<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
Bethlehem Steel Corporation
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
Bethlehem Steel Corporation
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
<PAGE>
BETHLEHEM
STEEL
CORPORATION
- --------------------------------------------------------------------------------
(R)
LOGO
Bethlehem Steel Corporation
NOTICE OF 1998
ANNUAL MEETING
OF STOCKHOLDERS
AND PROXY
STATEMENT
<PAGE>
BETHLEHEM STEEL CORPORATION
1170 EIGHTH AVENUE
BETHLEHEM, PENNSYLVANIA 18016-7699
(R)
LOGO OF BETHLEHEM STEEL CORPORATION
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
The Annual Meeting (the "Meeting") of Stockholders of Bethlehem Steel Corpo-
ration ("Bethlehem") will be held in the Main Ballroom, Radisson Hotel, 4727
Concord Pike, U.S. Route 202, Wilmington, Delaware, on Tuesday, April 28,
1998, at 11 a.m., for the following purposes:
(1) To elect twelve Directors to serve for terms of one year and until their
successors have been elected and qualified;
(2) To ratify the appointment of Price Waterhouse LLP as the independent au-
ditors for 1998;
(3) To take action upon the 1998 Stock Incentive Plan of Bethlehem which, if
approved by stockholders, will replace the 1994 Stock Incentive Plan; and
(4) To transact such other business as may properly come before the Meeting.
Stockholders of record at the close of business on March 2, 1998, are enti-
tled to receive notice of and to vote at the Meeting. A complete list of such
stockholders will be open for examination by any stockholder for any purpose
germane to the Meeting at the offices of The Corporation Trust Company at 1209
Orange Street, Wilmington, Delaware, for a period of ten days prior to the
Meeting.
This Notice, the Proxy Statement and the enclosed form of proxy are sent to
you by order of the Board of Directors.
William H. Graham
Secretary
March 13, 1998
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IF YOU DO NOT EXPECT TO ATTEND THE MEETING, PLEASE MARK, DATE AND SIGN THE
ENCLOSED FORM OF PROXY AND MAIL IT PROMPTLY IN THE ENCLOSED RETURN ENVELOPE.
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<PAGE>
BETHLEHEM STEEL CORPORATION
1170 EIGHTH AVENUE
BETHLEHEM, PENNSYLVANIA 18016-7699
TABLE OF CONTENTS
<TABLE>
<S> <C>
General Information for Stockholders....................................... 1
Proxy Procedure.......................................................... 1
Stockholder Proposals.................................................... 2
Election of Directors...................................................... 2
General Background....................................................... 2
Information Concerning Nominees.......................................... 3
Amount and Nature of Beneficial Ownership................................ 7
Committees of the Board.................................................. 8
Certain Business Relationships........................................... 8
Section 16(a) Beneficial Ownership Reporting Compliance.................. 9
Ratification of the Appointment of Independent Auditors.................... 9
Approval of 1998 Stock Incentive Plan...................................... 9
Summary of 1998 Stock Incentive Plan..................................... 9
Tax Effects.............................................................. 12
Other Information........................................................ 14
Executive Compensation..................................................... 14
Compensation Committee Report on Executive Compensation.................. 14
Summary Compensation Table............................................... 17
Stock Option/SAR Grants in 1997.......................................... 18
Aggregated Stock Option/SAR Exercises in 1997 and December 31, 1997,
Stock Option Values..................................................... 18
Pension Plan Table......................................................... 18
Comparative Stock Performance.............................................. 19
Additional Information..................................................... 20
Indemnification Assurance Agreements..................................... 20
Stockholders............................................................. 20
Other Matters............................................................ 20
Exhibit 1--1998 Stock Incentive Plan
</TABLE>
<PAGE>
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation by the
Board of Directors of Bethlehem Steel Corporation ("Bethlehem") of proxies for
use at the Annual Meeting of Stockholders to be held on April 28, 1998, and
any adjournments thereof. This Proxy Statement and the accompanying form of
proxy are being mailed to stockholders on or after March 13, 1998.
GENERAL INFORMATION FOR STOCKHOLDERS
PROXY PROCEDURE
Proxies are solicited by the Board of Directors of Bethlehem in order to
provide every stockholder with an opportunity to vote on all matters that
properly come before the Annual Meeting of Stockholders, whether or not the
stockholder attends in person. When the enclosed form of proxy is properly
signed, dated and returned, the shares represented will be voted by the per-
sons named as proxies in accordance with the stockholder's directions. If no
direction is indicated, the shares will be voted as recommended by the Board
of Directors.
Bethlehem has adopted a confidential voting policy which provides that votes
of all stockholders of Bethlehem shall be held in confidence from Bethlehem,
its directors, officers and employees except (i) to allow the independent in-
spectors of election to certify the results of the vote, (ii) as necessary to
meet applicable legal requirements and to assert or defend claims for or
against Bethlehem, (iii) in case of a contested proxy solicitation or (iv) in
the event a stockholder has made a written comment on the proxy material. As
part of the policy, Bethlehem will continue its current practice of employing
an independent tabulator to receive and tabulate the proxies and independent
inspectors of election.
Any stockholder executing a form of proxy may revoke that proxy or may sub-
mit a revised form of proxy at any time before it is voted. A stockholder may
also vote by ballot at the Annual Meeting, thereby canceling any proxy previ-
ously returned. Stockholders wishing to name as their proxy someone other than
those designated in the form of proxy may do so by crossing out the names of
the proxies appearing thereon and inserting the name(s) of the person(s) they
wish to have act as proxy. In such a case, it will be necessary that the form
of proxy be delivered by the stockholder to the person(s) named and that the
person(s) named be present and vote at the Annual Meeting. Any proxy form on
which alternate proxies have been named should not be mailed directly to Beth-
lehem.
If you are a participant in the Bethlehem Steel Corporation Employee Stock
Ownership Plan or the Savings Plan for Salaried Employees of Bethlehem Steel
Corporation and Subsidiary Companies, the enclosed form of proxy will indicate
the shares of ESOP Preference Stock and Common Stock allocated to your ESOP
account and the shares of Common Stock allocated to your Savings Plan account
by State Street Bank and Trust Company, Trustee under both plans, at the close
of business on March 2, 1998 ("Record Date"). When the enclosed form of proxy
is properly signed, dated and returned, it will serve as instructions to the
Trustee to vote the shares allocated to your ESOP and Savings Plan accounts in
accordance with your instructions. The enclosed form of proxy must be received
by Bethlehem's tabulator before the close of business on Friday, April 24,
1998, in order for your voting instructions as to the shares allocated to your
ESOP and Savings Plan accounts to have effect. If the enclosed form of proxy
is properly signed, dated and returned, but you do not otherwise specify in-
structions, the shares allocated to your ESOP and Savings Plan accounts will
be voted "For" the three proposals referred to in this Proxy Statement. If you
do not return the enclosed form of proxy by the close of business on April 24,
1998, (i) shares allocated to your ESOP account will be voted by the Trustee
in the same proportion as the shares with respect to which such instructions
are received and (ii) shares allocated to your Savings Plan account will be
voted by the Trustee in accordance with instructions of the Employee Benefits
Administration Committee.
Votes cast at the Annual Meeting will be tabulated by the persons appointed
as the independent inspectors of election for the Annual Meeting. The inspec-
tors of election will treat shares of Common Stock and of ESOP Preference
Stock represented by a properly signed and returned proxy as present at the
Annual Meeting for
1
<PAGE>
purposes of determining a quorum, without regard to whether the proxy is
marked as casting a vote or abstaining. Likewise, the inspectors of election
will treat shares of Common Stock represented by "broker non-votes" as present
for purposes of determining a quorum.
The nominees for election to the Board of Directors receiving the greatest
number of the affirmative votes cast by holders of Common Stock and of ESOP
Preference Stock, up to the number of directors to be elected, will be elected
as directors. Accordingly, so long as a quorum is present, abstentions or bro-
ker non-votes as to the election of directors will have no effect on the elec-
tion of directors.
The affirmative vote of the holders of a majority of the shares of Common
Stock and of ESOP Preference Stock that are present in person or by proxy and
entitled to vote at the Annual Meeting, voting together as a single class, is
required to ratify the appointment of the independent auditors and approve the
1998 Stock Incentive Plan. Therefore, abstentions and broker non-votes will
have the same effect as votes against these proposals.
STOCKHOLDER PROPOSALS
Stockholders may be asked to consider and take action on proposals submitted
by stockholders who are not members of management or the Board of Directors.
Proposals by stockholders may be included in the Proxy Statement if the pro-
posals are proper subjects for inclusion, are submitted to Bethlehem on a
timely basis and otherwise comply with Rule 14a-8 under Section 14(a) of the
Securities Exchange Act of 1934 and the laws of the State of Delaware. Each
proposal submitted should include the full and correct registered name and ad-
dress of the stockholder(s) making the proposal, the number of shares owned
and the dates of acquisition thereof. If beneficial ownership is claimed,
proof thereof should be submitted with the proposal. In addition, proponents
must appear personally or by proxy at the Annual Meeting to present the pro-
posal for action. In order for such proposals to be included for the Annual
Meeting of Stockholders to be held in 1999, they must be received by Bethlehem
on or before November 13, 1998.
The Board of Directors carefully considers all proposals and suggestions
submitted by stockholders to determine if they are in the best interests of
Bethlehem and the stockholders generally. When a stockholder presents, as a
formal resolution, a suggestion which is practicable, and in the best inter-
ests of Bethlehem and its stockholders, and which can be implemented by man-
agement and the Board without the necessity of stockholder approval, the sug-
gestion is usually adopted without stockholder approval and the proponent
withdraws the resolution.
ELECTION OF DIRECTORS
GENERAL BACKGROUND
As provided by the laws of Delaware, Bethlehem's state of incorporation, the
business and affairs of Bethlehem are managed by or under the direction of the
Board of Directors of Bethlehem, which is currently comprised of thirteen mem-
bers. The Board of Directors represents the interests of the stockholders as a
whole and has responsibility for the overall performance of Bethlehem. Stock-
holders elect directors in April of each year to serve for terms of one year
and until their successors have been elected and qualified. This annual elec-
tion of directors is one of the important purposes of the Annual Meeting.
Members of the Board are kept informed of Bethlehem's business by presenta-
tions made at Board meetings and by various reports sent to them by manage-
ment. The Board of Directors meets regularly and met 10 times during 1997. Di-
rectors also meet in committees of the Board and information concerning the
committees can be found beginning on page 8 of this Proxy Statement. During
1997, the average attendance of directors at Board meetings and meetings of
committees to which they belonged was approximately 95%.
Of the twelve directors standing for election, nine are not employees of
Bethlehem. These nine non-employee Board members bring valuable experience to
Bethlehem from a variety of fields. None of them has carried on an occupation
or employment with any subsidiary or other affiliate of Bethlehem.
Each non-employee director receives cash compensation of $22,000 annually
for service as a Bethlehem director. This annual retainer fee includes compen-
sation for service as a member of the Audit Committee, the Compensation Com-
mittee, the Finance Committee and the Committee on Directors. In addition,
each non-employee director who serves as Chairman of the Audit Committee, the
Compensation Committee or the Committee on Directors receives additional com-
pensation of $2,500 annually for service as such Committee Chairman. Each non-
employee director also receives an attendance fee of $1,000 for the Annual
Meeting of Stockholders, any regular or special board of directors' meeting,
any regular or special committee meeting held on a day other than a day on
which a board meeting is held and any special meeting attended at the request
of the Chairman and held on a day other than a day on which a board or commit-
tee meeting is held. Each non-employee director of
2
<PAGE>
Bethlehem also receives on December 1 of each year an award of 500 shares of
Bethlehem Common Stock pursuant to the 1994 Non-Employee Directors Stock Plan,
which was approved by stockholders. Non-employee directors are also reimbursed
for any expenses which may be incurred by them in connection with the business
and affairs of Bethlehem. None of the directors who are employees of Bethlehem
is compensated separately for service as a member of the Board of Directors or
any committee of the Board.
Under the Post Retirement Retainer Plan, directors who are not and have not
been employees of Bethlehem or its subsidiaries and who retire from the Board
with ten or more years of service, will receive annual payments equal to 100%
of the annual retainer fee payable at retirement. Directors who retire with
between five and ten years of service will receive annual payments starting at
50% of the annual retainer fee payable at retirement for directors with five
years of service and increasing 10% for each year of service up to ten years.
The annual payments will begin at retirement (or at age 65 if retirement is
prior to age 65) and will continue for a period equal to the director's years
of service with the Board. In the event of the death of a director, any unpaid
amount will be paid to the director's designated beneficiary or the director's
estate if there is no designated beneficiary.
The general retirement policy of the Board provides that non-employee direc-
tors shall retire at the end of their term as a director during which they
reach age 70, except that non-employee directors who were elected at the 1991
Annual Meeting of Stockholders (all current non-employee directors except
Messrs. Civiletti, Clark, Kaden and Kamen and Mrs. Peterson) shall retire at
the end of their term as a director during which they reach age 72. Employee
directors shall retire from the Board at the time of their retirement from
Bethlehem. The present retirement age for management employees of Bethlehem is
65.
