<PAGE>
[LOGO] ASARCO
RICHARD DE J. OSBORNE CHAIRMAN OF THE BOARD
March 12, 1997
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 30, 1997, 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.
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] ASARCO ASARCO INCORPORATED
180 MAIDEN LANE
NEW YORK, NY 10038
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 30, 1997
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 30, 1997, at 2 P.M. for the following purposes:
(1) To elect four directors to serve until the 2000 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 L.L.P. as independent auditors for the calendar year 1997.
(3) To transact such other business as may properly come before the meeting.
Stockholders of record at the close of business on March 7, 1997 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 12, 1997
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 30, 1997 and at any adjournment
thereof. This proxy statement and the enclosed form of proxy are being mailed,
commencing on or about March 17, 1997, to stockholders of record on March 7,
1997. 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 March 7, 1997, the record date for the annual
meeting, the Company had outstanding and entitled to be voted 42,919,619 shares
of Common Stock, without par value. Each share of Common Stock outstanding at
the record date will be entitled to one vote. 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 by the holders of shares entitled to vote is required to approve
proposals other than the election of directors.
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 29, 1997, four nominees are proposed for election at the annual
meeting. The remaining seven 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 29, 1997, the Board of Directors of the Company nominated James
C. Cotting, David C. Garfield, E. Gordon Gee and James Wood for election as
Class III directors to serve until the 2000 annual meeting of stockholders.
Messrs. Cotting, Garfield, Gee and Wood are currently serving as Class III
directors with a term of office expiring in 1997.
Proxies in the enclosed form will be voted, unless authority is withheld, for
the election of the four 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 III
(to serve until the 2000 annual meeting of stockholders)
<TABLE>
<CAPTION>
DIRECTOR
FOR DIRECTOR AGE SINCE
------------ --- --------
<S> <C> <C> <C>
James C. Cotting........ Director of Navistar International Corpora- 63 1987
tion, USG Corporation and the Interlake
Corporation; member of the Board of Gover-
nors of the Chicago Stock Exchange. 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. 69 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 53 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, Intimate Brands
Inc. and Abercrombie & Fitch Co.
James Wood.............. Chairman of the Board and Chief Executive 67 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.
</TABLE>
3
<PAGE>
DIRECTORS WHOSE TERM OF OFFICE CONTINUES
Class I
(serving until the 1998 annual meeting of stockholders)
<TABLE>
<CAPTION>
DIRECTOR
DIRECTOR AGE SINCE
-------- --- --------
<S> <C> <C> <C>
James W. Kinnear........ Director of Corning Incorporated and 68 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.
Francis R. McAllister... Executive Vice President of the Company in 54 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.,
Southern Peru Copper Corporation and
Cleveland-Cliffs, Inc.
Michael T. Nelligan..... Chief Executive Officer of Don Ward Trans- 57 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 of the Board and director of The 63 1991
BF Goodrich Company (diversified chemicals
and aerospace) since December 1996, its
Chairman and Chief Executive Officer from
July 1979 until November 1996, and its
President from 1975 to 1984; director of
Cooper Industries, Inc., Ameritech Cor-
poration, The Kroger Co., The Geon Company
and TRW, Inc.
</TABLE>
4
<PAGE>
Class II
(serving until the 1999 annual meeting of stockholders)
<TABLE>
<CAPTION>
DIRECTOR
DIRECTOR AGE SINCE
-------- --- --------
<C> <S> <C> <C>
Willard C. Butcher...... Director of Texaco Inc. and International 70 1974
Paper Company, and member of the Interna-
tional Advisory Board of Banca Nazionale
del Lavoro. Mr. Butcher was Chairman of
the Executive Committee of The Chase Man-
hattan 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 Executive Officer of The Chase
Manhattan Corporation from 1981 through
October 1990.
Richard de J. Osborne... Chairman of the Board, Chief Executive Of- 62 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, The BF Goodrich Compa-
ny, Grupo Mexico, S.A. de C.V. and The
Tinker Foundation Incorporated.
