Exhibit 3.1

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

Form 10-K


x	Annual report pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934 For the fiscal year ended December 31, 2008

Commission file No. 1-8491

HECLA MINING COMPANY
(Exact name of registrant as specified in its charter)

Delaware		77–0664171
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

6500 N. Mineral Drive, Suite 200 Coeur d’Alene, Idaho		83815-9408
(Address of principal executive offices)		(Zip Code)

208-769-4100
(Registrant’s telephone number, including area code)

Securities to be registered pursuant to Section 12(b) of the Act:


Title of each class		Name of each exchange on which registered
Common Stock, par value $0.25 per share		New York Stock Exchange
Series B Cumulative Convertible Preferred Stock, par value $0.25 per share		New York Stock Exchange
6.5% Mandatory Convertible Preferred Stock, par value $0.25 per share		New York Stock Exchange

Securities to be registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes o No x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes o No x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):


	Large Accelerated Filer x	Accelerated Filer o
	Non-Accelerated Filer o	Smaller reporting company o

(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No x

The aggregate market value of the registrant’s voting Common Stock held by nonaffiliates was $1,175,960,634 as of June 30, 2008. There were 127,540,301 shares of the registrant’s Common Stock outstanding as of June 30, 2008, and 217,181,821 shares as of February 27, 2009.

Documents incorporated by reference herein:

To the extent herein specifically referenced in Part III, the information contained in the Proxy Statement for the 2009 Annual Meeting of Shareholders of the registrant, which will be filed with the Commission pursuant to Regulation 14A within 120 days of the end of the registrant’s 2008 fiscal year is incorporated herein by reference. See Part III.

TABLE OF CONTENTS


Special Note on Forward-Looking Statements		1
PART I		1
Item 1. Business		1
Introduction		1
Products and Segments		3
Employees		3
Available Information		3
Item 1A. Risk Factors		4
Item 1B. Unresolved Staff Comments		16
Item 2. Property Descriptions		17
OPERATING PROPERTIES		17
The Greens Creek Unit		17
The Lucky Friday Unit		19
EXPLORATION PROPERTIES		21
The San Sebastian Unit		21
Item 3. Legal Proceedings		23
Item 4. Submission of Matters to a Vote of Security Holders		23
PART II		23
Item 5. Market for Registrant’s Common Equity and Related Stockholder Matters and Issuer Purchases of Equity Securities		23
Item 6. Selected Financial Data		26
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations		27
Overview		27
Results of Operations		28
The Greens Creek Segment		30
The Lucky Friday Segment		31
The San Sebastian Segment		32
The La Camorra Segment		32
Corporate Matters		33
Reconciliation of Total Cash Costs (non-GAAP) to Cost of Sales and Other Direct Production Costs and Depreciation, Depletion and Amortization (GAAP)		34
Financial Liquidity and Capital Resources		35
Contractual Obligations and Contingent Liabilities and Commitments		38
Off-Balance Sheet Arrangements		38
Critical Accounting Estimates		39
New Accounting Pronouncements		40
Forward-Looking Statements		41
Item 7A. Quantitative and Qualitative Disclosures About Market Risk		41
Short-term Investments		41
Commodity-Price Risk Management		41
Interest-Rate Risk Management		41
Provisional Sales		42
Item 8. Financial Statements and Supplementary Data		42
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures		44
Item 9A. Controls and Procedures		44
Disclosure Controls and Procedures		44
Management’s Annual Report on Internal Control over Financial Reporting		44
Attestation Report of Independent Registered Public Accounting Firm		45
Changes in Internal Control over Financial Reporting		46
Item 9B. Other Information		46
PART III		46
Item 10. Directors and Executive Officers of the Registrant		46
Item 11. Executive Compensation		48
Item 12. Security Ownership of Certain Beneficial Owners and Management		48
Item 13. Certain Relationships and Related Transactions		48
Item 14. Principal Accounting Fees and Services		48
PART IV		49
Item 15. Exhibits, Financial Statement Schedules and Reports on Form 8-K		49
Signatures		50
Index to Consolidated Financial Statements		F-1
Index to Exhibits		F-47

Table of Contents

S pecial Note on Forward-Looking Statements

Certain statements contained in this report (including information incorporated by reference) are “forward-looking statements” and are intended to be covered by the safe harbor provided for under Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Our forward-looking statements include our current expectations and projections about future results, performance, prospects and opportunities. We have tried to identify these forward-looking statements by using words such as “may,” “might,” “will,” “expect,” “anticipate,” “believe,” “could,” “intend,” “plan,” “estimate” and similar expressions. These forward-looking statements are based on information currently available to us and are expressed in good faith and believed to have a reasonable basis. However, our forward-looking statements are subject to a number of risks, uncertainties and other factors that could cause our actual results, performance, prospects or opportunities to differ materially from those expressed in, or implied by, these forward-looking statements.

These risks, uncertainties and other factors include, but are not limited to, those set forth under Item 1A. — Business — Risk Factors . Given these risks and uncertainties, readers are cautioned not to place undue reliance on our forward-looking statements. Projections included in this Form 10-K have been prepared based on assumptions, which we believe to be reasonable, but not in accordance with United States generally accepted accounting principles (“GAAP”) or any guidelines of the Securities and Exchange Commission (“SEC”). Actual results will vary, perhaps materially, and we undertake no obligation to update the projections at any future date. You are strongly cautioned not to place undue reliance on such projections. All subsequent written and oral forward-looking statements attributable to Hecla Mining Company or to persons acting on our behalf are expressly qualified in their entirety by these cautionary statements. Except as required by federal securities laws, we do not intend to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

P ART I

I tem 1. Business

For the sole purpose of implementing a holding company structure, on November 8, 2006, an Agreement and Plan of Reorganization was filed. Under that Plan of Reorganization, Hecla Mining Company, a new Delaware corporation organized on August 7, 2006, and formerly named Hecla Holdings Inc., became the successor issuer to Hecla Limited, formerly named Hecla Mining Company. In addition, Hecla Limited became a wholly-owned subsidiary of Hecla Mining Company.

For information regarding the organization of our business segments and our significant customers, see Note 12 of Notes to Consolidated Financial Statements.

Information set forth in Items 1A, 1B and 2 are incorporated by reference into this Item 1.

I ntroduction

Hecla Mining Company has provided precious and base metals to the U.S. economy and worldwide since its incorporation in 1891 (in this report, “we” or “our” or “us” refers to Hecla Mining Company and/or our affiliates and subsidiaries). We discover, acquire, develop, produce, and market silver, gold, lead and zinc. In doing so, we intend to manage our business activities in a safe, environmentally responsible and cost-effective manner.

We produce lead, zinc and bulk concentrates, which we sell to custom smelters, and unrefined silver and gold bullion bars (doré), which may be sold as doré or further refined before sale to precious metals traders. We are organized and managed into three segments that encompass our operating units and significant exploration interests:


	•	The Greens Creek unit;

	•	The Lucky Friday unit; and

	•	The San Sebastian unit and various exploration activities in Mexico.

Prior to the second quarter of 2008, we also reported a fourth segment, the La Camorra unit, representing our operations and various exploration activities in Venezuela. On July 8, 2008, we completed the sale of our wholly owned subsidiaries holding our business and operations in Venezuela. Our Venezuelan activities are reported as discontinued operations on the Condensed Consolidated Statement of Operations for all periods presented (see Note 13 of Notes to Consolidated Financial Statements for more information). As a result, we have determined that it is no longer appropriate to present a separate segment representing our operations in Venezuela, and have restated the corresponding information for all periods presented.

On April 16, 2008, we completed the acquisition of all of the ownership interest of the two indirect Rio Tinto, PLC subsidiaries holding a 70.3% interest in the Greens Creek mine. Our wholly-owned subsidiary, Hecla Alaska LLC,

Table of Contents

previously owned an undivided 29.7% joint venture interest in the assets of Greens Creek. The acquisition gives our various subsidiaries control of 100% of the Greens Creek mine. More information on the acquisition can be found in Note 19 of Notes to Consolidated Financial Statements .

The map below shows the locations of our operating units and our exploration projects, as well as our corporate offices located in Coeur d’Alene, Idaho and Vancouver, British Columbia.

(MAP)

Our current business strategy is to focus our financial and human resources in the following areas:


	•	Managing our operations in a manner that will facilitate repayment of our credit facilities (see Note 7 and Note 21 of Notes to the Consolidated Financial Statements for further discussion of our credit facilities);

	•	Fully integrating our April 2008 acquisition of the remaining 70.3% of the Greens Creek Joint Venture in Alaska, of which we previously held 29.7%, which increases our expected 2009 silver production to between 10 and 11 million ounces and gives our various subsidiaries sole ownership of the world’s fifth largest silver mine;

	•	Expanding our proven and probable reserves and production capacity at our operating properties;

	•	Maintaining and investing in exploration projects in the vicinities of the following four mining districts we believe to be under-explored and under-invested: North Idaho’s Silver Valley in the historic Coeur d’Alene Mining District; the prolific silver producing district near Durango, Mexico; at our Greens Creek unit on Alaska’s Admiralty Island, located offshore of Juneau; and the Creede district of Southwestern Colorado;

	•	Continuing to seek opportunities to acquire and invest in mining properties and companies; and

	•	Seeking opportunities for growth both internally and through acquisitions. See the Results of Operations and Financial Liquidity and Capital Resources sections below.

For the year ended December 31, 2008, we reported a net loss of $66.6 million compared to net income of $53.2 million and $69.1 million for the years ended December 31, 2007 and 2006, respectively, and net losses for the years ended December 31, 2005 and 2004 of $25.4 million and $6.1 million, respectively. Our financial results over the past five years have been impacted by:


	•	Exploration and pre-production development expenditures, which totaled $23.7 million, $20.8 million, $28.4 million, $26.2 million and $20.2 million, respectively, for the years ended December 31, 2008, 2007, 2006, 2005 and 2004, including exploration expenditures at our now-divested Venezuelan operations of $1.2 million, $3.9 million, $5.6 million, $8.3 million, and $5.9 million, respectively, for those periods. These amounts also include expenditures for the now-divested Hollister Development Block, as its development progressed until the sale of our interest in the project in April 2007, of $2.2 million, $14.4 million, $9.4 million and $4.2 million, respectively, for the years ended December 31, 2007, 2006, 2005 and 2004. In addition, exploration for the years ended December 31, 2005 and 2004 included $2.2 million and $0.3 million, respectively, for expenditures at the Noche Buena gold exploration property in Mexico, which was sold in April 2006;

	•	Provision for closed operations and environmental matters of $4.3 million, $49.2 million, $3.5 million, $1.3 million and $11.2 million, respectively, for the years ended December 31, 2008, 2007, 2006, 2005 and 2004. We recorded an increase of $44.7 million in 2007 to our estimated liabilities for environmental remediation in Idaho’s Coeur d’Alene Basin and the Bunker Hill Superfund Site. Accrual increases of $8.5 million were also recorded in 2004 for estimated future expenditures in the Coeur d’Alene Basin and the Grouse Creek mine;

	•	Fluctuations in average prices of the metals we produce, as average prices for silver, gold and lead increased over the four-year period ended December 31, 2007, while average zinc prices increased over the three-year period ended December 31, 2006, with a slight decline during 2007. Average prices for silver and gold continued to increase during the first half of 2008, but declined during the second half of 2008, while average lead and zinc prices decreased during 2008;

	•	Spikes in prices for diesel fuel and other consumables, which have impacted production costs at our operations;

	•	Our acquisition of the remaining 70.3% of the Greens Creek mine for $758.5 million in April 2008, a portion of which was funded by a $140 million term loan and $220 million bridge loan;

	•	The current global financial crisis, which has impacted metals prices, production costs, and our access to capital markets;

Table of Contents


	•	Losses from discontinued operations, net of tax, for the years ended December 31, 2008, 2007 and 2005 of $17.4 million, $15.0 million and $7.4 million, respectively, and income from discontinued operations, net of tax, for the years ended December 31, 2006 and 2004 of $4.3 million and $6.8 million, respectively; and

	•	Decreased production, and the eventual suspension of mining operations at the San Sebastian unit in Mexico in the fourth quarter of 2005.

A comprehensive discussion of our financial results for the years ended December 31, 2008, 2007 and 2006, individual operating unit performance, general corporate expenses and other significant items can be found in Item 7. — Management’s Discussion and Analysis of Consolidated Financial Condition and Results of Operations , as well as the Consolidated Financial Statements and Notes thereto.

Our results of operations are significantly affected by the prices of silver, gold, lead and zinc, which fluctuate and are affected by numerous factors beyond our control. Over the past five years, we have seen the prices of silver and gold generally rise, which has helped to offset the factors having a negative impact on our net income discussed above. Zinc and lead prices generally increased during the four-year period ended December 31, 2007. However, average zinc and lead prices decreased during 2008.

P roducts and Segments

Our segments are differentiated by geographic region and principal products produced. We produce zinc, lead and bulk concentrates at our Greens Creek unit and lead and zinc concentrates at our Lucky Friday unit, which we sell to custom smelters on contract, and unrefined silver and gold bullion bars (doré) at Greens Creek, which are sold directly to customers or further refined before sale to precious metals traders. Our segments as of December 31, 2008 included:


	•	The Greens Creek unit, a 100%-owned joint venture arrangement, through our subsidiaries Hecla Alaska LLC, Hecla Greens Creek Mining Company and Hecla Juneau Mining Company. We acquired 70.3% of our ownership of Greens Creek in April 2008 from indirect subsidiaries of Rio Tinto, PLC. Greens Creek is located on Admiralty Island, near Juneau, Alaska, and has been in production since 1989, with a temporary shutdown from April 1993 through July 1996. During 2008, Greens Creek contributed $130.8 million, or 67.9%, to our consolidated sales;

	•	The Lucky Friday unit located in northern Idaho. Lucky Friday is, through our subsidiaries Hecla Limited and Silver Hunter Mining Company, 100%-owned and has been a producing mine for us since 1958. During 2008, Lucky Friday contributed $61.9 million, or 32.1%, to our consolidated sales; and

	•	The San Sebastian unit, located in the State of Durango, Mexico, has been 100% owned by us through our wholly owned subsidiary, Minera Hecla, S.A. de C.V., since 1999. During 2005, San Sebastian reached the end of its known mine life.

The table below summarizes our production for the years ended December 31, 2008, 2007 and 2006, which reflects our previous 29.7% ownership of Greens Creek until April 16, 2008, and our 100% ownership thereafter.


	Year
	2008		2007		2006
Silver (ounces)		8,709,517		5,642,558		5,509,746
Gold (ounces)		76,810		107,708		179,276
Lead (tons)		35,023		24,549		22,899
Zinc (tons)		61,441		26,621		24,207

The gold production amounts above include 22,160, 87,490 and 160,563 ounces, respectively, for years ended December 31, 2008, 2007 and 2006 produced at our discontinued Venezuelan operations sold in July 2008.

E mployees

As of December 31, 2008, we employed 742 people, and believe relations with our employees are generally good.

Many of the employees at our Lucky Friday unit are represented by a union. The collective barginning agreement with workers at our Lucky Friday unit expires on April 30, 2009. We anticipate that we will reach a satisfactory contract with the union, although there can be no assurance that this can be done or that it can be done without disruptions to production. During the past five years, labor strikes and work slow-downs adversely affected our production in Mexico and at our now-divested Venezuelan operations. Similar labor problems could affect our financial results or condition in the future.

A vailable Information

We are a Delaware corporation, with our principal executive offices located at 6500 N. Mineral Drive, Suite 200, Coeur d’Alene, Idaho 83815-9408. Our telephone number is (208) 769-4100. Our web site address is www.hecla-

Table of Contents

mining.com . We file our annual, quarterly and current reports and amendments to these reports with the SEC, copies of which are available on our website or from the SEC free of charge ( www.sec.gov or 800-SEC-0330 or the SEC’s Public Reference Room, 100 F Street, N.E., Washington, D.C. 20549). Charters of our audit, compensation, corporate governance, and directors’ nominating committees, as well as our Code of Business Conduct and Ethics for Directors, Officers and Employees, are also available on our website. We will provide copies of these materials to shareholders upon request using the above-listed contact information, directed to the attention of Investor Relations.

We have included the Chief Executive Officer (CEO) and Chief Financial Officer (CFO) certifications regarding our public disclosure required by Section 302 of the Sarbanes-Oxley Act of 2002 as Exhibits 31.1 and 31.2 to this report. Additionally, we filed with the New York Stock Exchange (“NYSE”) the CEO’s certification regarding our compliance with the NYSE’s Corporate Governance Listing Standards (“Listing Standards”) pursuant to Section 303A.12(a) of the Listing Standards, which certification was dated June 3, 2008, and indicated that the CEO was not aware of any violations of the Listing Standards.

I tem 1A. Risk Factors

The following risks and uncertainties, together with the other information set forth in this Form 10-K, should be carefully considered by those who invest in our securities. Any of the following risks could materially adversely affect our business, financial condition or operating results and could decrease the value of our common and/or preferred stock.

FINANCIAL RISKS

We have limited cash resources and may be dependent on accessing additional financing to meet our expected cash needs.

We have cash requirements both for ongoing operating expenses, capital expenditures, working capital, and general corporate purposes and for required interest and principal payments on our credit facilities. See Financial Risks— The inability to meet the payment obligations of our credit facilities when due could adversely affect our financial results or condition . While we believe that we will be able to obtain the additional sources of financing that will allow us to meet our cash requirements, there can be no assurance we will be successful in such effort. We have retained a chief restructuring officer to assist us with assessing our operations and financial condition. On February 3, 2009, we reached an agreement to amend the terms of our credit facilities to defer all term facility payments due in 2009, totaling $66.7 million, to 2010 and 2011. In addition, on February 4, 2009, we entered into an agreement to sell 32 million units comprised of one share of Common Stock and one-half Series 3 Warrant to purchase one share of Common Stock in an underwritten public offering for proceeds of approximately $65.6 million. On February 6, 2009, the underwriters exercised their over-allotment option in connection with the original offering, resulting in the issuance and sale of 4.8 million additional units for additional proceeds of approximately $9.8 million. We applied $40 million of the total proceeds to the payment of our outstanding bridge facility balance on February 10, 2009. In accordance with the credit facilities, we also reduced our term loan by approximately $8 million in February 2008. See Note 21- Subsequent Events of Notes to Consolidated Financial Statements for more information on the credit facilities amendment and offering. The credit facilities also require us to make mandatory prepayments of our term loan with 75% of our semi-annual excess cash flow and with proceeds we receive from asset sales and the issuance of additional equity and debt, with limited exceptions. This requirement could affect our liquidity. A shortage of liquidity could have a material adverse affect on us.

The global financial crisis may have an impact on our business and financial condition in ways that we currently cannot predict.

The continued credit crisis and related turmoil in the global financial system has had and may continue to have an impact on our business and financial position. The financial crisis may limit our ability to raise capital through credit and equity markets, both of which we have utilized recently to finance the acquisition of the 70.3% interest in the Greens Creek mine and meet the related debt obligations. As discussed further below, the prices of the metals that we produce are affected by a number of factors, and it is unknown how these factors will be impacted by a continuation of the financial crisis.

We have had losses that may continue in the future.

We reported a net loss for the year ended December 31, 2008 of $66.6 million, and net income for the years ended December 31, 2007 and 2006, of $53.2 million and $69.1 million, respectively. A comparison of operating results over the past three years can be found in Results of Operations in Management’s Discussion and Analysis of Financial Condition and Results of Operations .

Many of the factors affecting our operating results are beyond our control, including the volatility of metals prices; smelter terms; diesel fuel prices; interest rates; global or regional political or economic policies; inflation; developments and crises; governmental regulations; continuity of orebodies; and speculation and sales by central banks and other holders and producers of gold and silver in response to these factors. We cannot foresee whether our operations will continue to generate

Table of Contents

sufficient revenue in order for us to generate net cash from operating activities. There can be no assurance that we will not experience net losses in the future.

Commodity hedging activities could expose us to losses.

We periodically enter into hedging activities, such as forward sales contracts and commodity put and call option contracts, to manage the prices received on the metals we produce and in an attempt to insulate our operating results from declines in prices for those metals. However, hedging may prevent us from realizing possible revenues in the event that the market price of a metal exceeds the price stated in a forward sale or call option contract. In addition, we may experience losses if a counterparty fails to purchase under a contract when the contract price exceeds the spot price of a commodity. At December 31, 2008, we had no commodity hedging contracts.

Our profitability could be affected by the prices of other commodities.

Our business activities are highly dependent on the costs of commodities such as fuel, steel and cement. The recent prices for such commodities have been volatile and may increase our costs of production and development. A material increase in costs at any of our operating properties could have a significant effect on our profitability. For additional discussion, see Results of Operations in Management’s Discussion and Analysis of Financial Condition and Results of Operations .

Our accounting and other estimates may be imprecise.

Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts and related disclosure of assets, liabilities, revenue and expenses at the date of the consolidated financial statements and reporting periods. The more significant areas requiring the use of management assumptions and estimates relate to:


	•	mineral reserves that are the basis for future cash flow estimates and units-of-production depreciation, depletion and amortization calculations;

	•	future metals prices;

	•	environmental, reclamation and closure obligations;

	•	asset impairments, including long-lived assets and investments;

	•	reserves for contingencies and litigation; and

	•	deferred tax asset valuation allowance.

Actual results may differ materially from these estimates using different assumptions or conditions. For additional information, see Critical Accounting Estimates in Management’s Discussion and Analysis of Financial Condition and Results of Operations , Note 1 — Significant Accounting Policies of Notes to Consolidated Financial Statements and the risk factors: “Our development of new orebodies and other capital costs may cost more and provide less return than we estimated,” “Our ore reserve estimates may be imprecise” and “Our environmental remediation obligations may exceed the provisions we have made.”

A substantial or extended decline in metals prices would have a material adverse effect on us.

The majority of our revenue is derived from the sale of silver, gold, lead and zinc and, as a result, our earnings are directly related to the prices of these metals. Silver, gold, lead and zinc prices fluctuate widely and are affected by numerous factors, including:


	•	speculative activities;

	•	relative exchange rates of the U.S. dollar;

	•	global and regional demand and production;

	•	recession or reduced economic activity; and

	•	other political and economic conditions.

These factors are largely beyond our control and are difficult to predict. If the market prices for these metals fall below our production or development costs for a sustained period of time, we will experience losses and may have to discontinue exploration, development or operations, or incur asset write-downs at one or more of our properties.

Table of Contents

The following table sets forth the average daily closing prices of the following metals for the year ended December 31, 1995, 2001 and each year thereafter through 2008.


	2008		2007		2006		2005		2004		2003		2002		2001		1995
Silver ⁽¹⁾ (per oz.)	$	15.02	$	13.39	$	11.57	$	7.31	$	6.66	$	4.88	$	4.60	$	4.37	$	5.20
Gold ⁽²⁾ (per oz.)	$	871.71	$	696.66	$	604.34	$	444.45	$	409.21	$	363.51	$	309.97	$	272.00	$	384.16
Lead ⁽³⁾ (per lb.)	$	0.95	$	1.17	$	0.58	$	0.44	$	0.40	$	0.23	$	0.21	$	0.22	$	0.29
Zinc ⁽⁴⁾ (per lb.)	$	0.85	$	1.47	$	1.49	$	0.63	$	0.48	$	0.38	$	0.35	$	0.40	$	0.47



(1)	London Fix
(2)	London Final
(3)	London Metals Exchange — Cash
(4)	London Metals Exchange — Special High Grade — Cash

On February 27, 2009, the closing prices for silver, gold, lead and zinc were $13.21 per ounce, $952.00 per ounce, $0.48 per pound and $0.51 per pound, respectively.

An extended decline in metals prices may cause us to record write-downs, which could negatively impact our results of operations.

Statement of Financial Accounting Standards No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets (“SFAS 144”) establishes accounting standards for impairment of the value of long-lived assets such as mining properties. SFAS 144 requires a company to review the recoverability of the cost of its assets by estimating the future undiscounted cash flows expected to result from the use and eventual disposition of the asset. Impairment, measured by comparing an asset’s carrying value to its fair value, must be recognized when the carrying value of the asset exceeds these cash flows and other variables, and recognizing impairment write-downs could negatively impact our results of operations. Metal price estimates are a key component used in the analysis of the carrying values of our assets. We evaluated the December 31, 2008 carrying values of long-lived assets at our Greens Creek and Lucky Friday segments by comparing them to the average estimated undiscounted cash flows resulting from models using various metals price scenarios. Because the average estimated undiscounted cash flows exceeded the asset carrying values, we did not record impairments as of December 31, 2008. However, if the prices of silver, gold, zinc and lead decline or we fail to control production costs or realize the mineable ore reserves or exploration potential at our mining properties, we may be required to recognize asset write-downs. For example, one model used in our evaluation was based on forward pricing and involved prices for the next seven years ranging from $8.80 to $9.23 per ounce for silver, $776 to $874 per ounce for gold, $0.46 to $0.47 per pound for lead and $0.54 to $0.61 per pound for zinc. This model resulted in estimated undiscounted cash flows that are less than the December 31, 2008 carrying values of long-lived assets at Greens Creek and Lucky Friday. If actual prices for each metal were to fall within these respective ranges for a sustained period of time in the future, we may be required to record write-downs to the carrying value of our long-term assets. We also utilized cash flow models based on the metals prices used in our reserve calculations, consensus metals prices, and historical three-year trailing prices in our review of asset carrying values. These models indicated undiscounted cash flows that exceeded our carry values at December 31, 2008.

The terms of our credit facilities restrict our current and future operations, particularly our ability to respond to changes in our business or to take certain actions and that, in turn, could impair our ability to meet our obligations.

Our credit facilities contain various restrictive covenants that limit management’s discretion in operating our business. In particular, these covenants limit our ability to, among other things:


	•	incur additional debt;

	•	make certain investments or pay dividends or distributions on our capital stock or purchase or redeem or retire capital stock;

	•	sell assets, including capital stock of our restricted subsidiaries;

	•	restrict dividends or other payments by restricted subsidiaries;

	•	create liens;

	•	enter into transactions with affiliates; and

	•	merge or consolidate with another company.

Table of Contents

Our credit facilities also require us to satisfy certain financial tests. Our ability to maintain or meet such financial tests may be affected by events beyond our control, including changes in general economic and business conditions, and we cannot provide assurance that we will maintain or meet such tests or that the lenders under our credit facilities will waive any failure to meet such tests.

These covenants could materially and adversely affect our ability to finance our future operations or capital needs. Furthermore, they may restrict our ability to expand, to pursue our business strategies, and otherwise to conduct our business. Our ability to comply with these covenants may be affected by circumstances and events beyond our control, such as prevailing economic conditions and changes in regulations, and we cannot provide assurance that we will be able to comply with them. A breach of these covenants could result in a default under our credit facilities. If there were an event of default under our credit facilities, the affected creditors could cause all amounts borrowed under these instruments to be due and payable immediately. Additionally, if we fail to repay indebtedness under the credit facilities when it becomes due, the lenders under the credit facilities could proceed against the assets which we have pledged to them as security.

Our ability to recognize the benefits of deferred tax assets is dependent on future cash flows and taxable income

We recognize the expected future tax benefit from deferred tax assets when the tax benefit is considered to be more likely than not of being realized. Otherwise, a valuation allowance is applied against deferred tax assets. Assessing the recoverability of deferred tax assets requires management to make significant estimates related to expectations of future taxable income. Estimates of future taxable income are based on forecasted cash flows from operations and the application of existing tax laws in each jurisdiction. Metal price estimates are a key component used in the determination of our ability to realize the expected future benefit of our deferred tax assets. To the extent that future taxable income differs significantly from estimates as a result of a decline in metals prices or other factors, our ability to realize the deferred tax assets could be impacted. Additionally, future issuances of common stock or common stock equivalents could limit our ability to utilize our net operating loss carryforwards pursuant to Section 382 of the Internal Revenue Code. Future changes in tax law or changes in ownership structure could limit our ability to obtain future tax benefits. As of December 31, 2008, our current and non-current deferred tax asset balances were $2.5 million and $36.1 million, respectively. See Note 6 of Notes to Condensed Consolidated Financial Statements for further discussion of our deferred tax assets.

The inability to meet the payment obligations of our credit facilities when due could adversely affect our financial results or condition.

The total outstanding balance of the debt facility at December 31, 2008 was $161.7 million, comprised of $121.7 million for the term facility and $40.0 million related to the bridge facility. On October 16, 2008, the remaining balance of $40 million was extended to February 16, 2009, subject to the requirement that a revised operating plan be submitted to the bank syndicate by November 14, 2008, which revised operating plan was timely submitted. On December 10, 2008, the bank syndicate notified us that the revised operating plan was satisfactory, thereby confirming that the remaining outstanding balance on the bridge loan was due on February 16, 2009. On December 10, 2008, we received a written amendment to the credit facilities from the bank syndicate waiving (for up to $20 million of net proceeds received by us by December 31, 2008) from the requirement that the proceeds of our December 11, 2008 offering of Common Stock Series 1 Warrants and Series 2 Warrants be used for paying down the bridge loan or term loan.

On December 31, 2008, we announced we had entered into the Third Amendment to the Amended and Restated Credit Agreement (the “Third Amendment”). The Third Amendment moved the $18.3 million quarterly principal payment due on our term facility on December 31, 2008 to February 13, 2009 and also provided us covenant relief for the period ended December 31, 2008, or, in certain instances, February 13, 2009. In exchange for this principal payment deferral and financial covenant relief, we agreed in the Third Amendment to (i) increase the interest rate on our term facility to 6% over LIBOR or 5% over the base rate, (ii) additional reporting requirements, (iii) grant additional security interests on the assets of our domestic subsidiaries with limited exceptions, (iv) have all our domestic subsidiaries guarantee the term facility and bridge facility with limited exceptions, (v) additional limitations on our covenants until February 13, 2009, (vi) keep unencumbered cash on hand in an amount not less than $10 million, (vii) retain a chief restructuring officer and (viii) move the maturity date of the bridge facility from February 16, 2009 to February 13, 2009.

On February 3, 2009, we announced we had entered into the Fourth Amendment to the Amended and Restated Credit Agreement (the “Fourth Amendment”). The Fourth Amendment deferred all of our scheduled principal payments on our term facility in 2009 so that our next scheduled principal payments are $15 million on March 31, 2010 and on the last day of each calendar quarter thereafter until the maturity date of March 31, 2011 on which the then remaining principal amount is due and payable. In exchange for this principal payment deferral, we agreed in the Fourth Amendment to (i) pay off our bridge facility with funds from an equity or subordinated debt offering of at least $50 million on or before February 12, 2009,

Table of Contents

(ii) pay an additional fee to our lenders upon effectiveness of the Fourth Amendment, and on each subsequent July 1 ^st and January 1 ^st , by issuing to the lenders an aggregate amount of a new Series of 12% Convertible Preferred Stock equal to 3.75% of the aggregate principal amount of the term facility outstanding on such date until the term facility if paid off in full, (iii) revise our financial covenants, including, without limitation, the addition of a liquidity covenant, and extend certain additional limitations on our covenants until the March 31, 2011 maturity date of the term facility, and (iv) make additional mandatory prepayments of our remaining term facility with 75% of our semi-annual excess cash flow and with proceeds we receive from asset sales and the issuance of additional equity and debt, with limited exceptions. The Fourth Amendment became effective upon us meeting certain conditions, including the receipt of net proceeds from an equity offering by February 12, 2009 of at least $50 million and payment of our bridge facility. On February 4, 2009, we entered into an agreement to sell 32 million units comprised of one share of Common Stock and one-half Series 3 Warrant to purchase one share of Common Stock in an underwritten public offering for proceeds of approximately $65.6 million. On February 6, 2009, the underwriters exercised their over-allotment option in connection with the original offering, resulting in the issuance and sale of 4.8 million additional units for additional proceeds of approximately $9.8 million. We applied $40 million of the total proceeds to the payment of our outstanding bridge facility balance on February 10, 2009. In accordance with the credit facilities, we also reduced our term loan by approximately $8 million in February 2009 (see Note 21 of Notes to Consolidated Financial Statements for more information).

As a result of the Fourth Amendment, we will have significant payments due in 2010 and 2011. We may defer some capital investment activities until we secure additional capital, if necessary, to maintain liquidity. We also may pursue additional equity issuances or financing. There can be no assurances that such financing will be available to us. Failure to meet the payment obligations of our credit facilities could cause us to be in default. If there were an event of default under our credit facilities, the affected creditors could cause all amounts borrowed under these instruments to be due and payable immediately. Additionally, if we fail to repay indebtedness under the credit facilities when it becomes due, the lenders under the credit facilities could proceed against the assets which we have pledged to them as security.

Failure to comply with debt covenants could adversely affect our financial results or condition.

Our acquisition of the companies owning 70.3% of the Greens Creek mine (see Note 19 of Notes to Consolidated Financial Statements for further discussion) was partially funded by a $380 million debt facility, which included a $140 million three-year term facility and a $240 million bridge facility scheduled to mature in October 2008. We utilized $220 million from the bridge facility at the time of closing the Greens Creek transaction, and the remaining $20 million available balance in September 2008. The total outstanding balance on the credit facilities at December 31, 2008 was $161.7 million, including $40.0 million related to the bridge facility. See “ The inability to meet the payment obligations of our credit facilities when due could adversely affect our financial results or condition ” above for more information on the status of our credit facilities.

The credit facilities include various covenants and other limitations related to our indebtedness and investments that require us to maintain certain measures of financial performance. Failure to comply with such provisions could adversely affect our results or financial condition and may limit our ability to obtain financing. See Note 7 of Notes to Consolidated Financial Statements for more information on the debt facility.

Deferral of dividends on our preferred stock may have adverse consequences.

In December 2008, we announced that we were deferring dividends scheduled for January 1, 2009 on our Series B Preferred Stock and 6.5% Mandatory Convertible Preferred Stock. Failure to pay such dividends will affect our eligibility to file Registration Statements on Form S-3 and our status as a “well-known seasoned issuer” in 2009, which may increase the expense and time associated with both the filing and effectiveness of future Registration Statements and the consummation of future financings. In the event we continue to defer dividends for six dividend periods, our holders of preferred stock will be able to elect two directors.

Returns for Investments in Pension Plans Are Uncertain

We maintain pension plans for employees, which provide for specified payments after retirement for certain employees. The ability of the pension plans to provide the specified benefits depends on our funding of the plans and returns on investments made by the plans. Returns, if any, on investments are subject to fluctuations based on investment choices and market conditions. A sustained period of low returns or losses on investments could require us to fund the pension plans to a greater extent than anticipated.

Table of Contents

OPERATION, DEVELOPMENT, EXPLORATION AND ACQUISITION RISKS

Our foreign operations are subject to additional inherent risks.

We recently sold our mining operations and assets in Venezuela, but still currently conduct exploration projects in Mexico. Although our exploration activities in Mexico have been curtailed recently to preserve cash, we continue to own assets and real estate and mineral interests in Mexico. We anticipate that we will continue to conduct significant operations in Mexico and possibly other international locations in the future. Because we conduct operations internationally, we are subject to political and economic risks such as:


	•	the effects of local political, labor and economic developments and unrest;

	•	significant or abrupt changes in the applicable regulatory or legal climate;

	•	exchange controls and export restrictions;

	•	expropriation or nationalization of assets with inadequate compensation;

	•	currency fluctuations and repatriation restrictions;

	•	invalidation of governmental orders, permits or agreements;

	•	renegotiation or nullification of existing concessions, licenses, permits and contracts;

	•	recurring tax audits and delays in processing tax credits tax credits or refunds;

	•	corruption, demands for improper payments, expropriation, and uncertain legal enforcement and physical security;

	•	disadvantages of competing against companies from countries that are not subject to U.S. laws and regulations;

	•	fuel or other commodity shortages;

	•	illegal mining;

	•	laws or policies of foreign countries and the United States affecting trade, investment and taxation;

	•	civil disturbances, war and terrorist actions; and

	•	seizures of assets.

Consequently, our exploration, development and production activities outside of the United States may be substantially affected by factors beyond our control, any of which could materially adversely affect our financial condition or results of operations.

We may be subject to a number of unanticipated risks related to inadequate infrastructure.

Mining, processing, development and exploration activities depend, to one degree or another, on adequate infrastructure. Reliable roads, bridges, power sources and water supply are important determinants, which affect capital and operating costs. Unusual or infrequent weather phenomena, sabotage, government or other interference in the maintenance or provision of such infrastructure could adversely affect our mining operations.

Our development of new orebodies and other capital costs may cost more and provide less return than we estimated.

Capitalized development projects may cost more and provide less return than we estimate. If we are unable to realize a return on these investments, we may incur a related asset write-down that could adversely affect our financial results or condition.

Our ability to sustain or increase our current level of production of metals partly depends on our ability to develop new orebodies and/or expand existing mining operations. Before we can begin a development project, we must first determine whether it is economically feasible to do so. This determination is based on estimates of several factors, including:


	•	ore reserves;

	•	expected recovery rates of metals from the ore;

	•	future metals prices;

	•	facility and equipment costs;

	•	availability of affordable sources of power and adequacy of water supply;

Table of Contents


	•	exploration and drilling success;

	•	capital and operating costs of a development project;

	•	environmental considerations and permitting;

	•	adequate access to the site, including competing land uses (such as agriculture);

	•	applicable tax rates;

	•	assumptions used in determining the value of our pension plan assets and liabilities;

	•	foreign currency fluctuation and inflation rates; and

	•	availability of financing.

These estimates are based on geological and other interpretive data, which may be imprecise. As a result, actual operating and capital costs and returns from a development project may differ substantially from our estimates as a result of which it may not be economically feasible to continue with a development project.

Our ore reserve estimates may be imprecise.

Our ore reserve figures and costs are primarily estimates and are not guarantees that we will recover the indicated quantities of these metals. You are strongly cautioned not to place undue reliance on estimates of reserves. Reserves are estimates made by our professional technical personnel, and no assurance can be given that the estimated amount of metal or the indicated level of recovery of these metals will be realized. Reserve estimation is an interpretive process based upon available data and various assumptions. Our reserve estimates, particularly those for properties that have not yet started producing, may change based on actual production experience. Further, reserves are valued based on estimates of costs and metals prices, which may not be consistent among our operating and non-operating properties. The economic value of ore reserves may be adversely affected by:


	•	declines in the market price of the various metals we mine;

	•	increased production or capital costs;

	•	reduction in the grade or tonnage of the deposit;

	•	increase in the dilution of the ore; and

	•	reduced recovery rates.

Short-term operating factors relating to our ore reserves, such as the need to sequentially develop orebodies and the processing of new or different ore grades, may adversely affect our cash flow. We may use forward sales contracts and other hedging techniques to partially offset the effects of a drop in the market prices of the metals we mine. However, if the prices of metals that we produce decline substantially below the levels used to calculate reserves for an extended period, we could experience:


	•	delays in new project development;

	•	net losses;

	•	reduced cash flow;

	•	reductions in reserves; and

	•	write-downs of asset values.

Efforts to expand the finite lives of our mines may not be successful, which could hinder our growth and decrease the value of our stock.

One of the risks we face is that our mines have a relatively small amount of proven and probable reserves, primarily because we have low volume, underground operations. Thus, we must continually replace depleted ore reserves. Our ability to expand or replace ore reserves primarily depends on the success of our exploration programs. Mineral exploration, particularly for silver and gold, is highly speculative and expensive. It involves many risks and is often non-productive. Even if we believe we have found a valuable mineral deposit, it may be several years before production from that deposit is possible. During that time, it may become no longer feasible to produce those minerals for economic, regulatory, political or other reasons. As a result of high costs and other uncertainties, we may not be able to expand or replace our existing ore reserves as they are depleted, which would adversely affect our business and financial position in the future.

Table of Contents

Our joint development and operating arrangements may not be successful.

We have entered into, and may in the future enter into joint venture arrangements in order to share the risks and costs of developing and operating properties. In a typical joint venture arrangement, the partners own a proportionate share of the assets, are entitled to indemnification from each other and are only responsible for any future liabilities in proportion to their interest in the joint venture. If a party fails to perform its obligations under a joint venture agreement, we could incur liabilities and losses in excess of our pro-rata share of the joint venture. We make investments in exploration and development projects that may have to be written off in the event we do not proceed to a commercially viable mining operation.

On February 21, 2008, we announced that our wholly-owned subsidiary, Rio Grande Silver Inc., acquired the right to earn into a 70% joint venture interest in an approximately 25-square-mile consolidated land package in the Creede Mining District of Colorado. For more information on the terms of the agreement, see Note 19 of Notes to Consolidated Financial Statements .

Our ability to market our metals production may be affected by disruptions or closures of custom smelters and/or refining facilities.

We sell substantially all of our metallic concentrates to custom smelters, with our doré bars sent to refiners for further processing before being sold to metal traders. If our ability to sell concentrates to our contracted smelters becomes unavailable to us, it is possible our operations could be adversely affected. See Note 12 of Notes to Consolidated Financial Statements for more information on the distribution of our sales and our significant customers.

Efforts to reduce costs may not be successful or may have adverse consequences.

In order to improve our cash position, we have taken a number of actions to reduce costs, including staff reductions and delaying or canceling exploration, development, and capital projects. These cost reduction efforts may not significantly reduce costs, particularly in the short term, and may adversely affect our current and future operations, production, reserves, regulatory posture, operating infrastructure, and financial results.

We face inherent risks in acquisitions of other mining companies or properties that may adversely impact our growth strategy.

Mines have limited lives, which is an inherent risk in acquiring mining properties. We are actively seeking to expand our mineral reserves by acquiring other mining companies or properties. Although we are pursuing opportunities that we feel are in the best interest of our investors, these pursuits are costly and often unproductive. Inherent risks in acquisitions we may undertake in the future could adversely affect our current business and financial condition and our growth.

There is a limited supply of desirable mineral lands available in the United States and foreign countries where we would consider conducting exploration and/or production activities, and any acquisition we may undertake is subject to inherent risks. In addition to the risk associated with limited mine lives, we may not realize the value of the companies or properties that are acquired due to a possible decline in metals prices, failure to obtain permits, labor problems, changes in regulatory environment, an inability to obtain financing and other factors previously described. Acquisitions of other mining companies or properties may also expose us to new geographic, political, operating, and geological risks. In addition, we face strong competition for companies and properties from other mining companies, some of which have greater financial resources than we do, and we may be unable to acquire attractive companies and mining properties on terms that we consider acceptable.

Our business depends on good relations with our employees.

We are dependent upon the ability and experience of our executive officers, managers, employees and other personnel, including those residing outside of the U.S., and there can be no assurance that we will be able to retain all of such employees. We compete with other companies both within and outside the mining industry in connection with the recruiting and retention of qualified employees knowledgeable of the mining business. Due to the relatively small size of our management team, the loss of these persons or our inability to attract and retain additional highly skilled employees could have an adverse effect on our business and future operations. Our labor contract with our employees at our Lucky Friday unit expires on April 30, 2009. Although we intend to negotiate a new agreement on a timely basis, there can be no assurance that we will do so or that the terms of any new agreement will be favorable to us.

Mining accidents or other adverse events at an operation could decrease our anticipated production.

Production may be reduced below our historical or estimated levels as a result of mining accidents; unfavorable ground conditions; work stoppages or slow-downs; lower than expected ore grades; the metallurgical characteristics of the ore are less economical than anticipated; or our equipment or facilities fail to operate properly or as expected.

Table of Contents

Our operations may be adversely affected by risks and hazards associated with the mining industry that may not be fully covered by insurance.

Our business is subject to a number of risks and hazards including:


	•	environmental hazards;

	•	political and country risks;

	•	civil unrest or terrorism;

	•	industrial accidents;

	•	labor disputes or strikes;

	•	unusual or unexpected geologic formations;

	•	cave-ins;

	•	explosive rock failures; and

	•	unanticipated hydrologic conditions, including flooding and periodic interruptions due to inclement or hazardous weather conditions.

	Such risks could result in:

	•	personal injury or fatalities;

	•	damage to or destruction of mineral properties or producing facilities;

	•	environmental damage;

	•	delays in exploration, development or mining;

	•	monetary losses; and

	•	legal liability.

We maintain insurance to protect against losses that may result from some of these risks at levels consistent with our historical experience, industry practice and circumstances surrounding each identified risk. Insurance against environmental risks is generally either unavailable or, we believe, too expensive for us, and we therefore do not maintain environmental insurance. Occurrence of events for which we are not insured may have an adverse effect on our business.

LEGAL, MARKET AND REGULATORY RISKS

We are currently involved in ongoing legal disputes that may materially adversely affect us.

There are several ongoing legal disputes in which we are involved. If any of these disputes results in a substantial monetary judgment against us, is settled on unfavorable terms or otherwise impacts our operations, our financial results or condition could be materially adversely affected. For example, we may ultimately incur environmental remediation costs substantially in excess of the amounts we have accrued and the plaintiffs in environmental proceedings may be awarded substantial damages, which costs and damages we may not be able to recover from our insurers. For a description of the lawsuits in which we are involved, see Note 8 of Notes to Consolidated Financial Statements.

We are required to obtain governmental and lessor approvals and permits in order to conduct mining operations.

In the ordinary course of business, mining companies are required to seek governmental and lessor approvals and permits for expansion of existing operations or for the commencement of new operations. Obtaining the necessary governmental permits is a complex, time-consuming and costly process. The duration and success of our efforts to obtain permits are contingent upon many variables not within our control. Obtaining environmental permits, including the approval of reclamation plans, may increase costs and cause delays depending on the nature of the activity to be permitted and the interpretation of applicable requirements implemented by the permitting authority. There can be no assurance that all necessary approvals and permits will be obtained and, if obtained, that the costs involved will not exceed those that we previously estimated. It is possible that the costs and delays associated with the compliance with such standards and regulations could become such that we would not proceed with the development or operation.

Table of Contents

We face substantial governmental regulation and environmental risk.

Our business is subject to extensive U.S. and foreign, federal, state and local laws and regulations governing development, production, labor standards, occupational health, waste disposal, use of toxic substances, environmental regulations, mine safety and other matters. See risk titled “Our environmental remediation obligations may exceed the provisions we have made.” We have been and are currently involved in lawsuits or disputes in which we have been accused of causing environmental damage, violating environmental laws, or violating environmental permits, and we may be subject to similar lawsuits or disputes in the future. New legislation and regulations may be adopted or permit lmits reduced at any time that result in additional operating expense, capital expenditures or restrictions and delays in the mining, production or development of our properties.

From time to time, the U.S. Congress considers proposed amendments to the General Mining Law of 1872, as amended, which governs mining claims and related activities on federal lands. The extent of any future changes is not known and the potential impact on us as a result of U.S. Congressional action is difficult to predict. Although a majority of our existing U.S. mining operations occur on private or patented property, changes to the General Mining Law, if adopted, could adversely affect our ability to economically develop mineral reserves on federal lands.

Our environmental remediation obligations may exceed the provisions we have made.

We are subject to significant environmental obligations, particularly in northern Idaho. At December 31, 2008, we had accrued $121.3 million as a provision for environmental remediation, $85.1 million of which relates to our various liabilities in Idaho, and there is a significant risk that the costs of remediation could materially exceed this provision. For an overview of our potential environmental liabilities, see Note 8 of Notes to Consolidated Financial Statements.

The titles to some of our properties may be defective or challenged.

Unpatented mining claims constitute a significant portion of our undeveloped property holdings, the validity of which could be uncertain and may be contested. Although we have conducted title reviews of our property holdings, title review does not necessarily preclude third parties from challenging our title. In accordance with mining industry practice, we do not generally obtain title opinions until we decide to develop a property. Therefore, while we have attempted to acquire satisfactory title to our undeveloped properties, some titles may be defective.

The price of our stock has a history of volatility and could decline in the future.

Our common and preferred stocks are listed on the New York Stock Exchange. The market price for our stock has been volatile, often based on:


	•	fluctuating proven and probable reserves;

	•	factors unrelated to our financial performance or future prospects, such as global economic developments and market perceptions of the attractiveness of particular industries;

	•	changes in metals prices, particularly silver and gold;

	•	our results of operations and financial condition as reflected in our public news releases or periodic filings with the Securities and Exchange Commission;

	•	political and regulatory risk;

	•	the success of our exploration programs;

	•	ability to meet production estimates;

	•	environmental and legal risk;

	•	the extent of analytical coverage concerning our business; and

	•	the trading volume and general market interest in our securities.

The market price of our stock at any given point in time may not accurately reflect our long-term value, and may prevent shareholders from realizing a profit on their investment.

Our Series B Preferred Stock has a liquidation preference of $50 per share or $8.0 million.

If we were liquidated, holders of our preferred stock would be entitled to receive approximately $8.0 million (plus any accrued and unpaid dividends) from any liquidation proceeds before holders of our Common Stock would be entitled to receive any proceeds. Our Series B Preferred Stock ranks on parity with our Mandatory Convertible Preferred Stock and our new 12% Convertible Preferred Stock.

Table of Contents

Our Mandatory Convertible Preferred Stock has a liquidation preference of $100 per share or $204.5 million.

If we were liquidated, holders of our preferred stock would be entitled to receive approximately $204.5 million (plus any accrued and unpaid dividends) from any liquidation proceeds before holders of our Common Stock would be entitled to receive any proceeds. Our Mandatory Convertible Preferred Stock ranks on parity with our Series B Preferred Stock and our new 12% Convertible Preferred Stock.

Our 12% Convertible Preferred Stock has a liquidation preference of $100 per share or $4.3 million.

If we were liquidated, holders of our 12% Convertible Preferred Stock would be entitled to receive approximately $4.3 million (plus any accrued and unpaid dividends) from any liquidation proceeds before holders of Common Stock would be entitled to receive any proceeds. Additional shares of 12% Convertible Preferred Stock may be issued in accordance with the provisions of our credit facilities. Our 12% Convertible Preferred Stock ranks on parity with our Series B Preferred Stock and our Mandatory Convertible Preferred Stock. See Note 21 of Notes to Consolidated Financial Statements for more information on our 12% Convertible Preferred Stock.

We may not be able to pay preferred stock dividends in the future.

Since July 2005, we have continued to pay regular quarterly dividends on our Series B Cumulative Convertible Preferred Stock through the third quarter of 2008. The annual dividend payable on the Series B preferred stock is currently $0.6 million. Prior to the fourth quarter of 2004, we had not declared preferred dividends on Series B preferred stock since the second quarter of 2000. In December 2007, we issued 6.5% Mandatory Convertible Preferred Stock with an annual dividend of $13.1 million, each of which quarterly dividend payments have been made through the third quarter of 2008. Series B and Mandatory Convertible preferred stock dividends due on January 1, 2009 for the fourth quarter of 2008 were deferred. Failure to pay such dividends for six dividend periods will enable our holders of preferred stock to elect two directors. There can be no assurance that we will continue to pay dividends in the future.

Additional issuances of equity securities by us would dilute the ownership of our existing stockholders and could reduce our earnings per share.

We may issue equity in the future in connection with acquisitions, strategic transactions or for other purposes. Any such acquisition could be material to us and could significantly increase the size and scope of our business, including our market capitalization. We may also be required to issue Common Stock upon the conversion of our Mandatory Convertible Preferred Stock and may pay dividends on our Mandatory Convertible Preferred Stock in shares of our Common Stock. To the extent we issue any additional equity securities, the ownership of our existing stockholders would be diluted and our earnings per share could be reduced.

On February 4, 2009, we entered into an agreement to sell 32 million units comprised of one share of Common Stock and one-half Series 3 Warrant to purchase one share of Common Stock in an underwritten public offering for proceeds of approximately $65.6 million. On February 6, 2009, the underwriters exercised their over-allotment option in connection with the original offering, resulting in the issuance and sale of 4.8 million additional units for additional proceeds of approximately $9.8 million. We applied $40 million of the total proceeds to the payment of our outstanding bridge facility balance on February 10, 2009. In accordance with the credit facilities, we also reduced our term loan by approximately $8 million in February 2009 (see Note 21 of Notes to Consolidated Financial Statements for more information).

The issuance of additional shares of our preferred stock or common stock in the future could adversely affect holders of Common Stock.

The market price of our Common Stock is likely to be influenced by our preferred stock. For example, the market price of our Common Stock could become more volatile and could be depressed by:


	•	investors’ anticipation of the potential resale in the market of a substantial number of additional shares of our Common Stock received upon conversion of the Mandatory Convertible Preferred Stock or as dividends thereon; and

	•	our failure to pay dividends on our currently outstanding Series B Preferred Stock or Mandatory Convertible Preferred Stock, which would prevent us from paying dividends to holders of our Common Stock.

In addition, our board of directors is authorized to issue additional classes or series of preferred stock without any action on the part of our stockholders. This includes the power to set the terms of any such classes or series of preferred stock that may be issued, including voting rights, dividend rights and preferences over Common Stock with respect to dividends or upon the liquidation, dissolution or winding up of the business and other terms. If we issue preferred stock in the future that has preference over our Common Stock with respect to the payment of dividends or upon liquidation,

Table of Contents

dissolution or winding up, or if we issue preferred stock with voting rights that dilute the voting power of our Common Stock, the rights of holders of the Common Stock or the market price of the Common Stock could be adversely affected.

On February 4, 2009, we entered into an agreement to sell 32 million units comprised of one share of Common Stock and one-half Series 3 Warrant to purchase one share of Common Stock in an underwritten public offering for proceeds of approximately $65.6 million. On February 6, 2009, the underwriters exercised their over-allotment option in connection with the original offering, resulting in the issuance and sale of 4.8 million additional units for additional proceeds of approximately $9.8 million. We applied $40 million of the total proceeds to the payment of our outstanding bridge facility balance on February 10, 2009. In accordance with the credit facilities, our term loan was also reduced by approximately $8 million in February 2009 (see Note 21 of Notes to Consolidated Financial Statements for more information).

If a large number of shares of our Common Stock is sold in the public market, the sales could reduce the trading price of our Common Stock and impede our ability to raise future capital.

We cannot predict what effect, if any, future issuances by us of our Common Stock or other equity will have on the market price of our Common Stock. In addition, shares of our Common Stock that we issue in connection with an acquisition may not be subject to resale restrictions. We may issue substantial additional shares of Common Stock or other securities in connection with material acquisition transactions. The market price of our Common Stock could decline if certain large holders of our Common Stock, or recipients of our Common Stock in connection with an acquisition, sell all or a significant portion of their shares of Common Stock or are perceived by the market as intending to sell these shares other than in an orderly manner. In addition, these sales could also impair our ability to raise capital through the sale of additional Common Stock in the capital markets.

On February 4, 2009, we entered into an agreement to sell 32 million units comprised of one share of Common Stock and one-half Series 3 Warrant to purchase one share of Common Stock in an underwritten public offering for proceeds of approximately $65.6 million. On February 6, 2009, the underwriters exercised their over-allotment option in connection with the original offering, resulting in the issuance and sale of 4.8 million additional units comprised for additional proceeds of approximately $9.8 million. We applied $40 million of the total proceeds to the payment of our outstanding bridge facility balance on February 10, 2009. In accordance with the credit facilities, we also reduced our term loan by approximately $8 million in February 2009 (see Note 21 of Notes to Consolidated Financial Statements for more information).

Common Stock issued pursuant to subsequent offerings or eligible for future issuance or sale may cause the Common Stock price to decline, which may negatively impact your investment.

We may issue substantial additional shares of Common Stock or other securities in connection with acquisition transactions or for other purposes, to the extent permitted by our credit facilities. Any such acquisition could be material to us and could significantly increase the size and scope of our business. Issuances or sales of substantial amounts of additional Common Stock or the perception that such issuances or sales could occur, may cause prevailing market prices for our Common Stock to decline and could result in dilution to our stockholders. See Legal, Market and Regulatory Risks — Additional issuances of equity securities by us would dilute the ownership of our existing stockholders and could reduce our earnings per share and If a large number of shares of our Common Stock is sold in the public market, the sales could reduce the trading price of our Common Stock and impede our ability to raise future capital .

The provisions in our certificate of incorporation, our by-laws and Delaware law could delay or deter tender offers or takeover attempts that may offer a premium for our Common Stock.

The provisions in our certificate of incorporation, our by-laws and Delaware law could make it more difficult for a third party to acquire control of us, even if that transaction would be beneficial to stockholders. These impediments include:


	•	the classification of our board of directors into three classes serving staggered three-year terms, which makes it more difficult to quickly replace board members;

	•	the ability of our board of directors to issue shares of preferred stock with rights as it deems appropriate without stockholder approval;

	•	a provision that special meetings of our board of directors may be called only by our chief executive officer or a majority of our board of directors;

Table of Contents


	•	a provision that special meetings of stockholders may only be called pursuant to a resolution approved by a majority of our entire board of directors;

	•	a prohibition against action by written consent of our stockholders;

	•	a provision that our board members may only be removed for cause and by an affirmative vote of at least 80% of the outstanding voting stock;

	•	a provision that our stockholders comply with advance-notice provisions to bring director nominations or other matters before meetings of our stockholders;

	•	a prohibition against certain business combinations with an acquirer of 15% or more of our Common Stock for three years after such acquisition unless the stock acquisition or the business combination is approved by our board prior to the acquisition of the 15% interest, or after such acquisition our board and the holders of two-thirds of the other Common Stock approve the business combination; and

	•	a prohibition against our entering into certain business combinations with interested stockholders without the affirmative vote of the holders of at least 80% of the voting power of the then outstanding shares of voting stock.

The existence of these provisions may deprive stockholders of an opportunity to sell our stock at a premium over prevailing prices. The potential inability of our stockholders to obtain a control premium could adversely affect the market price for our Common Stock.

If we cannot meet the New York Stock Exchange continued listing requirements, the NYSE may delist our Common Stock.

Our Common Stock is currently listed on the NYSE. In the future, we may not be able to meet the continued listing requirements of the NYSE, which require, among other things, that the average closing price of our common stock be above $1.00 over 30 consecutive trading days. Our closing stock price on February 27, 2008 was $1.52.

If we are unable to satisfy the NYSE criteria for continued listing, our Common Stock would be subject to delisting. A delisting of our Common Stock could negatively impact us by, among other things, reducing the liquidity and market price of our Common Stock; reducing the number of investors willing to hold or acquire our Common Stock, which could negatively impact our ability to raise equity financing; decreasing the amount of news and analyst coverage for the Company; and limiting our ability to issue additional securities or obtain additional financing in the future. In addition, delisting from the NYSE might negatively impact our reputation and, as a consequence, our business.

I tem 1B. Unresolved Staff Comments

None.

Table of Contents

I tem 2. Property Descriptions

O PERATING PROPERTIES

T he Greens Creek Unit

On April 16, 2008, we completed the acquisition of all of the equity of two Rio Tinto subsidiaries holding a 70.3% interest in the Greens Creek mine for approximately $750 million. The acquisition gives our various subsidiaries control of 100% of the Greens Creek mine, as our wholly-owned subsidiary, Hecla Alaska LLC, owned an undivided 29.7% joint venture interest in the assets of Greens Creek prior to our acquisition of the remaining 70.3% interest.

The Greens Creek orebody contains silver, zinc, gold and lead, and lies adjacent to the Admiralty Island National Monument, an environmentally sensitive area. The Greens Creek property includes 17 patented lode claims and one patented mill site claim, in addition to property leased from the U.S. Forest Service. Greens Creek also has title to mineral rights on 7,500 acres of federal land adjacent to the properties. The entire project is accessed by boat and served by 13 miles of road and consists of the mine, an ore concentrating mill, a tailings impoundment area, a ship-loading facility, camp facilities and a ferry dock. The map below illustrates the location and access to Greens Creek:

(MAP)

The Greens Creek deposit is a polymetallic, stratiform, massive sulfide deposit. The host rock consists of predominantly marine sedimentary, and mafic to ultramafic volcanic and plutonic rocks, which have been subjected to multiple periods of deformation. These deformational episodes have imposed intense tectonic fabrics on the rocks. Mineralization occurs discontinuously along the contact between a structural hanging wall of quartz mica carbonate phyllites and a structural footwall of graphitic and calcareous argillite. Major sulfide minerals are pyrite, sphalerite, galena, and tetrahedrite/tennanite.

Pursuant to a 1996 land exchange agreement, the joint venture transferred private property equal to a value of $1.0 million to the U.S. Forest Service and received exploration and mining rights to approximately 7,500 acres of land with mining potential surrounding the existing mine. Production from new ore discoveries on the exchanged lands will be subject to federal royalties included in the land exchange agreement. The royalty is only due on production from reserves that are not part of Greens Creek’s extralateral rights. Thus far, there has been no discovery triggering payment of the royalty. The royalty is 3% if the average value of the ore during a year is greater than $120 per ton of ore, and 0.75% if the value is $120 per ton or less. The benchmark of $120 per ton is adjusted annually according to the Gross Domestic Product (GDP) Implicit Price Deflator until the year 2016, and at December 31, 2008, was at approximately $157 per ton when applying the latest GDP Implicit Price Deflator observation.

Greens Creek is an underground mine which produces approximately 2,100 tons of ore per day. The primary mining methods are cut and fill and longhole stoping. The ore is processed on site at a mill, which produces lead, zinc and bulk concentrates, as well as doré containing silver and gold. In 2008, ore was processed at an average rate of approximately 2,008 tons per day. During 2008, mill recovery totaled approximately 73% silver, 87% zinc, 78% lead and 64% gold. The doré is sold to a precious metal refiner and on the open market and the three concentrate products are sold to a number of major smelters worldwide. Concentrates are shipped from a marine terminal located on Admiralty Island about nine miles from the mine site.

The Greens Creek unit has historically been powered completely by diesel generators located on site. However, an agreement was reached during 2005 to purchase excess hydroelectric power from the local power company. Installation of the necessary infrastructure was completed in 2006, and use of hydroelectric power commenced during the third quarter of 2006. Low lake levels and increased demand in the Juneau area have combined to decrease power available to Greens Creek, and it is unlikely that Greens Creek will obtain significant utility power until 2010.

The employees at Greens Creek are employees of our Hecla Greens Creek Mining Company, our wholly-owned subsidiary, and are not represented by a bargaining agent. There were 336 employees at the Greens Creek unit at December 31, 2008. All equipment, infrastructure and facilities, including camp and concentrate storage facilities, are in good condition.

As of December 31, 2008, we have recorded a $30.0 million asset retirement obligation for reclamation and closure costs. In August 2008, we obtained the release of our trust fund balance of $30.4 million previously held for future reclamation at Greens Creek, replacing it with a $30 million bond secured by the restricted cash balance of $7.6 million. The net book value of the Greens Creek unit property and its associated plant, equipment and mineral interests was approximately $738.4 million as of December 31, 2008.

Table of Contents

For 2007 and 2006, prior to our acquisition of the remaining 70.3% interest in Greens Creek, Kennecott Greens Creek Mining Company’s geology and engineering staff computed the estimated ore reserves, and provided the weighted average metals prices used in the reserve estimates, for the Greens Creek unit, with our technical support. We reviewed the geologic interpretation and reserve methodology, but the reserve compilations for those periods were not independently confirmed by us in their entirety. Information with respect to production, average costs per ounce of silver produced and proven and probable ore reserves is set forth in the following table, and represents our 100% ownership of Greens Creek after April 16, 2008, and our previous 29.7% ownership prior to that date.


	Years Ended December 31,
Production ⁽⁶⁾	2008		2007			2006
Ore milled (tons)		598,931		217,691			217,676
Silver (ounces)		5,829,253		2,570,701			2,636,083
Gold (ounces)		54,650		20,218			18,713
Zinc (tons)		52,055		18,612			17,670
Lead (tons)		16,630		6,252			6,242

Average Cost per Ounce of Silver Produced ⁽¹⁾
Total cash costs	$	3.29	$	(5.27	)	$	(3.47	)
Total production costs	$	8.52	$	(1.93	)	$	(0.30	)

Probable Ore Reserves ^{(2,3,4,5,6,7)}
Total tons		8,064,700		2,513,700			2,282,574
Silver (ounces per ton)		13.7		13.7			14.4
Gold (ounces per ton)		0.11		0.11			0.11
Zinc (percent)		10.5		10.2			10.4
Lead (percent)		3.8		3.8			4.0
Contained silver (ounces)		110,583,200		34,497,800			32,913,002
Contained gold (ounces)		870,100		270,000			257,101
Contained zinc (tons)		850,700		255,900			237,187
Contained lead (tons)		308,700		95,300			90,919




(1)	Includes by-product credits from gold, lead and zinc production. Cash costs per ounce of silver represent measurements that are not in accordance with GAAP that management uses to monitor and evaluate the performance of our mining operations. We believe cash costs per ounce of silver provide an indicator of profitability and efficiency at each location and on a consolidated basis, as well as providing a meaningful basis to compare our results to those of other mining companies and other mining operating properties. A reconciliation of this non-GAAP measure to cost of sales and other direct production costs and depreciation, depletion and amortization, the most comparable GAAP measure, can be found in Item 7. — MD&A, under Reconciliation of Total Cash Costs (non-GAAP) to Costs of Sales and Other Direct Production Costs and Depreciation, Depletion and Amortization (GAAP).

(2)	Estimates of proven and probable ore reserves for the Greens Creek unit as of December 2008, 2007 and 2006 are derived from successive generations of reserve and feasibility analyses for different areas of the mine each using a separate assessment of metals prices. The weighted average prices used for 2007 and 2006 reserve estimates were determined by the Kennecott Greens Creek Mining Company, then an indirect subsidiary of Rio Tinto, plc, and differ from the prices used by us, for example, in making such calculations for our Lucky Friday unit for those years. The average prices used for the Greens Creek unit were:


	December 31,
	2008		2007		2006
Silver (per ounce)	$	12.25	$	8.00	$	6.00
Gold (per ounce)	$	650	$	529	$	446
Lead (per pound)	$	0.80	$	0.27	$	0.27
Zinc (per pound)	$	0.80	$	0.58	$	0.47


(3)	Ore reserves represent in-place material, diluted and adjusted for expected mining recovery. Mill recoveries of ore reserve grades differ by ore zones and are expected to average 74% for silver, 68% for gold, 77% for zinc and 73% for lead.

(4)	The changes in reserves in 2008 versus 2007 and 2006 are due to the our acquisition of the remaining 70.3% of Greens Creek, as discussed above, along with the addition of new drill data and increases in forecasted precious metals prices, partially offset by depletion due to production. The changes in reserves in 2007 versus 2006 are due to the addition of new drill data and increases in forecasted precious metals prices, which have resulted in the addition of new reserves based on updated estimates for certain orebodies, partially offset by depletion due to production.

Table of Contents


(5)	We only report probable reserves at the Greens Creek unit, which are based on average drill spacing of 50 to 100 feet. Proven reserves typically require that mining samples are partly the basis of the ore grade estimates used, while probable reserve grade estimates can be based entirely on drilling results. Cutoff grade assumptions vary by orebody and are developed based on reserve prices, anticipated mill recoveries and smelter payables and cash operating costs. Cutoff grades range from $97 per ton net smelter return to $107 per ton net smelter return.

(6)	Reflects our 29.7% ownership interest until April 16, 2008, and our 100% ownership thereafter.

(7)	An independent review by AMEC E&C, Inc. was completed in 2008 for the 2007 reserve models for the 5250N and Northwest West zones.

The Lucky Friday Unit

Since 1958, we have owned and operated the Lucky Friday unit, a deep underground silver, lead and zinc mine located in the Coeur d’Alene Mining District in northern Idaho. Lucky Friday is one-quarter mile east of Mullan, Idaho, and is adjacent to U.S. Interstate 90. Below is a map illustrating the location and access to the Lucky Friday unit:

(MAP)

There have been two ore-bearing structures mined at the Lucky Friday unit. The first, mined through 2001, was the Lucky Friday vein, a fissure vein typical of many in the Coeur d’Alene Mining District. The orebody is located in the Revett Formation, which is known to provide excellent host rocks for a number of orebodies in the Coeur d’Alene Mining District. The Lucky Friday vein strikes northeasterly and dips steeply to the south with an average width of six to seven feet. Its principal ore minerals are galena and tetrahedrite with minor amounts of sphalerite and chalcopyrite. The ore occurs as a single continuous orebody in and along the Lucky Friday vein. The major part of the orebody has extended from the 1,200-foot level to and below the 6,020-foot level.

The second ore-bearing structure, known as the Lucky Friday Expansion Area, has been mined since 1997 pursuant to an operating agreement with Independence Lead Mines Company (“Independence’). During 1991, we discovered several mineralized structures containing some high-grade silver ores in an area known as the Gold Hunter property, approximately 5,000 feet northwest of the then existing Lucky Friday workings. This discovery led to the development of the Gold Hunter property on the 4900 level. On November 6, 2008, we completed the acquisition of substantially all of the assets of Independence, including the mining claims pertaining to their agreement with us that includes all future interest or royalty obligation to Independence (see Note 19 of Notes to Consolidated Financial Statements for further discussion). Prior to the acquisition, we controlled the Gold Hunter property under a long-term operating agreement with Independence that was to expire in February 2018 and was renewable thereafter, that entitled us, as operator, to an 81.48% interest in the net profits from operations from the Gold Hunter property. Under that agreement, we would have been obligated to pay a net profits interest of 18.52% to Independence after we have recouped our costs to explore and develop the property.

The principal mining method at the Lucky Friday unit is ramp access, cut and fill. This method utilizes rubber-tired equipment to access the veins through ramps developed outside of the orebody. Once a cut is taken along the strike of the vein, it is backfilled with cemented tailings and the next cut is accessed, either above or below, from the ramp system.

The ore produced from Lucky Friday is processed in a conventional flotation mill, which produces both a silver-lead concentrate and a zinc concentrate. In 2008, ore was processed at an average rate of approximately 875 tons per day. During 2008, mill recovery totaled approximately 93% silver, 93% lead and 83% zinc. All silver-lead and zinc concentrate production during 2008 was shipped to Teck Cominco Limited’s smelter in Trail, British Columbia, Canada.

Information with respect to the Lucky Friday unit’s production, average cost per ounce of silver produced and proven and probable ore reserves for the past three years is set forth in the table below.

Table of Contents


	Years Ended December 31,
Production	2008		2007			2006
Ore milled (tons)		317,777		323,659			276,393
Silver (ounces)		2,880,264		3,071,857			2,873,663
Lead (tons)		18,393		18,297			16,657
Zinc (tons)		9,386		8,009			6,537

Average Cost per Ounce of Silver Produced ⁽¹⁾
Total cash costs	$	6.06	$	(0.75	)	$	3.65
Total production costs	$	7.87	$	0.52		$	4.90

Proven Ore Reserves ^(2,3,4)
Total tons		1,270,000		760,700			628,976
Silver (ounces per ton)		12.4		12.3			13.1
Lead (percent)		7.8		7.2			8.2
Zinc (percent)		2.5		2.5			2.8
Contained silver (ounces)		15,800,800		9,324,800			8,245,675
Contained lead (tons)		98,700		54,500			51,322
Contained zinc (tons)		31,600		18,900			17,548

Probable Ore Reserves ^(2,3,4)
Total tons		523,400		680,000			732,920
Silver (ounces per ton)		11.6		11.9			13.5
Lead (percent)		6.5		7.5			8.2
Zinc (percent)		2.7		2.5			2.9
Contained silver (ounces)		6,046,800		8,065,200			9,890,120
Contained lead (tons)		33,900		50,900			60,284
Contained zinc (tons)		14,300		16,700			21,606

Total Proven and Probable Ore Reserves ^(2,3,4)
Total tons		1,793,400		1,440,700			1,361,896
Silver (ounces per ton)		12.2		12.1			13.3
Lead (percent)		7.4		7.3			8.2
Zinc (percent)		2.6		2.5			2.9
Contained silver (ounces)		21,847,500		17,390,000			18,135,795
Contained lead (tons)		132,600		105,400			111,606
Contained zinc (tons)		45,900		35,600			39,154



(1)	Includes by-product credits from lead and zinc production. Cash costs per ounce of silver or gold represent measurements that are not in accordance with GAAP that management uses to monitor and evaluate the performance of our mining operations. We believe cash costs per ounce of silver provide an indicator of profitability and efficiency at each location and on a consolidated basis, as well as providing a meaningful basis to compare our results to those of other mining companies and other mining operating properties. A reconciliation of this non-GAAP measure to cost of sales and other direct production costs and depreciation, depletion and amortization, the most comparable GAAP measure, can be found in Item 7. — Management’s Discussion and Analysis of Financial Condition and Results of Operations, under Reconciliation of Total Cash Costs (non-GAAP) to Costs of Sales and Other Direct Production Costs and Depreciation, Depletion and Amortization (GAAP).

(2)	Proven and probable ore reserves are calculated and reviewed in-house and are subject to periodic audit by others, although audits are not performed on an annual basis. Cutoff grade assumptions vary by ore body and are developed based on reserve prices, anticipated mill recoveries and smelter payables and cash operating costs. Due to multiple ore metals, and complex combinations of ore types, metal ratios and metallurgical performances at the Lucky Friday, the cutoff grade is expressed in terms of net smelter return (“NSR”), rather than metal grade. The cutoff grade at the Lucky Friday ranges from $66 per ton NSR to $85 per ton NSR. Our estimates of proven and probable reserves are based on the following metals prices:

Table of Contents


	December 31,
	2008		2007		2006
Silver (per ounce)	$	12.25	$	10.00	$	8.00
Lead (per pound)	$	0.80	$	0.60	$	0.42
Zinc (per pound)	$	0.80	$	1.00	$	0.67


(3)	Reserves are in-place materials that incorporate estimates of the amount of waste that must be mined along with the ore and expected mining recovery. Mill recoveries are expected to be 95% for silver, 94% for lead and 87% for zinc. Zinc recovery has improved from historical levels due to mill upgrades completed during 2007, 2006 and 2005.

(4)	The changes in reserves in 2008 versus 2007, and in 2007 versus 2006, are due to addition of data from new drill holes and development work together with increases in forecast metals prices, which has resulted in the addition of new reserves based on updated estimates, partially offset by depletion due to production.

During 2008, we initiated engineering, procurement and development activities relating to construction of an internal shaft at the Lucky Friday mine, which, upon completion, would provide access from the 6200 level down to the 8000 level in the mine. This new infrastructure would allow us to mine mineralized material below our current workings on the 5900 level, and also provide a deeper exploration platform. Activities for this project thus far have included: engineering, purchase of some equipment including hoists and service trucks, and pre-development construction from existing workings to the shaft collar, hoist room and other smaller facilities on the 4900 level. However, the project has been placed on hold due to decreases in metals prices during the second half of 2008; allowing time for additional internal study and review of deep access alternatives at the Lucky Friday. As a result, the timing and extent of future work on the internal shaft project is uncertain at this time.

Ultimate reclamation activities are anticipated to include stabilization of tailings ponds and waste rock areas. No final reclamation activities were performed in 2008, and at December 31, 2008, an asset retirement obligation of approximately $0.9 million had been recorded for reclamation and closure costs. The net book value of the Lucky Friday unit property and its associated plant, equipment and mineral interests was approximately $95.8 million as of December 31, 2008. The construction of the facilities at Lucky Friday ranges from the 1950s to 2008, and all are in good physical condition. In 2005, 2006 and 2007, we made capital improvements to our processing plant to improve concentrate grades and metal recoveries. Additions included a three-stage crushing system, increased flotation capacity and two new flash cells, new column cells and tailings thickeners, and an on-stream analyzer. The plant is maintained by our employees with assistance from outside contractors as required.

At December 31, 2008, there were 269 employees at the Lucky Friday unit. The United Steelworkers of America is the bargaining agent for the Lucky Friday’s 211 hourly employees. The current labor agreement expires on April 30, 2009. Avista Corporation supplies electrical power to the Lucky Friday unit.

EXPLORATION PROPERTIES

The San Sebastian Unit

The San Sebastian mine is located approximately 56 miles northeast of the city of Durango, Mexico, on concessions acquired in 1999. Access to San Sebastian is via Mexico Highway 40, approximately 7 miles east of Guadalupe Victoria, and then approximately 14 miles of paved rural road through the towns of Ignacio Allende and Emiliano Zapata. The processing plant, located near Velardeña, Durango, Mexico, was acquired in April 2001. The map below illustrates the location and access to the San Sebastian unit:

(MAP)

Our concession holdings cover approximately 308 square miles, including the Francine vein, the Don Sergio vein and multiple outlying active exploration areas. Production from the Francine vein was from a high-grade silver vein with significant gold credits. Production from the Don Sergio vein was from a high-grade gold vein with some silver credits. Mineral concession titles are obtained and held under the laws of Mexico, and are valid for 50 years with the possibility of extending another 50 years. There are work assessment and tax requirements that are variable and increase with the time that the concession is held.

Several intermediate sulfidation epithermal veins occur within the Saladillo Valley and include the Francine, Profesor, Middle and North vein systems. These veins are proximal to each other and are hosted within a series of shales with interbedded fine-grained sandstones interpreted to belong to the Cretaceous Caracol Formation. The Don Sergio, Jessica, Andrea and Antonella veins located in the Cerro Pedernalillo area, about 4 miles from Francine, are end member low sulfidation epithermal veins hosted by the same formation with the addition of dioritic intrusive rocks.

Underground development along the Francine vein started in May 2001, and reached full production during the second quarter of 2002. Mining of economic ore on the upper Francine vein was completed during the first quarter of 2005. The mine has been placed on care and maintenance as exploration continues on the property, including the Hugh Zone, which is

Table of Contents

located 2300 feet below historic mining. Mining of economic ore on the Don Sergio vein was completed in the fourth quarter of 2005 and reclamation of this portion of the mine site was completed during 2006. San Sebastian’s life-of-mine production over four years was 11.2 million ounces of silver and 155,937 ounces of gold.

The Francine vein strikes northwest and dips southwest, and is located on the southwestern limb of a doubly plunging anticline. The vein ranges in true thickness from more than 13 feet to less than 1.5 feet, and consists of several episodes of banded quartz, silica-healed breccias and minor amounts of calcite. The vein is oxidized to a depth of approximately 328 vertical feet and the wall rocks contain an alteration halo of less than 7 feet next to the vein. Mineralization within the oxidized portion of the vein contains limonite, hematite, silver halides and various copper carbonates. Higher-grade gold and silver mineralization is associated with disseminated hematite and limonite after pyrite and chalcopyrite, copper carbonates including malachite and azurite and hydrous copper silicates including chrysocolla. Native gold occurs associated with hematite and limonite. Mineralization in the sulfide portion of the Francine vein contains pyrite, chalcopyrite, sphalerite, galena, native silver, argentite and trace amounts of aguilarite. Hugh Zone mineralization contains chalcopyrite, sphalerite, galena, argentite, acanthite, tetrahedrite, polybasite, stephanite, freibergite, and pyrargyrite.

Access to both underground workings has been through ramps from the surface connecting one or more levels. Ore has been mined by the cut-and-fill stoping method and extracted from the stopes using rubber-tired equipment and hauled to the surface in trucks. Run of mine ore has been hauled in trucks by contractors to our processing facility near Velardeña, which is approximately 68 miles from the San Sebastian mine and 72 miles from the Don Sergio mine. The mill, which was constructed in 1994 and is capable of processing approximately 550 tons per day, is a conventional leach, counter-current decantation and Merrill Crowe precipitation circuit. The ore has been crushed in a two-stage crushing plant consisting of a primary jaw, a secondary cone crusher and a double-deck vibrating screen. The grinding circuit includes a primary ball mill and cyclone classifiers. The ground ore was thickened, followed by agitated leaching and four stages of counter-current decantation to wash solubilized silver and gold from the pulp. The solution bearing silver and gold was clarified, deaerated and zinc dust added to precipitate silver and gold that is recovered in plate and frame filters. The precious metal precipitate was smelted and refined into doré, and was then shipped to a third-party refiner. Processing of economic ore was completed during the fourth quarter of 2005, and the mill was placed on care and maintenance at that time.

During 2008, exploration activities were focused in the La Roca target area, district scaled soil geochemistry, and district scaled target identification through detailed mapping and sampling. Through this work, several new drillable targets have been identified in the district. Continued district scaled target identification through detailed mapping and sampling is planned during 2009.

Additional exploration at the San Sebastian unit during 2008 included activity at the Rio Grande exploration project, which is located approximately 51 miles north of Fresnillo in Zacatecas State, on concessions acquired under an option to purchase agreement in 2007. Access to the property is via Mexico Highway 49, approximately 1 mile south of the city of Rio Grande followed by approximately 6 miles of dirt road west to the center of the property.

Our Rio Grande concession holdings cover approximately 5 square miles and several low- to intermediate-sulfidation epithermal vein systems including the La Soledad, Arcangeles, El Leon, Sacramento, Concepcion, and San Martin vein systems in addition to multiple outlying active exploration areas. These veins are proximal to each other and are hosted within a series of shales with interbedded fine-grained sandstones interpreted to belong to the Cretaceous Caracol Formation. The Rio Grande vein systems strike north to northwest and dips to the west and southwest. The veins range in true thickness from more than 46-feet to less than 1.5 feet, and consist of several episodes of banded quartz, silica-healed breccias and minor amounts of calcite. These veins are partially oxidized to a depth of approximately 196 vertical feet and the wall rocks contain an alteration halo of less than 33 feet next to the vein. Mineralization within these veins consists of limonite, hematite, marcasite, pyrite, argentite, and pyrargyrite and trace amounts of chalcopyrite.

During 2008, the initial drilling of the La Soledad, Arcangeles, El Leon, Sacramento, Concepcion, San Martin, and Aguila Mexicana veins was completed. In 2009, we will continue district scaled target identification through detailed mapping and sampling, but are also considering optioning or dropping the Rio Grande project.

At December 31, 2008, the net book value of the San Sebastian unit property and its associated plant and equipment was $3.2 million, including approximately $3 million for the mill. Site infrastructure includes a water supply system, maintenance shop, warehouse, laboratory, tailings impoundment and various offices. Equipment and facilities are in good condition and have been placed on care and maintenance pending a resumption of operations. We are currently involved in litigation concerning our ownership of the Velardeña mill. We are negotiating with the plaintiff who has offered to purchase the mill from us. See the Mexico Litigation section of Note 8 of Notes to Consolidated Financial Statements for more information.

As of December 31, 2008, $1.2 million has been accrued for reclamation and closure costs, and there were 25 hourly and 32 salaried employees performing exploration, care and maintenance, reclamation and security functions. In January 2009, we reduced our workforce in Mexico by 18 hourly and 17 salary employees as a part of an effort to conserve cash.

Table of Contents

Due to the curtailment of mining activity, the collective bargaining agreement with the National Mine and Mill Workers Union for hourly mill employees was terminated during the fourth quarter of 2005. Electric power is purchased from Comisión Federal de Electricidad (a Mexico federal electric company).

I tem 3. Legal Proceedings

For a discussion of our legal proceedings, see Note 8 of Notes to Consolidated Financial Statements.

I tem 4. Submission of Matters to a Vote of Security Holders

No matters were submitted to a vote of security holders, through the solicitation of proxies or otherwise, during the quarter ended December 31, 2008.

Executive Officers of the Registrant

Information set forth in Part III, Item 10 is incorporated by reference into this Part I, Item 4.

P ART II

I tem 5. Market for Registrant’s Common Equity and Related Stockholder Matters and Issuer Purchases of Equity Securities


(a)	(i)	Shares of our common stock are traded on the New York Stock Exchange, Inc.

	(ii)	Our common stock quarterly high and low sale prices for the past two years were as follows:


	First Quarter		Second Quarter		Third Quarter		Fourth Quarter
2008 – High	$	12.79	$	13.14	$	10.00	$	4.93
– Low	$	8.05	$	7.40	$	4.00	$	0.99
2007 – High	$	9.21	$	9.89	$	9.80	$	12.57
– Low	$	6.36	$	7.47	$	6.58	$	8.18


(b)	As of February 27, 2009, there were 7,898 shareholders of record of the common stock.

(c)	No dividends have been declared on our common stock in the last two years. Quarterly dividends were paid on our Series B Cumulative Convertible Preferred Stock for the first three quarters of 2008, with $0.1 million for cumulative, undeclared, unpaid dividends at December 31, 2008 for the fourth quarter 2008. Dividends have been paid on our Mandatory Convertible Preferred Stock for the first three quarters of 2008, with cumulative, undeclared, unpaid dividends of $3.4 million at December 31, 2008 for the fourth quarter of 2008. We have no plans for payment of dividends on common stock. We cannot pay dividends on our common stock if we fail to pay, when due, dividends on our Series B or Mandatory Convertible Preferred Stock or our recently issued 12% Convertible Preferred Stock.

(d)	The following table provides information as of December 31, 2008, regarding our compensation plans under which equity securities are authorized for issuance:


	Number of Securities To Be Issued Upon Exercise of Outstanding Options, Warrants and Rights		Weighted-Average Exercise Price of Outstanding Options		Number of Securities Remaining Available For Future Issuance Under Equity Compensation Plans
Equity Compensation Plans Approved by Security Holders:
1995 Stock Incentive Plan		1,397,179		7.80		3,449,697
Stock Plan for Nonemployee Directors		—		N/A		735,454
Key Employee Deferred Compensation Plan		100,000		3.65		4,113,350
Total		1,497,179		7.52		8,298,501

See Notes 9 and 10 of Notes to Consolidated Financial Statements for information regarding the above plans.


(e)	We did not sell any unregistered securities in 2006 and 2007. During 2008, we issued unregistered common shares as follows:

Table of Contents


	a.	On January 17, 2008, we issued 550,000 unregistered common shares to fund our donation to the Hecla Charitable Foundation.

	b.	On January 24, 2008, we issued 118,333 unregistered common shares in a private placement pursuant to section 4(2) of the 1933 Act and Regulation D to an accredited investor to acquire properties in the Silver Valley of Northern Idaho.

	c.	On February 21, 2008, we issued 927,716 unregistered common shares in a private placement pursuant to section 4(2) of the 1933 Act and Regulation D to an accredited investor to acquire a joint venture interest (see Note 19 of Notes to Consolidated Financial Statements ).

	d.	On April 16, 2008, we issued 4,365,000 unregistered common shares in a private placement pursuant to section 4(2) of the 1933 Act and Regulation D to an accredited investor to partially fund our acquisition of the remaining 70.3% interest in the Greens Creek Joint Venture (see Note 19 of Notes to Consolidated Financial Statements ).

	e.	On October 24, 2008, we issued 633,360 unregistered common shares in a private placement pursuant to section 4(2) of the 1933 Act and Regulation D to an accredited investor as the result of an amendment to a joint venture buy-in agreement (see Note 19 of Notes to Consolidated Financial Statements ).


(f)	Comparison of Five-Year Cumulative Total Shareholder Return—December 2003 through December 2008 ⁽¹⁾ :

Hecla Mining Company, S&P 500, S&P 500 Gold Index, and Custom Peer Group ⁽²⁾



Date	Hecla Mining		S&P 500		S&P 500 Gold Index		Custom Peer Group

December 2003	$	100.00	$	100.00	$	100.00	$	100.00
December 2004	$	70.33	$	110.85	$	91.82	$	95.26
December 2005	$	48.97	$	116.28	$	111.39	$	117.34
December 2006	$	92.40	$	134.61	$	94.97	$	174.13
December 2007	$	112.79	$	141.99	$	103.92	$	204.53
December 2008	$	33.78	$	89.54	$	87.42	$	149.96

Table of Contents



(1)	Total shareholder return assuming $100 invested on December 31, 2003 and reinvestment of dividends on quarterly basis.

(2)	Agnico-Eagle Mines Ltd., Centerra Gold, Inc., Coeur d’Alene Mines Corp., Golden Star Resources Ltd., IAMGOLD Corporation, Kinross Gold Corporation, Northgate Minerals Corporation, Pan American Silver Corp., Stillwater Mining Company, Yamana Gold Inc.

Table of Contents

I tem 6. Selected Financial Data

The following table (in thousands, except per share amounts, common shares issued, shareholders of record, and employees) sets forth selected historical consolidated financial data as of and for each of the years ended December 31, 2004 through 2008, and is derived from our audited financial statements. The data set forth below should be read in conjunction with, and is qualified in its entirety by, our Consolidated Financial Statements and the Notes thereto.


	2008			2007			2006			2005			2004
Sales of products	$	192,655		$	153,702		$	122,585		$	71,152		$	82,942
Income (loss) from continuing operations	$	(37,173	)	$	68,157		$	64,788		$	(17,951	)	$	(12,958	)
Income (loss) from discontinued operations, net of tax	$	(17,395	)	$	(14,960	)	$	4,334		$	(7,409	)	$	6,824
Loss on disposal of discontinued operations, net of tax	$	(11,995	)	$	—		$	—		$	—		$	—
Net income (loss)	$	(66,563	)	$	53,197		$	69,122		$	(25,360	)	$	(6,134	)
Preferred stock dividends ^(1,2,3)		(13,633	)		(1,024	)		(552	)		(552	)		(11,602	)
Income (loss) applicable to common shareholders	$	(80,196	)	$	52,173		$	68,570		$	(25,912	)	$	(17,736	)
Basic and diluted income (loss) per common share	$	(0.57	)	$	0.43		$	0.57		$	(0.22	)	$	(0.15	)
Total assets	$	988,791		$	650,737		$	346,269		$	272,166		$	279,448
Accrued reclamation & closure costs	$	121,347		$	106,139		$	65,904		$	69,242		$	74,413
Noncurrent portion of debt	$	121,667		$	—		$	—		$	3,000		$	—
Cash dividends paid per common share	$	—		$	—		$	—		$	—		$	—
Cash dividends paid per Series B preferred share ⁽²⁾	$	3.50		$	3.50		$	3.50		$	18.38		$	—
Cash dividends paid per Mandatory Convertible Preferred share ⁽³⁾	$	3.48		$			$	—		$	—		$	—
Common shares issued		180,461,371			121,456,837			119,828,707			118,602,135			118,350,861
Mandatory Convertible Preferred shares issued		2,012,500			2,012,500			—			—			—
Shareholders of record		7,936			6,598			6,815			7,568			7,853
Employees		742			871			1,155			1,191			1,417



(1)	During the year ended December 31, 2004, we entered into various agreements to acquire Series B preferred stock in exchange for newly issued shares of common stock as follows:


	Year ended December 31, 2004
Number of shares of Series B preferred stock exchanged for shares of common stock		306,961
Number of shares of common stock issued		2,436,098
Non-cash preferred stock dividend incurred in exchange (millions of dollars) ^(a)	$	10.9


	(a)	The non-cash dividend represents the difference between the value of the common stock issued in the exchange offer and the value of the shares that were issuable under the stated conversion terms of the Series B preferred stock. The non-cash dividend had no impact on our total shareholders’ equity as the offset was an increase in common stock and surplus.

(2)	As of December 31, 2004, we had not declared or paid a total of $2.3 million of Series B preferred stock dividends. As the dividends are cumulative, they are reported in determining the income (loss) applicable to common stockholders, but are excluded in the amount reported as cash dividends paid per Series B preferred share. The $2.3 million in cumulative, undeclared dividends were paid in July 2005. A $0.875 per share dividend was declared on the 157,816 outstanding Series B preferred shares in December 2004, and paid in January 2005, and additional dividends totaling $0.4 million were declared and paid during 2005. A total of $2.9 million in dividends paid during 2005 are included in the amount reported as cash dividends paid per Series B preferred share for 2005, and $0.6 million in dividends declared during 2005 were included in the determination of loss applicable to common stockholders. During 2006 and 2007, $0.6 million in Series B preferred dividends were declared and paid. During 2008, $0.4 million in Series B preferred dividends were declared and paid, while $0.1 million in dividends for the fourth quarter of 2008 were deferred.

Table of Contents

(3)

Cumulative undeclared, unpaid Mandatory Convertible Preferred Stock dividends for the period from issuance to December 31, 2007 totaled $0.5 million, and are reported in determining income applicable to common share holders for the year ended December 31, 2007. The $0.5 million in cumulative undeclared dividends were paid in April 2008. During 2008, $9.8 million in Mandatory Convertible Preferred dividends were declared and paid. $6.5 million of the dividends declared in 2008 were paid in cash, and are included in the amount reported as cash dividends paid per Mandatory Convertible Preferred Share, and $3.3 million of the dividends declared in 2008 were paid in our Common Stock. Mandatory Convertible Preferred Stock dividends for the fourth quarter of 2008 totaling $3.3 million were deferred.

I tem 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

O verview

Established in 1891 in northern Idaho’s Silver Valley, Hecla Mining Company has long been well known in the mining world and financial markets as a quality producer of silver and gold. Headquartered in Coeur d’Alene, Idaho, this international, NYSE-traded company is 118 years old. Our production profile includes:


	•	Silver, gold, lead, and zinc contained in concentrates shipped to various smelters

	•	Silver and gold doré

Our operating properties and exploration interests are located in jurisdictions with relatively low political and economic risk in the United States and Mexico, and are contained in historically successful mining districts. We have three business segments for financial reporting purposes: the Greens Creek operating unit on Admiralty Island in Alaska USA, the Lucky Friday operating unit in Idaho USA, and the San Sebastian exploration unit in Durango, Mexico.

Our operating and strategic framework is based on expanding our production and locating and developing new resource potential. To implement this framework in 2008, we


	•	Acquired the remaining 70.3% interest of the Greens Creek Mine near Juneau, Alaska, so that we now control 100% of the world’s fifth largest silver mine and have almost doubled our annual silver production.

	•	Acquired the right to earn in to a 70% joint venture interest in a land package in one of Colorado’s most prolific silver mining districts.

	•	Acquired substantially all of the assets of Independence Lead Mines, thus consolidating 100% of the future profits of the Lucky Friday mine near Mullan, Idaho.

	•	Sold our subsidiaries engaged in Venezuelan mining operations.

Following the acquisitions in the U.S. and divestiture of our Venezuelan interests, we believe we are positioned as one of the lowest-cost, lowest-risk producers of precious metals.

Subsequent to the acquisitions discussed above we, like many companies, were affected by the global financial crisis. After opening the year at $14.93 per ounce, silver rose as high as $20.92 in the second quarter, but fell at one point as low as $8.88 in the fourth quarter. The same volatility affected our important by-products as well, with lead and zinc at the end of the fourth quarter selling for approximately one-third of their high points in the first quarter. The economic downturn affected not only our earnings, but also our stock price, which fell from its one-day high point of $13.14 in the second quarter to its one-day low of $0.99 in the fourth quarter, rebounding to $2.80 at the end of the year. With a high level of volatility in both our earnings and share price, our ability to raise capital to retire debt was affected.

Nevertheless, of the total $758.5 million purchase price of Greens Creek, we had just $162 million in debt outstanding between our bridge and term loan credit facilities at year-end. We extended, to February 2009, the final $40 million payment of the bridge loan and rescheduled all term loan payments initially scheduled for 2008 and 2009 totaling $121.7 million to 2010 and 2011.

We increased our production of silver to 8.7 million ounces in 2008, up from 5.6 million ounces in 2007. Production of lead and zinc, important by-products at our Lucky Friday and Greens Creek mines, also increased in 2008, with production of lead higher by 43% and zinc by 131% due to our acquisition of the remaining interest in Greens Creek. However, gold production declined in 2008 compared to 2007. While the Greens Creek acquisition increased domestic gold production, this increase was more than offset by the sale of our mining interests in Venezuela, and we no longer operate a primary gold mine as a result of the sale.

Revenues increased by 25% from 2007 to 2008, primarily as a result of the acquisition of the remaining interest in Greens Creek, in spite of lower lead and zinc prices.

We reported a loss of $0.57 in 2008 compared to earnings in 2007 of $0.43 per diluted share. Gross profit from operations declined from $77.8 million in 2007 to $17.9 million in 2008 as a result of lower by-product lead and zinc prices, higher operating costs, and valuation of in-process inventory associated with the Greens Creek Joint Venture acquisition. Our commitment to exploration and pre-development in 2008 was $5.5 million higher than in 2007; however, at the same time,

Table of Contents

we reduced general and administrative expense by $1.3 million. We recorded a gain of $7.7 million on sale of investments versus a gain of $63 million on asset sales in 2007, and while in 2007 we recognized a benefit from a decreased valuation allowance on deferred tax assets, we have recorded a provision in 2008 as a result of declining metals prices. Further affecting earnings per common share, dividends on preferred shares totaled $13.6 million in 2008, up from $1.0 million in 2007 as a result of our December 2007 issuance of 2,012,500 shares of Mandatory Convertible Preferred Stock.

The factors driving metals prices are beyond our control and are difficult to predict. As noted above, prices were highly volatile in 2008. Average prices in 2008 compared to those in 2007 and 2006 are illustrated in the Results of Operations section below.

Key Issues

Our strategy to increase production and expand our proven and probable reserves will be achieved through development and exploration, as well as by future acquisitions. Our strategic plan requires that we overcome several pervasive challenges and risks inherent in conducting mining, development, exploration and metal sales at multiple locations.

One such risk involves metals prices. While the metals mining industry enjoyed continued strength in metals prices from 2006 through mid-2008, we have no control over prices. As noted above, silver, lead and zinc prices in 2008 were highly volatile, and ended the year significantly lower than in the first and second quarters. We must make our strategic plans in the context of significant uncertainty about future revenues, which is a daunting challenge to an industry for which new opportunities can require many years and substantial cost from discovery to production. We approach this challenge by investing exploration and capital in districts with an established history of success, and in managing our operations in a manner that seeks to mitigate the effects of lower prices.

The recent unprecedented volatility in global financial markets poses a significant challenge to our ability to access credit and equity markets and to sell our products at a profit. While we have seen our share price rebound from its lowest levels in 2008 and have been successful in marketing our equity, we have deferred certain loan payments to 2010 and 2011 and the terms of our credit facilities could restrict our current and future operations.

Another challenge is the risk associated with environmental litigation and ongoing reclamation activities. As described in Note 8 of Notes to Consolidated Financial Statements , it is possible that our estimate of these liabilities may change in the future, affecting our strategic plans. In accordance with our environmental policy, our operating activities will be conducted in a manner that attempts to minimize risks to public health and safety. We attempt to design and manage our projects in an attempt to reasonably minimize risk and negative effects on the environment. We intend to continue to strive to ensure that our activities are conducted in compliance with applicable laws and regulations.

Reserve estimation is a major risk inherent in mining. Our reserve estimates, which drive our mining and investment plans and many of our costs, may change based on economic factors and actual production experience. Until ore is actually mined and processed, the volumes and grades of our reserves must be considered as estimates. Our reserves are depleted as we mine. Reserves can also change as a result of changes in economic and operating assumptions.

R esults of Operations

For the year ended December 31, 2008, we reported a loss applicable to common shareholders of $80.2 million compared to income applicable to common shareholders of $52.2 million in 2007 and $68.6 million in 2006. The following factors led to the reduced results for the year ended December 31, 2008 compared to 2007 and 2006:


	•	Decreased gross profit at our Greens Creek and Lucky Friday units (see the Greens Creek Segment and Lucky Friday Segment sections below for further discussion of operating results).

	•	A $17.4 million loss from discontinued operations at the La Camorra unit for the year ended December 31, 2008 compared to a loss from discontinued operations of $15.0 million in 2007 and income from discontinued operations of $4.3 million in 2006 (see the Discontinued Operations – La Camorra Unit section below).

	•	A loss on the sale of our interests in Venezuela, net of related income tax effect, of $12.0 million in 2008 (see Note 13 of Notes to Consolidated Financial Statements for more information).

	•	The sale of our interest in the Hollister Development Block gold exploration project in April 2007, which resulted in a pre-tax gain of $63.1 million reported in the second quarter of 2007.

	•	The sale of our investment in Alamos Gold, Inc. in January 2006 for $57.4 million in cash proceeds generating a pre-tax gain of $36.4 million.

	•	The sale of our Noche Buena gold exploration property in Mexico during April 2006 generating a $4.4 million pre-tax gain.

Table of Contents


	•	Interest expense of $19.6 million for the year ended December 31, 2008 in connection with debt incurred for the purchase of the remaining 70.3% interest in the Greens Creek joint venture. See Note 7 of Notes to the Consolidated Financial Statements for more information on our debt facilities.

	•	Valuation allowance adjustments to our deferred tax asset balances resulted in a $3.6 million net income tax provision recognized in 2008 compared to $10.5 million and $11.8 million income tax benefits recognized in 2007 and 2006 resulting from valuation allowance adjustments. We recorded a net increase to our deferred tax assets in 2008 by approximately $16.2 million due the addition of a $23 million net deferred tax asset relating to the purchase of the remaining 70.3% of Greens Creek, partially offset by reductions of $3.2 million due to the sale of our Venezuelan operations and $3.6 million due a decrease in the estimated future utilization of deferred tax assets (see Note 6 of Notes to the Consolidated Financial Statements for further discussion).

	•	Preferred stock dividends of $13.6 million for the year ended December 31, 2008 compared to $1.0 million and $0.6 million, respectively, for 2007 and 2006, due to the issuance of 2,012,500 shares of Mandatory Convertible Preferred Stock in December 2007. The net proceeds from the preferred stock issuance were utilized for the purchase of the remaining interest in the Greens Creek joint venture.

	•	Decreased average prices for zinc produced at our operations in 2008 compared to 2007 and 2006, and decreased average prices for lead produced at our operations in 2008 compared to 2007, as illustrated by the following table:


		December 31,
		2008		2007		2006
Silver —	London PM Fix ($/ounce)	$	15.02	$	13.39	$	11.57
	Realized price per ounce	$	14.40	$	13.78	$	12.10
Gold —	London PM Fix ($/ounce)	$	872	$	697	$	604
	Realized price per ounce	$	865	$	731	$	615
Lead —	LME Final Cash Buyer ($/pound)	$	0.95	$	1.17	$	0.58
	Realized price per pound	$	0.83	$	1.23	$	0.63
Zinc —	LME Final Cash Buyer ($/pound)	$	0.85	$	1.47	$	1.49
	Realized price per pound	$	0.71	$	1.24	$	1.73

The differences between realized metal prices and average market prices are due to the difference between metal prices upon transfer of title of concentrates to the buyer and final settlement. For 2008, we reported negative adjustments to provisional settlements of $25.7 million compared to negative adjustments of to provisional settlements of $3.1 million in 2007 and positive adjustments of $6.5 million in 2006.

Other significant variances affecting the comparison of our 2008 operating results to results for 2007 and 2006 were as follows:


	•	An increase of $44.7 million in 2007 in our estimated liabilities for environmental remediation in Idaho’s Coeur d’Alene Basin and the Bunker Hill Superfund Site. During the second quarter of 2007, we finalized a proposed multi-year clean-up plan for the upper portion of the Coeur d’Alene Basin, together with an estimate of related costs to implement the plan. Based on that work and a reassessment of our other potential liabilities in the Basin, we increased our accrual for remediation in the Basin by $42 million. We also accrued an additional $2.7 million for the remaining Bunker Hill Superfund Site work. For additional discussion, see Bunker Hill Superfund Site and Coeur d’Alene River Basin Environmental Claims in Note 8 of Notes to the Consolidated Financial Statements .

	•	We committed to a donation of our common stock valued at $5.1 million in 2007 for the creation of Hecla Charitable Foundation, an organization that will fund charitable contributions in the communities in which Hecla holds mining interests.

	•	Sale of our 8.2 million shares of Great Basin Gold stock in the second quarter of 2008, resulting in an $8.1 million gain, partially offset by $0.4 million in previously unrealized losses recorded in the fourth quarter of 2008 for the impairment of securities held at December 31, 2008.

	•	Differences in the average prices for silver and gold produced at our operations, as illustrated by the table above.

Table of Contents

T he Greens Creek Segment

Below is a comparison of the operating results and key production statistics of our Greens Creek segment, which reflects our 29.7% ownership share through April 16, 2008 and our 100% ownership thereafter. See Note 19 of Notes to Consolidated Financial Statements for further discussion of the acquisition of the 70.3% interest in Greens Creek. Dollars are presented in thousands, except for per ton and per ounce amounts.


