1999
Second Quarter
Form 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended June 30, 1999 Commission file number 1-164
------------- -----
ASARCO Incorporated
(Exact name of registrant as specified in its charter)
New Jersey 13-4924440
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
180 Maiden Lane, New York, N.Y. 10038
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 212-510-2000
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No ____
As of July 31, 1999 there were outstanding 39,783,396 shares of Asarco Common
Stock, without par value.
<PAGE>
ASARCO Incorporated
and Subsidiaries
INDEX TO FORM 10-Q
Page No.
Part I. Financial Information:
Item 1. Financial Statements (unaudited)
Condensed Consolidated Statement of Earnings
Three Months and Six Months Ended
June 30, 1999 and 1998 2
Condensed Consolidated Balance Sheet
June 30, 1999 and December 31, 1998 3
Condensed Consolidated Statement of Cash Flows
Three Months and Six Months Ended
June 30, 1999 and 1998 4
Notes to Condensed Consolidated Financial Statements 5-10
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 11-19
Report of Independent Accountants 20
Part II. Other Information:
Item 1. Legal Proceedings 21
Item 6 Exhibits and Reports on Form 8-K 22
Signatures 23
Exhibit Index 24
Exhibits 25-76
1
<PAGE>
ASARCO Incorporated
and Subsidiaries
CONDENSED CONSOLIDATED STATEMENT OF EARNINGS
(unaudited)
<TABLE>
<CAPTION>
3 Months Ended 6 Months Ended
June 30, June 30,
1999 1998 1999 1998
(in thousands, except per share data)
<S> <C> <C> <C> <C>
Sales of products and services $ 490,704 $ 571,148 $ 966,011 $1,185,658
--------- --------- --------- ----------
Operating costs and expenses:
Cost of products and services 424,227 496,188 855,274 1,033,972
Selling, administrative and other 35,859 33,836 72,092 71,284
Depreciation and depletion 37,164 35,686 73,117 71,958
Research and exploration 7,009 6,841 10,676 15,041
Environmental and other closed plant
charges, net of recoveries 1,582 1,426 3,681 5,980
Asset dispositions and impairments - - - 20,000
--------- --------- --------- ----------
Total operating costs and expenses 505,841 573,977 1,014,840 1,218,235
--------- --------- --------- ----------
Operating income (loss) (15,137) (2,829) (48,829) (32,577)
Interest expense (18,848) (16,398) (38,337) (33,858)
Other income 5,754 12,229 9,584 19,348
--------- --------- --------- ----------
Earnings (loss) before taxes on income and
minority interests (28,231) (6,998) (77,582) (47,087)
Taxes on income (benefit) (9,002) (1,482) (25,083) (15,975)
--------- --------- --------- ----------
Earnings (loss) before minority interests (19,229) (5,516) (52,499) (31,112)
Minority interests in net earnings of
consolidated subsidiaries (1,834) (9,026) (3,882) (15,236)
--------- --------- --------- ----------
Net earnings (loss) $(21,063) $(14,542) $(56,381) $ (46,348)
========= ========= ========= ==========
Per share amounts:
Net earnings (loss) - basic and diluted $ (0.53) $ (0.37) $ (1.42) $ (1.17)
Dividends to common stockholders $ 0.05 $ 0.20 $ 0.10 $ 0.40
Weighted average number of shares outstanding:
Basic and Diluted 39,747 39,657 39,711 39,654
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE>
ASARCO Incorporated
and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEET
(unaudited)
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
(in thousands)
ASSETS
Current assets:
<S> <C> <C>
Cash and cash equivalents $ 124,744 $ 193,048
Marketable securities 31,688 22,705
Accounts receivable, net 403,743 409,792
Inventories 305,037 352,411
Other assets 103,636 104,809
---------- ----------
Total current assets 968,848 1,082,765
Investments:
Available-for-sale and other at cost 123,186 121,532
Equity method 66,675 64,465
Property, net 2,592,344 2,526,567
Other assets including intangibles, net 226,250 228,480
---------- ----------
Total Assets $3,977,303 $4,023,809
========== ==========
LIABILITIES
Current liabilities:
Bank loans $ 15,884 $ 4,963
Current portion of long-term debt 31,462 27,676
Accounts payable 374,963 336,501
Salaries and wages 32,427 27,268
Taxes on income 90,304 84,007
Reserve for closed plant and environmental matters 47,658 53,394
Other current liabilities 41,187 47,611
---------- ----------
Total current liabilities 633,885 581,420
---------- ----------
Long-term debt 1,016,530 1,014,942
Deferred income taxes 27,735 56,045
Reserve for closed plant and environmental matters 76,120 90,985
Postretirement benefit obligation 110,478 108,741
Other liabilities and reserves 119,575 113,754
---------- ----------
Total non-current liabilities 1,350,438 1,384,467
---------- ----------
MINORITY INTERESTS 534,463 533,329
---------- ----------
COMMON STOCKHOLDERS' EQUITY
Common stock (a) 525,112 521,956
Accumulated other comprehensive income (loss), net of tax (15,097) (6,989)
Retained earnings 948,502 1,009,626
---------- ----------
Total Common Stockholders' Equity 1,458,517 1,524,593
---------- ----------
Total Liabilities, Minority Interests and Common
Stockholders' Equity $3,977,303 $4,023,809
========== ==========
(a) Common shares: authorized 80,000; outstanding: 39,767 39,652
The accompanying notes are an integral part of these financial statements.
</TABLE>
3
<PAGE>
ASARCO Incorporated
and Subsidiaries
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
3 Months Ended 6 Months Ended
June 30, June 30,
1999 1998 1999 1998
---- ---- ---- ----
(in thousands)
OPERATING ACTIVITIES
<S> <C> <C> <C> <C>
Net earnings (loss) $(21,063) $(14,542) $(56,381) $(46,348)
Adjustments to reconcile net earnings (loss) to net cash provided from
(used for) operating activities:
Depreciation and depletion 37,164 35,686 73,117 71,958
Provision (benefit)for deferred income taxes (13,097) (5,843) (27,743) (24,965)
Treasury stock used for employee benefits 473 63 866 1,100
Undistributed equity (earnings) losses (1,099) 2,129 (1,669) 191
Net (gain) loss on asset dispositions and impairments 340 98 310 20,275
Decrease in reserves for closed plant and
environmental matters (7,827) (23,817) (20,601) (33,971)
Minority interests 1,834 9,026 3,882 15,236
Cash provided from (used for) operating assets and liabilities:
Accounts receivable 5,676 26,317 1,459 (6,354)
Inventories (22,345) 17,598 45,715 47,102
Accounts payable and accrued liabilities 51,642 33,793 51,296 25,673
Other operating assets and liabilities (1,637) 22,623 2,209 (5,609)
Foreign currency transaction (gains) losses (390) 1,367 1,057 757
--------- -------- -------- --------
Net cash provided from (used for) operating activities 29,671 104,498 73,517 65,045
--------- --------- -------- --------
INVESTING ACTIVITIES
Capital expenditures (73,778) (71,630) (144,650) (171,127)
Sale of property 1,097 408 1,732 2,368
Purchase of cost investments and businesses (45) (37,352) (671) (37,944)
Sale of available-for-sale securities 14,472 19,844 33,884 52,037
Purchase of available-for-sale securities (14,457) (27,171) (33,103) (61,851)
Purchase of held-to-maturity investments (30,819) (51,876) (55,908) (52,880)
Proceeds from held-to-maturity investments 24,668 117,770 46,925 205,680
--------- --------- -------- --------
Net cash provided from (used for) investing
activities (78,862) (50,007) (151,791) (63,717)
--------- -------- -------- --------
FINANCING ACTIVITIES
Debt incurred 44,607 67,473 77,307 290,908
Debt repaid (44,708) (59,049) (61,650) (243,842)
Escrow (deposits) withdrawals on long-term loans (40) 5,385 (67) 7,000
Treasury stock transactions 630 291 1,599 (1,628)
Purchase of minority interests (345) (1,425) (529) (5,083)
Distributions to minority interests (1,452) (3,301) (2,219) (11,009)
Dividends paid to common stockholders (1,986) (7,932) (3,970) (15,861)
--------- -------- -------- --------
Net cash provided from (used for) financing
activities (3,294) 1,442 10,471 20,485
--------- -------- -------- --------
Effect of exchange rate changes on cash 2,982 (1,243) (501) (49)
--------- -------- -------- --------
Increase (decrease) in cash and cash equivalents (49,503) 54,690 (68,304) 21,764
Cash and cash equivalents at beginning of period 174,247 177,633 193,048 210,559
--------- -------- -------- --------
Cash and cash equivalents at end of period $124,744 $232,323 $124,744 $232,323
========= ======== ======== ========
The accompanying notes are an integral part of these financial statements.
</TABLE>
4
<PAGE>
ASARCO Incorporated
and Subsidiaries
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
A. In the opinion of Asarco Incorporated ("the Company"), the accompanying
unaudited condensed consolidated financial statements contain all
adjustments (consisting only of normal recurring adjustments) necessary to
present fairly the Company's financial position as of June 30, 1999 and the
results of operations and cash flows for the three and six month periods
ended June 30, 1999 and 1998. Certain reclassifications have been made in
the financial statements from amounts previously reported. This financial
data has been subjected to a review by PricewaterhouseCoopers LLP, the
Company's independent accountants. The results of operations for the three
month and six month periods are not necessarily indicative of the results
to be expected for the full year. The December 31, 1998 condensed
consolidated balance sheet data was derived from audited financial
statements, but does not include all disclosures required by generally
accepted accounting principles. The accompanying condensed consolidated
financial statements should be read in conjunction with the consolidated
financial statements and notes thereto included in the Company's 1998
annual report on Form 10-K.
B. Inventories were as follows:
(in millions)
June 30, Dec. 31,
1999 1998
------ ------
Inventories of smelters and refineries at lower of
LIFO cost or market $ 4.6 $ 2.3
Provisional cost of metals received from suppliers 40.1 57.9
Mine inventories at lower of FIFO cost or market 63.1 93.5
Metal inventory at lower of average cost or market 36.1 39.5
Materials and supplies at lower of average cost or
market 126.7 124.9
Other 34.4 34.3
------ ------
Total $305.0 $352.4
====== ======
At June 30, 1999 and December 31, 1998, replacement cost exceeded
inventories valued at LIFO cost by approximately $79.7 million and $74.0
million, respectively.
C. Financial Instruments:
Hedging: Derivative instruments may be used to manage exposure to market
risk from changes in commodity prices, interest rates or the value of the
Company's assets and liabilities. Derivative instruments which are
designated as hedges must be deemed effective at reducing the risk
associated with the exposure being hedged and must be designated as a hedge
at the inception of the contract.
The Company may purchase put options or create synthetic put options to
reduce or eliminate the risk of metal price declines below the option
strike price on a portion of its anticipated future production. The cost of
options is amortized on a straight-line basis during the period in which
the options are exercisable. Gains or losses from the sale or exercise of
options, net of unamortized acquisition costs, are recognized in the period
in which the underlying hedged production is sold. The Company also uses
futures contracts to hedge the effect of price changes on a portion of the
metals it sells. Gains and losses on futures contracts are reported as a
component of the underlying transaction.
5
<PAGE>
Trading Activities: Derivative instruments that do not meet the criteria to
be designated as hedges are considered trading activities and are marked to
market with the related adjustments recorded in net earnings.
Swap Agreements:Interest rate swap agreements limit the effect of increases
in interest rates on floating rate debt. The differential to be paid or
received as interest rates change under any such agreement is recorded in
interest expense. Fuel swap agreements limit the effect of increases in the
price of fuel. The differential to be paid or received as fuel prices
change is recorded as a component of cost of sales.
D. Business Segments:
(in millions)
The Company's reportable segments are separately managed strategic business
units that offer different products and services.
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
Segment Sales 1999 1998 1999 1998
------------- ---- ---- ---- ----
<S> <C> <C> <C> <C>
Copper $ 362.9 $ 426.7 $ 725.4 $ 911.6
Specialty Chemicals 89.3 90.0 174.9 173.0
Aggregates 16.1 14.8 25.6 24.6
All Other 22.4 39.6 40.1 76.5
------- ------- ------- --------
Total $ 490.7 $ 571.1 $ 966.0 $1,185.7
======= ======= ======= ========
Segment Earnings
Copper $(17.2) $ (1.9) $(46.8) $ (.2)
Specialty Chemicals 8.4 8.2 15.6 15.9
Aggregates 4.2 4.3 4.6 5.5
Exploration (5.2) (4.1) (7.2) (10.2)
All Other (1) (4.2) (9.4) (12.9) (41.7)
------- ------- ------- --------
Total $(14.0) $ (2.9) $(46.7) $ (30.7)
Interest and other (13.0) (4.2) (28.7) (14.5)
Less: Equity (earnings) losses (1.2) .1 (2.2) (1.9)
------- ------ ------- --------
Earnings (loss) before taxes on income
and minority interests $(28.2) $ (7.0) $(77.6) $ (47.1)
======= ======= ======= ========
</TABLE>
(1) The All Other segment includes a $20 million charge in the first
quarter of 1998 to reflect the effect of the sale of the Missouri Lead
Division ("MLD").
With the sale of the MLD in 1998, the closure of the Black Cloud lead-zinc mine
in Leadville, Colorado in the first quarter of 1999 and the change in management
responsibilities completed in April 1999, the Company's Lead, Zinc and Precious
Metals segment has been reclassified. The Company's custom lead smelting and
zinc mining operations are included in the All Other segment, and precious
metals refined at the Company's copper refineries are included in the Copper
segment.
6
<PAGE>
E. Contingencies and Litigation:
Environmental Litigation and Related Matters
In connection with the matters referred to below, as well as at other closed
plants and sites where the Company is working with federal and state agencies to
resolve environmental issues, the Company accrues for losses when such losses
are probable and reasonably estimable. Such accruals are adjusted as new
information develops or circumstances change and are not discounted to their
present value. Recoveries of environmental remediation costs from insurance
carriers and other parties are recorded as assets when the recoveries are deemed
probable.
Reserves for closed plants and environmental matters, including mine reclamation
costs for active and closed properties, totaled $123.8 million at June 30, 1999.
The Company anticipates that expenditures relating to these reserves will be
made over the next several years. Net cash expenditures against these reserves
for the three months ended June 30, 1999 and 1998 were $12.6 million and $25.4
million, respectively. Expenditures for the six months ended June 30, 1999 and
1998 were $25.6 million and $40.2 million, respectively.
The effect on pre-tax earnings of environmental and other closed plant charges
was $1.6 million and $1.4 million for the three months ended June 30, 1999 and
1998, respectively, and $3.7 million and $6.0 million for the six months ended
June 30, 1999 and 1998, respectively.
In 1997, separate class actions were commenced against the Company in Omaha,
Nebraska and in Denver, Colorado seeking compensatory and punitive damages for
alleged contamination of properties by emissions from the Company's former Omaha
plant and the Globe plant in Denver. In May 1999, the United States District
Court for the District of Nebraska dismissed the action relating to the Omaha
plant. Plaintiffs have appealed that ruling and filed a similar action in
Nebraska state court. The matter regarding the Globe plant has been settled
subject to court approval.
In March 1996, the United States government filed an action in United States
District Court in Boise, Idaho against the Company and three other mining
companies under the Comprehensive Environmental Response, Compensation and
Liability Act of 1980 (CERCLA or Superfund) and the federal Clean Water Act for
alleged natural resource damage to the Coeur d'Alene River Basin in Idaho. The
government contends that the defendants are liable for damages to natural
resources in a 1,500 square mile area caused by mining and related activities
that they and others undertook over the period between the mid-1800s and the
mid-1960s. The action also seeks a declaration that defendants are liable for
restoration of the area. The Company believes, and has been advised by outside
legal counsel, that it has strong legal defenses to the lawsuit. In 1996, the
court granted a motion to consolidate this case with a prior, similar lawsuit
filed by the Coeur d'Alene Tribe of Idaho. In 1998, the United States
Environmental Protection Agency (EPA) commenced a remedial investigation and
feasibility study of the Coeur d'Alene River Basin.
The Company, the United States Department of Justice, the EPA, and the Texas
Natural Resources Conservation Commission signed a consent decree filed in
United States District Court in Houston, Texas in April 1999 covering a broad
range of environmental issues affecting principally the facility of
Encycle/Texas, Inc., an indirect wholly-owned subsidiary of the Company, in
Corpus Christi, Texas and Asarco's Coy zinc mine in Tennessee. Pursuant to the
consent decree, the Company will perform certain environmental projects and pay
a $5.5 million penalty, without an admission of wrongdoing or liability. The
Company's existing environmental reserves are adequate to cover the cost of the
penalty and supplemental environmental projects. The consent decree is subject
to court approval.
7
<PAGE>
The Company and certain of its subsidiaries have received notices from EPA and
other federal and state agencies that they and in most cases numerous other
parties are potentially responsible to remediate alleged hazardous substance
releases at certain sites under CERCLA or similar state laws. In addition, the
Company and certain of its subsidiaries are defendants in lawsuits brought under
CERCLA or state laws that seek substantial damages and remediation. Remedial
action is being undertaken by the Company at some of the sites.
Product Litigation
The Company and two subsidiaries, as of June 30, 1999, are defendants in 1,169
lawsuits brought by 5,221 primary and 924 secondary plaintiffs seeking
substantial actual and punitive damages for personal injury or death allegedly
caused by exposure to asbestos. Three of these lawsuits are purported class
actions, two of which are allegedly brought on behalf of persons who are not
known to have asbestos-related injury. The third is purportedly brought on
behalf of persons suing both tobacco-related and asbestos-related entities
claiming damages for personal injury or death arising from exposure to asbestos
and cigarette smoke. In addition, the Company and certain subsidiaries are
defendants in product liability lawsuits involving various other products,
including metals.
Other Litigation
The Company is a defendant in lawsuits in Arizona, the earliest of which
commenced in 1975, involving the United States, Native Americans, and other
Arizona water users contesting the right of the Company and numerous other
individuals and entities to use water and, in some cases, seeking damages for
water usage and alleged contamination of ground water. The lawsuits could affect
the Company's use of water at its Ray Complex, Mission Complex, and other
Arizona operations.
The Company and certain subsidiaries are defendants in four purported class
actions and thirteen other lawsuits in Texas seeking substantial compensatory
and punitive damages for personal injury and contamination of property allegedly
caused by present and former operations in Texas and product sales of the
Company and its subsidiaries. Most of the cases name additional corporations as
defendants.
Opinion of Management
Future environmental related expenditures cannot be reliably determined in many
circumstances due to the early stages of investigation, the uncertainties
relating to specific remediation methods and costs, the possible participation
of other potentially responsible parties, and changing environmental laws and
interpretations. Similarly, due to the uncertainty of the outcome of court
proceedings, future expenditures related to litigation cannot be reliably
determined. It is the opinion of management that the outcome of the legal
proceedings and environmental contingencies mentioned, and other miscellaneous
litigation and proceedings now pending, will not materially adversely affect the
financial position of Asarco and its consolidated subsidiaries. However, it is
possible that litigation and environmental contingencies could have a material
effect on quarterly or annual operating results when they are resolved in future
periods. This opinion is based on considerations including experience related to
previous court judgments and settlements and remediation costs and terms. The
financial viability of other potentially responsible parties has been considered
when relevant and no credit has been assumed for any potential insurance
recovery when not deemed probable.
8
<PAGE>
F. Comprehensive Income:
Comprehensive income for the three and six month periods ended June 30,
1999 and 1998 was as follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
(in thousands) 1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net earnings (loss) $(21,063) $(14,542) $(56,381) $(46,348)
Other comprehensive income (loss):
Foreign currency translation adjustments (4,091) (2,683) (9,798) (3,222)
Unrealized gains (losses) on securities:
Unrealized holding gains (losses) arising during the
period, net of tax(a) 2,040 (897) 1,769 (1,533)
Less: Reclassifications of gains to net earnings (loss), net
of tax (b) - (1,433) (79) (3,656)
--------- --------- --------- ---------
Comprehensive income (loss) $(23,114) $(19,555) $(64,489) $(54,759)
======== ======== ======== ========
</TABLE>
(a) Includes tax expense (benefit) of $1,098 and $(483) for the three
month period ended June 30, 1999 and 1998, respectively, and $952 and
$(826) for the six month period ended June 30, 1999 and 1998,
respectively.
(b) Includes taxes of $771 for the three month period ended June 30, 1998
and $42 and $1,968 for the six month period ended June 30, 1999 and
1998, respectively.
Accumulated other comprehensive income balances as of June 30, 1999 and
December 31, 1998 were as follows:
<TABLE>
<CAPTION>
Foreign
Unrealized currency
gain (loss) translation Accumulated other
on securities adjustment comprehensive income (loss)
(in thousands) ------------- ----------- --------------------------
June 30, 1999
<S> <C> <C> <C>
Balance on January 1, 1999 $ 1,469 $ (8,458) $ (6,989)
Period change 1,690 (9,798) (8,108)
-------- --------- ----------
Balance on June 30, 1999 $ 3,159 $(18,256) $ (15,097)
======== ========= ==========
December 31, 1998
Balance on January 1, 1998 $ 11,654 $ (8,265) $ 3,389
Period change (10,185) (193) (10,378)
--------- --------- ----------
Balance on December 31, 1998 $ 1,469 $ (8,458) $ (6,989)
========= ========= =========
</TABLE>
G. Impact of New Accounting Standards:
In June 1998, the Financial Accounting Standards Board (FASB) issued SFAS No.
133 "Accounting for Derivative Instruments and Hedging Activities." This
statement establishes accounting and reporting standards for derivative
instruments and hedging activities. Initially, the statement was to be effective
in fiscal years beginning after June 15, 1999. In June 1999, the FASB issued
SFAS No. 137 which defers the effective date of SFAS No. 133 one year until June
15, 2000. The Company is currently assessing the impact of SFAS No.133.
9
<PAGE>
H. Subsequent Event:
On July 15, 1999, the Company and Cyprus Amax Minerals Company announced an
agreement, approved by the Board of Directors of both companies, for the
combination of the two companies in a merger-of-equals transaction. The proposed
new company, which will be named Asarco Cyprus Incorporated, will have a
beneficial interest in annual copper production of approximately 2.0 billion
pounds. Asarco Cyprus will have its corporate headquarters in New York City and
its operations headquarters in Tempe, Arizona.
Milton H. Ward, Cyprus Amax's chairman, president and chief executive officer,
and Francis R. McAllister, Asarco's chairman and chief executive officer, will
serve as co-chief executive officers and directors of Asarco Cyprus. Mr. Ward
will be chairman and co-CEO through April 2000 and, following April 2000, will
be chairman until his retirement at the end of 2000. Mr. Ward will remain a
director of the new company following his retirement. Mr. McAllister will be
president and co-CEO through April 2000, president and chief executive officer
until the end of 2000 and will become chairman, president and chief executive
officer at the end of 2000.
For the year ended December 31, 1998, Asarco and Cyprus Amax had sales of $2.2
billion and $2.6 billion, respectively. The combination, which is subject to
regulatory approvals and the approvals of the shareholders of both Cyprus Amax
and Asarco, is expected to close in the fourth quarter of 1999.
10
<PAGE>
Part I Item 2
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The Company reported a net loss of $21.1 million, or 53 cents per common share,
for the quarter ended June 30, 1999, compared with a net loss of $14.5 million,
or 37 cents per common share, for the quarter ended June 30, 1998. The loss was
principally the result of lower copper prices, which is estimated to have
reduced earnings by approximately $19.1 million when compared with the second
quarter of 1998.
For the six month period ended June 30, 1999, the Company reported a net loss of
$56.4 million or $1.42 per share, compared with a net loss of $46.3 million, or
$1.17 per share, for the six months ended June 30, 1998. Results for the first
six months of 1998 included an after-tax charge of $16.0 million related to the
sale of the Company's Missouri lead business and for severance costs associated
with a subsidiary's cost reduction program.
The average price for copper on both the New York Commodity Exchange (COMEX) and
the London Metal Exchange (LME) in the second quarter of 1999 was 67 cents per
pound compared with a COMEX price of 78 cents per pound and LME price of 79
cents per pound, in the second quarter of 1998. Through aggressive
implementation of its ongoing cost reduction program, the Company was able to
offset some of the effect of the low copper price. The Company's cost reduction
program and other operating improvements are estimated to have reduced the
after-tax loss in the second quarter of 1999 by $12.6 million compared with the
second quarter of 1998. Through the six months of 1999, these improvements have
produced an after-tax benefit of $27.9 million over the prior year.
The cost reduction programs in place at Asarco and its 54.3% owned subsidiary,
Southern Peru Copper Corporation (SPCC), have also had a significant effect on
the Company's production costs. The Company's consolidated cash cost per pound
of copper produced was approximately 60 cents per pound for the first six months
of 1999 as compared to approximately 66 cents per pound for the first six months
of 1998.
In order to further reduce operating costs, the Company has made operating
changes at its Mission mine that will decrease production by approximately 55
million pounds annually. The change will result in the layoff of approximately
150 employees at the mine. At the Ray mine, unusually hard ore has adversely
affected mill throughput, which will result in reduced production of
approximately 25 million pounds during 1999. Overall, the effect on 1999
production is estimated to be a reduction of 52 million pounds.
