SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
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Phelps Dodge Corporation
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<PAGE>
<PAGE>
phelps
dodge
Corporation 2600 N. Central Avenue, Phoenix, AZ 85004-3014 * (602) 234-8100
Douglas C. Yearley
Chairman and
Chief Executive Officer
April 1, 1998
Dear Shareholder:
You are cordially invited to attend our annual meeting of shareholders
to be held at 11:30 a.m. on Wednesday, May 6, 1998, at the Arizona Biltmore
Hotel, 24th Street and Missouri Avenue, Phoenix, Arizona.
Enclosed with this proxy statement are your voting card and the 1997
annual report.
Your vote is important. Whether you plan to attend or not, please sign,
date, and return the enclosed proxy card in the envelope provided, or you may
access the automated telephone voting feature which is described on your proxy
card. If you plan to attend the meeting you may vote in person.
Last year, 83% of our outstanding shares were represented in person or
by proxy. This year we would like even greater shareholder participation.
I look forward to your participation at our annual meeting.
Sincerely,
/s/ D C Yearley
<PAGE>
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To the Shareholders of Phelps Dodge Corporation:
The annual meeting of shareholders of Phelps Dodge Corporation will be
held at the Arizona Biltmore Hotel, 24th Street and Missouri Avenue, Phoenix,
Arizona, on Wednesday, May 6, 1998, at 11:30 a.m., to consider and take action
on the following:
1. Elect four directors;
2. Adopt the Phelps Dodge 1998 Stock Option and Restricted Stock Plan;
3. Ratify the appointment of Price Waterhouse LLP as independent
accountants for the Corporation for the year 1998; and
4. Transact any other business that may properly be brought before the
annual meeting.
Only holders of record of the Corporation's common shares at the close
of business on March 20, 1998, will be entitled to vote at the meeting or at any
adjournments of our annual meeting.
Shareholders who do not expect to attend the meeting in person are
asked to access the automated telephone voting feature described on the proxy
card or date, sign and complete the enclosed proxy and return it without delay
in the enclosed envelope, which requires no postage stamp if mailed in the
United States. If you are attending in person and you have mailed your proxy
card, you may revoke your proxy and vote in person at the meeting.
By order of the Board of Directors,
Robert C. Swan
Vice President and Secretary
Phoenix, Arizona
April 1, 1998
<PAGE>
PHELPS DODGE CORPORATION
ANNUAL SHAREHOLDERS MEETING
PROXY STATEMENT
Annual May 6, 1998 Arizona Biltmore Hotel
Meeting 11:30 a.m. 24th Street and Missouri Avenue
Phoenix, Arizona
Record Date Close of business on March 20, 1998. If you were a
shareholder at that time, you may vote at the meeting.
Only holders of our common shares are entitled to vote
and each share is entitled to one vote. On March 20,
1998, we had 58,660,563 common shares outstanding.
If you participate in the Automatic Dividend Investment
Service for Phelps Dodge Shareholders, administered by
The Chase Manhattan Bank, all common shares held for
your account under that service will be voted in
accordance with your proxy.
Proxies
Solicited By The Board of Directors.
Revoking You may revoke your proxy before it is voted at the
Your Proxy meeting by delivering a signed revocation letter or new
proxy, dated later than your first proxy, to Robert C.
Swan, our Corporate Secretary.
First Mailing This proxy statement and accompanying materials are
Date being first sent to shareholders on April 1, 1998.
1
<PAGE>
1. ELECTION OF DIRECTORS
Board The Corporation currently has eleven directors. Ten
Structure directors are divided into three classes: three in
Class I, four in Class II, and three in Class III. One
director currently is unclassified and is a nominee for
Class I. The terms of office of the three Class I
directors expire at the 1998 annual meeting of
shareholders.
Class I The four nominees for election as Class I directors are
Nominees listed below. If elected, the nominees will serve for a
term of three years and until their successors are
elected and qualify. Unless you instruct us on the
proxy card to vote differently, we will vote signed,
returned proxies FOR the election of such nominees. If
for any reason any nominee cannot or will not serve as
a director, we may vote such proxies for the election
of a substitute nominee designated by the Board of
Directors.
Class I A nominee must receive a plurality of the votes cast at
Election the annual meeting to be elected. Abstentions and
broker non-votes therefore have no effect on the
election of directors.
<TABLE>
<CAPTION>
Age, Principal Occupation,
Business Experience Director
Nominee and Other Directorships Held Since
- -------------------- -------------------------------------------------- ---------
<S> <C> <C>
Paul Hazen Mr. Hazen has been Chairman and Chief 1988
(Class I) Executive Officer of Wells Fargo & Company
(bank holding company) and of Wells Fargo
Bank, N.A. (national banking association) since
January 1, 1995. He was President of Wells
Fargo & Company and of Wells Fargo Bank,
N.A. from 1984 to 1994. He is a director of Wells
Fargo & Company, Wells Fargo Bank, N.A.,
AirTouch Communications, Inc. and Safeway,
Inc. Age 56.
Manuel J. Iraola Mr. Iraola has been President of Phelps Dodge 1997
(Class I) Industries, a division of the Corporation, since
1995, and a Senior Vice President of the
Corporation since 1995. From 1992 until 1995 he
was President of Phelps Dodge International
Corporation. He was Senior Vice President and
Chief Financial Officer of Columbian Chemicals
Company, a subsidiary of the Corporation, from
1986 until 1992. Age 50.
Marie L. Knowles Mrs. Knowles has been Executive Vice President 1994
(Class I) and Chief Financial Officer of Atlantic Richfield
Company (diversified energy company) since
1996. From 1993 until 1996 she was Senior Vice
President of Atlantic Richfield Company, and
President of ARCO Transportation Company, a
former subsidiary of Atlantic Richfield Company.
From 1990 to 1993 she was Vice President and
Controller of Atlantic Richfield Company. Mrs.
Knowles is a director of ARCO Chemical
Company and Vastar Resources, Inc. Age 51.
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
Age, Principal Occupation,
Business Experience Director
Nominee and Other Directorships Held Since
- -------------------- ---------------------------------------------------- ---------
<S> <C> <C>
Gordon R. Parker Mr. Parker was Chairman of Newmont Mining 1995
(Class I) Corporation and Newmont Gold Company (gold
mining company) from 1986 until his retirement
in 1994. He was Chief Executive Officer of both
companies from 1986 until 1993. Mr. Parker is a
director of Caterpillar, Inc., Gold Fields of South
Africa and The Williams Companies, Inc. Age 62.
</TABLE>
Continuing The seven directors whose terms will continue after the
Directors annual meeting and will expire at the 1999 annual
meeting (Class II) or the 2000 annual meeting (Class
III) are listed below.
<TABLE>
<CAPTION>
Age, Principal Occupation,
Business Experience Director
Director and Other Directorships Held Since
- --------------------- --------------------------------------------------- ---------
<S> <C> <C>
Paul W. Douglas Mr. Douglas was Chairman and Chief Executive 1983
(Class II) Officer of The Pittston Company (coal mining and
transportation services) from 1984 until his
retirement in 1991. He was President, Chief
Executive Officer and Chairman of the Executive
Committee of Freeport-McMoRan Inc. from 1981
to 1983 and of Freeport Minerals Company from
1975 to 1981. Mr. Douglas is a director of U.S.
Trust Corporation and a trustee of its subsidiary,
United States Trust Company of New York.
Age 71.
William A. Franke Mr. Franke has been Chairman and Chief 1980
(Class II) Executive Officer of America West Holdings
Corporation since February 1997 and Chairman
of the Board of its principal subsidiary, America
West Airlines, Inc. (airline carrier), since 1992.
He was the subsidiary's Chief Executive Officer
from 1993 until 1997, and its President from
1996 until 1997. He has been President of
Franke & Company, Inc. (investment firm), since
1987, and is a managing partner of Newbridge
Latin America, LLP (private equity investment
fund). He is a director of America West Holdings
Corporation, America West Airlines, Inc., Central
Newspapers, Inc., Beringer Wine Estates and
Mtel Latin America, Inc. He is also a director and
Chairman of the Board of Airplanes Limited, and
a controlling trustee and Chairman of Airplanes
U.S. Trust (aircraft financing and leasing), and a
director of the Air Transport Association of
America. Age 61.
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
Age, Principal Occupation,
Business Experience Director
Director and Other Directorships Held Since
- --------------------- ------------------------------------------------- ---------
<S> <C> <C>
Southwood J. Mr. Morcott has been Chairman of the Board of 1991
Morcott Dana Corporation (manufacturer and distributor
(Class II) of automotive and vehicular parts) since 1990.
From 1987 to 1995, he served as Chairman of
Hayes-Dana Inc. He was appointed Chief
Executive Officer of Dana Corporation in 1989
and Chief Operating Officer in 1986. He was
President of Dana Corporation from 1986 to
1995. Mr. Morcott is a director of Dana
Corporation, CSX Corporation and Johnson
Controls, Inc. Age 60.
J. Steven Whisler Mr. Whisler has been President and Chief 1995
(Class II) Operating Officer of the Corporation since
December 1997, and President of Phelps Dodge
Mining Company, a division of the Corporation,
since 1991. He was a Senior Vice President of
the Corporation from 1988 to December 1997
and a Vice President of the Corporation from
1987 until 1988. He was General Counsel of the
Corporation from 1987 until 1991. He is a
director of Burlington Northern Santa Fe
Corporation and Southern Peru Copper
Corporation. Age 43.
Robert N. Burt Mr. Burt has been Chairman of the Board and 1993
(Class III) Chief Executive Officer of FMC Corporation
(chemicals and machinery for industry,
agriculture and government) since 1991. He was
President of that company from 1990 to 1993
and Executive Vice President from 1988 to 1990.
From 1989 to 1991 he was Chairman and Chief
Executive Officer of FMC Gold Company. He is a
director of FMC Corporation and Warner-Lambert
Company. Age 60.
Robert D. Krebs Mr. Krebs has been Chairman of the Board of 1987
(Class III) Burlington Northern Santa Fe Corporation
(transportation) since April 1997, and President
and Chief Executive Officer from 1995 to 1997.
From 1988 to January 1998 he was Chairman,
President and Chief Executive Officer of Santa
Fe Pacific Corporation. He is a director of
Burlington Northern Santa Fe Corporation and
Santa Fe Pacific Pipelines, Inc. Age 55.
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
Age, Principal Occupation,
Business Experience Director
Director and Other Directorships Held Since
- ---------------------- -------------------------------------------------- ---------
<S> <C> <C>
Douglas C. Yearley Mr. Yearley has been Chairman of the Board and 1986
(Class III) Chief Executive Officer of the Corporation since
1989 and was President of the Corporation from
1991 until December 1997. He was President
of Phelps Dodge Industries, a division of the
Corporation, from 1988 until 1990, Executive
Vice President of the Corporation from 1987 until
1989 and Senior Vice President of the
Corporation from 1982 through 1986. He is a
director of J. P. Morgan & Co., Incorporated and
its principal banking subsidiary, Morgan Guaranty
Trust Company of New York, Lockheed Martin
Corporation, USX Corporation and Southern
Peru Copper Corporation. Age 62.
</TABLE>
Board The Board of Directors met eight times during 1997.
Meetings Various committees of the Board also met during the
year. Average attendance at all Board and committee
meetings was 95%.
Board The Audit Committee is comprised of Messrs. Douglas,
Committees Franke, Hazen (Chairman), (Mrs.) Knowles, and Krebs.
The Committee, which met four times during 1997,
generally performs the following functions:
* Recommends the appointment of the Corporation's
independent accountants and reviews the scope and
timing of their audit plans and the appropriateness
of their fees;
* Reviews the scope and results of internal audit
activity;
* Reviews internal audit policies and procedures and
financial and accounting controls;
* Reviews reports, recommendations, and opinions
prepared or given by the independent accountants
concerning the Corporation's financial statements,
financial and accounting personnel, and internal
controls, and implements such recommendations as
appropriate; and
* Reviews the Corporation's code of business ethics
and policies.
The Compensation and Management Development Committee,
comprised of Messrs. Burt, Douglas, Hazen and Morcott
(Chairman), met five times during 1997. The Committee
performs the following functions:
* Recommends to the Board the compensation for the
Corporation's senior officers;
* Reviews management recommendations concerning the
compensation of other officers and key personnel;
* Reviews the Corporation's program for management
development; and
* Reviews and recommends to the Board incentive
compensation awards, stock option grants and
restricted stock.
5
<PAGE>
The Committee on Directors is comprised of Messrs.
Franke, Krebs (Chairman), Morcott, and Parker. The
Committee, which met two times during 1997, performs
the following functions:
* Makes recommendations concerning the composition of
the Board and its committees, and reviews Board and
committee compensation; and
* Reviews the qualifications of potential director
candidates and recommends to the Board nominees for
election as directors.
The Committee on Directors will consider potential
nominees recommended by shareholders. Recommendations
should be sent to the Secretary of the Corporation and
should include the address and a brief description of
the qualifications of the individual recommended.
The Environmental, Health and Safety Committee,
comprised of Messrs. Burt (Chairman), Douglas, (Mrs.)
