Washington, D.C. 20549

(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

 

 

 

COEUR D’ALENE MINES CORPORATION
505 Front Avenue
Post Office Box I
Coeur d’Alene Idaho 83816

 

Dear Shareholder:

 

In 2009, your Company took a number of steps to deliver robust production growth and substantial, sustainable cash flows from two new silver mines that rank among the world’s largest.

 

At this year’s Annual Meeting of Shareholders, the Board of Directors recommends you vote YES on the following proposals that will continue positioning your Company for the future:

 

 

We hope you will attend this year’s Annual Meeting of Shareholders, to be held at The Coeur d’Alene Resort and Conference Center, Second Street and Front Avenue, Coeur d’Alene, Idaho at 9:30 a.m., local time, on May 11, 2010.

 

Only shareholders of record at the close of business on March 22, 2010 are entitled to notice of, and to vote at, the Annual Meeting.

 

Respectfully,

 

 

DENNIS E. WHEELER,
Chairman of the Board, President
and Chief Executive Officer

 

Coeur d’Alene, Idaho

March 30, 2010

COEUR D’ALENE MINES CORPORATION
505 Front Avenue
Post Office Box I
Coeur d’Alene Idaho 83816

 

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

 

Dear Shareholder:

 

Notice is hereby given that our Annual Meeting of Shareholders will be held at The Coeur d’Alene Resort and Conference Center, Second Street and Front Avenue, Coeur d’Alene, Idaho, on Tuesday, May 11, 2010, at 9:30 A.M., local time, for the following purposes:

 

1. Elect nine directors to serve for the ensuing year and until their respective successors are duly elected and qualified;

 

2. Adopt an amendment and restatement of the Coeur d’Alene Mines Corporation 2003 Long-Term Incentive Plan;

 

3. Ratify the appointment of KPMG as our independent registered public accounting firm; and

 

4. Transact such other business as properly may come before the Annual Meeting.

 

Nominees for directors to be elected at the Annual Meeting are set forth in the enclosed Proxy Statement.

 

Only shareholders of record at the close of business on March 22, 2010, the record date fixed by the Board of Directors, are entitled to notice of, and to vote at, the Annual Meeting.

 

 

 

 

 

Whether or not you plan to attend the Annual Meeting of Shareholders, we urge you to vote and submit your proxy in order to ensure the presence of a quorum.

 

Registered holders may vote:

 

1. By Internet: go to http://www.proxyvoting.com/cde

 

2. By toll-free telephone: call 1-866-540-5760; or

 

3. By mail (if you received a paper copy of the proxy materials by mail): mark, sign, date and promptly mail the enclosed proxy card in the postage-paid envelope.

 

Beneficial Shareholders.  If your shares are held in the name of a broker, bank or other holder of record, follow the voting instructions you receive from the holder of record to vote your shares.

 

By order of the Board of Directors,

 

DENNIS E. WHEELER
Chairman of the Board, President and
Chief Executive Officer

 

Coeur d’Alene, Idaho

March 30, 2010

 

TABLE OF CONTENTS

 

COEUR D’ALENE MINES CORPORATION

 

2010 ANNUAL MEETING OF SHAREHOLDERS

 

MAY 11, 2010

 

General

 

This proxy statement is furnished in connection with the solicitation by our Board of Directors of proxies of shareholders for shares to be voted at the Annual Meeting of Shareholders to be held at The Coeur d’Alene Resort and Conference Center, Second Street and Front Avenue, Coeur d’Alene, Idaho, on Tuesday, May 11, 2010, at 9:30 A.M., and any and all adjournments or postponements thereof.

 

Any shareholder executing a proxy has the right to revoke it at any time prior to its exercise by giving notice to our Secretary.

 

This proxy statement and the accompanying proxy are first being made available to our shareholders on or about March 30, 2010.

 

Pursuant to applicable Idaho law, there are no dissenters’ or appraisal rights relating to the matters to be acted upon at the Annual Meeting.

 

Important Notice Regarding the Availability of Proxy Materials for Annual Meeting of Shareholders to be Held on May 11, 2010: The Company’s Proxy Statement and Annual Report to Shareholders are available at http://bnymellon.mobular.net/bnymellon/cde.

 

All shareholders of record as of the close of business on March 22, 2010 are entitled to vote at the Annual Meeting and any adjournment or postponement thereof upon the matters listed in the Notice of Annual Meeting. Each shareholder is entitled to one vote for each share held of record on that date. As of the close of business on March 22, 2010, a total of 82,711,823 shares of our common stock were outstanding.

 

Shares represented by a proxy will be voted according to the instructions, if any, given in the proxy. Unless otherwise instructed, the person or persons named in the proxy will vote:

 

 

If you received a paper copy of the proxy materials by mail and wish to vote your proxy by mail, mark your vote on the enclosed proxy card; then follow the directions on the card. To vote your proxy using the Internet or by telephone, see the instructions set forth on the Notice of Annual Meeting of Shareholders included with this proxy statement or the Notice of Internet Availability of Proxy Materials mailed to our shareholders on or about March 30, 2010. Your shares will be voted according to your directions. If you sign and return but do not mark any selections on your proxy card, your shares will be voted as recommended by the Board of Directors.

 

Approval of each of the proposals requires the affirmative vote of a majority of the shares represented at the Annual Meeting in person or by proxy, and, with regard to Proposal No. 2, that shareholders holding a majority of the shares outstanding on the record date cast votes.

Votes cast by proxy or in person at the Annual Meeting will be tabulated by the inspectors of election appointed by us for the meeting. The number of shares represented at the meeting in person or by proxy will determine whether or not a quorum is present. The inspectors of election will treat abstentions and broker non-votes as shares that are present and entitled to vote for purposes of determining the presence of a quorum but as unvoted for purposes of determining the approval of any matter submitted to the shareholders for a vote. If a broker indicates on the proxy that it does not have discretionary authority as to certain shares to vote on a particular matter, those shares will not be considered as present and entitled to vote by the inspectors of election with respect to that matter.

 

If you hold your shares in street name in a brokerage account, it is critical that you cast your vote if you want it to count in the election of directors (Proposal No. 1 of this proxy statement). In the past, if you held your shares in street name and you did not indicate how you wanted your shares voted in the election of directors, your broker was allowed to vote those shares on your behalf in the election of directors as they felt appropriate. Recent changes in regulation take away the ability of your broker to vote your uninstructed shares in the election of directors on a discretionary basis. Thus, if you hold your shares in street name and you do not instruct your broker how to vote in the election of directors, no votes will be cast on your behalf. Your broker will, however, continue to have discretion to vote any uninstructed shares on the ratification of the appointment of the Company’s independent registered public accounting firm (Proposal No. 3 of this proxy statement). As in the past, they will not have discretion to vote uninstructed shares on the adoption of the amendment and restatement of the Coeur d’Alene Mines Corporation 2003 Long-Term Incentive Plan (Proposal No. 2 of this proxy statement).

 

If you are a shareholder of record and you do not cast your vote, no votes will be cast on your behalf on any of the items of business at the Meeting.

 

We will bear the cost of soliciting proxies. Proxies may be solicited by directors, officers or regular employees in person or by telephone or telegram and acting without special compensation. We have retained Morrow & Co. LLC, Stamford, Connecticut, to assist in the solicitation of proxies. Morrow & Co. LLC’s charge will be $7,500 plus out-of-pocket expenses.

 

Director and Nominee Experience and Qualifications

 

The Board believes that the Board, as a whole, should possess a combination of skills, professional experience, and diversity of viewpoints necessary to oversee the Company’s business. In addition, the Board believes that there are certain attributes that every director should possess, as reflected in the Board’s membership criteria. Accordingly, the Board and the Nominating and Corporate Governance Committee consider the qualifications of directors and director candidates individually and in the broader context of the Board’s overall composition and the Company’s current and future needs.

 

The Nominating and Corporate Governance Committee reviews and makes recommendations regarding the composition and size of the Board of Directors in order to ensure the Board has the requisite expertise and its membership consists of persons with sufficiently diverse and independent backgrounds. The Nominating and Corporate Governance Committee is responsible for developing and recommending Board membership criteria to the Board for approval. The Nominating and Corporate Governance Committee assesses the effectiveness of its criteria when evaluating new director candidates and when assessing the composition of the Board. This assessment enables the Board to update the skills and experience it seeks in the Board as a whole, and in individual directors, as the Company’s needs evolve and change over time.

 

As set forth in our Corporate Governance Guidelines, the membership criteria includes issues of ethics, integrity and values, sound business judgment, professional experience, industry knowledge, and diversity of viewpoints all in the context of an assessment of the perceived needs of the Board at that point in time. The Board, as a whole, should possess a variety of skills, occupational and personal backgrounds, experiences and

perspectives necessary to oversee the Company’s business. In addition, Board members generally should have relevant technical skills or financial acumen that demonstrate an understanding of the financial and operational aspects of a large, complex organization like the Company, including the associated risks. In identifying director candidates from time to time, the Nominating and Corporate Governance Committee may establish specific skills and experience that it believes the Company should seek in order to constitute a balanced and effective board.

 

In evaluating director candidates, and considering incumbent directors for renomination, the Board and the Nominating and Corporate Governance Committee has not formulated any specific minimum qualifications, but rather will consider a variety of factors. These include each nominee’s independence, financial acumen, personal accomplishments, career specialization, and experience in light of the needs of the Company. For incumbent directors, the factors include past performance on the Board. Among other things, the Board has determined that it is important to have individuals with the following skills and experiences on the Board:

 

 

Nine directors are to be elected at the Annual Meeting, each to serve for one year and until his successor is elected and qualified. Proxies will be voted at the Annual Meeting, unless authority is withheld, FOR the election of the nine persons named below. We do not contemplate that any of the persons named below will be unable, or will decline, to serve; however, if any such nominee is unable or declines to serve, the persons named in the accompanying proxy may vote for a substitute, or substitutes, in their discretion.

 

 

THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE ELECTION
OF THE ABOVE NOMINEES AS DIRECTORS.

 

Summary Description of the Amended and Restated 2003 Long-Term Incentive Plan

 

The Board of Directors approved on March 2, 2010, and is recommending that shareholders approve, an amended and restated Coeur d’Alene Mines Corporation 2003 Long-Term Incentive Plan (the “Amended Plan”). The Amended Plan is designed to update the longstanding practices of the Company to utilize long-term incentive pay to keep the Company’s compensation program competitive within the industry.

