<PAGE> 1
Rule 424(b)(3)
Registration No. 333-56867
PROSPECTUS SUPPLEMENT
(To Prospectus Dated July 31, 1998)
900,000 Shares
USX-Marathon Group Common Stock
of
USX Corporation
------------------------
The shares of USX-Marathon Group Common Stock ("Marathon Stock") included in
this Prospectus Supplement are to be delivered to Holders of Exchangeable Shares
(see "Glossary" in this Prospectus Supplement) of Marathon Oil Canada Limited
(formerly 761581 Alberta Ltd.) ("Albertaco"), an indirect Canadian subsidiary of
Marathon Oil Company, an Ohio Corporation ("Marathon"). The Exchangeable Shares
were issued in exchange for the outstanding shares of common stock of Tarragon
Oil and Gas Limited, an Ontario Corporation ("Tarragon"), in August 1998. The
Exchangeable Shares are exchangeable at any time on a one-for-one basis into
shares of Marathon Stock on the terms and conditions summarized herein. See
"Description of Exchangeable Shares" in this Prospectus Supplement.
The Marathon Stock is common stock of USX Corporation ("USX" or the
"Corporation") and is intended to reflect the performance of USX's energy
business that constitutes the Marathon Group of USX. The Marathon Stock is one
of two classes of common stock of USX outstanding, the other being USX-U. S.
Steel Group Common Stock ("Steel Stock"). The holders of Marathon Stock and
Steel Stock are holders of common stock of USX and continue to be subject to all
of the risks associated with an investment in USX and all of its businesses and
liabilities.
Dividends on the Marathon Stock will be payable when, as and if declared by
the Board of Directors of USX (the "Board") out of all funds of USX legally
available therefor. The Board intends to declare and pay dividends on the
Marathon Stock based on the financial condition and results of operations of the
Marathon Group. The voting power of one share of Steel Stock relative to one
share of Marathon Stock will fluctuate based upon the relative market values
thereof. Upon the liquidation of USX, the rights of the holders of the Marathon
Stock and the Steel Stock will be based on their relative market
capitalizations. Subject to certain conditions, the Marathon Stock may be
exchanged, at USX's option, for shares of the common stock of a wholly owned
subsidiary of USX to which the assets and liabilities of the Marathon Group have
been transferred as described in the accompanying Prospectus (see "Description
of Capital Stock--Marathon Stock--Exchange and Redemption").
The features of the Marathon Stock, as well as other special considerations,
are more fully discussed under "Price Range of Marathon Stock, Dividends and
Dividend Policy" in this Prospectus Supplement and under "Special
Considerations" and "Description of Capital Stock" in the accompanying
Prospectus.
USX will bear the cost of registering the shares of Marathon Stock,
estimated to be $35,000. Because shares of Marathon Stock will be issued in
exchange for Exchangeable Shares, USX will receive no proceeds on such issuance.
The Marathon Stock is listed on the New York, Chicago and Pacific Stock
Exchanges. On August 11, 1998, the reported last sale price of the Marathon
Stock on the New York Stock Exchange was $30 3/4 per share.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------
The date of this Prospectus Supplement is August 12, 1998.
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NO PERSON IS AUTHORIZED IN CONNECTION WITH ANY OFFERING MADE HEREBY TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN AS CONTAINED IN THIS
PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS, AND IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE CORPORATION. NEITHER THIS PROSPECTUS SUPPLEMENT NOR THE ACCOMPANYING
PROSPECTUS CONSTITUTES AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY BY
ANY PERSON IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL FOR SUCH PERSON TO MAKE
SUCH AN OFFERING OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS
SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL
UNDER ANY CIRCUMSTANCE IMPLY THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY
DATE SUBSEQUENT TO THE DATE HEREOF.
THE ISSUANCE AND RESALE OF THE MARATHON STOCK IN CANADA ARE SUBJECT TO
CERTAIN RESTRICTIONS. SEE "CANADIAN SECURITIES LAW CONSIDERATIONS" HEREIN.
------------------------
TABLE OF CONTENTS
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PAGE
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PROSPECTUS SUPPLEMENT
Summary............................... S-3
Use of Proceeds....................... S-5
Price Range of Marathon Stock,
Dividends and Dividend Policy....... S-5
Description of Exchangeable Shares.... S-6
Exchangeable Share Provisions.... S-6
Exchange Trust Agreement......... S-8
Support Agreement................ S-8
Call Rights...................... S-9
Delivery of Marathon Shares...... S-10
Capital Structure of Albertaco... S-10
Procedures for Delivery of
Certificates........................ S-11
Exchange of Exchangeable
Shares......................... S-11
Retraction of Exchangeable
Shares......................... S-12
Redemption of Exchangeable
Shares......................... S-14
Certain Income Tax Considerations..... S-15
Canadian Federal Income Tax
Considerations................. S-15
United States Federal Income Tax
Considerations................. S-18
Canadian Securities Law
Considerations...................... S-21
Legal Matters......................... S-21
Glossary.............................. S-22
</TABLE>
<TABLE>
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PAGE
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PROSPECTUS
Available Information................. 2
Incorporation of Certain Documents by
Reference........................... 2
USX Corporation....................... 3
Ratio of Earnings to Fixed Charges and
Ratio of Earnings to Combined Fixed
Charges and Preferred Stock
Dividends........................... 4
Use of Proceeds....................... 4
Pending Transaction................... 4
Special Considerations................ 4
Management and Accounting Policies.... 7
Description of the Debt Securities.... 8
Description of Capital Stock.......... 16
Description of Warrants............... 25
Plan of Distribution.................. 26
Validity of Securities................ 26
Experts............................... 26
Appendix I--Summary of USX Common
Stock............................... A-1
</TABLE>
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SUMMARY
The following is a summary of certain information contained elsewhere in
this Prospectus Supplement and in the accompanying Prospectus and is qualified
in its entirety by reference to the Prospectus which includes the documents
incorporated therein under "Incorporation of Certain Documents by Reference."
Readers are encouraged to refer to such incorporated documents for a more
complete description of USX. See "Glossary" for definitions of capitalized terms
not otherwise defined in this Prospectus Supplement.
MARATHON GROUP
The Marathon Group is comprised of Marathon and certain other subsidiaries
of USX, which are engaged in worldwide exploration and production of crude oil
and natural gas; domestic refining, marketing and transportation of petroleum
products; and other energy related businesses. Marathon Group revenues as a
percentage of total USX consolidated revenues were 69% in 1997, 71% in 1996 and
68% in 1995.
Exploration and Production
The Marathon Group believes it is the tenth largest U. S.-based integrated
oil and natural gas concern in terms of total proved barrel of oil equivalent
("BOE") reserves as of December 31, 1997. At December 31, 1997, it had net
proved liquid hydrocarbon and natural gas reserves, including equity affiliates,
of 1.4 billion barrels on a BOE basis, of which 68% were located in the United
States. In 1997, Marathon replaced 147% of its 1997 worldwide oil and gas
production on a BOE basis. Significant reserve additions during 1997 included
Phase 1 development of the Sakhalin II project in Russia and various Gulf of
Mexico properties. Marathon is currently conducting exploration and development
activities in 12 countries, including the United States. During 1997,
exploration activities resulted in discoveries in the United States (both
onshore and in the Gulf of Mexico), offshore Gabon and in the United Kingdom
sector of the North Sea. At year-end 1997, Marathon was producing crude oil
and/or natural gas in six countries, including the United States. During the
first six months of 1998, Marathon's worldwide liquid hydrocarbon production
averaged approximately 185,000 barrels per day and worldwide natural gas volumes
averaged approximately 1.2 billion cubic feet per day.
Refining, Marketing and Transportation
During 1997, Marathon and Ashland Inc. ("Ashland") agreed to combine the
major elements of their refining, marketing and transportation ("RM&T")
operations. On January 1, 1998, Marathon transferred certain RM&T net assets to
Marathon Ashland Petroleum LLC ("MAP"), a new consolidated subsidiary. Also on
January 1, 1998, Marathon acquired certain RM&T net assets from Ashland in
exchange for a 38% interest in MAP. MAP has seven refineries with a combined
capacity of 935,000 barrels per day, 84 light products and asphalt terminals,
about 5,400 retail marketing outlets in 20 states and significant pipeline
holdings. Marathon believes that MAP ranks sixth among U.S. petroleum
corporations on the basis of both crude oil refining capacity and refined
product sales volumes. Sales of refined products averaged approximately
1,161,000 barrels per day in the first six months of 1998.
USX CORPORATION
USX is a diversified company which is principally engaged in the energy
business through its Marathon Group, and in the steel business through its U. S.
Steel Group. The term "USX" when used herein refers to USX Corporation or USX
Corporation and its subsidiaries, as required by the context. The term "Group"
when used herein refers to the Marathon Group and/or the U. S. Steel Group, as
required by the context.
USX has two classes of common stock outstanding, USX-Marathon Group Common
Stock ("Marathon Stock") and USX-U. S. Steel Group Common Stock ("Steel Stock").
Each class of common stock is intended to provide the stockholders of such class
with a separate security reflecting the performance of the related Group.
Effective October 31, 1997, USX sold Delhi Gas Pipeline Corporation and other
subsidiaries of USX that comprised all of the Delhi Group (the "Delhi
Companies") and, on January 26, 1998, redeemed all the outstanding USX-Delhi
Group Common Stock.
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The U. S. Steel Group includes U. S. Steel, the largest steel producer in
the United States, which is primarily engaged in the production and sale of
steel mill products, coke and taconite pellets. The U. S. Steel Group also
includes the management of mineral resources, domestic coal mining, and
engineering and consulting services. Equity affiliates of the U. S. Steel Group
include Transtar Inc. and joint ventures, such as USS/Kobe Steel Company,
USS-POSCO Industries and PRO-TEC Coating Company. Other businesses that are part
of the U. S. Steel Group include real estate development and management, and
leasing and financing activities. U. S. Steel Group revenues as a percentage of
total USX consolidated revenues were 31% in 1997, 29% in 1996 and 32% in 1995.
USX was incorporated in 1901 and is a Delaware corporation. Its executive
offices are located at 600 Grant St., Pittsburgh, PA 15219-4776 (tel:
412-433-1121).
THE EXCHANGEABLE SHARES
Pursuant to the Arrangement Agreement, Albertaco, an indirect Canadian
subsidiary of Marathon, a wholly owned subsidiary of USX, acquired all of the
issued and outstanding common stock of Tarragon. Upon approval of the Tarragon
Securityholders on August 11, 1998 and the issuance of a Final Order by the
Ontario Court (General Division) on August 11, 1998 approving the transaction
and the filing of Articles of Arrangement of Tarragon with the relevant
authority in Ontario, the Arrangement was completed and each Tarragon
Securityholder ultimately received in exchange for each Tarragon Share, at their
election, Cdn$14.25 cash or Exchangeable Shares having an equivalent market
value. As a result, on August 12, 1998, an aggregate of approximately 878,000
Exchangeable Shares were held by former Tarragon Securityholders.
An Exchangeable Share is intended to be the economic equivalent of a share
of Marathon Stock. The holders of Exchangeable Shares will be entitled to
receive declared dividends equivalent to dividends declared from time to time by
USX on Marathon Shares. The Exchangeable Shares are:
- exchangeable at any time;
- retractable at the option of the holder (i.e. redeemable by
Albertaco) at any time; and
- automatically redeemable by Albertaco on August 11, 2003 (and, in
certain circumstances, as early as August 11, 2001);
in each case on a one for one basis (subject to adjustment in certain
circumstances) into shares of Marathon Stock. See "Description of Exchangeable
Shares" for a description of these and other important provisions of the
Exchangeable Shares.
The Exchangeable Shares provide certain holders of Tarragon shares an
opportunity to defer Canadian income tax payable on gains from the disposition
of their Tarragon Shares.
The disposition of the Exchangeable Shares for Marathon Shares will be a
taxable event under Canadian law. Such a disposition can occur as a result of
either a redemption (including a retraction) by Albertaco or an acquisition by
USX, Marathon or a Marathon Subsidiary. The Canadian federal income tax
consequences of a redemption differ significantly from those of an acquisition.
See "Certain Income Tax Considerations--Canadian Federal Income Tax
Considerations."
Also, while the matter is not free from doubt, it is anticipated that such
disposition will be a taxable event under U.S. law. See "Certain Income Tax
Considerations--United States Federal Income Tax Considerations--Exchange of
Exchangeable Shares for Marathon Shares."
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USE OF PROCEEDS
Because shares of Marathon Stock will be issued in exchange for
Exchangeable Shares, USX will receive no net proceeds (other than such
Exchangeable Shares received by USX, directly or indirectly) at the time of such
issuance.
PRICE RANGE OF MARATHON STOCK, DIVIDENDS AND DIVIDEND POLICY
The Marathon Stock is listed on the New York Stock Exchange (the "NYSE")
and the Chicago and Pacific Stock Exchanges. The following table sets forth the
range of high and low sales prices of the Marathon Stock on the NYSE Composite
Tape (the "Composite Tape") and dividends paid on the Marathon Stock for the
stated periods.
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DIVIDENDS
HIGH LOW PER SHARE
------- -------- ---------
<S> <C> <C> <C>
1996
First Quarter............................................. $20 1/2 $17 1/4 $.17
Second Quarter............................................ 22 7/8 19 1/8 .17
Third Quarter............................................. 22 1/8 20 .17
Fourth Quarter............................................ 25 1/2 21 1/8 .19
1997
First Quarter............................................. $28 1/2 $23 3/4 $.19
Second Quarter............................................ 31 1/8 25 5/8 .19
Third Quarter............................................. 38 3/16 28 15/16 .19
Fourth Quarter............................................ 38 7/8 29 .19
1998
First Quarter............................................. $40 1/2 $31 $.21
Second Quarter............................................ 38 7/8 32 3/16 .21
Third Quarter (through August 11)......................... 36 7/8 29 15/16 .21*
</TABLE>
* Dividend to be paid September 10, 1998 (see next to last paragraph on
this page).
On August 11, 1998, the reported last sale price of the Marathon Stock on
the NYSE was $30 3/4 per share.
On July 28, 1998, the USX board of directors (the "Board") declared a
dividend of $.21 per share on Marathon Stock payable on September 10, 1998 to
stockholders of record on August 19, 1998. Shares of Marathon Stock issued
pursuant to the offering will be entitled to declared dividends payable to
holders of record for such record dates following the holder's receipt of such
shares. The Board reserves the right to change the dividend rate at any time and
from time to time.
The Board intends to declare and pay dividends on the Marathon Stock based
on the financial condition and results of operations of the Marathon Group,
although it has no obligation under Delaware law to do so. Dividends on the
Marathon Stock will be payable when, as and if declared by the Board out of
legally available funds of USX (as defined under Delaware law). In making its
dividend decisions, the Board will rely on the financial statements of the
Marathon Group. In determining its dividend policy, the Board will consider,
among other things, the long-term earnings and cash flow capabilities of the
Marathon Group, as well as the dividend policies of publicly traded energy
companies. See "Special Considerations--Dividends and Earnings Per Share" and
"Description of Capital Stock--Marathon Stock--Dividends" in the accompanying
Prospectus.
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DESCRIPTION OF EXCHANGEABLE SHARES
Exchangeable Shares are the economic equivalent of Marathon Shares by
virtue of the terms of the Exchangeable Share Provisions, the Exchange Trust
Agreement and the Support Agreement. The Exchangeable Share Provisions, the
Exchange Trust Agreement, the Support Agreement and the Call Rights are
described in this section. See "Glossary" for capitalized terms used in this
Prospectus Supplement and not otherwise defined herein. For a description of the
Marathon Stock, see "Description of Capital Stock--Marathon Stock" in the
accompanying Prospectus.
EXCHANGEABLE SHARE PROVISIONS
The following is a summary description of the material provisions of the
Exchangeable Share Provisions and is qualified in its entirety by reference to
the full text of the Exchangeable Share Provisions.
Retraction of Exchangeable Shares by Holders
The holders of Exchangeable Shares are entitled at any time to retract
(i.e., require Albertaco to redeem) any or all of the Exchangeable Shares held
by such holder for an equivalent number of Marathon Shares for each Exchangeable
Share, which shall be delivered to the retracting holder on the retraction date
specified by the holder (which shall not be less than three nor more than ten
Business Days after the date on which Albertaco receives the retraction request
from the holder). This retraction right is subject to the Retraction Call Rights
of USX, Marathon and a Marathon Subsidiary. See "Call Rights--Retraction Call
Right."
If, as a result of liquidity or solvency provisions of applicable law,
Albertaco is not permitted to redeem all Exchangeable Shares tendered by a
retracting holder, Albertaco will redeem only those Exchangeable Shares tendered
by the holder (rounded down to a whole number of shares) as would not be
contrary to such provisions of applicable law. The retracting Holder of any
Exchangeable Shares not redeemed by Albertaco will be deemed to have required
USX, Marathon or a Marathon Subsidiary to purchase such unredeemed shares in
exchange for Marathon Shares on the retraction date pursuant to the Exchange
Right. See "Exchange Trust Agreement--Exchange Right."
Redemption of Exchangeable Shares
On the Automatic Redemption Date (which is August 11, 2003 subject to
extension or acceleration in certain circumstances, provided that in no event
shall it be earlier than August 11, 2001), Albertaco will redeem all but not
less than all of the then outstanding Exchangeable Shares by delivery of an
equivalent number of Marathon Shares for each Exchangeable Share. Albertaco
shall, at least 120 days prior to the Automatic Redemption Date, provide the
registered holders of the Exchangeable Shares with written notice of the
proposed redemption of the Exchangeable Shares. This redemption right is subject
to the Redemption Call Right of USX, Marathon and a Marathon Subsidiary. See
"Call Rights--Redemption Call Right."
Exchange of Exchangeable Shares by Holders
The holders of Exchangeable Shares are entitled at any time to deliver any
or all of the holder's Exchangeable Shares to Albertaco for delivery thereof by
Albertaco to USX and for exchange thereof directly with USX for Marathon Shares.
Albertaco will immediately give notice thereof to USX, which will be required
under the Support Agreement to acquire, or to cause Marathon or a Marathon
Subsidiary to acquire, each such Exchangeable Share directly from such holder in
consideration of the issuance of an equivalent number of Marathon Shares. See
also "Exchange Trust Agreement."
Ranking
The Exchangeable Shares are entitled to a preference over the Albertaco
Common Shares, the Albertaco Non-Voting Common Shares, the Albertaco Non-Voting
Subordinated Shares and any other classes of shares of Albertaco with respect to
the payment of dividends and the distribution of assets in the event of the
liquidation, dissolution or winding-up of Albertaco. See "Capital Structure of
Albertaco."
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Dividends
The holders of Exchangeable Shares will be entitled to receive declared
dividends equivalent to dividends declared from time to time by the board of
directors of USX on Marathon Shares. The declaration date, record date and
payment date for dividends on the Exchangeable Shares will be the same as that
for the corresponding dividends on the Marathon Shares.
Certain Restrictions
Without the approval of the holders of the Exchangeable Shares, Albertaco
will not:
(a) pay any dividend on the Albertaco Common Shares, the Albertaco
Non-Voting Common Shares, Albertaco Non-Voting Subordinated Shares or
any other shares ranking junior to the Exchangeable Shares, other than
stock dividends payable in Albertaco Common Shares, Albertaco
Non-Voting Common Shares, Albertaco Non-Voting Subordinated Shares or
in any such other shares ranking junior to the Exchangeable Shares;
(b) redeem, purchase or make any capital distribution in respect of
Albertaco Common Shares, Albertaco Non-Voting Common Shares, Albertaco
Non-Voting Subordinated Shares or any other shares ranking junior to
the Exchangeable Shares;
(c) redeem or purchase any other shares of Albertaco ranking equally with
the Exchangeable Shares with respect to the payment of dividends or on
any liquidation distribution; or
(d) issue any Exchangeable Shares or any other shares of Albertaco ranking
equally with, or superior to, the Exchangeable Shares other than by
stock dividends to the holders of the Exchangeable Shares or as
contemplated in the Support Agreement;
unless the dividends on the outstanding Exchangeable Shares corresponding to
dividends declared to date on the Marathon Shares have been declared on the
Exchangeable Shares and Albertaco shall have sufficient assets, funds and other
property available to enable the due and punctual payment of such dividends.
Liquidation
In the event of the liquidation, dissolution or winding-up of Albertaco a
holder of Exchangeable Shares will be entitled to receive for each Exchangeable
Share an amount (the "Liquidation Amount") equal to the amount that a holder of
an equivalent number of Marathon Shares would be entitled to receive on the
liquidation, dissolution or winding-up of USX, which amount shall be satisfied
by the delivery to holders of the Exchangeable Shares of that number of Marathon
Shares equal to the Liquidation Amount. This liquidation right is subject to the
Liquidation Call Rights of USX, Marathon and Marathon Subsidiaries. See "Call
Rights--Liquidation Call Right."
Voting Rights
Except as required by applicable law, the holders of the Exchangeable
Shares shall not be entitled as such to receive notice of or attend any meeting
of the shareholders of Albertaco or to vote at any such meeting.
Amendment and Approval
The rights, privileges, restrictions and conditions attaching to the
Exchangeable Shares may be changed only with the approval of the holders
thereof. Any such approval or any other approval or consent to be given by the
holders of the Exchangeable Shares will be sufficiently given if given in
accordance with applicable law and subject to a minimum requirement that such
approval or consent be evidenced by a resolution passed by not less than
two-thirds of the votes cast thereon (other than shares beneficially owned by
USX or entities controlled by USX; see "Support Agreement") at a meeting of the
holders of Exchangeable Shares duly called and held at which holders of at least
50% of the then outstanding Exchangeable Shares are present or represented by
proxy. In the event that no such quorum is present at such meeting within
one-half hour after the time appointed therefor, then the meeting will be
adjourned to such place and time not less than 10 days later as may be
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<PAGE> 8
determined at the original meeting and the holders of the Exchangeable Shares
present or represented by proxy at the adjourned meeting may transact the
business for which the meeting was originally called. At the adjourned meeting,
a resolution passed by the affirmative vote of not less than two-thirds of the
votes cast thereon will constitute the approval or consent of the holders of the
Exchangeable Shares.
Actions of Albertaco under Support Agreement
Under the Exchangeable Share Provisions, Albertaco has agreed to take all
such actions and do all such things as are necessary or advisable to perform and
comply with its obligations under, and to ensure the performance and compliance
by USX, Marathon and Holdco with their obligations under, the Support Agreement.
See "Support Agreement."
EXCHANGE TRUST AGREEMENT
The following is a summary of the material provisions of the Exchange Trust
Agreement and is qualified in its entirety by reference to the full text of the
Exchange Trust Agreement.
Grant of Rights in Trust
Pursuant to the Exchange Trust Agreement, USX has granted the Exchange
Right and the Automatic Exchange Right to the Trustee for the benefit of the
Holders.
Exchange Right
A Holder is entitled to instruct the Trustee to exercise the Exchange Right
at any time and from time to time with respect to any or all of the Exchangeable
Shares held by such Holder, thereby requiring USX to purchase from such Holder.
