SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
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Check the appropriate box:
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14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-11(c) or
Section240.14a-12
USX CORPORATION
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(Name of Registrant as Specified In Its Charter)
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and 0-11.
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[LOGO]
USX CORPORATION
USX-MARATHON GROUP COMMON STOCK
USX-U. S. STEEL GROUP COMMON STOCK
NOTICE OF ANNUAL MEETING
OF STOCKHOLDERS
AND PROXY STATEMENT
Tuesday, April 28, 1998
10:00 A.M., Eastern Daylight Time
Grand Ballroom
The Westin William Penn Hotel
530 William Penn Place
Pittsburgh, PA
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TABLE OF CONTENTS
PAGE
Notice of Annual Meeting of Stockholders................... 3
Proxy Statement............................................ 3
The Board of Directors................................... 4
Proposals of the Board--
Proposal No. 1--Election of Directors.................. 6
Nominees for Director................................ 6
Continuing Directors................................. 8
Proposal No. 2--Election of Independent Accountants.... 11
Proposal No. 3--Approval of Amendments to the USX
Corporation Senior Executive Officer Annual Incentive
Compensation Plan.................................... 11
Proposal No. 4--Approval of Amendments to the USX
Corporation 1990 Stock Plan.......................... 13
Security Ownership....................................... 16
Executive Compensation and Other Information............. 18
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Please Mark, Sign and Return Your Proxy Card Promptly
[LOGO]
USX Corporation Thomas J. Usher
600 Grant Street Chairman, Board of
Pittsburgh, PA 15219-4776 Directors
& Chief Executive Officer
March 9, 1998
To the Stockholders:
The 1998 annual meeting of stockholders (the "Meeting") will be held in the
Grand Ballroom of The Westin William Penn Hotel, 530 William Penn Place,
Pittsburgh, Pennsylvania, on Tuesday, April 28 at 10:00 A.M., Eastern Daylight
Time.
The election of directors and independent accountants will take place at the
Meeting. This year we will elect five Class II directors whose terms will expire
at the 2001 annual meeting. The proxy statement contains information with
respect to the nominees as well as the other directors who continue in office.
All of the nominees except one have previously been elected by the stockholders.
The proxy statement also contains two proposals by the Board of Directors. The
first would amend the Senior Executive Officer Annual Incentive Compensation
Plan by raising the maximum award payable to a participant, adding certain
positions to the list of participants and deleting references to the former
USX-Delhi Group. The second would amend the 1990 Stock Plan by extending the
Stock Plan's term to 2005 and its coverage to include employees of certain USX
affiliates, incorporating performance measures for the vesting of restricted
stock in order to preserve the tax deductibility of the value of such stock
under Section 162(m) of the Internal Revenue Code, correspondingly increasing
the maximum number of shares a participant could be awarded during a calendar
year, limiting the number of shares that could be granted in the form of
restricted stock, prohibiting the repricing of options except in the event of a
change in the outstanding common stock of the Corporation, limiting the term of
an option to ten years from the date of grant, providing that restrictions on
restricted stock will terminate in the event of a change in control of the
Corporation, adding a stock option restoration feature and deleting references
to the former USX-Delhi Group.
We hope you will be represented at the Meeting by marking, signing and returning
the enclosed proxy card as promptly as possible, whether or not you expect to be
present in person. The directors of USX Corporation appreciate the cooperation
of stockholders in directing proxies to vote at the Meeting.
Sincerely,
[SIGNATURE]
USX CORPORATION
600 Grant Street, Pittsburgh, PA 15219-4776
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
ON APRIL 28, 1998
The annual meeting of the stockholders of USX Corporation (the "Meeting")
will be held in the Grand Ballroom of The Westin William Penn Hotel, 530 William
Penn Place, Pittsburgh, Pennsylvania, on Tuesday, April 28, 1998 at 10:00 A.M.,
Eastern Daylight time, for the following purposes:
To elect five Class II directors;
To elect independent accountants for 1998;
To approve a proposal to amend the Senior Executive Officer Annual Incentive
Compensation Plan (a) to raise the maximum award payable to a participant, (b)
to add certain positions to the list of participants, and (c) to delete
references to the former USX-Delhi Group;
To approve a proposal to amend the 1990 Stock Plan (a) to extend the Stock
Plan's term to 2005 and its coverage to include employees of certain USX
affiliates, (b) to incorporate performance measures for the vesting of
restricted stock in order to preserve the tax deductibility of the value of such
stock under Section 162(m) of the Internal Revenue Code, (c) to correspondingly
increase the maximum number of shares a participant could be awarded during a
calendar year, (d) to limit the number of shares that could be granted in the
form of restricted stock, (e) to prohibit the repricing of options except in the
event of a change in the outstanding common stock of the Corporation, (f) to
limit the term of an option to ten years from the date of grant, (g) to provide
that restrictions on restricted stock will terminate in the event of a change in
control of the Corporation, (h) to add a stock option restoration feature, and
(i) to delete references to the former USX-Delhi Group; and
To transact such other business as may properly come before the Meeting.
Holders of record of each of the classes of USX's common stock on the books
of USX Corporation at the close of business on February 27, 1998 are entitled to
vote at the Meeting. Beneficial owners of shares of USX's common stock held by
banks, brokers or other intermediaries (i.e., in "street name") must present
proof of their ownership for admittance to the Meeting. Such proof may be in the
form of a recent brokerage statement or a letter or proxy from the intermediary.
By order of the Board of Directors,
DAN D. SANDMAN,
Secretary
Dated, March 9, 1998
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PROXY STATEMENT
This proxy statement is furnished in connection with the solicitation of
proxies by the Board of Directors (the "Board") of USX Corporation ("USX" or the
"Corporation") for use at the 1998 annual meeting of stockholders (the
"Meeting") to be held on April 28, 1998 in the Grand Ballroom of The Westin
William Penn Hotel, 530 William Penn Place, Pittsburgh, Pennsylvania. The
enclosed proxy is for the use of holders of record of USX-Marathon Group Common
Stock ("Marathon Stock") and USX-U.S. Steel Group Common Stock ("Steel Stock")
at the close of business on February 27, 1998. The USX-Delhi Group Common Stock
was redeemed on January 26, 1998 and will therefore not be voted at the Meeting.
The proxy is a means by which stockholders may authorize the voting of their
shares at the Meeting. Shares cannot be voted at the Meeting unless the owner of
record is present to vote or is represented by a proxy. Shares represented by
proxies received will be voted as specified by the stockholder. Except as
otherwise specified in the proxy, shares will be voted for the election of the
nominees for director named herein, for the election of Price Waterhouse LLP as
independent accountants for 1998 and for the proposals to amend the Senior
Executive Officer Annual Incentive Compensation Plan and the 1990 Stock Plan.
Any person who has signed and returned a proxy may revoke it at any time before
it is exercised by submitting a subsequently executed
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proxy, by giving notice of revocation to the Secretary of USX or by voting in
person at the Meeting. Both classes of common stock will vote together as a
single class on all matters presented for consideration at the Meeting.
Directors are elected by a plurality, and independent accountants by a majority,
of the votes of the shares present in person or represented by proxy and
entitled to vote. The proposals to amend the Senior Executive Officer Annual
Incentive Compensation Plan and the 1990 Stock Plan must receive a majority of
the votes present in person or represented by proxy and entitled to vote in
order to be approved. Abstentions are counted as votes present and entitled to
vote and have the effect of votes against a particular matter. Broker non-votes
are not counted in determining the number of shares voted for or against any
nominee for director or any other voting matter. Both abstentions and broker
non-votes are counted in determining the presence of a quorum.
The Board has adopted a policy on confidential voting with respect to
proxies. The policy, which will be applicable to voting in connection with the
Meeting, provides stockholders confidentiality in voting. Accordingly, all
executed proxy cards and ballots which identify stockholders are held
permanently confidential, except (i) as necessary to meet any applicable legal
requirements, (ii) in limited circumstances, such as contested proxy
solicitations, and (iii) to allow inspectors of election to tabulate and certify
the vote. The tabulators, who are currently employees of USX, and the inspectors
of election, who are not employees of USX, are required to execute appropriate
confidentiality agreements.
The Board knows of no business that will be presented for consideration at
the Meeting other than the matters described in this proxy statement. If any
other matters are presented, proxies will be voted in accordance with the best
judgment of the proxy holders.
As of the close of business on February 27, 1998, there were outstanding
288,794,243 shares of Marathon Stock and 86,578,618 shares of Steel Stock. At
the Meeting each share of Marathon Stock will be entitled to one vote and each
share of Steel Stock will be entitled to 1.027 votes with respect to matters to
be voted upon by both classes of common stock voting as a single class. The
number of votes each share of Steel Stock is entitled to cast has been
calculated using a formula based on time-weighted average ratios of the market
value of one share of Steel Stock to one share of Marathon Stock over the 20
business day period ending on February 20, 1998, as provided in USX's
Certificate of Incorporation. Shares of preferred stock are not entitled to vote
at the Meeting. This proxy statement was first mailed to the stockholders of USX
on or about March 9, 1998.
THE BOARD OF DIRECTORS
The business of USX is under the general direction of the Board as provided
by the By-Laws of USX and the laws of Delaware, the state of incorporation.
There are five principal committees of the Board: the Audit, Compensation,
Organization and Corporate Governance, and Public Policy Committees and the
Committee on Financial Policy.
THE AUDIT COMMITTEE has oversight responsibility for ensuring the integrity
of the financial reports of USX, determining that the administrative,
operational and internal accounting controls are reviewed periodically to assure
that USX is operating in accordance with prescribed procedures and codes of
conduct and providing direction to the internal audit staff and the independent
accountants. In carrying out its responsibilities, the Audit Committee makes
recommendations to the Board regarding the independent accountants to be
nominated for election by the stockholders and reviews the independence of such
accountants, approves the scope of the annual audit activities of the
independent accountants and USX's internal auditors, approves the audit fee
payable to the independent accountants and reviews audit results. It also has
been assigned the responsibility of reviewing matters pertaining to potentially
divergent interests, if any, between the two classes of common stock, the
policies and practices of USX with respect to the two business groups, the
allocation of charges and credits between the two business groups and the
discharge by the Board of its fiduciary duties to the common stockholders in the
context of the two separate classes of stock. In addition, the Audit Committee
reviews and approves the Form 10-K Annual Report filed with the Securities and
Exchange Commission (the "Commission"). Mr. Armstrong, Dr. Brown and Messrs.
Corry, Marshall, McGillicuddy, Schofield, Snow and Yearley are members of the
Audit Committee, and Mr. Armstrong is Chairman.
THE COMPENSATION COMMITTEE is responsible for making recommendations to the
Board on all matters of policy and procedures relating to compensation of
executive management, for approving the salaries of officers (other than the
officer-directors, whose salaries are approved by the Board) and for
administration of the Annual Incentive Compensation Plan and the Senior
Executive Officer Annual Incentive Compensation Plan. The Committee also
approves grants of options, stock appreciation rights and restricted stock
under, and administers, the plans under which long-term incentives are granted.
The Committee is authorized to adopt and amend, on behalf of USX, employee
benefit plans, to review the activities of United States Steel and Carnegie
Pension Fund as administrator of certain benefit plans and to make
recommendations to the Board concerning policy matters relating to employee
benefits. Its members are Messrs. Lee, Lego, McGillicuddy and Schofield, and Mr.
McGillicuddy is Chairman.
THE ORGANIZATION AND CORPORATE GOVERNANCE COMMITTEE makes recommendations to
the Board concerning the appropriate size and composition of the Board,
including candidates for election as directors, the composition and functions of
committees of the Board, the compensation of non-employee directors, and all
matters relating to the development and effective
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functioning of the Board. It also confers with USX's management concerning plans
for succession to executive management positions and assesses and makes
recommendations concerning overall corporate governance to the extent specific
matters are not the assigned responsibility of other committees of the Board.
The Organization and Corporate Governance Committee, in recommending candidates
for election as directors, among other considerations, studies from time to time
the composition of the Board and endeavors to locate candidates for Board
membership whose backgrounds indicate that they have broad knowledge and
experience in business and society in general. The Organization and Corporate
Governance Committee also considers nominees recommended by stockholders for
election as director. Such recommendations, together with the nominee's
qualifications and consent to be considered as a nominee, should be sent to the
Secretary of USX for presentation to the Organization and Corporate Governance
Committee. Messrs. Armstrong, Corry, Lego, Richman, Schofield and Yearley are
members of the Organization and Corporate Governance Committee, and Mr. Yearley
is Chairman.
THE PUBLIC POLICY COMMITTEE reviews and makes recommendations to the Board
concerning corporate policy in connection with community and governmental
relations, codes of conduct, environmental, safety and OSHA matters, investor
relations, trade matters and other broad social, political and public issues.
Mr. Armstrong, Dr. Brown and Messrs. Lee, Lego, Marshall, McGillicuddy, Richman
and Snow are members of the Public Policy Committee, and Mr. Lego is Chairman.
THE COMMITTEE ON FINANCIAL POLICY provides oversight with respect to the
appropriate capital structure and financial policies for the Corporation. In
undertaking such oversight, the key responsibility of the Committee is to make
recommendations to the Board concerning dividends. The Committee is delegated
authority to approve financings by USX, except for financings which involve the
issuance of common equity. This authority includes the recommendation of action
to subsidiary companies and partnerships or joint ventures involving USX. The
Committee is delegated authority to authorize loans to outside entities, to
authorize guarantees by USX of the credit of others and to authorize other uses
of USX credit, and to approve the Corporation's funding policy for its pension
and other post employment benefit plans. Collaterally, the Committee is
delegated responsibility for reviewing the performance of United States Steel
and Carnegie Pension Fund as investment manager and/or trustee of employee
benefit plans for the Corporation. In addition, the Committee receives reports
and makes recommendations to the Board on various financial matters. Its members
are Dr. Brown and Messrs. Corry, Lee, Marshall, Richman, Snow and Yearley, and
Mr. Lee is Chairman.
The Board of Directors met ten times in 1997. The Audit Committee met five
times in 1997, the Compensation Committee four times, the Organization and
Corporate Governance Committee three times, the Public Policy Committee three
times and the Committee on Financial Policy four times. The directors spend
considerable time in preparing for meetings of the Board and the committees on
which they serve. They also attend as many of the meetings as is possible.
During 1997, attendance of the directors averaged 92%. Due to a short illness,
one director, John M. Richman, attended fewer than 75% of the meetings of the
Board and the committees on which he serves. But for such illness, his
attendance would have been above 75%.
COMPENSATION OF DIRECTORS
Directors who are officers or employees of USX or of its subsidiaries
receive no fees or remuneration, as such, for service as a member of the Board
or any Board committee. The By-Laws of USX provide that each director who is not
such an officer or employee shall receive such allowances and attendance fees as
the Board may from time to time determine. The Board has determined that
non-employee directors shall each receive annual retainers of $60,000, each
Chairman of a Board committee an additional annual fee of $6,000 and other
members of a Board committee an additional annual fee of $5,000 each, plus a fee
of $1,600 for each Board or committee meeting attended.