	Years Ended December 31,
	2008			2007			2006
Sales	$	130,760		$	72,726		$	69,208
Cost of sales and other direct production costs	$	(100,197	)	$	(27,753	)	$	(24,125	)
Depreciation, depletion and amortization	$	(30,022	)	$	(8,440	)	$	(8,191	)
Gross Profit	$	541		$	36,533		$	36,892

Tons of ore milled		598,931			217,691			217,676
Silver ounces produced		5,829,253			2,570,701			2,636,083
Gold ounces produced		54,650			20,218			18,713
Zinc tons produced		52,055			18,612			17,670
Lead tons produced		16,630			6,252			6,242
Payable silver ounces sold		5,143,758			2,240,092			2,463,685
Payable gold ounces sold		44,977			15,543			16,502
Payable zinc tons sold		39,433			14,187			12,620
Payable lead tons sold		13,877			4,748			5,297
Silver ounces per ton		13.69			15.45			15.78
Gold ounces per ton		0.14			0.14			0.13
Zinc percent		10.13			9.67			9.36
Lead percent		3.59			3.66			3.66
Total cash cost per silver ounce ⁽¹⁾	$	3.29		$	(5.27	)	$	(3.47	)



(1)	A reconciliation of this non-GAAP measure to cost of sales and other direct production costs and depreciation, depletion and amortization, the most comparable GAAP measure, can be found in Reconciliation of Total Cash Costs to Costs (non-GAAP) of Sales and Other Direct Production Costs and Depreciation, Depletion and Amortization (GAAP) .


	The decrease in gross profit during 2008 compared to 2007 and 2006 was primarily the result of the following factors:

•	Higher cost of sales, as a percentage of sales, which increased to 77% in 2008 compared to 38% in 2007 and 35% in 2006. The higher cost of sales in 2008 is primarily due to increased costs of diesel fuel and other consumables, and an adjustment for the fair value of the finished and in-process product inventory acquired upon purchase of the 70.3% ownership interest. Upon the sale of the acquired inventory, the fair market value was expensed, which increased cost of sales and decreased gross profit margin in 2008.

•	Higher depreciation, depletion and amortization expense, as a percentage of sales, as a result of the fair market valuation of the acquired 70.3% share of property, plant, equipment and mineral interests at the acquisition date.

•	Lower silver ore grades in 2008 compared to 2007 and 2006.

•	A decline in average zinc and lead prices. Average zinc prices for 2008 were lower than those for 2007 and 2006, while average lead prices have declined from their 2007 levels.

•	Negative price adjustments to revenues of $22.9 million in 2008 as a result of declines in metal prices between transfer of title of concentrates to buyers and final settlements during the year.

The Greens Creek operation is partially powered by diesel generators, and production costs have been significantly affected by increasing fuel prices in 2007 and 2008. Infrastructure has been installed that allows hydroelectric power to be supplied to Greens Creek by Alaska Electric Light and Power Company (“AEL&P”), via a submarine cable from North Douglas Island, near Juneau, to Admiralty Island, where Greens Creek is located. It is anticipated that this project will reduce production costs at Greens Creek. AEL&P had agreed to supply surplus power to Greens Creek; however, supply has been hampered by low reservoir water supplies and high power demand in the Juneau vicinity.

Table of Contents

The $8.56 increase in total cash cost per silver ounce in 2008 compared to 2007 is due to lower zinc and lead prices, lower silver ore grades and increased operating costs. The $1.80 improvement in total cash costs per silver ounce in 2007 compared to 2006 is attributable to increased by-product credits, as 2007 lead and gold prices exceeded prices during the same 2006 period, partially offset by higher production costs. While value from zinc, lead and gold by-products is significant, we believe that identification of silver as the primary product is appropriate because:


	•	silver has historically accounted for a higher proportion of revenue than any other metal and is expected to do so in the future;

	•	we have historically presented Greens Creek as a producer primarily of silver, based on the original analysis that justified putting the project into production, and believe that consistency in disclosure is important to our investors regardless of the relationships of metals prices and production from year to year;

	•	metallurgical treatment maximizes silver recovery;

	•	the Greens Creek deposit is a massive sulfide deposit containing an unusually high proportion of silver; and

	•	in most of its working areas, Greens Creek utilizes selective mining methods in which silver is the metal targeted for highest recovery.

We periodically review our proven and probable reserves to ensure that reporting of primary products and by-products is appropriate. Because we consider zinc, lead and gold to be by-products of our silver production, the values of these metals offset operating costs.

T he Lucky Friday Segment

The following is a comparison of the operating results and key production statistics of our Lucky Friday segment (dollars are in thousands, except per ounce amounts):


	Years Ended December 31,
	2008			2007			2006
Sales	$	61,895		$	80,976		$	52,422
Cost of sales and other direct production costs	$	(39,392	)	$	(35,840	)	$	(26,936	)
Depreciation, depletion and amortization	$	(5,185	)	$	(3,883	)	$	(3,565	)
Gross profit	$	17,318		$	41,253		$	21,921

Tons of ore milled		317,777			323,659			276,393
Silver ounces produced		2,880,264			3,071,857			2,873,663
Lead tons produced		18,393			18,297			16,657
Zinc tons produced		9,386			8,009			6,537
Payable silver ounces sold		2,697,089			2,869,322			2,583,597
Payable lead tons sold		16,915			17,362			15,172
Payable zinc tons sold		6,299			5,076			4,146
Silver ounces per ton		9.70			10.27			11.34
Lead percent		6.23			6.12			6.57
Zinc percent		3.52			3.16			3.34
Total cash cost per silver ounce ⁽¹⁾	$	6.06		$	(0.75	)	$	3.65



(1)	A reconciliation of this non-GAAP measure to cost of sales and other direct production costs and depreciation, depletion and amortization, the most comparable GAAP measure, can be found below in Reconciliation of Total Cash Costs (non-GAAP) to Costs of Sales and Other Direct Production Costs and Depreciation, Depletion and Amortization (GAAP).

The $23.9 million decrease in gross profit in 2008 compared to 2007 resulted primarily from lower average lead and zinc prices, higher operating costs, and silver ore grades that decreased by 6%. In addition, negative price adjustments to revenues of $2.8 million impacted results for 2008 due to declines in metals prices between transfer of title of concentrates to buyers and final settlement during the year. The increase in gross profit in 2007 compared to 2006 was due primarily to higher average silver and lead prices and increased production, partially offset by lower ore grades.

The increase in total cash costs per silver ounce in 2008 compared to 2007 and 2006 is attributed to lower silver ore grades, higher mining and milling costs, and declining lead and zinc prices. Mining at longer strike lengths at the Lucky Friday allowed us to take advantage of the high base metals prices experienced in 2007 and the first half of 2008 and the

Table of Contents

mill’s ability to recover more zinc due to recent mill upgrades. This resulted in an economic benefit and allowed us to temporarily mine lower silver grade ore that was below anticipated life-of-mine reserve levels, which also delayed some production of metals included in the reserve to later periods. While value from lead and zinc is significant at the Lucky Friday, we believe that identification of silver as the primary product, with zinc and lead as by-products, is appropriate because:


	•	silver has historically accounted for a higher proportion of revenue than any other metal and is expected to do so in the future;

	•	the Lucky Friday unit is situated in a mining district long associated with silver production; and

	•	the Lucky Friday unit generally utilizes selective mining methods to target silver production.

We periodically review our proven and probable reserves to ensure that reporting of primary products and by-products is appropriate. Because we consider zinc and lead to be by-products of our silver production, the values of these metals offset operating costs.

T he San Sebastian Segment

We reached the end of the known mine life on the Francine and Don Sergio veins at the San Sebastian unit located in Mexico during the fourth quarter of 2005. However, significant exploration efforts have continued during 2006, 2007, and 2008 at the Hugh Zone and other exploration targets located on or near the San Sebastian property, where we now hold 308 square miles of contiguous concessions. Concessions totaling 166 square miles were added to our land package at the San Sebastian segment during the first quarter of 2008. Additional exploration activity at the San Sebastian unit in 2007 and 2008 has included completion of initial drilling on a number of veins at our Rio Grande project, where our concession holdings cover approximately 5 square miles. We incurred $4.6 million in exploration expenses during 2008 at San Sebastian compared to $7.5 million in 2007 and $5.8 million in 2006. The San Sebastian mine and Velardeña mill have been on care-and-maintenance status as we continue exploration efforts. We are currently involved in litigation concerning our ownership of the Velardeña mill. We are negotiating with the plaintiff who has offered to purchase the mill from us. See the Mexico Litigation section of Note 8 of Notes to Consolidated Financial Statements for more information.

D iscontinued Operations - The La Camorra Unit

During the second quarter of 2008, we committed to a plan to sell all of the outstanding capital stock of El Callao Gold Mining Company (“El Callao”) and Drake-Bering Holdings B.V. (“Drake-Bering”), our wholly owned subsidiaries holding our business and operations of the La Camorra Unit to Rusoro Mining, Ltd. (“Rusoro”) for $20 million in cash and 3,595,781 shares of Rusoro common stock valued at $4.5 million at the time of the transaction. The transaction closed on July 8, 2008. Pursuant to SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” the results of our Venezuelan operations have been reported in discontinued operations for all periods presented. See Note 13 of Notes to Consolidated Financial Statements for more information.

The following is a comparison of operating results and key production statistics for our discontinued Venezuelan operations, which included the La Camorra mine, a custom milling business and Mina Isidora (dollars are in thousands, except per ounce amounts):


	Years Ended December 31,
	2008			2007			2006
Sales	$	23,855		$	68,920		$	96,310
Cost of sales and other direct production costs		(21,656	)		(52,212	)		(53,235	)
Depreciation, depletion and amortization		(4,785	)		(14,557	)		(27,039	)
Gross profit	$	(2,586	)	$	2,151		$	16,036
Tons of ore milled		25,516			142,927			236,460
Gold ounces produced		22,160			87,490			160,563
Gold ounce per ton		0.894			0.629			0.708

Table of Contents

exchange rate of 2,150 Bolívares to $1.00 for approximately $25.4 million at open market exchange rates and in compliance with applicable regulations, incurring foreign exchange losses for the difference. All of these losses were incurred on repatriations of cash from Venezuela. During 2007, we exchanged the U.S. dollar equivalent of approximately $37.0 million, valued at the official exchange rate of 2,150 Bolívares to $1.00, for approximately $19.8 million at open market exchange rates, in compliance with applicable regulations, incurring foreign exchange losses for the difference. Approximately $13.8 million of the conversion losses for 2007 were incurred on the repatriation of cash from Venezuela, while additional losses of approximately $3.4 million in 2007 were related to conversions of Bolívares for the payment of expatriate payroll and other U.S. dollar-denominated goods and services.

C orporate Matters

Other significant variances affecting our 2008 results compared to 2007 results were as follows:


	•	Lower general and administrative expenses in 2008 by approximately $1.3 million, primarily due to a reduction in the value of stock appreciation rights, resulting from lower stock prices, and a decrease in incentive compensation, partially offset by increased staffing.

	•	Overall increase in exploration expense in 2008 of $6.5 million as a result of a surface drilling and generative exploration program in North Idaho’s Silver Valley, the initiation of a drilling program in the Creede Mining District in Colorado, the addition of exploration costs relating to our acquisition of the remaining 70.3% of Greens Creek, increased underground exploration at our Lucky Friday unit, and continued exploration activity at our San Sebastian unit in Mexico.

	•	Lower pre development expense in 2008 due to our sale of the Hollister Development Block project in Nevada in April 2007.

	•	An increase in other operating expense by $1.5 million as a result of our acquisition of the remaining 70.3% interest in Greens Creek;

	•	A decrease in the provision for closed operations and environmental matters in 2008 of $44.8 million due to increases to reclamation accruals recorded in 2007 discussed further below.

	•	A $3.3 million decrease in interest income in 2008 compared to 2007 due to lower cash balances and interest rates.

	•	Interest expense of $19.6 million for the year ended December 31, 2008 in connection with debt incurred for the purchase of the remaining 70.3% interest in the Greens Creek joint venture. See Note 7 of Notes to the Consolidated Financial Statements for more information on our debt facilities.

	•	An income tax provision of $3.8 million for 2008 compared to an income tax benefit of $8.5 million for 2007. See Note 6 to Notes to Consolidated Financial Statements for further discussion.

	Significant variances relating to 2007 results of operations compared to 2006 results were as follows:

	•	Overall increase in exploration expense in 2007 of $1.2 million, due primarily to increased costs for exploration activity at our San Sebastian unit in Mexico, the addition of our new office in Vancouver, British Columbia, and an exploration program to generate new projects underway in North Idaho’s Silver Valley, partially offset by the sale of the Hollister Development Block project.

	•	Lower pre-development expense in 2007, by $7.1 million, as a result of the Hollister sale.

	•	An increase in the provision for closed operations and environmental matters in 2007 of $45.6 million, which includes the $44.7 million adjustment to increase the accruals relating to the Coeur d’Alene Basin and Bunker Hill Superfund Site. A $1.2 million adjustment to increase the accrual related to the idle Republic mine site, in the State of Washington, also contributed to the higher 2007 expense.

	•	Increased interest income in 2007 by $3.6 million, due to higher invested cash and investment balances.

	•	An income tax benefit of $8.5 million in 2007 compared to an income tax benefit of $9.7 million in 2006. See Note 6 to Notes to Consolidated Financial Statements for further discussion.

Table of Contents

R econciliation of Total Cash Costs (non-GAAP) to Cost of Sales and Other Direct Production Costs and Depreciation, Depletion and Amortization (GAAP)

The tables below present reconciliations between non-GAAP total cash costs to cost of sales and other direct production costs and depreciation, depletion and amortization (GAAP) for our operations at the Greens Creek and Lucky Friday units for the years ended December 31, 2008, 2007 and 2006 (in thousands, except costs per ounce). Tables in previous periods have presented gold cost per ounce, however as a result of our sale of all of the outstanding capital stock of El Callao and Drake-Bering, our gold operations have been reclassified as discontinued operations for all periods presented.

Total cash costs include all direct and indirect operating cash costs related directly to the physical activities of producing metals, including mining, processing and other plant costs, third-party refining and marketing expense, on-site general and administrative costs, royalties and mining production taxes, net of by-product revenues earned from all metals other than the primary metal produced at each unit. Total cash costs provide management and investors an indication of net cash flow, after consideration of the realized price received for production sold. Management also uses this measurement for the comparative monitoring of performance of our mining operations period-to-period from a cash flow perspective. “Total cash cost per ounce” is a measure developed by gold companies in an effort to provide a comparable standard; however, there can be no assurance that our reporting of this non-GAAP measure is similar to that reported by other mining companies.

Cost of sales and other direct production costs and depreciation, depletion and amortization, is the most comparable financial measure calculated in accordance with GAAP to total cash costs. The sum of the cost of sales and other direct production costs and depreciation, depletion and amortization for our silver and gold operating units in the tables below is presented in our Consolidated Statement of Operations and Comprehensive Income (Loss).


	Total, All Properties
	Year ended December 31,
	2008			2007			2006
Total cash costs ⁽¹⁾	$	36,621		$	(15,873	)	$	1,329
Divided by silver ounces produced		8,709			5,643			5,510
Total cash cost per ounce produced	$	4.20		$	(2.81	)	$	0.24
Reconciliation to GAAP:
Total cash costs	$	36,621		$	(15,873	)	$	1,329
Depreciation, depletion and amortization		35,207			12,323			11,757
Treatment & freight costs		(82,786	)		(31,555	)		(37,046	)
By-product credits ⁽¹⁾		164,963			112,079			86,216
Change in product inventory ⁽²⁾		20,254			(1,261	)		1,278
Reclamation, severance and other costs		537			203			190
Cost of sales and other direct production costs and depreciation, depletion and amortization (GAAP)	$	174,796		$	75,916		$	63,724


	Greens Creek Unit
	Year ended December 31,
	2008			2007			2006
Total cash costs ⁽¹⁾	$	19,157		$	(13,560	)	$	(9,157	)
Divided by silver ounces produced		5,829			2,571			2,636
Total cash cost per ounce produced	$	3.29		$	(5.27	)	$	(3.47	)
Reconciliation to GAAP:
Total cash costs	$	19,157		$	(13,560	)	$	(9,157	)
Depreciation, depletion and amortization		30,022			8,440			8,192
Treatment & freight costs		(61,838	)		(17,295	)		(21,686	)
By-product credits ⁽¹⁾		122,146			59,622			54,081
Change in product inventory		20,245			(1,200	)		718
Reclamation, severance and other costs		487			186			170
Cost of sales and other direct production costs and depreciation, depletion and amortization (GAAP)	$	130,219		$	36,193		$	32,318

Table of Contents


	Lucky Friday Unit
	Year ended December 31,
	2008			2007			2006
Total cash costs ⁽¹⁾	$	17,464		$	(2,313	)	$	10,486
Divided by silver ounces produced		2,880			3,072			2,874
Total cash cost per ounce produced	$	6.06		$	(0.75	)	$	3.65
Reconciliation to GAAP:
Total cash costs	$	17,464		$	(2,313	)	$	10,486
Depreciation, depletion and amortization		5,185			3,883			3,565
Treatment & freight costs		(20,948	)		(14,260	)		(15,360	)
By-product credits ⁽¹⁾		42,817			52,457			32,135
Change in product inventory		9			(61	)		(345	)
Reclamation, severance and other costs		50			17			20
Cost of sales and other direct production costs and depreciation, depletion and amortization (GAAP)	$	44,577		$	39,723		$	30,501




(1)	“Total Cash Costs” includes all direct and indirect operating costs related directly to the physical activities of producing metals, including mining, processing and other plant costs, third-party refining and marketing expense, on-site general and administrative costs, royalties and mine production taxes, net of by-product revenues earned from all metals other than the primary metal produced at each unit.

(2)	Includes approximately $905,000 related to San Sebastian cost of sales and other direct production costs during the first quarter of 2006 for prior period doré shipments.

F inancial Liquidity and Capital Resources

Our liquid assets include (in millions):


	December 31, 2008		December 31, 2007		December 31, 2006
Cash and cash equivalents held in U.S. dollars	$	36.2	$	343.1	$	53.9
Cash and cash equivalents held in foreign currency		0.3		30.0		22.0
Adjustable rate securities		—		4.0		25.5
Marketable equity securities, current		—		21.8		—
Marketable equity securities, non-current		3.1		8.4		6.2
Total cash, cash equivalents and investments	$	39.6	$	407.3	$	107.6

Cash and cash equivalents held in U.S. dollars decreased by $307 million in 2008, as discussed below. Cash held in foreign currencies decreased in the second quarter as we exchanged Venezuelan Bolívares valued at approximately $38.7 million at the official exchange rate for approximately $25.4 million at the open market exchange rate, incurring a loss on the difference, and now hold nominal balances in Canadian dollars and Mexican pesos.

The decrease in the value of our current marketable equity securities during 2008 resulted from our sale of 8.2 million shares of Great Basin Gold, Inc. stock in the second quarter.

The decrease in our non-current marketable equity securities in 2008 was due to changes in the market values of the securities, partially off-set by the receipt of 3,595,781 shares of common stock of Rusoro Mining Ltd. in the third quarter of 2008 in connection with the sale of our business interests in Venezuela.

As discussed further below, a portion of the Greens Creek acquisition was funded by $220 million provided by a bridge loan which initially matured on October 16, 2008. An additional $20 million was provided by the bridge loan for general corporate purposes. In September and October 2008, we repaid $200 million of the $240 million balance outstanding on the loan, leaving a balance of $40 million, which was extended to February 13, 2009, subject to conditions as discussed in Note 7 of Notes to Condensed Consolidated Financial Statements . An additional $140 million was funded by a three-year term facility maturing in 2011, of which the first payment of $18.3 million was made on September 30, 2008, and for which another $18.3 million scheduled for payment on December 31, 2008 was moved to February 13, 2009. On February 3, 2009, we reached an agreement to amend the terms of our current credit facilities to defer all term facility principal payments due in 2009, totaling $66.7 million, to 2010 and 2011. In addition, on February 4, 2009, we entered into an agreement to sell 32 million units comprised of one share of Common Stock and one-half Series 3 Warrant to purchase one share of Common Stock in an underwritten public offering for proceeds of approximately $65.6 million. On February 6, 2009, the underwriters exercised their over-allotment option in connection with the original offering, resulting in the issuance and sale of 4.8 million additional units for additional proceeds of approximately $9.8 million. We applied $40 million of the total proceeds to the

Table of Contents

payment of our outstanding bridge facility balance on February 10, 2009. In accordance with the credit facilities, we also reduced our term loan by approximately $8 million in February 2009 (see Note 21 - Subsequent Events of Notes to Consolidated Financial Statements for further discussion of the credit facilities amendment and offering). We estimate that approximately $33 million of cash flow will be invested in capital expenditures through the end of 2009. We also may pursue additional acquisition opportunities, which would require additional equity issuances or financing. There can be no assurances that such financing will be available to us.


	Year Ended December 31
	2008		2007		2006
Cash provided by operating activities (in millions)	$	14.8	$	65.0	$	61.5

The lower cash provided by operating activities in 2008 compared to the 2007 period resulted primarily from lower cash provided by operating activities from continuing operations, which totaled $27.3 million in 2008 compared to $62.9 million in 2007. The $35.6 million decrease was a result of $51.6 million reduction in income from continuing operations adjusted for non-cash items resulting from lower metals prices and higher costs, partly offset by a $15.9 million increase in cash resulting from changes in accounts receivable, accounts payable, inventories, and other assets and liabilities. The decrease in cash provided by operating activities in 2008 was also impacted by increased losses from discontinued operations, including foreign exchange losses totaling $13.3 million incurred on exchange of Venezuelan Bolívares for U.S. dollars as described above. In total, losses on discontinued operations in 2008 exceeded those in 2007 by $14.5 million.

Cash provided by operating activities were higher in 2007 than in 2006 by $3.5 million as a result of $34.0 higher cash generated by continuing operations adjusted for non-cash items and $8.2 million increase in cash from accounts receivable, accounts payable, inventories, and other assets and liabilities, partly offset by $38.7 million lower cash from discontinued operations.


	Year Ended December 31
	2008			2007		2006
Cash (used in) provided by investing activities (in millions)	$	(681.1	)	$	29.3	$	8.2

Cash used in investing activities was higher in 2008 than in 2007 primarily as a result of the acquisition of the remaining interest in the Greens Creek Joint Venture from Rio Tinto, plc for $688.5 million (net of cash acquired), along with Hecla stock valued at approximately $53.4 million. In addition, we invested $68.7 million of cash in property, plant, equipment, and mineral interests in 2008, up from $34.9 million in 2007, and an additional $26.7 million for non-cash acquisition of properties paid for with the Hecla stock. The increased capital investment at our Lucky Friday unit was primarily for sustaining capital that will facilitate extension of our mine plan to deeper levels and a new tailings disposal area. Capital investment at the Greens Creek unit, of which our subsidiaries have owned 100% since April 16, 2008, was for sustaining capital that will modernize communications and the hauling fleet, and additional tailings capacity. Discontinued operations provided $21.9 million more cash in 2008, while other investing activities yielded $10.1 million less cash in 2008 than in 2007.

Cash provided by investing activities in 2007 exceeded cash provided in 2006’s level by $21.2 million as a result of liquidation of short-term investments held at the end of 2006 and lower cash requirements for discontinued operations, offset partly by higher capitalized costs in 2007 and $16.8 million less cash flow from sales of investments and properties.


	Year Ended December 31
	2008		2007		2006
Cash (used in) provided by financing activities (in millions)	$	329.6	$	202.9	$	(0.1	)

Significant financing activities in 2008 included the receipt of $380 million related to the amended credit agreement entered into in connection with the acquisition of the remaining interest in the Greens Creek Joint Venture as described in Critical Accounting Estimates - Business Combinations , the sale of 34.4 million shares of our common stock for proceeds, net of related fees, of $163.8 million in September, and the sale of 10.2 million shares for net proceeds of $19.6 million in December. In September, we repaid $181.2 million on our debt ($18.3 million on our term loan, as scheduled, and $162.9 million on our bridge loan), and in October we repaid an additional $37.1 million on our bridge loan. The primary use of cash for financing activities beyond loan payments was the payment of dividends on Series B and mandatory convertible

Table of Contents

preferred stock. In 2007, we realized $194.9 million from the sale of mandatory convertible preferred stock. We were required to pay $7.4 million in dividends on preferred shares in 2008 compared to $0.6 million in 2007. In 2007, $8.8 million was received from the sale of shares issued under our stock option plans.

Cash provided by financing activities in 2007 totaled $202.9 million, in contrast to cash used in 2006 of $0.1 million, due primarily to our sale of 2,012,500 shares of mandatory convertible preferred stock in 2007 which yielded $194.9 million. Proceeds from stock option exercises in 2007 were higher than in 2006 by $4.8 million as more options were exercised due to higher stock prices in the current year; and in 2006, we repaid our $3.0 million balance on our revolving loan facility, while in 2007, the facility carried no balance.

Acquisition of the Greens Creek Joint Venture

On April 16, 2008, we completed our acquisition of the remaining 70.3% of the Greens Creek Joint Venture from a subsidiary of Rio Tinto. We have been a partner in the Joint Venture for approximately 20 years. The 70.3% interest was acquired for $700 million cash ($688.1 million net of cash received) and 4.4 million shares of Hecla common stock, which was valued at $53.4 million. The $700 million in cash paid to Rio Tinto included $220 million in proceeds from a bridge financing which was originally scheduled to mature in October 2008, a $140 million three-year amortizing term loan facility scheduled to mature on March 31, 2011, and $340 million in cash which we held prior to closing. We utilized an additional $20 million available for general corporate purposes from the bridge facility in September 2008. See Cash (used in) provided by financing activities for information on the service of our debt facility obligations and equity issuances in 2008 related to the acquisition of the remaining 70.3% of Greens Creek.

On February 3, 2009, we reached an agreement to amend the terms of our current credit facilities to defer all term facility principal payments due in 2009, totaling $66.7 million, to 2010 and 2011. In addition, on February 4, 2009, we entered into an agreement to sell 32 million units comprised of one share of Common Stock and one-half Series 3 Warrant to purchase one share of Common Stock in an underwritten public offering for proceeds of approximately $65.6 million. On February 6, 2009, the underwriters exercised their over-allotment option in connection with the original offering, resulting in the issuance and sale of 4.8 million additional units for additional proceeds of approximately $9.8 million. We applied $40 million of the total proceeds to the payment of our outstanding bridge facility balance on February 10, 2009. In accordance with the credit facilities, we also reduced our term loan by approximately $8 million in February 2009. See Note 21 - Subsequent Events of Notes to Consolidated Financial Statements for further discussion of the credit facilities amendment and offering.

There are a number of factors that may impact our future ability to meet the obligations of our debt facility. If the volumes or the market prices for the metals we produce are inadequate or we fail to control our production, development or corporate costs for a sustained period of time, our ability to service our debt obligations may be adversely affected. Our cash and investment balances and cash flows from operations may not be adequate to meet our obligations, and we may be required to obtain additional cash through asset sales or the potential addition of new debt or equity financing. There can be no assurance that these cash sources will be available to us. See the discussion of Future Metals Prices in the Critical Accounting Estimates and discussion of the various risks associated with our credit facilities in Item 1A. Risk Factors .

Table of Contents

C ontractual Obligations and Contingent Liabilities and Commitments

The table below presents our fixed, non-cancelable contractual obligations and commitments primarily related to our outstanding purchase orders, certain capital expenditures, our credit facilities (as modified by amendments), and lease arrangements as of December 31, 2008 (in thousands):


	Payments Due By Period
	Less than 1 year		1-3 years		3-5 years		After 5 years		Total
Purchase obligations ⁽¹⁾	$	7,318	$	—	$	—	$	—	$	7,318
Long-term debt ⁽²⁾		58,677		122,796		—		—		181,473
Contractual obligations ⁽³⁾		6,009		—		—		—		6,009
Operating lease commitments ⁽⁴⁾		2,511		1,706		230		—		4,447
Total contractual cash obligations	$	74,515	$	124,502	$	230	$	—	$	199,247




(1)	Consist of open purchase orders of approximately $4.8 million at the Greens Creek unit and $2.5 million at the Lucky Friday unit. Included in these amounts are approximately $3.9 million and $2.1 million related to various capital projects at the Greens Creek and Lucky Friday units, respectively.

(2)	Obligations due in less than one year are comprised of $40 million in principal, $0.1 million in interest and $0.4 million in fees relating to our bridge credit facility and $8 million in principal and $10.2 in estimated interest on our term credit facilitiy. Obligations due in one to three years include $113.7 million in scheduled term facility principal payments and $9.1 million in estimated interest.For more information on our credit facilities, see Note 7 and Note 21 of Notes to Consolidated Financial Statements .

(3)	As of December 31, 2008, we were committed to approximately $2.2 million for various capital projects at the Greens Creek and Lucky Friday units. Total contractual obligations at December 31, 2008 also include approximately $3.8 million for commitments relating to non-capital items at Greens Creek.

(4)	We enter into operating leases in the normal course of business. Substantially all lease agreements have fixed payment terms based on the passage of time. Some lease agreements provide us with the option to renew the lease or purchase the leased property. Our future operating lease obligations would change if we exercised these renewal options and if we entered into additional operating lease arrangements.

On April 16, 2008, we completed the acquisition of the remaining 70.3% of the Greens Creek mine. Accordingly, our obligations relating to open purchase orders, capital projects, transportation and other non-capital cost commitments, and all other items relating to Greens Creek reflect our 100% ownership, versus 29.7% historically. For more information on the acquisition, see Note 19 of Notes to Consolidated Financial Statements .

On June 19, 2008, we announced that we had entered into an agreement to sell 100% of our wholly owned subsidiaries holding our business and operations in Venezuela, and the transaction closed on July 8, 2008. See Note 13 of Notes to the Consolidated Financial Statements for further discussion of the sale. As a result, our obligations relating to the discontinued La Camorra unit for open purchase orders, transportation and other non-capital commitments, and future royalty obligations were eliminated upon completion of the sale.

Within the area mined by Lucky Friday, we previously controlled the Gold Hunter property under a long-term operating agreement with Independence Lead Mines Company (“Independence”) scheduled to expire in February 2018 and renewable thereafter, that entitled us, as operator, to an 81.48% interest in the net profits from operations from the Gold Hunter property. Under that agreement, we would have been obligated to pay a net profits interest of 18.52% to Independence after we recouped our costs to explore and develop the property. Recoupment depended on, among other factors, metals prices and the extent of capital invested in Lucky Friday. On November 6, 2008, we completed the acquisition of substantially all of the assets of Independence, resulting in our 100% ownership of the property, thus eliminating our obligation to outside third parties (See Note 19 of Notes to Consolidated Financial Statements for further discussion of the transaction).

We maintain reserves for costs associated with mine closure, reclamation of land and other environmental matters. At December 31, 2008, our reserves for these matters totaled $121.3 million, for which no contractual or commitment obligations exist. Future expenditures related to closure, reclamation and environmental expenditures are difficult to estimate, although we anticipate we will make expenditures relating to these obligations over the next 30 years. For additional information relating to our environmental obligations, see Notes 5 and 8 of Notes to Consolidated Financial Statements .

O ff-Balance Sheet Arrangements

At December 31, 2008, we had no existing off-balance sheet arrangements, as defined under SEC regulations, that have or are reasonably likely to have a current or future effect on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

Table of Contents

C ritical Accounting Estimates

Our significant accounting policies are described in Note 1 of Notes to Consolidated Financial Statements . As described in Note 1 , we are required to make estimates and assumptions that affect the reported amounts and related disclosures of assets, liabilities, revenue, and expenses. Our estimates are based on our experience and our interpretation of economic, political, regulatory, and other factors that affect our business prospects. Actual results may differ significantly from our estimates.

We believe that our most critical accounting estimates are related to future metals prices, obligations for environmental, reclamation, and closure matters, mineral reserves, and accounting for business combinations, as they require us to make assumptions that were highly uncertain at the time the accounting estimates were made and changes in them are reasonably likely to occur from period to period. Management has discussed the development and selection of these critical accounting estimates with the Audit Committee of our board of directors, and the Audit Committee has reviewed the disclosures presented below. In addition, there are other items within our financial statements that require estimation, but are not deemed to be critical. However, changes in estimates used in these and other items could have a material impact on our financial statements.

Future Metals Prices

Metals prices are key components in estimates that determine the valuation of some of our significant assets and liabilities, including properties, plants and equipment, deferred tax assets, and certain accounts receivable. As shown under Item 1A. — Risk Factors , metals prices have been historically volatile. While average prices for silver and gold have performed favorably for five consecutive years, there has been a reduction in the average prices for zinc and lead in 2008 compared to 2007. We have recorded impairments to our asset carrying value because of low prices in the past, and we can offer no assurance that prices will either remain at their current levels or increase.

Processes supporting valuation of our assets and liabilities that are most significantly affected by prices include analyses of asset carrying values, depreciation, and deferred income taxes. On at least an annual basis – and more frequently if circumstances warrant – we examine the carrying values of our assets, our depreciation rates, and the valuation allowances on our deferred tax assets. In our analyses of carrying values and deferred taxes, we apply several pricing views to our forecasting model, including current prices, analyst price estimates, forward-curve prices, and historical prices (see Mineral Reserves , below, regarding prices used for reserve estimates). Using applicable accounting guidance and our view of metals markets, we use the average of the various methods to determine whether the values of our assets are fairly stated, and to determine the level of valuation allowances on our deferred tax assets. In addition, estimates of future metals prices are used in the valuation of certain assets in the determination of the purchase price allocations for our acquisitions (see Business Combinations below).

Sales of all metals products sold directly to smelters are recorded as revenues when title and risk of loss transfer to the smelter (generally at the time of shipment) at estimated forward metals prices for the estimated month of settlement. Due to the time elapsed from shipment to the smelter and the final settlement with the smelter, we must estimate the prices at which sales of our metals will be settled. Previously recorded sales and trade accounts receivable are adjusted to estimated settlement metals prices until final settlement by the smelter. Changes in metals prices between shipment and final settlement will result in changes to revenues and accounts receivable previously recorded upon shipment. As a result, our trade accounts receivable balances are subject to changes in metals prices until final settlement occurs. For more information, see part O. Revenue Recognition of Note 1 of Notes to Consolidated Financial Statements .

Obligations for Environmental, Reclamation and Closure Matters

The most significant liability on our balance sheet is for accrued reclamation and closure costs. We have conducted considerable remediation work at sites in the United States for which remediation requirements have not been fully determined, nor have they been agreed between us and various regulatory agencies with oversight over the properties. We have estimated our liabilities with counsel and in accordance with appropriate accounting guidance. On at least an annual basis – and more frequently if warranted – management reviews our liabilities with our Audit Committee. However, the range of liability proposed by the plaintiffs in environmental proceedings considerably exceeds the liabilities we have recognized. If substantial damages were awarded or remediation costs incurred in excess of our accruals, our financial results or condition could be materially adversely affected.

Mineral Reserves

Critical estimates are inherent in the process of determining our reserves. Our reserves are affected largely by our assessment of future metals prices, as well as by engineering and geological estimates of ore grade, accessibility and production cost. Metals prices are estimated at long-term averages, as described in Item 2. — Property Descriptions . Our assessment of reserves occurs at least annually, and periodically utilizes external audits.

Table of Contents

Reserves are a key component in valuation of our properties, plants and equipment. Reserve estimates are used in determining appropriate rates of units-of-production depreciation, with net book value of many assets depreciated over remaining estimated reserves. Reserves are also a key component in forecasts, with which we compare future cash flows to current asset values to ensure that carrying values are reported appropriately. Reserves also play a key role in the valuation of certain assets in the determination of the purchase price allocations for our acquisitions (see Business Combinations below). Reserves are a culmination of many estimates and not guarantees that we will recover the indicated quantities of metals.

Business Combinations

In accordance with SFAS 141, “Business Combinations,” we are required to allocate the purchase price of acquired companies to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values at acquisition date. We would recognize the excess of an acquired business’s cost over the fair value of acquired assets, less liabilities, as goodwill. The valuation of assets acquired and liabilities assumed requires management to make significant estimates and assumptions, especially with respect to long-lived assets, including estimates of future metals prices and mineral reserves, as discussed above. In some cases, we use third-party appraisers to determine the fair values and lives of property and other identifiable assets.

N ew Accounting Pronouncements

In May 2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted Accounting Principles,” which identifies the sources of accounting principles and provides entities with a framework for selecting the principles used in preparation of financial statements that are presented in conformity with GAAP. SFAS 162 will become effective 60 days following the SEC’s approval of the Public Company Accounting Oversight Board amendments to AU Section 411, The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles . The adoption of SFAS No. 162 is not expected to have a material impact on our consolidated financial statements.

In March 2008, the FASB issued SFAS No. 161 “Disclosures about Derivative Instruments and Hedging Activities, an amendment of FASB Statement No. 133 (SFAS No. 161),” to enhance the current disclosure framework in SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities, as amended.” SFAS No. 161 amends and expands the disclosures required by SFAS No. 133 so that they provide an enhanced understanding of (1) how and why an entity uses derivative instruments, (2) how derivative instruments and related hedged items are accounted for under SFAS No. 133 and its related interpretations, and (3) how derivative instruments affect an entity’s financial position, financial performance, and cash flows. SFAS No. 161 is effective for both interim and annual reporting periods beginning after November 15, 2008. We are currently evaluating the potential impact of this statement on our consolidated financial statements and at this time we do not anticipate a material effect.

In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements – an amendment of No. ARB 51,” which is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008. SFAS No. 160 amends ARB 51 to establish accounting and reporting standards for the noncontrolling ownership interest in a subsidiary and for the deconsolidation of a subsidiary. We are currently evaluating the potential impact of this statement on our consolidated financial statements and at this time we do not anticipate a material effect.

In December 2007, the FASB revised SFAS No. 141 “Business Combinations”. The revised standard is effective for transactions where the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008.SFAS No. 141(R) will change the accounting for the assets acquired and liabilities assumed in a business combination.


	•	Acquisition costs will be generally expensed as incurred;

	•	Noncontrolling interests (formally known as “minority interests”) will be valued at fair value at the acquisition date;

	•	Acquired contingent liabilities will be recorded at fair value at the acquisition date and subsequently measured at either the higher of such amount or the amount determined under existing guidance for non-acquired contingencies;

	•	In-process research and development will be recorded at fair value as an indefinite-lived intangible asset at the acquisition date

	•	Restructuring costs associated with a business combination will be generally expensed subsequent to the acquisition date; and

	•	Changes in deferred tax asset valuation allowances and income tax uncertainties after the acquisition date generally will affect income tax expense.

Table of Contents

The adoption of SFAS No. 141(R) does not currently have a material effect on our Consolidated Financial Statements. However, any future business acquisitions occurring on or after the beginning of the first annual reporting period beginning on or after December 15, 2008 will be accounted for in accordance with this statement.

In September 2006, the FASB issued SFAS No. 157 “Fair Value Measurements,” which became effective for fiscal years beginning after November 15, 2007, and for interim periods within those years, for certain financial assets and liabilities. SFAS No. 157 defines fair value, establishes a framework for measuring fair value and expands the related disclosure requirements. In February 2008, FASB Staff Position (FSP) No. FAS 157-2 was issued, which delayed by a year the effective date of SFAS No. 157 for certain nonfinancial assets and liabilities. We adopted SFAS No. 157 for financial assets and liabilities in the first quarter of 2008, and the adoption did not have a material impact on our consolidated financial statements. See Note 14 of Notes to the Consolidated Financial Statements for more information. We are currently evaluating the potential impact of the adoption of SFAS No. 157 as it relates to nonfinancial assets and liabilities on our consolidated financial statements.

F orward-Looking Statements

The foregoing discussion and analysis, as well as certain information contained elsewhere in this Form 10-K, contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and are intended to be covered by the safe harbor created thereby. See the discussion in Special Note on Forward-Looking Statements included prior to Part I, Item 1.

I tem 7A. Quantitative and Qualitative Disclosures about Market Risk

The following discussion about our risk-management activities includes forward-looking statements that involve risk and uncertainties, as well as summarizes the financial instruments held by us at December 31, 2008, which are sensitive to changes in interest rates and commodity prices and are not held for trading purposes. Actual results could differ materially from those projected in the forward-looking statements. In the normal course of business, we also face risks that are either nonfinancial or nonquantifiable (see Part I, Item 1A. – Risk Factors ).

Short-term Investments

From time to time we hold various types of short-term investments that are subject to changes in market interest rates and are sensitive to those changes. We did not carry any such short-term investments as of December 31, 2008.

Commodity-Price Risk Management

Interest-Rate Risk Management

At December 31, 2008, we had $161.7 million in debt associated with the acquisition of the remaining 70.3% of the Greens Creek mine. The debt consists of $121.7 million related to a three-year amortizing term facility maturing on March 31, 2011 and a $40.0 million bridge facility balance maturing on February 13, 2009.

On May 5, 2008, we entered into an interest rate swap agreement that had the economic effect of modifying the LIBOR-based variable interest obligations associated with our term facility. As a result, the interest payable related to $103.3 million if the $121.7 million term facility balance at December 31, 2008 is fixed at a rate of 9.38% until maturity on March 31, 2011, in accordance with the amortization schedule of the amended and restated credit agreement dated April 16, 2008. As a result of an amendment to the facility in December 2008 to defer the $18.3 million principal payment originally due on December 31, 2008 to February 13, 2009, the terms of the interest rate swap agreement and the note that the swap agreement pertains to did not match at December 31, 2008 with regards to the maturity date of the $18.3 million payment, with the hedge being slightly ineffective as a result. The fair value of the swap at December 31, 2008 was a liability of $2.5 million. The accumulated unrealized loss at December 31, 2008 related to the swap was $2.0 million at December 31, 2008, and we realized a hedging loss of $0.5 million in 2008 related to the ineffective portion of the swap. We are accounting for this swap as a hedge pursuant to FASB Statement No. 133, Accounting for Derivative Instruments and Hedging Activities . The unrealized loss is included in accumulated other comprehensive income in our consolidated balance sheet and the realized loss is included in interest expense in our consolidated statement of operations, with the fair value payable included in other non-current liabilities in our consolidated balance sheet. For additional information regarding our credit facilities, see Note 7 and Note 21 of Notes to the Consolidated Financial Statements .

Table of Contents

On February 3, 2009, we reached an agreement to amend the terms of our credit facilities to defer all principal payments due on our term facility in 2009, totaling $66.7 million, to 2010 and 2011. As a result of the amendment, the original hedging relationship was de-designated, and a new hedging relationship was designated. A retrospective hedge effectiveness test was performed on the original hedging relationship at the date of de-designation, and the original hedging relationship was determined to be ineffective. Consequently, the change in fair value of the swap of $0.2 million between December 31, 2008 and February 3, 2009 was recorded as a gain on the income statement. The amount of unrealized loss included in accumulated other comprehensive income relating to the original hedge will be recognized in the income statement when the hedged interest payments occur.

P rovisional Sales

Sales of all metals products sold directly to smelters, including by-product metals, are recorded as revenues when title and risk of loss transfer to the smelter (generally at the time of shipment) at estimated forward prices for the estimated month of settlement. Due to the time elapsed from shipment to the smelter and the final settlement with the smelter, we must estimate the prices at which sales of our metals will be settled. Previously recorded sales are adjusted to estimated settlement metals prices until final settlement by the smelter. Changes in metals prices between shipment and final settlement will result in changes to revenues previously recorded upon shipment. Our concentrate sales are based on a provisional sales price containing an embedded derivative that is required to be separated from the host contract for accounting purposes. The host contract is the receivable from the sale of the concentrates at the forward price at the time of the sale. The embedded derivative, which does not qualify for hedge accounting, is adjusted to market through earnings each period prior to final settlement. Metals prices can and often do fluctuate widely and are affected by numerous factors beyond our control (see Item 1A – Risk Factors – A substantial or extended decline in metals prices would have a material adverse effect on us for more information). At December 31, 2008, metals contained in concentrates and exposed to future price changes totaled 902,248 ounces of silver, 3,730 ounces of gold, 17,283 tons of zinc, and 5,609 tons of lead.

I tem 8. Financial Statements and Supplementary Data

Our Consolidated Financial Statements are included herein beginning on page F-1. Financial statement schedules are omitted as they are not applicable or the information required is included in the Consolidated Financial Statements.

The following table sets forth supplementary financial data (in thousands, except per share amounts) for each quarter of the years ended December 31, 2008 and 2007, derived from our unaudited financial statements. The data set forth below should be read in conjunction with and is qualified in its entirety by reference to our Consolidated Financial Statements.


2008	First Quarter			Second Quarter			Third Quarter			Fourth Quarter			Total
Sales of products ⁽¹⁾	$	36,627		$	63,995		$	64,525		$	27,508		$	192,655
Gross profit (loss) ⁽¹⁾	$	18,652		$	1,625		$	11,397		$	(13,815	)	$	17,859
Income (loss) from continuing operations	$	13,564		$	(10,309	)	$	(3,766	)	$	(36,662	)	$	(37,173	)
Income (loss) from discontinued operations, net of tax	$	1,918		$	(19,298	)	$	(15	)	$	—		$	(17,395	)
Gain (loss) on sale of discontinued operations, net of tax	$	—		$	(11,372	)	$	25		$	(648	)	$	(11,995	)
Net income (loss)	$	15,482		$	(40,979	)	$	(3,756	)	$	(37,310	)	$	(66,563	)
Preferred stock dividends	$	(3,408	)	$	(3,409	)	$	(3,408	)	$	(3,408	)	$	(13,633	)
Income (loss) applicable to common shareholders	$	12,074		$	(44,388	)	$	(7,164	)	$	(40,718	)	$	(80,196	)
Basic and diluted income (loss) per common share:
Income (loss) from continuing operations	$	0.08		$	(0.11	)	$	(0.05	)	$	(0.24	)	$	(0.36	)
Income (loss) from discontinued operations	$	0.02		$	(0.15	)	$	—		$	—		$	(0.12	)
Gain (loss) on sale of discontinued operations, net of tax	$	—		$	(0.09	)	$	—		$	—		$	(0.09	)
Income (loss) per common share	$	0.10		$	(0.35	)	$	(0.05	)	$	(0.24	)	$	(0.57	)

2007
Sales of products ⁽¹⁾	$	33,100		$	44,431		$	39,810		$	36,361		$	153,702
Gross profit ⁽¹⁾	$	16,018		$	23,965		$	20,718		$	17,085		$	77,786
Income from continuing operations	$	7,866		$	38,210		$	13,011		$	9,070		$	68,157
Income (loss) from discontinued operations, net of tax	$	277		$	(13,873	)	$	(526	)	$	(838	)	$	(14,960	)
Net income	$	8,143		$	24,337		$	12,485		$	8,232		$	53,197
Preferred stock dividends	$	(138	)	$	(138	)	$	(138	)	$	(610	)	$	(1,024	)
Income applicable to common shareholders	$	8,005		$	24,199		$	12,347		$	7,622		$	52,173
Basic and diluted income (loss) per common share:
Income from continuing operations	$	0.07		$	0.30		$	0.10		$	0.07		$	0.56
Loss from discontinued operations	$	—		$	(0.10	)	$	—		$	(0.01	)	$	(0.13	)
Income per common share	$	0.07		$	0.20		$	0.10		$	0.06		$	0.43

⁽¹⁾ Reconciliation of reported amounts varying from amounts previously reported on Form 10-Q:

Table of Contents


2008	First Quarter			Second Quarter
Sales of products, as previously reported on Form 10-Q	$	45,960
Reclassification of sales from discontinued Venezuelan operations ^(a)		(9,333	)

Sales of products, as reported on Form 10-K	$	36,627


Gross profit, as previously reported on Form 10-Q	$	21,781
Reclassification of gross profit (loss) from discontinued Venezuelan operations ^(a)		(3,129	)

Gross profit, as reported on Form 10-K	$	18,652


2007
Sales of products, as previously reported on Form 10-Q	$	54,593
Reclassification of sales from discontinued Venezuelan operations ^(a)		21,493

Sales of products, as reported on Form 10-K	$	33,100


Gross profit, as previously reported on Form 10-Q	$	17,870
Reclassification of gross profit (loss) from discontinued Venezuelan operations ^(a)		1,852

Gross profit, as reported on Form 10-K	$	16,018


Income from continuing operations, as previously reported on Form 10-Q				$	36,141
Adjustment for income tax benefit/provision associated with continuing and discontinued operations					2,069

Income from continuing operations, as reported on Form 10-K				$	38,210


Loss from discontinued operations, as previously reported on Form 10-Q				$	(11,804	)
Adjustment for income tax benefit/provision associated with continuing and discontinued operations					(2,069	)

Loss from discontinued operations, as reported on Form 10-K				$	(13,873	)


	(a) As a result of the sale of our Venezuelan operations on July 8, 2008, we have revised our previously issued financial statements for the years ended December 31, 2007, 2006 and 2005, including interim periods for those years, and for the quarter ended March 31, 2008, to reflect our Venezuelan operations as discontinued operations. See Note 13 of Notes to Consolidated Financial Statements for more information. These adjustments reflect the effect of reclassifying our discontinued Venezuelan operations on amounts previously reported in our Form 10-Q filed for the interim period ended March 31, 2008. Our Form 10-Qs filed for the interim periods ended June 30 and September 30, 2008 reflect the effect of the reclassification of our discontinued Venezuelan operation for all periods presented.

	(b) Based on our interpretation of FASB Statement No. 109 “Accounting for Income Taxes” (SFAS 109) upon filing our Form 10-Q for the period ended June 30, 2008, we classified $2.0 million of income tax benefit as a component of loss from our discontinued Venezuelan operations, and $0.1 of income tax provision to our continuing operations, for the quarter ended June 30, 2007, as reported in our Form 10-Q filed for the period ended June 30, 2008. Upon further clarification of the provisions of FAS 109, we have revised these amounts to classify $36,000 of income tax provision to discontinued operations, and $2.0 million of income tax benefit to continuing operations, resulting in $0.02 increases to basic and diluted income from continuing operations per common share and basic and diluted loss from discontinued operations per common share for the quarter ended June 30, 2007.

Table of Contents

I tem 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures

None

I tem 9A. Controls and Procedures

D isclosure Controls and Procedures

An evaluation was performed under the supervision and with the participation of our management, including the Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), of the effectiveness of the design and operation of our disclosure controls and procedures. Based on that evaluation, our CEO and CFO concluded that our disclosure controls and procedures were effective as of December 31, 2008, in ensuring them in a timely manner that material information required to be disclosed in this report has been properly recorded, processed, summarized and reported.

M anagement’s Annual Report on Internal Control over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over our financial reporting, which is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles in the United States of America.

Because of its inherent limitations, any system of internal control over financial reporting, no matter how well designed, may not prevent or detect misstatements due to the possibility that a control can be circumvented or overridden or that misstatements due to error or fraud may occur that are not detected. Also, because of changes in conditions, internal control effectiveness may vary over time.

Management assessed the effectiveness of our internal control over financial reporting as of December 31, 2008, using criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) and concluded that we have maintained effective internal control over financial reporting as of December 31, 2008, based on these criteria.

Our internal control over financial reporting as of December 31, 2008 has been audited by BDO Seidman, LLP, an independent registered public accounting firm, as stated in the attestation report which is included herein.

On April 16, 2008, our subsidiaries acquired the remaining 70.3% interest in the Greens Creek Joint Venture (“Greens Creek”), of which we previously held 29.7%. Prior to ownership by our various subsidiaries of 100% of the joint venture, we excluded Greens Creek from our assessment of internal control over financial reporting, as we did not have the ability to dictate or modify the controls at Greens Creek. We have commenced the process of assessing the effectiveness of our internal control over financial reporting at Greens Creek, using criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). However, management has excluded Greens Creek from its assessment of internal control over financial reporting as of December 31, 2008, as we are still in the process of assessing the effectiveness of our internal control over financial reporting there. Greens Creek represented 81% of our total assets at December 31, 2008, while its revenues comprised 68% of our total sales of products for the year ended December 31, 2008.

On January 1, 2008, we implemented a new business system at our corporate office to facilitate automation of our accounting processes. We believe the new system will enhance existing internal controls over financial reporting by decreasing manual controls inherent in our prior system.

Table of Contents

R eport of Independent Registered Public Accounting Firm

Board of Directors and Shareholders
Hecla Mining Company
Coeur d’Alene, Idaho

We have audited Hecla Mining Company’s internal control over financial reporting as of December 31, 2008, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). Hecla Mining Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the Item 9A, Management’s Report on Internal Control Over Financial Reporting . Our responsibility is to express an opinion on the company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

As indicated in the accompanying Item 9A, Management’s Report on Internal Control over Financial Reporting , management’s assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the internal controls of the Greens Creek Joint Venture, which controlling interest was acquired on April 16, 2008, and which is included in the consolidated balance sheet of Hecla Mining Company as of December 31, 2008, and the related consolidated statements of operations and comprehensive income (loss), stockholders’ equity, and cash flows for the year then ended. The Greens Creek Joint venture constituted 81% of total assets as of December 31, 2008, and 68% of revenues for the year then ended. Management did not complete its assessment on the effectiveness of internal control over financial reporting of the Greens Creek Joint Venture because of the timing of the acquisition which was completed on April 16, 2008. Our audit of internal control over financial reporting of Hecla Mining Company also did not include an evaluation of the internal control over financial reporting of the Greens Creek Joint Venture.

In our opinion, Hecla Mining Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2008, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Hecla Mining Company as of December 31, 2008 and 2007, and the related consolidated statements of operations and comprehensive income (loss), stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2008 and our report dated February 27, 2009 expressed an unqualified opinion thereon.

/s/ BDO Seidman, LLP

Spokane, Washington
February 27, 2009

Table of Contents

C hanges in Internal Control over Financial Reporting

There have been no changes in our internal controls over financial reporting during the quarter ended December 31, 2008, that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

Item 9B. Other Information

None.

P ART III

I tem 10. Directors and Executive Officers of the Registrant

In accordance with the Corporation’s Certificate of Incorporation, its Board of Directors is divided into three classes. The terms of office of the directors in each class expire at different times. The directors are elected for three-year terms. The Effective Dates listed below for each director is their current term of office. All officers are elected for a term, which ordinarily expires on the date of the meeting of the Board of Directors immediately following the Annual Meeting of Shareholders. The positions and ages listed below are as of the date of our next Annual Meeting of Shareholders in May 2009. There are no arrangements or understandings between any of the directors or officers and any other person(s) pursuant to which such officers were elected.


	Age at May 29, 2009	Position and Committee Assignments	Effective Dates

Phillips S. Baker, Jr.	49	President and CEO, Director ⁽¹⁾	5/08 — 5/09 5/08 — 5/11

Ronald W. Clayton	50	Senior Vice President – Operations	5/08 — 5/09

James A. Sabala	54	Senior Vice President and Chief Financial Officer ⁽⁵⁾	5/08 — 5/09

Dr. Dean W.A. McDonald	51	Vice President – Exploration	5/08 — 5/09

Don Poirier	50	Vice President – Corporate Development	5/08 – 5/09

John H. Bowles	63	Director ^(1,2,5)	7/06 — 5/09

David J. Christensen	47	Director ^(1,2,3)	5/08 — 5/11

Ted Crumley	64	Director and Chairman of the Board ^(1,4)	5/07 — 5/10

George R. Nethercutt, Jr.	64	Director ^(3,4)	5/06 — 5/09

Terry V. Rogers	62	Director ^(2,4,5)	5/07 – 05/10

Charles B. Stanley	50	Director ^(2,5)	5/07 – 05/10

Dr. Anthony P. Taylor	67	Director ^(3,4,5)	5/08 — 5/11




	(1)	Member of Executive Committee

	(2)	Member of Audit Committee

	(3)	Member of Corporate Governance and Directors Nominating Committee

	(4)	Member of Compensation Committee

	(5)	Member of Technical Committee

Phillips S. Baker, Jr., has been our Chief Executive Officer since May 2003; President since November 2001; and a director since November 2001. Prior to that, Mr. Baker was our Chief Financial Officer from May 2001 to June 2003; Chief Operating Officer from November 2001 to May 2003; and Vice President from May 2001 to November 2001. Prior to joining us, Mr. Baker served as Vice President and Chief Financial Officer of Battle Mountain Gold Company (a gold mining company) from March 1998 to January 2001. Mr. Baker also serves as a director for Questar Corporation (a Western U.S. natural gas distribution, pipelines and exploration and production company).

Ronald W. Clayton was appointed Senior Vice President - Operations in November 2006. Prior to that, Mr. Clayton was Vice President - North American Operations from September 2002 to October 2006. Prior to joining us, Mr. Clayton was

Table of Contents

Vice President – Operations for Stillwater Mining Company (a mining company) from July 2000 to May 2002. Mr. Clayton was also our Vice President – Metals Operations from May 2000 to July 2000.

James A. Sabala was appointed Chief Financial Officer in May 2008 and Senior Vice President in March 2008. Prior to his employment with Hecla, Mr. Sabala was Executive Vice President – Chief Financial Officer of Coeur d’Alene Mines Corporation (a mining company) from 2003 to February 2008. Mr. Sabala also served as Vice President – Chief Financial Officer of Stillwater Mining Company (a mining company) from 1998 to 2002.

Dr. Dean W.A. McDonald was appointed Vice President – Exploration in August 2006. Dr. McDonald has also been our Vice President – Exploration of our Canadian subsidiary, Hecla Mining Company of Canada Ltd., since August 2006. Prior to joining Hecla, Dr. McDonald was Vice President Exploration and Business Development for Committee Bay Resource Ltd. (a Canadian-based exploration and development company) from 2003 to August 2006.

Don Poirier was appointed Vice President – Corporate Development in July 2007. Prior to joining Hecla, Mr. Poirier was a mining analyst with Blackmont Capital (capital market specialists) from September 2002 to June 2007. Mr. Poirier held other mining analyst positions from 1988 to 2002.

David J. Christensen previously served as a director from May 2002 to October 2002, when he was elected to the Board of Directors by preferred shareholders in May 2002. He was re-appointed to Hecla’s Board of Directors in August 2003. The payment of the dividends in arrears in July 2005 resulted in the elimination of this director position, at such time he was then appointed to the Board of Directors when the number of director positions was increased from seven to nine. Mr. Christensen has been Chief Executive Officer of ASA Limited (a closed-end investment company) since February 2009, as well as being appointed to the board of directors of ASA Limited in November 2008. He served as Vice President – Investments of ASA Limited from May 2007 to February 2009. He served as Vice President of Corporate Development for Gabriel Resources Ltd. (a Canadian-based resource company) from October 2006 to February 2008.

John H. Bowles was elected by the shareholders to Hecla’s Board of Directors in May 2006. Mr. Bowles was a partner in the Audit and Assurance Group of PricewaterhouseCoopers LLP (an accounting firm) from April 1976 to June 2006. He concentrated his practice on public companies operating in the mining industry. Mr. Bowles has been a Director of HudBay Minerals Inc. (a zinc, copper, gold and silver mining company) since May 2006, as well as a Director of Boss Power Corp. (a mineral exploration company) since September 2007. He holds Fellowships in both the British Columbia Institute of Chartered Accountants and the Canadian Institute of Mining and Metallurgy. Mr. Bowles has been the Treasurer of Mining Suppliers Association of British Columbia (an association of providers of equipment, products and related services to the British Columbia mining industry) since May 1999. He has been Director Emeritus of Ducks Unlimited Canada since March 1996.

Ted Crumley has served as a director since 1995 and became Chairman of the Board in May 2006. Mr. Crumley served as the Executive Vice President and Chief Financial Officer of OfficeMax Incorporated (a distributor of office products) from January 2005 to December 2005, and as Senior Vice President from November 2004 to January 2005. Prior to that, Mr. Crumley was Senior Vice President and Chief Financial Officer of Boise Cascade Company (a wood and paper company), from 1994 to 2004.

George R. Nethercutt, Jr., was appointed to Hecla’s Board of Directors in February 2005. Mr. Nethercutt has served as a principal of Nethercutt Consulting LLC (a strategic planning and consulting firm), since January 2007. Prior to that, Mr. Nethercutt was a principal of Lundquist, Nethercutt & Griles, LLC (a strategic planning and consulting firm) from February 2005 to January 2007. Mr. Nethercutt has also been a board member for the Washington Policy Center (a premiere public policy organization providing high quality analysis on issues relating to the free market and government regulation) since January 2005. In August 2005, Mr. Nethercutt was appointed Of Counsel with the law firm of Paine Hamblen, LLP. Mr. Nethercutt serves as a board member of ARCADIS Corporation (an international company providing consultancy, engineering and management services), the Juvenile Diabetes Research Foundation International (a charity and advocate of juvenile diabetes research worldwide), as well as being the U.S. Chairman of the Permanent Joint Board on Defense – U.S./Canada. From 1995 to 2005, Mr. Nethercutt served in the U.S. House of Representatives, including House Appropriations subcommittees on Interior, Agriculture and Defense and the Science Committees subcommittee on Energy. He has been a member of the Washington State Bar Association since 1972.

Charles B. Stanley was elected to Hecla’s Board of Directors in May 2007. Mr. Stanley has been the Chief Operating Officer of Questar Corporation (a U.S. natural gas-focused exploration and production, interstate pipeline and local distribution company) since March 2008. He has been Executive Vice President and Director of Questar Corporation since 2002 and also President and Chief Executive Officer of Questar Market Resources, Inc.; Wexpro Company (management and development, cost-of-service properties); Questar Exploration and Production Company (oil and gas exploration and production); Questar Gas Management Company (gas gathering and processing); and Questar Energy Trading Company (wholesale marketing and storage) since 2002.

Table of Contents

Terry V. Rogers was elected to Hecla’s Board of Directors in May 2007. Mr. Rogers was the Senior Vice President and Chief Operating Officer of Cameco Corporation (the world’s largest uranium producer) from February 2003 to June 2007. Mr. Rogers also served as President of Kumtor Operating Company (a gold producing company and a division of Cameco Corporation) from 1999 to 2003.

Dr. Anthony P. Taylor has served as a director since May 2002 upon election by preferred shareholders. The payment of the dividends in arrears in July 2005 resulted in the elimination of this director position. At such time he was then appointed to the Board of Directors when the number of director positions was increased from seven to nine. Dr. Taylor has been the President, CEO and Director of Gold Summit Corporation (a public Canadian minerals exploration company) since October 2003. Dr. Taylor has also served as President and Director of Caughlin Preschool Corp. (a private Nevada corporation that operates a preschool) since October 2001 and was a director of Greencastle Resources Corporation (an exploration company) from December 2003 to June 2008. Prior to that, Dr. Taylor was President, Chief Executive Officer and Director of Millennium Mining Corporation (a private Nevada minerals exploration company) from January 2000 to October 2003.

Information with respect to our directors is set forth under the caption “Proposal 1 - Election of Directors” in our proxy statement to be filed pursuant to Regulation 14A for the annual meeting scheduled to be held on May 29, 2009 (the Proxy Statement), which information is incorporated herein by reference.

Reference is made to the information set forth in the first paragraph under the caption “Audit Committee Report – Membership and Role of the Audit Committee,” and under the caption “Corporate Governance” in the Proxy Statement to be filed pursuant to Regulation 14A, which information is incorporated herein by reference.

Reference is made to the information set forth under the caption “Section 16(a) Beneficial Ownership Reporting Compliance” in the Proxy Statement to be filed pursuant to Regulation 14A, which information is incorporated herein by reference.

Reference is made to the information set forth under the caption “Available Information” in Item 1 for information about the Company’s Code of Business Conduct and Ethics, which information is incorporated herein by reference.

I tem 11. Executive Compensation

Reference is made to the information set forth under the caption “Compensation of Non-Management Directors;” the caption “Compensation Discussion and Analysis;” the caption “Compensation Committee Interlocks and Insider Participation;” the caption “Compensation Committee Report,” the caption “Compensation Tables;” the first paragraph under the caption “Certain Information About the Board of Directors and Committees of the Board;” and under the caption “Other Benefits” in the Proxy Statement to be filed pursuant to Regulation 14A, which information is incorporated herein by reference.

I tem 12. Security Ownership of Certain Beneficial Owners and Management

Reference is made to the information set forth under the caption “Security Ownership of Certain Beneficial Owners and Management” and the caption “Equity Compensation Plan Information” in the Proxy Statement to be filed pursuant to Regulation 14A, which information is incorporated herein by reference.

I tem 13. Certain Relationships and Related Transactions

Reference is made to the information set forth in the Proxy Statement to be filed pursuant to Regulation 14A, which information is incorporated herein by reference.

I tem 14. Principal Accounting Fees and Services

Reference is made to the information set forth under the caption “Audit Fees – Audit and Non-Audit Fees” in the Proxy Statement to be filed pursuant to Regulation 14A, which information is incorporated herein by reference. Reference is made to the information set forth under the caption “Audit Fees – Policy on Audit Committee Pre-Approval of Audit and Non-Audit Services of Independent Auditor” in the Proxy Statement to be filed pursuant to Regulation 14A, which information is incorporated herein by reference.

Table of Contents

PART IV

Item 15. Exhibits, Financial Statement Schedules and Reports on Form 8-K


(a)	(1)	Financial Statements

		See Index to Financial Statements on Page F-1

(a)	(2)	Financial Statement Schedules

		Not applicable

(a)	(3)	Exhibits

		See Exhibit Index following the Financial Statements

Table of Contents

S ignatures

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


HECLA MINING COMPANY

By:	/s/ Phillips S. Baker, Jr.
	Phillips S. Baker, Jr., President, Chief Executive Officer and Director

Date:		March 2, 2009

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.


/s/ Phillips S. Baker, Jr.	3/2/09	/s/ Ted Crumley	3/2/09
Phillips S. Baker, Jr.	Date	Ted Crumley	Date
President, Chief Executive Officer and Director		Director
(principal executive officer)


/s/ James A. Sabala	3/2/09	/s/ Charles B. Stanley	3/2/09
James A. Sabala	Date	Charles B. Stanley	Date
Senior Vice President and		Director
Chief Financial Officer
(principal financial and accounting officer)


/s/ John H. Bowles	3/2/09	/s/ George R. Nethercutt, Jr.	3/2/09
John H. Bowles	Date	George R. Nethercutt, Jr.	Date
Director		Director



/s/ David J. Christensen	3/2/09	/s/ Terry V. Rogers	3/2/09
David J. Christensen	Date	Terry V. Rogers	Date
Director		Director


/s/ Anthony P. Taylor	3/2/09
Anthony P. Taylor	Date
Director

Table of Contents

I ndex to Consolidated Financial Statements


		Page
Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm		F-2
Consolidated Balance Sheets at December 31, 2008 and 2007		F-3
Consolidated Statements of Operations and Comprehensive Income (Loss) for the Years Ended December 31, 2008, 2007 and 2006		F-4
Consolidated Statements of Cash Flows for the Years Ended December 31, 2008, 2007 and 2006		F-5
Consolidated Statements of Changes in Shareholders’ Equity for the Years Ended December 31, 2008, 2007 and 2006		F-6
Notes to Consolidated Financial Statements		F-7 to F-46

F-1

Table of Contents

R eport of Independent Registered Public Accounting Firm

Board of Directors and Stockholders

Hecla Mining Company

Coeur d’ Alene, Idaho

We have audited the accompanying consolidated balance sheets of Hecla Mining Company as of December 31, 2008 and 2007 and the related consolidated statements of operations and comprehensive income (loss), stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2008. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Hecla Mining Company at December 31, 2008 and 2007, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2008 , in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Hecla Mining Company’s internal control over financial reporting as of December 31, 2008, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) and our report dated February 27, 2009 expressed an unqualified opinion thereon.

/s/ BDO Seidman, LLP

Spokane, Washington
February 27, 2009

F-2

Table of Contents

Hecla Mining Company and Subsidiaries

C onsolidated Balance Sheets
(In thousands, except share data)


	December 31,
	2008			2007
ASSETS

Current assets:
Cash and cash equivalents	$	36,470		$	373,123
Short-term investments and securities held for sale		—			25,759
Accounts and notes receivable:
Trade		8,314			14,053
Other, net		1,100			7,834
Inventories, net		21,331			15,511
Current deferred income taxes		2,481			7,370
Other current assets		4,154			5,934
Total current assets		73,850			449,584
Non-current investments		3,118			8,429
Non-current restricted cash and investments		13,133			15,181
Properties, plants, equipment and mineral interests, net		852,113			132,308
Non-current deferred income taxes		36,071			14,938
Other non-current assets		10,506			30,297
Total assets	$	988,791		$	650,737

LIABILITIES

Current liabilities:
Accounts payable and accrued liabilities	$	21,850		$	22,564
Accrued payroll and related benefits		8,475			16,184
Accrued taxes		4,408			3,703
Current debt		40,000			—
Current portion of long-term debt		8,018			—
Current portion of accrued reclamation and closure costs		2,227			9,686
Total current liabilities		84,978			52,137
Long-term debt		113,649			—
Accrued reclamation and closure costs		119,120			96,453
Other noncurrent liabilities		21,587			9,618
Total liabilities		339,334			158,208
Commitments and contingencies (Notes 2, 4, 5, 7, 8, 11, 19 and 21)

SHAREHOLDERS’ EQUITY

Preferred stock, 5,000,000 shares authorized:
Series B preferred stock, $0.25 par value, 157,816 shares issued and outstanding, liquidation preference 2008 — $8,029 and 2007 — $7,891		39			39
Mandatory convertible preferred stock, $0.25 par value, 2,012,500 shares issued and outstanding, liquidation preference 2008 — $204,520 and 2007 — $201,250		504			504
Common stock, $0.25 par value, 400,000,000 authorized; issued 2008 — 180,461,371 shares and issued 2007 — 121,456,837 shares		45,115			30,364
Capital surplus		981,161			725,076
Accumulated deficit		(351,700	)		(274,877	)
Accumulated other comprehensive income (loss)		(25,022	)		12,063
Less treasury stock, at cost; 81,375 common shares		(640	)		(640	)
Total shareholders’ equity		649,457			492,529
Total liabilities and shareholders’ equity	$	988,791		$	650,737

The accompanying notes are an integral part of the consolidated financial statements.

F-3

Table of Contents

Hecla Mining Company and Subsidiaries

C onsolidated Statements of Operations and Comprehensive Income (Loss)
(Dollars and shares in thousands, except per share amounts)


	Year Ended December 31,
	2008			2007			2006
Sales of products	$	192,655		$	153,702		$	122,585
Cost of sales and other direct production costs		139,589			63,593			51,968
Depreciation, depletion and amortization		35,207			12,323			11,756
		174,796			75,916			63,724
Gross profit		17,859			77,786			58,861
Other operating expenses:
General and administrative		13,894			15,166			15,011
Exploration		22,471			15,934			14,708
Pre-development expense		—			1,027			8,091
Depreciation and amortization		—			299			972
Other operating expense		2,744			1,229			5,309
Gain on disposition of property, plants, equipment and mineral interests		(203	)		(63,205	)		(4,497	)
Charitable foundation donation		—			5,143			—
Provision for closed operations and environmental matters		4,312			49,152			3,516
		43,218			24,745			43,110
Income (loss) from operations		(25,359	)		53,041			15,751
Other income (expense):
Net gain on sale of investments		7,724			—			36,422
Interest and other income		3,842			7,147			3,531
Interest expense		(19,573	)		(534	)		(608	)
		(8,007	)		6,613			39,345
Income (loss) from continuing operations before income taxes		(33,366	)		59,654			55,096
Income tax benefit (provision)		(3,807	)		8,503			9,692
Net income (loss) from continuing operations		(37,173	)		68,157			64,788
Gain (loss) from discontinued operations, net of tax		(17,395	)		(14,960	)		4,334
Loss on sale of discontinued operations, net of tax		(11,995	)		—			—
Net income (loss)		(66,563	)		53,197			69,122
Preferred stock dividends		(13,633	)		(1,024	)		(552	)

Income (loss) applicable to common shareholders	$	(80,196	)	$	52,173		$	68,570
Net income (loss)	$	(66,563	)	$	53,197		$	69,122
Minimum pension liability adjustment		—			—			388
Unrealized gain (loss) on defined benefit plan		(29,113	)		321			—
Amortization of net prior service benefit on defined benefit plan		624			4,753			—
Prior service cost from amendment to defined benefit plan		(1,472	)		—			—
Change in derivative contracts		(1,967	)		—			—
Unrealized holding gains (losses) on investments		(4,539	)		5,235			20,225
Reclassification of net gain on sale of marketable securities included in net income (loss)		(7,766	)		—			(36,422	)
Comprehensive income (loss)	$	(110,796	)	$	63,506		$	53,313
Basic and diluted income (loss) applicable to common shareholders per common share after preferred stock dividends:

Income (loss) from continuing operations	$	(0.36	)	$	0.56		$	0.54

Income (loss) from discontinued operations		(0.12	)		(0.13	)		0.03

Loss on sale of discontinued operations		(0.09	)		—			—

Income (loss) per common share	$	(0.57	)	$	0.43		$	0.57

Weighted average number of common shares outstanding – basic		141,272			120,420			119,255

Weighted average number of common shares outstanding – diluted		141,272			121,071			119,702

The accompanying notes are an integral part of the consolidated financial statements.

F-4

Table of Contents

Hecla Mining Company and Subsidiaries

C onsolidated Statements of Cash Flows
(In thousands)


	Year Ended December 31,
	2008			2007			2006
Operating activities:
Net income (loss)	$	(66,563	)	$	53,197		$	69,122
(Income) loss on discontinued operations, net of tax		29,390			14,960			(4,334	)
Income (loss) from continuing operations		(37,173	)		68,157			64,788
Non-cash elements included in net income (loss):
Depreciation, depletion and amortization		35,846			12,611			12,728
Gain on sale of investments		(7,724	)		—			(36,420	)
Gain on disposition of properties, plants and equipment		(203	)		(63,205	)		(4,497	)
Gain on sale of royalty interests		—			—			(341	)
Provision for reclamation and closure costs		651			46,153			544
Deferred income taxes		6,756			(10,486	)		(11,822	)
Stock compensation		4,122			3,381			2,459
Amortization of loan origination fees		6,646			—			—
Amortization of intangible asset		710			—			—
Loss on derivative contract		514			—			—
Charitable foundation donation paid with common stock		—			5,143			—
Other non-cash charges		—			—			285
Change in assets and liabilities:
Accounts and notes receivable		18,591			5,204			(16,923	)
Inventories		1,812			(1,656	)		1,085
Inventory purchase price allocation adjustment		16,637			—			—
Other current and noncurrent assets		(2,012	)		(2,184	)		1,645
Accounts payable and accrued liabilities		(9,263	)		3,632			5,730
Accrued payroll and related benefits		(1,943	)		3,423			2,492
Accrued taxes		1,068			461			755
Accrued reclamation and closure costs		(6,621	)		(6,520	)		(4,466	)
Other non-current liabilities		(1,141	)		(1,166	)		2,716
Net cash provided by (used by) discontinued operations		(12,488	)		2,047			40,736
Net cash provided by operating activities		14,785			64,995			61,494
Investing activities:
Additions to properties, plants, equipment and mineral interests		(68,674	)		(34,875	)		(17,436	)
Purchase of 70.3% of Greens Creek, net of cash acquired		(688,452	)		—			—
Proceeds from sale of investments		27,001			—			57,441
Proceeds from disposition of properties, plants and equipment		596			45,048			4,372
Redemptions of restricted cash and investment balances		31,839			—			—
Increases in restricted cash and investment balances		(8,562	)		(1,328	)		(404	)
Purchase of securities held for sale		—			(181	)		—
Purchases of short-term investments		—			(89,959	)		(54,665	)
Maturities of short-term investments		4,036			111,414			29,210
Net cash provided by (used by) discontinued operations		21,159			(785	)		(10,335	)
Net cash provided by (used in) investing activities		(681,057	)		29,334			8,183
Financing activities:
Proceeds from exercise of stock options		147			8,760			3,896
Proceeds from issuance of common stock and warrants, net of related expense		183,357			—			—
Proceeds from issuance of preferred stock, net of related expense		—			194,917			—
Dividend paid to preferred shareholders		(7,427	)		(552	)		(690	)
Loan origination fees paid		(8,125	)		—			—
Treasury share purchase		—			(209	)		(313	)
Borrowings on debt		380,000			—			4,060
Repayments on debt		(218,333	)		—			(7,060	)
Net cash provided by (used in) financing activities		329,619			202,916			(107	)
Change in cash and cash equivalents:
Net increase (decrease) in cash and cash equivalents		(336,653	)		297,245			69,570
Cash and cash equivalents at beginning of year		373,123			75,878			6,308
Cash and cash equivalents at end of year	$	36,470		$	373,123		$	75,878
Supplemental disclosure of cash flow information:
Cash paid during year for:
Interest	$	11,657		$	232		$	304
Income tax payments	$	546		$	4,903		$	1,387
Significant non-cash investing and financing activities:
Stock issued for acquisition of assets	$	26,693		$	—		$	—
Stock issued for acquisition of 70.3% of Greens Creek	$	53,384		$	—		$	—

See Notes 2, 4, 9 and 10 for additional non-cash investing and financing activities.

The accompanying notes are an integral part of the consolidated financial statements.

F-5

Table of Contents

Hecla Mining Company and Subsidiaries

C onsolidated Statements of Changes in Shareholders’ Equity

For the Years Ended December 31, 2008, 2007 and 2006
(Dollars in thousands)


	Series B Preferred Stock		Series C Mandatory Convertible Preferred Stock		Common Stock		Additional Paid-In Capital			Accumulated Deficit			Accumulated Other Comprehensive Income (Loss)			Treasury Stock			Total

Balances January 1, 2006	$	39	$	—	$	29,651	$	508,104		$	(396,092	)	$	19,746		$	(118	)	$	161,330
Net income											69,122									69,122
Restricted stock units granted								481												481
Options granted						13		1,965												1,978
Options exercised (839,000 shares)						210		3,308												3,518
Options issued for deferred compensation (44,000 shares)						11		197												208
Stock issued for deferred compensation (83,000 shares)						21		(20	)											1
Modification of stock option awards								(1,702	)											(1,702	)
Stock issued to directors (37,000 shares)						8		183												191
Series B Preferred dividends declared											(552	)								(552	)
Restricted stock distributions (156,000 shares)						43		(20	)											23
Treasury stock purchased																	(313	)		(313	)
Reclassification of realized gain on securities														(15,809	)					(15,809	)
Stock units formerly recorded as liabilities								1,289												1,289
Adjustment for adoption of SFAS No. 158														4,963						4,963

Balances, December 31, 2006		39		—		29,957		513,785			(327,522	)		8,900			(431	)		224,728
Change in functional currency in Venezuela														(7,146	)					(7,146	)
Net income											53,197									53,197
Options granted								1,842												1,842
Options exercised (1,444,000 shares)						362		8,384												8,746
Stock issued to directors (30,000 shares)						8		257												265
Series B Preferred dividends declared											(552	)								(552	)
Restricted stock units granted								1,289												1,289
Restricted stock unit distributions (154,000 shares)						37		(37	)											—
Treasury stock purchased																	(209	)		(209	)
Donation to charitable foundation								5,143												5,143
Sale of Mandatory Convertible Preferred Stock (2,012,500 shares)				504				194,413												194,917
SFAS No. 158 adjustment														5,074						5,074
Other comprehensive income														5,235						5,235

Balances, December 31, 2007		39		504		30,364		725,076			(274,877	)		12,063			(640	)		492,529
Net loss											(66,563	)								(66,563	)
Options granted								2,021												2,021
Options exercised (16,000 shares)						4		133												137
Stock issued to directors (20,000 shares)						5		171												176
Series B deferred dividends declared											(414	)								(414	)
Mandatory Convertible Preferred Stock dividends declared											(10,282	)								(10,282	)
Restricted stock units granted								1,928												1,928
Restricted stock unit distributions (220,000 shares)						55		(55	)											—
Common stock issued for Mandatory Convertible Preferred Stock dividends (622,000 shares)						156		3,115												3,271
Common stock issued for business and asset acquisitions (12,982,000 shares)						3,245		76,690												79,935
Common stock public offering (34,350,000 shares)						8,587		154,829												163,416
Common stock and warrant private placement issuance (10,244,000 shares)						2,561		17,253												19,814
Common stock issued for donation to charitable foundation (550,000 shares)						138														138
SFAS No. 158 adjustment											436			(29,961	)					(29,525	)
Reclassification of translation adjustment to loss on sale of discontinued operations														7,146						7,146
Other comprehensive loss														(14,270	)					(14,270	)

	$	39	$	504	$	45,115	$	981,161		$	(351,700	)	$	(25,022	)	$	(640	)	$	649,457

The accompanying notes are an integral part of the consolidated financial statements.

F-6

Table of Contents

Hecla Mining Company and Subsidiaries

N otes to Consolidated Financial Statements

Note 1: Summary of Significant Accounting Policies

A. Principles of Consolidation — Our Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America, and include our accounts, our wholly-owned subsidiaries’ accounts and a proportionate share of the accounts of the joint ventures in which we participate. All significant intercompany balances and transactions have been eliminated in consolidation.

Certain consolidated financial statement amounts have been reclassified to conform to the 2008 presentation. These reclassifications had no effect on the net income, comprehensive income, or accumulated deficit as previously recorded.

On April 16, 2008, we completed the acquisition of the companies owning 70.3% of the joint venture operating the Greens Creek mine for $700 million in cash and 4,365,000 million shares of our common stock, resulting in 100% ownership of Greens Creek by our various wholly owned subsidiaries. The operating results of the 70.3% portion of Greens Creek are included in our operating results from the date of acquisition and, therefore, operating results on a period-by-period basis may not be comparable.

On July 8, 2008, we completed the sale of all of the outstanding capital stock of El Callao Gold Mining Company and Drake-Bering Holdings B.V., our wholly owned subsidiaries which together owned our business and operations in Venezuela. Accordingly, our historical financial statements have been revised to report our Venezuelan operations as discontinued operations for all periods presented, and we have revised our segment reporting to discontinue the divested Venezuelan operations. See Note 13 for further discussion of the sale and resulting restatement of our previously issued financial statements.

B. Assumptions and Use of Estimates — Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts and related disclosure of assets, liabilities, revenue and expenses at the date of the consolidated financial statements and reporting periods. We consider our most critical accounting estimates to be future metals prices, obligations for environmental, reclamation and closure matters mineral reserves, and business combinations. Other significant areas requiring the use of management assumptions and estimates relate to asset impairments, including long-lived assets and investments; inventory net realizable value; post-employment, post-retirement and other employee benefit assets and liabilities; valuation of deferred tax assets; and reserves for contingencies and litigation. Legal costs are recorded when incurred. We have based our estimates on historical experience and on various other assumptions that we believe to be reasonable. Accordingly, actual results may differ materially from these estimates under different assumptions or conditions.

C. Cash and Cash Equivalents — Cash and cash equivalents consist of all cash balances and highly liquid investments with a remaining maturity of three months or less when purchased and are carried at fair value. Historically, cash and cash equivalents have been invested in certificates of deposit, U.S. government and federal agency securities, municipal securities and corporate bonds.

D. Investments and Securities Held for Sale — We determine the appropriate classification of our investments at the time of purchase and re-evaluate such determinations at each reporting date, in accordance with Financial Accounting Standards Board (“FASB”) Statement of Financial Accounting Standards (“SFAS”) No. 115 “Accounting for Certain Investments in Debt and Equity Securities.”

Short-term investments include certificates of deposit and held-to-maturity securities, based on our intent and ability to hold the securities to maturity. Held-to-maturity securities are stated at amortized cost, which approximates market, and include government and corporate obligations rated A or higher. Marketable equity securities and variable rate demand notes are categorized as available for sale and carried at fair market value.

Realized gains and losses on the sale of securities are recognized on a specific identification basis. Unrealized gains and losses are included as a component of accumulated other comprehensive income (loss), unless an other than temporary impairment in value has occurred, which would then be charged to current period net income (loss). Unrealized gains and losses originally included in accumulated other comprehensive income are reclassified to current period net income (loss) when the sale or determination of an other than temporary impairment of securities occurs.

F-7

Table of Contents

E. Accounts and Notes Receivable — Accounts and notes receivable include both receivables due from sales, as well as value added tax receivables paid in Venezuela and Mexico and funds advanced to third-party, small mining cooperatives in Venezuela.

In Venezuela and Mexico, value added taxes (“VAT”) are assessed on purchases of materials and services. We established a reserve equal to 3% at December 31, 2007, for the value added taxes in Venezuela to reflect estimated discounts we expected to incur. The discount reserves are comprised of provisions for historical discounts on sales of VAT receivable balances sold to brokers, potential rejections by SENIAT (the Venezuelan taxing authority), and additional amounts for contingencies. Value-added tax receivables totaled $1.1 million in Venezuela (net of reserves for anticipated discounts of $27,000) at December 31, 2007, and $0.1 million and $0.6 million, respectively, at December 31, 2008 and 2007 in Mexico.

As an exporter from Venezuela, we were eligible for refunds from the government for payment of VAT, and we prepared a monthly filing to obtain this refund. Refunds are given by the government in the form of tax certificates, which are marketable in Venezuela.

As part of the custom milling business included in our discontinued La Camorra unit, we entered into contracts with small mining groups and advance funds in the form of equipment and working capital, and collected such advances from ore delivered to the sampling and crushing plant. We periodically evaluated the recoverability of these receivables and established a reserve for uncollectibility, based on our review of each small mining group’s future profitability and its ability to repay advances. Receivables were classified as current and non-current based on historical collection patterns, and were not generally charged off against allowances as long as small mining groups are active.

As a result of the sale of our Venezuelan operations on July 8, 2008 (as discussed further in Note 13 ), ownership of all accounts receivable balances existing at the close of the sale relating to Venezuelan VAT refunds and advancement of funds to Venezuelan small mining groups transferred to Rusoro.

F. Inventories — Inventories are stated at the lower of average costs incurred or estimated net realizable value. Major types of inventories include materials and supplies and metals product inventory, which is determined by the stage at which the ore is in the production process (stockpiled ore, work in process and finished goods).

Materials and supplies inventory are valued at the lower of average cost or net realizable value. Pursuant to this policy, we recorded a provision for materials inventory impairment at our discontinued La Camorra unit in Venezuela of $5.1 million at December 31, 2007 for inventory value that we did not expect to consume over current remaining known life of the operation. Ownership of all material and supplies inventories held at our discontinued Venezuelan operations at the time of the sale on July 8, 2008 was transferred to Rusoro (see Note 13 for more information on the sale of our discontinued Venezuelan operations).

Stockpiled ore inventory represents ore that has been mined, hauled to the surface, and is available for further processing. Stockpiles are measured by estimating the number of tons added and removed from the stockpile, the number of contained metal ounces or pounds (based on assay data) and the estimated metallurgical recovery rates (based on the expected processing method). Stockpile ore tonnages are verified by periodic surveys. Costs are allocated to a stockpile based on relative values of material stockpiled and processed using current mining costs incurred up to the point of stockpiling the ore, including applicable overhead, depreciation, depletion and amortization relating to mining operations, and removed at each stockpile’s average cost per recoverable unit.

Work in process inventory represents materials that are currently in the process of being converted to a saleable product and includes circuit inventories in our milling process. In-process material is measured based on assays of the material fed into the process and the projected recoveries of the respective plants. In-process inventories are valued at the average cost of the material fed into the process attributable to the source material coming from the mines and stockpiles, plus the in-process conversion costs, including applicable depreciation relating to the process facilities incurred to that point in the process.

Finished goods inventory includes doré and concentrates at our operations, doré in transit to refiners and bullion in our accounts at refineries. Inventories are valued at the lower of full cost of production or net realizable value based on current metals prices.

G. Restricted Cash — Restricted cash and investments primarily represent investments in money market funds and bonds of U.S. government agencies and are restricted primarily for reclamation funding or surety bonds.

F-8

Table of Contents

H. Properties, Plants and Equipment – Costs are capitalized when it has been determined an ore body can be economically developed as a result of establishing proven and probable reserves. The development stage begins at new projects when our management and/or Board of Directors makes the decision to bring a mine into commercial production, and ends when the production stage, or exploitation of reserves, begins. Expenditures incurred during the development and production stages for new facilities, new assets or expenditures that extend the useful lives of existing facilities and major mine development expenditures are capitalized, including primary development costs such as costs of building access ways, shaft sinking, lateral development, drift development, ramps and infrastructure developments.

Costs for exploration, secondary development at operating mines, and maintenance and repairs on capitalized property, plant and equipment are charged to operations as incurred. Exploration costs include those relating to activities carried out (a) in search of previously unidentified mineral deposits, (b) at undeveloped concessions, or (c) at operating mines already containing proven and probable reserves, where a determination remains pending as to whether new target deposits outside of the existing reserve areas can be economically developed. Secondary development costs are incurred for preparation of an ore body for production in a specific ore block, stope or work area, providing a relatively short-lived benefit only to the mine area they relate to, and not to the ore body as a whole.

Drilling and related costs are either classified as exploration or secondary development, as defined above, and charged to operations as incurred, or capitalized, based on the following criteria:


	•	Whether the costs are incurred to further define mineralization at and adjacent to existing reserve areas or intended to assist with mine planning within a reserve area;

	•	Whether the drilling costs relate to an ore body that has been determined to be commercially mineable, and a decision has been made to put the ore body into commercial production; and

	•	Whether, at the time that the cost is incurred, the expenditure: (a) embodies a probable future benefit that involves a capacity, singly or in combination, with other assets to contribute directly or indirectly to future net cash inflows, (b) we can obtain the benefit and control others access to it, and (c) the transaction or event giving rise to our right to or control of the benefit has already occurred.

If all of these criteria are met, drilling and related costs are capitalized. Drilling costs not meeting all of these criteria are expensed as incurred. The following factors are considered in determining whether or not the criteria listed above have been met, and capitalization of drilling costs is appropriate:


	•	Completion of a favorable economic study and mine plan for the ore body targeted;

	•	Authorization of development of the ore body by management and/or the Board of Directors; and

	•	All permitting and/or contractual requirements necessary for us to have the right to or control of the future benefit from the targeted ore body have been met.

Drilling and related costs of approximately $3.1 million, $1.9 million and $0.2 million, respectively, for the years ended December 31, 2008, 2007 and 2006 met our criteria for capitalization listed above, at our properties that are in the production stage.

When assets are retired or sold, the costs and related allowances for depreciation and amortization are eliminated from the accounts and any resulting gain or loss is reflected in current period net income (loss). Idle facilities placed on standby basis are carried at the lower of net carrying value or estimated net realizable value.

Included in property, plant and equipment on our consolidated financial statements are mineral interests, which are tangible assets that include acquired undeveloped mineral interests and royalty interests. Undeveloped mineral interests include: (i) other mineralized material which is measured, indicated or inferred with insufficient drill spacing or quality to qualify as proven and probable reserves; and (ii) inferred material not immediately adjacent to existing proven and probable reserves but accessible within the immediate mine infrastructure. Residual values for undeveloped mineral interests represents the expected fair value of the interests at the time we plan to convert, develop, further explore or dispose of the interests and are evaluated at least annually.

I. Depreciation, Depletion and Amortization — Capitalized costs are depreciated or depleted using the straight-line method or unit-of-production method at rates sufficient to depreciate such costs over the shorter of estimated productive lives of such facilities or the useful life of the individual assets. Productive lives range from 1 to 9 years, but do not exceed the useful life of the individual asset. Determination of expected useful lives for amortization calculations are made on a property-by-property or asset-by-asset basis at least annually. Our estimates for mineral reserves are a key component in determining our units of production depreciation rates. Our estimates of proven and probable ore reserves may change, possibly in the near term, resulting in changes to depreciation, depletion and amortization rates in future reporting periods.

F-9

Table of Contents

Undeveloped mineral interests are amortized on a straight-line basis over their estimated useful lives taking into account residual values. At such time as an undeveloped mineral interest is converted to proven and probable reserves, the remaining unamortized basis is amortized on a unit-of-production basis as described above.

J. Impairment of Long-lived Assets — Management reviews and evaluates the net carrying value of all facilities, including idle facilities, for impairment at least annually, or upon the occurrence of other events or changes in circumstances that indicate that the related carrying amounts may not be recoverable. We estimate the net realizable value of each property based on the estimated undiscounted future cash flows that will be generated from operations at each property, the estimated salvage value of the surface plant and equipment, and the value associated with property interests.

Although management has made a reasonable estimate of factors based on current conditions and information, assumptions underlying future cash flows are subject to significant risks and uncertainties. Estimates of undiscounted future cash flows are dependent upon estimates of metals to be recovered from proven and probable ore reserves, and to some extent, identified resources beyond proven and probable reserves, future production and capital costs and estimated metals prices (considering current and historical prices, forward pricing curves and related factors) over the estimated remaining mine life. It is reasonably possible that changes could occur in the near term that could adversely affect our estimate of future cash flows to be generated from our operating properties. In accordance with Statement of Financial Accounting Standard (“SFAS”) No. 144 “Accounting for the Impairment or Disposal of Long-lived Assets,” if undiscounted cash flows including an asset’s fair value are less than the carrying value of a property, an impairment loss is recognized.

K. Proven and Probable Ore Reserves — At least annually, management reviews the reserves used to estimate the quantities and grades of ore at our mines which we believe can be recovered and sold economically. Management’s calculations of proven and probable ore reserves are based on engineering and geological estimates, including future metals prices and operating costs. From time to time, management obtains external audits of reserves. We obtained a third-party audit of our reserves at the Lucky Friday unit during 2006, and a partial audit of reserves at Greens Creek was concluded during the second quarter of 2008.

Reserve estimates will change as existing reserves are depleted through production and as production costs and/or metals prices change. A significant drop in metals prices may reduce reserves by making some portion of such ore uneconomic to develop and produce. Changes in reserves may also reflect that actual grades of ore processed may be different from stated reserve grades because of variation in grades in areas mined, mining dilution and other factors. Estimated reserves, particularly for properties that have not yet commenced production, may require revision based on actual production experience. It is reasonably possible that certain of our estimates of proven and probable ore reserves will change in the near term, which could result in a change to estimated future cash flows, associated carrying values of the asset and amortization rates in future reporting periods, among other things.

Declines in the market prices of metals, increased production or capital costs, reduction in the grade or tonnage of the deposit or an increase in the dilution of the ore or reduced recovery rates may render ore reserves uneconomic to exploit unless the utilization of forward sales contracts or other hedging techniques are sufficient to offset such effects. If our realized price for the metals we produce were to decline substantially below the levels set for calculation of reserves for an extended period, there could be material delays in the development of new projects, net losses, reduced cash flow, restatements or reductions in reserves and asset write-downs in the applicable accounting periods. Reserves should not be interpreted as assurances of mine life or of the profitability of current or future operations. No assurance can be given that the estimate of the amount of metal or the indicated level of recovery of these metals will be realized. See further discussion in Critical Accounting Estimates — Mineral Reserves in MD&A .

L. Pension Plans and Other Post-retirement Benefits — We maintain pension plans covering substantially all U.S. employees and provide certain post-retirement benefits for qualifying retired employees. Pension benefits generally depend on length and level of service and age upon retirement. Substantially all benefits are paid through pension trusts. We did not contribute to our pension plans during 2008 and 2007, and do not expect to do so in 2009.

In September 2006, the FASB issued SFAS No. 158 “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans, an amendment to FASB Statements No. 87, 88, 106, and 132(R).” SFAS No. 158, among other things, required us to:


	•	Recognize the funded status of our defined benefit plans in our consolidated financial statements; and

	•	Recognize as a component of other comprehensive income the actuarial gains and losses and prior service costs and credits that arise during the period but are not immediately recognized as components of net periodic benefit cost.

We adopted SFAS No. 158 for the year ending December 31, 2006. Implementation of this pronouncement resulted in an increase to noncurrent assets and current liabilities of approximately $4.1 million and $0.4 million, respectively, and a

F-10

Table of Contents

decrease to noncurrent liabilities of $1.3 million, with a corresponding adjustment to other comprehensive income. The adoption did not affect our results of operations.

M. Income Taxes — We provide for federal, state and foreign income taxes currently payable, as well as those deferred due to timing differences between reporting income and expenses for financial statement purposes versus tax purposes. Federal, state and foreign tax benefits are recorded as a reduction of income taxes, when applicable. We record deferred tax liabilities and assets for expected future tax consequences of temporary differences between the financial statement carrying amounts and the tax bases of those assets and liabilities, as well as operating loss and tax credit carryforwards, using enacted tax rates in effect in the years in which the differences are expected to reverse.

FIN 48, “Accounting for Uncertainty in Income Taxes,” requires that uncertain tax positions are evaluated in a two-step process, whereby (1) it is determined whether it is more likely than not that the tax positions will be sustained based on the technical merits of the position and (2) for those tax positions that meet the more-likely-than-not recognition threshold, the largest amount of tax benefit that is greater than fifty percent likely of being realized upon ultimate settlement with the related tax authority would be recognized.

For additional information, see Note 6 — Income Taxes .

N. Reclamation and Remediation Costs (Asset Retirement Obligations) — At our operating properties, we accrue costs associated with environmental remediation obligations in accordance with Statement of Financial Accounting Standards (SFAS) No. 143, “Accounting for Asset Retirement Obligations.” SFAS No. 143 requires us to record a liability for the present value of our estimated environmental remediation costs, and the related asset created with it, in the period in which the liability is incurred. The liability will be accreted and the asset will be depreciated over the life of the related assets. Adjustments for changes resulting from the passage of time and changes to either the timing or amount of the original present value estimate underlying the obligation will be made.

At our non-operating properties, we accrue costs associated with environmental remediation obligations when it is probable that such costs will be incurred and they are reasonably estimable. Estimates for reclamation and other closure costs are prepared in accordance with SFAS No. 5 “Accounting for Contingencies,” or Statement of Position 96-1 “Environmental Remediation Liabilities.” Accruals for estimated losses from environmental remediation obligations have historically been recognized no later than completion of the remedial feasibility study for such facility and are charged to provision for closed operations and environmental matters. Costs of future expenditures for environmental remediation are not discounted to their present value unless subject to a contractually obligated fixed payment schedule. Such costs are based on management’s current estimate of amounts to be incurred when the remediation work is performed, within current laws and regulations.

Future closure, reclamation and environmental-related expenditures are difficult to estimate, in many circumstances, due to the early stage nature of investigations, and uncertainties associated with defining the nature and extent of environmental contamination and the application of laws and regulations by regulatory authorities and changes in reclamation or remediation technology. We periodically review accrued liabilities for such reclamation and remediation costs as evidence becomes available indicating that our liabilities have potentially changed. Changes in estimates at our non-operating properties are reflected in current period net income (loss).

Accruals for closure costs, reclamation and environmental matters for operating and nonoperating properties totaled $121.3 million at December 31, 2008, and we anticipate that the majority of these expenditures relating to these accruals will be made over the next 30 years. It is reasonably possible the ultimate cost of reclamation and remediation could change in the future, and that changes to these estimates could have a material effect on future operating results as new information becomes known. For environmental remediation sites known as of December 31, 2008, we have recorded liabilities based on the low end of the estimated potential range of liabilities. If the highest estimate from the range (based upon information presently available) were recorded for each site, the total estimated liability would be increased by approximately $49 million. For additional information, see Note 5 and Note 8 .

O. Revenue Recognition — Sales of all metals products sold directly to smelters, including by-product metals, are recorded as revenues when title and risk of loss transfer to the smelter (generally at the time of shipment) at estimated forward prices for the estimated month of settlement. Due to the time elapsed from shipment to the smelter and the final settlement with the smelter, we must estimate the prices at which sales of our metals will be settled. Previously recorded sales are adjusted to estimated settlement metals prices until final settlement by the smelter.

Sales to smelters are recorded net of charges by the smelters for treatment, refining, smelting losses, and other charges negotiated by us with the smelters. Charges are estimated by us upon shipment of concentrates based on contractual terms, and actual charges do not vary materially from our estimates. Costs charged by smelters include fixed treatment and refining costs per ton of concentrate, and also include price escalators which allow the smelters to participate in the increase of lead and zinc prices above a negotiated baseline.

F-11

Table of Contents

Changes in metals prices between shipment and final settlement will result in changes to revenues previously recorded upon shipment. Our concentrate sales are based on a provisional sales price containing an embedded derivative that is required to be separated from the host contract for accounting purposes. The host contract is the receivable from the sale of the concentrates at the forward price at the time of the sale. The embedded derivative, which does not qualify for hedge accounting, is adjusted to market through earnings each period prior to final settlement.

At December 31, 2008, metals contained in concentrates and exposed to future price changes totaled 902,248 ounces of silver, 3,730 ounces of gold, 17,283 tons of zinc, and 5,609 tons of lead.

Sales from our Greens Creek and Lucky Friday units include significant value from by-product metals mined along with net values of each unit’s primary metal.

Sales of metals in products tolled by refiners and sold directly by us, rather than sold to smelters, are recorded at contractual amounts when title and risk of loss transfer to the buyer. We sell finished metals after refining, as well as doré produced at our locations. Third-party smelting and refinery costs are recorded as a reduction of revenue.

Changes in the market price of metals significantly affect our revenues, profitability, and cash flow. Metals prices can and often do fluctuate widely and are affected by numerous factors beyond our control, such as political and economic conditions, demand, forward selling by producers, expectations for inflation, central bank sales, custom smelter activities, the relative exchange rate of the U.S. dollar, purchases and lending, investor sentiment, and global mine production levels. The aggregate effect of these factors is impossible to predict. Because our revenue is derived from the sale of silver, gold, lead, and zinc, our earnings are directly related to the prices of these metals.

P. Foreign Currency — The functional currency for our operations located in the U.S., Mexico and Canada, as of December 31, 2008, was the U.S. dollar. Accordingly, for the San Sebastian unit in Mexico and our Canadian office, we have translated our monetary assets and liabilities at the period-end exchange rate, and non-monetary assets and liabilities at historical rates, with income and expenses translated at the average exchange rate for the current period. All translation gains and losses have been included in the current period net income (loss).

Effective January 1, 2007, we implemented a change in the functional currency for our discontinued Venezuelan operations from the U.S. dollar to the Bolívar, the local currency in Venezuela. We believe that significant changes in the economic facts and circumstances affecting our discontinued Venezuelan operations indicated that a change in the functional currency was appropriate, under the provisions of FASB Statement No. 52, “Foreign Currency Translation” (SFAS 52). In accordance with SFAS 52, the balance sheet for our discontinued Venezuelan operations has been recalculated, as of January 1, 2007, so that all assets and liabilities are translated at the current exchange rate of 2,150 Bolívar to $1, the fixed, official exchange rate in effect at that time. As a result, the dollar value of non-monetary assets, previously translated at historical exchange rates, has been significantly reduced. The offsetting translation adjustment was recorded to equity as a component of accumulated other comprehensive income, and reclassified to loss on sale of discontinued operations upon the sale of our Venezuelan operations.

For the years ended December 31, 2008, 2007 and 2006, we recognized total net foreign exchange losses of $13.2 million, $12.1 million and $5.0 million, respectively. Of these, $13.3 million, $12.0 million and $4.9 million, respectively, of the net foreign exchange losses for the three years are related to our discontinued Venezuelan operations, and are included in Gain (loss) from discontinued operations, net of tax with the remaining balance included in Net foreign exchange gain (loss) , on our Consolidated Statements of Operations and Comprehensive Income (Loss).

Exchange control regulations enacted in Venezuela in 2005 limited our ability to repatriate cash and receive dividends or other distributions without substantial cost. At December 31, 2007, we held the U.S. dollar equivalent of approximately $30.0 million denominated in the Venezuelan Bolívar at the rate of 2,150 Bolivares to $1.00. Additionally, we were required to convert into Venezuelan currency the proceeds of Venezuelan export sales made over the past 180 days, approximately $8.1 million, during the six months following December 31, 2007. Exchanging our cash held in local currency into U.S. dollars could be done through specific governmental programs, or through the use of negotiable instruments at conversion rates that were higher than the official rate (parallel rate) on which we incurred foreign currency losses. During 2008 and 2007, we exchanged the U.S. dollar equivalent of approximately $38.7 and $37.0 million, respectively, valued at the official exchange rate of 2,150 Bolivares to $1.00, for $25.4 and $19.8 million at open market exchange rates, in compliance with applicable regulations, incurring a foreign exchange loss for the difference. Changes to the Venezuelan Criminal Exchange Law enacted in December 2007 prohibit the publication of Bolívar exchange rates other than the official rate.

On July 8, 2008, we completed the sale of our discontinued Venezuelan operations to Rusoro Mining Company (“Rusoro”) (see Note 13 for further discussion). During the second quarter of 2008, we repatriated substantially all of our remaining Bolivares-denominated cash. Pursuant to the sale agreement, Rusoro paid us $0.9 million for the U.S. dollar equivalent of the residual Bolivares-denominated cash balances held in Venezuela at the close of the sale, converted at official rates.

F-12

Table of Contents

Q. Risk Management Contracts — We use derivative financial instruments as part of an overall risk-management strategy that is used as a means of hedging exposure to base metals prices and interest rates. We do not hold or issue derivative financial instruments for speculative trading purposes.