 

Purposes and Effects of the Amended Plan

 

The proposed Amended Plan, among other administrative changes, would allow awards under the plan to be granted to non-employee directors of the Company under the same plan and increase the number of shares available for grant under the plan by 4,000,000 shares. Based on the Company’s increased focus on equity-based incentive compensation to tie performance to shareholder value, and its expected share usage for equity-based incentive compensation awards in the near term, the Company intends for this request to cover the Company’s equity-based compensation needs for the next five years.

 

The Company currently maintains one active stock incentive plan for the purpose of granting stock-based compensation awards, which was originally approved by the shareholders on May 20, 2003. As of February 25, 2010, a total of 57,928 shares remained available for new award grants under the plan. In addition, as of February 25, 2010: (i) 348,638 shares were covered by outstanding options granted under the Company’s equity compensation plans, which options had a weighted average exercise price of $23.959 and a weighted average remaining term of 6.888 years; and (ii) 212,971 shares were subject to full-value awards outstanding under the Company’s equity compensation plans.

 

The Company believes that incentives and equity-based compensation awards motivate its directors, officers, employees and consultants to focus on the objective of creating shareholder value and promoting the success of the Company. The Company also believes that incentive compensation plans are an important tool for attracting, retaining and motivating highly qualified, skilled directors, officers, employees and consultants. As noted above, the Board of Directors approved the proposed Amended Plan, in part because the number of shares available under the plan as currently in effect is not adequate to provide for future incentives.

 

Summary of the Amended Plan

 

The following summary of the terms of the Amended Plan is qualified in its entirety by reference to the text of the Amended Plan, which is attached as Appendix A to this Proxy Statement. If approved by the Company’s shareholders, the Amended Plan will be effective as of the date of approval.

 

Administration.  The Amended Plan will be administered by the Compensation Committee of the Board of Directors (the “Committee”).

 

Eligibility.  As proposed to be amended and restated, employees of the Company, its affiliates and its subsidiaries, as well as non-employee Directors of the Company, are eligible to participate in the Amended Plan.

 

Approximately 23 individuals, eight directors and officers, will initially be expected to participate; however, because the Amended Plan provides for broad discretion in making awards, the respective benefits to be accorded to the participants cannot be determined at this time.

 

Stock Available for Issuance Through the Amended Plan.  The Amended Plan provides for a number of forms of stock-based compensation, as further described below. As proposed, up to 4,000,000 shares of the Company’s common stock will be authorized for issuance through the Amended Plan, plus any shares subject to outstanding awards under the Coeur d’Alene Mines Corporation 2005 Non-employee Directors’ Equity

Incentive Plan as of May 11, 2010 that on or after that date cease to be subject to such awards (other than as a result of exercise for or settlement in vested and nonforfeitable shares).

 

The Amended Plan contains a share-counting formula, pursuant to which each share of common stock issued pursuant to options or stock appreciation rights awarded under the Amended Plan will reduce the number of shares that remain available for issuance under the Amended Plan by 1, while each share of common stock issued pursuant to any other award under the Amended Plan will reduce the number of shares that remain available for issuance by 1.5. Shares of common stock underlying cancelled, terminated, expired, forfeited, or lapsed awards of stock-based compensation may be reused or reissued in a grant under the Amended Plan. However, shares may not be reused or reissued in a grant under the Amended Plan if the shares: (i) were subject to a stock-settled stock appreciation right and were not issued upon the net settlement or net exercise of such stock appreciation right, (ii) are delivered to or withheld by the Company to pay the exercise price of an option, (iii) are delivered to or withheld by the Company to pay the withholding taxes related an award, or (iv) are repurchased on the open market with the proceeds of an option exercise. Pursuant to a share-counting formula, each share eligible for reuse or reissuance added back to the plan will increase the number of shares available for issuance by 1 if the share was subject to options or stock appreciation rights granted under the Amended Plan or the Coeur d’Alene Mines Corporation 2005 Non-employee Directors’ Equity Incentive Plan, and will increase the number of shares available for issuance by 1.5 if the share was subject to any other award under either plan.

 

The Amended Plan provides for limits on the number of shares that may be subject to awards granted to any one participant in any one year as follows: (i) 60,000 shares for awards granted in the form of options; (ii) 60,000 shares for awards granted in the form of stock appreciation rights, (iii) 60,000 shares for awards granted in the form of restricted stock or restricted stock units, (iv) 60,000 shares for awards granted in the form of performance shares or performance units and (v) 60,000 shares for awards granted in the form of other stock-based awards. The Amended Plan also provides for an annual per participant limit of $1,200,000 for cash-based awards. In addition, the Amended Plan provides that non-employee directors may not receive awards (regardless of type) covering more than 60,000 shares in any one year.

 

Description of Awards Under the Amended Plan.  The Committee may award to eligible participants incentive and nonqualified stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares, performance units, cash-based awards, and stock-based awards. As separately described under “Performance Measures,” the Committee may also grant awards subject to satisfaction of specific performance goals. The forms of awards are described in greater detail below.

 

Stock Options.  The Committee will have discretion to award incentive stock options (“ISOs”), which are intended to comply with Section 422 of the Internal Revenue Code (the “Code”), or nonqualified stock options (“NQSOs”), which are not intended to comply with Section 422 of the Code. Subject to the specific terms of the Amended Plan, the Committee will have discretion to set such additional limitations on option grants as it deems appropriate.

 

Options granted to participants under the Amended Plan will expire at such times as the Committee determines at the time of the grant; however, no option will be exercisable later than ten years from the date of grant unless granted to a participant outside the United States. Each option award agreement will set forth the extent to which the participant will have the right to exercise the option following termination of the participant’s employment with the Company, its affiliates or its subsidiaries. The termination provisions will be determined within the discretion of the Committee, may not be uniform among all participants, and may reflect distinctions based on the reasons for termination of employment.

 

Options issued under the Amended Plan will not be repriced, replaced, or regranted through cancellation in exchange for cash, other awards, or a new option or SAR at a reduced exercise or base price, or by lowering the exercise price of a previously granted option, except (i) with the prior approval of the Company’s shareholders or (ii) equitably in connection with changes in outstanding common stock by reason of a merger, stock split, or certain other events.

Upon the exercise of an option under the Amended Plan, the option price is payable to the Company in full either: (a) in cash or its equivalent; (b) by tendering (either by actual delivery or attestation) previously acquired shares having an aggregate fair market value at the time of exercise equal to the total option price; (c) by withholding from the shares otherwise issuable upon the option’s exercise a number of shares with a fair market value equal to the total option price at the time of exercise; (d) by a combination of (a) and (b); or (e) by any other method approved by the Committee in its sole discretion.

 

The Committee also may allow cashless exercises as permitted under the Federal Reserve Board’s Regulation T, subject to applicable securities law restrictions, or by any other means which the Committee determines to be consistent with the Amended Plan’s purpose and applicable law.

 

Stock Appreciation Rights (SARs).  The Committee may grant SARs in tandem with stock options, freestanding and unrelated to options, or any combination of these vehicles. In any case, the form of payment of an SAR will be determined by the Committee at the time of grant, and may be in shares of common stock, cash, or a combination of the two. If granted other than in tandem, the Committee will determine the number of shares of common stock covered by and the exercise period for the SAR. Upon exercise of the SAR, the participant will receive an amount equal to the excess of the fair market value of one share of stock on the date of exercise over the exercise price, multiplied by the number of shares of stock covered by the SAR.

 

If an SAR is granted in tandem with an option, the exercise of the tandem SAR will require forfeiture of the related option (and when a share is purchased under the option, the tandem SAR shall similarly be cancelled). The Committee may limit the exercise period of a tandem SAR, except that the tandem SARs exercise period may not exceed that of the related option.

 

SARs issued under the Amended Plan will not be repriced, replaced, or regranted through cancellation in exchange for cash, other awards, or a new option or SAR at a reduced exercise or base price, or by lowering the exercise price of a previously granted SAR, except (i) with the prior approval of the Company’s shareholders or (ii) equitably in connection with changes in outstanding common stock by reason of a merger, stock split, or certain other events.

 

Restricted Stock and Restricted Stock Units.  The Committee will also be authorized to award shares of restricted common stock and RSUs under the Amended Plan upon such terms and conditions as it shall establish. These conditions may include requirements that participants pay a purchase price for each share of restricted stock or each RSU, restrictions based on specific performance goals, time-based restrictions on vesting following achievement of the performance goals, time-based restrictions, restrictions under applicable federal or state securities laws, or holding requirements or sale restrictions placed on the shares by the Company upon vesting of the restricted stock or RSUs. Although recipients may have the right to vote their restricted shares from the date of grant, they will not have the right to sell or otherwise transfer the shares during the applicable period of restriction or until earlier satisfaction of other conditions imposed by the Committee in its sole discretion. Participants holding restricted stock may also receive dividends on their shares of restricted stock and the Committee, in its discretion, will determine how such dividends on restricted shares are to be paid.

 

The Committee will also be authorized to award restricted stock units under the Amended Plan upon such terms and conditions as it shall establish. Restricted stock units are similar to restricted stock and are subject to the same provisions listed above with respect to restricted stock, except that no shares are actually awarded to the participant on the date of grant, and participants holding restricted stock units have no voting rights with respect to such units.

 

Each award agreement for restricted stock or restricted stock units will set forth the extent to which the participant will have the right to retain the restricted stock or restricted stock units following termination of the participant’s employment with the Company. These provisions will be determined in the sole discretion of the Committee, need not be uniform among all shares of restricted stock issued or restricted stock units granted pursuant to the Amended Plan, and may reflect distinctions based on reasons for termination of employment.

Performance Units and Performance Shares.  The Committee will also have discretion to award performance units and performance shares under the Amended Plan upon such terms and conditions as it shall establish. Performance units will have an initial value as determined by the Committee, while each performance share will have an initial value equal to the fair market value of one share of common stock of the Company on the date of grant. The payout on the number and value of the performance units and performance shares will be a function of the extent to which the corresponding performance goals are met.

 

Cash-Based Awards and Stock-Based Awards.  The Committee will also have discretion to award cash-based and stock-based awards under the Amended Plan upon such terms and conditions as it shall establish. Each cash-based award shall have a value as may be determined by the Committee. The Committee may establish performance goals for such awards in its discretion and determine payout in its discretion.

