<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)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] 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 12, 1998
Dear Stockholder:
You are cordially invited to attend the annual meeting of stockholders which
will be held in the Ricker Auditorium, 180 Maiden Lane, New York, New York on
Wednesday, April 29, 1998, 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 INCORPORATED
180 MAIDEN LANE
NEW YORK, N.Y. 10038
----------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 29, 1998
To the Stockholders:
The annual meeting of stockholders of ASARCO Incorporated will be held in the
Ricker Auditorium, 180 Maiden Lane, New York, New York on Wednesday, April 29,
1998, at 2 P.M. for the following purposes:
(1) To elect four directors to serve until the 2001 annual meeting of
stockholders, two directors to serve until the 1999 annual meeting of
stockholders, and one director 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 1998.
(3) To transact such other business as may properly come before the meeting.
Stockholders of record at the close of business on March 6, 1998 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, 1998
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 29, 1998 and at any adjournment
thereof. This proxy statement and the enclosed form of proxy are being mailed,
commencing on or about March 17, 1998, to stockholders of record on March 6,
1998. 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 6, 1998, the record date for the annual
meeting, the Company had outstanding and entitled to be voted 39,642,592 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 28, 1998, seven 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 except for Manuel T. Pacheco, Vincent A. Calarco and Kevin R.
Morano were elected to their present term of office at a previous annual
meeting of stockholders. Messrs. Pacheco, Calarco and Morano were elected by
the Board of Directors at its meetings on July 30, and September 24, 1997, and
January 28, 1998, respectively.
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 fourteen. At its
meeting
2
<PAGE>
held on January 28, 1998, the Board of Directors of the Company nominated
Vincent A. Calarco, Francis R. McAllister, Michael T. Nelligan and John D.
Ong for election as Class I directors to serve until the 2001 annual meeting of
stockholders, Manuel T. Pacheco and Kevin R. Morano as Class II directors to
serve until the 1999 annual meeting, and James W. Kinnear as a Class III
director to serve until the 2000 annual meeting. Messrs. Kinnear, McAllister,
Nelligan and Ong are currently serving as Class I directors with a term of
office expiring in 1998.
Proxies in the enclosed form will be voted, unless authority is withheld, for
the election of the seven 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 I
(to serve until the 2001 annual meeting of stockholders)
<TABLE>
<CAPTION>
DIRECTOR
FOR DIRECTOR AGE SINCE
------------ --- --------
<S> <C> <C> <C>
Vincent A. Calarco...... Chairman, President and Chief Executive Of- 55 1997
ficer of Crompton & Knowles Corporation
(specialty chemicals and equipment) since
1986, its president and Chief Executive
Officer since 1985.
Francis R. McAllister... President and Chief Operating Officer of 55 1988
the Company since January 1998; previously
its Executive Vice President in charge of
copper operations from April 1993 until
January 1998, and its Chief Financial Of-
ficer from April 1982 until April 1993;
director of Southern Peru Copper Corpora-
tion and Cleveland-Cliffs, Inc.
Michael T. Nelligan..... Chief Executive Officer of Don Ward Trans- 58 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 Emeritus of The BFGoodrich Company 64 1991
(diversified chemicals and aerospace)
since July 1, 1997, formerly Chairman and
director of The BFGoodrich Company from
December 1996 to July 1997, and its Chair-
man and Chief Executive Officer from July
1979 until December 1996, and its Presi-
dent from 1975 to 1984; director of Cooper
Industries, Inc., Ameritech Corporation,
The Kroger Co., The Geon Company, TRW,
Inc. and Defiance, Inc.
</TABLE>
3
<PAGE>
Class II
(to serve until the 1999 annual meeting of stockholders)
<TABLE>
<CAPTION>
DIRECTOR
FOR DIRECTOR AGE SINCE
------------ --- --------
<S> <C> <C> <C>
Manuel T. Pacheco....... President of the University of Missouri 56 1997
since August 1997; from 1991 to 1995,
President of the University of Arizona.
Kevin R. Morano......... Executive Vice President and Chief Finan- 44 1998
cial Officer of the Company since January
1998; previously its Vice President, Fi-
nance and Chief Financial Officer from
1993 until January 1998, and general man-
ager of the Company's Ray Complex from
1991 to 1993; Vice President and director
of Southern Peru Copper Corporation.