Derivative contracts qualifying as normal purchases and sales are accounted as such, under the provisions of SFAS No. 133 “Accounting for Derivative Instruments and Hedging Activities.” Gains and losses arising from a change in the fair value of a contract before the contract’s delivery date are not recorded, and the contract price is recognized in sales of products following settlement of the contract by physical delivery of production to the counterparty at contract maturity.

We measure derivative contracts as assets or liabilities based on their fair value. Gains or losses resulting from changes in the fair value of derivatives in each period are recorded either in current earnings or other comprehensive income (“OCI”), depending on the use of the derivative, whether it qualifies for hedge accounting and whether that hedge is effective. Amounts deferred in OCI are reclassified to sales of products (for metals price-related contracts) or interest expense (for interest rate-related contracts) when the hedged transaction has occurred. Ineffective portions of any change in fair value of a derivative are recorded in current period other operating income (expense).

On May 5, 2008, we entered into an interest rate swap agreement that had the economic effect of modifying the LIBOR-based variable interest obligations associated with our term facility. As a result, the interest payable related to $103.3 million of the $121.7 million term facility balance at December 31, 2008 is fixed at a rate of 9.38% until maturity on March 31, 2011, in accordance with the amortization schedule of the amended and restated credit agreement dated April 16, 2008. As a result of an amendment to the facility in December 2008 to defer the $18.3 million principal payment originally due on December 31, 2008 to February 13, 2009, the terms of the interest rate swap agreement and the note that the swap agreement pertains to did not match at December 31, 2008 with regards to the maturity date of the $18.3 million payment, with the hedge being slightly ineffective as a result. The fair value of the swap at December 31, 2008 was a liability of $2.5 million. We have recorded an accumulated unrealized loss of $2.0 million at December 31, 2008, and realized a $0.5 million hedging loss in 2008 related to the ineffective portion of the swap. The unrealized loss is included in accumulated other comprehensive income in our consolidated balance sheet and the realized loss is included in interest expense in our consolidated statement of operations, with the fair value payable included in other non-current liabilities in our consolidated balance sheet. For additional information regarding our credit facilities, see Note 7 and Note 21.

On February 3, 2009, we reached an agreement to amend the terms of our credit facilities to defer all principal payments due on our term facility in 2009, totaling $66.7 million, to 2010 and 2011 (See Note 21 for more information). As a result of the amendment, the original hedging relationship was de-designated, and a new hedging relationship was designated. A retrospective hedge effectiveness test was performed on the original hedging relationship at the date of de-designation, and the original hedging relationship was determined to be ineffective. Consequently, the change in fair value of the swap of $0.2 million between December 31, 2008 and February 3, 2009 was recorded as a gain on the income statement. The amount of unrealized loss included in accumulated other comprehensive income relating to the original hedge will be recognized in the income statement when the hedged interest payments occur.

We had no commodity-related derivative positions at December 31, 2008.

R. Stock Based Compensation — In accordance with SFAS No. 123(R), the fair value of the equity instruments granted to employees during 2008 were estimated on the date of grant using the Black-Scholes pricing model, utilizing the same methodologies and assumptions as we have historically used. As of December 31, 2008, the majority of the instruments outstanding were fully vested, and we recognized stock-based compensation expense under SFAS No. 123(R) of approximately $4.1 million during 2008, which was recorded to general and administrative expenses, exploration and cost of sales and other direct production costs. For the years ended December 31, 2007 and 2006, we recognized $3.4 million and $2.5 million, respectively, in compensation expense as required by SFAS No. 123(R).

For additional information on our employee stock option and unit compensation, see Notes 9 and 10 of Notes to Consolidated Financial Statements.

S. Pre-Development Expense — Costs incurred in the exploration stage that may ultimately benefit production, such as underground ramp development, are expensed due to the lack of proven and probable reserves, which would indicate future recovery of these expenses.

T. Legal Costs – Legal costs incurred in connection with a potential loss contingency are recorded to expense as incurred.

U. Basic and Diluted Income (Loss) Per Common Share — We calculate basic earnings per share on the basis of the weighted average number of common shares outstanding during the period. Diluted earnings per share is calculated using weighted average number of common shares outstanding during the period plus the effect of potential dilutive common shares during the period using the treasury stock method.

F-13

Table of Contents

Potential dilutive common shares include outstanding stock options, restricted stock awards, stock units, warrants and convertible preferred stock for periods in which we have reported net income. For periods in which we reported net losses, potential dilutive common shares are excluded, as their conversion and exercise would be anti-dilutive. See Note 15 of Notes to Consolidated Financial Statements for additional information.

V. Comprehensive Income (Loss) — In addition to net income (loss), comprehensive income (loss) includes all changes in equity during a period, such as adjustments to minimum pension liabilities, adjustments to recognize the overfunded or underfunded status of our defined benefit pension plans pursuant to SFAS No. 158, the effective portion of changes in fair value of derivative instruments, foreign currency translation adjustments and cumulative unrecognized changes in the fair value of available for sale investments, net of tax, if applicable.

W. New Accounting Pronouncements — In May 2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted Accounting Principles,” which identifies the sources of accounting principles and provides entities with a framework for selecting the principles used in preparation of financial statements that are presented in conformity with GAAP. SFAS 162 will become effective 60 days following the SEC’s approval of the Public Company Accounting Oversight Board amendments to AU Section 411, The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles . The adoption of SFAS No. 162 is not expected to have a material impact on our consolidated financial statements.

In December 2007, the FASB revised SFAS No. 141 “Business Combinations.” The revised standard is effective for transactions where the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008.SFAS No. 141(R) will change the accounting for the assets acquired and liabilities assumed in a business combination.


	•	Acquisition costs will be generally expensed as incurred;

	•	Noncontrolling interests (formally known as “minority interests”) will be valued at fair value at the acquisition date;

	•	Acquired contingent liabilities will be recorded at fair value at the acquisition date and subsequently measured at either the higher of such amount or the amount determined under existing guidance for non-acquired contingencies;

	•	In-process research and development will be recorded at fair value as an indefinite-lived intangible asset at the acquisition date

	•	Restructuring costs associated with a business combination will be generally expensed subsequent to the acquisition date; and

	•	Changes in deferred tax asset valuation allowances and income tax uncertainties after the acquisition date generally will affect income tax expense.

F-14

Table of Contents

liabilities. SFAS No. 157 defines fair value, establishes a framework for measuring fair value and expands the related disclosure requirements. In February 2008, FASB Staff Position (FSP) No. FAS 157-2 was issued, which delayed by a year the effective date of SFAS No. 157 for certain nonfinancial assets and liabilities. We adopted SFAS No. 157 for financial assets and liabilities in the first quarter of 2008, and the adoption did not have a material impact on our consolidated financial statements. See Note 14 of Notes to the Consolidated Financial Statements for more information. We are currently evaluating the potential impact of the adoption of SFAS No. 157 as it relates to nonfinancial assets and liabilities on our consolidated financial statements.

Note 2. Short-term Investments and Securities Held for Sale, Investments, and Restricted Cash

Cash

Exchange control regulations in Venezuela limited our ability to repatriate cash and receive dividends or other distributions without substantial cost. Our cash balances denominated in Bolívares that were maintained in Venezuela totaled a U.S. dollar equivalent, at official exchange rates, of approximately $30.0 million at December 31, 2007. On June 19, 2008, we entered into an agreement to sell our wholly owned subsidiaries holding our business and operations in Venezuela to Rusoro, with the transaction closing on July 8, 2008 (see Note 13 for further discussion of the transaction).

Prior to the sale of our Venezuelan operations, exchanging our cash held in local currency into U.S. dollars was done through specific governmental programs, or through the use of negotiable instruments at conversion rates that were less favorable than the official rate (parallel rate) on which we incurred foreign currency losses. During 2008, prior to the sale of our Venezuelan operations, we exchanged the U.S. dollar equivalent of approximately $38.7 million at the official exchange rate of 2,150 Bolívares to $1.00 for approximately $25.4 million at open market exchange rates and in compliance with applicable regulations, incurring foreign exchange losses for the difference. All of these losses were incurred on repatriations of cash from Venezuela. During 2007, we exchanged the U.S. dollar equivalent of approximately $37.0 million, valued at the official exchange rate of 2,150 Bolívares to $1.00, for approximately $19.8 million at open market exchange rates, in compliance with applicable regulations, incurring foreign exchange losses for the difference. Approximately $13.8 million of the conversion losses for 2007 were incurred on the repatriation of cash from Venezuela, while additional losses of approximately $3.4 million in 2007 were related to conversions of Bolívares for the payment of expatriate payroll and other U.S. dollar-denominated goods and services.

Our cash is maintained in various financial institutions, and the balances are insured up to the Federal Deposit Insurance Corporation limits of $250,000 per institution. Some of our cash balances at December 31, 2008 exceeded the federally insured limits. We have not experienced losses on cash balances exceeding the federally insured limits.

Short-term Investments and Securities Held for Sale

Short-term investments consisted of the following at December 31, 2008 and 2007 (in thousands):


	2008		2007
Adjustable rate securities	$	—	$	4,000
Marketable equity securities (Cost: 2007 - $18,903)		—		21,759
	$	—	$	25,759

Adjustable rate securities are carried at amortized cost. However, due to the short-term nature of these investments, the amortized cost approximates fair market value. Marketable equity securities are also carried at fair market value, as they are classified as “available-for-sale” securities under the provisions of SFAS No. 115. The $21.8 million marketable equity securities balance at December 31, 2007 represents 8.2 million shares of Great Basin Gold, Inc. stock, including 7.9 million shares transferred to us upon the sale of the Hollister Development Block gold exploration project interest to Great Basin Gold in April 2007. We sold 8.2 million shares of Great Basin Gold stock during the second quarter of 2008 for total proceeds of $27.0 million and recognized a gain on sale of investment of $8.1 million. In January 2006, we sold our equity shares of Alamos Gold Inc., generating a $36.4 million pre-tax gain and netting $57.4 million of cash proceeds.

Non-current Investments

At December 31, 2008 and 2007, the fair value of our non-current investments was $3.1 million and $8.4 million, respectively. The basis of these investments, representing equity securities, was approximately $5.2 million and $1.1 million, respectively, at December 31, 2008 and 2007. $1.9 million of the $3.1 million non-current investments balance at December 31, 2008 represents 3.6 million shares of Rusoro stock transferred to us upon the sale of El Callao and Drake Bering (see Note 13 for information on the sale of our discontinued Venezuelan operations). At December 31, 2008, we have recorded a $2.6 million unrealized loss on the Rusoro shares, which have been in a continuous unrealized loss position since August 2008. We considered the following information in concluding that the impairment on the Rusoro shares is temporary:

F-15

Table of Contents


	•	We believe that we have the intent and ability to hold the investment until its cost basis is recovered, and that it is not probable that we will sell the investment at a loss.

	•	Rusoro recently completed the acquisition of a new operating mine and continues to have access to liquidity. We believe that their assets continue to remain sound.

	•	Analysts have recently given Rusoro stock a “buy” rating with a target share price greater than our cost, and analyst net asset value calculations have recently exceeded our cost.

However, the exchange on which Rusoro stock is traded experienced a significant overall loss in value in 2008, there has been a general reduction in investor confidence in junior mining companies in recent months, and Rusoro shares are thinly traded. If our investment in Rusoro stock continues to have a fair value less than its original cost, we will monitor these factors in determining whether it is still appropriate to record an unrealized loss for the impairment in the future.

At December 31, 2008, total unrealized gains of $1.0 million for investments held having a net gain position and total unrealized losses of $3.1 million for investments held having a net loss position were included in accumulated other comprehensive income.

Restricted Cash and Investments

Various laws and permits require that financial assurances be in place for certain environmental and reclamation obligations and other potential liabilities. Restricted investments primarily represent investments in money market funds and certificate of deposit. These investments are restricted primarily for reclamation funding or surety bonds and were $15.2 million at December 31, 2008, and $17.2 million at December 31, 2007, which includes $7.6 million and $8.9 million, respectively, restricted for reclamation funding for the Greens Creek Joint Venture. In April 2008, we completed the acquisition of the companies holding 70.3% of the Greens Creek Joint Venture, resulting in our 100% ownership of Greens Creek through our various subsidiaries (see Note 19 for further discussion). In August 2008, we obtained release of the restricted cash balance of $30.4 million, replacing it with a letter of credit backed by the restricted cash balance of $7.6 million. Accordingly, the $7.6 million December 31, 2008 balance represents 100% of the Greens Creek restricted balance, while the $8.9 million balance at December 31, 2007 represents our 29.7% share of the $29.9 million total Greens Creek restricted balance held prior to our acquisition of the remaining 70.3% interest.

Our loan covenants required that we maintain an unencumbered cash balance of at least $10 million at December 31, 2008. There was no legal restriction on the funds, therefore, we did not classify them as restricted cash.

Note 3: Inventories

Inventories consist of the following (in thousands):


	December 31,
	2008		2007
Concentrates, doré, bullion, metals in transit and in-process inventories	$	12,874	$	5,465
Materials and supplies		8,457		10,046
	$	21,331	$	15,511

The product inventory acquired in connection with the purchase of the companies owning 70.3% of the Greens Creek mine, as discussed further in Note 19 , was all sold during the second quarter of 2008.

Note 4: Properties, Plants, Equipment and Mineral Interests, Royalty Obligations and Lease Commitments

Properties, Plants and Equipment and Mineral Interests

Our major components of properties, plants, equipment, and mineral interests are (in thousands):


	December 31,
	2008		2007
Mining properties, including asset retirement obligations	$	262,104	$	14,405
Development costs		88,026		147,320
Plants and equipment		308,482		218,791
Land		9,270		1,007
Mineral interests		369,125		4,940
Construction in progress		43,941		23,703
		1,080,948		410,166
Less accumulated depreciation, depletion and amortization		228,835		277,858
Net carrying value	$	852,113	$	132,308

F-16

Table of Contents

During 2008, we incurred total capital expenditures of approximately $68.7 million that included $44.1 million at the Lucky Friday unit and $24 million at the Greens Creek unit. In addition, on April 16, 2008, we completed the acquisition of the remaining 70.3% interest in the Greens Creek Joint Venture for $758.5 million. A total of $689.7 million of the purchase price was allocated to the net carrying value of property, plants, equipment and mineral interests at the Greens Creek unit, including $5.0 million for the asset retirement obligation, $266.7 million for development costs, $67.2 million for plants and equipment, $7.2 million for land, and $343.6 million for mineral interests. We also acquired substantially all of the assets of Independence Lead Mines (“Independence”) on November 6, 2008 for 6.9 million shares of our common stock. The Independence purchase price of approximately $14.6 million was allocated to mineral interests at the Lucky Friday unit. In addition, we issued approximately 1.6 million shares of our Common Stock in 2008 to acquire the right to earn into a 70% interest in the San Juan Silver Joint Venture with Emerald Mining & Leasing, LLC and Golden 8 Mining, LLC, which holds an approximately 25-square-mile consolidated land package in the Creede Mining District of Colorado, resulting in an $11.4 million increase to mineral interests. See Note 19 for further discussion of the acquisitions of 70.3% of Greens Creek, Independence, and San Juan Silver earn-in rights.

On July 8, 2008, we completed the sale of the companies holding 100% of the ownership interest of our discontinued Venezuelan operations, resulting in the disposal of properties, plants, equipment and mineral interests having net carrying value of approximately $32.3 million at the time of sale. See Note 13 for more information on the sale.

Leases

We enter into operating leases during the normal course of business. During the years ended December 31, 2008, 2007 and 2006, we incurred expenses of $2.0 million, $1.8 million and $1.2 million, respectively, for these leases. At December 31, 2008, future obligations under our non-cancelable leases were as follows (in thousands):


Year ending December 31,
2009	$	2,511
2010		853
2011		853
2012		220
2013		9
Total	$	4,446

Note 5: Environmental and Reclamation Activities

The liabilities accrued for our reclamation and closure costs at December 31, 2008 and 2007, were as follows (in thousands):


	2008			2007
Operating properties:
Greens Creek	$	29,964		$	5,150
Lucky Friday		879			807
Nonoperating properties:
San Sebastian		1,161			1,148
Grouse Creek		14,326			19,061
Coeur d’Alene Basin		65,600			65,600
Bunker Hill		3,155			3,459
Republic		3,800			3,800
All other sites		2,462			2,640
Discontinued operations – La Camorra		—			4,474
Total		121,347			106,139
Reclamation and closure costs, current		(2,227	)		(9,686	)
Reclamation and closure costs, long-term	$	119,120		$	96,453

The activity in our accrued reclamation and closure cost liability for the years ended December 31, 2008, 2007 and 2006, was as follows (in thousands):

F-17

Table of Contents


Balance at January 1, 2006	$	69,242
Accruals for estimated costs		643
Revision of estimated cash flows due to changes in reclamation plans		528
Payment of reclamation obligations		(4,509	)
Balance at December 31, 2006		65,904
Accruals for estimated costs		45,623
Revision of estimated cash flows due to changes in reclamation plans		1,293
Payment of reclamation obligations		(6,681	)
Balance at December 31, 2007		106,139
Accruals for estimated costs		811
Liability addition due to the purchase price allocation for the acquisition of 70.3% of Greens Creek		12,145
Revision of estimated cash flows due to changes in reclamation plans		13,114
Liability reduction due to the sale of discontinued operations		(4,474	)
Payment of reclamation obligations		(6,388	)
Balance at December 31, 2008	$	121,347

Below is a reconciliation as of December 31, 2008 and 2007 (in thousands), of our asset retirement obligations, which are included in our total accrued reclamation and closure costs of $121.3 million and $106.1 million, respectively, reflected above. The sum of our estimated reclamation and abandonment costs was discounted using a credit adjusted, risk-free interest rate of 7% from the time we incurred the obligation to the time we expect to pay the retirement obligation.


	2008			2007
Balance January 1	$	11,579		$	9,921
Changes in obligations due to acquisition of 70.3% of Greens Creek		12,145			—
Changes in obligations due to changes in reclamation plans		13,114			1,363
Accretion expense		475			354
Changes in obligations due to sale of discontinued operations		(4,474	)		—
Payment of reclamation obligations		(835	)		(59	)
Balance at December 31	$	32,004		$	11,579

For additional information as it pertains to the acquisition of the remaining 70.3% interest in Greens Creek, see Note 19. See Note 13 for further discussion of the sale of our discontinued Venezuelan operations.

Note 6: Income Taxes

Major components of our income tax provision (benefit) for the years ended December 31, 2008, 2007 and 2006, relating to continuing operations are as follows (in thousands):


	2008			2007			2006
Continuing operations:
Current:
Federal	$	3		$	811		$	1,371
State		(170	)		88			89
Foreign		370			504			442
Total current income tax provision		203			1,403			1,902
Deferred:
Federal		3,604			(9,906	)		(11,594	)
Foreign		—			—			—
Total deferred income tax (benefit) provision		3,604			(9,906	)		(11,594	)
Total income tax (benefit) provision from continuing operations		3,807			(8,503	)		(9,692	)

Discontinued operations:
Tax provision for loss on sale of discontinued operations		2,944			—			—
Tax provision (benefit) for loss from discontinued operations		—			(627	)		2,391

Total income tax (benefit) provision	$	6,751		$	(9,130	)	$	(7,301	)

F-18

Table of Contents

Domestic and foreign components of income (loss) from operations before income taxes for the years ended December 31, 2008, 2007 and 2006, are as follows (in thousands):


	2008			2007			2006
Domestic	$	(23,823	)	$	72,104		$	61,510
Foreign		(9,543	)		(12,450	)		(6,414	)
Discontinued operations		(26,446	)		(15,587	)		6,725
Total	$	(59,812	)	$	44,067		$	61,821

The annual tax provision (benefit) is different from the amount that would be provided by applying the statutory federal income tax rate to our pretax income (loss). The reasons for the difference are (in thousands):


	2008					2007					2006
Computed “statutory” (benefit) provision	$	(20,934	)	(35	)%	$	15,423		35	%	$	21,637		35	%
Percentage depletion		(2,594	)	(4	)		(10,416	)	(24	)		(9,126	)	(15	)
Net increase (utilization) of U.S. and foreign tax loss carryforwards		23,528		39			(3,534	)	(8	)		(23,159	)	(37	)
Change in valuation allowance other than utilization		3,604		6			(10,481	)	(24	)		(1,219	)	(2	)
Discontinued operations		2,944		5			—		—			—		—
Effect of U.S. AMT, state, foreign taxes and other		203		—			(122	)	—			4,566		7
	$	6,751		11	%	$	(9,130	)	(21	)%	$	(7,301	)	(12	)%

Pursuant to guidelines contained in SFAS No. 109, Accounting for Income Taxes, we evaluated the positive and negative evidence available to determine whether a valuation allowance is required on our net deferred tax assets for the period ended December 31, 2008. At December 31, 2008 and 2007, the balance of our valuation allowance used to offset our net deferred tax assets was $139 million and $115 million, respectively.

For the period ended December 31, 2008 three significant factors made an impact on our net deferred tax position. The Company acquired control of the Greens Creek Joint Venture in April and added net a deferred tax asset of $23 million related to the purchase price allocation and purchase accounting. In July, the Company sold its Venezuelan business and the deferred tax assets related the Venezuelan business were eliminated, resulting in a net deferred tax reduction of $3.2 million. Lastly, the economic conditions of recent months and the evidence available at year-end reduced the amount of deferred tax assets that the Company can expect to use in the future to $38.6 million which required a net increase to the valuation allowance of $3.6 million for the year. The year 2007 benefited from favorable metal prices resulting in higher taxable income and we utilized significant tax net operating loss carryforwards. We increased our net deferred tax assets by $10.5 million, to a total of $22.3 million at December 31, 2007, to reflect the total net deferred tax asset that we expect to utilize over a 2-year period based on income from operations. Due to our return to profitability in 2007 and 2006, we felt that 24 months was an appropriate period to measure based on all available evidence at that time.

The deferred tax asset will be amortized against taxable income in the U.S. in future periods. We will review available evidence in future periods to determine whether more or less of our deferred tax asset should be realized. Adjustment to the valuation allowance will be made in the period for which the determination is made.

F-19

Table of Contents

The components of the net deferred tax asset were as follows (in thousands):


	December 31,
	2008			2007
Deferred tax assets:
Accrued reclamation costs	$	44,281		$	40,709
Deferred exploration		8,523			4,564
Investment valuation differences		—			43
Postretirement benefits other than pensions		1,761			2,880
Deferred compensation		2,253			3,158
Foreign net operating losses		8,058			21,300
Federal net operating losses		85,200			64,589
State net operating losses		10,578			4,927
Capital loss carryforward		767			—
Tax credit carryforwards		2,809			3,075
Stock compensation		1,926			1,618
Other comprehensive income		10,009			—
Miscellaneous		2,162			9,080
Total deferred tax assets		178,327			155,943
Valuation allowance		(138,848	)		(115,413	)
Total deferred tax assets		39,479			40,530
Deferred tax liabilities:
Unrealized gain on marketable securities		—			(4,074	)
Pension costs		—			(12,231	)
Properties, plants and equipment		(927	)		(1,917	)
Total deferred tax liabilities		(927	)		(18,222	)
Net deferred tax asset	$	38,552		$	22,308

We plan to permanently reinvest earnings from foreign subsidiaries. For the years 2008, 2007 and 2006 we had no unremitted foreign earnings. Foreign net operating losses carried forward are shown above as a deferred tax asset.

We recorded a valuation allowance to reflect the estimated amount of deferred tax assets, which may not be realized principally due to the expiration of net operating losses and tax credit carryforwards. The changes in the valuation allowance for the years ended December 31, 2008, 2007 and 2006, are as follows (in thousands):


	2008			2007			2006
Balance at beginning of year	$	(115,413	)	$	(133,363	)	$	(160,396	)
Increase related to non-utilization of net operating loss carryforwards and non-recognition of deferred tax assets due to uncertainty of recovery		(39,679	)		(38,325	)		(19,569	)
Decrease related to net recognition of deferred tax assets		16,244			10,486			11,822
Decrease related to recognition of deferred tax liability on unrealized gain		—			5,192			—
Decrease related to utilization and expiration of deferred tax assets		—			25,967			34,780
Decrease due to utilization on gain on sale of subsidiary		—			14,630			—
Balance at end of year	$	(138,848	)	$	(115,413	)	$	(133,363	)

As of December 31, 2008, for U.S. income tax purposes, we have net operating loss carryforwards of $243.4 million and $140.6 million, respectively, for regular and alternative minimum tax purposes. These operating loss carryforwards expire over the next 15 to 20 years, the majority of which expire between 2011 and 2024. In addition, we have foreign tax operating loss carryforwards of approximately $25 million, which expire between 2009 and 2017. Our U.S. tax loss carryforwards may also be limited upon a change in control. We have approximately $1 million in alternative minimum tax credit carryforwards which do not expire and are eligible to reduce future regular U.S. tax liabilities.

Uncertain Tax Positions

The Company or one of its subsidiaries files income tax returns in the U.S. federal jurisdiction, various state and foreign jurisdictions. We are no longer subject to income tax examinations by U.S. federal and state tax authorities for years prior to 2005, or examinations by foreign tax authorities for years prior to 2002. We currently have no tax years under examination.

Based on our assessment of FIN 48, “Accounting for Uncertainty in Income Taxes,” we concluded that consistent with 2007, FIN 48 had no significant impact on our results of operations or financial position as of December 31, 2008. We do not have an accrual for uncertain tax positions as of December 31, 2008. As a result, tabular reconciliation of beginning and ending balances would not be meaningful. If interest and penalties were to be assessed, we would charge interest to interest expense, and penalties to other operating expense. It is not anticipated that unrecognized tax benefits would significantly increase or decrease within 12 months of the reporting date.

Note 7: Long-term Debt and Credit Agreement

In September 2005, we entered into a $30.0 million revolving credit agreement for an initial two-year term, with the right to extend the facility for two additional one-year periods, on terms acceptable to us and the lenders. In both September 2006 and September 2007, we amended and extended the agreement one additional year. Amounts borrowed under the credit agreement were to be available for general corporate purposes. Our then 29.7 % interest in the Greens Creek Joint Venture, which is held by Hecla Alaska LLC, our indirect wholly owned subsidiary, was pledged as collateral under the credit agreement. The interest rate on the agreement was either 2.25% above the London InterBank Offered Rate (“LIBOR”) or an

F-20

Table of Contents

alternate base rate plus 1.25%. We made quarterly commitment fee payments equal to 0.75% per annum on the sum of the average unused portion of the credit agreement. There were no outstanding borrowings at December 31, 2007.

On April 16, 2008, the credit agreement was amended and restated in connection with our acquisition of the companies owning 70.3% of the joint venture operating the Greens Creek mine (see Note 19 for further discussion of the Greens Creek acquisition). The amended and restated agreement involved a $380 million facility, consisting of a $140 million three-year term facility maturing on March 31, 2011, which was fully drawn upon closing of the Greens Creek transaction, and a $240 million bridge facility, which originally was scheduled to mature in October 2008.

We utilized $220 million from the bridge facility at the time of closing the Greens Creek transaction, and used the remaining $20 million balance available for general corporate purposes in September 2008. We applied $162.9 million in proceeds from the public offering of 34.4 million shares of our common stock against the bridge loan principal balance during the third quarter of 2008 (see Note 10 for more information). On October 16, 2008, the Company repaid an additional $37.1 million of the bridge facility balance, and reached an agreement with its bank syndicate to extend the remaining $40 million outstanding bridge facility balance until February 16, 2009, subject to certain reporting requirements and amendments to the bridge loan and term loan interest rates. The amendment required the Company to provide an updated long-range operating plan for the bank syndicate to review, and the plan was accepted by the banking group in December 2008. An additional amendment to the credit facilities in December 2008 changed the repayment date of the $40 million bridge facility balance to February 13, 2009. All of the $40 million outstanding bridge facility balance was classified as current at December 31, 2008. On February 4, 2009, we entered into an agreement to sell 32 million units comprised of one share of Common Stock and one-half Series 3 Warrant to purchase one share of Common Stock in an underwritten public offering for proceeds of approximately $65.6 million. On February 6, 2009, the underwriters exercised their over-allotment option in connection with the original offering, resulting in the issuance and sale of 4.8 million additional units for additional proceeds of approximately $9.8 million. We applied $40 million of the total proceeds to the payment of our outstanding bridge facility balance on February 10, 2009. In accordance with the credit facilities, we also reduced our term loan by approximately $8 million in February 2009 (see Note 21 of Notes to Consolidated Financial Statements for more information).

The first term facility principal payment of $18.3 was paid on September 30, 2008. In December 2008, we reached an agreement with the bank syndicate to move the $18.3 million principal payment originally scheduled for December 31, 2008 to February 13, 2009. On February 3, 2009, we again amended the terms of the credit agreement to defer all term facility principal payments due in 2009, totaling $66.7 million, to 2010 and 2011. As discussed above, we reduced our term loan by approximately $8 million in February, 2009. As a result, $8 million of the $121.7 million term facility balance outstanding at December 31, 2008 was classified as current, with the $113.7 million classified as non-current. According to the amended agreement, equal quarterly principal payments totaling $60.0 million are to be made in 2010, with a final payment of $53.7 million due on March 31, 2011. See Note 21 of Notes to Consolidated Financial Statements for further discussion of the amendment. We and all of our material U.S. subsidiaries guarantee the amended and restated credit agreement.

The December 2008 amendment to the agreement to defer the $18.3 million principal payment discussed above also resulted in a change to the interest rate on the term facility from an applicable margin of 2.25% and 3.00% over LIBOR to an applicable margin of 6% over LIBOR, or an alternative base rate plus an applicable margin of 5.00%. However, we have entered into an interest rate swap agreement to manage the effects of interest rate volatility on the term facility (see Note 11 ). $103.3 million of the $121.7 million term facility balance outstanding at December 31, 2008 was subject to the interest rate swap and had an interest rate of 9.38% at December 31, 2008. The $18.3 million deferred principal balance had an interest rate of 6.5% at December 31, 2008. The interest rate applicable margins did not change as a result of the February 3, 2009 amendment to the agreement. During 2008, we made interest payments totaling $5.4 million for the term facility, including net amounts paid for interest rate swap spreads.

The bridge facility has an interest rate of either LIBOR plus 6.00% or an alternative base rate plus 5.00%. At December 31, 2008, our interest rate on the bridge facility was 6.5%. During 2008, we made interest payments totaling $6.3 million for the bridge facility. We have also paid a commitment fee equal to 0.50% per annum on the unused portion of the bridge facility.

The amended and restated credit agreement includes various covenants and other limitations related to our indebtedness and investments, as well as other information and reporting requirements. We were not in compliance with certain covenants and other requirements related to the amended and restated credit agreement as of December 31, 2008. However, our non-compliance with these items has subsequently been waived. Additionally, we are required to pay any dividends on our 6.5% Mandatory Convertible Preferred Stock in common stock until the earlier of the date on which the bridge facility is repaid in full and February 13, 2009, to the extent payment of such dividends in common stock is permitted thereby and under applicable law.

F-21

Table of Contents

The February 3, 2009 amendment to the amended and restated credit agreement also requires us to pay an additional fee to our lenders upon effectiveness of the amendment, and on each subsequent July 1 ^st and January 1 ^st , by issuing to the lenders an aggregate amount of a new Series of 12% Convertible Preferred Stock (discussed further in Note 21 ) equal to 3.75% of the aggregate principal amount of the term facility outstanding on such date until the term facility is paid off in full. Pursuant to this requirement, 42,621 shares of 12% Convertible Preferred Stock were issued to the lenders in February 2009.

If the market prices for the metals we produce decline or we fail to control our production or development costs for a sustained period of time, our ability to service our debt obligations may be adversely affected. Failure to meet the payment obligations of our credit facilities could cause us to be in default. If there were an event of default under our credit facilities, the affected creditors could cause all amounts borrowed under these instruments to be due and payable immediately. Additionally, if we fail to repay indebtedness under the credit facilities when it becomes due, the lenders under the credit facilities could proceed against the assets which we have pledged to them as security.

Note 8: Commitments and Contingencies

Bunker Hill Superfund Site

In 1994, we, as a potentially responsible party under the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (“CERCLA”), entered into a Consent Decree with the Environmental Protection Agency (“EPA”) and the State of Idaho concerning environmental remediation obligations at the Bunker Hill Superfund site, a 21-square-mile site located near Kellogg, Idaho (the “Bunker Hill site”). The 1994 Consent Decree (the “Bunker Hill Decree” or “Decree”) settled our response-cost responsibility under CERCLA at the Bunker Hill site. Parties to the Decree included us, Sunshine Mining and Refining Company (“Sunshine”) and ASARCO Incorporated (“ASARCO”). Sunshine subsequently filed bankruptcy and settled all of its obligations under the Bunker Hill Decree.

In 1994, we entered into a cost-sharing agreement with other potentially responsible parties, including ASARCO, relating to required expenditures under the Bunker Hill Decree. ASARCO is in default of its obligations under the cost-sharing agreement and consequently in August 2005, we filed a lawsuit against ASARCO in Idaho State Court seeking amounts due us for work completed under the Decree. Additionally, we have claimed certain amounts due us under a separate agreement related to expert costs incurred to defend both parties with respect to the Coeur d’Alene River Basin litigation in Federal District Court, discussed further below. After we filed suit, ASARCO filed for Chapter 11 bankruptcy protection in United States Bankruptcy Court in Texas in August 2005. As a result of this filing, an automatic stay is in effect for our claims against ASARCO. We are unable to proceed with the Idaho State Court litigation against ASARCO because of the stay, and have asserted our claims in the context of the bankruptcy proceeding.

In late September 2008, we reached an agreement with ASARCO to allow our claim against ASARCO in ASARCO’s bankruptcy proceedings in the amount of approximately $3.3 million. Our claim included approximately $3.0 million in clean up costs incurred by us for ASARCO’s share of such costs under the cost sharing agreement with ASARCO related to the Bunker Hill Decree. The remaining $330,000 is litigation-related costs incurred by us for ASARCO’s share of expert fees in the Basin litigation. The agreement also provides that we and ASARCO release each other from any and all liability under the cost sharing agreement, the Bunker Hill Decree and the Basin CERCLA site (discussed below). The agreement is subject to ASARCO obtaining an order from the Federal District Court in Idaho modifying the existing Consent Decree for the Bunker Hill site. The mutual release of liability provision of the agreement is subject to final bankruptcy court approval of ASARCO’s separate settlement agreement with the United States which, among other things, set and allowed the United States’ claim against ASARCO for ASARCO’s Basin CERCLA liability. We believe the mutual release provision may not become effective due to ASARCO’s separate settlement with the United States not being approved by the Bankruptcy Court or being materially modified. Depending on the resolution of ASARCO’s bankruptcy proceedings, we could receive a portion of or all of our $3.3 million allowed claim against ASARCO in the bankruptcy proceeding. We are unable to predict the outcome and timing of ASARCO’s bankruptcy proceeding.

In December 2005, we received notice that the EPA allegedly incurred $14.6 million in costs relating to the Bunker Hill site from January 2002 to March 2005. The notice was provided so that we and ASARCO might have an opportunity to review and comment on the EPA’s alleged costs prior to the EPA’s submission of a formal demand for reimbursement, which has not occurred as of the date of this filing. We reviewed the costs submitted by the EPA to determine whether we have any obligation to pay any portion of the EPA’s alleged costs relating to the Bunker Hill site. We were unable to determine what costs we will be obligated to pay under the Bunker Hill Decree based on the information submitted by the EPA. We requested that the EPA provide additional documentation relating to these costs. In September 2006, we received from the EPA a certified narrative cost summary, and certain documentation said to support that summary, which revised the EPA’s earlier determination to state that it had incurred $15.2 million in response costs. The September notice stated that it was not a formal demand and invited us to discuss or comment on the matter. In the second quarter of 2007, we were able to identify certain costs submitted by the EPA that we believe it is probable that we may have liability within the context of the Decree, and

F-22

Table of Contents

accordingly, in June of 2007, we estimated the range of our potential liability to be between $2.7 million and $6.8 million, and accrued the minimum of the range as we believed no amount in the range was more likely than any other. We will continue to assess the materials relating to the alleged costs sent to us and to discuss the matter with the EPA. If we are unable to reach a satisfactory resolution, we anticipate exercising our right under the Bunker Hill Decree to challenge reimbursement of the alleged costs. However, an unsuccessful challenge would likely require us to further increase our expenditures and/or accrual relating to the Bunker Hill site.

The accrued liability balance at December 31, 2008 relating to the Bunker Hill site was $3.2 million. The liability balance represents our portion of the remaining remediation activities associated with the site, our estimated portion of a long-term institutional controls program required by the Bunker Hill Decree, and potential reimbursement to the EPA of costs allegedly incurred by the agency as described in a notice to us by the agency. We believe ASARCO’s remaining share of its future obligations will be paid through proceeds from an ASARCO trust created in 2003 for the purpose of funding certain of ASARCO’s environmental obligations, as well as distributions to be determined by the Bankruptcy Court. In the event we are not successful in collecting what is due us from the ASARCO trust or through the bankruptcy proceedings, because the Bunker Hill Decree holds us jointly and severally liable, it is possible our liability balance for the remedial activity at the Bunker Hill site could be $18.3 million, the amount we currently estimate to complete the total remaining obligation under the Decree, as well as potential reimbursement to the EPA of costs allegedly incurred by the agency at the Bunker Hill site. There can be no assurance as to the ultimate disposition of litigation and environmental liability associated with the Bunker Hill Superfund site, and we believe it is possible that a combination of various events, as discussed above, or other events could be materially adverse to our financial results or financial condition.

Coeur d’Alene River Basin Environmental Claims

Coeur d’Alene Indian Tribe Claims

In July 1991, the Coeur d’Alene Indian Tribe (“Tribe”) brought a lawsuit, under CERCLA, in Federal District Court in Idaho against us, ASARCO and a number of other mining companies asserting claims for damages to natural resources downstream from the Bunker Hill site over which the Tribe alleges some ownership or control. The Tribe’s natural resource damage litigation has been consolidated with the United States’ litigation described below. Because of various bankruptcies and settlements of other defendants, we are the only remaining defendant in the Tribe’s Natural Resource Damages case.

U.S. Government Claims

In March 1996, the United States filed a lawsuit in Federal District Court in Idaho against certain mining companies, including us, that conducted historic mining operations in the Silver Valley of northern Idaho. The lawsuit asserts claims under CERCLA and the Clean Water Act, and seeks recovery for alleged damages to, or loss of, natural resources located in the Coeur d’Alene River Basin (“Basin”) in northern Idaho for which the United States asserts it is the trustee under CERCLA. The lawsuit claims that the defendants’ historic mining activity resulted in releases of hazardous substances and damaged natural resources within the Basin. The suit also seeks declaratory relief that we and other defendants are jointly and severally liable for response costs under CERCLA for historic mining impacts in the Basin outside the Bunker Hill site. We have asserted a number of defenses to the United States’ claims.

In May 1998, the EPA announced that it had commenced a Remedial Investigation/ Feasibility Study under CERCLA for the entire Basin, including Lake Coeur d’Alene, as well as the Bunker Hill site, in support of its response cost claims asserted in its March 1996 lawsuit. In October 2001, the EPA issued its proposed clean-up plan for the Basin. The EPA issued the Record of Decision (“ROD”) on the Basin in September 2002, proposing a $359.0 million Basin-wide clean-up plan to be implemented over 30 years and establishing a review process at the end of the 30-year period to determine if further remediation would be appropriate.

During 2000 and 2001, we were involved in settlement negotiations with representatives of the United States, the State of Idaho and the Tribe. These settlement efforts were unsuccessful. However, we have resumed efforts to explore possible settlement of these and other matters, but it is not possible to predict the outcome of these efforts.

Phase I of the trial on the consolidated Tribe’s and the United States’ claims commenced in January 2001, and was concluded in July 2001. Phase I addressed the extent of liability, if any, of the defendants and the allocation of liability among the defendants and others, including the United States. In September 2003, the Court issued its Phase I ruling, holding that we have some liability for Basin environmental conditions. The Court refused to hold the defendants jointly and severally liable for historic tailings releases and instead allocated a 31% share of liability to us for impacts resulting from these releases. The portion of damages, past costs and clean-up costs to which this 31% applies, other cost allocations applicable to us and the Court’s determination of an appropriate clean-up plan is to be addressed in Phase II of the litigation. The Court also left issues on the deference, if any, to be afforded the United States’ clean-up plan, for Phase II.

F-23

Table of Contents

The Court found that while certain Basin natural resources had been injured, “there has been an exaggerated overstatement” by the plaintiffs of Basin environmental conditions and the mining impact. The Court significantly limited the scope of the trustee plaintiffs’ resource trusteeship and will require proof in Phase II of the litigation of the trustees’ percentage of trusteeship in co-managed resources. The United States and the Tribe are re-evaluating their claims for natural resource damages for Phase II; such claims may be in the range of $2.0 billion to $3.4 billion. We believe we have limited liability for natural resource damages because of the actions of the Court described above. Because of a number of factors relating to the quality and uncertainty of the United States’ and Tribe’s natural resources damage claims, we are currently unable to estimate what, if any, liability or range of liability we may have for these claims.

Two of the defendant mining companies, Coeur d’Alene Mines Corporation and Sunshine Mining and Refining Company, settled their liabilities under the litigation during 2001. We and ASARCO (which, as discussed above, filed for bankruptcy in August 2005) are the only defendants remaining in the United States’ litigation. Phase II of the trial was scheduled to commence in January 2006. As a result of ASARCO’s bankruptcy filing, the Idaho Federal Court vacated the January 2006 trial date. We anticipate the Court will schedule a status conference to address rescheduling the Phase II trial date once the Bankruptcy Court rules on a motion brought by the United States to declare the bankruptcy stay inapplicable to the Idaho Federal Court proceedings. The Company does not currently have an opinion as to when the Court might rule.

In 2003, we estimated the range of potential liability for remediation in the Basin to be between $18 million and $58 million and accrued the minimum of the range, as we believed no amount in the range was more likely than any other amount at that time. In the second quarter of 2007, we determined that the cash payment approach to estimating our potential liability used in 2003 was not reasonably likely to be successful, and changed to an approach of estimating our liability through the implementation of actual remediation in portions of the Basin. Accordingly, we finalized an upper Basin cleanup plan, including a cost estimate, and reassessed our potential liability for remediation of other portions of the Basin, which caused us to increase our estimate of potential liability for Basin cleanup to the range of $60.0 million to $80.0 million. Accordingly, in June 2007, we recorded a provision of $42.0 million, which increased our total liability for remediation in the Basin from $18.0 million to $60.0 million, the low end of the estimated range of liability, with no amount in the range being more likely than any other amount. The liability is not discounted, as the timing of the expenditures is uncertain, but is expected to occur over the next 20 to 30 years.

In expert reports exchanged with the defendants in August and September 2004, the United States claimed to have incurred approximately $87.0 million for past environmental study, remediation and legal costs associated with the Basin for which it is alleging it is entitled to reimbursement in Phase II. In a July 2006 Proof of Claim filed in the ASARCO bankruptcy case, the EPA increased this claim to $104.5 million. A portion of these costs is also included in the work to be done under the ROD. With respect to the United States’ past cost claims, as of December 31, 2008, we have determined a potential range of liability for this past response cost to be $5.6 million to $13.6 million, with no amount in the range being more likely than any other amount.

Although the United States has previously issued its ROD proposing a clean-up plan totaling approximately $359.0 million and its past cost claim is $87.0 million, based upon the Court’s prior orders, including its September 2003 order and other factors and issues to be addressed by the Court in Phase II of the trial, we currently estimate the range of our potential liability for both past costs and remediation (but not natural resource damages as discussed above) in the Basin to be $65.6 million to $93.6 million (including the potential range of liabilities of $60.0 million to $80.0 million for Basin cleanup, and $5.6 million to $13.6 million for the United States’ past cost claims as discussed above), with no amount in the range being more likely than any other number at this time. Based upon GAAP, we have accrued the minimum liability within this range, which at December 31, 2008, was $65.6 million. It is possible that our ability to estimate what, if any, additional liability we may have relating to the Basin may change in the future depending on a number of factors, including but not limited to information obtained or developed by us prior to Phase II of the trial and its outcome, and, any interim court determinations. There can be no assurance as to the outcome of the Coeur d’Alene River Basin environmental claims and we believe it is possible that a combination of various events, as discussed above, or other events could be materially adverse to our financial results or financial condition.

Insurance Coverage Litigation

In 1991, we initiated litigation in the Idaho District Court, County of Kootenai, against a number of insurance companies that provided comprehensive general liability insurance coverage to us and our predecessors. We believe the insurance companies have a duty to defend and indemnify us under their policies of insurance for all liabilities and claims asserted against us by the EPA and the Tribe under CERCLA related to the Bunker Hill site and the Basin. In 1992, the Idaho State District Court ruled that the primary insurance companies had a duty to defend us in the Tribe’s lawsuit. During 1995 and 1996, we entered into settlement agreements with a number of the insurance carriers named in the litigation. Prior to 2008, we have received a total of approximately $7.2 million under the terms of the settlement agreements. Thirty percent of these settlements

F-24

Table of Contents

were paid to the EPA to reimburse the U.S. Government for past costs under the Bunker Hill Decree. Litigation is still pending against one insurer with trial suspended until the underlying environmental claims against us are resolved or settled. The remaining insurer in the litigation, along with a second insurer not named in the litigation, is providing us with a partial defense in all Basin environmental litigation. As of December 31, 2008, we have not recorded a receivable or reduced our accrual for reclamation and closure costs to reflect the receipt of any potential insurance proceeds.

Independence Lead Mines Litigation

In March 2002, Independence Lead Mines Company (“Independence”) notified us of certain alleged defaults by us under a 1968 lease agreement relating to the Gold Hunter area (also known as the DIA properties) of our Lucky Friday unit. Independence alleged that we violated the “prudent operator obligations” implied under the lease by undertaking the Gold Hunter project and violated certain other provisions of the Agreement with respect to milling equipment and calculating net profits and losses. Under the lease agreement, we have the exclusive right to manage, control and operate the DIA properties. Independence holds an 18.52% net profits interest under the lease agreement that is payable after we recoup our investments in the DIA properties. In addition, after we recoup our investment, Independence has two years within which to elect to convert its net profits interest into a working interest.

In June 2002, Independence filed a lawsuit in Idaho State District Court seeking termination of the lease agreement and requesting unspecified damages. Trial of the case occurred in late March 2004. In July 2004, the Court issued a decision that found in our favor on all issues and subsequently awarded us approximately $0.1 million in attorneys’ fees and certain costs, which Independence has paid. In August 2004, Independence filed its Notice of Appeal with the Idaho Supreme Court. Oral arguments were heard by the Idaho Supreme Court in February 2006. In April 2006, the Idaho Supreme Court ruled in our favor on all of Independence’s claims.

In December 2006, Independence filed a lawsuit in the United States District Court for the District of Idaho seeking monetary damages and injunctive relief. Independence alleged that the April 2006 decision by the Idaho Supreme Court violated their civil rights and their constitutional right to due process, and also alleged that we engaged in mail fraud and securities fraud during the term of the lease. We moved to dismiss the lawsuit, and in September 2007, the Court granted our motion to dismiss all claims in the complaint, and the case was dismissed in its entirety. In October 2007, Independence filed a Notice of Appeal to the United States Court of Appeals for the Ninth Circuit.

In January 2007, Independence filed an action in Idaho State District Court for Shoshone County seeking rescission of the lease based upon the theory of mutual mistake. We responded to the lawsuit with a motion to dismiss. In May 2007, the court issued a decision that found in our favor and dismissed the plaintiff’s complaint on the merits and with prejudice. In addition, the court awarded us costs and attorney’s fees. Independence has appealed the judgment against it to the Idaho Supreme Court.

On February 12, 2008, we and our wholly owned subsidiary Hecla Merger Company entered into an asset purchase agreement with Independence. Under the terms of the Asset Purchase Agreement, Hecla Merger Company acquired substantially all of the assets of Independence in exchange for 6,936,884 shares of Hecla common stock (the “Independence Acquisition”). The Independence Acquisition closed in November 2008, and as of November 21, 2008, all litigation between us and Independence has been dismissed, and we have acquired all of Independence’s right, title and interest to the DIA properties and the related agreements between us and Independence.

Creede, Colorado, Litigation

In February 2007, Wason Ranch Corporation (“Wason”) filed a complaint in Federal District Court in Denver, Colorado, against us, Homestake Mining Company of California (“Homestake”), and Chevron USA Inc. (successor in interest to Chevron Resources Company) (collectively the “defendants”). The suit alleges violations of the Resource Conservation and Recovery Act (“RCRA”) by each of the defendants. In May 2007, Wason amended its complaint to add state tort law claims against us and defendant Ty Poxon (“Poxon”). The suit alleges damage to Wason’s property by each defendant. The suit also alleges violations of the Clean Water Act (“CWA”) by us and Homestake Mining Company of California. The suit alleges that the defendants are past and present owners and operators of mines and associated facilities located in Mineral County near Creede, Colorado, and such operations have released pollutants into the environment, including the plaintiff’s property, in violation of RCRA and CWA. The lawsuit seeks injunctive relief to abate the alleged harm and an unspecified amount of civil penalties for the alleged violations. We responded to the lawsuit with a motion to dismiss. On March 31, 2008, the Court issued a decision that found in our favor and dismissed the plaintiff’s complaint. In April 2008, Wason appealed the decision to the United States Court of Appeals for the Tenth Circuit.

F-25

Table of Contents

In October 2008, Wason and defendants Hecla, Homestake, and Poxon reached a settlement where Wason agreed to dismiss its appeal, and release and discharge Hecla from all state law claims arising out of environmental conditions due to mining or milling that were brought, or could have been brought, in its 2007 claim.

Mexico Litigation

In Mexico, our wholly owned subsidiary, Minera Hecla, S.A de C.V., currently is involved in two cases in the State of Durango, Mexico, concerning the Velardeña mill. The Velardeña mill processed ore from our now closed San Sebastian mine, and the mill was placed on care and maintenance upon closure of the mine. In the first case we are interveners in a commercial action initiated in April of 2006 by a creditor to the prior owner of the mill. In that litigation, the creditor to the prior mill owner seeks to demonstrate that he has an ownership interest in the mill arising out of an allegedly unpaid prior debt. We are contesting this action, and deny the assertion that the plaintiff has an ownership interest in the mill. We take this position for a number of reasons, including the fact that the mill was sold to us prior to plaintiff’s obtaining his alleged ownership interest. In the second matter, a civil action involving Minera Hecla that is in a different court within the State of Durango, the same creditor as in the first case claims that his ownership of the Velardeña mill relates back to the time he allegedly performed the work on which the debt was based, rather than the time that he filed his lien relating to the debt, which was after the mill was sold to us. We are contesting the position of the creditor.

In February 2009 we received notice that the court in the first matter referenced above ruled in favor of the creditor, and also in February 2009, we filed a timely appeal. We are currently negotiating with the plaintiff who has offered to purchase the mill from Minera Hecla. If such negotiations are successful, the above referenced litigation will be dismissed with prejudice.

The basis for our defense in the above matter is that we have a judicially determined valid bill of sale for the Velardeña mill. Thus, we believe that the claims of the creditor and his successors are without merit, and that Minera Hecla is the sole owner of the Velardeña mill. We intend to zealously defend our ownership interest. Although there can be no assurance as to the outcome of these proceedings, we believe that the proceedings will not have a material adverse effect on our results from operations or on our financial position.

BNSF Railway Company Claim

In early November 2008, legal counsel for the BNSF Railway Company (“BNSF”) submitted a contribution claim under CERCLA against Hecla for approximately $52,000 in past costs BNSF incurred in investigation of environmental conditions at the Wallace Yard near Wallace, Idaho. BNSF asserts that a portion of the Wallace Yard site includes the historic Hercules Mill owned and operated by Hercules Mining Company and that Hecla Limited is a successor to Hercules Mining Company. BNSF proposes that we reimburse them for the $52,000 in past costs and agree to pay all future clean up for the Hercules mill portion of the site, estimated to be $291,000, and 12.5% of any other site costs that cannot be apportioned. We requested and received additional information from BNSF and are investigating the claim.

Rio Grande Silver Guarantee

On February 21, 2008, our wholly-owned subsidiary, Rio Grande Silver Inc. (“Rio”), entered into an agreement with Emerald Mining & Leasing, LLC (“EML”) and Golden 8 Mining, LLC (“G8”) to acquire the right to earn-in to a 70% interest in the San Juan Silver Joint Venture, which holds a land package in the Creede Mining District of Colorado. On October 24, 2008, Rio entered into an amendment to the agreement which delays the incurrence of qualifying expenses to be paid by Rio pursuant to the original agreement. See Note 19 for more information on the original agreement and subsequent amendment to the agreement. In connection with the amended agreement, we are required to guarantee certain environmental remediation-related obligations of EML’s and G8’s to Homestake Mining Company of California (“Homestake”) up to a maximum liability to us of $2.5 million. As of December 31, 2008, we have not been required to make any payments pursuant to the guarantee. We may be required to make payments in the future, limited to the $2.5 million maximum liability, should EML and G8 fail to meet their obligations to Homestake. However, to the extent that any payments are made by us under the guarantee, EML and G8, in addition to other parties named in the amended agreement, have jointly and severally agreed to reimburse and indemnify us for any such payments. We have not recorded a liability relating to the guarantee as of December 31, 2008.

Other Commitments

Our contractual obligations as of December 31, 2008 included approximately $2.2 million for various capital projects at the Greens Creek and Lucky Friday units, and approximately $3.8 million for commitments relating to non-capital items at Greens Creek. In addition, our commitments relating to open purchase orders at December 31, 2008 included approximately $3.9 million and $2.1 million, respectively, for various capital items at the Greens Creek and Lucky Friday units, and approximately $0.9 million and $0.4 million, respectively, for various non-capital costs.

F-26

Table of Contents

We periodically use derivative financial instruments to manage certain interest rate and other financial risks. In May 2008, we entered into an interest rate swap agreement that had the economic effect of modifying the LIBOR-based variable interest obligations associated with our term debt facility. See Note 11 for more information on our interest rate swap.

Other Contingencies

We are subject to other legal proceedings and claims not disclosed above which have arisen in the ordinary course of our business and have not been finally adjudicated. These can include, but are not limited to, legal proceedings and/or claims pertaining to environmental or safety matters. Although there can be no assurance as to the ultimate disposition of these other matters, we believe the outcome of these other proceedings will not have a material adverse effect on our results from operations or financial position.

Note 9: Employee Benefit Plans

Pensions and Post-retirement Plans

We sponsor defined benefit pension plans covering substantially all U.S. employees and provide certain post-retirement benefits for qualifying retired employees. The following tables provide a reconciliation of the changes in the plans’ benefit obligations and fair value of assets over the two-year period ended December 31, 2008, and a statement of the funded status as of December 31, 2008 and 2007 (in thousands):


	Pension Benefits						Other Benefits
	2008			2007			2008			2007
Change in benefit obligation:
Benefit obligation at beginning of year	$	59,057		$	58,565		$	915		$	1,009
Service cost		1,687			910			8			7
Interest cost		3,640			3,396			52			59
Amendments		1,472			—			8,950			—
Actuarial gain		3,403			(283	)		50			—
Benefits paid		(3,526	)		(3,531	)		(22	)		(160	)
Benefit obligation at end of year		65,733			59,057			9,953			915
Change in fair value of plan assets:
Fair value of plan assets at beginning of year		84,287			77,044			—			—
Actual return (loss) on plan assets		(20,818	)		10,437			—			—
Employer and employee contributions		337			337			22			160
Benefits paid		(3,526	)		(3,531	)		(22	)		(160	)
Fair value of plan assets at end of year		60,280			84,287			—			—
Funded status at end of year	$	(5,453	)	$	25,230		$	(9,953	)	$	(915	)

The following table provides the amounts recognized in the consolidated balance sheets as of December 31, 2008 and 2007 (in thousands):


	Pension Benefits						Other Benefits
	2008			2007			2008			2007
Other non-current assets:
Prepaid benefit costs	$	1,516		$	29,897		$	—		$	—
Current liabilities:
Accrued benefit liability		(333	)		(385	)		(88	)		(94	)
Other non- current liabilities:
Accrued benefit liability		(6,636	)		(4,282	)		(9,865	)		(821	)
Accumulated other comprehensive (income) loss		21,653			(8,205	)		(718	)		(821	)
Net amount recognized	$	16,200		$	17,025		$	(10,671	)	$	(1,736	)

The benefit obligation and prepaid benefit costs were calculated by applying the following weighted average assumptions:


	Pension Benefits						Other Benefits
	2008			2007			2008			2007
Discount rate		6.00	%		6.00	%		6.00	%		6.00	%
Expected rate of return on plan assets		8.00	%		8.00	%		—			—
Rate of compensation increase		4.00	%		4.00	%		—			—

F-27

Table of Contents

The above assumptions were calculated based on information as of December 31, 2008 and September 30, 2007, the measurement dates for the plans. The discount rate is generally based on the rates of return available as of the measurement date from high-quality fixed income investments, which in past years we have used Moody’s AA bond index as a guide to setting the discount rate. The expected rate of return on plan assets is based upon consideration of the plan’s current asset mix, historical long-term return rates and the plan’s historical performance. Our current expected rate on plan assets of 8.0% represents approximately 302% of our past five-year’s average annual return rate of 1.99%.

The Other Benefit plans include an assumed health care cost rate of 8% in 2009. This assumed health care cost rate will decrease by 1% per year until 2013, when a constant rate of 4% is assumed. A 1% change in the assumed health care rate would result in a $148,000 effect on total service and interest cost and a $1,039,000 effect on the postretirement benefit obligation.

Net periodic pension cost (income) for the plans consisted of the following in 2008, 2007 and 2006 (in thousands):


	Pension Benefits									Other Benefits
	2008			2007			2006			2008			2007			2006
Service cost	$	1,687		$	910		$	814		$	8		$	7		$	6
Interest cost		3,640			3,396			3,274			52			60			75
Expected return on plan assets		(6,409	)		(6,020	)		(5,771	)		—			—			—
Amortization of prior service cost		561			461			426			(3	)		(3	)		(3	)
Amortization of net gain (loss) from earlier periods		(22	)		(26	)		36			(50	)		(59	)		61
Net periodic pension cost (income)	$	(543	)	$	(1,279	)	$	(1,221	)	$	7		$	5		$	139

The weighted-average allocations of investments at December 31, 2008 and September 30, 2007, the measurement dates of the plan, by asset category in the Hecla Mining Company Retirement Plan and the Lucky Friday Pension Plan are as follows:


	Hecla						Lucky Friday
	2008			2007			2008			2007
Interest-bearing cash		1	%		—	%		1	%		—	%
Equity securities		34	%		37	%		36	%		37	%
Debt securities		46	%		35	%		45	%		35	%
Real estate		14	%		12	%		15	%		12	%
Absolute return		—	%		11	%		—	%		11	%
Precious metals and other natural resources		5	%		5	%		3	%		5	%
Total		100	%		100	%		100	%		100	%

Precious metals and other natural resources include our common stock in the amounts of $1.4 million and $4.4 million at December 31, 2008 and September 30, 2007, the measurement dates of the plan, respectively. These investments represent approximately 2.3% and 5.3% of the total combined assets of these plans at December 31, 2008 and September 30, 2007, respectively.

Our target asset allocations are currently set in the ranges that follow:


Equity	19-31	%
Fixed income	29-43	%
Real estate	12-18	%
Absolute return	12-18	%
Precious metals and other natural resources	8-12	%

Investment objectives are established for each of the asset categories included in the pension plan with comparisons of performance against appropriate benchmarks. Our policy calls for each portion of the investments to be supervised by a qualified investment manager. The investment managers are monitored on an ongoing basis by our outside consultant, with formal reporting to us and the consultant performed each quarter.

The future benefit payments, which reflect expected future service as appropriate, are estimates of what will be paid in the following years (in thousands):

F-28

Table of Contents



Year Ending December 31,	Hecla Plan		Lucky Friday Plan		OPEB Plans
2009	$	2,683	$	913	$	93
2010		2,695		967		100
2011		2,689		1,023		111
2012		2,698		1,049		147
2013		2,735		1,045		206
Years 2014-2018		15,231		5,116		2,494

We do not expect to contribute to the pension plans during the next year.

The projected benefit obligation, accumulated benefit obligation and fair value of plan assets for pension plans with accumulated benefit obligations in excess of plan assets were $28.5 million, $29.4 million and $12.5 million, respectively, as of December 31, 2008, and $5.6 million, $4.7 million and zero, respectively, as of December 31, 2007.

For the pension plans and other benefit plans, the following amounts are included in accumulated other comprehensive income on our balance sheet as of December 31, 2008, that have not yet been recognized as components of net periodic benefit cost (in thousands):


	Pension Benefits		Other Benefits
Net actuarial (gain) loss	$	18,145	$	(590	)
Prior-service cost		3,508		(128	)

For the pension plans and other benefit plans, the following amounts are estimated to be recognized as components of net periodic benefit cost during 2009 (in thousands):


	Pension Benefits		Other Benefits
Net actuarial (gain) loss	$	1,232	$	(43	)
Prior-service cost		602		(3	)

During 2009, we do not expect to have any of the plans’ assets returned.

As a result of applying the measurement date provisions of FASB statement 158 ( Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans ) we adjusted the pension plan assets in the first quarter of 2008 to reflect a measurement date of December 31, 2007. The effect of changing the measurement date from September 30, 2007 to December 31, 2007 resulted in an increase to our pension asset of $0.5 million a reduction of retained earnings of $0.4 million and a reduction of other comprehensive income of $0.1 million.

As a part of our acquisition of the remaining 70.3% of the Greens Creek Joint Venture (see Note 19), we amended our pension plan to include certain employees of the Joint Venture. As a result, the pension plan was re-measured as of March 31, 2008. Due to changes in the market value of securities held by the plan, its assets were reduced by approximately $3.0 million. At the same time, the projected benefit obligation increased by approximately $2.1 million as a result of adding the Greens Creek employees. Of the $5.1 million reduction in the funded status of the plan, $3.0 million was charged to other comprehensive income and $2.1 was charged to the purchase price allocation of the remaining interest in the Joint Venture. In addition, as part of our acquisition of the remaining 70.3% of the Greens Creek Joint Venture, we established another post-employment benefit plan. This plan has a liability balance on our balance sheet of $8.9 million as of December 31, 2008.

Deferred Compensation Plans

We maintain a deferred compensation plan that was approved by our shareholders, which allows eligible officers and key employees to defer a portion or all of their compensation. A total of 6.0 million shares of common stock are authorized under this plan. Deferred amounts may be allocated to either an investment account or a stock account. The investment account is similar to a cash account and bears interest at the prime rate. In the stock account, quarterly deferred amounts and a 10% matching amount are converted into stock units equal to the average closing price of our common stock over a quarterly period. At the end of each quarterly period, participants are eligible to elect to convert a portion of their investment account into the stock account with no matching contribution.

During 2008, 2007 and 2006, participants accumulated 1,463, 1,988 and 3,162 common stock units, respectively, into their stock accounts. In 2008, 2007 and 2006, 1,545, 3,163 and 4,128 common stock units were distributed to participants in the form of common shares. Prior to the fourth quarter of 2006, participants were allowed to purchase discounted stock options. During 2006 and 2005, participants purchased approximately 40,137 and 472,614 discounted stock options,

F-29

Table of Contents

respectively, under the plan. During 2008, 2007 and 2006, zero, 25,130 and 207,655, respectively, of those options were exercised. During 2008, no discounted stock options reverted back to the plan upon employee termination.

In the fourth quarter of 2006, we modified 837,261 discounted stock options previously purchased by participants in our deferred compensation plan pursuant to changes in the Internal Revenue Service requirements relating to employee deferred compensation arrangements. As a result, the options were converted to stock equivalent units that will be settled in the employees’ investment accounts. Modification of the options resulted in a charge to compensation expense totaling $1.3 million, a charge to additional paid-in capital for expense previously recognized totaling $1.7 million, and a liability of $3.0 million for the fair value of stock equivalent units then outstanding. The stock units were valued using the Black-Scholes model. At December 31, 2008, 228,400 units remained unexercised with a value of $0.01 million.

As of December 31, 2008 and 2007, the deferred compensation plan, together with matching amounts and accumulated interest, amounted to approximately $1.0 million and $4.7 million, respectively.

During 2008, the Board of Directors approved the grant of 197,810 restricted common stock units, 15,221 of which reverted back to the plan due to employee termination. A total of 181,310 of the stock units will vest in May 2009, and will be distributable based upon predetermined dates as elected by the participants. The remaining stock units will vest in 2009 and 2010.

During 2007, the Board of Directors approved the grant of 125,400 restricted common stock units, 2,000 of which reverted back to the plan due to employee termination. A total of 117,850 of the stock units vested in May 2008, and were distributable based upon predetermined dates as elected by the participants.

During 2006, the Board of Directors approved the grant of 155,600 restricted common stock units, none of which reverted back to the plan due to employee termination. A total of 115,600 of the stock units vested in May 2007, and were distributable based upon predetermined dates as elected by the participants.

Capital Accumulation Plans

In April we amended our employees’ Capital Accumulation Plan, which is now available to all U.S. salaried and certain hourly employees immediately upon employment. Employees may contribute from 2% to 50% of their annual compensation to the plan. We make a matching contribution of 100% of an employee’s contribution up to, but not exceeding, 6% of the employee’s earnings. Our matching contribution was approximately $1.5 million in 2008.

During 2007 our Capital Accumulation Plan was available to all U.S. salaried and certain hourly employees after completion of two months of service. Employees were able to contribute from 2% to 15% of their annual compensation to the plan. We made a matching contribution of 25% of an employee’s contribution up to, but not exceeding, 6% of the employee’s earnings. Our matching contribution was approximately $0.1 million each in 2007 and 2006. In February 2008, our Board of Directors authorized additional profit-sharing contributions of $0.4 million to the participants of the plan.

We also maintain an employees ’ 401(k) plan, which is available to all hourly employees at the Lucky Friday unit after completion of six months of service. Employees may contribute from 2% to 50% of their compensation to the plan. We make a matching contribution of 35% of an employee’s contribution up to, but not exceeding, 5% of the employee’s earnings. Our contribution was approximately $154,000 in 2008, $139,000 in 2007 and $79,000 in 2006.

Note 10: Shareholders’ Equity

Common Stock

We are authorized to issue 400,000,000 shares of common stock, $0.25 par value per share, of which 180,461,391 shares of common stock were outstanding as of December 31, 2008. All of our currently outstanding shares of common stock are listed on the New York Stock Exchange under the symbol “HL”.

Subject to the rights of the holders of any outstanding shares of preferred stock, each share of common stock is entitled to: (i) one vote on all matters presented to the stockholders, with no cumulative voting rights; (ii) receive such dividends as may be declared by the Board of Directors out of funds legally available therefore; and (iii) in the event of our liquidation or dissolution, share ratably in any distribution of our assets.

Registration Statements

In September of 2007, we filed a shelf registration statement on Form S-3 with the U.S. Securities and Exchange Commission. This registration statement has allowed the Company to offer and sell from time to time, in one or more offerings, shares of common stock, preferred stock, warrants and debt securities. Hecla has used the net proceeds of all securities sold for general corporate purposes and debt service. In December 2007, our 6.5% Mandatory Convertible Preferred Stock was sold pursuant to this registration statement.

F-30

Table of Contents

Pursuant to this registration statement, on September 12, 2008, we completed an underwritten public sale of 31 million shares of our common stock for $5 per share, resulting in net proceeds of approximately $147 million after deducting related fees, expenses and underwriting discounts and commissions. On September 23, 2008, the underwriters exercised their over-allotment option in connection with the original offering, resulting in the issuance and sale of an additional 3.4 million shares for $5 per share, for additional net proceeds of approximately $16 million. The combined net proceeds of $163.6 million were applied to our bridge debt facility, resulting in a $162.9 million reduction to the bridge facility principal balance, with the remaining $0.9 million being paid in interest (see Note 7 for further discussion of our debt facility).

Also pursuant to our Form S-3 registration statement and base prospectus, on December 11, 2008, we entered into a definitive agreement to sell securities to selected institutional investors for aggregate proceeds of $21 million. The offering closed in December 2008. The securities in the sale included:


	•	Approximately 10.24 million shares of our common stock.

	•	Series 1 warrants to purchase up to approximately 7.68 million shares of our common stock at an exercise price of $2.45 per share, expiring in five years. The Series 1 warrants are not exercisable until June 9, 2009.

	•	Series 2 warrants to purchase up to 7.68 million shares of our common stock at an exercise price of $2.35 per share expiring on February 28, 2009.

The sale units, including common stock and warrants, were priced at $2.05 per share, resulting in gross proceeds of $21 million. Net proceeds were approximately $19.8 million after related placement costs. In arriving at the relative values of the common stock and warrants, we used the Black-Scholes option pricing model with a risk-free interest rate of 1.55% for Series 1 and 0.11% for Series 2, current stock price at closing on the date before issuance of $1.64, volatility of 162% for Series 1 and 44% for Series 2, dividend yield of 0%, and terms equal to the terms of the warrants. The relative values of our stock and warrants, in thousands, were:


	Shares		Value

Common Stock		10,243,902	$	13,859

Series 1 warrants to purchase Common Stock		7,682,927		5,335

Series 2 warrants to purchase Common Stock		7,682,927		620

Total			$	19,814

In addition, we granted the agent approximately 460,000 of the Series 1 warrants described above, but at an exercise price of $2.56 per share. Using the Black-Scholes option pricing model, we valued the warrants at $0.4 million, which is included in placement costs.

On February 4, 2009, we entered into an underwriting agreement to sell 32 million units for proceeds of approximately $65.6 million, pursuant to our Form S-3 registration statement and base prospectus. On February 6, 2009, the underwriters exercised their over-allotment option, resulting in the sale of an additional 4.8 million units for proceeds of approximately $9.8 million. Each unit consists of one share of our Common Stock and one-half common share purchase warrant. See Note 21 for more information on the offering.

In December 2005, we filed a registration statement with the SEC to issue up to $175.0 million of common stock and warrants in connection with business combinations and/or acquisition activities. This registration statement was also declared effective by the SEC. We issued 6.9 million shares of our common stock in November 2008 pursuant to this registration statement in our acquisition of substantially all of the assets of Independence Lead Mines (see Note 19 for more information on the acquisition).

Preferred Stock

Our Charter authorizes us to issue 5,000,000 shares of preferred stock, par value $0.25 per share. The preferred stock is issuable in series with such voting rights, if any, designations, powers, preferences and other rights and such qualifications, limitations and restrictions as may be determined by our Board of Directors. The Board may fix the number of shares constituting each series and increase or decrease the number of shares of any series. As of December 31, 2008, 2,170,316 shares were outstanding. As of December 31, 2008, there were 157,816 shares of Series B Cumulative Convertible Preferred Stock outstanding. All of the shares of our Series B Preferred Stock are listed on the New York Stock Exchange under the symbol “HL PB.” In December of 2007, we sold 2,012,500 shares of 6.5% Mandatory Convertible Preferred Stock for proceeds of $194.9 million, net of $6.4 million in related costs. Shares of our Mandatory Convertible Preferred Stock are

F-31

Table of Contents

listed on the New York Stock Exchange under the symbol “HL PrC.” A new Series of 12% Convertible Preferred Stock was established in connection with the Fourth Amendment to our Amended and Restated Credit Agreement in February 2009. See Note 21 for more information on our 12% Convertible Preferred Stock.

Ranking

The Series B and Mandatory Convertible preferred stock series rank (and the new 12% Convertible Preferred Stock will rank) on parity with respect to each other, and rank senior to our common stock and any shares of Series A preferred shares with respect to payment of dividends, and amounts upon liquidation, dissolution or winding up.

While any shares of Series B, Mandatory Convertible, or 12% Convertible preferred stock are outstanding, we may not authorize the creation or issue of any class or series of stock that ranks senior to the Series B, Mandatory Convertible, and 12% Convertible preferred stock as to dividends or upon liquidation, dissolution or winding up without the consent of the holders of 66 2/3% of the outstanding shares of Series B, Mandatory Convertible, and 12% Convertible preferred stock and any other series of preferred stock ranking on a parity with respect to the Series B, Mandatory Convertible or 12% Convertible preferred stock as to dividends and upon liquidation, dissolution or winding up, voting as a single class without regard to series.

Dividends

Series B preferred stockholders are entitled to receive, when, as and if declared by the Board of Directors out of our assets legally available therefore, cumulative cash dividends at the rate per annum of $3.50 per share of Series B Preferred Stock. Dividends on the Series B Preferred Stock are payable quarterly in arrears on October 1, January 1, April 1 and July 1 of each year (and, in the case of any undeclared and unpaid dividends, at such additional times and for such interim periods, if any, as determined by the Board of Directors), at such annual rate. Dividends are cumulative from the date of the original issuance of the Series B Preferred Stock, whether or not in any dividend period or periods we have assets legally available for the payment of such dividends. Accumulations of dividends on shares of Series B Preferred Stock do not bear interest. We have declared and paid our regular quarterly dividend of $0.875 per share on the outstanding Preferred B shares through the third quarter of 2008. Aggregate cash dividends declared and paid on our Series B Preferred shares in 2008 totaled $0.4 million, or $2.62 per share.

Dividends on our Mandatory Convertible Preferred Stock are payable on a cumulative basis when, as, and if declared by our board of directors, at an annual rate of 6.5% per share on the liquidation preference of $100 per share cash, common stock, or a combination thereof, on January 1, April 1, July 1, and October 1 of each year to, and including, January 1, 2011. We have declared and paid our quarterly dividends on the Mandatory Convertible Preferred Stock through the third quarter of 2008. On August 29, 2008 the Board of Directors declared that the regular quarterly dividend on the outstanding 6.5% Mandatory Convertible Preferred Stock in the amount of $1.625 per share would be paid in Common Stock of Hecla, for a total amount of approximately $3.27 million in Hecla Common Stock (with cash for fractional shares). The value of the shares of Common Stock issued as dividends was calculated at 97% of the average of the closing prices of Hecla’s Common Stock over the five consecutive trading day period ending on the second trading day immediately preceding the dividend payment date. Aggregate cash dividends declared and paid on our Mandatory Convertible Preferred shares in 2008 totaled $7.0 million, or $3.48 per share.

On December 5, 2008 the board of directors announced that in the interest of cash conservation quarterly payment of dividends to the holders of both the Hecla Series B Cumulative Convertible Preferred Stock and the Mandatory Convertible Preferred Stock would be deferred. Hecla’s common stock is currently below the minimum price needed ($3.395 per share) to pay the Mandatory Convertible Preferred Stock dividend in common stock without incurring an additional cash outlay. As of December 31, 2008, we had accumulated dividends in arrears of approximately $0.1 million, or $0.87 per share, on our Series B Preferred shares and approximately $3.3 million, or $1.63 per share, on our Mandatory Convertible Preferred shares.

Redemption

The Series B Preferred Stock is redeemable at our option, in whole or in part, at $50 per share, plus, in each case, all dividends undeclared and unpaid on the Series B Preferred Stock up to the date fixed for redemption, upon giving notice as provided below. The Mandatory Convertible Preferred Stock is not redeemable.

Liquidation Preference

The Series B preferred stockholders are entitled to receive, in the event that we are liquidated, dissolved or wound up, whether voluntary or involuntary, $50 per share of Series B preferred stock plus an amount per share equal to all dividends undeclared and unpaid thereon to the date of final distribution to such holders (the “Liquidation Preference”), and no more. Until the Series B preferred stockholders have been paid the Liquidation Preference in full, no payment will be made to any holder of Junior Stock upon our liquidation, dissolution or winding up. The term “Junior Stock” means our common stock and any other class of our capital stock issued and outstanding that ranks junior as to the payment of dividends or amounts

F-32

Table of Contents

payable upon liquidation, dissolution and winding up to the Series B preferred stock. As of December 31, 2008 and 2007, our Series B preferred stock had a liquidation preference of $8.0 million and $7.9 million, respectively.

In the event of our voluntary or involuntary liquidation, winding-up or dissolution, each holder of the Mandatory Convertible Preferred Stock will be entitled to receive a liquidation preference in the amount of $100 per share of the mandatory convertible preferred stock, plus an amount equal to accumulated and unpaid dividends on the shares to the date fixed for liquidation, winding-up or dissolution. The amounts payable with respect to the liquidation preference are to be paid out of our assets available for distribution to our shareholders, after satisfaction of liabilities to our creditors and distributions to holders of senior stock, and before any payment or distribution is made to holders of Junior Stock (including our common stock). If, upon our voluntary or involuntary liquidation, winding-up or dissolution, the amounts payable with respect to the liquidation preference, plus an amount equal to accumulated and unpaid dividends of the Mandatory Convertible Preferred Stock and all parity stock, are not paid in full, the holders of the Mandatory Convertible Preferred Stock and the parity stock will share equally and ratably in any distribution of our assets. The distribution of our assets will be shared in proportion to the liquidation preference and an amount equal to accumulated and unpaid dividends to which they are entitled. After payment of the full amount of the liquidation preference and an amount equal to accumulated and unpaid dividends to which they are entitled, the holders of the Mandatory Convertible Preferred Stock will have no right or claim to any of our remaining assets. As of December 31, 2008 and 2007, our Mandatory Convertible Preferred Stock had a liquidation preference of $204.5 million and $201.7 million, respectively.

Voting Rights

Except in certain circumstances and as otherwise from time to time required by applicable law, the Series B and Mandatory Convertible preferred stockholders have no voting rights and their consent is not required for taking any corporate action. When and if the Series B preferred stockholders are entitled to vote, each holder will be entitled to one vote per share. When and if the Mandatory Convertible preferred shareholders are entitled to vote, the number of votes that each share of the Mandatory Convertible Preferred Stock shall have shall be in proportion to the liquidation preference of such share.

Conversion

Each share of Series B preferred stock is convertible, 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 3.2154 shares of common stock for each share of Series B preferred stock). The right to convert shares of Series B preferred stock called for redemption will terminate at the close of business on the day preceding a redemption date (unless we default in payment of the redemption price).

Each share of our Mandatory Convertible Preferred Stock will automatically convert on January 1, 2011, into between 8.4502 and 10.3093 shares of our common stock, representing a minimum of 17,006,028 common shares and a maximum of 20,747,467 common shares that can be issued, subject to anti-dilution adjustments. At any time prior to January 1, 2011, holders may elect to convert each share of our Mandatory Convertible Preferred Stock into shares of common stock at the minimum conversion rate of 8.4502, subject to anti-dilution adjustments. In the event of a cash acquisition of us, under certain circumstances the conversion rate will be adjusted during the cash acquisition conversion period. The effective provisional conversion rate as of December 31, 2008 was 10.3093 shares of common stock per one share of Mandatory Convertible Preferred Stock.

Stock Award Plans

We use stock-based compensation plans to aid us in attracting, retaining and motivating our officers and key employees, as well as to provide us with the ability to provide incentives more directly linked to increases in stockholder value. These plans provide for the grant of options to purchase shares of our common stock and the issuance of restricted shares units of our common stock.

Stock-based compensation expense recognized for the years ended December 31, 2008, 2007 and 2006 were approximately $4.0 million, or $0.03 per basic and diluted share, $3.4 million, or $0.03 per basic and diluted share, and $2.5 million, or $0.02 per basic and diluted share, respectively. Over the next twelve months, we expect to recognize approximately $0.5 million in additional compensation expense as the remaining options and units vest as required by SFAS No. 123(R).

1995 Stock Incentive Plan

Our 1995 Stock Incentive Plan, as amended in 2004, authorizes the issuance of up to 11.0 million shares of our common stock pursuant to the grant or exercise of awards under the plan. The Board of Directors committee that administers the 1995 plan has broad authority to fix the terms and conditions of individual agreements with participants, including the duration of the award and any vesting requirements. The 1995 plan will terminate 15 years after the effective date of the plan.

F-33

Table of Contents

Deferred Compensation Plan

We maintain a deferred compensation plan that allows eligible officers and key employees to defer a portion or all of their compensation. Deferred amounts may be allocated to either an investment account, which is similar to cash, or to a stock account. Until the fourth quarter of 2006, amounts in participants’ investment accounts could be used to purchase discounted stock options; however, most options were modified to cash-settled stock equivalent units in the fourth quarter of 2006, and investment account balances may no longer be applied to the purchase of discounted stock options. However, funds may still be applied to the purchase of stock units. For further information see Note 9 of Notes to Consolidated Financial Statements.

Directors’ Stock Plan

In 1995, we adopted the Hecla Mining Company Stock Plan for Nonemployee Directors (the “Directors’ Stock Plan”), which may be terminated by our Board of Directors at any time. Each nonemployee director is to be credited on May 30 of each year with that number of shares determined by dividing $24,000 by the average closing price for our common stock on the New York Stock Exchange for the prior calendar year. All credited shares are held in trust for the benefit of each director until delivered to the director. Delivery of the shares from the trust occurs upon the earliest of: (1) death or disability; (2) retirement; (3) a cessation of the director’s service for any other reason; or (4) a change in control. The shares of our common stock credited to non-employee directors pursuant to the Directors’ Stock Plan may not be sold until at least six months following the date they are delivered. A maximum of one million shares of common stock may be granted pursuant to the Directors’ Stock Plan. During 2008, 2007 and 2006, respectively, 19,488, 29,561 and 36,949 shares were credited to the nonemployee directors. During 2008, 2007 and 2006, $176,000, $250,000 and $191,000, respectively, were charged to operations associated with the Directors’ Stock Plan. At December 31, 2008, there were 742,454 shares available for grant in the future under the plan.

Status of Stock Options

The fair value of the options granted during the years ended December 31, 2008, 2007, and 2006 were estimated on the date of grant using the Black-Scholes option-pricing model with the weighted average assumptions given below:


	2008			2007			2006
Weighted average fair value of options granted	$	3.72		$	3.11		$	2.35
Expected stock price volatility		51.00	%		45.00	%		51.42	%
Risk-free interest rate		2.58	%		4.61	%		4.92	%
Expected life of options		3.1 years			3.1 years			2.6 years

We estimate forfeiture and expected volatility using historical information over the expected life of the options. The risk-free interest rate is based on the implied yield available on U.S. Treasury zero-coupon issues over the equivalent lives of the options. The expected life of the options represents the estimated period of time until exercise and is based on historical experience of similar awards, giving consideration to the contractual terms and vesting schedules. We have not paid dividends on common shares in several years and do not anticipate paying them in the foreseeable future, therefore, no assumption of dividend payment is made in the model. The Black-Scholes option-pricing model requires the input of highly subjective assumptions, particularly for the expected term and expected stock price volatility.

During 2008, 2007 and 2006, respectively, options to acquire 542,560, 584,500 and 721,638 shares were granted to our officers and key employees. Of the options granted in 2008 and 2007, 509,560 and 559,500, respectively, were granted without vesting requirements. Of the options granted in 2006, 621,500 were granted without vesting requirements and 40,137 were modified to stock equivalent units to be settled in cash (see discussion below). The aggregate intrinsic value of options outstanding and exercisable as of December 31, 2008 before applicable income taxes was zero, based on our closing stock price of $2.80 per common share at December 31, 2008. The majority of options outstanding were fully vested at December 31, 2008. 16,500 of the 33,000 options issued with vesting requirements during 2008 vested prior to December 31, 2008. The remaining 16,500 unvested options at December 31, 2008 will vest in 2009 if the participant’s requisite service period is met.

During 2008, 2007 and 2006, respectively, 22,082, 29,500 and 808,703 options to acquire shares expired under the 1995 plan, and such options became available for re-grant under the 1995 plan. At December 31, 2008, 2007 and 2006, respectively, there were 735,837, 3,922,253 and 4,603,243 shares available for future grant under the 1995 plan.

In the fourth quarter of 2006, we modified 837,261 discounted stock options purchased by participants in our deferred compensation plan pursuant to reflect changes in the Internal Revenue Service requirements relating to employee deferred compensation arrangements. As a result, the 837,261 options were converted to stock equivalent units that will be settled in the employees’ investment accounts and, accordingly, are now classified as liabilities and marked to market each reporting

F-34

Table of Contents

period until exercise. On November 6, 2006 — the date of modification — we recorded a liability of $3.0 million and additional compensation expense of $1.3 million. At December 31, 2008 the fair value of the liability was zero.

Transactions concerning stock options pursuant to our stock option plans are summarized as follows:


	Shares Subject to Options			Weighted Average Exercise Price
Outstanding, December 31, 2007		1,133,500		$	6.60
Granted		542,560		$	9.87
Exercised		(17,500	)	$	7.86
Expired		(161,381	)	$	8.92
Outstanding, December 31, 2008		1,497,179		$	7.52

Of the outstanding shares above, 1,480,679 were exercisable at December 31, 2008. The weighted average remaining contractual term of options outstanding and exercisable at December 31, 2008 was three years.

The aggregate intrinsic values of options exercised during the years ended December 31, 2008, 2007, and 2006 were $0.1 million, $6.1 million and $2.6 million, respectively. We received cash proceeds of $0.1million for options exercised in 2008, $8.8 million for options exercised in 2007, and $3.9 million for options exercised in 2006.

Restricted Stock Units

Unvested restricted stock units, for which the board of directors has approved grants to employees, are summarized as follows:


	Shares			Weighted Average Grant Date Fair Value per Share
Unvested, January 1, 2007		142,800		$	8.37
Granted		197,810		$	9.51
Expired		(15,221	)	$	9.86
Deferred by recipients		(28,896	)	$	7.14
Distributed		(142,800	)	$	8.37
Unvested, December 31, 2008		153,693		$	9.92

Of the 153,693 units unvested at December 31, 2008, all except 16,500 will vest in September of 2009. Remaining units will be distributable based on predetermined dates as elected by the participants, unless participants forfeit their units through termination in advance of vesting. We have recognized approximately $1.2 million in compensation expense since grant date, and will record an additional $0.4 million in compensation expense over the remaining vesting period related to these units.

Approximately 142,800stock units vested in May 2008 and were distributed or deferred as elected by the recipients under the provisions of the deferred compensation plan. We recognized approximately $0.3 million in compensation expense related to these units in 2008. For these units, under the terms of the plan and upon vesting, management authorized a net settlement of distributable shares to employees after consideration of individual employees’ tax withholding obligations, at the election of each employee. In May 2007, we repurchased 24,042 shares for $0.2 million, or approximately $8.67 per share.

Note 11: Derivative Instruments

At times, we use commodity forward sales commitments, commodity swap contracts and commodity put and call option contracts to manage our exposure to fluctuation in the prices of certain metals which we produce. Contract positions are designed to ensure that we will receive a defined minimum price for certain quantities of our production, thereby partially offsetting our exposure to fluctuations in the market. These instruments do, however, expose us to other risks, including the amount by which the contract price exceeds the spot price of a commodity, and nonperformance by the counterparties to these agreements. At December 31, 2008, we had no outstanding forward sales contracts, commodity put and call options contracts or other commodity hedging positions.

We periodically use derivative financial instruments to manage interest rate risk. In May 2008, we entered into an interest rate swap agreement that had the economic effect of modifying the LIBOR-based variable interest obligations associated with our term facility. As a result, the interest payable related to $103.3 million of $121.7 million of the term facility balance at December 31, 2008 was effectively fixed at a rate of 9.38% until maturity on March 31, 2011, in accordance with the amortization schedule of the amended and restated credit agreement date April 16, 2008. As a result of an agreement with the bank syndicate to move the $18.3 million principal payment originally scheduled for December 31,

F-35

Table of Contents

2008 to February 13, 2009, the terms of the interest rate swap agreement and the notes that the swap agreement pertains to do not match with respect to the maturity date of the $18.3 million payment, with the hedge being slightly ineffective as a result. We realized a $0.5 million hedging loss in 2008 related to the ineffective portion of the swap. At December 31, 2008, the fair value of the swap totaled a liability of $2.5 million, with an accumulated unrealized loss of $2.0 million as a result of changes in fair value of the swap. We estimate that $0.9 million of the net unrealized loss will be reclassified to interest expense within the next twelve months. The interest rate swap is designated as a cash flow hedge. The fair value of the swap is calculated using the discounted cash flow method based on market observable inputs. We are accounting for this swap as a hedge pursuant to FASB Statement No. 133, Accounting for Derivative Instruments and Hedging Activities . See Note 1 - Q. Risk Management Contracts for more information. At inception and on an ongoing basis, we perform an effectiveness test using the hypothetical derivative method, and the swap was determined to be approximately 98% effective at December 31, 2008. The unrealized loss is included in accumulated other comprehensive income in our consolidated balance sheet and the realized loss is included in interest expense in our consolidated statement of operations, with the fair value payable included in other non-current liabilities in our consolidated balance sheet.

On February 3, 2009, we reached an agreement to amend the terms of our credit facilities to defer all scheduled term facility principal payments due in 2009, totaling $66.7 million, to 2010 and 2011. As a result of the amendment, the original hedging relationship was de-designated, and a new hedging relationship was designated. A retrospective hedge effectiveness test was performed on the original hedging relationship at the date of de-designation, and the original hedging relationship was determined to be ineffective. Consequently, the change in fair value of the swap of $0.2 million between December 31, 2008 and February 3, 2009 was recorded as a gain on the income statement. The amount of unrealized loss included in accumulated other comprehensive income relating to the original hedge will be recognized in the income statement when the hedged interest payments occur. See Note 21 of Notes to Consolidated Financial Statements for further discussion of the amendment.

Note 12: Business Segments

We discover, acquire, develop, produce, and market silver, gold, lead and zinc. Our products consist of both metal concentrates, which we sell to custom smelters, and unrefined bullion bars (doré), which may be sold as doré or further refined before sale to precious metals traders. We are currently organized and managed by three segments, which represent our operating units and various exploration targets: the Greens Creek unit, the Lucky Friday unit, and the San Sebastian unit and various exploration activities in Mexico.

Prior to the second quarter of 2008, we also reported a fourth segment, the La Camorra unit, representing our operations and various exploration activities in Venezuela. On June 19, 2008, we entered into an agreement to sell our wholly owned subsidiaries holding our business and operations in Venezuela, with the transaction closing on July 8, 2008. Our Venezuelan activities are reported as discontinued operations on the Condensed Consolidated Statement of Operations and Cash Flows for all periods presented (see Note 13. Discontinued Operations ). As a result, we have determined that it is no longer appropriate to present a separate segment representing our operations in Venezuela as of and for the year ended December 31, 2008, and have restated the corresponding information for all periods presented.

On April 16, 2008, we completed the acquisition of the companies owning 70.3% of the joint venture operating the Greens Creek mine for $700 million in cash and 4,365,000 million shares of our common stock, resulting in 100% ownership of Greens Creek by our various wholly owned subsidiaries. Accordingly, the information on our segments presented below reflects our 100% ownership of Greens Creek as of the April 16, 2008 acquisition date, and our previous 29.7% ownership interest prior to that date. See Note 19 for more information on the acquisition.

General corporate activities not associated with operating units and their various exploration activities, as well as discontinued operations and idle properties, are presented as “other.” Interest expense, interest income and income taxes are considered general corporate items, and are not allocated to our segments.

Sales of metal concentrates and metal products are made principally to custom smelters and metals traders. The percentage of sales from continuing operations contributed by each segment is reflected in the following table:


	Year Ended December 31,
	2008		2007		2006
Greens Creek	67.9	%	47.3	%	56.5	%
Lucky Friday	32.1	%	52.7	%	42.8	%
San Sebastian	—		—	%	0.7	%
	100	%	100	%	100	%

The tables below present information about reportable segments as of and for the years ended December 31 (in thousands).

F-36

Table of Contents


	2008			2007			2006
Net sales from continuing operations to unaffiliated customers:
Greens Creek	$	130,760		$	72,726		$	69,208
Lucky Friday		61,895			80,976			52,422
San Sebastian		—			—			955
	$	192,655		$	153,702		$	122,585
Income (loss) from operations:
Greens Creek	$	(2,489	)	$	35,212		$	35,919
Lucky Friday		14,636			39,451			20,886
San Sebastian		(6,367	)		(9,338	)		(3,783	)
Other		(31,139	)		(12,284	)		(37,271	)
	$	(25,359	)	$	53,041		$	15,751
Capital additions (including non-cash additions):
Greens Creek	$	721,387		$	9,147		$	7,785
Lucky Friday		58,698			24,778			9,409
San Sebastian		39			148			57
Discontinued operations		—			7,236			10,429
Other		12,821			843			177
	$	792,945		$	42,152		$	27,857
Depreciation, depletion and amortization from continuing operations:
Greens Creek	$	30,022		$	8,440		$	8,192
Lucky Friday		5,185			3,893			3,565
San Sebastian		—			45			310
Other		—			244			661
	$	35,207		$	12,622		$	12,728
Other significant non-cash items from continuing operations:
Greens Creek	$	1,194		$	170		$	170
Lucky Friday		18			18			20
San Sebastian		22			51			(4,334	)
Other		10,238			(19,253	)		(45,648	)
	$	11,472		$	(19,014	)	$	(49,792	)
Identifiable assets:
Greens Creek	$	800,030		$	70,671		$	71,560
Lucky Friday		103,748			58,350			33,118
San Sebastian		3,891			5,041			4,558
Discontinued operations		—			83,131			105,912
Other		81,122			433,544			131,121
	$	988,791		$	650,737		$	346,269

The following is sales information by geographic area, based on the location of concentrate shipments and location of parent company for sales from continuing operations to metal traders, for the years ended December 31 (in thousands):


	2008		2007		2006
United States	$	13,779	$	3,789	$	2,806
Canada		99,007		101,366		63,196
Mexico		15,684		122		4,793
Japan		21,590		20,491		25,074
Korea		32,106		18,224		22,674
China		10,489		9,710		4,042
	$	192,655	$	153,702	$	122,585

The following are our long-lived assets by geographic area as of December 31 (in thousands):


	2008		2007		2006
United States	$	848,930	$	92,028	$	71,580
Venezuela		—		37,063		51,291
Mexico		3,183		3,217		3,115
	$	852,113	$	132,308	$	125,986

F-37

Table of Contents

Sales from continuing operations to significant metals customers as a percentage of total sales were as follows for the years ended December 31:


	2008			2007			2006
Teck Cominco Ltd.		51.4	%		65.9	%		51.6	%
Korea Zinc		16.7	%		11.7	%		14.6	%
Dowa/Sumitomo		5.6	%		5.8	%		12.3	%

The proportion of sales from continuing operations to Teck Cominco Ltd. represents shipments of concentrates from our Lucky Friday and Greens Creek units to their smelter in British Columbia, Canada. As presented in the table above, sales to this customer have represented a large portion of our overall sales. If our ability to sell concentrates to the Teck Cominco smelter becomes unavailable to us due to disruptions or closure of their operations or other factors, it is possible that our operations and financial results could be adversely affected.

Note 13: Discontinued Operations

During the second quarter of 2008, we committed to a plan to sell all of the outstanding capital stock of El Callao Gold Mining Company (“El Callao”) and Drake-Bering Holdings B.V. (“Drake-Bering”), our wholly owned subsidiaries which together owned our business and operations in Venezuela, the “La Camorra unit.” On June 19, 2008, we announced that we had entered into an agreement to sell 100% of the shares of El Callao and Drake-Bering to Rusoro for $20 million in cash and 3,595,781 shares of Rusoro common stock. The transaction closed on July 8, 2008. Pursuant to SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” the results of operations have been reported in discontinued operations for all periods presented.

The following table details selected financial information included in the loss from discontinued operations in the consolidated statements of operations for the years ended December 31, 2008, 2007 and 2006 (in thousands):


	Year ended December 31,
	2008			2007			2006
Sales of products	$	23,855		$	68,920		$	96,310
Cost of sales and other direct production costs		(21,656	)		(52,212	)		(53,235	)
Depreciation, depletion and amortization		(4,785	)		(14,557	)		(27,039	)
Exploration expense		(1,167	)		(3,885	)		(5,558	)
Other operating income (expense)		(44	)		(1,175	)		633
Gain on disposition of properties, plants, equipment and mineral interests		—			—			106
Provision for closed operations		(502	)		(1,347	)		(40	)
Interest income		212			672			399
Foreign exchange loss		(13,308	)		(12,003	)		(4,851	)
Income tax benefit (provision)		—			627			(2,391	)
(Loss) income from discontinued operations	$	(17,395	)	$	(14,960	)	$	4,334

F-38

Table of Contents

Note 14: Fair Value Measurement

Effective January 1, 2008, we adopted the provisions of SFAS No. 157, “Fair Value Measurements,” for our financial assets and financial liabilities without a material effect on our results of operations and financial position. The effective date of SFAS No. 157 for non-financial assets and non-financial liabilities has been deferred by FSP 157-2 to fiscal years beginning after November 15, 2008, and we are currently evaluating the impact of adopting SFAS 157 for non-financial assets and non-financial liabilities on our results of operations and financial position.

SFAS No. 157 expands disclosure requirements to include the following information for each major category of assets and liabilities that are measured at fair value on a recurring basis:


a.	the fair value measurement;

b.	the level within the fair value hierarchy in which the fair value measurements in their entirety fall, segregating fair value measurements using quoted prices in active markets for identical assets or liabilities (Level 1), significant other observable inputs (Level 2), and significant unobservable inputs (Level 3);

c.	for fair value measurements using significant unobservable inputs (Level 3), a reconciliation of the beginning and ending balances, separately presenting changes during the period attributable to the following:


	1)	total gains or losses for the period (realized and unrealized), segregating those gains or losses included in earnings (or changes in net assets), and a description of where those gains or losses included in earnings (or changes in net assets) are reported in the statement of income (or activities);

	2)	the amount of these gains or losses attributable to the change in unrealized gains or losses relating to those assets liabilities still held at the reporting period date and a description of where those unrealized gains or losses are reported;

	3)	purchases, sales, issuances, and settlements (net); and

	4)	transfers in and/or out of Level 3.

The table below sets forth our financial assets and liabilities that were accounted for at fair value on a recurring basis as of December 31, 2008, and the fair value calculation input hierarchy level that we have determined applies to each asset and liability category.


	Balance at December 31, 2008		Input Hierarchy Level

Assets:
Cash and cash equivalents	$	36,470		Level 1
Trade accounts receivable		8,314		Level 2
Current restricted cash		2,107		Level 1
Non-current investments		3,118		Level 1
Non-current restricted cash		13,133		Level 1

Liabilities:
Interest rate swap		2,481		Level 2

The provisions of SFAS No. 159, “The Fair Value Option for Financial Liabilities,” also became effective for us on January 1, 2008. SFAS No. 159 permits entities to choose to measure many financial assets and financial liabilities at fair value. The provisions of SFAS No. 159 have not had a material effect on our financial position or results of operations as of and for the year ended December 31, 2008, as we have not elected an option to value any assets or liabilities at fair value pursuant to SFAS No. 159.

Note 15: Income (Loss) per Common Share

We calculate basic earnings per share on the basis of the weighted average number of common shares outstanding during the period. Diluted earnings per share is calculated based on the basis of the weighted average number of common shares outstanding during the period plus the effect of potential dilutive common shares during the period using the treasury stock method.

F-39

Table of Contents

A total of 2,170,316 shares of preferred stock were outstanding at December 31, 2008, of which 2,012,500 shares are convertible to common stock at the minimum rate of 8.4502 until January 1, 2011.

The following table represents net earnings per common share – basic and diluted (in thousands, except earnings per share):


	Year ended December 31,
	2008			2007			2006
Numerator
Income (loss) from continuing operations	$	(37,173	)	$	68,157		$	64,788
Preferred stock dividends		(13,633	)		(1,024	)		(552	)
Income (loss) from continuing operations applicable to common shares		(50,806	)		67,133			64,236
Income (loss) on discontinued operations, net of tax		(17,395	)		(14,960	)		4,334
Loss on sale of discontinued operations, net of tax		(11,995	)		—			—
Net income (loss) applicable to common shares for basic and diluted earnings per share	$	(80,196	)	$	52,173		$	68,570

Denominator
Basic weighted average common shares		141,272			120,420			119,255
Dilutive stock options and restricted stock		—			651			447
Diluted weighted average common shares		141,272			121,071			119,702

Basic earnings per common share
Income (loss) from continuing operations	$	(0.36	)	$	0.56		$	0.54
Income (loss) from discontinued operations		(0.12	)		(0.13	)		0.03
Loss on sale of discontinued operations		(0.09	)		—			—
Net income (loss) applicable to common shares	$	(0.57	)	$	0.43		$	0.57

Diluted earnings per common share
Income (loss) from continuing operations	$	(0.36	)	$	0.56		$	0.54
Income (loss) from discontinued operations		(0.12	)		(0.13	)		0.03
Loss on sale of discontinued operations		(0.09	)		—			—
Net income (loss) applicable to common shares	$	(0.57	)	$	0.43		$	0.57

For the years ended December 31, 2007 and 2006, 138,700 shares and 1,371,981 shares, respectively, for which the exercise price exceeded our stock price have been excluded from our calculation of earnings per share, as their conversion and exercise would have no effect on the calculation of dilutive shares.

On February 4, 2009, we entered into an agreement to sell 32 million units comprised of one share of Common Stock and one-half Series 3 Warrant to purchase one share of Common Stock at a price of $2.05 per unit in an underwritten public offering. On February 6, 2009, the underwriters exercised their over-allotment option in connection with the original offering, resulting in the issuance and sale of 4.8 million additional units. See Note 21 for more information.

Note 16: Other Comprehensive Income (Loss)

Due to the availability of U.S. net operating losses and related deferred tax valuation allowances, there is no tax effect associated with any component of other comprehensive income (loss). The following table lists the beginning balance, yearly activity and ending balance of each component of accumulated other comprehensive income (loss) (in thousands):


	Unrealized Gains (Losses) On Securities			Minimum Pension Liability Adjustment			Adjustment For SFAS No. 158			Change in Derivative Contracts			Cumulative Translation Adjustment			Total Accumulated Other Comprehensive Income (Loss)
Balance January 1, 2006	$	21,145		$	(1,399	)	$	—		$	—		$	—		$	19,746
2006 change		(16,197	)		1,399			3,952			—			—			(10,846	)
Balance December 31, 2006		4,948			—			3,952			—			—			8,900
2007 change		5,235			—			5,074			—			(7,146	)		3,163
Balance December 31, 2007		10,183			—			9,026			—			(7,146	)		12,063
2008 change		(12,305	)		—			(29,959	)		(1,967	)		7,146			(37,085	)
Balance December 31, 2008	$	(2,122	)	$	—		$	(20,933	)	$	(1,967	)	$	—		$	(25,022	)

F-40

Table of Contents

The $7.1 million change in cumulative translation adjustment in 2008 resulted from the July 2008 sale of our discontinued Venezuelan operations. The 2007 translation adjustment originated from a change in the functional currency for our now-divested Venezuelan operations from the U.S. Dollar to the Bolívar, the currency in Venezuela, implemented on January 1, 2007. The translation adjustment was reclassified from accumulated other comprehensive income to be included in the loss on sale of discontinued operations upon the sale. See Note 13 for more information on our discontinued Venezuelan operations. See Note 2 for more information on our marketable securities, Note 9 for more information on our employee benefit plans, and Note 11 for more information on our derivative contracts.

Note 17: Investment in Greens Creek Joint Venture

The Greens Creek unit is operated through a joint venture arrangement, of which we own an undivided 100% interest in its assets through our various subsidiaries. On April 16, 2008, we completed the acquisition the equity of the Rio Tinto subsidiaries owning a 70.3% in the Greens Creek Joint Venture. Prior to the acquisition, we owned 29.7% of the Greens Creek Joint Venture. See Note 19 of Notes to Consolidated Financial Statements for further discussion of the acquisition.

The Greens Creek Joint Venture restated its historical financial statements as a result of the identification of reporting errors in periods prior to January 1, 2007, relating to the calculation of depletion and amortization. The Joint Venture determined that the calculations that had been used in periods prior to January 1, 2007, were not consistent with guidelines established by the Securities Exchange Commission (“SEC”), and, as a result, changed their methodology to calculate depletion and amortization using only historical capitalized costs, applied against remaining proven and probable reserve production estimates, valued using SEC approved pricing methodology. Accordingly, the Joint Venture restated the balance sheet as of December 31, 2007 and 2006, and the statements of operations, cash flows, and changes in venturers’ equity for the years ended December 31, 2006 and 2005. The restatement has not affected the consolidated financial statements of Hecla Mining Company because Hecla’s calculations of depletion and amortization were historically performed independently of those performed by the Joint Venture. The following summarized balance sheets as of December 31, 2007, and the related summarized statements of operations for the years ended December 31, 2007 and 2006, are derived from the audited financial statements of the Greens Creek joint venture and reflect the restatements described above. The financial information below is presented on a 100% basis (in thousands).