Pursuant to the terms of a 1993 labor agreement with the United Steelworkers
of America ("USWA"), the USWA has the right to designate a nominee for consid-
eration by the Committee on Directors and the Board of Directors for one seat
on the Board. The nominee is to be a prominent individual with experience in
public service, labor, education or business. The nominee shall not be or be-
come, while serving as a director, an officer, employee or director of the
USWA. Subject to complying with the same standards of conduct as every other
Bethlehem director, and subject to annual election by the stockholders, the
USWA nominee will serve as a director during the term of the 1993 labor agree-
ment, which terminates July 31, 1999. Mr. Kaden was designated by the USWA for
consideration as a director of Bethlehem by the Committee on Directors. The
Committee on Directors recommended Mr. Kaden's election to the Board, the
Board elected Mr. Kaden a director in March 1994 and the stockholders elected
Mr. Kaden a director at the 1994 through 1997 Annual Meetings of Stockholders.
The twelve nominees whose biographies appear below have been recommended by
the Committee on Directors and proposed by the entire Board of Directors. They
have been recommended on the basis of their demonstrated broad knowledge, ex-
perience and ability in their respective endeavors and, most importantly, on
the basis of their ability to represent the interests of all stockholders,
rather than the special interests of a particular group.
INFORMATION CONCERNING NOMINEES
The persons named in the accompanying form of proxy intend to vote the
shares covered by proxies for the election of the director nominees named be-
low. Each nominee is presently a director of Bethlehem and has previously been
elected a director by the stockholders. If any nominee shall, prior to the An-
nual Meeting, become unavailable for election as a director, which is not ex-
pected, the persons named in the accompanying form of proxy will vote for such
substitute nominee, if any, as may be recommended by the Board of Directors.
Directors elected at the Meeting will hold office until the next Annual Meet-
ing of Stockholders and until their successors have been elected and quali-
fied, or until their earlier resignation, retirement or removal.
CURTIS H. BARNETTE
Mr. Barnette, age 63, has been a director of Bethle-
hem since 1986. He was elected Chairman and Chief
Executive Officer effective November 1, 1992. He has
been an employee of Bethlehem since 1967, holding
various positions. Prior to his election as Chairman
Photo of and Chief Executive Officer, Mr. Barnette had been
Curtis H. Barnette Secretary of Bethlehem since 1976, General Counsel
since 1977, Vice President, Law from 1977 to 1985
and Senior Vice President since 1985. Mr. Barnette
is also a director of Metropolitan Life Insurance
Company.
3
<PAGE>
BENJAMIN R. CIVILETTI
Mr. Civiletti, age 62, was elected a director of
Bethlehem in 1993. He has been Chairman of Venable,
Baetjer and Howard, a law firm, since July 1993 and
Photo of a partner since 1981. He had been Managing Partner
Benjamin R. Civiletti of that firm from 1987 until 1993. He previously
served as Attorney General of the United States from
1979 to 1981. Mr. Civiletti is also a director of
MBNA America Bank, N.A., MBNA International Bank
Limited and Wackenhut Corrections Corporation.
WORLEY H. CLARK
Mr. Clark, age 65, was elected a director of Bethle-
hem in 1993. He is President of W "H" Clark Associ-
ates, Ltd., a consulting firm. He retired as Chair-
man and Chief Executive Officer of Nalco Chemical
Photo of Company, a manufacturer of specialty chemicals, in
Worley H. Clark 1994, having held the positions of Chief Executive
Officer since 1982 and Chairman since 1984 and hav-
ing been an employee of that company since 1960. Mr.
Clark is also a director of NICOR Inc., USG Corpora-
tion, Fort James Corporation, Ultramar Diamond Sham-
rock Corporation, Merrill Lynch & Co., Inc. and
Millenium Chemicals Inc.
JOHN B. CURCIO
Mr. Curcio, age 63, was elected a director of Beth-
lehem in 1988. He was Chief Executive Officer and a
director of Mack Trucks, Inc., a manufacturer of
Photo of heavy-duty trucks, from 1983 until 1989 and Chairman
John B. Curcio of the Board from 1985 until his retirement. Mr.
Curcio is also a director of Minerals Technologies,
Inc. and Integrated Components Systems, Inc. and
Vice Chairman of Dallas & Mavis Specialized Carrier
Co. and Jupiter Logistics, de Mexico, SA de C.V.
LEWIS B. KADEN
Mr. Kaden, age 55, was elected a director of Bethle-
hem in 1994. He has been a partner of Davis Polk &
Photo of Wardwell, a law firm, and an Adjunct Professor of
Lewis B. Kaden Law at Columbia University since 1984, where he was
a Professor of Law from 1976 to 1984.
4
<PAGE>
HARRY P. KAMEN
Mr. Kamen, age 64, was elected a director of Bethle-
hem in 1993. He has been Chairman of the Board and
Chief Executive Officer of Metropolitan Life Insur-
ance Company, a mutual life insurance company, since
April 1993 and held the additional title of Presi-
dent of Metropolitan from December 1995 to November
1997. He has been an employee of Metropolitan since
1959, holding various positions. Prior to his elec-
Photo of tion as Chairman of the Board and Chief Executive
Harry P. Kamen Officer, Mr. Kamen had been serving as Senior Execu-
tive Vice President since October 1991, Executive
Vice President from January to September 1991, Exec-
utive Vice President and General Counsel from April
1989 to December 1990 and Senior Vice President and
General Counsel from January 1987 to March 1989. Mr.
Kamen is also a director of Banco Santander, New En-
gland Investment Companies, Inc. and Pfizer Inc.
ROBERT MCCLEMENTS, JR.
Mr. McClements, age 69, was elected a director of
Bethlehem in 1989. He retired in 1992 as Chairman of
the Board and a director of Sun Company, Inc., a di-
Photo of versified energy company, positions he held since
Robert McClements, Jr. 1987 and 1979, respectively. Mr. McClements also
served as Chief Executive Officer of that company
from 1985 until 1991. Mr. McClements is also a di-
rector of Unisys Corporation.
GARY L. MILLENBRUCH
Mr. Millenbruch, age 60, was elected a director of
Bethlehem in 1991. He was elected Executive Vice
President and Chief Financial Officer effective No-
Photo of vember 1, 1992, and Treasurer effective September 1,
Gary L. Millenbruch 1994. He has been an employee of Bethlehem since
1959, holding various positions. Prior to his elec-
tion as Executive Vice President and Chief Financial
Officer, he had been Senior Vice President and Chief
Financial Officer since 1986.
ROGER P. PENNY
Mr. Penny, age 61, was elected a director of Bethle-
hem in 1991. He was elected President and Chief Op-
Photo of erating Officer effective November 1, 1992. He has
Roger P. Penny been an employee of Bethlehem since 1958, holding
various positions. Prior to his election as Presi-
dent and Chief Operating Officer, Mr. Penny had been
Senior Vice President, Steel Operations since 1987.
5
<PAGE>
SHIRLEY D. PETERSON
Mrs. Peterson, age 56, was elected a director of
Bethlehem in January 1996. She has been President of
Hood College since July 1995. She was Commissioner
Photo of of the Internal Revenue Service from 1992 to 1993,
Shirley D. Peterson an Assistant Attorney General (Tax Division), United
States Department of Justice, from 1989 to 1992 and
a member of Steptoe & Johnson, a law firm, from 1993
to 1994 and 1969 to 1989. Mrs. Peterson is also an
Independent Trustee of Kemper Mutual Funds.
DEAN P. PHYPERS
Mr. Phypers, age 69, was elected a director of Beth-
lehem in 1986. He was a Senior Vice President and a
director of International Business Machines Corpora-
Photo of tion, an information technology and computer compa-
Dean P. Phypers ny, from 1979 and 1982, respectively, until 1987.
Mr. Phypers is also a director of American Interna-
tional Group, Inc., Church & Dwight Co., Inc. and
Cambrex Corp.
JOHN F. RUFFLE
Mr. Ruffle, age 60, was elected a director of Beth-
lehem in 1990. He retired in 1993 as Vice Chairman
of the Board of J.P. Morgan & Co. Incorporated, a
bank holding company, and Morgan Guaranty Trust Co.
of New York, a commercial bank, positions he held
Photo of since 1985. Mr. Ruffle is also a director of Trident
John F. Ruffle Corporation, American Shared Hospital Services,
Inc., Polymer Group, Inc. and Wackenhut Corrections
Corporation, a Trustee of JP Morgan Series Trust II
and a member of the Board of Managers of the North
Moore Fund, LLC and JP Morgan Global Emerging Mar-
kets Fund, LLC.
In addition to the business activities described above, the director nomi-
nees also participate in various other business, professional and charitable
activities.
6
<PAGE>
AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP
The following table shows the shares of Bethlehem Common Stock beneficially
owned, directly or indirectly, by each current director, Messrs. Jordan and
Post and all directors and executive officers as a group on the Record Date:
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
NAME BENEFICIAL OWNERSHIP(1)(2) PERCENT OF CLASS(3)
---- -------------------------- -------------------
<S> <C> <C>
Curtis H. Barnette.............. 336,662 (4)
Benjamin R. Civiletti........... 3,200 (4)
Worley H. Clark................. 4,000 (4)
John B. Curcio.................. 3,500 (4)
Lewis B. Kaden.................. 3,000 (4)
Harry P. Kamen.................. 6,000 (4)
Robert McClements, Jr........... 3,000 (4)
Gary L. Millenbruch............. 229,242 (4)
Roger P. Penny.................. 234,893 (4)
Shirley D. Peterson............. 1,500 (4)
Dean P. Phypers................. 5,000 (4)
William A. Pogue (5)............ 3,500 (4)
John F. Ruffle.................. 3,000 (4)
John A. Jordan, Jr. (5) ........ 98,909 (4)
David P. Post................... 113,415 (4)
- -----------
28 directors and executive
officers as a
group (including those named
above)......................... 1,712,421(6) 1.51%
</TABLE>
- -----------
(1) The figures shown include a total of 49,297 shares allocated on the Record
Date to the accounts of participants under the Savings Plan for Salaried
Employees of Bethlehem Steel Corporation and Subsidiary Companies. Bethle-
hem matches employee contributions up to 4% of base salary. These matching
contributions are in the form of Bethlehem Common Stock. Employees also
have the option to have their contributions invested in Bethlehem Common
Stock. As of the Record Date, there were 4,448 participants (including
about 89% of eligible employees) in the Savings Plan, holding a total of
3,825,108 shares of Bethlehem Common Stock, representing approximately 3%
of total outstanding shares.
(2) The Securities and Exchange Commission deems a person to have beneficial
ownership of all shares which that person has the right to acquire within
60 days. The figures shown also include stock options subject to acquisi-
tion within 60 days which were granted under the 1988 and 1994 Stock In-
centive Plans of Bethlehem to the following individuals or groups: Mr.
Barnette, 234,500 shares; Mr. Millenbruch, 149,500 shares; Mr. Penny,
163,250 shares; Mr. Jordan, 54,500 shares; Mr. Post, 87,950 shares; and
the directors and executive officers as a group, 1,095,500 shares.
(3) Based upon 113,134,857 total outstanding shares of Common Stock on the
Record Date.
(4) The number of shares deemed to be owned by each director or executive of-
ficer represents less than 1% of the outstanding shares.
(5) Mr. Pogue will retire as a director in April 1998. Mr. Jordan retired on
December 31, 1997.
(6) The figures shown include an aggregate of 2,314 shares held by, or for the
benefit of, the immediate families or other relatives of all directors and
executive officers as a group. Directors and executive officers disclaim
beneficial ownership of all of these shares.
- -----------
None of the directors or executive officers of Bethlehem own any shares of
Bethlehem's Preferred Stock or ESOP Preference Stock.
7
<PAGE>
COMMITTEES OF THE BOARD
Bethlehem's Board of Directors has established committees to assist it in
the discharge of its responsibilities. The principal committees, their current
members and the principal responsibilities of each are described below.
The Executive Committee is presently comprised of Messrs. Barnette (Chair-
man), Millenbruch and Penny. The Executive Committee has all of the delegable
powers of the Board, except when the Board is in session. The Executive Com-
mittee meets at appropriate times and met 7 times during 1997.
The Finance Committee is presently comprised of Mr. Barnette (Chairman) and
all other directors. The Finance Committee advises the Board, the Executive
Committee and the officers and employees of Bethlehem with respect to all ac-
tivities, plans and policies affecting the financial affairs of Bethlehem, in-
cluding dividends. The Finance Committee meets at appropriate times and met 8
times during 1997.
The Audit Committee is presently comprised of Messrs. Ruffle (Chairman),
Civiletti, Kaden and Kamen and Mrs. Peterson. The Audit Committee assists the
Board in reviewing and overseeing Bethlehem's accounting, auditing, internal
controls, financial reporting and legal compliance and has, but is not limited
to, the following powers: to review the performance of the independent audi-
tors and make recommendations to the Board with respect to the appointment,
reappointment or termination of the independent auditors; to review with
Bethlehem's general auditor and the independent auditors their annual audit
plans; to meet with management, the independent auditors and Bethlehem's gen-
eral auditor to discuss the appropriateness of Bethlehem's internal controls;
to meet separately, in executive session, on a regular basis, with Bethlehem's
general auditor and the independent auditors to discuss the results of their
examinations and their evaluations of Bethlehem's internal controls and finan-
cial reporting; to review the appointment and dismissal of Bethlehem's general
auditor; and to review with Bethlehem's general counsel the practices, proce-
dures and any material issues relating to litigation management, provisions
for contingent litigation liabilities and the legal compliance program. The
Audit Committee meets at appropriate times and met 4 times during 1997.
