SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
Filed by the Registrant / /
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Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c)
or Section 240.14a-12
USX CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
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and 0-11.
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USX Corporation
[LOGO] NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
USX AND PROXY STATEMENT
2001
Marathon Group Common Stock
U. S. Steel Group Common Stock
TUESDAY, APRIL 24, 2001
10:00 A.M. EASTERN TIME
Ballroom 4
The Greater Columbus Convention Center
400 North High Street
Columbus, Ohio 43215
PLEASE VOTE PROMPTLY EITHER BY:
- telephone,
- the Internet, or
- marking, signing and returning your proxy or
voting instruction card.
[LOGO]
USX
USX Corporation THOMAS J. USHER
600 Grant Street Chairman, Board of Directors
Pittsburgh, PA 15219-4776 & Chief Executive Officer
March 12, 2001
Dear USX Stockholder,
We will hold our 2001 annual meeting of stockholders in Ballroom 4 of The
Greater Columbus Convention Center, 400 North High Street, Columbus, Ohio, on
Tuesday, April 24, 2001 at 10:00 A.M. Eastern Time.
We will elect directors and independent accountants at the meeting. The Board of
Directors has nominated four of our 14 directors for re-election this year. They
are all Class II directors, which means their terms will expire at the 2004
annual meeting. You can read about them, and about the other directors who will
continue in office, on pages 12-17 of the proxy statement. All the nominees
except one have been previously elected by the stockholders.
We hope you will vote either by telephone, over the Internet or by marking,
signing and returning your proxy or voting instruction card as soon as possible,
whether or not you plan to attend the meeting.
Sincerely,
/s/ Thomas J. Usher
Marathon Group o U. S. Steel Group
TABLE OF CONTENTS
Notice of Annual Meeting of Stockholders.................................. 4
Proxy Statement........................................................... 5
Questions and Answers................................................... 5
The Board of Directors and its Committees............................... 7
Compensation of Directors............................................... 10
Proposals of the Board
Proposal No. 1
Election of Directors................................................. 11
Nominees for Director................................................. 12
Continuing Directors.................................................. 14
Proposal No. 2
Election of Independent Accountants................................... 17
Audit Committee Report.................................................. 18
Information Regarding the Independence of
the Independent Public Accountants...................................... 19
Security Ownership...................................................... 19
Executive Compensation.................................................. 21
Compensation Committee Report
on Executive Compensation............................................. 26
Shareholder Return Performance Presentation........................... 31
Pension Benefits...................................................... 33
Change in Control Arrangements and Employment Contract................ 35
Appendix A - Audit Committee Charter...................................... 37
3
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
ON APRIL 24, 2001
We will hold our 2001 annual meeting of stockholders in Ballroom 4 of The
Greater Columbus Convention Center, 400 North High Street, Columbus, Ohio 43215
on Tuesday, April 24, 2001 at 10:00 A.M. Eastern Time, in order to:
- - elect four Class II directors,
- - elect independent accountants for 2001, and
- - transact any other business that properly comes before the meeting.
You are entitled to vote at the meeting if you were an owner of record of either
USX-Marathon Group or USX-U. S. Steel Group common stock at the close of
business on February 23, 2001. If your ownership is through a broker or other
intermediary, you will need to have proof of your stockholdings in order to be
admitted to the meeting. A recent account statement, letter or proxy from your
broker or other intermediary will suffice.
By order of the Board of Directors,
Dan D. Sandman
Secretary
Dated: March 12, 2001
USX Corporation
600 Grant Street
Pittsburgh, PA 15219-4776
4
PROXY STATEMENT
WE HAVE SENT YOU THIS PROXY STATEMENT BECAUSE THE BOARD OF DIRECTORS IS ASKING
YOU TO GIVE YOUR PROXY (THAT IS, THE AUTHORITY TO VOTE YOUR SHARES) TO OUR PROXY
COMMITTEE SO THEY MAY VOTE YOUR SHARES ON YOUR BEHALF AT OUR ANNUAL MEETING OF
STOCKHOLDERS. The members of the proxy committee are Thomas J. Usher, Clarence
P. Cazalot, Jr., Paul J. Wilhelm and Robert M. Hernandez. They will vote your
shares as you instruct.
We will hold the meeting on April 24, 2001 in Ballroom 4 of The Greater Columbus
Convention Center, 400 North High Street, Columbus, Ohio. The proxy statement
contains information about the matters being voted on and other information that
may be helpful to you.
We began the mailing of the proxy statement, the proxy card and the 2000 annual
reports on or about March 12, 2001.
QUESTIONS AND ANSWERS
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/_/ WHO MAY VOTE?
You may vote if you were a holder of either USX-Marathon Group or USX-U.S.
Steel Group common stock at the close of business on February 23, 2001.
/_/ WHAT MAY I VOTE ON?
You may vote on:
- the election of four nominees to serve as Class II directors and
- the election of PricewaterhouseCoopers LLP as our independent
accountants.
/_/ HOW DOES THE BOARD RECOMMEND I VOTE?
The Board recommends that you vote:
- FOR each of the nominees for director and
- FOR the election of PricewaterhouseCoopers LLP as independent
accountants for 2001.
/_/ HOW DO I VOTE?
You may vote by telephone or over the Internet by following the instructions on
the enclosed proxy card (or, if you own your shares through a broker or other
intermediary, on the enclosed voting instruction card). You may also vote by
marking, signing and dating the enclosed proxy card or voting instruction card,
and returning it in the prepaid envelope. The proxy committee will vote your
shares in accordance with your directions. If you return a proxy card but do not
mark the boxes showing how you wish to vote, the proxy committee will vote your
shares FOR each proposal, but only if you have signed and dated the card.
Unsigned proxy cards will not be voted at all. If you are a stockholder of
record (that is, if you are registered on our books), you may also vote in
person by attending the meeting.
/_/ MAY I CHANGE MY VOTE?
If you are a stockholder of record, you may change your vote or revoke your
proxy at any time before your shares are voted at the meeting by:
- voting again by telephone or over the Internet,
- sending us a proxy card dated later than your last vote,
- notifying the Secretary of USX in writing, or
- voting at the meeting.
/_/ WHAT IS THE VOTING RELATIONSHIP BETWEEN THE TWO CLASSES OF STOCK?
Both classes of USX common stock - USX-Marathon Group Common Stock and USX-U.S.
Steel Group Common Stock - will be voted together as a single class on all
matters voted on at the meeting. Each share of Marathon stock will be entitled
to one vote and each share of U.S. Steel stock will be entitled to .567 votes.
We calculated the number of votes to which a share of U.S. Steel stock is
entitled by using a formula described
5
in USX's Restated Certificate of Incorporation. It is based on the ratio of the
market value of one share of U.S. Steel stock to one share of Marathon stock
over the 20 business-day period ending on February 15, 2001.
/_/ HOW MANY OUTSTANDING SHARES ARE THERE?
At the close of business on February 23, 2001, which is the record date for the
meeting, there were 308,582,855 shares of Marathon stock (representing
308,582,855 votes) and 88,800,321 shares of U.S. Steel stock (representing
50,349,782 votes) outstanding.
/_/ HOW BIG A VOTE DO THE PROPOSALS NEED IN ORDER TO BE ADOPTED?
Directors are elected by a plurality of the votes of the shares present in
person at the meeting or represented by proxy and entitled to vote; that is,
those receiving the most votes are elected, even if less than a majority.
Independent accountants are elected by a majority of the votes of the shares
present in person at the meeting or represented by proxy and entitled to vote.
Abstentions are counted as votes present and entitled to vote and have the same
effect as votes against a proposal. Broker non-votes are not counted as either
votes for or votes against a proposal. Both abstentions and broker non-votes are
counted in determining that a quorum is present for the meeting.
/_/ WHAT ARE BROKER NON-VOTES?
The New York Stock Exchange permits brokers to vote their customers' shares on
routine matters when the brokers have not received voting instructions from
their customers. The election of directors and the election of independent
accountants are examples of routine matters on which brokers may vote in this
way. Brokers may not vote their customers' shares on non-routine matters such as
mergers and contested proposals unless they have received voting instructions
from their customers. Non-voted shares on non-routine matters are broker
non-votes.
/_/ WHAT CONSTITUTES A QUORUM?
Under our by-laws, a quorum is one-third of the voting power of the outstanding
shares of stock entitled to vote.
/_/ WILL MY VOTE BE CONFIDENTIAL?
All voting records which identify stockholders are kept permanently
confidential except as necessary to meet legal requirements and in other limited
circumstances such as proxy contests. The vote tabulators, who are USX
employees, and the inspector of election, who is independent, are required to
execute confidentiality agreements.
/_/ HOW WILL VOTING BE CONDUCTED ON OTHER MATTERS RAISED AT THE MEETING?
If any matters are presented at the meeting other than the proposals on the
proxy card, the proxy committee will vote on them using their best judgment.
Your signed proxy card, or your telephone or Internet vote, gives them the
authority to do this. Under our by-laws, notice of any matter to be presented by
a stockholder for a vote at the meeting must have been received by our Corporate
Secretary on or after December 28, 2000 and no later than January 27, 2001, and
it must have been accompanied by certain information about the stockholder
presenting it. We have not received notice of any matter to be presented other
than those on the proxy card.
/_/ WHEN MUST SHAREHOLDER PROPOSALS BE SUBMITTED FOR THE 2002 ANNUAL MEETING?
Shareholder proposals submitted for inclusion in our 2002 proxy statement must
be received in writing by our Corporate Secretary no later than 5:00 P.M.
Eastern Time on November 12, 2001. Shareholder proposals submitted outside the
process for inclusion in the proxy statement must be received from stockholders
of record on or after December 27, 2001 and no later than January 26, 2002 and
must be accompanied by certain information about the stockholders making the
proposals, in accordance with our by-laws.
6
THE BOARD OF DIRECTORS AND ITS COMMITTEES
Under our by-laws and the laws of Delaware, USX's state of incorporation, the
business and affairs of USX are managed under the direction of the Board of
Directors. The Board met ten times in 2000. The directors spend considerable
time preparing for Board and committee meetings, and they attend as many
meetings as possible. In 2000, their attendance averaged 97 percent. The Board
has five principal committees, all the members of which are non-employee
directors. The table below shows the current committee memberships of each
director and the number of meetings that each committee held in 2000.
BOARD COMMITTEE
MEMBERSHIPS
ORGANIZATION
AND CORPORATE
AUDIT COMPENSATION GOVERNANCE PUBLIC POLICY COMMITTEE ON
DIRECTOR COMMITTEE COMMITTEE COMMITTEE COMMITTEE FINANCIAL POLICY
-------- --------- --------- --------- --------- ----------------
Neil A. Armstrong X X X
J. Gary Cooper X X* X
Charles A. Corry X X X
Shirley Ann Jackson X X X
Charles R. Lee X X X*
Paul E. Lego X X X
John F. McGillicuddy X X X
Seth E. Schofield X* X X
John W. Snow X* X X
Douglas C. Yearley X X X*
Number of Meetings
in 2000 5 6 5 4 5
* Chairman
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AUDIT COMMITTEE
The Audit Committee has had a written charter adopted by the Board for thirty
years. The current version, which was adopted by the Board in 1999, is attached
as Appendix A to this proxy statement. The charter requires the committee to
reassess and report to the Board on the adequacy of the charter on an annual
basis, which the committee did in 2000. All the members of the Audit Committee
are independent (as independence is defined in Sections 303.01(B)(2)(a) and (3)
of the New York Stock Exchange's listing standards, as may be modified or
supplemented).