Pursuant to the USX Corporation Deferred Compensation Plan for Non-Employee
Directors (the "Deferred Compensation Plan") non-employee directors may defer
some or all of their annual retainers in the form of Common Stock Units or cash.
Common Stock Units are book entry units equal in value to a share of Marathon
Stock or Steel Stock, as the case may be. New directors will be required to
receive at least 50 percent of their annual retainers in the form of Common
Stock Units. Common Stock Units are credited in January of each year to each
non-employee director's account as a combination of Marathon Stock and Steel
Stock in the same ratio that the outstanding shares of each class of common
stock, on a fully diluted basis, bear to each other on the last day of the
preceding calendar year. Each Common Stock Unit increases or decreases in value
by the same amount and with the same frequency as the fair market value of a
share of the corresponding class of common stock. Each quarter, whenever
dividends are paid on the Corporation's common stock, equivalent amounts are
converted to Common Stock Units and credited to each deferred stock account.
Deferred cash accounts may be invested in certain investment options. Deferred
stock benefits are distributed in shares of common stock within five business
days after a non-employee director leaves the Board. Deferred cash benefits are
distributed either in a lump sum or in installments over ten years, in either
case after the director leaves the Board. In the event of a change in control of
the Corporation resulting in the removal of a non-employee director from the
Board, such director will receive cash equal to the aggregate value of his or
her deferred cash account and deferred stock account as determined using the
higher of the closing prices of each class of the Corporation's common stock on
the New York Stock Exchange on the date of such change in control or the highest
price actually paid for each class of the Corporation's common stock in
connection with such change in control.
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In 1997 the Board eliminated the Non-Employee Director Retirement Benefit
Program (the "Retirement Program"). Accrued vested benefits under the Retirement
Program were converted into Common Stock Units under the Deferred Compensation
Plan. In addition, in order to compensate for lost future benefits, the annual
retainer was increased by $30,000. Each director has elected to take at least
that amount in the form of Common Stock Units.
The USX Corporation Non-Employee Director Stock Plan provides that USX will
supplement the fees paid to each non-employee director with a grant of shares of
each class of common stock of USX equal to that number of shares of such class
purchased in the open market by the director up to a maximum of 500 shares of
such class. In order to qualify for such grants, non-employee directors must
have purchased shares during the 60 days following the date of their initial
election to the Board.
The retirement policy for members of the Board provides that each
non-employee director may continue to serve until the end of the month in which
age 72 is attained and that each officer-director may continue to serve until
retirement as an employee, except that the chief executive officer may continue
to serve after such retirement if the Board requests that such chief executive
officer do so, provided that under no circumstances shall the chief executive
officer serve after the month in which such chief executive officer attains age
70. The policy requires retirement notwithstanding that the director's term
expires at a later date. It also provides that directors who undergo a
significant change in their business or professional careers should volunteer to
resign from the Board.
PROPOSALS OF THE BOARD
The following proposals are expected to be presented to the Meeting by the
Board.
PROPOSAL NO. 1--ELECTION OF DIRECTORS
USX's Certificate of Incorporation provides that the directors shall be
divided into three classes: Class I, Class II and Class III, each class to
consist, as nearly as may be possible, of one-third of the whole number of the
Board. At each annual meeting the directors elected to succeed those whose terms
expire shall be identified as being of the same class as those directors they
succeed and shall be elected for a term to expire at the third annual meeting of
stockholders after their election, and until their successors are duly elected
and qualified. A director elected to fill a vacancy is elected to the same class
as the director he or she succeeds and a director elected to fill a newly
created directorship holds office until the next election of the class to which
such director is elected.
The Board has set the maximum number of directors at sixteen, pursuant to
the provisions of the By-Laws. The current five Class II directors are nominees
for election this year for a three-year term expiring at the 2001 annual
meeting. All of the nominees (except Mr. Wilhelm, who was elected by the
directors effective July 25, 1995) and all of the continuing Class I and Class
III directors have previously been elected by the stockholders. Of the fifteen
present directors, four are current officers of USX, one is a retired officer of
USX, seven have top executive experience with a wide variety of businesses, one
was with the National Aeronautics and Space Administration and served as a
university professor before entering business, one had a career as a
distinguished chemist before becoming an educator and one has a distinguished
career in education in addition to service as a member of the President's
Cabinet. A brief statement of the background of each nominee and each continuing
director is given on the following pages. If any nominee shall be unable to
serve, proxies may be voted for another person designated by the Board.
To be eligible for election as directors, persons nominated other than by
the Board must be nominated in accordance with the procedures set forth in the
By-Laws which require that notice be received by the Secretary at least 60 days,
but not more than 90 days, prior to the date of the Meeting containing certain
information regarding the person or persons to be nominated and the stockholder
giving such notice.
NOMINEES FOR CLASS II DIRECTOR--TERM EXPIRES 2001
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VICTOR G. BEGHINI Director since
[PHOTO] 1990 Age: 63
VICE CHAIRMAN-MARATHON GROUP, USX CORPORATION. Mr. Beghini graduated from
Pennsylvania State University with a BS degree in petroleum engineering.
He joined Marathon in 1956 and served in various positions throughout the
United States until being elected vice president, supply & transportation
in early 1978 and a director of Marathon later that year. He was elected
president of Marathon Petroleum Company in January 1984, senior vice
president, domestic exploration and production for Marathon Oil Company in
1985 and senior vice president, worldwide production in 1986. Mr. Beghini
was elected president of Marathon Oil Company in 1987. He was elected vice
chairman-energy and a director of USX in June 1990 and vice
chairman-Marathon Group in May 1991. He is a director of Baker Hughes
Inc., Pitt-Des Moines, Inc. and the American Petroleum Institute; and a
member of the National Petroleum Council.
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6
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CHARLES R. LEE Director since
[PHOTO] 1991 Age: 58
CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER, GTE CORPORATION
(TELECOMMUNICATIONS). Mr. Lee received a Bachelor's degree in
metallurgical engineering from Cornell University and an MBA with
distinction from the Harvard Graduate School of Business. He served in
various financial and management positions before becoming senior vice
president-finance for Penn Central Corp. and then Columbia Pictures
Industries Inc. In 1983 he joined GTE as senior vice president of finance
and in 1986 was named senior vice president of finance and planning. He
was elected president, chief operating officer and director in December
1988 and elected to his present position in May 1992. Mr. Lee is a
director of The Procter & Gamble Company, the Stamford Hospital
Foundation, the New American Schools Development Corporation and United
Technologies Corporation. He is a member of The Business Council, the
Business Roundtable, The Conference Board and the New American Realities
Committee of the National Planning Association. He is also a member of the
Harvard Business School's Board of Directors of the Associates and a
trustee of Cornell University.
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RAY MARSHALL Director since
[PHOTO] 1994 Age: 69
PROFESSOR, UNIVERSITY OF TEXAS. Dr. Marshall graduated from Millsaps
College in 1949 with a BA degree and received an MA in economics from the
Louisiana State University in 1950 and a PhD in economics from the
University of California at Berkeley in 1954. From 1962 to 1967, Dr.
Marshall was a professor of economics at the University of Texas at
Austin. He was chairman of the department of economics and held the chair
of Alumni Professor of Economics at the University of Kentucky from 1967
to 1969. He returned to the University of Texas as chairman of the
department of economics and director of the Center for the Study of Human
Resources in 1969. In 1977 Dr. Marshall became the U.S. Secretary of Labor
under the Carter administration. Dr. Marshall currently holds the Audre
and Bernard Rapoport Centennial Chair in Economics and Public Affairs at
the University of Texas at Austin.
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THOMAS J. USHER Director since 1991 Age:
[PHOTO] 55
CHAIRMAN OF THE BOARD & CHIEF EXECUTIVE OFFICER, USX CORPORATION. Mr.
Usher graduated from the University of Pittsburgh with a BS degree in
industrial engineering, an MS degree in operations research and a PhD in
systems engineering. He joined USX in 1965 and held various positions in
industrial engineering. From 1975 through 1979, he held a number of
management positions at USX's South and Gary Works. He was elected
executive vice president-heavy products in 1986, president-U.S. Steel
Group and director of USX in 1991, president & chief operating officer of
USX in 1994 and chairman of the board and chief executive officer
effective July 1, 1995. He is a director of PNC Bank, N.A., PPG
Industries, Inc., Transtar, Inc., the International Iron and Steel
Institute and the U.S.-Japan Business Council, Inc.; Vice Chairman of the
American Iron and Steel Institute; a member of the Policy Committee of the
Business Roundtable; Director and Chairman of the U.S.-Korea Business
Council; and a member of the Board of Trustees of the University of
Pittsburgh and of the Board of the Extra Mile Education Foundation.
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PAUL J. WILHELM Director since
[PHOTO] 1995 Age: 56
PRESIDENT-U.S. STEEL GROUP, USX CORPORATION. Mr. Wilhelm received a BS
degree in mechanical engineering from Carnegie-Mellon University in 1964
and joined USX following graduation. After holding a number of management
positions, Mr. Wilhelm in 1992 was elected vice president-technology &
management services for the U.S. Steel Group. In 1993 he was named
president of USS/Kobe Steel Company, a joint venture between subsidiaries
of USX and Kobe Steel Ltd. Mr. Wilhelm was elected vice
president-operations of the U.S. Steel Group in 1994 and was elected to
his current position the same year. He is a member of the Association of
Iron & Steel Engineers and the American Iron & Steel Institute, serves on
the board of the Japan-America Society of Pennsylvania and is a member of
the board of trustees of Carnegie Mellon University.
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CONTINUING CLASS III DIRECTORS--TERM EXPIRES 1999
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JEANETTE G. BROWN Director since 1993 Age:
[PHOTO] 69
RETIRED DIRECTOR OF CORPORATE RESEARCH, BP AMERICA. Dr. Brown graduated
from Ohio University in 1950 with a BS degree and received an MS degree
from Western Reserve University in 1958. She holds eight D.Sc. (hon.)
degrees. Dr. Brown completed the Executive Management School, University
of California, Berkeley. From 1950 to 1988 she was employed by BP America
(formerly The Standard Oil Company) in various research positions. She
retired as director of corporate research, environmental and analytical
sciences. She is a director of AGA Gas, Inc., The BF Goodrich Company and
McDonald & Co. Investments, Inc. Dr. Brown is a trustee of the Ohio
University Foundation and was Distinguished Visiting Professor and
Director, Research Enhancement there from 1989-1995. She was appointed to
the Ohio Boards of Regents in 1995, and is chair of the Board of Trustees
of The Cleveland Scholarship Programs, Inc. and is a trustee of the
Cleveland Orchestra. She also serves on the White House Joint High Level
Advisory Panel on US/Japan Science and Technology Agreements.
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CHARLES A. CORRY Director since
[PHOTO] 1988 Age: 66
RETIRED CHAIRMAN OF THE BOARD & CHIEF EXECUTIVE OFFICER, USX CORPORATION.
Mr. Corry graduated from the University of Cincinnati in 1955 with a BA
degree and received a JD degree from the University of Cincinnati Law
School. After serving in the U.S. Air Force, he joined USX in 1959,
holding various finance and accounting positions prior to being named vice
president-corporate planning in 1979. Mr. Corry was elected senior vice
president and comptroller in 1982 and president of the U.S. Diversified
Group of USX in 1987. He was elected president of USX in 1988 and elected
chairman of the board and chief executive officer in 1989, the position he
held until his retirement on June 30, 1995. Mr. Corry serves as Chairman
of the Executive Committee of the Board. He is a director of GenCorp Inc.
and Mellon Bank Corporation, a member of the Federal Judicial Nominating
Commission and a member of The Business Council.
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PAUL E. LEGO Director since
[PHOTO] 1988 Age: 67
RETIRED CHAIRMAN, WESTINGHOUSE ELECTRIC CORPORATION. Mr. Lego graduated
from the University of Pittsburgh with BS and MS degrees in electrical
engineering after service in the U.S. Army. He joined Westinghouse in 1956
at the East Pittsburgh plant and held a number of engineering and
management positions prior to being named a vice president in 1979,
executive vice president in 1980 and senior executive vice president,
corporate resources in 1985. In 1988 Mr. Lego was elected a director and
president and chief operating officer of Westinghouse and chairman and
chief executive officer in 1990. Mr. Lego retired in January 1993. He is
Chairman of the Board of Commonwealth Industries, Inc. and a director of
Consolidated Natural Gas Company, Lincoln Electric Company, and PNC Bank
Realty Holding Company; a trustee of the University of Pittsburgh; and a
member of The Business Council and the board of overseers of the New
Jersey Institute of Technology.
- ------------------------------------------------------------------------------------------------
SETH E. SCHOFIELD Director since
[PHOTO] 1994 Age: 58
RETIRED CHAIRMAN AND CHIEF EXECUTIVE OFFICER, USAIR GROUP, INC. Mr.
Schofield graduated from the Harvard Business School Program for
Management Development in 1975. He served in various corporate staff
positions after joining USAir in 1957 and became executive vice
president-operations in 1981. Mr. Schofield served as president and chief
operating officer from 1990 until 1991. He was elected president and chief
executive officer in 1991 and became chairman of the boards of USAir Group
and USAir, Inc. in 1992. He retired in January 1996. Mr. Schofield is a
director of Calgon Carbon Corp., the Erie Insurance Group, DeSai
Investment Corporation and PNC Bank, NA.
- ------------------------------------------------------------------------------------------------
8
- ------------------------------------------------------------------------------------------------
DOUGLAS C. YEARLEY Director since
[PHOTO] 1992 Age: 62
CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER, PHELPS DODGE CORPORATION
(A MAJOR INTERNATIONAL MINING AND MANUFACTURING CONCERN). Mr. Yearley
graduated from Cornell University with a Bachelor's degree in
metallurgical engineering and attended the Program for Management
Development at Harvard Business School. He joined Phelps Dodge in 1960 as
director of research. He held several key positions before being elected
executive vice president and a director in 1987. Mr. Yearley was elected
chairman and chief executive officer in 1989 and president in 1991. He is
a director of Lockheed Martin Corporation, J.P. Morgan & Co. Incorporated
and Morgan Guaranty Trust Company, and Southern Peru Copper Corporation; a
member of the Policy Committee of The Business Roundtable; director of the
International Copper Association; chairman of the National Mining
Association Board; director of the Copper Development Association; member
of The Business Council; and director of the Phoenix Symphony Orchestra.
