SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-12
HARSCO CORPORATION
--------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
--------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
[Harsco Logo]
NOTICE OF
2003 MEETING
AND PROXY
STATEMENT
HARSCO CORPORATION
[Harsco Logo]
--------------------------------------------------------------------------------
HARSCO CORPORATION
350 Poplar Church Road
Camp Hill, PA 17011 USA
Mail: P.O. Box 8888
Camp Hill, PA 17001-8888 USA
Telephone: 717.763.7064
Fax: 717.763.6424
Web: www.harsco.com
March 26, 2003
To Our Stockholders:
You are cordially invited to attend the 2003 Annual Meeting of Stockholders of
your Company, which will be held on Tuesday, April 29, 2003, beginning at 10
a.m. at the Radisson Penn Harris Hotel and Convention Center, Camp Hill,
Pennsylvania.
Information about the Annual Meeting, including a listing and discussion of the
various matters on which you, as our stockholders, will act, may be found in the
formal Notice of Annual Meeting of Stockholders and Proxy Statement which
follow. We look forward to greeting as many of our stockholders as possible.
The Company is providing you with the opportunity to vote your shares by calling
a toll-free number or via the Internet as explained in the instructions on your
Proxy Card.
Whether you plan to attend the Annual Meeting or not, we urge you to fill in,
sign, date and return the enclosed Proxy Card, in the postage-paid envelope
provided, or vote by telephone or via the Internet, in order that as many shares
as possible may be represented at the Annual Meeting. The vote of every
stockholder is important and your cooperation in returning your executed Proxy
promptly will be appreciated.
Sincerely,
/s/ Derek C. Hathaway
Derek C. Hathaway
Chairman, President and Chief
Executive Officer
HARSCO CORPORATION
P.O. Box 8888
Camp Hill, Pennsylvania 17001-8888
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
The Annual Meeting of Stockholders of Harsco Corporation will be held on
Tuesday, April 29, 2003, at 10 a.m. at the Radisson Penn Harris Hotel and
Convention Center, Camp Hill, Pennsylvania to consider and act upon the
following matters:
1. Election of three Directors to serve until the 2006 Annual Meeting of
Stockholders, and until their successors are elected and qualified;
2. Ratification of the appointment by the Board of Directors of
PricewaterhouseCoopers LLP as independent accountants to audit the
accounts of the Company for the fiscal year ending December 31, 2003;
and
3. Such other business as may properly come before the Annual Meeting.
The Board of Directors has fixed the close of business on March 6, 2003, as the
record date for the determination of stockholders who are entitled to notice of,
and to vote at, the Annual Meeting and at any adjournments thereof. The polls
will open at 9:30 a.m. on the date of the Annual Meeting and will close at
approximately 10:15 a.m. Proxies will be accepted continuously from the time of
mailing until the closing of the polls.
STOCKHOLDERS WHO DO NOT EXPECT TO ATTEND THE ANNUAL MEETING IN PERSON ARE
REQUESTED TO FILL IN, DATE, SIGN AND MAIL THE ENCLOSED PROXY CARD IN THE
ENVELOPE PROVIDED, TO WHICH NO POSTAGE NEED BE AFFIXED IF MAILED IN THE UNITED
STATES, OR VOTE BY TELEPHONE OR VIA THE INTERNET, FOLLOWING THE INSTRUCTIONS ON
THE PROXY CARD.
By Order of the Board of Directors,
/s/ Paul C. Coppock
Paul C. Coppock
Senior Vice President, Chief Administrative Officer,
General Counsel and Secretary
March 26, 2003
PROXY STATEMENT
ANNUAL MEETING INFORMATION
This Proxy Statement has been prepared in connection with the solicitation
by the Board of Directors of Harsco Corporation, a Delaware corporation (the
"Company"), of Proxies in the accompanying form to be used at the Annual Meeting
of Stockholders of the Company, to be held April 29, 2003, or at any adjournment
or adjournments of the Annual Meeting.
The following information relates to the Annual Meeting and the voting of
your shares at the meeting:
Type of shares entitled to
vote at the Annual Meeting: The Company's common stock, par value $1.25
Record date for
stockholders entitled to
notice of, and to vote at,
the Annual Meeting: Close of business on March 6, 2003
Shares of common stock
issued and outstanding as
of the record date: 40,543,150 shares
Number of shares of
treasury stock held by the
Company as of the record
date (Not entitled to
vote): 26,494,610 shares
Proxy Statements, Notice or
Meeting and Proxy Cards
were first mailed to
stockholders: On or about March 26, 2003
Location of Company's
executive offices: 350 Poplar Church Road, Camp Hill, Pennsylvania 17011
All shares of common stock entitled to vote at the Annual Meeting are of
one class, with equal voting rights. Each share of common stock held by a
stockholder is entitled to cast one vote on each matter voted on at the Annual
Meeting. In order for the Annual Meeting to be valid and the actions taken
binding, a quorum of stockholders must be present at the meeting, either in
person or by proxy. A quorum is a majority of the issued and outstanding shares
of common stock as of the Record Date. Assuming that a quorum is present, the
affirmative vote by the holders of a plurality of the votes cast at the Annual
Meeting will be required to act on the election of directors and at least a
majority vote of the votes cast will be required for the ratification of
PricewaterhouseCoopers LLP as independent accountants for the current fiscal
year. The vote required to act on all other matters to come before the Annual
Meeting will be in accordance with the voting requirements established by the
Company's By-laws.
In certain circumstances, a stockholder will be considered to be present at
the Annual Meeting for quorum purposes but will not be deemed to have cast a
vote on a matter. That occurs when a stockholder is present but specifically
abstains from voting on a matter or when shares are represented at the Annual
Meeting by a proxy conferring authority to vote only on certain matters ("broker
non-votes"). In conformity with Delaware law, abstentions and broker non-votes
will not be treated as votes cast with respect to election of directors, and
therefore will not affect the outcome of director elections. With respect to
each other matter presented at the Annual Meeting, abstentions will be treated
as negative votes on such matters, while broker non-votes will not be counted in
determining the outcome.
2
The shares of common stock represented by each properly executed proxy
received by the Board of Directors will be voted as follows at the Annual
Meeting:
IF INSTRUCTIONS ARE PROVIDED, in accordance with such instructions
specified, or
IF NO INSTRUCTIONS ARE SPECIFIED, those shares of common stock will be
voted FOR the election of nominees for Directors and FOR the ratification of the
appointment of PricewaterhouseCoopers LLP as independent accountants for the
current fiscal year.
The Board of Directors knows of no other business to come before the Annual
Meeting. However, if any other matters are properly presented at the Annual
Meeting, or any adjournment of the Meeting, the persons voting the proxies will
vote them in accordance with their best judgment. Any proxy may be revoked by
notifying the Secretary of the Company in writing at any time prior to the
voting of the proxy.
PROPOSAL 1: ELECTION OF DIRECTORS
Information regarding the structure of the Company's Board of Directors:
Current size: 11 members
Size of Board authorized
in the By-laws: Not less than 5 or more than 12
Size of Board established
by: Board of Directors
Classified Board: Adopted in 1986
Number of classes: 3
Term of each class: 3 years
# of Directors' terms
expiring in 2003: 3
Individuals nominated for
election: D. C. Hathaway, J. J. Jasinowski and D. H. Pierce.
Messrs. D. C. Hathaway, J. J. Jasinowski and D. H. Pierce have been duly
nominated for their positions by the Board of Directors, upon the recommendation
of the Nominating Committee. The term of office for which these directors are
being nominated is until the 2006 Annual Meeting of Stockholders or until their
respective successors have been elected and qualified. Should any of these
nominees become unavailable or prove unable to serve for any reason, proxies
will be voted for the election of such other person or persons as the Board of
Directors may select to replace such nominee. No circumstance is presently known
which would render any nominee named herein unavailable to serve. Each person
named as a nominee for Director has advised the Company of his willingness to
serve if elected.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE
ELECTION OF MESSRS. HATHAWAY, JASINOWSKI AND PIERCE.
DIRECTOR INFORMATION
The information set forth below states the name of each nominee for
Director and of each Director continuing in office, his or her age, a listing of
present and previous employment positions, the year in which he or she first
became a Director of the Company, other directorships held and the Committees of
the Board on which the individual serves.
3
NOMINEES FOR TERMS EXPIRING IN 2006
DIRECTOR
OF THE
POSITION WITH THE COMPANY COMPANY
NAME AGE AND PRIOR BUSINESS EXPERIENCE SINCE
---- --- ----------------------------- --------
D. C. Hathaway 58 Chairman, President and Chief Executive Officer since July 1991
31, 2000 and also from April 1, 1994 to January 1, 1998.
Was Chairman and Chief Executive Officer from January 1,
1998 to July 31, 2000. Was President and Chief Executive
Officer from January 1, 1994 to April 1, 1994. Was
President and Chief Operating Officer of the Company from
May 1, 1991 to January 1, 1994. Held various executive
positions with the Company prior to 1991. Chairman of the
Executive Committee.
J. J. 64 President of the National Association of Manufacturers 1999
Jasinowski (business advocacy and policy association) since 1990. Mr.
Jasinowski is also an author and commentator on economic,
industrial and governmental issues. Mr. Jasinowski is a
director of The Phoenix Companies, Inc. and WebMethods.
Member of the Audit and Nominating and Corporate
Governance Committees.
D. H. Pierce 61 President and CEO of ABB Inc., the US subsidiary of global 2001
industrial, energy and automation provider ABB from 1999
until his retirement in June 2001. Between 1998 and 1999
he was president of Steam Power Plants and Environmental
Systems of ABB Inc. Between 1996 and 1998 he was Group
Executive Vice President -- The Americas Region and Member
of ABB Ltd. Group Executive Committee. Between 1994 and
1996 he was President of ABB China Ltd. Member of the
Audit Committee.
DIRECTORS WHOSE TERMS EXPIRE IN 2004
DIRECTOR
OF THE
POSITION WITH THE COMPANY COMPANY
NAME AGE AND PRIOR BUSINESS EXPERIENCE SINCE
---- --- ----------------------------- --------
G. D. H. Butler 56 Senior Vice President -- Operations of the Corporation 2002
since 2000. Concurrently serves as President of the
Heckett MultiServ International Division and President of
the SGB Division. Was President of the Heckett
MultiServ -- East Division from 1994 to 2000. Served as
Managing Director -- Eastern Region of the Heckett
MultiServ Division in 1994. Served in various officer
positions within MultiServ International, N.V. prior to
1994 and prior to Harsco's acquisition of that corporation
in 1993.
