<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
ASARCO Incorporated
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
[_] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-------------------------------------------------------------------------
(3) Filing Party:
-------------------------------------------------------------------------
(4) Date Filed:
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Notes:
<PAGE>
[LOGO] ASARCO
RICHARD DE J. OSBORNE CHAIRMAN OF THE BOARD
March 7, 1996
Dear Stockholder:
You are cordially invited to attend the annual meeting of stockholders which
will be held in the Ground Floor Auditorium, 1 Chase Manhattan Plaza, New
York, New York on Wednesday, April 24, 1996, at 2 P.M. We hope you can be with
us.
At the meeting, you will be asked to elect directors and to approve the
selection of auditors. You will also be asked to act upon proposals to adopt a
1996 Stock Incentive Plan and an Incentive Compensation Plan for Senior
Officers.
The meeting also provides an opportunity to give you a current report on the
activities of the Company and its plans and prospects for the future.
It is important that your shares be represented at the meeting whether or
not you are able to attend in person. Therefore, you are asked to vote, sign,
date and mail the enclosed proxy. Please do so today.
Sincerely,
/s/ Richard de J. Osborne
Richard de J. Osborne
Chairman and Chief Executive Officer
ASARCO INCORPORATED, 180 MAIDEN LANE, NEW YORK, N.Y. 10038 (212) 510-2000
<PAGE>
LOGO
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 24, 1996
To the Stockholders:
The annual meeting of stockholders of ASARCO Incorporated will be held in the
Ground Floor Auditorium, 1 Chase Manhattan Plaza, New York, New York on
Wednesday, April 24, 1996, at 2 P.M. for the following purposes:
(1) To elect three directors to serve until the 1999 annual meeting of
stockholders.
(2) To act upon a proposal to approve the selection by the Board of
Directors, upon recommendation of the Audit Committee, of Coopers &
Lybrand as independent auditors for the calendar year 1996.
(3) To act upon a proposal to adopt a 1996 Stock Incentive Plan.
(4) To act upon a proposal to adopt an Incentive Compensation Plan for
Senior Officers.
(5) To transact such other business as may properly come before the meeting.
Stockholders of record at the close of business on March 8, 1996 will be
entitled to vote at the annual meeting. Stockholders of record who attend the
annual meeting in person may withdraw proxies and vote in person if they wish.
By order of the Board of Directors,
R. Ferri
Secretary
New York, N.Y., March 7, 1996
YOUR VOTE IS IMPORTANT
Please mark, sign, date and return your
proxy.
<PAGE>
PROXY STATEMENT
This proxy statement is furnished as part of the solicitation by the Board of
Directors of ASARCO Incorporated, 180 Maiden Lane, New York, N.Y. 10038
("Asarco" or the "Company") of the proxies of all stockholders entitled to vote
at the annual meeting to be held on April 24, 1996 and at any adjournment
thereof. This proxy statement and the enclosed form of proxy are being mailed,
commencing on or about March 12, 1996, to stockholders of record on March 8,
1996. Any proxy in the enclosed form given pursuant to this solicitation and
received in time for the annual meeting will be voted with respect to all
shares represented by it and in accordance with the instructions, if any, given
in such proxy. If the Company receives a signed proxy with no voting
instructions given, such shares will be voted for the election of directors and
for the proposals. Any proxy may be revoked at any time prior to the exercise
thereof by notice from the stockholder, received in writing by the Secretary,
or by written ballot voted at the meeting.
At the close of business on February 29, 1996, the Company had outstanding
42,630,720 shares of Common Stock, without par value. Each share of Common
Stock outstanding at the March 8, 1996 record date will be entitled to one vote
at the annual meeting. The presence in person or by proxy of the holders of
record of a majority of the shares entitled to vote at the meeting shall
constitute a quorum. Abstentions, votes withheld and broker non-votes are
counted for quorum purposes but are not counted either as votes cast "For" or
"Against". A plurality of the votes cast is required for the election of
directors. The affirmative vote of a majority of the votes cast at the meeting
on each proposal by the holders of shares entitled to vote thereon is required
to approve each of the other matters described in this proxy statement.
When a stockholder participates in the Dividend Reinvestment Plan applicable
to the Company's Common Stock, his proxy to vote shares of Common Stock will
include the number of shares held for him by The Bank of New York, the agent
under the plan. If the stockholder does not send any proxy, the shares held for
his account in the Dividend Reinvestment Plan will not be voted. Shares of
Common Stock owned under the Company's Savings Plans will be voted by the
trustee under the plans in accordance with the instructions contained in the
proxy submitted by the beneficial stockholder. Any shares held by the trustee
as to which it receives no voting instructions will be voted by the trustee in
the same proportion as the shares for which it has received voting
instructions.
ELECTION OF DIRECTORS
At the recommendation of the Company's Organization and Compensation
Committee and pursuant to a resolution of the Board of Directors adopted on
January 31, 1996, three nominees are proposed for election at the annual
meeting. One director is retiring at the annual meeting, and the remaining
eight directors will continue to serve in accordance with their previous
election. All of the nominees are currently directors. All current directors
were elected to their present term of office at a previous annual meeting of
stockholders.
The Company's Restated Certificate of Incorporation, as amended, provides
that there shall be three classes of directors, as nearly equal in number as
possible, each class to be elected for a three-year term. The Board of
Directors has currently fixed the number of directors at eleven. At its meeting
2
<PAGE>
held on January 31, 1996, the Board of Directors of the Company nominated
Willard C. Butcher, Martha T. Muse and Richard de J. Osborne for election as
Class II directors to serve until the 1999 annual meeting of stockholders.
Messrs. Butcher and Osborne, Ms. Muse and Harry Holiday, Jr. are currently
serving as Class II directors with a term of office expiring in 1996. Mr.
Holiday will retire at the expiration of his term of office on April 24, 1996,
and will not be standing for re-election.
Proxies in the enclosed form will be voted, unless authority is withheld, for
the election of the three nominees named below. If any person should be
unavailable for election, proxies will be voted for another individual chosen
by the Board of Directors as a substitute for the unavailable nominee, unless
the Board of Directors adopts a resolution pursuant to the By-Laws reducing the
number of directors.
NOMINEES FOR ELECTION AS DIRECTORS
Class II
(to serve until the 1999 annual meeting of stockholders)
<TABLE>
<CAPTION>
DIRECTOR
FOR DIRECTOR AGE SINCE
------------ --- --------
<C> <S> <C> <C>
Willard C. Butcher...... Director of Texaco Inc., International Pa- 69 1974
per Company and M.I.M. Holdings Limited,
and member of the International Advisory
Board of Banca Nazionale del Lavoro. Mr.
Butcher was Chairman of the Executive Com-
mittee of The Chase Manhattan Bank, N.A.
from November 1, 1990 until October 31,
1991 and was Chairman of the Board and
Chief Executive Officer of the bank from
1981 through October 1990. Mr. Butcher was
also Chairman of the Board and Chief Exec-
utive Officer of The Chase Manhattan Cor-
poration from 1981 through October 1990.
Richard de J. Osborne... Chairman of the Board, Chief Executive Of- 61 1976
ficer and President of the Company since
December 1, 1985 and President of the Com-
pany from 1982; non-executive Chairman of
the Board and director of Southern Peru
Copper Corporation; director of Schering-
Plough Corporation, M.I.M. Holdings Limit-
ed, Grupo Mexico, S.A. de C.V. and The
Tinker Foundation Incorporated.
Martha T. Muse.......... Chairman of The Tinker Foundation Incorpo- 69 1994
rated (not-for-profit corporation) since
January 1996; previously its President and
Chief Executive Officer from 1975 to 1995,
its President from 1968 and its Executive
Director from 1965 to 1968; director
emerita of Columbia University; director
of The Bank of New York and The Bank of
New York Company, Inc.
</TABLE>
3
<PAGE>
DIRECTORS WHOSE TERM OF OFFICE CONTINUES
Class III
(serving until the 1997 annual meeting of stockholders)
<TABLE>
<CAPTION>
DIRECTOR
DIRECTOR AGE SINCE
-------- --- --------
<S> <C> <C> <C>
James C. Cotting........ Director of Navistar International Corpora- 62 1987
tion, USG Corporation and the Interlake
Corporation; member of the Board of Gover-
nors of the Chicago Stock Exchange; alter-
nate director of MIM Holdings Limited. Mr.
Cotting was Chairman of the Board of
Navistar International Corporation (truck
and engine manufacturer) from April 1,
1995 to March 31, 1996. He was Chairman
and Chief Executive Officer of Navistar
from 1987 through March 1995.
David C. Garfield....... Director of Schering-Plough Corporation. 68 1984
Mr. Garfield was consultant to Ingersoll-
Rand Company (machinery manufacturer) from
June 1986 until June 1992. Mr. Garfield
was President of Ingersoll-Rand Company
from 1981 through May 1986 and previously
its Vice Chairman.
E. Gordon Gee........... President of The Ohio State University 52 1989
since September 1990; from 1985 until Au-
gust 1990, President of the University of
Colorado; from 1981 to 1985, President of
West Virginia University; director of Banc
One Corporation, The Limited, Inc.,
Glimcher Realty Trust and Intimate Brands
Inc.
James Wood.............. Chairman of the Board and Chief Executive 66 1989
Officer of The Great Atlantic & Pacific
Tea Company, Inc. (supermarket chain)
since 1980; previously its President from
1988 to 1993 and at other times since
1980; prior to 1980, Chairman of the Board
and Chief Executive Officer of The Grand
Union Company; director of Schering-Plough
Corporation.
<CAPTION>
Class I
(serving until the 1998 annual meeting of stockholders)
DIRECTOR
DIRECTOR AGE SINCE
-------- --- --------
<S> <C> <C> <C>
James W. Kinnear........ Director of Corning Incorporated and 67 1990
PaineWebber Group Inc. and an advisory di-
rector of Unilever N.V. and Unilever PLC;
President and Chief Executive Officer of
Texaco Inc. (crude oil, natural gas and
petroleum products) from 1987 to April
1993; previously its Vice Chairman of the
Board from 1983 to 1987, Executive Vice
President from 1978 to 1983, and a direc-
tor from July 1977 to May 1994; alternate
director of M.I.M. Holdings Limited.
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
DIRECTOR
DIRECTOR AGE SINCE
-------- --- --------
<S> <C> <C> <C>
Francis R. McAllister... Executive Vice President of the Company in 53 1988
charge of copper operations since April
1993; previously its Chief Financial Offi-
cer from April 1982 until April 1993; di-
rector of Grupo Mexico, S.A. de C.V. and
Southern Peru Copper Corporation.
Michael T. Nelligan..... Chief Executive Officer of Don Ward Trans- 56 1984
port, Inc. (specialty trucking) since Jan-
uary 1987; its Chairman since August 1995
and previously its President. Mr. Nelligan
was Chairman of the Board of Ideal Basic
Industries, Inc. (cement products) from
October 1985 until January 1986, its Chief
Executive Officer from July 1983 until
January 1986 and its President from 1982
until January 1986.
John D. Ong............. Chairman and Chief Executive Officer of The 62 1991
BF Goodrich Company (diversified chemicals
and aerospace) since 1979 and its President
from 1975 to 1984; director of Cooper In-
dustries, Inc., Ameritech Corporation, The
Kroger Co., The Geon Company and TRW, Inc.
</TABLE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
Set forth below is certain information with respect to those persons who are
known to the Company to have been, as of the dates indicated below, the
beneficial owners of more than five percent of the Company's Common Stock.
<TABLE>
<CAPTION>
SHARES OF
THE
COMPANY'S
COMMON STOCK
BENEFICIALLY PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER OWNED CLASS
------------------------------------ ------------ ----------
<S> <C> <C>
John R. Simplot Self-Declaration of
Revocable Trust,
J.R. Simplot, Trustee.......................... 4,200,000(a) 9.87%
999 Main Street
Boise, Idaho 83702
Merrill Lynch & Co., Inc. ..................... 2,243,670(b) 5.27%
World Financial Center, North Tower
250 Vesey Street
New York, New York 10281
</TABLE>
- --------
(a) Information is provided in reliance upon information included in
stockholder's Schedule 13D, as amended by Amendment No. 2 thereto, dated
February 21, 1996. As Trustee, J.R. Simplot has sole dispositive and voting
power over such shares.
(b) Information is provided in reliance upon information included in a Schedule
13G, dated February 13, 1996, filed by Merrill Lynch & Co. and two of its
subsidiaries (collectively, "Merrill Lynch"). Merrill Lynch may be deemed
the beneficial owner of 5.27% of the Company's Common Stock held by or
through its wholly-owned subsidiaries. Merrill Lynch disclaims beneficial
ownership of all such Common Stock except for shares held in proprietary
trading accounts, customer accounts over which it has discretionary power,
or held by unit investment trusts for which it is the sponsor.
5
<PAGE>
BENEFICIAL OWNERSHIP OF MANAGEMENT
The information set forth below as to the shares of Common Stock of the
Company beneficially owned by the nominees, directors, executive officers named
in the Summary Compensation Table below and by all nominees, directors and
officers as a group is stated as of December 31, 1995.
<TABLE>
<CAPTION>
SHARES OF THE
COMPANY'S ADDITIONAL
COMMON STOCK SHARES DEEMED PERCENT
BENEFICIALLY BENEFICIALLY OF
OWNED(a) OWNED(b) TOTALS CLASS
------------- ------------- ------- -------
<S> <C> <C> <C> <C>
Willard C. Butcher(c).............. 1,200 -- 1,200 (d)
James C. Cotting(c)................ 1,400 -- 1,400 (d)
David C. Garfield(c)(e)............ 17,500 -- 17,500 (d)
E. Gordon Gee(c)................... 1,000 -- 1,000 (d)
Harry Holiday, Jr.(c).............. 1,300 -- 1,300 (d)
James W. Kinnear(c)................ 1,200 -- 1,200 (d)
Francis R. McAllister(f)........... 30,358 91,340 121,698 (d)
Martha T. Muse(c).................. 604 -- 604 (d)
Michael T. Nelligan(c)............. 1,415 -- 1,415 (d)
John D. Ong(c)..................... 800 -- 800 (d)
Richard de J. Osborne(f)(g)........ 99,882 233,000 332,882 .8%
James Wood(c)...................... 3,000 -- 3,000 (d)
Kevin R. Morano(f)................. 13,749 33,700 47,449 (d)
Robert M. Novotny(f)............... 11,282 19,500 30,782 (d)
Robert J. Muth(f).................. 13,990 19,654 33,644 (d)
All nominees, directors and
officers as a group (24
individuals)(f)................... 234,610 487,794 722,404 1.7%
</TABLE>
- --------
(a) Information with respect to beneficial ownership is based upon information
furnished by each nominee, director or officer. Except as noted below, all
nominees, directors and officers have sole voting and investment power over
the shares beneficially owned by them.
(b) Consists of shares deemed beneficially owned under regulations of the
Securities and Exchange Commission because such shares may be acquired
within 60 days after December 31, 1995, through the exercise of options
granted under the Company's Stock Incentive Plan or the previous Stock
Option Plan.
(c) See also the information below on Common Stock Equivalents.
(d) Less than 0.5%.
(e) Does not include 2,000 shares owned by Mr. Garfield's wife and 1,500 shares
owned by his daughters. Mr. Garfield disclaims beneficial ownership of
these shares.
(f) Includes restricted Common Stock awarded under the Company's Stock
Incentive Plan to certain of the Company's executive officers, and still
subject to restrictions, as follows: 41,000 such shares to Mr. Osborne;
11,480 to Mr. McAllister; 8,080 to Mr. Morano; 6,800 to Mr. Novotny; 5,640
to Mr. Muth and 18,920 to other executive officers. Restrictions on such
shares lapse in equal installments over five years beginning on their
respective grant dates.
(g) Includes 4,614 shares of Common Stock over which Mr. Osborne and his wife
share voting and investment power.
6
<PAGE>
COMMON STOCK EQUIVALENTS
The following table sets forth the per share number of Common Stock
equivalents credited as of December 31, 1995 to the accounts of the Company's
outside directors under the Company's Deferred Fee Plan for Directors and under
its Director's Deferred Payment Plan. Under both Plans, payments are made in
cash following retirement depending on the market value of the Common Stock at
that time. For additional information regarding these Plans, see "Additional
Information" below.
<TABLE>
<CAPTION>
DEFERRED
DEFERRED PAYMENT
FEE PLAN(a) PLAN(b) TOTAL
---------- -------- ------
<S> <C> <C> <C>
Willard C. Butcher............................... -- 3,100 3,100
James C. Cotting................................. -- 2,509 2,509
David C. Garfield................................ -- 3,660 3,660
E. Gordon Gee.................................... -- 901 901
Harry Holiday, Jr................................ -- 3,263 3,263
James W. Kinnear................................. 8,119 3,740 11,859
Martha T. Muse................................... 315 355 670
Michael T. Nelligan.............................. -- 4,484 4,484
John D. Ong...................................... -- 2,559 2,559
James Wood....................................... 3,263 4,449 7,712
------ ------ ------
Total.......................................... 11,697 29,020 40,717
</TABLE>
- --------
(a) Amounts shown reflect the number of share equivalents credited to the
Deferred Fee Plan plus dividends credited.
(b) Amounts shown reflect the number of share equivalents credited under
the Directors' Deferred Payment Plan plus dividends credited.
COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Organization and Compensation Committee of the Board of Directors has
furnished the following report on executive compensation.
The compensation of Asarco's executive officers other than those who are also
directors is reviewed and established annually by the Organization and
Compensation Committee of the Board of Directors. For the two officers who are
also directors (Mr. Osborne and Mr. McAllister) the Committee makes
compensation recommendations to the Board absent those officers, which
establishes their compensation. The Board did not modify or reject in any
material way the Committee's recommendations for 1995 compensation. The
Committee met a total of four times during 1995.
The Company retains an independent compensation consulting organization to
advise and assist the Company and the Committee in connection with compensation
matters. During 1995 the consulting organization made recommendations to the
Committee on base salary, cash incentive compensation and long-term incentive
compensation for the Chief Executive Officer and each other Asarco executive
position on subjects including target levels for base salary and cash incentive
compensation; long-term
7
<PAGE>
income targets and recommended weighting of stock option and restricted stock
values; and appropriate stock option and restricted stock valuation methods.
The Committee carefully considered the recommendations and acted within the
scope of the recommendations in these areas.
Asarco's executive officer compensation is composed of base salary and
incentive compensation.
The Company's policy for base salary for executive officers is to establish
par compensation levels for each position based on competitive data and the
responsibilities and value of each executive position to the Company. The
Committee considers compensation information from other companies in the mining
and metals industry and comparably sized and both larger and smaller companies
in other industries. The Committee then considers individual and corporate
performance in establishing salary levels within a competitive range.