The consideration for each Exchangeable Share to be acquired under the Exchange
Right will be an equivalent number of Marathon Shares. The Holder shall retain
the right to receive all Unpaid Dividends at the time of the exchange.
If, as a result of liquidity or solvency provisions of applicable law,
Albertaco is unable to redeem all of the Exchangeable Shares tendered for
retraction by a Holder in accordance with the Exchangeable Share Provisions, the
Holder will be deemed to have exercised the Exchange Right with respect to the
unredeemed Exchangeable Shares and USX will be required to purchase such shares
from the Holder in the manner set forth above.
Automatic Exchange Right
In the event of a USX Liquidation Event, USX will be required to acquire
each outstanding Exchangeable Share by exchanging an equivalent number of
Marathon Shares for each such Exchangeable Share. Such exchange shall occur
immediately prior to the effective time of such USX Liquidation Event.
SUPPORT AGREEMENT
The following is a summary description of the material provisions of the
Support Agreement and is qualified in its entirety by reference to the full text
of the Support Agreement.
Under the Support Agreement, USX and/or Marathon have agreed that they
will: (i) not declare or pay any dividend on the Marathon Shares unless
Albertaco simultaneously declares and pays an equivalent dividend on the
Exchangeable Shares; (ii) advise Albertaco of the declaration of any dividend on
the Marathon Shares and ensure that the declaration date, record date and
payment date for dividends on the Exchangeable Shares are the same as that for
the Marathon Shares; (iii) ensure that the record date for any dividend declared
on Marathon Shares is not less than 10 calendar days after the declaration date
for such dividend; (iv) take all actions and do all things necessary to provide
to the holders of the Exchangeable Shares the equivalent number of Marathon
Shares in the event of a liquidation, dissolution, or winding-up of Albertaco, a
retraction request by a holder of Exchangeable Shares, a redemption of
Exchangeable Shares of Albertaco, or a delivery by a holder of Exchangeable
Shares to Albertaco for exchange for Marathon Shares; and (v) not vote or
otherwise take any action or omit to take any action causing the liquidation,
dissolution or winding-up of Albertaco.
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<PAGE> 9
The Support Agreement also provides that if USX shall distribute additional
Marathon Shares or rights to subscribe therefor or other property or assets to
all or substantially all holders of Marathon Shares, or change the Marathon
Shares then USX will ensure that the record date for any such event or (if no
record date is applicable for such event) the effective date for any such event,
is not less than 10 calendar days after the date on which such event is declared
or announced by USX. In the event that any tender offer, share exchange offer,
issuer bid, take-over bid or similar transaction affecting the Marathon Shares
is proposed by USX or is proposed to USX or its shareholders and is to be
effected with the consent or approval of the board of directors of USX, USX
shall take all such actions and do all such things as are necessary and
reasonably within its power to enable holders of Exchangeable Shares to
participate in such transaction on an equivalent basis as the holders of
Marathon Shares, without discrimination.
USX has agreed that so long as any Exchangeable Shares not owned by USX or
any entity controlled by USX remain outstanding, USX will remain the beneficial
owner, directly or indirectly, of all outstanding voting securities of
Albertaco.
With the exception of administrative changes for the purpose of adding
covenants for the protection of the holders of the Exchangeable Shares, making
certain necessary amendments or curing ambiguities or clerical errors (in each
case provided that each of USX, Marathon and Albertaco is of the opinion that
such amendments are not prejudicial to the interests of the holders of the
Exchangeable Shares), the Support Agreement may not be amended without the
approval of the holders of the Exchangeable Shares.
Under the Support Agreement, USX has agreed not to exercise any voting
rights attached to the Exchangeable Shares owned by it or any entity controlled
by it on any matter considered at meetings of holders of Exchangeable Shares
(including any approval sought from such holders in respect of matters arising
under the Support Agreement).
CALL RIGHTS
The following description of the Call Rights is qualified in its entirety
by reference to the full text of the Exchangeable Share Provisions.
In the circumstances described below, USX, Marathon and a Marathon
Subsidiary will have certain overriding rights to acquire Exchangeable Shares
from holders thereof for an equivalent number of Marathon Shares for each
Exchangeable Share acquired. Different Canadian federal income tax consequences
to a holder of Exchangeable Shares will arise depending upon whether the Call
Rights are exercised or whether the relevant Exchangeable Shares are redeemed by
Albertaco pursuant to the Exchangeable Share provisions in the absence of the
exercise of the Call Rights. See "Certain Income Tax Considerations--Canadian
Federal Income Tax Considerations."
Retraction Call Right
Pursuant to the Exchangeable Share Provisions, a holder requesting
Albertaco to redeem the Exchangeable Shares will be deemed to offer such shares
to USX, Marathon or a Marathon Subsidiary, and USX, Marathon and a Marathon
Subsidiary will have an overriding Retraction Call Right to acquire all but not
less than all of the Exchangeable Shares that the holder has requested Albertaco
to redeem in exchange for an equivalent number of Marathon Shares for each
Exchangeable Share.
At the time of a Retraction Request by a holder of Exchangeable Shares,
Albertaco will immediately notify USX and Marathon. USX, Marathon or a Marathon
Subsidiary must then advise Albertaco within two Business Days as to whether
USX, Marathon or a Marathon Subsidiary will exercise the Retraction Call Right.
If USX, Marathon or a Marathon Subsidiary does not advise Albertaco within such
two Business Day period, Albertaco will notify the holder as soon as possible
thereafter that USX, Marathon and a Marathon Subsidiary will not exercise the
Retraction Call Right. A holder may revoke his or her Retraction Request, at any
time prior to the close of business on the Business Day preceding the Retraction
Date, in which case the holder's Exchangeable Shares will neither be purchased
by USX, Marathon or a Marathon Subsidiary nor redeemed by Albertaco. If the
holder does not revoke his or her Retraction Request, on the Retraction Date the
Exchangeable Shares that the
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<PAGE> 10
holder has requested Albertaco to redeem will be acquired by USX, Marathon or a
Marathon Subsidiary (assuming USX, Marathon or a Marathon Subsidiary exercises
its Retraction Call Right) or redeemed by Albertaco, as the case may be, in each
case for an equivalent number of Marathon Shares for each Exchangeable Share.
Liquidation Call Right
Pursuant to the Plan of Arrangement and the Exchangeable Share Provisions,
USX, Marathon and a Marathon Subsidiary will be granted an overriding
Liquidation Call Right, in the event of and notwithstanding the proposed
liquidation, dissolution or winding-up of Albertaco, to acquire all but not less
than all of the Exchangeable Shares then outstanding in exchange for Marathon
Shares and, upon the exercise by USX, Marathon or a Marathon Subsidiary of the
Liquidation Call Right, the holders thereof will be obligated to transfer such
shares to USX, Marathon or a Marathon Subsidiary, as the case may be. The
acquisition by USX, Marathon or a Marathon Subsidiary of all of the outstanding
Exchangeable Shares upon the exercise of the Liquidation Call Right will occur
on the effective date of the voluntary or involuntary liquidation, dissolution
or winding-up of Albertaco.
Redemption Call Right
Pursuant to the Plan of Arrangement and the Exchangeable Share Provisions,
USX, Marathon and a Marathon Subsidiary will be granted an overriding Redemption
Call Right, notwithstanding the proposed automatic redemption of the
Exchangeable Shares by Albertaco pursuant to the Exchangeable Share Provisions,
to acquire on the Automatic Redemption Date all but not less than all of the
Exchangeable Shares then outstanding in exchange for Marathon Shares and, upon
the exercise by USX, Marathon or a Marathon Subsidiary of the Redemption Call
Right, the holders thereof will be obligated to transfer such shares to USX,
Marathon or a Marathon Subsidiary, as the case may be.
Effect of Call Right Exercise
If USX, Marathon or a Marathon Subsidiary exercises one or more of their
Call Rights, Marathon Shares will be directly issued to holders of Exchangeable
Shares and USX, Marathon or a Marathon Subsidiary will become the holder of such
Exchangeable Shares. USX, Marathon and a Marathon Subsidiary will not be
entitled to exercise any voting rights attached to the Exchangeable Shares they
acquire. If USX, Marathon and a Marathon Subsidiary decline to exercise their
Call Rights when applicable, USX will be required, pursuant to the Support
Agreement, to issue Marathon Shares to the holders of Exchangeable Shares. The
Canadian tax consequences resulting from the exercise by USX, Marathon or a
Marathon Subsidiary of one or more of the Call Rights are discussed in
"--Canadian Federal Income Tax Considerations."
DELIVERY OF MARATHON SHARES
The following description is qualified in its entirety by reference to the
full text of the Support Agreement.
USX has undertaken in the Support Agreement to see that all Marathon Shares
to be delivered to holders of Exchangeable Shares pursuant to the Exchangeable
Share Provisions or on the exercise of the Exchange Rights or the Automatic
Exchange Rights under the Exchange Trust Agreement are duly registered,
qualified or approved under applicable Canadian and United States securities
laws, if required, so that such shares may be freely traded by the holder
thereof (other than any restriction on transfer by reason of a holder being a
"control person" of USX for purposes of Canadian law or an "affiliate" of USX
for purposes of United States law). In addition, USX has undertaken to cause the
Marathon Shares to be listed or quoted for trading on all stock exchanges or
quotation systems on which outstanding Marathon Shares are then listed or quoted
for trading.
CAPITAL STRUCTURE OF ALBERTACO
Albertaco is authorized to issue an unlimited number of Exchangeable
Shares. In addition to the Exchangeable Shares, Albertaco is authorized to issue
an unlimited number of shares designated as voting common shares (the "Albertaco
Common Shares"), an unlimited number of shares designated as non-voting
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<PAGE> 11
common shares (the "Albertaco Non-Voting Common Shares") and an unlimited number
of shares designated as non-voting subordinated shares (the "Albertaco
Non-Voting Subordinated Shares"). The attributes of such shares other than the
Exchangeable Shares are described below.
Albertaco Common Shares and Albertaco Non-Voting Common Shares
The holders of Albertaco Common Shares are entitled to receive notice of
and to attend all meetings of the shareholders of Albertaco and are entitled to
one vote for each share held of record on all matters considered at meetings of
the shareholders of Albertaco. The holders of Albertaco Non-Voting Common Shares
are not, except as required by applicable law, entitled to receive notice of and
to attend meetings of the shareholders of Albertaco and are not entitled to vote
at such meetings of the shareholders of Albertaco. The holders of Albertaco
Common Shares and the holders of Albertaco Non-Voting Common Shares are, subject
to the preference accorded holders of Exchangeable Shares and Albertaco
Non-Voting Subordinated Shares, entitled to receive such dividends as may be
declared by the Albertaco board of directors out of funds legally available
therefor and dividends may not be declared on either class separately from the
other. The rights of holders of Albertaco Common Shares and the rights of
holders of Albertaco Non-Voting Common Shares to receive such dividends are
equal in all respects, share for share. The holders of Albertaco Common Shares
and holders of Albertaco Non-Voting Common Shares are entitled upon any
liquidation, dissolution or winding-up of Albertaco, subject to the preference
accorded holders of the Exchangeable Shares and Albertaco Non-Voting
Subordinated Shares and to any other shares ranking senior to the Albertaco
Common Shares and the Albertaco Non-Voting Common Shares, to share equally,
share for share, the remaining property and assets of Albertaco. USX has agreed,
pursuant to the Support Agreement, that so long as there remain outstanding any
Exchangeable Shares not owned by USX or any entity controlled by USX, USX will
remain the beneficial owner, directly or indirectly, of all outstanding voting
securities of Albertaco. Immediately after consummation of the Arrangement,
there were no Albertaco Non-Voting Common Shares issued and outstanding.
Albertaco Non-Voting Subordinated Shares
All of the issued and outstanding Albertaco Non-Voting Subordinated Shares
will be held by a service provider who will not transfer any property to
Albertaco. The holders of Albertaco Non-Voting Subordinated Shares, are, subject
to the preference accorded holders of Exchangeable Shares, but in priority to
Albertaco Common Shares and Albertaco Non-Voting Common Shares, entitled (i) to
receive cumulative dividends at a rate of 6.5% per annum subject to declaration
by the board of directors of Albertaco out of funds legally available therefor,
and (ii) upon liquidation, dissolution or winding-up of Albertaco to $100 per
share plus accrued but unpaid dividends. Holders of Albertaco Non-Voting
Subordinated Shares are not, except as required by applicable law, entitled to
notice of, to attend or to vote at any meeting of the shareholders of Albertaco.
Albertaco Non-Voting Subordinated Shares are redeemable at the option of
Albertaco any time after the fifth anniversary of the date of their issuance at
$100 per share plus accrued but unpaid dividends. As of August 12, 1998, 1,000
Albertaco Non-Voting Subordinated Shares have been issued.
PROCEDURES FOR DELIVERY OF CERTIFICATES
The following description is qualified in its entirety by reference to the
full text of the Exchange Trust Agreement and the Exchangeable Share Provisions.
EXCHANGE OF EXCHANGEABLE SHARES
Exercise Instructions
Subject to the terms and conditions set forth in the Exchange Trust
Agreement, a Holder shall be entitled to instruct the Trustee to exercise the
Exchange Right with respect to all or any part of the Exchangeable Shares
registered in the name of such Holder on the books of Albertaco. To cause the
exercise of the Exchange Right by the Trustee, the Holder shall deliver to the
Trustee, in person or by certified or registered mail, at its principal offices
in Calgary, Alberta or Toronto, Ontario or at such other places in Canada as the
Trustee may from time to time designate by written notice to the Holders, the
certificates representing the Exchangeable Shares which such Holder desires USX
to purchase, duly endorsed in blank, and accompanied by such other documents and
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<PAGE> 12
instruments as may be required to effect a transfer of Exchangeable Shares under
applicable law and the by-laws of Albertaco and such additional documents and
instruments as the Trustee may reasonably require together with (a) a duly
completed form of notice of exercise of the Exchange Right, contained on the
reverse of or attached to the Exchangeable Share certificates, stating (i) that
the Holder thereby instructs the Trustee to exercise the Exchange Right so as to
require USX to purchase from the Holder the number of Exchangeable Shares
specified therein, (ii) that such Holder has good title to and owns all such
Exchangeable Shares to be acquired by USX free and clear of all liens, claims
and encumbrances, (iii) the names in which the certificates representing
Marathon Shares issuable in connection with the exercise of the Exchange Right
are to be issued and (iv) the names and addresses of the persons to whom the
Exchangeable Share Consideration should be delivered and (b) payment (or
evidence satisfactory to the Trustee, Albertaco and USX of payment) of the taxes
(if any) payable. If only a portion of the Exchangeable Shares represented by
any certificate or certificates delivered to the Trustee are to be purchased by
USX under the Exchange Right, a new certificate for the balance of such
Exchangeable Shares shall be issued to the Holder at the expense of Albertaco.
Exercise of Exchange Right Subsequent to Retraction
In the event that a Holder has exercised its right under the Exchangeable
Share Provisions to require Albertaco to redeem any or all of the Exchangeable
Shares held by the Holder (the "Retracted Shares") and is notified by Albertaco
that Albertaco will not be permitted as a result of liquidity or solvency
requirements of applicable law to redeem all such Retracted Shares, subject to
receipt by the Trustee of written notice to that effect from Albertaco and
provided that USX shall not have exercised the Retraction Call Right with
respect to the Retracted Shares and that the Holder has not revoked the
retraction request delivered by the Holder to Albertaco, the retraction request
will constitute and will be deemed to constitute notice from the Holder to the
Trustee instructing the Trustee to exercise the Exchange Right with respect to
those Retracted Shares which Albertaco is unable to redeem. In any such event,
Albertaco has agreed with the Trustee and in favor of the Holder immediately to
notify the Trustee of such prohibition against Albertaco redeeming all of the
Retracted Shares and immediately to forward or cause to be forwarded to the
Trustee all relevant materials delivered by the Holder to Albertaco or to the
transfer agent of the Exchangeable Shares (including without limitation a copy
of the retraction request) in connection with such proposed redemption of the
Retracted Shares and the Trustee will thereupon exercise the Exchange Right with
respect to the Retracted Shares that Albertaco is not permitted to redeem and
will require USX to purchase such shares.
RETRACTION OF EXCHANGEABLE SHARES
A holder of Exchangeable Shares shall be entitled at any time, subject to
the exercise by USX or Marathon of the Retraction Call Right and otherwise upon
compliance with the provisions of the Exchangeable Share Provisions to require
Albertaco to redeem any or all of the Exchangeable Shares registered in the name
of such holder by delivery to such holder of the Exchangeable Share
Consideration representing the Exchangeable Share Price in respect of such
Exchangeable Shares. In connection with payment of the Exchangeable Share Price,
Albertaco shall be entitled to liquidate some of the Marathon Shares to which
the particular holder of Exchangeable Shares is entitled and apply the proceeds
on behalf of such holder in order to fund any statutory withholding tax
obligation. To effect such redemption, the holder shall present and surrender at
the registered office of Albertaco or at any office of the Transfer Agent as may
be specified by Albertaco by notice to the holders of Exchangeable Shares the
certificate or certificates representing the Exchangeable Shares which the
holder desires to have Albertaco redeem, together with such other documents and
instruments as may be required to effect a transfer of Exchangeable Shares under
applicable law and the by-laws of Albertaco and such additional documents and
instruments as the Transfer Agent may reasonably require, and together with a
duly executed statement (the "Retraction Request") in the form of Exhibit A to
the Exchangeable Share Provisions or in such other form as may be acceptable to
Albertaco:
(i) specifying that the holder desires to have all or any number specified
therein of the Exchangeable Shares represented by such certificate or
certificates redeemed by Albertaco;
(ii) stating the Business Day on which the holder desires to have
Albertaco redeem the Retracted Shares (the "Retraction Date"),
provided that the Retraction Date shall be not less than three
Business Days
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<PAGE> 13
nor more than 10 Business Days after the date on which the Retraction
Request is received by Albertaco and further provided that, in the
event that no such Business Day is specified by the holder in the
Retraction Request, the Retraction Date shall be deemed to be the
tenth Business Day after the date on which the Retraction Request is
received by Albertaco; and
(iii) acknowledging the overriding right (the "Retraction Call Right") of
USX and Marathon to acquire all but not less than all the Retracted
Shares directly from the holder in exchange for one Marathon Share
for each Exchangeable Share and that the Retraction Request shall be
deemed to be a revocable offer by the holder to exchange the
Retracted Shares with USX or Marathon in accordance with the
Retraction Call Right on the terms and conditions set out below.
Subject to the exercise by USX or Marathon of the Retraction Call Right,
upon receipt by Albertaco or the Transfer Agent in the manner specified in the
Exchangeable Share Provisions of a certificate or certificates representing the
number of Exchangeable Shares which the holder desires to have Albertaco redeem,
together with a Retraction Request, and provided that the Retraction Request is
not revoked by the holder in the manner specified below, Albertaco shall redeem
the Retracted Shares effective at the close of business on the Retraction Date
and shall cause to be delivered to such holder the total Exchangeable Share
Price with respect to such shares by the delivery of the Exchangeable Share
Consideration. If only a portion of the Exchangeable Shares represented by any
certificate are redeemed (or purchased by USX or Marathon pursuant to the
Retraction Call Right), a new certificate for the balance of such Exchangeable
Shares shall be issued to the holder at the expense of Albertaco.
Upon receipt by Albertaco of a Retraction Request, Albertaco shall
immediately notify USX and Marathon thereof. In order to exercise the Retraction
Call Right, USX or Marathon must notify Albertaco in writing of its
determination to do so (the "USX/Marathon Call Notice") within two Business Days
of notification to USX and Marathon by Albertaco of the receipt by Albertaco of
the Retraction Request. If USX or Marathon does not so notify Albertaco within
such two Business Day period, Albertaco will notify the holder as soon as
possible thereafter that neither USX nor Marathon will exercise the Retraction
Call Right. If USX or Marathon delivers the USX/Marathon Call Notice within such
two Business Day time period, and provided that the Retraction Request is not
revoked by the holder, the Retraction Request shall thereupon be considered only
to be an offer by the holder to exchange the Retracted Shares with USX or
Marathon, as applicable, in accordance with the Retraction Call Right. In such
event, Albertaco shall not redeem the Retracted Shares and USX or Marathon, as
applicable, shall acquire from such holder and such holder shall deliver to USX
or Marathon, as applicable, on the Retraction Date the Retracted Shares in
exchange for delivery to such holder of the Exchangeable Share Consideration
respecting the total Exchangeable Share Price in respect of the Retracted
Shares. For the purposes of completing an exchange pursuant to the Retraction
Call Right, USX or Marathon, as applicable, shall deposit with the Transfer
Agent, on or before the Retraction Date the Exchangeable Share Consideration
representing the total Exchangeable Share Price. Provided that such Exchangeable
Share Consideration has been so deposited with the Transfer Agent, the closing
of the exchange of the Retracted Shares pursuant to the Retraction Call Right
shall be deemed to have occurred as at the close of business on the Retraction
Date and, for greater certainty, no redemption by Albertaco of such Retracted
Shares shall take place on the Retraction Date. In the event that neither USX
nor Marathon delivers a USX/Marathon Call Notice within such two Business Day
period or otherwise complies with these Exchangeable Share provisions in respect
thereto, and provided that the Retraction Request is not revoked by the holder,
Albertaco shall redeem the Retracted Shares on the Retraction Date.
Albertaco, USX or Marathon, as the case may be, shall deliver or cause the
Transfer Agent to deliver to the relevant holder, at the address of the holder
recorded in the securities register of Albertaco, for the Exchangeable Shares or
at the address specified in the holder's Retraction Request or by holding for
pick-up by the holder at the registered office of Albertaco or at any office of
the Transfer Agent as may be specified by Albertaco by notice to the holders of
Exchangeable Shares, the Exchangeable Share Consideration representing the total
Exchangeable Share Price and such delivery of such Exchangeable Share
Consideration to the Transfer Agent shall be deemed to be payment of and shall
satisfy and discharge all liability for the total Exchangeable Share Price.
Albertaco shall not be obligated to redeem Retracted Shares specified by a
holder in a Retraction Request to the extent that such redemption of Retracted
Shares would be contrary to liquidity or solvency requirements or
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<PAGE> 14
other provisions of applicable law. If Albertaco believes that on any Retraction
Date it would not be permitted by any of such provisions to redeem the Retracted
Shares tendered for redemption on such date, and provided that neither USX nor
Marathon shall have exercised the Retraction Call Right with respect to the
Retracted Shares, Albertaco shall only be obligated to redeem Retracted Shares
specified by a holder in a Retraction Request to the extent of the maximum
number that may be so redeemed (rounded down to a whole number of shares) as
would not be contrary to such provisions and shall notify the holder at least
two Business Days prior to the Retraction Date as to the number of Retracted
Shares which will not be redeemed by Albertaco. In any case in which the
redemption by Albertaco of Retracted Shares would be contrary to liquidity or
solvency requirements or other provisions of applicable law, Albertaco shall
redeem Retracted Shares on a pro rata basis and shall issue to each holder of
Retracted Shares a new certificate, at the expense of Albertaco, representing
the Retracted Shares not redeemed by Albertaco.