</TABLE>
Class III
(to serve until the 2000 annual meeting of stockholders)
<TABLE>
<CAPTION>
DIRECTOR
FOR DIRECTOR AGE SINCE
------------ --- --------
<S> <C> <C> <C>
James W. Kinnear........ Director of Corning Incorporated and 69 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.
DIRECTORS WHOSE TERM OF OFFICE CONTINUES
Class II
(serving until the 1999 annual meeting of stockholders)
<CAPTION>
DIRECTOR
DIRECTOR AGE SINCE
-------- --- --------
<S> <C> <C> <C>
Willard C. Butcher...... Director of Texaco Inc. and International 71 1974
Paper Company, and member of the Interna-
tional Advisory Board of Banca Nazionale
del Lavoro and the Chase Manhattan Bank
International Advisory Council. Mr.
Butcher was Chairman of the Executive Com-
mittee of The Chase Manhattan Bank, N.A.
from November 1990 until October 1991 and
was Chairman of the Board and Chief Execu-
tive Officer of the bank from 1981 through
October 1990. Mr. Butcher was also Chair-
man of the Board and Chief Executive Offi-
cer of The Chase Manhattan Corporation
from 1981 through October 1990.
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
DIRECTOR
DIRECTOR AGE SINCE
-------- --- --------
<S> <C> <C> <C>
Richard de J. Osborne... Chairman of the Board and Chief Executive 63 1976
Officer of the Company since December
1985, also its President from 1982 until
January 1998; non-executive Chairman of
the Board and director of Southern Peru
Copper Corporation; director of Schering-
Plough Corporation, The BFGoodrich Company
and The Tinker Foundation Incorporated.
Martha T. Muse.......... Chairman of The Tinker Foundation Incorpo- 71 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.
</TABLE>
Class III
(serving until the 2000 annual meeting of stockholders)
<TABLE>
<CAPTION>
DIRECTOR
DIRECTOR AGE SINCE
-------- --- --------
<S> <C> <C> <C>
James C. Cotting........ Director of USG Corporation and the 64 1987
Interlake Corporation; member of the Board
of Governors of the Chicago Stock Ex-
change. Mr. Cotting was Chairman of the
Board of Navistar International Corpora-
tion (truck and engine manufacturer) from
April 1995 to March 1996. He was Chairman
and Chief Executive Officer of Navistar
from 1987 through March 1995.
David C. Garfield....... Director of Schering-Plough Corporation. 70 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 Brown University since January 54 1989
1998; President of The Ohio State Univer-
sity from September 1990 until December
1997; from 1985 until August 1990, Presi-
dent of the University of Colorado; from
1981 to 1985, President of West Virginia
University; director of The Limited, Inc.,
Glimcher Realty Trust, Intimate Brands
Inc. and Abercrombie & Fitch Co.
James Wood.............. Chairman of the Board and Co-Chief Execu- 68 1989
tive Officer of The Great Atlantic & Pa-
cific Tea Company, Inc. (supermarket
chain) since 1980; previously its Presi-
dent 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>
5
<PAGE>
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>
Grupo Mexico, S.A. de C.V. .................... 3,466,800(a) 8.59%
Baja California 200
06760 Mexico City, Mexico
Princeton Services, Inc. ...................... 3,131,860 (b) 7.7 %
800 Scudders Mill Road
Plainsboro, New Jersey 08536
Donald Smith & Co., Inc ....................... 2,003,000 (c) 5.1 %
East 80 Route 4
Paramus, New Jersey 07652
</TABLE>
- --------
(a) Information is provided in reliance upon information included in Amendment
No. 1, dated January 26, 1998, to a Schedule 13D, filed by Grupo Minero
Mexico, S.A. de C.V. and Grupo Mexico, S.A. de C.V.
(b) Information is provided in reliance upon information included in Amendment
No. 3, dated March 3, 1998, to a Schedule 13G, filed by Princeton
Services, Inc. ("PSI"). PSI acts as the general partner of Merrill Lynch
Asset Management, L.P. and Fund Asset Management, L.P., each of which is
an investment adviser registered under Section 203 of the Investment
Advisers Act of 1940, and acts as an investment adviser to investment
companies and/or to private accounts. PSI may be deemed the beneficial
owner of 7.7% of the Company's Common Stock. PSI disclaims beneficial
ownership of such shares.