The Company's beneficial interest in mined copper production totaled 246.4
million pounds in the second quarter of 1999 as compared to 252.5 million pounds
in the second quarter of 1998. Lower copper production at the Mission and Ray
copper mines was partially offset by higher production at SPCC's operations.
Mined copper production at SPCC increased by 14% compared with the second
quarter of last year due to the Cuajone mine expansion, which was completed in
the first quarter of 1999 and higher ore grades at the Toquepala mine.
The Company's specialty chemicals business, Enthone-OMI Inc., had pre-tax
profits of $8.4 million in the second quarter of 1999, an increase from $8.2
million in the second quarter of 1998 mostly as a result of higher sales in
North America.
Pre-tax profits for the Company's aggregates business were $4.2 million in the
second quarter of 1999 compared with $4.3 million in the second quarter of the
prior year. Although sales were higher in the second quarter of 1999 compared
with 1998, margins were slightly lower due to the mix of products sold.
11
<PAGE>
On May 13, 1999, the Company announced that it had concluded an agreement
pursuant to which it will acquire 7.125 million newly issued common shares of
Coeur d'Alene Mines, or a fully diluted 19.3% common stock interest. In exchange
for this interest, Asarco will contribute the following: its 50% interest in
Silver Valley Resources Corporation, which operates the Coeur and Galena silver
mines; Asarco's wholly-owned subsidiary, Empresa Minera Manquiri S.R.L., which
owns an advanced Bolivian silver exploration project; 1.5 million shares and
warrants, representing an approximate 5% interest in Pan American Silver
Corporation of Vancouver, British Columbia; and a 20% net profits interest in
the Quiruvilca silver mine in Peru operated by Pan American Silver. The
transaction will be voted on by the shareholders of Coeur d'Alene Mines on
September 8, 1999. Closing of the transaction is expected to take place shortly
after shareholder approval is received.
On July 15, 1999, the Company and Cyprus Amax Minerals Company announced an
agreement, approved by the Board of Directors of both companies, for the
combination of the two companies in a merger-of-equals transaction. The proposed
new Company, Asarco Cyprus Incorporated, will be the largest publicly traded
copper company in the world. With its larger size and financial capacity, Asarco
Cyprus will be better able to expand its low cost copper production and take
advantage of other growth opportunities. The merger will improve the Company's
ability to meet the challenges of low copper prices and to generate substantial
cash flow during periods of strong copper prices.
The combination, which is subject to regulatory approvals and the approvals of
the shareholders of both Cyprus Amax and Asarco, is expected to close in the
fourth quarter of 1999.
Sales: Sales of products and services were $490.7 million in the second quarter
of 1999, compared with $571.1 million in the same period of 1998. Sales for the
six month period ended June 30, 1999 were $966.0 million compared with $1,185.7
million for the same period of 1998. The second quarter and six month period
decreases are both primarily due to lower copper prices and the sale of the
Missouri lead business. These decreases were partially offset by higher sales
from production at SPCC due to the completion of Cuajone mine expansion and
higher ore grades at the Toquepala mine.
12
<PAGE>
Metal sales volumes and prices for the three month and six month periods ended
June 30, 1999 and 1998 were as follows:
Metal Sales Volume:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Copper (000s pounds)
Asarco 302,600 289,900 631,500 624,900
SPCC (1) 181,200 167,200 349,900 337,200
------------ ------------ ------------ ------------
Consolidated 483,800 457,100 981,400 962,100
Asarco Beneficial Interest(2) 396,100 376,100 811,900 799,100
Silver (000s ounces)
Asarco 4,178 5,096 8,668 10,918
SPCC (1) 674 764 1,307 1,518
------------ ------------ ------------ ------------
Consolidated 4,852 5,860 9,975 12,436
Asarco Beneficial Interest(2) 4,537 5,503 9,364 11,726
Zinc (000s pounds) (3)
Asarco 33,600 38,000 70,700 75,000
Molybdenum (000s pounds) (3)
Asarco 959 1,254 1,890 2,719
SPCC (1) 3,228 2,730 5,552 5,581
------------ ------------ ------------ ------------
Consolidated 4,187 3,984 7,442 8,300
Asarco Beneficial Interest(2) 2,677 2,707 4,845 5,687
</TABLE>
(1) SPCC presented at 100%.
(2) The Company's equity interest in SPCC at both June 30, 1999 and 1998, was
54.3%. The Company's beneficial interest in the operations of SPCC, net
of the remaining labor shares interest, was 53.2% at both June 30, 1999
and 1998.
(3) The Company's zinc and molybdenum production is sold in the form of
concentrates. Volume represents pounds of zinc and molybdenum metal
contained in those concentrates.
13
<PAGE>
Average Metal Prices:
Prices for the Company's metals are established principally on the New York
Commodity Exchange (COMEX) or the London Metal Exchange (LME).
Three Months Ended Six Months Ended
June 30, June 30,
1999 1998 1999 1998
----- ----- ---- ----
Copper (per pound - COMEX) $0.67 $0.78 $0.65 $0.78
Copper (per pound - LME) $0.67 $0.79 $0.65 $0.78
Silver (per ounce - COMEX) $5.13 $5.69 $5.20 $5.96
Zinc (per pound - LME) $0.46 $0.48 $0.46 $0.48
Molybdenum (per pound -
Metals Week Dealer Oxide) $2.58 $3.90 $2.60 $3.87
Derivative Instruments: The Company uses derivative instruments to manage its
exposure to market risk from changes in commodity prices, interest rates or the
value of its assets and liabilities. Derivative instruments which are designated
as hedges must be deemed effective at reducing the risk associated with the
exposure being hedged and must be designated as a hedge at the inception of the
contract.
HEDGING:
Metal Futures Contracts: The majority of the Company's activities involving
metal futures contracts are designed to match the price realized for the
Company's metal production as closely as possible to the average monthly price
of the metal on the COMEX or LME during the month the Company makes shipments
to customers. For instance, sales contracts with customers may provide for
pricing in a month other than the month of shipment. In cases where pricing is
established in a month later than the month of shipment, the Company will sell
forward an equivalent amount of metal to the month that the price with the
customer is established. The gain or loss on these forward contracts is
offset with a lower or higher price on the customer invoice. Metal futures
contracts are also used to hedge the price of metals purchased by the Company
from third parties. Gains and losses on the liquidation of futures contracts
are included in earnings at the same time revenue from the related sale
transactions is recognized.
14
<PAGE>
At June 30, 1999 and December 31, 1998, the Company's aggregate metal futures
contract positions were as follows:
(in thousands)
Notional Unrealized
Weight Values Gain (Loss)
-------------------- ----------------------- -------------
June 30,1999
- ------------
Copper (pounds) 124,558 $ 82,392 $ 3,445
Silver (ounces) 4,355 $ 22,112 $ 186
Gold (ounces) 40 $ 10,848 $ (307)
Lead (pounds) 2,150 $ 559 $ (79)
Nickel (pounds) 576 $ 1,562 $ (43)
December 31,1998
- ----------------
Copper (pounds) 71,860 $ 48,207 $ 1,457
Silver (ounces) 5,630 $ 28,078 $ (184)
Gold (ounces) 32 $ 9,374 $ 206
Lead (pounds) 3,362 $ 742 $ (13)
Nickel (pounds) - - -
In the preceding table notional values represent the purchase or sales price of
the metal under contract. The unrealized gain or loss, if any, is the increase
or decrease in the value of the contract as of the date indicated.
The effect of a hypothetical 10 percent unfavorable change in metal prices on
the Company's June 30, 1999 positions would be a loss of $1.9 million in
addition to the unrealized gain or loss displayed in the table above.
However, any such additional loss would be offset by a corresponding
gain on the related customer contracts being hedged. Since the notional value
displayed in the table above represents the absolute sum of all outstanding
futures contracts, it is not an accurate measure of risk to the Company from
these transactions.
Price Protection: Depending on the market fundamentals of a metal and other
conditions, the Company may purchase put options or create synthetic put options
to reduce or eliminate the risk of metal price declines below the option strike
price on a portion of its anticipated future production. Synthetic put options
consist of a call option and a forward sale of the same quantity of metal. These
put options establish a minimum sales price for the production covered by such
put options and permit the Company to participate in price increases above the
option price. The cost of options is amortized on a straight-line basis during
the period in which the options are exercisable. Depending upon market
conditions, the Company may either sell options it holds or exercise the options
at maturity. Gains or losses from the sale or exercise of options, net of
unamortized acquisition costs, are recognized in the period in which the
underlying production is sold. At June 30, 1999 and 1998, the Company did not
hold any put options.
Earnings include pre-tax gains of $11.0 million for the six month period ended
June 30, 1998, from option sales and exercises related to copper sold in the
first half of 1998, including the Company's beneficial interest in SPCC's price
protection program. There were no pre-tax gains or losses from hedging
activities in the six month period ended June 30, 1999.
15
<PAGE>
Fuel Swaps: The Company may enter into fuel swap agreements to limit the effect
of increases in fuel prices on its production costs. A fuel swap establishes a
fixed price for the quantity of fuel covered by the agreement. The difference
between the published price for fuel and the price established in the contract
for the month covered by the swap is recognized as a component of cost of
products and services. As of June 30, 1999 and December 31, 1998, the Company
had entered into the following fuel swap agreements:
Weighted
Average
Contract
Fuel Type Period Quantity Price
- ---------------------------------------------- ----------------- --------------
June 30, 1999
- -------------
Residual Oil (Barrels) 7/99-12/99 1,073,700 $10.76
Residual Oil (Barrels) 1/00-12/00 1,048,800 $12.34
Diesel Fuel (Barrels) 7/99-12/99 553,800 $17.32
Diesel Fuel (Barrels) 1/00-12/00 564,000 $18.70
Natural Gas (BTUs in millions) 10/99-6/01 3,258,900 $ 2.14
December 31, 1998
- -----------------
Residual Oil (Barrels) 1/99-9/99 1,095,000 $ 9.84
Diesel Fuel (Barrels) 1/99-9/99 564,000 $15.35
Natural Gas (BTUs in millions) - - -
The unrealized gain in the Company's fuel swap positions at June 30, 1999 was
$7.0 million. The effect of a hypothetical 10 percent decrease from June 30,
1999 fuel prices would be to reduce the unrealized gain on fuel swaps by $5.8
million.
Interest Rate Swaps: The Company may enter into interest rate swap agreements to
limit the effect of interest rates on any floating rate debt. The differential
to be paid or received as interest rates change is recorded in interest expense.
During 1995, the Company entered into a swap agreement with an aggregate
notional amount of $15.0 million to limit the interest rate exposure on its
$15.0 million, 5 year term loan to 6.8%. Interest expense would have been lower
by $0.1 million in both quarters ended June 30, 1999 and 1998 had the Company
not hedged its exposure.
The effect of a hypothetical decrease of 1% in the prevailing interest rate
would be to increase interest expense by approximately $0.2 million over the
remaining life of the contract over what it would have been had the
exposure not been hedged.
TRADING:
Price protection programs utilizing synthetic puts may be implemented in steps.
In cases where the step approach is used, the Company's objective is to take
advantage of current market conditions to minimize its cost of the synthetic
put. Until a synthetic put is completed, any calls not matched with a forward
sale are considered trading activities and are marked to market with the gain or
loss, if any, recorded in earnings. At June 30, 1999, the Company did not hold
any call options. Earnings for the quarter ended June 30, 1998 included pre-tax
losses of $0.2 million from the expiration of call options and $1.6 million of
unrealized mark to market losses.
The Company may hold positions in the metals futures markets for metals which it
produces but which are not related to any specific sales to customers. These
contracts are considered trading activities and are marked to market with the
gain or loss, if any, recorded in earnings. At June 30, 1999 and 1998, such
futures positions were insignificant.
16
<PAGE>
Cost of Products and Services: Cost of products and services were $424.2 million
and $496.2 million for the quarters ended June 30, 1999 and 1998, respectively
and $855.3 million and $1,034.0 million for the six months ended June 30, 1999
and 1998, respectively. The second quarter and six month decreases in 1999 are
due to lower production costs resulting from the Company's cost reduction
program. In addition, a curtailment of the Company's copper refinery in
Amarillo, Texas and the sale of the Missouri Lead Division contributed to the
lower costs. Costs were also reduced by $4.3 million in the three month period
ended June 30, 1999 and $12.0 million in the six month period ended June 30,
1999 due to legal settlements and insurance proceeds.
Other Operating Costs: Selling, administrative and other expenses were $35.9 and
$33.8 million in the second quarters of 1999 and 1998, respectively, and $72.1
million and $71.3 million for the six months ended June 30, 1999 and 1998,
respectively. The increase in the three month and six month periods is the
result of higher corporate administrative costs and higher selling expenses
related to the specialty chemicals business.
Research and exploration expense was $7.0 million and $6.8 million in the second
quarters of 1999 and 1998, respectively, and $10.7 million and $15.0 million for
the six months ended June 30, 1999 and 1998, respectively. The decrease in the
six month period ending June 30, 1999 as compared with the prior period, is due
to lower spending in 1999 as part of the Company's cost reduction program.
Environmental and other closed plant charges were $1.6 million and $1.4 million
for the quarters ended June 30, 1999 and 1998, respectively, and $3.7 million
and $6.0 million for the six months ended June 30, 1999 and 1998, respectively.
Lower outside legal expenses contributed to the decrease in the six month period
ending June 30, 1999 as compared to the prior year six month period.
Asset dispositions and impairments for the six months ended June 30, 1998
include a $20.0 million charge to reflect the effect of the sale of the Missouri
lead business.
Non-operating Items: Interest expense was $18.8 million and $16.4 million for
the quarters ended June 30, 1999 and 1998, respectively, and $38.3 million and
$33.9 million in the six months ended June 30, 1999 and 1998, respectively. The
increases in the three month and six month periods in 1999 reflect higher
borrowings partially offset by lower rates on floating rate debt.
Other income was $5.8 million and $12.2 million for the quarters ended June 30,
1999 and 1998, respectively, and $9.6 million and $19.3 million for the six
months ended June 30, 1999 and 1998, respectively. The decrease in the three
month and six month periods are due to lower interest income and an insurance
recovery reported in the second quarter of 1998.
Taxes on Income: The increase in the rate of the consolidated tax benefit in the
second quarter of 1999 as compared to the second quarter of 1998 is attributable
to a reduction in SPCC's earnings.
Cash Flows:
Second quarter - Net cash provided from operating activities was $29.7 million
for the second quarter of 1999 and was primarily due to higher accounts payable
partially offset by increased inventory caused by higher prices. In the second
quarter of 1998, net cash provided from operating activities was $104.5 million
and was caused by higher payables and liabilities and lower inventories and
receivables.
Net cash used for investing activities was $78.9 million in the second quarter
of 1999, and was due to capital expenditures. In the second quarter of 1998, net
cash used for investing activities was $50.0 million principally related to
capital expenditures and the purchase of a German specialty chemicals company
by Enthone-OMI Inc. partially offset by higher proceeds from held-to-maturity
investments at SPCC.
17
<PAGE>
Six Months - Net cash provided from operating activities was $73.5 million in
the six month period ended June 30, 1999 and was primarily due to higher
accounts payable and lower copper concentrate inventories. In the six months
ended June 30, 1998, net cash provided from operating activities was $65.0
million and was caused by higher payables and liabilities and lower inventories.
Net cash used for investing activities was $151.8 million in the six month
period ended June 30, 1999 and was primarily due to capital expenditures. In the
six month period ended June 30, 1998, net cash used for investing activities was
$63.7 million principally related to capital expenditures and the purchase of
a German specialty chemicals company by Enthone-OMI Inc. partially offset by
higher proceeds from held-to-maturity investments at SPCC.
Liquidity and Capital Resources: At June 30, 1999, the Company's debt as a
percentage of total capitalization (the total of debt, minority interests and
equity) was 34.8%, compared with 33.7% at December 31, 1998. Consolidated debt
at June 30, 1999, including the debt of SPCC, none of which is guaranteed by
Asarco, was $1,063.9 million, compared with $1,047.6 million at December 31,
1998. Additional indebtedness permitted under the terms of the Company's most
restrictive covenants was $500.7 million at June 30, 1999. In addition, under
the most restrictive covenants of SPCC's loan agreements, SPCC would have been
permitted additional indebtedness of $882.5 million at June 30, 1999.
The Company expects that it will meet its cash requirements for 1999 and beyond
from internally generated funds, cash on hand and from borrowings under its
revolving credit agreements or from additional debt or equity financing.
The Company paid dividends to common stockholders of $2.0 million or 5 cents per
share in the second quarter of 1999 and $7.9 million or 20 cents per share in
the second quarter of 1998. In addition SPCC paid dividends of $1.0 million to
minority interests in the second quarter of 1999 and $2.9 million in the second
quarter of 1998. At June 30, 1999, the Company had 39,767,000 shares issued and
outstanding, compared with 39,652,000 at December 31, 1998.
Impact of New Accounting Standards: In June 1998, the Financial Accounting
Standards Board (FASB) issued SFAS No. 133 "Accounting for Derivative
Instruments and Hedging Activities." This statement establishes accounting and
reporting standards for derivative instruments and hedging activities.
Initially, the statement was to be effective in fiscal years beginning after
June 15, 1999. In June 1999, the FASB issued SFAS No. 137 which defers the
effective date of SFAS No. 133 one year until June 15, 2000. The Company is
currently assessing the impact of SFAS No.133.
Year 2000: The Company has implemented a three phase program to identify and
resolve Year 2000 (Y2K) issues related to the integrity and reliability of its
computerized information systems as well as computer systems embedded in its
production processes. Phase one of the Company's program which involved an
assessment of Y2K compliance of the Company's computerized information systems
and embedded computer systems has been completed. In phase two of the program
the Company is modifying or replacing all non-compliant systems. As of June 30,
1999, all of the Company's systems and approximately 98% of SPCC's systems have
been tested and are Y2K compliant with the remainder expected to be tested and
be Y2K compliant by the third quarter of 1999. The Company continues to test
these systems where appropriate.
As of June 30, 1999, the Company had spent approximately $2.8 million in
addition to its normal internal information technology costs in connection with
its Y2K program. The Company expects to incur additional costs of $0.4 million
including its beneficial interest in SPCC's costs to complete phases two and
three of the program.
18
<PAGE>
Phase three of the program, which involved the Company sending detailed
information requests to its principal customers, suppliers and service providers
to determine the status of their Y2K compliance, has been completed. The Company
received confirmations indicating that most are or will be Y2K compliant. The
Company will have further contact with those who have not responded or have
indicated further work was required to achieve Y2K compliance, but none are
critical to the Company's operations. SPCC has sent surveys to its major
customers, suppliers and service providers and also expects to complete this
phase of its program in the third quarter of 1999.
Among other things, the Company's operations depend on the availability of
utility services, principally electricity, and reliable performance by domestic
and international transportation services. A substantial disruption in any of
these services due to providers of these services failing to achieve Y2K
compliance would have an adverse impact on the Company's financial results, the
significance of which would depend on the length and severity of the disruption.
The Company has identified alternatives and has completed a contingency plan for
each of its principal operations. The purpose of the contingency plan is to
identify possible alternatives which could be used in the event of a disruption
in the delivery of essential goods or services and to minimize the effect of
such a disruption.
The above estimates and conclusions contain forward-looking statements and are
based on management's best estimate of future events. Actual results could
differ materially depending on the availability of resources and the Company's
ability to identify and correct all Y2K issues.
Cautionary Statement: Forward-looking statements in this report and in other
Company statements include statements regarding expected commencement dates of
mining or metal production operations, projected quantities of future metal
production, anticipated production rates, operating efficiencies, costs and
expenditures as well as projected demand or supply for the Company's products.
Actual results could differ materially depending upon factors including the
availability of materials, equipment, required permits or approvals and
financing, the occurrence of unusual weather or operating conditions, lower than
expected ore grades, the failure of equipment or processes to operate in
accordance with specifications, labor relations, environmental risks as well as
political and economic risk associated with foreign operations. Results of
operations are directly affected by metals prices on commodity exchanges which
can be volatile.
19
<PAGE>
PricewaterhouseCoopers LLP
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of ASARCO Incorporated:
We have reviewed the condensed consolidated balance sheet of ASARCO Incorporated
and Subsidiaries as of June 30, 1999 and the related condensed consolidated
statements of earnings and cash flows for the three month and six month periods
ended June 30, 1999 and 1998. These financial statements are the responsibility
of the Company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying interim condensed consolidated financial statements
for them to be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet as of December 31, 1998 and the
related consolidated statements of income, retained earnings, and cash flows for
the year then ended (not presented herein); and in our report dated January 26,
1999, we expressed an unqualified opinion on those consolidated financial
statements. In our opinion, the information set forth in the accompanying
condensed consolidated balance sheet as of December 31, 1998, is fairly stated,
in all material respects, in relation to the consolidated balance sheet from
which it has been derived.
PricewaterhouseCoopers LLP
New York, New York
July 21, 1999
20
<PAGE>
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings
1. Asarco and two of its wholly-owned subsidiaries, Lac d'Amiante du Quebec,
Ltee ("LAQ") and Capco Pipe Company, Inc. ("Capco"), have been named as
defendants, among numerous other defendants, in additional asbestos personal
injury lawsuits of the same general nature as the lawsuits reported on Form 10-K
for 1998 and prior years and Form 10-Q for the first quarter of 1999. As of June
30, 1999, there were pending against Asarco and its subsidiaries 1,169 lawsuits
brought by 5,221 primary and 924 secondary plaintiffs in 28 states seeking
substantial damages for personal injury or death allegedly caused by exposure to
asbestos. As of June 30, 1999, LAQ, Asarco, and Capco have settled or have been
dismissed from a total of 10,646 asbestos personal injury lawsuits brought by
approximately 114,308 primary and 65,510 secondary plaintiffs.
2. With respect to the purported class action brought against the Company on
behalf of individuals living or owning property near the Company's former Omaha
plant, reported on Form 10-K for 1998, in May 1999, the court dismissed the
case, and that ruling has been appealed. In June 1999, a purported class action
containing similar factual allegations was filed in state court in Nebraska on
behalf of Nebraska residents living within five miles of the former plant.
3. With respect to the citizens' suit brought against the Company alleging
violations of the Clean Water Act ("CWA") and Resource Conservation and Recovery
Act ("RCRA") at the Company's former Omaha plant, reported on Form 10-K for 1998
and prior years, in April 1999 the court entered summary judgment dismissing the
CWA claims. A trial of the RCRA claims was held in June 1999, and the court
rendered a verdict in favor of the Company.
4. With respect to the class action brought against the Company on behalf of
persons residing near the Company's Globe plant in Denver, Colorado, reported on
Form 10-K for 1998, on July 11, 1999, the Company and the class representatives
executed a memorandum of understanding settling the matter subject to
preparation of more detailed settlement documents and approval by the court.
5. With respect to the lawsuits arising out of the operations of the Company's
former Corpus Christi zinc refinery and the operations of its subsidiaries
Encycle, Inc. and Encycle/Texas, Inc., reported on Form 10-K for 1998, two of
the plaintiffs in that litigation have filed a separate action against the Texas
Natural Resources Conservation Commission ("TNRCC"), seeking to compel that
agency to assess additional penalties against the Company and conduct a further
investigation of allegedly contaminated properties near the plant. The same
plaintiffs and others have filed comments and have sought to intervene as
separate parties with respect to the consent decree among the Company, the
United States Department of Justice, the United States Environmental Protection
Agency ("EPA"), and the TNRCC reported on Form 10-Q for the first quarter of
1999. The consent decree represents the second and final phase of a multi-state
resolution of environmental issues between the Company and EPA. The consent
decree is subject to court approval. On August 2, 1999, the court denied the
motion to intervene as separate parties in the consent decree.
21
<PAGE>
Item 6 - Exhibits and Reports on Form 8-K
(a) The following Exhibits are filed as part of this report:
Exhibit
10. Material Contracts
(a) 1996 Stock Incentive Plan, as amended March 1, 1999
(b) Deferred Fee Plan for Directors, as amended and restated as
of April 28, 1999
(c) Directors' Deferred Payment Plan, as amended and restated as
of April 28, 1999
(d) Supplemental Pension Plan for Designated Mid-Career
Officers, as amended through April 28, 1999
(e) Supplemental Retirement Plan, as amended and restated as of
April 28, 1999
(f) Compensation Deferral Plan, as amended and restated as of
April 28, 1999
12. Statement re Computation of Consolidated Ratio of Earnings to
Fixed Charges and Combined Fixed Charges and Preferred Share
Dividend Requirements
15. Independent Accountants' Awareness Letter
(b) Reports on Form 8-K:
Report on Form 8-K filed on July 20, 1999 containing a press release dated
July 15, 1999 announcing an agreement between Cyprus Amax Minerals Company
and Asarco Incorporated for the combination of both companies in a
merger-of-equals transactions.
22
<PAGE>
SIGNATURES
Pursuant to the requirement of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ASARCO Incorporated
(Registrant)
Date: August 11, 1999 /s/ William Dowd
-----------------
William Dowd
Vice President and
Chief Financial Officer
Date: August 11, 1999 /s/ Edward J. Melando
---------------------
Edward J. Melando
Controller
23
<PAGE>
Exhibit Index
<TABLE>
<CAPTION>
Exhibit Page No.