 

Performance Measures.  The Committee may grant awards under the Amended Plan to eligible participants subject to the attainment of certain specified performance measures. The performance measures may include earnings per share (actual or targeted growth), economic value added (EVA), net income after capital costs, net income (before or after taxes), return measures (including return on average assets, return on capital, return on equity, or cash-flow return measures), stock price (including growth measures and total shareholder return), expense targets, margins, production levels, cash cost per ounce of production, EBITDA, capital budget targets, budget target measures, earnings before interest and taxes (EBIT), revenue, cash flow (including operating cash flow), reserve replacement, and resource levels. The number of performance-based awards granted to any participant in any year is determined by the Committee in its sole discretion. Following the end of a performance period, the Committee shall determine the value of the performance-based awards granted for the period based on the attainment of the preestablished objective performance goals. The Committee shall also have discretion to reduce or increase the value of a performance-based award, except in the case of “Covered Employees” (defined below under “Section 162(m)”), in which case the Committee may only reduce such value.

 

Adjustment and Amendments.  The Amended Plan provides for appropriate adjustments in the number of shares of common stock subject to awards and available for future awards in the event of changes in outstanding common stock by reason of a merger, stock split or certain other events.

 

Upon the occurrence of a change in control, unless otherwise specifically prohibited under applicable laws or by the rules and regulations of any governing governmental agencies or national securities exchanges, or unless the Committee determines otherwise in an award agreement:

 

 

The Committee shall have the authority to make any modifications to awards as determined by the Committee to be appropriate before the effective date of a change in control.

 

A change in control for the purposes of the Amended Plan is deemed to occur if:

 

 

The Amended Plan may be modified or amended by the Committee at any time and for any purpose which the Committee deems appropriate. However, no such modification may adversely affect an outstanding award without the affected holder’s consent. No amendment of the Amended Plan may be made without shareholder approval if such approval is required under Internal Revenue Service or Securities and Exchange Commission regulation, the rules of the New York Stock Exchange, or applicable law.

 

Nontransferability.  No derivative security (including, without limitation, options) granted pursuant to, and no right to payment under, the Amended Plan shall be assignable or transferable by a participant except by will or by the laws of descent and distribution, and any option or similar right shall be exercisable during a participant’s lifetime only by the participant or by the participant’s guardian or legal representative. These limitations may be waived by the Committee, subject to restrictions imposed under the Securities and Exchange Commission’s short-swing trading rules and federal tax requirements relating to incentive stock options.

 

Duration of the Amended Plan.  The Amended Plan will remain in effect, subject to the right of the Committee or the Company’s Board of Directors to amend or terminate the Amended Plan at any time, until the tenth anniversary of its approval by our shareholders. Termination of the Amended Plan will not affect the rights and obligations of the participants and the Company arising under previously-granted awards then in effect.

 

Section 162(m)

 

The Board of Directors believes that it is in the best interests of the Company and its shareholders to continue to provide for an equity incentive plan under which compensation awards made to the Company’s executive officers can qualify for deductibility by the Company for federal income tax purposes. Accordingly, the Amended Plan has been structured in a manner such that awards granted under it can satisfy the requirements for “performance-based” compensation within the meaning of Section 162(m) of the Internal Revenue Code of 1986 (the “Code”). In general, under Section 162(m), in order for the Company to be able to deduct compensation in excess of $1,000,000 paid in any one year to the Company’s chief executive officer or any of the Company’s three other most highly compensated executive officers (other than the chief financial officer), such compensation must qualify as “performance-based.” One of the requirements of “performance-based” compensation for purposes of Section 162(m) is that the material terms of the performance goals under which compensation may be paid be disclosed to and approved by the Company’s shareholders. For purposes of Section 162(m), the material terms include (i) the employees eligible to receive compensation, (ii) a description of the business criteria on which the performance goal is based and (iii) the maximum amount of compensation that can be paid to an employee under the performance goal. With respect to the various types of awards under the Amended Plan, each of these aspects is discussed below, and shareholder approval of the Amended Plan will be deemed to constitute approval of each of these aspects of the Amended Plan for purposes of the approval requirements of Section 162(m).

Equity Compensation Plan Information

 

The following table sets forth information as of December 31, 2009 regarding the Company’s equity compensation plans.

 

 

 

Federal Income Tax Consequences

 

Options.  With respect to options which qualify as ISOs, an Amended Plan participant will not recognize income for federal income tax purposes at the time options are granted or exercised. If the participant disposes of shares acquired by exercise of an ISO either before the expiration of two years from the date the options are granted or within one year after the issuance of shares upon exercise of the ISO (the “holding periods”), the participant will recognize in the year of disposition: (a) ordinary income, to the extent that the lesser of either (i) the fair market value of the shares on the date of option exercise, or (ii) the amount realized on disposition, exceeds the option price; and (b) capital gain, to the extent the amount realized on disposition exceeds the fair market value of the shares on the date of option exercise. If the shares are sold after expiration of the holding periods, the participant generally will recognize capital gain or loss equal to the difference between the amount realized on disposition and the option price.

 

With respect to NQSOs, the participant will recognize no income upon grant of the option and, upon exercise, will recognize ordinary income to the extent of the excess of the fair market value of the shares on the date of option exercise over the amount paid by the participant for the shares. Upon a subsequent disposition of the shares received under the option, the participant generally will recognize capital gain or loss to the extent of the difference between the fair market value of the shares at the time of exercise and the amount realized on the disposition.

 

SARs.  The recipient of a grant of SARs will not realize taxable income and the Company will not be entitled to deduction with respect to such grant on the date of such grant. Upon the exercise of an SAR, the recipient will realize ordinary income, and the Company will be entitled to a corresponding deduction, equal to the amount of cash and/or stock received.

 

Restricted Stock and Restricted Stock Units.  A participant holding restricted stock will, at the time the shares vest, realize ordinary income in an amount equal to the fair market value of the shares and any cash received at the time of vesting, and the Company will be entitled to a corresponding deduction for federal income tax purposes. Dividends paid to the participant on the restricted stock during the restriction period will generally be ordinary income to the participant and deductible as such by the Company.

 

In general, the Company will receive an income tax deduction at the same time and in the same amount which is taxable to the employee as compensation, except as provided below under “Section 162(m).” To the extent a participant realizes capital gains, as described above, the Company will not be entitled to any deduction for federal income tax purposes.

A participant holding restricted stock units will not be taxed until those units are actually paid out (whether in the form of shares or cash), at which time, the participant will realize ordinary income in an amount equal to the fair market value of the units and any cash received at the time of payout, and the Company will be entitled to a corresponding deduction for federal income tax purposes. Dividends paid to the participant on the restricted stock units during the restriction period will generally be ordinary income to the participant and deductible as such by the Company.

 

In general, the Company will receive an income tax deduction at the same time and in the same amount which is taxable to the employee as compensation, except as provided below under “Section 162(m).”

 

Performance Units and Performance Shares.  The recipient of a grant of performance units and/or performance shares will not realize taxable income and the Company will not be entitled to a deduction with respect to such grant on the date of such grant. Upon the payout of the award, the recipient will realize ordinary income and the Company will be entitled to a corresponding deduction, equal to the amount of cash received or the value of any stock received.

 

Cash-Based and Stock-Based Awards.  The recipient of a grant of cash-based or stock-based awards will not realize taxable income and the Company will not be entitled to a deduction with respect to such grant on the date of such grant. Upon the payout of such award, the recipient will realize ordinary income and the Company will be entitled to a corresponding deduction, equal to the amount of cash received or the value of any stock received.

 

Section 162(m).  Under Section 162(m) of the Code, compensation paid to executives in excess of $1 million for any taxable year is not deductible unless an exemption from such rule exists. Compensation paid by the Company in excess of $1 million for any taxable year to “Covered Employees” will generally be deductible by the Company or its affiliates for federal income tax purposes if it is based on the performance of the Company, is paid pursuant to a plan approved by shareholders of the Company, and meets certain other requirements. Generally, a “Covered Employee” under Section 162(m) means the chief executive officer and the three other highest-paid executive officers of the Company (other than the chief financial officer) as of the last day of the taxable year.

 

Amended Plan Benefits

 

The benefits that will be received under the Amended Plan by particular individuals or groups are not determinable at this time. Such awards are within the discretion of the Committee, and the Committee has not determined future awards or who might receive them. Information about awards granted in 2009 under the current plan to the Company’s named executive officers can be found in the table under the heading “2009 Grants of Plan-Based Awards” in this Proxy Statement. As of March 22, 2010, the closing price of a share of the Company’s common stock was $15.54.

 

THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE IN FAVOR OF THE
PROPOSED ADOPTION OF AN AMENDMENT AND RESTATEMENT OF THE
COEUR D’ALENE MINES CORPORATION 2003 LONG-TERM INCENTIVE PLAN.

 

 

The Audit Committee, which consists entirely of outside directors, is recommending approval of its appointment of KPMG LLP as independent registered public accounting firm for the Company to audit its consolidated financial statements for the year ending December 31, 2010 and to perform audit-related services, including review of the Company’s quarterly interim financial information and periodic reports and registration statements filed with the SEC and consultation in connection with various accounting and financial reporting matters. KPMG LLP audited the consolidated financial statements of the Company for the year ending December 31, 2009.

 

As a matter of good corporate governance, a resolution will be presented at the Annual Meeting to ratify the appointment by the Audit Committee of KPMG LLP to serve as the Company’s independent registered public accounting firm for the year ending December 31, 2010. If the shareholders do not approve the appointment of KPMG LLP, the Audit Committee will reconsider the appointment. Representatives of KPMG LLP are expected to be present at the Annual Meeting and will have the opportunity to make a statement, if they desire to do so, and are expected to be available to respond to appropriate questions.

 

The Board has put this proposal before the shareholders because the Board believes that seeking shareholder ratification of the appointment of the independent auditor is good corporate practice. If the appointment of KPMG LLP is not ratified, the Audit Committee will evaluate the basis for the shareholders’ vote when determining whether to continue the firm’s engagement.

 

THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE IN FAVOR OF THE RATIFICATION OF THE APPOINTMENT OF KPMG LLP AS THE COMPANY’S
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM.

 

Committees of the Board of Directors

 

Our Board of Directors met nine times during 2009. Our Board has established an Audit Committee in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) composed solely of outside directors and presently consisting of Messrs. Curran (Chairman), Robinson, Thompson and Winterer. The Audit Committee is responsible for reviewing and reporting to the Board of Directors with respect to various auditing and accounting matters, including the selection of our independent registered public accounting firm, the scope of the audit procedures, the nature of all audit and non-audit services to be performed, the performance of our independent registered public accounting firm and our accounting practices and policies. The Audit Committee met five times during 2009.