(c) Information is provided in reliance upon information included in a
Schedule 13G, dated February 2, 1998, filed by Donald Smith & Co., Inc.
6
<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, 1997.
<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)............ 1,600 -- 1,600 (d)
Vincent A. Calarco(c)............ 200 -- 200 (d)
James C. Cotting(c).............. 1,800 -- 1,800 (d)
David C. Garfield(c)(e).......... 17,900 -- 17,900 (d)
E. Gordon Gee(c)................. 1,400 -- 1,400 (d)
James W. Kinnear(c).............. 1,600 -- 1,600 (d)
Francis R. McAllister(f)......... 40,215 133,340 173,555 (d)
Kevin R. Morano(f)............... 21,462 70,700 92,162 (d)
Martha T. Muse(c)................ 1,004 -- 1,004 (d)
Michael T. Nelligan(c)........... 1,815 -- 1,815 (d)
John D. Ong(c)................... 1,200 -- 1,200 (d)
Richard de J. Osborne(f)(g)...... 134,376 325,500 459,876 1.2%
Manuel T. Pacheco(c)............. 200 -- 200 (d)
James Wood(c).................... 3,400 -- 3,400 (d)
Augustus B. Kinsolving(f)........ 14,409 62,744 77,153 (d)
Robert M. Novotny(f)............. 16,171 43,200 59,371 (d)
All nominees, directors and
officers as a group (25
individuals)(f)................. 307,959 788,048 1,096,007 2.8%
</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, 1997, through the exercise of options
granted under the Company's 1996 Stock Incentive Plan or the previous Stock
Incentive Plan or 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 1996 Stock
Incentive Plan or previous Stock Incentive Plan to certain of the Company's
executive officers, and still subject to restrictions, as follows: 53,400
such shares to Mr. Osborne; 14,520 to Mr. McAllister; 11,980 to Mr. Morano;
9,140 to Mr. Novotny; 6,680 to Mr. Kinsolving and 24,220 to other executive
officers. Restrictions on such shares lapse in equal installments over five
years beginning on their respective grant dates.
(g) Includes 4,983 shares of Common Stock over which Mr. Osborne and his wife
share voting and investment power.
7
<PAGE>
COMMON STOCK EQUIVALENTS
The following table sets forth the per share number of Common Stock
equivalents credited as of December 31, 1997 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 based 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............................... -- 3,275 3,275
Vincent A. Calarco............................... 250 271 521
James C. Cotting................................. -- 3,322 3,322
David C. Garfield................................ -- 3,867 3,867
E. Gordon Gee.................................... -- 1,624 1,624
James W. Kinnear................................. 11,849 5,295 17,144
Martha T. Muse................................... 710 1,047 1,757
Michael T. Nelligan.............................. -- 4,737 4,737
John D. Ong...................................... -- 4,047 4,047
Manuel T. Pacheco................................ 392 378 770
James Wood....................................... 3,448 6,044 9,492
------ ------ ------
Total.......................................... 16,649 33,907 50,556
</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.
8
<PAGE>
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. Southern Peru Copper Corporation
is a publicly-traded subsidiary of Asarco. This information is stated as of
December 31, 1997.
<TABLE>
<CAPTION>
SOUTHERN PERU COPPER
CORPORATION
--------------------
SHARES OF
COMMON STOCK PERCENT
BENEFICIALLY OF
OWNED(A) CLASS
------------ -------
<S> <C> <C>
Willard C. Butcher........................................ -- (b)
Vincent A. Calarco........................................ -- (b)
James C. Cotting.......................................... -- (b)
David C. Garfield......................................... -- (b)
E. Gordon Gee............................................. -- (b)
James W. Kinnear.......................................... -- (b)
Francis R. McAllister..................................... 1,793 (b)
Kevin R. Morano........................................... 1,793 (b)
Martha T. Muse............................................ 500 (b)
Michael T. Nelligan....................................... 1,000 (b)
John D. Ong............................................... -- (b)
Richard de J. Osborne(c).................................. 2,923 (b)
Manuel T. Pacheco......................................... -- (b)
James Wood................................................ -- (b)
Augustus B. Kinsolving.................................... 863 (b)
Robert M. Novotny......................................... 1,228 (b)
All nominees, directors and officers as a group (25 indi-
viduals)................................................. 16,485 (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 2,259 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 officers who were also
directors in 1997 (Mr. Osborne and Mr. McAllister) the Committee made
compensation recommendations to the Board absent those officers, which
established their compensation. The Board did not modify or reject in any
material way the Committee's recommendations for 1997 compensation. The
Committee met a total of four times during 1997. Long-term incentive
compensation awards for 1997 to officers and other salaried employees were
approved
9
<PAGE>
by the Committee (and recommended to the Board with respect to Messrs. Osborne
and McAllister) at the Committee's January 1998 meeting.
