Washington, DC 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:

 

2010 was a record-setting year for your Company. With our three new precious metals mines now in production and the rebirth of our flagship Rochester mine under way, Coeur is delivering robust production, metal sales and cash flow in strong metals markets.

 

At this year’s Annual Meeting of Shareholders, the Board of Directors recommends you vote promptly 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 10, 2011.

 

Only shareholders of record at the close of business on March 21, 2011 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 29, 2011

 

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 10, 2011, at 9:30 a.m., local time, for the following purposes:

 

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

 

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

 

3. Approve an advisory resolution on executive compensation;

 

4. Conduct an advisory vote on the frequency of future advisory votes on executive compensation; and

 

5. 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 21, 2011, 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 29, 2011

 

TABLE OF CONTENTS

 

COEUR D’ALENE MINES CORPORATION

 

2011 ANNUAL MEETING OF SHAREHOLDERS

 

MAY 10, 2011

 

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 10, 2011, 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 29, 2011.

 

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 10, 2011: 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 21, 2011 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 21, 2011, a total of 89,524,914 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 29, 2011. 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.

 

Directors will be elected by a plurality of the shares represented at the Annual Meeting in person or proxy. Approval of each of the other proposals requires the affirmative vote of a majority of the shares represented at the Annual Meeting in person or by proxy. 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), the advisory resolution on executive compensation (Proposal No. 3 of this proxy statement) or the advisory vote on the frequency of future advisory votes on executive compensation (Proposal No. 4 of this proxy statement). Recent changes in regulation take away the ability of your broker to vote your uninstructed shares in these matters 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, the advisory resolution on executive compensation or the advisory vote on the frequency of future advisory votes on executive compensation, then no votes will be cast on your behalf with respect to these matters.

 

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.

 

ELECTION OF DIRECTORS

 

Director and Nominee Experience and Qualifications

 

The Company’s Board of Directors 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 demonstrates 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.

 

RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM

 

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, 2011 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, 2010.

 

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, 2011. 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.

 

ADVISORY RESOLUTION ON EXECUTIVE COMPENSATION

 

We are asking shareholders to approve an advisory resolution on the Company’s executive compensation as reported in this proxy statement. As described below in the “Compensation Discussion and Analysis” section of this proxy statement, the Compensation Committee has structured our executive compensation program to achieve the following key qualities:

 

 

The executive compensation program established by the Compensation Committee of the Board of Directors is intended to motivate the Company’s executives, including the Named Executive Officers, to achieve goals consistent with the Company’s business strategies and which 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. As noted below, our executive compensation programs have a number of features designed to promote these objectives.

 

 

We urge shareholders to read the “Compensation Discussion and Analysis” beginning on page 19 of this proxy statement, which describes in more detail how our executive compensation policies and procedures operate and are designed to achieve our compensation objectives, as well as the Summary Compensation Table and other related compensation tables and narrative, appearing on pages 40 through 48, which provide detailed information on the compensation of our Named Executive Officers. The Compensation Committee and the Board believe that the policies and procedures articulated in the “Compensation Discussion and Analysis” are effective in achieving our goals and that the compensation of our Named Executive Officers reported in this proxy statement reflects and supports these compensation policies and procedures.

In accordance with recently adopted Section 14A of the Securities Exchange Act of 1934 (the “Exchange Act”), and as a matter of good corporate governance, we are asking shareholders to approve the following advisory resolution at the Annual Meeting:

 

RESOLVED, that the shareholders of Coeur d’Alene Mines Corporation (the “Company”) approve, on an advisory basis, the compensation of the Company’s Named Executive Officers disclosed in the Compensation Discussion and Analysis, the Summary Compensation Table and the related compensation tables, notes and narrative in the Proxy Statement for the Company’s 2011 Annual Meeting of Shareholders.

 

This advisory resolution, commonly referred to as a “say-on-pay” resolution, is non-binding on the Board of Directors. Although non-binding, the Board and the Compensation Committee will review and consider the voting results when making future decisions regarding our executive compensation program.