The Committee believes that the S&P Metals Miscellaneous Group, which
includes only four metals companies in addition to the Company, and the S&P 500
Index, both used for comparing shareholder returns, do not necessarily
represent the Company's most direct competitors for executive talent. In making
decisions that affect executive compensation the Committee reviews four
different comparator groups proposed by its independent consultants: one group
comprises 9 metals companies worldwide; another group includes 14 process-
oriented companies; a third group comprises 48 companies engaged in heavy
industry; and a fourth group consists of approximately 169 companies having
annual revenues of $1 billion to $5 billion (the "Comparator Groups"). These
groups represent companies whose operational and performance characteristics
are capable of comparison with those of the Company, allowing for meaningful
comparisons of executive compensation. The Comparator Groups include three of
the five companies in the S&P Metals Miscellaneous Group and approximately 150
companies in the S&P 500 Index.
Base salaries for the Company's executive officers in 1995 were slightly
above the median of the Comparator Groups studied by the Committee and
represented a slightly greater percentage of total compensation, relative to
the median for the Comparator Groups. Because the cyclical nature of the
Company's business can result in significant changes in incentive compensation
from year to year the Committee believes that compensation levels are more
stable and, accordingly, more competitive when base salaries comprise a larger
portion of total cash compensation. In general, the Committee structures total
compensation for each salaried position to be approximately at the median of
total compensation for comparable positions among the Comparator Groups.
Although the Company's base salaries are set at levels intended to be
competitive with the Company's industry peers, the Committee also takes into
consideration the Company's performance relative to companies in the Comparator
Groups as part of its compensation review. In this regard, the Company's
success in meeting transactional, operational and financial objectives are all
taken into consideration. Because the relative importance of each objective may
change over time, the Committee does not set fixed Company performance targets
for purposes of setting base salaries. The Company's success or failure in
achieving certain objectives or financial results, however, will generally
affect executive salaries. Thus, in a downward part of the business cycle,
salary increases may be delayed or salaries even reduced; in strong financial
years, the Company may award larger increases.
8
<PAGE>
Base salaries for Mr. Osborne, Mr. McAllister and the other executive
officers were increased effective February 1, 1995 by an average of 8.1
percent. Base salaries for Messrs. Osborne, McAllister and three other
executive officers had not been increased during the prior twenty-eight months,
while Mr. Morano's salary had been increased twenty-two months previously in
connection with his promotion to Chief Financial Officer.
Incentive compensation consists of cash incentive compensation awarded
annually if justified, and long-term incentive compensation. Long-term
incentive compensation combines restricted stock and stock options and is
designed to link the interests of executive officers with those of stockholders
by providing each executive an incentive to manage the business as an owner
with an equity stake.
Annual cash incentive payments are determined under the Asarco Incentive
Compensation Plan, which is administered by the Organization and Compensation
Committee. Approximately 76% of all active salaried employees of the Company
are eligible for annual cash incentive compensation payments. A target level of
annual incentive compensation is established for each eligible employee based
on the level of responsibility attached to such employee's position with the
Company. For executive officers these targets are set slightly below
competitive median levels to compensate for salary levels which are set
slightly above competitive median levels. The officers' levels of
responsibility are determined by the Committee after review of substantially
equivalent positions among the Comparator Groups.
Under the Asarco Incentive Compensation Plan, awards to employees are
increased or decreased from a predetermined target level, based upon
performance measured at three levels: individual, operating unit or staff group
and Company-wide. Incentive compensation for the Company's executive officers,
and particularly for the Chief Executive Officer, is determined by individual
and Company performance levels. Company performance in 1995 was evaluated
against certain objectives previously established by the Board of Directors.
Among such objectives were: the completion of certain transactions, including
the disposition or restructuring of certain Company investments; the
achievement of certain production, expense and profit goals; and the completion
of certain financial transactions. The degree to which the Company is able to
meet its annual objectives is expressed as a corporate performance rating
determined by the Board of Directors with the recommendation of the Committee.
In 1995, the Committee used considerations of business judgment to weight the
Company's stated objectives for purposes of determining the corporate
performance rating.
Incentive compensation for the Company's officers other than Messrs. Osborne
and McAllister was established by the Committee after two meetings at which it
considered the Company's performance in 1995. Incentive compensation for
Messrs. Osborne and McAllister was determined by the Board of Directors upon
the recommendation of the Committee, after review by the Board and the
Committee at meetings held in November 1995 and January 1996. The Committee and
the Board of Directors determined that the Company had achieved a 1995
corporate performance rating of 140% and concluded that annual cash incentive
payments should be made to each of the Company's officers including Messrs.
Osborne and McAllister. The Committee and the Board considered that
Mr. Osborne's performance continued to exceed expectations and merited an
increased individual award adjustment of 80%.
9
<PAGE>
In January 1995 the Committee approved awards of stock options and restricted
stock to the Company's officers other than Mr. Osborne and Mr. McAllister, and
recommended to the Board awards to Mr. Osborne and Mr. McAllister. These awards
were made within long-term incentive income targets based upon analyses by the
Company's compensation consultant. The consultant supplements data from the
Comparator Groups with broad based survey data to develop target levels of
"long-term gain opportunity" for various levels of total compensation, with
greater percentages of long term gain opportunity attaching to higher
responsibility levels. The Company's consultant surveys a broader group of
companies than those in the Comparator Groups so as to provide a more complete
analysis of competitive long-term incentive compensation award levels.
The Company makes long-term incentive awards on an annual basis and has not
established specific stock ownership objectives for its officers. In 1995,
long-term incentive compensation awards to the Company's executive officers
were at the median of awards made by the companies included in the Comparator
Groups and the consultant's surveys. In making 1995 long-term incentive awards
the Committee also considered each officer's performance. The Committee also
considered outstanding options and shares of restricted stock previously
awarded to the executive officers. In the case of the Chief Executive Officer
the Committee also considered his performance and responsibility in
establishing the Company's strategic goals and directing all elements of its
performance.
Section 162(m) of the Internal Revenue Code eliminates the Company's Federal
income tax deductions for certain compensation in excess of $1 million paid in
a taxable year to each of the Company's five highest paid officers as reported
in the proxy statement, unless compensation programs meet certain requirements,
principally concerning the adoption of fixed targets. The Committee has noted
that the nature of the Company's business, in which earnings are affected
substantially by changes in commodity market prices for the Company's principal
products, makes establishing fixed targets unresponsive to the rapidly changing
nature of the Company's business. Accordingly, the Committee now plans to make
changes in Asarco executive compensation programs for annual incentive
compensation and for stock option grants as a result of the provision. Such
changes are discussed below under "Proposal for 1996 Stock Incentive Plan" and
"Proposed Incentive Compensation Plan for Senior Officers." While the Committee
considers that restricted stock provides a form of long term compensation the
value of which is directly related to Company stock performance, the Committee
believes that it is not practical to change the Company's restricted stock plan
provisions to meet the requirements of Section 162(m).
Willard C. Butcher, Chairman
Harry Holiday, Jr.
James W. Kinnear
John D. Ong
----------------
10
<PAGE>
EXECUTIVE COMPENSATION
Set forth below is certain information concerning the annual and long-term
compensation for services in all capacities to the Company for fiscal years
1995, 1994 and 1993 of the Company's Chief Executive Officer and the other
four most highly compensated executive officers of the Company:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
---------------------- --------------------------
SECURITIES
UNDERLYING
NAME AND RESTRICTED OPTIONS ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS STOCK AWARDS(1) (SHARES) COMPENSATION(2)
------------------ ---- -------- -------- --------------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Richard de J. Osborne... 1995 $780,015 $850,000 $467,040 40,000 $23,400
Chairman of the Board, 1994 725,000 368,800 420,750 48,000 4,500
President and Chief 1993 725,000 -- 260,000 27,000 7,075
Executive Officer
Francis R. McAllister... 1995 404,765 283,400 122,598 16,000 12,143
Executive Vice President 1994 380,000 131,600 116,875 18,500 4,500
1993 380,000 -- 78,000 12,000 16,582
Kevin R. Morano......... 1995 306,257 241,100 102,165 13,000 9,188
Vice President 1994 265,000 113,600 93,500 14,500 4,500
1993 241,333 -- 35,175 5,600 7,075
Robert M. Novotny....... 1995 280,924 181,800 78,813 10,000 8,428
Vice President 1994 258,000 92,600 67,787 11,000 4,500
1993 258,000 -- 41,600 6,500 7,075
Robert J. Muth.......... 1995 278,674 134,700 58,380 7,800 8,360
Vice President 1994 264,000 70,100 58,437 9,800 4,500
1993 264,000 -- 39,000 5,800 7,075
</TABLE>
- --------
(1) Dollar values of restricted stock awards are shown as of the date of
grant. The number and dollar value of shares of restricted stock holdings
owned at December 31, 1995, and still subject to restrictions are as
follows: Mr. Osborne, 41,000 shares/$1,312,000; Mr. McAllister, 11,480
shares/$367,360; Mr. Morano, 8,080 shares/$258,560; Mr. Novotny, 6,800
shares/$217,600; and Mr. Muth, 5,640 shares/$180,480. Restrictions on such
shares lapse in equal installments over five years beginning with the
grant dates which occurred during the period from January 1991 through
January 1995. Cash dividends paid on shares of restricted stock are not
subject to restrictions.
(2) Amounts shown for 1995 reflect matching contributions made by the Company
for the named individuals under the Company's Savings Plan and
Supplemental Savings Plan. Amounts shown for 1994 and 1993 reflect
matching Company contributions made under the Company's Savings Plan, and
for Mr. McAllister, also include directors fees paid by a subsidiary in
1993. The Savings Plan is a qualified defined contribution profit sharing
plan available generally to all United States salaried employees with six
months of service with the Company. Savings Plan contributions are
immediately vested and may be withdrawn subject to certain restrictions,
penalties and suspension periods. The Supplemental Savings Plan is a non-
qualified deferred compensation plan available to employees eligible to
participate in the Savings Plan whose base annual salary exceeds the limit
imposed under the Internal Revenue Code. Compensation deferred and amounts
contributed by the Company may be withdrawn subject to certain
restrictions and penalties.
11
<PAGE>
OPTION GRANTS
Set forth below is further information on grants of stock options under the
Company's Stock Incentive Plan for the period January 1, 1995 to December 31,
1995. No stock appreciation rights ("SARs") were granted in 1995 or outstanding
as of December 31, 1995.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
GRANT
INDIVIDUAL GRANTS VALUE
--------------------------------------------- ----------
NUMBER OF % OF TOTAL
SHARES OPTIONS
UNDERLYING GRANTED TO EXERCISE GRANT DATE
OPTIONS EMPLOYEES IN OR BASE EXPIRATION PRESENT
NAME GRANTED(1) FISCAL YEAR PRICE $/SH DATE VALUE(2)
- ---- ---------- ------------ ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Richard de J. Osborne 40,000 18.5% $29.19 1/25/05 $367,325
Francis R. McAllister 16,000 7.4% $29.19 1/25/05 146,930
Kevin R. Morano 13,000 6.0% $29.19 1/25/05 119,381
Robert M. Novotny 10,000 4.6% $29.19 1/25/05 91,831
Robert J. Muth 7,800 3.6% $29.19 1/25/05 71,628
</TABLE>
- --------
(1) The options were awarded under the Company's 1990 stockholder-approved
Stock Incentive Plan. The option price per share equals the fair market value
of the Company's Common Stock on the date of grant. The options provide for
limited rights exercisable upon the occurrence of specified events that may
materially affect the value of the Company's Common Stock and are designated
as such by the Committee that administers the Plan, including a tender or
exchange offer for shares of the Company's Common Stock, the replacement of a
majority of the Board as a result of a proxy contest, a merger or
reorganization of the Company, or a liquidation or dissolution of the
Company. If an exercise event occurs, the holder is entitled to receive the
cash value of the options at the highest market value that the shares traded
over a period of sixty days preceding the event or, in the event of the
consummation of a tender offer, the tender offer price, in each case, less
the exercise price.
(2) Based on the Black-Scholes option pricing model, a widely recognized method
of valuing options. The following assumptions were used in determining the
value of the options using the model: expected volatility of 29.82% based on
actual monthly volatility for the preceding five years, risk-free rate of
return of 7.75% based on the yield of the five year U.S. treasury notes as of
the grant date, annual dividend rate of $0.72 per share based on average
dividends paid per share over the preceding ten years, and exercise of the
option five years after the grant date. The actual value, if any, an
executive may realize will depend on the excess of the stock price over the
exercise price on the date the option is exercised, so that there is no
assurance the value realized by an executive will be at or near the value
estimated by the Black-Scholes model. The model is used for valuing market
traded options and is not directly applicable to valuing stock options
granted under the Company's Stock Incentive Plan which cannot be sold.
12
<PAGE>
OPTION EXERCISES AND FISCAL YEAR-END VALUES
Set forth below is information concerning stock option exercises by named
executive officers during 1995, including the aggregate value of gains on the
date of exercise, the number of shares covered by exercisable options and the
value of "in-the-money" options as of December 31, 1995. All outstanding
options were exercisable at December 31, 1995.
AGGREGATED OPTION EXERCISES IN 1995 AND DECEMBER 31, 1995 OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES UNDERLYING VALUE OF
UNEXERCISED UNEXERCISED
OPTIONS AT YEAR END IN-THE-MONEY
SHARES ACQUIRED VALUE EXERCISABLE/ OPTIONS AT
NAME ON EXERCISE REALIZED UNEXERCISABLE(1) YEAR END(2)
---- --------------- -------- --------------------- ------------
<S> <C> <C> <C> <C>
Richard de J. Osborne... 36,980 $448,209(3) 233,000 $1,396,835
Francis R. McAllister... 9,662 86,910(4) 91,340 535,510
Kevin R. Morano......... 8,850 91,432(4) 33,700 174,527
Robert M. Novotny....... 17,500 153,938 19,500 63,530
Robert J. Muth.......... 14,076 147,604(4) 19,654 73,459
</TABLE>
- --------
(1) The above officers held no unexercisable options at December 31, 1995.
(2) Based on the New York Stock Exchange--Composite Transactions price for the
Company's Common Stock of $32 on December 29, 1995.
(3) In the case of Mr. Osborne, all after tax net proceeds were used to
acquire Asarco common shares.
(4) After tax net value realized was used to acquire Asarco common shares in
the following estimated percentages: Mr. McAllister, 90%; Mr. Morano, 47%;
and Mr. Muth, 39%.
13
<PAGE>
SHAREHOLDER RETURN PERFORMANCE PRESENTATION
Set forth below is a line graph comparing the yearly percentage change in the
cumulative total return on the Company's Common Stock against the cumulative
total return on the S&P Composite 500 Stock Index and the S&P Metals
Miscellaneous Group Index for the five year period 1990 to 1995.
<TABLE>
<CAPTION>
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
ASARCO INCORPORATED, S&P 500 INDEX & S&P METALS MISC. GROUP INDEX**
Measurement period S&P 500 S&P METALS
(Fiscal year Covered) ASARCO INDEX GROUP INDEX
- --------------------- --------- --------- -----------
<S> <C> <C> <C>
Measurement PT -
12/31/90 $100.00 $100.00 $100.00
FYE 12/31/91 $ 83.92 $130.47 $112.83
FYE 12/31/92 $101.20 $140.41 $121.06
FYE 12/31/93 $ 94.76 $154.56 $134.86
FYE 12/31/94 $119.81 $156.60 $157.46
FYE 12/31/95 $137.58 $215.45 $174.18
</TABLE>
* TOTAL RETURN ASSUMES REINVESTMENT OF DIVIDENDS
** ASSUMES $100 INVESTED ON 12/31/90 IN ASARCO COMMON STOCK, S&P 500 INDEX AND
S&P METALS GROUP INDEX
The preceding chart analyzes the total return on Asarco's common stock
compared to the S&P 500 and the S&P Metals Miscellaneous Group over the five
year period commencing December 31, 1990. In the first year of this period,
through December 31, 1991, Asarco's stock return declined 16.1%, compared to
positive returns of 30.5% and 12.8% for the S&P 500 and the S&P Metals
Miscellaneous Group, respectively. In 1992, returns on Asarco stock were a
positive 20.6% compared to positive returns of 7.6% and 7.3% for the S&P 500
and S&P Metals Miscellaneous Group. In 1993, Asarco's stock return was a
negative 6.4% compared to positive returns of 10.1% and 11.4% for the S&P 500
and S&P Metals Miscellaneous Group. In 1994, the return for Asarco stock was a
positive 26.4% compared to positive returns of 1.3% and 16.8% for the S&P 500
and S&P Metals Miscellaneous Group. In 1995, Asarco's stock provided a return
of 14.8% compared to 37.6% for the S&P 500 and 10.6% for the S&P Metals
Miscellaneous Group.
RETIREMENT PLANS
The following table shows the estimated amount of annual retirement income
(calculated as a single life annuity benefit) payable to employees for life,
commencing at normal retirement at age 65 in
14
<PAGE>
1996, under the Company's qualified Retirement Benefit Plan for Salaried
Employees ("Plan"), covering substantially all salaried employees, a prior plan
of the Company and a supplemental retirement benefit plan (the "Supplemental
Plan"). The Supplemental Plan is a non-qualified supplemental retirement
benefit plan under which any benefits not payable from Plan assets by reason of
the limitations imposed by the Internal Revenue Code of 1986, as amended (the
"Code") and the loss due to the deferrals of salaries made under the Company's
Deferred Income Benefit System are paid from the Company's general corporate
funds. The table assumes Social Security benefit levels as in effect on
January 1, 1996.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
APPROXIMATE ANNUAL RETIREMENT BENEFITS
--------------------------------------------------------------
FINAL
AVERAGE 15 YEARS 20 YEARS 25 YEARS 30 YEARS 35 YEARS
COMPENSATION OF SERVICE OF SERVICE OF SERVICE OF SERVICE OF SERVICE
- ------------ ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
$ 400,000 $ 87,518 $116,690 $145,863 $175,036 $204,208
500,000 110,018 146,690 183,363 220,036 256,708
600,000 132,518 176,690 220,863 265,036 309,208
700,000 155,018 206,690 258,363 310,036 361,708
800,000 177,518 236,690 295,863 355,036 414,208
900,000 200,018 266,690 333,363 400,036 466,708
1,000,000 222,518 296,690 370,863 445,036 519,208
1,100,000 245,018 326,690 408,363 490,036 571,708
1,200,000 267,518 356,690 445,863 535,036 624,208
1,300,000 290,018 386,690 483,363 580,036 676,708
</TABLE>
Benefits are calculated using a final average earnings formula (i.e., average
of the highest consecutive 60 months of the last 120 months of compensation
received "Final Average Compensation"), minus a Social Security offset.
As of January 31, 1996, the following officers had completed the number of
years of service indicated opposite their names: Richard de J. Osborne, 21
years; Francis R. McAllister, 29 years; Kevin R. Morano, 17 years; Robert M.