The Company retains an independent compensation consulting organization to
advise and assist the Company and the Committee in connection with compensation
matters. During 1997 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
is comprised of nine metals companies worldwide; another group includes 13
process-oriented companies; a third group is comprised of 50 companies engaged
in heavy industry; and a fourth group consists of approximately 175 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 127 companies in the S&P 500 Index.
Base salaries for the Company's executive officers in 1997 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
10
<PAGE>
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.
In 1997, base salaries for Mr. Osborne, Mr. McAllister and the other
executive officers were increased effective May 1 by an average of 4.9 percent.
Base salaries for Messrs. Osborne, McAllister and the other executive officers
as a group had not been increased during the prior twelve 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. The Asarco Compensation Deferral Plan ("Deferral Plan")
permits officers and eligible employees to defer all or a portion of awards
made under the Senior Officers' Plan and the Incentive Compensation Plan, and
to defer 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 obtain current federal
income tax deductibility of incentive compensation earned by the five officers
whose compensation might otherwise not be deductible under the Internal Revenue
Code. Incentive compensation awards to the five covered officers are determined
pursuant to the Senior Officers' Plan and the Incentive Compensation Plan, and
to the extent they exceed award levels under the Senior Officers' Plan, such
amounts may not be deductible.
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
11
<PAGE>
officers, and particularly for the Chief Executive Officer, is determined by
individual and Company performance levels. Company performance in 1997 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 1997, 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 1997. 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 1997 and January 1998. The Committee and
the Board of Directors determined that the Company had achieved a 1997
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 addition, the Board, upon the
Committee's recommendation, determined that bonuses should be paid to certain
of the Company's officers for their efforts in achieving the sale of the
Company's equity interest in Grupo Mexico, S.A. de C.V. As a result of such
awards, total cash incentive payments to Messrs. Osborne and Morano exceeded
amounts payable under the Senior Officers' Plan with respect to 1997 by
$205,402 and $9,167, respectively. Pursuant to the terms of the award to Mr.
Osborne, his receipt of the excess payment will be deferred until April 30,
1999.
In January 1997 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 1997,
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 1997 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
12
<PAGE>
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, changes in Asarco executive
compensation programs for annual incentive compensation and for stock option
grants as a result of the provision were approved by Asarco shareholders in
1996. While the Company 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). The Committee intends, to the extent practicable, to preserve
deductibility under the Internal Revenue Code of compensation paid to the
Company's executive officers. Although compensation paid is generally
deductible, certain compensation paid to some executives may not be deductible.