A holder of Retracted Shares may, by notice in writing given by the holder
to Albertaco before the close of business on the Business Day immediately
preceding the Retraction Date, withdraw its Retraction Request in which event
such Retraction Request shall be null and void and, for greater certainty, the
revocable offer constituted by the Retraction Request to exchange the Retracted
Shares with USX or Marathon shall be deemed to have been revoked.
USX and Marathon may assign their rights under the Retraction Call Right to
Holdco or another Marathon Subsidiary at any time with respect to all or any
portion of the Retracted Shares.
REDEMPTION OF EXCHANGEABLE SHARES
Subject to applicable law and the Redemption Call Right, Albertaco shall on
the Automatic Redemption Date redeem the whole of the then outstanding
Exchangeable Shares by delivery of the Exchangeable Share Consideration
representing the Exchangeable Share Price applicable on the last Business Day
prior to the Automatic Redemption Date (the "Redemption Price"). In connection
with payment of the Redemption Price, Albertaco shall be entitled to liquidate
some of the Marathon Shares to which the particular holder of Exchangeable
Shares is entitled and apply the proceeds on behalf of such holder in order to
fund any statutory withholding tax obligation.
In any case of a redemption of Exchangeable Shares, Albertaco shall, at
least 120 days before the Automatic Redemption Date, send or cause to be sent to
each holder of Exchangeable Shares a notice in writing of the redemption by
Albertaco or the purchase by USX or Marathon under the Redemption Call Right, as
the case may be, of the Exchangeable Shares held by such holder. Such notice
shall set out the Automatic Redemption Date and, if applicable, particulars of
the Redemption Call Right.
On or after the Automatic Redemption Date and subject to the exercise by
USX or Marathon of the Redemption Call Right, Albertaco shall cause to be
delivered to the holders of the Exchangeable Shares the Redemption Price for
each such Exchangeable Share upon presentation and surrender at the registered
office of Albertaco or at any office of the Transfer Agent as may be specified
by Albertaco in such notice of the certificates representing such Exchangeable
Shares, together with such other documents and instruments as may be required to
effect a transfer of Exchangeable Shares under applicable law and the by-laws of
Albertaco and such additional documents and instruments as the Transfer Agent
may reasonably require. Payment of the total Redemption Price for such
Exchangeable Shares shall be made by delivery to each holder, at the address of
the holder recorded in the securities register of Albertaco or by holding for
pick-up by the holder at the registered office of Albertaco at any office of the
Transfer Agent as may be specified by Albertaco in such notice, on behalf of
Albertaco of the Exchangeable Share Consideration representing the total
Redemption Price.
USX shall have the overriding right (the "Redemption Call Right"),
notwithstanding the compulsory redemption of the Exchangeable Shares by
Albertaco, to acquire from all but not less than all of the holders (other than
USX or any Subsidiary thereof) of Exchangeable Shares on the Automatic
Redemption Date all but not less than all of the Exchangeable Shares held by
each such holder upon the payment to each such holder by USX of the Exchangeable
Share Price in effect on the last Business Day prior to the Automatic Redemption
Date (the "Redemption Call Purchase Price"). In the event of the exercise of the
Redemption Call Right by USX, each holder shall be obligated to exchange all the
Exchangeable Shares held by the holder with USX on the Automatic
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<PAGE> 15
Redemption Date on delivery by USX to the holder of the Exchangeable Share
Consideration representing the Redemption Call Purchase Price for each such
share and the obligation of Albertaco to redeem any Exchangeable Shares
(including those held by USX or any Subsidiary thereof) shall terminate.
To exercise the Redemption Call Right, USX must notify the Transfer Agent
in writing, as agent for the holders of Exchangeable Shares, and Albertaco of
USX's intention to exercise such right at least 125 days before the Automatic
Redemption Date. The Transfer Agent will notify the holders of the Exchangeable
Shares as to whether or not USX has exercised the Redemption Call Right
forthwith after the date by which the same may be exercised by USX. If USX
exercises the Redemption Call Right, on the Automatic Redemption Date USX and
the holders will exchange all of the Exchangeable Shares then outstanding for
the Exchangeable Share Consideration in satisfaction of the Redemption Call
Purchase Price.
For the purposes of completing the exchange of the Exchangeable Shares
pursuant to the Redemption Call Right, USX shall deposit with the Transfer
Agent, on or before the Automatic Redemption Date, the Exchangeable Share
Consideration representing the total Redemption Call Purchase Price. Provided
that such Exchangeable Share Consideration has been so deposited with the
Transfer Agent, on and after the Automatic Redemption Date the rights of each
holder of Exchangeable Shares will be limited to receiving such holder's
proportionate part of (i) the Exchangeable Share Consideration issued by USX in
respect of the total Redemption Call Purchase Price upon presentation and
surrender by the holder of certificates representing the Exchangeable Shares
held by such holder and (ii) any Unpaid Dividends on the last Business Day prior
to the Automatic Redemption Date. Upon deposit of such Exchangeable Share
Consideration, the holder shall on and after the Automatic Redemption Date be
considered and deemed for all purposes to be the holder of the Marathon Shares
delivered to such holder. Upon surrender to the Transfer Agent of a certificate
or certificates representing Exchangeable Shares, together with such other
documents and instruments as may be required to effect a transfer of
Exchangeable Shares under applicable law and such additional documents and
instruments as the Transfer Agent may reasonably require, the holder of such
surrendered certificate or certificates shall be entitled to receive in exchange
therefor, and the Transfer Agent on behalf of USX shall deliver to such holder,
the Exchangeable Share Consideration to which the holder is entitled. If USX
does not exercise the Redemption Call Right in the manner described above, on
the Automatic Redemption Date the holders of the Exchangeable Shares will be
entitled to receive in exchange therefor the Redemption Price otherwise payable
by Albertaco in connection with the redemption of the Exchangeable Shares.
USX may assign its rights to exchange the Exchangeable Share Consideration
for Exchangeable Shares pursuant to the Redemption Call Right to Marathon,
Holdco or another Marathon Subsidiary at any time.
CERTAIN INCOME TAX CONSIDERATIONS
CANADIAN FEDERAL INCOME TAX CONSIDERATIONS
HOLDERS OF EXCHANGEABLE SHARES ARE URGED TO CONSULT THEIR OWN TAX ADVISORS
TO DETERMINE THE CANADIAN FEDERAL, PROVINCIAL AND TERRITORIAL TAX CONSEQUENCES
OF EXCHANGING EXCHANGEABLE SHARES FOR AND OWNING MARATHON SHARES.
Holders of Exchangeable Shares Resident of Canada
The following description is applicable to holders of Exchangeable Shares
who at all relevant times, for purposes of the Income Tax Act, are resident in
Canada, hold such Exchangeable Shares and any Marathon Shares as capital
property and deal at arm's length with USX.
Redemption or Exchange of Exchangeable Shares. The disposition of an
Exchangeable Share in exchange for a Marathon Share will be a taxable
transaction. Such a disposition can occur as a result of either a redemption
(including a retraction) by Albertaco or an acquisition by USX, Marathon or a
Marathon Subsidiary. The Canadian federal income tax consequences of a
redemption differ significantly from those of an acquisition. An Exchangeable
Shareholder who exercises the right of retraction in respect of an Exchangeable
Share cannot
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<PAGE> 16
control whether the share will be acquired by USX, Marathon or a Marathon
Subsidiary under the Retraction Call Right or will be redeemed by Albertaco if
the Retraction Call Right is not exercised; however, a holder who exercises the
right of retraction is entitled to be notified if the Retraction Call Right will
not be exercised by USX, Marathon or a Marathon Subsidiary in which case the
holder may cancel the Retraction Request and retain the Exchangeable Share.
The following describes generally the tax treatment to a holder of an
Exchangeable Share on a redemption (including a retraction) by Albertaco and an
acquisition by USX, Marathon or a Marathon Subsidiary.
(a) On a redemption of an Exchangeable Share by Albertaco, a portion of the
redemption proceeds may be deemed to be a dividend received by the
holder. The deemed dividend portion is calculated as the amount, if
any, by which the redemption proceeds exceed the "paid-up capital" (for
the purposes of the Income Tax Act) of the Exchangeable Shares at the
time of redemption. The deemed dividend is subject to the tax treatment
accorded to dividends described below. Albertaco is required to
calculate the deemed dividend and report the amount thereof to the
Exchangeable Shareholder. Further, the Exchangeable Shareholder may
also have a capital gain or capital loss as a result of the redemption.
The Exchangeable Shareholder is considered to have disposed of the
Exchangeable Share for proceeds of disposition equal to the redemption
proceeds less the amount of the deemed dividend. The amount of a
holder's capital loss (or a capital gain) will be equal to the amount
by which the adjusted cost base of the holder's Exchangeable Shares and
Ancillary Rights and reasonable costs of disposition exceed (or are
exceeded by) such proceeds of disposition. In the case of an
Exchangeable Shareholder that is a corporation, in some circumstances
the amount of any deemed dividend may be treated pursuant to subsection
55(2) of the Income Tax Act as proceeds of disposition, and not as a
deemed dividend, for purposes of calculating a capital gain.
(b) On the acquisition of an Exchangeable Share by USX, Marathon or a
Marathon Subsidiary, the holder will realize a capital gain (or a
capital loss) equal to the amount, if any, by which the proceeds of
disposition of the Exchangeable Share, less any reasonable cost of
disposition, exceed (or are less than) the adjusted cost base to the
holder of the Exchangeable Share and the Ancillary Rights. A holder
will be required to include in income any such capital gain or capital
loss in the manner and subject to the rules described below. The
acquisition of an Exchangeable Share by USX, Marathon or a Marathon
Subsidiary will not result in a deemed dividend to the holder of the
Exchangeable Share.
The redemption proceeds in the case of a redemption of an Exchangeable
Share by Albertaco and the proceeds of disposition in the case of an acquisition
of an Exchangeable Share by USX, Marathon or a Marathon Subsidiary will be the
fair market value of a Marathon Share at the time of the disposition, and the
holder will also be required to include in computing its income (subject to a
dividend tax credit or deduction in certain cases) the amount of any declared
but unpaid dividends on the Exchangeable Shares that the holder receives from
Albertaco on or after such redemption or acquisition. The cost of a Marathon
Share received on the redemption or acquisition of an Exchangeable Share will be
the fair market value of the Marathon Share at the time of such event.
Three-quarters of any resulting capital gain must be included in income as
a taxable capital gain by the holder and three-quarters of any resulting capital
loss may be used to offset taxable capital gains in the year the loss is
sustained, in any of the three previous years or in any subsequent year to the
extent and under the circumstances described in the Income Tax Act. The amount
of any loss otherwise determined may be reduced by the amount of any dividends
received or deemed to have been received by the holder on the Exchangeable
Shares to the extent and under the circumstances described in the Income Tax
Act. A holder of Exchangeable Shares that is a Canadian-controlled private
corporation under the Income Tax Act may be subject to an additional 6 2/3%
refundable tax defined by reference to certain income that generally includes
net taxable capital gains. Individuals may be subject to an alternative minimum
tax in certain cases.
Any resulting deemed dividend arising on the Exchangeable Shares will be
treated in the same manner as ordinary dividends on such shares, subject to
possible recharacterization as proceeds of disposition for certain corporate
shareholders.
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The following example illustrates the different treatment accorded a
redemption by Albertaco and an acquisition by USX, Marathon or a Marathon
Subsidiary, assuming that at the time the fair market value of a Marathon Share
is Cdn $50.00, and the Exchangeable Share has a paid-up capital of Cdn $5.00 and
an adjusted cost base to the holder of Cdn $8.00.
<TABLE>
<CAPTION>
ACQUISITION REDEMPTION
----------- ----------
(CDN $) (CDN $)
------- -------
<S> <C> <C>
Exchange Consideration...................................... $50.00 $50.00
Deemed Dividend(a).......................................... nil(b) 45.00
Proceeds of Disposition for Capital Gains Purposes.......... 50.00 5.00
Adjusted Cost Base.......................................... 8.00 8.00
------ ------
Capital Gain (Capital Loss)(a).............................. $42.00 $(3.00)(c)
====== ======
</TABLE>
- ---------------
Notes:
(a) These line items (being the deemed dividend and the capital gain (or capital
loss)) must be reported by the former holder of the Exchangeable Share.
(b) There is no deemed dividend in the case of an acquisition of the
Exchangeable Shares by a person other than Albertaco.
(c) Subject to the "stop loss" rules contained in section 112 of the Income Tax
Act which may apply to some holders.
Dividends on Marathon Shares. Dividends received on Marathon Shares will
be included in the recipient's income for the purposes of the Income Tax Act.
Such dividends received by an individual shareholder will not be subject to the
gross-up and dividend tax credit rules in the Income Tax Act. A shareholder that
is a corporation will include such dividends in computing its taxable income.
United States non-resident withholding tax on such dividends will be eligible
for foreign tax credit or deduction treatment where applicable under the Income
Tax Act. Special considerations will apply to the receipt of dividends by a
Canadian-resident corporate shareholder at a time when USX is a "foreign
affiliate" of the shareholder within the meaning of the Income Tax Act.
Disposition of Marathon Shares. A disposition or deemed disposition of a
Marathon Share by a holder thereof will generally result in a capital gain (or
capital loss) equal to the amount by which the proceeds of disposition exceed
(or are less than) the adjusted cost base to the holder of the share and
reasonable costs of disposition. Such holders will be required to include in
computing income any such capital gain or capital loss in the manner and subject
to the rules described above.
Tax-exempt Holders
Qualified Investments. Provided the Marathon Shares are listed on a
prescribed stock exchange (which currently includes the NYSE), the Marathon
Shares will be qualified investments under the Income Tax Act for trusts
governed by registered retirement savings plans, registered retirement income
funds and deferred profit sharing plans.
Foreign Property. The Marathon Shares will be foreign property under the
Income Tax Act.
Holders of Exchangeable Shares Not Resident in Canada
The following description is applicable to holders of Exchangeable Shares
who at all relevant times, for purposes of the Income Tax Act, are neither
resident in Canada nor deemed to be resident in Canada, deal at arm's length
with USX, hold their Exchangeable Shares and will hold their Marathon Shares as
capital property and do not use or hold and are not deemed to use or hold such
shares in carrying on a business in Canada and to whom such shares do not
otherwise constitute "taxable Canadian property" within the meaning of the
Income Tax Act (each, a "Non-Resident Holder").
On an exchange of Exchangeable Shares for Marathon Shares, a Non-Resident
Holder may be deemed to have realized a capital gain or sustained a capital loss
and to have received a dividend, each computed generally
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as described above for residents of Canada. The Canadian federal income tax
consequences of an exchange of Exchangeable Shares under a redemption differ
significantly from those of an exchange under an acquisition.
Where a capital gain arises on an exchange of Exchangeable Shares, such
capital gain will not be subject to tax under the Income Tax Act unless the
Exchangeable Shares are taxable Canadian property of the Non-Resident Holder.
Provided the Exchangeable Shares are listed on a prescribed stock exchange
(which, based on proposed regulations, includes the TSE) at the time they are
exchanged for Marathon Shares, they will not be taxable Canadian property of the
Non-Resident Holder unless the Non-Resident Holder uses or holds or is deemed to
use or hold the Exchangeable Shares in connection with carrying on a business in
Canada or the Non-Resident Holder alone, or together with persons with whom the
Non-Resident Holder does not deal at arm's length, owned 25% or more of the
issued shares of any class of Albertaco at any time within five years preceding
the time of the disposition.
A Non-Resident Holder will be subject to Canadian non-resident withholding
tax on dividends received or deemed to be received on the Exchangeable Shares at
the rate of 25% thereof unless reduced pursuant to the provisions of an
applicable tax convention. Under the Tax Treaty, the rate is generally reduced
to 15% if the Non-Resident Holder is resident in the United States for purposes
of such Tax Treaty.
A Non-Resident Holder will not generally be subject to tax under the Income
Tax Act on a disposition of the Marathon Shares unless, at the time of the
disposition, such shares:
(i) are not listed on a prescribed stock exchange and, at any time
within the 12 months preceding the time of disposition, more than 50% of
the value of such shares is derived directly or indirectly from real
property situated in Canada, Canadian resource property or other property
stipulated in the Income Tax Act for such purpose; or
(ii) are listed on a prescribed stock exchange and, at any time within
the 12 months preceding the time of disposition, more than 50% of the value
of such shares is derived directly or indirectly from real property
situated in Canada, Canadian resource property or other property stipulated
in the Income Tax Act for such purpose and the Non-Resident Holder, either
alone or together with persons with whom the holder does not deal at arm's
length, has owned (or had under option) 25% or more of the issued shares of
any class or series of USX, including Marathon Shares and shares of USX-U.
S. Steel Common Stock, at any time within five years preceding the time of
disposition.
Similarly, Non-Resident Holders will not be subject to tax under the Income
Tax Act on dividends paid on the Marathon Shares.
UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
This section summarizes the principal United States federal income tax
considerations generally applicable to a holder of Exchangeable Shares upon the
receipt and ownership of Marathon Shares but does not purport to be a complete
analysis of all of the potential tax effects thereof. This summary is based upon
U.S. federal income tax law currently in effect. No advance income tax ruling
has been sought or obtained from the U.S. Internal Revenue Service (the "IRS"),
and there can be no assurance that the IRS will not challenge certain of the
conclusions reached in this discussion, particularly those as to which
uncertainty is indicated. For convenience, masculine pronouns will be used to
refer to a single holder unless the discussion specifically refers to a holder
that is not an individual. References to "U.S. tax" unless otherwise indicated
are to U.S. federal income tax.
Except as specifically stated otherwise, this discussion does not address
state, local, or foreign taxes or federal tax aspects other than U.S. federal
income taxation under the Internal Revenue Code of 1986, as amended (the "U.S.
Code"), nor does it address all aspects of such tax that may be applicable in
the specific circumstances of a particular holder. The discussion may not apply
to holders that are subject to special provisions of the U.S. Code, such as
tax-exempt organizations, financial institutions, insurance companies,
broker-dealers, persons having a "functional currency" other than the U.S.
dollar, holders who hold Exchangeable Shares as part of a straddle, wash sale,
hedging, or conversion transaction (other than by virtue of their participation
in the Arrangement), and holders who acquired their Exchangeable Shares through
the exercise of employee stock options or otherwise as compensation for
services.
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EACH HOLDER OF EXCHANGEABLE SHARES IS URGED TO CONSULT WITH A TAX ADVISER
WITH RESPECT TO THE UNITED STATES FEDERAL, STATE, AND LOCAL TAX CONSEQUENCES AND
THE FOREIGN TAX CONSEQUENCES OF THE RECEIPT AND OWNERSHIP OF MARATHON SHARES.
U.S. Holders
General. This subsection is addressed to U.S. Holders who receive Marathon
Shares in exchange for Exchangeable Shares which they acquired in the
Arrangement and who held the Exchangeable Shares as capital assets. For this
purpose, a "U.S. Holder" means (a) a citizen or individual resident of the
United States, (b) a corporation created or organized in or under the laws of
the United States or any state thereof, (c) an estate the income of which is
includible in its gross income for U.S. federal income tax purposes without
regard to its source, or (d) a trust if a court within the United States is able
to exercise primary supervision over the administration of the trust and one or
more U.S. fiduciaries have the authority to control all substantial decisions of
the trust.
Exchange of Exchangeable Shares for Marathon Shares. Subject to the
qualifications in the discussion below, a U.S. Holder who exchanges his
Exchangeable Shares for Marathon Shares will generally recognize gain or loss on
such exchange in an amount equal to the difference between the fair market value
of the Marathon Shares at the time of the exchange and the U.S. Holder's tax
basis in the Exchangeable Shares surrendered. Such gain will be capital gain or
loss, except that ordinary income may be recognized as to declared but unpaid
dividends on the Exchangeable Shares. The U.S. Holder will have a basis in the
Marathon Shares which are received in an amount equal to the fair market value
of those shares at the time of the exchange, and his holding period will begin
on the day after the exchange.
There is a possibility, however, that any loss on the exchange might be
disallowed under the "wash sale" provisions of section 1091 of the U.S. Code. In
this event, the basis of the U.S. Holder in the Marathon Shares which he
received would be the same as the basis of the Exchangeable Shares exchanged
therefor, and the holding period of the Marathon Shares would include the period
during which the Exchangeable Shares were held.
Under the Taxpayer Relief Act of 1997, the maximum capital gains rate for
non-corporate U.S. Holders is 20% for Exchangeable Shares held for more than 18
months. Under pending legislation, such 20% rate would apply to Exchangeable
Shares held for more than one year. For U.S. foreign tax credit purposes, gain
recognized by a U.S. Holder will generally be treated as U.S. source gain except
that if, under the Tax Treaty, any Canadian tax is imposed on the exchange, the
gain may be treated as Canadian source gain at the election of the holder.
USX, Marathon, and Albertaco believe that the Exchangeable Shares are stock
of Albertaco, rather than of USX, for U.S. tax purposes, but this matter is not
free from doubt. If the Exchangeable Shares were treated as Marathon Shares for
U.S. tax purposes, then a U.S. Holder would recognize no gain or loss on the
exchange of Exchangeable Shares for Marathon Shares.
Different and generally less favorable tax consequences from those
described above could apply if, at any time during the U.S. Holder's holding
period for the Exchangeable Shares, Albertaco were a passive foreign investment
company (a "PFIC"), within the meaning of section 1297(a) of the U.S. Code.
Albertaco would be a PFIC for a taxable year only if either (a) 75% or more of
its gross income for the year were passive income (as defined for U.S. tax
purposes) or (b) on average for the year, 50% or more of its assets produced or
were held for the production of passive income. In the absence of future
regulations by the IRS, the calculation of asset values will be made according
to U.S. tax basis (as determined for purposes of computing U.S. earnings and
profits) rather than fair market value. For purposes of applying the foregoing
tests, the assets and gross income of Albertaco's significant subsidiaries will
be attributed to Albertaco.
USX, Marathon, and Albertaco intend to endeavor to cause Albertaco to avoid
PFIC status, although there can be no assurance that they will be able to do so
or that their intent will not change. If Albertaco believes that it is
nevertheless a PFIC for any taxable year, it will endeavor so to notify U.S.
Holders.
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Non-U.S. Holders
General. This subsection is addressed to a Non-U.S. Holder who acquires
Marathon Shares in exchange for Exchangeable Shares. For this purpose, the term
"Non-U.S. Holder" means a nonresident alien individual, a foreign corporation, a
foreign partnership, or a foreign estate or trust. A Non-U.S. Holder seeking
benefits under an applicable tax treaty or an exemption from U.S. withholding
tax for "effectively connected" income, as described below, may be required to
comply with additional certification and other requirements in order to
establish his entitlement to such benefits or exemption. This discussion does
not consider U.S. tax consequences that may be relevant to a Non-U.S. Holder who
is a United States expatriate or who has other special facts and circumstances.
The discussion assumes that, for U.S. tax purposes, the Marathon Shares will be
treated as stock of USX and not as an interest in any other corporation.
Dividends. Dividends received by a Non-U.S. Holder on Marathon Shares that
are not effectively connected with the conduct of a trade or business in the
United States will generally be subject to U.S. withholding tax. The U.S.
withholding tax is 30% unless reduced by treaty. Under the Tax Treaty, the rate
currently is 15%, generally, on dividends paid to residents of Canada.