Martha T. Muse.......... Chairman of The Tinker Foundation Incorpo- 70 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>
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>
Merrill Lynch & Co., Inc. .................... 2,990,948(a) 7.0%
World Financial Center, North Tower
250 Vesey Street
New York, New York 10281
</TABLE>
- --------
(a) Information is provided in reliance upon information included in Amendment
No. 1, dated February 14, 1997, to a Schedule 13G, filed by Merrill Lynch &
Co. and two of its subsidiaries (collectively, "Merrill Lynch"). Merrill
Lynch may be deemed the beneficial owner of 7.0% 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, 1996.
<TABLE>
<CAPTION>
ASARCO INCORPORATED
-------------------------------------------
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).............. 1,400 -- 1,400 (d)
James C. Cotting(c)................ 1,600 -- 1,600 (d)
David C. Garfield(c)(e)............ 17,700 -- 17,700 (d)
E. Gordon Gee(c)................... 1,200 -- 1,200 (d)
James W. Kinnear(c)................ 1,400 -- 1,400 (d)
Francis R. McAllister(f)........... 34,635 110,340 144,975 (d)
Martha T. Muse(c).................. 804 -- 804 (d)
Michael T. Nelligan(c)............. 1,615 -- 1,615 (d)
John D. Ong(c)..................... 1,000 -- 1,000 (d)
Richard de J. Osborne(f)(g)........ 113,831 283,000 396,831 .9%
James Wood(c)...................... 3,200 -- 3,200 (d)
Kevin R. Morano(f)................. 16,921 48,900 65,821 (d)
Robert M. Novotny(f)............... 13,304 25,800 39,104 (d)
Robert J. Muth(f).................. 11,692 27,823 39,515 (d)
All nominees, directors and
officers as a group (23
individuals)(f)................... 262,044 623,363 885,407 2.1%
</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, 1996, 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. 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: 46,300 such shares to Mr. Osborne;
12,580 to Mr. McAllister; 9,570 to Mr. Morano; 7,640 to Mr. Novotny; 6,380
to Mr. Muth and 18,750 to other executive officers. Restrictions on such
shares lapse in equal installments over five years beginning on their
respective grant dates.
(g) Includes 4,849 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, 1996 to the accounts of the Company's
outside directors under the Company's Deferred Fee Plan for Directors and under
its Directors' 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............................... -- 3,187 3,187
James C. Cotting................................. -- 2,886 2,886
David C. Garfield................................ -- 3,763 3,763
E. Gordon Gee.................................... -- 1,234 1,234
James W. Kinnear................................. 9,881 4,460 14,341
Martha T. Muse................................... 691 673 1,364
Michael T. Nelligan.............................. -- 4,609 4,609
John D. Ong...................................... -- 3,246 3,246
James Wood....................................... 3,355 5,189 8,544
------ ------ ------
Total.......................................... 13,927 29,247 43,174
</TABLE>
- --------
(a) Amounts shown reflect the number of share equivalents credited to the
Deferred Fee Plan plus share equivalents of dividends credited.
(b) Amounts shown reflect the number of share equivalents credited under
the Directors' Deferred Payment Plan plus share equivalents of
dividends credited.
7
<PAGE>
In addition, in satisfaction of applicable rules of the Securities and
Exchange Commission, information is set forth below as to the shares of
Southern Peru Copper Corporation common stock beneficially owned by the
nominees, directors and executive officers named in the Summary Compensation
Table below and by all nominees, directors and officers as a group. This
information is stated as of December 31, 1996.
<TABLE>
<CAPTION>
SOUTHERN PERU COPPER
CORPORATION
--------------------
SHARES OF
COMMON STOCK PERCENT
BENEFICIALLY OF
OWNED(A) CLASS
------------ -------
<S> <C> <C>
Willard C. Butcher........................................ -- (b)
James C. Cotting.......................................... -- (b)
David C. Garfield......................................... -- (b)
E. Gordon Gee............................................. -- (b)
James. W. Kinnear......................................... -- (b)
Francis R. McAllister..................................... 1,472 (b)
Martha T. Muse............................................ 500 (b)
Michael T. Nelligan....................................... 1,000 (b)
John D. Ong............................................... -- (b)
Richard de J. Osborne(c).................................. 2,524 (b)
James Wood................................................ -- (b)
Kevin R. Morano........................................... 1,472 (b)
Robert M. Novotny......................................... 946 (b)
Robert J. Muth............................................ 1,400 (b)
All nominees, directors and officers as a group (23 indi-
viduals)................................................. 13,540 (b)
</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) Less than 0.5%.