Page No.
<S> <C>
10. Material Contracts
(a) 1996 Stock Incentive Plan, as amended March 1, 1999 25-41
(b) Deferred Fee Plan for Directors, as amended and restated as of
April 28, 1999 42-47
(c) Directors' Deferred Payment Plan, as amended and restated as of
April 28, 1999 48-53
(d) Supplemental Pension Plan for Designated Mid-Career Officers, as
amended through April 28, 1999 54-61
(e) Supplemental Retirement Plan, as amended and restated as of April
28, 1999 62-67
(f) Compensation Deferral Plan, as amended and restated as of April
28, 1999 68-74
12. Statement re Computation of Consolidated Ratio of Earnings to Fixed Charges
and Combined Fixed Charges and Preferred Share Dividend Requirements 75
15. Independent Accountants' Awareness Letter 76
</TABLE>
24
<PAGE>
Exhibit 10(a)
ASARCO Incorporated
1996 STOCK INCENTIVE PLAN
(As Amended March 1, 1999)
1.Purposes. The purposes of the ASARCO Incorporated 1996 Stock Incentive Plan
are:
(a) To further the growth, development and success of the
Company and its Subsidiaries by enabling the executive and other key salaried
employees of the Company and its Subsidiaries to acquire a continued proprietary
interest in the Company, thereby increasing their personal interests in such
growth, development and success; and
(b) To maintain the ability of the Company and its
Subsidiaries to attract and retain highly qualified and experienced employees by
offering them an opportunity to acquire a continued proprietary interest in the
Company and its Subsidiaries which will reflect the growth, development and
success of the Company and its Subsidiaries.
Toward these objectives, the Committee may grant Options, Stock Appreciation
Rights, Limited Rights, Other Stock-Based Awards or award Restricted Stock or
Dividend Equivalents to such employees or pay such employees' bonuses (if any)
or other compensation in Common Stock or award or grant any combination thereof,
all pursuant to the terms and conditions of the Plan (each, an "Award").
2. Definitions. As used in the Plan, the following capitalized terms shall
have the meanings set forth below, unless the context clearly indicates
otherwise:
(a) "Additional Annual Increment" shall have the meaning set
forth in Section 4(a).
(b) "Agreement" shall have the meaning set forth in Section
3(e).
(c) "Award" shall have the meaning set forth in Section 1.
(d) "Award Gain" shall have the meaning set forth in Section
12(a).
(e) "Award Limit" shall mean an aggregate of 375,000 shares of
Common Stock applicable collectively to all Awards during any period of
three consecutive calendar years (as adjusted in accordance with
Section 17).
(f) "Board" shall mean the Board of Directors of the Company.
(g) "Code" shall mean the Internal Revenue Code of 1986, as it
may be amended from time to time, including regulations and rules
thereunder and successor provisions and regulations and rules thereto.
(h) "Committee" shall mean the Organization and Compensation
Committee of the Board, or such other Board committee as may be
designated by the Board to administer the Plan.
(i) "Common Stock" shall mean the no par value common stock of
the Company.
(j) "Company" shall mean ASARCO Incorporated, a New Jersey
corporation, or any successor entity.
(k) "Composite Tape" shall mean the Composite Tape for New
York Stock Exchange issues, or any successor thereto.
(l) "Coupled Stock Appreciation Rights" shall have the meaning
set forth in Section 7.
25
<PAGE>
(m) "Dividend Equivalents" shall mean the equivalent value (in
cash or Common Stock) of dividends paid on Common Stock subject to
Other Stock-Based Awards, which are granted under, and determined in
accordance with Section 11.
(n) "Exchange Act" shall mean the Securities Exchange Act of
1934, as it may be amended from time to time.
(o) "Exercise Event" shall have the meaning set forth in
Section 7(e).
(p) "Fair Market Value" of a share of Common Stock or other
Company or Subsidiary equity securities as of a given date shall be the
mean of the high and low sales prices for a share of Common Stock or
such securities as reported on the Composite Tape for such date;
provided, however, that if there is no sale of shares of Common Stock
or such securities reported on the Composite Tape on such date, such
fair market value shall be the mean between the bid and asked prices
for a share of Common Stock or such securities reported on the
Composite Tape at the close of trading on such date; provided further,
however, that if no such prices are reported for such day, the most
recent day for which such prices are available shall be used. In the
event that the method for determining the fair market value of a share
of Common Stock or such securities provided for in the previous
sentence shall not be practicable, then such fair market value shall be
determined by such other reasonable valuation method as the Committee
shall, in its discretion, select and apply in good faith as of the
given date; provided, however, that for purposes of paragraph (a) of
Section 6, such fair market value shall be determined subject to
Section 422(c)(7) of the Code.
(q) "Incentive Stock Option" shall mean an option to purchase
Common Stock granted to a Participant under the Plan in accordance with
the terms and conditions set forth in Section 6 and which conforms to
the applicable provisions of Section 422 of the Code.
(r) "Independent Stock Appreciation Rights" shall have the
meaning set forth in Section 7.
(s) "Limited Right" shall mean a limited stock appreciation
right granted to a Participant under the Plan in accordance with the
terms and conditions set forth in Section 7(e).
(t) "Notice" shall mean written notice actually received by
the Company at its offices, which may be delivered in person to the
Company's Controller or sent by facsimile to the Company's Controller,
or sent by certified or registered mail or reputable overnight courier,
prepaid, addressed to the Company at 180 Maiden Lane, New York, New
York 10038, Attention: Controller, or such other address or facsimile
number as may be furnished in writing by the Company to any
Participant.
(u) "Option" shall mean an option to purchase Common Stock
granted to a Participant under the Plan in accordance with the terms
and conditions set forth in Section 6. Options may be either Incentive
Stock Options or stock options other than Incentive Stock Options.
(v) "Optionee" shall mean a Participant who has been granted
an Option under the Plan in accordance with the terms and conditions
set forth in Section 6.
(w) "Other Stock-Based Awards" shall mean Awards granted to
Participants under the Plan that are valued in whole or in part by
reference to, or otherwise based on, the value of a share of Common
Stock, in accordance with the terms and conditions set forth in Section
10.
(x) "Participant" shall mean an executive or key salaried
employee of the Company or its Subsidiaries selected to participate in
the Plan pursuant to Section 3.
26
<PAGE>
(y) "Performance Criteria" applicable to Awards under the
Plan, shall mean one or more of the following, as selected by the
Committee: (i) return on equity calculated by dividing net earnings by
either (A) beginning stockholders' equity or (B) invested capital, or
(ii) actual consolidated beneficial mined copper production. For
purposes of the preceding sentence, equity and invested capital shall
exclude unrealized gain on securities reported at fair value. Net
earnings may be defined by the Committee as reported net earnings,
earnings before non-recurring items (as identified in the Company's
annual financial statements and management's discussion and analysis),
net earnings before extraordinary items, net earnings before the
cumulative effect of changes in accounting principles, or operating
income.
(z) "Permanent Disability" shall mean a permanent disability
under the terms of the Company's long-term disability plan; provided,
however, that, for purposes of Incentive Stock Options, "Permanent
Disability" shall mean "permanent and total disability" as set forth in
Section 22(e)(3) of the Code. The Committee may require medical
evidence of Permanent Disability, including medical examinations by
physicians selected by it, at the expense of the Company.
(aa) "Plan" shall mean this ASARCO Incorporated 1996 Stock
Incentive Plan.
(ab) "Predecessor Plan" shall have the meaning set forth
in Section 18(h).
(ac) "Restricted Stock" shall mean Common Stock awarded under
the Plan in accordance with the terms and conditions set forth in
Section 8.
(ad) "Restriction Period" shall have the meaning set forth
in Section 8(b).
(ae) "Rule 16b-3" shall mean Rule 16b-3 under the Exchange Act,
as such rule may be amended from time to time.
(af) "SEC" shall mean the Securities and Exchange Commission.
(ag) "Stock Appreciation Right" shall mean a stock appreciation
right granted to a Participant under the Plan and in accordance with
the terms and conditions of Section 7 and shall include both Coupled
Stock Appreciation Rights and Independent Stock Appreciation Rights.
(ah) "Subsidiary" shall mean any present or future corporation
which is or would be a "subsidiary corporation" of the Company as the
term is defined in Section 424(f) of the Code.
3.Administration of the Plan. (a) The Committee shall have total and exclusive
responsibility to control, operate, manage and administer the Plan in
accordance with its terms and conditions.
(b) The Committee shall be appointed from time to time by the Board, and
the Committee shall consist of not less than three (3) members of the Board,
each of whom is an "outside director" within the meaning of Section 162(m) of
the Code and, to the extent necessary for the Plan and/or Awards thereunder to
satisfy the requirements and conditions of Rule 16b-3, a "disinterested person,"
as defined by Rule 16b-3 (or a "non-employee director" under Rule 16b-3 as
proposed to be amended by the SEC, if such amendments are finally adopted by the
SEC substantially as proposed); provided, however, that if one or more of the
members of the Committee does not qualify as such an "outside director" or a
"disinterested person" (or a "non-employee director," if applicable) at the time
any Award is granted, such Award nevertheless shall be deemed to be properly
authorized and issued under the Plan and shall remain in full force and effect
subject to the other terms and conditions contained in the Plan and the relevant
Agreement. Appointment of Committee members shall be effective upon their
acceptance of such appointment. Committee members may be removed by the Board at
any time either with or without cause, and such members may resign at any time
by delivering Notice thereof to the Board. Any vacancy on the Committee, whether
due to action of the Board or any other reason, shall be filled by the Board.
27
<PAGE>
(c) The Committee shall have all authority that may be necessary or
helpful to enable it to discharge its responsibilities with respect to the Plan.
Without limiting the generality of the preceding sentence, the Committee shall
have the exclusive right to: (i) interpret the Plan and the Agreements; (ii)
construe any ambiguous provision in the Plan and/or the Agreements; (iii)
determine eligibility for participation in the Plan; (iv) select Participants;
(v) decide all questions concerning eligibility for and the amount of Awards
payable under the Plan; (vi) establish rules and regulations and administrative
guidelines for carrying out the Plan and amend, rescind or waive such rules or
regulations or administrative guidelines as it from time to time deems proper;
(vii) determine whether Awards to a Participant are to be granted alone or in
combination or in tandem; (viii) to the extent permitted under the Plan and the
applicable Agreement, accelerate the exercisability of any Option, Stock
Appreciation Right or Other Stock-Based Award (if applicable), or the
termination of any Restriction Period with respect to Restricted Stock when such
acceleration and/or termination would be in the best interest of the Company;
(ix) to the extent permitted under the Plan and the applicable Agreement, grant
waivers of Plan terms, conditions, restrictions and limitations; (x) to the
extent permitted under the Plan and the applicable Agreement, permit the
transfer of an Award or the exercise of an Award by one other than the
Participant who received the grant of such Award; (xi) correct any errors,
supply any omissions or reconcile any inconsistencies in the Plan and/or any
Agreement or any other instrument relating to any Award; (xii) to the extent
permitted by the Plan, amend or adjust the terms and conditions of any
outstanding Award and/or adjust the number and/or class of shares of Common
Stock subject to any outstanding Award; (xiii) in accordance with the Plan,
establish and administer any performance goals in connection with any Awards,
including the Performance Criteria to which such performance goals relate and
the applicable measurement periods, and certify whether, and to what extent, any
such performance goals have been met; and (xiv) take any and all such other
action it deems necessary or advisable for the proper operation and/or
administration of the Plan. The Committee shall have full discretionary
authority in all matters related to the discharge of its responsibilities and
the exercise of its authority under the Plan and its determination of
eligibility to participate in the Plan. In the absence of a showing of
arbitrariness or bad faith, as to which the claimant shall have the burden of
proof, decisions and actions by the Committee with respect to the Plan and any
Agreement shall be final, conclusive and binding on all persons having or
claiming to have any right or interest in or under the Plan and/or any
Agreement.
(d) In accordance with the terms and conditions and subject to the
limitations of the Plan, the Committee, in its discretion, shall: (i) select,
from time to time, from amongst those eligible, the employees to whom Awards
shall be granted under the Plan, which selection may be based upon information
furnished to the Committee by the Company's management; (ii) determine whether
such Award shall take the form of an Option other than an Incentive Stock
Option, Incentive Stock Option, Coupled Stock Appreciation Right, Independent
Stock Appreciation Right, Limited Right, Restricted Stock, bonuses or other
compensation payable in Common Stock, Other Stock-Based Award (and, if so, the
form thereof), Dividend Equivalents or any combination thereof; and (iii)
determine the number of shares of Common Stock to be included in such Awards and
the periods for which such Awards will be outstanding. Such employees who are
selected to participate in the Plan shall be referred to collectively herein as
"Participants." Awards, including Awards under the same section of the Plan,
need not be uniform as to all grants and recipients thereof.
(e) Each Award shall be evidenced by an option agreement or award
agreement (an "Agreement"), which shall be executed by the Company and the
Participant to whom such Award has been granted, unless the Agreement provides
otherwise; however, two or more Awards to a single Participant may be combined
in a single Agreement. An Agreement shall not be a precondition to the granting
of an Award; however, no person shall have any rights under any Award unless and
until the Participant to whom the Award shall have been granted shall have
executed and delivered to the Company an Agreement or other instrument
evidencing the Award, unless such Agreement provides otherwise, and has
otherwise complied with the applicable terms and conditions of the Award. The
Committee shall prescribe the form of all Agreements, and, subject to the terms
and conditions of the Plan, the Committee shall determine the content of all
Agreements. Any Agreement may be supplemented or amended in writing from time to
time as approved by the Committee; provided that the terms and conditions of any
such Agreement as supplemented or amended are not inconsistent with the
provisions of the Plan.
28
<PAGE>
(f) A majority of the members of the entire Committee shall constitute a
quorum and the actions of a majority of the members of the Committee in
attendance at a meeting at which a quorum is present, or actions by a memorandum
or other written instrument or instruments signed by all members of the
Committee, shall be the actions of the Committee.
(g) The Committee may consult with counsel who may be counsel to the
Company. The Committee may, with the approval of the Board, employ such other
attorneys or consultants, accountants, appraisers, brokers or other persons as
it deems necessary or appropriate. In accordance with Section 19, the Committee
shall not incur any liability for any action taken in good faith in reliance
upon the advice of such counsel or such other persons.
(h) In serving on the Committee, the members thereof shall be entitled to
indemnification as directors of the Company, and to any limitation of liability
and reimbursement as directors with respect to their services as members of the
Committee.
(i) The Committee may, in its discretion, delegate to appropriate
officers of the Company the administration of the Plan under this Section 3;
provided, however, that no such delegation by the Committee shall be made (i) if
such delegation would not be permitted under applicable law or (ii) with respect
to the administration of the Plan as it affects executive officers and directors
of the Company, and, provided further, however, the Committee may not delegate
its authority to correct errors, omissions or inconsistencies in the Plan. All
authority delegated by the Committee under this paragraph (i) of this Section 3
shall be exercised in accordance with the terms and conditions of the Plan and
any rules, regulations or administrative guidelines for, conditions on, or
limitations to the exercise of such authority that may from time to time be
established by the Committee.
(j) In its absolute discretion, the Board may at any time and from time
to time exercise any and all rights, duties and responsibilities of the
Committee under the Plan, including, but not limited to, establishing procedures
to be followed by the Committee, but excluding matters which under Rule 16b-3 or
Section 162(m) of the Code are required to be determined in the discretion of
the Committee.
4.Shares of Stock Subject to the Plan. (a) The shares of stock subject to
Awards granted under the Plan shall be shares of Common Stock. The total number
of shares of Common Stock that may be delivered pursuant to any Awards
(excluding any shares delivered with respect to Dividend Equivalents) under the
Plan is (i) the amount of shares of Common Stock available for option or award
under the Predecessor Plan as of the date of shareholder approval of this Plan,
which amount shall not exceed 475,076 shares of Common Stock, of which not more
than 54,100 shares may be awarded as Restricted Stock, plus an additional number
of shares on January 1 of each calendar year during the duration of the Plan,
beginning January 1, 1997, equal to one percent (1.0%) of the number of shares
of Common Stock outstanding on December 31 of the immediately preceding year
(the "Additional Annual Increment"), of which (ii) 15% of the amount of shares
of Common Stock in (i) above plus an additional amount of shares of Common Stock
each calendar year equal to fifteen percent (15%) of the Additional Annual
Increment with respect to such year may be awarded as Restricted Stock and (iii)
no more than 350,000 shares of Common Stock may be awarded in any calendar year
with respect to Incentive Stock Options, or an aggregate of 3,500,000 shares of
Common Stock for the duration of the Plan. Shares of Common Stock subject to the
Plan may be either authorized and unissued shares (which will not be subject to
preemptive rights) or previously issued shares acquired by the Company or any
Subsidiary. The exercise of a Stock Appreciation Right, whether paid in cash or
Common Stock, shall be deemed to be an issuance of Common Stock for purposes of
determining the number of shares delivered under the Plan.
(b) The maximum number of shares of Common Stock that may be subject to
all Awards granted under the Plan to a Participant shall not exceed the Award
Limit.
(c) Notwithstanding any of the foregoing limitations set forth in this
Section 4, the numbers of shares of Common Stock specified in this Section 4
shall be adjusted as provided in Section 17.
29
<PAGE>
(d) Any shares of Common Stock subject to an Option or Stock Appreciation
Right or Other Stock-Based Award which for any reason expires or is terminated
without having been fully exercised and any Restricted Stock which is forfeited
may again be granted pursuant to an Award under the Plan, subject to the
limitations of this Section 4; provided, however, that forfeited shares of
Common Stock shall not be available for further Awards if the recipient thereof
has realized any benefits of ownership from such shares.
5.Eligibility. Executive and other key salaried employees, including
officers, of the Company and its Subsidiaries (but excluding non-employee
directors as well as members of the Committee) shall be eligible to receive
Awards under the Plan.
6.Terms and Conditions of Stock Options. All Options to purchase Common
Stock granted under the Plan shall be either Incentive Stock Options or Options
other than Incentive Stock Options. Each Option shall be subject to all the
applicable provisions of the Plan, including the following terms and conditions,
and to such other terms and conditions not inconsistent therewith as the
Committee shall determine and which are set forth in the applicable Agreement.
(a) The option exercise price per share of shares of Common
Stock subject to each Option shall be determined by the Committee and
stated in the Agreement; provided, however, that, subject to paragraph
(h)(C) of this Section 6, such price shall not be less than 100% of the
Fair Market Value of a share of Common Stock at the time that the Option
is granted.
(b) Each Option shall be exercisable in whole or in such
installments during and over such period ending not later than ten (10)
years from the date such Option was granted as may be determined by the
Committee and stated in the Agreement, subject to paragraph (h)(C) of
this Section 6. In no event may an Option be exercised more than ten (10)
years from the date the Option was granted.
(c) An Option shall not be exercisable with respect to a
fractional share of Common Stock or with respect to the lesser of one
hundred (100) shares or the full number of shares of Common Stock then
subject to the Option. No fractional shares of Common Stock shall be
issued upon the exercise of an Option. If a fractional share of Common
Stock shall become subject to an Option by reason of a stock dividend or
otherwise, the Optionee shall not be entitled to exercise the Option with
respect to such fractional share.
(d) Each Option may be exercised by giving Notice to the
Company specifying the number of shares of Common Stock to be purchased,
which shall be accompanied by payment in full including, if required by
applicable law, applicable taxes, if any. Payment, except as provided in
the Agreement, shall be:
(i) in United States dollars by personal check,
subject to collection, or bank draft;
(ii) by tendering to the Company shares of Common
Stock owned by the person exercising the Option (or by such
person and his or her spouse), which may include shares received
as the result of a prior exercise of an Option, and having a
Fair Market Value on the date on which the Option is exercised
equal to the cash exercise price applicable to such Option;
(iii) in accordance with a cashless exercise program
established by the Committee in its discretion under which, if
so instructed by an Optionee, either (A) shares of Common Stock
may be issued by the Company directly to the Optionee's broker
or dealer upon receipt in cash of the purchase price thereof
under an Option from such broker or dealer, or (B) shares of
Common Stock may be issued by the Company directly to the
Optionee's broker or dealer in consideration of such broker's or
dealer's irrevocable commitment to pay to the Company in cash
that portion of the proceeds from the sale of such shares that
is equal to the cash exercise price of one or more Options
relating to such shares of Common Stock; or
30
<PAGE>
(iv) by any combination of the consideration provided
in the foregoing clauses (i), (ii) and (iii).
(e) No Optionee shall have any rights to dividends or other
rights of a shareholder with respect to shares of Common Stock subject to
his or her Option until he or she has given Notice to the Company of
exercise of his or her Option and paid for such shares, in accordance
with the provisions of the Plan.
(f) An Option may be exercised only if at all times during the
period beginning with the date of the granting of the Option and ending
on the date of such exercise the Optionee was an employee of either the
Company or of a Subsidiary or of another corporation referred to in
Section 421(a)(2) of the Code: provided, however, that if an Optionee's
employment terminates by reason of his or her death, Permanent
Disability, "normal retirement" under a retirement plan of the Company
and/or a Subsidiary, or other termination with the consent of his or her
employer, at any time when the Option, or any portion thereof, is
exercisable by the Optionee, the Optionee's Option may thereafter be
exercised with respect to that number of shares of Common Stock (subject
to adjustment as provided for in Section 17) which the Optionee could
have acquired by the exercise of such Option immediately prior to any
such termination of employment by the Optionee or the person or persons
to whom his or her rights under the Option shall have passed by will or
by the laws of descent and distribution, at any time prior to the
termination date of the Option, as stated in the Agreement. If an
Optionee's employment terminates for any reason except death, Permanent
Disability, "normal retirement" under a Company or Subsidiary retirement
plan or other termination with the consent of his or her employer, his or
her Option shall terminate upon such termination of employment; provided,
however, in the case of an Optionee whose employment is otherwise
terminated prior to his or her "normal retirement," the Committee shall
have discretion to permit his or her Option to be exercised following
such termination of employment at any time prior to the termination date
of the Option.
(g) The Committee may, but need not, require such
consideration from an Optionee at the time of granting an Option as it
shall determine, either in lieu of or in addition to, the limitations on
exercisability of such Option imposed under this Section 6.
(h)(A) Each Option shall state in the Agreement whether it
will or will not be treated as an Incentive Stock Option. No Incentive
Stock Option shall be granted unless such Option, when granted, qualifies
as an "incentive stock option" under Section 422 of the Code. Any
Incentive Stock Option granted under the Plan shall contain such terms
and conditions, consistent with the Plan, as the Committee may determine
to be necessary to qualify such Option as an "incentive stock option"
under Section 422 of the Code. No Incentive Stock Option shall be granted
to any Participant who is not an employee of the Company or a Subsidiary.
Any Incentive Stock Option granted under the Plan may be modified by the
Committee to disqualify such Option from treatment as an "incentive stock
option" under Section 422 of the Code.
(h)(B) Notwithstanding any intent to grant Incentive Stock
Options, an Option granted under the Plan will not be considered an
Incentive Stock Option to the extent that it, together with any other
"incentive stock options" (within the meaning of Section 422 of the Code,
but without regard to subsection (d) of such Section) under the Plan or
any other incentive stock option plans of the Company and any Subsidiary,
are exercisable for the first time by any Optionee during any calendar
year with respect to Common Stock having an aggregate Fair Market Value
in excess of $100,000 (or such other limit as may be required by the
Code) as of the time the Option with respect to such Common Stock is
granted. The rule set forth in the preceding sentence shall be applied by
taking Options into account in the order in which they were granted.
(h)(C) No Incentive Stock Option shall be granted to a
Participant who owns (within the meaning of Section 424(d) of the Code),
at the time the Option is granted, more than 10% of the total combined
voting power of all classes of stock of the Company or a Subsidiary. This
restriction does not apply if at the time such Incentive Stock Option is
31
<PAGE>
granted the Option exercise price per share of Common Stock subject to
the Option is at least 110% of the Fair Market Value of a share of Common
Stock on the date such Incentive Stock Option is granted, and the
Incentive Stock Option by its terms is not exercisable after the
expiration of five (5) years from such date of grant.
(i) An Option and any shares of Common Stock received upon the
exercise of an Option shall be subject to such other transfer and/or
ownership restrictions and/or legending requirements as the Committee may
establish in its discretion and which are specified in the Agreement and
may be referred to on the certificates evidencing such shares. The
Committee may require an Optionee to give prompt Notice to the Company
concerning any disposition of shares of Common Stock received upon the
exercise of an Incentive Stock Option within (i) two years from the date
of granting such Incentive Stock Option to such Participant or (ii) one
year from the transfer of such shares to such Participant or (iii) such
other period as the Committee may from time to time determine. The
Committee may direct that an Optionee with respect to an Incentive Stock
Option undertake in the applicable Agreement to give such notice
described in the preceding sentence, at such time and containing such
information as the Committee may prescribe, and/or that the certificates
evidencing shares acquired by exercise of an Incentive Stock Option refer
to such requirement to give such notice.