Novotny, 7 years and Robert J. Muth, 27 years. Under the Plan and Supplemental
Plan, the amounts of covered compensation of such persons for calendar year
1995 were Richard de J. Osborne, $1,148,815, Francis R. McAllister, $536,365,
Kevin R. Morano, $419,857, Robert M. Novotny, $373,524 and Robert J. Muth,
$348,774 and consisted of basic salary and bonuses in the year received as
shown in the Summary Compensation Table and in prior proxy statements. Bonuses
are generally received in the year following that in which they are earned.
Messrs. Osborne, Novotny and Muth are eligible to receive additional
benefits, not included in the amounts shown in the table, under the Company's
supplemental plan for designated officers hired in mid-career (the "Mid-Career
Plan"). The Mid-Career Plan provides supplemental retirement benefits out of
the general funds of the Company for officers holding the rank of Vice
President or higher who are determined by the Organization and Compensation
Committee to have had prior business or professional experience valuable to the
Company and relevant to the positions for which they were employed by the
Company, and who at retirement or termination of employment with the consent of
the Company will have been with the Company as a Vice President or higher for
10 years or more. The Mid-Career Plan provides for annual benefits equal to 55%
of the Final Average Compensation, which amount is reduced by any benefits
payable by the Company or any other employer under any other
15
<PAGE>
pension plan not attributable to the employee's contributions, and by all
Social Security benefits payable at the time of retirement or early
termination. All benefits under the Mid-Career Plan are forfeited by a
participant who prior to attaining age 65 terminates employment with the
Company without its consent. Participants in the Supplemental Plan and the Mid-
Career Plan may elect, in accordance with the terms of the plan, to receive
their benefits in a lump-sum payment at retirement.
EMPLOYMENT AGREEMENTS
The Company has employment agreements which provide for severance payments in
certain events to Messrs. Osborne, McAllister, Morano, Novotny, Muth and seven
other key executive officers. The employment agreements are for a term of one
year, renewable automatically on a year-to-year basis unless terminated by the
Company at least 60 days prior to the anniversary date, except that they
continue in effect for not less than three years following occurrence of a
change in control of the Company. If, as a result of a change in control, the
executive's employment is terminated, his responsibilities are materially
reduced, or his salary, bonus or benefits are adversely affected, the executive
is entitled to receive from the Company as severance pay one lump-sum payment
equal to the total of three times such executive's average annual base salary
and incentive compensation payments received for the higher of the three or
five years immediately preceding the date of termination or the change in
control, and the annual cost to the Company of all the benefits such executive
is entitled to receive immediately preceding the date of termination. Upon
termination by the Company after a change in control, under the agreements each
executive is also entitled to payment from the Company of the value of such
executive's stock options. The amount of the severance payment from the Company
will also include an amount necessary to reimburse each executive for any
excise taxes imposed by the Code in respect of such payments. The employment
agreements also provide that following the occurrence of a potential change in
control of the Company each executive officer will remain in the employ of the
Company for 180 days. Under the agreements, change in control as to an
executive shall not be deemed to have occurred if the event first giving rise
to the change in control involves a publicly-announced transaction or publicly-
announced proposed transaction which at the time of the announcement has not
been previously approved by the Company's Board of Directors and the executive
is part of a purchasing group proposing the transaction. Also, there is deemed
to be no change of control as to an executive if the executive is part of a
purchasing group which consummates a change in control transaction.
CERTAIN TRANSACTIONS
During 1995, the Company entered into financial, securities and commodities
transactions with subsidiaries of Merrill Lynch & Co., Inc. ("Merrill Lynch"),
resulting in net payments to the subsidiaries of $895,108. Merrill Lynch and
two of its subsidiaries may be deemed to own beneficially 5.27% of the
Company's Common Stock. Merrill Lynch disclaims ownership of certain of these
shares. Management believes these transactions to be on terms as favorable as
could be obtained from unaffiliated parties.
ADDITIONAL INFORMATION
The functions of the Organization and Compensation Committee of the Board of
Directors (composed of Messrs. Willard C. Butcher, Chairman, Harry Holiday,
Jr., James W. Kinnear and John D. Ong) include making recommendations to the
Board with respect to nomination and tenure policy for
16
<PAGE>
directors and election of and title changes for all corporate executive
officers. The Committee considers recommendations for nominees to the Board of
Directors from all sources. Such recommendations should be sent in writing to
the Secretary of the Company. The Company's By-Laws define notice procedures to
be followed by stockholders seeking to nominate directors for election. Under
the By-laws, a stockholder seeking to nominate a director for election by
shareholders must give written notice to the Secretary of the Company at least
90 days in advance of the anniversary date of the immediately preceding annual
meeting, or within 10 days of the giving of notice of a special meeting. The
notice must provide specific biographical data with respect to each nominee,
including such information as is required to be included in the Company's proxy
statement, and a representation by the stockholder that he or she is a holder
of record entitled to vote at the meeting and that he or she intends to appear
in person or by proxy to make the nomination. Nominations by stockholders for
election of directors at the Company's 1997 annual meeting of stockholders must
be received by January 24, 1997.
The Pension Advisory Committee of the Board of Directors (composed of Messrs.
David C. Garfield, Chairman, E. Gordon Gee, Harry Holiday, Jr., Michael T.
Nelligan, James Wood and Ms. Martha T. Muse) reviews pension fund and savings
plan matters affecting directors, officers and employees of the Company and
makes recommendations on such matters to the Board of Directors. The Committee
met two times during 1995.
The Board of Directors met 9 times during 1995. All incumbent directors
attended at least 75% of the aggregate number of meetings of the Board of
Directors and of the Committees of the Board on which they served.
Directors who are not officers or employees of the Company were paid in 1995
a basic fee of $23,000 plus $1,200 for attendance at each meeting of the Board
or of any Committee of the Board on which they served. The Company has a stock
award plan for non-employee directors providing for the award of 200 shares of
Asarco Common Stock per annum payable following each annual meeting to non-
employee directors who continue to serve or who are elected or reelected at
such meeting, or payable to non-employee directors who are first elected
between annual meetings or at a special meeting. The plan also allows incumbent
directors to forego their award for any year by giving irrevocable notice prior
to the start of such year or, in the case of new directors, by notice before
their election.
On January 18, 1995 Messrs. Willard C. Butcher and Richard de J. Osborne were
elected directors of MIM Holdings Limited ("MIM") as nominees of Asarco
pursuant to existing contractual provisions between MIM and Asarco, and Messrs.
James C. Cotting and James W. Kinnear were elected as alternate directors of
MIM. Asarco owns 15.1% of MIM's stock. MIM pays an annual fee of Australian
$45,000 to its directors including Messrs. Butcher and Osborne. Messrs. Cotting
and Kinnear receive $35,000 per annum from Asarco, which at current exchange
rates is comparable to the MIM directors fee, for serving as alternate
directors of MIM, since MIM does not pay fees to alternates. In addition, MIM
pays an annual fee of Australian $5,000 to Asarco for attendance at meetings of
MIM's Remuneration and Appointments Committee. Asarco divides the fee equally
among the four directors and alternate directors.
Directors may defer payment of fees payable for serving on the Board or a
Committee under the Deferred Fee Plan for Directors. Deferred compensation will
be credited with interest compounded
17
<PAGE>
quarterly at a floating rate equal to the prime rate charged by The Chase
Manhattan Bank, N.A. from the date on which it would normally have been paid
until payment or credited with a bookkeeping entry in shares of Asarco Common
Stock plus quarterly credits for shares of Common Stock that could be purchased
with dividends at fair market value. Fair market value is the mean of the high
and low sales prices for the Common Stock on New York Stock Exchange Composite
Trading on the date of the credit. In the case of cash or stock deferrals, the
value of a participant's deferred compensation is payable, at the participant's
election, in cash in a lump sum, or in annual installments commencing on
January 15 of any year subsequent to the fourth year following the year in
which such fees were earned. In any case, payment of the deferred compensation
will commence on January 15 of the year following termination of services as a
director. In the event of a participant's death, the value of the participant's
account is paid in a lump sum on the first January or July 15 following the
participant's death unless the participant had elected to continue the schedule
for payment of benefits previously elected.
On October 25, 1995 the Board of Directors terminated the Company's
Retirement Plan for Non-Employee Directors and adopted a Directors' Deferred
Payment Plan. The Directors' Retirement Plan provided an annual pension benefit
to retired directors equal to 50% of the annual retainer for directors with at
least five years of service, increasing by 10% of such annual retainer for each
additional year of service preceding retirement, to a maximum of 100%.
The Directors' Deferred Payment Plan provides that, in addition to the annual
cash retainer, the Company will credit to the deferred payment account of each
director who has less than ten years of Board service an annual amount equal to
75% of the annual cash retainer for up to ten years of service. For 1996, the
credit will be $17,250. At least 50% of such amount will be credited to a
Company Common Stock equivalent account and the balance may, at each director's
election, be credited to such account or to a bond equivalent account. The
Company Common Stock equivalent account will be credited with a bookkeeping
entry equal to the shares of Company Common Stock that could be purchased at
fair market value on the date of the credit, and, thereafter, on each dividend
payment date, with a bookkeeping entry indicating the additional shares that
could be purchased with dividends on shares previously credited to such
account. Fair market value is the average of the high and low sales prices for
the Common Stock on New York Stock Exchange Composite Trading on the date of
the initial credit, or, in the case of future contributions and dividends, for
the five trading days preceding the date of the credit or dividend. The bond
equivalent account amount will be credited with a bookkeeping entry equivalent
to interest at the yield rate for U.S. Treasury debt obligations with a 10-year
maturity, adjusted quarterly. The value of a director's deferred payment will
be paid in cash in a lump sum at retirement or in up to ten annual installments
after retirement, at the election of the Director.
Directors with ten years or more of Board service as of October 25, 1995 will
continue to be eligible to receive their fully-vested pension benefits under
the Directors' Retirement Plan. Prior to December 31, 1995, such directors
could reallocate the present value of their benefits under the Directors'
Retirement Plan to the Directors' Deferred Payment Plan, and all of the four
affected directors have elected to do so. Directors with at least five but less
than ten years of Board service were vested in their accrued benefits as of
December 31, 1995 under the Directors' Retirement Plan, with similar rights to
reallocate to the Deferred Payment Plan. All four of the affected directors
have elected to do so. They will not accrue further benefits under the
Retirement Plan but will accrue benefits under the Deferred Payment Plan until
their tenth anniversary of Board service. Directors with less than five years
18
<PAGE>
of Board service (two directors) will receive no benefits under the Retirement
Plan but received an initial credit under the Deferred Payment Plan equal to
75% of their current annual cash retainer times their years (calculated to the
nearest quarter year) of Board service as of December 31, 1995. Amounts
credited to the Company Common Stock equivalent account on behalf of such
directors were calculated at fair market value as of October 25, 1995.
PROPOSAL TO APPROVE THE SELECTION OF AUDITORS
Upon recommendation of its Audit Committee, the Board of Directors has
selected Coopers & Lybrand to serve as independent auditors for the Company for
the calendar year 1996, subject to approval of the stockholders. The Board of
Directors recommends that the stockholders approve the selection of Coopers &
Lybrand at the annual meeting. Coopers & Lybrand and its predecessors have
served as the Company's auditors continuously since 1935. Coopers & Lybrand
have advised the Company that neither the firm nor any of its members has any
direct or material indirect financial interest in the Company or its
subsidiaries.
The Audit Committee consists of Messrs. Michael T. Nelligan, Chairman, James
C. Cotting, David C. Garfield, E. Gordon Gee, James W. Kinnear and Ms. Martha
T. Muse. Three meetings were held in 1995. The functions of the Committee
include recommending the engagement of independent auditors, reviewing the
fees, scope and timing of their audit and their other services, and reviewing
the audit plan and results of the audit. The Committee also reviews the
Company's policies and procedures on internal auditing, accounting and
financial controls. The implementation and maintenance of internal controls are
understood to be primarily the responsibility of management.
A representative of Coopers & Lybrand will be present at the stockholders'
meeting. The representative will have an opportunity to make a statement and
will be available to respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE PROPOSAL.
PROPOSAL TO APPROVE 1996 STOCK INCENTIVE PLAN
The Board of Directors has adopted, subject to approval by the stockholders,
the ASARCO Incorporated 1996 Stock Incentive Plan (the "Stock Incentive Plan")
for key employees, including officers, of the Company and its subsidiaries to
replace the stock incentive plan currently in effect (the "Current Plan"). In
order for the Current Plan to continue to meet the requirements for U.S.
Federal tax deductibility of awards to each of the Company's five highest paid
executives under Internal Revenue Code Section 162(m), it would be necessary
for the Current Plan to be approved by the Company's shareholders prior to the
1997 Annual Meeting. The Stock Incentive Plan is more flexible than the Current
Plan, containing provisions that the Company believes are similar to those
presently adopted by other large corporations. Approval of the Stock Incentive
Plan will allow the Company to continue to reward outstanding performance by
employees in a manner that is designed to also enhance the rewards received by
the stockholders. The Stock Incentive Plan permits grants of any or all of the
following types of awards: stock options (including "incentive stock options"
under the Internal
19
<PAGE>
Revenue Code of 1986, as amended (the "Code")), stock appreciation rights
(either granted in conjunction with stock options or independently), limited
rights, restricted stock, bonuses or other compensation payable in stock, other
stock-based awards and dividend equivalents. In addition to the replacement of
the Current Plan, the purpose of adopting the Stock Incentive Plan is to
continue the availability to the Company of a stock-based compensation plan
that will encourage and enable participating employees of the Company and its
subsidiaries to acquire a continued proprietary interest in the Company through
stock ownership, thereby further aligning their interests with those of the
stockholders. The Stock Incentive Plan will also assist the Company and its
subsidiaries in attracting and retaining highly qualified and experienced
employees.
The Board of Directors recommends that the stockholders approve the Stock
Incentive Plan. The full text of the Stock Incentive Plan appears in Exhibit A
to this Proxy Statement and should be referred to for a complete description of
its provisions. The principal features of the Stock Incentive Plan are
summarized below, but this summary is qualified in its entirety by reference to
the complete text of the Stock Incentive Plan.
Duration of the Stock Incentive Plan. The Stock Incentive Plan shall become
effective on April 24, 1996, if a majority of the shares present and voting at
the meeting are voted in favor of it. Unless terminated sooner by the Board of
Directors, the Stock Incentive Plan will terminate on April 23, 2006, and no
option or other award may be granted under the Stock Incentive Plan after such
termination of the plan, but options or awards already granted may extend
beyond that date.
Shares Available for Awards. Subject to adjustments for certain changes in
capital, as discussed below, the total number of shares of Company Common Stock
that may be optioned or awarded under the Stock Incentive Plan is the amount of
shares remaining available for option or award under the Current Plan as of the
date of the meeting (but not exceeding 475,076 shares), of which up to 54,100
shares may be issued as Restricted Stock, plus an additional number of shares
on January 1 of each calendar year for the duration of the Stock Incentive Plan
equal to one percent of the number of shares of Company Common Stock
outstanding on the immediately preceding December 31. The Stock Incentive Plan
provides that no more than fifteen percent of the shares deliverable under the
plan may be awarded as restricted stock and no more than 350,000 shares may be
awarded in any calendar year with respect to incentive stock options. Any
shares subject to an option or stock appreciation right or other stock-based
award which for any reason expires or is terminated and any restricted stock
which is forfeited may again be awarded under the Stock Incentive Plan. The
maximum number of shares of Company Common Stock that may be subject to all
aggregate awards granted to a participant under the Stock Incentive Plan may
not exceed 375,000 shares of Company Common Stock during any period of three
consecutive calendar years (subject to adjustment for certain changes in
capital).
Eligibility. Executive and other key salaried employees, including officers,
of the Company and its subsidiaries, other than non-employee directors and
members of the Organization and Compensation Committee (the "Committee"), shall
be eligible to participate in the Stock Incentive Plan. There are currently
approximately 200 employees of the Company and its subsidiaries (including all
14 executive officers of the Company, of whom 2 executive officers are also
directors) who will be eligible to receive options and awards under the Stock
Incentive Plan if approved by the stockholders.
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<PAGE>
Administration. The Committee will administer the Stock Incentive Plan. The
Committee shall consist of not less than three directors of the Company, each
of whom shall be an "outside director" within the meaning of Section 162(m) of
the Code and a "disinterested person" or a "non-employee director," as
applicable within the meaning of Rule 16b-3 under the Securities Exchange Act
of 1934 (but only to the extent necessary for the Stock Incentive Plan and
awards thereunder to satisfy the requirements of such rule). Among the powers
granted to the Committee are the authority to interpret the Stock Incentive
Plan, establish rules and regulations for its operation, determine the
recipients of options and other awards under the Stock Incentive Plan,
determine the form and amount and other terms and conditions of such options
and awards within the parameters of the Stock Incentive Plan, accelerate the
exercisability of any option or award or the termination of restrictions
applicable to any restricted stock outstanding when such acceleration or
termination would be in the Company's best interest, and establish and
administer any performance goals applicable to any awards under the plan,
certifying whether and to what extent any such goals have been met. The
decisions and actions of the Committee with respect to the Stock Incentive Plan
shall be final and conclusive on all persons having or claiming to have any
right or interest in or under the Stock Incentive Plan. The Stock Incentive
Plan authorizes the Committee to delegate the administration of the plan
subject to certain limitations. The Stock Incentive Plan permits the Board of
Directors to exercise any power of the Committee under the plan, other than
with respect to matters required by law to be determined in the discretion of
the Committee.
Amendment and Termination of the Stock Incentive Plan. The Board of Directors
may amend or terminate the Stock Incentive Plan, but no such amendment or
termination may be made which would impair the rights of any holder of an
option or award already granted without his or her written consent or, without
the approval of the stockholders (to the extent required), increase the maximum
number of shares of Company Common Stock which may be sold or awarded under the
Stock Incentive Plan or change the class of persons eligible to receive an
option or award under the Stock Incentive Plan or extend the duration of the
Stock Incentive Plan or the period during which options may be exercised. The
Committee may, retroactively or prospectively, amend the terms of any option or
award already granted, provided no such amendment will impair the previously
accrued rights of any participant without his or her written consent.
Stock Options. The option price per share of Common Stock subject to an
option will not be less than 100% of the fair market value of that stock at the
time the option is granted. Options granted under the Stock Incentive Plan will
expire on a date fixed by the Committee but not more than 10 years from the
date of grant. Each option will state whether it is immediately exercisable in
full or when and to what extent it shall be exercisable.