(c) Includes 2,103 shares of Common Stock over which Mr. Osborne and his wife
share voting and investment power.
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 1996 compensation. The
Committee met a total of four times during 1996. Long-term incentive
compensation awards for 1996 to officers and other salaried employees were
approved by the Committee (and recommended to the Board with respect to Messrs.
Osborne and McAllister) at the Committee's January 1997 meeting.
8
<PAGE>
The Company retains an independent compensation consulting organization to
advise and assist the Company and the Committee in connection with compensation
matters. During 1996 the consulting organization made recommendations to the
Committee on base salary, cash incentive compensation and long-term incentive
compensation matters for the Chief Executive Officer and each other Asarco
executive position. Such recommendations included target levels for base salary
and cash incentive compensation, long-term income targets, 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. It also considers compensation information from smaller,
larger and comparably sized 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 50 companies engaged in heavy
industry; and a fourth group consists of approximately 171 companies having
annual revenues of $1 billion to $6 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 four of
the five companies in the S&P Metals Miscellaneous Group and approximately 121
companies in the S&P 500 Index.
Base salaries for the Company's executive officers in 1996 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
9
<PAGE>
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.
Base salaries for Mr. Osborne, Mr. McAllister and the other executive
officers were increased effective May 1, 1996 by an average of 4.5 percent.
Base salaries for Messrs. Osborne, McAllister and the other executive officers
as a group had not been increased during the prior fifteen months.
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 for Senior Officers ("Senior Officers' Plan") and the Asarco
Incentive Compensation Plan, which are administered by the Organization and
Compensation Committee. The Senior Officers' Plan covers the five most highly
compensated Company officers with respect to the year in which compensation is
awarded. Approximately 72% of all active salaried employees of the Company are
eligible for annual cash incentive compensation payments under the Incentive
Compensation Plan. Effective December 1, 1996, following the Committee's
recommendation and approval, the Board of Directors approved the Asarco
Compensation Deferral Plan ("Deferral Plan"). The Deferral Plan, among other
things, permits officers and eligible employees to defer all or a portion of
awards made under the Senior Officers' Plan and the Incentive Compensation
Plan. The Committee adopted the Deferral Plan as its administrative guidelines
to permit deferral under the Senior Officers' Plan. Pursuant to the Deferral
Plan, Messrs. McAllister and Muth, two of the five most highly compensated
officers, each elected to defer receipt of 50% of their 1996 incentive
compensation awards. All of the Company's five most highly compensated officers
participate in the previously existing salary deferral feature of the Deferral
Plan, which allows deferral of that portion of salary that could have been
deferred under the Savings Plan but for limitations imposed by the Internal
Revenue Code.
The sole purpose of the Senior Officers' 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. While the Senior Officers' Plan provides
maximum award levels to five covered officers, the Senior Officers' Plan is
administered so as to provide no greater benefits than could be provided under
the Company's Incentive Compensation Plan.
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 1996 was evaluated
against certain objectives previously established by the Board of Directors.
Among such objectives were: the completion of certain
10
<PAGE>
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 1996, 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 1996. 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 1996 and January 1997. The Committee and
the Board of Directors determined that the Company had achieved a 1996
corporate performance rating of 75% 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 85%.
In January 1996 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 1996,
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 1996 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. Accordingly, the
Committee in January and February 1996 made changes in Asarco executive
compensation programs for annual incentive compensation and for stock option
grants as a result of the provision. These changes were approved by Asarco
shareholders at the 1996 Annual Meeting in connection with the adoption of a
new Asarco 1996 Stock Incentive Plan and the Senior Officers' Plan. While the
Committee considers that restricted stock provides a form of long term
compensation the value of which is directly
11
<PAGE>
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
James W. Kinnear
Martha T. Muse
James Wood
----------------
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No current or former officer or employee of the Company or any of its
subsidiaries serves as a member of the Organization and Compensation Committee
of the Board of Directors (the "Committee"). At January 1, 1996, the members of
the Committee were Willard C. Butcher, Chairman, Harry Holiday, Jr., James W.