*Balance Sheet*	2007
Assets:
Current assets	$	47,365
Properties, plants and equipment, net		149,599
Securities held for reclamation fund		30,012
Total assets	$	226,976
Liabilities and equity:
Liabilities	$	50,316
Equity		176,660
Total liabilities and equity	$	226,976


*Summary of Operations*	2007		2006
Net revenue	$	252,960	$	240,747
Operating income	$	128,217	$	127,499
Net income	$	130,214	$	129,235

Our portion of the assets and liabilities of the Greens Creek unit were recorded pursuant to the proportionate consolidation method, whereby 29.7% of the assets and liabilities of the Greens Creek unit were included in our consolidated financial statements prior to our April 16, 2008 acquisition of the remaining 70.3% joint venture interest, subject to adjustments to conform with our accounting policies.

Our balance sheet as of December 31, 2008 reflects our 100% ownership of the Greens Creek Joint Venture, while our 2008 operating results reflect our 100% ownership of the joint venture since our April 16, 2008 acquisition for the remaining

F-41

Table of Contents

70.3% interest, and our previous 29.7% ownership portion prior to the acquisition date. We have adjusted various asset and liability balances as of the acquisition date to reflect the purchase price allocation for the acquisition of the 70.3% joint venture interest. See Note 19 for more information on the purchase price allocation. In addition, our 2008 operating results reflect depreciation, depletion and amortization on the allocation of purchase price to the acquired 70.3% portion of property, plant, equipment and mineral interests.

Note 18: Related Party Transactions

Prior to the acquisition of the remaining 70.3% interest in the Greens Creek Joint Venture (“The Venture”) by our various subsidiaries on April 16, 2008 (discussed further below), payments were made on behalf of the Venture by Kennecott and its affiliates, which were related parties to the Venture, for payroll expenses, employee benefits, insurance premiums and other miscellaneous charges. These charges were reimbursed by the Venture monthly. We were a 29.7% partner in the Venture prior to our acquisition of the remaining 70.3%.

Prior to the acquisition, under the terms of the Joint Venture Agreement, Kennecott Greens Creek Mining Company (“KGCMC”), as manager of the Venture, received a management fee equal to 4.25% of the first $1 million of total monthly cash operating expenditures (including capital investments) plus 1% of monthly expenditures in excess of $1 million. KGCMC also paid certain direct expenses associated with services provided to the Venture by Kennecott Minerals, Kennecott Utah Copper, Rio Tinto Services and Rio Tinto Procurement, which were related parties. Prior to our acquisition of the remaining 70.3% in the Venture, KGCMC charged the following amounts to the Venture in the years ended December 31, 2008, 2007 and 2006 (on a 100% basis, in thousands):


	Years Ended December 31,
	2008		2007		2006
Management fees	$	619	$	1,631	$	1,388
Direct expenses		1,942		2,433		1,385
Total	$	2,561	$	4,064	$	2,773

In addition to the charges paid to KGCMC, the Venture contracted with Rio Tinto Marine, a related party, to act as its agent in booking shipping vessels with third parties. Rio Tinto Marine earned a 1.5% commission on shipping charges. Commissions paid totaled approximately $2.3 million for the year ended December 31, 2008, and $0.1 million for each of the years ended December 31, 2007 and 2006, respectively, on a 100% basis.

Beginning in 2004, the Venture contracted with Rio Tinto Procurement, a related party, to act as its agent in procurement issues. A fixed monthly fee was charged for procurement services, and charges were quoted for other related contracting and cataloging services. Charges paid, on 100% basis, totaled $0.1 million for the year ended December 31, 2008, and $0.2 million for each of the years ended December 31, 2007 and 2006.

On April 16, 2008, we completed the acquisition of the equity of the Rio Tinto subsidiaries owning the remaining 70.3% interest in the Greens Creek mine. As a result, the related party relationships described above between the Venture and Kennecott and its affiliates will terminated upon closure of the transaction, with the exception of certain transitional services provided by Kennecott and its affiliates on a temporary basis, in accordance with the acquisition agreement. See Note 19 for further discussion of the transaction.

In the fourth quarter of 2007, we committed to the establishment of the Hecla Charitable Foundation to operate exclusively for charitable and educational purposes, with a particular emphasis in those communities in which we have employees or operations. In December 2007, our Board of Directors made an unconditional commitment to donate 550,000 shares of our common stock, valued at $5.1 million as of the commitment date. Accordingly, the contribution was recorded as other expense, with a credit to stockholders’ equity as of and for the year ended December 31, 2007. The contributed shares of our common stock were issued to the Foundation in January 2008. The Hecla Charitable Foundation was established by Hecla as a not-for-profit organization which is seeking 501(c)(3) status from the Internal Revenue Service. Its financial statements are not consolidated by Hecla.

Note 19: Acquisitions

Acquisition of 70.3% of Greens Creek

On April 16, 2008, we completed the acquisition of all of the equity of the Rio Tinto, PLC subsidiaries holding a 70.3% interest in the Greens Creek mine, consolidating our ownership. We announced the agreement for this transaction on February 12, 2008. Our wholly-owned subsidiary, Hecla Alaska LLC, previously owned an undivided 29.7% joint venture interest in the assets of Greens Creek. The acquisition gives our various subsidiaries control of 100% of the Greens Creek mine.

F-42

Table of Contents

The purchase price was composed of $700 million in cash and 4,365,000 shares of our common stock valued at $53.4 million, and estimated acquisition related costs of $5.1 million for a total acquisition price of $758.5 million. The number of common shares issued, 4,365,000, was determined by dividing $50 million by the volume-weighted average trading price for the 20 trading days immediately prior to the second trading day immediately preceding the closing date. For purchase accounting, the valuation of the shares was based upon the average closing price of Hecla shares a few days before and after April 14, 2008 (two days prior to the closing date of the acquisition on April 16, 2008).

The cash portion of the purchase price was partially funded by a $380 million debt facility, which included a $140 million three-year term facility and a $240 million bridge facility, the latter of which was subsequently reduced to a $40 million bridge facility which now matures in February 2009, subject to certain conditions. We utilized $220 million from the bridge facility at the time of closing the Greens Creek transaction, and the remaining $20 million for general corporate purposes in September 2008. In September 2008, the Company applied $162.9 million in proceeds from the public issuance of 34.4 million shares of our common stock was applied against the bridge facility principal balance. See Note 7- Long-term Debt and Credit Agreement and Note 21 – Subsequent Events for additional disclosure regarding the status of the Company’s credit agreement.

The following summarizes the allocation of purchase price to the fair value of the assets acquired and liabilities assumed at the date of acquisition (in thousands):


Consideration:
Cash payments	$	700,000
Hecla stock issued (4,365,000 shares at $12.23 per share)		53,384
Acquisition related costs		5,074
Total purchase price	$	758,458

Fair value of net assets acquired:
Cash	$	16,938
Product inventory		28,510
Other current assets		15,597
Property, plants, equipment and mineral interests, net		689,687
Identified intangible		5,995
Deferred tax asset		23,000
Other assets		21,278
Total assets		801,005

Less: Liabilities assumed		42,547

Net assets acquired	$	758,458

Included in the acquired assets are accounts receivable valued at approximately $9.8 million due under provisional sales contracts based on the fair values of the underlying metals at acquisition date. Final pricing settlements on all receivables acquired on April 16, 2008 occurred at various times during the second quarter of 2008, at which time negative price adjustments were recorded as reductions of revenue.

The $689.7 million fair value for “Property, plants, equipment and mineral interests, net” acquired is comprised of $5.0 million for the asset retirement obligation, $266.7 million for development costs, $67.2 million for plants and equipment, $7.2 million for land, and $343.6 million for value beyond proven and probable reserves . The $343.6 million attributed to value beyond proven and probable reserves consists primarily of exploration potential generally representing the anticipated expansion of the existing mineralized material delineated at the mine. Exploration interests have been defined as specific exploration targets which capture anticipated at or near mine site extensions to known ore bodies. While we have a fair degree of confidence that mineralization exists, as of yet, there is insufficient geological sampling data to classify such material as a reserve or other mineralized material. We perform a reserve study each year and determine the quantity of metals added to proven and probable reserves based on, among other factors, the cutoff value per ton net smelter return. As ore is added to proven and probable reserves, value per ton based on the initial purchase price allocation will be reclassified to development costs each year. After reclassification to development, costs will be depreciated on a units-of-production basis over the life of the proven and probable reserves.

As noted in the table above, we attributed approximately $6.0 million of the purchase price to an intangible asset. Amortization of the intangible asset is expected to total approximately $1.2 million annually through the year 2012.

F - 43

Table of Contents

The results of operations of this acquisition have been included in the Consolidated Financial Statements from the date of acquisition. As a result, product and material and supplies inventory balances at December 31, 2008 reflect our 100% share of Greens Creek’s balances, while December 31, 2007 amounts reflect our 29.7% ownership prior to the acquisition. The value of the acquired 70.3% portion of Greens Creek product inventory was based upon its fair market value as of the acquisition date, resulting in increased cost of sales by approximately $16.6 million during the second quarter of 2008. The acquired product inventory was all sold in the second quarter of 2008.

The unaudited pro forma financial information below represents the combined results of our operations as if the Greens Creek acquisition had occurred at the beginning of the periods presented. The unaudited pro forma financial information is presented for informational purposes only and is not indicative of the results of operations that would have occurred if the acquisition had taken place at the beginning of the periods presented, nor is it indicative of future operating results.


	Year ended December 31,
	2008			2007
Sales of products	$	231,578		$	324,453
Net income (loss) from continuing operations		(26,520	)		99,511
Income (loss) applicable to common shareholders		(69,543	)		70,446
Basic and diluted income (loss) per common share		(0.50	)		0.56

The pro forma financial information includes adjustments to reflect the depreciation and amortization of assets acquired, an estimate of the interest expense that would have been incurred, and the dividends on the mandatory convertible preferred stock that would have been incurred. Also included in the pro forma amounts for the year ended December 31, 2007 is a nonrecurring adjustment of $16.6 million for the purchase accounting valuation for product inventory.

Independence Acquisition

On November 6, 2008, we completed the acquisition of substantially all of the assets of Independence Lead Mines Company (“Independence”), located in northern Idaho’s Silver Valley, for 6,936,884 shares of our common stock, which had an estimated value of $14.2 million based on the closing price of our stock on the acquisition date. Included in the assets acquired is a land position near our Lucky Friday unit in the Silver Valley, in close proximity to where we have initiated a significant generative exploration program. The assets acquired also include mining claims previously held by Independence pertaining to an agreement with us, which includes all future interest or royalty obligation by us to Independence.

Acquisition of San Juan Silver Mining Joint Venture earn-in rights

On February 21, 2008, we announced that our wholly-owned subsidiary, Rio Grande Silver Inc. (“Rio”), acquired the right to earn into a 70% interest in the San Juan Silver Joint Venture, which holds an approximately 25-square-mile consolidated land package in the Creede Mining District of Colorado, for a total of 927,716 shares of our common stock, valued at $9.4 million at the time of the transaction. The agreement originally consisted of a three-year buy-in with a total value of $23.2 million, consisting of exploration work and cash. Under the original agreement, Rio could earn up to a 70% joint interest by paying Emerald Mining & Leasing, LLC (“EML”), and Golden 8 Mining, LLC (“G8”), a total of $11.2 million in common stock, by spending $6 million in exploration on the property during the first year, and by committing to an additional total of $6 million in exploration work over the subsequent two years.

On October 24, 2008, Rio entered into an amendment to the agreement which delays the incurrence of the qualifying expenses to be paid by Rio. Pursuant to the amendment, Rio must now incur $9 million in qualifying expenses on or before the fourth anniversary of the agreement date, and incur $12 million in qualifying expenses on or before the fifth anniversary of the agreement date, extending the payment dates under the original agreement for such qualifying expenses from the second anniversary and the third anniversary of the agreement date, respectively. As a result of the amendment, Rio no longer is required to incur the initial $6 million in qualifying expenses on or before the first anniversary of the agreement date. In addition, the amendment required us to issue to EML and G8 $2 million ($1 million each) in unregistered shares of Hecla common stock in November 2008. The agreement originally required such issuance on or before the first anniversary of the agreement date. The amendment also requires us to guarantee certain indemnification obligations of EML and G8 up to a maximum liability of $2.5 million.

F - 44

Table of Contents

Note 20: Hollister Sale

In April 2007, we completed the sale of our interest in the Hollister Development Block gold exploration project in Nevada to our former partner, Great Basin Gold, Inc., for $45 million in cash and $15 million in Great Basin Gold common stock, based on the average closing share price for the 20 trading days prior to the announcement of the transaction. The number of shares of Great Basin Gold stock transferred to Hecla was 7,930,214, which had a current value of $18.6 million as of the close of market on April 18, 2007, the last price prior to the closing of the transaction. We spent approximately $31.6 million to develop an underground ramp and conduct underground exploration at Hollister toward meeting the requirements of an earn-in agreement with Rodeo Creek Gold, Inc., a wholly owned subsidiary of Great Basin Gold, and most of these costs were treated as exploration and pre-development expense as incurred. As a result of the sale, we recognized a pre-tax gain of $63.1 million in the second quarter of 2007.

Note 21: Subsequent Events

Credit agreement amendment

On February 3, 2009, we announced we had entered into the Fourth Amendment to our Amended and Restated Credit Agreement (the “Fourth Amendment”). The Fourth Amendment deferred all of our scheduled principal payments on our term facility in 2009 so that our next scheduled principal payments are $15 million on March 31, 2010 and on the last day of each calendar quarter thereafter until the maturity date of March 31, 2011. On that date, the then remaining $53.7 million principal amount is due and payable. In exchange for this principal payment deferral, we agreed in the Fourth Amendment to (i) pay off our bridge facility with funds from an equity offering of at least $50 million on or before February 12, 2009, (ii) pay an additional fee to our lenders upon effectiveness of the Fourth Amendment, and on each subsequent July 1 ^st and January 1 ^st , by issuing to the lenders an aggregate amount of a new Series of 12% Convertible Preferred Stock (discussed further below) equal to 3.75% of the aggregate principal amount of the term facility outstanding on such date until the term facility if paid off in full, (iii) revise our financial covenants, including, without limitation, the addition of a liquidity covenant, and extend certain additional limitations on our covenants until the March 31, 2011 maturity date of the term facility, and (iv) make additional mandatory prepayments of our remaining term facility with 75% of our semi-annual excess cash flow and with proceeds we receive from asset sales and the issuance of additional equity and debt, with limited exceptions. The Fourth Amendment was not effective until certain conditions were met, including the receipt of net proceeds from an equity offering by February 12, 2009 of at least $50 million and payment of our bridge facility. On February 4, 2009, we entered into an agreement to sell 32 million units comprised of one share of Common Stock and one-half Series 3 Warrant to purchase one share of Common Stock in an underwritten public offering for gross proceeds of approximately $65.6 million. On February 6, 2009, the underwriters exercised their over-allotment option in connection with the original offering, resulting in the issuance and sale of 4.8 million additional units for additional gross proceeds of approximately $9.8 million. We applied $40 million of the total proceeds to the payment of our outstanding bridge facility balance on February 10, 2009. In accordance with the credit facilities, we also reduced our term loan by approximately $8 million in February 2009 (see Underwritten equity offering below for more information).

Pursuant to the Fourth Amendment, 42,621 shares of 12% Convertible Preferred Stock were issued to the lenders in February 2009. Below is information on the characteristics of the new Series of 12% Convertible Preferred Stock established in connection with the Fourth Amendment to our Amended and Restated Credit Agreement.

Ranking

The 12% Convertible Preferred Stock ranks senior to our Common Stock and any shares of Series A preferred stock (“Junior Stock”), and on parity with our Series B and Mandatory Convertible preferred stock.

Dividends

Holders of shares of outstanding 12% Convertible Preferred Stock shall be entitled to receive, when, as and if declared by the Board of Directors, out of funds legally available therefore, cumulative dividends at the rate per annum of 12% per share on the sum of the liquidation preference plus all accrued and unpaid dividends thereon from and including the date of issuance (“Dividend Rate”), payable quarterly in arrears on January 1, April 1, July 1, and October 1 of each year. Dividends will be cumulative from the most recent date as to which dividends shall be paid, or if no dividends have been paid, from the date of issuance, whether or not in any dividend period or periods there shall have been funds legally available for payment of such dividends. The Dividend Rate on accrued but unpaid dividends shall be compounded quarterly on January 1, April 1, July 1 and October 1 of each year.

F - 45

Table of Contents

Redemption

The 12% Convertible Preferred Stock will be redeemable as follows:


•	All outstanding 12% Convertible Preferred Stock will be redeemed by us on February 10, 2014, at a price equal to the sum of 100% of the liquidation preference plus all accumulated and unpaid dividends thereon, from and including date of issuance.

•	At the option of the shareholder at a price of 101% of the liquidation preference plus all accumulated and unpaid dividends, from and including the date of issuance.

•	At our option, in whole, or, from time to time, in part, out of funds legally available for such purpose, at any time, as follows:

		1.	from the date of issuance through March 31, 2011, at a price equal to 103% of the sum of the liquidation preference plus all accumulated and unpaid dividends, from and including the date of issuance;

		2.	from April 1, 2011 through March 31, 2012, at a price equal to 102% of the sum of the liquidation preference plus all accumulated and unpaid dividends, from and including the date of issuance;

		3.	from April 1, 2012 through March 31, 2013, at a price equal to 101% of the sum of the liquidation preference plus all accumulated and unpaid dividends, from and including the date of issuance; and

		4.	from April 1, 2013 and thereafter, at a price equal to 100% of the sum of the liquidation preference plus all accumulated and unpaid dividends, from and including the date of issuance.

Liquidation Preference

The 12% Convertible Preferred shareholders will be entitled to receive, in the event that we are liquidated, dissolved or wound up, whether voluntary or involuntary, $100 per share of 12% Convertible Preferred Stock plus an amount per share equal to accumulated and unpaid dividends on the shares to the date fixed at liquidation, winding-up or dissolution, to be paid out of assets available for distribution to our shareholders, after satisfaction of liabilities owed to our creditors and distributions to holders of stock senior to the 12% Convertible Preferred Stock, and before any payment or distribution is made on any Junior Stock, including, without limitation, Common Stock.

Voting Rights

Except under specific circumstances as set forth in the Certificate of Designations or as otherwise from time to time required by applicable law, the 12% Convertible Preferred shareholders will have no voting rights and their consent will not be required for taking any corporate action.

Conversion

Each share of 12% Convertible Preferred Stock will be convertible, in whole or in part at the option of the holder thereof, at any time after the issuance, into shares of Common Stock at the conversion price of $1.74 per share of Common Stock (equivalent to a conversion rate of 57.47 shares of common stock for each share of 12% Convertible Preferred Stock).

Underwritten offering

On February 4, 2009, we entered into an agreement to sell 32 million units comprised of one share of Common Stock and one-half Series 3 Warrant to purchase one share of Common Stock. The units were sold at a price of $2.05 per unit in an underwritten public offering for gross proceeds of approximately $65.6 million. On February 6, 2009, the underwriters exercised their over-allotment option in connection with the original offering, resulting in the issuance and sale of 4.8 million additional units for additional gross proceeds of approximately $9.8 million. The net proceeds from the offering, including the over-allotment option, were approximately $71.3 million. The offering was made pursuant to our existing shelf-registration statement and base prospectus filed with the Securities and Exchange Commission. Each whole warrant will entitle the holder to purchase one share of our Common Stock, exercisable at a price of $2.50 per share for a period of 5 ½ years from the closing date of the sale. The warrant shares are not exercisable for the first six months from the closing date. $40 million of the total proceeds were used for the payment of our outstanding bridge facility balance on February 10, 2009. In accordance with the credit facilities, we also reduced our term loan by approximately $8 million in February 2009. The remaining proceeds are available for general working capital requirements.

F - 46

Table of Contents

Hecla Mining Company and Wholly Owned Subsidiaries
Form 10-K – December 31, 2008
Index to Exhibits


2.1	Stock Purchase Agreement, dated as of February 12, 2008, by and among Kennecott Minerals Holdings Company, Hecla Admiralty Company, and Hecla Mining Company. Filed as exhibit 2.1 to Registrant’s Current Report on Form 8-K filed on February 19, 2008 (File No. 1-8491), and incorporated herein by reference. *

2.2	Exploration, Development and Mining Operating Agreement, dated February 21, 2008, by and among Emerald Mining & Leasing, LLC, Golden 8 Mining, LLC, and Rio Grande Silver, Inc. Filed as exhibit 2.1 to Registrant’s Current Report on Form 8-K filed on February 26, 2008 (File No. 1-8491), and incorporated herein by reference.*

2.3	First Amendment to that certain Exploration, Development and Mine Operating Agreement dated February 21, 2008, between Emerald Mining & Leasing, LLC, Golden 8 Mining, LLC, and Rio Grande Silver, Inc. by and among Emerald Mining & Leasing, LLC, EML, Emerald Ranch Limited Liability Company, Brian F. Egolf, Golden 8 Mining, LLC, and Rio Grande Silver, Inc. Filed as exhibit 2.2 to Registrant’s Current Report on Form 8-K filed on October 30, 2008 (Filed No. 1-8491), and incorporated herein by reference.

2.4	Asset Purchase Agreement, dated as of February 13, 2008, by and among Hecla Mining Company, Hecla Merger Company and Independence Lead Mines Company. Filed as exhibit 2.2 to Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2008 (File No. 1-8491), and incorporated herein by reference. *

2.5	Agreement to Amend the Asset Purchase Agreement by and among Independence Lead Mines Company, Hecla Mining Company and Hecla Merger Company, dated August 12, 2008. Filed as exhibit 2.1 to Registrant’s Current Report on Form 8-K filed on August 13, 2008 (File No. 1-8491), and incorporated herein by reference.

2.6	Stock Purchase Agreement, dated as of June 19, 2008, by and among Rusoro Mining Ltd., Rusoro MH Acquisition Ltd., and Hecla Limited. Filed as exhibit 2.1 to Registrant’s Current Report on Form 8-K filed on June 25, 2008 (File No. 1-8491), and incorporated herein by reference. *

2.7	Letter agreement by and among Hecla Limited, Rusoro MH Acquisition, Ltd., and Rusoro Mining Ltd. dated June 27, 2008. Filed as exhibit 2.1 to Registrant’s Current Report on Form 8-K filed on July 3, 2008 (File No. 1-8491), and incorporated herein by reference.

3.1	Certificate of Incorporation of the Registrant as amended to date. **

3.2	Bylaws of the Registrant as amended to date. Filed as exhibit 3.1 to Registrant’s Current Report on Form 8-K filed on December 6, 2007 (File No. 1-8491), and incorporated herein by reference.

4.1(a)	Form of Series 1 Common Stock Purchase Warrant. Filed as exhibit 4.1 to Registrant’s Current Report on Form 8-K filed on December 11, 2008 (File No. 1-8491), and incorporated herein by reference.

4.1(b)	Form of Series 2 Common Stock Purchase Warrant. Filed as exhibit 4.2 to Registrant’s Current Report on Form 8-K filed on December 11, 2008 (File No. 1-8491), and incorporated herein by reference.

4.1(c)	Form of Series 3 Common Stock Purchase Warrant. Filed as exhibit 4.1 to Registrant’s Current Report on Form 8-K filed on February 9, 2009 (File No. 1-8491), and incorporated herein by reference.

F - 47

Table of Contents


4.2(a)	Certificate of Designations of 6.5% Mandatory Convertible Preferred Stock of the Registrant. Filed as part of Exhibit 3.1 hereto and incorporated herein by reference.

4.2(b)	Form of 6.5% Mandatory Convertible Preferred Stock Certificate. Filed as exhibit 4.1 to Registrant’s Current Report on Form 8-K filed December 14, 2007 (File No. 1-8491), and incorporated herein by reference.

4.2(c)	Certificate of Designations, Preferences and Rights of Series A Junior Participating Preferred Stock of the Registrant. Filed as exhibit 4.1(a) to Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2006 (File No. 1-8491), and incorporated herein by reference.

4.2(d)	Certificate of Designations, Preferences and Rights of Series B Cumulative Convertible Preferred Stock of the Registrant. Filed as part of Exhibit 3.1 hereto and incorporated herein by reference.

4.2(e)	Certificate of Designations, Preferences and Rights of 12% Convertible Preferred Stock of the Registrant. Filed as part of Exhibit 3.1 hereto and incorporated herein by reference.

10.1	Underwriting Agreement, dated September 8, 2008, between Hecla Mining Company and Merrill Lynch, Pierce, Fenner & Smith incorporated and Scotia Capital (USA) Inc., as representatives of the underwriters identified therein. Filed as exhibit 1.1 to the Registrant’s Current Report on Form 8-K filed on September 9, 2008 (File No. 1-8491), and incorporated herein by reference.

10.2	Placement Agency Agreement, dated December 10, 2008, by and between Hecla Mining Company and Rodman & Renshaw, LLC. Filed as exhibit 1.1 to Registrant’s Current Report on Form 8-K filed on December 11, 2008 (File No. 1-8491), and incorporated herein by reference.

10.3	Stock Purchase Agreement, dated as of February 12, 2008, by and among Kennecott Minerals Holdings Company, Hecla Admiralty Company, and Hecla Mining Company. Filed as exhibit 2.1 to Registrant’s Current Report on Form 8-K filed on February 16, 2008 (File No. 1-8491), and incorporated herein by reference. *

10.4	Asset Purchase Agreement, dated as of February 12, 2008, by and among Hecla Mining Company, Hecla Merger Company and Independence Lead Mines Company. Filed as exhibit 2.2 to Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2008 (File No. 1-8491), and incorporated herein by reference. *

10.5	Agreement to Amend the Asset Purchase Agreement, dated August 12, 2008, by and among Independence Lead Mines Company, Hecla Mining Company and Hecla Merger Company. Filed as exhibit 2.1 to Registrant’s Current Report on Form 8-K filed on August 13, 2008 (File No. 1-8491), and incorporated herein by reference. *

10.6	Shareholder Agreement, dated as of February 12, 2008 by and among Hecla Merger Company and each of Bernard C. Lannen, Wayne L. Schoonmaker, Gordon Berkhaug, and Robert Bunde. Filed as Exhibit 3 to Independence Lead Mines Company’s Schedule 13D filed by Hecla Mining Company on February 22, 2008 (File No. 005-81828), and incorporated herein by reference.

10.7	Stock Purchase Agreement, dated as of June 19, 2008, by and among Rusoro Mining Ltd., Rusoro MH Acquisition Ltd., and Hecla Limited. Filed as exhibit 2.1 to Registrant’s Current Report on Form 8-K filed on June 25, 2008 (File No. 1-8491), and incorporated herein by reference. *

10.8	Letter agreement by and among Hecla Limited, Rusoro MH Acquisition, Ltd., and Rusoro Mining Ltd. dated June 27, 2008. Filed as exhibit 2.1 to Registrant’s Current Report on Form 8-K filed on July 3, 2008 (File No. 1-8491), and incorporated herein by reference.

10.9(a)	Amended and Restated Bank Credit Agreement, dated as of April 16, 2008, by and among Hecla Mining Company, various Lenders, The Bank of Nova Scotia, as the Administrative Agent for the Lenders, and Scotia Capital as Sole Lead Arranger and Sole Bookrunner. Filed as exhibit 10.1 to

F - 48

Table of Contents


	Registrant’s Current Report on Form 8-K filed on April 22, 2008 (File No. 1-8491), and incorporated herein by reference. *

10.9(b)	Guaranty, dated as of April 16, 2008, by Hecla Mining Company. Filed as exhibit 10.2 to Registrant’s Current Report on Form 8-K filed on April 22, 2008 (File No. 1-8491), and incorporated herein by reference.

10.9(c)	First Amendment to Amended and Restated Credit Agreement, dated October 16, 2008, by and among Hecla Mining Company, The Bank of Nova Scotia, as the Administrative Agent for the Lenders, and various Lenders. Filed as exhibit 10.2 to Registrant’s Current Report on Form 8-K filed on October 16, 2008 (File No. 1-8491), and incorporated herein by reference. *

10.9(d)	Second Amendment to Amended and Restated Credit Agreement, dated December 9, 2008, by and among Hecla Mining Company, The Bank of Nova Scotia, as the Administrative Agent for the Lenders, and various Lenders. Filed as exhibit 10.4 to Registrant’s Current Report on Form 8-K filed on December 11, 2008 (File No. 1-8491), and incorporated herein by reference. *

10.9(e)	Letter Agreement dated December 9, 2008, between Hecla Mining Company and The Bank of Nova Scotia, as the Administrative Agent for the Lenders. Filed as exhibit 10.5 to Registrant’s Current Report on Form 8-K filed on December 11, 2008 (File No. 1-8491), and incorporated herein by reference.

10.9(f)	Third Amendment to Amended and Restated Credit Agreement, dated December 30, 2008. Filed as exhibit 10.4 to Registrant’s Current Report on Form 8-K filed on January 2, 2009 (File No. 1-8491), and incorporated herein by reference. *

10.9(g)	Fourth Amendment to Amended and Restated Credit Agreement, dated February 3, 2009. Filed as exhibit 10.5 to Registrant’s Current Report on Form 8-K on February 3, 2009 (File No. 1-8491), and incorporated herein by reference. *

10.10	Securities Purchase Agreement, dated as of December 10, 2008 between Hecla Mining Company and the purchasers identified on the signature pages thereto. Filed as exhibit 10.1 to Registrant’s Current Report on Form 8-K filed on December 11, 2008 (File No. 1-8491), and incorporated herein by reference.

10.11	Underwriting Agreement, dated February 4, 2009 between Hecla Mining Company and Cannacord Adams Inc. and Canaccord Capital. Filed as exhibit 1.1 to Registrant’s Current Report on Form 8-K filed on February 9, 2009 (File No. 1-8491), and incorporated herein by reference.

10.12	Exploration, Development and Mining Operating Agreement, dated February 21, 2008, by and among Emerald Mining & Leasing, LLC, Golden 8 Mining, LLC, and Rio Grande Silver, Inc. Filed as exhibit 2.1 to Registrant’s Current Report on Form 8-K filed on February 26, 2008 (File No. 1-8491), and incorporated herein by reference.*

10.13	First Amendment to that certain Exploration, Development and Mine Operating Agreement dated February 21, 2008, between Emerald Mining & Leasing, LLC, Golden 8 Mining, LLC, and Rio Grande Silver, Inc. by and among Emerald Mining & Leasing, LLC, EML, Emerald Ranch Limited Liability Company, Brian F. Egolf, Golden 8 Mining, LLC, and Rio Grande Silver, Inc. Filed as exhibit 2.2 to Registrant’s Current Report on Form 8-K filed on October 30, 2008 (Filed No. 1-8491), and incorporated herein by reference.

10.14	Employment Agreement dated June 1, 2007, between Registrant and Phillips S. Baker, Jr. (Registrant has substantially identical agreements with each of Messrs. Ronald W. Clayton, Philip C. Wolf, Lewis E. Walde, Michael H. Callahan, Dean W. McDonald, Don Poirier and Ms. Vicki Veltkamp). An identical Employment Agreement was entered into between the Registrant and Don Poirier on July 9, 2007, as well as with James A. Sabala on March 26, 2008. Filed as exhibit

F - 49

Table of Contents


	10.1 to Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2007 (File No. 1-8491), and incorporated herein by reference. (1)

10.15	Form of Indemnification Agreement dated November 8, 2006, between Registrant and Phillips S. Baker, Jr., Philip C. Wolf, Ronald W. Clayton, Lewis E. Walde, Michael H. Callahan, Dean McDonald, Vicki Veltkamp, Ted Crumley, John H. Bowles, David J. Christensen, George R. Nethercutt, Jr., and Anthony P. Taylor. An identical Indemnification Agreement was entered into between the Registrant and Charles B. Stanley and Terry V. Rogers on May 4, 2007, Don Poirier on July 9, 2007, and James A. Sabala on March 26, 2008. Filed as exhibit 10.7 to Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2006 (File No. 1-8491). (1)

10.16(a)	Hecla Mining Company Executive and Senior Management Long-Term Performance Payment Plan. (1) **

10.16(b)	Hecla Mining Company Performance Pay Compensation Plan incorporated by reference herein to Exhibit 10.5(a) to Registrant’s Form 10-K for the year ended December 31, 2004. (1)

10.16(c)	Hecla Mining Company 1995 Stock Incentive Plan, as amended. Filed as exhibit 10.2(b) to Registrant’s Annual Report on Form 10-K for the year ended December 31, 2004 (File No. 1-8491), and incorporated herein by reference. (1)

10.16(d)	Hecla Mining Company Stock Plan for Nonemployee Directors, as amended. Filed as exhibit 10.4(c) to Registrant’s Annual Report on Form 10-K for the year ended December 31, 2007 (File No. 1-8491), and incorporated herein by reference. (1)

10.16(e)	Hecla Mining Company Key Employee Deferred Compensation Plan, as amended. (1) **

10.16(f)	Hecla Mining Company form of Non-Qualified Stock Option Agreement (Under the Key Employee Deferred Compensation Plan) entered into between Hecla Mining Company and participants under the Key Employee Deferred Compensation Plan, as amended. Filed as exhibit 10.1 to Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2005 (File No. 1-8491), and incorporated herein by reference. (1)

10.17(a)	Hecla Mining Company Retirement Plan for Employees and Supplemental Retirement and Death Benefit Plan. (1) **

10.17(b)	Supplemental Excess Retirement Master Plan Documents. Filed as exhibit 10.5(b) to Registrant’s Annual Report on Form 10-K/A-1 for the year ended December 31, 1994 (File No. 1-8491), and incorporated herein by reference. (1)

10.17(c)	Hecla Mining Company Nonqualified Plans Master Trust Agreement. Filed as exhibit 10.5(c) to Registrant’s Annual Report on Form 10-K/A-1 for the year ended December 31, 1994 (File No. 1-8491), and incorporated herein by reference. (1)

10.18	Restated Mining Venture Agreement among Kennecott Greens Creek Mining Company, Hecla Mining Company and CSX Alaska Mining Inc. dated May 6, 1994. Filed as exhibit 99.A to Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 1994 (File No. 1-8491), and incorporated herein by reference.

10.19	Engagement letter between Hecla Mining Company and Alvarez & Marsal North America, LLC, dated December 29, 2008. (1)**

21.	List of subsidiaries of Registrant.**

23.1	Consent of BDO Seidman, LLP.**

23.2	Consent of AMEC E&C Services, Inc.**

31.1	Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.**

F - 50

Table of Contents


31.2	Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.**

32.1	Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**

32.2	Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**


(1)	Indicates a management contract or compensatory plan or arrangement.

*	The agreements filed or incorporated by reference contain a brief list identifying the contents of all omitted schedules, which schedules Hecla Mining Company agrees to furnish supplementally to the Securities and Exchange Commission upon its request.

**	Filed herewith.

F - 51

HECLA MINING COMPANY

ALVAREZ & MARSAL NORTH AMERICA, LLC

Phillips S. Baker, Jr.

Stanley E. Speer

President & CEO

Managing Director

CERTIFICATE OF INCORPORATION

HECLA MINING COMPANY

ARTICLE I.

Name

The name of the Corporation shall be HECLA MINING COMPANY

ARTICLE II.

Registered Office

The address of the registered office of the Corporation in the State of Delaware is 1209 Orange Street, in the City of Wilmington, County of New Castle, Delaware 19801. The name of its registered agent at such address is The Corporation Trust Company.

ARTICLE III.

Purpose

The purpose for which the Corporation is formed is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of Delaware.

ARTICLE IV.

Capital Stock

Section 1. Authorized Capital Stock . The Corporation shall be authorized to issue two classes of shares of Capital Stock to be designated, respectively, “Preferred Stock” and “Common Stock”; the total number of shares of capital stock which the Corporation shall have authority to issue is 405,000,000; the total number of shares of Preferred Stock shall be 5,000,000, and each such share shall have a par value of $0.25; the total number of shares of Common Stock shall be 400,000,000, and each such share shall have a par value of $0.25.

Section 2. Issuance of Preferred Stock . Shares of Preferred Stock may be issued from time to time in one or more series. The Board of Directors of the Corporation (hereinafter referred to in this Certificate of Incorporation as the “Board”) is hereby authorized to fix the voting rights, if any, designations, powers, preferences and the relative, participating, optional or

other rights, if any, and the qualifications, limitations or restrictions thereof, of any unissued series of Preferred Stock; and to fix the number of shares constituting such series, and to increase or decrease the number of shares of any such series (but not below the number of shares thereof then outstanding).

Section 3. No Preemptive Rights . Without limiting the power of the Corporation to grant such rights by private contract, no holders of stock of the Corporation shall be entitled as such, as a matter of right, to the preemptive right to purchase or subscribe for any stock which the Corporation may issue or sell, whether or not exchangeable for any stock of the Corporation and whether out of unissued shares authorized by this Certificate of Incorporation as originally filed, or by any amendment hereof, or out of shares of stock of the Corporation acquired by it after the issuance thereof, and whether issued for cash, labor performed, personal property of any kind, including securities of other corporations, real property or interest therein, nor shall any holder of any shares of the capital stock of the Corporation be entitled as such, as a matter of right, to purchase or subscribe for any obligation which the Corporation may issue or sell which shall be attached or appurtenant to any warrant or warrants or any other instrument or instruments that shall confer upon the holder or holders of such obligation the right to subscribe for or purchase from the Corporation any shares of its capital stock.

Section 4. Voting Rights . Except as otherwise provided by law or by the resolution or resolutions adopted by the Board designating the rights, powers and preferences of any series of Preferred Stock, the Common Stock shall have the exclusive right to vote for the election of directors and for all other purposes, each holder of the Common Stock being entitled to one vote for each share held. Whenever this Certificate of Incorporation or the By-Laws of the Corporation shall require the affirmative vote of the holders of at least 80% of the voting power of the then outstanding shares of the capital stock of the Corporation entitled to vote generally in the election of directors (such capital stock is hereinafter referred to in this Certificate of Incorporation as “Voting Stock”), voting together as a single class, for the taking of corporate action: (i) such affirmative vote shall be in addition to any other affirmative vote required by law or by the resolution or resolutions designating the rights, powers and preferences of any outstanding series of Preferred Stock; and (ii) each outstanding share of Common Stock shall be entitled to one vote and each outstanding share of each series of Preferred Stock which is Voting Stock shall be entitled to the number of votes to which it is generally entitled, pursuant to the resolution or resolutions designating the rights, powers and preferences of such series of Preferred Stock, in the election of directors.

ARTICLE V

By-Laws

In furtherance and not in limitation of the powers conferred by law, the Board is expressly authorized to make, repeal, alter, amend and rescind the By-Laws of the Corporation by a majority vote of the entire Board at any regular or special meeting of the Board; provided, however that, notwithstanding anything contained in this Certificate of Incorporation or the By-Laws of the Corporation to the contrary, the affirmative vote of the holders of at least 80% of the voting power of the then outstanding shares of Voting Stock, voting together as a single class, shall be required to (i) alter, amend or repeal any provision of the By-Laws which is substantially identical to and/or implements the last sentence of Article IV, or Articles VI, VII or VIII, of this Certificate of Incorporation or (ii) alter, amend or repeal any provision of this proviso to Article V.

ARTICLE VI.

Board of Directors

Section 1. Number, Election and Terms . The business and affairs of the Corporation shall be managed under the direction of a Board of Directors which, subject to any right of the holders of any series of Preferred Stock then outstanding to elect additional directors under specified circumstances shall consist of not less than five nor more than nine persons. The exact number of directors within the minimum and maximum limitations specified in the preceding sentence shall be fixed from time to time by the Board pursuant to a resolution adopted by a majority of the entire Board. The directors shall be divided into three classes, as nearly equal in number as possible, with the term of office of the first class to expire at the 1984 Annual Meeting of Shareholders, the term of office of the second class to expire at the 1985 Annual Meeting of Shareholders and the term of office of the third class to expire at the 1986 Annual Meeting of Shareholders. At each Annual Meeting of Shareholders following such initial classification and election, directors elected to succeed those directors whose terms expire shall be elected for a term of office to expire at the third succeeding Annual Meeting of Shareholders after their election.

Section 2. Newly Created Directorships and Vacancies . Subject to the rights of the holders of any series of Preferred Stock then outstanding, newly created directorships resulting from any increase in the authorized number of directors or any vacancies in the Board resulting from death, resignation, retirement, disqualification, removal from office or other cause shall be filled only by a majority vote of the directors then in office, and directors so chosen shall hold

office for a term expiring at the Annual Meeting of Shareholders at which the term of the class to which they have been elected expires. No decrease in the number of directors constituting the Board shall shorten the term of any incumbent director.

Section 3. Removal . Subject to the rights of the holders of any series of Preferred Stock then outstanding, any director, or the entire Board may be removed from office at any time, but only for cause and only by the affirmative vote of the holders of at least 80% of the voting power of the then outstanding shares of the Voting Stock, voting together as a single class.

Section 4. Amendment, Repeal, etc. Notwithstanding anything contained in this Certificate of Incorporation to the contrary, the affirmative vote of the holders of at least 80% of the voting power of the then outstanding shares of Voting Stock, voting together as a single class, shall be required to alter, amend or repeal this Article VI.

ARTICLE VII.

Actions by Shareholders

Any action required or permitted to be taken by the shareholders of the Corporation must be effected at a duly called annual or special meeting of shareholders of the Corporation and may not be effected by any consent in writing by such shareholders. Special meetings of shareholders of the Corporation may be called only by the Board pursuant to a resolution approved by a majority of the entire Board. Notwithstanding anything contained in this Certificate of Incorporate to the contrary, the affirmative vote of the holders of at least 80% of the voting power of the then outstanding shares of Voting Stock, voting together as a single class, shall be required to alter, amend or repeal this Article VII.

ARTICLE VIII.

Certain Business Combinations

Section 1. Vote Required for Certain Business Combinations .

A. Higher Vote for Certain Business Combinations . Except as otherwise expressly provided in Section 2 of this Article VIII:


	(i) any merger or consolidation of the Corporation or any Subsidiary (as hereinafter defined) with (a) any Interested Shareholder (as hereinafter defined) or (b) any other corporation (whether or not itself an Interested Shareholder) which is, or after such merger or consolidation would be, an Affiliate (as hereinafter defined) of an Interested Shareholder; or


	(ii) any sale, lease, exchange, mortgage, pledge, transfer or other disposition (in one transaction or a series of transactions) to or with any Interested Shareholder or any Affiliate of any Interested Shareholder of any assets of the Corporation or any Subsidiary having an aggregate Fair Market Value (as herein defined) of $1,000,000 or more; or

	(iii) the issuance or transfer by the Corporation of any Subsidiary (in one transaction or a series of transactions) of any securities of the Corporation or any subsidiary to any Interested Shareholder or any Affiliate of any Interested Shareholder in exchange for cash, securities or other property (or a combination thereof) having an aggregate Fair Market Value of $1,000,000 or more; or

	(iv) the adoption of any plan or proposal for the liquidation or dissolution of the Corporation proposed by or on behalf of an Interested Shareholder or any Affiliate of any Interested Shareholder; or

	(v) any reclassification of securities (including any reverse stock split), or recapitalization of the Corporation, or any merger or consolidation of the Corporation with any of its Subsidiaries or any other transaction (whether or not with or into or otherwise involving an Interested Shareholder) which has the effect, directly or indirectly, of increasing the proportionate share of the outstanding shares of any class of equity or convertible securities of the Corporation or any Subsidiary which is directly or indirectly owned by any Interested Shareholder or any affiliate of any Interested Shareholder;

shall require the affirmative vote of the holders of at least 80% of the voting power of the then outstanding shares of Voting Stock, voting together as a single class. Such affirmative vote shall be required notwithstanding the fact that no vote may be required, or that a lesser percentage may be specified, by law or in any agreement with any national securities exchange or otherwise.

B. Definition of “Business Combination” . The term “Business Combination” as used in this Article VIII shall mean any transaction which is referred to in any one or more of clauses (i) through (v) of paragraph A of this Section 1.

Section 2. When Higher Vote is Not Required . The provisions of Section 1 of this Article VIII shall not be applicable to any particular Business Combination, and such Business Combination shall require only such affirmative vote as is required by law and any resolution or resolutions designating the rights, powers and preferences of any outstanding series of Preferred Stock, if all of the conditions specified in either of the following paragraphs A and B are met (it being intended that in the case of a Business Combination not involving any cash or

consideration other than cash to be received by the holders of each class or series of outstanding Voting Stock (other than Institutional Voting Stock, as hereinafter defined), the provisions of such Section 1 shall not be applicable only if the condition specified in the following paragraph A is met)”

A. Approval by Continuing Directors . The Business Combination shall have been approved by a majority of the Continuing Directors (as hereinafter defined).

B. Price and Procedure Requirements . All of the following conditions shall have been met:


	(i) The aggregate amount of the cash and the Fair Market Value (as hereinafter defined) as of the date of the consummation of the Business Combination of consideration other than cash to be received per share by holders of Common Stock in such Business Combination shall be at least equal to the highest of the following:

		(a) (if applicable) the highest per share price (including any brokerage commissions, transfer taxes and soliciting dealers’ fees) paid by the Interested Shareholder for any shares of Common Stock acquired by it (1) within the two-year period immediately prior to the first public announcement of the proposal of the Business Combination (the “Announcement Date”) or (2) in the transaction in which it became an Interested Shareholder, whichever is higher;

		(b) the Fair Market Value per share of Common Stock on the Announcement Date or on the date on which the Interested Shareholder became an Interested Shareholder (such latter date is referred to in this Article VIII as the “Determination Date”), whichever is higher; and

		(c) (if applicable) the price per share equal to the Fair Market Value per share of Common Stock on the Announcement Date or the Determination Date, whichever is higher, multiplied by the ratio of (1) the highest per share price (including any brokerage commissions, transfer taxes and soliciting dealers’ fees) paid by the Interested Shareholder for any shares of Common Stock acquired by it within the two-year period immediately prior to the Announcement Date to (2) the Fair Market Value per share of Common Stock on the first day in such two-year period upon which the Interested Shareholder acquired any shares of Common Stock.

	(ii) The aggregate amount of the cash and the Fair Market Value as of the date of the consummation of the Business Combination of consideration other than cash to be received per share by holders of shares of any other series of outstanding Voting Stock


	(other than Institutional Voting Stock, as hereinafter defined) shall be at least equal to the highest of the following (it being intended that the requirements of this paragraph B (ii) shall be required to be met with respect to every series of outstanding Voting Stock (other than Institutional Voting Stock), whether or not the Interested Shareholder has previously acquired any shares of a particular series of Voting Stock):

		(a) (if applicable) the highest per share price (including any brokerage commissions, transfer taxes and soliciting dealers’ fees) paid by the Interested Shareholder for any shares of such series of Voting Stock acquired by it (1) within the two-year period immediately prior to the Announcement Date or (2) in the transaction in which it became an Interested Shareholder, whichever is higher;

		(b) (if applicable) the highest preferential amount per share to which the holders of shares of such series of Voting Stock are entitled in the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation;

		(c) the Fair Market Value per share of such series of Voting Stock on the Announcement Date or on the Determination Date, whichever is higher; and

		(d) (if applicable) the price per share equal to the Fair Market Value per share of such series of Voting Stock on the Announcement Date or the Determination Date, whichever is higher, multiplied by the ratio of (1) the highest per share price (including any brokerage commissions, transfer taxes and soliciting dealers’ fees) paid by the Interested Shareholder for any shares of such series of Voting Stock acquired by it within the two-year period immediately prior to the Announcement Date to (2) the Fair Market Value per share of such series of Voting Stock on the first day in such two-year period upon which the Interested Shareholder acquired any shares of such series of Voting Stock.

	(iii) The consideration to be received by holders of a particular class (in the case of Common Stock) or series (in the case of Preferred Stock of outstanding Voting Stock shall be in cash or in the same form as the Interested Shareholder has previously paid for shares of such class or series of Voting Stock. If the Interested Shareholder has paid for shares of any class or series of Voting Stock with varying forms of consideration, the form of consideration for such class or series of Voting Stock shall be either cash or the form used to acquire the largest number of shares of such class or series of Voting Stock previously acquired by it.

	(iv) After such Interested Shareholder has become an Interested Shareholder and prior to the consummation of such Business Combinations: (a) except as approved by a


	majority of the Continuing Directors, there shall have been no failure to declare and pay at the regular date therefore any full quarterly dividends (whether or not cumulative) on the outstanding Preferred Stock; (b) there shall have been (1) no reduction in the annual rate of dividends paid on the Common Stock (except as necessary to reflect any subdivision of the Common Stock), except as approved by a majority of the Continuing Directors, and (2) an increase in such annual rate of dividends as necessary to reflect any reclassification (including any reverse stock split), recapitalization, reorganization or any similar transaction which has the effect of reducing the number of outstanding shares of Common Stock, unless the failure so to increase such annual rate is approved by a majority of the Continuing Directors; and (c) such Interested Shareholder shall have not become the beneficial owner of any additional shares of Voting Stock except as part of the transaction which results in such Interested Shareholder becoming an Interested Shareholder.

	(v) After such Interested Shareholder has become an Interested Shareholder, such Interested Shareholder shall not have received the benefit directly or indirectly (except proportionately as a shareholder), of any loans, advances, guarantees, pledges or other financial assistance or any tax credits or other tax advantages provided by the Corporation, whether in anticipation of or in connection with such Business Combination or otherwise.

	(vi) A proxy or information statement describing the proposed business Combination and complying with the requirements of the Securities Exchange Act of 1934 and the rules and regulations thereunder (or any subsequent provisions replacing such Act, rules or regulations) shall be mailed to public shareholders of the Corporation at least 30 days prior to the consummation of such Business Combination (whether or not such proxy or information statement is required to be mailed pursuant to such Act or subsequent provisions).

Section 3. Certain Definitions . For the purposes of this Article VIII:

A. A “Person” shall mean any individual, firm, corporation or other entity.

B. “Interested Shareholder” shall mean any person (other than the Corporation or any Subsidiary) who or which:


	(i) is the beneficial owner, directly or indirectly, of more than 12 ½% of the voting power of the outstanding Voting Stock; or


	(ii) if an Affiliate of the Corporation and at any time within the two-year period immediately prior to the date in question was the beneficial owner, directly or indirectly, of 12 ½% or more of the voting power of the then outstanding Voting Stock; or

	(iii) if an assignee of or has otherwise succeeded to any shares of Voting Stock which were at any time within the two-year period immediately prior to the date in question beneficially owned by any Interested Shareholder if such assignment or succession shall have occurred in the course of a transaction or series of transactions not involving a public offering within the meaning of the Securities Act of 1933.

	C. A person shall be a “beneficial owner” of any Voting Stock:

	(i) which such person or any of its Affiliates or Associates (as hereinafter defined) beneficially owns, directly or indirectly; or

	(ii) which such person or any of its Affiliates or Associates has (a) the right to acquire (whether such right is exercisable immediately or only after the passage of time), pursuant to any agreement, arrangement or understanding or upon the exercise of conversion rights, exchange rights, warrants or options, or otherwise, or (b) the right to vote pursuant to any agreement, arrangement or understanding; or

	(iii) which are beneficially owned, directly or indirectly, by any other person with which such person or any of its Affiliates or Associates has any agreement, arrangement or understanding for the purpose of acquiring holding, voting or disposing of any shares of Voting Stock.

D. For the purpose of determining whether a person is an Interested Shareholder pursuant to paragraph B of this Section 3, the number of shares of Voting Stock deemed to be outstanding shall include shares deemed owned through application of paragraph C of this Section 3 but shall not include any other shares of Voting Stock which may be issuable pursuant to any agreement, arrangement or understanding, or upon exercise of conversion rights, warrants or options, or otherwise.

E. “Affiliate” or “Associate” shall have the respective meanings ascribed to such terms in rule 12b-2 of the General Rules and Regulations under the Securities Exchange Act of 1934, as in effect on March 1, 1983.

F. “Subsidiary” means any corporation of which a majority of any class of equity security is owned, directly or indirectly, by the Corporation; provided, however, that for the purposes of the definition of Interested Shareholder set forth in paragraph B of this Section 3, the term “Subsidiary” shall mean only a corporation of which a majority of each class of equity security is owned directly or indirectly, by the Corporation.

G. “Continuing Director” means any member of the Board who is unaffiliated with the Interested Shareholder and was a member of the Board prior to the time that the Interested Shareholder became an Interested Shareholder, and any successor of a Continuing Director who is unaffiliated with the Interested Shareholder and is recommended to succeed a Continuing Director by a majority of Continuing Directors then on the Board.

H. “Fair Market Value” means: (i) in the case of stock, the highest closing sale price during the 30-day period immediately preceding the date in question of a share of such stock on the Composite Tape for New York Stock Exchange – Listed Stock, or, if such stock is not quoted on the Composite Tape, on the New York Stock exchange, or, if such stock is not listed on such Exchange, on the principal United States securities exchange registered under the Securities Exchange Act of 1934 on which such stock is listed, or, if such stock is not listed on any such exchange, the highest closing bid quotation with respect to a share of such stock during the 30-day period preceding the date in question on the National Association of Securities Dealers, Inc. Automated Quotations System or any system then in use, or if no such quotations are available, the fair market value on the date in question of a share of such stock as determined by the Board in good faith; and (ii) in the case of property other than cash or stock, the fair market value of such property on the date in question as determined by the Board in good faith.

I. “Institutional Voting Stock” shall mean any series of Voting Stock which was issued to and continues to be held solely by one or more insurance companies, pension funds, commercial banks, savings banks or similar financial institutions or institutional investors.

J. In the event of any Business Combination in which the Corporation survives, the phrase “consideration other than cash to be received” as used in Section 2 of this Article VIII shall include the shares of Common Stock and/or the shares of any series of outstanding Voting Stock retained by the holders of such shares.

Section 4. Powers of the Board of Directors . A majority of the directors of the Corporation shall have the power and duty to determine for the purposes of this Article VIII, on the basis of information known to them after reasonable inquiry (A) whether a person is an Interested Shareholder, (B) the number of shares of Voting Stock beneficially owned by any person, (c) whether a person is an Affiliate or Associate of another (D) whether a series of

Voting Stock is Institutional Voting Stock and (E) whether the assets which are the subject of any Business Combination have, or the consideration to be received for the issuance or transfer of securities by the Corporation or any Subsidiary in any Business Combination has, an aggregate Fair Market Value of $1,000,000 or more.

Section 5. No Effect on Fiduciary Obligations of Interested Shareholders . Nothing contained in this Article VIII shall be construed to relieve any Interested Shareholder from any fiduciary obligation imposed by law.

Section 6. Amendment, Repeal, etc. Notwithstanding anything contained in this Certificate of Incorporation to the contrary, the affirmative vote of the holders of at least 80% of the voting power of the then outstanding shares of the Voting Stock, voting together as a single class, shall be required to alter, amend or repeal this Article VIII.

ARTICLE IX.

Limitation of Liability and Indemnification

Section 1. Limitation of Liability . A director of the Corporation shall not be personally liable to the Corporation 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 Corporation 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 article to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of a director of the Corporation shall be eliminated or limited to the fullest extent permitted by the Delaware General Corporation 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 repeal or modification of this paragraph by the shareholders of the Corporation shall not adversely affect any right or protection of a director of the Corporation existing at the time of such repeal or modification.

Section 2. Indemnification and Insurance .

A. Right to Indemnification of Directors, Officers and Employees . Each person 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 proceeding, whether civil, criminal, administrative or investigative (hereinafter a “proceeding”), by reason of the fact that he or she is or was a director, officer or employee of the Corporation or is or was serving at the request of the Corporation 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 proceeding is alleged action in an official capacity as a director, officer or employee or in any other capacity while serving as a director, officer or employee shall be indemnified and held harmless by the Corporation 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 amendment, only to the extent that such amendment permits the Corporation to provide broader indemnification rights than permitted prior thereto), against all expense, liability and loss (including attorneys’ fees, judgments, fines, ERISA excise taxes or penalties 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 indemnitees heirs, executors and administrators; provided, however, that except as provided in paragraph B hereof with respect to proceedings to enforce rights to indemnification, the Corporation shall indemnify any such indemnitee in connection with a proceeding (or part thereof) initiated by such indemnitee only if such proceeding (or part thereof) was authorized by the board of directors of the Corporation. The right to indemnification conferred in this Section shall be a contract right and shall include the right to be paid by the Corporation the expense 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 any other capacity in which service was or is rendered by such indemnitee, including, without limitation, service to an employee benefit plan) shall be made only upon delivery to the Corporation of an undertaking (hereinafter an “undertaking”), by or on behalf of such indemnitee, to repay all amounts so advanced if it shall ultimately be determined 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 Corporation within sixty days after a written claim has been received by the Corporation, except in the case of a claim for an advancement of expenses, in which case the applicable period shall be twenty days, the indemnitee may at any time thereafter bring suit against the Corporation 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 Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the indemnitee shall be entitled to be paid also the expense of prosecuting 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 Corporation to recover an advancement of expenses pursuant to the terms of an undertaking the Corporation shall be entitled to recover such expenses upon a final adjudication that, the

indemnitee has not met the applicable standard of conduct set forth in the Delaware General Corporation Law. Neither the failure of the Corporation (including its board of directors, 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 Corporation Law, nor an actual determination by the Corporation (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 indemnitee 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 hereunder, or by the Corporation 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 Corporation.

C. Non-Exclusivity of Rights . The rights to indemnification 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 Certificate of Incorporation, By-Law, agreement, vote of shareholders or disinterested directors or otherwise. The Corporation is authorized to enter into contracts of indemnification.

D. Insurance . The Corporation may maintain insurance, at its expense, to protect itself and any director, officer, employee or agent of the Corporation or another corporation, partnership, joint venture, trust or other enterprise against any expense, liability or loss, whether or not the Corporation would have the power to indemnify such person against such expense, liability or loss under the Delaware General Corporation Law.

E. Indemnification of Agents of the Corporation . The Corporation 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 Corporation to the fullest extent of the provisions of this Section with respect to the indemnification and advancement of expenses of directors, officers and employees of the Corporation.

ARTICLE X.

Amendment of Certificate of Incorporation

The Corporation reserves the right to amend, alter, change or repeal any provision contained in this Certificate of Incorporation, in the manner now or hereafter prescribed by statute, and all rights conferred on shareholders herein are granted subject to this reservation. Notwithstanding the foregoing the provisions set forth in the last sentence of Article IV, and in

Articles VI, VII and VIII may not be altered, amended or repealed in any respect unless such alteration, amendment or repeal is approved as specified in each thereof.

ARTICLE XI.

Incorporator

The name and mailing address of the incorporator of the Corporation is:

Tami D. Hansen

6500 N. Mineral Drive, Suite 200

Coeur d’Alene, ID 83815-9408

THE UNDERSIGNED, being the incorporator hereinbefore named, for the purpose of forming a corporation to do business both within and without the State of Delaware and in pursuance of the Delaware General Corporation Law, does make and file this Certificate of Incorporation, hereby declaring and certifying that the facts herein stated are true, and accordingly has hereunto set his hand this 7 ^th day of August 2006.


	/s/ Tami D. Hansen
		Tami D. Hansen
		Incorporator

CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS

OF SERIES B CUMULATIVE CONVERTIBLE PREFERRED STOCK

(Par Value $0.25 Per Share)

HECLA HOLDINGS INC.

Pursuant to Section 151 of the General Corporation Law

of the State of Delaware

The undersigned, Philips S. Baker, Jr., President and Chief Executive Officer of HECLA HOLDINGS INC., a corporation organized and existing under the General Corporation Law of the State of Delaware (the “Corporation”), in accordance with the provisions of Section 103 thereof, DOES HEREBY CERTIFY:

That in accordance with the provisions of Section 151 of the General Corporation Law of the State of Delaware and pursuant to Article IV of the Certificate of Incorporation of the Corporation, the Board of Directors of the Corporation is authorized to issue from time to time shares of Preferred Stock, par value $0.25 per share, in one or more series and has authorized the creation of the series of Preferred Stock hereinafter provided for and has established the voting rights thereof and authorized, in accordance with Section 141(c) of the General Corporation Law of the State of Delaware and Article III, Section 7 of the By-Laws, an Executive Committee of the Board of Directors to adopt, and said Executive Committee has adopted, the following resolution (which includes the voting powers of such series as authorized by the Board of Directors) creating a series of 2,300,000 shares of Preferred Stock, par value $0.25 per share, designated as Series B Cumulative Convertible Preferred Stock, as follows:

RESOLVED that pursuant to the authority expressly vested in the Board of Directors of this Corporation in accordance with the provisions of its Certificate of Incorporation, a series of Preferred Stock of the Corporation, par value $0.25 per share, be and it hereby is, created, and that the designation and amount thereof and the voting powers preferences and relative, participating, operational and other special rights of the shares of such series, and the qualifications, limitation or restrictions thereof are as follows:

Section 1. Number of Shares and Designation . Two million three hundred thousand (2,300,000) shares of the Preferred Stock, par value $0.25 per share, of the Corporation are

hereby constituted as a series of the Preferred Stock designated as Series B Cumulative Convertible Preferred Stock (the “Convertible Preferred Stock”).

Section 2. Definitions . For purposes of the Convertible Preferred Stock, the following terms shall have the meanings indicated:

“Board of Directors” shall mean the board of directors of the Corporation or any committee authorized by such board of directors to perform any of its responsibilities with respect to the Convertible Preferred Stock.

“Business Day” shall mean any day other than a Saturday, Sunday or a day on which state or federally chartered banking institutions in New York, New York are not required to be open.

“Common Stock” shall mean the Common Stock of the Corporation, par value $0.25 per share.

“Constituent Person” shall have the meaning set forth in paragraph (E) of Section 7 hereof.

“Conversion Price” shall mean the conversion price per share of Common tock for which the Convertible Preferred Stock is convertible; as such Conversion Price may be adjusted pursuant to Section 7 hereof. The initial Conversion Price will be $15.55.

“Current Market Price” of publicly traded shares of Common Stock or any other class of capital stock or other security of the Corporation or any other issuer for any day shall mean the last reported sales price, regular way on such day, or, if no sale takes place on such day, the average of the reported closing bid and asked prices on such day, regular way, in either case as reported on the New York Stock Exchange Composite tape or, if such security is not listed or admitted for trading on the New York Stock Exchange (“NYSE”), on the principal national securities exchange on which such security is listed or admitted for trading or, if not listed or admitted for trading on any national securities exchange, on the National Market System of the National Association of Securities Dealers, Inc. Automated Quotations System (“NASDAQ”) or, if such security is not quoted on such National Market System, the average of the closing bid and asked prices on such day in the over-the-counter market as reported by NASDAQ or, if bid and asked prices for such security on such day shall not have been reported through NASDAQ, the average of the bid and asked prices on such day as furnished by any NYSE member firm regularly making a market in such security selected for such purpose by the Board of directors.

“Dividend Payment Date” shall mean October 1, January 1, April 1 and July 1 in each year, commencing on October 1, 1993 ; provided , however , that if any Dividend Payment Date

falls on any day other than a Business Day, the dividend payment due on such Dividend Payment Date shall be paid on the Business Day immediately following such Dividend Payment Date.

“Dividend Periods” shall mean quarterly dividend periods commencing on October 1, January 1, April 1 and July 1 of each year and ending on and including the day preceding the first day of the next succeeding Dividend Period (other than the initial Dividend Period, which shall commence on the Issue Date and end on and include October 1, 1993 ).

“Fair Market Value” shall mean the average of the daily Current Market Prices of a share of Common Stock during the five (5) consecutive Trading Days selected by the Corporation commencing not more than 20 Trading Days before, and ending not later than, the earlier of the day in question and the day before the “ex” date with respect to the issuance or distribution requiring such computation. The term “‘ex’ date”, when used with respect to any issuance or distribution, means the first day on which the Common Stock trades regular way, without the right to receive such issuance or distribution, on the exchange or in the market, as the case may be, used to determine that day’s Current Market Price.

“Issue Date” shall mean the first date on which shares of Convertible Preferred Stock are issued and sold.

“Junior Stock” shall mean the Common Stock, the Series A Preferred Shares and any other class or series of stock of the Corporation over which the Convertible Preferred Stock has preference or priority in the payment of dividends or in the distribution of assets on any liquidation, dissolution or winding up of the Corporation.

“Liquidation Preference” shall have the meaning set forth in paragraph (A) of Section 4 hereof.

“LYONS” shall mean the Corporation’s outstanding Liquid Yield Option Notes due 2004.

“non-electing share” shall have the meaning set forth in paragraph (E) of Section 7 hereof.

“Parity Stock” shall mean any other class or series of stock of the Corporation which ranks on a parity with the Convertible Preferred Stock as to payment of dividends or in the distribution of the assets on any liquidation, dissolution or winding up of the Corporation.

“Person” shall mean any individual, firm, partnership, corporation or other entity, and shall include any successor (by merger or otherwise) of such entity.

“Preferred Director”“ shall mean a director elected pursuant to paragraph (C) of Section 9 hereof.

“Redemption Date” shall have the meaning set forth in paragraph (C) of Section 5 hereof.

“Rights” shall mean the rights of the Corporation which are issuable under the Corporation’s Rights Agreement dated as of May 19, 1986, a amended from time to time, or rights to purchase any capital stock of the Corporation under any successor shareholder rights plan or plans adopted in replacement of the Corporation’s Rights Agreement.

“Securities” shall have the meaning set forth in paragraph (D) (iii) of Section 7 hereof.

“Series A Preferred Shares” shall mean the preferred stock of the Corporation, par value $0.25 per share, designated Series A Junior Participating Preferred Shares in the Certificate of Incorporation of the Corporation.

“set apart for payment” shall be deemed to include, without any action other than the following, the recording by the Corporation in its accounting ledgers of any accounting or bookkeeping entry which indicates, pursuant to a declaration of dividends or other distribution by the Board of Directors, the allocation of funds to be so paid on any series or class of capital stock of the Corporation; provided , however , that if any funds for any class or series of Junior Stock or any parity stock are placed in a separate account of the Corporation or delivered to a disbursing, paying or other similar agent, then during the period that any such funds remain in such account or with such agent, “set apart for payment” with respect to the Convertible Preferred Stock shall mean placing such funds in a separate account or delivering such funds to a disbursing, paying or other similar agent.

“Stated Value” shall have the meaning set forth in paragraph (A) of Section 4 hereof.

“Trading Day” shall mean any day on which the securities in question are traded on the NYSE, or if such securities are not listed or admitted for trading on the NYSE, on the principal national securities exchange on which such securities are listed or admitted, or if not listed or admitted for trading in any national securities exchange, on the National Market System of the NASDAQ, or if such securities are not quoted on such National Market System, in the applicable securities market in which the securities are traded.

“Transaction” shall have the meaning set forth in paragraph (E) of Section 7 hereof.

“Transfer Agent” shall mean American Stock Transfer & Trust Company or such other agent or agents of the Corporation as may be designated by the Board of Directors as the transfer agent for the Convertible Preferred Stock.

Section 3. Dividends .

(A) The holders of shares of the Convertible Preferred Stock shall be entitled to receive, when, as and if declared by the Board of Directors out of assets legally available for that purpose, dividends payable in cash at the rate per annum of $3.50 per share of Convertible Preferred Stock. Such dividends shall be cumulative from the Issue Date, whether or not in any Dividend Period or Dividend Periods there shall be assets of the corporation legally available for the payment of such dividends, and shall be payable quarterly, when, as and if declared by the Board of Directors, in arrears on Dividend Payment Dates, commencing on October 1, 1993. Each such dividend shall be payable in arrears to the holders of record and shares of the Convertible Preferred Stock, as they appear on the stock records of the Corporation at the close of business on such record dates, which shall not be more than 60 days nor less than 10 days preceding the payment dates thereof, as shall be fixed by the Board of Directors. Accrued and unpaid dividends for any past Dividend Periods may be declared and paid at any time, without reference to any Dividend Payment Date, to holders of record on such date, not exceeding 45 days preceding the payment date thereof, as may be fixed by the Board of Directors.

(B) The amount of dividends payable for each full Dividend Period for the Convertible Preferred Stock shall be computed by dividing the annual dividend rate by four. The amount of dividends payable for the initial dividend Period, or any other period shorter or longer than a full dividend Period, on the Convertible Preferred Stock shall be computed on the basis of twelve 30-day months and a 360-day year. Holders of shares of Convertible Preferred Stock shall not be entitled to any dividends, whether payable in cash, property or stock, in excess of cumulative dividends, as herein provided, on the Convertible Preferred Stock. No interest, or sum of money in lieu of interest, shall be payable in respect of any dividend payment or payments on the Convertible Preferred Stock that may be in arrears.

(C) So long as any shares of the Convertible Preferred Stock are outstanding, no dividends, except as described in the next succeeding sentence, shall be declared or paid or set apart for payment on any Parity Stock for any period unless full cumulative dividends have been or contemporaneously are declared and paid or declared and a sum sufficient for the payment thereof set apart for such payment on the Convertible Preferred Stock for all Dividend Periods terminating on or prior to the date of payment of the dividend on such Parity Stock. When dividends are not paid in full or a sum sufficient for such payment is not set apart, as aforesaid, all dividends declared upon shares of the Convertible Preferred Stock and all dividends declared upon any parity Stock shall be declared ratably in proportion to the respective amounts of dividends accumulated and unpaid on the Convertible Preferred Stock and accumulated and unpaid on such Parity Stock.

(D) So long as any shares of the Convertible Preferred Stock are outstanding, no dividends (other than (i) the Rights and (ii) dividends or distributions paid in shares of, or options, warrants or rights to subscribe for or purchase shares of, Junior Stock) shall be declared or paid or set apart for payment or other distribution declared or made upon Junior Stock, nor shall any Junior Stock or any Parity Stock be redeemed, purchased or otherwise acquired (other than a redemption, purchase or other acquisition of shares of Common Stock made for purposes of an employee incentive or benefit plan of the Corporation or any subsidiary) for any consideration (or any moneys be paid to or made available for a sinking fund for the redemption of any shares of any such stock) by the Corporation, directly or indirectly (except by conversion into or exchange for Junior Stock), unless in each case all accrued and unpaid dividends on all outstanding shares of the Convertible Preferred Stock and any Parity Stock shall have been paid or funds have been set apart for payment of such dividends for all past Dividend Periods with respect to the Convertible Preferred Stock and all past Dividend Periods with respect to such Parity Stock.

Section 4. Payments upon Liquidation .

(A) In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation, before any payment or distribution of the assets of the Corporation (whether capital or surplus) shall be made to or set apart for the holders of Junior Stock, the holders of the shares of Convertible Preferred Stock shall be entitled to receive fifty dollars ($50) per share of Convertible Preferred Stock (the “Stated Value”) plus an amount per share of Convertible Preferred Stock equal to all dividends (whether) or not earned or declared) accrued and unpaid thereon to the date of final distribution to such holders (the “Liquidation Preference”); but such holders shall not be entitled to any further payment. If, upon any liquidation, dissolution or winding up of the Corporation, the assets of the Corporation, or proceeds thereof, distributable among the holders of the shares of Convertible Preferred Stock shall be insufficient to pay in full and Liquidation Preference and the Liquidation Preference on all other shares of any parity Stock, then such assets, or the proceeds thereof, shall be distributed among the holders of shares of Convertible Preferred Stock and any such other Parity Stock ratably in accordance with the respective amounts that would be payable on such shares of Convertible Preferred Stock and any such other stock if all amounts payable thereon were paid in full. For the purposes of this Section 4, (i) a consolidation, merger or business combination of the corporation with or into one or more corporations, or (ii) a sale or transfer of all or substantially all of the Corporation’s assets, shall not be deemed to be a liquidation, dissolution or winding up, voluntary or involuntary, of the Corporation.

(B) Subject to the rights of the holders of Parity Stock, after payment shall have been made to the holders of the Convertible Preferred Stock, and to the fullest extent provided in this Section 4, any other series or class or classes of Junior Stock shall, subject to the respective terms and provisions (if any) applying thereto, be entitled to receive any and all assets remaining to be paid or distributed, and the holders of the Convertible Preferred Stock shall not be entitled to share therein.

Section 5. Redemption at the Option of the Corporation .

(A) The shares of Convertible Preferred Stock shall be redeemable at the option of the Corporation, in whole, or, from time to time, in part, out of funds legally available for such purpose, at any time or after July 1, 1996, at the following redemption prices per share, if redeemed during the twelve-month period beginning July 1 of the year indicated below, plus, in each case, an amount equal to all dividends accrued and unpaid on the shares of Convertible Preferred Stock up to the date fixed for the redemption, upon giving notice as provided herein below:


Year	Redemption Price Per Share

1996	$	52.45
1997		52.10
1998		51.75
1999		51.40
2000		51.05
2001		50.70
2002		50.35
2003 and thereafter		50.00

(B) If fewer than all of the outstanding shares of Convertible Preferred Stock are to be redeemed, the number of shares to be redeemed shall be determined by the Board of Directors and the shares to be redeemed shall be determined pro rata or by lot or in such other manner and subject to such regulations as the Board of Directors in its sole discretion shall prescribe.

(C) At least 30 days, but not more than 60 days, prior to the date fixed for the redemption of shares of Convertible Preferred Stock, a written notice shall be mailed in postage prepaid envelope to each holder of record of the shares of Convertible Preferred Stock to be redeemed, addressed to such holder at his or her post office address as shown on the records of the Corporation, notifying such holder of the election of the Corporation to redeem such shares, stating the date fixed for redemption thereof (the “Redemption Date”), and calling upon such holder to surrender to the Corporation, on the Redemption Date at the place designated in such notice, his or her certificate or certificates representing the number of shares specified in such notice of redemption. On or after the Redemption Date, such holder of shares of Convertible Preferred Stock to be redeemed shall present and surrender his or her certificate or certificates for such shares to the Corporation at the place designated in such notice and thereupon the

redemption price of such shares shall be paid to the order of the person whose name appears on such certificate or certificates as the owner thereof and such surrendered certificate shall be cancelled. In case less than all the shares represented by any such certificates are redeemed, a new certificate shall be issued representing the unredeemed shares.

From and after the Redemption Date (unless the Corporation defaults in payment of the redemption price), all dividends on the shares of Convertible Preferred Stock designated for redemption in such notice shall cease to accrue, and all rights of the holders thereof as stockholders of the Corporation, except the right to receive the redemption price of such shares (including an amount equal to all accrued and unpaid dividends up to the Redemption Date) upon the surrender of certificates representing the same, shall cease and terminate and such shares shall not thereafter be transferred (except with the consent of the corporation) on the books of the corporation, and such shares shall not be deemed to be outstanding for any purpose whatsoever; provided however , in the case of the Redemption Date falling after a dividend payment record date and prior to the related Dividend Payment Date, the holders of Convertible Preferred Stock at the close of business on such record date will be entitled to receive the dividend payable on such shares on the corresponding Dividend Payment Date, notwithstanding the redemption of such shares following such dividend payment record date.

At its election, the Corporation, prior to the Redemption Date, may deposit the redemption price (including an amount equal to all accrued and unpaid dividends up to the Redemption Date) of the shares of Convertible Preferred Stock so called for redemption in trust for the holders thereof with a bank or trust company having a capital surplus and undivided profits aggregating not less than $50,000,000) in the borough of Manhattan, city and state of New York, or in any other city in which the corporation at the time shall maintain a transfer agency with respect to such shares, in which case the aforesaid notice to holders of shares of Convertible Preferred Stock to be redeemed shall (i) state the date of such deposit, (ii) shall specify the office of such bank or trust company as the place of payment of the redemption price and (iii) shall call upon such holders to surrender the certificates representing such shares at such place on or after the date fixed in such redemption notice (which shall not be later than the Redemption Date) against payment of the redemption price (including an amount equal to all accrued and unpaid dividends up to the Redemption Date). Any interest accrued on such funds shall be paid to the corporation from time to time. Any moneys so deposited which shall remain unclaimed by the holders of such shares of Convertible Preferred Stock at the end of two years after the Redemption Date shall be returned by such bank or trust company to the Corporation.

If a notice of redemption has been given pursuant to this section 5 and any holder of shares of Convertible Preferred Stock shall, prior to the close of business on the day preceding the Redemption Date, given written notice to the corporation pursuant to Section 7 below of the conversion of any or all of the shares to be redeemed held by such holder (accompanied by a certificate or certificates for such shares, duly endorsed or assigned to the Corporation, and any

necessary transfer tax payment, as required by Section 7 below), then such redemption shall not become effective as to such shares to be converted, such conversion shall become effective as provided in Section 7 below, and any moneys set aside by the Corporation for the redemption of such shares of converted Convertible Preferred Stock shall revert to the general funds of the Corporation.

Section 6. Shares to Be Retired . All shares of Convertible Preferred Stock which shall have been issued and reacquired in any manner by the Corporation (excluding, until the corporation elects to retire them, shares which are held as treasury shares) shall be restored to the status of authorized but unissued shares of Preferred Stock, without designation as to series.

Section 7. Conversion . Holders of shares of Convertible Preferred Stock shall have the right to convert all or a portion of such shares into shares of Common Stock, as follows:

(A) Subject to and upon compliance with the provisions of this Section 7, a holder of shares of Convertible Preferred Stock shall have the right, at his or her option, at any time after the Issue Date, to convert such shares into the number of fully paid and nonassessable shares of Common Stock obtained by dividing the aggregate Stated Value of such shares by the Conversion Price (as in effect on the date provided for in the last paragraph of paragraph (B) of this Section 7) by surrendering such shares to be converted, such surrender to be made in the manner provided in paragraph (B) of this Section 7; provided , however , that the right to convert shares called for redemption pursuant to Section 5 shall terminate at the close of business on the date preceding the Redemption Date, unless the corporation shall default in making payment of the cash payable upon such redemption under Section 5 hereof. Certificates will be issued for the remaining shares of Convertible Preferred Stock in any case in which fewer than all of the shares of Convertible Preferred Stock represented by a certificate are converted.

(B) In order to exercise the conversion right, the holder of shares of Convertible Preferred Stock to be converted shall surrender the certificate or certificates representing such shares, duly endorsed or assigned to the Corporation or in blank, at the office of the Transfer Agent in the Borough of Manhattan, City of New York, accompanied by written notice to the Corporation that the holder thereof elects to convert Convertible Preferred Stock. Unless the shares issuable on conversion are to be issued in the same name as the name in which such share of Convertible Preferred Stock is registered, each share surrendered for conversion shall be accompanied by instruments of transfer, in the form satisfactory to the Corporation, duly executed by the holder or such holder’s duly authorized attorney and an amount sufficient to pay any transfer or similar tax (or evidence reasonably satisfactory to the Corporation demonstrating that such taxes have been paid).

Holders of shares of Convertible Preferred Stock at the close of business on a dividend payment record date shall be entitled to receive the dividend payable on such shares on the corresponding Dividend Payment Date notwithstanding the conversion thereof following such dividend payment record date and prior to such Dividend Payment Date. However, shares of Convertible Preferred Stock surrendered for conversion during the period between the close of business one any dividend payment record date and the opening of business on the corresponding Dividend Payment Date (except shares converted after the issuance of a notice of redemption with respect to a Redemption Date during such period, which shall be entitled to the benefit of such dividend on the Dividend Payment Date) must be accompanied by payment of an amount equal to the dividend payable on such shares on such Dividend Payment Date. A holder of shares of Convertible Preferred Stock on a dividend payment record date who (or whose transferee) tenders any such shares for conversion into shares of Common Stock on such Dividend Payment Date will receive the dividend payable by the Corporation on such shares of Convertible Preferred Stock on such date, and the converting holder need not include payment of the amount of such dividend upon surrender of shares of Convertible Preferred Stock for conversion. Except as provided above, the Corporation shall make no payment or allowance for unpaid dividends, whether or not in arrears, on converted shares or for dividends on the shares of Common Stock issued upon such conversion.

As promptly as practicable after the surrender of certificates for shares of Convertible Preferred Stock as aforesaid, the Corporation shall issue and deliver at such office to such holder, or on his or her written order, a certificate or certificates for the number of full shares of Common Stock issuable upon the conversion of such shares in accordance with the provisions of this Section 7, and any fractional interest in respect of a share of Common Stock arising upon such conversion shall be settled as provided in paragraph (C) of this Section 7.

Each conversion shall be deemed to have been effected immediately prior to the close of business on the date on which the certificates for shares of Convertible Preferred Stock shall have been surrendered and such notice (and if applicable payment of an amount equal to the dividend payable on such shares) received by the Corporation as aforesaid, and the person or persons in whose name or names any certificate or certificates for shares of Common Stock shall be issuable upon such conversion shall be deemed to have become the holder or holders of record of the shares represented thereby at such time on such date and such conversion shall be at the Conversion Price in effect at such time on such date, unless the stock transfer books of the Corporation shall be closed on that date, in which event such person or persons shall be deemed to have become such holder or holders of record at the close of business on the next succeeding day on which such stock transfer books are open, but such conversion shall be at the Conversion Price in effect on the date upon which such shares shall have been surrendered and such notice received by the Corporation.

(C) No fractional shares or scrip representing fractions of shares of Common Stock shall be issued upon conversion of the Convertible Preferred Stock. Instead of any fractional interest in a share of Common Stock that would otherwise be deliverable upon the conversion of a share of Convertible Preferred Stock, the Corporation shall pay to the holder of such share an amount in cash based upon the Current Market Price of Common Stock on the Trading Day immediately preceding the date of conversion. If more than one share shall be surrendered for conversion at one time by the same holder, the number of full shares of Common Stock issuable upon conversion thereof shall be computed on the basis of the aggregate number of shares of Convertible Preferred Stock so surrendered.

(D) The Conversion Price shall be adjusted from time to time as follows:


	(i) If the Corporation shall after the Issue Date (A) pay a dividend or make a distribution on its capital stock in shares of its Common Stock, (B) subdivide its outstanding Common Stock into a greater number of shares, (C) combine its outstanding Common Stock into a smaller number of shares or (D) issue any shares of capital stock by reclassification of its Common Stock, the Conversion Price in effect at the opening of business on the day next following the date fixed for the determination of stockholders entitled to receive such dividend or distribution or at the opening of business on the day next following the day on which such subdivision, combination or reclassification becomes effective, as the case may be, shall be adjusted so that the holder of any share of Convertible Preferred Stock thereafter surrendered for conversion shall be entitled to receive the number of shares of Common Stock that such holder would have owned or have been entitled to receive after the happening of any of the events described above had such share been converted immediately prior to the record date in the case of a dividend or distribution or the effective date in the case of a subdivision, combination or reclassification. An adjustment made pursuant to this subparagraph (i) shall become effective immediately after the opening of business on the day next following the record date (except as provided in paragraph (H) below) in the case of a dividend or distribution and shall become effective on the day next following the effective date in the case of a subdivision, combination or reclassification.

	(ii) If the Corporation shall issue after the Issue Date rights or warrants (in each case, other than the Rights) to all holders of Common Stock entitling them (for a period expiring within 45 days after the record date mentioned below) to subscribe for or purchase Common Stock or Securities which are convertible into Common Stock at a price per share less than the Fair Market Value per share of Common Stock on the record date for the determination of stockholders entitled to receive such rights or warrants, then the Conversion Price in effect at the opening of business on the day next following such record date shall be adjusted to equal the price determined by multiplying (I) the


	Conversion Price in effect immediately prior to the opening of business on the day next following the date fixed for such determination by (II) a fraction, the numerator of which shall be the sum of (A) the number of shares of Common Stock outstanding on the close of business on the date fixed for such determination and (B) the number of shares that the aggregate proceeds to the Corporation from the exercise of such rights or warrants for Common Stock would purchase at such Fair Market Value, and the denominator of which shall be the sum of (A) the number of shares of Common Stock outstanding on the close of business on the date fixed for such determination and (B) the number of additional shares of Common Stock offered for subscription or purchase pursuant to such rights or warrants Such adjustment shall become effective immediately after the opening of business on the day next following such record date (except as provided in paragraph (H) below). In determining whether any rights or warrants entitle the holders of Common Stock to subscribe for or purchase shares of Common Stock at less than such Fair Market Value, there shall be taken into account any consideration received by the Corporation upon issuance and upon exercise of such rights or warrants, the value of such consideration, if other than cash, to be determined by valuation of the Board of Directors.

	(iii) If the Corporation shall distribute to all holders of its Common Stock any shares of capital stock of the Corporation (other than Common Stock) or evidence of its indebtedness or assets (excluding any cash dividends or distributions paid from profits or surplus of the Corporation or referred to in subparagraph (i) above or any stock, securities or other property received pursuant to paragraph 7(E) below) or rights or warrants (in each case, other than the Rights) to subscribe for or purchase any of its securities (excluding those rights and warrants issued to all holders of Common Stock entitling them for a period expiring within 45 days after the record date referred to in subparagraph (ii) above to subscribe for or purchase Common Stock, which rights and warrants are referred to in and treated under subparagraph (ii) above) (any of the foregoing being hereinafter in this subparagraph (iii) called the “Securities”), then in each such case the Conversion Price shall be adjusted so that it shall equal the price determined by multiplying (I) the Conversion Price in effect immediately prior to the close of business on the date fixed for the determination of stockholders entitled to receive such distribution by (II) a fraction, the numerator of which shall be the Fair Market Value per share of the Common Stock on the record date mentioned below less the then Fair Market Value (as determined by the Board of Directors, whose determination shall be conclusive) of the portion of the capital stock or assets or evidences of indebtedness so distributed or of such rights or warrants applicable to one share of Common Stock, and the denominator of which shall be the Fair Market Value per share of the Common Stock on the record date mentioned below. Such adjustment shall become effective immediately at the opening of business on the Business Day next following (except as provided in paragraph (H) below) the record date for the determination of shareholders entitled to receive such distribution. For the purposes of


	this subparagraph (iii), the distribution of a Security, which is distributed not only to the holders of the Common Stock on the date fixed for the determination of stockholders entitled to such distribution of such Security, but also is distributed to the holders of the Convertible Preferred Stock (assuming for purposes of this subparagraph (iii) that such shares of Convertible Preferred Stock have been converted) or reserved for distribution with each share of Common Stock delivered to a person converting a share of Convertible Preferred Stock after such determination date, shall not require an adjustment of the Conversion Price pursuant to this subparagraph (iii); provided that on the date, if any, on which a Person converting a share of Convertible Preferred Stock would no longer be entitled to receive such Security with a share of Common Stock (other than as a result of the termination of all such Securities), a distribution of such Securities shall be deemed to have occurred and the Conversion Price shall be adjusted as provided in this subparagraph (iii) (and such day shall be deemed to be “the date fixed for the determination of the stockholders entitled to receive such distribution” and “the record date” within the meaning of the two preceding sentences).

	(iv) No adjustment in the Conversion Price shall be required unless such adjustment would require a cumulative increase or decrease of at least 1% in such price; provided , however , that any adjustments that by reason of this subparagraph (iv) are not required to be made shall be carried forward and taken into account in any subsequent adjustment until made; and provided , further , that any adjustment shall be required and made in accordance with the provisions of this Section 7 (other than this subparagraph (iv)) not later than such time as may be required in order to preserve the tax-free nature of a distribution to the holders of shares of Common Stock. Notwithstanding any other provisions of this Section 7, the Corporation shall not be required to make any adjustment of the Conversion Price for the issuance of any shares of Common Stock pursuant to any plan providing for the reinvestment of dividends in securities of the Corporation. All calculations under this Section 7 shall be made to the nearest cent (with $.005 being rounded upward) or to the nearest 1/10 of a share (with .05 of a share being rounded upward), as the case may be. Anything in this paragraph (D) to the contrary notwithstanding, the Corporation shall be entitled, to the extent permitted by law, to make such reductions in the Conversion Price, in addition to those required by this paragraph (D), as it in its discretion shall determine to be advisable in order that any stock dividends, subdivision of shares, reclassification or combination of shares, distribution of rights or warrants to purchase stock or securities, or a distribution of other assets (other than cash dividends) hereafter made by the Corporation to its stockholders shall not be taxable.

	(v) Anything in this paragraph (D) to the contrary not withstanding, no adjustment in the Conversion Price shall be required upon the issuance of any shares of Common Stock to holders of the LYONs, upon the conversion or redemption thereof, if any, in the case of any adjustment in the conversion rate for the LYONs, or in the case of any exchange of shares of Common Stock for LYONs.

(E) If the Corporation shall be a party to any transaction (including without limitation a merger, consolidation, sale of all or substantially all of the Corporation’s assets or recapitalization of the Common Stock and excluding any transaction as to which subparagraph (D) (i) of this Section 7 applies) (each of the foregoing being referred to herein as a “Transaction”), in each case as a result of which shares of Common Stock shall be converted into the right to receive stock, securities or other property (including cash or any combination thereof), each share of Convertible Preferred Stock which is not converted into the right to receive stock, securities or other property in connection with such Transaction shall thereafter be convertible into the kind and amount of shares of stock, securities and other property (including cash or any combination thereof) receivable upon the consummation of such Transaction by a holder of that number of shares or fraction thereof of Common Stock into which one share of Convertible Preferred Stock was convertible immediately prior to such Transaction, assuming such holder of Common Stock (i) is not a Person with which the Corporation consolidated or into which the Corporation merged or which merged into the Corporation or to which such sale or transfer was made, as the case may be (“Constituent Person”), or an affiliate of a Constituent Person and (ii) failed to exercise his or her rights of election, if any, as to the kind or amount of stock, securities and other property (including cash) receivable upon such Transaction (provided that if the kind or amount of stock, securities and other property (including cash) receivable upon such Transaction is not the same for each share of Common Stock of the Corporation held immediately prior to such Transaction by other than a Constituent Person or an affiliate thereof and in respect of which such rights of election shall not have been exercised (“non-electing share”), than for the purpose of this paragraph (E) the kind and amount of stock, securities and other property (including cash) receivable upon such Transaction by each non-electing share shall be deemed to be the kind and amount so receivable per share by the plurality of the non-electing shares). The Corporation shall not be a party to any Transaction unless the terms of such Transaction are consistent with the provisions of this paragraph (E) and it shall not consent or agree to the occurrence of any Transaction until the Corporation has entered into an agreement with the successor or purchasing entity, as the case may be, for the benefit of the holders of the Convertible Preferred Stock that will contain provisions enabling the holders of the Convertible Preferred Stock that remains outstanding after such Transaction to convert into the consideration received by holders of Common Stock at the Conversion Price in effect immediately prior to such Transaction. The provisions of this paragraph (E) shall similarly apply to successive Transactions.

(F) If:


	(i) the Corporation shall declare a dividend (or any other distribution) on the Common Stock (other than in cash out of profits or surplus and other than the Rights); or

	(ii) the Corporation shall authorize the granting to the holders of the Common Stock of rights or warrants (other than the Rights) to subscribe for or purchase any shares of any class or any other rights or warrants (other than the Rights); or

	(iii) there shall be any reclassification of the Common Stock (other than an event to which subparagraph (D) (i) of this Section 7 applies) or any consolidation or merger to which the Corporation is a party and for which approval of any stockholders of the Corporation is required, or the sale or transfer of all or substantially all of the assets of the Corporation as an entirety; or

	(iv) there shall occur the voluntary or involuntary liquidation, dissolution or winding up of the Corporation,

then the Corporation shall cause to be filed with the Transfer Agent and shall cause to be mailed to the holders of shares of the Convertible Preferred Stock at their address as shown on the stock records of the Corporation, as promptly as possible, but at least 15 days prior to the applicable date hereinafter specified, a notice stating (A) the date on which a record is to be taken for the purpose of such dividend, distribution or rights or warrants, or, if a record is not to be taken, the date on which the holders of Common Stock of record to be entitled to such dividend, distribution or rights or warrants are to be determined or (B) the date on which such reclassification, consolidation, merger, sale, transfer, liquidation, dissolution or winding p is expected to become effective, and the date on which it is expected that holders of Common Stock of record shall be entitled to exchange their shares of Common Stock for securities or other property, if any, deliverable upon such reclassification, consolidation, merger, sale, transfer, liquidation, dissolution or winding up. Failure to give or receive such notice or any defect therein shall not affect the legality or validity of the proceedings described in this Section 7.

(G) Whenever the Conversion Price is adjusted as herein provided, the Corporation shall promptly file with the Transfer Agent an officer’s certificate setting forth the Conversion Price after such adjustment and setting forth a brief statement of the facts requiring such adjustment which certificate shall be prima facie evidence of the correctness of such adjustment. Promptly after delivery of such certificate, the Corporation shall prepare a notice of

such adjustment of the Conversion Price setting forth the adjusted Conversion Price and the effective date of such adjustment and shall mail such notice of such adjustment of the Conversion Price to the holder of each share of Convertible Preferred Stock at such holder’s last address as shown on the stock records of the Corporation.

(H) In any case in which paragraph (D) of this Section 7 provides that an adjustment shall become effective on the day next following a record date for an event, the Corporation may defer until the occurrence of such event (A) issuing to the holder of any share of Convertible Preferred Stock converted after such record date and before the occurrence of such event the additional shares of Common Stock issuable upon such conversion by reason of the adjustment required by such event over and above the Common Stock issuable upon such conversion before giving effect to such adjustment and (B) paying to such holder any amount in cash in lieu of any fraction pursuant to paragraph (C) of this Section 7.

(I) For purposes of this Section 7, the number of shares of Common Stock at any time outstanding shall not include any shares of Common Stock then owned or held by or for the account of the Corporation. The Corporation shall not pay a dividend or make any distribution on shares of Common Stock held in the treasury of the Corporation.

(J) There shall be no adjustment of the Conversion Price in case of the issuance of any stock of the Corporation in a reorganization, acquisition or other similar transaction except as specifically set forth in this Section 7. If any action or transaction would require adjustment of the Conversion Price pursuant to more than one paragraph of this Section 7, only one adjustment shall be made and such adjustment shall be the amount of adjustment that has the highest absolute value to the holders of Convertible Preferred Stock as determined by the Board of Directors.

(K) If the Corporation shall take any action affecting the Common Stock, other then action described in this Section 7, that in the opinion of the Board of Directors would materially adversely affect the conversion rights of the holders of the shares of Convertible Preferred Stock, the Conversion Price for the Convertible Preferred Stock may be adjusted, to the extent permitted by law, in such manner, if any, and at such time, as the Board of Directors may determine to be equitable in the circumstances.

(L) The Corporation covenants that it will at all times reserve and keep available, free from preemptive rights, out of the aggregate of its authorized but unissued shares of Common Stock or its issued shares of Common Stock held in its treasury, or both, for the purpose of effecting conversion of the Convertible Preferred Stock, the full number of shares of Common Stock deliverable upon the conversion of all outstanding shares of Convertible Preferred Stock not theretofore converted. For purposes of this paragraph (L), the number of shares of Common Stock that shall be deliverable upon the conversion of all outstanding shares

of Convertible Preferred Stock shall be computed as if at the time of computation all such outstanding shares were held by a single holder.

The Corporation covenants that any shares of Common Stock issued upon conversion of the Convertible Preferred Stock shall be validly issued, fully paid and non-assessable. Before taking any action that would cause an adjustment reducing the Conversion Price below the then-par value of the shares of Common Stock deliverable upon conversion of the Convertible Preferred Stock, the Corporation will take any corporate action that in the opinion of its counsel, may be necessary in order that the Corporation may validly and legally issue fully paid and non-assessable shares of Common Stock at such adjusted Conversion Price.

The Corporation shall endeavor to list the shares of Common Stock required to be delivered upon conversion of the Convertible Preferred Stock, prior to such delivery, upon each national securities exchange, if any, upon which the outstanding Common Stock is listed at the time of such delivery.

Prior to the delivery of any securities that the Corporation shall be obligated to deliver upon conversion of the Convertible Preferred Stock, the Corporation shall endeavor to comply with all federal and state laws and regulations thereunder requiring the registration of such securities with, or any approval of or consent to the delivery thereof by, any governmental authority.

(M) The Corporation will pay any and all documentary, stamp or similar issue or transfer taxes payable in respect of the issue or delivery of shares of Common Stock or other securities or property on conversion of the Convertible Preferred Stock pursuant hereto; provided , however , that the Corporation shall not be required to pay any tax that may be payable in respect of any transfer involved in the issue or payable in respect of any transfer involved in the issue or delivery of shares of Common Stock or other securities or property in a name other than that of the holder of the Convertible Preferred Stock to be converted and no such issue or delivery shall be made unless and until the person requesting any issue or delivery has paid to the Corporation the amount of any such tax or established, to the reasonable satisfaction of the Corporation, that such tax has been paid.

Section 8. Ranking . Any class or series of stock of the Corporation shall be deemed to rank:

(A) prior to the Convertible Preferred Stock, as to the payment of dividends and as to distributions of assets upon liquidation, dissolution or winding up, if the holders of such class or series shall be entitled to the receipt of dividends and of amounts distributed upon liquidation, dissolution or winding up in preference or priority to the holders of Convertible Preferred Stock;

(B) on a parity with the Convertible Preferred Stock, as to the payment of dividends and as to distribution of assets upon liquidation, dissolution or winding up, whether or not the dividend rates, dividend payment dates or redemption or liquidation prices per share thereof be different from those of the Convertible Preferred Stock if the holders of such class of stock or series and the Convertible Preferred Stock shall be entitled to the receipt of dividends and of amounts distributable upon liquidation, dissolution or winding up in proportion to their respective amounts of accrued and unpaid dividends per share or Liquidation Preferences, without preference or priority one over the other; and

(C) junior to the Convertible Preferred Stock, as to the payment of dividends or as to the distribution of assets upon liquidation, dissolution or winding up, if such stock or series shall be Common Stock or Series A Preferred Shares or if the holders of Convertible Preferred Stock shall be entitled to receipt of dividends or of amounts distributable upon liquidation, dissolution or winding up in preference or priority to the holders of shares of such stock or series.

Section 9. Voting . (A) Unless the affirmative vote of the holders of a greater number of shares shall then be required by law, the affirmative vote of the holders of at least 66-2/3% of all of the outstanding shares of Convertible Preferred Stock, given in person or by proxy, by a vote at a meeting called for the purpose voting separately as a class, shall be necessary for authorizing, effecting or validating the amendment, alteration or repeal of any of the provisions of the Certificate of Incorporation or of any certificate amendatory thereof or supplement thereto (including any Certificate of Designations, Preferences and rights or any similar document relating to any series of Preferred Stock) which would materially adversely affect the preferences, rights, powers or privileges of the Convertible Preferred Stock; provided , however , that the amendment of the provisions of the Certificate of Incorporation so as to authorize or create, or to increase the authorized amount of, any Junior Stock or Parity Stock shall not be deemed to materially adversely affect the preferences, rights, powers or privileges of Convertible Preferred Stock.

(B) Unless the affirmative vote or consent of the holders of a greater number of shares shall then be required by law, the consent of the holders of at least 66-2/3% of all of the outstanding shares of Convertible Preferred Stock and all other series of Parity Stock upon which such voting power shall have been conferred, given in person or by proxy, by a vote at a meeting called for the purpose at which the holders of shares of Convertible Preferred Stock and such Parity Stock shall vote together as a single class without regard to series, shall be necessary for authorizing, effecting or validating the creation, authorization or issue of any shares of any class of Preferred Stock as to dividends or upon liquidation, dissolution or winding up, or the reclassification of any authorized stock of the Corporation into any such prior shares, or the creation, authorization or issuance of any obligation or security convertible into or evidencing the right to purchase any such prior shares.

(C) If at the time of any annual meeting of stockholders for the election of directors the Corporation shall be in default on preference dividends (as defined below) on the Convertible Preferred Stock and any other Parity Stock, the number of directors constituting the Board of Directors of the Corporation shall be increased by two, and the holders of the Convertible Preferred Stock together with the holders of such other Parity Stock upon which such voting power shall have been conferred shall have the right at such meeting (and any subsequent meeting if such default shall continue to exist), voting together as a single class without regard to series, to the exclusion of the holders of Common Stock, to elect two additional directors (the “Preferred Directors”) of the Corporation to fill such newly created directorships. Such right shall continue until there are no dividends in arrears upon the Convertible Preferred Stock. Any Preferred Director may be removed without cause by, and shall not be removed without cause except by, the vote of the holders of record of the outstanding shares of Convertible Preferred Stock and Parity Stock with respect to which such a default shall exist, voting together as a single class without regard to series, at a meeting of the stockholders, or of the holders of shares of such stock as to which a default exists, called for the purpose. So long as a default in any preference dividends on such stock shall exist, (a) any vacancy in the office of a Preferred Director may be filled (except as provided in the following clause (b)) pursuant to an instrument in writing signed by the remaining Preferred Director and filed with the Corporation and (b) in the case of the removal of any Preferred Director, the vacancy may be filled by the vote of the holders of the outstanding shares of Convertible Preferred Stock and Parity Stock with respect to which such a default shall exist, voting together as a single class without regard to series, at the same meeting at which such removal shall be voted. Each director appointed as aforesaid by the remaining Preferred Director shall be deemed, for all purposes hereof, to be a Preferred director. Whenever a default in preference dividends shall no longer exist, the term of office of each Preferred Director shall terminate forthwith and the number of directors constituting the Board of Directors of the Corporation shall be reduced by two. For the purposes hereof, a “default on preference dividends” on the Convertible Preferred Stock or Parity Stock shall be deemed to exist whenever the equivalent of six quarterly dividends have not been declared and paid or set apart for payment, whether or not consecutive, and, having so occurred, such default shall be deemed to exist thereafter until, but only until, all accrued dividends on all shares of Convertible Preferred Stock or Parity Stock of each and every series then outstanding shall have been declared and paid or set apart for payment to the end of the last preceding dividend period.

(D) For purposes of the foregoing provisions of this Section 9, each share of Convertible Preferred Stock shall have one (1) vote per share. Except as otherwise required by applicable law or as set forth herein, the shares of Convertible Preferred Stock shall not have any relative, participating, optional or other special voting rights and powers and the consent of the holders thereof shall not be required for the taking of any corporate action.

Section 10. Determinations by the Board of Directors . Any determinations made in good faith by the Board of Directors of the Corporation under any provision of this Certificate of Designations, Preferences and Rights shall be final and binding on all stockholders (including holders of shares of Convertible Preferred Stock) of the Corporation.

Section 11. Record Holders . The Corporation and the Transfer Agent may deem and treat the record holder of any shares of Convertible Preferred Stock as the true and lawful owner thereof for all purposes, and neither the Corporation nor the Transfer Agent shall be affected by any notice to the contrary.

IN WITNESS WHEREOF, the Corporation has caused this Certificate of Designations to be made under the seal of the Corporation and signed and attested by its duly authorized officers this 8 ^th day of August 2006.


		HECLA HOLDINGS INC.

		By:	/s/ Phillips S. Baker, Jr.
			Phillips S. Baker, Jr.
			President and CEO

(Corporate Seal)

Attest:

By:	/s/ Philip C. Wolf
	Philip C. Wolf
	Corporate Secretary

STATE OF DELAWARE
CERTIFICATE OF CORRECTION

Hecla Mining Company, a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware.

DOES HEREBY CERTIFY:


	1.	The name of the corporation is Hecla Mining Company.

	2.	That a Certificate of Designations, Preferences and Rights of Series B Cumulative Convertible Preferred Stock (Par Value $0.25 Per Share) of Hecla Mining Company (then known as Hecla Holdings Inc.) was filed by the Secretary of State of Delaware on August 14, 2006 and that said Certificate requires correction as permitted by Section 103 of the General Corporation Law of the State of Delaware.

	3.	The inaccuracy or defect of said Certificate is:

		Section 7(M) of the Certificate incorrectly repeats the phrase “payable in respect of any transfer involved in the issue or”;

		Section 9(B) inadvertently omitted the phrase “stock of the Corporation ranking prior to the Convertible”.

	4.	Section 7(M) of the Certificate is corrected to read in its entirety as follows:

		The Corporation will pay any and all documentary, stamp or similar issue or transfer taxes payable in respect of the issue or delivery of shares of Common Stock or other securities or property on conversion of the Convertible Preferred Stock pursuant hereto; provided , however , that the Corporation shall not be required to pay any tax that may be payable in respect of any transfer involved in the issue or delivery of shares of Common Stock or other securities or property in a name other than that of the holder of the Convertible Preferred Stock to be converted and no such issue or delivery shall be made unless and until the person requesting any issue or delivery has paid to the Corporation the amount of any such tax or established, to the reasonable satisfaction of the Corporation, that such tax has been paid.