The Compensation Committee is presently comprised of Messrs. Clark (Chair-
man), Curcio, McClements, Phypers and Pogue. The Compensation Committee has
the responsibility for management compensation and review and has, but is not
limited to, the following powers: to fix the compensation to be paid to the
principal corporate officers of Bethlehem; all the powers and duties of the
Board under the Annual Incentive Compensation Plan for Key Employees of Beth-
lehem, the 1994 and 1988 Stock Incentive Plans of Bethlehem, and the 1994 Non-
Employee Directors Stock Plan; and to review and approve Bethlehem's report on
executive compensation to be contained in this Proxy Statement. The members of
the Committee do not participate in the executive compensation programs the
Committee administers. The Committee's report on executive compensation can be
found beginning on page 14 of this Proxy Statement. The Compensation Committee
meets at appropriate times and met 5 times during 1997.
The Committee on Directors is presently comprised of Mr. Phypers (Chairman)
and all other non-employee directors. The Committee on Directors advises the
Board with respect to corporate governance issues and has, but is not be lim-
ited to, the following powers: to search for persons qualified to be members
of the Board and to make recommendations with respect thereto to the Board; to
review and evaluate the members of the Board, the Committees of the Board and
procedures and policies of the Board; to review and evaluate the performance
of Bethlehem and the management thereof; to review compensation and benefits
for members of the Board; and to review organization, strategic planning and
scheduling for the Board and the Committees of the Board. If any stockholder
wishes to recommend a nominee for membership on the Board of Directors, he or
she should write to the Secretary of Bethlehem specifying the name of the nom-
inee and the qualifications of such nominee for membership on the Board of Di-
rectors. Each submission must include the written consent of the person pro-
posed for nomination indicating that the person is willing and able to serve
as a director of Bethlehem. All such recommendations will be brought to the
attention of the Committee on Directors. The Committee on Directors meets at
appropriate times and met 5 times during 1997.
CERTAIN BUSINESS RELATIONSHIPS
As noted above, Mr. Civiletti is Chairman of Venable, Baetjer and Howard and
Mr. Kaden is a partner of Davis Polk & Wardwell. Both of these law firms ren-
der legal service to Bethlehem in the ordinary course of business.
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SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The Securities Exchange Act of 1934 requires Bethlehem's directors and exec-
utive officers and certain other stockholders to file reports of ownership and
changes in ownership of Bethlehem stock with the Securities and Exchange Com-
mission and the New York Stock Exchange. To Bethlehem's knowledge, all such
reports for 1997 were timely filed, except that Bethlehem filed one report
late reflecting the disposition of 50 shares of Bethlehem Common Stock by D.
L. Stephenson.
RATIFICATION OF THE APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors, on the recommendation of the Audit Committee, has
appointed the firm of Price Waterhouse LLP ("Price Waterhouse") as independent
auditors to examine the financial statements of Bethlehem and its consolidated
subsidiaries for the year 1998.
Price Waterhouse is a member of the SEC Practice Section of the American In-
stitute of Certified Public Accountants and has submitted a copy of its peer
review results to the Audit Committee. The peer review consists of a review
and evaluation of the quality of a firm's accounting and auditing services by
partners and managers from another CPA firm or from several CPA firms.
Price Waterhouse states that no partner or professional employee of that
firm has any direct financial interest or any material indirect financial in-
terest in Bethlehem or in any of its subsidiaries.
Representatives of Price Waterhouse are expected to be present at the Annual
Meeting of Stockholders with an opportunity to make a statement if they desire
to do so and to be available to respond to appropriate questions.
The affirmative vote of the holders of a majority of the shares of Common
Stock and of ESOP Preference Stock that are present in person or by proxy and
entitled to vote at the Annual Meeting, voting together as a single class, is
required for ratification of the appointment of the independent auditors.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR RATIFICATION OF
THE APPOINTMENT OF THE INDEPENDENT AUDITORS.
APPROVAL OF 1998 STOCK INCENTIVE PLAN
On December 10, 1997 the Board of Directors adopted and recommended for sub-
mission to stockholders for their approval the 1998 Stock Incentive Plan (the
"1998 Plan"). The 1998 Plan is substantially similar to, and would replace,
the 1994 Stock Incentive Plan (the "1994 Plan") which was previously approved
by stockholders. Virtually no shares remain available for future award under
the 1994 Plan. The Board of Directors believes that it is desirable that Beth-
lehem continue to have a stock incentive plan to help align the interests of
executive officers and other key employees of Bethlehem and its subsidiaries
with the interests of stockholders. Encouraging ownership of Bethlehem Common
Stock by executive officers and key employees through a stock incentive plan
will increase the long term retention of such employees and provide additional
incentive for them to promote the success of Bethlehem and enhance stockholder
value.
If approved by stockholders, the 1998 Plan would become effective on April
28, 1998 and would terminate on December 31, 2002.
SUMMARY OF 1998 STOCK INCENTIVE PLAN
The main features of the 1998 Plan are described below, but the description
is qualified in its entirety by reference to the complete text of the 1998
Plan which appears as Exhibit 1 to this Proxy Statement.
1. There will be reserved for use upon the exercise of, or the surrender of
the right to exercise, options and pursuant to stock awards under the 1998
Plan an aggregate of 5,000,000 shares of Bethlehem Common Stock (about 4% of
the shares of Common Stock outstanding and not held in treasury at March 2,
1998), although the number of shares to be issued pursuant to restricted stock
awards shall not exceed 1,000,000. Such shares may be, in whole or in part, as
the Board shall from time to time determine, issued shares of Common Stock
which have been reacquired by Bethlehem or authorized but unissued shares of
Common Stock. The number of shares is subject to adjustment in the event of
changes in the outstanding Common Stock of Bethlehem by reason of stock divi-
dends, stock splits, recapitalizations and the like. In general, if an option
expires or terminates or is forfeited or canceled for any reason without hav-
ing been exercised or the right to exercise it surrendered in full, the re-
maining shares covered thereby will again be available for the purposes of the
1998 Plan, and if any stock
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award is forfeited before the restrictions provided for in such stock award
lapse in full, the remaining shares covered thereby will again be available
for the purposes of the 1998 Plan.
2. Only regular key employees (including officers) of Bethlehem or any of
its subsidiaries who shall be selected by the Board may receive option and
stock awards under the 1998 Plan. No officer or employee may receive option
and stock awards over the period the 1998 Plan is in effect for an aggregate
of more than 400,000 shares under the 1998 Plan. In 1997, option awards cover-
ing 651,100 shares were made to 326 key employees under the 1994 Plan. In ad-
dition, restricted stock awards for an aggregate of 155,000 shares were made
to 51 key employees on April 30, 1997 and July 30, 1997 under the 1994 Plan.
3. Options may be "incentive stock options" within the meaning of Section
422(b) of the Internal Revenue Code of 1986 or nonqualified stock options. The
purchase price of the Common Stock covered by each option will be not less
than 100% of the fair market value of the Common Stock at the time of granting
the option, determined as provided in the 1998 Plan. No outstanding option may
be amended to lower the purchase price of the Common Stock covered thereby.
The purchase price is payable in full at the time of exercise in cash or in
whole or in part with shares of Common Stock (valued at the closing sale price
of a share of Common Stock on the New York Stock Exchange on the date the op-
tion is exercised). The ability to pay all or a portion of the purchase price
of the Common Stock covered by each option with shares of Common Stock would
permit possible payment in successive and substantially simultaneous exer-
cises. Such payment might permit an option holder to start with a relatively
small number of shares of Common Stock and exercise all his then exercisable
stock options without additional cash (except for fractional share adjustments
and subject to the general requirement that an option, unless it covers less
than 100 shares of Common Stock, may not be exercised as to less than 100
shares at any one time) or any more investment other than the original shares
of Common Stock held by such holder. However, whether the option holder exer-
cises the entire stock option in a single exercise, or through a series of
successive and substantially simultaneous exercises, the net increase in
shares of Common Stock held by the option holder as a result of either type of
exercise would be identical.
4. The term of each option will be not more than ten years from the date of
grant, and will be subject to earlier termination or forfeiture as described
below. Options may be exercised, as determined by the Board and specified in
the written option agreement relating thereto, at any time or from time to
time, in one or more installments, as the Board in its discretion shall deter-
mine. The Board may also establish conditions to exercise based upon continued
employment, the attainment of specified financial performance goals and other
relevant factors.
5. Unless otherwise determined by the Board, option and stock awards will
not be transferable otherwise than by will or the laws of descent and distri-
bution.
6. If so authorized by the Board, the right to exercise an option, or a por-
tion thereof (but only to the extent and in the amounts that such option shall
then be exercisable), may be surrendered to Bethlehem in return for the pay-
ment by Bethlehem of an amount equal to the excess of the fair market value of
the shares of Common Stock covered thereby or portion thereof over the option
price thereof. Any such payment may be made in shares of Common Stock (valued,
generally, at the closing sale price of the Common Stock on the New York Stock
Exchange on the date of surrender), or in cash, or partly in cash and partly
in shares of Common Stock, as the Board shall determine.
7. The Board may permit any taxes required to be withheld in connection with
any option or stock award to be paid in cash, in already-owned shares of Com-
mon Stock, or by the withholding of shares of Common Stock otherwise issuable
upon the exercise or vesting of any such award, or any combination of the
foregoing.
8. An option agreement may provide that (i) any shares of Common Stock is-
sued upon the exercise of the option provided for therein, (ii) any payment
(whether in shares of Common Stock, or in cash, or some combination thereof)
made by Bethlehem upon the surrender of the right to exercise the option pro-
vided for therein, (iii) the option itself provided for therein or (iv) any
combination of the foregoing will be forfeited and returned to Bethlehem if
the recipient shall cease to remain in the employ of Bethlehem or one or more
of its subsidiaries during the period or periods specified by such agreement.
The holder of an option will, as one of the conditions of the option agreement
relating thereto, agree to remain in the employ of Bethlehem or one or more of
its subsidiaries in order to exercise the option. Any such condition to remain
in the employ of Bethlehem or one or more of its subsidiaries will not apply
(i) if employment shall terminate or be terminated by reason of retirement,
death or permanent disability or (ii) if a change in control shall have oc-
curred. The term "change in control" means (i) the first purchase of shares
pursuant to a tender offer or exchange (other than a tender offer or exchange
by Bethlehem) for all or part of Bethlehem's Common Stock or any securities
convertible into such Common Stock,
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(ii) the receipt by Bethlehem of a Schedule 13D or other advice indicating
that a person is the "beneficial owner" (as that term is defined in Rule 13d3
under the Securities Exchange Act of 1934) of 20% or more of Bethlehem's Com-
mon Stock calculated as provided in paragraph (d) of said Rule 13d3, (iii) the
date of approval by stockholders of Bethlehem of an agreement providing for
any consolidation or merger of Bethlehem in which Bethlehem will not be the
continuing or surviving corporation or pursuant to which shares of Common
Stock of Bethlehem would be converted into cash, securities or other property,
other than a merger of Bethlehem in which the holders of Common Stock of Beth-
lehem immediately prior to the merger would have the same proportion of owner-
ship of common stock of the surviving corporation immediately after the merg-
er, (iv) the date of the approval by stockholders of Bethlehem of any sale,
lease, exchange or other transfer (in one transaction or a series of related
transactions) of all of or substantially all the assets of Bethlehem or (v)
the adoption of any plan or proposal for the liquidation or dissolution of
Bethlehem.
9. A holder of an option who retires or whose employment terminates or is
terminated by reason of permanent disability (and, if he shall die within five
years after such retirement or such termination by reason of permanent dis-
ability, his estate or a person who has acquired the right to exercise such
option by bequest or inheritance) may exercise the option, or, subject to ac-
ceptance by Bethlehem, surrender it as described in paragraph 6 above, at any
time within five years after such retirement or after such termination by rea-
son of permanent disability, but not after the expiration of the term of the
option. If the holder dies after such retirement or such termination by reason
of permanent disability and during the period during which the option may be
exercised, his estate or such person who has acquired the right to exercise
the option will be deemed to have offered, immediately prior to the termina-
tion of such period, to surrender the right to exercise the option as de-
scribed in paragraph 6 above, unless the option has theretofore been exercised
or so surrendered or forfeited. The term "permanent disability" means disabil-
ity by bodily injury or disease, either occupational or nonoccupational in
cause, preventing the employee on the basis of satisfactory medical evidence
from engaging in any employment of the type normally performed by the employ-
ee.
10. If the holder of an option dies while employed by Bethlehem or by one or
more of its subsidiaries, the option may be exercised in whole or in part, or,
subject to acceptance by Bethlehem, the right to exercise the option may be
surrendered as described in paragraph 6 above, by his estate (or by a person
who has acquired the right to exercise such option by bequest or inheritance)
at any time within five years after the date of death.