Kinnear and John D. Ong. Mr. Ong ceased being a member of the Committee on
April 24, 1996, and did not attend any Committee meeting after February 1996.
Effective April 15, 1996, Richard de J. Osborne, Chairman, Chief Executive
Officer and President of the Company, was elected to the board of directors of
The BFGoodrich Company. Mr. Ong is the Chairman of The BFGoodrich Company. Mr.
Holiday retired from the Board of Directors and the Committee on April 24,
1996. Messrs. Holiday and Ong were succeeded on the Committee, effective April
24, 1996, by James Wood and Martha T. Muse.
12
<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
1996, 1995 and 1994 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... 1996 $811,672 $485,000 $539,750 50,000 $24,350
Chairman of the Board, 1995 780,015 850,000 467,040 40,000 23,400
President and Chief 1994 725,000 368,800 420,750 48,000 4,500
Executive Officer
Francis R. McAllister... 1996 419,008 172,600 142,875 19,000 12,570
Executive Vice President 1995 404,765 283,400 122,598 16,000 12,143
1994 380,000 131,600 116,875 18,500 4,500
Kevin R. Morano......... 1996 324,672 141,800 114,300 15,200 9,740
Vice President 1995 306,257 241,100 102,165 13,000 9,188
1994 265,000 113,600 93,500 14,500 4,500
Robert M. Novotny....... 1996 291,008 100,300 88,900 12,300 8,730
Vice President 1995 280,924 181,800 78,813 10,000 8,428
1994 258,000 92,600 67,787 11,000 4,500
Robert J. Muth.......... 1996 286,672 74,300 76,200 10,400 8,600
Vice President 1995 278,674 134,700 58,380 7,800 8,360
1994 264,000 70,100 58,437 9,800 4,500
</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, 1996, and still subject to restrictions are as
follows: Mr. Osborne, 46,300 shares/$1,151,713; Mr. McAllister, 12,580
shares/$312,928; Mr. Morano, 9,570 shares/$238,054; Mr. Novotny, 7,640
shares/$190,045; and Mr. Muth, 6,380 shares/$158,703. Restrictions on such
shares lapse in equal installments over five years beginning with the
grant dates which occurred during the period from January 1992 through
January 1996. Cash dividends paid on shares of restricted stock are not
subject to restrictions.
(2) Amounts shown for 1995 and 1996 reflect matching contributions made by the
Company for the named individuals under the Company's Savings Plan and
Compensation Deferral Plan (formerly the Supplemental Savings Plan).
Amounts shown for 1994 reflect matching Company contributions made under
the Company's Savings Plan. 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 Compensation
Deferral Plan is a non-qualified deferred compensation plan that allows
eligible employees to defer that portion of their salary that could have
been deferred under the Savings Plan but for limitations imposed by the
Internal Revenue Code, and to defer all or part of their eligible
incentive compensation, as provided in the Plan. The Compensation Deferral
Plan became effective on December 1, 1996, as an amendment and restatement
of the Company's Supplemental Savings Plan. Salary deferrals are eligible
for a Company matching contribution under the Plan. Compensation deferred
and amounts contributed by the Company may be withdrawn subject to certain
restrictions and penalties. Deferrals of incentive compensation are not
eligible for a Company matching contribution.
13
<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, 1996 to December 31,
1996. No stock appreciation rights ("SARs") were granted in 1996 or outstanding
as of December 31, 1996.
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 50,000 19.8% $31.125 1/31/06 $428,800
Francis R. McAllister 19,000 7.5% $31.125 1/31/06 162,944
Kevin R. Morano 15,200 6.0% $31.125 1/31/06 130,355
Robert M. Novotny 12,300 4.9% $31.125 1/31/06 105,485
Robert J. Muth 10,400 4.1% $31.125 1/31/06 89,190
</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 27.90% based on
actual monthly volatility for the preceding five years, risk-free rate of
return of 5.24% based on the yield of the five year U.S. treasury notes as of
the grant date, annual dividend rate of $0.79 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.
14
<PAGE>
OPTION EXERCISES AND FISCAL YEAR-END VALUES
Set forth below is information concerning stock option exercises by named
executive officers during 1996, 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, 1996. All outstanding
options were exercisable at December 31, 1996.