 

THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE APPROVAL OF THE ADVISORY RESOLUTION ON EXECUTIVE COMPENSATION.

 

ADVISORY VOTE ON THE FREQUENCY OF FUTURE ADVISORY

VOTES ON EXECUTIVE COMPENSATION

 

Pursuant to recently adopted Section 14A of the Exchange Act, we are asking shareholders to vote on whether future advisory votes on executive compensation of the nature reflected in Proposal No. 3 above should occur every year, every two years or every three years.

 

After careful consideration, the Board recommends that future advisory votes on executive compensation occur every three years (triennially). We believe that this frequency is appropriate for a number of reasons. Most significantly, our compensation programs are designed to reward long-term performance. Thus, we encourage our shareholders also to evaluate our executive compensation programs over a multi-year horizon and to review the compensation of our Named Executive Officers over the past three fiscal years, as reported in the Summary Compensation Table on page 40. In addition, we believe that a triennial advisory vote on executive compensation reflects the appropriate time frame to enable the Compensation Committee and the Board to evaluate the results of the most recent advisory vote on executive compensation, to discuss the implications of that vote with shareholders to the extent needed, to develop and implement any adjustments to our executive compensation programs that may be appropriate in light of a past advisory vote on executive compensation, and for shareholders to see and evaluate any such adjustments to our executive compensation programs.

 

The Board is aware of and took into account views that some have expressed in support of conducting an annual advisory vote on executive compensation. We are aware that some shareholders believe that annual advisory votes will enhance or reinforce accountability. However, we have in the past and will in the future continue to be engaged with our shareholders on a number of topics and in a number of forums. Thus, we view the advisory vote on executive compensation as an additional, but not exclusive, means for our shareholders to communicate with us regarding their views on the Company’s executive compensation programs. We believe that the many avenues that have and will continue to exist for shareholder engagement differentiate the Company from the situation that exists in certain countries where an annual advisory vote on executive compensation is prevalent. In addition, the fact that all of our directors stand for election annually in our view provides appropriate assurances of Board accountability. Also, because our executive compensation programs have typically not changed materially from year to year and are designed to operate over the long-term and to enhance long-term performance, we are concerned that an annual advisory vote on executive compensation could lead to a near-term perspective inappropriately bearing on our executive compensation programs. Finally, although we currently believe that holding an advisory vote on executive compensation every three years will reflect the right balance of considerations in the normal course, we will periodically reassess that view and can provide for an advisory vote on executive compensation on a more frequent basis if changes in our compensation programs or other circumstances suggest that such a vote would be appropriate.

 

We understand that our shareholders may have different views as to what is an appropriate frequency for advisory votes on executive compensation, and we will carefully review the voting results on this proposal. Shareholders will be able to specify one of four choices for this proposal on the proxy card: one year, two years, three years, or abstain. Shareholders are not voting to approve or disapprove the Board’s recommendation. This advisory vote on the frequency of future advisory votes on executive compensation is non-binding on the Board of Directors. Notwithstanding the Board’s recommendation and the outcome of the shareholder vote, the Board may in the future decide to conduct advisory votes on a more or less frequent basis and may vary its practice based on factors such as discussions with shareholders and the adoption of material changes to compensation programs.

 

THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE TO CONDUCT FUTURE ADVISORY VOTES ON EXECUTIVE COMPENSATION EVERY THREE YEARS.

 

Committees of the Board of Directors

 

Our Board of Directors met ten times during 2010. 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 2010.

 

Our Board has a Compensation Committee, consisting of Messrs. Robinson (Chairman), Mellor, Edwards and Bogert. 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 four times during 2010.

 

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 once during 2010.