Willard C. Butcher, Chairman
James W. Kinnear
Martha T. Muse
James Wood
----------------
13
<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
1997, 1996 and 1995 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
OTHER UNDERLYING
NAME AND ANNUAL RESTRICTED OPTIONS ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(1) STOCK AWARDS(2) (SHARES) COMPENSATION(3)
------------------ ---- -------- -------- --------------- --------------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Richard de J. Osborne... 1997 $865,000 $957,000 $25,588 $577,500 67,500 $25,950
Chairman of the Board 1996 811,672 485,000 28,850 539,750 50,000 24,350
and
Chief Executive Officer 1995 780,015 850,000 -- 467,040 40,000 23,400
Francis R. McAllister... 1997 441,668 335,300 22,588 159,500 25,500 13,250
President and Chief 1996 419,008 172,600 25,850 142,875 19,000 12,570
Operating Officer 1995 404,765 283,400 -- 122,598 16,000 12,143
Kevin R. Morano......... 1997 345,340 259,700 25,588 140,250 21,800 10,360
Executive Vice President 1996 324,672 141,800 28,150 114,300 15,200 9,740
1995 306,257 241,100 -- 102,165 13,000 9,188
Robert M. Novotny....... 1997 303,008 103,300 22,588 104,500 17,400 9,090
Vice President 1996 291,008 100,300 25,150 88,900 12,300 8,730
1995 280,924 181,800 -- 78,813 10,000 8,428
Augustus B. Kinsolving.. 1997 295,004 132,500 22,588 77,000 12,600 1,600
Vice President and 1996 283,672 75,200 25,850 62,250 9,000 1,500
General Counsel 1995 275,924 130,700 -- 52,542 6,500 2,067
</TABLE>
- --------
(1) Represents annual retainer, stock award and fees received for services as
a director of Southern Peru Copper Corporation.
(2) 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, 1997, and still subject to restrictions are as
follows: Mr. Osborne, 53,400 shares/$1,198,163; Mr. McAllister, 14,520
shares/$325,793; Mr. Morano, 11,980 shares/$268,801; Mr. Novotny, 9,140
shares/$205,079; and Mr. Kinsolving, 6,680 shares/$149,883. Restrictions
on such shares lapse in equal installments over five years beginning with
the grant dates which occurred during the period from January 1993 through
January 1997, except upon a change of control, in which case all shares
vest immediately. Cash dividends paid on shares of restricted stock are
not subject to restrictions.
(3) Amounts shown 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). 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. 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.
14
<PAGE>
OPTION GRANTS
Set forth below is further information on grants of stock options under the
Company's 1996 Stock Incentive Plan for the period January 1, 1997 to
December 31, 1997. No stock appreciation rights ("SARs") were granted in 1997
or outstanding as of December 31, 1997.
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... 67,500 18.3% $27.50 1/28/07 $491,265
Francis R. McAllister... 25,500 6.9% $27.50 1/28/07 185,589
Kevin R. Morano......... 21,800 5.9% $27.50 1/28/07 158,660
Robert M. Novotny....... 17,400 4.7% $27.50 1/28/07 126,637
Augustus B. Kinsolving.. 12,600 3.4% $27.50 1/28/07 91,703
</TABLE>
- --------
(1) The options were awarded under the Company's stockholder-approved 1996
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 28.36% based
on actual monthly volatility for the preceding five years, risk-free rate
of return of 6.37% based on the yield of the five year U.S. treasury note
as of the grant date, annual dividend rate of $0.87 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.
15
<PAGE>
OPTION EXERCISES AND FISCAL YEAR-END VALUES
Set forth below is information concerning stock option exercises by named
executive officers during 1997, 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, 1997. All outstanding
options were exercisable at December 31, 1997.
AGGREGATED OPTION EXERCISES IN 1997 AND DECEMBER 31, 1997 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... 25,000 $217,125(3) 325,500 $2,678
Francis R. McAllister... -- -- 133,340 617
Kevin R. Morano......... -- -- 70,700 --
Robert M. Novotny....... -- -- 43,200 --
Augustus B. Kinsolving.. 3,456 $ 28,597(3) 62,744 319
</TABLE>
- --------
(1) The above officers held no unexercisable options at December 31, 1997.
(2) Based on the New York Stock Exchange--Composite Transactions price for the
Company's Common Stock of $22.4375 on December 31, 1997.
(3) All after-tax net value realized was received in additional shares of
Common Stock.
16
<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 1992 to 1997.
