MMR Mcmoran Exploration Company

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )

Filed by the Registrant þ
Filed by a Party other than the Registrant o

Check the appropriate box:

o

Preliminary Proxy Statement

 

 

 

 

 

 

Notice of Annual Meeting of Stockholders

 

June 15, 2011

 

 

 

 

 

April 28, 2011

 

 

Your vote is important. Whether or not you plan to attend the annual meeting in person, it is important that your shares be represented and voted at the annual meeting. You may transmit your vote via the internet or you may complete and return a proxy card. Your cooperation is appreciated.

 

By Order of the Board of Directors.

NANCY D. PARMELEE

Senior Vice President, Chief Financial Officer
& Secretary

Information about Attending the Annual Meeting

 

Only stockholders of record on the record date of April 19, 2011 are entitled to notice of and to attend or vote at our annual meeting. If you plan to attend the meeting in person, please bring the following:

 

1. Proper identification.

 

2. Acceptable Proof of Ownership if your shares are held in “street name.”

 

Street Name means your shares are held of record by brokers, banks or other institutions.

 

Acceptable Proof of Ownership is either (a) a letter from your broker confirming that you beneficially owned McMoRan Exploration Co. stock on the record date or (b) an account statement showing that you beneficially owned McMoRan Exploration Co. stock on the record date.

 

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE STOCKHOLDER MEETING TO BE HELD ON JUNE 15, 2011.

 

This proxy statement and the 2010 Annual Report are available at
http://www.edocumentview.com/MMR_MTG

 

Table of Contents

 

McMoRan Exploration Co.
1615 Poydras Street
New Orleans, Louisiana 70112

 

The 2010 Annual Report to Stockholders, including financial statements, is being made available to stockholders together with these proxy materials on or about April 28, 2011.

 

Why am I receiving these proxy materials?

 

Our board of directors is soliciting your proxy to vote at our 2011 annual meeting of stockholders because you owned shares of our common stock at the close of business on April 19, 2011, the record date for the annual meeting, and are therefore entitled to vote at the meeting. This proxy statement, along with a proxy card or a voting instruction card, is being made available to stockholders on or about April 28, 2011. We have made these materials available to you on the internet and, in some cases, we have delivered printed proxy materials to you. This proxy statement summarizes the information that you need to know in order to cast your vote at the annual meeting. You do not need to attend the annual meeting in person to vote your shares.

 

Why did I receive a notice of internet availability of proxy materials instead of a full set of proxy materials?

 

In accordance with the rules of the Securities and Exchange Commission (SEC), we are permitted to furnish proxy materials, including this proxy statement, and our 2010 Annual Report to stockholders by providing access to these documents on the internet instead of mailing printed copies. Most stockholders will not receive printed copies of the proxy materials unless requested. Instead, the notice will instruct you as to how you may access and review the proxy materials on the internet. The notice also instructs you as to how you may cast your vote via the internet. If you would like to receive a printed or e-mail copy of our proxy materials, please follow the instructions for requesting the materials in the notice.

 

When and where will the annual meeting be held?

 

The annual meeting will be held at 11:30 a.m. Eastern Time on Wednesday, June 15, 2011, at the Hotel du Pont located at 11th and Market Streets, Wilmington, Delaware 19801. You can obtain directions to the Hotel du Pont online at the hotel’s web site at http://www.hoteldupont.com/map-directions/index.cfm .

 

Who is soliciting my proxy?

 

Our board of directors is soliciting your proxy to vote on all matters scheduled to come before the 2011 annual meeting of stockholders, whether or not you attend in person. By completing and returning the proxy card or voting instruction card, or by transmitting your voting instructions via the internet, you are authorizing the proxy holders to vote your shares at our annual meeting as you have instructed.

 

On what matters will I be voting? How does the board of directors recommend that I cast my vote?

 

At the annual meeting, you will be asked to elect our director nominees; approve, on an advisory basis, the compensation of our named executive officers; approve, on an advisory basis, the frequency of future advisory votes on the compensation of our named executive officers; ratify the appointment of our independent registered public accounting firm; adopt the proposed amendment to our Amended and Restated Certificate of Incorporation; and consider any other matter that properly comes before the meeting.

 

Our board of directors unanimously recommends that you vote:

 

 

 

We do not expect any matters to be presented for action at the meeting other than the matters described in this proxy statement. By signing and returning a proxy card, however, you will give to the persons named as proxies discretionary voting authority with respect to any other matter that may properly come before the annual meeting, and they intend to vote on any such other matter in accordance with their best judgment.

 

How many votes may I cast?

 

You may cast one vote for every share of our common stock that you owned on April 19, 2011, the record date.

 

How many shares are eligible to be voted?

 

As of the record date, we had 158,431,745 shares of common stock outstanding, each of which is entitled to one vote.

 

How many shares must be present to hold the annual meeting?

 

Under Delaware law and our by-laws, the presence in person or by proxy of a majority of the outstanding shares of our common stock entitled to vote is necessary to constitute a quorum at the annual meeting. The inspector of election will determine whether a quorum is present. If you are a beneficial owner (as defined below) of shares of our common stock and you do not instruct your bank, broker, trustee or other nominee how to vote your shares on any of the proposals, your shares will be counted as present at the annual meeting for purposes of determining whether a quorum exists. In addition, votes of stockholders of record who are present at the annual meeting in person or by proxy will be counted as present at the annual meeting for purposes of determining whether a quorum exists, whether or not such holder abstains from voting on any of the proposals.

 

How do I vote?

 

Stockholders of Record

 

If your shares are registered directly in your name with our transfer agent, BNY Mellon Shareowner Services, you are the stockholder of record of those shares and these proxy materials have been made available or mailed to you by us. You may vote your shares by internet or by mail as further described below. Your vote authorizes each of James R. Moffett, Richard C. Adkerson, Nancy D. Parmelee and Kathleen L. Quirk, as your proxies, each with the power to appoint his or her substitute, to represent and vote your shares as you directed.

 

 

 

 

 

Only the latest dated proxy received from you, whether by internet or mail, will be voted at the annual meeting. If you vote by internet, please do not mail your proxy card. You may also vote in person at the annual meeting.

 

Beneficial Owners

 

If your shares are held in a stock brokerage account, by a bank, broker, trustee, or other nominee, you are considered the beneficial owner of shares held in street name and these proxy materials are being forwarded to you by your bank, broker, trustee or nominee that is considered the owner of record of those shares. As the beneficial owner, you have the right to direct your bank, broker, trustee or nominee on how to vote your shares via the internet or by telephone if the bank, broker, trustee or nominee offers these options or by signing and returning a proxy card. Your bank, broker, trustee or nominee will send you instructions for voting your shares. For a discussion of the rules regarding the voting of shares held by beneficial owners, please see the question below entitled “What happens if I don’t vote for a proposal? What is discretionary voting? What is a broker non-vote?”