J. I. Scheiner 58 President and Chief Operating Officer of Benatec 1995
Associates, Inc. (engineering and environmental company)
since 1991. Previously, he was President of Stoner
Associates, Inc. (engineering software company) and Vice
President of Huth Engineers (engineering company). Served
as Secretary of Revenue for the Commonwealth of
Pennsylvania, and served as Deputy Secretary for
Administration, Pennsylvania Department of Transportation.
He is a member of the Pennsylvania Chamber of Business and
Industry Board. Chairman of the Audit Committee and member
of the Executive and the Management Development and
Compensation Committees.
4
DIRECTOR
OF THE
POSITION WITH THE COMPANY COMPANY
NAME AGE AND PRIOR BUSINESS EXPERIENCE SINCE
---- --- ----------------------------- --------
I. C. Strachan 59 Chairman of Instinet Group Inc. (electronic agency 2001
securities broker). Deputy Chairman of Invensys plc
(controls and automation company) from 1999 to 2000. Chief
Executive Officer of BTR plc (industrial manufacturing
company) from 1996 and 1999. He was with Rio Tinto plc
(formerly RTZ plc) (mining company) as Deputy Chief
Executive Officer from 1991 to 1995 and as Chief Financial
Officer from 1987 to 1991. He serves on the boards of
Transocean Inc., Reuters PLC and Johnson Matthey plc.
Member of the Management Development and Compensation
Committee.
R. C. Wilburn 59 President of the Gettysburg National Battlefield Museum 1986
Foundation (nonprofit educational institution) since 2000.
Former President and Chief Executive Officer of the
Colonial Williamsburg Foundation (historic preservation
and educational outreach organization) between 1992 and
1999. Other former positions include Distinguished Service
Professor at Carnegie Mellon University; President of
Carnegie Institute and Carnegie Library and Secretary of
Education for the Commonwealth of Pennsylvania. He is a
Director of Erie Indemnity Company, Erie Family Life, and
CoManage. Chairman of the Management Development and
Compensation Committee; Member of the Nominating and
Corporate Governance and Executive Committees.
DIRECTORS WHOSE TERMS EXPIRES IN 2005
DIRECTOR
OF THE
POSITION WITH THE COMPANY COMPANY
NAME AGE AND PRIOR BUSINESS EXPERIENCE SINCE
---- --- ----------------------------- --------
S. D. Fazzolari 50 Senior Vice President, Chief Financial Officer and 2002
Treasurer of the Corporation since 1999. Served as Senior
Vice President and Chief Financial Officer from January
1998 to August 1999. Served as Vice President and
Controller from January 1994 to December 1997 and as
Controller from January 1993 to January 1994.
5
DIRECTOR
OF THE
POSITION WITH THE COMPANY COMPANY
NAME AGE AND PRIOR BUSINESS EXPERIENCE SINCE
---- --- ----------------------------- --------
C. F. Scanlan 55 Since 1996, President and Chief Executive Officer of The 1998
Health Alliance of Pennsylvania (representation and
advocacy organization) and Executive Vice President and
Chief Operating Officer since 1995. President and Chief
Executive Officer of The Hospital and Healthsystem
Association of Pennsylvania since 1995. Director of Health
Forum (knowledge transfer and e-commerce company), a
subsidiary of American Hospital Association. Served as
Chairman of the Board of PHICO Group (a medical
malpractice insurance company) since 1998, and served as
Chairman of PHICO Insurance Company, a wholly-owned
subsidiary of PHICO Group from 1998 to November 2001. On
August 16, 2001, the Commonwealth Court of Pennsylvania
issued an Order of Rehabilitation for PHICO Insurance
Company which gave the Pennsylvania Insurance Department
statutory control over that company. On December 14, 2001,
PHICO Insurance Company's parent, PHICO Group, filed a
Chapter 11 bankruptcy petition in the U.S. Bankruptcy
Court in Harrisburg, Pennsylvania. On February 1, 2002,
the Pennsylvania Insurance Department declared the PHICO
Insurance Company insolvent and the Pennsylvania
Commonwealth Court issued an order authorizing the
Insurance Department to liquidate that company. The
liquidation is proceeding. Member of the Management
Development and Compensation and Audit Committees.
A. J. Sordoni, 59 Chairman of Sordoni Construction Services, Inc. (building 1988
III construction and management services company) and has been
employed by that company since 1967. Former Chairman and
Director of C-TEC Corporation and Mercom, Inc. Chairman of
the Nominating and Corporate Governance Committee; Member
of the Management Development and Compensation and
Executive Committees.
J. P. Viviano 64 Retired Vice Chairman of Hershey Foods Corporation. Was 1999
President and Chief Operating Officer of Hershey Foods
Corporation from 1994 to 1998 (confectionery and grocery
products). Mr. Viviano is a director of Chesapeake
Corporation, Huffy Corporation, R. J. Reynolds Tobacco
Holdings, Inc. and RPM, Inc. Member of the Audit Committee
and the Nominating and Corporate Governance Committee.
SHARE OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
Shown below is information with respect to each person or group known to
the Company to beneficially own more than five percent of the Company's common
stock. This information is derived from Schedule 13D filed by such person with
the Securities and Exchange Commission in July 2002.
TITLE OF NAME AND ADDRESS AMOUNT AND NATURE PERCENT
CLASS OF BENEFICIAL OWNERS OF BENEFICIAL OWNERSHIP OF CLASS
-------- -------------------- --------------------------- --------
Common Stock Atlantic Investment 2,692,400 shares 6.71
Management, Inc. Sole dispositive and voting
666 Fifth Avenue power over 2,692,400 shares
New York, NY 10103
6
SHARE OWNERSHIP OF MANAGEMENT
The following table sets forth, as of March 6, 2003, information with
respect to the beneficial ownership of the Company's outstanding voting
securities, stock options and other stock equivalents by:
(a) each Director,
(b) the Company's Chief Executive Officer and the Company's four most highly
compensated other executive officers (the "Named Executives"), and
(c) all Directors and executive officers as a group.
All of the Company's outstanding voting securities are common stock.
NUMBER OF NUMBER OF NUMBER OF OTHER
NAME SHARES(1) EXERCISABLE OPTIONS(2) STOCK EQUIVALENTS
---- --------- ---------------------- -----------------
G. D. H. Butler................... 1,000 67,000 24,000(6)
P. C. Coppock..................... 52,897(3) 115,000 26,741(6)
S. D. Fazzolari................... 10,653 100,000 25,510(6)
D. C. Hathaway.................... 112,278 337,500 108,981(6)
J. J. Jasinowski.................. 1,200 8,000 5,823(7)
R. W. Kaplan...................... 10,850(4) 109,000 26,071(6)
D. H. Pierce...................... 2,000 4,000 2,272(7)
C. F. Scanlan..................... 1,500 10,000 0
J. I. Scheiner.................... 3,526 16,000 2,915(7)
A. J. Sordoni, III................ 105,500(5) 20,000 0
I. C. Strachan.................... 500 2,000 0
J. P. Viviano..................... 5,400 8,000 5,787(7)
R. C. Wilburn..................... 3,500 20,000 446(7)
All Directors and executive
officers as a group. (14 persons
in total, including those listed
above).......................... 313,599 829,800 234,886
---------------
(1) Includes, in the case of Messrs. Butler, Coppock, Fazzolari, Hathaway,
Kaplan and all Directors and executive officers as a group, -0- shares,
11,086 shares, 8,288 shares, 26,719 shares, 4,890 shares and 53,435 shares,
respectively, pursuant to the Company's Savings Plan in respect of which
such persons have shared voting power.
(2) Represents all stock options exercisable within 60 days of March 6, 2003
awarded under the 1986 Stock Option Plan, the 1995 Executive Incentive
Compensation Plan and the 1995 Non-Employee Directors' Stock Plan.
Unexercised stock options have no voting power.
(3) Includes 18,480 shares owned by his wife as to which Mr. Coppock disclaims
beneficial ownership.
(4) Includes 61 shares owned by his daughter as to which Mr. Kaplan disclaims
beneficial ownership.
(5) Includes 14,000 shares owned by his wife as to which Mr. Sordoni disclaims
beneficial ownership.
(6) Includes stock options not exercisable within 60 days of March 6, 2003 and
non-voting phantom shares held under the Supplemental Retirement Benefit
Plan which will ultimately
7
be paid out in cash based upon the value of shares of common stock at the
time of the payout.
(7) Certain Directors have elected to defer a portion of their Directors' fees
in the form of credits for non-voting phantom shares under the terms of the
Company's Deferred Compensation Plan for Non-Employee Directors. These
phantom shares are included. They will ultimately be paid out in cash based
upon the value of the shares at the time of payout.
Except as otherwise stated, each individual has sole voting and investment
power over the shares set forth opposite his name. As of March 6, 2003, none of
the Directors and executive officers individually beneficially owned more than
1% of the Company's common stock, and the Directors and executive officers of
the Company as a group beneficially owned approximately 2.8% of the Company's
outstanding common stock.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
Directors and certain of its officers to send reports of their ownership of
Harsco Corporation stock and changes in ownership to the Company and the
Securities and Exchange Commission (the "SEC"), The New York Stock Exchange,
Inc. and The Pacific Exchange, Inc. SEC regulations also require the Company to
identify in this Proxy Statement any person subject to this requirement who
failed to file any such report on a timely basis and the Company is not aware of
any such failure during 2002.
BOARD COMMITTEES AND MEETING ATTENDANCE
The Board of Directors met eight times during the fiscal year ended
December 31, 2002. Each of the Directors of the Board attended at least 75% of
the meetings of the Board and all Committees on which the Director served.
AUDIT COMMITTEE Meetings in 2002: 5
Duties: Oversees the financial reporting
processes of the Company, including meeting
with members of management, the external
auditors and the internal auditors,
reviewing and approving both audit and
non-audit services, reviewing the results of
the annual audit and reviewing the adequacy
of the Company's internal controls. The
Chairman of the Committee meets quarterly
with management and the independent
accountants to review financial matters. The
Audit Committee recently completed a review
of its charter and the Board approved a
significant charter revision to clarify and
expand the Committee's responsibilities. A
copy of the new charter is included as
Appendix A to this Proxy Statement. See also
the Report of the Audit Committee found on
page 10.
EXECUTIVE COMMITTEE Meetings in 2002: 0
Duties: Authorized to exercise all powers
and authority of the Board of Directors when
Board is not in session, except as may be
limited by the General Corporation Law of
the State of Delaware.
8
MANAGEMENT DEVELOPMENT AND
COMPENSATION COMMITTEE Meetings in 2002: 7
Duties: Administers the Company's executive
compensation policies and plans; advises the
Board regarding management succession and
compensation levels for members of senior
management. See also the Compensation
Committee Report on page 13. The Board has
revised the Committee's charter as of
January 2003 to clarify and expand its
responsibilities regarding the selection,
development and compensation of executives
of the Company.