The Audit Committee is, among other things, responsible for:
- - ensuring the integrity of our financial reports,
- - recommending to the Board the independent accountants to be nominated for
election by the stockholders,
- - reviewing the independence of the independent accountants,
- - reviewing the scope of the audit activities of the independent accountants
and our internal auditors,
- - providing direction to the internal audit staff and the independent
accountants,
- - approving the independent accountants' fees,
- - reviewing audit results,
- - reviewing and approving the annual financial statements, the annual
reports to stockholders, and the Annual Report on Form 10-K filed with the
Securities and Exchange Commission,
- - determining that appropriate controls are in place to ensure that we
operate in accordance with our procedures and codes of conduct,
- - reviewing compliance with our business conduct policies,
7
- - reviewing significant accounting, auditing and Securities and Exchange
Commission pronouncements,
- - reviewing:
-- matters pertaining to potentially divergent interests, if any,
between the holders of the two classes of common stock,
-- our policies and practices with respect to the two business groups,
-- the Board's performance of its fiduciary duties to both classes of
stockholders,
-- on an annual basis, a report outlining the activities undertaken by
the committee over the past year to meet the requirements of the
committee's charter, and
- - assessing, and reporting annually to the Board on, the activities of the
committee and on the adequacy of the committee's charter.
- --------------------------------------------------------------------------------
COMPENSATION
COMMITTEE
The Compensation Committee is composed solely of directors who satisfy all
criteria for independence under applicable law and who, in the opinion of the
Board, are free of any relationship that would interfere with their exercise of
independent judgment as members of the committee.
The committee is responsible for:
- - making recommendations to the Board and to the boards of subsidiaries on
all matters of policy and procedures relating to executive compensation,
- - approving the salaries of officers (other than the officer-directors,
whose salaries are approved by the Board),
- - administering the Annual Incentive Compensation Plan and the Senior
Executive Officer Annual Incentive Compensation Plan,
- - administering the plans under which long-term incentives are granted and
approving grants of options, stock appreciation rights, restricted stock
and other incentives under those plans,
- - the timely certification as to the meeting of applicable performance
levels under the foregoing plans,
- - approving the annual report on executive compensation for the proxy
statement, and
- - such other duties and responsibilities as may be assigned to the committee
by the Board or as designated in plans approved by the shareholders.
The committee is also authorized to:
- - adopt and amend employee benefit plans,
- - review the activities of the United States Steel and Carnegie Pension Fund
as administrator of certain benefit plans, and
- - make recommendations to the Board concerning policy matters relating to
employee benefits.
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ORGANIZATION AND CORPORATE GOVERNANCE COMMITTEE
The Organization and Corporate Governance Committee:
- - makes recommendations to the Board concerning the appropriate size and
composition of the Board, including
-- candidates for election as directors,
-- the composition and functions of Board committees,
-- the compensation of non-employee directors, and
-- all matters relating to the development and effective functioning of
the Board,
8
- - confers with management concerning plans for succession to executive
management positions,
- - assesses and makes recommendations concerning overall corporate governance
to the extent specific matters are not the assigned responsibility of
other Board committees, and
- - considers nominees recommended by stockholders for election as directors.
In recommending candidates for election as directors, the committee, among other
considerations, studies the composition of the Board and tries to identify
candidates with broad knowledge and experience in business and society in
general. Recommendations of candidates by stockholders of record should be sent,
together with the nominee's qualifications and consent to be considered as a
nominee, to the Secretary of USX for presentation to the committee.
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PUBLIC POLICY COMMITTEE
The Public Policy Committee concentrates on the following areas of emphasis:
ownership of USX, stockholder attitudes toward USX, political-legislative
developments affecting USX, and USX policies on major public issues.
The committee reviews the following matters and reports to the Board such
observations and information thereon as the committee deems appropriate:
- - matters bearing on the relationship between management and present or
potential stockholders with emphasis on policy and major programs
affecting ownership of USX,
- - communications to and from the investment community, particularly USX's
stockholders,
- - legislative and regulatory issues affecting USX's businesses and
operations,
- - public issues identified by USX as likely to generate expectations of USX
by its constituencies, including stockholders, employees, customers,
vendors, governments and the public, and USX's position regarding
identified public issues including, but not limited to, employee health
and safety, environmental, energy and trade matters,
- - USX efforts to affect identified public issues through research, analysis,
lobbying efforts and participation in business and government programs,
and
- - codes of conduct applicable to employees of USX and its principal
operating units.
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COMMITTEE ON FINANCIAL POLICY
The Committee on Financial Policy provides oversight with respect to the
appropriate capital structure and financial policies of USX. Its key
responsibility in that role is to make recommendations to the Board concerning
dividends. The Board has also delegated to the committee the authority to:
- - approve financings by USX (except financings which involve the issuance of
common stock), including the recommendation of action to subsidiaries,
partnerships and joint ventures,
- - authorize loans to outside entities, guarantees by USX of the credit of
others, and other uses of USX credit, and
- - approve USX's funding policy for its pension and other post-employment
benefit plans.
In addition, the committee is responsible for reviewing the performance of the
United States Steel and Carnegie Pension Fund as investment manager and/or
trustee of our employee benefit plans. It also receives reports and makes
recommendations to the Board on various financial matters.
9
COMPENSATION OF DIRECTORS
Our by-laws require that each non-employee director be paid allowances and
attendance fees as the Board may from time to time determine. Directors who are
employees of USX receive no compensation for their service on the Board. We pay
our non-employee directors as follows:
Annual Retainer $60,000
Committee Membership Fee $ 5,000 ($6,000 for committee chairmen)
Meeting Fee (for each
Board or committee meeting) $ 2,000
- --------------------------------------------------------------------------------
Under our Deferred Compensation Plan for Non-Employee Directors, directors may
defer some or all of their annual retainers in the form of Common Stock Units or
cash. Each of our directors has elected to defer at least half of his or her
retainer in the form of Common Stock Units, and some have deferred their entire
retainers in this way. All new directors are required to defer at least half of
their retainers as Common Stock Units. A Common Stock Unit is what is sometimes
referred to as "phantom stock" because initially no stock is actually issued.
Instead, we keep a book entry account for each director that shows how many
Common Stock Units he or she has. Then, when a director leaves the Board, he or
she must take actual shares of common stock corresponding to the number of
Common Stock Units in his or her account. We believe this is an effective way to
increase the directors' equity holdings in USX and thereby further align their
interest with that of the stockholders.
Every January, we credit each non-employee director's deferred stock account
with both Marathon Common Stock Units and U. S. Steel Common Stock Units in the
same ratio that the outstanding shares of each class of stock on a fully diluted
basis had to each other on the last trading day of the previous year. "Fully
diluted" means that we assume the exercise of all currently outstanding stock
options and the conversion to common stock of all convertible securities if the
exercise or conversion would result in lower earnings per share. The ongoing
value of each Common Stock Unit equals the market price of the corresponding
class of stock (Marathon or U. S. Steel). When dividends are paid on the common
stock, we credit each account with equivalent amounts in additional Common Stock
Units.
Directors may also defer portions of their annual retainers in the form of cash,
which may be invested in certain investment options. When a director leaves the
Board, he or she receives the deferred cash either in a lump sum or in
installments over ten years.
If USX were to undergo a change in control resulting in the removal of a
non-employee director from the Board, that director would receive a cash
payment equal to the value of his or her deferred stock and deferred cash
accounts.
Under our Non-Employee Director Stock Plan, each non-employee director may
receive a grant of up to 500 shares of each class of common stock. In order to
qualify, a director must first purchase an equivalent number of shares in the
open market during the 60 days following his or her initial election to the
Board. The shares granted under this plan may not be sold until the director
leaves the Board.
Our retirement policy for directors requires non-employee directors to retire at
the end of the month in which they turn 72, even if their terms have not
expired. Employee directors must retire from the Board when they retire as
employees, except that the chief executive officer may remain on the Board, at
the Board's request, through the month in which he or she turns 70. Our policy
also provides that directors who undergo a significant change in their business
or professional careers should volunteer to resign from the Board.
10
PROPOSALS OF THE BOARD
The Board will present the following proposals at the meeting:
PROPOSAL NO.1
ELECTION OF DIRECTORS
USX's Certificate of Incorporation divides the directors into three classes:
Class I, Class II and Class III. Each class must consist, as nearly as possible,
of one-third of the directors. Once elected, directors serve for a term of three
years and until their successors are duly elected and qualified. At each annual
meeting, directors who are elected to succeed directors whose terms have expired
are identified as being of the same class as those they succeed. A director
elected to fill a vacancy is elected to the same class as the director he or she
succeeds, and a director elected to fill a newly created directorship holds
office until the next election of the class to which he or she is elected.
Our by-laws require the Board to fix the number of directors, and the Board has
set the maximum number of directors at 19. The current four Class II directors
are nominees for election this year for a three-year term that will expire at
the 2004 annual meeting. All four of them except Ambassador Cooper (who was
elected by the Board effective May 1, 1999), and all of the continuing Class I
and Class III directors except Dr. Jackson (who was elected by the Board
effective July 1, 2000), have previously been elected by the stockholders. Of
the 14 current directors, four are officers of USX, one is a retired officer of
USX, six have top executive experience with a wide variety of businesses, one
was with the National Aeronautics and Space Administration and served as a
university professor before entering business, one had a distinguished career in
the military and the diplomatic corps before entering business, and one has had
a distinguished career in academia, business and government. A brief statement
about the background of each nominee and each continuing director is given on
the following pages. If any nominee for whom you have voted becomes unable to
serve, your proxy may be voted for another person designated by the Board.
Our by-laws describe the procedures that must be used in order for someone
nominated by a stockholder of record to be eligible for election as a director.
They require that notice be received by the Secretary at least 45 days, but not
more than 75 days, before the first anniversary of the date on which we first
mailed our proxy materials for the preceding year's annual meeting of
stockholders. The notice must contain certain information about the nominee,
including his or her age, address, occupation and share ownership, as well as
the name, address and share ownership of the stockholder giving the notice.
11
NOMINEES FOR CLASS II DIRECTOR
Terms Expire 2004
[PHOTO]
J. Gary Cooper Director since 1999 Age 64
Chairman and Chief Executive Officer, Commonwealth National Bank (commercial
bank)
Ambassador Cooper graduated from the University of Notre Dame with a BS degree
in finance and attended Harvard University's Senior Managers in Government
program. He was awarded an honorary doctor of law degree from Troy University. A
retired Major General in the U.S. Marine Corps, Ambassador Cooper was twice
elected to the Alabama legislature, was commissioner of the Alabama Department
of Human Resources and was appointed Assistant Secretary of the Air Force during
the George H. W. Bush administration. He was the United States Ambassador to
Jamaica from 1994 to 1997. Ambassador Cooper is a director of GenCorp Inc. and
Protective Life Corporation.