 

Our Board has a Compensation Committee, consisting of Messrs. Thompson (Chairman), Mellor, Robinson and Edwards. The Compensation Committee is responsible for determining and approving, together with the other independent members of the Board, the annual compensation of the Company’s Chief Executive Officer, determining the annual compensation of the non-CEO executive officers and the directors, overseeing the Company’s stock incentive plans and other executive benefit plans and providing guidance in the area of certain employee benefits. The Compensation Committee met five times during 2009.

 

Our Board has a Nominating and Corporate Governance Committee consisting of Messrs. Mellor (Chairman), Thompson, Winterer, Edwards and Bogert. The Nominating and Corporate Governance Committee is responsible for proposing nominees for the Board of Directors, establishing corporate governance guidelines and related corporate governance matters. The Nominating Committee and Corporate Governance met two times during 2009.

 

Our Board also has an Executive Committee on which Messrs. Wheeler (Chairman), Curran, Mellor, Robinson, Winterer and Lundquist currently serve. The Executive Committee is authorized to act in the place of the Board of Directors on limited matters that require action between Board meetings. The Executive Committee did not meet during 2009.

 

Our Board has determined that each of the following directors and director nominees are independent within the meaning of applicable New York Stock Exchange listing standards and rules: James J. Curran, John H. Robinson, Robert E. Mellor, Timothy R. Winterer, J. Kenneth Thompson, Sebastian Edwards and L. Michael Bogert. This includes each of the members of the Audit Committee, Compensation Committee, and Nominating and Corporate Governance Committee. As a result, all of our directors and nominees for director are independent except for Dennis E. Wheeler and Andrew Lundquist. Our Board determined that Mr. Vitale, who resigned from the Board effective March 17, 2009 was not independent because Deutsche Bank Securities Inc., an investment banking firm of which he was a managing director, received fees in 2006 and 2008 for investment banking services performed for the Company. In its evaluation of the directors’ independence, the Board considered the related person transactions with respect to Mr. Lundquist discussed below under “Certain Related Person Transactions.”

 

Copies of the charters of the Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee are available at our website, www.coeur.com, and to any shareholder who requests them. Each incumbent director attended at least 90% of the meetings of the Board of Directors and committees on which he served during 2009.

 

Policy Regarding Director Nominating Process

 

The Nominating and Corporate Governance Committee has adopted a policy pursuant to which a shareholder who has owned at least 1% of our outstanding shares of common stock for at least two years may recommend a director candidate that the Committee will consider when there is a vacancy on the board either as a result of a director resignation or an increase in the size of the Board. Such recommendation must be in writing addressed to the Chairman of the Nominating and Corporate Governance Committee at our principal executive offices and must be received by the Chairman at least 120 days prior to the anniversary date of the

release of the prior year’s proxy statement. Although the Committee has not formulated any specific minimum qualifications that the Committee believes must be met by a nominee that the Committee recommends to the board, the Committee will take into account the factors discussed above under “Director Nominee Experience and Qualifications.” The Committee does not believe that there will be any differences between the manner in which the Committee evaluates a nominee recommended by a shareholder and the manner in which the Committee evaluates nominees recommended by other persons.

 

Policy Regarding Shareholder Communications with Directors

 

Shareholders and other interested persons desiring to communicate with a director, the non-management directors as a group or the full Board may address such communication to the attention of Kelli Kast, Esq., General Counsel of the Company, 505 Front Avenue, P.O. Box I, Coeur d’Alene, Idaho 83816, and such communication will be forwarded to the intended recipient or recipients.

 

Policy Regarding Director Attendance at Annual Meetings

 

The Company has a policy that encourages directors to attend each annual meeting of shareholders, absent extraordinary circumstances. Each of the nine members of the Board attended the annual meeting on May 12, 2009.

 

Meetings of Non-Management Directors

 

Non-management members of the Board of Directors conduct regularly-scheduled meetings as required without members of management being present. Robert E. Mellor presides over each meeting of non-management directors.

 

Board Leadership

 

Currently, Mr. Dennis E. Wheeler serves as Chairman of the Board, President and Chief Executive Officer (“CEO”). The Board believes that the Company and its shareholders are best served at this time by this leadership structure, in which a single leader serves as Chairman and CEO and the Board has an independent presiding director in Mr. Robert E. Mellor. Combining the roles of Chairman and CEO makes clear that the person serving in these roles has primary responsibility for managing the Company’s business, under the oversight and review of the Board. The Board believes that this approach makes sense because the CEO is the individual with primary responsibility for implementing the Company’s strategy, directing the work of other officers and leading implementation of the Company’s strategic plans as approved by the Board. This structure results in a single leader being directly accountable to the Board and, through the Board, to shareholders, and enables the CEO to act as the key link between the Board and other members of management. It also facilitates the Board decision-making process because Mr. Wheeler, who has first-hand knowledge of our operations and the major issues facing Company, chairs the Board meetings where the Board discusses strategic and business issues.

 

In addition, the Board has established the position of presiding director. The presiding director is a director elected from time to time by the Board. Our current presiding director is Mr. Robert E. Mellor, an independent director who has served on our Board since 1998 and has served as presiding director since 2008. Mr. Mellor currently serves as the chairman of our Nominating and Corporate Governance Committee and as a member of our Compensation Committee and Executive Committee. As presiding director, Mr. Mellor presides over executive sessions of the non-management directors. The Board also maintains a procedure that allows interested parties to communicate directly and confidentially with the presiding director.

 

Furthermore, the Board has determined that seven of its nine directors are independent, and the Audit Committee, Compensation and Nominating Committee and Corporate Governance Committee are composed solely of independent directors. Consequently, the independent directors directly oversee such critical items as the Company’s financial statements, executive compensation, the selection and evaluation of directors and the development and implementation of our corporate governance programs.

The Board and Nominating and Corporate Governance Committee review the structure of Board and Company leadership as part of their annual review of the succession planning process. The Board believes that a single leader serving as Chairman and CEO, together with an experienced and engaged presiding director, and an Audit Committee, Compensation and Nominating Committee and Corporate Governance Committee consisting of independent directors, is the most appropriate leadership structure for the Board at this time.

 

Corporate Governance Guidelines and Code of Business Conduct and Ethics for Directors and Employees

 

The Board of Directors has adopted Corporate Governance Guidelines and a Code of Business Conduct and Ethics for Directors, Officers and Employees in accordance with New York Stock Exchange corporate governance listing standards. Copies of these documents are available at our website, www.coeur.com, and to any shareholder who requests them.

 

Compensation Consultant Fee Disclosure

 

The Compensation Committee of the Board of Directors (the “Committee”) acts on behalf of the Board to establish and oversee the Company’s executive compensation program in a manner that supports the Company’s business strategy as further set forth below under the heading “Role of Compensation Committee and its Consultant” in the “Compensation Discussion and Analysis” section below.

 

The Committee has retained Mercer (US) Inc. (“Mercer”), a wholly-owned subsidiary of Marsh & McLennan Companies, Inc. (“MMC”), to provide information, analyses and advice to the Committee regarding the Company’s executive and Board of Director compensation programs, as described below. Mercer is a global firm providing executive compensation and other human resource consulting services. Mercer reports directly to the Committee chair. Mercer’s fees for executive compensation consulting to the Committee in 2009 were $138,873.45.

 

The decisions made by the Committee are the responsibility of the Committee and may reflect factors and considerations other than the information and recommendations provided by Mercer, management or any other advisor to the Committee.

 

During 2009, other MMC affiliates provided the Company services unrelated to executive compensation. The amount received by the MMC affiliates, directly or indirectly, totaled $400,051 in 2009 and primarily related to brokering certain insurance policies carried by the Company. Neither the Board nor the Committee specifically approved the unrelated services.

 

Because of the policies and procedures Mercer and the Committee have in place, the Committee is confident that the advice it receives from the individual executive compensation consultant is objective and not influenced by Mercer’s or its affiliates’ relationships with the Company. These policies and procedures include:

 

 

 

While it is necessary for the consultant to interact with management to gather information, the Committee has adopted protocols governing if and when the consultant’s advice and recommendations can be shared with management. These protocols are included in the consultant’s engagement letter. The Committee also determines the appropriate forum for receiving consultant recommendations. Where appropriate, management invitees are present to provide context for the recommendations. In other cases, the Committee receives the consultant’s recommendations in executive sessions where management is not present. This approach protects the Committee’s ability to receive objective advice from the consultant so that the Committee may make independent decisions about executive compensation at the Company.

 

Risk Oversight

 

The Board of Directors is responsible for assessing the major risks facing the Company and reviewing options for their mitigation. In addition, the Board has delegated oversight of certain categories of risk to the Audit Committee. The Audit Committee reviews with management and the independent auditor compliance with laws, regulations and internal procedures and contingent liabilities and discusses policies with respect to risk assessment and risk management.

 

In performing their oversight responsibilities, the Board and the Audit Committee periodically discuss with management the Company’s policies with respect to risk assessment and risk management. The Audit Committee reports to the Board regularly on matters relating to the specific areas of risk the Audit Committee oversees.

 

Throughout the year, the Board and the Audit Committee each receive reports from management regarding major risks and exposures facing the Company and the steps management has taken to monitor and control such risks and exposures. In addition, throughout the year, the Board and the Audit Committee each dedicate a portion of their meetings to reviewing and discussing specific risk topics in greater detail.

 

The Compensation Committee is responsible for recommending compensation for executive officers that includes performance-based reward opportunities that support growth and innovation without encouraging or rewarding excessive risk.

 

Compensation Committee Role in Risk

 

In December 2009, the Compensation Committee conducted an analysis of the current risk profile of the Company’s compensation programs. The risk assessment included a review of the primary design features of the Company’s compensation programs and the process for determining executive and employee compensation. The risk assessment identified numerous ways in which the Company’s compensation programs potentially mitigate risk, including:

 

Audit and Non-Audit Fees

 

The following sets forth information relating to fees billed or incurred by the Company for professional services rendered to the Company for the each of the past two years:

 

 

None of the services described above were approved by the Audit Committee under the de minimus exception provided by Rule 2-01(c)(7)(i)(C) under Regulation S-X.

 

Audit Committee Policies and Procedures for Pre-Approval of Independent Auditor Services

 

The Audit Committee has policies and procedures requiring pre-approval by the Committee of the engagement of the Company’s independent auditor to perform audit as well as permissible non-audit services for the Company.

