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 2008, 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:

 

 

These proposals have been unanimously recommended by your Board of Directors who believe they will:

 

 

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 Avenue and Front Avenue, Coeur d’Alene, Idaho at 9:30 a.m., local time, on May 12, 2009.

 

Only shareholders of record at the close of business on March 19, 2009 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

April 1, 2009

 

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 12, 2009, at 9:30 A.M., local time, for the following purposes:

 

1. Elect a Board of Directors consisting of nine persons to serve for the ensuing year or until their respective successors are duly elected and qualified;

 

2. Authorize an amendment to our Articles of Incorporation to reduce the par value of our common stock from $1.00 per share to $0.01 per share;

 

3. Authorize the Board of Directors to effect a reverse stock split of our common stock at a stock split ratio of 1-for-10;

 

4. Subject to the approval of Proposal No. 3, authorize an amendment to our Articles of Incorporation to change the number of authorized common shares from 750,000,000 shares to 150,000,000 shares;

 

5. Ratify the appointment of KPMG as our independent accountants; and

 

6. Transact such other business as properly may come before the 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 19, 2009, 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

April 1, 2009

 

PROXY STATEMENT

 

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 on Tuesday, May 12, 2009, 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 April 1, 2009.

 

If the reverse stock split discussed in detail herein is approved by our stockholders, we will exchange one new share for ten outstanding shares. We will not issue any fractional shares. Stockholders who otherwise would hold fractional shares as a result of the reverse stock split will be entitled to receive cash (without interest or deduction) in lieu of such fractional shares upon following the procedures of our transfer agent described below under Proposal No. 3 under the heading “Fractional Shares.”

 

If you hold nine or fewer shares, you will cease to be a stockholder when the reverse stock split becomes effective. 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 12, 2009: The Company’s Proxy Statement and Annual Report to Shareholders are available at http://bnymellon.mobular.net/bnymellon/cde.

 

VOTING SECURITIES

 

All shareholders of record as of the close of business on March 19, 2009 are entitled to vote at the Annual Meeting or 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 19, 2009, a total of 673,905,440 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 April 1,

2009. Your shares will be voted according to your directions. If you do not mark any selections on your proxy card, your shares will be voted as recommended by the Board of Directors.

 

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 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.

 

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. We have retained Morrow & Company, Inc., New York, New York, to assist in the solicitation of proxies. Morrow & Company’s charge will be $7,500 plus out-of-pocket expenses.

 

PROPOSAL NO. 1

 

ELECTION OF DIRECTORS

 

Nine directors are to be elected at the Annual Meeting, each to serve for one year or 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. Mr. Alex Vitale, a valued member of our Board since 2005, resigned from the Board on March 17, 2009. We thank Mr. Vitale for his service on the Board. Mr. L. Michael Bogert was appointed to the Board on March 17, 2009 to fill the vacancy created by Mr. Vitale’s resignation. We are pleased to nominate Mr. Bogert to continue to serve on the Board. 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.

Committees of the Board of Directors

 

Our Board of Directors met nine times during 2008. Our Board has an Audit Committee comprised 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 public accountants, the scope of the audit procedures, the nature of all audit and non-audit services to be performed, the performance of our independent accountants and our accounting practices and policies. The Audit Committee met six times during 2008.

 

Our Board has a Compensation Committee, comprised solely of outside directors and presently 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, for 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 four times during 2008.

 

Our Board has a Nominating and Corporate Governance Committee consisting of Messrs. Mellor (Chairman), Thompson, Winterer and Edwards. The Nominating and Corporate Governance Committee is responsible for proposing nominees for the Board of Directors, the establishment of corporate governance guidelines and related corporate governance matters. The Nominating Committee met two times during 2008.

 

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 2008.

 

Our Board has determined that, except for Dennis E. Wheeler and Andrew Lundquist, each director and each of the nominees for director, including each of the members of the Audit Committee, Compensation Committee, and Nominating and Corporate Governance Committee, are independent within the meaning of applicable New York Stock Exchange listing standards and rules. 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 75% of the meetings of the Board of Directors and committees on which he served during 2008.

 

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 factors it will take into account will include strength of character, mature judgment, career specialization, relevant technical skills or financial acumen, diversity of viewpoint and industry knowledge, as set forth in the Committee’s charter. 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 83814, 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 13, 2008.