- ------------------------------------------------------------------------------------------------
CONTINUING CLASS I DIRECTORS--TERM EXPIRES 2000
- ------------------------------------------------------------------------------------------------
NEIL A. ARMSTRONG Director since 1984 Age:
[PHOTO] 67
CHAIRMAN, AIL SYSTEMS INC. (DEFENSE ELECTRONICS COMPANY). Mr. Armstrong
received a BS degree in aeronautical engineering from Purdue University
and an MS degree in aerospace engineering from the University of Southern
California. For 17 years he served with the National Aeronautics and Space
Administration and its predecessor agency as engineer, test pilot,
astronaut and administrator. From 1971 to 1979 he was professor of
aerospace engineering at the University of Cincinnati. In 1982 he became
chairman of CTA, Inc. and retired from that position in 1992. He has
served as chairman of AIL Systems Inc. since June 1989. He is a director
of CINergy Corp., Cincinnati Milacron Inc., Eaton Corporation, RMI
Titanium Company and Thiokol Corporation and is a member of the National
Academy of Engineering.
- ------------------------------------------------------------------------------------------------
ROBERT M. HERNANDEZ Director since 1991 Age:
[PHOTO] 53
VICE CHAIRMAN & CHIEF FINANCIAL OFFICER, USX CORPORATION. Mr. Hernandez
graduated from the University of Pittsburgh with a Bachelor's degree in
economics and mathematics and received an MBA from the Wharton Graduate
School of Finance and Commerce at the University of Pennsylvania. He
joined USX in 1968 and held various finance and accounting positions until
1980 when he was appointed assistant corporate comptroller. He was elected
vice president and treasurer in 1984 and senior vice president and
comptroller in 1987. In 1989, he was appointed president of the U.S.
Diversified Group and in 1990 elected senior vice president-finance &
treasurer. He was elected director and executive vice president-accounting
& finance & chief financial officer in 1991 and vice chairman & chief
financial officer in 1994. Mr. Hernandez is a director and chairman of RMI
Titanium Company; a director of Marinette Marine Corporation and Transtar,
Inc., and a director and chairman of the executive committee of ACE
Limited; a trustee of BlackRock Funds; a member of the boards of trustees
of the Allegheny Health, Education and Research Foundation and of
Allegheny General Hospital; a director of the Pennsylvania Chamber of
Business and Industry; and a member of the Pennsylvania Business
Roundtable.
- ------------------------------------------------------------------------------------------------
9
- ------------------------------------------------------------------------------------------------
JOHN F. MCGILLICUDDY Director since
[PHOTO] 1984 Age: 67
RETIRED CHAIRMAN OF THE BOARD, CHEMICAL BANKING CORPORATION. Mr.
McGillicuddy graduated from Princeton University in 1952 and received an
LLB degree from Harvard Law School in 1955. He joined Manufacturers
Hanover Trust Company in 1958, became vice president in 1962, senior vice
president in 1966 and executive vice president and assistant to the
chairman in 1969. In 1970 he was elected vice chairman and a director of
Manufacturers Hanover Corporation and Manufacturers Hanover Trust Company
and became president of both in 1971. Mr. McGillicuddy was named chairman
and chief executive officer of the companies in 1979. Following the merger
of Manufacturers Hanover Corporation and Chemical Banking Corporation on
January 1, 1992, Mr. McGillicuddy became chairman of the board and chief
executive officer of the new Chemical Banking Corporation and retired in
January 1994. He is a director of Southern Peru Copper Corporation and UAL
Corporation. He is a member of The Business Council and a trustee emeritus
of Princeton University.
- ------------------------------------------------------------------------------------------------
JOHN M. RICHMAN Director since 1985 Age:
[PHOTO] 70
COUNSEL FOR WACHTELL, LIPTON, ROSEN & KATZ (LAW FIRM). Mr. Richman is a
graduate of Yale University and Harvard Law School. He joined the Kraft,
Inc. law department in 1954 and became general counsel of the Sealtest
Foods Division in 1963. He was named general counsel of the corporation in
1970, senior vice president in 1973 and was elected deputy chairman and a
director in 1979. In 1979 he became chairman and chief executive officer.
In 1980 he was elected chairman of Dart & Kraft, Inc. which was renamed
Kraft, Inc. in 1986. In 1988, following the merger of Kraft, Inc. and
Philip Morris Companies Inc., he was elected a director and vice chairman
of the board of Philip Morris Companies Inc. He ceased being a vice
chairman of the board in 1989 and a director in 1994. Mr. Richman became
acting chairman & chief executive officer of R.R. Donnelley & Sons Company
in 1996 and retired from that position in 1997. He is a director of
BankAmerica Corporation and Bank of America NT&SA, Security Capital
Atlantic Incorporated, Stream International, Inc. and the Evanston
Hospital Corporation; a trustee of Northwestern University, the Johnson
Foundation and the Chicago Symphony Orchestra; and a member of The
Business Council.
- ------------------------------------------------------------------------------------------------
JOHN W. SNOW Director since
[PHOTO] 1995 Age: 58
CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER, CSX CORPORATION (A MAJOR
TRANSPORTATION COMPANY). Mr. Snow did undergraduate work at Kenyon College
and the University of Toledo, received a Ph.D. in economics from the
University of Virginia and earned a law degree from George Washington
University Law School. Following an academic career as an economics and
law professor and several high-level presidential appointments with the
U.S. Department of Transportation and the National Highway Traffic Safety
Administration, Mr. Snow joined CSX in 1977 as vice-president--government
affairs for Chessie System Inc. After a number of other senior management
assignments, he was elected president and chief operating officer of CSX
in 1988, president and chief executive officer in 1989 and chairman,
president and chief executive officer in 1991. Mr. Snow is a director of
Circuit City Stores, Inc. and Textron Inc. He is also a member of the
board of the Association of American Railroads; a member of the boards of
trustees of The Johns Hopkins University and of the University of Virginia
Darden School Foundation; and a member of the Policy Committee of the
Business Roundtable, of the Executive Committee of The Business Council
and of the U.S. Japan Business Council.
- ------------------------------------------------------------------------------------------------
10
PROPOSAL NO. 2--ELECTION OF INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP ("Price Waterhouse") has served as independent
accountants of USX for many years. It is believed that the knowledge of USX's
business and its organization gained through this period of service is very
valuable. In accordance with the established policy of the firm, partners and
employees of Price Waterhouse assigned to the USX engagement are periodically
rotated, thus giving USX the benefit of new thinking and approaches in the audit
area. Representatives of Price Waterhouse are expected to be present at the
Meeting with an opportunity to make a statement if they desire to do so and to
be available to respond to appropriate questions.
For the year 1997, Price Waterhouse performed professional services
principally in connection with audits of the consolidated financial statements
of USX and the financial statements of the Marathon Group and the U.S. Steel
Group, certain subsidiaries and certain pension and other employee benefit
plans; review of quarterly reports and review of filings with the Securities and
Exchange Commission and other agencies.
PROPOSAL NO. 3--APPROVAL OF AMENDMENTS TO
THE USX CORPORATION SENIOR EXECUTIVE OFFICER
ANNUAL INCENTIVE COMPENSATION PLAN
The Board unanimously recommends that the stockholders approve amendments
to, and the restatement of, the USX Corporation Senior Executive Officer Annual
Incentive Compensation Plan (the "Plan"). Capitalized terms used herein shall
have the meanings assigned to them in the Plan, a copy of which is attached as
Annex I.
BACKGROUND
The Plan was initially approved by the stockholders on May 2, 1994, having
received over 94 percent of the votes cast. It is designed to preserve the tax
deductibility, under Section 162(m) of the Internal Revenue Code, of the annual
incentive compensation paid to the Corporation's senior executive officers. Its
objectives are to advance the interests of the Corporation by providing
Participants with annual incentive opportunities linked directly to specific
business results. It is intended to (a) reinforce the Corporation's goal-setting
and strategic planning process, (b) recognize the efforts of senior executive
officers in achieving designated objectives, and (c) aid in attracting and
retaining competent senior executive officers, thus ensuring the long-range
success of the Corporation. The Plan establishes performance measures that are
used by the Compensation Committee to evaluate the performance of the
Corporation and/or a Group for purposes of paying Awards.
The Committee believes that the current annual maximum Award payable to a
participant in the amount of $1,420,000 should be raised to $3,000,000. Because
the Plan does not have a termination date, the Committee believes that adequate
growth in incentive compensation in future years should be provided for and that
increasing the amount of such maximum Award to $3,000,000 would permit such
growth.
The Committee also recommends the addition of certain positions to the list
of eligible participants in the Plan. Some of these positions (e.g. USX
Corporation President) are not currently occupied, but the Committee wants to
ensure that if they ever are occupied, the incentive compensation paid to such
officers will be tax deductible. Other positions (e.g. Marathon Oil Company
Senior Vice Presidents) are currently occupied, and the Committee wants to
ensure that such officers' incentive compensation will be tax deductible if they
are ever among the Corporation's five most highly-compensated officers.
In summary, the amendments would
(a) increase the maximum annual Award payable to a Participant from
$1,420,000 to $3,000,000;
(b) add the following positions to the list of eligible participants in the
Plan:
USX Corporation Chairman
USX Corporation President
USX Corporation Vice Chairmen
USX Corporation Executive Vice Presidents
Marathon Oil Company Senior Vice Presidents
U. S. Steel Group Senior Vice Presidents; and
(c) delete outdated references to the former USX-Delhi Group.
It is impossible to determine either the amounts that will be awarded in the
future or those that would have been awarded for 1997 as a result of these
amendments, since Awards are, and will continue to be, within the discretion of
the Committee under the terms of the Plan.
If the stockholders do not approve the amendments to the Plan, the Plan will
remain in effect in its current form.
11
SUMMARY OF MATERIAL FEATURES OF THE AMENDED AND RESTATED USX CORPORATION SENIOR
EXECUTIVE OFFICER ANNUAL INCENTIVE COMPENSATION PLAN
The Plan, as amended and restated, would authorize the Compensation
Committee to adopt, in accordance with regulations promulgated under the
Internal Revenue Code, applicable target levels under the performance measures
described below, and the amounts to be awarded for attaining such target levels.
The Committee will have the right to reduce the amount of an Award or eliminate
an Award that would otherwise be payable to a Participant, i.e. exercise
"negative discretion". In no event will the amount of an Award payable to a
Participant for a given year exceed $3,000,000.
Individuals serving in one of the positions listed below for at least a
portion of a calendar year will be eligible to participate in the Plan:
USX Corporation Chairman
USX Corporation Chief Executive Officer
USX Corporation President
USX Corporation Vice Chairmen
USX Corporation Chief Operating Officer
USX Corporation Chief Financial Officer
USX Corporation General Counsel
USX Corporation Executive Vice Presidents
USX Corporation Senior Vice Presidents
Marathon Oil Company President
Marathon Oil Company Executive Vice Presidents
Marathon Oil Company Senior Vice Presidents
U. S. Steel Group President
U. S. Steel Group Executive Vice Presidents
U. S. Steel Group Senior Vice Presidents
Set forth below are the performance measures under the Plan, which are not
being amended except to delete performance measures related to the former
USX-Delhi Group:
ELIGIBLE POSITIONS
----------------------------------------------------------------------------------------
USX CORPORATION
CHAIRMAN,
CHIEF EXECUTIVE OFFICER,
PRESIDENT,
VICE CHAIRMEN,
U. S. STEEL GROUP MARATHON OIL COMPANY CHIEF OPERATING OFFICER,
PRESIDENT, PRESIDENT, CHIEF FINANCIAL OFFICER,
EXECUTIVE VICE PRESIDENTS EXECUTIVE VICE PRESIDENTS GENERAL COUNSEL,
APPLICABLE PERFORMANCE AND AND EXECUTIVE VICE PRESIDENTS AND
MEASURES SENIOR VICE PRESIDENTS SENIOR VICE PRESIDENTS SENIOR VICE PRESIDENTS
- ---------------------------------------- -------------------------- -------------------------- ------------------------------
Income from Operations
U. S. Steel Group..................... X X
Marathon Group........................ X X
Steel Shipments......................... X X
Oil and Natural Gas Production
Liquid Hydrocarbon.................... X X
Natural Gas........................... X X
Increases in Reserves in
Excess of Annual Production
Liquid Hydrocarbon.................... X X
Natural Gas........................... X X
Refined Products
Sales................................. X X
Margins............................... X X
Worker Safety
U. S. Steel Group--Injury
Frequency Rate...................... X X
Marathon Group--Lost-Time
Accidents........................... X X
Toxic Emissions Improvements
U. S. Steel Group..................... X X
Marathon Group........................ X X
Work Force Diversity.................... X
Common Stock Performance
U. S. Steel Group..................... X X
Marathon Group........................ X X
Awards may be paid only after the Committee certifies that the applicable
performance measures have been satisfied.
This summary is qualified in its entirety by reference to the copy of the
Plan attached as Annex I.
12
PROPOSAL NO. 4--APPROVAL OF AMENDMENTS TO
THE USX CORPORATION 1990 STOCK PLAN
The Board unanimously recommends that the stockholders approve amendments
to, and the restatement of, the USX Corporation 1990 Stock Plan (the "Stock
Plan"). Capitalized terms used herein shall have the meanings assigned to them
in the Stock Plan, a copy of which is attached as Annex II.
BACKGROUND
The Stock Plan was initially approved by the stockholders on May 7, 1990
with a termination date of May 7, 2000. On April 29, 1997, the stockholders
approved certain amendments to the Stock Plan placing individual limits on
grants of stock options and stock appreciation rights to preserve the tax
deductibility of such compensation under Section 162(m) of the Internal Revenue
Code, and increasing the number of shares of USX-Delhi Group Common Stock
available for grant.
The Stock Plan is designed (a) to promote the long-term financial interests
and growth of the Corporation and its subsidiaries by attracting and retaining
management personnel with the training, experience and ability to enable them to
make a substantial contribution to the success of the Corporation's business,
(b) to motivate management personnel by means of growth-related incentives to
achieve long-range growth goals, (c) to further the identity of interests of
participants with those of the stockholders of the Corporation through
opportunities for increased stock ownership in the Corporation, and (d) to
permit grants to participants with respect to the class of common stock that
reflects the performance of the Corporation's major business in which the
participant works.