 

The nature of the policies and procedures depend upon the nature of the services involved, as follows:

 

 

 

With respect to the approval by the Audit Committee Chairman of audit, audit-related and tax services that do not exceed $50,000, the Chairman is required to report the matter to the full Audit Committee at its next meeting and the auditor will report on the scope and fee for such service in its annual report to the Committee. The Chief Financial Officer of the Company is responsible for tracking all independent auditor fees against the budget for such services and reports at least annually to the Audit Committee.

 

The following table sets forth information, as of March 19, 2010, concerning the beneficial ownership of our common stock by each beneficial holder of more than 5% of our outstanding shares of common stock, each of the nominees for election as directors, each of the executive officers listed in the Summary Compensation Table set forth below, and by all of our directors and executive officers as a group.

 

 

 

 

The Audit Committee of our Board of Directors, which currently consists of James J. Curran (Chairman), John H. Robinson, J. Kenneth Thompson and Timothy R. Winterer, is governed by its charter, a copy of which is available on our website at www.coeur.com. All the members of the Audit Committee are “independent” as defined in the rules of the Securities and Exchange Commission and the listing standards of the New York Stock Exchange. The Board of Directors has determined that James J. Curran, Chairman of the Audit Committee, is an “audit committee financial expert” within the meaning of rules adopted by the Securities and Exchange Commission.

 

The Audit Committee reviewed and discussed our audited financial statements for the year ended December 31, 2009 with management and our independent auditing firm, KPMG LLP. In that connection, the Audit Committee discussed with KPMG LLP the matters required to be discussed by Statement of Auditing Standards No. 61, as amended, as adopted by the Public Company Accounting Oversight Board in Rule 3200T (“SAS 61”). SAS 61 requires an auditor to communicate certain matters relating to the conduct of an audit to the Audit Committee including:

 

 

KPMG LLP reported to the Audit Committee that:

 

 

In addition, the Audit Committee received from KPMG LLP the written disclosures and the letter required by applicable requirements of the Public Company Accounting Oversight Board regarding KPMG

LLP’s communications with the Audit Committee concerning independence and the Audit Committee discussed KPMG LLP’s independence with KPMG LLP.

 

Based on the above-referenced review and discussions, the Audit Committee recommended to the Board of Directors that the financial statements be included in the Company’s Annual Report on Form 10-K for the year ending December 31, 2009, for filing with the Securities and Exchange Commission. Reference is made to the Audit Committee’s charter for additional information as to the responsibilities and activities of the Audit Committee.

 

Audit Committee of the Board of Directors
JAMES J. CURRAN, Chairman
JOHN H. ROBINSON
J. KENNETH THOMPSON
TIMOTHY R. WINTERER

 

Overview

 

Coeur is one of the world’s largest publicly-traded primary producers of silver, and has a significant presence in gold. Coeur is engaged in the development, exploration and operation of silver and gold mining properties, with operations in six countries. In 2009, Coeur had sales of $300.6 million, with approximately 79% of revenues from sales of silver. Coeur’s primary business objectives are to increase production levels and reserves, decrease cash-production costs, and increase cash flows and earnings. Coeur aims to meet these objectives through cost-competitive operations, internal development projects, exploration and acquisitions. Additional information about Coeur is available at our website, www.coeur.com.

 

The following is a discussion of Coeur’s executive compensation program and compensation decisions made with respect to the Company’s named executive officers (“NEOs”) listed in the 2009 Summary Compensation Table.

 

Role of the Compensation Committee and its Consultant

 

The Compensation Committee of the Board of Directors (the “Committee”) acts on behalf of the Board to establish and oversee the Company’s executive compensation program in a manner that supports the Company’s business strategy. The Committee may not delegate its responsibilities in connection with executive compensation. The Committee formulates an annual calendar for its activity that is designed to cover necessary regular approvals as well as special topics. The Committee meets at least twice annually, or more frequently as circumstances dictate, in order to set executive compensation for the year, review recommendations of its outside consultant, and recommend compensation changes to the Board of Directors. The Committee met five times in 2009.

 

As further described under the heading “Compensation Consultant Fee Disclosure” in the “Corporate Governance” section above, the Committee has retained Mercer (US) Inc. (“Mercer”) to provide information, analyses, and advice regarding executive and director compensation, as described below. Mercer is a global firm providing executive compensation and other human resource consulting services. Mercer reports directly to the Committee chair.

 

At the Committee’s direction, Mercer provided the following services for the Committee during 2009:

 

 

In the course of conducting its activities during 2009, Mercer attended four meetings of the Compensation Committee and presented its findings and recommendations for discussion.

Compensation Objectives and Principles

 

The primary objective of the Company’s executive compensation program is to motivate the Company’s executives to achieve goals that are consistent with the Company’s business strategies and that create shareholder value. Consequently, a majority of Coeur’s executives’ compensation opportunities are in the form of at-risk incentives that require performance against measurable objectives or an increase in long-term shareholder value to result in payouts.

 

The second fundamental objective of the Company’s executive compensation program is to attract and retain highly-skilled executives. Increased mining activity world-wide in recent years has resulted in a significant increase in demand for executive and professional talent with technical skills and industry experience. In addition, over the past decade and a half, fewer people have entered the mining industry and several mining schools have closed, resulting in a shortage of industry talent. As a result of these talent market pressures, Coeur’s executives and professionals are routinely pursued by competitors, and some of the Company’s valued talent has left the Company for other opportunities. Attraction and retention of executive talent is thus a significant factor in many of the compensation decisions discussed below.

 

In order to meet these compensation objectives in the design and governance of compensation programs for the Company’s executive officers, including the NEOs, the Committee is guided by the following principles that express the Committee’s view that compensation at Coeur should be:

 

 

Reward Company-wide results in addition to recognizing individual performance, focusing on objectives that are directly under the control of executives.

 

 

Compared to mining industry peers, target total compensation at the market 75th percentile level in order to attract, motivate and retain high caliber talent.

 

 

Provide a significant portion of incentive compensation to executives in the form of equity-based awards. Award values fluctuate based on share value thus aligning officer and shareholder interests.

 

 

Clearly communicate both the desired results and the incentive pay programs used to reward the achievement of these results.

 

In 2009, our executive officer compensation program used the components identified in the following table:

 

 

Determining Executive Compensation

 

Coeur’s compensation objectives and principles are supported in the compensation-setting process through a number of policies and processes.

 

Total Compensation:  In determining the mix of compensation components and the value of each component for each of the Company’s executive officers, including its NEOs, the Committee takes into account the executive’s role, the competitive market, individual and Company performance, and internal equity. The Committee does not make use of tally sheets, nor are amounts realized or realizable from prior compensation awards considered in setting of the current year’s compensation. Details of the various programs and how they support the overall business strategy are outlined below in “Compensation Components.”

 

Variable Pay at Risk:  Consistent with a performance-based philosophy, Coeur’s compensation program emphasizes pay at risk. The percentage of an executive’s compensation opportunity that is at risk or variable instead of fixed is based primarily on the executive’s role in the Company. Executives who are in a greater position to directly influence our overall performance have a larger portion of their pay at risk through short and long-term incentive programs compared to other executives. Typically, at least 50% of the target total

compensation opportunity for our executives is in the form of variable compensation. The CEO has more pay at risk than the other NEOs, consistent with the competitive market. The mix of compensation elements for our NEOs in 2009, as a percentage of total compensation, is set forth in the table below:

 

 

Market Positioning:  The Committee’s policy is to target the components of compensation relative to the competitive market (as defined below under “Competitive Market Assessments”) as follows:

 

 

The Committee has established this positioning approach based on both industry experience and the continued expectation that above-market positioning is necessary in order to attract and retain experienced and high caliber executive talent in the highly competitive mining talent market. In any given year, an individual executive’s compensation may be set above or below the target market positioning, depending on the individual executive’s experience, recent performance and expected future contribution, retention concerns, and internal equity among the executives. Details regarding actual compensation in 2009 and a comparison to targets are outlined below in “Compensation Components.”

 

Competitive Market Assessment:  The Committee annually reviews the compensation of the executives relative to the competitive market, based on an assessment prepared by Mercer. This review typically takes place at the Committee’s regular first quarter meeting (historically between January and mid-March). Mercer’s assessment is typically prepared in the fourth quarter of the prior year, and includes an evaluation of base salary and annual and long-term incentive opportunities. In preparing this assessment, Mercer uses publicly-disclosed data from a peer group of metal and mineral mining companies (see discussion below). Mercer also uses mining industry data collected from surveys published by The Hay Group and PricewaterhouseCoopers, and general industry data collected from surveys published by Mercer and Watson Wyatt. The Committee weighs the peer group and survey data equally in developing a market composite for each executive position. The Committee is not provided with the names of the companies in any of the survey data.

 

At the request of the Committee, in late 2008, upon input from Mercer regarding industry wide practices in freezing 2009 executive compensation at 2008 levels due to the global economic downturn that began in 2008, the Committee decided to use the competitive pay information from Mercer’s 2008 market assessment to inform compensation decisions for 2009, because the Committee believed that market pay levels in 2009 would remain consistent with the prior year.

 

Peer Group:  As a member of the precious metals mining industry, Coeur competes for executive talent with other precious metals mining companies, as well as with base metal and mineral mining companies. As such, the Committee uses a peer group composed primarily of companies in the precious metals mining industry of comparable size, level of complexity and scope of operations to Coeur. In addition, the Committee considers companies that are based in either the United States or Canada as part of the Company’s executive talent market.

The peer group is used in the market comparison for NEO pay levels (as described above). The Committee reviews the peer group each year in consultation with Mercer to determine its continued validity as a source of competitive compensation data, and adds or removes companies as appropriate. For the 2008 competitive market assessment — which was used again by the Committee in 2009 — the peer group consisted of the following companies:

 

 

 

Even though Coeur’s 2008 revenue was below that of the peer companies, the Committee determined that these companies continued to form a suitable peer group for the executive compensation review in 2009, based on the following considerations: the Company’s key labor market for executive talent consists primarily of these named companies; the Company’s level of complexity and scope of operations is similar to these companies (i.e., exploration and development of silver and gold mines, with operations in several foreign countries); and it was expected that the Company’s 2009 revenue would significantly exceed 2008 revenue due to the beginning of booking silver sales from Palmarejo in the first half of 2009.

 

Compensation Components

 

The specific rationale, design, determination of amounts and related information regarding each of the components of Coeur’s executive officer compensation program are outlined below.