 

Meetings of Non-Management Directors

 

Non-management members of the Board of Directors conduct at least two regularly-scheduled meetings per year without members of management being present. Robert E. Mellor presides over each meeting of non-management directors.

 

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

 

In February 2004, the Board of Directors 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.

 

SHARE OWNERSHIP

 

The following table sets forth information, as of March 19, 2009, 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.

 

 

 

 

COMPENSATION DISCUSSION AND ANALYSIS

 

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 and companies, with operations in seven countries. In 2008, Coeur had sales of $189.5 million, with approximately 70% 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 2008 Summary Compensation Table on page 26. Effective March 21, 2008, Mitchell J. Krebs was appointed Senior Vice President — Chief Financial Officer upon the resignation of James A. Sabala. In addition, Alan L. Wilder, Senior Vice President, Project Development, retired from Coeur effective January 15, 2009; therefore, in 2008 we had six NEOs.

 

In light of the current global economic downturn and the potential implications for the Company’s business strategies, the Company has implemented a freeze of base salary levels for its executive officers in their current positions during 2009.

 

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 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 two times 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 has retained Mercer (US) Inc. (“Mercer”) to provide information, analyses, and advice regarding executive and director compensation, as described below. Mercer reports directly to the Committee chair.

 

The Committee has established procedures that it considers adequate to ensure that Mercer’s advice to the Committee remains objective and is not influenced by the Company’s management. These procedures include: a direct reporting relationship of the Mercer consultant to the Committee; a provision in the Committee’s engagement letter with Mercer specifying the information, data, and recommendations that can and cannot be shared with management; an annual update to the Committee on Mercer’s financial relationship with the Company, including a summary of the work performed for the Company during the preceding 12 months; and written assurances from Mercer that, within the Mercer organization, the Mercer consultant who performs services for the Committee has a reporting relationship and compensation determined separately from Mercer’s other lines of business and from its other work for the Company. Mercer has provided the Committee with written assurance that these procedures continue to be in place and were followed during the last completed fiscal year.

At the Committee’s direction, Mercer provided the following services for the Committee during fiscal year 2008:

 

 

In the course of conducting its activities during fiscal year 2008, Mercer attended two meetings of the Compensation Committee and presented its findings and recommendations for discussion. In performing its duties under the engagement with the Committee during the last completed fiscal year, Mercer was subject to the following instructions: Mercer may not share data and recommendations regarding the CEO’s compensation (including equity awards) with any member of management, without the Committee chair’s prior approval; and Mercer may contact the Company’s executive officers for information necessary to fulfill its assignment.

 

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. Further, the compensation and benefit amounts presented in the Company’s Annual Report on Form 10-K and proxy statement reflect the decisions of the Committee taking into account many factors and considerations and may or may not be consistent with recommendations made by Mercer, management, or any other advisor to the Committee.

 

Compensation Objectives and Principles

 

Motivating the Company’s executives to achieve goals that are consistent with the Company’s business strategies and that create shareholder value is the primary objective of the Company’s executive compensation program. 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 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. The objective of attraction and retention 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 for 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 2008, 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. Amounts realized or realizable from prior compensation awards are not considered in setting other elements of 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 40% 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 2008, 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 total compensation opportunity is targeted at the market 75th percentile. 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 2008 and a comparison to targets are outlined below in “Compensation Components.”

 

Competitive Market Assessments:  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 January to 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) and survey data from a broader set of mining and general industry companies. For market assessments reviewed by the Committee in 2008, mining industry data was collected from surveys published by The Hay Group and PricewaterhouseCoopers, and general industry data was 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.

 

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 comprised 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, the Committee removed Bema Gold, Cambior and Glamis Gold from the peer group due to their acquisition, and added IAMGOLD and Yamana Gold to the peer group. For the 2009 competitive market assessment, the Committee will remove Meridian Gold due to its acquisition.

 

The peer group used for the 2008 competitive market assessment consisted of the following companies:

 

 

 

Even though Coeur’s 2007 revenue was below that of the peer companies, the Committee determined that these companies form a suitable peer group, 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 the Company’s level of complexity and scope of operations is generally not similar to other companies in the industry with lower revenue.

 

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. The independent members of the Board of Directors and the Committee, respectively, approved the following increases to base salaries for the CEO and the other NEOs in February 2008:

 

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 salaries of each NEO.