Gain on Dispositions. A Non-U.S. Holder generally will not be subject to
U.S. tax on any gain recognized on the receipt of Marathon Shares in exchange
for Exchangeable Shares or upon the sale or other disposition of such Marathon
Shares unless (a) such gain is effectively connected with the conduct of a trade
or business in the United States, or, if a tax treaty applies, is attributable
to a permanent establishment maintained by the Non-U.S. Holder in the United
States, or (b) the Non-U.S. Holder is an individual who is present in the United
States for 183 days or more in the taxable year of disposition, and certain
other conditions are satisfied.
Special considerations not herein described would apply to any Non-U.S.
Holder who, actually or constructively, owned more than 5% of the Marathon
Shares or Exchangeable Shares having a fair market value exceeding 5% of the
total fair market value of the outstanding Marathon Shares or who, in unusual
circumstances, actually or constructively owned more than 5% of the Exchangeable
Shares if USX were, during the relevant period of ownership, a U.S. real
property holding corporation (a "USRPHC"), within the meaning of section 897 of
the U.S. Code. USX does not believe that it is presently a USRPHC. If, in the
future, USX should become a USRPHC, it will endeavor so to notify Non-U.S.
Holders of Exchangeable Shares and Marathon Shares.
U.S. Estate Tax. Marathon shares held by an individual Non-U.S. Holder at
the time of death will be deemed to be a U.S. situs asset for purposes of U.S.
estate tax law and therefore will generally be subject to the U.S. estate tax,
except as may otherwise be provided by an applicable tax or estate tax treaty
with the United States.
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CANADIAN SECURITIES LAW CONSIDERATIONS
The issuance of shares of Marathon Stock upon an exchange of Exchangeable
Shares and the resale of such Marathon Stock will be subject to the registration
and prospectus requirements of applicable Canadian securities legislation.
Albertaco has applied for and expects to receive rulings or orders of certain
provincial securities regulatory authorities in Canada to permit such issuance
and resale in such provinces without restriction by a person other than a
"control person," provided that no unusual effort is made to prepare the market
for any such resale or to create a demand for the securities which are the
subject of any such resale and no extraordinary commission or consideration is
paid in respect thereof.
LEGAL MATTERS
The validity of the issuance of the shares of Marathon Stock offered hereby
will be passed upon for USX by D. D. Sandman, Esq., General Counsel, Secretary
and Senior Vice President--Human Resources & Public Affairs of USX or by J.A.
Hammerschmidt, Esq., Assistant General Counsel--Corporate and Assistant
Secretary of USX. Messrs. Sandman and Hammerschmidt, in their respective
capacities as set forth above, are paid salaries by USX, participate in various
employee benefit plans offered by USX and own common stock of USX.
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GLOSSARY
"ALBERTACO" means Marathon Oil Canada Limited (formerly 761581 Alberta
Ltd.), a Subsidiary of Holdco.
"ANCILLARY RIGHTS" means any and all rights granted by USX, Marathon and a
Marathon Subsidiary to Tarragon Securityholders in connection with the
Arrangement and the documents related thereto (including, without limitation,
the Exchange Rights, but excluding the Sale Right).
"ARRANGEMENT" means the arrangement under the provisions of Section 182 of
the OBCA as set out in the Plan of Arrangement.
"ARRANGEMENT AGREEMENT" means the amended and restated Arrangement
Agreement dated June 20, 1998 (as amended and restated July 7, 1998) among
Tarragon, Marathon, Albertaco and Holdco pursuant to which Tarragon, Marathon,
Albertaco and Holdco have implemented the Arrangement.
"ARTICLES OF ARRANGEMENT" means the articles of arrangement in respect of
the Arrangement required under Section 183(1) of the OBCA to be filed with the
Director after the Final Order has been made.
"AUTOMATIC EXCHANGE RIGHTS" means the benefit of the obligation of USX to
effect the automatic exchange of Marathon Shares for Exchangeable Shares
pursuant to the Exchange Trust Agreement.
"AUTOMATIC REDEMPTION DATE" means the date for the automatic redemption by
Albertaco of Exchangeable Shares pursuant to Article 7 of the Exchangeable
Shares Provisions, which date shall be the Business Day next following the fifth
anniversary of the date of the first issuance of Exchangeable Shares unless (a)
such date shall be extended at any time or from time to time to a specified
later date by the board of directors of Albertaco or (b) such date shall be
accelerated at any time to a specified earlier date (but no earlier than the
third anniversary of the first issuance of Exchangeable Shares) by the board of
directors of Albertaco if at such time there are issued and outstanding less
than 5% of the number of Exchangeable Shares initially issued pursuant to the
Plan of Arrangement (including Exchangeable Shares which the recipients elect to
sell for cash pursuant to the Plan of Arrangement, but excluding Exchangeable
Shares held by USX and its Subsidiaries) and as such number of shares may be
adjusted as deemed appropriate by the board of directors of Albertaco to give
effect to any subdivision or consolidation of or stock dividend on the
Exchangeable Shares, any issuance or distribution of rights to acquire
Exchangeable Shares or securities exchangeable for or convertible into
Exchangeable Shares, any issue or distribution of other securities or rights or
evidences of indebtedness or assets, or any other capital reorganization or
other transaction affecting the Exchangeable Shares, in each case upon at least
60 days' prior written notice of any such extension or acceleration, as the case
may be, to the registered holders of the Exchangeable Shares, in which case the
Automatic Redemption Date shall be such later or earlier date; provided,
however, that the accidental failure or omission to give any such notice of
extension or acceleration, as the case may be, to less than 10% of such holders
of Exchangeable Shares shall not affect the validity of such extension or
acceleration.
"BUSINESS DAY" means any day other than a Saturday, a Sunday or a day when
banks are not open for business in any of Pittsburgh, Pennsylvania, Houston,
Texas or Calgary, Alberta.
"CALL RIGHTS" means the rights of USX, Marathon and a Marathon Subsidiary
under the Exchangeable Share Provisions to acquire Exchangeable Shares from
holders thereof in the circumstances therein set forth.
"COURT" means the Ontario Court (General Division).
"DIRECTOR" means the Director duly appointed under the OBCA.
"EXCHANGE RIGHT" means the right granted by USX and Marathon to the
Trustee, as trustee for and on behalf of, and for the use and benefit of, the
Holders, to require USX to purchase from each or any Holder at any time and from
time to time all or any part of the Exchangeable Shares held by such Holders.
"EXCHANGEABLE SHAREHOLDER" means a holder of Exchangeable Shares.
"EXCHANGE TRUST AGREEMENT" means the Exchange Trust Agreement among
Albertaco, USX, Marathon and the Trustee, made as of August 11, 1998.
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"EXCHANGEABLE SHARES" means shares of Albertaco that are exchangeable on a
one-for-one basis (subject to adjustment in certain circumstances) into Marathon
Shares and having attached thereto the attributes set out in the Exchangeable
Share Provisions.
"EXCHANGEABLE SHARE CONSIDERATION" means, for any exchange of Exchangeable
Shares pursuant to the Exchangeable Share Provisions, the Plan of Arrangement,
the Support Agreement or the Exchange Trust Agreement, certificates representing
the aggregate number of Marathon Shares deliverable in connection with
satisfaction of the relevant Exchangeable Share Price, provided that any such
stock shall be duly issued as fully paid and non-assessable and free and clear
of any lien, claim and encumbrance, security interest or adverse claim and
provided further that such consideration shall be paid less any tax required to
be deducted and withheld therefrom and without interest.
"EXCHANGEABLE SHARE PRICE" means, initially, one Marathon Share for each
Exchangeable Share and is subject to adjustment from time to time as provided in
the Exchangeable Share Provisions.
"EXCHANGEABLE SHARE PROVISIONS" means those provisions contained in the
articles of Albertaco regarding the rights, privileges, restrictions and
conditions of the Exchangeable Shares.
"FINAL ORDER" means the final order of the Court approving the Arrangement
pursuant to Section 182(5)(f) of the OBCA, as such order may be affirmed,
amended or modified by any court of competent jurisdiction.
"HOLDCO" means 787722 Alberta Ltd., a wholly owned Subsidiary of Marathon.
"HOLDER" means the registered holders from time to time of Exchangeable
Shares, other than USX and its Subsidiaries.
"INCOME TAX ACT" means the Income Tax Act (Canada), R.S.C. 1985, c.1 (5th
Supp), as amended, including the regulations promulgated thereunder.
"INVESTEE AGREEMENTS" means agreements dated December 9, 1997 between
Tarragon and each of Triax Resource Limited Partnership and Triax Resource
Limited Partnership II, as the same may be amended from time to time, providing
for the issuance of an aggregate of 1,000,000 Special Warrants.
"LIQUIDATION AMOUNT" means an amount equal to the amount that a holder of
an equivalent number of Marathon Shares on the Liquidation Date would be
entitled to receive on the liquidation, dissolution or winding-up of USX, which
Liquidation Amount shall be satisfied by the delivery to holders of the
Exchangeable Shares such number of Marathon Shares as have a fair market value
on the last Business Day prior to the Liquidation Date equal to the Liquidation
Amount.
"LIQUIDATION CALL RIGHT" means the overriding right of USX, in the event of
and notwithstanding the proposed liquidation, dissolution or winding-up of
Albertaco pursuant to Article 5 of the Exchangeable Share Provisions, to acquire
from all but not less than all of the holders (other than USX and any Subsidiary
thereof) of Exchangeable Shares on the Liquidation Date all but not less than
all of the Exchangeable Shares held by each such holder on payment by USX to the
holder of the Exchangeable Share Price in effect on the last Business Day prior
to the Liquidation Date.
"LIQUIDATION DATE" means in the event of the liquidation, dissolution or
winding-up of Albertaco or any other distribution of the assets of Albertaco
among its shareholders for the purpose of winding-up its affairs, a holder of
Exchangeable Shares shall be entitled, subject to applicable law, to receive
from the assets of Albertaco in respect of each Exchangeable Share held by such
holder on the effective date (the "Liquidation Date") of such liquidation,
dissolution or winding-up, before any distribution of any part of the assets of
Albertaco to the holders of the Albertaco Common Shares, the Albertaco
Non-Voting Common Shares or any other shares ranking junior to the Exchangeable
Shares.
"MARATHON" means Marathon Oil Company, a corporation organized and existing
under the laws of the State of Ohio and any successor corporation.
"MARATHON SHARES" means shares of Marathon Stock.
"MARATHON SUBSIDIARY" means any Subsidiary of Marathon, other than
Albertaco.
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"ME" means The Montreal Exchange.
"NYSE" means the New York Stock Exchange.
"OBCA" means the Business Corporations Act (Ontario), R.S.O. 1990, c. B.16
as amended, including the regulations promulgated thereunder.
"OPTIONHOLDERS" means the holders of Tarragon Options.
"PLAN OF ARRANGEMENT" means the plan of arrangement contemplated in the
Arrangement Agreement.
"REDEMPTION CALL PURCHASE PRICE" means the payment to each holder of
Exchangeable Shares by USX of the Exchangeable Share Price in effect on the last
Business Day prior to the Automatic Redemption Date.
"REDEMPTION CALL RIGHT" means the overriding right of USX, notwithstanding
the compulsory redemption of the Exchangeable Shares by Albertaco pursuant to
Article 7 of the Exchangeable Share Provisions, to acquire from all but not less
than all of the holders (other than USX or any Subsidiary thereof) of
Exchangeable Shares on the Automatic Redemption Date all but not less than all
of the Exchangeable Shares held by each such holder upon the payment to each
such holder by USX of the Exchangeable Share Price in effect on the last
Business Day prior to the Automatic Redemption Date.
"REDEMPTION PRICE" means the Exchangeable Share Consideration, representing
the Exchangeable Share Price applicable on the last Business Day prior to the
Automatic Redemption Date, delivered by Albertaco.
"RETRACTION CALL RIGHT" means the overriding right of USX and Marathon to
acquire all but not less than all the Retracted Shares directly from the holder
in exchange for one Marathon Share for each Exchangeable Share.
"RETRACTION DATE" means the Business Day on which the holder of
Exchangeable Shares desires to have Albertaco redeem the Retracted Shares,
provided that the Retraction Date shall be not less than three Business Days nor
more than 10 Business Days after the date on which the Retraction Request is
received by Albertaco and further provided that, in the event that no such
Business Day is specified by the holder in the Retraction Request, the
Retraction Date shall be deemed to be the tenth Business Day after the date on
which the Retraction Request is received by Albertaco.
"RETRACTION REQUEST" means a duly executed statement or such other form as
may be acceptable to Albertaco pursuant to which a holder of Exchangeable Shares
shall be entitled at any time, subject to the exercise by USX or Marathon of the
Retraction Call Right and otherwise upon compliance with the Exchangeable Share
Provisions, to require Albertaco to redeem any or all of the Exchangeable Shares
registered in the name of such holder by delivery to such holder of the
Exchangeable Share Consideration representing the Exchangeable Share Price in
respect of such Exchangeable Shares.
"RETRACTED SHARES" means those Exchangeable Shares represented by a
certificate or certificates redeemed by Albertaco pursuant to a Retraction
Request.
"SALE RIGHT" means the right of a holder of Exchangeable Shares to sell
Exchangeable Shares to Holdco for cash under the Arrangement.
"SERVICE" means the United States Internal Revenue Service.
"SPECIAL WARRANTS" means the Special Warrants entitling the holders thereof
to acquire one Tarragon Share per Special Warrant without payment of additional
consideration, issued or to be issued by Tarragon pursuant to the Investee
Agreements.
"SUBSIDIARY" of any person means each partnership, joint venture,
corporation, association or other business entity of which more than 50% of the
total voting power of shares of stock or units of ownership or beneficial
interest entitled to vote in the election of directors (or members of a
comparable governing body) is owned or controlled, directly or indirectly, by
such person.
"SUPPORT AGREEMENT" means the Support Agreement between USX, Marathon and
Albertaco, made as of August 11, 1998.
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"TARRAGON OPTION" means the right to purchase one Tarragon Share granted
pursuant to Tarragon's existing share option plan.
"TARRAGON SECURITIES" means any or all of the Tarragon Shares, the Tarragon
Options and the Special Warrants.
"TARRAGON SECURITYHOLDERS" means the Tarragon Shareholders, the
Optionholders and the Warrantholders.
"TARRAGON SHAREHOLDERS" means the holders of Tarragon Shares.
"TARRAGON SHARES" means the common shares of Tarragon.
"TAX TREATY" means Canada-U.S. Income Tax Convention.
"TRANSFER AGENT" means Montreal Trust Company of Canada or such other
person as may from time to time be the registrar and transfer agent for the
Exchangeable Shares.
"TRUSTEE" means Montreal Trust Company of Canada and any successor trustee
appointed under the Exchange Trust Agreement.
"TSE" means The Toronto Stock Exchange.
"UNPAID DIVIDENDS" means the full amount of all cash and non-cash dividends
declared and unpaid in respect of Exchangeable Shares on a specified date.
"U.S." or "UNITED STATES" means the United States of America including the
states thereof, the District of Columbia, territories and possessions.
"USX" means USX Corporation, a corporation organized and existing under the
laws of the State of Delaware and any successor corporation.
"USX LIQUIDATION EVENT" means each of the following events at the time set
forth below:
(i) in the event of any determination by the board of directors of
USX to institute voluntary liquidation, dissolution or winding-up
proceedings with respect to USX or to effect any other
distribution of assets of USX among its stockholders for the
purpose of winding-up its affairs, at least 60 days prior to the
proposed effective date of such liquidation, dissolution,
winding-up or other distribution; and
(ii) immediately, upon the earlier of (A) receipt by USX of notice of
and (B) USX otherwise becoming aware of any threatened or
instituted claim, suit, petition or other proceedings with
respect to the involuntary liquidation, dissolution or winding-up
of USX or to effect any other distribution of assets of USX among
its stockholders for the purpose of winding-up its affairs.
"USX/MARATHON CALL NOTICE" means the written notification by USX or
Marathon to Albertaco of USX's or Marathon's exercise of the Retraction Call
Right.
"WARRANTHOLDERS" means the holders of Special Warrants.
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USX Corporation
Debt Securities
Preferred Stock
USX-Marathon Group Common Stock
USX-U.S. Steel Group Common Stock
Warrants
------------------------
USX Corporation ("USX") proposes to issue and offer from time to time (1)
unsecured debt securities of USX (the "Debt Securities"); (2) USX Corporation
Preferred Stock ("Preferred Stock"); (3) USX-Marathon Group Common Stock of USX
Corporation ("Marathon Stock"); (4) USX-U. S. Steel Group Common Stock of USX
Corporation ("Steel Stock"); (5) Warrants to purchase Debt Securities, Preferred
Stock, Marathon Stock or Steel Stock (the "Warrants"), or a combination of the
foregoing at an aggregate public offering price not exceeding $1,542,569,300 (or
the equivalent thereof in foreign denominated currency (or units based on or
related thereto) in the case of Debt Securities), at prices and on terms to be
determined at or prior to the time or times of sale. The Marathon Stock and
Steel Stock are together referred to as "Common Stock."
Specific terms of the securities in respect to which this Prospectus is
being delivered ("Offered Securities") shall be set forth in an accompanying
Prospectus Supplement, together with the terms of the offering of the Offered
Securities, the initial price thereof and net proceeds from the sale thereof.
All such Prospectus Supplement(s) shall also set forth with regard to the
particular Offered Securities, without limitation, the following: (1) in the
case of Debt Securities, the designation of each separate series and the
aggregate principal amount, maturity, interest rate, if any, whether fixed or
variable (or the manner of calculation thereof), redemption and sinking fund
provisions or other repayment obligations, currency in which denominated,
amounts determined by reference to an index, purchase price and any listing on a
securities exchange, (2) in the case of Preferred Stock, the designation, number
of shares offered, liquidation preference per share, dividend rate, dates on
which dividends are to be payable and dates from which dividends accrue, any
redemption or sinking fund provisions, any conversion features, and any listing
on a securities exchange, (3) in the case of Marathon Stock or Steel Stock, the
number of shares offered, the number of shares to be outstanding after the
offering, the price range and dividend history of the relevant stock and any
listing on a securities exchange, and (4) in the case of Warrants, the number
and terms thereof, the designation and the number of securities issuable upon
their exercise, the exercise price, the exercise time period, the terms of the
offering and sale thereof and any listing on a securities exchange.
USX may sell the Offered Securities to or through underwriters or directly
to other purchasers or through agents or through and to brokers or dealers
acting as underwriters who will be named in the accompanying Prospectus
Supplement(s) along with terms of the public offering, including the offering
price, the principal amounts, if any, to be purchased by underwriters, the
commission or discount to the underwriters and the amount of other expenses
attributable to the issuance and distribution of the Offered Securities.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------
The date of this Prospectus is July 31, 1998.
<PAGE> 27
AVAILABLE INFORMATION
USX Corporation ("USX") is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, files reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by USX can be inspected and copied at
prescribed rates at the Public Reference Room of the Commission at 450 Fifth
Street, N.W., Room 1024, Washington, D.C. 20549, and at the public reference
facilities maintained by the Commission at 7 World Trade Center, Suite 1300, New
York, New York 10048, and 500 West Madison Street, Suite 1400, Chicago, Illinois
60661. Documents filed by USX can also be inspected at the offices of the New
York Stock Exchange, Inc. (the "NYSE"), The Chicago Stock Exchange and the
Pacific Stock Exchange. The Commission maintains a web site at
http://www.sec.gov containing reports, proxy and information statements and
other information regarding registrants that file electronically with the
Commission, including USX.
USX has filed a Registration Statement on Form S-3 (the "Registration
Statement") with the Commission pursuant to the Securities Act of 1933, as
amended (the "Securities Act"), with respect to the Offered Securities. This
Prospectus does not contain all the information set forth in the Registration
Statement and the exhibits thereto, to which reference is hereby made.
Statements contained herein concerning the provisions of certain documents are
not necessarily complete, and in each instance reference is made to the copy of
such document filed as an exhibit to the Registration Statement or otherwise
filed with the Commission. Each such statement is qualified in its entirety by
such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents heretofore filed by USX with the Commission (file
no. 1-5153) are incorporated herein by reference:
(a) Annual Report on Form 10-K for the year ended December 31, 1997.
(b) Quarterly Report on Form 10-Q for the quarter ended March 31, 1998.
(c) Current Reports on Form 8-K dated January 1, February 27, March 5,
May 29 and July 13, 1998.
(d) The description of the Marathon Stock included in USX's Form 8
Amendment to a Registration Statement on Form 8-B filed on April 11,
1991.
(e) The description of Steel Stock included in USX's Form 8-A
Registration Statement filed on April 11, 1991.
(f) The Amended and Restated Rights Plan included in USX's Form 8
Amendment to Form 8-A Registration Statement filed on October 5, 1992.
All reports and other documents filed by USX pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this Prospectus
and prior to the termination of the offering of the Offered Securities shall be
deemed to be incorporated by reference herein. Any statement contained in a
document incorporated or deemed to be incorporated by reference herein shall be
deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any other subsequently filed
document which also is incorporated or deemed to be incorporated by reference
herein modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
USX undertakes to provide without charge to each person to whom a
Prospectus is delivered, on the written or oral request of such person, a copy
of any or all of the information incorporated by reference in this Prospectus,
other than exhibits to such information (unless such exhibits are specifically
incorporated by reference into the information that this Prospectus
incorporates). Requests for such copies should be directed to the Office of the
Corporate Secretary, USX Corporation, 600 Grant Street, Pittsburgh, Pennsylvania
15219-4776 (telephone: 412-433-4801).
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<PAGE> 28
USX CORPORATION
USX is a diversified company which is principally engaged in the energy
business through its Marathon Group, and in the steel business through its U. S.
Steel Group. The term "USX" when used herein refers to USX Corporation or USX
Corporation and its subsidiaries, as required by the context. The term "Group"
when used herein refers to the Marathon Group and/or the U. S. Steel Group, as
required by the context.
USX has two classes of common stock, USX--Marathon Group Common Stock
("Marathon Stock") and USX--U. S. Steel Group Common Stock ("Steel Stock"). Each
class of common stock is intended to provide the stockholders of such class with
a separate security reflecting the performance of the related Group. Effective
October 31, 1997, USX sold Delhi Gas Pipeline Corporation and other subsidiaries
of USX that comprised all of the Delhi Group (the "Delhi Companies") and, on
January 26, 1998, redeemed all the outstanding USX-Delhi Group Common Stock.
The Marathon Group is comprised of Marathon Oil Company ("Marathon")
and certain other consolidated subsidiaries of USX which are engaged in
worldwide exploration and production of crude oil and natural gas; domestic
refining, marketing and transportation of petroleum products; and other
energy related businesses. During 1997, Marathon and Ashland Inc.
("Ashland") agreed to combine the major elements of their refining,
marketing and transportation ("RM&T") operations. On January 1, 1998,
Marathon transferred certain RM&T net assets to Marathon Ashland Petroleum
LLC ("MAP"), a new consolidated subsidiary. Also on January 1, 1998,
Marathon acquired certain RM&T net assets from Ashland in exchange for a
38% interest in MAP. Marathon Group revenues as a percentage of total USX
consolidated revenues were 69% in 1997, 71% in 1996 and 68% in 1995.
