AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 14, 1997
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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USX CORPORATION USX CAPITAL TRUST I
(Exact name of Registrant as specified in its (Exact name of Registrant as specified in its charter)
charter)
DELAWARE DELAWARE
(State or other jurisdiction of incorporation or (State or other jurisdiction of incorporation or organization)
organization)
25-0996816 23-2886802
(I.R.S. Employer Identification No.) (I.R.S. Employer Identification No.)
1311, 2911 AND 3312 6733
(Primary Standard Industrial Classification Code (Primary Standard Industrial Classification Code Number)
Number)
600 GRANT STREET 101 BARCLAY STREET
PITTSBURGH, PENNSYLVANIA 15219-4776 NEW YORK, NEW YORK 10286
(412) 433-1121 (212) 815-5192
(Address, including zip code, and telephone number, (Address, including zip code, and telephone number,
including area code, of registrant's principal including area code, of registrant's principal executive office)
executive office)
D.D. SANDMAN, ESQ.
USX CORPORATION
GENERAL COUNSEL & SENIOR VICE PRESIDENT--HUMAN RESOURCES, AND SECRETARY
600 GRANT STREET, PITTSBURGH, PA 15219-4776
(412) 433-1121
(Name, address, including zip code, and telephone number, including area code, of agent for service)
Copy to: RAYMOND W. WAGNER, ESQ. SIMPSON THACHER & BARTLETT 425 LEXINGTON
AVENUE, NEW YORK, NEW YORK 10017-3954 (212) 455-2000
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective and all other
conditions to the exchange offer (the "Exchange Offer") described in the
enclosed prospectus have been satisfied or waived.
If the securities being registered on this form are to be offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. [_]
CALCULATION OF REGISTRATION FEE
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PROPOSED PROPOSED
MAXIMUM MAXIMUM
TITLE OF EACH CLASS OF AMOUNT OFFERING AGGREGATE AMOUNT OF
SECURITIES TO BE TO BE PRICE OFFERING REGISTRATION
REGISTERED REGISTERED PER UNIT(2) PRICE FEE
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6.75% Convertible Quar-
terly Income Preferred
Securities (the "Trust
Convertible Preferred
Securities") of USX
Capital Trust I (the
"Trust") representing
indirectly undivided
beneficial interests in
6.75% Convertible Ju-
nior Subordinated De-
bentures (the "Convert-
ible Debentures") of
USX Corporation ("USX") 6,700,000
held by the Trust...... Securities(1) $44.375 $297,312,500(3) $90,095
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----------------------------------
Guarantee of the Trust
Convertible Preferred
Securities by USX...... -- -- (4)
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USX-U.S. Steel Group
Common Stock, par value
$1.00 per share, of USX
(together with Series A
Junior Preferred Stock
Purchase Rights)....... (5) (5) (5) (5)
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(1) Maximum amount of each class of Securities (other than USX--U.S. Steel
Group Common Stock) issuable by USX and the Trust pursuant to the Exchange
Offer.
(2) Each share of 6.50% Cumulative Convertible Preferred Stock of USX accepted
for exchange will be exchanged for one Trust Convertible Preferred
Security. Based on the average of the high and low prices for the 6.50%
Cumulative Convertible Preferred Stock on March 10, 1997, as reported by
the New York Stock Exchange Composite Tape.
(3) The proposed maximum aggregate offering price was calculated pursuant to
Rule 457(f) under the Securities Act of 1933.
(4) No separate consideration will be received for the Guarantee. Pursuant to
Rule 457(n), no filing fee is required.
(5) Such presently indeterminable number of shares as may be issued upon
conversion of the Trust Convertible Preferred Securities and/or the
Convertible Debentures in accordance with the respective terms thereof.
Pursuant to Rule 457(i), no filing fee is required.
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THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE
COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
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++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED MARCH 14, 1997
USX CORPORATION
OFFER TO EXCHANGE
6.75% CONVERTIBLE QUARTERLY INCOME PREFERRED SECURITIES (CONVERTIBLE QUIPSSM*
SECURITIES) (INITIAL LIQUIDATION AMOUNT $50 PER SECURITY) OF
USX CAPITAL TRUST I
GUARANTEED BY USX CORPORATION TO THE EXTENT SET FORTH HEREIN FOR
6.50% CUMULATIVE CONVERTIBLE PREFERRED STOCK OF USX CORPORATION
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THE EXCHANGE OFFER WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON
, 1997, UNLESS EXTENDED.
USX Corporation, a Delaware corporation ("USX" or the "Company"), hereby
offers, upon the terms and subject to the conditions set forth in this
Prospectus (the "Prospectus") and the accompanying Letter of Transmittal (the
"Letter of Transmittal" which, together with the Prospectus, constitute the
"Exchange Offer"), to exchange 6.75% Convertible Quarterly Income Preferred
Securities (the "Trust Convertible Preferred Securities") of USX Capital Trust
I, a Delaware statutory business trust (the "Trust"), for up to 6,700,000 of
the outstanding shares of 6.50% Cumulative Convertible Preferred Stock (the
"6.50% Convertible Preferred Stock") of the Company. The Company will directly
or indirectly own all of the common securities of the Trust (the "Trust Common
Securities" and, together with the Trust Convertible Preferred Securities, the
"Trust Securities"). The Trust Securities will represent undivided beneficial
ownership interests in the assets of the Trust.
The Exchange Offer will be effected on the basis of one Trust Convertible
Preferred Security for each share of 6.50% Convertible Preferred Stock, in each
case validly tendered and accepted for exchange in the Exchange Offer. As of
the date of the Prospectus, there are 6,900,000 shares of 6.50% Convertible
Preferred Stock outstanding. Shares of 6.50% Convertible Preferred Stock not
accepted for exchange because of proration will be returned.
The Trust Convertible Preferred Securities have an initial liquidation amount
of $50.00 per security. The Trust Convertible Preferred Securities will be
convertible at any time prior to the close of business on March 31, 2037 (or
earlier under certain circumstances as set forth herein), at the option of the
holder thereof, into shares of USX-U.S. Steel Group Common Stock, par value
$1.00 per share (the "Steel Stock"), of the Company at a conversion price of
$46.25 per share of Steel Stock (equivalent to a conversion ratio of 1.081
shares of Steel Stock for each Trust Convertible Preferred Security), subject
to adjustment in certain circumstances. On March 13, 1997, the last reported
sales price of the Steel Stock on the New York Stock Exchange Composite Tape
(the "Composite Tape") was $29.125.
Immediately prior to the exchange of Trust Convertible Preferred Securities
for the shares of 6.50% Convertible Preferred Stock validly tendered and
accepted for exchange in the Exchange Offer, the Company will deposit in the
Trust as trust assets its 6.75% Convertible Junior Subordinated Debentures
maturing March 31, 2037 (the "Convertible Debentures"), having an aggregate
principal amount equal to the aggregate initial liquidation amount of the Trust
Securities to be issued by the Trust. Upon the occurrence and continuation of a
Tax Event (as defined herein), among other things, the Company will have the
right, if certain conditions are met, to shorten the stated maturity of the
Convertible Debentures to a date not less than five years from the date of
issuance. See "Description of the Trust Convertible Preferred Securities--Trust
Special Event Distribution or Redemption; Shortening of Stated Maturity."
(Continued on next page)
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SEE "RISK FACTORS" STARTING ON PAGE 23 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED IN CONNECTION WITH THE EXCHANGE OFFER.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR BY ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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Goldman, Sachs & Co. and Merrill Lynch & Co. have been retained to act as
Dealer Managers to solicit exchanges of shares of 6.50% Convertible Preferred
Stock for Trust Convertible Preferred Securities. See "The Exchange Offer--
Dealer Managers; Soliciting Dealers." The Bank of New York has been retained to
act as Exchange Agent in connection with the Exchange Offer. Morrow & Co., Inc.
has been retained to act as Information Agent to assist in connection with the
Exchange Offer.
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*QUIPS is a servicemark of Goldman, Sachs & Co.
----------
The Dealer Managers for the Exchange Offer:
GOLDMAN, SACHS & CO. MERRILL LYNCH & CO.
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The date of this Prospectus is , 1997
Upon the terms and subject to the conditions of the Exchange Offer, the
Company will accept for exchange up to 6,700,000 shares of 6.50% Convertible
Preferred Stock validly tendered and not withdrawn prior to 12:00 midnight,
New York City time, on , 1997, or, if extended by the Company, in its
sole discretion, the latest date and time to which extended (the "Expiration
Date"). The Exchange Offer will expire on the Expiration Date. Tenders of
shares of 6.50% Convertible Preferred Stock may be withdrawn at any time prior
to the Expiration Date and, unless accepted for exchange by the Company, may
be withdrawn at any time after 40 business days after the date of this
Prospectus.
NONE OF THE BOARD OF DIRECTORS OF THE COMPANY (THE "BOARD"), THE COMPANY,
THE TRUSTEES (AS DEFINED HEREIN) OR THE TRUST MAKES ANY RECOMMENDATION TO
HOLDERS OF 6.50% CONVERTIBLE PREFERRED STOCK AS TO WHETHER TO TENDER OR
REFRAIN FROM TENDERING IN THE EXCHANGE OFFER. HOLDERS OF 6.50% CONVERTIBLE
PREFERRED STOCK ARE URGED TO CONSULT THEIR FINANCIAL AND TAX ADVISORS IN
MAKING THEIR DECISIONS ON WHAT ACTION TO TAKE IN LIGHT OF THEIR OWN PARTICULAR
CIRCUMSTANCES.
IN ORDER TO PARTICIPATE IN THE EXCHANGE OFFER, HOLDERS OF 6.50% CONVERTIBLE
PREFERRED STOCK MUST SUBMIT A LETTER OF TRANSMITTAL AND COMPLY WITH THE OTHER
PROCEDURES FOR TENDERING IN ACCORDANCE WITH THE INSTRUCTIONS CONTAINED HEREIN
AND IN THE LETTER OF TRANSMITTAL PRIOR TO THE EXPIRATION DATE. SEE "THE
EXCHANGE OFFER--PROCEDURES FOR TENDERING" AND "--LETTER OF TRANSMITTAL."
LETTERS OF TRANSMITTAL, 6.50% CONVERTIBLE PREFERRED STOCK AND ANY OTHER
REQUIRED DOCUMENTS SHOULD BE SENT ONLY TO THE EXCHANGE AGENT AND NOT TO THE
COMPANY, THE TRUST, THE DEALER MANAGERS OR THE INFORMATION AGENT.
For a description of the other terms of the Exchange Offer, see "The
Exchange Offer--Terms of the Exchange Offer," "--Expiration Date; Extensions;
Amendments; Termination," "--Withdrawal of Tenders", and "--Acceptance of
Shares and Proration."
Consummation of the Exchange Offer is subject to (i) the condition that,
immediately after the acceptance for exchange of shares of 6.50% Convertible
Preferred Stock, there would be at least 400 record or beneficial holders with
an aggregate of at least 1,000,000 Trust Convertible Preferred Securities in
order to satisfy New York Stock Exchange ("NYSE") minimum listing requirements
(the "Minimum NYSE Distribution Condition"); (ii) receipt of at least
3,450,000 validly tendered shares of 6.50% Convertible Preferred Stock; and
(iii) the condition (the "OID Condition") that the Company reasonably expects
on the Expiration Date, based upon the terms of the Trust Convertible
Preferred Securities and the recent trading values of the 6.50% Convertible
Preferred Stock and the Steel Stock, that the Convertible Debentures will not
be issued with reportable original issue discount ("OID"). If the fair market
value of the Convertible Debentures (as measured by the fair market value of
the Trust Convertible Preferred Securities) at the date of issuance does not
exceed $45.125, the Convertible Debentures would be treated as having been
issued with reportable OID.
The Company expressly reserves the right, in its sole discretion, subject to
applicable law, to (i) terminate the Exchange Offer, and not accept for
exchange any shares of 6.50% Convertible Preferred Stock and promptly return
all shares of 6.50% Convertible Preferred Stock at any time for any reason,
including (without limitation) if fewer than 3,450,000 of such shares are
tendered, (ii) waive any condition to the Exchange Offer (other than the
Minimum NYSE Distribution Condition and the OID Condition) and accept up to
6,700,000 shares of 6.50% Convertible Preferred Stock previously tendered
pursuant to the Exchange Offer, (iii) extend the Expiration Date and retain
all shares of 6.50% Convertible Preferred Stock tendered pursuant to such
Exchange Offer until the Expiration Date, subject, however, to all withdrawal
rights of Holders (see "The Exchange Offer--Withdrawal of Tenders") or (iv)
amend or modify the terms of the Exchange Offer in any manner. Any amendment
2
applicable to the Exchange Offer will apply to all shares of 6.50% Convertible
Preferred Stock tendered pursuant to the Exchange Offer. The minimum period
during which the Exchange Offer must remain open following a material change
in the terms of the Exchange Offer or a waiver by the Company of a material
condition of the Exchange Offer, other than a change in the percentage of the
6.50% Convertible Preferred Stock being sought or in the consideration
offered, will depend upon the facts and circumstances, including the relative
materiality of the change or waiver. See "The Exchange Offer--Expiration Date;
Extensions; Amendments; Termination."
The Company will own, directly or indirectly, all of the Trust Common
Securities. The Trust exists for the sole purposes of (a) issuing its Trust
Securities in exchange for Convertible Debentures having an aggregate
principal amount equal to the aggregate initial liquidation amount of such
Trust Securities and (b) engaging in such other activities as are necessary or
incidental thereto. The Trust Convertible Preferred Securities and the Trust
Common Securities will rank on a parity with each other and payment thereon
shall be pro rata; provided that (i) if a Declaration Event of Default (as
defined herein) occurs and is continuing, the rights of holders of Trust
Common Securities to receive payment of periodic distributions and payments
upon liquidation, redemption, or otherwise will be subordinated to the rights
of holders of the Trust Convertible Preferred Securities and (ii) holders of
Trust Common Securities have the exclusive right (subject to the terms of the
Declaration (as defined herein)) to appoint, replace, or remove Trustees and
to increase or decrease the number of Trustees. See "USX Capital Trust I,"
"Description of the Trust Convertible Preferred Securities" and "Description
of the Convertible Debentures."
Cash distributions on the Trust Convertible Preferred Securities will
accumulate from and including March 31, 1997 at an annual rate of 6.75% (the
"distribution rate") of the initial liquidation amount of $50.00 per Trust
Convertible Preferred Security, and will be payable quarterly in arrears on
the last calendar day of March, June, September and December of each year,
commencing on June 30, 1997 ("distributions"). Cash distributions not paid on
the regular scheduled distribution date therefor will bear interest thereon at
the distribution rate, compounded quarterly, to the extent permitted by
applicable law. The term "distributions" as used herein includes such cash
distributions and any such interest payable unless otherwise stated. The
distribution rate and the distribution and other payment dates for the Trust
Convertible Preferred Securities will correspond to the interest rate and the
interest and other payment dates on the Convertible Debentures deposited in
the Trust as trust assets. As a result, if principal or interest is not paid
on the Convertible Debentures, including as a result of the Company's election
to extend the interest payment period on the Convertible Debentures as
described below, the Trust will not make payments on the Trust Securities. The
Convertible Debentures provide that, so long as the Company shall not be in
default in the payment of interest on the Convertible Debentures, the Company
shall have the right to defer payments of interest on the Convertible
Debentures by extending the interest payment period from time to time. Such
deferral right, if exercised, would result in a corresponding deferral of
quarterly distributions on the Trust Convertible Preferred Securities (though
such deferred distributions would bear interest thereon at the distribution
rate, compounded quarterly). Such deferral rights could result in multiple
extension periods of varying lengths but are limited to an aggregate of 20
consecutive quarters (each, an "Extension Period"), and no such Extension
Period may extend beyond the maturity of the Convertible Debentures. During
any such Extension Period, the Company may not declare or pay dividends on, or
redeem, purchase, acquire, or make any distribution, payment or liquidation
payment with respect to, any shares of its capital stock or debt securities
that rank on a parity with or junior to the Convertible Debentures (with
certain limited exceptions); see "Risk Factors--Risks Relating to the Trust
Convertible Preferred Securities--Option to Extend Interest Payment Period"
and "Description of the Convertible Debentures--Interest" and "--Option to
Extend Interest Payment Period."
The obligations of the Company under the Convertible Debentures will be
unsecured obligations of the Company and will be subordinate in right of
payment, to the extent set forth herein, to all Senior
3
Indebtedness (as defined herein) of the Company, but senior to all capital
stock of the Company now outstanding or hereafter issued by the Company,
including the 6.50% Convertible Preferred Stock, and to any guarantee now or
hereafter entered into by the Company in respect of capital stock of its
affiliates, including the Guarantee (as defined herein). As of December 31,
1996, the Company's Senior Indebtedness included, among other items, $4.3
billion of indebtedness (including indebtedness of consolidated subsidiaries
guaranteed by the Company). The Trust's funds available for distribution to
the holders of the Trust Convertible Preferred Securities will be limited to
payments received from the Company on the Convertible Debentures. The
Convertible Debentures will be structurally subordinated to all obligations of
the Company's subsidiaries. See "Description of the Trust Convertible
Preferred Securities--Distributions."
The payment of distributions, payments on the liquidation of the Trust and
payments on the redemption of the Trust Convertible Preferred Securities, out
of moneys held by the Trust as set forth below, will be guaranteed by the
Company on a subordinated basis as and to the extent described herein (the
"Guarantee"). The Guarantee will be a full and unconditional guarantee from
the time of exchange of the Trust Convertible Preferred Securities, but the
Guarantee will cover distributions and other payments on the Trust Convertible
Preferred Securities only if and to the extent that the Company has made a
payment of interest or principal on the Convertible Debentures deposited in
the Trust as trust assets. The Company's obligations under the Guarantee will
be unsecured and will rank (i) subordinate and junior in right of payment to
all other liabilities of the Company, (ii) on a parity with the most senior
preferred or preference stock now or hereafter issued by the Company
(including the 6.50% Convertible Preferred Stock) and with any guarantee now
or hereafter entered into by the Company in respect of any preferred or
preference stock of any affiliate of the Company, and (iii) senior to the
Steel Stock and each of the other classes of the Company's common stock. The
Guarantee will be structurally subordinated to all obligations of the
Company's subsidiaries. See "Description of the Guarantee."
For a description of the redemption rights with respect to the Trust
Convertible Preferred Securities, the possible dissolution of the Trust and
distribution of Convertible Debentures held by the Trust to holders of the
Trust Securities and the liquidation amount on the Trust Convertible Preferred
Securities, see "Risk Factors--Risks Relating to the Trust Convertible
Preferred Securities--Trust Special Event Distribution or Redemption;
Shortening of Stated Maturity," "Description of the Trust Convertible
Preferred Securities--Mandatory Redemption," "--Trust Special Event
Distribution or Redemption; Shortening of Stated Maturity," "--Redemption
Procedures for Redemption by the Trust" and "--Liquidation Distribution Upon
Dissolution" and "Description of the Convertible Debentures."
The Steel Stock is intended to reflect the performance of the steel and
other businesses which constitute the U.S. Steel Group of USX. The Steel Stock
is one of three classes of common stock of USX, the others being USX-Marathon
Group Common Stock and USX-Delhi Group Common Stock. Dividends on the Steel
Stock will be payable when, as and if declared by the Board out of the lesser
of (i) the Available Steel Dividend Amount (as defined herein) and (ii) all
funds of USX legally available therefor. The Board intends to declare and pay
dividends on the Steel Stock based on the financial condition and results of
operations of the U.S. Steel Group. The voting power of one share of Steel
Stock relative to one share of each of the other classes of USX common stock
will fluctuate based upon the relative market values thereof. Upon
liquidation, the rights of the holders of the Steel Stock and each of the
other classes of USX common stock will be based on their relative market
capitalizations. Under certain conditions, the Steel Stock may be exchanged or
redeemed, at the Company's option. See "Risk Factors--Risks Relating to the
Common Stock of the Company," "Price Range of Steel Stock, Dividends and
Dividend Policy" and "Description of Capital Stock and Amended and Restated
Rights Plan."
Application will be made to list the Trust Convertible Preferred Securities
on the NYSE under the symbol X PrT. If Convertible Debentures are distributed
to the holders of Trust Convertible Preferred
4
Securities in exchange therefor upon the liquidation of the Trust, the Company
will use its reasonable efforts to list the Convertible Debentures on the NYSE
or such other stock exchanges or automated quotation systems, if any, on which
the Trust Convertible Preferred Securities are then listed or traded.
The shares of 6.50% Convertible Preferred Stock are listed and principally
traded on the NYSE under the symbol X.PA. On March 13, 1997, the last full day
of trading prior to the filing of the Registration Statement of which this
Prospectus forms a part, the last reported sales price of the 6.50%
Convertible Preferred Stock on the Composite Tape was $44.625 per share. On
March , 1997, the closing sales price of the 6.50% Convertible Preferred
Stock on the Composite Tape was $ per share. To the extent that shares of
6.50% Convertible Preferred Stock are tendered and accepted in the Exchange
Offer, the terms on which untendered 6.50% Convertible Preferred Stock could
subsequently be sold may be adversely affected. See "The Exchange Offer--
Listing and Trading of Trust Convertible Preferred Securities and 6.50%
Convertible Preferred Stock."
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THE EXCHANGE OFFER OTHER THAN THOSE
CONTAINED IN THIS PROSPECTUS. IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS SHOULD NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
TRUST, THE TRUSTEES, THE COMPANY OR THE DEALER MANAGERS. NEITHER THE DELIVERY
OF THIS PROSPECTUS NOR ANY EXCHANGE CONTEMPLATED HEREBY SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE TRUST OR THE COMPANY SINCE THE RESPECTIVE DATES AS OF WHICH
INFORMATION IS GIVEN HEREIN. THE EXCHANGE OFFER IS NOT BEING MADE TO (NOR WILL
TENDERS BE ACCEPTED FROM OR ON BEHALF OF) HOLDERS OF 6.50% CONVERTIBLE
PREFERRED STOCK IN ANY JURISDICTION IN WHICH THE MAKING OF THE EXCHANGE OFFER
OR THE ACCEPTANCE OF TENDERS THEREIN WOULD NOT BE IN COMPLIANCE WITH THE LAWS
OF SUCH JURISDICTION. HOWEVER, THE TRUST AND THE COMPANY MAY, AT THEIR
DISCRETION, TAKE SUCH ACTION AS THEY MAY DEEM NECESSARY FOR THE COMPANY TO
MAKE THE EXCHANGE OFFER IN ANY SUCH JURISDICTION AND EXTEND THE EXCHANGE OFFER
TO HOLDERS OF 6.50% CONVERTIBLE PREFERRED STOCK IN SUCH JURISDICTION. IN ANY
JURISDICTION WHERE THE SECURITIES LAWS OR BLUE SKY LAWS OF WHICH REQUIRE THE
EXCHANGE OFFER TO BE MADE BY A LICENSED BROKER OR DEALER, THE EXCHANGE OFFER
IS BEING MADE ON BEHALF OF THE COMPANY BY THE DEALER MANAGERS OR ONE OR MORE
REGISTERED BROKERS OR DEALERS WHICH ARE LICENSED UNDER THE LAWS OF SUCH
JURISDICTION.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements incorporated by reference or made in this Prospectus under
the caption "U.S. Steel Group" in the "Prospectus Summary," constitute
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995 and are subject to the safe harbor created by
that Act. These statements typically contain words such as "anticipates,"
"believes," "estimates," "expects" or similar words indicating that future
outcomes are uncertain. These statements in the Company's Annual Report on
Form 10-K for the year ended December 31, 1996 are accompanied by cautionary
language identifying important factors, though not necessarily all such
factors, that could cause future outcomes to differ materially from those set
forth in the forward-looking statements.
5
TABLE OF CONTENTS
PAGE
----
Available Information...................................................... 6
Incorporation of Certain Documents by Reference............................ 7
Prospectus Summary......................................................... 8
Risk Factors............................................................... 23
Price Range of Steel Stock, Dividends and Dividend Policy.................. 32
Price Range of 6.50% Convertible Preferred Stock........................... 33
Capitalization............................................................. 34
U.S. Steel Group Selected Financial Information............................ 35
USX Corporation Selected Consolidated Financial Information................ 38
The Exchange Offer......................................................... 40
USX Capital Trust I........................................................ 50
Description of the Trust Convertible Preferred Securities.................. 51
Description of the Guarantee............................................... 68
Description of the Convertible Debentures.................................. 71
Effect of Obligations Under The Convertible Debentures and the Guarantee... 81
Description of Capital Stock and Amended and Restated Rights Plan.......... 82
Management and Accounting Policies......................................... 96
Description of the 6.50% Convertible Preferred Stock....................... 97
Book-Entry System--The Depository Trust Company............................ 105
Certain Federal Income Tax Considerations.................................. 107
ERISA Considerations....................................................... 116
Legal Matters.............................................................. 116
Experts.................................................................... 117
Index of Certain Terms..................................................... 118
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements, and other information concerning the Company can be inspected and
copied at prescribed rates at the public reference facilities maintained by
the Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C.
20549, and at the public reference facilities at Seven World Trade Center, New
York, New York 10048, and Citicorp Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661. Documents filed by the Company can also be
inspected at the offices of the NYSE, the Chicago Stock Exchange, and the
Pacific Stock Exchange. The Commission maintains a Web site at
http://www.sec.gov containing reports, proxy and information statements and
other information regarding registrants that file electronically with the
Commission, including the Company.
This Prospectus constitutes a part of a combined registration statement on
Form S-4 (together with all amendments and exhibits, the "Registration
Statement") filed by the Company and the Trust with the Commission under the
Securities Act of 1933, as amended (the "Securities Act"). This Prospectus
does not contain all of the information included in the Registration
Statement, certain parts of which are omitted in accordance with the rules and
regulations of the Commission. Statements contained herein concerning the
provisions of any document do not purport to be complete and, in each
instance, are qualified in all respects by reference to the copy of such
document filed as an exhibit to the Registration Statement or otherwise filed
with the Commission. Each such statement is subject to and qualified in its
entirety by such reference. Reference is made to such Registration
6
Statement and to the exhibits relating thereto for further information with
respect to the Company, the Trust and the securities offered hereby.
No separate financial statements of the Trust have been included herein. The
Company does not consider that such financial statements would be material to
holders of the Trust Convertible Preferred Securities because (i) all of the
voting securities of the Trust will be owned, directly or indirectly, by the
Company, a reporting company under the Exchange Act, (ii) the Trust has no
independent operations but exists for the sole purpose of issuing securities
representing undivided beneficial interests in the assets of the Trust in
order to refinance outstanding shares of the 6.50% Convertible Preferred
Stock, and (iii) the Company's obligations described herein, the guarantee by
the Company of the Trust's obligations under the Trust Convertible Preferred
Securities, and the Convertible Debentures to be held by the Trust and the
related indenture, taken together, constitute a full and unconditional
guarantee of payments due on the Trust Convertible Preferred Securities. See
"Description of the Convertible Debentures" and "Description of the
Guarantee."
The Trust is not currently subject to the information reporting requirements
of the Exchange Act. The Trust will become subject to such requirements upon
the effectiveness of the Registration Statement, although it intends to seek
and expects to receive exemption therefrom.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company's Annual Report on Form 10-K for the year ended December 31,
1996 has been filed by the Company with the Commission (file no. 1-5153) and
is incorporated herein by reference.
All reports and other documents filed by the Company pursuant to Section
13(a), 13(c), 14, or 15(d) of the Exchange Act subsequent to the date of this
Prospectus and prior to the termination of the offering of the securities
offered hereby shall be deemed to be incorporated by reference herein. Any
statement contained in a document incorporated or deemed to be incorporated by
reference herein shall be deemed to be modified or superseded for purposes of
this Prospectus to the extent that a statement contained herein or in any
other subsequently filed document which also is incorporated or deemed to be
incorporated by reference herein modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed, except as so
modified and superseded, to constitute a part of this Prospectus.
THIS PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE NOT PRESENTED
HEREIN OR DELIVERED HEREWITH. THE COMPANY WILL PROVIDE WITHOUT CHARGE TO EACH
PERSON, INCLUDING ANY BENEFICIAL OWNER OF SHARES OF 6.50% CONVERTIBLE
PREFERRED STOCK, TO WHOM THIS PROSPECTUS IS DELIVERED, UPON THE WRITTEN OR
ORAL REQUEST OF SUCH PERSON, A COPY OF ANY OR ALL OF THE FOREGOING DOCUMENTS
INCORPORATED HEREIN BY REFERENCE, OTHER THAN EXHIBITS TO SUCH DOCUMENTS
(UNLESS SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED BY REFERENCE INTO SUCH
DOCUMENTS). THESE DOCUMENTS ARE AVAILABLE UPON REQUEST FROM THE OFFICE OF THE
CORPORATE SECRETARY, USX CORPORATION, 600 GRANT STREET, PITTSBURGH,
PENNSYLVANIA 15219-4776 (TELEPHONE: 412-433-4801). IN ORDER TO ENSURE TIMELY
DELIVERY OF THE DOCUMENTS, ANY REQUEST SHOULD BE MADE NOT LATER THAN FIVE
BUSINESS DAYS PRIOR TO THE EXPIRATION DATE.
7
PROSPECTUS SUMMARY
The following summary does not purport to be complete and is qualified in its
entirety by the detailed information contained elsewhere in this Prospectus or
by documents incorporated by reference into this Prospectus.
THE COMPANY
The Company is a diversified company which is principally engaged in the
steel business through its U.S. Steel Group, in the energy business through its
Marathon Group and in the gas gathering and processing business through its
Delhi Group. The U.S. Steel Group, the Marathon Group and the Delhi Group are
each referred to herein as a "Group."
The Company has three classes of common stock: Steel Stock, USX-Marathon
Group Common Stock ("Marathon Stock") and USX-Delhi Group Common Stock ("Delhi
Stock"). The Steel Stock, the Marathon Stock and the Delhi Stock are together
referred to as "Common Stock." Each class of Common Stock is intended to
provide the stockholders of such class with a separate security reflecting the
performance of the related group. Holders of Steel Stock, Marathon Stock and
Delhi Stock are holders of common stock of the Company and continue to be
subject to all of the risks associated with an investment in the Company and
all of its businesses and liabilities.
The U.S. Steel Group includes U.S. Steel, the largest integrated steel
producer in the United States, and certain steel-related and other businesses
described below under "U.S. Steel Group." U.S. Steel Group revenues as a
percentage of total Company consolidated revenues were 27% in 1996 and 31% in
each of 1995 and 1994.
The Marathon Group is comprised of Marathon Oil Company ("Marathon") and
certain other subsidiaries of the Company which are engaged in worldwide
exploration, production, transportation and marketing of crude oil and natural
gas; and domestic refining, marketing and transportation of petroleum products.
Marathon Group revenues as a percentage of total Company consolidated revenues
were 68% in 1996 and 66% in each of 1995 and 1994.
The Delhi Group consists of Delhi Gas Pipeline Corporation and certain other
subsidiaries of the Company which are engaged in the purchasing, gathering,
processing, treating, transporting and marketing of natural gas. Delhi Group
revenues as a percentage of total Company consolidated revenues were 5% in 1996
and 3% in each of 1995 and 1994.
The Company was incorporated in 1901 and is a Delaware corporation. Its
executive offices are located at 600 Grant St., Pittsburgh, PA 15219-4776 (tel:
(412) 433-1121). The terms "USX" and the "Company" when used herein refer to
USX Corporation or USX Corporation and its subsidiaries as required by the
context.
U.S. STEEL GROUP
The U.S. Steel Group includes U.S. Steel, the largest integrated steel
producer in the United States (referred to hereinafter as "U.S. Steel"), which
is primarily engaged in the production and sale of steel mill products, coke
and taconite pellets. The U.S. Steel Group also includes the management of
mineral resources, domestic coal mining, engineering and consulting services
and technology licensing. Other businesses that are part of the U.S. Steel
Group include real estate development and management, and leasing and financing
activities.
8
The domestic steel industry is cyclical and highly competitive and is
affected by excess world capacity which has restricted price increases during
periods of economic growth and led to price decreases during economic
contraction. In addition, the domestic steel industry, including U.S. Steel,
faces competition from producers of materials such as aluminum, cement,
composites, glass, plastics and wood in many markets.
Beginning in the early 1980's, U.S. Steel responded to competition resulting
from excess steel industry capability by eliminating less efficient facilities,
modernizing those that remain and entering into joint ventures, all with the
objective of focusing production on higher value-added products, where superior
quality and special characteristics are of critical importance. These products
include bake hardenable steels and coated sheets for the automobile and
appliance industries, laminated sheets for the manufacture of motors and
electrical equipment, improved tin mill products for the container industry and
oil country tubular goods. In addition, U.S. Steel continues to pursue lower
manufacturing cost objectives through continuing cost improvement programs.
These initiatives include, but are not limited to, reduced production cycle
time, improved yields, continued customer orientation and improved process
control.
Since 1982, U.S. Steel has invested approximately $4.0 billion in capital
facilities for its steel operations. U.S. Steel believes that these
expenditures have made its remaining steel operations among the most modern,
efficient and competitive in the world.
In addition to the modernization of its production facilities, USX has
entered into a number of joint ventures with domestic and foreign partners to
take advantage of market or manufacturing opportunities in the sheet, tin
plate, tubular, bar and plate consuming industries.
THE TRUST
The Trust is a statutory business trust that was formed under the Delaware
Business Trust Act (the "Delaware Trust Act") on March 13, 1997. The Trust
exists for the sole purpose of (a) issuing its Trust Securities in exchange for
Convertible Debentures having an aggregate principal amount equal to the
aggregate initial liquidation amount of such Trust Securities and (b) engaging
in such other activities as are necessary and incidental thereto.
THE EXCHANGE OFFER
PURPOSE OF THE EXCHANGE OFFER
The purpose of the Exchange Offer is to refinance the 6.50% Convertible
Preferred Stock with the Trust Convertible Preferred Securities. Dividends
payable on the 6.50% Convertible Preferred Stock are not deductible for United
States federal income tax purposes. This refinancing will benefit the Company
by permitting the Company to deduct interest payable on the Convertible
Debentures for federal income tax purposes. See "The Exchange Offer--Purpose of
the Exchange Offer."
THE EXCHANGE OFFER; SECURITIES OFFERED
Upon the terms and subject to the conditions of the Exchange Offer, the
Company hereby offers to exchange Trust Convertible Preferred Securities
representing preferred undivided beneficial ownership interests in the assets
of the Trust for up to 6,700,000 shares of 6.50% Convertible Preferred Stock
(97.1% of the 6,900,000 outstanding shares of 6.50% Convertible Preferred
Stock)
9
of the Company. Shares not accepted because of proration will be returned to
the tendering holders at the Company's expense as promptly as practicable
following the Expiration Date. The Exchange Offer will be effected on the basis
of one Trust Convertible Preferred Security for each share of 6.50% Convertible
Preferred Stock validly tendered and accepted for exchange in the Exchange
Offer. See "The Exchange Offer--Terms of the Exchange Offer."
Immediately prior to the exchange of Trust Convertible Preferred Securities
for the shares of 6.50% Convertible Preferred Stock validly tendered and
accepted for exchange in the Exchange Offer, the Company will deposit in the
Trust as trust assets Convertible Debentures having an aggregate principal
amount equal to the aggregate initial liquidation amount of the Trust
Securities to be issued by the Trust.
The Convertible Debentures, having an interest rate of 6.75% and a stated
maturity of March 31, 2037 (unless, in certain circumstances upon the
occurrence of a Tax Event, the stated maturity is shortened to a date not less
than five years from the date of issuance) will be the sole assets of the
Trust. The Trust Convertible Preferred Securities will be guaranteed by the
Company to the extent set forth in the Guarantee and described herein. The
Trust Convertible Preferred Securities will be convertible, at the option of
the holder thereof, into shares of Steel Stock at a conversion price of $46.25
per share of Steel Stock (equivalent to a conversion ratio of 1.081 shares of
Steel Stock for each Trust Convertible Preferred Security). The right to
convert the Convertible Debentures will terminate as set forth under
"Description of the Convertible Debentures--Conversion of the Convertible
Debentures." See "Description of the Trust Convertible Preferred Securities--
Trust Special Event Distribution or Redemption; Shortening of Stated Maturity."
EXPIRATION DATE; WITHDRAWALS
Upon the terms and subject to the conditions of the Exchange Offer, the
Company will accept for exchange up to 6,700,000 shares of 6.50% Convertible
Preferred Stock validly tendered and not withdrawn prior to the Expiration
Date, or if extended by the Company, at its sole discretion, the latest date
and time to which extended. The Exchange Offer will expire on the Expiration
Date. Tenders of shares of 6.50% Convertible Preferred Stock pursuant to the
Exchange Offer may be withdrawn at any time prior to the Expiration Date and,
unless accepted for exchange by the Company, may be withdrawn at any time after
40 business days after the date of this Prospectus. See "The Exchange Offer--
Withdrawal of Tenders" and "--Expiration Date; Extensions; Amendments;
Termination."
EXTENSIONS, AMENDMENTS AND TERMINATION
The Company expressly reserves the right to (i) extend, amend or modify the
terms of the Exchange Offer in any manner and (ii) withdraw or terminate the
Exchange Offer and not accept for exchange any shares of 6.50% Convertible
Preferred Stock, at any time for any reason, including (without limitation) (a)
if fewer than 3,450,000 shares of 6.50% Convertible Preferred Stock are
tendered (which condition may be waived by the Company), (b) if the Minimum
NYSE Distribution Condition is not satisfied or (c) if the OID Condition is not
satisfied. The Minimum NYSE Distribution Condition and the OID Condition may
not be waived by the Company. See "The Exchange Offer--Expiration Date;
Extensions; Amendments; Termination."
PROCEDURES FOR TENDERING
Each Holder of 6.50% Convertible Preferred Stock wishing to accept the
Exchange Offer must (i) properly complete and sign the Letter of Transmittal or
a facsimile thereof (all references in this Prospectus to the Letter of
Transmittal shall be deemed to include a facsimile thereof) in accordance
10
with the instructions contained herein and therein, together with any required
signature guarantees, and deliver the same to The Bank of New York, as Exchange
Agent, at either of its addresses set forth in "The Exchange Offer--Exchange
Agent and Information Agent" and either (a) certificates for the shares of
6.50% Convertible Preferred Stock held by such Holder must be received by the
Exchange Agent at either such addresses or (b) such shares of 6.50% Convertible
Preferred Stock must be transferred pursuant to the procedures for book-entry
transfer described herein and a confirmation of such book-entry transfer must
be received by the Exchange Agent, in each case prior to the Expiration Date,
or (ii) comply with the guaranteed delivery procedures described herein. See
"The Exchange Offer--General" and "--Procedures for Tendering."
SPECIAL PROCEDURES FOR BENEFICIAL OWNERS
Any beneficial owner whose shares of 6.50% Convertible Preferred Stock are
registered in the name of a broker, dealer, commercial bank, trust company, or
other nominee and who wishes to tender should contact such registered Holder
promptly and instruct such registered Holder to tender on such beneficial
owner's behalf. If such beneficial owner wishes to tender on its own behalf,
such owner must, prior to completing and executing a Letter of Transmittal and
delivering its shares of 6.50% Convertible Preferred Stock, either make
appropriate arrangements to register the ownership of such shares in such
owner's name or obtain a properly completed stock power from the registered
Holder. The transfer of registered ownership may take considerable time and may
not be able to be completed prior to the Expiration Date. See "The Exchange
Offer--Procedures for Tendering--Signature Guarantees."
GUARANTEED DELIVERY PROCEDURES
If a Holder desires to accept the Exchange Offer and time will not permit a
Letter of Transmittal or shares of 6.50% Convertible Preferred Stock to reach
the Exchange Agent before the Expiration Date or the procedure for book-entry
transfer cannot be completed on a timely basis, a tender may be effected in
accordance with the guaranteed delivery procedures set forth in "The Exchange
Offer--Procedures for Tendering--Guaranteed Delivery."
ACCEPTANCE OF SHARES; PRORATION
If more than 6,700,000 shares of 6.50% Convertible Preferred Stock have been
validly tendered and not withdrawn prior to the Expiration Date, the Company
will accept for exchange shares of 6.50% Convertible Preferred Stock from each
tendering Holder on a pro rata basis, subject to adjustment to avoid the
acceptance for exchange of fractional shares, upon the terms and subject to the
conditions of the Exchange Offer, including the reservation by the Company of
the right to withdraw or terminate the Exchange Offer and certain other rights.
For the purposes of prorating tendered securities, the Company will accept all
securities tendered by persons who own, beneficially or of record, an aggregate
of not more than a specified number which is less than 100 shares of such
security and who tender all their securities, before prorating securities
tendered by others.
If the Company decides, in its sole discretion, to increase or decrease the
number of shares of 6.50% Convertible Preferred Stock sought in the Exchange
Offer or to increase or decrease the consideration offered to holders of shares
of 6.50% Convertible Preferred Stock, and if the Exchange Offer is scheduled to
expire less than ten business days from and including the date that notice of
such increase or decrease is first published, sent or given in the manner
specified in "The Exchange Offer--Terms of the Exchange Offer" and "--
Expiration Date; Extensions; Amendments; Termination," then
11
the Exchange Offer will remain open for a minimum of ten business days from and
including the date of such notice.
All shares of 6.50% Convertible Preferred Stock not accepted for exchange
pursuant to the Exchange Offer, including shares not accepted because of
proration, will be returned to the tendering Holders at the Company's expense
as promptly as practicable following the Expiration Date.
DELIVERY OF THE TRUST CONVERTIBLE PREFERRED SECURITIES
Subject to the terms and conditions of the Exchange Offer, the delivery of
the Trust Convertible Preferred Securities to be issued pursuant to the
Exchange Offer will occur as promptly as practicable following the Expiration
Date. See "The Exchange Offer--Terms of the Exchange Offer" and "--Expiration
Date; Extensions; Amendments; Termination."
If proration of tendered shares of 6.50% Convertible Preferred Stock is
required, because of the difficulty in determining the number of shares of
6.50% Convertible Preferred Stock validly tendered (including shares tendered
by the guaranteed delivery procedures described in "The Exchange Offer--
Procedures for Tendering"), the Company does not expect that it will be able to
announce the final proration factor or to commence the exchange for any shares
of 6.50% Convertible Preferred Stock pursuant to the Exchange Offer until
approximately seven business days after the Expiration Date. Preliminary
results of the proration will be announced by press release as promptly as
practicable after the Expiration Date. Holders of shares of 6.50% Convertible
Preferred Stock may obtain such preliminary information from the Dealer Manager
or the Information Agent and may also be able to obtain such information from
their brokers.
Until the final proration factors are known, the Company will not (i) issue
any Trust Convertible Preferred Securities in exchange for any shares of 6.50%
Convertible Preferred Stock accepted for exchange pursuant to the Exchange
Offer, (ii) return shares of 6.50% Convertible Preferred Stock delivered to the
Exchange Agent but not tendered or (iii) return shares of 6.50% Convertible
Preferred Stock tendered but not accepted for exchange because of proration.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The exchange of shares of 6.50% Convertible Preferred Stock for Trust
Convertible Preferred Securities pursuant to the Exchange Offer will be a
taxable event. A holder who owns, directly or constructively, no other stock of
the Company or otherwise satisfies one of the tests of section 302 of the
Internal Revenue Code of 1986, as amended (the "Code"), will recognize capital
gain or loss in an amount equal to the difference between the fair market value
of the Trust Convertible Preferred Securities received in the exchange and the
exchanging holder's tax basis in the shares of 6.50% Convertible Preferred
Stock surrendered. However, other holders could be subject to dividend
treatment. See "Certain Federal Income Tax Considerations--Exchange of 6.50%
Convertible Preferred Stock for Trust Convertible Preferred Securities."
The Trust Convertible Preferred Securities represent an ownership interest in
the Convertible Debentures held by the Trust. Therefore, certain tax attributes
of the Convertible Debentures (such as OID, if any) are deemed to apply to the
Trust Convertible Preferred Securities. If the fair market value of the
Convertible Debentures (as measured by the fair market value of the Trust
Convertible Preferred Securities) at the date of issuance does not exceed
$45.125, the Convertible Debentures would be treated as having been issued with
reportable OID. Consummation of the Exchange Offer is conditioned upon the
Company's reasonable expectation on the Expiration Date, based on the terms of
the Trust Convertible Preferred Securities and the recent trading values of the
6.50% Convertible Preferred Stock and the Steel Stock, that the Convertible
Debentures will not be issued with reportable
12
OID. Although the Company cannot assure that the Convertible Debentures will be
issued without reportable OID, it is the Company's intent to consummate the
Exchange Offer only if the Company reasonably expects, on the Expiration Date,
to issue the Convertible Debentures without reportable OID. If the Convertible
Debentures are treated as having been issued with reportable OID, a holder of
Trust Convertible Preferred Securities would be required to include the amount
of OID in gross income in advance of the receipt of cash attributed to such
income.
In addition, if an Extension Period deferring interest on the Convertible
Debentures occurs, all holders will be required to include accrued and unpaid
interest on the Convertible Debentures in gross income as OID, although the
holders did not receive a cash distribution from the Trust related to such
interest. The OID is added to the holder's adjusted tax basis in the holder's
pro rata share of the underlying Convertible Debentures. A holder who disposes
of his Trust Convertible Preferred Securities will not receive from the Company
any cash related to the interest income the holder accrued and included in its
taxable income under the OID rules (because that cash will be paid to a holder
of record at the end of the Extension Period). See "Certain Federal Income Tax
Considerations--Interest Income and Original Issue Discount."
UNTENDERED SHARES
Holders of 6.50% Convertible Preferred Stock who do not tender their shares
of 6.50% Convertible Preferred Stock in the Exchange Offer or whose shares of
6.50% Convertible Preferred Stock are not accepted for exchange will continue
to hold such 6.50% Convertible Preferred Stock and will be entitled to all the
rights and preferences, and will be subject to all of the limitations,
applicable thereto. See "The Exchange Offer--Listing and Trading of Trust
Convertible Preferred Securities and 6.50% Convertible Preferred Stock." The
Company may exercise its optional redemption rights on any shares of 6.50%
Convertible Preferred Stock which are not tendered and exchanged in the
Exchange Offer. The optional redemption price for a share of the 6.50%
Convertible Preferred Stock immediately after the Expiration Date will be
$51.95, plus accumulated and unpaid dividends, if any, up to but excluding the
date fixed for redemption. To the extent that shares of 6.50% Convertible
Preferred Stock are tendered and exchanged in the Exchange Offer, a Holder's
ability to sell untendered shares of 6.50% Convertible Preferred Stock could be
adversely affected. See "Risk Factors--Risks Relating to the Trust Convertible
Preferred Securities--Reduced Trading Market for 6.50% Convertible Preferred
Stock."
EXCHANGE AGENT AND INFORMATION AGENT
The Bank of New York has been appointed as Exchange Agent in connection with
the Exchange Offer. Questions and requests for assistance, requests for
additional copies of this Prospectus or of the Letter of Transmittal and
requests for Notices of Guaranteed Delivery should be directed to Morrow & Co.,
Inc., which has been retained by the Company to act as Information Agent for
the Exchange Offer. The addresses and telephone numbers of the Exchange Agent
and Information Agent are set forth in "The Exchange Offer--Exchange Agent and
Information Agent."
DEALER MANAGERS; SOLICITING DEALERS
Goldman, Sachs & Co. and Merrill Lynch & Co. have been retained to act as
Dealer Managers to solicit exchanges of shares of 6.50% Convertible Preferred
Stock for Trust Convertible Preferred Securities. Exchanges of 6.50%
Convertible Preferred Stock may also be solicited by Soliciting Dealers (as
defined herein) from beneficial owners of fewer than 5,000 shares. Questions
with respect to the Exchange Offer may be directed to Goldman, Sachs & Co. at
(800) 323-5678 and Merrill Lynch & Co. at (800) 436-1019. See "The Exchange
Offer--Dealer Managers; Soliciting Dealers."
13
COMPARISON OF TRUST CONVERTIBLE PREFERRED SECURITIES AND 6.50% CONVERTIBLE
PREFERRED STOCK
The following is a brief summary of certain terms of the Trust Convertible
Preferred Securities and the 6.50% Convertible Preferred Stock. For a more
complete description of the Trust Convertible Preferred Securities, see
"Description of the Trust Convertible Preferred Securities." For a more
complete description of the Convertible Debentures which will be deposited in
the Trust as trust assets and will represent the sole source for the payment of
distributions and other payments on the Trust Convertible Preferred Securities,
see "Description of the Convertible Debentures." For a more complete
description of the 6.50% Convertible Preferred Stock, see "Description of the
6.50% Convertible Preferred Stock."
TRUST CONVERTIBLE 6.50% CONVERTIBLE
PREFERRED SECURITIES PREFERRED STOCK
------------------------------- -------------------------------
Issuer................ The Trust. Payment of The Company.
distributions and on
liquidation or redemption is
guaranteed by the Company on a
subordinated basis, to the
extent described herein.
Distribution on
Liquidation.......... $50.00 per Trust Convertible $50.00 per share of 6.50%
Preferred Security, plus Convertible Preferred Stock,
accrued and unpaid plus accrued and unpaid
distributions. dividends.