 

Participants in our Employee Capital Accumulation Program

 

If you hold shares of our common stock through our Employee Capital Accumulation Program, which is the company’s 401(k) plan (ECAP), you may only vote your shares by mail. Accordingly, please complete, date and sign your proxy card and return it in the postage-paid envelope provided to you.

 

What happens if I don’t vote for a proposal? What is discretionary voting? What is a broker non-vote?

 

If you properly execute and return a proxy or voting instruction card, your shares will be voted as you specify. If you are a stockholder of record and you make no specifications on your proxy card, your shares will be voted in accordance with the recommendations of our board of directors, as provided above.

 

If you are a beneficial owner and you do not provide voting instructions to your broker, bank or other holder of record holding shares for you, your shares will not be voted with respect to any proposal for which your broker does not have discretionary authority to vote. Rules of the New York Stock Exchange (NYSE) determine whether proposals presented at stockholder meetings are “discretionary” or “non-discretionary.” If a proposal is determined to be discretionary , your broker, bank or other holder of record is permitted under NYSE rules to vote on the proposal without receiving voting instructions from you. If a proposal is determined to be non-discretionary , your broker, bank or other holder of record is not permitted under NYSE rules to vote on the proposal without receiving voting instructions from you. A “broker non-vote” occurs when a bank, broker or other holder of record holding shares for a beneficial owner does not vote on a non-discretionary proposal because the holder of record has not received voting instructions from the beneficial owner.

 

Under the rules of the NYSE, the proposals relating to the ratification of our independent registered public accounting firm and the amendment to our Amended and Restated Certificate of Incorporation to amend the definitions of “Continuing Director” and “Interested Stockholder” are discretionary proposals and all the other proposals are non-discretionary proposals. If you are a beneficial owner and you do not provide voting instructions to your bank, broker or other holder of record holding shares for you, your shares may be voted with respect to the ratification of our independent registered public accounting firm and the proposed amendment to our Amended and Restated Certificate of Incorporation to amend the definitions of “Continuing Director” and “Interested Stockholder.” Whereas, if you are a beneficial owner and you do not provide voting instructions to your broker, bank or other holder of record holding shares for you, your shares will not be voted with respect to the election of directors, the compensation of our named executive officers, and the frequency of future advisory votes on the compensation of our named executive officers. Without your voting instructions on these matters, a broker non-vote will occur with respect to your shares. Shares subject to broker non-votes will not be counted as votes for or against and will not be included in calculating the number of votes necessary for approval of such matters to be presented at the annual meeting; however, such shares will be considered present at the annual meeting for purposes of determining the existence of a quorum.

What vote is required, and how will my votes be counted, to elect directors and to adopt the other proposals?

 

 

In uncontested elections, our directors are elected by the affirmative vote of the holders of a majority of the shares voted. In contested elections (where the number of nominees exceeds the number of directors to be elected), our directors are elected by a plurality of shares voted. Under our by-laws, all other matters require the affirmative vote of the holders of a majority of our common stock present in person or by proxy and entitled to vote thereon, except as otherwise provided by statute, our certificate of incorporation or our by-laws. With respect to Proposal No. 3, although the vote is non-binding, our board will consider the stockholders to have “approved” the frequency selected by a plurality of the votes cast; that is, the frequency receiving the highest number of affirmative votes.

 

Can I revoke or change my vote after I deliver my proxy?

 

Yes. Your proxy can be revoked or changed at any time before it is voted if you provide notice in writing to our corporate secretary before the annual meeting, if you timely provide to us another proxy with a

later date or if you vote in person at the annual meeting or notify the corporate secretary in writing at the annual meeting of your wish to revoke your proxy.

 

Who pays for soliciting proxies?

 

We pay all expenses incurred in connection with the solicitation of proxies for the annual meeting. We have retained Georgeson Inc., 199 Water Street, 26th Floor, New York, New York, for an estimated fee of $7,500, plus reimbursement of certain reasonable expenses, to assist in the solicitation of proxies and otherwise in connection with the annual meeting. We and our proxy solicitor will also request banks, brokers, and other intermediaries holding shares of our common stock beneficially owned by others to send this document to, and obtain proxies from, the beneficial owners and will reimburse holders for their reasonable expenses in so doing. Solicitation of proxies by mail may be supplemented by telephone, email and other electronic means, advertisements and personal solicitation by our directors, officers and employees. No additional compensation will be paid to directors, officers or employees for such solicitation efforts.

 

Could other matters be considered and voted upon at the annual meeting?

 

Our board does not expect to bring any other matter before the annual meeting, and it is not aware of any other matter that may be considered at the meeting. In addition, pursuant to our by-laws, the time has elapsed for any stockholder to properly bring a matter before the meeting. However, if any other matter does properly come before the meeting, the proxy holders will vote the proxies in his or her discretion.

 

What happens if the annual meeting is postponed or adjourned?

 

Unless a new record date is fixed, your proxy will still be valid and may be voted at the postponed or adjourned meeting. You will still be able to change or revoke your proxy until it is voted.

2012 Stockholder Proposals

 

If you want us to consider including a proposal in next year’s proxy statement, you must deliver it in writing to our Corporate Secretary, McMoRan Exploration Co., 1615 Poydras Street, New Orleans, Louisiana 70112 by December 30, 2011.

 

If you want to present a proposal at next year’s annual meeting but do not wish to have it included in our proxy statement, you must submit it in writing to our corporate secretary, at the above address, by February 16, 2012, in accordance with the specific procedural requirements in our by-laws. If you would like a copy of these procedures, please contact our corporate secretary, or access our by-laws on our web site at www.mcmoran.com under About Us — Corporate Governance. Failure to comply with our by-law procedures and deadlines may preclude presentation of the matter at the meeting.

 

Corporate Governance Guidelines; Ethics and Business Conduct Policy

 

Our corporate governance guidelines and our ethics and business conduct policy are available at www.mcmoran.com under About Us — Corporate Governance and are available in print upon request. Amendments to or waivers of the ethics and business conduct policy granted to any of our directors or executive officers will be published promptly on our web site.

 

Board and Committee Meeting Attendance

 

Our board of directors held five regular meetings and four special meetings during 2010. During 2010, except for Messrs. Carmichael and Ford, each of our directors attended 100% of the aggregate of the total number of meetings of the board and the total number of meetings held by each committee of the board on which each such director served. Messrs. Ford and Carmichael each had a 94% attendance rate. Messrs. Bush and Carmichael joined our board on June 8, 2010 and Messrs. Flores and Wombwell joined our board on

December 30, 2010. Directors are invited but not required to attend annual meetings of our stockholders. Mr. Adkerson attended the last annual meeting of stockholders.