NOMINATING AND CORPORATE
GOVERNANCE COMMITTEE Meetings in 2002: 1
Duties: Recommends Director candidates to
the Board for election at Annual Meeting;
reviews and recommends potential new
Director candidates. The Board has revised
the Committee's charter as of January 2003
to expand its responsibilities in the
nominating area and to assign new
responsibilities for overseeing the
Company's corporate governance.
DIRECTORS' COMPENSATION
The current fees for Non-Employee Directors effective January 1, 2003 are
as follows:
Annual Retainer: $31,500
Committee Chair Fee (Annual): $5,000
Board Meeting Fee (Per Meeting): $1,200
Committee Meeting Fee (Per Meeting): $1,200
Other Meetings and Duties (Per Day): $1,200
Stock Options(1): 2,000 shares annually (issued at
an exercise price equal to
market value on date of grant.
Grant date is first business day
of May.)
Plan Participation(2): Deferred Compensation Plan for
Non-Employee Directors
Directors who are actively employed by the Company receive no additional
compensation for serving as Directors and by policy, the Company does not pay
consulting or professional service fees to Directors.
(1) On May 1, 2002 the Company issued stock options for 2,000 shares each to
the Non-Employee Directors. The exercise price of the options was $41.92
per share. The options can be exercised in whole or in part on or after
May 1, 2003 and the options expire April 30, 2012.
(2) The Deferred Compensation Plan for Non-Employee Directors allows each
outside Director to defer all or a portion of their director compensation
until some future date selected by the Director. Pursuant to the
Director's election, the accumulated deferred compensation is held in
either an interest-bearing account or a Harsco phantom share account. The
interest-bearing deferred account accumulates notional interest on the
account balance at a rate equal to the five-year United States Treasury
Note yield rate in effect from time to time. Contributions to the phantom
stock account are recorded as notional shares of Harsco common stock.
Deferred amounts are credited to the
9
Director's account quarterly on the 15th of February, May, August and
November. The number of phantom shares recorded is equal to the number of
shares of common stock that the compensation which is deferred would have
purchased at the market price of the stock on the day the account is
credited. Dividends earned on the phantom shares are credited to the
account as additional phantom shares. All phantom shares are non-voting
and payments out of the account are made solely in cash based upon the
market price of the common stock on the date of payment selected by the
Director. Under certain circumstances, the accounts may be paid out early
upon termination of directorship following a change in control. Directors
are also permitted to make early withdrawals of their deferred accounts
subject to a 10% forfeiture penalty.
REPORT OF THE AUDIT COMMITTEE
The Audit Committee of the Board of Directors (the "Committee") is composed
of five Directors each of whom is independent under the Rules of the New York
Stock Exchange currently in effect. We also believe that each of the current
members will satisfy the independence requirement contained in the proposed New
York Stock Exchange Listing Standards currently under review by the Securities
and Exchange Commission (the "Proposed NYSE Listing Standards").
The Audit Committee operates pursuant to a written charter which was
adopted in 1992 and last amended in March 2003. The most recent revisions
clarified and expanded the responsibilities of the Audit Committee consistent
with the requirements of the Proposed NYSE Listing Standards and the
Sarbanes-Oxley Act of 2002. A copy of the charter, as revised, is included as
Appendix A to this Proxy Statement.
The Audit Committee reports to and acts on behalf of the Board of Directors
by monitoring the Company's financial reporting processes and system of internal
controls, the independence and performance of the independent accountants and
the performance of the Company's internal auditors. In carrying out these
responsibilities, the Audit Committee meets with members of management, the
Company's independent auditors and the Company's internal auditors on a regular
basis or as may otherwise be needed. The Audit Committee Chairman or his
designee meets with management and with the independent accountants each quarter
to review and discuss the Company's Quarterly Report on Form 10-Q or Annual
Report on Form 10-K prior to their filing with the Securities and Exchange
Commission.
Under the provisions of the most recently adopted Charter, the Audit
Committee will also:
- Have full responsibility for hiring and overseeing the Company's
independent public accountants, including the approval of all services
and fees.
- Review with management the Company's earnings releases and other
financial disclosures (not necessarily before they are filed) and the
Company's policy and guidelines regarding risk assessment and management.
- Specifically address with the independent accountants the Company's
critical accounting policies, significant judgments and assumptions used
in the preparation of the financial statements and alternatives, the
adequacy of the Company's internal controls, any audit issues and
communications with management.
- Independently hire any outside consultants needed to carry out its
responsibilities.
- Annually review its own effectiveness in performing its responsibilities.
10
While the Audit Committee and Board of Directors monitor the Company's
financial record keeping and controls, it is the Company's management that is
ultimately responsible for the Company's financial reporting process, including
the Company's system of internal controls, disclosure control procedures and the
preparation of the financial statements. The independent accountants support the
financial reporting process by performing an audit of the Company's financial
statements and issuing a report thereon.
The Audit Committee has reviewed and discussed with management and the
independent accountants the consolidated financial statements for the year ended
December 31, 2002 and related periods. These discussions focused on the quality,
not just the acceptability, of the accounting principles used by the Company,
key accounting policies followed in the preparation of the financial statements
and the reasonableness of significant judgments made by management in the
preparation of the financial statements and alternatives that may be available.
Management has represented to the Audit Committee that, based on their audit and
other involvement with the Company's financial reporting processes, the
Company's consolidated financial statements were prepared in accordance with
generally accepted accounting principles.
The Audit Committee also discussed with the Company's internal auditors and
independent accountants the overall scope and plans for their respective audits
of the Company's financial statements. In addition, the Audit Committee
discussed with the independent accountants their independence from the Company
and its management and the matters required to be discussed by Statement on
Auditing Standards No. 61 (Communications with Audit Committees).
PricewaterhouseCoopers LLP, the Company's independent accountants, has provided
the Audit Committee written disclosures and the letter required by Independence
Standards Board Standard No. 1 concerning the accountant's independence from the
Company.
Based on the review and discussions referred to above, the Audit
Committee's review of the representations of management and the report of the
independent accountants, the Audit Committee has recommended to the Board of
Directors that the Company's audited financial statements be included in the
Company's Annual Report on Form 10-K for the fiscal year ended December 31,
2002.
SUBMITTED BY THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS:
J.I. Scheiner, Chairman
J.J. Jasinowski
D.H. Pierce
C.F. Scanlan
J.P. Viviano
11
FEES BILLED BY THE ACCOUNTANTS FOR AUDIT AND NON-AUDIT SERVICES
The following table sets forth the amount of audit fees, audit-related
fees, tax fees and all other fees billed or expected to be billed by
PricewaterhouseCoopers LLP, the Company's principal accountant for the year
ended December 31, 2002 and December 31, 2001.
AMOUNT AMOUNT
2002 2001
---------- ----------
Audit Fees(1)...................................... $2,514,600 $2,205,900
Audit-Related Fees(2).............................. $ 213,500 $ 29,500
Tax Fees(3)........................................ $ 604,200 $ 700,000
All Other Fees(4).................................. $ 26,300 $ 2,600
Total Fees......................................... $3,358,600 $2,938,000
---------------
(1) Includes the consolidated audit as well as statutory audits and quarterly
reviews.
(2) Includes due diligence procedures and employee benefit plan audits.
(3) Includes services performed in connection with income tax services other
than those directly related to the audit of the income tax accrual.
(4) Includes actuarial services in certain foreign countries.
As part of the Audit Committee Charter, the Company has established
guidelines for the types of services the Company can engage the independent
auditors to perform. Specifically the Company has specified the nine types of
services that the independent accountants may not perform for the Company. Any
services that are performed must first be reviewed with and approved by the
Audit Committee. Some approvals for services will be on a case-by-case basis
while others may be approved annually with a budget cap for the type of work
approved, such as tax services. The guidelines for engaging independent
accountants are found in Section IV, Paragraph 8 of the Audit Committee Charter,
a copy of which is attached to this Proxy Statement as Appendix A.
PROPOSAL 2: APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The Audit Committee has designated PricewaterhouseCoopers LLP as
independent accountants to audit the Company's financial statements for the
fiscal year ending December 31, 2003. This firm has audited the financial
statements of the Company and its predecessors since 1929. Although not required
to do so by law or otherwise, the Audit Committee desires that shareholders
ratify its selection of PricewaterhouseCoopers LLP as the Company's independent
accountants. Therefore, the Audit Committee's choice of independent accountants
will be submitted for ratification or rejection at the Annual Meeting. In the
absence of contrary direction from shareholders, all proxies that are submitted
will be voted in favor of the confirmation of PricewaterhouseCoopers LLP as the
Company's independent accountants. A representative of PricewaterhouseCoopers
LLP will attend the Annual Meeting, with the opportunity to make a statement and
answer questions of stockholders.
If this proposal is not ratified by a majority of the shares entitled to
vote at the Annual Meeting, the appointment of the independent accountants will
be reevaluated by the Audit Committee. Due to the difficulty and expense of
making any substitution of accountants, it is unlikely that their appointment
for the audit of the financial statements for the fiscal year ending December
31, 2003 would be changed. However, the Audit Committee would review whether to
seek new independent accountants for the fiscal year ending December 31, 2004.
The Audit Committee, at its meeting held on November 19, 2002, reviewed the
fee estimate for the annual audit of the Company's fiscal 2002 financial
statements and, taking into
12
consideration the possible effect of non-audit services on the accountants'
independence, also reviewed specific non-audit services to be rendered for
income tax services. The Committee authorized the Committee Chairman to finalize
and sign the engagement agreement with PricewaterhouseCoopers LLP.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE
FOR THIS PROPOSAL.
BOARD COMPENSATION COMMITTEE REPORT
ON EXECUTIVE COMPENSATION
The Company's executive compensation program is administered by the
Management Development and Compensation Committee ("Compensation Committee"), a
Committee of the Board of Directors composed of the non-employee Directors
listed below this Report. The Company considers all of the members of the
Compensation Committee to be independent and none of these Directors have any
interlocking or other relationships with the Company that are subject to
disclosure under the Securities and Exchange Commission rules relating to proxy
statements. All decisions of the Compensation Committee relating to the salaries
and grade levels of the Company's executive officers are approved by the full
Board.
Set forth below is a report prepared by the members of the Compensation
Committee whose names appear below this Report, addressing the Company's
compensation policies for 2002 as they affected the Company's executive
officers, including the Named Executives.
EXECUTIVE OFFICER COMPENSATION POLICIES
The Compensation Committee's executive compensation policies are designed
to:
- Provide incentives for achievement of the Company's annual and long-term
performance goals;
- Reinforce the common interest of management and the stockholders in
enhancing shareholder value;
- Reward individual initiative and achievement;
- Provide levels of compensation that are fair, reasonable and competitive
with comparable industrial companies; and
- Attract and retain qualified executives who are critical to the Company's
long-term success.