Payment of the option price upon exercise of an option may be made (i) in
cash, (ii) by delivery of Company Common Stock already owned by the optionee,
(iii) in accordance with a cashless exercise program established by the
Committee under which, if so instructed by the optionee, either (A) shares
may be issued by the Company directly to the optionee's broker or dealer upon
receipt of the purchase price in cash from the broker or dealer or (B) shares
may be issued by the Company to the optionee's broker or dealer in
consideration for such broker's or dealer's irrevocable commitment to pay to
the Company that portion of the proceeds from the sale of such shares that is
equal to the exercise price of the option(s) relating to such shares, or (iv)
by any combination of cash, shares or in accordance with such cashless exercise
program. No optionee shall have any rights to dividends or other rights of
21
<PAGE>
a stockholder with respect to the shares subject to the option until the
optionee has given written notice of exercise and has paid for such shares in
the manner described above.
The Stock Incentive Plan permits optionees to exercise their options with
shares in immediately successive transactions. An optionee can use option
shares received from the exercise of a portion of his or her option to pay the
option price on the next exercise. At the conclusion of such transactions the
additional shares held by an optionee will be equal in value to the excess of
the fair market value of the shares over the total exercise price for such
shares, similar to the result of exercising stock appreciation rights for
stock, as described below.
If an optionee's employment terminates by reason of his or her death,
permanent disability (within the meaning set forth in the Company's long-term
disability plan), "normal retirement" under a retirement plan of the Company or
a subsidiary of the Company or with the consent of his or her employer, the
optionee's option may thereafter be exercised by the optionee or his or her
legatee or estate at any time prior to the termination date of the option. If
an optionee's employment terminates for any reason other than death, permanent
disability, "normal retirement" under a Company or subsidiary retirement plan
or with the consent of his or her employer, his or her option shall terminate
upon such termination of employment (or three months thereafter in the case of
an incentive stock option); however, in the case of an optionee whose
employment is otherwise terminated prior to his or her "normal retirement," the
Stock Incentive Plan gives the Committee discretion to permit his or her option
to be exercised following such termination of employment at any time prior to
the termination date of the option.
Stock Appreciation Rights. A stock appreciation right (an "SAR") may be
granted either in conjunction with a stock option (a "Coupled SAR") or alone
(an "Independent SAR"). In November 1994 the Committee decided to discontinue
the future grant of SARs. Most officers then holding SARs voluntarily
surrendered them to the Company, and no SARs were outstanding at the end of
1995. The Committee does not presently intend to award SARs in the future.
Nevertheless, the Committee considers that it is sound planning to provide
flexibility in the new Stock Incentive Plan to award SARs should future
conditions change during the term of the new plan.
Upon exercise of an SAR, the holder thereof is entitled to receive the excess
of the fair market value of the stock for which the SAR is exercised over the
SAR exercise price, which, in the case of a Coupled SAR, shall be the exercise
price of the related option. Such amount is payable in stock or in cash or in a
combination of stock and cash at the discretion of the Committee. A Coupled SAR
may be granted at the time of grant of the related stock option or, in the case
of a Coupled SAR granted with a stock option other than an incentive stock
option, at any time thereafter during the term of such option. A Coupled SAR
shall be exercisable to the extent its related stock option is exercisable. Any
related stock option shall no longer be exercisable to the extent that a
Coupled SAR has been exercised and a Coupled SAR shall not be exercisable upon
the exercise or expiration of the related stock option. The Committee will,
with regard to an Independent SAR, determine the number of shares subject to
the SAR, the manner and time of the SAR's exercise, and the SAR exercise price,
provided such exercise price is not less than the fair market value of the
shares subject to the Independent SAR on the date it is granted. The
exercisability of an Independent SAR following termination of the holder's
employment is governed by the same rules described above with respect to stock
options.
22
<PAGE>
The Committee may grant limited rights, either alone or in conjunction with
stock options, exercisable in the event of the consummation of a tender or
exchange offer for shares of the Company's Common Stock, or a proxy contest
which causes the replacement of one-third or more of the members of the Board
of Directors, or a merger or reorganization in which the Company does not
survive or in which the stockholders of the Company receive stock or securities
of another corporation or cash, or a liquidation or dissolution of the Company
or other similar events, all as specified in the applicable award agreement,
and expiring 30 days after the occurrence of any such event. Limited rights may
permit cash-outs of options, or cash payments with respect to shares covered by
a limited right granted alone, at the highest market value of the Common Stock
over the 60-day period prior to the event or the tender offer price or the
highest market value on the date of exercise, less in any such case the
exercise price.
Restricted Stock. During a time period established by the Committee (the
"restriction period") the recipient of restricted stock is not permitted to
sell, transfer, pledge or assign the shares. Shares of restricted stock shall
become free of all restrictions if, during the applicable restriction period,
the recipient's employment is terminated by death, permanent disability, as
determined by the Committee, and, to the extent set by the Committee at the
time of the award or later, retirement under a retirement plan of the Company
or any subsidiary of the Company. Upon termination of a recipient's employment
during the restriction period for any other reason, the recipient's shares of
restricted stock will be forfeited and revert to the Company, unless the
Committee determines that such forfeiture might not be in the best interests of
the Company.
The recipient of restricted stock under the Stock Incentive Plan shall be
entitled to vote the shares and receive all dividends paid thereon, except that
dividends paid in Company Common Stock or other property shall also be subject
to the same restrictions to the extent determined by the Committee.
Bonuses or Other Compensation Payable in Stock. In lieu of salary, cash
bonuses or other compensation otherwise payable to employees under the
Company's or applicable subsidiary's compensation practices, the Committee may
determine that such salary, bonuses or other compensation shall be payable in
Company Common Stock or partly in Company Common Stock and partly in cash. Any
such shares shall be subject to such terms as the Committee may determine in
its discretion.
Other Stock-Based Awards. The Committee may grant to participants under the
Stock Incentive Plan other stock-based awards, which are valued in whole or in
part by reference to, or otherwise based on Company Common Stock. The form of
any other stock-based awards granted under the Stock Incentive Plan shall be
determined in the discretion of the Committee, and may include, for example,
deferred stock, performance shares, performance units or convertible
debentures. The Committee shall also have the discretion to determine the
terms, conditions, restrictions and/or limitations, consistent with the Stock
Incentive Plan, applicable to any other stock-based awards granted under the
plan. The Stock Incentive Plan gives the Committee the discretion, under
certain circumstances, to waive any such limitations or requirements and to
modify or accelerate the exercisability or other terms and conditions of any
other stock-based award.
The Committee may include as part of an other stock-based award an entitlement
to receive, currently or on a deferred basis, dividend equivalents or interest
with respect to the Company Common Stock subject to such award. Any dividend
equivalents and interest payments shall be subject to such terms, conditions,
restrictions and/or limitations as the Committee may establish and shall be paid
in such form and manner and at such times as the Committee determines.
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<PAGE>
Deferral of Awards. At the discretion of the Committee, payment of any option
or other award under the Stock Incentive Plan may be deferred by a plan
participant until such time as the Committee may establish.
Change in Control. In the event of a change in control of the Company or a
threatened or anticipated change in control of the Company (as defined by the
Committee in the applicable award agreement), the Committee may, in its
discretion, provide that any of the following applicable actions be taken as a
result, or in anticipation, of any such event to assure fair and equitable
treatment of Stock Incentive Plan participants: (i) accelerate time periods for
purposes of vesting in, or realizing gain from, any outstanding option, SAR,
other stock-based award or shares of restricted stock; (ii) offer to purchase
any outstanding option, SAR or other stock-based award or shares of restricted
stock from the holder for its equivalent cash value, as determined by the
Committee, as of the date of the change in control; or (iii) make adjustments
or modifications to outstanding options, SARs or other stock-based awards or
with respect to restricted stock as the Committee deems appropriate to maintain
and protect the rights and interests of Stock Incentive Plan participants
following such change in control. In no event, however, may any stock option be
exercised after ten years from the date it was granted.
Changes in Capital. Adjustments shall be made by the Committee in the
aggregate number and class of shares available under the Stock Incentive Plan,
the number, class and price of shares subject to outstanding option, SAR and
other stock-based award grants and the number and class of shares under awards
of restricted stock, in each case to reflect changes in Company Common Stock
through changes in the Company's corporate structure or capitalization such as
through a stock dividend, stock split or merger.
If a transaction shall occur or be proposed which the Committee determines
may materially adversely affect the market value of the Company Common Stock,
the Committee may (i) cancel all restrictions on restricted stock, (ii)
accelerate the exercisability of outstanding stock options, SARs and/or other
stock-based awards, (iii) adjust stock options, SARs and/or other stock-based
awards by substituting for Company Common Stock stock or other securities of
the surviving corporation or stock or other securities that may be issuable by
another corporation in the transaction or stock or other securities of an
affiliate of such corporation, if any such stock or other securities are
publicly traded. In any such adjustment event the aggregate exercise price (as
applicable) shall remain the same and the amount of shares or other securities
subject to the option or other award shall be the amount which could have been
purchased on the date of such transaction with the proceeds which would have
been received by the participant if the option or other award had been
exercised in full prior to the date of such transaction and the participant
exchanged all such shares in the transaction.
Transferability of Options and Awards. The Stock Incentive Plan gives the
Committee the discretion to permit the recipient of an option or other award
under the Stock Incentive Plan to transfer such option or award, together with
any rights such recipient had to exercise such option or award. It is the
Committee's present intent to provide in award agreements that, during the
lifetime of a recipient of an option or other award under the Stock Incentive
Plan, such option or other award is only exercisable by such recipient and
shall not be transferable except by will or the laws of descent and
distribution.
Tax Withholding Obligations. If any tax withholding obligations arise under
applicable law with respect to any option or award, the Stock Incentive Plan
provides that the participant shall pay, or make other arrangements
satisfactory to the Company to pay, in cash any such taxes at the time the
income
24
<PAGE>
with respect to such option or award is first includible in the participant's
taxable income, or, if the participant elects to be taxed earlier with respect
to an award, the date of such election. The Stock Incentive Plan gives the
Committee discretion to permit a participant to elect withholding of Company
Common Stock otherwise deliverable to such participant or to tender pre-owned
Company Common Stock or other marketable equity securities of the Company or a
subsidiary, acquired more than six months prior to such tender, valued at fair
market value on the date of such tender in full or partial satisfaction of such
tax obligations under procedures approved by the Committee.
Awards under the Current Plan. The following table shows awards of restricted
stock and stock options made under the Current Plan during 1995 and 1996 to the
five named individuals, all executive officers as a group and all other
employees as a group.
<TABLE>
<CAPTION>
1996 1995
------------------ ------------------
RESTRICTED RESTRICTED
STOCK OPTIONS STOCK OPTIONS
---------- ------- ---------- -------
<S> <C> <C> <C> <C>
Richard de J. Osborne.................. 17,000 50,000 16,000 40,000
Francis R. McAllister.................. 4,500 19,000 4,200 16,000
Kevin R. Morano........................ 3,600 15,200 3,500 13,000
Robert M. Novotny...................... 2,800 12,300 2,700 10,000
Robert J. Muth......................... 2,400 10,400 2,000 7,800
All executive officers as a group...... 36,750 142,900 36,900 118,800
All other employees as a group......... 6,100 104,500 17,800 97,400
</TABLE>
Certain Federal Income Tax Consequences. The following is a brief summary of
certain significant United States Federal income tax consequences, under
existing law, of the Stock Incentive Plan. This summary is not intended to be
exhaustive and, among other things, does not describe state, local or foreign
tax consequences.
Under the Code, the grant of stock options does not result in taxable income
to the optionees or any tax deduction to the Company. However, the transfer of
Company Common Stock to optionees upon exercise of their options may or may not
give rise to taxable income to the optionees and tax deductions to the Company
depending upon whether or not the options are incentive stock options.
In general, the exercise of an incentive stock option is exempt from regular
income tax (but not from alternative minimum tax) and does not result in a tax
deduction to the Company at any time unless the optionee disposes of the
Company Common Stock within two years of the option grant or one year of the
transfer of such stock to such optionee (a "disqualifying disposition"). If
these holding period requirements are satisfied, an optionee who acquired
Company Common Stock upon the exercise of an incentive stock option will
recognize any gain or loss realized upon sale of such stock as long-term
capital gain or loss. However, if such an optionee makes a disqualifying
disposition of any such stock, the optionee will recognize ordinary income in
an amount equal to the difference between the option exercise price and the
fair market value of the stock on the date the option is exercised. The Company
will be entitled to a deduction equal to the amount of any ordinary income so
recognized by the optionee. Any additional gain realized by the optionee on a
disqualifying disposition of such stock will be capital gain. If the total
amount realized in a disqualifying disposition is less than the exercise price
of the incentive stock option, the difference will be a capital loss to the
optionee.
The exercise of an option which is not an incentive stock option generally
results in immediate recognition of ordinary income by the optionee and a
corresponding tax deduction to the Company in
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<PAGE>
the amount by which the fair market value of the shares of Company Common Stock
acquired exceeds the option exercise price. Such optionee will recognize as
capital gain or loss any profit or loss realized on the sale or exchange of any
such shares disposed of or sold.
The award of restricted stock to a Stock Incentive Plan participant will not
result in taxable income to the participant at the time of the award as long as
the shares are not transferrable and are subject to a substantial risk of
forfeiture, unless the participant elects to be taxed immediately. At the first
time such stock becomes transferrable or no longer subject to a substantial risk
of forfeiture, the participant will recognize ordinary income in an amount equal
to the fair market value of such shares of Company Common Stock at the time the
restrictions lapse. The Company will generally be entitled to a tax deduction,
in the amount of the ordinary income recognized by the participant, for the
Company's taxable year in which the participant recognizes such income.
The payment of bonuses or other compensation in Company Common Stock is
generally immediately taxable to the grantee and deductible by the Company;
however, to the extent that such stock is not transferrable and subject to a
substantial risk of forfeiture, the tax consequences to the participant and the
Company will be similar to the tax consequences of awards of restricted stock,
described above.
The exercise of an SAR or a limited right for cash is immediately taxable to
the grantee and deductible by the Company. The exercise of an SAR for stock is
generally taxable and deductible in the same manner as the exercise of an
option which is not an incentive stock option.
Under Section 162(m) of the Code, the Company may be limited as to Federal
income tax deductions to the extent that total annual compensation in excess of
$1 million is paid to the chief executive officer of the Company or any one of
the other four highest paid executive officers who are employed by the Company
on the last day of the taxable year. However, certain "performance-based
compensation" the material terms of which are disclosed to and approved by the
Company's shareholders is not subject to this limitation on deductibility. The
Company has structured the stock option and SAR portions of the Stock Incentive
Plan with the intention that compensation resulting therefrom would be
qualified performance-based compensation and would be deductible without regard
to the limitations otherwise imposed by Section 162(m) of the Code. The Stock
Incentive Plan allows the Committee discretion to award other stock-based
awards that are intended to be qualified performance-based compensation. It is
not intended that compensation resulting from restricted stock awarded under
the Stock Incentive Plan will be qualified performance based compensation
within the meaning of Section 162(m) of the Code.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE PROPOSAL.
PROPOSAL TO APPROVE INCENTIVE COMPENSATION PLAN FOR SENIOR OFFICERS
The Board of Directors has adopted, subject to approval by the stockholders,
the ASARCO Incorporated Incentive Compensation Plan for Senior Officers (the
"Incentive Plan") to provide a competitive level of compensation to the top
executives of the Company through incentive bonuses which are tied to the
financial performance of the Company.
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<PAGE>
The sole purpose of instituting the Plan is to assure current federal income
tax deductibility of incentive compensation earned by the five officers whose
compensation might otherwise not be deductible as a result of recent changes in
the Internal Revenue Code. The Incentive Plan is to be administered so as to
provide no greater benefits than could be provided under the Company's existing
Incentive Compensation Plan ("ICP"). As described in the Organization and
Compensation Committee Report on Executive Compensation on pages 7-10, the
officers who are or initially could be covered under the Incentive Plan have
received incentive compensation awards for fiscal year 1995 and earlier years
under the Company's incentive compensation plans that provide for discretion to
be exercised by the Committee in granting awards to management employees of the
Company and its subsidiaries.
The Board of Directors recommends that the stockholders approve the Incentive
Plan. The Incentive Plan will have been approved if a majority of the shares
present and voting at the meeting on the proposal are voted in favor of it. The
principal features of the Incentive Plan are summarized below, but this summary
is qualified in its entirety by reference to the terms of the Incentive Plan,
which is attached hereto as Exhibit B.
The five most highly compensated named executive officers of the Company in
the Company's proxy statement with respect to a year shall be eligible to
participate in the Incentive Plan for such year (a "Performance Year"). In
general, the Organization and Compensation Committee (the "Committee") will
administer the Incentive Plan and determine the size of each award thereunder.
However, if an employee who is also a member of the Board of Directors is
eligible to participate, such participant's award under the Incentive Plan will
be subject to a majority vote of the non-employee members of the Board of
Directors, based upon the recommendation of the Committee.
For each Performance Year, a fund (the "Covered Employees Performance Fund")
equal to Applicable Net Earnings (as defined below) shall be established out of
which individual awards ("Awards") may be paid to participants. The maximum
Award which a participant may receive is limited as follows: (i) no more than
37.5% of the Covered Employees Performance Fund may be paid to the Chief
Executive Officer of the Company, (ii) no more than 25.0% of the Covered
Employees Performance Fund may be paid to the second most highly compensated
participant, and (iii) no more than 12.5% of the Covered Employees Performance
Fund may be paid to any of the other participants.
For purposes of determining the size of the Covered Employees Performance
Fund, "Applicable Net Earnings" means 2.0% of the Company's audited net after-
tax income, as adjusted by the Committee to eliminate special after-tax credits
and charges for non-recurring items (as identified in the Company's annual
financial statements and management's discussion and analysis).
The Committee may, in its sole discretion, reduce, but not increase, a
participant's award under the Incentive Plan, based on the Committee's
evaluation of the performance of the Company or the executive, the relationship
of the award to other elements of the Company's executive compensation program
and such other factors as the Committee may deem appropriate. The reduction of
one participant's award will not necessarily cause an increase or a decrease in
any other participant's award. As described in the report of the Committee on
page 8, the Committee frequently utilizes information about certain peer
companies' compensation practices, including information provided by
27
<PAGE>
outside consultants, in setting the compensation of the Company's senior
executive officers. While the Covered Employees Performance Fund is designed to
make annual bonuses paid to participants contingent on Applicable Net Earnings
and to preserve the Company's compensation deduction in respect of such
bonuses, the Committee believes that competitive compensation practices should
continue to be an important factor in determining the appropriate level of
compensation of its executive officers.
Awards shall normally be paid to participants as soon as practicable after
the Company's receipt of its audited financial statements for the Performance
Year with respect to which the Awards are to be paid. Such payments shall be
made in cash or, in the discretion of the Committee, in shares of Company stock
pursuant to the Company's 1996 Stock Incentive Plan. In the Committee's
discretion, a participant may defer the receipt of all or a portion of any
Award within limits and under guidelines established by the Committee. Such
deferred amounts may be credited with interest or another earnings factor, at
rates or in such manner as determined by the Committee, and shall be paid to
such participant in a lump sum or installments, as determined by the Committee,
from the general assets of the Company.