[GRAPH APPEARS HERE]
<TABLE>
COMPARISON OF FIVE YEAR CUMULATIVE RETURN
AMONG ASARCO INCORPORATED, S&P METALS MISC. GROUP INDEX AND S&P 500 INDEX**
<CAPTION> S&P
Measurement period ASARCO METALS S&P
(Fiscal year Covered) INC. MISC. GROUP 500
- --------------------- --------- ----------- ---------
<S> <C> <C> <C>
Measurement PT -
12/31/92 $ 100 $ 100 $ 100
FYE 12/31/93 $ 93.64 $ 111.40 $ 110.08
FYE 12/31/94 $ 118.40 $ 130.07 $ 111.53
FYE 12/31/95 $ 135.96 $ 143.88 $ 153.44
FYE 12/31/96 $ 108.69 $ 146.80 $ 188.67
FYE 12/31/97 $ 100.75 $ 98.69 $ 251.63
</TABLE>
*TOTAL RETURN ASSUMES REINVESTMENT OF DIVIDENDS
**ASSUMES $100 INVESTED ON 12/31/92 IN ASARCO COMMON STOCK, S&P METALS GROUP
INDEX & S&P 500 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, 1992. In the first year of this period,
through December 31, 1993, Asarco's stock had a negative return of 6.4%, the
S&P 500 returned 10.1% and the S&P Metal Miscellaneous Group returned 11.4%. 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 the 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
return 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. In 1997, Asarco's stock provided a
negative return of 7.3% compared to a positive return of 33.4% for the S&P 500
and a negative return of 32.8% 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 1998, 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
17
<PAGE>
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 Plan are paid from the Company's general corporate funds. The table
assumes Social Security benefit levels as in effect on January 1, 1998.
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>
$ 300,000 $ 64,699 $ 86,266 $107,832 $129,398 $150,965
400,000 87,199 116,266 145,332 174,398 203,465
500,000 109,699 146,266 183,832 219,398 255,965
600,000 132,199 176,266 220,332 264,398 308,465
700,000 154,699 206,266 257,832 309,398 360,965
800,000 177,199 236,266 295,332 354,398 413,465
900,000 199,699 266,266 332,832 399,398 465,965
1,000,000 222,199 296,266 370,332 444,398 518,465
1,100,000 244,699 326,266 407,832 489,398 570,965
1,200,000 267,199 356,266 445,332 534,398 623,465
1,300,000 289,699 386,266 482,832 579,398 675,965
1,400,000 312,199 416,266 520,332 624,398 728,465
1,500,000 334,699 446,266 557,832 669,398 780,965
1,600,000 357,199 476,266 595,332 714,398 833,465
1,700,000 379,699 506,266 632,832 759,398 885,965
</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, 1998, the following officers had completed the number of
years of service indicated opposite their names: Richard de J. Osborne, 23
years; Francis R. McAllister, 31 years; Kevin R. Morano, 19 years; Robert M.
Novotny, 9 years and Augustus B. Kinsolving, 23 years. Under the Plan and
Supplemental Plan, the amounts of covered compensation of such persons for
calendar year 1997 were Richard de J. Osborne, $1,350,000, Francis R.
McAllister, $614,268, Kevin R. Morano, $487,140, Robert M. Novotny, $403,308
and Augustus B. Kinsolving, $370,204 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 Kinsolving 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
18
<PAGE>
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 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, except in the case of a change
in control. Participants in the Supplemental Plan and the Mid-Career Plan
receive their benefits in a lump-sum payment at retirement (which payment may
be deferred) unless they elect, in accordance with the terms of the plan, to
receive an annuity benefit.
EMPLOYMENT AGREEMENTS
The Company has employment agreements which provide for severance payments in
certain events to Messrs. Osborne, McAllister, Morano, Novotny, Kinsolving 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 nine 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. In addition, the Supplemental
Plan and the Mid-Career Plan provide for lump-sum payment of accrued benefits
upon a change in control. 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 in control as
to an executive if the executive is part of a purchasing group which
consummates a change in control transaction.
CERTAIN TRANSACTIONS
During 1997, the Company paid an aggregate amount of approximately $7.7
million to Grupo Mexico, S.A. de C.V. ("Grupo Mexico") and a subsidiary company
for unrefined copper and metal
19
<PAGE>
processing services. Grupo Mexico beneficially owns approximately 8.59% of the
Company's Common Stock. In addition, during 1997 the Company entered into
financial, securities and commodities transactions, primarily relating to the
Company's copper price protection program and hedging of precious metals, with
subsidiaries of Merrill Lynch & Co., Inc. ("Merrill Lynch"), resulting in net
payments to the Company of approximately $1.9 million. Affiliates of Merrill
Lynch may be deemed to own beneficially approximately 7.7% of the Company's
Common Stock. Such affiliates disclaim ownership of these shares. Management
believes these transactions to be on terms as favorable as could be obtained
from unaffiliated parties. Also in 1997, 2,085,989 shares of the Series B
shares of the capital stock of Grupo Mexico were sold by the Company to Grupo
Mexico pursuant to a right of first refusal, for an aggregate consideration of
$8.3 million.