(j) Notwithstanding any other provision contained in the Plan
to the contrary, the maximum number of shares of Common Stock which may
be subject to Options granted under the Plan to any Participant shall not
exceed the Award Limit. To the extent required by Section 162(m) of the
Code, shares of Common Stock subject to Options which are cancelled shall
continue to be counted against the Award Limit and if, after the grant of
an Option, the price of shares subject to such Option is reduced, the
transaction is treated as a cancellation of the Option and a grant of a
new Option and both the Option deemed to be canceled and the Option
deemed to be granted are counted against the Award Limit.
7.Terms and Conditions of Stock Appreciation Rights. Any Stock
Appreciation Rights granted by the Committee under the Plan shall, in the
discretion of the Committee, either be granted alone ("Independent Stock
Appreciation Rights") or in conjunction with all or part of an Option granted
under the Plan ("Coupled Stock Appreciation Rights"), and the applicable
Agreement shall state whether a Stock Appreciation Right is an Independent Stock
Appreciation Right or a Coupled Stock Appreciation Right. Each Stock
Appreciation Right shall be subject to all the applicable provisions of the
Plan, including the following terms and conditions, and to such other terms and
conditions not inconsistent therewith as the Committee shall determine and which
are set forth in the applicable Agreement.
(a) The Committee may grant a Coupled Stock Appreciation Right (i)
with respect to an Option which is not an Incentive Stock Option, either
at the time such Option is granted or at any subsequent time during the
term of such Option, or (ii) with respect to an Incentive Stock Option,
only at the time such Incentive Stock Option is granted. A Coupled Stock
Appreciation Right shall entitle the grantee thereof to elect, in the
manner described below and as set forth in the applicable Agreement, in
lieu of exercising his or her related Option for all or a portion of the
shares of Common Stock covered by such Option, to surrender such Option
with respect to any or all of such shares and to receive from the Company
a payment having a value equal to the amount by which (A) the Fair Market
Value of a share of Common Stock on the date of such election, multiplied
by the number of shares of Common Stock as to which the grantee shall
have made such election, exceeds (B) the exercise price stated in such
Option multiplied by such number of shares, subject to any limitations on
such amount, including any periodic change therein, as the Committee may
in its discretion impose, as set forth in the applicable Agreement. A
Coupled Stock Appreciation Right shall be exercisable only to the extent
and at the time the related Option is exercisable, and the Coupled Stock
Appreciation Right shall terminate and shall no longer be exercisable
upon the expiration or exercise of the related Option. An Option with
respect to which an Optionee has elected to exercise a Coupled Stock
Appreciation Right, as described above, shall, to the extent of the
shares covered by such exercise, be canceled automatically and
surrendered to the Company, and such Option shall thereafter remain
32
<PAGE>
exercisable according to its terms only with respect to the number of
shares of Common Stock as to which it would otherwise be exercisable,
less the number of such shares with respect to which such Coupled Stock
Appreciation Right has been so-exercised.
(b) The Committee, in its discretion, shall establish the terms
and conditions of Independent Stock Appreciation Rights, including the
exercise price thereof, which shall not be less than 100% of the Fair
Market Value of the Common Stock on the date any such Independent Stock
Appreciation Right is granted, the number of shares of Common Stock
covered thereby and the period of time during which any Independent Stock
Appreciation Right may be exercised, which shall not extend beyond ten
(10) years from the date of grant thereof, and any other terms and
conditions the Committee may deem appropriate and which are consistent
with the terms and conditions and limitations of the Plan. An Independent
Stock Appreciation Right shall entitle the grantee thereof to elect, in
the manner described below and as set forth in the applicable Agreement,
to receive from the Company a payment having a value equal to the amount
by which (A) the Fair Market Value of a share of Common Stock on the date
of such election, multiplied by the number of shares of Common Stock as
to which the grantee shall have made such election, exceeds (B) the
exercise price stated in the Agreement applicable to such Independent
Stock Appreciation Right multiplied by such number of shares, subject to
any limitations on such amount, including any periodic change therein, as
the Committee may in its discretion impose, as set forth in the
applicable Agreement. Except as provided in the Agreement, the right to
exercise an Independent Stock Appreciation Right shall terminate as
specified in Section 6(f), as if the Independent Stock Appreciation Right
were an Option other than an Incentive Stock Option.
(c) The Company may, in the discretion of the Committee, as set
forth in the Agreement, make payment on a properly exercised Stock
Appreciation Right: (i) in cash equal to the excess of the amount
described in clause (A) over the amount described in clause (B) of either
paragraph (a) or (b) above, as applicable, after taking into account any
limitations imposed in accordance therewith; or (ii) in the nearest whole
number of shares of Common Stock having an aggregate Fair Market Value on
the date of exercise of the Stock Appreciation Right which is not greater
than the cash amount calculated in clause (i) above; or (iii) in a
combination of the manners described in clauses (i) and (ii) above.
(d) An election to exercise Stock Appreciation Rights shall be
deemed to have been made on the date of Notice of such election to the
Company; provided, however, the Committee may provide in the applicable
Agreement that a Stock Appreciation Right shall be deemed to be exercised
at the close of business on the scheduled expiration date of such Stock
Appreciation Right if at such time such Stock Appreciation Right by its
terms remains exercisable and, if so exercised, would result in a payment
to the holder thereof.
(e) Notwithstanding anything in this Section 7 to the contrary,
the Committee may grant Limited Rights to an eligible employee of the
Company or a Subsidiary, either alone or in conjunction with all or part
of an Option granted to such employee, and, in the case of any such
conjunctive grant, at the time of such Option grant or thereafter during
the term of such Option. A Limited Right shall be exercisable upon the
occurrence of an Exercise Event specified in the applicable Agreement,
and shall expire thirty (30) days after the occurrence of such Exercise
Event. Exercise Events may include, at the discretion of the Committee
and as specified in the applicable Agreement, consummation of a tender or
exchange offer for the shares of Common Stock outstanding at the
commencement of such offer, or a proxy contest the result of which is the
replacement of one-third or more of the members of the Board, or
consummation of a merger or reorganization of the Company in which the
Company does not survive or in which the shareholders of the Company
receive stock or securities of another corporation or cash, or a
liquidation or dissolution of the Company or other similar events. As
determined by the Committee, in its discretion, at the time Limited
Rights are awarded to a Participant, and as stated in the applicable
Agreement, Limited Rights shall permit such a Participant to receive in
cash for each share of Common Stock covered by a corresponding Option, in
the case of a Limited Right granted in conjunction with an Option
(without regard to the date on which the Option otherwise would be
33
<PAGE>
exercisable), or covered by a Limited Right granted alone, either (i) the
highest market trading price per share of Common Stock reported on the
Composite Tape during the sixty (60) days immediately preceding the date
of the applicable Exercise Event or (ii) the highest market trading price
per share of Common Stock reported on the Composite Tape on the date of
exercise of the Limited Right, less the per share exercise price of the
corresponding Option, in the case of a Limited Right granted in
conjunction with an Option, or the exercise price of the Limited Right,
as stated in the Agreement, in the case of a Limited Right granted alone.
In the event that the Exercise Event is the consummation of a tender or
exchange offer, the value per share set by the offeror shall be
substituted for the highest market price per share provided in clause (i)
of the preceding sentence if the value per share set by the offeror is
higher than such highest market price per share. Limited Rights shall not
extend the exercise period of any Option and, to the extent exercised,
shall reduce the shares of Common Stock available under the Plan,
pursuant to Section 4, and the shares of Common Stock covered by the
Options to which such Limited Rights relate, if applicable.
(f) Notwithstanding any other provision contained in the Plan to
the contrary, the maximum number of shares of Common Stock for which
Stock Appreciation Rights may be granted under the Plan to any
Participant shall not exceed the Award Limit. To the extent required by
Section 162(m) of the Code, shares of Common Stock subject to Stock
Appreciation Rights which are cancelled continue to be counted against
the Award Limit and if, after grant of a Stock Appreciation Right, the
price of shares subject to such Stock Appreciation Right is reduced, the
transaction is treated as a cancellation of the Stock Appreciation Right
and a grant of a new Stock Appreciation Right and both the Stock
Appreciation Right deemed to be canceled and the Stock Appreciation Right
deemed to be granted are counted against the Award Limit.
8.Terms and Conditions of Restricted Stock Awards. All awards of
Restricted Stock under the Plan shall be subject to all the applicable
provisions of the Plan, including the following terms and conditions, and to
such other terms and conditions not inconsistent therewith, as the Committee
shall determine and which are set forth in the applicable Agreement.
(a) Awards of Restricted Stock may be in addition to or in lieu of
any other types of Awards granted under the Plan.
(b) During a period set by the Committee at the time of each award
of Restricted Stock (the "Restriction Period"), as specified in the
Agreement, the recipient shall not be permitted to sell, transfer,
pledge, assign, encumber or otherwise dispose of the shares of Restricted
Stock and any attempt by such recipient to sell, transfer, pledge,
assign, encumber or otherwise dispose of such Restricted Stock shall
constitute the immediate and automatic forfeiture of such Award.
(c) Shares of Restricted Stock shall become free of all
restrictions applicable thereto if the recipient dies or his or her
employment with the Company or a Subsidiary terminates by reason of
Permanent Disability, as determined by the Committee, during the
Restriction Period and, to the extent set by the Committee at the time of
the award or later, if the recipient retires under a retirement plan of
the Company or a Subsidiary during such period. If the Committee
determines that any such recipient is not subject to a Permanent
Disability or that a retiree's Restricted Stock is not to become free of
restrictions, the Restricted Stock held by either such recipient, as the
case may be, shall be forfeited and revert to the Company.
(d) Shares of Restricted Stock shall be forfeited and revert to
the Company upon the recipient's termination of employment with the
Company or a Subsidiary during the Restriction Period for any reason
other than death, Permanent Disability or, to the extent determined by
the Committee, retirement under a retirement plan of the Company or a
Subsidiary except to the extent the Committee, at its sole discretion,
finds that such forfeiture might not be in the best interest of the
Company, and, therefore, waives all or part of the application of this
provision to the Restricted Stock held by such recipient.
34
<PAGE>
(e) Each recipient of shares of Restricted Stock hereunder may,
but need not, be issued one or more stock certificates in respect of such
shares of Restricted Stock. Stock certificates for shares of Restricted
Stock shall be registered in the name of the recipient but shall be
appropriately legended and returned to the Company by the recipient,
together with a stock power, endorsed in blank by the recipient. As the
Committee, in its discretion, may deem appropriate, in lieu of the
issuance of certificates for any shares of Restricted Stock during the
applicable Restriction Period, a "book entry" (i.e., a computerized or
manual entry) may be made in the records of the Company, or its
designated stock transfer agent, to evidence the ownership of such shares
of Restricted Stock in the name of the applicable recipient. Such records
of the Company or such agent shall, absent manifest error, be binding on
all recipients of Restricted Stock hereunder.
(f) The recipient of shares of Restricted Stock shall be entitled
to vote shares of Restricted Stock and shall be entitled to all dividends
paid thereon, except that dividends paid in Common Stock or other
property shall be subject to the same restrictions to the extent
determined by the Committee.
(g) In the event of any adjustment as provided in Section 17, or
any stock or securities received as a dividend on shares of Restricted
Stock, such new or additional shares or securities shall be subject to
the same terms and conditions as relate to the original shares of
Restricted Stock.
(h) Restricted Stock shall become free of the foregoing
restrictions upon expiration of the applicable Restriction Period and the
Company shall, subject to paragraphs (d) and (e) of Section 18, then
deliver Common Stock certificates evidencing such stock to the
Participant.
(i) Restricted Stock and any Common Stock received upon the
expiration of the Restriction Period shall be subject to such other
transfer restrictions and/or legending requirements that are imposed by
the Committee, in its discretion, and specified in the Agreement.
9.Bonuses or Other Compensation Payable in Stock. In lieu of cash bonuses
or other compensation otherwise payable under the Company's or applicable
Subsidiary's compensation practices to employees of either who are eligible to
participate in the Plan, the Committee, in its discretion, may determine that
such bonuses or other compensation shall be payable in Common Stock or partly in
Common Stock and partly in cash. Such bonuses or other compensation shall be in
consideration of services previously performed and as an incentive toward future
services and shall consist of shares of Common Stock subject to such terms as
the Committee may determine in its discretion. The number of shares of Common
Stock payable in lieu of a bonus or other compensation otherwise payable shall
be determined by dividing the amount of such bonus or other compensation by the
Fair Market Value of one share of Common Stock on the date such bonus or other
compensation is payable.
10. Terms and Conditions of Other Stock-Based Awards. The Committee may
grant to Participants Awards under the Plan that are valued in whole or in part
by reference to, or otherwise based on Common Stock ("Other Stock-Based
Awards"). The provisions of Other Stock-Based Awards need not be the same with
respect to each recipient or each Award. The Committee, in its discretion, may
grant Other Stock-Based Awards as it deems appropriate, including, by way of
example and not in limitation, (i) to take advantage of the compensation
practices or tax laws or accounting rules applicable at the time of grant of
such an Award, even if such practices, laws and/or rules are different from
those in effect on the effective date of the Plan, (ii) to reflect the financial
situation of the Company from time to time or (iii) to conform to and comply
with tax, securities or other law or regulations in jurisdictions outside the
United States. Other Stock-Based Awards shall take such form as the Committee,
in its discretion, from time to time, determines, including, by way of example,
and not in limitation, deferred stock, performance shares, performance units and
convertible debentures. All Other Stock-Based Awards under the Plan shall be
subject to all the applicable provisions of the Plan, including the following
terms and conditions, and to such other terms, conditions, restrictions and/or
limitations, if any, not inconsistent with the Plan, as the Committee shall
determine, in its discretion, and which are set forth in the applicable
Agreement.
35
<PAGE>
(a) The recipient of an Other Stock-Based Award may be entitled to
receive, currently or on a deferred basis, Dividend Equivalents or
interest with respect to the number of shares of Common Stock covered by
such Award and such amounts (if any) may be deemed to be reinvested in
additional Common Stock or otherwise reinvested, all as determined, at
the time of grant of such Award or subsequently during the term of such
Award, by the Committee, in its discretion, and stated in the Agreement.
(b) An Other Stock-Based Award, and any Common Stock covered by
such Award, may be forfeited to the extent determined by the Committee,
in its discretion, and stated in the Agreement.
(c) All Other Stock-Based Awards, and any Common Stock covered
thereby, shall be forfeited upon termination of the recipient's
employment with the Company or a Subsidiary; provided, however, the
Committee may, in its discretion, determine, at or after the time an
Other Stock-Based Award is granted, that if any such employment is
terminated by reason of death or Permanent Disability or, to the extent
that subsection (d) of this Section 10 is inapplicable to a Participant's
Other Stock-Based Award, "normal retirement" under a retirement plan of
the Company and/or a Subsidiary, or otherwise with the written consent of
such employer any or all remaining limitations, restrictions or
requirements, if any, imposed pursuant to the Plan or in the Agreement
with respect to such Other Stock-Based Award shall be waived. The
Committee may, in its discretion, otherwise modify or accelerate the
exercisability or other terms and conditions of any Other Stock-Based
Award to the extent that any such modification or acceleration is (i)
permitted under, and not inconsistent with the Plan and (ii) in the best
interests of the Company and provided that subsection (d) of this Section
10 is not applicable to such Other Stock-Based Award.
(d) An Other Stock-Based Award based in whole or in part upon the
attainment of particular performance goals established by the Committee
is intended to qualify as "other performance-based compensation," as used
in Code Section 162(m)(4)(C). Such performance goals shall be determined
over a measurement period or periods established by the Committee and
shall relate to one or more Performance Criteria, as determined by the
Committee, in its discretion. The maximum number of shares of Common
Stock that may be awarded to a Participant subject to an Other
Stock-Based Award shall not exceed the Award Limit.
11. Dividend Equivalents. On the date of grant (or at any subsequent time
during the applicable term) of any Other Stock-Based Award, the Committee may
choose to include as part of such Other Stock-Based Award the right to receive
Dividend Equivalents with respect to the Common Stock, or any portion thereof,
subject to such Other Stock-Based Award. Any such Dividend Equivalents shall be
calculated in the manner prescribed by the Committee, in its discretion,
consistent with the Plan. Any such Dividend Equivalents shall be paid to the
Participant for record dates during the period of time between such date of
grant and the date the applicable Other Stock-Based Award is exercised or
terminates. Dividend Equivalents shall be subject to such terms, conditions,
restrictions and/or limitations as the Committee may establish and shall be paid
in such form and manner and at such times as the Committee shall determine. Any
Dividend Equivalents may, at the Committee's discretion, be converted into cash
by such formula and at such time and subject to such limitations as may be
determined by the Committee in its discretion, and any Dividend Equivalents that
are not paid currently in cash may, at the discretion of the Committee, accrue
interest or be reinvested into additional shares of Common Stock. The total
number of shares of Common Stock available for delivery under the Plan under
Section 4 shall not be reduced to reflect any Dividend Equivalents that are
reinvested into additional shares of Common Stock.
12. Deferral of Awards. In the discretion of the Committee, payment of
any Award, or any portion thereof, may be deferred by a Participant until such
time as the Committee may establish. All such deferrals shall be accomplished by
the delivery of a written, irrevocable election (in the form prescribed by the
Committee) by the Participant prior to the time established by the Committee for
such purpose. All such deferrals shall be made in accordance with administrative
guidelines established by the Committee to ensure that such deferrals comply
with the requirements of applicable law, including, without limitation, the
Code. Deferred payments shall be paid in a lump sum or installments, as
36
<PAGE>
determined by the Committee. Deferred Awards may also be credited with interest
or other growth factor, at such rates or in such manner as are determined by the
Committee, and, with respect to those deferred Awards denominated in the form of
Common Stock, with Dividend Equivalents.
13. Change in Control. (a) In the event of a change in control of the
Company or a threatened or anticipated change in control of the Company, each as
defined (if at all) by the Committee in the Agreement, the Committee may, in its
discretion, provide in the Agreement that any of the following applicable
actions be taken as a result, or in anticipation, of any such event to assure
fair and equitable treatment of Participants:
(i) accelerate time periods for purposes of vesting in, or
realizing gain from, any outstanding Option or Stock Appreciation Right
or Other Stock-Based Award or shares of Restricted Stock granted or
awarded pursuant to the Plan;
(ii) offer to purchase any outstanding Option or Stock
Appreciation Right or Other Stock-Based Award or shares of Restricted
Stock granted or awarded pursuant to the Plan from the holder thereof for
its equivalent cash value, as determined by the Committee, in its
discretion, as of the date of the change in control; or
(iii) make adjustments or modifications to outstanding Options or
Stock Appreciation Rights or Other Stock-Based Awards or with respect to
Restricted Stock as the Committee deems appropriate to maintain and
protect the rights and interests of the Participants following such
change in control.
In no event, however, may any Option be exercised after ten (10)
years from the date it was originally granted.
(b) The Company shall pay all legal fees and related expenses incurred by
a Participant in seeking to obtain or enforce any payment, benefit or right he
or she may be entitled to under the Plan or an Agreement after a change in
control of the Company; provided, however, such a Participant shall be required
to repay any such amounts to the Company to the extent a court of competent
jurisdiction issues a final and non-appealable order setting forth the
determination that the position taken by the Participant was frivolous or
advanced in bad faith.
14. Transfer, Leave of Absence. For purposes of the Plan: (a) a transfer
of an employee from the Company to a Subsidiary or an affiliate of the Company,
whether or not incorporated, or vice versa, or from one Subsidiary or affiliate
of the Company to another, and (b) a leave of absence, duly authorized in
writing by the Company or a Subsidiary or affiliate of the Company, shall not be
deemed a termination of employment of the employee.
15. Rights of Employees and Other Persons. (a) No person shall have any
rights or claims under the Plan except in accordance with the provisions of the
Plan and the Agreement.
(b) Nothing contained in the Plan or in any Agreement shall be deemed to
give any employee the right to be retained in the service of the Company or its
Subsidiaries nor restrict in any way the right of the Company or any Subsidiary
to terminate any employee's employment at any time with or without cause.
(c) The adoption of the Plan shall not be deemed to give any employee of
the Company or any Subsidiary or any other person any right to be selected as a
Participant or to be granted an Award.
(d) Nothing contained in the Plan or in any Agreement shall be deemed to
give any employee the right to receive any bonus, whether payable in cash or in
Common Stock, or in any combination thereof, from the Company, nor be construed
as limiting in any way the right of the Company to determine, in its sole
discretion, whether or not it shall pay any employee bonuses, and, if so paid,
the amount thereof and the manner of such payment.
16. Tax Withholding Obligations. (a) The Company and/or any Subsidiary
are authorized to take whatever actions are necessary and proper to satisfy all
37
<PAGE>
obligations of Participants for the payment of all Federal, state and local
taxes in connection with any Awards (including, but not limited to, actions
pursuant to the following paragraphs (b) and (c) of this Section 16).
(b) If any Participant properly elects, within the period permitted under
Section 83 of the Code after the date on which property subject to an Award is
transferred to such Participant to include in gross income for Federal income
tax purposes an amount equal to the Fair Market Value (on the date of transfer)
of the Common Stock subject to such Award, such Participant shall pay, or make
arrangements satisfactory to the Company, as determined in the Committee's
discretion, to pay to the Company, at the time of such election, any Federal,
state or local taxes required to be withheld with respect to such Award. If any
such Participant shall fail to make such tax payments as are required, the
Company and its Subsidiaries shall, to the extent permitted by law, have the
right to deduct any such taxes from any payment of any kind otherwise due to
such Participant.
(c) Any Participant who does not or cannot make the election described in
paragraph (a) of this Section 16 with respect to an Award shall (and in no event
shall Common Stock be delivered to such Participant with respect to such Award
until), no later than the date as of which the value of the Award first becomes
includible in the gross income of the Participant for income tax purposes, pay
to the Company in cash, or make arrangements satisfactory to the Company, as
determined in the Committee's discretion, regarding payment to the Company of,
any taxes of any kind required by law to be withheld with respect to the Common
Stock or other property subject to such Award, and the Company and any
Subsidiary shall, to the extent permitted by law, have the right to deduct any
such taxes from any payment of any kind otherwise due to such Participant;
provided, however, the Committee may, in its discretion and pursuant to
procedures approved by the Committee, permit the Participant to elect
withholding by the Company of Common Stock otherwise deliverable to such
Participant pursuant to such Award (provided, however, that the amount of any
Common Stock so withheld shall not exceed the minimum required withholding
obligation taking into account the Participant's effective tax rate and all
applicable Federal, state, local and foreign taxes) and/or to tender to the
Company Common Stock or other marketable equity securities issued by the Company
or a Subsidiary owned by such Participant (or by such Participant and his or her
spouse jointly) and acquired more than six (6) months prior to such tender
valued at Fair Market Value on the date of such tender in full or partial
satisfaction of such tax obligations.
17. Changes in Capital. (a) Upon changes in the outstanding Common
Stock by reason of a stock dividend, stock split, reverse split, subdivision,
recapitalization, merger, consolidation (whether or not the Company is a
surviving corporation), an extraordinary dividend payable in cash or property,
combination or exchange of shares, separation, reorganization or liquidation,
the aggregate number and class of shares available under the Plan as to which
Awards may be granted, the number and class of shares under (i) each Option and
the option price per share, (ii) each Stock Appreciation Right and the exercise
price thereof, (iii) each Other Stock-Based Award and the exercise price (or
equivalent, if applicable) thereof and (iv) each award of Restricted Stock
shall, in each case, be correspondingly adjusted by the Committee, such
adjustments to be made in the case of any outstanding Options and/or Stock
Appreciation Rights without change in the total price applicable to such Options
and Stock Appreciation Rights.
(b) If a transaction shall occur or be proposed which the Committee, in
its discretion, determines may materially adversely affect the market value of
the Common Stock after such transaction, the Committee may make such adjustments
as it deems appropriate and equitable in respect of outstanding Awards,
including, but not limited to: (i) cancel all restrictions on Restricted Stock
previously awarded to Participants under the Plan, (ii) accelerate the time of
exercise so that Options and/or Stock Appreciation Rights and/or Other
Stock-Based Awards which are outstanding shall become immediately exercisable in
full without regard to any limitations of time or amount otherwise contained in
the Plan or the applicable Agreements, (iii) determine that the Options or Stock
Appreciation Rights or Other Stock-Based Awards shall be adjusted and make such
adjustments by substituting for Common Stock subject to such Options or Stock
Appreciation Rights or Other Stock-Based Awards stock or other securities of any
successor corporation to the Company or stock or other securities that may be
issuable by another corporation in the transaction if such stock or other
securities are publicly traded, or, if such stock or other securities are not
38
<PAGE>
publicly traded, by substituting stock or other securities of an affiliate of
such corporation if the stock or other securities of such affiliate are publicly
traded. In any such adjustment event the aggregate exercise price (as
applicable) shall remain the same and the amount of shares or other securities
subject to option or other rights under an Award shall be the amount of shares
or other securities which could have been purchased on the closing date or
expiration date of such transaction with the proceeds which would have been
received by the Participant if the Option or Stock Appreciation Right or Other
Stock-Based Award had been exercised in full prior to such transaction or
expiration date and the Participant exchanged all of such shares in the
transaction. No Participant shall have any right to prevent the consummation of
any of the foregoing acts affecting the number of shares available to such
Participant. Any actions or determinations of the Committee under this paragraph
(b) of Section 17 need not be uniform as to all outstanding Awards, nor treat
all Participants identically. Notwithstanding the foregoing adjustments, any
changes to Incentive Stock Options shall, unless the Committee determines
otherwise, only be effective to the extent such adjustments or changes do not
cause a "modification" (within the meaning of Section 424(h)(3) of the Code) of
such Incentive Stock Options or adversely affect the tax status of such
Incentive Stock Options.