		Section 9(B) of the Certificate is corrected to read in its entirety as follows:

		Unless the affirmative vote or consent of the holders of a greater number of shares shall then be required by law, the consent of the holders of at least 66-2/3% of all of the outstanding shares of Convertible Preferred Stock and all other series of Parity Stock upon which such voting power shall have been conferred, given in person or by proxy, by a vote at a meeting called for the purpose at which the holders of shares of Convertible Preferred Stock and such Parity Stock shall vote together as a single, class without regard to series, shall be necessary for authorizing, effecting or validating the creation, authorization or issue of any shares of any class of stock of the Corporation ranking prior to the Convertible Preferred Stock as to dividends or upon liquidation, dissolution or winding up, or the reclassification of any authorized stock of the Corporation into any such prior shares, or the creation, authorization or issuance of any obligation or security convertible into or evidencing the right to purchase any such prior shares.

IN WITNESS WHEREOF , said corporation has caused this Certificate of Correction this 29 ^th day of January, A.D. 2009.


	By:	/s/ Michael B. White
		Authorized Officer


	Name:	Michael B. White
		Print or Type


	Title:	Secretary

CERTIFICATE OF DESIGNATIONS OF

6.5% MANDATORY CONVERTIBLE PREFERRED STOCK

HECLA MINING COMPANY.

Pursuant to Section 151 of the General Corporation Law
of the State of Delaware

The undersigned, Philip C. Wolf, Senior Vice President and General Counsel of Hecla Mining Company, a Delaware corporation (hereinafter called the “ Corporation ”), does hereby certify that the Board of Directors of the Corporation (the “ Board of Directors ”), pursuant to the provisions of Sections 103 and 151 of the General Corporation Law of the State of Delaware, hereby makes this Certificate of Designations (this “ Certificate ”) and hereby states and certifies that pursuant to the authority expressly vested in the Board of Directors by the Certificate of Incorporation of the Corporation (as such may be amended, modified or restated from time to time, the “ Certificate of Incorporation ”), the Board of Directors duly adopted the following resolutions:

RESOLVED, that, pursuant to Article IV of the Restated Certificate of Incorporation (which authorizes 5,000,000 shares of Preferred Stock, par value $0.25 per share (the “ Preferred Stock ”)), and the authority conferred on the Board of Directors, the Board of Directors hereby fixes the powers, designations, preferences and relative, participating, optional and other special rights, and the qualifications, limitations and restrictions, of a series of Preferred Stock.

RESOLVED, that each share of such series of new Preferred Stock shall rank equally in all respects and shall be subject to the following provisions:

(1) Number and Designation . Two million twelve thousand five hundred (2,012,500) shares (including up to 262,500 shares subject to the underwriters’ over-allotment option) of the Preferred Stock of the Corporation shall be designated as “6.5% Mandatory Convertible Preferred Stock” (the “ Mandatory Convertible Preferred Stock ”).

(2) Certain Definitions . As used in this Certificate, the following terms shall have the meanings defined in this Section 2:

“ Affiliate ” shall have the meaning given to that term in Rule 405 of the Securities Act of 1933, as amended, or any successor rule thereunder.

“ Agent Members ” shall have the meaning set forth in Section 18(a).

“ Applicable Market Value ” means the average of the Closing Prices per share of Common Stock over the 20 consecutive Trading Day period ending on the third Trading Day immediately preceding the Mandatory Conversion Date or the Provisional Conversion Date, as applicable.

“ Board of Directors ” shall have the meaning set forth in the recitals.

“ Business Day ” means any day other than a Saturday or Sunday or any other day on which commercial banks in New York City are authorized or required by law or executive order to close.

A “ Cash Acquisition ” will be deemed to have occurred at such time after the Issue Date that there is the consummation of any acquisition (whether by means of a liquidation, share exchange, tender offer, consolidation, recapitalization, reclassification, merger of the Corporation or any sale, lease or other transfer of the Corporation’s and its subsidiaries’ consolidated assets) or a series of related transactions or events pursuant to which 90% or more of the Common Stock is exchanged for, converted into or constitutes solely the right to receive cash, securities or other property, and more than 10% of the cash, securities or other property consists of cash, securities or other property that is not, or upon issuance shall not be, traded on the New York Stock Exchange or quoted on the Nasdaq Global Select Market or the Nasdaq Global Market (or their respective successors).

“ Cash Acquisition Conversion ” shall have the meaning set forth in Section 10(a).

“ Cash Acquisition Conversion Additional Conversion Amount ” shall have the meaning set forth in Section 10(c)(ii).

“ Cash Acquisition Conversion Date ” means the effective date of any Cash Acquisition Conversion of Mandatory Convertible Preferred Stock pursuant to Section 10.

“ Cash Acquisition Conversion Period ” shall have the meaning set forth in Section 10(a).

“ Cash Acquisition Conversion Rate ” means the conversion rate set forth in the table below for the applicable Effective Date and the applicable Stock Price applicable to Cash Acquisition Conversions during the Cash Acquisition Conversion Period:


Stock Price on Effective Date

Effective Date	$	2.00	$	4.00	$	6.00	$	8.00	$	9.70	$	10.77	$	11.83	$	14.00	$	16.00	$	18.00	$	20.00	$	25.00	$	30.00
December 18, 2007		9.8651		9.2917		8.9006		8.6721		8.5568		8.5079		8.4715		8.4237		8.3988		8.3847		8.3769		8.3708		8.3717
January 1, 2009		10.1118		9.6760		9.2186		8.8966		8.7191		8.6408		8.5813		8.5014		8.4588		8.4338		8.4191		8.4045		8.4017
January 1, 2010		10.2320		10.1104		9.7159		9.2722		8.9747		8.8348		8.7269		8.5834		8.5107		8.4708		8.4493		8.4301		8.4266
January 1, 2011		10.3093		10.3093		10.3093		10.3093		10.3093		9.2876		8.4502		8.4502		8.4502		8.4502		8.4502		8.4502		8.4502

If the Stock Price falls between two Stock Prices set forth in the table above, or if the Effective Date falls between two Effective Dates set forth in the table above, the Cash Acquisition Conversion Rate shall be determined by straight-line interpolation between the Cash Acquisition Conversion Rates set forth for the higher and lower Stock Prices and Effective Dates, as applicable, based on a 365-day year.

If the Stock Price is in excess of $30.00 per share (subject to adjustment), then the Cash Acquisition Conversion Rate shall be the Minimum Conversion Rate. If the Stock Price is less than $2.00 per share (subject to adjustment), then the Cash Acquisition Conversion Rate shall be the Maximum Conversion Rate.

The Stock Prices in the column headings in the table above are subject to adjustment in accordance with the provisions of Section 15(c)(iii). The conversion rates set forth in the table above are each subject to adjustment in the same manner as each Fixed Conversion Rate as set forth in Section 15.

“ Cash Acquisition Dividend Make-Whole Amount ” shall have the meaning set forth in Section 10(c)(i)(B).

“ Cash Acquisition Notice ” shall have the meaning set forth in Section 10(b).

“ Certificate ” shall have the meaning set forth in the recitals.

“ Closing Price ” of the Common Stock or any securities distributed in a Spin-Off, as the case may be, means, as of any date of determination:

(a) the closing price on that date or, if no closing price is reported, the last reported sale price, of shares of the Common Stock or such other securities on the New York Stock Exchange on that date; or

(b) if the Common Stock or such other securities are not traded on the New York Stock Exchange, the closing price on that date as reported in composite transactions for the principal U.S. national or regional securities exchange on which the Common Stock or such other securities are so traded or, if no closing price is reported, the last reported sale price of shares of the Common Stock or such other securities on the principal U.S. national or regional securities exchange on which the Common Stock or such other securities are so traded on that date; or

(c) if the Common Stock or such other securities are not traded on a U.S. national or regional securities exchange, the last quoted bid price on that date for the Common Stock or such other securities in the over-the-counter market as reported by Pink Sheets LLC or a similar organization; or

(d) if the Common Stock or such other securities are not so quoted by Pink Sheets LLC or a similar organization, the market price of the Common Stock or such other securities on that date as determined by a nationally recognized independent investment banking firm retained by the Corporation for this purpose.

(www.nyse.com) and as reported by Bloomberg Professional Service; provided that in the event that there is a discrepancy between the closing price and the last reported sale price as reflected on the website of the New York Stock Exchange and as reported by Bloomberg Professional Service, the closing price and the last reported sale price on the website of the New York Stock Exchange shall govern.

“ Common Stock ” as used in this Certificate means the Corporation’s common stock, par value $0.25 per share, as the same exists at the date of filing of this Certificate relating to the Mandatory Convertible Preferred Stock, or any other class of stock resulting from successive changes or reclassifications of such common stock consisting solely of changes in par value, or from par value to no par value, or from no par value to par value.

“ Conversion Date ” shall have the meaning set forth in Section 4(d).

“ Corporate Trust Office ” means the principal corporate trust office of the Transfer Agent at which, at any particular time, its corporate trust business shall be administered.

“ Corporation ” shall have the meaning set forth in the recitals.

“ Current Market Price ” per share of Common Stock on any date means for the purposes of determining an adjustment to the Fixed Conversion Rate:

(a) for purposes of adjustments pursuant to Section 15(a)(ii), Section 15(a)(iv)(A) in the event of an adjustment not relating to a Spin-Off, and Section 15(a)(v), the average of the Closing Prices over the five consecutive Trading Day period ending on the Trading Day preceding the Ex-Date with respect to the issuance or distribution requiring such computation;

(b) for purposes of adjustments pursuant to Section 15(a)(iv)(B) in the event of an adjustment relating to a Spin-Off, the average of the Closing Prices over the first ten consecutive Trading Days commencing on and including the fifth Trading Day following the Ex-Date for such distribution; and

(c) for purposes of adjustments pursuant to Section 15(a)(vi), the average of the Closing Prices over the five consecutive Trading Day period ending on the seventh Trading Day after the Expiration Date of the tender offer or exchange offer.

“ Depositary ” means DTC or its nominee or any successor appointed by the Corporation.

“ Dividend Payment Date ” means January 1, April 1, July 1, and October 1 of each year to and including the Mandatory Conversion Date.

“ Dividend Period ” means the period from and including a Dividend Payment Date to but excluding the next Dividend Payment Date, except that the initial Dividend Period will commence on and include the Issue Date and will end on and exclude the April 1, 2008 Dividend Payment Date.

“ Dividend Rate ” shall have the meaning set forth in Section 4.

“ DTC ” means The Depository Trust Corporation.

“ Early Conversion ” shall have the meaning set forth in Section 9(a).

“ Early Conversion Additional Conversion Amount ” shall have the meaning set forth in Section 9(c).

“ Early Conversion Date ” shall have the meaning set forth in Section 9(b).

“ Effective Date ” shall have the meaning set forth in Section 10(a).

“ Exchange Property ” shall have the meaning set forth in Section 15(e).

“ Ex-Date ” when used with respect to any issuance or distribution, means the first date on which shares of the Common Stock trade without the right to receive such issuance or distribution.

“ Expiration Date ” shall have the meaning set forth in Section 15(a)(vi).

“ Expiration Time ” shall have the meaning set forth in Section 15(a)(vi).

“ Fair Market Value ” means the fair market value as determined in good faith by the Board of Directors, whose determination shall be conclusive and set forth in a resolution of the Board of Directors.

“ Fixed Conversion Rates ” means the Maximum Conversion Rate and the Minimum Conversion Rate.

“ Global Preferred Share ” shall have the meaning set forth in Section 18(a).

“ Global Shares Legend ” shall have the meaning set forth in Section 18(a).

“ Holder ” means the person in whose name the shares of the Mandatory Convertible Preferred Stock are registered, which may be treated by the Corporation and the Transfer Agent as the absolute owner of the shares of Mandatory Convertible Preferred Stock for the purpose of making payment and settling conversions and for all other purposes.

“ Initial Price ” shall have the meaning set forth in Section 8(b)(ii).

“ Issue Date ” shall mean December 18, 2007, the original date of issuance of the Mandatory Convertible Preferred Stock.

“ Junior Stock ” means the Common Stock, our Series A Junior Participating Preferred Stock, $0.25 par value per share, and each other class of capital stock or series of Preferred Stock established after the Issue Date, the terms of which do not expressly provide that such class or series ranks senior to or on a parity with the Mandatory Convertible Preferred Stock as to dividend rights or rights upon the Corporation’s liquidation, winding-up or dissolution.

“ Liquidation Preference ” means, as to the Mandatory Convertible Preferred Stock, $100.00 per share.

“ Mandatory Conversion Additional Conversion Amount ” shall have the meaning set forth in Section 8(d).

“ Mandatory Conversion Date ” means January 1, 2011.

“ Mandatory Conversion Rate ” shall have the meaning set forth in Section 8(b).

“ Mandatory Convertible Preferred Stock ” shall have the meaning set forth in Section 1.

“ Material Transaction ” means the purchase, acquisition, by lease, exchange, merger, consolidation, succession or other acquisition, in one transaction or a series of related transactions by the Corporation and/or any of its wholly-owned subsidiaries from the same seller, of assets or a business, the aggregate purchase price of which is equal to or exceeds $100,000,000.

“ Maximum Conversion Rate ” shall have the meaning set forth in Section 8(b)(iii).

“ Maximum Provisional Conversion Rate ” shall have the meaning set forth in the definition of “Provisional Conversion Rate.”

“ Minimum Conversion Rate ” shall have the meaning set forth in Section 8(b)(i).

“ Minimum Provisional Conversion Rate ” shall have the meaning set forth in the definition of “Provisional Conversion Rate.”

“ Officer ” means the Chairman of the Board of Directors, the Chief Executive Officer, the Chief Financial Officer, the President, any Vice President, the Treasurer, or the Secretary of the Corporation.

“ Officer’s Certificate ” means a certificate of the Corporation, signed by any duly authorized Officer of the Corporation.

“ Parity Stock ” means the Series B Cumulative Convertible Preferred Stock, $0.25 par value per share, and each other class of capital stock or series of Preferred Stock established after the Issue Date, the terms of which expressly provide that such class or series shall rank on a parity with the Mandatory Convertible Preferred Stock as to dividend rights or rights upon the Corporation’s liquidation, winding-up or dissolution.

“ Person ” means a legal person, including any individual, corporation, estate, partnership, joint venture, association, joint-stock company, limited liability company or trust.

“ Preferred Stock ” shall have the meaning set forth in the recitals.

“ Provisional Conversion Date ” means the date fixed by the Board of Directors for the Provisional Conversion of the Mandatory Convertible Preferred Stock into shares of Common Stock, which will be no less than 45 nor more than 60 calendar days from the date of the written notice exercising such right.

“ Provisional Conversion Rate ” means the conversion rate set forth in the table below for the Applicable Market Value:


Applicable Market Value	Provisional Conversion Rate	Conversion Value (Applicable Market Value Multiplied by the Provisional Conversion Rate)
$2.00	19.2474 (“maximum provisional conversion rate”)	$38.49
$4.00	13.7474	$54.99
$6.00	11.9141	$71.48
$8.00	10.9974	$87.98
$10.00	10.4474	$104.47
$12.00	10.0808	$120.97
$14.00	9.8189	$137.46
$16.00	9.6224	$153.96
$18.00	9.4696	$170.45
$20.00	9.3474	$186.95
$22.00	9.2474	$203.44
$24.00	9.1641	$219.94
$26.00	9.0936	$236.43
$28.00	9.0331	$252.93
$30.00	8.9808 (“minimum provisional conversion rate”)	$269.42

The exact Applicable Market Value may not be set forth on the table, in which case the following rules shall apply.

If the Applicable Market Value is between two Applicable Market Values on the table, the Provisional Conversion Rate will be determined by straight-line interpolation between the Provisional Conversion Rates set forth for the higher and lower Applicable Market Values.

If the Applicable Market Value is in excess of $30.00 per share (subject to adjustment), then the Provisional Conversion Rate will be the Minimum Provisional Conversion Rate (subject to adjustment).

If the Applicable Market Value is less than $2.00 per share (subject to adjustment), then the Provisional Conversion Rate will be the Maximum Provisional Conversion Rate (subject to adjustment).

The Applicable Market Values set forth in the first column of the table will be adjusted as of any date on which the Fixed Conversion Rates of the Mandatory Convertible Preferred Stock

are adjusted. The Adjusted Applicable Market Values will equal the Applicable Market Values applicable immediately prior to such adjustment multiplied by a fraction, the numerator of which is the Minimum Conversion Rate immediately prior to the adjustment giving rise to the Applicable Market Value adjustment and the denominator of which is the Minimum Conversion Rate as so adjusted.

“ Provisional Conversion Right ” shall have the meaning set forth in Section 11(a).

“ Record Date ” means March 15, June 15, September 15, and December 15, immediately preceding the April 1, July 1, October 1, and January 1, respectively, Dividend Payment Date. These Record Dates shall apply regardless of whether a particular Record Date is a Business Day.

“ Record Holder ” means a Holder of record of the Mandatory Convertible Preferred Stock as such Holder appears on the stock register of the Corporation at 5:00 p.m., New York City time, on a Record Date.

“ Reorganization Event ” shall have the meaning set forth in Section 15(e).

“ Restated Certificate of Incorporation ” shall have the meaning set forth in the recitals.

“ Senior Stock ” means any class of capital stock or series of Preferred Stock established after the Issue Date, the terms of which expressly provide that such class or series shall rank senior to the Mandatory Convertible Preferred Stock as to dividend rights or rights upon the Corporation’s liquidation, winding-up or dissolution.

“ Share Cap ” shall have the meaning set forth in Section 4A(e).

“ Shelf Registration Statement ” shall mean a shelf registration statement filed with the Securities and Exchange Commission in connection with the issuance of or resales of shares of Common Stock issued as payment of a dividend, including dividends paid in connection with a conversion, as described under Section 4A(f).

“ Spin-Off ” means a dividend or other distribution of shares to all or substantially all holders of Common Stock consisting of capital stock of, or similar equity interests in, or relating to a subsidiary or other business unit of the Corporation.

“ Stock Price ” means the price paid per share of Common Stock in a Cash Acquisition. If the consideration paid consists only of cash, the Stock Price shall equal the amount of cash paid per share. In all other circumstances, the Stock Price shall be the average of the Closing Prices per share of the Common Stock over the 10 consecutive Trading Day period ending on the Trading Day preceding the Effective Date.

“ Threshold Appreciation Price ” shall have the meaning set forth in Section 8(b)(i).

“ Trading Day ” means a day on which the Common Stock:

(a) is not suspended from trading on any U.S. national or regional securities exchange or association or over-the-counter market at the close of business; and

(b) has traded at least once on the U.S. national or regional securities exchange or association or over-the-counter market that is the primary market for the trading of the Common Stock.

“ Transfer Agent ” shall initially mean American Stock Transfer & Trust Company, New York, New York, the Corporation’s duly appointed transfer agent, registrar, and conversion and dividend disbursing agent for the Mandatory Convertible Preferred Stock.

“ Voting Rights Class ” shall have the meaning set forth in Section 6(a)(i).

“ Voting Rights Triggering Event ” shall mean the failure of the Corporation to pay dividends on the Mandatory Convertible Preferred Stock with respect to six or more Dividend Periods (whether or not consecutive).

(3) Ranking . The Mandatory Convertible Preferred Stock will, with respect to dividend rights or rights upon the liquidation, winding-up or dissolution of the Corporation rank (i) senior to all Junior Stock, (ii) on parity with all Parity Stock and (iii) junior to all Senior Stock and the Corporation’s existing and future indebtedness.

(4) Dividends . (a) Holders of shares of outstanding Mandatory Convertible Preferred Stock shall be entitled to receive, when, as and if declared by the Board of Directors, or an authorized committee of the Board of Directors, out of funds of the Corporation legally available therefor, cumulative dividends at the rate per annum of 6.5% per share on the Liquidation Preference (the “ Dividend Rate ”) (equivalent to $6.50 per annum per share).

Dividends shall be payable in arrears on each Dividend Payment Date (commencing on April 1, 2008) for the Dividend Period ending immediately prior to such Dividend Payment Date, to the Record Holders of Mandatory Convertible Preferred Stock on the Record Date applicable to such Dividend Payment Date. If a Dividend Payment Date is not a Business Day, payment will be made on the next succeeding Business Day, without any interest or other payment in lieu of interest accruing with respect to this delay. Such dividends shall be cumulative from the most recent date as to which dividends shall have been paid or, if no dividends have been paid, from the Issue Date, whether or not in any Dividend Period(s) there shall have been funds of the Corporation legally available for the payment of such dividends. Accumulated dividends on shares of Mandatory Convertible Preferred Stock shall not bear interest if they are paid subsequent to the applicable Dividend Payment Date.

Dividends payable for each full Dividend Period will be computed by dividing the Dividend Rate by four. Dividends payable for any period other than a full Dividend Period shall be computed on the basis of the actual number of days elapsed during the period over a 360-day year (consisting of twelve 30-day months).

(b) No dividend shall be declared or paid upon, or any sum or number of shares of the Common Stock set apart for the payment of dividends upon, any outstanding share of Mandatory Convertible Preferred Stock with respect to any Dividend Period unless all dividends for all preceding Dividend Periods shall have been declared and paid upon, or a sufficient sum or number of shares of Common Stock shall have been set apart for the payment of such dividend upon, all outstanding shares of Mandatory Convertible Preferred Stock.

(c) Holders of shares of Mandatory Convertible Preferred Stock shall not be entitled to any dividends on the Mandatory Convertible Preferred Stock, whether payable in cash, property or stock, in excess of full cumulative dividends.

(d) Dividends on any share of Mandatory Convertible Preferred Stock converted to Common Stock shall cease to accumulate on the Mandatory Conversion Date, the Cash Acquisition Conversion Date, the Early Conversion Date or Provisional Conversion Date (each, a “ Conversion Date ”), as applicable.

(e) The Corporation shall disclose in its annual and quarterly reports on Form 10-K and Form 10-Q, respectively, filed with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended, the amount of any accumulated and unpaid dividends on Mandatory Convertible Preferred Stock for Dividend Periods ending prior to the last date of the relevant quarterly or annual period as to which such report relates.

(4A) Method of Payment of Dividends . (a) Subject to Section 4A(e), any declared dividend (or any portion of any declared dividend) on the Mandatory Convertible Preferred Stock, whether or not for a current Dividend Period or any prior Dividend Period (including in connection with the payment of accumulated and declared and unpaid dividends to the extent required to be paid pursuant to Section 8, Section 9, or Section 10), may be paid by the Corporation, as determined in the Corporation’s sole discretion:


	(i)	in cash;

	(ii)	by delivery of shares of Common Stock; or

	(iii)	through any combination of cash and shares of Common Stock.

(b) Each payment of a declared dividend on the Mandatory Convertible Preferred Stock shall be made in cash, except to the extent the Corporation elects to make all or any portion of such payment in Common Stock by giving notice to Holders thereof of such election and the portion of such payment that shall be made in cash and the portion of such payment that shall be made in Common Stock no later than 10 Trading Days prior to the Dividend Payment Date for such dividend.

(c) Common Stock issued in payment or partial payment of a declared dividend shall be valued for such purpose at 97% of the average of the Closing Prices per share of Common Stock over the five consecutive Trading Day period ending on the second Trading Day immediately preceding:


	(i)	the applicable Dividend Payment Date, in respect of a dividend payable on any such date; or

	(ii)	the Mandatory Conversion Date, the Early Conversion Date, or the Cash Acquisition Conversion Date, as applicable, in respect of a dividend payable on such date.

(d) No fractional shares of Common Stock shall be delivered to Holders in payment or partial payment of a dividend. A cash adjustment shall be paid to each Holder that would otherwise be entitled to a fraction of a share of Common Stock based on the average of the Closing Prices of the Common Stock over the five consecutive Trading Day period ending on the second Trading Day immediately preceding the Dividend Payment Date for such dividend.

(e) Notwithstanding the foregoing, in no event shall the number of shares of Common Stock delivered in connection with any regular dividend payment or any dividend payment made in connection with a conversion exceed a number equal to the total dividend payment divided by $3.395 (this number of shares, the “ Share Cap ”), subject to adjustment in the same manner (but on an inversely proportional basis) as each Fixed Conversion Rate as set forth in Section 15. To the extent the Corporation does not deliver shares of Common Stock as a result of the Share Cap and the Corporation is legally able to do so, the Corporation shall, notwithstanding any notice by it to the contrary, pay the remaining declared and unpaid dividends in cash.

(f) To the extent that the Corporation, in its reasonable judgment, determines that a Shelf Registration Statement is required in connection with the issuance of, or for resales of, Common Stock issued as payment of a dividend, including dividends paid in connection with a conversion, the Corporation shall, to the extent such a Shelf Registration Statement is not currently filed and effective, use its reasonable best efforts to file and maintain the effectiveness of such a Shelf Registration Statement until the earlier of such time as all sales of Common Stock have been resold thereunder and such time as all such shares are freely tradeable without registration. To the extent applicable, the Corporation shall also use its reasonable best efforts to have the shares of Common Stock qualified or registered under applicable state securities laws, if required, and approved for listing on the New York Stock Exchange (or if the Common Stock is not listed on the New York Stock Exchange, on the principal other U.S. national or regional securities exchange on which the Common Stock is then listed).

(5) Payment Restrictions . (a) Unless all accumulated and unpaid dividends on Mandatory Convertible Preferred Stock for all prior Dividend Periods shall have been paid in full, the Corporation shall not:


	(i)	declare or pay any dividend or make any distribution of assets on any Junior Stock, other than dividends or distributions in the form of Junior Stock and cash solely in lieu of fractional shares in connection with any such dividend or distribution;


	(ii)	redeem, purchase or otherwise acquire any shares of Junior Stock or pay or make any monies available for a sinking fund for such shares of Junior Stock, other than (A) upon conversion or exchange for other Junior Stock, (B) the purchase of fractional interests in shares of any Junior Stock pursuant to the conversion or exchange provisions of such Junior Stock, or (C) the forfeiture of unvested shares of restricted stock or share withholdings upon exercise, delivery or vesting of equity awards granted to officers, directors and employees upon termination of employment or service with the Corporation or any of its subsidiaries;

	(iii)	except as provided in Section 5(b), declare or pay any dividend or make any distribution of assets on any shares of Parity Stock, other than (A) dividends or distributions in the form of Parity Stock or Junior Stock, (B) cash solely in lieu of fractional shares in connection with any such dividend or distribution, and (C) regular quarterly dividends on the Series B Cumulative Convertible Preferred Stock declared prior to the Issue Date and payable January 1, 2008; or

	(iv)	redeem, purchase or otherwise acquire any shares of Parity Stock, except upon conversion into or exchange for other Parity Stock or Junior Stock and cash solely in lieu of fractional shares in connection with any such conversion or exchange.

(b) When dividends are not paid in full upon the shares of Mandatory Convertible Preferred Stock, all dividends declared on Mandatory Convertible Preferred Stock and any other Parity Stock shall be paid either:


	(i)	pro rata so that the amount of dividends so declared on the shares of Mandatory Convertible Preferred Stock and each such other class or series of Parity Stock shall in all cases bear to each other the same ratio as accumulated dividends on the shares of Mandatory Convertible Preferred Stock and such class or series of Parity Stock bear to each other; or

	(ii)	on another basis that is at least as favorable to the Holders of Mandatory Convertible Preferred Stock entitled to receive such dividends.

(6) Voting Rights . (a) The Holders of Mandatory Convertible Preferred Stock shall have no voting rights except as set forth below or as otherwise required by Delaware law from time to time:


	(i)	If and whenever at any time or times a Voting Rights Triggering Event occurs, then the Holders of shares of Mandatory Convertible Preferred Stock, voting separately as a single class with any Parity Stock having similar voting rights that are exercisable (the “ Voting Rights Class ”), shall be entitled at the Corporation’s next regular or special meeting of shareholders of the Corporation to elect two additional directors to the Board of Directors. Upon the election of any such additional directors, the number of directors that comprise the Board of Directors shall be increased by such number of additional directors.


	(ii)	Such voting rights may be exercised at a special meeting of the holders of the shares of the Voting Rights Class, called as hereinafter provided, or at any annual meeting of shareholders held for the purpose of electing directors, and thereafter at each such annual meeting at which any of such two directorships shall be vacant or expiring until such time as all dividends in arrears on the shares of Mandatory Convertible Preferred Stock shall have been paid in full, at which time or times such voting rights and the term of the directors elected pursuant to Section 6(a)(i) shall terminate. So long as the Corporation’s Certificate of Incorporation provides for a classified board, such additional directors shall be elected for terms of one, two or three years so as to cause the number of directors in each class to be as nearly equal in number as possible.

	(iii)	At any time when voting rights pursuant to Section 6(a)(i) shall have vested and be continuing in Holders of Mandatory Convertible Preferred Stock, or if a vacancy shall exist in the office of any such additional director, the Board of Directors may call, and, upon written request of the Holders of record of at least 25% of the outstanding shares of Mandatory Convertible Preferred Stock addressed to the chairman of the Board of Directors shall call, a special meeting of the holders of shares of the Voting Rights Class (voting separately as a single class with any Parity Stock having similar rights that are exercisable) for the purpose of electing the directors that such holders are entitled to elect. Such meeting shall be held at the earliest practicable date upon the notice required for annual meetings of shareholders at the place for holding annual meetings of shareholders of the Corporation, or, if none, at a place designated by the Board of Directors. Notwithstanding the provisions of this Section 6(a)(iii), no such special meeting shall be called during a period within the 60 days immediately preceding the date fixed for the next annual meeting of shareholders in which such case, the election of directors pursuant to Section 6(a)(i) shall be held at such annual meeting of shareholders.

	(iv)	At any meeting at which the holders of the Voting Rights Class shall have the right to elect directors as provided herein, the presence in person or by proxy of the holders of shares representing more than 50% in voting power of the then outstanding shares of the Voting Rights Class shall be required and shall be sufficient to constitute a quorum of such class for the election of directors by such class. The affirmative vote of the holders of the Voting Rights Class constituting a majority of the Voting Rights Class present at such meeting, in person or by proxy, shall be sufficient to elect any such director.

	(v)	Any director elected pursuant to the voting rights created under this Section 6(a) shall hold office until the next annual meeting of shareholders at which such director’s class is being elected (unless such term has previously terminated pursuant to Section 6(a)(ii))


		and any vacancy in respect of any such director shall be filled only by vote of the remaining director so elected by holders of the Voting Rights Class, or if there be no such remaining director, by the holders of shares of the Voting Rights Class at a special meeting called in accordance with the procedures set forth in this Section 6(a), or, if no such special meeting is called, at the next annual meeting of shareholders.

	(vi)	So long as any shares of Mandatory Convertible Preferred Stock remain outstanding, unless a greater percentage shall then be required by law, the Corporation shall not, without the affirmative vote or consent of the holders of at least 66 2/3% of the outstanding shares of Mandatory Convertible Preferred Stock and all other shares of the Voting Rights Class, voting separately as a single class, in person or by proxy, at an annual meeting of the Corporation’s shareholders or at a special meeting called for such purpose, or by written consent in lieu of such meeting, alter, repeal or amend, whether by merger, consolidation, combination, reclassification or otherwise, any provisions of the Restated Certificate of Incorporation or this Certificate if the amendment would amend, alter or affect the powers, preferences or rights of Mandatory Convertible Preferred Stock so as to adversely affect the Holders thereof, including, without limitation, the creation of, increase in the authorized number of, or issuance of, shares of any class or series of Senior Stock.

	(vii)	In exercising the voting rights set forth in this Section 6(a), each share of Mandatory Convertible Preferred Stock and any other shares of the Voting Rights Class participating in the votes described above shall be in proportion to the liquidation preference of such share.

(b) The Corporation may authorize, increase the authorized amount of, or issue any shares of any class or series of Parity Stock or Junior Stock, without the consent of the Holders of Mandatory Convertible Preferred Stock, and in taking such actions the Corporation shall not be deemed to have affected adversely the powers, preferences or rights of Holders of shares of Mandatory Convertible Preferred Stock.

(7) Liquidation, Dissolution or Winding-Up . (a) In the event of any liquidation, winding-up or dissolution of the Corporation, whether voluntary or involuntary, each Holder of Mandatory Convertible Preferred Stock shall be entitled to receive the Liquidation Preference plus an amount equal to accumulated and unpaid dividends on the shares to the date fixed for liquidation, winding-up or dissolution to be paid out of the assets of the Corporation available for distribution to its shareholders, after satisfaction of liabilities owed to the Corporation’s creditors and distributions to holders of Senior Stock, and before any payment or distribution is made on any Junior Stock, including, without limitation, Common Stock.

(b) Neither the sale, conveyance, exchange or transfer (for cash, shares of stock, securities or other consideration) of all or substantially all the assets or business of the Corporation (other

than in connection with the liquidation, winding-up or dissolution of its business) nor the merger or consolidation of the Corporation into or with any other Person shall be deemed to be a liquidation, winding-up or dissolution, voluntary or involuntary, for the purposes of this Section 7.

(c) After the payment to the Holders of the shares of Mandatory Convertible Preferred Stock of full preferential amounts provided for in this Section 7, the Holders of Mandatory Convertible Preferred Stock as such shall have no right or claim to any of the remaining assets of the Corporation.

(d) If upon the voluntary or involuntary liquidation, winding-up or dissolution of the Corporation, the amounts payable with respect to the Liquidation Preference plus an amount equal to accumulated and unpaid dividends of the Mandatory Convertible Preferred Stock and all Parity Stock are not paid in full, the holders of the Mandatory Convertible Preferred stock and the Parity Stock will share equally and ratably in any distribution of the Corporation’s assets in proportion to the respective liquidation preference and an amount equal to the accumulated and unpaid dividends to which such holders are entitled.

(8) Mandatory Conversion on the Mandatory Conversion Date . (a) Each share of Mandatory Convertible Preferred Stock shall automatically convert (unless previously converted at the option of the Holder in accordance with Section 9, pursuant to an exercise of a Cash Acquisition Conversion right pursuant to Section 10 or pursuant to an exercise of the Provisional Conversion Right pursuant to Section 11) on the Mandatory Conversion Date, into a number of shares of Common Stock equal to the Mandatory Conversion Rate.

(b) The “ Mandatory Conversion Rate ” shall be as follows:


	(i)	if the Applicable Market Value of the Common Stock is greater than $11.83 (the “ Threshold Appreciation Price ”), then the Mandatory Conversion Rate shall be equal to 8.4502 shares of Common Stock per share of Mandatory Convertible Preferred Stock (the “ Minimum Conversion Rate ”);

	(ii)	if the Applicable Market Value of the Common Stock is less than or equal to the Threshold Appreciation Price but greater than or equal to $9.70 (the “ Initial Price ”), then the Mandatory Conversion Rate shall be equal to $100 divided by the Applicable Market Value of the Common Stock; or

	(iii)	if the Applicable Market Value of the Common Stock is less than the Initial Price, then the Mandatory Conversion Rate shall be equal to 10.3093 shares of Common Stock per share of Mandatory Convertible Preferred Stock (the “ Maximum Conversion Rate ”).

(c) The Fixed Conversion Rates, the Threshold Appreciation Price, the Initial Price and the Applicable Market Value are each subject to adjustment in accordance with the provisions of Section 15.

(d) In addition to the number of shares of Common Stock issuable pursuant to this Section 8 at the Mandatory Conversion Rate, the Holders of Mandatory Convertible Preferred Stock on the Mandatory Conversion Date shall have the right to receive an amount equal to all accumulated and declared and unpaid dividends on the Mandatory Convertible Preferred Stock, for the then-current Dividend Period ending on the Mandatory Conversion Date and all prior Dividend Periods (other than previously declared dividends on the Mandatory Convertible Preferred Stock payable to Holders of record as of a prior date).

In addition, if on the Mandatory Conversion Date the Corporation has not declared all or any portion of the accumulated and unpaid dividends payable on such date, the Mandatory Conversion Rate will be adjusted so that Holders receive an additional number of shares of Common Stock equal to the amount of accumulated and unpaid dividends that have not been declared (“ Mandatory Conversion Additional Conversion Amount ”) divided by the average of the Closing Prices of the Common Stock over the 20 consecutive Trading Day period ending on the third Trading Day immediately preceding the Mandatory Conversion Date; provided, however, that in no event shall the Corporation increase the number of shares of Common Stock to be issued in excess of the Share Cap. To the extent that the Corporation does not deliver any or all of the additional shares as a result of the Share Cap, the Corporation shall not pay the remaining Mandatory Conversion Additional Conversion Amount in cash.

(9) Early Conversion at the Option of the Holder . (a) Other than during a Cash Acquisition Conversion Period, the Holders of Mandatory Convertible Preferred Stock shall have the right to convert their shares of Mandatory Convertible Preferred Stock, in whole or in part, at any time prior to the Mandatory Conversion Date (“ Early Conversion ”), into shares of Common Stock at the Minimum Conversion Rate.

(b) In addition to the number of shares of Common Stock issuable pursuant to Section 9(a), with respect to each share of Mandatory Convertible Preferred Stock being converted, the converting Holder shall have the right to receive on the effective date of the Early Conversion (the “ Early Conversion Date ”) all accumulated and declared and unpaid dividends for all prior Dividend Periods ending on or prior to the Dividend Payment Date immediately preceding the Early Conversion Date (other than previously declared dividends on the Mandatory Convertible Preferred Stock payable to Holders of record as of a prior date).

(c) In addition, if on the Early Conversion Date the Corporation has not declared all or any portion of the accumulated and unpaid dividends payable for such prior dividend periods, the Minimum Conversion Rate will be adjusted so that the converting Holder receives an additional number of shares of Common Stock equal to such amount of accumulated and unpaid dividends that have not been declared (the “ Early Conversion Additional Conversion Amount ”), divided by the average of the Closing Prices of the Common Stock over the 20 consecutive Trading Day period ending on the third Trading Day immediately preceding the Early Conversion Date; provided, however , that in no event shall the Corporation increase the number of shares of Common Stock to be issued in excess of the Share Cap. To the extent that the Corporation does

not deliver any or all additional shares as a result of the Share Cap, the Corporation will not pay the remaining Early Conversion Additional Conversion Amount in cash. Except as described above, upon any Early Conversion of the Mandatory Convertible Preferred Stock, the Corporation shall make no payment or allowance for unpaid dividends on the Mandatory Convertible Preferred Stock.

(10) Cash Acquisition Conversion . (a) If a Cash Acquisition occurs prior to the Mandatory Conversion Date, the Holders of the Mandatory Convertible Preferred Stock shall have the right to convert their shares of Mandatory Convertible Preferred Stock, in whole or in part (such right of the Holders to convert their shares pursuant to this Section 10(a) being the “ Cash Acquisition Conversion ”) during a period (the “ Cash Acquisition Conversion Period ”) that begins on the effective date of such Cash Acquisition (the “ Effective Date ”) and ends at 5:00 p.m., New York City time, on the date that is 15 calendar days after the Effective Date (or, if earlier, the Mandatory Conversion Date) into shares of Common Stock at the Cash Acquisition Conversion Rate (as adjusted pursuant to Section 15).

(b) On or before the twentieth calendar day prior to the anticipated Effective Date of the Cash Acquisition, a written notice (the “ Cash Acquisition Notice ”) shall be sent by or on behalf of the Corporation, by first-class mail, postage prepaid, to the Holders of record as they appear on the stock register of the Corporation. Such notice shall state:


	(i)	the anticipated effective date of the Cash Acquisition;

	(ii)	that Holders shall have to right to effect a Cash Acquisition Conversion in connection with such Cash Acquisition during the Cash Acquisition Conversion Period;

	(iii)	the Cash Acquisition Conversion Period;

	(iv)	if the Corporation shall elect to pay any amount payable pursuant to Section 10(c) below in shares of Common Stock or a combination cash and shares of Common Stock, that the Corporation shall pay such amount payable in full in shares or in a combination of cash and shares of Common Stock (and if so, will specify the combination, which may be in percentage terms); and

	(v)	the instructions a Holder must follow to effect a Cash Acquisition Conversion in connection with such Cash Acquisition.

(c) Upon any conversion pursuant to Section 10(a), in addition to issuing to the converting Holders the number of shares of Common Stock at the Cash Acquisition Conversion Rate, the Corporation shall:


	(i)	(x) pay the converting Holders in cash (or in the Corporation’s sole discretion (subject to the Share Cap) in shares of Common Stock or a combination of cash and shares of Common Stock) to the extent the Corporation is legally permitted to do so, the sum of:

(A) an amount equal to any accumulated and declared and unpaid dividends on shares of Mandatory Convertible Preferred Stock subject to such Cash Acquisition Conversion (other than previously declared dividends on the Mandatory Convertible Preferred Stock payable to Record Holders as of a prior date), and

(B) the present value of all dividend payments on shares of Mandatory Convertible Preferred Stock subject to such Cash Acquisition Conversion for all remaining Dividend Periods from the Effective Date to but excluding the Mandatory Conversion Date (the “ Cash Acquisition Dividend Make-Whole Amount ”) (the present value of the remaining future dividend payments shall be computed using a discount rate equal to 8.50%), or

(y) increase the number of shares of Common Stock to be issued on conversion by a number equal to (A) the sum of any accumulated and declared and unpaid dividends and the Cash Acquisition Dividend Make-Whole Amount divided by (B) the Stock Price; and

(ii) if the Corporation has not declared all or any portion of the accumulated and unpaid dividends payable on the Effective Date, the Cash Acquisition Conversion Rate will be adjusted so that converting Holders receive an additional number of shares of Common Stock equal to the amount of accumulated and unpaid dividends that have not been declared (the “ Cash Acquisition Conversion Additional Conversion Amount ”), divided by the Stock Price; provided, however , that in no event shall the Corporation increase the number of shares of Common Stock to be issued in excess of the Share Cap. To the extent that the Corporation does not deliver any or all additional shares as a result of the Share Cap, the Corporation shall not pay the remaining Cash Acquisition Conversion Additional Conversion Amount in cash.

(11) Provisional Conversion on the Provisional Conversion Date. (a) The Corporation may, at any time on or prior to July 1, 2008, at its option, cause the conversion of all, but not less than all, the outstanding shares of the Mandatory Convertible Preferred Stock into a number of shares of Common Stock equal to the Provisional Conversion Rate (subject to adjustment) (the “ Provisional Conversion Right ”); provided, however , that the Corporation may not elect to exercise its Provisional Conversion Right if, on or prior to July 1, 2008, the Corporation has completed a Material Transaction.

(b) Each share of Mandatory Convertible Preferred Stock shall automatically convert (unless previously converted at the option of the Holder in accordance with Section 9 or pursuant to an exercise of a Cash Acquisition Conversion right pursuant to Section 10) on the Provisional Conversion Date, into a number of shares of Common Stock equal to the Provisional Conversion Rate.

(c) The Corporation may elect to exercise the Provisional Conversion Right only if, in addition to issuing the number of shares of Common Stock equal to the Provisional Conversion Rate, the Corporation is then legally permitted to, and does, pay Holders an amount in cash equal to all accumulated and unpaid dividends (whether or not declared) on the Mandatory Convertible Preferred Stock for the then-current Dividend Period ending on the Provisional Conversion Date and all prior Dividend Periods (other than previously declared dividends on the Mandatory Convertible Preferred Stock payable to Holders of record as of a prior date). If the Corporation has not declared, or is unable to declare, all or any portion of such dividends, the Corporation shall not exercise the Provisional Conversion Right.

(d) The Corporation may elect to deliver, in lieu of shares of Common Stock upon conversion, cash or any combination of cash and shares of Common Stock, as determined by the Corporation in its sole discretion. The Corporation will deliver an amount of cash (if any) equal to (i) (x) the Provisional Conversion Rate minus (y) the number of shares of Common Stock the Corporation delivers (if any), multiplied by (ii) the Applicable Market Value.

(e) If the Corporation elects to exercise the Provisional Conversion Right, it will send a written notice by first class mail to each Holder specifying, among other things, the Provisional Conversion Date, that all accrued and unpaid dividends in respect of the current and any prior Dividend Period for which such dividend has not been paid in full will be paid in full in cash, whether such conversion amount will be payable in full in shares of Common Stock or any combination of cash and shares of Common Stock and, if a combination, specifying the portions payable in cash and Common Stock (which may be in percentage terms). In addition, the Corporation will issue a press release containing such information and publish such information on its website; provided , however , that the failure to issue such press release or publish such information on the Corporation’s website will not prevent or delay such conversion.

(12) Conversion Procedures. (a) Upon a Mandatory Conversion pursuant to Section 8 on the Mandatory Conversion Date or upon a Provisional Conversion pursuant to Section 11 on the Provisional Conversion Date, any outstanding shares of Mandatory Convertible Preferred Stock will automatically convert into shares of Common Stock. The person or persons entitled to receive the shares of Common Stock issuable upon conversion of the Mandatory Convertible Preferred Stock will be treated as the record holder(s) of such shares of Common Stock as of 5:00 p.m., New York City time, on the Mandatory Conversion Date or Provisional Conversion Date, as applicable. Except as provided under Section 15(c)(ii), prior to 5:00 p.m., New York City time, on the Mandatory Conversion Date or Provisional Conversion Date, as applicable, the shares of Common Stock issuable upon conversion of the Mandatory Convertible Preferred Stock will not be deemed to be outstanding for any purpose and Holders shall have no rights with respect to such shares of Common Stock, including voting rights, rights to respond to tender offers and rights to receive any dividends or other distributions on the Common Stock, by virtue of holding the Mandatory Convertible Preferred Stock.

(b) To effect an Early Conversion pursuant to Section 9, a Holder who:

(i) holds a beneficial interest in a global share of Mandatory Convertible Preferred stock must deliver to DTC the appropriate instruction form for conversion pursuant to DTC’s conversion program and, if required, pay funds equal to the dividend payable on the next Dividend Payment Date to which such Holder is not entitled and, if required, pay all taxes or duties, if any; or

(ii) holds shares of Mandatory Convertible Preferred Stock in certificated form must:

(A) complete and manually sign the conversion notice on the back of the Mandatory Convertible Preferred Stock certificate or a facsimile of the conversion notice;

(B) deliver the completed conversion notice and the certificated shares of Mandatory Convertible Preferred Stock to be converted to the Conversion Agent;

(D) if required, pay funds equal to the dividend payable on the next Dividend Payment Date to which such Holder is not entitled; and

(E) if required, pay all transfer or similar taxes, if any.

The Early Conversion Date will be the date on which a Holder has satisfied all of the foregoing requirements, to the extent applicable. Holders will not be required to pay any taxes or duties relating to the issuance or delivery of Common Stock if Holders exercise their conversion rights, but they will be required to pay any tax or duty that may be payable relating to any transfer involved in the issuance or delivery of Common Stock in a name other than the name of such Holder. Certificates representing Common Stock will be issued and delivered only after all applicable taxes and duties, if any, payable by Holders have been paid in full.

The person or persons entitled to receive the Common Stock issuable upon Early Conversion shall be treated for all purposes as the record holder(s) of such shares of Common Stock as of 5:00 p.m., New York City time, on the applicable Early Conversion Date. No allowance or adjustment, except as set forth in Section 15, shall be made in respect of dividends payable to holders of Common Stock of record as of any date prior to such applicable Conversion Date. Prior to the applicable Early Conversion Date, shares of Common Stock issuable upon conversion of any shares of Mandatory Convertible Preferred Stock shall not be deemed outstanding for any purpose, and Holders of shares of Mandatory Convertible Preferred Stock shall have no rights with respect to the Common Stock (including voting rights, rights to respond to tender offers for the Common Stock and rights to receive any dividends or other distributions on the Common Stock) by virtue of holding shares of Mandatory Convertible Preferred Stock.

In the event that an Early Conversion is effected with respect to shares of Mandatory Convertible Preferred Stock representing less than all the shares of Mandatory Convertible Preferred Stock held by a Holder, upon such Early Conversion the Corporation shall execute and the Transfer Agent shall countersign and deliver to the Holder thereof, at the expense of the Corporation, a certificate evidencing the shares of Mandatory Convertible Preferred Stock as to which Early Conversion was not effected.

(c) To effect a Cash Acquisition Conversion pursuant to Section 10, a Holder shall deliver to the Conversion Agent, no earlier than the Effective Date of the Cash Acquisition, and no later than 5:00 p.m., New York City time, on the date that is 15 calendar days after the Effective Date (as specified in the Cash Acquisition Notice), the certificate(s) (if such shares are held in certificated form) evidencing the shares of Mandatory Convertible Preferred Stock with respect to which the Cash Acquisition Conversion right is being exercised, duly assigned or endorsed for transfer to the Corporation, or accompanied by duly executed stock powers relating thereto, or in blank, with a written notice to the Corporation stating the Holder’s intention to convert early in connection with the Cash Acquisition containing the information set forth in Section 12(b) and providing the Corporation with payment instructions. For the avoidance of doubt, Holders of Mandatory Convertible Preferred Stock who do not submit their conversion notice during the Cash Acquisition Conversion Period shall not be entitled to convert their shares of Mandatory Convertible Preferred Stock at the Cash Acquisition Conversion Rate or to receive the Cash Acquisition Dividend Make-Whole Amount.

The person or persons entitled to receive the Common Stock issuable upon such conversion shall be treated for all purposes as the record holder(s) of such shares of Common Stock as of 5:00 p.m., New York City time, on the applicable Cash Acquisition Conversion Date. No allowance or adjustment, except as set forth in Section 15, shall be made in respect of dividends payable to holders of Common Stock of record as of any date prior to such applicable Conversion Date. Prior to such applicable Cash Acquisition Conversion Date, shares of Common Stock issuable upon conversion of any shares of Mandatory Convertible Preferred Stock shall not be deemed outstanding for any purpose, and Holders of shares of Mandatory Convertible Preferred Stock shall have no rights with respect to the Common Stock (including voting rights, rights to respond to tender offers for the Common Stock and rights to receive any dividends or other distributions on the Common Stock) by virtue of holding shares of Mandatory Convertible Preferred Stock.

In the event that a Cash Acquisition Conversion is effected with respect to shares of Mandatory Convertible Preferred Stock representing less than all the shares of Mandatory Convertible Preferred Stock held by a Holder, upon such Cash Acquisition Conversion the Corporation shall execute and the Transfer Agent shall countersign and deliver to the Holder thereof, at the expense of the Corporation, a certificate evidencing the shares of Mandatory Convertible Preferred Stock as to which Cash Acquisition Conversion was not effected.

(d) Shares of Mandatory Convertible Preferred Stock shall cease to be outstanding on the applicable Conversion Date, subject to the right of Holders of such shares to receive shares of Common Stock issuable upon conversion of such shares of Mandatory Convertible Preferred Stock and other amounts and shares of Common Stock, if any, to which they are entitled pursuant to Section 8, Section 9, Section 10 or Section 11, as applicable.

(e) In the event that a Holder of shares of Mandatory Convertible Preferred Stock shall not by written notice designate the name in which shares of Common Stock to be issued upon conversion of such Mandatory Convertible Preferred Stock should be registered or the address to which the certificate or certificates representing such shares of Common Stock should be sent, the Corporation shall be entitled to register such shares, and make such payment, in the name of the Holder of such Mandatory Convertible Preferred Stock as shown on the records of the Corporation and to send the certificate or certificates representing such shares of Common Stock to the address of such Holder shown on the records of the Corporation.

(13) Reservation of Common Stock . (a) The Corporation shall at all times reserve and keep available out of its authorized and unissued Common Stock or shares held in the treasury of the Corporation, solely for issuance upon the conversion of shares of Mandatory Convertible Preferred Stock as herein provided, free from any preemptive or other similar rights, such number of shares of Common Stock as shall from time to time be issuable upon the conversion of all the shares of Mandatory Convertible Preferred Stock then outstanding. For purposes of this Section 13(a), the number of shares of Common Stock that shall be deliverable upon the conversion of all outstanding shares of Mandatory Convertible Preferred Stock shall be computed as if at the time of computation all such outstanding shares were held by a single Holder.

(b) Notwithstanding the foregoing, the Corporation shall be entitled to deliver upon conversion of shares of Mandatory Convertible Preferred Stock, as herein provided, shares of Common Stock reacquired and held in the treasury of the Corporation (in lieu of the issuance of authorized and unissued shares of Common Stock), so long as any such treasury shares are free and clear of all liens, charges, security interests or encumbrances (other than liens, charges, security interests and other encumbrances created by the Holders).

(c) All shares of Common Stock delivered upon conversion of the Mandatory Convertible Preferred Stock shall be duly authorized, validly issued, fully paid and non-assessable, free and clear of all liens, claims, security interests and other encumbrances (other than liens, charges, security interests and other encumbrances created by the Holders).

(d) Prior to the delivery of any securities that the Corporation shall be obligated to deliver upon conversion of the Mandatory Convertible Preferred Stock, the Corporation shall use its reasonable best efforts to comply with all federal and state laws and regulations thereunder requiring the registration of such securities with, or any approval of or consent to the delivery thereof by, any governmental authority.

(e) The Corporation hereby covenants and agrees that, if at any time the Common Stock shall be listed on the New York Stock Exchange or any other U.S. national securities exchange or automated quotation system, the Corporation shall, if permitted by the rules of such exchange or automated quotation system, list and keep listed, so long as the Common Stock shall be so listed on such exchange or automated quotation system, all Common Stock issuable upon conversion of the Mandatory Convertible Preferred Stock; provided, however , that if the rules of such exchange or automated quotation system permit the Corporation to defer the listing of such Common Stock until the first conversion of Mandatory Convertible Preferred Stock into Common Stock in accordance with the provisions hereof, the Corporation covenants to list such Common Stock issuable upon conversion of the Mandatory Convertible Preferred Stock in accordance with the requirements of such exchange or automated quotation system at such time.

(14) Fractional Shares . (a) No fractional shares of Common Stock shall be issued as a result of any conversion of shares of Mandatory Convertible Preferred Stock.

(b) In lieu of any fractional share of Common Stock otherwise issuable in respect of any mandatory conversion pursuant to Section 8 or a provisional conversion pursuant to Section 11 or a conversion at the option of the Holder pursuant to Section 9 or Section 10, the Corporation shall pay an amount in cash (computed to the nearest cent) equal to the same fraction of:

(i) in the case of a conversion pursuant to Section 8, a Cash Acquisition Conversion pursuant to Section 10 or a Provisional Conversion pursuant to Section 11, the average of the Closing Prices over the five consecutive Trading Day period preceding the Trading Day immediately preceding the Mandatory Conversion Date, Cash Acquisition Conversion Date or Provisional Conversion Date, as applicable; or

(ii) in the case of an Early Conversion pursuant to Section 9, the Closing Price of the Common Stock on the second Trading Day immediately preceding the Early Conversion Date.

(c) If more than one share of the Mandatory Convertible Preferred Stock is surrendered for conversion at one time by or for the same Holder, the number of full shares of Common Stock issuable upon conversion thereof shall be computed on the basis of the aggregate number of shares of the Mandatory Convertible Preferred Stock so surrendered.

(15) Anti-Dilution Adjustments to the Fixed Conversion Rates . (a) Each Fixed Conversion Rate shall be subject to the following adjustments:

(i) Stock Dividends and Distributions . If the Corporation issues Common Stock to all or substantially all of the holders of Common Stock as a dividend or other distribution, each Fixed Conversion Rate in effect at 5:00 p.m., New York City time, on the date fixed for determination of the holders of Common Stock entitled to receive such dividend or other distribution will be divided by a fraction:

(A) the numerator of which is the number of shares of Common Stock outstanding at 5:00 p.m., New York City time, on the date fixed for such determination, and

(B) the denominator of which is the sum of the number of shares of Common Stock outstanding at 5:00 p.m., New York City time, on the date fixed for such determination and the total number of shares of Common Stock constituting such dividend or other distribution.

Any adjustment made pursuant to this clause (i) will become effective immediately after 5:00 p.m., New York City time, on the date fixed for such determination. If any dividend or distribution described in this clause (i) is declared but not so paid or made, each Fixed Conversion Rate shall be readjusted, effective as of the date the Board of Directors publicly announces its decision not to make such dividend or distribution, to such Fixed Conversion Rate that would be in effect if such dividend or distribution had not been declared. For the purposes of this clause (i), the number of shares of Common Stock outstanding at 5:00 p.m., New York City time, on the date fixed for such determination shall not include shares held in treasury by the Corporation but shall include any shares issuable in respect of any scrip certificates issued in lieu of fractions of shares of Common Stock. The Corporation shall not pay any dividend or make any distribution on shares of Common Stock held in treasury by the Corporation.

(ii) Issuance of Stock Purchase Rights . If the Corporation issues to all or substantially all holders of Common Stock rights or warrants (other than rights or warrants issued pursuant to a dividend reinvestment plan or share purchase plan or other similar plans), entitling such holders, for a period of up to 45 calendar days from the date of issuance of such rights or warrants, to subscribe for or purchase shares of Common Stock at a price per share less than the Current Market Price, each Fixed Conversion Rate in effect at 5:00 p.m., New York City time, on the date fixed for determination of the holders of Common Stock entitled to receive such rights or warrants will be increased by multiplying such Fixed Conversion Rate by a fraction:

(A) the numerator of which is the sum of the number of shares of Common Stock outstanding at 5:00 p.m., New York City time, on the date fixed for such determination and the number of shares of Common Stock issuable pursuant to such rights or warrants, and

(B) the denominator of which is the sum of the number of shares of Common Stock outstanding at 5:00 p.m., New York City time, on the date fixed for such determination and the number of shares of Common Stock equal to the quotient of the aggregate offering price payable to exercise such rights or warrants divided by the Current Market Price.

made upon the issuance of such rights or warrants been made on the basis of the delivery of only the number of shares of Common Stock actually delivered. In determining the aggregate offering price payable for such shares of Common Stock, there shall be taken into account any consideration received for such rights or warrants and the value of such consideration (if other than cash, to be determined by the Board of Directors). For the purposes of this clause (ii), the number of shares of Common Stock at the time outstanding shall not include shares held in treasury by the Corporation but shall include any shares issuable in respect of any scrip certificates issued in lieu of fractions of shares of Common Stock. The Corporation shall not issue any such rights or warrants in respect of shares of Common Stock held in treasury by the Corporation.

(iii) Subdivisions and Combinations of the Common Stock . If outstanding shares of Common Stock shall be subdivided into a greater number of shares of Common Stock or combined into a lesser number of shares of Common Stock, each Fixed Conversion Rate in effect at 5:00 p.m., New York City time, on the effective date of such subdivision or combination shall be multiplied by a fraction:

(A) the numerator of which is the number of shares of Common Stock that would be outstanding immediately after, and solely as a result of, such subdivision or combination, and

(B) the denominator of which is the number of shares of Common Stock outstanding immediately prior to such subdivision or combination.

Any adjustment made pursuant to this clause (iii) shall become effective immediately after 5:00 p.m., New York City time, on the effective date of such subdivision or combination.

(iv) Debt or Asset Distribution . (A) If the Corporation distributes to all or substantially all holders of Common Stock evidences of its indebtedness, shares of capital stock, securities, cash or other assets (excluding (1) any dividend or distribution covered by Section 15(a)(i), (2) any rights or warrants covered by Section 15(a)(ii), (3) any dividend or distribution covered by Section 15(a)(v) and (4) any Spin-Off to which the provisions set forth in Section 15(a)(iv)(B) apply), each Fixed Conversion Rate in effect at 5:00 p.m., New York City time, on the date fixed for the determination of holders of Common Stock entitled to receive such distribution will be multiplied by a fraction:

1. the numerator of which is the Current Market Price, and

2. the denominator of which is the Current Market Price minus the Fair Market Value on such date fixed for determination of the portion of the evidences of indebtedness, shares of capital stock, securities, cash or other assets so distributed applicable to one share of Common Stock.

(B) In the case of a Spin-Off, each Fixed Conversion Rate in effect at 5:00 p.m., New York City time, on the date fixed for the determination of holders of Common Stock entitled to receive such distribution will be multiplied by a fraction:

1. the numerator of which is the sum of the Current Market Price and the Fair Market Value of the portion of those shares of capital stock or similar equity interests so distributed applicable to one share of Common Stock as of the fifteenth Trading Day after the Ex-Date for such distribution (or, if such shares of capital stock or equity interests are listed on a U.S. national or regional securities exchange, the average of the Closing Prices of such securities for the 10 consecutive Trading Day period ending on such fifteenth Trading Day), and

2. the denominator of which is the Current Market Price.

Any adjustment made pursuant to this clause (iv) shall become effective immediately after 5:00 p.m., New York City time, on the date fixed for the determination of the holders of Common Stock entitled to receive such distribution. In the event that such distribution described in this clause (iv) is not so made, each Fixed Conversion Rate shall be readjusted, effective as of the date the Board of Directors publicly announces its decision not to pay such dividend or distribution, to such Fixed Conversion Rate that would then be in effect if such distribution had not been declared. If an adjustment to each Fixed Conversion Rate is required under this clause (iv) during any conversion period in respect of shares of Mandatory Convertible Preferred Stock that have been tendered for conversion, delivery of the shares of Common Stock issuable upon conversion will be delayed to the extent necessary in order to complete the calculations provided for in this clause (iv).

(v) Cash Distributions . If the Corporation distributes cash to all or substantially all holders of Common Stock, (1) any cash that is distributed in a Reorganization Event to which Section 15(e) applies, (2) any dividend or distribution in connection with the liquidation, dissolution or winding up of the Corporation or (3) any consideration payable in as part of a tender or exchange offer by the Corporation or any subsidiary of the Corporation), each Fixed Conversion Rate in effect at 5:00 p.m., New York City time, on the date fixed for determination of the holders of Common Stock entitled to receive such distribution will be multiplied by a fraction:

(A) the numerator of which is the Current Market Price, and

(B) the denominator of which is the Current Market Price minus the amount per share of such distribution.

Any adjustment made pursuant to this clause (v) shall become effective immediately after 5:00 p.m., New York City time, on the date fixed for the determination of the holders of Common Stock entitled to receive such distribution. In the event that any distribution described in this clause (v) is not so made, each Fixed Conversion Rate shall be readjusted, effective as of the date the Board of Directors publicly announces its decision not to pay such distribution, to such Fixed Conversion Rate which would then be in effect if such distribution had not been declared.

(vi) Self Tender Offers and Exchange Offers . If the Corporation or any subsidiary of the Corporation successfully completes a tender or exchange offer pursuant to a Schedule to or Registration Statement on Form S-4 for Common Stock (excluding any securities convertible or exchangeable for Common Stock), where the cash and the value of any other consideration included in the payment per share of Common Stock exceeds the Current Market Price, each Fixed Conversion Rate in effect at 5:00 p.m., New York City time, on the date of expiration of the tender or exchange offer (the “ Expiration Date ”) will be multiplied by a fraction:

(A) the numerator of which shall be equal to the sum of:

a. the aggregate cash and Fair Market Value on the Expiration Date of any other consideration paid or payable for shares validly tendered or exchanged and not withdrawn as of the Expiration Date; and

b. the product of the Current Market Price and the number of shares of Common Stock outstanding immediately after the last time tenders or exchanges may be made pursuant to such tender or exchange offer (the “ Expiration Time ”) on the Expiration Date; and

(B) the denominator of which shall be equal to the product of:


	1.	the Current Market Price; and

	2.	the number of shares of Common Stock outstanding immediately prior to the Expiration Time on the Expiration Date.

Any adjustment made pursuant to this clause (vi) shall become effective immediately after 5:00 p.m., New York City time, on the Expiration Date. In the event that the Company or one of its subsidiaries is obligated to purchase shares of Common Stock pursuant to any such tender offer or exchange offer, but the Company or such subsidiary is permanently prevented by applicable law from effecting any such purchases, or all such purchases are rescinded, then each Fixed Conversation Rate shall be readjusted to be such Fixed Conversion Rate that would then be in effect if such tender offer or exchange offer had not been made. Except as set forth in the preceding sentence, if the application of this clause (vi) to any tender offer or exchange offer would result in a decrease in each Fixed Conversation Rate, no adjustment shall be made for such tender offer or exchange offer under this clause (vi). If an adjustment to each Fixed Conversion Rate is required pursuant to this clause (vi) during any settlement period in respect of shares of Mandatory Convertible Preferred Stock that have been tendered for conversion, delivery of the related conversion consideration will be delayed to the extent necessary in order to complete the calculations provided for in this clause (vi).

(vii) In cases where the Fair Market Value of assets (including cash), debt securities or certain rights, warrants or options to purchase securities of the Corporation as to which Section 15(a)(iv)(A) and Section 15(a)(v) apply, applicable to one share of Common Stock, distributed to stockholders equals or exceeds the average of the Closing Prices of the Common Stock over the five consecutive Trading Day period ending on the Trading Day before the Ex-

Date for such distribution, rather than being entitled to an adjustment in each Fixed Conversion Rate, Holders of Mandatory Convertible Preferred Stock shall be entitled to receive upon conversion, in addition to a number of shares of Common Stock equal to the applicable conversion rate in effect on the applicable Conversion Date, the kind and amount of assets (including cash), debt securities or rights, warrants or options comprising the distribution that such Holder would have received if such Holder had converted its shares of Mandatory Convertible Preferred Stock immediately prior to the record date for determining the holders of Common Stock entitled to receive the distribution calculated by multiplying the kind and amount of assets (including cash), debt securities or rights, warrants or options comprising the distribution by the number of shares of Common Stock equal to the Minimum Conversion Rate in effect on the applicable Conversion Date.

(viii) Rights Plans . To the extent that the Corporation has a rights plan in effect with respect to the Common Stock on any Conversion Date, upon conversion of any Mandatory Convertible Preferred Stock, Holders shall receive, in addition to the Common Stock, the rights under such rights plan, unless, prior to such Conversion Date, the rights have separated from the Common Stock, in which case each Fixed Conversion Rate shall be adjusted at the time of separation of such rights as if the Corporation made a distribution to all holders of the Common Stock as described in Section 15(a)(iv), subject to readjustment in the event of the expiration, termination or redemption of such rights.

(b) Adjustment for Tax Reasons . The Corporation may make such increases in each Fixed Conversion Rate, in addition to any other increases required by this Section 15, as the Board of Directors deems it advisable to avoid or diminish any income tax to holders of the

Common Stock resulting from any dividend or distribution of the Corporation’s shares of Common Stock (or issuance of rights or warrants to acquire shares of Common Stock) or from any event treated as such for income tax purposes or for any other reasons; provided that the same proportionate adjustment must be made to each Fixed Conversion Rate.

(c) Calculation of Adjustments; Adjustments to Threshold Appreciation Price, Initial Price and Stock Price . (i) All adjustments to each Fixed Conversion Rate shall be calculated to the nearest 1/10,000th of a share of Common Stock. Prior to the Mandatory Conversion Date, no adjustment in a Fixed Conversion Rate shall be required unless such adjustment would require an increase or decrease of at least one percent therein; provided , that any adjustments which by reason of this Section 15(c) are not required to be made shall be carried forward and taken into account in any subsequent adjustment; provided, however that with respect to adjustments to be made to the Fixed Conversion Rates in connection with cash dividends paid by the Corporation, the Fixed Conversion Rates shall be adjusted regardless of whether such aggregate adjustments amount to one percent or more of the Fixed Conversion Rates no later than March 15 of each calendar year; provided, further that on the earlier of the Mandatory Conversion Date, the Effective Date of a Cash Acquisition or the Provisional Conversion Date, adjustments to each

Fixed Conversion Rate shall be made with respect to any such adjustment carried forward and which has not been taken into account before such date.

(ii) If an adjustment is made to the Fixed Conversion Rates pursuant to Sections 15(a)(i), 15(a)(ii), 15(a)(iii), 15(a)(iv), 15(a)(v), 15(a)(vi) or 15(b), an inversely proportional adjustment shall also be made to the Threshold Appreciation Price and the Initial Price solely for purposes of determining which of clauses (i), (ii) and (iii) of Section 8(b) shall apply on the Mandatory Conversion Date. Such adjustment shall be made by dividing each of the Threshold Appreciation Price and the Initial Price by a fraction, the numerator of which shall be either Fixed Conversion Rate immediately after such adjustment pursuant to Sections 15(a)(i), 15(a)(ii), 15(a)(iii), 15(a)(iv), 15(a)(v), 15(a)(vi) or 15(b) and the denominator of which shall be such Fixed Conversion Rate immediately before such adjustment; provided , that if such adjustment to the Fixed Conversion Rates is required to be made pursuant to the occurrence of any of the events contemplated by Sections 15(a)(i), 15(a)(ii), 15(a)(iii), 15(a)(iv), 15(a)(v), 15(a)(vi) or 15(b) during the period taken into consideration for determining the Applicable Market Value, appropriate and customary adjustments shall be made to the Fixed Conversion Rates. The Corporation shall make appropriate adjustments to the Closing Prices prior to the relevant Ex-Date used to calculate the Applicable Market Value to account for any adjustments to the Initial Price, the Threshold Appreciation Price and the Fixed Conversion Rates that become effective during the period in which the Applicable Market Value is being calculated. If:

(A) the record date for a dividend or distribution on Common Stock occurs after the end of the 20 consecutive Trading Day period used for calculating the Applicable Market Value and before the Mandatory Conversion Date, and

(B) such dividend or distribution would have resulted in an adjustment of the number of shares issuable to the Holders of Mandatory Convertible Preferred Stock had such record date occurred on or before the last Trading Day of such 20 consecutive Trading Day period, then the Corporation shall deem the Holders of Mandatory Convertible Preferred Stock to be holders of record of Common Stock for purposes of that dividend or distribution. In this case, the Holders of the Mandatory Convertible Preferred Stock would receive the dividend or distribution on Common Stock together with the number of shares of Common Stock issuable upon the Mandatory Conversion Date.

(iii) If an adjustment is made to the Minimum Conversion Rate pursuant to Sections 15(a)(i), 15(a)(ii), 15(a)(iii), 15(a)(iv), 15(a)(v), 15(a)(vi) or 15(b), a proportional adjustment shall be made to each Stock Price column heading set forth in the table included in the definition of “Cash Acquisition Conversion Rate.” Such adjustment shall be made by multiplying each Stock Price included in such table by a fraction, the numerator of which is the Minimum Conversion Rate immediately prior to such adjustment and the denominator of which is the Minimum Conversion Rate immediately after such adjustment.

(iv) No adjustment to the Fixed Conversion Rates shall be made if Holders may participate in the transaction that would otherwise give rise to an adjustment. In addition, the applicable Conversion Rate shall not be adjusted:

(A) upon the issuance of any shares of Common Stock pursuant to any present or future plan providing for the reinvestment of dividends or interest payable on the Corporation’s securities and the investment of additional optional amounts in shares of Common Stock under any plan;

(B) upon the issuance of any shares of Common Stock or rights or warrants to purchase those shares pursuant to any present or future employee, director or consultant benefit plan or program of or assumed by the Corporation or any of its subsidiaries;

(C) upon the issuance of any shares of Common Stock pursuant to any option, warrant, right or exercisable, exchangeable or convertible security outstanding as of the Issue Date; or

(D) for a change in the par value or no par value of the Common Stock.

(d) Notice of Adjustment . Whenever the Fixed Conversion Rates are to be adjusted, the Corporation shall:

(i) compute such adjusted Fixed Conversion Rates, Cash Acquisition Conversion Rates and Provisional Conversion Rates, and prepare and transmit to the Transfer Agent an Officer’s Certificate setting forth such adjusted Fixed Conversion Rates, Cash Acquisition Conversion Rates and Provisional Conversion Rates, the method of calculation thereof in reasonable detail and the facts requiring such adjustment and upon which such adjustment is based;

(ii) as soon as practicable following the occurrence of an event that requires an adjustment to the Fixed Conversion Rates (or if the Corporation is not aware of such occurrence, as soon as practicable after becoming so aware), provide, or cause to be provided, a written notice to the Holders of Mandatory Convertible Preferred Stock of the occurrence of such event; and

(iii) as soon as practicable following the determination of such adjusted Fixed Conversion Rates, Cash Acquisition Conversion Rates and Provisional Conversion Rates, provide, or cause to be provided, to the Holders of Mandatory Convertible Preferred Stock a statement setting forth in reasonable detail the method by which the adjustment to such Fixed Conversion Rates, Cash Acquisition Conversion Rates and Provisional Conversion Rates was determined and setting forth such adjusted Fixed Conversion Rates, Cash Acquisition Conversion Rates and Provisional Conversion Rates.

(e) Reorganization Events . In the event of:

(i) any consolidation or merger of the Corporation with or into another Person (other than a merger or consolidation in which the Corporation is the continuing corporation and in which the Common Stock outstanding immediately prior to the merger or consolidation is not exchanged for cash, securities or other property of the Corporation or another Person);

(ii) any sale, transfer, lease or conveyance to another Person of all or substantially all of the property and assets of the Corporation;

(iii) any reclassification of Common Stock into securities including securities other than Common Stock; or

(iv) any statutory exchange of securities of the Corporation with another Person (other than in connection with a merger or acquisition),

(each, a “ Reorganization Event ”), each share of Mandatory Convertible Preferred Stock outstanding immediately prior to such Reorganization Event shall, without the consent of Holders of Mandatory Convertible Preferred Stock, become convertible into the kind of securities, cash and other property (the “ Exchange Property ”) that such Holder would have been entitled to receive if such Holder had converted its Mandatory Convertible Preferred Stock into Common Stock immediately prior to such Reorganization Event. For purposes of the foregoing, the type and amount of consideration that a Holder of Mandatory Convertible Preferred Stock would have been entitled to receive as a holder of Common Stock in the case of any Reorganization Event that causes the Common Stock to be converted into the right to receive more than a single type of consideration determined based in part upon any form of shareholder election will be deemed to be the weighted average of the types and amounts of consideration received by the holders of Common Stock that affirmatively make such an election. In such event, on the applicable Conversion Date, the applicable conversion rate then in effect will be applied to determine the amount and value of securities, cash or property a holder of one share of Common Stock would have received in such transaction (without any interest thereon and without any right to dividends or distributions thereon which have a record date that is prior to the Conversion Date). The applicable Conversion Rate shall be determined based upon the Applicable Market Value of the Exchange Property.

For purposes of this Section 15(e), “ Applicable Market Value ” shall be deemed to refer to the Applicable Market Value of the Exchange Property and such value shall be determined (A) with respect to any publicly traded securities that compose all or part of the Exchange Property, based on the Closing Price of such securities, (B) in the case of any cash that composes all or part of the Exchange Property, based on the amount of such cash and (C) in the case of any other property that composes all or part of the Exchange Property, based on the value of such property, as determined by a nationally recognized independent investment banking firm retained by the Corporation for this purpose. For purposes of this Section 15(e), the term “ Closing Price ”

shall be deemed to refer to the closing sale price, last quoted bid price or mid-point of the last bid and ask prices, as the case may be, of any publicly traded securities that comprise all or part of the Exchange Property. For purposes of this Section 15(e), references to Common Stock in the definition of “ Trading Day ” shall be replaced by references to any publicly traded securities that comprise all or part of the Exchange Property.

The above provisions of this Section 15(e) shall similarly apply to successive Reorganization Events and the provisions of Section 15 shall apply to any shares of capital stock of the Corporation (or any successor) received by the holders of Common Stock in any such Reorganization Event.

The Corporation (or any successor) shall, within 20 days of the occurrence of any Reorganization Event, provide written notice to the Holders of such occurrence of such event and of the kind and amount of the cash, securities or other property that constitute the Exchange Property. Failure to deliver such notice shall not affect the operation of this Section 15(e).

(16) Replacement Stock Certificates . (a) If physical certificates are issued, and any of the Mandatory Convertible Preferred Stock certificates shall be mutilated, lost, stolen or destroyed, the Corporation shall, at the expense of the Holder, issue, in exchange and in substitution for and upon cancellation of the mutilated Mandatory Convertible Preferred Stock certificate, or in lieu of and substitution for the Mandatory Convertible Preferred Stock certificate lost, stolen or destroyed, a new Mandatory Convertible Preferred Stock certificate of like tenor and representing an equivalent amount of shares of Mandatory Convertible Preferred Stock, but only upon receipt of evidence of such loss, theft or destruction of such Mandatory Convertible Preferred Stock certificate and indemnity, if requested, satisfactory to the Corporation and the Transfer Agent.

(b) The Corporation is not required to issue any certificates representing the Mandatory Convertible Preferred Stock on or after the Mandatory Conversion Date. In lieu of the delivery of a replacement certificate following the Mandatory Conversion Date, the Transfer Agent, upon delivery of the evidence and indemnity described above, shall deliver the shares of Common Stock issuable pursuant to the terms of the Mandatory Convertible Preferred Stock formerly evidenced by the certificate.

(17) Transfer Agent, Registrar, and Conversion and Dividend Disbursing Agent . The duly appointed Transfer Agent, Registrar and Conversion and Dividend Disbursing Agent for the Mandatory Convertible Preferred Stock shall be American Stock Transfer & Trust Company, New York, New York. The Corporation may, in its sole discretion, remove the Transfer Agent in accordance with the agreement between the Corporation and the Transfer Agent; provided that the Corporation shall appoint a successor transfer agent who shall accept such appointment prior to the effectiveness of such removal. Upon any such removal or appointment, the Corporation shall send notice thereof by first-class mail, postage prepaid, to the Holders of the Mandatory Convertible Preferred Stock.

(18) Form . (a) The Mandatory Convertible Preferred Stock shall be issued in the form of one or more permanent global shares of Mandatory Convertible Preferred Stock in definitive, fully registered form with the global legend (the “ Global Shares Legend ”) as set forth on the form of Mandatory Convertible Preferred Stock certificate attached hereto as Exhibit A (each, a “ Global Preferred Share ”), which is hereby incorporated in and expressly made a part of this Certificate. The Global Preferred Shares may have notations, legends or endorsements required by law, stock exchange rules, agreements to which the Corporation is subject, if any, or usage ( provided that any such notation, legend or endorsement is in a form acceptable to the Corporation). The Global Preferred Shares shall be deposited on behalf of the Holders of the Mandatory Convertible Preferred Stock represented thereby with the Registrar, at its New York office as custodian for DTC or a Depositary, and registered in the name of the Depositary or a nominee of the Depositary, duly executed by the Corporation and countersigned and registered by the Registrar as hereinafter provided. The aggregate number of shares represented by each Global Preferred Share may from time to time be increased or decreased by adjustments made on the records of the Registrar and the Depositary or its nominee as hereinafter provided. This Section 18(a) shall apply only to a Global Preferred Share deposited with or on behalf of the Depositary. The Corporation shall execute and the Registrar shall, in accordance with this Section 18, countersign and deliver initially one or more Global Preferred Shares that (i) shall be registered in the name of Cede & Co. or other nominee of the Depositary and (ii) shall be delivered by the Registrar to Cede & Co. or pursuant to instructions received from Cede & Co. or held by the Registrar as custodian for the Depositary pursuant to an agreement between the Depositary and the Registrar. Members of, or participants in, the Depositary (“ Agent Members ”) shall have no rights under this Certificate, with respect to any Global Preferred Share held on their behalf by the Depositary or by the Registrar as the custodian of the Depositary, or under such Global Preferred Share, and the Depositary may be treated by the Corporation, the Registrar and any agent of the Corporation or the Registrar as the absolute owner of such Global Preferred Share for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the Corporation, the Registrar or any agent of the Corporation or the Registrar from giving effect to any written certification, proxy or other authorization furnished by the Depositary or impair, as between the Depositary and its Agent Members, the operation of customary practices of the Depositary governing the exercise of the rights of a holder of a beneficial interest in any Global Preferred Share. The Holder of shares of the Mandatory Convertible Preferred Stock may grant proxies or otherwise authorize any Person to take any action that a Holder is entitled to take pursuant to the Mandatory Convertible Preferred Stock, this Certificate or the Restated Certificate of Incorporation. Owners of beneficial interests in Global Preferred Shares shall not be entitled to receive physical delivery of certificated shares of Mandatory Convertible Preferred Stock, unless (x) the Depositary is unwilling or unable to continue as Depositary for the Global Preferred Shares and the Corporation does not appoint a qualified replacement for the Depositary within 90 days, (y) the Depositary ceases to be a “clearing agency” registered under the Exchange Act and the Corporation does not appoint a qualified replacement for the Depositary within 90 days or (z) the

Corporation decides to discontinue the use of book-entry transfer through DTC (or any successor Depositary). In any such case, the Global Preferred Shares shall be exchanged in whole for definitive shares of Mandatory Convertible Preferred Stock in registered form, with the same terms and of an equal aggregate Liquidation Preference. Definitive shares of Mandatory Convertible Preferred Stock shall be registered in the name or names of the Person or Person specified by the Depositary in a written instrument to the Registrar.

(b) (i) An Officer shall sign the Global Preferred Shares for the Corporation, in accordance with the Corporation’s bylaws and applicable law, by manual or facsimile signature.

(ii) If an Officer whose signature is on a Global Preferred Share no longer holds that office at the time the Transfer Agent countersigns the Global Preferred Share, the Global Preferred Share shall be valid nevertheless.

(iii) A Global Preferred Share shall not be valid until an authorized signatory of the Transfer Agent manually countersigns such Global Preferred Share. The signature shall be conclusive evidence that such Global Preferred Share has been countersigned under this Certificate. Each Global Preferred Share shall be dated the date of its countersignature.

(19) Miscellaneous . (a) All notices referred to herein shall be in writing, and, unless otherwise specified herein, all notices hereunder shall be deemed to have been given upon the earlier of receipt thereof or three Business Days after the mailing thereof if sent by registered or certified mail (unless first-class mail shall be specifically permitted for such notice under the terms of this Certificate) with postage prepaid, addressed: (i) if to the Corporation, to its office at 6500 North Mineral Drive, Suite 200, Coeur d’Alene, Idaho 83815-9408 (Attention: General Counsel) or to the Transfer Agent at its Corporate Trust Office, or other agent of the Corporation designated as permitted by this Certificate, or (ii) if to any Holder of the Mandatory Convertible Preferred Stock or holder of shares of Common Stock, as the case may be, to such holder at the address of such holder as listed in the stock record books of the Corporation (which may include the records of any transfer agent for the Mandatory Convertible Preferred Stock or Common Stock, as the case may be), or (iii) to such other address as the Corporation or any such holder, as the case may be, shall have designated by notice similarly given.

(b) The Corporation shall pay any and all stock transfer and documentary stamp taxes that may be payable in respect of any issuance or delivery of shares of Mandatory Convertible Preferred Stock or shares of Common Stock or other securities issued on account of Mandatory Convertible Preferred Stock pursuant hereto or certificates representing such shares or securities. The Corporation shall not, however, be required to pay any such tax that may be payable in respect of any transfer involved in the issuance or delivery of shares of Mandatory Convertible Preferred Stock or Common Stock or other securities in a name other than that in which the shares of Mandatory Convertible Preferred Stock with respect to which such shares or other securities are issued or delivered were registered, or in respect of any payment to any person other than a payment to the Holder thereof, and shall not be required to make any such issuance,

delivery or payment unless and until the person otherwise entitled to such issuance, delivery or payment has paid to the Corporation the amount of any such tax or has established, to the satisfaction of the Corporation, that such tax has been paid or is not payable.

(c) The Liquidation Preference and the Dividend Rate each shall be subject to equitable adjustment whenever there shall occur a stock split, combination, reclassification or other similar event involving the Mandatory Convertible Preferred Stock. Such adjustments shall be determined in good faith by the Board of Directors and submitted by the Board of Directors to the Transfer Agent.


	HECLA MINING COMPANY

	By:	/s/ Philip C. Wolf
		Philip C. Wolf, Senior Vice President
		and General Counsel

STATE OF DELAWARE
CERTIFICATE OF CORRECTION

Hecla Mining Company, a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware.

DOES HEREBY CERTIFY:


	1.	The name of the corporation is Hecla Mining Company.

	2.	That a Certificate of Designations of 6.5% Mandatory Convertible Preferred Stock of Hecla Mining Company was filed by the Secretary of State of Delaware on December 14, 2007 and that said Certificate requires correction as permitted by Section 103 of the General Corporation Law of the State of Delaware.

	3.	The inaccuracy or defect of said Certificate is:

		The first sentence of Section 15(a)(v) of the Certificate incorrectly omits the term “(excluding”; and

		The last paragraph of Section 15(a)(vi) of the Certificate contains two typographical errors by referring to “the Company” instead of “the Corporation”.

	4.	The first sentence of Section 15(a)(v) of the Certificate is corrected to read in its entirety as follows:

Cash Distributions . If the Corporation distributes cash to all or substantially all holders of Common Stock, (excluding (1) any cash that is distributed in a Reorganization Event to which Section 15(e) applies, (2) any dividend or distribution in connection with the liquidation, dissolution or winding up of the Corporation or (3) any consideration payable in as part of a tender or exchange offer by the Corporation or any subsidiary of the Corporation), each Fixed Conversion Rate in effect at 5:00 p.m., New York City time, on the date fixed for determination of the holders of Common Stock entitled to receive such distribution will be multiplied by a fraction:

(A) the numerator of which is the Current Market Price, and

(B) the denominator of which is the Current Market Price minus the amount per share of such distribution.


	5.	The last paragraph of Section 15(a)(vi) of the Certificate is corrected to read in its entirety as follows:

Any adjustment made pursuant to this clause (vi) shall become effective immediately after 5:00 p.m., New York City time, on the Expiration Date. In the event that the Corporation or one of its subsidiaries is obligated to purchase shares of Common Stock pursuant to any such tender offer or exchange offer, but the Corporation or such subsidiary is permanently prevented by applicable law from effecting any such purchases, or all such purchases are rescinded, then each Fixed Conversation Rate shall be readjusted to be such Fixed Conversion Rate that would then be in effect if such tender offer or exchange offer had not been made. Except as set forth in the preceding sentence, if the application of this clause (vi) to any tender offer or exchange offer would result in a decrease in each Fixed Conversation Rate, no adjustment shall be made for such tender offer or exchange offer under this clause (vi). If an adjustment to each Fixed Conversion Rate is required pursuant to this clause (vi) during any settlement period in respect of shares of Mandatory Convertible Preferred Stock that have been tendered for conversion, delivery of the related conversion consideration will be delayed to the extent necessary in order to complete the calculations provided for in this clause (vi).

IN WITNESS WHEREOF , said corporation has caused this Certificate of Correction this 29 ^th day of January, A.D. 2009.


By:	/s/ Michael B. White
		Authorized Officer



Name:	Michael B. White
		Print or Type



	Title:		Secretary

CERTIFICATE OF DESIGNATIONS OF

12% CONVERTIBLE PREFERRED STOCK

HECLA MINING COMPANY.

Pursuant to Section 151 of the General Corporation Law
of the State of Delaware

The undersigned, Michael B. White, Secretary of Hecla Mining Company, a Delaware corporation (hereinafter called the “ Corporation ”), does hereby certify that the Board of Directors of the Corporation or an authorized committee thereof (the “ Board of Directors ”), pursuant to the provisions of Sections 103 and 151 of the General Corporation Law of the State of Delaware, hereby makes this Certificate of Designations (this “ Certificate ”) and hereby states and certifies that pursuant to the authority expressly vested in the Board of Directors by the Certificate of Incorporation of the Corporation (as such may be amended, modified or restated from time to time, the “ Certificate of Incorporation ”), the Board of Directors duly adopted the following resolutions:

RESOLVED, that each share of such series of new Preferred Stock shall rank equally in all respects and shall be subject to the following provisions:

Number and Designation . Four Hundred Thousand (400,000) shares of the Preferred Stock of the Corporation shall be designated as “12% Convertible Preferred Stock” the (“ 12% Convertible Preferred Stock ”).

Certain Definitions . As used in this Certificate, the following terms shall have the meanings defined in this Section 2:

“ 12% Convertible Preferred Stock ” shall have the meaning set forth in Section 1.

“ Board of Directors ” shall have the meaning set forth in the recitals.

“ Business Day ” means any day other than a Saturday or Sunday or any other day on which commercial banks in New York City are authorized or required by law or executive order to close.

“ Certificate ” shall have the meaning set forth in the recitals.

“ Change-of-Control ” means the existence or occurrence of any of the following: (a) the sale, conveyance or disposition of all or substantially all of the assets of the Corporation; (b) the effectuation of a transaction or series of related transactions in which more than fifty percent (50%) of the voting power of the Corporation is disposed of (excluding any disposition in connection with a public offering or to widely dispersed institutional purchasers); (c) the consolidation, merger or other business combination of the Corporation with or into any other entity, immediately following which the prior stockholders of the Corporation fail to own, directly or indirectly, at least fifty percent (50%) of the voting equity of the surviving entity; (d) a transaction or series of transactions in which any Person or “group” (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended) acquires more than fifty percent (50%) of the voting equity of the Corporation; (e) the replacement of a majority of the Board of Directors with individuals who were not nominated or elected by at least a majority of the directors at the time of such replacement; or (f) a transaction or series of transactions that constitutes or results in a “going private transaction” (as defined in Section 13(e) of the Securities Exchange Act of 1934, as amended and the regulations of the Commission issued thereunder).

“ Closing Price ” of the Common Stock or any securities distributed in a Spin-Off, as the case may be, means, as of any date of determination:


	(i)	the closing price on that date or, if no closing price is reported, the last reported sale price, of shares of the Common Stock or such other securities on the New York Stock Exchange on that date; or

	(ii)	if the Common Stock or such other securities are not traded on the New York Stock Exchange, the closing price on that date as reported in composite transactions for the principal U.S. national or regional securities exchange on which the Common Stock or such other securities are so traded or, if no closing price is reported, the last reported sale price of shares of the Common Stock or such other securities on the principal U.S. national or regional securities exchange on which the Common Stock or such other securities are so traded on that date; or

	(iii)	if the Common Stock or such other securities are not traded on a U.S. national or regional securities exchange, the last quoted bid price on that date for the Common Stock or such other securities in the over-the-counter market as reported by Pink Sheets LLC or a similar organization; or


	(iv)	if the Common Stock or such other securities are not so quoted by Pink Sheets LLC or a similar organization, the market price of the Common Stock or such other securities on that date as determined by a nationally recognized independent investment banking firm retained by the Corporation for this purpose.

For the purposes of this Certificate, all references herein to the closing price and the last reported sale price of the Common Stock on the New York Stock Exchange shall be such closing price and last reported sale price as reflected on the website of the New York Stock Exchange (www.nyse.com) and as reported by Bloomberg Professional Service; provided that in the event that there is a discrepancy between the closing price and the last reported sale price as reflected on the website of the New York Stock Exchange and as reported by Bloomberg Professional Service, the closing price and the last reported sale price on the website of the New York Stock Exchange shall govern.

“ Common Stock ” as used in this Certificate means the Corporation’s common stock, par value $0.25 per share, as the same exists at the date of filing of this Certificate relating to the 12% Convertible Preferred Stock, or any other class of stock resulting from successive changes or reclassifications of such common stock consisting solely of changes in par value, or from par value to no par value, or from no par value to par value.

“ Conversion Date ” shall have the meaning set forth in Section 4(d).

“ Conversion Price ” shall mean the conversion price per share of Common Stock for which the 12% Convertible Preferred Stock is convertible, as such Conversion Price may be adjusted as provided herein. The initial Conversion Price will be $1.74.

“ Conversion Rate ” shall have the meaning set forth in Section 8 hereof.

“ Convertible Preferred Stock ” shall have the meaning set forth in the Credit Agreement.

“ Corporate Trust Office ” means the principal corporate trust office of the Transfer Agent at which, at any particular time, its corporate trust business shall be administered.

“ Corporation ” shall have the meaning set forth in the recitals.

“ Credit Agreement ” means that certain Amended and Restated Credit Agreement, dated as of April 16, 2008 (as amended, supplemented or otherwise modified from time to time), of the Corporation.

“ Current Market Price ” per share of Common Stock on any date means for the purposes of determining an adjustment to the Conversion Rate:


	(i)	for purposes of adjustments pursuant to Section 12(a)(ii), Section 12(a)(iv)(A) in the event of an adjustment not relating to a Spin-Off, and Section 12(a)(v), the average of the Closing Prices over the five consecutive Trading Day period ending on the Trading Day preceding the Ex-Date with respect to the issuance or distribution requiring such computation;

	(ii)	for purposes of adjustments pursuant to Section 12(a)(iv)(B) in the event of an adjustment relating to a Spin-Off, the average of the Closing Prices over the first ten consecutive Trading Days commencing on and including the fifth Trading Day following the Ex-Date for such distribution; and

	(iii)	for purposes of adjustments pursuant to Section 12(a)(vi), the average of the Closing Prices over the five consecutive Trading Day period ending on the seventh Trading Day after the Expiration Date of the tender offer or exchange offer.

“ Dividend Payment Date ” means January 1, April 1, July 1, and October 1 of each year.

“ Dividend Period ” means the period from and including a Dividend Payment Date to but excluding the next Dividend Payment Date, except that the initial Dividend Period will commence on and include the Share Specific Issue Date and will end on and exclude the next Dividend Payment Date.

“ Dividend Rate ” shall have the meaning set forth in Section 4.

“ Exchange Property ” shall have the meaning set forth in Section 12(e).

“ Ex-Date ” when used with respect to any issuance or distribution, means the first date on which shares of the Common Stock trade without the right to receive such issuance or distribution.

“ Expiration Date ” shall have the meaning set forth in Section 12(a)(vi).

“ Expiration Time ” shall have the meaning set forth in Section 12(a)(vi).

“ Fair Market Value ” means the fair market value as reasonably determined in good faith by the Board of Directors.

“ Holder ” means the person in whose name the shares of the 12% Convertible Preferred Stock are registered, which may be treated by the Corporation and the Transfer Agent as the absolute owner of the shares of 12% Convertible Preferred Stock for the purpose of making payment and settling conversions and for all other purposes.

“ Issue Date ” shall mean February 10, 2009, the first date of issuance of the 12% Convertible Preferred Stock.

“ Junior Stock ” means the Common Stock, the Series A Junior Participating Preferred Stock, $0.25 par value per share, and each other class of capital stock or series of Preferred Stock established after the Issue Date, the terms of which do not expressly provide that such class or series ranks senior to or on a parity with the 12% Convertible Preferred Stock as to dividend rights or rights upon the Corporation’s liquidation, winding-up or dissolution.

“ Liquidation Preference ” means, as to the 12% Convertible Preferred Stock, $100.00 per share.

“ Loans ” shall have the meaning as set forth in the Credit Agreement.

“ Officer’s Certificate ” means a certificate of the Corporation, signed by any duly authorized Officer of the Corporation.

“ Parity Stock ” means the Series B Cumulative Convertible Preferred Stock, $0.25 par value per share, the 6.5% Mandatory Convertible Preferred Stock, $0.25 par value per share, any subsequent issuance of Convertible Preferred Stock pursuant to the Credit Agreement, and each other class of capital stock or series of Preferred Stock established after the Issue Date, the terms of which expressly provide that such class or series shall rank on a parity with the 12% Convertible Preferred Stock as to dividend rights or rights upon the Corporation’s liquidation, winding-up or dissolution.

“ Person ” means a legal person, including any individual, corporation, estate, partnership, joint venture, association, joint-stock company, limited liability company or trust.

“ Preferred Stock ” shall have the meaning set forth in the recitals.

“ Record Holder ” means a Holder of record of the 12% Convertible Preferred Stock as such Holder appears on the stock register of the Corporation at 5:00 p.m., New York City time, on a Record Date.

“ Redemption Date ” shall have the meaning set forth in Section 9 hereof.

“ Reorganization Event ” shall have the meaning set forth in Section 12(e).

“ Restated Certificate of Incorporation ” shall have the meaning set forth in the recitals.

“ Senior Stock ” means any class of capital stock or series of Preferred Stock established after the Issue Date, the terms of which expressly provide that such class or series shall rank senior to the 12% Convertible Preferred Stock as to dividend rights or rights upon the Corporation’s liquidation, winding-up or dissolution.

“Share Specific Issuance Date” shall have the meaning set forth in Section 4 hereof.

“ Shelf Registration Statement ” shall mean a shelf registration statement filed with the Securities and Exchange Commission pursuant to Rule 415 under the Securities Act of 1933, as amended.

“ Trading Day ” means a day on which the Common Stock:


	(i)	is not suspended from trading on any U.S. national or regional securities exchange or association or over-the-counter market at the close of business; and

	(ii)	has traded at least once on the U.S. national or regional securities exchange or association or over-the-counter market that is the primary market for the trading of the Common Stock.

“ Transfer Agent ” shall initially mean American Stock Transfer and Trust Company, the Corporation’s duly appointed transfer agent, registrar, and conversion and dividend disbursing agent for the 12% Convertible Preferred Stock.

“ Voting Rights Class ” shall have the meaning set forth in Section 6 hereof.

“ Voting Rights Triggering Event ” shall mean the failure of the Corporation to pay dividends on the 12% Convertible Preferred Stock with respect to six or more Dividend Periods (whether or not consecutive).

Ranking . The 12% Convertible Preferred Stock will, with respect to dividend rights or rights upon the liquidation, winding-up or dissolution of the Corporation rank (i) senior to all

Junior Stock, (ii) on parity with all Parity Stock and (iii) junior to all Senior Stock and the Corporation’s existing and future indebtedness.

Dividends . (a) Holders of shares of outstanding 12% Convertible Preferred Stock shall be entitled to receive, when, as and if declared by the Board of Directors, or an authorized committee of the Board of Directors, out of funds of the Corporation legally available therefor, cumulative dividends at the rate (the “ Dividend Rate ”) per annum of 12% per share on the sum of the Liquidation Preference plus all accrued and unpaid dividends thereon from and including the date such particular shares of 12% Convertible Preferred Stock were first issued by the Company (the “Share Specific Issue Date” ). The initial issuance of shares of 12% Convertible Preferred Stock will occur as of February 10, 2009 and subsequent issuances are contemplated each July 1 and January 1 thereafter during the term of the Credit Agreement. The Dividend Rate on accrued but unpaid dividends shall be compounded quarterly on January 1, April 1, July 1 and October 1 of each year.

Dividends shall be payable in arrears on each Dividend Payment Date (commencing on the first Dividend Payment Date) for the Dividend Period ending immediately prior to such Dividend Payment Date to the Record Holders of 12% Convertible Preferred Stock on the Record Date applicable to such Dividend Payment Date. If a Dividend Payment Date is not a Business Day, payment will be made on the next succeeding Business Day. Such dividends shall be cumulative from the most recent date as to which dividends shall have been paid or, if no dividends have been paid, from the Share Specific Issue Date, whether or not in any Dividend Period(s) there shall have been funds of the Corporation legally available for the payment of such dividends.

No dividend shall be declared or paid upon any outstanding share of 12% Convertible Preferred Stock with respect to any Dividend Period unless all dividends for all preceding Dividend Periods shall have been declared and paid upon all outstanding shares of 12% Convertible Preferred Stock.

Holders of shares of 12% Convertible Preferred Stock shall not be entitled to any dividends on the 12% Convertible Preferred Stock in excess of full cumulative dividends.

Dividends on any share of 12% Convertible Preferred Stock converted to Common Stock shall cease to accumulate on the date of its conversion (the “Conversion Date”) to Common Stock pursuant to this Certificate or the Redemption Date (provided the Corporation has not defaulted on paying the redemption price on the Redemption Date).

The Corporation shall disclose in its annual and quarterly reports on Form 10-K and Form 10-Q, respectively, filed with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended, the amount of any accumulated and unpaid dividends on 12% Convertible Preferred Stock for Dividend Periods ending prior to the last date of the relevant quarterly or annual period as to which such report relates.

Each payment of a declared dividend on the 12% Convertible Preferred Stock shall be made in cash.

Payment Restrictions . (a) Unless all accumulated and unpaid dividends on 12% Convertible Preferred Stock for all prior Dividend Periods shall have been paid in full, the Corporation shall not:


	(i)	declare or pay any dividend or make any distribution of assets on any Junior Stock, other than dividends or distributions in the form of Junior Stock and cash solely in lieu of fractional shares in connection with any such dividend or distribution;

	(ii)	redeem, purchase or otherwise acquire any shares of Junior Stock or pay or make any monies available for a sinking fund for such shares of Junior Stock, other than (A) upon conversion or exchange for other Junior Stock, (B) the purchase of fractional interests in shares of any Junior Stock pursuant to the conversion or exchange provisions of such Junior Stock, or (C) the forfeiture of unvested shares of restricted stock or share withholdings upon exercise, delivery or vesting of equity awards granted to officers, directors and employees upon termination of employment or service with the Corporation or any of its subsidiaries;

	(iii)	except as provided in Section 5(b), declare or pay any dividend or make any distribution of assets on any shares of Parity Stock, other than (A) dividends or distributions in the form of Parity Stock or Junior Stock or (B) cash solely in lieu of fractional shares in connection with any such dividend or distribution; or

	(iv)	redeem, purchase or otherwise acquire any shares of Parity Stock, except upon conversion into or exchange for other Parity Stock or Junior Stock and cash solely in lieu of fractional shares in connection with any such conversion or exchange.

When dividends are not paid in full upon the shares of 12% Convertible Preferred Stock, all dividends declared on 12% Convertible Preferred Stock and any other Parity Stock shall be paid either:


	(i)	pro rata so that the amount of dividends so declared on the shares of 12% Convertible Preferred Stock and each such other class or series of Parity Stock


		shall in all cases bear to each other the same ratio as accumulated dividends on the shares of 12% Convertible Preferred Stock and such class or series of Parity Stock bear to each other; or

	(ii)	on another basis that is at least as favorable to the Holders of 12% Convertible Preferred Stock entitled to receive such dividends.

Voting Rights . (a) The Holders of 12% Convertible Preferred Stock shall have no voting rights except as set forth below or as otherwise required by Delaware law from time to time:


	(i)	If and whenever at any time or times a Voting Rights Triggering Event occurs, then the Holders of shares of 12% Convertible Preferred Stock, voting separately as a single class with any Parity Stock having similar voting rights that are exercisable (the “Voting Rights Class”), shall be entitled at the Corporation’s next regular or special meeting of shareholders of the Corporation to elect two additional directors to the Board of Directors. Upon the election of any such additional directors, the number of directors that comprise the Board of Directors shall be increased by such number of additional directors.

	(ii)	Such voting rights may be exercised at a special meeting of the holders of the shares of the Voting Rights Class, called as hereinafter provided, or at any annual meeting of shareholders held for the purpose of electing directors, and thereafter at each such annual meeting at which any of such two directorships shall be vacant or expiring until such time as all dividends in arrears on the shares of 12% Convertible Preferred Stock shall have been paid in full, at which time or times such voting rights and the term of the directors elected pursuant to Section 6(a)(i) shall terminate. So long as the Corporation’s Certificate of Incorporation provides for a classified board, such additional directors shall be elected for terms of one, two or three years so as to cause the number of directors in each class to be as nearly equal in number as possible.

	(iii)	At any time when voting rights pursuant to Section 6(a)(i) shall have vested and be continuing in Holders of 12% Convertible Preferred Stock, or if a vacancy shall exist in the office of any such additional director, the Board of Directors may call, and, upon written request of the Holders of record of at least 25% of the outstanding shares of 12% Convertible Preferred Stock addressed to the chairman of the Board of Directors shall call, a special meeting of the holders of shares of the Voting Rights Class (voting separately as a single class with any Parity Stock having similar rights that are exercisable) for the purpose of electing the directors that such holders are entitled to elect. Such meeting shall be held at the earliest practicable date upon the notice required for annual meetings of shareholders at the place for holding annual meetings of shareholders of the Corporation, or, if


		none, at a place designated by the Board of Directors. Notwithstanding the provisions of this Section 6(a)(iii), no such special meeting shall be called during a period within the 60 days immediately preceding the date fixed for the next annual meeting of shareholders in which such case, the election of directors pursuant to Section 6(a)(i) shall be held at such annual meeting of shareholders.

	(iv)	At any meeting at which the holders of the Voting Rights Class shall have the right to elect directors as provided herein, the presence in person or by proxy of the holders of shares representing more than 50% in voting power of the then outstanding shares of the Voting Rights Class shall be required and shall be sufficient to constitute a quorum of such class for the election of directors by such class. The affirmative vote of the holders of the Voting Rights Class constituting a majority of the Voting Rights Class present at such meeting, in person or by proxy, shall be sufficient to elect any such director.