Distribution/Dividend
Rate................. 6.75% per annum cash distribu- 6.50% per annum cash dividend
tion payable quarterly on the payable quarterly on the last
last calendar day of March, calendar day of March, June,
June, September and December of September, and December of each
each year, commencing June 30, year, out of funds legally
1997, but only if, and to the available therefor, when, as
extent that, interest payments and if declared by the Board.
are made by the Company in re- Dividends are cumulative.
spect of the Convertible Deben-
tures held by the Trust. So
long as the Company is not in
default in the payment of in-
terest on the Convertible De-
bentures, the Company shall
have the right to defer pay-
ments of interest on the Con-
vertible Debentures for the du-
ration of an Extension Period.
14
TRUST CONVERTIBLE 6.50% CONVERTIBLE
PREFERRED SECURITIES PREFERRED STOCK
------------------------------- -------------------------------
During any Extension Period In the event that the
(which will not exceed 20 con- equivalent of six quarterly
secutive calendar quarters) on dividends (whether consecutive
the Convertible Debentures, or not) are accrued but not
distribution payments on the paid, the holders of 6.50%
Trust Convertible Preferred Se- Convertible Preferred Stock
curities will not be made but will have certain voting
will continue to accumulate, rights. See "Voting
and will bear interest at the Rights/Enforcement" below.
distribution rate, compounded
quarterly, to the extent per-
mitted by applicable law. In
addition, during any Extension
Period the Company, subject to
limited exceptions, may not,
among other things, declare or
pay any dividends on or make
any distributions with respect
to any of its capital stock.
If a deferral of an interest If a deferral of a dividend
payment occurs, the holders of payment occurs, the holders of
the Trust Convertible Preferred 6.50% Convertible Preferred
Securities would accrue income Stock would not be required to
as OID for United States fed- include such amount in income
eral income tax purposes. for United States federal
income tax purposes until the
dividend is actually declared
and paid.
Conversion............ Convertible at the option of Convertible at the option of
the holder, in whole or in the holder, in whole or in
part, into whole shares of part, into whole shares of
Steel Stock at a conversion Steel Stock at a conversion
price of $46.25 per share of price of $46.125 per share of
Steel Stock (equivalent to a Steel Stock (equivalent to a
conversion ratio of 1.081 conversion ratio of 1.084
shares of Steel Stock for each shares of Steel Stock for each
Trust Convertible Preferred share of 6.50% Convertible
Security), subject to Preferred Stock), subject to
adjustments upon certain adjustments upon certain
events. events.
The right to convert Trust The right to convert shares of
Convertible Preferred 6.50% Convertible Preferred
Securities will terminate prior Stock called for redemption
to the close of business (i) on will terminate at the close of
March 31, 2037 (unless the business on the related
stated maturity of the redemption date, subject to
Convertible Debentures is certain exceptions.
shortened following a Tax
Event, in which case, on the
advanced maturity date) and
(ii) in the case of Trust
Convertible Preferred
Securities called for
redemption, on the related
redemption date, subject to
certain exceptions.
15
TRUST CONVERTIBLE 6.50% CONVERTIBLE
PREFERRED SECURITIES PREFERRED STOCK
------------------------------- -------------------------------
Maturity/Mandatory
Redemption........... At March 31, 2037, subject to Perpetual, subject to certain
certain exceptions stated exceptions stated below.
below.
If a U.S. Steel Group Special
If a U.S. Steel Group Special Event or a Marathon Group
Event (as defined herein) or a Special Event occurs, the
Marathon Group Special Event Company must redeem the shares
(as defined herein) occurs, the of 6.50% Convertible Preferred
Company must redeem the Stock, provided that funds are
Convertible Debentures, in legally available therefor, in
whole, at 100% of the principal whole, for $50.00 per share,
amount thereof, together with together with accrued and
interest accrued and unpaid to unpaid dividends to the
the redemption date. redemption date.
In addition, upon the
occurrence of a Trust Special
Event (as defined herein),
including a Tax Event, the
Trust could be dissolved (with
the consent of the Company)
except in the limited
circumstances described below,
with the result that the
Convertible Debentures would be
distributed
to the holders of the Trust
Securities in connection with
the liquidation of the Trust,
or the stated maturity of the
Convertible Debentures could be
shortened
at the option of the Company
to a date not less than five
years from the date of
issuance. In certain
circumstances, the Company
would have the right to redeem
the Convertible Debentures, in
whole or in part, at 100% of
the principal amount thereof,
together with interest accrued
and unpaid to the redemption
date, in lieu of a distribution
of the Convertible Debentures
by the Trust or a shortening of
the stated maturity of the
Convertible Debentures.
16
TRUST CONVERTIBLE 6.50% CONVERTIBLE
PREFERRED SECURITIES PREFERRED STOCK
------------------------------- -------------------------------
Upon any redemption or other
repayment of the Convertible
Debentures, the proceeds
thereof must immediately be
applied to redeem the Trust
Convertible Preferred
Securities and the Trust Common
Securities having an aggregate
liquidation amount equal to the
aggregate principal amount of
the Convertible Debentures so
repaid.
Holders of 6.50% Convertible
Holders of Trust Convertible Preferred Stock have no right
Preferred Securities have no to require the Company to
right to require the Company to redeem the 6.50% Convertible
redeem the Convertible Preferred Stock.
Debentures or to require the
Trust to redeem Trust
Convertible Preferred
Securities.
Optional Redemption... The Convertible Debentures will The 6.50% Convertible Preferred
be redeemable at the option of Stock is redeemable at the
the Company, in whole or in option of the Company, in whole
part, upon not less than 30 or in part, upon not less than
days' notice nor more than 60 30 days' notice nor more than
days' notice, initially at a 60 days' notice, at a
redemption price through March redemption price per share
31, 1998 equal to 103.90% of through March 31, 1997
the aggregate principal amount equivalent to 104.55%
of the Convertible Debentures (expressed as a percentage of
to be redeemed and declining the $50.00 initial liquidation
annually on each April 1 preference thereof), declining
thereafter at the same rate as on April 1, 1997 to 103.90% and
the 6.50% Convertible Preferred declining annually on each
Stock to par on April 1, 2003, April 1 thereafter to par on
together with accrued and April 1, 2003, together with
unpaid interest thereon to the accrued and unpaid dividends
redemption date. thereon to the redemption date.
17
TRUST CONVERTIBLE 6.50% CONVERTIBLE
PREFERRED SECURITIES PREFERRED STOCK
------------------------------- -------------------------------
The Company will not exercise The Company will not exercise
its option to redeem the its option to redeem the 6.50%
Convertible Debentures if the Convertible Preferred Stock if
Company is advised in advance the Company is advised in
by either Moody's Investors advance by either Moody's or
Service, Inc. ("Moody's") or S&P that to do so would result
Standard & Poor's Corporation in an immediate lowering of the
("S&P") that to do so would Company's credit rating on its
result in an immediate lowering senior unsecured debt from its
of the Company's credit rating then existing level, unless the
on its senior unsecured debt Company shall have received
from its then existing level, from the issuance of its common
unless the Company shall have stock, since the date which is
received from the issuance of two years prior to the
its common stock, since the redemption date, net proceeds
date which is two years prior in an aggregate amount at least
to the redemption date, net equal to the aggregate initial
proceeds in an aggregate amount liquidation preference of the
at least equal to the aggregate 6.50% Convertible Preferred
principal amount of the Stock to be redeemed.
Convertible Debentures to be
redeemed.
Subordination......... Subordinated to all Senior Subordinated to claims of
Indebtedness of the Company but creditors, including holders of
senior to all capital stock, the Company's outstanding debt
including the 6.50% Convertible securities and the Convertible
Preferred Stock, now or Debentures, and structurally
hereafter issued by the subordinated to all existing
Company, and to any guarantee and future obligations of the
now or hereafter entered into Company's subsidiaries. The
by the Company in respect of 6.50% Convertible Preferred
capital stock of its Stock ranks senior to all
affiliates, including the classes of
Guarantee.
The Convertible Debentures (and Common Stock and any shares of
the Company's obligations under Junior Preferred Stock (as
the Guarantee) also will be defined herein) as to payment
subordinated to all existing of dividends and upon
and future obligations of the liquidation.
Company's subsidiaries, except
to the extent that the Company
is a creditor of the
subsidiaries and is recognized
as such. In addition, the
Guarantee will rank junior to
the Convertible Debentures.
18
TRUST CONVERTIBLE 6.50% CONVERTIBLE
PREFERRED SECURITIES PREFERRED STOCK
------------------------------- -------------------------------
As of December 31, 1996, Senior As of December 31, 1996, Senior
Indebtedness included, among Indebtedness included, among
other items, $4.3 billion of other items, $4.3 billion of
indebtedness (including indebtedness (including
indebtedness of consolidated indebtedness of consolidated
subsidiaries guaranteed by the subsidiaries guaranteed by the
Company). Company).
Guarantee............. The Company will fully and None.
unconditionally guarantee, on a
subordinated basis and to the
extent set forth herein, the
payment in full of (i)
distributions on the Trust
Convertible Preferred
Securities to the extent the
Trust has funds available
therefor, (ii) the amount
payable upon redemption of the
Trust Convertible Preferred
Securities to the extent the
Trust has funds available
therefor, and (iii) generally,
the liquidation amount of the
Trust Convertible Preferred
Securities to the extent the
Trust has assets available for
distribution to holders of
Trust Convertible Preferred
Securities.
The Company's obligations under
the Guarantee will be unsecured
and will rank (i) subordinate
and junior in right of payment
to all other liabilities of the
Company, (ii) on a parity with
the most senior preferred or
preference stock now or
hereafter issued by the Company
and with any guarantee now or
hereafter entered into by the
Company in respect of any
preferred or preference stock
of any affiliate of the
Company, and (iii) senior to
the Steel Stock and each of the
other classes of the Company's
Common Stock.
19
TRUST CONVERTIBLE 6.50% CONVERTIBLE
PREFERRED SECURITIES PREFERRED STOCK
------------------------------- -------------------------------
Voting Rights/
Enforcement.......... Generally, holders of the Trust The 6.50% Convertible Preferred
Convertible Preferred Stock is non-voting except that
Securities will not have any (i) if, on the date used to
voting rights. However, if an determine stockholders of
Indenture Event of Default (as record for any meeting of
defined herein) occurs and is stockholders for election of
continuing, the holders of 25% directors, six full quarterly
of the aggregate liquidation dividends (whether consecutive
amount of the Trust Convertible or not) payable on the
Preferred Securities may direct Preferred Stock (as defined
the Institutional Trustee (as herein) of the Company of any
defined herein) to declare the series (including the 6.50%
principal of and interest on Convertible Preferred Stock)
the Convertible Debentures are accrued and unpaid, the
immediately due and payable. If holders of Preferred Stock of
(i) the Institutional Trustee all series will have the right
fails to enforce its rights at such meeting, voting as a
under the Convertible single class without regard to
Debentures or (ii) the Company series, to elect two additional
defaults under the Guarantee, a directors, (ii) the approval of
record holder of the Trust the holders of at least 66 2/3%
Convertible Preferred of the outstanding shares of
Securities may institute a 6.50% Convertible Preferred
legal proceeding directly Stock and all other Preferred
against the Company to enforce Stock ranking on a parity with
the Institutional Trustee's the 6.50% Convertible Preferred
rights without first Stock, voting separately as a
instituting any legal class, will be required to
proceeding against the authorize the issuance of any
Institutional Trustee. class or series of preferred
stock ranking senior to the
Furthermore, if a Declaration 6.50% Convertible Preferred
Event of Default (as defined Stock as to dividends or
herein) has occurred and is liquidation rights, and (iii)
continuing and such event is the approval of at least 66
attributable to the failure of 2/3% of the outstanding shares
the Company to pay interest or of 6.50% Convertible Preferred
principal on the Convertible Stock, voting as a separate
Debentures, a record holder of series or, in certain
Trust Convertible Preferred circumstances, together with
Securities may institute a all other series of Preferred
proceeding directly against the Stock as a class, will be
Company for enforcement of required for certain amendments
payment to such holder of the to the Company's Certificate of
principal of or interest on the Incorporation affecting
Convertible Debentures having a adversely the powers,
principal amount equal to the preferences or rights of
aggregate liquidation amount of Holders of the 6.50%
the Trust Convertible Preferred Convertible Preferred Stock.
Securities of such holder.
20
TRUST CONVERTIBLE 6.50% CONVERTIBLE
PREFERRED SECURITIES PREFERRED STOCK
------------------------------- -------------------------------
Listing and Trading... Application will be made to The 6.50% Convertible Preferred
list the Trust Convertible Stock is listed on the NYSE
Preferred Securities on the under the symbol X.PA. The
NYSE under the symbol X PrT. Exchange Offer is for up to
In order to satisfy the NYSE 6,700,000 shares of 6.50%
listing requirements, Convertible Preferred Stock
acceptance of shares of 6.50% (97.1% of the 6,900,000 shares
Convertible Preferred Stock is outstanding) rather than for
subject to the Minimum NYSE all of the outstanding shares
Distribution Condition, which of 6.50% Convertible Preferred
condition may not be waived Stock in order to avoid a
by the Company. delisting of the 6.50%
Convertible Preferred Stock
from the NYSE following
consummation of the Exchange
Offer.
The Trust Convertible Preferred To the extent shares of 6.50%
Securities constitute a new Convertible Preferred Stock are
issue of securities of the tendered and accepted in the
Trust with no established Exchange Offer, the liquidity
trading market. The liquidity and trading market for shares
of the Trust Convertible of 6.50% Convertible Preferred
Preferred Securities will be Stock outstanding following the
affected by the number of Exchange Offer, and the terms
shares of 6.50% Convertible upon which such shares could be
Preferred Stock tendered and sold, could be adversely
accepted for exchange in the affected.
Exchange Offer. Although the
Dealer Managers have indicated
to the Company and the Trust
that they intend to make a
market in the Trust Convertible
Preferred Securities, as
permitted by applicable laws
and regulations prior to the
commencement of trading on the
NYSE, they are not obligated to
do so and may discontinue any
such market-making at any time
without notice. There can be no
assurance that an active market
for the Trust Convertible
Preferred Securities will
develop or, if developed, will
be sustained in the future.
Dividends Received
Deduction............ Distributions on the Trust Dividends on the 6.50%
Convertible Preferred Convertible Preferred Stock are
Securities will not be eligible eligible for the dividends
for the dividends received received deduction for
deduction for corporate corporate holders.
holders.
21
ACCOUNTING TREATMENT
The financial statements of the Trust will be reflected in the Company's
consolidated financial statements and the financial statements of the U.S.
Steel Group with the Trust Convertible Preferred Securities shown as "USX
obligated mandatorily redeemable convertible preferred securities of a
subsidiary trust holding solely convertible debentures", and appropriate
disclosure about the Trust Convertible Preferred Securities, the Guarantee, and
the Convertible Debentures will be included in the notes to the Company's
consolidated financial statements. See "Capitalization." For financial
reporting purposes, the Company will record distributions payable on the Trust
Convertible Preferred Securities as "Interest and other financial costs" in the
Company's consolidated statement of operations and the U.S. Steel Group's
statement of operations.
22
RISK FACTORS
Prospective exchanging Holders of 6.50% Convertible Preferred Stock should
carefully consider, in addition to the other information set forth elsewhere
in this Prospectus, the following:
RISKS RELATING TO THE TRUST CONVERTIBLE PREFERRED SECURITIES
EXCHANGE OFFER AS TAXABLE EVENT
The exchange of shares of 6.50% Convertible Preferred Stock for Trust
Convertible Preferred Securities pursuant to the Exchange Offer will be a
taxable event. A holder who owns, directly or constructively, no other stock
of the Company or otherwise satisfies one of the tests of section 302 of the
Code, will recognize capital gain or loss in an amount equal to the difference
between the fair market value of the Trust Convertible Preferred Securities
received in the exchange and the exchanging holder's tax basis in the shares
of 6.50% Convertible Preferred Stock surrendered. However, other holders could
be subject to dividend treatment. See "Certain Federal Income Tax
Considerations." All Holders of 6.50% Convertible Preferred Stock are advised
to consult their own tax advisors regarding the federal, state, local, and
foreign tax consequences of an exchange of shares of 6.50% Convertible
Preferred Stock.
CORPORATE HOLDERS OF TRUST CONVERTIBLE PREFERRED SECURITIES NOT ENTITLED TO
DIVIDENDS RECEIVED DEDUCTION
While dividends with respect to the 6.50% Convertible Preferred Stock are
eligible for the dividends received deduction for corporate holders, each
corporate holder of the Trust Convertible Preferred Securities will be
considered the owner of an undivided interest in the Convertible Debentures
and will be required to include distributions on the Trust Convertible
Preferred Securities in gross income without a deduction for dividends
received.
POSSIBLE ORIGINAL ISSUE DISCOUNT
The Trust Convertible Preferred Securities represent an ownership interest
in the Convertible Debentures held by the Trust. Therefore, certain tax
attributes of the Convertible Debentures (such as OID, if any) are deemed to
apply to the Trust Convertible Preferred Securities. If the fair market value
of the Convertible Debentures (as measured by the fair market value of the
Trust Convertible Preferred Securities) at the date of issuance does not
exceed $45.125, the Convertible Debentures would be treated as having been
issued with OID. If the Convertible Debentures are treated as having been
issued with OID, a holder of Trust Convertible Preferred Securities would be
required to include the amount of OID in gross income in advance of the
receipt of cash attributable to such income. See "Certain Federal Income Tax
Considerations--Interest Income and Original Issue Discount." Although the
Company cannot assure that the Convertible Debentures will be issued without
reportable OID, it is the intent of the Company to consummate the Exchange
Offer only if, on the Expiration Date, the Company reasonably expects to issue
the Convertible Debentures without reportable OID.
TRUST SPECIAL EVENT DISTRIBUTION OR REDEMPTION; SHORTENING OF STATED MATURITY
Upon the occurrence of a Trust Special Event (as defined herein) including a
Tax Event, the Trust could be dissolved (with the consent of the Company)
except in the limited circumstance described below, with the result that,
after the satisfaction of liabilities to creditors, the Convertible Debentures
would be distributed to the holders of the Trust Securities in connection with
the liquidation of the Trust, or the stated maturity of the Convertible
Debentures could be shortened at the option of the Company. In certain
circumstances, the Company would have the right to redeem the Convertible
Debentures, in whole or in part, without premium, in lieu of a distribution of
the Convertible Debentures by the Trust, in which event the Trust would redeem
the Trust Securities on a pro rata basis to the same extent as
23
the Convertible Debentures are redeemed by the Company. See "Description of
the Trust Convertible Preferred Securities--Trust Special Event Distribution
or Redemption; Shortening of Stated Maturity" and "Certain Federal Income Tax
Considerations--Receipt of Convertible Debentures or Cash Upon Liquidation of
the Trust."
There can be no assurance as to the market prices for the Trust Convertible
Preferred Securities or the Convertible Debentures that may be distributed in
exchange for Trust Convertible Preferred Securities if a dissolution or
liquidation of the Trust were to occur or if the stated maturity of the
Convertible Debentures is shortened. Accordingly, the Trust Convertible
Preferred Securities that an investor may receive in the Exchange Offer or the
Convertible Debentures that a holder of Trust Convertible Preferred Securities
may receive on dissolution and liquidation of the Trust may trade at a
discount to the value of the 6.50% Convertible Preferred Stock on the
Expiration Date of the Exchange Offer. Because holders of Trust Convertible
Preferred Securities may receive Convertible Debentures upon the occurrence of
a Trust Special Event, prospective purchasers of Trust Convertible Preferred
Securities are also making an investment decision with regard to the
Convertible Debentures and should carefully review all the information
regarding the Convertible Debentures contained herein. See "Description of the
Trust Convertible Preferred Securities--Trust Special Event Distribution or
Redemption; Shortening of Stated Maturity" and "Description of the Convertible
Debentures--General."
PROPOSED TAX LEGISLATION
Legislation was proposed by the United States Department of the Treasury on
February 6, 1997, as part of President Clinton's Fiscal 1998 Budget Proposal
(the "Proposed Legislation") that contained a provision which generally would
deny the interest deduction for interest paid or accrued on an instrument
issued by a corporation that (i) has a maximum term of more than 15 years and
(ii) is not shown as indebtedness on the separate balance sheet of the issuer
or, where the instrument is issued to a related party (other than a
corporation), where the holder or some other related party issues a related
instrument that is not shown as indebtedness on the issuer's consolidated
balance sheet. This provision is proposed to be effective generally for
instruments issued on or after the date of first Congressional committee
action on the Proposed Legislation. If this provision were to apply to the
Convertible Debentures, the Company would not be able to deduct the interest
on the Convertible Debentures. It is expected that if the Proposed Legislation
were enacted, such legislation would not apply to the Convertible Debentures
because they would be issued prior to the date of first Congressional
committee action. However, there can be no assurance that the Proposed
Legislation or future legislative proposals or final legislation will not
adversely affect the ability of the Company to deduct interest on the
Convertible Debentures or otherwise affect the tax treatment of the
transactions described herein. If enacted, such a change could give rise to a
Tax Event pursuant to which there could be a distribution of the Convertible
Debentures to holders of the Trust Convertible Preferred Securities, a
maturity advancement (as defined herein) or, in certain circumstances,
redemption of the Convertible Debentures (and thus the Trust Convertible
Preferred Securities) by the Company. See "--Trust Special Event Distribution
or Redemption--Shortening of Stated Maturity."
OPTION TO EXTEND INTEREST PAYMENT PERIOD
So long as the Company shall not be in default in the payment of interest on
the Convertible Debentures, the Company will have the right at any time, and
from time to time, under the Indenture (as such term is defined in
"Description of the Convertible Debentures" herein) to defer payments of
interest on the Convertible Debentures by extending the interest payment
period at any time, for a period not exceeding 20 consecutive quarters and not
extending beyond the maturity of the Convertible Debentures. As a consequence
of such an extension, quarterly distributions on the Trust Convertible
Preferred Securities would be deferred (but despite such deferral would
continue to accumulate with interest thereon at the rate specified by the
Convertible Debentures, compounded quarterly) by the
24
Trust during any such extended interest payment period. Prior to the
termination of any such Extension Period, the Company may further extend the
interest payment period; provided that such Extension Period, together with
all such previous and further extensions thereof, may not exceed 20
consecutive quarters or extend beyond the maturity of the Convertible
Debentures. Upon the termination of any Extension Period and the payment of
all amounts then due, the Company may commence a new Extension Period, subject
to the above requirements. If the Company exercises this right to defer
interest payments, then, subject to limited exceptions, it may not declare or
pay any dividend on, make any distributions with respect to, or redeem,
purchase, acquire, or make a liquidation payment with respect to, any of its
capital stock. See "Description of the Trust Convertible Preferred
Securities--Distributions" and "Description of the Convertible Debentures--
Option to Extend Interest Payment Period."
Should the Company exercise its right to defer payments of interest by
extending the interest payment period, each holder of Trust Convertible
Preferred Securities will be required to accrue income (OID) in respect of the
deferred and compounded interest allocable to its Trust Convertible Preferred
Securities for United States federal income tax purposes, which will be
allocated but not distributed, to holders of record of Trust Convertible
Preferred Securities. As a result, each such holder of Trust Convertible
Preferred Securities will recognize income for United States federal income
tax purposes in advance of the receipt of cash and will not receive the cash
from the Trust related to such income if such holder disposes of its Trust
Convertible Preferred Securities prior to the record date for the date on
which distributions of such amounts are made. The Company has no current
intention of exercising its right to defer payments of interest by extending
the interest payment period on the Convertible Debentures. However, should the
Company determine to exercise such right in the future, the market price of
the Trust Convertible Preferred Securities is likely to be affected. A holder
that disposes of its Trust Convertible Preferred Securities during an
Extension Period, therefore, might not receive the same return on its
investment as a holder that continues to hold its Trust Convertible Preferred
Securities. In addition, as a result of the existence of the Company's right
to defer interest payments, the market price of the Trust Convertible
Preferred Securities (which represent an undivided beneficial ownership
interest in the Convertible Debentures) may be more volatile than other
securities that do not grant the issuer such rights. See "Certain Federal
Income Tax Considerations--Interest Income and Original Issue Discount."
RANKING OF SUBORDINATED OBLIGATIONS UNDER THE GUARANTEE AND CONVERTIBLE
DEBENTURES
The Company's obligations under the Guarantee will be unsecured and will
rank subordinate in right of payment to all other liabilities of the Company
and on a parity with the most senior preferred or preference stock now or
hereafter issued by the Company (including the 6.50% Convertible Preferred
Stock) and with any guarantee now or hereafter entered into by the Company in
respect of any preferred or preference stock of any affiliate of the Company.
The obligations of the Company under the Convertible Debentures will be
unsecured and will rank on a parity with the indebtedness under the Loan
Agreement, dated as of March 3, 1994, between the Company and USX Capital LLC,
and subordinate and junior in right of payment to all present and future
Senior Indebtedness of the Company. Senior Indebtedness includes (i) all
indebtedness of the Company for money borrowed or in connection with the
acquisition of properties or assets and (ii) any indebtedness of others of the
kinds described in clause (i) for which the Company is liable as guarantor or
otherwise. Both the Guarantee and the Convertible Debentures will be
structurally subordinated to all obligations of the Company's subsidiaries. No
payment of principal of (including redemption), premium, if any, or interest
on the Convertible Debentures may be made (i) if any Senior Indebtedness of
the Company is not paid when due and any applicable grace period with respect
to such default has ended and such default not having been cured or waived or
ceasing to exist or (ii) if the maturity of any Senior Indebtedness has been
accelerated because of a default.
As of December 31, 1996, the Company's Senior Indebtedness included, among
other items, $4.3 billion of indebtedness (including indebtedness of
consolidated subsidiaries) guaranteed by the
25
Company. There are no terms in the Trust Convertible Preferred Securities, the
Convertible Debentures, or the Guarantee that limit the Company's or its
subsidiaries' ability to incur additional indebtedness, including indebtedness
that ranks senior to the Convertible Debentures and the Guarantee. See
"Description of the Guarantee--Status of the Guarantee" and "Description of
the Convertible Debentures--Subordination."
RIGHTS UNDER THE GUARANTEE
The Guarantee will be qualified as an indenture under the Trust Indenture
Act. The Institutional Trustee will act as indenture trustee under the
Guarantee for the purposes of compliance with the provisions of the Trust
Indenture Act (the "Guarantee Trustee"). The Guarantee Trustee will hold the
Guarantee for the benefit of the holders of the Trust Securities.
The Guarantee guarantees to the holders of the Trust Convertible Preferred
Securities the payment of (i) any accumulated and unpaid distributions
required to be paid on the Trust Convertible Preferred Securities, to the
extent the Trust has funds available therefor, (ii) the redemption price and
all accumulated and unpaid distributions with respect to Trust Convertible
Preferred Securities called for redemption by the Trust, to the extent the
Trust has funds available therefor and (iii) upon a voluntary or involuntary
dissolution, winding-up or termination of the Trust (other than in connection
with the distribution of Convertible Debentures to the holders of Trust
Convertible Preferred Securities or a redemption of all the Trust Convertible
Preferred Securities), the lesser of (a) the aggregate of the liquidation
amount and all accumulated and unpaid distributions on the Trust Convertible
Preferred Securities to the date of the payment to the extent the Trust has
funds available therefor or (b) the amount of assets of the Trust remaining
available for distribution to holders of the Trust Convertible Preferred
Securities in liquidation of the Trust.
The holders of a majority in liquidation amount of the Trust Convertible
Preferred Securities will have the right to direct the time, method and place
of conducting any proceeding for any remedy available to the Guarantee Trustee
or to exercise any trust or power conferred upon the Guarantee Trustee under
the Guarantee. If the Guarantee Trustee fails to enforce such Guarantee, any
holder of Trust Convertible Preferred Securities may institute a legal
proceeding directly against the Company to enforce such holder's right to
receive payment under the Guarantee without first instituting a legal
proceeding against the Trust, the Guarantee Trustee or any other person or
entity. If the Company were to default on its obligation to pay amounts
payable on the Convertible Debentures, the Trust would lack available funds
for the payment of distributions or amounts payable on redemption of the Trust
Convertible Preferred Securities or otherwise, and, in such event, holders of
the Trust Convertible Preferred Securities would not be able to rely upon the
Guarantee for payment of such amounts. See "Description of the Guarantee."
However, a holder of the Trust Convertible Preferred Securities could instead
rely on the enforcement (i) by the Institutional Trustee of its rights as
registered holder of the Convertible Debentures against the Company pursuant
to the terms of the Convertible Debentures or (ii) by such holder of its right
of direct action against the Company to enforce payments on Convertible
Debentures. See "Description of the Convertible Debentures-- Indenture Events
of Default." The Declaration provides that each holder of Trust Convertible
Preferred Securities, by acceptance thereof, agrees to the provisions of the
Guarantee, including the subordination provisions thereof, and the Indenture.
ENFORCEMENT OF CERTAIN RIGHTS BY HOLDERS OF TRUST CONVERTIBLE PREFERRED
SECURITIES
If (i) the Trust fails to pay distributions in full on the Trust Convertible
Preferred Securities (other than pursuant to a deferral of interest during an
Extension Period) or (ii) a Declaration Event of Default occurs and is
continuing, then the holders of Trust Convertible Preferred Securities could
rely upon, and under certain circumstances, could cause, the enforcement by
the Institutional Trustee of its rights
26
as a holder of the Convertible Debentures against the Company. In addition,
the holders of a majority in liquidation amount of the Trust Convertible
Preferred Securities will have the right to direct the time, method, and place
of conducting any proceeding for any remedy available to the Institutional
Trustee or to direct the exercise of any trust or power conferred upon the
Institutional Trustee under the Declaration, including the right to direct the
Institutional Trustee to exercise the remedies available to it as a holder of
the Convertible Debentures. If the Institutional Trustee fails to enforce its
rights under the Convertible Debentures, a holder of Trust Convertible
Preferred Securities may institute a legal proceeding directly against the
Company to enforce the Institutional Trustee's rights under the Convertible
Debentures without first instituting any legal proceeding against the
Institutional Trustee or any other person or entity. Notwithstanding the
foregoing, if a Declaration Event of Default has occurred and is continuing
and such event is attributable to the failure of the Company to pay interest
or principal on the Convertible Debentures on the date such interest or
principal is otherwise payable (or in the case of redemption, on the
redemption date), then the registered holder of Trust Convertible Preferred
Securities may directly institute a proceeding for enforcement of payment to
such holder of the principal of or interest on the Convertible Debentures
having a principal amount equal to the aggregate liquidation amount of the
Trust Convertible Preferred Securities of such holder (a "Direct Action") on
or after the respective due date specified in the Convertible Debentures. In
connection with such Direct Action, the Company, as the holder of the Trust
Common Securities, will be subrogated to the rights of such holder of Trust
Convertible Preferred Securities under the Declaration to the extent of any
payment made by the Company to such holder of Trust Convertible Preferred
Securities in such Direct Action. The holders of Trust Convertible Preferred
Securities will not be able to exercise directly any other remedy available to
the holders of the Convertible Debentures. See "Description of the Trust
Convertible Preferred Securities--Declaration Events of Default" and
"Description of the Convertible Debentures--Indenture Events of Default."
LIMITED VOTING RIGHTS
Holders of Trust Convertible Preferred Securities will have limited voting
rights and will not be entitled to vote to appoint, remove or replace, or to
increase or decrease the number of, the Trustees, which voting rights are
vested exclusively in the holder of the Trust Common Securities. See
"Description of the Trust Convertible Preferred Securities--Voting Rights."
TRADING PRICE
The Trust Convertible Preferred Securities may trade at a price that does
not fully reflect the value of accrued and unpaid interest with respect to the
underlying Convertible Debentures. Should the Company exercise its right to
defer payments of interest, a holder who disposes of his Trust Convertible
Preferred Securities between record dates for payments of distributions
thereon will be required to include accrued and unpaid interest on the
Convertible Debentures through the date of disposition in income as ordinary
income (i.e., OID), and to add such amount to his adjusted tax basis in his
pro rata share of the underlying Convertible Debentures deemed disposed of.
The OID from a holder's pro rata share is then added to his or her adjusted
basis in the Trust Convertible Preferred Securities. To the extent the selling
price is less than the holder's adjusted tax basis, a holder will recognize a
capital loss. Subject to certain limited exceptions, capital losses cannot be
applied to offset ordinary income for United States federal income tax
purposes. See "Certain Federal Income Tax Considerations--Interest Income and
Original Issue Discount" and "--Sale or Redemption of Trust Convertible
Preferred Securities."
LACK OF ESTABLISHED TRADING MARKET FOR TRUST CONVERTIBLE PREFERRED SECURITIES
The Trust Convertible Preferred Securities constitute a new issue of
securities of the Trust with no established trading market. The liquidity of
the Trust Convertible Preferred Securities will be
27
affected by the number of shares of 6.50% Convertible Preferred Stock accepted
on the Exchange Offer. While application will be made to list the Trust
Convertible Preferred Securities on the NYSE and acceptance of validly
tendered shares of 6.50% Convertible Preferred Stock is subject to the Minimum
NYSE Distribution Condition (which may not be waived), there can be no
assurance that an active market for the Trust Convertible Preferred Securities
will develop or be sustained in the future. Although the Dealer Managers have
indicated to the Company and the Trust that they intend to make a market in
the Trust Convertible Preferred Securities, as permitted by applicable laws
and regulations prior to the commencement of trading on the NYSE, they are not
obligated to do so and may discontinue any such market-making at any time
without notice. Accordingly, no assurance can be given as to the liquidity of,
or trading markets for, the Trust Convertible Preferred Securities. See "The
Exchange Offer--Listing and Trading of Trust Convertible Preferred Securities
and 6.50% Convertible Preferred Stock."
REDUCED TRADING MARKET FOR 6.50% CONVERTIBLE PREFERRED STOCK
To the extent shares of 6.50% Convertible Preferred Stock are tendered and
accepted in the Exchange Offer, and/or the number of Holders of 6.50%
Convertible Preferred Stock is reduced to below certain levels, the liquidity
and trading market for shares of 6.50% Convertible Preferred Stock outstanding
following the Exchange Offer, and the terms upon which such shares could be
sold, could be adversely affected. In addition, if the Exchange Offer is
substantially subscribed, there would be a significant risk that round lot
holdings of shares of 6.50% Convertible Preferred Stock outstanding following
the Exchange Offer would be limited. Further, following the Expiration Date,
and in accordance with and subject to applicable law, the Company may from
time to time acquire shares of 6.50% Convertible Preferred Stock in the open
market, by tender offer, subsequent exchange offer or otherwise. The Company's
decision to make such acquisitions is dependent on many factors, including
market conditions at the time of any contemplated acquisition. Accordingly,
the Company cannot predict whether and to what extent it will acquire any
additional shares of 6.50% Convertible Preferred Stock and the consideration
to be paid therefor.
The Exchange Offer is for up to 6,700,000 shares of 6.50% Convertible
Preferred Stock (or 97.1% of the 6,900,000 shares outstanding) rather than for
all of the outstanding shares of 6.50% Convertible Preferred Stock in order to
avoid a delisting of the 6.50% Convertible Preferred Stock from the NYSE
following consummation of the Exchange Offer. See "The Exchange Offer--Listing
and Trading of Trust Convertible Preferred Securities and 6.50% Convertible
Preferred Stock." Although the Company does not anticipate that the NYSE will
delist the 6.50% Convertible Preferred Stock as a result of the Exchange
Offer, acquisitions by the Company of 6.50% Convertible Preferred Stock after
the Exchange Offer will make it more likely that the NYSE will delist the
6.50% Convertible Preferred Stock than if the Exchange Offer had not occurred.
RISKS RELATING TO THE COMMON STOCK OF THE COMPANY
STOCKHOLDERS OF ONE COMPANY; FINANCIAL IMPACTS FROM ONE GROUP COULD AFFECT
THE OTHER GROUPS
Although the financial statements of the U.S. Steel Group, the Marathon
Group and the Delhi Group separately report the assets, liabilities (including
contingent liabilities) and stockholders' equity of the Company attributed to
each such Group, such attribution of assets, liabilities (including contingent
liabilities) and stockholders' equity among the U.S. Steel Group, the Marathon
Group and the Delhi Group for the purpose of preparing their respective
financial statements does not affect legal title to such assets or
responsibility for such liabilities. Holders of Steel Stock, Marathon Stock
and Delhi Stock are holders of common stock of the Company, and continue to be
subject to all of the risks associated with an investment in the Company and
all of its businesses and liabilities. Financial
28
impacts arising from one Group that affect the overall cost of the Company's
capital could affect the results of operations and financial condition of the
other Groups. In addition, net losses of any Group, as well as dividends and
distributions on any class of the Company's common stock or series of
Preferred Stock and repurchases of any class of the Company's common stock or
series of preferred stock, will reduce the funds of the Company legally
available for payment of dividends on the Steel Stock. Accordingly, the USX
consolidated financial information should be read in connection with the Group
financial information. The Company prepares consolidated financial statements,
as well as financial statements of each Group. Holders of the respective
classes of Common Stock are provided consolidated financial statements and the
financial statements of their respective group.
NO RIGHTS OR ADDITIONAL DUTIES WITH RESPECT TO THE GROUPS; POTENTIAL
CONFLICTS
Holders of Steel Stock, Marathon Stock and Delhi Stock have only the rights
of stockholders of the Company, and, except as described under "Description of
Capital Stock and Amended and Restated Rights Plan--Steel Stock--Exchange and
Redemption" and "--Voting," holders of Common Stock are not provided any
rights specifically related to any Group. In addition, principles of Delaware
law established in cases involving differing treatment of classes of capital
stock or groups of holders of the same class of capital stock provide that a
board of directors owes an equal duty to all stockholders regardless of class
or series and does not have separate or additional duties to any group of
stockholders.
The existence of separate classes of Common Stock may give rise to occasions
when the interests of holders of Steel Stock, Marathon Stock and Delhi Stock
may diverge or appear to diverge. Examples include the optional exchange of
Steel Stock for Marathon Stock at the 10% premium or of Delhi Stock for
Marathon Stock or Steel Stock at the 15% premium, as the case may be; the
determination of the record date of any such exchange or for the redemption of
any Steel Stock or Delhi Stock; the establishment of the date for public
announcement of the liquidation of the Company; and the commitment of capital
among the U.S. Steel Group, the Marathon Group and the Delhi Group.
Because the Board owes an equal duty to all stockholders regardless of
class, the Board is the appropriate body to deal with these matters. In order
to assist the Board in this regard, the Company has formulated policies to
serve as guidelines for the resolution of matters involving a conflict or a
potential conflict, including policies dealing with the payment of dividends,
limiting capital investment in the U.S. Steel Group over the long term to its
internally generated cash flow, and allocating of corporate expenses and other
matters. The Board has been advised concerning the applicable law relating to
the discharge of its fiduciary duties to the common stockholders in the
context of the separate classes of Common Stock and has delegated to the Audit
Committee of the Board the responsibility to review matters which relate to
this subject and report to the Board. While the classes of Common Stock may
give rise to an increased potential for conflicts of interest, established
rules of Delaware law would apply to the resolution of any such conflicts.
Under Delaware law, a good faith determination made by a disinterested and
adequately informed Board with respect to any such matter would be a defense
to any claim of liability made on behalf of the holders of any class of Common
Stock. The Company is aware of no precedent concerning the manner in which
such rules of Delaware law would be applied in the context of its capital
structure.
LIMITED SEPARATE VOTING RIGHTS
Holders of shares of Steel Stock, Marathon Stock and Delhi Stock vote
together as a single class on all matters as to which all the Company's common
stockholders are entitled to vote. Holders of Steel Stock, Marathon Stock or
Delhi Stock will have no rights to vote on matters as a separate Group except
as described under "Description of Capital Stock Amended and Restated Rights
Plan--Steel Stock--Voting" and in certain limited circumstances as currently
provided under Delaware law.
29
Separate meetings for the holders of each class of Common Stock will not be
held. Accordingly, subject to such exceptions, holders of shares of Steel
Stock, Marathon Stock or Delhi Stock, cannot bring a proposal to a vote of the
holders of Steel Stock, Marathon Stock or Delhi Stock only, but are required
to bring any proposal to a vote of all holders of capital stock of the Company
entitled to vote generally voting together as a single class.
The interests of the holders of the Steel Stock, Marathon Stock and Delhi
Stock may diverge or appear to diverge with respect to certain matters as to
which such holders are entitled to vote. If, when a stockholder vote is taken
on any matter as to which a separate vote by any class would not be required
under the Certificate of Incorporation or Delaware law, the holders of one or
more classes of Common Stock would have more than the number of votes required
to approve any such matter, the holders of that class or classes would be in a
position to control the outcome of the vote on such matter. The Certificate of
Incorporation provides that neither the increase nor the decrease of the
authorized number of shares of any class of Common Stock requires a separate
vote of any such class. Thus, it is possible that the holders of a majority of
any class or two classes of Common Stock could constitute a majority of the
voting power of all classes of Common Stock and approve the increase or
decrease of the authorized amount of another class or classes of Common Stock
without the approval of the holders of such other class or classes of Common
Stock.
On all matters where the holders of Common Stock vote together as a single
class, a share of Marathon Stock will have one vote and each share of Steel
Stock and Delhi Stock will have a fluctuating vote per share based on relative
time-weighted average ratios of their Market Values. For purposes of the USX
Annual Stockholders meeting to be held on April 29, 1997, the per share voting
rights of Marathon Stock, Steel Stock and Delhi Stock are one vote, 1.181
votes and .589 vote per share, respectively. Accordingly, the holders of
Marathon Stock, Steel Stock and Delhi Stock have approximately 73.1%, 25.5%
and 1.4%, respectively, of the total voting power of the Company for that
meeting.
MANAGEMENT AND ACCOUNTING POLICIES SUBJECT TO CHANGE
Since 1991 the Company has applied certain management and accounting
policies adopted by the Board and described herein, which policies may be
modified or rescinded in the sole discretion of the Board without approval of
stockholders, although the Board has no present intention to do so. The Board
may also adopt additional policies depending upon the circumstances. Any
determination of the Board to modify or rescind such policies, or to adopt
additional policies, including any such decision that would have disparate
impacts upon holders of Steel Stock, or Marathon Stock or Delhi Stock, would
be made by the Board in good faith and in the honest belief that such decision
is in the best interests of all stockholders of the Company. In addition,
generally accepted accounting principles require that any change in accounting
policy be preferable (in accordance with such principles) to the policy
previously established.
LIMITATIONS ON POTENTIAL UNSOLICITED ACQUISITIONS
If the U.S. Steel Group, the Marathon Group and the Delhi Group were
separate companies, any person interested in acquiring one of them without
negotiation with management could seek to obtain control of it by means of a
tender offer or proxy contest. Because each Group is not a separate company,
any person interested in acquiring only one Group without negotiation with the
Company management would be required to seek control of the voting power
representing all of the outstanding capital stock of the Company entitled to
vote on such acquisition. See "Limited Separate Voting Rights" above.
Because of fluctuations in the relative Market Values of shares of the three
classes of Common Stock, the voting power of a particular stockholder may be
increased or decreased from that held at
30
the time the stockholder acquired the stock or from that held at the time of
the previous vote. The fluctuating voting powers of the three classes of
Common Stock may influence a purchaser interested in acquiring and maintaining
control of the Company to acquire equivalent holdings in all classes of Common
Stock.
DIVIDENDS AND EARNINGS PER SHARE
The Board intends to declare and pay dividends on the Steel Stock, Marathon
Stock and Delhi Stock based on the financial condition and results of
operations of the respective Group, although it has no obligation under
Delaware law to do so. Subject to any prior rights of the holders of Preferred
Stock: (a) dividends on Steel Stock will be payable out of the lesser of (i)
the Available Steel Dividend Amount and (ii) legally available funds; (b)
dividends on Marathon Stock will be payable out of legally available funds of
the Company (as defined under Delaware law); and (c) dividends on Delhi Stock
will be payable when, as and if declared by the Board out of the lesser of (i)
the Available Delhi Dividend Amount and (ii) legally available funds. In
making its dividend decisions, the Board will rely on the financial statements
of each Group. In determining its dividend policy, the Board will consider,
among other things, the long-term earnings and cash flow capabilities of each
Group, as well as the dividend policies of similar publicly traded companies.
The method of calculating earnings per share for the Steel Stock, the
Marathon Stock and the Delhi Stock reflects the Board's intent that the
separately reported earnings and surplus of the Steel Group, the Marathon
Group and the Delhi Group, as determined consistent with the Certificate of
Incorporation, are available for payment of dividends to the respective
classes of stock, although legally available funds and liquidation preferences
of these classes of stock do not necessarily correspond with these amounts.
Dividends on all classes of Preferred Stock and the Company common stock are
limited to legally available funds of the Company, which are determined on the
basis of the entire Corporation. Distributions on the Steel Stock, the
Marathon Stock and the Delhi Stock would be precluded by a failure to pay
dividends on any series of Preferred Stock. Net losses of any Group as well as
dividends and distributions on any class of common stock or series of
Preferred Stock and repurchases of any class of common stock or series of
Preferred Stock, will reduce the funds of the Company legally available for
payment of dividends on all classes of common stock.
Under Delaware law, a corporation may declare and pay dividends on its
capital stock either (1) out of its surplus or (2) in case there is no
surplus, out of its net profits for the year in which the dividend is declared
and/or the proceeding fiscal year. "Surplus" is the amount by which the total
assets of the corporation exceed total liabilities and capital. Capital for
the Company is the sum of (a) the aggregate par value of the outstanding
shares of Common Stock (equal to $1 per share), and (b) the aggregate stated
capital of the outstanding shares of 6.50% Convertible Preferred Stock ($1 per
share). If the capital of a corporation is diminished by depreciation in the
value of its properties, or by losses, or otherwise, to an amount less than
the aggregate amount of capital represented by the outstanding stock of all
classes having a preference upon the distribution of assets, dividends may not
be paid out of net profits (that is pursuant to clause (2) above) until the
deficiency in capital shall have been repaired. For purposes of determining
surplus, the assets and liabilities of a corporation are to be valued on the
basis of market value.
POTENTIAL EFFECTS OF EXCHANGE AND REDEMPTION OF COMMON STOCK
Under various conditions, the Steel Stock may be exchanged, at the Company's
option, for shares of Marathon Stock, or if there are no shares of Marathon
Stock outstanding, Delhi Stock at a 10% premium. Any exchange of Steel Stock
for Marathon Stock or Delhi Stock would preclude holders of Steel Stock from
retaining their investment in a security reflecting the Company's steel and
other businesses that constitute the U.S. Steel Group. See "Description of
Capital Stock and Amended and
31
Restated Rights Plan--Steel Stock--Exchange and Redemption." The Company
cannot predict the impact on the market price of the Steel Stock or its
ability to effect any such exchange.
Under various conditions, the Delhi Stock may be exchanged, at the Company's
option, for shares of Marathon Stock, or if there are no shares of Marathon
Stock outstanding, Steel Stock at a 10% premium. In addition, the Board may at
any time exchange each outstanding share of Delhi Stock for a number of shares
of Marathon Stock or, if there are no shares of Marathon Stock outstanding and
shares of Steel Stock are outstanding, of Steel Stock at a 15% premium. See
"Description of Capital Stock and Amended and Restated Rights Plan--Delhi
Stock--Exchange and Redemption." Any exchange of Delhi Stock for Steel Stock
would dilute the interests of holders of Steel Stock. The Company cannot
predict the impact on the market price of the Delhi Stock or its ability to
effect any such exchange.
PRICE RANGE OF STEEL STOCK, DIVIDENDS AND DIVIDEND POLICY
The Steel Stock is listed on the NYSE and the Chicago and Pacific Stock
Exchanges. The following table sets forth the range of high and low sales
prices of the Steel Stock on the Composite Tape for the stated periods.
HIGH LOW
------- ------
1995
First Quarter.................................................. $39 1/8 $30
Second Quarter................................................. 34 3/4 29 1/4
Third Quarter.................................................. 39 30 5/8
Fourth Quarter................................................. 33 5/8 29 1/8
1996
First Quarter.................................................. 37 7/8 30
Second Quarter................................................. 35 7/8 27 3/4
Third Quarter.................................................. 29 5/8 24 1/8
Fourth Quarter................................................. 32 26 1/2
1997
First Quarter (through March 13)............................... 33 3/8 28 5/8
------- ------
On March 13, 1997, the reported last sale price of the Steel Stock on the
Composite Tape was $29 1/8 per share.
Since May 6, 1991, the Board has declared a dividend each quarter on the
Steel Stock of $.25 per share. The Board reserves the right to change the
dividend rate at any time and from time to time. The Board intends to declare
and pay dividends on the Steel Stock based on the financial condition and
results of operations of the U.S. Steel Group, although it has no obligation
under Delaware law to do so. Dividends on the Steel Stock will be payable
when, as and if declared by the Board out of the lesser of (i) the Available
Steel Dividend Amount (as defined herein) and (ii) legally available funds of
USX (as defined under Delaware law). In making its dividend decisions, the
Board will rely on the financial statements of the U.S. Steel Group. In
determining its dividend policy, the Board will consider, among other things,
the long-term earnings and cash flow capabilities of the U.S. Steel Group, as
well as the dividend policies of publicly traded steel companies. See "U.S.