 

A general increase of 3.5% was budgeted and approved for 2008 for the Company’s employees, including the NEOs. An additional 2.0% was budgeted and approved for strategic adjustments in individual compensation based upon market competitiveness, individual merit, job performance and other factors. The additional 2.0% strategic compensation budget is a funded pool that included all salary-rated employees within the U.S.-paid employee group. The increase that an individual could be awarded was not limited simply by summing the 3.5% general increase and 2.0% strategic budget to arrive at a 5.5% maximum increase. NEOs who performed well received the general increase in base salary, and NEOs whose skills, abilities and positions were in significant demand were eligible for an additional increase from the strategic pool. Messrs. Wheeler, Krebs, Weston and Birak were provided with an additional increase from the strategic pool due to the increased importance of their positions, both within the Company and, more importantly, within the mining industry. The strategic importance of Mr. Wheeler’s position was discussed in the previous paragraph. Mr. Krebs leads the Company’s financial, accounting, business development and commercial activities, as well as oversees investor relations and supports internal auditing efforts. Mr. Krebs brings extensive experience and education to this position. Mr. Weston has overall responsibility for operational success of our international, global operations and projects. He has thirty years of in-depth operational experience with international mining companies and operations. Mr. Birak is in charge of identification of the Company’s future mine and/or ore reserves. He has thirty years of exploration experience and has held similar positions with other mining companies. Mr. Birak additionally is our qualified person for purposes of mineral material reporting set forth in our various stock exchange filings. In today’s mining labor market, this quantifiable talent commands high salaries. The Company considered it necessary and prudent to provide a larger than 3.5% increase to these NEOs in order to help ensure their retention, while maintaining the Company’s policy of targeting base salaries between the 50th and 75th percentile range of the competitive market.

 

The initial base salary of each NEO as set forth in his employment agreement was established according to the Company’s compensation policy of targeting the 50th to 75th percentile range of the competitive market (as described above in “Determining Executive Compensation”) prevailing at the time the agreement was entered into. The other factors listed above relating to determining base salaries also influence the decision in establishing an NEO’s initial base salary, as well as any subsequent adjustments. Below is a chart showing the 2008 base salary for each NEO compared to the competitive market range as determined by Mercer for the first quarter 2008 Committee meeting:

 

Effective March 21, 2008, Mr. Krebs was promoted to Senior Vice President — Chief Financial Officer upon the resignation of Mr. Sabala. Mr. Krebs did not receive an increase in base salary as a result of this promotion, because his 2008 base salary was already at the 50th percentile of the market range established for the CFO position (i.e., the market range shown above for Mr. Sabala) and the Committee viewed this market positioning as appropriate due to Mr. Krebs being new in the position.

 

In light of the current global economic downtown 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.

 

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 2008 were increased from 2007 levels for most of the NEOs, as follows:

 

 

Target AIP award opportunities for 2009 will remain the same as in 2008.

 

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 2008, Company performance was measured against predetermined annual goals established by the Committee for the following four measures (which were unchanged from 2007):

 

 

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 2009, the Committee has approved the replacement of the operating net income measure with operating cash flow. Operating cash flow excludes the effects of non-cash accounting adjustments that are included in operating net income, resulting in a more “pure” dollar figure for measuring the Company’s actual financial performance. As a result, Company executives have more operational control and influence over this measure than net income.

 

In addition to Company measures, specific individual objectives are developed for each executive at the beginning of the year. These 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 2007 and will remain the same for 2009.

 

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 2008 goals.

 

For 2008, the Company AIP goals were set as follows, based upon budgeted metals prices of $15.00 per ounce of silver and $825.00 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 net income 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 net income 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 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.

 

2008 AIP Calculation and Payments:  For 2008, the payout percentage for Company performance was 25% of target, calculated as follows:

 

 

The level of individual performance achievement for our NEOs in 2008 was assessed as follows:

 

Mr. Sabala resigned from the Company during 2008 and therefore his individual performance for 2008 was not assessed and he did not receive an annual incentive payment in 2008.

 

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 2008. The Committee determined that the CEO’s individual performance achievement was 126% of target, noting that under his leadership, the Company entered into one of its most important periods in history with three large, major operating projects on its slate: San Bartolomé Mine start up, commissioning & operating (Bolivia); Palmarejo Mine project construction and pre-operational feasibility planning (Mexico); and Kensington Mine completion, tailings facility discussions and litigation activity leading to a Supreme Court review (Alaska).