 

Our Board inaugurated an Environmental, Health, Safety and Social Responsibility Committee in 2010 consisting of Messrs. Lundquist (Chairman), Thompson, and Bogert. The Environmental, Health, Safety and Social Responsibility Committee is responsible for reviewing and reporting to the Board of Directors with respect to the Company’s efforts and results in the areas of environmental compliance, safety and health of its employees and corporate social responsibility matters. During its first year as a committee, in 2010, the Environmental, Health, Safety and Social Responsibility Committee met once.

 

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 met once during 2010.

 

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. 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, Nominating and Corporate Governance Committee and Environmental, Health, Safety and Social Responsibility Committee are available at our website, www.coeur.com, and to any shareholder who requests them. Each incumbent director attended at least 80% of the meetings of the Board of Directors and committees on which he served during 2010.

 

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. Eight of the nine members of the Board attended the annual meeting on May 11, 2010.

 

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 lead director. 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 the Company, chairs the Board meetings where the Board discusses strategic and business issues.

 

In addition, the Board has established the position of lead director. The lead director is a director elected from time to time by the Board. Our current lead director is Mr. Robert E. Mellor, an independent director who has served on our Board since 1998 and has served as lead 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 lead 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 lead 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 lead 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 2010 were $111,041.

 

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 2010, other MMC affiliates provided the Company services unrelated to executive compensation. The amount received by the MMC affiliates, directly or indirectly, totaled $446,104 in 2010 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 2010, 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:

 

 

Compensation Committee Interlocks and Insider Participation

 

None of the members of the Compensation Committee during 2010 or as of the date of this proxy statement is or has been an officer or employee of the Company, and no executive officer of the Company served on the compensation committee or board of any company that employed any member of the Company’s Compensation Committee or Board of Directors.

 

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 minimis 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:

 

 

 

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 certain information regarding the Company’s current officers:

 

 

Dennis E. Wheeler currently serves as Chairman of the Board, President and Chief Executive Officer. He has served as Chairman of the Board since May 1992, Chief Executive Officer since December 1986, and President from December 1980 to September 2002 and January 2005 to present. Prior thereto he held the positions of Chief Administrative Officer from December 1980 to December 1986, Secretary from January 1980 to December 1980 and Senior Vice President and General Counsel from 1978 to 1980.

 

Mitchell J. Krebs first joined Coeur in 1995 after spending several years in the investment banking industry in New York. During his tenure with Coeur, Mr. Krebs has held various positions in the corporate development department, including Senior Vice President of Corporate Development. Since March 2008, Mr. Krebs has held the position of Chief Financial Officer and served as Treasurer from July 2008 through March 2010. Mr. Krebs holds a BS in Economics from The Wharton School at the University of Pennsylvania and an MBA from Harvard University.

 

Kelli C. Kast was appointed Senior Vice President, General Counsel, Chief Administrative Officer and Corporate Secretary in March 2009. Prior to that, Ms. Kast served as Vice President, General Counsel and Corporate Secretary from May of 2005 to March of 2009. Ms. Kast was previously Corporate Counsel for HealtheTech Inc. from April 2004 to April 2005. Prior thereto, she served as Assistant General Counsel and Corporate Secretary for Global Water Technologies Inc. and Psychrometric Systems, Inc. from December 1997 through February 2003.

Donald J. Birak was appointed as Senior Vice President, Exploration of Coeur in January 2004. Prior to that, Mr. Birak was employed with AngloGold North America, Inc. from March 1999 to January 20, 2004, as Vice President, Exploration and with Independence Mining Company Inc. as Vice President of Exploration from 1995 to 1999.

 

K. Leon Hardy was appointed Senior Vice President Operations in 2010. Prior to this he was Senior Vice President North American Operations from July 2008 to February 2010. Prior to that, Mr. Hardy served as Vice President and General Manager for Coeur Argentina from May 2003 to July 2008. Prior to that Mr. Hardy was employed with Apex Silver Mines as Operations Manager at their San Cristobal project in Bolivia from 1999 to 2002. Prior to that Mr. Hardy was employed in Argentina with Minera Alumbrera Ltd from 1996 to 1998. Prior to that Mr. Hardy was employed with Cyprus Amax Minerals from 1979 to 1996.