 

Board Composition and Leadership Structure

 

As of the date of this proxy statement, our board consists of eleven members, six of whom have no material relationship with the company and are independent within the meaning of our corporate governance guidelines, which comply with the NYSE director independence standards, as currently in effect. We also have three advisory directors who do not vote. For more information about our advisory directors, see “Advisory Directors” below.

 

James R. Moffett and Richard C. Adkerson serve as co-chairmen of our board and Mr. Moffett also serves as our president and chief executive officer. While in the past we separated the roles of chairman and chief executive officer, in May 2010 our board named Mr. Moffett, the board’s co-chairman since 1998, as chief executive officer. Our board of directors believes that Mr. Moffett’s service as both a co-chairman and chief executive officer is in the best interest of the company and our stockholders. As one of the company’s founders, Mr. Moffett possesses detailed, in-depth knowledge of the issues, opportunities and challenges facing the company and its businesses and is thus well positioned to develop agendas that focus the board’s time and attention on the most critical challenges and opportunities facing the company. Combining the roles of chairman and chief executive officer creates unified leadership and direction for the board and executive management, which our board believes will enhance the company’s ability to communicate its message and strategy clearly and consistently to our stockholders, as well as enable decisive, flexible and unified company leadership and ensure clear accountability.

 

Our board of directors has concluded that its current leadership structure provides an appropriate framework for our directors to provide independent, objective and effective oversight of management. Our co-chairmen of our board, Messrs. Moffett and Adkerson, are not considered independent directors because they are part of our management team and receive compensation for services to the company. In accordance with our corporate governance guidelines, our non-management directors meet in executive session at the end of each regularly scheduled board meeting. The presiding director for executive session meetings rotates on a meeting by meeting basis among the independent directors who are chairpersons of our three principal board committees (audit, corporate personnel, and nominating and corporate governance, discussed below), except as the directors may otherwise determine for a specific meeting. We believe that this approach effectively encourages full engagement of the non-management directors in executive sessions, while avoiding unnecessary hierarchy. Following each executive session of non-management directors, the presiding director serves as a liaison between the non-management directors and the co-chairmen regarding any specific feedback or issues that have been discussed in executive session. In addition, our three principal board committees are composed entirely of independent directors, and they have the power and authority to engage independent legal, financial or other advisors as they may deem necessary, without consulting or obtaining the approval of the full board or management.

 

Advisory Directors

 

In February 2004, our board established the position of advisory director to provide general policy advice to our board as determined from time to time by our board. Each advisory director, upon the invitation of our board of directors, has the privilege to receive notice of and to attend regular meetings of our board of directors or any committee of our board for which such advisory director has been appointed to serve as an advisor or consultant, and may participate in all discussions occurring during such meetings in an advisory capacity. Advisory directors serve at the pleasure of the board, are not entitled to vote on any matter brought before the board or any board committee and are not considered a director of the company for any purpose. Compensation paid to advisory directors is determined from time to time by the board, and advisory directors may have consulting agreements with the company.

 

In 2004, our board appointed Gabrielle K. McDonald and Morrison C. Bethea as advisory directors, each of whom previously served as a director of the company. Judge McDonald’s principal occupation is

serving as a judge on the Iran-United States Claims Tribunal, The Hague, The Netherlands since November 2001. Judge McDonald also serves as the Special Counsel on Human Rights to FCX. Dr. Bethea is a staff physician at Ochsner Foundation Hospital and Clinic in New Orleans, Louisiana, and is also a Clinical Professor of Surgery at the Tulane University Medical Center. In January 2008, J. Taylor Wharton resigned as a member of our board and was appointed to serve as an advisory director. Dr. Wharton is the retired Special Assistant to the President for Patient Affairs and professor of Gynecologic Oncology at The University of Texas M. D. Anderson Cancer Center.

 

Board Committees

 

Our board has three standing committees: an audit committee, a corporate personnel committee and a nominating and corporate governance committee. Each of our audit, corporate personnel, and nominating and corporate governance committees are composed entirely of independent directors. Each committee operates under a written charter adopted by our board. All of the committee charters are available on our web site at www.mcmoran.com under About Us — Corporate Governance and are available in print upon request. The primary functions of each board committee are described below.

 

 

 

 

On June 8, 2010, the board of directors elected Messrs. Bush and Carmichael as directors of the company and authorized a special committee of independent directors, comprised of Messrs. Bush and Carmichael, with the power and authority to oversee the company’s efforts to evaluate a potential financing transaction with Freeport-McMoRan Copper & Gold Inc. (FCX). Between June 8, 2010 and September 19, 2010, the special committee held numerous formal meetings and engaged in additional informal meetings and discussions. Messrs. Bush and Carmichael attended 100% of the meetings of the special committee.

Corporate Personnel Committee Procedures

 

The corporate personnel committee has the sole authority to set annual compensation amounts and annual incentive plan criteria for our executive officers, evaluate the performance of our executive officers, and make awards to our executive officers under our stock incentive plans. The committee also reviews, approves and recommends to our board of directors any proposed plan or arrangement providing for incentive, retirement or other compensation to our executive officers, as well as any proposed contract under which compensation is awarded to one of our executive officers. The committee annually recommends to our board the slate of officers for the company and periodically reviews the functions of our executive officers and makes recommendations to our board concerning those functions. The committee also periodically evaluates the performance of our executive officers.

 

If stock options or other equity awards are granted in a given year, the committee’s policy is that such regular annual equity awards are granted at its first or second meeting of each fiscal year, and that to the extent the committee approves any awards at other times during the year, such awards will be made during an open window period when our executive officers and directors are permitted to trade in company securities. Each August, our board establishes a meeting schedule for itself and its committees for the next calendar year. The first and second meetings of each year are scheduled approximately five months in advance, and are scheduled to fall within the window period following the release of the company’s earnings for the fourth quarter of the previous year.

 

The terms of our stock incentive plans provide that the exercise price of each stock option cannot be less than the fair market value of a share of our common stock on the grant date. Pursuant to the committee’s policies, for purposes of our stock incentive plans the fair market value of our common stock will be determined by reference to the closing sale price on the grant date. In addition, our stock incentive plans permit the committee to delegate to appropriate personnel its authority to make awards to employees other than those subject to Section 16 of the Securities Exchange Act of 1934, as amended. Our current equity grant policy provides that each co-chairman of the board has authority to make or modify grants to such employees, subject to the following conditions:

 

 

During 2010, the committee engaged an independent executive compensation consultant to advise the committee on matters related to executive compensation. Please refer to “Compensation Discussion and Analysis” for more information related to the independent executive compensation consultant and for more information regarding the stock option grants made by the committee to our named executive officers.

 

Compensation Committee Interlocks and Insider Participation

 

The current members of our corporate personnel committee are Mr. Graham and Ms. Mestayer. In 2010, none of our executive officers served as a director or member of the compensation committee of another entity, where an executive officer of the entity served as one of our directors or on our corporate personnel committee.