ADDITIONAL INFORMATION
The functions of the Organization and Compensation Committee of the Board of
Directors (currently composed of Messrs. Willard C. Butcher, Chairman, James W.
Kinnear, John D. Ong, James Wood and Ms. Martha T. Muse) 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 1999 annual meeting of stockholders must
be received by January 29, 1999.
The Pension Advisory Committee of the Board of Directors (currently composed
of Messrs. David C. Garfield, Chairman, E. Gordon Gee, Michael T. Nelligan,
Manuel T. Pacheco 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 1997.
The Board of Directors met 10 times during 1997. 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 Mr.
Gee, who attended 93% of such meetings, and Mr. Calarco, who attended all but
one of four such meetings held since the date of his election to the Board.
Directors who are not officers or employees of the Company were paid in 1997
a basic fee of $26,000 plus $1,200 for attendance at each meeting of the Board
or of any Committee of the Board on which they served. 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.
20
<PAGE>
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 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.
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 1998, 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. In the event of a change of
control, the value of a participant's accounts under the Deferred Fee Plan and
the Deferred Payment Plan will be paid in a lump sum immediately.
21
<PAGE>
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 1998, 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 currently consists of Messrs. Michael T. Nelligan,
Chairman, Vincent A. Calarco, James C. Cotting, David C. Garfield, E. Gordon
Gee and James W. Kinnear. Three meetings were held in 1997. 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.
22
<PAGE>
PROPOSALS OF STOCKHOLDERS
Proposals of stockholders intended to be presented at the Company's 1999
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, 1998,
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 1998 annual meeting of stockholders
will be available after June 1, 1998 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, 1998
23
<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 10, 1998
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 29, 1998.
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
<PAGE>
ASARCO Incorporated
PROXY
Proxy Solicited by Board of Directors for Annual Meeting
of Stockholders to be held April 29, 1998
The undersigned hereby appoints RICHARD de J. OSBORNE, FRANCIS R. McALLISTER
and KEVIN R. MORANO, 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 Ricker Auditorium, 180 Maiden Lane, New York, New York at 2.P.M., on
Wednesday, April 29, 1998, 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
<PAGE>
<TABLE>
<CAPTION>
DIRECTORS RECOMMEND A VOTE "FOR"
<S> <C> <C>
1. Classified board election: FOR all nominees [X] WITHHOLD AUTHORITY to vote [X} *EXCEPTIONS [X]
listed below for all nominees listed below
Class I Director Nominees: Vincent A. Calarco, Francis R. McAllister, (INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR
Michael T. Nelligan and John D. Ong A PARTICULAR NOMINEE, MARK THE "EXCEPTIONS" BOX
Class II Director Nominees: Manuel T. Pacheco and Kevin R. Morano AND ENTER THE NAME(S) OF THE EXCEPTION(S) BELOW.)
Class III Director Nominee: James W. Kinnear
*EXCEPTION(S) ---------------------------------------
DIRECTORS RECOMMEND A VOTE "FOR" ADDRESS CHANGE COMMENTS
FOR [X] AGAINST [X] ABSTAIN [X] If you have noted either an
2. Selection of Coopers & Lybrand L.L.P. as independent auditors for 1998. Address Change or made Comments
3. In their discretion, the proxies are authorized to vote upon such other on the reverse side of this card.
business as may properly come before the meeting. mark here. [X]
Mark here to elect to have
your vote kept confidential. [X]
- ----------------------------------------------------------------------------------------------------------------------------------
NO VOTING BOXES BELOW THIS LINE
[ ]
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
NO TEXT PRINT IN THIS full title.
ADDRESS AREA
DATE , 1998
--------------------------------
SIGNED
------------------------------
--------------------------------------
[ ]
VOTES MUST BE INDICATED (X) IN
SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING BLACK OR BLUE INK AS IN THIS EXAMPLE. [X]
THE ENCLOSED ENVELOPE.
</TABLE>