	(v)	Any director elected pursuant to the voting rights created under this Section 6(a) shall hold office until the next annual meeting of shareholders at which such director’s class is being elected (unless such term has previously terminated pursuant to Section 6(a)(ii)) and any vacancy in respect of any such director shall be filled only by vote of the remaining director so elected by holders of the Voting Rights Class, or if there be no such remaining director, by the holders of shares of the Voting Rights Class at a special meeting called in accordance with the procedures set forth in this Section 6(a), or, if no such special meeting is called, at the next annual meeting of shareholders.

	(vi)	So long as any shares of 12% Convertible Preferred Stock remain outstanding, unless a greater percentage shall then be required by law, the Corporation shall not, without the affirmative vote or consent of the holders of at least 66 2/3% of the outstanding shares of 12% Convertible Preferred Stock and all other shares of the Voting Rights Class, voting separately as a single class, in person or by proxy, at an annual meeting of the Corporation’s shareholders or at a special meeting called for such purpose, or by written consent in lieu of such meeting, alter, repeal or amend, whether by merger, consolidation, combination, reclassification or otherwise, any provisions of the Restated Certificate of Incorporation or this Certificate if the amendment would amend, alter or affect the powers, preferences or rights of 12% Convertible Preferred Stock so as to adversely affect the Holders thereof, including, without limitation, the creation of, increase in the authorized number of, or issuance of, shares of any class or series of Senior Stock.

	(vii)	In exercising the voting rights set forth in this Section 6(a), each share of 12% Convertible Preferred Stock and any other shares of the Voting Rights Class participating in the votes described above shall be in proportion to the liquidation preference of such share.

The Corporation may authorize, increase the authorized amount of, or issue any shares of any class or series of Parity Stock or Junior Stock, without the consent of the Holders of 12% Convertible Preferred Stock, and in taking such actions the Corporation shall not be deemed to have affected adversely the powers, preferences or rights of Holders of shares of 12% Convertible Preferred Stock.

Liquidation, Dissolution or Winding-Up . (a) In the event of any liquidation, winding-up or dissolution of the Corporation, whether voluntary or involuntary, each Holder of 12% Convertible Preferred Stock shall be entitled to receive the Liquidation Preference plus an amount equal to accumulated and unpaid dividends on the shares to the date fixed for liquidation, winding-up or dissolution to be paid out of the assets of the Corporation available for distribution to its shareholders, after satisfaction of liabilities owed to the Corporation’s creditors and distributions to holders of Senior Stock, and before any payment or distribution is made on any Junior Stock, including, without limitation, Common Stock.

Neither the sale, conveyance, exchange or transfer (for cash, shares of stock, securities or other consideration) of all or substantially all the assets or business of the Corporation (other than in connection with the liquidation, winding-up or dissolution of its business) nor the merger or consolidation of the Corporation into or with any other Person shall be deemed to be a liquidation, winding-up or dissolution, voluntary or involuntary, for the purposes of this Section 7.

After the payment to the Holders of the shares of 12% Convertible Preferred Stock of full preferential amounts provided for in this Section 7, the Holders of 12% Convertible Preferred Stock as such shall have no right or claim to any of the remaining assets of the Corporation.

If upon the voluntary or involuntary liquidation, winding-up or dissolution of the Corporation, the amounts payable with respect to the Liquidation Preference plus an amount equal to accumulated and unpaid dividends of the 12% Convertible Preferred Stock and all Parity Stock are not paid in full, the holders of the 12% Convertible Preferred stock and the Parity Stock will share equally and ratably in any distribution of the Corporation’s assets in proportion to the respective liquidation preference and an amount equal to the accumulated and unpaid dividends to which such holders are entitled.

Conversion . Holders of shares of 12% Convertible Preferred Stock shall have the right to convert all or a portion of such shares into shares of Common Stock, as follows:

Subject to and upon compliance with the provisions of this Section 8, a holder of shares of 12% Convertible Preferred Stock shall have the right, at his or her option, at any time after the

Issue Date, to convert such shares into the number of fully paid and nonassessable shares of Common Stock obtained by dividing the sum of the aggregate Liquidation Preference of such shares plus all accrued and unpaid dividends thereon by the Conversion Price (such number of shares, the “Conversion Rate”) by surrendering such shares to be converted as provided herein; provided, however, that the right to convert shares called for redemption shall terminate at the close of business on the date preceding the Redemption Date, unless the corporation shall default in making payment of the cash payable upon such redemption. Certificates will be issued for the remaining shares of 12% Convertible Preferred Stock in any case in which fewer than all of the shares of 12% Convertible Preferred Stock represented by a certificate are converted.

In order to exercise the conversion right, the holder of shares of 12% Convertible Preferred Stock to be converted shall surrender the certificate or certificates representing such shares, duly endorsed or assigned to the Corporation or in blank, at the office of the Transfer Agent in the Borough of Manhattan, City of New York, accompanied by written notice to the Corporation that the holder thereof elects to convert 12% Convertible Preferred Stock. Unless the shares issuable on conversion are to be issued in the same name as the name in which such share of 12% Convertible Preferred Stock is registered, each share surrendered for conversion shall be accompanied by instruments of transfer, in the form reasonably satisfactory to the Corporation, duly executed by the holder or such holder’s duly authorized attorney and an amount sufficient to pay any transfer or similar tax (or evidence reasonably satisfactory to the Corporation demonstrating that such taxes have been paid).

Holders of shares of 12% Convertible Preferred Stock at the close of business on a dividend payment record date shall be entitled to receive the dividend payable on such shares on the corresponding Dividend Payment Date notwithstanding the conversion thereof following such dividend payment record date and prior to such Dividend Payment Date. However, shares of 12% Convertible Preferred Stock surrendered for conversion during the period between the close of business on any dividend payment record date and the opening of business on the corresponding Dividend Payment Date must be accompanied by payment of an amount equal to the dividend payable on such shares on such Dividend Payment Date. A holder of shares of 12% Convertible Preferred Stock on a dividend payment record date who (or whose transferee) tenders any such shares for conversion into shares of Common Stock on such Dividend Payment Date will receive the dividend payable by the Corporation on such shares of Convertible Preferred Stock on such date, and the converting holder need not include payment of the amount of such dividend upon surrender of shares of 12% Convertible Preferred Stock for conversion, but such dividend amount shall not be deemed accumulated and unpaid for purposes of calculating the conversion hereunder. Except as provided above, the Corporation shall make no payment or allowance for unpaid dividends, whether or not in arrears, on converted shares or for dividends on the shares of Common Stock issued upon such conversion.

As promptly as practicable after the surrender of certificates for shares of 12% Convertible Preferred Stock as aforesaid, the Corporation shall issue and deliver at such office to

such holder, or on his or her written order, a certificate or certificates for the number of full shares of Common Stock issuable upon the conversion of such shares in accordance with the provisions of this Section 8, and any fractional interest in respect of a share of Common Stock arising upon such conversion shall be settled as provided in this Section 8.

Each conversion shall be deemed to have been effected immediately prior to the close of business on the date on which the certificates for shares of 12% Convertible Preferred Stock shall have been surrendered and such notice (and if applicable payment of an amount equal to the dividend payable on such shares) received by the Corporation as aforesaid, and the person or persons in whose name or names any certificate or certificates for shares of Common Stock shall be issuable upon such conversion shall be deemed to have become the holder or holders of record of the shares represented thereby at such time on such date and such conversion shall be at the Conversion Rate in effect at such time on such date, unless the stock transfer books of the Corporation shall be closed on that date, in which event such person or persons shall be deemed to have become such holder or holders of record at the close of business on the next succeeding day on which such stock transfer books are open, but such conversion shall be at the Conversion Rate in effect on the date upon which such shares shall have been surrendered and such notice received by the Corporation.

In the event that a Holder of shares of 12% Convertible Preferred Stock shall not by written notice designate the name in which shares of Common Stock to be issued upon conversion of such 12% Convertible Preferred Stock should be registered or the address to which the certificate or certificates representing such shares of Common Stock should be sent, the Corporation shall be entitled to register such shares, and make such payment, in the name of the Holder of such 12% Convertible Preferred Stock as shown on the records of the Corporation and to send the certificate or certificates representing such shares of Common Stock to the address of such Holder shown on the records of the Corporation.

Redemption.

The Corporation shall redeem all outstanding 12% Convertible Preferred Stock on February 10, 2014, at a price equal to the sum of 100% of the Liquidation Preference plus all accumulated and unpaid dividends thereon, from and including the Share Specific Issue Date.

Upon the occurrence of a Change-of-Control of the Corporation, shares of the 12% Convertible Preferred Stock shall be redeemable at the option of a Holder thereof at a price equal to 101% of the Liquidation Preference plus all accumulated and unpaid dividends thereon, from and including the Share Specific Issue Date, by delivery of a notice to the Corporation that the Holder elects to have the Corporation redeem all or a portion of its shares of 12% Convertible Preferred Stock in accordance with Section 9(b) hereof. Upon its receipt of the Holder’s notice referred to in the immediately preceding sentence, the Corporation shall set a Redemption Date as soon as practicable (and notify the Holder thereof in the manner provided in Section 9(e)

hereof, except that the Corporation shall so notify the Holder within 10 days from the Corporation’s receipt of the Holder’s notice); provided that in any event the Corporation shall not set such Redemption Date for a date that is later than the earlier of (i) 10 days prior to the Change-of-Control or, if such Change-of-Control was not authorized by the Corporation’s Board of Directors at least 15 days prior to the Change-of-Control, as soon as is practicable prior to the Change-of-Control, or (ii) 30 days from the receipt of the Corporation of the Holder’s notice. The Corporation shall provide the Holders notice of the Change-of-Control at least 45 days prior to the Change-of-Control or, if such time frame is not practicable under the circumstances, as soon as is practicable.

Subject to the immediately succeeding sentence, the shares of 12% Convertible Preferred Stock shall be redeemable at the option of the Corporation, in whole, or, from time to time, in part, out of funds legally available for such purpose, at any time, as follows:


	(i)	from February 10, 2009 through March 31, 2011, at a price equal to 103% of the sum of the Liquidation Preference plus all accumulated and unpaid dividends thereon, from and including the Share Specific Issue Date;

	(ii)	from April 1, 2011 through March 31, 2012, at a price equal to 102% of the sum of the Liquidation Preference plus all accumulated and unpaid dividends thereon, from and including the Share Specific Issue Date;

	(iii)	from April 1, 2012 through March 31, 2013, at a price equal to 101% of the sum of the Liquidation Preference plus all accumulated and unpaid dividends thereon, from and including the Share Specific Issue Date; and

	(iv)	from April 1, 2013 and thereafter, at a price equal to 100% of the sum of the Liquidation Preference plus all accumulated and unpaid dividends thereon, from and including the Share Specific Issue Date;

Notwithstanding the foregoing sentence, the Corporation shall not have the right to redeem the 12% Convertible Preferred Shares pursuant to the foregoing sentence in the event that any Loans under the Credit Agreement are then outstanding.

If fewer than all of the outstanding shares of 12% Convertible Preferred Stock are to be redeemed pursuant to Section 9(c) hereof, the number of shares to be so redeemed shall be determined by the Board of Directors and the shares to be redeemed shall be determined pro rata or by lot or in such other manner and subject to such regulations as the Board of Directors in its sole discretion shall prescribe.

At least 45 days, but not more than 75 days, prior to the date fixed for the redemption of shares of 12% Convertible Preferred Stock, a written notice shall be mailed in postage prepaid

envelope to each holder of record of the shares of 12% Convertible Preferred Stock to be redeemed, addressed to such holder at his or her post office address as shown on the records of the Corporation, notifying such holder that its shares are subject to redemption, stating the date fixed for redemption thereof (the “Redemption Date”), and calling upon such holder to surrender to the Corporation, on the Redemption Date at the place designated in such notice, his or her certificate or certificates representing the number of shares specified in such notice of redemption. On or after the Redemption Date, such holder of shares of 12% Convertible Preferred Stock to be redeemed shall present and surrender his or her certificate or certificates for such shares to the Corporation at the place designated in such notice and thereupon the redemption price of such shares shall be paid to the order of the person whose name appears on such certificate or certificates as the owner thereof and such surrendered certificate shall be cancelled. In case less than all the shares represented by any such certificates are redeemed, a new certificate shall be issued representing the unredeemed shares.

From and after the Redemption Date (unless the Corporation defaults in payment of the redemption price), all dividends on the shares of Convertible Preferred Stock designated for redemption in such notice shall cease to accrue, and all rights of the holders thereof as stockholders of the Corporation, except the right to receive the redemption price of such shares (including an amount equal to all accrued and unpaid dividends up to the Redemption Date) upon the surrender of certificates representing the same, shall cease and terminate and such shares shall not thereafter be transferred (except with the consent of the Corporation) on the books of the Corporation, and such shares shall not be deemed to be outstanding for any purpose whatsoever; provided however , in the case of the Redemption Date falling after a dividend payment record date and prior to the related Dividend Payment Date, the holders of Convertible Preferred Stock at the close of business on such record date will be entitled to receive the dividend payable on such shares on the corresponding Dividend Payment Date, notwithstanding the redemption of such shares following such dividend payment record date, but such dividend amount shall not be deemed accumulated and unpaid for purposes of calculating the redemption price hereunder.

Redemption Date) against payment of the redemption price (including an amount equal to all accrued and unpaid dividends up to the Redemption Date). Any interest accrued on such funds shall be paid to the corporation from time to time. Any moneys so deposited which shall remain unclaimed by the holders of such shares of 12% Convertible Preferred Stock at the end of two years after the Redemption Date shall be returned by such bank or trust company to the Corporation.

If a notice of redemption has been given pursuant to this section 9 and any holder of shares of 12% Convertible Preferred Stock shall, prior to the close of business on the day preceding the Redemption Date, given written notice to the corporation pursuant to Section 8 above of the conversion of any or all of the shares to be redeemed held by such holder (accompanied by a certificate or certificates for such shares, duly endorsed or assigned to the Corporation, and any necessary transfer tax payment, as required by Section 8 above), then such redemption shall not become effective as to such shares to be converted, such conversion shall become effective as provided in Section 8 above, and any moneys set aside by the Corporation for the redemption of such shares of converted 12% Convertible Preferred Stock shall revert to the general funds of the Corporation.

Reservation of Common Stock . (a) The Corporation shall at all times reserve and keep available out of its authorized and unissued Common Stock or shares held in the treasury of the Corporation, solely for issuance upon the conversion of shares of 12% Convertible Preferred Stock as herein provided, free from any preemptive or other similar rights, such number of shares of Common Stock as shall from time to time be issuable upon the conversion of all the shares of 12% Convertible Preferred Stock then outstanding. For purposes of this Section 10(a), the number of shares of Common Stock that shall be deliverable upon the conversion of all outstanding shares of 12% Convertible Preferred Stock shall be computed as if at the time of computation all such outstanding shares were held by a single Holder.

Notwithstanding the foregoing, the Corporation shall be entitled to deliver upon conversion of shares of 12% Convertible Preferred Stock, as herein provided, shares of Common Stock reacquired and held in the treasury of the Corporation (in lieu of the issuance of authorized and unissued shares of Common Stock), so long as any such treasury shares are free and clear of all liens, charges, security interests or encumbrances (other than liens, charges, security interests and other encumbrances created by the Holders).

All shares of Common Stock delivered upon conversion of the 12% Convertible Preferred Stock shall be duly authorized, validly issued, fully paid and non-assessable, free and clear of all liens, claims, security interests and other encumbrances (other than liens, charges, security interests and other encumbrances created by the Holders).

Prior to the delivery of any securities that the Corporation shall be obligated to deliver upon conversion of the 12% Convertible Preferred Stock, the Corporation shall use its reasonable

best efforts to comply with all federal and state laws and regulations thereunder requiring the registration of such securities with, or any approval of or consent to the delivery thereof by, any governmental authority. Without limiting the foregoing, the Corporation hereby covenants and agrees that it shall use its reasonable best efforts to (i) file as soon as practicable (but in any event within 90 days of the Issue Date) a Shelf Registration Statement with respect to the resale of Common Stock issuable upon conversion of the 12% Convertible Preferred Stock, (ii) cause such registration statement to become effective within 180 days of the Issue Date, and (iii) maintain the effectiveness of such registration statement until the earlier of such time as all such shares are freely tradable by the holders thereof without registration or two years from the date in which all Holders of the 12% Convertible Preferred Stock will have exercised their conversion rights with respect to all of their shares and have been issued Common Stock in connection therewith; provided that, if the Corporation is not eligible to register the resale of shares by a Holder on Form S-3, at a Holder’s request, registration shall be effected on Form S-1 (or any applicable successor form).

The Corporation hereby covenants and agrees that, if at any time the Common Stock shall be listed on the New York Stock Exchange or any other U.S. national securities exchange or automated quotation system, the Corporation shall, if permitted by the rules of such exchange or automated quotation system, list and keep listed, so long as the Common Stock shall be so listed on such exchange or automated quotation system, all Common Stock issuable upon conversion of the 12% Convertible Preferred Stock; provided, however , that if the rules of such exchange or automated quotation system permit the Corporation to defer the listing of such Common Stock until the first conversion of 12% Convertible Preferred Stock into Common Stock in accordance with the provisions hereof, the Corporation covenants to list such Common Stock issuable upon conversion of the 12% Convertible Preferred Stock in accordance with the requirements of such exchange or automated quotation system at such time.

Fractional Shares . (a) No fractional shares of Common Stock shall be issued as a result of any conversion of shares of 12% Convertible Preferred Stock.

In lieu of any fractional share of Common Stock otherwise issuable in respect of any conversion pursuant to Section 8, the Corporation shall pay an amount in cash (computed to the nearest cent) equal to the same fraction of the Closing Price of the Common Stock on the second Trading Day immediately preceding the Conversion Date.

If more than one share of the 12% Convertible Preferred Stock is surrendered for conversion at one time by or for the same Holder, the number of full shares of Common Stock issuable upon conversion thereof shall be computed on the basis of the aggregate number of shares of the 12% Convertible Preferred Stock so surrendered.

Anti-Dilution Adjustments to the Conversion Rate . (a) The Conversion Rate shall be subject to the following adjustments:

Stock Dividends and Distributions . If the Corporation issues Common Stock to all or substantially all of the holders of Common Stock as a dividend or other distribution, the Conversion Rate in effect at 5:00 p.m., New York City time, on the date fixed for determination of the holders of Common Stock entitled to receive such dividend or other distribution will be divided by a fraction:


		1.	the numerator of which is the number of shares of Common Stock outstanding at 5:00 p.m., New York City time, on the date fixed for such determination, and

		2.	the denominator of which is the sum of the number of shares of Common Stock outstanding at 5:00 p.m., New York City time, on the date fixed for such determination and the total number of shares of Common Stock constituting such dividend or other distribution.

Any adjustment made pursuant to this clause (i) will become effective immediately after 5:00 p.m., New York City time, on the date fixed for such determination. If any dividend or distribution described in this clause (i) is declared but not so paid or made, the Conversion Rate shall be readjusted, effective as of the date the Board of Directors publicly announces its decision not to make such dividend or distribution, to the Conversion Rate that would be in effect if such dividend or distribution had not been declared. For the purposes of this clause (i), the number of shares of Common Stock outstanding at 5:00 p.m., New York City time, on the date fixed for such determination shall not include shares held in treasury by the Corporation but shall include any shares issuable in respect of any scrip certificates issued in lieu of fractions of shares of Common Stock. The Corporation shall not pay any dividend or make any distribution on shares of Common Stock held in treasury by the Corporation.

Issuance of Stock Purchase Rights . If the Corporation issues to all or substantially all holders of Common Stock rights or warrants (other than rights or warrants issued pursuant to a dividend reinvestment plan or share purchase plan or other similar plans), entitling such holders, for a period of up to 45 calendar days from the date of issuance of such rights or warrants, to subscribe for or purchase shares of Common Stock at a price per share less than the Current Market Price, the Conversion Rate in effect at 5:00 p.m., New York City time, on the date fixed for determination of the holders of Common Stock entitled to receive such rights or warrants will be increased by multiplying the Conversion Rate by a fraction:


		1.	the numerator of which is the sum of the number of shares of Common Stock outstanding at 5:00 p.m., New York City time, on the date fixed for such determination and the number of shares of Common Stock issuable pursuant to such rights or warrants, and

		2.	the denominator of which is the sum of the number of shares of Common Stock outstanding at 5:00 p.m., New York City time, on the date fixed for such


	determination and the number of shares of Common Stock equal to the quotient of the aggregate offering price payable to exercise such rights or warrants divided by the Current Market Price.

Any adjustment made pursuant to this clause (ii) will become effective immediately after 5:00 p.m., New York City time, on the date fixed for such determination. In the event that such rights or warrants described in this clause (ii) are not so issued, the Conversion Rate shall be readjusted, effective as of the date the Board of Directors publicly announces its decision not to issue such rights or warrants, to the Conversion Rate that would then be in effect if such issuance had not been declared. To the extent that such rights or warrants are not exercised prior to their expiration or shares of Common Stock are otherwise not delivered pursuant to such rights or warrants upon the exercise of such rights or warrants, the Conversion Rate shall be readjusted to the Conversion Rate that would then be in effect had the adjustment made upon the issuance of such rights or warrants been made on the basis of the delivery of only the number of shares of Common Stock actually delivered. In determining the aggregate offering price payable for such shares of Common Stock, there shall be taken into account any consideration received for such rights or warrants and the value of such consideration (if other than cash, the Fair Market Value thereof). For the purposes of this clause (ii), the number of shares of Common Stock at the time outstanding shall not include shares held in treasury by the Corporation but shall include any shares issuable in respect of any scrip certificates issued in lieu of fractions of shares of Common Stock. The Corporation shall not issue any such rights or warrants in respect of shares of Common Stock held in treasury by the Corporation.

Subdivisions and Combinations of the Common Stock . If outstanding shares of Common Stock shall be subdivided into a greater number of shares of Common Stock or combined into a lesser number of shares of Common Stock, the Conversion Rate in effect at 5:00 p.m., New York City time, on the effective date of such subdivision or combination shall be multiplied by a fraction:


		1.	the numerator of which is the number of shares of Common Stock that would be outstanding immediately after, and solely as a result of, such subdivision or combination, and

		2.	the denominator of which is the number of shares of Common Stock outstanding immediately prior to such subdivision or combination.

Any adjustment made pursuant to this clause (iii) shall become effective immediately after 5:00 p.m., New York City time, on the effective date of such subdivision or combination.

Debt or Asset Distribution . (A) If the Corporation distributes to all or substantially all holders of Common Stock evidences of its indebtedness, shares of capital stock, securities, cash or other assets (excluding (1) any dividend or distribution covered by Section 12(a)(i), (2) any

rights or warrants covered by Section 12(a)(ii), (3) any dividend or distribution covered by Section 12(a)(v) and (4) any Spin-Off to which the provisions set forth in Section 12(a)(iv)(B) apply), the Conversion Rate in effect at 5:00 p.m., New York City time, on the date fixed for the determination of holders of Common Stock entitled to receive such distribution will be multiplied by a fraction:


	1.	the numerator of which is the Current Market Price, and

	2.	the denominator of which is the Current Market Price minus the Fair Market Value on such date fixed for determination of the portion of the evidences of indebtedness, shares of capital stock, securities, cash or other assets so distributed applicable to one share of Common Stock.

In the case of a Spin-Off, the Conversion Rate in effect at 5:00 p.m., New York City time, on the date fixed for the determination of holders of Common Stock entitled to receive such distribution will be multiplied by a fraction:


	1.	the numerator of which is the sum of the Current Market Price and the Fair Market Value of the portion of those shares of capital stock or similar equity interests so distributed applicable to one share of Common Stock as of the fifteenth Trading Day after the Ex-Date for such distribution (or, if such shares of capital stock or equity interests are listed on a U.S. national or regional securities exchange, the average of the Closing Prices of such securities for the 10 consecutive Trading Day period ending on such fifteenth Trading Day), and

	2.	the denominator of which is the Current Market Price.

Any adjustment made pursuant to this clause (iv) shall become effective immediately after 5:00 p.m., New York City time, on the date fixed for the determination of the holders of Common Stock entitled to receive such distribution. In the event that such distribution described in this clause (iv) is not so made, the Conversion Rate shall be readjusted, effective as of the date the Board of Directors publicly announces its decision not to pay such dividend or distribution, to the Conversion Rate that would then be in effect if such distribution had not been declared. If an adjustment to the Conversion Rate is required under this clause (iv) during any conversion period in respect of shares of 12% Convertible Preferred Stock that have been tendered for conversion, delivery of the shares of Common Stock issuable upon conversion will be delayed to the extent necessary in order to complete the calculations provided for in this clause (iv).

Cash Distributions . If the Corporation distributes cash to all or substantially all holders of Common Stock, (excluding any (1) any cash that is distributed in a Reorganization Event to which Section 12(e) applies, (2) any dividend or distribution in connection with the liquidation, dissolution or winding up of the Corporation or (3) any consideration payable in as part of a

tender or exchange offer by the Corporation or any subsidiary of the Corporation), the Conversion Rate in effect at 5:00 p.m., New York City time, on the date fixed for determination of the holders of Common Stock entitled to receive such distribution will be multiplied by a fraction:


		1.	the numerator of which is the Current Market Price, and

		2.	the denominator of which is the Current Market Price minus the amount per share of such distribution.

Any adjustment made pursuant to this clause (v) shall become effective immediately after 5:00 p.m., New York City time, on the date fixed for the determination of the holders of Common Stock entitled to receive such distribution. In the event that any distribution described in this clause (v) is not so made, the Conversion Rate shall be readjusted, effective as of the date the Board of Directors publicly announces its decision not to pay such distribution, to the Conversion Rate which would then be in effect if such distribution had not been declared.

Self Tender Offers and Exchange Offers . If the Corporation or any subsidiary of the Corporation successfully completes a tender or exchange offer pursuant to a Schedule TO or Registration Statement on Form S-4 for Common Stock (excluding any securities convertible or exchangeable for Common Stock), where the cash and the value of any other consideration included in the payment per share of Common Stock exceeds the Current Market Price, the Conversion Rate in effect at 5:00 p.m., New York City time, on the date of expiration of the tender or exchange offer (the “Expiration Date”) will be multiplied by a fraction:


1.	the numerator of which shall be equal to the sum of:

	a.	the aggregate cash and Fair Market Value on the Expiration Date of any other consideration paid or payable for shares validly tendered or exchanged and not withdrawn as of the Expiration Date; and

	b.	the product of the Current Market Price and the number of shares of Common Stock outstanding immediately after the last time tenders or exchanges may be made pursuant to such tender or exchange offer (the “ Expiration Time ”) on the Expiration Date; and

2.	the denominator of which shall be equal to the product of:

	a.	the Current Market Price; and

	b.	the number of shares of Common Stock outstanding immediately prior to the Expiration Time on the Expiration Date.

Any adjustment made pursuant to this clause (vi) shall become effective immediately after 5:00 p.m., New York City time, on the Expiration Date. In the event that the Corporation or one of its subsidiaries is obligated to purchase shares of Common Stock pursuant to any such tender offer or exchange offer, but the Corporation or such subsidiary is permanently prevented by applicable law from effecting any such purchases, or all such purchases are rescinded, then the Conversion Rate shall be readjusted to be the Conversion Rate that would then be in effect if such tender offer or exchange offer had not been made. Except as set forth in the preceding sentence, if the application of this clause (vi) to any tender offer or exchange offer would result in a decrease in the Conversion Rate, no adjustment shall be made for such tender offer or exchange offer under this clause (vi). If an adjustment to the Conversion Rate is required pursuant to this clause (vi) during any settlement period in respect of shares of 12% Convertible Preferred Stock that have been tendered for conversion, delivery of the related conversion consideration will be delayed to the extent necessary in order to complete the calculations provided for in this clause (vi).

In cases where the Fair Market Value of assets (including cash), debt securities or certain rights, warrants or options to purchase securities of the Corporation as to which Section 12(a)(iv)(A) and Section 12(a)(v) apply, applicable to one share of Common Stock, distributed to stockholders equals or exceeds the average of the Closing Prices of the Common Stock over the five consecutive Trading Day period ending on the Trading Day before the Ex-Date for such distribution, rather than being entitled to an adjustment in the Conversion Rate, Holders of 12% Convertible Preferred Stock shall be entitled to receive upon conversion, in addition to a number of shares of Common Stock equal to the applicable conversion rate in effect on the applicable Conversion Date, the kind and amount of assets (including cash), debt securities or rights, warrants or options comprising the distribution that such Holder would have received if such Holder had converted its shares of 12% Convertible Preferred Stock immediately prior to the record date for determining the holders of Common Stock entitled to receive the distribution calculated by multiplying the kind and amount of assets (including cash), debt securities or rights, warrants or options comprising the distribution by the number of shares of Common Stock equal to the Conversion Rate in effect on the applicable Conversion Date.

Rights Plans . To the extent that the Corporation has a rights plan in effect with respect to the Common Stock on any Conversion Date, upon conversion of any 12% Convertible Preferred Stock, Holders shall receive, in addition to the Common Stock, the rights under such rights plan, unless, prior to such Conversion Date, the rights have separated from the Common Stock, in which case the Conversion Rate shall be adjusted at the time of separation of such rights as if the Corporation made a distribution to all holders of the Common Stock as described in Section 12(a)(iv), subject to readjustment in the event of the expiration, termination or redemption of such rights.

Adjustment for Tax Reasons . The Corporation may make such increases in the Conversion Rate, in addition to any other increases required by this Section 12, as the Board of Directors deems it advisable to avoid or diminish any income tax to holders of the Common Stock resulting from any dividend or distribution of the Corporation’s shares of Common Stock (or issuance of rights or warrants to acquire shares of Common Stock) or from any event treated as such for income tax purposes or for any other reasons; provided that the same proportionate adjustment must be made to the Conversion Rate.

Calculation of Adjustments . (i) All adjustments to the Conversion Rate shall be calculated to the nearest 1/10,000th of a share of Common Stock. No adjustment in the Conversion Rate shall be required unless such adjustment would require an increase or decrease of at least one percent therein; provided , that any adjustments which by reason of this Section 12(c) are not required to be made shall be carried forward and taken into account in any subsequent adjustment; provided, however, that with respect to adjustments to be made to the Conversion Rate in connection with cash dividends paid by the Corporation, the Conversion Rate shall be adjusted regardless of whether such aggregate adjustments amount to one percent or more of the Conversion Rates no later than March 15 of each calendar year; provided, further that on the Conversion Date adjustments to the Conversion Rate shall be made with respect to any such adjustment carried forward and which has not been taken into account before such date.

No adjustment to the Conversion Rate shall be made if Holders may participate in the transaction that would otherwise give rise to an adjustment. In addition, the applicable Conversion Rate shall not be adjusted:


	1.	upon the issuance of any shares of Common Stock pursuant to any present or future plan providing for the reinvestment of dividends or interest payable on the Corporation’s securities and the investment of additional optional amounts in shares of Common Stock under any plan;

	2.	upon the issuance of any shares of Common Stock or rights or warrants to purchase those shares pursuant to any present or future employee, director or consultant benefit plan or program of or assumed by the Corporation or any of its subsidiaries;

	3.	upon the issuance of any shares of Common Stock pursuant to any option, warrant, right or exercisable, exchangeable or convertible security outstanding as of the Issue Date; or

	4.	for a change in the par value or no par value of the Common Stock.

Notice of Adjustment . Whenever the Conversion Rates are to be adjusted, the Corporation shall:


	1.	compute such adjusted Conversion and prepare and transmit to the Transfer Agent an Officer’s Certificate setting forth such adjusted Conversion Rate, the method of calculation thereof in reasonable detail and the facts requiring such adjustment and upon which such adjustment is based;

	2.	as soon as practicable following the occurrence of an event that requires an adjustment to the Conversion Rate (or if the Corporation is not aware of such occurrence, as soon as practicable after becoming so aware), provide, or cause to be provided, a written notice to the Holders of 12% Convertible Preferred Stock of the occurrence of such event; and

	3.	as soon as practicable following the determination of such adjusted Conversion Rate, provide, or cause to be provided, to the Holders of 12% Convertible Preferred Stock a statement setting forth in reasonable detail the method by which the adjustment to the Conversion Rate was determined and setting forth such adjusted Conversion Rate.

	Reorganization Events . In the event of:

	1.	any consolidation or merger of the Corporation with or into another Person (other than a merger or consolidation in which the Corporation is the continuing corporation and in which the Common Stock outstanding immediately prior to the merger or consolidation is not exchanged for cash, securities or other property of the Corporation or another Person);

	2.	any sale, transfer, lease or conveyance to another Person of all or substantially all of the property and assets of the Corporation;

	3.	any reclassification of Common Stock into securities including securities other than Common Stock; or

	4.	any statutory exchange of securities of the Corporation with another Person (other than in connection with a merger or acquisition),

(each, a “ Reorganization Event ”), each share of 12% Convertible Preferred Stock outstanding immediately prior to such Reorganization Event shall, without the consent of Holders of 12% Convertible Preferred Stock, become convertible into the kind of securities, cash and other property (the “ Exchange Property ”) that such Holder would have been entitled to receive if such Holder had converted its 12% Convertible Preferred Stock into Common Stock immediately prior to such Reorganization Event. For purposes of the foregoing, the type and amount of consideration that a Holder of 12% Convertible Preferred Stock would have been entitled to receive as a holder of Common Stock in the case of any Reorganization Event that

causes the Common Stock to be converted into the right to receive more than a single type of consideration determined based in part upon any form of shareholder election will be deemed to be the weighted average of the types and amounts of consideration received by the holders of Common Stock that affirmatively make such an election.

The above provisions of this Section 12(e) shall similarly apply to successive Reorganization Events and the provisions of Section 12 shall apply to any shares of capital stock of the Corporation (or any successor) received by the holders of Common Stock in any such Reorganization Event.

Replacement Stock Certificates . If physical certificates are issued, and any of the 12% Convertible Preferred Stock certificates shall be mutilated, lost, stolen or destroyed, the Corporation shall, at the expense of the Holder, issue, in exchange and in substitution for and upon cancellation of the mutilated 12% Convertible Preferred Stock certificate, or in lieu of and substitution for the 12% Convertible Preferred Stock certificate lost, stolen or destroyed, a new 12% Convertible Preferred Stock certificate of like tenor and representing an equivalent amount of shares of 12% Convertible Preferred Stock, but only upon receipt of evidence of such loss, theft or destruction of such 12% Convertible Preferred Stock certificate and indemnity, if requested, satisfactory to the Corporation and the Transfer Agent.

Transfer Agent, Registrar, and Conversion and Dividend Disbursing Agent . The duly appointed Transfer Agent, Registrar and Conversion and Dividend Disbursing Agent for the 12% Convertible Preferred Stock shall be American Stock Transfer and Trust Company. The Corporation may, in its sole discretion, remove the Transfer Agent in accordance with the agreement between the Corporation and the Transfer Agent; provided that the Corporation shall appoint a successor transfer agent who shall accept such appointment prior to the effectiveness of such removal. Upon any such removal or appointment, the Corporation shall send notice thereof by first-class mail, postage prepaid, to the Holders of the 12% Convertible Preferred Stock.

Miscellaneous . (a) All notices referred to herein shall be in writing, and, unless otherwise specified herein, all notices hereunder shall be deemed to have been given upon the earlier of receipt thereof or three Business Days after the mailing thereof if sent by registered or certified mail (unless first-class mail shall be specifically permitted for such notice under the terms of this Certificate) with postage prepaid, addressed: (i) if to the Corporation, to its office at 6500 North Mineral Drive, Suite 200, Coeur d’Alene, ID 83815, (Attention: General Counsel) or to the Transfer Agent at its Corporate Trust Office, or other agent of the Corporation designated as permitted by this Certificate, or (ii) if to any Holder of the 12% Convertible Preferred Stock or

holder of shares of Common Stock, as the case may be, to such holder at the address of such holder as listed in the stock record books of the Corporation (which may include the records of any transfer agent for the 12% Convertible Preferred Stock or Common Stock, as the case may be), or (iii) to such other address as the Corporation or any such holder, as the case may be, shall have designated by notice similarly given.

The Corporation shall pay any and all stock transfer and documentary stamp taxes that may be payable in respect of any issuance or delivery of shares of 12% Convertible Preferred Stock or shares of Common Stock or other securities issued on account of 12% Convertible Preferred Stock pursuant hereto or certificates representing such shares or securities. The Corporation shall not, however, be required to pay any such tax that may be payable in respect of any transfer involved in the issuance or delivery of shares of 12% Convertible Preferred Stock or Common Stock or other securities in a name other than that in which the shares of 12% Convertible Preferred Stock with respect to which such shares or other securities are issued or delivered were registered, or in respect of any payment to any person other than a payment to the Holder thereof, and shall not be required to make any such issuance, delivery or payment unless and until the person otherwise entitled to such issuance, delivery or payment has paid to the Corporation the amount of any such tax or has established, to the satisfaction of the Corporation, that such tax has been paid or is not payable.

The Liquidation Preference and the Dividend Rate each shall be subject to equitable adjustment whenever there shall occur a stock split, combination, reclassification or other similar event involving the 12% Convertible Preferred Stock. Such adjustments shall be reasonably determined in good faith by the Board of Directors and submitted by the Board of Directors to the Transfer Agent.

HECLA MINING COMPANY


By:	/s/ Michael B. White


ATTEST:
By:

__________________, _________

Exhibit 10.16(a)

HECLA MINING COMPANY
EXECUTIVE AND SENIOR MANAGEMENT
LONG-TERM PERFORMANCE PAYMENT PLAN

(As Amended and Restated January 1, 2005)

Article I
Introduction

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

Article II
Plan Purpose and Objectives

Plan objectives include:


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

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

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

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

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


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

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

Article III
Duration of the Plan

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

Example Overlapping Performance Periods

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

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

Article IV
Eligibility

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

A. New Eligible Employees

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

B. Promotion and/or Salary Changes

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

C. Reassignment and/or Relocation

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

D. Leaves of Absence

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

E. Death

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

F. Retirement

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

G. Disability

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

H. Voluntary Separation from Service

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

I. Involuntary Separation from Service

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

J. Change of Control

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

K. Special Rule for Specified Employees

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

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

L. No Acceleration or Additional Deferral

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

Article V
Plan Value Potential

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

Article VI
Performance Measures

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


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

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

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

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

Article VII
Performance Award Value

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

Article VIII
Performance Award Distribution

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

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

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

Article IX
Other Information

A. Regulatory Compliance

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

B. Designation of Beneficiary

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

C. Amendment or Termination of the Plan

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

D. Correction of Errors

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

E. No Employment Guarantee

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

F. No Assignment

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

G. Governing Law

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

H. Unfunded Status

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

I. Claim Process

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

J. No Employment Contract

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

K. No Exclusivity

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


	HECLA MINING COMPANY

	By:

	Its:

	Date:

Exhibit 10.16(e)

HECLA MINING COMPANY
KEY EMPLOYEE DEFERRED COMPENSATION PLAN
(Amended and Restated Effective January 1, 2005)

HECLA MINING COMPANY
KEY EMPLOYEE DEFERRED COMPENSATION PLAN
(Amended and Restated Effective January 1, 2005)

TABLE OF CONTENTS

			Page

ARTICLE I.	PURPOSE AND INTENT		1

	Section 1.1.	Purpose of Plan
	Section 1.2.	Intent and Construction

ARTICLE II.	DEFINITIONS		2

	Section 2.1.	Definitions
	Section 2.2.	Rules of Interpretation

ARTICLE III.	PARTICIPATING EMPLOYERS		8

	Section 3.1.	Eligibility
	Section 3.2.	Participation Requirements
	Section 3.3.	Recordkeeping and Reporting
	Section 3.4.	Termination of Participation
	Section 3.5.	Separate Accounting

ARTICLE IV.	ELIGIBILITY AND PARTICIPATION		10

	Section 4.1.	Eligibility
	Section 4.2.	Participation
	Section 4.3.	Suspension of Eligibility

ARTICLE V.	BENEFITS		10

	Section 5.1.	Deferred Compensation
	Section 5.2.	Deferral Elections
	Section 5.3.	Matching Amounts
	Section 5.4.	Discretionary Amounts
	Section 5.5.	Stock Options

ARTICLE VI.	VALUATION OF BENEFITS		16

	Section 6.1.	Investment Account
	Section 6.2.	Company Stock Account
	Section 6.3.	Discounted Stock Option

			Page
ARTICLE VII.	VESTING OF ACCOUNTS		19

	Section 7.1.	Vested Benefit
	Section 7.2.	Nature of Accounts

ARTICLE VIII.	DISTRIBUTION AND EXERCISE OF OPTIONS		20

	Section 8.1.	Distributable Events
	Section 8.2.	Distribution of Benefits
	Section 8.3.	Designation of Beneficiaries
	Section 8.4.	Death Prior to Full Distribution
	Section 8.5.	Facility of Payment
	Section 8.6.	Form of Distribution
	Section 8.7.	Lump Sum Distribution of Benefits
	Section 8.8.	Application for Distribution
	Section 8.9.	Limitation on Payment
	Section 8.10.	Tax Withholding

ARTICLE IX.	NONTRANSFERABILITY AND VOTING RIGHTS		27

	Section 9.1.	Anti-Alienation of Benefits
	Section 9.2.	Voting of Company Stock With Respect to Accounts
	Section 9.3.	Voting With Respect to Options

ARTICLE X.	ADMINISTRATION OF THE PLAN		28

	Section 10.1.	Administrator
	Section 10.2.	Authority of Administrator
	Section 10.3.	Operation of Plan and Claims Procedures
	Section 10.4.	Participant’s Address
	Section 10.5.	Conflict of Interest
	Section 10.6.	Service of Process
	Section 10.7.	Errors in Computations

ARTICLE XI.	MISCELLANEOUS PROVISIONS		32

	Section 11.1.	No Employment Rights
	Section 11.2.	Participants Should Consult Advisors
	Section 11.3.	Unfunded and Unsecured
	Section 11.4.	Plan Provisions
	Section 11.5.	Severability
	Section 11.6.	Applicable Law
	Section 11.7.	Stock Subject to Plan

ARTICLE XII.	AMENDMENT OF THE PLAN		33

	Section 12.1.	Amendment of the Plan	33
	Section 12.2.	Procedure for Amendment	33

			Page
ARTICLE XIII.	TERMINATION OF PLAN		33

	Section 13.1.	Termination of the Plan	33
	Section 13.2.	Procedure for Amendment to Terminate the Plan	34

EXHIBIT A —	HECLA MINING COMPANY KEY EMPLOYEE DEFERRED COMPENSATION PLAN PARTICIPANTS		A-1

EXHIBIT B —	HECLA MINING COMPANY KEY EMPLOYEE DEFERRED COMPENSATION PLAN PARTICIPATING EMPLOYERS		B-1

iii

HECLA MINING COMPANY
KEY EMPLOYEE DEFERRED COMPENSATION PLAN
(Amended and Restated Effective January 1, 2005)

ARTICLE I

PURPOSE AND INTENT

Section 1.1. Purpose of Plan . Effective as of July 18, 2002, HECLA MINING COMPANY, a taxable corporation organized under the laws of the State of Delaware, established a deferred compensation plan, the HECLA MINING COMPANY KEY EMPLOYEE DEFERRED COMPENSATION PLAN, which was approved by the stockholders of Hecla Mining Company as required under the applicable securities laws and the New York Stock Exchange. The purpose of the plan was to assist Hecla Mining Company in attracting and retaining high-ranking executive officers and key high-ranking management personnel, encouraging their long term commitment to the success of Hecla Mining Company and providing an opportunity for them to participate in the increase in the value of Hecla Mining Company.


	(a)	Pursuant to the authority and power of Hecla Mining Company reserved to it in Section 14.1 of the plan document, Hecla Mining Company has amended the plan document, in the form of a restatement of the plan document, effective January 1, 2005, to: (i) freeze the plan in effect as of December 31, 2004, so that participation in that plan would be limited to existing participants, and any employees who are not participants in that plan as of December 31, 2004, would not be eligible to become participants in the plan, (ii) maintain accounts to which amounts of compensation were deferred and credited and the right to which was earned and vested (as defined in paragraph (a)(2) of section 1.409A-6 of the Treasury Regulations) as of December 31, 2004, (iii) permit no additional amounts to be credited to those accounts, other than to adjust such accounts based upon earnings and losses and (iv) require those amounts which are earned and vested as of December 31, 2004, and any earnings thereon to be governed by the terms and conditions of the plan document in effect as of December 31, 2004, and not to be subject to or governed by section 409A of the Code.

	(b)	On April 10, 2007, the Department of the Treasury and the Internal Revenue Service issued final regulations with respect to the application of section 409A of the Internal Revenue Code, sections 1.409A-1 through 1.409A-6 of the Treasury Regulations. Consequently, Hecla Mining Company has adopted an amendment of the Hecla Mining Company Key Employee Deferred Compensation Plan to conform the plan document to those final regulations which are effective as of January 1, 2009.

Section 1.2. Intent and Construction . Pursuant to sections 201(2), 301(a)(3), and 401(a)(1) of the Employee Retirement income Security Act of 1974, as amended, this written plan document is intended to be an unfunded and unsecured plan maintained by Hecla Mining

Company primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees. The plan document is further intended to be construed and administered in conformance with the applicable requirements of section 409A of the Internal Revenue Code, the guidance issued by the Department of the Treasury and the Internal Revenue Service with respect to the application of section 409A, sections 1.409A-1 through 1.409A-6 of the Treasury Regulations, the Employee Retirement Income Security Act of 1974, as amended, and to be maintained by Hecla Mining Company pursuant to this written plan document for the purpose of providing deferred compensation for the plan participants. This plan document shall be administered and construed in a manner consistent with said intent and according to the laws of the State of Delaware to the extent that such laws are not preempted by the laws of the United States of America.

ARTICLE II

DEFINITIONS

Section 2.1. Definitions . When used in this document with initial capital letters, the terms defined in this Section 2.1 shall have the meanings respectively ascribed to them unless a different meaning is plainly required by the context.


	(a)	Account or Accounts. “Account” or “Accounts” means the separate bookkeeping account or accounts established and maintained for a Participant representing separate unfunded and unsecured general obligations of the Company with respect to a Participant under the Plan and to which amounts shall be credited pursuant to the Plan. The Account or Accounts of a Participant shall consist of the Company Stock Account and the Investment Account.

	(b)	Beneficiary. “Beneficiary” means the person, persons or trust designated by a Participant, or automatically by operation of the Plan, to receive any benefits which may become payable under the Plan by reason of the death of the Participant.

	(c)	Board of Directors. “Board of Directors” means the Board of Directors of Hecla Mining Company.

	(d)	Business Day. “Business Day” means a day on which the New York Stock Exchange is open for trading.

	(e)	Change in Control. “Change in Control” means, for purposes of the interpretation of this Plan in conformance with section 409A of the Code and the applicable guidance issued by the Department of the Treasury and the Internal Revenue Service with respect to the application of section 409A, with respect to a Plan Participant, a Change in Control event must relate to: (i) the corporation for which the Participant is performing services at the time of the Change in Control event, (ii) the corporation that is liable for the payment of the deferred compensation (or all corporations liable for the payment if more than one corporation is liable), or (iii) a corporation that is a majority shareholder of a


		corporation identified in part (i) or part (ii) above, or any corporation in a chain of corporations in which each corporation is a majority shareholder of another corporation in the chain, ending in a corporation identified in part (i) or part (ii) above. For purposes of this provision, a majority shareholder is a shareholder owning more than fifty percent (50%) of the total fair market value and total voting power of such corporation. Also, for purposes of this provision, section 318(a) of the Code applies to determine stock ownership. Additionally, for purposes of this provision and in conformance with section 409A and the applicable guidance issued by the Department of the Treasury and the Internal Revenue Service with respect to the application of section 409A, a change in the ownership of a corporation or a change in the effective control of a corporation shall be determined in accordance with the provisions described below in this definition.

		(i)	A change in the ownership of a corporation shall occur on the date that any one person, or more than one person acting as a group, in one transaction or a series of transactions, directly or indirectly, acquires ownership of stock of the corporation that, together with stock held by such person or group, constitutes more than fifty percent (50%) of the total fair market value or total voting power of the stock of the corporation. However, if any one person or more than one person acting as a group, is considered to own more than fifty percent (50%) of the total fair market value or total voting power of the stock of the corporation, the acquisition of additional stock by the same person or persons shall not be considered to cause a change in the ownership of the corporation (or to cause a change in the effective control of the corporation). An increase in the percentage of stock owned by any one person, or persons acting as a group, as a result of a transaction, in one transaction or a series of transactions, directly or indirectly, in which the corporation acquires its stock in exchange for property shall be treated as an acquisition of stock for purposes of this provision.

		(ii)	For purposes of paragraph (i) above, persons will not be considered to be acting as a group solely because they purchase or own stock of the same corporation at the same time, or as a result of the same public offering. However, persons will be considered to be acting as a group if they are owners of a corporation that enters into a merger, consolidation, purchase or acquisition of stock, or similar business transaction with the corporation. If a person, including an entity, owns stock in both corporations that enter into a merger, consolidation, purchase or acquisition of stock, or similar transaction, such shareholder is considered to be acting as a group with other shareholders in a corporation prior to the transaction giving rise to the change and not with respect to the ownership interest in the other corporation.

		(iii)	A change in the effective control of a corporation shall occur on the date that either:


		(A)	any one person, or more than one person acting as a group, in one transaction or a series of transactions, directly or indirectly, acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such person or persons) ownership of stock of the corporation possessing thirty-five percent (35%) or more of the total voting power of the stock of the corporation; or

		(B)	a majority of members of the board of directors of the corporation is replaced during any 12-month period by directors whose appointment or election is not endorsed by a majority of the members of the board of directors of the corporation prior to the date of the appointment or election, provided that for purposes of this subparagraph (B) the term “corporation” shall be determined in accordance with the requirements of section 409A of the Code and the applicable guidance issued by the Department of the Treasury with respect to the application of section.

	(iv)	A change in the ownership of a substantial portion of the assets of a corporation shall occur on the date that any one person, or more than one person acting as a group acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such person or persons) assets from the corporation that have a total gross fair market value equal to or more than forty percent (40%) of the total gross fair market value of all of the assets of the corporation immediately prior to such acquisition or acquisitions. For this purpose, gross fair market value means the value of the assets of the corporation, or the value of the assets being disposed of, determined without regard to any liabilities associated with such assets.

	(v)	The provisions of this subsection (e) regarding the definition of the term “Change in Control,” shall be determined and administered in accordance with section 409A and section 1.409A-3(i)(5) of the Treasury Regulations.

(f)	Code. “Code” means the Internal Revenue Code of 1986, any amendments thereto, and any regulations or rulings issued thereunder.

(g)	Common Stock. “Common Stock” means the common stock, par value $0.25 per share, of Hecla Mining Company as such stock may be classified, reclassified, converted or exchanged by reorganization, merger or otherwise.

(h)	Company. “Company” means the Hecla Mining Company, a Delaware corporation.

(i)	Company Stock Account. “Company Stock Account” means the Account established and maintained for a Participant as a record of deferred amounts of Eligible Compensation and Performance-Based Compensation credited to the Account pursuant to Sections 5.1 and 5.2, matching amounts credited to the Account pursuant to Section 5.3, discretionary amounts credited to the Account


	pursuant to Section 5.4, and the positive value of exercise proceeds credited to the Account pursuant to Section 5.5, which shall be denominated in units and measured by the value of Company Common Stock; the Account shall be maintained for bookkeeping purposes only.

(j)	Compensation Committee. “Compensation Committee” means the Compensation Committee of the Board of Directors or such other committee of directors as may be designated by the Board of Directors to administer the Plan. The committee administering the Plan shall be composed solely of two or more non-employee directors, as defined in Rule 16b-3 under the Securities Exchange Act of 1934, as amended. Notwithstanding anything to the contrary contained herein, the Board of Directors may, at any time and from time to time, without any further action of the Compensation Committee, exercise the powers and duties of the Compensation Committee under the Plan.

(k)	Deferral Election Form. “Deferral Election Form” means the form approved by the Compensation Committee from time to time for use by a Participant to elect to defer compensation under the Plan.

(l)	Disability . “Disability” means, with respect to a Participant, the Participant is: (i) unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months; (ii) by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months, receiving income replacement benefits for a period of not less than three (3) months under an accident and health plan covering employees of the Company; or (iii) determined to be totally disabled by the Social Security Administration. This definition shall be interpreted and construed in a manner consistent with section 1.409A-3(i)(4) of the Treasury Regulations.

(m)	Discretionary Amount. “Discretionary Amount” means an amount denominated in units that are measured by the value of Company Common Stock credited to the Account of a Participant pursuant to the Plan.

(n)	Distributable Event. “Distributable Event” means an event identified as such in Section 8.1 of the Plan.

(o)	Eligible Compensation. “Eligible Compensation” means, with respect to a Participant, remuneration for services performed during a taxable year as defined herein and as determined for purposes of the interpretation of the Plan:

	(i)	except as provided herein and in the succeeding paragraphs of this subsection, Eligible Compensation means wages within the meaning of section 3401(a) of the Code (for purposes of income tax withholding) but determined without regard to any rules that limit the remuneration


		included in wages based on the nature or location of the employment or the services performed or the limitations imposed on tax-qualified plans described in section 401(a) of the Code, and shall include any elective deferral as defined in section 402(g)(3) of the Code and any amount which is contributed or deferred by a Participating Employer at the election of the Participant by reason of section 125 of the Code, section 134(f) of the Code, section 403(b) of the Code, or section 457 of the Code;

	(ii)	Eligible Compensation shall be further determined in accordance with the following rules and requirements:

		(A)	Eligible Compensation shall be determined by including bonuses (other than vacation bonuses), sick pay and short-term disability benefits;

		(B)	Eligible Compensation shall not include: any remuneration not paid in cash; the value of life insurance coverage included in the Participant’s wages under section 79 of the Code; any car allowance or moving expense or mileage reimbursement; severance pay; amounts deferred under any plan of deferred compensation except this Plan; any benefit under any qualified or nonqualified stock option or stock purchase plan or deferred compensation plan; expatriate premiums; amounts realized upon the exercise of a nonqualified stock option, the lapse of restrictions applicable to restricted stock, or any disposition of stock acquired under a qualified or incentive stock option; or any compensation in the form of Performance-Based Compensation.

(p)	ERISA. “ERISA” means the Employee Retirement Income Security Act of 1974, any amendments thereto, and any regulations or rulings issued thereunder.

(q)	Investment Account. “Investment Account” means the Account established and maintained for a Participant as a record of any deferred amounts that may be credited to the account of the Participant pursuant to the Plan and measured in dollars pursuant to the provisions of the Plan. The Account shall be maintained for bookkeeping purposes only.

(r)	Participant. “Participant” means an individual who has satisfied the eligibility and participation requirements of Article IV of the Plan and is determined to be a Participant pursuant to and in accordance with Article IV of the Plan, which individual shall be identified as a Participant on Exhibit A attached hereto and made a part hereof by reference.

(s)	Participating Employer. “Participating Employer” means an employer that has satisfied the eligibility and participation requirements of Article III of the Plan and is determined to be a Participating Employer pursuant to and in accordance with Article III of the Plan, which Participating Employer shall be identified as a


	Participating Employer on Exhibit B attached hereto and made a part hereof by reference.

(t)	Performance-Based Compensation. “Performance-Based Compensation” means compensation where the amount of, or entitlement to, the compensation is contingent on the satisfaction of preestablished organizational or individual performance criteria relating to a performance period of at least twelve (12) consecutive months in which the Participant performs services. Organizational or individual performance criteria are considered preestablished if established in writing by not later than ninety (90) days after the commencement of the period of service to which the criteria relates, provided that the outcome is substantially uncertain at the time the criteria are established (Performance-Based Compensation may include payments based on performance criteria that are not approved by the Compensation Committee of the Board of Directors or by stockholders of the Company). This definition shall be interpreted and construed in a manner consistent with section 1.409A-1(e) of the Treasury Regulations.

(u)	Plan. “Plan” means the “HECLA MINING COMPANY KEY EMPLOYEE DEFERRED COMPENSATION PLAN,” as amended and restated effective as of January 1, 2005, and as approved and adopted by the Board of Directors and the stockholders of the Company, which is unfunded and maintained by Hecla Mining Company and certain of its affiliated companies primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees of Hecla Mining Company or another Participating Employer.

(v)	Unforeseeable Emergency. “Unforeseeable Emergency” means a severe financial hardship to the service provider resulting from an illness or accident of the service provider, the spouse of the service provider, or of a dependent (as defined in section 152 of the Code without regard to section 152(b)(1), (b)(2), and (d)(1)(B)) of the service provider; loss of the service provider’s property due to casualty; or other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the service provider; whether a service provider is faced with an Unforeseeable Emergency permitting a distribution under the Plan shall be determined based on the relevant facts and circumstances of each case, but, in any case, a distribution shall not be allowed to the extent that such emergency is or may be relieved through reimbursement or compensation from insurance or otherwise, by liquidation of the service provider’s assets, to the extent the liquidation of such assets would not cause a severe financial hardship or by cessation of deferrals under the Plan. The amount of a distribution on account of an Unforeseeable Emergency shall be limited to the amount reasonably necessary to satisfy the emergency need, plus amounts necessary to pay any federal, state or local income taxes or penalties reasonably anticipated to result from the distribution. This definition shall be interpreted and construed in a manner consistent with section 1.409A-3(i)(3) of the Treasury Regulations.


	(w)	Vested. “Vested” means, for purposes of determining the benefit that may be payable to or on behalf of a Participant under the Plan, an interest in the benefit described under the Plan which may be payable to or on behalf of the Participant in accordance with and subject to the terms of the Plan.

Section 2.2. Rules of Interpretation . An individual shall be considered to have attained a given age on the individual’s birthday for that age (and not on the day before). The birthday of any individual born on a February 29 shall be deemed to be February 28 in any year that is not a leap year. Notwithstanding any other provision of this Plan or any election or designation made under the Plan, any individual who feloniously and intentionally kills the Participant or Beneficiary shall be deemed for all purposes of this Plan and all elections and designations made under this Plan to have died before the Participant or Beneficiary. A final judgment of conviction of felonious and intentional killing is conclusive for the purposes of this Section 2.2. In the absence of a conviction of felonious and intentional killing, Company shall determine whether the killing was felonious and intentional for the purposes of this Section 2.2. Whenever appropriate, words used herein in the singular may be read in the plural, or words used herein in the plural may be read in the singular; the masculine may include the feminine and the feminine may include the masculine; and the words “hereof,” “herein” or “hereunder” or other similar compounds of the word “here” shall mean and refer to this entire Plan and not to any particular paragraph or section of this Plan unless the context clearly indicates to the contrary. The titles given to the various sections of this Plan are inserted for convenience of reference only and are not part of this Plan, and they shall not be considered in determining the purpose, meaning or intent of any provision hereof. Any reference in this Plan to a statute or regulation shall be considered also to mean and refer to any subsequent amendment or replacement of that statute or regulation. This document shall, except to the extent that federal law is controlling, be construed and enforced in accordance with the laws of the State of Delaware.

ARTICLE III

PARTICIPATING EMPLOYERS

Section 3.1. Eligibility . To be eligible to adopt and participate in the Plan, an employer must be a member of a controlled group of corporations as determined in accordance with section 1563(a)(1), (2) and (3) of the Code for purposes of determining a controlled group of corporations under section 414(b) of the Code, except however that the language “at least fifty percent” is used instead of “at least eighty percent” in each place it appears in section 1563(a)(1), (2) and (3) of the Code, and in applying section 1.414(c)-2 of the Treasury Regulations for purposes of determining trades or businesses (whether or not incorporated) that are under common control for purposes of section 414(c) of the Code, the language “at least fifty percent” is used instead of “at least eighty percent” in each place it appears in section 1.414(c)-2 of the Treasury Regulations. For purposes of this provision, the term “member of a controlled group” means two or more corporations connected through stock ownership described in section 1563(a)(1), (2), or (3), whether or not such corporations are “component members of a controlled group” within the meaning of section 1563(b) of the Code.

Section 3.2. Participation Requirements . The Company, the sponsor of the Plan, and any other affiliated company that is or becomes eligible to adopt the Plan and become a Participating Employer pursuant to Section 3.1 of the Plan may adopt the Plan and become a Participating Employer in the Plan provided that such affiliated company declares in writing to be subject to the terms and conditions of the Plan, files such declaration with the Compensation Committee, and the participation is accepted and approved in writing by the Compensation Committee. The date on which such eligible company may become a Participating Employer in the Plan shall be the date determined by the Compensation Committee. Each Participating Employer shall be obligated for its allocable portion of the benefit provided under the Plan with respect to any employee of the Participating Employer who is a Participant in the Plan and eligible to receive a benefit under the terms of the Plan. The benefit obligations of a Participating Employer are not secured in any way. The obligations of a Participating Employer constitute no more than an unfunded and unsecured promise by the Participating Employer of payment and performance. A Participating Employer shall be responsible for, and shall have the obligation of, its allocable share of costs and expenses incurred with respect to the operation and administration of the Plan, and shall be responsible for, and have the obligation of, any benefits payable under the Plan with respect to any employees of such Participating Employer who are Participants in the Plan and eligible to receive benefits under the terms of the Plan.

Section 3.3. Recordkeeping and Reporting . Each Participating Employer shall maintain records sufficient to determine the benefits (and the compensation sources of such benefits) which may become payable to or with respect to any employee of such Participating Employer who is a Participant in the Plan and to provide such Participants any reports which may be required under the terms of the Plan or by law.

Section 3.4. Termination of Participation . A Participating Employer, other than the Company, may withdraw from participation in the Plan at any time by providing the Company with thirty (30) days advance written notice of such withdrawal from participation and the effective date of the withdrawal of the Participating Employer, which thirty (30) day notice period may be waived by the Company. In addition, the Company may terminate the participation of a Participating Employer in the Plan by providing such Participating Employer with thirty (30) days advance written notice, which thirty (30) day notice period may be waived by the Participating Employer. A Participating Employer which terminates its participation in the Plan shall remain obligated under the Plan with respect to benefits payable with respect to employees of the Participating Employer participating in the Plan unless otherwise expressly agreed by the Company with the Company fully assuming such obligations.

Section 3.5. Separate Accounting . The Company shall establish and maintain separate Accounts for each of the Participating Employers and their respective Participants. Such separate accounting is intended to comply with section 404(a)(5) of the Code and section 1.404(a)-12 of the Treasury Regulations (which provide that an employer can deduct the amounts contributed to a nonqualified plan in the taxable year in which an amount attributable to the contribution is includable in the gross income of employees participating in the plan, but, in the case of a plan in which more than one employee participates only if separate accounts are maintained for each employee).

ARTICLE IV

ELIGIBILITY AND PARTICIPATION

Section 4.1. Eligibility . Eligibility to participate in the Plan shall be limited and selective; only a select group of high-ranking executive officers and key high-ranking management personnel of a Participating Employer shall be eligible to participate in the Plan. Eligibility shall be determined by the Compensation Committee acting on behalf of the Board of Directors of the Company, and such determination shall be final, conclusive and binding upon all parties in interest.

Section 4.2. Participation . A high-ranking executive officer or a key high-ranking management person determined to be eligible to participate in the Plan by the Compensation Committee pursuant to Section 4.1 of the Plan shall become a Participant in the Plan as of the date on which the Compensation Committee determines such eligible individual to be a Participant in the Plan. If the Compensation Committee determines that a high-ranking executive officer or a key high-ranking management person is eligible to become a Participant in the Plan, the Compensation Committee shall inform that individual in writing of the determination of eligibility and participation and the date on which the individual shall become a Participant in the Plan. Once an individual becomes a Participant in the Plan, the individual shall remain a Participant until the benefits which may be payable to the individual under the Plan have been distributed to or on behalf of the individual.

Section 4.3. Suspension of Eligibility . Notwithstanding any provision apparently to the contrary in the Plan document or in any written communications, summary, resolution or document or oral communication, in the event the Compensation Committee determines that a Participant will no longer be eligible to actively participate in the Plan, then, subject to the rules and requirements of section 409A of the Code, sections 1.409A-1 through 1.409A-6 of the Treasury Regulations, and applicable guidance issued by the Department of the Treasury, the compensation deferral elections made by that individual in accordance with the provisions of the Plan will be terminated and no additional amounts shall be deferred and credited to an Account of that individual under the Plan until such time as the individual is again determined to be eligible to participate in the Plan by the Compensation Committee and makes a new election under the provisions of the Plan; except, however, that the amounts or units credited to the Accounts of such individual shall continue to be adjusted by the other provisions of the Plan until fully distributed.

ARTICLE V

BENEFITS

Section 5.1. Deferred Compensation . Subject to the conditions and restrictions imposed under the Plan, a Participant may elect to defer receipt of Eligible Compensation and Performance-Based Compensation. Compensation may only be deferred to the extent that the Participant is or may be entitled to receive such compensation and the total amount deferred by a Participant shall be limited in any Plan Year, if necessary, to satisfy Social Security taxes

(including Medicare), other employment taxes, federal, state, or local income taxes, employee benefit plan deferrals or contributions, and any other required or necessary withholding requirements as determined in the sole and absolute discretion of the Compensation Committee. For each calendar year, subject to the limitations of this Section 5.1, a Participant may elect to defer up to one hundred percent (100%) of any Performance-Based Compensation payable pursuant to a bonus or incentive plan, and up to one hundred percent (100%) of Eligible Compensation. Upon such deferral, the Participant will have no further right to such deferred compensation other than as provided under the Plan. Such deferred compensation shall be the record of the value of such deferred compensation credited to the Investment Account or the Company Stock Account. Unless an allocation is made to another Account under the terms of the Plan, any Eligible Compensation and Performance-Based Compensation deferred under the Plan by a Participant shall be credited to the account of the Participant and allocated to the Investment Account or the Company Stock Account of the Participant pursuant to the direction of the Participant.

Section 5.2. Deferral Elections . Compensation for services performed by a Participant during a calendar year or during a performance period of at least twelve (12) consecutive months in which the Participant performs services may be deferred at the election of the Participant and credited to the Investment Account or the Company Stock Account of the Participant only if the election is made pursuant to the rules and requirements of this Section 5.2.


	(a)	The General Rule. Except as otherwise provided in this Section 5.2, Eligible Compensation for services performed by a Participant during a calendar year may be deferred at the election of the Participant only if the election to defer such Eligible Compensation is made and becomes irrevocable not later than the last day of the calendar year immediately preceding the calendar year during which services are to be performed.

	(b)	Performance-Based Compensation. In the case of Performance-Based Compensation based upon a performance period of at least twelve (12) months, provided that the Participant performs services continuously from a date no later than the date upon which the performance criteria are established through a date no earlier than the date upon which the Participant makes an initial deferral election, an initial deferral election may be made with respect to the Performance-Based Compensation no later than the date that is six (6) months before the end of the performance period, provided that in no event may an election to defer Performance-Based Compensation be made after such compensation has become both substantially certain to be paid and readily ascertainable. For purposes of this provision, the performance criteria shall be established in writing no later than ninety (90) days after the commencement of the performance period.

	(c)	First Year of Eligibility. The rule to apply with respect to the first year of eligibility: in the case of the first Plan Year in which an employee becomes eligible to participate in the Plan, with the determination of eligibility made under Article IV of the Plan based upon the date on which the information relevant to the employee is properly recorded on the administrative records or files of the recordkeeper, the employee may make an initial deferral election regarding


		Eligible Compensation within thirty (30) days after the date the employee becomes eligible to participate in the Plan, with respect to Eligible Compensation payable for services to be performed subsequent to the election. In the case of Performance-Based Compensation, in accordance with section 1.409A-2(a)(8) of the Treasury Regulations, an initial deferral election may be made with respect to such Performance-Based Compensation on or before the date that is six (6) months before the end of the performance period, provided that the employee performs services continuously from the later of the beginning of the performance period or the date the performance criteria are established through the date an election is made under the Plan and section 1.409A-2(a)(8) of the Treasury Regulations, and provided further that in no event may an election to defer Performance-Based Compensation be made after such compensation has become readily ascertainable.

Section 5.3. Matching Amounts . Subject to the limitations imposed under the Plan, if a Participant elects to defer Eligible Compensation or Performance-Based Compensation for a calendar year and to have all or a portion of such deferred compensation credited to the Company Stock Account of the Participant for that calendar year, the Compensation Committee shall credit the Company Stock Account of the Participant with a matching amount equal to ten percent (10%), unless another percentage is determined to apply by the Compensation Committee for the calendar year, of the sum of the Eligible Compensation and the Performance-Based Compensation deferred by the Participant for that calendar year and credited to the Company Stock Account for that calendar year. The matching amount shall be denominated in units and measured by the value of the Company Common Stock, and the Company Stock Account of the Participant shall be credited with that number of units (including fractions thereof) equal to the number of shares (including fractions thereof) of Company Common Stock that could have been purchased with the dollar amount of such matching units as of the last Business Day of the calendar quarter with respect to which amounts deferred would have been credited to the Account of the Participant, based on the average of the closing prices as reported on the New York Stock Exchange for each day during that quarter; except, however, that effective as of November 7, 2006, the units credited to the Account shall be based upon the closing price on the last Business Day of such calendar quarter. The liability of a benefit payable under the Plan with respect to the whole units credited to the Company Stock Account shall be satisfied only in shares of Company Common Stock and partial units shall be satisfied in cash.

Section 5.4. Discretionary Amounts . Irrespective of any Eligible Compensation or Performance-Based Compensation that may be deferred by a Participant for a calendar year or any matching amounts that may be credited to the Company Stock Account of a Participant for the calendar year, the Compensation Committee may at any time and from time to time, in its sole and absolute discretion, determine to credit the Company Stock Account of a Participant with an amount determined by the Compensation Committee in its sole and absolute discretion, which amount shall be denominated in units and measured by the value of Company Common Stock and shall be subject to restrictions as determined by the Company or Compensation Committee and shall not be Vested until such restrictions lapse after a stated period of service. The credit of such a discretionary amount to the Company Stock Account of a Participant shall be authorized pursuant to and in accordance with the requirements of the Delaware General Corporation Law and Rule 16b-3 under Section 16 of the Securities Exchange Act of 1934 for

such purpose or purposes as the Compensation Committee may deem appropriate. The discretion of the Compensation Committee as to whether a discretionary amount may be credited to the Company Stock Account of a Participant and, if so, the amount to be credited, shall be separately exercised with respect to each Participant. An amount may, therefore, differ from Participant to Participant both as to the amount and as to the percentage of compensation. When a Company Stock Account of a Participant is to be credited with a discretionary amount, it shall be credited with that number of units (including fractions thereof) equal to the number of shares (including fractions thereof) of Company Common Stock that could have been purchased with the dollar amount of the discretionary amount as of such date or dates as determined by the Compensation Committee, based upon the closing price on such date or dates as reported on the New York Stock Exchange for such date or dates.


	(a)	The liability of a benefit payable under this Section 5.4 of the Plan with respect to the whole units credited to the Company Stock Account shall be satisfied in shares of Company Common Stock and partial units shall be satisfied in cash.

	(b)	A Participant may elect to defer the value of a discretionary amount credited to the Company Stock Account of the Participant under this Section 5.4; however, an election by a Participant to defer the value of any such amount, treated as restricted stock units credited under this Section 5.4, must be made within thirty (30) days after any restricted stock units have been made available to the Participant in the calendar year immediately preceding the calendar year in which such restricted stock units vest and become payable under the stated terms of such restricted stock units. If an election to defer the value of a restricted stock units is made by a Participant and the employment of a Participant terminates prior to the date on which such restricted stock units vest and the stated restrictions lapse, the restricted stock units made available with respect to the Participant and deferred under the Plan are forfeited.

	(c)	An election to defer the value of any restricted stock units must state a specified date in the future for the distribution of the value of such restricted stock units, which shall be the distribution date that shall apply unless an earlier distribution event occurs under Section 8.1 of the Plan and such earlier distribution event shall supersede the stated distribution date selected by the Participant under this Section 5.4.

Section 5.5. Stock Options . For the period beginning January 1, 2005, and ending December 31, 2006, the Compensation Committee could at any time and from time to time, in its sole and absolute discretion, determine to grant a discounted stock option with respect to Company Common Stock under this Plan. If a stock option was granted under the Plan, an election made by a Participant with respect to the time of payment upon the exercise of the stock option granted under the Plan was required to be made not later than the last day of the calendar year immediately preceding the calendar year during which such grant of a discounted stock option was made. If no election was made, a lump sum payment was required to be made as of the last business day of the first month following the month in which such discounted stock option was vested, and no substantial risk of forfeiture existed, subject to applicable securities laws. The grant of a discounted stock option, the exercise of the stock option and an election to

defer the compensation related to the exercise of the stock option are governed by this Section 5.5 and Section 6.3. The grant of any discounted option was subject to the availability of sufficient shares of Company Common Stock authorized for issuance under the Plan.


(a)	In the event the Compensation Committee determined to grant a discounted stock option under the Plan, the stock option granted pursuant to this Section 5.5 was evidenced by a written agreement, approved in advance by the Compensation Committee, and incorporated herein and made a part of this Plan, and stated, with respect to such determination:

	(i)	the terms and conditions of the stock option, including, without limitation, the terms and conditions regarding the manner in which the stock option may be exercised and accounted for under the Plan; and

	(ii)	whether any limitations or restrictions applied with respect to the timing of the vesting and exercise of the stock option.

(b)	A stock option granted pursuant to this provision shall be deemed to be exercised as of the close of the ten (10) day window period described in Section 6.3 of the Plan after a distributable event as determined under Section 8.1 of the Plan unless determined to be exercised as of an earlier date pursuant to the terms of the written agreement, and no provision in the Plan could be deemed to alter the terms and conditions of an option granted under this Plan.

(c)	Upon the exercise of a stock option prior to the date on which allocation was made to the Investment Account pursuant to resolutions approved and adopted by the Board of Directors, the positive value of the exercise proceeds, determined in accordance with the formula set forth in subsection (d) of this Section 5.5, was required to be credited to the Company Stock Account in the form of stock units as of the date on which occurred the exercise of the stock option and no shares of Company Common Stock were made available or delivered to the Participant at that time; effective as of the date provided in resolutions approved and adopted by the Board of Directors and incorporated herein by reference, upon the exercise of a stock option on or after that date, the positive value of the exercise proceeds, determined in accordance with the formula set forth in subsection (d) of this Section 5.5 in an equivalent dollar amount was credited to the Investment Account as of the date on which occurred the exercise of the stock option and no shares of Company Common Stock were made available or delivered to the Participant.

(d)	As of the exercise date of a stock option granted under this Section 5.5, for a stock option exercised prior to the date on which allocation was made to the Investment Account pursuant to resolutions approved and adopted by the Board of Directors and incorporated herein by reference, the positive value of the difference between the following amounts was credited to the Company Stock Account of the Participant in the form of stock units and measured by the value of the Company Common Stock; effective as of the date provided in resolutions adopted by the


	Board of Directors, for a stock option exercised on or after that date, the positive value of the difference between the following amounts was credited to the Investment Account of the Participant in the form of an equivalent dollar amount and measured in dollars:

	(i)	the number of shares of Company Common Stock that would have been obtained by the exercise of the stock option; and

	(ii)	the number of shares of Company Common Stock or cash required to pay both the exercise price of the stock option, and, if required at that time, any foreign, federal, state, or local tax withholding.

(e)	In the event of any change in the outstanding shares of Company Common Stock by reason of any stock split, reverse stock split, or stock dividend in the form of a split, the Company shall adjust the number of stock units credited to the Company Stock Account of the Participant attributable to the value of stock units credited to the Company Stock Account pursuant to this Section 5.5 so that the number equals the number of stock units credited to the Company Stock Account prior to the event, multiplied by a fraction, the denominator of which is the number of stock units credited to the Company Stock Account prior to the event, and the numerator of which is the number of shares of Company Common Stock the Participant would have had after the event if the Participant had shares of Company Common Stock immediately prior to the event equal in number to the number of stock units credited to the Company Stock Account of the Participant immediately prior to the event.

(f)	In the event of any dividend (other than a stock dividend in the form of a split), recapitalization, merger, consolidation, spin-off, reorganization, combination or exchange of shares or other similar corporate change, then, if the Board of Directors of the Company shall determine, in its sole and absolute discretion, that such change equitably required an adjustment in the number of stock units then credited to the Company Stock Account of the Participant attributable to the value of stock units credited to the Company Stock Account pursuant to this Section 5.5, such adjustment shall be made by the Board of Directors and such determination and adjustment shall be conclusive and binding for all purposes of the Plan with respect to all interested parties.

(g)	The number of stock units credited to the Company Stock Account of a Participant was automatically increased as of each dividend payment date of Company Common Stock in an amount equal to the number of shares of Company Common Stock that could be purchased on such dividend payment date with the cash dividends that would be paid on a number of shares of Company Common Stock equal to the number of stock units credited to the Company Stock Account of the Participant on the record date for such dividend.

(h)	The value of the stock units credited to the Investment Account of a Participant pursuant to this Section 5.5 shall be distributed in accordance with Section 8.1,


		with the liability of a benefit payable under the Plan with respect to the dollar value credited to the Investment Account satisfied in cash.

	(i)	A stock option granted pursuant to this Section 5.5 shall be subject to such limitations and restrictions as may be determined to be necessary and appropriate to comply with any applicable federal and state securities rules and regulations; specifically, with respect to each stock option granted under this provision: (i) each stock option shall not be transferable, and the Participant shall have no right to sell, assign, or pledge (as collateral for a loan, or as security for the performance of an obligation, or for any other purpose) his or her interest in such option to any person; and (ii) each stock option shall not be exercisable until the later of: (A) six (6) months after the grant date, or (B) the first day of the calendar year following the calendar year in which occurs the grant date. Stock issued upon the exercise of an option may only be sold pursuant to an effective registration statement or an exemption from such registration, to be determined by counsel to the Company, and certificates representing shares of stock shall be appropriately legended.

ARTICLE VI

VALUATION OF BENEFITS

Section 6.1. Investment Account . In accordance with the terms and conditions of the Plan, for the purpose of providing the basis on which earnings and losses may be attributed or credited to the Investment Account of a Participant under the Plan, the value of Eligible Compensation and Performance-Based Compensation deferred by a Participant under the Plan and credited to the Investment Account of the Participant shall be determined as provided in this Section 6.1.


	(a)	As of the close of the last day of each calendar month, an additional amount shall be credited to the Investment Account of the Participant equal to the product of: (i) the average daily balance of the Investment Account for the month, multiplied by (ii) the prime rate quoted at the beginning of the quarter by The Wall Street Journal .

	(b)	Benefits attributable to the value of the Investment Account at the time of a Distributable Event under Section 8.1 of the Plan shall be measured in dollars and delivered to the Participant in cash.

	(c)	A Participant may elect, pursuant to the conditions and limitations of Section 6.2 or Section 6.3, whichever may apply based upon the election made, to allocate an amount allocated to the Investment Account of the Participant to either: (i) the Company Stock Account and have such amount denominated in stock units and measured by the value of Company Common Stock, or (ii) the opportunity to have the amount measured by the value of the exercise proceeds determined by the exercise of a discounted stock option granted pursuant to the provisions of Section 5.5; an election to have an amount allocated to either the Company Stock


		Account or the opportunity to have the amount measured by the value of the exercise proceeds determined by the exercise of a discounted stock option may be made once for each fiscal quarter of the fiscal year of the Company and if such an election is made, it must be made within a ten (10) day period following the public release of the Company’s financial results for that fiscal quarter for which an election is made, and once made, such an election shall be irrevocable.

	(d)	Any election made pursuant to this Section 6.1 must be made in the form and manner prescribed by the Compensation Committee and to the extent an amount credited to the Investment Account is allocated pursuant to subsection (c) of this Section 6.1, such allocated amount shall not be credited with interest under subsection (a).

Section 6.2. Company Stock Account . The value of Eligible Compensation and Performance-Based Compensation deferred by a Participant under the Plan, matching amounts and discretionary amounts credited to the Company Stock Account and stock units allocated to the Company Stock Account of a Participant under the Plan shall be measured by the value of Company Common Stock. Compensation for services performed by a Participant during a calendar year deferred at the election of the Participant and credited to the Company Stock Account pursuant to Section 5.2, matching amounts credited to the Company Stock Account pursuant to Section 5.3, and discretionary amounts credited to the Company Stock Account pursuant to Section 5.4 shall be denominated in units and measured by the value of Company Common Stock and, unless otherwise provided under the terms of the Plan, credited to the Company Stock Account as of the close of the last Business Day of each calendar quarter based upon the number of shares (including fractions thereof) of Company Common Stock that could have been purchased with the dollar amount of such amounts or units as of the last Business Day of the calendar quarter with respect to which such amounts or units would have been credited to the Account of the Participant, based on the average of the closing prices as reported on the New York Stock Exchange for each day during that quarter.


	(a)	If an amount credited to the Investment Account is allocated to the Company Stock Account at the election of a Participant pursuant to Section 6.1, the amount credited to the Company Stock Account shall be denominated in units and measured by the value of Company Common Stock and credited to the Company Stock Account based upon the number of shares (including fractions thereof) of Company Common Stock that could have been purchased with the dollar amount allocated to the Company Stock Account, determined as of the last Business Day within a ten (10) day period following the public release of the Company’s financial results for the fiscal quarter of the Company’s fiscal year for which the credit or allocation is made at the stock price per share based upon the closing price as reported on the New York Stock Exchange for such date.

	(b)	For purposes of the interpretation and operation of the Plan, “fair market value” shall mean, as of any given date, the mean between the highest and lowest reported sales prices of the Common Stock on the New York Stock Exchange Composite Tape or, if not listed on such exchange, on any other national securities exchange on which the Company Common Stock is listed or on the


		NASDAQ Stock Market, except, however, that effective as of November 7, 2006, “fair market value” shall mean, as of any given date, the closing sale price of the Company Common Stock on the New York Stock Exchange Composite Tape. If there is no regular public trading market for such Company Common Stock, the “fair market value” of the Company Common Stock shall be determined in good faith by the Compensation Committee of the Board of Directors of the Company in a manner consistent with and pursuant to section 1.409A-1(b)(5)(iv) of the Treasury Regulations and the Securities and Exchange Commission.

	(c)	Each unit credited to the Company Stock Account shall be measured by the value of one share of Company Common Stock and treated as though invested in such a share of Company Common Stock. The liability for the benefit payable with respect to the units credited to the Company Stock Account shall be satisfied only in shares of Company Common Stock.

	(d)	In the event of any change in the outstanding shares of Company Common Stock by reason of any stock split, reverse stock split, or stock dividend in the form of a split, the Company shall adjust the number of stock units allocated to the Company Stock Account of the Participant attributable to the value of stock units credited to the Company Stock Account pursuant to this Section 6.3 so that the number equals the number of stock units credited to the Company Stock Account prior to the event, multiplied by a fraction, the denominator of which is the number of stock units credited to the Company Stock Account prior to the event, and the numerator of which is the number of shares of Company Common Stock the Participant would have had after the event if the Participant had shares of Company Common Stock immediately prior to the event equal in number to the number of stock units credited to the Company Stock Account of the Participant immediately prior to the event. In the event of any dividend (other than a stock dividend in the form of a split), recapitalization, merger, consolidation, spin-off, reorganization, combination or exchange of shares or other similar corporate change, then if the Board of Directors of the Company shall determine, in its sole and absolute discretion, that such change equitably requires an adjustment in the number of stock units then credited to the Company Stock Account of the Participant, such adjustment shall be made by the Board of Directors and such determination and adjustment shall be conclusive and binding for all purposes of the Plan with respect to the interested parties.

	(e)	The number of stock units credited to the Company Stock Account of a Participant shall be automatically increased as of each dividend payment date of Company Common Stock in an amount equal to the number of shares of Company Common Stock that could be purchased on such dividend payment date with the cash dividends that would be paid on a number of shares of Company Common Stock equal to the number of stock units credited to the Company Stock Account of the Participant on the record date for such dividend. The number of units credited to a Company Stock Account shall be adjusted to reflect any change in the outstanding Common Stock by reason of any stock dividend or split,


		recapitalization, merger, consolidation, combination or exchange of shares or other similar corporate change.

Section 6.3. Discounted Stock Option . Effective prior to January 1, 2007, and subject to the terms and conditions of Section 5.5, if a Participant made an irrevocable election to have an amount allocated to the Investment Account allocated to the opportunity to have the amount measured by the value of the exercise proceeds determined by the exercise of a discounted stock option granted pursuant to Section 5.5, the Participant shall be granted an option, as of the last Business Day of the election period that shall be within a ten (10) day period following the public release of the Company’s financial results for the fiscal quarter for which the election is made (the “determination date”) to “purchase” (in effect, determine the value of the allocation election) shares of Company Common Stock at the stock price per share determined after the application of the discount and based upon the closing price as reported on the New York Stock Exchange for such Business Day, with the number of shares made available to the Participant for purposes of this election as of such determination date based upon the result of: (i) the amount subject to the election divided by (ii) the discount (or “spread,” the difference between the fair market value of the Company Common Stock as of the determination date and the value of the Company Common Stock after the discount was applied as of the determination date). (For example, if the Participant elected to have the value of $1,000 allocated to the opportunity to have such amount valued based upon the exercise proceeds of the exercise of a discounted stock option, the fair market value of the common stock as of the determination date was $1.00, and the discount was 15%, the Participant would be granted an option, as of the determination date, to “purchase” (i.e., determine the value of the allocation election) 6,666 shares of the Company’s stock at $.85 per share, which value shall be allocated to the Company Stock Account prior to the date on which allocation shall be made to the Investment Account pursuant to resolutions approved and adopted by the Board of Directors which provide that, with respect to a stock option exercised on or after that date, such value shall be allocated to the Investment Account as provided in Section 5.5 of the Plan. The grant of a discounted stock option for which a Participant may have the opportunity to elect to have the benefit determined by the value of a discounted stock option as provided in this Section 6.3 shall not be available, offered or effective after December 31, 2006.

ARTICLE VII

VESTING OF ACCOUNTS

Section 7.1. Vested Benefit . Subject to restrictions that may be imposed by the Company for discretionary amounts credited under Section 5.4, for discounted stock options under Section 5.5, and for any other stock options, a Participant shall be considered to be 100% Vested in the stock units and amounts credited to the Accounts of the Participant under the Plan.

Section 7.2. Nature of Accounts . The Accounts established under the Plan shall be maintained for bookkeeping purposes only. Neither the Accounts nor the Plan shall be required to hold any actual funds, shares of Company Common Stock or other assets.

ARTICLE VIII

DISTRIBUTION OF BENEFITS AND EXERCISE OF OPTIONS

Section 8.1. Distributable Events . The amount credited to the Account or Accounts of the Participant under this Plan may be distributed only on account of one or more of the distribution events specified in this Section 8.1. In the event the Participant becomes eligible to receive a benefit under the Plan, then, except as otherwise provided in this Section 8.1 and Section 8.2 of the Plan, the amount credited to the Accounts shall be distributable as of the date on which occurs the earliest of the events specified in this Section 8.1.


	(a)	The date on which the Participant incurs a separation from service with the Company and all corporations or entities with whom the Company would be considered a single employer under subsections (b) and (c) of section 414 of the Code in accordance with section 1.409A-1(h) of the Treasury Regulations; except, however, that if the Participant is a “specified employee” (a “specified employee” as defined in section 1.409A-1(i) of the Treasury Regulations means a key employee as defined in section 416(i) of the Code of a publicly traded company, determined as of December 31 of each calendar year and applied as of the April 1 following such determination in accordance with section 409A of the Code and section 1.409A-1(i) of the Treasury Regulations) who separates from service, then the payment of the benefit payable under the Plan shall be made as of the first day of the seventh month following the date of separation from service, determined in accordance with section 409A of the Code and section 1.409A-3(i)(2) of the Treasury Regulations.

	(b)	The date on which the Participant incurs a separation from service with the Company and all corporations or entities with whom the Company would be considered a single employer under subsections (b) and (c) of section 414 of the Code due to Disability, determined in accordance with section 409A of the Code and section 1.409A-3(i)(4) of the Treasury Regulations.

	(c)	The date on which occurs the death of the Participant.

	(d)	Except as otherwise provided with respect to the election made pursuant to subsection (b) of Section 8.2 of the Plan, the time or fixed schedule specified under and in accordance with the provisions of subsection (b) of Section 8.2 of the Plan and in accordance with section 1.409A-3(i)(1) of the Treasury Regulations.

	(e)	The date on which occurs a determination and payment based upon an Unforeseeable Emergency in accordance with subsection (c) of Section 8.2 and section 1.409A-3(i)(3) of the Treasury Regulations.

	(f)	The date on which occurs a Change in Control, effecting a change in the ownership or in the effective control of Company or a change in the ownership of a substantial portion of the assets of the Company, determined in accordance with


		subsection (e) of Section 2.1 of the Plan and section 409A of the Code and section 1.409A-3(i)(5) of the Treasury Regulations.

	(g)	The occurrence of the termination of the Plan, determined and effected pursuant to Article XIII of the Plan and in accordance with section 409A of the Code and section 1.409A-3(j)(4)(ix) of the Treasury Regulations.

Section 8.2. Distribution of Benefits . The manner in which benefits shall be distributed to or on behalf of a Participant shall be determined in accordance with this Section 8.2.


	(a)	Distribution Without Scheduled Date. As of the date on which occurs a distributable event pursuant to Section 8.1 of the Plan, then, except as otherwise determined in subsections (b) and (c) of this Section 8.2 or as otherwise provided in subsection (a) of Section 8.1, the benefit payable to or on behalf of a Participant in accordance with the terms of the Plan shall be payable as of the first day of the first calendar month immediately following the close of the ten (10) day window period described in Section 6.3 following such distributable event.

	(b)	Distribution With Scheduled Date. For each calendar year for which an election to defer Eligible Compensation or Performance-Based Compensation is made by a Participant pursuant to Article V of the Plan, the Participant may elect a scheduled distribution date that shall apply with respect to the benefit based upon the Eligible Compensation and the Performance-Based Compensation deferred by the Participant pursuant to that election to defer compensation. An election made pursuant to this subsection (b) shall be effective only if the scheduled distribution date is objectively determinable and is at least twenty-four (24) months after the last day of the calendar year in which the election to defer Eligible Compensation is made or which precedes the calendar year Performance-Based Compensation is determined for which a deferral election is made. Except with respect to a distribution pursuant to subsection (g) of Section 8.1, each election made in accordance with this subsection (b) should state whether the scheduled distribution date shall be effective even if that distribution date is not the earliest to occur of the dates specified in Section 8.1 of the Plan other than subsection (g) of Section 8.1. If the distribution election does not specifically provide that the scheduled distribution date is effective even if that distribution date is not the earliest to occur of the dates specified in Section 8.1, then the earliest to occur of the dates specified in Section 8.1 shall govern the distribution of such benefit. The distribution of a benefit payable to or on behalf of the Participant in accordance with the terms of the Plan shall be made in accordance with the distribution elections made pursuant to this subsection (b) and the rules regarding those distribution elections. The scheduled distribution date must be objectively determinable as required under section 409A of the Code and section 1.409A-3(i)(l) of the Treasury Regulations. The Participant may elect to change the time of distribution subject to certain requirements. This subsequent election shall be made in conformance with section 409A of the Code and section 1.409A-2(b) of


	the Treasury Regulations. A subsequent election to delay the timing of a distribution shall be effective only if the following conditions are met:

	(i)	an election related to a payment described in section 1.409A-3(a)(4) (payment at a specified time or pursuant to a fixed schedule) must be made not less than twelve (12) months before the date the payment is scheduled to be paid,

	(ii)	the election shall not take effect until at least twelve (12) months after the date on which the election is made, and

	(iii)	an election related to a payment not described in section 1.409A-3(a)(2) (payment on account of Disability), section 1.409A-3(a)(3) (payment on account of death), or section 1.409A-3(a)(6) (payment on account of the occurrence of an Unforeseeable Emergency), the payment with respect to which such election is made must be deferred for a period of not less than five (5) years from the date such payment would otherwise have been.

(c)	Unforeseeable Emergency. If the Participant experiences an Unforeseeable Emergency, the Participant may make a request to the Compensation Committee, by submitting a form acceptable to the Compensation Committee, to receive a distribution of all or a portion of the amount allocated to the Account or Accounts of the Participant in accordance with the provisions and requirements of this subsection (c). Except as otherwise provided herein, a request by a Participant will be considered by the Compensation Committee only if the Participant has obtained all distributions, including hardship distributions, and all nontaxable (at the time of the loan) loans currently available under all qualified and other nonqualified plans of deferred compensation maintained by Company or any other entity affiliated with the Company. If the request for a distribution is approved, the compensation deferral elections of the Participant under the Plan will immediately terminate, and a distribution based upon an Unforeseeable Emergency shall be made in the form of a lump sum as of the first day of the first calendar month immediately following the calendar month in which the date occurs of the approval by the Compensation Committee. The Participant may not again elect to defer compensation under the Plan until the enrollment period for the calendar year that begins at least twelve (12) months after such distribution.

(d)	Payment Elections. Notwithstanding any provision in the Plan to the contrary, pursuant to Notice 2005-1, Q&A-19(c), and Notice 2006-79 issued by the Department of the Treasury and the Internal Revenue Service and Part XI, Transition Relief, of the regulations issued by the Department of the Treasury and the Internal Revenue Service under section 409A of the Code, new payment elections shall be permitted under the Plan without violating the subsequent deferral and anti-acceleration rules of section 409A of the Code. Accordingly, new payment elections may be made on or before December 31, 2008, with respect to the timing of the payment of such amounts and the elections will not be treated as a change in the timing of a payment under section 409A(a)(4) or an


		acceleration of a payment under section 409A(a)(3), provided that the elections are made on or before December 31, 2008. With respect to an election to change the time of payment made on or after January 1, 2008, and on or before December 31, 2008, the election may apply only to amounts that would not otherwise be payable in 2008 and may not cause an amount to be paid in 2008 that would not otherwise be payable in 2008. With respect to an election to change the time of payment made on or after January 1, 2008, and on or before December 31, 2008, the election may apply only to amounts that would not otherwise be payable in 2008 and may not cause an amount to be paid in 2008 that would not otherwise be payable in 2008.

Section 8.3. Designation of Beneficiaries .


(a)	Right to Designate. The Participant may designate, upon forms to be furnished by and filed with the Compensation Committee, one or more primary Beneficiaries or alternative Beneficiaries to receive all or a specified portion of any benefits which may be payable with respect to the Participant under the Plan in the event of the Participant’s death. The Participant may change or revoke any such designation from time to time without notice to or consent from any Beneficiary. No such designation, change or revocation shall be effective unless executed by the Participant and received and accepted by the Compensation Committee during the lifetime of the Participant.

(b)	Failure of Designation. If a Participant fails to designate a Beneficiary, designates a Beneficiary and thereafter revokes such designation without naming another Beneficiary, or designates one or more Beneficiaries and all such Beneficiaries so designated fail to survive the Participant, then the benefits which may be payable with respect to the Participant under the Plan, or the part thereof as to which such Participant’s designation fails, as the case may be, shall be payable to the first class of the following classes of automatic Beneficiaries with a member surviving the Participant and (except in the case of surviving issue) in equal shares if there is more than one member in such class surviving the Participant:

	(i)	the surviving spouse of the Participant;

	(ii)	the surviving issue per stirpes and not per capita;

	(iii)	the surviving parents of the Participant;

	(iv)	the surviving brothers and sisters of the Participant;

	(v)	the representative of Participant’s estate.

(c)	Definitions. When used herein and, unless the Participant has otherwise specified in the Participant’s Beneficiary designation, when used in a Beneficiary designation, “issue” means all persons who are lineal descendants of the person whose issue are referred to, including legally adopted descendants and their


	descendants but not including illegitimate descendants and their descendants; “child” means an issue of the first generation; “per stirpes” means in equal shares among living children of the person whose issue are referred to and the issue (taken collectively) of each deceased child of such person, with such issue taking by right of representation of such deceased child; and “survive” and “surviving” mean living after the death of the Participant.

(d)	Special Rules. Unless the Participant has otherwise specified in the Beneficiary designation, the following rules shall apply:

	(i)	if there is not sufficient evidence that a Beneficiary was living at the time of the death of the Participant, it shall be deemed that the Beneficiary was not living at the time of the death of the Participant;

	(ii)	the automatic Beneficiaries specified in subsection (b) of this Section 8.3 and the Beneficiaries designated by the Participant shall become fixed at the time of the Participant’s death so that, if a Beneficiary survives the Participant but dies before the receipt of all payments due such Beneficiary hereunder, such remaining payments shall be payable to the representative of such Beneficiary’s estate;

	(iii)	if the Participant designates as a Beneficiary the person who is the spouse of the Participant on the date of the designation, either by name or by relationship, or both, the dissolution, annulment or other legal termination of the marriage between the Participant and such person shall automatically revoke such designation; except, however, that the foregoing shall not prevent the Participant from designating a former spouse as a Beneficiary on a form executed by the Participant and received by the Compensation Committee after the date of the legal termination of the marriage between the Participant and such former spouse, and during the lifetime of the Participant;

	(iv)	any designation of a Beneficiary by name that is accompanied by a description of relationship to the Participant shall be given effect without regard to whether the relationship to the Participant exists either then or at the Participant’s death;

	(v)	any designation of a Beneficiary only by statement of relationship to the Participant shall be effective only to designate the person or persons standing in such relationship to the Participant at the Participant’s death.

(e)	Validity of Designation. A Beneficiary designation is permanently void if it either is executed or is filed by a Participant who, at the time of such execution or filing, is then a minor under the law of the state of the legal residence of the Participant. The Compensation Committee shall be the sole judge of the content, interpretation and validity of a purported Beneficiary designation.


	(f)	No Beneficiary Rights. Prior to the death of the Participant, no person designated to be a Beneficiary shall have any rights or interest in the benefits credited under this Plan including, but not limited to, the right to be the sole Beneficiary or to consent to the designation of Beneficiaries (or the changing of designated Beneficiaries) by the Participant.

Section 8.4. Death Prior to Full Distribution . If, at the death of the Participant, any payment to the Participant was due or otherwise distributable but not actually paid, the amount of such payment shall be included in the Accounts which is payable to the Beneficiary (and shall not be paid to the Participant’s estate).

Section 8.5. Facility of Payment . In case of Disability of the Participant or Beneficiary eligible to receive distribution of a benefit payable under the terms of the Plan, such benefit shall be paid if the Compensation Committee shall be advised of the existence of such condition (any payment made in accordance with these provisions shall constitute a complete discharge of any liability or obligation of the Plan, the Company and any other Participating Employer therefor):


	(a)	to the duly appointed guardian, conservator or other legal representative of such Participant or Beneficiary, or

	(b)	to a person or institution entrusted with the care or maintenance of the incompetent or disabled Participant or Beneficiary, provided such person or institution has satisfied the Compensation Committee that the payment will be used for the best interest and assist in the care of such Participant or Beneficiary, and provided further, that no prior claim for said payment has been made by a duly appointed guardian, conservator or other legal representative of such Participant or Beneficiary.

Section 8.6. Form of Distribution . The liability of a benefit payable under the Plan with respect to the whole units credited to the Company Stock Account shall be satisfied and delivered to the Participant or Beneficiary only in shares of Company Common Stock and partial units shall be satisfied and delivered to the Participant or Beneficiary in cash. The liability of a benefit payable under the Plan with respect to the amounts credited to the Investment Account at the time of a distributable event shall be satisfied and delivered to the Participant or Beneficiary only in the form of cash. The distribution and delivery of shares of Company Common Stock shall be subject to all federal or state securities laws or other rules and regulations as determined by the Company to be applicable.

Section 8.7. Lump Sum Distribution of Benefits . In the event a Participant becomes eligible to receive a payment of a benefit under the Plan with respect to stock units credited to the Company Stock Account or amounts credited to the Investment Account as of a date on which occurs a distributable event, including a distributable event determined by an election made by the Participant pursuant to subsection (b) of Section 8.2, the benefit payable to the Participant or, in the event of the Participant’s death, to the Participant’s designated Beneficiary under the Plan, which may be specifically determined for stock units or amounts credited to the

Accounts or subaccounts of a Participant pursuant to elections made under subsection (b) of Section 8.2, shall be paid in the form of a lump sum payment.

Section 8.8. Application for Distribution . A Participant shall not be required to make application to receive payment. Distribution shall not be made to any beneficiary, however, until such Beneficiary shall have filed a written application for benefits in a form acceptable to the Compensation Committee and such application shall have been approved by the Compensation Committee.

Section 8.9. Limitation on Payment . Notwithstanding any provision in the Plan to the contrary, the payment of a benefit payable under the Plan to a Participant or Beneficiary may be deferred or limited in order to comply with applicable securities laws, tax laws, judicial determinations or orders, bank covenants, or any other applicable law as permitted or required under section 409A of the Code and applicable guidance issued by the Department of the Treasury with respect to the application of section 409A.

Section 8.10. Tax Withholding . The Company shall have the authority, duty and power to determine, withhold and report the amount of any applicable employment taxes and any applicable foreign, federal, state, or local taxes as may be required under section 409A of the Code, or other applicable provision of the Code, and guidance issued by the Department of the Treasury or the Internal Revenue Service with respect to the application of section 409A or other applicable provision of the Code, and any other applicable law with respect to any amount payable under the Plan. The Company shall have the authority, duty and power to reduce any benefit payable pursuant to the Plan by the amount of any foreign, federal, state or local taxes required by law to be withheld by the Company under applicable law with respect to such payment of benefits, and if required by law, the Participant’s share of Federal Insurance Contributions Act taxes, and any other employment taxes. Amounts required to be includable in income shall be reported on an individual’s Form W-2 or Form 1099, whichever is applicable, for the year includable in income. The Company may withhold from any cash payment under the Plan payable to the Participant or Beneficiary an amount sufficient to cover any withholding taxes required or permitted to be withheld from the Participant or Beneficiary. The Company shall have the right to require the Participant or Beneficiary receiving Company Common Stock under the Plan to pay to the Company a cash amount sufficient to cover any withholding taxes, including any income tax, social security tax, national insurance contribution, or other kind or type of tax for which the Participant, Beneficiary or the Company may be liable as a consequence of the Particpant or Beneficiary receiving Company Common Stock. In lieu of all or any part of such a cash payment from a person receiving Company Common Stock under the Plan, the Company may permit the individual to elect to cover all or any part of the withholdings, and to cover any additional withholdings up to the amount needed to cover the full amount of foreign, federal, state and local tax with respect to income arising from payment of Company Common Stock, through a reduction of the number of shares of Company Common Stock delivered to such individual or a subsequent return to the Company of shares of Company Common Stock held by the Participant or Beneficiary, in each case valued in the same manner as used in computing the withholding taxes under the applicable laws. The Company may in accordance with and to the extent it is able under the laws of the jurisdiction with respect to which a tax is owed, deduct the relevant amount from subsequent earnings payable to the Participant or Beneficiary. To the extent that the Company cannot (or does not) make the

relevant deductions, the Participant or Beneficiary receiving the Company Common Stock shall enter into such other arrangements for the individual to reimburse the Company for the amount of the tax liability as the Company shall require. The Company shall be entitled to:


	(a)	withhold and deduct from future wages of a Participant (or from other amounts that may be due and owing to a Participant from the Company), including all payments under this Plan, or make other arrangements for the collection of (including through the sale of the shares of Company Common Stock otherwise issuable pursuant to the provisions of the Plan) all legally required amounts necessary to satisfy any and all foreign, federal, state, or local tax withholding and employment-related tax requirements attributable to the shares of Company Common Stock, or

	(b)	require a Participant promptly to remit the amount of such withholding to the Company before taking any action with respect to the shares of Company Common Stock; to the extent specified by the Company, withholding may be satisfied by withholding shares of Company Common Stock to be received upon a distributable event under the Plan, or by delivery to the Company of previously owned shares of Company Common Stock; in addition, the Company may reasonably delay the issuance or delivery of shares of Company Common Stock as it determines appropriate to address tax withholding and other administrative matters.

ARTICLE IX

NONTRANSFERABILITY AND VOTING RIGHTS

Section 9.1. Anti-Alienation of Benefits . The amounts and stock units which may be credited to the Accounts of a Participant under the Plan, any options which may be granted under the Plan, and any rights or privileges pertaining thereto, may not be anticipated, alienated, sold, transferred, assigned, pledged, encumbered, or subjected to any charge or legal process; and no interest or right to receive a benefit may be taken, either voluntarily or involuntarily, for the satisfaction of the debts of, or other obligations or claims against, such person or entity, including claims for alimony, support, separate maintenance and claims in bankruptcy proceedings.