At the 1995 Annual Meeting of Stockholders, the Board of Directors
proposed, and the stockholders overwhelmingly approved the 1995 Executive
Incentive Compensation Plan which the Board believes has provided an improved
basis for achieving these goals. The current compensation program is applicable
to all corporate and divisional officers of the Company and is composed
primarily of:
- Salary based upon grade levels that reflect the degree of responsibility
associated with the executive's position and the executive's past
achievement;
- Annual incentive compensation awarded under the 1995 Executive Incentive
Compensation Plan, based upon achievement of specific economic
value-added ("EVA(R)") goals established for the relevant business unit;
- Stock option grants under the 1995 Executive Incentive Compensation Plan
made annually by the Compensation Committee on the basis of the
Committee's evaluation of
13
each unit's strategic performance and the contribution of the executive,
at its discretion with exercise prices equal to the market price at the
date of grant; and
- Various retirement and other benefits commonly found in similar
companies.
The Compensation Committee believes that the Company benefits from a broad
based executive compensation program that extends the program's incentives to
approximately 34 division officers in addition to the six executive officers and
one other corporate officer. However, as an executive's level of responsibility
increases, a greater portion of his or her potential total compensation
opportunity should be based on performance incentives and a lesser portion on
salary, causing greater variability in the individual's total compensation from
year to year. This is achieved under the Company's current 1995 Executive
Incentive Compensation Plan by using the executive's numeric grade level and
annual salary as multipliers along with the proportion of target achievement
when computing annual incentive compensation awards.
The Compensation Committee also believes that as executives rise to
positions that can have a greater impact on the Company's performance, the
compensation program should place more emphasis on the value of the common
stock. This objective is met by granting stock options for the Company's common
stock. The quantity of stock options granted to an individual in any year is
based upon the executive's grade level and the strategic performance of the
executive and the executive's business unit. In determining the aggregate number
of options to grant to all participants as a group, the Committee will also
exercise its discretion taking into account financial budget considerations, the
number of currently outstanding options, and the Company's current performance.
The Company has not reset the exercise price on any existing stock options in
the past, and as a matter of sound compensation policy, does not foresee doing
so in the future.
Section 162(m) of the Internal Revenue Code limits the deductibility of
executive compensation for individuals in excess of $1 million per year paid by
publicly traded corporations to the chief executive officer and the four other
executives named in the compensation table of the Proxy Statement. The Company
has determined that given the rates of compensation currently in effect and the
exemption under Internal Revenue Service regulations applicable to income
derived from stock options granted under the Harsco 1986 Stock Option Plan or
the 1995 Executive Incentive Compensation Plan, and the exemption applicable to
the performance based incentive compensation bonuses under the 1995 Executive
Incentive Compensation Plan, the Company should not be exposed to any
nondeductibility of executive compensation expense under Section 162(m) in the
2002 tax year. In 1995, the Company obtained stockholder approval of the 1995
Executive Incentive Compensation Plan, which was designed to preserve the
deductibility to the extent possible, of executive compensation resulting from
performance based awards under that Plan. The Company obtained renewal of that
approval by the stockholders in 1998 and again in 2001.
COMPENSATION STUDY AND REVISIONS TO OFFICER COMPENSATION STRUCTURE EFFECTIVE FOR
2001
In 2000, the Committee conducted an in-depth review of the Company's
officer compensation structure with the assistance of compensation consultant,
Towers Perrin. The study confirmed that while total cash compensation (salary
plus target annual bonus) for the officer corps approximated the median of the
comparative survey data, the Company's officer compensation scheme was
structured to pay salaries that were generally below the median
14
paid at comparable companies, and that the annual incentive compensation
opportunity was higher. The study also indicated that long-term incentive
compensation was below the median at the upper officer levels. These findings
and the Company's experience in recent years led the Committee to conclude that
the compensation budget could be deployed to more effectively achieve the goals
of attracting, retaining, and motivating executives. The gap between the
Company's base salaries and the industry median was making the compensation
package uncompetitive in many cases.
In December 2000, the Committee resolved this problem by shifting a portion
of the annual bonus opportunity into the officers' base salaries. This was
achieved by amending the terms for the annual incentive compensation calculation
to lower the bonus opportunity as a percentage of salary commencing with the
2001 plan year, and raising salaries effective January 1, 2001 to bring them
more closely in line with competitive medians. Under the existing terms of the
annual incentive compensation plan, target bonus opportunity was calculated
under the following formula:
.04 X grade level X salary = target bonus opportunity
Beginning with the 2001 plan year, the .04 factor was lowered to .02 and
the factor for maximum bonus opportunity was reduced. With the adoption of the
EVA based incentive goals for 2002, the factor for maximum bonus opportunity is
..04, which is two times target bonus.
The grade levels for corporate and division officers who qualify for
bonuses under this formula range from 14 for certain division officers to 30 for
the Chairman, President and Chief Executive Officer.
At a meeting in January 2001, the Committee adjusted the Company's stock
option award guidelines to more closely align long-term incentive compensation
opportunity with the median levels indicated by the Towers Perrin survey data.
The effect of these changes is to generally bring each of the three main
components of the Company's executive compensation plan, and the total of the
three components, closer to the median compensation levels at other companies of
similar size.
ADOPTION OF EVA BASED ANNUAL INCENTIVE PLAN EFFECTIVE FOR 2002
At the 2001 Annual Meeting of Stockholders, the stockholders approved an
amendment to the 1995 Executive Incentive Compensation Plan that enabled the
Company to implement EVA measures as performance criteria for determining annual
incentive compensation awards. The Committee, with assistance from Stern Stewart
& Co., adopted an EVA based annual incentive compensation plan for the corporate
and division officers for the 2002 plan year. The annual incentive compensation
awards for 2002 were based upon minimum, target and maximum EVA improvement
goals that the Committee has established in consultation with Stern Stewart for
each business unit.
EVA is a measurement of the amount by which the Company's net operating
profit after tax, after certain adjustments, exceed the cost of capital employed
by the Company. The use of EVA as a performance measurement for incentive
compensation is designed to help managers in making decisions that lead to
overall improvement in shareholder value, taking into account not only profits
generated, but the economic cost of capital to generate the profits.
15
RELATIONSHIP OF PERFORMANCE TO COMPENSATION
The Company currently ties executive pay to corporate performance primarily
through the 1995 Executive Incentive Compensation Plan annual awards that are
based upon achievement of objectives adopted by the Compensation Committee, and
stock option grants which only provide realizable compensation through increases
in the stock price.
Annual Incentive Compensation Plan
The opportunity for the six executive officers and one other corporate
officer to earn compensation under the terms of the 1995 Executive Incentive
Compensation Plan in effect for 2002 was dependent upon meeting EVA objectives
for their respective business units in the case of Messrs. Butler and Kaplan,
and an EVA objective for the Company for the other five officers. These EVA
objectives are established by the Compensation Committee prior to the beginning
of the year.
No award will be made for achievement of only the minimum performance
level, but awards will begin to be earned as performance in each of the
designated objective categories rises above the minimum. For 2002, achieving
target level of EVA performance results in an award that is 50% of the award for
achieving the maximum level of performance against the EVA objective, and the
award will continue to rise correspondingly as the achieved results approach the
maximum objective performance level set by the Compensation Committee.
The Compensation Committee establishes minimum, target and maximum
objectives for overall Company EVA performance and allocates that corporate
office target objective among the divisions for that year. Thus, the incentive
compensation awards of the corporate officers are closely related to the overall
performance of the divisions against their EVA goals.
Messrs. Butler and Kaplan attained 86% and 100% of target achievement
respectively based on the performance of their business units, resulting in
annual incentive compensation awards to them for 2002 of 86% and 100% of target
bonus respectively. The other four executive officers attained 74% of target
achievement for the 2002 goal resulting in each earning 74% of the target annual
incentive compensation for 2002 under the Plan. The amounts of the awards under
the Plan are summarized in the Summary Compensation Table.
Stock Options
As shown in the table that follows, the Compensation Committee granted
stock options to the executive officers on January 21, 2002 under the 1995
Executive Incentive Compensation Plan with an exercise price of $32.65 per
share, which was the market price on the date of grant. This Plan was approved
by the stockholders in 1995 and is used to make grants to other corporate
officers and key employees, division officers as well as the executive officers.
The number of options granted to each officer is determined by grade level and
the Committee's evaluation of the strategic performance of the individual and
the individual's unit. Thus, the Chairman, President and Chief Executive
Officer, Mr. Hathaway, who has the highest grade level, received the largest
award. The absolute maximum stock option award as provided in the 1995 Plan is
150,000 shares for any single participant in a calendar year. The Committee does
have the discretion to limit or entirely eliminate the number of stock options
granted in any period, and, in fact, upon management's recommendation, has
declined to award any stock options in January of 2003.
16
The guidelines for the maximum annual number of options granted for each
grade level were established in January 2001 based upon a recommendation from
Towers Perrin, and that firm's 2000 survey of the long-term incentive
compensation and total compensation practices of major United States companies.
Towers Perrin used a Black-Scholes valuation of the Company's options to make
comparisons of compensation value. In determining the January 21, 2002 grants,
the Committee considered the number of options previously granted to
participants under the 1986 Stock Option Plan and the 1995 Plan, and the
increase in the aggregate number that would be outstanding upon approval of the
2002 grants.
Salaries
The Compensation Committee completed its annual review of officer salaries
at the November 15, 2001 Committee meeting and determined that the salaries of
all corporate officers, including the Named Executives, and most of the division
officers should remain unchanged in 2002. On November 16, 2001, the Board of
Directors confirmed and approved that determination and the 2002 salaries of the
corporate officers including the Named Executives remained frozen at the 2001
levels.
As discussed above, when the Committee set those salaries in December 2000,
it considered an analysis of compensation survey data that the compensation
consultant, Towers Perrin had prepared, and determined that a combination of
increases in salary and reductions in bonus opportunity should be made. That
change was implemented effective January 1, 2001, making the salaries
competitive with industry medians and lowering the bonus opportunity to more
closely reflect industry norms.
Each year, the Compensation Committee considers adjustments to the salary
of each executive officer based upon the available salary budget, the
performance of each officer, comparison survey data provided by one or more
major consulting firms, comparison to other internal salaries and the Company's
salary range structure for various grade levels. The salary range structure for
various grade levels is also revised from time to time based upon industry
survey data provided by Towers Perrin. Based on this information, the Committee,
at its December 2000 meeting, approved an increase in the salary range structure
for all officer grade levels. The Towers Perrin industry compensation survey
considered by the Committee is a broad based survey of companies selected by the
consulting firm which are not limited to the companies within the Dow Jones
Industrial-Diversified Index referenced elsewhere in the Proxy Statement, though
some of those companies may have been included in the survey.