[PHOTO]
Charles R. Lee Director since 1991 Age 61
Chairman of the Board and Co-CEO, Verizon Communications (communications
company)
Mr. Lee received a Bachelor's degree in metallurgical engineering from Cornell
University and an MBA with distinction from the Harvard Graduate School of
Business. He served in various financial and management positions before
becoming Senior Vice President-Finance for Penn Central Corp. and then Columbia
Pictures Industries Inc. In 1983 he joined GTE Corporation (which merged with
Bell Atlantic Corporation to form Verizon Communications in 2000) as Senior Vice
President of Finance and in 1986 was named Senior Vice President of Finance and
Planning. He was elected President, Chief Operating Officer and director in
December 1988 and was elected Chairman of the Board and Chief Executive Officer
of GTE in May 1992. He was elected to his present position with Verizon
Communications on June 30, 2000. Mr. Lee is a director of The Procter & Gamble
Company, United Technologies Corporation, the Stamford Hospital Foundation, and
the New American Schools Development Corporation. He is a member of The Business
Council, the Business Roundtable, The Conference Board and the New American
Realities Committee of the National Planning Association. He is also a Trustee
Emeritus and Presidential Councillor of Cornell University.
[PHOTO]
Thomas J. Usher Director since 1991 Age 58
Chairman of the Board & Chief Executive Officer, USX Corporation
Mr. Usher graduated from the University of Pittsburgh with a BS degree in
industrial engineering, an MS degree in operations research and a Ph.D. in
systems engineering. He joined USX in 1965 and held various positions in
industrial engineering. From 1975 through 1979, he held a number of
management positions at USX's South and Gary Works. He was elected Executive
Vice President-Heavy Products in 1986, President-U.S. Steel Group and
director of USX in 1991, President & Chief Operating Officer of USX in 1994
and Chairman of the Board & Chief Executive Officer effective July 1, 1995.
He is a director of H. J. Heinz Co., PNC Financial Services Group, PPG
Industries, Inc., Transtar, Inc., and the U.S.-Japan Business Council; Vice
Chairman of the International Iron and Steel Institute; a member of the
Policy Committee of the Business Roundtable; Director and Chairman of the
U.S.-Korea Business Council; Chairman and member of the Executive Committee
of TheSteelAlliance and a member of the Board of Trustees of the University
of Pittsburgh and of the Board of the Extra Mile Education Foundation.
12
[PHOTO]
Paul J. Wilhelm Director since 1995 Age 59
Vice Chairman-USX Corporation and President-U. S. Steel Group
Mr. Wilhelm received a BS degree in mechanical engineering from Carnegie Mellon
University in 1964 and joined USX following graduation. After holding a number
of management positions, Mr. Wilhelm in 1992 was elected Vice
President-Technology & Management Services for the U.S. Steel Group. In 1993 he
was named President of USS/Kobe Steel Company, a joint venture between
subsidiaries of USX and Kobe Steel Ltd. Mr. Wilhelm was elected Vice
President-Operations of the U.S. Steel Group in 1994, President-U.S. Steel Group
the same year, and director of USX in 1995. He was named Vice Chairman-USX
Corporation in 2000. Mr. Wilhelm is a member of the Association of Iron and
Steel Engineers, past Chairman of the American Iron and Steel Institute,
Chairman of the Japan-America Society of Pennsylvania, a member of the Board of
Trustees of Carnegie Mellon University, Chairman of the Board for the Greater
Pittsburgh Council Boy Scouts of America, a member of the boards of the
University of Pittsburgh Cancer Institute Council and of the Pittsburgh Regional
Alliance, and a member of the University of Pittsburgh's board of visitors for
the Katz School of Business and College of Business Administration.
13
CONTINUING CLASS III DIRECTORS
Terms Expire 2002
[PHOTO]
Charles A. Corry Director since 1988 Age 69
Retired Chairman of the Board & Chief Executive Officer, USX Corporation
Mr. Corry graduated from the University of Cincinnati in 1955 with a BA degree
and received a JD degree from the University of Cincinnati Law School. After
serving in the U.S. Air Force, he joined USX in 1959, holding various finance
and accounting positions prior to being named Vice President-Corporate Planning
in 1979. Mr. Corry was elected Senior Vice President and Comptroller in 1982 and
President of the U. S. Diversified Group of USX in 1987. He was elected
President of USX in 1988 and elected Chairman of the Board & Chief Executive
Officer in 1989, the position he held until his retirement on June 30, 1995. He
is a director of Mellon Financial Corp. and Omnova Solutions Inc., a member of
the Federal Judicial Nominating Commission and a member of The Business Council.
[PHOTO]
Shirley Ann Jackson Director since July 1, 2000 Age 54
President, Rensselaer Polytechnic Institute
Dr. Jackson received a BS degree in physics in 1968, and a Ph.D. in theoretical
elementary particle physics in 1973, from the Massachusetts Institute of
Technology. She was a research associate at the Fermi National Accelerator
Laboratory, a visiting scientist at the European Center for Nuclear Research
and, from 1976 to 1991, a theoretical physicist at the former AT&T Bell
Laboratories. She was a professor of theoretical physics at Rutgers University
from 1991 to 1995. She was head of the U.S. Nuclear Regulatory Commission from
1995 to 1999. Dr. Jackson was named President of Rensselaer Polytechnic
Institute in 1999. Dr. Jackson is a director of Federal Express Corporation,
Newport News Shipbuilding, Sealed Air Corporation and UtiliCorp United, Inc. She
is a member of the National Academy of Engineering, a Fellow of the American
Academy of Arts and Sciences and a Fellow of the American Physical Society. She
holds 14 honorary degrees, was awarded the New Jersey Governor's Award in
Science in 1993, and was inducted into the National Women's Hall of Fame in
1998. Dr. Jackson is also a trustee of the Brookings Institution and is a Life
Trustee of M.I.T.
[PHOTO]
Paul E. Lego Director since 1988 Age 70
Retired Chairman and CEO, Westinghouse Electric Corporation
Mr. Lego graduated from the University of Pittsburgh with BS and MS degrees in
electrical engineering after service in the U.S. Army. He joined Westinghouse in
1956 at the East Pittsburgh plant and held a number of engineering and
management positions prior to being named a Vice President in 1979, Executive
Vice President in 1980 and Senior Executive Vice President, Corporate Resources
in 1985. In 1988 Mr. Lego was elected a director and President and Chief
Operating Officer of Westinghouse and, in 1990, Chairman and Chief Executive
Officer. Mr. Lego retired in January 1993. He is Chairman of the Board of
Commonwealth Industries, Inc. and a director of Dominion Resources Inc., Lincoln
Electric Holdings, Inc. and Orlimar Golf Company; an emeritus trustee of the
University of Pittsburgh; and a member of The Business Council.
14
[PHOTO]
Seth E. Schofield Director since 1994 Age 61
Retired Chairman and Chief Executive Officer, USAir Group
Mr. Schofield graduated from the Harvard Business School Program for Management
Development in 1975. He served in various corporate staff positions after
joining USAir in 1957 and became Executive Vice President-Operations in 1981.
Mr. Schofield served as President and Chief Operating Officer from 1990 until
1991. He was elected President and Chief Executive Officer in 1991 and became
Chairman of the boards of USAir Group and USAir, Inc. in 1992. He retired in
January 1996. Mr. Schofield is a director of Calgon Carbon Corp. and an Advisory
Board member of Desai Capital Management.
[PHOTO]
Douglas C. Yearley Director since 1992 Age 65
Chairman Emeritus, Phelps Dodge Corporation
Mr. Yearley graduated from Cornell University with a Bachelor's degree in
metallurgical engineering and attended the Program for Management Development at
Harvard Business School. He joined Phelps Dodge in 1960 as Director of Research.
He held several key positions before being elected Executive Vice President and
a director in 1987, Chief Executive Officer in 1989 and President in 1991. He
retired in May, 2000. He is a director of Lockheed Martin Corporation, and a
member of the Business Council, the Center for Compatible Economic Development
and the National Council of the World Wildlife Fund.
15
CONTINUING CLASS I DIRECTORS
Terms Expire 2003
[PHOTO]
Neil A. Armstrong Director since 1984 Age 70
Chairman, EDO Corporation (electronic and electromechanical systems company)
Mr. Armstrong received a BS degree in aeronautical engineering from Purdue
University and an MS degree in aerospace engineering from the University of
Southern California. For 17 years he served with the National Aeronautics and
Space Administration and its predecessor agency as engineer, test pilot,
astronaut and administrator. From 1971 to 1979 he was professor of aerospace
engineering at The University of Cincinnati. He became Chairman of CTA, Inc. in
1982, Chairman of AIL Systems Inc. in 1989 and director and Chairman of the EDO
Corporation in 2000. He is a director of RTI International Metals, Inc. and a
member of the National Academy of Engineering.
[PHOTO]
Clarence P. Cazalot, Jr. Director since 2000 Age 50
Vice Chairman-USX Corporation and President-Marathon Oil Company
Mr. Cazalot graduated from Louisiana State University in 1972 with a BS degree
in geology and joined Texaco Inc. that same year as a geophysicist. After
holding a number of management positions, Mr. Cazalot was elected a Vice
President of Texaco Inc. and President of Texaco's Latin America/West Africa
Division in 1992. In 1994 he was named President of Texaco Exploration and
Production Inc., and in 1997 he was named President of International Marketing
and Manufacturing. Mr. Cazalot was named President-International Production and
Chairman of London-based Texaco Ltd. in 1998. He was named President-Worldwide
Production Operations of Texaco Inc. in 1999. Mr. Cazalot was elected Vice
Chairman-USX Corporation and President-Marathon Oil Company effective March 3,
2000. He is a Director and Executive Committee member of the U.S.-Saudi Arabian
Business Council and a member of the Policy and Executive committees of the
American Petroleum Institute.
[PHOTO]
Robert M. Hernandez Director since 1991 Age 56
Vice Chairman & Chief Financial Officer, USX Corporation
Mr. Hernandez graduated from the University of Pittsburgh with a Bachelor's
degree in economics and mathematics and received an MBA from the Wharton
Graduate School of Finance and Commerce at the University of Pennsylvania. He
joined USX in 1968 and held various finance and accounting positions until 1980
when he was appointed Assistant Corporate Comptroller. He was elected Vice
President and Treasurer in 1984 and Senior Vice President and Comptroller in
1987. In 1989, he was appointed President of the U.S. Diversified Group and in
1990 elected Senior Vice President-Finance & Treasurer. He was elected director
and Executive Vice President-Accounting & Finance & Chief Financial Officer in
1991 and Vice Chairman & Chief Financial Officer in 1994. Mr. Hernandez is a
director and Chairman of RTI International Metals, Inc.; a director of Transtar,
Inc., and a director and Chairman of the Executive Committee of ACE Limited; a
trustee of BlackRock Funds; a director of the Pennsylvania Chamber of Business
and Industry; and a member of the Pennsylvania Business Roundtable.