11. Anything in the 1998 Plan to the contrary notwithstanding, if a change
in control shall occur, the right to exercise all outstanding options to the
extent such options shall not theretofore have been forfeited or exercised or
the right to exercise such options theretofore surrendered shall automatically
vest in accordance with their respective terms. Upon the occurrence of a
change in control, an employee to whom an option shall have been granted may
exercise the portion, if any, of such option that shall then be exercisable,
and any and all installments of such option that shall not then be exercisable
and shall not theretofore have been forfeited shall automatically become exer-
cisable on the date or dates established in the option agreement relating
thereto as the date or dates on which such installment or installments shall
become exercisable, regardless of whether the conditions, if any, to exercise
based upon continued employment, the attainment of specified financial perfor-
mance goals or any other factor shall have been or shall thereafter be satis-
fied. Such employee or, if such employee shall die, the estate of such em-
ployee (or a person who shall have acquired the right to exercise such option
by bequest or inheritance) may exercise each such portion that shall become
exercisable pursuant to the immediately preceding sentence during the six-
month period after it shall have become exercisable, but not after the expira-
tion of the term of the option.
12. Each stock award will be subject to such terms and conditions as the
Board in its discretion shall determine, which may include, without limita-
tion, conditions for issuance of shares of Common Stock pursuant thereto at
any time subsequent to the granting thereof or in installments from time to
time or providing for forfeiture of such award or the shares issued or there-
tofore issued pursuant thereto in designated circumstances. The Board may in
its discretion award unrestricted shares of Common Stock in consideration of
services theretofore rendered by the recipient. The Board in its discretion
may require, among other things, that the recipient pay the par value for the
shares to be issued pursuant to the award. A stock award made pursuant to the
1998 Plan may be subject to such terms, conditions and restrictions, includ-
ing, without limitation, substantial risks of forfeiture based upon require-
ments relating to continued employment, the attainment of specified financial
performance goals or other relevant factors and for such period or periods as
shall be determined by the Board at the time that the stock is awarded. In the
event of a recipient's termination of employment for any reason prior to the
lapse of restrictions applicable to a stock award made to such recipient, the
Board may determine in its sole discretion that any or all rights to shares of
Common Stock as to which there will still remain unlapsed restrictions will be
forfeited by such recipient to Bethlehem without payment or any consideration
by Bethlehem, or that the restrictions with respect to all or a portion of
such shares will terminate.
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13. The 1998 Plan will be administered by the Board or by a committee ap-
pointed by the Board consisting of not less than three members of the Board.
Subject to the provisions of the 1998 Plan, the Board or such committee will
determine the employees to whom option and stock awards shall be granted, the
type of awards, and the terms and conditions of each option and stock award.
The committee will be composed of individuals who are not employees of Bethle-
hem or its subsidiaries and who receive fees from Bethlehem only in their ca-
pacity as members of the Board. It is expected that the Compensation Committee
will be appointed to administer the 1998 Plan.
14. The 1998 Plan may be amended by the stockholders of Bethlehem. The Board
may also amend the 1998 Plan, but it may not, without approval of the stock-
holders, (i) increase the maximum number of shares as to which option and
stock awards may be granted under the 1998 Plan (other than as described in
paragraph 1 above), (ii) change the manner of determining the option prices
except to change the manner of determining the fair market value of the Common
Stock as provided in the 1998 Plan, (iii) increase the maximum term of each
option as set forth in the first sentence of paragraph 4 above, (iv) change
the provisions outlined in the third sentence of paragraph 13 above or (v) ex-
tend the term of the 1998 Plan. No amendment of the 1998 Plan may adversely
affect any rights under an outstanding option or stock award without the con-
sent of the holder thereof.
15. Unless extended by approval of the stockholders, the 1998 Plan will ter-
minate on December 31, 2002; provided that the Board or the stockholders may
terminate the Plan at an earlier date. No termination of the 1998 Plan may ad-
versely affect any rights under an outstanding option or grant without the
consent of the holder thereof.
16. The 1998 Plan provides that its submission to stockholders for approval
will not be construed as creating any limitations on the power of the Board to
adopt such other incentive arrangements as it may deem desirable, including,
without limitation, the granting of stock options or stock otherwise than un-
der the 1998 Plan.
TAX EFFECTS
Incentive Stock Options. Under the Internal Revenue Code of 1986 (the
"Code"), if shares of Common Stock are issued to the original holder of an in-
centive stock option granted and exercised in accordance with the 1998 Plan,
and exercised during employment or within three months after the participant's
termination of employment (12 months in the case of permanent and total dis-
ability as defined in the Code), then (1) no income will be realized by such
holder at the time of the grant of the option or the transfer of such shares
to such holder pursuant to the exercise of such option; (2) for purposes of
the alternative minimum tax, the holder will have alternative minimum taxable
income resulting from the exercise of the option, and tax basis in the shares
received on exercise of the option, determined at the same time and in the
same amount as if the option were a nonqualified option (so that, for example,
alternative minimum taxable income will generally be based on the value of the
shares on the date of exercise of the option); (3) no deduction will be allow-
able to Bethlehem for Federal income tax purposes in connection with the grant
or exercise of such option; and (4) upon a sale or exchange of such shares af-
ter the later of (a) one year from the date of transfer of the shares to the
original holder and (b) two years from the date of the grant of the option,
any amount realized by such holder in excess of the option price will be taxed
to the holder as short- or long-term capital gain, and any loss sustained by
the holder will be a short- or long-term capital loss.
If such shares are disposed of before the holding period requirements in
clause (4) above are satisfied, then (i) the holder will recognize taxable or-
dinary income in the year of the disposition in an amount determined under the
rules of the Code; (ii) subject to the limitations described below, Bethlehem
will be entitled to a deduction in the amount of the ordinary income so recog-
nized; (iii) the holder will realize short-term capital gain or loss, as the
case may be, in an amount equal to the difference between (x) the amount real-
ized by the holder upon sale or exchange of the shares and (y) the option
price paid by the holder increased by the amount of ordinary income, if any,
realized by the holder; and (iv) the alternative minimum tax calculation de-
scribed above will nevertheless still apply in the year of exercise, although
if the shares are sold to an unrelated party in the taxable year of exercise
there should generally be no adverse effect because the alternative minimum
taxable income will then be limited to the taxable gain on the sale as deter-
mined for regular tax purposes.
Nonqualified Options. Under the Code, if shares of Common Stock are issued
to the original holder of a nonqualified option (i.e., an option which is not
an incentive stock option, or an incentive stock option which is exercised
more than three months after the participant's termination of employment (or
more than 12 months thereafter in the case of permanent and total disability
as defined in the Code)) granted and exercised in accordance with the 1998
Plan, then (1) no income will be recognized by the holder at the time of the
grant of the
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option; (2) upon exercise of the option the holder will recognize ordinary in-
come in an amount equal to the excess of the fair market value, at the time of
exercise, of the shares acquired over the option price; (3) upon the sale of
the shares acquired pursuant to the exercise of the option, the holder will
realize short-term or long-term capital gain or loss, as the case may be, in
an amount equal to the difference between the amount realized on such sale and
the holder's tax basis in the shares (determined as described in the following
paragraph); and (4) subject to the limitation described below, Bethlehem will
be entitled to a deduction in an amount equal to the ordinary income realized
by the holder as set forth in clause (2) above.
If payment of the option price is made entirely in cash, the tax basis of
the shares will be equal to their fair market value on the date of exercise,
but not less than the option price, and their holding period will begin on the
day after the tax basis of the shares is so determined. If the option recipi-
ent uses previously owned shares of Common Stock to exercise an option in
whole or in part, the transaction will not be considered to be a taxable dis-
position of the previously owned shares. The holder's tax basis and holding
period of the previously owned shares will be carried over to the equivalent
number of shares received on exercise. The tax basis of the additional shares
received upon exercise will be the fair market value of the shares on the date
of exercise, but not less than the amount of cash used in payment, and the
holding period for such additional shares will begin on the day after the tax
basis of the shares is so determined.
Stock Appreciation Rights. In the event the Board authorizes the surrender
of the right to exercise an option in exchange for an amount equal to the ex-
cess of the fair market value of the shares of Common Stock covered thereby
over the option price, such surrender shall be considered the exercise of a
stock appreciation right. On the exercise of a stock appreciation right for
cash, the holder will be taxed at ordinary income rates on the amount of cash
received. On the exercise of a stock appreciation right for shares, the holder
will be taxed at that time on the fair market value of the shares received.
Subject to the limitation described below, Bethlehem will be entitled to a de-
duction at the same time and in the same amount as the holder has income, in-
cluding a deduction for such dividends paid to the holder in the absence of
the election under Section 83(b).
Restricted Stock. If restricted shares of Common Stock are granted to a par-
ticipant under the 1998 Plan, then
(1) except as described in clause (2) below, when the shares cease to be
subject to restrictions under the 1998 Plan, the participant will recognize
taxable ordinary income equal to the excess of the fair market value of the
shares at that time over the amount, if any, paid for such shares; and
(2) within 30 days after the date the shares are considered to be trans-
ferred to a participant, the participant may elect under Section 83(b) of
the Code to recognize taxable ordinary income at the time of transfer in an
amount equal to the excess of the fair market value of the shares at such
time over the amount, if any, paid for such shares, in which case (a) if
the shares are subsequently forfeited, no deduction of such amount will be
allowed and the participant will have a capital loss equal to the amount,
if any, paid for such shares and (b) no additional income will be recog-
nized upon the lapse of restrictions on the shares.
The recipient's holding period for the shares will begin at the time taxable
income is recognized under these rules, and the tax basis in the shares will
be the amount of ordinary income so recognized plus the amount, if any, paid
for the shares. Moreover, any dividends received on the restricted shares
prior to the date the participant recognizes income as described above will be
taxable compensation income when received. Subject to the limitation described
below, Bethlehem is entitled to deduct amounts equal to the amounts of income
recognized by the participant.
Parachute Payment. If the exercisability of an option or the elimination of
the restrictions on stock acquired under the 1998 Plan is accelerated or if a
condition relating to the exercise of an option is eliminated as a result of a
change in control, all or a portion of the value of the option or stock at
that time may be a parachute payment for purposes of determining whether a 20%
excise tax is payable by the employee as a result of the receipt of an excess
parachute payment pursuant to Section 4999 of the Code. Bethlehem will not be
entitled to a deduction for any amounts considered an excess parachute pay-
ment.
Limitation on Bethlehem's Deduction. Pursuant to the Omnibus Budget Recon-
ciliation Act of 1993, Bethlehem's tax deduction for all compensation (includ-
ing the value of restricted stock when it becomes taxable to the officer) paid
to specified officers in any one year after 1993 is limited to $1,000,000 in
certain circumstances. Generally, "performance based" compensation, as defined
in Code Section 162(m), is not subject to the limitation. Accordingly, compen-
sation resulting from the exercise or surrender of a stock option under the
1998 Plan will be exempt from this limitation if the 1998 Plan is approved by
stockholders and the grant of such options is made by
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the Committee described on page 16. Compensation arising from the grant of re-
stricted shares of Common Stock will generally be subject to this limitation.
The Committee has the discretion, however, to grant restricted shares of Com-
mon Stock intended to qualify as "performance based" compensation as defined
in Code Section 162(m). Such grants will vest only upon the Committee's writ-
ten confirmation that one or more pre-established, objective performance goals
have been satisfied. The specific goals established by the Committee will be
determined with reference to one or more financial performance goals includ-
ing, but not limited to: market price of Common Stock, market share of Bethle-
hem or a business unit thereof, earnings, net income, earnings per share, re-
turn on equity or costs.
OTHER INFORMATION
Bethlehem intends to take such actions as may be required to keep the shares
of Common Stock reserved for purposes of the 1998 Plan registered under the
Securities Act of 1933, as amended, and listed on the New York Stock Exchange.
On March 2, 1998, the closing price of the Common Stock on the New York
Stock Exchange was $10.8125 per share. The affirmative vote of the holders of
a majority of the outstanding shares of Common Stock and of ESOP Preference
Stock that are present in person or by proxy and entitled to vote at the An-
nual Meeting, voting together as a single class, is required for approval of
the 1998 Plan.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR APPROVAL OF
THE 1998 STOCK INCENTIVE PLAN.
EXECUTIVE COMPENSATION
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Bethlehem's executive compensation programs are designed to attract, retain
and motivate highly qualified executives to help cause the best possible per-
formance from them. Compensation for Bethlehem's executives is based both on
individual performance and upon corporate and business unit performance and
consists of the following elements:
. Salaries that are determined by individual contribution and performance
and that are competitive in the marketplace.
. Incentive compensation bonuses that, if paid, are directly linked to cor-
porate and business unit profitability and performance which enhance
stockholder value.
. Long-term stock incentives that are designed to align the interests of
the executives with those of the stockholders and to increase the long-
term retention of key employees. Stock ownership fosters commitment to
long-term stockholder value and executives are encouraged to own and hold
Bethlehem Common Stock through these stock incentive plans and the Sav-
ings Plan.