 

Board’s Role in Oversight of Risk Management

 

Our board of directors as a whole is responsible for risk oversight, with reviews of certain areas being conducted by the relevant board committees that report to the full board. In its risk oversight role, our board of directors reviews, evaluates and discusses with appropriate members of management whether the risk management processes designed and implemented by management are adequate in identifying, assessing,

managing and mitigating material risks facing the company. In addition, as reflected in our ethics and business conduct policy, our board seeks to establish a “tone at the top” communicating the board’s strong commitment to ethical behavior and compliance with the law.

 

Our board believes that full and open communication between senior management and the board of directors is essential to effective risk oversight. Our co-chairmen meet regularly with senior management to discuss a variety of matters including business strategies, opportunities, key challenges and risks facing the company, as well as management’s risk mitigation strategies. Senior management attends all regularly scheduled board meetings where they conduct presentations to the board on various strategic matters involving our operations and are available to address any questions or concerns raised by the board on risk management-related or any other matters. Our board oversees the strategic direction of the company, and in doing so considers the potential risks and rewards of the company’s business opportunities and challenges, and monitors the development and management of risks that impact our strategic goals.

 

While our board is ultimately responsible for risk oversight at the company, our three board committees assist our board in fulfilling its oversight responsibilities with respect to certain areas of risk. As part of its responsibilities as set forth in its charter, the audit committee is responsible for reviewing and discussing with management and our independent registered public accounting firm the company’s major financial risk exposures and the measures management has taken to monitor, control and minimize such risks, including the company’s risk assessment and risk management policies. The audit committee assists our board in fulfilling its oversight responsibilities by monitoring the effectiveness of the company’s systems of financial reporting, auditing, internal controls and legal and regulatory compliance. Our internal auditor and independent registered public accounting firm meet regularly in executive session with the audit committee. As part of its responsibilities as set forth in its charter, the corporate personnel committee is responsible for overseeing the company’s assessment of whether its compensation policies and practices are likely to expose the company to material risks and in consultation with management, is responsible for overseeing the company’s compliance with regulations governing executive compensation. The nominating and corporate governance committee assists our board in fulfilling its oversight responsibilities with respect to the management of risks associated with the company’s board leadership structure and corporate governance matters. Each committee regularly reports on these matters to the full board.

 

Board and Committee Independence and Audit Committee Financial Experts

 

On the basis of information solicited from each director, and upon the advice and recommendation of the nominating and corporate governance committee, our board has affirmatively determined that each of Messrs. Bush, Carmichael, Day, Ford and Graham and Ms. Mestayer has no material relationship with the company and is independent within the meaning of our corporate governance guidelines, which comply with the applicable NYSE listing standards and SEC rules. In making this determination, the nominating and corporate governance committee, with assistance from the company’s legal counsel, evaluated responses to a questionnaire completed annually by each director regarding relationships and possible conflicts of interest between each director, the company and management. In its review of director independence, the committee considered all commercial, industrial, banking, consulting, legal, accounting, charitable, and familial relationships any director may have with the company or management. The nominating and corporate governance committee recommended to the board that the six directors named above be considered independent, which the board approved.

 

Our board also has determined that each of the members of the audit, corporate personnel, and nominating and corporate governance committees has no material relationship with the company and satisfies the independence criteria (including the enhanced criteria with respect to members of the audit committee) set forth in the applicable NYSE listing standards and SEC rules. In addition, our board has determined that each member of the audit committee, Messrs. Day, Ford and Graham and Ms. Mestayer, qualifies as an “audit committee financial expert,” as such term is defined by the rules of the SEC.

Consideration of Director Nominees

 

In evaluating nominees for membership on our board, our nominating and corporate governance committee applies the board membership criteria set forth in our corporate governance guidelines. Under these criteria, the committee will take into account many factors, including personal and professional integrity, general understanding of our industry, corporate finance and other matters relevant to the successful management of a publicly-traded company in today’s business environment, educational and professional background, independence, and the ability and willingness to work cooperatively with other members of the board and with senior management. In selecting nominees, the committee seeks to have a board that represents a diverse range of perspectives and experience relevant to the company. The committee will also evaluate each individual in the context of our board as a whole, with the objective of recommending nominees who can best perpetuate the success of the business, be an effective director in conjunction with the full board, and represent stockholder interests through the exercise of sound judgment using his or her experience in these various areas.

 

Our nominating and corporate governance committee regularly assesses the appropriate size of our board, and whether any vacancies on our board are expected due to retirement or otherwise. In the event that vacancies are anticipated, or otherwise arise, the committee will consider various potential candidates who may come to the attention of the committee through current board members, professional search firms, stockholders or other persons. Each candidate brought to the attention of the committee, regardless of who recommended such candidate, is considered on the basis of the criteria set forth in our corporate governance guidelines.

 

As stated above, our nominating and corporate governance committee will consider candidates proposed for nomination by our stockholders. Stockholders may propose candidates by submitting the names and supporting information to: Corporate Secretary, McMoRan Exploration Co., 1615 Poydras Street, New Orleans, Louisiana 70112. Supporting information should include (a) the name and address of the candidate and the proposing stockholder, (b) a comprehensive biography of the candidate and an explanation of why the candidate is qualified to serve as a director taking into account the criteria identified in our corporate governance guidelines, (c) proof of ownership, the class and number of shares, and the length of time that the shares of our common stock have been beneficially owned by each of the candidate and the proposing stockholder, and (d) a letter signed by the candidate stating his or her willingness to serve, if elected.

 

In addition, our by-laws permit stockholders to nominate candidates directly for consideration at next year’s annual meeting. Any nomination must be in writing and received by our corporate secretary at our principal executive offices no later than February 16, 2012. If the date of next year’s annual meeting is moved to a date more than 90 days after or 30 days before the anniversary of this year’s annual meeting, the nomination must be received no later than 90 days prior to the date of the 2012 annual meeting or 10 days following the public announcement of the date of the 2012 annual meeting. Any stockholder submitting a nomination under our by-laws must include (a) all information relating to the nominee that is required to be disclosed in solicitations of proxies for election of directors pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (including such nominee’s written consent to being named in the proxy statement as a nominee and to serving as a director if elected), and (b) the name and address (as they appear on the company’s books) of the nominating stockholder and the class and number of shares beneficially owned by such stockholder. Nominations should be addressed to: Corporate Secretary, McMoRan Exploration Co., 1615 Poydras Street, New Orleans, Louisiana 70112.

 

Communications with the Board

 

Stockholders or other interested parties may communicate directly with one or more members of our board, or the non-management directors as a group, by writing to the director or directors at the following address: McMoRan Exploration Co., Attn: Board of Directors or the name of the individual director or directors, 1615 Poydras Street, New Orleans, Louisiana 70112. The communication will be forwarded to the appropriate directors.