The U. S. Steel Group includes U. S. Steel, the largest steel producer
in the United States, which is primarily engaged in the production and sale
of steel mill products, coke and taconite pellets. The U. S. Steel Group
also includes the management of mineral resources, domestic coal mining,
and engineering and consulting services. Equity affiliates of the U. S.
Steel Group include Transtar Inc. and joint ventures, such as USS/Kobe
Steel Company, USS-POSCO Industries and PRO-TEC Coating Company. Other
businesses that are part of the U. S. Steel Group include real estate
development and management, and leasing and financing activities. U. S.
Steel Group revenues as a percentage of total USX consolidated revenues
were 31% in 1997, 29% in 1996 and 32% in 1995.
USX includes consolidated financial information in its periodic reports
required by the Exchange Act, in its annual shareholder reports and in other
financial communications. The consolidated financial statements are supplemented
with separate financial statements of the Marathon Group and the U. S. Steel
Group together with the related Management's Discussion and Analyses,
descriptions of business and other financial and business information to the
extent such information is required to be presented in the report being filed.
The financial information of the Marathon Group and the U. S. Steel Group and
certain financial information relating to the Delhi Group, taken together,
includes all accounts which comprise the corresponding consolidated financial
information of USX.
For consolidated financial reporting purposes, USX's reportable industry
segments correspond with its two Groups. The attribution of assets, liabilities
(including contingent liabilities) and stockholders' equity among the Marathon
Group and the U. S. Steel Group for the purpose of preparing their respective
financial statements does not affect legal title to such assets or
responsibility for such liabilities. Holders of Marathon Stock and Steel Stock
are holders of common stock of USX and continue to be subject to all of the
risks associated with an investment in USX and all of its businesses and
liabilities. Financial impacts arising from either of the Groups which affect
the overall cost of USX's capital could affect the results of operations and
financial condition of both Groups. In addition, net losses of either Group, as
well as dividends and distributions on either class of USX common stock or
series of any preferred stock and repurchases of either class of USX common
stock or any series of preferred stock at prices in excess of par or stated
value, will reduce funds of USX legally available for payment of dividends on
both classes of USX common stock. Accordingly, the USX consolidated financial
information should be read in connection with the Marathon Group and the U. S.
Steel Group financial information.
USX was incorporated in 1901 and is a Delaware corporation. Its executive
offices are located at 600 Grant St., Pittsburgh, PA 15219-4776 (tel:
412-433-1121).
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<PAGE> 29
RATIO OF EARNINGS TO FIXED CHARGES
AND RATIO OF EARNINGS TO COMBINED
FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
(UNAUDITED)
CONTINUING OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
MARCH 31 YEAR ENDED DECEMBER 31
------------ ------------------------------------
1998 1997 1996 1995 1994 1993
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges......... 4.95 4.11 3.90 1.62 2.18 (a)
==== === === ==== ==== ====
Ratio of earnings to combined fixed charges
and preferred stock dividends............ 4.77 3.92 3.62 1.49 2.01 (b)
==== === === ==== ==== ====
</TABLE>
- ---------
(a) Earnings did not cover fixed charges by $312 million for 1993.
(b) Earnings did not cover combined fixed charges and preferred stock dividends
by $356 million for 1993.
USE OF PROCEEDS
Unless otherwise indicated in the applicable Prospectus Supplement, USX
intends to use the net proceeds from the sale of the Offered Securities for
general corporate purposes, including, without limitation, the refunding of
outstanding long-term indebtedness and other financial obligations, interest
rate management, leveling of its debt maturity schedule, the financing and
re-financing of acquisitions, purchases of Common Stock, capital expenditures,
investments in subsidiaries and joint ventures, and working capital.
PENDING TRANSACTION
On June 20, 1998, Marathon Oil Company and Tarragon Oil and Gas Limited, an
Ontario Corporation, ("Tarragon") entered into an Arrangement Agreement, as
subsequently amended and restated, pursuant to which all issued and outstanding
common stock of Tarragon would be acquired by an indirect Canadian subsidiary of
Marathon Oil Company and holders thereof would receive, at their election, Cdn
$14.25 ($9.81, assuming an exchange rate of Cdn $'s to U.S. $'s of 0.6886) or
the economic equivalent in Exchangeable Shares to be issued by such Canadian
subsidiary. The Exchangeable Shares, when issued and outstanding, will be
exchangeable at any time into Marathon Stock on a one-for-one basis. The
aggregate cost of the Tarragon securities is estimated to be $750 million. The
transaction is subject to approval by the Ontario Court (General Division),
Ontario, Canada and is expected to be completed on or about August 11, 1998.
Filing of the financial information related to the acquisition of Tarragon by
Marathon is not required under the applicable sections of the Securities
Exchange Act of 1934, as amended, or the Securities Act of 1933, as amended;
however, unaudited pro forma financial statements of the USX-Marathon Group, USX
Corporation and Tarragon were included in Tarragon's Information Circular used
in connection with solicitation of Tarragon's shareholders' approval of the
transaction contemplated in the Arrangement Agreement. Such unaudited pro forma
financial statements were filed on USX Corporation's Current Report on Form 8-K
dated July 13, 1998.
SPECIAL CONSIDERATIONS
CONSIDERATIONS RELATING TO COMMON STOCK
Stockholders of One Company; Financial Impacts from One Group Could Affect the
other Group
Although the financial statements of the Marathon Group and the U. S. Steel
Group separately report the assets, liabilities (including contingent
liabilities) and stockholders' equity of USX attributed to each such Group, such
attribution of assets, liabilities (including contingent liabilities) and
stockholders' equity between the Marathon Group and the U. S. Steel Group for
the purpose of preparing their respective financial
4
<PAGE> 30
statements does not affect legal title to such assets or responsibility for such
liabilities. Holders of Marathon Stock and Steel Stock are holders of common
stock of USX, and continue to be subject to all of the risks associated with an
investment in USX and all of its businesses and liabilities. Financial impacts
arising from one Group that affect the overall cost of USX's capital could
affect the results of operations and financial condition of the other Group. In
addition, net losses of either Group, as well as dividends and distributions on
either class of USX common stock or any series of Preferred Stock and
repurchases of either class of USX common stock or any series of Preferred
Stock, will reduce the funds of USX legally available for payment of dividends
on the Common Stock of both Groups. Accordingly, the USX consolidated financial
information should be read in connection with the Group financial information.
USX prepares and provides consolidated financial statements, as well as
financial statements of each Group, to the holders of the respective classes of
Common Stock. See "Management and Accounting Policies."
No Rights or Additional Duties With Respect to the Groups; Potential Conflicts
Holders of Marathon Stock and Steel Stock have only the rights of
stockholders of USX, and, except as described under "Description of Capital
Stock--Marathon Stock--Exchange and Redemption" and "--Voting" and under
"Description of Capital Stock--Steel Stock--Exchange and Redemption" and
"--Voting," holders of Common Stock are not provided any rights specifically
related to either Group. In addition, principles of Delaware law established in
cases involving differing treatment of classes of capital stock or groups of
holders of the same class of capital stock provide that a board of directors
owes an equal duty to all stockholders regardless of class or series and does
not have separate or additional duties to any group of stockholders.
The existence of separate classes of Common Stock may give rise to
occasions when the interests of holders of Marathon Stock and Steel Stock may
diverge or appear to diverge. Examples include the optional exchange of the
Steel Stock for Marathon Stock at the 10% premium; the determination of the
record date of any such exchange or for the redemption of any Steel Stock; the
establishing of the date for public announcement of the liquidation of USX; and
the commitment of capital between the Marathon Group and the U. S. Steel Group.
USX is not aware of any precedent involving the fiduciary duties of directors of
corporations having classes of common stock or separate classes or series of
capital stock the rights of which are defined by reference to specified
operations of the corporation. However, under the principles of Delaware law
referred to above and the "business judgment rule," absent abuse of discretion,
a good faith determination made by a disinterested and adequately informed USX
Board of Directors (the "Board") with respect to any matter having disparate
impacts upon holders of Marathon Stock and holders of Steel Stock would be a
defense to any challenge to such determination made by or on behalf of the
holders of either class of Common Stock.
Because the Board owes an equal duty to all stockholders regardless of
class, the Board is the appropriate body to deal with these matters. In order to
assist the Board in this regard, USX has formulated policies to serve as
guidelines for the resolution of matters involving a conflict or a potential
conflict, including policies dealing with the payment of dividends, limiting
capital investment in the U. S. Steel Group over the long term to its internally
generated cash flow, and allocation of corporate expenses and other matters. See
"Management and Accounting Policies." The Board has been advised concerning the
applicable law relating to the discharge of its fiduciary duties to the common
stockholders in the context of the separate classes of Common Stock and has
delegated to the Audit Committee of the Board the responsibility to review
matters which relate to this subject and report to the Board.
Limited Separate Voting Rights
Holders of shares of Marathon Stock and Steel Stock vote together as a
single class on all matters as to which all USX common stockholders are entitled
to vote. Holders of Marathon Stock and Steel Stock will have no rights to vote
on matters as a separate Group except as described under "Description of Capital
Stock--Marathon Stock--Voting" and under "Description of Capital Stock--Steel
Stock--Voting" and in certain limited circumstances as currently provided under
Delaware law. Separate meetings for the holders of each class of Common Stock
will not be held. Accordingly, subject to certain exceptions, holders of shares
of
5
<PAGE> 31
Marathon Stock or shares of Steel Stock cannot bring a proposal to a vote of the
holders of Marathon Stock or holders of Steel Stock only, but are required to
bring any proposal to a vote of all holders of capital stock of USX entitled to
vote generally voting together as a single class.
The interests of the holders of the Marathon Stock and Steel Stock may
diverge or appear to diverge with respect to certain matters as to which such
holders are entitled to vote. If, when a stockholder vote is taken on any matter
as to which a separate vote by any class would not be required under the USX
Corporation Restated Certificate of Incorporation, as amended from time to time
(the "Certificate of Incorporation"), or Delaware law, the holders of one class
of Common Stock would have more than the number of votes required to approve any
such matter, the holders of that class would be in a position to control the
outcome of the vote on such matter. The Certificate of Incorporation provides
that neither the increase nor the decrease of the authorized number of shares of
either class of Common Stock requires a separate vote of either such class.
Thus, it is possible that the holders of a majority of either class of Common
Stock could constitute a majority of the voting power of both classes of Common
Stock and approve the increase or decrease of the authorized amount of the other
class of Common Stock without the approval of the holders of such other class of
Common Stock.
On all matters where the holders of Common Stock vote together as a single
class, a share of Marathon Stock will have one vote and each share of Steel
Stock will have a fluctuating vote per share based on time-weighted average
ratios of their Market Values (See "Description of Capital Stock"). Assuming
that the time-weighted averages of the Market Values of Marathon Stock and Steel
Stock were $33 and $32, respectively, the per share voting rights of Marathon
Stock and Steel Stock would be one vote and 0.970 votes per share, respectively.
If the Marathon Stock and the Steel Stock had such per share voting rights as of
June 30, 1998, the holders of Marathon Stock and Steel Stock would have
approximately 77% and 23%, respectively, of the total voting power of USX.
Management and Accounting Policies Subject to Change
Since 1991, USX has applied certain management and accounting policies
adopted by the Board and described herein, which policies may be modified or
rescinded in the sole discretion of the Board without approval of stockholders,
although the Board has no present intention to do so. See "Management and
Accounting Policies." The Board may also adopt additional policies depending
upon the circumstances. Any determination of the Board to modify or rescind such
policies, or to adopt additional policies, including any such decision that
would have disparate impacts upon holders of Marathon Stock or Steel Stock,
would be made by the Board in good faith and in the honest belief that such
decision is in the best interests of all stockholders of USX. In addition,
generally accepted accounting principles require that any change in accounting
policy be preferable (in accordance with such principles) to the policy
previously established.
Limitations on Potential Unsolicited Acquisitions
If the Marathon Group and the U. S. Steel Group were separate companies,
any person interested in acquiring one of them without negotiation with
management could seek to obtain control of it by means of a tender offer or
proxy contest. Because each Group is not a separate company, any person
interested in acquiring only one Group without negotiation with USX management
would be required to seek control of the voting power representing all of the
outstanding capital stock of USX entitled to vote on such acquisition. See
"Limited Separate Voting Rights" above.
Because of fluctuations in the relative Market Values of shares of the
classes of Common Stock, the voting power of a particular stockholder may be
increased or decreased from that held at the time the stockholder acquired the
stock or from that held at the time of the previous vote. The fluctuating voting
powers of the classes of Common Stock may influence a purchaser interested in
acquiring and maintaining control of USX to acquire equivalent holdings in both
classes of Common Stock.
6
<PAGE> 32
Dividends and Earnings Per Share
The Board intends to declare and pay dividends on the Marathon Stock and
Steel Stock based on the financial condition and results of operations of the
respective Group, although it has no obligation under Delaware law to do so.
Subject to any prior rights of the holders of Preferred Stock: (a) dividends on
Marathon Stock will be payable out of legally available funds of USX (as defined
under Delaware law) and (b) dividends on Steel Stock will be payable out of the
lesser of (i) the Available Steel Dividend Amount and (ii) legally available
funds. In making its dividend decisions, the Board will rely on the financial
statements of each Group. In determining its dividend policy, the Board will
consider, among other things, the long-term earnings and cash flow capabilities
of each Group, as well as the dividend policies of similar publicly traded
companies.
The method of calculating earnings per share for the Marathon Stock and the
Steel Stock reflects the Board's intent that the separately reported earnings
and surplus of the Marathon Group and the U. S. Steel Group as determined
consistent with the Certificate of Incorporation, are available for payment of
dividends to the respective classes of stock, although legally available funds
and liquidation preferences of these classes of stock do not necessarily
correspond with these amounts. Dividends on all classes of Preferred Stock and
Common Stock are limited to legally available funds of USX, which are determined
on the basis of the entire Corporation. Distribution on the Marathon Stock and
the Steel Stock would be precluded by a failure to pay dividends on any series
of Preferred Stock. Net losses of either Group as well as dividends and
distributions on either class of Common Stock or any series of Preferred Stock
and repurchases of either class of Common Stock or any series of Preferred
Stock, will reduce the funds of USX legally available for payment of dividends
on both classes of Common Stock.
Under Delaware law, a corporation may declare and pay dividends on its
capital stock either (1) out of its surplus or (2) in case there is no surplus,
out of its net profits for the year in which the dividend is declared and/or the
preceding fiscal year. "Surplus" is the amount by which the total assets of the
corporation exceed total liabilities and capital. Capital for USX is the sum of
(a) the aggregate par value of the outstanding shares of Common Stock (equal to
$1 per share) and (b) the aggregate stated capital of the outstanding shares of
6.50% Convertible Preferred Stock ($1 per share). If the capital of a
corporation is diminished by depreciation in the value of its properties, or by
losses, or otherwise, to an amount less than the aggregate amount of capital
represented by the outstanding stock of all classes having a preference upon the
distribution of assets, dividends may not be paid out of net profits (that is
pursuant to clause (2) above) until the deficiency in capital shall have been
repaired. For purposes of determining surplus, the assets and liabilities of a
corporation are to be valued on the basis of market value.
Potential Effects of Exchange and Redemption of Common Stock
Under various conditions, the Steel Stock may be exchanged, at USX's
option, for shares of Marathon Stock at a 10% premium. Any exchange of Steel
Stock for Marathon Stock would preclude holders of Steel Stock from retaining
their investment in a security reflecting USX's steel and other businesses that
constitute the U. S. Steel Group. See "Description of Capital Stock--Steel
Stock--Exchange and Redemption."
MANAGEMENT AND ACCOUNTING POLICIES
MANAGEMENT POLICIES
The Board has adopted certain policies with respect to the Marathon Group
and the U. S. Steel Group including, without limitation, the intention to: (i)
limit capital expenditures of the U. S. Steel Group over the long term to an
amount equal to the internally generated cash flow of the U. S. Steel Group,
including funds generated by sales of assets of the U. S. Steel Group, (ii) sell
assets and provide services between the groups only on an arm's-length basis and
(iii) treat funds generated by sale of Marathon Stock and Steel Stock and
securities convertible into such stock as assets of the respective Group and
apply such funds to acquire assets or reduce liabilities of the Marathon Group
or the U. S. Steel Group, respectively, as the case may be.
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<PAGE> 33
The above policies may be modified or rescinded in the sole discretion of
the Board without approval of the stockholders, although the Board has no
present intention to do so. The Board may also adopt additional policies
depending upon the circumstances. Any determination of the Board to modify or
rescind such policies, or to adopt additional policies, including any such
decision that would have disparate impacts upon holders of the separate classes
of Common Stock, would be made by the Board in good faith and in the honest
belief that such decision is in the best interest of all stockholders of USX.
ACCOUNTING MATTERS AND POLICIES
USX prepares the Marathon Group and the U. S. Steel Group financial
statements in accordance with generally accepted accounting principles, and
these financial statements (and certain financial information relating to the
Delhi Group), taken together, comprise all of the accounts included in the
corresponding consolidated financial statements of USX. The financial statements
of the Marathon Group and the U. S. Steel Group principally reflect the
financial position and results of operations of the businesses included therein.
Consistent with the Certificate of Incorporation and related policies, such
group financial statements also include portions of USX's corporate assets and
liabilities (including contingent liabilities). Principal corporate activities
attributed to the groups and reflected in their financial statements include
financial activities, corporate general and administrative costs, common stock
transactions and income taxes.
The above policies may be modified or rescinded in the sole discretion of
the Board without approval of the stockholders, although the Board has no
present intention to do so. The Board may also adopt additional policies
depending upon the circumstances. Any determination of the Board to modify or
rescind such policies, or to adopt additional policies, including any such
decision that would have disparate impacts upon holders of the separate classes
of Common Stock, would be made by the Board in good faith and in the honest
belief that such decision is in the best interest of all stockholders of USX. In
addition, generally accepted accounting principles require that any change in an
accounting policy be preferable (in accordance with such principles) to the
previous policy.
DESCRIPTION OF THE DEBT SECURITIES
The Debt Securities will be general unsecured obligations of USX and will
rank pari passu with the other general unsecured obligations of USX. The Debt
Securities will be issued under an Indenture, dated as of March 15, 1993,
between PNC Bank, National Association (the "Trustee") and USX (the
"Indenture"). A copy of the Indenture is filed as an exhibit to the Registration
Statement. The following summaries of certain provisions of the Indenture do not
purport to be complete and are qualified in their entirety by reference to the
provisions of the Indenture, which are incorporated by reference herein. Certain
capitalized terms used herein are defined in the Indenture. The Section numbers
referred to in the following summaries are references to relevant sections of
the Indenture.
GENERAL
The Indenture does not limit the principal amount of Debt Securities or
other indebtedness which may be issued thereunder from time to time by USX and
USX may in the future issue additional Debt Securities (in addition to those
offered hereby) under the Indenture. As of April 30, 1998, an aggregate
principal amount of $1.4 billion of Debt Securities had been issued, and were
outstanding under, the Indenture.
The Debt Securities of any Series may be issued in definitive form or, if
provided in the Prospectus Supplement relating thereto, may be represented in
whole or in part by a Global Security or Securities, registered in the name of a
Depositary designated by USX. Each Debt Security represented by a Global
Security is referred to herein as a "Book-Entry Security."
Debt Securities may be issued from time to time pursuant to this Prospectus
in an aggregate principal amount or initial public offering price of up to
$1,542,569,300 or the equivalent thereof in foreign denominated currency or
units based on or relating to foreign denominated currencies, including European
Currency Units ("ECU"), and will be offered independently or together on terms
determined by market conditions at the
8
<PAGE> 34
time of sale. The Debt Securities may be issued in one or more series with the
same or various maturities and may be sold at par, a premium or an original
issue discount. Debt Securities sold at an original issue discount may bear no
interest or interest at a rate which is below market rates.
Reference is made to the Prospectus Supplement for the specific terms of
the Debt Securities offered hereby, including the following (to the extent
applicable to a particular series of Debt Securities): (i) designation,
aggregate principal amount, purchase price (expressed as a percentage of the
principal amount thereof), and denomination; (ii) date of maturity; (iii) if
other than currency of the United States, the currency or units based on or
relating to currencies for which Debt Securities may be purchased and in which
principal and any premium or interest will or may be payable; (iv) interest rate
or rates (or the manner of calculation thereof), if any; (v) the times at which
any such interest will be payable; (vi) the place or places where principal and
any premium and interest will be payable; (vii) any redemption or sinking fund
provisions or other repayment obligations and any remarketing arrangements
related thereto; (viii) any index used to determine the amount of payment of
principal of and any premium and interest on the Debt Securities; (ix) the
application, if any, of the defeasance provisions to the Debt Securities; (x) if
other than the principal amount thereof, the portion of the principal amount of
the Debt Securities which shall be payable upon declaration of acceleration of
the maturity thereof; (xi) if other than 100% of the principal amount thereof
plus accrued interest, the Change in Control Purchase Price or Prices applicable
to purchases of Debt Securities upon the occurrence of a Change in Control;
(xii) whether the Debt Securities will be issued in whole or in part in the form
of one or more Global Securities and, in such case, the Depositary for such
Global Securities; and (xiii) any other specific terms of the Debt Securities,
including any terms which may be required by or advisable under United States
laws or regulations.
Except with respect to Book-Entry Securities, Debt Securities may be
presented for exchange or registration of transfer, in the manner, at the places
and subject to the restrictions set forth in the Debt Securities and the
Prospectus Supplement. Such services will be provided without charge, other than
any tax or other governmental charge payable in connection therewith, but
subject to the limitations provided in the Indenture. For a description of
payments of principal of and any premium and interest on, and transfer of,
Book-Entry Securities, and exchanges of Global Securities representing
Book-Entry Securities, see "Book-Entry Securities" hereunder.