The compensation study that Towers Perrin prepared for the Company in 2000
analyzed competitive compensation levels and total direct compensation (defined
as base salary, annual incentives and long-term incentives in the form of cash
and stock option awards) for the Company's key executive positions. The analysis
was based on competitive data from Towers Perrin's 2000 Executive Compensation
Data Base Survey for general industry companies with annual revenues between $1
and $3 billion. The salary increases effective January 1, 2001 were based upon
that analysis, and a review of the performance of each officer. The salary for
the Chief Executive Officer in 2000 was below the median in the Towers Perrin
analysis, but was less than 1% above the 75th percentile in 2001 following the
reduction in bonus opportunity and corresponding increase in salary. The total
of salary plus target bonus opportunity for the Chief Executive Officer in 2001
was between the 50th and 75th percentile. The 2001 salaries for the other
executive officers ranged between 7% above and 9% below the Towers Perrin
medians for those positions.
17
In preparation for future compensation adjustments, the Committee intends
to periodically review similar detailed survey data. In general, the Committee
strives to maintain total compensation packages which range from moderately
below to moderately above the industry medians.
Other Compensation
The Company has certain other broad based employee benefit plans in which
the executive officers participate on the same terms as non-executive employees,
including health insurance, the Savings Plan and the term life insurance benefit
equal to two times the individual's salary up to a maximum benefit of $500,000.
In addition, the executive officers participate in the Supplemental Retirement
Benefit Plan as described elsewhere in this Proxy Statement, which supplements
both the qualified pension plan and the Company's 401(k) Savings Plan.
THE CHIEF EXECUTIVE OFFICER'S 2002 COMPENSATION
The incentive plan cash, stock options, and salary awarded or paid to Mr.
Hathaway with respect to 2002 are discussed in the Summary Compensation Table on
page 19 in this Proxy Statement with respect to amounts, and in this Report with
respect to the factors considered by the Compensation Committee. Of the total
$1,231,010 in cash compensation paid to Mr. Hathaway for 2002 as reflected in
the Summary Compensation Table, 30.7% was dependent upon achieving the EVA
performance objective under the 1995 Executive Incentive Compensation Plan. This
is consistent with the Compensation Committee's view that those executives most
able to affect the performance of the Company should have a significant portion
of their potential total compensation opportunity at risk based upon Company
performance. The Compensation Committee believes that attainment of specific,
measurable EVA goals is an important determinant of total return to stockholders
over the long-term and has the advantage of not being subject to period vagaries
of the common stock price. However, the Compensation Committee also believes
that the Chief Executive Officer and other officers should share in the gains or
losses of common stock value experienced by the stockholders in order to
reinforce the alignment of their respective interests. Therefore, the
Compensation Committee utilizes stock option grants as an important component of
compensation. The Compensation Committee believes that the combined effect of
these compensation elements is to establish strong incentives to achieve results
which will provide stockholders with the investment returns that they seek.
In summary, the Committee believes that the Company's total compensation
program achieves the objective of providing meaningful and appropriate rewards,
recognizing both current performance contributions and the attainment of
long-term strategic business goals of critical importance to the future growth
of Harsco Corporation.
SUBMITTED BY THE MANAGEMENT DEVELOPMENT AND COMPENSATION COMMITTEE OF THE BOARD
OF DIRECTORS:
R. C. Wilburn, Chairman
C. F. Scanlan
J. I. Scheiner
A. J. Sordoni, III
I. C. Strachan
18
EXECUTIVE COMPENSATION AND OTHER INFORMATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table sets forth information concerning the compensation
awarded to, earned by or paid to the Named Executives for services rendered to
the Company in all capacities during each of the last three fiscal years.
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
AWARDS
------------
ANNUAL COMPENSATION SECURITIES ALL OTHER
NAME AND ------------------------ UNDERLYING COMPEN-
PRINCIPAL SALARY BONUS OPTIONS SATION
POSITION YEAR ($) ($) (#)(1) ($)(2)
--------- ---- ------- ------- ------------ ---------
D. C. Hathaway.............................. 2002 852,500 378,510 100,000 37,084
Chairman, President & 2001 852,500 215,290 125,000 220,806
Chief Executive Officer 2000 620,000 896,520 100,000 39,209
G. D. H. Butler(3).......................... 2002 402,000 159,031 24,000 -0-
Senior Vice President -- Operations 2001 375,200 258,888 40,000 -0-
2000 223,808 303,193 10,000 -0-
P. C. Coppock............................... 2002 309,000 105,184 24,000 12,468
Senior Vice President, 2001 309,000 59,827 40,000 63,864
Chief Administrative Officer, 2000 235,000 260,521 20,000 13,675
General Counsel & Secretary
S. D. Fazzolari............................. 2002 309,000 105,184 24,000 12,468
Senior Vice President, Chief 2001 309,000 59,827 40,000 63,864
Financial Officer & Treasurer 2000 235,000 260,521 20,000 13,033
R. W. Kaplan(4)............................. 2002 325,000 149,500 24,000 13,114
Senior Vice President -- Operations 2001 325,000 62,925 40,000 66,766
2000 235,000 260,521 20,000 13,033
---------------
(1) Represents stock options granted in the respective years. The Company
granted these options, relating to shares of its common stock, to certain
employees, including executive officers, of the Company under its 1995
Executive Incentive Compensation Plan. Options granted are not exercisable
for twelve months following the date of grant, unless a change in control of
the Company occurs, nor are they exercisable ten years after the date of
grant. The options granted in 2002 are not exercisable until two years after
the grant date. The exercise price per share of options granted under the
Plan was one hundred percent (100%) of the fair market value of common stock
at the date of grant.
(2) For 2002, represents Company Savings Plan contributions and certain
Supplemental Retirement Benefit Plan contributions made on behalf of the
Named Executives. The Company maintains the Harsco Corporation Savings Plan
which includes the "Salary Reduction" feature afforded by Section 401(k) of
the Internal Revenue Code. Eligible employees may authorize the Company to
contribute from 1% to 16% of their pre-tax compensation to the Savings Plan.
In October of 2002, the contribution limit was raised to 75% of an
employee's pre-tax compensation subject to IRS and Plan limitations. The
Company makes matching contributions for the purchase of common stock of the
Company for the account of each participating employee equal to 50% of the
first 1% to
19
6% of such employee's "Salary Reduction" contribution. Under the
Supplemental Savings Benefit portion of the Supplemental Retirement Benefit
Plan, if the IRS-imposed limitations on Section 401(k) Savings Plan
contributions are reached by a Named Executive for a given year, so that he
is unable to make the maximum 6% of pre-tax compensation "Salary Reduction"
contribution that would be subject to the Company's matching contributions
under the Savings Plan, the Company will make contributions on behalf of the
Named Executive to the Supplemental Savings Benefit portion of the
Supplemental Retirement Benefit Plan in an amount equal to the amount of the
matching contributions that it would have made under the Savings Plan if the
Executive could have contributed the full 6% of his pre-tax compensation,
less the amount of matching contributions that the Company actually made for
his benefit under the Savings Plan. Such Company contributions to the
Supplemental Retirement Benefit portion of the Supplemental Retirement
Benefit Plan are credited in the form of phantom shares based upon the value
of common stock on the date of the Company's contributions. Dividends that
would have been paid on common stock are credited as additional phantom
shares, and all phantom shares will ultimately be paid out in cash based
upon the value of shares of common stock at the time of payment. The Company
terminated this Supplemental Savings Benefit effective December 31, 2002.
For 2001, includes a special cash bonus for successful integration of the
SGB Group business after acquiring it in 2000.
(3) Mr. Butler was elected Senior Vice President -- Operations effective
September 26, 2000. He serves concurrently as President of the Heckett
MultiServ International Division. Effective September 26, 2000, Mr. Butler
was appointed to the additional position of President of the SGB Division.
Mr. Butler's salary and bonus are designated in U.S. dollars, but he is paid
in British pounds at conversion rates that were in effect during the
respective periods.
(4) Mr. Kaplan was elected Senior Vice President -- Operations effective July 1,
1998 and is concurrently President of the Harsco Gas & Fluid Control Group.
20
STOCK OPTIONS
The following table contains information concerning the number of stock
options granted to each Named Executive under the Company's 1995 Executive
Incentive Compensation Plan during the last fiscal year:
OPTION GRANTS IN 2002
INDIVIDUAL GRANTS
----------------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO EXERCISE
OPTIONS EMPLOYEES OR BASE GRANT DATE
GRANTED IN FISCAL PRICE EXPIRATION PRESENT
NAME (#)(1) YEAR ($/SH) DATE VALUE($)(2)
---- ---------- ---------- -------- ---------- -----------
D. C. Hathaway --....................... 100,000 16.7 32.65 01/20/12 936,000
Chairman, President & Chief Executive
Officer
G. D. H. Butler --...................... 24,000 4.0 32.65 01/20/12 224,640
Senior Vice President -- Operations
P. C. Coppock --........................ 24,000 4.0 32.65 01/20/12 224,640
Senior Vice President, Chief
Administrative Officer, General
Counsel & Secretary
S. D. Fazzolari --...................... 24,000 4.0 32.65 01/20/12 224,640
Senior Vice President, Chief Financial
Officer & Treasurer
R. W. Kaplan --......................... 24,000 4.0 32.65 01/20/12 224,640
Senior Vice President -- Operations
---------------
(1) The Company granted these options, for shares of its common stock, to
certain employees, including executive officers, of the Company under its
1995 Executive Incentive Compensation Plan. The Company's 1995 Executive
Incentive Compensation Plan authorizes the Compensation Committee to grant
stock options to purchase common stock, as well as stock appreciation rights
to certain officers and employees who in the discretion of the Compensation
Committee significantly impact the profitability of the Company. Options
granted in 2002 are not exercisable for two years following the date of
grant, unless a change in control of the Company occurs, nor are they
exercisable more than ten years after the grant. The exercise price per
share of options granted under the 1995 Executive Incentive Compensation
Plan was one hundred percent (100%) of the fair market value of common stock
at the date of grant. There were no stock appreciation rights granted in
2002.
(2) The fair value of the options granted during 2002 is estimated on the date
of grant using the binomial option pricing model. This estimate has been
developed for purposes of comparative disclosure and does not necessarily
reflect the Company's view of the value of the option. The estimated value
has been determined based upon the terms of the option grant, the common
stock price performance history, the Company's experience that its options,
on average, are exercised within five years of grant, a $1.00 dividend and a
3.25% rate of dividend increase. Options expiring in January 2012 are
assumed to have stock volatility of 35.2% and a 4.23% risk-free interest
rate.