Knowles, and Morcott, met three times in 1997. The
Committee generally performs the following functions:
* Reviews the Corporation's environmental, health,
and safety policies;
* Reviews management's implementation of these
policies; and
* Makes reports and recommendations to the Board
concerning the results of its reviews.
Directors The Board of Directors has adopted a policy that each
Stock director shall own a total of not less than 2,000
Ownership common shares of the Corporation. Stock units granted
Policy to a director under the Corporation's Directors Stock
Unit Plan or the Deferred Compensation Plan apply
toward attainment of the requirement.
Board Compensation
Retainer Directors that are not salaried employees of the
and Fees Corporation ("Non-Employee Director") receive the
following annual compensation for their Board service:
Annual Retainer: $25,000
Attendance Fees: $1,000 for each Board meeting
$1,000 for each Board Committee
meeting
Expenses related to attendance
Committee Chair
Stipend: $3,000
Stock Units: 450 units
Directors In order to encourage increased stock ownership, the
Stock Unit Board of Directors adopted the Directors Stock Unit
Plan Plan. Pursuant to that Plan each Non-Employee Director
receives an annual grant of 450 stock units (which
includes the 150 units discussed in the following
paragraph) having a value equal to 450 of the
Corporation's common shares. While stock units do not
confer on a director the right to vote, each stock unit
is credited on each dividend payment date with stock
units equal to the applicable dividend payable on the
Corporation's common shares. Upon termination of
service as a director, the director is entitled to
payment of his or her accumulated stock units in an
equivalent number of the Corporation's common shares or
in cash.
6
<PAGE>
The Corporation's Directors Retirement Plan was
terminated for active directors, effective December 31,
1997. Each Non-Employee Director continuing in office
thereafter received a grant of stock units under the
Directors Stock Unit Plan for that number of units
having a value (at the time of grant) equal to the
dollar value of the director's pension accruals. In
addition, beginning in 1998, each Non-Employee Director
also receives 150 stock units which are intended to
replace the estimated average dollar value of future
annual pension accruals that would have been made under
the Plan.
Directors Directors may defer payment of retainer and/or meeting
Deferred fees to future years and may elect to have such
Compensation deferred compensation (i) receive interest thereon at
Plan prevailing market rates, (ii) deemed invested in the
Corporation's common shares or (iii) invested in one of
several mutual funds designated for that purpose.
Expenses All directors are reimbursed for travel and other
and Benefits related expenses incurred in attending shareholder,
Board and committee meetings. The Corporation also
provides Non-Employee Directors with life insurance
benefits and allows them to participate in its Matching
Gifts Program, whereby it will match gifts by directors
to qualified organizations up to a total of $10,000 per
year.
Directors and On June 1, 1996, the Corporation purchased directors'
Officers and officers' liability insurance policies from
Liability National Union Fire Insurance Company of Pittsburgh,
Insurance Pa., Aetna Casualty and Surety Company, Continental
Casualty Company, Federal Insurance Company and XL
Insurance Company, each for a three-year term ending
June 1, 1999, at premiums of $1,230,636, $400,000,
$347,500, $150,000 and $200,000, respectively. The
policies insure (i) directors, officers, division
presidents and vice presidents of the Corporation and
its subsidiaries, and employees who are fiduciaries of
employee benefit plans of the Corporation and its
subsidiaries, against certain liabilities they may
incur in the performance of their duties and (ii) the
Corporation against any obligation to indemnify such
persons against such liabilities, and (iii) the
Corporation for allegations related to securities
claims.
Compensation Committee Interlocks and Insider
Participation
The following directors served on the Compensation and
Management Development Committee during all or part of
1997: Messrs. Burt, Douglas, Hazen and Morcott
(Chairman). None of these Directors is or has been an
officer or employee of the Corporation or any of its
subsidiaries or has had any other relationship with the
Corporation or any of its subsidiaries requiring
disclosure under the applicable rules of the Securities
and Exchange Commission.
7
<PAGE>
Share Ownership of Directors and Executive Officers
The following table lists the common share ownership as
of February 1, 1998 for our directors and executive
officers. "Beneficial Ownership" includes shares a
director or officer has the power to vote or transfer,
and stock options that were exercisable on February 1,
1998 or within 60 days thereafter. On February 1, 1998,
the directors and executive officers of Phelps Dodge
owned, in the aggregate, 1,068,955 shares of Phelps
Dodge common stock (approximately 1.8 percent of the
shares outstanding). Phelps Dodge directors also have
interests in stock-based units under Corporation plans.
While these units may not be voted or transferred, they
are listed in the table below because they represent a
component of the total economic interest of our
directors in Phelps Dodge stock.
<TABLE>
<CAPTION>
Options
Shares Exercisable
Name of Beneficially Within Stock
Beneficial Owner Owned 60 Days Units(1) Total
- ------------------------------------- ----------------- ------------ ---------------- ------------
<S> <C> <C> <C> <C>
Robert N. Burt 2,140 2,295 1,181 5,616
Paul W. Douglas 2,000 8,035 3,349 13,384
William A. Franke 2,000 8,035 1,815 11,850
Paul Hazen 3,000 8,035 3,640 (2) 14,675
Manuel J. Iraola 44,534 (3) 85,597 0 130,131
Marie L. Knowles 1,000 1,147 961 3,108
Robert D. Krebs 1,894 6,887 1,470 10,251
Southwood J. Morcott 1,801 4,591 3,265 (2) 9,657
Gordon R. Parker 1,000 1,147 1,083 3,230
Ramiro G. Peru 5,616 18,040 0 23,656
Thomas M. St. Clair 20,606 100,050 0 120,656
J. Steven Whisler 83,994 (3) 160,098 0 244,092
Douglas C. Yearley 113,078 382,335 0 495,413
Directors and executive officers
as a group 282,663 786,292 16,764 1,085,719
- ------------------------------------- ------- ------- ------ ---------
</TABLE>
--------------
(1) Represents stock units awarded under the Directors
Stock Unit Plan.
(2) Includes stock units awarded under the Directors
Deferred Compansation Plan.
(3) Includes the following shares of restricted stock
awarded under the 1993 Stock Option and Restricted
Stock Plan: Mr. Iraola, 30,000 shares, and Mr.
Whisler, 25,000 shares.
8
<PAGE>
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based on a review of reports filed by our directors,
executive officers and beneficial holders of 10% or
more of our outstanding shares, and upon representions
from those persons, all reports required to be filed by
our reporting persons during 1997 were filed on time.
To the knowledge of the Corporation, the following
entities beneficially owned in excess of five percent
of the Corporation's common shares as of December 31,
1997:
<TABLE>
<CAPTION>
Number of Percent of
Name and Address Shares Outstanding
- -------------------------------------------------------------- ----------- ------------
<S> <C> <C>
AMVESCAP PLC; AVZ, Inc.; AIM Management Group, Inc.; 4,784,030 8.1%
AMVESCAP Group Services, Inc.; INVESCO, Inc.;
INVESCO North American Holdings, Inc.; and
INVESCO Capital Management, Inc.(a)
111 Devonshire Square
London, EC2M 4YR England
The Capital Group Companies, Inc. and 4,896,300 8.3%
Capital Research and Management Company(b)
333 South Hope Street
Los Angeles, CA 90071
Morgan Stanley, Dean Witter,(c) 4,322,259 7.35%
Discover & Co. and
Dean Witter InterCapital Inc.
1585 Broadway
New York, NY 10036
Wellington Management Company, LLP(d) and 3,814,520 6.49%
Vanguard Wellington Fund, Inc.
75 State Street
Boston, MA 02109
</TABLE>
--------------
(a) A report on Schedule 13G, dated February 9, 1998,
disclosed that these entities, filing jointly as
parent holding companies and as a registered
investment advisor (INVESCO Capital Management,
Inc.), had shared voting power over 4,784,030
shares and shared dispositive power over 4,784,030
shares.
(b) An amended report on Schedule 13G, dated February
10, 1998, disclosed that these entities, filing
jointly as parent holding companies and registered
investment advisors, had sole dispositive power
over 4,896,300 shares.
(c) Morgan Stanley, Dean Witter, Discover & Co.
("MSDWD") filed a report on Schedule 13G, dated
February 13, 1998, which disclosed that it had
shared voting power over 4,142,682 shares and
shared dispositive power over 4,322,259 shares
(including the shares held by Dean Witter
InterCapital Inc. ("DW InterCapital") described
below). MSDWD is a registered investment advisor
and the parent holding company of DW InterCapital,
which also reported on such Schedule 13G having
shared voting and shared dispositive power over
3,825,718 shares, which represented 6.51% of the
outstanding common shares at December 31, 1997. The
address of DW InterCapital is Two World Trade
Center, New York, New York 10048.
9
<PAGE>
(d) Wellington Management Company LLP ("Wellington
Management") filed an amended report on Schedule
13G, dated January 14, 1998, which disclosed that,
as a registered investment advisor and a parent
holding company, it had shared voting power over
307,770 shares and shared dispositive power over
3,814,520 shares (including the 3,304,900 shares
held by Vanguard Wellington Fund (the "Wellington
Fund") described below). On a separate Schedule
13G, dated February 9, 1998, the Wellington Fund
disclosed that it had sole voting power and shared
dispositive power over 3,304,900 shares, which
represented 5.62% of the outstanding common shares
at December 31, 1997. Wellington Management is the
investment advisor for the Wellington Fund and
shares dispositive power over the shares held by
the Fund. The address of the Wellington Fund is 100
Vanguard Boulevard, Malvern, Pa. 19355.
EXECUTIVE COMPENSATION AND OTHER INFORMATION
The following table summarizes the compensation we paid
our Chairman and Chief Executive Officer and each of
the other most highly compensated executive officers in
1997, 1996 and 1995.
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation
- ------------------------------------------------------------------------- ---------------------------------
Other All
Name Annual Restricted Other
and Base Compen- Stock Options Compen-
Principal Salary Bonus sation(3) Awards(4) Granted sation(5)
Position Year ($) ($)(1) ($) ($) (#) ($)
- -------------------------- ------ --------- --------- ----------- ------------ ------------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Douglas C. Yearley 1997 750,000 860,300 152,248 -0- 242,660 (2) $125,765
Chairman of the Board, 1996 675,000 675,000 56,172 -0- 103,601 (2) 109,465
Chief Executive 1995 640,000 642,880 48,639 -0- 163,032 (2) 101,270
Officer and Director
J. Steven Whisler 1997 400,000 309,900 18,349 -0- 121,960 (2) 43,602
President and Chief 1996 355,000 300,000 14,793 -0- 44,499 (2) 38,489
Operating Officer; 1995 340,000 267,200 6,149 1,684,375 63,010 (2) 36,684
President, PDMC
and Director
Manuel J. Iraola 1997 360,000 247,800 22,064 -0- 36,933 (2) 41,604
Senior Vice President; 1996 320,000 280,000 17,216 -0- 30,000 36,650
President, PDI 1995 275,000 227,600 17,208 1,684,375 50,000 31,094
and Director
Thomas M. St. Clair 1997 300,000 239,400 7,993 -0- 39,516 (2) 53,968
Senior Vice 1996 290,000 188,900 12,589 -0- 53,572 (2) 50,915
President and 1995 280,000 186,200 3,631 -0- 40,630 (2) 47,901
Chief Financial Officer
Ramiro G. Peru(6)
Senior Vice President,
Organization 1997 190,000 125,800 7,494 -0- 29,964 (2) 20,444
Development
and Information
Technology
- --------------------------
</TABLE>
10
<PAGE>
(1) Amounts shown under "Bonus" were paid under the
Annual Incentive Compensation Plan. Amounts shown
under "Base Salary" and "Bonus" include any salary
or bonus deferred by the executive under the Phelps
Dodge Employee Savings Plan (the "Savings Plan")
and the Phelps Dodge Corporation Supplemental
Savings Plan (the "Supplemental Savings Plan"),
formerly known as the savings plan component of the
Comprehensive Executive Nonqualified Retirement and
Savings Plan of Phelps Dodge Corporation.
(2) The option grants denoted by "(2)" include reload
options, as well as normal compensatory options.
(3) Amounts shown under "Other Annual Compensation"
include tax payment reimbursements for all reported
executives, and spousal travel expenses of $63,937
for one executive officer.
(4) The 1995 awards reflect a special grant of
restricted shares to Messrs. Iraola and Whisler.
These grants require a five year post-grant service
to vest, but are subject to earlier vesting as a
result of the recipient's death, disability,
retirement or a change in control of the
Corporation. Dividends on restricted stock are paid
to the holder.
On December 31, 1997, the named executives held the
following numbers of shares of restricted stock
which had the following aggregate values as of such
date; Mr. Whisler, 25,000 shares valued at
$1,554,688; Mr. Iraola, 30,000 shares valued at
$1,865,625. The reported values are based on the
market value of unrestricted shares of the
Corporation's stock, as of December 31, 1997
($62.1875), and as such do not reflect any discount
attributable to the restrictions on transferability
and risk of forfeiture inherent in the restricted
stock.