If a participant terminates employment during a Performance Year, amounts
will be paid under the Incentive Plan to such participant as the Committee
determines.
The Incentive Plan shall not be deemed an exclusive method of providing
incentive compensation for participants, nor shall it preclude the Committee or
the Board from authorizing or approving other forms of incentive compensation,
including cash incentive compensation to officers who are participants in the
Incentive Plan in excess of amounts payable under the Incentive Plan.
The Board of Directors of the Company may amend or terminate the Incentive
Plan at any time, but no amendment or termination may adversely affect a
participant's right to receive an Award after the start of a Performance Year
without his or her consent.
The Revenue Reconciliation Act of 1993 added Section 162(m) to the Internal
Revenue Code. Section 162(m) limits the corporate income tax deduction for
publicly held companies to $1,000,000 in any tax year for compensation paid to
each of the Chief Executive Officer and the four highest paid executive
officers other than the Chief Executive Officer. This rule applies to all
deductible compensation including the deduction arising from the payment of
annual bonuses. Various forms of compensation are exempted from this deduction
limitation, including payments that are (i) subject to the attainment of pre-
established objective performance goals, (ii) established and administered by
outside directors, and (iii) approved by stockholders. The Board of Directors
believes payments made under the Incentive Plan will qualify for exemption from
the operation of Section 162(m) and, therefore, will be deductible by the
Company.
Because awards under the Incentive Plan are to be determined based on the
Company's annual Applicable Net Earnings, it is not currently possible to
determine the amount of any Award that will be payable under the Incentive Plan
for fiscal 1996. Nevertheless, it is the Committee's intention that the amount
of an Award under the Incentive Plan be the same as if awards were made under
the ICP, so that it would generally exercise its right to reduce amounts
available under the Incentive Plan to the appropriate extent to carry out that
intention. Thus, as indicated in the table below, had the Incentive
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<PAGE>
Plan been in effect in fiscal 1995, Awards thereunder would have been the same
as awards under the ICP, as compared to the maximum allocable for Awards under
the Incentive Plan.
<TABLE>
<CAPTION>
MAXIMUM AWARD AWARD
NAME AND POSITION ALLOCATION UNDER ICP
----------------- ------------- ----------
<S> <C> <C>
Richard de J. Osborne........................... $1,864,823 $ 850,000
Chairman of the Board, President and Chief
Executive Officer
Francis R. McAllister........................... 1,243,215 283,400
Executive Vice President
Kevin R. Morano................................. 621,608 241,100
Vice President
Robert M. Novotny............................... 621,608 181,800
Vice President
Robert J. Muth.................................. 621,608 134,700
Vice President
All five named individuals as a group........... 4,972,860 1,691,000
</TABLE>
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE PROPOSAL.
PROPOSALS OF STOCKHOLDERS
Proposals of stockholders intended to be presented at the Company's 1997
annual meeting of stockholders must be received by the Company at its principal
executive offices (180 Maiden Lane, New York, N.Y. 10038) by November 12, 1996
in order to be considered for inclusion in the Company's proxy statement and
form of proxy.
OTHER INFORMATION
The Company is not aware of any other matters to be considered at the
meeting. If any other matters properly come before the meeting, the persons
named in the enclosed form of proxy will vote said proxy in accordance with
their judgment on such matters.
A transcript of the proceedings of the 1996 annual meeting of stockholders
will be available after June 3, 1996 to any stockholder upon request to the
Secretary, specifying a proper purpose for the request, and upon payment of
$10.00 to cover the cost of postage and reproduction.
Asarco has adopted a confidential voting policy regarding shareholder votes
at Company shareholder meetings. Under the policy, shareholders' votes are kept
confidential by an independent inspector of election, who may be the transfer
agent, except as may be necessary to meet applicable legal requirements or to
respond to written comments on proxy cards. Each proxy solicited by the Board
which identifies the vote of a specific shareholder will be treated in
accordance with this policy unless the shareholder elects not to have such vote
kept confidential. In the event of a contested solicitation, if the Company and
the opposing party can agree in writing on mutually acceptable confidentiality
29
<PAGE>
procedures which would apply to each party's solicitation, the Company agrees
to be bound by the confidentiality procedures set forth in such agreement. If
the parties do not agree on mutually acceptable confidentiality procedures, the
Company's policy on confidential voting shall not apply to the solicitation.
The Asarco confidential voting policy shall not operate to impair free and
voluntary communication between Asarco and its shareholders, including
voluntary disclosure by shareholders of the nature of their votes.
The cost of soliciting proxies in the accompanying form will be borne by the
Company. Morrow & Co., Inc. and Georgeson & Company Inc. have been employed to
solicit proxies by mail, telephone or personal solicitation for fees to be paid
by the Company of $10,000 each, plus reasonable out-of-pocket expenses. A
number of regular employees of the Company, without additional compensation,
may solicit proxies personally or by mail or telephone.
ASARCO Incorporated
R. Ferri, Secretary
New York, N.Y., March 7, 1996
30
<PAGE>
EXHIBIT A
ASARCO INCORPORATED
1996 STOCK INCENTIVE PLAN
1. Purposes. The purposes of the ASARCO Incorporated 1996 Stock Incentive
Plan are:
(a) To further the growth, development and success of the Company and its
Subsidiaries by enabling the executive and other key salaried employees of
the Company and its Subsidiaries to acquire a continued proprietary
interest in the Company, thereby increasing their personal interests in
such growth, development and success; and
(b) To maintain the ability of the Company and its Subsidiaries to
attract and retain highly qualified and experienced employees by offering
them an opportunity to acquire a continued proprietary interest in the
Company and its Subsidiaries which will reflect the growth, development and
success of the Company and its Subsidiaries.
Toward these objectives, the Committee may grant Options, Stock Appreciation
Rights, Limited Rights, Other Stock-Based Awards or award Restricted Stock or
Dividend Equivalents to such employees or pay such employees' bonuses (if any)
or other compensation in Common Stock or award or grant any combination
thereof, all pursuant to the terms and conditions of the Plan (each, an
"Award").
2. Definitions. As used in the Plan, the following capitalized terms shall
have the meanings set forth below, unless the context clearly indicates
otherwise:
(a) "ADDITIONAL ANNUAL INCREMENT" shall have the meaning set forth in
Section 4(a).
(b) "AGREEMENT" shall have the meaning set forth in Section 3(e).
(c) "AWARD" shall have the meaning set forth in Section 1.
(d) "AWARD GAIN" shall have the meaning set forth in Section 12(a).
(e) "AWARD LIMIT" shall mean an aggregate of 375,000 shares of Common
Stock applicable collectively to all Awards during any period of three
consecutive calendar years (as adjusted in accordance with Section 17).
(f) "BOARD" shall mean the Board of Directors of the Company.
(g) "CODE" shall mean the Internal Revenue Code of 1986, as it may be
amended from time to time, including regulations and rules thereunder and
successor provisions and regulations and rules thereto.
(h) "COMMITTEE" shall mean the Organization and Compensation Committee of
the Board, or such other Board committee as may be designated by the Board
to administer the Plan.
(i) "COMMON STOCK" shall mean the no par value common stock of the
Company.
(j) "COMPANY" shall mean ASARCO Incorporated, a New Jersey corporation,
or any successor entity.
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(k) "COMPOSITE TAPE" shall mean the Composite Tape for New York Stock
Exchange issues, or any successor thereto.
(l) "COUPLED STOCK APPRECIATION RIGHTS" shall have the meaning set forth
in Section 7.
(m) "DIVIDEND EQUIVALENTS" shall mean the equivalent value (in cash or
Common Stock) of dividends paid on Common Stock subject to Other Stock-
Based Awards, which are granted under, and determined in accordance with
Section 11.
(n) "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as it
may be amended from time to time.
(o) "EXERCISE EVENT" shall have the meaning set forth in Section 7(e).
(p) "FAIR MARKET VALUE" of a share of Common Stock or other Company or
Subsidiary equity securities as of a given date shall be the mean of the
high and low sales prices for a share of Common Stock or such securities as
reported on the Composite Tape for such date; provided, however, that if
there is no sale of shares of Common Stock or such securities reported on
the Composite Tape on such date, such fair market value shall be the mean
between the bid and asked prices for a share of Common Stock or such
securities reported on the Composite Tape at the close of trading on such
date; provided further, however, that if no such prices are reported for
such day, the most recent day for which such prices are available shall be
used. In the event that the method for determining the fair market value of
a share of Common Stock or such securities provided for in the previous
sentence shall not be practicable, then such fair market value shall be
determined by such other reasonable valuation method as the Committee
shall, in its discretion, select and apply in good faith as of the given
date; provided, however, that for purposes of paragraph (a) of Section 6,
such fair market value shall be determined subject to Section 422(c)(7) of
the Code.
(q) "INCENTIVE STOCK OPTION" shall mean an option to purchase Common
Stock granted to a Participant under the Plan in accordance with the terms
and conditions set forth in Section 6 and which conforms to the applicable
provisions of Section 422 of the Code.
(r) "INDEPENDENT STOCK APPRECIATION RIGHTS" shall have the meaning set
forth in Section 7.
(s) "LIMITED RIGHT" shall mean a limited stock appreciation right granted
to a Participant under the Plan in accordance with the terms and conditions
set forth in Section 7(e).
(t) "NOTICE" shall mean written notice actually received by the Company
at its offices, which may be delivered in person to the Company's
Controller or sent by facsimile to the Company's Controller, or sent by
certified or registered mail or reputable overnight courier, prepaid,
addressed to the Company at 180 Maiden Lane, New York, New York 10038,
Attention: Controller, or such other address or facsimile number as may be
furnished in writing by the Company to any Participant.
(u) "OPTION" shall mean an option to purchase Common Stock granted to a
Participant under the Plan in accordance with the terms and conditions set
forth in Section 6. Options may be either Incentive Stock Options or stock
options other than Incentive Stock Options.
(v) "OPTIONEE" shall mean a Participant who has been granted an Option
under the Plan in accordance with the terms and conditions set forth in
Section 6.
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(w) "OTHER STOCK-BASED AWARDS" shall mean Awards granted to Participants
under the Plan that are valued in whole or in part by reference to, or
otherwise based on, the value of a share of Common Stock, in accordance
with the terms and conditions set forth in Section 10.
(x) "PARTICIPANT" shall mean an executive or key salaried employee of the
Company or its Subsidiaries selected to participate in the Plan pursuant to
Section 3.
(y) "PERFORMANCE CRITERIA" applicable to Awards under the Plan, shall
mean one or more of the following, as selected by the Committee: (i) return
on equity calculated by dividing net earnings by either (A) beginning
stockholders' equity or (B) invested capital, or (ii) actual consolidated
beneficial mined copper production. For purposes of the preceding sentence,
equity and invested capital shall exclude unrealized gain on securities
reported at fair value. Net earnings may be defined by the Committee as
reported net earnings, earnings before non-recurring items (as identified
in the Company's annual financial statements and management's discussion
and analysis), net earnings before extraordinary items, net earnings before
the cumulative effect of changes in accounting principles, or operating
income.
(z) "PERMANENT DISABILITY" shall mean a permanent disability under the
terms of the Company's long-term disability plan; provided, however, that,
for purposes of Incentive Stock Options, "Permanent Disability" shall mean
"permanent and total disability" as set forth in Section 22(e)(3) of the
Code. The Committee may require medical evidence of Permanent Disability,
including medical examinations by physicians selected by it, at the expense
of the Company.
(aa) "PLAN" shall mean this ASARCO Incorporated 1996 Stock Incentive
Plan.
(ab) "PREDECESSOR PLAN" shall have the meaning set forth in Section
18(h).
(ac) "RESTRICTED STOCK" shall mean Common Stock awarded under the Plan in
accordance with the terms and conditions set forth in Section 8.
(ad) "RESTRICTION PERIOD" shall have the meaning set forth in Section
8(b).
(ae) "RULE 16B-3" shall mean Rule 16b-3 under the Exchange Act, as such
rule may be amended from time to time.
(af) "SEC" shall mean the Securities and Exchange Commission.
(ag) "STOCK APPRECIATION RIGHT" shall mean a stock appreciation right
granted to a Participant under the Plan and in accordance with the terms
and conditions of Section 7 and shall include both Coupled Stock
Appreciation Rights and Independent Stock Appreciation Rights.
(ah) "SUBSIDIARY" shall mean any present or future corporation which is
or would be a "subsidiary corporation" of the Company as the term is
defined in Section 424(f) of the Code.
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3. Administration of the Plan. (a) The Committee shall have total and
exclusive responsibility to control, operate, manage and administer the Plan in
accordance with its terms and conditions.
(b) The Committee shall be appointed from time to time by the Board, and the
Committee shall consist of not less than three (3) members of the Board, each
of whom is an "outside director" within the meaning of Section 162(m) of the
Code and, to the extent necessary for the Plan and/or Awards thereunder to
satisfy the requirements and conditions of Rule 16b-3, a "disinterested
person," as defined by Rule 16b-3 (or a "non-employee director" under Rule 16b-
3 as proposed to be amended by the SEC, if such amendments are finally adopted
by the SEC substantially as proposed); provided, however, that if one or more
of the members of the Committee does not qualify as such an "outside director"
or a "disinterested person" (or a "non-employee director," if applicable) at
the time any Award is granted, such Award nevertheless shall be deemed to be
properly authorized and issued under the Plan and shall remain in full force
and effect subject to the other terms and conditions contained in the Plan and
the relevant Agreement. Appointment of Committee members shall be effective
upon their acceptance of such appointment. Committee members may be removed by
the Board at any time either with or without cause, and such members may resign
at any time by delivering Notice thereof to the Board. Any vacancy on the
Committee, whether due to action of the Board or any other reason, shall be
filled by the Board.
(c) The Committee shall have all authority that may be necessary or helpful
to enable it to discharge its responsibilities with respect to the Plan.
Without limiting the generality of the preceding sentence, the Committee shall
have the exclusive right to: (i) interpret the Plan and the Agreements; (ii)
construe any ambiguous provision in the Plan and/or the Agreements; (iii)
determine eligibility for participation in the Plan; (iv) select Participants;
(v) decide all questions concerning eligibility for and the amount of Awards
payable under the Plan; (vi) establish rules and regulations and administrative
guidelines for carrying out the Plan and amend, rescind or waive such rules or
regulations or administrative guidelines as it from time to time deems proper;
(vii) determine whether Awards to a Participant are to be granted alone or in
combination or in tandem; (viii) to the extent permitted under the Plan and the
applicable Agreement, accelerate the exercisability of any Option, Stock
Appreciation Right or Other Stock-Based Award (if applicable), or the
termination of any Restriction Period with respect to Restricted Stock when
such acceleration and/or termination would be in the best interest of the
Company; (ix) to the extent permitted under the Plan and the applicable
Agreement, grant waivers of Plan terms, conditions, restrictions and
limitations; (x) to the extent permitted under the Plan and the applicable
Agreement, permit the transfer of an Award or the exercise of an Award by one
other than the Participant who received the grant of such Award; (xi) correct
any errors, supply any omissions or reconcile any inconsistencies in the Plan
and/or any Agreement or any other instrument relating to any Award; (xii) to
the extent permitted by the Plan, amend or adjust the terms and conditions of
any outstanding Award and/or adjust the number and/or class of shares of Common
Stock subject to any outstanding Award; (xiii) in accordance with the Plan,
establish and administer any performance goals in connection with any Awards,
including the Performance Criteria to which such performance goals relate and
the applicable measurement periods, and certify whether, and to what extent,
any such performance goals have been met; and (xiv) take any and all such other
action it deems necessary or advisable for the proper operation and/or
administration of the Plan. The Committee shall have full discretionary
authority in all matters related to the discharge of its responsibilities and
the exercise of its authority under the Plan and its determination of
eligibility to participate in the Plan. In the absence of a showing of
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arbitrariness or bad faith, as to which the claimant shall have the burden of
proof, decisions and actions by the Committee with respect to the Plan and any
Agreement shall be final, conclusive and binding on all persons having or
claiming to have any right or interest in or under the Plan and/or any
Agreement.
(d) In accordance with the terms and conditions and subject to the
limitations of the Plan, the Committee, in its discretion, shall: (i) select,
from time to time, from amongst those eligible, the employees to whom Awards
shall be granted under the Plan, which selection may be based upon information
furnished to the Committee by the Company's management; (ii) determine whether
such Award shall take the form of an Option other than an Incentive Stock
Option, Incentive Stock Option, Coupled Stock Appreciation Right, Independent
Stock Appreciation Right, Limited Right, Restricted Stock, bonuses or other
compensation payable in Common Stock, Other Stock-Based Award (and, if so, the
form thereof), Dividend Equivalents or any combination thereof; and (iii)
determine the number of shares of Common Stock to be included in such Awards
and the periods for which such Awards will be outstanding. Such employees who
are selected to participate in the Plan shall be referred to collectively
herein as "Participants." Awards, including Awards under the same section of
the Plan, need not be uniform as to all grants and recipients thereof.
(e) Each Award shall be evidenced by an option agreement or award agreement
(an "Agreement"), which shall be executed by the Company and the Participant to
whom such Award has been granted, unless the Agreement provides otherwise;
however, two or more Awards to a single Participant may be combined in a single
Agreement. An Agreement shall not be a precondition to the granting of an
Award; however, no person shall have any rights under any Award unless and
until the Participant to whom the Award shall have been granted shall have
executed and delivered to the Company an Agreement or other instrument
evidencing the Award, unless such Agreement provides otherwise, and has
otherwise complied with the applicable terms and conditions of the Award. The
Committee shall prescribe the form of all Agreements, and, subject to the terms
and conditions of the Plan, the Committee shall determine the content of all
Agreements. Any Agreement may be supplemented or amended in writing from time
to time as approved by the Committee; provided that the terms and conditions of
any such Agreement as supplemented or amended are not inconsistent with the
provisions of the Plan.
(f) A majority of the members of the entire Committee shall constitute a
quorum and the actions of a majority of the members of the Committee in
attendance at a meeting at which a quorum is present, or actions by a
memorandum or other written instrument or instruments signed by all members of
the Committee, shall be the actions of the Committee.
(g) The Committee may consult with counsel who may be counsel to the Company.
The Committee may, with the approval of the Board, employ such other attorneys
or consultants, accountants, appraisers, brokers or other persons as it deems
necessary or appropriate. In accordance with Section 19, the Committee shall
not incur any liability for any action taken in good faith in reliance upon the
advice of such counsel or such other persons.
(h) In serving on the Committee, the members thereof shall be entitled to
indemnification as directors of the Company, and to any limitation of liability
and reimbursement as directors with respect to their services as members of the
Committee.