The Compensation Committee believes that the Stock Plan has proven to be an
effective vehicle for providing long-term incentives to its management personnel
and that it continues to promote the interests of the Corporation and its
stockholders. Accordingly, the Committee believes that the Stock Plan should be
extended beyond its current expiration date of May 7, 2000 and that its
incentive features should be more broadly available to employees of the
Corporation's limited liability company subsidiaries and joint ventures included
within the Marathon Group or the U. S. Steel Group. The Committee is not,
however, recommending an increase in the aggregate number of shares available
for grant in any calendar year. In addition, the Committee believes that the
Stock Plan should be amended to establish new performance measures for the
vesting of restricted stock in order to preserve the tax deductibility thereof
under Section 162(m) of the Internal Revenue Code, and correspondingly to
increase the maximum number of shares a participant could be awarded during a
calendar year. The Committee also recommends that limits be established on the
number of shares that could be granted in the form of restricted stock, that the
repricing of options be prohibited except in the event of a change in the
outstanding common stock of the Corporation, that no option have a term
exceeding ten years from the date of grant, and that all restrictions on
restricted stock terminate in the event of a change in control of the
Corporation. Finally, the Committee recommends, as a means by which the
Corporation's executives can increase their holdings of USX common stock, the
addition of a restoration feature to the exercise of stock options under the
Stock Plan. Unlike option repricing, the restoration feature would simply
provide that whenever an employee presents previously-owned shares to satisfy
the option price, he or she would receive a number of options equal to the
number of presented shares. The restored options would have an exercise price
equal to the fair market value of the stock on the date the restored options are
granted and carry the same expiration date as the original options.
In summary, the amendments would
(a) extend the term of the Stock Plan to May 31, 2005;
(b) extend the coverage of the Stock Plan to include employees of the
Corporation's limited liability company subsidiaries, such as Marathon Ashland
Petroleum LLC, and joint ventures included within either the Marathon Group or
the U. S. Steel Group (without increasing the aggregate number of shares
available for grant in any calendar year);
(c) incorporate performance measures for the vesting of restricted stock in
order to preserve the tax deductibility for the value of such stock under
Section 162(m) of the Internal Revenue Code;
(d) in connection with such tax deductibility, increase the maximum
aggregate number of shares that could be awarded to any participant during any
calendar year from 300,000 in total to 500,000 of each class of common stock,
such maximum to apply in total to Options, Restored Options, Stock Appreciation
Rights and Restricted Stock;
(e) limit the number of shares that could be granted in the form of
restricted stock during the remaining seven years of the Stock Plan to 1,200,000
shares of Marathan Stock and 800,000 shares of Steel Stock;
(f) prohibit the repricing of options except in the event of a change in the
outstanding common stock of USX by reason of a stock split, stock dividend,
stock combination or reclassification, recapitalization or merger, or similar
event;
(g) limit the term of an option to ten years from the date of grant;
(h) provide that restrictions on restricted stock will terminate in the
event of a change in control of the Corporation;
(i) add an option restoration feature whereby participants could present
previously-owned shares in payment of an option exercise price and receive a
number of options ("Restored Options") equal to the number of shares presented,
such Restored Options to have an exercise price equal to the fair market value
of the applicable class of stock on the date the Restored Options are granted
and carry the same expiration date as the original option exercised; and
(j) delete outdated references to the former USX-Delhi Group.
If the amendments are not approved by the stockholders, the Stock Plan will
remain in effect in its current form.
13
SUMMARY OF MATERIAL FEATURES OF THE AMENDED AND RESTATED USX CORPORATION 1990
STOCK PLAN
GENERAL
The Stock Plan, as amended and restated, would permit the grant of any or
all of the following types of awards in any combination or sequence: (a) Stock
Options, (b) Restored Options, (c) Stock Appreciation Rights and (d) Restricted
Stock. Up to 0.5% of the outstanding Marathon Stock and up to 0.8% of the
outstanding Steel Stock on December 31 of the preceding year will be available
for Grants during each calendar year the Stock Plan is in effect. Any unused
Shares in any year are available for Grant in subsequent years and Shares
related to Grants that are forfeited, terminated, cancelled, expired,
unexercised, settled in cash in lieu of Shares or in such manner that all or
some of the Shares covered by the Grant are not issued to a participant, shall
immediately become available under the Stock Plan.
The employees of the Corporation who are eligible for participation under
the Stock Plan are all executive officers and others in responsible positions
whose performance in the judgment of the Compensation Committee affects the
Corporation's success. It is expected that approximately 600 employees will be
eligible for participation under the Stock Plan in 1998. Over the term of the
Stock Plan, it is anticipated that other employees will become eligible for
participation in the Stock Plan.
The Compensation Committee shall administer the Stock Plan. It shall
determine the type or types of Grants to be made under the Stock Plan and shall
set forth in each such Grant the terms, conditions and limitations applicable to
it. The Compensation Committee shall have full and exclusive power to interpret
the Stock Plan, to adopt rules, regulations and guidelines relating to the Stock
Plan and to make all of the determinations necessary for its administration.
TYPES OF GRANTS
OPTIONS. The Compensation Committee may grant the right to purchase a
specified number of Shares at not less than the Fair Market Value on the date of
the Grant. All Options will be Non-Qualified Options. Payment of the purchase
price shall be made in cash or in such other form as approved by the Committee
including common stock valued at its fair market value on the date of the option
exercise. No Option will have a term exceeding ten years from the date of grant
or be exercisable prior to the expiration of one year from the date of grant,
and no Option will be repriced except in the event of any change in the
outstanding common stock of the Corporation by reason of a stock split, stock
dividend, stock combination or reclassification, recapitalization or merger, or
similar event. In the case of a change in control of the Corporation, all
restrictions will terminate.
An employee receiving the Option does not realize income under the Internal
Revenue Code upon the grant of the Option. The employee will generally realize
income at the time of exercise of the Option in the amount of the difference
between the option price and the fair market value of the common stock on the
date of exercise. The Corporation will then be entitled to a tax deduction in an
amount equal to the amount of income realized by the employee.
RESTORED OPTIONS. An employee may exercise an Option by paying the purchase
price in previously owned Shares of the class of stock of the underlying Option.
Upon such an exercise, a Restored Option will be granted equal to the number of
Shares presented plus any Shares withheld for the payment of taxes. A Restored
Option will have an exercise price equal to the Fair Market Value of the class
of stock of the exercised option on the date of exercise, as well as the same
expiration date as the original exercised option. No Restored Option will be
exercisable prior to the expiration of one year from the date of grant.
STOCK APPRECIATION RIGHTS. The Compensation Committee may grant a
participant the right to receive a payment in cash and/or common stock equal to
the excess of the fair market value of a Share of common stock on the date the
right is exercised over the fair market value of a Share on the date the right
is granted for a specified number of Shares. No Stock Appreciation Right will be
exercisable prior to the expiration of one year from the date of grant.
An employee receiving the right does not realize income under the Internal
Revenue Code at the time of receipt of the right. The employee will realize
income upon the exercise of the right in the amount of the cash received and the
fair market value on the date of exercise of the common stock received. The
Corporation will then be entitled to a tax deduction in the amount of such
income realized by the employee.
RESTRICTED STOCK. The Compensation Committee may award Shares of common
stock for no cash consideration or for such other consideration as may be
determined by the Committee. Each award shall be subject to conditions
including, but not limited to, continuous service with the Corporation of at
least one year following the date of such award and vesting restrictions based
on achievement of target levels under specified performance measures, and also
subject to provisions for forfeiture and non-transfer. No Shares of Restricted
Stock will be vested prior to one year from the date of grant. In the case of a
change in control of the Corporation, all restrictions will terminate. During
the period January 1, 1998 through May 31, 2005, the number of Shares of
Restricted Stock granted will not exceed 1,200,000 for Marathon Stock or 800,000
for Steel Stock.
14
Each award of Restricted Stock will remain unvested for a minimum of one
year and until the Compensation Committee vests the Shares. The Committee will
base its vesting decisions on the achievement of target levels under the
following performance measures:
PERFORMANCE MEASURES FOR THE
VESTING OF RESTRICTED STOCK
- --------------------------------------------------------------------------------------------------------------------------
MARATHON GROUP U. S. STEEL GROUP
- ------------------------------------------------------------ ------------------------------------------------------------
Earnings before interest, taxes and depreciation as a Income from operations as a percent of capital employed
percent of total assets
Oil and gas reserve replacement ratio Income from operations per ton shipped
Income per barrel of oil equivalent produced (upstream) Operating cash flow as a percent of capital employed
Operating income per barrel of refinery throughput Safety performance
(downstream)
Safety performance
An employee normally will not realize income under the Internal Revenue Code
upon the grant of Restricted Stock. Upon the termination of the restrictions
applicable to such stock, the employee will realize taxable income equal to the
fair market value of the Shares of common stock at that time. The Corporation
will be entitled to a deduction in the same amount and at the same time as the
employee realizes income. Dividends paid to the employee with respect to
Restricted Stock constitute compensation and are taxable to the employee and
deductible by the Corporation.
During any calendar year, no participant will be awarded Grants with respect
to more than 500,000 Shares of each class of common stock.
It is not practical to predict the number of Shares that will be awarded
under Grants made to participants in the future or to determine those that would
have been awarded in 1997 as a result of the amendments, because such numbers
are, and will continue to be, within the discretion of the Compensation
Committee under the terms of the Stock Plan. Information regarding Grants made
in 1997 is provided in the Executive Compensation section of this proxy
statement.
The Stock Plan will terminate on May 31, 2005, subject to earlier
termination by the Board.
AMENDMENTS
The Board of Directors may amend, suspend or terminate the Stock Plan
provided that no such action may, without stockholder approval, increase the
aggregate number of Shares available for grants under the Stock Plan, decrease
the price of Options, Restored Options or Stock Appreciation Rights, change the
requirements relating to the Compensation Committee or extend the term of the
Stock Plan. The Compensation Committee may amend the terms and conditions
applicable to outstanding grants consistent with the Stock Plan, provided that
no such action may modify the Grant in a manner adverse to the participant
without the participant's consent.
This summary is qualified in its entirety by reference to the copy of the
Stock Plan attached as Annex II.
15
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table furnishes information concerning all persons known to
USX to beneficially own 5% or more of any class of the voting stock of USX:
NAME AND ADDRESS AMOUNT AND NATURE PERCENT
TITLE OF CLASS OF BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP OF CLASS
- ----------------------- -------------------------------------------------------------- ----------------------- -----------
Marathon Stock Wellington Management Company, LLP 19,894,000(1) 6.9(1)
75 State Street
Boston, MA 02109
Marathon Stock FMR Corp., Edward C. Johnson 3d and Abigail P. Johnson 20,443,485(2) 7.09(2)
82 Devonshire Street
Boston, MA 02109
Steel Stock Princeton Services, Inc. 8,130,070(3) 9.4(3)
800 Scudders Mill Road
Plainsboro, NJ 08536
Includes:
Merrill Lynch Asset Management, L.P. 4,980,070(3) 5.8(3)
800 Scudders Mill Road
Plainsboro, NJ 08536
Steel Stock Mellon Bank Corporation 4,554,619(4) 5.28(4)
One Mellon Bank Center
Pittsburgh, PA 15258
Steel Stock The Prudential 5,401,345(5) 6.25(5)
Insurance Company of America
751 Broad Street
Newark, NJ 07102
- --------------------------
(1) Based on Schedule 13G dated January 17, 1998 which indicates that Wellington
Management Company, LLP had sole voting power over no shares, shared voting
power over 3,420,300 shares, sole dispositive power over no shares and
shared dispositive power over 19,894,000 shares.
(2) Based on Schedule 13G dated December 30, 1997 which indicates that FMR Corp.
had sole voting power over 2,669,385 shares, shared voting power over no
shares, sole dispositive power over 20,443,485 shares and shared dispositive
power over no shares. According to such Schedule 13G, Fidelity Management &
Research Company ("Fidelity"), a wholly-owned subsidiary of FMR Corp., is
the beneficial owner of 16,920,200 shares; Edward C. Johnson 3d, FMR Corp.,
through its control of Fidelity, and the various investment companies to
which Fidelity acts as investment adviser (the "Funds") each has sole power
to dispose of the 16,920,200 shares owned by the Funds; neither FMR Corp.
nor Edward C. Johnson 3d has the sole power to vote or direct the voting of
the shares held by the Funds; Fidelity Management Trust Company, a
wholly-owned subsidiary of FMR Corp., is the beneficial owner of 3,115,885
shares; Edward C. Johnson 3d and FMR Corp., through its control of Fidelity
Management Trust Company, each has sole dispositive power over 3,115,885
shares and sole power to vote or to direct the voting of 2,261,985 shares,
and no power to vote or to direct the voting of 853,900 shares; and Fidelity
International Limited ("FIL"), once a majority-owned subsidiary of Fidelity
but now operating as an independent entity, is the beneficial owner of
407,400 shares. FMR Corp. and FIL are of the view that they are not acting
as a "group" for purposes of Section 13(d) of the Securities Exchange Act of
1934.
(3) Based on Schedule 13G dated January 30, 1998 which indicates that Princeton
Services, Inc. had sole voting power over no shares, shared voting power
over 8,130,070 shares, sole dispositive power over no shares and shared
dispositive power over 8,130,070 shares; and that Merrill Lynch Asset
Management, L.P. had sole voting power over no shares, shared voting power
over 4,980,070 shares, sole dispositive power over no shares and shared
dispositive power over 4,980,070 shares.
(4) Based on Schedule 13G dated January 23, 1998 which indicates that Mellon
Bank Corporation had sole voting power over 3,029,215 shares, shared voting
power over 61,041 shares, sole dispositive power over 4,283,711 shares and
shared dispositive power over 160,867 shares.
(5) Based on Schedule 13G dated February 10, 1998 which indicates that The
Prudential Insurance Company of America had sole voting power over 445,773
shares, shared voting power over 4,499,135 shares, sole dispositive power
over 445,773 shares and shared dispositive power over 4,703,135 shares.
Included in the total number of shares are 233,500 convertible preferred
shares which are convertible into Steel Stock at a ratio of 1.081 Steel
Stock share for each preferred share.
16
SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the number of shares of each class of USX
common stock beneficially owned, as of January 31, 1998, by each director, by
each executive officer named in the Summary Compensation Table and by all
directors and executive officers as a group. No director or executive officer
beneficially owned, as of January 31, 1998, any equity security of USX other
than common stock.