Section 9.2. Voting of Company Stock With Respect to Accounts . No Participant shall be entitled to any voting rights with respect to any stock units credited to any Account under the Plan.

Section 9.3. Voting With Respect to Options . No Participant shall be entitled to any voting rights with respect to any stock options granted pursuant to the Plan.

ARTICLE X

ADMINISTRATION OF THE PLAN

Section 10.1. Administrator . The administrator of the Plan shall be the Company. However, except as otherwise provided herein, the Compensation Committee shall act on behalf of the Company with respect to the administration of the Plan and the performance of functions generally assigned to the Company.

Section 10.2. Authority of Administrator . The Compensation Committee shall have the authority, duty and power to interpret and construe the provisions of the Plan as it deems appropriate, to adopt, establish and revise rules, procedures and regulations relating to the Plan, to determine the conditions subject to which any benefits may be payable, to resolve all factual and legal questions concerning the status and rights of the Participants and others under the Plan, including, but not limited to, eligibility for benefits and to make any other determinations which it believes necessary or advisable for the administration of the Plan. Benefits under this Plan will be payable only if the Compensation Committee decides in its discretion that the applicant is entitled to them under the Plan. The Company shall have the duty and responsibility of maintaining records, making the requisite calculations and disbursing payments hereunder. The determinations, interpretations, and regulations of the Compensation Committee and the calculations of the Company shall be final and binding on all persons and parties concerned. The Secretary of the Company shall be the agent of the Plan for the service of legal process in accordance with section 502 of ERISA.

Section 10.3. Operation of Plan and Claims Procedures . The Company shall be responsible for the general operation and administration of the Plan and for carrying out the provisions thereof. The Company shall be responsible for the expenses incurred in the administration of the Plan. The Company shall also be responsible for determining eligibility for payments and the amounts payable pursuant to the Plan. The Company shall be entitled to rely conclusively upon all tables, valuations, certificates, opinions and reports furnished by any actuary, accountant, controller, counsel or other person employed or engaged by the Company with respect to the Plan. The procedures for filing claims for payments under the Plan are described below. For claims procedures purposes, the “Claims Manager” shall be the Company.


	(a)	Claims Forms. It is the intent of the Company that benefits payable under the Plan shall be payable without the Participant having to complete or submit any claims forms. However, a Participant who believes he or she is entitled to a payment under the Plan may submit a claim for payments in writing to the Company. Any claim for payments under the Plan must be made by the Participant or his or her beneficiary in writing and state the claimant’s name and the nature of benefits payable under the Plan on a form acceptable to the Company. If for any reason a claim for payments under the Plan is denied by the Company, the Claims Manager shall deliver to the claimant a written explanation setting forth the specific reasons for the denial, specific references to the pertinent provisions of the Plan on which the denial is based, a description of any additional material or information necessary for the claimant to perfect the claim and an


		explanation of why such material or information is necessary, and information on the procedures to be followed by the claimant in obtaining a review of his or her claim, all written in a manner calculated to be understood by the claimant. For this purpose:


	(i)	the claimant’s claim shall be deemed to be filed when presented in writing to the Claims Manager;

	(ii)	the Claims Manager’s explanation shall be in writing delivered to the claimant within ninety (90) days of the date the claim is filed.

(b)	Review. The claimant shall have sixty (60) days following his or her receipt of the denial of the claim to file with the Claims Manager a written request for review of the denial. For such review, the claimant or the claimant’s representative may review pertinent documents and submit written issues and comments.

(c)	Decision on Review. The Claims Manager shall decide the issue on review and furnish the claimant with a copy within sixty (60) days of receipt of the claimant’s request for review of the claimant’s claim. The decision on review shall be in writing and shall include specific reasons for the decision, written in a manner calculated to be understood by the claimant, as well as specific references to the pertinent provisions in the Plan on which the decision is based. In no event may a claimant commence legal action for benefits the claimant believes are due the claimant until the claimant has exhausted all of the remedies and procedures afforded the claimant by this Section 10.3.

(d)	Disability Claims. Any review of an appeal of a determination with respect to the Participant’s Disability must meet the following standards: the review does not afford deference to the initial adverse determination; the review is conducted by an appropriate person who is neither the party who made the initial adverse benefit determination that is the subject of the appeal nor a subordinate of such party; the review provides for the appropriate person to consult with health care professionals with appropriate training and experience in the field of medicine involved in the medical judgment in deciding the appeal of an adverse benefit determination that is based in whole or in part on a medical judgment; and the review provides for the identification of the medical or vocational experts whose advice was obtained in connection with the claimant’s adverse benefit determination, without regard to whether the advice was relied upon in making the determination. Furthermore, the ninety (90) day period described in these procedures shall be reduced to forty-five (45) days in the case of a claim of the Participant’s Disability. The forty-five (45) day period may be extended by thirty (30) days if the Claims Manager determines the extension is necessary to circumstances outside the control of the Plan, and the claimant is notified prior to the end of the forty-five (45) day period. If prior to the end of the thirty (30) day extension period, the Claims Manager determines that additional time is necessary, the period may be extended for a second thirty (30) day period,


	provided the claimant is notified prior to the end of the first thirty (30) day extension period and such notice specifies the circumstances requiring the extension and the date as of which the Plan expects to render a decision. The sixty (60) day period described in these procedures shall be reduced to forty-five (45) days with respect to the appeal of the denial of the Participant’s claim of Disability. The forty-five (45) day period may be extended by an additional forty-five (45) days if the Claims Manager determines the extension is necessary to circumstances outside the control of the Plan, and the claimant is notified prior to the end of the initial forty-five (45) day period.

(e)	General Rules. No inquiry or question shall be deemed to be a claim or a request for a review of a denied claim unless made in accordance with the claims procedure. The Claims Manager may require that any claim for benefits and any request for a review of a denied claim be filed on forms to be furnished by the Claims Manager upon request. The Claims Manager may, in its discretion, hold one or more hearings on a claim or a request for a review of a denied claim. Claimants may be represented by a lawyer or other representative at their own expense, but the Claims Manager reserves the right to require the claimant to furnish written authorization. A claimant’s representative shall be entitled to copies of all notices given to the claimant.

(f)	Deadline to File Claim. To be considered timely under the Plan’s claim and review procedure, a claim must be filed with the Company within one (1) year after the claimant knew or reasonably should have known of the principal facts upon which the claim is based.

(g)	Exhaustion of Administrative Remedies. The exhaustion of the claim and review procedure is mandatory for resolving every claim and dispute arising under this Plan. As to such claims and disputes:

	(i)	no claimant shall be permitted to commence any legal action to recover Plan benefits or to enforce or clarify rights under the Plan under section 502 or section 510 of ERISA or under any other provision of law, whether or not statutory, until the claim and review procedure set forth herein have been exhausted in their entirety; and

	(ii)	in any such legal action all explicit and all implicit determinations by the Company (including, but not limited to, determinations as to whether the claim, or a request for a review of a denied claim, was timely filed) shall be afforded the maximum deference permitted by law.

(h)	Deadline to File Legal Action. No legal action to recover Plan benefits or to enforce or clarify rights under the Plan under section 502 or section 510 of ERISA or under any other provision of law, whether or not statutory, may be brought by any claimant on any matter pertaining to this Plan unless the legal action is commenced in the proper forum before the earlier of:


	(i)	thirty (30) months after the claimant knew or reasonably should have known of the principal facts on which the claim is based, or

	(ii)	six (6) months after the claimant has exhausted the claim and review procedure.

(i)	Knowledge of Facts by Participant Imputed to Beneficiary. Knowledge of all facts that a Participant knew or reasonably should have known shall be imputed to every claimant who is or claims to be a beneficiary of the Participant or otherwise claims to derive an entitlement by reference to the Participant for the purpose of applying the previously specified periods.

Section 10.4. Participant’s Address . Each Participant shall keep the Company informed of his or her current address and the current address of his or her beneficiary. The Company shall not be obligated to search for any person.

Section 10.5. Conflict of Interest . If any individual to whom authority has been delegated or redelegated hereunder shall also be a Participant in this Plan, such Participant shall have no authority with respect to any matter specifically affecting such Participant’s individual interest hereunder or the interest of a person superior to him or her in the Company or Participating Employer (as distinguished from the interests of all Participants and their beneficiaries or a broad class of Participants and beneficiaries), all such authority being reserved exclusively to other individuals as the case may be, to the exclusion of such Participant, and such Participant shall act only in such Participant’s individual capacity in connection with any such matter.

Section 10.6. Service of Process . In the absence of any designation to the contrary by the Company, the Compensation Committee is designated as the appropriate and exclusive agent for the receipt of service of process directed to the Plan in any legal proceeding, including arbitration, involving the Plan.

Section 10.7. Errors in Computations . The Company, any Participating Employer or the Compensation Committee shall not be liable or responsible for any error in the computation of any Account or the determination of any benefit payable to or with respect to any Participant resulting from any misstatement of fact made by the Participant or by or on behalf of any survivor to whom such benefit shall be payable, directly or indirectly, to the Company, any Participating Employer or the Compensation Committee and used in determining the benefit. The Company, any Participating Employer, or the Compensation Committee shall not be obligated or required to increase the benefit payable to or with respect to such Participant which, on discovery of the misstatement, is found to be understated as a result of such misstatement of the Participant. However, the benefit of any Participant which is overstated by reason of any such misstatement or any other reason shall be reduced to the amount appropriate in view of the truth (and to recover any prior overpayment).

ARTICLE XI

MISCELLANEOUS PROVISIONS

Section 11.1. No Employment Rights . Neither the Plan nor any action taken under the Plan shall be construed as providing any Participant any right to be retained in the service or employ of any Participating Employer.

Section 11.2. Participants Should Consult Advisors . Neither any Participating Employer, nor their respective directors, officers, employees or agents makes any representation or warranty with respect to the foreign, federal, state or other tax, financial, estate planning, or the securities or other legal implications of participation in the Plan. Participants should consult with their own tax, financial and legal advisors with respect to their participation in the Plan.

Section 11.3. Unfunded and Unsecured . The Plan shall at all times be considered entirely unfunded both for tax purposes and for purposes of Title I of the Employee Retirement Income Security Act of 1974, as amended, and no provision shall at any time be made with respect to segregating assets of the Company or any Participating Employer for payment of any amounts under the Plan. Any funds invested under the Plan shall continue for all purposes to be part of the respective general assets of the Company or any Participating Employer and available to general creditors in the event of a bankruptcy (involvement in a pending proceeding under the Federal Bankruptcy Code) or insolvency (inability to pay debts as they mature) of the Company or a Participating Employer. The Company shall promptly notify the Trustee and the applicable Participants of such bankruptcy or insolvency. No Participant or any other person shall have any interests in any particular assets of the Company or any Participating Employer by reason of the right to receive a benefit under the Plan and to the extent the Participant or any other person acquires a right to receive benefits under the Plan, such right shall be no greater than the right of any general unsecured creditor. The Plan constitutes a mere promise by the Company and any other Participating Employer for the payment of benefits payable under the Plan to the Participants in the future. Nothing contained in the Plan shall constitute a guaranty by any Participating Employer or any other person or entity that any funds in any trust or the assets of the Company or any Participating Employer will be sufficient to pay any benefit under the Plan. Furthermore, no Participant shall have any right to a benefit under the Plan except in accordance with the terms of the Plan.

Section 11.4. Plan Provisions . Except when otherwise required by the context, any singular terminology shall include the plural.

Section 11.5. Severability . If a provision of the Plan shall be held to be illegal or invalid, the illegality or invalidity shall not affect the remaining parts of the Plan and the Plan shall be construed and enforced as if the illegal or invalid provision had not been included.

Section 11.6. Applicable Law . To the extent not preempted by the laws of the United States, the laws of the State of Delaware shall apply with respect to the Plan.

Section 11.7. Stock Subject to Plan . Subject to and in accordance with the terms of the Plan, the maximum number of shares of Common Stock that shall be made available for

purposes of satisfying the obligations of the Company under the Plan is 6,000,000 shares, subject to adjustment by reason of any stock dividend or split, recapitalization, merger, consolidation, combination or exchange of shares or other similar corporate change. For purposes of counting shares of Company Common Stock available under this Section 11.7 for distribution from the Accounts under the Plan and for issuance upon exercise of stock options granted pursuant to the Plan, the number of shares covered by units credited to such Accounts shall be counted on the date units are credited to an Account and the number of shares covered by stock options granted pursuant to the Plan shall be counted on the date of grant.

ARTICLE XII

AMENDMENT OF THE PLAN

Section 12.1. Amendment of the Plan . The Board of Directors reserves the power to alter, amend or wholly revise the Plan at any time and from time to time and the interest of each Participant is subject to the powers so reserved; provided, however, that no amendment made subsequent to a Change in Control shall be effective to the extent that it would have a materially adverse impact on a Participant’s reasonably expected economic benefit attributable to compensation deferred by the Participant prior to the Change in Control.

Section 12.2. Procedure for Amendment . An amendment shall be authorized by the Board of Directors of the Company and shall be stated in an instrument in writing signed in the name of the Company by a person or persons authorized by the Board of Directors. After the instrument has been so executed, the Plan shall be deemed to have been amended in the manner therein set forth, and all parties interested herein shall be bound thereby. No amendment to the Plan may alter, impair, or reduce the Vested benefit payable under the Plan as determined prior to the effective date of such amendment without the written consent of the Participant.

ARTICLE XIII

TERMINATION OF PLAN

Section 13.1. Termination of the Plan . The Plan shall permit an acceleration of the time and form of a payment of the benefits payable under the Plan in accordance with one of the events described herein.


	(a)	In the event of a complete liquidation and dissolution of the Company, the Company shall terminate the Plan within twelve (12) months of the liquidation and dissolution of the Company, or with the approval of a bankruptcy court, and the value of the benefits payable under the Plan to the Participant shall be determined as of that date and shall be distributed to the Participant or his or her Beneficiary; provided, however, that the benefits payable under the Plan are included in the gross income of the Participant or his Beneficiary in the latest of: (i) the calendar year in which the Plan termination occurs; (ii) the calendar year in which the amount is no longer subject to a substantial risk of forfeiture; or (iii) the first calendar year in which the payment is administratively practicable.


	(b)	The Company may, at its sole and absolute discretion, determine to terminate the Plan, provided that: (i) the termination does not occur proximate to a downturn in the financial health of the Company, (ii) all arrangements sponsored by the Company that would be aggregated with the Plan pursuant to section 1.409A-1(c) of the Treasury Regulations or the corresponding provision in future guidance issued by the Department of the Treasury if the Participant participated in all of the arrangements are terminated; (iii) no payments other than the payments that would be payable under the terms of the arrangements if the termination had not occurred are made within twelve (12) months of the termination of the arrangements; (iv) all payments are made within twenty-four (24) months of the termination of the arrangements; and (v) the Company does not adopt a new arrangement that would be aggregated with any terminated arrangement under section 1.409A-1(c) of the Treasury Regulations or the corresponding provision in future guidance issued by the Department of the Treasury if the Participant participated in both arrangements, at any time within three (3) years following the date of termination of the arrangement.

	(c)	An acceleration of the time of the payment of the value of the benefit payable under the Plan to the Participant shall also be allowed at any time the Plan fails to meet the requirements of section 409A and the regulations issued thereunder as permitted under the final regulations issued by the Department of the Treasury and the Internal Revenue Service. However, the payment made based upon the acceleration for the failure to meet the requirements of section 409A and the regulations issued thereunder may not exceed the amount required to be included in income as a result of the failure to comply with the requirements of section 409A and the regulations issued thereunder.

	(d)	This Section 13.1 shall be construed and administered in a manner consistent with section 409A of the Code and section 1.409A-3(j)(4)(ix) of the Treasury Regulations or the corresponding provision in future guidance issued by the Department of the Treasury.

Section 13.2. Procedure for Amendment to Terminate the Plan . Procedure for Amendment to Terminate the Plan. An amendment to terminate the Plan shall be authorized by the Board of Directors of the Company and shall be stated in an instrument in writing signed in the name of the Company by a person or persons authorized by the Board of Directors. After the instrument has been so executed, the Plan shall be deemed to have been amended in the manner therein set forth, and all parties interested herein shall be bound thereby.

Dated as of this ______ day of _____________, _____.


	HECLA MINING COMPANY

	By:

	Title:

EXHIBIT A

HECLA MINING COMPANY
KEY EMPLOYEE DEFERRED COMPENSATION PLAN PARTICIPANTS

Name of Participants

A-1

EXHIBIT B

HECLA MINING COMPANY
KEY EMPLOYEE DEFERRED COMPENSATION PLAN

PARTICIPATING EMPLOYERS


1.	Hecla Mining Company, a Delaware corporation

2.	Minera Hecla, S.A. de C.V., a Mexican corporation (January 1, 2003)

3.	Hecla Greens Creek Mining Company, a Delaware corporation

B-1

Exhibit 10.17(a)

EXECUTION COPY

HECLA MINING COMPANY

RESTATED

RETIREMENT PLAN

(Effective as of January 1, 2008)

HECLA MINING COMPANY

RESTATED
RETIREMENT PLAN

TABLE OF CONTENTS


		Page
INTRODUCTION		1

ARTICLE I DEFINITIONS		2
	A. Accrued Benefit	2
	B. Actuarial Equivalent	2
	C. Administrator	3
	D. Annuity Starting Date	3
	F. Average Compensation	3
	G. Beneficiary	3
	H. Code	3
	I. Committee	3
	J. Company	3
	K. Compensation	4
	L. Covered Compensation	5
	M. Credited Service	5
	N. Death Benefit	5
	O. Early Retirement	5
	P. Early Retirement Age	5
	Q. Early Retirement Benefit	6
	R. Early Retirement Date	6
	S. Effective Date	6
	T. Eligible Employee	6
	U. Eligible Spouse	7
	V. Employee	7
	W. Employer	7
	X. Enrolled Actuary	7
	Y. Entry Date	7
	Z. ERISA	8
	AA. Fiscal Year	8
	AB. Hour of Service	8
	AC. Key Employee	9
	AD. Leased Employee	10
	AE. Non-Key Employee	10
	AF. Normal Form	10
	AG. Normal Retirement	11
	AH. Normal Retirement Age	11
	AI. Normal Retirement Benefit	11
	AJ. Normal Retirement Date	11
	AK. One-Year Break in Service	11


		Page
	AL. Participant	11
	AM. Plan	11
	AN. Plan Year	12
	AO. Social Security Retirement Age	12
	AP. Social Security Taxable Wage Base	12
	AQ. Spousal Consent	12
	AR. Top-Heavy Plan	12
	AS. Total Compensation	13
	AT. Total Disability	15
	AU. Trust	15
	AV. Trustees	15
	AW. Year of Service	15
	AX. Modification of Top-Heavy Rules	15
	AY. Phased Retirement Date	16
	AZ. Phased Retirement Benefit	17
	BA. Highly Compensated Employee	17
	BB. Military Service	17
	BC. Kennecott Companies	17
	BD. Kennecott Employees	17
	BE. Kennecott Defined Contribution Plan	17
	BF. Kennecott Pension Plan	17
	BG. Kennecott Pension Participants	18
	BH. Retirement Credit Balance Benefits	18
	BI. Termination of Employment	18
	BJ. Distribution Calendar Year	18
	BK. Date of Distribution	18
	BL. Retroactive Annuity Starting Date	18

ARTICLE II ELIGIBILITY AND PARTICIPATION		18
	A. Service Requirement	18
	B. Eligibility Computation Period	19
	C. Participation	19
	D. Leaves of Absence	20
	E. Suspended Participation	20
	F. Inactive Participation	20
	G. Reemployment After Retirement	21

ARTICLE III NORMAL RETIREMENT BENEFITS		21
	A. Benefit Eligibility	21
	B. Waiver of Employer Contributions	21
	C. Annual Valuation	22
	D. Normal Retirement Benefit	22
	E. Minimum Benefit Requirements	25
	F. Maximum Benefit for any Participant	26
	G. Early Retirement Benefit	26
	H. Delayed Retirement Benefit	27
	I. Death Benefit	27
	J. Disability Retirement Benefit	28


		Page
	K. Eligible Spouse’s Survivor Benefits	28
	L. Qualified Joint and Survivor Annuity	29
	M. Deferred Vested Benefit	30
	N. Distributions Prior to Early Retirement Age	31
	O. Optional Form of Benefit	31
	P. Time of Distribution	32
	Q. Direct Rollover Distributions to an Eligible Retirement Plan	40
	R. Determination of Accrued Benefit Fresh-Start Rules	41
	S. Pension Enhancement Option	42
	T. Early Retirement Window Benefit	44
	U. Early Retirement Window Additional Benefit	45
	V. Phased Retirement Benefit	46
	W. Special Early Retirement Window Benefit	47
	Z. Employer Contributions	50

ARTICLE IV RETIREMENT CREDIT BALANCE BENEFITS		51
	A. Benefit Eligibility	51
	B. Retirement Credit Balance Benefit	51
	C. Qualified Joint and Survivor Annuity	52
	D. Optional Form of Benefit	53
	E. Death Benefit	54
	F. Time of Distribution	54
	G. Employer Contributions	55

ARTICLE V LIMITATIONS ON BENEFITS		55
	A. General Limitations	55

ARTICLE VI VESTING OF EMPLOYER FUNDED BENEFITS		56
	A. Vesting	56
	B. Termination of Employment	58
	C. Rehired Participants	58

ARTICLE VII LOANS TO PARTICIPANTS		58

ARTICLE VIII BENEFICIARIES		59
	A. Designation	59
	B. Absence of Valid Designation of Beneficiaries	59

ARTICLE IX PARTICIPANT’S CONTRIBUTIONS AND SPECIAL ACCOUNTS		59

ARTICLE X ESTABLISHMENT OF TRUST		59
	A. Trust Agreement	59
	B. Trust Agreement Part of Plan	60

ARTICLE XI PLAN FIDUCIARIES AND ADMINISTRATION		60
	A. Named Fiduciaries	60
	B. Fiduciary Standard	60
	C. Multiple Duties and Advisors	61
	D. Allocation and Delegation of Fiduciary Duties	61

iii


		Page
	E. Indemnification	61
	F. Costs and Expenses	61
	G. Authority to Amend and Terminate	62
	H. Administrative Committee	62
	I. Plan Administration	62
	J. Claims Procedures	63
	K. Agent for Legal Process	65

ARTICLE XII AMENDMENT AND TERMINATION		65
	A. Amendment	65
	B. Termination or Complete Discontinuance of Contributions	65
	C. Nonreversion	66
	D. Limitations on Benefits in the Event of Plan Termination	67
	E. Termination After Change in Control	68

ARTICLE XIII MISCELLANEOUS		68
	A. Limitation of Rights; Employment Relationship	68
	B. Transfer of Assets of Employer; Transfer of Assets of Plan	69
	C. Spendthrift Provision	69
	D. Applicable Law, Severability	69
	E. Incorporation of Trust Agreement Provisions	70
	F. No Liability	70
	G. Missing Persons	70

APPENDIX I		72

APPENDIX II		73

APPENDIX III		74

RESTATEMENT HISTORY


A.	Effective as of January 1, 1947, Hecla Mining Company adopted the Hecla Mining Company Retirement Plan (the “Prior Plan”) and executed a Trust Agreement. As of the original effective date of the Prior Plan, and subsequently the Plan, such arrangements have been intended to have tax-qualified status under Sections 401(a) of the Internal Revenue Code, as amended (the “Code”), exempt from tax under Section 501(a) of the Code, and to be subject to the applicable provisions of the Employee Retirement Income Security Act of 1974, as amended, as well as the applicable predecessor laws.

B.	Effective as of January 1, 1987, Hecla Mining Company amended and restated the Prior Plan and the Trust Agreement established under the Prior Plan to provide retirement entitlements for the exclusive benefit of its Eligible Employees and their beneficiaries in accordance with the terms and conditions set forth in the Plan.

C.	Effective as of July 1, 2001, Hecla Mining Company amended and restated the Prior Plan and the Trust Agreement established under the Prior Plan to provide retirement entitlements for the exclusive benefit of its Eligible Employees and their beneficiaries in accordance with the terms and conditions set forth in the Plan.

D.	Effective May 10, 2002, Hecla Mining Company amended and restated the Prior Plan and the Trust Agreement established under the Prior Plan to provide retirement entitlements for the exclusive benefit of its Eligible Employees and their beneficiaries in accordance with the terms and conditions set forth in the Plan.

E.	Effective February 16, 2006, Hecla Mining Company amended and restated the Prior Plan and the Trust Agreement established under the Prior Plan to provide retirement entitlements for the exclusive benefit of its Eligible Employees and their beneficiaries in accordance with the terms and conditions set forth in the Plan.

F.	Effective as of January 1, 2008, Hecla Mining Company amended and restated the Prior Plan and the Trust Agreement established under the Prior Plan to provide retirement entitlements for the exclusive benefit of its Eligible Employees and their beneficiaries in accordance with the terms and conditions set forth in the Plan.

Notwithstanding the restatement of the Plan nor any provision of this Plan to the contrary, no benefit accrued under the Prior Plan and protected under Section 411(d)(6) of the Internal Revenue Code of 1986, as amended, and regulations thereunder, shall be reduced or eliminated by this Plan.

HECLA MINING COMPANY

RESTATED RETIREMENT PLAN

INTRODUCTION

This instrument constitutes the Hecla Mining Company Retirement Plan (the “Plan”) established and maintained by Hecla Mining Company (the “Company”), originally effective as of January 1, 1947. The Plan is intended to constitute a tax-qualified defined benefit plan within the meaning of Section 401(a) of the Internal Revenue Code of 1986, as amended (the “Code”), and is subject to the applicable provisions of the Employee Retirement Income Security Act of 1974 (“ERISA”). The assets of the Plan are held in a tax-exempt trust established under Section 501(a) of the Code (the “Trust”), the custody and disposition of which are subject to the terms of a trust agreement executed by the Company as of the Plan’s original effective date. Subsequent to the Plan’s original effective date, the Plan has been amended and restated in its entirety effective as of January 1, 1987, July 1, 2001, May 10, 2002, February 16, 2006, and most recently as of December 3, 2007, with each such amendment and restatement of the Plan in full compliance with the applicable legal requirements then in effect, including, but not limited to, the requirements of Section 411(d)(6) of the Code which prohibit the reduction or elimination of protected benefits (as defined thereunder). Effective as of April 16, 2008, Hecla Admiralty Company, a wholly owned subsidiary of the Company and “Employer” within the meaning of Paragraph W of Article I hereof, acquired all of the outstanding shares of capital stock of both the Kennecott Greens Creek Mining Company and the Kennecott Juneau Mining Company (collectively “Kennecott Companies”), the employees of which (the “Kennecott Employees”) participated in the Rio Tinto America, Inc. Investment Partnership Plan, a tax-qualified defined contribution plan funded solely by the Kennecott Companies (the “Kennecott Defined Contribution Plan”) and the Rio Tinto America, Inc. Retirement Plan (the “Kennecott Pension Plan”). In connection with the transaction, the Company amended the Plan effective as of April 16, 2008, to add a cash balance feature as necessary to replicate the benefits provided to the Kennecott Employees under the Kennecott Defined Contribution Plan, which has resulted in the change of the Plan’s classification, effective as of April 16, 2008, to that of a statutory hybrid plan within the meaning of Section 411(a)(13) of the Code. Effective as of the same date, the Company amended the provisions of the Plan governing the calculation of the Normal Retirement Benefits in order to allow Kennecott Employees who participated in the Kennecott Pension Plan as of the effective date of the aforementioned transaction, to accrue a Normal Retirement Benefit under this Plan calculated, in part, based upon the Kennecott Employees’ vested and accrued benefit entitlement under the Kennecott Pension Plan. This Plan is hereby restated in its entirety effective as of January 1, 2008, in order to incorporate all amendments made to the Plan since the last restatement, and to incorporate all recent regulatory changes as reflected in Internal Revenue Service Notice 2007-94, including, but not limited to, the Pension Protection Act of 2006, the final Treasury Regulations under Section 417 of the Code, governing “retroactive annuity starting dates,” the final Treasury Regulations under Section 415 of the Code, and the final Treasury Regulation under Section 401(a)(9) of the Code governing required minimum distributions.

ARTICLE I

DEFINITIONS


A.	“Accrued Benefit” shall mean, effective as of April 16, 2008, with respect to the Normal Retirement Benefits provided under Article III, that portion of a Participant’s Normal Retirement Benefit which he has earned as of a determination date based upon the benefit formula reflected under Article III, which takes into account the Participant’s years of Credited Service through the determination date. For purposes of the Retirement Credit Balance Benefit provided under Article IV, Accrued Benefit shall mean the Participant’s Retirement Credit Balance (as defined in Paragraph BH of this Article I) as of any date. Accrued Benefits provided under the Plan shall be subject to the minimum benefit requirements of Articles III and IV.

B.	“Actuarial Equivalent” shall mean a benefit, payable in a different form and/or at a different time than a Participant’s Accrued Benefit, which shall be an amount that is equal in value to the Participant’s Accrued Benefit by using assumptions determined by an Enrolled Actuary as follows.

	1.	For purposes of the Normal Retirement Benefits provided under Article III, the preretirement assumptions to be used are: Interest at seven percent (7%) per annum with mortality based on the UP-1984 (Uninsured Pensioners Unisex) table of mortality with no setback. The post-retirement assumptions to be used for this purpose are: Interest at seven percent (7%) per annum with mortality based on the UP-1984 (Uninsured Pensioners-Unisex) table of mortality with no setback. In determining whether this Plan is a Top-Heavy Plan as of a “determination date,” the same assumptions as stated above shall be used to calculate the value of each Participant’s Accrued Benefit as of such ‘determination date.’ If the definition of ‘Actuarial Equivalent’ is amended, the value of a Participant’s Accrued Benefit on or after the date of such amendment shall be the greater of: (1) the Actuarial Equivalent of the Participant’s total Accrued Benefit computed in accordance with the new definition, or (2) the Actuarial Equivalent of the Participant’s Accrued Benefit determined as of the date of such amendment and computed in accordance with the old definition.

	2.	For purposes of the Retirement Credit Balance Benefits provided under Article IV, effective as of April 16, 2008, the interest rate shall be equal to the annual rate of change of the consumer price index plus three percent (3%), with mortality based upon the UP-1984 (Uninsured Pensioners Unisex) table of mortality with no setback. The foregoing assumptions are intended to comply with the rate of return safe harbors reflected in IRS Notice 2007-6 and IRS Notice 96-8, in order to comply with the requirements of Sections 411 and 417 of the Code. To the extent the assumptions reflected in this Subparagraph B-2 are inconsistent with the foregoing regulatory guidance, the provisions of IRS Notice 2007-6 and IRS Notice 96-8 shall govern and control.


	3.	For purposes of determining the Actuarial Equivalent of lump-sum payments made on or after January 1, 2008, under Articles III and IV, the lump-sum payment amount shall be calculated as the greater of: (a) the value determined using the interest rate or rates which would be used, as of the first day of the Plan Year that contains the Annuity Starting Date, by the Pension Benefit Guaranty Corporation for purposes of determining the present value of the Participant’s benefits under the Plan, if the Plan had terminated on such date with insufficient assets to provide benefits guaranteed by the Pension Benefit guaranty Corporation on that date; and (b) the value determined based upon (i) the Applicable Mortality Table under Section 417(e)(3)(B) of the Code, and (ii) the Applicable Interest Rate under Section 417(e)(3) of the Code for the fifth month immediately preceding the beginning of the Plan Year which includes the date selected for payment of the benefit.

C.	“Administrator” shall mean the Plan Administrator as specified in Article XI.

D.	“Annuity Starting Date” shall mean the first day of the first period for which an amount is payable as an annuity or, in the case of a benefit not payable in the form of an annuity, the first day on which all events have occurred which entitled the Participant to such benefit. In the case of a deferred annuity, the Annuity Starting Date shall be the date on which the annuity payments are scheduled to commence. The payment of any disability retirement benefit is to be disregarded in determining the Annuity Starting Date.

E.	[RESERVED]

F.	“Average Compensation” shall mean the average of the Compensation for the Participant’s three (3) consecutive years (36 months), selected from the last ten (10) years, which produce the highest such average. The period of service over which Compensation shall be considered when determining a Participant’s Average Compensation shall begin with the date the Participant first performs an Hour of Service for the Employer and end with his most recent date of termination for benefit purposes.

	In the event the period of employment is fewer than three (3) years, such lesser period of service shall be used to determine Average Compensation.

G.	“Beneficiary” shall mean the person or persons (natural or otherwise) designated by or for a Participant, entitled under this Plan to receive benefits after the death of a Participant.

H.	“Code” shall mean the Internal Revenue Code of 1986, as amended from time to time.

I.	“Committee” shall mean the administrative committee appointed and acting in accordance with Article XI of this Plan.

J.	“Company” shall mean Hecla Mining Company, a Delaware corporation.


K.	“Compensation” shall mean all compensation for the Plan Year paid or payable in cash or in kind by the Employer for personal services and elective deferrals with respect to employment with the Employer: (i) under a qualified cash or deferred arrangement described in Section 401(k) of the Code; (ii) to a plan qualified under Section 125 of the Code (iii) to a tax sheltered annuity described in Section 403(b) of the Code; (iv) to a plan qualified under Section 402(h) of the Code; or (v) for limitation years beginning after December 31, 1997, to an elective contribution under Section 408(p)(2)(A)(i). However, in the event that this Plan becomes a Top-Heavy Plan in a Plan Year beginning before January 1, 1989, Compensation shall not include, with respect to any Employee, in any Plan Year, any compensation in excess of $200,000. For Plan Years that begin after December 31, 1988 but before January 1, 1994 (whether or not a Top-Heavy Plan), Compensation shall not include, with respect to any Employee, in any Plan Year (or such other applicable period specifically designated in the Plan), any compensation in excess of $200,000 or such other amount established subsequent to 1989 and prior to 1994 by the Secretary of the Treasury in accordance with Section 401(a)(17) of the Code. For Plan Years beginning after December 1, 1993, Compensation shall not include, with respect to any Employee in any Plan Year (or such other applicable period specifically designated in the Plan), any Compensation in excess of $150,000 or such other amount established subsequent to 1993 by the Secretary of the Treasury in accordance with Section 401(a)(17) of the Code. In addition, effective for benefits accrued after December 31, 1993 the amount of Compensation for any prior Plan Year that may be taken into account in determining an Employee’s benefit accruing in the current Plan Year, shall be limited to the applicable dollar limitation under Section 401(a)(17) of the Code for such prior period, except that for periods beginning before the first day of the first Plan Year beginning after December 31, 1993, the applicable dollar limitation shall be $150,000. For limitation years beginning on and after January 1, 2001 for purposes of applying the limitations described in Article V of the Plan, compensation paid or made available during such limitation years shall include elective amounts that are not includible in the gross income of the employee by reason of section 132(f)(4).

	(a)	Increase in limit . The annual compensation of each Participant taken into account in determining benefit accruals in any plan year beginning after December 31, 2001, shall not exceed $200,000. Annual compensation means compensation during the Plan Year or such other consecutive 12-month period over which compensation is otherwise determined under the Plan (the determination period). For purposes of determining benefit accruals in a Plan Year beginning after December 31, 2001, compensation for any prior determination period shall be limited as provided in the preceding Paragraph.

	(b)	Cost-of-living adjustment . The $200,000 limit on annual compensation in the preceding Paragraph shall be adjusted for cost-f-living increases in accordance with section 401(a)(17)(B) of the Code. The cost-of-living adjustment in effect for a calendar year applies to annual compensation for the determination period that begins with or within such calendar year. Effective as of January 1, 2008, a Participant’s annual compensation shall not exceed $230,000. Effective as of January 1, 2009, such limit shall be increased to $245,000.


L.	“Covered Compensation” shall mean for any Plan Year, the average (without indexing) of the Social Security Taxable Wage Base in effect for each calendar year during the thirty-five (35) year period ending with the last day of the calendar year in which the Participant attains (or will attain) Social Security Retirement Age. No change in Covered Compensation shall decrease a Participant’s Accrued Benefit under the Plan. In determining a Participant’s Covered Compensation for a Plan Year, the Social Security Taxable Wage Base for the current Plan Year and any subsequent Plan Year shall be assumed to be the same as in effect for the Plan Year for which the determination is being made. A Participant’s Covered Compensation for any Plan Year after the thirty-five (35) year period is the Participant’s Covered Compensation for the Plan Year in which the Participant attained Social Security Retirement Age. A Participant’s Covered Compensation for a Plan Year before the thirty-five (35) year period is the Social Security Taxable Wage Base in effect as of the beginning of the Plan Year. A Participant’s Covered Compensation shall be automatically adjusted for each Plan Year in accordance with these rules.

M.	“Credited Service” shall mean the total elapsed period of employment with the Employer while the Employee is an Eligible Employee, calculated from the Employee’s hire date to the date of his termination, subject to the break in service rules of Article V. The number of years and whole months of Credited Service shall be used to calculate the amount of any pension benefits to which an Eligible Employee is entitled. Elapsed time of less than 15 days of service shall be disregarded, and 15 or more days of service shall be counted as a whole month of Credited Service. As of and after April 16, 2008, an Eligible Employee’s Credited Service hereunder shall not include years of service with the Kennecott Companies.

N.	“Death Benefit” shall mean a benefit payable in the event of the death of a Participant prior to such Participant’s Normal Retirement Age or Termination of Employment (as hereafter defined) as specified in Article III or, effective as of April 16, 2008, Article IV.

O.	“Early Retirement” shall mean retirement on or after a Participant’s Early Retirement Age. Effective as of April 16, 2008, a Participant that is entitled to a Retirement Credit Balance Benefit under Article IV is not required to attain their Early Retirement Age as a condition precedent to benefit entitlement if the Participant has a Termination of Employment (as defined in Paragraph BI of this Article I) with the Employer prior to the attainment of the Participant’s Normal Retirement Date.

P.	“Early Retirement Age” shall mean the earliest of:


1.	The later of:

	(a)	Age fifty-five (55), or

	(b)	The age of the Participant upon completion of ten (10) Years of Service.


	2.	The later of:

		(a)	Age sixty (60), or

		(b)	The age of the Participant upon completion of thirty (30) Years of Service.

	3.	The later of:

		(a)	Age fifty-five (55), or

		(b)	The age of the Participant upon completion of thirty (30) Years of Service if the Participant was terminated by the Company by reason of reduction of the work force.

Q.	“Early Retirement Benefit” shall mean a monthly benefit in the Normal Form as determined pursuant to Article III of this Plan.

R.	“Early Retirement Date” shall mean a date prior to the Participant’s Normal Retirement Date, which is the first day of any month coinciding with or following a Participant’s termination of employment and after satisfaction of the requirements for entitlement to an Early Retirement Benefit.

S.	“Effective Date” shall mean January 1, 1947, and January 1, 2008, in connection with this recent restatement.

T.	“Eligible Employee” shall mean, effective as of April 16, 2008, any Employee, except a person whose Compensation and conditions of employment are subject to determination by collective bargaining, provided that retirement entitlements have been a subject of good faith bargaining between the Employer and the person’s lawful representative or bargaining agent.

	1.	An Employee shall qualify as an Eligible Employee entitled to Normal Retirement Benefits under Article III only if such Employee is employed by an Employer, as well as those Kennecott Employees with vested and accrued benefits under the Kennecott Pension Plan (as defined in Paragraph BF of this Article I) and otherwise satisfies the applicable requirements of Article III. The foregoing Employees shall not qualify as Eligible Employees for purposes of the Retirement Credit Balance Benefits provided under Article IV.

	2.	An Employee shall qualify as an Eligible Employee entitled to Retirement Credit Balance Benefits under Article IV only if such Employee is employed by the Kennecott Companies, was a participant in the Kennecott Defined Contribution Plan and otherwise satisfies the applicable requirements of Article IV. The foregoing Employees shall not qualify as Eligible Employees for purposes of the Normal Retirement Benefits provided under Article III.


U.	“Eligible Spouse” shall mean that spouse to whom a Participant is married during the 12-month period ending on either the Annuity Starting Date or the date of his death whichever occurs earlier. To the extent provided under a “qualified domestic relations order” as described in Section 414(p) of the Code, the term Eligible Spouse shall mean a former spouse in addition to or in place of the Participant’s current spouse.

V.	“Employee” shall mean a person currently employed by the Employer, any portion of whose income is subject to withholding of income tax and/or for whom Social Security or railroad retirement contributions are made by the Employer, as well as any other person qualifying as a common law employee of the Employer “Employee” shall also include any Leased Employee deemed to be an Employee as provided in Sections 414(n) or 414(o) of the Code.

W.	“Employer” shall mean the Company and any other corporation, partnership or sole proprietorship which has adopted or hereafter adopts the Plan with the approval of the Company. In addition, for purposes of determining an Employee’s Hours of Service, the term “Employer” includes:

	1.	Any corporation or trade or business which is or was a member of a controlled group of corporations, a group of businesses under common control or an affiliated service group (within the meaning of Section 414(b), (c), (m), and (o) of the Code respectively) of which an Employer adopting the Plan is a member, but only for such period as the corporation or trade or business and the adopting Employer are or were considered members of the group;

	2.	Any corporation or trade or business which is a predecessor employer, if this Plan is a successor plan to the predecessor employer’s qualified plan;

	3.	Any corporation or trade or business for which a Leased Employee performs services, but only for such period as the Leased Employee performs such services; and

	4.	Any corporation or trade or business which has been acquired directly or indirectly by the Company, provided that such corporation or trade or business shall be treated as an Employer under this Play only during such Plan Years as are designated by the Board of Directors of the Company, and only with respect to those persons employed by such corporation or trade or business on the date it was acquired by the Company.

X.	“Enrolled Actuary” shall mean a person enrolled by the Joint Board for the Enrollment of Actuaries under ERISA who has been engaged by the Administrator to prepare valuations, establish appropriate assumptions, and complete all required actuarial reports.

Y.	“Entry Date” shall mean the date upon which an Eligible Employee first becomes a Participant, which shall be the Effective Date or the first day of each month thereafter.


Z.	“ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended.

AA.	“Fiscal Year” shall mean the accounting period used by the Company on the Effective Date for federal income tax purposes, which currently is the twelve (12) month period ending December 31 ^st of each year.

AB.	“Hour of Service” shall mean each hour for which an Employee is:

	1.	Directly or indirectly paid or entitled to payment by the Employer for the performance of duties.

	2.	Directly or indirectly paid or entitled to payment by the Employer on account of a period of time during which no duties were performed (irrespective of whether the employment relationship was terminated) due to vacation, holiday, illness, incapacity (including disability), layoff, jury duty, military duty, or leave of absence authorized under Paragraph D of Article II. However, no more than 501 House of Service shall be credited under this Subparagraph 2 on account of any single continuous period (except for hours credited due to salary continuation or paid temporary disability leave) during which the Employee performs no duties (whether or not such period occurs in a single computation period). Payments made or due under a plan maintained by the Employer solely to comply with applicable workers’ compensation, unemployment compensation, or disability insurance law, or to reimburse an Employee for medical or medically-related expenses shall not be considered as payments by the Employer for purposes of this Subparagraph;

	3.	Absent from work by reason of the pregnancy of the Employee, the birth of a child of the Employee, the placement of a child with the Employee in connection with the adoption of the child by the Employee, or the care of such child by the Employee for a period immediately following birth or placement. No more than 501 Hours of Service shall be credited under this Subparagraph 3 by reason of any one pregnancy or placement. Hours of Service credited under this Subparagraph 3 shall be credited solely for purposes of determining whether a One-Year Break in Service has occurred in a computation period. All Hours of Service credited under this Subparagraph 3 shall be credited only in the computation period in which the absence from work begins if any of such Hours of Service are required in that computation period to avoid a One-Year Break in Service. If none of the Hours of Service credited under this Subparagraph 3 are required to avoid a One-Year Break in Service in the computation period in which the absence begins, then the Hours of Service will be credited to the next computation period. An Employee will be credited with 8 Hours of Service for each day of absence covered by this Subparagraph. Credit will be given pursuant to this Subparagraph 3 only after the Employee furnishes to the Administrator such timely information as the Administrator may reasonably require to establish that the absence is for a reason described in this Subparagraph;


	4.	Either awarded back pay or for which the Employer agrees to pay such back pay, irrespective of mitigation of damages. An Hour of Service received under this Subparagraph 4 shall be credited to that computation period for which the award was granted. The same Hours of Service shall not be credited both under either Subparagraph 1 or 2, as the case may be, and under this Subparagraph 4. Hours of Service for which back pay is awarded or agreed to with respect to periods described in Subparagraph 2 shall be subject to the limitations set forth in that Subparagraph; or

	5.	Temporary absence due to injuries arising out of and in the course of the Company’s employ shall be recognized in computing benefits; provided, however, that such temporary absence shall cease when the employee is physically capable of returning to work for the Company. Solely for the purpose of computing benefits, the period of absence shall be credited with earnings and hours of service to the extent that would have been received if the employee had not been injured. Only injuries causing an absence exceeding sixty (60) days or more shall be recognized under the provisions of this Paragraph.

	For purposes of Subparagraphs 2 and 4 of this Paragraph AB, and for purposes of Subparagraph 1 in the case of an Employee for whom records of hours worked are not required by applicable law to be kept, an Employee shall be credited with 95 Hours of Service for each semi-monthly pay period for which he would have been required to be credited with an Hour of Service. Hours of Service shall be credited to the applicable computation period in accordance with Department of Labor Regulation Section 2530.200b-2(b) and (c).

AC.	“Key Employee” shall mean, with respect to Plan Years beginning prior to January 1, 2002, an Employee or former Employee and their Beneficiaries who, within the meaning of Section 416(i) of the Code and the regulations thereunder, is or at any time during the four preceding Plan Yeas has been:

	1.	An officer of the Employer whose annual compensation exceeds 50% of the amount in effect under Section 415(b)(1)(A) of the Code for any such Plan Year;

	2.	One of the ten (10) Employees whose annual compensation from the Employer exceeds the limitation in effect under Section 415(c)(1)(A) of the Code and who owns or is considered as owning more than a one-half percent (1/2%) ownership interest and one of the ten largest percentage ownership interests in the Employer;

	3.	A five percent (5%) owner of the Employer; or

	4.	A one percent (1%) owner of the Employer having an annual compensation of more than $150,000.


	For purposes of this definition, no more than fifty employees (or, if less than fifty, either three employees or ten percent of all employees, whichever is greater) shall be treated as officer. In addition, for purposes of determining ownership percentages hereunder, the constructive ownership rules of Section 318 of the Code shall apply as provided by Section 416(i)(1)(B) of the Code. For purposes of Subparagraph 2, if two Employees have the same interest in the Employer, the Employee having greater annual compensation from the Employer shall be treated as having a larger interest. For purposes of determining the number of officers taken into account under Subparagraph AC-1 above, employees described in Section 414(q)(8) of the Code shall be excluded. For purposes of determining compensation for years beginning after 1988, Total Compensation shall be used in addition to elective and salary-reduction contributions made by any 401(k) plan of the Employer, a simplified employee pension plan, a cafeteria plan, and a tax-sheltered annuity. Paragraph AR and Paragraph AX of this Article I governs the determination of Top-Heavy Plan and Key Employees for Plan Years beginning on and after January 1, 2002.

AD.	“Leased Employee” shall mean a person (other than an Employee) who has performed services (i) under primary direction or control by the Employer, (ii) on a substantially fulltime basis for a period of at least one (1) year, (iii) either directly or indirectly for the Employer (or for the Employer and related persons determined in accordance with Section 414(n)(6) of the Code), and (iv) pursuant to a written or oral agreement between the Employer and any other person. For purposes of this Plan, Leased Employees shall be treated as follows:

	1.	Contributions and benefits provided to the Leased Employee by the person who has entered into the agreement with the Employer, which are attributable to services performed for the Employer, shall be treated as provided by the Employer.

	2.	Service provided by the individual who becomes a Leased Employee to the person who has entered into the agreement with the Employer, which are attributable to services performed for the Employer, shall be treated as provided under this Plan.

	The term “Leased Employee” shall include a person described above who is covered by a qualified money purchase pension plan of the other person who has entered into the agreement with the Employer which provides (i) a Unintegrated employer contribution rate of at least ten percent (10%) of compensation as defined in Section 415(c)(3) of the Code including amounts contributed pursuant to a salary reduction agreement which are excludable from his gross income under Sections 125, 402(e)(3), 402(h), and 403(b) of the Code, (ii) immediate participation, and (iii) immediate and full vesting.

AE.	“Non-Key Employee” shall mean any Employee who is not a Key Employee.

AF.	“Normal Form” shall mean an annuity payable monthly for the life of the Participant. The first monthly payment shall be made as of the first day of the month coincident


	with or next following the Participant’s Normal Retirement Date with the last payment as of the first day of the month in which the recipient’s death occurs.

AG.	“Normal Retirement” shall mean retirement on or after the Participant’s Normal Retirement Age. In the case of a Participant who continues in the employ of the Employer after reaching such Normal Retirement Age, ‘Normal Retirement’ shall mean retirement on the delayed retirement date, which is the date of the Participant’s actual termination of employment. When such Participant actually retires, he shall then be entitled to a Delayed Retirement Benefit in accordance with Article III. Notwithstanding the foregoing, if a Participant continues employment, but not in ‘Section 203(a)(3)(B) service’ under Department of Labor Regulation 29 CFR Section 2530.203-3, payment shall commence to the Participant as if the Participant had terminated employment as of his Normal Retirement Age and benefits will continue to accrue under the Plan. Effective as of April 16, 2008, a Participant that is entitled to a Retirement Credit Balance Benefit under Article IV is not required to attain their Normal Retirement Age as a condition precedent to benefit entitlement if the Participant has a Termination of Employment (as defined in Paragraph BI of this Article I) with the Employer prior to the Participant’s attainment of the Participant’s Normal Retirement Age.

AH.	“Normal Retirement Age” shall mean the earlier of:

	(1)	Age 60 if the Participant has not less than thirty (30) Years of Service with the Company while covered under this Plan; or

	(2)	Age 65.

AI.	“Normal Retirement Benefit” shall mean a monthly benefit in the Normal Form as determined pursuant to Article III of this Plan.

AJ.	“Normal Retirement Date” shall mean the first day of the month coinciding with or next following a Participant’s attainment of Normal Retirement Age.

AK.	“One-Year Break in Service” shall mean, with respect to any Employee, a computation period during which the Employee is credited with 500 or fewer Hours of Service. Except as provided in Paragraph B of Article II, the Plan Year shall be the computation period.

AL.	“Participant” shall mean any Eligible Employee who has become a participant of this Plan, in accordance with Article II of this Plan. Notwithstanding the foregoing, effective as of April 16, 2008, an Eligible Employee hereunder shall become a Participant solely with respect to either the Normal Retirement Benefits provided under Article III or the Retirement Credit Balance Benefits provided under Article IV, but shall not become a Participant for purposes of the benefits provided under both Articles III and IV.

AM.	“Plan” shall mean the Hecla Mining Company Retirement Plan, as set forth herein, and any amendments hereto. Effective as of April 16, 2008, the Plan is intended to


	constitute a statutory hybrid plan within the meaning of Section 411(a)(13) of the Code which, in part, provides benefits based upon the balance of a Participant’s hypothetical account.

AN.	“Plan Year” shall mean the twelve (12) month period ending December 31 ^st .

AO.	“Social Security Retirement Age” shall mean age sixty-five (65) for individuals born before January 1, 1938, age sixty-six (66) for individuals born before January 1, 1955 and age sixty-seven (67) for individuals born on or after January 1, 1955.

AP.	“Social Security Taxable Wage Base” shall mean the contribution and benefit limit in effect under Section 3121(a)(1) of the Code.

AQ.	“Spousal Consent” shall mean an Eligible Spouse’s written consent which acknowledges the effect of the Participant’s election and is witnessed by a Plan representative or a notary public. Once made, consent shall be irrevocable unless the Participant changes his Beneficiary designation or revokes his election to waive the qualified joint and survivor annuity or the qualified pre-retirement survivor annuity, as applicable; upon such event, consent and shall be deemed to be revoked. Notwithstanding the foregoing, Spousal Consent is not required if the Participant establishes to the satisfaction of a Plan representative that such written consent may not be obtained because there is no Eligible Spouse or that the Eligible Spouse cannot be located. In addition, no Spousal Consent is necessary if the Participant has been legally separated or abandoned within the meaning of local law and the Participant provides the Plan representative with a court order to that effect, so long as such court order does not conflict with a qualified domestic relations order. If the Eligible Spouse is legally incompetent to consent, the Eligible Spouse’s legal guardian may consent on her behalf, even if the legal guardian is the Participant. If the Eligible Spouse has consented to the designation of a trust as the Participant’s Beneficiary, Spousal Consent is not required for the designation of or change in trust beneficiaries.

AR.	“Top-Heavy Plan” shall mean, subject to Section AX of the Plan effective as of January 1, 2002: (1) a plan in which, as of the “determination date,” the aggregate of “accounts” of Key Employees exceeds sixty percent (60%) of the aggregate of “accounts” of all employees under the plan; and (2) each plan which is included in an “aggregation group” if such group is a top-heavy group, as determined under Section 416(g)(2) of the Code. For purposes of this Paragraph: (a) “determination date” means the last day of the immediately preceding Plan Year or, in the case of the first Plan Year, the last day of such year. Where two or more plans are aggregated, the plans will be aggregated by adding together the results for each plan as of the determination dates for such plans which fall in the same calendar year; (b) “accounts” means the sum of all accounts maintained for the employee determined as of the most recent valuation date occurring within the twelve-month period ending on the determination date (or, in the case of a defined benefit plan, the present value of the cumulative accrued benefits determined as of the valuation date used for computing plan costs for minimum funding purposes), including distributions made with respect to such employee under the plan during the five (5) year period ending on the


	“determination date,” but excluding, however, rollover contributions, the account of a Non-Key Employee who was formerly a Key Employee, the account of an individual who has not performed services for the Employer at any time during the give (5) year period ending on the determination date, and further excluding those amounts attributable to deductible employee contributions (as defined in Section 72)(o)(5)(A) of the Code); and (c) “aggregation group” means (i) each plan of the Employer in which a Key Employee participates, and each other plan of the Employer which enables a plan in which a Key Employee participates to meet the requirements of Section 401(a)(4) or Section 410 of the Code (including a terminated plan maintained within the last five (5) year period ending on the ‘determination date”), and (ii) any other plan maintained by the Employer which the Company elects to include within the group, provided the resulting group satisfies Section 401(a)(4) and Section 410 of the Code. In determining the cumulative accrued benefits of a defined benefit plan for purposes of this Paragraph, the actuarial assumptions specified by the defined benefit plan for this purpose shall be utilized. If differing actuarial assumptions are specified for two or more defined benefit plans, then the actuarial assumptions for the defined benefit plan including the largest number of employees in the first year any defined benefit plan is included within the aggregation group shall be utilized. Solely for the purpose of determining if the Plan, or any other plan in a required aggregation group of which this Plan is a part, is a Top Heavy Plan, the accrued benefit of an Employee other than a Key Employee shall be determined (a) under the method, if any, that uniformly applies for accrual purposes under all plans maintained by the Employer, or (b) if there is no such method, as if such benefit accrued not more rapidly than the slowest accrual rate permitted under the fractional accrual rate of Section 411(b)(1)(C) of the Code.

AS.	“Total Compensation” shall mean all amounts paid or made available to an Employee which are treated as compensation under Treasury Regulation Section 1.415-2(d)(2), and are not excluded from compensation under Treasury Regulation Section 1.415-2(d)(3).

	1.	Items Includable as Compensation . For purposes of applying the limitations of Section 415 of the Code, the term “compensation” includes:

		(a)	The Participant’s wages, salaries, fees for professional services and other amounts received for personal services actually rendered in the course of employment with an Employer maintaining the Plan (including, but not limited to, commissions paid to salesmen, compensation for services on the basis of a percentage of profits, commissions on insurance premiums, tips, bonuses, fringe benefits, reimbursements, and expense allowances).

		(b)	In the case of a Participant who is an employee within the meaning of Section 401(c)(1) of the code and the regulations thereunder, the Participant’s earned income (as described in Section 401(c)(2) of the code and the regulations thereunder).


	(c)	For purposes of subsections (a) and (b) of this Subparagraph, earned income from sources outside the United States (as defined in Section 911(b) of the Code, whether or not excludable from gross income under Section 911 of the Code).

	(d)	Amounts described in Sections 104(a)(3), 105(a) and 105(h) of the Code, but only to the extent that these amounts are includable in the gross income of the employee.

	(e)	Amounts paid or reimbursed by the Employer for moving expenses incurred by an employee, but only to the extent that these amounts are not deductible by the employee under Section 217 of the Code.

	(f)	The value of a non-qualified stock option granted to an employee by the Employer, but only to the extent that the value of the option is includable in the gross income of the employee for the taxable year in which granted.

	(g)	The amount includable in the gross income of an employee upon making the election described in Section 83(b) of the Code.

2.	Items Not Includable as Compensation . The term “compensation” does not include items such as:

	(a)	Contributions made by the Employer to a plan of deferred compensation to the extent that, before the application of the Code Section 415 limitations to that plan, the contributions are not includable in the gross income of the employee for the taxable year in which contributed. In addition, Employer contributions made on behalf of an employee to a simplified employee pension described in Section 408(k) of the code are not considered as compensation for the taxable year in which contributed to the extent such contributions are deductible by the employee under Section 219(b)(7) of the Code. Additionally, any distributions from a plan of deferred compensation are not considered as compensation for Code Section 415 purposes, regardless of whether such amounts are includable in the gross income of the employee when distributed. However, any amounts received by an employee pursuant to an unfunded non-qualified plan may be considered as compensation for Code Section 415 purposes in the year such amounts are includable in the gross income of the employee.

	(b)	Amounts realized from the exercise of a non-qualified stock option, or when restricted stock (or property) held by an employee either becomes freely transferable or is no longer subject to a substantial risk of forfeiture under Section 83 of the Code and the regulations thereunder.

	(c)	Amounts realized from the sale, exchange or other disposition of stock acquired under a qualified stock option.


		(d)	Other amounts which receive special tax benefits, such as premiums for group term life insurance (but only to the extent that the premiums are not includable in the gross income of the employee), or contributions made by an Employer (whether or not under a salary reduction agreement) toward the purchase of an annuity contract described in Section 403(b) of the Code (whether or not the contributions are excludable from the gross income of the employee).

			Except as otherwise provided in this Plan, Total Compensation shall be determined on the basis of the Plan Year.

AT.	“Total Disability” shall mean total and permanent disability determined by a medical examiner of the Company’s choice.

AU.	“Trust” shall mean the trust established pursuant to Article X of this Plan.

AV.	“Trustees” shall mean the trustee or trustees of the Trust established pursuant to this Plan.

AW.	“Year of Service” shall mean a computation period during which an Employee is credited with not less than 1,000 Hours of Service with the Employer. Except as provided in Paragraph B of this Article II, the Plan Year shall be the computation period.

AX.	“Modification of Top-Heavy Rules” shall apply for purposes of determining whether the Plan is a top-heavy plan under section 416(g) of the Code for Plan Years beginning after December 31, 2001, and whether the Plan satisfies the minimum benefits requirements of section 416(g) of the Code for such years.

	1.	The term “Key Employee” means any employee or former employee (including any deceased employee) who at any time during the Plan Year that includes the determination date was an officer of the employer having annual compensation greater than $150,000 (effective as of January 1, 2008, as increased to $160,000 effective January 1, 2009), as adjusted under Section 416(i)(1) of the Code for subsequent Plan Years, a 5-percent owner of the employer, or a 1-percent owner of the employer having annual compensation of more than $150,000. For this purpose, annual compensation means “415 Compensation” as reflected in Subparagraph AX-4. The determination of who is a key employee will be made in accordance with Section 416(i)(1) of the Code and the applicable regulations and other guidance of general applicability issued thereunder.

	2.	The following shall apply for purposes of determining the present values of accrued benefits and the amounts of account balances of employees as of the determination date.

		(a)	Distributions during year ending on the determination date. The present values of accrued benefits and the amounts of account balances


			of an employee as of the determination date shall be increased by the distributions made with respect to the employee under the Plan and any Plan aggregated with the Plan under Section 416(g)(2) of the Code during the 1-year period ending on the determination date. The preceding sentence shall also apply with distributions under a termination plan which, had it not been terminated, would have been aggregated with the Plan under Section 416(g)(2)(A)(i) of the Code. In the case of a distribution made for a reason other than separation from service, death, or disability, this provision shall be applied by submitting “5-year period” for “1-year period”.

		(b)	Employees not performing services during year ending on the determination date. The accrued benefits and accounts of any individual who has not performed services for the employer during the 1-year period ending on the determination date shall not be taken into account.

	3.	For purposes of satisfying the minimum benefit requirement of Section 416(c)(1) of the Code and the Plan, in determining years of service with the employer, any service with the employer shall be disregarded to the extent that such services occurs during a Plan Year when the Plan benefits (within the meaning of Section 410(b) of the Code) no key employee or former key employee.

	4.	For purposes of this Paragraph AX, “415 Compensation” shall mean all amounts paid or made available by the Employer to a Participant in a Plan Year that would constitute Compensation if paid to a Participant by the Employer. Effective as of January 1, 2008, 415 Compensation shall include any Compensation paid by the later of (a) 2 ½ months after a Participant’s severance from the service of the Employer, or (b) by the end of the Plan Year that includes the date of the Participant’s severance from employment if: (i) the payment is regular compensation for services during the Participant’s regular working hours or outside of those hours, and would have been paid to the Participant prior to the severance from employment had the Participant remained employed (such as overtime or shift differential), (ii) payment is for unused accrued sick, vacation or other leave, but only if the Participant would have been able to use the leave had they remained employed, and (iii) payment received from an unfunded nonqualified deferred compensation plan, if such payment would have been made at the same time the Participant severed from employment had they remained employed. Except as provided herein, 415 Compensation shall not include severance pay or similar post-severance payments. This definition shall comply with the Treasury Regulations issued under Section 415(c) of the Code effective as of January 1, 2008, and shall be interpreted and construed in accordance therewith.

AY.	“Phased Retirement Date” shall mean the first day of the month coinciding with or next following a Participant’s election of Phased Retirement Benefits.


AZ.	“Phased Retirement Benefit” shall mean a monthly benefit in the Normal Form as determined pursuant to Article III of this Plan.

BA.	“Highly Compensated Employee” means an Employee who, during the Plan Year or during the preceding 12-month period:

	(a)	is more than 5% owner of the Employer (applying the constructive ownership rules of Section 318 of the Code,

	(b)	has Compensation in excess of $80,000 (as adjusted by the Commissioner of Internal Revenue for the relevant year);

	If the Employee satisfies the definition in clause (b), in the Plan Year but does not satisfy clause (b) during the preceding 12-month period and does not satisfy clause (a) in either period the Employee is a Highly Compensated Employee only if he is one of the 100 most highly compensated Employees for the Plan Year.

	For purposes of this Section BA, “Compensation” means Compensation as defined in Section K of this Article I.

	The term “Highly Compensated Employee” also includes any former Employee who separated from Service (or has a deemed Separation from Service, as determined under Treasury regulations) prior to the Plan Year, performs no Service for the Employer during the Plan Year, and was a Highly Compensated Employee either for the separation year or any Plan Year ending on or after his 55 ^th birthday.

BB.	“Military Service” Notwithstanding any provision of this Plan to the contrary, contributions, benefits and service will be provided in accordance with Section 414(u) of the Code.

BC.	“Kennecott Companies” shall mean the Kennecott Greens Creek Mining Company and the Kennecott Juneau Mining Company. Effective as of and after April 16, 2008, Eligible Employees of the Kennecott Companies shall be eligible to participate in the Plan solely with respect to the either the Normal Retirement Benefits provided under Article III or the Retirement Credit Balance Benefits provided under Article IV.

BD.	“Kennecott Employees” shall mean employees of the Kennecott Companies prior to, as of and after April 16, 2008.

BE.	“Kennecott Defined Contribution Plan” means the Rio Tinto America, Inc. Investment Partnership Plan, a tax-qualified defined contribution plan, within the meaning of Section 401(a) of the Code, and subject to the requirements of ERISA.

BF.	“Kennecott Pension Plan” means the Rio Tinto America, Inc. Retirement Plan, a tax-qualified defined benefit plan, within the meaning of Section 401(a) of the Code, and subject to the requirements of ERISA.


BG.	“Kennecott Pension Participants” shall mean Eligible Employees of the Kennecott Companies with vested and accrued benefit entitlement under the Kennecott Pension Plan; provided, however, such term shall not include Kennecott Employees who elected, as of September 30, 2007, to cease benefit accrual under the Kennecott Pension Plan and to commence participation in the Kennecott Defined Contribution Plan as of October 1, 2007.

BH.	“Retirement Credit Balance Benefits“ shall mean a Participant’s Accrued Benefit as determined under Article IV.

BI.	“Termination of Employment“ shall mean a Participant’s separation from service of the Employer by reason of his resignation, retirement, discharge, disability or death.

BJ.	“Distribution Calendar Year” A calendar year for which a minimum distribution is required. For distributions beginning before the Participant’s death, the first Distribution Calendar Year is the calendar year immediately preceding the calendar year which contains the Participant’s required beginning date (within the meaning of Paragraph P of Article III.) For distributions beginning after the Participant’s death, the first Distribution Calendar Year is the calendar year in which distributions are required to begin pursuant to Paragraph P-10 of Article III.

BK.	“Date of Distribution” shall mean the date the Participant’s benefit under the Plan commences based upon the Participant’s (with Spousal Consent, if applicable) election of a Retroactive Annuity Starting Date as provided in Paragraph X of Article III.

BL.	“Retroactive Annuity Starting Date” A benefit commencement date (which constitutes an annuity starting date within the meaning of Section 417(f) of the Code) affirmatively elected by the Participant that occurs on or before the date on which the Administrator provides the written explanation of the Qualified Joint and Survivor Annuity as required by Paragraph X of Article III, in accordance with Section 417(a)(3) of the Code.

ARTICLE II
ELIGIBILITY AND PARTICIPATION

An Eligible Employee shall become a Participant of the Plan in accordance with the following requirements; provided, however, that an Eligible Employee who is employed on the Effective Date shall become a Participant of the Plan on that date; and provided further, that an Eligible Employee who was a Participant of the Plan prior to the effective date of this amendment shall continue to be a Participant of the Plan under the terms and conditions set forth herein:


A.	Service Requirement

	1.	Each Eligible Employee who has completed one (1) Year of Service as an Eligible Employee shall become a Participant of the Plan as of the Entry Date coincident with or next following the last day of the Eligibility Computation Period during which such period of service is completed.


		Effective January 1, 1995, each Eligible Employee who has completed one (1) Year of Service shall become a Participant of the Plan as of the Entry Date coincident with or next following the last day of the Eligibility Computation Period during which such period of service is completed.

	2.	An Eligible Employee who satisfies the service requirements of Subparagraph 1 but who is not an Eligible Employee on the Entry Date shall become a Participant of the Plan immediately upon again becoming an Eligible Employee.

	3.	Effective as of April 16, 2008, each person employed by the Kennecott Companies as of April 15, 2008, and who participated in the Kennecott Defined Contribution Plan or the Kennecott Pension Plan as of such date, shall become a Participant in the Plan on April 16, 2008. Each Eligible Employee hired by the Kennecott Companies as of and after April 16, 2008, who has completed one (1) Year of Service as an Eligible Employee shall become a Participant of the Plan as of the Entry Date coincident with or next following the last day of the Eligibility Computation Period during which such period of service is completed.

B.	Eligibility Computation Period

	For purposes of Article II, the initial Eligibility Computation Period shall be the twelve (12) consecutive month period commencing with the date on which an Employee first performs an Hour of Service for the Employer. Subsequent Eligibility Computation Periods will be the Plan Year, commencing with the Plan Year which includes the first anniversary of the date the Employee first performs an Hour of Service.

C.	Participation

	Participation in the Plan continues until a Participant terminates by Early Retirement, Normal Retirement, by delayed retirement, by reason of Total Disability, death or Termination of Employment with the Employer and has a One-Year Break in Service. An Employee whose participation in the Plan has terminated shall become a Participant again on the date he again becomes an Eligible Employee and completes the service requirement of Paragraph IIA. Effective as of April 16, 2008, an Employee of the Kennecott Companies whose participation in the Plan has terminated shall become a Participant again on the date he is rehired and otherwise satisfies the requirements of Paragraph IIA-3. An Employee whose participation in the Plan has terminated but who has not received all benefits under the Plan shall be a ‘former Participant.’ For the purpose of establishing a One-Year Break in Service hereunder, the applicable computation period shall be the Eligibility Computation Period as defined in Paragraph B of Article II hereof.


D.	Leaves of Absence

	A Participant’s employment is not considered terminated for purposes of the Plan while he is on leave of absence with the consent of the Employer, provided that he returns to the employ of the Employer at the expiration of such leave. Leaves of absence shall mean leaves granted by the Employer, in accordance with written rules uniformly applied to all Employees, for reasons of health or public service or for reasons determined by the Employer to be in its best interests. A Participant’s employment shall also not be deemed to have terminated while he is a member of the Armed Forces of the United States, provided that he returns to the employment of the Employer within ninety (90) days (or such longer period as may be prescribed by law) from the date he first became entitled to his discharge. Participants who do not return to the employ of the Employer within sixty (60) days following the end of the leave of absence, or within the required time in case of service with the Armed Forces, shall be deemed to have terminated their employment as of the date when their leaves of absence began, unless such failure to return was the result of Early Retirement, Normal Retirement, delayed retirement, Total Disability or death.

E.	Suspended Participation

	A Participant who ceases to be an Eligible Employee, but who has not separated from the service of the Employer, shall become a suspended Participant. During the period of suspension, no amounts which are based on his Compensation or Total Compensation from and after the date of suspension shall be used to determine his Accrued Benefit under Article III. However, the Participant shall continue to vest in his Accrued Benefit, and he shall be entitled to benefits in accordance with the other provisions of the Plan while he is a suspended Participant. Notwithstanding the foregoing, effective as of April 16, 2008, a Participant’s Retirement Credit Balance Benefits entitlement under Article IV shall continue to be credited with interest, pursuant to the assumptions set forth in Paragraph B-2 of Article I, during the Participant’s period of suspension.

F.	Inactive Participation

	A Participant who has fewer than 1,000 Hours of Service in any Plan Year, but who is not separated from the service of the Employer, shall be an inactive Participant for such Plan Year. No amounts which are based on his Compensation or Total Compensation shall be used to determine his Accrued Benefit for such Plan Year. Provided, however, effective as of April 16, 2008, a Participant’s Retirement Credit Balance Benefits entitlement under Article IV shall continue to be credited with interest, pursuant to the assumptions set forth in Paragraph B-2 of Article I, during the Participant’s period of inactive participation.


G.	Reemployment After Retirement

	If a Participant is reemployed by the Employer in “Section 203(a)(3)(B) service” after commencing benefit payments, the Participant’s payments will be suspended and benefits will continue to accrue as described in Subparagraph D-1 of Article III and Subparagraph B of Article IV. Benefit payments will recommence as of the Participant’s delayed retirement date and will be determined as provided in Paragraph H of Article III, and Paragraph B of Article IV. The employer shall adopt written procedures relating to this Paragraph G which comply with Department of Labor Regulation 29 CFR Section 2530.203-3; these written procedures shall be provided to Participants by personal delivery or first class mail during the first payroll period in which the Plan withholds payments or the first calendar month that his benefits are suspended. The preceding suspension provisions shall not apply to a Participant during the first twenty-four (24) months following the Participant’s Phased Retirement Date for purposes of Article III.

ARTICLE III
NORMAL RETIREMENT BENEFITS


A.	Benefit Eligibility

	Effective as of April 16, 2008, the Normal Retirement Benefits described in this Article III shall apply solely with respect to: (1) Eligible Employees who are employed by an Employer and who are Participants in the Plan as of April 16, 2008; (2) Eligible Employees who are employed by an Employer other than the Kennecott Companies after April 16, 2008; and (3) Eligible Employees of the Kennecott Companies who participated in the Kennecott Pension Plan prior to April 16, 2008. An Eligible Employee employed by the Kennecott Companies as of and after April 16, 2008, who was not formerly a participant in the Kennecott Pension Plan with vested and accrued retirement benefits thereunder, shall not be eligible to receive any benefit to which this Article III applies. Notwithstanding the foregoing, Kennecott Employees with vested and accrued benefits under the Kennecott Pension Plan who elected, as of September 30, 2007, to cease benefit accrual under the Kennecott Pension Plan and to commence participation in the Kennecott Defined Contribution Plan as of October 1, 2007, shall not be eligible to receive a Normal Retirement Benefit as provided under this Article III. Instead, such Kennecott Employees shall be eligible to receive solely those Retirement Credit Balance Benefits under Article IV.

B.	Waiver of Employer Contributions

	Notwithstanding anything herein to the contrary, contributions by an Employer may be waived in whole or in part in any Plan Year during which a substantial business hardship has been sustained, as determined in writing by the Secretary of the Treasury pursuant to Section 412(d) of the Code.


C.	Annual Valuation

	As soon as practical after the end of each Plan Year or after the removal or resignation of the Trustee, the Trustee shall determine the fair market value of the Trust Fund as of the close of the Plan Year (or the close of the shorter period ending with such resignation or removal), using procedures in accordance with generally accepted accounting principles.

D.	Normal Retirement Benefit

	1.(a)	Subject to the Annual Overall Disparity provisions of Subparagraph D-3(a) and to the provisions of Paragraphs E and F of this Article III, each Participant who is not an Employee on or after July 1, 2000, upon attainment of his Normal Retirement Age, shall be entitled to receive a Normal Retirement Benefit equal to one-twelfth (1/12) of the sum of (a)(i) and (ii):

		(i)	1.0% (subject to Subparagraph D-3 below) of such Participant’s Average Compensation multiplied by the number of years of Credited Service, plus

		(ii)	0.50% (subject to Subparagraph D-3 below) of such Participant’s Excess Compensation multiplied by the number of years of Credited Service.

	(b)	Subject to the Annual Overall Disparity provisions of Subparagraph D-3(a) and to the provisions of Paragraphs E and F of this Article III, each Participant who is an Employee on or after July 1, 2000, upon attainment of his Normal Retirement Age, shall be entitled to receive a Normal Retirement Benefit equal to one-twelfth (1/12) of the sum of (b)(i) and (ii):

		(i)	1.0% (subject to Subparagraph D-3 below) of such Participant’s Average Compensation multiplied by the number of years of Credited Service, plus

		(ii)	0.75% (subject to Subparagraph D-3 below) of such Participant’s Excess Compensation multiplied by the number of years of Credited Service.

		The number of years of Credited Service taken into account for any Participant under Subparagraph D-1(a)(ii) and D-1(b)(ii) above shall not exceed such Participant’s Cumulative Disparity Limit as determined under Subparagraph D-3(b) of this Article III.

	For purposes of this Paragraph D, “Excess Compensation” shall mean for any Plan Year the amount by which a Participant’s Average Compensation exceeds the Participant’s Covered Compensation for such Plan Year.


2.	For any Participant whose Average Compensation is sufficient to generate a retirement benefit, said retirement benefit shall be not less than a minimum of $13.33 per month.

3.	Notwithstanding any other provision of this Plan to the contrary, if the Employer also maintains or maintained another qualified plan that provides for, or provided for, permitted disparity, the following provisions shall apply:

	(a)	Annual Overall Disparity . In any Plan Year beginning after December 31, 1988, in which any Participant accrues a benefit under this Plan, and under another qualified plan of the Employer (including a simplified employee pension plan as defined in Section 408(k) of the Code), that provides for permitted disparity (or imputes disparity) under Section 401(1) of the Code and the regulations thereunder, the benefit of all Participants under this Plan shall be equal to the base benefit percentage, as entered into the benefit formula in Subparagraph D-1(a) of this Article III, multiplied by the Participant’s Average Compensation. In the event that this Subparagraph D-3(a) is applicable, this Plan shall have a Fresh-Start Date on the last day of the Plan Year preceding the Plan Year in which this Subparagraph is first applied. Further, if in any subsequent Plant Year this Plan no longer benefits any Participant who also benefits under another qualified plan of the Employer (including a simplified employee pension plan as defined in Section 408(k) of the Code), that provides for permitted disparity (or imputes disparity) under Section 401(1) of the Code and the regulations thereunder, this Plan shall have a Fresh-Start Date on the last day of the Plan Year preceding the Plan Year in which this Subparagraph is no longer applicable.

	(b)	Cumulative Disparity Limit . If a Participant of this Plan:

		(i)	has benefited under one or more defined benefit plans of the Employer for a Plan Year beginning after December 31, 1991;

		(ii)	currently benefits or has ever benefited under one or more other qualified plans of the Employer (including a simplified employee pension plan as defined in Section 408(k) of the Code) that provide for, or provided for, permitted disparity; and

		(iii)	the number of years, when aggregated, in which such Participant benefits under all such plans using a formula that takes into account such permitted disparity exceeds thirty-five (35), then:

			The Participant’s benefit accrued under this Plan shall be restricted and limited to such Participant’s Cumulative Disparity Limit which shall be equal to thirty-five (35) less the number of years during which such Participant earned a year of credited service under one or more qualified plans ever maintained by the Employer (including a simplified employee pension plan as defined in Section 408(k) of the Code), other than years for which a Participant earned a year of


		Credited Service under this Plan. For purposes of determining the Participant’s Cumulative Disparity Limit, all years ending in the same calendar year are treated as the same year. If the Participant’s Cumulative Disparity Limit is less than the period of years specified in Subparagraph D-1(b) of this Article III, then for years after the Participant reaches the Cumulative Disparity Limit and through the end of the period specified in Subparagraph D-1, the Participant’s benefit shall be equal to the excess benefit percentage, or, if less, the highest percentage permitted under the 133-1/3 percent accrual rule of Section 411(b)(1)(B) of the Code, if applicable, multiplied by the Participant’s Average Compensation.

4.	Notwithstanding any provision of this Paragraph D to the contrary, if a Participant is entitled to a Minimum Annual Retirement Benefit pursuant to Paragraph E of this Article III, the Participant’s Normal Retirement Benefit shall be the greater of the benefit otherwise provided by this Paragraph D or the Minimum Annual Retirement Benefit.

5.	Benefits paid under this Subparagraph D shall be adjusted by the percentages and subject to the limitations set forth in Appendix I, as the Participants identified in that Appendix are shown from time to time.

6.	For purposes of determining the Normal Retirement Benefit of an Employee who becomes a Participant in the Plan as of and after April 16, 2008, who formerly participated in the Kennecott Pension Plan as of April 16, 2008, such Participant’s monthly Normal Retirement Benefit under this Paragraph D shall be adjusted by the sum of (a)(i) plus (a)(ii) below, minus the sum of (b)(i) plus (b)(ii) below.

	(a)(i)	1% of the Kennecott Pension Participant’s Average Monthly Final Earnings under the Plan multiplied by the Kennecott Pension Participant’s years of benefit service with the Kennecott Companies.

	(ii)	1-2/3% of the Kennecott Pension Participant’s Average Monthly Final Earnings under the Plan in excess of the Participant’s Monthly Covered Compensation, multiplied by the Kennecott Pension Participant’s years of benefit service at the Kennecott Companies.

	(b)(i)	1% of the Kennecott Pension Participant’s Average Monthly Final Earnings under the Kennecott Pension Plan not in excess of the Participant’s Monthly Covered Compensation, multiplied by the Kennecott Pension Participant’s years of benefit service at the Kennecott Companies.

	(ii)	1-2/3% of the Kennecott Pension Participant’s Average Monthly Final Earnings under the Kennecott Pension Plan in excess of the Participant’s Monthly Covered Compensation, multiplied by the Kennecott Pension Participant’s years of benefit service at the Kennecott Companies.


		For purposes of Subparagraphs 6(a)(i), 6(a)(ii), 6(b)(i) and 6(b)(ii), the terms ‘Average Monthly Final Earnings’ and ‘Monthly Covered Compensation’ shall mean as defined under the Kennecott Pension Plan, the applicable provisions of which are reflected in Appendix III hereto. To the extent the formula reflected in Subparagraph D-6(b) is inconsistent with the provisions of the Kennecott Pension Plan as reflected in Appendix III, the provisions of Appendix III shall govern and control, solely for the purpose of this Subparagraph D-6(b).

E.	Minimum Benefit Requirements

	1.	Notwithstanding any provision of this Plan to the contrary, in any Plan Year in which the Plan is a Top-Heavy Plan, each Non-Key Employee who is a Participant shall accrue a Minimum Annual Retirement Benefit which shall be equal to the lesser of: (a) two percent (2%) of the Participant’s Average Annual Compensation multiplied by Years of Minimum Benefit Service, or (b) twenty percent (20%) of the Participant’s Average Annual Compensation.

	2.	Notwithstanding any provision of this Paragraph E to the contrary, in any Plan Year in which this Plan is a Top-Heavy Plan, each Non-Key Employee Participant who is also covered by a defined contribution plan of the Employer shall accrue a Minimum Annual Retirement Benefit as provided by this Plan.

	3.	For purposes of this Paragraph E, the term:

		(a)	“Minimum Annual Retirement Benefit” shall mean a benefit payable annually in the form of a single life annuity (with no ancillary benefits) beginning at the Normal Retirement Age.

		(b)	“Average Annual Compensation” shall mean the average of the Total Compensation for the Participant’s five (5) consecutive years which produce the highest such average. In the event a Participant has been such for fewer than five (5) years, such lesser period of participating service shall be 35 used to determine Average Annual Compensation. Except to the extent otherwise provided in the Plan, a year shall not be included for purposes of determining Average Annual Compensation if:

			(i)	Such year is not included in a Year of Service;

			(ii)	Such year ends with or within a Plan Year beginning before January 1, 1984; or

			(iii)	Such year begins after the close of the last year in which the Plan was a Top-Heavy Plan.


		(c)	“Years of Minimum Benefit Service” shall mean Years of Service, but excluding:

			(i)	Years of Service prior to January 1, 1984;

			(ii)	Years of Service in which the Plan is not a Top-Heavy Plan; and

			(iii)	Years of Service in excess of ten (10) years.

F.	Maximum Benefit for any Participant

	The amount of a Participant’s Normal Retirement Benefit shall be subject to the limitations of Section 415 of the Code as described under Article V of this Plan.

G.	Early Retirement Benefit

	1.	Each Participant, upon Early Retirement, shall be entitled to receive an Early Retirement Benefit which shall be equal to his Accrued Benefit reduced by one-half percent (1/2%) for each month his Early Retirement Date precedes his Normal Retirement Date. Said benefit shall commence as of the first day of the month coincident with or next following the Participant’s Early Retirement Date.

	2.	Early Retirement with Thirty (30) Years of Service. A Participant, or former Participant who has terminated with vested benefits, who has not less than thirty (30) Years of Service with the Company may retire on the first day of any month following his sixtieth (60) birthday. In such case, no actuarial reduction will be applied to the pension to be received. In addition, a former Participant who has not less than thirty (30) Years of Service and has attained the age of fifty-five (55), but who has not attained the age of sixty (60) and who has been terminated by the Company by reason of reduction of the work force, may retire on the first day of any moth following his termination on pension (1) to commence on the first day of the month following his sixtieth (60 ^th ) birthday in the amount accrued to him on the date of his actual retirement, or (2) to commence at this option on the first day of any month after his termination by the Company by reason of a reduction of work force and before this sixtieth (60 ^th ) birthday, but the amount of his pension shall be reduced by one-half (1/2) of one percent (1%) for each month which the date payments commence precedes age sixty (60). For purposes of this Subparagraph G-2, Years of Service while covered under the Lucky Friday Pension Plan shall be included.


	Notwithstanding the foregoing, if a Participant’s retirement benefit commences at or prior to age sixty (60) with actuarial reduction from age sixty (60) under the terms of this Subparagraph, the percentage under Subparagraph D-1(a) of this Article III shall be increased as follows:


Benefit Commencement Age	Social Security Retirement Age

	66	67

60	.025%	.050%
59	.020	.045

Benefit Commencement Age	Social Security Retirement Age

	66	67

58	.015	.040
57	.010	.035
56	.005	.036
55	.006	.034


H.	Delayed Retirement Benefit

	If a Participant continues to be employed (or is reemployed by the Employer) after attaining Normal Retirement Age in “section 203(a)(3)(B) service” under Department of Labor Regulation 29 CFR Section 2530.203-3, payments shall not commence (or, in the case of reemployment, shall be suspended) until the Participant’s delayed retirement date. Such Participant, upon Normal Retirement on a delayed retirement date, shall be entitled to receive a Delayed Retirement Benefit which shall be the Normal Retirement Benefit based on years of Credited Service and Average Compensation through the Participant’s actual retirement date. The Plan shall give notice to such Participant as required under Department of Labor Regulation 29 CFR Section 2530.203-3(b)(4) no later than the end of the first calendar month or payroll period in which the Plan delays the commencement of payments (or suspends payments due to reemployment). Notwithstanding the foregoing, if a Participant continues to be employed (or is reemployed by the Employer) after attaining Early Retirement Age. Benefits will accrue while such Participant remains employed as described in Article III and the amount of the payments will be recalculated each year as of the last day of the Plan Year to reflect those additional benefits. The increase in the Participant’s Accrued Benefit will be offset by the Actuarial Equivalent of the benefits received during the Plan Year. This Section III – H shall not apply to a Participant who has elected a Phased Retirement Date.

I.	Death Benefit

	In the event of the death of vested Participant prior to such Participant’s Normal Retirement Age or Annuity Starting Date, such Participant’s Beneficiary shall be entitled to receive a Death Benefit payable pursuant to the provisions of Paragraph K of this Article III.


J.	Disability Retirement Benefit

	A Participant who has ten (10) Years of Service and who, while in the employ of the Company and covered under this Plan prior to his Normal Retirement Date, is found to be totally and permanently disabled by a medical examiner of the Company’s choice, and whose disability is not covered by any Worker’s Compensation Act or Occupational Disease Law, shall be retired on the first of any month following the date he was determined to be totally disabled and be entitled to a monthly pension allowance equal to that pension he would receive for normal retirement based upon his service to his disability retirement date. In the event a Participant is totally and permanently disabled prior to completing the aforenoted ten (10) Years of Service, then, for purposes of accumulating the required ten (10) Years of Service described in this Paragraph J, time during which an Employee or former Employee is receiving benefits under a Hecla Mining Company non-occupational disability plan, insurance or related plan for permanent disability, or workmen’s compensation plan paid for by the Company, shall be taken into account for the purposes of computing Years of Service up to a total of ten (10) years, but not for the purposes of computing any accrued benefits payable.

	An Employee will not be entitled to disability benefits under this Paragraph if the Total Disability resulted form his having been engaged in a criminal enterprise or from habitual drunkenness or addiction to narcotics or was from a self-inflicted injury or resulted from service in the Armed Forces after the effective date of the Plan or for which the employee receives a military pension. Provided also that if the Participant should recover so as to be able to return to the service of the Company, the pension provided by the Paragraph shall be suspended. If any such pensioner is restored at any age to active service as an Employee, his disability pension shall cease and his participant in the Plan shall be renewed.

	The Company shall have the right, prior to his Normal Retirement Date, to require any participant receiving a monthly disability pension allowance pursuant to this Paragraph to be examined by a physician of the Company’s choice not more often than once in each calendar year to determine if he continues to be disabled, as a condition to his continuing to receive the disability pension allowance prior to his Normal Retirement Date. If the Company determines, at any time prior to his Normal Retirement Date, than any such Participant is not disabled, his disability pension allowance shall cease.

K.	Eligible Spouse’s Survivor Benefits

	1.	If a Participant dies on or after his Annuity Start Date with respect to such benefit, effective as of December 12, 2002, the Participant’s Eligible Spouse, if any, shall receive:


		(a)	A benefit in the form of a qualified joint and survivor annuity as set forth in Paragraph L of this Article III, and

		(b)	If the deceased Participant’s Annuity Start Date was prior to July 1, 1986, a monthly benefit payable for thirty-six (36) consecutive months equal to the lesser of $75.00 and the monthly retirement benefit the Participant was receiving from the Plan immediately prior to his death.

	2.	If a vested Participant dies before his Annuity Starting Date with respect to such benefit, the Participant’s Eligible Spouse, if any, shall receive the portion of the Participant’s Accrued Benefit which is not being distributed in the form of a qualified joint and survivor annuity as a qualified pre-retirement survivor annuity unless otherwise elected as provided below. A “qualified pre-retirement survivor annuity” means an immediate survivor annuity for the life of the Eligible Spouse. Payments to the Participant’s Eligible Spouse under such annuity shall be the same as the amounts which would be payable as a survivor annuity under a qualified joint and survivor annuity (or the Actuarial Equivalent thereof) if:

		(a)	In the case of a Participant who dies after the earliest date on which he could elect to commence benefits under the Plan, such Participant had retired with an immediate qualified joint and survivor annuity on the day before his death. The qualified pre-retirement survivor annuity shall be calculated as of the Participant’s death.

		(b)	In the case of a Participant who dies on or before the earliest date on which he could elect to commence benefits under the Plan, such Participant: had (i) separated form service on the earlier of actual separation of service or the date of death, (ii) survived until the earliest date on which he could elect to commence benefits under the Plan, (iii) retired with a benefit in the form of an immediate qualified joint and survivor annuity at that time, and (iv) dies on the day thereafter. The qualified pre-retirement survivor annuity shall be calculated as of the earliest date on which the Participant could elect to commence benefits.

	3.	If a vested Participant dies before his Annuity Starting Date while in the active employ of the Company, the Participant’s Eligible Spouse, if any, shall receive a monthly benefit of one-half (1/2) of the Participant’s monthly Accrued Benefit as of the date of his death.

L.	Qualified Joint and Survivor Annuity

	Unless the Participant elects otherwise as provided in Subparagraph L-2 below, the Committee shall direct the Trustee to distribute on behalf of a vested Participant a benefit in the form of a qualified joint and survivor annuity for all distributions to the Participant.


	1.	The term “qualified joint and survivor annuity” means an immediate annuity for the life of the Participant if he does not have an Eligible Spouse or, if he has an Eligible Spouse, an annuity which is the Actuarial Equivalent of the Normal Form for the life of the Participant with a survivor annuity for the life of his Eligible Spouse. The survivor annuity percentage shall be fifty percent (50%) of the amount of the annuity payable during the joint lives of the Participant and his Eligible Spouse.

	2.	Notwithstanding the foregoing, a Participant may elect to waive the qualified joint and survivor annuity and thereby receive an alternate form of distribution asset forth in Paragraph N of this Article III. Such waiver must be made within the one hundred and eighty (180) day period (ninety (90) day period prior to January 1, 2008) ending on the Participants Annuity Starting Date with respect to such benefit. A Participant may subsequently revoke an election to waive a qualified joint and survivor annuity and elect again to waive the qualified joint and survivor annuity at any time and any number of times prior to such Annuity Starting Date. All such elections and revocations shall be in writing. Any election to waive a qualified joint and survivor annuity (1) must specify the alternate form of distribution elected, (2) must be accompanied by the designation of a specific nonspouse beneficiary (including any class of beneficiaries or any contingent beneficiaries) who will receive the benefit upon the Participant’s death, if applicable, and (3) must be accompanied by a Spousal Consent, to the extent required under Paragraph AQ of Article I.

	3.	Such designation of a joint and survivor annuity or exercise of the election to waive the joint and survivor annuity made before retirement shall become effective on the date of retirement. Any designation, change in designation or election to waive the joint and survivor annuity made after retirement shall become effective two (2) years after the date of such change of designation or election provided that both the Participant and his spouse must be alive at the end of the two (2) year period (unless (i) the Participant died from accidental causes, (ii) failure to give effect to the election or revocation would deprive the survivor of a survivor annuity and (iii) the election or revocation was made before the accident occurred). No designation of survivor pension amount, change in designation of survivor pension amount or election to take without survivor benefits shall affect any pensions payable prior to the date such respective exercise becomes effective. If the spouse dies after the Participant’s retirement, the Participant shall have no right to designate another, change the pension amount, or elect to waive the joint and survivor annuity.

M.	Deferred Vested Benefit

	1.	A Participant who ceases to be an Employee for reasons other than death, Total Disability or retirement shall be entitled to a deferred vested benefit, commencing as of his Normal Retirement Date, which shall be equal to his Accrued Benefit at termination of employment multiplied by his vested percentage determined pursuant to Article VI.


	2.	A Participant eligible for a termination benefit who ceased to be an Employee after satisfying the service requirements for an Early Retirement Benefit but before satisfying the age requirement for such Early Retirement Benefit shall be entitled upon satisfaction of the age requirement to elect to commence to receive his deferred vested benefit. The amount paid pursuant to this Subparagraph M-3 shall be the Actuarial Equivalent of the deferred vested benefit he would have received at his Normal Retirement Date.

N.	Distributions Prior to Early Retirement Age

	Distributions prior to Early Retirement Age are not allowed except for payment of disability benefits, lump-sum payments of under $3,500, Early Retirement Window Benefit payments, or Early Retirement Window Additional Benefit payments.

O.	Optional Form of Benefit

	1.	Effective for distributions made after December 31, 1992, a Participant or Beneficiary who is entitled to receive an Eligible Rollover Distribution may direct the Committee to pay all or a portion of such distribution directly to an Eligible Retirement Plan, in lieu of paying such amount to the Participant or Beneficiary, pursuant to Paragraph Q of this Article III. Except as provided in Paragraph L, a Participant may elect to receive his retirement benefits in any forms described in Subparagraph O(2) of this Article III, provided that distributions may be made only over one of the following periods (or a combination thereof):

		(a)	The life of the Participant;

		(b)	The life of the Participant and his Beneficiary;

		(c)	A period certain not extending beyond the life expectancy of the Participant; or

		(d)	a period certain not extending beyond the joint and last survivor expectancy of the Participant and his designated Beneficiary.

			An election to receive a Plan distribution under any method set forth in this Paragraph O for an Annuity Starting Date which occurs on or after the Participant’s Normal Retirement Age shall apply to all subsequent distributions mad eon behalf of the Participant. The form of benefit selected shall be the Actuarial Equivalent of the Normal Form of benefit.

	2.	Optional forms of benefits are as follows, each of which shall be the Actuarial Equivalent of the Normal Form:

		(a)	An annuity payable over the life of the Participant.


		(b)	A joint and survivor annuity payable over the life of the Participant with a continuation of 100%, 66 2/3% or 50% of the benefit to the spouse of the Participant upon the death of the Participant.

		(c)	A joint and survivor annuity with pop-up payable over the life of the Participant with a continuation of 100%, 66 2/3% or 50% of the benefit to the spouse of the Participant upon the death of the Participant. If the Participant’s spouse predeceases the Participant, the benefit payable to the Participant shall revert to its original amount as if the joint and survivor option had not been elected.

	3.	If the Participant’s Eligible Spouse is not the designated beneficiary, the method of distribution selected must assure that at least fifty percent (50%) of the present value of the amount available for distribution is paid within the Participant’s life expectancy; and payments under such distribution method shall comply with Treasury Regulation Section 1.401(a)(9)-2 Q&A-6(b).

	4.	Notwithstanding anything to the contrary in this Article III, if a Participant ceases to be an Employee for any reason and the Actuarial Equivalent present value of his vested Accrued Benefit derived from Employer and Employee contributions (including rollovers) is equal to or less than $3,500 on the date distributions commence, the Committee shall pay as soon as practicable to the Participant or his Beneficiary, as the case may be, the Actuarial Equivalent present value of his vested Accrued Benefit in a lump-sum. No distribution may be made under the preceding sentence after the Participant’s Annuity Starting Date unless the Participant and his Eligible Spouse consent thereto in a manner which is comparable to the Spousal Consent requirements in Paragraph AQ of Article I. A Participant who has no vested right in his Accrued Benefit shall be deemed to have received a distribution of his entire vested Accrued Benefit as of the date he terminated participation in the Plan. The Actuarial Equivalent of lump-sum payments shall be determined in accordance with Subparagraph B-3 of Article I.

	5.	If any monthly annuity benefit payable under the Plan is $10 or less, the Plan may make benefit payments in less frequent intervals of one (1) year or less.

	6.	A Participant who is entitled to receive an Early Retirement Window Additional Benefit may elect to receive the Actuarial Equivalent present value of such benefit in a lump-sum.

P.	Time of Distribution

	1.	The Committee must provide the Participant with a “general notice of distribution” no less than thirty (30) and no more than one hundred and eighty (180) days (ninety (90) days prior to January 1, 2008) before the Participant’s Annuity Starting Date. Such notice must be in writing and must set forth the following information: (i) an explanation of the eligibility requirements for,


	the material features of, and the relative values of the alternate forms of benefits available under Paragraphs L and O of this Article III, and (ii) the Participant’s right to defer receipt of a Plan distribution under Subparagraphs P-3 and P-4 of this Article III. This general notice also shall include (a) the terms and conditions of a qualified joint and survivor annuity; (b) the Participant’s right to make, and the effect of, an election to waive the qualified joint and survivor annuity; (c) the rights of the Participant’s Eligible Spouse; and (d) the right to make, and the effect of, a revocation of an election to waive a qualified joint and survivor annuity. Such notice shall be given to the Participant in person, by mailing, by posting, or by placing it in an Employer publication which is distributed in such a manner as to be reasonable available to such Participant. If the notice is to be posted, it shall be posted at the location within the Participant’s principal place of employment which is customarily used for employer notices to employees with regard to labor-management relation matters. Notice under this Paragraph P is not required if the present value of the Participant’s vested Accrued Benefit is less than or equal to $3,500.

2.	Upon receipt of the general notice of distribution, a Participant may consent in writing to receive a distribution of his vested Accrued Benefit to be distributed at the time and in the manner set forth in this Article III. The Participant’s consent to receive such distribution prior to his Normal Retirement Age must be accompanied by the written consent of the Participant’s Eligible Spouse, if married, which is comparable to the Spousal Consent requirements in Paragraph AQ of Article I, unless the distribution is to be made in the form of a joint and survivor annuity. Notwithstanding anything contained herein to the contrary, as provided in Paragraph X of this Article III, a Participant (with Spousal Consent, if applicable) may elect a Retroactive Annuity Starting Date, in which case the issuance of the written explanation described in Paragraph P of this Article III shall be provided as required in Paragraph X.

3.	Subject to the maximum deferral requirements of Subparagraphs P-5 and P-6 of this Article III, a Participant may elect to defer receipt of a Plan distribution, provided that such election is in writing, describes the form of benefit payment, indicates the date the distribution is to commence, and is signed by the Participant. To the extent not inconsistent with Subparagraph P-4 below, in the event that the Participant does not elect to defer receipt of his distribution, payment of a Participant’s Accrued Benefit shall be gin not later than the 60 ^th day after the latest of the close of the Plan Year in which:

	(a)	The Participant attains the earlier of age sixty-five (65) or Normal Retirement Age;

	(b)	Occurs the tenth (10 ^th ) anniversary of the year in which the Participant entered the Plan; or

	(c)	The Participant terminates employment with the Employer.


	4.	In the event that the Participant has terminated employment and the Participant (and the Eligible Spouse, if applicable) neither consents to receive a Plan distribution nor elects to defer receipt of a Plan distribution, the Actuarial Equivalent present value of the Participant’s vested Accrued Benefit shall be distributed in the form of a qualified joint and survivor annuity upon the Participant’s Normal Retirement Date (or, such later date of termination), but in no event before the date the Participant attains Normal Retirement Age, if the Actuarial Equivalent present value of such vested Accrued Benefit derived from Employer and Employee contributions (including rollovers) exceeds $3,500 (or, if the present value of such vested Accrued Benefit exceeded $3,500 prior to such distribution, is less than or equal to $3,500 for distributions made after the initial distribution date). For purposes of this Subparagraph P-4, the determination whether the Actuarial Equivalent present value of the Participant’s vested Accrued Benefit is equal to or less than $3,500 shall be made in accordance Subparagraph B-3 of Article I. The Committee may distribute a benefit in the form of a qualified joint and survivor annuity to the Participant without his prior consent if such distribution is necessary to comply with Section 415 or 411(b) of the Code.

	5.	Notwithstanding anything to the contrary contained in this Plan, other than the rules pertaining to pre-1984 elections described in Subparagraph P-6 below, distribution to a Participant shall commence no later than April 1 ^st of the calendar year following the later of (a) the calendar year in which the Participant attains age seventy and one-half 70 ½ or (b) terminates employment. Notwithstanding the foregoing, distributions must commence to Employees who were five-percent (5%) owners (as defined in Section 416 of the Code) no later than April 1 of the calendar year following the year in which the Participant attains age seventy and one-half (70 ½). Once distributions have begun to a five percent (5%) owner, such distributions must continue even if the Participant ceases to be a five percent (5%) owner in a subsequent year. If the amount of the required payment cannot be ascertained by the date payment is to commence, of if it is not possible to make such payment because of the Committee’s inability to locate the Participant after making reasonable efforts to do so, a payment retroactive to the required commencement date shall be made no later than sixty (60) days after the date the amount of such payment can be ascertained or the Participant is located.

	6.	Notwithstanding anything in this Paragraph P to the contrary, a Participant may receive a Plan distribution at a time and in a form different from that required under this Paragraph if such distribution is pursuant to a written election by a Participant which (a) was signed and filed with the Employer prior to January 1, 1984, (b) specified when Plan distributions shall begin and in what form they shall be paid, (c) indicated the Participant’s designated Beneficiary in the case of a distribution upon the Participant’s death, (d) satisfied the requirements of the Internal Revenue Code in effect immediately prior to the effective date of the Tax Equity and Fiscal Responsibility Act of 1982, (e) satisfies the requirements of Paragraph L of this Article III, and (f)


	either was not changed or changed only to substitute or add another Beneficiary if such change did not affect the period over which distributions were to be made. The Company shall alter this election if it determines that such action is necessary to preserve the tax qualification of this Plan.

7.	The Participant’s Beneficiary may consent to receive benefits as soon as practicable after the Participant’s death. Such consent by a surviving spouse must be comparable to the Spousal Consent requirements in Subparagraph AQ of Article I.

8.	A Beneficiary may elect to defer such distribution beyond the time specified in Subparagraph P-7 above, provided that such election is in writing, describes the form of benefit payment to be received, indicates the date distributions are to commence, is signed by the Beneficiary, and satisfies the requirements of Subparagraph P-10 of this Article III.

9.	In the event that the Beneficiary neither consents to receipt a Plan distribution nor elects to defer receipt of a Plan distribution, the Beneficiary shall receive a Plan distribution as soon as practicable after the Participant’s death. Notwithstanding the foregoing but subject to Subparagraph P-10 below, if the Beneficiary is the Participant’s Eligible Spouse, the Beneficiary shall not receive a Plan distribution before the date the Participant attained or would have attained Normal Retirement Age if the present value of the Participant’s vested Accrued Benefit exceeds $3,500 at the time of distribution (or, if the present value of the Participant’s vested Accrued Benefit exceeded $3,500 prior to such distribution, is less than or equal to $3,500 for distributions made after the initial distribution date). For purposes of this Subparagraph P-9, the determination whether the Actuarial Equivalent present value of the Participant’s vested Accrued Benefit is equal to or less than $3,500 shall be made in accordance with Subparagraph B-3 of Article I.

10.	Notwithstanding any provision of this Paragraph P to the contrary, any distribution to a Participant’s Beneficiary must comply with the following requirements effective as of January 1, 2003.

	(a)	If the Participant dies before distributions begin, the Participant’s entire interest will be distributed, or begin to be distributed, no later than as follows:

		(i)	If the Participant’s Eligible Spouse is the Participant’s sole Beneficiary, then distributions to the Eligible Spouse will begin by December 31 of the calendar year immediately following the calendar year in which the Participant died, or by December 31 of the calendar year in which the Participant would have attained age 70-½, if later.


	(ii)	If the Participant’s Eligible Spouse is not the Participant’s sole Beneficiary, then distributions to the designated beneficiary will begin by December 31 of the calendar year immediately following the calendar year in which the Participant died.

	(iii)	If there is no Beneficiary as of September 30 of the year following the year of the Participant’s death, the Participant’s entire interest will be distributed by December 31 of the calendar year containing the fifth anniversary of the Participant’s death.

	(iv)	If the Participant’s Eligible Spouse is the Participant’s sole Beneficiary and the Eligible Spouse dies after the Participant but before distributions to the Eligible Spouse begin, this Subparagraph P-10(a), other than Subparagraph P-10(a)(i), will apply as if the Eligible Spouse were the Participant.