Steel Group--Selected Financial Information-footnote (a)," "Risk Factors--
Risks Relating to the Common Stock of the Company--Dividends and Earnings Per
Share" and "Description of Capital Stock and Amended and Restated Rights
Plan--Steel Stock--Dividends."
32
PRICE RANGE OF 6.50% CONVERTIBLE PREFERRED STOCK
The 6.50% Convertible Preferred Stock is listed on the NYSE. The following
table sets forth the range of high and low sales prices of the 6.50%
Convertible Preferred Stock on the Composite Tape for the stated periods.
HIGH LOW
------- -------
1995
First Quarter................................................. $49 7/8 $43 1/4
Second Quarter................................................ 48 1/2 43 7/8
Third Quarter................................................. 50 1/8 46 1/8
Fourth Quarter................................................ 49 3/4 45 3/4
1996
First Quarter................................................. 51 1/4 47 1/8
Second Quarter................................................ 49 43 5/8
Third Quarter................................................. 45 1/8 41 3/8
Fourth Quarter................................................ 45 3/4 41 1/2
1997
First Quarter (through March 13).............................. 47 1/2 44 1/8
------- -------
On March 13, 1997, the reported last sale price of the 6.50% Convertible
Preferred Stock on the Composite Tape was $44 5/8 per share.
33
CAPITALIZATION
The following table sets forth the capitalization of the U.S. Steel Group
and the consolidated capitalization of the Company (i) at December 31, 1996,
and (ii) as adjusted to give effect to the issuance of Trust Convertible
Preferred Securities in the Exchange Offer on the assumption that 6,700,000 of
the outstanding shares of the 6.50% Convertible Preferred Stock are validly
tendered and accepted for exchange.
DECEMBER 31, 1996
-------------------------------------
U.S. STEEL GROUP USX CONSOLIDATED
------------------ ------------------
ACTUAL AS ADJUSTED ACTUAL AS ADJUSTED
------ ----------- ------ -----------
(DOLLARS IN MILLIONS)
Short-term obligations (including notes
payable and current maturities of long-
term debt)............................. $ 91 $ 91 $ 434 $ 434
Long-term debt due after one year....... 1,014 1,014 3,859 3,859
Preferred stock of subsidiary........... 64 64 250 250
USX obligated mandatorily redeemable
convertible preferred securities of a
subsidiary trust holding solely
convertible debentures ("Trust
Convertible Preferred
Securities")(a)(b)..................... -- 335 -- 335
Stockholders' equity.................... 1,566 1,231 5,022 4,687
------ ------ ------ ------
Total capitalization.................... $2,735 $2,735 $9,565 $9,565
====== ====== ====== ======
- --------
(a) To the extent that 6,700,000 shares of the 6.50% Convertible Preferred
Stock are not validly tendered and accepted for exchange in the Exchange
Offer, the amount attributed to Trust Convertible Preferred Securities
would decrease and the amounts under the "As Adjusted" column attributed
to the 6.50% Convertible Preferred Stock included in "Stockholders'
equity" would increase.
(b) The amounts shown assume issuance of the Trust Convertible Preferred
Securities at an aggregate fair value equivalent to the aggregate initial
liquidation amount of $335 million. The difference between the aggregate
fair value of the Trust Convertible Preferred Securities and the carrying
value of the 6.50% Convertible Preferred Stock is charged to Additional
paid-in capital included in "Stockholders' equity." To the extent that the
actual aggregate fair value of the Trust Convertible Preferred Securities
differs from the aggregate initial liquidation amount, the balance of the
carrying value of the Trust Convertible Preferred Securities and
Additional paid-in capital will change accordingly.
34
U.S. STEEL GROUP
SELECTED FINANCIAL INFORMATION
The following selected financial information has been derived from the
financial statements of the U.S. Steel Group for each of the five years in the
period ended December 31, 1996. The information set forth below should be read
in connection with the U.S. Steel Group financial statements and notes thereto
and accompanying "Management's Discussion and Analysis" contained in the USX
Annual Report on Form 10-K for the year ended December 31, 1996, incorporated
herein by reference. Specific reference is made to footnotes (a) and (b)
regarding basis of presentation and corporate activities. The financial
information of the U.S. Steel Group supplements the consolidated financial
information of USX and, taken together with the financial information of the
Marathon Group and the Delhi Group, includes all accounts which comprise the
corresponding consolidated financial information of USX.
YEAR ENDED DECEMBER 31,
-------------------------------------------------
1996 1995 1994 1993 1992
-------- -------- -------- -------- ---------
(DOLLARS IN MILLIONS EXCEPT PER SHARE DATA)
STATEMENT OF OPERATIONS
DATA:
Revenues................... $ 6,547 $ 6,475 $ 6,077 $ 5,797 $ 4,939
Operating income (loss).... 360 500 324 36 (221)
Operating costs include:
Depreciation, depletion 292 318 314 314 288
and amortization.........
Pension credits........... (159) (132) (120) (202) (231)
Restructuring charges..... -- -- -- 42 10
Other income (loss)........ 123 82 64 25 (15)
Other income (loss)
includes:
Gain on affiliate stock 53 -- -- -- --
offering.................
Gain on disposal of 1 2 1 31 3
investments..............
Income (loss) from 66 80 59 (11) (27)
affiliates--equity method
.........................
Income (loss) before
extraordinary loss and
cumulative effect of
changes in accounting
principles................ 275 303 201 (169) (271)
Net income (loss) before $ 273 $ 301 $ 201 $ (238) $ (1,606)
preferred dividends.......
Dividends on preferred (22) (24) (25) (21) (3)
stock.....................
-------- -------- -------- -------- ---------
Net income (loss) $ 251 $ 277 $ 176 $ (259) $ (1,609)
applicable to Steel Stock.
======== ======== ======== ======== =========
BALANCE SHEET DATA (AT
PERIOD END):
Capital expenditures--for $ 337 $ 324 $ 248 $ 198 $ 298
year......................
Total assets............... 6,580 6,521 6,480 6,629 6,251
Capitalization:
Notes payable............. $ 18 $ 8 $ -- $ -- $ 15
Total long-term debt...... 1,087 1,016 1,453 1,562 2,259
Preferred stock of
subsidiary and other
minority interest........ 64 64 64 5 16
Preferred stock........... 7 7 32 32 25
Common stockholders'
equity................... 1,559 1,337 913 585 222
-------- -------- -------- -------- ---------
Total capitalization...... $ 2,735 $ 2,432 $ 2,462 $ 2,184 $ 2,537
======== ======== ======== ======== =========
PER SHARE DATA--STEEL STOCK:
Income (loss) before
extraordinary loss and
cumulative effect of
changes in accounting
principles:
primary................... $ 3.00 $ 3.53 $ 2.35 $ (2.96) $ (4.92)
fully diluted............. 2.97 3.43 2.33 (2.96) (4.92)
Net income (loss):
primary................... 2.98 3.51 2.35 (4.04) (28.85)
fully diluted............. 2.95 3.41 2.33 (4.04) (28.85)
Dividends paid per share... 1.00 1.00 1.00 1.00 1.00
Book value per share (at
period end)............... 18.37 16.10 12.01 8.32 3.72
The footnotes appearing on the following two pages are an integral part of
this information.
35
- --------
(a) BASIS OF PRESENTATION--The financial statements of the U.S. Steel Group
include the financial position, results of operations and cash flows for
all businesses of USX other than the businesses, assets and liabilities
included in the Marathon Group or the Delhi Group, and a portion of the
corporate assets and liabilities and related transactions which are not
separately identified with ongoing operating units of USX. The U.S. Steel
Group financial statements are prepared using the amounts included in the
USX consolidated financial statements.
Although the financial statements of the U.S. Steel Group, the Marathon
Group and the Delhi Group separately report the assets, liabilities
(including contingent liabilities) and stockholders' equity of USX
attributed to each such group, such attribution of assets, liabilities
(including contingent liabilities) and stockholders' equity among the U.S.
Steel Group, the Marathon Group and the Delhi Group for the purpose of
preparing their respective financial statements does not affect legal title
to such assets or responsibility for such liabilities. Holders of Steel
Stock, Marathon Stock and Delhi Stock are holders of common stock of USX,
and continue to be subject to all the risks associated with an investment
in USX and all of its businesses and liabilities. Financial impacts arising
from one Group that affect the overall cost of USX's capital could affect
the results of operations and financial condition of other groups. In
addition, net losses of any Group, as well as dividends and distributions
on any class of USX Common Stock or series of preferred stock and
repurchases of any class of USX Common Stock or series of preferred stock
at prices in excess of par or stated value, will reduce the funds of USX
legally available for payment of dividends on all classes of Common Stock.
Accordingly, the USX consolidated financial information should be read in
connection with the U.S. Steel Group financial information.
(b) FINANCIAL ACTIVITIES--As a matter of policy, USX manages most financial
activities on a centralized, consolidated basis. Such financial activities
include the investment of surplus cash; the issuance, repayment and
repurchase of short-term and long-term debt; the issuance, repurchase and
redemption of preferred stock; and the issuance and repurchase of common
stock. Transactions related primarily to invested cash, short-term and
long-term debt (including convertible debt), related net interest and
other financial costs, and preferred stock and related dividends are
attributed to the U.S. Steel Group, the Marathon Group and the Delhi Group
based upon the cash flows of each group for the periods presented and the
initial capital structure of each group. Most financing transactions are
attributed to and reflected in the financial statements of all three
groups. However, transactions such as leases, certain collateralized
financings, certain indexed debt instruments, financial activities of
consolidated entities which are less than wholly owned by USX and
transactions related to securities convertible solely into any one class
of common stock are or will be specifically attributed to and reflected in
their entirety in the financial statements of the group to which they
relate.
CORPORATE GENERAL AND ADMINISTRATIVE COSTS--Corporate general and
administrative costs are allocated to the U.S. Steel Group, the Marathon
Group and the Delhi Group based upon utilization or other methods management
believes to be reasonable and which consider certain measures of business
activities, such as employment, investments and sales. The costs allocated
to the U.S. Steel Group primarily consist of employment costs including
pension effects, professional services, facilities and other related costs
associated with corporate activities.
INCOME TAXES--All members of the USX affiliated group are included in the
consolidated United States federal income tax return filed by USX.
Accordingly, the provision for federal income taxes and the related payments
or refunds of tax are determined on a consolidated basis. The consolidated
provision and the related tax payments or refunds have been reflected in the
U.S. Steel Group, the Marathon Group and the Delhi Group financial
statements in accordance with USX's tax allocation policy. In general, such
policy provides that the consolidated tax provision and related tax payments
or refunds are allocated among the U.S. Steel Group, the Marathon Group and
the Delhi Group, for group financial statement purposes, based principally
upon the
36
financial income, taxable income, credits, preferences and other amounts
directly related to the respective groups.
For tax provision and settlement purposes, tax benefits resulting from
attributes (principally net operating losses and various tax credits),
which cannot be utilized by one of the three groups on a separate return
basis but which can be utilized on a consolidated basis in that year or in
a carryback year, are allocated to the group that generated the attributes.
To the extent that one of the three groups is allocated a consolidated tax
attribute which, as a result of expiration or otherwise, is not ultimately
utilized on the consolidated tax return, the prior years' allocation of
such attribute is adjusted such that the effect of the expiration is borne
by the group that generated the attribute. Also, if a tax attribute cannot
be utilized on a consolidated basis in the year generated or in a carryback
year, the prior years' allocation of such consolidated tax effects is
adjusted in a subsequent year to the extent necessary to allocate the tax
benefits to the group that would have realized the tax benefits on a
separate return basis. As a result, the allocated group amounts of taxes
payable or refundable are not necessarily comparable to those that would
have resulted if the groups had filed separate tax returns.
37
USX CORPORATION
SELECTED CONSOLIDATED FINANCIAL INFORMATION
The following selected consolidated financial information has been derived
from the consolidated financial statements of USX for each of the five years
in the period ended December 31, 1996. The information set forth below should
be read in connection with the USX consolidated financial statements and notes
thereto and accompanying "Management's Discussion and Analysis" contained in
the USX Annual Report on Form 10-K for the year ended December 31, 1996,
incorporated herein by reference.
YEAR ENDED DECEMBER 31,
-------------------------------------------
1996 1995 1994 1993 1992
------- ------- ------- ------- -------
(DOLLARS IN MILLIONS)
STATEMENT OF OPERATIONS DATA:
Revenues......................... $23,844 $20,964 $19,530 $18,290 $17,849
Operating income ................ 1,625 631 1,044 273 91
Operating costs include:
Depreciation, depletion and am-
ortization..................... 1,012 1,160 1,065 1,077 1,091
Inventory market valuation
charges (credits).............. (209) (70) (160) 241 (62)
Pension credits................. (160) (142) (116) (211) (260)
Restructuring charges (credits). -- (6) 37 42 125
Impairment of long-lived assets. -- 675 -- -- --
Other income (loss).............. 164 101 78 40 (23)
Other income (loss) includes:
Gain on affiliate stock offer-
ing............................ 53 -- -- -- --
Gain on disposal of investments. 21 3 5 36 3
Income (loss) from affiliates--
equity method.................. 85 89 64 (1) (14)
Income (loss) before income tax-
es, extraordinary loss and cumu-
lative effect of changes in ac-
counting principles............. 1,368 269 685 (239) (189)
Income (loss) before
extraordinary loss and
cumulative effect of changes in
accounting principles........... 952 221 501 (167) (160)
Net income (loss) before pre-
ferred dividends................ $ 943 $ 214 $ 501 $ (259) $(1,826)
Dividends on preferred stock..... (22) (28) (31) (27) (9)
------- ------- ------- ------- -------
Net income (loss) applicable to
common stocks................... $ 921 $ 186 $ 470 $ (286) $(1,835)
======= ======= ======= ======= =======
BALANCE SHEET DATA (AT PERIOD
END):
Capital expenditures--for year... $ 1,168 $ 1,016 $ 1,033 $ 1,151 $ 1,505
Total assets..................... 16,980 16,743 17,517 17,414 17,252
Capitalization:
Notes payable................... $ 81 $ 40 $ 1 $ 1 $ 47
Total long-term debt............ 4,212 4,937 5,599 5,970 6,302
Preferred stock of subsidiary
and other minority interest.... 250 250 250 5 16
Preferred stock................. 7 7 112 112 105
Common stockholders' equity..... 5,015 4,321 4,190 3,752 3,604
------- ------- ------- ------- -------
Total capitalization........... $ 9,565 $ 9,555 $10,152 $ 9,840 $10,074
======= ======= ======= ======= =======
38
YEAR ENDED DECEMBER 31,
----------------------------------------------------------
1996 1995 1994 1993 1992
---------- ---------- ---------- ---------- -----------
(DOLLARS IN MILLIONS EXCEPT PER SHARE DATA AND RATIOS)
COMMON SHARE DATA--STEEL
STOCK:
Income (loss) before
extraordinary loss and
cumulative effect of
changes in accounting
principles applicable
to Steel Stock........ $ 253 $ 279 $ 176 $ (190) $ (274)
Per share--primary.... 3.00 3.53 2.35 (2.96) (4.92)
--fully diluted.... 2.97 3.43 2.33 (2.96) (4.92)
Net income (loss) ap-
plicable to Steel
Stock................. 251 277 176 (259) (1,609)
Per share--primary.... 2.98 3.51 2.35 (4.04) (28.85)
--fully diluted.... 2.95 3.41 2.33 (4.04) (28.85)
Dividends paid per
share................. 1.00 1.00 1.00 1.00 1.00
Book value per share
(at period end)....... 18.37 16.10 12.01 8.32 3.72
COMMON SHARE DATA--MARA-
THON STOCK:
Income (loss) before
extraordinary loss and
cumulative effect of
changes in accounting
principles applicable
to Marathon Stock..... $ 671 $ (87) $ 315 $ (12) $ 103
Per share--primary.... 2.33 (.31) 1.10 (.04) .37
--fully diluted.... 2.31 (.31) 1.10 (.04) .37
Net income (loss) ap-
plicable to Marathon
Stock................. 664 (92) 315 (35) (228)
Per share--primary.... 2.31 (.33) 1.10 (.12) (.80)
--fully diluted.... 2.29 (.33) 1.10 (.12) (.80)
Dividends paid per
share................. .70 .68 .68 .68 1.22
Book value per share
(at period end)....... 11.62 9.99 11.01 10.58 11.37
COMMON SHARE DATA--DELHI
STOCK OUTSTANDING SINCE
OCTOBER 2, 1992:
Net income (loss) ap-
plicable to outstand-
ing Delhi Stock....... $ 5.9 $ 1.1 $ (20.9) $ 7.8 $ 2.0
Per share--primary and
fully diluted........ .62 .12 (2.22) .86 .22
Dividends paid per
share................. .20 .20 .20 .20 .05
Book value per share
(at period end)....... 12.30 11.88 12.09 14.50 13.83
RATIOS (UNAUDITED):
Ratio of earnings to
fixed charges......... 3.81 1.63 2.08 (a) (a)
Ratio of earnings to
combined fixed charges
and preferred stock
dividends............. 3.55 1.50 1.92 (b) (b)
- --------
(a) Earnings did not cover fixed charges by $281 million for 1993 and by $197
million for 1992.
(b) Earnings did not cover fixed charges and preferred stock dividends by $325
million for 1993 and by $211 million for 1992.
39
THE EXCHANGE OFFER
GENERAL
Participation in the Exchange Offer is voluntary and Holders should
carefully consider whether to accept. None of the Board, the Company, the
Trustees nor the Trust make any recommendation to Holders as to whether to
tender or refrain from tendering in the Exchange Offer. Holders of 6.50%
Convertible Preferred Stock are urged to consult their financial and tax
advisors in making their own decisions on what action to take in light of
their own particular circumstances.
Unless the context requires otherwise, the term "Holder" with respect to
this Exchange Offer Section means (i) any person in whose name any shares of
6.50% Convertible Preferred Stock are registered on the books of the Company,
(ii) any other person who has obtained a properly completed stock power from
the registered holder, or (iii) any person whose shares of 6.50% Convertible
Preferred Stock are held of record by The Depository Trust Company ("DTC") who
desires to deliver such shares by book-entry transfer at DTC.
PURPOSE OF THE EXCHANGE OFFER
The purpose of the Exchange Offer is to refinance the 6.50% Convertible
Preferred Stock with the Trust Convertible Preferred Securities. This
refinancing will benefit the Company by permitting the Company to deduct
interest payable on the Convertible Debentures for United States federal
income tax purposes, while dividends payable on the 6.50% Convertible
Preferred Stock are not deductible. The extent of this benefit, however,
cannot be predicted because it depends upon the number of shares of 6.50%
Convertible Preferred Stock exchanged pursuant to the Exchange Offer, the
Company's federal income tax position in any year and the period of time the
Trust Convertible Preferred Securities remain outstanding. Neither the Trust's
ability to defer distribution payments on the Trust Convertible Preferred
Securities nor the more limited voting rights on the part of holders of the
Trust Convertible Preferred Securities is a purpose of the Company in making
the Exchange Offer.
The Company may exercise its optional redemption rights on any shares of
6.50% Convertible Preferred Stock that remain outstanding after the
consummation of the Exchange Offer. The optional redemption price for a share
of the 6.50% Convertible Preferred Stock immediately after the Expiration Date
of the Exchange Offer will be $51.950, plus accrued and unpaid dividends, if
any, up to but excluding the redemption date.
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions of the Exchange Offer, the
Company will exchange Trust Convertible Preferred Securities representing
undivided beneficial ownership interests in the assets of the Trust for up to
6,700,000 of the outstanding shares of 6.50% Convertible Preferred Stock
(97.1% of the 6,900,000 outstanding shares of 6.50% Convertible Preferred
Stock) of the Company. The Exchange Offer will be effected on the basis of one
Trust Convertible Security for each share of 6.50% Convertible Preferred Stock
validly tendered and accepted for exchange in the Exchange Offer. Consummation
of the Exchange Offer is conditioned on, without limitation, (i) the
satisfaction of the Minimum NYSE Distribution Condition, which requires that,
immediately after the acceptance for exchange of shares of 6.50% Convertible
Preferred Stock in the Exchange Offer, there will be at least 400 record or
beneficial holders with an aggregate of at least 1,000,000 Trust Convertible
Preferred Securities; (ii) receipt of at least 3,450,000 validly tendered
shares of 6.50% Convertible Preferred Stock (which condition may be waived by
the Company); and (iii) the satisfaction of the OID Condition. The OID
Condition requires that the Company reasonably expect, on the Expiration Date,
based upon the terms of the Trust Convertible Preferred Securities and the
recent trading values of the 6.50% Convertible Preferred Stock, that the
Convertible Debentures will not be issued with reportable OID. The Minimum
NYSE Distribution Condition and the OID Condition may not be waived by the
Company. See "--Expiration Date; Extensions; Amendments; Termination."
40
Upon the terms and subject to the conditions of the Exchange Offer, the
Company will accept for exchange up to 6,700,000 shares of 6.50% Convertible
Preferred Stock validly tendered and not withdrawn as promptly as practicable
after the Expiration Date unless the Exchange Offer has been withdrawn or
terminated. The Company will not accept shares of 6.50% Convertible Preferred
Stock for exchange prior to the Expiration Date. The Company expressly
reserves the right, in its sole discretion, to delay acceptance for exchange
of shares of 6.50% Convertible Preferred Stock tendered under the Exchange
Offer or the exchange of Trust Convertible Preferred Securities for the shares
of 6.50% Convertible Preferred Stock accepted for exchange (subject to Rules
13e-4 and 14e-1 under the Exchange Act, which require that the Company
consummate the Exchange Offer or return the shares of 6.50% Convertible
Preferred Stock deposited by or on behalf of the Holders thereof promptly
after the termination or withdrawal of the Exchange Offer), or to withdraw or
terminate the Exchange Offer and not accept any shares of 6.50% Convertible
Preferred Stock at any time for any reason. In all cases, except to the extent
waived by the Company, delivery of the Trust Convertible Preferred Securities
in exchange for the shares of 6.50% Convertible Preferred Stock accepted for
exchange pursuant to the Exchange Offer will be made only after timely receipt
by the Exchange Agent of such shares (or confirmation of book-entry transfer
thereof), a properly completed and duly executed Letter of Transmittal, and
any other documents required thereby.
As of March 14, 1997, there were 6,900,000 shares of 6.50% Convertible
Preferred Stock outstanding. This Prospectus, together with the Letter of
Transmittal, is being sent to all registered Holders as of such date.
The Company shall be deemed to have accepted validly tendered shares of
6.50% Convertible Preferred Stock (or defectively tendered shares of 6.50%
Convertible Preferred Stock with respect to which the Company has waived such
defect) when, as and if the Company has given oral or written notice thereof
to the Exchange Agent. The Exchange Agent will act as agent for the tendering
Holders for the purpose of receiving the Trust Convertible Preferred
Securities from the Company and remitting such Trust Convertible Preferred
Securities to tendering Holders. Upon the terms and subject to the conditions
of the Exchange Offer, delivery of Trust Convertible Preferred Securities in
exchange for shares of 6.50% Convertible Preferred Stock will be made as
promptly as practicable after the Expiration Date.
If proration of tendered shares of 6.50% Convertible Preferred Stock is
required, because of the difficulty in determining the number of shares of
6.50% Convertible Preferred Stock validly tendered (including shares tendered
by the guaranteed delivery procedures described in "--Procedures for
Tendering"), the Company does not expect that it would be able to announce the
final proration factor or to commence the exchange for any shares of 6.50%
Convertible Preferred Stock pursuant to the Exchange Offer until approximately
seven business days after the Expiration Date. Preliminary results of the
proration will be announced by press release as promptly as practicable after
the Expiration Date. Holders of 6.50% Convertible Preferred Stock may obtain
such preliminary information from the Dealer Managers, the Information Agent
or the Exchange Agent and may also be able to obtain such information from
their brokers.
Until the final proration factors are known, the Company will not issue any
Trust Convertible Preferred Securities in exchange for any shares of 6.50%
Convertible Preferred Stock accepted for exchange pursuant to the Exchange
Offer or return shares of 6.50% Convertible Preferred Stock tendered but not
accepted for exchange because of proration.
If any tendered shares of 6.50% Convertible Preferred Stock are not accepted
for exchange because of an invalid tender, proration, the occurrence of
certain other events set forth herein, or otherwise, unless otherwise
requested by the Holder under "Special Delivery Instructions" in the Letter of
Transmittal, such shares will be returned, without expense, to the tendering
Holder thereof (or in the
41
case of shares of 6.50% Convertible Preferred Stock tendered by book-entry
transfer into the Exchange Agent's account at DTC, such shares will be
credited to an account maintained at DTC designated by the participant therein
who so delivered such shares), as promptly as practicable after the Expiration
Date or the withdrawal or termination of the Exchange Offer.
Holders of 6.50% Convertible Preferred Stock will not have any appraisal or
dissenters' rights under the Delaware General Corporation Law in connection
with the Exchange Offer. The Company intends to conduct the Exchange Offer in
accordance with the applicable requirements of the Exchange Act and the rules
and regulations of the Commission thereunder.
Holders who tender shares of 6.50% Convertible Preferred Stock in the
Exchange Offer will not be required to pay brokerage commissions or fees or,
subject to the instructions in the Letter of Transmittal, transfer taxes with
respect to the exchange of shares of 6.50% Convertible Preferred Stock
pursuant to the Exchange Offer. See "--Fees and Expenses."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS; TERMINATION
The Exchange Offer will expire on the Expiration Date. The Company reserves
the right to extend the Exchange Offer in its sole discretion at any time and
from time to time by giving oral or written notice to the Exchange Agent and
by timely public announcement communicated, unless otherwise required by
applicable law or regulation, by issuing a press release. During any extension
of the Exchange Offer, all shares of 6.50% Convertible Preferred Stock
previously tendered pursuant to the Exchange Offer and not withdrawn will
remain subject to the Exchange Offer.
The Company expressly reserves the right to (i) amend or modify the terms of
the Exchange Offer in any manner and (ii) withdraw or terminate the Exchange
Offer and not accept for exchange any shares of 6.50% Convertible Preferred
Stock, at any time for any reason, including (without limitation) if fewer
than 3,450,000 shares of 6.50% Convertible Preferred Stock are tendered (which
condition may be waived by the Company), if the Minimum Distribution Condition
is not satisfied or if the OID Condition is not satisfied. The Minimum
Distribution Condition and the OID Condition may not be waived by the Company.
If the Company makes a material change in the terms of the Exchange Offer or
if it waives a material condition of the Exchange Offer, the Company will
extend the Exchange Offer. The minimum period for which the Exchange Offer
will be extended following a material change or waiver, other than a change in
the percentage of the 6.50% Convertible Preferred Stock being sought for
exchange or in the consideration offered, will depend upon the facts and
circumstances, including the relative materiality of the change or waiver.
With respect to a change in the percentage of the 6.50% Convertible Preferred
Stock being sought or in the consideration offered, the Exchange Offer will be
extended for a minimum of ten business days following public announcement of
such change. Any withdrawal or termination of the Exchange Offer will be
followed as promptly as practicable by public announcement thereof. In the
event the Trust withdraws or terminates the Exchange Offer, it will give
immediate notice to the Exchange Agent, and all shares of 6.50% Convertible
Preferred Stock theretofore tendered pursuant to the Exchange Offer will be
returned promptly to the tendering Holders thereof. See "--Withdrawal of
Tenders."
ACCUMULATED DISTRIBUTIONS ON TRUST CONVERTIBLE PREFERRED SECURITIES AND
ACCRUED DIVIDENDS ON 6.50% CONVERTIBLE PREFERRED STOCK
The Trust Convertible Preferred Securities will accumulate distributions at
an annual rate of 6.75% from and including March 31, 1997. Dividends accrued
on the 6.50% Convertible Preferred Stock after March 31, 1997 will not be paid
in cash on shares of 6.50% Convertible Preferred Stock accepted for exchange
in the Exchange Offer or accounted for in determining the number of shares of
Trust Convertible Preferred Securities to be exchanged for each share of 6.50%
Convertible Preferred Stock.
42
PROCEDURES FOR TENDERING
The tender of shares of 6.50% Convertible Preferred Stock by a Holder
thereof pursuant to one of the procedures set forth below will constitute an
agreement between such Holder and the Company in accordance with the terms and
subject to the conditions set forth herein and in the Letter of Transmittal.
Each Holder of 6.50% Convertible Preferred Stock wishing to accept the
Exchange Offer must (i) properly complete and sign the Letter of Transmittal
or a facsimile thereof (all references in this Prospectus to the Letter of
Transmittal shall be deemed to include a facsimile thereof) in accordance with
the instructions contained herein and therein, together with any required
signature guarantees, and deliver the same to the Exchange Agent, at either of
its addresses set forth in "--Exchange Agent and Information Agent" and
certificates for the shares of 6.50% Convertible Preferred Stock held by such
Holder must be received by the Exchange Agent at either of such addresses
prior to the Expiration Date, (ii) transfer such shares of 6.50% Convertible
Preferred Stock pursuant to the procedures for book-entry transfer described
below, with a confirmation of such book-entry transfer received by the
Exchange Agent prior to the Expiration Date, or (iii) comply with the
guaranteed delivery procedures described below.
LETTERS OF TRANSMITTAL, 6.50% CONVERTIBLE PREFERRED STOCK AND ANY OTHER
REQUIRED DOCUMENTS SHOULD BE SENT ONLY TO THE EXCHANGE AGENT AND NOT TO THE
COMPANY, THE TRUST, THE DEALER MANAGERS OR THE INFORMATION AGENT.
Signature Guarantees. If tendered shares of 6.50% Convertible Preferred
Stock are registered in the name of the signer of the Letter of Transmittal
and the Trust Convertible Preferred Securities to be issued in exchange
therefor are to be issued (and any untendered shares of 6.50% Convertible
Preferred Stock are to be reissued) in the name of the registered Holder
(which term, for the purposes described herein, shall include any participant
in DTC whose name appears on a security listing as the owner of the 6.50%
Convertible Preferred Stock), the signature of such signer need not be
guaranteed. If the tendered shares of 6.50% Convertible Preferred Stock are
registered in the name of someone other than the signer of the Letter of
Transmittal, such tendered shares must be endorsed or accompanied by written
instruments of transfer in form satisfactory to the Company and duly executed
by the registered Holder, and the signature on the endorsement or instrument
of transfer must be guaranteed by a financial institution (including most
banks, savings and loan associations, and brokerage houses) that is a
participant in the Security Transfer Agents Medallion Program or The New York
Stock Exchange Medallion Signature Guarantee Program or the Stock Exchange
Medallion Program (any of the foregoing hereinafter referred to as an
"Eligible Institution"). If the Trust Convertible Preferred Securities and/or
6.50% Convertible Preferred Stock not exchanged are to be delivered to an
address other than that of the registered Holder appearing on the register for
the 6.50% Convertible Preferred Stock, the signature in the Letter of
Transmittal must be guaranteed by an Eligible Institution. Any beneficial
owner whose shares of 6.50% Convertible Preferred Stock are registered in the
name of a broker, dealer, commercial bank, trust company, or other nominee and
who wishes to tender should contact such registered Holder promptly and
instruct such registered Holder to tender on such beneficial owner's behalf.
If such beneficial owner wishes to tender on its own behalf, such owner must,
prior to completing and executing a Letter of Transmittal and delivering its
shares of 6.50% Convertible Preferred Stock, either make appropriate
arrangements to register the ownership of such shares in such owner's name or
obtain a properly completed stock power from the registered Holder. The
transfer of registered ownership may take considerable time and may not be
able to be completed prior to the Expiration Date.
THE METHOD OF DELIVERY OF 6.50% CONVERTIBLE PREFERRED STOCK AND ALL OTHER
DOCUMENTS IS AT THE ELECTION AND RISK OF THE HOLDER. IF SENT BY MAIL, IT IS
RECOMMENDED THAT REGISTERED MAIL, RETURN RECEIPT REQUESTED, BE USED,
43
PRIOR INSURANCE OBTAINED AND THE MAILING BE MADE SUFFICIENTLY IN ADVANCE OF
THE EXPIRATION DATE TO PERMIT DELIVERY TO THE EXCHANGE AGENT ON OR BEFORE THE
EXPIRATION DATE.
Book-Entry Transfer. The Company understands that the Exchange Agent will
make a request promptly after the date of this Prospectus to establish
accounts with respect to the 6.50% Convertible Preferred Stock at DTC for the
purpose of facilitating the Exchange Offer, and subject to the establishment
thereof, any financial institution that is a participant in DTC's system may
make book-entry delivery of 6.50% Convertible Preferred Stock by causing DTC
to transfer such 6.50% Convertible Preferred Stock into the Exchange Agent's
account with respect to the 6.50% Convertible Preferred Stock in accordance
with DTC's Automated Tender Offer Program ("ATOP") procedures for such
bookentry transfers. However, the exchange for shares of 6.50% Convertible
Preferred Stock so tendered will only be made after timely confirmation (a
"Book-Entry Confirmation") of such book-entry transfer of shares of 6.50%
Convertible Preferred Stock into the Exchange Agent's account, and timely
receipt by the Exchange Agent of an Agent's Message (as such term is defined
in the next sentence) and any other documents required by the Letter of
Transmittal. The term "Agent's Message" means a message, transmitted by DTC
and received by the Exchange Agent and forming a part of a Book-Entry
Confirmation, which states that DTC has received an express acknowledgement
from a participant tendering shares of 6.50% Convertible Preferred Stock that
is the subject of such Book-Entry Confirmation that such participant has
received and agrees to be bound by the terms of the Letter of Transmittal, and
that the Trust may enforce such agreement against such participant. See "Book-
Entry System--The Depository Trust Company."
Guaranteed Delivery. If a Holder desires to accept the Exchange Offer and
time will not permit a Letter of Transmittal or shares of 6.50% Convertible
Preferred Stock to reach the Exchange Agent before the Expiration Date or the
procedure for book-entry transfer cannot be completed on a timely basis, a
tender may be effected if the Exchange Agent has received at its office, prior
to the Expiration Date, a letter, a telegram, or facsimile transmission from
an Eligible Institution setting forth the name and address of the tendering
Holder, the name(s) in which the 6.50% Convertible Preferred Stock is
registered and, if the 6.50% Convertible Preferred Stock is held in
certificated form, the certificate number of the 6.50% Convertible Preferred
Stock to be tendered, and stating that the tender is being made thereby and
guaranteeing that within three trading days after the date of execution of
such letter, telegram or facsimile transmission by the Eligible Institution,
the 6.50% Convertible Preferred Stock, in proper form for transfer together
with a properly completed and duly executed Letter of Transmittal (and any
other required documents), or a confirmation of book-entry transfer of such
6.50% Convertible Preferred Stock into the Exchange Agent's account at DTC,
will be delivered by such Eligible Institution. Unless the shares of 6.50%
Convertible Preferred Stock being tendered by the above-described method are
deposited with the Exchange Agent within the time period set forth above
(accompanied or preceded by a properly completed Letter of Transmittal and any
other required documents) or a confirmation of book-entry transfer of such
6.50% Convertible Preferred Stock into the Exchange Agent's account at DTC in
accordance with DTC's ATOP procedures is received, the Company may, at its
option, reject the tender. Copies of a Notice of Guaranteed Delivery which may
be used by Eligible Institutions for the purposes described in this paragraph
are available from the Exchange Agent and the Information Agent.
Miscellaneous. All questions as to the validity, form, eligibility
(including time of receipt) and acceptance for exchange of any tender of
shares of 6.50% Convertible Preferred Stock will be determined by the Company,
whose determination will be final and binding. The Company reserves the
absolute right to reject any or all tenders not in proper form or the
acceptance for exchange of which may, in the opinion of the Company's counsel,
be unlawful. The Company also reserves the absolute right to waive any defect
or irregularity in the tender of any shares of 6.50% Convertible Preferred
Stock, and the Company's interpretation of the terms and conditions of the
Exchange Offer
44
(including the instructions in the Letter of Transmittal) will be final and
binding. None of the Company, the Exchange Agent, the Dealer Managers, the
Information Agent or any other person will be under any duty to give
notification of any defects or irregularities in tenders or incur any
liability for failure to give any such notification.
Tenders of shares of 6.50% Convertible Preferred Stock involving any
irregularities will not be deemed to have been made until such irregularities
have been cured or waived. Shares of 6.50% Convertible Preferred Stock
received by the Exchange Agent that are not validly tendered and as to which
the irregularities have not been cured or waived will be returned by the
Exchange Agent to the tendering Holder (or in the case of shares of 6.50%
Convertible Preferred Stock tendered by book-entry transfer into the Exchange
Agent's account at DTC, such shares will be credited to an account maintained
at DTC designated by the participant therein who so delivered such shares),
unless otherwise requested by the Holder in the Letter of Transmittal, as
promptly as practicable after the Expiration Date or the withdrawal or
termination of the Exchange Offer.
LETTER OF TRANSMITTAL
The Letter of Transmittal contains, among other things, the following terms
and conditions, which are part of the Exchange Offer.
The party tendering shares of 6.50% Convertible Preferred Stock for exchange
(the "Transferor") exchanges, assigns and transfers such shares to the Company
and irrevocably constitutes and appoints the Exchange Agent as the
Transferor's agent and attorney-in-fact to cause such shares to be assigned,
transferred, and exchanged. The Transferor represents and warrants that it has
full power and authority to tender, exchange, assign and transfer the shares
of 6.50% Convertible Preferred Stock and to acquire Trust Convertible
Preferred Securities issuable upon the exchange of such tendered shares, and
that, when the same are accepted for exchange, the Company will acquire good
and unencumbered title to the tendered shares of 6.50% Convertible Preferred
Stock, free and clear of all liens, restrictions, charges, and encumbrances
and not subject to any adverse claim. The Transferor also warrants that it
will, upon request, execute and deliver any additional documents deemed by the
Company to be necessary or desirable to complete the exchange, assignment and
transfer of tendered shares of 6.50% Convertible Preferred Stock or transfer
ownership of such shares on the account books maintained by DTC. All authority
conferred by the Transferor will survive the death, bankruptcy, or incapacity
of the Transferor, and every obligation of the Transferor shall be binding
upon the heirs, legal representatives, successors, assigns, executors, and
administrators of such Transferor.
WITHDRAWAL OF TENDERS
Tenders of shares of 6.50% Convertible Preferred Stock pursuant to the
Exchange Offer may be withdrawn at any time prior to the Expiration Date and,
unless accepted for exchange by the Company, may be withdrawn at any time
after 40 business days after the date of this Prospectus.
To be effective, a written notice of withdrawal delivered by mail, hand
delivery, or facsimile transmission must be timely received by the Exchange
Agent at the address set forth in the Letter of Transmittal. The method of
notification is at the risk and election of the Holder. Any such notice of
withdrawal must specify (i) the Holder named in the Letter of Transmittal as
having tendered shares of 6.50% Convertible Preferred Stock to be withdrawn,
(ii) if shares of 6.50% Convertible Preferred Stock are held in certificated
form, the certificate numbers of such shares to be withdrawn, (iii) that such
Holder is withdrawing his election to have such shares exchanged, and (iv) the
name of the registered Holder of such shares, and must be signed by the Holder
in the same manner as the original signature on the Letter of Transmittal
(including any required signature guarantees) or be accompanied by
45
evidence satisfactory to the Company that the person withdrawing the tender
has succeeded to the beneficial ownership of the shares of 6.50% Convertible
Preferred Stock being withdrawn. The Exchange Agent will return the properly
withdrawn shares of 6.50% Convertible Preferred Stock promptly following
receipt of notice of withdrawal. If shares of 6.50% Convertible Preferred
Stock have been tendered pursuant to the procedure for book-entry transfer,
any notice of withdrawal must specify the name and number of the account at
DTC to be credited with the withdrawn shares of 6.50% Convertible Preferred
Stock and otherwise comply with DTC's procedures. All questions as to the
validity of notice of withdrawal, including time of receipt, will be
determined by the Company, and such determination will be final and binding on
all parties. Withdrawals of tenders of shares of 6.50% Convertible Preferred
Stock may not be rescinded and any shares of 6.50% Convertible Preferred Stock
withdrawn will thereafter be deemed not validly tendered for purposes of the
Exchange Offer. Properly withdrawn shares of 6.50% Convertible Preferred
Stock, however, may be retendered by following the procedures therefor
described elsewhere herein at any time prior to the Expiration Date. See "--
Procedures for Tendering."
ACCEPTANCE OF SHARES AND PRORATION
Upon the terms and subject to the conditions of the Exchange Offer, if
6,700,000 or fewer shares of 6.50% Convertible Preferred Stock (or, if
increased as provided herein, such higher number as the Company may elect to
purchase pursuant to the Exchange Offer) have been validly tendered and not
withdrawn prior to the Expiration Date, the Company may accept for exchange
all such shares of 6.50% Convertible Preferred Stock. Upon the terms and
subject to the conditions of the Exchange Offer, if more than 6,700,000 shares
of 6.50% Convertible Preferred Stock (or, if decreased as provided herein,
such lesser number as the Company may elect to purchase pursuant to the
Exchange Offer) have been validly tendered and not withdrawn prior to the
Expiration Date, the Company may accept for exchange shares of 6.50%
Convertible Preferred Stock from each tendering Holder on a pro rata basis,
subject to adjustment to avoid the acceptance for exchange of fractional
shares.
For purposes of prorating tendered Securities, the Company will accept all
securities tendered by persons who own, beneficially or of record, an
aggregate of not more than a specified number which is less than 100 shares of
such security and who tender all their securities, before prorating securities
tendered by others.
If the Company decides, in its sole discretion, to increase or decrease the
number of shares of 6.50% Convertible Preferred Stock sought in the Exchange
Offer or to increase or decrease the consideration offered to holders of
shares of 6.50% Convertible Preferred Stock, and if the Exchange Offer is
scheduled to expire less than ten business days from and including the date
that notice of such increase or decrease is first published, sent or given in
the manner specified in "--Expiration Date; Extensions; Amendments;
Termination," then the Exchange Offer will be extended for a minimum of ten
business days from and including the date of such notice.
All shares of 6.50% Convertible Preferred Stock not accepted pursuant to the
Exchange Offer, including shares not accepted because of proration, will be
returned to the tendering Holders at the Company's expense as promptly as
practicable following the Expiration Date.
46
EXCHANGE AGENT AND INFORMATION AGENT
The Bank of New York has been appointed as Exchange Agent for the Exchange
Offer. Deliveries to the Exchange Agent should be as follows:
THE EXCHANGE AGENT:
THE BANK OF NEW YORK
By Hand or Overnight Courier:
The Bank of New York
101 Barclay Street
Tender & Exchange Department
Receive and Delivery Window
New York, New York 10286
By Mail:
(Registered or Certified Mail Recommended)
The Bank of New York
Tender & Exchange Department
P.O. Box 11248 Church Street Station
New York, New York 10286-1248
By Facsimile Transmission
(For Eligible Institutions Only):
(212) 571-3080
Confirm Receipt of Notice of Guaranteed Delivery by Telephone:
(212) 815-4997
Morrow & Co., Inc. has been retained to act as Information Agent. Questions
and requests for assistance regarding the Exchange Offer, requests for
additional copies of this Prospectus or of the Letter of Transmittal and
requests for Notice of Guaranteed Delivery may be directed to the Information
Agent at the telephone numbers and location listed below.
INFORMATION AGENT:
MORROW & CO., INC.
909 Third Avenue
20th Floor
New York, NY 10022
(212) 754-8000
Toll Free (800) 566-9061
Banks and Brokerage Firms
Please call:
(800) 662-5200
The Company will pay the Exchange Agent and Information Agent reasonable and
customary fees for their services and will reimburse them for all their
reasonable out-of-pocket expenses in connection therewith.
47
DEALER MANAGERS; SOLICITING DEALERS
Goldman, Sachs & Co. and Merrill Lynch & Co., as Dealer Managers, have
agreed to solicit exchanges of shares of 6.50% Convertible Preferred Stock.
The Company will pay the Dealer Managers a fee of $.3125 per share of 6.50%
Convertible Preferred Stock validly tendered and accepted for exchange
pursuant to the Exchange Offer. The Company has agreed to reimburse the Dealer
Managers for their reasonable out-of-pocket expenses in connection with the
Exchange Offer (including the reasonable legal fees and expenses of their
counsel). The Dealer Managers engage in transactions with, and from time to
time have performed services for, the Company.
Subject to certain conditions, the Company will pay to a Soliciting Dealer
(including a Dealer Manager) a solicitation fee of $1.00 per share of 6.50%
Convertible Preferred Stock validly tendered and accepted for exchange
pursuant to the Exchange Offer, to the extent that the tender of such share
was solicited by such Soliciting Dealer from a beneficial owner of 5,000 or
fewer shares of 6.50% Convertible Preferred Stock. As used in this Prospectus,
"Soliciting Dealer" includes (i) any broker or dealer in securities, including
a Dealer Manager in its capacity as a broker or dealer, who is a member of any
national securities exchange or of the National Association of Securities
Dealers, Inc. (the "NASD"), (ii) any foreign broker or dealer not eligible for
membership in the NASD who agrees to conform to the NASD's Rules of Fair
Practice in soliciting tenders outside the United States to the same extent as
though it were an NASD member, or (iii) any bank or trust company, any one of
whom has solicited and obtained a tender pursuant to the Exchange Offer. No
solicitation fee shall be payable to a Soliciting Dealer with respect to an
exchange of shares of 6.50% Convertible Preferred Stock by a holder unless the
Letter of Transmittal accompanying such tender designates such Soliciting
Dealer as such in the box captioned "Solicited Tenders."
If tendered shares of 6.50% Convertible Preferred Stock are being delivered
by book-entry transfer made to an account maintained by the Exchange Agent
with DTC, the Soliciting Dealer must return a Notice of Solicited Tenders
(included in the materials provided to brokers and dealers) to the Exchange
Agent within three trading days after the Expiration Date in order to receive
a solicitation fee. No solicitation fee shall be payable to a Soliciting
Dealer in respect of shares of 6.50% Convertible Preferred Stock (i)
beneficially owned by such Soliciting Dealer or (ii) registered in the name of
such Soliciting Dealer unless such shares of 6.50% Convertible Preferred Stock
are held by such Soliciting Dealer as nominee and such shares of 6.50%
Convertible Preferred Stock are being exchanged for the benefit of one or more
beneficial owners identified on the Letter of Transmittal or the Notice of
Solicited Tenders. No solicitation fee shall be payable to the Soliciting
Dealer with respect to the tender of shares of 6.50% Convertible Preferred
Stock by the holder of record, for the benefit of the beneficial owner, unless
the beneficial owner has designated such Soliciting Dealer. No solicitation
fee shall be payable to a Soliciting Dealer if such Soliciting Dealer is
required for any reason to transfer any portion of such fee to a tendering
holder (other than itself).
Other than as described above, the Company will not pay any solicitation
fees to any broker, dealer, bank, trust company or other person for any shares
of 6.50% Convertible Preferred Stock exchanged in connection with the Exchange
Offer. The Company will reimburse such persons for customary handling and
mailing expenses incurred in connection with the Exchange Offer. No broker,
dealer, bank, trust company or fiduciary shall be deemed to be the agent of
the Company, the Exchange Agent, the Information Agent or the Dealer Managers
for purposes of the Exchange Offer.
Additional solicitation may be made by telecopier, by telephone or in person
by officers and regular employees of the Company and its affiliates. No
additional compensation will be paid to any such officers and employees who
engage in soliciting tenders.
48
LISTING AND TRADING OF TRUST CONVERTIBLE PREFERRED SECURITIES AND 6.50%
CONVERTIBLE PREFERRED STOCK
The Trust Convertible Preferred Securities constitute a new issue of
securities of the Trust with no established trading market. The liquidity of
the Trust Convertible Preferred Securities will be affected by the number of
shares of 6.50% Convertible Preferred Stock accepted for exchange in the
Exchange Offer. While application will be made to list the Trust Convertible
Preferred Securities on the NYSE, there can be no assurance that an active
market for the Trust Convertible Preferred Securities will develop or be
sustained in the future on the NYSE. Although the Dealer Managers have
indicated to the Trust that they intend to make a market in the Trust
Convertible Preferred Securities following the Expiration Date as permitted by
applicable laws and regulations prior to the commencement of trading on the
NYSE, they are not obligated to do so and may discontinue any such market-
making at any time without notice. Accordingly, no assurance can be given as
to the liquidity of, or trading markets for, the Trust Convertible Preferred
Securities.
To the extent that a certain number of shares of 6.50% Convertible Preferred
Stock are tendered and accepted in the Exchange Offer and/or the number of
holders of 6.50% Convertible Preferred Stock is reduced to below certain
levels, the liquidity and trading market for untendered 6.50% Convertible
Preferred Stock could be adversely affected. In addition, if the Exchange
Offer is substantially subscribed or oversubscribed, there would be a
significant risk that round lot holdings of 6.50% Convertible Preferred Stock
outstanding following the Exchange Offer would be limited.
