<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 27, 1998
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF
1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_]CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[_]Preliminary Proxy Statement
[X]Definitive Proxy Statement
[_]Definitive Additional Materials
[_]Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
LUKENS INC.
-----------------------------------------------------
(Name of Registrant as Specified In Its Charter)
-----------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[_]No fee required.
[_]Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
Common stock, par value $.01 per share ("Lukens Common Stock"), of
Lukens Inc. ("Lukens").
(2) Aggregate number of securities to which transaction applies:
17,730,974, being the number of shares of Lukens Common Stock expected
to be acquired in the transaction.
(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):
The filing fee of $105,392.91 is calculated in accordance with Rule 0-
11(c)(1) under the Securities Exchange Act of 1934 (the "Exchange Act")
as follows: one-fiftieth of one percent of $526,964,547.30, which is
the sum of (a) the amount of cash to be paid and (b) the value of the
common stock, par value $1.00 per share ("Bethlehem Common Stock"), of
Bethlehem Steel Corporation ("Bethlehem") to be issued, to holders of
Lukens Common Stock in the transaction. The cash to be paid,
$361,711,869.60, was calculated as the product of: (a) $30, (b)
17,730,974, the aggregate number of outstanding shares of Lukens Common
Stock (assuming the exercise of all Lukens stock options, including
options issuable in accordance with the Merger Agreement) and (c) 0.68.
The value of the Bethlehem Common Stock was determined in accordance
with Rule 0-11(a)(4) under the Exchange Act based on the value of the
Lukens Common Stock to be acquired by Bethlehem in the transaction. The
value of the Lukens Common Stock to be acquired in exchange for
Bethlehem Common Stock is $165,252,677.70, calculated as (x) the
product of (a) $29.72, the average of the high and low sales prices per
share of Lukens Common Stock on January 29, 1998 as reported on the New
York Stock Exchange, multiplied by (b) 17,730,974; reduced by (y)
$361,711,869.60, the amount of cash to be paid.
(4) Proposed maximum aggregate value of transaction:
$526,964,547.30
(5) Total fee paid:
$105,392.91 (Fee paid by wire transfer, on February 3, 1998.)
[X]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:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
[LOGO OF LUKENS]
April 27, 1998
Dear Fellow Stockholder:
It is a pleasure for me to invite you to a Special Meeting of stockholders
of Lukens Inc. ("Lukens"), which will be held on May 28, 1998, at 9:00 a.m.,
local time, at the Hotel Du Pont, 11th and Market Streets, Wilmington,
Delaware. At the Special Meeting, you will be asked to vote on a proposal to
adopt the merger agreement among Bethlehem Steel Corporation ("Bethlehem"),
Lukens Acquisition Corporation, a wholly owned subsidiary of Bethlehem
("Merger Sub"), and Lukens. If the merger agreement is adopted by the
stockholders of Lukens and the other conditions to the merger are satisfied or
waived, Merger Sub will be merged with and into Lukens with Lukens continuing
as the surviving corporation. Following the merger, Bethlehem intends to cause
Lukens to be merged with and into Bethlehem.
In the merger, holders of shares of Lukens Common Stock may elect to receive
for each such share either (i) $30.00 in cash, without interest thereon, or
(ii) a number of shares of Bethlehem Common Stock, initially valued at $30.00
(subject to the qualifications described in the enclosed Proxy
Statement/Prospectus), based on the average of the daily closing prices per
share of Bethlehem Common Stock as reported on the New York Stock Exchange
Composite Transactions Tape for a specified period, subject to the limitation
that the amount of cash to be paid and the amount of Bethlehem Common Stock to
be delivered in the merger will not exceed 68% and 32%, respectively, of the
aggregate consideration to be paid or delivered by Bethlehem in the merger. An
election form is being mailed to holders of shares of Lukens Common Stock with
this Proxy Statement/Prospectus. The deadline for making the cash election is
5:00 p.m., New York City time, on May 27, 1998. In addition, pursuant to the
terms of the merger, holders of shares of Lukens Series B ESOP Convertible
Preferred Stock will receive for each such share the number of shares of
Bethlehem Common Stock (and, if applicable, the amount of cash) such holders
would be entitled to receive had such holders converted each such share of
Lukens Series B ESOP Convertible Preferred Stock into shares of Lukens Common
Stock immediately prior to the merger and not elected to receive cash in the
merger.
THE BOARD OF DIRECTORS OF LUKENS HAS DETERMINED THAT THE MERGER IS FAIR TO,
AND IN THE BEST INTERESTS OF, LUKENS AND ITS STOCKHOLDERS AND HAS APPROVED AND
ADOPTED IN ALL RESPECTS EACH OF THE MERGER AGREEMENT AND THE MERGER, SUBJECT
TO AND IN ACCORDANCE WITH THE TERMS OF THE MERGER AGREEMENT, AND RECOMMENDS
THAT YOU VOTE FOR THE PROPOSAL TO ADOPT THE MERGER AGREEMENT AT THE SPECIAL
MEETING.
Credit Suisse First Boston Corporation ("CSFB") has acted as financial
advisor to the Board of Directors of Lukens in connection with the merger and
has rendered to the Board of Directors of Lukens its written opinion dated
January 4, 1998 to the effect that, as of the date of such opinion and based
upon and subject to certain matters stated therein, the consideration to be
received by holders of Lukens Common Stock in the merger was fair to such
holders from a financial point of view. A copy of the written opinion of CSFB
rendered to the Board of Directors of Lukens in connection with the merger is
included as an annex to the attached Proxy Statement/Prospectus and should be
read carefully in its entirety with respect to the procedures followed,
assumptions made, matters considered and limitations on the review undertaken
in connection with such opinion.
<PAGE>
The enclosed Proxy Statement/Prospectus contains a discussion of the
background of, reasons for and terms of the merger. Please read this material
carefully. I hope that you will attend the Special Meeting; however, whether
or not you plan to attend, it is important that your shares, regardless of the
number, be represented. Accordingly, I urge you to complete, sign, date and
return your proxy card in the envelope enclosed for your convenience. If you
attend the Special Meeting, you may vote in person if you wish, even if you
have previously returned your proxy card. Your prompt cooperation will be
greatly appreciated.
Sincerely yours,
/s/ R.W. Van Sant
R.W. Van Sant
Chairman, President and
Chief Executive Officer
<PAGE>
LUKENS INC.
50 SOUTH FIRST AVENUE
COATESVILLE, PENNSYLVANIA 19320-0911
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 28, 1998
----------------
TO THE STOCKHOLDERS OF
LUKENS INC.:
NOTICE IS HEREBY GIVEN that a Special Meeting of Stockholders of Lukens Inc.
("Lukens") will be held on May 28, 1998, at 9:00 a.m., local time, at the
Hotel Du Pont, 11th and Market Streets, Wilmington, Delaware (together with
any and all adjournments, postponements or continuations thereof, the "Special
Meeting"), for the following purposes:
(1) To consider and vote upon a proposal to adopt an Agreement and Plan
of Merger dated as of December 15, 1997, as amended as of January 4, 1998
(as so amended, the "Merger Agreement"), among Bethlehem Steel Corporation
("Bethlehem"), Lukens Acquisition Corporation, a wholly owned subsidiary of
Bethlehem ("Merger Sub"), and Lukens providing for the merger of Merger Sub
with and into Lukens (the "Merger"), pursuant to which and subject to the
terms and conditions of the Merger Agreement, (a) each share of common
stock, par value $.01 per share, of Lukens ("Lukens Common Stock")
outstanding immediately prior to the effective time of the Merger (the
"Effective Time") (other than shares owned by Lukens, which will be
canceled, and shares held by stockholders exercising appraisal rights under
Section 262 of the Delaware General Corporation Law (the "DGCL")) will be
converted into the right to receive, at the election of the holder but
subject to possible proration, either (i) $30 in cash, without interest
thereon, or (ii) a number of shares of common stock, par value $1.00 per
share, of Bethlehem ("Bethlehem Common Stock") equal to $30 divided by the
average of the daily closing prices per share of Bethlehem Common Stock, as
reported on the New York Stock Exchange ("NYSE") Tape, for the 15
consecutive full NYSE trading days immediately preceding the third full
NYSE trading day prior to the Effective Time, but not less than 2.878 or
more than 4.317, subject to the limitation that the amount of cash to be
paid and the amount of Bethlehem Common Stock to be delivered in the Merger
will not exceed 68% and 32%, respectively, of the total value of the
consideration to be paid or delivered by Bethlehem in the Merger, (b) each
share of Series B ESOP Convertible Preferred Stock, par value $.01 per
share, of Lukens ("Lukens Preferred Stock") outstanding immediately prior
to the Effective Time (other than shares held by stockholders exercising
appraisal rights under Section 262 of the DGCL) will be converted into the
right to receive the number of shares of Bethlehem Common Stock (and, if
applicable, the amount of cash) that a holder of the number of shares of
Lukens Common Stock into which such shares of Lukens Preferred Stock could
have been converted immediately prior to the Effective Time would have the
right to receive if such holder did not make an election to receive cash in
the Merger with respect to such shares and (c) Lukens will continue as the
surviving corporation, all as more fully described in the accompanying
Proxy Statement/Prospectus.
(2) To transact such other business as may properly come before the
Special Meeting.
Only stockholders of record at the close of business on April 17, 1998 (the
"Record Date") are entitled to notice of the Special Meeting and to vote
thereat. Adoption of the Merger Agreement will require the affirmative vote of
the holders of outstanding shares of Lukens Common Stock and Lukens Preferred
Stock, voting together as a single class, representing a majority of the
combined voting power of the outstanding shares of Lukens Common Stock and
Lukens Preferred Stock, and such vote is the only vote of the holders of any
class or series of Lukens' capital stock necessary to adopt the Merger
Agreement.
<PAGE>
THE BOARD OF DIRECTORS OF LUKENS HAS DETERMINED THAT THE MERGER IS FAIR TO,
AND IN THE BEST INTERESTS OF, LUKENS AND ITS STOCKHOLDERS AND HAS APPROVED AND
ADOPTED IN ALL RESPECTS EACH OF THE MERGER AGREEMENT AND THE MERGER, SUBJECT
TO AND IN ACCORDANCE WITH THE TERMS OF THE MERGER AGREEMENT, AND RECOMMENDS
THAT YOU VOTE FOR THE PROPOSAL TO ADOPT THE MERGER AGREEMENT AT THE SPECIAL
MEETING.
Your vote is important. Whether or not you expect to attend the Special
Meeting, please complete, sign, date and promptly return the enclosed proxy
card in the envelope enclosed for your convenience.
By Order of the Board of Directors
/s/ William D. Sprague
William D. Sprague
Vice President, General Counsel
and Secretary
April 27, 1998
YOUR VOTE IS IMPORTANT. PLEASE COMPLETE AND RETURN YOUR PROXY PROMPTLY.
ADOPTION OF THE MERGER AGREEMENT WILL REQUIRE THE AFFIRMATIVE VOTE OF THE
HOLDERS OF OUTSTANDING SHARES OF LUKENS COMMON STOCK AND LUKENS PREFERRED
STOCK, VOTING TOGETHER AS A SINGLE CLASS, REPRESENTING A MAJORITY OF THE
COMBINED VOTING POWER OF THE OUTSTANDING SHARES OF LUKENS COMMON STOCK AND
LUKENS PREFERRED STOCK. REGARDLESS OF WHETHER YOU PLAN TO ATTEND THE SPECIAL
MEETING, PLEASE COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD IN THE
ENVELOPE ENCLOSED FOR YOUR CONVENIENCE.
<PAGE>
LUKENS INC. BETHLEHEM STEEL CORPORATION
PROXY STATEMENT PROSPECTUS
This Proxy Statement/Prospectus is being furnished to the stockholders of
Lukens Inc. ("Lukens") in connection with the solicitation of proxies by the
Board of Directors of Lukens (the "Lukens Board") for use at the special
meeting of stockholders of Lukens to be held on May 28, 1998 at 9:00 a.m.,
local time, at the Hotel Du Pont, 11th and Market Streets, Wilmington,
Delaware (together with any and all adjournments, postponements or
continuations thereof, the "Special Meeting").
At the Special Meeting, the holders of common stock of Lukens, par value
$.01 per share ("Lukens Common Stock"), and Series B ESOP Convertible
Preferred Stock of Lukens, par value $.01 per share ("Lukens Preferred
Stock"), will consider and vote upon a proposal to adopt the Agreement and
Plan of Merger dated as of December 15, 1997, as amended as of January 4, 1998
(the "Merger Agreement"), among Bethlehem Steel Corporation ("Bethlehem"),
Lukens Acquisition Corporation, a wholly owned subsidiary of Bethlehem
("Merger Sub"), and Lukens, providing for the merger of Merger Sub with and
into Lukens upon the terms and subject to the conditions of the Merger
Agreement (the "Merger"). Lukens will be the surviving corporation in the
Merger (the "Surviving Corporation"). Following the Merger, Bethlehem intends
to cause the Surviving Corporation to be merged with and into Bethlehem.
Bethlehem would then succeed to and assume all the rights and obligations of
Lukens and Merger Sub.
Pursuant to the Merger Agreement, each share of Lukens Common Stock issued
and outstanding at the effective time of the Merger (the "Effective Time")
(except for certain shares described herein) will be converted into the right
to receive, at the stockholder's election but subject to possible proration,
either $30 in cash or shares of common stock of Bethlehem, par value $1.00 per
share ("Bethlehem Common Stock") with an initial value of $30. If the average
price of Bethlehem Common Stock over a specified period prior to the Effective
Time is more than $10.42, then the shares of Bethlehem Common Stock to be
issued in the Merger will have an initial value that is greater than $30 per
share of Lukens Common Stock. If such average price is less than $6.95, then
such shares of Bethlehem Common Stock will have an initial value that is less
than $30 per share of Lukens Common Stock. See "SUMMARY--The Merger,"
beginning at page 6, and "THE MERGER--Merger Consideration," beginning at page
35, for additional details regarding how the Merger consideration will be
determined.
In addition, each share of Lukens Preferred Stock issued and outstanding at
the Effective Time (except for certain shares described herein) will be
converted into the right to receive the number of shares of Bethlehem Common
Stock (and, in the event of proration, the amount of cash) that a holder of
three shares of Lukens Common Stock would have the right to receive if such
holder did not make an election to receive cash in the Merger with respect to
such shares.
Because the Effective Time may occur at a later date than the date of the
Special Meeting, stockholders of Lukens may not be able to determine the
number of shares of Bethlehem Common Stock issuable for each share of Lukens
Common Stock or Lukens Preferred Stock at the time of the Special Meeting. See
"RISK FACTORS--Risk Factors Related to the Merger--Relationship Between
Conversion Number and Relative Stock Prices." To obtain a hypothetical example
of what such number would be if it were to be determined based on recent
Bethlehem Common Stock prices, call 1-888-217-3012.
Because of possible proration, (i) holders of Lukens Common Stock who elect
to receive cash may actually receive a combination of cash and stock instead
of all cash and (ii) holders of Lukens Common Stock who do not elect to
receive cash, and holders of Lukens Preferred Stock, may receive a combination
of cash and Bethlehem Common Stock instead of all stock. If holders of Lukens
Common Stock elect to receive cash with respect to more than 68% of the
Outstanding Shares (as defined herein), each share of Lukens Common Stock for
which an election to receive cash is made will be converted into the right to
receive a prorated amount of cash and shares of Bethlehem Common Stock. If
holders of Lukens Common Stock elect to receive cash with respect to less than
68% of the Outstanding Shares, each share of Lukens Common Stock (other than
shares of Lukens Common Stock for which an election to receive cash is made),
and each share of Lukens Preferred Stock, will be converted into the right to
receive a prorated amount of Bethlehem Common Stock and cash. The proration
calculations are subject to further adjustment to ensure that the aggregate
number of shares of Bethlehem Common Stock issuable (i) in connection with the
Merger and (ii) upon conversion or exercise of all securities of Lukens
outstanding immediately prior to the Effective Time (other than shares of
Lukens Common Stock and Lukens Preferred Stock) does not exceed 19.9% of the
number of outstanding shares of Bethlehem Common Stock. See "SUMMARY--The
Merger," beginning at page 6 and "THE MERGER--Merger Consideration," beginning
at page 35, for additional details regarding proration.
Bethlehem may issue as many as 22.6 million, or as few as 15.1 million,
shares of Bethlehem Common Stock in connection with the Merger. The aggregate
amount of cash to be paid to Lukens stockholders in the Merger, assuming that
no outstanding options to purchase Lukens Common Stock are exercised prior to
the Effective Time, will be $333.6 million and the value of the total Merger
consideration to Lukens stockholders, assuming the Merger consideration has a
value of $34.45 per share, will be $558.7 million (excluding certain
restricted stock).
(Continued on next page)
<PAGE>
THE BOARD OF DIRECTORS OF LUKENS HAS DETERMINED THAT THE MERGER IS FAIR TO,
AND IN THE BEST INTERESTS OF, LUKENS AND ITS STOCKHOLDERS AND HAS APPROVED AND
ADOPTED IN ALL RESPECTS EACH OF THE MERGER AGREEMENT AND THE MERGER, SUBJECT
TO AND IN ACCORDANCE WITH THE TERMS OF THE MERGER AGREEMENT, AND RECOMMENDS
THAT YOU VOTE FOR THE PROPOSAL TO ADOPT THE MERGER AGREEMENT AT THE SPECIAL
MEETING. SEE "SUMMARY--THE MERGER--INTERESTS OF CERTAIN PERSONS IN THE
MERGER."
This Proxy Statement/Prospectus also serves as a prospectus of Bethlehem
under the Securities Act of 1933, as amended (the "Securities Act"), relating
to the shares of Bethlehem Common Stock to be issued in connection with the
Merger.
This Proxy Statement/Prospectus and the accompanying form of proxy are first
being mailed to stockholders of Lukens on or about April 28, 1998.
THE SECURITIES TO BE ISSUED IN CONNECTION WITH THE MERGER HAVE NOT BEEN
APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROXY
STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION, OTHER THAN THOSE CONTAINED IN THIS PROXY STATEMENT/PROSPECTUS,
IN CONNECTION WITH THE SOLICITATION AND THE OFFERING MADE BY THIS PROXY
STATEMENT/PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION
SHOULD NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS PROXY
STATEMENT/PROSPECTUS DOES NOT CONSTITUTE THE SOLICITATION OF A PROXY OR AN
OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO PURCHASE, ANY SECURITIES IN
ANY JURISDICTION IN WHICH SUCH SOLICITATION OR OFFERING MAY NOT LAWFULLY BE
MADE.
NEITHER THE DELIVERY OF THIS PROXY STATEMENT/PROSPECTUS NOR ANY DISTRIBUTION
OF SECURITIES MADE HEREUNDER SHALL IMPLY THAT THERE HAS BEEN NO CHANGE IN THE
INFORMATION SET FORTH HEREIN OR IN THE AFFAIRS OF BETHLEHEM OR LUKENS SINCE
THE DATE HEREOF OR THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO ITS DATE.
SEE "RISK FACTORS" BEGINNING ON PAGE 19 FOR CERTAIN MATTERS YOU SHOULD
CONSIDER.
The date of this Proxy Statement/Prospectus is April 27, 1998.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
AVAILABLE INFORMATION....................................................... 1
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE............................. 1
CAUTIONARY STATEMENT........................................................ 3
SUMMARY..................................................................... 4
Risk Factors............................................................... 4
The Companies.............................................................. 4
The Special Meeting........................................................ 5
Recent Developments........................................................ 5
The Merger................................................................. 6
Bethlehem Selected Consolidated Financial Data............................. 14
Lukens Selected Consolidated Financial Data................................ 15
Bethlehem Selected Unaudited Pro Forma Combined Financial Data............. 16
Comparative Per Share Data for Bethlehem and Lukens........................ 17
Comparative Stock Prices and Dividends..................................... 18
Market Price Data.......................................................... 18
RISK FACTORS................................................................ 19
Risk Factors Related to the Merger......................................... 19
Risk Factors Related to Bethlehem.......................................... 19
Risk Factors Related to the Steel Industry................................. 21
THE SPECIAL MEETING......................................................... 23
Purpose.................................................................... 23
Record Date; Voting Rights; Required Vote.................................. 23
Stock Ownership of Management.............................................. 23
Quorum..................................................................... 24
Proxies.................................................................... 24
Solicitation of Proxies.................................................... 24
Appraisal Rights........................................................... 25
Stock Certificates......................................................... 25
THE MERGER.................................................................. 26
General.................................................................... 26
Background of the Merger................................................... 26
Recommendation of the Lukens Board and Reasons
for the Merger............................................................ 29
Certain Information........................................................ 31
Opinion of Financial Advisor to Lukens..................................... 31
The Closing; Effective Time................................................ 35
Merger Consideration....................................................... 35
Election Procedure......................................................... 38
Exchange Procedures........................................................ 39
Stock Exchange Listing..................................................... 41
Delisting and Deregistration of Lukens Common Stock........................ 41
Expenses................................................................... 41
Certain U.S. Federal Income Tax Considerations............................. 42
Interests of Certain Persons in the Merger................................. 43
Ownership Interest of the Stockholders of Lukens after the Merger.......... 46
Appraisal Rights........................................................... 46
</TABLE>
<TABLE>
<S> <C>
Accounting Treatment..................................................... 49
Resale of Bethlehem Common Stock......................................... 50
OTHER TERMS OF THE MERGER AGREEMENT....................................... 51
The Surviving Corporation................................................ 51
Representations and Warranties........................................... 52
Business of Lukens Pending the Effective Time of the Merger.............. 53
Effect on Lukens Benefit Plans and Stock Options......................... 54
Conditions to the Consummation of the Merger............................. 55
No Solicitation.......................................................... 56
Right of Lukens Board to Withdraw Recommendation......................... 57
Termination, Amendment and Waiver........................................ 57
Termination Fee.......................................................... 58
SALE OF ASSETS AND CONVERSION AGREEMENT................................... 58
OPERATIONS AFTER THE MERGER............................................... 58
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS............... 60
COMPARISON OF RIGHTS OF COMMON STOCKHOLDERS OF BETHLEHEM AND LUKENS....... 67
Authorized Capital Stock................................................. 67
Size of Bethlehem and Lukens Boards; Staggered Boards.................... 67
Election of Directors.................................................... 67
Removal of Directors..................................................... 68
Special Meeting of Stockholders; Action by Written Consent............... 68
Stockholder Lists; Inspection Rights..................................... 68
Amendment of Certificate of Incorporation................................ 69
Amendment of By-Laws..................................................... 69
Required Vote for Authorization of Certain Actions....................... 69
Business Combinations.................................................... 70
Fair Price Provisions.................................................... 70
Rights Plans............................................................. 71
OTHER MATTERS............................................................. 74
Regulatory Approvals Required............................................ 74
Legal Matters............................................................ 74
Experts.................................................................. 74
Stockholder Proposals.................................................... 74
ANNEX I AGREEMENT AND PLAN OF MERGER......................................
Agreement and Plan of Merger dated
as of December 15, 1997................................................. I-1
Amendment dated as of January 4, 1998.................................... I-44
ANNEX II OPINION OF CREDIT SUISSE
FIRST BOSTON CORPORATION................................................. II-1
ANNEX III SECTION 262 OF THE DELAWARE GENERAL CORPORATION LAW............. III-1
</TABLE>
i
<PAGE>
AVAILABLE INFORMATION
Bethlehem and Lukens are subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). In
accordance with the Exchange Act, Bethlehem and Lukens file proxy statements,
reports and other information with the Securities and Exchange Commission (the
"SEC"). This filed material can be inspected and copied at the public
reference facilities maintained by the SEC at Room 1024, 450 Fifth Street,
N.W., Washington, D.C. 20549, and at the following Regional Offices of the
SEC: the Midwest Regional Office (Suite 1400, Citicorp Center, 500 West
Madison Street, Chicago, Illinois 60661) and the Northeast Regional Office
(Seven World Trade Center, 13th Floor, New York, New York 10048). The filed
material also is available to the public from commercial document retrieval
services and at the web site maintained by the SEC at "http://www.sec.gov."
Copies of such material also can be obtained by mail from the Public Reference
Section of the SEC, 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates. In addition, such material can be inspected at the offices
of the New York Stock Exchange, Inc. (the "NYSE"), 20 Broad Street, New York,
New York 10005.
Bethlehem has filed a Registration Statement on Form S-4 (the "Registration
Statement") with the SEC under the Securities Act with respect to the
Bethlehem Common Stock to be issued in connection with the Merger. This Proxy
Statement/Prospectus does not contain all the information set forth in the
Registration Statement and the exhibits thereto, certain portions of which
have been omitted as permitted by the rules and regulations of the SEC. Copies
of the Registration Statement are available from the SEC upon payment of
prescribed rates. For further information, reference is made to the
Registration Statement and the exhibits filed therewith. Statements contained
in this Proxy Statement/Prospectus or in any document incorporated by
reference in this Proxy Statement/Prospectus relating to the contents of any
contract or other document referred to herein or therein describe all material
elements of such contract or other document but are not necessarily complete,
and in each instance reference is made to the copy of such contract or other
document filed as an exhibit to the Registration Statement or such other
document, each such statement being qualified in all respects by such
reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following Bethlehem documents are incorporated by reference in this
Proxy Statement/Prospectus: (i) Bethlehem's Annual Report on Form 10-K for the
fiscal year ended December 31, 1997, file number 1-1941, (ii) Bethlehem's
Current Report on Form 8-K dated January 4, 1998 (filed January 14, 1998),
file number 1-1941, (iii) the description of the Series A Junior Participating
Preference Stock, par value $1.00 per share, of Bethlehem set forth in
Bethlehem's Form 8-A/A dated January 12, 1996, file number 1-1941, and (iv)
the description of the Bethlehem Common Stock set forth in Bethlehem's
Registration Statement on Form S-3 dated March 8, 1994, Registration Statement
number 33-52209.
The following Lukens documents are incorporated by reference in this Proxy
Statement/Prospectus: (i) Lukens' Annual Report on Form 10-K for the fiscal
year ended December 27, 1997, as amended, file number 1-3258, and (ii) Lukens'
Current Report on Form 8-K dated January 4, 1998 (filed January 5, 1998), file
number 1-3258.
THIS PROXY STATEMENT/PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH
ARE NOT PRESENTED OR DELIVERED HEREWITH. A COPY OF SUCH DOCUMENTS INCORPORATED
HEREIN BY REFERENCE (EXCLUDING EXHIBITS UNLESS SUCH EXHIBITS ARE SPECIFICALLY
INCORPORATED BY REFERENCE INTO THE INFORMATION INCORPORATED HEREIN) THAT ARE
NOT PRESENTED HEREIN OR DELIVERED HEREWITH WILL BE PROVIDED BY FIRST-CLASS
MAIL WITHOUT CHARGE TO EACH PERSON, INCLUDING ANY BENEFICIAL OWNER, TO WHOM
THIS PROXY STATEMENT/PROSPECTUS IS DELIVERED, UPON ORAL OR WRITTEN REQUEST OF
ANY SUCH PERSON. WITH RESPECT TO BETHLEHEM DOCUMENTS, WRITTEN REQUESTS SHOULD
BE ADDRESSED TO THE SECRETARY, BETHLEHEM STEEL CORPORATION, 1170 EIGHTH
AVENUE, BETHLEHEM, PENNSYLVANIA 18016-7699 AND TELEPHONE REQUESTS SHOULD BE
DIRECTED TO (610) 694-2424. WITH RESPECT TO LUKENS DOCUMENTS, WRITTEN REQUESTS
SHOULD BE DIRECTED TO LUKENS INC., 50 SOUTH FIRST AVENUE, COATESVILLE,
PENNSYLVANIA 19320-0911, ATTENTION: SECRETARY, AND TELEPHONE REQUESTS SHOULD
BE DIRECTED TO (610) 383-2000. IN ORDER TO ENSURE TIMELY DELIVERY OF THE
DOCUMENTS IN ADVANCE OF THE SPECIAL MEETING TO WHICH THIS PROXY
STATEMENT/PROSPECTUS RELATES, ANY SUCH REQUEST SHOULD BE MADE BY MAY 20, 1998.
<PAGE>
All reports filed by Bethlehem and Lukens and all definitive proxy or
information statements filed by Bethlehem and Lukens pursuant to Sections
13(a), 13(c), 14 and 15(d) of the Exchange Act subsequent to the date of this
Proxy Statement/Prospectus and prior to the date of the Special Meeting shall
be deemed to be incorporated by reference into this Proxy Statement/Prospectus
from the dates of filing of such documents. Any statement contained in a
document incorporated or deemed to be incorporated in this Proxy
Statement/Prospectus shall be deemed to be modified or superseded for purposes
of this Proxy Statement/Prospectus to the extent that a statement contained
herein or in any other subsequently filed document that also is or is deemed
to be incorporated by reference modifies or supersedes such statement. Any
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Proxy Statement/Prospectus.
All information contained in this Proxy Statement/Prospectus relating to
Bethlehem has been supplied by Bethlehem, and all information relating to
Lukens has been supplied by Lukens.
2
<PAGE>
CAUTIONARY STATEMENT
When used in this Proxy Statement/Prospectus, the words "estimate,"
"project," "intend," "expect" and similar expressions identify forward-looking
statements. Readers are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date of this Proxy
Statement/Prospectus. Such statements are subject to risks and uncertainties
that could cause actual results to differ materially from those contemplated
in such forward-looking statements. Such risks and uncertainties include those
risks, uncertainties and risk factors identified under the heading "Forward-
Looking Statements" in the Bethlehem Annual Report on Form 10-K for the fiscal
year ended December 31, 1997, under the heading "Forward-Looking Information"
in the Lukens Annual Report on Form 10-K for the fiscal year ended December
27, 1997, as amended, and under the heading "RISK FACTORS" in this Proxy
Statement/Prospectus. Neither Bethlehem nor Lukens undertakes any obligation
to publicly release any revisions to these forward-looking statements to
reflect events or circumstances after the date hereof or to reflect the
occurrence of unanticipated events.
3
<PAGE>
SUMMARY
The following is a summary of certain information, including information
contained elsewhere in this Proxy Statement/Prospectus. Reference is made to,
and this summary is qualified in its entirety by, the more detailed information
contained elsewhere in this Proxy Statement/Prospectus, in the attached Annexes
and in the documents incorporated herein by reference. As used herein, unless
the context otherwise clearly requires, "Lukens" refers to Lukens Inc. and its
consolidated subsidiaries and "Bethlehem" refers to Bethlehem Steel Corporation
and its consolidated subsidiaries. Capitalized terms not otherwise defined in
this Proxy Statement/Prospectus have the respective meanings specified in the
Merger Agreement. LUKENS STOCKHOLDERS ARE URGED TO READ CAREFULLY THIS PROXY
STATEMENT/PROSPECTUS AND THE ATTACHED ANNEXES IN THEIR ENTIRETY.
RISK FACTORS
In considering whether to vote for the proposal to adopt the Merger
Agreement, stockholders of Lukens should consider, among other things, those
matters which could materially affect the value of the Bethlehem Common Stock
to be received by the stockholders of Lukens in the Merger. Such risk factors
include those related to (i) the Merger, (ii) the capital structure and
operations of Bethlehem and (iii) the steel industry generally.
Risk factors related to the Merger include: (i) the possibility that the
average price of Bethlehem Common Stock used to determine the number of shares
of Bethlehem Common Stock issuable for each share of Lukens Common Stock or
Lukens Preferred Stock will be different from the price per share of Bethlehem
Common Stock on the date of this Proxy Statement/Prospectus, (ii) the
uncertainties involved in integrating business operations and achieving cost
reductions and (iii) the interests of certain persons in the Merger in addition
to their interests as stockholders.
Risk factors related to Bethlehem include: (i) the sensitivity of the results
of operations of Bethlehem to steel prices, (ii) Bethlehem's reliance on
purchased materials and services, (iii) the possibility of higher than expected
charges for employee postretirement obligations, (iv) Bethlehem's highly
leveraged capital structure, (v) the possibility that it will be necessary for
Bethlehem to exit or restructure businesses or operations and (vi) Bethlehem's
need to negotiate new labor contracts.
Risk factors related to the steel industry generally include: (i) the
cyclical nature of the domestic steel industry, (ii) intensifying competition,
including that due to mini-mill producers, imports and substitute materials,
(iii) the presence of excess world capacity for steel production, (iv)
unplanned outages and (v) uncertainties regarding the cost of future
environmental control requirements.
See "RISK FACTORS."
THE COMPANIES
Bethlehem, a Delaware corporation, primarily manufactures and sells a wide
variety of steel mill products including hot rolled, cold rolled and coated
sheets and strip, plates, tin mill products, specialty blooms, carbon and alloy
bars, rail and large-diameter pipe. Bethlehem also produces and sells coke and
iron ore. The principal executive offices of Bethlehem are located at 1170
Eighth Avenue, Bethlehem, Pennsylvania 18016-7699, and the telephone number is
(610) 694-2424.
Merger Sub, a Delaware corporation, is a wholly owned subsidiary of Bethlehem
formed solely for the purposes of the Merger. The principal executive offices
of Merger Sub are located at 1170 Eighth Avenue, Bethlehem, Pennsylvania 18016-
7699, and the telephone number is (610) 694-2424.
Lukens is a holding company incorporated in Delaware. Subsidiaries of Lukens
manufacture carbon, alloy and clad steel plates, and stainless steel sheet,
strip, plate, hot band and slabs. The principal executive offices of Lukens are
located at 50 South First Avenue, Coatesville, Pennsylvania 19320-0911, and the
telephone number is (610) 383-2000.
4
<PAGE>
THE SPECIAL MEETING
Purpose. The Special Meeting will be held at the Hotel Du Pont, 11th and
Market Streets, Wilmington, Delaware, on May 28, 1998, at 9:00 a.m., local
time, to consider and vote upon a proposal to adopt the Merger Agreement, which
provides for the Merger of Merger Sub with and into Lukens with Lukens
continuing as the Surviving Corporation. The stockholders of Lukens will also
consider and take action upon any other business which may properly be brought
before the Special Meeting. See "THE SPECIAL MEETING--Purpose."
Record Date. Only holders of record of Lukens Common Stock and Lukens
Preferred Stock at the close of business on April 17, 1998 (the "Record Date")
are entitled to receive notice of and to vote at the Special Meeting. At the
close of business on the Record Date, there were 15,030,527 shares of Lukens
Common Stock outstanding, each of which entitles the registered holder thereof
to one vote, and 453,877 shares of Lukens Preferred Stock outstanding, each of
which entitles the registered holder thereof to three votes. See "THE SPECIAL
MEETING--Record Date; Voting Rights; Required Vote."
Quorum; Required Vote. The presence at the meeting in person or by properly
executed proxy of stockholders of Lukens entitled to cast at least a majority
of the votes that all stockholders are entitled to cast at the Special Meeting
will constitute a quorum at the Special Meeting.
Adoption of the Merger Agreement will require the affirmative vote of the
holders of outstanding shares of Lukens Common Stock and Lukens Preferred
Stock, voting together as a single class, representing a majority of the
combined voting power of the outstanding shares of Lukens Common Stock and
Lukens Preferred Stock. An abstention will have the effect of a vote against
adoption of the Merger Agreement. Brokers who hold shares of Lukens Common
Stock as nominees will not have discretionary authority to vote such shares in
the absence of instructions from the beneficial owners thereof. Any shares
which are not voted because the nominee-broker lacks such discretionary
authority will have the effect of votes cast against the adoption of the Merger
Agreement.
No approval by stockholders of Bethlehem is required to effect the Merger.
Stock Ownership of Management. At the close of business on the Record Date,
directors and executive officers of Lukens and their affiliates were the
beneficial owners of an aggregate of approximately 1,045,252 shares of Lukens
Common Stock and 10,490 shares of Lukens Preferred Stock, or approximately 6.6%
of the combined voting power of the outstanding shares of Lukens Common Stock
and Lukens Preferred Stock, voting together as a single class (approximately
6.1% on a fully diluted basis assuming the conversion of all shares of Lukens
Preferred Stock and the exercise of all options to purchase shares of Lukens
Common Stock outstanding on the Record Date).
RECENT DEVELOPMENTS
Delaware Shareholder Litigation. On December 23, 1997, a purported
stockholder of Lukens, Carrie Anne Polonetsky, filed a purported class action
(the "Polonetsky Action") in the Court of Chancery of the State of Delaware
(the "Court of Chancery") against the Lukens Board alleging, among other
things, that the Lukens Board had breached its fiduciary duties by failing to
obtain the highest value reasonably available in a sale of Lukens. Two other
purported stockholders of Lukens, Wretha Evelyn Walker and Michael Abramsky,
filed purported class actions (collectively with the Polonetsky Action, the
"Delaware Actions") in the Court of Chancery on December 29, 1997 and January
6, 1998, respectively, making substantially similar allegations. The Delaware
Actions have been consolidated by order of the Court of Chancery dated March
11, 1998. On March 27, 1998, the plaintiffs in the Delaware Actions filed a
consolidated amended complaint against the Lukens Board alleging, among other
things, that the Lukens Board had breached its fiduciary duties by failing to
obtain the highest value reasonably available in a sale of Lukens. On April 13,
1998, all defendants in the Delaware Actions filed a motion to dismiss such
amended complaint and a motion to stay discovery. The defendants intend to
defend the Delaware Actions vigorously.
5
<PAGE>
Sale of Assets and Conversion Agreement. On January 28, 1998, Bethlehem
entered into an agreement (the "Sale Agreement") providing for the sale to
Allegheny Ludlum Corporation ("Allegheny Ludlum") of certain Lukens stainless
steel production facilities located in Houston, Pennsylvania, and Massillon,
Ohio, and the vacuum oxygen decarburization unit at the Lukens Coatesville
plant, for $175 million, all subject to the consummation of the Merger. Under a
separate conversion agreement (the "Conversion Agreement"), subject to the
consummation of the Merger, Bethlehem will provide melting, casting and
processing services to Allegheny Teledyne Incorporated ("Allegheny") at the
Lukens Coatesville and Conshohocken plants. Lukens did not participate in any
discussions or negotiations regarding the Sale Agreement or the Conversion
Agreement. The waiting period under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), for the transactions
described in this paragraph expired at 11:59 p.m. on March 12, 1998.
THE MERGER
General. At the Effective Time, Merger Sub will be merged with and into
Lukens with Lukens continuing as the Surviving Corporation. As a result of the
Merger, the separate corporate existence of Merger Sub will cease and Lukens
will succeed to all the rights and be responsible for all the obligations of
Merger Sub in accordance with the DGCL. Upon the terms and subject to the
conditions set forth in the Merger Agreement, at the Effective Time, each share
of Lukens Common Stock and Lukens Preferred Stock outstanding immediately prior
to the Effective Time (other than shares owned by Lukens, which will be
canceled, and shares held by stockholders exercising appraisal rights under
Section 262 of the DGCL) will be converted into the right to receive the Merger
Consideration (as defined below). Cash will be paid in lieu of any fractional
shares of Bethlehem Common Stock.
The Merger will become effective upon the filing of the Certificate of Merger
with the Secretary of State of the State of Delaware unless the Certificate of
Merger provides for a later time or date of effectiveness. The filing of the
Certificate of Merger will occur as soon as practicable following the closing
of the Merger, which will occur not later than the second business day after
satisfaction or waiver of the conditions set forth in the Merger Agreement. See
"OTHER TERMS OF THE MERGER AGREEMENT--Conditions to the Consummation of the
Merger."
Following the Merger, Bethlehem intends to cause the Surviving Corporation to
be merged with and into Bethlehem. Bethlehem would then succeed to and assume
all the rights and obligations of Lukens and Merger Sub.
Recommendation of the Lukens Board. The Lukens Board has determined that the
Merger is fair to, and in the best interests of, Lukens and its stockholders.
THE LUKENS BOARD HAS APPROVED AND ADOPTED IN ALL RESPECTS EACH OF THE MERGER
AGREEMENT AND THE MERGER, SUBJECT TO AND IN ACCORDANCE WITH THE TERMS OF THE
MERGER AGREEMENT, AND RECOMMENDS THAT YOU VOTE FOR THE PROPOSAL TO ADOPT THE
MERGER AGREEMENT AT THE SPECIAL MEETING. See "THE MERGER--Recommendation of the
Lukens Board and Reasons for the Merger."
In considering the approval, adoption and recommendation by the Lukens Board
of the Merger Agreement and the Merger, stockholders of Lukens should consider
that certain directors of Lukens may have conflicts of interests. See "--
Interests of Certain Persons in the Merger" and "THE MERGER--Interests of
Certain Persons in the Merger."
Opinion of Financial Advisor to Lukens. Credit Suisse First Boston
Corporation ("CSFB"), financial advisor to Lukens, has rendered to the Lukens
Board a written opinion dated January 4, 1998 to the effect that, as of such
date and based upon and subject to certain matters stated in such opinion, the
Common Merger Consideration (as defined below) was fair to the holders of
Lukens Common Stock from a financial point of view. A copy of the written
opinion of CSFB dated January 4, 1998 is attached hereto as Annex II and should
be read carefully in its entirety with respect to the procedures followed,
assumptions made, matters considered and limitations on the review undertaken
in connection with such opinion. THE OPINION OF CSFB IS DIRECTED TO THE LUKENS
BOARD AND RELATES ONLY TO THE FAIRNESS OF THE COMMON MERGER CONSIDERATION FROM
A FINANCIAL
6
<PAGE>
POINT OF VIEW, DOES NOT ADDRESS ANY OTHER ASPECT OF THE PROPOSED MERGER OR ANY
RELATED TRANSACTION AND DOES NOT CONSTITUTE A RECOMMENDATION TO ANY STOCKHOLDER
AS TO HOW SUCH STOCKHOLDER SHOULD VOTE AT THE SPECIAL MEETING. See "THE
MERGER--Opinion of Financial Advisor to Lukens." CSFB's opinion does not
address the fairness of the Preferred Merger Consideration (as defined below)
from a financial point of view to the holders of Lukens Preferred Stock. Such
Preferred Merger Consideration has been determined pursuant to the provisions
of the certificate of designations with respect to the Lukens Preferred Stock.
Merger Consideration. At the Effective Time, each outstanding share of Lukens
Common Stock (other than shares owned by Lukens, which will be canceled, and
shares held by stockholders exercising appraisal rights under Section 262 of
the DGCL, if available) will be converted into the right to receive cash,
shares of Bethlehem Common Stock or a combination of both cash and Bethlehem
Common Stock (collectively, the "Common Merger Consideration"). See "THE
MERGER--Merger Consideration." Each holder of Lukens Common Stock will have the
opportunity to indicate on an election form (the "Election Form") whether such
stockholder wishes to receive cash (a "Cash Election") with respect to each
share of Lukens Common Stock held by such stockholder (subject to possible
proration). Each share of Lukens Common Stock for which a Cash Election is not
made will be converted in the Merger into the right to receive, subject to
possible proration, the Stock Consideration (as defined below). The allocation
of cash and/or shares of Bethlehem Common Stock that a holder of Lukens Common
Stock will receive will depend on (i) whether the stockholder makes a Cash
Election and (ii) the results of the proration procedures that will apply if
the Requested Stock Amount exceeds the Stock Cap or if the Requested Cash
Amount exceeds the Cash Cap (as such terms are defined below).
Each share of Lukens Common Stock for which an effective Cash Election is
made will be converted into the right to receive, subject to possible
proration, cash (the "Cash Consideration") in an amount equal to $30 (the "Cash
Election Price"). Each share of Lukens Common Stock for which an effective Cash
Election is not made, or for which a Cash Election has been properly revoked,
will be converted into the right to receive, subject to possible proration, the
number of shares of Bethlehem Common Stock (the "Stock Consideration") equal to
$30 divided by the average of the daily closing prices per share of Bethlehem
Common Stock for the 15 consecutive full NYSE trading days immediately
preceding the third full NYSE trading day prior to the Effective Time, as such
prices are reported on the NYSE Composite Transactions Tape (the "NYSE Tape")
(the "Average Market Price"), but not less than 2.878 or more than 4.317 (the
"Conversion Number").
Holders of Lukens Preferred Stock will not have an opportunity to make a Cash
Election with respect to their shares of Lukens Preferred Stock. Subject to the
exercise of appraisal rights, each issued and outstanding share of Lukens
Preferred Stock will be converted into the right to receive the consideration
that a holder of the number of shares of Lukens Common Stock into which such
share of Lukens Preferred Stock could have been converted would have the right
to receive in connection with the Merger if such holder did not make a Cash
Election (the "Preferred Merger Consideration," and together with the Common
Merger Consideration, the "Merger Consideration").
In the event that the Requested Cash Amount exceeds the Cash Cap (each as
defined below), each share of Lukens Common Stock for which an effective Cash
Election is made (an "Electing Share") will be converted into the right to
receive a prorated amount of cash and Bethlehem Common Stock. The maximum
aggregate amount of cash to be paid to holders of Lukens Common Stock and
Lukens Preferred Stock in connection with the Merger (the "Cash Cap") will be
equal to the product of (x) the Cash Election Price, (y) the number of
Outstanding Shares and (z) .68. The term "Outstanding Shares" means the sum of
(x) the number of shares of Lukens Common Stock outstanding immediately prior
to the Effective Time plus (y) the number of shares of Lukens Common Stock into
which the outstanding shares of Lukens Preferred Stock could have been
converted immediately prior to the Effective Time. If the product of (x) the
number of Electing Shares and (y) the Cash Election Price (such product, the
"Requested Cash Amount") exceeds the Cash Cap, then a cash proration factor
(the "Cash Proration Factor") will be determined by dividing the Cash Cap by
the Requested Cash Amount. Each Electing Share will be converted into the right
to receive (x) cash in an amount equal to the product of (A) the Cash Election
Price and (B) the Cash Proration Factor (such product, the "Prorated Cash
Amount") and (y)
7
<PAGE>
a number of shares of Bethlehem Common Stock equal to the product of (A) the
excess of 1.0 over the Cash Proration Factor and (B) the Conversion Number.