MARATHON STEEL
NAME STOCK STOCK
- -------------------------------------------------------------------------------------------------- ---------- ----------
SHARES SHARES
---------- ----------
Neil A. Armstrong(1).............................................................................. 10,467 3,384
Victor G. Beghini(2)(3)........................................................................... 586,758 96,113
Jeanette G. Brown (1)............................................................................. 2,182 1,418
Charles A. Corry(1)(2)(3)......................................................................... 216,139 80,372
Robert M. Hernandez(2)(3)(4)...................................................................... 309,290 101,459
Charles R. Lee(1)................................................................................. 7,822 3,183
Paul E. Lego(1)................................................................................... 7,689 2,432
Ray Marshall(1)................................................................................... 3,331 1,798
John F. McGillicuddy(1)........................................................................... 9,829 3,112
John M. Richman(1)................................................................................ 10,273 3,286
Dan D. Sandman(2)(3).............................................................................. 60,653 47,359
Seth E. Schofield(1).............................................................................. 2,664 1,566
John W. Snow(1)................................................................................... 2,139 1,372
Thomas J. Usher(2)(3)............................................................................. 334,771 291,014
Paul J. Wilhelm(2)(3)............................................................................. 40,351 129,686
Douglas C. Yearley(1)............................................................................. 5,153 2,426
All Directors and Executive Officers as a group (37 persons)(1)(2)(3)(5).......................... 2,421,846 1,343,309
- --------------------------
(1) Includes Common Stock Units credited under the USX Corporation Deferred
Compensation Plan for Non-Employee Directors as follows:
MARATHON STOCK STEEL STOCK
NAME COMMON STOCK UNITS COMMON STOCK UNITS
- ----------------------------------------------------------- ----------------------- -----------------------
Neil A. Armstrong.......................................... 8,967 3,084
Jeanette G. Brown.......................................... 1,139 372
Charles A. Corry........................................... 1,139 372
Charles R. Lee............................................. 5,822 1,983
Paul E. Lego............................................... 6,146 2,123
Ray Marshall............................................... 2,277 743
John F. McGillicuddy....................................... 7,829 2,712
John M. Richman............................................ 8,573 2,946
Seth E. Schofield.......................................... 1,605 508
John W. Snow............................................... 1,139 372
Douglas C. Yearley......................................... 4,153 1,426
(2) Includes shares held under the USX Savings Fund Plan, the Marathon Thrift
Plan, the USX Dividend Reinvestment and Stock Purchase Plans, the 1986 Stock
Option Incentive Plan and the 1990 Stock Plan.
(3) Includes shares which may be acquired upon exercise of outstanding options
as follows: Mr. Usher: Marathon Stock 282,500, Steel Stock 258,500; Mr.
Corry: Marathon Stock 215,000, Steel Stock 80,000; Mr. Beghini: Marathon
Stock 468,250, Steel Stock 70,750; Mr. Wilhelm: Marathon Stock 31,800, Steel
Stock 111,750; Mr. Hernandez: Marathon Stock 257,450, Steel Stock 87,500;
Mr. Sandman: Marathon Stock 35,000, Steel Stock 38,725; and all directors
and executive officers as a group: Marathon Stock 1,854,775 and Steel Stock
1,117,640.
(4) As of January 31, 1998 United States Steel and Carnegie Pension Fund,
trustee of USX's Pension Plan, owned 657,080 shares of Marathon Stock. This
stock was received in exchange for common stock of Texas Oil & Gas Corp. Mr.
Hernandez is chairman and one of six members of the Investment Committee of
the trustee. The Board of Directors of the trustee has by formal resolution
delegated sole power to vote and dispose of such stock to a subcommittee of
the Investment Committee which is composed of members who are not officers
or employees of USX. Mr. Hernandez disclaims beneficial ownership of such
stock.
(5) Total shares beneficially owned in each case constitute less than one
percent of the outstanding shares of each class.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
USX is required to identify any director or officer who failed to timely
file with the Securities and Exchange Commission a required report relating to
ownership and change in ownership of USX's equity securities. Terrence D. Straub
was late in filing his Form 5 for 1996 and a Form 4 for a transaction in July
1997. Kenneth L. Matheny was two days late filing his Form 3, but he reported
all transactions on a timely basis.
17
EXECUTIVE COMPENSATION AND OTHER INFORMATION
The following table sets forth certain information concerning the
compensation awarded to, earned by or paid to the chief executive officer and
the other four most highly compensated executive officers of USX for services
rendered in all capacities during 1997, 1996 and 1995:
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION(4)
ANNUAL COMPENSATION -----------------------
------------------------------------------------- RESTRICTED
SALARY OTHER STOCK ALL OTHER
NAME AND AND BONUS ANNUAL AWARD(S) OPTIONS COMPENSATION
PRINCIPAL POSITION YEAR SALARY($) BONUS($) TOTAL($) COMPENSATION($) ($)(1) SARS(#)(2) ($)(3)
- ------------------------------ ---- --------- --------- --------- --------------- ---------- ---------- ------------
T. J. Usher................... 1997 981,250 1,420,000 2,401,250 16,820 89,199 200,000 136,079
Chairman & Chief 1996 833,333 1,200,000 2,033,333 21,178 57,879 160,000 77,956
Executive Officer 1995 675,000 900,000 1,575,000 4,646 1,838,203 130,000 65,029
V. G. Beghini................. 1997 723,333 1,050,000 1,773,333 0 0 90,000 116,084
Vice Chairman-- 1996 692,500 850,000 1,542,500 0 20,578 80,000 41,475
Marathon Group 1995 667,500 625,000 1,292,500 0 947,042 73,000 77,475
and President--
Marathon Oil
Company
P. J. Wilhelm................. 1997 407,500 611,000 1,018,500 7,874 30,599 75,000 47,698
President--U.S. 1996 358,333 537,000 895,333 2,457 28,590 65,000 30,977
Steel Group 1995 320,833 450,000 770,833 2,699 720,078 55,000 29,304
R. M. Hernandez............... 1997 522,500 750,000 1,272,500 6,954 29,733 75,000 62,434
Vice Chairman & Chief 1996 495,000 650,000 1,145,000 5,568 19,297 65,000 49,213
Financial Officer 1995 475,000 550,000 1,025,000 6,080 612,734 59,000 46,931
D. D. Sandman................. 1997 354,583 530,000 884,583 2,986 21,812 40,000 39,077
General Counsel, 1996 323,083 450,000 773,083 1,606 33,700 35,000 27,392
Secretary and Senior 1995 288,583 340,000 628,583 2,249 416,659 27,500 24,360
Vice President--
Human Resources & Public
Affairs
- --------------------------
(1) Grants of restricted stock under the USX 1990 Stock Plan. Grants are subject
to conditions including continued employment and achievement of business
performance standards. Dividends are paid on restricted stock. Shown below
is the vesting schedule for restricted stock scheduled to vest less than
three years from the date of grant, together with the number and value, as
of December 31, 1997, of the aggregate holdings of restricted stock for each
of the executive officers named in the Summary Compensation Table. Vesting
shown assumes achievement of business performance at peer-group standard (as
described in the Compensation Committee Report on page 22).
UNVESTED RESTRICTED SHARES
VESTING SCHEDULE AGGREGATE HOLDINGS
-------------------------------------------------- --------------------------------------
MAY MAY VALUE AS OF
CLASS OF 1998 1999 CLASS OF DECEMBER 31,
DATE GRANTED STOCK (SHARES) (SHARES) STOCK SHARES 1997($)
------------- --------- ----------- ----------- --------- ----------- --------------
T. J. Usher..................... July 25,1995 Marathon 9,750 Marathon 29,250 978,962
Steel 5,250 Steel 15,660 476,651
May 27, 1997 Marathon 1,950 Delhi 90 1,848
Steel 960 ----------
Total 1,457,461
---------------------
V. G. Beghini................... July 25, 1995 Marathon 5,200 Marathon 13,676 457,719
Steel 2,800 Steel 7,364 224,142
--------------
Total 681,861
P. J. Wilhelm................... July 25, 1995 Marathon 1,750 Marathon 5,220 174,707
Steel 3,250 Steel 9,750 296,766
May 27, 1997 Marathon 320 Delhi 30 616
Steel 650 --------------
Total 472,089
R. M. Hernandez................. July 25, 1995 Marathon 3,250 Marathon 9,750 326,321
Steel 1,750 Steel 5,220 158,884
Delhi 30 616
--------------
Total 485,821
D. D. Sandman................... July 25, 1995 Marathon 2,340 Marathon 7,020 234,951
Steel 1,260 Steel 3,780 115,054
--------------
Total 350,005
18
(2) All option shares listed were granted with tandem stock appreciation rights
("SARs").
(3) This column includes amounts contributed by USX under the USX Savings Fund
Plan or the Marathon Thrift Plan and the related supplemental savings plans.
Such amounts for 1997 are $49,063, $94,275, $20,375, $26,125 and $17,729 for
Messrs. Usher, Beghini, Wilhelm, Hernandez and Sandman, respectively. Also
included are amounts attributable to split-dollar life insurance provided by
USX. (Marathon Oil Company does not provide split-dollar life insurance.)
For 1997, these amounts are $42,746, $11,302, $21,552 and $10,713 for
Messrs. Usher, Wilhelm, Hernandez and Sandman, respectively. Also included
are dividends paid on restricted stock. For 1997, these amounts were
$44,270, $21,809, $16,020, $14,757, and $10,634 for Messrs. Usher, Beghini,
Wilhelm, Hernandez and Sandman, respectively.
(4) Restricted stock and stock options/SAR shares granted by class of stock are
as follows (Delhi Stock shares, options and SARs were redeemed on January
26, 1998 at the redemption price of $20.60 per share.):
CLASS OF RESTRICTED STOCK OPTION/
STOCK STOCK($) SAR SHARES
--------- ----------- --------------
T. J. Usher............................................................ 1997 Marathon 57,281 130,000
Steel 30,720 64,000
Delhi 1,198 6,000
1996 Marathon 32,712 104,000
Steel 25,167 52,000
Delhi 0 4,000
1995 Marathon 950,625 84,500
Steel 887,578 42,500
Delhi 0 3,000
V. G. Beghini.......................................................... 1997 Marathon 0 58,500
Steel 0 31,500
Delhi 0 0
1996 Marathon 11,635 65,000
Steel 8,943 13,000
Delhi 0 2,000
1995 Marathon 489,762 59,750
Steel 457,280 11,250
Delhi 0 2,000
P. J. Wilhelm.......................................................... 1997 Marathon 9,400 24,000
Steel 20,800 48,750
Delhi 399 2,250
1996 Marathon 7,831 10,000
Steel 20,759 53,000
Delhi 0 2,000
1995 Marathon 170,625 8,150
Steel 549,453 45,850
Delhi 0 1,000
R. M. Hernandez........................................................ 1997 Marathon 19,094 48,750
Steel 10,240 24,000
Delhi 399 2,250
1996 Marathon 10,897 43,000
Steel 8,400 20,000
Delhi 0 2,000
1995 Marathon 316,875 38,500
Steel 295,859 18,500
Delhi 0 2,000
D. D. Sandman.......................................................... 1997 Marathon 13,748 26,000
Steel 8,064 12,800
Delhi 0 1,200
1996 Marathon 19,041 23,000
Steel 14,659 10,000
Delhi 0 2,000
1995 Marathon 215,475 18,575
Steel 201,184 6,925
Delhi 0 2,000
19
1997 OPTION/SAR GRANTS
The following table sets forth certain information concerning options and
stock appreciation rights ("SARs") granted during 1997 to each executive officer
named in the Summary Compensation Table under the USX 1990 Stock Plan:
POTENTIAL REALIZABLE
VALUE AT ASSUMED ANNUAL
RATES OF
% OF TOTAL EXERCISE STOCK PRICE APPRECIATION
NO. OF OPTIONS/SARS OR BASE FOR
OPTIONS/ GRANTED TO PRICE OPTION TERM($)(4)
CLASS OF SARS EMPLOYEES PER EXPIRATION --------------------------
NAME OR GROUP STOCK(5) GRANTED(1) IN 1997(3) SHARE($) DATE 0% 5%
- ------------------------- ---------- ----------- --------------- ----------- -------------- --- ---------------
T. J. Usher.............. Marathon 130,000(2) 17.2% 29.3750 May 27, 2007 0 2,401,594
Steel 64,000(2) 14.0% 32.0000 May 27, 2007 0 1,287,974
Delhi 6,000(2) 6.4% 13.3125 N/A N/A 50,233
V. G. Beghini............ Marathon 58,500(2) 7.7% 29.3750 May 27, 2007 0 1,080,717
Steel 31,500(2) 6.9% 32.0000 May 27, 2007 0 633,925
Delhi 0(2) 0.0% N/A N/A N/A N/A
P. J. Wilhelm............ Marathon 24,000(2) 3.2% 29.3750 May 27, 2007 0 443,371
Steel 48,750(2) 10.7% 32.0000 May 27, 2007 0 981,074
Delhi 2,250(2) 2.4% 13.3125 N/A N/A 18,837
R. M. Hernandez.......... Marathon 48,750(2) 6.4% 29.3750 May 27, 2007 0 900,598
Steel 24,000(2) 5.2% 32.0000 May 27, 2007 0 482,990
Delhi 2,250(2) 2.4% 13.3125 N/A N/A 18,837
D. D. Sandman............ Marathon 26,000(2) 3.4% 29.3750 May 27, 2007 0 480,319
Steel 12,800(2) 2.8% 32.0000 May 27, 2007 0 257,595
Delhi 1,200(2) 1.3% 13.3125 N/A N/A 10,047
All Stockholders......... Marathon N/A N/A 29.3750 May 27, 2007 0 5,334,981,143
Steel N/A N/A 32.0000 May 27, 2007 0 1,742,343,574
Delhi N/A N/A 13.3125 N/A N/A 79,078,259
All Optionees............ Marathon 756,260 100.0% 29.3750 May 27, 2007 0 13,970,996
Steel 457,590 100.0% 32.0000 May 27, 2007 0 9,208,816
Delhi 94,250 100.0% 13.3125 N/A N/A 789,080
All Optionees' Gain as... Marathon N/A N/A 29.3750 May 27, 2007 0 0.26%
% of All Steel N/A N/A 32.0000 May 27, 2007 0 0.53%
Stockholders' Gain Delhi N/A N/A 13.3125 N/A N/A 1.00%
NAME OR GROUP 10%
- ------------------------- ----------------
T. J. Usher.............. 6,086,106
3,263,987
127,300
V. G. Beghini............ 2,738,748
1,606,494
N/A
P. J. Wilhelm............ 1,123,589
2,486,240
47,738
R. M. Hernandez.......... 2,282,290
1,223,995
47,738
D. D. Sandman............ 1,217,221
652,797
25,460
All Stockholders......... 13,519,879,191
4,415,450,433
200,398,903
All Optionees............ 35,405,219
23,336,998
1,999,674
All Optionees' Gain as... 0.26%
% of All 0.53%
Stockholders' Gain 1.00%
- --------------------------
(1) All options listed are exercisable on May 27, 1998.
(2) These options were granted with tandem SARs, which have the same date of
exercisability as the underlying option. Upon the exercise of an SAR, an
optionee receives an amount, in cash and/or shares, equal to the excess, for
a specified number of shares, of (a) the fair market value of a share on the
date the SAR is exercised (except that for any SAR exercised during the
10-business-day period beginning on the third business day following the
release of USX's quarterly earnings, the Compensation Committee may, in its
sole discretion, establish a uniform fair market value of a share for such
period which shall not be more than the highest daily fair market value and
shall not be less than the lowest daily fair market value during such
10-business-day period) over (b) the exercise or base price per share.
(3) Indicates percentage of total options granted in the applicable class of
stock.