 

Tom T. Angelos was appointed Chief Compliance Officer in September, 2010. Prior thereto he served as Senior Vice President and Chief Accounting Officer since March 2008. Prior to this, Mr. Angelos was Vice President, Controller and Chief Accounting Officer of the Company from December 2006 to March 2008 and Controller and Chief Accounting Officer of the Company from 2004 to 2006. Mr. Angelos was previously Controller of Stillwater Mining Company from 1998 to 2004, and from 1983 to 1998 was employed by Coeur in various capacities, most recently as Controller.

 

Elizabeth M. Druffel was appointed Treasurer for Coeur in March of 2010 and Chief Accountant in September of 2010. Prior to that, Ms. Druffel served as Director of Financial Operations and Assistant Treasurer since joining Coeur in September of 2008. Ms. Druffel is a Certified Public Accountant and was previously employed as an Audit Senior Manager with KPMG. Ms. Druffel holds a BS in Accounting and a Masters of Accountancy, both from the University of Idaho.

 

The following table sets forth information, as of March 21, 2011, 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, 2010 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, 2010, 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 U.S.-based primary silver producers and a growing gold producer. Coeur is engaged in the development, exploration and operation of silver and gold mining properties, with operations in five countries. Coeur’s primary business objectives are to increase silver and gold 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. The Company’s 2010 performance highlights are as follows:

 

 

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 2010 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 four times in 2010.

 

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 2010:

 

 

 

In the course of conducting its activities during 2010, Mercer attended two 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 2010, 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 60% 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 2010, 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 median 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 2010 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 analyzes publicly disclosed compensation data from a peer group of metal and mineral mining companies (see discussion below). Mercer also analyzes mining industry compensation data from surveys published by The Hay Group and PricewaterhouseCoopers provided to it by Coeur, 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.

 

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. 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 based on the criteria mentioned above. For the 2010 competitive market assessment, the Committee reviewed 2009 full year

data and in light of such data, the Committee decided to expand the peer group to include Eldorado Gold, New Gold and Gammon Gold. The 2010 peer group consisted of the following companies:

 

 

 

 

Even though Coeur’s 2009 revenue, the most recent data available when the Committee made its peer group determinations for 2010, was below that of most of the peer companies, the Committee determined that these companies form a suitable peer group for the executive compensation review in 2010, 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 when the peer group was determined it was expected that the Company’s 2010 revenue would significantly exceed 2009 revenue due to increasing levels of production from the Palmarejo, San Bartolomé and Kensington mines.

 

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 typically approved at the Committee’s regular first quarter meeting and are applied retroactively to the beginning of the year.

 

In light of the recovering economy, improved Company performance, and desire to more closely achieve target levels of compensation, the Company removed the freeze of base salary levels for its executive officers

in their current positions that was in place during 2009. The Committee approved the following base salary increases for the CEO and the other NEOs for 2010:

 

 

Mr. Hardy received the greatest percentage increase in base salary due to his promotion to Senior Vice President, Operations, effective February 2010. Mr. Wheeler’s base salary is higher than that of the other Named Executive Officers 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 competitiveness, is used in determining the base salary of each NEO. The Company considered it necessary and prudent to provide these salary increases to the 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.

 

Below is a table showing the 2010 base salary for each NEO compared to the competitive market range used by the Committee in its review of Coeur’s executive compensation:

 

 

 

(a) Comparative market data presented for Mr. Hardy is 2010 market data for the position of Senior Vice President, Operations, which he assumed in early 2010.

 

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 2010 were increased from 2009 levels, as follows:

 

 

(a) Comparative market data presented for Mr. Hardy is 2010 market data for the position of Senior Vice President, Operations, which he assumed in early 2010.