16
[PHOTO]
John F. McGillicuddy Director since 1984 Age 70
Retired Chairman of the Board, Chemical Banking Corporation
Mr. McGillicuddy graduated from Princeton University in 1952 and received an LLB
degree from Harvard Law School in 1955. He joined Manufacturers Hanover Trust
Company in 1958, became Vice President in 1962, Senior Vice President in 1966
and Executive Vice President and Assistant to the Chairman in 1969. In 1970 he
was elected Vice Chairman and a director of Manufacturers Hanover Corporation
and Manufacturers Hanover Trust Company, and he became President of each in
1971. Mr. McGillicuddy was named Chairman and Chief Executive Officer of each
company in 1979. Following the merger of Manufacturers Hanover Corporation and
Chemical Banking Corporation on January 1, 1992, Mr. McGillicuddy became
Chairman of the Board and Chief Executive Officer of the new Chemical Banking
Corporation and retired in January 1994. He is a director of Empire
HealthChoice, Inc., Southern Peru Copper Corporation and UAL Corporation. He is
Chairman Emeritus of New York-Presbyterian Hospital, a member of The Business
Council and a Trustee Emeritus of Princeton University.
[PHOTO]
John W. Snow Director since 1995 Age 61
Chairman, President and Chief Executive Officer, CSX Corporation (a major
transportation company)
Mr. Snow did undergraduate work at Kenyon College and the University of Toledo,
received a Ph.D. in economics from the University of Virginia and earned a law
degree from George Washington University Law School. Following an academic
career as an economics and law professor and several high-level presidential
appointments with the U.S. Department of Transportation and the National Highway
Traffic Safety Administration, Mr. Snow joined CSX in 1977 as Vice
President-Government Affairs for Chessie System Inc. After a number of other
senior management assignments, he was elected President and Chief Operating
Officer of CSX in 1988, President and Chief Executive Officer in 1989 and
Chairman, President and Chief Executive Officer in 1991. Mr. Snow is a director
of Circuit City Stores, Inc., Verizon Communications, and Johnson & Johnson. He
is on the Board of the Association of American Railroads, a member of the board
of trustees of The Johns Hopkins University, and a member of the Business
Roundtable and of The Business Council. He is serving a three-year term on the
Federal Aviation Administration Management Advisory Council as Chairman of the
Air Traffic Services Subcommittee.
- --------------------------------------------------------------------------------
PROPOSAL NO. 2 ELECTION OF INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP ("PricewaterhouseCoopers") has served as independent
accountants of USX for many years. We believe that their knowledge of USX's
business and its organization gained through this period of service is very
valuable. In accordance with the established policy of the firm, partners and
employees of PricewaterhouseCoopers assigned to the USX engagement are
periodically rotated, thus giving USX the benefit of new thinking and approaches
in the audit area. We expect representatives of PricewaterhouseCoopers to be
present at the meeting with an opportunity to make a statement if they desire to
do so and to be available to respond to appropriate questions.
For the year 2000, PricewaterhouseCoopers performed professional services
principally in connection with audits of the consolidated financial statements
of USX and the financial statements of the Marathon Group and the U.S. Steel
Group, certain subsidiaries and certain pension and other employee benefit
plans. They also reviewed quarterly reports and other filings with the
Securities and Exchange Commission and other agencies.
17
AUDIT COMMITTEE REPORT
Our committee has reviewed and discussed USX's audited financial statements for
2000 with USX's management. We have discussed with the independent auditors,
PricewaterhouseCoopers LLP ("PricewaterhouseCoopers"), the matters required to
be discussed by Statement of Auditing Standards No. 61 (Communication with Audit
Committees), as may be modified or supplemented. We have received the written
disclosures and the letter from PricewaterhouseCoopers required by Independence
Standards Board Standard No. 1 (Independence Discussions with Audit Committees),
as may be modified or supplemented, and we have discussed with
PricewaterhouseCoopers its independence. Based on the review and discussions
referred to above, we recommended to the Board that the consolidated audited
financial statements for USX, the audited financial statements for the
USX-Marathon Group, and the audited financial statements for the USX-U. S. Steel
Group be included in USX's Annual Report on Form 10-K for 2000 for filing with
the Securities and Exchange Commission.
John W. Snow, Chairman
J. Gary Cooper
Shirley Ann Jackson
Paul E. Lego
John F. McGillicuddy
Douglas C. Yearley
18
INFORMATION REGARDING THE INDEPENDENCE
OF THE INDEPENDENT PUBLIC ACCOUNTANTS
AUDIT FEES
Aggregate fees billed to USX for professional services rendered for
PricewaterhouseCoopers' audit of USX's annual financial statements for 2000 and
for its reviews of USX's financial statements included in USX's Forms 10-Q for
2000 were $3,665,460.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES
Aggregate fees billed to USX for professional services rendered by
PricewaterhouseCoopers for 2000 as described in Paragraph (c)(4)(ii) of Rule
2-01 of Regulation S-X were $2,549,414.
ALL OTHER FEES
Aggregate fees billed to USX for services rendered for 2000 by
PricewaterhouseCoopers, other than the services described in the previous two
paragraphs, were $2,352,831.
COMPATIBILITY OF PRICEWATERHOUSECOOPERS' SERVICES WITH ITS INDEPENDENCE
The Audit Committee has considered whether PricewaterhouseCoopers' provision of
the services covered under the headings "Financial Information Systems Design
and Implementation Fees" and "All Other Fees" above is compatible with
maintaining PricewaterhouseCoopers' independence, and the committee has
determined that it is.
- -------------------------------------------------------------------------------
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table furnishes information concerning all persons known to USX to
beneficially own five percent or more of any class of the voting stock of USX:
Name and Address Amount and Nature Percent
Class of of of
Beneficial Owner Beneficial Ownership Class
---------------- -------------------- -----
Marathon Stock Wellington Management Company, LLP 15,562,200 (1) 5.05 (1)
75 State Street
Boston, MA 02109
- ----------
(1) Based on Schedule 13G dated February 14, 2001 which indicates that
Wellington Management Company, LLP had sole voting power over no shares,
shared voting power over 762,600 shares, sole dispositive power over no
shares and shared dispositive power over 15,562,200 shares.
19
SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the number of shares of each class of USX common
stock beneficially owned as of January 31, 2001 by each director, by each
executive officer named in the Summary Compensation Table and by all directors
and executive officers as a group. No director or executive officer beneficially
owned, as of January 31, 2001, any equity securities of USX other than those
shown.
Marathon Stock U. S. Steel Stock
Name Shares Shares
---- ------ ------
Neil A. Armstrong (1) ..................................... 13,925 4,723
Clarence P. Cazalot, Jr.(2)(3) ............................ 440,000 35,000
J. Gary Cooper (1)(2) ..................................... 3,367 1,791
Charles A. Corry (1)(2)(3) ................................ 63,864 81,350
Robert M. Hernandez (2)(3)(4) ............................. 581,492 262,940
Shirley Ann Jackson (1)(2) ................................ 2,771 1,746
Charles R. Lee (1) ........................................ 13,606 5,307
Paul E. Lego (1)(2) ....................................... 10,933 3,659
John F. McGillicuddy (1) .................................. 13,180 4,402
Dan D. Sandman (2)(3) ..................................... 211,900 134,696
Seth E. Schofield (1)(2) .................................. 8,686 3,717
John W. Snow (1) .......................................... 6,918 2,971
Thomas J. Usher (2)(3) .................................... 1,073,976 709,406
Paul J. Wilhelm (2)(3) .................................... 137,940 418,523
Douglas C. Yearley (1) .................................... 8,161 3,545
All Directors and Executive Officers as a group ........... 5,467,849 3,949,801
(36 persons) (1)(2)(3)(5)
(1) Includes Common Stock Units credited under the USX Corporation Deferred
Compensation Plan for Non-Employee Directors as follows:
Marathon Stock U. S. Steel Stock
Common Stock Units Common Stock Units
------------------ ------------------
Neil A. Armstrong .................................. 12,425 4,424
J. Gary Cooper ..................................... 2,344 756
Charles A. Corry ................................... 3,865 1,351
Shirley Ann Jackson ................................ 1,763 732
Charles R. Lee ..................................... 11,606 4,107
Paul E. Lego ....................................... 9,340 3,336
John F. McGillicuddy ............................... 11,180 4,003
Seth E. Schofield .................................. 7,576 2,585
John W. Snow ....................................... 5,918 1,972
Douglas C. Yearley ................................. 7,161 2,546
(2) Includes shares held under the USX Savings Fund Plan, the Marathon Thrift
Plan, the USX Dividend Reinvestment and Direct Stock Purchase Plans and
the 1990 Stock Plan.
(3) Includes shares which may be acquired upon exercise of outstanding options
as follows (all options other than those granted on March 3, May 30,
September 25 and December 20, 2000 are currently exercisable): Mr. Usher:
Marathon Stock 892,600, U.S. Steel Stock 606,400; Mr. Corry: Marathon
Stock 60,000, U.S. Steel Stock 80,000; Mr. Cazalot: Marathon Stock
380,000, U.S. Steel Stock 20,000; Mr. Wilhelm: Marathon Stock 113,000,
U.S. Steel Stock 339,750; Mr. Hernandez: Marathon Stock 497,950, U.S.
Steel Stock 217,000; Mr.Sandman: Marathon Stock 153,400, U.S. Steel Stock
107,325; and all directors and executive officers as a group: Marathon
Stock 2,877,130, U.S. Steel Stock 2,276,025.
(4) As of January 31, 2001 the United States Steel and Carnegie Pension Fund,
trustee of the United States Steel Corporation Plan for Employee Pension
Benefits and the United States Steel Corporation Plan for Non-Union
Employee Pension Benefits, owned 587,680 shares of Marathon Stock. This
stock was received in exchange for common stock of Texas Oil & Gas Corp.
Mr. Hernandez is chairman and one of seven members of the Investment
Committee of the trustee. The board of directors of the trustee has by
formal resolution delegated sole power to vote and dispose of such stock
to a subcommittee of the Investment Committee which is composed of members
who are not officers or employees of USX. Mr. Hernandez disclaims
beneficial ownership of such stock.
(5) Total shares beneficially owned in each case constitute less than one
percent of the outstanding shares of each class except that all directors
and executive officers as a group own 1.77 percent of the Marathon Stock
and 4.45 percent of the U.S. Steel Stock.