(b)	If the Participant’s interest is distributed in the form of an annuity purchased from an insurance company, distributions thereunder will be made in accordance with the requirements of Section 401(a)(9) of the Code and the Treasury Regulations. If the Participant’s interest is paid in the form of annuity distributions under the Plan, payments under the annuity shall satisfy the following requirements:

	(i)	The annuity distributions will be paid in periodic payments made at intervals not longer than one year.

	(ii)	The distribution period will be over a life (or lives) or over a period certain not longer than the period described in this Paragraph P-10.

	(iii)	Once payments have begun over a period certain, the period certain will not be changed even if the period certain is shorter than the maximum permitted.

	(iv)	Payments will either be nonincreasing or increase only as follows:

		(A)	By an annual percentage increase that does not exceed the annual percentage increase in a cost-of-living index that is based on prices of all items and issued by the Bureau of Labor Statistics;

		(B)	To the extent of the reduction in the amount of the Participant’s payments to provide for a survivor benefit upon death, but only if the Beneficiary whose life was being used to determine the distribution period described in Subparagraph P-10(e) dies or is no longer the


			Participant’s beneficiary pursuant to a qualified domestic relations order within the meaning of a Section 414(p) of the Code; or

		(C)	To pay increased benefits that result from a Plan amendment.

(c)	The amount that must be distributed on or before the Participant’s required beginning date (or, if the Participant dies before distributions begin, the date distributions are required to begin under Subparagraph P-10(a)) is the payment that is required for one payment interval. The second payment need not be made until the end of the next payment interval even if that payment interval ends in the next calendar year. Payment intervals are the periods for which payments are received, e.g., bi-monthly, monthly, semi-annually, or annually. All of the Participant’s benefit accruals as of the last day of the first Distribution Calendar Year will be included in the calculation of the amount of the annuity payments for payment intervals ending on or after the Participant’s required beginning date.

(d)	Any additional benefits accruing to the Participant in a calendar year after the first Distribution Calendar Year will be distributed beginning with the first payment interval ending in the calendar year immediately following the calendar year in which such amount accrues.

(e)	This Subparagraph P-10(e) shall govern the requirements for annuity distributions that commence during the Participant’s lifetime.

	(i)	If the Participant’s interest is being distributed in the form of a Qualified Joint and Survivor Annuity for the joint lives of the Participant and a nonspouse Beneficiary, annuity payments to be made on or after the Participant’s required beginning date to the designated beneficiary after the Participant’s death must not at any time exceed the applicable percentage of the annuity payment for such period that would have been payable to the Participant using the table set forth in Q&A-2 of Section 1.401(a)(9)-6T of the Treasury Regulations. If the form of distribution combines a Qualified Joint and Survivor Annuity for the joint lives of the Participant and a nonspouse Beneficiary and a period certain annuity, the requirement in the preceding sentence will apply to annuity payments to be made to the designated Beneficiary after the expiration of the period certain.

	(ii)	Unless the Participant’s Eligible Spouse is the sole Beneficiary and the form of distribution is a period certain and no life annuity, the period certain for an annuity distribution


		commencing during the Participant’s lifetime may not exceed the applicable distribution period for the Participant under the Uniform Lifetime Table set forth in Section 1.401(a)(9)-9 of the Treasury Regulations for the calendar year that contains the annuity starting date. If the annuity starting date precedes the year in which the Participant reaches age seventy (70), the applicable distribution period for the Participant is the distribution period for age seventy (70) under the Uniform Lifetime Table set forth in Section 1.401(a)(9)-9 of the Treasury Regulations plus the excess of seventy (70) over the age of the Participant as of the Participant’s birthday in the year that contains the annuity starting date. If the Participant’s spouse is the Participant’s sole Beneficiary and the form of distribution is a period certain and no life annuity, the period certain may not exceed the longer of the Participant’s applicable distribution period, as determined under this Subparagraph, or the joint life and last survivor expectancy of the Participant and the Participant’s Eligible Spouse as determined under the Joint and Last Survivor Table set forth in a Section 1.401(a)(9)-9 of the Treasury Regulations, using the Participant’s and spouse’s attained ages as of the Participant’s and Eligible Spouse’s birthdays in the calendar year that contains the annuity starting date.

(f)	This Subparagraph P-10(f) shall govern the requirements for minimum distributions where the Participant dies before the date distributions begin.

	(i)	If the Participant dies before the date distribution of his or her interest begins and there is a Beneficiary, the Participant’s entire interest will be distributed, beginning no later than the time described in Subparagraphs P-10(a)(i) or (a)(ii) over the life of the Beneficiary or over a period certain not exceeding:

		(A)	Unless the annuity starting date is before the first Distribution Calendar Year, the life expectancy of the designated Beneficiary determined using the beneficiary’s age as of the Beneficiary’s birthday in the calendar year immediately following the calendar year of the Participant’s death; or

		(B)	If the annuity starting date is before the first Distribution Calendar Year, the life expectancy of the designated Beneficiary determined using the Beneficiary’s age as of the Beneficiary’s birthday in the calendar year that contains the annuity starting date.


	(g)	If the Participant dies before the date distributions begin and there is no designated Beneficiary as of September 30 of the year following the year of the Participant’s death, distribution of the Participant’s entire interest will be completed by December 31 of the calendar year containing the fifth anniversary of the Participant’s death.

	(h)	If the Participant dies before the date distribution of his or her interest begins, the Participant’s Eligible Spouse is the Participant’s sole designated Beneficiary, and the Eligible Spouse dies before distributions to the surviving spouse begin, Subparagraphs P-10(f), (g) and (h) will apply as if the Eligible Spouse were the Participant, except that the time by which distributions must begin will be determined without regard to Subparagraph P-10(a).

11.	Notwithstanding any Plan provision to the contrary, all Plan distributions shall comply with the requirements of Section 401(a)(9) of the Code and the final Treasury Regulations thereunder.

12.	Notwithstanding any other provisions of this Plan to the contrary, for Plan Years beginning on or after January 1, 1992, Benefits distributed under this Plan to those Participants and former Participants who are among the twenty-five (25) most highly compensated employees shall be subject to the following requirements:

	(a)	Such Benefits shall be restricted such that the annual payments so distributed shall be no greater than an amount equal to the payment that would be made on behalf of such Participant or former Participant under a single life annuity which is the Actuarial Equivalent, as determined in accordance with Paragraph B of Article I, of the sum of the Participant’s or former Participant’s Accrued Benefit multiplied by his vested percentage and the Participant’s or former Participant’s other Benefits under this Plan.

	(b)	The preceding Subparagraph P-12(a) shall not apply if:

		(i)	After payment of the Benefit to a Participant or former Participant described in this Subparagraph P-12, the value of Plan assets equals or exceeds one hundred ten percent (110%) of the value of current liabilities, as defined in Section 412(1)(7) of the Code, or

		(ii)	The value of the Benefits distributable to a Participant or former Participant described in this Subparagraph P-12 is less than one percent (1%) of the value of current liabilities, as defined in Section 412(1)(7) of the Code.

	For purposes of this Subparagraph P-12, Benefit includes any periodic income, any withdrawal values payable to a living Participant or former Participant,


		and any death benefits not provided for by insurance on the Participant’s or former Participant’s life.

Q.	Direct Rollover Distributions to an Eligible Retirement Plan

	1.	Effective for distributions made after December 31, 1992, a Participant or Beneficiary who is entitled to receive an Eligible Rollover Distribution may direct the Committee to pay all or a portion of such distribution directly to an Eligible Retirement Plan, in lieu of paying such amount to the Participant or Beneficiary.

	2.	The Committee shall establish reasonable rules and procedures with respect to elections to make direct rollover distributions to an Eligible Retirement Plan pursuant to this Paragraph Q.

	3.	The Committee shall treat the election by a Participant or Beneficiary to make or not make a direct rollover with respect to one payment in a series of periodic payments as applicable to all subsequent payments in the series unless the Participant or Beneficiary subsequently changes the election.

	4.	For purposes of this Paragraph Q and Subparagraph 0-1 of this Article III, the following definitions shall apply:

		(a)	“Eligible Rollover Distribution” shall mean any distribution of all or any portion of the balance to the credit of the Participant or Beneficiary, except that an Eligible Rollover Distribution does not include: any distribution that is one of a series of substantially equal periodic payments (not less frequently than annually) made for the life (or life expectancy) of the Participant or Beneficiary, or the joint lives (or joint life expectancies) of the Participant or Beneficiary and such Participant’s or Beneficiary’s designated beneficiary, or for a specified period of ten years or more; any distribution to the extent such distribution is required under Section 401(a)(9) of the Code; and the portion of any distribution that is not includible in gross income (determined without regard to the exclusion for net unrealized appreciation with respect to employer securities).

		(b)	“Eligible Retirement Plan” shall mean an individual retirement account described in Section 408(a) of the Code, an individual retirement annuity described in Section 408(b) of the Code, an annuity plan described in Section 403(a) of the Code, or a qualified trust described in Section 401 (a) of the Code, that accepts the Participant’s or Beneficiary’s Eligible Rollover Distribution. However, in the case of an Eligible Rollover Distribution to the surviving spouse, an Eligible Retirement Plan is an individual retirement account or individual retirement annuity.


		(c)	“Beneficiary” shall include a Participant’s former spouse who is the alternate payee under a qualified domestic relations order, as defined in Section 414(p) of the Code, with respect to the interest of the former spouse.

	5.	For purposes of the direct rollover provisions in section III-Q of the Plan, an eligible retirement plan shall also mean an annuity contract described in section 403(b) of the Code and an eligible plan under section 457(b) of the Code which is maintained by a state, political subdivision of a state, or any agency or instrumentality of a state or political subdivision of a state and which agrees to separately account for amounts transferred into such Plan from this Plan. The definition of eligible retirement plan shall also apply in the case of a distribution to a surviving spouse, or to a spouse or former spouse who is the alternate payee under a qualified domestic relation order, as defined in section 414(p) of the Code.

R.	Determination of Accrued Benefit Fresh-Start Rules

	This Paragraph R shall apply to all Participants who have accrued benefits as of the Fresh-Start Date and are credited with at least one Hour of Service after that date.

	1.	Definitions . For purposes of this Paragraph R. the terms Normal Form, Normal Retirement Age and Plan shall be construed under the provisions of the Plan in effect on the latest Fresh-Start Date if such term is to be applied as of such latest Fresh-Start Date. Further, the following definitions shall apply unless indicated otherwise:

		(a)	“Fresh-Start Date” shall mean the last day of the Plan Year preceding the Plan Year for which any amendment of the Plan that directly or indirectly affects the amount of a Participant’s benefit determined under the current benefit formula (such as an amendment to the definition of Compensation used in the current benefit formula or a change in the Normal Retirement Age) is made effective.

		(b)	“Frozen Accrued Benefit” shall mean the amount of the Participant’s Accrued Benefit as of the latest Fresh-Start Date determined in accordance with the provisions of Subparagraph R-3 of this Article III.

	2.	Accrued Benefit Formula . Each Participant’s Accrued Benefit under the Plan shall be equal to the greater of (a) or the sum of (b) plus (c):

		(a)	the Participant’s Accrued Benefit determined with respect to the current benefit formula as applied to the Participant’s total years of Credited Service under the Plan, or

		(b)	the Participant’s Frozen Accrued Benefit, if any, plus


		(c)	the Participant’s Accrued Benefit determined with respect to the current benefit formula as applied to the Participant’s years of Credited Service beginning after the latest Fresh-Start Date.

	3.	Frozen Accrued Benefit Determination The amount of the Participant’s Frozen Accrued Benefit shall be determined in accordance with the method described below:

		(a)	A Participant’s Frozen Accrued Benefit is the amount of the Participant’s Accrued Benefit determined in accordance with the provisions of the Plan in effect on the latest Fresh-Start Date, determined as if the Participant terminated employment with the Employer as of the latest Fresh-Start Date, without regard to any amendment made to the Plan after that date. If this Plan has not had a Fresh-Start Date, the Participant’s Frozen Accrued Benefit shall be zero (O).

		(b)	If, as of the latest Fresh-Start Date, the amount of a Participant’s Frozen Accrued Benefit was limited by the application of Section 415 of the Code, the Participant’s Frozen Accrued Benefit shall be increased for years after the latest Fresh-Start Date to the extent permitted under Section 415(d)(1) of the Code.

		(c)	If the Frozen Accrued Benefit of a Participant includes the top-heavy minimum benefits provided in Paragraph E of this Article III, the Participant’s Frozen Accrued Benefit shall be increased to the extent necessary to comply with the average compensation requirement of Section 416(c)(1)(D)(i) of the Code.

		(d)	If, as of the latest Fresh-Start Date:

			(i)	the Plan’s Normal Form of benefit in effect on such latest Fresh-Start Date is not the same as the Normal Form of benefit under the Plan after the latest Fresh-Start Date, or

			(ii)	the Normal Retirement Age for any Participant on such latest Fresh-Start Date was greater than the Normal Retirement Age for such Participant after the latest Fresh-Start Date.

S.	Pension Enhancement Option

	The provisions of Article VIII notwithstanding, any Participant who has reached his annuity starting date (or who is retiring for disability) may elect to have such pension increased by the Actuarial Equivalent of any rollover contribution or elective transfer of funds, as provided in this Paragraph S.


1.	The pension enhancement is available to any Participant who commences to receive his Normal Retirement Benefit, Early Retirement Benefit, Delayed Retirement Benefit or Disability Retirement Benefit under this Plan.

2.	The amount of such rollover or transfer shall not be less than $10,000 (ten thousand dollars).

3.	The funds rolled-over or transferred into this Plan must originate from the Participant’s account in the Hecla Mining Company Capital Accumulation Plan (“the 401(k) Plan”). Funds which are rolled-over from the 401(k) Plan into an individual retirement account and subsequently rolled-over into this Plan will be considered to have originated in the 401(k) Plan.

4.	The rollover or transfer of funds must be described in the Internal Revenue Regulation 1.401(a)(4)-11(b).

5.	The increase in the amount of the Participant’s retirement benefit attributable to the rollover or transfer shall be made in the same form of payment as the retirement benefit (except as provided in Paragraph S7 of this Article III) and shall be the actuarial equivalent of the amount of the rollover or transfer determined using the following:

	(a)	An interest rate determined as of the first day of July each Plan Year. This interest rate will be equal to the weighted average interest rate based on the Plan’s allocation of assets as reported on the December 31 ^st preceding the most recent July 1 ^st . The weighted average interest rate for each Plan Year will equal the total of the products of the asset allocation percentage times the following rates of return:

		(i)	the Pension Benefit Guarantee Corporation (PBGC) immediate annuity rate for terminating single-employer pension plans in effect on January 1 plus 2% (two percent) for fixed income investments,

		(ii)	the rate determined in 5(a)(i) above plus 3 ½% (three and one-half percent) for equity investments, and

		(iii)	3 ½% (three and one-half percent) for all other investments; and

	(b)	Mortality under the 1983 Group Annuity Mortality table incorporating a blend of male and female mortality in equal proportions as published in Revenue Ruling 95-6.

6.	The acceptance by the Plan of a rollover contribution or elective transfer and payment of any enhanced pension shall be subject to and conditioned upon meeting the Spousal Consent requirements of Paragraph AQ of Article I.

7.	Upon the death of the Participant (and Beneficiary, if any) a single sum death benefit will be paid to the beneficiary designated for this purpose equal to the


		excess, if any, of the amount of rollover or transfer over the total of the retirement benefits paid attributable to the rollover or transfer.

	8.	Enhanced pension benefits shall not be considered in connection with the benefit limitations described in Article V.

T.	Early Retirement Window Benefit .

	Any Participant who is an Employee and who meets the following requirements shall be entitled to receive an Early Retirement Window Benefit as provided in this Section T. Payment of the Early Retirement Window Benefit shall commence as of the first day of the first month following the Employee’s termination of employment.

	1.	Eligibility Requirements. To be eligible for the Early Retirement Window Benefit, the Employee must meet all of the following requirements:

		(a)	The Employee must terminate employment during the period starting December 1, 2001 and ending December 31, 2001.

		(b)	As of January 1, 2001, the Employee:

			(i)	Must have attained at least age 48;

			(ii)	Must have age plus Credited Service exceed 60; and

			(iii)	Must not be the chief officer of the Company

	2.	Amount of Early Retirement Window Benefit. The amount of the Early Retirement Window Benefit shall be the greater of:

		(a)	The Early Retirement Benefit determined under Paragraph G of this Article III without the reduction in Subparagraph G-1, if applicable; or

		(b)	The Early Retirement Benefit determined under Paragraph G of this Article III with five (5) years added to the Employee’s Credited Service.

	3.	Special Rules. The following rules shall apply to all Early Retirement Window Benefits and any subsequent retirement benefits that the Employee may become entitled to:

		(a)	Certain Employees may receive the Early Retirement Window Benefit even though, for bona fide business reasons as determined by the Company, they terminate employment within a reasonable period after December 31, 2001.

		(b)	As provided for in Paragraph G of Article II, if an Employee who retires and receives an Early Retirement Window Benefit is re-employee by the Employer is section 203(a)(3)(B) service after


			commencing benefit payments, the Employee’s payments will be suspended and benefits will continue to accrued as described in Subparagraph D-1 of Article III. Upon such Employee’s subsequent retirement, the Employee will be entitled to receive the greater of:

			(i)	The sum of the Employee’s Early Retirement Window Benefit plus the benefits which accrue under Article III for the period from the date of the Employee’s re-employment to the date of the Employee’s re-retirement reduced by the Actuarial Equivalent of the Early Retirement Window Benefits received, or

			(ii)	The benefit determined under Article III based on all years of Credited Service reduced by the Actuarial Equivalent of the Early Retirement Window Benefits received.

U.	Early Retirement Window Additional Benefit .

	Any Participant who is an Employee and who meets the requirements and so elects to receive an Early Retirement Window Benefit shall be entitled to receive an Early Retirement Window Additional Benefit as provided in this Section U. Payment of the Early Retirement Window Additional Benefit shall commence as of the first day of the first month following the Employee’s termination of employment.

	1.	Amount of Early Retirement Window Additional Benefit. The amount of the Early Retirement Window Additional Benefit shall be a retirement supplement with an Actuarial Equivalent present value equal to the product of 1.2 and the sum of (a) and (b):

		(a)	If the annualized rate of base salary at the Employee’s termination of employment is less than $100,000, 1/104 times the product of (i) and (ii):

			(i)	the annualized rate of base salary at the Employee’s termination of employment; and

			(ii)	the number of years and months of continuous employment with the Employer,

		plus

		(b)	$4,647.96

	2.	Special Rules. The following rules shall apply to all Early Retirement Window Additional Benefits:

		(a)	Certain Employees may receive the Early Retirement Window Additional Benefit even though, for bona fide business reasons as


			determined by the Company, they terminate employment within a reasonable period after December 31, 2001.

		(b)	Any Participant who is otherwise eligible for an Early Retirement Window Benefit but is entitled to and elects to receive a Disability Retirement Benefit pursuant to Paragraph J of Article III shall be entitled to receive an Early Retirement Window Additional Benefit, providing his disability retirement date is on or before January 1, 2002.

		(c)	As provided for in Paragraph G of Article II, if an Employee who retires and receives an Early Retirement Window Additional benefit is re-employed by the Employer in “section 203(a)(3)(B) service” after commencing benefit payments, the Employer’s payments will be suspended and benefits will continue to accrue as described in Subparagraph U-1 of Article III. Upon such Employee’s subsequent retirement, the Employee will be entitled to receive a re-determined Early Retirement Window Additional Benefit based upon the annualized rate of base salary at the date of the Employee’s re-retirement and inclusive of the number of years and months of continuous employment for the period from the date of the Employee’s re-employment to the date of the Employee’s re-retirement, reduced by the Actuarial Equivalent of the Early Retirement Window Additional Benefit received.

V.	Phased Retirement Benefit .

	1.	Eligibility Requirement . Any Participant who is an Employee who has attained Normal Retirement Age and who has not otherwise elected another Retirement Date may elect to receive a Phased Retirement Benefit.

	2.	Amount of Phased Retirement Benefit . The amount of the Phased Retirement Benefit shall be the Normal Retirement Benefit determined under Paragraph D of this Article III.

	3.	Special Payment Rules . During the first twenty-four (24) calendar months after the Phased Retirement Date of an Employee, the Participant’s monthly benefit payments will not be suspended during periods of employment by the Employer in Section 203(a)(3)(B) service. After those first twenty-four (24) calendar months, the suspension provisions of Article II, Section G shall apply.

	4.	Suspension of Benefits . When applicable, a Participant’s Phased Retirement Benefit shall be suspended for months when section 203(a)(3)(B) service with the Employer exceeds thirty-nine (39) hours. During such suspensions, benefits will continue to accrue as described in Subparagraph D-1 of Article III. Upon such Employee’s subsequent retirement, the Normal Retirement Benefit determined under Paragraph III-D shall include benefits accrued during the re-employment period.


W.	Special Early Retirement Window Benefit .

	Any Participant who is an Employee and who meets the following requirements shall be entitled to receive a Special Early Retirement Window Benefit as provided in this Paragraph W. Payment of the Special Early Retirement Window Benefit shall commence as of the first day of the month following the Employee’s termination of employment.

	1.	Eligibility Requirements . To be eligible for the Special Early Retirement Window Benefit, the Employee must meet all of the following requirements:

		(a)	Eligible Employees include all Hecla Mining Company Corporate salaried employees;

		(b)	Eligible Employees may apply for the Special Early Retirement Window Benefit from March 1, 2006 through March 15, 2006;

		(c)	As of January 1, 2006, the Employee must have age plus years of service with the Company of at least 75 (seventy-five).

	2.	Amount of Special Early Retirement Window Benefit . The amount of the Special Early Retirement Window Benefit is equal to the retiree’s accrued (to their actual retirement date) pension without reduction for early retirement.

	3.	Special Rules . The following rule shall apply to all Special Early Retirement Window Benefits and any subsequent retirement benefits that the Employee may become entitled to:

		(a)	As provided for in Paragraph G of Article II, if an Employee who retires and receives a Special Early Retirement Window Benefit is reemployed by the Employer in Section 203(a)(3)(B) service after commencing benefit payments, the Employee’s payments will be suspended and benefits will continue to accrue as described in Subparagraph D-1 and Article III. Upon such Employee’s subsequent retirement, the Employee will be entitled to receive the greater of:

			(i)	The sum of the Employee’s Special Early Retirement Window Benefit plus the benefits which accrue under Article III for the period from the date of the Employee’s re-employment to the date of the Employee’s re-retirement reduced by the Actuarial Equivalent of the Special Early Retirement Window Benefits received, or

			(ii)	The benefit determined under Article III based on all of Credited Service reduced by the Actuarial Equivalent of the Special Early Retirement Window Benefits received.


X.	Retroactive Annuity Starting Date

	In the event a Participant affirmatively elects for their benefits to commence as of a Retroactive Annuity Starting Date, this Paragraph X shall apply.

	1.	Except as provided herein, the written explanation described in Paragraph P of this Article III shall be provided to the Participant within no more than one hundred and eighty (180) days (ninety (90) days prior to January 1, 2008) and no fewer than thirty (30) days prior to the Date of Distribution based upon the Participant’s election of a Retroactive Annuity Starting Date. Notwithstanding the foregoing, the Date of Distribution may occur more than one hundred and eighty (180) days (ninety (90) days prior to January 1, 2008) after the date of the issuance of the written explanation as a result of administrative delay. In the event distribution of the Participant’s benefit does not occur within one hundred and eighty (180) days (ninety (90) days prior to January 1, 2008) following the issuance of the written explanation for reasons other than administrative delay, the Administrator shall furnish the Participant with another written explanation. The Participant (with Spousal Consent, if applicable) may, in writing, waive the requirement that benefits not be distributed in less than thirty (30) days of the Participant’s receipt of the written explanation, in which case benefits will not be distributed in less than seven (7) days after the written explanation is furnished. The Participant’s election to commence benefit receipt must be made after the written explanation is provided, and on or before the date the first distribution is made.

	2.	The Participant’s Eligible Spouse as of the Date of Distribution, including an alternate payee under the terms of a Qualified Domestic Relations Order, must consent to the Participant’s election of the Retroactive Annuity Starting Date. Spousal Consent, however, is not required in the event the survivor benefits that would be payable to the Participant’s Eligible Spouse as of the Retroactive Annuity Starting Date are not less than the survivor benefits that would be payable to the Participant’s Eligible Spouse in an optional form of benefit that satisfies the Qualified Joint and Survivor Annuity requirements as of a benefit commencement date which occurs subsequent to the date the written explanation is furnished. Additionally, Spousal Consent is not required if the Participant’s Eligible Spouse as of the Retroactive Annuity Starting Date would not be the Participant’s Eligible Spouse as of the date benefits actually commence, unless otherwise required by the terms of a Qualified Domestic Relations Order.

	3.	A Participant is not permitted to select a Retroactive Annuity Starting Date that precedes the date upon which the Participant could have otherwise started receiving benefits under the terms of this Article III. A Participant shall be deemed to have elected a Retroactive Annuity Starting Date, and receive distributions subject to this Paragraph X, even if the Participant’s benefits hereunder are adjusted in order to comply with Sections 417(e)(3) and 415 of the Code.


	4.	Future periodic payments with respect to a Participant who elects a Retroactive Annuity Starting Date shall be the same as the future periodic payments, if any, that would have been paid with respect to the Participant had payments actually commenced on the Retroactive Annuity Starting Date. Each Participant to whom this Paragraph X applies shall be paid make-up payments to reflect any missed payment or payments for the period from the Retroactive Annuity Starting Date to the date of the actual make-up payment (with the appropriate adjustment for interest from the date of the actual make-up payment). Said payments shall comply, in all respects, with the requirements of Sections 417(e)(3) and 415 of the Code, with the applicable interest rate and applicable mortality table determined as of that date. Distributions hereunder consisting of make-up payments under this Subparagraph X-4 shall not constitute “eligible rollover distributions” within the meaning of Section 401(a)(31) of the Code.

	5.	Distributions (including interest adjustments) made hereunder as of a Retroactive Annuity Starting Date are intended to satisfy the annual benefit limitation of Section 415 of the Code in accordance with this Subparagraph X-5. Distributions under Paragraph X shall satisfy the annual benefit limitation of Section 415 of the Code as of the Date of Distribution, for all purposes, including for purposes of determining the applicable interest rate and the applicable mortality table. In the event the Participant’s benefit would have been exempt from the present value requirements of Section 417(e)(3) of the Code if the benefit commenced on the Retroactive Annuity Starting Date, the annual benefit limitation of Section 415 of the Code shall not be applied as of the Date of Distribution, if such date is twelve (12) months or less from the Retroactive Annuity Staring Date. Instead, the annual benefit limitation of Section 415 of the Code shall be applied as of the Retroactive Annuity Starting Date.

	6.	In the event the Participant’s benefit would have been subject to the present value requirements of Section 417(e)(3) of the Code had distributions commenced on the Retroactive Annuity Starting Date, the Participant’s benefit entitlement shall not be less than the benefit produced by applying the applicable interest rate and the applicable mortality table determined as of the Date of Distribution, to the Normal, Early or Deferred Vested Benefit under this Article III that corresponds to the benefit that was used to determine the Participant’s benefit entitlement as of the Retroactive Annuity Starting Date.

	7.	The purpose of this Paragraph X is to conform the requirements governing Retroactive Annuity Starting Dates as set forth in Treasury Regulations Section 1.417(e)-1, as now in effect or as hereunder amended. To the extent this Paragraph X is inconsistent with said regulations, Treasury Regulations Section 1.417(e)-1 shall govern and control.


Y.	Supplement to Medicare Benefit

	A retired Participant who meets the following requirements shall be entitled to a Supplement to Medicare Benefit as provided in this Section Y. Payment of the Supplement to Medicare Benefit shall be made once per calendar quarter after the eligibility requirements are met.


	1.	Participant Eligibility Requirements . To be eligible for the Supplement to Medicare Benefit, the Participant must meet both of the following requirements:

		(a)	The Participant’s Annuity Start Date was prior to October 1, 1982, and

		(b)	The participant has attained age sixty-five (65) or the Participant has not attained age sixty-five (65) but is in receipt of Medicare benefits due to a disability.

	2.	Spouse Eligibility Requirement. For the Participant to also be eligible for the Spouse Supplement to Medicare Benefit, the Eligible Spouse must attain age sixty-five (65).

	3.	Eligible Spouse’s Survivor Benefits . If a Participant with an Annuity Start Date prior to October 1, 1982 dies, the Participant’s Eligible Spouse, if any, shall receive a Supplement to Medicare Benefit upon attainment of age sixty-five (65).

	4.	Amount of Supplement to Medicare Benefit . The amount of the Supplement to Medicare Benefit payable for each of the Participant and Eligible Spouse, if any, shall be:

		(a)	$48.00 per quarter if the individual purchases a Supplement to Medicare Plan, plus

		(b)	$33.00 per quarter if the individual purchases Medicare Part B coverage.

Z.	Employer Contributions

	For purposes of funding the Normal Retirement Benefits for eligible Participants under this Article III, the Employer shall contribute all amounts needed to provide the benefits under this Article III. The amount of Employer contributions shall be based on the recommendation of the Enrolled Actuary using such methods and assumptions as he may deem advisable and consistent with the minimum funding standards of ERISA.

ARTICLE IV
RETIREMENT CREDIT BALANCE BENEFITS


A.	Benefit Eligibility

	Effective as of April 16, 2008, the Retirement Credit Balance Benefits described in this Article IV shall apply solely with respect to those Eligible Employees that were employed by the Kennecott Companies prior to April 16, 2008, provided that such Eligible Employees participated in the Kennecott Defined Contribution Plan. Accordingly, no Eligible Employee employed by the Kennecott Companies prior to April 16, 2008, who participated in the Kennecott Pension Plan shall be eligible to receive any benefit to which this Article IV applies, unless the Eligible Employee ceased benefit accrual under the Kennecott Pension Plan effective as of September 30, 2007, and commenced participation in the Kennecott Defined Contribution Plan effective as of October 1, 2007. Eligible Employees that commence employment with the Kennecott Companies after April 16, 2008 shall be eligible to receive the benefits to which this Article IV applies, provided the Eligible Employee satisfies the requirements of Article II. No other Eligible Employee employed by an Employer prior to and after April 16, 2008 shall be eligible to receive Retirement Credit Balance Benefits under this Article IV, unless the Company adopts amendments to the Plan extending eligibility for benefits under this Article IV.

B.	Retirement Credit Balance Benefit

	Upon a Participant’s Termination of Employment with the Employer after April 16, 2008, the Participant shall be entitled to receive an Accrued Benefit calculated as the balance of the hypothetical Retirement Credit Balance Account (“Account”) maintained for the Participant, which shall equal the hypothetical accumulation of Employer contributions allocated to such Account on the Participant’s behalf, as well as the interest credits as described in Paragraph B-2 of Article I, and as reflected in this Paragraph B.

	1.	For each Plan Year in which a Participant is scheduled to work at least one thousand (1,000) Hours of Service with the Employer, the Participant’s hypothetical Retirement Credit Balance Account shall be credited with an amount equal to the sum of (a) and (b), and annually increased by the interest credit reflected in (c):

		(a)	6% of such Participant’s Compensation (as defined in Paragraph K of Article I), plus

		(b)	11.7% of such Participant’s Compensation that exceeds the Social Security Taxable Wage Base for the Plan Year.

		(c)	For each calendar quarter of the Plan Year in which the Eligible Employee is a Participant, the Participant’s Retirement Credit Balance Benefit shall be credited with interest at a rate equal to the quarterly rate of change of the consumer price index plus three-quarters of one percent (3/4 of 1%).


		For the period beginning April 16, 2008, and ending December 31, 2008, each Participant’s entitlement hereunder shall be based solely upon the Participant’s Compensation for the Plan Year as earned between April 16, 2008 and December 31, 2008, with Compensation that exceeds the Social Security Taxable Wage Base for the Plan Year determined on a pro rata basis.

	2.	For purposes of this Paragraph B, the Annual and Cumulative Disparity provisions of Paragraph D-3 of Article III, and the Minimum Benefit Requirements of Paragraph E of Article III, shall apply to the extent applicable, and are deemed incorporated into this Article IV as if those provisions were a part hereof.

	3.	Notwithstanding any provision of this Paragraph B to the contrary, if a Participant is entitled to a Minimum Annual Retirement Benefit pursuant to Paragraph E of Article III, the Participant’s Retirement Credit Balance Benefit shall be the greater of the benefit otherwise provided by this Paragraph B or the Minimum Annual Retirement Benefit.

	4.	In no event shall any benefits provided under the Plan exceed the limitations of Section 415 as provided in Article V.

C.	Qualified Joint and Survivor Annuity

	Unless the Participant elects otherwise as provided in Subparagraph C-2 below, the Committee shall direct the Trustee to distribute on behalf of a vested Participant a benefit in the form of a qualified joint and survivor annuity for all distributions to the Participant.

	1.	The term “qualified joint and survivor annuity” means an immediate annuity for the life of the Participant if he does not have an Eligible Spouse or, if he has an Eligible Spouse, an annuity which is the Actuarial Equivalent of the Participant’s Retirement Credit Balance Benefit for the life of the Participant with a survivor annuity for the life of his Eligible Spouse. The survivor annuity percentage shall be fifty percent (50%) of the amount of the annuity payable during the joint lives of the Participant and his Eligible Spouse.

	2.	Notwithstanding the foregoing, a Participant may elect to waive the qualified joint and survivor annuity and thereby receive an alternate form of distribution as set forth in Paragraph F of this Article IV. Such waiver must be made within the one hundred and eighty (180) day period (ninety (90) day period prior to January 1, 2008) ending on the Participant’s Annuity Starting Date with respect to such benefit. A Participant may subsequently revoke an election to waive a qualified joint and survivor annuity and elect again to waive the qualified joint and survivor annuity at any time and any number of times prior to such Annuity Starting Date. All such elections and revocations shall be in


		writing. Any election to waive a qualified joint and survivor annuity must (a) specify the alternate form of distribution elected, (b) be accompanied by the designation of a specific nonspouse beneficiary (including any class of beneficiaries or any contingent beneficiaries) who will receive the benefit upon the Participant’s death, if applicable, and (c) be accompanied by a Spousal Consent, to the extent required under Paragraph AQ of Article I.

	3.	Such designation of a joint and survivor annuity or exercise of the election to waive the joint and survivor annuity made before the Participant’s Termination of Employment shall become effective on the date of the Participant’s Termination of Employment. Any designation, change in designation or election to waive the joint and survivor annuity made after the Participant’s Termination of Employment shall become effective two (2) years after the date of such change of designation or election provided that both the Participant and his spouse must be alive at the end of the two (2) year period (unless (a) the Participant died from accidental causes, (b) failure to give effect to the election or revocation would deprive the survivor of a survivor annuity and (c) the election or revocation was made before the accident occurred). No designation of survivor pension amount, change in designation of survivor pension amount or election to take without survivor benefits shall affect any pensions payable prior to the date such respective exercise becomes effective. If the spouse dies after the Participant’s retirement, the Participant shall have no right to designate another, change the pension amount, or elect to waive the joint and survivor annuity.

	4.	If a Participant dies prior to benefit commencement under this Article IV, the Participant’s Eligible Spouse, if any, shall receive a portion of the Participant’s Accrued Benefit payable under this Article IV, in the form described under Paragraph K of Article III, with Annuity Starting Date meaning the date of the Participant’s death.

D.	Optional Form of Benefit

	1.	Except as provided in Paragraph C, a Participant may elect to receive his Retirement Credit Balance Benefits in any forms described in this Article IV, provided that distributions may be made only over one of the following periods (or a combination thereof): (a) the life of the Participant; (b) the life of the Participant and his Beneficiary; (c) A period certain not extending beyond the life expectancy of the Participant; or (d) a period certain not extending beyond the joint and last survivor expectancy of the Participant and his designated Beneficiary. The form of benefit selected shall be the Actuarial Equivalent of the Participant’s Retirement Credit Balance as of the date of commencement.

	2.	The optional forms of benefits are as follows: (a) cash lump sum payment; (b) an annuity payable over the life of the Participant; (c) a joint and survivor annuity payable over the life of the Participant with a continuation of 100%, 66 2/3% or 50% of the benefit to the Eligible Spouse of the Participant upon the


		death of the Participant; or (c) a joint and survivor annuity with pop-up payable over the life of the Participant with a continuation of 100%, 66 2/3% or 50% of the benefit to the Eligible Spouse of the Participant upon the death of the Participant. If the Participant’s Eligible Spouse predeceases the Participant, the benefit payable to the Participant shall revert to its original amount as if the joint and survivor option had not been elected.

	3.	If the Participant’s Eligible Spouse is not the designated beneficiary, the method of distribution selected must assure that at least fifty percent (50%) of the present value of the amount available for distribution is paid within the Participant’s life expectancy; and payments under such distribution method shall comply with Treasury Regulation Section 1.401(a)(9)-2 Q&A-6(b).

	4.	Notwithstanding anything to the contrary in this Article IV, if a Participant ceases to be an Employee for any reason and the Actuarial Equivalent present value of his vested Accrued Benefit under this Article IV is equal to or less than $3,500 on the date distributions commence, the Committee may, in its sole discretion, pay as soon as practicable to the Participant or his Beneficiary, as the case may be, the Actuarial Equivalent present value of his vested Accrued Benefit in a lump-sum. No distribution may be made under the preceding sentence unless the Participant and his Eligible Spouse consent thereto in a manner which is comparable to the Spousal Consent requirements in Paragraph AQ of Article I. For purposes of this Subparagraph F-4, the determination whether the Actuarial Equivalent present value of the Participant’s vested Accrued Benefit is equal to or less than $3,500 shall be made in accordance with Subparagraph B-3 of Article I.

	5.	The Direct Rollover Distribution provisions of Paragraph Q of Article III shall apply in connection with amounts distributed under this Article IV in the form of a cash lump sum.

E.	Death Benefit

	In the event of the death of a vested Participant prior to such Participant’s Normal Retirement Age or Annuity Starting Date, such Participant’s Beneficiary shall be entitled to receive a lump sum distribution of the Participant’s Account or a Death Benefit payable pursuant to the provisions of Subparagraph C-4 of this Article IV, if greater in value.

F.	Time of Distribution

	For purposes of this Article IV, the Time of Distribution rules under Paragraph P of Article III shall apply, to the extent applicable, but substituting the “Normal Retirement date” as reflected therein for the Participant’s Termination of Employment or death, and by further substituting benefit determination references to Article III to Article IV.


G.	Employer Contributions

	The amount of Employer contributions necessary to fund the benefits under this Article IV shall be based on the recommendation of the Enrolled Actuary using such methods and assumptions as he may deem advisable and consistent with the applicable provisions of ERISA and the Code.

ARTICLE V
LIMITATIONS ON BENEFITS


A.	General Limitations

	1.	The Annual Benefit payable to any Participant shall not exceed the lesser of the Defined Benefit Dollar Limitation or one hundred percent (100%) of the Participant’s average annual Total Compensation for his high three (3) years, where “high three (3) years” refers to the period of three (3) consecutive Plan Years (or the actual number of consecutive years of employment for Participants who are employed for less than three (3) consecutive years with the Employer) during which the Participant was an active participant in the Plan and had the greatest aggregate Total Compensation.

	2.	Benefit increases resulting from the increase in the limitations of section 415(b) of the Code will be provided to all current and former participants (with benefits limited by section 415(b)) who have an accrued benefit under the Plan immediately prior to the effective date of this section (other than an accrued benefit resulting from a benefit increase solely as a result of the increases in limitations under section 415(b)).

	3.	The “defined benefit dollar limitation” is $160,000, as adjusted, effective January 1 of each year, under section 415(d) of the Code in such manner as the Secretary shall prescribe, and payable in the form of a straight life annuity. A limitation as adjusted under section 415(d) will apply to limitation years ending with or within the calendar year for which the adjustment applies. Effective as of January 1, 2008, “$185,000” shall be substituted for “$160,000.” Effective as of January 1, 2009, “$195,000” shall be substituted for “$185,000.”

	4.	The maximum permissible benefit will be adjusted as follows:

		(a)	If the participant has fewer than 10 years of participation in the plan, the defined benefit dollar limitation shall be multiplied by a fraction, (i) the numerator of which is the number of years (or part thereof) of participation in the Plan and (ii) the denominator of which is 10. In the case of a participant who has fewer than 10 years of service with the employer, the defined benefit compensation limitation shall be multiplied by a fraction, (i) the numerator of which is the number of years (or part thereof) of service with the employer and (ii) the denominator of which is 10.


		(b)	If the benefit of a participant begins prior to age 62, the defined benefit dollar limitation applicable to the participant at such earlier age is an annual benefit payable in the form of a straight life annuity beginning at the earlier age that is the actuarial equivalent of the defined benefit dollar limitation applicable to the participant at age 62 (adjusted under (a) above, if required). The defined benefit dollar limitation applicable at an age prior to age 62 is determined as the lesser of (i) the actuarial equivalent (at such age) of the defined benefit dollar limitation computed using the interest rate and mortality table specified in Article I-A of the Plan and (ii) the actuarial equivalent (at such age) of the defined benefit dollar limitation computed using a 5 percentage interest rate and the applicable mortality table as defined in article I-A of the plan. Any decrease in the defined benefit dollar limitation determined in accordance with this Subparagraph (b) shall not reflect a mortality decrement if benefits are not forfeited upon the death of the participant. If any benefits are forfeited upon death, the full mortality decrement is taken into account.

		(c)	If the benefit of a participant begins after the participant attains age 65, the defined benefit dollar limitation applicable to the participant at the later age is the annual benefit payable in the form of a straight life annuity beginning at the later age that is actuarially equivalent to the defined benefit dollar limitation applicable to the participant at the defined benefit dollar limitation applicable to the participant at age 65 (adjusted under (a) above, if required). The actuarial equivalent of the defined benefit dollar limitation applicable at an age after age 65 is determined as (i) the lesser of the actuarial equivalent (at such age) of the defined benefit dollar limitation computed using the interest rate and mortality table specified in Article I-A of the Plan and (ii) the actuarial equivalent (at such age) of the defined benefit dollar limitation computed using a 5 percent interest rate assumption and the applicable mortality table as defined in Article I-A of the Plan. For these purposes, mortality between age 65 and the age at which benefits commence shall be ignored.

ARTICLE VI
VESTING OF EMPLOYER FUNDED BENEFITS


A.	Vesting

	1.	A Participant’s total Accrued Benefit derived from Employer contributions shall be vested in him upon attainment of Normal Retirement Age, or on earlier termination of employment by death.


	2.	In the event this Plan is a Top-Heavy Plan, then (except as provided in Subparagraph 1), a Participant’s Accrued Benefit derived from Employer contributions shall vest in accordance with the following schedule:


Completed Years of Service	Vested Percentage

Less than 2	0	%
2	20
3	40
4	60
5	80
6 or more	100


	3.(a)	Except as provided in Subparagraphs 1 and 2, a Participant’s Accrued Benefit under Article III derived from Employer contributions shall vest in accordance with the following schedule:


Completed Years of Vesting Service		Vested Percentage

Less than 5		0%
5 or More		100%


	(b)	Except as provided in Subparagraphs 1 and 2, a Participant’s Accrued Benefit under Article IV derived from Employer contributions shall vest in accordance with the following schedule, with Participants employed by the Kennecott Companies receiving credit for their years of vesting service with the Kennecott Companies earned prior to April 16, 2008:


Completed Years of Vesting Service		Vested Percentage

1		33-1/3%
2		66-2/3%
3 or More		100%


	4.	If a Participant who has completed: (a) five (5) Years of Service before the first day of the first Plan Year beginning after December 31, 1988; or (b) three (3) Years of Service at any time and at least one (1) Hour of Service on or after the first day of the first Plan Year beginning after December 31, 1988 elects, during the period commencing on the date the amendment is adopted and ending sixty (60) days after the later of (i) the day the Plan amendment is adopted, (ii) the day the Plan amendment becomes effective, or (iii) the day the Participant is issued a written notice of the Plan amendment, to have his Accrued Benefit derived from Employer contributions vest under the terms of the vesting schedule previously in effect, then, notwithstanding the provisions of the vesting schedules above, his Accrued Benefit shall vest in accordance with the schedule included in the Plan which he elects.


	5.	In determining the Years of Service under the Plan for purposes of determining a Participant’s vested percentage under Subparagraphs 2 and 3 above, all of a Participant’s Years of Service with the Employer shall be taken into account, except as provided in subsections (a) and (b) of this Subparagraph 5.

		(a)	If, at the time of a One-Year Break in Service, a Participant does not have any vested right under Subparagraph 2 or 3 above, Years of Service before such One-Year Break in Service shall not thereafter be taken into account if the number of consecutive One-Year Breaks in Service equals or exceeds either five (5) or the aggregate number of Years of Service before such Breaks in Service, whichever is greater;

		(b)	The aggregate number of Years of Service before such Breaks in Service shall be deemed not to include any Years of Service not required to be taken into account hereunder by reason of any prior application of this Subparagraph.

	6.	Amounts vested pursuant to this Paragraph shall not be subject to divestment for cause.

	7.	In determining the Years of Service under the Plan for purposes of determining a Participant’s vested percentage under Subparagraphs 2 and 3 above, a Participant’s Years of Service, not to exceed five (5) years, with foreign companies that are directly or indirectly wholly owned subsidiaries of Hecla Mining Company shall be taken into account, except as provided in subsections (a) and (b) of Subparagraph 5.

B.	Termination of Employment

	Upon termination of employment, a Participant shall be entitled to receive a benefit equal to the product of his Accrued Benefit multiplied by his vested percentage as determined hereunder. This amount shall be subject to distribution in accordance with the provisions of Articles III and IV.

C.	Rehired Participants

	Notwithstanding anything to the contrary contained in this Article VI, a Participant’s benefit shall be offset by the Actuarial Equivalent of the amount of any distribution he has previously received.

ARTICLE VII LOANS TO PARTICIPANTS

	No loans shall be made under this Plan to Participants from the assets of the Trust.

ARTICLE VIII
BENEFICIARIES


A.	Designation

	Subject to the qualified pre-retirement survivor annuity and qualified joint and survivor annuity requirements set forth in Article III, a Participant shall have the right to designate, on forms provided by the Employer, a Beneficiary or Beneficiaries to receive the benefits herein provided in the event of his death and to revoke such designation or to substitute another Beneficiary or Beneficiaries at any time.

B.	Absence of Valid Designation of Beneficiaries

	If, upon the death of a Participant, former Participant or Beneficiary, there is no valid designation of Beneficiary on file with the Employer, the following shall be designated by the Committee as the Beneficiary or Beneficiaries, in order of priority:

	1.	The surviving spouse;

	2.	Surviving children, including adopted children, in equal shares;

	3.	Surviving parents, in equal shares;

	4.	The Participant’s estate;

	5.	The Beneficiary’s estate;

	6.	The trustee(s) of the trust(s) named as beneficiary of the residue of the Participant’s probate estate;

	7.	The trustee(s) of the trust(s) named as beneficiary of the residue of the Beneficiary’s probate estate.

	The determination of the Committee as to which persons, if any, qualify within the categories listed above shall be final and conclusive upon all persons.

ARTICLE IX PARTICIPANT’S CONTRIBUTIONS AND SPECIAL ACCOUNTS

Individual Participants may not make contributions to this Plan. All contributions must be made by the Employer.

ARTICLE X ESTABLISHMENT OF TRUST

A.	Trust Agreement

	Contributions made by the Employer pursuant to Article III hereof, and all other assets of this Plan shall be held in trust under a Trust Agreement. The Employer


	shall enter into a Trust Agreement with the Trustee for the administration of the Trust which shall contain the assets of the Plan. The Trustee shall not be responsible for the administration of this Plan but only for the Trust established pursuant to this Plan.

B.	Trust Agreement Part of Plan

	The Trust Agreement shall be deemed to be a part of this Plan, and any rights or benefits accruing to any person under this Plan shall be subject to all of the relevant terms and provisions of the Trust Agreement, including any amendments. In addition to the powers of the Trustee set forth in the Trust Agreement, the Trustee shall have any powers, express or implied, granted to it under the Plan. In the event of any conflict between the provisions of the Trust Agreement and the provisions of the Plan, the provisions of the Plan shall control, except for the duties and responsibilities of the Trustee, in which case the Trust Agreement shall control.

ARTICLE XI PLAN FIDUCIARIES AND ADMINISTRATION

A.	Named Fiduciaries

	The authority to control and manage the operation and administration of the Plan is vested in the named fiduciaries specified herein. Each named fiduciary shall be responsible solely for the tasks allocated to it. No fiduciary shall have any liability for a breach of fiduciary responsibility of another fiduciary with respect to the Plan and Trust, unless it participates knowingly in the breach; has actual knowledge of the breach and fails to take reasonable remedial action to remedy said breach; or, through its negligence in performing its own specific fiduciary responsibilities, which give rise to its status as a fiduciary, it has caused another fiduciary to commit a breach of fiduciary responsibility.

B.	Fiduciary Standard

	Each named fiduciary and every other fiduciary under the Plan shall discharge its duties with respect to the Plan solely in the interests of the Participants and Beneficiaries and;

	1.	For the exclusive purpose of providing benefits to Participants and their Beneficiaries and defraying reasonable expenses of administering the Plan;

	2.	With the care, skill, prudence and diligence, under the circumstances then prevailing, that a prudent man acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims;

	3.	In accordance with the documents and instruments governing the Plan, insofar as these are consistent with the provisions of Title I of ERISA.


C.	Multiple Duties and Advisors

	Any person or group of persons may serve in more than one fiduciary capacity with respect to the Plan. A named fiduciary, or a fiduciary designated by a named fiduciary in accordance with the terms of the Plan, may employ one or more persons to render advice with regard to any responsibilities such fiduciary has under the Plan.

D.	Allocation and Delegation of Fiduciary Duties

	Each named fiduciary may allocate its fiduciary duties among its members or may delegate its responsibilities to persons who are not named fiduciaries with respect to the specific responsibility delegated. Any such allocation or delegation shall be in writing and shall be made a permanent part of the records of the named fiduciary. Such allocation or delegation shall be reviewed periodically by the named fiduciary and shall be terminable upon such notice as the named fiduciary, in its sole discretion, deems reasonable and prudent under the circumstances. An action by the Board of Directors of the Company or the Administrative Committee allocating or delegating its named fiduciary responsibilities shall be evidenced by a duly adopted resolution of the Committee or of the Board of Directors of the Company.

E.	Indemnification

	Any Employer shall indemnify and hold harmless the named fiduciaries and any officers or employees of the Employer to which fiduciary responsibilities have been delegated, from and against any and all liabilities, claims, demands, costs and expenses, including attorneys’ fees, which may arise out of an alleged breach in the performance of their fiduciary duties under the Plan and under ERISA, other than such liabilities, claims, demands, costs and expenses as may result from the gross negligence or willful misconduct of such persons. The Company shall have the right, but not the obligation, to conduct the defense of such persons in any proceeding to which this Paragraph applies. An Employer may satisfy its obligation under this Paragraph, in whole or in part, through the purchase of a policy or policies of insurance; however, no insurer shall have any rights against the Employer arising out of this Paragraph.

F.	Costs and Expenses

	The costs and expenses of the named fiduciaries shall be paid from Plan assets held in the Trust to the extent not paid by the Company. The payment by the Company of such costs and expenses for a Plan Year shall not be deemed an election to pay the costs and expenses in any subsequent Plan Year. The Company may charge to an Employer such expenses advanced by it on behalf of the Employer.


G.	Authority to Amend and Terminate

	Subject to Article XII, the Board of Directors of the Company is the named fiduciary responsible for the amendment and termination of the Plan and Trust. In addition, the Board of Directors of the Company shall appoint and replace the members of the Administrative Committee as required.

H.	Administrative Committee

	The Administrative Committee (or more briefly denoted as “the Committee”) is the named fiduciary with the power and the duty to: (a) interpret the terms of the Plan; (b) formulate rules and regulations necessary to administer the Plan in accordance with its terms; (c) finally review claims under the claims review procedure; (d) establish and execute the funding policy of the Plan; (e) invest Plan assets, if the Company has transferred responsibility for Plan investments to the Committee pursuant to Article V of the Trust; and (f) annually review the funding policy and method.

	1.	The Administrative Committee shall consist of two (2) or more persons and shall have as its officers a chairman who shall be a member of the Committee, a secretary who may be, but need not be, a member, and such other officers as may be appointed by the Board of Directors of the Company. The members of the Committee and its officers shall be appointed by and hold office at the pleasure of the Board of Directors of the Company and shall serve as such without compensation.

	2.	The Committee shall keep minutes of its meetings and proceedings. Every decision made or action taken by a majority of the members then in office shall constitute a decision or action of the Committee, and shall be final, conclusive and binding upon all persons affected. A Committee decision or action, under or in connection with the Plan, may be made or taken either at a meeting held pursuant to its rules, at which a majority of the members then in office are present and vote in favor thereof, or without a meeting if approved and evidenced by a writing signed by a majority of the members then in office. No Committee member shall vote on any question relating solely to himself.

I.	Plan Administration

	The Company shall be the Administrator of the Plan for purposes of Section 3(16) of ERISA and Section 414(g) of the Code. In addition, the Administrator shall have the power and the duty to perform the following administrative functions according to the policies, interpretations, rules, practices and procedures established by the Board of Directors of the Company or the Committee in accordance with the respective areas of named fiduciary responsibilities:


	1.	Apply Plan rules determining eligibility for participation or benefits;

	2.	Calculate service and compensation credits for benefits;

	3.	Prepare employee communications material;

	4.	Maintain Participants’ service and employment records;

	5.	Prepare reports required by government agencies;

	6.	Calculate benefits and, if necessary, purchase annuity contracts which satisfy the requirements of Sections 401(a)(9), 401(a)(11) and 417 of the Code;

	7.	Orient new Participants and advise Participants regarding their rights and options under the Plan;

	8.	Collect contributions and apply contributions as provided in the Plan;

	9.	Prepare reports concerning Participants’ benefits;

	10.	Process claims; and

	11.	Make recommendations to the Board of Directors of the Company or the Committee on Plan administration.

	The Administrator (and those to whom it has delegated its authority) shall have vested in it under the terms of this Plan full discretionary and final authority when exercising its duties hereunder.

J.	Claims Procedures

	1.	Filing of Claim . A Participant or Beneficiary who believes he is entitled to a benefit which he has not received may file a claim in writing with his Employer. The Employer may require a claimant to submit additional information, if necessary to process the claim. The Company or its delegate shall review the claim and render its decision within ninety (90) days from the date the claim is filed (or the requested additional information is submitted, if later), unless special circumstances require an extension of time for processing the claim. If such an extension is required, written notice of the extension shall be furnished the claimant within the initial ninety (90) day period. The notice shall indicate the special circumstances requiring the extension and the date by which the Company expects to reach a decision on the claim. In no event shall the extension exceed a period of ninety (90) days from the end of the initial period.


2.	Notice of Claim Denied. If the Company denies a claim, in whole or in part, it shall provide the claimant with written notice of the denial within the period specified in Subparagraph 1. The notice shall be written in language calculated to be understood by the claimant, and shall include the following information:

	(a)	The specific reason for such denial;

	(b)	Specific reference to pertinent Plan provisions upon which the denial is based;

	(c)	A description of any additional material or information which may be needed to clarify or perfect the request, and an explanation of why such information is required; and

	(d)	An explanation of the Plan’s review procedure with respect to the denial of benefits.

3.	Review Procedure . Any claimant whose claim has been denied, in whole or in part, shall follow those review procedures as set forth herein.

	(a)	A claimant whose claim has been denied, in whole or in part, may request a full and fair review of the claim by the Committee by making written request therefor within sixty (60) days of receipt of the notification of denial. The Committee, for good cause shown, may extend the period during which the request may be filed. The claimant shall be permitted to examine all documents pertinent to the claim and shall be permitted to submit issues and comments regarding the claim to the Committee in writing.

	(b)	The Committee shall render its decision within sixty (60) days after receipt of the application for review, unless special circumstances (such as the need to hold a hearing) require an extension of time for processing, in which case the decision shall be rendered as soon as possible but not later than one hundred and twenty (120) days after receipt of a request for review. If an extension of time is necessary, written notice shall be furnished the claimant before the extension period commences.

	(c)	The Committee shall decide whether a hearing shall be held on the claim. If so, it shall notify the claimant in writing of the time and place for the hearing. Unless the claimant agrees to a shorter period, the hearing shall be scheduled at least fourteen (14) days after the date of the notice of hearing. The claimant and/or his authorized representative may appear at any such hearing.


		(d)	The Committee shall send its decision on review to the claimant in writing within the time specified in this section. If the claim is denied, in whole or in part, the decision shall specify the reasons for the denial in a manner calculated to be understood by the claimant, referring to the specific Plan provisions on which the decision is based. The Committee shall not be restricted in its review to those provisions of the Plan cited in the original denial of the claim.

		(e)	If the Committee does not furnish its decision on review within the time specified in this Subparagraph 3, the claim shall be deemed denied on review.

K.	Agent for Legal Process

	The Company shall be the Plan’s agent for service of legal process.

		ARTICLE XII AMENDMENT AND TERMINATION

A.	Amendment

	To provide for contingencies which may require or make advisable the clarification, modification or amendment of this Plan, the Board of Directors of the Company reserves the right to amend this Plan (and such right is delegated to the Board of Directors of the Company by all Employers), at any time and from time to time, in whole or in part, by formally adopting such amendment in writing. Such power to amend includes the right, without limitation, to make retroactive amendments referred to in Section 401(b) of the Code. However, such right to amend the Plan shall be subject to Paragraph C of this Article XII. Further, no amendment of the Plan shall (1) alter, change or modify the duties, powers or liabilities of the Trustee or an Investment Manager appointed pursuant to the Trust Agreement without its written consent; or (2) permit any assets of the Trust to be used to pay premiums or contributions of the Employer under any other plan maintained by the Employer for the benefit of its employees.

B.	Termination or Complete Discontinuance of Contributions

	Although the Employer has established the Plan with the bona fide intention and expectation that it will be able to make contributions indefinitely, nevertheless the Employer is not and shall not be under any obligation or liability whatsoever to continue its contributions or to maintain the Plan for any given length of time. An Employer may, in its sole and absolute discretion, discontinue such contributions or terminate the Plan with respect to its Employees, in accordance with the provisions of the Plan, at any time with no liability whatsoever for such discontinuance or termination. If the Plan is terminated or partially terminated, or if contributions of an Employer are completely discontinued, the rights of all affected Participants in their Accrued Benefits shall thereupon become nonforfeitable, notwithstanding any other provisions of the Plan. However, the Trust shall continue until all benefits have been distributed in accordance with the Plan.


C.	Nonreversion

	1.	Except as provided in this Subparagraph C-1, the assets of the Plan shall never inure to the benefit of an Employer; such assets shall be held for the exclusive purpose of providing benefits to Participants and their Beneficiaries and for defraying the reasonable administrative expenses of the Plan.

		(a)	If an Employer contribution is made by virtue of a mistake of fact, this Paragraph C shall not prohibit the return of such contribution to the Employer within one (1) year after the payment of the contribution.

		(b)	If an Employer contribution is made to the Plan which does not initially qualify under Section 401(a) of the Code, or any successor provision thereto, then the contribution shall be returned to the Employer within one (1) year after the date of denial of qualification of the Plan, provided that an application for determination is made by the time prescribed by law for filing the Employer’s return for the taxable year in which the Plan was adopted, or such later date as the Secretary of the Treasury may prescribe.

		(c)	If a deduction for an Employer contribution is disallowed under Section 404 of the Code, or any successor provision thereto, the contribution shall be returned to the Employer (to the extent disallowed) within one (1) year after such disallowance.

		(d)	In the case of the termination of the Plan, any residual assets of the Plan shall be distributed to the Employer at the direction of the Administrator (or at the direction of a trustee appointed upon the application of the Pension Benefit Guaranty Corporation) if all liabilities of the Plan to Participants and their Beneficiaries have been satisfied and the distribution does not contravene any provision of law, provided, however, that this provision shall not be effective before the end of the fifth calendar year following the earlier of. (1) the date of restatement, (2) the date of any earlier amendment or restatement allowing such reversion, or (3) the original effective date of this Plan, if the Plan has provided for such reversions from its original effective date. The certificate of an Enrolled Actuary engaged by the Committee pursuant to ERISA stating that there are residual assets of the Plan remaining in the Trust Fund after all liabilities of the Plan to Participants and their Beneficiaries have been satisfied shall be conclusive evidence of this fact; but in its discretion, the Trustee may require other and additional evidence of the existence and amount of residual assets. Notwithstanding the foregoing provisions of this Article XII, if any assets of the Plan attributable to employee contributions


			remain after all liabilities of the Plan to Participants and their Beneficiaries have been satisfied, such assets so attributable at the direction of the Committee (or at the direction of a trustee appointed upon the application of the Pension Benefit Guaranty Corporation) shall be equitably distributed to the Participants who made such contributions or to their Beneficiaries and the Employer may elect to reallocate the residual assets to those Employees who are Participants as of the date of termination of the Plan, such allocation to be made in a nondiscriminatory manner. Said election shall be in writing and shall be made prior to receipt of a determination by the Internal Revenue Service of the Plan’s qualified status resulting from the termination.

	2.	The Company shall have no right to modify or amend the Plan retroactively in such a manner so as (i) to reduce the Participant’s vested entitlement, (ii) to reduce the benefits of any Participant or his Beneficiary accrued under the Plan by reason of contributions made by an Employer prior to the modification or amendment, or (iii) to eliminate an optional form of benefit with respect to benefits attributable to service before the amendment, except to the extent permitted by Section 411(d)(6) of the Code or Section 204(g) of ERISA and the regulations interpreting these sections.

D.	Limitations on Benefits in the Event of Plan Termination

	Notwithstanding any other provisions of this Plan to the contrary, in the event of Plan termination, the Benefits provided under this Plan to those Participants or former Participants who are considered highly compensated employees shall be limited to a Benefit that is nondiscriminatory under Section 401(a)(4) of the Code and shall be subject to the following conditions:

	1.	For Plan Years beginning on or after January 1, 1992, Benefits distributed under this Plan to those Participants and former Participants who are among the twenty-five (25) most highly compensated employees shall be restricted such that the annual payments so distributed shall be no greater than an amount equal to the payment that would be made on behalf of such Participant or former Participant under a single life annuity which is the Actuarial Equivalent, as determined in accordance with Paragraph B of Article I, of the sum of the Participant’s or former Participant’s Accrued Benefit and the Participant’s or former Participant’s other Benefits under this Plan.

	2.	The preceding Subparagraph D-2 shall not apply if.

		(a)	After payment of the Benefit to a Participant or former Participant described in Subparagraph D-2 above, the value of Plan assets equals or exceeds one hundred ten percent (110%) of the value of current liabilities, as defined in Section 412(1)(7) of the Code, or

		(b)	The value of the Benefits distributable to a Participant or former Participant described in Subparagraph D-2 above is less than one percent (1%) of the value of current liabilities, as defined in Section 412(1)(7) of the Code.


		For purposes of this Paragraph D, Benefit includes loans in excess of the amount set forth in Section 72(p)(2)(A) of the Code, any periodic income, any withdrawal values payable to a living Participant or former Participant, and any death benefits not provided for by insurance on the Participant’s or former Participant’s life.

E.	Termination After Change in Control

	Notwithstanding any other provisions of this Plan, in the event this Plan is terminated following a “change in control” (as hereinafter defined), the assets of the Plan shall be applied in accordance with the provisions of this Article to satisfy all liabilities to Participants and beneficiaries, and any remaining assets shall be applied on a pro rate basis to increase the benefits of the Participants and beneficiaries; provided, however, that no allocation of such remaining assets shall be made to any person who is a “Disqualified Individual,” as such term is defined in Section 280G(c) of the Code, if an to the extent that the allocation would be subject to the tax imposed by Section 4999 of the Code. For purposes hereof, a “change in control” shall occur if (i) there is an acquisition by any person or group of more than fifty percent (50%) of the then outstanding voting stock of the Company, otherwise than through a transaction arranged by, or with the consent of, the Company or its Board of Directors, or (ii) during any period of two consecutive years, individuals who, at the beginning of the period, constitute the Board of Directors, including for this purpose any new director whose election or nomination for election by the Company’s shareholders was approved by a vote of at least two-thirds of the directors then still in office who were directors at the beginning of the period, cease for nay reason to constitute a majority of the Board of Directors. Notwithstanding the provisions of Section (19) hereof, the foregoing provisions of this Paragraph may not be amended, following a “change in control,” without the written consent of a majority in both number and interest of the then Plan Participants and beneficiaries.

ARTICLE XIII MISCELLANEOUS

A.	Limitation of Rights; Employment Relationship

	Neither the establishment of the Plan and the Trust, nor any modifications thereof, nor the creation of any fund or account, nor the payment of any benefits, shall be construed as giving to any Participant or other person any legal or equitable right against the Employer or the Trustee except as provided herein; and in no event shall the terms of employment of any Employee or Participant, express or implied, be modified or in any way be affected hereby.


B.	Transfer of Assets of Employer; Transfer of Assets of Plan

	1.	If the Employer merges or consolidates with or into a corporation, or if substantially all of the assets of the Employer are transferred to another business, the Plan hereby created shall terminate on the effective date of such merger, consolidation or transfer. However, if the surviving corporation resulting from such merger or consolidation, or the business to which the Employer’s assets have been transferred, adopts this Plan, it shall continue and such corporation or business shall succeed to all rights, powers and duties of the Employer hereunder. The employment of any Employee who continues in the employ of such successor corporation or business shall not be deemed to have been terminated for any purpose hereunder.

	2.	In no event shall this Plan be merged or consolidated with any other plan, nor shall there be any transfer of assets or liabilities from this Plan to any other plan, unless immediately after such merger, consolidation or transfer, each Participant’s benefits, if such other plan were then to terminate, are at least equal to or greater than the benefits to which the Participant would have been entitled, had this Plan been terminated immediately before such merger, consolidation, or transfer.

C.	Spendthrift Provision

	Neither the Employer nor the Trustee shall recognize any transfer, mortgage, pledge, hypothecation, order, or assignment by any Participant or Beneficiary of all or part of his interest hereunder, except a transfer pursuant to a “qualified domestic relations order” within the meaning of Section 414(p) of the Code or Section 303(d) of the Retirement Equity Act of 1984. Such interest shall not otherwise be subject in any manner to transfer by operation of law. Such interest shall be exempt from the claims of creditors or other claimants from all orders, decrees, levies, garnishments and/or executions and other legal or equitable processes or proceedings against such Participant or Beneficiary to the fullest extent permitted by law.

D.	Applicable Law, Severability

	The Plan hereby created shall be construed, administered and governed in all respects in accordance with ERISA and the laws of the State of Idaho; provided, however, that if any provision of this Plan is susceptible of more than one interpretation, such interpretation shall be given thereto as is consistent with the Plan being a qualified employees’ pension plan under the provisions for qualification set forth in the Code. If any provision of this Plan shall be held by a court of competent jurisdiction to be invalid or unenforceable, the remaining provisions shall continue in full force and effect.


E.	Incorporation of Trust Agreement Provisions

	The relevant provisions of the Trust Agreement regarding: (1) the exclusive benefit of Employees and their Beneficiaries, (2) amendment, (3) termination, (4) other employers, (5) Idaho law, (6) headings, gender and number, and (7) nonalienation are hereby incorporated into this Plan and are equally applicable to the Plan and to the Trust, which Plan and Trust together shall constitute the entire Plan as defined in the Code.

F.	No Liability

	Any payment to any Participant, or to his legal representative or Beneficiary, in accordance with the provisions of the Plan, shall to the extent thereof be in full satisfaction of all claims hereunder against the Trustee, the Committee and the Employer, any of whom may require such Participant, legal representative or Beneficiary, as a condition precedent to such payment, to execute a receipt therefor in such form as shall be determined by the Trustee, the Committee or the Employer, as the case may be. The Employer does not guarantee the Trust, the Participants, former Participants or their Beneficiaries against loss of or depreciation in value of any right or benefit that any of them may acquire under the terms of this agreement. All benefits payable hereunder shall be paid or provided for solely from the Trust, and the Employer does not assume any liability or responsibility therefor.

G.	Missing Persons

	In the case of any benefit payable to a person under this Plan, if the Committee is unable to locate the person within six (6) months from the date a certified letter was mailed to such person notifying him of the benefit, the Committee shall direct the Trustee to maintain the Participant as an inactive Participant. The Committee shall continue to maintain this Participant in inactive status until: (1) the person entitled to the benefit makes application therefor; or (2) the benefit reverts by escheat to the state, whichever occurs first.

This Plan has been executed in several counterparts, each of which shall be deemed to be an original, and said counterparts shall constitute but one and the same instrument, which instrument may be sufficiently evidenced by one counterpart.


		Dated: December ____, 2008


	HECLA MINING COMPANY

By:
		Phillips S. Baker, Jr.
		President and CEO

By:
		Lewis E. Walde
		Vice President and CFO

APPENDIX I

Normal Retirement Benefits for Certain Employees Under Article III


A.	Effective July 1, 2000 the Normal Retirement Benefit for the following Participants shall thereafter be increased by the following percentages:


Participant	Percentage

Booth, Williams	10.40	%
Brown, Art	22.60	%
Carland, Robert	23.20	%
Childress, Gary	73.10	%
Clayton, Ronald	19.60	%
Fein, Matthew	1.60	%
Fudge, Thomas	5.20	%
Kauffman, Roger	117.30	%
Lang, Allan	27.70	%
Langstaff, Jon	14.20	%
Stilwell, John	46.30	%
Summers, Alastair	31.30	%
Veltkamp, Vicki	4.80	%
White, Michael B. White	29.60	%
Wollant, Douglas	13.00	%


B.	In no event shall the Normal Retirement Benefit exceed the benefit that would be determined if Compensation included amounts deferred into the Hecla Mining Company Executive Deferral Plan and amounts excluded under Section 401(a)(17) of the Code, and if compensation and service credited under any employment agreement between the Employee and Employer which so provides are included for purposes of determining retirement benefits.

C.	In no event shall the above percentage increases cause the Plan to fail the nondiscrimination tests of Section 401(a)(4) and the regulations thereunder. If at any time the increases would cause the Plan to fail the nondiscrimination tests of Section 401(a)(4), such percentages shall be decreased for each listed Participant on a proportional basis.

D.	In no event shall any benefits provided under the Plan exceed the limitations of Section 415 as provided in Article V.

APPENDIX II

Normal Retirement Benefits for Certain Employees Under Article III


A.	Effective August 1, 2005, the Normal Retirement Benefit for the following Participant(s) shall thereafter be increased by the following percentages:


Participant	Percentage

Garitone, Nancy	14.32	%

APPENDIX III

Kennecott Pension Plan Definitions Under Article III

For purposes of Subparagraph D-6(b) of Article III, the terms below shall have the following meaning. References to Section numbers in the definitions below shall constitute references solely to the Kennecott Pension Plan.


A.	Benefit Service

	Benefit Service for any Participant shall equal the sum of his Benefit Service attributable to employment prior to January 1, 2003 as determined in accordance with the Plan as in effect on December 31, 2002 and his Benefit Service attributable to employment after December 31, 2002 as determined in accordance with this Section 2.03.

	Each Eligible Employee shall be credited with Benefit Service under the Plan for the period or periods during which such Eligible Employee maintains an employment relationship with the Employer or an Affiliated Employer. An Eligible Employee’s employment relationship shall begin on the date the Eligible Employee first completes an Hour of Service as an Eligible Employee and shall end on his Severance from Service Date.

	Except as provided in Sections 2.03(e) and (g) all periods of an Employee’s Benefit Service, whether or not consecutive, shall be aggregated. Benefit Service attributable to employment on or after January 1, 2003 shall be measured in elapsed years and fractions of years whereby each completed calendar month shall constitute one-twelfth of a year and days (based on a 30-day month) when aggregated shall constitute a fraction of a year equal to the number of days divided by 365.

	Notwithstanding any contrary provision of this Section 2.03, in the case of an Eligible Employee whose Employment Commencement Date (or if applicable, his Reemployment Commencement Date) is after December 1, 2002 and on or before December 1, 2003 and who completes a Year of Eligibility Service during the 12-month period that begins on such Employment Commencement Date (or if applicable, his Reemployment Commencement Date), Benefit Service attributable to service after December 31, 2002 for such Eligible Employee shall also include the period of employment between his Employment Commencement Date and December 31, 2002. Benefit Service attributable to such period of employment shall be determined in accordance with the Plan as in effect on December 31, 2002.

	Except as provided in Section 7.04(c), no service earned under any qualified plan maintained by the Employer other than the Plan, the Kennecott Plan, the Luzenac Plan or the U.S. Borax Plan shall be counted as Benefit Service under the Plan.

	If an Employee or Participant incurs a one-year Period of Severance and is subsequently rehired and has no nonforfeitable Accrued Benefit at the time of his one-year Period of Severance, his years Benefit Service prior to such one-year Period of


	Severance shall not be taken into account if the number of consecutive one-year Periods of Severance equals or exceeds the greater of (i) five, or (ii) his total years of Benefit Service prior to the one-year Period of Severance.

	If an Employee or Participant incurs a one-year Period of Severance and he is subsequently rehired and (i) he has a nonforfeitable interest in his Accrued Benefit, or (ii) the number of consecutive one-year Periods of Severance is less than the greater of (A) five, or (B) his total of years of Benefit Service prior to the one-year Period of Severance, his years of Benefit Service prior to such one-year Period of Severance shall be restored to him.

	In the event a Participant receives a distribution in accordance with Section 8.02(c) by the end of the second Plan year following the Plan Year in which his termination occurs and he is reemployed, the Benefit Service that is attributable to such distribution shall not be counted in determining the benefits he accrues subsequent to his Reemployment Commencement Date.

	Notwithstanding the other provisions of this Section 2.03, any Participant who is an IPP Participant shall cease to accrue Benefit Service after September 30, 2007.

B.	Covered Compensation

	The average of the maximum taxable wage bases in effect in each year that would be used to calculate the primary Social Security benefit for an Employee retiring at his Social Security Retirement Age.

C.	Determination of Final Average Earnings

	Except as provided in Section 7.03, Final Average Earnings for a Participant shall be determined as follows:

	(a)	Determine all 36-consecutive month periods during the last 120 months of the Participant’s employment;

	(b)	Each 36-consecutive month period determined in paragraph (a) gives rise to one, two or three “averaging years” as follows:

		(i)	A Participant who has been employed for at least 36 months will have three averaging years, each a 12-consecutive month period.

		(ii)	A Participant who has been employed for fewer than 36 months will have one, two or three averaging years, determined as follows:


Months of employment	Averaging years
12 or fewer months	One averaging year that begins on the Participant’s Employment Commencement Date and ends on his date of termination of employment

At least 12 but not more than 24 months	Two averaging years:

	•	One averaging year that begins 12 months before his date of termination of employment and ends on his date of termination of employment

	•	One averaging year that begins on the Participant’s Employment Commencement Date and ends 12 months before his date of termination of employment.

At least 24 but not more than 36 months	Three averaging years:

	•	One averaging year that begins 12 months before his date of termination of employment and ends on his date of termination of employment.

	•	One averaging year that begins 24 months before his date of termination of employment and ends 12 months before his date of termination of employment.

	•	One averaging year that begins on the Participant’s Employment Commencement Date and ends 24 months before his date of termination of employment.


	(c)	For each averaging year, determine the “limited Base Pay” for the averaging year by disregarding any Base Pay in excess of the Annual Dollar Limit in effect on the first day of such averaging year; provided, however, that if the averaging year is less than a 12-month period, the applicable Annual Dollar Limit shall be the Annual Dollar Limit in effect on the day that is 12 months before the last day of such averaging year. For this purpose, the Annual Dollar Limit shall be prorated for any averaging year that is less than a 12-month period.

	(d)	Determine the 36-consecutive month period during the last 120 months of the Participant’s employment during which the Participant had the highest aggregate limited Base Pay and determine the averaging years associated with such 36-consecutive month period as provided in paragraph (b).

	(e)	For each averaging year determine the amount of earnings for the averaging year by adding one-half of the amount of any cash bonus (other than a cash bonus paid under a long-term incentive program of the Employer) paid to the Participant (and determined without regard to any deferral of such bonus under any deferred compensation program of the Employer) in the averaging year to the limited Base Pay for the averaging year determined in paragraph (c).

	(f)	For each averaging year disregard any earnings determined in paragraph (e) that exceed the Annual Dollar Limit in effect on the first day of such averaging year; provided, however, that if the averaging year is less than a 12-month period, the applicable Annual Dollar Limit shall be the Annual Dollar Limit in effect on the day that is 12 months before the last day of such averaging year. For this purpose, the Annual Dollar Limit shall be prorated for any averaging year that is less than a 12-month period.


	(g)	The Participant’s monthly Final Average Earnings are determined by aggregating the earnings determined in paragraph (f) for all of his averaging years and dividing such sum by the lesser of (i) 36 or (ii) the number of the Participant’s months of employment.

D.	Determination of Final Average Earnings for U.S. Borax Service

	Notwithstanding Section 7.02, for purposes of determining benefits attributable to periods of employment with U.S. Borax, Inc. for a Participant who was a participant in the U.S. Borax Plan on December 31, 2002, Final Average Earnings shall be determined in the same manner as under Section 7.02, but with Sections 7.02(e), (f) and (g) replaced with the following:

	(a)	Determine the Participant’s aggregate overtime pay for the three-consecutive calendar years ending before January 1, 2003 during which the Participant had the highest aggregate overtime pay and prorate such overtime pay over his averaging years.

	(b)	If the Participant was a participant in the U.S. Borax Plan on December 31, 2002 determine the Participant’s vacation pay earned but not taken (up to 520 hours) as of the Participant’s termination date and prorate such vacation pay over his averaging years.

	(c)	For each averaging year, determine the greater of (i) and (ii) as follows:

		(i)	The sum of his vacation pay allocated to such averaging year in paragraph (f) and one-half of the amount of any cash bonus (other than a cash bonus paid under a long-term incentive program of the Employer) paid to the Participant (and determined without regard to any deferral of such bonus under any deferred compensation program of the Employer) during such averaging year.

		(ii)	The sum of his vacation pay allocated to such averaging year in paragraph (f) and his overtime pay allocated to such averaging year in paragraph (e).

	(d)	For each averaging year, determine the amount of earnings for the averaging year by adding the amount determined in paragraph (g) to the limited Base Pay for the averaging year determined in paragraph (c).

	(e)	For each averaging year, disregard any amounts determined under paragraph (h) that exceed the Annual Dollar Limit in effect on the first day of such averaging year; provided, however, that if the averaging year is less than a 12-month period, the applicable Annual Dollar Limit shall be the Annual Dollar Limit in effect on the day that is 12 months before the last day of such averaging year. For this purpose, the Annual Dollar Limit shall be prorated for any averaging year that is less than a 12-month period.


	(f)	The Participant’s monthly Final Average Earnings for the Participant are determined by aggregating the earnings determined under paragraph (i) for all applicable averaging years and dividing the sum by the lesser of (i) 36 or (ii) the number of the Participant’s months of employment.

	(g)	For purposes of this Section 7.03, overtime earnings for any Participant who terminates after December 31, 2007 and vacation pay for any Participant who terminates after December 31, 2009 shall be disregarded.

Exhibit 10.19



		633 West Fifth Street, Suite 2560, Los Angeles, CA 90071
		Phone: 213.330.2390 Fax: 213.330.2133
		www.alvarezandmarsal.com

December 29, 2008

Phillips S. Baker Jr.
President and Chief Executive Officer
Hecla Mining Company
6500 N Mineral Drive Suite 200
Coeur d’Alene, Idaho 83815-9408

Dear Mr. Baker:

This letter confirms and sets forth the terms and conditions of the engagement between Alvarez & Marsal North America, LLC (“A&M”) and Hecla Mining Company and its subsidiaries (the “Company”), including the scope of the services to be performed and the basis of compensation for those services effective as of December 19, 2008. Upon execution of this letter by each of the parties below and receipt of the retainer described below, this letter will constitute an agreement between the Company and A&M.


	1.	Description of Services


a.	Officers . In connection with this engagement, A&M shall make available to the Company:

	(i)	Stanley E. Speer to serve as the Chief Restructuring Officer (the “CRO”);

	(ii)	Upon the mutual agreement of A&M and the Board of Directors of the Company (the “Board”), such additional personnel as are necessary to assist in the performance of the duties set forth in clause l.b below (the “Additional Personnel”). Such Additional Personnel may be designated by the Company as executive officers upon mutual agreement between A&M and the Company; and

	(iii)	Dean Swick will serve as a Senior Advisor.


b.	Duties .

	(i)	The CRO, together with any Additional Personnel, in cooperation with the Chief Executive Officer of the Company (the “CEO”), shall perform a financial review of the Company, including but not limited to a review and assessment of financial information that has been, and that will be, provided by the Company to its creditors, including without limitation its short and long-term projected cash flows;

	(ii)	The CRO and any Additional Personnel shall assist the CEO in the identification of cost reduction and operations improvement opportunities;

	(iii)	The CRO and any Additional Personnel shall assist the CEO in developing for the Board’s review possible restructuring plans or strategic alternatives for maximizing the Company’s ability to meet its cash needs as well as to maximize the enterprise value of the Company’s various business lines;

	(iv)	The CRO jointly with the Chief Financial Officer (“CFO”) shall serve as the principal contact with the Company’s creditors with respect to the Company’s financial and operational matters; and

	(v)	The CRO and any Additional Personnel shall perform such other services as requested or directed by the Board and CEO and agreed to by such officer.

c.	Reporting . The CRO and any Additional Personnel shall report to the CEO and to the Board.

d.	Employment by A&M . The CRO and any Additional Personnel will continue to be employed by A&M and while rendering services to the Company will continue to work with other personnel at A&M in connection with other unrelated matters, which will not unduly interfere with services pursuant to this engagement. With respect to the Company, however, the CRO and any Additional Personnel shall operate under the direction of the CEO and the Board.

e.	Projections; Reliance; Limitation of Duties . You understand that the services to be rendered by the CRO and any Additional

-2-


			Personnel may include the preparation of projections and other forward-looking statements, and that numerous factors can affect the actual results of the Company’s operations, which may materially and adversely differ from those projections and other forward-looking statements. In addition, the CRO and any Additional Personnel will be relying on information provided by other members of the Company’s management in the preparation of those projections and other forward-looking statements. Neither the CRO, any Additional Personnel nor A&M makes any representation or guarantee that an appropriate restructuring proposal or strategic alternative can be formulated for the Company, that any restructuring proposal or strategic alternative presented to the Board will be more successful than all other possible restructuring proposals or strategic alternatives, that restructuring is the best course of action for the Company or, if formulated, that any proposed restructuring plan or strategic alternative will be accepted by any of the Company’s creditors, shareholders and other constituents. Further, neither the CRO, and any Additional Personnel nor A&M assumes responsibility for the selection of any restructuring proposal or strategic alternative that any such officer assists in formulating and presenting to the Board, and the CRO and any Additional Personnel shall be responsible for implementation only of the proposal or alternative approved by the Board and only to the extent and in the manner authorized and directed by the Board.

		f.	Additional Responsibilities . Upon the mutual agreement of the Company and A&M, A&M may provide such additional personnel as the Company may request to assist in performing the services described above and such other services as may be agreed to, on such terms and conditions and for such compensation as the Company and A&M shall agree.

		g.	In connection with the services to be provided hereunder, from time to time A&M may utilize the services of employees of its affiliates. Such affiliates are wholly owned by A&M’s parent company and employees.

-3-


2.	Compensation

	a.	A&M will be paid by the Company for the services of the CRO and any Additional Personnel at the following hourly billing rates. The hourly billing rate for the CRO is $650; for Mr. Swick is $725; for Sven Johnson is $550; and for James Parker is $375. The current hourly billing rates for other A&M personnel, based on the position held by such A&M personnel in A&M, are:


i. Managing Director		$625 - $850
ii. Director		$450 - $625
iii. Associate		$300 - $450
iv. Analyst		$225 - $300


			Other A&M personnel beyond those listed above may assist on the engagement if deemed necessary and approved in advance by the Company. Such rates shall be subject to adjustment annually at such time as A&M adjusts its rates generally, which will not occur prior to July 1,2009.

		b.	In addition, A&M will be reimbursed by the Company for the reasonable out-of-pocket expenses of the CRO and any Additional Personnel, and if applicable, other A&M personnel, incurred in connection with this assignment, such as travel, lodging, duplications, computer research, messenger and telephone charges. In addition, A&M shall be reimbursed by the Company for the reasonable fees and expenses of its counsel incurred in connection with the preparation, negotiation and enforcement of this Agreement. All fees and expenses due to A&M will be billed on a monthly basis or, at A&M’s discretion, more frequently.

		c.	The Company shall promptly remit to A&M a retainer in the amount of $400,000, which shall be credited against any amounts due at the termination of this engagement and returned upon the satisfaction of all obligations hereunder.

		d.	The Company and A&M recognize that it is appropriate that A&M receive incentive compensation for its services hereunder, in addition to the compensation set forth above. To establish such incentive compensation, A&M and the Company will seek to reach agreement within 45 days from the date hereof on the amount of such incentive compensation and the terms on which it shall be payable.

-4-


	3.	Term

		The engagement will commence as of the date hereof and may be terminated by either party without cause by giving 10 days’ written notice to the other party. A&M normally does not withdraw from an engagement unless the Company misrepresents or fails to disclose material facts, fails to pay fees or expenses, or makes it unethical or unreasonably difficult for A&M to continue to represent the Company, or unless other just cause exists. In the event of any such termination, any fees and expenses due to A&M shall be remitted promptly (including fees and expenses that accrued prior to but were invoiced subsequent to such termination). If the Company terminates this engagement without Cause or if A&M terminates this engagement for Good Reason, A&M shall also be entitled to receive the Incentive Fee upon the occurrence of the event specified in Section 2(d) if such event occurs within six months of the termination. The Company may immediately terminate A&M’s services hereunder at any time for Cause by giving written notice to A&M. Upon any such termination, the Company shall be relieved of all of its payment obligations under this Agreement, except for the payment of fees and expenses through the effective date of termination (including fees and expenses that accrued prior to but were invoiced subsequent to such termination) and its obligations under paragraph 8. For purposes of this Agreement, “Cause” shall mean if (i) the CRO or any of the Additional Personnel is convicted of, admits guilt in a written document filed with a court of competent jurisdiction to, or enters a plea of nolo contendere to, an allegation of fraud, embezzlement, misappropriation or any felony; (ii) the CRO or any of the Additional Personnel willfully disobeys a lawful direction of the Board; or (iii) a material breach of any of A&M’s or the CRO or any of the Additional Personnel material obligations under this Agreement which is not cured within 30 days of the Company’s written notice thereof to A&M describing in reasonable detail the nature of the alleged breach. For purposes of this Agreement, termination for “Good Reason” shall mean either its resignation caused by a breach by the Company of any of its material obligations under this Agreement that is not cured within 30 days of A&M having given written notice of such breach to the Company describing in reasonable detail the nature of the alleged breach or a filing of a petition under Chapter 11 of the United States Bankruptcy Code in respect of the Company unless within 45 days thereafter (or, if sooner, prior to the date on which a plan of reorganization is confirmed or the case is converted to one under Chapter 7), the Company has obtained judicial authorization to continue the engagement on the terms herein pursuant to an order which has become a final, nonappealable order.

-5-


	4.	No Audit, Duty to Update .

		It is understood that the CRO, any Additional Personnel and A&M are not being requested to perform an audit, review or compilation, or any other type of financial statement reporting engagement that is subject to the rules of the AICPA, SEC or other state or national professional or regulatory body. They are entitled to rely on the accuracy and validity of the data disclosed to them or supplied to them by employees and representatives of the Company. The CRO, any Additional Personnel and A&M are under no obligation to update data submitted to them or review any other areas unless specifically requested by the Board to do so.

	5.	No Third Party Beneficiary .

		The Company acknowledges that all advice (written or oral) given by A&M to the Company in connection with this engagement is intended solely for the benefit and use of the Company (limited to its Board and management) in considering the matters to which this engagement relates. The Company agrees that no such advice shall be used for any other purpose or reproduced, disseminated, quoted or referred to at any time in any manner or for any purpose other than accomplishing the tasks referred to herein without A&M’s prior approval (which shall not be unreasonably withheld), except as required by law, applicable disclosure provisions under securities laws, or any listing agreement with the New York Stock Exchange.

	6.	Conflicts .

		A&M is not currently aware of any relationship that would create a conflict of interest with the Company or those parties-in-interest of which you have made us aware. You have been advised that A&M is assisting ASARCO LLC in its Chapter 11 bankruptcy proceedings. Because A&M is a consulting firm that serves clients on an international basis in numerous cases, both in and out of court, it is possible that A&M may have rendered or will render services to or have business associations with other entities or people which had or have or may have relationships with the Company, including creditors of the Company. In the event you accept the terms of this engagement, A&M will not represent, and A&M has not represented, the interests of any such entities or people in connection with this matter. Each of the Companies acknowledges and agrees that the services being provided hereunder are being provided on behalf of each of them and each of them hereby waives any and all conflicts of interest that may arise on account of the services being provided on behalf of any other Company. Each Company represents that

-6-


		it has taken all corporate action necessary and is authorized to waive such potential conflicts of interest.

	7.	Confidentiality / Non-Solicitation .

		The CRO, and Additional Personnel and A&M shall keep as confidential all non-public information received from the Company in conjunction with this engagement, except (i) as requested by the Company or its legal counsel; (ii) as required by legal proceedings or (iii) as reasonably required in the performance of this engagement. All obligations as to nondisclosure shall cease as to any part of such information to the extent that such information is or becomes public other than as a result of a breach of this provision. Except as specifically provided for in this letter, the Company on behalf of itself and its subsidiaries and affiliates and any person which may acquire all or substantially all of its assets agrees that, until two (2) years subsequent to the termination of this engagement, it will not solicit, recruit, hire or otherwise engage any employee of A&M who worked on this engagement while employed by A&M (“Solicited Person”). Should the Company or any of its subsidiaries or affiliates or any person who acquires all or substantially all of its assets extend an offer of employment to or otherwise engage any Solicited Person and should such offer be accepted, A&M shall be entitled to a fee from the party extending such offer equal to the Solicited Person’s hourly client billing rate at the time of the offer multiplied by 4,000 hours for a Managing Director, 3,000 hours for a Senior Director and 2,000 hours for any other A&M employee. The fee shall be payable at the time of the Solicited Person’s acceptance of employment or engagement.

	8.	Indemnification .

		The Company shall indemnify the CRO and all Additional Personnel to the same extent as the most favorable indemnification it extends to its officers or directors, whether under the Company’s bylaws, its certificate of incorporation, by contract or otherwise, and no reduction or termination in any of the benefits provided under any such indemnities shall affect the benefits provided to the CRO or Additional Personnel. The CRO and any Additional Personnel named as an officer pursuant to Section l(a)(ii) shall be covered as an officer under the Company’s existing director and officer liability insurance policy. The Company shall also maintain any such insurance coverage for the CRO and each Additional Personnel named as an officer pursuant to Section l(a)(ii) for a period of not less than two years following the date of the termination of such officer’s services hereunder. The provisions of this section 8 are in the nature of contractual obligations and no change in applicable law or the Company’s charter,

-7-


		bylaws or other organizational documents or policies shall affect the CRO’s or any Additional Personnel (named as an officer pursuant to Section l(a)(ii)) rights hereunder. The attached indemnity provisions are incorporated herein and the termination of this agreement or the engagement shall not affect those provisions, which shall survive termination.

	9.	Miscellaneous .

		This Agreement shall (together with the attached indemnity provisions) be: (a) governed and construed in accordance with the laws of the State of New York, regardless of the laws that might otherwise govern under applicable principles of conflict of laws thereof; (b) incorporates the entire understanding of the parties with respect to the subject matter thereof; and (c) may not be amended or modified except in writing executed by each of the signatories hereto. The Company and A&M agree to waive trial by jury in any action, proceeding or counterclaim brought by or on behalf of the parties hereto with respect to any matter relating to or arising out of the performance or non-performance of the Company or A&M hereunder. The Company and A&M agree, to the extent permitted by applicable law, that any Federal Court sitting within the Southern District of New York shall have exclusive jurisdiction over any litigation arising out of this Agreement; to submit to the personal jurisdiction of the Courts of the United States District Court for the Southern District of New York; and to waive any and all personal rights under the law of any jurisdiction to object on any basis (including, without limitation, inconvenience of forum) to jurisdiction or venue within the State of New York for any litigation arising in connection with this Agreement. Notwithstanding anything herein to the contrary, with the Company’s consent, A&M may reference or list the Company’s name and/or a general description of the services in A&M’s marketing materials, including, without limitation, on A&M’s website.

-8-

If the foregoing is acceptable to you, kindly sign the enclosed copy to acknowledge your agreement with its terms.


	Very truly yours,

	Alvarez & Marsal North America, LLC

	By:
		Stanley E. Speer
		Managing Director

Accepted and Agreed:

Hecla Mining Company and Subsidiaries


By:
	Phillips S. Baker Jr.
	President and Chief Executive Officer

-9-

INDEMNIFICATION AGREEMENT

This indemnity is made part of an agreement, dated December 19, 2008 (which together with any renewals, modifications or extensions thereof, is herein referred to as the “Agreement”) by and between Alvarez & Marsal North America, LLC (“A&M”) and Hecla Mining Company and its Subsidiaries (the “Company”), for services to be rendered to the Company by A&M.

A. The Company agrees to indemnify and hold harmless each of A&M, its affiliates and their respective shareholders, members, managers, employees, agents, representatives and subcontractors (each, an “Indemnified Party” and collectively, the “Indemnified Parties”) against any and all losses, claims, damages, liabilities, penalties, obligations and expenses, including the reasonable costs for counsel or others (including employees of A&M, based on their then current hourly billing rates) in investigating, preparing or defending any action or claim, whether or not in connection with litigation in which any Indemnified Party is a party, or enforcing the Agreement (including these indemnity provisions), as and when incurred, caused by, relating to, based upon or arising out of (directly or indirectly) the Indemnified Parties’ acceptance of or the performance or nonperformance of their obligations under the Agreement; provided, however, such indemnity shall not apply to any such loss, claim, damage, liability or expense to the extent it is found in a final judgment by a court of competent jurisdiction (not subject to further appeal) to have resulted primarily and directly from such Indemnified Party’s gross negligence or willful misconduct. The Company also agrees that no Indemnified Party shall have any liability (whether direct or indirect, in contract or tort or otherwise) to the Company for or in connection with the engagement of A&M, except to the extent that any such liability for losses, claims, damages, liabilities or expenses are found in a final judgment by a court of competent jurisdiction (not subject to further appeal) to have resulted primarily and directly from such Indemnified Party’s gross negligence or willful misconduct. The Company further agrees that it will not, without the prior consent of an Indemnified Party, settle or compromise or consent to the entry of any judgment in any pending or threatened claim, action, suit or proceeding in respect of which such Indemnified Party seeks indemnification hereunder (whether or not such Indemnified Party is an actual party to such claim, action, suit or proceedings) unless such settlement, compromise or consent includes an unconditional release of such Indemnified Party from all liabilities arising out of such claim, action, suit or proceeding.

B. These indemnification provisions shall be in addition to any liability which the Company may otherwise have to the Indemnified Parties. In the event that, at any time whether before or after termination of the engagement or the Agreement, as a result of or in connection with the Agreement or A&M’s and its personnel’s role under the Agreement, A&M or any Indemnified Party is required to produce any of its personnel (including former employees) for examination, deposition or other written, recorded or oral presentation, or A&M or any of its personnel (including former employees) or any other Indemnified Party is required to produce or otherwise review, compile, submit, duplicate, search for, organize or report on any material within such Indemnified Party’s possession or control pursuant to a subpoena or other legal (including administrative) process, the Company will reimburse the Indemnified Party for its out of pocket expenses, including the reasonable fees and expenses of its counsel, and will compensate the

-1-

Indemnified Party for the time expended by its personnel based on such personnel’s then current hourly rate.

C. If any action, proceeding or investigation is commenced to which any Indemnified Party proposes to demand indemnification hereunder, such Indemnified Party will notify the Company with reasonable promptness; provided, however, that any failure by such Indemnified Party to notify the Company will not relieve the Company from its obligations hereunder, except to the extent that such failure shall have actually prejudiced the defense of such action. The Company shall promptly pay expenses reasonably incurred by any Indemnified Party in defending, participating in, or settling any action, proceeding or investigation in which such Indemnified Party is a party or is threatened to be made a party or otherwise is participating in by reason of the engagement under the Agreement, upon submission of invoices therefor, whether in advance of the final disposition of such action, proceeding, or investigation or otherwise. Each Indemnified Party hereby undertakes, and the Company hereby accepts its undertaking, to repay any and all such amounts so advanced if it shall ultimately be determined that such Indemnified Party is not entitled to be indemnified therefor. If any such action, proceeding or investigation in which an Indemnified Party is a party is also against the Company, the Company may, in lieu of advancing the expenses of separate counsel for such Indemnified Party, provide such Indemnified Party with legal representation by the same counsel who represents the Company, provided such counsel is reasonably satisfactory to such Indemnified Party, at no cost to such Indemnified Party; provided, however, that if such counsel or counsel to the Indemnified Party shall determine that due to the existence of actual or potential conflicts of interest between such Indemnified Party and the Company such counsel is unable to represent both the Indemnified Party and the Company, then the Indemnified Party shall be entitled to use separate counsel of its own choice, and the Company shall promptly advance its reasonable expenses of such separate counsel upon submission of invoices therefor. Nothing herein shall prevent an Indemnified Party from using separate counsel of its own choice at its own expense. The Company will be liable for any settlement of any claim against an Indemnified Party made with the Company’s written consent, which consent shall not be unreasonably withheld.

D. In order to provide for just and equitable contribution if a claim for indemnification pursuant to these indemnification provisions is made but it is found in a final judgment by a court of competent jurisdiction (not subject to further appeal) that such indemnification may not be enforced in such case, even though the express provisions hereof provide for indemnification, then the relative fault of the Company, on the one hand, and the Indemnified Parties, on the other hand, in connection with the statements, acts or omissions which resulted in the losses, claims, damages, liabilities and costs giving rise to the indemnification claim and other relevant equitable considerations shall be considered; and further provided that in no event will the Indemnified Parties’ aggregate contribution for all losses, claims, damages, liabilities and expenses with respect to which contribution is available hereunder exceed the amount of fees actually received by the Indemnified Parties pursuant to the Agreement. No person found liable for a fraudulent misrepresentation shall be entitled to contribution hereunder from any person who is not also found liable for such fraudulent misrepresentation.

-2-

E. In the event the Company and A&M seek judicial approval for the assumption of the Agreement or authorization to enter into a new engagement agreement pursuant to either of which A&M would continue to be engaged by the Company, the Company shall promptly pay expenses reasonably incurred by the Indemnified Parties, including attorneys’ fees and expenses, in connection with any motion, action or claim made either in support of or in opposition to any such retention or authorization, whether in advance of or following any judicial disposition of such motion, action or claim, promptly upon submission of invoices therefor and regardless of whether such retention or authorization is approved by any court. The Company will also promptly pay the Indemnified Parties for any expenses reasonably incurred by them, including attorneys’ fees and expenses, in seeking payment of all amounts owed it under the Agreement (or any new engagement agreement) whether through submission of a fee application or in any other manner, without offset, recoupment or counterclaim, whether as a secured claim, an administrative expense claim, an unsecured claim, a prepetition claim or a postpetition claim.

F. Neither termination of the Agreement nor termination of A&M’s engagement nor the filing of a petition under Chapter 7 or 11 of the United States Bankruptcy Code (nor the conversion of an existing case to one under a different chapter) shall affect these indemnification provisions, which shall hereafter remain operative and in full force and effect.

G. The rights provided herein shall not be deemed exclusive of any other rights to which the Indemnified Parties may be entitled under the certificate of incorporation or bylaws of the Company, any other agreements, any vote of stockholders or disinterested directors of the Company, any applicable law or otherwise.

-3-

Exhibit 21

LIST OF HECLA MINING COMPANY SUBSIDIARIES

List of Subsidiaries

Hecla Limited, a Delaware corporation
Hecla Admiralty Company, a Delaware corporation
Hecla Canada Ltd., a Federal Canadian corporation
Hecla Silver Valley, Inc., a Delaware corporation
Silver Hunter Mining Company, a Delaware corporation
Rio Grande Silver, Inc., a Delaware corporation
2140238 Ontario Limited, an Ontario Canadian corporation

Exhibit 23.1

Consent of Independent Registered Public Accounting Firm

Hecla Mining Company
6500 N. Mineral Drive, Suite 200
Coeur d’Alene, Idaho 83815

We hereby consent to the incorporation by reference in the Registration Statements on Form S-3 ASR (No. 333-145919) and Form S-4 (No. 333-130682) and Form S-8 (No. 333-96995, 33-60095, and 33-60099) of Hecla Mining Company of our reports dated February 27, 2009, relating to the consolidated financial statements, and the effectiveness of Hecla Mining Company’s internal control over financial reporting, which appears in the Annual Report to Shareholders, which is incorporated by reference in this Annual Report on Form 10-K.

BDO Seidman, LLP

Spokane, Washington
February 27, 2009

Exhibit 23.2

THIRD PARTY REVIEWER CONSENT

We consent to the reference to us in the Annual Report on Form 10-K for the year ended December 31, 2008, and the Registration Statements on Form S-3ASR (No. 333-145919), Form S-4 (No. 333-130682) and Form S-8 (File No. 333-96995, 33-60095 and 33-60099) of Hecla Mining Company. In giving this consent, we do not admit that we are within the category of persons whose consent is required by Section 7 of the Securities Act of 1933 or the rules and regulations of the Securities and Exchange Commission.

/s/ AMEC E&C Services, Inc.

January 7, 2009

Exhibit 31.1

Hecla Mining Company and Subsidiaries

CERTIFICATIONS


I, Phillips S. Baker, Jr., President, Chief Executive Officer and Director of Hecla Mining Company (“Hecla”), certify that:

1.	I have reviewed this annual report on Form 10-K of Hecla;

2.	Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have:

	a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

	b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

	c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

	d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and


5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

	a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

	b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


Date: March 2, 2009

	/s/ Phillips S. Baker, Jr.
	Phillips S. Baker, Jr.
	President, Chief Executive Officer and Director

Exhibit 31.2

Hecla Mining Company and Subsidiaries

CERTIFICATIONS

I, James A. Sabala, Senior Vice President and Chief Financial Officer of Hecla Mining Company (“Hecla”), certify that:

1.	I have reviewed this annual report on Form 10-K of Hecla;

Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have:

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


Date: March 2, 2009

	/s/ James A. Sabala
	James A. Sabala
	Senior Vice President and Chief Financial Officer

Exhibit 32.1

Hecla Mining Company and Subsidiaries

CERTIFICATIONS


I, Phillips S. Baker, Jr., President, Chief Executive Officer and Director of Hecla Mining Company (“Hecla”), certify that to my knowledge:

1.	This annual report of Hecla on Form 10-K (“report”) fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2.	The information contained in the report fairly presents, in all material respects, the financial condition and results of operations of Hecla.


Date: March 2, 2009

	/s/ Phillips S. Baker, Jr.
	Phillips S. Baker, Jr.
	President, Chief Executive Officer and Director

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906 has been provided to Hecla and will be retained by Hecla and furnished to the Securities and Exchange Commission or its staff upon request.

The foregoing certification is being furnished in accordance with Securities and Exchange Commission Release No. 34-47551 and shall not be considered filed as part of the Form 10-K.

Exhibit 32.2

Hecla Mining Company and Subsidiaries

CERTIFICATIONS

I, James A. Sabala, Senior Vice President and Chief Financial Officer of Hecla Mining Company (“Hecla”), certify that to my knowledge:


1.	This annual report of Hecla on Form 10-K (“report”) fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2.	The information contained in the report fairly presents, in all material respects, the financial condition and results of operations of Hecla.

Date: March 2, 2009


	/s/ James A. Sabala
	James A. Sabala
	Senior Vice President and Chief Financial Officer

The foregoing certification is being furnished in accordance with Securities and Exchange Commission Release No. 34-47551 and shall not be considered filed as part of the Form 10-K.