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(i) The Committee may, in its discretion, delegate to appropriate officers of
the Company the administration of the Plan under this Section 3; provided,
however, that no such delegation by the Committee shall be made (i) if such
delegation would not be permitted under applicable law or (ii) with respect to
the administration of the Plan as it affects executive officers and directors
of the Company, and, provided further, however, the Committee may not delegate
its authority to correct errors, omissions or inconsistencies in the Plan. All
authority delegated by the Committee under this paragraph (i) of this Section 3
shall be exercised in accordance with the terms and conditions of the Plan and
any rules, regulations or administrative guidelines for, conditions on, or
limitations to the exercise of such authority that may from time to time be
established by the Committee.
(j) In its absolute discretion, the Board may at any time and from time to
time exercise any and all rights, duties and responsibilities of the Committee
under the Plan, including, but not limited to, establishing procedures to be
followed by the Committee, but excluding matters which under Rule 16b-3 or
Section 162(m) of the Code are required to be determined in the discretion of
the Committee.
4. Shares of Stock Subject to the Plan. (a) The shares of stock subject to
Awards granted under the Plan shall be shares of Common Stock. The total number
of shares of Common Stock that may be delivered pursuant to any Awards
(excluding any shares delivered with respect to Dividend Equivalents) under the
Plan is (i) the amount of shares of Common Stock available for option or award
under the Predecessor Plan as of the date of shareholder approval of this Plan,
which amount shall not exceed 475,076 shares of Common Stock, of which not more
than 54,100 shares may be awarded as Restricted Stock, plus an additional
number of shares on January 1 of each calendar year during the duration of the
Plan, beginning January 1, 1997, equal to one percent (1.0%) of the number of
shares of Common Stock outstanding on December 31 of the immediately preceding
year (the "Additional Annual Increment"), of which (ii) 15% of the amount of
shares of Common Stock in (i) above plus an additional amount of shares of
Common Stock each calendar year equal to fifteen percent (15%) of the
Additional Annual Increment with respect to such year may be awarded as
Restricted Stock and (iii) no more than 350,000 shares of Common Stock may be
awarded in any calendar year with respect to Incentive Stock Options, or an
aggregate of 3,500,000 shares of Common Stock for the duration of the Plan.
Shares of Common Stock subject to the Plan may be either authorized and
unissued shares (which will not be subject to preemptive rights) or previously
issued shares acquired by the Company or any Subsidiary. The exercise of a
Stock Appreciation Right, whether paid in cash or Common Stock, shall be deemed
to be an issuance of Common Stock for purposes of determining the number of
shares delivered under the Plan.
(b) The maximum number of shares of Common Stock that may be subject to all
Awards granted under the Plan to a Participant shall not exceed the Award
Limit.
(c) Notwithstanding any of the foregoing limitations set forth in this
Section 4, the numbers of shares of Common Stock specified in this Section 4
shall be adjusted as provided in Section 17.
(d) Any shares of Common Stock subject to an Option or Stock Appreciation
Right or Other Stock-Based Award which for any reason expires or is terminated
without having been fully exercised and any Restricted Stock which is forfeited
may again be granted pursuant to an Award under the Plan,
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subject to the limitations of this Section 4; provided, however, that forfeited
shares of Common Stock shall not be available for further Awards if the
recipient thereof has realized any benefits of ownership from such shares.
5. Eligibility. Executive and other key salaried employees, including
officers, of the Company and its Subsidiaries (but excluding non-employee
directors as well as members of the Committee) shall be eligible to receive
Awards under the Plan.
6. Terms and Conditions of Stock Options. All Options to purchase Common
Stock granted under the Plan shall be either Incentive Stock Options or Options
other than Incentive Stock Options. Each Option shall be subject to all the
applicable provisions of the Plan, including the following terms and
conditions, and to such other terms and conditions not inconsistent therewith
as the Committee shall determine and which are set forth in the applicable
Agreement.
(a) The option exercise price per share of shares of Common Stock subject
to each Option shall be determined by the Committee and stated in the
Agreement; provided, however, that, subject to paragraph (h)(C) of this
Section 6, such price shall not be less than 100% of the Fair Market Value
of a share of Common Stock at the time that the Option is granted.
(b) Each Option shall be exercisable in whole or in such installments
during and over such period ending not later than ten (10) years from the
date such Option was granted as may be determined by the Committee and
stated in the Agreement, subject to paragraph (h)(C) of this Section 6. In
no event may an Option be exercised more than ten (10) years from the date
the Option was granted.
(c) An Option shall not be exercisable with respect to a fractional share
of Common Stock or with respect to the lesser of one hundred (100) shares
or the full number of shares of Common Stock then subject to the Option. No
fractional shares of Common Stock shall be issued upon the exercise of an
Option. If a fractional share of Common Stock shall become subject to an
Option by reason of a stock dividend or otherwise, the Optionee shall not
be entitled to exercise the Option with respect to such fractional share.
(d) Each Option may be exercised by giving Notice to the Company
specifying the number of shares of Common Stock to be purchased, which
shall be accompanied by payment in full including, if required by
applicable law, applicable taxes, if any. Payment, except as provided in
the Agreement, shall be:
(i) in United States dollars by personal check, subject to
collection, or bank draft;
(ii) by tendering to the Company shares of Common Stock owned by the
person exercising the Option (or by such person and his or her spouse),
which may include shares received as the result of a prior exercise of
an Option, and having a Fair Market Value on the date on which the
Option is exercised equal to the cash exercise price applicable to such
Option;
(iii) in accordance with a cashless exercise program established by
the Committee in its discretion under which, if so instructed by an
Optionee, either (A) shares of Common Stock may be issued by the
Company directly to the Optionee's broker or dealer upon receipt in
cash of the purchase price thereof under an Option from such broker or
dealer, or (B) shares of Common Stock may be issued by the Company
directly to the Optionee's broker or dealer in consideration of such
broker's or dealer's irrevocable commitment to pay to the Company in
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cash that portion of the proceeds from the sale of such shares that is
equal to the cash exercise price of one or more Options relating to
such shares of Common Stock; or
(iv) by any combination of the consideration provided in the
foregoing clauses (i), (ii) and (iii).
(e) No Optionee shall have any rights to dividends or other rights of a
shareholder with respect to shares of Common Stock subject to his or her
Option until he or she has given Notice to the Company of exercise of his
or her Option and paid for such shares, in accordance with the provisions
of the Plan.
(f) An Option may be exercised only if at all times during the period
beginning with the date of the granting of the Option and ending on the
date of such exercise (or in the case of an Incentive Stock Option, the
date three (3) months before the date of such exercise) the Optionee was an
employee of either the Company or of a Subsidiary or of another corporation
referred to in Section 421(a)(2) of the Code; provided, however, that if
any such continuous employment is terminated by death, Permanent
Disability, "normal retirement" under a retirement plan of the Company
and/or a Subsidiary, or otherwise terminated with the written consent of
such employer at any time when the Option, or any portion thereof, is
exercisable by the Optionee, such Option may be exercised with respect to
that number of shares of Common Stock (subject to adjustment as provided
for in Section 17) which the Optionee could have acquired by the exercise
of such Option immediately prior to any such termination of employment by
the Optionee or the person or persons to whom his or her rights under the
Option shall have passed by will or by the laws of descent and distribution
or otherwise, at any time prior to the termination date of the Option, as
stated in the Agreement; provided further, however, that if any such
continuous employment is otherwise terminated by retirement before such
"normal retirement" at any time when the Option, or any portion thereof, is
exercisable by the Optionee, the Committee may, in its discretion,
determine that such Option shall nevertheless be exercisable in accordance
with this subsection (f) of Section 6.
(g) The Committee may, but need not, require such consideration from an
Optionee at the time of granting an Option as it shall determine, either in
lieu of or in addition to, the limitations on exercisability of such Option
imposed under this Section 6.
(h)(A) Each Option shall state in the Agreement whether it will or will
not be treated as an Incentive Stock Option. No Incentive Stock Option
shall be granted unless such Option, when granted, qualifies as an
"incentive stock option" under Section 422 of the Code. Any Incentive Stock
Option granted under the Plan shall contain such terms and conditions,
consistent with the Plan, as the Committee may determine to be necessary to
qualify such Option as an "incentive stock option" under Section 422 of the
Code. No Incentive Stock Option shall be granted to any Participant who is
not an employee of the Company or a Subsidiary. Any Incentive Stock Option
granted under the Plan may be modified by the Committee to disqualify such
Option from treatment as an "incentive stock option" under Section 422 of
the Code.
(B) Notwithstanding any intent to grant Incentive Stock Options, an
Option granted under the Plan will not be considered an Incentive Stock
Option to the extent that it, together with any other "incentive stock
options" (within the meaning of Section 422 of the Code, but without regard
to subsection (d) of such Section) under the Plan or any other incentive
stock option plans of the Company and any Subsidiary, are exercisable for
the first time by any Optionee during any calendar
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year with respect to Common Stock having an aggregate Fair Market Value in
excess of $100,000 (or such other limit as may be required by the Code) as
of the time the Option with respect to such Common Stock is granted. The
rule set forth in the preceding sentence shall be applied by taking Options
into account in the order in which they were granted.
(C) No Incentive Stock Option shall be granted to a Participant who owns
(within the meaning of Section 424(d) of the Code), at the time the Option
is granted, more than 10% of the total combined voting power of all classes
of stock of the Company or a Subsidiary. This restriction does not apply if
at the time such Incentive Stock Option is granted the Option exercise
price per share of Common Stock subject to the Option is at least 110% of
the Fair Market Value of a share of Common Stock on the date such Incentive
Stock Option is granted, and the Incentive Stock Option by its terms is not
exercisable after the expiration of five (5) years from such date of grant.
(i) An Option and any shares of Common Stock received upon the exercise
of an Option shall be subject to such other transfer and/or ownership
restrictions and/or legending requirements as the Committee may establish
in its discretion and which are specified in the Agreement and may be
referred to on the certificates evidencing such shares. The Committee may
require an Optionee to give prompt Notice to the Company concerning any
disposition of shares of Common Stock received upon the exercise of an
Incentive Stock Option within (i) two years from the date of granting such
Incentive Stock Option to such Participant or (ii) one year from the
transfer of such shares to such Participant or (iii) such other period as
the Committee may from time to time determine. The Committee may direct
that an Optionee with respect to an Incentive Stock Option undertake in the
applicable Agreement to give such notice described in the preceding
sentence, at such time and containing such information as the Committee may
prescribe, and/or that the certificates evidencing shares acquired by
exercise of an Incentive Stock Option refer to such requirement to give
such notice.
(j) Notwithstanding any other provision contained in the Plan to the
contrary, the maximum number of shares of Common Stock which may be subject
to Options granted under the Plan to any Participant shall not exceed the
Award Limit. To the extent required by Section 162(m) of the Code, shares
of Common Stock subject to Options which are cancelled shall continue to be
counted against the Award Limit and if, after the grant of an Option, the
price of shares subject to such Option is reduced, the transaction is
treated as a cancellation of the Option and a grant of a new Option and
both the Option deemed to be canceled and the Option deemed to be granted
are counted against the Award Limit.
7. Terms and Conditions of Stock Appreciation Rights. Any Stock Appreciation
Rights granted by the Committee under the Plan shall, in the discretion of the
Committee, either be granted alone ("Independent Stock Appreciation Rights") or
in conjunction with all or part of an Option granted under the Plan ("Coupled
Stock Appreciation Rights"), and the applicable Agreement shall state whether a
Stock Appreciation Right is an Independent Stock Appreciation Right or a
Coupled Stock Appreciation Right. Each Stock Appreciation Right shall be
subject to all the applicable provisions of the Plan, including the following
terms and conditions, and to such other terms and conditions not inconsistent
therewith as the Committee shall determine and which are set forth in the
applicable Agreement.
(a) The Committee may grant a Coupled Stock Appreciation Right (i) with
respect to an Option which is not an Incentive Stock Option, either at the
time such Option is granted or at any subsequent time during the term of
such Option, or (ii) with respect to an Incentive Stock Option,
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only at the time such Incentive Stock Option is granted. A Coupled Stock
Appreciation Right shall entitle the grantee thereof to elect, in the
manner described below and as set forth in the applicable Agreement, in
lieu of exercising his or her related Option for all or a portion of the
shares of Common Stock covered by such Option, to surrender such Option
with respect to any or all of such shares and to receive from the Company a
payment having a value equal to the amount by which (A) the Fair Market
Value of a share of Common Stock on the date of such election, multiplied
by the number of shares of Common Stock as to which the grantee shall have
made such election, exceeds (B) the exercise price stated in such Option
multiplied by such number of shares, subject to any limitations on such
amount, including any periodic change therein, as the Committee may in its
discretion impose, as set forth in the applicable Agreement. A Coupled
Stock Appreciation Right shall be exercisable only to the extent and at the
time the related Option is exercisable, and the Coupled Stock Appreciation
Right shall terminate and shall no longer be exercisable upon the
expiration or exercise of the related Option. An Option with respect to
which an Optionee has elected to exercise a Coupled Stock Appreciation
Right, as described above, shall, to the extent of the shares covered by
such exercise, be canceled automatically and surrendered to the Company,
and such Option shall thereafter remain exercisable according to its terms
only with respect to the number of shares of Common Stock as to which it
would otherwise be exercisable, less the number of such shares with respect
to which such Coupled Stock Appreciation Right has been so-exercised.
(b) The Committee, in its discretion, shall establish the terms and
conditions of Independent Stock Appreciation Rights, including the exercise
price thereof, which shall not be less than 100% of the Fair Market Value
of the Common Stock on the date any such Independent Stock Appreciation
Right is granted, the number of shares of Common Stock covered thereby and
the period of time during which any Independent Stock Appreciation Right
may be exercised, which shall not extend beyond ten (10) years from the
date of grant thereof, and any other terms and conditions the Committee may
deem appropriate and which are consistent with the terms and conditions and
limitations of the Plan. An Independent Stock Appreciation Right shall
entitle the grantee thereof to elect, in the manner described below and as
set forth in the applicable Agreement, to receive from the Company a
payment having a value equal to the amount by which (A) the Fair Market
Value of a share of Common Stock on the date of such election, multiplied
by the number of shares of Common Stock as to which the grantee shall have
made such election, exceeds (B) the exercise price stated in the Agreement
applicable to such Independent Stock Appreciation Right multiplied by such
number of shares, subject to any limitations on such amount, including any
periodic change therein, as the Committee may in its discretion impose, as
set forth in the applicable Agreement. Except as provided in the Agreement,
the right to exercise an Independent Stock Appreciation Right shall
terminate as specified in Section 6(f), as if the Independent Stock
Appreciation Right were an Option other than an Incentive Stock Option.
(c) The Company may, in the discretion of the Committee, as set forth in
the Agreement, make payment on a properly exercised Stock Appreciation
Right: (i) in cash equal to the excess of the amount described in clause
(A) over the amount described in clause (B) of either paragraph (a) or (b)
above, as applicable, after taking into account any limitations imposed in
accordance therewith; or (ii) in the nearest whole number of shares of
Common Stock having an aggregate Fair Market Value on the date of exercise
of the Stock Appreciation Right which is not greater than the cash
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amount calculated in clause (i) above; or (iii) in a combination of the
manners described in clauses (i) and (ii) above.
(d) An election to exercise Stock Appreciation Rights shall be deemed to
have been made on the date of Notice of such election to the Company;
provided, however, the Committee may provide in the applicable Agreement
that a Stock Appreciation Right shall be deemed to be exercised at the
close of business on the scheduled expiration date of such Stock
Appreciation Right if at such time such Stock Appreciation Right by its
terms remains exercisable and, if so exercised, would result in a payment
to the holder thereof.
(e) Notwithstanding anything in this Section 7 to the contrary, the
Committee may grant Limited Rights to an eligible employee of the Company
or a Subsidiary, either alone or in conjunction with all or part of an
Option granted to such employee, and, in the case of any such conjunctive
grant, at the time of such Option grant or thereafter during the term of
such Option. A Limited Right shall be exercisable upon the occurrence of an
Exercise Event specified in the applicable Agreement, and shall expire
thirty (30) days after the occurrence of such Exercise Event. Exercise
Events may include, at the discretion of the Committee and as specified in
the applicable Agreement, consummation of a tender or exchange offer for
the shares of Common Stock outstanding at the commencement of such offer,
or a proxy contest the result of which is the replacement of one-third or
more of the members of the Board, or consummation of a merger or
reorganization of the Company in which the Company does not survive or in
which the shareholders of the Company receive stock or securities of
another corporation or cash, or a liquidation or dissolution of the Company
or other similar events. As determined by the Committee, in its discretion,
at the time Limited Rights are awarded to a Participant, and as stated in
the applicable Agreement, Limited Rights shall permit such a Participant to
receive in cash for each share of Common Stock covered by a corresponding
Option, in the case of a Limited Right granted in conjunction with an
Option (without regard to the date on which the Option otherwise would be
exercisable), or covered by a Limited Right granted alone, either (i) the
highest market trading price per share of Common Stock reported on the
Composite Tape during the sixty (60) days immediately preceding the date of
the applicable Exercise Event or (ii) the highest market trading price per
share of Common Stock reported on the Composite Tape on the date of
exercise of the Limited Right, less the per share exercise price of the
corresponding Option, in the case of a Limited Right granted in conjunction
with an Option, or the exercise price of the Limited Right, as stated in
the Agreement, in the case of a Limited Right granted alone. In the event
that the Exercise Event is the consummation of a tender or exchange offer,
the value per share set by the offeror shall be substituted for the highest
market price per share provided in clause (i) of the preceding sentence if
the value per share set by the offeror is higher than such highest market
price per share. Limited Rights shall not extend the exercise period of any
Option and, to the extent exercised, shall reduce the shares of Common
Stock available under the Plan, pursuant to Section 4, and the shares of
Common Stock covered by the Options to which such Limited Rights relate, if
applicable.
(f) Notwithstanding any other provision contained in the Plan to the
contrary, the maximum number of shares of Common Stock for which Stock
Appreciation Rights may be granted under the Plan to any Participant shall
not exceed the Award Limit. To the extent required by Section 162(m) of the
Code, shares of Common Stock subject to Stock Appreciation Rights which are
cancelled continue to be counted against the Award Limit and if, after
grant of a Stock Appreciation Right, the price of shares subject to such
Stock Appreciation Right is reduced, the transaction is
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treated as a cancellation of the Stock Appreciation Right and a grant of a
new Stock Appreciation Right and both the Stock Appreciation Right deemed
to be canceled and the Stock Appreciation Right deemed to be granted are
counted against the Award Limit.
8. Terms and Conditions of Restricted Stock Awards. All awards of Restricted
Stock under the Plan shall be subject to all the applicable provisions of the
Plan, including the following terms and conditions, and to such other terms and
conditions not inconsistent therewith, as the Committee shall determine and
which are set forth in the applicable Agreement.
(a) Awards of Restricted Stock may be in addition to or in lieu of any
other types of Awards granted under the Plan.