(5) Amounts shown include the following contributions
and accruals by the Corporation for 1997 to the
Savings Plan and 1997 accruals under the
Supplemental Savings Plan, and for premium payments
for life insurance policies issued through the
Executive Life Insurance Plan for the reported
executives:
Executive
Employee Supplemental Life
Savings Savings Insurance
Plan Plan Plan
-------- ------------ ---------
Douglas C. Yearley 16,000 59,000 50,765
J. Steven Whisler 16,000 24,000 3,602
Manuel J. Iraola 16,000 20,000 5,604
Thomas M. St. Clair 16,000 14,000 23,968
Ramiro G. Peru 16,000 3,000 1,444
(6) Effective January 1, 1997, Mr. Peru was elected a
Senior Vice President of the Corporation.
Stock Each of the executives listed in the Summary
Options Compensation Table was eligible to receive two types of
option grants during 1997: normal option grants and
reload option grants. The first type of grant is a
compensatory award normally made on an annual basis
which is intended to reward each named executive based
on the Corporation's future performance. Normal option
grants customarily include the right to receive reload
options.
A reload option is granted to an employee who exercises
an option with already-owned shares. It replaces the
opportunity for future appreciation that the employee
would otherwise lose by exercising the original option,
while encouraging
11
<PAGE>
the employee to increase his share ownership. Reload
options provide only limited incremental value to the
employee as compared to the options they replace.
Reload option grants customarily include the right to
receive additional reload options.
The following table contains information with respect
to the normal compensatory option grants and reload
option grants made to each named executive during 1997
and the hypothetical value at the time of grant based
on a variation of the Black-Scholes model (see footnote
(3) on page 13). The Corporation is not aware of any
option pricing model which can provide a true
assessment of the value of the options. Over their
lives, the options could have a greater or a lesser
value than that shown in the table, and under some
circumstances they could have zero value.
Option Grants in 1997
<TABLE>
<CAPTION>
Normal % of Total
and Reload Options Granted
Options to Employees Expiration Grant Date
Name Granted(1) In 1997(2) Price Date Present Value(3)
- ----------------------- ------------ ---------------- ------------- ------------ -----------------
<S> <C> <C> <C> <C> <C>
Douglas C. Yearley 5,612 21.9% $ 72.3750 12/7/98 $ 40,000
9,763 72.3750 12/5/00 69,500
14,139 72.3750 12/2/97 100,700
2,774 72.3750 12/7/98 19,800
18,316 72.3750 12/1/03 130,400
47,523 81.1875 12/7/04 383,000
8,703 81.1875 2/7/00 70,100
7,119 85.8438 12/7/98 61,200
16,462 85.8438 12/5/00 141,400
16,460 85.8438 2/7/00 141,400
12,632 85.8438 12/4/01 108,500
3,157 85.8438 12/2/02 27,100
80,000 65.3750 12/3/07 920,800
J. Steven Whisler 20,601 11.0% 68.6250 12/2/02 138,400
2,160 68.6250 10/6/98 14,500
1,280 68.6250 12/7/98 8,600
5,076 81.5625 2/7/00 41,300
20,340 81.5625 12/7/04 165,600
19,503 81.5625 12/1/03 158,800
53,000 65.3750 12/3/07 610,000
Manuel J. Iraola 4,933 3.3% 82.1250 12/1/03 40,700
32,000 65.3750 12/3/07 368,300
Thomas M. St. Clair 3,848 3.6% 81.6250 12/2/02 31,500
931 81.6250 2/7/00 7,600
3,246 81.6250 12/5/00 26,600
4,110 81.6250 12/4/01 33,600
6,381 81.6250 12/7/04 52,200
21,000 65.3750 12/3/07 241,700
Ramiro G. Peru 306 2.7% 74.9375 12/2/02 2,300
982 74.9375 12/1/03 7,400
5,000 69.6250 2/5/07 62,200
2,676 84.1875 12/7/04 22,800
21,000 65.3750 12/3/07 241,700
</TABLE>
--------------
(1) During 1997, normal options were granted in the
following amounts to the named executive officers:
Mr. Yearley, 80,000 Mr. Whisler, 53,000; Mr.
Iraola, 32,000; Mr. St. Clair, 21,000; and Mr.
Peru, 26,000. The remaining grants disclosed in the
table are reload options.
12
<PAGE>
Normal options expire no later than the tenth
anniversary of the date of grant, plus one day. If
an employee retires on his normal retirement date,
or retires early under any pension or retirement
plan maintained by the Corporation or any
subsidiary, or dies, his exercisable options
terminate no later than the fifth anniversary of
his retirement or death. If an optionee's
employment terminates for any reason other than
retirement or death, his exercisable options
terminate no later than 30 days following the
termination of his employment.
Normal options generally become exercisable in
three substantially equal annual installments
beginning on the first anniversary of the date of
grant or earlier (but not earlier than six months
from the date of grant except in the case of death)
on (a) an employee's normal retirement date or
death, (b) the date an employee ceases to be
employed if his employment ceases within two years
following a change of control of the Corporation,
and (c) the date the Corporation's common shares
are purchased pursuant to a third party tender
offer or the Corporation's shareholders approve a
merger or similar transaction which the Corporation
will not survive as a publicly held corporation.
Options include limited rights exercisable only in
the event the Corporation's common shares are
purchased pursuant to a third party tender offer or
the Corporation's shareholders approve a merger or
similar transaction which the Corporation will not
survive as a publicly held corporation. Under these
limited rights, an optionee may elect, in lieu of
purchasing shares, to relinquish the option with
respect to all or any of such shares and to receive
a payment equal to (a) the price paid for a common
share in such merger or similar transaction
multiplied by the number of common shares the
optionee could have purchased less (b) the total
purchase price for that number of common shares
under the terms of the option.
Options include the right to receive reload options
in the event the optionee exercises an option with
already-owned shares. Reload options contain the
same expiration dates and other terms as the
options they replace except that they have an
exercise price per share equal to the fair market
value of a common share on the date the reload
option is granted and become exercisable in full
six months after they are granted. Reload options
customarily include the right to receive additional
reload options.
(2) Illustrates the total number of normal and reload
options granted as a percent of the aggregate
number of 1997 normal options (819,200 shares) and
1997 reload options (291,231 shares) granted to all
employees.
(3) The hypothetical present value of the options at
the date of grant was determined using a variation
of the Black-Scholes option pricing model. The
Black-Scholes model is a complicated mathematical
formula which is widely used to value options
traded on the stock exchanges. However, executive
stock options differ from exchange-traded options
in several key respects. Executive options are
long-term, non-transferable and subject to vesting
restrictions, whereas exchange-traded options are
short-term and can be exercised or sold immediately
in a liquid market. The model used here is adapted
to estimate the present value of an executive
option and considers a number of factors, including
the grant price of the option, the volatility of
the Corporation's common shares, the dividend rate,
the term of the option, the time it is expected to
be outstanding and interest rates. The
Black-Scholes values were derived using as
13
<PAGE>
assumptions the following financial factors which
existed at or about the time that the options were
granted: volatility of .2300, dividend yield of
3.02%, and interest rates of 5.80% for normal
options and 5.70% for reload options. In view of
the Corporation's historic exercise experience and
the inherent motivation to exercise options early
in their terms because of the reload option
feature, normal options were assumed to be
outstanding for three years at time of exercise and
reload options for one year. No downward
adjustments were made to the resulting grant-date
option values to account for potential forfeiture
or non-transferability of the options in question.
Because the Black-Scholes model was not developed
for executive options and requires the use of
assumptions primarily based on conditions in effect
at the time of grant (and not over the term of the
option), it provides only a theoretical estimate of
the value of these options.
Reload option grants are part of the Corporation's
overall program to increase the number of common shares
owned by its executive officers and other key
employees. Traditional option programs generally do not
encourage optionees to exercise options prior to the
end of their term or to hold the shares received upon
such exercise. The Compensation and Management
Development Committee adopted the reload option
program, with shareholder approval, to encourage option
exercises and stock retention by permitting an optionee
to exercise an option with already-owned common shares
and to be restored to the same economic opportunity
available immediately prior to such exercise.
Under the reload program, an employee who exercises an
option (the "Original Option") with already-owned
shares prior to the end of the option term will receive
an additional option (the "Reload Option") covering a
number of shares equal to the number used to exercise
the Original Option. The Reload Option will be
exercisable, beginning six months after grant and
continuing for the remaining term of the Original
Option, at a price equal to the fair market value of
the shares on the date the Original Option is
exercised. As a result of the exercise of the Original
Option with already-owned shares, the net number of
common shares held by the employee will increase by the
number of shares that has an aggregate market value
equal to the "spread" on the option (the "spread"
equals the aggregate market price of the option shares
on the day of exercise less the aggregate exercise
price). Thus, the number of shares covered by the
Reload Option plus the number of additional shares
received on the exercise of the Original Option will
equal the number of shares covered by the Original
Option. The program thereby serves to replace the
opportunity for future appreciation that an optionee
would otherwise lose by exercising an option using
already-owned shares. In addition, by inducing option
exercises and stock retention, the reload feature
offers optionees the opportunity to receive dividends
on a greater number of shares than would be the case
without such a feature.
An employee will also benefit from the use of the
reload feature if the market price of the underlying
shares declines between the date he exercises the
Original Option and the expiration date of that option.
By encouraging an employee to exercise options with
shares, the reload feature enables an employee to
protect against a decline in the market price of the
common shares without losing the potential benefit of a
price increase.
14
<PAGE>
Aggregated Option Exercises in 1997 and December 31, 1997 Option Values
The following table provides information concerning
options exercised in 1997 by the named executives and
the options held by them at the end of 1997:
<TABLE>
<CAPTION>
Value of
Number of Unexercised
Unexercised In-the-Money
Shares Options at Options at
Acquired 12/31/97 12/31/97
on Value (Exercisable/ (Exercisable/
Name Exercise(1) Realized Unexercisable) Unexercisable)(2)
- ----------------------- ------------- ------------- ----------------- ------------------
<S> <C> <C> <C> <C>
Douglas C. Yearley 236,757 $5,596,122 382,335/160,001 $ 143,753/ 0
J. Steven Whisler 106,111 2,890,558 160,098/ 89,668 61,815/ 0
Manuel J. Iraola 9,169 347,849 80,597/ 68,667 430,552/45,313
Thomas M. St. Clair 24,867 518,199 100,050/ 42,668 38,813/ 0
Ramiro G. Peru 6,048 167,266 16,374/ 34,134 8,651/ 0
</TABLE>
--------------
(1) All of the named executives used shares already
owned by them to pay the exercise price of some or
all of the options they exercised in 1997. Mr.
Yearley exercised most of the options in 1997 in
the above manner. He acquired 36,901 shares upon
exercise of these options in excess of the shares
used to pay the exercise price and associated
taxes, and received reload options to purchase
162,660 shares.
Options for 106,111, 9,169, 24,867 and 6,048 were
exercised by Mr. Whisler, Mr. Iraola, Mr. St. Clair
and Mr. Peru, respectively, in this manner. The
number of common shares acquired upon exercise of
these options in excess of the shares used to pay
the exercise price and associated taxes was 19,766,
2,481, 3,392 and 1,123, respectively.
(2) Value is based on the mean of the high and low
prices of the common shares on the Consolidated
Trading Tape on December 31, 1997 ($62.1875).
Pension and Other Retirement Benefits
Retirement The following pension table shows the estimated
Plans aggregate annual benefits payable in the form of a
straight life annuity commencing at age 65 (i)
under the Phelps Dodge Retirement Plan for Salaried
Employees (the "Retirement Plan") as supplemented
by the supplementary retirement provisions of the
Phelps Dodge Corporation Supplemental Retirement
Plan (previously known as the Comprehensive
Executive Non-qualified Retirement and Savings
Plan) that make up amounts limited by the Internal
Revenue Code (the "Code") and (ii) under the
supplementary retirement provisions of the Phelps
Dodge Corporation Supplemental Retirement Plan
based on incentive compensation under the Annual
Incentive Compensation Plan.