In the event that the Requested Stock Amount exceeds the Stock Cap (each as
defined below), each share of Lukens Common Stock for which an effective Cash
Election is not made, or for which a Cash Election has been properly revoked,
and each outstanding share of Lukens Preferred Stock will be converted into the
right to receive a prorated amount of Bethlehem Common Stock and cash. The
maximum number of shares of Bethlehem Common Stock that may be issued to
holders of Lukens Common Stock and Lukens Preferred Stock in connection with
the Merger (the "Stock Cap") will be equal to the product of (x) the Conversion
Number, (y) the number of Outstanding Shares and (z) .32. The "Deemed Stock
Electing Shares" will be equal to the number of Outstanding Shares minus the
number of Electing Shares. If the product of (x) the Deemed Stock Electing
Shares and (y) the Conversion Number (such product, the "Requested Stock
Amount") exceeds the Stock Cap (a "Stock Proration Event"), then each Deemed
Stock Electing Share will be converted into the right to receive a combination
of cash and shares of Bethlehem Common Stock. A stock proration factor (the
"Stock Proration Factor") will be determined by dividing the Stock Cap by the
Requested Stock Amount. Each Deemed Stock Electing Share will be converted into
the right to receive (x) a number of shares of Bethlehem Common Stock equal to
the product of (A) the Conversion Number and (B) the Stock Proration Factor
(such product, the "Prorated Stock Amount") and (y) cash in an amount equal to
the product of (A) the excess of 1.0 over the Stock Proration Factor and (B)
the Cash Election Price.
The proration calculations are subject to adjustment to ensure that the
aggregate number of shares of Bethlehem Common Stock issuable (i) in connection
with the Merger and (ii) upon conversion or exercise of all securities of
Lukens outstanding immediately prior to the Effective Time (other than shares
of Lukens Common Stock and Lukens Preferred Stock), including upon the exercise
of Employee Stock Options (as defined below), does not exceed 19.9% of the
number of outstanding shares of Bethlehem Common Stock immediately prior to the
Effective Time. If the number of shares of Bethlehem Common Stock that would be
so issued would exceed such 19.9% threshold, the Cash Cap will be increased and
the Stock Cap will be decreased to the extent necessary so that, after giving
effect thereto, the number of shares of Bethlehem Common Stock issuable would
not exceed 19.9% of the number of outstanding shares of Bethlehem Common Stock
immediately prior to the Effective Time.
Election Procedure. An Election Form is being mailed together with this Proxy
Statement/Prospectus to each person who was a holder of Lukens Common Stock on
the Record Date. Each such holder (and each record holder of Lukens Common
Stock on or prior to the Election Date, as defined below) will have the right
to submit an Election Form specifying the number of shares of Lukens Common
Stock that such person desires to have converted into the right to receive
cash, subject to possible proration.
The exchange agent for the payment of the Merger Consideration in connection
with the Merger will be First Chicago Trust Company of New York (the "Exchange
Agent"). Any Cash Election will have been properly made only if the Exchange
Agent has received at its designated office (as set forth in the Election Form
enclosed herewith), by 5:00 p.m., New York City time, on May 27, 1998, the
business day (the "Election Date") next preceding the Special Meeting, an
Election Form properly completed and signed and accompanied by the certificates
for the shares of Lukens Common Stock to which the Election Form relates,
properly endorsed or otherwise in proper form for transfer (or accompanied by
an appropriate guarantee of delivery of such certificates as set forth in the
Election Form from a firm that is a member of a registered national securities
exchange or of the National Association of Securities Dealers, Inc., or a
commercial bank or trust company having an office or correspondent in the
United States, provided such certificates are in fact delivered to the Exchange
Agent within three NYSE trading days after the date of execution of the
guarantee of delivery). See "THE MERGER--Election Procedure."
Exchange Procedures. As of the Effective Time, Bethlehem will deposit with
the Exchange Agent, for the benefit of Lukens stockholders, the cash and
certificates representing the shares of Bethlehem Common Stock
8
<PAGE>
constituting the Merger Consideration. As soon as practicable after the
Effective Time, the Exchange Agent will mail to each record holder a letter of
transmittal (the "Letter of Transmittal") and instructions for surrendering
certificates representing shares of Lukens Common Stock or Lukens Preferred
Stock ("Certificates"). Upon surrender of such Certificates, together with a
duly executed Letter of Transmittal and any other required documents, the
holder will be entitled to receive the shares of Bethlehem Common Stock, cash
or combination thereof to which the holder is entitled under the Merger
Agreement. No Letter of Transmittal will be required with respect to
Certificates previously surrendered with an Election Form. See "THE MERGER--
Exchange Procedures."
Certain Considerations. In considering whether to vote for the proposal to
adopt the Merger Agreement and whether to make a Cash Election, Lukens
stockholders should consider the following: (i) the Conversion Number will be
determined based on the Average Market Price (which will be calculated based on
the average per share closing price of Bethlehem Common Stock on each of the 15
consecutive trading days immediately preceding the third full NYSE trading day
prior to the Effective Time), (ii) the Average Market Price may vary from the
price of Bethlehem Common Stock at the date of this Proxy Statement/Prospectus
due to changes in the business, operations or prospects of Bethlehem, general
market and economic conditions and other factors and (iii) the Conversion
Number will not be greater than 4.317 or less than 2.878. Although Lukens will
not be obligated to effect the Merger if the Average Market Price is less than
$6.95, Lukens may waive this condition and proceed with the Merger even if the
Average Market Price is less than $6.95.
By way of example only, if the Effective Time had occurred on April 24, 1998
(the most recent practicable date prior to the date of this Proxy
Statement/Prospectus), the Conversion Number would be equal to $30 divided by
$15.258, the Average Market Price for an assumed period ending on April 20,
1998, the trading day immediately preceding the third full trading day prior to
April 24, 1998, but not greater than 4.317 or less than 2.878. Accordingly, if
the Effective Time had occurred on April 24, 1998, Lukens stockholders would
receive 2.878 shares of Bethlehem Common Stock, subject to possible proration,
for each share of Lukens Common Stock for which a Cash Election had not been
made. Lukens stockholders who wish to receive further examples based on
Bethlehem Common Stock prices as of a more recent date may call 1-888-217-3012.
BECAUSE OF MARKET FLUCTUATIONS AND OTHER FACTORS, THE BETHLEHEM COMMON STOCK
PRICES USED IN CALCULATING THE ACTUAL CONVERSION NUMBER MAY VARY FROM THE
EARLIER PRICES USED IN THE EXAMPLE SET FORTH ABOVE OR ANY SUCH SUBSEQUENT
EXAMPLE. ACCORDINGLY, THE ACTUAL CONVERSION NUMBER MAY DIFFER FROM THE
CONVERSION NUMBER CONTAINED IN ANY SUCH EXAMPLE.
The Effective Time is currently expected to occur shortly after the Special
Meeting. However, because the Effective Time may occur at a later date than the
date of the Special Meeting, stockholders of Lukens may not be able to
determine the Conversion Number at the time of the Special Meeting.
9
<PAGE>
The market price of Bethlehem Common Stock has fluctuated in recent periods.
The following table illustrates the applicable Conversion Number at various
assumed Average Market Prices and the corresponding value of a number of shares
of Bethlehem Common Stock equal to the Conversion Number (assuming the value is
equal to the Average Market Price):
<TABLE>
<CAPTION>
VALUE OF THE
STOCK CONSIDERATION
AVERAGE CONVERSION PER SHARE OF
MARKET PRICE NUMBER LUKENS COMMON STOCK*
------------ ---------- --------------------
<S> <C> <C>
$ 6.00 4.317 $25.90
6.50 4.317 28.06
--------------------------------------------------------------------------------------
6.95 4.317 30.00
7.00 4.286 30.00
7.50 4.000 30.00
8.00 3.750 30.00
8.50 3.529 30.00
9.00 3.333 30.00
9.50 3.158 30.00
10.00 3.000 30.00
10.42 2.878 30.00
--------------------------------------------------------------------------------------
10.50 2.878 30.22
11.00 2.878 31.66
11.50 2.878 33.10
12.00 2.878 34.54
12.50 2.878 35.98
13.50 2.878 38.85
14.00 2.878 40.29
14.50 2.878 41.73
15.00 2.878 43.17
15.50 2.878 44.61
16.00 2.878 46.05
16.50 2.878 47.49
17.00 2.878 48.93
</TABLE>
- --------
* The Cash Consideration has a fixed value of $30 per share. Accordingly, if a
holder of Lukens Common Stock receives in the Merger a combination of cash
and Bethlehem Common Stock, either because the holder makes a Cash Election
with respect to some but not all the shares held by such holder or because
of proration, the blended value such holder will receive in respect of each
share of Lukens Common Stock will be (i) less than the amounts shown (but
more than $30) if the Average Market Price is greater than $10.42 or (ii)
greater than the amounts shown (but less than $30) if the Average Market
Price is less than $6.95.
See "RISK FACTORS--Risk Factors Related to the Merger--Relationship Between
Conversion Number and Relative Stock Prices."
Certain U.S. Federal Income Tax Considerations. In general, the receipt of
Merger Consideration by a Lukens stockholder will be a taxable transaction for
U.S. Federal income tax purposes. A Lukens stockholder generally will recognize
taxable gain or loss equal to the difference, if any, between (i) the sum of
the amount of cash, if any, and the fair market value of the shares of
Bethlehem Common Stock, if any, received by the stockholder and (ii) such
stockholder's tax basis in the shares of Lukens Common Stock exchanged
therefor. Notwithstanding the foregoing, if (i) the Surviving Corporation
merges into Bethlehem (the "Bethlehem Merger"), (ii) the shareholders of Lukens
receive in the Merger an amount of stock in Bethlehem that constitutes a
sufficient continuing interest in Bethlehem and (iii) the Merger and Bethlehem
Merger are integrated, then it is possible that the Merger and the Bethlehem
Merger could be treated as qualifying as a reorganization under the Code. At
the present time, Bethlehem intends to treat the Merger as a taxable
transaction. See "THE MERGER--Certain Federal Income Tax Considerations." ALL
STOCKHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS.
10
<PAGE>
Interests of Certain Persons in the Merger. Certain directors and executive
officers of Lukens, as well as others, have interests in the Merger in addition
to their interests as stockholders of Lukens, including with respect to: (i)
benefits under certain severance agreements, certain of which will be
accelerated as a result of the Merger; (ii) accelerated vesting of options to
purchase Lukens Common Stock; (iii) accelerated lapse of restrictions on shares
of restricted stock; (iv) rights under certain supplemental retirement plans of
Lukens; and (v) rights to continuing indemnification and directors' and
officers' liability insurance coverage after the Effective Time, subject to
certain limitations. See "THE MERGER--Interests of Certain Persons in the
Merger."
Lukens Stock Options. Under the terms of the Merger Agreement, each Employee
Stock Option (as defined below) will be converted into an option to acquire, on
the same terms and conditions as were applicable under the Employee Stock
Option (except that the vesting of options will be accelerated to the Effective
Time), the number of shares of Bethlehem Common Stock (rounded down to the
nearest whole share) determined by multiplying the number of shares of Lukens
Common Stock subject to the Employee Stock Option by the Conversion Number, at
a price per share of Bethlehem Common Stock (rounded up to the nearest whole
cent) equal to (a) the aggregate exercise price for the shares of Lukens Common
Stock otherwise purchasable pursuant to the Employee Stock Option divided by
(b) the number of shares of Bethlehem Common Stock deemed purchasable pursuant
to such Employee Stock Option. See "OTHER TERMS OF THE MERGER AGREEMENT--Effect
on Lukens Benefit Plans and Stock Options."
Appraisal Rights. Holders of record of Lukens Preferred Stock and, if a Stock
Proration Event occurs, holders of record of Lukens Common Stock, who comply
with the applicable statutory procedures summarized in "THE MERGER--Appraisal
Rights," will be entitled to appraisal rights under Section 262 of the Delaware
General Corporation Law (the "DGCL"). Under Section 262 of the DGCL, appraisal
rights are not available with respect to shares of stock of a constituent
corporation in a merger if: (i) such shares are listed on a national securities
exchange on the record date fixed to determine the stockholders entitled to
receive notice of and to vote at the meeting of stockholders to act upon the
agreement of merger and (ii) pursuant to the terms of the agreement of merger,
the holder of such shares has the right to receive in exchange for such shares
solely shares of stock of a company which are listed on a national securities
exchange (and cash in lieu of fractional shares). If a Stock Proration Event
does not occur, pursuant to the terms of the Merger Agreement, holders of
Lukens Common Stock (which is listed on a national securities exchange) will
have the right to receive in exchange for their respective shares, if they so
elect, Common Merger Consideration consisting solely of shares of Bethlehem
Common Stock (and cash in lieu of fractional shares) and therefore will not
have the right to demand appraisal under Section 262 of the DGCL. However, if a
Stock Proration Event occurs, holders of record of Lukens Common Stock will be
required by the terms of the Merger Agreement to accept, in exchange for their
respective shares, Common Merger Consideration consisting of both shares of
Bethlehem Common Stock and cash, and will therefore be entitled to demand
appraisal under Section 262 of the DGCL. The full text of Section 262 of the
DGCL is attached hereto as Annex III, and any stockholder desiring to exercise
appraisal rights in connection with the Merger is urged to consult with legal
counsel prior to taking any action in order to ensure that such stockholder
complies with the applicable statutory provisions. Failure to take any of the
steps required under Section 262 of the DGCL on a timely basis may result in
the loss of appraisal rights. Lukens reserves the right to challenge any
assertion of appraisal rights. See "THE MERGER--Appraisal Rights" and Annex III
hereto.
Regulatory Approvals Required. The consummation of the Merger is subject to
the expiration or termination of the relevant waiting period under the HSR Act.
Bethlehem and Lukens filed notification and report forms with the Antitrust
Division of the United States Department of Justice (the "Antitrust Division")
and the Federal Trade Commission (the "FTC") under the HSR Act on January 6,
1998. Effective at 11:59 p.m., EST, on February 5, 1998 the waiting period
under the HSR Act with respect to the Merger expired. See "OTHER MATTERS--
Regulatory Approvals Required."
Conditions to the Merger. The obligations of Bethlehem and Lukens to
consummate the Merger are subject to various conditions, including, without
limitation, obtaining the affirmative vote of the holders of the
11
<PAGE>
outstanding shares of Lukens Common Stock and Lukens Preferred Stock, voting
together as a single class, representing a majority of the combined voting
power of the outstanding shares of Lukens Common Stock and Lukens Preferred
Stock ("Lukens Stockholder Approval"), regulatory approvals, approval for
listing (subject to official notice of issuance) on the NYSE and the Chicago
Stock Exchange ("CSE") of the Bethlehem Common Stock to be issued in connection
with the Merger and the absence of any injunction or other legal restraint
preventing the consummation of the Merger. See "OTHER TERMS OF THE MERGER
AGREEMENT--Conditions to the Consummation of the Merger."
In addition, Lukens will not be obligated to effect the Merger if the Average
Market Price is less than $6.95. Lukens may waive this condition and proceed
with the Merger even if the Average Market Price is less than $6.95. The last
reported sale price of Bethlehem Common Stock on the NYSE Tape on April 24,
1998, the last trading day prior to the date of this Proxy
Statement/Prospectus, was $15 5/16.
Lukens does not currently anticipate that it will waive any condition of the
Merger. In the event that Lukens so determines at any time prior to the closing
of the Merger that it would be appropriate to waive any material condition of
the Merger, including, without limitation, the condition with respect to the
Average Market Price, Lukens will, to the extent required by applicable law,
including federal and state securities laws, amend the Proxy
Statement/Prospectus to include additional information and allow additional
time for stockholders of Lukens to change their proxies.
No Solicitation. The Merger Agreement provides that Lukens will not, directly
or indirectly through another person, (i) solicit or initiate, or take any
other action designed to facilitate, any inquiries or the making of any
Takeover Proposal (as defined below) or (ii) participate in any discussions or
negotiations regarding any Takeover Proposal. However, if at any time prior to
Lukens Stockholder Approval, the Lukens Board determines in good faith, after
consultation with outside counsel, that it is necessary to do so to comply with
its fiduciary duties to Lukens' stockholders under applicable law, Lukens may,
in response to an unsolicited Takeover Proposal, and subject to compliance with
its obligation to provide certain information to Bethlehem, (A) furnish
information with respect to Lukens and its subsidiaries pursuant to a customary
confidentiality agreement and (B) participate in negotiations regarding such
Takeover Proposal. Lukens must immediately advise Bethlehem of any Takeover
Proposal, the material terms and conditions of such Takeover Proposal and the
identity of the person making such Takeover Proposal. Lukens must also keep
Bethlehem reasonably informed of the status and details of any such Takeover
Proposal. See "OTHER TERMS OF THE MERGER AGREEMENT--No Solicitation."
Right of the Lukens Board to Withdraw Recommendation. The Merger Agreement
provides that neither the Lukens Board nor any committee thereof will withdraw
or modify, or propose publicly to withdraw or modify, in a manner adverse to
Bethlehem, its approval or recommendation of the Merger or the Merger Agreement
unless it determines in good faith, after consultation with outside counsel,
that it is necessary to do so to comply with its fiduciary duties to the Lukens
stockholders under applicable law. Furthermore, neither the Lukens Board nor
any committee thereof may approve or recommend, or propose publicly to approve
or recommend, any Takeover Proposal or cause Lukens to enter into any
Acquisition Agreement (as defined below) related to any Takeover Proposal.
However, in the event that the Lukens Board receives a Superior Proposal (as
defined below) prior to Lukens Stockholder Approval, the Lukens Board may: (i)
withdraw or modify its approval or recommendation of the Merger or the Merger
Agreement if it determines in good faith, after consultation with outside
counsel, that it is necessary to do so to comply with its fiduciary duties to
Lukens' stockholders under applicable law; or (ii) approve or recommend such
Superior Proposal or terminate the Merger Agreement and, if it so chooses,
cause Lukens to enter into any Acquisition Agreement with respect to any
Superior Proposal, but only after complying with certain provisions requiring
Lukens to provide notice and information to Bethlehem regarding the Superior
Proposal. See "OTHER TERMS OF THE MERGER AGREEMENT--Right of Lukens Board to
Withdraw Recommendation."
12
<PAGE>
Termination. The Merger Agreement may be terminated at any time prior to the
Effective Time, whether before or after receipt of Lukens Stockholder Approval:
(i) by mutual written consent of Bethlehem and Lukens; (ii) by either Bethlehem
or Lukens (A) if the Merger has not been consummated on or before June 30,
1998, unless the failure to consummate the Merger is the result of a willful
and material breach of the Merger Agreement by the party seeking to terminate,
(B) if Lukens Stockholder Approval is not obtained at the Special Meeting, (C)
if any governmental entity has issued an order, decree, ruling or injunction or
takes other action permanently enjoining, restraining or otherwise prohibiting
the Merger and such order, decree, ruling, injunction or other action has
become final and nonappealable or (D) in the event of certain breaches by the
other party of any representation, warranty, covenant or other agreement
contained in the Merger Agreement; (iii) by Lukens if such termination is
necessary for the Lukens Board to comply with its fiduciary duties regarding a
Superior Proposal, provided that it pays the termination fee required, if any,
or (iv) by Bethlehem if (A) the Lukens Board or any committee thereof withdraws
or modifies in a manner adverse to Bethlehem its approval or recommendation of
the Merger or the Merger Agreement, or approves or recommends any Superior
Proposal, or (B) the Lukens Board or any committee thereof resolves to take any
of the foregoing actions.
Termination Fee. Generally, in the event that (i) a Takeover Proposal is made
or publicly announced, and thereafter the Merger Agreement is terminated by
either Bethlehem or Lukens pursuant to certain provisions of the Merger
Agreement and within 12 months of such termination Lukens or any of its
subsidiaries enters into any Acquisition Agreement or consummates any Takeover
Proposal or (ii) the Merger Agreement is terminated by Lukens because the
Lukens Board has received a Superior Proposal, Lukens must promptly pay
Bethlehem a fee equal to $13.5 million (the "Termination Fee") payable by wire
transfer of same day funds. See "OTHER TERMS OF THE MERGER AGREEMENT--
Termination Fee."
Accounting Treatment. The Merger will be treated as a "purchase" for
financial reporting and accounting purposes, in accordance with generally
accepted accounting principles ("GAAP"). See "THE MERGER--Accounting
Treatment."
13
<PAGE>
BETHLEHEM SELECTED CONSOLIDATED FINANCIAL DATA
The following table sets forth selected historical consolidated financial
data for Bethlehem for each of the five years in the period ended December 31,
1997. Such data have been derived from, and should be read in conjunction with,
the audited consolidated financial statements and other financial information
contained in Bethlehem's Annual Report on Form 10-K for the year ended December
31, 1997, including the notes thereto, incorporated by reference herein. See
"AVAILABLE INFORMATION" and "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE."
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------
1997 1996 1995 1994 1993
-------- -------- -------- -------- --------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
EARNINGS STATISTICS:
Net Sales.............. $4,631.2 $4,679.0 $4,867.5 $4,819.4 $4,323.4
Estimated Gain (Loss)
on Exiting Businesses. 135.0 (465.0) -- -- (350.0)
Income (Loss) from
Operations............ 374.0 (328.4) 268.9 133.6 (295.2)
Net Financing Expense.. (38.3) (47.4) (52.3) (39.1) (56.1)
Net Income (Loss)...... 280.7 (308.8) 179.6 80.5 (266.3)
Dividends on Preferred
and Preference Stock.. 41.6 41.9 42.4 43.1 39.8
Net Income (Loss)
Applicable to Common.. 239.1 (350.7) 137.2 37.4 (306.1)
Net Income (Loss) per
Common Share--Basic... 2.13 (3.15) 1.24 0.35 (3.37)
Net Income (Loss) per
Common Share--Diluted. 2.03 (3.15) 1.23 0.35 (3.37)
BALANCE SHEET
STATISTICS:
Working Capital........ $ 553.2 $ 531.0 $ 476.2 $ 557.9 $ 676.9
Property, Plant &
Equipment--Net........ 2,357.7 2,419.8 2,714.2 2,759.3 2,634.3
Total Assets........... 4,802.6 5,109.9 5,700.3 5,782.4 5,876.7
Total Debt............. 493.4 546.7 638.3 757.3 813.8
Stockholders' Equity... 1,215.0 966.0 1,238.3 1,155.8 696.6
OTHER STATISTICS:
Capital Expenditures... $ 228.2 $ 259.0 $ 266.8 $ 444.6 $ 327.1
Depreciation........... 231.0 268.7 284.0 261.1 277.5
</TABLE>
14
<PAGE>
LUKENS SELECTED CONSOLIDATED FINANCIAL DATA
The following table sets forth selected historical consolidated financial
data for Lukens for each of the five fiscal years during the period ended
December 27, 1997. Such data have been derived from, and should be read in
conjunction with, the audited consolidated financial statements and other
financial information contained in the Lukens Annual Report on Form 10-K for
the fiscal year ended December 27, 1997, as amended, including the notes
thereto, incorporated by reference herein. See "AVAILABLE INFORMATION" and
"INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE."
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
----------------------------------------------------------------
DECEMBER 27, DECEMBER 28, DECEMBER 30, DECEMBER 31, DECEMBER 25,
1997 1996 1995 1994 1993
------------ ------------ ------------ ------------ ------------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
EARNINGS STATISTICS:
Net Sales.............. $994.4 $970.3 $1,049.2 $947.0 $862.1
Unusual Items.......... -- (20.2) -- -- --
Income (Loss) from
Operations............ 13.4 (26.1) 68.0 49.6 36.6
Net Financing Expense.. (19.1) (16.7) (13.5) (13.2) (16.3)
Income (Loss) from
Continuing Operations. (4.6) (28.4) 34.0 22.2 13.1
Discontinued
Operations, Net of
Tax................... -- -- -- -- 2.8
Net Income (Loss)
Before Cumulative
Effect of Accounting
Change................ (4.6) (28.4) 34.0 22.2 15.9
Cumulative Effect of
Accounting Change..... -- -- -- -- (65.9)
Net Income (Loss)...... (4.6) (28.4) 34.0 22.2 (50.0)
Dividend Requirements
on Preferred.......... 2.0 2.0 2.0 2.0 1.9
Net Income (Loss)
Applicable to Common.. (6.6) (30.4) 32.0 20.2 (51.9)
Net Income (Loss) per
Common Share--Basic... (0.45) (2.06) 2.18 1.38 (3.58)
Net Income (Loss) per
Common Share--Diluted. (0.45) (2.06) 2.05 1.32 (3.08)
BALANCE SHEET
STATISTICS:
Working Capital........ $114.5 $ 99.2 $ 106.2 $106.5 $146.0
Property, Plant &
Equipment--Net........ 497.6 533.3 529.4 478.1 431.9
Total Assets........... 877.4 888.8 919.7 826.4 817.2
Total Debt............. 250.9 253.6 228.2 208.5 226.6
Redeemable Preferred
Stock................. -- 13.4 -- -- --
Stockholders' Equity... 241.8 244.6 298.7 277.1 266.8
OTHER STATISTICS:
Capital Expenditures... $ 19.4 $ 57.1 $ 104.1 $120.3 $ 67.4
Depreciation and
Amortization.......... 51.8 48.9 41.3 44.0 45.5
Dividends per Share on
Common Stock.......... 1.00 1.00 1.00 1.00 1.00
</TABLE>
15
<PAGE>
BETHLEHEM SELECTED UNAUDITED PRO FORMA COMBINED FINANCIAL DATA
The following table sets forth selected unaudited pro forma combined
financial data for Bethlehem for the one-year period ended December 31, 1997,
which are presented to reflect the estimated impact on the historical
consolidated financial statements of Bethlehem of the Merger, which will be
accounted for as a purchase, including the issuance of approximately 15.1
million shares of Bethlehem Common Stock in connection with the Merger. The
income statement data presented below assume that the Merger had been
consummated as of January 1, 1997, and the balance sheet data presented below
assume that the Merger had been consummated on December 31, 1997. The data
presented below also give effect to certain historical and planned transactions
and dispositions as explained in Notes 5 and 6 to the Unaudited Pro Forma
Combined Condensed Financial Statements. The data presented below do not
reflect any cost savings or other synergies anticipated by Bethlehem management
as a result of the Merger and are not necessarily indicative of the results of
operations or the financial position which would have occurred had the Merger
been consummated as of January 1, 1997 or on December 31, 1997. Moreover, such
data are not necessarily indicative of Bethlehem's future results of operations
or financial position. The selected unaudited pro forma combined financial data
presented below should be read in conjunction with the historical consolidated
financial data of Bethlehem and Lukens and the Unaudited Pro Forma Combined
Condensed Financial Information, including the notes thereto, incorporated by
reference or appearing elsewhere in this Proxy Statement/Prospectus. See
"AVAILABLE INFORMATION," "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE" and
"UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS."
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1997
(UNAUDITED)(1)
-------------------------
(DOLLARS IN MILLIONS,
EXCEPT PER SHARE AMOUNTS)
<S> <C>
EARNINGS STATISTICS:
Net Sales...................................... $4,943.8
Estimated Gain on Exiting Businesses........... 100.0
Income from Operations......................... 418.3
Net Financing Expense.......................... (57.4)
Net Income..................................... 301.5
Net Income per Common Share.................... 2.06
<CAPTION>
AS OF DECEMBER 31, 1997
(UNAUDITED)(1)
-------------------------
<S> <C>
BALANCE SHEET STATISTICS:
Working Capital................................ $ 554.1
Total Assets................................... 5,687.9
Total Debt..................................... 744.4
Stockholders' Equity........................... 1,404.2
</TABLE>
- --------
(1) Lukens has a 52-53 week fiscal year ending on the last Saturday of December
in each calendar year. Lukens' 1997 fiscal year ended on December 27, 1997.
16
<PAGE>
COMPARATIVE PER SHARE DATA FOR BETHLEHEM AND LUKENS
The following table sets forth certain earnings, dividend and book value per
share data for Bethlehem and Lukens on historical and pro forma bases. The pro
forma operating income data are derived from the Unaudited Pro Forma Combined
Condensed Income Statement appearing elsewhere herein, which gives effect to
the Merger as a purchase as if the Merger had been consummated as of January 1,
1997. The pro forma dividend data assume dividend payments consistent with
Bethlehem's historical payments. Book value data for all pro forma
presentations are based upon the number of outstanding shares of Bethlehem
Common Stock, adjusted to include the shares of Bethlehem Common Stock to be
issued in connection with the Merger. The information set forth below should be
read in conjunction with the historical consolidated financial data of
Bethlehem and of Lukens and the Unaudited Pro Forma Combined Condensed
Financial Statements, including the notes thereto, incorporated by reference or
appearing elsewhere in this Proxy Statement/Prospectus. See "AVAILABLE
INFORMATION," "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE" and "UNAUDITED
PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS."
The pro forma data presented below do not reflect any cost savings, other
synergies or Merger-related expenses anticipated by Bethlehem management as a
result of the Merger.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1997(1)
(UNAUDITED)
------------
<S> <C>
BETHLEHEM HISTORICAL:
Income per share--basic....................................... $ 2.13
Common cash dividends per share............................... --
Book value per common share................................... 5.78
LUKENS HISTORICAL:
Loss per share--basic......................................... $(0.45)
Common cash dividends per share............................... 1.00
Book value per common share................................... 16.18
BETHLEHEM UNAUDITED PRO FORMA COMBINED:
Income per share--basic....................................... $ 2.06
Common cash dividends per share............................... --
Book value per common share................................... 6.66
LUKENS PRO FORMA EQUIVALENT(2):
Income per share--basic....................................... $ 5.93
Common cash dividends per share............................... --
Book value per common share................................... 19.17
</TABLE>
- --------
(1) Lukens has a 52-53 week fiscal year ending on the last Saturday of December
in each calendar year. Lukens' 1997 fiscal year ended on December 27, 1997.
(2) Lukens' pro forma equivalent amounts are calculated by multiplying the
respective pro forma combined per share amounts by an assumed Conversion
Number of 2.878. The actual Conversion Number may differ from the number
used in this calculation.
17
<PAGE>
COMPARATIVE STOCK PRICES AND DIVIDENDS
Bethlehem Common Stock (symbol: BS) and Lukens Common Stock (symbol: LUC) are
listed for trading on the NYSE. The following table sets forth, for the periods
indicated, the high and low sale prices of Bethlehem Common Stock and Lukens
Common Stock on the NYSE Tape and the quarterly cash dividends per share paid
on Bethlehem Common Stock and Lukens Common Stock. Under the Merger Agreement,
Lukens may not pay a quarterly dividend in excess of $.25 per share of Lukens
Common Stock between the date of the Merger Agreement and the Effective Time
without the consent of Bethlehem.
<TABLE>
<CAPTION>
LUKENS BETHLEHEM
COMMON STOCK(1) COMMON STOCK CASH DIVIDENDS CASH DIVIDENDS
------------------ ----------------- ON LUKENS ON BETHLEHEM
HIGH LOW HIGH LOW COMMON STOCK(1) COMMON STOCK
-------- ------- ------ ------ --------------- --------------
<S> <C> <C> <C> <C> <C> <C>
CALENDAR 1996
First Quarter......... $30 1/4 $24 1/4 $15 7/8 $13 1/8 $0.25 --
Second Quarter........ 27 3/8 23 3/4 14 1/2 11 1/2 0.25 --
Third Quarter......... 24 1/8 18 12 9 1/4 0.25 --
Fourth Quarter........ 20 3/4 13 1/2 10 5/16 7 5/8 0.25 --
CALENDAR 1997
First Quarter......... 22 3/8 16 5/8 9 3/8 7 5/8 0.25 --
Second Quarter........ 20 1/2 16 3/4 10 3/4 7 3/4 0.25 --
Third Quarter......... 22 17 15/16 12 7/8 9 13/16 0.25 --
Fourth Quarter........ 29 1/8 15 11 9/16 7 3/4 0.25 --
CALENDAR 1998
First Quarter......... 34 1/4 28 15 1/2 8 1/16 0.25 --
Second Quarter
(through April 24,
1998)................ 36 32 7/8 17 1/8 13 5/8 -- --
</TABLE>
- --------
(1) Lukens has a 52-53 week fiscal year ending on the last Saturday of December
in each calendar year. The information set forth above is presented based
on calendar year quarters which do not correspond to Lukens' fiscal
quarters.
MARKET PRICE DATA
The following table sets forth the last reported sales prices of Bethlehem
Common Stock and Lukens Common Stock on the NYSE Tape on December 12, 1997, the
last trading day before announcement of the merger agreement as entered into on
December 15, 1997, and on April 24, 1998, the last trading day prior to the
date of this Proxy Statement/Prospectus:
<TABLE>
<CAPTION>
BETHLEHEM LUKENS
COMMON COMMON
STOCK STOCK
--------- ------
<S> <C> <C>
December 12, 1997...................................... $8 1/8 $17 1/2
April 24, 1998......................................... $15 5/16 $34 1/4
</TABLE>
LUKENS STOCKHOLDERS ARE URGED TO OBTAIN CURRENT MARKET QUOTATIONS FOR
BETHLEHEM COMMON STOCK AND LUKENS COMMON STOCK.
18
<PAGE>
RISK FACTORS
In considering whether to vote for the proposal to adopt the Merger
Agreement, the stockholders of Lukens should consider the following matters,
which could materially affect the value of the Bethlehem Common Stock to be
received by stockholders of Lukens in connection with the Merger.
RISK FACTORS RELATED TO THE MERGER
Relationship Between Conversion Number and Relative Stock Prices. The
Conversion Number will be equal to $30 divided by the Average Market Price,
which is the average of the daily closing prices of Bethlehem Common Stock for
the 15 consecutive full NYSE trading days immediately preceding the third full
NYSE trading day prior to the Effective Time, but will not be less than 2.878
or more than 4.317. The Average Market Price may vary from the price of
Bethlehem Common Stock at the date of this Proxy Statement/Prospectus. Such
variations may be the result of changes in the business, operations or
prospects of Bethlehem or Lukens, market assessments of the likelihood that
the Merger will be consummated and the timing thereof, regulatory
considerations, general market and economic conditions and other factors.
Because the Effective Time may occur at a date later than the Special Meeting,
there can be no assurance that the price of Bethlehem Common Stock on the date
of the Special Meeting will be indicative of the Average Market Price. The
Effective Time will occur as soon as practicable following the Closing (as
defined below), which will occur no later than the second business day after
the satisfaction or waiver of the conditions set forth in the Merger
Agreement. See "THE MERGER AGREEMENT--Conditions to the Consummation of the
Merger." Furthermore, the Conversion Number will not exceed 4.317 (which would
correspond to an Average Market Price of $6.95) regardless of whether the
actual Average Market Price is less than $6.95. Although Lukens will not be
obligated to effect the Merger if the Average Market Price is less than $6.95,
Lukens may waive this condition and proceed with the Merger even if the
Average Market Price is less than $6.95. Stockholders of Lukens are urged to
obtain current market quotations for Bethlehem Common Stock and Lukens Common
Stock. See "THE MERGER--Merger Consideration" and "OTHER TERMS OF THE MERGER
AGREEMENT--Conditions to the Consummation of the Merger--Conditions to the
Obligations of Lukens."
Uncertainties in Integrating Business Operations and Achieving Cost
Reductions. The value of Bethlehem Common Stock following the Merger may be
affected by the ability of the management of Bethlehem to achieve the cost
reductions from operating and administrative efficiencies and other synergies
expected to result from the consummation of the Merger. The consolidation of
functions, the integration of departments, systems and procedures, and the
relocation of staff present significant management challenges. There can be no
assurance that such actions will be successfully accomplished as rapidly as
currently expected. Moreover, although the primary purpose of such actions
will be to realize direct cost reductions and other operating efficiencies,
there can be no assurance of the extent to which cost reductions and
efficiencies will be achieved.
Interests of Certain Persons in the Transaction. In considering the
recommendation of the Merger by the Lukens Board, the stockholders of Lukens
should take into account that certain directors and executive officers of
Lukens, as well as others, may be deemed to have interests in the Merger in
addition to their interests as stockholders. The Lukens Board has considered
these interests, among other matters, in approving and adopting the Merger
Agreement. See "THE MERGER--Interests of Certain Persons in the Merger."
RISK FACTORS RELATED TO BETHLEHEM
Steel Price Sensitivity. Bethlehem's financial results of operations are
significantly affected by relatively small (on a percentage basis) variations
in the realized prices for its products. For example, Bethlehem shipped 8.8
million net tons of steel products and recorded net sales of $4.6 billion
during 1997, implying an average realized price per ton of about $530. A one
percent increase or decrease in this implied average realized price during
1997 would, on a pro forma basis, have resulted in an increase or decrease in
net sales and pre-tax income of about $46 million. Competitive pressures in
the steel industry are severe. These pressures could limit Bethlehem's ability
to obtain price increases or could lead to a decline in prices, which could
have a material adverse effect upon Bethlehem.
19
<PAGE>
Purchased Materials and Services. Bethlehem purchases about $3 billion per
year of raw materials, energy, equipment, goods and services from commercial
sources in about 40 countries. Bethlehem's profitability could be affected by
difficulties in obtaining these items and by the prices paid for them. These
difficulties could include such things as labor strikes, political instability
and natural disasters.
Employee Postretirement Obligations. Bethlehem has substantial financial
obligations related to its employee postretirement plans for pensions and
healthcare. Moreover, due to the excess of projected benefit obligations over
pension fund assets, Bethlehem's annual pension expense is higher on a per ton
basis than that of most other domestic steel producers. This pension expense,
combined with postretirement healthcare expense, puts Bethlehem at a
competitive disadvantage with respect to such costs compared to most other
domestic steel producers. As of December 31, 1997, Bethlehem's consolidated
balance sheet reflected liabilities of $440 million and $1,595 million,
recognized in accordance with generally accepted accounting principles, for
postretirement pensions and benefits other than pensions, respectively. The
calculation of the actuarial present value of the accumulated benefit
obligations and recorded liabilities for active employees assumes continued
employment with projections for retirements, deaths, resignations and
discharges. If actual terminations of active employees occur significantly
earlier than projected (as a result of facility shutdowns, restructurings or
other reasons), the accumulated benefit obligations and recorded liabilities
would increase substantially. The charges for employees terminated as a result
of facility shutdowns or restructurings vary depending upon the demographics
of the workforce, but could be $100,000 per employee. The recording of these
charges could result in a material adverse impact on Bethlehem's financial
condition because of the increase in recorded liabilities, decrease in
stockholders' equity and increases in required contributions to the pension
fund and retiree healthcare payments. See "--Facility Shutdowns and
Restructurings."
Capital Structure. Bethlehem's capital structure is highly leveraged
reflecting its recorded liabilities for pensions and other postretirement
obligations. Although Bethlehem believes it has sufficient access to funds for
the operation of its business, its existing obligations and below investment
grade credit ratings may limit its ability to raise capital in the future.
Bethlehem expects to finance the Cash Consideration to be paid in connection
with the Merger with available cash and with the sale of Lukens' stainless and
distribution businesses. Bethlehem has already signed the Sale Agreement to
sell certain assets of Lukens to Allegheny for $175 million. If the sale of
assets contemplated by the Sale Agreement and/or the potential sales of other
Lukens assets are not consummated at the Effective Time, Bethlehem may incur
additional debt in the amount of $275 million by entering into a short-term
borrowing arrangement and by drawing on its current revolving credit
arrangement to finance the remaining portion of the Cash Consideration to be
paid in connection with the Merger.
Facility Shutdowns and Restructurings. During the last five years, Bethlehem
has shut down or restructured several facilities and operations. Since 1993,
Bethlehem has recorded charges of $815 million in connection with these
actions including restructuring charges of $465 million ($382 million after-
tax) in 1996 for the exit of Bethlehem Structural, the Eagle Nest coal
operation, BethForge, CENTEC and BethShip and the write-off of the assets of
the Coke Division located in Bethlehem, Pennsylvania as an impaired asset.
Eagle Nest, BethForge, CENTEC and BethShip were sold and Bethlehem Structural
ended operations by the end of 1997. Also during 1997, Bethlehem sold its High
Power Mountain coal assets and its equity interest in Iron Ore Company of
Canada. Bethlehem discontinued operations at the Bethlehem Coke Division by
March 31, 1998. If it becomes necessary for Bethlehem to exit or restructure
additional businesses and operations in the future, it could incur substantial
additional charges in the process. The recording of these charges could have a
material adverse impact on Bethlehem's financial condition because of the
increase in recorded liabilities, decrease in stockholders' equity and
possible increases in required contributions to the pension fund and retiree
healthcare payments. Except as previously announced, Bethlehem does not
currently anticipate any additional facility shutdowns, restructurings or
other reasons why active Bethlehem employees might be terminated. As
previously announced, Bethlehem discontinued its Bethlehem Coke Division
located in Bethlehem, Pennsylvania, and in connection with the Merger the 160-
inch plate mill at its Sparrows Point Division. Bethlehem also anticipates
workforce reductions in the range of 800 employees in connection with the
closure of the Bethlehem Coke Division and an additional 900 employees at its
Sparrows Point Division over the next
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three to four years as part of its previously announced comprehensive plan to
achieve and sustain a superior rate of return on the capital invested at this
facility. See "UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS"
for the effects of these workforce reductions on Bethlehem's financial
condition.
Negotiation of New Labor Agreements. Bethlehem's 1993 labor agreement with
the United Steelworkers of America (the "USWA"), covering most of Bethlehem's
USWA-represented employees, expires on August 1, 1999. Bethlehem's ability to
operate could be impacted by a strike or work stoppage if it is unable to
negotiate a new agreement with its represented employees when the existing
agreement expires in 1999. Also, Bethlehem's profitability could be adversely
affected if increased costs associated with any future contract are not
recoverable through productivity improvements or price increases.
RISK FACTORS RELATED TO THE STEEL INDUSTRY
Cyclicality. The domestic steel industry is highly cyclical in nature.
Domestic integrated producers suffered substantial losses in the first half of
the 1980s. During the second half of the 1980s, domestic steel producers
benefited from improved industry conditions and in 1988 domestic steel
industry earnings reached record levels. Steel demand and pricing declined
between 1989 and 1992 and the domestic industry reported substantial losses.
Since 1993, there has been a recovery in steel markets and domestic steel
producers have reported improved results. There can be no assurance as to the
extent of any future improvement in domestic steel industry earnings.
Intensifying Competition. The domestic steel industry is highly competitive.
This competition affects, and will continue to affect after the Merger, the
prices that Bethlehem can charge for its products, the utilization of its
production facilities, its ability to sell higher value products and
ultimately its profitability.
Mini-mill Producers. Domestic integrated producers, such as Bethlehem, have
lost market share in recent years to domestic mini-mill producers. These
producers provide significant competition in certain product lines, including
hot rolled sheet products. Mini-mill producers are relatively efficient, low-
cost producers that produce steel from scrap in electric furnaces (which are
less expensive to build than integrated facilities), have low employment and
environmental costs per ton shipped and target regional markets. Through the
use of iron substitutes and thin slab casting technology, mini-mill producers
are increasingly able to compete directly with producers of higher value
products, including cold rolled and coated sheets. Most of the new flat rolled
facilities that will be constructed over the next several years will be
electric furnace facilities.
Imports. Domestic steel producers also face significant competition from
foreign producers and have been, and may continue to be, adversely affected by
unfairly traded imports. In certain cases, foreign producers may be pricing
their products below their production costs. Imports of finished steel
products accounted for about 18 percent of the domestic market in 1997 and
about 17 percent in both 1996 and 1995. Anti-dumping and countervailing duty
orders covering imports of corrosion resistant sheet from six countries, cold
rolled sheet from three countries and plates from 11 countries, which resulted
from unfair trade cases filed by Bethlehem and 11 other companies in 1992,
remain in place. Imports of flat rolled steel from countries not subject to
orders, including particularly the Commonwealth of Independent States
(formerly the USSR), eastern European countries and the People's Republic of
China, have increased significantly. In December 1997, the International Trade
Commission ruled that imports of cut-to-length plate from the People's
Republic of China, Russia, the Ukraine and South Africa were causing or
threatening to cause material injury to the domestic steel industry.
Antidumping duty orders covering imports of cut-to-length plate from these
countries were suspended by agreements limiting the quantity of plate imports
for a five-year period, except for South Africa which is subject to a price
floor. Violation of the suspension agreements by these countries would result
in the antidumping duty orders becoming effective. Bethlehem continues to be
concerned about the high levels of unfairly traded imports which could
adversely affect the profitability of Bethlehem.
Substitute Materials. For many steel products, there is substantial
competition from manufacturers of products other than steel, including
aluminum, ceramics, concrete, glass, plastics and wood. Changes to the
relative competitiveness of these substitute materials and the emergence of
additional substitute materials could adversely affect future prices and
demand for Bethlehem's products.
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Excess World Capacity. There is excess world capacity for many of the
products produced by Bethlehem. Moreover, many foreign steel producers are
owned, controlled or subsidized by foreign governments. Decisions by these
foreign producers to continue marginal facilities may be influenced to a
greater degree by political and economic policy considerations than by
prevailing market conditions. In addition, overcapacity has been perpetuated
by the continued operation, modernization and upgrading of marginal domestic
facilities through bankruptcy reorganization proceedings and by the sale of
marginal domestic facilities to new owners, which operate such facilities with
a lower cost structure. Over the next several years, construction of
additional flat rolled production facilities could result in increased
domestic capability of up to 10 million tons over 1997 levels.
The major restructuring of the domestic steel industry, which began in the
late 1970s and early 1980s, has removed the steelmaking capacity that once
existed to meet market demand during peak periods. During the last few years,
domestic producers have met a portion of the demand that exceeded steelmaking
capacity by importing semifinished slabs for rolling into finished products in
their own mills. Increased imports of finished products met the remaining
demand, which could not be met by domestic rolling mills.
Outages. Steel operations are subject to planned and unplanned outages due
to required maintenance, equipment malfunctions, work stoppages, various
hazards (including explosions, fires and severe weather conditions) and the
availability of raw materials, supplies, utilities and other items needed for
the production of steel. These outages could result in reduced production and
increased costs.
Environmental Control Requirements. Steel producers incur substantial costs
in complying with federal, state and local environmental laws. Future specific
environmental control requirements cannot be predicted. Estimates for future
capital expenditures and operating costs required for environmental compliance
are subject to numerous uncertainties, including the evolving nature of
regulations, possible imposition of more stringent requirements, availability
of new technologies and the timing of expenditures.
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THE SPECIAL MEETING
PURPOSE
This Proxy Statement/Prospectus is being furnished to the holders of Lukens
Common Stock and Lukens Preferred Stock in connection with the solicitation of
proxies by the Lukens Board for use at the Special Meeting.