CERTAIN COVENANTS OF USX
Creation of Certain Liens
If USX or any Subsidiary of USX shall mortgage, pledge, encumber or subject
to a lien (hereinafter to "Mortgage" or a "Mortgage," as the context may
require) as security for any indebtedness for money borrowed (i) any blast
furnace facility or raw steel producing facility, or rolling mills which are a
part of a plant which includes such a facility, or (ii) any property capable of
producing oil or gas; and which, in either case, is located in the United States
and is determined to be a principal property by the Board of Directors of USX in
its discretion, USX will secure or will cause such Subsidiary to secure each
Series of the Debt Securities equally and ratably with all indebtedness or
obligations secured by the Mortgage then being given and with any other
indebtedness of USX or such Subsidiary then entitled thereto; provided, however,
that this covenant shall not apply in the case of: (a) any Mortgage existing on
the date of the Indenture (whether or not such Mortgage includes an
after-acquired property provision); (b) any Mortgage, including a purchase money
Mortgage, incurred in connection with the acquisition of any property (any
Mortgage incurred within 180 days after such acquisition or the completion of
construction shall be deemed to be in connection with such acquisition), the
assumption of any Mortgage previously existing on such acquired property or any
Mortgage existing on the property of any corporation when it becomes a
Subsidiary of USX; (c) any Mortgage on such property in favor of the United
States, or any State, or instrumentality of either, to secure partial, progress
or advance payments to USX or any Subsidiary of USX pursuant to the provisions
of any contract or any statute; (d) any Mortgage on such property in favor of
the United States, any State, or instrumentality of either, to secure borrowings
for the purchase or construction of the property Mortgaged; (e) any Mortgage in
connection with a sale or other transfer of oil or gas in place for a period of
time or in an amount such that the purchaser will realize therefrom a specified
amount of money or specified amount of minerals or any interest in
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property of the character commonly referred to as an "oil payment" or
"production payment"; (f) any Mortgage on any property arising in connection
with or to secure all or any part of the cost of the repair, construction,
improvement, alteration, exploration, development or drilling of such property
or any portion thereof; (g) any Mortgage on any pipeline, gathering system,
pumping or compressor station, pipeline storage facility, other pipeline
facility, drilling equipment, drilling platform, drilling barge, any movable
railway, marine or automotive equipment, gas plant, office building, storage
tank, or warehouse facility, any of which is located on any property included
under clause (ii) above; (h) any Mortgage on any equipment or other personal
property used in connection with any property included under clause (ii) above;
(i) any Mortgage on any property included under clause (ii) above arising in
connection with the sale of accounts receivable resulting from the sale of oil
or gas at the wellhead; or (j) any renewal of or substitution for any Mortgage
permitted under the preceding clauses. Notwithstanding the foregoing, USX may
and may permit its Subsidiaries to grant Mortgages or incur liens on property
covered by the restriction described above so long as the net book value of the
property so encumbered, together with all property subject to the restriction on
certain sale and leasebacks described below, does not at the time such Mortgage
or lien is granted exceed five percent (5%) of Consolidated Net Tangible Assets,
(as such term is defined in the Indenture). (Section 4.03)
"Consolidated Net Tangible Assets" means the aggregate value of all assets
of USX and its subsidiaries after deducting therefrom (a) all current
liabilities (excluding all long-term debt due within one year), (b) all
investments in unconsolidated subsidiaries and all investments accounted for on
the equity basis and (c) all goodwill, patent and trademarks, unamortized debt
discount and other similar intangibles (all determined in conformity with
generally accepted accounting principles and calculated on a basis consistent
with USX's most recent audited consolidated financial statements). (Section
1.01)
As of the date of this Prospectus, neither USX nor any subsidiary of USX
has any property referred to in either clause (i) or (ii) above and in the
following subsection "Limitations on Certain Sales and Leasebacks" which has
been determined by the Board of Directors of USX to be a principal property.
Limitations on Certain Sale and Leasebacks
USX will not, nor will it permit any Subsidiary to, sell or transfer (i)
any blast furnace facility or raw steel producing facility, or rolling mills
which are a part of a plant which includes such a facility, or (ii) any property
capable of producing oil or gas; and which, in either case, is located in the
United States and is determined to be a principal property by the Board of
Directors of USX in its discretion, with the intention of taking back a lease
thereof, provided, however, this covenant shall not apply if (a) the lease is to
a Subsidiary (or to USX in the case of a Subsidiary); (b) the lease is for a
temporary period by the end of which it is intended that the use of the property
by the lessee will be discontinued; (c) USX or a Subsidiary could, in accordance
with Section 4.03, heretofore described, Mortgage such property without equally
and ratably securing the Debt Securities; (d) the transfer is incident to or
necessary to effect any operating, farm out, farm in, unitization, acreage
exchange, acreage contributions, bottom hole or dry hole arrangements or pooling
agreement or any other agreement of the same general nature relating to the
acquisition, exploration, maintenance, development and operation of oil and gas
properties in the ordinary course of business or as required by regulatory
agencies having jurisdiction over the property; or (e) USX promptly informs the
Trustee of such sale, the net proceeds of such sale are at least equal to the
fair value (as determined by resolution adopted by the Board of Directors of
USX) of such property and USX within 180 days after such sale applies an amount
equal to such net proceeds (subject to reduction by reason of credits to which
USX is entitled, under the conditions specified in the Indenture) to the
retirement or in substance defeasance of funded debt of USX or a Subsidiary.
(Section 4.04)
Merger and Consolidation
USX will not merge or consolidate with any other corporation or sell or
convey all or substantially all of its assets to any person, firm or
corporation, except that USX may merge or consolidate with, or sell or convey
all or substantially all of its assets to, any other corporation, provided that
(i) USX shall be the continuing corporation or the successor corporation (if
other than USX, as the case may be) shall be a corporation organized and
existing under the laws of the United States of America or a State thereof and
such corporation
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shall expressly assume the due and punctual payment of the principal of and any
premium and interest on all the Debt Securities, according to their tenor, and
the due and punctual performance and observance of all of the covenants and
conditions of the Indenture to be performed by USX and (ii) USX or such
successor corporation, as the case may be, shall not, immediately after such
merger, consolidation, sale or conveyance, be in default in the performance of
any such covenant or condition and no event which with the lapse of time, the
giving of notice or both would constitute an Event of Default shall have
occurred and be continuing. (Section 11.01)
If upon any consolidation or merger of USX with or into any other
corporation, or upon any sale or conveyance of substantially all of the
properties of USX, or upon any acquisition by USX of all or any part of the
property of another corporation, any property owned immediately prior thereto
would thereupon become subject to any mortgage, lien, pledge, charge or
encumbrance, USX, prior to such event, will secure the Debt Securities (equally
and ratably with any other indebtedness of USX secured thereby) by a lien on all
of such property of USX, prior to all liens, charges and encumbrances other than
any theretofore existing thereon. (Section 11.03)
PURCHASE OF DEBT SECURITIES UPON A CHANGE IN CONTROL
In the event of any Change in Control (as defined below) of USX, each
holder of Debt Securities will have the right, at that holder's option, subject
to the terms and conditions of the Indenture, to require USX to become obligated
to purchase all of that holder's Debt Securities on the date that is 35 Business
Days after the occurrence of such Change in Control (the "Change in Control
Purchase Date") at a cash price equal to (i) unless otherwise specified in the
terms of such Debt Securities, 100% of the principal amount thereof, together
with accrued interest to such Change in Control Purchase Date (except that
interest installments due prior to such Change in Control Purchase Date will be
payable to the holders of such Debt Securities of record at the close of
business on the relevant record dates according to their terms and the
provisions of the Indenture), or (ii) such other price or prices as may be
specified in the terms of such Debt Securities (the "Change in Control Purchase
Prices"). (Section 4.07)
Within 15 Business Days after a Change in Control, USX is obligated to mail
to the Trustee and to all holders of Debt Securities of any Series at their
addresses shown in the Debt Security register (and to beneficial owners as
required by applicable law) a notice regarding the Change in Control, stating,
among other things: (i) the last date on which the Change in Control purchase
right may be exercised, (ii) the Change in Control Purchase Price, (iii) the
Change in Control Purchase Date, (iv) the name and address of the Paying Agent,
and (v) the procedures that holders must follow to exercise these rights. USX
will cause a copy of such notice to be published in a daily newspaper of
national circulation. (Section 4.07)
To exercise this right, a holder of Debt Securities of any Series must
deliver a Change in Control Purchase Notice to the Paying Agent for that Series
at its address set forth in USX's notice regarding the Change in Control at any
time prior to the close of business on the Change in Control Purchase Date. The
Change in Control Purchase Notice shall state (i) the certificate numbers of the
Debt Securities to be delivered by the holder thereof for purchase by USX and
(ii) that such Debt Securities are to be purchased by USX pursuant to the
applicable provisions of the Debt Securities and USX's notice regarding the
Change in Control. (Section 4.07)
Upon receipt by USX of the Change in Control Purchase Notice, the holder of
the Debt Security in respect of which such notice was given shall (unless such
notice is withdrawn as specified in the Indenture) thereafter be entitled to
receive solely the Change in Control Purchase Price with respect to such Debt
Security. Any Change in Control Purchase Notice may be withdrawn by the holder
of Debt Securities of any Series by a written notice of withdrawal delivered to
the Paying Agent for that Series at any time prior to the close of business on
the Change in Control Purchase Date. The notice of withdrawal shall state the
certificate numbers of the Debt Securities as to which the withdrawal notice
relates. (Section 4.08)
Payment of the Change in Control Purchase Price for a Debt Security of any
Series for which a Change in Control Purchase Notice has been delivered and not
withdrawn is conditioned upon delivery of such Debt Security (together with
necessary endorsements) to the Paying Agent for that Series at its address set
forth in
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USX's notice regarding the Change in Control, at any time (whether prior to, on
or after the Change in Control Purchase Date) after the delivery of such Change
in Control Purchase Notice. (Section 4.07) Payment of the Change in Control
Purchase Price for such Debt Security will be made promptly following the later
of the Change in Control Purchase Date or the time of delivery of such Debt
Security. (Section 4.08)
Under the Indenture, a "Change in Control" of USX is deemed to have
occurred at such time as (i) any "person" or "group" of persons (excluding USX,
any Subsidiary, any employee stock ownership plan or any other employee benefit
plan of USX) shall have acquired "beneficial ownership" (within the meaning of
Section 13(d) or 14(d) of the Exchange Act and the applicable rules and
regulations thereunder) of shares of Voting Stock representing at least 35% of
the outstanding Voting Power of USX, (ii) during any period of twenty-five
consecutive months, commencing before or after the date of the Indenture,
individuals who at the beginning of such twenty-five month period were directors
of USX (together with any replacement or additional directors whose election was
recommended by incumbent management of USX or who were elected by a majority of
directors then in office) cease to constitute a majority of the board of
directors of USX, or (iii) any person or group of related persons shall acquire
all or substantially all of the assets of USX; provided, that a Change in
Control shall not be deemed to have occurred pursuant to clause (iii) above if
USX shall have merged or consolidated with or transferred all or substantially
all of its assets to another corporation in compliance with the provisions of
Section 11.01 of the Indenture (relating to when USX may merge or transfer
assets) and the surviving or successor or transferee corporation is no more
leveraged than was USX immediately prior to such event. For purposes of this
definition, the term "leveraged" when used with respect to any corporation shall
mean the percentage represented by the total assets of that corporation divided
by its stockholders' equity, in each case determined and as would be shown in a
consolidated balance sheet of such corporation prepared in accordance with
generally accepted accounting principles in the United States of America. The
term "substantially all" in clause (iii) above has not been quantified for
purposes of defining Change in Control and, depending upon the factual
circumstances, there may be uncertainty as to when a Change in Control has
occurred for purposes of determining the rights of holders of Debt Securities
pursuant to this provision.
Notwithstanding the foregoing, a Change in Control will not be deemed to
have occurred by virtue of (i) USX, any Subsidiary of USX, any employee stock
ownership plan or any other employee benefit plan of USX or any such Subsidiary,
or any Person holding Voting Stock for or pursuant to the terms of any such
employee benefit plan, acquiring beneficial ownership of shares of Voting Stock,
whether representing 35% or more of the outstanding Voting Power of USX or
otherwise or (ii) any Person whose ownership of shares of Voting Stock
representing 35% or more of the outstanding Voting Power of USX results solely
from USX's calculation from time to time of the relative voting rights of
Marathon Stock and Steel Stock.
"Voting Stock" means stock of USX of any class or classes (however
designated) having ordinary voting power for the election of the directors of
USX, other than stock having such power only by reason of the happening of a
contingency. "Voting Power" means the total voting power represented by all
outstanding shares of all classes of Voting Stock. (Section 4.07)
In the event a Change in Control occurs, USX intends to comply with any
applicable securities laws or regulations, including any applicable requirements
of Rule 14e-1 under the Exchange Act. The Change in Control purchase feature of
the Debt Securities may in certain circumstances make more difficult or
discourage a takeover of USX. The Change in Control purchase feature, however,
is not the result of management's knowledge of any specific effort to accumulate
shares of Common Stock or to obtain control of USX by means of a merger, tender
offer, solicitation or otherwise, or part of a plan by management to adopt a
series of anti-takeover provisions. The Change in Control purchase feature is
similar to that contained in other debt offerings of USX as a result of
negotiations between USX and the underwriters thereof.
Except as described above, the Change in Control purchase feature does not
afford holders of the Debt Securities protection against possible adverse
effects of a reorganization, restructuring, merger or similar transaction
involving USX.
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Although USX's existing indebtedness does not limit USX's ability to
purchase Debt Securities, USX's ability to purchase Debt Securities in the
future may be limited by the terms of any then existing borrowing arrangements
and by its financial resources.
EVENTS OF DEFAULT
An Event of Default with respect to Debt Securities of any Series is
defined in the Indenture as being: (i) default in the payment of the principal
of or premium, if any, on any of the Debt Securities of such Series when due and
payable; (ii) default in the payment of interest on the Debt Securities of such
Series when due, continuing for 30 days; (iii) default in the payment of the
Change in Control Purchase Price of any of the Debt Securities of such Series as
and when the same shall become due and payable; (iv) default in the deposit of
any sinking fund payment with respect to any Debt Security of such Series when
due; (v) failure by USX in the performance of any other covenant or agreement in
the Debt Securities of such Series or in the Indenture continued for a period of
90 days after notice of such failure as provided in the Indenture; (vi) certain
events of bankruptcy, insolvency, or reorganization with respect to USX; or
(vii) any other Event of Default provided with respect to Debt Securities of
that Series. (Section 6.01)
USX is required annually to deliver to the Trustee officers' certificates
stating whether or not the signers have any knowledge of any default in the
performance by USX of certain covenants. (Section 4.06)
In case an Event of Default shall occur and be continuing with respect to
any Series, the Trustee or the holders of not less than 25% in principal amount
of the Debt Securities of such Series then outstanding may declare the Debt
Securities of such Series to be due and payable. (Section 6.01) The Trustee is
required to give holders of the Debt Securities of any Series written notice of
a default with respect to such Series as and to the extent provided by the Trust
Indenture Act. (Section 6.07)
If, however, at any time after the Debt Securities of such Series have been
declared due and payable, and before any judgment or decree for the moneys due
has been obtained or entered, USX shall pay or deposit with the Trustee amounts
sufficient to pay all matured installments of interest upon the Debt Securities
of such Series and the principal of all Debt Securities of such Series which
shall have become due, otherwise than by acceleration, together with interest on
such principal and, to the extent legally enforceable, on such overdue
installments of interest and all other amounts due under the Indenture shall
have been paid, and any and all defaults with respect to such Series under the
Indenture shall have been remedied, then the holders of a majority in aggregate
principal amount of the Debt Securities of such Series then outstanding, by
written notice to USX and the Trustee, may waive all defaults with respect to
such Series and rescind and annul the declaration that the Debt Securities of
such Series are due and payable. (Section 6.01) In addition, prior to any such
declaration that the Debt Securities of such Series are due and payable, the
holders of a majority in aggregate principal amount of the Debt Securities of
such Series may waive any past default and its consequences with respect to such
Series, except a default in the payment of the principal of or any premium or
interest on any Debt Securities of such Series. (Section 6.06)
The Trustee is under no obligation to exercise any of the rights or powers
under the Indenture at the request, order or direction of any of the holders of
Debt Securities, unless such holders shall have offered to the Trustee
reasonable security or indemnity. (Section 7.02) Subject to such provisions for
the indemnification of the Trustee and certain limitations contained in the
Indenture, the holders of a majority in aggregate principal amount of the Debt
Securities of each Series at the time outstanding shall have the right to direct
the time, method and place of conducting any proceeding for any remedy available
to the Trustee, or exercising any trust or power conferred on the Trustee, with
respect to the Debt Securities of such Series. (Section 6.06)
MODIFICATION OF THE INDENTURE
The Indenture contains provisions permitting USX and the Trustee to modify
the Indenture or enter into or modify any supplemental indenture without the
consent of the holders of the Debt Securities in regard to matters as shall not
adversely affect the interests of the holders of the Debt Securities, including,
without limitation, the following: (a) to evidence the succession of another
corporation to USX; (b) to add to the covenants of USX further covenants,
restrictions, conditions or provisions for the benefit or protection of the
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holders of any or all Series of Debt Securities or to surrender any right or
power conferred upon USX by the Indenture; (c) to cure any ambiguity or to
correct or supplement any provision of the Indenture (or supplements) which may
be defective or inconsistent with any other provision in the Indenture (or
supplements); to convey, transfer, assign, mortgage or pledge any property to or
with the Trustee; or to make such other provisions in regard to matters or
questions arising under the Indenture as shall not adversely affect the
interests of the holders of the Debt Securities then outstanding; (d) to add to,
change or eliminate any of the provisions of the Indenture in respect of one or
more Series of Debt Securities thereunder, under certain conditions specified
therein; (e) to evidence the appointment of a successor trustee and to add to or
change provisions of the Indenture necessary to provide for or facilitate the
administration of the trusts under the Indenture by more than one trustee; (f)
to set forth the form and any terms of any Series of Debt Securities which USX
and the Trustee deem necessary or desirable to include in a supplemental
indenture; and (g) to add to or change any of the provisions of the Indenture to
such extent as shall be necessary or desirable to permit or facilitate the
issuance of Debt Securities in bearer form, registrable or not registrable as to
principal, and with or without interest coupons. USX and the Trustee may
otherwise modify the Indenture or any supplemental indenture with the consent of
the holders of not less than 66 2/3% in aggregate principal amount of each
Series of Debt Securities affected thereby at the time outstanding, except that
no such modifications shall (i) extend the fixed maturity of any Debt
Securities, or reduce the principal amount thereof or reduce the rate or extend
the time of payment of any premium or interest thereon, or change the currency
in which the Debt Securities are payable, without the consent of the holder of
each Debt Security so affected, or (ii) reduce the aforesaid percentage of Debt
Securities of any Series, the consent of the holders of which is required for
any such modifications or supplemental indenture, without the consent of the
holders of all Debt Securities affected thereby then outstanding. (Article Ten)
SATISFACTION AND DISCHARGE; DEFEASANCE AND COVENANT DEFEASANCE
The Indenture shall be satisfied and discharged if (i) USX shall deliver to
the Trustee all Debt Securities then outstanding for cancellation or (ii) all
Debt Securities shall have become due and payable or are to become due and
payable within one year and USX shall deposit an amount sufficient to pay the
principal, premium, if any, and interest to the date of maturity, provided that
in either case USX shall have paid all other sums payable under the Indenture.
(Section 12.01)
The Indenture provides, if such provision is made applicable to the Debt
Securities of a Series, that USX may elect either (A) to defease and be
discharged from any and all obligations with respect to any Debt Security of
such Series (except for the obligations to register the transfer or exchange of
such Debt Security, to replace temporary or mutilated, destroyed, lost or stolen
Debt Securities, to maintain an office or agency in respect of the Debt
Securities and to hold moneys for payment in trust) ("defeasance") or (B) to be
released from its obligations with respect to such Debt Security under Sections
4.03, 4.04, 4.07, 4.09, 11.01 and 11.03 of the Indenture (being the restrictions
described above under "Certain Covenants of USX" and USX's obligations described
under "Purchase of Debt Securities upon a Change in Control") and (ii) that
Sections 6.01(d), 6.01(e) (as to Sections 4.03, 4.04, 4.07, 4.09, 11.01 and
11.03) and 6.01(h), as described in clauses (iv), (v) and (vii) under "Events of
Default" above, shall not be deemed to be Events of Default under the Indenture
with respect to such Series ("covenant defeasance"), upon the deposit with the
Trustee (or other qualifying trustee), in trust for such purpose, of money
and/or Government Obligations (as defined) which through the payment of
principal and interest in accordance with their terms will provide money, in an
amount sufficient to pay the principal of (and premium, if any) and interest on
such Debt Security, on the scheduled due dates therefor. In the case of
defeasance, the holders of such Debt Securities are entitled to receive payments
in respect of such Debt Securities solely from such Trust. Such a trust may only
be established if, among other things, USX has delivered to the Trustee an
Opinion of Counsel (as specified in the Indenture) to the effect that the
holders of the Debt Securities affected thereby will not recognize income, gain
or loss for Federal income tax purposes as a result of such defeasance or
covenant defeasance and will be subject to Federal income tax on the same
amounts, in the same manner and at the same times as would have been the case if
such defeasance or covenant defeasance had not occurred. Such Opinion of
Counsel, in the case of defeasance under clause (A) above, must refer to and be
based upon a ruling of the Internal Revenue Service or a change in applicable
Federal income tax law occurring after the date of the Indenture. (Section
12.02)
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RECORD DATES
The Indenture provides that in certain circumstances USX or the Trustee may
establish a record date for determining the holders of outstanding Debt
Securities of a Series entitled to join in the giving of notice or the taking of
other action under the Indenture by the holders of the Debt Securities of such
Series.
BOOK-ENTRY SECURITIES
The following description of Book-Entry Securities will apply to any Series
of Debt Securities issued in whole or in part in the form of a Global Security
or Securities except as otherwise provided in the Prospectus Supplement relating
thereto.
Upon issuance, all Book-Entry Securities of like tenor and having the same
date of original issue will be represented by a single Global Security. Each
Global Security representing Book-Entry Securities will be deposited with, or on
behalf of, the Depositary, which will be a clearing agent registered under the
Exchange Act. The Global Security will be registered in the name of the
Depositary or a nominee of the Depositary.
Ownership of beneficial interest in a Global Security representing
Book-Entry Securities will be limited to institutions that have accounts with
the Depositary or its nominee ("participants") or persons that may hold
interests through participants. In addition, ownership of beneficial interests
by participants in such a Global Security will only be evidenced by, and the
transfer of that ownership interest will only be effected through, records
maintained by the Depositary or its nominee for such Global Security. Ownership
of beneficial interest in such a Global Security by persons that hold through
participants will only be evidenced by, and the transfer of that ownership
interest within such participant will only be effected through, records
maintained by such participant. The laws of some jurisdictions require that
certain purchasers of securities take physical delivery of such securities in
definitive form. Such laws may impair this ability to transfer beneficial
interests in such a Global Security.
Payment of principal of and any premium and interest on Book-Entry
Securities represented by any Global Security registered in the name of or held
by the Depositary or its nominee will be made to the Depositary or its nominee,
as the case may be, as the registered owners and holder of the Global Security
representing such Book-Entry Securities. None of USX, the Trustee or any agent
of USX or the Trustee will have any responsibility or liability for any aspect
of the Depositary's records or any participant's records relating to or payments
made on account of beneficial ownership interests in a Global Security
representing such Book-Entry Securities or for maintaining, supervising or
reviewing any of the Depositary's records or any participant's records relating
to such beneficial ownership interests. Payments by participants to owners of
beneficial interests in a Global Security held through such participants will be
governed by the Depositary's procedures, as is now the case with securities held
for the accounts of customers registered in "street name," and will be the sole
responsibility of such participants.
No Global Security may be transferred except as a whole by the Depositary
for such Global Security to a nominee of the Depositary or by a nominee of the
Depositary to the Depositary or another nominee of the Depositary.