. A broad-based employee benefits program which includes a pension program,
a savings plan, group medical coverage and life insurance.
The Compensation Committee of the Board of Directors is responsible for ad-
ministering Bethlehem's executive compensation programs and for determining
the compensation of Bethlehem's executive officers. The Committee has avail-
able to it extensive compensation surveys (primarily with respect to salaries,
annual incentive compensation and stock options), independent compensation
consultants and information about executive compensation within the steel in-
dustry and other industry groups. The Committee is composed of directors who
are not current or retired employees of Bethlehem and who do not participate
in the executive compensation programs which the Committee administers.
Salaries. The Committee believes the salary of an executive must be based
primarily on the executive's level of responsibility and performance. In addi-
tion, the Committee believes that salaries should be competitive with execu-
tive salaries provided by other companies in the steel business, including the
peer group of integrated steelmakers shown in the comparative performance
chart on page 19, and by other companies which are appropriate to use for com-
parison purposes because of similarities in size or the nature of the busi-
nesses. The Committee reviews both publicly available information about the
salaries paid to executive officers of other steel companies and broad survey
data from over 300 manufacturing, non-utility and non-financial services com-
panies to
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determine salary levels that compare to those at companies with similar busi-
ness performance, measured by such criteria as revenue, return on assets and
return on equity. Salary levels for Bethlehem's executives are targeted at the
median of such survey data for companies with annual revenues of between $3
billion and $6 billion. Since duties, responsibilities and experience of an
executive officer may differ from survey norms in both content and scope, ad-
justments are made by the Committee in its judgment for those factors as well
as for individual performance. Consequently, some salaries are lower and some
higher than survey medians. The Committee conducts periodic reviews of execu-
tive officer salaries and makes adjustments as warranted. The increase in the
1997 salaries of the executive officers named in the Summary Compensation Ta-
ble was based on individual performance and the continued improvement in
Bethlehem's performance and financial results during 1996. The 1997 salary
levels for these officers do not, in the Committee's opinion, significantly
deviate from survey medians described above.
Incentive Compensation Bonuses. The Committee believes that competitive sal-
aries should be supplemented by incentive compensation bonus awards which are
directly linked to performance-oriented goals as measured by Bethlehem's an-
nual business plan. The Committee also believes that achievement of these
goals should create value for Bethlehem's stockholders over time. The awards
may be granted in cash, stock or a combination thereof.
Incentive compensation bonus awards for executive officers are paid pursuant
to a profit-sharing plan for essentially all salaried employees. Under the
plan, employees and executive officers have the opportunity to earn a targeted
percentage of base salary which increases with higher position levels, thereby
placing a greater percentage of compensation at risk for those with greater
responsibility. For the chief executive officer and the other four executive
officers named in the Summary Compensation Table, payment of incentive compen-
sation under this program is based entirely on the achievement of corporate
objectives for return on net assets above a threshold goal and payments may
not exceed 120% of base salary for the chief executive officer and 100% of
base salary for the other four executive officers. For other executive offi-
cers, incentive payments are based on the achievement of corporate profitabil-
ity and budget goals and, in the case of executives at business units, in part
on the achievement of business unit profitability goals and in part on the
achievement of corporate profitability goals. For 1997, Mr. Barnette and each
of the other four officers named in the Summary Compensation Table received an
incentive compensation bonus award equal to approximately 101% and 85%, re-
spectively, of base salary based on Bethlehem's 1997 return on net assets. For
1998, incentive compensation awards for the chief executive officer and other
executive officers will be based on the achievement of corporate objectives
for return on net assets above a threshold goal and the achievement of perfor-
mance-oriented goals.
Long-Term Stock Incentives. The Committee believes that stock incentives are
an important element of Bethlehem's executive compensation program. They help
align the interests of Bethlehem's executives with those of the stockholders
and increase the long-term retention of key employees. Executive officers are
required to own or have plans to own Common Stock in amounts related to their
base salary and to hold and not dispose of shares they own. As discussed be-
low, the Committee has made stock option and restricted stock awards to execu-
tive officers and other key employees under its stock incentive plans. Also,
Bethlehem's Savings Plan provides for matching company contributions which are
made entirely in Bethlehem Common Stock.
Executive officers and other key employees have received annual grants of
stock options under Bethlehem's stock incentive plans. The Committee believes
that stock options provide an incentive that focuses the executive's attention
on managing Bethlehem from the perspective of an owner with an equity stake in
the business. Options are awarded with an exercise price equal to the market
price of Common Stock on the date of grant and have a maximum term of ten
years. Options awarded in 1997 may be exercised for up to one-fourth of the
shares covered by the option each year over a four-year period commencing on
the date of grant and were awarded in tandem with stock appreciation rights.
Executives are encouraged to hold the stock received through the exercise of
options and stock appreciation rights. In determining the number of option
shares to be awarded to an executive officer, the Committee considers the per-
formance of the individual and the individual's position level. The Committee,
in its judgment, may adjust the number of shares based on a comparison of op-
tion awards (using grant date value) of the survey companies described under
"Salaries". Applying these factors, during 1997 the Committee awarded 326 key
employees, including Mr. Barnette and the other executive officers named in
the table on page 17, options to purchase Bethlehem Common Stock at a price of
$8.375 per share (the fair market value of Bethlehem Common Stock on the date
of the award).
The Committee has also implemented a Key Employee Stock Investment Award
Program under the 1994 Stock Incentive Plan which is designed to help increase
the long-term retention of key employees, encourage their ownership of stock
and align their interests with the interests of the stockholders. Under this
Program, executive officers and other key employees have been awarded re-
stricted shares of Common Stock which may
15
<PAGE>
not be sold, transferred or assigned while the shares are restricted. Unless
otherwise determined by the Committee, (a) the restrictions on the shares gen-
erally expire either (i) at the later of age 64 or retirement or (ii) after
five years as to one-half of the shares awarded and at the later of age 64 or
retirement as to the remaining shares and (b) the shares are forfeited if the
employee voluntarily leaves the employment of Bethlehem (unless, at
Bethlehem's request, the employee enters into a consulting and non-compete
agreement) or is terminated for cause before the restrictions expire. Divi-
dends, if declared, are payable upon the restricted shares. The size of re-
stricted stock awards under this Program is determined by the Committee in its
judgment based on a number of factors including level of responsibility, indi-
vidual performance and potential to make a contribution to Bethlehem's future
success, overall corporate progress toward achieving sustained profitability
and the restricted stock practices at other companies. The Committee assigns
no specific weight to any of these factors when making its determinations. Mr.
Barnette and the other named executive officers did not receive any restricted
stock awards in 1997.
Compensation of Chief Executive Officer. In establishing Mr. Barnette's sal-
ary for 1997, the Committee considered the salaries of chief executive offi-
cers of other steel companies and companies of similar size and complexity.
They also considered Mr. Barnette's performance and the continued challenges
facing Bethlehem. During 1996, Bethlehem took significant actions to improve
stockholder value. It announced a restructuring plan that included the exit of
several underperforming businesses. This plan was successfully implemented in
1997. Bethlehem also enhanced the competitiveness of its three core steel Di-
visions and made steady progress in dealing with its pension and health care
legacy costs.
Mr. Barnette received an incentive compensation bonus award for 1997 which
is discussed under Incentive Compensation Bonuses above. Stock option awards
received by Mr. Barnette during 1997 are discussed under Long-Term Stock In-
centives above.
Limitation on Deductibility of Executive Compensation. Section 162(m) of the
Internal Revenue Code denies a publicly held corporation, such as Bethlehem, a
federal income tax deduction for certain compensation in excess of $1 million
per year paid to or accrued for each of its chief executive officer and four
other most highly compensated executive officers. "Performance based" compen-
sation, such as stock options awarded under Bethlehem's 1994 Stock Incentive
Plan are not subject to the limitation on deductibility.
Based on Bethlehem's substantial net loss carryforwards ($1.8 billion at De-
cember 31, 1997) and the levels and types of compensation of Bethlehem's af-
fected executive officers, the Committee continues to believe that the limita-
tion on deductibility of certain compensation is currently not material to
Bethlehem. Nevertheless, the Committee will continue to review the situation
and future events with an objective of achieving deductibility to the extent
appropriate. Restricted stock awards under the existing Key Employee Stock In-
vestment Award Program are not exempt from the limitation, but the Committee
feels that such awards are a necessary and appropriate incentive to motivate
executives and align their interests with the interests of stockholders.
Compensation Committee
Worley H. Clark, Chairman
John B. Curcio
Robert McClements, Jr.
Dean P. Phypers
William A. Pogue
16
<PAGE>
SUMMARY COMPENSATION TABLE
The following table shows the aggregate compensation awarded or paid to, or
earned by, Bethlehem's chief executive officer and each of Bethlehem's other
four most highly compensated executive officers.
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
------------------------------------ ------------------------
OTHER SECURITIES
ANNUAL RESTRICTED UNDERLYING
COMPEN- STOCK OPTIONS/ ALL OTHER
SALARY ($) BONUS(2)($) SATION(3)($) AWARDS(4)($) SARS (#) COMPENSATION(5)($)
---------- ----------- ------------- ------------- ---------- ------------------
<S> <C> <C> <C> <C> <C> <C>
Curtis H. Barnette
Chairman and Chief
Executive Officer
1997.................. $675,000 $694,600 $931,277 $ 0 50,000 $69,677
1996.................. 655,000 90,400 0 412,500 50,000 70,718
1995.................. 625,000 221,300 0 0 50,000 73,660
John A. Jordan, Jr.(1)
Senior Vice President
1997.................. $362,000 $305,900 $651,179 $ 0 0 $40,034
1996.................. 349,250 41,700 0 137,500 25,000 40,458
1995.................. 336,250 101,800 0 0 25,000 43,303
Gary L. Millenbruch
Executive Vice
President and Treasurer
1997.................. $455,000 $392,100 $554,843 $ 0 30,000 $51,123
1996.................. 439,001 51,300 0 206,250 30,000 51,179
1995.................. 420,833 125,400 0 0 30,000 52,707
Roger P. Penny
President
1997.................. $521,500 $451,300 $714,877 $ 0 35,000 $53,641
1996.................. 501,001 58,600 0 206,250 35,000 54,678
1995.................. 480,000 143,100 0 0 35,000 57,845
David P. Post
Senior Vice President
1997.................. $312,500 $270,400 $288,943 $ 0 25,000 $28,926
1996.................. 298,334 35,100 0 137,500 25,000 29,400
1995.................. 282,500 84,100 105,668 0 25,000 31,181
</TABLE>
- -----------
(1) Mr. Jordan retired on December 31, 1997.
(2) Each executive named in the table received an annual incentive
compensation bonus award for 1997 equal to a percentage of base salary at
year end 1997 based on Bethlehem's 1997 return on net assets as described
under Incentive Compensation Bonuses.
(3) Relates to the unfunded retirement benefits payable to such officers under
the Excess Benefit Plan and Supplemental Benefits Plan and represents the
amount of payments to cover tax liabilities arising from the purchase of
individually owned annuities to secure a portion of such benefits.
(4) Fair market value at date of issuance of restricted shares of Common Stock
awarded under the Key Employee Stock Investment Award Program. The shares
are restricted and generally may not be sold, transferred or assigned
until the later of age 64 or retirement. Mr. Barnette's 1996 award will
vest on February 1, 1999, and Mr. Post's 1996 award will vest on January
1, 1998. Dividends, if declared, are payable upon the restricted stock.
The aggregate number of shares of restricted stock awarded under the Key
Employee Stock Investment Award Program and held by each of the named in-
dividuals at December 31, 1997, and the aggregate value of these shares
based on a market value of $8.6873 per share at December 31, 1997, is as
follows: Mr. Barnette, 36,000 restricted shares with a value of $312,743;
Mr. Jordan, 10,000 restricted shares with a value of $86,873; Mr.
Millenbruch, 46,000 restricted shares with a value of $399,616; Mr. Penny,
46,000 restricted shares with a value of $399,616; and Mr. Post, 15,000
restricted shares with a value of $130,310. During 1997, restrictions
ended on the following additional shares: Mr. Barnette, 66,000 shares; and
Mr. Jordan, 19,250 shares.
(5) "All Other Compensation" consists of supplemental insurance costs,
Matching Company Contributions to the Savings Plan, cash or single premium
annuities purchased to cover the shortfall of Matching Company
Contributions to the Savings Plan due to Internal Revenue Code limitations
and the value of split dollar insurance benefits in the following
respective amounts for 1997: Mr. Barnette--$13,442, $5,867, $39,347,
$11,021; Mr. Jordan--$9,594, $5,867, $15,956, $8,617; Mr. Millenbruch--
$8,903, $5,867, $23,028, $13,325; Mr. Penny--$6,254, $5,867, $27,924,
$13,596; and Mr. Post--$6,469, $5,867, $12,330, $4,260. Split Dollar
Insurance is in lieu of the Group Term Life Insurance generally provided
by Bethlehem to its salaried employees. Each executive pays his own
premium for the term life portion of the insurance policy. Bethlehem is
reimbursed for the total premium amount advanced out of the proceeds of
the insurance policy if the individual dies while the split dollar
arrangement is in effect or out of the built-up cash value of the policy
if the arrangement terminates prior to the death of the individual. As
security for repayment, Bethlehem is a collateral assignee of the policy
to the extent of any such unreimbursed premium.