 

We use a combination of cash and equity-based incentive compensation to attract and retain qualified candidates to serve on our board. In setting director compensation, we consider the significant amount of time directors dedicate in fulfilling their duties as directors as well as the skill-level required by the company to be an effective member of our board. The form and amount of director compensation is reviewed by our nominating and corporate governance committee, which makes recommendations to the full board.

 

Cash Compensation

 

Each non-management director and advisory director receives an annual fee of $40,000. Committee chairs receive an additional annual fee as follows: audit committee, $12,000; corporate personnel committee and nominating and corporate governance committee, $6,000. Each non-management director and each advisory director receives a fee of $1,500 for attending each board and committee meeting (for which he or she is a member) and is reimbursed for reasonable out-of-pocket expenses incurred in attending such meetings. In addition, each of Messrs. Bush and Carmichael received $28,500 in connection with their service in 2010 on the special committee of the board of directors, which included a retainer of $6,000 for serving on the special committee, in addition to a fee of $1,500 for each committee meeting, or group of meetings, the member attended. The compensation of each of Messrs. Moffett and Adkerson, the co-chairmen of our board, is reflected in the “Summary Compensation Table” below.

 

Equity-Based Compensation

 

During 2010, non-management directors and advisory directors also receive equity-based compensation under the 2004 Director Compensation Plan (the 2004 Plan) and the 2008 Stock Incentive Plan (the 2008 Plan), both of which were approved by our stockholders. Under the 2004 Plan, each non-management director and advisory director received an annual grant of options to acquire 3,500 shares of our common stock on June 1st of each year. In addition, the 2008 Plan authorizes our nominating and corporate governance committee to make additional equity grants to our non-management directors and advisory directors at its discretion. The share pool available under the 2004 Plan was depleted in January 2011, thus going forward equity-based grants to non-management and advisory directors will be made only from the 2008 Plan. Under our current program, upon approval of our nominating and corporate governance committee, each non-management director and advisory director receives an annual grant of options to acquire an aggregate 5,000 shares of our common stock and 2,500 restricted stock units (RSUs) on June 1st of each year. All options are granted at fair market value on the grant date, vest ratably over the first four anniversaries of the grant date and expire on the tenth anniversary of the grant date. The RSUs also vest ratably over the first four anniversaries of the grant date. Each RSU entitles the director to receive one share of our common stock upon vesting. To the extent dividends are paid on our common stock in the future, dividend equivalents will accrue on the RSUs on the same basis as dividends will be paid on our common stock and will include market rate interest. The dividend equivalents will only be paid upon vesting of the shares of our common stock. Our program also provides for a pro rata grant of options to a director upon his or her initial election to our board other than at an annual meeting.

 

On June 1, 2010, each non-management director and advisory director serving at the time was granted an option to purchase 5,000 shares of our common stock with an exercise price of $9.48 and 2,500 RSUs. In addition, upon election to our board, on June 8, 2010 each of Messrs. Bush and Carmichael were granted options to purchase 5,000 shares of our common stock with an exercise price of $10.21 and 2,500 RSUs and on December 30, 2010 each of Messrs. Flores and Wombwell were granted options to purchase 2,500 shares of our common stock with an exercise price of $17.18 and 1,250 RSUs.

 

Non-management directors may elect to exchange all or a portion of their annual fee for an equivalent number of shares of our common stock on the payment date, based on the fair market value of our common stock on the date preceding the payment date. Non-management directors may also elect to defer all or a portion of their annual fee and meeting fees, and such deferred amounts will accrue interest at a rate equal to the prime commercial lending rate announced from time to time by JPMorgan Chase (compounded quarterly),

and shall be paid out at such time or times as directed by the non-management director. See footnote (1) to the “Director Compensation” table for details regarding participation in these programs by our non-management directors.

 

2010 Director Compensation

 

The table below summarizes the total compensation paid to or earned by our non-management directors during 2010. The amounts included in the “Stock Awards” and “Option Awards” columns reflect the aggregate grant date fair value, and do not necessarily equate to the income that will ultimately be realized by the director for these awards.

 

2010 Director Compensation

 

 

 

 

 

 

 

 

 

In accordance with our by-laws, our board of directors has fixed the current number of directors at eleven. The terms of all of our directors expire at the 2011 annual meeting of stockholders. Upon the recommendation of our nominating and corporate governance committee, our board has nominated each of Messrs. Adkerson, Bush, Carmichael, Day, Flores, Ford, Graham, Moffett, Rankin and Wombwell and Ms. Mestayer to serve a one-year term. The persons named as proxies in the enclosed form of proxy intend to vote your proxy for the election of each such director, unless otherwise directed. If, contrary to our expectations, a nominee should become unavailable for any reason, your proxy will be voted for a substitute nominee designated by our board, unless otherwise directed.

 

The table below provides certain information as of April 19, 2011, with respect to each director nominee. The biographies of each of the director nominees below contain information regarding the person’s service as a director, business experience, director positions held currently or at any time during the last five years, and the experiences, qualifications, attributes or skills that caused our nominating and corporate governance committee and our board to determine that the person should be nominated to serve as a director for the company in 2011. Unless otherwise indicated, each person has been engaged in the principal occupation shown for the past five years. The year first elected a director and positions with the company described below include the period that the person served as a director or an officer of McMoRan Oil & Gas Co., a predecessor of the company formed in 1994.

 

Upon completion of our acquisition of the shallow water Gulf of Mexico shelf properties, interests and assets of Plains Exploration & Production Company (PXP) on December 30, 2010, we entered into a stockholder agreement with PXP pursuant to which, among other things, the size of our board of directors was increased from 9 to 11 members and PXP had the right to nominate two individuals to serve on our board of directors. On December 30, 2010, Messrs. Flores and Wombwell were appointed to our board of directors as the designated directors of PXP pursuant to the stockholder agreement.

 

 

Vote Required to Elect Director Nominees

 

Under our by-laws, in an uncontested election, directors are elected by a majority of the votes cast. In contested elections where the number of nominees exceeds the number of directors to be elected, directors are elected by a plurality vote, with the eleven director nominees who receive the most votes being elected.

 

In an uncontested election, any nominee for director who has a majority of votes cast “withheld” from his or her election will be required to promptly tender his or her resignation to the board. Our nominating and corporate governance committee will recommend to our board whether to accept or reject the tendered resignation. Our board will act on the committee’s recommendation and publicly disclose its decision within 90 days after the date of the annual meeting of stockholders. Any director who tenders his or her resignation will not participate in the committee’s recommendation or the board action regarding whether to accept or reject the tendered resignation.

 

In addition, if each member of the nominating and corporate governance committee fails to be elected at the same election, the independent directors who were elected will appoint a committee to consider the tendered resignations and recommend to our board whether to accept or reject them. Any vacancies on our board may be filled by a majority of the directors then in office. Each director elected in this manner will hold office until his or her successor is elected and duly qualified.