(4) The dollar amounts under these columns are the result of calculations at 0%
and at the 5% and 10% rates set by the Securities and Exchange Commission
and therefore are not intended to forecast possible future appreciation, if
any, of the price of the Marathon Stock or the Steel Stock. USX did not use
an alternative formula for a grant date valuation, as USX is not aware of
any formula which will determine with reasonable accuracy a present value
based on future unknown or volatile factors. Amounts shown for All
Stockholders represent the potential realizable value assuming appreciation
at the rates indicated based on the exercise or base price per share and the
expiration date applicable to grants made in 1997 and the number of
outstanding shares as of December 31, 1997.
(5) Delhi Stock options and SARs were redeemed on January 26, 1998 at the
redemption price of $20.60 per share.
20
OPTION EXERCISES AND YEAR-END VALUES
The following table sets forth certain information concerning options to
purchase USX common stock and stock appreciation rights ("SARs") exercised by
each executive officer named in the Summary Compensation Table during 1997
together with the total number of options and SARs outstanding at December 31,
1997 and the value of such options:
AGGREGATED 1997 OPTION/SAR EXERCISES
AND DECEMBER 31, 1997 OPTION/SAR VALUES
TOTAL VALUE
OF UNEXERCISED
IN-THE-MONEY
NO. OF TOTAL VALUE NO. OF OPTIONS/SARS AT
SHARES REALIZED UNEXERCISED DECEMBER 31,
UNDERLYING FOR ALL OPTIONS/SARS AT 1997 FOR
OPTIONS/SARS CLASSES OF DECEMBER 31, ALL CLASSES
NAME EXERCISED(1) STOCK($)(1) 1997(1) OF STOCK($)(1)
- -------------------------------------------------------- -------------- ----------- ---------------- ----------------
T. J. Usher............................................. 109,500 1,352,281 560,000 2,064,686
V. G. Beghini........................................... 25,000 57,843 549,000 4,843,809
P. J. Wilhelm........................................... 20,650 178,353 148,800 175,287
R. M. Hernandez......................................... 74,000 262,977 359,200 3,028,554
D. D. Sandman........................................... 97,375 968,407 82,925 191,352
- --------------------------
Note: All options listed above, except those granted on May 27, 1997, are
currently exercisable. Except for 7,800 shares held by Mr. Wilhelm, all options
listed above were granted with tandem SARs.
(1) Figures by class of stock are as follows (Dehli Stock options and SARs were
redeemed on January 26, 1998 at the redemption price of $20.60 per share.):
NO. OF NO. OF
SHARES UNEXERCISED
UNDERLYING OPTIONS/SARS AT
CLASS OF OPTIONS/SARS VALUE DECEMBER 31,
STOCK EXERCISED REALIZED($) 1997
---------- -------------- ----------- ----------------
T. J. Usher............................................... Marathon 109,500 1,352,281 282,500
Steel 0 0 258,500
Delhi 0 0 19,000
V. G. Beghini............................................. Marathon 25,000 57,843 468,250
Steel 0 0 70,750
Delhi 0 0 10,000
P. J. Wilhelm............................................. Marathon 20,650 178,353 31,800
Steel 0 0 111,750
Delhi 0 0 5,250
R. M. Hernandez........................................... Marathon 74,000 262,977 257,450
Steel 0 0 87,500
Delhi 0 0 14,250
D. D. Sandman............................................. Marathon 97,375 968,407 35,000
Steel 0 0 38,725
Delhi 0 0 9,200
21
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Compensation programs for USX's executives are designed to attract, retain
and motivate employees who will contribute to achievement of corporate goals and
objectives. The principal elements of executive compensation are salaries,
short-term incentive (bonus) awards and long-term incentive awards, which are
currently made to executives in the form of stock options, with tandem stock
appreciation rights, and restricted stock.
The Compensation Committee is involved in decision making with respect to
all executive compensation matters, either making recommendations to the USX or
a subsidiary company board or acting on its own, whichever is appropriate. The
Committee administers the Senior Executive Officer Annual Incentive Compensation
Plan, which was adopted in 1994 and is intended to meet the requirements for
deductibility under the tax law for awards made under the Plan, and the USX
Annual Incentive Compensation Plan, as well as the Corporation's plan under
which long-term incentives are granted--the 1990 Stock Plan. The Committee has
approved the amendments to the Senior Executive Officer Annual Incentive
Compensation Plan and the 1990 Stock Plan that are being submitted to the
stockholders for approval elsewhere in the proxy statement.
Each executive management salary is subjectively administered within a
salary range with a midpoint that is externally competitive and internally
equitable. The midpoint is externally competitive in the respect that it is near
the average midpoint for comparable positions at companies of similar size and
complexity, and it is internally equitable in the sense that it reflects the
ranking of the position in comparison with other positions in the same
organization. The data used in setting each position's midpoint are obtained
from surveys coordinated by independent consultants, with each business line
having its own source of relevant data. Ultimately, an executive's salary level
reflects a variety of factors, including time in position and experience, with
the Committee giving such weight to each factor as it considers appropriate.
While the overall decision making is subjective, performance is given the
highest weight in determining salary increases. Thus, an executive's salary
reflects, first, the relative "value" of the position, as measured both
externally and internally, such factors as time in the position and experience,
and, finally, the sustained level of performance. Under the current salary
administration philosophy, once an executive's salary has reached the midpoint
for the position, increases rarely exceed amounts necessary to maintain the
salary near the midpoint, assuming performance merits such increases. At this
level, short- and long-term incentive opportunities provide the primary basis
for any significant increases in compensation. The results of the Committee's
considerations and the salary administration philosophy described above are
reflected in the salaries shown for the officers named in the Summary
Compensation Table.
Short-term incentives are targeted to provide award opportunities near the
average of those for other industrial companies. The Senior Executive Officer
Annual Incentive Compensation Plan provides for awards based on pre-established
performance measures specifically related to the responsibilities of Plan
participants. No portion of an award related to achievement of a specific
performance measure may be paid unless performance reaches the minimum, or
threshold, level for that measure. While performance measures vary across the
Corporation, payments for 1997 were based on performance (as measured for
incentive compensation purposes) that was at or above threshold levels for
profit from operations, stock performance and worker safety for the Marathon and
U. S. Steel Groups. Threshold levels were also exceeded by the U. S. Steel Group
for steel shipments; by the Marathon Group for production of natural gas, for
refined product sales, for refined product margins and for toxic emissions
improvements; and by the Corporation for workforce diversity. The Compensation
Committee certified in writing prior to payment of the awards for the year 1997
that the pre-established, applicable performance measures required under the
Plan were satisfied.
Executives who do not participate in the Senior Executive Officer Annual
Incentive Compensation Plan participate in the USX (which includes U. S. Steel),
or Marathon Annual Incentive Compensation Plans ("other Plans"). The primary
basis for individual award determination under these other Plans is the degree
of achievement of pre-established objectives, including profit, cash flow and
EVA-Registered Trademark- (economic value added), as measured for incentive
compensation purposes, as well as individual objectives. Consideration is also
given to directional changes over the previous year's performance as well as the
absolute levels of income and cash flow. Awards are subjective, since the
Committee gives such weight to the various factors as it deems appropriate.
Opportunities for payouts from long-term incentive compensation provide the
most direct link to total shareholder return. Under the 1990 Stock Plan, the
Committee may grant stock options, stock appreciation rights and/or restricted
stock. The Committee makes stock option grants that are subjectively determined
to be reasonable and in line with other compensation. The number of shares
granted generally reflects the optionee's level of responsibility, and the
classes of stock granted reflect the specific Group(s) to which the optionee's
responsibilities relate. Grants are normally made once a year. If the Committee
determines that such action is desirable, it may vary the typical grant pattern,
such as by making an additional grant or by varying the size of grant. A grant
of stock options was made by the Committee in May 1997.
Since the inception of the 1990 Stock Plan, the Committee has subjectively
established, for each recipient, an annual target level of restricted stock
shares, based on the same factors as are used for granting stock options. Shares
are vested on
- --------------------------
EVA-Registered Trademark- is a registered trademark of Stern Stewart & Co.
22
the basis of the performance of the Corporation and its Groups. A major grant,
made in 1995, was intended to cover the five-year period ending with 1999;
subsequent grants were made to Plan participants only to permit vesting at the
target level for the number of years of employment remaining in the period. The
Committee's vesting decisions were made on the basis of peer-group performance
comparisons with relevant businesses. Performance factors included earnings
before interest, taxes and depreciation as a percent of total assets (Marathon
Group), pretax profit from operations as a percent of sales (Delhi Group) and as
a percent of capital employed (U. S. Steel and Delhi Groups), operating cash
flow as a percent of capital employed (U. S. Steel and Delhi Groups) and net
operating cash flow as a percent of capital employed (Delhi Group). In addition,
the comparison for the Marathon Group included downstream operating income per
barrel sold, upstream income per barrel of oil equivalent produced, and oil and
gas reserve replacement ratio. The comparison for the U. S. Steel Group included
operating profit per ton of steel shipped. Safety performance comparisons were
included for all three Groups. Vesting of restricted stock for corporate
officers was based on composite results for the three operating Groups. In May
1997, shares of restricted stock were vested based on 1996 performance.
As a means of monitoring USX's executive compensation programs, the
Committee annually compares the salary, bonus and long-term incentive payouts
for the Chairman, the Chief Financial Officer, and the Presidents of the U. S.
Steel and Marathon Groups with the same elements for similar positions at
comparable companies. Periodically, an independent consultant reviews USX's
executive compensation programs to ensure that the various forms of compensation
provided are appropriate for the Corporation and its business units and that the
programs provide competitive, performance-based compensation. A compensation
comparison of selected executive positions, which included all of USX's
Officer-Director positions, indicated that the salaries and the projected value
of long-term incentive grants were generally below average for the sample
positions.
Bonuses were more variable, with some above and some below average. The
Committee has used and intends to continue using the results of such
compensation comparisons as one of the factors in its decision making process.
With respect to the compensation comparisons discussed herein, the
Compensation Committee believes that the companies with whom the Corporation
competes for employees at its headquarters and business units are not
necessarily the same companies with which shareholder returns would logically be
compared. The peer groups used in the performance graphs include the Standard &
Poor's 500 Stock Index, the Standard and Poor's Domestic Integrated Oil Index
and those steel and gas companies deemed most comparable to the Corporation's
businesses for measuring stock performance. The companies used for comparing
compensation reflect similarities to USX and its operating groups in such
factors as line of business, size and complexity. Therefore, the compositions of
the groups of companies used for compensation comparisons are not identical to
those of the peer groups shown in the Shareholder Return Performance
presentation.
The 1997 compensation of the CEO reflects the same elements, and the
Committee considers the same factors as those described above, in determining
the CEO's compensation. The CEO's leadership and effectiveness in dealing with
major corporate problems and opportunities are considered in determining salary
increases. Taking into consideration these factors, as well as the comparability
of Mr. Usher's salary with CEOs of other companies of similar size and
complexity and the position of his salary in the range for his position, the
Committee approved a salary increase for Mr. Usher effective August 1, 1997.
The increase in Mr. Usher's award under the Senior Executive Officer Annual
Incentive Compensation Plan for 1997 reflects improvement over 1996 (a year
marked by significant improvement) in the Corporation's performance, as measured
by the pre-established performance measures discussed above. For example, profit
from operations (as measured for incentive compensation purposes) is a heavily
weighted performance factor under the Plan. This factor increased about 14% for
the Marathon Group and over 60% for the U. S. Steel Group. The higher award also
reflects significant increases in the prices of all three classes of the
Corporation's common stock (another performance factor under the Plan), as well
as an increase in the salary to which the award is related.
The additional shares granted to Mr. Usher in 1997 in the form of restricted
stock and stock options under the 1990 Stock Plan were subjectively considered
by the Committee to be at a competitive level relative to other CEOs.
John F. McGillicuddy
Charles R. Lee
Paul E. Lego
Seth E. Schofield
23
SHAREHOLDER RETURN PERFORMANCE PRESENTATION
Set forth below are line graphs comparing the yearly change in cumulative
total stockholder return for each class of USX's common stock with the
cumulative total return of the Standard & Poor's 500 Stock Index and, as
applicable, the Standard & Poor's Domestic Integrated Oil Index, or a Steel
Index or a Gas Index as defined in footnotes to the graphs.
The Steel Stock Index has been updated to include AK Steel Corporation, LTV
Steel Corporation, and National Steel Corporation. It is referred to in the
graph as the "New Steel Index." These three companies, which were not publicly
traded at the beginning of the five-year period, now present a sufficiently
meaningful trading history for inclusion in the index. The Steel Stock graph
also contains the index used in last year's proxy statement. It is referred to
as the "Old Steel Index."
COMPARISON OF CUMULATIVE TOTAL RETURN ON $100 INVESTED IN MARATHON STOCK
ON DECEMBER 31, 1992 VS. S&P 500 AND S&P DOMESTIC INTEGRATED OIL INDEX(1)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
USX-MARATHON S&P 500 S&P OIL INDEX
12/31/92 100 100 100
12/31/93 99 110 105
12/31/94 102 112 111
12/31/95 126 153 126
12/31/96 160 189 159
12/31/97 231 252 189
- --------------------------
(1) Total return assumes reinvestment of dividends.
24
COMPARISON OF CUMULATIVE TOTAL RETURN ON $100 INVESTED IN STEEL STOCK
ON DECEMBER 31, 1992 VS. S&P 500 AND STEEL INDEX(1)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
USX-U.S. STEEL S&P 500 OLD STEEL INDEX NEW STEEL INDEX
12/31/92 100 100 100 100
12/31/93 131 110 125 124
12/31/94 110 112 120 124
12/31/95 98 153 90 104
12/31/96 104 189 64 86
12/31/97 106 252 59 78
- --------------------------
(1) Total return assumes reinvestment of dividends.
(2) Old Steel Index consists of the common stocks of Armco Inc., Bethlehem
Steel Corporation and Inland Steel Industries for the period December 31,
1992 through December 31, 1993 and Bethlehem Steel Corporation and Inland
Steel Industries for the period January 1, 1994 through December 31, 1997.
Armco Inc. underwent a restructuring in April 1994 whereby its carbon steel
operations were placed in a separately traded public company, AK Steel
Corporation, rendering continuing comparison with Armco Inc. meaningless.
(3) New Steel Index consists of the common stocks of AK Steel Corporation for
the period March 30, 1994 through December 31, 1997, LTV Steel Corporation
for the period June 30, 1993 through December 31, 1997, National Steel
Corporation for the period April 1, 1993 through December 31, 1997 and both
Bethlehem Steel Corporation and Inland Steel Industries for the period
December 31, 1992 through December 31, 1997.
25
COMPARISON OF CUMULATIVE TOTAL RETURN ON $100 INVESTED IN DELHI STOCK
ON DECEMBER 31, 1992 VS. S&P 500 AND GAS INDEX(1)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
USX-DELHI S&P 500 INDEX GAS INDEX (2)
12/31/92 100 100 100
12/31/93 95 110 132
12/31/94 62 112 97
12/31/95 65 153 100
12/31/96 102 189 130
12/31/97 133 252 160
- --------------------------
(1) Total return assumes reinvestment of dividends.