(b) During a period set by the Committee at the time of each award of
Restricted Stock (the "Restriction Period"), as specified in the Agreement,
the recipient shall not be permitted to sell, transfer, pledge, assign,
encumber or otherwise dispose of the shares of Restricted Stock and any
attempt by such recipient to sell, transfer, pledge, assign, encumber or
otherwise dispose of such Restricted Stock shall constitute the immediate
and automatic forfeiture of such Award.
(c) Shares of Restricted Stock shall become free of all restrictions
applicable thereto if the recipient dies or his or her employment with the
Company or a Subsidiary terminates by reason of Permanent Disability, as
determined by the Committee, during the Restriction Period and, to the
extent set by the Committee at the time of the award or later, if the
recipient retires under a retirement plan of the Company or a Subsidiary
during such period. If the Committee determines that any such recipient is
not subject to a Permanent Disability or that a retiree's Restricted Stock
is not to become free of restrictions, the Restricted Stock held by either
such recipient, as the case may be, shall be forfeited and revert to the
Company.
(d) Shares of Restricted Stock shall be forfeited and revert to the
Company upon the recipient's termination of employment with the Company or
a Subsidiary during the Restriction Period for any reason other than death,
Permanent Disability or, to the extent determined by the Committee,
retirement under a retirement plan of the Company or a Subsidiary except to
the extent the Committee, at its sole discretion, finds that such
forfeiture might not be in the best interest of the Company, and,
therefore, waives all or part of the application of this provision to the
Restricted Stock held by such recipient.
(e) Each recipient of shares of Restricted Stock hereunder may, but need
not, be issued one or more stock certificates in respect of such shares of
Restricted Stock. Stock certificates for shares of Restricted Stock shall
be registered in the name of the recipient but shall be appropriately
legended and returned to the Company by the recipient, together with a
stock power, endorsed in blank by the recipient. As the Committee, in its
discretion, may deem appropriate, in lieu of the issuance of certificates
for any shares of Restricted Stock during the applicable Restriction
Period, a "book entry" (i.e., a computerized or manual entry) may be made
in the records of the Company, or its designated stock transfer agent, to
evidence the ownership of such shares of Restricted Stock in the name of
the applicable recipient. Such records of the Company or such agent shall,
absent manifest error, be binding on all recipients of Restricted Stock
hereunder.
(f) The recipient of shares of Restricted Stock shall be entitled to vote
shares of Restricted Stock and shall be entitled to all dividends paid
thereon, except that dividends paid in Common Stock or other property shall
be subject to the same restrictions to the extent determined by the
Committee.
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(g) In the event of any adjustment as provided in Section 17, or any
stock or securities received as a dividend on shares of Restricted Stock,
such new or additional shares or securities shall be subject to the same
terms and conditions as relate to the original shares of Restricted Stock.
(h) Restricted Stock shall become free of the foregoing restrictions upon
expiration of the applicable Restriction Period and the Company shall,
subject to paragraphs (d) and (e) of Section 18, then deliver Common Stock
certificates evidencing such stock to the Participant.
(i) Restricted Stock and any Common Stock received upon the expiration of
the Restriction Period shall be subject to such other transfer restrictions
and/or legending requirements that are imposed by the Committee, in its
discretion, and specified in the Agreement.
9. Bonuses or Other Compensation Payable in Stock. In lieu of cash bonuses
or other compensation otherwise payable under the Company's or applicable
Subsidiary's compensation practices to employees of either who are eligible to
participate in the Plan, the Committee, in its discretion, may determine that
such bonuses or other compensation shall be payable in Common Stock or partly
in Common Stock and partly in cash. Such bonuses or other compensation shall be
in consideration of services previously performed and as an incentive toward
future services and shall consist of shares of Common Stock subject to such
terms as the Committee may determine in its discretion. The number of shares of
Common Stock payable in lieu of a bonus or other compensation otherwise payable
shall be determined by dividing the amount of such bonus or other compensation
by the Fair Market Value of one share of Common Stock on the date such bonus or
other compensation is payable.
10. Terms and Conditions of Other Stock-Based Awards. The Committee may
grant to Participants Awards under the Plan that are valued in whole or in part
by reference to, or otherwise based on Common Stock ("Other Stock-Based
Awards"). The provisions of Other Stock-Based Awards need not be the same with
respect to each recipient or each Award. The Committee, in its discretion, may
grant Other Stock-Based Awards as it deems appropriate, including, by way of
example and not in limitation, (i) to take advantage of the compensation
practices or tax laws or accounting rules applicable at the time of grant of
such an Award, even if such practices, laws and/or rules are different from
those in effect on the effective date of the Plan, (ii) to reflect the
financial situation of the Company from time to time or (iii) to conform to and
comply with tax, securities or other law or regulations in jurisdictions
outside the United States. Other Stock-Based Awards shall take such form as the
Committee, in its discretion, from time to time, determines, including, by way
of example, and not in limitation, deferred stock, performance shares,
performance units and convertible debentures. All Other Stock-Based Awards
under the Plan shall be subject to all the applicable provisions of the Plan,
including the following terms and conditions, and to such other terms,
conditions, restrictions and/or limitations, if any, not inconsistent with the
Plan, as the Committee shall determine, in its discretion, and which are set
forth in the applicable Agreement.
(a) The recipient of an Other Stock-Based Award may be entitled to
receive, currently or on a deferred basis, Dividend Equivalents or interest
with respect to the number of shares of Common Stock covered by such Award
and such amounts (if any) may be deemed to be reinvested in additional
Common Stock or otherwise reinvested, all as determined, at the time of
grant of such Award or subsequently during the term of such Award, by the
Committee, in its discretion, and stated in the Agreement.
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(b) An Other Stock-Based Award, and any Common Stock covered by such
Award, may be forfeited to the extent determined by the Committee, in its
discretion, and stated in the Agreement.
(c) All Other Stock-Based Awards, and any Common Stock covered thereby,
shall be forfeited upon termination of the recipient's employment with the
Company or a Subsidiary; provided, however, the Committee may, in its
discretion, determine, at or after the time an Other Stock-Based Award is
granted, that if any such employment is terminated by reason of death or
Permanent Disability or, to the extent that subsection (d) of this Section
10 is inapplicable to a Participant's Other Stock-Based Award, "normal
retirement" under a retirement plan of the Company and/or a Subsidiary, or
otherwise with the written consent of such employer any or all remaining
limitations, restrictions or requirements, if any, imposed pursuant to the
Plan or in the Agreement with respect to such Other Stock-Based Award shall
be waived. The Committee may, in its discretion, otherwise modify or
accelerate the exercisability or other terms and conditions of any Other
Stock-Based Award to the extent that any such modification or acceleration
is (i) permitted under, and not inconsistent with the Plan and (ii) in the
best interests of the Company and provided that subsection (d) of this
Section 10 is not applicable to such Other Stock-Based Award.
(d) An Other Stock-Based Award based in whole or in part upon the
attainment of particular performance goals established by the Committee is
intended to qualify as "other performance-based compensation," as used in
Code Section 162(m)(4)(C). Such performance goals shall be determined over
a measurement period or periods established by the Committee and shall
relate to one or more Performance Criteria, as determined by the Committee,
in its discretion. The maximum number of shares of Common Stock that may be
awarded to a Participant subject to an Other Stock-Based Award shall not
exceed the Award Limit.
11. Dividend Equivalents. On the date of grant (or at any subsequent time
during the applicable term) of any Other Stock-Based Award, the Committee may
choose to include as part of such Other Stock-Based Award the right to receive
Dividend Equivalents with respect to the Common Stock, or any portion thereof,
subject to such Other Stock-Based Award. Any such Dividend Equivalents shall be
calculated in the manner prescribed by the Committee, in its discretion,
consistent with the Plan. Any such Dividend Equivalents shall be paid to the
Participant for record dates during the period of time between such date of
grant and the date the applicable Other Stock-Based Award is exercised or
terminates. Dividend Equivalents shall be subject to such terms, conditions,
restrictions and/or limitations as the Committee may establish and shall be paid
in such form and manner and at such times as the Committee shall determine. Any
Dividend Equivalents may, at the Committee's discretion, be converted into cash
by such formula and at such time and subject to such limitations as may be
determined by the Committee in its discretion, and any Dividend Equivalents that
are not paid currently in cash may, at the discretion of the Committee, accrue
interest or be reinvested into additional shares of Common Stock. The total
number of shares of Common Stock available for delivery under the Plan under
Section 4 shall not be reduced to reflect any Dividend Equivalents that are
reinvested into additional shares of Common Stock.
12. Deferral of Awards. In the discretion of the Committee, payment of any
Award, or any portion thereof, may be deferred by a Participant until such time
as the Committee may establish. All such deferrals shall be accomplished by the
delivery of a written, irrevocable election (in the form prescribed by the
Committee) by the Participant prior to the time established by the Committee
for such purpose.
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All such deferrals shall be made in accordance with administrative guidelines
established by the Committee to ensure that such deferrals comply with the
requirements of applicable law, including, without limitation, the Code.
Deferred payments shall be paid in a lump sum or installments, as determined by
the Committee. Deferred Awards may also be credited with interest or other
growth factor, at such rates or in such manner as are determined by the
Committee, and, with respect to those deferred Awards denominated in the form
of Common Stock, with Dividend Equivalents.
13. Change in Control. (a) In the event of a change in control of the Company
or a threatened or anticipated change in control of the Company, each as
defined (if at all) by the Committee in the Agreement, the Committee may, in
its discretion, provide in the Agreement that any of the following applicable
actions be taken as a result, or in anticipation, of any such event to assure
fair and equitable treatment of Participants:
(i) accelerate time periods for purposes of vesting in, or realizing gain
from, any outstanding Option or Stock Appreciation Right or Other Stock-
Based Award or shares of Restricted Stock granted or awarded pursuant to
the Plan;
(ii) offer to purchase any outstanding Option or Stock Appreciation Right
or Other Stock-Based Award or shares of Restricted Stock granted or awarded
pursuant to the Plan from the holder thereof for its equivalent cash value,
as determined by the Committee, in its discretion, as of the date of the
change in control; or
(iii) make adjustments or modifications to outstanding Options or Stock
Appreciation Rights or Other Stock-Based Awards or with respect to
Restricted Stock as the Committee deems appropriate to maintain and protect
the rights and interests of the Participants following such change in
control.
In no event, however, may any Option be exercised after ten (10) years
from the date it was originally granted.
(b) The Company shall pay all legal fees and related expenses incurred by a
Participant in seeking to obtain or enforce any payment, benefit or right he or
she may be entitled to under the Plan or an Agreement after a change in control
of the Company; provided, however, such a Participant shall be required to
repay any such amounts to the Company to the extent a court of competent
jurisdiction issues a final and non-appealable order setting forth the
determination that the position taken by the Participant was frivolous or
advanced in bad faith.
14. Transfer, Leave of Absence. For purposes of the Plan: (a) a transfer of
an employee from the Company to a Subsidiary or an affiliate of the Company,
whether or not incorporated, or vice versa, or from one Subsidiary or affiliate
of the Company to another, and (b) a leave of absence, duly authorized in
writing by the Company or a Subsidiary or affiliate of the Company, shall not
be deemed a termination of employment of the employee.
15. Rights of Employees and Other Persons. (a) No person shall have any
rights or claims under the Plan except in accordance with the provisions of the
Plan and the Agreement.
(b) Nothing contained in the Plan or in any Agreement shall be deemed to give
any employee the right to be retained in the service of the Company or its
Subsidiaries nor restrict in any way the right of the Company or any Subsidiary
to terminate any employee's employment at any time with or without cause.
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(c) The adoption of the Plan shall not be deemed to give any employee of the
Company or any Subsidiary or any other person any right to be selected as a
Participant or to be granted an Award.
(d) Nothing contained in the Plan or in any Agreement shall be deemed to give
any employee the right to receive any bonus, whether payable in cash or in
Common Stock, or in any combination thereof, from the Company, nor be construed
as limiting in any way the right of the Company to determine, in its sole
discretion, whether or not it shall pay any employee bonuses, and, if so paid,
the amount thereof and the manner of such payment.
16. Tax Withholding Obligations. (a) The Company and/or any Subsidiary are
authorized to take whatever actions are necessary and proper to satisfy all
obligations of Participants for the payment of all Federal, state and local
taxes in connection with any Awards (including, but not limited to, actions
pursuant to the following paragraphs (b) and (c) of this Section 16).
(b) If any Participant properly elects, within the period permitted under
Section 83 of the Code after the date on which property subject to an Award is
transferred to such Participant to include in gross income for Federal income
tax purposes an amount equal to the Fair Market Value (on the date of transfer)
of the Common Stock subject to such Award, such Participant shall pay, or make
arrangements satisfactory to the Company, as determined in the Committee's
discretion, to pay to the Company, at the time of such election, any Federal,
state or local taxes required to be withheld with respect to such Award. If any
such Participant shall fail to make such tax payments as are required, the
Company and its Subsidiaries shall, to the extent permitted by law, have the
right to deduct any such taxes from any payment of any kind otherwise due to
such Participant.
(c) Any Participant who does not or cannot make the election described in
paragraph (a) of this Section 16 with respect to an Award shall (and in no
event shall Common Stock be delivered to such Participant with respect to such
Award until), no later than the date as of which the value of the Award first
becomes includible in the gross income of the Participant for income tax
purposes, pay to the Company in cash, or make arrangements satisfactory to the
Company, as determined in the Committee's discretion, regarding payment to the
Company of, any taxes of any kind required by law to be withheld with respect
to the Common Stock or other property subject to such Award, and the Company
and any Subsidiary shall, to the extent permitted by law, have the right to
deduct any such taxes from any payment of any kind otherwise due to such
Participant; provided, however, the Committee may, in its discretion and
pursuant to procedures approved by the Committee, permit the Participant to
elect withholding by the Company of Common Stock otherwise deliverable to such
Participant pursuant to such Award (provided, however, that the amount of any
Common Stock so withheld shall not exceed the minimum required withholding
obligation taking into account the Participant's effective tax rate and all
applicable Federal, state, local and foreign taxes) and/or to tender to the
Company Common Stock or other marketable equity securities issued by the Company
or a Subsidiary owned by such Participant (or by such Participant and his or her
spouse jointly) and acquired more than six (6) months prior to such tender
valued at Fair Market Value on the date of such tender in full or partial
satisfaction of such tax obligations.
17. Changes in Capital. (a) Upon changes in the outstanding Common Stock by
reason of a stock dividend, stock split, reverse split, subdivision,
recapitalization, merger, consolidation (whether or not the Company is a
surviving corporation), an extraordinary dividend payable in cash or property,
combination or exchange of shares, separation, reorganization or liquidation,
the aggregate number and
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class of shares available under the Plan as to which Awards may be granted, the
number and class of shares under (i) each Option and the option price per
share, (ii) each Stock Appreciation Right and the exercise price thereof, (iii)
each Other Stock-Based Award and the exercise price (or equivalent, if
applicable) thereof and (iv) each award of Restricted Stock shall, in each
case, be correspondingly adjusted by the Committee, such adjustments to be made
in the case of any outstanding Options and/or Stock Appreciation Rights without
change in the total price applicable to such Options and Stock Appreciation
Rights.
(b) If a transaction shall occur or be proposed which the Committee, in its
discretion, determines may materially adversely affect the market value of the
Common Stock after such transaction, the Committee may make such adjustments as
it deems appropriate and equitable in respect of outstanding Awards, including,
but not limited to: (i) cancel all restrictions on Restricted Stock previously
awarded to Participants under the Plan, (ii) accelerate the time of exercise so
that Options and/or Stock Appreciation Rights and/or Other Stock-Based Awards
which are outstanding shall become immediately exercisable in full without
regard to any limitations of time or amount otherwise contained in the Plan or
the applicable Agreements, (iii) determine that the Options or Stock
Appreciation Rights or Other Stock-Based Awards shall be adjusted and make such
adjustments by substituting for Common Stock subject to such Options or Stock
Appreciation Rights or Other Stock-Based Awards stock or other securities of
any successor corporation to the Company or stock or other securities that may
be issuable by another corporation in the transaction if such stock or other
securities are publicly traded, or, if such stock or other securities are not
publicly traded, by substituting stock or other securities of an affiliate of
such corporation if the stock or other securities of such affiliate are
publicly traded. In any such adjustment event the aggregate exercise price (as
applicable) shall remain the same and the amount of shares or other securities
subject to option or other rights under an Award shall be the amount of shares
or other securities which could have been purchased on the closing date or
expiration date of such transaction with the proceeds which would have been
received by the Participant if the Option or Stock Appreciation Right or Other
Stock-Based Award had been exercised in full prior to such transaction or
expiration date and the Participant exchanged all of such shares in the
transaction. No Participant shall have any right to prevent the consummation of
any of the foregoing acts affecting the number of shares available to such
Participant. Any actions or determinations of the Committee under this
paragraph (b) of Section 17 need not be uniform as to all outstanding Awards,
nor treat all Participants identically. Notwithstanding the foregoing
adjustments, any changes to Incentive Stock Options shall, unless the Committee
determines otherwise, only be effective to the extent such adjustments or
changes do not cause a "modification" (within the meaning of Section 424(h)(3)
of the Code) of such Incentive Stock Options or adversely affect the tax status
of such Incentive Stock Options.
18. Miscellaneous Provisions. (a) The Plan shall be unfunded. The Company
shall not be required to establish any special or separate fund or to make any
other segregation of assets to assure the issuance of shares or the payment of
cash upon exercise or payment of any Award. Proceeds from the sale of shares of
Common Stock pursuant to Options granted under the Plan shall constitute
general funds of the Company. The expenses of the Plan shall be borne by the
Company.
(b) Subject to the provisions of the Plan and the applicable Agreement, an
Award by its terms shall be personal and no Award may be sold, transferred,
pledged, assigned, encumbered or otherwise alienated or hypothecated, other
than by will or by the laws of descent and distribution. During the
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lifetime of a Participant, his or her Award shall be exercisable only by such
Participant. In the event any Award is exercised by the executors,
administrators, heirs or distributees of the estate of a deceased Participant
pursuant to the terms and conditions of the Plan and the applicable Agreement,
the Company shall be under no obligation to issue Common Stock thereunder
unless and until the Company is satisfied, as determined in the discretion of
the Committee, that the person or persons exercising such Award are the duly
appointed legal representative of the deceased Participant's estate or the
proper legatees or distributees thereof. Notwithstanding anything contained in
the Plan to the contrary, at the Committee's discretion, an Agreement may
permit the transfer of an Award other than an Incentive Stock Option by the
recipient thereof, subject to such terms, conditions and limitations prescribed
by the Committee, and the applicable transferee of such Award shall be treated
under the Plan and the applicable Agreement as the Participant for purposes of
any exercise of such Award.