20
EXECUTIVE COMPENSATION
The following table sets forth certain information concerning the compensation
awarded to, earned by or paid to Mr. Usher and to the other four most highly
compensated executive officers of USX who were serving as executive officers at
the end of 2000 for services rendered in all capacities during 2000, 1999 and
1998:
SUMMARY COMPENSATION TABLE
Long-Term
Annual Compensation Compensation(4)
----------------------------------------------- --------------------
Name Salary and Other Restricted All
and Bonus Annual Stock Options/ Other
Principal Salary Bonus Total Compensation Award(s) SARs Compensation
Position Year ($) ($) ($) ($) ($)(1) (#)(2) ($)(3)
--------- ---- ------ ----- ----- ------------ -------- ---- ------------
T. J. Usher 2000 1,325,000 2,500,000 3,825,000 7,729 4,925,000 400,000 112,406
Chairman 1999 1,241,667 1,400,000 2,641,667 13,660 291,151 324,000 119,108
& Chief 1998 1,097,917 1,320,000 2,417,917 11,549 354,840 270,000 126,805
Executive Officer
C. P. Cazalot, Jr. 2000 495,652 1,500,000 1,995,652 0 1,875,000 400,000 28,239
Vice Chairman-
USX Corporation
and President-
Marathon Oil
Company
(effective March 3, 2000)
P. J. Wilhelm 2000 655,833 800,000 1,455,833 7,343 1,762,500 150,000 49,862
Vice Chairman- 1999 604,167 600,000 1,204,167 7,496 119,490 120,000 49,329
USX Corporation 1998 535,833 600,000 1,135,833 8,426 217,817 100,000 49,593
and President-
U. S. Steel Group
R. M. Hernandez 2000 600,000 1,000,000 1,600,000 9,250 1,477,500 150,000 56,512
Vice Chairman 1999 573,750 600,000 1,173,750 7,535 94,153 120,000 55,435
& Chief 1998 542,500 650,000 1,192,500 7,876 53,841 100,000 58,180
Financial Officer
D. D. Sandman 2000 459,167 650,000 1,109,167 4,597 923,438 80,000 47,693
General Counsel, 1999 425,000 425,000 850,000 4,251 75,323 60,000 47,852
Secretary and 1998 397,917 450,000 847,917 4,852 66,079 56,000 46,196
Senior Vice
President-
Human Resources
& Public Affairs
- -----------
(1) Grants of restricted stock under the USX 1990 Stock Plan. Grants are
subject to conditions including continued employment and achievement of
business performance standards. Dividends are paid on restricted stock.
Shown below is the vesting schedule for restricted stock scheduled to vest
less than three years from the date of grant, together with the number and
value, as of December 31, 2000, of the aggregate holdings of restricted
stock for each of the executive officers named in the Summary Compensation
Table. Vesting shown assumes achievement of business performance at
peer-group standard (as described in the Compensation Committee Report
which begins on page 26).
21
Unvested Restricted Shares
Vesting Schedule for Restricted Stock Aggregate Holdings
------------------------------------------------------------- --------------------------------------
Value as of
Class of May 2001 May 2002 May 2003 Class of December 31, 2000
Date Granted Stock (Shares) (Shares) (Shares) Stock Shares ($)
------------ -------- -------- -------- -------- -------- ------ -----------------
T. J. Usher May 30, 2000 Marathon 26,000 26,000 26,000 Marathon 130,000 3,684,694
U.S. Steel 14,000 14,000 14,000 U.S. Steel 70,000 1,255,625
----------
4,940,319
C. P. Cazalot, Jr. May 30, 2000 Marathon 12,000 12,000 12,000 Marathon 60,000 1,700,628
U.S. Steel 3,000 3,000 3,000 U.S. Steel 15,000 269,063
----------
1,969,691
P. J. Wilhelm May 30, 2000 Marathon 3,000 3,000 3,000 Marathon 15,000 425,157
U.S. Steel 12,000 12,000 12,000 U.S. Steel 60,000 1,076,250
----------
1,501,407
R. M. Hernandez May 30, 2000 Marathon 7,800 7,800 7,800 Marathon 39,000 1,105,408
U.S. Steel 4,200 4,200 4,200 U.S. Steel 21,000 376,688
----------
1,482,096
D. D. Sandman May 30, 2000 Marathon 4,875 4,875 4,875 Marathon 24,375 690,880
U.S. Steel 2,625 2,625 2,625 U.S. Steel 13,125 235,430
----------
926,310
(2) All option shares listed were granted with tandem stock appreciation
rights ("SARs").
(3) This column includes amounts contributed by USX under the USX Savings Fund
Plan or the Marathon Thrift Plan and the related supplemental savings
plans. Such amounts for 2000 are $79,500 for Mr. Usher, $28,239 for Mr.
Cazalot, $39,350 for Mr. Wilhelm, $36,000 for Mr. Hernandez and $27,550
for Mr. Sandman. Also included are amounts attributable to split-dollar
life insurance provided by USX. (Marathon Oil Company does not provide
split-dollar life insurance.) For 2000, these amounts are $30,906 for Mr.
Usher, $8,512 for Mr. Wilhelm, $18,512 for Mr. Hernandez and $18,143 for
Mr. Sandman. Also included are amounts attributable to a mandatory tax
compliance program. For 2000, these amounts were $2,000 for each of
Messrs. Usher, Wilhelm, Hernandez and Sandman. For 1998 and 1999, this
column also included dividends paid on restricted stock, which have never
been, and are not now, at above-market or preferential rates.
22
(4) Restricted stock and stock options/SAR shares granted by class of stock
are as follows:
Restricted
Class of Stock Stock Option/
Stock ($) SAR Shares
-------- ----- -------------
T. J. Usher 2000 Marathon 3,315,000 260,000
U.S. Steel 1,610,000 140,000
1999 Marathon 191,878 210,600
U.S. Steel 99,273 113,400
1998 Marathon 221,000 175,500
U.S. Steel 133,840 94,500
C. P. Cazalot, Jr. 2000 Marathon 1,530,000 380,000
U.S. Steel 345,000 20,000
P. J. Wilhelm 2000 Marathon 382,500 30,000
U.S. Steel 1,380,000 120,000
1999 Marathon 24,675 24,000
U.S. Steel 94,815 96,000
1998 Marathon 72,420 35,000
U.S. Steel 145,397 65,000
R. M. Hernandez 2000 Marathon 994,500 97,500
U.S. Steel 483,000 52,500
1999 Marathon 62,040 78,000
U.S. Steel 32,113 42,000
1998 Marathon 33,150 65,000
U.S. Steel 20,691 35,000
D. D. Sandman 2000 Marathon 621,563 52,000
U.S. Steel 301,875 28,000
1999 Marathon 49,644 39,000
U.S. Steel 25,679 21,000
1998 Marathon 41,548 36,400
U.S. Steel 24,531 19,600
23
2000 OPTION/SAR GRANTS
The following table sets forth certain information concerning options and stock
appreciation rights ("SARs") granted during 2000 to each executive officer named
in the Summary Compensation Table under the USX 1990 Stock Plan:
Individual Grants
---------------------------------------------
Number of % of Total Potential Realizable Value
Securities Options/ Exercise at Assumed Annual Rates of
Underlying SARs or Base Stock Price Appreciation
Options/ Granted to Price per for Option Term ($)(4)
Class of SARs Employees Share Expiration ------------------------------------
Name or Group Stock Granted(1) in 2000(3) ($) Date 0% 5% 10%
- ------------- ----- ---------- ---------- --- ---- -- -- ---
T. J. Usher Marathon 260,000(2) 14.4% 25.5000 May 30, 2010 0 4,169,568 10,566,504
U.S. Steel 140,000(2) 15.3% 23.0000 May 30, 2010 0 2,025,044 5,131,854
C. P. Cazalot, Jr. Marathon 300,000(2) 16.7% 23.4063 March 3, 2010 0 4,416,030 11,191,080
Marathon 80,000(2) 4.4% 25.5000 May 30, 2010 0 1,282,944 3,251,232
U.S. Steel 20,000(2) 2.2% 23.0000 May 30, 2010 0 289,292 733,122
P. J. Wilhelm Marathon 30,000(2) 1.7% 25.5000 May 30, 2010 0 481,104 1,219,212
U.S. Steel 120,000(2) 13.1% 23.0000 May 30, 2010 0 1,735,752 4,398,732
R. M. Hernandez Marathon 97,500(2) 5.4% 25.5000 May 30, 2010 0 1,563,588 3,962,439
U.S. Steel 52,500(2) 5.7% 23.0000 May 30, 2010 0 759,392 1,924,445
D. D. Sandman Marathon 52,000(2) 2.9% 25.5000 May 30, 2010 0 833,914 2,113,301
U.S. Steel 28,000(2) 3.1% 23.0000 May 30, 2010 0 405,009 1,026,371
All Stockholders Marathon N/A N/A 25.5000 N/A 0 4,943,604,423 12,528,064,275
U.S. Steel N/A N/A 23.0000 N/A 0 1,283,979,481 3,253,852,872
All Optionees Marathon 300,000 16.7% 23.4063 March 3, 2010 0 4,416,030 11,191,080
Marathon 1,439,880 80.0% 25.5000 May 30, 2010 0 23,091,068 58,517,299
Marathon 30,000 1.7% 26.4375 Sept. 25, 2010 0 498,792 1,264,038
Marathon 30,000 1.7% 26.4688 Dec. 20, 2010 0 499,383 1,265,535
U.S. Steel 915,470 100.0% 23.0000 May 30, 2010 0 13,241,907 33,557,560
All Optionees' Marathon N/A N/A 23.4063 N/A 0 0.09% 0.09%
Gain as % of Marathon N/A N/A 25.5000 N/A 0 0.47% 0.47%
All Stockholders' Marathon N/A N/A 26.4375 N/A 0 0.01% 0.01%
Gain Marathon N/A N/A 26.4688 N/A 0 0.01% 0.01%
U. S. Steel N/A N/A 23.0000 N/A 0 1.03% 1.03%
- ----------
(1) The option granted to Mr. Cazalot on March 3 is one-third exercisable on
the third, fourth and fifth anniversaries of the grant date. Options
granted to optionees other than those named in the Summary Compensation
Table on September 25 and December 20 are each one-third exercisable on
the first, second and third anniversaries of the grant date. All other
options listed are exercisable on May 30, 2001.
(2) These options were granted with tandem SARs, which have the same exercise
date as the underlying options. Upon the exercise of an SAR, an optionee
receives an amount, in cash and/or shares, equal to the excess, for a
specified number of shares, of (a) the fair market value of a share on the
date the SAR is exercised (except that for any SAR exercised during the
10-business-day period beginning on the third business day following the
release of USX's quarterly earnings, the Compensation Committee may, in
its sole discretion, establish a uniform fair market value of a share for
such period which shall not be more than the highest daily fair market
value and shall not be less than the lowest daily fair market value during
such 10-business-day period) over (b) the exercise or base price per
share.
(3) Indicates percentage of total options granted in the applicable class of
stock.
(4) The dollar amounts under these columns are the result of calculations at
0% and at the 5% and 10% rates set by the Securities and Exchange
Commission and therefore are not intended to forecast possible future
appreciation, if any, of the price of the Marathon Stock or the U.S. Steel
Stock. USX did not use an alternative formula for a grant date valuation,
as USX is not aware of any formula which will determine with reasonable
accuracy a present value based on future unknown or volatile factors.
Amounts shown for All Stockholders represent the potential realizable
value assuming appreciation at the rates indicated based on the exercise
or base price per share and the expiration date applicable to grants made
in 2000 and the number of outstanding shares as of December 31, 2000.
24
OPTION EXERCISES AND YEAR-END VALUES
The following table sets forth certain information concerning options to
purchase USX common stock and stock appreciation rights ("SARs") exercised by
each executive officer named in the Summary Compensation Table during 2000
together with the total number of options and SARs outstanding at December 31,
2000 and the value of such options.