15
<PAGE>
Pension Plan Table
<TABLE>
<CAPTION>
Final Average
Salary and
Incentive
Estimated Annual Benefits for Years of Benefit Service Indicated(c)
Compensation ----------------------------------------------------------------------------------------------------------------
(a)(b) 10 15 20 25 30 35 40 45
- -------------- ----------- ----------- ---------- ----------- ----------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 290,000 $ 44,390 $ 66,580 $ 88,770 $110,970 $133,160 $155,350 $ 177,550 $ 199,740
$ 465,000 $ 72,390 $108,580 $144,770 $180,970 $217,160 $253,350 $ 289,550 $ 325,740
$ 660,000 $103,590 $155,380 $207,170 $258,970 $310,760 $362,550 $ 414,350 $ 466,140
$ 765,000 $120,390 $180,580 $240,770 $300,970 $361,160 $421,350 $ 481,550 $ 541,740
$ 850,000 $133,990 $200,980 $267,970 $334,970 $401,960 $468,950 $ 535,950 $ 602,940
$ 935,000 $147,590 $221,380 $295,170 $368,970 $442,760 $516,550 $ 590,350 $ 664,140
$ 1,020,000 $161,190 $241,780 $322,370 $402,970 $483,560 $564,150 $ 644,750 $ 725,340
$ 1,105,000 $174,790 $262,180 $349,570 $436,970 $524,360 $611,750 $ 699,150 $ 786,540
$ 1,190,000 $188,390 $282,580 $376,770 $470,970 $565,160 $659,350 $ 753,550 $ 847,740
$ 1,275,000 $201,990 $302,980 $403,970 $504,970 $605,960 $706,950 $ 807,950 $ 908,940
$ 1,360,000 $215,590 $323,380 $431,170 $538,970 $646,760 $754,550 $ 862,350 $ 970,140
$ 1,445,000 $229,190 $343,780 $458,370 $572,970 $687,560 $802,150 $ 916,750 $1,031,340
$ 1,530,000 $242,790 $364,180 $485,570 $606,970 $728,360 $849,750 $ 971,150 $1,092,540
$ 1,683,000 $267,270 $400,900 $534,530 $668,170 $801,800 $935,430 $1,069,070 $1,202,700
</TABLE>
--------------
(a) The Retirement Plan provides a member upon
retirement at age 65 with a pension for life in a
defined amount based upon final average salary and
length of benefit service. Under the Retirement
Plan, final average salary ("Final Average Salary")
is the highest average annual base salary for any
consecutive 36-month period plus the highest
average annual incentive compensation for any
consecutive 60-month period during a member's last
120 months of employment. Benefit service includes
all periods of employment with the Corporation or
its participating subsidiaries. Benefits under the
Retirement Plan are subject to certain limitations
under the Code, and to the extent the result of
such limitations would be a benefit less than would
otherwise be paid under such Plan, the difference
is provided under the supplementary retirement
provisions of the Phelps Dodge Corporation
Supplemental Retirement Plan. The formula for
determining benefits payable under the Retirement
Plan takes into account estimated social security
benefits payable. The amounts set forth in the
table assume maximum social security benefits
payable in 1997.
(b) Amounts of annual incentive compensation have been
estimated based on the five-year average annual
incentive compensation awarded to participating
employees for 1993 through 1997. The actual amount
of incentive compensation for an individual at any
level of Final Average Salary could vary.
(c) The expected credited years of benefit service at
normal retirement for the Corporation's five
current named executive officers as of December 31,
1997 are as follows: Mr. Yearley, 41 years; Mr.
Whisler, 43 years; Mr. Iraola, 30 years, Mr. St.
Clair, 11 years; and Mr. Peru, 42 years. The years
of service are based on normal retirement for all
executive officers under the Retirement Plan and
the applicable provisions of the Supplemental
Retirement Plan.
16
<PAGE>
Severance and Change of Control Arrangements
Severance The Corporation has severance agreements with each of
Agreements its five executive officers under which the executive
With Our would receive a lump sum payment equal to his annual
Executives base salary in the event the Corporation terminates his
employment, other than for cause or mandatory
retirement, or the executive voluntarily terminates his
employment because of material reductions in his salary
or his position, duties and responsibilities. The
terminated executive would also receive (i)
outplacement services at a cost up to 15% of his base
salary and (ii) the cost of continued coverage for a
limited period under the Corporation's group health,
life insurance and disability plans.
Change of The Corporation also has agreements with such
Control executives under which each executive would receive, in
Agreements the event he ceases to be employed by the Corporation
With Our within two years following a change of control of the
Executives Corporation (for a reason other than death, disability,
willful misconduct, normal retirement or under certain
circumstances a voluntary termination of employment by
the executive), a lump sum equal to (i) three times the
executive's highest base salary during that year and
the prior two years plus (ii) three times the
executive's average bonus paid under the Annual
Incentive Compensation Plan for the two calendar years
preceding the year in which the change of control
occurs, less (iii) any severance payable under his
Severance Agreement. The amount of such payments, when
combined with any other payments that are contingent
upon a change of control, may be capped at the maximum
amount that can be paid without triggering an excise
tax under the Internal Revenue Code. This "Cap" on
payments does not apply if the amount of such payments,
calculated without the Cap, is at least 20% more than
the amount of such payments calculated with the Cap. If
the payments are not subject to the Cap, the
Corporation will provide the executive with a tax
gross-up payment to reimburse the executive for any
excise taxes as well as the presumed income taxes on
the gross-up. The terminated executive would also
receive the cost of continued coverage for a limited
period under the Corporation's group health, life
insurance and disability plans. Except under certain
circumstances, these change of control agreements
expire on December 31, 2002.
Other Change Although normal compensatory options granted by the
of Control Corporation generally become exercisable in three
Provisions substantially equal annual installments beginning on
the first anniversary of the date of grant, they also
become exercisable in certain change of control
situations. Specifically, such options are exercisable
(but not earlier than six months from the date of
grant) for a period of 30 days beginning on the date
the Corporation's common shares are purchased pursuant
to a third party tender offer or the Corporation's
shareholders approve a merger or similar transaction
which the Corporation will not survive as a publicly
held corporation or, in the case of the five executive
officers and certain other employees, the date the
employee ceases to be employed if he ceases to be
employed within two years following a change of
control. In addition, such options include limited
rights exercisable only in the event the Corporation's
common shares are purchased pursuant to a third party
tender offer or the Corporation's shareholders approve
a merger or similar transaction which the Corporation
will not survive as a publicly held corporation. Under
these limited rights, an optionee may elect, in lieu of
purchasing shares, to relinquish the option with
respect to all or any of such shares and to receive a
payment equal to (i) the price paid for a common share
in such merger or similar transaction multiplied by the
number of common shares the optionee could have
purchased less (ii) the total purchase price for that
number of common shares under the terms of the option.
17
<PAGE>
The Supplemental Retirement Plan provides for the
payment of unreduced benefits to employees who meet
liberalized age and length of service requirements and
whose employment is terminated by the Corporation or
any of its subsidiaries within two years following a
change of control of the Corporation. The Supplemental
Retirement Plan also provides an additional 36 months
of service credit to an executive who, due to his
termination of employment within two years following a
change of control of the Corporation, becomes entitled
to receive payments under his change of control
agreement with the Corporation. The Supplemental
Savings Plan obligates the Corporation to transfer an
amount equal to the deficiency in the assets of the
Plan's trust fund, if any, prior to the day on which a
change of control occurs.
18
<PAGE>
Compensation and Management Development Committee
Report on Executive Compensation
The The Committee is composed solely of directors
Committee (currently four) who are not employees of the
Corporation. It has periodically retained respected
independent compensation consultants to advise and
assist it in connection with various compensation
matters.
Corporate The Corporation's goal is to be the leader in each of
Goals the domestic and international mining and manufacturing
activities in which it competes. It also seeks to
achieve and sustain progressive increases in value for
its shareholders, while balancing appropriately the
short and long-term opportunities for the Corporation.
To meet these goals, the Corporation employs high
caliber, dedicated senior managers who are well trained
and results oriented. The Board of Directors
established the Compensation and Management Development
Committee to provide oversight of the Corporation's
compensation and management development programs and to
ensure that these programs maximize the Corporation's
ability to attract, retain and motivate employees to
meet these stated objectives.
The Committee believes it can motivate senior managers
participating in these programs by:
o Emphasizing the relationship between pay and
performance by rewarding managers who bring about
solid achievement with regard to key business
strategies and specific operational objectives and
by increasing the relative amount of compensation
at risk as management responsibilities increase.
o Assuring that the elements of variable compensation
are linked as directly as practicable to measurable
financial, operational and other forms of
performance.
o Encouraging stock ownership by executives.
o Tying pay for performance as closely as possible to
success in maximizing the value of the
Corporation's stock over the long term.
Elements of The executive officers are compensated by salaries,
Executive annual incentive awards and long-term incentive
Compensation compensation. Each element focuses on performance in a
different but complementary way. Salaries focus on
individual performance as well as competence, length of
service and the Corporation's performance during the
officer's tenure. Annual incentives relate to
individual, corporate and, where appropriate, unit
performance. Long-term incentive awards, which are paid
in the form of stock options, and, from time to time,
in restricted stock, create a long-term identity of
interest with the shareholders based on the
Corporation's performance and related growth of
shareholder value.
The Committee believes that the Corporation competes
for its executive talent primarily with similarly sized
industrial companies located in the United States.
Accordingly, where possible, the Committee compares the
compensation for the top five executives, at least
annually, to the compensation paid to executives
holding similar positions at sixteen publicly held
industrial corporations of an average size, measured by
revenues and market capital, similar to that of the
Corporation (referred
19
<PAGE>
to below as the "comparison group"). For other
executives, comparisons to similar positions are based
on a much larger group of companies of similar size to
the Corporation measured by revenues. The Committee
believes that the competitive data used is generally
representative of the competitive level of compensation
paid to executive officers in companies the size of
Phelps Dodge. Thus, the companies used for comparison
purposes in connection with the compensation paid to
the Corporation's executive officers are different from
the companies included in the peer group used in the
performance graphs on pages 23 and 24 and to compare
shareholder returns.
Executive Individual salaries for executive officers are
Salaries generally established by the Board of Directors, on the
recommendation of the Committee, to reflect the
officer's performance, competence, and length of
service and the Corporation's performance during the
executive officer's tenure. Generally, salary
adjustments are targeted to move salaries to median
levels over time for sustained and expected performance
and competence. The salaries of executive officers who
have performed exceptionally well over sustained
periods of time may be adjusted to exceed median
levels. Based on available information, the Committee
believes salaries in 1997 for the executive officers
were at or near the median when compared to employees
in similar positions in the comparison group of
companies. The Committee determined that, based on the
fact that over the last decade Phelps Dodge stock has
significantly outperformed the S&P Metals Mining index
and the executives named in the Summary Compensation
Table have sustained excellent performance, salaries
for these executives should be adjusted upward in 1998.
Annual The Annual Incentive Compensation Plan provides the
Incentives executive officers and certain other officers and
managers with compensation based on success in
achieving annual individual, corporate and, where
appropriate, unit goals. For each executive officer, a
target award is determined approximating the median of
the annual incentive compensation paid by the
comparison group to individuals holding comparable
positions. Lower threshold awards and higher maximum
awards are also established. Corporate goals are set
using return on equity and net operating cash flow
return on invested capital, both of which are
fundamental indicators of the Corporation's
performance. The goals are equally weighted and
determine 70% of the CEO's and COO's total annual
incentive compensation, and 60% and 15% of the
corporate executives' and operation executives' awards,
respectively. In 1997, the Corporation's performance
with respect to return on equity was approximately
midway between target and maximum goals. The
Corporation's 1997 performance with respect to net
operating cash flow return on invested capital was
approximately three-fourths of the way between target
and maximum goals. In the last four years, the
Corporation's operating cash flow has increased 99
percent resulting in top quartile performance against
the peer group companies during the period. Based on
these results and the Committee's evaluation of
performance relative to individual and, where
appropriate, unit goals, the Committee recommended, and
the Board approved, Annual Incentive Compensation
awards for 1997 above the targeted amounts for the
listed executives.
Long-term The Committee uses stock options as the principal
Incentive method of providing long-term incentive compensation
Compensation primarily because employees benefit from options, if at
all, only to the extent of increases in the value of
the Corporation's common shares. To further the
identity of interest with the shareholders, the
executive officers are expected to acquire and own
significant numbers of the Corporation's shares.
20
<PAGE>
The Committee has determined that to focus the
executives' attention to an appropriate extent on the
long-term growth of shareholder value, the targeted
compensation levels with respect to the present value
of stock options should be approximately midway between
the fiftieth and seventy-fifth percentiles of the
long-term incentive awards made to executives holding
similar positions in companies in the comparison group.
Adjustments are made from these levels based on the
performance, career potential, critical skills and
prior grant history of the executive officer. Of the
stock options granted to executive officers in 1997,
three were above the targeted levels, one was at the
targeted level and one was slightly below the targeted
level. All of the Committee's option grants for 1997
were approved by the Board.
Grants of The Committee also made grants of restricted stock to a
Restricted limited number of other key employees under the
Stock Corporation's 1993 Stock Option and Restricted Stock
Plan. The principal purpose of these grants was to
retain the services of key executive personnel through
a means that also provides a meaningful economic
incentive to increase the value of the Corporation's
common shares. The size of each award was determined
based on the Committee's subjective determination of
the recipient's expected contribution to the
Corporation over the stated vesting period, the
significance of the recipient's position with the
Corporation and the importance of maintaining
continuity of management in the recipient's function.
Stock To underscore the connection between the interests of
Ownership management and stockholders, the Corporation, several
Guidelines years ago, established informal stock ownership
guidelines for its executive officers. In 1996, the
Corporation formalized this program and established
stock ownership targets for officers of the Corporation
who hold the position of Vice President and above and
certain senior executives within the Phelps Dodge
Mining Company and Phelps Dodge Industries divisions.
The targets are expressed in terms of the value of the
Corporation's common shares held by the executive as a
multiple of salary grade midpoint. The targets range
from one and one-half times salary midpoint up to five
times salary midpoint for the CEO. Many Vice Presidents
and other executives already hold a substantial amount
of common shares, but those who do not hold sufficient
shares have five years to reach their personal
ownership targets.