 

Recommendation of the Board of Directors

 

OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE FOR ALL OF THE DIRECTOR NOMINEES LISTED ABOVE.

Stock Ownership of Directors and Executive Officers

 

Unless otherwise indicated, the table below shows the amount of our common stock each of our directors and our chief executive officer, our chief financial officer and our other executive officers (collectively, the named executive officers) beneficially owned as of the record date, April 19, 2011, and all shares shown are held with sole voting and investment power, and include, if applicable, shares held in our Employee Capital Accumulation Program (ECAP).

 

 

 

 

Name of Beneficial Owner		Number of RSUs
Richard C. Adkerson			—
A. Peyton Bush, III			1,875
William P. Carmichael			1,875
Robert A. Day			3,750
James C. Flores			1,250
Gerald J. Ford			3,750
H. Devon Graham, Jr.			3,750
Glenn A. Kleinert			—
Suzanne T. Mestayer			3,750
James R. Moffett			—
C. Howard Murrish			—
Nancy D. Parmelee			3,333
Kathleen L. Quirk			—
B. M. Rankin, Jr.			3,750
John F. Wombwell			1,250
For more information regarding the RSUs, see the sections titled “Director Compensation” and “Compensation Discussion and Analysis.”

 

 

 

 

Section 16(a) of the Securities Exchange Act of 1934, as amended, requires our directors and executive officers and persons who own more than 10% of our common stock to file reports of ownership and changes in ownership with the SEC. Based solely upon our review of the Forms 3, 4 and 5 filed during 2010, and written representations from certain reporting persons that no Forms 5 were required, we believe that all required reports were timely filed.

Stock Ownership of Certain Beneficial Owners

 

Based on filings with the SEC, the table below shows the beneficial owners of more than 5% of our outstanding common stock other than Mr. Moffett, whose beneficial ownership is reflected in the table in the section titled “Stock Ownership of Directors and Executive Officers.” Unless otherwise indicated, all information is presented as of December 31, 2010, and all shares beneficially owned are held with sole voting and investment power.

 

 

 

 

 

This section of the proxy statement describes and analyzes our executive compensation philosophy and program in the context of the compensation paid during the last fiscal year to each person serving as our chief executive officer during 2010, our chief financial officer, and each of our three other executive officers (our named executive officers). For fiscal 2010, our named executive officers are:

 

 

In this CD&A, we first provide an Executive Summary of our actions and highlights from 2010. We next explain the principles that guide our corporate personnel committee’s (the committee) executive compensation decisions and the process we follow when setting executive compensation. Finally, we discuss in detail each component of executive compensation, including the actual results yielded for each named executive officer in fiscal 2010. You should read this section of the proxy statement in conjunction with the advisory vote that we are conducting on the compensation of our named executive officers (see proposal no. 2), as it contains information that is relevant to your voting decision.

 

Executive Summary

 

We are an entrepreneurially managed company, and our executive compensation practices reflect this philosophy. Our business focus is on high risk, high reward exploration opportunities, which is mirrored in our executive compensation program that provides for high risk, high reward earning opportunities. We seek to closely align the interests of our named executive officers with the interests of our stockholders through the use of performance-based compensation that balances rewards for both short- and long-term results. The primary objectives of our compensation program are to attract and retain executives, to motivate them to implement our business strategies, and to reward those executives for successful performance. Our compensation program is designed to create an energetic environment in which the named executive officers are enthusiastic about and committed to our company and its objectives, and are working toward the successful long-term performance of the company. The compensation program for our named executive officers is bifurcated, being comprised solely of long-term incentive awards for three of our executives, and comprised of a mix of base salary, annual cash incentive awards and long-term incentive awards for our other executives.

 

2010 Company Highlights

 

We are engaged in the exploration, development and production of oil and natural gas in the shallow waters of the Gulf of Mexico and onshore in the Gulf Coast area of the United States. Our exploration strategy is focused on targeting large structures on the “deep gas play” and on the “ultra-deep play.” As described in “ Management’s Discussion and Analysis of Financial Conditions and Results of Operations ” in our Annual Report on Form 10-K for fiscal year 2010, we have one of the largest acreage positions in these areas, and our focused strategy enables us to make use of our geological, engineering and operational expertise in these areas. During 2010, despite the challenges facing the oil and gas industry, we experienced significant operational and strategic accomplishments, including the following:

 

 

 

 

 

 

 

 

Compensation Philosophy and Processes

 

Our company is managed jointly by Mr. Moffett, who serves as our co-chairman of the board and chief executive officer, and Mr. Adkerson, who serve as co-chairmen of the board. Messrs. Moffett and Adkerson develop the company’s business strategy, but each concentrates on a different aspect of our operations and development. Mr. Moffett directs the company’s exploration and development activities, and since Mr. Kleinert’s retirement in May 2010, when Mr. Moffett assumed the role of president and chief executive officer, he has also been responsible for ensuring that the business strategy is appropriately executed by the management team. Mr. Adkerson primarily focuses on financial strategy and planning and on administrative activities.

 

Setting Compensation Levels

 

Levels reflect company performance and position  — The committee does not apply “hard metrics” to its decisions regarding executive compensation. The committee’s decisions regarding salary levels, bonus awards, and equity grant amounts (made in the form of stock options) for 2010 reflect the committee’s views as to the broad scope of responsibilities of our executive officers and the committee’s subjective assessment of our executives’ contribution to the company’s overall success.

 

Focus on reduction of cash outlay  — The structure of our executive compensation program also supports our company’s view that compensation for our most senior executives should be closely tied to the creation of stockholder value and that such compensation should be designed to minimize cash requirements, a consideration that has become even more critical in light of recent market conditions. In connection with our efforts to reduce overhead cash requirements, Messrs. Moffett and Adkerson, since 2002, and Ms. Quirk, since 2007, have agreed to forego all cash compensation in exchange for special annual stock option grants, as discussed under “Stock Options.” We recognize that our business focus is high risk, high reward exploration opportunities, and we do not believe this practice of providing solely equity-based compensation to a limited group of executives promotes risk-taking by these executives beyond what we believe is appropriate in terms of our business model. These executives, particularly Messrs. Moffett and Adkerson, have significant stock holdings and have shown their longstanding commitment to increase their holdings. In addition, each of these executives has other sources of income. With respect to our other named executive officers, the committee believes that our balance of annual and long-term compensation elements, and our use of stock options as a long-term performance vehicle, result in a compensation program that aligns our executives’ interests with those of our stockholders and does not promote excessive risk-taking on the part of our executives or other employees.