A Global Security representing Book-Entry Securities of any Series is
exchangeable for definitive Debt Securities of such Series in registered form,
of like tenor and of an equal aggregate principal amount, only if (a) the
Depositary notifies USX that it is unwilling or unable to continue as Depositary
for such Global Security or the Depositary ceases to be a clearing agency
registered under the Exchange Act, (b) USX in its sole discretion determines
that such Global Security shall be exchangeable for definitive Debt Securities
in registered form, or (c) there shall have occurred and be continuing an Event
of Default with respect to the Debt Securities of that Series. Any Global
Security that is exchangeable pursuant to the preceding sentence shall be
exchangeable in whole for definitive Debt Securities in registered form, of like
tenor and of an equal aggregate principal amount, and in the authorized
denominations for that Series. Such definitive Debt Securities shall be
registered in the name or names of such person or persons as the Depositary
shall instruct the Trustee. It is expected that such instructions may be based
upon directions received by the Depositary from its participants with respect to
ownership of beneficial interests in such Global Security.
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Except as provided above, owners of beneficial interests in such Global
Security will not be entitled to receive physical delivery of Debt Securities in
definitive form and will not be considered the holders thereof for any purpose
under the Indenture, and no Global Security representing Book-Entry Securities
shall be exchangeable, except for another Global Security of like denomination
and tenor to be registered in the name of the Depositary or its nominee.
Accordingly, each person owning a beneficial interest in such Global Security
must rely on the procedures of the Depositary and, if such person is not a
participant, on the procedures of the participant through which such person owns
its interest, to exercise any rights of a holder under the Indenture. USX
understands that under existing industry practices, in the event that USX
requests any action of holders or an owner of a beneficial interest in such
Global Security desires to give or take any action that a holder is entitled to
give or take under the Indenture, the Depositary would authorize the
participants holding the relevant beneficial interests to give or take such
action, and such participants would authorize beneficial owners owning through
such participant to give or take such action or would otherwise act upon the
instructions of beneficial owners owning through them.
CONCERNING THE TRUSTEE
PNC Bank, National Association is also trustee for Marathon Oil Company's
7% Monthly Interest Guaranteed Notes Due 2002, which are guaranteed by USX, for
fourteen series of obligations issued by various governmental authorities
relating to environmental projects at various USX facilities, for an aggregate
principal amount of $1.3 billion of debt securities issued by USX under an
Indenture between USX and the Trustee dated July 1, 1991 and for $1.4 billion of
Debt Securities which have heretofore been issued by USX under the Indenture.
USX and its subsidiaries maintain ordinary banking relationships, including
loans and deposit accounts, with PNC Bank, National Association and anticipate
that they will continue to do so.
DESCRIPTION OF CAPITAL STOCK
The following is a description of the terms of the capital stock of USX
included in the Certificate of Incorporation. This description does not purport
to be complete and is qualified in its entirety by reference to the Certificate
of Incorporation, and the Amended and Restated Rights Agreement (the "Restated
Rights Agreement") between USX and Mellon Bank, N.A., as Rights Agent (the
"Rights Agent"), which have been filed as exhibits to the Registration Statement
of which this Prospectus is a part.
GENERAL
The authorized capital stock of USX consists of (i) 40 million shares of
preferred stock, without par value (the "Preferred Stock"), of which three
million shares are designated as 6.50% Cumulative Convertible Preferred Stock
("6.50% Convertible Preferred Stock") and eight million shares are designated as
Series A Junior Preferred Stock, (ii) 550 million shares of a class of common
stock designated as USX-Marathon Group Common Stock, par value $1.00 per share,
(iii) 200 million shares of a class of common stock designated as USX-U. S.
Steel Group Common Stock, par value $1.00 per share and (iv) 50 million shares
of a class of common stock designated as USX-Delhi Group Common Stock, par value
$1.00 per share.
As of June 30, 1998, there were 2,961,887 shares of 6.50% Convertible
Preferred Stock, 290,265,145 shares of Marathon Stock, 87,291,033 shares of
Steel Stock and no shares of USX-Delhi Group Common Stock issued and
outstanding. Effective January 26, 1998, all of the outstanding USX-Delhi Group
Common Stock was redeemed in connection with the sale of the Delhi Companies,
and therefore, such stock is not discussed further in this description of
Capital Stock. No shares of Series A Junior Preferred Stock are outstanding.
Additionally, there were 3,937,163 of the 6.75% Convertible Junior Subordinated
Debentures due 2037 outstanding as of June 30, 1998 convertible into 4,256,073
shares of Steel Stock, subject to adjustment in certain circumstances.
As used herein:
"Disposition" shall mean the sale, transfer, assignment or other
disposition (whether by merger, consolidation, sale or contribution of
assets or stock or otherwise) of properties or assets.
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"Marathon Group" means, at any time, (x) all businesses in which any
of Marathon Oil Company, Texas Oil & Gas Corp., Carnegie Natural Gas
Company and Apollo Gas Company (or any of their predecessors or successors)
is or has been engaged, directly or indirectly, other than the businesses
of the Delhi Group after October 2, 1992 (the date of first issuance of
USX-Delhi Group Common Stock), (y) all assets and liabilities of USX to the
extent attributed to any of such businesses, whether or not such assets or
liabilities are or were assets or liabilities of such companies and (z)
such businesses, assets and liabilities acquired by USX for the Marathon
Group after May 6, 1991, as determined by the Board to be included in the
Marathon Group.
"Market Value" of either class of Common Stock on any Business Day
means the average of the high and low reported sales prices regular way of
a share of such class on such Business Day or, in case no such reported
sale takes place on such Business Day, the average of the reported closing
bid and asked prices regular way of a share on such class on such Business
Day, in either case on the Composite Tape, or if the shares of such class
are not listed or admitted to trading on the NYSE on such Business Day, on
specified alternative markets, or, if not listed or admitted to trading on
such markets, the market value as determined by the Board, subject to
adjustments necessary to reflect any dividends (other than regular cash
dividends) or distributions on, or subdivisions or combinations of,
outstanding shares of such class.
"Business Day" means each weekday other than any day on which any
relevant class of Common Stock is not traded on any national securities
exchange or the National Association of Securities Dealers Automated
Quotations National Market System or in the over-the-counter market.
"Net Proceeds," as of any date, from any Disposition of any of the
properties and assets of the U. S. Steel Group shall mean an amount, if
any, equal to the gross proceeds of such Disposition after payment of, or
reasonable provision for (i) any taxes payable by USX in respect of such
Disposition, (ii) any taxes payable by USX in respect of any dividend or
redemption pursuant to a dividend or redemption paid to holders of Steel
Stock in connection with such Disposition, (iii) any transaction costs,
including, without limitation, any legal, investment banking and accounting
fees and expenses and (iv) any liabilities (contingent or otherwise) of, or
allocated to, the U. S. Steel Group including, without limitation any
indemnity obligations incurred in connection with the Disposition. For
purposes of this definition, any properties and assets of the U. S. Steel
Group remaining after such Disposition shall constitute "reasonable
provision" for such amount of taxes, costs and liabilities (contingent or
otherwise) as can be supported by such properties and assets. To the extent
the proceeds of any Disposition include any securities or other property
other than cash, the Board of Directors shall determine the value of such
securities or property.
"U. S. Steel Group" means, at any time, all of the businesses in which
USX is or has been engaged, directly or indirectly, and all assets and
liabilities of USX, other than any businesses, assets or liabilities of the
Marathon Group if any shares of Marathon Stock are outstanding.
PREFERRED STOCK
The authorized Preferred Stock may be issued without the approval of the
holders of Common Stock in one or more series, from time to time, with each such
series to have such designation, powers, preferences and relative,
participating, optional or other special rights, and qualifications, limitations
or restrictions thereof, as shall be stated in a resolution providing for the
issue of any such series adopted by the Board and as described in the
appropriate Prospectus Supplement (if any). The future issuance of Preferred
Stock may have the effect of delaying, deferring or preventing a change in
control of USX.
Holders of the 6.50% Convertible Preferred Stock are entitled to receive
cumulative dividends, to be declared and paid before declaration and payment of
dividend on USX's common stock, at the rate of 6.50% per annum. The 6.50%
Convertible Preferred Stock was not redeemable prior to April 1, 1996, except as
described below. On and after such date, the 6.50% Convertible Preferred Stock
is redeemable at the option of USX under certain circumstances, in whole or in
part, for cash, currently at a price of $51.625 per share, and at prices
declining annually on each April 1 to an amount equal to $50.00 per share on and
after April 1, 2003, plus, in each case, an amount equal to accrued and unpaid
dividends to the redemption date. If USX
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exchanges all of the outstanding Steel Stock for shares of a wholly owned
subsidiary of USX to which all of the assets and liabilities of the U. S. Steel
Group have been transferred, pays a dividend on or redeems shares of Steel Stock
with the Net Proceeds from the Disposition of all or substantially all of the
assets of the U. S. Steel Group, pays a dividend on, or USX or any of its
subsidiaries consummates a tender or exchange offer for, Steel Stock, and the
aggregate amount of such dividend or the consideration paid in such tender or
exchange offer is an amount equal to all or substantially all of the assets, the
6.50% Convertible Preferred Stock is required to be redeemed, in whole, for
$50.00 per share, plus dividends accrued and unpaid to the redemption date. The
6.50% Convertible Preferred Stock is required to be redeemed under certain other
limited circumstances. The 6.50% Convertible Preferred Stock will not be
entitled to the benefit of any sinking fund.
Shares of the 6.50% Convertible Preferred Stock are convertible at any time
at the option of the holder, unless previously redeemed, into shares of Steel
Stock, at a conversion price of $46.125 per share of Steel Stock (equivalent to
a conversion rate of 1.084 shares of Steel Stock for each share of 6.50%
Convertible Preferred Stock), subject to adjustment in certain circumstances.
The holders of the 6.50% Convertible Preferred Stock have no vote except
certain class votes in limited circumstances. Upon the dissolution, liquidation
or winding-up of USX, the holders of the 6.50% Convertible Preferred Stock are
entitled to receive out of the assets of USX available for distribution to
stockholders, before any payment or distribution shall be made on Common Stock
or any other class of stock ranking junior to such series upon liquidation, the
amount of $50 per share plus all accrued and unpaid dividends thereon.
MARATHON STOCK
DIVIDENDS--DIVIDENDS ON THE MARATHON STOCK ARE INTENDED TO BE PAID BASED ON
THE FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF THE MARATHON GROUP.
Subject to any prior rights of the holders of the Preferred Stock,
dividends may be paid on the Marathon Stock as determined by the Board out of
funds of USX legally available therefor.
The Board may, in its sole discretion, declare and pay dividends
exclusively on the Marathon Stock, or exclusively on the Steel Stock, or on both
classes in equal or unequal amounts, notwithstanding the respective amount of
funds available for dividends on each class, the respective voting and
liquidation rights of each class, the amount or prior dividends declared on each
class or any other factor.
EXCHANGE AND REDEMPTION--MARATHON STOCK MAY BE EXCHANGED FOR SHARES OF A
SUBSIDIARY OF USX TO WHICH USX WOULD HAVE TRANSFERRED ALL OF THE ASSETS AND
LIABILITIES OF THE MARATHON GROUP.
At any time after the transfer of all the assets and liabilities of the
Marathon Group to a wholly-owned subsidiary of USX (the "Marathon Group
Subsidiary"), the Board may, in its sole discretion and by a majority vote of
the directors then in office, provided that there are funds of USX legally
available therefor, exchange all of the outstanding shares of Marathon Stock for
all of the outstanding shares of the common stock of the Marathon Group
Subsidiary (the "Marathon Group Subsidiary Stock"), on a pro rata basis.
General Redemption Provisions: In the event of any exchange or redemption
of a class of Common Stock, USX shall cause to be given to each holder of such
Common Stock a notice stating (A) that shares of such Common Stock shall be
exchanged or redeemed, as the case may be, (B) the date of the exchange or
redemption, (C) in the event of a partial redemption, the number of shares of
Steel Stock to be redeemed, (D) the kind and amount of shares of capital stock
or cash and/or securities or other property to be received by such holder with
respect to each share of such class of Common Stock held by such holder,
including details as to the calculation thereof, (E) the place or places where
certificates for shares of such class of Common Stock, properly endorsed or
assigned for transfer (unless USX waives such requirement), are to be
surrendered for delivery of certificates for shares of such capital stock or
cash and/or securities or other property and (F) that, except as provided in the
second following paragraph, dividends on such shares of Common Stock will cease
to be paid as of such exchange date or redemption date. Such notice shall be
sent by first-class mail, postage prepaid, not less than 30 nor more than 60
days prior to the exchange date or redemption date, as the case may be, and in
any case to each holder of such class of Common Stock to be
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exchanged or redeemed, at such holder's address as the same appears on the stock
transfer books of USX. Neither the failure to mail such notice to any particular
holder of such class of Common Stock nor any defect therein shall affect the
sufficiency thereof with respect to any other holder of such class of Common
Stock.
If less than all of the outstanding shares of Steel Stock are to be
redeemed, such shares shall be redeemed by USX pro rata among the holders of
such class of Common Stock or by such other method as may be determined by the
Board to be equitable.
No adjustments in respect of dividends shall be made upon the exchange or
redemption of any shares of any class of Common Stock; provided, however, that
if such shares are exchanged or redeemed by USX after the record date for
determining holders of such class of Common Stock entitled to any dividend or
distribution thereon, such dividend or distribution shall be payable to the
holders of such shares at the close of business on such record date
notwithstanding such exchange or redemption.
Before any holder of shares of any class of Common Stock shall be entitled
to receive certificates representing shares of any kind of capital stock or cash
and/or securities or other property to be received by such holder with respect
to any exchange or redemption of such class of Common Stock, such holder shall
surrender at such office as USX shall specify certificates for such shares of
such class of Common Stock, properly endorsed or assigned for transfer (unless
USX shall waive such requirement). As soon as practicable after surrender of
certificates for shares of such class of Common Stock, USX will deliver to the
holder of such shares so surrendered the certificates representing the number of
whole shares of the kind of capital stock or cash and/or securities or other
property to which such holder is entitled, together with any fractional payment
referred to below. If less than all of the shares of such class of Common Stock
represented by any one certificate are to be redeemed, USX will issue and
deliver a new certificate for the shares of such class of Common Stock not
redeemed.
USX shall not be required to issue or deliver fractional shares of any
class of capital stock or any fractional securities to any holder of any class
of Common Stock upon any exchange, redemption, dividend or other distribution.
If more than one share of such class of Common Stock shall be held at the same
time by the same holder, USX may aggregate the number of shares of any class of
capital stock that shall be issuable or the amount of securities that shall be
deliverable to such holder upon any exchange, redemption, dividend or other
distribution (including any fractions of shares or securities). If the number of
shares of any class of capital stock or the amount of securities remaining to be
issued or delivered to any holder of any class of Common Stock is a fraction,
USX shall, if such fraction is not issued or delivered to such holder, pay a
cash adjustment in respect of such fraction in an amount equal to the fair
market value of such fraction on the fifth Business Day prior to the date such
payment is to be made. For purposes of the preceding sentence, "fair market
value" of any fraction shall be (i) in the case of any fraction of a share of
capital stock of USX, the product of such fraction and the Market Value of one
share of such capital stock and (ii) in the case of any other fractional
security, such value as is determined by the Board.
VOTING--SHARES OF MARATHON STOCK SHALL HAVE ONE VOTE PER SHARE. SHARES OF
STEEL STOCK WILL, WHEN VOTING WITH THE OTHER CLASS OF COMMON STOCK (MARATHON
STOCK), HAVE A NUMBER OF VOTES PER SHARE BASED UPON THE TIME WEIGHTED AVERAGE
RATIOS OF THE MARKET VALUE OF A SHARE OF STEEL STOCK TO THE MARKET VALUE OF A
SHARE OF MARATHON STOCK.
Except as set forth below and under "Steel Stock--Voting," holders of both
classes of Common Stock vote together as a single class on all matters as to
which all holders of Common Stock are entitled to vote. On all matters to be
voted on by the holders of both classes of Common Stock together as a single
class, (i) each share of outstanding Marathon Stock has one vote and (ii) each
share of Steel Stock has a number of votes equal to the quotient (calculated to
the nearest three decimal places), as of the fifth Business Day prior to the
applicable record date, of (A) the sum of (1) four times the average ratio of
X/Y for the five-Business Day period ending on such fifth Business Day, (2)
three times the average ratio of X/Y for the next preceding five-Business Day
period, (3) two times the average ratio of X/Y for the next preceding
five-Business Day period and (4) the average ratio of X/Y for the next preceding
five-Business Day period, divided by (B) ten, where X is the Market Value of the
Steel Stock and Y is the Market Value of the Marathon Stock. If shares of only
one class of Common Stock are outstanding, each share of that class shall have
one vote.
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Assuming that the time weighted averages of the Market Values of Marathon
Stock and Steel Stock were $33 and $32, respectively, the per share voting
rights of Marathon Stock and Steel Stock would be one vote and 0.970 votes per
share, respectively. If the Marathon Stock and the Steel Stock had such per
share voting rights as of June 30, 1998, the holders of Marathon Stock and Steel
Stock would have approximately 77% and 23%, respectively, of the total voting
power of USX.
In addition, the approval of the holders of at least 66 2/3% of the
outstanding Marathon Stock, voting as a separate class, shall be necessary for:
(i) the declaration or payment of any dividend, or the making of any
other payment or distribution on or with respect to, any shares of any
other class of Common Stock, if such dividend, payment or distribution is
to be made with (A) proceeds from the sale, transfer, assignment or other
disposition (whether by merger, consolidation, sale or contribution of
assets or stock or otherwise) (a "Disposition") of any of the properties
and assets of the Marathon Group or (B) any portion of an equity interest
in a person, entity or group that owns any of the properties and assets of
the Marathon Group; or
(ii) the use, or reservation for use, of any proceeds from the
Disposition of any of the properties and assets of the Marathon Group, or
any of the properties and assets acquired with such proceeds, in any
business of the Corporation other than the Marathon Group.
Notwithstanding the foregoing, however, such vote shall not be required if such
proceeds are loaned at a rate or rates representative of actual borrowings and
short-term investments by USX.
The vote or consent of the holders of a majority of all of the outstanding
shares of any class of Common Stock, voting as a separate class, is currently
required under Delaware law for any amendment to the Certificate of
Incorporation that would increase or decrease the par value of the shares of
such class or alter or change the powers or special rights of the shares of such
class so as to affect them adversely. The Certificate of Incorporation provides
that neither the increase nor decrease of the authorized number of shares of any
class of Common Stock shall require a separate vote of any class. Thus, it is
possible that the holders of a majority of one class of Common Stock could
constitute a majority of the voting power of both classes and approve the
increase or decrease of the authorized amount of the other class of Common Stock
without the approval of the holders of such other class of Common Stock.
The Certificate of Incorporation also provides that unless the vote or
consent of a greater number of shares shall then be required by law, the
approval of the holders of a majority of the outstanding shares of any class of
Common Stock, voting as a separate class, shall be necessary for authorizing,
effecting or validating the merger or consolidation of USX into or with any
other corporation if such merger or consolidation would adversely affect the
powers or special rights of such class of Common Stock, either directly or
indirectly.
LIQUIDATION--IN THE EVENT OF THE LIQUIDATION OF USX, HOLDERS OF EITHER
CLASS OF COMMON STOCK WILL BE ENTITLED TO RECEIVE A PORTION OF THE FUNDS
DISTRIBUTABLE TO HOLDERS OF BOTH CLASSES OF COMMON STOCK BASED UPON THE
TIME-WEIGHTED AVERAGE AGGREGATE MARKET CAPITALIZATION OF EACH SUCH CLASS OF
COMMON STOCK TO THE AGGREGATE MARKET CAPITALIZATION OF BOTH CLASSES OF COMMON
STOCK.
The Certificate of Incorporation provides that, in the event of a
dissolution, liquidation or winding-up of USX, whether voluntary or involuntary,
after payment of creditors and after the holders of Preferred Stock receive the
full preferential amounts to which they are entitled, the holders of outstanding
shares of each class of Common Stock will share the funds remaining for
distribution to the holders of Common Stock. The holders of the outstanding
Common Stock will each be entitled to receive a fraction of such funds equal to
the quotient of (i) the sum of (A) four times the average ratio of X/Y for the
five-Business Day period ending on the Business Day prior to the date of the
public announcement of (1) a voluntary dissolution, liquidation or winding-up by
USX or (2) the institution of any proceeding for the involuntary dissolution,
liquidation or winding-up of USX, (B) three times the average ratio of X/Y for
the next preceding five-Business Day period, (C) two times the average ratio of
X/Y for the next preceding five-Business Day period and (D) the average ratio of
X/Y for the next preceding five-Business Day period, divided by (ii) ten, where
X is the market capitalization of such class of Common Stock and Y is the
aggregate market capitalization of both classes of Common Stock. For purposes of
the preceding sentence, "Market Capitalization" of any class of
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Common Stock on any day shall mean the product of (i) the Market Value of such
class of Common Stock on such day and (ii) the number of shares of such class of
Common Stock outstanding on such day.
STEEL STOCK
DIVIDENDS--DIVIDENDS ON THE STEEL STOCK ARE INTENDED TO BE PAID BASED UPON
THE FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF THE U. S. STEEL GROUP.
Subject to any prior rights of the holders of the Preferred Stock,
dividends on the Steel Stock may be declared and paid only out of the lesser of
(i) funds of USX legally available therefor and (ii) the Available Steel
Dividend Amount.
The "Available Steel Dividend Amount," on any date, means either:
(a) the greater of:
(i) an amount equal to (x) $2.244 billion, increased or decreased,
as appropriate, to reflect: (A) Steel Net Income from the close of
business on December 31, 1990, (B) any dividends or other distributions
declared or paid with respect to, or repurchases or issuances of, any
shares of common stock of USX after December 31, 1990 and prior to the
close of business on May 6, 1991 attributed to the U. S. Steel Group,
(C) any dividends or other distributions declared or paid with respect
to, or repurchases or issuances of, any shares of Steel Stock or any
shares of Preferred Stock attributed to the U. S. Steel Group and (D)
any other adjustments to stockholders' equity of the U. S. Steel Group
made in accordance with generally accepted accounting principles, less
(y) the sum of the aggregate par value of all outstanding Steel Stock
and the aggregate stated capital of all outstanding Preferred Stock
attributed to the U. S. Steel Group; and
(ii) the excess of the fair market value of the net assets of the
U. S. Steel Group over the sum of the aggregate par value of all
outstanding Steel Stock and the aggregate stated capital of all
outstanding Preferred Stock attributed to the U. S. Steel Group,
in the case of each of clauses (i) and (ii) increased by an amount equal
to any effects of the recognition of the transition obligation upon the
adoption of SFAS No. 106 (including any amendments thereto) and any
cumulative effects of the adoption of SFAS No. 109 (including any
amendments thereto) in the year of adoption; or
(b) in case there shall be no such amount, an amount equal to Steel
Net Income (if positive) for the fiscal year in which the dividend is
declared and/or the preceding fiscal year.
The amount of $2.244 billion in clause (a)(i) above represents the amount
of total stockholders' equity of USX as of December 31, 1990 assigned to the U.
S. Steel Group by the Board after giving consideration to the historical debt
and equity structure of USX.
The Available Steel Dividend Amount as of March 31, 1998 was at least
$3.094 billion, as calculated under the preceding clause (a)(i).