At the Special Meeting, the stockholders of Lukens will consider and vote
upon a proposal to adopt the Merger Agreement, which provides for the Merger
of Merger Sub with and into Lukens with Lukens continuing as the Surviving
Corporation. Following the Merger, Bethlehem intends to cause the Surviving
Corporation to be merged with and into Bethlehem. The stockholders of Lukens
will also consider and take action upon any other business which may properly
be brought before the Special Meeting.
The Lukens Board has determined that the Merger is fair to, and in the best
interests of, Lukens and its stockholders and has approved and adopted in all
respects each of the Merger Agreement and the Merger, subject to and in
accordance with the terms of the Merger Agreement. THE LUKENS BOARD RECOMMENDS
THAT THE STOCKHOLDERS OF LUKENS VOTE FOR THE PROPOSAL TO ADOPT THE MERGER
AGREEMENT AT THE SPECIAL MEETING. See "THE MERGER--Background of the Merger"
and "--Recommendation of the Lukens Board and Reasons for the Merger." For a
discussion of conflicts of interests that certain directors of Lukens may have
with respect to the Merger Agreement and the Merger, see "THE MERGER--
Interests of Certain Persons in the Merger." Such interests, together with
other relevant factors, were considered by the Lukens Board in making its
recommendation and approving and adopting the Merger Agreement and the Merger.
The Bethlehem Board has approved the Merger and the issuance of Bethlehem
Common Stock in connection with the Merger. Bethlehem, as the sole stockholder
of Merger Sub, has adopted, and the Board of Directors of Merger Sub has
approved, the Merger Agreement. No approval by stockholders of Bethlehem is
required to effect the Merger.
RECORD DATE; VOTING RIGHTS; REQUIRED VOTE
Only holders of record of Lukens Common Stock and Lukens Preferred Stock at
the close of business on the Record Date, April 17, 1998, are entitled to
receive notice of and to vote at the Special Meeting. At the close of business
on the Record Date, there were 15,030,527 shares of Lukens Common Stock
outstanding, each of which entitles the registered holder thereof to one vote,
and 453,877 shares of Lukens Preferred Stock outstanding, each of which
entitles the registered holder thereof to three votes. Consequently, the total
number of votes entitled to be cast at the Special Meeting by the holders of
the outstanding shares of Lukens Common Stock and Lukens Preferred Stock,
voting together as a single class, is 16,392,158.
Adoption of the Merger Agreement will require the affirmative vote of the
holders of outstanding shares of Lukens Common Stock and Lukens Preferred
Stock, voting together as a single class, representing a majority of the
combined voting power of the outstanding shares of Lukens Common Stock and
Lukens Preferred Stock. An abstention will have the effect of a vote against
adoption of the Merger Agreement. Brokers who hold shares of Lukens Common
Stock as nominees will not have discretionary authority to vote such shares in
the absence of instructions from the beneficial owners thereof. Any shares
which are not voted because the nominee-broker lacks such discretionary
authority will have the effect of votes cast against the adoption of the
Merger Agreement.
STOCK OWNERSHIP OF MANAGEMENT
At the close of business on the Record Date, directors and executive
officers of Lukens and their affiliates were the beneficial owners of an
aggregate of approximately 1,045,252 shares of Lukens Common Stock and 10,490
shares of Lukens Preferred Stock, or approximately 6.6% of the voting power of
the outstanding shares of Lukens Common Stock and Lukens Preferred Stock,
voting together as a single class (approximately 6.1% on a fully diluted basis
assuming the conversion of all shares of Lukens Preferred Stock and the
exercise of all options to purchase shares of Lukens Common Stock outstanding
on the Record Date).
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QUORUM
The presence at the meeting in person or by properly executed proxy of
stockholders of Lukens entitled to cast at least a majority of the votes that
all stockholders are entitled to cast at the Special Meeting will constitute a
quorum at the Special Meeting.
Shares of Lukens Common Stock and Lukens Preferred Stock represented by
proxies which are marked "abstain" will be counted as shares present for
purposes of determining the presence of a quorum on all matters, as will
shares of Lukens Common Stock and Lukens Preferred Stock that are represented
by proxies that are executed by any broker, fiduciary or other nominee on
behalf of the beneficial owner(s) thereof regardless of whether authority to
vote is withheld from such broker, fiduciary or nominee on one or more
matters.
In the event that a quorum is not present at the Special Meeting, it is
expected that such meeting will be adjourned, postponed or continued.
PROXIES
All shares of Lukens Common Stock and Lukens Preferred Stock represented by
properly executed proxies in the enclosed form which are received in time for
the Special Meeting and have not been revoked will be voted in accordance with
the instructions indicated in such proxies. If no instructions are indicated,
shares represented by properly executed proxies will be voted FOR adoption of
the Merger Agreement.
An abstention will have the effect of a vote against adoption of the Merger
Agreement. Brokers who hold shares of Lukens Common Stock as nominees will not
have discretionary authority to vote such shares in the absence of
instructions from the beneficial owners thereof. Any shares which are not
voted because the nominee-broker lacks such discretionary authority will be
counted for purposes of determining a quorum at the Special Meeting, and will
have the effect of votes cast against the adoption of the Merger Agreement.
Lukens does not know of any matter not described in the Notice of Special
Meeting that is expected to come before the Special Meeting. If, however, any
other matters are properly presented for action at the Special Meeting, the
persons named in the enclosed form of proxy and acting thereunder will have
the discretion to vote on such matters in accordance with their best judgment,
unless such authority is withheld.
A stockholder of Lukens has submitted a proposal to be considered at the
next annual meeting of stockholders of Lukens. In the event that the Merger
Agreement is not adopted by the stockholders of Lukens, or the Merger
Agreement is terminated prior to the Effective Time for any reason, the Lukens
Board currently intends to promptly call an annual meeting of stockholders of
Lukens for the purpose, among others, of electing directors and considering
such proposal. See "OTHER MATTERS--Stockholder Proposals."
Any proxy may be revoked by the stockholder executing it at any time prior
to its exercise (i) by giving written notice thereof to the Secretary of
Lukens, (ii) by completing, signing, dating and returning a later dated proxy
or (iii) by voting in person at the Special Meeting. No such revocation shall
be effective, however, until such notice of revocation has been received by
Lukens at or prior to the Special Meeting. Attendance at the Special Meeting
will not in and of itself constitute the revocation of a proxy.
SOLICITATION OF PROXIES
Proxies are being solicited hereby on behalf of the Lukens Board. Except as
otherwise provided in the Merger Agreement, the entire cost of proxy
solicitation for the Special Meeting, including the reasonable expenses of
brokers, fiduciaries and other nominees in forwarding solicitation material to
beneficial owners, will be borne by Lukens. In addition to the use of the
mail, solicitation may be made by telephone or otherwise by officers and
employees of Lukens. Such officers and employees will not be additionally
compensated for such solicitation, but may be reimbursed for out-of-pocket
expenses incurred in connection therewith. If undertaken,
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the expense of such solicitation would be nominal. Lukens has retained
Corporate Investor Communications, Inc. and Innisfree M&A Incorporated to aid
in the solicitation of proxies from its stockholders. The fees of such firms
are estimated to be not more than $16,000, plus reimbursement of out-of-pocket
expenses.
APPRAISAL RIGHTS
Holders of record of Lukens Preferred Stock and, if a Stock Proration Event
occurs, holders of record of Lukens Common Stock will be entitled to demand
judicial appraisal of, and obtain a cash payment for, the "fair value" of
their respective shares of Lukens Preferred Stock and Lukens Common Stock
(exclusive of any element of value arising from the accomplishment or
expectation of the Merger), pursuant to Section 262 of the DGCL. Under Section
262 of the DGCL, appraisal rights are not available with respect to shares of
stock of a constituent corporation in a merger if: (i) such shares are listed
on a national securities exchange on the record date fixed to determine the
stockholders entitled to receive notice of and to vote at the meeting of
stockholders to act upon the agreement of merger and (ii) pursuant to the
terms of the agreement of merger, the holder of such shares has the right to
receive in exchange for such shares solely shares of stock of a company which
are listed on a national securities exchange (and cash in lieu of fractional
shares). If a Stock Proration Event does not occur, pursuant to the terms of
the Merger Agreement, holders of Lukens Common Stock (which is listed on a
national securities exchange) will have the right to receive in exchange for
their respective shares, if they so elect, Common Merger Consideration
consisting solely of shares of Bethlehem Common Stock (and cash in lieu of
fractional shares) and therefore will not have the right to demand appraisal
under Section 262 of the DGCL. However, if a Stock Proration Event occurs,
holders of record of Lukens Common Stock will be required by the terms of the
Merger Agreement to accept, in exchange for their respective shares, Common
Merger Consideration consisting of both shares of Bethlehem Common Stock and
cash, and will therefore be entitled to demand appraisal under Section 262 of
the DGCL. In order to exercise such rights, such holders of Lukens Common
Stock or Lukens Preferred Stock must not vote in favor of adoption of the
Merger Agreement, must deliver to Lukens a written demand for appraisal prior
to the taking of the vote on the Merger Agreement at the Special Meeting and
must otherwise comply with the procedural requirements of Section 262 of the
DGCL. The full text of Section 262 of the DGCL is attached hereto as Annex
III, and any stockholder desiring to exercise appraisal rights in connection
with the Merger is urged to consult with legal counsel prior to taking any
action in order to ensure that such stockholder complies with the applicable
statutory provisions. Failure to take any of the steps required under Section
262 of the DGCL on a timely basis may result in the loss of appraisal rights.
See "THE MERGER--Appraisal Rights" and Annex III hereto.
STOCK CERTIFICATES
STOCKHOLDERS SHOULD NOT FORWARD ANY STOCK CERTIFICATES WITH THEIR PROXY
CARDS. STOCKHOLDERS SHOULD SEND CERTIFICATES REPRESENTING SHARES OF LUKENS
COMMON STOCK FOR WHICH A CASH ELECTION IS BEING MADE TO THE EXCHANGE AGENT
TOGETHER WITH, AND IN ACCORDANCE WITH THE INSTRUCTIONS ON, THE ELECTION FORM
MAILED HEREWITH. A LETTER OF TRANSMITTAL, WITH INSTRUCTIONS FOR THE SURRENDER
OF CERTIFICATES REPRESENTING LUKENS COMMON STOCK FOR WHICH A CASH ELECTION HAS
NOT BEEN MADE OR LUKENS PREFERRED STOCK, WILL BE MAILED TO STOCKHOLDERS
SHORTLY AFTER THE EFFECTIVE TIME.
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THE MERGER
The description of the Merger and the Merger Agreement contained in this
Proxy Statement/Prospectus describes all material elements of the Merger and
the Merger Agreement but does not purport to be complete and is qualified in
its entirety by reference to the Merger Agreement, the full text of which is
attached hereto as Annex I and incorporated herein by reference.
GENERAL
At the Effective Time of the Merger, Merger Sub will be merged with and into
Lukens with Lukens continuing as the Surviving Corporation and a wholly owned
subsidiary of Bethlehem. As a result of the Merger, the separate corporate
existence of Merger Sub will cease and Lukens will succeed to all the rights
and be responsible for all the obligations of Merger Sub in accordance with
the DGCL. Following the Merger, Bethlehem intends to cause the Surviving
Corporation to be merged with and into Bethlehem. Bethlehem would then succeed
to and assume all the rights and obligations of Lukens and Merger Sub.
Upon the terms and subject to the conditions set forth in the Merger
Agreement, at the Effective Time, (i) each share of Lukens Common Stock
outstanding immediately prior to the Effective Time (other than shares owned
by Lukens, which will be canceled, and shares held by stockholders exercising
appraisal rights under Section 262 of the DGCL, if available) will be
converted into the right to receive, at the election of the holder, either (x)
$30 in cash, without interest thereon, or (y) a number of shares of Bethlehem
Common Stock equal to $30 divided by the average of the daily closing prices
of Bethlehem Common Stock, as reported on the NYSE Tape, for the 15
consecutive full NYSE trading days immediately preceding the third full NYSE
trading day prior to the Effective Time, but not less than 2.878 or more than
4.317, in each case subject to possible proration to ensure that the aggregate
amount of cash to be paid and the aggregate amount of Bethlehem Common Stock
to be delivered in the Merger will not exceed 68% and 32%, respectively, of
the total value of the consideration to be paid or delivered by Bethlehem in
the Merger, and (ii) each share of Lukens Preferred Stock outstanding
immediately prior to the Effective Time (other than shares held by
stockholders exercising appraisal rights under Section 262 of the DGCL) will
be converted into the right to receive the number of shares of Bethlehem
Common Stock (and the amount of cash, if applicable) that a holder of the
number of shares of Lukens Common Stock into which such shares of Lukens
Preferred Stock could have been converted immediately prior to the Effective
Time would have the right to receive if such holder did not make a Cash
Election with respect to such shares. Cash will be paid in lieu of any
fractional shares of Bethlehem Common Stock.
BACKGROUND OF THE MERGER
Beginning in 1996, Lukens engaged in exploratory discussions from time to
time regarding a possible strategic combination or an expanded business
relationship with certain third parties. The reasons for entering into such
discussions included the following: (i) the potential for reducing
inefficient, excess industry capacity for the production of carbon and alloy
and stainless steel plate and cold rolled stainless steel sheet by permitting
the shutdown or restructuring of redundant facilities; (ii) the desirability
of leveraging recent capital investments by Lukens and improving Lukens'
competitive position through the formation of a strategic alliance; (iii) the
goals of enhancing shareholder value and ensuring more stable prospects for
shareholders and other stakeholders; and (iv) the need to improve Lukens'
access to capital markets to fund growth and modernization. As part of these
exploratory discussions, after considering certain potential candidates for a
strategic combination, Lukens determined initially to pursue discussions with
two companies--Allegheny and Bethlehem--because each appeared to represent the
best strategic fit with Lukens' principal lines (i.e., stainless and carbon
and alloy products) with respect to process capabilities and requirements as
well as geographic coverage.
On March 7, 1997, Lukens and Allegheny entered into a confidentiality
agreement (the "Allegheny Confidentiality Agreement") pursuant to which Lukens
agreed to furnish confidential information to Allegheny for the purpose of
enabling Allegheny to consider the desirability of a possible transaction with
Lukens. The Allegheny Confidentiality Agreement contained customary provisions
regarding treatment of confidential information and a provision prohibiting
Allegheny, except under certain circumstances, from taking any action
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for a period of two years from the date of execution of such agreement to
acquire any voting securities of Lukens or otherwise seek to influence or
control Lukens (the "Allegheny Standstill Provision"). Pursuant to the
Allegheny Confidentiality Agreement, Allegheny's obligation under the
Allegheny Standstill Provision terminated on December 15, 1997, subject to
possible reinstatement upon the occurrence of certain events, when the Board
of Directors of Lukens publicly accepted the merger proposal made to it by
Bethlehem.
Following execution of the Allegheny Confidentiality Agreement, members of
senior management of Lukens and Allegheny met to discuss the desirability of a
strategic transaction between the two companies.
Subsequently, during May 1997, R. William Van Sant, Chairman, President and
Chief Executive Officer of Lukens, Curtis H. Barnette, Chairman and Chief
Executive Officer of Bethlehem, and Bethlehem's financial advisor held
preliminary discussions regarding the possibility of a strategic combination
between Lukens and Bethlehem, including the combination of their respective
steel plate businesses. Subsequent meetings among representatives of Lukens
and Bethlehem focused on possible operating synergies in the carbon and alloy
plate business, the potential acquisition of Lukens by Bethlehem, the benefits
that could be derived from such an acquisition and the necessity for
additional due diligence.
Moreover, discussions between Lukens and Allegheny continued into June 1997.
On or about June 17, 1997, Richard P. Simmons, Chairman and Chief Executive
Officer of Allegheny, informed Mr. Van Sant that Allegheny was interested in
further exploring a transaction pursuant to which shares of common stock of
Allegheny ("Allegheny Common Stock") would be exchanged for shares of Lukens
capital stock in a merger transaction. Mr. Simmons also informed Mr. Van Sant
that Allegheny expected to conduct an extensive due diligence review of
Lukens.
On June 30, 1997, Lukens and Bethlehem exchanged confidentiality agreements
(the "Bethlehem Confidentiality Agreements") containing, among other things,
customary provisions regarding treatment of confidential information furnished
by each to the other and a provision prohibiting, for a period of one year
after the date of execution of the agreements, each company from acquiring the
securities of the other in a transaction not approved by the other's board of
directors.
In mid-July 1997, following further discussions among representatives of
Lukens and Allegheny, together with their respective financial advisors,
Allegheny informed Lukens that it was not prepared to proceed on the terms
previously discussed. As a result, contacts between Lukens and Allegheny
terminated in July 1997.
During July and August 1997, management of Lukens periodically met with
management of Bethlehem to discuss the possibility of a strategic combination
between Lukens and Bethlehem. During September and October 1997,
representatives of Lukens and Bethlehem, together with their respective
financial advisors, met on several occasions to conduct due diligence
investigations and to continue their discussions regarding a possible
transaction.
In November 1997, Mr. Simmons of Allegheny called Mr. Van Sant and expressed
an interest in reopening discussions regarding a possible acquisition of
Lukens by Allegheny, and due diligence meetings among representatives of
Lukens and Allegheny were held. During that same time period, additional
discussions continued among representatives of Lukens and Bethlehem regarding,
among other things, Lukens' prospective operating performance. Representatives
of Lukens and Allegheny, and separately, Lukens and Bethlehem, continued their
respective discussions and due diligence investigations during late November
and early December 1997. Throughout the discussions with Bethlehem and
Allegheny, Mr. Van Sant regularly advised the Lukens Board of the nature and
status of such discussions.
On December 7, 1997, Mr. Simmons informed Mr. Van Sant that Allegheny was
prepared to pay consideration having a total value, as of that date, of $23.50
per share of Lukens Common Stock, comprised of $11.75 in cash and a fixed
fraction of a share of Allegheny Common Stock, which fraction then had a
market value of $11.75. During that discussion, Mr. Simmons indicated that
Allegheny would not agree to any mechanisms, such as a variable exchange ratio
with limitations (i.e., "caps" or "collars"), designed to guarantee a minimum
value to the stockholders of Lukens.
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During the week of December 8, 1997, management of Lukens concluded that it
would be advisable to accelerate its discussions with both Bethlehem and
Allegheny. On December 12, 1997, representatives of CSFB, Lukens' financial
advisor, and representatives of Allegheny's financial advisor continued
discussions regarding a possible transaction. At that time, representatives of
Allegheny's financial advisor informed representatives of CSFB that Allegheny
was prepared to pay consideration having a total value, as of that time, of
$23.20 per share of Lukens Common Stock, comprised of $11.75 in cash and a
fixed fraction of a share of Allegheny Common Stock, which fraction then had a
market value of $11.45. During that discussion, representatives of Allegheny's
financial advisor repeated that Allegheny would not agree to any mechanisms
designed to guarantee a minimum value to the stockholders of Lukens.
In addition, representatives of Lukens and Bethlehem met on December 12,
1997 to discuss a draft merger agreement that Bethlehem had submitted to
Lukens. On December 13, 1997, a meeting also took place among representatives
of Lukens and Allegheny to discuss certain aspects of the respective
operations and prospects of Lukens and Allegheny.
During the latter part of December 13, 1997, representatives of Bethlehem
informed representatives of Lukens that Bethlehem was prepared to acquire
Lukens for consideration, comprised of cash and shares of Bethlehem Common
Stock, having a total value of $23.00 per share of Lukens Common Stock.
Moreover, Bethlehem proposed that each holder of Lukens Common Stock would
have the right to elect to receive the merger consideration in cash, subject
to possible proration to ensure that no more than 50% of the aggregate merger
consideration would be cash.
Early on December 14, 1997, representatives of Bethlehem, after being
informed that management of Lukens could not recommend Bethlehem's $23.00 per
share offer to the Lukens Board, increased its offer to $25.00 per share of
Lukens Common Stock with each holder of Lukens Common Stock having the right
to elect to receive the merger consideration in cash, subject to possible
proration to ensure that no more than 62% of the aggregate merger
consideration would be cash.
During the evening of December 14, 1997, all members of the Lukens Board met
by telephone conference and heard presentations from management of Lukens and
its advisors, including representatives of CSFB, regarding (i) Allegheny's
offer and the terms of its proposed merger agreement and (ii) Bethlehem's
offer and the terms of its proposed merger agreement. CSFB delivered its oral
opinion (subsequently confirmed in writing) to the effect that, as of the date
of such opinion and based upon and subject to certain matters stated therein,
the merger consideration of $25.00 per share of Lukens Common Stock to be paid
pursuant to Bethlehem's revised offer was fair to the holders of Lukens Common
Stock from a financial point of view. See "--Opinion of Financial Advisor to
Lukens." Following further presentations by management of Lukens and its
advisors, and after discussion, the Lukens Board voted to accept the Bethlehem
offer, to approve and adopt the merger agreement submitted to Lukens, with
such changes as approved by the appropriate officers of Lukens, to submit such
merger agreement for adoption by the stockholders of Lukens and to recommend
that the stockholders of Lukens vote for the proposal to adopt such merger
agreement.
On December 15, 1997, Lukens and Bethlehem entered into the agreement and
plan of merger dated as of that date, which Merger Sub subsequently joined as
a party.
On December 22, 1997, Allegheny sent a letter to the Lukens Board and issued
a press release to the effect that Allegheny was prepared (i) to pay $28.00 in
cash per share of Lukens Common Stock and (ii) to enter into a merger
agreement with Lukens on terms and conditions substantially identical to those
in the merger agreement with Bethlehem, as entered into on December 15, 1997
(the "Allegheny Takeover Proposal"). Lukens notified Bethlehem of the
Allegheny Takeover Proposal in accordance with the merger agreement with
Bethlehem, as entered into on December 15, 1997; and each of Lukens and
Bethlehem issued press releases. During the afternoon of December 22, 1997,
the Lukens Board met by telephone conference and heard presentations from
management of Lukens and its advisors regarding the Allegheny Takeover
Proposal.
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In accordance with the procedures set forth in the merger agreement with
Bethlehem, as entered into on December 15, 1997, limited contacts between
representatives of Lukens and Allegheny regarding the Allegheny Takeover
Proposal took place between December 22, 1997 and December 30, 1997.
On December 30, 1997, the Lukens Board met by telephone conference to
consider the Allegheny Takeover Proposal. At that meeting, the Lukens Board
heard presentations by management of Lukens and its advisors. After
discussion, the Lukens Board unanimously voted (i) that the Allegheny $28.00
per share, all-cash offer was a "superior proposal," as defined in the merger
agreement with Bethlehem, as entered into on December 15, 1997, as compared to
the Bethlehem $25.00 per share cash and stock offer, (ii) to furnish
information to Allegheny pursuant to the Allegheny Confidentiality Agreement,
(iii) to participate in negotiations with Allegheny regarding the Allegheny
Takeover Proposal and (iv) to provide Bethlehem with notice of its
determination that the Allegheny Takeover Proposal constituted a "superior
proposal" under the merger agreement with Bethlehem, as entered into on
December 15, 1997.
Numerous discussions took place from December 30, 1997 through January 3,
1998 between and among the respective representatives and advisors of Lukens
and Bethlehem, including discussions with respect to the possible amendment of
the merger agreement with Bethlehem, as entered into on December 15, 1997.
During these discussions, representatives of Bethlehem indicated its interest
in presenting an offer with a value higher than that of the Allegheny Takeover
Proposal, subject to Lukens' willingness to amend the merger agreement, as
entered into on December 15, 1997, to increase the Termination Fee.
Representatives of Lukens indicated that it would not agree to an increase in
the Termination Fee.
On January 4, 1998, Lukens received a proposed amendment (the "Amendment")
to the merger agreement with Bethlehem, as entered into on December 15, 1997,
from representatives of Bethlehem, pursuant to which Bethlehem offered to
increase the merger consideration to $30.00 per share of Lukens Common Stock
in cash and shares of Bethlehem Common Stock. Pursuant to the Amendment, each
holder of Lukens Common Stock would have the right to elect to receive the
merger consideration in cash, subject to possible proration to ensure that no
more than 68% of the aggregate merger consideration would be cash. The
Amendment did not increase the Termination Fee.
During the evening of January 4, 1998, the Lukens Board met by telephone
conference and heard presentations by management of Lukens and its advisors,
including representatives of CSFB, regarding, among other things, the ability
of Bethlehem to finance the Merger and the value of Bethlehem Common Stock.
CSFB delivered its oral opinion to the Lukens Board (subsequently confirmed by
delivery of a written opinion dated January 4, 1998) to the effect that, as of
the date of such opinion and based upon and subject to certain matters stated
therein, the Common Merger Consideration was fair to the holders of Lukens
Common Stock from a financial point of view. See "--Opinion of Financial
Advisor to Lukens." After discussion, the Lukens Board voted (i) to approve
and adopt the Amendment, (ii) to submit the Merger Agreement for adoption by
the stockholders of Lukens and (iii) to recommend that the stockholders of
Lukens vote for the proposal to adopt the Merger Agreement. Members of the
Lukens Board present at its January 4, 1998 meeting were Mr. R. W. Van Sant,
Chairman, Ms. Sandra L. Helton, and Messrs. Michael O. Alexander, T. Kevin
Dunnigan, William H. Nelson, III, David B. Price, Jr., Joab L. Thomas and W.
Paul Tippett. Messrs. Rod Dammeyer and Ronald M. Gross were unable to attend
that meeting.
On January 4, 1998, Lukens, Bethlehem and Merger Sub entered into the
Amendment.
RECOMMENDATION OF THE LUKENS BOARD AND REASONS FOR THE MERGER
THE LUKENS BOARD HAS DETERMINED THAT THE MERGER IS FAIR TO, AND IN THE BEST
INTERESTS OF, LUKENS AND ITS STOCKHOLDERS AND RECOMMENDS THAT THE STOCKHOLDERS
OF LUKENS VOTE FOR THE PROPOSAL TO ADOPT THE MERGER AGREEMENT AT THE SPECIAL
MEETING.
The conclusions reached by the Lukens Board and its recommendation that the
Merger Agreement be adopted by the stockholders of Lukens were based on its
consideration of a variety of positive and negative
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factors relating both to the advisability of a sale of Lukens and to the terms
of the Merger Agreement. The material factors considered by the Lukens Board
are as follows:
. The Common Merger Consideration represents a substantial premium over the
market price for shares of Lukens Common Stock on the date immediately
prior to the announcement of the merger agreement with Bethlehem, as
entered into on December 15, 1997;
. The Lukens Board's knowledge of the business, operations, properties,
assets, competitive positions, financial condition, operating results,
managements, strategic objectives and prospects of Lukens and Bethlehem
and of the industry in which they operate;
. Increases in global capacity in plate steel and the resulting highly
competitive environment;
. The enhanced financial strength of the combination of Lukens and
Bethlehem will enable future capital expenditures necessary to compete in
the global marketplace;
. Possible alternatives to the Merger, including the Allegheny Takeover
Proposal and continuing to operate Lukens as an independent public
company, as well as the impact, short-term and long-term, of such
alternatives on the value of Lukens Common Stock;
. The cost savings and other potential synergies in the steel operations of
the two companies (anticipated by the management of Lukens to be
approximately $37 million annually in each of fiscal years 1998 and 1999),
which will potentially allow effective integration of the two companies
and efficiencies which may positively impact Bethlehem's performance after
the Merger, thereby benefitting the stockholders of Lukens through
increases in the value of shares of Bethlehem Common Stock;
. The ability of the stockholders of Lukens to participate in the enhanced
prospects of the combined company through ownership of Bethlehem Common
Stock;
. The opinion of CSFB delivered to the Lukens Board to the effect that, as
of the date of such opinion and based upon and subject to certain matters
stated therein, the Common Merger Consideration was fair to the holders of
Lukens Common Stock from a financial point of view (see "--Opinion of
Financial Advisor to Lukens");
. The terms of the Merger Agreement which, among other things, provide: (i)
holders of Lukens Common Stock with the right to elect, subject to
possible proration, to receive the Common Merger Consideration in cash,
and that the stockholders of Lukens would also have the right to continue
to have an equity interest in Bethlehem (although the Lukens Board
considered the risk that the market value of the Bethlehem Common Stock
might decline after the Merger); (ii) the Lukens Board with the
flexibility to consider and accept a Takeover Proposal which constitutes a
"superior proposal"; and (iii) Lukens with the ability to terminate the
Merger Agreement in the event that the Average Market Price is below
$6.95;
. The Lukens Board evaluated the taxable nature of the transaction and
concluded that the transaction was attractive to the stockholders of
Lukens even though it was anticipated that they would be taxed on any gain
that may be recognized with respect to the Merger Consideration received;
. The likelihood that the FTC or the Antitrust Division might raise
objections to the Merger on antitrust grounds; and
. The ability of Bethlehem to finance the aggregate Cash Consideration.
The Lukens Board concluded that these factors, considered as a whole,
supported a decision to approve and adopt the Merger Agreement and the Merger,
recommend submission of the Merger Agreement for adoption by the stockholders
of Lukens and recommend that the stockholders of Lukens vote "for" the
proposal to adopt the Merger Agreement. The foregoing discussion of the
information and factors considered and given weight by the Lukens Board is not
intended to be exhaustive. In view of the variety of factors considered in
connection with its evaluation of the Merger Agreement and the Merger, the
Lukens Board did not find it practicable to, and did not, quantify or
otherwise assign relative weights to the specific factors considered in
reaching its determination. In addition, individual members of the Lukens
Board may have given different weight to the different factors.
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In considering the approval, adoption and recommendation by the Lukens Board
of the Merger Agreement and the Merger, stockholders of Lukens should consider
that certain directors of Lukens may have conflicts of interest. See "--
Interests of Certain Persons in the Merger."
CERTAIN INFORMATION
Lukens provided CSFB and Bethlehem during the fourth quarter of 1997, in
connection with their due diligence review of Lukens, with a business plan for
the future financial performance of Lukens prepared by the management of
Lukens based on a 52-53 week fiscal year ending on the last Saturday of
December in each calendar year. This business plan reflected earnings per
share ("EPS") of $1.56 primary ($1.52 fully diluted) for 1998, $2.76 primary
($2.63 fully diluted) for 1999 and $3.34 primary ($3.17 fully diluted) for
2000. This business plan did not include Merger costs and was not examined or
compiled by Lukens' independent accountants or prepared in accordance with the
standards for prospective financial information established by the American
Institute of Certified Public Accountants. The estimates contained in such
business plan depend upon future financial performance and numerous other
assumptions with respect to industry performance, general business and
economic conditions, access to markets and distribution channels and other
matters, all of which are inherently subject to significant uncertainties and
contingencies and many of which are beyond the control of Lukens and
Bethlehem. See "RISK FACTORS." Differences between actual results and such
business plan may occur and such differences may be material. Lukens and
Bethlehem disclaim any duty to update such business plan and make no
representations as to whether such business plan will be achieved. See
"CAUTIONARY STATEMENT."
OPINION OF FINANCIAL ADVISOR TO LUKENS
CSFB has acted as financial advisor to Lukens in connection with the Merger.
CSFB was selected by Lukens based on CSFB's experience, expertise and
familiarity with Lukens and its business. CSFB is an internationally
recognized investment banking firm and is regularly engaged in the valuation
of businesses and securities in connection with mergers and acquisitions,
leveraged buyouts, negotiated underwritings, competitive biddings, secondary
distributions of listed and unlisted securities, private placements and
valuations for corporate and other purposes.
In connection with CSFB's engagement, Lukens requested that CSFB evaluate
the fairness of the Common Merger Consideration to holders of Lukens Common
Stock from a financial point of view. On January 4, 1998, CSFB rendered to the
Lukens Board an oral opinion (which opinion was subsequently confirmed by
delivery of a written opinion dated January 4, 1998) to the effect that, as of
such date and based upon and subject to certain matters stated in such
opinion, the Common Merger Consideration was fair to the holders of Lukens
Common Stock from a financial point view. CSFB's opinion does not address the
fairness of the Preferred Merger Consideration from a financial point of view
to the holders of Lukens Preferred Stock. Such Preferred Merger Consideration
has been determined pursuant to the provisions of the certificate of
designations with respect to the Lukens Preferred Stock.
The full text of CSFB's written opinion to the Lukens Board dated January 4,
1998, which sets forth the procedures followed, assumptions made, matters
considered and limitations on the review undertaken, is attached as Annex II
to this Proxy Statement/Prospectus and is incorporated herein by reference.
CSFB has consented to the inclusion of its opinion letter to the Lukens Board
as Annex II to this Proxy Statement/Prospectus. In giving such consent, CSFB
does not admit that it comes within the category of persons whose consent is
required under Section 7 of the Securities Act, or the rules and regulations
of the SEC thereunder, nor does it thereby admit that it is an expert with
respect to any part of the Registration Statement of which this Proxy
Statement/Prospectus is a part within the meaning of the term "experts" as
used in the Securities Act, or the rules and regulations of the SEC
thereunder. HOLDERS OF LUKENS COMMON STOCK ARE URGED TO READ CSFB'S OPINION
CAREFULLY IN ITS ENTIRETY. CSFB'S OPINION IS DIRECTED TO THE LUKENS BOARD AND
RELATES ONLY TO THE FAIRNESS OF THE COMMON MERGER CONSIDERATION FROM A
FINANCIAL POINT OF VIEW, DOES NOT ADDRESS ANY OTHER ASPECT OF THE MERGER OR
ANY RELATED TRANSACTION AND DOES NOT CONSTITUTE A RECOMMENDATION TO ANY
STOCKHOLDER AS TO HOW SUCH STOCKHOLDER SHOULD VOTE AT THE SPECIAL MEETING. The
summary of the opinion of CSFB set forth in this Proxy Statement/Prospectus is
qualified in its entirety by reference to the full text of such opinion.
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In arriving at its opinion, CSFB reviewed the Merger Agreement and certain
publicly available business and financial information relating to Lukens and
Bethlehem. CSFB also reviewed certain other information relating to Lukens and
Bethlehem, including financial forecasts provided to or otherwise discussed
with CSFB by Lukens and Bethlehem, and met with the managements of Lukens and
Bethlehem to discuss the businesses and prospects of Lukens and Bethlehem.
CSFB also considered certain financial and stock market data of Lukens and
Bethlehem and compared those data with similar data for other publicly held
companies in businesses similar to those of Lukens and Bethlehem and
considered, to the extent publicly available, the financial terms of certain
other business combinations and other transactions recently completed. CSFB
also considered such other information, financial studies, analyses and
investigations and financial, economic and market criteria which CSFB deemed
relevant.
In connection with its review, CSFB did not assume any responsibility for
independent verification of any of the information provided to or otherwise
reviewed by CSFB and relied on such information being complete and accurate in
all material respects. With respect to the financial forecasts, CSFB was
informed by Lukens, and CSFB assumed, that such forecasts were reasonably
prepared on bases reflecting the best currently available estimates and
judgments as to the future financial performance of Lukens and Bethlehem and
the cost savings and other potential synergies (including the amount, timing
and achievability thereof) anticipated to result from the Merger. In addition,
CSFB did not make an independent evaluation or appraisal of the assets or
liabilities (contingent or otherwise) of Lukens or Bethlehem, nor was CSFB
furnished with any such evaluations or appraisals. CSFB's opinion was
necessarily based upon information available to CSFB, and financial, economic,
market and other conditions as they existed and could be evaluated, on the
date of its opinion. CSFB did not express any opinion as to the actual value
of the Bethlehem Common Stock when issued pursuant to the Merger or the prices
at which the Bethlehem Common Stock will trade subsequent to the Merger.
Although CSFB evaluated the Common Merger Consideration from a financial point
of view, CSFB was not requested to, and did not, recommend the specific
consideration payable in the Merger, which consideration was determined
through negotiation between Lukens and Bethlehem. No other limitations were
imposed by Lukens on CSFB with respect to the investigations made or
procedures followed by CSFB in rendering its opinion.
In preparing its opinion to the Lukens Board, CSFB performed a variety of
financial and comparative analyses, including those described below. The
summary of CSFB's analyses set forth below describes the material analyses
performed by CSFB but does not purport to be an exhaustive description of the
analyses underlying CSFB's opinion. The preparation of a fairness opinion is a
complex analytic process involving various determinations as to the most
appropriate and relevant methods of financial analyses and the application of
those methods to the particular circumstances and, therefore, such an opinion
is not readily susceptible to summary description. In arriving at its opinion,
CSFB made qualitative judgments as to the significance and relevance of each
analysis and factor considered by it. Accordingly, CSFB believes that its
analyses must be considered as a whole and that selecting portions of its
analyses and factors, without considering all analyses and factors, could
create a misleading or incomplete view of the processes underlying such
analyses and its opinion. In its analyses, CSFB made numerous assumptions with
respect to Lukens, Bethlehem, industry performance, regulatory, general
business, economic, market and financial conditions and other matters, many of
which are beyond the control of Lukens and Bethlehem. No company, transaction
or business used in such analyses as a comparison is identical to Lukens,
Bethlehem or the Merger, nor is an evaluation of the results of such analyses
entirely mathematical; rather, such analyses involve complex considerations
and judgments concerning financial and operating characteristics and other
factors that could affect the acquisition, public trading or other values of
the companies, business segments or transactions being analyzed. The estimates
contained in such analyses and the ranges of valuations resulting from any
particular analysis are not necessarily indicative of actual values or
predictive of future results or values, which may be significantly more or
less favorable than those suggested by such analyses. In addition, analyses
relating to the value of businesses or securities do not purport to be
appraisals or to reflect the prices at which businesses or securities actually
may be sold. Accordingly, such analyses and estimates are inherently subject
to substantial uncertainty. CSFB's opinion and financial analyses were not the
only factors considered by the Lukens Board in its evaluation of the Merger
and should not be viewed as determinative of the views of the Lukens Board or
management of Lukens with respect to the Common Merger Consideration or the
Merger.
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The following is a summary of the material financial analyses performed by
CSFB in connection with its opinion dated January 4, 1998:
Selected Companies Analysis. CSFB compared certain financial and operating
information with respect to Lukens' three business segments--carbon and alloy,
stainless steel and steel distribution--to corresponding data of the following
selected publicly traded companies in the carbon and alloy, stainless steel
and steel distribution industries: (i) Carbon and Alloy Companies: Bethlehem,
USX Corporation (U.S. Steel Group) and Oregon Steel Mills, Inc. (the "Carbon
and Alloy Companies"); (ii) Stainless Steel Companies: Allegheny, Armco Inc.
and J&L Specialty Steel, Inc. (the "Stainless Steel Companies"); and (iii)
Steel Distribution Companies: A.M. Castle & Co., Huntco Inc., Olympic Steel,
Inc., Reliance Steel & Aluminum Co., Ryerson Tull, Inc. and Steel Technologies
Inc. (the "Steel Distribution Companies" and, together with the Carbon and
Alloy Companies and the Stainless Steel Companies, the "Lukens Selected
Companies"). The Lukens Selected Companies were determined based on a
combination of factors such as size, relative operating performance,
geographic markets served and/or types of business conducted generally. CSFB
compared, among other things, adjusted market values (equity market value,
plus total debt, preferred stock and minority interests, less cash and cash
equivalents) as multiples of (i) estimated calendar 1998 sales, earnings
before interest, taxes, depreciation and amortization ("EBITDA") and earnings
before interest and taxes ("EBIT") in the case of the Carbon and Alloy
Companies and the Steel Distribution Companies and (ii) estimated calendar
1999 sales, EBITDA and EBIT in the case of the Stainless Steel Companies
(estimated calendar 1999 financial data of Lukens was analyzed relative to the
estimated calendar 1999 financial data of the Stainless Steel Companies in
order to reflect improved market conditions in the stainless steel sector and
the full benefits of Lukens' recently completed modernization program).
Estimated financial data for the Lukens Selected Companies were based on
research analyst estimates and estimated financial data for Lukens were based
on internal estimates of the management of Lukens. Applying a range of
selected multiples of estimated calendar 1998 sales, EBITDA and EBIT of the
Carbon and Alloy Companies and the Steel Distribution Companies of 0.5x to
0.6x, 3.5x to 4.5x and 6.5x to 7.5x, respectively (in the case of the Carbon
and Alloy Companies), and 0.4x to 0.5x, 6.5x to 7.5x and 8.0x to 9.0x,
respectively (in the case of the Steel Distribution Companies) to the
estimated calendar 1998 sales, EBITDA and EBIT of Lukens, and estimated
calendar 1999 sales, EBITDA and EBIT of the Stainless Steel Companies of 0.5x
to 0.7x, 4.0x to 4.5x and 5.5x to 6.5x, respectively, to the estimated
calendar 1999 sales, EBITDA and EBIT of Lukens, resulted in an enterprise
reference range (unadjusted for capitalized corporate overhead) for Lukens of
approximately $585 million to $700 million.
CSFB also compared certain financial and operating information of Bethlehem
to corresponding data of the following selected publicly traded companies in
the steel industry: AK Steel Holding Corporation, Inland Steel Company, The
LTV Corporation, National Steel Corporation, Rouge Industries, Inc., USX
Corporation (U.S. Steel Group) and WHX Corporation (collectively, the
"Bethlehem Selected Companies"). The Bethlehem Selected Companies were
determined based on a combination of factors such as size, relative operating
performance, geographic markets served and/or types of business conducted
generally. CSFB compared adjusted market values as multiples of estimated
calendar 1998 sales, EBITDA and EBIT. Estimated financial data for Bethlehem
and the Bethlehem Selected Companies were based on research analyst estimates.
Applying a range of selected multiples for the Bethlehem Selected Companies of
estimated calendar 1998 sales, EBITDA and EBIT of 0.3x to 0.5x, 3.0x to 4.0x
and 5.5x to 6.5x, respectively, to corresponding financial data of Bethlehem
resulted in an enterprise reference range for Bethlehem of approximately $1.4
billion to $1.9 billion.
Selected Transactions Analysis. CSFB analyzed, among other things, the
implied transaction multiples paid in the following selected merger and
acquisition transactions involving companies in the carbon and alloy,
stainless steel and steel distribution industries (acquiror/target): (i)
Transactions in the carbon and alloy industry: Texas Industries Inc./Chaparral
Steel Company, Birmingham Steel Corporation/American Steel & Wire Company,
Kyoei Co. Ltd/FLS Holding Inc. and Kohlberg & Co. L.P./Northwestern Steel &
Wire Company (the "Carbon and Alloy Transactions"); (ii) Transactions in the
stainless steel industry: British Steel plc/Avesta Sheffield AB, Allegheny
Ludlum Corp./Teledyne, Inc., Allegheny Ludlum Corp./Athlone Industries, Inc.,
Lukens/Washington Steel Corp., Armco, Inc./Cyclops Industries, Inc., Ugine
S.A./Jones & Laughlin Steel Corp. and Mercury Stainless Corp./Washington Steel
Corp. (the "Stainless Steel Transactions"); and (iii) Transactions
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in the steel distribution industry: Ryerson Tull, Inc./Thypin Steel Co., Inc.,
Reliance Steel & Aluminum Co./Siskin Steel & Supply Company, Inc., Gibraltar
Steel Corporation/Wm. R. Hubbel Steel Company, Rolled Alloys, Inc./Atek Metals
Center, Inc., Rio Algom Limited/Alcan Aluminum Limited (Metal Goods) and
Investor Group/Earle M. Jorgensen Company (the "Steel Distribution
Transactions" and, together with the Carbon and Alloy Transactions and the
Stainless Steel Transactions, the "Lukens Selected Transactions"). The Lukens
Selected Transactions were determined based primarily on the types of business
conducted by the companies involved in such transactions. CSFB compared
transaction values in the Selected Transactions as multiples of latest 12
months sales, EBITDA and EBIT. All multiples were based on historical
financial information available at the time of announcement of the
transaction. Applying a range of selected multiples of latest 12 months sales,
EBITDA and EBIT of the Carbon and Alloy Transactions and the Steel
Distribution Transactions of 0.6x to 0.7x, 5.5x to 6.5x and 8.0x to 9.0x,
respectively (in the case of the Carbon and Alloy Transactions), and 0.5x to
0.6x, 8.5x to 10.0x and 10.0x to 12.0x, respectively (in the case of the Steel
Distribution Transactions), to the estimated calendar 1997 sales, EBITDA and
EBIT of Lukens, and latest 12 months sales, EBITDA and EBIT of the Stainless
Steel Transactions of 0.7x to 0.9x, 8.0x to 9.0x and 11.5x to 12.5x,
respectively, to the estimated calendar 1998 sales, EBITDA and EBIT of Lukens
(estimated calendar 1998 financial data of Lukens was analyzed relative to the
Stainless Steel Transactions in order to reflect normalized operating results
of Lukens), resulted in an enterprise reference range (unadjusted for
capitalized corporate overhead) for Lukens of approximately $625 million to
$725 million.
CSFB also analyzed the implied transaction multiples paid in the following
selected merger and acquisition transactions in the steel industry
(acquiror/target): Texas Industries, Inc./Chaparral Steel Company, Birmingham
Steel Corporation/American Steel & Wire Company, Kyoei Co. Ltd/FLS Holding
Inc. and Kohlberg & Co. L.P./Northwestern Steel & Wire Company (collectively,
the "Bethlehem Selected Transactions"). The Bethlehem Selected Transactions
were determined based primarily on the types of business conducted by the
companies involved in such transactions. CSFB compared transaction values in
the Bethlehem Selected Transactions as multiples of latest 12 months sales,
EBITDA and EBIT. All multiples were based on historical financial information
available at the time of announcement of the transaction. Applying a range of
selected multiples of latest 12 months sales, EBITDA and EBIT of the Bethlehem
Selected Transactions of 0.4x to 0.5x, 4.0x to 5.0x and 7.0x to 8.0x,
respectively, to the estimated calendar 1997 sales, EBITDA and EBIT of
Bethlehem resulted in an enterprise reference range for Bethlehem of
approximately $1.75 billion to $2.2 billion.
Discounted Cash Flow Analysis. CSFB estimated the present value of the
future streams of after-tax cash flows that could be produced through fiscal
year 2007 by each of Lukens' three business segments, based on (i) internal
estimates of the management of Lukens for the years 1998 through 2000,
inclusive, and growth rates assumed by CSFB (based on discussions with
management of Lukens) for subsequent years ("Case I") and (ii) certain
adjustments to Case I estimates based on discussions with the management of
Lukens which assumed, among other things, lower price levels in Lukens' carbon
and alloy and stainless steel segments and slower growth in certain business
segments ("Case II"). Ranges of estimated terminal values were calculated
using terminal multiples of EBITDA. The free cash flow streams and estimated
terminal values were then discounted to present value using terminal EBITDA
multiples of 4.0x to 7.0x and discount rates of 9% to 11% depending upon the
business segment analyzed. This analysis indicated an enterprise reference
range (unadjusted for capitalized corporate overhead) for Lukens of
approximately $770 million to $860 million (Case I) and $705 million to $785
million (Case II).