21
OPTION EXERCISES AND HOLDINGS
The following table sets forth information, with respect to the Named
Executives, concerning the exercise of options during fiscal year 2002 and
unexercised options at December 31, 2002:
AGGREGATED OPTION EXERCISES IN 2002
AND OPTION VALUES AT 12/31/02
VALUE OF UNEXERCISED
SHARES NUMBER OF SECURITIES IN-THE-MONEY
ACQUIRED UNDERLYING UNEXERCISED OPTIONS AT
ON VALUE OPTIONS AT 12/31/02(#)(2) 12/31/02($)(3)
EXERCISE REALIZED --------------------------- ---------------------------
NAME (#) ($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- -------- --------- ----------- ------------- ----------- -------------
D. C. Hathaway --............ 57,500 1,153,233 337,500 100,000 1,216,925 0
Chairman, President & Chief
Executive Officer
G. D. H. Butler --........... 1,000 10,240 67,000 24,000 325,190 0
Senior Vice President --
Operations
Paul C. Coppock --........... 40,000 680,961 115,000 24,000 355,000 0
Senior Vice President,
Chief Administrative
Officer, General Counsel &
Secretary
S. D. Fazzolari --........... 24,000 393,750 100,000 24,000 354,540 0
Senior Vice President,
Chief Financial Officer &
Treasurer
R. W. Kaplan --.............. 18,200 331,283 109,000 24,000 435,200 0
Senior Vice President --
Operations
---------------
(1) Represents the difference between the exercise price and the market price of
common stock on the date of exercise.
(2) Options granted during a particular year are not exercisable for twelve
months following the date of grant (two years for 2002 grants) unless a
change in control of the Company occurs.
(3) Represents the difference between the exercise price and the market price of
common stock on December 31, 2002, multiplied by the number of in-the-money
unexercised options contained in the respective category. Average market
price at December 31, 2002 was $31.87 per share. Options are in-the-money
when the market price of the underlying securities exceeds the exercise
price.
STOCK PERFORMANCE GRAPH
The following performance graph compares the yearly percentage change in
the cumulative total stockholder return (assuming the reinvestment of dividends)
on the Company's common stock against the cumulative total return of the
Standard & Poor's MidCap 400 Index and the Dow Jones Industrial-Diversified
Index for the past five years. The graph assumes an initial investment of $100
on December 31, 1997 in the Company's common stock or in the underlying
securities which comprise each of those market indices. The information
contained in the graph is not necessarily indicative of future Company
performance.
22
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
AMONG HARSCO CORPORATION, S&P MIDCAP 400 INDEX AND DOW JONES
INDUSTRIAL-DIVERSIFIED INDEX(1)(2)
FISCAL YEAR ENDING DECEMBER 31
[LINE GRAPH]
--------------------------------------------------------------------------------
1997 1998 1999 2000 2001 2002
--------------------------------------------------------------------------------
Harsco Corporation 100 72 78 63 90 87
S&P MidCap 400
Index 100 119 137 161 160 136
Dow Jones
Industrial-Diversified 100 129 174 175 158 102
---------------
(1) Peer companies included in the Dow Jones Industrial-Diversified Index are:
Albany International Corp., Briggs & Stratton Corp., Carlisle Companies
Inc., Crane Company Inc., Dover Corporation, Eaton Corp., Emerson Electric
Co., Flowserve Corp., FMC Corporation, General Electric Co., Honeywell
International Inc., IDEX Corp., Illinois Tool Works, Inc., Ingersoll-Rand
Company, ITT Industries Inc., Kaydon Corp., Kennametal Inc., Minnesota
Mining & Manufacturing Co., Mueller Industries Inc., Parker Hannifin
Corporation, Pentair Inc., Rockwell Automation Corp., The Shaw Group Inc.,
Teleflex Inc., Textron Inc., The Timken Company and Tyco International Ltd.
(2) In December 2001, Dow Jones restructured its industry classification system.
The net result of this change is that all US indexes will show differences
when compared to the prior index series.
RETIREMENT PLANS
The Company provides retirement benefits for each officer under the
Supplemental Retirement Benefit Plan ("Supplemental Plan"). All executive
officers are covered by the Supplemental Plan excepting G.D.H. Butler who is
covered by the U.K. pension plan described
23
below. Until December 31, 2002, the Supplemental Plan replaced the 401(k)
Company match lost due to government limitations on such contributions. The
replacement was in the form of phantom shares as more fully described in
footnote 2 on page 20. The Plan was amended effective January 1, 2003, to
eliminate any future replacement of lost company match and any further granting
of phantom shares. All U.S. executive officers are also covered by the qualified
pension plan. Each plan is a defined benefit plan providing for normal
retirement at age 65. Early retirement may be taken commencing with the first
day of any month following the attainment of age 55, provided at least 15 years
of service have been completed. Early retirement benefits commencing prior to
age 65 are reduced. The Supplemental Plan also provides for unreduced pension
benefits if retirement occurs after age 62, provided at least 30 years of
service have been completed. The Supplemental Plan provides for a preretirement
death benefit payable in a monthly benefit to a beneficiary designated by the
participant for participants who die after qualifying for benefits. The
Supplemental Plan also includes provisions which fully vest participants upon
termination of employment following a "change in control" of the Company as
defined in the Supplemental Plan.
Total pension benefits are based on final average compensation and years of
service. The normal retirement benefit under the Supplemental Plan is equal to a
total of .8% of final average compensation up to the "Social Security Covered
Compensation" as defined in the Supplemental Plan plus 1.6% of the final average
compensation in excess of the "Social Security Covered Compensation" multiplied
by up to 33 years of service, reduced by the benefits under the qualified plan.
Final average compensation is defined as the aggregate compensation (base salary
plus nondiscretionary incentive compensation) for the 60 highest consecutive out
of the last 120 months prior to date of retirement or termination of employment
for any reason prior to normal retirement date. The Plan was amended in 2002 to
provide that for any retirements on or after January 1, 2003, the 1.6% factor in
the benefit formula is reduced to 1.5% and the definition of Final Average
Compensation was amended to reduce the amount of nondiscretionary incentive
compensation included in the benefit calculation from 100% to 50%, for such
amounts paid on or after January 1, 2003. Notwithstanding these amendments, no
participant's retirement benefit shall be reduced by reason of these amendments,
below the benefit accrued at December 31, 2002.
The following table shows estimated total annual pension benefits payable
to the U. S. executive officers of the Company under the qualified pension plan
and the Supplemental Plan, including the Named Executives upon retirement at age
65, in various remuneration and year-of- service classifications, assuming the
total pension benefit was payable as a straight life annuity guaranteed for ten
years and retirement took place on January 1, 2003.
24
PENSION PLAN TABLE -- U.S. EXECUTIVES
YEARS OF SERVICE
---------------------------------------------------------
REMUNERATION(1) 10 15 20 25 30 35*
--------------- ------- ------- ------- ------- ------- -------
300,000....................... 44,844 67,267 89,689 112,111 134,533 147,987
400,000....................... 60,844 91,267 121,689 152,111 182,533 200,787
500,000....................... 76,844 115,267 153,689 192,111 230,533 253,587
600,000....................... 92,844 139,267 185,689 232,111 278,533 306,387
700,000....................... 108,844 163,267 217,689 272,111 326,533 359,187
800,000....................... 124,844 187,267 249,689 312,111 374,533 411,987
900,000....................... 140,844 211,267 281,689 352,111 422,533 464,787
1,000,000...................... 156,844 235,267 313,689 392,111 470,533 517,587
1,100,000...................... 172,844 259,267 345,689 432,111 518,533 570,387
1,200,000...................... 188,844 283,267 377,689 472,111 566,533 623,187
1,300,000...................... 204,844 307,267 409,689 512,111 614,533 675,987
1,400,000...................... 220,844 331,267 441,689 552,111 662,533 728,787
1,500,000...................... 236,844 355,267 473,689 592,111 710,533 781,587
1,600,000...................... 252,844 379,267 505,689 632,111 758,533 834,387
---------------
* The Supplemental Plan has a 33 year service maximum.
(1) Final average compensation for the U.S. Named Executives as of the end of
the last calendar year is: Mr. Hathaway: $1,336,040.20; Mr. Coppock:
$487.951.60; Mr. Fazzolari: $418,203.40; and Mr. Kaplan: $442,028.40. The
estimated credited years of service for each Named Executive are as follows:
Mr. Hathaway: 36.5 years; Mr. Coppock: 21.5 years; Mr. Fazzolari: 22.5
years; and Mr. Kaplan: 23.5 years.
The Company does not provide retiree medical benefits to its executive
officers.
The following table shows estimated total annual pension benefits payable
to the U.K. executive officer of the Company, Mr. Butler, for life, under the
Harsco Pension Scheme, a qualified pension plan in the U.K., upon retirement at
age 60, which is normal retirement age under the Scheme, in various remuneration
and year-of-service classifications, assuming the total pension benefit was
payable and retirement took place on January 1, 2003. The benefit would be paid
in British pounds and all amounts in the table below are stated in U.S. dollars
at a conversion rate of $1.6097 = L1.00. The Scheme provides that if the
participant dies within five years after starting to receive a pension, a lump
sum will be paid equal to the pension payments that would have been made during
the remainder of the five year period. The annual pension benefit is based on
the highest annual total of salary and bonus within the last five years (or the
highest average amount of annual salary plus bonus received in any three
consecutive scheme years within the last ten years, if higher) ("Final
Pensionable Salary") and the years of service, subject to various deductions for
service prior to April 6, 1989, and a statutory limitation of two thirds of the
Final Pensionable Salary. The Plan was amended in 2002 to provide that for any
retirements on or after January 1, 2003, the benefit accrual rate is reduced,
and the definition of Final Pensionable Salary is amended to reduce the amount
of incentive bonus included in the calculation from 100% of 50% for such amounts
paid on or after January 1, 2003. Notwithstanding these amendments, no
participant's retirement benefit shall be reduced be reason of these amendments
below the benefit accrued at December 31, 2002.
25
PENSION PLAN TABLE -- U.K. EXECUTIVE
YEARS OF SERVICE
---------------------------------------------------------
REMUNERATION(1) 10 15 20 25 30 35
--------------- ------- ------- ------- ------- ------- -------
300,000....................... 50,000 78,333 111,667 145,000 178,333 200,000
400,000....................... 66,667 104,444 148,889 193,333 237,778 266,667
500,000....................... 83,333 130,556 186,111 241,667 297,222 333,333
600,000....................... 100,000 156,667 223,333 290,000 356,667 400,000
700,000....................... 116,667 182,778 260,556 338,333 416,111 466,667
800,000....................... 133,333 208,889 297,778 386,667 475,556 533,333
900,000....................... 150,000 235,000 335,000 435,000 535,000 600,000
1,000,000...................... 166,667 261,111 372,222 483,333 594,444 666,667
---------------
(1) Final Pensionable Salary for G.D.H. Butler as of the end of the last
calendar year is $753,071. The estimated credited years of service for Mr.