 

Mr. Wheeler’s individual performance goals in 2008 consisted of milestones that were directly related to the three projects mentioned above, in addition to 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 2008. Under his leadership, the Company was able to obtain $355 million of external capital to fund its aggressive growth strategy, which in 2008 focused on the construction of both the San Bartolomé and Palmarejo mines. San Bartolomé began operations, and by year-end was reaching planned operational budget numbers. The construction and costs for the Palmarejo Mine were kept on track and on budget throughout the year, while maintaining a planned start up in the first quarter of 2009. The Company was recognized by the International Society of Mine Safety Professionals at its 2008 annual conference held in May, 2008 and was presented with five safety awards. The Company operated without lost time accidents at: the San Bartolomé Project in Bolivia; Coeur South American Exploration group; and the Kensington Mine. The Company’s global operations received recognition for working over 2 million man-hours with no lost-time and no reportable incidents. The Kensington Mine tailings legal case was appealed and heard before the US Supreme Court, and the Company is poised to act swiftly once the Court’s decision is made. While operations costs were higher than budgeted, a focused cost containment effort was undertaken in October 2008 to reduce company spending that made both positive and immediate impacts on operating cash flow.

 

Set forth below is a description of the individual objectives established for each NEO for 2008 and a discussion as to whether such objectives were achieved.

 

Dennis E. Wheeler

 

 

 

Mitchell J. Krebs

 

 

Richard M. Weston

 

 

 

Donald J. Birak

 

 

Alan L. Wilder

 

 

For 2008, 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:

 

 

Mr. Sabala resigned from the Company during 2008 and therefore he did not receive an annual incentive payment for 2008.

 

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. However, the Committee has never used its discretionary power to limit AIP awards.

 

In 2008, the Committee awarded discretionary bonuses as follows:

 

Promotion Bonus:  Effective March 21, 2008, Mitchell J. Krebs was promoted to Senior Vice President — Chief Financial Officer upon the resignation of James A. Sabala. The Committee awarded Mr. Krebs a special one-time discretionary cash bonus of $25,000 upon his promotion, in recognition of his contributions to the Company and to acknowledge his taking on a more significant leadership role in the Company.

 

Major Transaction Bonus:  In December 2007, the Company completed the acquisition of Palmarejo Silver and Gold Corporation and Bolnisi Gold. The primary benefits and ramifications of this major transaction are as follows:

 

 

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 NEOs. The NEOs who were awarded a Major Transaction Bonus and the bonus amounts 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. One-half of the bonus was paid to these employees in cash in January 2008. The other half will be paid in cash after the Company books silver sales from Palmarejo (expected in the first half of 2009), provided that the employee is a full-time employee of the Company in good standing at that time. Mr. Sabala forfeited the second half of his bonus when he resigned from the Company in March 2008. The Committee believes that this payout arrangement 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 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. In 2008, as in 2007 and 2006, Coeur’s executives were granted one-third of their long-term incentive value in each of these three forms of equity. This mix provides a strong emphasis on alignment with shareholder interests, balances incentive and retention needs, and minimizes share dilution. Stock options provide alignment with shareholders 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.

 

For LTIP grants made in early 2009, the Committee granted stock appreciation rights, restricted stock units and performance units, in addition to stock options, restricted stock, and performance shares. The purpose of granting these non-equity awards 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 equity grants. The Committee also granted long-term incentives valued below the target levels for 2009 discussed below in “LTIP Target Opportunities.”

 

LTIP grants are made on an annual basis. This enables the Committee to adjust the levels, forms, and mix of long-term incentive awards, as appropriate, to respond to changes in the 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. The specific terms of the long-term incentives granted to our NEOs in 2008 are disclosed in the 2008 Grants of Plan-Based Awards table included in this proxy statement.