Aggregate Reference Ranges. On the basis of the valuation methodologies
employed in the analyses described above for each of Bethlehem and Lukens,
CSFB derived (i) an aggregate enterprise reference range for Bethlehem of
approximately $1.6 billion to $2.0 billion and (ii) an aggregate enterprise
reference range (unadjusted for capitalized corporate overhead) and an equity
reference range (adjusted for a range of capitalized corporate overhead, net
debt and a range of option proceeds) for Lukens of approximately $695 million
to $810 million and $330 million to $465 million, respectively, or
approximately $19.77 to $27.18 per share (as compared to the equity value for
Lukens implied by the Common Merger Consideration of $30.00 per share, based
on a closing price of Bethlehem Common Stock on January 2, 1998).
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Pro Forma Merger Analysis. CSFB analyzed the potential pro forma effect of
the Merger on Bethlehem's projected EPS for fiscal years 1998 and 1999 based
on research analyst estimates and after giving effect to certain cost savings
and other potential synergies anticipated by the management of Lukens to
result from the Merger. This analysis indicated that the Merger could be
dilutive to Bethlehem's EPS in fiscal year 1998 and accretive to Bethlehem's
EPS in fiscal year 1999, assuming approximately $37 million of annual cost
savings and other potential synergies anticipated by the management of Lukens
to result from the Merger in each such fiscal year are achieved. The actual
results achieved by the combined company may vary from projected results and
the variations may be material. See "CAUTIONARY STATEMENT."
Certain Other Factors and Comparative Analysis. In rendering its opinion,
CSFB considered certain other factors and other comparative analyses,
including, among other things, (i) a review of indications of interest
received by third parties other than Bethlehem, (ii) the historical stock
price performance of Lukens and Bethlehem relative to the Lukens Selected
Companies and the Bethlehem Selected Companies and movements in the S&P Iron &
Steel Composite Index and (iii) the pro forma capitalization of the combined
company.
Miscellaneous. Pursuant to the terms of CSFB's engagement, Lukens has agreed
to pay CSFB for its services in connection with the Merger an aggregate
financial advisory fee equal to 0.7% of the aggregate consideration (including
liabilities assumed) payable in the Merger. The aggregate financial advisory
fee payable to CSFB is estimated to be approximately $5.3 million. Lukens also
has agreed to indemnify CSFB and certain related persons and entities against
certain liabilities, including liabilities under the federal securities laws,
arising out of CSFB's engagement, and to reimburse CSFB for reasonable out-of-
pocket expenses, including the fees and expenses of its legal counsel,
incurred by CSFB in connection with its engagement. CSFB has during the past
several years provided investment banking services to Lukens unrelated to the
Merger, for which services CSFB has received compensation. In the ordinary
course of its business, CSFB and its affiliates may actively trade the debt
and equity securities of both Lukens and Bethlehem for their own accounts and
for the accounts of customers and, accordingly, may at any time hold a long or
short position in such securities.
THE CLOSING; EFFECTIVE TIME
Under the Merger Agreement, the closing of the Merger (the "Closing") will
occur not later than the second business day after the satisfaction or waiver
of the conditions to closing. See "OTHER TERMS OF THE MERGER AGREEMENT--
Conditions to the Consummation of the Merger." The Merger Agreement provides
that Bethlehem and Lukens will cause a Certificate of Merger to be filed as
soon as practicable on or after the date of the Closing (the "Closing Date").
The Merger will become effective at such time as a Certificate of Merger is
duly filed with the Secretary of State of the State of Delaware, or at such
later time as Bethlehem and Lukens may agree and as is specified in the
Certificate of Merger.
MERGER CONSIDERATION
At the Effective Time, each outstanding share of Lukens Common Stock (other
than shares held by Lukens and other than Dissenting Shares, as defined below)
will be converted into the right to receive cash, shares of Bethlehem Common
Stock or a combination of both cash and Bethlehem Common Stock. Each holder of
Lukens Common Stock will have the opportunity to make a Cash Election with
respect to each share of Lukens Common Stock held by such stockholder (subject
to possible proration). Each share of Lukens Common Stock for which a Cash
Election is not made will be converted in the Merger into the right to
receive, subject to possible proration, the Stock Consideration. The
allocation of cash and/or shares of Bethlehem Common Stock that a holder of
Lukens Common Stock will receive will depend on (i) whether the stockholder
makes a Cash Election and (ii) the results of the proration procedures that
will apply if the Requested Stock Amount exceeds the Stock Cap or if the
Requested Cash Amount exceeds the Cash Cap.
Each share of Lukens Common Stock for which an effective Cash Election is
made will be converted into the right to receive, subject to possible
proration, cash from Bethlehem in an amount equal to $30. Each share of Lukens
Common Stock for which an effective Cash Election is not made, or for which a
Cash Election has been
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<PAGE>
properly revoked, will be converted into the right to receive, subject to
possible proration, the number of shares of Bethlehem Common Stock equal to
the Conversion Number.
By way of example only, if the Effective Time had occurred on April 24, 1998
(the most recent practicable date prior to the date of this Proxy
Statement/Prospectus), the Conversion Number would be equal to $30 divided by
$15.258, the Average Market Price for an assumed period ending on April 20,
1998, the trading day immediately preceding the third full trading day prior
to April 24, 1998, but not greater than 4.317 or less than 2.878. Accordingly,
if the Effective Time had occurred on April 24, 1998, Lukens stockholders
would receive 2.878 shares of Bethlehem Common Stock, subject to possible
proration, for each share of Lukens Common Stock for which a Cash Election had
not been made. Lukens stockholders who wish to receive further examples based
on Bethlehem Common Stock prices as of a more recent date may call 1-888-217-
3012. BECAUSE OF MARKET FLUCTUATIONS AND OTHER FACTORS, THE BETHLEHEM COMMON
STOCK PRICES USED IN CALCULATING THE ACTUAL CONVERSION NUMBER MAY VARY FROM
THE EARLIER PRICES USED IN THE EXAMPLE SET FORTH ABOVE OR ANY SUCH SUBSEQUENT
EXAMPLE. ACCORDINGLY, THE ACTUAL CONVERSION NUMBER MAY DIFFER FROM THE
CONVERSION NUMBER CONTAINED IN ANY SUCH EXAMPLE.
Holders of Lukens Preferred Stock will not have the opportunity to make a
Cash Election. Subject to the exercise of appraisal rights, each issued and
outstanding share of Lukens Preferred Stock will be converted into the right
to receive the consideration that a holder of the number of shares of Lukens
Common Stock into which such share of Lukens Preferred Stock could have been
converted immediately prior to the Effective Time would have the right to
receive in connection with the Merger if such holder did not make a Cash
Election with respect to such shares.
Cash Proration. In the event that the Requested Cash Amount exceeds the Cash
Cap, each share of Lukens Common Stock for which a Cash Election is made will
be converted into the right to receive a prorated amount of cash and Bethlehem
Common Stock. The Cash Cap, the maximum aggregate amount of cash to be paid to
holders of Lukens Common Stock and Lukens Preferred Stock in the Merger, will
be equal to the product of (x) the Cash Election Price, (y) the number of
Outstanding Shares and (z) .68. The number .68 in clause (z) of the preceding
sentence is subject to adjustment to ensure that the aggregate number of
shares of Bethlehem Common Stock issuable (i) in connection with the Merger
and (ii) upon conversion or exercise of all securities of Lukens outstanding
immediately prior to the Effective Time (other than shares of Lukens Common
Stock and Lukens Preferred Stock), including upon the exercise of Employee
Stock Options, does not exceed 19.9% of the number of outstanding shares of
Bethlehem Common Stock immediately prior to the Effective Time. If the
Requested Cash Amount exceeds the Cash Cap, then each Electing Share will be
converted into the right to receive a combination of cash and shares of
Bethlehem Common Stock. A Cash Proration Factor will be determined by dividing
the Cash Cap by the Requested Cash Amount. Each Electing Share will be
converted into the right to receive (x) a Prorated Cash Amount equal to the
product of (A) the Cash Election Price and (B) the Cash Proration Factor and
(y) a number of shares of Bethlehem Common Stock equal to the product of (A)
the excess of 1.0 over the Cash Proration Factor and (B) the Conversion
Number.
Stock Proration. In the event that the Requested Stock Amount exceeds the
Stock Cap, each share of Lukens Common Stock for which an effective Cash
Election is not made, or for which a Cash Election has been properly revoked,
will be converted into the right to receive a prorated amount of Bethlehem
Common Stock and cash. The Stock Cap, the maximum number of shares of
Bethlehem Common Stock that may be issued in the Merger, will be equal to the
product of (x) the Conversion Number, (y) the number of Outstanding Shares and
(z) .32. The number .32 in clause (z) of the preceding sentence is subject to
adjustment to ensure that the aggregate number of shares of Bethlehem Common
Stock issuable (i) in connection with the Merger and (ii) upon conversion or
exercise of all securities of Lukens outstanding immediately prior to the
Effective Time (other than shares of Lukens Common Stock and Lukens Preferred
Stock), including upon the exercise of Employee Stock Options, does not exceed
19.9% of the number of outstanding shares of Bethlehem Common Stock
immediately prior to the Effective Time. If the Requested Stock Amount exceeds
the Stock Cap, a Stock Proration Event will have occurred and each Deemed
Stock Electing Share will be converted into the right to receive a combination
of cash and shares of Bethlehem Common Stock. A Stock Proration Factor will be
determined by dividing the Stock Cap by the Requested Stock Amount. Each
Deemed Stock Electing Share will
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<PAGE>
be converted into the right to receive (x) a Prorated Stock Amount, which is a
number of shares of Bethlehem Common Stock equal to the product of (A) the
Conversion Number and (B) the Stock Proration Factor and (y) cash in an amount
equal to the product of (A) the excess of 1.0 over the Stock Proration Factor
and (B) the Cash Election Price.
Examples. The following three examples illustrate how the Merger
Consideration and proration provisions would operate under certain assumed
circumstances. For purposes of these examples, it is assumed that there would
be 16.4 million Outstanding Shares at the Effective Time:
Example 1--$11 Bethlehem Common Stock Price; 100% Deemed Stock Election
<TABLE>
<S> <C> <C>
Conversion Number = 2.878*
Stock Cap = 2.878 x 16.4 million x .32
= 15.10 million shares of Bethlehem Common Stock available
Requested Stock
Amount = 16.4 x 2.878
= 47.20 million shares of Bethlehem Common Stock requested
Stock Proration Fac-
tor = 15.10 / 47.20
= .32
Prorated Stock
Amount = .32 x 2.878
= .92 of a share of Bethlehem Common Stock
</TABLE>
<TABLE>
<S> <C>
Result: Each share of Lukens Common Stock will be converted into the right to receive (i) .92 of a
share of Bethlehem Common Stock and (ii) (1--.32) x $30 = $20.40 in cash.
Value of .92 of a share of Bethlehem Common Stock
(at $11 per share) = $10.12
Cash received = 20.40
Total value:$30.52
</TABLE>
- --------
* Minimum Conversion Number ("collar" operative)
Example 2--$10 Bethlehem Common Stock Price; 50% Cash Election--50% Deemed
Stock Election
<TABLE>
<S> <C> <C>
Conversion Number = 3.000
Cash Cap = $30 x 16.4 million x .68
= $334.56 million
Stock Cap = 3.000 x 16.4 million x .32
= 15.74 million shares of Bethlehem Common Stock available
Requested Cash
Amount = $30 x 16.4 million x .5
= $246 million**
Requested Stock
Amount = 3.000 x 16.4 million x .5
= 24.6 million shares of Bethlehem Common Stock requested
Stock Proration Fac-
tor = 15.74 / 24.6
= .64
Prorated Stock
Amount = .64 x 3.000
= 1.92 shares of Bethlehem Common Stock
</TABLE>
<TABLE>
<S> <C>
Result: Each share of Lukens Common Stock for which a Cash Election is made will be
converted into the right to receive $30 in cash.
Each share of Lukens Common Stock for which a Deemed Stock Election is made will be
converted into the right to receive (i) 1.92 shares of Bethlehem Common Stock and
(ii) (1--.64) x $30 = $10.80 in cash
Value of 1.92 shares of Bethlehem Common Stock
(at $10 per share) = $19.20
Cash received = 10.80
Total Value: $30.00
</TABLE>
- --------
** Since the Requested Cash Amount is less than the Cash Cap, cash will not be
prorated
37
<PAGE>
Example 3--$9.00 Bethlehem Common Stock Price; 100% Cash Election
<TABLE>
<S> <C> <C>
Conversion Number = 3.333
Cash Cap = $30 x 16.4 million x .68
= $334.56 million
Requested Cash
Amount = $30 x 16.4 million
= $492 million
Cash Proration
Factor = $334.56 million / $492 million
= .68
Prorated Cash Amount = .68 x $30
= $20.40
</TABLE>
<TABLE>
<S> <C>
Result: Each share of Lukens Common Stock will be converted into the right to receive
(i) $20.40 in cash and (ii) (1-- .68) x 3.333 = 1.067 shares of Bethlehem Common Stock.
Value of 1.067 shares of Bethlehem Common Stock
(at $9.00 per share) = $ 9.60
Cash received= 20.40
Total Value: $30.00
</TABLE>
Dissenting Shares; Failure to Effect Appraisal Rights. Any issued and
outstanding shares of Lukens Preferred Stock and, if a Stock Proration Event
has occurred, any issued and outstanding shares of Lukens Common Stock, in
either case held by a person (a "Dissenting Stockholder") who shall not have
voted to adopt the Merger Agreement or consented thereto in writing and who
shall have properly demanded appraisal for such shares in accordance with
Section 262 of the DGCL ("Dissenting Shares") shall not be converted into the
right to receive cash or Bethlehem Common Stock pursuant to the Merger
Agreement unless such holder fails to perfect or withdraws or otherwise loses
his right to appraisal. If, after the Effective Time, such Dissenting
Stockholder fails to perfect or withdraws or loses his right to appraisal,
such Dissenting Stockholder's shares of Lukens Common Stock or Lukens
Preferred Stock will no longer be considered Dissenting Shares and will be
deemed to have been converted into and to have become exchangeable for, at the
Effective Time, (x) in the case of Lukens Common Stock, the right to receive
for each such share the consideration, without interest, that a holder of a
share of Lukens Common Stock who had not demanded appraisal (a "Nondissenting
Share") of Lukens Common Stock and who had made a Cash Election with respect
to such Nondissenting Share would have received with respect to such
Nondissenting Share (it being understood that no adjustment shall be made to
the proration computation, if any, to give effect to the withdrawal of, or the
failure to perfect, the demand for appraisal with respect to such Dissenting
Shares) and (y) in the case of shares of Lukens Preferred Stock, the right to
receive for each such share the consideration that a holder of the number of
Nondissenting Shares of Lukens Common Stock into which such share of Lukens
Preferred Stock could have been converted immediately prior to the Effective
Time who had not made a Cash Election with respect to such Nondissenting
Shares would have received, in each case subject to possible proration. See
"--Appraisal Rights."
ELECTION PROCEDURE
An Election Form is being mailed together with this Proxy
Statement/Prospectus to each person who was a holder of Lukens Common Stock on
the Record Date. Each such holder (and each record holder of Lukens Common
Stock on or prior to the Election Date) will have the right to submit an
Election Form specifying the number of shares of Lukens Common Stock that such
person desires to have converted into Cash Consideration, subject to possible
proration.
ANY CASH ELECTION WILL HAVE BEEN PROPERLY MADE ONLY IF THE EXCHANGE AGENT
HAS RECEIVED AT ITS DESIGNATED OFFICE (AS SET FORTH IN THE ELECTION FORM
ENCLOSED HEREWITH), BY 5:00 P.M., NEW YORK CITY TIME, ON THE ELECTION DATE,
MAY 27, 1998, THE BUSINESS DAY NEXT PRECEDING THE SPECIAL MEETING, AN ELECTION
38
<PAGE>
FORM PROPERLY COMPLETED AND SIGNED AND ACCOMPANIED BY THE CERTIFICATES FOR THE
SHARES OF LUKENS COMMON STOCK TO WHICH THE ELECTION FORM RELATES, PROPERLY
ENDORSED OR OTHERWISE IN PROPER FORM FOR TRANSFER (OR ACCOMPANIED BY AN
APPROPRIATE GUARANTEE OF DELIVERY OF THE CERTIFICATES AS SET FORTH IN THE
ELECTION FORM FROM A FIRM WHICH IS A MEMBER OF A REGISTERED NATIONAL
SECURITIES EXCHANGE OR OF THE NATIONAL ASSOCIATION OF SECURITIES DEALERS,
INC., OR A COMMERCIAL BANK OR TRUST COMPANY HAVING AN OFFICE OR CORRESPONDENT
IN THE UNITED STATES, PROVIDED THE CERTIFICATES ARE IN FACT DELIVERED TO THE
EXCHANGE AGENT WITHIN THREE NYSE TRADING DAYS AFTER THE DATE OF EXECUTION OF
SUCH GUARANTEE OF DELIVERY).
Any holder of Lukens Common Stock who has made a Cash Election by submitting
an Election Form to the Exchange Agent may revoke such Cash Election by
written notice received by the Exchange Agent prior to 5:00 p.m., New York
City time, on May 27, 1998, the Election Date. In addition, all Election Forms
will be automatically revoked if the Exchange Agent is notified in writing by
Bethlehem and Lukens that the Merger has been abandoned. If an Election Form
is revoked, the Certificate or Certificates (or guarantees of delivery, as
appropriate) for the shares of Lukens Common Stock to which the Election Form
relates will be promptly returned to the Lukens stockholder submitting the
same to the Exchange Agent.
The determination of the Exchange Agent as to whether or not Cash Elections
have been properly made or revoked and when elections and revocations were
received by it will be binding. If no Election Form is received with respect
to shares of Lukens Common Stock, or if the Exchange Agent determines that any
Cash Election was not properly made with respect to any shares of Lukens
Common Stock, such shares will be converted in the Merger into the right to
receive Stock Consideration, subject to possible proration. The Exchange Agent
will also make all computations as to the proration contemplated by the Merger
Agreement and any such computation will be conclusive and binding. The
Exchange Agent may, with the mutual agreement of Bethlehem and Lukens, make
such rules as are consistent with the Merger Agreement for the implementation
of the elections contemplated by the Merger Agreement and as are necessary or
desirable fully to effect such elections.
EXCHANGE PROCEDURES
Deposit with the Exchange Agent. As of the Effective Time, Bethlehem will
deposit with the Exchange Agent for the benefit of the holders of Lukens
Common Stock and Lukens Preferred Stock, for exchange through the Exchange
Agent, the cash and certificates representing the shares of Bethlehem Common
Stock representing the Merger Consideration payable and issuable in exchange
for outstanding shares of Lukens Common Stock and Lukens Preferred Stock.
Exchange Procedures. As soon as practicable after the Effective Time, the
Exchange Agent will mail to each holder of record of a Certificate or
Certificates (i) a Letter of Transmittal and (ii) instructions for
surrendering such Certificates in exchange for the Merger Consideration. Upon
surrender of such Certificates for cancelation to the Exchange Agent or to
such other agent or agents as may be appointed by Bethlehem, together with a
duly executed Letter of Transmittal and such other documents as may reasonably
be required by the Exchange Agent, the holder of such Certificates will be
entitled to receive in exchange therefor a certificate representing that
number of whole shares of Bethlehem Common Stock, cash or a combination
thereof, that such holder has the right to receive pursuant to the Merger
Agreement, and the surrendered Certificates will be canceled. No Letter of
Transmittal will be required with respect to Certificates previously
surrendered with an Election Form (unless such Election Form was duly and
timely revoked).
In the event of a transfer of ownership of Lukens Common Stock or Lukens
Preferred Stock that is not registered in the transfer records of Lukens, a
certificate representing the proper number of shares of Bethlehem Common Stock
may be issued and cash may be paid to a person other than the person in whose
name the surrendered Certificate is registered, if the Certificate is properly
endorsed or otherwise in proper form for transfer and the person requesting
such issuance pays any transfer or other taxes required by reason of the
issuance of shares of Bethlehem Common Stock and the payment of cash to a
person other than the registered holder of the Certificate or establishes to
the satisfaction of Bethlehem that the tax has been paid or is not applicable.
39
<PAGE>
Until surrendered, each Certificate will be deemed at any time after the
Effective Time to represent only the right to receive upon such surrender the
Merger Consideration which the holder thereof has the right to receive in
respect of the Certificate pursuant to the Merger Agreement. No interest will
be paid or will accrue on any cash payable to holders of Certificates pursuant
to the Merger Agreement. Bethlehem will pay the charges and expenses of the
Exchange Agent.
No Distributions with Respect to Unexchanged Shares. No dividends or other
distributions with respect to Bethlehem Common Stock with a record date after
the Effective Time will be paid to the holder of any unsurrendered Certificate
with respect to the shares of Bethlehem Common Stock issuable under the Merger
Agreement, and no cash payment in lieu of fractional shares will be paid to
any such holder. All such dividends, other distributions and cash in lieu of
fractional shares of Bethlehem Common Stock will be paid by Bethlehem to the
Exchange Agent to be held until the surrender of the Certificate in accordance
with the Merger Agreement. Subject to applicable laws, following surrender of
any such Certificate, there will be paid to the holder of the certificate
representing whole shares of Bethlehem Common Stock issued in exchange
therefor, without interest, (i) at the time of surrender, the amount of any
cash payable in lieu of a fractional share of Bethlehem Common Stock to which
the holder is entitled and the amount of dividends or other distributions with
a record date after the Effective Time previously paid with respect to such
whole shares of Bethlehem Common Stock, and (ii) at the appropriate payment
date, the amount of dividends or other distributions with a record date after
the Effective Time but prior to surrender and with a payment date subsequent
to such surrender payable with respect to such whole shares of Bethlehem
Common Stock.
No Further Ownership Rights in Lukens Common Stock and Lukens Preferred
Stock. All cash paid and shares of Bethlehem Common Stock issued upon the
surrender of Certificates in accordance with the terms of the Merger Agreement
will be deemed to have been paid and issued in full satisfaction of all rights
pertaining to the shares of Lukens Common Stock and Lukens Preferred Stock
previously represented by such Certificates, subject, however, to the
Surviving Corporation's obligation to pay any dividends or make any other
distributions with a record date prior to the Effective Time which may have
been declared or made by Lukens on such shares of Lukens Common Stock or
Lukens Preferred Stock in accordance with the Merger Agreement or prior to the
date of the Merger Agreement and which remain unpaid at the Effective Time.
After the Effective Time, there will be no further registration of transfers
on the stock transfer books of the Surviving Corporation of the shares of
Lukens Common Stock and Lukens Preferred Stock. If, after the Effective Time,
Certificates are presented to the Surviving Corporation or the Exchange Agent
for any reason, they will be canceled and exchanged as provided in the Merger
Agreement except as otherwise provided by law.
No Fractional Shares. No certificates or scrip representing fractional
shares of Bethlehem Common Stock will be issued upon the surrender for
exchange of Certificates, no dividend or distribution of Bethlehem will relate
to such fractional share interests and such fractional share interests will
not entitle the owner thereof to vote or to any rights of a stockholder of
Bethlehem.
As promptly as practicable following the Effective Time, the Exchange Agent
will determine the excess of (A) the number of whole shares of Bethlehem
Common Stock delivered to the Exchange Agent by Bethlehem over (B) the
aggregate number of whole shares of Bethlehem Common Stock to be distributed
to holders of Lukens Common Stock and Lukens Preferred Stock (such excess, the
"Excess Common Shares"). Following the Effective Time, the Exchange Agent will
sell the Excess Common Shares at then-prevailing prices on the NYSE. Until the
net proceeds of such sale have been distributed to the holders of
Certificates, the Exchange Agent will hold such proceeds in trust for the
holders of Certificates (the "Common Share Trust"). The Surviving Corporation
will pay all commissions, transfer taxes and other out-of-pocket transaction
costs, including the expenses and compensation of the Exchange Agent incurred
in connection with the sale of the Excess Common Shares. The Exchange Agent
will determine the portion of the Common Share Trust to which each holder of
Certificates is entitled, if any, by multiplying the amount of the aggregate
proceeds comprising the Common Share Trust by a fraction, the numerator of
which is the amount of the fractional share interest to which such holder of
Certificates is entitled (after taking into account all shares of Lukens
Common Stock and
40
<PAGE>
Lukens Preferred Stock held at the Effective Time by such holder) and the
denominator of which is the aggregate amount of fractional share interests to
which all holders of Certificates are entitled.
The Surviving Corporation may elect at its option, in lieu of the issuance
and sale of Excess Common Shares and the making of the payments described in
the previous paragraph, to pay each holder of Certificates an amount in cash
equal to the product obtained by multiplying (A) the fractional share interest
to which such holder (after taking into account all shares of Lukens Common
Stock and Lukens Preferred Stock held at the Effective Time by such holder)
would otherwise be entitled by (B) the closing price for a share of Bethlehem
Common Stock as reported on the NYSE Tape on the trading day immediately
preceding the Closing Date.
As soon as practicable after the determination of the amount of cash, if
any, to be paid to holders of Certificates with respect to any fractional
share interests, the Exchange Agent will make available such amounts to such
holders.
Lost Certificates. If any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
such Certificate to be lost, stolen or destroyed and, if required by the
Surviving Corporation, the posting by such person of a bond in such reasonable
amount as the Surviving Corporation may direct as indemnity against any claim
that may be made against it with respect to such Certificate, the Exchange
Agent will issue in exchange for such lost, stolen or destroyed Certificate
the Merger Consideration and any cash in lieu of fractional shares, and unpaid
dividends and distributions on shares of Bethlehem Common Stock deliverable in
respect thereof.
Withholding Rights. Bethlehem or the Exchange Agent will be entitled to
deduct and withhold from the consideration otherwise payable in connection
with the Merger Agreement to any holder of Lukens Common Stock or Lukens
Preferred Stock such amounts as Bethlehem or the Exchange Agent is required to
deduct and withhold with respect to the making of such payment under the Code,
or any provision of state, local or foreign tax law. To the extent that
amounts are so withheld and paid over to the appropriate taxing authority by
Bethlehem or the Exchange Agent, such withheld amounts will be treated for all
purposes of the Merger Agreement as having been paid to the holder of Lukens
Common Stock or Lukens Preferred Stock in respect of which such deduction and
withholding were made by Bethlehem or the Exchange Agent.
STOCK EXCHANGE LISTING
It is a condition to each party's obligation to effect the Merger that the
shares of Bethlehem Common Stock issuable to Lukens stockholders pursuant to
the Merger Agreement will have been approved for listing on the NYSE and the
CSE, subject to official notice of issuance.
DELISTING AND DEREGISTRATION OF LUKENS COMMON STOCK
If the Merger is consummated, the shares of Lukens Common Stock will be
delisted from the NYSE and will be deregistered under the Exchange Act.
EXPENSES
The Merger Agreement provides that all fees and expenses incurred in
connection with the Merger, the Merger Agreement and the transactions
contemplated by the Merger Agreement will be paid by the party incurring such
fees or expenses, whether or not the Merger is consummated. Bethlehem will pay
any real estate transfer taxes attributable to the transfer of the beneficial
ownership of the Lukens real property. If the Merger Agreement is terminated,
under certain circumstances, Lukens would be required to pay a termination fee
to Bethlehem. See "OTHER TERMS OF THE MERGER AGREEMENT--Termination Fee."
41
<PAGE>
CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS
In the opinions of Skadden, Arps, Slate, Meagher & Flom LLP, counsel to
Lukens, and Cravath, Swaine & Moore, counsel to Bethlehem, subject to the
qualifications set forth below and contained herein, the following describes
the material U.S. Federal income tax consequences of the Merger to holders of
Lukens Common Stock that exchange such stock for the Common Merger
Consideration pursuant to the Merger. In general, the receipt of cash, shares
of Bethlehem Common Stock, or a combination thereof in exchange for Lukens
Common Stock pursuant to the Merger as Merger Consideration will be a taxable
transaction for U.S. Federal income tax purposes under the Internal Revenue
Code of 1986, as amended (the "Code") and may also be a taxable transaction
under applicable state, local or foreign laws. Generally, for U.S. Federal
income tax purposes, a holder of Lukens Common Stock that exchanges his or her
shares of Lukens Common Stock for cash, shares of Bethlehem Common Stock, or a
combination thereof pursuant to the Merger will recognize gain or loss equal
to the difference, if any, between (i) the sum of the amount of cash, if any,
and the fair market value of the shares of Bethlehem Common Stock, if any,
received by the stockholder and (ii) such stockholder's tax basis in the
shares of Lukens Common Stock exchanged therefor. Gain or loss should be
calculated separately for each block of shares exchanged in the Merger.
If shares of Lukens Common Stock are held by a stockholder as capital
assets, gain or loss recognized by the stockholder will be capital gain or
loss. Such capital gain or loss will be long-term capital gain or loss if the
stockholder held the shares of Lukens Common Stock for more than one year, and
in the case of a noncorporate stockholder that held his or her shares of
Lukens Common Stock exchanged pursuant to the Merger for more than eighteen
months may be subject to a preferential U.S. Federal income tax rate of 20%.
Generally, the U.S. Federal income tax basis of shares of Bethlehem Common
Stock, if any, received by a holder of Lukens Common Stock in exchange for
Lukens Common Stock pursuant to the Merger will equal the fair market value of
the shares of Bethlehem Common Stock at the time of the exchange. The holding
period of the shares of Bethlehem Common Stock received by a holder of Lukens
Common Stock in exchange for Lukens Common Stock pursuant to the Merger will
commence on the day after the Effective Time.
Bethlehem has indicated that, following the Merger, it intends to effect the
Bethlehem Merger pursuant to which the Surviving Corporation will be merged
with and into Bethlehem. Thus, notwithstanding the foregoing and assuming
certain other conditions are satisfied, if (i) Bethlehem effectuates the
Bethlehem Merger, (ii) the stockholders of Lukens receive in connection with
the Merger an amount of stock in Bethlehem that constitutes a sufficient
continuing interest in Bethlehem and (iii) the Merger and the Bethlehem Merger
are integrated, then it is possible that the Merger and the Bethlehem Merger
could be treated as qualifying as a reorganization under the Code. In general,
to satisfy the continuity of interest requirement, the stockholders of Lukens
would have to receive an amount of Stock Consideration by value (as of the
effective date of the transaction) which constitutes a sufficient percentage
of the total value of all the Merger Consideration. The Supreme Court of the
United States has found an adequate continuity of interest in one instance
where 38% of the consideration received in the transaction was stock and 62%
was cash. If, as of the effective date, each share of Bethlehem Common Stock
were worth approximately $13.60, the Stock Consideration would be
approximately 38% and the Cash Consideration would be approximately 62% of the
total Merger Consideration, respectively.
Although the law is unclear as to whether a part-stock/part-cash transaction
(such as the Merger) should be integrated with a subsequent transaction (such
as the Bethlehem Merger) to determine whether a reorganization has occurred
under the Code or whether the transactions should be viewed as two separate
transactions with the consequences as described above, at the present time,
Bethlehem intends to treat the Merger as a taxable transaction. If, however,
the Merger and the Bethlehem Merger were found to be an integrated
reorganization under the Code, (i) a holder of Lukens Common Stock who
received solely Bethlehem Common Stock in exchange for Lukens Common Stock
would not recognize gain or loss upon such exchange (except to the extent cash
was received in lieu of fractional shares), (ii) a holder of Lukens Common
Stock who received solely cash would recognize gain or loss equal to the
excess of the amount of cash received over the adjusted tax basis of the
Lukens Common Stock exchanged therefor and (iii) a holder of Lukens Common
Stock who received a
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combination of cash and Bethlehem Common Stock would recognize gain (but not
loss) equal to the lesser of (x) the amount of cash received as Merger
Consideration and (y) the amount of gain realized (i.e., the excess of the
amount of cash and the fair market value of Bethlehem Common Stock received
that is allocable to each block of Lukens Common Stock over the adjusted tax
basis of such block).
A holder of Lukens Common Stock that receives Common Merger Consideration
will be subject to 31% backup withholding on the cash and/or fair market value
of the Bethlehem Common Stock received, as applicable, unless the stockholder
provides his or her taxpayer identification number and certifies that such
number is correct or properly certifies that he or she is awaiting a taxpayer
identification number, unless an exception applies. Exemptions are available
for holders of Lukens Common Stock that are corporations and for certain
foreign individuals and entities. A holder of Lukens Common Stock that does
not furnish a taxpayer identification number as required may be subject to a
penalty imposed by the Internal Revenue Service (the "IRS"). All holders of
Lukens Common Stock should complete and sign the main signature form and the
Substitute Form W-9 included as part of the Election Form or Letter of
Transmittal to provide the information and certification necessary to avoid
backup withholding (unless an applicable exemption exists and is proved in a
manner satisfactory to Bethlehem and the Exchange Agent).
If backup withholding applies to a holder of Lukens Common Stock, the
Exchange Agent will be required to withhold 31% of the sum of the cash and
fair market value of the shares of Bethlehem Common Stock, if any, that
otherwise would be delivered to such Lukens stockholder. Backup withholding is
not an additional tax. Rather, the amount of the backup withholding can be
credited against the U.S. Federal income tax liability of the person subject
to the backup withholding, provided the required information is given to the
IRS. If the backup withholding results in an overpayment of tax, a refund can
be obtained by the holder of Lukens Common Stock upon the filing of a U.S.
Federal income tax return.
THE FOREGOING DISCUSSION DESCRIBES THE MATERIAL U.S. FEDERAL INCOME TAX
CONSEQUENCES TO HOLDERS OF SHARES OF LUKENS COMMON STOCK WITH RESPECT TO THE
MERGER. THIS DISCUSSION MAY NOT BE APPLICABLE TO PARTICULAR CATEGORIES OF
LUKENS STOCKHOLDERS, INCLUDING STOCKHOLDERS WHO ACQUIRED SHARES PURSUANT TO
THE EXERCISE OF EMPLOYEE STOCK OPTIONS OR OTHERWISE AS COMPENSATION, NON-U.S.
PERSONS AND CORPORATIONS OR ENTITIES THAT ARE OTHERWISE SUBJECT TO SPECIAL TAX
TREATMENT UNDER THE CODE (SUCH AS INSURANCE COMPANIES, TAX-EXEMPT ENTITIES AND
REGULATED INVESTMENT COMPANIES). LUKENS STOCKHOLDERS ARE URGED TO CONSULT
THEIR OWN TAX ADVISERS TO DETERMINE THE PARTICULAR TAX CONSEQUENCES TO THEM
(INCLUDING THE APPLICATION AND EFFECT OF ANY STATE, LOCAL OR FOREIGN INCOME
TAX LAWS AND ANY OTHER TAX LAWS) OF THE MERGER AND THE BETHLEHEM MERGER.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain directors and executive officers of Lukens, as well as others, may
be deemed to have interests in the Merger in addition to their interests
solely as stockholders. The Lukens Board has considered these interests, among
other matters, in approving and adopting the Merger Agreement.
Severance Agreements. Lukens has entered into severance agreements with
Messrs. R. W. Van Sant (October 12, 1991), T.G. John (February 1, 1993), J.J.
Norton (October 1, 1994, as amended January 29, 1997), F.J. Smith (April 15,
1993), J.C. van Roden, Jr. (October 31, 1990), W.W. Beible (January 29, 1997),
J.H. Bucher (April 15, 1993), P.B. Clemens (January 29, 1997), C.B. Houghton,
Jr. (November 30, 1994), R.D. Luzzi (February 1, 1993) and W.D. Sprague
(October 31, 1990) (the "Severance Agreements"), each an executive officer of
Lukens. (Dates in parentheses indicate the date entered into or amended.)
Under each of the Severance Agreements, if the employment of any of such
executive officers is terminated within two years following the Effective Time
for any reason other than termination by Lukens for "cause," the executive
officer's death or disability or by the executive officer with "good reason,"
the executive officer is entitled to receive (i) a lump sum cash payment in an
amount equal to (A) three times the sum of the executive officer's salary plus
the average of the highest three bonus awards made in respect of the five most
recently completed measuring periods preceding the termination of employment
plus (B) additional amounts in respect of contingent bonuses for
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uncompleted measuring periods, elective deferred compensation, certain stock
options and certain supplemental retirement benefits, (ii) paid coverage for
36 months under life, disability, and accident and health programs similar to
those in effect at the date of termination of employment and (iii) for any
executive officer who, as the result of the foregoing, becomes subject to the
excise tax pursuant to Section 280G of the Code, an additional lump sum cash
payment in an amount such that the executive officer will be in the same net
after-tax position as the executive officer would have been had no such excise
tax been applicable.
In connection with the Merger, Lukens and Bethlehem have agreed that (i)
immediately following the Effective Time Messrs. Van Sant, van Roden and
Sprague will have "good reason" under their respective Severance Agreements to
resign and (ii) Bethlehem will not dispute that each other executive officer
who is a party to a Severance Agreement will have "good reason" to resign upon
the completion of three months of continuous service to the Surviving
Corporation following the Effective Time.
As a result, under their respective Severance Agreements after the Merger
upon a qualifying termination of employment, Messrs. Van Sant, John, Norton,
Smith, van Roden, Beible, Bucher, Clemens, Houghton, Luzzi and Sprague will be
entitled to receive aggregate payments of $17,819,153, $3,338,652, $2,823,811,
$3,231,978, $3,013,667, $1,763,368, $2,275,262, $1,928,364, $2,822,740,
$2,224,860 and $2,491,760, respectively, subject to fluctuation in the value
of Bethlehem Common Stock.
Accelerated Vesting of Restricted Stock under Lukens Inc. 1997 Performance-
Vested Restricted Stock Plan. Pursuant to the Performance-Vested Restricted
Stock Plan (the "PVRS Plan"), 134,000 shares of Lukens Common Stock have been
granted as "restricted stock" to certain executive officers. Such shares are
subject to forfeiture, in whole or in part, unless Lukens achieves certain
performance objectives for the period commencing January 1, 1997 and ending
December 31, 1999. As a result of the Merger, at the Effective Time, all
forfeiture restrictions on such restricted shares will lapse.
Under the PVRS Plan, Mr. Van Sant has received 50,000 restricted shares of
Lukens Common Stock, Messrs. John, Norton, Smith and van Roden have each
received 14,000 restricted shares of Lukens Common Stock, and Messrs. Bucher,
Houghton, Luzzi and Sprague have each received 7,000 restricted shares of
Lukens Common Stock.
Supplemental Retirement Plans. Lukens has adopted three supplemental
retirement plans for the benefit of certain executive officers and other
employees: the Lukens Inc. Supplemental Retirement Plan for Designated
Executives, the Lukens Inc. Supplemental Retirement Plan for Lukens
Performance Incentive Plan Participants and the Lukens Inc. Supplemental
Retirement Plan (collectively, the "SERP"). In general, the SERP provides for
the payment of retirement benefits to certain executive officers and other
employees of Lukens in excess of the retirement benefits generally payable
under the Lukens Inc. Salaried Employees Retirement Plan.
The SERP previously provided for a cash lump sum payment of the value of
participants' accrued benefits upon a "change of control," without regard to
whether the participant's employment was terminated or whether the participant
continued to be eligible to participate in the SERP. On December 9, 1997, the
Lukens Board amended the SERP, so that (i) participants' accrued benefits
under the SERP become nonforfeitable upon the completion of five or more years
of continuous service in the management group; (ii) at the Effective Time, no
cash lump sum payment will be made automatically to participants in the SERP;
and (iii) if a participant's employment with the Surviving Corporation or
Bethlehem is terminated by the employer without "cause," the participant
resigns for "good reason" or the SERP is terminated without replacement by a
similar plan, in each case within five years following the Effective Time, the
participant, or all participants, as the case may be, shall become entitled to
a cash lump sum payment of the value of benefits accrued under the SERP.
In connection with the Merger, Lukens and Bethlehem have agreed that (i)
immediately following the Effective Time, Messrs. Van Sant, van Roden, and
Sprague will have "good reason" under their respective Severance Agreements to
resign and (ii) Bethlehem will not dispute that each other executive officer
who is a party to a Severance Agreement will have "good reason" to resign upon
the completion of three months of continuous service to the Surviving
Corporation following the Effective Time.
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As a result, after the Merger upon a qualifying termination of employment,
Messrs. Van Sant, John, Smith, van Roden, Beible, Bucher, Clemens, Houghton,
Luzzi and Sprague will be entitled to receive aggregate payments of
$4,091,953, $173,777, $476,426, $228,438, $291,105, $173,185, $201,832,
$609,540, $87,677 and $224,367, respectively, under the SERP. Any such payment
will substantially reduce retirement benefits that would otherwise have been
payable at age 62 or the actual retirement date, if later.
On December 9, 1997, the Lukens Board authorized the adoption of an
irrevocable grantor trust. On or before the Effective Time, the present value
of accrued benefits under the SERP as of such date will be deposited into the
grantor trust and will be available for distribution in accordance with the
terms of the SERP.
Stock Options. At the Effective Time or such earlier time as is provided in
the applicable stock option plan, or employee or director stock option or
agreement, as in effect on the date of the Merger Agreement, all outstanding
employee stock options to purchase shares of Lukens Common Stock ("Employee
Stock Options") will become vested and exercisable in full. At the Effective
Time, each of the Employee Stock Options that is outstanding and unexercised
at the Effective Time will be converted automatically into an option to
purchase shares of Bethlehem Common Stock. The duration and other terms of the
new option will be the same as that of the original option, except the vesting
of all options will be accelerated to the Effective Time. See "OTHER TERMS OF
THE MERGER AGREEMENT--Effect on Lukens Benefit Plans and Stock Options--
Employee Stock Options."
Messrs. Van Sant, John, Norton, Smith, van Roden, Beible, Bucher, Clemens,
Houghton, Luzzi and Sprague have received grants of Employee Stock Options to
purchase 492,147, 74,515, 54,280, 60,976, 62,927, 24,100, 47,093, 19,893,
47,137, 45,880 and 56,589 shares of Lukens Common Stock, respectively, which
options have exercise prices ranging from $16.625 per share to $47.25 per
share. All amounts payable in respect of such Employee Stock Options have been
reflected in the amounts payable under the Severance Agreements, as discussed
above. See "--Severance Agreements."
Ms. S. Helton and Messrs. M.O. Alexander, R. Dammeyer, T.K. Dunnigan, R.
Gross, W.H. Nelson, D.B. Price, J.L. Thomas and W.P. Tippett, each a non-
employee director of Lukens, have received grants of Employee Stock Options to
purchase 3,000, 5,000, 2,000, 4,000, 5,000, 5,000, 2,000, 5,000 and 5,000
shares of Lukens Common Stock, respectively, which options have exercise
prices ranging from $18.9375 per share to $46.5625 per share.
Director Retirement Plans. Any director of Lukens who is separately
compensated for Lukens Board services may elect to defer compensation for
distribution at a later date. Deferred amounts may be invested in mutual funds
or interest-bearing accounts and may be paid in a lump sum or in annual
installments over a period of five years.
For periods before May 1, 1997, Lukens maintained a plan for non-employee
directors which was terminated as of April 30, 1997. Effective as of May 1,
1997, Lukens adopted the Lukens Inc. Non-Employee Director Equity Compensation
Plan (the "ECP"). Under the ECP, the present value of the benefit of each non-
employee director under the terminated directors' retirement plan, determined
as of May 1, 1997, was credited to a bookkeeping account established for the
benefit of each non-employee director. The amount credited to each account was
deemed invested in hypothetical shares of Lukens Common Stock at the average
closing price of such shares for May 1997. Under the ECP, on each April 30
occurring after May 1, 1997, an additional amount will be credited to accounts
established for all non-employee directors, and deemed invested in
hypothetical shares of Lukens Common Stock based on the closing price of
Lukens Common Stock on the allocation date. The amount credited is based on
the annual retainer compensation for directors then in effect, discounted for
a ten-year period at the thirty-year U.S. Treasury bond rate then in effect.
Pursuant to the terms of the ECP, within sixty days following the Effective
Time, the amount credited to each non-employee director's account under the
ECP will be paid in a cash lump sum.
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Assuming the Merger is consummated prior to April 30, 1999, under the ECP
after the Merger, Ms. S. Helton and Messrs. M.O. Alexander, R. Dammeyer, T.K.
Dunnigan, R.M. Gross, W.H. Nelson, D.B. Price, J.L. Thomas and W.P. Tippett,
each a non-employee director of Lukens, will be entitled to receive aggregate
payments of approximately $24,939, $56,793, $29,665, $51,224, $111,981,
$267,058, $22,346, $95,860 and $151,488, respectively.
Indemnification of Certain Persons. The Merger Agreement provides that, for
six years after the Effective Time, Bethlehem will, or will cause the
Surviving Corporation to, indemnify, defend and hold harmless any person who
is as of the date of the Merger Agreement, or has been at any time prior to
the date of the Merger Agreement, or who becomes prior to the Effective Time,
a director, officer, employee or agent (an "Indemnified Person") of Lukens or
any of its subsidiaries against all losses, claims, damages, liabilities,
costs and expenses (including attorneys' fees and expenses), judgments, fines
and amounts paid in settlement in connection with any actual or threatened
action, suit, claim, proceeding or investigation (each a "Claim") to the
extent that any such Claim is based on, or arises out of, certain facts or
circumstances to the full extent permitted under the DGCL, the Lukens
Certificate of Incorporation or the Lukens By-laws (each as defined below) or
any indemnification agreement in effect as of the date of the Merger
Agreement.
Bethlehem and Lukens have agreed that, subject to certain conditions, all
rights to indemnification or liabilities, and all limitations with respect
thereto, existing in favor of any Indemnified Person, as provided in the
Lukens Certificate of Incorporation or Lukens By-laws and any indemnification
agreement in effect as of the date of the Merger Agreement, will survive the
Merger and will continue in full force and effect, without any amendment
thereto, for a period of six years from the Effective Time to the extent such
rights, liabilities and limitations are consistent with the DGCL.
Further, pursuant to the Merger Agreement, Bethlehem or the Surviving
Corporation will maintain, subject to certain conditions, Lukens' existing
directors' and officers' liability insurance policy for a period of not less
than six years after the Effective Time. See "OTHER TERMS OF THE MERGER
AGREEMENT--The Surviving Corporation--Continuing Indemnification."