AGGREGATED 2000 OPTION/SAR EXERCISES
AND DECEMBER 31, 2000 OPTION/SAR VALUES
No. of Total Value
Securities of Unexercised
No. of Total Value Underlying In-The-Money
Shares Realized Unexercised Options/SARs at
Underlying for Both Options/SARs at December 31, 2000
Options/SARs Classes of December 31, for Both Classes
Name Exercised(1) Stock ($)(1) 2000(1) of Stock ($)(1)
- ---- ------------ ------------ ------- ---------------
T. J. Usher 0 - 1,499,000 1,421,472
C. P. Cazalot, Jr. 0 - 400,000 1,708,754
P. J. Wilhelm 0 - 452,750 85,314
R. M. Hernandez 0 - 714,950 1,968,422
D. D. Sandman 0 - 260,725 147,878
Note: All options listed above, except those granted on May 30, 2000 and those
granted on March 3, 2000 to Mr. Cazalot, are currently exercisable. All options
listed above were granted with SARs.
(1) Figures by class of stock are as follows:
No. of Securities Total Value of
Underlying Unexercised
Unexercised In-The-Money
No. of Shares Options/SARs Options/SARs
Underlying Value at at
Class of Option/SARs Realized December 31, December 31,
Stock Exercised ($) 2000 2000 ($)
----- --------- --- ---- --------
T. J. Usher Marathon 0 0 892,600 1,421,472
U.S. Steel 0 0 606,400 0
C. P. Cazalot, Jr. Marathon 0 0 380,000 1,708,754
U.S. Steel 0 0 20,000 0
P. J. Wilhelm Marathon 0 0 113,000 85,314
U.S. Steel 0 0 339,750 0
R. M. Hernandez Marathon 0 0 497,950 1,968,422
U.S. Steel 0 0 217,000 0
D. D. Sandman Marathon 0 0 153,400 147,878
U.S. Steel 0 0 107,325 0
25
COMPENSATION COMMITTEE REPORT
ON EXECUTIVE COMPENSATION
Our committee sets policies and administers programs on executive compensation.
When we believe that action should be taken on a specific compensation item, we
either make a recommendation to the USX Board or a subsidiary company board or
take action on our own, whichever is appropriate. We report to the USX Board
actions which do not require Board approval. The purpose of this report is to
summarize the philosophy, specific program objectives and other relevant factors
considered by the committee in decision making with respect to the compensation
of USX, Marathon Group and U. S. Steel Group executive officers, including the
officers named in the Summary Compensation Table.
Compensation programs for USX's executive officers are designed to attract,
retain and motivate employees who will make significant contributions to the
achievement of corporate goals and objectives. The principal elements of our
executive officers' compensation are:
- - Salary
- - Short-term incentive (bonus) awards and
- - Long-term incentive awards (stock options with stock appreciation rights and
restricted stock).
For each of the above elements of compensation, we exercise our discretion in
the subjective consideration of the factors described below and within the
limitations of the various plans.
SALARY
Salary administration at USX begins with the development, and periodic
adjustment, of salary structures for executive officers employed at the
corporate level and at each major business unit. Each executive officer's
position is assigned a salary grade with an associated salary range. Our two
major objectives in developing salary structures and assigning grades are to
maintain:
1. external competitiveness - the midpoint of the salary range for each
position is near the average midpoint for similar positions at comparable
companies, and
2. internal equity - each position's grade in the unit's hierarchy of
positions accurately reflects its relative "value".
The data used in developing and adjusting salary structures are obtained from
surveys coordinated by independent consultants, with each unit having its own
sources of relevant data.
We make decisions on salary increases and, occasionally - when business
conditions dictate- salary decreases. When we determine salary increases, we
give the highest weighting to performance; but we also consider other factors,
such as experience and time in position. Once an executive officer's salary has
passed the midpoint for the position, increases seldom exceed amounts necessary
to maintain the salary near the midpoint, assuming performance merits such
increases. Therefore, incentive opportunities provide the primary basis for
significant increases in compensation. The salaries shown for the officers named
in the Summary Compensation Table reflect the results of our salary reviews and
related actions.
26
SHORT-TERM INCENTIVE AWARDS
USX's short-term incentive (bonus) opportunities for executive officers are
designed to provide awards near the average of those provided by similar
companies for on-target performance. However, our incentive plans are designed
to provide exceptional rewards for superior performance and lower rewards for
below-average performance. We make bonus awards under the Senior Executive
Officer Annual Incentive Compensation Plan, as well as under other plans
developed for specific business units. The Senior Executive Officer Annual
Incentive Compensation Plan was developed specifically to retain USX's tax
deduction for awards made to the officers named in the Summary Compensation
Table and was approved, as amended and restated, by the stockholders on April
28, 1998.
SENIOR EXECUTIVE OFFICER ANNUAL INCENTIVE COMPENSATION PLAN
This plan provides for awards based on pre-established performance measures
specifically related to the responsibilities of plan participants. For each
performance measure, we can award the applicable portion of the bonus only if
performance reaches the minimum, or threshold, level for that measure. While
performance for 2000 varied among USX's business units, performance levels were
reached or exceeded for the following:
For Marathon Group Income from operations, liquid hydrocarbon production,
natural gas production, refined product sales, refined
product margins, worker safety and environmental
emissions improvements
For U. S. Steel Group Income from operations, steel shipments, worker safety
and environmental emissions improvements
For USX (Corporate) All the above plus workforce diversity
Our committee certified in writing prior to payment of awards for the year 2000
that the pre-established, applicable performance levels (measured for incentive
compensation purposes) required under the plan were satisfied.
OTHER PLANS
We also administer other bonus plans in which corporate and business unit
executive officers participate. These plans were developed specifically for
corporate, U. S. Steel Group and Marathon Group employees. Our committee makes
awards based on performance comparisons with the current business plan, with
previous years and with peer groups on the basis of such financial measures as
income, cash flow and return on capital employed, as measured for incentive
compensation purposes, as well as individual objectives. In addition,
non-financial measures, such as safety performance (compared with the prior
year's industry average) and environmental and diversity performance are also
considered. In determining awards under these plans, we also give consideration
to the absolute levels of income and cash flow. When making awards to executive
officers under these plans, our committee gives such weight to the various
factors as we deem appropriate.
Based on consideration of other factors, our committee may reduce or eliminate a
short-term incentive award that would otherwise be payable under the
above-discussed plans.
27
LONG-TERM INCENTIVE AWARDS
We consider long-term incentive awards to be of major importance in the mix of
compensation elements because these awards provide the most direct link to the
returns that you, as USX stockholders, receive. The stockholders approved the
1990 Stock Plan, as amended and restated, on April 28, 1998. We administer this
plan, under which we may grant (1) stock options, with or without a restoration
feature, (2) stock appreciation rights and/or (3) restricted stock. Our stock
options and restricted stock meet the requirements for deductibility under the
tax laws.
STOCK OPTION GRANTS
Our committee makes stock option grants that we believe to be reasonable and in
line with other compensation. The number of shares we grant generally reflects
the employee's level of responsibility, and the class or classes of stock
granted reflect the specific business unit(s) to which the employee's
responsibilities relate. Following our normal annual grant practice, we granted
stock options in May 2000.
RESTRICTED STOCK GRANTS
Since the inception of the 1990 Stock Plan, our committee has established, for
each recipient, an annual target level of restricted stock shares, based on the
same factors as we consider in granting stock options. A major grant is made to
cover five years, with the intention that one fifth of the shares will vest each
year if performance is at the target level. We vest restricted stock at levels
higher or lower than annual targets, depending on performance. We made our third
major grant in 2000, to cover the five-year performance period ending with 2004,
and we will make interim grants only to permit vesting at the target level for
the number of years remaining in the period. To emphasize the long-term nature
of the awards, our vesting decisions are based on three-year average
performance, which is compared with three-year peer-group performance for
relevant businesses.
Vesting of restricted stock shares is based on pre-established performance
measures specifically related to the responsibilities of plan participants. We
can vest a portion of the annual target shares only if performance reaches the
minimum, or threshold, level established for that period. In May 2000, we
compared our three-year (1997-1999) average performance with that of competitors
for the measures shown below. This comparison provides the primary basis for the
determination of vesting levels for restricted stock. However, vesting levels
may be reduced (or eliminated entirely) based on other factors considered
relevant by the committee.
28
Unit Performance Measure
Marathon Group Earnings before interest, taxes and depreciation as a
percent of total assets
Oil and gas reserve replacement ratio
Income per barrel of oil equivalent produced (upstream)
Operating income per barrel of refinery throughput
(downstream)
Safety performance
U. S. Steel Group Income from operations as a percent of capital employed
Income from operations per ton shipped
Operating cash flow as a percent of capital employed
Safety performance
USX Headquarters Weighted Composite (65% Marathon Group/35% U. S. Steel
Group)
Our committee certified in writing prior to vesting of restricted stock shares
in the year 2000 that the pre-established applicable performance levels required
under the plan were satisfied.
The committee periodically compares data on long-term incentive grants made at
other companies with those made at USX. Our objective in making grants under the
1990 Stock Plan is to provide opportunities to receive above-average
compensation (compared with that of similar companies) when performance is above
the target level.
Overall, executive compensation at USX is designed to provide total pay that is
above average when both short- and long-term incentive goals are exceeded.
------------
In addition to the compensation comparisons described above, our committee
annually compares the salary, bonus and long-term incentive payouts for the
Chairman, the Chief Financial Officer, and the Presidents of the U. S. Steel
Group and of Marathon Oil Company with the same elements for similar positions
at comparable companies.
With respect to the compensation comparisons that we make, we believe that the
companies with which USX competes for employees are not necessarily limited to
the companies with which shareholder returns would logically be compared. The
peer groups used in the performance graphs include the Standard & Poor's 500
Stock Index and those oil and steel companies deemed most comparable to USX's
businesses for measuring stock performance. The companies used for comparing
compensation reflect similarities to USX and its operating groups in such
factors as line of business (when relevant), size and complexity. Therefore, the
compositions of the groups of companies used for compensation comparisons are
not identical to those of the peer groups shown in the Shareholder Return
Performance Presentation on pages 31 and 32.
Mr. Usher's 2000 compensation reflects the same elements and the same factors as
those described above. His leadership and effectiveness in dealing with major
corporate problems and opportunities are also considered in determining his
salary increases. Taking into account these factors, as well as (1) the
comparability of his salary with CEO's of other companies of similar size and
complexity and (2) the position of his salary in the range for his position, the
committee approved a salary increase for Mr. Usher effective October 1, 2000.
29
The committee made an award to Mr. Usher for 2000 under the Senior Executive
Officer Annual Incentive Compensation Plan taking into consideration the overall
performance of USX and its business units, specifically the performance measures
listed in the previous table. The committee also considered Mr. Usher's
contributions to improving USX's business portfolio through key acquisitions and
dispositions, including the purchase of U.S. Steel Kosice and the exchange of
Sakhalin assets; the establishment of important business alliances; the skill
demonstrated in the transition to a new leadership team and strategic direction
at Marathon; ongoing cost reduction efforts through organizational restructuring
and voluntary early retirement programs, and strong environmental and safety
performances at both business units versus their peer groups.
The committee considered the additional stock option shares granted to Mr. Usher
under the 1990 Stock Plan to be at a competitive level relative to other CEO's.
On the basis of the performance shown in the above table, we also vested
restricted stock for and made an additional grant of restricted stock to Mr.
Usher.