(c) It is understood that the Committee may, at any time and from time to
time after the granting of an Award, specify such additional terms, conditions
and restrictions with respect to any such Option, Stock Appreciation Right,
Limited Right, Other Stock-Based Award, Restricted Stock and/or Dividend
Equivalent subject to such Award as may be deemed necessary or appropriate to
ensure compliance with any and all applicable laws, including, but not limited
to, terms, restrictions and conditions for compliance with Federal and state
securities laws and methods of withholding or providing for the payment of
required taxes and restrictions regarding a Participant's ability to exercise
Awards under a cashless exercise program established by the Committee.
(d) If at any time the Committee shall determine, in its discretion, that the
listing, registration and/or qualification of shares of Common Stock upon any
national securities exchange or under any state or Federal law, or the consent
or approval of any governmental regulatory body, is necessary or desirable as a
condition of, or in connection with, the sale or purchase of shares of Common
Stock hereunder, no Option or Stock Appreciation Right or Other Stock-Based
Award may be exercised or Restricted Stock or bonus or other compensation
payable in Common Stock may be transferred in whole or in part unless and until
such listing, registration, qualification, consent and/or approval shall have
been effected or obtained, or otherwise provided for, free of any conditions
not acceptable to the Committee.
(e) The Committee may require Participants receiving Common Stock in
connection with any Award under the Plan to represent and agree with the
Company in writing that the Participant is acquiring the shares for investment
without a view to distribution thereof. The certificates for such shares may
include any legend which the Committee deems appropriate to reflect any
restrictions on transfer.
(f) The Committee may, in its discretion, extend one or more loans to
Participants who are key employees of the Company or a Subsidiary in connection
with the exercise or receipt of an Award granted to any such employees. The
terms and conditions of any such loan shall be set by the Committee.
(g) By accepting any benefit under the Plan, each Participant and each person
claiming under or through such Participant shall be conclusively deemed to have
indicated their acceptance and ratification of, and consent to, all of the
terms and conditions of the Plan and any action taken under the Plan by the
Committee, the Company or the Board.
(h) From and after the date of approval of the Plan by the Company's
stockholders, no subsequent awards of any kind shall be granted under the
Company's Stock Incentive Plan approved by its shareholders in April 1990 (the
"Predecessor Plan").
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(i) Neither the adoption of the Plan nor anything contained herein shall (i)
affect any other compensation or incentive plans or arrangements of the Company
or any Subsidiary (other than the Predecessor Plan, as provided in paragraph
(h) of this Section 18), or (ii) prevent or limit the right of the Company or
any Subsidiary to (A) establish any other forms of incentives or compensation
for their employees or consultants or directors, or (B) grant or assume options
or other rights otherwise than under the Plan.
(j) The Plan shall be governed by and construed in accordance with the laws
of the State of New Jersey, except as superseded by applicable Federal law.
19. Limits of Liability. (a) Any liability of the Company or a Subsidiary to
any Participant with respect to any Award shall be based solely upon
contractual obligations created by the Plan and the Agreement.
(b) Neither the Company nor a Subsidiary nor any member of the Committee or
the Board, nor any other person participating in any determination of any
question under the Plan, or in the interpretation, administration or
application of the Plan, shall have any liability, in the absence of bad faith,
to any party for any action taken or not taken in connection with the Plan,
except as may expressly be provided by statute.
20. Limitations Applicable to Certain Awards Subject to Section 16 and Code
Section 162(m). Unless stated otherwise in the Agreement, notwithstanding any
other provision of the Plan, any Award granted to an executive or officer of
the Company who is then subject to Section 16 of the Exchange Act, shall be
subject to any additional limitations set forth in any applicable exemptive
rule under Section 16 of the Exchange Act (including Rule 16b-3 as it may be
amended from time to time) that are requirements for the application of such
exemptive rule, and the Plan shall be deemed amended to the extent necessary to
conform to such limitations. Furthermore, unless stated otherwise in the
Agreement, notwithstanding any other provision of the Plan, any Award granted
to an officer or executive of the Company intended to qualify as "other
performance-based compensation" as described in Section 162(m)(4)(C) of the
Code shall be subject to any additional limitations set forth in Section 162(m)
of the Code (including any amendment to Section 162(m) of the Code) or any
regulations or rulings issued thereunder that are requirements for qualification
as "other performance-based compensation" as described in Section 162(m)(4)(C)
of the Code, and the Plan shall be deemed amended to the extent necessary to
conform to such requirements.
21. Amendments and Termination. The Board may, at any time and with or
without prior notice, amend, alter, suspend or terminate the Plan; provided,
however, no amendment, alteration, suspension or termination shall be made
which would impair the rights of any holder of an Award theretofore granted
without his or her written consent or which, without first obtaining approval
of the stockholders of the Company (where such approval is necessary to satisfy
the then-applicable requirements of Rule 16b-3, or any requirements under the
Code relating to Incentive Stock Options or for exemption from Section 162(m)
of the Code, or applicable state law), would:
(a) except as is provided in Sections 4(a) and 17, increase the maximum
number of shares of Common Stock which may be sold or awarded under the
Plan;
(b) change the class of persons eligible to receive an Award under the
Plan; or
A-19
<PAGE>
(c) extend the duration of the Plan or the period during which Options
may be exercised under Section 6(b).
The Committee may amend the terms of any Award theretofore granted, including
any Agreement, retroactively or prospectively, but no such amendment shall
impair the previously accrued rights of any Participant without his or her
written consent.
22. Duration. Following adoption of the Plan by the Board, the Plan shall
become effective as of the date on which it is approved by the holders of a
majority of the Company's outstanding Common Stock which is present and voted
at a meeting, which approval must occur within the period ending twelve months
after the date the Plan is adopted by the Board. The Plan shall terminate upon
the earliest of the following dates or events to occur:
(a) upon the effective date of a resolution adopted by the Board
terminating the Plan;
(b) the date all shares of Common Stock subject to the Plan are delivered
pursuant to the Plan's provisions; or
(c) ten (10) years from the date the Plan is approved by the Company's
shareholders.
No Award may be granted under the Plan after the earliest to occur of the
events or dates described in the foregoing paragraphs (a) through (c) of this
Section 22; however, Awards theretofore granted may extend beyond such date.
No such termination of the Plan shall affect the rights of any Participant
hereunder and all Awards previously granted hereunder shall continue in force
and in operation after the termination of the Plan, except as they may be
otherwise terminated in accordance with the terms of the Plan or the Agreement.
A-20
<PAGE>
ASARCO INCORPORATED EXHIBIT B
INCENTIVE COMPENSATION PLAN FOR SENIOR OFFICERS
(EFFECTIVE JANUARY 1, 1996)
PURPOSE
The purpose of the ASARCO Incorporated Incentive Compensation Plan for Senior
Officers is to promote the interests of the shareholders of ASARCO Incorporated
by providing a competitive level of compensation to the top executives of
ASARCO Incorporated through incentives bonuses which are tied to the financial
performance of ASARCO Incorporated.
ARTICLE I
DEFINITIONS
Whenever used herein, unless the context otherwise indicates, the following
terms shall have the respective meanings set forth below.
1.1 "Applicable Net Earnings" means 2.0% of the Company's audited net after-tax
income, as adjusted by the Committee to eliminate special after-tax credits
and charges for non-recurring items (as identified in the Company's annual
financial statements and management's discussion and analysis).
1.2 "Award" means the portion of the Covered Employees Performance Fund to
which a Participant is entitled, as determined pursuant to Article II of
the Plan.
1.3 "Board" means the Board of Directors of ASARCO Incorporated.
1.4 "Board Committee" means the members of the Board who have never been
employees of the Company.
1.5 "Code" means the Internal Revenue Code of 1986, as amended.
1.6 "Committee" means the Organization and Compensation Committee of the Board,
or such other committee as may be designated by the Board to administer the
Plan.
1.7 "Company" means ASARCO Incorporated, or any successor entity.
1.8 "Covered Employees Performance Fund" means a fund equal to Applicable Net
Earnings.
1.9 "Effective Date" means January 1, 1996.
1.10 "Participant" means, for a given Performance Year, an employee of the
Company (including such an employee who is also a member of the Board) who
is shown as one of the five most highly compensated named executive
officers of the Company in the Company's proxy statement with respect to
such Performance Year.
B-1
<PAGE>
1.11 "Participant Director" means a Participant who is also a member of the
Board.
1.12 "Performance Year" means the calendar year, or such other fiscal year as
the Board may adopt for the Plan.
1.13 "Plan" means the ASARCO Incorporated Incentive Compensation Plan for
Senior Officers, as the same may be amended from time to time.
1.14 When used herein, the masculine gender will be deemed to include the
feminine gender, and the singular number the plural, unless the context
clearly indicates otherwise.
ARTICLE II
ALLOCATION OF COVERED EMPLOYEES PERFORMANCE FUND
2.1 For each Performance Year beginning on and after the Effective Date, the
Participants as a group, shall be eligible to receive, as incentive
compensation under the Plan, the Covered Employees Performance Fund, if
any, as determined for such Performance Year.
2.2 In the discretion of the Committee, the Covered Employees Performance Fund
for a given Performance Year shall be divided into individual Awards for
that Performance Year's Participants (subject to the maximum individual
limits set forth in Section 2.3) and paid, in accordance with Section 3.1,
to such Participants. In so dividing the Covered Employees Performance
Fund and making Awards to individual Participants, the Committee may
consider a Participant's effect on various factors including, without
limitation, the financial results of the Company, progress on strategic
initiatives, compensation payouts in past years, competitive compensation
practices and overall corporate results. Notwithstanding the foregoing, in
the case of Participant Directors, the Committee's duties hereunder will
be to make recommendations to the Board Committee regarding the individual
Awards for such Participant Directors which individual Awards will then be
subject to the approval of a majority of the Board Committee.
2.3 The amount of any Award hereunder shall not exceed the following
individual limitations for any Performance Year: (i) no more than 37.5% of
the Covered Employees Performance Fund may be paid to the Chief Executive
Officer of the Company, (ii) no more than 25.0 % of the Covered Employees
Performance Fund may be paid to the second most highly compensated
Participant, and (iii) no more than 12.5% of the Covered Employees
Performance Fund may be paid to any of the other Participants.
2.4 If a Participant ceases to be employed by the Company or its subsidiaries
at any time prior to the end of a Performance Year, amounts shall be paid
to the Participant under the Plan as determined by the Committee.
B-2
<PAGE>
ARTICLE III
DISTRIBUTION OF AWARDS
3.1 Distribution of each Participant's Award shall normally be made as soon as
practicable after the Company's receipt of its audited financial statements
for the Performance Year with respect to which the amount of the Award is
determined. Such payments shall be made in cash or, in the discretion of
the Committee, in shares of Company Common Stock pursuant to Section 9 of
the Company's 1996 Stock Incentive Plan.
3.2 Notwithstanding anything herein to the contrary, no Awards need be made
from the Covered Employees Performance Fund for any Performance Year,
payments under the Plan to any Participant shall be at the sole discretion
of the Committee (or, in the case of Participant Directors, the Board
Committee), and no Participant shall be entitled to any payments under the
Plan unless and until the Company shall have made payment of the Award to
the Participant.
3.3 In the discretion of the Committee, payment of any Award, or any portion
thereof, may be deferred by a Participant within limits established by the
Committee. Any such deferrals shall be accomplished by the delivery of a
written, irrevocable election (in the form prescribed by the Committee) by
the Participant prior to the time established by the Committee for such
purpose. All such deferrals shall be made in accordance with administrative
guidelines established by the Committee to ensure that such deferrals
comply with the requirements of applicable law, including, without
limitation, the Code. Deferred Awards shall be paid in a lump sum or
installments, as determined by the Committee, from the general assets of
the Company. Deferred Awards may also be credited with interest or another
earnings factor, at such rates or in such manner as are determined by the
Committee.
3.4 Under no circumstances will any Company funds be set aside or reserved for
any Participant for payment under the Plan, and any obligation of the
Company to a Participant under the Plan will be unfunded and will be paid
from the general assets of the Company.
ARTICLE IV
ADMINISTRATION
4.1 The Plan shall be administered by the Committee which shall have the
exclusive authority and responsibility to interpret the Plan's provisions,
including, without limitation, the eligibility for and the amounts of
Awards payable hereunder and the person or persons to whom such Award is
payable. The Committee shall be appointed from time to time by the Board
and shall consist of not less than three (3) members of the Board.
Notwithstanding the foregoing, matters relating to the Awards payable
hereunder to Participant Directors shall be administered by the Board
Committee.
ARTICLE V
MISCELLANEOUS
5.1 The Board of Directors may, in its sole discretion, terminate, suspend or
amend the Plan at any time or from time to time, in whole or in part;
provided however, that no such termination, suspension or amendment shall
adversely affect a Participant's right to receive an Award under the Plan
after the start of a Performance Year, without such Participant's written
consent.
B-3
<PAGE>
5.2 Nothing contained in the Plan will confer upon any Participant the right to
be retained in the service of the Company or any of its affiliates; nor
will it interfere with the right of the Company or any of its affiliates to
discharge or otherwise deal with a Participant without regard to the
existence of the Plan.
5.3 To the maximum extent permitted by law, no Award under the Plan shall be
assignable or subject in any manner to alienation, sale, transfer, claims
of creditors, pledge, attachment or encumbrances of any kind.
5.4 If any dispute arises under the Plan between the Company and a Participant
(or his beneficiary) as to the amount or timing of any Award payable
hereunder or as to the persons entitled thereto, such dispute shall be
resolved by binding arbitration proceedings initiated by either party to
the dispute in accordance with the rules of the American Arbitration
Association and the results of such proceedings shall be conclusive on both
parties and shall not be subject to judicial review. In the event of any
dispute covered by this Section 5.4, each party shall pay its own costs and
expenses, including attorney's fees, with respect hereto; provided,
however, that all such costs and expenses shall be paid promptly by the
losing party to the prevailing party if it is determined by the arbitrators
that the position taken by the losing party was without merit.
5.5 Notwithstanding any other provision of the Plan, no Awards hereunder shall
be made unless the Plan is approved by the Board, and by the shareholders
of the Company.
5.6 The Company shall have the right to deduct from any payments made hereunder
any amounts necessary to satisfy applicable withholding tax requirements.
5.7 Notwithstanding any other provision of the Plan, Awards made hereunder are
intended to qualify as "other performance-based compensation," as described
in Code section 162(m)(4)(C), and shall be subject to any additional
limitations as set forth in Code section 162(m) or any regulations or
rulings issued thereunder or with respect thereto that are requirements for
qualification as "other performance-based compensation" as described in
Code section 162(m)(4)(C), and the Plan shall be deemed amended to the
extent necessary to conform to such requirements.
5.8 The Plan shall not be deemed an exclusive method of providing incentive
compensation for Participants, nor shall it preclude the Committee or the
Board from authorizing or approving other forms of incentive compensation,
including cash incentive compensation to officers who are Participants in
the Plan in excess of amounts payable under the Plan or when no amounts are
payable under the Plan.
5.9 Any provision of the Plan deemed to be in violation of any law or
regulation shall be null and void and of no effect and shall not affect the
validity of any other provision hereof.
5.10 The Plan shall be governed by the laws of the State of New Jersey to the
extent not preempted by Federal law.
B-4
<PAGE>
ASARCO Incorporated
P R O X Y
Proxy Solicited by Board of Directors for Annual Meeting
of Stockholders to be held April 24, 1996
The undersigned hereby appoints RICHARD DE J. OSBORNE, FRANCIS R.
McALLISTER and AUGUSTUS B. KINSOLVING, and each of them, with power of
substitution, the proxies of the undersigned to vote all the shares the
undersigned may be entitled to vote at the annual meeting of stockholders of
ASARCO Incorporated, to be held in the Ground Floor Auditorium, 1 Chase
Manhattan Plaza, New York, New York at 2 P.M., on Wednesday, April 24, 1996, and
at any adjournments thereof upon all matters specified in the notice of said
meeting as set forth on the reverse hereof, and upon such other business as may
lawfully come before the meeting.
Classified Board Election: For the nominees listed on the reverse
hereof, or such other person or persons, if any, as may be chosen to replace
unavailable nominees.
The shares represented by this proxy will be voted as directed by the
stockholder. If a signed proxy is returned to the Company with no voting
instruction given, such shares will be voted FOR all nominees for election as
directors, FOR Proposal No. 2, FOR Proposal No. 3 and FOR Proposal No. 4. If you
do not wish your shares voted FOR a particular nominee, mark the Exception box
and enter the name(s) of the exception(s) in the space provided.
PLEASE VOTE ON ALL PROPOSALS, SIGN, DATE AND RETURN THE PROXY CARD
PROMPTLY USING THE ENCLOSED ENVELOPE.
(Continued on the other side.)
ASARCO INCORPORATED
P.O. BOX 11467
NEW YORK, N.Y. 10203-0467
<PAGE>
Directors recommend a vote "For"
1. Classified board election:
For Withhold Exception*
[_] [_] [_]
*Exception(s):
----------------------------
Class II Director Nominees: Willard C. Butcher, Richard de J. Osborne and
Martha T. Muse.
Directors recommend a vote "For"
2. Selection of Coopers & Lybrand as independent auditors for 1996.
For Against Abstain
[_] [_] [_]
Directors recommend a vote "For"
3. Proposal to adopt a 1996 Stock Incentive Plan.
For Against Abstain
[_] [_] [_]
Directors recommend a vote "For"
4. Proposal to adopt an Incentive Compensation Plan for Senior Officer.
For Against Abstain
[_] [_] [_]
5. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting.
Mark here to elect NOT to have your vote kept confidential.
Address Change Comments
If you have noted either an Address Change or made
Comments on the reverse side of this card, mark here.
Please sign exactly as name or names appear on this proxy. If stock is held
jointly, each holder should sign. If signing as attorney, trustee, executor,
administrator, custodian, guardian or corporate officer, please give full title.
DATED , 1996
-------------------
SIGNED
-------------------------
-------------------------
Votes must be indicated (X) in Black
or Blue as in this example. X
Sign, Date and Return the Proxy Card Promptly Using the Enclosed Envelope
<PAGE>
ASARCO INCORPORATED
180 MAIDEN LANE
NEW YORK, NEW YORK 10038
BECAUSE OF DELAYS IN MAIL
PLEASE SIGN AND RETURN THE
ENCLOSED PROXY EVEN IF YOU
RETURNED THE ORIGINAL
April 7, 1996
To the Stockholders of ASARCO Incorporated
A REMINDER
We have previously sent to you proxy soliciting material relating to the
annual meeting of stockholders to be held on April 24, 1996.
According to our latest records, we have not as yet received your Proxy. The
time before the meeting is short and many of our shares are held in small
amounts. Your signed Proxy will be helpful, whether your holding is large or
small, and will aid us in avoiding further expense and delay.
A Proxy and return envelope are enclosed for your use.
Thank you for your cooperation.
Very truly yours,
R. Ferri
Secretary
PLEASE ACT PROMPTLY