Although net income and stockholders' equity of the U. S. Steel Group was
reduced when USX adopted the accounting changes required by SFAS No. 106 and
SFAS No. 109, such changes did not affect cash flows of the U. S. Steel Group.
As a result, in order to preclude dividends on the Steel Stock from being
limited by such noncash accounting changes, the amounts in each of clause (a)(i)
and clause (a)(ii) of the definition of "Available Steel Dividend Amount" were
adjusted to eliminate the effects of such changes, as set forth above.
Clause (b) in the definition of "Available Steel Dividend Amount" will
permit the payment of dividends on the Steel Stock in any fiscal year to the
extent there is positive Steel Net Income (as defined below) in such fiscal year
or in the preceding fiscal year or to the extent of the sum of positive Steel
Net Income, if any, in both such years. Any loss in either such year would not
reduce positive Steel Net Income, if any, in the other year for purposes of
determining the applicable limitation on dividends. Such provision is comparable
to Section 170 of the Delaware General Corporation Law, which allows the payment
of dividends on common
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stock of any Delaware corporation in any fiscal year to the extent of
consolidated net income of the corporation for such fiscal year and/or the
preceding fiscal year.
As used herein, "Steel Net Income" means the net income or loss of the U.
S. Steel Group determined in accordance with generally accepted accounting
principles, including income and expenses of USX attributed to the U. S. Steel
Group, on a substantially consistent basis, including, without limitation,
corporate administrative costs, net interest and other financial costs and
income taxes. For information concerning the policies governing the attribution
of corporate activities to the U. S. Steel Group which are being followed by USX
in determining Steel Net Income, see "Management and Accounting Policies."
The Board may, in its sole discretion, declare and pay dividends
exclusively on the Marathon Stock, or exclusively on the Steel Stock, or on both
classes in equal or unequal amounts, notwithstanding the respective amount of
funds available for dividends on each class, the respective voting and
liquidation rights of each class, the amount of prior dividends declared on each
class or any other factor.
EXCHANGE AND REDEMPTION--IN THE EVENT OF A DISPOSITION OF ALL OR
SUBSTANTIALLY ALL OF THE ASSETS OF THE U. S. STEEL GROUP, USX IS REQUIRED TO (1)
PAY A DIVIDEND, (2) REDEEM STEEL STOCK OR (3) EXCHANGE STEEL STOCK FOR MARATHON
STOCK.
If USX transfers all the assets and liabilities of the U. S. Steel Group to
a wholly owned subsidiary of USX (the "U. S. Steel Group Subsidiary"), Steel
Stock may be exchanged, at the sole discretion of the Board, by a majority vote
of the directors then in office, provided that there are funds of USX legally
available therefor, for all of the outstanding stock of the U. S. Steel Group
Subsidiary, on a pro rata basis on the same terms and conditions as on the
Marathon Stock.
In addition, upon the Disposition, in one transaction or a series of
related transactions, of all or substantially all of the properties and assets
of the U. S. Steel Group (other than in connection with the Disposition by USX
of all of its properties and assets in one transaction) to any person, entity or
group (other than to the holders of all outstanding shares of Steel Stock on a
pro rata basis or to a person, entity or group in which USX, directly or
indirectly, owns a majority equity interest), USX shall, within 60 days
following the consummation of such Disposition, either (i) subject to the
limitations on dividends on Steel Stock set forth above, declare and pay a
dividend in cash and/or in securities or other property received as proceeds of
such Disposition to the holders of the Steel Stock in an amount equal to the Net
Proceeds of such Disposition, (ii) to the extent that there are funds of USX
legally available therefor, redeem the number of whole shares of Steel Stock
having an aggregate average Market Value during the ten-Business Day period
following consummation of such Disposition, closest to the value of the Net
Proceeds of such Disposition, for cash and/or securities or other property
received as proceeds of such Disposition in an amount equal to the Net Proceeds
or (iii) exchange each outstanding share of Steel Stock for a number of shares
of Marathon Stock equal to 110% of the average daily ratio (calculated to the
nearest five decimal places) of the Market Value of one share of Steel Stock to
the Market Value of one share of Marathon Stock during such period.
If, immediately after any event, USX, directly or indirectly, owns less
than a majority equity interest in any person, entity or group in which USX,
directly or indirectly, owned a majority equity interest immediately prior to
the occurrence of such event, a Disposition of all of the properties and assets
of the U. S. Steel Group owned by such person, entity or group shall be deemed
to have occurred. In the case of a Disposition of properties or assets in a
series of related transactions, such Disposition shall not be deemed to have
been consummated until the consummation of the last of such transactions.
"Substantially all of the properties and assets of the U. S. Steel Group,"
as of any date, means a portion of such properties and assets that represents at
least 80% of either of the then-current market value of, or the aggregate
revenues for the immediately preceding twelve fiscal quarterly periods of USX
derived from, the properties and assets of the U. S. Steel Group as of such date
(excluding the assets and properties of any person, entity or group in which
USX, directly or indirectly, owns less than a majority equity interest).
After any such special dividend or redemption pursuant to clause (i) or
(ii) in the third preceding paragraph, the Board may, by a majority vote of the
directors then in office, exchange each outstanding share of Steel Stock for a
number of shares of Marathon Stock equal to 110% of the Market Value Ratio as of
the
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fifth Business Day prior to the date notice of such exchange is mailed to the
holders of Steel Stock. For purposes of the preceding sentence, "Market Value
Ratio", as of any date, means the highest of the following (calculated to the
nearest five decimal places): (A) the average ratio of S/X for the five-Business
Day period ending on such date. (B) the quotient of (1) the sum of (w) four
times the average ratio of S/X for the five-Business Day period ending on such
date, (x) three times the average ratio of S/X for the next preceding five-
Business Day period, (y) two times the average ratio of S/X for the next
preceding five-Business Day period and (z) the average ratio of S/X for the next
preceding five-Business Day period, divided by (2) ten and (C) if the special
dividend pursuant to clause (i) of the third preceding paragraph was declared
and paid or the redemption pursuant to clause (ii) thereof was made prior to the
commencement of the most recently completed fiscal quarter of USX, the average
ratio of S/X for such fiscal quarter, where S is the Market Value of one share
of the Steel Stock and X is the Market Value of one share of the Marathon Stock.
In determining whether to effect such an exchange, the Board, in addition to
other matters, would likely consider whether the remaining properties and assets
of the U. S. Steel Group constitute a viable business. Other considerations
could include the number of shares of Steel Stock remaining outstanding
following any such redemption, the per share market price of the Steel Stock
following the payment of such a dividend or such a redemption and the cost of
maintaining stockholder accounts.
An exchange or redemption of Steel Stock for Marathon Stock would be made
on the same general terms and conditions as described above under "Marathon
Stock--Exchange and Redemption--General Provisions."
VOTING--SHARES OF STEEL STOCK WILL, WHEN VOTING TOGETHER WITH ALL OTHER
CLASSES OF COMMON STOCK, HAVE A NUMBER OF VOTES PER SHARE BASED UPON
TIME-WEIGHTED AVERAGE RATIOS OF THE MARKET VALUE OF A SHARE OF STEEL STOCK TO
THE MARKET VALUE OF A SHARE OF MARATHON STOCK.
The holders of shares of the Steel Stock have the voting rights described
above under the caption "Marathon Stock--Voting."
In addition, as is the case with the use of the proceeds from the
Disposition of any properties or assets of the Marathon Group, unless the vote
or consent of a greater number of shares shall then be required by law, the
approval of the holders of at least 66 2/3% of the outstanding Steel Stock,
voting as a separate class, shall be necessary for:
(i) the declaration or payment of any dividend on, or the making of
any other payment or distribution on or with respect to, any shares of any
other class of common stock, if such dividend, payment or distribution is
to be made with (A) proceeds from the Disposition of any of the properties
and assets of the U. S. Steel Group or (B) any portion of an equity
interest in a person, entity or group that owns any of the properties and
assets of the U. S. Steel Group; or
(ii) the use, or reservation for use, of any proceeds from the
Disposition of any of the properties and assets of the U. S. Steel Group,
or any of the properties and assets acquired with such proceeds, in any
business of USX other than a business of the U. S. Steel Group.
Notwithstanding the foregoing, however, such vote shall not be required if
such proceeds are loaned at a rate or rates representative of actual
borrowings and short-term investments by USX.
LIQUIDATION--IN THE EVENT OF THE LIQUIDATION OF USX, HOLDERS OF STEEL STOCK
WILL BE ENTITLED TO RECEIVE A PORTION OF THE FUNDS DISTRIBUTABLE TO HOLDERS OF
COMMON STOCK BASED ON THE RELATIVE TIME-WEIGHTED AVERAGE AGGREGATE MARKET
CAPITALIZATION OF THE STEEL STOCK TO THE AGGREGATE MARKET CAPITALIZATION OF BOTH
CLASSES OF COMMON STOCK.
In the event of a dissolution, liquidation or winding-up of USX, the
holders of shares of Steel Stock are entitled to receive funds in the amounts
described above under "Marathon Stock--Liquidation."
DETERMINATIONS BY BOARD
Any determinations made by the Board under the foregoing provisions will be
final and binding on all stockholders of USX.
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<PAGE> 49
OTHER RIGHTS
The holders of Common Stock do not have any preemptive rights or any rights
to convert their shares into any other securities of USX.
STOCK TRANSFER AGENT AND REGISTRAR
USX maintains its own stock transfer department at the following address:
USX Corporation, Shareholders Services Department, 600 Grant Street, Room 611,
Pittsburgh, PA 15219-4776. Certificates representing shares can also be
presented for registration of transfer at ChaseMellon Shareholder Services, 120
Broadway, 13th Floor, New York, NY 10021.
ChaseMellon Shareholder Services L.L.C., 4 Station Square, Pittsburgh, PA
15219 is the Registrar for all the Common Stock.
AMENDED AND RESTATED RIGHTS PLAN
The following is a brief description of the terms of the Stockholders
Rights Plan set forth in the Restated Rights Agreement between USX and Mellon
Bank, N.A., as Rights Agent.
Under the Restated Rights Agreement, the right (each a "Right") to purchase
from USX a unit consisting of one one-hundredth of a share (a "Unit") of Series
A Junior Preferred Stock, no par value (the "Junior Preferred Stock"), at a
purchase price of $120 in cash per Unit, subject to adjustment, is attached to
each share of Marathon Stock and Steel Stock (sometimes hereinafter referred to
together as the "Voting Stock"). A Right attached to a share of Marathon Stock
is hereinafter referred to as a "Marathon Right" and a Right attached to a share
of Steel Stock is hereinafter referred to as a "Steel Right."
The Rights will separate from the Voting Stock and a Rights distribution
date will occur upon the earlier of (i) 15 days following a public announcement
that a person or group of affiliated or associated persons (an "Acquiring
Person") has acquired (except pursuant to a Qualifying Offer (defined in the
Restated Rights Agreement as an all-cash tender offer for all outstanding shares
of Voting Stock meeting certain prescribed requirements)), or obtained the right
to acquire, beneficial ownership of Voting Stock representing 15% or more of the
total voting power of all outstanding shares of Voting Stock (the "Stock
Acquisition Date"), or (ii) 15 days (or upon such later date as may be
determined by the Board) following the commencement of a tender offer or
exchange offer (other than a Qualifying Offer) that would result in a person or
a group beneficially owning Voting Stock representing 15% or more of the total
voting power of all outstanding shares of Voting Stock. For purposes of the
Restated Rights Agreement, total voting power of Voting Stock shall be
determined based upon the most recent calculation announced by USX. See
"Marathon Stock--Voting" and "Steel Stock--Voting" above. If a person
inadvertently becomes the beneficial owner of Voting Stock representing 15% or
more of the total voting power of the Voting Stock due to the recalculation by
USX of the relative voting power of Marathon Stock and Steel Stock, such person
will not be an Acquiring Person unless and until such person acquires any
additional shares of Voting Stock.
In the event that a person or group becomes the beneficial owner of Voting
Stock representing 15% or more of the total voting power of all outstanding
shares of Voting Stock (except pursuant to a Qualifying Offer), the Rights
"flip-in" and entitle each holder of a Right (other than the Acquiring Person
and certain related parties) to receive, upon exercise, Marathon Stock or Steel
Stock, as the case may be (or in certain circumstances, cash, property, or other
securities of USX), having a value equal to two times the exercise price of the
Marathon Right or Steel Right, respectively. However, Rights are not exercisable
until such time as the Rights are no longer redeemable by USX as set forth
below.
In the event that, any time following the Stock Acquisition Date, (i) USX
is acquired in a merger or other business combination transaction in which USX
is not the surviving corporation (other than a merger that follows a Qualifying
Offer) or its Voting Stock is changed or exchanged, or (ii) 50% or more of USX's
assets, earning power or cash flow is sold or transferred, the Rights
"flip-over" and entitle each holder of a Right (other than an Acquiring Person
and certain related parties) to receive, upon exercise, common stock of the
acquiring company having a value equal to two times the exercise price of the
Right.
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<PAGE> 50
At any time until 15 days following the Stock Acquisition Date (subject to
extension), USX may redeem the Rights in whole, but not in part, at a price of
$.01 per whole Right payable in stock or cash or any other form of consideration
deemed appropriate by the Board (the "Redemption Price"). Immediately upon the
action of the Board ordering redemption of the Rights, the Rights will terminate
and the only right of the holders of the Rights will be to receive the
Redemption Price.
The Board may, at its option, at any time after any person becomes an
Acquiring Person, exchange all or part of the outstanding and exercisable
Marathon Rights and Steel Rights (other than Rights held by the Acquiring Person
and certain related parties) for shares of Marathon Stock and Steel Stock,
respectively, at an exchange ratio of one share of Marathon Stock for each
Marathon Right and one share of Steel Stock for each Steel Right (subject to
certain anti-dilution adjustments). However, the Board may not effect such an
exchange at any time any person or group owns Voting Stock representing 50% or
more of the total voting power of the Voting Stock then outstanding.
As long as the Rights are attached to shares of Voting Stock, USX will
issue Marathon Rights on each share of Marathon Stock and Steel Rights on each
share of Steel Stock issued prior to the Rights distribution date so that all
such shares will have attached Rights.
A copy of the Restated Rights Agreement is available free of charge from
the Rights Agent by writing to Mellon Bank, N.A. at One Mellon Bank Center,
Pittsburgh, Pennsylvania 15258, Attention: Corporate Trust Group.
DESCRIPTION OF WARRANTS
USX may issue Warrants for the purchase of Debt Securities, Preferred
Stock, Marathon Stock or Steel Stock (each a "USX Security," and together the
"USX Securities"). Warrants may be issued independently or together with any USX
Security offered by any Prospectus Supplement and may be attached to or separate
from any such USX Security. Each series of Warrants will be issued under a
separate warrant agreement (a "Warrant Agreement") to be entered into between
USX and a bank or trust company, as warrant agent (the "Warrant Agent"). The
Warrant Agent will act solely as an agent of USX in connection with the Warrants
and will not assume any obligation or relationship of agency or trust for or
with any holders or beneficial owners of Warrants. The following summary of
certain provisions of the Warrants does not purport to be complete and is
subject to, and qualified in its entirety by reference to, the provisions of the
Warrant Agreement that will be filed with the SEC in connection with the
offering of such Warrants.
DEBT WARRANTS
The Prospectus Supplement relating to a particular issue of Warrants to
issue Debt Securities ("Debt Warrants") will describe the terms of such Debt
Warrants, including the following (if applicable): (a) the title of such Debt
Warrants; (b) the offering price for such Debt Warrants; (c) the aggregate
number of such Debt Warrants; (d) the designation and terms of the Debt
Securities purchasable upon exercise of such Debt Warrants; (e) the designation
and terms of the Debt Securities with which such Debt Warrants are issued and
the number of such Debt Warrants issued with each such Debt Security; (f) the
date from and after which such Debt Warrants and any Debt Securities issued
therewith will be separately transferable; (g) the principal amount of Debt
Securities purchasable upon exercise of a Debt Warrant and the price at which
such principal amount of Debt Securities may be purchased upon exercise (which
price may be payable in cash, securities, or other property); (h) the date on
which the right to exercise such Debt Warrants shall commence and the date on
which such right shall expire; (i) the minimum or maximum amount of such Debt
Warrants that may be exercised at any one time; (j) whether the Debt Warrants
represented by the Debt Warrant certificates, or Debt Securities that may be
issued upon exercise of the Debt Warrants, will be issued in registered or
bearer form; (k) information with respect to book-entry procedures; (l) the
currency or currency units in which the offering price and the exercise price
are payable; (m) a discussion of material United States federal income tax
considerations; (n) the redemption or call provisions applicable to such Debt
Warrants; and (o) any additional terms of the Debt Warrants, including terms,
procedures, and limitations relating to the exchange and exercise of such Debt
Warrants.
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<PAGE> 51
STOCK WARRANTS
The Prospectus Supplement relating to any particular issue of Warrants to
issue Preferred Stock, Marathon Stock or Steel Stock will describe the terms of
such Warrants, including the following (if applicable): (a) the title of such
Warrants; (b) the offering price for such Warrants; (c) the aggregate number of
such Warrants; (d) the designation and terms of the Preferred Stock, Marathon
Stock or Steel Stock purchasable upon exercise of such Warrants; (e) the
designation and terms of the USX Securities with which such Warrants are issued
and the number of such Warrants issued with each such USX Security; (f) the date
from and after which such Warrants and any USX Securities issued therewith will
be separately transferable; (g) the number of shares of Preferred Stock,
Marathon Stock or Steel Stock purchasable upon exercise of a Warrant and the
price at which such shares may be purchased upon exercise; (h) the date on which
the right to exercise such Warrants shall commence and the date on which such
right shall expire; (i) the minimum or maximum amount of such Warrants that may
be exercised at any one time; (j) the currency or currency units in which the
offering price and the exercise price are payable; (k) a discussion of material
United States federal income tax considerations; (l) the antidilution provisions
of such Warrants; (m) the redemption or call provisions applicable to such
Warrants; and (n) any additional terms of the Warrants, including terms,
procedures, and limitations relating to the exchange and exercise of such
Warrants.
PLAN OF DISTRIBUTION
USX may issue the Offered Securities to or through underwriters or directly
to purchasers, agents or dealers or through brokers. Offers to purchase Offered
Securities may be solicited directly by USX or brokers or dealers designated by
USX from time to time. Any such broker or dealer may be deemed to be an
underwriter as that term is defined in the Securities Act, and will be named in
the Prospectus Supplement, together with the compensation payable thereto by USX
in connection with the sale of the Offered Securities.
Underwriters, agents, brokers and dealers may be entitled under agreements
which may be entered into with USX to indemnification by USX against certain
civil liabilities, including liabilities under the Securities Act. Such
underwriters, agents, brokers and dealers may engage in transactions with, or
perform services for, USX in the ordinary course of business.
Also, USX may issue the Offered Securities in connection with acquisitions.
The Prospectus may be used in connection with the re-offering of the Offered
Securities by persons receiving such securities in connection with an
acquisition who may be deemed underwriters under the Securities Act of 1933.
Offered Securities may be issued in connection with the acquisition of
Tarragon. See "Pending Transaction." USX will bear the cost of registering any
such securities.
The place and time of delivery for the Offered Securities in respect of
which this Prospectus is delivered will be set forth in the accompanying
Prospectus Supplement.
VALIDITY OF SECURITIES
The validity of the issuance of the Offered Securities will be passed upon
for USX by D. D. Sandman, Esq., General Counsel, Secretary and Senior Vice
President--Human Resources & Public Affairs of USX or by J.A. Hammerschmidt,
Esq., Assistant General Counsel--Corporate and Assistant Secretary of USX.
Messrs. Sandman and Hammerschmidt, in their respective capacities as set forth
above, are paid salaries by USX, participate in various employee benefit plans
offered by USX and own common stock of USX.
EXPERTS
The consolidated financial statements of USX as of December 31, 1997 and
1996 and for each of the three years in the period ended December 31, 1997
incorporated in this Prospectus by reference to USX's Annual Report on Form 10-K
for the year ended December 31, 1997 have been so incorporated in reliance on
the reports of PricewaterhouseCoopers LLP, independent accountants, given on the
authority of said firm as experts in auditing and accounting.
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<PAGE> 52
APPENDIX I
SUMMARY OF USX COMMON STOCK
The following summary is qualified in its entirety by the detailed
information appearing elsewhere in, or incorporated by reference in, this
Prospectus. Capitalized terms used in this summary have the respective meanings
ascribed to them elsewhere in this Prospectus.
<TABLE>
<CAPTION>
USX COMMON STOCK
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USX-MARATHON GROUP USX-U. S. STEEL GROUP
COMMON STOCK COMMON STOCK
------------------ ---------------------
<S> <C> <C>
BUSINESS: Energy business. Steel and other businesses.
NUMBER OF SHARES
OUTSTANDING AS OF
JUNE 30, 1998: 290,265,145 87,291,033
VOTING RIGHTS: Except as otherwise described Except as otherwise described
herein, the Marathon Stock will vote herein, the Steel Stock will vote as
as a single class with the Steel a single class with the Marathon
Stock. The Marathon Stock will have Stock. Each share of Steel Stock
one vote per share. will have a variable number of votes
based upon the relative Market
Values of one share of Steel Stock
and one share of Marathon Stock, and
may have more than, less than or
exactly one vote per share.
DIVIDENDS: Dividends on the Marathon Stock will Dividends on the Steel Stock will be
be paid at the discretion of the paid at the discretion of the Board
Board based primarily upon the based primarily upon the long-term
long-term earnings and cash flow earnings and cash flow capabilities
capabilities of the Marathon Group, of the U. S. Steel Group, as well as
as well as on the dividend policies on the dividend policies of publicly
of publicly traded energy companies. traded steel companies. Dividends
Dividends will be payable out of all will be payable out of the lesser of
funds of USX legally available (i) all funds of USX legally
therefor. available therefor and (ii) the
Available Steel Dividend Amount.
EXCHANGE AND REDEMPTION: USX may exchange the Marathon Stock USX may exchange the Steel Stock for
for shares of a wholly owned shares of a wholly owned subsidiary
subsidiary that holds all the assets that holds all the assets and
and liabilities of the Marathon liabilities of the U.S. Steel Group.
Group.
If USX sells all or substantially
all of the properties and assets of
the U. S. Steel Group, USX must
either: (i) pay a special dividend
to holders of Steel Stock equal to
the Net Proceeds; or (ii) redeem
shares of Steel Stock having an
aggregate Market Value closest to
the value of the Net Proceeds for an
amount equal to the Net Proceeds; or
(iii) exchange each share of Steel
Stock for a number of shares of
Marathon Stock equal to 110% of the
ratio of the Market Values of one
share of Steel Stock to one share of
Marathon Stock.
LIQUIDATION: In the event of the liquidation of In the event of the liquidation of
USX, holders of Marathon Stock will USX, holders of Steel Stock will
share the funds, if any, remaining share the funds, if any, remaining
for distribution to common for distribution to common
stockholders with holders of Steel stockholders with holders of
Stock based upon the relative market Marathon Stock based upon the
capitalizations of each. relative market capitalizations of
each.
LISTING: NYSE under the symbol "MRO". NYSE under the symbol "X".
</TABLE>
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