Evaluation of stock option gains  — The committee does not factor into its executive compensation decisions the gains received by our executive officers in connection with the exercise of stock options. The value of stock options upon exercise is directly related to the appreciation in value of our common stock, which in turn we believe is directly affected by the efforts of our executive officers in managing our company. Many of the stock options received by Messrs. Moffett and Adkerson and Ms. Quirk were received in lieu of cash compensation. Because each undertakes a certain degree of risk and uncertainty in accepting a variable, performance-dependent award instead of cash, we believe it would be inappropriate to have the value of those awards upon exercise affect future compensation decisions. Further, a key purpose served by granting stock options to executives is to provide an incentive for them to manage the company in a way that focuses on increasing stockholder value over time. Accordingly, the committee has not taken realized gains on option exercises into account when making decisions regarding future compensation.

 

Evaluation of Peers and Process

 

The design of our 2010 compensation program remains a product of a comprehensive analysis performed in 2004. The committee has not formally evaluated peer companies until recently. In addition, the committee has not referred to benchmarks in order to set executive compensation levels or structures. We believe we are aware of and understand the compensation practices of our industry and the companies we compete with for talent, and have maintained an executive compensation program providing consistent levels and forms of compensation from year to year targeted to maintain and attract a talented executive team. Further, we believe our program supports our core compensation goals by linking a majority of executive compensation to company performance, both long-term and short-term, and provides a level of total compensation to each of our named executive officers that continues to be reasonable and appropriate. The committee consults with our co-chairmen of the board when reviewing the performance of and determining compensation for our executive officers other than our co-chairmen themselves.

 

In March 2010, the committee engaged the services of Cogent Compensation Partners to provide executive compensation consulting services during 2010 and beyond. Pursuant to the terms of the engagement, Cogent will not provide services to the company’s management without the committee’s prior approval. In December 2010, Cogent commenced a competitive review of our executive compensation practices and reported its results to the committee in February 2011. Cogent compared our executive compensation levels with those of the following ten peer companies: Noble Energy, Inc., Newfield Exploration Company, Plains Exploration & Production Company, Stone Energy Corporation, W&T Offshore, Inc., Energy XXI Ltd., ATP Oil & Gas Corporation, Venoco, Inc., Energy Partners, Ltd., and Contango Oil & Gas Company. The committee used this report to evaluate whether our compensation levels were within industry norms. Based on its review, Cogent reported that the company’s total executive pay levels are within the market range (with total direct compensation below the market median and long-term incentives near the median), and are consistent with the levels found in other entrepreneurial companies.

 

Components of Executive Compensation

 

The company employs one of its named executive officers, Mr. Murrish. The other named executive officers, Messrs. Moffett and Adkerson and Mses. Parmelee and Quirk, provide services to the company through a services agreement between FM Services Company and the company, as discussed below in “Certain Transactions.” Executive officer compensation for 2010 for Messrs. Moffett and Adkerson and Ms. Quirk consisted solely of awards of stock options, and for Mr. Murrish and Ms. Parmelee included base salaries, annual incentive awards, and stock options. We also provide Mr. Murrish and Ms. Parmelee certain post-employment benefits and to a limited degree, certain perquisites described below, and they participate in benefit programs generally available to our employees, such as our ECAP and health insurance plan.

 

Base Salaries

 

Our philosophy is that base salaries, which provide fixed compensation, should meet the objective of attracting and retaining the executive officers needed to successfully manage our business. Actual individual salary amounts reflect the committee’s judgment with respect to each executive officer’s responsibility,

performance, work experience and the individual’s historical compensation. As part of their agreement with the company to forego cash compensation, Messrs. Moffett and Adkerson and Ms. Quirk did not receive salaries in 2010, receiving instead the special stock option grants discussed in “Stock Options” below. With respect to our other named executive officers, our goal is to allocate more compensation to the performance-dependent elements of the total compensation package, and we do not routinely provide base salary increases. Consequently, we did not increase base salaries for 2010, with Mr. Murrish’s base salary remaining unchanged since 2005, and Ms. Parmelee’s remaining unchanged since 2007.

 

Annual Incentive Awards

 

Annual cash incentives are a variable component of compensation designed to reward our executives for maximizing annual operating and financial performance. Executive officers and certain managers of the company participate in our performance incentive awards program. Under the program, the annual award is established following the end of the fiscal year based on the participant’s level of responsibility after reviewing our operational and strategic accomplishments during the year. When determining the actual amounts awarded to participants for any year, the committee makes a subjective determination after considering company performance as measured by operational and financial accomplishments and overall market conditions. With respect to Mr. Murrish and Ms. Parmelee, the committee also considers the recommendations of the co-chairmen of the board.

 

Of our named executive officers, only Mr. Murrish and Ms. Parmelee, received an annual incentive award for 2010 under our performance incentive awards program. As previously stated, Messrs. Moffett and Adkerson and Ms. Quirk agreed to forego all cash compensation during 2010, including annual incentive awards, instead receiving special grants of stock options. For 2010, the committee reviewed our operational and strategic accomplishments during 2010, as noted above under “2010 Company Highlights,” and determined that the company’s performance supported cash incentive awards to our executive officers commensurate with the awards granted for 2009, except that Ms. Parmelee received an additional $50,000 in recognition of expanded administrative responsibilities she undertook following Mr. Kleinert’s retirement.

 

Stock Options

 

We grant long-term incentives in the form of stock options to the company’s executive officers. Stock options are a variable component of compensation intended to provide a significant potential value that reinforces the importance of creating value for our stockholders. The committee believes that stock options are an effective and appropriate long-term incentive for our executives in that their value is dependent on an increase in our share price and aligns the executives’ interests with those of our stockholders. In 2010, and most recently in February 2011, we made annual stock option grants to all of our executive officers. Stock option grant levels have been historically based upon the position and level of responsibility of the individual, and have remained at relatively consistent levels for our named executive officers in recent years. These annual grants vest ratably on the first four anniversaries of the grant date, have a term of ten years and an exercise price equal to the fair market value of our common stock on the grant date. All of our outstanding stock option grants vest fully upon a change in control of the company. We have a longstanding commitment to not reprice stock options.

 

In addition, we also made special grants of stock options to the co-chairmen and Ms. Quirk in lieu of their 2010 cash compensation as discussed below.

 

Grants in lieu of Salary to Co-Chairmen of the Board and Ms. Quirk.   Annually since 2002 for Messrs. Moffett and Adkerson and since 2007 for Ms. Quirk, each has agreed to receive a special grant of stock options in lieu of cash compensation. On February 1, 2010, the committee granted 250,000 options to Mr. Moffett, 150,000 options to Mr. Adkerson, and 45,000 options to Ms. Quirk, each option being fully exercisable, having a term of ten years and an exercise price of $15.73, the fair market value on the grant date. None of these executives received a base salary in 2010 or an annual incentive award from the company for 2010.