Tax Section 162(m) of the Internal Revenue Code generally
Code places a $1 million per person limit on the deduction a
Issues publicly-held corporation may take for compensation
paid to its chief executive officer and its four other
highest compensated "covered employees," excluding for
this purpose deferred compensation and, in general,
compensation constituting "performance-based"
compensation. In 1997, the Corporation obtained
shareholder approval of an amendment to its 1993 Stock
Option and Restricted Stock Plan to continue to exclude
the compensation from stock options from the $1 million
deductibility limit. Other elements of the compensation
payable to executive officers, such as salary, annual
incentive compensation and restricted stock, are not
excludable from such limit. Mr. Yearley deferred
$240,000 of his salary in 1997, however, as a result of
the Corporation's performance in 1997 and the related
above-target incentive compensation award to Mr.
Yearley, his compensation subject to Section 162(m)
exceeded one million dollars resulting in the loss of a
Federal income tax deduction with respect to
approximately $372,000 of his compensation.
21
<PAGE>
CEO Douglas C. Yearley, the Chief Executive Officer of the
Compensation Corporation, received a base salary of $750,000 in
1997, an Annual Incentive Compensation Plan award of
$860,300 for 1997 performance compared to stated
corporate and individual performance goals, and a
compensatory option grant in 1997 to purchase 80,000
common shares. Mr. Yearley also received in 1997, under
a program available to all optionees, 162,660 reload
options in connection with his use of already-owned
shares to pay the exercise price of other options. The
number of reload options granted to an employee is
equivalent to the number of shares that the employee
transfers to the Corporation to exercise outstanding
options.
The first 70% of Mr. Yearley's Annual Incentive
Compensation Plan award was equally determined on the
basis of the Corporation's actual return on equity and
net operating cash flow return on invested capital as
compared to goals set at the beginning of the year. The
Corporation's performance was approximately midway
between the target and the maximum goals for return on
equity and approximately three-fourths of the way
between target and maximum for net operating cash flow
return on invested capital. The remaining 30% of Mr.
Yearley's award was based on the Committee's subjective
evaluation of his performance with regard to individual
goals pertaining to the organization's culture,
shareholder value, and the growth of Phelps Dodge
Mining Company and Phelps Dodge Industries. Based on
its judgment as to Mr. Yearley's performance in these
respects, the Committee made an above target award to
him as to this part of his incentive compensation. Mr.
Yearley's compensatory stock option grant, which was at
the targeted level, was based on the policy discussed
above.
The Committee believes that Mr. Yearley's 1997 salary
was at or near the 1997 median paid by comparable
companies to their CEOs. With the payment of an above
target annual incentive award and a stock option grant
at the target level, the total value of the
compensation package provided to Mr. Yearley for 1997
was above the median, which was well in line with the
company's comparative performance during 1997. The
Committee believes that adjustments to base salaries in
1998 will position Mr. Yearley's total compensation at
the appropriate level for his sustained excellent
performance in the future.
Conclusion The Committee will continue to evaluate the
Corporation's compensation programs to best enable the
Corporation to employ and motivate high caliber,
dedicated people. Such employees, properly motivated,
are believed to be key to achievement of the
Corporation's goal to be the international leader in
the mining and manufacturing activities in which it
competes and the related enhancement of shareholder
value over the long term.
THE COMPENSATION AND MANAGEMENT
DEVELOPMENT COMMITTEE
Southwood J. Morcott, Chairman
Robert N. Burt
Paul W. Douglas
Paul Hazen
22
<PAGE>
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
AMONG PHELPS DODGE CORPORATION, THE S & P 500 INDEX
AND THE S & P METALS MINING INDEX
* The chart above reflects $100 invested at 12/31/92 in Phelps Dodge
common stock, the S&P 500, and in a peer group represented by the S&P
Metals Mining index, comprised of Phelps Dodge, ASARCO Incorporated,
Cyprus Amax Minerals Co., Freeport-McMoRan Copper & Gold Inc., and
Inco Ltd.
<TABLE>
<CAPTION>
Cumulative Total Return
----------------------------------------------------------------------------
12/31/92 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97
<S> <C> <C> <C> <C> <C> <C>
Phelps Dodge Corp. 100.00 104.01 135.98 140.95 157.52 149.12
S & P 500 100.00 110.08 111.53 153.45 188.68 251.64
S & P METALS MINING 100.00 111.40 130.08 143.88 146.80 98.68
</TABLE>
23
<PAGE>
COMPARISON OF TEN YEAR CUMULATIVE TOTAL RETURN*
AMONG PHELPS DODGE CORPORATION, THE S & P 500 INDEX
AND THE S & P METALS MINING INDEX
* The chart above reflects $100 invested at 12/31/87 in Phelps Dodge
common stock, the S&P 500, and in a peer group represented by the S&P
Metals Mining index, comprised of Phelps Dodge, ASARCO Incorporated,
Cyprus Amax Minerals Co., Freeport-McMoRan Copper & Gold Inc., and
Inco Ltd. This 10-year graph illustrates the relative stock
performances over a period that more closely represents the longer
business cycle generally associated with the industry of the
Corporation and is especially meaningful because the business focus
and growth strategies of the Corporation have been and continue to be
long term.
<TABLE>
<CAPTION>
Cumulative Total Return
-------------------------------------------------------------------------------------------------------------
12/31/87 12/31/88 12/31/89 12/31/90 12/31/91 12/31/92 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Phelps Dodge Corp. 100.00 115.43 155.10 156.72 193.74 290.90 302.55 395.56 410.03 458.24 433.78
S & P 500 100.00 116.61 153.56 148.79 194.12 208.91 229.97 233.00 320.58 394.18 525.69
S & P METALS MINING 100.00 131.81 151.70 144.10 162.58 174.43 194.32 226.89 250.98 256.07 172.13
</TABLE>
24
<PAGE>
2. 1998 STOCK OPTION AND RESTRICTED STOCK PLAN
On March 4, 1998, the Board of Directors adopted the
1998 Stock Option and Restricted Stock Plan (the "1998
Plan"), subject to approval by a majority of the
Corporation's shareholders voting on the proposal at
the 1998 annual meeting. To simplify the administration
of the Corporation's option plans, if the 1998 Plan is
approved by shareholders, outstanding awards under the
Phelps Dodge Corporation 1993 Stock Option and
Restricted Stock Plan (the "1993 Plan") and the Phelps
Dodge Corporation 1987 Stock Option and Restricted
Stock Plan (the "1987 Plan") will be incorporated into
and governed by the terms of the 1998 Plan and the
terms and conditions of such outstanding awards may be
amended pursuant to the 1998 Plan. The principal
features of the 1998 Plan are summarized below, but
such summary is qualified in its entirety by reference
to the full text of the 1998 Plan, which is attached as
Exhibit A.
The 1998 Plan is substantially similar in its terms to
the 1993 Plan, with three significant exceptions:
Principal 1. Option Repricing. Repricing of options is
Differences prohibited in the 1998 Plan.
from the
1993 Plan 2. Stock Appreciation Rights. Grants of Stock
Appreciation Rights are not permitted in the 1998
Plan.
3. Restricted Stock. Grants of Restricted Stock
generally will not vest before the fifth, but not
sooner than the third, anniversary from the date of
grant. Awards of Restricted Stock which are based
upon the achievement of specific performance
criteria will not vest before the first anniversary
of the grant date.
General Under the 1998 Plan, the Compensation and Management
Development Committee (the "Committee") may grant to
executives and other key employees of the Corporation
and its subsidiaries without any payment therefor (i)
incentive stock options ("ISOs") and non-qualified
stock options ("NQOs") to purchase the Corporation's
common shares at a per share exercise price equal to or
greater than their fair market value on the day of
grant and (ii) common shares which are subject to
certain restrictions ("Restricted Stock").
As of March 4, 1998, there were five executive officers
and approximately 216 key employees eligible to
participate in the 1998 Plan. Participants are selected
by the Committee based upon their past and potential
future contribution to the long-term financial success
of the Corporation. As of March 20, 1998, the fair
market value of a common share was $65.5313.
Shares The total number of common shares available for option
Available for grants and Restricted Stock awards under the 1998 Plan
Issuance is the sum of (A) 4,000,000; (B) the number of common
shares received by the Corporation in payment of the
exercise price under any option granted under the 1998
Plan, the 1993 Plan and the 1987 Plan and (C) the
number of shares remaining available for issuance under
the 1993 Plan. No option grants or Restricted Stock
awards may be made under the 1998 Plan after March 4,
2008. As of March 4, 1998, 1,323,450 shares remained
available for issuance under the 1993 Plan and, of this
amount, up to 742,308 shares were available for
Restricted Stock awards.
25
<PAGE>
Upon the exercise of an option, payment may be made in
cash (including cash paid pursuant to a so-called
cashless exercise program with an authorized broker)
or, in the discretion of the Committee, in common
shares having a market value equal to such exercise
price or in a combination of cash and common shares.
Options expire no later than the tenth anniversary of
the date of grant, plus, in the case of NQOs, one day.
If the optionee dies, becomes disabled, retires on his
or her normal retirement date or retires early pursuant
to the early retirement provisions of a pension or
retirement plan of the Corporation or one of its
subsidiaries (a "Retirement") his or her exercisable or
unexercisable options, held for at least six months,
terminate no later than the fifth anniversary of the
death, disability or retirement.
Exercise of Options generally become exercisable in three or four
Options substantially equal installments beginning on the first
anniversary of the date of grant. Any unexercisable
options held by an employee who dies become exercisable
upon the employee's death. The Committee may provide
for early vesting of option installments, including
without limitation the vesting of installments: (1) not
later than an employee's normal or early retirement
date, (2) not later than the date an employee ceases to
be employed if he ceases to be employed within two
years following a change of control of the Corporation
(as defined in the 1998 Plan), (3) in the event that
either the Corporation's common shares are purchased
pursuant to a third party tender offer or the
Corporation's shareholders approve a merger or similar
transaction in which the Corporation will not survive
as a publicly held corporation. If an employee is
terminated for cause all of his or her options will
immediately expire.
Reload options may be granted under the 1998 Plan with
respect to the exercise, with already owned shares, of
options granted under the 1998 Plan, 1993 Plan or the
1987 Plan. Reload options are granted on terms similar
to the original option (including having a term equal
to the remaining term of the original option), except
that they have an exercise price per share equal to the
fair market value of a common share on the date the
reload options are granted and are not exercisable for
six months after the date they are granted.
Restricted Under the 1998 Plan, the Committee may award shares of
Stock Grants Restricted Stock to executives and key employees
without any payment therefor subject to certain
restrictions. Shares of Restricted Stock are subject to
restrictions on transfer and risk of forfeiture
generally for a period of (i) five, but not less than
three, years from the date of the award in the case of
an award of Restricted Stock that will vest, if at all,
upon the passage of time and the performance of
continuous service as an employee or (ii) one year, in
the case of awards that will vest, if at all, upon the
achievement of specified performance objectives.
Restricted Stock awards will also generally vest if the
employee's employment terminated due to death,
disability or normal retirement. The Committee may, in
its discretion, provide for earlier lapse of the
transfer and forfeiture restrictions, including,
without limitation, upon the achievement of performance
goals specified by the Committee. Unless the Committee
otherwise determines, if an executive or key employee
terminates employment (other than due to death or
disability or normal retirement) prior to the lapse of
the transfer and forfeiture restrictions, his or her
Restricted Stock will be forfeited.
Amendments The Board of Directors may amend the 1998 Plan at any
time, except that the approval of the holders of a
majority of common shares voting on the amendment at
the annual meeting would be required for any amendment
(i) increasing the total
26
<PAGE>
number of common shares that may be sold, issued or
transferred under the 1998 Plan (except by adjustments
to reflect stock or extraordinary cash dividends, stock
splits or share combinations or recapitalizations of
the Corporation), (ii) modifying provisions regarding
eligibility, (iii) reducing the purchase price for
common shares offered pursuant to options (except by
adjustments to reflect stock or extraordinary cash
dividends, stock splits, share combinations or
recapitalizations), or (iv) extending the 1998 Plan's
expiration date.
Federal No taxable income is recognized to the employee upon
Income Tax the grant of an NQO. Upon the exercise of an NQO, the
Treatment of employee generally recognizes ordinary income for
Options Federal income tax purposes in an amount equal to the
excess of (i) the fair market value of the common
shares issued on the date of exercise over (ii) the
exercise price for such common shares. The Corporation
generally receives a deduction at the time of exercise
in an amount equal to the income realized as ordinary
income by the employee. Upon the sale of common shares
acquired by exercise of an NQO, the employee will
realize a long-term or short-term capital gain or loss
depending upon his holding period for such stock. To
qualify for long-term capital gain treatment, the
common shares must be held for more than one year after
exercise. If the employee holds a common share for more
than eighteen months after exercise, the rate of tax
applicable to his long-term capital gain will be lower.