OWNERSHIP INTEREST OF THE STOCKHOLDERS OF LUKENS AFTER THE MERGER
Based on the number of shares of Lukens Common Stock and Lukens Preferred
Stock outstanding on the Record Date, and assuming the conversion prior to the
Effective Time of each share of Lukens Preferred Stock into that number of
shares into which such share was then convertible, upon consummation of the
Merger, there will be approximately 128.6 to 136.1 million shares of Bethlehem
Common Stock outstanding immediately following the Effective Time (based on
the minimum Conversion Number and maximum Conversion Number, respectively), of
which the holders of Lukens Common Stock and Lukens Preferred Stock will own
approximately 11.8% to 16.1% (approximately 13.1 to 17.8% on a diluted basis
assuming the exercise of all options to purchase shares of Bethlehem Common
Stock and shares of Lukens Common Stock outstanding on the Record Date)
representing approximately 11.8% to 16.1% of the voting power of Bethlehem
Common Stock (approximately 13.1% to 17.8% on a diluted basis).
APPRAISAL RIGHTS
Holders of record of Lukens Preferred Stock and, if a Stock Proration Event
occurs, holders of record of Lukens Common Stock, in each case who properly
demand appraisal of their shares ("Dissenting Shares") and otherwise comply
with the applicable statutory procedures summarized herein, will be entitled
under Section 262 of the DGCL ("Section 262") to have their Dissenting Shares
appraised by the Court of Chancery and to receive payment in cash of the "fair
value" of such Dissenting Shares, exclusive of any element of value arising
from the accomplishment or expectation of Merger, together with a fair rate of
interest, if any, as determined by such court. Under Section 262 of the DGCL,
appraisal rights are not available with respect to shares of stock of a
constituent corporation in a merger if: (i) such shares are listed on a
national securities exchange on the record date fixed to determine the
stockholders entitled to receive notice of and to vote at the meeting of
stockholders
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to act upon the agreement of merger and (ii) pursuant to the terms of the
agreement of merger, the holder of such shares has the right to receive in
exchange for such shares solely shares of stock of a company which are listed
on a national securities exchange (and cash in lieu of fractional shares). If
a Stock Proration Event does not occur, pursuant to the terms of the Merger
Agreement, holders of Lukens Common Stock (which is listed on a national
securities exchange) will have the right to receive in exchange for their
respective shares, if they so elect, Common Merger Consideration consisting
solely of shares of Bethlehem Common Stock (and cash in lieu of fractional
shares) and therefore will not have the right to demand appraisal under
Section 262 of the DGCL. However, if a Stock Proration Event occurs, holders
of record of Lukens Common Stock will be required by the terms of the Merger
Agreement to accept, in exchange for their respective shares, Common Merger
Consideration consisting of both shares of Bethlehem Common Stock and cash,
and will therefore be entitled to demand appraisal under Section 262 of the
DGCL. This summary contains all material elements of Section 262 of the DGCL
but is not a complete statement of the law pertaining to appraisal rights
under the DGCL and is qualified in its entirety by the full text of Section
262 which is reprinted in its entirety as Annex III to this Proxy
Statement/Prospectus. All references in Section 262 and in this summary to a
"stockholder" or "holder" are to the record holder of the shares of Lukens
Common Stock or Lukens Preferred Stock as to which appraisal rights may be
asserted. Lukens reserves the right to challenge any assertion of appraisal
rights.
A holder of record of Lukens Preferred Stock and, if a Stock Proration Event
occurs, a holder of record of Lukens Common Stock, who does not vote in favor
of adoption of the Merger Agreement and who otherwise complies with the
applicable statutory procedures summarized herein will be entitled to
appraisal rights under Section 262 of the DGCL. A person having a beneficial
interest in shares of Lukens Common Stock or Lukens Preferred Stock held of
record in the name of another person, such as a broker or nominee, must act
promptly to cause the record holder to follow the steps summarized below
properly and in a timely manner to perfect appraisal rights.
Under Section 262, where a proposed merger is to be submitted for approval
at a meeting of stockholders, the corporation, not less than 20 days prior to
the meeting, must notify each of its stockholders who was such on the record
date for such meeting with respect to shares for which appraisal rights are
available, that appraisal rights are so available, and must include in such
notice a copy of Section 262. This Proxy Statement/Prospectus constitutes such
notice to the Lukens stockholders and the applicable statutory provisions of
the DGCL are attached to this Proxy Statement/Prospectus as Annex III. Any
stockholder who wishes to assert appraisal rights or who wishes to preserve
his right to do so should review this summary and Annex III carefully, because
failure to timely and properly comply with the procedures specified will
result in the loss of appraisal rights under the DGCL.
A holder of Dissenting Shares wishing to exercise any appraisal right such
holder may have must deliver to Lukens prior to the taking of the vote on the
Merger Agreement at the Special Meeting to be held on May 28, 1998, a properly
executed written demand for appraisal of such holder's Dissenting Shares, and
such Dissenting Shares must not be voted in favor of adoption of the Merger
Agreement. A holder of Dissenting Shares wishing to exercise such holder's
appraisal rights must be the record holder of the Dissenting Shares on the
date the written demand for appraisal is made and must continue to hold the
Dissenting Shares of record through the effective date of the Merger.
Accordingly, a holder of Dissenting Shares who is the record holder of
Dissenting Shares on the date the written demand for appraisal is made, but
who thereafter transfers such Dissenting Shares prior to the consummation of
the Merger, will lose any right to appraisal in respect of such Dissenting
Shares. A holder of Dissenting Shares who votes against adoption of the Merger
Agreement will not be deemed to have satisfied the notice requirement of such
holder with respect to appraisal rights merely by so voting. The written
demand for appraisal must be in addition to and separate from any proxy or
vote abstaining from or against adoption of the Merger Agreement.
Only a holder of record of Dissenting Shares is entitled to assert appraisal
rights for the Dissenting Shares registered in that holder's name. A demand
for appraisal should be executed by or on behalf of the holder of record,
fully and correctly, as such holder's name appears on such holder's stock
certificates. If the Dissenting Shares are owned of record in a fiduciary
capacity, such as by a trustee, guardian or custodian, execution of the
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demand should be made in that capacity, and if the Dissenting Shares are owned
of record by more than one person as in a joint tenancy or tenancy in common,
the demand should be executed by or on behalf of all joint owners. An
authorized agent, including one or more joint owners, may execute a demand for
appraisal on behalf of a holder of record; however, the agent must identify
the record owner or owners and expressly disclose the fact that, in executing
the demand, the agent is acting as agent for such owner or owners. A record
holder such as a broker who holds shares of Lukens Common Stock or Lukens
Preferred Stock as nominee for several beneficial owners may exercise
appraisal rights with respect to such shares held for one or more beneficial
owners while not exercising appraisal rights with respect to such shares held
for other beneficial owners; in such case, the written demand should set forth
the number of Dissenting Shares as to which appraisal is sought. When no
number of Dissenting Shares is expressly mentioned the demand will be presumed
to cover all shares held in the name of the record owner. If a stockholder
holds Dissenting Shares through a broker who in turn holds the shares through
a central securities depositary nominee, such as Cede & Co., a demand for
appraisal of shares must be made by or on behalf of the depositary nominee and
must identify the depositary nominee as record holder. Stockholders who hold
their Dissenting Shares in brokerage accounts or other nominee forms and who
wish to assert appraisal rights are urged to consult with their brokers to
determine the appropriate procedures for the making of a demand for appraisal
by such a nominee.
All written demands for appraisal should be sent or delivered to Lukens Inc.
at 50 South First Avenue, Coatesville, Pennsylvania 19320-0911, Attention:
Secretary.
Within 10 days after the consummation of the Merger, the Surviving
Corporation will notify each stockholder who has properly asserted appraisal
rights under Section 262 of the date the Merger became effective.
Within 120 days after the consummation of the Merger, but not thereafter,
the Surviving Corporation or any stockholder who has complied with the
statutory requirements summarized above may file a petition in the Court of
Chancery demanding a determination of the fair value of the Dissenting Shares
of all such stockholders. If such a petition has been properly filed, all
stockholders who have complied with the statutory requirements summarized
above and who have not withdrawn their individual right to appraisal will be
included on a duly verified list of all stockholders demanding payment for
their shares. The Surviving Corporation is under no obligation to and has no
present intention to file a petition with respect to the appraisal of the fair
value of the Dissenting Shares. Accordingly, it is the obligation of the
stockholders to initiate all necessary action to perfect their appraisal
rights within the time prescribed in Section 262.
Within 120 days after the consummation of the Merger, any stockholder who
has complied with the requirements for exercise of appraisal rights will be
entitled, upon written request, to receive from the Surviving Corporation a
statement setting forth the aggregate number of Dissenting Shares with respect
to which demands for appraisal have been received and the aggregate number of
holders of such Dissenting Shares. Such statements must be mailed within ten
days after a written request therefor has been received by the Surviving
Corporation.
The Court of Chancery may require the stockholders who have demanded an
appraisal for their shares and who hold stock represented by Certificates to
submit their Certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings. If any stockholder fails
to comply with such direction, the Court of Chancery may dismiss the
proceedings as to such stockholder.
If a petition for an appraisal is timely filed, after a hearing on such
petition, the Court of Chancery will determine the stockholders entitled to
appraisal rights, if any, and will appraise the "fair value" of their
Dissenting Shares, exclusive of any element of value arising from the
accomplishment or expectation of the Merger, together with a fair rate of
interest, if any, to be paid upon the amount determined to be the fair value.
Any stockholder whose name appears on the duly verified list of stockholders
referred to above and who has submitted the certificates for his, hers or its
Dissenting Shares to the Register in Chancery, if so required, may participate
fully in any determination of fair value made by the Court of Chancery, unless
it is determined that such stockholder is not entitled to appraisal rights
under Section 262 of the DGCL. Stockholders considering
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seeking appraisal should be aware that the fair value of their Dissenting
Shares as determined under Section 262 could be more than, the same as or less
than the value of the consideration they would receive pursuant to the Merger
Agreement if they did not seek appraisal of their Dissenting Shares and that
investment banking opinions as to fairness from a financial point of view are
not necessarily opinions as to fair value under Section 262. The Delaware
Supreme Court has stated that "proof of value by any techniques or methods
which are generally considered acceptable in the financial community and
otherwise admissible in court" should be considered in the appraisal
proceedings.
The Court of Chancery will determine the amount of interest, if any, to be
paid upon the amounts to be received by persons whose Dissenting Shares have
been appraised. The costs of the action may be determined by the Court of
Chancery and taxed upon the parties as the Court of Chancery deems equitable.
The Court of Chancery may also order that all or a portion of the expenses
incurred by any stockholder in connection with an appraisal, including,
without limitation, reasonable attorneys' fees and the fees and expenses of
experts utilized in the appraisal proceeding, be charged pro rata against the
value of all the Dissenting Shares entitled to appraisal.
Any holder of Dissenting Shares who has duly demanded an appraisal in
compliance with Section 262 will not, after the consummation of the Merger, be
entitled to vote the Dissenting Shares subject to such demand for any purpose
or be entitled to the payment of dividends or other distributions on those
Dissenting Shares (except dividends or other distributions payable to holders
of record of Dissenting Shares as of a record date prior to the consummation
of the Merger).
If any stockholder who properly demands appraisal of his, her or its
Dissenting Shares under Section 262 fails to perfect, or effectively withdraws
or loses, his, her or its right to appraisal, as provided in the DGCL, the
Dissenting Shares of such stockholder will be converted into the right to
receive the consideration to which he, she or it is entitled with respect to
such Dissenting Shares in accordance with the Merger Agreement. A stockholder
will fail to perfect, or effectively lose or withdraw, his, her or its right
to appraisal if, among other things, no petition for appraisal is filed within
120 days after the Effective Time or if the stockholder withdraws his, her or
its demand for appraisal. Any withdrawal of a demand for appraisal attempted
more than 60 days after the Effective Time will require the written approval
of the Surviving Corporation. Notwithstanding the foregoing, no appraisal
proceeding pending in the Court of Chancery will be dismissed as to any
stockholder without the approval of the Court of Chancery, and any such
approval may be conditioned upon such terms as the Court of Chancery deems
just.
Failure to follow the steps required by Section 262 for perfecting appraisal
rights may result in the loss of such rights. If, after the Effective Time, a
Dissenting Stockholder fails to perfect or withdraws or loses his, her or its
right to appraisal, such Dissenting Stockholder's shares of Lukens Common
Stock or Lukens Preferred Stock will no longer be considered Dissenting Shares
and will be deemed to have been converted into and to have become exchangeable
for, at the Effective Time, (x) in the case of Lukens Common Stock, the right
to receive for each such share the consideration, without interest, that a
holder of a Nondissenting Share of Lukens Common Stock who had made a Cash
Election with respect to such Nondissenting Share would have received with
respect to such Nondissenting Share (it being understood that no adjustment
will be made to the proration computation to give effect to the withdrawal of,
or the failure to perfect, the demand for appraisal with respect to such
Dissenting Shares) and (y) in the case of Lukens Preferred Stock, the right to
receive for each such share the consideration, without interest, that a holder
of the number of Nondissenting Shares of Lukens Common Stock into which such
share of Lukens Preferred Stock could have been converted immediately prior to
the Effective Time who had not made a Cash Election with respect to such
Nondissenting Shares prior to the Election Date would have received, in each
case subject to possible proration.
ACCOUNTING TREATMENT
The Merger will be treated as a "purchase" for financial reporting and
accounting purposes, in accordance with GAAP. After the Merger, the results of
operations of Lukens will be included in the consolidated financial
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statements of Bethlehem. The purchase price (i.e., the aggregate Merger
Consideration) will be allocated based on the fair value of the assets
acquired and the liabilities assumed. Any excess of cost over fair value of
the net tangible assets of Lukens will be recorded as goodwill and other
intangible assets. Such allocations will be made based upon valuations and
other studies that have not yet been finalized.
RESALE OF BETHLEHEM COMMON STOCK
The Bethlehem Common Stock issued pursuant to the Merger will be
transferable under the Securities Act except for shares issued to any Lukens
stockholder who may be deemed to be an affiliate of Lukens (an "Affiliate")
for purposes of Rule 145 under the Securities Act. An "Affiliate" is defined
generally as including, without limitation, directors, certain executive
officers and beneficial owners of 10% or more of a class of common stock of a
company. Lukens has agreed to use its reasonable efforts to cause each
Affiliate to deliver to Bethlehem on or prior to the Closing Date a written
agreement providing, among other things, that such Affiliate will not transfer
any Bethlehem Common Stock received in connection with the Merger except in
compliance with the Securities Act. This Proxy Statement/Prospectus does not
cover resales of shares of Bethlehem Common Stock received by any person who
may be deemed to be an Affiliate.
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OTHER TERMS OF THE MERGER AGREEMENT
The following is a brief summary of the material provisions of the Merger
Agreement not previously described in "THE MERGER." The full text of the
Merger Agreement is attached as Annex I to this Proxy Statement/Prospectus and
is incorporated herein by reference. The following summary describes all
material elements of such provisions but is qualified in its entirety by
reference to the Merger Agreement.
THE SURVIVING CORPORATION
Certificate of Incorporation and By-laws. The Merger Agreement provides that
the Lukens Certificate of Incorporation and the Lukens By-laws, as in effect
immediately prior to the Effective Time, will be the certificate of
incorporation and by-laws of the Surviving Corporation until thereafter
changed or amended as provided therein or by applicable law.
Directors and Officers. The directors of Merger Sub immediately prior to the
Effective Time will be the directors of the Surviving Corporation, until the
earlier of their resignation or removal or until their respective successors
are duly elected and qualified, as the case may be. Lukens will obtain such
resignations as may be necessary to effect the foregoing. The officers of
Lukens immediately prior to the Effective Time will be the officers of the
Surviving Corporation, until the earlier of their resignation or removal or
until their respective successors are duly elected and qualified, as the case
may be.
Continuing Indemnification. For six years after the Effective Time, the
Merger Agreement requires Bethlehem to (or to cause the Surviving Corporation
to) indemnify, defend and hold harmless any person who is, or at any time
prior to the Effective Time has been, a director, officer, employee or agent
of Lukens or any of its subsidiaries against all Claims to the extent that any
such Claim is based on, or arises out of: (i) the fact that such Indemnified
Person is or was a director, officer, employee or agent of Lukens or any of
its subsidiaries or is or was serving at the request of Lukens or any of its
subsidiaries as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise; or (ii) the Merger
Agreement or any of the transactions contemplated thereby. The indemnification
provided in the Merger Agreement applies to the extent that any such Claim
pertains to any matter or fact arising, existing or occurring prior to or at
the Effective Time, regardless of whether such Claim is asserted or claimed
prior to, at or after the Effective Time, to the full extent permitted under
the DGCL, the Lukens Certificate of Incorporation or the Lukens By-laws or any
indemnification agreement in effect at the date of the Merger Agreement
including provisions relating to advancement of expenses incurred in the
defense of any such Claim. Neither Bethlehem nor the Surviving Corporation
will be required to indemnify any Indemnified Person in connection with any
proceeding (or any portion thereof) involving any Claim initiated by the
Indemnified Person unless the initiation of such proceeding or portion thereof
was authorized by the Bethlehem Board or unless the proceeding is brought by
an Indemnified Person to enforce rights under the continuing indemnification
provisions. Without limiting the generality of the preceding sentence, in the
event any Indemnified Person becomes involved in any Claim, after the
Effective Time, Bethlehem has agreed to periodically advance to such
Indemnified Person its legal and other expenses (including the cost of any
investigation and preparation incurred in connection therewith), subject to
the Indemnified Person providing to Bethlehem an undertaking to reimburse all
amounts so advanced in the event that a court of competent jurisdiction
finally determines that the Indemnified Person is not entitled to such
indemnification.
Bethlehem and Lukens have agreed that all rights to indemnification or
liabilities and all limitations with respect thereto existing in favor of any
Indemnified Person, as provided in the Lukens Certificate of Incorporation or
the Lukens By-laws and any indemnification agreement in effect at the date of
the Merger Agreement, will survive the Merger and will continue in full force
and effect, without any amendment thereto, for a period of six years from the
Effective Time. In the event any Claim is asserted or made within such six-
year period, all such rights in respect of any such Claim will continue until
disposition of the Claim. The continuation of existing indemnification
discussed above will not require Bethlehem to amend the Bethlehem Certificate
of Incorporation or the Bethlehem By-laws (each as defined below).
Bethlehem or the Surviving Corporation must either maintain Lukens' existing
directors' and officers' liability insurance policy ("D&O Insurance") for a
period of not less than six years after the Effective Time or
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provide substantially similar coverage on terms no less advantageous to the
former directors and officers of Lukens. If the existing D&O Insurance expires
or is canceled during the six-year period, Bethlehem or the Surviving
Corporation must use its best efforts to obtain substantially similar D&O
Insurance. Neither Bethlehem nor the Surviving Corporation, however, will be
required to pay an annual premium for D&O Insurance in excess of 200% of the
last annual premium paid prior to the date of the Merger Agreement, but in
such case shall purchase as much coverage as possible for such amount. See
"THE MERGER--Interests of Certain Persons in the Merger."
REPRESENTATIONS AND WARRANTIES
The Merger Agreement includes various customary representations and
warranties of the parties thereto.
Representations and Warranties of Lukens. The Merger Agreement includes
representations and warranties by Lukens as to, among other things, (i) the
organization, standing and requisite corporate power of Lukens and each of its
subsidiaries; (ii) the subsidiaries of Lukens; (iii) the capital structure of
Lukens and its subsidiaries; (iv) the authorization, execution, delivery,
performance and enforceability of the Merger Agreement and related matters,
the Merger Agreement's non-contravention of any agreement, law, charter
provision or by-law provision of Lukens or any of its subsidiaries and the
absence of the need for governmental or third party filings, consents,
approvals or actions with respect to any transaction contemplated by the
Merger Agreement (except for certain filings specified in the Merger
Agreement); (v) compliance as to form of, and the accuracy of information
contained in, documents filed by Lukens with the SEC; (vi) the accuracy of
information supplied by Lukens in connection with this Proxy
Statement/Prospectus and the Registration Statement; (vii) the absence of
certain material changes or events since the date of the most recent audited
financial statements filed by Lukens with the SEC (except as disclosed in
documents filed with the SEC and publicly available prior to the date of the
Merger Agreement), including, without limitation, the absence of any material
adverse change in Lukens; (viii) the absence of material litigation; (ix) the
absence of certain changes in the Lukens benefit plans or collective
bargaining agreements; (x) compliance with applicable laws relating to the
Lukens benefit plans and certain other matters relating to the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"); (xi) the filing
of tax returns and payment of taxes and the absence of certain audits,
examinations and liens with respect to tax obligations; (xii) the absence of
excess parachute payments: (xiii) voting requirements for the adoption of the
Merger Agreement by the stockholders of Lukens; (xiv) approval of the Merger
by the Lukens Board for purposes of applicable state takeover statutes; (xv)
amendment of the Lukens Rights Agreement; (xvi) certain broker's and advisor's
fees; (xvii) the receipt of an opinion of CSFB; (xviii) compliance with laws
applicable to Lukens and its subsidiaries; (xix) compliance with environmental
laws and regulations; (xx) the absence of undisclosed material contracts or
indebtedness; (xxi) ownership or the right to use, non-infringement of others'
rights with respect to, and the absence of any claim regarding, intellectual
property material to the business of Lukens as a whole; (xxii) the absence of
undisclosed collective bargaining agreements and labor disputes; (xxiii) good
and valid title to all material assets reflected on the most recent balance
sheet included in filed SEC documents; (xxiv) good and marketable fee title to
all owned real property and valid title to the leasehold estates in all leased
real property; (xxv) existence of insurance policies, in full force and
effect, that are in Lukens' judgment reasonable for the business and assets of
Lukens and its subsidiaries; (xxvi) absence of certain undisclosed
transactions with affiliates; and (xxvii) delivery of certain books and
records of Lukens and its significant subsidiaries.
Representations and Warranties of Bethlehem. The Merger Agreement also
includes representations and warranties by Bethlehem as to, among other
things, (i) corporate organization, standing and power; (ii) the capital
structure of Bethlehem and its subsidiaries; (iii) the authorization,
execution, delivery, performance and enforceability of the Merger Agreement
and related matters, the Merger Agreement's non-contravention of any
agreement, law, charter provision or by-law provision of Bethlehem or any of
its subsidiaries and the absence of the need for governmental or third party
filings, consents, approvals or actions with respect to any transaction
contemplated by the Merger Agreement (except for certain filings specified in
the Merger Agreement); (iv) compliance as to form of, and the accuracy of
information contained in, documents filed by Bethlehem with the SEC; (v) the
accuracy of information supplied by Bethlehem in connection with this Proxy
Statement/Prospectus
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and the Registration Statement; (vi) the absence of certain material changes
or events since the date of the most recent financial audited statements filed
by Bethlehem with the SEC (except as disclosed in documents filed with the SEC
and publicly available prior to the date of the Merger Agreement), including,
without limitation, any material adverse change in Bethlehem; (vii) the
absence of material litigation; (viii) compliance with applicable laws
relating to the Bethlehem benefit plans and certain other matters relating to
ERISA; (ix) the filing of tax returns and payment of taxes and the absence of
certain audits, examinations and liens with respect to tax obligations; (x)
certain broker's and advisor's fees; (xi) compliance with laws applicable to
Bethlehem and its subsidiaries; and (xii) the effect of the Merger with
respect to the Bethlehem Rights Agreement.
BUSINESS OF LUKENS PENDING THE EFFECTIVE TIME OF THE MERGER
Lukens has agreed, subject to certain exceptions set forth in the Merger
Agreement, to carry on its business and the business of its subsidiaries prior
to the Effective Time in the usual, regular and ordinary course in
substantially the same manner as previously conducted and in compliance in all
material respects with applicable laws and regulations and to use all
reasonable efforts to preserve intact its current business organization, keep
available the services of its current officers and employees and preserve its
business relationships to the end that its goodwill and ongoing business will
be unimpaired at the Effective Time.
Subject to certain exceptions, and without limiting the generality of the
previous paragraph, prior to the Effective Time Lukens will not, and will not
permit any of its subsidiaries to, without the consent of Bethlehem: (i) (A)
declare, set aside or pay any dividends on, or make any other distributions in
respect of, any of its capital stock, other than dividends and distributions
by a direct or indirect wholly owned subsidiary of Lukens to its parent and
other than regular quarterly cash dividends of $.25 on Lukens Common Stock and
$1.20 on Lukens Preferred Stock, (B) split, combine or reclassify any of its
capital stock or issue or authorize the issuance of any other securities in
respect of, in lieu of or in substitution for shares of its capital stock or
(C) purchase, redeem or otherwise acquire any shares of capital stock of
Lukens or any of its subsidiaries or any other securities thereof or any
rights, warrants or options to acquire any such shares or other securities;
(ii) issue, deliver, sell, pledge or otherwise encumber any shares of its
capital stock, any other voting securities or any securities convertible into,
or any rights, warrants or options to acquire, any such shares, voting
securities or convertible securities (other than the issuance of Lukens Common
Stock upon the exercise of Employee Stock Options, as defined below,
outstanding on the date of the Merger Agreement and in accordance with their
present terms or in accordance with the present terms of the Lukens Inc. 1985
Stock Option and Appreciation Plan and Lukens Inc. Stock Option Plan for Non-
Employee Directors (the "Lukens Stock Plans")); (iii) amend the Lukens
Certificate of Incorporation or the Lukens By-laws or other organizational
documents; (iv) acquire or agree to acquire (A) by merging or consolidating
with, or by purchasing a substantial portion of the assets of, or in any other
manner, any business or any corporation, limited liability company,
partnership, joint venture or other entity or division thereof or (B) any
assets that individually or in the aggregate are material to Lukens and its
subsidiaries taken as a whole, except for purchases of inventory in the
ordinary course of business consistent with past practice; (v) sell, lease,
license, mortgage or otherwise encumber or subject to any lien or otherwise
dispose of any of its properties or assets other than in the ordinary course
of business consistent with past practice; (vi) (A) incur any indebtedness for
borrowed money or guarantee any such indebtedness of another person, issue or
sell any debt securities or warrants or other rights to acquire any debt
securities of Lukens or any of its subsidiaries, guarantee any debt securities
of another person, enter into any "keep well" or other agreement to maintain
any financial statement condition of another person or enter into any
arrangement having the economic effect of any of the foregoing, except for
short-term borrowings incurred in the ordinary course of business consistent
with past practice, or (B) make any loans, advances or capital contributions
to, or investments in, any other person, other than to Lukens or any direct or
indirect subsidiary of Lukens or to officers and employees of Lukens or any of
its subsidiaries for travel, business or relocation expenses in the ordinary
course of business; (vii) make or agree to make any new capital expenditures
which individually exceed $1,000,000 or in the aggregate exceed $10,000,000;
(viii) make any tax election that could reasonably be expected to have a
material adverse effect on Lukens or settle or compromise any material tax
liability; (ix) pay, discharge, settle or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted, unasserted, contingent or
otherwise), other than the payment, discharge, settlement or satisfaction, in
the ordinary course of business consistent with past practice or
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in accordance with their terms, of liabilities reflected or reserved against
in, or contemplated by, the most recent consolidated financial statements (or
the notes thereto) of Lukens included in the documents filed by Lukens with
the SEC, incurred since the date of such financial statements in the ordinary
course of business consistent with past practice or which do not in the
aggregate have a material adverse effect on Lukens; (x) (A) amend (other than
as required by applicable law) any Lukens benefit plan in any material
respect, (B) increase the compensation or bonus opportunity of any employee of
Lukens or its subsidiaries, except for any increases in the ordinary course of
business consistent with past practice or (C) grant any additional equity
based compensation to any employee of Lukens or its subsidiaries, except for
grants in the ordinary course of business consistent with past practice; (xi)
except in the ordinary course of business or except as could not reasonably be
expected to have a material adverse effect on Lukens, modify, amend or
terminate any material contract or agreement to which Lukens or any of its
subsidiaries is a party or waive, release or assign any material rights or
claims thereunder; (xii) make any change to its accounting methods, principles
or practices except as required by GAAP; or (xiii) authorize, or commit or
agree to take, any of the foregoing actions.
EFFECT ON LUKENS BENEFIT PLANS AND STOCK OPTIONS
Lukens Benefit Plans. Prior to the Effective Time Lukens will honor, and
after the Effective Time Bethlehem will cause the Surviving Corporation to
honor, in accordance with their respective terms and without offset,
deduction, counterclaim, interruption or deferment, all Lukens Plans (as
defined below) and all other written employment, severance, termination and
retirement agreements to which Lukens is a party as of the Effective Time.
"Lukens Plan" means any collective bargaining agreement or employment contract
or bonus, pension, profit sharing, deferred compensation, incentive
compensation, stock ownership, stock purchase, stock option, phantom stock,
retirement, vacation, severance, disability, death benefit, hospitalization,
medical or other plan, arrangement or understanding (whether or not legally
binding) providing benefits to any current or former director, officer or
employee of Lukens or any of its subsidiaries. For the purposes of certain
Lukens Plans and certain other employment, severance, termination and
retirement agreements to which Lukens is a party, Lukens Stockholder Approval
or the consummation of the Merger will constitute a "change in control" of
Lukens (as this term is defined in such plans and agreements) at the Effective
Time and "Good Reason" (as this term is defined in certain severance
agreements). Bethlehem has agreed to cause the Surviving Corporation, after
consummation of the Merger, to pay all amounts provided under such Lukens
Plans and agreements in accordance with their respective terms and to honor
all rights, privileges and modifications to or with respect to any such Lukens
Plans or agreements that become effective as a result of such change in
control.
Bethlehem has agreed to provide, for a period of no less than one year after
the Effective Time, employee pension and welfare plans for the benefit of
employees and former employees of Lukens that are not materially less
favorable, in the aggregate, than the Lukens Plans in effect immediately prior
to the Effective Time. To the extent any benefit plan of Bethlehem or the
Surviving Corporation is made applicable to any employee or former employee of
Lukens, Bethlehem or the Surviving Corporation will grant employees and former
employees of Lukens credit for service with Lukens prior to the Effective Time
for the purposes of determining eligibility to participate and the employee's
nonforfeitable interest in benefits under the benefit plan. Unless a
duplication of benefits would result, credit for service with Lukens will also
be granted for calculating benefits (including benefits the amount or level of
which is determined by reference to an employee's vesting service) under the
benefit plan. In addition, to the extent any plan of Bethlehem or the
Surviving Corporation that constitutes a Welfare Plan (as defined below) is
made applicable to any employee or former employee of Lukens, Bethlehem or the
Surviving Corporation will: (i) waive all preexisting condition exclusions and
waiting periods otherwise applicable to employees and former employees of
Lukens, except to the extent any such limitations or waiting periods in effect
under comparable Lukens Plans have not been satisfied as of the date the plan
is made applicable and (ii) credit each employee and former employee of Lukens
for any co-payments and deductibles paid by the employee or former employee
under comparable Lukens Plans prior to the date the plan is made applicable.
"Welfare Plan" means any "employee pension benefit plan" as defined in Section
3(2) of ERISA or any "employee welfare benefit plan" as defined in Section
3(1) of ERISA. Nothing in the Merger Agreement limits the power of the
Surviving Corporation to amend or terminate any Lukens Plan or any other
employee benefit plan, program, agreement or policy or requires the Surviving
Corporation or Bethlehem to offer to continue (other than as required by its
terms) any written employment contract.
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Employee Stock Options. At the Effective Time or such earlier time as is
provided in the applicable stock option plan or employee or director stock
option or agreement as in effect on the date of the Merger Agreement all
Employee Stock Options will become vested and exercisable in full. At the
Effective Time, each Employee Stock Option that is outstanding and unexercised
at the Effective Time will be converted automatically into an option to
purchase shares of Bethlehem Common Stock. The number of shares of Bethlehem
Common Stock to be subject to the new option will be equal to the product of
the number of shares of Lukens Common Stock subject to the original option and
the Conversion Number. Any fractional shares of Bethlehem Common Stock
resulting from such multiplication will be rounded down to the nearest share.
The exercise price per share under the new option will equal (a) the aggregate
exercise price of the original option divided by (b) the total number of
shares of Bethlehem Common Stock subject to the option. The exercise price
will be rounded up to the nearest cent. The adjustment provided in the Merger
Agreement with respect to any incentive stock options will be effected in a
manner consistent with Section 424(a) of the Code. The duration and other
terms of the new option will be the same as that of the original option,
except that the vesting of all options will be accelerated to the Effective
Time. Bethlehem will file with the SEC a registration statement on Form S-8
(or other appropriate form) or a post-effective amendment to the Registration
Statement as promptly as practicable after the date of the Merger Agreement
for purposes of registering all shares of Bethlehem Common Stock issuable
after the Effective Time upon exercise of the Employee Stock Options, and will
have such registration statement or post-effective amendment become effective
and comply, to the extent applicable, with state securities or blue sky laws.
See "THE MERGER--Interests of Certain Persons in the Merger."
CONDITIONS TO THE CONSUMMATION OF THE MERGER
Conditions to Each Party's Obligations to Effect the Merger. The respective
obligation of each party to effect the Merger is subject to the satisfaction
or waiver on or prior to the Closing Date of the following conditions: (i)
receipt of Lukens Stockholder Approval; (ii) termination or expiration of the
applicable waiting period under the HSR Act; (iii) the absence of any
judgment, decree, statute, law, ordinance, rule, regulation, temporary
restraining order, preliminary or permanent injunction, order enacted,
entered, promulgated, enforced or issued by any court of competent
jurisdiction or other governmental entity, or other legal restraint or
prohibition preventing the consummation of the Merger; (iv) the effectiveness
of the Registration Statement under the Securities Act and the absence of any
stop order or proceedings seeking a stop order, and the receipt of all state
securities or "blue sky" authorizations necessary to issue the Bethlehem
Common Stock issuable pursuant to the Merger Agreement; and (v) approval for
listing on the NYSE and the CSE of the shares of Bethlehem Common Stock
issuable to the Lukens stockholders pursuant to the Merger Agreement and under
the Lukens Stock Plans, subject to official notice of issuance.
Conditions to the Obligations of Bethlehem and Merger Sub. The obligations
of Bethlehem and Merger Sub to effect the Merger are further subject to
satisfaction (or waiver by Bethlehem) on or prior to the Closing Date of the
following conditions: (i) the representations and warranties of Lukens set
forth in the Merger Agreement must be true and correct (without regard to any
materiality qualifications or references to material adverse effect contained
in any specific representation or warranty), as of the date of the Merger
Agreement and as of the Closing Date as though made on and as of the Closing
Date except to the extent such representations or warranties expressly relate
to an earlier date (in which case as of such date), unless the failure of all
such representations and warranties to be true and correct would not have a
material adverse effect on Lukens and Bethlehem has received a certificate to
that effect signed on behalf of Lukens by the chief executive officer and the
chief financial officer of Lukens; (ii) Lukens must have performed in all
material respects all its obligations under the Merger Agreement at or prior
to the Closing Date, and Bethlehem must have received a certificate to that
effect signed on behalf of Lukens by the chief executive officer and the chief
financial officer of Lukens; (iii) there must not be pending or threatened by
any governmental entity any suit, action or proceeding (A) challenging
Bethlehem's acquisition of any shares of capital stock of Lukens or the
Surviving Corporation, seeking to restrain or prohibit the Merger or seeking
damages that are material in relation to Lukens and its subsidiaries, or
Bethlehem and its subsidiaries, in each case taken as a whole, (B) seeking to
prohibit or limit the ownership or operation by Lukens, Bethlehem or any of
their respective subsidiaries of any material portion of the business or
assets of Lukens, Bethlehem or any of their respective subsidiaries, or to
compel Lukens,
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Bethlehem or any of their respective subsidiaries to dispose of or hold
separate any material portion of the business or assets of Lukens, Bethlehem
or any of their respective subsidiaries as a result of the Merger or any of
the transactions contemplated by the Merger Agreement, (C) seeking to impose
limitations on the ability of Bethlehem to acquire or hold, or exercise full
rights of ownership of, any shares of capital stock of Lukens or the Surviving
Corporation, (D) seeking to prohibit Bethlehem or any of its subsidiaries from
effectively controlling in any material respect the business or operations of
Lukens or its subsidiaries or (E) which otherwise would reasonably be expected
to have a material adverse effect on Lukens or Bethlehem; and (iv) there must
not have been any material adverse change relating to Lukens at any time after
the date of the Merger Agreement. In addition, there must not be any judgment,
order, decree, statute, law, ordinance, rule or regulation that is reasonably
likely to result, directly or indirectly, in any of the consequences referred
to in clauses (iii)(B) through (E) above.
Conditions to the Obligations of Lukens. The obligation of Lukens to effect
the Merger is further subject to satisfaction (or waiver by Lukens) on or
prior to the Closing Date of the following conditions: (i) the representations
and warranties of Bethlehem set forth in the Merger Agreement must be true and
correct (without regard to any materiality qualifications or references to
material adverse effect contained in any specific representation or warranty),
as of the date of the Merger Agreement and as of the Closing Date as though
made on and as of the Closing Date except to the extent such representations
or warranties expressly relate to an earlier date (in which case as of such
date), unless the failure of all such representations and warranties to be
true and correct would not have a material adverse effect on Bethlehem and
Lukens has received a certificate to that effect signed on behalf of Bethlehem
by the chief executive officer and the chief financial officer of Bethlehem;
(ii) Bethlehem must have performed in all material respects all its
obligations under the Merger Agreement at or prior to the Closing Date, and
Lukens must have received a certificate to that effect signed on behalf of
Bethlehem by the chief executive officer and the chief financial officer of
Bethlehem; (iii) the Average Market Price must be greater than or equal to
$6.95; and (iv) there must not have been any material adverse change relating
to Bethlehem at any time after the date of the Merger Agreement.
Lukens does not currently anticipate that it will waive any condition of the
Merger. In the event that Lukens so determines at any time prior to the
closing of the Merger that it would be appropriate to waive any material
condition of the Merger, including, without limitation, the condition with
respect to the Average Market Price, Lukens will, to the extent required by
applicable law, including federal and state securities laws, amend the Proxy
Statement/Prospectus to include additional information and allow additional
time for stockholders of Lukens to change their proxies.
NO SOLICITATION
The Merger Agreement provides that Lukens will not, nor will it permit or
authorize its subsidiaries, directors, officers, employees, investment
bankers, financial advisors, attorneys, accountants or other representatives
to, directly or indirectly: (i) solicit, initiate or facilitate any inquiries
or the making of any Takeover Proposals (as defined below), including by
furnishing information, or (ii) participate in any discussions or negotiations
regarding any Takeover Proposal. Lukens may, however, provide information
pursuant to a customary confidentiality agreement in response to, and
participate in negotiations regarding, an unsolicited Takeover Proposal if the
Lukens Board determines in good faith after consultation with outside counsel,
prior to Lukens Stockholder Approval, that it is necessary to do so to comply
with its fiduciary duties to the Lukens stockholders under applicable law.
"Takeover Proposal" means any inquiry, proposal or offer from any person
relating to any direct or indirect acquisition or purchase of 20% or more of
the assets or 20% or more of any class of equity securities of Lukens or any
of its subsidiaries, any tender offer or exchange offer for 20% or more of any
class of equity securities of Lukens or any of its subsidiaries, or any
merger, consolidation, business combination, recapitalization, liquidation,
dissolution or similar transaction involving Lukens or any of its
subsidiaries, other than the transactions contemplated by the Merger
Agreement. Lukens must immediately advise Bethlehem of any Takeover Proposal,
the material terms and conditions of such Takeover Proposal and the identity
of the person making such Takeover Proposal. Lukens must keep Bethlehem
reasonably informed of the status and details of any such Takeover Proposal.
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RIGHT OF LUKENS BOARD TO WITHDRAW RECOMMENDATION
The Merger Agreement provides that neither the Lukens Board nor any
committee thereof will (i) withdraw or modify, or propose publicly to withdraw
or modify, in a manner adverse to Bethlehem, the approval or recommendation by
the Lukens Board or such committee of the Merger or the Merger Agreement
unless it determines in good faith, after consultation with outside counsel,
that it is necessary to do so to comply with its fiduciary duties to the
Lukens stockholders under applicable law, (ii) approve or recommend, or
propose publicly to approve or recommend, any Takeover Proposal or (iii) cause
Lukens to enter into any letter of intent, agreement in principle, acquisition
agreement or other similar agreement (each, an "Acquisition Agreement")
related to any Takeover Proposal.
In the event, however, that the Lukens Board receives a Superior Proposal
(as defined below) prior to Lukens Stockholder Approval, the Lukens Board may
(i) withdraw or modify its approval or recommendation of the Merger or the
Merger Agreement if it determines in good faith, after consultation with
outside counsel, that it is necessary to do so to comply with its fiduciary
duties to the Lukens stockholders under applicable law or (ii) approve or
recommend such Superior Proposal or terminate the Merger Agreement (and if it
so chooses, cause Lukens to enter into an Acquisition Agreement with respect
to any Superior Proposal) but only after the fifth business day following
Bethlehem's receipt of written notice from Lukens advising Bethlehem that the
Lukens Board has received a Superior Proposal, specifying the terms and
conditions of such Superior Proposal and identifying the person making such
Superior Proposal. "Superior Proposal" means any proposal or offer made by a
third party to acquire, directly or indirectly, for consideration consisting
of cash and/or securities, more than 50% of the combined voting power of the
shares of Lukens Common Stock then outstanding or a substantial portion of the
assets of Lukens and its subsidiaries and otherwise on terms which the Lukens
Board determines in its good faith judgment to be more favorable to Lukens'
stockholders than the Merger and for which financing, to the extent required,
is then committed or which, in the good faith judgment of the Lukens Board, is
reasonably capable of being obtained by such third party.
Nothing contained in the Merger Agreement will prohibit Lukens from taking
and disclosing to its stockholders a position contemplated by Rule 14e-2(a)
under the Exchange Act or making any disclosure to the Lukens stockholders if
the Lukens Board determines in good faith, after consultation with outside
counsel, that such disclosure is required by its fiduciary duties to the
stockholders of Lukens under applicable law.
TERMINATION, AMENDMENT AND WAIVER
The Merger Agreement may be terminated at any time prior to the Effective
Time, whether before or after receipt of Lukens Stockholder Approval: (i) by
mutual written consent of Bethlehem and Lukens; (ii) by either Bethlehem or
Lukens (A) if the Merger has not been consummated on or before June 30, 1998,
unless the failure to consummate the Merger is the result of a willful and
material breach of the Merger Agreement by the party seeking to terminate; (B)
if Lukens Stockholder Approval is not obtained at the Special Meeting; (C) if
any governmental entity has issued an order, decree, ruling or injunction or
taken any other action permanently enjoining, restraining or otherwise
prohibiting the Merger and such order, decree, ruling, injunction or other
action has become final and nonappealable; or (D) in the event of a breach by
the other party of any representation, warranty, covenant or other agreement
contained in the Merger Agreement which (x) would give rise to the failure of
a condition set forth in clauses (i) or (ii) of "--Conditions to the
Consummation of the Merger--Conditions to the Obligations of Bethlehem and
Merger Sub" or clauses (i) or (ii) of "--Conditions to the Consummation of the
Merger--Conditions to the Obligations of Lukens," as applicable, and (y)
cannot be or has not been cured within 30 days after the giving of written
notice to the breaching party of such breach (a "Material Breach") (provided
that the terminating party is not then in Material Breach of any
representation, warranty, covenant or other agreement contained in the Merger
Agreement); (iii) by Lukens pursuant to a determination by the Lukens Board
that it has received a Superior Proposal, in accordance with the provisions
described under "--Right of Lukens Board to Withdraw Recommendation"; provided
that it has complied with the applicable provisions and pays the termination
fee required, if any, by the provisions described under "--Termination Fee";
or (iv) by Bethlehem if (A) the Lukens Board or any committee thereof
withdraws or modifies in a manner adverse to Bethlehem its approval or
recommendation of the Merger or the Merger
57
<PAGE>
Agreement, or approves or recommends any Superior Proposal or (B) the Lukens
Board or any committee thereof resolves to take any of the foregoing actions.
The Merger Agreement may be amended by the parties at any time before or
after Lukens Stockholder Approval. After Lukens Stockholder Approval has been
obtained, however, no amendment may be made that by law requires further
approval by the stockholders of Lukens without obtaining such further
approval. The Merger Agreement can be amended only by an instrument in writing
signed on behalf of each of the parties.
At any time prior to the Effective Time, a party may (i) extend the time for
the performance of any obligation of another party, (ii) waive any
inaccuracies in the representations and warranties of another party contained
in the Merger Agreement or (iii) subject to any applicable law that requires
stockholder approval, waive compliance by another party with any provision of
the Merger Agreement. Any extension or waiver must be set forth in an
instrument in writing signed on behalf of the party granting the extension or
waiver. The Merger Agreement provides that the failure of any party to assert
any of its rights will not constitute a waiver of its rights.
TERMINATION FEE
In the event that (i) a Takeover Proposal is made known to Lukens or any of
its subsidiaries or is made directly to its stockholders generally or any
person publicly announces an intention to make a Takeover Proposal and
thereafter the Merger Agreement is terminated by either Bethlehem or Lukens
pursuant to the provisions described in clauses (ii)(A), (ii)(B) or (iv) under
the caption "--Termination, Amendment and Waiver," or (ii) the Merger
Agreement is terminated by Lukens pursuant to a determination by the Lukens
Board that it has received a Superior Proposal as described in clause (iii)
under the caption "--Termination, Amendment and Waiver," then Lukens must
promptly pay Bethlehem a fee equal to $13.5 million payable by wire transfer
of same day funds. No Termination Fee will be payable to Bethlehem, however,
pursuant to the provision described in clause (i) of this paragraph unless and
until within 12 months of such termination Lukens or any of its subsidiaries
enters into any Acquisition Agreement or consummates any Takeover Proposal.