AGGREGATED OPTION EXERCISES IN 1996 AND DECEMBER 31, 1996 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... -- -- 283,000 $137,490
Francis R. McAllister... -- -- 110,340 45,305
Kevin R. Morano......... -- -- 48,900 12,938
Robert M. Novotny....... 6,000 $46,470 25,800 --
Robert J. Muth.......... 2,231 $18,556 27,823 --
</TABLE>
- --------
(1) The above officers held no unexercisable options at December 31, 1996.
(2) Based on the New York Stock Exchange--Composite Transactions price for the
Company's Common Stock of $24.875 on December 31, 1996.
15
<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 1991 to 1996.
<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 -
12/31/91 $100.00 $100.00 $100.00
FYE 12/31/92 $120.59 $107.62 $107.29
FYE 12/31/93 $112.92 $118.47 $119.52
FYE 12/31/94 $142.78 $120.03 $139.55
FYE 12/31/95 $163.95 $165.14 $154.37
FYE 12/31/96 $131.08 $203.05 $157.50
</TABLE>
* TOTAL RETURN ASSUMES REINVESTMENT OF DIVIDENDS
** ASSUMES $100 INVESTED ON 12/31/91 IN ASARCO COMMON STOCK, S&P 500 INDEX &
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, 1991. In the first year of this period,
through December 31, 1992, Asarco's stock returned 20.6%, the S&P 500 returned
7.6% and the S&P Metal Miscellaneous Group returned 7.3%. In 1993, Asarco's
stock had a negative return of 6.4% compared to positive returns of 10.1% for
the S&P 500 and 11.4% for S&P Metals Miscellaneous Group. In 1994, the return
for Asarco's stock was a positive 26.4% compared to positive returns of 1.3%
for the S&P 500 and 16.8% for 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. In 1996, Asarco's stock declined 20.1%
compared to positive returns of 23.0% for the S&P 500 and 2.0% 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 1997, 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 and the Compensation Deferral
16
<PAGE>
Plan are paid from the Company's general corporate funds. The table assumes
Social Security benefit levels as in effect on January 1, 1997.
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 $ 87,363 $116,484 $145,605 $174,726 $ 203,847
500,000 109,863 146,484 183,105 219,726 256,347
600,000 132,363 176,484 220,605 264,726 308,847
700,000 154,863 206,484 258,105 309,726 361,347
800,000 177,363 236,484 295,605 354,726 413,847
900,000 199.863 266,484 333,105 399,726 466,347
1,000,000 222,363 296,484 370,605 444,726 518,847
1,100,000 244,863 326,484 408,105 489,726 571,347
1,200,000 267,363 356,484 445,605 534,726 623,847
1,300,000 289,863 386,484 483,105 579,726 676,347
1,400,000 312,363 416,484 520,605 624,726 728,847
1,500,000 334,863 446,484 558,105 669,726 781,347
1,600,000 357,363 476,484 595,605 714,726 833,847
1,700,000 379,863 506,484 633,105 759,726 886,347
1,800,000 402,363 536,484 670,605 804,726 938,847
1,900,000 424,863 566,484 708,105 849,726 991,347
2,000,000 447,363 596,484 745,605 894,726 1,043,847
</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, 1997, the following officers had completed the number of
years of service indicated opposite their names: Richard de J. Osborne, 22
years; Francis R. McAllister, 30 years; Kevin R. Morano, 18 years; Robert M.
Novotny, 8 years and Robert J. Muth, 28 years. Under the Plan and Supplemental
Plan, the amounts of covered compensation of such persons for calendar year
1996 were Richard de J. Osborne, $1,661,672, Francis R. McAllister, $702,408,
Kevin R. Morano, $565,772, Robert M. Novotny, $472,808 and Robert J. Muth,
$421,372 and consisted of basic salary and cash incentive compensation payments
in the year received as shown in the Summary Compensation Table and in prior
proxy statements. Cash incentive compensation payments 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
17
<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 9 months 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 annual base salary, average
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 certain benefits such executive is
entitled to receive immediately preceding the date of termination. The
executive would also be entitled to continuation of health and other insurance
benefits for a period of three years following 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 1996, the Company or its subsidiaries purchased and sold sulfuric acid
from and to J.R. Simplot Company aggregating approximately $118,000. Mr. J.R.