No taxable income is realized by the employee either
upon the grant or exercise of an ISO. The tax is
deferred until the common shares acquired upon the
exercise of the ISO are sold, provided that the shares
are held for at least one year after the date of
exercise and not sold until the second anniversary of
the date of grant. Upon a subsequent sale or exchange
of the common shares received upon exercise of an ISO,
any profit will be a long-term capital gain and any
loss will be a long-term capital loss. If the common
shares acquired upon the exercise of an ISO are
transferred before the expiration of either of the
required holding periods, the employee is taxed at
ordinary income tax rates in the year the common shares
are sold. The amount subject to ordinary income tax
will generally be the difference between the fair
market value of the common shares at the date of
exercise and the exercise price. No income tax
deduction is available to the Corporation upon the
exercise or sale of the common shares received upon
exercise of an ISO, unless the employee incurs a
disqualifying disposition prior to meeting the
requisite holding periods and realizes ordinary income
upon any such sale.
27
<PAGE>
New Plan Benefits The following table sets forth the number of common
Table shares subject to option grants which would have been
awarded to the named executives and the non-executive
officer employee group under the 1998 Plan during 1997
if the 1998 Plan had been in effect in 1997:
Phelps Dodge 1998 Stock Option
And Restricted Stock Plan
<TABLE>
<CAPTION>
Number of Number of
Name and Position Option Shares(a) Restricted Shares
- ------------------------------------------------------------- ------------------ ------------------
<S> <C> <C>
Douglas C. Yearley
Chairman of the Board,
Chief Executive Officer and Director 80,000 0
J. Steven Whisler
President and Chief Operating Officer;
President, PDMC and Director 53,000 0
Manuel J. Iraola
Senior Vice President; President, PDI and Director 32,000 0
Thomas M. St. Clair
Senior Vice President and Chief Financial Officer 21,000 0
Ramiro G. Peru
Senior Vice President, Organization Development
and Information Technology 26,000 0
Executive officer group 212,000 0
Non-executive officer employee group 607,200 15,250
</TABLE>
--------------
(a) The option grants shown reflect the normal options
granted in 1997 under the 1993 Plan, which is
substantially similar to the 1998 Plan. These
grants to the named executives are also disclosed
in the table entitled "Option Grants in 1997" on
page 12. Normal option grants under the 1993 Plan
were made in accordance with the Corporation's
compensation practices and are generally likely to
be indicative of future awards granted under the
1998 Plan, subject to changes in the market price
of the Corporation's common shares and in the
performance, career potential, critical skills and
compensation history of the individual grantees.
The option grants shown in the table above do not
include the reload options granted in 1997 under
the 1993 Plan. Reload options are granted in
accordance with the individual's exercise
decisions. Individual decisions are based on
numerous varying factors and, therefore, 1997
exercises are not likely to be indicative of future
exercises. Thus, the Corporation believes the
number of reload option grants that are likely to
be made under the 1998 Plan are not determinable.
Reload options granted to the named executives in
1997 are also set forth in the table entitled
"Option Grants in 1997" on page 12. No grants of
shares of Restricted Stock were made to executive
officers in 1997 under the 1993 Plan.
28
<PAGE>
Voting on An affirmative vote of a majority of the common shares
the New present and voting on the 1998 Plan at the annual
Plan meeting of shareholders is required for adoption.
Therefore, the effect of a broker non-vote is the same
as an abstention.
The Board of Directors recommends a vote FOR adoption
of the 1998 Stock Option and Restricted Stock Plan.
3. RATIFICATION OF APPOINTMENT OF ACCOUNTANTS
On the recommendation of the Audit Committee, the Board
of Directors has appointed Price Waterhouse LLP as
independent accountants for the Corporation for the
year 1998.
Price Waterhouse LLP or a predecessor firm has been the
independent accountants for the Corporation since 1915.
A representative of Price Waterhouse LLP will be
present at the annual meeting with the opportunity to
make a statement if he so desires and to respond to
appropriate questions.
The Board of Directors recommends a vote FOR
ratification of the appointment of Price Waterhouse LLP
as independent accountants.
OTHER BUSINESS
The Board of Directors is not aware of any other
matters to be presented at the annual meeting. If any
other matter proper for action at the meeting should be
presented, the holders of the accompanying proxy will
vote the shares represented by the proxy on such matter
in accordance with their best judgment. If any matter
not proper for action at the meeting should be
presented, the holders of the proxy will vote against
consideration of the matter or the proposed action.
VOTING PROCEDURES
All shares represented by the accompanying proxy, if
the proxy is duly executed and received by the
Corporation at or prior to the annual meeting, will be
voted at the meeting in accordance with any
instructions specified on such proxy. Where no
instruction is specified, the shares may be voted
according to the instructions on the proxy.
It is the policy of the Corporation that, except under
limited circumstances, each shareholder proxy card,
ballot and voting tabulation that identifies any
shareholder will be kept confidential and that the
receipt and tabulation of such votes will be conducted
by independent third parties, including the
Corporation's transfer agent and its proxy solicitation
firm, and not by employees of the Corporation.
The cost of soliciting proxies for the meeting will be
borne by the Corporation. The Corporation has retained
Morrow & Co., Inc., 909 Third Avenue, New York, N.Y.
10022-4799 to assist in soliciting proxies for a fee
estimated at $17,500 plus reasonable expenses. Morrow &
Co., Inc. and some officers and other employees of the
Corporation may solicit proxies in person and by
telephone or otherwise. The Corporation may also
reimburse brokers and others who are record holders of
the Corporation's shares for their reasonable expenses
incurred in obtaining voting instructions from
beneficial owners of such shares.
29
<PAGE>
Proposals For 1999
The Corporation will review for inclusion in next
year's proxy statement shareholder proposals received
by December 1, 1998. Proposals should be sent to the
Secretary of the Corporation, 2600 North Central
Avenue, Phoenix, Arizona 85004-3014.
Annual Report For 1997
The annual report of the Corporation for the year 1997,
including financial statements, is being furnished
concurrently with this proxy statement to persons who
were shareholders of record as of March 20, 1998, the
record date for the annual meeting. The annual report
does not form part of the material for the solicitation
of proxies.
By order of the Board of Directors,
Robert C. Swan
Vice President and Secretary
Phoenix, Arizona
April 1, 1998
30
<PAGE>
Exhibit A
PHELPS DODGE 1998 STOCK OPTION
AND RESTRICTED STOCK PLAN
SECTION 1
PURPOSE
The purpose of the Plan is to foster and promote the long-term financial
success of the Corporation and materially increase shareholder value by (a)
motivating superior performance by means of performance-related incentives, (b)
encouraging and providing for the acquisition of an ownership interest in the
Corporation by Employees, and (c) enabling the Corporation to attract and
retain the services of an outstanding team upon whose judgment, interest and
special effort the successful conduct of its operations is largely dependent.
SECTION 2
DEFINITIONS
2.1 Definitions. Whenever used herein, the following terms shall have the
respective meanings set forth below:
(a) "Act" shall mean the Securities Exchange Act of 1934, as amended.
(b) "Adjustment Event" shall mean any stock dividend, stock split or
share combination of, or extraordinary cash dividend on, the common shares
or recapitalization of the Corporation.
(c) "Board" shall mean the Board of Directors of the Corporation.
(d) "common shares" shall mean the common shares of the Corporation.
(e) "Cause" shall mean (i) the willful failure by the Participant to
perform substantially his duties as an Employee (other than due to physical
or mental illness) after reasonable notice to the Participant of such
failure, (ii) serious misconduct on the part of the Participant that is
injurious to the Corporation or any Subsidiary in any way, including,
without limitation, by way of damage to any of their respective reputations
or standings in their respective industries, (iii) the conviction of, or
entrance of a plea of nolo contendere by, the Participant with respect to a
crime that constitutes a felony or (iv) the breach by the Participant of
any written covenant or agreement with the Corporation or any Subsidiary
not to disclose any information pertaining to the Corporation or any
Subsidiary or not to compete or interfere with the Corporation or any
Subsidiary.
(f) A "Change of Control" shall be deemed to have taken place at the
time (i) when any "person" or "group" of persons (as such terms are used in
Section 13 of the Securities Exchange Act of 1934, as amended (the
"Exchange Act")), other than the Corporation or any employee benefit plan
sponsored by the Corporation, becomes the "beneficial owner" (as such term
is used in Section 13 of the Exchange Act) of 25% or more of the total
number of common shares at the time outstanding; (ii) of the approval by
the vote of the Corporation's stockholders holding at least 50% (or such
greater percentage as may be required by the Certificate of Incorporation
or By-Laws of the Corporation or by law) of the voting stock of the
Corporation of any merger, consolidation, sale of assets, liquidation or
reorganization in which the Corporation will not survive as a publicly
owned corporation; or (iii) when the individuals who, at the beginning of
any period of two years or less, constituted the Board cease, for any
reason, to constitute at least a majority thereof, unless the election or
nomination for election of each new director was approved by the vote of at
least two-thirds of the directors then still in office who were directors
at the beginning of such period.
(g) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(h) "Committee" shall mean a Committee of the Board, which shall
consist of two or more members. Each member of the Committee shall be a
"Non-Employee Director" within the meaning of Rule 16b-3 as promulgated
under the Act, or meet any other applicable standard for administrators
under that or any similar rule which may be in effect from time to time.
Each member of the Committee shall serve at the pleasure of the Board.
(i) "Corporation" shall mean Phelps Dodge Corporation, a New York
corporation, and any successor thereto.
31
<PAGE>
(j) "Disability" means the inability of a Participant to perform his
duties for a period of at least 180 days due to mental or physical
infirmity, as determined pursuant to the Corporation's policies.
(k) "Employee" shall mean any executive or other key employee of the
Corporation or any Subsidiary (as determined by the Committee in its sole
discretion).
(l) "Fair Market Value" shall mean the mean of the high and low prices
of the common shares on the Consolidated Trading Tape on the date of
determination or, if no sale of common shares is recorded on the Tape on
such date, then on the next preceding day on which there was such a sale.
(m) "Immediate Family Member" shall mean with respect to a
Participant, the Participant's spouse, ancestors (including parents and
grandparents), siblings (including half-brothers and sisters), and
descendants (including children, grandchildren and great grandchildren), as
well as any entity, such as a limited liability company, partnership or
trust, in which all of the beneficial ownership interests are held directly
or indirectly by the Participant or a natural person who is an Immediate
Family Member. For purposes of this definition, individuals who have the
legal relationship described herein through legal adoption and the children
of the Participant's spouse or the spouse of one of the Participant's
children or grandchildren shall be treated as Immediate Family Members.
(n) "Option" shall mean the right to purchase common shares at a
stated price for a specified period of time. For purposes of the Plan, an
Option may be either (i) an "Incentive Stock Option" within the meaning of
section 422 of the Code or (ii) an Option which is not an Incentive Stock
Option (a "Non-qualified Stock Option").
(o) "Participant" shall mean any Employee designated by the Committee
to receive an Option or share of Restricted Stock under the Plan.
(p) "Plan" shall mean the 1998 Stock Option and Restricted Stock Plan,
as set forth herein and as the same may be amended from time to time.
(q) "Predecessor Plans" shall mean the Phelps Dodge 1987 Stock Option
and Restricted Stock Plan and the Phelps Dodge 1993 Stock Option and
Restricted Stock Plan.
(r) "Restricted Period" shall mean the period during which shares of
Restricted Stock are subject to forfeiture and restrictions on
transferability pursuant to Section 6.2 of the Plan.
(s) "Restricted Stock" shall mean common shares granted to a
Participant pursuant to the Plan which is subject to forfeiture and
restrictions on transferability in accordance with Section 6 of the Plan.
(t) "Retirement" shall mean termination of a Participant's employment
on or after the Participant's normal retirement date or early retirement
under any pension or retirement plan of the Corporation or a Subsidiary.
(u) "Subsidiary" shall mean any company in which the Corporation
and/or another Subsidiary owns 50% or more of the total combined voting
power of all classes of stock.
2.2 Gender and Number. Except when otherwise indicated by the context,
words in the masculine gender used in the Plan shall include the feminine
gender, the singular shall include the plural and the plural shall include the
singular.
SECTION 3
ADMINISTRATION
3.1 Power to Grant and Establish Terms of Awards. The Committee shall have
authority, subject to the terms of the Plan, to determine the Employees
eligible for Options and awards of Restricted Stock and those to whom Options
or Restricted Stock shall be granted, the number of common shares to be covered
by each Option or award of Restricted Stock, any conditions that may be imposed
upon the grant of an Option, the time or times at which Options or Restricted
Stock shall be granted, and the terms and provisions of the instruments by
which Options or Restricted Stock shall be evidenced; to designate Options as
Incentive Stock Options or Non-qualified Stock Options; to permit Participants
to elect to defer the issuance of common shares otherwise deliverable upon the
exercise of an Option on such terms and subject to such conditions as the
Committee shall determine; and to determine the period of time during which
restrictions on Restricted Stock shall remain in effect. The grant of any
Option to any Employee or an award of Restricted Stock shall neither entitle
such Employee to, nor disqualify him from, participation in any other grant of
Options or award of Restricted Stock. Notwithstanding anything else contained
in the preceding sentence to
32
<PAGE>
the contrary, in no event may the number of common shares subject to Options
granted to any single Participant within any 12-month period exceed 350,000
common shares, as such number may be adjusted pursuant to Section 4.3.