Butler is 33.5 years.
EMPLOYMENT AGREEMENTS WITH OFFICERS OF THE COMPANY
On September 25, 1989, the Board of Directors authorized the Company to
enter into employment agreements with certain officers, including Messrs.
Hathaway, Coppock and Kaplan, and subsequently with Messrs. Fazzolari and Butler
(the "Agreements"). Pursuant to those authorizations, the Company entered into
individual Agreements with the Named Executive Officers. The Agreements are
designed as an inducement to retain the services of the officers and provide for
continuity of management during the course of any threatened or attempted change
in control of the Company. The Agreements are also intended to ensure that, if a
possible change in control should arise and the officer should be involved in
deliberations or negotiations in connection with the possible change in control,
the officer would be in a position to consider as objectively as possible
whether the possible change in control transaction is in the best interests of
the Company and its stockholders without concern for his position or financial
well-being. Should a change in control occur, the Agreements provide for
continuity of management following the change by imposing certain obligations of
continued employment on the officers.
Under the Agreements, the Company and the officers agree that in the event
of a change in control, such officer will remain in the Company's employ for a
period of three years from the date of the change in control (or to such
officer's normal retirement date, if earlier), subject to such officer's right
to resign during a thirty-day period commencing one year from the date of the
change in control or for good reason, as defined in the Agreement. If such
officer's employment terminates within three years after a change in control for
any reason other than cause as defined in the Agreements, resignation without
good reason as defined in the Agreements, or disability or death, such officer
will be paid a lump sum amount equal to such officer's average annual gross
income reported on Form W-2 (P-60 for Mr. Butler) for the most recent five
taxable years prior to the change in control, multiplied by the lesser of 2.99
or the number of whole and fractional years left to such executive officer's
normal retirement date, plus interest. The payment may be subject to reduction
to avoid adverse tax consequences.
For purposes of the Agreements, a "change in control" would be deemed to
have occurred if (i) any person or group acquires 20% or more of the Company's
issued and outstanding shares of common stock; (ii) the members of the Board as
of the date of the Agreements (the "Incumbent Board") including any person
subsequently becoming a Director whose election, or nomination for election by
the Company's shareholders, was approved by a majority of the
26
Directors then comprising the Incumbent Board, cease to constitute a majority of
the Board of the Company as a result of the election of Board members pursuant
to a contested election; (iii) the stockholders approve of a reorganization,
merger or consolidation that results in the stockholders of the Company
immediately prior to such reorganization, merger or consolidation owning less
than 50% of the combined voting power of the Company; or (iv) the stockholders
approve the liquidation or dissolution of the Company or the sale of all or
substantially all of the Company's assets.
If such provisions under the applicable Agreements had become operative on
January 1, 2003, the Company would have been required to pay Messrs. Hathaway,
Butler, Coppock, Fazzolari and Kaplan the following termination payments based
on compensation information available at December 31, 2002: $4,218,032,
$1,719,121, $1,523,342, $1,288,480 and $1,386,719, respectively.
On September 26, 1988, the Company entered into an agreement with Mr.
Hathaway which provides that for purposes of calculating his retirement
benefits, his years of service will be deemed to have commenced June 20, 1966.
OTHER MATTERS
The cost of this solicitation of proxies will be borne by the Company. In
addition to solicitation by use of mail, employees of the Company may solicit
proxies personally or by telephone or facsimile but will not receive additional
compensation for these services. Arrangements may be made with brokerage houses,
custodians, nominees and fiduciaries to send proxies and proxy materials to
their principals and the Company may reimburse them for their expense in so
doing. The Company has retained Morrow & Co. to assist in the solicitation at a
cost that is not expected to exceed $10,000 plus reasonable out-of-pocket
expenses.
STOCKHOLDER PROPOSALS AND NOMINATIONS FOR PRESENTATION AT 2004 ANNUAL MEETING OF
STOCKHOLDERS
If a stockholder of the Company wishes to submit a proposal for
consideration at the 2004 Annual Meeting of Stockholders, such proposal must be
received at the executive offices of the Company no later than November 28,
2003, to be considered for inclusion in the Company's Proxy Statement and Proxy
Card relating to the 2004 Annual Meeting. Although a stockholder proposal
received after such date will not be entitled to inclusion in the Company's
Proxy Statement and Proxy Card, a stockholder can submit a proposal for
consideration at the 2004 Annual Meeting in accordance with the Company's
By-laws if written notice is given to the Secretary of the Company not less than
60 days nor more than 90 days prior to the Meeting. In the event that the
Company gives less than 70 days notice of the Meeting date to stockholders, the
stockholder must give notice of the proposal within ten days after the mailing
of notice or announcement of the Meeting date. The 2004 Annual Meeting is
scheduled to be held on April 27, 2004. In order to nominate a candidate for
election as a Director at the 2004 Annual Meeting, a stockholder must provide
written notice and supporting information to the Secretary of the Company by
personal delivery or mail not later than January 30, 2004.
27
APPENDIX A
HARSCO CORPORATION
AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
CHARTER
(AS AMENDED AND RESTATED MARCH 20, 2003)
I. PURPOSE
The Audit Committee (the "Committee") shall:
A. Provide assistance to the Board of Directors in fulfilling its
responsibility to the shareholders, potential shareholders and
investment community with respect to its oversight of:
(i) The quality and integrity of the Corporation's financial statements;
(ii) The Corporation's compliance with legal and regulatory
requirements;
(iii) The independent accountant's qualifications and independence;
(iv) The performance of the Corporation's internal audit function and
independent accountants; and
(v) The establishment and maintenance of processes to assure that an
adequate system of internal control is functioning within the
Corporation.
B. Prepare the report that SEC rules require be included in the
Corporation's annual proxy statement.
The Audit Committee will primarily fulfill these responsibilities by carrying
out the activities enumerated in Section IV of this Charter.
II. ORGANIZATION
The Committee shall be comprised of three or more directors as determined
by the Board, each of whom is determined by the Board to be independent under
the rules of the New York Stock Exchange and the Sarbanes-Oxley Act. No member
of the Committee may serve on the audit committee of more than three public
companies, including the Corporation, unless the Board of Directors (i)
determines that such simultaneous service would not impair the ability of such
member to effectively serve on the Committee and (ii) discloses such
determination in the annual proxy statement.
All members of the Committee shall have a working familiarity with basic
finance and accounting practices (or acquire such familiarity within a
reasonable period after his or her appointment) and there should be at least one
member which the Board of Directors determines to its satisfaction from the
totality of the member's education and experience, qualifies him or her to serve
on the Committee as a "financial expert."
No member of the Committee shall receive compensation other than (i)
director's fees for service as a director of the Corporation, including
reasonable compensation for serving on the Committee and regular stock options
and benefits that other directors receive.
The Chairman of the Board shall submit his recommendation to the Nominating
and Corporate Governance Committee for the appointment of members of the Audit
Committee and
28
the Chairman of the Committee. The Board shall elect the members and Chairman of
the Committee at the annual organizational meeting of the Board to serve until
the next annual organizational meeting or until their successors shall be duly
elected and qualified.
III. MEETINGS
The Committee shall meet at least four times annually, or more frequently
as circumstances dictate. The Committee will fully discuss with management any
questions which it may have regarding matters within the scope of its
responsibilities. As part of its job to foster open communication, the Committee
shall periodically meet separately with each of management, the director of the
internal auditing department and the independent accountants to discuss any
matters that the Committee or each of these groups believe should be discussed
privately. In addition, the Committee or a member of the Committee designated by
the Chairman, shall meet with management and the independent accountants
quarterly to review the financial statements of the Corporation as outlined in
Section IV of this Charter.
IV. RESPONSIBILITIES AND DUTIES
The Audit Committee shall report Committee actions to the full Board of
Directors and may make appropriate recommendations. The Committee, in
discharging its oversight role, is empowered to study or investigate any matter
of interest or concern that the Committee deems appropriate. In this regard, the
Committee shall have the authority to retain outside legal, accounting or other
advisors for this purpose, including the authority to approve the fees payable
to such advisors and any other terms of retention.
The Committee shall be given full access to the Corporation's internal
audit group, Board of Directors, corporate executives and independent
accountants as necessary to carry out these responsibilities. While acting
within the scope of its stated purpose, the Committee shall have all the
authority of the Board of Directors. To fulfill its responsibilities and duties,
the Audit Committee shall:
DOCUMENTS/REPORTS REVIEW
1. Review and update this Charter annually, or more frequently as conditions
dictate.
2. Review with management and the independent accountants prior to public
dissemination the Corporation's annual audited financial statements and
quarterly financial statements, including the Corporation's disclosures
under "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and a discussion with the independent accountants of
the matters required to be discussed by Statement of Auditing Standards No.
61.
3. Discuss with management and the independent accountants the Corporation's
earnings press releases, as well as additional financial information and
earnings guidance that management may provide to analysts and rating
agencies in accordance with Regulation FD. The Committee's discussion in
this regard may be general in nature (i.e., discussion of the types of
information disclosed and the type of presentation made). The discussions
need not take place in advance of each earnings release or cover each
instance in which the Corporation may provide earnings guidance.
4. Review summaries of the regular internal reports to management prepared by
the internal auditing department and management's response.
29
INDEPENDENT ACCOUNTANTS
5. Retain and terminate independent accountants and approve all audit
engagement fees and terms.
6. Inform each registered public accounting firm performing work for the
Corporation that such firm shall report directly to the Committee.
7. Oversee the work of any registered public accounting firm employed by the
Corporation, including the resolution of any disagreement between management
and the auditor regarding financial reporting, for the purpose of preparing
or issuing an audit report or related work.
8. Approve in advance any significant audit or non-audit engagement or
relationship between the Corporation and the independent accountants, other
than "prohibited non-auditing services."
The following shall be "prohibited non-auditing services": (i) bookkeeping
or other services related to the accounting records or financial statements
of the audit client; (ii) financial information systems design and
implementation; (iii) appraisal or valuation services, providing fairness
opinions or preparing contribution-in-kind reports; (iv) actuarial services;
(v) internal audit outsourcing services; (vi) management functions or human
resources; (vii) broker or dealer, investment adviser, or investment banking
services; (viii) legal services and expert services unrelated to the audit;
and (ix) any other service that the Public Company Accounting Oversight
Board prohibits through regulation.