Under the rules of the NYSE, preferred securities such as the 6.50%
Convertible Preferred Stock are subject to delisting if (i) the aggregate
value of publicly-held shares is less than $2 million and (ii) the number of
publicly-held shares is less than 100,000. Because at least 200,000 shares of
6.50% Convertible Preferred Stock will remain outstanding after the
consummation of the Exchange Offer, the number of outstanding shares of 6.50%
Convertible Preferred Stock will exceed the delisting criteria set forth in
clause (ii) above. In addition, based on the market price of 6.50% Convertible
Preferred Stock on the Composite Tape, ($44.625 on March 13, 1997, the last
reported sales price of the 6.50% Convertible Preferred Stock on the last full
trading day immediately prior to the Company's first public announcement of
the Exchange Offer), the aggregate value of the minimum number of shares of
6.50% Convertible Preferred Stock which will be outstanding after the
consummation of the Exchange Offer should exceed the delisting criteria set
forth in clause (i) above. See "Risk Factors--Risks Relating to the Trust
Convertible Preferred Securities--Lack of Established Trading Market for Trust
Convertible Preferred Securities" and "--Reduced Trading Market for 6.50%
Convertible Preferred Stock."
TRANSACTIONS AND ARRANGEMENTS CONCERNING THE 6.50% CONVERTIBLE PREFERRED STOCK
IN CONNECTION WITH THE EXCHANGE OFFER
Except as described herein, there are no contracts, arrangements,
understandings or relationships in connection with the Exchange Offer between
the Company or any of its directors or executive officers, the Trust or any of
the Trustees, and any person with respect to any securities of the Company or
the Trust, including the Trust Convertible Preferred Securities, the
Convertible Debentures, the 6.50% Convertible Preferred Stock and the Steel
Stock issuable upon conversion thereof.
FEES AND EXPENSES; TRANSFER TAXES
The expenses of soliciting tenders of shares of 6.50% Convertible Preferred
Stock will be borne by the Company. For compensation to be paid to the Dealer
Managers and the Soliciting Dealers, see "--Dealer Managers; Soliciting
Dealers." The total cash expenditures to be incurred by the Company in
connection with the Exchange Offer, other than fees payable to the Dealer
Managers and Soliciting
49
Dealers, but including the expenses of the Dealer Managers and the Trust,
printing, accounting, and legal fees and the fees and expenses of the Exchange
Agent, the Information Agent, the trustees under the Indenture, the Guarantee
and the Trust, are estimated to be approximately $600,000.
The Company will pay all transfer taxes, if any, applicable to the transfer
and exchange of shares of 6.50% Convertible Preferred Stock accepted in the
Exchange Offer. Holders are responsible for any transfer taxes arising because
certificates representing the Trust Convertible Preferred Securities, or
shares of the 6.50% Convertible Preferred Stock not tendered or accepted for
exchange, are to be delivered to, or registered in the name of, any person
other than the registered Holder of such tendered shares, or if a transfer tax
is to be imposed for any reason other than exchange of shares of 6.50%
Convertible Preferred Stock pursuant to the Exchange Offer. If satisfactory
evidence of payment of such taxes or exemption therefrom is not submitted with
the Letter of Transmittal, the amount of such transfer taxes will be billed
directly to such tendering Holder.
USX CAPITAL TRUST I
The Trust is a statutory business trust formed under Delaware law pursuant
to (i) a declaration of trust, dated as of March 13, 1997, executed by the
Company, as sponsor, and the trustees of the Trust (the "Trustees") and (ii)
the filing of a certificate of trust with the Secretary of State of Delaware
on March 13, 1997. Such declaration will be amended and restated in its
entirety (as so amended and restated, the "Declaration") substantially in the
form filed as an exhibit to the Registration Statement of which this
Prospectus is a part. The Declaration will be qualified as an indenture under
the Trust Indenture Act. The Company will initially acquire all of the Trust
Securities and will offer the Trust Convertible Preferred Securities to the
Holders of 6.50% Convertible Preferred Stock in the Exchange Offer.
Immediately after consummation of the Exchange Offer, former holders of 6.50%
Convertible Preferred Stock will own all of the issued and outstanding Trust
Convertible Preferred Securities and the Company will own all of the issued
and outstanding Trust Common Securities. The Trust Common Securities will have
an aggregate initial liquidation amount equal to no less than 3% of the total
capital of the Trust. The Trust exists for the sole purposes and functions of
(a) issuing its Trust Securities in exchange for Convertible Debentures having
an aggregate initial principal amount equal to the aggregate initial
liquidation amount of the Trust Securities and (b) engaging in only those
other activities as are necessary or incidental thereto. The Company, as
borrower, will pay all costs and expenses related to the Trust and the
offering of the Trust Securities.
Pursuant to the Declaration, the number of Trustees will initially be five.
Three of the Trustees (the "Regular Trustees") must be persons who are
employees or officers of the Company. The fourth Trustee must be an entity
permitted by the Commission to act as an institutional trustee under the Trust
Indenture Act, unaffiliated with the Company and with a combined capital and
surplus of at least $50 million, which will serve as indenture trustee under
the Declaration for the purpose of compliance with the Trust Indenture Act
(the "Institutional Trustee"). Initially, The Bank of New York, a banking
corporation, will be the Institutional Trustee until it resigns or is removed
by the Company. The fifth Trustee must be a resident of Delaware or an entity
that maintains its principal place of business in the state of Delaware (the
"Delaware Trustee"). Initially, The Bank of New York (Delaware), an affiliate
of the Institutional Trustee, will be the Delaware Trustee until it resigns or
is removed by the Company. The Company, as the holder of the Trust Common
Securities, will have the right to appoint or remove any Trustee and to
increase or decrease the number of Trustees (but not below two Trustees).
The Institutional Trustee will hold title to the Convertible Debentures for
the benefit of the holders of the Trust Securities and will have the power to
exercise all rights, powers, and privileges as the holder of the Convertible
Debentures under the Indenture. In addition, the Institutional Trustee will
maintain exclusive control of a segregated non-interest bearing trust account
(the "Institutional Trustee
50
Account") into which it will deposit all payments of funds received in respect
of the Convertible Debentures for the benefit of the holders of the Trust
Securities. Funds in the Institutional Trustee Account will be held uninvested
until distributed in accordance with the terms of the Declaration. The
Institutional Trustee will make payments of distributions and payments on
liquidation, redemption and otherwise to the holders of the Trust Securities
out of funds from the Institutional Trustee Account. Trust and Trustee
expenses are not paid from funds in the Institutional Trustee Account, but are
paid by the Company pursuant to the Indenture. See "Description of the
Convertible Debentures--Miscellaneous."
For the purpose of compliance with the Trust Indenture Act, The Bank of New
York will also act as the Guarantee Trustee and as Debenture Trustee (as
defined herein) under the Indenture (as defined herein). The Bank of New York
is currently the trustee under an indenture under which debt securities issued
by the Company in an aggregate principal amount of approximately $42 million
are currently outstanding. It is also a participating lender under the
Company's $2.35 billion revolving credit agreement, under which no amounts
were outstanding as of December 31, 1996, and under seven other loans to the
Company and affiliates under which an aggregate of $57 million was outstanding
as of that date. The debt securities and the guarantee by the Company under
the indentures and the loans described above are Senior Indebtedness. The Bank
of New York also performs certain miscellaneous banking functions and may
enter into other banking and financial service relationships with the Company
in the future.
The foregoing summary of the material terms and provisions of the
Declaration is subject to, and qualified in its entirety by reference to, the
Declaration, a copy of which is filed as an exhibit to the Registration
Statement of which this Prospectus is a part, the Delaware Trust Act and the
Trust Indenture Act.
The business address of the Trust is c/o The Bank of New York, 101 Barclay
Street, New York, NY 10286, and its telephone number at that address is (212)
815-5192.
DESCRIPTION OF THE TRUST CONVERTIBLE PREFERRED SECURITIES
The Trust Convertible Preferred Securities will be issued pursuant to the
terms of the Declaration. The Declaration will be qualified as an indenture
under the Trust Indenture Act. The Institutional Trustee, The Bank of New
York, will act as indenture trustee for the Trust Convertible Preferred
Securities under the Declaration for purposes of compliance with the Trust
Indenture Act. The terms of the Trust Convertible Preferred Securities and the
rights of the holders thereof, will include those stated in the Declaration,
those made part of the Declaration by the Trust Indenture Act, and those set
forth in the Delaware Trust Act. The following summary of the material terms
and provisions of the Trust Convertible Preferred Securities and the rights of
the holders thereof, is subject to, and qualified in its entirety by reference
to, the Declaration, a copy of which is filed as an exhibit to the
Registration Statement of which this Prospectus forms a part, the Trust
Indenture Act and the Delaware Trust Act.
GENERAL
The Declaration authorizes the Regular Trustees to issue, on behalf of the
Trust, the Trust Securities, which represent undivided beneficial ownership
interests in the assets of the Trust. All of the Trust Common Securities will
be owned, directly or indirectly, by the Company. The Trust Common Securities
will rank on a parity, and payments will be made thereon on a pro rata basis,
with the Trust Convertible Preferred Securities, except that upon the
occurrence and during the continuance of a Declaration Event of Default (as
defined herein), the rights of the holders of the Trust Common
51
Securities to receive payment of periodic distributions and payments upon
liquidation, redemption and otherwise will be subordinated to the rights of
the holders of the Trust Convertible Preferred Securities. The Declaration
does not permit the issuance by the Trust of any securities, or other
interests in the assets of the Trust, other than the Trust Securities or the
incurrence of any indebtedness by the Trust. Pursuant to the Declaration, the
Institutional Trustee will hold the Convertible Debentures for the benefit of
the holders of the Trust Securities. The payment of distributions out of money
held by the Trust, and payments upon redemption of the Trust Convertible
Preferred Securities or liquidation of the Trust, will be guaranteed by the
Company to the extent described under "Description of the Guarantee." The
Guarantee will be held by The Bank of New York, the Guarantee Trustee, for the
benefit of the holders of the Trust Convertible Preferred Securities. The
Guarantee will not cover payment of distributions when the Trust does not have
sufficient available funds to pay such distributions. In such event, the
remedy of a holder of Trust Convertible Preferred Securities would be to vote
to direct the Institutional Trustee to enforce the Institutional Trustee's
rights under the Convertible Debentures except in the limited circumstances in
which the holder may take Direct Action (as defined herein). See "--
Declaration Events of Default" and "--Voting Rights."
DISTRIBUTIONS
Distributions on the Trust Convertible Preferred Securities will be fixed at
a rate per annum of 6.75% of the initial liquidation amount of the securities.
Distributions not paid on the regularly scheduled payment date therefor will,
to the extent permitted by law, accumulate interest thereon at the
distribution rate, compounded quarterly. The term "distribution" as used
herein includes any such interest payable unless otherwise stated. The amount
of distributions payable for any full quarterly distribution period will be
computed on the basis of a 360-day year of twelve 30-day months. The amount of
distributions payable for any period shorter than a full quarterly
distribution period for which distributions are computed, will be computed on
the basis of a 30-day month and, for periods of less than a month, the actual
number of days elapsed per 30-day month.
Distributions on the Trust Convertible Preferred Securities will be
cumulative, will accumulate from and including March 31, 1997, and will be
payable quarterly in arrears on the last calendar day of March, June,
September and December of each year, commencing June 30, 1997, when, as and if
funds are available for payment. Distributions will be made by the
Institutional Trustee, except as otherwise described below.
So long as the Company is not in default in the payment of interest on the
Convertible Debentures, the Company will have the right under the Indenture at
any time, and from time to time, to defer payments of interest by extending
the interest payment period on the Convertible Debentures, during which
Extension Period no interest will be due and payable on the Convertible
Debentures. As a consequence of such deferral, quarterly distributions on the
Trust Convertible Preferred Securities will also be deferred, although such
deferred distributions would accumulate with interest thereon, to the extent
permitted by law, at the distribution rate, compounded quarterly, during any
such Extension Period. If the Company exercises this right, then during such
Extension Period (a) the Company shall not declare or pay any dividend on,
make any distributions with respect to, or redeem, purchase, acquire or make a
liquidation payment with respect to, any of its capital stock (other than (i)
purchases or acquisitions of shares of capital stock in connection with any
employee benefit plan or program, director plan or program, dividend
reinvestment, stock repurchase or other similar plans available to
stockholders of the Company, or any option, warrant, right or exercisable,
exchangeable or convertible security outstanding as of the Expiration Date,
(ii) as a result of a reclassification of the Company's capital stock pursuant
to the exchange or conversion provisions of the Company's capital stock or the
exchange or conversion of one class or series of the Company's capital stock
for another class or series of the Company's capital stock or the capital
securities of a subsidiary (including a trust such as
52
the Trust), or (iii) the purchase of fractional interests in shares of the
Company's capital stock pursuant to the conversion or exchange provisions of
such capital stock or security being converted or exchanged), and (b) the
Company shall not make any payment of interest, principal or premium, if any,
on, or repay, repurchase or redeem or make any guarantee payment (other than
pursuant to the Guarantee) with respect to, any debt securities issued by the
Company that rank on a parity with or junior to the Convertible Debentures.
Prior to the termination of any such Extension Period, the Company may further
extend the Extension Period; provided that such Extension Period, together
with all such previous and further extensions, may not exceed 20 consecutive
quarters or extend beyond the maturity of the Convertible Debentures. Upon the
termination of any Extension Period and the payment of all interest accrued
and unpaid on the Convertible Debentures, the Company may commence a new
Extension Period, subject to the above requirements. See "Description of the
Convertible Debentures--Additional Interest" and "--Option to Extend Interest
Payment Period." If distributions are deferred, the accumulated distributions
(including accrued interest thereon) will be paid to holders of the Trust
Convertible Preferred Securities as they appear on the books and records of
the Trust on the first record date following the termination of the Extension
Period. The Company has no present intention of exercising its rights to defer
payments by extending the interest payment period on the Convertible
Debentures.
Distributions on the Trust Convertible Preferred Securities must be paid on
the dates on which they are payable only to the extent that the Trust has
funds available for the payment of such distributions. The Trust's funds
available for distribution to the holders of the Trust Convertible Preferred
Securities will be limited to payments received from the Company on the
Convertible Debentures. See "Description of the Convertible Debentures." The
payment of distributions out of moneys held by the Trust will be guaranteed by
the Company to the extent set forth under "Description of the Guarantee."
Distributions on the Trust Convertible Preferred Securities will be payable
to the holders thereof as they appear on the books and records of the Trust on
the relevant record dates, which, as long as the Trust Convertible Preferred
Securities remain in book-entry only form, will be one Business Day (as
defined below) prior to the relevant distribution payment dates, unless
otherwise provided in the Declaration or unless a different regular record
date is established or provided for the corresponding interest payment date on
the Convertible Debentures. Such distributions will be paid through the
Institutional Trustee who will hold amounts received in respect of the
Convertible Debentures for the benefit of the holders of the Trust Securities.
Subject to any applicable laws and regulations and the provisions of the
Declaration and the Indenture, distributions will be paid by check mailed to
the address of the person entitled thereto as it appears in the register;
provided, however, that payments to DTC will be made by wire transfer of
immediately available funds to the account of DTC or its nominee. See "Book-
Entry System--The Depository Trust Company." If the Trust Convertible
Preferred Securities do not continue to remain in book-entry only form, the
Regular Trustees shall have the right to select record dates, which shall
conform to the rules of any securities exchange or other organization on which
the Trust Convertible Preferred Securities are listed or quoted and shall be
at least one Business Day prior to the relevant payment dates. If any date on
which distributions are payable on the Trust Convertible Preferred Securities
is not a Business Day, then payment of the distributions payable on such date
will be made on the next succeeding day that is a Business Day (and without
any interest or other payment in respect of any such delay), except that, if
such Business Day is in the next succeeding calendar year, such payment shall
be made on the immediately preceding Business Day, in each case with the same
force and effect as if made on such payment date. A "Business Day", except
with respect to the 6.50% Convertible Preferred Stock, means any day other
than a Saturday, Sunday, or any other day on which banking institutions in New
York City or Pittsburgh, Pennsylvania are permitted or required by any
applicable law to close.
53
CONVERSION RIGHTS
GENERAL
Trust Convertible Preferred Securities will be convertible, in whole or in
part (but only for whole Trust Convertible Preferred Securities), at any time,
at the option of the holders thereof, into shares of Steel Stock at an initial
conversion price equal to $46.25 per share of Steel Stock (equivalent to a
conversion ratio of 1.081 shares of Steel Stock for each Trust Preferred
Convertible Security), subject to adjustment as described below (the
"Conversion Price").
The right to convert Trust Convertible Preferred Securities will terminate
prior to the close of business (i) on March 31, 2037, (unless the stated
maturity of the Convertible Debentures is shortened as described under "--
Trust Special Event Distribution or Redemption; Shortening of Maturity," in
which case on the advanced maturity date) or (ii) in the case of Trust
Preferred Convertible Securities called for redemption, on the related
redemption date, unless the Company gives a notice of redemption of the Trust
Convertible Preferred Securities in connection with a dividend on or a
redemption of Steel Stock resulting from the Disposition of all or
substantially all of the properties and assets of the U.S. Steel Group, as set
forth under "Mandatory Redemption--U.S. Steel Group Special Events; Marathon
Group Special Events", in which case, such right will terminate on the 31st
day prior to the date selected by the Board for the payment of such dividend
or such redemption. For information as to notices of redemption, see "--
Redemption Procedures for Redemption by the Trust."
The terms of the Trust Convertible Preferred Securities provide that a
holder of Trust Convertible Preferred Securities wishing to exercise its
conversion right shall deliver an irrevocable conversion request (and, if such
Trust Convertible Preferred Securities are certificated, the Trust Convertible
Preferred Securities certificate(s), duly endorsed or assigned to the Trust in
blank) to the Institutional Trustee, as conversion agent (the "Conversion
Agent"), directing the Conversion Agent, on behalf of such holder, to exchange
such Trust Convertible Preferred Securities for a portion of the Convertible
Debentures and immediately convert such Convertible Debentures into Steel
Stock at the Conversion Price. Holders may obtain copies of the required form
of the conversion request from the Conversion Agent. So long as a book-entry
system for the Trust Convertible Preferred Securities is in effect, however,
procedures for converting the Trust Convertible Preferred Securities into
shares of Steel Stock will differ, as described under "Book-Entry System--The
Depository Trust Company." Each conversion will be deemed to have been
effected immediately prior to the close of business on the date on which the
conversion request is received by the Trust and the conversion shall be at the
Conversion Price in effect at such time and on such date.
Fractional shares of Steel Stock or other common stock of the Company are
not to be issued upon conversion, but, in lieu thereof, the Company will pay a
cash adjustment based on the current market price thereof on the trading day
prior to the conversion date.
RIGHT TO RECEIVE DISTRIBUTIONS; DIVIDENDS ON STEEL STOCK
Except as provided below, accumulated but unpaid distributions will not be
paid in cash on the Trust Convertible Preferred Securities that are converted
nor will such accumulated distributions be converted into additional shares of
Steel Stock, but such accumulated distributions will be deemed to be paid in
full and then returned by the holder to the Company as partial consideration
for the Steel Stock received on conversion. Holders of Trust Convertible
Preferred Securities at the close of business on a distribution record date
will be entitled to receive the distribution payable on such Trust Convertible
Preferred Securities (except that holders of Trust Convertible Preferred
Securities called for redemption on a redemption date between such record date
and the distribution payment date shall not be entitled to receive such
distribution on such distribution payment date) on the corresponding
distribution payment date notwithstanding the conversion of such Trust
Convertible Preferred
54
Securities following such distribution record date and prior to such
distribution payment date. However, Trust Convertible Preferred Securities
surrendered for conversion during the period between the close of business on
any distribution record date and the opening of business on the corresponding
distribution payment date (except Trust Convertible Preferred Securities
called for redemption on a redemption date during such period) must be
accompanied by payment of an amount equal to the distribution payable on such
Trust Convertible Preferred Securities on such distribution payment date. A
holder of Trust Convertible Preferred Securities on a distribution record date
who (or whose transferee) tenders any such Trust Convertible Preferred
Securities for conversion into shares of Steel Stock on such distribution
payment date will receive the distribution payable by the Company on such
Trust Convertible Preferred Securities on such date, and the converting holder
need not include payment of the amount of such distribution upon surrender of
Trust Convertible Preferred Securities for conversion. The Company will make
no payment or allowance for dividends on the shares of Steel Stock issued on
conversion.
The Company will not redeem any Trust Convertible Preferred Securities
unless all accumulated and unpaid distributions have been paid on all
outstanding Trust Convertible Preferred Securities for all quarterly
distribution payment periods terminating on or prior to the date of
redemption. Since the Company is required to pay all accumulated and unpaid
distributions, other than for the current quarter, prior to redeeming the
Trust Convertible Preferred Securities, holders choosing to convert their
Trust Convertible Preferred Securities in order to avoid such redemption will,
at most, forego actual receipt of a cash distribution payment only for the
current quarter.
CONVERSION PRICE ADJUSTMENTS
The Conversion Price for the Convertible Debentures (and thus the Conversion
Price of the Trust Convertible Preferred Securities) will be subject to
adjustment upon certain events, including:
(i) dividends, and other distributions, payable in Steel Stock on any
class of capital stock of the Company and combinations and subdivisions of
Steel Stock;
(ii) the issuance of certain rights or warrants entitling the holder
thereof to subscribe for or purchase Steel Stock at less than the Current
Market Price per share of Steel Stock (calculated as set forth in the
Indenture); provided that if such rights or warrants are only exercisable
upon the occurrence of certain triggering events, then the Conversion Price
of the Convertible Debentures (and thus the Conversion Price of the Trust
Convertible Preferred Securities) will not be adjusted until such
triggering events occur;
(iii) distributions to all holders of Steel Stock of any shares of
capital stock (other than any common stock of the Company), evidences of
indebtedness or cash or other assets of the Company (including securities,
but excluding, among other things, those dividends, distributions, rights
and warrants referred to above; dividends consisting exclusively of cash
and securities received pursuant to a merger or consolidation described
below);
(iv) distributions consisting exclusively of cash (excluding any regular
quarterly cash dividends, any cash distributions referred to in (iii) above
and any cash distributed in a merger or consolidation referred to below) to
all holders of Steel Stock, if the aggregate amount of all such cash
distributions, together with (A) all other all-cash distributions (to which
such Conversion Price adjustment would otherwise apply) made within the
preceding 12 months not triggering a Conversion Price adjustment and (B)
all Excess Purchase Payments (as defined below) in respect of each tender
offer or exchange offer for, or other negotiated purchase of, Steel Stock
concluded by the Company or any of its subsidiaries within the preceding 12
months not triggering a Conversion Price adjustment, exceeds an amount
equal to 12 1/2% of the product of the Current Market Price per share of
Steel Stock (calculated as set forth in the Indenture) times the number of
shares of Steel Stock outstanding on the date fixed for determination of
holders of Steel Stock entitled to receive such distribution; and
55
(v) payment of an Excess Purchase Payment, if the aggregate amount of
such Excess Purchase Payment, together with (A) the aggregate amount of any
all-cash distributions (excluding any regular quarterly cash dividends, any
cash distributions referred to in (iii) above and any cash distributed in a
merger or consolidation referred to below) made within the preceding 12
months not triggering a Conversion Price adjustment and (B) all Excess
Purchase Payments in respect of each tender or exchange offer or other
negotiated purchase for Steel Stock concluded by the Company or any of its
subsidiaries within the preceding 12 months not triggering a Conversion
Price adjustment, exceeds an amount equal to 12 1/2% of the product of the
Current Market Price per share of Steel Stock (calculated as set forth in
the Declaration) times the number of shares of Steel Stock outstanding on
the expiration date of such tender offer or exchange offer or other
negotiated purchase. For purposes of these Conversion Price adjustments,
the term "Excess Purchase Payment" means the excess, if any, of (A) the
aggregate of the cash and the value of all other consideration paid by the
Company or any of its subsidiaries with respect to the shares of Steel
Stock acquired in a tender or exchange offer or such other purchase by the
Company over (B) the Current Market Price per share of Steel Stock times
the number of shares of Steel Stock acquired in the tender or exchange
offer or such other purchase (calculated as set forth in the Indenture).
The Company from time to time may reduce the Conversion Price of the
Convertible Debentures (and thus the Conversion Price of the Trust Convertible
Preferred Securities) by any amount for any period of at least 20 Business
Days (or such other period as may then be required by applicable law), in
which case the Company shall give at least 15 days' notice of such reduction
to each holder of Trust Convertible Preferred Securities and each holder of
Convertible Debentures, if the Board has made a determination that such
reduction would be in the best interests of the Company, which determination
shall be conclusive. The Company may, at its option, make such reductions in
the Conversion Price, in addition to those set forth above, as the Board
determines to be necessary in order that any event treated for federal income
tax purposes as a dividend of stock or stock rights will not be taxable to
recipients thereof. The Company will comply with applicable law, including
Rule 13e-4 under the Exchange Act, in connection with any such adjustment to
the conversion price. See "Certain Federal Income Tax Consequences--Conversion
Price Adjustment."
No adjustments will be made in the Conversion Price of the Convertible
Debentures (and thus the Conversion Price of the Trust Convertible Preferred
Securities) if distributions on or other transactions occur with respect to
the Marathon Stock or the Delhi Stock, except as provided in the next
paragraph.
After any date on which all outstanding shares of Steel Stock are exchanged
for shares of Marathon Stock or Delhi Stock as set forth under "Description of
Capital Stock and Amended and Restated Rights Plan--Steel Stock--Exchange and
Redemption," each Trust Convertible Preferred Security will thereafter be
convertible into the number of shares of Marathon Stock or Delhi Stock, as the
case may be, receivable upon such exchange by a holder of that number of
shares or fraction thereof of Steel Stock into which one Trust Convertible
Preferred Security was convertible immediately prior to such exchange. From
and after any such adjustment to the Trust Convertible Preferred Securities,
Conversion Price adjustments as nearly equivalent as may be practicable to the
adjustments upon certain events in respect of Steel Stock described above for
Steel Stock shall be made upon such events in respect of shares of Marathon
Stock or Delhi Stock, as the case may be.
In case the Company shall be a party to any transaction (including, without
limitation, a merger or consolidation of the Company, but excluding
transactions described in the prior paragraph), in each case as a result of
which shares of Steel Stock will be converted into the right to receive stock,
securities or other property (including cash or any combination thereof), each
Convertible Debenture (and thus each Trust Convertible Preferred Security), if
outstanding after the consummation of the transaction, will be convertible
thereafter into the kind and amount of shares of stock and other
56
securities and property (including cash) (or any combination thereof)
receivable upon the consummation of such transaction by a holder of that
number of shares of Steel Stock or fraction thereof into which one Trust
Convertible Preferred Security was convertible immediately prior to such
transaction (assuming such holder of Steel Stock failed to exercise any rights
of election and received per share the kind and amount received per share by a
plurality of non-electing shares). The Company may not become a party to any
such transaction unless the terms thereof are consistent with the foregoing.
If the Company, by dividend or otherwise, distributes to all holders of
Steel Stock or other class of common stock into which the Convertible
Debentures (and thus the Trust Convertible Preferred Securities) are then
convertible shares of common stock other than Steel Stock or any class of
common stock into which Convertible Debentures (and thus the Trust Convertible
Preferred Securities) are then convertible (other than pursuant to the second
preceding paragraph), each Convertible Debenture (and thus each Trust
Convertible Preferred Security) will be convertible, in addition to the number
of shares of Steel Stock and/or such other common stock into which such share
is then convertible, into the number of shares of such other common stock
receivable upon payment of such distribution by a holder of that number of
shares or fraction thereof of Steel Stock or such other common stock into
which one Convertible Debenture (and thus one Trust Convertible Preferred
Security) was convertible immediately prior to the record date fixed for the
determination of stockholders entitled to receive such distribution. On the
payment date of such distribution, a Conversion Price in respect of such
common stock will be established in accordance with the Indenture and,
thereafter, Conversion Price adjustments as nearly as equivalent in type as
may be practicable to the adjustments described above which are to be made in
respect of Steel Stock shall be made in respect of shares of such common
stock.
No adjustment of the Conversion Price in respect of the Steel Stock or any
other conversion price in respect of any other common stock of the Company
will be required to be made in any case until cumulative adjustments amount to
1% or more thereof. Any adjustments not so required to be made will be carried
forward and taken into account in subsequent adjustments.
Notice to Holders
In order to give holders of Trust Convertible Preferred Securities an
opportunity to determine whether to convert Trust Convertible Preferred
Securities into shares of Steel Stock, the Company is required to give notice
of its intention (A) to pay a dividend on, redeem shares of, or make a tender
or exchange offer for, Steel Stock that would constitute a U.S. Steel Group
Special Event, or exchange shares of Steel Stock for Marathon Stock or Delhi
Stock following a Disposition of all or substantially all of the properties
and assets of the U.S. Steel Group or (B) to exchange Steel Stock for shares
of the U.S. Steel Group Subsidiary, not less than 45 days prior to the date
selected by the Board for the payment of such dividend on or such redemption
of Steel Stock resulting from the Disposition of all or substantially all of
the properties and assets of the U.S. Steel Group and not less than 30 days
prior to the exchange date for such exchange, the consummation of such tender
or exchange offer or the payment date of any other such dividend. In addition,
from and after any exchange of Steel Stock for Marathon Stock, as described
above, the Company is required to give a comparable notice of its intention to
take similar actions with respect to Marathon Stock that would constitute a
Marathon Group Special Event.
MANDATORY REDEMPTION
Upon the repayment of the Convertible Debentures, whether at maturity or
upon redemption, the proceeds from such repayment must be applied
substantially simultaneously to redeem Trust Securities having an aggregate
initial liquidation amount equal to the aggregate principal amount of the
57
Convertible Debentures so repaid. The Convertible Debentures will mature on
March 31, 2037 (unless the stated maturity of the Convertible Debentures is
shortened following a Tax Event, in which case on the advanced maturity date).
The Convertible Debentures may be redeemed at any time, including in certain
circumstances upon the occurrence of a Trust Special Event, and must be
redeemed, in whole, by the Company upon the occurrence of a U.S. Steel Group
Special Event or a Marathon Group Special Event. The Company will issue a
press release announcing any such redemption. See "--U.S. Steel Group Special
Events; Marathon Group Special Events", "--Trust Special Event Distribution or
Redemption; Shortening of Stated Maturity" and "Description of the Convertible
Debentures--Redemption at the Option of the Company."
In the event the Company redeems fewer than all of the Convertible
Debentures and, therefore, fewer than all of the outstanding Trust Securities
are to be redeemed, the Trust Convertible Preferred Securities and Trust
Common Securities will be redeemed pro rata, which means that so long as the
Trust Convertible Preferred Securities are in book-entry form the redemption
proceeds will be distributed in accordance with the procedures of the
Depository (as defined herein). See "Book-Entry System--The Depository Trust
Company." The Company may not redeem any Convertible Debentures (and therefore
cause a mandatory redemption of Trust Convertible Preferred Securities) unless
all accumulated and unpaid distributions have been paid on all outstanding
Trust Convertible Preferred Securities for all quarterly distribution payment
periods terminating on or prior to the last distribution payment date before
the date of redemption. Any redemption of Trust Convertible Preferred
Securities, other than as described below under "--U.S. Steel Group Special
Events; Marathon Group Special Events" or under "--Trust Special Event
Distribution or Redemption; Shortening of Stated Maturity," will be made at
the following prices (expressed as percentages of the principal amount of the
Convertible Debentures) (each, a "Redemption Price") together with accrued and
unpaid interest to, but excluding, the redemption date, if redeemed during the
12-month period beginning April 1 of the following years:
REDEMPTION PRICE
(AS A PERCENTAGE OF INITIAL DOLLAR EQUIVALENT
YEAR LIQUIDATION AMOUNT) PER SECURITY
---- --------------------------- -----------------
1997 103.90% $51.950
1998 103.25 51.625
1999 102.60 51.300
2000 101.95 50.975
2001 101.30 50.650
2002 100.65 50.325
2003 and thereafter 100.00 50.000
The Company will not exercise its option to redeem the Convertible
Debentures (and thus the Trust Convertible Preferred Securities), if the
Company is advised in advance by either Moody's or S&P that to do so would
result in an immediate lowering of the Company's credit rating on its senior
unsecured debt from its then existing level, unless the Company shall have
received from the issuance of common stock, since the date which is two years
prior to the redemption date, net proceeds in an aggregate amount at least
equal to the aggregate principal amount of the Convertible Debentures proposed
to be redeemed.
U.S. STEEL GROUP SPECIAL EVENTS; MARATHON GROUP SPECIAL EVENTS
If (i) (A) the Company exchanges all of the outstanding shares of Steel
Stock for all of the outstanding shares of common stock of a wholly owned
subsidiary of the Company to which all of the assets and liabilities of the
U.S. Steel Group have been transferred or (B) in the event of a Disposition of
all or substantially all of the properties and assets of the U.S. Steel Group,
the Company either pays a dividend on the Steel Stock in, or redeems a number
of shares of Steel Stock for, an amount equal
58
to the Net Proceeds of such Disposition, as described in "Description of
Capital Stock and Amended and Restated Rights Plan--Steel Stock--Exchange and
Redemption" or (ii) the Company pays a dividend on, or the Company or any of
its subsidiaries consummates a tender or exchange offer for, shares of Steel
Stock, and the aggregate amount of such dividend or the consideration paid in
such tender offer or exchange offer is an amount equal to all or substantially
all of the properties and assets of the U.S. Steel Group (as such term is
defined under such caption, except that the calculation thereof shall be made
without giving effect to any borrowing made by the Company or any of its
subsidiaries in connection with such dividend, tender offer or exchange offer)
(the events described in (i) and (ii) collectively the "U.S. Steel Group
Special Events"), the Company must redeem the Convertible Debentures, in
whole, at a price equal to 100% of the aggregate principal amount thereof,
together with an amount equal to accrued and unpaid interest to the redemption
date. Following such redemption, Trust Convertible Preferred Securities with
an aggregate initial liquidation amount equal to the aggregate principal
amount of the Convertible Debentures so redeemed shall be redeemed by the
Trust, on a pro rata basis, at a redemption price equal to 100% of the initial
liquidation amount to be redeemed, together with accumulated but unpaid
distributions thereon to but excluding such redemption date. The redemption
date with respect to a redemption of the Trust Convertible Preferred
Securities resulting from any U.S. Steel Group Special Event will be the
applicable exchange date, dividend payment date or redemption date for the
Steel Stock or the consummation date of such tender offer or exchange offer,
and such redemption of Convertible Debentures (and thus the Trust Convertible
Preferred Securities) will be conditioned upon the actual exchange of Steel
Stock, payment with respect to the Steel Stock of such dividend or redemption
amount or the consummation of such tender offer or exchange offer, as the case
may be.
In addition, if, following a Disposition of all or substantially all of the
properties and assets of the U.S. Steel Group, the Company exchanges all of
the outstanding shares of Steel Stock for Marathon Stock and, subsequent to
such exchange, any event similar to any of the events described in clauses (i)
(A) and (ii) of the preceding paragraph occurs in respect of the Marathon
Stock, at which time there is another class of the Company's common stock
outstanding other than Marathon Stock (each, a "Marathon Group Special
Event"), the Company must redeem the Convertible Debentures, in whole, at a
price equal to 100% of the aggregate principal amount thereof, together with
an amount equal to accrued and unpaid interest to the redemption date.
Following such redemption, Trust Convertible Preferred Securities with an
aggregate initial liquidation amount equal to the aggregate principal amount
of the Convertible Debentures so redeemed shall be redeemed by the Trust, on a
pro rata basis, at a redemption price equal to 100% of the liquidation amount
to be redeemed, together with accumulated but unpaid distributions thereon to
but excluding such redemption date. The date on which such redemption of Trust
Convertible Preferred Securities will occur, and the conditions in respect
thereof, will be determined in the manner described in the preceding paragraph
with respect to any redemption resulting from any similar U.S. Steel Group
Special Event.
TRUST SPECIAL EVENT DISTRIBUTION OR REDEMPTION; SHORTENING OF STATED MATURITY
If, at any time, a Tax Event or an Investment Company Event (each, a "Trust
Special Event") shall occur and be continuing, the Trust may, with the consent
of the Company, except in the limited circumstances described below, be
dissolved with the result that, after the satisfaction of creditors (if any),
Convertible Debentures with an aggregate principal amount equal to the
aggregate liquidation amount of, with an interest rate identical to the
distribution rate of, and accrued and unpaid interest equal to accumulated and
unpaid distributions on, the Trust Securities, would, subject to the rights of
creditors under applicable law, be distributed to the holders of the Trust
Securities in liquidation of such holders' interests in the Trust on a pro
rata basis within 90 days following the occurrence of the Trust Special Event;
provided, however, that such dissolution and distribution shall be conditioned
on (i) the Regular Trustees' receipt of an opinion of an independent tax
counsel experienced in such matters (a "No Recognition Opinion"), which
opinion may rely on published revenue rulings of the Internal
59
Revenue Service ("IRS"), to the effect that the holders of the Trust
Securities will not recognize any gain or loss for United States federal
income tax purposes as a result of such dissolution and distribution of
Convertible Debentures, (ii) the Company or the Trust being unable to avoid
such Trust Special Event within such 90-day period by taking some ministerial
action (such as filing a form or making an election or pursuing some other
similar reasonable measure) that will have no adverse effect on the Trust, the
Company or the holders of the Trust Securities or does not subject any of them
to more than de minimis regulatory requirements and (iii) the Company's prior
written consent to such dissolution and distribution. Assuming that (i) and
(ii) of the above proviso are satisfied, if the Company declines to consent to
the dissolution and distribution, the Company may incur an obligation to pay
Additional Interest (as defined herein). See "Description of the Convertible
Debentures--Additional Interest."
"Tax Event" means that the Regular Trustees shall have received an opinion
of an independent tax counsel experienced in such matters (a "Dissolution Tax
Opinion") to the effect that on or after the Expiration Date, as a result of
(a) any amendment to, clarification of or change (including any announced
proposed change) in the laws, or any regulations thereunder, of the United
States or any political subdivision or taxing authority thereof or therein,
(b) any official administrative pronouncement, ruling, regulatory procedure,
notice or announcement, including any notice or announcement of intent to
adopt such procedures or regulations (an "Administrative Action") or any
judicial decision or (c) any amendment to, clarification of, or change in the
official position or the interpretation of such Administrative Action or
judicial decision that differs from the theretofore generally accepted
position, there is more than an insubstantial risk that (i) the Trust is or,
within 90 days of the date thereof, will be subject to United States federal
income tax with respect to interest accrued or received on the Convertible
Debentures, (ii) the Trust is, or, within 90 days of the date thereof, will be
subject to more than a de minimis amount of taxes, duties or other
governmental charges, or (iii) interest payable in cash by the Company to the
Trust on the Convertible Debentures (other than interest attributable to the
Trust Common Securities) is not, or, within 90 days of the date thereof, will
not be, deductible, in whole or in part, by the Company for United States
federal income tax purposes; provided, however, that such an opinion shall not
be deemed to be a "Dissolution Tax Opinion" if the occurrence of any of the
events described in (a), (b) or (c) above requires the Company, for United
States federal income tax purposes, to defer taking a deduction for any OID
that accrues with respect to the Convertible Debentures until the interest
payment related to such OID is paid by the Company in cash, provided, the
occurrence of any of the events described in (a), (b) or (c) above does not
create more than an insubstantial risk that the Company will be prevented from
taking a deduction for OID accruing with respect to the Convertible Debentures
at a date that is no later than the date the interest payment related to such
OID is actually paid by the Company in cash.
"Investment Company Event" means that the Regular Trustees shall have
received an opinion of an independent counsel experienced in such matters (a
"Change in 1940 Act Opinion") to the effect that, as a result of the
occurrence of a change in law or regulation or a written change in
interpretation or application of law or regulation by any legislative body,
court, governmental agency or regulatory authority on or after the Expiration
Date, there is more than an insubstantial risk that the Trust is or will be
considered an "investment company" which is required to be registered under
the Investment Company Act of 1940, as amended (the "1940 Act").
Furthermore, if in the event of a Trust Special Event (i) after receipt of a
Dissolution Tax Opinion by the Regular Trustees, the Company has received an
opinion (a "Redemption Tax Opinion") of an independent tax counsel experienced
in such matters that, as a result of a Tax Event, there is more that an
insubstantial risk that the Company would be precluded from deducting the
interest on the Convertible Debentures for United States federal income tax
purposes even after the Convertible Debentures were distributed to the holders
of Trust Securities in liquidation of such holders' interests in the Trust as
described above, or (ii) after receipt by the Regular Trustees of a
Dissolution Tax
60
Opinion or a Change in 1940 Act Opinion, the Regular Trustees shall have been
informed by independent tax counsel experienced in such matters that it
cannot, for substantive reasons, deliver a No Recognition Opinion to the
Trust, (a) the Company shall have the right to shorten the stated maturity of
the Convertible Debentures to the minimum extent required, but in any event to
a date not less than five years from the date of issuance (the action referred
to in this clause (a) being referred to herein as a "maturity advancement"),
such that, in the opinion of counsel to Company experienced in such matters,
after advancing the stated maturity, interest paid on the Convertible
Debentures will be deductible for federal income tax purposes, or (b) if in
the opinion of counsel to the Company who rendered the Redemption Tax Opinion,
there would in all cases, after effecting a maturity advancement, be more than
an insubstantial risk that the Company would continue to be precluded from
deducting interest on the Convertible Debentures, the Company shall have the
right, upon not less than 30 nor more than 60 days notice, to redeem the
Convertible Debentures, in whole or in part, at 100% of the principal amount
thereof, plus accrued and unpaid interest thereon, for cash within 90 days
following the occurrence of such Trust Special Event. Following such
redemption, Trust Securities with an aggregate initial liquidation amount
equal to the aggregate principal amount of the Convertible Debentures so
redeemed shall be redeemed by the Trust, on a pro rata basis, at a redemption
price equal to 100% of the liquidation amount thereof, together with
accumulated and unpaid distributions thereon to, but excluding, such
redemption date; provided, however, that if at the time there is available to
the Company or the Trust the opportunity to eliminate, which elimination shall
be complete within the 90-day period, such Trust Special Event by taking some
ministerial action that has no adverse effect on the Trust, the Company or the
holders of the Trust Securities, or does not subject any of them to more than
de minimis regulatory requirements, the Company or the Trust will pursue such
measure in lieu of redemption.
On and after the date fixed by the Regular Trustees for any distribution of
Convertible Debentures upon dissolution of the Trust, (i) the Trust
Convertible Preferred Securities will no longer be deemed to be outstanding,
(ii) the Depository (as defined herein) or its nominee, as the record holder
of the Trust Convertible Preferred Securities, will receive a registered
global certificate or certificates representing the Convertible Debentures to
be delivered upon such distribution, and (iii) any certificate representing
Trust Convertible Preferred Securities not held by the Depository or its
nominee will be deemed to represent beneficial interests in Convertible
Debentures having an aggregate principal amount equal to the aggregate initial
liquidation amount of, with an interest rate identical to the distribution
rate of, and accrued and unpaid interest (including Compound Interest (as
defined herein)) equal to accumulated and unpaid distributions on such Trust
Convertible Preferred Securities until such certificates are presented to the
Company or its agent for transfer or reissuance.
REDEMPTION PROCEDURES FOR REDEMPTION BY THE TRUST
The Trust may not redeem any of the outstanding Trust Convertible Preferred
Securities unless all accumulated and unpaid distributions have been paid on
all outstanding Trust Convertible Preferred Securities for all quarterly
distribution periods terminating on or prior to the date of redemption. If the
Trust gives a notice of redemption in respect of Trust Convertible Preferred
Securities, then, by 12:00 noon, New York City time, on the redemption date,
provided that the Company has paid the Institutional Trustee, the
Institutional Trustee will irrevocably deposit with the Depository or its
nominee funds sufficient to pay the applicable redemption price, plus
accumulated but unpaid distributions thereon, and will give the Depository
irrevocable instructions and authority to pay such amounts to the holders of
the Trust Convertible Preferred Securities. See "Book-Entry System--The
Depository Trust Company." If notice of redemption shall have been given and
funds deposited as required, then immediately prior to the close of business
on the date of such deposit, distributions will cease to accrue and all rights
of holders of such Trust Convertible Preferred Securities so called for
redemption will cease, except the right of the holders of such Trust
Convertible Preferred Securities to receive the redemption price, plus
accumulated but unpaid distributions thereon but without further accrued
61
interest on such redemption price. The distributions payable upon redemption
(unless the date of redemption is a distribution payment date) will be payable
to the person to whom the redemption price is payable. In the event that any
date fixed for redemption of Trust Convertible Preferred Securities is not a
Business Day, then payment of the redemption price, plus accumulated but
unpaid distributions thereon, payable on such date will be made on the next
succeeding day that is a Business Day (and without any interest or other
payments in respect of any such delay) except that, if such Business Day falls
in the next calendar year, such payment will be made on the immediately
preceding Business Day in each case with the same force and effect as if made
on such date fixed for redemption. In the event that payment of the redemption
price, plus accumulated but unpaid distributions thereon, in respect of Trust
Convertible Preferred Securities is improperly withheld or refused and not
paid either by the Institutional Trustee, or, if paid to the Institutional
Trustee, by the Company pursuant to the Guarantee, distributions on such Trust
Convertible Preferred Securities will continue to accumulate at the
distribution rate from the original redemption date to the actual date of
payment, in which case the actual payment date will be considered the date
fixed for redemption for purposes of calculating the redemption price and the
accumulated but unpaid distributions thereon.
In the event that fewer than all of the outstanding Trust Securities are to
be redeemed, the Trust Securities will be redeemed pro rata. So long as the
Trust Convertible Securities are in book-entry form, the distribution of
proceeds will be made in accordance with the procedures applied by the
Depository. See "Book-Entry System--The Depository Trust Company."
Subject to the foregoing and applicable law (including, without limitation,
United States federal securities laws), the Company or any of its subsidiaries
may at any time, and from time to time, purchase outstanding Trust Convertible
Preferred Securities by tender, in the open market or otherwise.
Notice of redemption will be given not less than 30 nor more than 60 days
prior to the redemption date, other than notice of any redemption of the Trust
Convertible Preferred Securities as a result of any dividend on or redemption
of Steel Stock resulting from a Disposition of all or substantially all of the
properties and assets of the U.S. Steel Group or any tender offer or exchange
offer for the Steel Stock that would constitute a U.S. Steel Group Special
Event. Notice of redemption in connection with a dividend on, or a redemption
of, the Steel Stock resulting from such Disposition will be given not less
than 45 days prior to the date selected by the Board for the payment of such
dividend or such redemption and notice of redemption as a result of any such
tender offer or exchange offer will be given on the date of public
announcement thereof (but in any event not less than 30 days prior to such
redemption) by the Company. Similar notice will be given with respect to any
redemption occurring after a Marathon Group Special Event. Prior to giving a
notice of redemption resulting from a U.S. Steel Group Special Event or a
Marathon Group Special Event, the Company is required to pay all accrued and
unpaid interest (including Compound Interest, if any) on the Convertible
Debentures through the Interest Payment Date (as defined herein) next
preceding the date of such notice. Substantially simultaneously, the Trust
will pay all accumulated and unpaid distributions on the outstanding Trust
Convertible Preferred Securities through the distribution payment date next
preceding the date of such notice. Any such notice will be given to each
holder of record of the Trust Convertible Preferred Securities. If the Trust
Convertible Preferred Securities are not in book-entry form, notice of
redemption shall be given by mail.
LIQUIDATION DISTRIBUTION UPON DISSOLUTION
In the event of any voluntary or involuntary, dissolution, winding-up and
liquidation of the Trust (a "Liquidation"), the then holders of the Trust
Convertible Preferred Securities will be entitled to receive out of the assets
of the Trust, after satisfaction of liabilities to creditors, if any, an
amount equal to the aggregate initial liquidation amount of the Trust
Convertible Preferred Securities, plus
62
accumulated and unpaid distributions thereon to the date of payment (the
"Liquidation Distribution"), unless, in connection with such Liquidation,
Convertible Debentures in an aggregate principal amount equal to the aggregate
liquidation amount of, with an interest rate identical to the distribution
rate of, and accrued and unpaid interest equal to accumulated and unpaid
distributions on, the Trust Convertible Preferred Securities have been
distributed on a pro rata basis to the holders of the Trust Securities in
exchange for such Trust Securities.
If, upon any such Liquidation, the Liquidation Distribution can be paid only
in part because the Trust has insufficient assets available to pay in full the
aggregate Liquidation Distribution for all Trust Securities, then the amounts
payable directly by the Trust on the Trust Securities shall be paid on a pro
rata basis. The holders of the Trust Common Securities will be entitled to
receive distributions upon any such dissolution pro rata with the holders of
the Trust Convertible Preferred Securities, except that if a Declaration Event
of Default has occurred and is continuing, the Trust Convertible Preferred
Securities shall have a preference over the Trust Common Securities with
regard to such distributions.