18. Miscellaneous Provisions. (a) The Plan shall be unfunded. The Company
shall not be required to establish any special or separate fund or to make any
other segregation of assets to assure the issuance of shares or the payment of
cash upon exercise or payment of any Award. Proceeds from the sale of shares of
Common Stock pursuant to Options granted under the Plan shall constitute general
funds of the Company. The expenses of the Plan shall be borne by the Company.
(b) Subject to the provisions of the Plan and the applicable Agreement,
an Award by its terms shall be personal and no Award may be sold, transferred,
pledged, assigned, encumbered or otherwise alienated or hypothecated, other than
by will or by the laws of descent and distribution. During lifetime of a
Participant, his or her Award shall be exercisable only by such Participant. In
the event any Award is exercised by the executors, administrators, heirs or
distributees of the estate of a deceased Participant pursuant to the terms and
conditions of the Plan and the applicable Agreement, the Company shall be under
no obligation to issue Common Stock thereunder unless and until the Company is
satisfied, as determined in the discretion of the Committee, that the person or
persons exercising such Award are the duly appointed legal representative of the
deceased Participant's estate or the proper legatees or distributees thereof.
Notwithstanding anything contained in the Plan to the contrary, at the
Committee's discretion, an Agreement may permit the transfer of an Award other
than an Incentive Stock Option by the recipient thereof, subject to such terms,
conditions and limitations prescribed by the Committee, and the applicable
transferee of such Award shall be treated under the Plan and the applicable
Agreement as the Participant for purposes of any exercise of such Award.
(c) It is understood that the Committee may, at any time and from time to
time after the granting of an Award, specify such additional terms, conditions
and restrictions with respect to any such Option, Stock Appreciation Right,
Limited Right, Other Stock-Based Award, Restricted Stock and/or Dividend
Equivalent subject to such Award as may be deemed necessary or appropriate to
ensure compliance with any and all applicable laws, including, but not limited
to, terms, restrictions and conditions for compliance with Federal and state
securities laws and methods of withholding or providing for the payment of
required taxes and restrictions regarding a Participant's ability to exercise
Awards under a cashless exercise program established by the Committee.
(d) If at any time the Committee shall determine, in its discretion, that
the listing, registration and/or qualification of shares of Common Stock upon
any national securities exchange or under any state or Federal law, or the
consent or approval of any governmental regulatory body, is necessary or
desirable as a condition of, or in connection with, the sale or purchase of
shares of Common Stock hereunder, no Option or Stock Appreciation Right or Other
Stock-Based Award may be exercised or Restricted Stock or bonus or other
compensation payable in Common Stock may be transferred in whole or in part
unless and until such listing, registration, qualification, consent and/or
approval shall have been effected or obtained, or otherwise provided for, free
of any conditions not acceptable to the Committee.
39
<PAGE>
(e) The Committee may require Participants receiving Common Stock in
connection with any Award under the Plan to represent and agree with the Company
in writing that the Participant is acquiring the shares for investment without a
view to distribution thereof. The certificates for such shares may include any
legend which the Committee deems appropriate to reflect any restrictions on
transfer.
(f) The Committee may, in its discretion, extend one or more loans to
Participants who are key employees of the Company or a Subsidiary in connection
with the exercise or receipt of an Award granted to any such employees. The
terms and conditions of any such loan shall be set by the Committee.
(g) By accepting any benefit under the Plan, each Participant and each
person claiming under or through such Participant shall be conclusively deemed
to have indicated their acceptance and ratification of, and consent to, all of
the terms and conditions of the Plan and any action taken under the Plan by the
Committee, the Company or the Board.
(h) From and after the date of approval of the Plan by the Company's
stockholders, no subsequent awards of any kind shall be granted under the
Company's Stock Incentive Plan approved by its shareholders in April 1990 (the
"Predecessor Plan").
(i) Neither the adoption of the Plan nor anything contained herein shall
(i) affect any other compensation or incentive plans or arrangements of the
Company or any Subsidiary (other than the Predecessor Plan, as provided in
paragraph (h) of this Section 18), or (ii) prevent or limit the right of the
Company or any Subsidiary to (A) establish any other forms of incentives or
compensation for their employees or consultants or directors, or (B) grant or
assume options or other rights otherwise than under the Plan.
(j) The Plan shall be governed by and construed in accordance with the
laws of the State of New Jersey, except as superseded by applicable Federal law.
19. Limits of Liability. (a) Any liability of the Company or a Subsidiary
to any Participant with respect to any Award shall be based solely upon
contractual obligations created by the Plan and the Agreement.
(b) Neither the Company nor a Subsidiary nor any member of the Committee
or the Board, nor any other person participating in any determination of any
question under the Plan, or in the interpretation, administration or application
of the Plan, shall have any liability, in the absence of bad faith, to any party
for any action taken or not taken in connection with the Plan, except as may
expressly be provided by statute.
20. Limitations Applicable to Certain Awards Subject to Section 16 and
Code Section 162(m). Unless stated otherwise in the Agreement, notwithstanding
any other provision of the Plan, any Award granted to an executive or officer of
the Company who is then subject to Section 16 of the Exchange Act, shall be
subject to any additional limitations set forth in any applicable exemptive rule
under Section 16 of the Exchange Act (including Rule 16b-3 as it may be amended
from time to time) that are requirements for the application of such exemptive
rule, and the Plan shall be deemed amended to the extent necessary to conform to
such limitations. Furthermore, unless stated otherwise in the Agreement,
notwithstanding any other provision of the Plan, any Award granted to an officer
or executive of the Company intended to qualify as "other performance-based
compensation" as described in Section 162(m)(4)(C) of the Code shall be subject
to any additional limitations set forth in Section 162(m) of the Code (including
any amendment to Section 162(m) of the Code) or any regulations or rulings
issued thereunder that are requirements for qualification as "other
performance-based compensation" as described in Section 162(m)(4)(C) of the
Code, and the Plan shall be deemed amended to the extent necessary to conform to
such requirements.
21. Amendments and Termination. The Board may, at any time and with or
without prior notice, amend, alter, suspend or terminate the Plan; provided,
however, no amendment, alteration, suspension or termination shall be made which
would impair the rights of any holder of an Award theretofore granted without
his or her written consent or which, without first obtaining approval of the
stockholders of the Company (where such approval is necessary to satisfy the
then-applicable requirements of Rule 16b-3, or any requirements under the Code
40
<PAGE>
relating to Incentive Stock Options or for exemption from Section 162(m) of the
Code, or applicable state law), would:
(a) except as is provided in Sections 4(a) and 17, increase the
maximum number of shares of Common Stock which may be sold or awarded
under the Plan;
(b) change the class of persons eligible to receive an Award
under the Plan; or
(c) extend the duration of the Plan or the period during which
Options may be exercised under Section 6(b).
The Committee may amend the terms of any Award theretofore granted,
including any Agreement, retroactively or prospectively, but no such amendment
shall impair the previously accrued rights of any Participant without his or her
written consent.
22. Duration. Following adoption of the Plan by the Board, the Plan shall
become effective as of the date on which it is approved by the holders of a
majority of the Company's outstanding Common Stock which is present and voted at
a meeting, which approval must occur within the period ending twelve months
after the date the Plan is adopted by the Board. The Plan shall terminate upon
the earliest of the following dates or events to occur:
(a) upon the effective date of a resolution adopted by the Board
terminating the Plan;
(b) the date all shares of Common Stock subject to the Plan are
delivered pursuant to the Plan's provisions; or
(c) ten (10) years from the date the Plan is approved by the
Company's shareholders.
No Award may be granted under the Plan after the earliest to occur of the
events or dates described in the foregoing paragraphs (a) through (c) of this
Section 22; however, Awards theretofore granted may extend beyond such date.
No such termination of the Plan shall affect the rights of any
Participant hereunder and all Awards previously granted hereunder shall continue
in force and in operation after the termination of the Plan, except as they may
be otherwise terminated in accordance with the terms of the Plan or the
Agreement.
41
<PAGE>
Exhibit 10(b)
ASARCO Incorporated
DEFERRED FEE PLAN FOR DIRECTORS
(As Amended and Restated as of April 28, 1999)
Section 1. Effective Date. The effective date of the Plan as originally adopted
is January 1, 1982. The effective date of the Plan as hereby amended and
restated is April 28, 1999.
Section 2. Definitions.
1. Board - the Board of Directors of ASARCO Incorporated.
2. Company - ASARCO Incorporated.
3. Deferral Amounts - all compensation deferred by a Director under the Plan.
4. Deemed Retirement Date - May 1 of the calendar year in which a Participant
reaches his Normal Retirement Date.
5. Director - any individual serving as a member of the Board.
6. Fair Market Value - as to Company stock, Fair Market Value shall mean the
average of the high and low prices of a single share of Company common
stock as reported by the Wall Street Journal for New York Stock Exchange -
Composite Trading as of the first trading day coincident with or next
following the day as of which such value is to be determined.
7. Investment Manager - the Investment Company selected by the Company for
deemed investment of all Deferral Amounts allocated to a Participant's
Investment Subaccount.
8. Investment Subaccount - a deemed investment in those mutual funds, except
the Asarco Common Stock Fund, available under the Company's Savings Plan.
9. Normal Retirement Date - Normal Retirement Date for a Director as defined
in the corporate by-laws, currently the date of the Annual Meeting of
Stockholders next following the Director's 72nd birthday.
10. Participant - any eligible Director or former Director with a Participant
Account balance.
11. Participant Account - A bookkeeping account established in the financial
records of the Company for each Participant. Participant accounts consist
of an Asarco Stock Subaccount and an Investment Subaccount. Participant
Accounts are credited with a Participant's Deferral Amounts, and deemed
investment earnings or losses arising therefrom based on Participant
elections pursuant to Sections 4 and 5.
12. Asarco Stock Subaccount - a phantom Asarco stock equivalent account
consisting of deemed whole shares of ASARCO Incorporated common stock and
cash.
42
<PAGE>
Section 3. Eligibility. Any Non-employee Director is eligible to participate in
the Plan.
Section 4. Participation. To become a Participant, a Director must file a
written election to defer either 50 percent or 100 percent of cash compensation
payable by reason of service on the Board. An amount equal to the compensation
deferred will be credited to the Participant's Participant Account as soon as
practicable after the date such compensation is otherwise payable.
An election to participate must be received by the Company prior to
January 1 of the calendar year during which the election is to be effective and
shall be irrevocable for the entire year. Notwithstanding the foregoing, a
Director may elect to become a Participant in the Plan for the calendar year in
which he first becomes eligible by filing a written election to participate
within 30 days of becoming eligible. The election will be effective on a
prospective basis and only as to remuneration not yet earned.
An election shall remain in effect for subsequent years unless amended
or terminated in writing prior to January 1 of any subsequent year. An election
can be revoked or withdrawn at any time with respect to amounts to be earned in
years subsequent to the date of revocation or withdrawal.
Section 5. Deemed Investment Provisions. The Company will establish a
Participant Account for each Participant. Each Participant Account will
have an Asarco Stock Subaccount and/or an Investment Subaccount. A
Participant must allocate his Deferral Amounts, in increments of 25
percent, to one or both of the Subaccounts.
(a) Deferral Amounts Allocated to Asarco Stock Subaccounts
(4)A Participant's Asarco Stock Subaccount shall be deemed invested in
accordance with the Participant's election in whole shares of Company
common stock which could be purchased at Fair Market Value with the
Deferral Amounts credited to a Participant's Asarco Stock Subaccount on
the last business day of each calendar quarter.
(5) The Stock Subaccount also shall be credited with a bookkeeping entry
indicating the number of additional whole shares which could be
purchased at Fair Market Value with any dividends payable on the deemed
shares held in the Asarco Stock Subaccount on the day such dividends
are payable to shareholders of Company common stock.
(6) Any amounts that are insufficient to permit the crediting of a whole
share of Company common stock shall be carried as a cash balance
bookkeeping entry in such Stock Subaccount. On any date on which new
funds are available for deemed investment in Company stock (either due
to an additional deferral or the availability of deemed dividends), the
cash amount will be added to any such other funds, and the maximum
number of whole shares that could be purchased at Fair Market Value
will be deemed invested. The remaining amount, if any, will be held as
cash. No interest shall be credited on any such Stock Subaccount cash
balance.
(4) The Asarco Stock Subaccount shall be adjusted to reflect any stock
split, stock dividend, recapitalization, merger, consolidation,
reorganization or other similar change in the Company's common stock.
(b) Deferral Amounts Allocated to Investment Subaccounts
1) At the time of the election to participate in the Plan, the Participant
must elect in writing to have any Deferral Amounts allocated to his
Investment Subaccount invested, in increments of 5%, in one or more of
the investment funds as are provided under the Asarco Savings Plan,
except, however, that the Asarco Common Stock Fund shall not be
available as a deemed investment. Said election must total one hundred
percent (100%) of his Deferral Amounts allocated to the Investment
Subaccount.
2) A Participant's Investment Subaccount shall be deemed invested in
accordance with the Participant's election. The Participant's account
shall be credited with deemed earnings, gains, losses, expenses and
43
<PAGE>
changes in the fair market value of such Participant's account as if
the Company had followed such investment designations.
3) Each Participant may elect that his future Investment Subaccount
deferrals be deemed invested in a proportion different from that
previously elected. Such new election shall be prospective only and
shall be made in accordance with paragraph (b)(2). Any changes in such
deemed investments must be in accordance with rules, if any, as are
established by the Company or the Investment Manager.
4) Consistent with this Section 5, each Participant may elect in writing,
that a whole percentage (no less than 5%) or specific dollar amount of
his deemed investment in any fund available under the Investment
Subaccount may be transferred to any other fund available thereunder.
Such election will be prospective only and will be permitted in
accordance with rules, if any, as shall be established by the Company
or the Investment Manager.
Section 6. Transfers. No election may be made to have amounts previously
credited to a Participant's Investment Subaccount transferred to his Stock
Subaccount. Amounts previously credited to a Participant's Stock Subaccount may
not be transferred to his Investment Subaccount, except on or after the earlier
in time of (a) one year prior to Normal Retirement Date, or (b) the actual
retirement date.
Section 7. Payment of Deferred Compensation.
(a) Retirement at Normal Retirement Date
A Participant who retires at his Normal Retirement Date will receive
the entire value of his Participant Account in cash on January 15 of
the year following the year of retirement. Alternatively, the
Participant may elect, at least 12 months prior to his Normal
Retirement Date, to receive all or a portion of the value of his
Participant Account on such Normal Retirement Date.
(b) Termination at Other than Normal Retirement Date
A Participant who terminates service as a Director at a date other than
Normal Retirement Date will receive the entire value of his Participant
Account in cash on the 15th day of the 13th month following the date of
termination. Alternatively, the Participant may elect, at least 12
months prior to the date of such other termination, to receive all or a
portion of the value of his Participant Account on such date of other
termination.
(c) Further Deferral
Notwithstanding (a) and (b) of this section, a Participant may elect to
further defer receipt of all or a portion of his Participant Account
for a period of up to 10 years from the earlier to occur of the Deemed
Retirement Date or, if applicable, the date of termination. In order to
defer a payment of benefits under the Plan, a Participant must file a
written election at least one year in advance of the date that a
payment of benefits under the Plan would otherwise be made. The
Participant may elect to receive the amount deferred in a single cash
payment or in annual cash installments. Any such election may be
amended to accelerate, further defer or change the form of payment of
all or part of a Participant Account, if amended in accordance with the
provisions of Section 7(f).
(d) Financial Hardship of Participants
At any time a Participant may request a payment of all or a portion of
the value of his Participant Account. Such a request shall be approved
by the Company only upon a finding that the Participant has suffered a
severe financial hardship which has resulted from events beyond the
Participant's control ("Hardship Event"), and only in the amount
reasonably needed to satisfy such Hardship Event. Whether a Hardship
Event has occurred shall be determined in accordance with Treasury
Regulation Sections 1.457- 2(h)(4) and (5). In the event such a payment
is approved, payment of all or a portion of the value of the
Participant Account shall be made as soon as practicable to the
Participant.
44
<PAGE>
(e) Other Withdrawals
Absent a Hardship Event or adequate prior notice (in accordance with
paragraph (c) above), a request for a payment of all or a portion of
the value of a Participant Account may be made by a Participant subject
to a 6% penalty of the amount of the requested payment, which penalty
shall be deducted from the requested payment. The requested payment,
less such penalty, shall be paid in cash in a single lump sum as soon
as practicable after the requested payment date.
(f) Amendment of Election
At any time subsequent to an election pursuant to paragraph (c), a
Participant may file an election to amend such prior election affecting
any Deferral Amount payable at least 12 months subsequent to such
amendment, either to accelerate, further defer or change the form of
payment, provided no such election may accelerate any payment to a date
earlier than 12 months from the date of amendment. The amended form of
payment may be a single sum payment of any Deferral Amounts not yet due
and payable or annual installments of any such Deferral Amounts, or a
combination thereof, provided no payments may be extended longer than
the time specified in paragraph (c).
(g) Allocation of Amounts Withdrawn
In the case of any payment pursuant to this Section 7 of less than the
total value of a Participant Account, the Committee will make
reasonable efforts to follow any instructions received from the
Participant indicating from which deemed investments in the Participant
Account, including the Asarco Stock Subaccount, any such distribution
is first to come. In the absence of instructions, distributions shall
be made on a pro rata basis from all the deemed investments, including
the Asarco Stock Subaccount, currently elected by the Participant
pursuant to Section 5 with respect to the Participant's Deferral
Amounts.
Section 8. Designation of Beneficiary.
(a) A Participant may designate a beneficiary by giving written notice to
the Company. If no beneficiary is designated, the beneficiary will be
the Participant's estate. If more than one beneficiary statement has
been filed, the beneficiary or beneficiaries designated in the
statement bearing the most recent date will be deemed the valid
beneficiary.
(b) In the event of a Participant's death before he has received all of the
benefits to which he is entitled hereunder, the value of the
Participant's Participant Account shall be paid to the estate or
designated beneficiary of the deceased Participant in one cash lump sum
as soon as practicable after the first January 15 or July 15 following
such date of death, unless the Participant has elected to continue
without change the schedule for payment of benefits, in which case the
beneficiary shall have the investment choices provided under Section
5(b) for the time of the deferral.
(c) If a distribution is to be made to a beneficiary and such beneficiary
dies before such distribution has been made, the amount of the
distribution will be paid to the estate of the beneficiary in one lump
sum.
Section 9. Participant's Rights Unsecured. The right of any Participant to
receive benefits under the provisions of the Plan shall be contractual in nature
only; however, the amounts of such benefits may be held in a trust, the assets
of which shall be subject to the claims of the Company's general creditors only
in the event of bankruptcy or insolvency. Any amounts paid to a Participant from
such trust shall reduce the amount of benefits owed by the Company.
Section 10. Assignability. No right to receive payments hereunder shall be
transferable or assignable by a Participant or beneficiary.
Section 11. Participation in Other Plans. Nothing in this Plan will affect any
right which a Participant may otherwise have to participate in any other
retirement plan or agreement which the Company may have now or hereafter.
45
<PAGE>
Section 12. Discretion of Company and Board. Any decision made or action taken
by the Company or by the Board arising out of or in connection with the
construction, administration, interpretation and effect of the Plan shall lie
within the absolute discretion of the Company or the Board, as the case may be,
and shall be final, conclusive and binding upon all persons.
Section 13. Change of Control.
(a) Notwithstanding any other provision of this Plan, in the event of a Change
of Control (as defined below), no person that is not a Participant in the
Plan immediately prior to such Change of Control shall be permitted to be a
Participant under the Plan following such Change of Control. Upon and after
a Change of Control, this Plan may not be amended, modified or terminated
if any such amendment, modification or termination would adversely affect
any accrued benefits of a Participant or his or her rights with respect to
such accrued benefits in the Plan, unless any such amendment, modification
or termination is consented to in writing by all such Participants. Upon a
Change of Control, payment of all of the value of any and all amounts
accrued to the Participant hereunder shall be made to a Participant
immediately. For purposes of calculating such payment, a Participant's
Investment Subaccount and/or Stock Subaccount shall be valued as of the
date of the Change of Control.
(b) Participants who were receiving annual installment payments pursuant to
Section 7 as of January 28, 1998, who did not consent to the provisions
of this Section 13 within sixty (60) days of the date of notice of the
January 28, 1998 amendment shall continue to receive annual installment
payments as elected pursuant to Section 7 hereof following a Change of
Control.
(c) For purposes of this Plan, a "Change of Control" shall be deemed to have
occurred if:
(1) any "person", as such term is used in Sections 13(d) and 14(d) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act")
(other than the Company, any trustee or other fiduciary holding
securities under an employee benefit plan of the Company, or any
company owned, directly or indirectly, by the stockholders of the
Company in substantially the same proportions as their ownership of the
stock of the Company), is or becomes the "beneficial owner" (as defined
in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company representing either 31% or more of the voting
power of all classes of capital stock of the Company or 33-1/3% or more
of the then outstanding common stock without par value, of the Company;
(2) the following individuals cease for any reason to constitute a
majority of the number of Directors then serving: individuals who, on
the date hereof, constitute the Board of Directors of the Company and
any new Director (other than a Director whose initial assumption of
office is in connection with an actual or threatened election contest,
including but not limited to a consent solicitation, relating to the
election of Directors of the Company) whose appointment or election by
the Board of Directors or nomination for election by the Company's
stockholders was approved or recommended by a vote of at least two
thirds (2/3) of the Directors then still in office who either were
Directors on the date hereof or whose appointment or election or
nomination for election was previously so approved or recommended;
(3) the stockholders of the Company approve a merger or consolidation
of the Company or any direct or indirect subsidiary of the Company with
any other company, other than (i) a merger or consolidation which would
result in the voting securities of the Company outstanding immediately
prior thereto continuing to represent (either by remaining outstanding
or being converted into voting securities of the surviving entity or
any parent thereof) more than 50% of the combined voting power of the
voting securities of the Company or such surviving entity or any parent
thereof outstanding immediately after such merger or consolidation or
(ii) a merger or consolidation effected to implement a recapitalization
of the Company (or similar transaction) in which no "person" (as
defined herein) acquires more than 50% of the combined voting power of
the Company's then outstanding securities; or
46
<PAGE>
(4) the stockholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition
by the Company of all or substantially all of the Company's assets.
Section 14. Amendment. This Plan may at any time or from time to time be
amended, modified or terminated by the Board. No amendment, modification or
termination shall, without the consent of a Participant, adversely affect such
Participant's accruals in his Participant Account.
Section 15. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York.
IN WITNESS WHEREOF, the Company has caused this Amendment to its Deferred Fee
Plan for Directors to be duly adopted and executed by its duly authorized
officers and its corporate seal affixed hereto on the 28th day of April, 1999.
ASARCO Incorporated
By:/s/Kevin R. Morano
President
Attest:
/s/Susana D. Delanney
Assistant Secretary
47
<PAGE>
Exhibit 10(c)
ASARCO Incorporated
DIRECTORS' DEFERRED PAYMENT PLAN
(As Amended and Restated as of April 28, 1999)
Section 1. - Effective Date. The effective date of the Plan as originally
adopted is October 25, 1995. The effective date of the Plan as hereby
amended and restated is April 28, 1998.
Section 2. - Definitions.
1. Accrual Amounts - all amounts accrued for the benefit of a Director under the
Plan.
2. Board - the Board of Directors of ASARCO Incorporated.
3. Company - ASARCO Incorporated.
4. Deemed Retirement Date - May 1 of the calendar year a participant reaches his
Normal Retirement Date. 5. Director - any individual serving as a member of
the Board. 6. Fair Market Value - as to Company stock, Fair Market Value
shall mean the average of the high and low prices of a single share of
Company common stock as reported by the Wall Street Journal for
New York Stock Exchange - Composite Trading as of the first trading day
coincident with or next following the day as of which such value is to be
determined.
7. Investment Manager- the Investment Company selected by the Company for
deemed investment of all Accrual Amounts allocated to a Participant's
Investment Subaccount.
8. Investment Subaccount - a deemed investment in those mutual funds, except
the Asarco Common Stock Fund, available under the Company's Savings Plan.
9. Normal Retirement Date - normal retirement date for a Director as defined
in the corporate by-laws, currently the date of the Annual Meeting of
Stockholders next following the Director's 72nd birthday.
10.Participant - any eligible Director or former Director with a Participant
Account balance.
11.Participant Account - A bookkeeping account established in the financial
records of the Company for each Participant. Participant accounts consist
of an Asarco Stock Subaccount and an Investment Subaccount. Participant
Accounts are credited with a Participant's Accrual Amounts, and deemed
investment earnings or losses arising therefrom based on Participant
elections pursuant to Sections 4 and 5.
12.Asarco Stock Subaccount - a phantom Asarco stock equivalent account
consisting of deemed whole shares of ASARCO Incorporated common stock and
cash.