Notwithstanding the foregoing, pre-approval is not necessary for minor audit
services if: (i) the aggregate amount of all such non-audit services
provided to the Corporation constitutes not more than five percent of the
total amount of revenues paid by the Corporation to its auditor during the
fiscal year in which the non-audit services are provided; (ii) such services
were not recognized by the Corporation at the time of the engagement to be
non-audit services; and (iii) such services are promptly brought to the
attention of the Committee and approved prior to the completion of the audit
by the Committee or by one or more members of the Committee who are members
of the Board to whom authority to grant such approvals has been delegated by
the Committee.
The Committee may delegate to one or more of its members the authority to
approve in advance all significant audit or non-audit services to be
provided by the independent accountants so long as it is presented to the
full Committee at a later time.
9. Review, at least annually, the qualifications, performance and independence
of the independent accountants. In conducting its review and evaluation, the
Committee should:
(a) Obtain and review a report by the Corporation's independent accountant
describing: (i) the auditing firm's internal quality-control procedures;
(ii) any material issues raised by the most recent internal
quality-control review, or peer review, of the auditing firm, or by any
inquiry or investigation by governmental or professional authorities,
within the preceding five years, respecting one or more independent
audits carried out by the auditing firm, and any steps taken to deal
with any such issues; and (iii) (to assess the auditor's independence)
all relationships between the independent accountant and the
Corporation;
(b) Ensure the rotation of the lead audit partner at least every five years,
and consider whether there should be regular rotation of the audit firm
itself.
30
(c) Confirm with any independent accountant retained to provide audit
services for any fiscal year that the lead (or coordinating) audit
partner (having primary responsibility for the audit), or the audit
partner responsible for reviewing the audit, has not performed audit
services for the Corporation in each of the five previous fiscal years
of that Corporation.
(d) Take into account the opinions of management and the Corporation's
internal auditors (or other personnel responsible for the internal audit
function).
FINANCIAL REPORTING PROCESSES
10. In consultation with the independent accountants and the internal auditors,
review the integrity of the organization's financial reporting processes,
both internal and external. In that connection, the Committee should obtain
and discuss with management and the independent accountant reports from
management and the independent accountant regarding: (i) all critical
accounting policies and practices to be used by the Corporation; (ii)
analyses prepared by management and/or the independent accountant setting
forth significant financial reporting issues and judgments made in
connection with the preparation of the financial statements, including all
alternative treatments of financial information with generally accepted
accounting principles that have been discussed with the Corporation's
management, the ramifications of the use of the alternative disclosures and
treatments, and the treatment preferred by the independent accountant; (iii)
major issues regarding accounting principles and financial statement
presentations, including any significant changes in the Corporation's
selection of application of accounting principles; (iv) major issues as to
the adequacy of the Corporation's internal controls and any specific audit
steps adopted in light of material control deficiencies; and (v) any other
material written communications between the independent accountant and the
Corporation's management.
11. Review periodically the effect of regulatory and accounting initiatives, as
well as off-balance sheet structures, on the financial statements of the
Corporation.
12. Review with the independent accountant (i) any audit problems or other
difficulties encountered by the auditor in the course of the audit process,
including any restrictions on the scope of the independent accountant's
activities or on access to requested information, and any significant
disagreements with management (which the committee will work with management
to resolve in accordance with Section IV. 7 of this Charter) and (ii)
management's responses to such matters. Without excluding other
possibilities, the Committee may wish to review with the independent
accountant (i) any accounting adjustments that were noted or proposed by the
auditor but were "passed" (as immaterial or otherwise), (ii) any
communications between the audit team and the audit firm's national office
respecting auditing or accounting issues presented by the engagement and
(iii) any "management" or "internal control" letter issued, or proposed to
be issued, by the independent accountant to the Corporation.
13. Review and discuss with the independent accountant the responsibilities,
budget and staffing of the Corporation's internal audit function.
31
INTERNAL CONTROL FRAMEWORK, CODE OF CONDUCT, AND LEGAL COMPLIANCE
14. Evaluate whether management is setting the appropriate tone at the top by
communicating the importance of the Harsco Internal Control Framework and
ensuring that all individuals possess an understanding of their roles and
responsibilities.
15. Review periodically the Harsco Code of Conduct and ensure that management
has established a system to enforce this Code.
16. Review activities, organizational structure, and qualifications of the
internal audit department.
17. Review, with the organization's counsel, legal compliance matters including
corporate securities trading policies.
18. Review, with the organization's counsel, any legal matter that could have a
significant impact on the Corporation.
19. Discuss with management and the independent accountants the Corporation's
guidelines, policies and controls with respect to risk assessment and risk
management. The Committee should discuss the Corporation's major financial
risk exposures and the steps management has taken to monitor and control
such exposures. The Committee is not the sole body of the Board responsible
for reviewing risk assessment and control, and the Committee will support
the Board's shared oversight of these matters.
20. Set clear hiring policies for employees or former employees of the
independent accountants. At a minimum, these policies should provide that
any registered public accounting firm may not provide audit services to the
Corporation if the CEO, controller, CFO, chief accounting officer or any
person serving in an equivalent capacity for the Corporation was employed by
the registered public accounting firm and participated in the audit of the
Corporation within one year of the initiation of the current audit.
21. Maintain procedures under or supplemental to the Code of Conduct for: (i)
the receipt, retention and treatment of complaints received by the
Corporation regarding accounting, internal accounting controls, or auditing
matters; and (ii) the confidential, anonymous submission by employees of the
Corporation of concerns regarding questionable accounting or auditing
matters.
22. Perform any other activities consistent with this Charter, the Corporation's
By-laws and governing law, as the Committee or the Board deems necessary or
appropriate to fulfill the purposes of the Charter.
REPORTS
23. Provide the report of the Committee required by the rules of the Securities
and Exchange Commission to be included in the Corporation's proxy statement
for each annual meeting.
24. Report regularly to the full Board of Directors including:
(i) with respect to any issues that arise with respect to the quality or
integrity of the Corporation's financial statements, the Corporation's
compliance with legal or regulatory requirements, the performance and
independence of the Corporation's independent accountants or the
performance of the internal audit function;
(ii) following all meetings of the Committee; and
32
(iii) with respect to such other matters as are relevant to the Committee's
discharge of its responsibilities.
The Committee shall provide such recommendations as the Committee may deem
appropriate. The report to the Board of Directors may take the form of an
oral report by the Chairman or any other member of the Committee designated
by the Committee to make such report.
While the Committee has the responsibilities and powers set forth in this
Charter, it is not the duty of the Committee to plan or conduct audits or to
determine that the Corporation's financial statements are complete and accurate
and are in accordance with generally accepted accounting principles. This is the
responsibility of management and the independent accountants.
Nothing contained in this Charter is intended to alter or impair the
operation of the "business judgment rule" as interpreted by the courts under the
Delaware General Corporation Law. Further, nothing contained in this Charter is
intended to alter or impair the right of the members of the Committee to rely,
in discharging their oversight role, on the records of the Corporation and on
other information presented to the Committee, Board of Directors or the
Corporation by its officers or employees or by outside experts such as the
independent accountants.
V. ANNUAL PERFORMANCE EVALUATION
The Committee shall discuss annually, its evaluation of the Committee's
effectiveness in performing its responsibilities under this Charter. The
Committee shall conduct such evaluation and reviews in such manner as it deems
appropriate.
33
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE Mark Here
MANNER DIRECTED HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO for Address
DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR PROPOSALS 1 Change or | |
AND 2. THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR Comments
PROPOSALS 1 AND 2.
1. ELECTION OF DIRECTORS
FOR all nominees WITHHOLD
listed to the right AUTHORITY
(except as marked to vote for all nominees
to the contrary) listed to the right
| | | |
NOMINEES: 01 D.C. Hathaway, 02 J.J. Jasinowski, and 03 D.H. Pierce
(INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nominee's name in the space provided below.)
2. APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP as the independent accountants
of the Company.
FOR AGAINST ABSTAIN
| | | | | |
"By checking the box to the right, I consent to future
access of the Annual Report, Proxy Statements, prospectuses
and other communications electronically via the Internet. I
understand that the Company may no longer distribute printed | |
materials to me for any future shareholder meeting until
such consent is revoked. I understand that I may revoke my
consent at any time by contacting the Company's transfer
agent, Mellon Investor Services, Ridgefield Park, NJ and
that costs normally associated with electronic access, such
as usage and telephone charges, will be my responsibility.
Please disregard if you have previously provided your
consent decision."
PLEASE MARK, SIGN, DATE, AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
Signature_______________________ Signature_______________________Date__________
Please sign exactly as name appears above. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
sign in full corporate name by President or other authorized officer. If a
partnership, please sign in partnership name by authorized person.
--------------------------------------------------------------------------------
- FOLD AND DETACH HERE -
Vote by Internet or Telephone or Mail
24 Hours a Day, 7 Days a Week
Internet and telephone voting is available through 11 PM Eastern Time
the day prior to annual meeting day.
Your telephone or Internet vote authorizes the named proxies to vote your shares
in the same manner as if you marked, signed and returned your proxy card.
-------------------------------------- -------------------------------------- ------------------------
Internet Telephone Mail
http://www.eproxy.com/hsc 1-800-435-6710
Use the Internet to vote your proxy. Use any touch-tone telephone to Mark, sign and date
Have your proxy card in hand when vote your proxy. Have your proxy your proxy card
you access the web site. You will be OR card in hand when you call. You will OR and
prompted to enter your control be prompted to enter your control return it in the
number, located in the box below, to number, located in the box below, enclosed postage-paid
create and submit an electronic and then follow the directions envelope.
ballot. given.
-------------------------------------- -------------------------------------- ------------------------
If you vote your proxy by Internet or by telephone,
you do NOT need to mail back your proxy card.
You can view the Annual Report and Proxy Statement
on the Internet at www.harsco.com
MELLON INVESTOR SERVICES, L.L.C.
HARSCO CORPORATION - PROXY CARD (1)
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
HARSCO CORPORATION
The undersigned hereby appoints J.I. Scheiner, A.J. Sordoni, III and R.C.
Wilburn proxies, each with power to act without the other and with power of
substitution, and hereby authorizes them to represent and vote, as designated on
the other side and otherwise in their discretion, all the shares of stock of
Harsco Corporation standing in the name of the undersigned with all powers which
the undersigned would possess if present at the Annual Meeting of Stockholders
of the Company to be held April 29, 2003 or any adjournment thereof.
(Continued, and to be marked, dated and signed on the other side which also
includes instructions on how to vote by Internet or telephone.)
--------------------------------------------------------------------------------
- FOLD AND DETACH HERE -
Annual
[LOGO OF HARSCO CORPORATION] Meeting of
Stockholders
April 29, 2003 10:00 a.m.
The Radisson Penn Harris
Hotel and Convention Center
Routes 11 and 15 at Erford Road
Camp Hill, Pennsylvania