SALE OF ASSETS AND CONVERSION AGREEMENT
On January 28, 1998, Bethlehem entered into the Sale Agreement providing for
the sale to Allegheny Ludlum of certain assets of Lukens. These assets include
Lukens' Houston, Pennsylvania plant, which is used for the melting, casting
and rolling of stainless steel; the wide anneal and pickle line recently
installed at Lukens' Massillon, Ohio plant; and the vacuum-oxygen
decarburization unit used in the refining of stainless steel at Lukens'
Coatesville, Pennsylvania plant, for $175 million. The consummation of the
sale of these assets is subject to the consummation of the Merger and certain
other conditions. Bethlehem will provide melting, casting and processing
services to Allegheny at the Lukens Coatesville and Conshohocken plants. The
waiting period under the HSR Act for the transactions described in this
paragraph expired at 11:59 p.m. on March 12, 1998.
OPERATIONS AFTER THE MERGER
Bethlehem expects to achieve cost reductions from operating and
administrative efficiencies and other synergies following the consummation of
the Merger. Bethlehem believes that these operating and administrative
efficiencies and other synergies will reach approximately $60 million per
year, excluding possible integration costs, on a pre-tax basis and before the
amortization of goodwill. Bethlehem believes that these synergies will be
achieved primarily as a result of (i) reduced production expenses (net of
transportation costs and fixed cost penalties), (ii) reduced selling,
administrative and general expenses (including information technology
improvements, billing, payroll and other administrative efficiencies), (iii)
improved operating efficiency as a result of higher volumes at underutilized
facilities and more appropriate use of facilities, (iv) reduced material and
services costs resulting from increased purchasing volume as well as strategic
sourcing and (v) technology
58
<PAGE>
sharing benefits and other efficiencies. For example, Bethlehem expects that
it will be able to make more appropriate use of the Bethlehem Burns Harbor and
the Lukens Coatesville facilities by transferring some specialty grades, which
are typically ordered in small quantities, from the Bethlehem Burns Harbor
facility to the Lukens Coatesville facility, which is better suited to smaller
heat sizes. Also, Bethlehem's Sparrows Point facility will be able to furnish
larger size cast slabs to Lukens' Conshohocken Steckel mill, which should
result in improvements to that facility's productivity and costs compared to
its current semi-finished steel supply. The actual results achieved by the
combined company may vary from projected results and the variations may be
material. See "CAUTIONARY STATEMENT." Bethlehem believes that there will be a
transition period of about three to nine months for integrating its operations
with Lukens. Bethlehem expects that operating and administrative efficiencies
and other synergies, including the reduction of the current Bethlehem and
Lukens workforces and overhead expenses, will begin soon after the closing of
the Merger and increase throughout the transition period and that most of the
approximately $60 million per year of expected synergies will be achieved
within approximately eighteen months after the Effective Time. Bethlehem
currently intends to close Lukens' Coatesville 206" plate mill and Bethlehem's
Sparrows Point 160" plate mill, and increase the output of existing facilities
at Bethlehem's Burns Harbor Division and Lukens' 110" Conshohocken Steckel
mill, both of which are currently underutilized, at a future time that will be
determined on a basis consistent with customer requirements and other factors.
The existing Lukens workforce will be reduced by approximately 100 to 200
employees as a result of increased operating and administrative efficiencies
and by approximately 1,100 employees as a result of the expected sale of
Lukens' stainless sheet and distribution businesses. The timing and extent of
the reductions will not be finalized until after the Merger. See "RISK
FACTORS."
59
<PAGE>
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
The unaudited pro forma combined condensed financial statements for
Bethlehem for the one-year period ended December 31, 1997 are presented to
reflect the estimated impact on the historical consolidated financial
statements of Bethlehem of the Merger, which will be accounted for as a
purchase, including the issuance of approximately 15.1 million shares of
Bethlehem Common Stock in connection with the Merger. The unaudited pro forma
combined condensed income statement presented below assumes that the Merger
had been consummated as of January 1, 1997, and the unaudited pro forma
combined condensed balance sheet presented below assumes that the Merger had
been consummated on December 31, 1997. The unaudited pro forma combined
condensed financial statements also give effect to certain historical and
planned transactions and dispositions as explained in Notes 5 and 6. The
unaudited pro forma combined condensed financial statements presented below do
not reflect any cost savings or other synergies anticipated by Bethlehem
management as a result of the Merger and are not necessarily indicative of the
results of operations or the financial position which would have occurred had
the Merger been consummated as of January 1, 1997 or on December 31, 1997.
Moreover, such statements are not necessarily indicative of Bethlehem's future
results of operations or financial position. The unaudited pro forma combined
condensed financial statements presented below should be read in conjunction
with the historical consolidated financial data of Bethlehem and Lukens,
including the notes thereto, incorporated by reference or appearing elsewhere
in this Proxy Statement/Prospectus. See "AVAILABLE INFORMATION,"
"INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE," "SUMMARY--Bethlehem
Selected Consolidated Financial Data" and "SUMMARY--Lukens Selected
Consolidated Financial Data."
60
<PAGE>
PRO FORMA COMBINED CONDENSED BALANCE SHEET
DECEMBER 31, 1997
(DOLLARS IN MILLIONS)
ASSETS
<TABLE>
<CAPTION>
TRANSACTION STAINLESS COMBINED
BETHLEHEM LUKENS ADJUSTMENTS DISPOSITIONS PRO FORMA
HISTORICAL HISTORICAL (UNAUDITED) (UNAUDITED)(5) (UNAUDITED)
---------- ---------- ----------- -------------- -----------
<S> <C> <C> <C> <C> <C>
CURRENT ASSETS:
Cash and Cash
Equivalents........... $ 252.4 $ 6.6 $(128.9)(3) $ 160.6 $ 290.7
Receivables, Less
Allowances............ 306.0 118.0 -- (48.3) 375.7
Inventories............ 893.8 145.6 30.0 (3) (94.8) 974.6
Deferred Income Taxes.. -- 13.7 (13.7)(3) -- --
Other Current Assets... 11.8 1.8 -- (0.1) 13.5
-------- ------ ------- ------- --------
TOTAL CURRENT ASSETS. 1,464.0 285.7 (112.6) 17.4 1,654.5
INVESTMENTS AND
MISCELLANEOUS ASSETS... 100.9 4.5 -- -- 105.4
PROPERTY, PLANT AND
EQUIPMENT--NET......... 2,357.7 497.6 75.0 (3) (320.0) 2,585.3
(25.0)(4) --
DEFERRED INCOME TAX
ASSET--NET............. 880.0 34.6 (34.6)(3) 50.0 957.7
22.7 (3)
5.0 (4)
INTANGIBLE ASSET--
PENSIONS............... -- 22.8 (22.8)(3) -- --
INTANGIBLE ASSET--
GOODWILL............... -- 32.2 (32.2)(3) -- 385.0
385.0 (3)
-------- ------ ------- ------- --------
TOTAL ASSETS......... $4,802.6 $877.4 $ 260.5 $(252.6) $5,687.9
======== ====== ======= ======= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts Payable....... $ 371.2 $ 87.6 $ -- $ (33.1) $ 425.7
Accrued Employment
Costs................. 323.9 43.8 -- (15.1) 352.6
Debt and Capital Lease
Obligations........... 41.8 6.3 200.0 (3) (200.0) 48.1
Other Current
Liabilities........... 173.9 33.5 71.0 (3) (4.4) 274.0
-------- ------ ------- ------- --------
TOTAL CURRENT
LIABILITIES......... 910.8 171.2 271.0 (252.6) 1,100.4
PENSION LIABILITY....... 440.0 53.7 8.0 (3) -- 508.7
7.0 (4)
POSTRETIREMENT BENEFITS
OTHER THAN PENSIONS.... 1,445.0 151.3 (1.0)(3) -- 1,598.3
3.0 (4)
LONG-TERM DEBT AND
CAPITAL LEASE
OBLIGATIONS............ 451.6 244.7 -- -- 696.3
OTHER LONG-TERM
LIABILITIES............ 340.2 14.8 25.0 (3) -- 380.0
STOCKHOLDERS' EQUITY:
Preferred & Preference
Stock................. 13.9 28.2 (28.2)(3) -- 13.9
Common Stock........... 115.0 0.2 (0.2)(3) -- 130.1
15.1 (3)
Common Stock Held in
Treasury at Cost...... (60.0) (10.3) 10.3 (3) -- (60.0)
Additional Paid-in
Capital............... 1,854.0 86.7 (86.7)(3) -- 2,068.7
214.7 (3)
(Accumulated
Deficit)/Retained
Earnings.............. (707.9) 150.1 (150.1)(3) -- (737.9)
(30.0)(4)
Unearned ESOP Stock.... -- (10.6) -- -- (10.6)
Deferred
Compensation--
Restricted Stock...... -- (2.6) 2.6 (3) -- --
-------- ------ ------- ------- --------
TOTAL STOCKHOLDERS'
EQUITY.............. 1,215.0 241.7 (52.5) -- 1,404.2
-------- ------ ------- ------- --------
TOTAL LIABILITIES AND
STOCKHOLDERS'
EQUITY.............. $4,802.6 $877.4 $ 260.5 $(252.6) $5,687.9
======== ====== ======= ======= ========
</TABLE>
61
<PAGE>
PRO FORMA COMBINED CONDENSED INCOME STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 1997
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
BETHLEHEM ADJUSTED TRANSACTION STAINLESS COMBINED
BETHLEHEM DISPOSITIONS BETHLEHEM LUKENS ADJUSTMENTS DISPOSITIONS PRO FORMA
HISTORICAL (UNAUDITED)(6) (UNAUDITED) HISTORICAL (UNAUDITED) (UNAUDITED)(5) (UNAUDITED)
---------- -------------- ----------- ---------- ----------- -------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
NET SALES............... $4,631.2 $(203.9) $4,427.3 $994.4 $ -- $(477.9) $4,943.8
-------- ------- -------- ------ ------ ------- --------
COSTS AND EXPENSES:
Cost of Sales
(exclusive of
depreciation and
amortization shown
separately below)..... 4,053.3 (256.6) 3,796.7 875.6 (4.0)(7) (450.1) 4,218.2
Depreciation and
Amortization.......... 231.0 (3.1) 227.9 51.8 18.0 (8) (27.0) 270.7
Selling, Administration
and General Expense... 107.9 (3.6) 104.3 53.6 -- (21.3) 136.6
Estimated (Gain) Loss
on Exiting Businesses. (135.0) -- (135.0) -- 35.0 (4) -- (100.0)
-------- ------- -------- ------ ------ ------- --------
TOTAL COSTS AND
EXPENSES............ 4,257.2 (263.3) 3,993.9 981.0 49.0 (498.4) 4,525.5
-------- ------- -------- ------ ------ ------- --------
INCOME (LOSS) FROM
OPERATIONS............. 374.0 59.4 433.4 13.4 (49.0) 20.5 418.3
FINANCING INCOME
(EXPENSE):
Interest and Other
Financing Costs....... (47.5) -- (47.5) (19.1) -- -- (66.6)
Interest Income........ 9.2 -- 9.2 -- -- -- 9.2
-------- ------- -------- ------ ------ ------- --------
INCOME (LOSS) BEFORE
INCOME TAXES .......... 335.7 59.4 395.1 (5.7) (49.0) 20.5 360.9
BENEFIT (PROVISION) FOR
INCOME TAXES........... (55.0) (9.0) (64.0) 1.1 7.0 (9) (3.5) (59.4)
-------- ------- -------- ------ ------ ------- --------
NET INCOME (LOSS)....... 280.7 50.4 331.1 (4.6) (42.0) 17.0 301.5
DIVIDENDS ON PREFERRED
AND PREFERENCE STOCK... 41.6 -- 41.6 2.0 (2.0)(10) -- 41.6
-------- ------- -------- ------ ------ ------- --------
NET INCOME (LOSS)
APPLICABLE TO COMMON
STOCK.................. $ 239.1 $ 50.4 $ 289.5 $ (6.6) $(40.0) $ 17.0 $ 259.9
======== ======= ======== ====== ====== ======= ========
NET INCOME (LOSS) PER
SHARE.................. $ 2.13 $(0.45) $ 2.06 (10)
======== ====== ========
AVERAGE SHARES
OUTSTANDING (IN
THOUSANDS)............. 112,439 13,974 (10) 126,413
</TABLE>
62
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
(1) BASIS OF PRESENTATION. The purchase method of accounting has been used
in the preparation of the accompanying unaudited pro forma combined condensed
financial statements. Under this method of accounting, the aggregate purchase
price is allocated to specific assets acquired and liabilities assumed based
on their estimated fair values. Because the Stock Consideration will be based
on the Average Market Price, the final aggregate purchase price will not be
known until the Effective Time. For purposes of the unaudited pro forma
combined condensed financial statements, the preliminary fair values of
Lukens' assets and liabilities were estimated by Bethlehem's management based
primarily on its knowledge of the carbon and alloy plate business, on
information obtained from investment advisors regarding the Stainless business
and on information furnished by Lukens' management. The final allocation of
the purchase price will not be determined until after the consummation of the
Merger and will be based on a final evaluation of the Lukens assets acquired
and liabilities assumed at the Closing Date, adjusted to be consistent with
Bethlehem's accounting policies. All required work to fully evaluate the
assets and liabilities of Lukens acquired by Bethlehem will not be completed
by the Closing Date and purchase accounting adjustments may not be finalized
for up to one year after the Closing Date. Except for the resulting goodwill
that will ultimately be based on the final Lukens' assets acquired and
liabilities assumed by Bethlehem on the closing date, the final aggregate
purchase price and the ultimate proceeds received from the disposition of the
Stainless Group assets not covered by the Sale Agreement with Allegheny
Ludlum, any such final purchase accounting adjustments are not expected to
have a material effect on future results of operations or financial position
when compared to the preliminary purchase accounting adjustments included in
these unaudited pro forma combined condensed financial statements. The final
purchase accounting adjustments are contingent upon the final Lukens assets
acquired and liabilities assumed by Bethlehem at the Closing Date, the Average
Market Price of Bethlehem Common Stock as described above and in Note 2, the
actuarial valuation of Lukens pension and other postretirement benefit
obligations as described in Note 3(b), the adjustments to liabilities for
costs incurred after consummation of the Merger in excess of amounts recorded
as liabilities by Lukens as described in Note 3(c) and the ultimate proceeds
from the disposition of the Stainless Group assets not covered by the Sale
Agreement with Allegheny Ludlum as described in Note 5. The unaudited pro
forma combined condensed financial information is presented for the calendar
year ended December 31, 1997. Lukens has a 52-53 week fiscal year ending on
the last Saturday of December in each calendar year. Lukens' 1997 fiscal year
ended on December 27, 1997.
(2) PURCHASE PRICE INFORMATION. Pursuant to the Merger Agreement, each share
of Lukens Common Stock issued and outstanding at the Effective Time (other
than shares owned by Lukens, which will be canceled, and shares held by
stockholders exercising appraisal rights under Section 262 of the DGCL, if
available) will be converted into the right to receive, at the stockholder's
election but subject to possible proration, either $30 in cash or shares of
Bethlehem Common Stock with an initial value of $30. If the Average Market
Price is greater than $10.42, the total equivalent purchase price per share of
Lukens Common Stock will have an initial value greater than $30. If the
Average Market Price is less than $6.95, such shares will have an initial
value of less than $30. 68% of the Lukens shares will be converted into Cash
Consideration and 32% into Stock Consideration. The number of shares of
Bethlehem Common Stock to be issued for each share of Lukens Common Stock
exchanged for Bethlehem Common Stock will equal $30 divided by the Average
Market Price based on the daily closing prices per share of Bethlehem Common
Stock during the 15 consecutive full NYSE trading days immediately preceding
the third full NYSE trading day prior to the Effective Time, as such prices
are reported on the NYSE Tape, but will not be less than 2.878 nor more than
4.317 shares (such limits on the Conversion Number are referred to herein as
the "Collar"). The Collar benefits Lukens stockholders in the event of
increases in the market value of Bethlehem Common Stock above $10.42 per share
by ensuring that Lukens stockholders will receive a minimum number of shares
of Bethlehem Common Stock and results, if operative, in such stockholders
receiving consideration with a value that is greater than $30 per share. The
Collar would be disadvantageous to Lukens stockholders in the event of
decreases in the market value of Bethlehem Common Stock below $6.95 per share
because it would limit the number of shares of Bethlehem Common Stock issued
and results, if operative, in such stockholders receiving consideration with a
value that is less than $30 per share.
63
<PAGE>
Under the Merger Agreement, Bethlehem will issue no more than 22.6 million
shares, nor less than 15.1 million shares, of Bethlehem Common Stock. Pro
forma earnings and book value per common share for the year ended
and as of December 31, 1997, based on the minimum and maximum shares to be
issued are as follows:
<TABLE>
<CAPTION>
MINIMUM MAXIMUM
------- -------
<S> <C> <C>
Number of shares issued (millions)........................... 15.1 22.6
Pro forma equivalent earnings per share...................... $2.06 $1.94
Pro forma equivalent book value per share.................... $6.66 $6.29
</TABLE>
Based on the minimum Conversion Number of 2.878 and the number of shares of
Lukens Common Stock and equivalents outstanding on December 31, 1997,
Bethlehem would issue 15,059,655 shares of Bethlehem Common Stock and would
pay $333.6 cash to Lukens' stockholders (including holders of restricted
stock) as of the Closing Date. If Bethlehem Common Stock has an Average Market
Price between $6.95 and $10.42 per share, the equivalent price per share of
Lukens Common Stock would be $30 and the value to Lukens' stockholders
(including holders of restricted stock) would be $490.6. For every $1 that the
Average Market Price of a share of Bethlehem Common Stock exceeds $10.42, the
equivalent price per share of Lukens Common Stock would exceed $30 by $.92 and
the value to Lukens' stockholders would exceed $490.6 by $15.1. In addition,
the change in control amount would increase as a result of the increased value
of the Employee Stock Options and the restricted stock. The components of the
aggregate purchase price, assuming that a share of Bethlehem Common Stock has
an Average Market Price of $15.26, which would be the Average Market Price if
the Effective Time had occurred on April 24, 1998, the most recent practicable
date prior to the date of this Proxy Statement/Prospectus, are as follows:
<TABLE>
<S> <C>
Estimated shares of Lukens Common Stock outstanding (assuming
conversion of ESOP Preferred Stock outstanding and excluding
restricted stock shown in change in control below) at December
31, 1997....................................................... 16,218,127
Equivalent price per share...................................... $ 34.45
-----------
Value to Lukens' stockholders--purchase price................... $ 558.7
Estimated change in control amount:
Salaries and bonuses under Severance Agreements............... 10.0
Additional pension service and benefits....................... 5.0
Cash lump sum payment to participants in the SERP............. 7.0
Reimbursement for excise taxes................................ 12.0
Employee Stock Options........................................ 17.0
Restricted stock.............................................. 5.0
-----------
Total........................................................... 56.0
-----------
Estimated investment advisors, accounting, legal and other
professional fees.............................................. 15.0
-----------
Aggregate purchase price........................................ $ 629.7
===========
</TABLE>
ADJUSTMENTS TO THE UNAUDITED COMBINED CONDENSED BALANCE SHEET AND INCOME
STATEMENT
(3) To record the aggregate purchase price of the Merger as described in
Notes (1) and (2) above and to eliminate certain historical Lukens balances as
follows:
<TABLE>
<S> <C>
Issuance of new Bethlehem equity (see Note 2) of 15,059,655 common
shares assuming an Average Market Price of $15.26 per share
allocated as follows:
Common stock, par value $1.00 per share (15,059,655 shares)..... $ 15.1
Capital in excess of par value.................................. 214.7
Cash paid to Lukens' stockholders (a)............................. 328.9
Estimated change in control liability............................. 56.0
Estimated investment advisors, legal, accounting and other profes-
sional fees...................................................... 15.0
------
Aggregate purchase price (see Note 2)............................. 629.7
------
Less: Stockholders' equity of Lukens, including ESOP Preferred
Stock:
ESOP Preferred Stock............................................ (28.2)
Common Stock.................................................... (0.2)
Common Stock held in treasury................................... 10.3
Additional paid-in capital...................................... (86.7)
Retained earnings............................................... (150.1)
</TABLE>
64
<PAGE>
<TABLE>
<S> <C>
Deferred compensation--restricted stock.......................... 2.6
Adjustment of inventory to replacement value....................... (30.0)
Adjustment of certain plant and equipment to replacement value..... (75.0)
Adjustments to deferred income tax asset:
Elimination of Lukens' asset--current............................ 13.7
Elimination of Lukens' asset--long-term.......................... 34.6
Net deferred tax asset recognized based on taxable temporary dif-
ferences acquired (after making purchase accounting adjustments)
at Bethlehem's estimated effective tax rate..................... (22.7)
Elimination of Lukens intangible asset--goodwill................... 32.2
Adjustments of employee benefit obligations to eliminate existing
unrecognized net gain or loss, prior service cost from plan amend-
ments
and the initial transition obligation, and intangible asset--pen-
sions (b):
Intangible asset--pensions....................................... 22.8
Pension liability................................................ 8.0
Postretirement benefits other than pensions...................... (1.0)
Adjustment of long-term liabilities to fair value (c).............. 25.0
------
Total Lukens stockholders' equity and adjustments to acquired as-
sets and liabilities............................................ (244.7)
------
Recognition of intangible asset--goodwill.......................... $385.0
======
</TABLE>
- --------
(a) Bethlehem has announced its intention to finance a portion of the Cash
Consideration to be paid to Lukens stockholders in connection with the
Merger through the sale of Lukens' Stainless Group. Bethlehem has signed the
Sale Agreement to sell certain Stainless Group assets to Allegheny Ludlum
for $175. In the event that closing of the Allegheny Ludlum transaction does
not take place simultaneously with the Closing of the Merger with Lukens,
Bethlehem has arranged a short-term line of credit for $200. Bethlehem's
source of the Cash Consideration to be paid Lukens stockholders is assumed
to be this $200 line of credit and Bethlehem's available cash on hand.
Bethlehem's cash on hand expected to be available at Closing and Bethlehem's
receivable purchase and sale arrangement with a group of 13 banks that is
available through September 12, 2002 provide reasonable assurance that
Bethlehem will have sufficient cash to meet its requirements at Closing.
(b) Bethlehem will not obtain actuarial valuations of Lukens' pension and
other postretirement benefit obligations until after the Merger is
consummated. Actuarial valuations may differ from those currently used by
Lukens to measure its pension and other postretirement benefit obligations,
including differences resulting from conforming actuarial policies and
assumptions. Accordingly, the differences resulting from the final actuarial
valuation of Lukens' pension and postretirement benefit obligation
valuations will be reflected in the allocation of the purchase price as of
the Closing Date. Any such final adjustments to the pension and other
postretirement benefit obligations are not expected to have a material
effect on Bethlehem's financial position or future results of operations.
(c) Represents Bethlehem's preliminary estimate of appropriate purchase
accounting adjustments for costs to be incurred after consummation of the
Merger in excess of amounts recorded as liabilities by Lukens covering, for
example, severance and other employee benefits related to planned reduction
of selling, general and administration employees, conforming employee
benefit policies, separation and disposal of stainless and non-operating
facilities, fair valuing financial obligations and potential future
environmental, investigative and other clean up costs for existing
contamination prior to consummation of the Merger. Bethlehem has engaged or
plans to engage consultants to assist in assessing these matters. Based on
the work to be performed by these consultants, Bethlehem expects to
finalize, in all material respects, the amounts required to be reflected as
purchase accounting adjustments by December 31, 1998, or within one year of
consummation of the Merger. Any such final adjustments are not expected to
have a material effect on Bethlehem's financial position or future results
of operations.
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(4) Recognition of impairment loss on equipment and curtailment loss for
employee benefits of $35 ($30 after tax) in connection with the closure of
Bethlehem's 160p plate mill at the Sparrows Point Division to be implemented
and recognized upon consummation of the Merger in the second quarter of 1998,
reducing Bethlehem employees by approximately 425. If the Merger is not
consummated, Bethlehem will continue to operate the plate mill at the Sparrows
Point facility.
(5) Recognition of the planned sale of the entire Lukens' Stainless Group.
Bethlehem has announced its intention to sell Lukens' Stainless Group,
including those assets to be sold to Allegheny Ludlum pursuant to the Sale
Agreement. Bethlehem plans to sell the remaining Stainless Group plant and
equipment and liquidate working capital within one year of the date of the
Merger. The ultimate proceeds from disposition of the Stainless Group assets
not covered by the Sale Agreement with Allegheny Ludlum may cause an
adjustment to goodwill in the future. Any such adjustment to goodwill is not
expected to have a material effect on Bethlehem's financial position or future
results of operations. See Lukens' Annual Report on Form 10-K for the fiscal
year ended December 27, 1997, which is incorporated herein by reference, for
further information on Lukens' Stainless Group. Bethlehem plans to account for
the Stainless Group segment as discontinued operations, in accordance with APB
Opinion No. 30 and EITF 87-11, from the consummation of the Merger to dates of
disposal. The disposal of the Stainless Group will not affect Bethlehem future
operating results except for any required adjustment to Goodwill and related
amortization.
(6) Elimination of the results of operations of the following businesses
that Bethlehem exited during 1997 or during the first quarter of 1998: Iron
Ore Company of Canada, Bethlehem Structural, Bethlehem Coke, BethForge,
CENTEC, BethShip and HPM. See Note C. Estimated Gain (Loss) on Exiting
Businesses and Impairment of Long-lived Assets to the consolidated financial
statements in Bethlehem's Annual Report on Form 10-K for the fiscal year ended
December 31, 1997, which is incorporated herein by reference.
(7) Recognition of lower pension expense to reflect the elimination of
Lukens' amortization of prior service cost resulting from the appropriate
purchase accounting adjustments to the pension liability.
(8) Amortization of goodwill on a straight-line basis over 25 years and
depreciation of the purchase accounting adjustment to property, plant and
equipment on a straight-line basis over 18 years.
(9) Income tax expense on the results of operations of Lukens and the pro
forma adjustments, excluding non-deductible goodwill amortization, at
Bethlehem's estimated effective rate for income statement purposes.
(10) Pro forma earnings per share calculated reflects the elimination of
dividends on Lukens Preferred Stock and assumes 13,973,944 shares (an
estimated 15,065,299 shares of Bethlehem Common Stock issued in connection
with the Merger less 1,091,355 unearned ESOP shares) were outstanding from
January 1, 1997.
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COMPARISON OF RIGHTS OF COMMON STOCKHOLDERS OF
BETHLEHEM AND LUKENS
The rights of Bethlehem stockholders are governed by the Bethlehem Restated
Certificate of Incorporation (the "Bethlehem Certificate of Incorporation"),
its By-laws (the "Bethlehem By-laws") and the DGCL. The rights of Lukens
stockholders are governed by the Lukens Restated Certificate of Incorporation
(the "Lukens Certificate of Incorporation"), the Lukens Amended and Restated
By-laws (the "Lukens By-laws") and the DGCL. After the Effective Time, the
rights of Lukens stockholders who become Bethlehem stockholders will be
governed by the Bethlehem Certificate of Incorporation, the Bethlehem By-laws
and the DGCL.
The following is a summary of the material differences between the rights of
Bethlehem stockholders and the rights of Lukens stockholders. This summary
addresses all material provisions of the DGCL and the Certificate of
Incorporation and By-laws of each of Bethlehem and Lukens that relate to such
material differences but is not intended to be complete and is qualified in
its entirety by reference to applicable provisions of the DGCL and to the
Certificate of Incorporation and By-laws of each of Bethlehem and Lukens.
AUTHORIZED CAPITAL STOCK
Bethlehem. The total number of shares of all classes of stock that Bethlehem
has the authority to issue is 290,000,000, of which: (i) 20,000,000 are
preferred stock, par value $1.00, (ii) 20,000,000 are preference stock, par
value $1.00, and (iii) 250,000,000 are to be common stock, par value $1.00.
Lukens. The total number of shares of all classes of stock that Lukens has
the authority to issue is 41,000,000, of which: (i) 1,000,000 are preferred
stock, par value $.01, and (ii) 40,000,000 are common stock, par value $.01.
SIZE OF BETHLEHEM AND LUKENS BOARDS; STAGGERED BOARDS
Bethlehem. The Bethlehem Certificate of Incorporation provides that the
number of directors shall be fixed by, or in the manner provided in, the
Bethlehem By-laws but the number of directors may not be less than three. The
Certificate of Incorporation also provides that the number will be increased
for periods during which there is a default in preference dividends, with the
additional directors to be elected by the holders of Bethlehem preferred
stock. The Bethlehem By-laws provide that the number of directors may be
determined by the vote of the majority of the Board. Until the Board otherwise
determines, the number of directors is 15. Bethlehem currently has 13
directors. Stockholders of Bethlehem elect directors in April of each year to
serve for terms of one year and until their successors have been elected and
qualified.
Lukens. The Lukens Certificate of Incorporation provides that the Lukens
Board shall consist of not less than nine or more than 13 directors, with the
exact number of directors to be determined from time to time by resolution
adopted by a majority of the Lukens Board. The Lukens Board is divided into
three classes, designated Class I, Class II and Class III. Each class must
consist, as nearly as may be possible, of one-third of the total number of
directors constituting the entire Lukens Board. The Lukens Board currently
consists of ten members: three directors with terms expiring in 1998, three
directors with terms expiring in 1999 and four directors with terms expiring
in 2000. Lukens directors are elected to serve three-year terms. If the number
of directors is changed, the increase or decrease is apportioned among the
classes so as to maintain the number of directors in each class as nearly
equal as possible, and any additional director of any class elected to fill a
vacancy resulting from an increase in such class holds office for a term
coinciding with the remaining term of that class. In no case will a decrease
in the number of directors shorten the term of any incumbent director.
ELECTION OF DIRECTORS
Bethlehem. The Bethlehem By-laws provide that the directors will be the
persons receiving the greatest number of votes, up to the number of directors
to be elected, at a meeting of the stockholders entitled to vote for
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the election of directors at which a quorum is present. Neither the Bethlehem
Certificate of Incorporation nor the Bethlehem By-laws provide for cumulative
voting.
Lukens. The Lukens Certificate of Incorporation provides that the Lukens
Common Stock will be entitled to one vote per share which may be voted
cumulatively in the election of directors in accordance with Section 214 of
the DGCL. Under Section 214 of the DGCL, each holder of Lukens Common Stock is
entitled to a number of votes equal to the number of shares of Lukens Common
Stock held by such holder multiplied by the number of directors to be elected.
A holder may cast all such votes for a single candidate or may distribute them
among any number of candidates.
REMOVAL OF DIRECTORS
Bethlehem. The Bethlehem By-laws provide that any director may be removed,
with or without cause, by the affirmative vote of the stockholders of record
holding a majority of the shares entitled to vote at an election of directors.
"Cause" is defined in the Bethlehem By-laws as the willful and continuous
failure substantially to perform one's duties to Bethlehem or the willful
engaging in gross misconduct materially and demonstrably injurious to
Bethlehem.
Lukens. The Lukens Certificate of Incorporation provides that subject to the
rights, if any, of the holders of shares of Lukens preferred stock then
outstanding, any or all of the Lukens directors may be removed from office at
any time, but only for cause and only by the affirmative vote of the holders
of a majority of the outstanding securities of Lukens then entitled to vote
generally in the election of directors, considered for purposes of removal of
directors as one class.
SPECIAL MEETING OF STOCKHOLDERS; ACTION BY WRITTEN CONSENT
Bethlehem. The Bethlehem Certificate of Incorporation provides that special
meetings of the stockholders for any purpose or purposes may be called only by
(i) the Chairman, (ii) the President, (iii) the Secretary or (iv) the majority
of the whole Board. Only such business as is specified in the notice of any
special meeting of the stockholders shall come before such meeting. Any action
that may be taken at an annual or special meeting may be taken without a
meeting by written consent of the holders of the minimum number of votes that
would be necessary to take such action at a meeting at which all shares
entitled to vote were present and voted.
Lukens. The Lukens Certificate of Incorporation provides that special
meetings of Lukens Stockholders, for any purpose or purposes, may be called
only by: (i) the Lukens Board, (ii) the Chairman of the Lukens Board, (iii)
the President or (iv) at any time prior to an Acquisition Transaction (as
defined in the Lukens Certificate of Incorporation), by the stockholders
entitled to cast at least 1/5 of the votes that all stockholders are entitled
to cast at such meeting. The Lukens Certificate of Incorporation has
eliminated the ability of stockholders to act by written consent.
STOCKHOLDER LISTS; INSPECTION RIGHTS
Bethlehem. The Bethlehem By-laws require the preparation, at least ten days
before every meeting of the stockholders, of a complete alphabetical list of
the stockholders entitled to vote at the meeting. The list must show the
address of, and the number of shares registered in the name of, each
stockholder. The list must be open to inspection by any stockholder, for any
purpose germane to the meeting, during ordinary business hours for a period of
at least ten days prior to the meeting.
Lukens. The provisions of the Lukens By-laws regarding stockholder lists and
rights of inspection are the same as those of the Bethlehem By-laws in all
material respects.
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AMENDMENT OF CERTIFICATE OF INCORPORATION
Bethlehem. The Bethlehem Certificate of Incorporation provides that its
provisions may be amended or repealed in the manner prescribed by law. The
DGCL provides that a corporation may amend its certificate of incorporation in
the following manner: (i) the board of directors adopts a resolution setting
forth the amendment proposed, declaring its advisability, and either calling a
special meeting of the stockholders for the consideration of such amendment or
directing that the amendment proposed be considered at the next annual meeting
of the stockholders, (ii) the special or annual meeting is called and held
upon notice setting forth the amendment or a brief summary of the changes to
be effected and (iii) at the meeting a vote of the stockholders entitled to
vote on the amendment is taken. If a majority of the outstanding stock
entitled to vote on the amendment, and a majority of the outstanding stock of
each class entitled to vote on the amendment as a class, is voted in favor of
the amendment, a certificate of amendment is executed, acknowledged and filed
and the amendment becomes effective. Any provision of a certificate of
incorporation that requires for action the vote of a greater number or
proportion of voting power than would otherwise be required by the DGCL may
not be altered, amended or repealed except by such greater vote.
Lukens. The Lukens Certificate of Incorporation also provides that its
provisions may be amended or repealed in the manner prescribed by law, except
that any proposal to amend, repeal or adopt any provision of the Lukens
Certificate of Incorporation inconsistent with the Lukens Fair Price Provision
(as defined below) which is proposed by or on behalf of an Interested
Stockholder (as defined below) or an affiliate or associate of an Interested
Stockholder will require the affirmative vote of the holders of not less than
66 2/3% of the votes entitled to be cast by the holders of all the then
outstanding shares of voting stock of Lukens, voting together as a single
class, excluding such voting stock beneficially owned by such Interested
Stockholder. Such 66 2/3% vote will not be required for any amendment, repeal
or adoption unanimously recommended by the Lukens Board if all of its
directors are persons who would be eligible to serve as Continuing Directors
(as defined below).
AMENDMENT OF BY-LAWS
Bethlehem. The Bethlehem Certificate of Incorporation provides that the
Bethlehem Board may adopt, amend or repeal the by-laws of Bethlehem. Under the
DGCL, the stockholders have the power to adopt, amend or repeal a
corporation's by-laws. In its certificate of incorporation, a corporation may
confer the power to adopt, amend or repeal its by-laws upon the directors.
Conferring such power on the directors does not, however, divest the
stockholders of the power to adopt, amend or repeal the by-laws.
Lukens. The Lukens Certificate of Incorporation authorizes the Lukens Board
to make, repeal, alter, amend and rescind the Lukens By-laws. The Lukens By-
laws provide that they may be altered, amended or repealed in whole or in part
by the vote of a majority of the whole Lukens Board at any meeting duly
convened after proper notice is given to directors of the proposed amendment.
The Lukens Certificate of Incorporation provides that the Lukens By-laws shall
not be made, repealed, altered, amended or rescinded by the stockholders of
Lukens except by the affirmative vote of the holders of not less than 80% of
the total voting power of all outstanding securities of Lukens then entitled
to vote generally in the election of directors.
REQUIRED VOTE FOR AUTHORIZATION OF CERTAIN ACTIONS
Bethlehem. The Bethlehem By-laws provide that, except as otherwise provided
in the Bethlehem Certificate of Incorporation, each stockholder entitled to
vote is entitled to one vote per share of stock of Bethlehem held of record on
the record date for such vote. Unless otherwise specified, all matters are
decided by the vote of a majority in voting interest of the stockholders
present in person or by proxy and entitled to vote, provided a quorum is
present. A quorum consists of a majority of the shares of stock of Bethlehem
entitled to vote on a matter.
Lukens. A majority of the shares entitled to vote constitutes a quorum.
Unless otherwise specified, all issues are decided by the vote of a majority
of the stock represented and entitled to vote at a meeting.
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BUSINESS COMBINATIONS
In general, Section 203 of the DGCL prohibits an interested stockholder
(generally, a 15% or greater stockholder) of a Delaware corporation from
engaging in a "business combination" (as defined in the DGCL) with such
corporation for three years following the time such person became an
interested stockholder. The provision is not applicable when (i) prior to the
time the stockholder became an interested stockholder, the board of directors
of the corporation approved either the business combination or the transaction
that resulted in the stockholder becoming an interested stockholder, (ii) upon
consummation of the transaction that resulted in the stockholder becoming an
interested stockholder, such interested stockholder owned at least 85% of the
outstanding voting stock of the corporation, not including shares owned by
directors who are also officers and by certain employee stock plans or (iii)
at or subsequent to the time that the stockholder becomes an interested
stockholder, the business combination is approved by the board of directors of
the corporation and authorized at a meeting of stockholders, and not by
written consent, by the affirmative vote of the holders of at least two-thirds
of the outstanding voting stock entitled to vote thereon, excluding shares
owned by the interested stockholder.
The restrictions of Section 203 generally do not apply to business
combinations with an interested stockholder that are proposed subsequent to
the public announcement of, and prior to the consummation or abandonment of,
certain mergers, sales of a majority of a corporation's assets or tender
offers for 50% or more of a corporation's voting stock. The DGCL allows
corporations to elect not to be subject to Section 203 of the DGCL.
Section 203 would not preclude the holders of a controlling interest from
exercising control over Bethlehem or Lukens and would not prevent a hostile
takeover or hostile acquisition of control of Bethlehem or Lukens. Section 203
may, however, discourage or make more difficult a hostile takeover or
acquisition of control.
Bethlehem. The Bethlehem Certificate of Incorporation does not contain an
election not to be subject to Section 203 of the DGCL.
Lukens. The Lukens Certificate of Incorporation does not contain an election
not to be subject to Section 203 of the DGCL.
FAIR PRICE PROVISIONS
Bethlehem. The Bethlehem Certificate of Incorporation does not contain a
fair price provision.
Lukens. The Lukens Certificate of Incorporation requires, in addition to any
other affirmative vote otherwise required, the affirmative vote of not less
than 66 2/3% of the votes entitled to be cast by the holders of all the then
outstanding shares of voting stock, voting together as a single class,
excluding the stock of an Interested Stockholder (as defined below), for the
approval of a Business Combination (defined generally to include, among other
transactions, a merger, certain sales or exchanges of assets and certain
recapitalizations) with or proposed by an Interested Stockholder or an
affiliate or associate of such, unless certain criteria set forth in the
Lukens Certificate of Incorporation are met, including the requirements that
either (i) such Business Combination is approved by a majority of Continuing
Directors (defined generally to include any director (a) who was a member of
the initial Lukens Board, (b) who is not an Interested Stockholder or an
affiliate, associate or representative of the Interested Stockholder and who
was a member of the Lukens Board prior to the Interested Stockholder becoming
an Interested Stockholder, or (c) who subsequently becomes a member of the
Lukens Board if such director is not an Interested Stockholder or an
affiliate, associate or representative of the Interested Stockholder and such
person's nomination for election or election to the Lukens Board was
recommended or approved by a majority of the Continuing Directors) or (ii) (a)
the aggregate amount of cash and the fair market value of consideration other
than cash to be received by the holders of Lukens Common Stock and holders of
any class or series of outstanding Lukens capital stock, other than Lukens
Common Stock, are each at least equal to a certain minimum amount, (b) the
consideration received by Lukens stockholders meets certain criteria as to the
form thereof, (c) there shall not have occurred certain adverse events in
respect of dividends on Lukens
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capital stock, (d) a proxy or information statement describing the Business
Combination is mailed to all Lukens stockholders and (e) such Interested
Stockholder shall not have made any major change in Lukens' business or equity
capital structure without the approval of a majority of Continuing Directors
(the "Lukens Fair Price Provision"). The Lukens Certificate of Incorporation
defines an "Interested Stockholder" as any person (other than Lukens or one of
its subsidiaries and other than any profit-sharing, employee stock ownership
or other employee benefit plan of Lukens or one of its subsidiaries or any
trustee of or fiduciary with respect to any such plan when acting in such
capacity) who (a) is or has announced or publicly disclosed a plan or
intention to become the beneficial owner of stock representing 10% or more of
the votes entitled to be cast by the holders of all then outstanding shares of
stock entitled to vote generally at stockholders' meetings or (b) is an
affiliate or associate of Lukens and at any time within the two year period
immediately prior to the date in question was the beneficial owner of stock
representing 10% or more of the votes entitled to be cast by the holders of
all then outstanding shares of stock which are then entitled to vote generally
at stockholders' meetings.
RIGHTS PLANS
Bethlehem. On September 28, 1988, the Bethlehem Board declared a dividend
distribution of one right (a "Bethlehem Right") for each outstanding share of
Bethlehem Common Stock. Each Bethlehem Right entitles the registered holder to
purchase from Bethlehem a unit consisting of one one-hundredth of a share (a
"Bethlehem Unit") of Series A Junior Participating Preference Stock, par value
$1.00 per share, at a purchase price of $80.00 per Bethlehem Unit, subject to
adjustment. The description and terms of the Bethlehem Rights are set forth in
a Rights Agreement dated as of September 28, 1988 as amended by Amendment No.
1 to the Rights Agreement dated as of November 1, 1995 (the "Bethlehem Rights
Agreement").
Initially, the Bethlehem Rights will be attached to all Bethlehem Common
Stock certificates and no separate Bethlehem Rights certificates will be
issued. The Bethlehem Rights will separate from the Bethlehem Common Stock and
a distribution date will occur upon the earlier of (i) ten days following a
public announcement that a person or group of affiliated or associated persons
has acquired, or obtained the right to acquire, beneficial ownership of 15% or
more of the outstanding shares of Bethlehem Common Stock and otherwise becomes
a Bethlehem Acquiring Person, as defined below (the "Bethlehem Stock
Acquisition Date"), or (ii) ten business days (or such later date as may be
determined by the Bethlehem Board) following the commencement of a tender
offer or exchange offer (or such later date as may be determined by the
Bethlehem Board) that would result in a person or group beneficially owning
20% or more of such outstanding shares of the Bethlehem Common Stock.
In the event that (i) a Person (as defined in the Bethlehem Rights
Agreement) becomes a Bethlehem Acquiring Person (except pursuant to an offer
for all outstanding shares of Bethlehem Common Stock which at least a majority
of the directors of the Bethlehem Board who are not officers of Bethlehem and
who are not representatives, nominees, Affiliates or Associates (as defined in
the Bethlehem Rights Agreement) of Bethlehem or a Bethlehem Acquiring Person
determines to be fair to, and otherwise in the best interests of, Bethlehem
and its stockholders), (ii) Bethlehem is the surviving corporation in a merger
with a Bethlehem Acquiring Person and its common stock is not changed or
exchanged, (iii) a Bethlehem Acquiring Person engages in one or more "self-
dealing" transactions as set forth in the Bethlehem Rights Agreement, or (iv)
during such time as there is a Bethlehem Acquiring Person, an event occurs
which results in such Bethlehem Acquiring Person's ownership interest being
increased by more than 1% (e.g., a reverse stock split), each holder of a
Bethlehem Right will thereafter have the right to receive, upon exercise,
Bethlehem Common Stock (or, in certain circumstances, cash, property, or other
securities of Bethlehem) having a value equal to two times the exercise price
of the Bethlehem Right. Notwithstanding any of the foregoing, following the
occurrence of any of the events set forth in this paragraph, all Bethlehem
Rights that are, or (under certain circumstances specified in the Bethlehem
Rights Agreement) were, beneficially owned by a Bethlehem Acquiring Person or
Associates or Affiliates of a Bethlehem Acquiring Person will be null and
void.
"Bethlehem Acquiring Person" means any person who, together with all
affiliates and associates of such person, is the beneficial owner of 15% or
more of the shares of Bethlehem Common Stock then outstanding (subject to
certain exceptions).
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In the event that, at any time following the Bethlehem Stock Acquisition
Date, (i) Bethlehem is acquired in a merger or other business combination
transaction in which Bethlehem is not the surviving corporation (other than a
merger described in the second preceding paragraph or a merger which follows
an offer described in the second preceding paragraph), or (ii) 50% or more of
Bethlehem's assets or earning power is sold or transferred, each holder of a
Bethlehem Right (except Bethlehem Rights which previously have been voided as
set forth above) will thereafter have the right to receive, upon exercise,
common stock of the acquiring company having a value equal to two times the
exercise price of the Bethlehem Right. The events set forth in this paragraph
and in the second preceding paragraph are referred to as the "Triggering
Events."
The Bethlehem Rights have certain anti-takeover effects. They will cause
substantial dilution to a person or group that attempts to acquire Bethlehem
in a manner that causes a Triggering Event unless the offer is conditioned on
the acquisition of a substantial number of the Bethlehem Rights. The Bethlehem
Rights, however, should not affect any prospective offeror willing to make an
offer at a fair price and otherwise in the best interests of Bethlehem and its
stockholders as determined by a majority of the independent directors, or
willing to negotiate with the Bethlehem Board. The Bethlehem Rights should not
interfere with any merger or other business combination approved by the
Bethlehem Board because the Bethlehem Board may, at any time until ten days
following the Bethlehem Stock Acquisition Date, redeem all the then
outstanding Rights at a price of $.01 per Right. The Bethlehem Rights are not
exercisable following the occurrence of a Triggering Event until such time as
they are no longer redeemable by Bethlehem.
Lukens. On September 25, 1996, the Lukens Board declared a dividend
distribution of one right (a "Lukens Right") for each outstanding share of
Lukens Common Stock. Each Lukens Right entitles the registered holder to
purchase from Lukens a unit consisting of one one-hundredth of a share (a
"Lukens Unit") of Series A Junior Participating Preferred Stock, par value
$.01 per share, of Lukens at a purchase price of $80 per Lukens Unit, subject
to adjustment. The description and terms of the Lukens Rights are set forth in
the Renewed Rights Agreement dated as of September 25, 1996 (the "Lukens
Rights Agreement") between Lukens and American Stock Transfer and Trust
Company, as Rights Agent. The Lukens Rights Agreement became effective, by its
terms, on August 10, 1997. The Lukens Rights, by their terms, expire on
September 25, 2006, unless the Lukens Board extends the final expiration date
under the Lukens Rights Agreement or redeems them earlier.