 

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 2010, 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 2009):

 

 

For 2010, adjusted operating cash flow in the CFROI measure replaces adjusted pre-tax net income less depreciation, depletion, amortization and interest expense. This change was made so that cash flow in the CFROI measure would use the same definition of cash flow as the operating cash flow measure.

 

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 for 2010.

 

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 2010 goals.

 

For 2010, the Company AIP goals were set as follows, based upon budgeted metals prices of $16.00 per ounce of silver and $950.00 per ounce of gold (subject to adjustment for actual prices, as described below):

 

 

The threshold and maximum goals for production, cost and operating cash flow 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.

 

2010 AIP Calculation and Payments:  For 2010, the payout percentage for Company performance was 46% of target, calculated as follows:

 

 

The level of individual performance achievement for our NEOs in 2010 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 2010. The Committee determined that the CEO’s individual performance achievement was 175% of target, noting that under his leadership, the Company had a record setting year for revenue and operating cash flow. The Company also successfully completed its strategic plan

to bring all three of its large-scale, long-life precious metals mines into production, with approximately 1% growth in silver production and 118% growth in gold production during the year and positioned itself to generate significant, sustainable production and cash flow for the Company’s shareholders going forward.

 

In addition to certain milestones directly related to progress at Palmarejo Mine (Mexico), San Bartolomé Mine (Bolivia) and early start-up at the Kensington Mine (Alaska), the Company’s three largest operations, Mr. Wheeler’s individual performance goals for 2010 included holding executive officers accountable for their performance, specifically in areas of safety, environmental compliance, production, operating and overhead cash costs, capital expenditures and reduction in debt. Mr. Wheeler steered a steady course for the Company through 2010, including orchestrating several strategic new hires to bolster the Company’s talent base. The Company reduced its total debt by over $34 million, or 18%, and perhaps most notably completed an early start-up of the Kensington Mine in Alaska. Additionally, the Company was recognized by the International Society of Mine Safety Professionals with seven 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 2010 and a discussion of related achievements.

 

Dennis E. Wheeler

 

 

Mitchell J. Krebs

 

 

Kelli C. Kast

 

 

 

Donald J. Birak

 

 

K. Leon Hardy

 

 

 

For 2010, 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 a one-time special achievement and major transaction bonus as noted in our 2008 proxy statement, the Committee had not previously exercised its discretionary ability to direct such bonus payments. There were no discretionary bonus awards or payments in 2010.

 

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 and 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 granted 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 ratable 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. For LTIP grants made in early 2010, the Committee approved grants consisting entirely of cash-settled stock appreciation rights, restricted stock units and performance units, with one-third of the total long-term incentive value in each of these three vehicles. The reason for making these non-equity grants in 2009 and 2010 was that the number of shares remaining in the 2003 Long-Term Incentive Plan were not sufficient to make equity-based grants at the levels previously approved by the Committee. The specific terms of the long-term incentives granted to our NEOs in 2010 are disclosed in the 2010 Grants of Plan-Based Awards table included in this proxy statement.

 

At the Annual Meeting of Shareholders held on May 11, 2010, the Company’s stockholders approved the amendment and restatement of the 2003 Long-Term Incentive Plan (the “Amended Plan”). The Amended Plan increased the number of shares available for grant under the plan by 4,000,000 shares. The Committee intends to use stock options, restricted stock, and performance shares for future LTIP grants to executives, rather than making cash-settled grants. 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 these shares to provide for the Company’s equity-based compensation needs for the next five years. The Amended Plan will terminate with respect to the grant of new awards on May 11, 2020.