Pursuant to the Declaration, the Trust shall dissolve (i) on March 31, 2037,
the expiration of the term of the Trust, (ii) upon the bankruptcy of the
Company as the holder of the Trust Common Securities, (iii) upon the filing of
a certificate of dissolution or its equivalent with respect to the Company as
the holder of the Trust Common Securities, upon the consent of the holders of
at least a majority in liquidation amount of the Trust Securities voting
together as a single class to file a certificate of cancellation with respect
to the Trust, or the revocation of the charter of the Company as the holder of
the Trust Common Securities and the expiration of 90 days after the date of
revocation without a reinstatement thereof, (iv) upon the distribution of
Convertible Debentures upon the occurrence and continuation of a Trust Special
Event, (v) upon the entry of a decree of a judicial dissolution of the Company
as holder of the Trust Common Securities or the Trust, (vi) upon the
redemption of all the Trust Securities and the payment to the holders of the
Trust Securities in accordance with their terms and (vii) upon the
distribution of the Steel Stock or any other class of common stock of the
Company to all holders of Trust Convertible Preferred Securities upon
conversion of all outstanding Trust Convertible Preferred Securities.
DECLARATION EVENTS OF DEFAULT
An event of default under the Indenture (an "Indenture Event of Default")
constitutes an event of default under the Declaration with respect to the
Trust Securities (a "Declaration Event of Default"). See "Description of
Convertible Debentures--Indenture Events of Default."
Upon the occurrence and continuance of a Declaration Event of Default, the
Institutional Trustee as the sole holder of the Convertible Debentures will
have the right under the Indenture to declare the principal amount of the
Convertible Debentures due and payable. The Company and the Trust are each
required to file annually with the Institutional Trustee an officer's
certificate as to its compliance with all conditions and covenants under the
Declaration.
If the Institutional Trustee fails to enforce its rights under the
Convertible Debentures, any holder of Trust Convertible Preferred Securities
may institute a legal proceeding against the Company to enforce the
Institutional Trustee's rights under the Convertible Debentures.
Notwithstanding the foregoing, if a Declaration Event of Default has occurred
and is continuing and such event is attributable to the failure of the Company
to pay interest or principal on the Convertible Debentures on the date such
interest or principal is otherwise payable (or in the case of redemption, the
redemption date), then the registered holder of Trust Convertible Preferred
Securities may institute a Direct Action for payment on or after the
respective due date specified in the Convertible Debentures. In connection
with such Direct Action, the rights of the Company, as holders of the Trust
Common Securities, will be subrogated to the rights of such holder of Trust
Convertible Preferred Securities under the Declaration
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to the extent of any payment made by the Company to such holder of Trust
Convertible Preferred Securities in such Direct Action. Except as provided in
the preceding sentences, the holders of Trust Convertible Preferred Securities
will not be able to exercise directly any other remedy available to the
holders of the Convertible Debentures.
Pursuant to the Declaration, the holder of the Trust Common Securities will
be deemed to have waived any Declaration Event of Default with respect to the
Trust Common Securities until all Declaration Events of Default with respect
to the Trust Convertible Preferred Securities have been cured, waived or
otherwise eliminated. Until such Declaration Events of Default with respect to
the Trust Convertible Preferred Securities have been so cured, waived or
otherwise eliminated, the Institutional Trustee will be deemed to be acting
solely on behalf of the holders of the Trust Convertible Preferred Securities
and only the holders of the Trust Convertible Preferred Securities will have
the right to direct the Institutional Trustee in accordance with the terms of
the Trust Convertible Preferred Securities.
VOTING RIGHTS
Except as described herein, under the Delaware Trust Act, the Trust
Indenture Act and under "Description of the Guarantee--Modification of the
Guarantee; Assignment", and as otherwise required by law and the Declaration,
the holders of the Trust Convertible Preferred Securities will have no voting
rights.
Subject to the requirement of the Institutional Trustee obtaining a tax
opinion as set forth in the last sentence of the next paragraph, the holders
of a majority in aggregate liquidation amount of the Trust Convertible
Preferred Securities have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Institutional
Trustee, or direct the exercise of any trust or power conferred upon the
Institutional Trustee under the Declaration, including the right to direct the
Institutional Trustee, as holder of the Convertible Debentures, to (i)
exercise the remedies available under the Indenture with respect to the
Convertible Debentures, (ii) waive any past Indenture Event of Default that is
waivable under the Indenture, or (iii) exercise any right to rescind or annul
a declaration that the principal of all the Convertible Debentures shall be
due and payable; provided, however, that if an Indenture Event of Default has
occurred and is continuing, then the holders of 25% of the aggregate
liquidation amount of the Trust Convertible Preferred Securities may direct
the Institutional Trustee to declare the principal of and interest on the
Convertible Debentures immediately due and payable; provided, further, that,
where a consent or action under the Indenture would require the consent or act
of holders of more than a majority in aggregate principal amount of the
Convertible Debentures (a "Super Majority"), only the holders of at least such
Super Majority in aggregate liquidation amount of the Trust Convertible
Preferred Securities may direct the Institutional Trustee to give such consent
or take such action.
The Institutional Trustee shall notify all holders of the Trust Convertible
Preferred Securities of any notice of default received from the Debenture
Trustee with respect to the Convertible Debentures. Such notice shall state
that such Indenture Event of Default also constitutes a Declaration Event of
Default. Except with respect to the directing the time, method and place of
conducting a proceeding for a remedy, the Institutional Trustee shall not take
any of the actions described in clauses (i), (ii) or (iii) above unless the
Institutional Trustee has obtained an opinion of tax counsel to the effect
that, as a result of such action, the Trust will not be classified as other
than a grantor trust for United States federal income tax purposes.
In the event the consent of the Institutional Trustee, as the holder of the
Convertible Debentures, is required under the Indenture with respect to any
amendment, modification or termination of the Indenture or the Convertible
Debentures, the Institutional Trustee shall request the direction of the
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holders of the Trust Securities with respect to such amendment, modification
or termination and shall vote with respect to such amendment, modification or
termination as directed by a majority in liquidation amount of the Trust
Securities voting together as a single class; provided, however, that where a
consent under the Indenture would require the consent of the holders of a
Super Majority in aggregate principal amount of the Convertible Debentures,
the Institutional Trustee may only give such consent at the direction of the
holders of at least the same Super Majority percentage in liquidation amount
of the Trust Securities as is required under the Indenture of aggregate
principal amount of the Convertible Debentures outstanding. The Institutional
Trustee shall not take any such action in accordance with the directions of
the holders of the Trust Securities unless the Institutional Trustee has
obtained an opinion of tax counsel to the effect that for the purposes of
United States federal income taxes the Trust will not be classified as other
than a grantor trust on account of such action.
A waiver of an Indenture Event of Default will constitute a waiver of the
corresponding Declaration Event of Default.
Any approval or direction of holders of Trust Convertible Preferred
Securities may be given at a separate meeting of holders of Trust Convertible
Preferred Securities convened for such purpose, at a meeting of all of the
holders of Trust Securities or pursuant to written consent. The Regular
Trustees will cause a notice of any meeting at which holders of Trust
Convertible Preferred Securities are entitled to vote, or of any matter upon
which action by written consent of such holders is to be taken, to be mailed
to each holder of record of Trust Convertible Preferred Securities. Each such
notice will include a statement setting forth the following information: (i)
the date of such meeting or the date by which such action is to be taken; (ii)
a description of any resolution proposed for adoption at such meeting on which
such holders are entitled to vote or of such matter upon which written consent
is sought; and (iii) instructions for the delivery of proxies or consents. No
vote or consent of the holders of Trust Convertible Preferred Securities will
be required for the Trust to redeem, participate in the exchange and/or cancel
Trust Convertible Preferred Securities or to distribute Convertible
Debentures, each in accordance with the Declaration and the terms of the Trust
Convertible Preferred Securities.
Notwithstanding that holders of Trust Convertible Preferred Securities are
entitled to vote or consent under any of the circumstances described above,
any of the Trust Convertible Preferred Securities that are owned at such time
by the Company or any entity directly or indirectly controlling or controlled
by, or under direct or indirect common control with, the Company, shall not be
entitled to vote or consent and shall, for purposes of such vote or consent,
be treated as if such Trust Convertible Preferred Securities were not
outstanding.
The procedures by which holders of Trust Convertible Preferred Securities
may exercise their voting rights are described below. See "--Book-Entry Only
Issuances" and "Book-Entry System--The Depository Trust Company."
Holders of the Trust Convertible Preferred Securities will have no rights to
appoint or remove the Trustees, who may be appointed, removed or replaced
solely by the Company as the indirect or direct holder of all of the Trust
Common Securities.
MODIFICATION OF THE DECLARATION
The Declaration may be modified and amended if approved by the Regular
Trustees (and in certain circumstances the Institutional Trustee), provided
that, if any proposed amendment provides for, or the Regular Trustees
otherwise propose to effect, (i) any action that would adversely affect the
powers, preferences or special rights of the Trust Securities, whether by way
of amendment to the Declaration or otherwise or (ii) the dissolution, winding
up or termination of the Trust, then the holders of the Trust Securities
voting together as a single class will be entitled to vote on such amendment
or
65
proposal and such amendment or proposal shall not be effective except with the
approval of at least a majority in liquidation amount of the Trust Securities
affected thereby; provided that if any amendment or proposal referred to in
clause (i) above would adversely affect only the Trust Convertible Preferred
Securities or only the Trust Common Securities, then only the affected class
will be entitled to vote on such amendment or proposal and such amendment or
proposal shall not be effective except with the approval of a majority in
liquidation amount of such class of Trust Securities.
Notwithstanding the foregoing, no amendment or modification may be made to
the Declaration if such amendment or modification would (i) cause the Trust to
be classified for purposes of United States federal income taxation as other
than a grantor trust, (ii) reduce or otherwise adversely affect the powers of
the Institutional Trustee in contravention of the Trust Indenture Act or (iii)
cause the Trust to be deemed an "investment company" which is required to be
registered under the 1940 Act.
MERGERS, CONSOLIDATIONS OR AMALGAMATIONS
The Trust may not consolidate, amalgamate, merge with or into, or be
replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety to, any corporation or other body, except as
described below. The Trust may, with the consent of the Regular Trustees or,
if there are more than two, a majority of the Regular Trustees and without the
consent of the holders of the Trust Securities, the Delaware Trustee or the
Institutional Trustee, consolidate, amalgamate, merge with or into, or be
replaced by a trust organized as such under the laws of any state, provided
that (i) such successor entity either (x) expressly assumes all of the
obligations of the Trust under the Trust Securities or (y) substitutes for the
Trust Convertible Preferred Securities other securities having substantially
the same terms as the Trust Securities (the "Successor Securities"), so long
as the Successor Securities rank the same as the Trust Convertible Preferred
Securities rank with respect to distributions and payments upon liquidation,
redemption, and otherwise, (ii) the Company expressly acknowledges a trustee
of such successor entity possessing the same powers and duties as the
Institutional Trustee as the holder of the Convertible Debentures, (iii) the
Company uses its reasonable efforts to cause the Trust Convertible Preferred
Securities or any Successor Securities to be listed or quoted on any national
securities exchange or with another organization on which the Trust
Convertible Preferred Securities are then listed or quoted, (iv) such merger,
consolidation, amalgamation or replacement does not cause the Trust
Convertible Preferred Securities (including any Successor Securities) to be
downgraded by any nationally recognized statistical rating organization, (v)
such merger, consolidation, amalgamation or replacement does not adversely
affect the rights, preferences and privileges of the holders of the Trust
Securities (including any Successor Securities) in any material respect (other
than with respect to any dilution of the holders' interest in the new entity),
(vi) such successor entity has a purpose identical to that of the Trust, (vii)
prior to such merger, consolidation, amalgamation or replacement, the Company
has received an opinion of an independent counsel to the Trust experienced in
such matters to the effect that, (A) such merger, consolidation, amalgamation
or replacement does not adversely affect the legal rights, preferences and
privileges of the holders of the Trust Securities (including any Successor
Securities) in any material respect (other than with respect to any dilution
of the holders' interest in the new entity), (B) following such merger,
consolidation, amalgamation or replacement, neither the Trust nor such
successor entity will be required to register as an investment company under
the 1940 Act, and (C) following such merger, consolidation, amalgamation or
replacement, the Trust or such successor entity will continue to be, or will
be, classified as a grantor trust for United States federal income tax
purposes, and (viii) the Company guarantees the obligations of such successor
entity under the Successor Securities at least to the extent provided by the
Guarantee and the Trust Common Securities Guarantee (as defined below).
Notwithstanding the foregoing, the Trust shall not, except with the consent of
holders of 100% in liquidation amount of the Trust Securities, consolidate,
amalgamate, merge with or into, or be replaced by any other entity or permit
any other entity to consolidate, amalgamate, merge with or into, or replace it
if such consolidation, amalgamation, merger or replacement would cause the
Trust or the
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successor entity to be classified as other than a grantor trust for United
States federal income tax purposes.
BOOK-ENTRY ONLY ISSUANCES
DTC will act as securities depositary for the Trust Convertible Preferred
Securities. The Trust Convertible Preferred Securities will be issued only as
fully registered securities registered in the name of Cede & Co., DTC's
nominee ("Cede"). One or more fully registered global Trust Convertible
Preferred Securities certificates, representing the total aggregate number of
Trust Convertible Preferred Securities, will be issued and will be deposited
with DTC. Although voting with respect to the Trust Convertible Preferred
Securities is limited, in those cases where a vote is required, neither DTC
nor Cede will itself consent or vote with respect to Trust Convertible
Preferred Securities. Under its usual procedures, DTC would solicit votes on
behalf of the Trust through an Omnibus Proxy. Except as provided herein, a
Beneficial Owner in a global Trust Convertible Preferred Security certificate
will not be entitled to receive physical delivery of Trust Convertible
Preferred Securities. Accordingly, each Beneficial Owner must rely on the
procedures of DTC to exercise any rights under the Trust Convertible Preferred
Securities. A more detailed description of the DTC book-entry system is set
forth in "Book-Entry System--The Depository Trust Company."
INFORMATION CONCERNING THE INSTITUTIONAL TRUSTEE
The Institutional Trustee, prior to the occurrence of a default with respect
to the Trust Securities and after the curing of any defaults that may have
occurred, undertakes to perform only such duties as are specifically set forth
in the Declaration. In case a default has occurred (that has not been cured or
waived pursuant to the Declaration) of which the Institutional Trustee has
actual knowledge, the Institutional Trustee shall exercise the same degree of
care as a prudent individual would exercise in the conduct of his or her own
affairs. Subject to such provisions, the Institutional Trustee is under no
obligation to exercise any of the powers vested in it by the Declaration at
the request of any holder of Trust Convertible Preferred Securities, unless
such holder provides security and indemnity, reasonably satisfactory to the
Institutional Trustee, against the costs, expenses and liabilities which might
be incurred hereby. The holders of Trust Convertible Preferred Securities will
not be required to offer such indemnity in the event such holders, by
exercising their voting rights, direct the Institutional Trustee to take any
action it is empowered to take under the Declaration following a Declaration
Event of Default. The Institutional Trustee also serves as trustee under the
Guarantee and the Indenture.
See "USX Capital Trust I" regarding The Bank of New York's service as
trustee under indentures under which securities have been issued or guaranteed
by the Company.
CONVERSION AGENT AND PAYING AGENT
The Institutional Trustee is appointed under the terms of the Trust
Securities to act as Conversion Agent. In addition, in the event that the
Trust Convertible Preferred Securities do not remain in book-entry only form,
the following provisions would apply:
The Institutional Trustee will act as paying agent and may designate an
additional or substitute paying agent at any time. Registration of transfers
of Trust Convertible Preferred Securities will be effected without charge by
or on behalf of the Trust, but upon payment (with the giving of such indemnity
as the Trust or the Company may require) in respect of any tax or other
government charges that may be imposed in relation to it. The Trust will not
be required to register or cause to be registered the transfer of Trust
Convertible Preferred Securities after such Trust Convertible Preferred
Securities have been called for redemption.
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GOVERNING LAW
The Declaration and the Trust Convertible Preferred Securities will be
governed by, and construed in accordance with, the internal laws of the State
of Delaware.
MISCELLANEOUS
The Regular Trustees are authorized and directed to take any action so that
the Trust will not be required to register as an "investment company" under
the 1940 Act or characterized as other than a grantor trust for United States
federal income tax purposes, and to cooperate with the Company so that the
Convertible Debentures will be treated as indebtedness of the Company for
United States federal income tax purposes. In this connection, the Regular
Trustees are authorized to take any action, not inconsistent with the
Declaration and applicable law, that the Regular Trustees determine in their
discretion to be necessary or desirable to achieve such end, as long as such
action does not adversely affect the interests of the holders of the Trust
Convertible Preferred Securities.
Holders of the Trust Convertible Preferred Securities have no preemptive
rights.
DESCRIPTION OF THE GUARANTEE
Set forth below is a summary of information concerning the Guarantee which
will be executed and delivered by the Company for the benefit of the holders
of Trust Convertible Preferred Securities. The Guarantee will be qualified as
an indenture under the Trust Indenture Act. The Bank of New York will act as
the Guarantee Trustee. The terms of the Guarantee will be those set forth in
such Guarantee and those made part of such Guarantee by the Trust Indenture
Act. The summary is subject in all respects to the provisions of, and is
qualified in its entirety by reference to, the form of Guarantee, which is
filed as an exhibit to the Registration Statement of which this Prospectus
forms a part, and the Trust Indenture Act. The Guarantee will be held by the
Guarantee Trustee for the benefit of the holders of the Trust Securities.
GENERAL
Pursuant to the Guarantee, the Company will agree, to the extent set forth
therein, to pay in full to the holders of the Trust Convertible Preferred
Securities the Guarantee Payments (as defined herein) (except to the extent
paid by the Trust), as and when due, regardless of any defense, right of
setoff, or counterclaim which the Trust may have or assert. The following
payments with respect to Trust Convertible Preferred Securities issued by the
Trust to the extent not paid by the Trust (the "Guarantee Payments"), will be
subject to the Guarantee thereon (without duplication): (i) any accumulated
and unpaid distributions which are required to be paid on such Trust
Convertible Preferred Securities to the extent the Trust shall have funds
available therefor; (ii) the redemption price and all accumulated and unpaid
distributions to the date of redemption to the extent the Trust has funds
available therefor with respect to any Trust Convertible Preferred Securities
called for redemption by the Trust, and (iii) upon a voluntary or involuntary
dissolution, winding-up, or termination of the Trust (other than in connection
with the conversion of all of the Trust Securities into Steel Stock, or any
other class of common stock of the Company, or the distribution of the
Convertible Debentures to the holders of Trust Convertible Preferred
Securities as provided in the Declaration), the lesser of (a) the aggregate of
the liquidation amount and all accumulated and unpaid distributions on such
Trust Convertible Preferred Securities to the date of payment, to the extent
the Trust has funds available therefor or (b) the amount of assets of the
Trust remaining available for distribution to holders of such Trust
Convertible Preferred
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Securities in liquidation of the Trust. The Company's obligation to make a
Guarantee Payment may be satisfied by direct payment of the required amounts
by the Company to the holders of Trust Convertible Preferred Securities or by
causing the Trust to pay such amounts to such holders.
The Guarantee will not apply to any payment of distributions on the Trust
Convertible Preferred Securities except to the extent the Trust shall have
funds available therefor. If the Company does not make interest payments on
the Convertible Debentures purchased by the Trust, the Trust will not pay
distributions on the Trust Convertible Preferred Securities issued by the
Trust and will not have funds available therefor. See "Description of the
Convertible Debentures--Certain Covenants of the Company." The Guarantee, when
taken together with the Company's obligations under the Convertible
Debentures, the Indenture and the Declaration, including its obligations to
pay costs, expenses, debts and liabilities of the Trust (other than with
respect to the Trust Securities), will provide a full and unconditional
guarantee on a subordinated basis by the Company of payments due on the Trust
Convertible Preferred Securities.
The Company has also agreed to guarantee fully and unconditionally the
obligations of the Trust with respect to the Trust Common Securities (the
"Trust Common Securities Guarantee") to the same extent as the Guarantee,
except that upon an Indenture Event of Default, rights of holders of Trust
Common Securities to receive payment of periodic distributions and payments on
liquidation, redemption, or otherwise will be subordinated to the rights of
the holders of Trust Convertible Preferred Securities.
CERTAIN COVENANTS OF THE COMPANY
In the Guarantee, the Company will covenant that, so long as any Trust
Convertible Preferred Securities remain outstanding, if there shall have
occurred any event that would constitute an event of default under the
Guarantee or the Declaration, then (a) the Company shall not declare or pay
any dividend on, make any distributions with respect to, or redeem, purchase,
acquire or, make a liquidation payment with respect to, any of its capital
stock (other than (i) purchases or acquisitions of shares of capital stock in
connection with any employee benefit plan or program, director plan or
program, dividend reinvestment, stock repurchase or other similar plans
available to stockholders of the Company, or any option, warrant, right or
exercisable, exchangeable or convertible security outstanding as of the
Expiration Date, (ii) as a result of a reclassification of the Company's
capital stock or the exchange or conversion of one class or series of the
Company's capital stock for another class or series of the Company's capital
stock or the capital securities of a subsidiary (including a trust such as the
Trust), or (iii) the purchase of fractional interests in shares of the
Company's capital stock pursuant to the conversion or exchange provisions of
such capital stock or security being converted or exchanged) and (b) the
Company shall not make any payment of interest, principal or premium, if any,
on, or repay, repurchase, or redeem any debt securities (including guarantees)
issued by the Company that rank on a parity with or junior to the Convertible
Debentures and (c) the Company shall not make any guarantee payments with
respect to the foregoing (other than pursuant to the Guarantee).
MODIFICATION OF THE GUARANTEE; ASSIGNMENT
Except with respect to any changes that do not adversely affect the rights
of holders of Trust Convertible Preferred Securities (in which case no consent
of holders of Trust Convertible Preferred Securities will be required), the
Guarantee may be amended only with the prior approval of the holders of at
least a majority in liquidation amount of the outstanding Trust Convertible
Preferred Securities. All guarantees and agreements contained in a Guarantee
shall bind the successors, assigns, receivers, trustees and representatives of
the Company and shall inure to the benefit of the holders of the Trust
Convertible Preferred Securities then outstanding.
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TERMINATION
The Guarantee will terminate upon (a) full payment of the redemption price
of all Trust Convertible Preferred Securities, (b) the distribution of Steel
Stock, or any other class of common stock of the Company, or upon distribution
of the Convertible Debentures held by the Trust to the holders of the Trust
Convertible Preferred Securities or (c) full payment of the amounts payable in
accordance with the Declaration upon liquidation of the Trust. Notwithstanding
the foregoing, the Guarantee will continue to be effective or will be
reinstated, as the case may be, if at any time any holder of Trust Convertible
Preferred Securities must restore payment of any sums paid under Trust
Convertible Preferred Securities or the Guarantee. The subordination
provisions of the Convertible Debentures provide that in the event payment is
made on the Convertible Debentures or the Guarantee in contravention of such
provisions, such payments shall be paid over the holders of Senior
Indebtedness.
EVENTS OF DEFAULT
An event of default under the Guarantee will occur upon the failure of the
Company to perform any of its payment or other obligations thereunder. The
holders of a majority in liquidation amount of the Trust Convertible Preferred
Securities have the right to direct the time, method and place of conducting
any proceeding for any remedy available to the Guarantee Trustee in respect of
the Guarantee or exercising any trust or power conferred upon the Guarantee
Trustee under the Guarantee. If the Guarantee Trustee fails to enforce such
Guarantee, any holder of Trust Convertible Preferred Securities may institute
a legal proceeding directly against the Company to enforce the Guarantee
Trustee's rights under the Guarantee, without first instituting a legal
proceeding against the Trust, the Guarantee Trustee, or any other person or
entity. Notwithstanding the foregoing, if the Company has failed to make a
payment required under the Guarantee, a holder of the Trust Convertible
Preferred Securities may directly institute a proceeding against the Company
for enforcement of the Guarantee for such payment. The Company waives any
right or remedy to require that any action be brought first against the Trust
or any other person or entity before proceeding directly against the Company
under the circumstances described in the two preceding sentences.
STATUS OF THE GUARANTEE
The Guarantee will constitute an unsecured obligation of the Company and
will rank (i) subordinate and junior in right of payment to all other
liabilities of the Company, (ii) on a parity with the most senior preferred or
preference stock now or hereafter issued by the Company, including the 6.50%
Convertible Preferred Stock, and with any guarantee now or hereafter entered
into by the Company in respect of any preferred or preference stock of any
affiliate of the Company; and (iii) senior to the Steel Stock or any other
class of common stock of the Company. The terms of the Trust Convertible
Preferred Securities provide that each holder of Trust Convertible Preferred
Securities by acceptance thereof agrees to the subordination provisions and
other terms of the Guarantee relating thereto.
The Guarantee creates a guarantee of payment and not of collection (that is,
the holder of Trust Convertible Preferred Securities may institute a legal
proceeding directly against the Company to enforce its rights under the
Guarantee without instituting a legal proceeding against the Trust, the
Guarantee Trustee, or any other person or entity).
INFORMATION CONCERNING THE GUARANTEE TRUSTEE
The Guarantee Trustee, before the occurrence of any event of default with
respect to the Guarantee and after curing all events of default with respect
to the Guarantee that may have occurred, shall undertake to perform only such
duties as are specifically set forth in the Guarantee. After an
70
event of default with respect to the Guarantee has occurred, the Guarantee
Trustee shall exercise the rights and powers vested in it by the Guarantee,
and shall use the same degree of care and skill in its exercise thereof as a
prudent individual would exercise or use under the circumstances in the
conduct of his or her own affairs. Subject to such provisions, the Guarantee
Trustee is under no obligation to exercise any of the powers vested in it by
the Guarantee at the request of any holder of Trust Convertible Preferred
Securities, unless such holder shall have provided to the Guarantee Trustee
such security and indemnity, reasonably satisfactory to the Guarantee, against
the costs, expenses, and liabilities that might be incurred thereby.
DESCRIPTION OF THE CONVERTIBLE DEBENTURES
Set forth below is a description of the terms of the Convertible Debentures.
The following description is subject to, and is qualified in its entirety by
reference to, the Supplemental Indenture (the "Supplemental Indenture") and
the Multiple Series Indenture (the "Base Indenture" and, together with the
Supplemental Indenture, the "Indenture"), each to be entered into by and
between the Company and The Bank of New York, as Trustee (the "Debenture
Trustee"), the forms of which are filed as an exhibit to the Registration
Statement of which this Prospectus forms a part. Certain capitalized terms
used herein are defined in the Indenture.
Under certain circumstances involving the dissolution of the Trust,
including following the occurrence of a Trust Special Event, Convertible
Debentures may be distributed to the holders of the Trust Securities in
liquidation of the Trust. See "Description of the Trust Convertible Preferred
Securities--Trust Special Event Distribution or Redemption; Shortening of
Stated Maturity."
If the Convertible Debentures are distributed to the holders of the Trust
Convertible Preferred Securities, the Company will use its reasonable efforts
to have the Convertible Debentures listed or quoted on such national
securities exchange or similar organization on which the Trust Convertible
Preferred Securities are then listed or quoted, if any.
GENERAL
The Convertible Debentures will be issued as an unsecured series of debt
under the Indenture. The Convertible Debentures will be limited in aggregate
principal amount to the initial liquidation preference of all shares of 6.50%
Convertible Preferred Stock tendered and accepted for exchange in the Exchange
Offer. Additional series of debt may be issued under the Indenture.
The Convertible Debentures are not subject to a sinking fund provision. The
Convertible Debentures are convertible into shares of Steel Stock at the
option of the holders of the Convertible Debentures at an initial conversion
price of $46.25 per share of Steel Stock (equivalent to a conversion ratio of
1.081 shares of Steel Stock for each Convertible Debenture) subject to the
conversion price adjustments described under "Description of the Trust
Convertible Preferred Securities--Conversion Rights--Conversion Price
Adjustments." The entire principal amount of the Convertible Debentures will
mature and become due and payable, together with any accrued and unpaid
interest thereon, including Compound Interest and Additional Interest, if any,
on March 31, 2037 (unless the stated maturity of the Convertible Debentures is
shortened as described under "Description of Trust Convertible Preferred
Securities--Trust Special Event Distribution or Redemption; Shortening of
Stated Maturity," in which case on the advanced maturity date). The right to
convert the Convertible Debentures will terminate as set forth under "--
Conversion of the Convertible Debentures."
If Convertible Debentures are distributed to holders of Trust Convertible
Preferred Securities in liquidation of such holders' interests in the Trust,
such Convertible Debentures will initially be issued as a Global Security (as
defined herein). See "--Book-Entry and Settlement." As described herein,
71
under certain limited circumstances, Convertible Debentures may be issued in
certificated form in exchange for a Global Security. See "Book-Entry System--
The Depository Trust Company." In the event that Convertible Debentures are
issued in certificated form, such Convertible Debentures will be in
denominations of $50.00 and integral multiples thereof and may be transferred
or exchanged at the offices described below. Payments on Convertible
Debentures issued as a Global Security will be made to DTC, a successor
depositary or, in the event that no depositary is used, to a Paying Agent for
the Convertible Debentures. In the event Convertible Debentures are issued in
certificated form, principal, premium, if any, and interest will be payable,
the transfer of the Convertible Debentures will be registrable and Convertible
Debentures will be exchangeable for Convertible Debentures of other
denominations of a like aggregate principal amount at the corporate trust
office of the Institutional Trustee in New York, New York; provided that
payment of interest may be made at the option of the Company by check mailed
to the address of the holder entitled thereto. Notwithstanding the foregoing,
so long as the holder of the Convertible Debentures is the Institutional
Trustee, the payment of principal, premium, if any, and interest on the
Convertible Debentures held by the Institutional Trustee will be made at such
place and to such account as may be designated by the Institutional Trustee.
SUBORDINATION
The Convertible Debentures are on a parity with indebtedness under the Loan
Agreement dated as of March 3, 1994 between the Company and USX Capital LLC
and, subordinated and junior in right of payment to all Senior Indebtedness of
the Company, including the 6.50% Convertible Preferred Stock, but senior to
all capital stock of the Company now outstanding or hereafter issued by the
Company, to the extent set forth in the Indenture. No payment of principal
(including redemption payments), premium, if any, or interest on the
Convertible Debentures may be made (i) if any Senior Indebtedness of the
Company is not paid when due and any applicable grace period with respect to
such default has ended and such default has not been cured or waived or ceased
to exist, or (ii) if the maturity of any Senior Indebtedness of the Company
has been accelerated because of a default and such acceleration has not been
rescinded. Upon any payment by the Company or distribution of assets of the
Company to creditors upon any dissolution, winding-up, liquidation or
reorganization, whether voluntary or involuntary, or in bankruptcy,
insolvency, receivership or other proceedings, all principal, premium, if any,
and interest due or to become due on all Senior Indebtedness of the Company
must be paid in full before the holders of Convertible Debentures are entitled
to receive or retain any payment. Upon satisfaction of all claims of all
Senior Indebtedness then outstanding, the rights of the holders of the
Convertible Debentures will be subrogated to the rights of the holders of
Senior Indebtedness of the Company to receive payments of distributions
applicable to Senior Indebtedness until all amounts owing on the Convertible
Debentures are paid in full. For purposes of the subordination provisions, the
payment, issuance and delivery of cash, property or securities (other than
stock and certain subordinated securities of the Company) upon conversion of a
Convertible Debenture will be deemed to constitute payment on account of the
principal of such Convertible Debenture.
By reason of such subordination, in the event of liquidation or insolvency,
creditors of the Company may recover less, ratably, than holders of Senior
Indebtedness and may recover more, ratably, than the holders of the
Convertible Debentures.
In the event of the acceleration of the maturity of any Convertible
Debentures, the holders of Senior Indebtedness outstanding at the time of such
acceleration will first be entitled to receive payment in full of all amounts
due thereon before the holders of the Convertible Debentures will be entitled
to receive any payment upon the principal of (and premium, if any) or interest
on, the Convertible Debentures.
The term "Senior Indebtedness" means, with respect to the Company, the
principal, premium, if any, and interest on (i) all indebtedness of the
Company, whether outstanding on the date hereof or
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hereafter created, incurred or assumed, which is for money borrowed, or
evidenced by a note or similar instrument given in connection with the
acquisition of any business, properties or assets, including securities, (ii)
any indebtedness of others of the kinds described in the preceding clause (i)
for the payment of which the Company is responsible or liable (directly or
indirectly, contingently or otherwise) as guarantor or otherwise and (iii)
amendments, renewals, extensions and refundings of any such indebtedness,
unless in any instrument or instruments evidencing or securing such
indebtedness or pursuant to which the same is outstanding, or in any such
amendment, renewal, extension or refunding, it is expressly provided that such
indebtedness is not superior in right of payment to the Convertible
Debentures. The Senior Indebtedness shall continue to be Senior Indebtedness
and entitled to the benefits of the subordination provisions irrespective of
any amendment, modification or waiver of any term of the Senior Indebtedness
or extension or renewal of the Senior Indebtedness.
The Indenture does not limit the aggregate amount of Senior Indebtedness
that may be issued or incurred by the Company and does not limit obligations
at subsidiaries of the Company which obligations are structurally senior to
the Convertible Debentures.
CERTAIN COVENANTS OF THE COMPANY
Except as otherwise provided in the Indenture, for so long as the
Convertible Debentures are issued to the Trust or the Institutional Trustee
and the Trust Securities remain outstanding, the Company will covenant (i) to
directly or indirectly maintain 100% ownership of the Trust Common Securities;
provided, however, that any permitted successor of the Company under the
Indenture may succeed to the Company's ownership of such Trust Common
Securities, (ii) to use its reasonable efforts to cause the Trust (a) to
remain a statutory business trust, except in connection with the distribution
of the Convertible Debentures, the redemption of all Trust Securities or
certain mergers, consolidations, amalgamations or other transactions, each as
permitted by the Declaration, and (b) to continue to be classified as a
grantor trust for United States federal income tax purposes and (iii) to use
its reasonable efforts to cause each holder of Trust Securities to be treated
as owning an undivided beneficial ownership interest in the Convertible
Debentures.
REDEMPTION AT THE OPTION OF THE COMPANY
Except as described below with respect to accrued and unpaid interest, the
Company will have the right to redeem the Convertible Debentures, in whole or
in part, for cash, from time to time, upon not less than 30 nor more than 60
days notice, at the following Redemption Prices (expressed as percentages of
the principal amount of the Convertible Debentures), together with accrued and
unpaid interest thereon, including Compound Interest (as defined herein) to,
but excluding, the redemption date, if redeemed during the 12-month period
beginning April 1 of the following years:
YEAR REDEMPTION PRICE
---- ----------------
1997 103.90%
1998 103.25
1999 102.60
2000 101.95
2001 101.30
2002 100.65
2003 and thereafter 100.00
The Company will not exercise its option to redeem the Convertible
Debentures if the Company is advised in advance by either Moody's or S&P that
to do so would result in an immediate lowering of the Company's credit rating
on its senior unsecured debt from its then existing level, unless the Company
shall have received from the issuance of its common stock, since the date
which is two years prior to the redemption date, net proceeds in an aggregate
amount at least equal to the aggregate principal amount of the Convertible
Debentures to be redeemed.
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Notwithstanding the foregoing, the Company may not redeem any Convertible
Debentures unless all accrued and unpaid interest has been paid on all
outstanding Convertible Debentures for all quarterly interest payment periods
terminating on or prior to the last interest payment date before the date of
redemption. If Convertible Debentures are redeemed on the last calendar day of
any March, June, September or December, accrued and unpaid interest shall be
payable to holders of record on the record date for such interest payment.
The Company shall also have the right to redeem the Convertible Debentures
at any time in certain circumstances upon the occurrence of a Trust Special
Event as described under "Description of the Trust Convertible Preferred
Securities--Trust Special Event Distribution or Redemption; Shortening of
Stated Maturity" at 100% of the principal amount thereof, together with any
accrued and unpaid interest thereon (including Compound Interest), to, but
excluding, the redemption date.
The Company is required to redeem Convertible Debentures upon the occurrence
of a U.S. Steel Group Special Event or a Marathon Group Special Event at 100%
of the principal amount thereof, together with any accrued and unpaid interest
thereon, including Compound Interest, to, but excluding, the redemption date.
See "Description of the Trust Convertible Preferred Securities--Mandatory
Redemption--U.S. Steel Group Special Events; Marathon Group Special Events."
The Company will give holders of the Convertible Debentures notice thereof
prior to such redemption on the dates specified under "Description of the
Trust Convertible Preferred Securities--Redemption Procedures for Redemption
by the Trust."
So long as the Trust Convertible Preferred Securities are outstanding, the
Declaration requires that the proceeds from the redemption of any of the
Convertible Debentures be used to redeem Trust Convertible Preferred
Securities.
INTEREST
Each Convertible Debenture shall bear interest at the rate of 6.75% per
annum from and including March 31, 1997. Interest is payable quarterly in
arrears on the last calendar day of March, June, September and December of
each year (each, an "Interest Payment Date"), commencing on June 30, 1997, to
the person in whose name such Convertible Debenture is registered, subject to
certain exceptions, at the close of business on the business day next
preceding such Interest Payment Date. In the event the Trust Convertible
Preferred Securities shall not continue to remain in book-entry only form and
the Convertible Debentures are not in the form of a Global Security, the
Company shall have the right to select record dates, which shall be at least
one Business Day before an Interest Payment Date.
The amount of interest payable for any full quarterly interest period will
be computed on the basis of a 360-day year of twelve 30-day months. The amount
of interest payable for any period shorter than a full quarterly interest
period for which interest is computed, will be computed on the basis of 30-day
months and, for periods of less than a month, the actual number of days
elapsed per 30-day month. In the event that any date on which interest is
payable on the Convertible Debentures is not a business day, then payment of
the interest payable on such date will be made on the next succeeding day that
is a business day (and without any interest or other payment in respect of any
such delay), except that, if such business day is in the next succeeding
calendar year, then such payment shall be made on the immediately preceding
business day, in each case with the same force and effect as if made on such
date.
OPTION TO EXTEND INTEREST PAYMENT PERIOD
So long as the Company is not in default in the payment of interest on the
Convertible Debentures, the Company will have the right, at any time, and from
time to time, during the term of the Convertible
74
Debentures, to defer payments of interest by extending the interest payment
period for a period not exceeding 20 consecutive quarters, during which
Extension Period no interest will be due and payable. At the end of the
Extension Period, the Company shall pay all interest then accrued and unpaid
(including any Additional Interest), together with interest thereon compounded
quarterly at the rate specified for the Convertible Debentures to the extent
permitted by applicable law ("Compound Interest"). Prior to the termination of
any such Extension Period, the Company may further extend such Extension
Period; provided that such Extension Period, together with all such previous
and further extensions, may not exceed 20 consecutive quarters or extend
beyond the maturity of the Convertible Debentures. Upon the termination of any
Extension Period and the payment of all amounts then due, the Company may
commence a new Extension Period, subject to the above requirements. No
interest during an Extension Period, except at the end thereof, shall be due
and payable. The Company has no present intention of exercising its right to
defer payments of interest by extending the interest payment period on the
Convertible Debentures.
During any such Extension Period, (a) the Company shall not declare or pay
any dividend on, make any distributions with respect to, or redeem, purchase,
acquire or make a liquidation payment with respect to, any of its capital
stock (other than (i) purchases or acquisitions of shares of capital stock in
connection with any employee benefit plan or program, director plan or
program, dividend reinvestment, stock repurchase or other similar plans
available to stockholders of the Company, or any option, warrant, right or
exercisable, exchangeable or convertible security outstanding as of the
Expiration Date, (ii) as a result of a reclassification of the Company's
capital stock pursuant to the exchange or conversion provisions of the
Company's capital stock or the exchange or conversion of one class or series
of the Company's capital stock for another class or series of the Company's
capital stock or the capital securities of a subsidiary (including a trust
such as the Trust), or (iii) the purchase of fractional interests in shares of
the Company's capital stock pursuant to the conversion or exchange provisions
of such capital stock or security being converted or exchanged), and (b) the
Company shall not make any payment of interest, principal or premium, if any,
on, or repay, repurchase, or redeem or make any guarantee payment (other than
pursuant to the Guarantee) with respect to any debt securities issued by the
Company that rank on a parity with or junior to the Convertible Debentures.
If the Institutional Trustee shall be the only holder of the Convertible
Debentures, the Company shall give the Regular Trustees, the Institutional
Trustee and the Debenture Trustee notice of its election of such Extension
Period one Business Day prior to the earlier of (i) the date distributions on
the Trust Convertible Preferred Securities are payable or (ii) the date the
Regular Trustees are required to give notice to any national stock exchange or
other organization on which the Trust Convertible Preferred Stock is listed or
quoted, if any, or to holders of the Trust Convertible Preferred Securities as
of the record date or the date such distribution is payable. Any one of the
Regular Trustees shall give notice of the Company's selection of such
Extension Period to the holders of the Trust Convertible Preferred Securities.
If the Institutional Trustee shall not be the holder of the Convertible
Debentures, the Company shall give the holders of the Convertible Debentures
notice of its election of such Extension Period ten Business Days prior to the
earlier of (i) the Interest Payment Date for the first quarter of such
Extension Period or (ii) the date upon which the Company is required to give
notice of the record or payment date of such related interest payment to any
national stock exchange or other organization on which the Convertible
Debentures are listed or quoted, if any, or to holders of the Convertible
Debentures.
CONVERSION OF THE CONVERTIBLE DEBENTURES
The Convertible Debentures will be convertible into the Steel Stock at the
option of the holders of the Convertible Debentures at the initial conversion
price of $46.25 per share of Steel Stock, subject to the conversion price
adjustments described under "Description of the Trust Convertible Preferred
Securities--Conversion Rights--Conversion Price Adjustments." The right to
convert Convertible
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Debentures will terminate prior to the close of business (i) on March 31, 2037
(unless the stated maturity of the Convertible Debentures is shortened
following a Tax Event, as described under "Description of Trust Convertible
Preferred Securities--Trust Special Event Distribution or Redemption;
Shortening of Stated Maturity", in which case on the advanced maturity date)
or (ii) in the case of Convertible Debentures called for redemption, on the
redemption date, unless the Company gives notice of redemption of the
Convertible Debentures in connection with a dividend on or a redemption of
Steel Stock resulting from the Disposition of all or substantially all of the
properties and assets of the U.S. Steel Group, as set forth under "Description
of the Trust Convertible Preferred Securities--Mandatory Redemption--U.S.
Steel Group Special Events; Marathon Group Special Events", in which case the
right to convert Convertible Debentures will terminate on the 31st day prior
to the date selected by the Board for such dividend or redemption.
In order to give holders of Convertible Debentures an opportunity to
determine whether to convert such Convertible Debentures into shares of Steel
Stock, the Company is required to give holders of the Convertible Debentures
notice of its intention to effect a U.S. Steel Group Special Event or a
Marathon Group Special Event, or to exchange shares of Steel Stock for
Marathon Stock of Delhi Stock following a Disposition of all or substantially
all of the assets of the U.S. Steel Group, at the times specified under
"Description of the Trust Convertible Preferred Securities--Conversion
Rights--Notice to Holders."
Except as provided below, accrued but unpaid interest will not be paid in
cash on Convertible Debentures that are converted nor will such accrued
interest be converted into additional shares of Steel Stock, but such accrued
interest will be deemed to be paid in full and then returned by the holder to
the Company as partial consideration for the Steel Stock received upon
conversion. Holders of Convertible Debentures at the close of business on an
interest record date will be entitled to receive the interest payable on such
Convertible Debentures (except that holders of Convertible Debentures called
for redemption on a redemption date between such record date and the Interest
Payment Date shall not be entitled to receive such interest on such Interest
Payment Date) on the corresponding Interest Payment Date notwithstanding the
conversion of such Convertible Debentures following such interest record date
and prior to such Interest Payment Date. However, Convertible Debentures
surrendered for conversion during the period between the close of business on
any interest record date and the opening of business on the corresponding
Interest Payment Date (except Convertible Debentures called for redemption on
a redemption date during such period) must be accompanied by payment of an
amount equal to the interest payable on such Convertible Debentures on such
Interest Payment Date. A holder of Convertible Debentures on an interest
record date who (or whose transferee) tenders any such Convertible Debentures
for conversion into shares of Steel Stock on such Interest Payment Date will
receive the interest payable by the Company on such Convertible Debentures on
such date, and the converting holder need not include payment of the amount of
such interest upon surrender of Convertible Debentures for conversion. The
Company will make no payment or allowance for dividends on the shares of Steel
Stock issued upon conversion.
The Convertible Debentures held by the Trust will not be converted except
pursuant to a notice of conversion delivered to the Conversion Agent by a
holder of Trust Convertible Preferred Securities. Upon surrender of a Trust
Convertible Preferred Security to the Conversion Agent for conversion, the
Trust will distribute Convertible Debentures to the Conversion Agent on behalf
of the holder of the Trust Convertible Preferred Securities so converted,
whereupon the Conversion Agent will convert such Convertible Debentures to the
Steel Stock on behalf of such holder. The Company's delivery to the holders of
the Convertible Debentures (through the Conversion Agent) of the fixed number
of shares of Steel Stock into which the Convertible Debentures are convertible
(together with the cash payment, if any, in lieu of fractional shares) will be
deemed to satisfy the Company's obligation to pay the principal amount of the
Convertible Debentures so converted, and the accrued and unpaid interest
thereon attributable to the period from the last date to which interest has
been paid or duly provided
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for. Interest may, at the Company's option, be paid either (i) by check mailed
to the address of the person entitled thereto as it appears in the register or
(ii) by transfer to an account maintained by such person located in the United
States; provided, however, that payments to DTC will be made by wire transfer
of immediately available funds to the account of DTC or its nominee.
ADDITIONAL INTEREST
If at any time the Trust shall be required to pay any taxes, duties,
assessments or governmental charges of whatever nature imposed by the United
States or any other taxing authority, then, in any such case, the Company will
pay as additional interest ("Additional Interest") on the Convertible
Debentures any and all taxes, duties, assessments or governmental charges of
whatever nature directly imposed on the Trust in its capacity as a legal
entity or as a holder of the Convertible Debentures by the United States, or
any other taxing authority, so that the net amounts received and retained by
such Trust and the Institutional Trustee after paying such taxes, duties,
assessments or governmental charges will be equal to the amounts such Trust
and the Institutional Trustee would have received had no such taxes, duties,
assessments or governmental charges been incurred by or imposed on such Trust.
CONSOLIDATION, MERGER AND SALE OF ASSETS
Except as otherwise provided in the Indenture, the Company may not merge or
consolidate or sell or convey all or substantially all of its assets unless
the successor corporation (if other than the Company) is a domestic
corporation and assumes the Company's obligations under the Convertible
Debentures and the Indenture.
INDENTURE EVENTS OF DEFAULT
Any one of the following events will constitute an Indenture Event of
Default with respect to the Convertible Debentures:
(a) default in the payment of any interest on the Convertible Debentures
when due and payable, if continued for 30 days after written notice has
been given as provided in the Indenture, whether or not such payment is
prohibited by the subordination provisions of the Indenture and the
Convertible Debentures, provided, however, that a valid extension of the
interest payment period does not constitute a default in the payment of
interest;
(b) default in the payment of principal of (or premium, if any, on) the
Convertible Debentures when due and payable whether or not such payment is
prohibited by the subordination provisions of the Indenture and the
Convertible Debentures;
(c) failure to perform any other covenant of the Company in the Indenture
or the Convertible Debentures (other than a covenant included in the
Indenture solely for the benefit of any series of debt securities other
than the Convertible Debentures), if continued for 90 days after written
notice has been given as provided in the Indenture;
(d) failure of the Company to deliver the Steel Stock or shares of
another class of common stock of the Company upon a valid conversion
election by the holder or holders of the Convertible Debentures to convert
such Convertible Debentures into shares of Steel Stock or shares of such
other class of common stock;
(e) certain events in bankruptcy, insolvency or reorganization involving
the Company; or
(f) the voluntary or involuntary dissolution, winding-up, or termination
of the Trust, except in connection with (i) the distribution of Convertible
Debentures to the holders of Trust Securities in liquidation of the Trust
or in their interest in the Trust, (ii) the redemption of the Trust
Convertible Preferred Securities and (iii) certain mergers, consolidations
or amalgamations, each as permitted by the Declaration.