Simplot is the trustee of the John R. Simplot Self-Declaration of Revocable
Trust, which until October 1996 owned in excess of 5% of the Company's Common
Stock. During 1996, the Company entered into financial, securities and
commodities transactions, primarily relating to the Company's hedging of
precious metals, with subsidiaries of Merrill Lynch & Co., Inc. ("Merrill
Lynch"), resulting in net payments to the subsidiaries of $10.8 million.
Merrill Lynch and two of its subsidiaries may be deemed to own beneficially
7.0% 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.
18
<PAGE>
ADDITIONAL INFORMATION
The functions of the Organization and Compensation Committee of the Board of
Directors (composed of Messrs. Willard C. Butcher, Chairman, James W. Kinnear,
Martha T. Muse and James Wood) include making recommendations to the Board with
respect to nomination and tenure policy for 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 1998 annual meeting of stockholders must be received
by January 30, 1998.
The Pension Advisory Committee of the Board of Directors (composed of Messrs.
David C. Garfield, Chairman, E. Gordon Gee, Michael T. Nelligan, John D. Ong
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
1996.
The Board of Directors met 9 times during 1996. All incumbent directors
attended 100% of the aggregate number of meetings of the Board of Directors and
of the Committees of the Board on which they served, with the exception of
Messrs. Gee and Ong, who attended 93% and 63% of such meetings, respectively.
Directors who are not officers or employees of the Company were paid in 1996
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. Effective January 1,
1997 the annual retainer was increased to $26,000. Non-employee directors also
receive compensation under a stock award plan 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.
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 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
19
<PAGE>
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 the Directors' Deferred
Payment Plan. 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 1997, the credit will be $19,500. 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.
PROPOSAL TO APPROVE THE SELECTION OF AUDITORS
Upon recommendation of its Audit Committee, the Board of Directors has
selected Coopers & Lybrand L.L.P. to serve as independent auditors for the
Company for the calendar year 1997, subject to approval of the stockholders.
The Board of Directors recommends that the stockholders approve the selection
of Coopers & Lybrand L.L.P. at the annual meeting. Coopers & Lybrand L.L.P. and
its predecessors have served as the Company's auditors continuously since 1935.
Coopers & Lybrand L.L.P. 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 and James W. Kinnear. Four
meetings were held in 1996. 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 L.L.P. 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.
20
<PAGE>
PROPOSALS OF STOCKHOLDERS
Proposals of stockholders intended to be presented at the Company's 1998
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 17, 1997
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 1997 annual meeting of stockholders
will be available after June 3, 1997 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 if the shareholder elects on the proxy 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 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 12, 1997
21
<PAGE>
ASARCO INCORPORATED
PROXY
PROXY SOLICITED BY BOARD OF DIRECTORS FOR ANNUAL MEETING OF STOCKHOLDERS TO BE
HELD APRIL 30, 1997
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 30, 1997, 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 and FOR Proposal No. 2. 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
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Directors recommend a vote "FOR"
1. Classified board election:
For [ ] Withhold [ ] Exceptions* [ ]
Class III Director Nominees: James C. Cotting, David C.
Garfield, E. Gordon Gee and James Wood
(INSTRUCTIONS: To withhold activity to vote for a
particular nominee, mark the "Exceptions" box and
enter the name(s) of the exception(s) below.)
*Exception(s) ............
...........................
Directors recommend a vote "FOR"
2. Selection of Coopers & Lybrand L.L.P. as independent
auditors for 1997.
For [ ] Against [ ] Abstain [ ]
3. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting.
Address Change Comments
- -----------------------------------------------------
If you have noted either an Address Change or made
Comments on the reverse side of this card, mark here. [ ]
- -----------------------------------------------------
Mark here to elect to have your vote kept confidential [ ]
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 .................., 1997
SIGNED .......................
SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE.
VOTES MUST BE INDICATED [X]
IN BLACK OR BLUE AS IN THIS EXAMPLE.
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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 10, 1997
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 30, 1997.
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