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 2008, the grants were approved at the January 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 higher 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 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. For 2008, the target long-term incentive values as a percentage of base salary for our NEOs were as follows (unchanged from 2007):

 

 

Based on the Committee’s 2007 competitive market assessment, the Committee determined that, for most of its executives, there was a shortfall in the total compensation opportunity of greater than 10% compared to the intended market 75th percentile positioning. The shortfall was due to a significant gap in the target LTIP opportunities provided to the Company’s executives, also compared to the intended market 75th percentile positioning. The Committee believed that this shortfall placed the Company at a significant disadvantage in retaining our executives. The Committee also determined that increasing the annual target LTIP opportunities would leave the Company exposed to a potential downturn in the competitive market, given the large increases already observed in the market since the prior year. Therefore, the Committee considered and approved a special Market Adjustment LTIP grant of restricted stock, to be provided only to those executives who were below market. The Committee also decided that, to further protect the Company, the grants would be made in two installments, with one-half of the shares provided at the time of the regular LTIP grants in 2007 and one-half in 2008. The second half of the Market Adjustment LTIP grant would remain subject to the Committee’s approval and the executive’s full-time employment with the Company in good standing at that time.

 

Based on the Committee’s 2008 competitive market assessment, the Committee determined that, for most of its executives, there continued to be a shortfall in the total compensation opportunity of greater than 10% compared to the intended market 75th percentile positioning. The shortfall continued to be due to a significant gap in the target LTIP opportunities provided to the Company’s executives, also compared to the intended market 75th percentile positioning. The Committee also determined that the gap in the target LTIP opportunities compared to market had in fact increased from the prior year, due to an increase in the market target LTIP opportunities since the prior year. The Committee believed that this shortfall continued to place the Company at a significant disadvantage in retaining our executives. The Committee therefore considered and approved the second half of the Market Adjustment LTIP grant in early 2008. The specific terms of the restricted stock granted to the NEOs in 2008 in connection with the Market Adjustment LTIP grant are disclosed in the 2008 Grants of Plan-Based Awards table included in this proxy statement.

The Committee also considered and decided in 2008 that rather than continue the strategy of making up the gap to market by providing discretionary long-term incentive grants, it would increase the annual target LTIP opportunities, beginning with the 2009 LTIP grants. Therefore, as set forth in the following table, the Committee considered and approved an increase in target long-term incentive values as a percentage of base salary for our NEOs. Mr. Sabala is not included in the table because he did not receive a LTIP grant in 2009, due to his resignation in 2008. Mr. Wilder is not included in the table because he also did not receive a LTIP grant in 2009, due to his retirement effective January 15, 2009. As discussed earlier, in 2009 the Committee granted long-term incentives valued below these target levels.

 

 

Stock Options:  Stock options represent one-third of the target LTIP value granted to Coeur’s executives (including our NEOs) in 2008. 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 are therefore aligned with shareholder interests. 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 2008 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 represents one-third of the target LTIP value granted to Coeur’s executives (including our NEOs) in 2008. 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 defined above. The Committee believes that restricted stock provides alignment with 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 2008 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 represent one-third of the target LTIP value granted to Coeur’s executives (including our NEOs) in 2008. 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. 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, 2007 and December 31, 2010 for the 2008-2010 grant). This measure is intended to focus the Company’s executives on creating shareholder value, while providing further alignment with 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 provides alignment with shareholders by rewarding for

the creation of shareholder value in excess of what our shareholders could realize by investing in other companies in our industry. For the 2008-2010 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 2006-2008 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 2006-2008 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 2008 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 plan (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. The agreements specify the terms and conditions of employment, the duties and responsibilities of the executive during this 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 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.

 

Coeur 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. Effective December 31, 2008, Mr. Wheeler’s employment agreement was amended to comply with Section 409A of the Internal Revenue Code. Mr. Wheeler’s employment agreement, which calls for a base salary of $587,633 plus annual incentive compensation, includes similar change-in-control provisions as those included in the executive change-in-control agreements described below, and in the event of his death, his employment agreement provides for the 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.

 

Effective March 7, 2008, Coeur entered into an amendment to our employment agreement with Mitchell J. Krebs in connection with his appointment to the position of Senior Vice President — Chief Financial Officer. The term of the agreement expires July 31, 2009. Effective December 31, 2008, Mr. Krebs’ employment agreement was amended to comply with Section 409A of the Internal Revenue Code. His agreement calls for a base salary of $262,449 plus annual incentive compensation. Mr. Krebs’s employment agreement includes the same change-in-control provisions as those included in the executive change-in-control agreements described below.

 

Effective July 31, 2008, Coeur entered into an amendment to our employment agreement with Richard M. Weston, pursuant to which he was employed as Senior Vice President, Operations, to extend his term through July 31, 2010. Effective December 31, 2008, Mr. Weston’s employment agreement was amended to comply with Section 409A of the Internal Revenue Code. His agreement calls for a base salary of $289,820 plus annual incentive compensation and certain expatriate benefits. Mr. Weston’s employment agreement includes the same change-in-control provisions as those included in the executive change-in-control agreements described below.