Seth E. Schofield, Chairman
Neil A. Armstrong
Charles R. Lee
John W. Snow
Douglas C. Yearley
30
SHAREHOLDER RETURN PERFORMANCE PRESENTATION
The line graphs below compare the yearly change in cumulative total stockholder
return for each class of our common stock with the cumulative total return of
the Standard & Poor's 500 Stock Index. The Marathon graph also shows a
comparison with the Standard & Poor's Domestic Integrated Oil Index, and the
U.S. Steel graph also shows a comparison with a Steel Index that is defined in a
footnote to the graph.
COMPARISON OF CUMULATIVE TOTAL RETURN
ON $100 INVESTED IN MARATHON STOCK ON DECEMBER 31, 1995
VS.
S&P 500 and S&P Domestic Integrated Oil Index(1)
[GRAPHIC OMITTED]
PLOT POINTS FOR 2001 PROXY CHARTS
USX - MRO S&P 500 S&P OIL INDEX
--------- ------- -------------
12/31/95 100 100 100
12/31/96 126 123 126
12/31/97 183 164 150
12/31/98 168 211 122
12/31/99 142 255 152
12/31/00 165 232 177
(1) Total return assumes reinvestment of dividends.
31
COMPARISON OF CUMULATIVE TOTAL RETURN
ON $100 INVESTED IN U. S. STEEL STOCK ON DECEMBER 31, 1995
VS.
S&P 500 and Steel Index(1)
[GRAPHIC OMITTED]
PLOT POINTS FOR 2001 PROXY CHARTS
USX - USS S&P 500 STEEL INDEX (2)
--------- ------- --------------
12/31/95 100 100 100
12/31/96 105 123 83
12/31/97 108 164 75
12/31/98 83 211 72
12/31/99 123 255 63
12/31/00 71 232 22
(1) Total return assumes reinvestment of dividends.
(2) The Steel Index consists of the common stocks of AK Steel Corporation,
Bethlehem Steel Corporation, LTV Corporation and National Steel
Corporation for the period December 31, 1995 through December 31, 2000,
and Inland Steel Industries for the period December 31, 1995 through
December 31, 1997. Inland Steel Industries sold its steelmaking
subsidiary, Inland Steel Co., to Ispat International NV in 1998. The
resulting company, Ispat Inland Inc., is not publicly traded.
- -------------------------------------------------------------------------------
TRANSACTIONS
In the regular course of its business since January 1, 2000, USX and its
subsidiaries have had transactions with entities with which certain directors
were affiliated. Such transactions were in the ordinary course of business and
at competitive prices and terms. We do not consider any such director to have a
material interest in any such transaction. We anticipate that similar
transactions will occur in 2001.
32
PENSION BENEFITS
The United States Steel Corporation Plan for Non-Union Employee Pension Benefits
is comprised of two defined benefits. One is based on final earnings and the
other on career earnings. Directors who have not been employees of USX or its
subsidiaries do not receive any benefits under the plan. The following table
shows the annual final earnings pension benefits for retirement at age 65 (or
earlier under certain circumstances) for various levels of eligible earnings
which would be payable to employees retiring with the years of service shown.
The benefits are based on a formula of a specified percentage (dependent on
years of service) of average annual eligible earnings in the five consecutive
years of the ten years prior to retirement in which such earnings were highest.
As of January 31, 2001, Mr.Usher had 35 credited years of service, Mr.
Wilhelm 36, Mr. Hernandez 32 and Mr.Sandman 8.
Table of Pension Benefits
Final Earnings Pension Benefits
Average Annual
Eligible Earnings
for Highest Five
Consecutive Years
in Ten-Year Period
Proceeding
Retirement
Annual Benefits for Years of Service
15 Years 20 Years 25 Years 30 Years 35 Years 40 Years 45 Years
-------- -------- -------- -------- -------- -------- --------
$ 100,000 $ 17,325 $ 23,100 $ 28,875 $ 34,650 $ 40,950 $ 47,250 $ 53,550
300,000 51,975 69,300 86,625 103,950 122,850 141,750 160,650
500,000 86,625 115,500 144,375 173,250 204,750 236,250 267,750
700,000 121,275 161,700 202,125 242,550 286,650 330,750 374,850
900,000 155,925 207,900 259,875 311,850 368,550 425,250 481,950
1,100,000 190,575 254,100 317,625 381,150 450,450 519,750 589,050
1,300,000 225,225 300,300 375,375 450,450 532,350 614,250 696,150
1,500,000 259,875 346,500 433,125 519,750 614,250 708,750 803,250
Annual career earnings pension benefits are equal to one percent of total career
eligible earnings plus a 30 percent supplement. The estimated annual career
earnings benefits payable at normal retirement age 65, assuming no increase in
annual earnings, will be $255,825 for Mr. Usher, $114,952 for Mr. Wilhelm,
$158,430 for Mr. Hernandez and $110,319 for Mr.Sandman. Earnings for the purpose
of calculating both the final earnings and career earnings pensions are limited
to base salary for services performed, allowance for absence covered by sick
leave salary continuance and payment for absence while on regular vacation or
holidays. These earnings are reported in the salary column of the Summary
Compensation Table on page 21. They do not include any awards under the Annual
Incentive Compensation Plan or the Senior Executive Officer Annual Incentive
Compensation Plan. Benefits under both pension provisions are based on a
straight life annuity form of benefit, which is not subject to reduction for
Social Security benefits; but the final earnings pension is subject to offset
for a pension provided outside the plan from a fund to which USX has
contributed, and for payments made by USX pursuant to workers' compensation or
similar laws when such payments are the result of a permanent disability.
Benefits may be paid as an actuarially determined lump sum in lieu of monthly
pensions under both the final earnings and career earnings provisions of the
plan.
In addition to the pension benefit described above, members of USX executive
management, including all of the executive officers named in the Summary
Compensation Table except Mr. Cazalot, are entitled, upon retirement after age
60, or before age 60 with USX's consent, to the benefits shown in the table
below based on bonuses paid under the Annual Incentive Compensation Plan and the
Senior Executive Officer Annual Incentive Compensation Plan. These bonuses are
reported in the bonus column of the Summary Compensation Table on page 21.
33
SUPPLEMENTAL PENSION BENEFITS
AVERAGE ANNUAL
BONUS FOR THREE
HIGHEST YEARS
IN TEN-YEAR PERIOD
PRECEDING ANNUAL BENEFITS FOR YEARS OF SERVICE
RETIREMENT
15 YEARS 20 YEARS 25 YEARS 30 YEARS 35 YEARS 40 YEARS 45 YEARS
- ------------------------------------------------------------------------------------------------------------
$ 100,000 $ 23,100 $ 30,800 $ 38,500 $ 46,200 $ 53,900 $ 61,600 $ 69,300
300,000 69,300 92,400 115,500 138,600 161,700 184,800 207,900
500,000 115,500 154,000 192,500 231,000 269,500 308,000 346,500
700,000 161,700 215,600 269,500 323,400 377,300 431,200 485,100
900,000 207,900 277,200 346,500 415,800 485,100 554,400 623,700
1,100,000 254,100 338,800 423,500 508,200 592,900 677,600 762,300
1,300,000 300,000 400,400 500,500 600,600 700,700 800,800 900,900
1,500,000 346,500 462,200 577,500 693,000 808,500 924,000 1,039,500
1,700,000 392,700 523,600 654,500 785,400 916,300 1,047,200 1,178,100
1,900,000 438,900 585,200 731,500 877,800 1,024,100 1,170,400 1,316,700
============================================================================================================
Marathon Oil Company provides retirement benefits based on final earnings. The
following table shows the annual pension benefits for retirement at age 65 for
various levels of eligible earnings which would be payable to employees retiring
with the years of service shown. The table is based on a formula of a specified
percentage (dependent on years of participation in the Marathon Oil Company
Retirement Plan) of average annual eligible earnings in the three consecutive
years of the ten prior to retirement in which such earnings were highest.
FINAL AVERAGE
EARNINGS FOR HIGHEST
THREE CONSECUTIVE
YEARS IN TEN-YEAR
PERIOD PRECEDING ANNUAL BENEFITS FOR YEARS OF SERVICE
RETIREMENT
15 YEARS 20 YEARS 25 YEARS 30 YEARS 35 YEARS 40 YEARS
- ---------------------------------------------------------------------------------------
$ 100,000 $ 20,314 $ 27,085 $ 33,856 $ 40,627 $ 47,398 $ 50,784
300,000 68,314 91,085 113,856 136,627 159,398 170,784
500,000 116,314 155,085 193,856 232,627 271,398 290,784
700,000 164,314 219,085 273,856 328,627 383,398 410,784
900,000 212,314 283,085 353,856 424,627 495,398 530,784
1,100,000 260,314 347,085 433,856 520,627 607,398 650,784
1,300,000 308,314 411,085 513,856 616,627 719,398 770,784
1,500,000 356,314 475,085 593,856 712,627 831,398 890,784
2,000,000 476,314 635,085 793,856 952,627 1,111,398 1,190,784
- ---------------------------------------------------------------------------------------
Covered earnings include pay for hours worked, pay for allowed hours, military
leave allowance, commissions, 401(k) contributions to the Marathon Oil Company
Thrift Plan and bonuses. These earnings are reported in the salary and bonus
columns of the Summary Compensation Table on page 21. The benefits reflected
above are based upon a straight life annuity form of benefit and include the
applicable Social Security offset as defined by the Marathon plan. Mr. Sandman
has 20 years of credited participation. On April 1, 2001, Mr. Cazalot will be
credited with one year of participation.
In order to comply with the limitations prescribed by the Internal Revenue Code,
pension benefits will be paid directly by USX or by Marathon when they exceed
the amounts permitted by the Code to be paid from federal income tax qualified
pension plans.
34
CHANGE IN CONTROL ARRANGEMENTS AND
EMPLOYMENT CONTRACT
We believe that if a change in control of USX became possible our key officers
should be encouraged to continue their dedication to their assigned duties. For
that reason, we have entered into agreements with each of the current officers
named in the Summary Compensation Table that provide that, if an officer's
employment is terminated under certain circumstances following a change in
control, the officer will be entitled to the following severance benefits:
- - a cash payment of up to three times the sum of the officer's current
salary plus the highest bonus in the three years before the date of
termination,
- - a cash payment in settlement of outstanding options,
- - life, disability, accident and health insurance benefits for 24 months
after termination,
- - a cash payment equal to the actuarial equivalent of the difference between
amounts receivable by the officer under our pension and welfare benefit
plans and those which would be payable if (a) the officer had retired as
of the termination date under conditions entitling a retiree under similar
circumstances to the highest benefits available under those plans and (b)
the officer had been absent due to layoff for a year before termination,
- - a cash payment equal to the difference between amounts receivable under
our savings or thrift plans and amounts which would have been received if
the officer's savings had been fully vested, and
- - a cash payment of the amount necessary to ensure that the payments listed
above are not subject to net reduction due to the imposition of federal
excise taxes.
Each agreement is automatically extended each year unless we notify the officer
that we do not wish it extended. In any event, however, each agreement continues
for two years after a change in control. The severance benefits are payable if,
any time after a change in control, the officer's employment is terminated for
good reason or is terminated for other than cause or disability. The severance
benefits are not payable if termination is due to the officer's death or
disability or occurs after the officer reaches age 65.