Section 3. - Eligibility. All non-employee Directors who are either: (a) elected
to the Board of Directors of ASARCO Incorporated after October 25, 1995 or
(b) who have not yet reached the tenth anniversary of their election as of
that date, are Participants in the Plan.
Non-employee Directors with five or more years of service as of October
25, 1995 are eligible to transfer benefits accrued under the ASARCO Incorporated
Retirement Plan for Non-Employee Directors (the Directors' Retirement Plan)
pursuant to transitional rules as provided in the Plan as originally adopted.
Section 4. - Accrual of Benefits. Each eligible Participant shall accrue a
benefit equal to 75 percent of the cash retainer paid to Directors by the
Company. Benefits will accrue on the last business day of each calendar quarter.
Each Participant will accrue benefits under the Plan for a maximum of ten years.
The accrual of benefits under the Plan by Directors who accrued benefits under
the Directors' Retirement Plan will be reduced by one year for each year of
credited service under the Directors' Retirement Plan.
At least 50 percent of all Accrual Amounts shall be credited to the
Asarco Stock Subaccount. A Director may elect in writing to have the remainder
of his Accrual Amounts credited, in additional increments of 25 percent, to
either (a) his Asarco Stock Subaccount, or (b) an Investment Subaccount, as
described below.
48
<PAGE>
An election by a Director under this Section 4 must be received by the
Company prior to January 1 of the calendar year during which the election is to
be effective and shall be irrevocable for the entire year. If no election is
made, Accrual Amounts shall be allocated 100 percent to the Asarco Stock
Subaccount. An election shall remain in effect for subsequent years unless
changed prior to the January 1 of any such subsequent year.
Section 5. - Deemed Investment Provisions. The Company will establish a
Participant Account for each Participant. A Participant's Accrual Amounts will
be deemed invested in the Asarco Stock Subaccount, and if elected, the
Investment Subaccount, in accordance with his election under Section 4.
a) Accrual Amounts Allocated to Asarco Stock Subaccounts
(1) A Participant's Asarco Stock Subaccount shall be deemed invested in
accordance with the Participant's election in whole shares of Company
common stock which could be purchased at Fair Market Value with the
Accrual Amounts credited to a Participant's Asarco Stock Subaccount
on the last business day of each calendar quarter.
(2) The Asarco Stock Subaccount also shall be credited with a bookkeeping
entry indicating the number of additional whole shares which could be
purchased at Fair Market Value with any dividends payable on the
deemed shares held in the Asarco Stock Subaccount on the day such
dividends are payable to shareholders of Company common stock.
(3) Any amounts that are insufficient to permit the crediting of a whole
share of Company common stock shall be carried as a cash balance
bookkeeping entry in such Asarco Stock Subaccount. On any date on
which new funds are available for deemed investment in Company stock
(either due to an additional deferral or the availability of deemed
dividends), the cash amount will be added to any such other funds,
and the maximum number of whole shares that could be purchased at
Fair Market Value will be deemed invested. The remaining amount, if
any, will be held as cash. No interest shall be credited on any such
Asarco Stock Subaccount cash balance.
4) The Asarco Stock Subaccount shall be adjusted to reflect any stock
split, stock dividend, recapitalization, merger, consolidation,
reorganization or other similar change in the Company's common stock.
b) Accrual Amounts Allocated to Investment Subaccounts
1) At the time of the election to participate in the Plan, the
Participant must elect in writing to have any Accrual Amounts
allocated to his Investment Subaccount invested, in increments of
5%, in one or more of the investment funds as are provided under
the Asarco Savings Plan, except, however, that the Asarco Common
Stock Fund shall not be available as a deemed investment. Said
election must total one hundred percent (100%) of his Accrual
Amounts allocated to the Investment Subaccount.
2) A Participant's Investment Subaccount shall be deemed invested in
accordance with the Participant's election. The Participant's
account shall be credited with deemed earnings, gains, losses,
expenses and changes in the fair market value of such
Participant's account as if the Company had followed such
investment designations.
3) Each Participant may elect that his future Investment Subaccount
deferrals be deemed invested in a proportion different from that
previously elected. Such new election shall be prospective only
and shall be made in accordance with paragraph (b)(2). Any changes
in such deemed investments must be in accordance with rules, if
any, as are established by the Company or the Investment Manager.
4) Consistent with this Section 5, each Participant may elect in
writing, that a whole percentage (no less than 5%) or specific
dollar amount of his deemed investment in any fund available under
the Investment Subaccount may be transferred to any other fund
available thereunder. Such election will be prospective only and
49
<PAGE>
will be permitted in accordance with rules, if any, as shall be
established by the Company or the Investment Manager.
Section 6. Transfers. No election may be made to have amounts previously
credited to a Participant's Investment Subaccount transferred to his Asarco
Stock Subaccount. Amounts previously credited to a Participant's Asarco Stock
Subaccount may not be transferred to his Investment Subaccount, except on or
after the earlier in time of (a) one year prior to normal retirement date, or
(b) the actual retirement date.
Section 7. - Payment of Deferred Compensation.
(a) Retirement at Normal Retirement Date
A Participant who retires at his Normal Retirement Date will receive
the entire value of his Participant Account in cash on January 15 of
the year following the year of retirement. Alternatively, the
Participant may elect, at least 12 months prior to his Normal
Retirement Date, to receive all or a portion of the value of his
Participant Account on such Normal Retirement Date.
(b) Termination at Other than Normal Retirement Date
A Participant who terminates service as a Director at a date other than
Normal Retirement Date will receive the entire value of his Participant
Account in cash on the 15th day of the 13th month following the date of
termination. Alternatively, the Participant may elect, at least 12
months prior to the date of such other termination, to receive all or a
portion of the value of his Participant Account on such date of other
termination.
(c) Further Deferral
Notwithstanding (a) and (b) of this section, a Participant may elect to
further defer receipt of all or a portion of his Participant Account
for a period of up to 10 years from the earlier to occur of the Deemed
Retirement Date or, if applicable, the date of termination. In order to
defer a payment of benefits under the Plan, a Participant must file a
written election at least one year in advance of the date that a
payment of benefits under the Plan would otherwise be made. The
Participant may elect to receive the amount deferred in a single cash
payment or in annual cash installments. Any such election may be
amended to accelerate, further defer or change the form of payment of
all or part of a Participant Account, if amended in accordance with the
provisions of Section 7(f).
(d) Financial Hardship of Participants
At any time a Participant may request a payment of all or a portion of
the value of his Participant Account. Such a request shall be approved
by the Company only upon a finding that the Participant has suffered a
severe financial hardship which has resulted from events beyond the
Participant's control ("Hardship Event"), and only in the amount
reasonably needed to satisfy such Hardship Event. Whether a Hardship
Event has occurred shall be determined in accordance with Treasury
Regulation Sections 1.457- 2(h)(4) and (5). In the event such a payment
is approved, payment of all or a portion of the value of the
Participant Account shall be made as soon as practicable to the
Participant.
(e) Other Withdrawals
Absent a Hardship Event or adequate prior notice (in accordance with
paragraph (c) above), a request for a payment of all or a portion of
the value of a Participant Account may be made by a Participant subject
to a 6% penalty of the amount of the requested payment, which penalty
shall be deducted from the requested payment. The requested payment,
less such penalty, shall be paid in cash in a single lump sum as soon
as practicable after the requested payment date.
50
<PAGE>
(f) Amendment of Election
At any time subsequent to an election pursuant to paragraph (c), a
Participant may file an election to amend such prior election affecting
any Accrual Amount payable at least 12 months subsequent to such
amendment, either to accelerate, further defer or change the form of
payment, provided no such election may accelerate any payment to a date
earlier than 12 months from the date of amendment. The amended form of
payment may be a single sum payment of any Accrual Amounts not yet due
and payable or annual installments of any such Accrual Amounts, or a
combination thereof, provided no payments may be extended longer than
the time specified in paragraph (c).
(g) Allocation of Amounts Withdrawn
In the case of any payment pursuant to this Section 7 of less than the
total value of a Participant Account, the Committee will make
reasonable efforts to follow any instructions received from the
Participant indicating from which deemed investments in the Participant
Account, including the Asarco Stock Subaccount, any such distribution
is first to come. In the absence of instructions, distributions shall
be made on a pro rata basis from all the deemed investments, including
the Asarco Stock Subaccount, currently elected by or otherwise
applicable to the Participant pursuant to Section 5 with respect to the
Participant's Accrual Amounts.
Section 8. - Designation of Beneficiary.
(a) A Participant may designate a beneficiary by giving written notice to
the Company. If no beneficiary is designated, the beneficiary will be
the Participant's estate. If more than one beneficiary statement has
been filed, the beneficiary or beneficiaries designated in the
statement bearing the most recent date will be deemed the valid
beneficiary.
(b) In the event of a Participant's death before he has received all of the
benefits to which he is entitled hereunder, the value of the
Participant's Participant Account shall be paid to the estate or
designated beneficiary of the deceased Participant in one cash lump sum
as soon as practicable after the first January 15 or July 15 following
such date of death, unless the Participant has elected to continue
without change the schedule for payment of benefits, in which case the
beneficiary shall have the investment choices provided under Section
5(b) for the time of the deferral.
(c) If the distribution is to be made to a beneficiary and such beneficiary
dies before such distribution has been made, the amount of the
distribution will be paid to the estate of the beneficiary in one lump
sum.
Section 9. - Participant's Rights Unsecured. The right of any Participant to
receive future installments under the provisions of the Plan shall be
contractual in nature only; however, the amounts of such installments may be
held in a trust, the assets of which shall be subject to the claims of the
Company's general creditors in the event of bankruptcy or insolvency only. Any
installment paid from such trust shall reduce the amount of benefits owed by the
Company.
Section 10. - Assignability. No right to receive payments hereunder shall be
transferable or assignable by a participant or beneficiary.
Section 11. - Participation in Other Plans. Nothing in this Plan will affect any
right which a participant may otherwise have to participate in any other
retirement plan or agreement which the Company may have now or hereafter.
Section 12. - Discretion of Company and Board. Any decision made or action taken
by the Company or by the Board arising out of or in connection with the
construction, administration, interpretation and effect of the Plan shall lie
within the absolute discretion of the Company or the Board, as the case may be,
and shall be final, conclusive and binding upon all persons.
Section 13. - Change of Control.
(a) Notwithstanding any other provision of this Plan, in the event of a
Change of Control (as defined below), no person that is not a
Participant in the
51
<PAGE>
Plan immediately prior to such Change of Control shall be permitted to
be a Participant under the Plan following such Change of Control.Upon
and after a Change of Control, this Plan may not be amended, modified
or terminated if any such amendment,modification or termination would
adversely affect any accrued benefits of a Participant or his or her
rights with respect to such accrued benefits in the Plan, unless any
such amendment, modification or termination is consented to in writing
by all such Participants. Upon a Change of Control, payment of all of
the value of any and all amounts accrued to the Participant hereunder
shall be made to a Participant immediately. For purposes of
calculating such payment, a Participant's Investment Subaccount and/or
Asarco Stock Subaccount shall be valued as of the date of the Change
of Control.
(b) Participants who were receiving annual installment payments pursuant to
Section 7 as of January 28, 1998, who did not consent to the provisions
of this Section 13 within sixty (60) days of the date of notice of the
January 28, 1998 amendment shall continue to receive annual installment
payments as elected pursuant to Section 7 hereof following a Change of
Control.
c) For purposes of this Plan, a "Change of Control" shall be deemed to
have occurred if:
(1) any "person", as such term is used in Sections 12(d) and 13(d) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act")
(other than the Company, any trustee or other fiduciary holding
securities under an employee benefit plan of the Company, or any
company owned, directly or indirectly, by the stockholders of the
Company in substantially the same proportions as their ownership of the
stock of the Company), is or becomes the "beneficial owner" (as defined
in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company representing either 31% or more of the voting
power of all classes of capital stock of the Company or 33-1/3% or more
of the then outstanding common stock without par value, of the Company;
(2) the following individuals cease for any reason to constitute a
majority of the number of Directors then serving: individuals who, on
the date hereof, constitute the Board of Directors of the Company and
any new Director (other than a Director whose initial assumption of
office is in connection with an actual or threatened election contest,
including but not limited to a consent solicitation, relating to the
election of Directors of the Company) whose appointment or election by
the Board of Directors or nomination for election by the Company's
stockholders was approved or recommended by a vote of at least two
thirds (2/3) of the Directors then still in office who either were
Directors on the date hereof or whose appointment or election or
nomination for election was previously so approved or recommended;
(3) the stockholders of the Company approve a merger or consolidation
of the Company or any direct or indirect subsidiary of the Company with
any other company, other than (i) a merger or consolidation which would
result in the voting securities of the Company outstanding immediately
prior thereto continuing to represent (either by remaining outstanding
or being converted into voting securities of the surviving entity or
any parent thereof) more than 50% of the combined voting power of the
voting securities of the Company or such surviving entity or any parent
thereof outstanding immediately after such merger or consolidation or
(ii) a merger or consolidation effected to implement a recapitalization
of the Company (or similar transaction) in which no "person" (as
defined herein) acquires more than 50% of the combined voting power of
the Company's then outstanding securities; or
(4) the stockholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition
by the Company of all or substantially all of the Company's assets.
Section 14. - Amendment. This Plan may at any time or from time to time be
amended, modified or terminated by the Board. No amendment, modification or
termination shall, without the consent of a participant, adversely affect such
Participant's accruals in his Participant Account.
52
<PAGE>
Section 15. - Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York.
IN WITNESS WHEREOF, the Company has caused this Amendment to its
Directors' Deferred Payment Plan to be duly adopted and executed by
its duly authorized officers and its corporate seal affixed hereto on
the 28th day of April, 1999.
ASARCO Incorporated
By: /s/Kevin R. Morano
President
Attest: /s/Susana D. Delanney
Assistant Secretary
53
<PAGE>
Exhibit 10(d)
ASARCO Incorporated
SUPPLEMENTAL PENSION PLAN
FOR DESIGNATED MID-CAREER OFFICERS
(As amended through April 28, 1999)
WHEREAS, the Organization and Compensation Committee (the "Committee")
of the Board of Directors of ASARCO Incorporated (the "Company" or "Asarco") has
been advised by its independent compensation consultants that executive officers
who join or have joined the Company in mid-career, and subsequently serve as
vice president or higher rank for ten or more years, usually do not have
sufficient time before retirement to accrue benefits under existing pension
plans of the Company adequate to their needs or appropriate to reflect their
experience or employment responsibilities, and that a supplemental retirement
benefits plan for such persons should be adopted to remove these inequities, to
encourage the continued association of these executives with the Company, and to
assure that the Company is able to attract and retain executives with valuable
prior experience; and
WHEREAS, the Committee has recommended the adoption of, and the Board
of Directors has approved and decided to adopt, the ASARCO Incorporated
Supplemental Pension Plan for Designated Mid-Career Officers (the "Plan") to
permit the Company to provide supplemental retirement benefits to key officers
identified by the Committee who otherwise would receive retirement benefits
which would not reflect their experience prior to employment with the Company or
would not be appropriate for the position of responsibility which they hold with
the Company.
NOW, THEREFORE, the Company hereby adopts the Plan effective November
24, 1987.
1. DEFINITIONS.
1.1 Benefit Commencement Date. Except as provided in Sections 3.1,
3.3 and 6, the date on which benefits are scheduled to commence
under the Pension Plan.
1.2 Board. The Board of Directors of ASARCO Incorporated.
1.3 Company. ASARCO Incorporated.
1.4 Compensation. Compensation shall be as defined under the Pension
Plan.
1.5 Committee. The Organization and Compensation Committee of the
Board.
1.6 Disability. Permanent and total disability as defined in the
Pension Plan.
1.7 Executive. An officer of the Company holding a rank of Vice
President or higher who is determined by the Committee in its
sole discretion to be a person who when first employed by the
Company already had prior business or professional experience
which was valuable to the Company and relevant to the position
for which he was employed. This term shall also include the
Executive's spouse in the event benefit payments, as described
hereinafter, have commenced under the Plan to such spouse. The
terms Executive or Participant shall have identical meanings
in this Plan.
1.8 Final Compensation Rate. The average of the sixty highest
consecutive monthly amounts of the Executive's basic
compensation and incentive bonuses, in the one hundred twenty
months preceding his retirement or termination of employment
prior to age 65.
1.9 Pension Plan. The Retirement Benefit Plan for Salaried Employees
of ASARCO Incorporated.
1.10 Primary Insurance Amount. The Executive's Primary Insurance
Amount for social security purposes, determined on the basis
54
<PAGE>
of the Executive's actual compensation with respect to years
of employment with the Company. With respect to years of
employment, if any, prior to employment with the Company, the
Committee shall estimate the Executive's income that is
treated as wages for purposes of the Social Security Act. If
the Executive's employment with the Company is terminated
prior to age 65, for years following termination of
employment, it shall be assumed for purposes of calculating
the Primary Insurance Amount that the Executive earns
compensation so as to accrue maximum Social Security benefits.
2. SUPPLEMENTAL BENEFIT. All supplemental benefits under the Plan shall be
determined according to this Section 2.
2.1 Net Annual Benefit. The base annual benefit payable to the
Executive on or after age 65 shall be determined by multiplying his
annualized Final Compensation Rate by 0.55 (fifty-five percent). This
amount shall be reduced by the sum of (i) the annual amount of any
benefits accrued as of the Benefit Commencement Date (other than
benefits attributable to pre- or post-tax contributions made by the
Executive) which are payable, which have been paid or which will become
payable to the Executive from any defined benefit, money purchase or
other pension benefit plan (whether qualified or nonqualified)
maintained by the Company or any other employer at any time, (ii) the
annual amount of any benefits payable, paid or to be paid on account of
Disability under a plan maintained by the Company or any other employer
at any time, and (iii) his annual Primary Insurance Amount. In the
event the Executive has received, is receiving, or is scheduled to
receive benefits from another such pension or disability plan in any
form other than a single life annuity (including a single sum
distribution or a variable annuity) or at a time other than when
benefits commence under this Plan, the benefits to be taken into
account under (i) and (ii) above shall be determined in good faith by
the Company based on actuarial assumptions and factors reasonably
utilized under the Pension Plan as of the date of determination, or to
the extent such factors or assumptions do not contemplate a particular
situation which arises under this Plan, based upon the factors applied
by the Pension Benefit Guaranty Corporation for purposes of determining
the present value of benefits upon termination of a plan with
insufficient assets. In the event of a controversy concerning the
calculation of benefits described in (i) or (ii) above, the Committee
shall in good faith determine the amount of benefits pursuant to
Section 5 of the Plan. The benefit remaining after this reduction shall
constitute the Executive's Net Annual Benefit.
2.2 Form and Timing of Payment.
(a) Except as otherwise provided herein, the benefit shall be
payable to the Executive in a lump sum, payable on January 15
of the year immediately following the Benefit Commencement
Date, and calculated as set forth in Section 2.3.
Alternatively, an Executive may elect, at least twelve (12)
months prior to his Benefit Commencement Date, to receive all
or a portion of the benefit payable hereunder on such Benefit
Commencement Date. In the event of a Change of Control (as
defined below) the benefit shall be payable as soon as
practicable following the Change of Control and the lump sum
shall be calculated as set forth in Sections 2.3 and 6 below.
(b) An Executive may elect prior to the Benefit Commencement
Date to defer (for a period not to exceed twenty (20) years)
all or part (but not less than $50,000) of a lump sum payment
under the Plan (the "Deferral Amount") to a future date or to
convert the Deferral Amount to a series of scheduled
installments. Such an election must be made at least twelve
(12) months prior to the date payment would be made under
Section 2.2(a), except in the event of termination by reason
of Disability, in which case the election may be made at any
time prior to the Benefit Commencement Date. Any such election
may be amended to accelerate, further defer (except as
otherwise provided with respect to a Surviving Spouse in
Section 2.2(j)) or to change the form of payment of all or
55
<PAGE>
part of the Deferral Amount, if amended in accordance with the
provisions of Section 2.2(h). The Deferral Amount shall be
deemed invested, as of the Benefit Commencement Date, in
accordance with an election to be made by the Executive under
rules established by the Committee. The Company will attempt
to follow the Executive's elections, but will not be required
to do so. Regardless of whether the Executive's elections are
followed, the Deferral Amount shall be credited with deemed
earnings, gains, losses, expenses and changes in the fair
market value of such Deferral Amount as if the Company had
followed such investment designations.
(c) The election of a deemed investment option is the sole
responsibility of each Executive. Neither the Company, nor the
Committee, nor any trustee of any trust that may be
established in connection with the Plan are authorized or
permitted to advise (or shall have any liability with respect
to) an Executive as to the election of any option or the
manner in which his Deferral Amount shall be deemed to be
invested. Except for an Executive who elects annuity payments
pursuant to paragraph (e) below, absent an election to defer
pursuant to paragraph (b) above, all unpaid benefit amounts
shall be deemed invested as of the Benefit Commencement Date
in the Vanguard Money Market Reserve -- Prime Portfolio (or
other comparable money market fund selected by the Company),
until paid to the Executive pursuant to paragraph (a) above.
(d) All deemed investments of Deferral Amounts including
provisions for transfers among investment vehicles will be in
accordance with rules established by the Committee.
(e) Notwithstanding paragraphs (a) and (b) above, an Executive
may elect in writing to receive single life annuity payments
under the Plan at approximately the same time as payments are
to be made to the Executive under the Pension Plan. Such an
election must be made at least twelve (12) months prior to the
Benefit Commencement Date, except in the event of termination
by reason of Disability, in which case the election may be
made at anytime prior to the Benefit Commencement Date. Any
such election may be changed, provided that no such change
shall be given effect unless it is made in writing at least
twelve (12) months prior to the Benefit Commencement Date.
(f) At any time subsequent to an Executive's Benefit
Commencement Date, an Executive who made an election pursuant
to Section 2.2(b) may request a payment of all or a portion of
the value of his Deferral Amount not yet payable. Such a
request shall be approved by the Committee only upon a finding
that the Executive has suffered a severe financial hardship
which has resulted from events beyond the Executive's control
("Hardship Event"), and only in the amount reasonably needed
to satisfy such Hardship Event. Whether a Hardship Event has
occurred shall be determined in accordance with Treasury
Regulation Sections 1.457-2(h)(4) and (5). In the event such a
payment is approved, payment of the approved amount from the
Deferral Amount shall be made as soon as practicable to the
Executive.
(g) At any time subsequent to an Executive's Benefit
Commencement Date, an Executive who made an election
pursuant to Section 2.2(b) may elect the acceleration of
payment of all or a portion of the value of any Deferral
Amount not yet payable subject to a 6% penalty of the amount
accelerated. Payment of such amount, less such penalty
(which shall be forfeited), shall be paid in cash in a
single lump sum as soon as practicable.
(h) At any time subsequent to the Benefit Commencement Date,
an Executive who has made an election pursuant to Section
56
<PAGE>
2.2(b) may file an election to amend such prior election
affecting any Deferral Amount payable at least 12 months
subsequent to such amendment, either to accelerate, further
defer or to change the form of payment of such Deferral
Amount, provided no such election may accelerate any payment
to a date earlier than 12 months from the date of amendment.
The amended form of payment may be a single sum payment of any
Deferral Amounts not yet due and payable or annual
installments of any such Deferral Amounts, or a combination
thereof, provided no payments may be extended longer than the
time specified in Section 2.2(b).
(i) Upon the death of an Executive who has elected an annuity
form of payment pursuant to Section 2.2(e) above, the
Executive's surviving spouse, if any, at the date of death
("Surviving Spouse") shall receive 50% of the Net Annual
Benefit described in Section 2.1 above and as adjusted as
provided in Section 3.3, if applicable, for life.
(j) Upon the death of an Executive in all other events, the
Executive's Surviving Spouse, shall receive any benefits due
to the Executive under this Plan as adjusted as provided in
Section 3.3, at the same time as provided under paragraph (a)
above, except a valid election under paragraph (b) above shall
survive the death of the Executive. In such case, the
Surviving Spouse shall have the same rights as are provided to
the Executive pursuant to this Section 2 except that further
deferrals will not be permitted. The Executive may designate a
contingent beneficiary by giving written notice to the
Company. If the Executive has no Surviving Spouse, any
remaining benefits payable shall be paid as soon as
practicable in a single sum to his contingent beneficiary, or
if none, to his estate.
(k) In the case of any payment pursuant to this Section 2.2 of
less than the total value of a Deferral Amount, the Committee
will make reasonable efforts to follow any instructions
received from the Executive indicating from which deemed
investments any such distribution is first to come. In the
absence of instructions, distributions shall be made on a pro
rata basis from all the deemed investments currently elected
by the Executive pursuant to Section 2.2(b) with respect to
the Deferral Amount.