Messrs. Moffett and Adkerson and Ms. Quirk also agreed to forego all cash compensation during 2011 in exchange for special stock option grants. Accordingly, on February 7, 2011, the committee granted 300,000 options to Mr. Moffett, 100,000 options to Mr. Adkerson, and 45,000 options to Ms. Quirk, each option being fully exercisable, having a term of ten years and having an exercise price of $17.25, the fair market value on the grant date. Although the number of options granted to each of these executives in connection with their agreements to forego cash compensation has been relatively consistent over the last few years, the committee increased Mr. Moffett’s 2011 award by 50,000 options and similarly decreased Mr. Adkerson’s award to reflect Mr. Moffett’s increased responsibilities as president and chief executive officer. The committee continues to believe that granting a relatively consistent number of options year to year is appropriate for our program, and recognizes that this will result in fluctuations in the grant date fair value of the awards each year as a result of changes in our stock price.

 

Post-Employment Compensation

 

In addition to the compensation received by the executive officers during 2010, we provide post-employment benefits to Mr. Murrish and Ms. Parmelee through an ECAP which is available to all qualified employees, and a severance plan generally available to all company employees. We provide additional post-employment benefits to these executives through a nonqualified defined contribution plan, as well as a separate supplemental retirement benefit for Ms. Parmelee. These programs are described below and in detail under the heading “Retirement Benefit Programs.”

 

Nonqualified Defined Contribution Plan and Discontinued Defined Benefit Program.   Our nonqualified defined contribution plan provides those employees whose earnings in a prior year were in excess of the dollar limit under Section 401(a)(17) of the Internal Revenue Code, including our executive officers, the ability to defer up to 20% of their base salary after deferrals to the ECAP have ceased due to qualified plan limits. The company makes a matching contribution equal to the participant’s deferrals in this plan and the ECAP (the qualified plan) limited to 5% of the participant’s base salary. We do not take into account bonuses or income associated with option exercises or the vesting of RSUs when determining the company’s matching contributions. The matching contribution noted above is the same as the matching contribution in the ECAP, which provides that participants will receive a company contribution equal to 100% of the participant’s deferrals to the ECAP subject to the qualified plan limits. The purpose of the 5% company contribution in our nonqualified plan is to continue the 5% contribution in the ECAP that is subject to the qualified plan limits. The nonqualified defined contribution plan is unfunded.

 

We had a defined benefit program in place until June 30, 2000. To compensate for the discontinuance of benefit accruals under this plan, we decided that we prospectively would make an additional company contribution to our ECAP participants equal to 4% of each participant’s pensionable compensation up to the applicable IRS limits, and also an additional company contribution of 4% of compensation in excess of such limits to participants in our nonqualified plan. Further, because participants in a pension plan accrue most of their benefits in the last 10 years of service, we decided that employees who met certain age and service requirements as of June 30, 2000 (including Messrs. Kleinert and Murrish and Ms. Parmelee) would receive an additional 6% company contribution, for a total of 10%, to both the qualified and nonqualified plans. The purpose of the nonqualified plan is to make total retirement benefits for our employees who earn over the qualified plan limits commensurate with those available to other employees as a percentage of pay.

 

Supplemental Retirement Benefit — Ms. Parmelee.   We have agreed to pay Ms. Parmelee a supplemental nonqualified benefit upon her retirement. This unfunded arrangement will provide a traditional defined benefit based upon accruals on excess compensation through 2000 when the traditional nonqualified defined benefit was frozen. This supplemental retirement benefit is intended to restore the value of her nonqualified benefits that were modified during the four-year period preceding 2000 when we restructured our defined benefit program. The benefit under this arrangement is described under “Retirement Benefit Programs” below.

 

Perquisites and Other Personal Benefits

 

We also provide limited perquisites to Mr. Murrish and Ms. Parmelee, namely through our Executive Services Program. Effective January 1, 2009, we amended this program to eliminate reimbursements for club

memberships and all tax gross-ups on perquisites for our executive officers. As revised, this program continues to provide reimbursement to our executive officers and other senior managers for personal financial and tax advice, certain long-term care insurance premiums and certain security services. We continue to believe that the reimbursement for financial and tax advice historically offered under this program remain appropriate, in that they provide our executives with increased efficiencies in handling personal matters and promote their focus on company business. As reflected in the “Summary Compensation Table” below, to the extent either of these executives participate in this program, the benefits received are minimal compared to each executive’s total compensation.

 

We also maintain a charitable matching contribution program, pursuant to which we will match charitable contributions made by our employees, including our executive officers, up to certain limits. The program is designed to encourage all employees to contribute to hospitals, community, education and cultural institutions, and social service and environmental organizations.

 

Tax Considerations

 

Section 162(m) of the Internal Revenue Code limits a public company’s annual tax deduction to $1 million for compensation paid to certain highly compensated executive officers. Qualified performance-based compensation is excluded from this deduction limitation if certain requirements are met. The committee’s policy is to structure compensation awards that will be deductible where doing so will further the purposes of our executive compensation program. The committee also considers it important to retain flexibility to design compensation programs that recognize a full range of criteria important to our success, even where compensation payable under the programs may not be fully deductible.

 

The committee believes that the stock options qualify for the exclusion from the deduction limitation under Section 162(m). The committee believes that the remaining components of individual executive compensation for 2010 that do not qualify for an exclusion from Section 162(m) should not exceed $1 million and therefore will qualify for deductibility.

Corporate Personnel Committee Report On Executive Compensation

 

The corporate personnel committee of our board of directors has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management, and based on such review and discussions, the corporate personnel committee recommended to the board that the Compensation Discussion and Analysis be included in this proxy statement.

 

Submitted by the Corporate Personnel Committee as of April 12, 2011:

 

H. Devon Graham, Jr., Chairman            Suzanne T. Mestayer

 

The table below summarizes the total compensation paid to or earned by our named executive officers. See “Compensation Discussion and Analysis” for a more detailed discussion of executive compensation program.

 

2010 Summary Compensation Table

 

 

 

 

 

 

						Preferential
						Nonqualified				Change in Actuarial
						Deferred				Present Value of
						Compensation				Accumulated
Name		Year				Earnings				Pension Benefits				Total
Nancy D. Parmelee			2010				—				—				—
			2009				—				—				—
			2008				8,302				10,246				18,548
C. Howard Murrish			2010				—				—				—
			2009				—				—				—
			2008				11,028				17,933				28,961
Glenn A. Kleinert			2010			$	—			$	—			$	—
			2009				—				—				—
			2008				8,813				—				8,813

 

 

		Perquisites and Other Personal Benefits																	Additional All Other Compensation
														Personal
														Excess
						Financial								Liability									Life
		Matching				and Tax								Insurance					Plan				Insurance
Name		Gifts				Advice				Security				Premiums					Contributions				Premiums
Ms. Parmelee			7,360				4,800				—				651					52,600				1,899
Mr. Murrish			7,900				10,000				1,200				1,575					70,000				8,405
Mr. Kleinert			7,500				600				—				1,575					46,250				1,029

 

 

Grants of Plan-Based Awards in Fiscal Year 2010

 

 

 

 

 

Outstanding Equity Awards at December 31, 2010