(2) Gas Index consists of the common stocks of American Oil and Gas
Corporation, Associated Natural Gas Corporation, Tejas Gas Corporation and
Western Gas Resources, Inc. for the period December 31, 1992 through
December 31, 1993 and Tejas Gas Corporation and Western Gas Resources, Inc.
for the period January 1, 1994 through December 31, 1997. American Oil and
Gas Corporation and Associated Natural Gas Corporation were acquired by
other companies in 1994, rendering continuing meaningful comparison with
them impossible.
26
TRANSACTIONS
In the regular course of its business since January 1, 1997, USX and its
subsidiaries have had transactions with corporations of which certain
non-employee directors are executive officers. Such transactions were in the
ordinary course of business and at competitive prices and terms. USX does not
consider any such director to have a material interest in any such transaction.
USX anticipates that similar transactions will occur in 1998.
PENSION BENEFITS
The United States Steel Corporation Plan for Non-Union Employee Pension
Benefits ("USX Pension Plan") is comprised of two defined benefits: the first,
based on final earnings and the second, on career earnings. Directors who have
not been employees of USX will not receive any benefits under the USX Pension
Plan. The following table shows the annual final earnings pension benefits for
retirement at age 65 (or earlier under certain circumstances), for various
levels of eligible earnings which would be payable to employees retiring with
representative years of service based on a formula of a specified percentage
(dependent on years of service) of average annual eligible earnings in the five
consecutive years of the ten years prior to retirement in which such earnings
were highest. As of January 31, 1998, Messrs. Usher, Wilhelm, Hernandez and
Sandman had 32, 33, 29 and 5 credited years of service, respectively.
TABLE OF PENSION BENEFITS
FINAL EARNINGS PENSION BENEFITS
AVERAGE ANNUAL ELIGIBLE
EARNINGS FOR HIGHEST
FIVE CONSECUTIVE
YEARS IN TEN-YEAR ANNUAL BENEFITS FOR YEARS OF SERVICE
PERIOD PRECEDING ----------------------------------------------------------
RETIREMENT 15 YEARS 20 YEARS 25 YEARS 30 YEARS 35 YEARS 40 YEARS
- ------------------------ -------- -------- -------- -------- -------- --------
$100,000.......... $ 17,325 $ 23,100 $ 28,875 $ 34,650 $ 40,950 $ 47,250
300,000.......... 51,975 69,300 86,625 103,950 122,850 141,750
500,000.......... 86,625 115,500 144,375 173,250 204,750 236,250
700,000.......... 121,275 161,700 202,125 242,550 286,650 330,750
900,000.......... 155,925 207,900 259,875 311,850 368,550 425,250
1,100,000........ 190,575 254,100 317,625 381,150 450,450 519,750
1,300,000........ 225,225 300,300 375,375 450,450 532,350 614,250
Annual career earnings pension benefits are equal to 1% of total career
eligible earnings plus a 30% supplement. The estimated annual career earnings
benefits payable at normal retirement age 65, assuming no increase in annual
earnings, will be $215,255 for Mr. Usher, $93,903 for Mr. Wilhelm, $146,747 for
Mr. Hernandez and $93,750 for Mr. Sandman. Earnings for the purpose of
calculating both the final earnings and career earnings pensions are limited to
base salary for services performed, allowance for absence covered by sick leave
salary continuance and payment for absence while on regular vacation or holidays
and do not include any awards under the Annual Incentive Compensation Plan or
the Senior Executive Officer Annual Incentive Compensation Plan. Benefits under
both pension provisions are based on a straight life annuity form of benefit,
which is not subject to reduction for Social Security benefits, but, as provided
by the USX Pension Plan, the final earnings pension is subject to offset for a
pension provided outside the USX Pension Plan from a fund to which USX has
contributed and for payments made by USX pursuant to workers' compensation or
similar laws when such payments are the result of a permanent disability.
Benefits may be paid as an actuarially determined lump sum in lieu of monthly
pensions under both the final earnings and career earnings provisions of the
Plan.
In addition to the pension benefit described above, members of USX executive
management, which includes all of the executive officers named in the Summary
Compensation Table except Mr. Beghini, are entitled to the benefits shown in the
table below based on bonuses paid under the Annual Incentive Compensation Plan
and the Senior Executive Officer Annual Incentive Compensation Plan upon
retirement after age 60 or before age 60 with USX's consent:
27
SUPPLEMENTAL PENSION BENEFITS
AVERAGE ANNUAL BONUS
FOR THREE HIGHEST
YEARS IN TEN-YEAR ANNUAL BENEFITS FOR YEARS OF SERVICE
PERIOD PRECEDING ----------------------------------------------------------
RETIREMENT 15 YEARS 20 YEARS 25 YEARS 30 YEARS 35 YEARS 40 YEARS
- -------------------- -------- -------- -------- -------- -------- --------
$100,000....... $ 23,100 $ 30,800 $ 38,500 $ 46,200 $ 53,900 $ 61,600
300,000....... 69,300 92,400 115,500 138,600 161,700 184,800
500,000....... 115,500 154,000 192,500 231,000 269,500 308,000
700,000....... 161,700 215,600 269,500 323,400 377,300 431,200
900,000....... 207,900 277,200 346,500 415,800 485,100 554,400
1,100,000..... 254,100 338,800 423,500 508,200 592,900 677,600
1,300,000..... 300,300 400,400 500,500 600,600 700,700 800,800
The Marathon Oil Company Retirement Plan (the "Marathon Plan") provides
benefits based on final earnings. The following table shows the annual pension
benefits for retirement at age 65 for various levels of eligible earnings which
would be payable to employees retiring with representative years of service. The
table is based on a formula of a specified percentage (dependent on years of
participation in the plan) of average annual eligible earnings in the three
consecutive years of the ten prior to retirement in which such earnings were
highest.
FINAL AVERAGE EARNINGS
FOR HIGHEST THREE
CONSECUTIVE YEARS ANNUAL BENEFITS FOR YEARS OF SERVICE
IN TEN-YEAR PERIOD ----------------------------------------------------------------
PRECEDING RETIREMENT 15 YEARS 20 YEARS 25 YEARS 30 YEARS 35 YEARS 40 YEARS
- ---------------------- -------- -------- -------- ---------- ---------- ----------
$100,000........ $ 20,779 $ 27,706 $ 34,632 $ 41,558 $ 48,485 $ 51,948
300,000........ 68,779 91,706 114,632 137,558 160,485 171,948
500,000........ 116,779 155,706 194,632 233,558 272,485 291,948
700,000........ 164,779 219,706 274,632 329,558 384,485 411,948
900,000........ 212,779 283,706 354,632 425,558 496,485 531,948
1,100,000...... 260,779 347,706 434,632 521,558 608,485 651,948
1,300,000...... 308,779 411,706 514,632 617,558 720,485 771,948
1,500,000...... 356,779 475,706 594,632 713,558 832,485 891,948
2,000,000...... 476,779 635,706 794,632 953,558 1,112,485 1,191,948
Earnings covered by the Marathon Plan include pay for hours worked, pay for
allowed hours, military leave allowance, commissions, 401(k) contributions to
the Marathon Oil Company Thrift Plan and bonuses. The benefits reflected above
are based upon a straight life annuity form of benefit and include the
applicable Social Security offset as defined by the Marathon Plan. As of January
31, 1998, Mr. Beghini had 40 years of credited participation. Mr. Sandman has 20
years of credited participation.
In order to comply with the limitations prescribed by the Internal Revenue
Code of 1986, as amended (the "Code"), pension benefits will be paid directly by
USX or by Marathon when in excess of those permitted by the Code to be paid from
federal income tax qualified pension plans.
CHANGE IN CONTROL ARRANGEMENTS
In order to encourage key officers to continue their dedication to their
assigned duties in the face of potentially disturbing circumstances arising from
the possibility of a change in control of USX, USX has entered into agreements
with each of the executive officers named in the Summary Compensation Table
which provide that in the event of termination of employment under certain
circumstances following a change in control (as defined in the agreement) the
officer will be entitled to certain severance benefits. These severance benefits
are (i) a cash payment of up to three times the sum of the officer's current
salary plus the highest annual bonus paid to the officer in the three years
immediately preceding the date of termination under any annual bonus plan of
USX; (ii) a cash payment in settlement of outstanding options under any option
or incentive plan of USX; (iii) life, disability, accident and health insurance
benefits for a 24-month period after termination; (iv) a cash payment equal to
the actuarial equivalent of the difference between amounts receivable by the
officer under the pension and welfare benefit plans of USX or Marathon,
whichever is applicable, and those which would be payable if the officer had
retired as of the date of termination under conditions entitling a retiree under
similar circumstances to the highest benefits available under such pension and
welfare plans and the officer had been absent due to layoff for a one-year
period ending on the date of termination; (v) a cash payment equal to the
difference between amounts receivable under the applicable USX or Marathon
Savings Fund Plan or Thrift Plan and amounts which would have been received if
the officer's savings had been fully vested; and (vi) a cash payment of the
amount necessary to insure that the above-mentioned payments are not subject to
net reduction due to imposition of excise taxes which are payable under Section
4999 of the Code. Each of the agreements is
28
subject to automatic annual extension unless prior notice is given by USX that
it does not wish to extend the agreement, provided that in any event the
agreement continues for two years following a "change in control." The
circumstances which occasion payment of these severance benefits are termination
by the officer for "good reason" or by USX other than for "cause" or
"disability" at any time following a "change in control." All the agreements
provide that severance benefits are not payable if termination is due to death
or disability or is on or after attaining age 65. A "change in control" is
defined as a change in control of a nature that would be required to be reported
in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), whether or not
USX is then subject to such reporting requirement; provided that such a change
in control shall be deemed to have occurred if (A) any "person" (as defined in
Sections 13(d) and 14(d) of the Exchange Act but excluding USX, its
subsidiaries, fiduciaries under any USX benefit plans, underwriters temporarily
holding USX securities and corporations owned by the stockholders of USX in
substantially the same proportions as their ownership of stock of USX) is or
becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange
Act), directly or indirectly, of securities of USX representing twenty percent
or more of the combined voting power of USX's then outstanding voting
securities; (B) there shall cease to be a majority of the Board comprised as
follows: individuals who on the date of the agreement constitute the Board and
any new director(s) (other than a director whose initial assumption of office is
in connection with an election contest) whose appointment or election by the
Board or nomination for election by USX's stockholders was approved by a vote of
at least two-thirds of the directors then still in office who either were
directors on the date of the agreement or whose appointment, election or
nomination for election was previously so approved; or (C) there is consummated
a merger or consolidation of USX or a USX subsidiary with any other corporation,
other than a merger or consolidation which would result in the holders of the
voting securities of USX outstanding immediately prior thereto holding
securities which represent immediately after such merger or consolidation at
least 50% of the combined voting power of the entity surviving the merger or
consolidation (or the parent of such surviving entity) or the shareholders of
USX approve a plan of complete liquidation of USX, or there is consummated the
sale or other disposition of all or substantially all of USX's assets.
STOCKHOLDER PROPOSALS
Proposals of security holders intended to be presented at the 1999 annual
meeting of stockholders must be received no later than November 9, 1998 for
inclusion in the proxy statement and proxy for that meeting.
In addition, the By-Laws provide that only such business as is properly
brought before the annual meeting will be conducted. For business to be properly
brought before the meeting by a stockholder, the By-Laws require that notice be
received by the Secretary at least 60, but not more than 90, days prior to the
meeting and that such notice provide certain information regarding the business
desired to be brought before the annual meeting and about the stockholder giving
the notice.
SOLICITATION STATEMENT
The cost of this solicitation of proxies will be borne by USX. In addition
to soliciting proxies by mail, directors, officers and employees of USX, without
receiving additional compensation therefor, may solicit proxies by telephone,
telegram, in person or by other means. Arrangements also will be made with
brokerage firms and other custodians, nominees and fiduciaries to forward proxy
solicitation material to the beneficial owners of each class of common stock
held of record by such persons and USX will reimburse such brokerage firms,
custodians, nominees and fiduciaries for reasonable out-of-pocket expenses
incurred by them in connection therewith.
By order of the Board of Directors,
DAN D. SANDMAN,
Secretary
Dated, March 9, 1998
29
ANNEX I
USX CORPORATION SENIOR EXECUTIVE OFFICER
ANNUAL INCENTIVE COMPENSATION PLAN
(AS AMENDED FOR APPROVAL BY THE SHAREHOLDERS ON APRIL 28, 1998)
1. PURPOSE
The objectives of the Senior Executive Officer Annual Incentive Compensation
Plan (the "Plan") are to advance the interests of the Corporation by providing
Plan Participants with annual incentive opportunities linked directly to
specific results. It is intended that the Plan will:
(a) reinforce the Corporation's goal-setting and strategic planning process,
(b) recognize the efforts of senior executive officers in achieving
objectives, and
(c) aid in attracting and retaining competent senior executive officers,
thus ensuring the long-range success of the Corporation.
2. DEFINITIONS
The following definitions will apply:
Award - An award granted under the Senior Executive Officer Annual Incentive Compensation
Plan.
Board - The Board of Directors of USX Corporation.
Committee - The Compensation Committee of the Board of Directors of USX Corporation, which will
consist of not less than three directors of the Corporation who are appointed by the
Board of Directors and who will not be and will not have been an officer or an
employee of the Corporation. In addition, in order to be a member of the Committee, a
director must be an "outside director" within the meaning of Section 162(m) of the
Internal Revenue Code of 1986, as amended (the "Code"), and the regulations
thereunder.
Corporation - USX Corporation, together with any 80% or more owned subsidiary companies.
Group - One of the Corporation's two Groups -- Marathon Group or U.S. Steel Group.
Participant - A senior executive officer who is eligible to receive incentive compensation under
the Plan.
3. ADMINISTRATION
The Committee will administer the Plan and will make all other
determinations necessary under the Plan. Determinations made by the Committee
will be final and binding upon Participants and their legal representatives and,
in the case of deceased Participants, upon their executors, administrators,
estates, beneficiaries, heirs and legatees. The terms and provisions of the Plan
will be construed under and controlled by the law of the Commonwealth of
Pennsylvania.
4. PARTICIPANTS
Participants in the Plan are those who served in one of the positions listed
below for at least a portion of the year for which Awards are made:
USX Corporation Chairman
USX Corporation Chief Executive Officer
USX Corporation President
USX Corporation Vice Chairmen
USX Corporation Chief Operating Officer
USX Corporation Chief Financial Officer
USX Corporation General Counsel
USX Corporation Executive Vice Presidents
USX Corporation Senior Vice Presidents
Marathon Oil Company President
Marathon Oil Company Executive Vice Presidents
Marathon Oil Company Senior Vice Presidents
U.S. Steel Group President
U.S. Steel Group Executive Vice Presidents
U.S. Steel Group Senior Vice Presidents
Awards made to individuals who die (in which case the Award will be made to
the estate of the Participant) or retire during the year will be prorated based
on the period of active employment. An employee who is a participant in any
other cash incentive plan for a year or portion thereof may not participate in
the Plan for the same year or portion thereof.