Prior to the occurrence of a distribution date (as defined below), the
Lukens Rights will be attached to all shares of Lukens Common Stock and no
separate Lukens Rights certificates will be distributed. The Lukens Rights
will separate from the Lukens Common Stock and a distribution date will be
deemed to have occurred upon the earlier to occur of: (i) the tenth business
day (unless postponed by the Lukens Board) after the date on which there is a
public announcement that a person (a "Lukens Acquiring Person") has acquired
beneficial ownership of 15% or more of the then outstanding shares of Lukens
Common Stock (such first date of public announcement being referred to as the
"Lukens Stock Acquisition Date"); (ii) the tenth business day (unless
postponed by the Lukens Board) after the date on which a person commences a
tender offer or exchange offer for the outstanding shares of Lukens Common
Stock if, upon consummation thereof, the offeror would be the beneficial owner
of 15% or more of the then outstanding shares of Lukens Common Stock; or (iii)
immediately following a determination by the Lukens Board that any person is
an Adverse Person (as defined below). An "Adverse Person" is any person found
to be such by the Lukens Board (with the concurrence of a majority of the
outside directors). A person may be found to be an Adverse Person upon a
determination by the Lukens Board that such person has become the beneficial
owner of 10% or more of Lukens Common Stock and that (i) such beneficial
ownership is intended to cause Lukens to repurchase the Lukens Common Stock
beneficially owned by such person or to pressure Lukens to take actions or
enter into one or more transactions intended to provide such person with
short-term financial gains that are not in the best long-term interests of
Lukens and its stockholders or (ii) such beneficial ownership is causing or is
reasonably likely to cause a material adverse impact on the business or
prospects of Lukens.
The Lukens Rights do not become exercisable, however, until the occurrence
of a Flip-In Event or a Flip-Over Event (each as defined below). In the event
that (i) any Lukens Acquiring Person or any Associate or
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Affiliate (as defined in the Lukens Rights Agreement) of such person shall
merge or otherwise combine with Lukens and (A) Lukens shall be the surviving
corporation in such transaction and (B) the Lukens Common Stock shall remain
unchanged, (ii) any person (other than an Exempt Person (as defined in the
Lukens Rights Agreement)) shall become the beneficial owner of 15% or more of
the Lukens Common Stock (subject to certain exceptions and excluding a tender
offer or exchange offer for all outstanding shares of Lukens Common Stock at a
price determined by a majority of Lukens' Outside Directors (as defined in the
Lukens Rights Agreement) to be fair to and in the best interests of Lukens'
stockholders), or (iii) the Lukens Board shall declare any person to be an
Adverse Person, a flip-in event (a "Flip-In Event") will be deemed to have
occurred. Following the occurrence of a Flip-In Event, each Lukens Right
(other than Lukens Rights held by the party triggering the Lukens Rights and
certain related persons and transferees, which are voided) will entitle the
holder to acquire, upon payment of the purchase price, Lukens Common Stock
having a value equal to twice the purchase price of the Lukens Right.
In the event that, following the Lukens Stock Acquisition Date, directly or
indirectly, (i) Lukens engages in a merger or consolidation in which Lukens is
not the surviving corporation, (ii) another entity merges or consolidates with
Lukens and in connection therewith the Lukens Common Stock is exchanged for or
changed into the stock of another entity or (iii) Lukens (or one or more of
its subsidiaries), in one or more related transactions, sells assets, cash
flow or earning power aggregating more than 50% of the assets, cash flow or
earning power of Lukens and its subsidiaries taken as a whole, a flip-over
event (a "Flip-Over Event") will be deemed to have occurred. Following the
occurrence of a Flip-Over Event, each Lukens Right (other than Lukens Rights
held by the party triggering the Lukens Rights and certain related persons and
transferees, which are voided) becomes exercisable, upon payment of the
purchase price, for common stock of the other party to the transaction having
a value equal to twice the purchase price.
Lukens Rights held by a party that causes the Lukens Rights to be triggered
(i.e., a Lukens Acquiring Person or an Adverse Person) and certain related
persons and transferees are voided after the Lukens Rights are triggered and
become exercisable for Lukens Common Stock at a discount (i.e., a Flip-In
Event has occurred) or become exercisable for common stock of the acquiror at
a discount (i.e., a Flip-Over Event has occurred).
Lukens Rights are generally redeemable at $.01 per Lukens Right by action of
the Lukens Board at any time prior to the tenth business date following the
Lukens Stock Acquisition Date, unless there has been an earlier event
involving an Adverse Person. In general, the Lukens Rights Agreement may be
amended by the Lukens Board (i) prior to the distribution date in any manner
and (ii) on or after the distribution date in certain respects, including (A)
to shorten or lengthen any time period and (B) in a manner not adverse to the
interests of Lukens Rights holders (other than an Acquiring Person or an
Adverse Person). However, certain basic economic terms may not be amended
(i.e., redemption price and number of shares issuable on exercise of Lukens
Rights) and amendments extending the redemption period must be made while the
Lukens Rights are still redeemable.
The Lukens Rights Plan is designed, among other things, to deter certain
coercive or abusive takeover tactics (such as the acquisition of a significant
position by one or more stockholders without offering fair value to all
stockholders), encourage third parties interested in acquiring Lukens to
negotiate with the Lukens Board and otherwise assist the Lukens Board in
representing the interests of all Lukens stockholders. The Lukens Rights Plan
accomplishes these objectives by encouraging a potential acquiror to seek to
have the Lukens Board redeem the Lukens Rights prior to the Lukens Rights
becoming exercisable at a discounted price which, effectively, would dilute
the acquiror's equity interest in Lukens.
Pursuant to the Merger Agreement, the Lukens Rights Agreement was amended as
of December 15, 1997 to, among other things, ensure that a Lukens Stock
Acquisition Date, distribution date or triggering event does not occur solely
by reason of the execution of the Merger Agreement or the consummation of the
Merger or the other transactions contemplated by the Merger Agreement.
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OTHER MATTERS
REGULATORY APPROVALS REQUIRED
Under the HSR Act and the rules promulgated thereunder by the FTC, certain
acquisition transactions may not be consummated unless notice has been given
and certain information has been furnished to the Antitrust Division and the
FTC and specified waiting period requirements have been satisfied. Bethlehem
and Lukens each filed with the Antitrust Division and the FTC a Notification
and Report Form with respect to the Merger on January 6, 1998. Effective at
11:59 p.m., EST, on February 5, 1998, the waiting period under the HSR Act
with respect to the Merger expired. At any time before or after the Effective
Time, the FTC or the Antitrust Division could take such action under the
antitrust laws as it deems necessary or desirable in the public interest,
including seeking to enjoin the Merger or seeking the divestiture of Lukens by
Bethlehem, in whole or in part, or the divestiture of substantial assets of
Bethlehem, Lukens or their respective subsidiaries. State Attorneys General
and private parties may also bring legal action under Federal or state
antitrust laws in certain circumstances.
Bethlehem and Lukens do not believe that any other material governmental
approvals or actions will be required for consummation of the Merger. See
"OTHER TERMS OF THE MERGER AGREEMENT--Conditions to the Consummation of the
Merger."
LEGAL MATTERS
The validity of the shares of Bethlehem Common Stock to be issued in
connection with the Merger will be passed upon for Bethlehem by William H.
Graham, Esq., Vice President (Law), General Counsel and Secretary of
Bethlehem. Mr. Graham is paid a salary by Bethlehem, is a participant in
various employee benefit plans offered to employees of Bethlehem generally and
owns and has options to purchase shares of Bethlehem Common Stock.
EXPERTS
The financial statements and related financial statement schedule
incorporated in this Proxy Statement/Prospectus by reference to the Bethlehem
Steel Corporation Annual Report on Form 10-K for the year ended December 31,
1997, have been so incorporated in reliance on the reports of Price Waterhouse
LLP, independent auditors, given on the authority of said firm as experts in
auditing and accounting.
The financial statements and related financial statement schedule
incorporated in this Proxy Statement/Prospectus by reference to the Lukens
Inc. Annual Report on Form 10-K for the year ended December 27, 1997, as
amended, have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their reports with respect thereto, and are
incorporated by reference in this Proxy Statement/Prospectus and in the
Registration Statement in which this Proxy Statement/Prospectus is included in
reliance upon the authority of said firm as experts in accounting and auditing
in giving said reports.
It is expected that representatives of Arthur Andersen LLP, Lukens'
independent auditors, will be present at the Special Meeting where they will
have an opportunity to respond to appropriate questions of stockholders and to
make a statement if they so desire.
STOCKHOLDER PROPOSALS
Any Bethlehem stockholder who wishes to submit a proposal for presentation
to the 1999 Annual Meeting of Stockholders must submit the proposal to the
Secretary, Bethlehem Steel Corporation, 1170 Eighth Avenue, Bethlehem,
Pennsylvania 18016-7699. Proposals must be received by Bethlehem on or before
November 13, 1998 for inclusion, if appropriate, in Bethlehem's proxy
statement and the form of proxy relating to the Bethlehem 1999 Annual Meeting.
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Lukens has postponed its 1998 Annual Meeting of Stockholders pending
consummation of the Merger. In the event that the Merger is consummated,
Lukens will not hold its 1998 Annual Meeting of Stockholders. In the event
that the Merger Agreement is not adopted by the stockholders of Lukens, or the
Merger Agreement is terminated prior to the Effective Time for any reason, the
Lukens Board currently intends to promptly call an annual meeting of
stockholders of Lukens for the purpose, among others, of electing directors
and considering a proposal previously submitted by a stockholder of Lukens.
Other stockholder proposals intended to be presented at such annual meeting
should be submitted to Lukens Inc., 50 South First Avenue, Coatesville,
Pennsylvania 19320-0911, Attention: Secretary, and should be received a
reasonable time before such annual meeting to be considered for qualification
and inclusion in Lukens' proxy statement and proxy card for such annual
meeting.
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ANNEX I
AGREEMENT AND PLAN OF MERGER
DATED AS OF DECEMBER 15, 1997,
BETWEEN
BETHLEHEM STEEL CORPORATION
AND
LUKENS INC.
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TABLE OF CONTENTS
ARTICLE I
THE MERGER
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SECTION 1.01. The Merger................................................ I-4
SECTION 1.02. Closing................................................... I-4
SECTION 1.03. Effective Time............................................ I-4
SECTION 1.04. Effects of the Merger..................................... I-5
SECTION 1.05. Certificate of Incorporation and By-laws.................. I-5
SECTION 1.06. Directors................................................. I-5
SECTION 1.07. Officers.................................................. I-5
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK
OF THE CONSTITUENT CORPORATIONS
SECTION 2.01. Effect on Capital Stock................................... I-5
SECTION 2.02. Cash Elections............................................ I-7
SECTION 2.03. Proration................................................. I-8
SECTION 2.04. Exchange of Certificates.................................. I-9
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.01. Representations and Warranties of the Company............. I-11
SECTION 3.02. Representations and Warranties of Bethlehem............... I-21
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
SECTION 4.01. Conduct of Business....................................... I-25
SECTION 4.02. No Solicitation........................................... I-27
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.01. Preparation of the Form S-4 and the Proxy
Statement/Prospectus; Company Shareholders Meeting....... I-28
SECTION 5.02. Letters of the Company's Accountants...................... I-28
SECTION 5.03. Letters of Bethlehem's Accountants........................ I-29
SECTION 5.04. Access to Information; Confidentiality.................... I-29
SECTION 5.05. Reasonable Efforts........................................ I-29
SECTION 5.06. Employee Matters.......................................... I-30
SECTION 5.07. Employee Stock Options.................................... I-30
SECTION 5.08. Rights Agreement.......................................... I-31
SECTION 5.09. Continuance of Existing Indemnification Rights............ I-31
</TABLE>
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SECTION 5.10. Fees and Expenses......................................... I-32
SECTION 5.11. Public Announcements...................................... I-32
SECTION 5.12. Affiliates................................................ I-33
SECTION 5.13. Stock Exchange Listings................................... I-33
SECTION 5.14. Shareholder Litigation.................................... I-33
SECTION 5.15. Merger Sub................................................ I-33
ARTICLE VI
CONDITIONS PRECEDENT
SECTION 6.01. Conditions to Each Party's Obligation To Effect the
Merger.................................................. I-33
SECTION 6.02. Conditions to Obligations of Bethlehem and Merger Sub..... I-34
SECTION 6.03. Conditions to Obligation of the Company................... I-34
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
SECTION 7.01. Termination............................................... I-35
SECTION 7.02. Effect of Termination..................................... I-35
SECTION 7.03. Amendment................................................. I-36
SECTION 7.04. Extension; Waiver......................................... I-36
SECTION 7.05. Procedure for Termination, Amendment, Extension or Waiver. I-36
ARTICLE VIII
GENERAL PROVISIONS
SECTION 8.01. Nonsurvival of Representations and Warranties............. I-36
SECTION 8.02. Notices................................................... I-36
SECTION 8.03. Definitions............................................... I-37
SECTION 8.04. Interpretation............................................ I-37
SECTION 8.05. Counterparts.............................................. I-38
SECTION 8.06. Entire Agreement; No Third-Party Beneficiaries............ I-38
SECTION 8.07. Governing Law............................................. I-38
SECTION 8.08. Assignment................................................ I-38
SECTION 8.09. Disclosure Schedules...................................... I-38
SECTION 8.10. Severability.............................................. I-38
SECTION 8.11. Enforcement............................................... I-38
EXHIBIT A Affiliate Letter.......................................... I-41
</TABLE>
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AGREEMENT AND PLAN OF MERGER dated as of December 15, 1997, between
BETHLEHEM STEEL CORPORATION, a Delaware corporation ("Bethlehem"), and LUKENS
INC., a Delaware corporation (the "Company").
WHEREAS, the respective Boards of Directors of Bethlehem and the Company
have approved the merger of a subsidiary of Bethlehem with and into the
Company (the "Merger"), upon the terms and subject to the conditions set forth
in this Agreement, whereby each issued and outstanding share of Common Stock,
par value $.01 per share, of the Company ("Company Common Stock"), other than
shares owned by the Company and other than Dissenting Shares (as defined in
Section 2.01(e)), will be converted into the right to receive, at the election
of the holder thereof and subject to the terms hereof, shares of Common Stock,
par value $1.00 per share, of Bethlehem ("Bethlehem Common Stock") or cash,
and each issued and outstanding share of Series B ESOP Convertible Preferred
Stock, par value $.01 per share of the Company ("Company Series B Preferred
Stock"), other than shares owned by the Company and other than Dissenting
Shares, will be converted into the right to receive, subject to certain rights
of redemption, the number of shares of Bethlehem Common Stock and the amount
of cash that a holder of the number of shares of Company Common Stock into
which such share of Company Series B Preferred Stock could have been converted
immediately prior to the Effective Time (as defined in Section 1.03) would
receive in the Merger if such holder failed to exercise the right of election
set forth in Section 2.02 hereof;
WHEREAS, Bethlehem and the Company desire to make certain representations,
warranties, covenants and agreements in connection with the Merger and also to
prescribe various conditions to the Merger; and
WHEREAS, following the Effective Time, Bethlehem intends to cause the
Company to be merged with and into Bethlehem.
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements contained in this Agreement, the parties agree as
follows:
ARTICLE I
THE MERGER
SECTION 1.01. The Merger. Upon the terms and subject to the conditions set
forth in this Agreement, and in accordance with the Delaware General
Corporation Law (the "DGCL"), a subsidiary of Bethlehem ("Merger Sub") shall
be merged with and into the Company at the Effective Time (as defined in
Section 1.03). Following the Effective Time, the separate corporate existence
of Merger Sub shall cease and the Company shall continue as the surviving
corporation (the "Surviving Corporation") and shall succeed to and assume all
the rights and obligations of Merger Sub in accordance with the DGCL.
SECTION 1.02. Closing. The closing of the Merger (the "Closing") will take
place at 10:00 a.m. on a date to be specified by the parties (the "Closing
Date"), which (subject to satisfaction or waiver of the conditions set forth
in Sections 6.01, 6.02 and 6.03) shall be no later than the second business
day after satisfaction or waiver of the conditions set forth in Section 6.01,
at the offices of Cravath, Swaine & Moore unless another time, date or place
is agreed to in writing by the parties hereto.
SECTION 1.03. Effective Time. Subject to the provisions of this Agreement,
as soon as practicable on or after the Closing Date, the parties shall file a
certificate of merger (the "Certificate of Merger") executed in accordance
with the relevant provisions of the DGCL and shall make all other filings or
recordings required under the DGCL. The Merger shall become effective at such
time as the Certificate of Merger is duly filed with the Delaware Secretary of
State, or at such subsequent time as Bethlehem and the Company shall agree and
as is specified in the Certificate of Merger (the time the Merger becomes
effective being hereinafter referred to as the "Effective Time").
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SECTION 1.04. Effects of the Merger. The Merger shall have the effects
specified in Section 259 of the DGCL.
SECTION 1.05. Certificate of Incorporation and By-laws. (a) The Restated
Certificate of Incorporation of the Company, as in effect immediately prior to
the Effective Time, shall be the certificate of incorporation of the Surviving
Corporation until thereafter changed or amended as provided therein or by
applicable law.
(b) The By-laws of the Company as in effect at the Effective Time shall be
the by-laws of the Surviving Corporation until thereafter changed or amended
as provided therein or by applicable law.
SECTION 1.06. Directors. The directors of Merger Sub immediately prior to
the Effective Time shall be the directors of the Surviving Corporation, until
the earlier of their resignation or removal or until their respective
successors are duly elected and qualified, as the case may be. The Company
will obtain such resignations as may be necessary to effect the foregoing.
SECTION 1.07. Officers. The officers of the Company immediately prior to the
Effective Time shall be the officers of the Surviving Corporation, until the
earlier of their resignation or removal or until their respective successors
are duly elected and qualified, as the case may be.
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT CORPORATIONS
SECTION 2.01. Effect on Capital Stock. As of the Effective Time, by virtue
of the Merger and without any action on the part of the holder of any shares
of Company Common Stock or Company Series B Preferred Stock:
(a) Capital Stock of Merger Sub. Each issued and outstanding share of
capital stock of Merger Sub shall be converted into and become one fully
paid and nonassessable share of Common Stock of the Surviving Corporation.
(b) Cancellation of Treasury Stock. Each share of Company Common Stock
and Company Series B Preferred Stock that is owned by the Company shall
automatically be canceled and retired and shall cease to exist, and no
consideration shall be delivered in exchange therefor.
(c) Conversion of Company Common Stock. Except as otherwise provided
herein and subject to Sections 2.03 and 2.04(e), each issued and
outstanding share of Company Common Stock (other than shares to be canceled
in accordance with Section 2.01(b) and other than Dissenting Shares) shall
be converted into the following (the "Common Merger Consideration"):
(i) for each such share of Company Common Stock with respect to which
an election to receive cash ("Cash Consideration") has been effectively
made and not revoked pursuant to Section 2.02 ("Electing Shares"), the
right to receive in cash from Bethlehem an amount equal to $25 (the
"Cash Election Price"); and
(ii) for each such share of Company Common Stock other than Electing
Shares, the right to receive from Bethlehem a number of duly
authorized, validly issued, fully paid and nonassessable shares of
Bethlehem Common Stock ("Stock Consideration") equal to the Conversion
Number. The "Conversion Number" means the quotient, rounded to the
nearest thousandth, or if there shall not be a nearest thousandth, the
next higher thousandth, obtained by dividing the Cash Election Price by
the average of the daily closing prices per share of Bethlehem Common
Stock (the "Average Market Price") as reported on the New York Stock
Exchange ("NYSE") Composite Transactions Tape (as reported in The Wall
Street Journal or, if not reported therein, in another authoritative
source mutually selected by Bethlehem and the Company) for the 15
consecutive full NYSE trading days immediately preceding the third full
NYSE trading day prior to the Effective Time (the "Averaging Period");
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provided that the Conversion Number shall not be greater than 3.62 or
less than 2.797. Notwithstanding the foregoing, (a) if the Board of
Directors of Bethlehem declares a dividend on the outstanding shares of
Bethlehem Common Stock having a record date after the Effective Time
but an ex-dividend date (based on "regular way" trading on the NYSE of
shares of Bethlehem Common Stock (the "Ex-Date")) that occurs during
the Averaging Period, then for purposes of computing the Average Market
Price, the closing price on the Ex-Date and any trading day in the
Averaging Period after the Ex-Date will be adjusted by adding thereto
the amount of such dividend and (b) if the Board of Directors of
Bethlehem declares a dividend on the outstanding shares of Bethlehem
Common Stock having a record date before the Effective Time and an Ex-
Date that occurs during the Averaging Period, then for purposes of
computing the Average Market Price, the closing price on any trading
day before the Ex-Date will be adjusted by subtracting therefrom the
amount of such dividend. For purposes of the immediately preceding
sentence, the amount of any noncash dividend will be the fair market
value thereof on the payment date for such dividend as determined in
good faith by mutual agreement of Bethlehem and the Company.
(d) Conversion of Company Series B Preferred Stock
Each issued and outstanding share of Company Series B Preferred Stock
(other than Dissenting Shares) shall be converted into the right to receive
the number of shares of Bethlehem Common Stock and, in accordance with
Sections 2.03(c) and (d), the amount of cash, that a holder of the number
of shares of Company Common Stock into which such share of Company Series B
Preferred Stock could have been converted immediately prior to the
Effective Time would have the right to receive pursuant to Sections 2.01(c)
and 2.03(c) and (d) if such holder did not make a Cash Election with
respect to such shares. The consideration issuable pursuant to this
paragraph is referred to herein as the "Preferred Merger Consideration",
and together with the Common Merger Consideration, as the "Merger
Consideration".
(e) Shares of Dissenting Shareholders. Notwithstanding anything in this
Agreement to the contrary, any issued and outstanding shares of Company
Series B Preferred Stock and, if a Stock Proration Event (as hereinafter
defined) shall have occurred, any issued and outstanding shares of Company
Common Stock, in either case held by a person (a "Dissenting Shareholder")
who shall not have voted to adopt this Agreement or consented thereto in
writing and who shall have properly demanded appraisal for such shares in
accordance with Section 262 of the DGCL ("Dissenting Shares") shall not be
converted as described in Section 2.01(c) and (d), unless such holder fails
to perfect or withdraws or otherwise loses his right to appraisal. If,
after the Effective Time, such Dissenting Shareholder fails to perfect or
withdraws or loses his right to appraisal, such Dissenting Shareholder's
shares of Company Common Stock or Company Series B Preferred Stock shall no
longer be considered Dissenting Shares for the purposes of this Agreement
and shall thereupon be deemed to have been converted into and to have
become exchangeable for, at the Effective Time, (x) in the case of Company
Common Stock, the right to receive for each such share the amount in cash
(and, if applicable, the number of shares of Bethlehem Common Stock),
without interest, that a holder of a share who had not demanded appraisal
(a "Nondissenting Share") of Company Common Stock and who had made a Cash
Election (as defined below) with respect to such Nondissenting Share
pursuant to Section 2.02 prior to the Election Date (as defined below)
would have received with respect to such Nondissenting Share after giving
effect to Section 2.03 (it being understood that no adjustment shall be
made to the proration computation (if any) made following the Election Date
to give effect to the withdrawal of, or the failure to perfect, the demand
for appraisal with respect to such Dissenting Shares) and (y) in the case
of Company Series B Preferred Stock, the right to receive for each such
share the number of shares of Bethlehem Common Stock and the amount of cash
that a holder of the number of Nondissenting Shares of Company Common Stock
into which such share of Company Series B Preferred Stock could have been
converted immediately prior to the Effective Time who had not made a Cash
Election with respect to such Nondissenting Shares pursuant to Section 2.02
prior to the Election Date would have received after giving effect to
Section 2.03. The Company shall give Bethlehem (i) prompt notice of any
demands for appraisal of shares of Company Common Stock or Company Series B
Preferred Stock received by the Company and (ii) the opportunity to
participate in and direct all negotiations and proceedings with respect
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to any such demands. The Company shall not, without the prior written
consent of Bethlehem, make any payment with respect to, or settle, offer to
settle or otherwise negotiate, any such demands.
(f) Cancellation of Company Common Stock and Company Series B Preferred
Stock. As of the Effective Time, all shares of Company Common Stock and
Company Series B Preferred Stock shall no longer be outstanding and shall
automatically be canceled and shall cease to exist, and each holder of a
certificate that immediately prior to the Effective Time represented any
such shares of Company Common Stock or Company Series B Preferred Stock (a
"Certificate") shall cease to have any rights with respect thereto, except
the right to receive the applicable Merger Consideration and any cash in
lieu of fractional shares to be issued or paid in consideration therefor
upon surrender of such Certificate in accordance with Section 2.02 or 2.04,
without interest, or, in the case of Dissenting Shareholders, if any, the
rights, if any, accorded under Section 262 of the DGCL.
SECTION 2.02. Cash Elections. (a) Each person who, on or prior to the
Election Date referred to in Section 2.02(c) below, is a record holder of
shares of Company Common Stock will be entitled, with respect to all or any
portion of his shares, to make an unconditional election (a "Cash Election")
on or prior to such Election Date to receive the Cash Consideration, on the
basis hereinafter set forth.
(b) Prior to the mailing of the Proxy Statement/Prospectus (as defined in
Section 3.01(d)), Bethlehem shall enter into an agreement with a bank or trust
company mutually acceptable to the Company and Bethlehem to act as exchange
agent (the "Exchange Agent") for the payment of the Merger Consideration.
(c) Bethlehem shall prepare and mail a form of election, which form shall be
subject to the reasonable approval of the Company (the "Form of Election"),
with the Proxy Statement/Prospectus to the record holders of Company Common
Stock as of the record date for the Company Shareholders Meeting (as defined
in Section 5.01(b)), which Form of Election shall be used by each record
holder of shares of Company Common Stock who wishes to elect to receive the
Cash Consideration for any or all shares of Company Common Stock held by such
holder. Bethlehem and the Company will use reasonable efforts to make the Form
of Election and the Proxy Statement/Prospectus available to all persons who
become record holders of Company Common Stock during the period between such
record date and the Election Date referred to below. Any shareholder's
election to receive the Cash Consideration shall have been properly made only
if the Exchange Agent shall have received at its designated office, by 5:00
p.m., New York City time, on the business day (the "Election Date") next
preceding the date of the Company Shareholders Meeting, a Form of Election
properly completed and signed and accompanied by Certificates for the shares
of Company Common Stock to which such Form of Election relates, properly
endorsed or otherwise in proper form for transfer (or accompanied by an
appropriate guarantee of delivery of such Certificates as set forth in such
Form of Election from a firm which is a member of a registered national
securities exchange or of the National Association of Securities Dealers, Inc.
or a commercial bank or trust company having an office or correspondent in the
United States, provided such Certificates are in fact delivered to the
Exchange Agent within three NYSE trading days after the date of execution of
such guarantee of delivery). Failure to deliver Certificates covered by any
guarantee of delivery within three NYSE trading days after the date of
execution of such guarantee of delivery shall be deemed to invalidate any
otherwise properly made Cash Election.
(d) Any Form of Election may be revoked by the shareholder submitting it to
the Exchange Agent only by written notice received by the Exchange Agent prior
to 5:00 p.m., New York City time, on the Election Date. In addition, all Forms
of Election shall automatically be revoked if the Exchange Agent is notified
in writing by Bethlehem and the Company that the Merger has been abandoned. If
a Form of Election is revoked, the Certificate or Certificates (or guarantees
of delivery, as appropriate) for the shares of Company Common Stock to which
such Form of Election relates shall be promptly returned to the shareholder
submitting the same to the Exchange Agent.
(e) The determination of the Exchange Agent whether or not Cash Elections
have been properly made or revoked pursuant to this Section 2.02 and when Cash
Elections and revocations were received by it shall be
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binding. If the Exchange Agent determines that any Cash Election was not
properly made with respect to shares of Company Common Stock, such shares
shall be treated by the Exchange Agent as shares that were not Electing Shares
at the Effective Time, and such shares shall be converted in the Merger into
the right to receive Stock Consideration pursuant to Section 2.01(c)(ii). The
Exchange Agent shall also make all computations as to the proration
contemplated by Section 2.03, and any such computation shall be conclusive and
binding on the holders of shares of Company Common Stock and on the holders of
Company Series B Preferred Stock. The Exchange Agent may, with the mutual
agreement of Bethlehem and the Company, make such rules as are consistent with
this Section 2.02 for the implementation of the elections provided for herein
as shall be necessary or desirable fully to effect such elections.
SECTION 2.03. Proration. (a) Notwithstanding anything in this Agreement to
the contrary, the maximum aggregate amount of cash that may be paid to holders
of Company Common Stock and Company Series B Preferred Stock pursuant to this
Article II (the "Cash Cap") shall be equal to the product of (x) the Cash
Election Price, (y) the number of Outstanding Shares and (z) .62; provided,
however, that the number in clause (z) shall be increased by an amount equal
to any reduction required to the number in clause (z) of Section 2.03(c)
pursuant to the proviso to Section 2.03(c). As used herein, the term
"Outstanding Shares" shall mean the sum of (x) the number of shares of Company
Common Stock outstanding immediately prior to the Effective Time plus (y) the
number of shares of Company Common Stock into which the outstanding shares of
Company Series B Preferred Stock could have been converted immediately prior
to the Effective Time.
(b) If the product of (x) the number of Electing Shares and (y) the Cash
Election Price (such product, the "Requested Cash Amount") exceeds the Cash
Cap, then each Electing Share shall be converted into the right to receive
cash and shares of Bethlehem Common Stock in accordance with the terms of
Section 2.01 in the following manner:
(i) a cash proration factor (the "Cash Proration Factor") shall be
determined by dividing the Cash Cap by the Requested Cash Amount; and
(ii) each Electing Share shall be converted into the right to receive (x)
cash in an amount equal to the product of (A) the Cash Election Price and
(B) the Cash Proration Factor (such product, the "Prorated Cash Amount")
and (y) a number of shares of Bethlehem Common Stock equal to the product
of (A) the excess of (1) 1 over (2) the Cash Proration Factor and (B) the
Conversion Number.
(c) Notwithstanding anything in this Agreement to the contrary, the maximum
number of shares of Bethlehem Common Stock that may be issued to holders of
Company Common Stock and Company Series B Preferred Stock pursuant to this
Article II (the "Stock Cap") shall be equal to the product of (x) the
Conversion Number, (y) the number of Outstanding Shares and (z) .38; provided,
however, that the number in clause (z) shall be reduced to the extent
necessary to ensure that the sum of (A) the Stock Cap and (B) the aggregate
number of shares of Bethlehem Common Stock issuable upon conversion or
exercise of all securities of the Company outstanding immediately prior to the
Effective Time (other than Company Common Stock and Company Series B Preferred
Stock) shall not exceed the product of (i) the number of outstanding shares of
Bethlehem Common Stock immediately prior to the Effective Time and (ii) .199.
(d) If the product of (x) the difference between (A) the number of
Outstanding Shares minus (B) the number of Electing Shares (such difference,
the "Deemed Stock Electing Shares") and (y) the Conversion Number (such
product, the "Requested Stock Amount") exceeds the Stock Cap (a "Stock
Proration Event"), then each Deemed Stock Electing Share shall be converted
into the right to receive cash and shares of Bethlehem Common Stock in
accordance with the terms of Section 2.01 in the following manner:
(i) a stock proration factor (the "Stock Proration Factor") shall be
determined by dividing the Stock Cap by the Requested Stock Amount; and
(ii) each Deemed Stock Electing Share shall be converted into the right
to receive (x) a number of shares of Bethlehem Common Stock equal to the
product of (A) the Conversion Number and (B) the Stock
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Proration Factor (such product, the "Prorated Stock Amount") and (y) cash
in an amount equal to the product of (A) the excess of (1) 1 over (2) the
Stock Proration Factor and (B) the Cash Election Price.
SECTION 2.04. Exchange of Certificates. (a) Deposit with the Exchange Agent.
As of the Effective Time, Bethlehem shall deposit with the Exchange Agent, for
the benefit of the holders of shares of Company Common Stock and Company
Series B Preferred Stock, for exchange through the Exchange Agent, the cash
and certificates representing shares of Bethlehem Common Stock representing
the Merger Consideration (such cash and shares of Bethlehem Common Stock
together with any dividends or distributions with respect to such shares with
a record date after the Effective Time, and any cash payable in lieu of any
fractional shares pursuant to Section 2.04(e) being hereinafter referred to as
the "Exchange Fund") payable and issuable pursuant to Section 2.01 in exchange
for outstanding shares of Company Common Stock and shares of Company Series B
Preferred Stock.
(b) Exchange Procedures. As soon as reasonably practicable after the
Effective Time, the Exchange Agent shall mail to each holder of record of a
Certificate or Certificates, (i) a letter of transmittal (which shall specify
that delivery shall be effected, and risk of loss and title to such
Certificates shall pass, only upon delivery of such Certificates to the
Exchange Agent and shall be in such form and have such other provisions as
Bethlehem and the Company may reasonably specify) and (ii) instructions for
use in effecting the surrender of such Certificates in exchange for the Merger
Consideration. Upon surrender of such a Certificate for cancelation to the
Exchange Agent or to such other agent or agents as may be appointed by
Bethlehem, together with such letter of transmittal, duly executed, and such
other documents as may reasonably be required by the Exchange Agent, the
holder of such Certificate shall be entitled to receive in exchange therefor a
certificate representing that number of whole shares of Bethlehem Common Stock
and cash, if any, which such holder has the right to receive pursuant to this
Article II, and the Certificate so surrendered shall forthwith be canceled. No
letter of transmittal will be required with respect to Certificates previously
surrendered with a Form of Election (unless such Form of Election was duly and
timely revoked). In the event of a transfer of ownership of Company Common
Stock or Company Series B Preferred Stock that is not registered in the
transfer records of the Company, a certificate representing the proper number
of shares of Bethlehem Common Stock may be issued (and, if applicable, cash
may be paid) to a person other than the person in whose name the Certificate
so surrendered is registered, if such Certificate shall be properly endorsed
or otherwise be in proper form for transfer and the person requesting such
issuance shall pay any transfer or other Taxes (as defined in Section 3.01(k))
required by reason of the issuance of shares of Bethlehem Common Stock (and,
if applicable, the payment of cash) to a person other than the registered
holder of such Certificate or establish to the satisfaction of Bethlehem that
such Tax has been paid or is not applicable. Until surrendered as contemplated
by this Section 2.04(b), each Certificate shall be deemed at any time after
the Effective Time to represent only the right to receive upon such surrender
the Merger Consideration which the holder thereof has the right to receive in
respect of such Certificate pursuant to the other provisions of this Article
II. No interest will be paid or will accrue on any cash payable to holders of
Certificates pursuant to the provisions of this Article II. Bethlehem shall
pay the charges and expenses of the Exchange Agent.
(c) Distributions with Respect to Unexchanged Shares. No dividends or other
distributions with respect to Bethlehem Common Stock with a record date after
the Effective Time shall be paid to the holder of any unsurrendered
Certificate with respect to the shares of Bethlehem Common Stock issuable
hereunder in respect thereof, and no cash payment in lieu of fractional shares
shall be paid to any such holder pursuant to Section 2.04(e), and all such
dividends, other distributions and cash in lieu of fractional shares of
Bethlehem Common Stock shall be paid by Bethlehem to the Exchange Agent and
shall be included in the Exchange Fund, in each case until the surrender of
such Certificate in accordance with this Article II. Subject to the effect of
applicable laws, following surrender of any such Certificate, there shall be
paid to the holder of the certificate representing whole shares of Bethlehem
Common Stock issued in exchange therefor, without interest, (i) at the time of
such surrender, the amount of any cash payable in lieu of a fractional share
of Bethlehem Common Stock to which such holder is entitled pursuant to Section
2.04(e) and the amount of dividends or other distributions with a record date
after the Effective Time theretofore paid with respect to such whole shares of
Bethlehem Common
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Stock, and (ii) at the appropriate payment date, the amount of dividends or
other distributions with a record date after the Effective Time but prior to
such surrender and with a payment date subsequent to such surrender payable
with respect to such whole shares of Bethlehem Common Stock.
(d) No Further Ownership Rights in Company Common Stock and Company Series B
Preferred Stock. All cash paid and shares of Bethlehem Common Stock issued
upon the surrender of Certificates in accordance with the terms of this
Article II (including any cash paid pursuant to Section 2.04(e)) shall be
deemed to have been paid and issued in full satisfaction of all rights
pertaining to the shares of Company Common Stock and Company Series B
Preferred Stock theretofore represented by such Certificates, subject,
however, to the Surviving Corporation's obligation to pay any dividends or
make any other distributions with a record date prior to the Effective Time
which may have been declared or made by the Company on such shares of Company
Common Stock or Company Series B Preferred Stock in accordance with the terms
of this Agreement or prior to the date of this Agreement and which remain
unpaid at the Effective Time, and there shall be no further registration of
transfers on the stock transfer books of the Surviving Corporation of the
shares of Company Common Stock and Company Series B Preferred Stock that were
outstanding immediately prior to the Effective Time. If, after the Effective
Time, Certificates are presented to the Surviving Corporation or the Exchange
Agent for any reason, they shall be canceled and exchanged as provided in this
Article II, except as otherwise provided by law.
(e) No Fractional Shares. (i) No certificates or scrip representing
fractional shares of Bethlehem Common Stock shall be issued upon the surrender
for exchange of Certificates, no dividend or distribution of Bethlehem shall
relate to such fractional share interests and such fractional share interests
will not entitle the owner thereof to vote or to any rights of a stockholder
of Bethlehem.
(ii) As promptly as practicable following the Effective Time, the Exchange
Agent will determine the excess of (A) the number of whole shares of Bethlehem
Common Stock delivered to the Exchange Agent by Bethlehem pursuant to Section
2.04(a) over (B) the aggregate number of whole shares of Bethlehem Common
Stock to be distributed to holders of Company Common Stock and Company Series
B Preferred Stock pursuant to Section 2.01 and Section 2.03 (such excess being
herein called the "Excess Common Shares"). Following the Effective Time, the
Exchange Agent will sell the Excess Common Shares at then-prevailing prices on
the NYSE, all in the manner provided in Section 2.04(e)(iii).
(iii) The sale of the Excess Common Shares by the Exchange Agent will be
executed on the NYSE through one or more member firms of the NYSE and will be
executed in round lots to the extent practicable. The Exchange Agent will use
reasonable efforts to complete the sale of the Excess Common Shares as
promptly following the Effective Time as, in the Exchange Agent's sole
judgment, is practicable consistent with obtaining the best execution of such
sales in light of prevailing market conditions. Until the net proceeds of such
sale or sales have been distributed to the holders of Certificates, the
Exchange Agent will hold such proceeds in trust for the holders of
Certificates (the "Common Share Trust"). The Surviving Corporation will pay
all commissions, transfer taxes and other out-of-pocket transaction costs,
including the expenses and compensation of the Exchange Agent incurred in
connection with such sale of the Excess Common Shares. The Exchange Agent will
determine the portion of the Common Shares Trust to which each holder of
Certificates is entitled, if any, by multiplying the amount of the aggregate
proceeds comprising the Common Shares Trust by a fraction, the numerator of
which is the amount of the fractional share interest to which such holder of
Certificates is entitled (after taking into account all shares of Company
Common Stock and Company Series B Preferred Stock held at the Effective Time
by such holder) and the denominator of which is the aggregate amount of
fractional share interests to which all holders of Certificates are entitled.
(iv) Notwithstanding the provisions of Section 2.04(e)(ii) and (iii), the
Surviving Corporation may elect at its option, in lieu of the issuance and
sale of Excess Common Shares and the making of the payments hereinabove
contemplated, to pay each holder of Certificates an amount in cash equal to
the product obtained by multiplying (A) the fractional share interest to which
such holder (after taking into account all shares of Company Common Stock and
Company Series B Preferred Stock held at the Effective Time by such holder)
would
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otherwise be entitled by (B) the closing price for a share of Bethlehem Common
Stock as reported on the NYSE Composite Transactions Tape (as reported in The
Wall Street Journal, or, if not reported therein, in any other authoritative
source) on the trading day immediately preceding the Closing Date, and, in
such case, all references herein to the cash proceeds of the sale of the
Excess Common Shares and similar references will be deemed to mean and refer
to the payments calculated as set forth in this Section 2.04(e)(iv).
(v) As soon as practicable after the determination of the amount of cash, if
any, to be paid to holders of Certificates with respect to any fractional
share interests, the Exchange Agent will make available such amounts to such
holders of Certificates subject to and in accordance with the terms of Section
2.04(c).
(g) Termination of Exchange Fund. Any portion of the Exchange Fund that
remains undistributed to the holders of the Certificates for six months after
the Effective Time shall be delivered to Bethlehem, upon demand, and any
holders of the Certificates who have not theretofore complied with this
Article II shall thereafter look only to Bethlehem for payment of their claim
for any cash, any shares of Bethlehem Common Stock, any cash in lieu of
fractional shares and any dividends or distributions with respect to Bethlehem
Common Stock.
(h) No Liability. None of Bethlehem, the Company or the Exchange Agent shall
be liable to any person in respect of any shares of Bethlehem Common Stock or
any cash from the Exchange Fund delivered to a public official pursuant to any
applicable abandoned property, escheat or similar law.
(i) Investment of Exchange Fund. The Exchange Agent shall invest any cash
included in the Exchange Fund, as directed by Bethlehem, on a daily basis. Any
interest and other income resulting from such investments shall be paid to
Bethlehem.
(j) Lost Certificates. If any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
such Certificate to be lost, stolen or destroyed and, if required by the
Surviving Corporation, the posting by such person of a bond in such reasonable
amount as the Surviving Corporation may direct as indemnity against any claim
that may be made against it with respect to such Certificate, the Exchange
Agent will issue in exchange for such lost, stolen or destroyed Certificate
the Merger Consideration and any cash in lieu of fractional shares, and unpaid
dividends and distributions on shares of Bethlehem Common Stock deliverable in
respect thereof, pursuant to this Agreement.
(k) Withholding Rights. Bethlehem or the Exchange Agent shall be entitled to
deduct and withhold from the consideration otherwise payable pursuant to this
Agreement to any holder of shares of Company Common Stock or Company Series B
Preferred Stock such amounts as Bethlehem or the Exchange Agent is required to
deduct and withhold with respect to the making of such payment under the Code,
or any provision of state, local or foreign tax law. To the extent that
amounts are so withheld and paid over to the appropriate taxing authority by
Bethlehem or the Exchange Agent, such withheld amounts shall be treated for
all purposes of this Agreement as having been paid to the holder of the shares
of Company Common Stock or Company Series B Preferred Stock in respect of
which such deduction and withholding was made by Bethlehem or the Exchange
Agent.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.01. Representations and Warranties of the Company. Except as set
forth with respect to a specifically identified representation and warranty on
the Disclosure Schedule delivered by the Company to Bethlehem prior to the
execution of this Agreement (the "Company Disclosure Schedule"), the Company
represents and warrants to Bethlehem as follows:
(a) Organization, Standing and Corporate Power. Each of the Company and
each of its subsidiaries (as defined in Section 8.03) is a corporation duly
organized, validly existing and in good standing (with respect to
jurisdictions which recognize such concept) under the laws of the
jurisdiction in which it is
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incorporated and has the requisite corporate power and authority to carry
on its business as now being conducted. Each of the Company and each of its
subsidiaries is duly qualified or licensed to do business and is in good
standing (with respect to jurisdictions which recognize such concept) in
each jurisdiction in which the nature of its business or the ownership or
leasing of its properties makes such qualification or licensing necessary,
other than in such jurisdictions where the failure to be so qualified or
licensed or to be in good standing individually or in the aggregate would
not have a material adverse effect (as defined in Section 8.03) on the
Company.
(b) Subsidiaries. The Company Disclosure Schedule sets forth a true and
complete list of each subsidiary of the Company. All the outstanding shares
of capital stock of each such subsidiary have been validly issued and are
fully paid and nonassessable and are owned directly or indirectly by the
Company, free and clear of all pledges, claims, liens, charges,
encumbrances and security interests of any kind or nature whatsoever
(collectively, "Liens"). Except for the capital stock of its subsidiaries,
the Company does not own, directly or indirectly, any capital stock or
other ownership interest in any corporation, limited liability company,
partnership, joint venture or other entity.
(c) Capital Structure. The authorized capital stock of the Company
consists of 40,000,000 shares of Company Common Stock and 1,000,000 shares
of series preferred stock, par value $.01 per share ("Company Preferred
Stock"). At the close of business on November 28, 1997, (i) 14,941,227
shares of Company Common Stock were issued and outstanding, (ii) 470,300
shares of Company Series B Preferred Stock were issued and outstanding (and
1,410,900 shares of Company Common Stock were reserved for issuance upon
the conversion thereof), (iii) 872,032 shares of Company Common Stock were
held by the Company in its treasury, (iv) 1,378,847 shares of Company
Common Stock were reserved for issuance pursuant to Lukens Inc. 1985 Stock
Option and Appreciation Plan and Lukens Inc. Stock Option Plan for Non-
Employee Directors (collectively, the "Stock Plans"), and (v) 200,000
shares of Company Series A Preferred Stock were reserved for issuance in
connection with the rights (the "Rights") to purchase shares of Company
Series A Preferred Stock issued pursuant to the Renewed Rights Agreement
dated September 25, 1996 (as amended from time to time, the "Rights
Agreement") between the Company and American Stock Transfer and Trust
Company, as rights agent. Except as set forth above, at the close of
business on December 14, 1997, no shares of capital stock or other voting
securities of the Company were issued, reserved for issuance or outstanding
(except for shares of Company Common Stock issued upon conversion of shares
of Company Series B Preferred Stock since November 28, 1997). At the close
of business on December 14, 1997, there were no outstanding stock
appreciation rights or rights (other than outstanding employee stock
options to purchase shares of Company Common Stock ("Employee Stock
Options")) to receive shares of Company Common Stock on a deferred basis
granted under the Stock Plans or otherwise. All outstanding shares of
capital stock of the Company are, and all shares which may be issued will
be, when issued, duly authorized, validly issued, fully paid and
nonassessable and not subject to preemptive rights. There are no notes,
bonds, debentures or other indebtedness of the Company having the right to
vote (or convertible into, or exchangeable for, securities having the right
to vote) on any matters on which shareholders of the Company may vote.