 

Base Salary

 

The annual base compensation for our executives is structured to ensure that we are able to attract and retain high caliber executives capable of achieving our strategic and business objectives. As described above in “Determining Executive Compensation”, we target base salaries between the 50th and 75th percentile levels of the competitive market. The Committee reviews executive salaries annually as part of its competitive market assessment and makes adjustments based on the actual positioning relative to market compared to the desired positioning, the individual executive’s position, organization level, scope of responsibility, tenure and experience, education and expected future contribution. Adjustments are approved at the Committee’s regular first quarter meeting and are applied retroactively to the beginning of the year.

In light of the global economic downturn and the potential implications for the Company’s business strategies, the Company implemented a freeze of base salary levels for its executive officers in their current positions during 2009. However, the Committee approved an increase in base salary for Ms. Kast upon her promotion to Senior Vice President, General Counsel, Chief Administrative Officer and Corporate Secretary, effective March 17, 2009. The following table shows the base salaries for the CEO and the other NEOs in effect for 2009:

 

 

Mr. Wheeler’s base salary is higher than that of the other NEOs due to the fact that he is the top executive in the Company and has been a substantial contributor to its performance for over 30 years. Mr. Wheeler has held several executive-level positions during his tenure at Coeur, including the positions of General Counsel, President, Chief Executive Officer and Chairman of the Board of Directors, often holding more than one top position at the same time, as is currently the situation. Mr. Wheeler has a broad and deep knowledge of the mining industry, the investment community that focuses on this industry, the major industry influences (including peer companies, individuals, educational institutions and industry-focused organizations), government elements (both political and bureaucratic) and interested non-governmental organizations. This breadth of industry and executive knowledge and leadership ability places his value well above others within the organization. By comparison to the market competitive target, the Company believes he is properly compensated. This same process of recognizing an individual’s skills, abilities, talent, contribution and tenure, in light of market competiveness, is used in determining the base salary of each NEO.

 

Below is a table showing the 2009 base salary for each NEO compared to the 2008 competitive market range used by the Committee in its 2009 executive compensation review:

 

 

 

(a) Comparative market data presented for Ms. Kast is 2009 market data for the positions of Senior Vice President, General Counsel and Chief Administrative Officer, which she assumed in early 2009.

 

Annual Incentive Plan (“AIP”)

 

The AIP is an annual cash incentive plan that rewards executives for the achievement of annual Company financial and operational goals and for the achievement of individual executive goals.

AIP Target Opportunities:  Under the AIP, each executive has a target award opportunity expressed as a percentage of base salary established at the beginning of each year. The target award opportunities are determined based on the competitive market and the desired market positioning, the individual executive’s position, organization level, scope of responsibility and ability to impact our performance, and internal equity among the executives. Based on these criteria, the target AIP award opportunities in 2009 were not changed from 2008 levels and remain as follows:

 

 

(a) Comparative market data presented for Ms. Kast is 2009 market data for the positions of Senior Vice President, General Counsel and Chief Administrative Officer, which she assumed in early 2009.

 

As with base salary, Mr. Wheeler’s target AIP opportunity is substantially higher than that of the other NEOs for the reasons described above with respect to his base salary.

 

Actual awards are paid after the end of each year and can range from 0% to 200% of the target awards, based on the actual performance of the Company and the individual executives versus goals.

 

AIP Performance Measures and Weights:  For 2009, Company performance was measured against predetermined annual goals established by the Committee for the following four measures (three of which are the same as in 2008):

 

 

For 2009, operating cash flow replaces the previous operating net income measure. Considering the need for the Company to maintain a strong liquidity position, the Committee decided that operating cash flow is more appropriate as a key metric for executives. Operating cash flow excludes the effects of non-cash accounting adjustments that are included in operating net income. The Company believes this results in a more appropriate measurement of the Company’s actual liquidity over which Company executives have more operational control and influence than net income.

 

The four measures are weighted equally (i.e., 25% each) in determining overall Company performance. The Committee selected these metrics and weights based on the following considerations and objectives. For example, production, operating cash flow and growth in gross investment meet the growth objective, and cash operating cost per ounce and cash flow return on investment meet the profitability objective.

 

 

 

In addition to Company measures, specific individual objectives are developed for each executive at the beginning of the year. These individual objectives are typically operational or strategic in nature and are intended to support the Company objectives. Objectives for executives other than the CEO are established by the CEO and reviewed by the Committee. Objectives for the CEO are established by the Committee and reviewed with the other independent members of the Board. The specific objectives for each executive are chosen to reflect each executive’s individual responsibilities, and can be grouped into the following broad categories:

 

 

To promote collaboration among Coeur’s senior leadership as well as personal accountability, 50% of each executive’s AIP award is based on Company performance and 50% is based on each executive’s individual performance. The Committee evaluates the AIP performance measures and weights each year to ensure that they reflect the objectives of the plan and are consistent with the Committee’s stated compensation principles. These weights were not changed from 2008.

 

AIP Performance Goal Setting and Payout Leverage:  Management develops threshold, target and maximum performance goals for each Company AIP measure based on a variety of factors, including historical Company performance, internal budgets and forecasts, peer performance, and industry and market expectations. The Committee reviews the goals and adjusts them, as it deems appropriate, prior to granting its approval. Once the performance goals are set, they are not subject to change for that plan year without the specific approval of the Board. No adjustments were made to the 2009 goals.

 

For 2009, the Company AIP goals were set as follows, based upon budgeted metals prices of $10.00 per ounce of silver and $750.00 per ounce of gold (subject to adjustment for actual prices, as described below):

 

 

The threshold and maximum goals for production, cost and operating net income goals represent a +/- 10% variance around target, while the CFROI and GGI goals represent a +/- 20% variance around target. Production, cost and operating cash flow measures pay out at 50% of target for threshold performance and at 0% of target if threshold performance is not achieved. CFROI and GGI pay out at 0% of target for threshold performance. All measures pay out at 100% of target for target performance, and at 200% of target for performance that meets or exceeds the maximum. Payouts are interpolated for performance between threshold and target and between target and maximum.

Many of the individual objectives established for the executives are objective and quantifiable, which helps ensure accountability for results. Others, however, are subjective by nature, which requires the exercise of discretion and judgment to assess performance attainment. AIP payouts for individual performance range from 0% to 200% of target, as follows:

 

 

AIP Earned Awards:  Following the end of the year, the Committee reviews the Company’s actual performance and determines the extent of goal achievement. The Committee adjusts the actual operating cash flow and CFROI for actual realized metal prices during the year that differed from the assumptions that went into setting the goals. This is done in order to make the goals neutral to fluctuations in the market prices of silver and gold, which are beyond the control of the Company and its executives. The Committee makes this adjustment in the interest of fairness to both the executives and shareholders.

 

In addition, following the end of the year, the CEO reviews and reports to the Committee the performance of the other executives on their individual objectives and determines the level of achievement compared to target for each executive. The Committee, together with the other independent members of the Board, reviews the performance of the CEO on his individual objectives and determines the level of achievement compared to target. Determining the overall level of achievement for each executive on his or her individual objectives includes a significant discretionary assessment. AIP awards are normally paid in cash no later than March 15 following the end of the AIP plan year, subject to withholding of applicable taxes.

 

2009 AIP Calculation and Payments:  For 2009, the payout percentage for Company performance was 25% of target, calculated as follows:

 

 

The level of individual performance achievement for our NEOs in 2009 was assessed as follows:

 

In determining the CEO’s individual performance achievement, the Committee, together with the other independent members of the Board, considered their evaluation of Mr. Wheeler’s performance against his financial, operational and strategic goals for 2009. The Committee determined that the CEO’s individual performance achievement was 150% of target, noting that under his leadership, the Company successfully completed its strategic plan to transform into a company with three large-scale, long-life precious metals mines, with approximately 45% growth in silver production and 61% growth in gold production during the year.

 

In addition to certain milestones directly related to progress at Palmarejo Mine (Mexico), San Bartolomé Mine (Bolivia) and Kensington Mine (Alaska), the Company’s three largest operations, Mr. Wheeler’s individual performance goals for 2009 included holding executive officers accountable for their performance, specifically in areas of safety, environmental compliance, production, operating and overhead cash costs, capital expenditures and exploration reserve additions. Mr. Wheeler steered a steady course for the Company through 2009. The Company reduced its total debt by over $150 million, or 37%, successfully completed a 1-for-10 reverse stock split, secured access to capital for the completion of the three mines noted above, and perhaps most notably received a favorable U.S. Supreme Court decision in on its Kensington Mine tailings litigation, which decision resulted in the subsequent re-issuance of the U.S. Army Corps of Engineers 404 permit allowing the Company to move forward toward a planned 2010 startup. Additionally, the Company was recognized by the International Society of Mine Safety Professionals with six national and international safety awards relating to its operating and exploration properties in North and South America.

 

Set forth below is a description of the individual objectives established for each NEO for 2009 and a discussion as to whether such objectives were achieved.

 

Dennis E. Wheeler

 

 

Mitchell J. Krebs

 

 

Richard M. Weston

 

 

 

Donald J. Birak

 

 

Kelli C. Kast

 

 

 

For 2009, based on the Company and individual NEO performance achievement as a percentage of target and the performance weights described above, the Committee approved annual incentive payments to the NEOs (together with the other independent members of the Board for the CEO) as follows:

 

 

Discretionary Bonus Payments

 

The Committee has the discretion to award cash or equity bonuses outside of the parameters of the AIP formula. However, such discretionary bonuses are infrequently awarded. Factors that the Committee may consider in deciding whether to award such bonuses include extraordinary personal or Company achievement or results due to the individual’s leadership, direction or effort, either within or outside of the specific objectives established under the AIP. Prior to granting the special achievement and major transaction bonuses noted in our 2008 Proxy Statement, the Committee had not previously exercised its discretionary ability to direct such bonus payments. The Committee may also limit AIP awards when performance criteria are satisfied.

 

In 2009, the Committee awarded discretionary bonuses as follows:

 

Major Transaction Bonus:  In December 2007, the Company completed the acquisition of Palmarejo Silver and Gold Corporation and Bolnisi Gold. In recognition of the successful close of the transaction, which required a level of effort during 2007 that was significantly over and above the ongoing responsibilities of the key employees responsible for the transaction, the Committee, together with the other independent members of the Board, determined in January 2008 that it was appropriate to award a special one-time “Major Transaction Bonus” to these employees. These employees included our current NEOs. One-half of the Major Transaction Bonus was paid in cash in January 2008. The other half was paid in cash in the second quarter of 2009 after the Company booked silver sales from Palmarejo. The Committee determined that deferring the payout of the second half of the transaction bonus balances the interests of both the recipients and shareholders, in that it recognizes the successful close of the transaction and also ensures that there is alignment between the bonus

and the expected benefits of acquisition. The current NEOs who were awarded a Major Transaction Bonus and the portion of the bonus amounts paid in 2009 are as follows:

 

 

Mr. Krebs was awarded a larger bonus as a percentage of salary than the other NEOs, based on the Committee’s assessment that his contribution to the transaction exceeded that of the other NEOs. The Board reserves the right to pay — or not to pay — a major transaction bonus for any future transactions, as it deems appropriate.