3.2 Administration. Any Option grant or award of Restricted Stock made by
the Committee may be subject to such conditions, not inconsistent with the
terms of the Plan, as the Committee shall determine. The Committee, by majority
action thereof, is authorized to prescribe, amend and rescind rules and
regulations relating to the Plan, to provide for conditions deemed necessary or
advisable to protect the interests of the Corporation, to interpret the Plan
and to make all other determinations necessary or advisable for the
administration and interpretation of the Plan to carry out its provisions and
purposes. Determinations, interpretations or other actions made or taken by the
Committee pursuant to the provisions of the Plan shall be final, binding and
conclusive for all purposes and upon all persons. The Committee may consult
with legal counsel, who may be counsel to the Corporation, and shall not incur
any liability for any action taken in good faith in reliance upon the advice of
counsel. Without limiting the generality of the foregoing, the Committee may
delegate to any officer of the Corporation or any committee comprised of
officers of the Corporation the authority to take any and all actions permitted
or required to be taken by the Committee hereunder; provided that such
delegation shall not be permitted with respect to Options or other awards
granted or to be granted to any officer of the Corporation and that, to the
extent the Committee delegates authority to grant Options and other awards
hereunder, such delegation shall specify the aggregate number of common shares
that may be awarded pursuant to such delegation and may establish the maximum
number of common shares that may be subject to any award made pursuant to such
delegation and any other limitations thereon that the Committee may choose to
impose.
SECTION 4
STOCK SUBJECT TO PLAN
4.1 Number. The stock as to which Options and awards of Restricted Stock
may be granted shall be common shares. When Options are exercised or Restricted
Stock is awarded, the Corporation may either issue unissued common shares or
transfer issued shares held in its treasury. Subject to adjustment as provided
in Section 4.3 below, the total number of common shares (i) which may be sold
to Employees under the Plan pursuant to Options, and (ii) that may be
transferred or issued as Restricted Stock pursuant to Section 6 shall not
exceed the sum of (A) 4,000,000 common shares, (B) the number of common shares
received by the Corporation on or after the date this Plan is adopted by the
Board (the "Effective Date") in payment of the exercise price under any Option,
whether issued under the Plan or a Predecessor Plan, and (C) the number of
common shares remaining available for issuance under the Phelps Dodge 1993
Stock Option and Restricted Stock Plan on the Effective Date. Notwithstanding
the foregoing, the total number of common shares that may be transferred or
issued hereunder as awards of Restricted Stock pursuant to Section 6 shall not
exceed 400,000 common shares, plus that number of the common shares referred to
in subclause (C) of the immediately preceding sentence that on the Effective
Date were available for awards of Restricted Stock under the Phelps Dodge 1993
Stock Option and Restricted Stock Plan. Any option settled in cash shall reduce
the number of common shares under the Plan by the number of shares that would
have been issued had the Option been exercised for common shares.
4.2 Canceled, Terminated or Forfeited Awards. If, after the Effective
Date, an Option granted hereunder or an Option granted under a Predecessor Plan
which is outstanding on the date hereof expires, or is terminated, canceled or
otherwise surrendered by a Participant prior to its exercise, or if shares of
Restricted Stock are returned to the Corporation pursuant to the terms of the
Plan, or if shares of Restricted Stock awarded under a Predecessor Plan which
are still restricted on the date hereof are returned to the Corporation prior
to the time at which a Participant's rights become non-forfeitable, the common
shares covered by such Option immediately prior to such expiration or other
termination or the common shares affected by such return of Restricted Stock
shall again be available for future grants under the Plan.
4.3 Adjustment in Capitalization. The number and price of common shares
covered by each Option, the maximum number of common shares that may be awarded
as Options under Section 3.1 and the total number of common shares that may be
sold, issued or transferred under the Plan shall be proportionately adjusted to
reflect, as deemed equitable and appropriate by the Committee, an Adjustment
Event. To the extent deemed equitable and appropriate by the Committee, subject
to any required action by stockholders, in any merger, consolidation,
reorganization, liquidation, dissolution, or other similar transaction, any
Option granted under the Plan shall pertain to the securities and other
property to which a holder of the number of common shares covered by the Option
would have been entitled to receive in connection with such event.
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<PAGE>
Any shares of stock (whether common shares, shares of stock into which
common shares are converted or for which common shares are exchanged or shares
of stock distributed with respect to common shares) or cash or other property
received with respect to any award of Restricted Stock granted under the Plan
as a result of any Adjustment Event, any distribution of property or any
merger, consolidation, reorganization, liquidation, dissolution or other
similar transaction shall, except as provided in Section 6.4 or as otherwise
provided by the Committee at or after the date an award of Restricted Stock is
made by the Committee, be subject to the same terms and conditions, including
restrictions on transfer, as are applicable to such shares of Restricted Stock
and any stock certificate(s) representing or evidencing any shares of stock so
received shall be legended in substantially the same manner as provided in
Section 6.5 hereof.
SECTION 5
STOCK OPTIONS
5.1 Grant of Options. The date of grant of an Option under the Plan will
be the date on which the Option is awarded by the Committee or, if so
determined by the Committee, the date on which occurs any event the occurrence
of which is an express condition precedent to the grant of the Option. The
Committee may provide, at or after the date of grant of an Option, that, upon
the exercise of such Option and payment of the exercise price therefor with
already owned common shares, an additional Option will be granted for the
number of shares so delivered in payment of the exercise price, having such
other terms and conditions not inconsistent with the Plan as the Committee may
determine, including the feature described in this second sentence of this
Section 5.1. The aggregate Fair Market Value of the common shares with respect
to which Incentive Stock Options are exercisable for the first time by a
Participant during any calendar year under the Plan and any other stock option
plan of the Corporation or any Subsidiary shall not exceed $100,000 or such
other amount as may be subsequently specified by the Internal Revenue Code of
1986, as amended. Options shall be evidenced by instruments in such form or
forms as the Committee may from time to time approve.
5.2 Option Price. The Option price per share shall be at or above the Fair
Market Value of the optioned shares on the day the Option is granted (as
determined under Section 5.1).
5.3 Payment. Upon exercise, the Option price shall be paid (i) in cash,
including an assignment of the right to receive cash proceeds of the sale of
common shares subject to the Option; (ii) in the discretion of the Committee,
in already owned common shares of the Corporation having a Fair Market Value on
the date of exercise equal to such Option price or in a combination of cash and
common shares or (iii) in accordance with such procedures or in such other form
as the Committee shall from time to time determine.
5.4 Term and Exercise of Options. Each Incentive Stock Option shall expire
not later than the tenth anniversary of the date of its grant, and each
Non-qualified Stock Option shall expire not later than the day after the tenth
anniversary of the date of its grant. Options shall become exercisable in three
or four substantially equal annual installments commencing on the first
anniversary of the date of grant, as the Committee in its discretion shall
determine, or at such other times and upon the occurrence of such other events
or conditions as the Committee may determine at or after the grant of such
Option. Notwithstanding the foregoing, the Committee may include in any Option
instrument, initially or by amendment at any time, a provision making any
installment or installments exercisable at such earlier or later date, or upon
the occurrence of such earlier or later event, as may be specified by such
provision. Without limiting the generality of the foregoing, the Committee may
approve, pursuant to the foregoing sentence, provisions making installments
exercisable (i) upon a Participant's Retirement, (ii) six months (or such
greater or lesser period as the Committee shall in its discretion determine)
from the date on which an Option is granted if such Option is granted in
conjunction with the Participant's exercise of another Option (whether such
Option is issued under this Plan or a Predecessor Plan) with common shares
already owned by the Participant, (iii) not later than the date the Participant
ceases to be employed by the Corporation if he ceases to be so employed within
two years following a Change of Control of the Corporation, and (iv) at such
time and for such period as the Committee deems appropriate, in the event of a
Change of Control. Except as may be provided in any provision approved by the
Committee pursuant to this Section 5.4, after becoming exercisable each
installment shall remain exercisable until expiration, termination or
cancellation of the Option. An Option may be exercised from time to time, in
whole or in part, up to the total number of common shares with respect to which
it is then exercisable.
5.5 Termination of Employment. If the Participant ceases to be employed by
the Corporation or a Subsidiary other than by reason of death, Disability,
Retirement or the Participant's termination for Cause, all Options granted to
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<PAGE>
him and exercisable on the date of his termination of employment shall
terminate on the earlier of such Options' expiration or one month (or such
greater period of time, not to exceed one year, determined by the Committee in
its sole discretion) after the day his employment ends. If the Participant
ceases to be employed on account of Disability or Retirement, all Options
granted to him and exercisable on the date of his termination of employment due
to Disability or his Retirement shall terminate on the earlier of such Options'
expiration or the fifth anniversary of the day of such termination or
Retirement. If the Participant's employment is terminated for Cause, all
Options granted to such Participant which are then outstanding shall be
forfeited. Except as otherwise determined by the Committee at or after grant of
any Option, any installment which has not become exercisable prior to the time
the Participant ceases to be employed by the Corporation or a Subsidiary other
than by reason of death shall lapse and be thenceforth unexercisable. Whether
authorized leave of absence or absence in military or governmental service may
constitute employment for the purposes of the Plan shall be conclusively
determined by the Committee.
5.6 Exercise upon Death of Participant. If the Participant dies while he
is employed by the Corporation or a Subsidiary, his Options may be exercised,
for the full number of common shares covered thereby for which such Options
were not previously exercised, by his estate, personal representative or
beneficiary who acquires the Options by will or by the laws of descent and
distribution, at any time prior to the earlier of the Options' expiration or
the fifth anniversary of the Participant's death. Such Options shall terminate
upon the earlier of such Options' expiration or the fifth anniversary of such
Participant's death. If the Participant dies while he is no longer employed by
the Corporation, his Options may be exercised, for the number of common shares
as to which he could have exercised them on the date of his death, by his
estate, personal representative or beneficiary who acquires the Options by will
or by the laws of descent and distribution, at any time prior to the
termination date provided by Section 5.5.
SECTION 6
RESTRICTED STOCK
6.1 Grant of Restricted Stock. Any award made hereunder of Restricted
Stock shall be subject to the terms and conditions of the Plan and to any other
terms and conditions not inconsistent with the Plan (including, but not limited
to, requiring the Employee to pay the Corporation an amount equal to the par
value per share for each share of Restricted Stock awarded) as shall be
prescribed by the Committee in its sole discretion. The Committee may require
that, as a condition to any award of Restricted Stock under the Plan, the
Employee shall have entered into an agreement with the Corporation setting
forth the terms and conditions of such award and such other matters as the
Committee, in its sole discretion, shall have determined. As determined by the
Committee, the Corporation shall either (i) transfer or issue to each
Participant to whom an award of Restricted Stock has been made the number of
shares of Restricted Stock specified by the Committee or (ii) hold such shares
of Restricted Stock for the benefit of the Participant for the Restricted
Period.
6.2 Restrictions on Transferability. Shares of Restricted Stock may not be
sold, assigned, transferred, pledged, hypothecated or otherwise encumbered by
the Participant during the Restricted Period, except as hereinafter
provided.
6.3 Rights as a Shareholder. Except for the restrictions set forth herein
and unless otherwise determined by the Committee, the Participant shall have
all the rights of a shareholder with respect to such shares of Restricted
Stock, including, but not limited to, the right to vote and the right to
receive dividends.
6.4 Lapse of Restricted Period. Unless the Committee shall otherwise
determine at or after the date an award of Restricted Stock is made to the
Participant by the Committee, the Restricted Period shall commence upon the
date of grant and shall lapse with respect to the shares of Restricted Stock on
the earlier of: (a) the fifth, but not sooner than the third, anniversary of
the date of grant in the case of an award of Restricted Stock that vests based
on the passage of time and the performance of continuous service as an
employee, (b) the first anniversary of the date of grant, in the case of a
Restricted Stock award that vests based on the achievement of specified
performance criteria or (c) the date of a Change of Control, unless sooner
terminated as otherwise provided herein. Without limiting the generality of the
foregoing, the Committee may provide for termination of the Restricted Period
upon the achievement by the Participant of performance goals specified by the
Committee at the date of grant. The determination of whether the Participant
has achieved such performance goals shall be made by the Committee in its sole
discretion.
35
<PAGE>
6.5 Legend. Each certificate issued to a Participant with respect to
shares of Restricted Stock awarded under the Plan shall be registered in the
name of the Participant and shall bear the following (or similar) legend:
"The shares of stock represented by this certificate are subject to
the terms and conditions contained in the Phelps Dodge 1998 Stock
Option and Restricted Stock Plan and may not be sold, pledged,
transferred, assigned, hypothecated, or otherwise encumbered in any
manner until ."