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If any Indenture Event of Default shall occur and be continuing, the
Institutional Trustee, as the holder of the Convertible Debentures, will have
the right under the Indenture to declare the principal of the Convertible
Debentures (including any Compound Interest and Additional Interest, if any)
and any other amounts payable under the Indenture to be forthwith due and
payable and to enforce its other rights as a creditor with respect to the
Convertible Debentures. An Indenture Event of Default also constitutes a
Declaration Event of Default. The holders of Trust Convertible Preferred
Securities in certain circumstances have the right to direct the Institutional
Trustee to exercise its rights as the holder of the Convertible Debentures. In
addition, if the Institutional Trustee fails to enforce its rights under the
Convertible Debentures any holder of Trust Convertible Preferred Securities
may institute a legal proceeding against the Company to enforce the
Institutional Trustee's rights under the Convertible Debentures. See
"Description of the Trust Convertible Preferred Securities--Declaration Events
of Default" and "--Voting Rights." Notwithstanding the foregoing, if an
Indenture Event of Default has occurred and is continuing and such event is
attributable to the failure of the Company to pay interest or principal on the
Convertible Debentures on the date such interest or principal is otherwise
payable (or in the case of redemption, the redemption date), the Company
acknowledges that then a holder of Trust Convertible Preferred Securities may
institute a Direct Action for payment on or after the respective due date
specified in the Convertible Debentures. Notwithstanding any payments made to
such holder of Trust Convertible Preferred Securities by the Company in
connection with a Direct Action, the Company shall remain obligated to pay the
principal of or interest on the Convertible Debentures held by the Trust or
the Institutional Trustee of the Trust, and the Company shall be subrogated to
the rights of the holder of such Trust Convertible Preferred Securities with
respect to payments on the Trust Convertible Preferred Securities to the
extent of any payments made by the Company to such holder in any Direct
Action. The holders of Trust Convertible Preferred Securities will not be able
to exercise directly any other remedy available to the holders of the
Convertible Debentures.
If any Indenture Event of Default shall occur and be continuing and the
Convertible Debentures have been distributed to the holders of the Trust
Securities upon a liquidation of the Trust, the holders of not less than 25%
in aggregate liquidation amount of the Convertible Debentures will have the
right to declare the principal of the Convertible Debentures (including any
Compound Interest and Additional Interest, if any) and any other amounts
payable under the Indenture to be forthwith due and payable and to enforce
their other rights as a creditor with respect to the Convertible Debentures.
DEFEASANCE
The obligations of the Company with respect to the payment of the principal,
premium, if any, and interest on, the Convertible Debentures will terminate if
the Company irrevocably deposits or causes to be deposited with the Debenture
Trustee, under the terms of an escrow trust agreement satisfactory to the
Debenture Trustee, as a trust fund specifically pledged as security for, and
dedicated solely to, the benefit of the holders of the Convertible Debentures,
(i) money, (ii) U.S. government obligations, which through the payment of
interest and principal in respect thereof in accordance with their terms will
provide money at such time or times as payments are due and payable on the
Convertible Debentures, or (iii) a combination of (i) and (ii), sufficient to
pay and discharge each installment of principal, premium, if any, and interest
on the Convertible Debentures. The discharge of the Convertible Debentures is
subject to certain other conditions, including, without limitation, (a) no
Indenture Event of Default or event (including such deposit) which with notice
or lapse of time would become an Indenture Event of Default shall have
occurred and be continuing on the date of such deposit, (b) such deposit and
the related intended consequence will not result in any default or event of
default under any material indenture, agreement or other instrument binding
upon the Company or its subsidiaries or any of their properties and (c) the
Company shall have delivered to the Debenture Trustee an opinion of counsel or
a ruling by the IRS satisfactory to the Trustee to the effect that holders of
the Convertible Debentures will not recognize income, gain or loss for federal
income tax purposes
78
if the Company makes such deposit. The conversion rights under the Indenture
will survive until the Convertible Debentures are no longer outstanding.
MODIFICATION, WAIVER, MEETINGS AND VOTING
MODIFICATION OF INDENTURE
The Indenture will provide that the Company and the Debenture Trustee may,
without the consent of any holders of Convertible Debentures, enter into
supplemental indentures for the purposes, among other things, of adding to the
Company's covenants, adding additional Indenture Events of Default, or curing
ambiguities or inconsistencies in such Indenture, or making other changes to
the Indenture or form or terms of the Convertible Debentures, provided such
action does not have a material adverse effect on the interests of the holders
of the Convertible Debentures. In addition, modifications and amendments of
the Indenture may be made by the Company and the Debenture Trustee with the
consent of the holders of not less than a majority in aggregate principal
amount of the Convertible Debentures and all other series of debt securities
issued under the Indenture then outstanding affected, acting as one class, by
such modification or amendment; provided, however, that no such modification
or amendment may, without the consent of each holder of Convertible Debentures
outstanding that is affected thereby, (a) change the stated maturity of the
principal of, or any installment of principal of or rate of interest on the
Convertible Debentures, (b) reduce the principal, premium, if any, or interest
on any Convertible Debentures, (c) change any obligation to pay additional
amounts, (d) change the place of payment or the currency or currency unit in
which the Convertible Debentures or interest thereon is payable, (e) impair
the right to institute suit for the enforcement of any payment on or with
respect to the Convertible Debentures, (f) reduce the percentage in principal
amount of the Convertible Debentures then outstanding required for
modification or amendment of the Indenture or for any waiver of compliance
with certain provisions of the Indenture or for waiver of certain defaults,
(g) change any obligation of the Company to maintain an office or agency in
the places and for the purposes required by the Indenture, (h) make any change
that would materially adversely affect the right to convert the Convertible
Indentures or (i) modify any of the above provisions.
WAIVER OF DEFAULT
The holders of a majority in aggregate principal amount of the Convertible
Debentures then outstanding may, on behalf of the holders of all Convertible
Debentures, waive any past default under the Indenture with respect to the
Convertible Debentures except a default (a) in the payment of principal,
premium, if any, or any interest on the Convertible Debentures and (b) in
respect of a covenant or provision of the Indenture which cannot be modified
or amended without the consent of each holder of the Convertible Debentures
then outstanding.
MEETINGS AND VOTING
A meeting may be called at any time by the Debenture Trustee, and upon
request, by the Company pursuant to a resolution of the Board or the holders
of at least 25% in principal amount of the Convertible Debentures then
outstanding. Except as described above under "--Modifications of Indenture"
and "--Waiver of Default," a resolution presented at a meeting or reconvened
meeting at which a quorum of the holders of Convertible Debentures then
outstanding is present may be adopted by the affirmative vote of the lesser of
(i) the holders of a majority in principal amount of the Convertible
Debentures then outstanding, or (ii) the holders of 66 2/3% in principal
amount of the Convertible Debentures then outstanding represented and voting
at the meeting; provided, however, that if any consent, waiver or other action
which the Indenture expressly provides may be made, given or taken by the
holders of a specified percentage, which is less than a majority of the
principal amount of the
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Convertible Debentures then outstanding, such action may be adopted at a
meeting or reconvened meeting at which a quorum is present by the affirmative
vote of the lesser of (a) the holders of such specified percentage in
principal amount of the Convertible Debentures then outstanding or (b) a
majority in principal amount of Convertible Debentures then outstanding of
such series represented and voting at the meeting. Any resolution passed or
decision taken at any meeting of holders of Convertible Debentures duly held
in accordance with the Indenture will be binding on all holders of Convertible
Debentures whether or not present or represented at the meeting.
Except with respect to certain reconvened meetings, the quorum at a meeting
of the holders of Convertible Debentures will be persons holding or
representing a majority in principal amount of the Convertible Debentures then
outstanding.
BOOK-ENTRY AND SETTLEMENT
If distributed to holders of Trust Convertible Preferred Securities in
connection with the involuntary or voluntary dissolution, winding-up, or
liquidation of the Trust as a result of the occurrence of a Special Event, the
Convertible Debentures will be issued in the form of one or more global
certificates registered in the name of the depository or its nominee. For
further detail, see "Book-Entry System--The Depository Trust Company."
THE DEPOSITORY
If the Convertible Debentures are distributed to holders of Trust
Convertible Preferred Securities in liquidation of such holders' interests in
the Trust, DTC will act as securities depository for the Convertible
Debentures. For a description of DTC and the specific terms of the depository
arrangements, see "Description of the Trust Convertible Preferred Securities--
Book-Entry Only Issuances."
None of the Company, the Trust, the Institutional Trustee, any paying agent
and any other agent of the Company or the Debenture Trustee will have any
responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests in a Global
Security for such Convertible Debentures or for maintaining, supervising or
reviewing any records relating to such beneficial ownership interests.
DISCONTINUANCE OF THE DEPOSITORY'S SERVICES
A Global Security shall be exchangeable for Convertible Debentures
registered in the names of persons other than the Depository or its nominee
only if (i) the Depository notifies the Company that it is unwilling or unable
to continue as a depository for such Global Security and no successor
depository shall have been appointed, (ii) the Depository, at any time, ceases
to be a clearing agency registered under the Exchange Act at which time the
Depository is required to be so registered to act as such depository and no
successor depository shall have been appointed, (iii) the Company, in its sole
discretion, determines that such Global Security shall be so exchangeable or
(iv) there shall have occurred an Indenture Event of Default with respect to
such Convertible Debentures. Any Global Security that is exchangeable pursuant
to the preceding sentence shall be exchangeable for Convertible Debentures
registered in such names as the Depository shall direct. It is expected that
such instructions will be based upon directions received by the Depository
from its Participants with respect to ownership of beneficial interests in
such Global Security.
GOVERNING LAW
The Indenture and the Convertible Debentures will be governed by, and
construed in accordance with, the laws of the State of New York, unless
otherwise required by mandatory provisions of law.
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MISCELLANEOUS
The Indenture will provide that the Company, as borrower, will pay all fees
and expenses related to (i) the issuance and exchange of the Trust Securities
and the Convertible Debentures, (ii) the organization, maintenance and
dissolution of the Trust, (iii) the retention of the Trustees and (iv) the
enforcement by the Institutional Trustee of the rights of the holders of the
Trust Convertible Preferred Securities.
The Company will have the right at all times to assign any of its respective
rights or obligations under the Indenture to a direct or indirect wholly owned
subsidiary of the Company; provided that, in the event of any such assignment,
the Company will remain liable for all of their respective obligations.
Subject to the foregoing, the Indenture will be binding upon and inure to the
benefit of the parties thereto and their respective successors and assigns.
The Indenture provides that it may not otherwise be assigned by the parties
thereto.
EFFECT OF OBLIGATIONS UNDER THE
CONVERTIBLE DEBENTURES AND THE GUARANTEE
As set forth in the Declaration, the sole purposes of the Trust are (a)
issuing its Trust Securities in exchange for Convertible Debentures having an
aggregate principal amount equal to the aggregate initial liquidation amount
of such Trust Securities and (b) engaging in such other activities as are
necessary or incidental thereto.
As long as payments of interest and other payments are made when due on the
Convertible Debentures, such payments will be sufficient to cover
distributions and payments due on the Trust Securities because of the
following factors: (i) the aggregate principal amount of Convertible
Debentures will be equal to the sum of the aggregate liquidation amount of the
Trust Securities; (ii) the interest rate and the interest and other payment
dates on the Convertible Debentures will match the distribution rate and
distribution and other payment dates for the Trust Convertible Preferred
Securities; (iii) the Company, as borrower, shall pay all, and the Trust shall
not be obligated to pay, directly or indirectly, costs, expenses, debt, and
obligations of the Trust (other than with respect to the Trust Securities);
and (iv) the Declaration further provides that the Trustees shall not take or
cause or permit the Trust to, among other things, engage in any activity that
is not consistent with the purposes of the Trust.
Payments of distributions (to the extent funds therefor are available) and
other payments due on the Trust Convertible Preferred Securities (to the
extent funds therefor are available) are guaranteed by the Company as and to
the extent set forth under "Description of the Guarantee." If the Company does
not make interest payments on the Convertible Debentures held by the Trust,
the Trust will not have sufficient funds to pay distributions on the Trust
Convertible Preferred Securities. The Guarantee is a full guarantee on a
subordinated basis with respect to the Trust Convertible Preferred Securities
issued by the Trust from the time of its issuance but does not apply to any
payment of distributions unless and until the Trust has sufficient funds for
the payment of such distributions. The Guarantee covers the payment of
distributions and other payments on the Trust Convertible Preferred Securities
only if and to the extent that the Company has made a payment of interest or
principal on the Convertible Debentures held by the Trust as its sole asset.
The Guarantee, when taken together with the Company's obligations under the
Convertible Debentures, the Indenture and the Declaration, including its
obligations to pay costs, expenses, debts and liabilities of the Trust (other
than with respect to the Trust Securities), provides a full and unconditional
guarantee of amounts on the Trust Convertible Preferred Securities.
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If the Company fails to make interest or other payments on the Convertible
Debentures when due (taking account of any Extension Period), the Declaration
provides a mechanism whereby a holder of the Trust Convertible Preferred
Securities, using the procedures described in "Description of the Trust
Convertible Preferred Securities--Book-Entry Only Issuances" and "--Voting
Rights" and "Book Entry System--The Depository Trust Company" may direct the
Institutional Trustee to enforce its rights under the Convertible Debentures.
Notwithstanding the foregoing, in such circumstances a holder of Trust
Convertible Preferred Securities may institute a Direct Action for payment on
or after the respective due date specified in the Convertible Debentures. In
connection with such Direct Action, the Company will be subrogated to the
rights of such holder of Trust Convertible Preferred Securities in such Direct
Action. The Company, under the Guarantee, acknowledges that the Guarantee
Trustee shall enforce the Guarantee on behalf of the holders of the Trust
Convertible Preferred Securities. If the Company fails to make payments under
the Guarantee, the Guarantee provides a mechanism whereby the holders of the
Trust Convertible Preferred Securities may direct the Guarantee Trustee to
enforce its rights thereunder. Any holder of Trust Convertible Preferred
Securities may institute a legal proceeding directly against the Company to
enforce such holder's right to receive payment under the Guarantee without
first instituting a legal proceeding against the Trust, the Guarantee Trustee,
or any other person or entity.
DESCRIPTION OF CAPITAL STOCK AND AMENDED AND RESTATED RIGHTS PLAN
The following is a description of the terms of the capital stock of the
Company included in the Restated Certificate of Incorporation of the Company
(the "Certificate of Incorporation"). This description does not purport to be
complete and is qualified in its entirety by reference to the Certificate of
Incorporation and the Amended and Restated Rights Agreement, dated as of
October 1, 1992 (the "Restated Rights Agreement") between the Company and
Mellon Bank, N.A., as Rights Agent (the "Rights Agent"), which have been filed
as exhibits to the Registration Statement of which this Prospectus forms a
part.
GENERAL
The authorized capital stock of the Company consists of (i) 40 million
shares of preferred stock (the "Preferred Stock"), without par value, of which
6,900,000 are designated as 6.50% Convertible Preferred Stock and eight
million shares are designated as Series A Junior Preferred Stock (the "Junior
Preferred Stock"), (ii) 550 million shares of a class of common stock
designated as USX-Marathon Group Common Stock, par value $1.00 per share,
(iii) 200 million shares of a class of common stock designated as USX-U.S.
Steel Group Common Stock, par value $1.00 per share and (iv) 50 million shares
of a class of common stock designated as USX-Delhi Group Common Stock, par
value $1.00 per share. As of December 31, 1996, there were 6,900,000 shares of
6.50% Convertible Preferred Stock, 287,525,213 shares of Marathon Stock,
84,885,473 shares of Steel Stock and 9,448,269 shares of Delhi Stock issued
and outstanding. No shares of Junior Preferred Stock are outstanding. The
Marathon Stock, the Steel Stock and the Delhi Stock are together referred to
as "Common Stock."
As used herein:
"U.S. Steel Group" means, at any time, all of the businesses in which the
Company is or has been engaged, directly or indirectly, and all assets and
liabilities of the Company, other than any businesses, assets or
liabilities of the Marathon Group or the Delhi Group if any shares of
Marathon Stock or Delhi Stock are outstanding.
"Marathon Group" means, at any time, (w) all businesses in which any of
Marathon Oil Company, Texas Oil & Gas Corp. and Carnegie Natural Gas
Company (or any of their
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predecessors or successors) is or has been engaged, directly or indirectly,
other than the businesses of the Delhi Group after October 2, 1992 (the
date of first issuance of Delhi Stock), (x) all assets and liabilities of
the Company to the extent attributed to any of such businesses, whether or
not such assets or liabilities are or were assets or liabilities of such
companies, (y) a proportionate interest in the business, assets and
liabilities of the Delhi Group equal to one less the Delhi Fraction and (z)
such businesses, assets and liabilities acquired by the Company for the
Marathon Group after May 6, 1991, as determined by the Board to be included
in the Marathon Group; provided that after any dividend or distribution
with respect to any shares of Delhi Stock, or any repurchase of shares of
Delhi Stock from holders of Delhi Stock generally, the Marathon Group shall
include an amount of assets or properties of the Delhi Group equal to the
aggregate amount of such kind of assets or properties so paid in respect of
shares of Delhi Stock multiplied by a fraction, the numerator of which is
equal to one less the Delhi Fraction and the denominator of which is equal
to the Delhi Fraction.
"Delhi Group" shall mean, (i) all of the businesses in which any of Delhi
Gas Pipeline Corporation ("DGPC"), The Nueces Company, Delhi Gasmark, Inc.
(previously Texas Gasmark, Inc.), Tonkawa Gas Processing Company, Delhi Gas
Marketing Corp. (previously TXO Gas Marketing Corp.), Delhi Gas Ventures
Corp. (previously TXO Gas Ventures Corp.), Red River Gas Pipeline
Corporation, Ozark Gas Pipeline Corporation, Sweetwater Pipeline
Corporation, Western Gas Transmission, Inc., and Western Gas Corporation
(or any of their predecessors or successors) is or has been engaged,
directly or indirectly, (ii) all assets and liabilities of the Company to
the extent attributed to any of such businesses, whether or not such assets
or liabilities are or were assets and liabilities of such companies and
(iii) such businesses, assets and liabilities acquired by the Company for
the Delhi Group as determined by the Board to be included in the Delhi
Group; provided that, from and after any dividend or distribution with
respect to any shares of Delhi Stock, or any repurchase of shares of Delhi
Stock from holders of Delhi Stock generally, the Delhi Group shall no
longer include an amount of assets or properties of the Delhi Group equal
to the aggregate amount of such kind of properties or assets so paid in
respect of shares of Delhi Stock multiplied by a fraction, the numerator of
which is equal to one less the Delhi Fraction and the denominator of which
is equal to the Delhi Fraction. If all of the outstanding shares of Steel
Stock are exchanged for shares of Delhi Stock as set forth under "--Steel
Stock Exchange and Redemption," all of the businesses, assets and
liabilities of the U.S. Steel Group shall be included in the Delhi Group.
"Delhi Fraction" means, on any date, a fraction the numerator of which
shall be the number of shares of Delhi Stock outstanding on such date and
the denominator of which shall be initially 14,000,000 shares; provided
that such fraction shall not be greater than one. The denominator of the
Delhi Fraction shall be adjusted to reflect subdivisions, combinations and
other reclassifications of Delhi Stock, stock dividends payable in shares
of Delhi Stock to holders thereof, the issuance of shares of Delhi Stock
the proceeds of which are attributed to the Delhi Group and repurchases by
the Company of shares of Delhi Stock. As of the date of this Prospectus,
the Delhi Fraction is 1/1.
"Disposition" shall mean the sale, transfer, assignment or other
disposition (whether by merger, consolidation, sale or contribution of
assets or stock or otherwise) of properties or assets.
"Market Value" of any class of Common Stock on any Business Day means the
average of the high and low reported sales prices regular way of a share of
such class on such Business Day or, in case no such reported sale takes
place on such Business Day, the average of the reported closing bid and
asked prices regular way of a share on such class on such Business Day, in
either case on the NYSE Composite Tape, or if the shares of such class are
not listed or admitted to trading on the NYSE on such Business Day, on
specified alternative markets, or, if not listed or
83
admitted to trading on such markets, the market value as determined by the
Board, subject to adjustments necessary to reflect any dividends (other
than regular cash dividends) or distributions on, or subdivisions or
combinations of, outstanding shares of such class. "Business Day," as used
in "Description of Capital Stock and Amended and Restated Rights Plan,"
means each weekday other than any day on which any relevant class of Common
Stock is not traded on any national securities exchange or the NASDAQ Stock
Market or in the over-the-counter market.
"Net Proceeds," as of any date, from any Disposition of any of the
properties and assets of the U.S. Steel Group or the Delhi Group, as the
case may be, shall mean an amount, if any, equal to the gross proceeds of
such Disposition after payment of, or reasonable provision for, (i) any
taxes payable by the Company in respect of such Disposition, (ii) any taxes
payable by the Company in respect of any dividend or redemption pursuant to
a dividend or redemption paid to holders of Steel Stock or Delhi Stock, as
the case may be, in connection with such Disposition, (iii) any transaction
costs, including, without limitation, any legal, investment banking and
accounting fees and expenses and (iv) any liabilities (contingent or
otherwise) of, or allocated to, the U.S. Steel Group or the Delhi Group, as
the case may be, including, without limitation any indemnity obligations
incurred in connection with the Disposition. For purposes of this
definition, any properties and assets of the U.S. Steel Group or the Delhi
Group, as the case may be, remaining after such Disposition shall
constitute "reasonable provision" for such amount of taxes, costs and
liabilities (contingent or otherwise) as can be supported by such
properties and assets. To the extent the proceeds of any Disposition
include any securities or other property other than cash, the Board of
Directors shall determine the value of such securities or property.
PREFERRED STOCK
The authorized Preferred Stock may be issued without the approval of the
holders of Common Stock in one or more series, from time to time, with each
such series to have such designation, powers, preferences and relative,
participating, optional or other special rights, and qualifications,
limitations or restrictions thereof, as shall be stated in a resolution
providing for the issue of any such series adopted by the Board.
STEEL STOCK
DIVIDENDS--DIVIDENDS ON THE STEEL STOCK ARE INTENDED TO BE PAID BASED UPON
THE FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF THE U.S. STEEL GROUP.
Subject to any prior rights of the holders of the Preferred Stock, dividends
may be paid on the Steel Stock as determined by the Board out of the lesser of
(i) the Available Steel Dividend Amount and (ii) funds of the Company legally
available therefor.
The "Available Steel Dividend Amount," on any date, means either:
(a) the greater of:
(i) an amount equal to (x) $2.244 billion, increased or decreased, as
appropriate, to reflect: (A) Steel Net Income from the close of business on
December 31, 1990, (B) any dividends or other distributions declared or
paid with respect to, or repurchases or issuances of, any shares of common
stock of the Company after December 31, 1990 and prior to the close of
business on May 6, 1991 attributed to the U.S. Steel Group, (C) any
dividends or other distributions declared or paid with respect to, or
repurchases or issuances of, any shares of Steel Stock or any shares of
Preferred Stock attributed to the U.S. Steel Group and (D) any other
adjustments to stockholders' equity of the U.S. Steel Group made in
accordance with generally accepted
84
accounting principles, less (y) the sum of the aggregate par value of all
outstanding Steel Stock and the aggregate stated capital of all outstanding
Preferred Stock attributed to the U.S. Steel Group; and
(ii) the excess of the fair market value of the net assets of the U.S.
Steel Group over the sum of the aggregate par value of all outstanding
Steel Stock and the aggregate stated capital of all outstanding Preferred
Stock attributed to the U.S. Steel Group,
in the case of each of clauses (i) and (ii), increased by an amount equal
to any effects of the recognition of the transition obligation upon the
adoption of Statement of Financial Accounting Standards ("SFAS") No. 106,
"Employers' Accounting for Postretirement Benefits Other Than Pensions"
(including any amendments thereto) and any cumulative effects of the
adoption of SFAS No. 109, "Accounting For Income Taxes" (including any
amendments thereto) in the year of adoption; or
(b) in case there shall be no such amount, an amount equal to Steel Net
Income (if positive) for the fiscal year in which the dividend is declared
and/or the preceding fiscal year.
The amount of $2.244 billion in clause (a)(i) above represents the amount of
total stockholders' equity of USX as of December 31, 1990 assigned to the U.S.
Steel Group by the Board after giving consideration to the historical debt and
equity structure of the Company.
The Available Steel Dividend Amount as of December 31, 1996 was at least
$2.808 billion, as calculated under the preceding clause (a)(i).
Although net income and stockholders' equity of the U.S. Steel Group was
reduced when the Company adopted the accounting changes required by SFAS No.
106 and SFAS No. 109, such changes did not affect cash flows of the U.S. Steel
Group. As a result, in order to preclude dividends on the Steel Stock from
being limited by such noncash accounting changes, the amounts in each of
clause (a)(i) and clause (a)(ii) of the definition of "Available Steel
Dividend Amount" were adjusted to eliminate the effects of such changes, as
set forth above.
Clause (b) in the definition of "Available Steel Dividend Amount" will
permit the payment of dividends on the Steel Stock in any fiscal year to the
extent there is positive Steel Net Income in such fiscal year or in the
preceding fiscal year or to the extent of the sum of positive Steel Net
Income, if any, in both such years. Any loss in either such year would not
reduce positive Steel Net Income, if any, in the other year for purposes of
determining the applicable limitation on dividends. Such provision is
comparable to Section 170 of the Delaware General Corporation Law, which
allows the payment of dividends on common stock of any Delaware corporation in
any fiscal year to the extent of consolidated net income of the corporation
for such fiscal year and/or the preceding fiscal year.
As used herein, "Steel Net Income" means the net income or loss of the U.S.
Steel Group determined in accordance with generally accepted accounting
principles, including income and expenses of the Company attributed to the
U.S. Steel Group on a substantially consistent basis, including, without
limitation, corporate administrative costs, net interest and other financial
costs and income taxes. For information concerning the policies governing the
attribution of corporate activities to the U.S Steel Group which are being
followed by the Company in determining Steel Net Income, see "Risk Factors--
Risks Relating to the Common Stock of the Company--Management and Accounting
Policies Subject to Change."
The Board may, in its sole discretion, declare and pay dividends exclusively
on the Steel Stock, exclusively on the Marathon Stock, exclusively on the
Delhi Stock or on such classes in equal or unequal amounts, notwithstanding
the respective amount of funds available for dividends on each
85
class, the respective voting and liquidation rights of each class, the amount
of prior dividends declared on each class or any other factor.
EXCHANGE AND REDEMPTION--IN THE EVENT OF A DISPOSITION OF ALL OR
SUBSTANTIALLY ALL OF THE ASSETS OF THE U.S. STEEL GROUP, USX IS REQUIRED TO
(1) PAY A DIVIDEND, (2) REDEEM STEEL STOCK OR (3) EXCHANGE STEEL STOCK FOR
MARATHON STOCK OR, IF THERE ARE NO SHARES OF MARATHON STOCK OUTSTANDING, DELHI
STOCK, SUBJECT TO CERTAIN LIMITATIONS.
If USX transfers all the assets and liabilities of the U.S. Steel Group to a
wholly owned subsidiary of the Company (the "U.S. Steel Group Subsidiary"),
the Board may, in its sole discretion and by a majority vote of the directors
then in office, provided that there are funds of the Company legally available
therefor, exchange all of the outstanding shares of the Steel Stock for all of
the outstanding stock of the U.S. Steel Group Subsidiary, on a pro rata basis.
In addition, upon the Disposition, in one transaction or a series of related
transactions, of all or substantially all of the properties and assets of the
U.S. Steel Group (other than in connection with the Disposition by the Company
of all of its properties and assets in one transaction) to any person, entity
or group (other than to the holders of all outstanding shares of Steel Stock
on a pro rata basis or to a person, entity or group in which the Company
directly or indirectly, owns a majority equity interest), the Company shall,
within 60 days following the consummation of such Disposition, either (i)
subject to the limitations on dividends on Steel Stock set forth above,
declare and pay a dividend in cash and/or in securities or other property
received as proceeds of such Disposition to the holders of the Steel Stock in
an amount equal to the Net Proceeds of such Disposition, (ii) to the extent
that there are funds of the Company legally available therefor, redeem the
number of whole shares of Steel Stock having an aggregate average Market Value
during the ten-Business Day period following consummation of such Dispositions
closest to the value of the Net Proceeds of such Disposition, for cash and/or
securities or other property received as proceeds of such Disposition in an
amount equal to the Net Proceeds or (iii) exchange each outstanding share of
Steel Stock for a number of shares of Marathon Stock or, if there are no
shares of Marathon Stock outstanding and shares of Delhi Stock are
outstanding, of Delhi Stock, equal to 110% of the average daily ratio
(calculated to the nearest five decimal places) of the Market Value of one
share of Steel Stock to the Market Value of one share of Marathon Stock or one
share of Delhi Stock, as the case may be, during such period.
If, immediately after any event, the Company directly or indirectly, owns
less than a majority equity interest in any person, entity or group in which
the Company directly, or indirectly, owned a majority equity interest
immediately prior to the occurrence of such event, a Disposition of all of the
properties and assets of the U.S. Steel Group owned by such person, entity or
group shall be deemed to have occurred. In the case of a Disposition of
properties or assets in a series of related transactions, such Disposition
shall not be deemed to have been consummated until the consummation of the
last of such transactions.
"Substantially all of the properties and assets of the U.S. Steel Group," as
of any date, means a portion of such properties and assets that represents at
least 80% of either of the then-current market value of, or the aggregate
revenues for the immediately preceding twelve fiscal quarterly periods of the
Company derived from, the properties and assets of the U.S. Steel Group as of
such date (excluding the assets and properties of any person, entity or group
in which the Company, directly or indirectly, owns less than a majority equity
interest).
After any such special dividend or redemption pursuant to clause (i) or (ii)
in the third preceding paragraph, the Board may, by a majority vote of the
directors then in office, exchange each outstanding share of Steel Stock for a
number of shares of Marathon Stock or, if there are no shares of Marathon
Stock outstanding and shares of Delhi Stock are outstanding, of Delhi Stock,
equal to 110% of the Market Value Ratio as of the fifth Business Day prior to
the date notice of such exchange
86
is mailed to the holders of Steel Stock. "Market Value Ratio", as of any date,
means the highest of the following (calculated to the nearest five decimal
places): (A) the average ratio of S/X for the five-Business Day period ending
on such date, (B) the quotient of (1) the sum of (w) four times the average
ratio of S/X for the five-Business Day period ending on such date, (x) three
times the average ratio of S/X for the next preceding five-Business Day
period, (y) two times the average ratio of S/X for the next preceding five-
Business Day period and (z) the average ratio of S/X for the next preceding
five-Business Day period, divided by (2) ten and (C) if the special dividend
pursuant to clause (i) of the third preceding paragraph was declared and paid
or the redemption pursuant to clause (ii) thereof was made prior to the
commencement of the most recently completed fiscal quarter of the Company, the
average ratio of S /X for such fiscal quarter, where S is the Market Value of
one share of the Steel Stock and X is the Market Value of one share of the
Marathon Stock or one share of Delhi Stock, as the case may be. In determining
whether to effect such an exchange, the Board, in addition to other matters,
would likely consider whether the remaining properties and assets of the U.S.
Steel Group constitute a viable business. Other considerations could include
the number of shares of Steel Stock remaining outstanding following any such
redemption, the per share market price of the Steel Stock following the
payment of such a dividend or such a redemption and the cost of maintaining
stockholder accounts.
General Redemption Provisions. In the event of any exchange or redemption of
a class of Common Stock, the Company shall cause to be given to each holder of
Steel Stock a notice stating (A) that shares of Steel Stock shall be exchanged
or redeemed, as the case may be, (B) the date of the exchange or redemption,
(C) in the event of a partial redemption, the number of shares of Steel Stock
or Delhi Stock, as the case may be, to be redeemed, (D) the kind and amount of
shares of capital stock or cash and/or securities or other property to be
received by such holder with respect to each share of such class of Common
Stock held by such holder, including details as to the calculation thereof,
(E) the place or places where certificates for shares of such class of Common
Stock, properly endorsed or assigned for transfer (unless the Company waives
such requirement), are to be surrendered for delivery of certificates for
shares of such capital stock or cash and/or securities or other property and
(F) that, except as provided in the second following paragraph, dividends on
such class of Common Stock will cease to be paid as of such exchange date or
redemption date. Such notice shall be sent by first-class mail, postage
prepaid, not less than 30 nor more than 60 days prior to the exchange date or
redemption date, as the case may be, and in any case to each holder of such
class of Common Stock to be exchanged or redeemed, at such holder's address as
the same appears on the stock transfer books of the Company. Neither the
failure to mail such notice to any particular holder of such class of Common
Stock nor any defect therein shall affect the sufficiency thereof with respect
to any other holder of such class of Common Stock.
If less than all of the outstanding shares of Steel Stock or Delhi Stock, as
the case may be, are to be redeemed as described above, such shares shall be
redeemed by the Company pro rata among the holders of such class of Common
Stock or by such other method as may be determined by the Board to be
equitable.
No adjustments in respect of dividends shall be made upon the exchange or
redemption of any shares of any class of Common Stock; provided, however, that
if such shares are exchanged or redeemed by the Company after the record date
for determining holders of such class of Common Stock entitled to any dividend
or distribution thereon, such dividend or distribution shall be payable to the
holders of such shares at the close of business on such record date
notwithstanding such exchange or redemption of such shares or the Company's
default in payment of the dividend or distribution due on such date.
Before any holder of shares of any class of Common Stock shall be entitled
to receive certificates representing shares of any kind of capital stock or
cash and/or securities or other property to be
87
received by such holder with respect to any exchange or redemption of such
class of Common Stock, such holder shall surrender at such office as the
Company shall specify certificates for such shares of such class of Common
Stock, properly endorsed or assigned for transfer (unless the Company shall
waive such requirement). As soon as practicable after surrender of
certificates for shares of such class of Common Stock, the Company will
deliver to the holder of such shares so surrendered the certificates
representing the number of whole shares of the kind of capital stock or cash
and/or securities or other property to which such holder is entitled, together
with any fractional payment referred to below. If less than all of the shares
of such class of Common Stock represented by any one certificate are to be
redeemed, the Company will issue and deliver a new certificate for the shares
of Steel Stock not redeemed.
The Company shall not be required to issue or deliver fractional shares of
any class of capital stock or any fractional securities to any holder of any
class of Common Stock upon any exchange, redemption, dividend or other
distribution. If more than one share of such class of Common Stock shall be
held at the same time by the same holder, the Company may aggregate the number
of shares of any class of capital stock that shall be issuable or the amount
of securities that shall be deliverable to such holder upon any exchange,
redemption, dividend or other distribution (including any fractions of shares
or securities). If the number of shares of any class of capital stock or the
amount of securities remaining to be issued or delivered to any holder of any
class of Common Stock is a fraction, the Company shall, if such fraction is
not issued or delivered to such holder, pay a cash adjustment in respect of
such fraction in an amount equal to the fair market value of such fraction on
the fifth Business Day prior to the date such payment is to be made. For
purposes of the preceding sentence, "fair market value" of any fraction shall
be (i) in the case of any fraction of a share of capital stock of the Company,
the product of such fraction and the Market Value of one share of such capital
stock and (ii) in the case of any other fractional security, such value as is
determined by the Board.
VOTING--SHARES OF STEEL STOCK WILL, WHEN VOTING TOGETHER WITH ALL OTHER
CLASSES OF COMMON STOCK, HAVE A NUMBER OF VOTES PER SHARE BASED UPON TIME-
WEIGHTED AVERAGE RATIOS OF THE MARKET VALUE OF A SHARE OF STEEL STOCK TO THE
MARKET VALUE OF A SHARE OF MARATHON STOCK.
Except as set forth below and under "--Marathon Stock--Voting" and "--Delhi
Stock--Voting," holders of all classes of Common Stock vote together as a
single class on all matters as to which all holders of Common Stock are
entitled to vote. On all matters to be voted on by the holders of all classes
of Common Stock together as a single class, (i) each share of outstanding
Marathon Stock has one vote and (ii) each share of Steel Stock and Delhi Stock
has a number of votes equal to the quotient (calculated to the nearest three
decimal places), as of the fifth Business Day prior to the applicable record
date, of (A) the sum of (1) four times the average ratio of X/Y for the five-
Business Day period ending on such fifth Business Day, (2) three times the
average ratio of X/Y for the next preceding five-Business Day period, (3) two
times the average ratio of X/Y for the next preceding five-Business Day period
and (4) the average ratio of X/Y for the next preceding five Business Day
period, divided by (B) ten, where X is the Market Value of the Steel Stock or
the Delhi Stock, as the case may be, and Y is the Market Value of the Marathon
Stock, or if there are no shares of Marathon Stock outstanding on such record
date or other applicable date or on any of the 25 Business Days prior thereto,
the sum of the Market Values of the Steel Stock and of the Delhi Stock. If
shares of only one class of Common Stock are outstanding, each share of that
class shall have one vote.
For purposes of the Company's 1997 Annual Stockholders' Meeting to be held
on April 29, 1997, the per share voting rights of Marathon Stock, Steel Stock
and Delhi Stock are one vote, 1.181 votes and .589 vote per share,
respectively. Accordingly, the holders of Marathon Stock, Steel Stock and
Delhi Stock have approximately 73.1%, 25.5% and 1.4%, respectively, of the
total voting power of the Company for that meeting.
88
In addition, as is the case with the use of the proceeds from the
Disposition of any properties or assets of the Marathon Group or the Delhi
Group, unless the vote or consent of a greater number of shares shall then be
required by law, the approval of the holders of at least 66 2/3% of the
outstanding Steel Stock, voting as a separate class, shall be necessary for:
(i) the declaration or payment of any dividend on, or the making of any
other payment or distribution on or with respect to, any shares of any
other class of Common Stock, if such dividend, payment or distribution is
to be made with (A) proceeds from the Disposition of any of the properties
and assets of the U.S. Steel Group or (B) any portion of an equity interest
in a person, entity or group that owns any of the properties and assets of
the U.S. Steel Group; or
(ii) the use, or reservation for use, of any proceeds from the
Disposition of any of the properties and assets of the U.S. Steel Group, or
any of the properties and assets acquired with such proceeds, in any
business of the Company other than a business of the U.S. Steel Group.
Notwithstanding the foregoing, however, such vote shall not be required if
such proceeds are loaned at a rate or rates representative of actual
borrowings and short-term investments by the Company.
The vote or consent of the holders of a majority of all of the outstanding
shares of any class of Common Stock, voting as a separate class, is currently
required under Delaware law for any amendment to the Certificate of
Incorporation that would increase or decrease the par value of the shares of
such class or alter or change the powers or special rights of the shares of
such class so as to affect them adversely. The Certificate of Incorporation
provides that neither the increase nor decrease of the authorized number of
shares of any class of Common Stock shall require a separate vote of any
class. Thus, it is possible that the holders of a majority of one or more
classes of Common Stock could constitute a majority of the voting power of all
classes and approve the increase or decrease of the authorized amount of any
other class of Common Stock without the approval of the holders of such other
class of Common Stock.
The Certificate of Incorporation also provides that unless the vote or
consent of a greater number of shares shall then be required by law, the
approval of the holders of a majority of the outstanding shares of any class
of Common Stock, voting as a separate class, shall be necessary for
authorizing, effecting or validating the merger or consolidation of the
Company into or with any other corporation if such merger or consolidation
would adversely affect the powers or special rights of such class of Common
Stock, either directly or indirectly.
LIQUIDATION--IN THE EVENT OF THE LIQUIDATION OF THE COMPANY, HOLDERS OF EACH
CLASS OF COMMON STOCK WILL BE ENTITLED TO RECEIVE A PORTION OF THE FUNDS
DISTRIBUTABLE TO HOLDERS OF COMMON STOCK BASED ON THE RELATIVE TIME-WEIGHTED
AVERAGE AGGREGATE MARKET CAPITALIZATION OF EACH SUCH CLASS OF COMMON STOCK TO
THE AGGREGATE MARKET CAPITALIZATION OF ALL CLASSES OF COMMON STOCK.
The Certificate of Incorporation provides that, in the event of a
dissolution, liquidation or winding-up of the Company, whether voluntary or
involuntary, after payment of creditors and after the holders of Preferred
Stock receive the full preferential amounts to which they are entitled, the
holders of outstanding shares of each class of Common Stock will share the
funds remaining for distribution to the holders of Common Stock. The holders
of the outstanding Common Stock will each be entitled to receive a fraction of
such funds equal to the quotient of (i) the sum of (A) four times the average
ratio of x/y for the five-Business Day period ending on the Business Day prior
to the date of the public announcement of (1) a voluntary dissolution,
liquidation or winding-up by the Company or (2) the institution of any
proceeding for the involuntary dissolution, liquidation or winding-up of the
Company (B) three times the average ratio of x/y for the next preceding five-
Business Day period, (C) two times the average ratio of x/y for the next
preceding five-Business Day period and (D) the average ratio of x/y for the
next preceding five-Business Day period, divided by (ii) ten, where x is the
Market
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Capitalization of such class of Common Stock and y is the aggregate Market
Capitalization of all classes of Common Stock. For purposes of the preceding
sentence, "Market Capitalization" of any class of Common Stock on any day
shall mean the product of (i) the Market Value of such class of Common Stock
on such day and (ii) the number of shares of such class of Common Stock
outstanding on such day.
MARATHON STOCK
DIVIDENDS--DIVIDENDS ON THE MARATHON STOCK ARE INTENDED TO BE PAID BASED ON
THE FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF THE MARATHON GROUP.
Subject to any prior rights of the holders of the Preferred Stock, dividends
may be paid on the Marathon Stock as determined by the Board out of funds of
the Company legally available therefor.
The Board may, in its sole discretion, declare and pay dividends exclusively
on the Marathon Stock, exclusively on the Steel Stock, exclusively on the
Delhi Stock or on such classes in equal or unequal amounts, notwithstanding
the respective amount of funds available for dividends on each class, the
respective voting and liquidation rights of each class, the amount or prior
dividends declared on each class or any other factor.
EXCHANGE AND REDEMPTION--MARATHON STOCK MAY BE EXCHANGED FOR SHARES OF A
SUBSIDIARY OF THE COMPANY TO WHICH THE COMPANY WOULD HAVE TRANSFERRED ALL OF
THE ASSETS AND LIABILITIES OF THE MARATHON GROUP.
If the Company transfers all of the assets and liabilities of the Marathon
Group to a wholly owned subsidiary of the Company (the "Marathon Group
Subsidiary"), the Board may, in its sole discretion and by a majority vote of
the directors then in office, provided that there are funds of the Company
legally available therefor, exchange all of the outstanding shares of Marathon
Stock for all of the outstanding stock of the Marathon Group Subsidiary, on a
pro rata basis on the same terms and conditions as on the Steel Stock.
VOTING--SHARES OF MARATHON STOCK SHALL HAVE ONE VOTE PER SHARE. SHARES OF
STEEL STOCK AND DELHI STOCK WILL, WHEN VOTING TOGETHER WITH ALL OTHER CLASSES
OF COMMON STOCK, HAVE A NUMBER OF VOTES PER SHARE BASED UPON THE TIME WEIGHTED
AVERAGE RATIOS OF THE MARKET VALUE OF A SHARE OF STEEL STOCK OR DELHI STOCK,
AS THE CASE MAY BE, TO THE MARKET VALUE OF A SHARE OF MARATHON STOCK.
The holders of shares of the Marathon Stock have the voting rights described
above under "--Steel Stock--Voting."
In addition, as is the case with the use of the proceeds from the
Disposition of any properties or assets of the U.S. Steel Group and the Delhi
Group, unless the vote or consent of a greater number of shares shall then be
required by law, the approval of the holders of at least 66 2/3% of the
outstanding shares of Marathon Stock, voting as a separate class, is necessary
for:
(i) the declaration or payment of any dividend on, or the making of any
other payment or distribution with respect to, any shares of any other
class of Common Stock, if such dividend, payment or distribution is to be
made with (A) proceeds from the Disposition of any of the properties and
assets of the Marathon Group or (B) any portion of an equity interest in a
person, entity or group that owns any of the properties and assets of the
Marathon Group; or
(ii) the use, or reservation for use, of any proceeds from the
Disposition of any of the properties and assets of the Marathon Group, or
any of the properties and assets acquired with such proceeds, in any
business of the Company other than a business of the Marathon Group.
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Notwithstanding the foregoing, however, such vote shall not be required if
such proceeds are loaned at a rate or rates representative of actual
borrowings and short-term investments by the Company.
LIQUIDATION--IN THE EVENT OF THE LIQUIDATION OF USX, HOLDERS OF EACH CLASS
OF COMMON STOCK WILL BE ENTITLED TO RECEIVE A PORTION OF THE FUNDS
DISTRIBUTABLE TO HOLDERS OF ALL CLASSES OF COMMON STOCK BASED UPON THE TIME-
WEIGHTED AVERAGE AGGREGATE MARKET CAPITALIZATION OF EACH SUCH CLASS OF COMMON
STOCK TO THE AGGREGATE MARKET CAPITALIZATION OF ALL CLASSES OF COMMON STOCK.
In the event of a dissolution, liquidation or winding-up of the Company, the
holders of shares of the Marathon Stock are entitled to receive funds in the
amounts described above under "--Steel Stock--Liquidation."
DELHI STOCK
DIVIDENDS--DIVIDENDS ON THE DELHI STOCK ARE INTENDED TO BE PAID BASED UPON
THE FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF THE DELHI GROUP.
Subject to any prior rights of the holders of the Preferred Stock, dividends
may be paid on the Delhi Stock as determined by the Board out of the lesser of
(i) the Available Delhi Dividend Amount and (ii) funds of the Company legally
available therefor. The "Available Delhi Dividend Amount," on any date, means
the product of the Delhi Fraction and either:
(a) the greater of:
(i) an amount equal to (X) $172.9 million, increased or decreased, as
appropriate, to reflect, from June 30, 1992, (A) Delhi Net Income, (B) any
dividends or other distributions declared or paid with respect to, or
repurchases or issuances of, any shares of Marathon Stock prior to the
close of business on the date Delhi Stock is first issued attributed to the
Delhi Group, (C ) any dividends or other distributions declared or paid
with respect to, or repurchases or issuances of, any shares of Delhi Stock
or any shares of Preferred Stock attributed to the Delhi Group, (D) assets
or properties of the Delhi Group that are no longer included as part of the
Delhi Group as a result of any such dividend, distribution or repurchase
pursuant to the proviso to the definition of "Delhi Group" set forth above
and (E) any other adjustments to stockholders' equity of the Delhi Group
made in accordance with generally accepted accounting principles less (Y)
the sum of the aggregate stated capital of all outstanding Preferred Stock
attributed to the Delhi Group and the quotient of the aggregate par value
of all outstanding Delhi Stock divided by the Delhi Fraction; and
(ii) the excess of the fair market value of the net assets of the Delhi
Group over the sum of the aggregate stated capital of all outstanding
Preferred Stock attributed to the Delhi Group, and the quotient of the
aggregate par value of all outstanding Delhi Stock divided by the Delhi
Fraction; or
(b) in case there shall be no such amount, an amount equal to Delhi Net
Income (if positive) for the fiscal year in which the dividend is declared
and/or the preceding fiscal year.
The amount of $172.9 million in clause (a) (i) above represents the amount
of the stockholders' equity of USX as of June 30, 1992 attributable to the
Delhi Group based upon a capital structure determined by the Board pursuant to
the Certificate of Incorporation.
The Available Delhi Dividend Amount as of December 31, 1996 was at least
$106.7 million as calculated under the preceding clause (a)(i).
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"Delhi Net Income" means the net income or loss of the Delhi Group
determined in accordance with generally accepted accounting principles,
including income and expenses of USX attributed to the Delhi Group on a
substantially consistent basis, including, without limitation, corporate
administrative costs, net interest and other financial costs and income taxes.
The policies governing the attribution of corporate activities to the Delhi
Group which are being followed by USX in determining Delhi Net Income are
comparable to those that will be used by USX in determining Steel Net Income.
See "Management and Accounting Policies."
Clause (b) in the definition of "Available Delhi Dividend Amount" will
permit the payment of dividends on the Delhi Stock in any fiscal year to the
extent there is positive Delhi Net Income in such fiscal year or in the
preceding fiscal year or to the extent of the sum of positive Delhi Net
Income, if any, in both such years. Any loss in either such year would not
reduce positive Delhi Net Income, if any, in the other year for purposes of
determining the applicable limitation on dividends. Such provision is
comparable to Section 170 of the Delaware General Corporation Law, which is
applicable to the Delhi Stock, and which allows the payment of dividends on
common stock of any Delaware corporation in any fiscal year to the extent of
consolidated net income of the corporation for such fiscal year and/or the
preceding fiscal year.
The Board may, in its sole discretion, declare and pay dividends exclusively
on the Marathon Stock, exclusively on the Steel Stock, exclusively on the
Delhi Stock or on such classes in equal or unequal amounts, notwithstanding
the respective amount of funds available for dividends on each class, the
respective voting and liquidation rights of each class, the amount or prior
dividends declared on each class or any other factor.
EXCHANGE AND REDEMPTION--IN THE EVENT OF A DISPOSITION OF ALL OR
SUBSTANTIALLY ALL OF THE ASSETS OF THE DELHI GROUP, USX IS REQUIRED TO (1) PAY
A DIVIDEND, (2) REDEEM DELHI STOCK OR (3) EXCHANGE DELHI STOCK FOR MARATHON
STOCK OR, IF THERE ARE NO SHARES OF MARATHON STOCK OUTSTANDING, STEEL STOCK,
SUBJECT TO CERTAIN LIMITATIONS. ALSO, THE BOARD MAY REQUIRE THAT THE DELHI
STOCK BE EXCHANGED FOR MARATHON STOCK, OR IF THERE ARE NO SHARES OF MARATHON
STOCK OUTSTANDING, STEEL STOCK, IN CERTAIN CIRCUMSTANCES.