 

Timing of Long-Term Incentive Awards:  The Committee typically makes annual long-term incentive grants to the Company’s executives at its regular first quarter meeting, based on the grant levels that were approved by the Committee for the prior year. In 2010, the grants were approved at the March 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 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 Grant Levels:  The Committee has established grant levels of long-term incentives 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. The total value of each executive’s LTIP grant is determined by multiplying the LTIP grant percentage previously approved by the Committee by the executive’s base salary in the prior year. For grants made in 2010, the long-term incentive grant values as a percentage of base salary for our NEOs were as follows (unchanged from 2009):

 

 

 

Based on the Committee’s 2010 competitive market assessment, the Committee determined that, for most of the Company’s executives, there was a shortfall in the target total compensation opportunity of greater than 15% compared to the intended market 75th percentile positioning. This was primarily due to LTIP grant levels that fell below the intended market 75th percentile positioning. The Committee believed that this shortfall placed the Company at a significant disadvantage in retaining the Company’s executives. The Committee therefore considered and decided to increase the annual LTIP grant levels provided to the Company’s executives, beginning with the grants to be made in early 2011. The Committee determined that this increase, combined with the increase in base salaries for 2010 described above, would result in target total compensation opportunities that were consistent with the intended market 75th percentile positioning. Therefore, as set forth in the following table, the Committee considered and approved an increase in LTIP grant levels as a percentage of base salary for our NEOs.

 

 

Stock Options:  Stock options (including stock appreciation rights) represent one-third of the LTIP value granted to Coeur’s executives (including our NEOs) in 2010. 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 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. Cash-settled stock appreciation rights granted in 2010 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 LTIP value granted to Coeur’s executives (including our NEOs) in 2010. 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 Committee believes that restricted stock aligns executives’ interests with those of shareholders via actual (or phantom) share ownership, and vesting requirements provide retention value and therefore also continuity in the Company’s senior leadership team. Cash-settled restricted stock units granted in 2010 vest at a rate of 331/3% per year based on continued employment with the Company. 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). 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 LTIP value granted to Coeur’s executives (including our NEOs) in 2010. The target number of performance shares granted is determined by dividing the 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, 2009 and December 31, 2012 for the 2010-2012 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 2010-2012 performance period, the relative TSR performance scale and the corresponding number of cash-equivalent share units that can be 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. Shares of Coeur common stock are issued to the participant based on the number performance shares earned. For grants of cash-settled performance units, an equivalent cash payment is made to the participant based on the number of performance units earned.

For the 2008-2010 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 2008-2010 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 2010 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 non-compete 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.

 

Effective August 6, 2010, the Company entered into an amendment to our employment agreement with Dennis E. Wheeler, pursuant to which he is employed as Chairman of the Board, President and Chief

Executive Officer, extending the term of employment through December 31, 2011 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 $646,000 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.”

 

Effective August 6, 2010, 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 December 31, 2011. His agreement calls for a base salary of $289,000 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 August 2, 2010, 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 December 31, 2011. Her agreement calls for a base salary of $289,000 plus annual incentive compensation. Ms. Kast’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 August 2, 2010, 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 December 31, 2011. His agreement calls for a base salary of $282,000 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 August 2, 2010, the Company entered into an amendment to our employment agreement with K. Leon Hardy, pursuant to which he is employed as Senior Vice President, Operations, extending the term through December 31, 2011. His agreement calls for a base salary of $275,000 plus annual incentive compensation. Mr. Hardy’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.”

 

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 constitutes 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 an “excess 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.

 

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:

 

 

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” under Section 280G of the Internal Revenue Code, 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.

 

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 stock ownership policy or holding period requirements for Company stock earned by executive officers from LTIP grants. As required by the Dodd-Frank Wall Street Reform and Consumer Protection Act, the Committee plans to establish a clawback policy.

 

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. 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, 2008, 2009 and 2010: (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) Kelli C. Kast, Senior Vice President, General Counsel, Chief Administrative Officer and Corporate Secretary; (iv) Donald J. Birak, Senior Vice President, Exploration, and (v) K. Leon Hardy, Senior Vice President, Operations, the last three of whom were the three most highly compensated executive officers in addition to the CEO and CFO whose total compensation exceeded $100,000 during 2010. The identification of such Named Executive Officers is determined based on each individual’s total compensation for the year ended December 31, 2010, 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 2010, 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.