2.3 Calculation of Lump Sum. The amount of the lump sum described in
Section 2.2(a) shall be the present value of the benefits payable under
the Plan, determined by using the following actuarial assumptions for
the Executive:
(a) Discount Rate. The discount rate used in computing the
present value of benefits payable under the Plan is the yield
on 10-year treasury notes on the Benefit Commencement Date, or
if a legal holiday, the first business day immediately
following the Benefit Commencement Date. However, at any time
during a thirteen month period ending with the Benefit
Commencement Date, the Executive may designate an alternative
date for fixing the interest rate used to calculate the
present value of the lump sum distribution. The designation
must be in writing, and the date designated must be within
seven calendar days of the date the designation is received by
the Company. The designation of the discount rate, once made,
may not be changed for any reason. Notwithstanding the
foregoing, if an Executive designates an Alternative Date
under this subsection in contemplation of commencing benefits
under the Pension Plan, such designation will survive a
subsequent postponement of the commencement of benefits under
the Pension Plan by such Executive, except that, if the yield
on 10-year treasury notes on the Benefit Commencement Date is
higher than on the Alternative Date, the yield on the Benefit
Commencement Date will be used.
57
<PAGE>
(b) Mortality Table. The Mortality Table used will be that
contained in U.S. Internal Revenue Service Revenue Ruling 95-6
or any succeeding Revenue Ruling issued by the Internal
Revenue Service for use in applying the provisions of sections
415 and 417(e) of the Internal Revenue Code.
2.4 Eligibility for Benefit. Except as provided under Section 3.3 and
Section 6 no benefit shall be payable unless the Executive shall have
been in the employ of the Company as a Vice President or officer of
higher rank for a period of at least 10 years on his Benefit
Commencement Date.
3. TERMINATION OF EMPLOYMENT PRIOR TO AGE 65. If the Executive terminates
employment prior to age 65, for any reason, his rights and benefits
under the Plan will be determined in accordance with this Section 3.
3.1 Benefit Commencement. Except as provided in Section 6 upon a Change
of Control, the Benefit Commencement Date shall be as defined in
Section 1 (and the Executive shall have no right to elect any other
date); provided, however, that at the option of the Company, the
Company may require that the Benefit Commencement Date shall be the
last day of the month in which the Executive reaches his 65th birthday,
if later than the date benefits would otherwise commence hereunder. The
option provided to the Company herein shall not be exercised
unreasonably or in bad faith.
3.2 Benefit Adjustment. If the Executive terminates prior to age 65 for
reasons other than death or Disability, his Net Annual Benefit shall be
reduced by 33/100 of one percent (0.0033) for each month such
termination precedes the month in which he attains age 65.
3.3 Death and Disability. If the employment of the Executive with the
Company terminates prior to age 65 but after completion of at least 10
years service with the Company, whether or not as an officer, due to
reason of Disability, the Executive will be eligible for immediate
commencement of benefit payments as provided in Section 2. Further, no
reduction in Net Annual Benefits will be made under Section 3.2 above.
If the employment of the Executive with the Company terminates prior to
age 65 but after completion of at least 10 years service with the
Company, whether or not as an officer, for the reason of death, the
Executive's Surviving Spouse shall be eligible for a Net Annual Benefit
equal to 50% of the Executive's Net Annual Benefit as provided in
Section 2.2 above, except that if the spouse is more than 60 months
younger than the Executive, such spouse's Net Annual Benefit shall be
reduced by 1/12 of 1% for each full month by which the spouse is more
than 60 months younger than the Executive; provided, however, that in
determining the amount of such survivor benefit, no reduction shall be
made pursuant to Section 3.2 for the early commencement of benefits;
and further provided, however, such benefits shall be paid in
accordance with Section 2.2 above.
3.4 Company Consent. Except for termination of employment under Section
3.3 above or in the event of a Change of Control (as defined below), if
the Executive voluntarily terminates employment with the Company prior
to age 65 without the express, written consent of the Company, all
rights of the Executive to benefits hereunder shall thereupon
terminate; it being understood that if the Executive's employment is
terminated at the Company's request, no benefits hereunder shall be
forfeited pursuant to this Section 3.4.
4. INDEMNIFICATION. The Company shall pay any and all legal fees and
expenses incurred by the Executive in seeking to obtain or enforce any
rights under the Plan, provided that the Executive is successful in
obtaining or enforcing such rights.
5. ADMINISTRATION. Issues relating to the administration of the Plan and
payment of benefits thereunder shall be determined in good faith by the
Committee pursuant to the terms of the Plan.
58
<PAGE>
6. CHANGE OF CONTROL.
(a) Notwithstanding any other provision of this Plan, in the event of a
Change of Control (as defined below), no person that is not a
Participant in the Plan immediately prior to such Change of Control
shall be permitted to be a Participant under the Plan following such
Change of Control. Upon and after a Change of Control, this Plan may
not be amended, modified or terminated if any such amendment,
modification or termination would adversely affect any accrued benefits
of a Participant or his or her rights with respect to such accrued
benefit in the Plan, unless any such amendment, modification or
termination is consented to in writing by all such Participants. Upon a
Change of Control, benefits under the Plan shall vest at a rate of ten
percent (10%) for each year the Executive served as a Vice President or
higher (prorated for partial years) and the requirements of Sections
2.4, 3.1 and 3.4 shall be deemed waived. Upon a Change of Control, the
value of the benefits payable to an Executive under the Plan will be
determined assuming, for purposes of applying Section 3.2, that the
Executive terminated on the date of the Change of Control at age 55 or
his actual age, if older, and shall be paid in a single cash lump sum
to the Executive immediately, provided that in the case of an Executive
who has not attained age 55, such amount shall be discounted to reflect
the commencement of benefits prior to age 55 using the assumptions
provided in Section 2.3.
(b) For purposes of this Plan, a "Change of Control" shall be deemed to
have occurred if:
(1) any "person", as such term is used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act") (other than the Company, any trustee or other fiduciary holding
securities under an employee benefit plan of the Company, or any
company owned, directly or indirectly, by the stockholders of the
Company in substantially the same proportions as their ownership of the
stock of the Company), is or becomes the "beneficial owner" (as defined
in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company representing either 31% or more of the voting
power of all classes of capital stock of the Company or 33-1/3% or more
of the then outstanding common stock without par value, of the Company;
(2) the following individuals cease for any reason to
constitute a majority of the number of directors then serving:
individuals who, on the date hereof, constitute the Board of Directors
of the Company and any new director (other than a director whose
initial assumption of office is in connection with an actual or
threatened election contest, including but not limited to a consent
solicitation, relating to the election of directors of the Company)
whose appointment or election by the Board of Directors or nomination
for election by the Company's stockholders was approved or recommended
by a vote of at least two thirds (2/3) of the directors then still in
office who either were directors on the date hereof or whose
appointment or election or nomination for election was previously so
approved or recommended;
(3) the stockholders of the Company approve a merger or
consolidation of the Company or any direct or indirect subsidiary of
the Company with any other company, other than (i) a merger or
consolidation which would result in the voting securities of the
Company outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or being converted into voting
securities of the surviving entity or any parent thereof) more than 50%
of the combined voting power of the voting securities of the Company or
such surviving entity or any parent thereof outstanding immediately
after such merger or consolidation or (ii) a merger or consolidation
effected to implement a recapitalization of the Company (or similar
transaction) in which no "person" (as defined herein) acquires more
than 50% of the combined voting power of the Company's then outstanding
securities; or
(4) the stockholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition
by the Company of all or substantially all of the Company's assets.
59
<PAGE>
7. AMENDMENT. The Plan may not be terminated or amended except by action
of the Board, and may not be amended to terminate or reduce or
adversely affect benefits of any Executive then participating in the
Plan without the approval of such Executive.
8. FORFEITURE. No forfeiture provisions contained herein shall survive a
Change of Control.
9. GOVERNING LAW; BINDING EFFECT. The Plan shall be governed and construed
and enforceable in accordance with the laws of the State of New York.
If the Company is consolidated or merged with or into another
corporation, or if another entity purchases all, or substantially all
of the Company's assets the surviving or acquiring corporation shall
succeed to the Company's rights and obligations under the Plan. The
Plan shall inure to the benefit of, and shall be enforceable by, the
Executive's personal or legal representatives, executors,
administrators, successors, heirs, devisees, and legatees.
10. NATURE OF OBLIGATIONS. The Company's obligations to pay benefits under
the Plan shall be contractual in nature only; however, the amounts of
such payments may be held in a trust, the assets of which shall be
subject to the claims of the Company's general creditors in the event
of bankruptcy or insolvency only. Any benefit paid from such trust
shall reduce the amount of benefits owed by the Company.
11. NOTICE. Any notice or filing required or permitted to be given to the
Company shall be sufficient if in writing and hand delivered or when
sent by Registered or Certified mail to the principal office of the
Company, directed to the attention of the Secretary of the Company. Any
notice to the Executive must be in writing and is effective when
delivered or when mailed by Registered or Certified mail, return
receipt requested, postage prepaid to the Executive or his personal
representatives at his last known address.
12. EMPLOYMENT. Nothing contained in the Plan nor any action taken
hereunder shall be construed as a contract guaranteeing the Executive
continued status as an employee. Further, if the Executive has
committed willful misconduct in office materially injurious to the
Company or has been convicted of a felony relating to conduct in office
affecting the Company constituting willful violation of criminal law,
any rights of the Executive under the Plan may be terminated by action
of the Committee.
13. VALIDITY. In the event any provision of this Plan is held invalid,
void, or unenforceable, the same shall not affect in any respect
whatsoever the validity of any other provision of this Plan. Recipients
in pay status as of January 28, 1998, who do not consent to the
amendment to the Plan, effective January 28, 1998, within sixty (60)
days of the date of notice of the amendment shall continue to receive
benefits in the event of a Change of Control under the terms of the
Plan in effect on the date preceding January 28, 1998.
14. ASSIGNMENT. The Executive may not assign, alienate, anticipate, or
otherwise encumber any rights, duties or amounts which he may be
entitled to receive under the Plan.
15. PROTECTIVE PROVISIONS. The Executive shall cooperate in good faith with
the Company in furnishing any and all information reasonably requested
by the Company in order to determine and facilitate benefit payments
under the Plan.
16. GENDER, SINGULAR AND PLURAL. All pronouns in any variations thereof
shall be deemed to refer to the masculine or feminine as the identity
of the person or persons may require. As the context may require, the
singular may be read as the plural and the plural as the singular.
60
<PAGE>
17. CAPTIONS. The captions to the sections and paragraphs of the Plan are
for convenience or reference only and shall not control or affect the
meaning or construction of any of its provisions.
IN WITNESS WHEREOF, the Plan, as amended through April 28, 1999, has
been adopted by the Company upon the recommendation of the Committee
and the approval of its Board of Directors.
ASARCO Incorporated
By: /s/Kevin R. Morano
President
Attest:
/s/Susana D. Delanney
Assistant Secretary
61
<PAGE>
Exhibit 10(e)
ASARCO Incorporated
SUPPLEMENTAL RETIREMENT PLAN
(As amended and restated as of April 28, 1999)
Section 1. Effective Date.
The effective date of the Supplemental Retirement Plan (the "Plan") as
originally adopted is February 27, 1976. The effective date of the Plan as
hereby amended and restated is April 28 , 1999.
Section 2. Definitions.
1. Benefits. The amount calculated under Section 4 for each Eligible Employee.
2. Benefit Commencement Date. Except as provided in Section 14, the date
benefits commence under the Pension Plan.
3. Board. The Board of Directors of ASARCO Incorporated.
4. Code. The Internal Revenue Code of 1986, as amended.
5. Committee. The Organization and Compensation Committee of the Board or any
individual or individuals to whom it delegates authority.
6. Company. ASARCO Incorporated.
7. Deferral Amount. Any Benefit amount, including earnings thereon, receipt of
which is deferred under Section 7.
8. Disability. Permanent and total disability as defined in the Pension Plan.
9. Eligible Employee. Any employee who meets the eligibility criteria of
Section 3.
10. Investment Manager. The investment company selected by the Company, or
designated by the Company at the request of an Eligible Employee pursuant
to Section 15, for deemed investment of deferred benefits.
11. Pension Plan. The Retirement Benefit Plan for Salaried Employees of ASARCO
Incorporated.
Section 3. Eligibility.
All salaried employees of the Company or of any subsidiary specifically
designated by the Company, whose retirement benefits payable under the Pension
Plan, are reduced:
(i) due to the benefit limitations of Section 415 of the Code; or
(ii) due to the requirement of Section 401(a)(17) of the Code that
compensation in excess of the limit in effect for a particular
year thereunder may not be taken into account for Pension Plan
purposes; or
(iii) due to participation in any Company plan or program that
provides for elective pre-tax deferrals (the reductions under
this Section 3(i), (ii), and (iii) hereinafter collectively
referred to as "Code Reductions") shall be eligible as to
Benefits under this Plan.
Section 4. Calculation of Benefits.
The Company will pay or cause to be paid to each Eligible Employee or surviving
spouse of such Eligible Employee (as defined in the Pension Plan), as the case
62
<PAGE>
may be, who receives payment under the Pension Plan (for purposes of this
section 4 each a "Recipient"), a Benefit which is equivalent to the excess, if
any, of
(i) the amount such Recipient would have received under the
Pension Plan for each calendar year, taking into account all
provisions of the Pension Plan in effect and applicable from
time to time to the Recipient, except for the Code Reductions;
over
(ii) the amount the Recipient is entitled to receive under the
Pension Plan for such year, taking into account the Code
Reductions.
Section 5. Payment of Benefits.
(a) Except as otherwise provided herein, Benefits under the Plan shall be paid
in a lump sum, in cash, on January 15th of the year immediately following the
year of the Eligible Employee's Benefit Commencement Date. Alternatively, an
Eligible Employee may elect, at least twelve (12) months prior to his Benefit
Commencement Date, to receive all or a portion of the Benefits payable hereunder
on such Benefit Commencement Date.
(b) An Eligible Employee may elect to receive annuity payments under the Plan in
the same form and at approximately the same time as payments are to be made to
the Eligible Employee under the Pension Plan. Such an election must be made in
writing at least twelve (12) months prior to the Benefit Commencement Date,
except in the event of termination by reason of "Disability", in which case the
election may be made at any time prior to the date of termination. An election
under this subsection may be amended at any time provided that no such amendment
shall be given effect unless it is made in writing at least twelve (12) months
prior to the Benefit Commencement Date.
Section 6. Death of Employee.
Upon the death of an Eligible Employee:
(i) Who has elected an annuity form of payment pursuant to Section
5(b), the Eligible Employee's beneficiary under the Pension
Plan shall receive the Benefit described in Section 4 above,
if any, in the same form and approximately at the same time as
payments are made to such beneficiary under the Pension Plan.
(ii) Who has not elected an annuity form of payment pursuant to
Section 5(b), the Eligible Employee's surviving spouse, if
any, shall receive any Benefits at the same time as provided
in Section 5, except a valid election under Section 7 shall
survive the death of the Eligible Employee. In such case,
the surviving spouse shall have the same rights as are
provided to the Eligible Employee pursuant to Section 7
below except that further deferrals will not be permitted.
An Eligible Employee may designate a contingent beneficiary
by giving written notice to the Company. If there is no
surviving spouse, the amount payable pursuant to this
subsection shall be paid as soon as practicable in a lump
sum to the Eligible Employee's contingent beneficiary, or if
none, to his estate.
Section 7. Deferral of Benefit Payments.
(a) If the value of the Benefits payable to an Eligible Employee is at least
$50,000, an Eligible Employee may elect at least twelve (12) months prior to the
date Benefits will be paid under Section 5(a) (except in the event of
termination by reason of Disability, in which case the election may be made at
any time prior to the Benefit Commencement Date), to defer, for a period not to
exceed twenty (20) years from the Benefit Commencement Date, the Deferral Amount
to a future date or to provide for the payment of a Deferral Amount in a series
of scheduled installments. Any election made pursuant to this subsection may be
amended to accelerate, further defer (except as otherwise provided with respect
to a surviving spouse in Section 6(ii)) or to change the form of payment of all
or part of the Deferral Amount, if amended in accordance with the provisions of
Section 7(d).
63
<PAGE>
(b) At any time subsequent to the Benefit Commencement Date, an Eligible
Employee who made an election pursuant to Section 7(a) and who has suffered a
severe financial hardship which has resulted from events beyond the Eligible
Employee's control ("Hardship Event"), may request a payment of all or a portion
of the value of his Deferral Amount which is not yet payable. If such a request
shall be approved by the Committee payment of all or a portion of the value of
the Deferral Amount shall be made in cash in a single lump sum as soon as
practicable to the Eligible Employee but only in an amount reasonably needed to
satisfy such Hardship Event. Whether a Hardship Event has occurred shall be
determined in accordance with Treasury Regulation Sections 1.457- 2(h)(4) and
(5).
(c) At any time subsequent to the Benefit Commencement Date, an Eligible
Employee who made an election pursuant to Section 7(a) may elect the
acceleration of payment of all or a portion of the value of the Deferral Amount
not yet payable subject to a 6% penalty of the amount accelerated. Payment of
such amount, less such penalty (which shall be forfeited), shall be paid in cash
in a single lump sum as soon as practicable after the requested payment date.
(d) At any time subsequent to the Benefit Commencement Date, an Eligible
Employee who has made an election pursuant to Section 7(a) may file an election
to amend such prior election affecting any Deferral Amount payable at least 12
months subsequent to such amendment, either to accelerate, further defer or to
change the form of payment of such Deferral Amount, provided no such election
may accelerate any payment to a date earlier than 12 months from the date of
amendment. The amended form of payment may be a single sum payment of any
amounts not yet due and payable or annual installments of any such amounts, or a
combination thereof, provided no payments may be extended longer than the time
specified in Section 7(a).
(e) In the case of any payment pursuant to this Section 7 of less than the total
value of a Deferral Amount, the Committee will make reasonable efforts to follow
any instructions received from the Eligible Employee indicating from which
deemed investments any such distribution is first to come. In the absence of
instructions, distributions shall be made on a pro rata basis from all the
deemed investments currently elected by the Eligible Employee pursuant to
Section 8 with respect to the Deferral Amount.
Section 8. Investment of Deferral Amounts.
(a) Any Deferral Amount shall be deemed invested, as of the Benefit Commencement
Date, in accordance with an election to be made by the Eligible Employee in such
investment vehicles as are provided under rules established by the Committee.
The Company will attempt to follow the Eligible Employee's elections, but will
not be required to do so. Regardless of whether the Eligible Employee's
elections are followed, the Deferral Amount shall be credited with deemed
earnings, gains, losses, expenses, and changes in the fair market value of such
Deferral Amount as if the Company had followed such investment designations. All
elections, amendments to elections, and provisions for transfers among
investment vehicles shall be in accordance with rules, if any, as shall be
established by the Committee.
(b) The election of a deemed investment option is the sole responsibility of
each Eligible Employee. Neither Asarco, nor the Committee that administers the
Plan, nor any trustee of any trust that may be established in connection with
the Plan are authorized or permitted to advise (or shall have any liability with
respect to) an Eligible Employee as to the election of any option or the manner
in which his Deferral Amount shall be deemed to be invested.
(c) Except for an Eligible Employee who elects annuity payments pursuant to
Section 5(b), absent an election to defer Benefits purusant to Section 7, all
unpaid Benefit amounts shall be deemed invested as of the Benefit Commencement
Date in the Vanguard Money Market Reserve - Prime Portfolio, or other comparable
money market fund selected by the Company, until paid to the Eligible Employee
pursuant to the first sentence of Section 5(a).
64
<PAGE>
Section 9. Value of Benefits.
The amount of the lump sum referred to in Section 5(a) shall be the present
value of the Benefit amount determined under Section 4 (after taking into
account, if applicable, any reductions as set forth in the Pension Plan to
reflect the commencement of payments prior to age 65) by assuming that the
Eligible Employee has elected a single life annuity under the Pension Plan and
by using the following actuarial assumptions:
(a) Discount Rate. The discount rate used in computing the present value of
benefits payable under the Plan is the yield on 10-year treasury notes on the
Eligible Employee's Benefit Commencement Date, or if a legal holiday, the first
business day immediately following the Benefit Commencement Date. However, at
any time during a thirteen month period ending with the Benefit Commencement
Date, an Eligible Employee may designate an alternative date for fixing the
interest rate (the "Alternative Date") used to calculate the present value of
the lump sum distribution. The designation must be in writing, and the
Alternative Date must be within seven calendar days of the date the designation
is received by the Company. The designation of the Alternative Date for fixing
the interest rate, once made, may not be changed for any reason. Notwithstanding
the foregoing, if an Eligible Employee designates an Alternative Date under this
subsection in contemplation of commencing benefits under the Pension Plan, such
designation will survive a subsequent postponement of the commencement of
benefits under the Pension Plan by such Eligible Employee, except that, if the
yield on 10-year treasury notes on the Benefit Commencement Date is higher than
on the Alternative Date, the yield on the Benefit Commencement Date will be
used.
(b) Mortality Table. The Mortality Table used will be that contained in U.S.
Internal Revenue Service Revenue Ruling 95-6 or any succeeding Revenue Ruling
issued by the Internal Revenue Service for use in applying the provisions of
Sections 415 and 417(e) of the Internal Revenue Code.
Section 10. Employee's Rights Unsecured.
The right of any Eligible Employee to receive benefits under the provisions of
the Plan shall be contractual in nature only; however, the amounts of such
benefits may be held in a trust, the assets of which shall be subject to the
claims of the Company's general creditors in the event of bankruptcy or
insolvency only. Any amounts paid from such trust shall reduce the amount of
benefits owed by the Company.
Section 11. Assignability.
No right or interest of the Eligible Employee under this Plan shall be subject
to voluntary or involuntary alienation, assignment or transfer of any kind.
Section 12. Participation in Other Plans.
Nothing in this Plan will affect any right which an Eligible Employee may
otherwise have to participate in any other retirement plan, or agreement, which
the Company may have now or hereafter.
Section 13. Discretion of Company, Committee and Board.
Any decision made or action taken by the Company, the Committee or by the Board
arising out of or in connection with the construction, administration,
interpretation, and effect of the Plan shall lie within the absolute discretion
of the Company, the Committee or the Board, as the case may be, and shall be
final, conclusive and binding upon all persons.
Section 14. Change of Control.
(a) Notwithstanding any other provision of this Plan, in the event of a Change
of Control (as defined below), no person that is not an Eligible Employee
immediately prior to such Change of Control shall be permitted to be an Eligible
Employee under the Plan following such Change of Control. Upon and after a
65
<PAGE>
Change of Control, this Plan may not be amended, modified or terminated if any
such amendment, modification or termination would adversely affect any accrued
benefits of an Eligible Employee or his or her rights with respect to such
accrued benefits in the Plan, unless any such amendment, modification or
termination is consented to in writing by all Eligible Employees. Upon a Change
of Control, payment shall be made to Eligible Employees immediately in a single
cash lump sum of (1) the value of any and all amounts accrued to the Eligible
Employees hereunder calculated using the Discount Rate and Mortality Table set
forth in Section 9 or (2) the value of their Deferral Amounts. For purposes of
this Section 14, benefits under the Pension Plan for employees who have not
attained age 55 shall be the amount determined under the Pension Plan payable as
a vested deferred benefit (as defined in the Pension Plan) at age 55 after
taking into account the discount for commencement of payment before age 55 using
the actuarial assumptions in Section 9.
(b) For purposes of this Plan, a "Change of Control" shall be deemed to have
occurred if:
(1) any "person", as such term is used in Sections 12(d) and 13(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") (other
than the Company, any trustee or other fiduciary holding securities
under an employee benefit plan of the Company, or any company owned,
directly or indirectly, by the stockholders of the Company in
substantially the same proportions as their ownership of the stock of
the Company), is or becomes the "beneficial owner" (as defined in Rule
13d-3 under the Exchange Act), directly or indirectly, of securities of
the Company representing either 31% or more of the voting power of all
classes of capital stock of the Company or 33-1/3% or more of the then
outstanding common stock without par value, of the Company;
(2) the following individuals cease for any reason to constitute a majority
of the number of Directors then serving: individuals who, on the date
hereof, constitute the Board of Directors of the Company and any new
Director (other than a Director whose initial assumption of office is
in connection with an actual or threatened election contest, including
but not limited to a consent solicitation, relating to the election of
Directors of the Company) whose appointment or election by the Board of
Directors or nomination for election by the Company's stockholders was
approved or recommended by a vote of at least two thirds (2/3) of the
Directors then still in office who either were Directors on the date
hereof or whose appointment or election or nomination for election was
previously so approved or recommended;
(3) the stockholders of the Company approve a merger or consolidation of
the Company or any direct or indirect subsidiary of the Company with
any other company, other than (i) a merger or consolidation which would
result in the voting securities of the Company outstanding immediately
prior thereto continuing to represent (either by remaining outstanding
or being converted into voting securities of the surviving entity or
any parent thereof) more than 50% of the combined voting power of the
voting securities of the Company or such surviving entity or any parent
thereof outstanding immediately after such merger or consolidation or
(ii) a merger or consolidation effected to implement a recapitalization
of the Company (or similar transaction) in which no "person" (as
defined herein) acquires more than 50% of the combined voting power of
the Company's then outstanding securities; or
(4) the stockholders of the Company approve a plan of complete liquidation
of the Company or an agreement for the sale or disposition by the
Company of all or substantially all of the Company's assets.
Section 15. Designation of Investment Manager.