17
<PAGE>
STOCK OPTION/SAR GRANTS IN 1997(1)
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
- -------------------------------------------------------------------------------
HISTORIC (1987-
POTENTIAL REALIZABLE 1997)
VALUE AT ASSUMED ANNUAL RATE OF
NUMBER OF PERCENT OF TOTAL ANNUAL RATES OF STOCK STOCK PRICE
SHARES OPTIONS/SARS PRICE APPRECIATION FOR APPRECIATION
UNDERLYING GRANTED TO EXERCISE OPTION TERM(2) (DECLINE)
OPTIONS/SARS EMPLOYEES PRICE EXPIRATION ----------------------- ---------------
GRANTED(#) IN 1997(%) PER SHARE($) DATE 5%($) 10%($) (6%)
------------ ---------------- ------------ ---------- ----------- ----------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Curtis H. Barnette...... 50,000 7.68% $8.375 4-30-07 $ 263,350 $ 667,400 0
John A. Jordan, Jr...... 0 0 0 4-30-07 0 0 0
Gary L. Millenbruch..... 30,000 4.61 8.375 4-30-07 158,010 400,440 0
Roger P. Penny.......... 35,000 5.38 8.375 4-30-07 184,345 467,180 0
David P. Post........... 25,000 3.84 8.375 4-30-07 131,675 333,700 0
All Optionees (326 exec-
utive officers and key
employees)............. 651,100 100.00 8.375 4-30-07 3,429,344 8,690,883 0
</TABLE>
- -----------
(1) All stock options granted in 1997 were granted in tandem with stock appre-
ciation rights ("SARs"), have a term of ten years and may be exercised for
up to one-fourth of the shares covered by the option each year over a
four-year period commencing on the date of grant. The exercise price (per
share) of the option is the market price of Common Stock on the date the
option is awarded.
(2) These amounts represent assumed rates of appreciation only. Actual gains,
if any, on stock option exercises and Common Stock holdings are dependent
on the future performance of the Common Stock and overall market condi-
tions. As is shown in the last column, which shows there has been an an-
nual rate of stock price decline for Common Stock during the last ten
years, there can be no assurance that the amounts reflected in these col-
umns will be achieved.
AGGREGATED STOCK OPTION/SAR EXERCISES IN 1997 AND DECEMBER 31, 1997, STOCK
OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SHARES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT 12/31/97 (#) OPTIONS/SARS AT 12/31/97
SHARES ACQUIRED VALUE ----------------------------- -------------------------
ON EXERCISE(#) REALIZED ($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
--------------- ------------ ----------------------------- -------------------------
<S> <C> <C> <C> <C>
Curtis H. Barnette...... 0 0 184,250/137,750 0/0
John A. Jordan, Jr...... 0 0 38,250/ 41,250 0/0
Gary L. Millenbruch..... 0 0 122,000/ 80,000 0/0
Roger P. Penny.......... 0 0 130,750/ 93,750 0/0
David P. Post........... 0 0 65,450/ 66,250 0/0
</TABLE>
PENSION PLAN TABLE
<TABLE>
<CAPTION>
ESTIMATED ANNUAL RETIREMENT BENEFIT
-----------------------------------------------------------------------------
25 30 35 40
COVERED YEARS OF YEARS OF YEARS OF YEARS OF
COMPENSATION SERVICE SERVICE SERVICE SERVICE
- ------------ -------- -------- -------- --------
<S> <C> <C> <C> <C>
$ 300,000 $112,500 $135,000 $157,500 $180,000
400,000 150,000 180,000 210,000 240,000
500,000 187,500 225,000 262,500 300,000
600,000 225,000 270,000 315,000 360,000
700,000 262,500 315,000 367,500 420,000
800,000 300,000 360,000 420,000 480,000
900,000 337,500 405,000 472,500 540,000
1,000,000 375,000 450,000 525,000 600,000
</TABLE>
The table above shows the estimated annual retirement benefit (before any
deductions, including social security benefits) payable in the aggregate to
Bethlehem's named executive officers under its qualified defined benefit pen-
sion plan, its Excess Benefit Plan and its Supplemental Benefits Plan. The
benefit levels in the table assume retirement at age 62, the years of service
shown and payment in the form of a single life annuity.
18
<PAGE>
Individually owned annuities were purchased in 1993 and 1997 to secure a por-
tion of the unfunded benefits payable to the named executive officers under
the Excess Benefit Plan and the Supplemental Benefits Plan. An additional an-
nuity was also purchased for Mr. Post in 1995. The amount of the benefits
which were funded by the purchase of the annuities was based on the funded
level of Bethlehem's defined benefit pension plan at June 30, 1993, for the
1993 annuities, December 31, 1994, for the 1995 annuity purchased for Mr. Post
and December 31, 1996, for the 1997 annuities.
Covered compensation for purposes of determining retirement benefits for the
named executive officers generally consists of salary and incentive compensa-
tion reported in the "Bonus" column in the Summary Compensation Table. The
monthly retirement benefit payable is generally determined by multiplying av-
erage monthly covered compensation (for salary, the highest consecutive 60
months in the last 120 months of continuous service and for incentive compen-
sation, the 5 highest 12-month periods, whether or not consecutive, in the
last 120 months of continuous service) times 1.5% times the number of credited
years of service. The incentive compensation portion of the benefit is subject
to adjustment to the extent it results in the monthly retirement benefit ex-
ceeding 55% of average monthly covered compensation. Benefits are also subject
to a deduction for social security benefits as well as certain other adjust-
ments.
As of December 31, 1997, the credited years of service under the Pension
Plan or Supplemental Benefits Plan for Messrs. Barnette, Jordan, Millenbruch,
Penny and Post were 35 years, 40 years, 38 years, 39 years and 41 years, re-
spectively.
COMPARATIVE STOCK PERFORMANCE
The following graph compares the cumulative total stockholder return on
Bethlehem Common Stock for the last five years with the cumulative total re-
turn for the same period of the Standard & Poor's 500 Stock Index ("S&P 500")
and a peer group of publicly-traded integrated steelmakers described below.
The graph assumes the investment of $100 in Bethlehem Common Stock, the S&P
500 and the peer group on December 31, 1992, and reinvestment of all divi-
dends. The total return for the peer group has been weighted for market capi-
talization at the beginning of each period.
The peer group consists of Armco Inc., Inland Steel Industries, LTV Corpora-
tion, National Steel Corporation and the U.S. Steel Group of USX Corporation.
Information has only been included for (1) LTV common stock at December 31,
1993-1997, and (2) National Steel Corporation at December 31, 1993-1997, since
public trading did not commence in those stocks until 1993. Information has
only been included for Armco common stock at December 31, 1992-1994, since
Armco transferred its carbon steel business during 1994 to a separately traded
public company making continuing comparison inappropriate.
LOGO
<TABLE>
<CAPTION>
1992 1993 1994 1995 1996 1997
<S> <C> <C> <C> <C> <C> <C>
Bethlehem Steel
Corporation $100 $127.34 $119.50 $ 86.72 $ 55.47 $ 54.29
S&P 500 $100 $110.06 $111.58 $158.45 $188.68 $250.99
Peer Group $100 $121.50 $117.69 $ 98.15 $ 90.58 $ 87.82
</TABLE>
19
<PAGE>
ADDITIONAL INFORMATION
INDEMNIFICATION ASSURANCE AGREEMENTS
It is and has been Bethlehem's policy to indemnify its officers and direc-
tors against any costs, expenses and other liabilities to which they may be-
come subject by reason of their service to Bethlehem, and to insure its direc-
tors and officers against such liabilities, as and to the extent permitted by
applicable law and in accordance with the principles of good corporate gover-
nance. In this regard, Article IX of Bethlehem's By-laws requires Bethlehem to
indemnify its directors and officers to the maximum extent permitted by the
General Corporation Law of the State of Delaware.
Pursuant to this policy, Bethlehem has entered into individual Indemnifica-
tion Assurance Agreements with each of its directors and executive officers
pursuant to which Bethlehem has agreed to indemnify each of its directors and
executive officers to the full extent provided by applicable law and the By-
laws of Bethlehem as currently in effect. In addition, Bethlehem has estab-
lished in connection with its indemnification policy an irrevocable letter of
credit in an aggregate amount of $5 million to assure payment to each director
and executive officer of any amounts to which they may become entitled as in-
demnification pursuant to the By-laws in the event that, for any reason, Beth-
lehem shall not pay to them any such indemnification.
Section 102(b)(7) of the General Corporation Law of the State of Delaware
permits a Delaware corporation to include in its certificate of incorporation
a provision eliminating the potential monetary liability of a director to the
corporation or its stockholders for breach of fiduciary duty as a director,
provided that such provision shall not eliminate the liability of a director
(i) for any breach of the director's duty of loyalty to the corporation or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) for improper pay-
ment of dividends or (iv) for any transaction from which the director receives
an improper personal benefit. Bethlehem's Second Restated Certificate of In-
corporation, as amended, includes such a provision in Article Ninth thereof.
STOCKHOLDERS
Holders of record of Bethlehem's Common Stock and ESOP Preference Stock on
the Record Date are entitled to notice of the Annual Meeting and to vote at
the Meeting the shares held on that date. Each share of Common Stock and ESOP
Preference Stock is entitled to one vote. On the Record Date, a total of
113,134,857 shares of Common Stock of Bethlehem, owned of record by approxi-
mately 34,700 stockholders, were outstanding and a total of 2,303,791 shares
of ESOP Preference Stock of Bethlehem, owned of record by State Street Bank
and Trust Company, Post Office Box 1389, Boston, Massachusetts 02104-1389, un-
der a qualified plan for approximately 12,700 participants, were outstanding.
To the knowledge of the Board of Directors, there were no other beneficial
owners of 5% or more of the ESOP Preference Stock and no beneficial owners of
5% or more of Bethlehem's Common Stock on the Record Date.
OTHER MATTERS
Management and the Board of Directors do not know of any matters other than
those set forth in the form of proxy that will be presented for consideration
at the 1998 Annual Meeting. However, execution of a proxy, unless otherwise
indicated, confers on the persons named as proxies discretionary authority to
vote the shares represented in accordance with their best judgment on other
business, if any, that may properly come before the Meeting.
The cost of soliciting proxies will be borne by Bethlehem. A number of its
officers and regular employees may solicit proxies personally and by tele-
phone. Bethlehem has engaged Georgeson & Company, Inc. to assist in soliciting
proxies from brokers, bank nominees and institutional holders for an estimated
fee of $10,000 plus expenses. Arrangements have been made for brokerage hous-
es, nominees and other custodians and fiduciaries to send proxy material to
their principals, and Bethlehem will reimburse them for their expenses in do-
ing so.
MARCH 13, 1998
20
<PAGE>
[PROXY CARD - FRONT/BOTTOM]
Bethlehem Steel Corporation
1170 EIGHTH AVENUE
BETHLEHEM, PA 18016-7699
[LOGO OF BETHLEHEM STEEL APPEARS HERE]
March 13, 1998
To All Bethlehem Stockholders:
It is a pleasure to invite you to the Annual Meeting of Stockholders which
will be held on Tuesday, April 28, 1998. We will meet in the Main Ballroom of
the Radisson Hotel, Wilmington, Delaware, at 11 a.m. Your continuing interest in
Bethlehem's business is appreciated, and I hope that as many of you as possible
will attend the Meeting in person.
The annual election of directors will take place at the Meeting. Personal
information about each nominee for the Board of Directors as well as information
about the functions of the Board and its committees is contained in the Proxy
Statement. All nominees have previously been elected by the stockholders.
William A. Pogue will retire as a director in April of 1998. We acknowledge
and thank him for his loyal and dedicated service to Bethlehem.
You are also being asked to ratify the appointment of Price Waterhouse LLP
as Bethlehem's independent auditors for 1998.
The Compensation Committee proposed, and the Board adopted on December 10,
1997, subject to stockholder approval, the 1998 Stock Incentive Plan. If
approved, the 1998 Stock Incentive Plan will replace the 1994 Stock Incentive
Plan. The 1998 Plan provides for the award of stock options and shares of
Bethlehem Common Stock to key employees of Bethlehem and its subsidiaries. Stock
options and stock are an important form of compensation for our management
personnel, just as they are in other major corporations. The 1998 Stock
Incentive Plan is described in detail in the Proxy Statement and is attached as
Exhibit 1. We are asking stockholders to approve it at the Meeting.
Please read the formal notice of the Meeting and the Proxy Statement
carefully. For those of you who cannot be present at the Meeting, I urge you to
participate by completing, signing and returning your proxy in the enclosed
envelope. Your vote is important, and the management of Bethlehem appreciates
the cooperation of stockholders in directing proxies to vote at the Meeting.
Sincerely,
/s/ Curtis H. Barnette
Curtis H. Barnette,
Chairman
<PAGE>
[X] Please mark your votes
as in this example.
If this card is properly executed, shares will be voted in the manner
directed herein by the undersigned. If no direction is made, this proxy will
be voted FOR Proposals 1, 2 and 3.