 

Effective July 31, 2008, the Company entered into an amendment to our employment agreement with Donald J. Birak, pursuant to which he was employed as Senior Vice President, Exploration, to extend the term through July 31, 2010. Effective December 31, 2008, Mr. Birak’s employment agreement was amended to comply with Section 409A of the Internal Revenue Code. His agreement calls for a base salary of $262,449 plus annual incentive compensation. Mr. Birak’s employment agreement includes the same change-in-control provisions as those included in the executive change-in-control agreements described below.

 

Coeur had an employment agreement with Alan L. Wilder, pursuant to which he was employed as Senior Vice President, Project Development, until January 15, 2009. Effective December 31, 2008, Mr. Wilder’s employment agreement was amended to comply with Section 409A of the Internal Revenue Code. His agreement called for a base salary of $255,440 plus annual incentive compensation. Mr. Wilder’s employment agreement included the same change-in-control provisions as those included in the executive change-in-control agreements described below. Mr. Wilder’s employment with Coeur ended January 15, 2009. Mr. Wilder continues to provide his services to the Company in a limited consulting capacity.

 

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 will be payable to the executives in the event of a change-in-control and the termination of the executive’s employment within two years after such change-in-control for any reason other than for cause, disability, death, normal retirement or early retirement. These agreements continue from year-to-year unless terminated by the Company by written notice. The term

“change-in-control” for purposes of the executive change-in-control agreements has the same meaning as that discussed below under “Change-in-Control Agreements.”

 

Termination of Employment/Severance and Change-in-Control (“CIC”) Arrangements

 

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. The benefits payable to an executive in the event of a qualifying termination of employment include payments for the remaining duration of the agreement at the following levels:

 

 

Regarding the CIC provisions, the Committee believes that these agreements are important to provide reasonable compensation opportunities in the unique circumstances of a CIC that are not provided by the Company’s other compensation programs. The Committee believes that CIC benefits, if structured appropriately, serve to minimize the distraction caused by a potential transaction and reduce the risk that key talent would leave the Company before a transaction closes. The Committee also believes that these provisions motivate the executives to make decisions that are in the best interests of the shareholders should a transaction take place. They do this by providing executives with the necessary job stability and financial security during a CIC 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. The Committee also believes that CIC agreements are an essential component of the executive compensation program and are necessary to attract and retain senior talent in a highly competitive market.

 

The following benefits are payable to an executive in the event of a CIC and a subsequent qualifying termination of employment within two years following the change-in-control and include lump sum payments consisting of the following:

 

 

For all of the NEOs except the CEO, the agreements provide for special circumstances in the event the payment provided would constitute “parachute payments” 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 of the executives to the parachute payment rules. Because of the critical nature of his position, the CIC 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 him after the deduction of all applicable taxes will be equal to the initial CIC payment.

The employment agreements and severance and CIC provisions were developed by the Company and the Committee based on market and industry competitive practice. The Company periodically reviews, along with the 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.

 

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.

 

2008 SUMMARY COMPENSATION TABLE

 

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, 2006, 2007 and 2008: (i) Dennis E. Wheeler, Chairman of the Board, President, and Chief Executive Officer; (ii) Mitchell J. Krebs, Senior Vice President and Chief Financial Officer; (iii) Richard M. Weston, Senior Vice President, Operations, Donald J. Birak, Senior Vice President, Exploration, and Alan L. Wilder, Senior Vice President, Project Development, which persons were the three most highly compensated executive officers whose total compensation exceeded $100,000 during 2008; and (iv) James A. Sabala, Coeur’s former Executive Vice President and Chief Financial Officer who resigned effective March 21, 2008. The identification of such Named Executive Officers is determined based on the individual’s total compensation for the years ended December 31, 2006, 2007 and 2008, as reported below.

 

 

 

Explanatory Notes:

 

 

 

 

 

2008 GRANTS OF PLAN-BASED AWARDS

 

The following table sets forth information regarding all incentive plan awards that were made to the named executive officers during 2008, 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 FAS 123(R). Non-equity incentive plan awards are awards that are not subject to FAS 123(R) and are intended to serve as an incentive for performance to occur over a specified period.