(a) If the total lump sum value of an Eligible Employee's benefits under the
Plan, the ASARCO Incorporated Supplemental Pension Plan for Designated
Mid-Career Officers, and the ASARCO Incorporated Compensation Deferral Plan
(collectively the "Plans") would as of the Eligible Employee's retirement date
exceed $3 million, the Eligible Employee may file a request with the Committee
that the entire lump sum value of any such benefits deferred under the Plans be
deemed invested in such one or more investment alternatives as are provided by
an investment manager to be designated by the Eligible Employee. Such request
may be made at any time, however, it may only be effective after the Eligible
Employee has retired or otherwise commences to receive benefits under the
Pension Plan.
66
<PAGE>
(b) Approval of any such request by an Eligible Employee to designate an
investment manager under this Section 15 shall be at the sole discretion of the
Committee and, if approved, all fees related to all investment services provided
by the designated investment manager will be deducted from the value of the
Eligible Employee's accounts. The Eligible Employee designating the investment
manager will be solely responsible for the actions of the designated investment
manager and neither the Company, nor the Committee, nor any trustee of any trust
that may be established in connection with the Plans shall have any
responsibility for, or liability with respect to, review or oversight of the
performance of the designated investment manager.
Section 16. Severability.
The provisions of this Plan shall be severable, and if any one or more
provisions shall be considered or held to be invalid or unenforceable, or shall
result in a portion of the Plan being treated as a pension plan under Title I of
ERISA, the remaining provisions shall continue to be valid and enforceable.
Section 17. Cost to be Borne by Subsidiary.
If any payment under this Plan is to be made to an Eligible Employee on account
of any employee's service for a subsidiary of the Company, the cost of such
payment shall be borne in such proportions as the Company and such subsidiary
shall determine.
Section 18. Administration.
The Plan shall be administered by the Committee. The Committee shall construe
and interpret the Plan and may adopt rules and regulations governing the
administration of the Plan, as well as exercise any duties and powers conferred
on it by the terms of the Plan. The Committee shall act by vote or written
consent of a majority of its members or otherwise as in accordance with its
general procedures as in effect from time to time.
Section 19. Amendment.
This Plan may at any time or from time to time be amended, modified,
discontinued or terminated by the Board if, in its sole discretion, such a
change is deemed necessary and desirable.
Section 20. Governing Law.
This Agreement shall be governed by and construed in accordance with the laws of
the State of New York.
IN WITNESS WHEREOF, the Company has caused this Amendment to its
Supplemental Retirement Plan to be duly adopted and executed by its duly
authorized officers and its corporate seal affixed hereto on the 28th day of
April, 1999.
ASARCO Incorporated
By: /s/Kevin R. Morano
President
Attest:
/s/Susana D. Delanney
Assistant Secretary
67
<PAGE>
Exhibit 10(f)
ASARCO Incorporated
Compensation Deferral Plan
(As Amended and Restated as of April 28, 1999)
Section 1 - Effective Date.
The effective date of the Plan as originally adopted is February 1, 1995. The
effective date of the Plan as hereby amended and restated is April 28, 1999.
Section 2 - Definitions.
1) Board - the Board of Directors of ASARCO Incorporated.
2) Code - the Internal Revenue Code of 1986, as amended.
3) Committee - the Organization and Compensation Committee of the Board or
any individual or individuals to whom authority has been delegated
hereunder by the Organization and Compensation Committee.
4) Company - ASARCO Incorporated and any subsidiary of ASARCO Incorporated that
has adopted the Plan.
5) Deferral Amounts - a Participant's Salary Deferral Amounts (including any
of such amounts further deferred under Section 6(b)), Incentive
Compensation Deferral Amounts, Employer Provided Benefit, and Special
Incentive Awards (each as defind in Section 4(b)).
6) Director - any individual serving as a member of the Board.
7) Incentive Compensation Plan - the Incentive Compensation Plan for Exempt
Salaried Employees of ASARCO Incorporated. 8) Incentive Plan - the Incentive
Compensation Plan for Senior Officers of ASARCO Incorporated. 9)Participant -
an Eligible Employee,as defined in Section 3, who has a valid election in
effect under the Plan. 10) Participant Account - A bookkeeping account
established in the financial records of the Company to record the Deferral
Amounts and deemed investment earnings or losses arising therefrom based on
Participant elections pursuant to Section 5.
11)Retirement - Retirement under the Retirement Benefit Plan for Salaried
Employees of ASARCO Incorporated.
13)Savings Plan - Savings Plan of ASARCO Incorporated and Participating
ubsidiaries.
Section 3 - Eligibility.
a) Salary Deferral
For purposes of salary deferral, any employee eligible to participate in
the Savings Plan who:
1) had compensation from the Company of at least $80,000 (or such other
greater limit as may be established under Code Section 414(q)(1)(B)(1))
(the "HCE Limit") for the calendar year preceding the year for which
the election is effective, or
2) has an annualized base salary equal to or greater than the HCE Limit
for the year for which the election is effective shall be considered an
"Eligible Employee".
b) Incentive Compensation Deferral
For purposes of deferrals of incentive compensation received under the
Incentive Compensation Plan and the Incentive Plan ("Incentive Compensation
Awards"), any exempt salaried employee of the Company who meets the
compensation requirements of Section 3(a)(1) or 3 (a) (2) above, shall be
considered an "Eligible Employee".
Section 4 - Participation.
a) Election to Defer
1) Salary Deferral. To become a Participant in the salary deferral
component of the Plan for a particular calendar year, an Eligible
Employee must elect, prior to the beginning of such calendar year, to
defer receipt of a percentage of his base annual salary to be earned
during the succeeding calendar year. Such an election shall be in
68
<PAGE>
writing on forms prescribed by the Committee, and shall include the
percentage of base annual salary to be deferred. A Participant's
election to defer with respect to a calendar year under this subsection
(a)(1) shall continue in effect for all subsequent calendar years until
changed in accordance with subsection (d). An employee of the Company
who becomes an Eligible Employee during a calendar year may elect to
become a Participant in the Salary Deferral component of the Plan for
such calendar year by electing to defer a percentage of his base annual
salary (in accordance with Section 4(b)) within 30 days of becoming an
Eligible Employee. The election will be effective on a prospective
basis beginning with the payroll period that occurs as soon as
administratively practicable following receipt of the election by the
Committee.
2) Incentive Compensation Deferral. To become a participant in the
Incentive Compensation Deferral component of the Plan for a particular
calendar year, an Eligible Employee must elect, prior to the beginning
of such calendar year, to defer receipt of an amount not to exceed 100
percent of his Incentive Compensation Award, payable during the
calendar year to which the election relates. Such an election shall be
in writing on forms prescribed by the Committee. A Participant's
election to defer with respect to a calendar year under this
subsection (a)(2) shall continue in effect for all subsequent calendar
years until changed in accordance with subsection (d).
b) Deferral Amount
1) Salary Deferral. A Participant who meets the requirements of Section
4(a)(1) for a calendar year may elect to have the following amounts
(the "Salary Deferral Amount") credited to his account for such
calendar year or portion thereof during which an election is effective
(the "Deferral Period"):
a) the product of (i) the Participant's elected salary deferral
contribution percentage under this Plan (not to exceed the maximum
contribution percentage permitted under the Savings Plan) and (ii)
the lesser of the Participant's base annual salary for such year
or the Compensation Limit (as defined below); reduced by the
maximum contribution permitted for highly compensated employees
under the Savings Plan due to the limitations imposed by Code
Section 401(k)(3) or by the plan administrator for the Savings
Plan for such calendar year; and
b) the Participant's elected salary deferral contribution percentage
under the Savings Plan as in effect on January 1 of such year,
multiplied by the Participant's base annual salary in excess of
the Code Section 401(a)(17) limit, as adjusted from time to time
($160,000 in 1999) (the "Compensation Limit"); provided, however,
that the total amount of Salary Deferrals under this subsection
cannot exceed the maximum contribution percentage as may then be
permitted under the Savings Plan.
2) Incentive Compensation Deferral. The amount of a Participant's
incentive compensation deferral for a Deferral Period shall be any
whole dollar amount or whole percent of his Incentive Compensation
Award payable during the calendar year as elected by the Participant
(the "Incentive Compensation Deferral Amount"). In the event the award
payable is less than the dollar amount specified in the Participant's
election, the full amount of the award shall be deferred (subject to
Section 15).
3) Employer Provided Benefit. With respect to each Deferral Period, the
Company shall make a deemed matching contribution equal to 50% of each
Participant's Salary Deferral Amount (each such deemed matching
contribution, an "Employer Provided Benefit"); provided, however, that
no Participant's Employer Provided Benefit with respect to a particular
year may exceed the amount by which 3% of such Participant's base
salary for such year exceeds the matching contribution made by the
Company on the Participant's behalf under the Savings Plan for such
year.
4) Special Incentive Awards. Notwithstanding anything to the contrary
herein, the Committee, in its discretion, may provide for any amounts
awarded to a Participant by the Board or the Committee as a special
incentive award under the Incentive Compensation Plan to be deferred
69
<PAGE>
pursuant to the terms of this Plan and credited to a Participant's
Account, subject to the terms and limitations of the award ("Special
Incentive Awards").
c) Irrevocability of Election
Subject to the provisions of subsection (d) of this Section 4, a
deferral election hereunder shall be irrevocable.
d) Change of Election
A Participant may change prior elections with respect to Salary
Deferral or Incentive Compensation Deferral once in each calendar
year. Changes shall be in writing, on forms prescribed by the
Committee. Such change of election shall first be effective for
the calendar year beginning after the date the change is received by
the Committee.
Section 5 - Deemed Investment Provisions.
a) At the time of the election to participate in the Plan, the Participant
must elect in writing to have his Deferral Amounts deemed invested, in
increments of no less than 5%, in one or more of the investment funds as
are provided under the Savings Plan, except however, that the Asarco Common
Stock Fund shall not be available as a deemed investment. Said election
must total one hundred percent (100%) of his Deferral Amounts.
b) The Participant Accounts shall be credited with deemed earnings, gains,
losses, expenses and changes in the fair market value of such Participant
Accounts as if the Company had followed such investment designations.
c) Each Participant may elect in writing that his future Deferral Amounts be
deemed invested in a proportion different from that previously elected, but
the new election shall be prospective only and shall be made in accordance
with paragraph (b) of this Section 5. Any changes in such deemed
investments must be in accordance with rules, if any, as are established by
the Committee.
d) The election of a deemed investment option is the sole responsibility of
each Participant. Neither the Company, nor the Committee, nor any trustee
of any trust that may be established in connection with the Plan are
authorized or permitted to advise (or shall have any liability with respect
to) a Participant as to the election of any option or the manner in which
his Deferral Amounts shall be deemed to be invested.
e) Consistent with this Section 5, each Participant may elect in writing, that
a whole percentage (no less than 5%) or specific dollar amount of his
deemed investment in any fund may be transferred to any other fund
available under the Plan. Such election will be prospective only and will
be permitted in accordance with rules, if any, as are established by the
Committee.
Section 6 - Value and Payment of Benefits.
a) Payment of Benefits
Each Participant shall receive the value of his Participant Account in cash
on January 15 of the year following the year of the Participant's normal
Retirement. If a Participant terminates service with the Company prior to
qualifying for normal Retirement, the value of his Participant Account will
be distributed in cash on the 15th day of the 13th month following the date
of termination (subject to Section 15). As an alternative to receiving
payment on the dates provided in this paragraph, a Participant may elect,
at least twelve (12) months prior to the date of his Retirement or other
termination of service with the Company (as the case may be), to receive
payment of all the value of his Participant Account on such Retirement date
or the date of other termination of service with the Company (as the case
may be). In the event of the death of a Participant before receiving the
value of his Participant Account, such distribution shall be paid to his
beneficiary or beneficiaries designated pursuant to Section 7 as soon as
practicable under the Plan.
b) Further Deferral
Notwithstanding subsection (a) of this section, a Participant who retires
from the Company, and who at the time of Retirement has a balance in his
70
<PAGE>
Participant Account of at least $50,000, may elect to further defer receipt
of all or a portion of his Participant Account, but not less than $50,000
for a period of up to 20 years from his date of Retirement. The deferred
portion of a Participant's Account shall continue to constitute Deferral
Amounts and shall continue to be subject to the provisions of Section 5
above, including without limitation paragraph (b) thereof. To defer a
payment of benefits under the Plan, a Participant must file a written
election at least twelve (12) months in advance of the date that payment of
benefits under the Plan would otherwise be made. The Participant may elect
to receive the amount deferred in a single cash payment or in annual cash
installments. Any election made pursuant to this paragraph may be amended
to accelerate, further defer or to change the form of payment of all or
part of the Deferral Amounts, if amended in accordance with the provisions
of paragraph (e) hereof, but only to the extent that the Participant's
right to accelerate the payment of a Deferral Amount has not been
restricted by the terms of a Special Incentive Award.
c) Financial Hardship of Participants
Except as may otherwise be provided by the terms of a Special Incentive
Award, at any time prior to commencement of payment of benefits pursuant to
paragraph (b) of this Section 6, a Participant may request a payment of all
or a portion of the value of his Participant Account. Such a request shall
be approved by the Committee only upon a finding that the Participant has
suffered a severe financial hardship which has resulted from events beyond
the Participant's control ("Hardship Event"), and only in the amount
reasonably needed to satisfy such Hardship Event. Whether a Hardship Event
has occurred shall be determined in accordance with Treasury Regulation
Sections 1.457- 2(h)(4) and (5). In the event such a payment is approved,
payment of all or a portion of the value of the Participant Account shall
be made as soon as practicable to the Participant.
d) Other Withdrawals
Absent a Hardship Event or adequate prior notice (in accordance with
paragraph (b) above), a request for a payment of all or a portion of the
value of a Participant Account may be made by a Participant subject to a 6%
penalty of the amount of the requested payment, which penalty shall be
deducted from the requested payment. The requested payment, less such
penalty, shall be paid in cash in a single lump sum as soon as practicable
after the requested payment date.
e) Amendment of Election
At any time subsequent to an election pursuant to paragraph (b), a
Participant may file an election to amend such prior election affecting any
Deferral Amount payable at least twelve (12) months subsequent to such
amendment, either to accelerate, further defer or to change the form of
payment, provided no such election may accelerate any payment to a date
earlier than twelve (12) months from the date of amendment. The amended
form of payment may be a single sum payment of any Deferral Amounts not yet
due and payable or annual installments of any such Deferral Amounts, or a
combination thereof, provided no payments may be extended longer than the
time specified in paragraph (b).
f) Allocation of Amounts Withdrawn
In the case of any payment pursuant to this Section 6 of less than all of
the value of a Participant Account, the Committee will make reasonable
efforts to follow any instructions received from the Participant indicating
from which deemed investments any such distribution is first to come. In
the absence of instructions, distributions shall be made on a pro rata
basis from all the deemed investments currently elected by the Participant
pursuant to Section 5 with respect to the Participant Account.
Section 7 - Designation of Beneficiary.
A Participant may designate one or more beneficiaries by giving written notice
to the Committee. If no beneficiary is so designated, the Participant's
beneficiary will be the Participant's estate. If more than one beneficiary
statement has been filed the beneficiary or beneficiaries designated in the
statement bearing the most recent date will be deemed the valid beneficiary.
71
<PAGE>
Section 8 - Participant's Rights Unsecured.
The right of any Participant to receive benefits under the provisions of the
Plan shall be contractual in nature only; however, the amounts of such benefits
may be held in a trust, the assets of which shall be subject to the claims of
the Company's general creditors only in the event of bankruptcy or insolvency.
Any amounts paid to a Participant from such trust shall reduce the amount of
benefits owed by the Company.
Section 9 - Participation in Other Plans.
Nothing in this Plan will affect any right which a Participant may otherwise
have to participate in any other retirement plan or agreement which the Company
may have now or hereafter.
Section 10 - Non-Alienation of Benefits.
No right to receive payments hereunder shall be transferable or assignable by a
Participant or beneficiary.
Section 11 - Administration of the Plan.
The Plan shall be administered by the Committee. The Committee shall construe
and interpret the Plan and may adopt rules and regulations governing the
administration of the Plan, as well as exercise any duties and powers conferred
on it by the terms of the Plan. The Committee shall act by vote or written
consent of a majority of its members or otherwise as in accordance with its
general procedures as in effect from time to time.
Section 12 - Amendment or Termination of the Plan.
This Plan may at any time or from time to time be amended, modified or
terminated by the Board. No amendment, modification or termination shall,
without the consent of a Participant, adversely affect such Participant's
accruals in his Participant Account.
Section 13 - No Entitlement to Awards or Right of Continued Employment.
Neither the establishment of the Plan nor the payment of any benefits hereunder
nor any action of the Company, a subsidiary of the Company, or the Committee
shall be held or construed to confer upon any person any legal right to be
awarded any amounts under the Incentive Plan or the Incentive Compensation Plan
or to continue in the employ of the Company or a subsidiary of the Company. The
Company and its subsidiaries expressly reserve the right to discharge any
Participant whenever the interest of any such company in its sole discretion may
so require without liability to such company or the Committee except as to any
rights which may be expressly conferred upon such Participant under the Plan.
Section 14 - Discretion of Company, Committee, and Board.
Any decision made or action taken by the Company or by the Committee or by the
Board arising out of or in connection with the construction, administration,
interpretation and effect of the Plan shall lie within the absolute discretion
of the Company, the Committee or the Board, as the case may be, and shall be
final, conclusive and binding upon all persons.
Section 15 - Tax Withholding.
There shall be deducted from all deferrals or payments made under this Plan the
amount of any taxes required to be withheld by any Federal, state, local or
foreign government, including any employment taxes required to be withheld under
Code Section 3121(v). The Participants and their beneficiaries, distributees,
and personal representatives will bear any and all Federal, foreign, state,
local or other income or other taxes imposed on amounts paid under the Plan, and
the Company may take whatever actions are necessary and proper to satisfy all
obligations of such persons for payment of all such taxes.
72
<PAGE>
Section 16 - Change of Control.
a) Notwithstanding any other provision of this Plan, in the event of a Change
of Control (as defined below), no person that is not a Participant in the
Plan immediately prior to such Change of Control shall be permitted to be a
Participant under the Plan following such Change of Control. Upon and after
a Change of Control, this Plan may not be amended, modified or terminated
if any such amendment, modification or termination would adversely affect
any accrued benefits of a Participant or his or her rights with respect to
such accrued benefits in the Plan, unless any such amendment, modification
or termination is consented to in writing by all such Participants. Upon a
Change of Control, payment of all of the value of a Participant Account,
including any Special Incentive Award component thereof, shall be made to
the Participant immediately in a single cash lump sum without penalty . For
purposes of this Section 16 the term "Company" shall mean ASARCO
Incorporated.
b) For purposes of this Plan, a "Change of Control" shall be deemed to have
occurred if:
1) any "person", as such term is used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act")
(other than the Company, any trustee or other fiduciary holding
securities under an employee benefit plan of the Company, or any
company owned, directly or indirectly, by the stockholders of the
Company in substantially the same proportions as their ownership of
the stock of the Company), is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly,
of securities of the Company representing either 31% or more of the
voting power of all classes of capital stock of the Company or 33-1/3%
or more of the then outstanding common stock, without par value, of
the Company;
2) the following individuals cease for any reason to constitute a majority
of the number of Directors then serving: individuals who, on the date
hereof, constitute the Board of Directors of the Company and any new
director (other than a Director whose initial assumption of office is
in connection with an actual or threatened election contest, including
but not limited to a consent solicitation, relating to the election of
Directors of the Company) whose appointment or election by the Board of
Directors or nomination for election by the Company's stockholders was
approved or recommended by a vote of at least two-thirds (2/3) of the
Directors then still in office who either were Directors on the date
hereof or whose appointment or election or nomination for election was
previously so approved or recommended;
3) the stockholders of the Company approve a merger or consolidation of
the Company or any direct or indirect subsidiary of the Company with
any other company, other than (i) a merger or consolidation which would
result in the voting securities of the Company outstanding immediately
prior thereto continuing to represent (either by remaining outstanding
or being converted into voting securities of the surviving entity or
any parent thereof) more than 50% of the combined voting power of the
voting securities of the Company or such surviving entity or parent
thereof outstanding immediately after such merger or consolidation or
(ii) a merger or consolidation effected to implement a recapitalization
of the Company (or similar transaction) in which no "person" (as
defined herein) acquires more than 50% of the combined voting power of
the Company's then outstanding securities; or
4) the stockholders of the Company approve a plan of complete liquidation
of the Company or an agreement for the sale or disposition by the
Company of all or substantially all of the Company's assets.
Section 17 - Severability.
In the event any provision of this Plan would serve to invalidate the Plan, that
provision shall be deemed to be null and void, and the Plan shall be construed
as if it did not contain the particular provision that would make it invalid.
73
<PAGE>
Section 18 - Governing Law; Binding Effect; Miscellaneous.
The Plan shall be governed and construed and enforceable in accordance with the
laws of the State of New York, except as superseded by applicable Federal law.
Where appearing in the Plan, the masculine gender shall include the feminine
gender.
IN WITNESS WHEREOF, the Company has caused the ASARCO Incorporated
Compensation Deferral Plan to be duly adopted and executed by its duly
authorized officers and its corporate seal affixed hereon as of the 28th day of
April, 1999.
ATTEST: ASARCO Incorporated
/s/Susana D. Delanney By:/s/Kevin R. Morano
Assistant Secretary President
74
<PAGE>
Exhibit 12 Statement re Computation of Consolidated Ratio of Earnings to Fixed
Charges and Combined Fixed Charges and Preferred Share Dividend
Requirements
<TABLE>
<CAPTION>
Three Three Six Six
Months Months Months Months
Ended Ended Ended Ended
June 30, June 30, June 30, June 30,
1999 1998 1999 1998
(Dollars in thousands) (Dollars in thousands)
<S> <C> <C> <C> <C>
NET EARNINGS (LOSS) $(21,063) $(14,542) $(56,381) $(46,348)
Adjustments
Taxes (benefit) on Income (9,038) (1,523) (25,209) (16,102)
Equity Earnings, Net of Taxes (1,063) 75 (2,018) (1,778)
Dividends received from non-
consolidated companies - 2,096 475 2,096
Total Fixed Charges 23,196 20,256 46,319 41,888
Interest Capitalized (2,202) (2,960) (3,687) (5,276)
Capitalized Interest Amortized 374 884 715 1,714
Minority interest 1,834 9,026 3,882 15,236
-------- --------- -------- --------
EARNINGS (LOSS) $ (7,962) $ 13,312 $(35,904) $ (8,570)
======== ======== ======== ========
FIXED CHARGES
Interest Expense $18,848 $ 16,398 $ 38,337 $ 33,858
Interest Capitalized 2,202 2,960 3,687 5,276
Imputed Interest Expense 2,146 898 4,295 2,754
-------- -------- -------- --------
TOTAL FIXED CHARGES $23,196 $ 20,256 $ 46,319 $ 41,888
======== ======== ======== ========
Ratio of Earnings to Fixed Charges (a) (a) (b) (b)
======== ======== ======== ========
(a) For the quarter ended June 30, 1999 and 1998 earnings were insufficient to
cover fixed charges by $31,158 and $6,944, respectively.
(b) For the six months ended June 30, 1999 and 1998 earnings were insufficient
to cover fixed charges by $82,223 and $50,458, respectively.
</TABLE>
75
<PAGE>
Exhibit 15 Independent Accountant's Awareness Letter
PricewaterhouseCoopers LLP
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
We are aware that our report dated July 21, 1999 on our review of the interim
financial information of ASARCO Incorporated and Subsidiaries as of June 30,
1999 and for the three month and six month periods ended June 30, 1999 and 1998
and included in this Form 10-Q for the quarter ended June 30, 1999 is
incorporated by reference in the Company's Registration Statements on Form S-8
(File Nos. 2-67732, 2-83782, 33-34606, 333-16875, 333-18083 and 333-46181) and
Form S-3 (File Nos. 33-45631, 33-55993 and 333-02359). Pursuant to Rule 436(c)
under the Securities Act of 1933, this report should not be considered a part of
the Registration Statements prepared or certified by us within the meaning of
Sections 7 and 11 of that Act.
PricewaterhouseCoopers LLP
New York, New York
August 11, 1999
76
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-mos
<FISCAL-YEAR-END> Dec-31-1999
<PERIOD-START> Apr-1-1999
<PERIOD-END> Jun-30-1999
<CASH> 124,744
<SECURITIES> 31,688
<RECEIVABLES> 414,168
<ALLOWANCES> 10,425
<INVENTORY> 305,037
<CURRENT-ASSETS> 968,848
<PP&E> 4,920,097
<DEPRECIATION> 2,327,753
<TOTAL-ASSETS> 3,977,303
<CURRENT-LIABILITIES> 633,885
<BONDS> 0
0
0
<COMMON> 525,112
<OTHER-SE> 933,405
<TOTAL-LIABILITY-AND-EQUITY> 3,977,303
<SALES> 966,011
<TOTAL-REVENUES> 966,011
<CGS> 855,274
<TOTAL-COSTS> 855,274
<OTHER-EXPENSES> 159,566
<LOSS-PROVISION> 621
<INTEREST-EXPENSE> 38,337
<INCOME-PRETAX> (77,582)
<INCOME-TAX> (25,083)
<INCOME-CONTINUING> (52,499)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (56,381)
<EPS-BASIC> (1.42)
<EPS-DILUTED> (1.42)
</TABLE>