Bethlehem's Board of Directors recommends a vote FOR election of directors
and Proposals 2 and 3.
FOR WITHHELD
1. Election of
Directors. [ ] [ ]
(see reverse)
For, except vote withheld from
the following nominee(s):
FOR AGAINST ABSTAIN
2. Ratification of appointment
of Independent Auditors. [ ] [ ] [ ]
FOR AGAINST ABSTAIN
3. Approval of 1998 Stock
Incentive Plan. [ ] [ ] [ ]
Please sign exactly as name appears hereon.
Joint owners should each sign. When signing as
attorney, executor, administrator, trustee or
guardian, please give full title as such.
SIGNATURE(S) DATE
<PAGE>
BETHLEHEM STEEL CORPORATION
1170 Eighth Avenue
Bethlehem, PA 18016-7699
P
R This Proxy is Solicited on Behalf of the Board of Directors
O for the Annual Meeting of Stockholders, April 28, 1998
X
Y
The undersigned hereby appoints Curtis H. Barnette, Roger P. Penny and Gary
L. Millenbruch the proxies (each with power to act alone and with power of
substitution) of the undersigned to represent and vote the shares of stock
which the undersigned is entitled to vote at the Annual Meeting of
Stockholders of Bethlehem Steel Corporation to be held on April 28, 1998,
and at any adjournment or postponement thereof, as hereinafter specified
and, in their discretion, upon such other matters as may properly come
before the Meeting.
Election of Directors. Nominees:
C. H. Barnette, B. R. Civiletti, W. H. Clark, J. B. Curcio, L. B.
Kaden, H. P. Kamen, R. McClements, Jr., G. L. Millenbruch, R. P. Penny,
S. D. Peterson, D. P. Phypers, J. F. Ruffle
You are encouraged to specify your choice by marking the appropriate boxes
on the reverse side. On matters on which you do not specify a choice, your
shares will be voted in accordance with the recommendation of Bethlehem's
Board of Directors. Please mark, sign, date and return this proxy promptly
using the enclosed envelope.
This card also constitutes voting instructions for any shares of stock
allocated to your account under the Bethlehem Steel Corporation Employee
Stock Ownership Plan and under the Savings Plan for Salaried Employees of
Bethlehem Steel Corporation and Subsidiary Companies, as described in the
Notice of Meeting and Proxy Statement dated March 13, 1998.
[SEE REVERSE SIDE]
<PAGE>
[PROXY CARD - BACK BOTTOM]
BETHLEHEM'S
OBJECTIVES
Increase stockholder value
Serve our customers
Partnerships among employees
Be a good citizen
STRATEGY
Concentrate on steel
Rebuild our financial strength --
make the plans
Improve continuously--
safety and total quality
Focus on the Vision [Logo of Bethlehem
Be the Premier Steel Company Steel appears here]
<PAGE>
EXHIBIT 1
1998 STOCK INCENTIVE PLAN
OF
BETHLEHEM STEEL CORPORATION
1. PURPOSE OF THE PLAN.
This Stock Incentive Plan (the Plan) is intended to encourage ownership of
Common Stock of Bethlehem Steel Corporation (Bethlehem) by key employees of
Bethlehem and its subsidiaries and to provide additional incentive for them to
promote the success of the business.
2. STOCK SUBJECT TO THE PLAN.
Subject to certain adjustments as set forth in Section 15 hereof, there
shall be reserved for issuance upon the exercise or surrender of the right to
exercise options to be granted under the Plan (Options) and pursuant to stock
awards (Grants) an aggregate of 5,000,000 shares of the Common Stock of Beth-
lehem (Common Stock); provided, however, that the number of such shares issued
pursuant to Grants shall not exceed 1,000,000. Such shares may be, in whole or
in part, as the Board of Directors of Bethlehem (Board) shall from time to
time determine, issued shares of Common Stock which have been reacquired by
Bethlehem or authorized but unissued shares of Common Stock. Except as other-
wise provided in Section 7 hereof, if any Option shall expire, terminate or be
forfeited or canceled for any reason without having been exercised or the
right to exercise it surrendered in full, the remaining shares covered thereby
shall again be available for the purposes of the Plan, and if any Grant shall
be forfeited before the restrictions provided for in such Grant shall lapse in
full, the remaining shares covered thereby shall again be available for the
purposes of the Plan.
Options under the Plan may be incentive stock options within the meaning of
Section 422(b) of the Internal Revenue Code of 1986 (the Code), as the same
may be amended from time to time, or nonqualified stock options and shall be
designated accordingly in the applicable option agreement.
3. PERSONS TO WHOM AWARDS SHALL BE GRANTED.
Options and Grants (Awards) may be granted, separately or in such combina-
tions as the Board may in any individual case determine, to regular key em-
ployees (including officers) of Bethlehem or of any subsidiary of Bethlehem
who shall be selected as provided in Section 20 hereof. A director of Bethle-
hem or of a subsidiary who shall not at the time also be an employee of Beth-
lehem or a subsidiary shall not be eligible to receive an Award. An employee
who shall have been granted an Award may be granted one or more additional
Awards; however, no employee may receive Awards under the Plan over the period
the Plan is in effect for an aggregate of more than 400,000 shares, subject to
adjustment as set forth in Section 15 hereof. The term "subsidiary" as used in
this Plan means a corporation more than 50% of the voting stock of which shall
at the time be owned directly or indirectly by Bethlehem.
OPTIONS
4. OPTION PRICES.
The purchase price of the Common Stock covered by each Option shall be not
less than 100% of the fair market value of the Common Stock at the time of
granting the Option. Such fair market value shall be determined by the Board
but shall not be less than the mean of the high and low prices of the Common
Stock on the New York Stock Exchange on the day the Option shall be granted.
No outstanding Option may be amended to lower the purchase price of the Common
Stock covered thereby.
5. TERM OF OPTIONS.
The term of each Option shall be not more than ten years from the date of
granting thereof and shall be subject to earlier termination or forfeiture as
herein provided.
6. EXERCISE OF OPTIONS.
An Option may be made exercisable at any time or from time to time, in one
or more installments, as the Board in its discretion shall determine; provid-
ed, however, that an Option may not be exercised as to less than 100 shares at
any one time (or the remaining shares then covered by the Option, if less than
100 shares). The Board may also establish conditions to exercise based upon
continued employment, the attainment of specified financial performance goals
and other relevant factors. The Board may waive any or all such conditions
with
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respect to any or all Option recipients and may accelerate the expiration of
the period during which any Option or portion of an Option shall not be exer-
cisable.
The purchase price of the shares of Common Stock purchased upon the exercise
of an Option shall be paid in full at the time of exercise in cash or in whole
or in part with shares of Common Stock. The value of any share delivered in
payment of all or part of the purchase price upon the exercise of an Option
shall be the closing sale price of a share of Common Stock on the New York
Stock Exchange on the date the Option shall be exercised.
Except as provided in Sections 10, 11 and 14 hereof, an Option may not be
exercised in whole or in part unless the holder thereof shall then be an em-
ployee of Bethlehem or of a subsidiary. The holder of an Option shall not have
any of the rights of a stockholder with respect to the shares covered by his
Option until and except to the extent that the Option shall have been duly ex-
ercised or the right to exercise the Option shall have been surrendered in
whole or in part for shares of Common Stock as provided in Section 7 hereof.
7. SURRENDER OF OPTIONS.
The Board, upon such terms and conditions as it shall deem appropriate, may
(but shall not be obligated to) authorize on behalf of Bethlehem the accept-
ance of the surrender of the right to exercise an Option or a portion thereof
(but only to the extent and in the amounts that such Option shall then be ex-
ercisable) and the payment by Bethlehem therefor of an amount equal to the ex-
cess of the fair market value of the shares of Common Stock covered by such
Option or portion thereof over the option price of such shares. Such payment
shall be made in shares of Common Stock (valued at fair market value), or in
cash, or partly in cash and partly in shares of Common Stock, as the Board
shall determine. For the purposes of this Section 7, such fair market value
shall be deemed to be the closing sale price of the Common Stock on the New
York Stock Exchange on the date of surrender or, with respect to surrenders
during the period beginning on the third business day following the date of
release by Bethlehem of its quarterly financial results and ending on the
twelfth business day following the date of such release, such fair market
value shall be determined by the Board but shall not exceed the highest clos-
ing sale price or be less than the lowest closing sale price of the Common
Stock on the New York Stock Exchange during such period. The shares of Common
Stock covered by an Option or portion thereof the right to exercise which
shall have been so surrendered shall not again be available for the purposes
of the Plan.
8. OPTION AGREEMENTS.
Each Option shall be evidenced by a written option agreement which agreement
(and any amendment thereof) shall contain such terms and provisions, consis-
tent with the requirements of the Plan, as the Board in its discretion shall
determine. Option agreements need not be identical.
9. CONTINUING EMPLOYMENT OF OPTION RECIPIENTS.
An option agreement may provide that (i) any shares of Common Stock issued
upon the exercise of the Option provided for therein, (ii) any payment
(whether in shares of Common Stock, or in cash, or some combination thereof)
made by Bethlehem upon the surrender as provided in Section 7 hereof of the
right to exercise the Option provided for therein, (iii) the Option itself
provided for therein or (iv) any combination of the foregoing shall be for-
feited and returned to Bethlehem if the recipient shall cease to remain in the
employ of Bethlehem or one or more of its subsidiaries during the period or
periods specified by such agreement. The holder of an Option shall, as one of
the terms of the option agreement relating thereto, agree to remain in the em-
ploy of Bethlehem or one or more of its subsidiaries in order to exercise the
Option. Such employment shall be at the pleasure of each employing corporation
and at such compensation as such employing corporation shall reasonably deter-
mine. Any such condition to remain in the employ of Bethlehem or its subsidi-
aries shall not apply (i) if employment shall terminate or be terminated by
reason of retirement, death or permanent disability or (ii) if a change in
control as defined in this Section 9 shall have occurred. For purposes of this
Plan, the term change in control shall mean (i) the first purchase of shares
pursuant to a tender offer or exchange (other than a tender offer or exchange
by Bethlehem) for all or part of Bethlehem's Common Stock or any securities
convertible into such Common Stock, (ii) the receipt by Bethlehem of a Sched-
ule 13D or other advice indicating that a person is the "beneficial owner" (as
that term is defined in Rule 13d-3 under the Securities Exchange Act of 1934)
of 20% or more of Bethlehem's Common Stock calculated as provided in paragraph
(d) of said Rule 13d-3, (iii) the date of approval by stockholders of Bethle-
hem of an agreement providing for any consolidation or merger of Bethlehem in
which Bethlehem will not be the continuing or surviving corporation or pursu-
ant to which shares of Common Stock of Bethlehem would be converted into cash,
securities or other property, other than a merger of Bethlehem in which the
holders of Common Stock of Bethlehem immediately prior to the merger would
have the same proportion of ownership of common stock of the surviving corpo-
ration immediately after the merger, (iv) the date of the approval by stock-
holders of Bethlehem of any sale, lease, exchange or other transfer (in one
transaction or a series of related transactions) of all or substantially all
of the assets of Bethlehem or (v) the adoption of any plan or proposal for the
liquidation or dissolution of Bethlehem.
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10. RETIREMENT OR TERMINATION OF EMPLOYMENT OF OPTION RECIPIENTS BY REASON OF
PERMANENT DISABILITY.
If an employee to whom an Option shall have been granted shall retire, or if
his employment shall terminate or be terminated by reason of permanent dis-
ability, such employee (and, if he shall die within five years after such re-
tirement or such termination by reason of permanent disability, then the es-
tate of such employee or a person who shall have acquired the right to exer-
cise such Option by bequest or inheritance) may exercise such Option in whole
or in part, and/or the Board may authorize the acceptance of the surrender of
the right to exercise such Option or any portion thereof as provided in Sec-
tion 7 hereof, at any time within five years after such retirement or after
such termination by reason of permanent disability, but not after the expira-
tion of the term of the Option.
If an employee to whom an Option shall have been granted shall die after
such retirement or such termination by reason of permanent disability and dur-
ing the applicable period during which such Option may be exercised, his es-
tate or the person who shall have acquired the right to exercise such Option
by bequest or inheritance shall be deemed to have offered, immediately prior
to the termination of such period, to surrender the right to exercise such Op-
tion pursuant to the provisions of Section 7 hereof, unless such Option shall
have theretofore been exercised, or the right to exercise such Option shall
have theretofore been so surrendered, or such Option shall have been forfeit-
ed.
If the employment of an employee to whom an Option shall have been granted
shall be terminated otherwise than by reason of retirement, death or permanent
disability, such Option shall, to the extent not theretofore forfeited or ex-
ercised or the right to exercise it theretofore surrendered, be canceled upon
such termination of employment, and, if so provided in the related option
agreement, the shares of Common Stock issued upon the exercise of the Option
or the shares of Common Stock, or cash, or combination thereof paid by Bethle-
hem upon the surrender of the Option shall be forfeited and returned to Beth-
lehem.