5. DETERMINATION OF AWARDS
Each Award granted under the Plan will be based upon the performance of the
Corporation and/or a Group. Performance will be evaluated using the specific
performance measures outlined in the table below. The Committee has the
authority to adopt, in accordance with regulations established under the Code,
applicable target levels under these performance measures and the amounts to be
awarded for attaining these target levels.
The Committee reserves the right to reduce the amount of an Award or
eliminate an Award that would otherwise be payable to a Participant under the
Plan. In no event will the amount of an Award payable to a Participant for a
year exceed $3.0 million.
ELIGIBLE POSITIONS
----------------------------------------------------------------
U.S. STEEL GROUP MARATHON OIL COMPANY
PRESIDENT, PRESIDENT,
APPLICABLE EXECUTIVE VICE PRESIDENTS EXECUTIVE VICE PRESIDENTS
PERFORMANCE AND AND
MEASURES SENIOR VICE PRESIDENTS SENIOR VICE PRESIDENTS
- ------------------------------------------ ------------------------------- -------------------------------
Income from Operations
U.S. Steel Group X
Marathon Group X
Steel Shipments X
Oil and Natural Gas Production
Liquid Hydrocarbon X
Natural Gas X
Increases in Reserves in Excess of Annual
Production
Liquid Hydrocarbon X
Natural Gas X
Refined Products
Sales X
Margins X
Worker Safety
U.S. Steel Group--Injury Frequency
Rate X
Marathon Group--Lost-Time Accidents X
Toxic Emissions Improvements
U.S. Steel Group X
Marathon Group X
Work Force Diversity
Common Stock Performance
U.S. Steel Group X
Marathon Group X
USX CORPORATION
CHAIRMAN,
CHIEF EXECUTIVE OFFICER,
PRESIDENT,
VICE CHAIRMEN,
CHIEF OPERATING OFFICER,
CHIEF FINANCIAL OFFICER,
APPLICABLE GENERAL COUNSEL
PERFORMANCE EXECUTIVE VICE PRESIDENTS AND
MEASURES SENIOR VICE PRESIDENTS
- ------------------------------------------ ---------------------------------
Income from Operations
U.S. Steel Group X
Marathon Group X
Steel Shipments X
Oil and Natural Gas Production
Liquid Hydrocarbon X
Natural Gas X
Increases in Reserves in Excess of Annual
Production
Liquid Hydrocarbon X
Natural Gas X
Refined Products
Sales X
Margins X
Worker Safety
U.S. Steel Group--Injury Frequency
Rate X
Marathon Group--Lost-Time Accidents X
Toxic Emissions Improvements
U.S. Steel Group X
Marathon Group X
Work Force Diversity X
Common Stock Performance
U.S. Steel Group X
Marathon Group X
6. PAYMENT OF AWARDS
Awards can be paid under the Plan only after the Committee certifies in
writing that the applicable performance measures have been satisfied.
The Compensation Committee may permit deferral of receipt of all or any
portion of an Award granted under the Plan for such period and under such
conditions as the Committee may determine, including the payment of interest at
a reasonable rate.
No Award will be paid to a Participant who quits or is discharged prior to
payment of an Award.
2
Unless receipt is deferred, an Award will be paid in cash as soon as
practicable following the determination of Awards. Awards are subject to income
and payroll tax withholding.
(A) For Participants who are (or were prior to death or retirement during
the year) employees of USX Corporation (Headquarters) or U.S. Steel
Group, Awards will not be considered as part of the Participant's salary
and will not be used in the calculation of any other pay, allowance or
benefit except for provisions as stated under the Supplemental Pension
Program.
(B) For Participants who are (or were prior to death or retirement during
the year) employees of Marathon Group, Awards are included in "gross pay"
for purposes of benefit calculations under the respective retirement and
thrift plans unless the Award is paid after a Participant retires.
7. Effective Date
Subject to approval by a majority of votes present in person or represented
by proxy and entitled to vote on April 28, 1998, this Plan, as amended, will
have an effective date of January 1, 1998.
1/14/98
3
ANNEX II
USX CORPORATION 1990 STOCK PLAN
(AS AMENDED FOR APPROVAL BY THE STOCKHOLDERS ON APRIL 28, 1998)
1. OBJECTIVES. The USX Corporation 1990 Stock Plan (the "Plan") is designed:
(a) to promote the long-term financial interests and growth of the
Corporation and subsidiaries by attracting and retaining management personnel
with the training, experience and ability to enable them to make a substantial
contribution to the success of the Corporation's businesses;
(b) to motivate management personnel by means of growth-related incentives
to achieve long-range growth goals;
(c) to further the identity of interests of participants with those of the
stockholders of the Corporation through opportunities for increased stock
ownership in the Corporation; and
(d) to permit grants to participants with respect to the class of common
stock that reflects the performance of the Corporation's major business in which
the participant works.
2. DEFINITIONS.
(a) BOARD. The Board of Directors of USX Corporation;
(b) COMMITTEE. The Compensation Committee of the Board of Directors of USX
Corporation, which will consist of not less than three directors of the
Corporation who are appointed by the Board of Directors and who will satisfy the
definition of "non-employee director" under Rule 16b-3 promulgated under the
Securities Exchange Act of 1934 or any successor rule. In addition, in order to
be a member of the Committee, a director must be an "outside director" within
the meaning of Section 162(m) of the Internal Revenue Code of 1986, as amended
(the "Code"), and the regulations thereunder.
(c) CORPORATION. USX Corporation (USX) and its (1) wholly-owned and
partially-owned subsidiaries including limited liability companies
("Subsidiaries") and wholly-owned and partially-owned subsidiaries, direct and
indirect, of Subsidiaries, and (2) joint ventures included within the U. S.
Steel Group or the Marathon Group;
(d) FAIR MARKET VALUE. Such value of a Share as reported for stock exchange
transactions and determined in accordance with any applicable resolutions or
regulations of the Committee in effect at the relevant time;
(e) GRANT. A Grant made under the Plan to a Participant in the form of an
Option, Restored Option, Stock Appreciation Right or Restricted Stock or any
combination thereof;
(f) MARATHON STOCK. USX-Marathon Group Common Stock, par value $1.00;
(g) GROUP. One of the Corporation's two Groups--Marathon Group or U. S.
Steel Group.
(h) PARTICIPANT. An employee of the Corporation to whom a Grant is made;
(i) SHARE. A share of Marathon Stock or Steel Stock, which, in any case,
may be authorized but unissued or issued and reacquired;
(j) SHARES. Shares of Marathon Stock or Steel Stock, or a combination
thereof, which, in any case, may be authorized but unissued or issued and
reacquired; and
(k) STEEL STOCK. USX-U.S. Steel Group Common Stock, par value $1.00.
3. ELIGIBILITY. Employees of the Corporation eligible for a Grant under the Plan
are all executive officers and others in responsible positions whose
performance, in the judgment of the Committee, affects the Corporation's
success.
4. ADMINISTRATION. The Plan shall be administered by the Committee in accordance
with Rule 16b-3 promulgated under the Securities Exchange Act of 1934 or any
successor rule. The Committee shall determine the type or types of Grants to be
made to each Participant and shall set forth in such Grant the terms, conditions
and limitations applicable to it, including provisions relating to change in
control of the Corporation. Grants may be made singly, in combination or in
tandem. The Committee shall have full and exclusive power to interpret the Plan,
to adopt rules, regulations and guidelines relating to the Plan, to grant
waivers of Plan restrictions, other than the restrictions described in Paragraph
10, and to make all of the determinations necessary for its administration.
5. SHARES SUBJECT TO THE PLAN. Up to 0.5% of the outstanding Marathon Stock and
up to 0.8% of the outstanding Steel Stock, as determined on December 31 of the
preceding year, shall be available for Grants during each calendar year in which
the Plan is in effect. In addition, Shares related to Grants that are forfeited,
terminated, cancelled, expire unexercised, settled in cash in lieu of stock or
in such manner that all or some of the Shares covered by a Grant are not issued
to a Participant shall immediately become available for Grants, and these
Shares, as well as any unused portion of the percentage limit of Shares in any
calendar year, shall be carried forward and available for Grants in succeeding
calendar years. During any calendar year, no Participant shall be awarded Grants
pursuant to Paragraphs 7, 8, 9 and 10 hereof with respect to more than 500,000
Shares of each class of stock.
6. DELEGATION OF AUTHORITY. The Committee may delegate to the Stock Option
Officer and to other senior officers of the Corporation its duties under the
Plan subject to such conditions and limitations as the Committee shall prescribe
except that only the Committee may designate and make Grants to Participants who
are subject to Section 16 of the Securities Exchange Act of 1934.
7. OPTIONS. A right to purchase a specified number of Shares at not less than
100% of Fair Market Value on the date of the Grant. All Options will be
Non-Qualified Options. Full payment for Shares purchased shall be made at the
time of the exercise of the Option, in whole or in part. Payment of the purchase
price shall be made in cash or in such other form as the Committee may approve,
including Shares valued at the Fair Market Value of the Shares on the date of
exercising the Option. No option shall have a term exceeding ten years from the
date of grant or be exercisable prior to the expiration of one year from the
date of grant, and no option shall be repriced except as provided for in
Paragraph 12.
8. RESTORED OPTION. An option issued as a result of the exercise of an option
for which the purchase price is paid wholly in previously owned Shares of the
class of stock of the underlying option. Upon such an exercise, a Restored
Option shall be granted with respect to Shares of the class of stock of the
underlying option, equal to the number of Shares actually used to exercise the
underlying option or portion thereof plus any Shares withheld for the payment of
taxes. A Restored Option (1) shall have an option price equal to the Fair Market
Value of the class of stock of the underlying option on the date of exercise,
(2) shall have the same expiration date as the underlying option and (3) shall
not be exercisable prior to the expiration of one year from the date of grant.
Grants and exercises of Restored Options shall be subject to such other
restrictions as shall be determined by the Compensation Committee.
9. STOCK APPRECIATION RIGHT. A right to receive a payment in cash and/or Shares
equal to the excess of the Fair Market Value of a Share on the date the Stock
Appreciation Right (SAR) is exercised over the Fair Market Value of a Share at
the date of the SAR Grant for a specified number of Shares; provided, that for
any SAR exercised during the 10-business-day period beginning on the third
business day following the release of USX's quarterly earnings, the Committee
may, in its sole discretion, establish a uniform Fair Market Value of a Share
for such period which shall not be more than the highest daily Fair Market Value
and shall not be less than the lowest daily Fair Market Value during such 10-
business-day period. No Stock Appreciation Right shall be exercisable prior to
the expiration of one year from the date of grant. "Business day" shall mean all
calendar days except Saturdays, Sundays and national holidays.
10. RESTRICTED STOCK. An award of Shares for no cash consideration, if permitted
by applicable law, or for such other consideration as determined by the
Committee. Each award shall be subject to: the condition that the Participant's
continuous service with the Corporation continue for at least one year following
the date of such award; vesting restrictions based on achievement of business
objectives, Corporation and Group performance and other criteria; and provisions
for forfeiture and non-transfer. Subject to such forfeiture and transfer
restriction provisions as may be established by the Committee, any Participant
receiving an award shall have all the rights of a stockholder of the Corporation
with respect to Shares of Restricted Stock, including the right to vote the
Shares and the right to receive any cash dividends thereon. During the period
January 1, 1998 through May 31, 2005, the number of Shares of Restricted Stock
granted shall not exceed 1,200,000 for Marathon Stock or 800,000 for U.S. Steel
Stock.
Each award of Restricted Stock under this Plan shall remain unvested until
the Committee vests the Shares based upon the performance of the Corporation
and/or a Group. Performance will be evaluated using the specific performance
measures outlined in the table below. The Committee has the authority to adopt,
in accordance with regulations established under the Code, applicable target
levels under these performance measures and the percentage of Restricted Stock
to be vested for attaining these target levels. The Committee reserves the right
to reduce the percentage of Restricted Shares to be vested for a Participant.
Shares of Restricted Stock under this Plan will be vested only after the
Committee certifies in writing that the applicable performance measures have
been satisfied. No Shares of Restricted Stock shall be vested prior to the
expiration of one year from the date of grant. In the case of a change in
control of the Corporation, all restrictions shall terminate.
MARATHON GROUP U. S. STEEL GROUP
- ------------------------------------------------------------ ------------------------------------------------------------
Earnings before interest, taxes and depreciation as % of Income from operations as % of capital employed
total assets
Oil and gas reserve replacement ratio Income from operations per ton shipped
Upstream--Income per barrel of oil equivalent produced Operating cash flow as % of capital employed
Downstream--Operating income per barrel of refinery Safety performance
throughput
Safety performance
11. TRANSFER. No Grant may be assigned, pledged or transferred other than by
will or by the laws of descent and distribution and during a Participant's
lifetime shall be exercisable only by the Participant or his or her guardian or
legal representative.
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12. ADJUSTMENTS. In the event of any change in the outstanding common stock of
USX by reason of a stock split, stock dividend, stock combination or
reclassification, recapitalization or merger, or similar event, the Committee
may adjust appropriately the number of Shares available for or covered by Grants
and Share prices related to outstanding Grants and make such other revisions to
outstanding Grants as it deems are equitably required.
13. TAX WITHHOLDING. The Corporation shall have the right to deduct applicable
taxes from any cash payment under this Plan which are required to be withheld
and further to condition the obligation to deliver or the vesting of Shares
under this Plan upon the Participant paying USX such amount as it may request to
satisfy any liability for applicable withholding taxes. Participants may elect
to have USX withhold Shares to satisfy all or part of their withholding
liability in the manner and to the extent provided for by the Committee at the
time of such election.
14. AMENDMENTS. The Committee shall have the authority to make such amendments
to any terms and conditions applicable to outstanding Grants as are consistent
with this Plan provided that, except for adjustments under Paragraph 12 hereof,
no such action shall modify such Grant in a manner adverse to the Participant
without the Participant's consent except as such modification is provided for or
contemplated in the terms of the Grant.
The Board may amend, suspend or terminate the Plan except that no such
action may be taken (other than as provided in Paragraph 12) which would,
without stockholder approval, increase the aggregate number of Shares available
for Grants under the Plan, decrease the price of Options, Restored Options or
SARs, change the requirements relating to the Committee or extend the term of
the Plan.
15. EFFECTIVE AND TERMINATION DATES. The Plan shall be effective on the date it
is approved by the stockholders of USX and shall terminate May 31, 2005, subject
to earlier termination by the Board pursuant to Paragraph 14.
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