The definition of a change in control for purposes of these agreements is
complex but is summarized as follows. It includes any change in control required
to be reported in response to Item 6(e) of Schedule 14A under the Securities
Exchange Act of 1934 and provides that a change in control will have occurred
if:
- - any person not affiliated with USX acquires 20 percent or more of the
voting power of our outstanding securities,
- - the Board no longer has a majority made up of (1) individuals who were
directors on the date of the agreements and (2) new directors (other than
directors who join the Board in connection with an election contest)
approved by two-thirds of the directors then in office who (a) were
directors on the date of the agreements or (b) were themselves previously
approved by the Board in this manner,
- - USX merges with another company and USX's stockholders end up with less
than 50 percent of the voting power of the new entity,
- - our stockholders approve a plan of complete liquidation of USX, or
- - we sell all or substantially all of USX's assets.
USX has entered into an employment contract with Mr. Cazalot. The terms and
conditions of the contract provide for Mr. Cazalot to receive an annual salary
of $600,000; a minimum bonus award for the year 2000 of $800,000; a retention
bonus of $200,000 on the first, second, third, fourth and fifth anniversaries of
his employment date (which was March 3, 2000); a stock option grant for 300,000
shares of USX-Marathon Group Common Stock with an option price to be determined
in accordance
35
with the USX Corporation 1990 Stock Plan and exercisable as follows: 100,000
shares three years from the date of grant (which was March 3, 2000), 100,000
shares four years from the date of grant, and 100,000 shares five years from the
date of grant; a stock option grant on May 30, 2000, 80 percent in USX-Marathon
Group Common Stock and 20 percent in USX-U. S. Steel Group Common Stock, with
the same vesting period as options granted to other executive management
employees (currently one year); a restricted stock grant of 75,000 shares on May
30, 2000, 80 percent in USX-Marathon Group Common Stock and 20 percent in USX-U.
S. Steel Group Common Stock, with an annual target vesting rate of 15,000
shares; eligibility for all of Marathon Oil Company's existing and future
employee benefit programs applicable to executive officers; a comprehensive
physical examination at USX expense each calendar year in accordance with
Marathon Oil Company's policy covering physical examinations for its executive
officers; tax preparation and financial planning advice under terms and
conditions comparable to those applicable to USX executive management; a
change-in-control agreement such as those described above; coverage for his
family and himself under Marathon Oil Company's medical care plan immediately
upon his employment; reimbursement of the cost of membership fees and dues for
one country club; and five weeks of paid vacation per year or the number of
weeks to which he would be entitled under Marathon Oil Company's vacation plan,
whichever is longer.
- -------------------------------------------------------------------------------
STATEMENT REGARDING THE DELIVERY OF A SINGLE SET OF PROXY MATERIALS TO
HOUSEHOLDS WITH MULTIPLE USX SHAREHOLDERS
If you have consented to the delivery of only one set of proxy materials to
multiple USX shareholders who share your address, then only one proxy statement
is being delivered to your household unless we have received contrary
instructions from one or more of the shareholders sharing your address. We will
deliver promptly upon oral or written request a separate copy of the proxy
statement to any shareholder at your address. If you wish to receive a separate
copy of the proxy statement, you may call us toll-free at 1-866-433-4801 or
write to us at USX Shareholder Services, Room 611, 600 Grant Street, Pittsburgh,
PA 15219-4776. Shareholders sharing an address who now receive multiple copies
of the proxy statement may request delivery of a single copy by calling us at
the above number or writing to us at the above address.
- -------------------------------------------------------------------------------
SOLICITATION STATEMENT
We will bear the cost of this solicitation of proxies. In addition to soliciting
proxies by mail, our directors, officers and employees may solicit proxies by
telephone, in person or by other means. They will not receive any extra
compensation for this work. We will also make arrangements with brokerage firms
and other custodians, nominees and fiduciaries to forward proxy solicitation
material to the beneficial owners of each class of common stock, and we will
reimburse them for reasonable out-of-pocket expenses that they incur in
connection with forwarding the material.
By order of the Board of Directors,
Dan D. Sandman,
Secretary
March 12, 2001
36
APPENDIX A
AUDIT COMMITTEE CHARTER
The responsibilities of the Audit Committee shall be those outlined in this
charter. The committee shall reassess and report to the Board of Directors on
the adequacy of this charter on an annual basis.
The Audit Committee shall be comprised of not less than three nor more than ten
members, all of whom are independent and qualified under standards established
by the New York Stock Exchange.
One of the important duties of the Audit Committee is the relationship of the
Corporation with its independent accountant. The independent accountant is
ultimately accountable to the Board of Directors and the Audit Committee as
representatives of the shareholders. As shareholder representatives, the Audit
Committee and the Board of Directors have the ultimate authority and
responsibility to select, evaluate, assess the independence of and, where
appropriate, replace the independent accountants.
The Audit Committee shall have oversight responsibility for ensuring the
integrity of the financial reports of the Corporation; shall determine that the
Corporation's administrative, operational and internal accounting controls have
been periodically reviewed and examined to determine if the Corporation is
operating in accordance with its prescribed procedures and codes of conduct;
shall also provide direction to the internal audit staff and the independent
accountants; shall review matters pertaining to conflicts or apparent conflicts
of interest between the holders of Marathon Stock and the holders of U. S. Steel
Stock, the policies and practices of the Corporation with respect to the
Marathon Group and the U.S. Steel Group, and the discharge by the Board of
Directors of its fiduciary duties to the common stockholders in the context of
the two separate classes of stock; and shall report to the Board of Directors on
the activities of the Committee.
In carrying out its oversight responsibilities, the Audit Committee shall:
1. Recommend annually to the Board of Directors the firm of independent
accountants selected to be nominated for election by the stockholders to
audit the accounts of the Corporation.
2. Review the fees proposed for the coming year and approve the final fees
and expenses of the independent accountants for audit services and
non-audit services performed by the independent accountants for the past
year. Approve in advance all non-audit services to be performed by the
independent accountants for which the total fee is expected to exceed
$500,000.
3. Annually review the independence letter issued by the independent
accountants under Independence Standards Board Standard No. 1, actively
engage in a dialogue with the independent accountants with respect to any
relationships disclosed in that letter, and report to the Board of
Directors any appropriate action necessary to maintain their continuing
independence.
4. Review annually the scope of audit activities of both the independent
accountants and the internal audit staff.
5. Periodically receive and review reports from the independent accountants,
the internal audit staff and management with respect to the status and
results of their activities.
37
6. Review significant accounting, auditing and Securities and Exchange
Commission pronouncements.
7. Review and approve the annual financial statements, the Annual Reports to
stockholders and the Form 10-K Annual Report giving special consideration
in such review to any material changes in accounting policy.
8. Receive and review reports from management concerning compliance with
Corporate policies dealing with business conduct.
9. Receive and review the audit plans and audit reports of the Corporation's
benefit plans as contained in the Annual Report of the United States Steel
and Carnegie Pension Fund.
10. Annually review the business expense reporting of the officers of the
Corporation.
11. As required, periodically review the policies and practices of the
Corporation with respect to the Marathon Group and the U. S. Steel Group,
including receiving and reviewing reports from management with respect to
compliance with such policies and practices.
12. As required, meet and discuss with the Chairman of the Board of Directors
and the General Counsel, or their designees, matters relating to the
discharge by the Board of Directors of its fiduciary duties to the common
stockholders in the context of the Marathon Stock and the U. S. Steel
Stock.
13. Annually review a report outlining the activities undertaken by the
committee over the past year to meet the requirements of this charter.
38
USX Corporation
600 Grant Street
Pittsburgh, PA 15219-4776
USX [LOGO]
[USX LOGO] ATTENDANCE CARD
2001 ANNUAL MEETING OF STOCKHOLDERS
You are cordially invited to attend the Annual Meeting of Stockholders on
April 24, 2001. The Meeting will be held in Ballroom 4 of The Greater
Columbus Convention Center, 400 North High Street, Columbus, Ohio, 43215 at
10:00 A.M. Eastern Time.
Use of this attendance card is for our mutual convenience. Your right to
attend the meeting without this attendance card is not affected, upon
presentation of identification.
Attached below is your 2001 Proxy Card.
Dan D. Sandman
Secretary
For the personal use of the named stockholder(s) - not transferable. Please
present this card upon arrival.
- -------------------------------------------------------------------------------
YOU MAY VOTE A) BY COMPLETING THE PROXY CARD
ATTACHED BELOW AND RETURNING IT
IN THE ENCLOSED ENVELOPE, OR
B) BY TOLL-FREE TELEPHONE CALL, OR
C) ON THE INTERNET
- -------------------------------------------------------------------------------
TO VOTE BY TELEPHONE OR INTERNET USE THE CONTROL
NUMBER IN THE BOX BELOW
YOUR CONTROL NUMBER
[ ]
BY TELEPHONE BY INTERNET
Toll-free 1-888-216-1303 https://www.proxyvotenow.com/usx
Have your control number available when you call or visit the Internet site
and follow the prompts. If voting on the Internet, be certain to enter the
complete address as shown above.
Voting is available 24 hours a day, 7 days a week.
Do NOT return the proxy card if you have voted
by telephone or Internet.
- -------------------------------------------------------------------------------
The undersigned hereby appoint(s) Thomas J. Usher, Clarence P. Cazalot, Jr.,
Paul J. Wilhelm and Robert M. Hernandez, or any of them, proxies to vote as
herein stated on behalf of the undersigned at the Annual Meeting of
Stockholders of USX Corporation on April 24, 2001 and any adjournment or
postponement thereof and upon all other matters properly coming before the
Meeting, including the proposals set forth in the Proxy Statement for such
Meeting with respect to which the proxies are instructed to vote as follows:
PROPOSALS OF THE BOARD OF DIRECTORS -- The directors recommend a vote "FOR"
Proposal No. 1--Election of directors--Nominees: (01)J. Gary Cooper, FOR all nominees [] WITHHOLD AUTHORITY []
(02)Charles R. Lee, (03)Thomas J. Usher and (04)Paul J. Wilhelm (except as indicated) to vote for ALL nominees
(TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL
NOMINEE STRIKE OUT THAT NOMINEE'S NAME)
Proposal No. 2--Election of PricewaterhouseCoopers LLP as independent accountants FOR [] AGAINST [] ABSTAIN []
- -------------------------------------------------------------------------------
SIGNATURE(S)
----------------------------
-----------------------------------------
DATED 2001
-----------
Please sign exactly as your name appears
hereon, including representative
capacity where applicable. If more than
one named owner, all owners should sign.
THIS PROXY IS SOLICITED BY THE BOARD OF
DIRECTORS AND REPRESENTS YOUR HOLDINGS
OF USX-MARATHON GROUP COMMON STOCK
AND/OR USX-U.S. STEEL GROUP COMMON
STOCK. UNLESS OTHERWISE MARKED, PROXIES
ARE TO VOTE FOR PROPOSALS 1 AND 2, AND
IN THEIR DISCRETION UPON ALL OTHER
MATTERS PROPERLY BROUGHT BEFORE THE
MEETING AND ANY ADJOURNMENT OR
POSTPONEMENT THEREOF.