6.6 Death, Disability or Retirement. Unless the Committee shall otherwise
determine at the date of grant, if a Participant ceases to be employed by the
Corporation or any Subsidiary by reason of death, Disability or Retirement, the
Restricted Period covering all shares of Restricted Stock transferred or issued
to such Participant under the Plan shall immediately lapse.
6.7 Termination of Employment. Unless the Committee shall otherwise
determine at or after the date of grant, if a Participant ceases to be employed
by the Corporation or any Subsidiary for any reason other than those specified
in Section 6.6 at any time prior to the date when the Restricted Period lapses,
all shares of Restricted Stock owned by such Participant shall revert back to
the Corporation upon the Participant's termination of employment. Whether
authorized leave of absence or absence in military or government service may
constitute employment for the purposes of the Plan shall be conclusively
determined by the Committee.
6.8 Issuance of New Certificates. Upon the lapse of the Restricted Period
with respect to any shares of Restricted Stock, such shares shall no longer be
subject to the restrictions imposed under Section 6.2 and the Corporation shall
issue or have issued new stock certificates without the legend described in
Section 6.5 in exchange for those previously issued.
SECTION 7
TERMINATION AND AMENDMENT OF PLAN
The Board may terminate or amend the Plan in any respect at any time,
except that without the approval of the holders of a majority of common shares
present and voting on the proposal at an annual meeting of shareholders, the
total number of shares that may be sold, issued or transferred under the Plan
may not be increased (except by adjustment pursuant to Section 4.3), the
category of persons eligible to receive Options and shares of Restricted Stock
may not be changed, the purchase price at which shares may be offered pursuant
to Options may not be reduced (except by adjustment pursuant to Section 4.3)
and the expiration date of the Plan may not be extended. No action of the Board
or shareholders, however, may, without the consent of a Participant alter or
impair his rights under any Option or award of Restricted Stock previously
granted.
SECTION 8
APPLICABILITY OF PLAN TO GRANTS UNDER PREDECESSOR PLANS
The provisions of the Plan relating to Options and Restricted Stock grants
shall apply to, and govern, existing Option and Restricted Stock grants made
under the Predecessor Plans as if such awards were granted hereunder (except
that no such awards shall count against the share limit set forth in Section
4.1) and such Options and Restricted Stock grants shall, where appropriate, be
deemed to have been amended to provide any additional rights, subject in the
case of Options and Restricted Stock grants outstanding as of the date of
adoption of this Plan by the Board, to the right of an affected Participant to
consent to the application of such amendments to such grants as provided in
Section 7.
SECTION 9
MISCELLANEOUS PROVISIONS
9.1 Nontransferability of Awards. Unless the Committee otherwise
determines at or after grant to permit any award made hereunder to be
transferable to the Immediate Family Members of a Participant, an award granted
under the Plan may not be sold, transferred, pledged, assigned or otherwise
encumbered or hypothecated, other than by will or by the laws of descent and
distribution. All rights with respect to awards granted to a Participant under
the Plan shall be exercisable during his lifetime only by such Participant.
36
<PAGE>
9.2 Securities Law Compliance. Instruments evidencing Options may contain
such other provisions, not inconsistent with the Plan, as the Committee deems
advisable. common shares received pursuant to the Plan shall be transferable
only if the proposed transfer will be in compliance with applicable securities
laws.
9.3 Tax Withholding. The Corporation shall have the power to withhold, or
require a Participant to remit to the Corporation promptly upon notification of
the amount due, an amount sufficient to satisfy Federal, State and local
withholding tax requirements on any award under the Plan and payment for any
partial shares that result from an option exercise, and the Corporation may
defer payment of cash or issuance or delivery of common shares until such
requirements are satisfied. The Committee may, in its discretion, permit a
Participant to elect, subject to such conditions as the Committee shall impose,
(i) to have common shares otherwise issuable or deliverable under the Plan
withheld by the Corporation or (ii) to deliver to the Corporation previously
acquired shares of Stock, in each case, having a Fair Market Value sufficient
to satisfy all or part of the Participant's estimated total Federal, State and
local tax obligation associated with the transaction.
9.4 Term of Plan. This Plan shall be effective as of March 4, 1998,
subject to approval by the holders of a majority of common shares present and
voting on the Plan at the 1998 annual meeting of shareholders. This Plan shall
expire on March 4, 2008 (except as to Options and Restricted Stock outstanding
on that date), unless sooner terminated pursuant to Section 7 of the Plan.
9.5 Governing Law. The Plan, and all Agreements hereunder, shall be
construed in accordance with and governed by the laws of the State of New York.
37
<PAGE>
Notice of
Annual Meeting
of Shareholders
and Proxy
Statement
May 6, 1998
<PAGE>
PROXY
PHELPS DODGE CORPORATION
Solicited on Behalf of the Board of Directors of Phelps Dodge Corporation
The undersigned shareholder of PHELPS DODGE CORPORATION hereby appoints
ROBERT N. BURT, ROBERT D. KREBS and DOUGLAS C. YEARLEY, or any of them, proxies
of the undersigned, each with power of substitution, at the annual meeting of
shareholders of the Corporation to be held at the Arizona Biltmore Hotel, 24th
Street and Missouri Avenue, Phoenix, Arizona, on Wednesday, May 6, 1998 at 11:30
a.m., and at any adjournments thereof, to vote all Common Shares of the
Corporation held or owned by the undersigned, including any which may be held
for the undersigned's account under the Automatic Dividend Investment Service
for Phelps Dodge Common Shares administered by The Chase Manhattan Bank.
THIS PROXY IS CONTINUED ON THE REVERSE SIDE
PLEASE SIGN ON THE REVERSE SIDE AND RETURN PROMPTLY
- --------------------------------------------------------------------------------
<PAGE>
CONFIDENTIAL PROXY
PHELPS DODGE EMPLOYEE SAVINGS PLAN
THE PHELPS DODGE CORPORATION SUPPLEMENTAL SAVINGS PLAN
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF PHELPS DODGE CORPORATION
To M & I Marshall & Ilsley Trust Company of Arizona, Trustee:
I hereby acknowledge receipt of the Notice of Annual Meeting of Shareholders
of Phelps Dodge Corporation to be held on Wednesday, May 6, 1998, and
accompanying Proxy Statement. I hereby instruct you to vote in person or by
proxy, at such meeting and at any adjournments thereof all the Phelps Dodge
Corporation Common Shares credited to my account under the Phelps Dodge Employee
Savings Plan and/or the Phelps Dodge Corporation Supplemental Savings Plan as
indicated on the reverse of this card, and in your or your proxies' discretion
on all other matters.
You are instructed to vote the shares credited to my account as directed by
automated telephone vote or on the reverse side.
UNLESS WE RECEIVE INSTRUCTIONS FROM YOU THE NUMBER OF SHARES CREDITED TO YOUR
ACCOUNT AS OF THE RECORD DATE, MARCH 20, 1998, WILL NOT BE VOTED AT THE MEETING.
THIS PROXY IS CONTINUED ON THE REVERSE SIDE
PLEASE SIGN ON THE REVERSE SIDE AND RETURN PROMPTLY
- --------------------------------------------------------------------------------
<PAGE>
CONFIDENTIAL PROXY
ACCURIDE EMPLOYEE SAVINGS PLAN
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF PHELPS DODGE CORPORATION
To M & I Marshall & Ilsley Trust Company of Arizona, Trustee:
I hereby acknowledge receipt of the Notice of Annual Meeting of Shareholders
of Phelps Dodge Corporation to be held on Wednesday, May 6, 1998, and
accompanying Proxy Statement. I hereby instruct you to vote in person or by
proxy, at such meeting and at any adjournments thereof all the Phelps Dodge
Corporation Common Shares credited to my account under the Accuride Employee
Savings Plan as indicated on the reverse of this card, and in your or your
proxies' discretion on all other matters.
You are instructed to vote the shares credited to my account as directed by
automated telephone vote or on the reverse side.
UNLESS WE RECEIVE INSTRUCTIONS FROM YOU THE NUMBER OF SHARES CREDITED TO YOUR
ACCOUNT AS OF THE RECORD DATE, MARCH 20, 1998, WILL NOT BE VOTED AT THE MEETING
THIS PROXY IS CONTINUED ON THE REVERSE SIDE
PLEASE SIGN ON THE REVERSE SIDE AND RETURN PROMPTLY
- --------------------------------------------------------------------------------
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
Please mark
your votes as [ X ]
indicated in
this example
FOR WITHHELD
ALL FOR ALL FOR AGAINST ABSTAIN
PROPOSAL 1: Election of [ ] [ ] PROPOSAL 2: Approval of [ ] [ ] [ ] The Board of Directors
Directors for the term the Phelps Dodge 1998 recommends you vote
specified in the proxy Stock Option and Restricted FOR MANAGEMENT
Statement: Stock Plan PROPOSALS 1, 2, AND
3.
01 P. Hazen
02 M. Iraola The proxies are
03 M. Knowles instructed to vote as
04 G. Parker FOR AGAINST ABSTAIN directed above, and in
their discretion on all
WITHHELD FOR: (Write PROPOSAL 3: Ratification [ ] [ ] [ ] other matters. Where no
name(s) of nominee(s) of Independent Public direction is specified,
below). Accountants this proxy will be
________________________ voted FOR Management
________________________ Proposals 1, 2, and 3
as recommended by the
Board of Directors
Signature(s)_______________________________________________________________________________ Date_________________________
NOTE: Please sign name exactly as it appears hereon. Joint owners should each sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title as such.
</TABLE>
<PAGE>
................................................................................
^ FOLD AND DETACH HERE ^
PLEASE FOLD AND DETACH HERE AND READ THE REVERSE SIDE
HELP US SAVE MONEY - VOTE BY TELEPHONE [GRAPHIC]
IF YOU WISH TO VOTE BY TELEPHONE, PLEASE READ THE INSTRUCTIONS BELOW
Have your proxy in hand. Decide how you wish to vote.
o On a Touch Tone Telephone call Toll Free 1-800-840-1208 24 hours per day - 7
days a week.
o You will be asked to enter a Personal Identification number
OPTION #1 To vote as the Board of Directors recommends on ALL proposals: Press 1
now. If you wish to vote on each proposal separately, press 0 now.
When you Press 1, your vote will be confirmed and cast as you directed. END OF
CALL
OPTION #2 If you selected to vote on each proposal separately, you will hear
these instructions
Proposal 1: To vote FOR ALL nominees, press 1; to WITHHOLD FOR ALL nominees,
press 9; To WITHHOLD FOR AN INDIVIDUAL nominee, press 0. Please make your
selection now.
To withhold for individual nominees please enter the two digit number that
appears next to the nominee you DO NOT wish to vote for. Once you have completed
voting for Directors, press 0.
Proposal 2: You may make your selection any time: To vote for, press 1; Against
press 9; Abstain press 0.
The instructios are the same for all remaining proposal(s).
When asked, please confirm your vote by pressing 1.
Your vote selection will be repeated and you will have an
opportunity to confirm it.
Please do not return the above proxy card if you voted by phone.
Thank you for voting.
<PAGE>
PHELPS DODGE CORPORATION
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF PHELPS DODGE CORPORATION
The undersigned shareholder of Phelps Dodge Corporation hereby appoints
ROBERT N. BURT, ROBERT D. KREBS and DOUGLAS C. YEARLEY, or any of them, proxies
of the undersigned, each with power of substitution, at the annual meeting of
shareholders of the Corporation to be held at the Arizona Biltmore Hotel, 24th
Street and Missouri Avenue, Phoenix, Arizona, on Wednesday, May 6, 1998 at 11:30
a.m., and at any adjournments thereof, to vote all Common Shares of the
Corporation held or owned by the undersigned, including any which may be held
for the undersigned's account under the Automatic Dividend Investment Service
for Phelps Dodge Common Shares administered by The Chase Manhattan Bank.
The proxies are instructed to vote as directed below, and in their discretion on
all other matters. Where no direction is specified, this proxy will be voted FOR
Management Proposals 1, 2 and 3 as recommended by the Board of Directors.
Management Proposals:
The Board of Directors recommends you vote FOR Management Proposals 1, 2 and 3.
Proposal 1: Election of Directors for the respective terms specified in the
Proxy Statement; Messrs. Hazen, Iraola, (Mrs.) Knowles and Parker.
FOR all WITHHELD WITHHELD for the following only
nominees for all nominees (write name(s) of nominee(s) below)
[ ] [ ] ____________________________________
PLEASE SIGN ON REVERSE SIDE
AND RETURN PROMPTLY
<PAGE>
<TABLE>
PROXY
<S> <C>
Proposal 2: Approval of the Phelps Dodge 1998 FOR [ ] AGAINST [ ] ABSTAIN [ ]
Stock Option and Restricted Stock Plan
Proposal 3: Ratification of Independent Public Accountants FOR [ ] AGAINST [ ] ABSTAIN [ ]
Dated: __________________________________
Signature _______________________________
Signature _______________________________
Please sign exactly as name appears above. When shares are held by joint tenants, both should sign. When
signing as attorney, executor, administrator, trustee or guardian, please give full title as such. If a
corporation, please sign in full corporate name by President or other authorized officer. If a
partnership, please sign in partnership name by authorized person.
</TABLE>