If USX transfers all of the assets and liabilities of the Delhi Group to a
wholly owned subsidiary of USX (the "Delhi Group Subsidiary"), the Delhi Stock
may be exchanged, at the sole discretion of the Board, by a majority vote of
the directors then in office, provided that there are funds of the Company
legally available therefor, for a number of shares of common stock of the
Delhi Group Subsidiary equal to the product of the Delhi Fraction and the
number of all outstanding shares of the Delhi Group Subsidiary, on a pro rata
basis. The Company would retain the balance of the outstanding shares of
common stock of the Delhi Group Subsidiary if the Delhi Fraction were less
than one, which balance would be attributed to the Marathon Group.
In addition, upon the Disposition, in one transaction or a series of related
transactions, of all or substantially all of the properties and assets of the
Delhi Group (other than in connection with the Disposition by the Company of
all of its properties or assets in one transaction) to any person, entity or
group (other than to the holders of all outstanding shares of Delhi Stock on a
pro rata basis or to any person, entity or group in which the Company directly
or indirectly, owns a majority equity interest), the Company shall, within 60
days following the consummation of such Disposition, either (i) subject to the
limitations of dividends on Delhi Stock set forth under "Dividends" above,
declare and pay a dividend in cash and/or in securities or other property
received as proceeds of such Disposition to the holders of Delhi Stock in an
amount equal to the product of the Delhi Fraction and the Net Proceeds of such
Disposition, (ii) to the extent that there are funds of the Company legally
available therefor, redeem the number of whole shares of Delhi Stock having an
aggregate average Market Value, during a specified period, closest to the
value of the product of the Delhi Fraction and the Net Proceeds of
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such Disposition, for cash and/or securities or other property received as
proceeds of such Disposition in an amount equal to such product or (iii)
exchange each outstanding share of Delhi Stock for a number of shares of
Marathon Stock, or if there are no shares of Marathon Stock outstanding and
shares of Steel Stock are outstanding, of Steel Stock, equal to 110% of the
average daily ratio (calculated to the nearest five decimal places) of the
Market Value of one share of Delhi Stock to the Market Value of one share of
Marathon Stock or one share of Steel Stock, as the case may be, during a
specified period. The term "substantially all of the properties and assets of
the Delhi Group" has substantially the same meanings with respect to the Delhi
Stock as such term has with respect to the Steel Stock as set forth under "--
Steel Stock--Exchange and Redemption."
If, immediately after any event, the Company, directly or indirectly, owns
less than a majority equity interest in any person, entity or group in which
the Company, directly or indirectly, owned a majority equity interest
immediately prior to the occurrence of such event, a Disposition of all of the
properties and assets of the Delhi Group owned by such person, entity or group
shall be deemed to have occurred. In the case of a Disposition of properties
or assets in a series of related transactions, such Disposition shall not be
deemed to have been consummated until the consummation of the last of such
transactions.
After any such special dividend or redemption pursuant to clause (i) or (ii)
in the second preceding paragraph, the Board may, by a majority vote of the
directors then in office, exchange each outstanding share of Delhi Stock for a
number of shares of Marathon Stock or, if there are no shares of Marathon
Stock outstanding and shares of Steel Stock are outstanding, of Steel Stock,
equal to 110% of the Market Value Ratio as of the fifth Business Day prior to
the date notice of such exchange is mailed to the holders of Delhi Stock. In
determining whether to effect such an exchange, the Board, in addition to
other matters, would likely consider whether the remaining properties and
assets of the Delhi Group constitute a viable business. Other considerations
could include the number of shares of Delhi Stock remaining outstanding
following any such redemption, the per share market price of the Delhi Stock
following the payment of such a dividend or such a redemption and the cost of
maintaining stockholder accounts.
In addition, the Board may, by a majority vote of the directors then in
office, at any time exchange each outstanding share of Delhi Stock for a
number of shares of Marathon Stock or, if there are no shares of Marathon
Stock outstanding and shares of Steel Stock are outstanding, of Steel Stock,
equal to 115% of the Market Value Ratio as of the fifth Business Day prior to
the date such notice is mailed to the holders of Delhi Stock.
For purposes of the two preceding paragraphs, "Market Value Ratio", as of
any date, means the highest of the following (calculated to the nearest five
decimal places): (A) the average ratio of D/X for the five-Business Day period
ending on such date, (B) the quotient of (1) the sum of (w) four times the
average ratio of D/X for the five-Business Day period ending on such date, (x)
three times the average ratio of D/X for the next preceding five-Business Day
period, (y) two times the average ratio of D/X for the next preceding five-
Business Day period and (z) the average ratio of D/X for the next preceding
five-Business Day period, divided by (2) ten and (C) if the special dividend
pursuant to clause (i) of the second preceding paragraph was declared and paid
or the redemption pursuant to clause (ii) thereof was made prior to the
commencement of the most recently completed fiscal quarter of USX, the average
ratio of D/X for such fiscal quarter, where D is the Market Value of one share
of Delhi Stock and X is the Market Value of one share of Marathon Stock or one
share of Steel Stock, as the case may be.
An exchange or redemption of Delhi Stock for Marathon Stock or Steel Stock,
as the case may be, would be made on the same general terms and conditions as
described above under "--Steel Stock--Exchange and Redemption--General
Redemption Provisions."
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VOTING--SHARES OF DELHI STOCK WILL, WHEN VOTING TOGETHER WITH ALL OTHER
CLASSES OF COMMON STOCK, HAVE A NUMBER OF VOTES PER SHARE BASED UPON TIME-
WEIGHTED AVERAGE RATIOS OF THE MARKET VALUE OF A SHARE OF DELHI STOCK TO THE
MARKET VALUE OF A SHARE OF MARATHON STOCK.
The holders of shares of the Delhi Stock have the voting rights described
above under "--Steel Stock--Voting."
In addition, as is the case with the use of the proceeds from the
Disposition of any properties or assets of the Steel Group or the Marathon
Group, unless the vote or consent of a greater number of shares shall then be
required by law, the approval of the holders of at least 66 2/3% of the
outstanding shares of Delhi Stock, voting as a separate class, is necessary
for:
(i) the declaration or payment of any dividend on, or the making of any
other payment or distribution with respect to any shares of any other class
of common stock, if such dividend, payment or distribution is to be made
with (A) proceeds from the Disposition of any of the properties and assets
of the Delhi Group or (B) any portion of an equity interest in a person,
entity or group that owns any of the properties and assets of the Delhi
Group; or
(ii) the use, or reservation for use, of any proceeds from the
Disposition of any of the properties or assets of the Delhi Group, or any
of the properties and assets acquired with such proceeds, in any business
of the Company other than the Delhi Group.
Notwithstanding the foregoing, however, such vote shall not be required if
such proceeds are loaned at a rate or rates representative of actual
borrowings and short-term investments by the Company.
LIQUIDATION--IN THE EVENT OF THE LIQUIDATION OF USX, HOLDERS OF DELHI STOCK
WILL BE ENTITLED TO RECEIVE A PORTION OF THE FUNDS DISTRIBUTABLE TO HOLDERS OF
COMMON STOCK BASED ON THE RELATIVE TIME-WEIGHTED AVERAGE AGGREGATE MARKET
CAPITALIZATION OF THE DELHI STOCK TO THE AGGREGATE MARKET CAPITALIZATION OF
ALL CLASSES OF COMMON STOCK.
In the event of a dissolution, liquidation or winding-up of the Company, the
holders of shares of the Delhi Stock are entitled to receive funds in the
amounts described above under "--Steel Stock--Liquidation."
DETERMINATIONS BY BOARD
Any determinations made by the Board under the foregoing provisions will be
final and binding on all stockholders of the Company.
OTHER RIGHTS
The holders of Common Stock do not have any preemptive rights or any rights
to convert their shares into any other securities of the Company.
STOCK TRANSFER AGENT AND REGISTRAR
USX maintains its own stock transfer department at the following address:
USX Corporation, Shareholder Services Department, 600 Grant Street, Room 611,
Pittsburgh, PA 15219-4776. Certificates representing shares can also be
presented for registration of transfer at Chemical Mellon Shareholder
Services, 120 Broadway, New York, NY 10271.
ChaseMellon, Commerce Court, 4 Station Square, Pittsburgh, PA 15219 is the
Registrar for all the Common Stock.
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AMENDED AND RESTATED RIGHTS PLAN
The following is a brief description of the terms of the Stockholders Rights
Plan set forth in the Restated Rights Agreement.
Under the Restated Rights Agreement, the right (each a "Right") to purchase
from the Company a unit consisting of one one-hundredth of a share (a "Unit")
of Junior Preferred Stock, at a purchase price of $120 in cash per Unit,
subject to adjustment, is attached to each share of Marathon Stock, Steel
Stock and Delhi Stock (sometimes hereinafter referred to together as the
"Voting Stock"). A Right attached to a share of Marathon Stock is hereinafter
referred to as a "Marathon Right," a Right attached to a share of Steel Stock
is hereinafter referred to as a "Steel Right" and a Right attached to a share
of Delhi Stock is hereinafter referred to as a "Delhi Right."
The Rights will separate from the Voting Stock and a Rights distribution
date will occur upon the earlier of (i) 15 days following a public
announcement that a person or group of affiliated or associated persons (an
"Acquiring Person") has acquired (except pursuant to a Qualifying Offer
(defined in the Restated Rights Agreement as an all-cash tender offer for all
outstanding shares of Voting Stock meeting certain prescribed requirements)),
or obtained the right to acquire, beneficial ownership of Voting Stock
representing 15% or more of the total voting power of all outstanding shares
of Voting Stock (the "Stock Acquisition Date"), or (ii) 15 days (or upon such
later date as may be determined by the Board) following the commencement of a
tender offer or exchange offer (other than a Qualifying Offer) that would
result in a person or a group beneficially owning Voting Stock representing
15% or more of the total voting power of all outstanding shares of Voting
Stock. For purposes of the Restated Rights Agreement, total voting power of
Voting Stock shall be determined based upon the most recent calculation
announced by USX. See "--Steel Stock--Voting," "--Marathon Stock--Voting" and
"--Delhi Stock--Voting." If a person inadvertently becomes the beneficial
owner of Voting Stock representing 15% or more of the total voting power of
the Voting Stock due to the recalculation by the Company of the relative
voting power of Marathon Stock, Steel Stock and Delhi Stock, such person will
not be an Acquiring Person unless and until such person acquires any
additional shares of Voting Stock.
In the event that a person or group becomes the beneficial owner of Voting
Stock representing 15% or more of the total voting power of all outstanding
shares of Voting Stock (except pursuant to a Qualifying Offer), the Rights
"flip-in" and entitle each holder of a Right (other than the Acquiring Person
and certain related parties) to receive, upon exercise, Marathon Stock, Steel
Stock or Delhi Stock, as the case may be (or in certain circumstances, cash,
property, or other securities of the Company), having a value equal to two
times the exercise price of the Marathon Right, Steel Right or Delhi Right,
respectively. However, Rights are not exercisable until such time as the
Rights are no longer redeemable by the Company as set forth below.
In the event that, any time following the Stock Acquisition Date, (i) the
Company is acquired in a merger or other business combination transaction in
which the Company is not the surviving corporation (other than a merger that
follows a Qualifying Offer) or its Voting Stock is changed or exchanged, or
(ii) 50% or more of the Company's assets, earning power or cash flow is sold
or transferred, the Rights "flip-over" and entitle each holder of a Right
(other than an Acquiring Person and certain related parties) to receive, upon
exercise, common stock of the acquiring company having a value equal to two
times the exercise price of the Right.
At any time until 15 days following the Stock Acquisition Date (subject to
extension), the Company may redeem the Rights in whole, but not in part, at a
price of $.01 per whole Right payable in stock or cash or any other form of
consideration deemed appropriate by the Board (the "Redemption Price").
95
Immediately upon the action of the Board ordering redemption of the Rights,
the Rights will terminate and the only right of the holders of the Rights will
be to receive the Redemption Price.
The Board may, at its option, at any time after any person becomes an
Acquiring Person, exchange all or part of the outstanding and exercisable
Marathon Rights, Steel Rights and Delhi Rights (other than Rights held by the
Acquiring Person and certain related parties) for shares of Marathon Stock,
Steel Stock and Delhi Stock, respectively, at an exchange ratio of one share
of Marathon Stock for each Marathon Right, one share of Steel Stock for each
Steel Right and one share of Delhi Stock for each Delhi Right (subject to
certain anti-dilution adjustments). However, the Board may not effect such an
exchange at any time any person or group owns Voting Stock representing 50% or
more of the total voting power of the Voting Stock then outstanding.
As long as the Rights are attached to shares of Voting Stock, the Company
will issue Marathon Rights on each share of Marathon Stock, Steel Rights on
each share of Steel Stock and Delhi Rights on each share of Delhi Stock issued
prior to the Rights distribution date so that all such shares will have
attached Rights.
MANAGEMENT AND ACCOUNTING POLICIES
MANAGEMENT POLICIES
The Board has adopted certain policies with respect to the U.S. Steel Group,
the Marathon Group and the Delhi Group including, without limitation, the
intention to: (i) limit capital expenditures of the U.S. Steel Group over the
long term to an amount equal to the internally generated cash flow of the U.S.
Steel Group, including funds generated by sales of assets of the U.S. Steel
Group, (ii) sell assets and provide services among the groups only on an
arm's-length basis and (iii) treat funds generated by the sale of Steel Stock,
Marathon Stock and Delhi Stock, and securities convertible into such stock, as
assets of the respective Group and apply such funds to acquire assets or
reduce liabilities of the U.S. Steel Group, the Marathon Group or the Delhi
Group, respectively, as the case may be.
The above policies may be modified or rescinded in the sole discretion of
the Board without approval of the stockholders, although the Board has no
present intention to do so. The Board may also adopt additional policies
depending upon the circumstances. Any determination of the Board to modify or
rescind such policies, or to adopt additional policies, including any such
decision that would have disparate impacts upon holders of the separate
classes of Common Stock, would be made by the Board in good faith and in the
honest belief that such decision is in the best interest of all stockholders
of the Company.
ACCOUNTING MATTERS AND POLICIES
The Company prepares the U.S. Steel Group, the Marathon Group and the Delhi
Group financial statements in accordance with generally accepted accounting
principles, and these financial statements, taken together, comprise all of
the accounts included in the corresponding consolidated financial statements
of the Company. The financial statements of the U.S. Steel Group, the Marathon
Group and the Delhi Group principally reflect the financial position and
results of operations of the businesses included therein. Consistent with the
Certificate of Incorporation and related policies, such group financial
statements also include portions of the Company's corporate assets and
liabilities (including contingent liabilities). Principal corporate activities
attributed to the groups and reflected in their financial statements include
financial activities, corporate general and administrative costs, common stock
transactions and income taxes.
The above policies may be modified or rescinded in the sole discretion of
the Board without approval of the stockholders, although the Board has no
present intention to do so. The Board may
96
also adopt additional policies depending upon the circumstances. Any
determination of the Board to modify or rescind such policies, or to adopt
additional policies, including any such decision that would have disparate
impacts upon holders of the separate classes of Common Stock, would be made by
the Board in good faith and in the honest belief that such decision is in the
best interest of all stockholders of the Company. In addition, generally
accepted accounting principles require that any change in an accounting policy
be preferable (in accordance with such principles) to the previous policy.
DESCRIPTION OF THE 6.50% CONVERTIBLE PREFERRED STOCK
GENERAL
The following is a description of the terms of the 6.50% Convertible
Preferred Stock. This description does not purport to be complete and is
qualified in its entirety by reference to the Certificate of Incorporation,
which has been filed as an exhibit to the Registration Statement of which this
Prospectus forms a part.
USX is the transfer agent, dividend disbursing agent and conversion agent
for the 6.50% Convertible Preferred Stock through its Shareholder Services
Department at the following address: USX Corporation, Shareholder Services
Department, 600 Grant Street, Room 611, Pittsburgh, PA 15219-4776.
Certificates representing shares can also be presented for registration of
transfer at Chemical Mellon Shareholder Services, 120 Broadway, New York, NY
10271. ChaseMellon, Commerce Court, 4 Station Square, Pittsburgh, PA 15219 is
the Registrar for the 6.50% Convertible Preferred Stock.
RANKING
The 6.50% Convertible Preferred Stock ranks senior to all classes of common
stock of the Company and any shares of Junior Preferred Stock issued pursuant
to the Restated Rights Agreement as to payment of dividends and upon
dissolution, liquidation or winding-up.
While any shares of 6.50% Convertible Preferred Stock are outstanding, the
Company may not authorize, effect or validate the issuance of any shares of
any class of stock of the Company that ranks prior to the 6.50% Convertible
Preferred Stock, either as to dividends or upon liquidation, or reclassify any
of the outstanding stock of the Company into any such prior shares, or issue
any obligation or security convertible into or evidencing the right to
purchase any such prior shares, without the consent of the holders of 66 2/3%
of the outstanding shares of 6.50% Convertible Preferred Stock and all other
series of Preferred Stock ranking on a parity with the 6.50% Convertible
Preferred Stock, either as to dividends or upon liquidation, voting together
as a single class without regard to series. However, the Company may increase
the authorized number of shares of Preferred Stock or create or authorize
shares of any other series of Preferred Stock ranking on a parity with the
6.50% Convertible Preferred Stock as to dividends and upon liquidation without
the consent of any holder of the 6.50% Convertible Preferred Stock. See "--
Voting Rights" below. Stock of any class of the Company shall be deemed to
rank on a parity with the 6.50% Convertible Preferred Stock, either as to
dividends or upon liquidation, whether or not the dividend rates, dividend
payment dates or redemption or liquidation prices per share or sinking fund
provisions, if any, are different from those of the 6.50% Convertible
Preferred Stock, if the holders of such stock are entitled to the receipt of
dividends or of amounts distributable upon dissolution, liquidation or
winding-up of the Company in proportion to their respective dividend rates or
liquidation prices, without preference or priority.
DIVIDENDS
Holders of shares of 6.50% Convertible Preferred Stock are entitled to
receive, when, as and if declared by the Board, out of funds legally available
therefor, cumulative cash dividends at the annual
97
rate of 6.50% per annum on the initial liquidation preference of $50 per
share, or $3.25 per share of 6.50% Convertible Preferred Stock per annum.
Dividends on the 6.50% Convertible Preferred Stock are payable quarterly on
the last calendar day of March, June, September and December of each year,
commencing June 30, 1993 (and, in the case of any accrued dividends not paid
on an applicable dividend payment date, at such additional times and for such
interim periods, if any, as determined by the Board), at such annual rate.
Each such dividend will be payable to holders of record as they appear on the
stock records of the Company at the close of business on such record dates,
not exceeding 30 days preceding the payment dates thereof, as shall be fixed
by the Board. Dividends are cumulative whether or not in any dividend period
or periods there shall be funds of the Company legally available for the
payment of such dividends. Dividends payable on the 6.50% Convertible
Preferred Stock for any period shorter or longer than a full quarterly
dividend are computed on the basis of a 360-day year consisting of twelve 30-
day months. Dividends payable on the 6.50% Convertible Preferred Stock for
each full quarterly dividend period are computed by dividing the annual
dividend rate by four.
Except as provided in the next sentence, no dividends will be declared or
paid or set apart for payment on the Preferred Stock of any series ranking, as
to dividends, on a parity with or junior to the 6.50% Convertible Preferred
Stock for any period unless full cumulative dividends have been or
contemporaneously are declared and paid on the 6.50% Convertible Preferred
Stock for all past dividend periods. When dividends are not paid in full, as
aforesaid, upon the shares of 6.50% Convertible Preferred Stock and any other
Preferred Stock ranking on a parity as to dividends with the 6.50% Convertible
Preferred Stock, all dividends declared upon the 6.50% Convertible Preferred
Stock and any other Preferred Stock ranking on a parity as to dividends with
the 6.50% Convertible Preferred Stock will be declared ratably in proportion
to accrued and unpaid dividends on the 6.50% Convertible Preferred Stock and
such other Preferred Stock. Holders of 6.50% Convertible Preferred Stock are
not entitled to any dividends, whether payable in cash, property or stock, in
excess of full cumulative dividends. No interest, or sum of money in lieu of
interest, will be payable in respect of any dividend payment or payments on
the 6.50% Convertible Preferred Stock which may be in arrears.
No dividend (other than a dividend in Common Stock or in any other stock of
the Company ranking junior to the 6.50% Convertible Preferred Stock as to
dividends and upon liquidation) will be declared, paid or set aside for
payment or other distribution declared or made upon the Common Stock or upon
any other stock of USX ranking junior to or on a parity with the 6.50%
Convertible Preferred Stock as to dividends or upon liquidation, nor shall any
Common Stock nor any other stock of the Company ranking prior to or on a
parity with the 6.50% Convertible Preferred Stock as to dividends or upon
liquidation be redeemed, purchased or otherwise acquired for any consideration
(or any moneys paid to or made available for a sinking fund for the redemption
of any shares of any such stock) by the Company (except by conversion into or
exchange for stock of the Company ranking junior to the 6.50% Convertible
Preferred Stock as to dividends and upon liquidation) unless, in each case,
the full cumulative dividends on all outstanding shares of the 6.50%
Convertible Preferred Stock shall have been paid or contemporaneously are
declared and paid for all past dividend periods.
OPTIONAL REDEMPTION
On April 1, 1996, the 6.50% Convertible Preferred Stock became redeemable at
the option of the Company, in whole at any time or in part from time to time,
for cash at the following redemption prices per share, if redeemed during the
twelve-month period beginning April 1 of the year indicated below, together
with, in each case, an amount equal to all dividends accrued and unpaid up to
the redemption date, upon giving notice as provided below:
98
REDEMPTION PRICE
(AS A PERCENTAGE OF INITIAL DOLLAR EQUIVALENT
YEAR LIQUIDATION PREFERENCE) PER SHARE
---- --------------------------- -----------------
1996 104.55% $52.275
1997 103.90 51.950
1998 103.25 51.625
1999 102.60 51.300
2000 101.95 50.975
2001 101.30 50.650
2002 100.65 50.325
2003 and thereafter 100.00 50.000
If fewer than all of the outstanding shares of the 6.50% Convertible
Preferred Stock are to be redeemed, the shares to be redeemed will be
determined pro rata or by lot or in such other manner as prescribed by the
Board.
The Company will not exercise its option to redeem the 6.50% Convertible
Preferred Stock if the Company is advised in advance by either Moody's or S&P
that to do so would result in an immediate lowering of the Company's credit
rating on its senior unsecured debt from its then existing level, unless the
Company shall have received from the issuance of common stock, since the date
which is two years prior to the redemption date, net proceeds in an aggregate
amount at least equal to the aggregate initial liquidation preference of the
6.50% Convertible Preferred Stock to be redeemed.
MANDATORY REDEMPTION IF A U.S. STEEL GROUP SPECIAL EVENT OR A MARATHON GROUP
SPECIAL EVENT OCCURS
If a U.S. Steel Group Special Event occurs, the Company is required to
redeem the shares of 6.50% Convertible Preferred Stock, provided that funds
are legally available therefor, in whole, for $50.00 per share, plus an amount
equal to dividends accrued and unpaid to the redemption date. The redemption
date with respect to a redemption of the 6.50% Convertible Preferred Stock
resulting from any U.S. Steel Group Special Event will be the applicable
exchange date, dividend payment date or redemption date for the Steel Stock,
or the consummation date of the tender offer or exchange offer, that is the
basis for such U.S. Steel Group Special Event. Such redemption of 6.50%
Convertible Preferred Stock will be conditioned upon the actual exchange of
Steel Stock, payment with respect to the Steel Stock of such dividend or
redemption amount or the consummation of such tender offer or exchange offer,
as the case may be.
In addition, if a Marathon Group Special Event occurs, the Company must
redeem the shares of 6.50% Convertible Preferred Stock, provided that funds
are legally available therefor, in whole, for $50.00 per share, plus an amount
equal to dividends accrued and unpaid to the redemption date. The date on
which such redemption will occur, and the conditions in respect thereof, will
be determined in the manner described in the preceding paragraph with respect
to any redemption resulting from any similar U.S. Steel Group Special Event.
GENERAL REDEMPTION PROCEDURES
Notice of redemption will be given by mail, not less than 30 nor more than
60 days prior to the redemption date, other than notice of any redemption of
the 6.50% Convertible Preferred Stock as a result of any dividend on or
redemption of Steel Stock resulting from a Disposition of all or substantially
all of the properties and assets of the U.S. Steel Group or any tender offer
or exchange offer for the Steel Stock. Notice of redemption in connection with
a dividend on, or a redemption of, the Steel Stock resulting from such
Disposition will be given by mail not less than 45 days prior to the date
selected by the Board for the payment of such dividend or such redemption and
notice of redemption as a result
99
of any such tender offer or exchange offer will be given by mail on the date
of public announcement thereof (but in any event not less than 30 days prior
to such redemption) by the Company. Similar notice will be given with respect
to any redemption occurring after an exchange of Steel Stock for Marathon
Stock, as described in the preceding paragraph. Any such notice will be given
to each holder of record of the 6.50% Convertible Preferred Stock.
In the event that full cumulative dividends on the 6.50% Convertible
Preferred Stock have not been paid or contemporaneously are declared and paid
for all past dividend periods, no shares of 6.50% Convertible Preferred Stock
may be redeemed unless all shares of the 6.50% Convertible Preferred Stock are
simultaneously redeemed and the Company may not purchase or acquire shares of
6.50% Convertible Preferred Stock otherwise than pursuant to a purchase or
exchange offer made on the same terms to all holders of 6.50% Convertible
Preferred Stock.
From and after a redemption date, provided that the Company has made
available at the office of the redemption agent a sufficient amount of cash
for the payment of the redemption price of the shares called for redemption,
dividends on the 6.50% Convertible Preferred Stock called for redemption will
cease to accrue, and such shares shall no longer be deemed to be outstanding
and all rights of the holders thereof as stockholders of the Company shall
cease except the right to receive the cash payable upon such redemption on
such redemption date, without interest from the date of such redemption.
LIQUIDATION PREFERENCE
Upon the dissolution, liquidation or winding up of the Company, whether
voluntary or involuntary, the holders of shares of 6.50% Convertible Preferred
Stock will be entitled to receive out of the assets of the Company available
for distribution to stockholders, before any payment or distribution may be
made on the Common Stock or on any other class of stock ranking junior to the
6.50% Convertible Preferred Stock upon liquidation, the amount of $50.00 per
share, plus a sum equal to all dividends (whether or not earned or declared)
accrued and unpaid thereon to the date of final distribution and no more.
In the event the assets of the Company available for distribution to the
holders of the 6.50% Convertible Preferred Stock upon any dissolution,
liquidation or winding-up of the Company, whether voluntary or involuntary,
shall be insufficient to pay in full the liquidation preference of the 6.50%
Convertible Preferred Stock, no such distribution shall be made on account of
any shares of any other class or series of Preferred Stock ranking on a parity
with the shares of 6.50% Convertible Preferred Stock upon such dissolution,
liquidation or winding-up unless proportionate distributive amounts shall be
paid on account of the shares of the 6.50% Convertible Preferred Stock,
ratably, in proportion to the full distributable amounts for which holders of
all such parity shares are respectively entitled upon such dissolution,
liquidation or winding-up. Neither the sale, lease or exchange (for cash,
shares of stock, securities or other consideration) of all or substantially
all the property and assets of the Company nor the merger or consolidation of
the Company into or with any other corporation or the merger or consolidation
of any other corporation into or with the Company will be considered a
dissolution, liquidation or winding-up, voluntary or involuntary, of the
Company.
VOTING RIGHTS
Except as indicated below, or except as otherwise from time to time required
by applicable law, the holders of shares of 6.50% Convertible Preferred Stock
have no voting rights.
If, on the date used to determine stockholders of record for any meeting of
stockholders for election of directors, six full quarterly dividends (whether
or not consecutive) payable on any series of
100
Preferred Stock are accrued and unpaid, the number of directors then
constituting the Board will be increased by two and the holders of the
Preferred Stock of all series (whether or not the holders of such series of
Preferred Stock would be entitled to vote for election of directors if such
nonpayment of dividends did not exist) will have the right at such meeting,
voting together as a single class without regard to series, to the exclusion
of the holders of the Common Stock, to elect two directors of the Company to
fill such newly created directorships. Each director elected by the holders of
the shares of Preferred Stock will continue to serve as such director for the
full term for which such director shall have been elected, notwithstanding
that prior to the end of such term all such dividends on all Preferred Stock
shall have been paid for all past dividend periods.
The approval of the holders of at least 66-2/3% of the outstanding shares of
6.50% Convertible Preferred Stock, voting separately as a class, will be
necessary for authorizing, effecting or validating the amendment, alteration
or repeal of any of the provisions of the Certificate of Incorporation or of
any certificate amendatory or supplemental thereto (including any certificate
of designation or any similar document relating to any series of Preferred
Stock) so as to affect adversely the powers, preference or rights of the 6.50%
Convertible Preferred Stock. The increase of the authorized amount of the
Preferred Stock or the creation or authorization of any shares of any other
class of stock of the Company ranking prior to or on a parity with the 6.50%
Convertible Preferred Stock as to dividends or upon liquidation, or the
reclassification of any authorized stock of the Company into any such prior or
parity shares, or the creation or authorization of any obligation or security
convertible into or evidencing the right to purchase any such prior or parity
shares shall not be deemed to affect adversely the powers, preferences or
rights of the 6.50% Convertible Preferred Stock.
Notwithstanding the foregoing, the approval of the holders of at least 66-
2/3% of the outstanding shares of 6.50% Convertible Preferred Stock and all
other series of Preferred Stock ranking on a parity with shares of the 6.50%
Convertible Preferred Stock, either as to dividends or upon liquidation,
voting together as a single class without regard to series, will be necessary
to authorize, effect or validate the issuance of any shares of any class of
stock of the Company that ranks prior to the 6.50% Convertible Preferred
Stock, as to dividends or upon liquidation, or to reclassify any of the
outstanding stock of the Company into any such prior shares, or to issue any
obligation or security convertible into or evidencing the right to purchase
any such prior shares.
The approval of the holders of at least a majority of the outstanding shares
of 6.50% Convertible Preferred Stock and all other series of Preferred Stock
ranking on a parity with shares of the 6.50% Convertible Preferred Stock,
either as to dividends or upon liquidation, voting as a single class, will be
necessary to authorize, effect or validate the merger or consolidation of the
Company into or with any other corporation if such merger or consolidation
would adversely affect the powers, preference or rights of the 6.50%
Convertible Preferred Stock or if, after such merger or consolidation, there
shall be outstanding any shares of any class of stock ranking prior to the
shares of the 6.50% Convertible Preferred Stock as to dividends or upon
liquidation or any obligation or security convertible into or evidencing the
right to purchase any such prior shares (except such stock, securities or
obligations of the Company as may have been outstanding immediately preceding
such merger or consolidation). See "--Conversion Rights--Adjustments to the
6.50% Convertible Preferred Stock Conversion Price."
CONVERSION RIGHTS
RIGHT TO CONVERT; TERMINATION OF CONVERSION RIGHTS
Shares of 6.50% Convertible Preferred Stock are convertible, in whole or in
part (but only in whole shares of 6.50% Convertible Preferred Stock), at any
time (except as provided in the next sentence), at the option of the holders
thereof, into shares of Steel Stock at a conversion price of $46.125 per
101
share of Steel Stock (equivalent to a conversion rate of 1.084 shares of Steel
Stock for each share of 6.50% Convertible Preferred Stock), subject to
adjustment as described below (the "6.50% Convertible Preferred Stock
Conversion Price").
The right to convert shares of 6.50% Convertible Preferred Stock called for
redemption terminates at the close of business on the related redemption date,
unless the Company gives a notice of redemption of the 6.50% Convertible
Preferred Stock in connection with a dividend on or a redemption of Steel
Stock resulting from the Disposition of all or substantially all of the
properties and assets of the U.S. Steel Group, as set forth under "--Mandatory
Redemption if a U.S. Steel Group Special Event or a Marathon Group Special
Event Occurs" above, in which case, such right will terminate on the 31st day
prior to the date selected by the Board for the payment of such dividend or
such redemption. For information as to notices of redemption, see "--General
Redemption Procedures."
Conversion of shares of 6.50% Convertible Preferred Stock, or a specified
portion thereof, may be effected by delivering certificates evidencing such
shares, together with written notice of conversion and a proper assignment of
such certificates to USX or in blank, to the office or agency to be maintained
by the Company for that purpose. Such office currently is the Company's
Shareholder Services Department located at the address set forth under "--
General."
Each conversion will be deemed to have been effected immediately prior to
the close of business on the date on which the certificates for shares of
6.50% Convertible Preferred Stock shall have been surrendered and notice
received by the Company as aforesaid (and, if applicable, as described below
under "--Right to Receive Dividends," payment of an amount equal to the
dividend payable on such shares) and the conversion shall be at the 6.50%
Convertible Preferred Stock Conversion Price in effect at such time and on
such date.
Fractional shares of common stock of the Company are not to be issued upon
conversion, but, in lieu thereof, the Company will pay a cash adjustment based
on the current market price thereof on the day prior to the conversion date.
RIGHT TO RECEIVE DIVIDENDS
Except as provided below, the Company is not required to make any payment or
allowance for unpaid dividends, whether or not in arrears, on converted shares
or for dividends on the shares of Steel Stock issued upon such conversion.
Holders of shares of 6.50% Convertible Preferred Stock at the close of
business on a dividend record date are entitled to receive the dividend
payable on such shares (except that holders of shares called for redemption on
a redemption date between such record date and the dividend payment date shall
not be entitled to receive such dividend on such dividend payment date) on the
corresponding dividend payment date notwithstanding the conversion of such
shares following such dividend record date and prior to such dividend payment
date. However, shares of 6.50% Convertible Preferred Stock surrendered for
conversion during the period between the close of business on any dividend
record date and the opening of business on the corresponding dividend payment
date (except shares called for redemption on a redemption date during such
period) must be accompanied by payment of an amount equal to the dividend
payable on such shares on such dividend payment date. A holder of shares of
6.50% Convertible Preferred Stock on a dividend record date who (or whose
transferee) tenders any such shares for conversion into shares of Steel Stock
on such dividend payment date will receive the dividend payable by the Company
on such shares of 6.50% Convertible Preferred Stock on such date, and the
converting holder need not include payment of the amount of such dividend upon
surrender of shares of 6.50% Convertible Preferred Stock for conversion.
102
ADJUSTMENTS TO THE 6.50% CONVERTIBLE PREFERRED STOCK CONVERSION PRICE
The 6.50% Convertible Preferred Stock Conversion Price is subject to
adjustment upon certain events, including:
(i) dividends and other distributions payable in Steel Stock on any class
of capital stock of the Company and combinations and subdivisions of Steel
Stock;
(ii) the issuance of certain rights or warrants entitling the holder
thereof to subscribe for or purchase Steel Stock at less than the Current
Market Price per share of Steel Stock (calculated as set forth in the
Certificate of Incorporation); provided that if such rights or warrants are
only exercisable upon the occurrence of certain triggering events, then the
6.50% Convertible Preferred Stock Conversion Price will not be adjusted
until such triggering events occur;
(iii) distributions to all holders of Steel Stock of any shares of
capital stock (other than any common stock of the Company), evidences of
indebtedness or cash or other assets of the Company (including securities,
but excluding, among other things, those dividends, distributions, rights
and warrants referred to above and dividends consisting exclusively of cash
and securities received pursuant to a merger or consolidation described
below);
(iv) distributions consisting exclusively of cash (excluding any regular
quarterly cash dividends, any cash distributions referred to in (iii) above
and any cash distributed in a merger or consolidation referred to below) to
all holders of Steel Stock, if the aggregate amount of all such cash
distributions, together with (A) all other all-cash distributions (to which
such adjustment would otherwise apply) made within the preceding 12 months
not triggering a 6.50% Convertible Preferred Stock Conversion Price
adjustment and (B) all Excess Purchase Payments (as defined below) in
respect of each tender offer or exchange offer for, or other negotiated
purchase of, Steel Stock concluded by the Company or any of its
subsidiaries within the preceding 12 months not triggering a 6.50%
Convertible Preferred Stock Conversion Price adjustment, exceeds an amount
equal to 12 1/2% of the product of the Current Market Price per share of
Steel Stock (calculated as set forth in the Certificate of Incorporation)
times the number of shares of Steel Stock outstanding on the date fixed for
determination of holders of Steel Stock entitled to receive such
distribution; and
(v) payment of an Excess Purchase Payment, if the aggregate amount of
such Excess Purchase Payment, together with (A) the aggregate amount of any
all-cash distributions (excluding any regular quarterly cash dividends, any
cash distributions referred to in (iii) above and any cash distributed in a
merger or consolidation referred to below) made within the preceding 12
months not triggering a 6.50% Convertible Preferred Stock Conversion Price
adjustment and (B) all Excess Purchase Payments in respect of each tender
or exchange offer or other negotiated purchase for Steel Stock concluded by
the Company or any of its subsidiaries within the preceding 12 months not
triggering a 6.50% Convertible Preferred Stock Conversion Price adjustment,
exceeds an amount equal to 12 1/2% of the product of the Current Market
Price per share of Steel Stock (calculated as set forth in the Certificate
of Incorporation) times the number of shares of Steel Stock outstanding on
the expiration date of such tender offer or exchange offer or other
negotiated purchase. For purposes of these adjustments, the term "Excess
Purchase Payment" means the excess, if any, of (A) the aggregate of the
cash and the value of all other consideration paid by the Company or any of
its subsidiaries with respect to the shares of Steel Stock acquired in a
tender or exchange offer or such other purchase by the Company over (B) the
Current Market Price per share of Steel Stock times the number of shares of
Steel Stock acquired in the tender or exchange offer or such other purchase
(calculated as set forth in the Certificate of Incorporation).
The Company from time to time may reduce the 6.50% Convertible Preferred
Stock Conversion Price by any amount for any period of at least 20 business
days (or such other period as may then be
103
required by applicable law), in which case the Company shall give at least 15
days' notice of such reduction, if the Board has made a determination that
such reduction would be in the best interests of the Company, which
determination shall be conclusive. The Company may, at its option, make such
reductions in the 6.50% Convertible Preferred Stock Conversion Price as the
Board determines to be necessary in order that any event treated for federal
income tax purposes as a dividend of stock or stock rights will not be taxable
to recipients thereof. The Company will comply with Rule 13e-4 under the
Exchange Act in connection with any such adjustment to the 6.50% Convertible
Preferred Conversion Price.
No adjustments will be made in the 6.50% Convertible Preferred Stock
Conversion Price if distributions on or other transactions occur with respect
to the Marathon Stock or the Delhi Stock, except as provided in the next
paragraph.
After any date on which all outstanding shares of Steel Stock are exchanged
for shares of Marathon Stock or Delhi Stock as set forth under "Description of
Capital Stock and Amended and Restated Rights Plan--Steel Stock--Exchange and
Redemption," each share of 6.50% Convertible Preferred Stock will thereafter
be convertible into the number of shares of Marathon Stock or Delhi Stock, as
the case may be, receivable upon such exchange by a holder of that number of
shares or fraction thereof of Steel Stock into which one share of 6.50%
Convertible Preferred Stock was convertible immediately prior to such
exchange. From and after any such adjustment to the 6.50% Convertible
Preferred Stock, 6.50% Convertible Preferred Stock Conversion Price
adjustments as nearly equivalent as may be practicable to the adjustments upon
certain events in respect of Steel Stock described above for Steel Stock shall
be made upon such events in respect of shares of Marathon Stock or Delhi
Stock, as the case may be.
In case the Company shall be a party to any transaction (including, without
limitation, a merger or consolidation of the Company, but excluding
transactions described in the prior paragraph), in each case as a result of
which shares of Steel Stock will be converted into the right to receive stock,
securities or other property (including cash or any combination thereof), each
share of 6.50% Convertible Preferred Stock, if outstanding after the
consummation of the transaction, will thereafter be convertible into the kind
and amount of shares of stock and other securities and property (including
cash) (or any combination thereof) receivable upon the consummation of such
transaction by a holder of that number of shares of Steel Stock or fraction
thereof into which one share of 6.50% Convertible Preferred Stock was
convertible immediately prior to such transaction (assuming such holder of
Steel Stock failed to exercise any rights of election and received per share
the kind and amount received per share by a plurality of non-electing shares).
The Company may not become a party to any such transaction unless the terms
thereof are consistent with the foregoing.
If the Company, by dividend or otherwise, distributes to all holders of
Steel Stock or other class of common stock into which shares of 6.50%
Convertible Preferred Stock are then convertible shares of common stock other
than Steel Stock or any class of common stock into which shares of 6.50%
Convertible Preferred Stock are then convertible, each share of 6.50%
Convertible Preferred Stock will be convertible, in addition to the number of
shares of Steel Stock and/or such other common stock into which such share is
then convertible, into the number of shares of such other common stock
receivable upon payment of such distribution by a holder of that number of
shares or fraction thereof of Steel Stock or such other common stock into
which one share of 6.50% Convertible Preferred Stock was convertible
immediately prior to the record date fixed for the determination of
stockholders entitled to receive such distribution. On the payment date of
such distribution, a conversion price in respect of such common stock will be
established in accordance with the Certificate of Incorporation and,
thereafter, conversion price adjustments as nearly as equivalent in type as
may be practicable to the adjustments described above which are to be made in
respect of Steel Stock shall be made in respect of shares of such common
stock.
104
No adjustment of the 6.50% Convertible Preferred Conversion Price in respect
of the Steel Stock or any other conversion price in respect of any other
common stock of the Company are required to be made in any case until
cumulative adjustments amount to 1% or more thereof. Any adjustments not so
required to be made will be carried forward and taken into account in
subsequent adjustments.
Notice to Holders
In order to give holders of shares of the 6.50% Convertible Preferred Stock
an opportunity to determine whether to convert such shares into shares of
Steel Stock, the Company is required to give notice of its intention (A) to
pay a dividend on, redeem shares of, or make a tender or exchange offer for,
Steel Stock that would constitute a U.S. Steel Group Special Event, or
exchange shares of Steel Stock for Marathon Stock or Delhi Stock following a
Disposition of all or substantially all of the properties and assets of the
U.S. Steel Group or (B) to exchange Steel Stock for shares of the U.S. Steel
Group Subsidiary, not less than 45 days prior to the date selected by the
Board for the payment of such dividend on or such redemption of Steel Stock
resulting from the Disposition of all or substantially all of the properties
and assets of the U.S. Steel Group and not less than 30 days prior to the
exchange date for such exchange, the consummation of such tender or exchange
offer or the payment date of any other such dividend. In addition, from and
after any exchange of Steel Stock for Marathon Stock, as described above, the
Company is required to give a comparable notice of its intention to take
certain similar actions with respect to Marathon Stock that would constitute a
Marathon Group Special Event.
BOOK-ENTRY SYSTEM--THE DEPOSITORY TRUST COMPANY
DTC will act as securities depositary (the "Depository") for the Trust
Convertible Preferred Securities and, if such are distributed to the holders
of Trust Convertible Preferred Securities as described herein, is expected to
act as the Depository for the Convertible Debentures. For purposes of the
description of the book-entry system below, the Trust Convertible Preferred
Securities and the Convertible Debentures are referred to as the "Convertible
Securities."
DTC is a limited-purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law,
a member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act. DTC
holds securities that its participants (the "Participants") deposit with DTC.
DTC also facilitates the settlement among Participants of securities
transactions, such as transfers and pledges, in deposited securities through
electronic computerized book-entry changes in Participants' accounts, thereby
eliminating the need for physical movement of securities certificates. Direct
Participants include securities brokers and dealers, banks, trust companies,
clearing corporations and certain other organizations (the "Direct
Participants"). DTC is owned by a number of its Direct Participants and by the
NYSE, the American Stock Exchange, Inc., and the National Association of
Securities Dealers, Inc. Access to the DTC system is also available to others,
such as securities brokers and dealers, banks, and trust companies that clear
transactions through or maintain a direct or indirect custodial relationship
with a Direct Participant either directly or indirectly ("Indirect
Participants"). The rules applicable to DTC and its Participants are on file
with the Commission.
The ownership interest of each actual owner of a Convertible Security
("Beneficial Owner") within the DTC system is recorded on the Direct and
Indirect Participants' records and is credited to the Direct Participant on
DTC's records. Beneficial Owners do not receive written confirmation from DTC
of their transactions, but Beneficial Owners are expected to receive written
confirmations providing details of the transactions, as well as periodic
statements of their holdings, from the Direct or Indirect
105
Participants through which the Beneficial Owners exchanged or hold Convertible
Securities. Transfers of ownership interests in the Convertible Securities are
to be accomplished by entries made on the books of Participants acting on
behalf of Beneficial Owners. Beneficial Owners will not receive certificates
representing their ownership interests in a Convertible Security, except in
the event that use of the book-entry system for such Convertible Security is
discontinued.
The laws of some jurisdictions require that certain purchasers of securities
take physical delivery of securities in definitive form. Such laws may impair
the ability to transfer beneficial interests in the Convertible Securities
represented by a global certificate.
To facilitate subsequent transfers, all the Convertible Securities deposited
by Participants with DTC are registered in the name of Cede. The deposit of
Convertible Securities with DTC and their registration in the name of Cede
effect no change in beneficial ownership. DTC has no knowledge of the identity
of the Beneficial Owners of the Convertible Securities, as its records reflect
only the identity of the Direct Participants to whose accounts such
Convertible Securities are credited, which may or may not be the Beneficial
Owners. The Participants will remain responsible for keeping account of their
holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants and by Direct
Participants and Indirect Participants to Beneficial Owners will be governed
by arrangements among them, subject to any statutory or regulatory
requirements that may be in effect from time to time.
Redemptions are coordinated through DTC. Redemption notices shall be sent to
Cede. If less than all of the Convertible Securities held by DTC are being
redeemed, DTC will reduce the amount of the interest of each Direct
Participant in such Convertible Securities in accordance with its procedures.
Conversions are coordinated through DTC. Conversions notices shall be sent
to Cede by a Direct Participant for the benefit of Beneficial Owners. DTC will
reduce the amount of interest of a Direct Participant in the Convertible
Securities as result of any such conversion in accordance with its procedures.
In addition, although voting with respect to the Convertible Securities is
limited, in those cases where a vote is required, neither DTC nor Cede will
itself consent or vote with respect to such securities. Under its usual
procedures, DTC would mail an Omnibus Proxy to the issuer of the Convertible
Security for which a vote is being solicited as soon as possible after the
record date. The Omnibus Proxy assigns Cede consenting or voting rights to
those Direct Participants to whose accounts the voting Convertible Securities
are credited on the record date (identified in a listing attached to the
Omnibus Proxy). The Company and the Trust believe that the arrangements among
DTC, Direct and Indirect Participants, and Beneficial Owners will enable the
Beneficial Owners to exercise rights equivalent in substance to the rights
that can be directly exercised by a holder of a Convertible Security.
Distribution payments on the Convertible Securities are made to DTC. DTC's
practice is to credit Direct Participants' accounts on the relevant payment
date in accordance with their respective holdings shown of DTC's record unless
DTC has reason to believe that it will not receive payments on such payment
date. Payments by Participants to Beneficial Owners will be governed by
standing instructions and customary practices, as is the case with securities
held for the account of customers in bearer form or registered in "street
name," and such payments will be the responsibility of such Participant and
not of DTC, the Trust, or the Company, subject to any statutory or regulatory
requirements to the contrary that may be in effect from time to time. Payment
of distributions to DTC is the responsibility of the issuer of the Convertible
Security, disbursement of such payments to the Beneficial Owners is the
responsibility of Direct and Indirect Participants.
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DTC has advised the Company that it will take any action permitted to be
taken by a holder of the Convertible Securities (including, without
limitation, the presentation of a stock certificate for conversion) only at
the direction of one or more Participants to whose account with DTC interests
in shares presented by a global certificate are credited and only in respect
of such number of the shares of the Convertible Securities represented by a
global certificate as to which such Participants have given such direction.
Except as provided herein, a Beneficial Owner in a global Convertible
Security certificate will not be entitled to receive physical delivery of such
securities. Accordingly, each Beneficial Owner must rely on the procedures of
DTC to exercise any rights under such securities. Because DTC can only act on
behalf of Participants, who in turn act on behalf of Indirect Participants,
the ability of a person having a beneficial interest in shares represented by
a global certificate to pledge such interest to persons or entities that do
not participate in the DTC system, or otherwise take actions in respect of
such interest, may be affected by the lack of a physical certificate of such
interest.
DTC may discontinue providing its services as Depository with respect to the
Convertible Securities at any time by giving reasonable notice to the issuer.
Under such circumstances, in the event that a successor securities depositary
is not obtained, certificates for the Convertible Securities for which DTC has
discontinued its services are required to be printed and delivered. In
addition, the issuer of the Convertible Security may decide to discontinue use
of the system of book-entry transfers through DTC (or any successor
depositary) with respect to its Convertible Securities. In that event,
certificates for such Convertible Securities will be printed and delivered.
The information in this section concerning DTC and DTC's book-entry system has
been obtained from sources that the Company and the Trust believe to be
reliable, but neither the Company nor the Trust takes responsibility for the
accuracy thereof.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
GENERAL
In the opinion of Miller & Chevalier, Chartered, special tax counsel to the
Company and the Trust ("Special Tax Counsel"), the following are the material
United States federal income tax consequences of the acquisition by exchange,
ownership, and disposition of the Trust Convertible Preferred Securities.