 

Long-Term Incentive Plan (LTIP)

 

The primary purpose of our long-term incentive plan is to align the interests of our executives with those of the shareholders by rewarding the executives for creating shareholder value over the long term. The LTIP is also an attractive vehicle for attracting and retaining executive talent in the highly competitive mining market.

 

Forms and Mix of Long-Term Incentive Compensation:  The Company’s 2003 Long-Term Incentive Plan provides for the award of stock options, stock appreciation rights, restricted stock and restricted stock units, performance shares and performance units, and cash-based awards. Since 2006, the Committee has used stock options, restricted stock, and performance shares in its LTIP grants to executives, with one-third of the total long-term incentive value in each of these three forms of equity. The Committee believes that this mix provides alignment with shareholder interests, balances incentive and retention needs, and minimizes share dilution. Stock options provide alignment with shareholder interests by focusing the executives on creating shareholder value over the long-term via share price appreciation. Restricted stock is granted with a three-year service vesting requirement for retention purposes, while also providing alignment with shareholders via actual share ownership. Performance shares are earned based on total shareholder return performance relative to the companies in our peer group.

 

LTIP grants are made on an annual basis. This enables the Committee to adjust the levels, forms, and mix of long-term incentive grants, as appropriate, to respond to changes in the precious metal mining industry and the broader market, as well as to respond to Company-specific changes and issues. The Committee does not take into account prior equity awards when making annual equity awards to executives.

 

For LTIP grants made in early 2009, the Committee approved grants of cash-settled stock appreciation rights, restricted stock units and performance units, in addition to grants of stock options, restricted stock, and performance shares. The cash-settled grants have the same terms as the equity-based grants and provide identical payout opportunities. The purpose of making these non-equity grants was to minimize the level of shareholder dilution resulting from the 2009 LTIP grants, reflecting the impact of the significant drop in the Company’s share price over the past year on the number of shares needed for the grants, even though the actual LTIP grants made to each executive were significantly below the target grant levels, as discussed below in “LTIP Target Opportunities.” The specific terms of the long-term incentives granted to our NEOs in 2009 are disclosed in the 2009 Grants of Plan-Based Awards table included in this proxy statement.

 

For LTIP grants made in early 2010, only cash-settled stock appreciation rights, restricted stock units and performance units were used, due to limited number of shares remaining in the 2003 Long-Term Incentive Plan to make equity-based grants.

 

Timing of Long-Term Incentive Awards:  The Committee makes annual long-term incentive grants to the Company’s executives at its regular first quarter meeting. In 2009, the grants were approved at the February Committee meeting. Grants to the CEO are approved by the independent members of the Board, including the

members of the Committee. Grants to the non-CEO executive officers are approved by the Committee, based on the recommendations of the CEO. The Committee meeting date is the effective grant date for equity grants, unless Board approval is required. The exercise price for stock options and the grant price for restricted stock and performance shares is the greater of the closing price of the stock on the day of grant (or the day after the grant day if the grant day falls on a weekend or non-market day) or the par value per share. For executives who are hired or appointed during the year, the Committee recommends compensation levels in connection with the Board’s appointment of the executive and may approve equity grants for the executive. The Committee does not coordinate the timing of equity awards with the release of material, non-public information.

 

LTIP Target Opportunities:  The Committee has established target levels of long-term incentive awards for each executive expressed as a percentage of base salary. The levels are determined based on the competitive market and the desired market positioning, the individual executive’s position, organization level, scope of responsibility, ability to impact our performance, and internal equity among the executives. In 2008, the Committee approved an increase in the target long-term incentive values as a percentage of base salary for our executives, beginning with the grants made in 2009. The current target long-term incentive values as a percentage of base salary for our NEOs are as follows:

 

 

 

Although the 2009 target LTIP opportunities were increased from 2008 levels, the actual LTIP grants approved by the Committee in February 2009 were significantly below these new levels, and approximated the value of the 2008 LTIP grants. This is because on the date of grant, prior to the effectiveness of the 1-for-10 reverse share split effective May 26, 2009, the closing price of the Company’s common stock was $0.69. However, the par value of the Company’s common stock at that time was $1.00 per share, and as discussed above in “Timing of Long-Term Incentive Awards,” grants are made based on the greater of these two values. As a result, fewer awards were granted than would have been had the actual share price been used to determine the awards. The Committee believed that in light of the global economic downturn and the decline in Company’s share price, providing LTIP grants below the intended target levels was appropriate for the 2009 grants.

 

Stock Options:  Stock options (including stock appreciation rights) represent one-third of the target LTIP value granted to Coeur’s executives (including our NEOs) in 2009. The number of options granted is determined by dividing the total option grant value by the Black-Scholes value of a single option. The Committee believes that options provide an incentive for executives to drive long-term share price appreciation through the development and execution of effective long-term business strategies. Stock options are issued at the higher of the par value per share or 100% of the fair market value to assure that executives will receive a benefit only when the stock price increases. Stock options therefore align executives’ interests with those of shareholders. Stock options granted in 2009 had an exercise price of $1.00 (as a result of the Company’s 1-for-10 reverse stock split, these stock options now have an exercise price of $10), which represented a 45% reduction in value to the executive as that price was $0.31 above the closing price of Coeur’s common stock on the date of grant. Stock options generally have value for the executive only if the executive remains employed for the period required for the options to vest. Stock options therefore provide retention value. Stock options granted in 2009 vest at a rate of 331/3% per year and expire at the end of ten years (or earlier in the case of termination of employment).

Restricted Stock:  Restricted stock (including restricted stock units) represents one-third of the target LTIP value granted to Coeur’s executives (including our NEOs) in 2009. The number of restricted shares granted is determined by dividing the total restricted stock grant value by the higher of the par value per share or the fair market value, as described above. The number of restricted shares granted in 2009 was based on the $1.00 par value, which represented a 45% reduction in value to the executive as that price was $0.31 above the closing price of Coeur’s common stock on the date of grant. The Committee believes that restricted stock aligns executives’ interests with those of shareholders via actual share ownership while also providing retention value and therefore also continuity in the Company’s senior leadership team. Restricted stock also balances the more volatile rewards associated with stock options by providing value to the executives even with a declining share price, which may occur due to general market or industry-specific forces that are beyond the control of the executives (for example, a drop in the market prices of silver and gold). Restricted stock granted in 2009 vests at a rate of 331/3% per year based on continued employment with the Company. Holders of restricted stock may, if the Committee so determines, receive dividends, if any, and exercise voting rights on their restricted stock during the period of restriction. There are no performance restrictions associated with the grants of restricted stock. The Committee may grant restricted stock with alternative vesting schedules or with performance restrictions as deemed necessary to achieve the desired business goals.

 

Performance Shares:  Performance shares (including performance units) represent one-third of the target LTIP value granted to Coeur’s executives (including our NEOs) in 2009. The target number of performance shares granted is determined by dividing the target performance share grant value by the higher of the par value per share or the fair market value, as defined above. As with restricted stock, the number of performance shares granted in 2009 was based on the $1.00 par value, which represented a 45% reduction in value to the executive as that price was $0.31 above the closing price of Coeur’s common stock on the date of grant. Performance is measured over a three-year period in comparison to the peer group described above. Performance shares are earned based on our total shareholder return (“TSR”) performance over a three-year period relative to our peer group. TSR is defined as stock price appreciation plus dividends and any cash-equivalent distributions. TSR is calculated using the three-month average share price at the beginning and end of the period (i.e., three-month averages ending December 31, 2008 and December 31, 2011 for the 2009-2011 grant). This measure is intended to focus the Company’s executives on creating shareholder value, while further aligning executives’ interests with those of shareholders via the use of shares. Performance is measured relative to peers in order to mitigate the impact of metal prices on the ultimate award value, as the share prices of our peers are similarly influenced by realized metal prices. Measuring TSR relative to peers also aligns executives’ interests with those of shareholders by rewarding the creation of shareholder value in excess of what our shareholders could realize by investing in other companies in our industry. For the 2009-2011 performance period, the relative TSR performance scale and the corresponding number of shares earned as a percentage of target were set by the Committee as follows (unchanged from prior performance periods):

 

 

No performance shares are earned if the Company’s performance is below threshold. The number of performance shares earned is interpolated for relative TSR performance between threshold and target levels and for performance between target and maximum levels. As performance shares are earned, shares of Coeur common stock are issued to the participant.

 

For the 2007-2009 performance period, the Company performed below the 25th percentile of the peer group and therefore no performance shares were earned. The table below sets forth the threshold, target and maximum TSR performance levels for the 2007-2009 performance period, corresponding respectively to the 25th, 50th and 75th percentile TSR performance of the peer group, and the Company’s TSR performance.

 

 

Benefits and Perquisites

 

The primary purpose of providing benefits and limited perquisites to Coeur’s executives is to attract and retain the talent to manage the Company. The Committee intends the type and value of benefits and perquisites offered to be competitive with overall market practices. Details of the benefits and perquisites provided to our NEOs are disclosed in the “All Other Compensation” column of the 2009 Summary Compensation Table set forth in this proxy statement.

 

The primary benefits for the Company’s executives include participation in the Company’s broad-based plans: the 401(k) and defined contribution retirement plans (which includes matching Company contributions), health and dental coverage, various Company-paid insurance plans, including disability and life insurance, paid time off and paid holidays. The Company also provides certain expatriate benefits and supplementary allowances to its expatriate employees, as the Company deems appropriate and consistent with typical market practices.

 

With respect to perquisites, Coeur prefers to take a minimalist approach. In general, Coeur will provide a specific perquisite only when the perquisite provides competitive value and promotes retention of executives, or when the perquisite provides shareholder value, such as ensuring the health of the executives. In addition, perquisites that promote efficient performance of the Company’s executives are also considered. The limited perquisites Coeur provides its executives may include an automobile allowance or Company vehicle and fuel allowance, physical exam, and home office expense.