An Option shall not be affected by any change of duties or position of the
holder or any temporary leave of absence granted to him by the employing cor-
poration. Nothing in the Plan or in any option agreement entered into pursuant
to the Plan shall confer upon any employee any right to continue in the employ
of Bethlehem or of any of its subsidiaries or interfere in any way with the
right of Bethlehem or any such subsidiary to terminate the employment of such
employee at any time.
For purposes of this Plan the term "permanent disability" means disability
by bodily injury or disease, either occupational or non-occupational in cause,
preventing the employee on the basis of satisfactory medical evidence from en-
gaging in any employment of the type normally performed by the employee.
11. DEATH OF OPTION RECIPIENT; CHANGE IN CONTROL.
If an employee to whom an Option shall have been granted shall die while em-
ployed by Bethlehem or one or more of its subsidiaries, such Option may be ex-
ercised in whole or in part, and/or the Board may authorize the acceptance of
the surrender of the right to exercise such Option or any portion thereof as
provided in Section 7 hereof, by the estate of such employee (or by a person
who shall have acquired the right to exercise such Option by bequest or inher-
itance), at any time within five years after the death of such employee, but
not after the expiration of the term of the Option.
Anything in this Plan to the contrary notwithstanding, if a change in con-
trol (as defined in Section 9 hereof) shall occur, the right to exercise all
outstanding Options to the extent such Options shall not theretofore have been
forfeited or exercised or the right to exercise such Options theretofore sur-
rendered shall automatically vest in accordance with their respective terms.
Upon the occurrence of a change in control, an employee to whom an Option
shall have been granted may exercise the portion, if any, of such Option that
shall then be exercisable, and any and all installments of such Option that
shall not then be exercisable and shall not theretofore have been forfeited
shall automatically become exercisable on the date or dates established in the
option agreement relating thereto as the date or dates on which such install-
ment or installments shall become exercisable, regardless of whether the con-
ditions, if any, to exercise based upon continued employment, the attainment
of specified financial performance goals or any other factor shall have been
or shall thereafter be satisfied. Such employee or, if such employee shall
die, the estate of such employee (or a person who shall have acquired the
right to exercise such Option by bequest or inheritance) may exercise each
such portion that shall become exercisable pursuant to the immediately preced-
ing sentence during the six-month period after it shall have become exercis-
able, but not after the expiration of the term of the Option.
GRANTS
12. GRANTS.
A Grant shall be subject to such terms and conditions as the Board in its
discretion shall determine, which may include, without limitation, conditions
for issuance of shares of Common Stock pursuant thereto at any time
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subsequent to the granting thereof or in installments from time to time or
providing for forfeiture of such Grant or the shares issued or theretofore is-
sued pursuant thereto in designated circumstances; provided, however, that
upon the issuance of shares pursuant to a Grant, the recipient shall, with re-
spect to such shares, be and become a Bethlehem stockholder except to the ex-
tent otherwise provided in such Grant. The Board may in its discretion award
unrestricted shares of Common Stock in consideration of services theretofore
rendered by the recipient. The Board in its discretion may require, among
other things, that the recipient pay the par value for the shares to be issued
pursuant to a Grant. Each Grant shall be evidenced by a written instrument in
such form as the Board shall determine, including, without limitation, a cer-
tificate for shares of Common Stock bearing a legend indicating the restric-
tions of the Grant.
In the event of a recipient's termination of employment for any reason prior
to the lapse of restrictions applicable to a Grant made to such recipient, the
Board may determine in its sole discretion that any or all rights to shares of
Common Stock as to which there shall still remain unlapsed restrictions shall
be forfeited by such recipient to Bethlehem without payment or any considera-
tion by Bethlehem, and neither the recipient nor any successors, heirs, as-
signs or personal representatives of such recipient shall thereafter have any
further rights or interest in such shares, or that the restrictions with re-
spect to all or a portion of such shares shall terminate.
13. RESTRICTED STOCK AGREEMENTS.
Each Grant of restricted shares shall be evidenced by a written restricted
stock agreement which agreement (and any amendment thereof) may contain such
terms and provisions, consistent with the requirements of the Plan, as the
Board in its discretion shall determine. Restricted stock agreements need not
be identical. Such agreements shall contain the following terms and condi-
tions:
(a) Restriction Period. A Grant of restricted shares made pursuant to this
Plan may be subject to such terms, conditions and restrictions, including,
without limitation, substantial risks of forfeiture based upon requirements
relating to continued employment, the attainment of specified financial per-
formance goals or other relevant factors and for such period or periods as
shall be determined by the Board at the time that the Grant shall be awarded.
The Board shall have the power to permit, in its discretion, an acceleration
of the expiration of the applicable restriction period with respect to any
part of or all the restricted Common Stock awarded to any recipient, and to
waive any or all terms, conditions or restrictions contained in any or all re-
stricted stock agreements.
(b) Lapse of Restrictions. Each restricted stock agreement shall specify the
terms and conditions upon which any restrictions on the right to receive
shares representing restricted stock awarded under the Plan shall lapse, as
determined by the Board. Upon the lapse of such restrictions, a certificate or
certificates for shares of Common Stock without any restriction shall be is-
sued to the recipient or his legal representative.
(c) Section 162(m) Awards. As provided above, the Board may in its discre-
tion make a Grant of restricted shares subject to such terms, conditions and
restrictions as it shall determine. If the Board shall desire that a Grant
qualify as "performance based" compensation under Section 162(m) of the Code,
the Compensation Committee (as described below) shall make the Grant in con-
formance with the requirements of Section 162(m) of the Code. The vesting of
such Grants shall be subject to the Compensation Committee's written certifi-
cation that one or more pre-established, objective performance goals have been
satisfied. The specific goals established by the Compensation Committee shall
be determined with reference to one or more financial performance goals in-
cluding, but not limited to: market price of Common Stock, market share of
Bethlehem or a business unit thereof, earnings, net income, earnings per
share, return on equity or costs.
TERMS OF GENERAL APPLICABILITY
14. NONTRANSFERABILITY OF AWARDS.
Except as otherwise determined by the Board and set forth in an employee's
option agreement, an Award shall not be transferable otherwise than by will or
the laws of descent and distribution, and an Option may be exercised or the
right to exercise an Option surrendered during the lifetime of the employee
only by him, or if he shall be incompetent his legal representative.
15. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION.
In the event of changes in the outstanding Common Stock of Bethlehem by rea-
son of stock dividends, stock splits, recapitalizations, mergers, consolida-
tions, combinations or exchanges of shares, separations, reorganizations or
liquidations, the number and class of shares to be issued pursuant to out-
standing Awards and as to which Awards may be granted under the Plan shall be
appropriately adjusted by the Board. An adjustment shall not be made in the
minimum number of shares which may be purchased at any time.
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16. NO LOANS IN CONNECTION WITH AWARDS.
Neither Bethlehem nor any subsidiary may directly or indirectly lend money
to any employee to acquire or carry shares of Common Stock purchased upon the
exercise of an Option or to pay in whole or in part for shares to be issued
pursuant to a Grant.
17. TAX WITHHOLDING.
Bethlehem or a subsidiary shall have the power and the right to deduct or
withhold or require a recipient of an Award to remit to Bethlehem or the sub-
sidiary the amount of any taxes required to be withheld in connection with the
grant, vesting or exercise of an Award. The Board may permit any taxes re-
quired to be withheld to be paid in cash, in already-owned shares of Common
Stock or by the withholding of shares of Common Stock otherwise issuable upon
the exercise or vesting of any such award, or any combination of the forego-
ing. The Board may from time to time establish procedures with respect to
stock withholding consistent with applicable requirements of Rule 16b-3 prom-
ulgated by the Securities and Exchange Commission.
18. EFFECTIVENESS OF THE PLAN.
The Plan shall become effective on April 28, 1998, upon its approval by the
stockholders at the 1998 Annual Meeting of Stockholders or at any adjournment
thereof. Unless the Plan shall be so approved, it shall be null and void.
19. TIME OF GRANTING OF AWARDS.
Nothing contained in the Plan or in any resolution adopted or to be adopted
by the Board or by any committee to which the Board shall have delegated power
pursuant to Section 20 hereof or by the stockholders of Bethlehem with respect
to the Plan shall constitute the granting of an Award. The granting of an
Award shall take place on the date on which the Board shall approve the grant-
ing of such Award or such later date as the Board shall designate as the date
of granting of such Award.
20. ADMINISTRATION OF THE PLAN.
Subject to the express provisions of the Plan, the Board shall have plenary
authority, in its discretion, to determine the terms and conditions to be in-
cluded in any Award (which terms and conditions may differ with respect to re-
cipients), the time or times at which, and the employees of Bethlehem and its
subsidiaries to whom, Awards shall be granted, the type of such Awards, the
purchase price (if any, in the case of Grants), and the number of the shares
to be covered by each Award, the conditions of continuing employment, the time
or times when each Option may be exercised or the right to exercise such Op-
tion may be surrendered and when restrictions provided for by any Grant may
lapse and whether in whole or in installments; to interpret the Plan; to pre-
scribe, amend and rescind the rules and regulations relating to it; and to
make all other determinations which the Board shall deem necessary or advis-
able for the administration of the Plan. The Board may, however, at any time
or from time to time, delegate to the Compensation Committee or such other
committee or committees (which shall consist of not less than three members of
the Board) appointed by the Board any of or all the powers and duties of the
Board under the Plan (except those relating to (i) the determination whether
the shares of Common Stock reserved for use in connection with the Plan shall
be issued shares or unissued shares, (ii) the appointment of any such commit-
tee and (iii) the termination or amendment of the Plan). The Board may from
time to time appoint members of any such committee in substitution for or in
addition to members previously appointed, may fill vacancies, however caused,
in any such committee and may discharge any such committee. So long as any
such delegation shall be in force, any action by the Compensation Committee or
any other such committee within the scope of such delegation shall be and be
deemed to be action by the Board under the Plan.
Anything herein to the contrary notwithstanding, (i) Awards intended to
qualify as "performance based" compensation under Section 162(m) of the Code
shall be made by the Compensation Committee or another committee appointed by
the Board, and any such committee shall, for all purposes related to such
Awards, be comprised solely of two or more "outside directors", as defined in
Treasury Regulation Section 1.162-27(e)(3) and shall have the authority to es-
tablish and administer performance goals, and to certify that performance
goals are attained and (ii) with respect to all Awards (including those de-
scribed above), none of the employees of Bethlehem or any subsidiary shall as
a member of the Board or of the Compensation Committee or of any such other
committee have any vote with regard to the granting of an Award to such em-
ployee, the purchase price (if any, in the case of Grants) of the shares of
Common Stock covered by any such Award, the time at which any such Award shall
be granted, the number of shares covered thereby, when an Option may be exer-
cised or the right to exercise it surrendered or when restrictions with re-
spect to shares of restricted stock shall lapse and whether in whole or in in-
stallments, the conditions under which the Award or shares of Common Stock is-
sued pursuant thereto shall be forfeited or the provisions of the related op-
tion or restricted stock agreement.
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Words in the masculine gender used herein shall be deemed to include the
feminine gender.
21. GOVERNMENT AND OTHER REGULATIONS.
The obligation of Bethlehem to sell and deliver shares of Common Stock under
the Options and pursuant to the Grants shall be subject to (i) all applicable
laws, rules and regulations and such approvals by any governmental agencies as
may be required, including, without limitation, the effectiveness of a regis-
tration statement under the Securities Act of 1933, as deemed necessary or ap-
propriate by counsel for Bethlehem, and (ii) the condition that such shares
shall have been duly listed on the New York Stock Exchange.
22. NONEXCLUSIVITY OF THE PLAN.
Neither the adoption of the Plan by the Board nor the submission of the Plan
to the stockholders of Bethlehem for approval shall be construed as creating
any limitations on the power of the Board to adopt such other incentive ar-
rangements as it may deem desirable, including, without limitation, the grant-
ing of stock options or stock otherwise than under the Plan, and such arrange-
ments may be either applicable generally or only in specific cases.
23. AMENDMENT OF THE PLAN.
The Plan may be amended by the stockholders of Bethlehem. The Board may also
amend the Plan in such respects as it shall deem advisable; provided, however,
that the Board may not, without approval of the stockholders of Bethlehem (i)
(except as provided in Section 15 hereof) increase the maximum number of
shares of Common Stock as to which Awards may be granted under the Plan, (ii)
change the manner of determining the Option prices except to change the manner
of determining the fair market value of the Common Stock as set forth in Sec-
tions 4 and 7 hereof, (iii) increase the maximum term of each Option as pro-
vided in Section 5 hereof, (iv) change the provisions of the second paragraph
of Section 20 hereof or (v) extend the term of the Plan as provided in Section
24 hereof. No amendment of the Plan may adversely affect any rights under an
outstanding Option or Grant without the consent of the holder thereof.
24. TERMINATION OF THE PLAN.
Unless extended by approval of the stockholders, the Plan will terminate on
December 31, 2002; provided that the Board or the stockholders may terminate
the Plan at an earlier date. No termination of the Plan may adversely affect
any rights under an outstanding Option or Grant without the consent of the
holder thereof.
25. GOVERNING LAW.
To the extent that Federal laws do not otherwise control, the 1998 Plan and
all determinations made and actions taken pursuant hereto shall be governed by
the law of the State of Delaware.
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