Unless otherwise stated, this summary deals with the beneficial owners of
6.50% Convertible Preferred Stock who are United States persons. As used
herein, a "United States person" means (i) a person that is a citizen or
resident of the United States, (ii) a corporation, partnership or other entity
created or organized in or under the laws of the United States or any
political subdivision thereof, (iii) an estate the income of which is subject
to United States federal income taxation regardless of its source, or (iv) a
trust if a court within the United States is able to exercise primary
supervision over the administration of such trust and one or more United
States fiduciaries have the authority to control all the substantial decisions
of such trust. Unless otherwise stated, this summary deals only with Trust
Convertible Preferred Securities held as capital assets by holders who
exchange shares of 6.50% Convertible Preferred Stock. It does not deal with
special classes of holders such as banks, thrifts, real estate investment
trusts, regulated investment companies, insurance companies, dealers in
securities or currencies, tax-exempt investors, foreign governments, or with
persons that hold the Trust Convertible Preferred Securities or the 6.50%
Convertible Preferred Stock as a position in a "straddle," as part of a
"synthetic security" or "hedge," as part of a "conversion transaction" or
other integrated investment, or as other than a capital asset. This summary
also does not address the tax consequences to persons that have a functional
currency other than the U.S. Dollar or the tax consequences to stockholders,
partners, or beneficiaries of a holder of Trust Convertible Preferred
Securities. Further, it does not include any description of any alternative
minimum tax consequences or the tax laws of any state or local government or
any foreign government that may be applicable to
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the Trust Convertible Preferred Securities or to a holder's decision to
exchange shares of 6.50% Convertible Preferred Stock for Trust Convertible
Preferred Securities. This summary is based on the Code, Treasury regulations
thereunder, and administrative and judicial interpretations thereof, as of the
date hereof, all of which are subject to change, possibly on a retroactive
basis.
ALL HOLDERS OF 6.50% CONVERTIBLE PREFERRED STOCK ARE ADVISED TO CONSULT
THEIR OWN TAX ADVISORS REGARDING THE FEDERAL, STATE, LOCAL, AND FOREIGN TAX
CONSEQUENCES OF AN EXCHANGE OF SHARES OF 6.50% CONVERTIBLE PREFERRED STOCK FOR
TRUST CONVERTIBLE PREFERRED SECURITIES AND THE OWNERSHIP, CONVERSION AND
DISPOSITION OF TRUST CONVERTIBLE PREFERRED SECURITIES RECEIVED IN THE EXCHANGE
OFFER IN LIGHT OF THEIR OWN PARTICULAR CIRCUMSTANCES.
EXCHANGE OF 6.50% CONVERTIBLE PREFERRED STOCK FOR TRUST CONVERTIBLE PREFERRED
SECURITIES
The exchange of shares of 6.50% Convertible Preferred Stock for Trust
Convertible Preferred Securities will be a taxable event. If, with respect to
a particular holder, such holder does not own, directly or constructively, any
other stock of the Company, or if the exchange satisfies one of the tests of
section 302 of the Code described below, it will be treated as a transaction
in which capital gain or loss is recognized, rather than as a dividend. The
tests under section 302 of the Code are applied on a stockholder-by-
stockholder basis. Therefore, whether an exchange will be treated as a
transaction in which capital gain or loss is recognized or as a dividend with
respect to a particular holder will depend on that holder's particular facts
and circumstances. If the exchange of shares of 6.50% Convertible Preferred
Stock for Trust Convertible Preferred Securities is treated as a transaction
in which capital gain or loss is recognized with respect to a particular
holder, the capital gain or loss will be based on the difference between the
issue price of the Trust Convertible Preferred Securities received in the
exchange and the holder's adjusted tax basis in the shares of 6.50%
Convertible Preferred Stock surrendered therefor. Any capital gain or loss
will be long-term capital gain or loss if the shares of 6.50% Convertible
Preferred Stock surrendered in the exchange were held by the holder for more
than one year. The exchanging holder's tax basis in the Trust Convertible
Preferred Securities received in the exchange will equal the fair market value
of the Trust Convertible Preferred Securities at the time of the exchange and
the holding period for the Trust Convertible Preferred Securities will begin
on the day after the day on which the Trust Convertible Preferred Securities
are acquired by the holder.
The issue price of the Convertible Debentures represented by the Trust
Convertible Preferred Securities will generally be equal to their fair market
value, determined as of the date on which the Trust Convertible Preferred
Securities are issued. It is possible that, in certain circumstances, the
issue price of the Convertible Debentures represented by the Trust Convertible
Preferred Securities may exceed their principal amount, in which case a United
States person generally may elect to amortize such premium over the term of
the Trust Convertible Preferred Securities. It is also possible that, in
certain circumstances, the issue price of the Convertible Debentures
represented by the Trust Convertible Preferred Securities may be less than
their stated redemption price at maturity by more than a de minimis amount
and, as a result, the Convertible Debentures could be considered to have been
issued with OID (within the meaning of section 1273(a) of the Code). See "--
Interest Income and Original Issue Discount". Because the fair market value of
the Trust Convertible Preferred Securities will not be known until after the
date they are issued, it is not possible, as of the date of this Prospectus,
to determine whether any such premium or discount will exist as of the date of
issuance.
Pursuant to section 302 of the Code, an exchange will be treated as a
transaction in which gain or loss is recognized if, after giving effect to the
constructive ownership rules of section 318 of the
108
Code, the exchange (i) represents a "complete termination" of the exchanging
holder's stock interest in the Company, (ii) is "substantially
disproportionate" with respect to the exchanging holder or (iii) is "not
essentially equivalent to a dividend" with respect to the exchanging holder,
all within the meaning of section 302(b) of the Code. Under the constructive
ownership rules of section 318 of the Code, a holder of Trust Convertible
Preferred Securities will be treated as owning the Steel Stock into which such
Trust Convertible Preferred Securities are convertible. Accordingly, an
exchange pursuant to the Exchange Offer could not, standing alone, satisfy the
"complete termination" or the "substantially disproportionate" tests. An
exchange will be "not essentially equivalent to a dividend" as to a particular
holder if it results in a "meaningful reduction" in such holder's interest in
the Company (after application of the constructive ownership rules of section
318 of the Code). In general, there are no fixed rules for determining whether
a "meaningful reduction" has occurred. However, based upon published rulings
of the IRS, a meaningful reduction will be deemed to have occurred if the
holder's stock ownership (treating the Trust Convertible Preferred Securities
as converted) is minimal, the holder exercises no control over the affairs of
the Company, and the holder's percentage equity interest in the Company is
reduced in the redemption to any extent. Because the number of shares of Steel
Stock issued upon conversion of a Trust Convertible Preferred Security will be
less than the number of shares issued upon conversion of a share of 6.50%
Convertible Preferred Stock, the meaningful reduction test should be satisfied
by the exchange. However, no assurance can be given that these tests will be
satisfied, and, if such tests are not satisfied, the exchange will be treated
as a dividend. EACH HOLDER SHOULD CONSULT ITS OWN TAX ADVISOR AS TO ITS
ABILITY IN LIGHT OF ITS OWN PARTICULAR CIRCUMSTANCES TO SATISFY ANY OF THE
FOREGOING TESTS.
If an exchange is treated as a dividend with respect to a particular
exchanging holder under section 302 of the Code, such holder (i) will not
recognize any loss on the exchange, (ii) will recognize dividend income
(rather than capital gain) in an amount equal to the fair market value of the
Trust Convertible Preferred Securities received without regard to the holder's
basis in the shares of 6.50% Convertible Preferred Stock surrendered in the
exchange, to the extent of its proportionate share of the Company's current or
accumulated earnings and profits. The holding period for the Trust Convertible
Preferred Securities will begin on the day after the day on which the Trust
Convertible Preferred Securities are acquired by the exchanging Holder.
CORPORATE HOLDERS SHOULD CONSULT WITH THEIR OWN TAX ADVISORS CONCERNING THE
AVAILABILITY OF THE CORPORATE DIVIDENDS--RECEIVED DEDUCTION AND THE POSSIBLE
APPLICATION OF THE EXTRAORDINARY DIVIDEND RULES OF CODE SECTION 1059 TO AN
EXCHANGE BY A CORPORATE HOLDER FOR WHOM THE DISTRIBUTION IS TAXABLE AS A
DIVIDEND.
CLASSIFICATION OF THE CONVERTIBLE DEBENTURES
In connection with the issuance of the Convertible Debentures, Special Tax
Counsel will render its opinion that, although the matter is not free from
doubt, the Convertible Debentures will be classified for United States federal
income tax purposes as indebtedness of the Company under current law. By
accepting a Trust Convertible Preferred Security, each holder covenants to
treat the Convertible Debentures as indebtedness and the Trust Convertible
Preferred Securities as evidence of an indirect beneficial ownership in the
Convertible Debentures. No assurance can be given, however, that the
classification of the Convertible Debentures as indebtedness will not be
challenged by the IRS. Nevertheless, Special Tax Counsel has advised that it
is of the view that, if challenged, the opinions expressed herein would be
sustained by a court with jurisdiction in a properly presented case. The
remainder of this discussion assumes that the Convertible Debentures will be
classified for United States federal income tax purposes as indebtedness of
the Company.
CLASSIFICATION OF THE TRUST
In connection with the issuance of the Trust Convertible Preferred
Securities, Special Tax Counsel will render its opinion that the Trust will be
classified for United States federal income tax purposes as
109
a grantor trust and not as an association taxable as a corporation.
Accordingly, for United States federal income tax purposes, each holder of
Trust Convertible Preferred Securities will be considered the owner of an
undivided interest in the Convertible Debentures, and pursuant to the
agreement to treat the Convertible Debentures as indebtedness, each holder
will be required to include in its gross income interest received or accrued
with respect to its allocable share of the Convertible Debentures.
INTEREST INCOME AND ORIGINAL ISSUE DISCOUNT
Corporate holders of the Trust Convertible Preferred Securities will not be
entitled to a dividends-received deduction with respect to any income
recognized with respect to the Trust Convertible Preferred Securities.
Depending on the fair market value of the Convertible Debentures at the time
of issuance, they may be treated as issued with OID. The Convertible
Debentures will be considered to having been issued with OID (within the
meaning of section 1273(a) of the Code) if the "issue price" of the
Convertible Debentures is less than the "stated redemption price at maturity"
of the Convertible Debentures by an amount that is greater than the product of
.25% of such "stated redemption price at maturity" and the number of complete
years to maturity of the Convertible Debentures (such product is referred to
herein as the "De Minimis OID Amount"). The "issue price" of the Convertible
Debentures will be equal to the fair market value of the Convertible
Debentures as of the date of issuance. The "stated redemption price at
maturity" of the Convertible Debentures will be equal to the sum of all
payments to be made on the Convertible Debentures, other than payments of
"qualified stated interest." Accordingly, under the de minimis rule, there
will be no reportable OID if the amount of discount on the Convertible
Debentures is less than 9.75% of the stated redemption price at maturity
(i.e., if the fair market value of the Convertible Debentures, as measured by
the fair market value of the Trust Convertible Preferred Securities, at the
date of issuance exceeds $45.125).
Although the Company cannot assure the ultimate outcome of OID treatment, it
is the intent of the Company to consummate the Exchange Offer only if the
Company reasonably expects on the Expiration Date to issue the Convertible
Debentures without reportable OID.
If the Convertible Debentures are considered to be issued with OID for
United States federal income tax purposes, the holders of Trust Convertible
Preferred Securities will be required to accrue their pro rata share of the
excess of the stated redemption price at maturity over the issue price (as
OID) on a daily economic accrual basis (using the constant-yield-to-maturity
method of accrual described in section 1272(a) of the Code) regardless of
their regular method of accounting. Consequently, holders would be required to
include the amount of such excess in gross income for United States federal
income tax purposes in advance of the receipt of the cash attributable to such
income. A holder will have an adjusted tax basis in its Trust Convertible
Preferred Securities equal to the issue price of its pro rata share of
Convertible Debentures (evidenced by the Trust Convertible Preferred
Securities) plus any OID included in gross income.
The stated interest on the Convertible Debentures should be considered
"qualified stated interest" under the applicable Treasury regulations (the
"Regulations") because the Company believes that the terms of the Convertible
Debentures ensure that the likelihood of its exercising its option to defer
payments of interest is "remote" because exercising that option would prevent
the Company from declaring dividends on any class of its equity securities and
the Company has paid regular quarterly dividends on the Steel Stock (and its
common stock prior to the issuance of the Steel Stock) for more than five
years. Accordingly, based on the advice of Special Tax Counsel, the Company
intends to take the position that, as long as the issue price of the
Convertible Debentures is not less than their stated redemption price at
maturity by more than the de minimis OID Amount, the Convertible Debentures
will not be considered to be issued with OID and, further, stated interest on
the Convertible Debentures generally will be taxable to a holder as ordinary
income at the time it is paid or accrued in accordance with the holder's
method of tax accounting. See "--Exchange of 6.50% Convertible Preferred Stock
for Trust Convertible Preferred Securities."
110
Moreover, under the Regulations, if the Company exercises its right to defer
payments of interest, the Convertible Debentures will become OID instruments,
and all holders of the Trust Convertible Preferred Securities will be required
to accrue the stated interest (and any OID, or if the Convertible Debentures
are not considered to be issued with OID, any de minimis OID) on a daily basis
during the extended interest period even though the Company will not pay the
interest in cash until the end of the extended interest period, and even if
some holders generally use the cash method of accounting. A holder who sells
the Trust Convertible Preferred Securities during the extended interest period
will not receive from the Company any cash related to the interest income the
holder accrued and included in its taxable income under the OID rules (because
that cash will be paid to the holder of record at the end of the extended
interest period).
If the Convertible Debentures become OID instruments (i.e., if the Company
ever exercises its right to defer payments of interest), the Convertible
Debentures will be taxed as OID instruments for as long as they remain
outstanding. Thus, even after the end of the extended interest period, all
holders will be required to continue accruing interest (and any OID or de
minimis OID) on the Convertible Debentures on a daily basis, regardless of
their method of accounting. Under the OID rules, a holder would accrue an
amount of interest income each year that approximates the stated interest
payments (and any OID or de minimis OID) called for under the terms of the
Convertible Debentures, and actual cash payments of interest on the
Convertible Debentures would not be reported separately as taxable income. Any
amount of OID included in a holder's gross income (whether or not during an
extended interest period) with respect to a Trust Convertible Preferred
Security will increase such holder's adjusted tax basis in such Trust
Convertible Preferred Security, and the amount of distributions received by
such holder in respect of such accrued OID will reduce the adjusted tax basis
of such Trust Convertible Preferred Security.
The Regulations have not yet been addressed in any rulings or other
interpretations by the IRS, and it is possible that the IRS could take a
position contrary to Special Tax Counsel's interpretation.
RECEIPT OF CONVERTIBLE DEBENTURES OR CASH UPON LIQUIDATION OF THE TRUST;
SHORTENING OF STATED MATURITY
Under certain circumstances, as described under "Description of the Trust
Convertible Preferred Securities--Special Event Distribution or Redemption;
Shortening of Stated Maturity" the Convertible Debentures may be distributed
to holders in exchange for the Trust Convertible Preferred Securities and in
liquidation of the Trust. This distribution cannot occur without an opinion of
an independent tax counsel to the effect that the distribution will not result
in recognition of gain or loss to each holder. If the exchange is a non-
taxable event, each holder would receive an aggregate tax basis in the
Convertible Debentures equal to the holder's aggregate tax basis in the Trust
Convertible Preferred Securities. A holder's holding period in the Convertible
Debentures received in liquidation of the Trust would include the period
during which the Trust Convertible Preferred Securities were held by the
holder. However, the tax-free treatment of the distribution may be adversely
affected as a result of a change in law. In certain circumstances, the stated
maturity of the Convertible Debentures could be shortened at the option of the
Company. Assuming the Convertible Debentures are properly treated as
indebtedness, this change, by itself, would occur pursuant to the terms of the
instrument and would not result in recognition of gain or loss to a holder of
Trust Convertible Preferred Securities. However, the maturity advancement
could be treated as a reissuance for purposes of the OID rules, and could
increase the amount of OID on a Convertible Debenture.
Under certain circumstances described herein (see "Description of the Trust
Convertible Preferred Securities--Trust Special Event Distribution or
Redemption; Shortening of Stated Maturity"), the Convertible Debentures may be
redeemed for cash and the proceeds of the redemption distributed to holders in
redemption of the Trust Convertible Preferred Securities. Under current law,
such a
111
redemption would, for United States federal income tax purposes, constitute a
taxable disposition of the redeemed Trust Convertible Preferred Securities and
a holder would recognize gain or loss as if it sold the redeemed Trust
Convertible Preferred Securities for cash. See "--Sale or Redemption of Trust
Convertible Preferred Securities."
SALE OR REDEMPTION OF TRUST CONVERTIBLE PREFERRED SECURITIES
A holder that sells or redeems Trust Convertible Preferred Securities will
recognize gain or loss equal to the difference between its adjusted tax basis
in the Trust Convertible Preferred Securities and the amount realized on such
sale or redemption (except to the extent that such amount realized is
characterized as a payment in respect of accrued interest on such holder's
allocable share of the Convertible Debentures that such holder has not
included in gross income previously). Assuming that the Company does not defer
payment of interest on the Convertible Debentures, a holder's adjusted tax
basis in the Trust Convertible Preferred Securities will be the fair market
value of those securities on the date of the exchange of shares of 6.50%
Convertible Preferred Stock for Trust Convertible Preferred Securities.
Subject to the discussion below regarding accrued and unpaid interest, such
gain or loss generally will be a capital gain or loss and generally will be a
long-term capital gain or loss if the Trust Convertible Preferred Securities
have been held for more than one year.
Should the Company exercise its right to defer payments on interest, a
holder who disposes of its Trust Convertible Preferred Securities between
record dates for payments of distributions thereon will be required to include
accrued and unpaid interest on the Convertible Debentures through the date of
disposition in income as ordinary income, and to add such amount to its
adjusted tax basis in its allocable share of the underlying Convertible
Debentures deemed disposed. The OID from a holder's pro rata share is then
added to his adjusted basis in the Trust Convertible Preferred Securities. To
the extent the selling price is less than the holder's adjusted tax basis, a
holder will recognize a capital loss. Subject to certain limited exceptions,
capital losses cannot be applied to offset ordinary income for United States
federal income tax purposes.
CONVERSION OF TRUST CONVERTIBLE PREFERRED SECURITIES INTO THE STEEL STOCK
A holder of Trust Convertible Preferred Securities will not recognize
income, gain or loss upon the conversion, through the Conversion Agent, of
Convertible Debentures into the Steel Stock except to the extent of ordinary
income recognized with respect to accrued and unpaid interest on the
Convertible Debentures at that time. A holder of Trust Convertible Preferred
Securities will also recognize gain upon the receipt of cash in lieu of a
fractional share of the Steel Stock equal to the amount of the cash received
less such holder's tax basis in such fractional share. Such a holder's tax
basis in the Steel Stock received upon conversion should generally be equal to
such holder's tax basis in the Trust Convertible Preferred Securities
delivered to the Conversion Agent for exchange, plus the amount of interest
income recognized on the exchange, minus the basis allocated to any fractional
share for which cash is received, and such holder's holding period in the
Steel Stock received upon conversion will begin on the day after the day the
holder acquired the Trust Convertible Preferred Securities delivered to the
Conversion Agent for exchange (except that the holding period of the Steel
Stock deemed issued for accrued interest will begin on the day following the
date of conversion).
CONVERSION PRICE ADJUSTMENT
Treasury Regulations promulgated under section 305 of the Code would treat
holders of Trust Convertible Preferred Securities as having received a
constructive distribution from the Company in the event the Conversion Price
of the Convertible Debentures were adjusted if (i) as a result of such
adjustment, the proportionate interest of such holder in the assets or
earnings and profits of the Company were increased and (ii) the adjustment was
not made pursuant to a bona fide, reasonable
112
anti-dilution formula. An adjustment to the Conversion Price would not be
considered made pursuant to such formula if the adjustment was made to
compensate for certain taxable distributions with respect to the Steel Stock.
Thus, under certain circumstances, a reduction in the Conversion Price for the
holders may result in deemed dividend income to holders to the extent of the
current or accumulated earnings and profits of the Company. Holders of the
Convertible Debentures would be required to include their allocable share of
such deemed dividend in gross income but will not receive any cash related
thereto.
PROPOSED TAX LEGISLATION
See the discussion under "Risk Factors--Risks Relating to the Trust
Convertible Preferred Securities--Proposed Tax Legislation."
INFORMATION REPORTING TO HOLDERS
Income on the Trust Convertible Preferred Securities will generally be
reported to holders on Form 1099, which should be mailed to holders of the
Trust Convertible Preferred Securities by January 31 following each calendar
year.
The Trust will be obligated to report annually to Cede, as holder of record
of the Trust Convertible Preferred Securities, the interest received or
accrued related to the Convertible Debentures for the year. The Trust
currently intends to report such information on Form 1099 prior to January 31
following each calendar year even though the Trust is not legally required to
report to record holders until April 15 following each calendar year. Under
current law, holders of Trust Convertible Preferred Securities who hold as
nominees for beneficial holders will not have any obligation to report
information regarding the beneficial holders to the Trust. The Trust,
moreover, will not have any obligation to report to beneficial holders who are
not also record holders. Thus, beneficial holders of the Trust Convertible
Preferred Securities who hold their Trust Convertible Preferred Securities
through nominees will receive Form 1099 reflecting the income on their Trust
Convertible Preferred Securities from such nominee holders rather than the
Trust.
BACKUP WITHHOLDING
Payments made on, and proceeds from the sale of the Trust Convertible
Preferred Securities or the Convertible Debentures distributed to holders of
the Trust Convertible Preferred Securities may be subject to a "backup"
withholding tax of 31% unless the holder complies with certain identification
requirements. Any withheld amounts will be allowed as a refund or credit
against the holder's United States federal income tax provided the required
information is provided to the IRS.
NON-UNITED STATES PERSONS
For purposes of this discussion, "non-United States person" means any person
who, for United States federal income tax purposes, is not a United States
person (as defined above).
On April 15, 1996, the U.S. Treasury Department issued proposed regulations
that could affect the procedures to be followed by a non-United States person
in establishing non-United States person status. These proposed regulations
would generally be effective for payments made after December 31, 1997. Non-
United States persons should consult their tax advisors regarding the effect,
if any, of the proposed regulations on their acquisition, ownership and
disposition of the Trust Convertible Preferred Securities.
ALL HOLDERS OF 6.50% CONVERTIBLE PREFERRED STOCK THAT ARE NON-UNITED STATES
PERSONS ARE ADVISED TO CONSULT THEIR OWN TAX ADVISORS REGARDING THE
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FEDERAL, STATE, LOCAL, AND FOREIGN TAX CONSEQUENCES OF THEIR EXCHANGE OF
SHARES OF 6.50% CONVERTIBLE PREFERRED STOCK FOR TRUST CONVERTIBLE PREFERRED
SECURITIES AND THE OWNERSHIP, CONVERSION, AND DISPOSITION OF TRUST CONVERTIBLE
PREFERRED SECURITIES RECEIVED IN THE EXCHANGE OFFER IN LIGHT OF THEIR OWN
PARTICULAR CIRCUMSTANCES.
EXCHANGE OF 6.50% CONVERTIBLE PREFERRED STOCK FOR TRUST CONVERTIBLE PREFERRED
SECURITIES
Subject to the discussion of backup withholding below, if a holder that is a
non-United States person proves, in a manner and under arrangements
satisfactory to the Company or other withholding agent, that the exchange of
shares of 6.50% Convertible Preferred Stock for Trust Convertible Preferred
Securities qualifies as a transaction in which gain or loss is recognized
rather than as a dividend (see "--Exchange of 6.50% Convertible Preferred
Stock for Trust Convertible Preferred Securities"), the Company or other
withholding agent will not withhold federal income tax on the issuance of the
Trust Convertible Preferred Securities to that holder and that holder
generally will not be subject to United States federal income tax in respect
of gain recognized on the exchange unless (i) the gain is effectively
connected with a trade or business conducted by the non-United States person
within the United States (in which case the branch profits tax may also apply
if the holder is a foreign corporation), (ii) in the case of a non-United
States person that is an individual, the holder is present in the United
States for a period or periods aggregating 183 days or more in the taxable
year of the exchange and certain other conditions are satisfied or (iii) the
Company is or has been a "United States real property holding corporation"
within the meaning of section 897(c)(2) of the Code within the shorter of the
holder's holding period or the five-year period ending on the date of the
exchange (which the Company does not believe it has been or is currently) and
certain other conditions are satisfied, and no treaty exception is applicable.
If a holder that is a non-United States person exchanges shares of 6.50%
Convertible Preferred Stock for Trust Convertible Preferred Securities and
does not prove, in a manner satisfactory to the Company or other withholding
agent, that such exchange qualifies as a transaction in which gain or loss is
recognized, the Company will treat the issuance of Trust Convertible Preferred
Securities to the non-United States person as a dividend distribution. The
Company will withhold United States federal income tax from the gross proceeds
to that holder in an amount equal to 30% of the proceeds (including Trust
Convertible Preferred Securities that the holder would otherwise have
received) unless the holder is eligible for a reduced tax treaty rate with
respect to dividend income (in which case tax will be withheld at the reduced
rate) or unless the holder establishes that it is exempt from tax (such as by
providing the appropriate form certifying its status as a foreign government).
Except as may otherwise be provided in an applicable income tax treaty, a
holder that is a non-United States person will be taxed at ordinary federal
income tax rates on a net income basis if such dividend is effectively
connected with the conduct of a trade or business of such holder within the
United States (in which case the branch profits tax may also apply if the
holder is a foreign corporation) and will not be subject to the withholding
tax described in the preceding sentence. A holder that is a non-United States
person may be eligible to obtain from the IRS a refund of tax withheld if such
holder meets one of three tests of section 302 described above under "--
Exchange of 6.50% Convertible Preferred Stock for Trust Convertible Preferred
Securities" or is otherwise able to establish that no tax (or a reduced amount
of tax) was due.
PAYMENTS ON TRUST CONVERTIBLE PREFERRED SECURITIES
Subject to a discussion of backup withholding below, payments of principal,
premium, if any, and interest (including OID, if any) on a Trust Convertible
Preferred Security by the Company or its agent (in its capacity as such) to a
beneficial owner that is a non-United States person will not be subject to
United States federal withholding tax provided that (a) such person does not
actually or constructively
114
own 10% or more of the total combined voting power of all classes of stock of
the Company entitled to vote, (b) such person is not a controlled foreign
corporation that is related to the Company actually or constructively through
stock ownership, (c) such person is not a bank that acquired its Trust
Convertible Preferred Security in consideration of an extension of credit made
pursuant to a loan agreement entered into in the ordinary course of business
and (d) either (i) the beneficial owner certifies under penalties of perjury
on a Form W-8 delivered to the Company or its agent, that it is not a United
States person and provides its name and address or (ii) a qualifying
securities clearing organization, bank or other financial institution that
holds customers' securities in the ordinary course of its trade or business
and that holds the Trust Convertible Preferred Security certifies to the
Company or its agent under penalties of perjury that such statement has been
received from the beneficial owner in a suitable form by it or by a qualifying
intermediary and furnishes the payor with a copy thereof.
If the beneficial owner of a Trust Convertible Preferred Security who is a
non-United States person is engaged in a trade or business within the United
States and interest (including OID, if any) on the Trust Convertible Preferred
Security is effectively connected with the conduct of such trade or business,
such beneficial owner may be subject to United States federal income tax on
such interest (including OID, if any) at ordinary federal income tax rates on
a net basis (in which case the branch profits tax may also apply if the holder
is a foreign corporation). As discussed under the heading "Risk Factors--Risks
Relating to the Trust Convertible Preferred Securities--Proposed Tax
Legislation," the Proposed Legislation would deny an interest deduction to the
Company for interest payable on the Convertible Debentures. Such Proposed
Legislation may also cause the Convertible Debentures to be classified as
equity (rather than indebtedness) of the Company for United States federal
income tax purposes. If the Convertible Debentures are not classified for
United States federal income tax purposes as indebtedness of the Company,
payments by the Trust or any of its paying agents to any holder of a Trust
Convertible Preferred Security who is a non-United States person could be
subject to United States withholding tax at a 30% rate (or a lower rate
prescribed by an applicable treaty). Prospective investors that are non-United
States persons should consult their tax advisors concerning the possible
application of these rules.
SALE, EXCHANGE OR CONVERSION OF TRUST CONVERTIBLE PREFERRED SECURITIES
Subject to the discussion of backup withholding below, any capital gain
realized upon the sale or exchange of a Trust Convertible Preferred Security
(including upon retirement of a Trust Convertible Preferred Security or to the
extent cash is received in lieu of a fractional share of Steel Stock upon
conversion) by a beneficial owner who is a non-United States person ordinarily
will not be subject to United States federal income tax unless (i) such gain
is effectively connected with a trade or business conducted by such non-United
States person within the United States (in which case the branch profits tax
may also apply if the holder is a foreign corporation), (ii) in the case of a
non-United States person that is an individual, such holder is present in the
United States for a period or periods aggregating 183 days or more in the
taxable year of the exchange and certain other conditions are satisfied or
(iii) the Company is or has been a "United States real property holding
corporation" within the meaning of section 897(c)(2) of the Code within the
shorter of the holder's holding period or the five-year period ending on the
date of the exchange and certain other conditions are satisfied, and no treaty
exception is applicable.
The conversion of Trust Convertible Preferred Securities into Steel Stock
will not result in a realization of gain or loss or be subject to United
States withholding tax.
BACKUP WITHHOLDING AND INFORMATION REPORTING
Information reporting on IRS Form 1099 and backup withholding at a rate of
31% will not apply to payments of principal and interest (including OID, if
any) or a paying agent to a non-United States
115
holder on a Trust Convertible Preferred Security if the certification
described in clause (d) under "--Payments on Trust Convertible Preferred
Securities" above is received, provided that the payor does not have actual
knowledge that the holder is a United States person. However, interest
(including OID, if any) on a Trust Convertible Preferred Security owned by a
holder that is non-United States person may be required to be reported
annually on IRS Form 1042S.
Payments of the proceeds from the sale by a holder that is a non-United
States person of a Trust Convertible Preferred Security made to or through a
foreign office of a broker will not be subject to information reporting or
backup withholding, except that if the broker is a United States person, a
controlled foreign corporation for United States tax purposes or a foreign
person 50% or more of whose gross income is effectively connected with a
United States trade or business for a specified three-year period, information
reporting may apply to such payments. Payments of the proceeds from the sale
of a Trust Convertible Preferred Security to or through the United States
office of a broker is subject to information reporting and backup withholding
unless the holder certifies as to its non-United States person status or
otherwise establishes an exemption from information reporting and backup
withholding.
ERISA CONSIDERATIONS
Generally, employee benefit plans that are subject to the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), or Section 4975
of the Code ("Plans"), may exchange shares of the 6.50% Convertible Preferred
Stock for the Trust Convertible Preferred Securities, subject to the investing
fiduciary's determination that the investment in the Trust Convertible
Preferred Securities satisfies ERISA's fiduciary standards and other
requirements applicable to investments by the Plan.
ANY PLANS OR OTHER ENTITIES WHOSE ASSETS INCLUDE PLAN ASSETS SUBJECT TO
ERISA OR SECTION 4975 OF THE CODE PROPOSING TO ACQUIRE THE TRUST CONVERTIBLE
PREFERRED SECURITIES SHOULD CONSULT WITH THEIR OWN COUNSEL.
LEGAL MATTERS
Certain matters of Delaware law relating to the validity of the Trust
Convertible Preferred Securities offered hereby will be passed upon for the
Company by Morris, Nichols, Arsht & Tunnell, Wilmington, Delaware, and certain
matters relating to the validity of the Convertible Debentures, the Guarantee
and the Steel Stock will be passed upon for the Company by D.D. Sandman, Esq.,
General Counsel & Senior Vice President--Human Resources, and Secretary of the
Company, or by J.A. Hammerschmidt, Esq., Assistant General Counsel--Corporate,
and Assistant Secretary of the Company. Mr. Sandman and Mr. Hammerschmidt, in
their capacities as General Counsel & Senior Vice President--Human Resources,
and Secretary of the Company, and Assistant General Counsel--Corporate, and
Assistant Secretary of the Company, respectively, are paid salaries by the
Company and participate in various employee benefit plans offered to officers
of the Company generally. Certain federal income tax matters will be passed
upon for the Company by Miller & Chevalier, Chartered, Washington, D.C.
Certain legal matters will be passed upon for the Dealer Managers by Simpson
Thacher & Bartlett (a partnership which includes professional corporations),
New York, New York. Messrs. Sandman or Hammerschmidt and Simpson Thacher &
Bartlett will rely as to certain matters of Delaware law on the opinion of
Morris, Nichols, Arsht & Tunnell.
116
EXPERTS
The consolidated financial statements of USX, the financial statements of
the U.S. Steel Group, the financial statements of the Marathon Group and the
financial statements of the Delhi Group as of December 31, 1996 and 1995 and
for each of the three years in the period ended December 31, 1996,
incorporated in this Prospectus by reference to USX's Annual Report on Form
10-K for the year ended December 31, 1996, have been so incorporated in
reliance on the reports of Price Waterhouse LLP, independent accountants,
given on the authority of said firm as experts in auditing and accounting.
----------------
117
INDEX OF CERTAIN TERMS
Acquiring Person............................................................ 95
Additional Interest......................................................... 77
Administrative Action....................................................... 60
Agent's Message............................................................. 44
ATOP........................................................................ 44
Available Delhi Dividend Amount............................................. 92
Available Steel Dividend Amount............................................. 84
Base Indenture.............................................................. 71
Beneficial Owner............................................................ 105
Board....................................................................... 2
Book-Entry Confirmation..................................................... 44
Business Day................................................................ 53
Cede........................................................................ 67
Certificate of Incorporation................................................ 82
Change in 1940 Act Opinion.................................................. 60
Code........................................................................ 12
Commission.................................................................. 6
Common Stock................................................................ 8
Company..................................................................... 8
Composite Tape.............................................................. 1
Compound Interest........................................................... 75
Conversion Agent............................................................ 54
Conversion Price............................................................ 54
Convertible Debentures...................................................... 1
Convertible Securities...................................................... 105
Debenture Trustee........................................................... 71
Declaration Event of Default................................................ 63
Declaration................................................................. 50
Delaware Trust Act.......................................................... 9
Delaware Trustee............................................................ 50
Delhi Fraction.............................................................. 83
Delhi Group................................................................. 83
Delhi Group Subsidiary...................................................... 92
Delhi Net Income............................................................ 92
Delhi Right................................................................. 95
Delhi Stock................................................................. 8
De Minimis OID Amount....................................................... 110
Depository.................................................................. 105
DGPC........................................................................ 83
Direct Action............................................................... 27
Direct Participants......................................................... 105
Disposition................................................................. 83
Dissolution Tax Opinion..................................................... 60
Distribution Rate........................................................... 3
Distributions............................................................... 3
DTC......................................................................... 40
Eligible Institution........................................................ 43
ERISA....................................................................... 116
Excess Purchase Payment..................................................... 56
Exchange Act................................................................ 6
118
Exchange Offer........................................................... 1
Expiration Date.......................................................... 2
Extension Period......................................................... 3
Group.................................................................... 8
Guarantee................................................................ 4
Guarantee Payments....................................................... 68
Guarantee Trustee........................................................ 26
Holder................................................................... 40
Indenture................................................................ 71
Indenture Event of Default............................................... 63
Indirect Participants.................................................... 105
Institutional Trustee Account............................................ 50
Institutional Trustee.................................................... 50
Interest and Other Financial Costs....................................... 22
Interest Payment Date.................................................... 74
Investment Company....................................................... 60
Investment Company Event................................................. 60
IRS...................................................................... 60
Issue Price.............................................................. 110
Junior Preferred Stock................................................... 82
Letter of Transmittal.................................................... 1
Liquidation.............................................................. 62
Liquidation Distribution................................................. 63
Marathon................................................................. 8
Marathon Group........................................................... 82
Marathon Group Special Event............................................. 59
Marathon Group Subsidiary................................................ 90
Marathon Right........................................................... 95
Marathon Stock........................................................... 8
Market Capitalization.................................................... 90
Market Value............................................................. 83
Market Value Ratio....................................................... 87
Maturity Advancement..................................................... 61
Minimum NYSE Distribution Condition...................................... 2
Moody's.................................................................. 18
NASD..................................................................... 48
Net Proceeds............................................................. 84
1940 Act................................................................. 60
No Recognition Opinion................................................... 59
Non-United States Person................................................. 113
NYSE..................................................................... 4
OID...................................................................... 2
OID Condition............................................................ 2
Participants............................................................. 105
Plans.................................................................... 116
Preferred Stock.......................................................... 82
Proposed Legislation..................................................... 24
Prospectus............................................................... 1
Qualified Stated Interest................................................ 110
Redemption Price......................................................... 58, 95
Redemption Tax Opinion................................................... 60
Registration Statement................................................... 6
119
Regular Trustees............................................................ 50
Regulations................................................................. 110
Restated Rights Agreement................................................... 82
Right....................................................................... 95
Rights Agent................................................................ 82
Securities Act.............................................................. 6
Senior Indebtedness......................................................... 72
SFAS........................................................................ 85
6.50% Convertible Preferred Stock........................................... 1
6.50% Convertible Preferred Stock Conversion Price.......................... 101
Soliciting Dealer........................................................... 48
Special Tax Counsel......................................................... 107
Stated Redemption Price at Maturity......................................... 110
Steel Net Income............................................................ 85
Steel Right................................................................. 95
Steel Stock................................................................. 1
Stock Acquisition Date...................................................... 95
substantially all of the properties and assets of the U.S. Steel Group...... 86
Successor Securities........................................................ 66
Super Majority.............................................................. 64
Supplemental Indenture...................................................... 71
Surplus..................................................................... 31
S&P......................................................................... 18
Tax Event................................................................... 60
Transferor.................................................................. 45
Trust....................................................................... 1
Trust Common Securities..................................................... 1
Trust Common Securities Guarantee........................................... 69
Trust Convertible Preferred Securities...................................... 1
Trust Securities............................................................ 1
Trust Special Event......................................................... 59
Trustees.................................................................... 50
Unit........................................................................ 95
United States person........................................................ 107
U.S. Steel.................................................................. 8
U.S. Steel Group............................................................ 8
U.S. Steel Group Special Events............................................. 59
U.S. Steel Group Subsidiary................................................. 86
USX......................................................................... 8
Voting Stock................................................................ 95
120
The Exchange Agent:
THE BANK OF NEW YORK
By Hand or Overnight Courier: By Mail
(Registered or Certified Mail Recommended):
Tender & Exchange Department 101 Tender & Exchange Department P.O.
Barclay Street Receive and Deliver Box 11248 Church Street Station
Window New York, New York 10286 New York, New York 10286-1248
By Facsimile Transmission
(For Eligible Institutions Only):
(212) 815-6213
Confirm Receipt of Notice of Guaranteed Delivery
by Telephone:
(212) 815-4997
The Information Agent:
MORROW & CO., INC.
909 Third Avenue
20th Floor New York, NY 10022
(212) 754-8000
Toll Free (800) 566-9061
Banks and Brokerage Firms
please call:
(800) 662-5200
Any questions or requests for assistance or additional copies of this
Prospectus and the Letter of Transmittal may be directed to the Information
Agent at its telephone number and location set forth above. You may also
contact your broker, dealer, commercial bank or trust company or other nominee
for assistance concerning the Exchange Offer.
The Dealer Managers for the Exchange Offer are:
MERRILL LYNCH & CO.
GOLDMAN, SACHS & CO. World Financial Center
85 Broad Street North Tower--Fifth Floor
New York, New York 10004 New York, New York 10281
(800) 323-5678 (Toll-Free) (800) 436-1019 (Toll-Free)
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Article V of the Company's By Laws provides that the Company shall indemnify
to the fullest extent permitted by law any person who is made or is threatened
to be made a party or is involved in any action, suit, or proceeding whether
civil, criminal, administrative or investigative by reason of the fact that he
is or was a director, officer, employee or agent of the Company or was serving
at the request of the Company as an officer, director, employee or agent of
another corporation, partnership, joint venture, enterprise, or nonprofit
entity.
The Company is empowered by Section 145 of the Delaware General Corporation
Law, subject to the procedures and limitations stated therein, to indemnify
any person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of the Company) by reason of the fact that such person is or was an
officer, employee, agent or director of the Company, or is or was serving at
the request of the Company as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise
against expenses (including attorneys' fees), judgments, fines and amounts
paid in settlement actually and reasonably incurred by such person in
connection with such action, suit or proceeding if he acted in good faith and
in a manner he reasonably believed to be in or not opposed to the best
interests of the Company, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful. The
Company may indemnify any such person against expenses (including attorneys'
fees) in an action by or in the right of the Company under the same
conditions, except that no indemnification is permitted without judicial
approval if such person is adjudged to be liable to the Company. To the extent
such person is successful on the merits or otherwise in the defense of any
action referred to above, the Company must indemnify him against the expenses
which he actually and reasonably incurred in connection therewith.
Policies of insurance are maintained by the Company under which directors
and officers of the Company are insured, within the limits and subject to the
limitations of the policies, against certain expenses in connection with the
defense of actions, suits or proceedings, and certain liabilities which might
be imposed as a result of such actions, suits or proceedings, to which they
are parties by reason of being or having been such directors or officers. In
addition, the Regular Trustees of the Trust and their attorneys-in-fact are
similarly insured.
The Company's Certificate of Incorporation provides that no director shall
be personally liable to the Company or its stockholders for monetary damages
for any breach of fiduciary duty by such director as a director, except (i)
for breach of the director's duty of loyalty to the Company or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) pursuant to
Section 174 of the Delaware General Corporation Law, or (iv) for any
transaction from which the director derived an improper personal benefit.
Section 11 of the form of Dealer Manager Agreement filed as Exhibit 1.1 to
this registration statement provides for indemnification of each of the
Company and the Trust, their directors, trustees, and officers who sign this
registration statement, and each person, if any, who controls the Company or
the Trust within the meaning of either Section 15 of the Securities Act of
1933, as amended,or Section 20 of the Securities Exchange Act of 1934, as
amended, by the Dealer Manager, with respect to information relating to the
Dealer Manager, furnished to the Company or the Trust in writing by the Dealer
Manager, expressly for use in this registration statement and certain other
materials prepared in connection with the exchange offer contemplated hereby.
II-1
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
See Index to Exhibits.
ITEM 22. UNDERTAKINGS.
(a) The Company hereby undertakes to respond to requests for information
that is incorporated by reference into the prospectus pursuant to Item 4,
10(b), 11 or 13 of Form S-4, within one business day of receipt of such
request, and to send the incorporated documents by first-class mail or equally
prompt means. This includes information contained in documents filed
subsequent to the effective date of the registration statement throughout the
date responding to the request.
(b) The undersigned registrants each hereby undertake to supply by means of
a post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
(c) The Company hereby undertakes that, for purposes of determining any
liability under the Securities Act of 1933, each filing of the Company's
annual report pursuant to Section 13(a) or Section 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee
benefit plan's annual report pursuant to Section 15(d) of the Securities
Exchange Act of 1934) that is incorporated by reference in the registration
statement shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(d) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Company pursuant to the foregoing provisions or otherwise, the Company has
been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities
Act of 1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Company of expenses incurred or paid by a director, officer or controlling
person of the Company in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Company will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
II-2
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Pittsburgh, Commonwealth
of Pennsylvania, on March 14, 1997.
USX Corporation (Registrant)
By /s/ Kenneth L. Matheny
-----------------------------------
Kenneth L. Matheny
Vice President & Comptroller
Pittsburgh, Pennsylvania
Pursuant to the requirements of the Securities Act of 1933, this registration
statement has been signed by the following persons in the capacities indicated
on March 14, 1997.
SIGNATURE TITLE
--------- -----
- ------------------------------------------------------------- Chairman of the Board of Directors,
Thomas J. Usher Chief Executive Officer and Director
(Principal Executive Officer)
* Vice Chairman & Chief Financial
- ------------------------------------------------------------- Officer and Director
Robert M. Hernandez (Principal Financial Officer)
/s/ Kenneth L. Matheny Vice President & Comptroller
- ------------------------------------------------------------- (Principal Accounting Officer)
Kenneth L. Matheny
- ------------------------------------------------------------- Director
Neil A. Armstrong
*
- ------------------------------------------------------------- Director
Victor G. Beghini
- ------------------------------------------------------------- Director
Jeanette Grasselli Brown
*
- ------------------------------------------------------------- Director
Charles A. Corry
*
- ------------------------------------------------------------- Director
Charles R. Lee
*
- ------------------------------------------------------------- Director
Paul E. Lego
*
- ------------------------------------------------------------- Director
Ray Marshall
II-3
SIGNATURE TITLE
--------- -----
Director
- ---------------------------------------
John F. McGillicudy
* Director
- ---------------------------------------
John M. Richman
* Director
- ---------------------------------------
Seth E. Schofield
* Director
- ---------------------------------------
John W. Snow
* Director
- ---------------------------------------
Paul J. Wilhelm
* Director
- ---------------------------------------
Douglas C. Yearley
*By /s/ Kenneth L. Matheny
-------------------------------------
Kenneth L. Matheny, Attorney-in-Fact
II-4
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this amendment to the registration statement to be signed on
its behalf by the undersigned, thereunto duly authorized in the City of
Dallas, State of Texas, on March 14, 1997.
USX Capital Trust I
*
By:
---------------------------------
A. G. Adkins
Trustee
Pursuant to the requirements of the Securities Act of 1933, this amendment
to the registration statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
*
- ------------------------------------- Trustee March 14, 1997
A. G. Adkins
*
- ------------------------------------- Trustee March 14, 1997
P. J. Kuntz
*
- ------------------------------------- Trustee March 14, 1997
M. K. Stewart
The Bank of New York Trustee March , 1997
By: _________________________________
Title: ______________________________
The Bank of New York (Delaware) Trustee March , 1997
By: _________________________________
Title: ______________________________
*By: /s/ W. F. Schwind, Jr.
--------------------------------
W. F. Schwind, Jr.
Attorney-in-Fact
II-5
EXHIBIT INDEX
NUMBER EXHIBIT
1.1 Form of Dealer Manager Agreement.
3.1 Certificate of Trust of the Trust.
4.1 Restated Certificate of Incorporation of the Company, as amended and currently in
effect.
4.2 Bylaws of the Company, as amended and currently in effect (incorporated by
reference to Exhibit 3(a) to the Company's Report on Form 10-Q for the quarter
ended June 30, 1996).
4.3 Form of Multi-Series Indenture, between the Company and The Bank of New York,
as trustee.
4.4 Form of First Supplemental Indenture, between the Company and The Bank of New
York, as trustee.
4.5 Declaration of Trust of the Trust.
4.6 Form of Amended and Restated Declaration of Trust of the Trust, including form of
Trust Convertible Preferred Security.
4.7 Form of Guarantee Agreement.
4.8 Form of Common Stock certificate of the Company.*
4.9 Amended and Restated Rights Agreement (incorporated by reference to Form 8
Amendment to Form 8-A filed on October 5, 1992.)
5.1 Opinion of Morris, Nichols, Arsht & Tunnell.*
5.2 Opinion of Dan D. Sandman, Esq.*
8.1 Opinion of Miller & Chevalier, Chartered.*
12.1 Statement re computation of ratio of earnings to fixed charges for the Company
(incorporated by reference to Exhibit 12.2 to the Company's Annual Report on Form
10-K for the year ended December 31, 1996).
12.2 Statement re computation of ratio of earnings to combined fixed charges and
preferred stock dividends for the Company (incorporated by reference to Exhibit
12.1 to the Company's Annual Report on Form 10-K for the year ended December 31,
1996).
23.1 Consent of Price Waterhouse LLP.
23.2 Consent of Morris Nichols Arhst & Tunnell (contained in its opinion filed as
Exhibit 5.1 to this Registration Statement).*
23.3 Consent of Dan D. Sandman, Esq. or J. A. Hammerschmidt (contained in the opinion
filed as Exhibit 5.2).*
23.4 Consent of Miller & Chevalier, Chartered (contained in its opinion filed as
Exhibit 8.1 to this Registration Statement).*
24.1 Powers of Attorney (the Company).
24.2 Power of Attorney (the Trust) (contained in Exhibit 4.5).
25.1 Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939, as
amended, of The Bank of New York, as trustee under the Indenture.
25.2 Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939, as
amended, of The Bank of New York, as trustee under the Amended and Restated
Declaration of Trust of the Trust.
25.3 Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939, as
amended, of The Bank of New York, as trustee under the Guarantee Agreement.
99.1 Form of Letter of Transmittal.
99.2 Form of Notice of Guaranteed Delivery.
99.3 Form of Letter to Registered Holders and Depository Trust Company Participants.
99.4 Form of Letter to Clients.
99.5 Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other
Nominees.
99.6 Form of Newspaper Announcement.
- --------
* To be filed by amendment