 

Employment Agreements

 

The Company has employment agreements with each of its Named Executive Officers. Each agreement specifies the terms and conditions of employment, the duties and responsibilities of the executive during the term, the compensation and benefits to be provided by the Company in exchange for the executive’s services, the compensation and benefits to be provided by the Company in the event of a qualifying termination of employment not preceded by a change-in-control of the Company, and the compensation and benefits to be provided by the Company in the event of a qualifying termination of employment that is preceded by a change-in-control of the Company. The Compensation Committee believes that such agreements benefit the Company by clarifying the terms of employment and ensuring the Company is protected by noncompete and nondisclosure provisions.

 

All of the employment agreements and severance and change-in-control provisions were developed by the Company and the Compensation Committee based on market and industry competitive practice. The Company periodically reviews, along with the Compensation Committee, the benefits provided under the agreements to ensure that they continue to serve Coeur’s interests in retaining these key executives, are consistent with market and industry practice, and are reasonable.

 

The Company has an employment agreement with Dennis E. Wheeler, Chairman of the Board, President and Chief Executive Officer, which provides for a term of employment through December 31, 2010 unless terminated or modified by the Company by written notice, subject to the terms and conditions of the agreement. Mr. Wheeler’s employment agreement calls for a base salary of $587,633 plus annual incentive compensation, and in the event of his death, his employment agreement provides for a lump sum payment to his estate of an amount equal to his annual base salary and eligible annual incentive plan payment at the time

of his death. The Company additionally has a change-in-control agreement with Mr. Wheeler more fully described below under “Termination of Employment/Severance and Change-in-Control Arrangements— Chairman of the Board, President and Chief Executive Officer.”

 

The Company has an employment agreement with Richard M. Weston, Senior Vice President, Operations, which provides for a term of employment through July 31, 2010. His agreement calls for a base salary of $289,820 plus annual incentive compensation and certain expatriate benefits. Mr. Weston’s employment agreement includes change-in-control provisions as described below under “Termination of Employment/Severance and Change-in-Control Arrangements — Executive Officers Other Than CEO”. Mr. Weston resigned from the Company due to personal reasons, effective March 31, 2010.

 

Effective July 31, 2009, the Company entered into an amendment to our employment agreement with Mitchell J. Krebs, pursuant to which he is employed as Senior Vice President and Chief Financial Officer, extending the term through July 31, 2011. His agreement calls for a base salary of $262,449 plus annual incentive compensation. Mr. Krebs’s employment agreement includes change-in-control provisions as described below under “Termination of Employment/Severance and Change-in-Control Arrangements — Executive Officers Other Than CEO”.

 

Effective July 31, 2009, the Company entered into an amendment to our employment agreement with Donald J. Birak, pursuant to which he is employed as Senior Vice President, Exploration, extending the term through July 31, 2011. His agreement calls for a base salary of $262,449 plus annual incentive compensation. Mr. Birak’s employment agreement includes change-in-control provisions as described below under “Termination of Employment/Severance and Change-in-Control Arrangements — Executive Officers Other Than CEO”.

 

Effective July 31, 2009, the Company entered into an amendment to our employment agreement with Kelli C. Kast, pursuant to which she is employed as Senior Vice President, General Counsel, Chief Administrative Officer and Corporate Secretary, extending the term through July 31, 2011. Her agreement calls for a base salary of $262,449 plus annual incentive compensation. Ms. Kast’s employment agreement includes the same change-in-control provisions as described below under “Termination of Employment/Severance and Change-in-Control Arrangements — Executive Officers Other Than CEO”.

 

In addition to the above described employment agreements, the Company has change-in-control agreements with a total of seven executive officers that provide for certain benefits that would be payable to the executives in the event of a change-in-control followed by the termination of the executive’s employment within two years for any reason other than termination for cause, disability, death, normal retirement or early retirement. These agreements continue from year to year unless terminated by the Company by written notice.

 

Termination of Employment/Severance and Change-in-Control Arrangements

 

Executive Officers Other Than CEO

 

The Committee believes severance arrangements are an essential component of the executive compensation program and are necessary to attract and retain senior talent in a highly competitive market. Regarding the change-in-control provisions, the Committee believes that these agreements provide reasonable compensation in the unique circumstances of a change-in-control that are not provided by the Company’s other compensation programs. The Committee believes that change-in-control benefits, if structured appropriately, serve to minimize the distraction caused by a potential change-in-control transaction and reduce the risk that key talent would leave the Company before a change-in-control transaction closes. The Committee also believes that these provisions motivate executives to make decisions that are in the best interests of the shareholders should a transaction take place by providing executives with the necessary job stability and financial security during a change-in-control transaction (and the subsequent period of uncertainty) to help them stay focused on managing the Company rather than on their own personal employment situation. The Committee believes that all of these objectives serve the shareholders’ interests.

Each of the following constitute a change-in-control under the Company’s change-in-control agreements with the NEOs other than the CEO:

 

 

If a change-in-control occurs, an executive shall be entitled to the benefits described below only upon a subsequent involuntary termination, whether actual or constructive, of the executive’s employment within the two year period immediately following the change-in-control, for any reason other than termination for cause, disability, death, normal retirement or early retirement. Termination for “cause” is termination of employment on account of (i) fraud, misrepresentation, theft or embezzlement, (ii) intentional violation of laws involving moral turpitude or which is materially injurious to the Company, (iii) willful and continued failure by the executive substantially to perform his or her duties with the Company or its subsidiaries (other than failure resulting from the executive’s incapacity due to physical or mental illness) after a demand for substantial performance is delivered to the executive by the President or the Chairman of the Board of the Company, which demand specifically identifies the manner in which the executive has not substantially performed his or her duties.

 

The following benefits are payable to an executive in the event of a qualifying termination of employment within two years following a change-in-control:

 

 

For all of the NEOs except the CEO, the agreements provide for special circumstances in the event the payment provided would constitute a “parachute payment” under Section 280G of the Internal Revenue Code. In this case, the payment will be reduced to the amount that will result in no portion being subject to the excise tax. This clause limits the exposure of the Company and the executives to the parachute payment rules. Because of the critical nature of the CEO position, the change-in-control agreement for the CEO provides that for any payment that qualifies as an “excess parachute payment,” the Company will pay an additional amount

in cash so that the net amount retained by the CEO after the deduction of all applicable taxes will be equal to the initial change-in-control payment.

 

Chairman of the Board, President and Chief Executive Officer

 

Coeur has a change-in-control Agreement with Dennis E. Wheeler in similar form to the above described executive change-in-control agreements with the exception of the definition of change-in-control and the benefits available in connection with a change-in-control and subsequent qualifying termination. Under this change-in-control agreement, the definition of change-in-control is as follows:

 

 

If a qualifying termination of employment occurs within two years following the change-in-control, Mr. Wheeler will receive the following:

 

 

In addition, provided that Mr. Wheeler executes a release of claims against the Company that is effective within 60 days following the date of termination, Mr. Wheeler will receive:

 

 

Supplementary Compensation Policies

 

The Committee has established additional policies to ensure that the overall compensation structure is responsive to shareholder interests and competitive with the market. These specific policies are outlined below. The Committee has not established a “clawback” policy to recoup incentive awards that were earned based on performance that was later restated or adjusted, so that the awards would not have been earned. The Committee has also not established a stock ownership policy or holding period requirements for Company stock earned from LTIP grants.

 

Limitations on Deductibility of Compensation

 

Section 162(m) of the Internal Revenue Code generally limits the deductibility of compensation paid by a public company to certain of its most highly compensated executives to $1 million, per executive, per year. However, there are exceptions for payments made by a public company due to death, disability, a change-in-control or for those payments that are performance based. In February of 2008, the Internal Revenue Service issued various rulings that concluded payments made pursuant to employment contracts, irrespective of performance, based upon voluntary retirement, resignation or termination without cause will prevent such compensation from meeting the performance-based exception, even in years the performance goals were attained. These rulings are prospective and will not apply to compensation paid with respect to performance periods which commence on or before January 1, 2009, and payments pursuant to employment contracts that were in effect on February 21, 2008, without consideration for extensions, renewals and evergreen provisions.

 

The Committee believes that the stock options and performance shares granted to the Company’s NEOs under the 2003 Long-Term Incentive Plan generally qualify under Section 162(m) as performance-based compensation. The Committee also believes that the portion of the Annual Incentive Plan that pays out based on the achievement of corporate goals qualifies under Section 162(m). Grants of service-vesting restricted stock are not performance-based, and therefore are potentially not deductible. However, deductibility is not the sole factor used by the Committee in ascertaining appropriate levels or manner of compensation. The Committee believes that it is important to preserve flexibility in administering compensation programs in a manner designed to attract, retain and reward high-performing executives, and to promote business objectives that may not necessarily align with the requirements for full deductibility under Section 162(m). Consequently, the Committee has not adopted a policy that all compensation must qualify as deductible under Section 162(m), and the Company may enter into compensation arrangements under which payments are not deductible under Section 162(m).

 

Individual Tax Treatment

 

For individual tax purposes, the Company typically withholds common shares to cover income taxes resulting from the vesting of restricted stock, or payment of common stock earned upon satisfaction of performance share targets.

 

Set forth below is information regarding compensation earned by or paid or awarded to the following executive officers of the Company during the years ended December 31, 2007, 2008 and 2009: (i) Dennis E. Wheeler, Chairman of the Board, President, and Chief Executive Officer; (ii) Mitchell J. Krebs, Senior Vice President and Chief Financial Officer; and (iii) Richard M. Weston, Senior Vice President, Operations, Donald J. Birak, Senior Vice President, Exploration, and Kelli C. Kast, Senior Vice President, General Counsel, Chief Administrative Officer and Corporate Secretary, which persons were the three most highly compensated executive officers whose total compensation exceeded $100,000 during 2009. The identification of such Named Executive Officers is determined based on each individual’s total compensation for the year ended December 31, 2009, as reported below.

 

 

 

Explanatory Notes:

 

 

 

 

The following table sets forth information regarding all incentive plan awards that were made to the named executive officers during 2009, including incentive plan awards (equity-based and non-equity based) and other plan-based awards. Disclosure on a separate line item is provided for each grant of an award made to a named executive officer during the year. The information supplements the dollar value disclosure of stock, option and non-stock awards in the Summary Compensation Table by providing additional details about such awards. Equity incentive-based awards are subject to a performance condition or a market condition as those terms are defined by FASB ASC 718. Non-equity incentive plan awards are awards that are not subject to FASB ASC 718 and are intended to serve as an incentive for performance to occur over a specified period.