Except as set forth above, at the close of business on December 14, 1997,
there were no outstanding securities, options, warrants, calls, rights,
commitments, agreements, arrangements or undertakings of any kind to which
the Company or any of its subsidiaries was a party or by which any of them
was bound obligating the Company or any of its subsidiaries to issue,
deliver or sell, or cause to be issued, delivered or sold, additional
shares of capital stock or other voting securities of the Company or of any
of its subsidiaries or obligating the Company or any of its subsidiaries to
issue, grant, extend or enter into any such security, option, warrant,
call, right, commitment, agreement, arrangement or undertaking. At the
close of business on December 14, 1997, and except as provided pursuant to
the terms of the Company Series B Preferred Stock there were no outstanding
contractual obligations of the Company or any of its subsidiaries to
repurchase, redeem or otherwise acquire any shares of capital stock of the
Company or any of its subsidiaries. At the close of business on December
14, 1997, there were no outstanding contractual obligations of the Company
to vote or to dispose of any shares of the capital stock of any of its
subsidiaries. The Company has delivered to Bethlehem a complete and correct
copy of the Rights Agreement.
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(d) Authority; Noncontravention. The Company has all requisite corporate
power and authority to enter into this Agreement and, subject to the
Company Shareholder Approval (as defined in Section 3.01(m)), to consummate
the transactions contemplated by this Agreement. The execution and delivery
of this Agreement by the Company and the consummation by the Company of the
transactions contemplated by this Agreement have been duly authorized by
all necessary corporate action on the part of the Company, subject, in the
case of the adoption of this Agreement, to the Company Shareholder
Approval. This Agreement has been duly executed and delivered by the
Company and constitute valid and binding obligations of the Company,
enforceable against the Company in accordance with their terms. The
execution and delivery of this Agreement do not, and the consummation of
the transactions contemplated by this Agreement and compliance with the
provisions of this Agreement will not, conflict with, or result in any
violation of, or default (with or without notice or lapse of time, or both)
under, or give rise to a right of termination, cancelation or acceleration
of any obligation or to loss of a material benefit under, or result in the
creation of any Lien upon any of the properties or assets of the Company or
any of its subsidiaries under, (i) the Certificate of Incorporation or By-
laws of the Company or the comparable organizational documents of any of
its subsidiaries, (ii) any loan or credit agreement, note, bond, mortgage,
indenture, lease or other agreement, instrument, permit, concession,
franchise or license applicable to the Company or any of its subsidiaries
or their respective properties or assets or (iii) subject to the
governmental filings and other matters referred to in the following
sentence, any judgment, order, decree, statute, law, ordinance, rule or
regulation applicable to the Company or any of its subsidiaries or their
respective properties or assets, other than, in the case of clauses (ii)
and (iii), any such conflicts, violations, defaults, rights, losses or
Liens that individually or in the aggregate would not (x) have a material
adverse effect on the Company, (y) impair the ability of the Company to
perform its obligations under this Agreement in any material respect or (z)
prevent or materially delay the consummation of any of the transactions
contemplated by this Agreement. No consent, approval, order or
authorization of, or registration, declaration or filing with, any Federal,
state or local government or any court, administrative or regulatory agency
or commission or other governmental authority or agency, domestic or
foreign (a "Governmental Entity"), is required by or with respect to the
Company or any of its subsidiaries in connection with the execution and
delivery of this Agreement by the Company or the consummation by the
Company of the transactions contemplated by this Agreement, except for (1)
the filing of a premerger notification and report form by the Company under
the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the
"HSR Act"); (2) the filing with the Securities and Exchange Commission (the
"SEC") of (A) a proxy statement relating to the Company Shareholders
Meeting (such proxy statement, (as defined in Section 5.01(c)), in each
case as amended or supplemented from time to time, the "Proxy
Statement/Prospectus"), and (B) such reports under Section 13(a) or 15(d)
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as
may be required in connection with this Agreement and the transactions
contemplated by this Agreement; (3) the filing of the Certificate of Merger
with the Delaware Secretary of State and appropriate documents with the
relevant authorities of other states in which the Company is qualified to
do business; (4) such filings and consents as may be required under any
environmental, health or safety law or regulation pertaining to any
notification, disclosure or required approval necessitated by the Merger or
the transactions contemplated by this Agreement; (5) such filings with and
approvals of the NYSE to permit the shares of Company Common Stock that are
to be issued pursuant to the terms of this Agreement to be listed on the
NYSE and; (6) such consents, approvals, orders, authorizations,
registrations, declarations and filings the failure to make or obtain which
would not reasonably be expected to have a material adverse effect on the
Company or impair the ability of the Company to perform its obligations
under this Agreement in any material respect.
(e) SEC Documents; Undisclosed Liabilities. The Company has filed all
required reports, schedules, forms, statements and other documents with the
SEC since January 1, 1996 (the "SEC Documents"). As of their respective
dates, the SEC Documents complied in all material respects with the
requirements of the Securities Act of 1933, as amended (the "Securities
Act"), or the Exchange Act, as the case may be, and the rules and
regulations of the SEC promulgated thereunder applicable to such SEC
Documents, and none of the SEC Documents contained any untrue statement of
a material fact or omitted to state a material fact required to be stated
therein or necessary in order to make the statements therein, in light of
the
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circumstances under which they were made, not misleading. Except to the
extent that information contained in any SEC Document has been revised or
superseded by a later Filed SEC Document (as defined in Section 3.01(g)),
none of the SEC Documents contains any untrue statement of a material fact
or omits to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The financial
statements of the Company included in the SEC Documents comply as to form
in all material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto, have been
prepared in accordance with generally accepted accounting principles
(except, in the case of unaudited statements, as permitted by Form 10-Q of
the SEC) applied on a consistent basis during the periods involved (except
as may be indicated in the notes thereto) and fairly present the
consolidated financial position of the Company and its consolidated
subsidiaries as of the dates thereof and the consolidated results of their
operations and cash flows for the periods then ended (subject, in the case
of unaudited statements, to normal year-end audit adjustments). Except as
set forth in the Filed SEC Documents, neither the Company nor any of its
subsidiaries has any liabilities or obligations of any nature (whether
accrued, absolute, contingent or otherwise) that, individually or in the
aggregate, would reasonably be expected to have a material adverse effect
on the Company.
(f) Information Supplied. None of the information supplied or to be
supplied by the Company specifically for inclusion or incorporation by
reference in (i) the registration statement on Form S-4 to be filed with
the SEC by Bethlehem in connection with the issuance of Bethlehem Common
Stock in the Merger (the "Form S-4") will, at the time it becomes effective
under the Securities Act, contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading or (ii) the Proxy
Statement/Prospectus will, at the date it is first mailed to the Company's
shareholders or at the time of the Company Shareholders Meeting, contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading. The Proxy Statement/Prospectus will comply as to form in all
material respects with the requirements of the Exchange Act and the rules
and regulations thereunder, except that no representation or warranty is
made by the Company with respect to statements made or incorporated by
reference therein based on information supplied by Bethlehem specifically
for inclusion or incorporation by reference in the Proxy
Statement/Prospectus.
(g) Absence of Certain Changes or Events. Except as disclosed in the SEC
Documents filed and publicly available prior to the date of this Agreement
(as amended to the date of this Agreement, the "Filed SEC Documents"),
since the date of the most recent audited financial statements included in
the Filed SEC Documents, the Company has conducted its business only in the
ordinary course, and there has not been (i) any material adverse change (as
defined in Section 8.03) in the Company, (ii) any declaration, setting
aside or payment of any dividend or other distribution (whether in cash,
stock or property) with respect to any of the Company's capital stock,
other than regular quarterly cash dividends, (iii) any split, combination
or reclassification of any of the Company's capital stock or any issuance
or the authorization of any issuance of any other securities in respect of,
in lieu of or in substitution for shares of the Company's capital stock,
(iv) (x) any granting by the Company or any of its significant subsidiaries
to any executive officer or other employee of the Company or any of its
significant subsidiaries of any increase in compensation, except for normal
increases in the ordinary course of business consistent with past practice
or as was required under employment agreements in effect as of the date of
the most recent audited financial statements included in the Filed SEC
Documents or (y) any granting by the Company or any of its significant
subsidiaries to any such executive officer or other employee of any
increase in severance or termination pay, (v) any damage, destruction or
loss, whether or not covered by insurance, that has or would reasonably be
expected to have a material adverse effect on the Company, (vi) except as
may have been required by a change in generally accepted accounting
principles, any change in accounting methods, principles or practices by
the Company materially affecting its assets, liabilities or business or
(vii) any Tax election that would reasonably be expected to have a material
adverse effect on the Company, or any settlement or compromise of any
material Tax liability.
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(h) Litigation. Except as disclosed in the Filed SEC Documents, there is
no suit, action or proceeding pending or, to the knowledge of the Company,
threatened against or affecting the Company or any of its subsidiaries that
individually or in the aggregate would reasonably be expected to have a
material adverse effect on the Company, nor is there any judgment, order,
decree, statute, law, ordinance, rule or regulation of any Governmental
Entity outstanding against the Company or any of its subsidiaries having,
or which would reasonably be expected to have, such a material adverse
effect.
(i) Absence of Changes in Benefit Plans. Subject to Section 5.06 and
except as disclosed in the Filed SEC Documents, since the date of the most
recent audited financial statements included in the Filed SEC Documents,
there has not been any adoption or amendment in any material respect (or
any agreement to adopt or amend in any material respects) by the Company or
any of its subsidiaries of any collective bargaining agreement or
employment contract or any bonus, pension, profit sharing, deferred
compensation, incentive compensation, stock ownership, stock purchase,
stock option, phantom stock, retirement, vacation, severance, disability,
death benefit, hospitalization, medical or other plan, arrangement or
understanding (whether or not legally binding) providing benefits to any
current or former director, officer or employee of the Company or any of
its subsidiaries ("Company Plans"). Without limiting the foregoing, except
as disclosed in the Filed SEC Documents, since the date of the most recent
audited financial statements included in the Filed SEC Documents, there has
not been any change in any actuarial or other assumption used to calculate
funding obligations with respect to any Pension Plan (as defined in Section
3.01(j)), or in the manner in which contributions to any Pension Plan are
made or the basis on which such contributions are determined. Except as
disclosed in the Filed SEC Documents, there exist no employment,
consulting, severance, termination or indemnification agreements,
arrangements or understandings between the Company or any of its
subsidiaries and any current or former director, officer or employee of the
Company or any of its subsidiaries.
(j) ERISA Compliance. (i) The Company Disclosure Schedule contains a list
of each "employee pension benefit plan" (as defined in Section 3(2) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"))
(sometimes referred to herein as a "Pension Plan"), each "employee welfare
benefit plan" (as defined in Section 3(1) of ERISA) (sometimes referred to
herein as a "Welfare Plan"), each employment contract, stock option, stock
purchase, deferred compensation plan or arrangement and each other employee
fringe benefit plan or arrangement maintained, contributed to or required
to be maintained or contributed to by the Company, any of its subsidiaries
or any other person or entity that, together with the Company, is or was
treated as a single employer under Section 414(b), (c), (m) or (o) of the
Code (each, a "Commonly Controlled Entity") for the benefit of any current
or former directors, officers, employees or independent contractors of the
Company or any of its subsidiaries (collectively, "Company Benefit Plans").
The Company has delivered or made available to Bethlehem true, complete and
correct copies of (v) each Company Benefit Plan (or, in the case of any
unwritten Company Benefit Plans, descriptions thereof), (w) the two most
recent annual reports on Form 5500 filed with the Internal Revenue Service
with respect to each Company Benefit Plan (if any such report was
required), (x) the most recent summary plan description for each Company
Benefit Plan for which such summary plan description is required, (y) each
currently effective trust agreement, insurance or group annuity contract
and each other funding or financing arrangement relating to any Company
Benefit Plan and (z) the most recent actuarial and financial valuation
prepared with respect to each Company Benefit Plan.
(ii) Each Company Benefit Plan has been administered in all respects in
accordance with its terms and the Company, its subsidiaries and all the
Company Benefit Plans are in compliance in all respects with the applicable
provisions of ERISA, the Code and all other applicable laws and the terms
of all applicable collective bargaining agreements except, in each case,
for any failure to administer or any non-compliance that would not
reasonably be expected to have a material adverse effect on the Company. To
the knowledge of the Company, there are no investigations by any
Governmental Entity, termination proceedings or other claims (except
routine claims for benefits payable under the Company Benefit Plans), suits
or proceedings against or involving any Company Benefit Plan or asserting
any rights or claims to benefits under any Company Benefit Plan that would
reasonably be expected to have a material adverse effect on the Company.
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To the knowledge of the Company, there are no facts or circumstances that
could give rise to any liability that would reasonably be expected to have
a material adverse effect on the Company in the event of any such
investigation, claim, suit or proceeding.
(iii) (1) All contributions to, and payments from, the Company Benefit
Plans that may have been required to be made in accordance with the terms
of the Company Benefit Plans, any applicable collective bargaining
agreement and, when applicable, Section 302 of ERISA or Section 412 of the
Code, have been timely made, (2) there has been no application for waiver
or waiver of the minimum funding standards imposed by Section 412 of the
Code with respect to any Pension Plan, (3) no Pension Plan has or had at
any time during the current plan year an "accumulated funding deficiency"
within the meaning of Section 412(a) of the Code and (4) there is no
liability under Title IV of ERISA with respect to any Company Benefit Plan
(except for insurance premiums payable to the Pension Benefit Guaranty
Corporation which are not yet due) that has not been satisfied as of the
date hereof, except, in each case, for contributions, payments,
applications, deficiencies or liabilities that would not reasonably be
expected to have a material adverse effect on the Company.
(iv) Each Pension Plan that is intended to be a tax-qualified plan has
been the subject of a determination letter from the Internal Revenue
Service to the effect that such Pension Plan and related trust is qualified
and exempt from U.S. Federal income Taxes under Sections 401(a) and 501(a),
respectively, of the Code; no such determination letter has been revoked,
and, to the knowledge of the Company, revocation has not been threatened;
and no such Pension Plan has been amended since the effective date of its
most recent determination letter in any respect that would adversely affect
in any material respect its qualification, materially increase its costs or
require security under Section 307 of ERISA. The Company has delivered or
made available to Bethlehem a copy of the most recent determination letter
received with respect to each Pension Plan for which such a determination
letter has been issued, as well as a copy of any pending application for a
determination letter.
(v) (1) No "prohibited transaction" (as defined in Section 4975 of the
Code or Section 406 of ERISA) has occurred that involves the assets of any
Company Benefit Plan and (2) none of the Company, any of its subsidiaries
or, to the knowledge of the Company, any non-employee trustee,
administrator or other fiduciary of any Company Benefit Plan or any agent
of any of the foregoing has engaged in any transaction or acted in a manner
that could, or failed to act so as to, subject the Company or any trustee,
administrator or other fiduciary to any liability for breach of fiduciary
duty under ERISA or any other applicable law, except, in each case, for
"prohibited transactions" or liabilities that would not reasonably be
expected to have a material adverse effect on the Company.
(vi) Each Welfare Plan may be amended or terminated without material
liability to the Company at any time after the Effective Time.
(vii) No employee of the Company will be entitled to any additional
benefits or any acceleration of the time of payment or vesting of any
benefits under any Company Benefit Plan as a result of the transactions
contemplated by this Agreement.
(k) Taxes. (i) Each of the Company and its subsidiaries has filed all Tax
Returns required to be filed by it or requests for extensions to file such
returns or reports have been timely filed, granted and have not expired,
except to the extent that such failures to file or to have extensions
granted that remain in effect individually or in the aggregate would not
have a material adverse effect on the Company. All returns filed by the
Company and each of its subsidiaries are complete and accurate in all
material respects to the knowledge of the Company. The Company and each of
its subsidiaries has paid (or the Company has paid on its behalf) all Taxes
shown as due on such returns and all material Taxes otherwise due, and the
most recent financial statements contained in the Filed SEC Documents
adequately provide for all Taxes payable by the Company and its
subsidiaries for all taxable periods and portions thereof accrued through
the date of such financial statements, except where the failure to have
such an adequate liability would not have a material adverse effect on the
Company.
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(ii) No deficiencies for any Taxes have been proposed, asserted or
assessed against the Company or any of its subsidiaries that are not
adequately provided for on the financial statements, except for
deficiencies that individually or in the aggregate would not have a
material adverse effect on the Company, and no requests for waivers of the
time to assess any such Taxes have been granted or are pending. The U.S.
Federal income Tax returns of the Company and each of its subsidiaries
consolidated in such returns have been either examined by and settled with
the U.S. Internal Revenue Service or closed by virtue of the applicable
statute of limitations. There is no audit, examination, deficiency or
refund litigation pending with respect to Taxes and during the past three
years no taxing authority has given written notice of the intent to
commence any such examination, audit deficiency or refund litigation. None
of the assets or properties of the Company or any of its subsidiaries is
subject to any material Tax lien, other than any such liens for Taxes which
are not due and payable, which may thereafter be paid without penalty or
the validity of which are being contested in good faith by appropriate
proceedings and for which adequate provisions are being maintained in
accordance with generally accepted accounting principles ("Permitted Tax
Liens").
(iii) The Company and its subsidiaries shall not be required to include
in a taxable period ending after the Effective Time any taxable income
attributable to income that economically accrued in a prior taxable period
as a result of Section 481 of the Code, the installment method of
accounting or any comparable provision of state or local Tax law.
(iv) As used in this Agreement, "Taxes" shall include all Federal, state
and local income, franchise, use, property, sales, excise and other taxes,
tariffs or governmental charges of any nature whatsoever, domestic or
foreign, including any interest, penalties or additions with respect
thereto.
(l) No Excess Parachute Payments; Section 162(m) of the Code. (i) Any
amount that could be received (whether in cash or property or the vesting
of property) as a result of any of the transactions contemplated by this
Agreement by any director, officer or employee of the Company or any of its
affiliates (as defined in Section 8.03) who is a "disqualified individual"
(as such term is defined in Treasury Regulation Section 1.280G-1) under any
employment, severance or termination agreement, other compensation
arrangement or Company Benefit Plan currently in effect would not be
characterized as an "excess parachute payment" (as such term is defined in
Section 280G(b)(1) of the Code).
(ii) The disallowance of a deduction under Section 162(m) of the Code for
employee remuneration will not apply to any amount paid or payable by the
Company or any of its subsidiaries under any contract, plan, program,
arrangement or understanding.
(m) Voting Requirements. The affirmative vote of the holders of
outstanding shares of the Company Common Stock and Company Series B
Preferred Stock, voting together as a single class, representing a majority
of the voting power of the outstanding shares of Company Common Stock and
Company Series B Preferred Stock (the "Company Shareholder Approval") is
the only vote of the holders of any class or series of the Company's
capital stock necessary to adopt this Agreement and to approve the
transactions contemplated by this Agreement. The provisions of Section A of
Article ELEVENTH of the Company's Restated Certificate of Incorporation are
inapplicable to the Merger and the other transactions contemplated by this
Agreement.
(n) State Takeover Statutes. The Board of Directors of the Company has
approved the terms of this Agreement and the consummation of the Merger and
the other transactions contemplated by this Agreement and such approval
constitutes approval of this Agreement, the Merger and the other
transactions contemplated by this Agreement under the provisions of Section
203(a)(l) of the DGCL. To the best of the Company's knowledge, no other
state takeover statute or similar statute or regulation applies or purports
to apply to this Agreement or any of the transactions contemplated by this
Agreement.
(o) Rights Agreement. The Rights Agreement will be amended as of the date
hereof (the "Rights Plan Amendment") (i) to render the Rights Agreement
inapplicable to this Agreement, the Merger and the other transactions
contemplated by this Agreement and (ii) to ensure that (y) neither
Bethlehem nor any of its wholly owned subsidiaries is an Acquiring Person
(as defined in the Rights Agreement) pursuant to the
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Rights Agreement and (z) a Stock Acquisition Date, Distribution Date or
Triggering Event (in each case as defined in the Rights Agreement) does not
occur solely by reason of the execution of this Agreement or the
consummation of the Merger or the other transactions contemplated by this
Agreement.
(p) Brokers. No broker, investment banker, financial advisor or other
person, other than Credit Suisse First Boston Corporation, is entitled to
any broker's, finder's, financial advisor's or other similar fee or
commission in connection with the transactions contemplated by this
Agreement based upon arrangements made by or on behalf of the Company.
(q) Opinion of Financial Advisor. The Company has received the opinion of
Credit Suisse First Boston Corporation, as of the date of this Agreement,
to the effect that, as of such date, the Merger Consideration is fair to
the holders of the Company's Common Stock from a financial point of view.
(r) Compliance with Applicable Laws. Each of the Company and its
subsidiaries has in effect all Federal, state and local governmental
approvals, authorizations, certificates, permits, filings, franchises,
licenses, notices and rights, domestic or foreign ("Permits") necessary for
it to own, lease or operate its properties and assets and to carry on its
business as now conducted, and there has occurred no default under any such
Permit, except for the lack of Permits and for defaults under Permits which
lack or default individually or in the aggregate would not have a material
adverse effect on the Company. Except as disclosed in the Filed SEC
Documents, the Company and its subsidiaries are in compliance with all
applicable judgments, orders, decrees, statutes, laws, ordinances, rules
and regulations of any Governmental Entity, except for possible
noncompliance which individually or in the aggregate would not have a
material adverse effect on the Company.
(s) Environmental Laws and Regulations. Except as described in the Filed
SEC Documents, to the knowledge of the Company (a) the Company and each of
its subsidiaries is in compliance with all applicable Federal, state, local
and foreign laws and regulations relating to pollution or protection of
human health or the environment (including, without limitation, ambient
air, surface water, ground water, land surface or subsurface strata)
(collectively, "Environmental Laws"), except for non-compliance that would
not, individually or in the aggregate, have a material adverse effect on
the Company, which compliance includes, but is not limited to, the
possession by the Company and each of its subsidiaries of permits and other
governmental authorizations required under applicable Environmental Laws,
and compliance with the terms and conditions thereof; (b) neither the
Company nor any of its subsidiaries has received written notice of, or, to
the knowledge of the Company, is the subject of, any actions, causes of
action, claims, investigations, demands or notices by any person alleging
liability under or non-compliance with any Environmental Law
("Environmental Claims") that would, individually or in the aggregate, have
a material adverse effect on the Company; and (c) there has been no
treatment, storage, disposal or release of any hazardous or toxic material,
substance or waste or petroleum, or any fractions or by-products thereof,
at any property or facility currently or, to the knowledge of the Company,
formerly owned, leased or operated by the Company in a manner or at levels
that require or could require investigation, removal or remediation under
Environmental Laws that would either individually or in the aggregate
reasonably be expected to lead to a material adverse effect on the Company.
(t) Contracts; Indebtedness. (a) Except as disclosed in the Filed SEC
Documents, there are no contracts or agreements that are material to the
business, properties, assets, financial condition or results of operations
of the Company and its subsidiaries taken as a whole. Neither the Company
nor any of its subsidiaries is in violation of or in default under (nor
does there exist any condition which upon the passage of time or the giving
of notice would cause such a violation of or default under) any loan or
credit agreement, note, bond, mortgage, indenture, lease, permit,
concession, franchise, license or any other contract, agreement,
arrangement or understanding, to which it is a party or by which it or any
of its properties or assets is bound, except for violations or defaults
that would not reasonably be expected to result in a material adverse
effect on the Company.
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(b) The Company Disclosure Schedule sets forth (i) a list of all
agreements, instruments and other obligations pursuant to which any
indebtedness of the Company or any of its subsidiaries in an aggregate
principal amount in excess of $3,000,000 is outstanding or may be incurred
and (ii) the respective principal amounts outstanding thereunder as of
December 13, 1997.
(u) Intellectual Property. The Company and its subsidiaries own, or are
validly licensed or otherwise have the right to use, all patents, patent
rights, trademarks, trade names, service marks, copyrights, know how and
other proprietary intellectual property rights and computer programs
(collectively, "Intellectual Property Rights") that are material to the
conduct of the business of the Company and its subsidiaries taken as a
whole. The Company Disclosure Schedule sets forth a description of all
Intellectual Property Rights that are material to the conduct of the
business of the Company and its subsidiaries taken as a whole. No claims
are pending or, to the knowledge of the Company, threatened that the
Company or any of its subsidiaries is infringing or otherwise adversely
affecting the rights of any person with regard to any Intellectual Property
Right so as to materially adversely affect any of the Company's material
Intellectual Property Rights, and the Company is not aware of any basis for
any such claims. To the knowledge of the Company, no person is infringing
the rights of the Company or any of its subsidiaries with respect to any
material Intellectual Property Right so as to materially adversely effect
such Intellectual Property Right.
(v) Labor Matters. Except as disclosed in the Filed SEC Documents,
neither the Company nor any of its subsidiaries is party to any collective
bargaining agreement, memorandum of understanding, settlement or other
labor agreement with any union or labor organization and no union or labor
organization has been recognized by the Company or any of its subsidiaries
as an exclusive bargaining representative for employees of the Company or
any of its subsidiaries. Except as disclosed in the Filed SEC Documents, to
the Company's knowledge, there is no current union representation question
involving employees of the Company or any of its subsidiaries, nor does the
Company have knowledge of any significant activity or proceeding of any
labor organization (or representative thereof) or employee group to
organize any such employees. Except as disclosed in the Filed SEC
Documents, neither the Company nor any of its subsidiaries has made any
commitment that would require the application of the terms of any
collective bargaining agreements entered into by the Company or any of its
subsidiaries to Bethlehem, to any joint venture of Bethlehem, or to any
subsidiary of Bethlehem.
Except as disclosed in the Filed SEC Documents there is no material labor
dispute, strike, picketing or work stoppage, or any lockout, involving
employees of the Company or any of its subsidiaries pending or, to the
Company's knowledge, threatened against or involving the Company or any of
its subsidiaries.
Except as disclosed in Filed SEC Documents, (i) there is no grievance,
arbitration, unfair labor practice, investigation, employment
discrimination or other labor or employment related charge, complaint or
claim against the Company or any of its subsidiaries pending before any
court, arbitrator, mediator or governmental agency or tribunal, or, to the
Company's knowledge, threatened, and (ii) there has been no adjudication by
any court, arbitrator, mediator or governmental agency or tribunal that, in
the case of either (i) or (ii), has or that would reasonably be expected to
have a material adverse effect on the Company or otherwise limit or affect
the business operations of the Company.
(w) Assets Other than Real Property Interests. The Company or a
subsidiary has good and valid title to all material assets reflected on the
most recent balance sheet included in the Filed SEC Documents (the "Balance
Sheet") or thereafter acquired, except those sold or otherwise disposed of
for fair value since the date of the Balance Sheet in the ordinary course
of business consistent with past practice and not in violation of this
Agreement, in each case free and clear of all mortgages, liens, security
interests or encumbrances of any kind except (i) mechanics', carriers',
workmen's , repairmen's or other like liens arising or incurred in the
ordinary course of business, liens arising under original purchase price
conditional sales contracts and equipment leases with third parties entered
into in the ordinary course of business and liens for Taxes which are not
due and payable or which may thereafter be paid without penalty, (ii)
mortgages, liens, security interests and encumbrances which secure debt
that is reflected as a liability on the Balance Sheet and the existence of
which is indicated in the notes thereto and (iii) other imperfections of
title or encumbrances, if
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any, which do not, individually or in the aggregate, materially impair the
continued use and operation of the assets to which they relate in the
business of the Company and the subsidiaries as presently conducted (the
mortgages, liens, security interests, encumbrances and imperfections of
title described in clauses (i), (ii) and (iii) above are hereinafter
referred to collectively as "Permitted Liens").
All the material tangible personal property of the Company and the
subsidiaries has been maintained in all material respects in accordance
with the past practice of the Company and the subsidiaries and generally
accepted industry practice. Each item of material tangible personal
property of the Company and the subsidiaries is in all material respects in
good working order and is adequate and sufficient for the Company's
intended purposes, ordinary wear and tear excepted. All leased personal
property of the Company and the subsidiaries is in all material respects in
the condition required of such property by the terms of the lease
applicable thereto during the term of the lease and upon the expiration
thereof.
This Section 3.01(w) does not relate to real property or interests in
real property, such items being the subject of Section 3.01(x).
(x) Title to Real Property. Schedule 3.01(x) sets forth a complete list
of all real property owned in fee by the Company and the subsidiaries
(individually, an "Owned Property") and identifies any material reciprocal
easement or operating agreements relating thereto. Schedule 3.01(x) sets
forth a complete list of all real property and interests in real property
leased by the Company and the subsidiaries (individually, a "Leased
Property") and identifies any material base leases and reciprocal easement
or operating agreements relating thereto. The Company or a subsidiary has
(i) good and marketable fee title to all Owned Property insurable at
regular rates and (ii) good and valid title to the leasehold estates in all
Leased Property (an Owned Property or Leased Property being sometimes
referred to herein, individually, as a "Company Property" and,
collectively, as "Company Properties"), in each case free and clear of all
mortgages, liens, security interests, encumbrances, leases, assignments,
subleases, easements, covenants, rights-of-way and other similar
restrictions of any nature whatsoever, except (A) leases, subleases and
similar agreements set forth in Schedule 3.02(x), (B) Permitted Liens, (C)
easements, covenants, rights-of-way and other similar restrictions of
record, (D) any conditions that may be shown by a current, accurate survey
or physical inspection of any Company Property made prior to Closing and
(E) (I) zoning, building and other similar restrictions, (II) mortgages,
liens, security interests, encumbrances, easements, covenants, rights-of-
way and other similar restrictions that have been placed by any developer,
landlord or other third party on property over which the Company or any
subsidiary has easement rights or on any Leased Property and subordination
or similar agreements relating thereto, and (III) unrecorded easements,
covenants, rights-of-way and other similar restrictions, none of which
items set forth in clauses (C), (D) and (E), individually or in the
aggregate, materially impair the value or the continued use and operation
of the property to which they relate in the business of the Company and the
subsidiaries as presently conducted. To the knowledge of the Company, the
current use by the Company and the subsidiaries of the plants, offices and
other facilities located on Company Property does not violate any local
zoning or similar land use or government regulations in any material
respect.
(y) Insurance. The Company and the subsidiaries maintain policies of fire
and casualty, liability and other forms of insurance in such amounts, with
such deductibles and against such risks and losses as are, in the Company's
judgment, reasonable for the business and assets of the Company and the
subsidiaries. The insurance policies owned and maintained by the Company
and the subsidiaries are listed in Schedule 3.01(y). All such policies are
in full force and effect, all premiums due and payable thereon have been
paid (other than retroactive or retrospective premium adjustments that are
not yet, but may be, required to be paid with respect to any period ending
prior to the Closing Date under comprehensive general liability and
workmen's compensation insurance policies), and no notice of cancellation
or termination has been received with respect to any such policy which has
not been replaced on substantially similar terms prior to the date of such
cancelation. To the knowledge of the Company, the activities and operations
of the Company and the subsidiaries have been conducted in a manner so as
to conform in all material respects to all applicable provisions of such
insurance policies.
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(z) Transactions with Affiliates. Except as set forth in the Filed SEC
Documents, there is no agreement, contract or other arrangement between the
Company or any subsidiary, on the one hand, and any affiliate (other than
the Company or a subsidiary), on the other hand, that will continue in
effect subsequent to the Closing. After the Closing no affiliate of the
Company or any subsidiary (other than the Company or any subsidiary) will
have any material interest in any property (real or personal, tangible or
intangible) or contract used in or pertaining to the business of the
Company or a subsidiary. No affiliate of the Company or any subsidiary
(other than the Company or any subsidiary) has any direct or indirect
ownership interest in any person in which the Company or a subsidiary has
any direct or indirect ownership interest or with which the Company or a
subsidiary competes or has a business relationship.
(aa) Books and Records. The Company has delivered to Bethlehem prior to
the execution of this Agreement complete and correct copies of its Restated
Certificate of Incorporation and By-laws and the articles of incorporation
and by-laws (or comparable organizational documents) of its significant
subsidiaries, in each case as amended to date. The books of account, minute
books, stock record books, and other records of the Company and its
subsidiaries, are complete and correct and have been maintained in
accordance with sound business practices. The minute books of the Company
and its subsidiaries contain accurate and complete records of all meetings
held of, and corporate action taken by, the stockholders, the Boards of
Directors, and committees of the Boards of Directors of the Company and its
subsidiaries, and no meeting prior to November 30, 1997 of any such
stockholders, Board of Directors, or committee has been held for which
minutes have not been prepared and are not contained in such minute books.
At the Closing, all of those books and records will be in the possession of
the Company and its subsidiaries.
SECTION 3.02. Representations and Warranties of Bethlehem. Except as set
forth with respect to a specifically identified representation and warranty on
the Disclosure Schedule delivered by Bethlehem to the Company prior to the
execution of this Agreement (the "Bethlehem Disclosure Schedule"), Bethlehem
represents and warrants to the Company as follows:
(a) Organization, Standing and Corporate Power. Bethlehem is a
corporation duly organized, validly existing and in good standing under the
laws of Delaware and has the requisite corporate power and authority to
carry on its business as now being conducted. Bethlehem is duly qualified
or licensed to do business and is in good standing (with respect to
jurisdictions which recognize such concept) in each jurisdiction in which
the nature of its business or the ownership or leasing of its properties
makes such qualification or licensing necessary, other than in such
jurisdictions where the failure to be so qualified or licensed or to be in
good standing individually or in the aggregate would not have a material
adverse effect on Bethlehem. Bethlehem has delivered to the Company
complete and correct copies of its Restated Certificate of Incorporation
and By-laws as amended to the date hereof.
(b) Capital Structure. The authorized capital stock of Bethlehem consists
of 250,000,000 shares of Bethlehem Common Stock, 20,000,000 shares of
preferred stock, par value $1.00 per share ("Bethlehem Preferred Stock")
and 20,000,000 shares of preference stock, par value $1.00 per share
("Bethlehem Preference Stock"). At the close of business on December 12,
1997, (i) 112,931,683 shares of Bethlehem Common Stock were issued and
outstanding, (ii) 2,500,000 shares of $5.00 Cumulative Convertible
Preferred Stock, 4,000,000 shares of $2.50 Cumulative Convertible Preferred
Stock, and 5,123,200 shares of Bethlehem $3.50 Cumulative Convertible
Preferred Stock were issued and outstanding, (iii) 1,703,849 shares of
Bethlehem Series A Preference Stock and 706,254 shares of Bethlehem Series
B Preference Stock were issued and outstanding, (iv) 2,051,583 shares of
Bethlehem Common Stock were held by Bethlehem in its treasury, (v)
7,716,693 shares of Bethlehem Common Stock were reserved for issuance
pursuant to the 1994 Stock Incentive Plan of Bethlehem Steel Corporation,
the 1988 Stock Incentive Plan of Bethlehem Steel Corporation, the 1994 Non-
Employee Directors Stock Plan of Bethlehem Steel Corporation, and the
Savings Plan for Salaried Employees of Bethlehem Steel Corporation and
Subsidiary Companies (collectively, the "Bethlehem Stock Plans") and (vi)
1,500,000 shares of Series A Junior Participating Preference Stock are
reserved for issuance in connection with the rights (the "Bethlehem
Rights") to
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purchase shares of Series A Junior Participating Preference Stock issued
pursuant to the Rights Agreement dated as of September 28, 1988 (as amended
from time to time, the "Bethlehem Rights Agreement") between Bethlehem and
Morgan Shareholder Services Trust Company, as Rights Agent. Except as set
forth above, at the close of business on December 12, 1997, no shares of
capital stock or other voting securities of Bethlehem were issued, reserved
for issuance or outstanding. At the close of business on December 12, 1997,
there were no outstanding stock appreciation rights or rights (other than
employee stock options to purchase shares of Bethlehem Common Stock) to
receive shares of Bethlehem Common Stock on a deferred basis granted under
the Bethlehem Stock Plans or otherwise. All outstanding shares of capital
stock of Bethlehem are, and all shares which may be issued pursuant to this
Agreement will be, when issued, duly authorized, validly issued, fully paid
and nonassessable and not subject to preemptive rights. There are no notes,
bonds, debentures or other indebtedness of Bethlehem having the right to
vote (or convertible into, or exchangeable for, securities having the right
to vote) on any matters on which stockholders of Bethlehem may vote. Except
as set forth above, at the close of business on December 12, 1997, there
were no outstanding securities, options, warrants, calls, rights,
commitments, agreements, arrangements or undertakings of any kind to which
Bethlehem or any of its subsidiaries was a party or by which any of them
was bound obligating Bethlehem or any of its subsidiaries to issue, deliver
or sell, or cause to be issued, delivered or sold, additional shares of
capital stock or other voting securities of Bethlehem or any of its
subsidiaries or obligating Bethlehem or any of its subsidiaries to issue,
grant, extend or enter into any such security, option, warrant, call,
right, commitment, agreement, arrangement or undertaking. At the close of
business on December 12, 1997, there were no outstanding contractual
obligations of Bethlehem or any of its subsidiaries to repurchase, redeem
or otherwise acquire any shares of capital stock of Bethlehem or any of its
subsidiaries.
(c) Authority; Noncontravention. Bethlehem has all requisite corporate
power and authority to enter into this Agreement and to consummate the
transactions contemplated by this Agreement. The execution and delivery of
this Agreement by Bethlehem and the consummation by Bethlehem of the
transactions contemplated by this Agreement have been duly authorized by
all necessary corporate action on the part of Bethlehem. This Agreement has
been duly executed and delivered by Bethlehem and constitutes a valid and
binding obligation of Bethlehem, enforceable against Bethlehem in
accordance with its terms. The execution and delivery of this Agreement do
not, and the consummation of the transactions contemplated by this
Agreement and compliance with the provisions of this Agreement by Bethlehem
will not, conflict with, or result in any violation of, or default (with or
without notice or lapse of time, or both) under, or give rise to a right of
termination, cancellation or acceleration of any obligation or to loss of a
material benefit under, or result in the creation of any Lien upon any of
the properties or assets of Bethlehem under, (i) the Restated Certificate
of Incorporation or By-laws of Bethlehem, (ii) any loan or credit
agreement, note, bond, mortgage, indenture, lease or other agreement,
instrument, permit, concession, franchise or license applicable to
Bethlehem or its properties or assets or (iii) subject to the governmental
filings and other matters referred to in the following sentence, any
judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to Bethlehem or its properties or assets, other than, in the
case of clauses (ii) and (iii), any such conflicts, violations, defaults,
rights, losses or Liens that individually or in the aggregate would not (x)
have a material adverse effect on Bethlehem, (y) impair the ability of
Bethlehem to perform its obligations under this Agreement in any material
respect or (z) prevent or materially delay the consummation of any of the
transactions contemplated by this Agreement. No consent, approval, order or
authorization of, or registration, declaration or filing with, any
Governmental Entity is required by or with respect to Bethlehem in
connection with the execution and delivery of this Agreement by Bethlehem
or the consummation by Bethlehem of the transactions contemplated by this
Agreement, except for (1) the filing of a premerger notification and report
form by Bethlehem under the HSR Act; (2) the filing with the SEC of the
Form S-4 and such reports under Section 13(a), 13(d), 15(d) or 16(a) of the
Exchange Act as may be required in connection with this Agreement; (3) the
filing of the Certificate of Merger with the Delaware Secretary of State
and appropriate documents with the relevant authorities of other states in
which Bethlehem is qualified to do business; (4) such filings and consents
as may be required under any environmental, health or safety law or
regulation pertaining to any notification, disclosure or required
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approval necessitated by the Merger or the transactions contemplated by
this Agreement; (5) such filings with and approvals of the NYSE and the
Chicago Stock Exchange (the "CSE") to permit the shares of Bethlehem Common
Stock that are to be issued in the Merger and under the Stock Plans to be
listed on the NYSE and the CSE; and (6) such consents, approvals, orders,
authorizations, registrations, declarations and filings the failure to make
or obtain which would not reasonably be expected to have a material adverse
effect on Bethlehem or impair the ability of Bethlehem to perform its
obligations under this Agreement in any material respect.
(d) SEC Documents; Undisclosed Liabilities. Bethlehem has filed all
required reports, schedules, forms, statements and other documents with the
SEC since January 1, 1996 (the "Bethlehem SEC Documents"). As of their
respective dates, the Bethlehem SEC Documents complied in all material
respects with the requirements of the Securities Act or the Exchange Act,
as the case may be, and the rules and regulations of the SEC promulgated
thereunder applicable to such Bethlehem SEC Documents, and none of the
Bethlehem SEC Documents contained any untrue statement of a material fact
or omitted to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. Except to the
extent that information contained in any Bethlehem SEC Document has been
revised or superseded by a later Filed Bethlehem SEC Document (as defined
in Section 3.02(f)), none of the Bethlehem SEC Documents contains any
untrue statement of a material fact or omits to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The financial statements of Bethlehem included in the Bethlehem
SEC Documents comply as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC
with respect thereto, have been prepared in accordance with generally
accepted accounting principles (except, in the case of unaudited
statements, as permitted by Form 10-Q of the SEC) applied on a consistent
basis during the periods involved (except as may be indicated in the notes
thereto) and fairly present the consolidated financial position of
Bethlehem and its consolidated subsidiaries as of the dates thereof and the
consolidated results of their operations and cash flows for the periods
then ended (subject, in the case of unaudited statements, to normal year-
end audit adjustments). Except as set forth in the Filed Bethlehem SEC
Documents, neither Bethlehem nor any of its subsidiaries has any material
liabilities or obligations of any nature (whether accrued, absolute,
contingent or otherwise) that, individually or in the aggregate, would
reasonably be expected to have a material adverse effect on Bethlehem.
(e) Information Supplied. None of the information supplied or to be
supplied by Bethlehem specifically for inclusion or incorporation by
reference in the Form S-4 will, at the time the Form S-4 becomes effective
under the Securities Act, contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading. The Form S-4 will
comply as to form in all material respects with the requirements of the
Securities Act and the rules and regulations thereunder, except that no
representation or warranty is made by Bethlehem with respect to statements
made or incorporated by reference therein based on information supplied by
the Company specifically for inclusion or incorporation by reference in the
Proxy Statement/ Prospectus or the Form S-4.
(f) Absence of Certain Changes or Events. Except as disclosed in the
Bethlehem SEC Documents filed and publicly available prior to the date of
this Agreement (as amended to the date of this Agreement, the "Filed
Bethlehem SEC Documents"), since the date of the most recent audited
financial statements included in the Filed Bethlehem SEC Documents,
Bethlehem has conducted its business only in the ordinary course, and there
has not been (i) any material adverse change in Bethlehem, (ii) any
declaration, setting aside or payment of any dividend or other distribution
(whether in cash, stock or property) with respect to any of Bethlehem's
capital stock, other than regular quarterly cash dividends, (iii) any
split, combination or reclassification of any of Bethlehem's capital stock
or any issuance or the authorization of any issuance of any other
securities in respect of, in lieu of or in substitution for shares of
Bethlehem's capital stock, (iv) any damage, destruction or loss, whether or
not covered by insurance, that has or would reasonably be expected to have
a material adverse effect on Bethlehem, (v) except as may have been
required by a change
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in generally accepted accounting principles, any change in accounting
methods, principles or practices by Bethlehem materially affecting its
assets, liabilities or business or (vi) any Tax election that would
reasonably be expected to have a material adverse effect on Bethlehem, or
any settlement or compromise of any material Tax liability.
(g) Litigation. Except as disclosed in the Filed Bethlehem SEC Documents,
there is no suit, action or proceeding pending or, to the knowledge of
Bethlehem, threatened against or affecting Bethlehem or any of its
subsidiaries that individually or in the aggregate would reasonably be
expected to have a material adverse effect on Bethlehem, nor is there any
judgment, order, decree, statute, law, ordinance, rule or regulation of any
Governmental Entity outstanding against Bethlehem or any of its
subsidiaries having, or which would reasonably be expected to have, any
such material adverse effect.
(h) ERISA Compliance. With respect to each "employee benefit plan" (as
defined in Section 3(1) of ERISA) and each other employment, compensation,
deferred compensation, change in control, termination or equity-based plan,
program, agreement or arrangement entered into, maintained or contributed
to by Bethlehem or a Commonly Controlled Entity of Bethlehem ("Bethlehem
Benefit Plan"), no event has occurred and, to the knowledge of Bethlehem,
no condition or set of circumstances exists, in connection with which
Bethlehem or any of its subsidiaries could be subject to any liabilities
(except liabilities for benefits claims and funding obligations payable in
the ordinary course) under ERISA, the Code or any other applicable law that
are individually or in the aggregate reasonably likely to have a material
adverse effect on Bethlehem.
(i) Taxes. (i) Each of Bethlehem and its subsidiaries has filed all
Tax Returns required to be filed by it or requests for extensions to
file such returns or reports have been timely filed, granted and have
not expired, except to the extent that such failures to file or to have
extensions granted that remain in effect individually or in the
aggregate would not have a material adverse effect on Bethlehem. All
returns filed by Bethlehem and each of its subsidiaries are complete
and accurate in all material respects to the knowledge of Bethlehem.
Bethlehem and each of its subsidiaries has paid (or Bethlehem has paid
on its behalf) all Taxes shown as due on such returns and all material
Taxes otherwise due, and the most recent financial statements contained
in the Filed Bethlehem SEC Documents reflect an adequate liability for
all Taxes payable by Bethlehem and its subsidiaries for all taxable
periods and portions thereof accrued through the date of such financial
statements, except where the failure to have such an adequate liability
would not have a material adverse effect on Bethlehem.
(ii) No deficiencies for any Taxes have been proposed, asserted or
assessed against Bethlehem or any of its subsidiaries that are not
adequately reflected on the financial statements, except for
deficiencies that individually or in the aggregate would not have a
material adverse effect on Bethlehem, and no requests for waivers of
the time to assess any such Taxes have been granted or are pending. The
U.S. Federal income Tax returns of Bethlehem and each of its
subsidiaries consolidated in such returns have either been examined by
and settled with the U.S. Internal Revenue Service or closed by virtue
of the applicable statute of limitations. There is no audit,
examination, deficiency or refund litigation pending with respect to
Taxes and during the past three years no taxing authority has given
written notice of the intent to commence any such examination, audit,
deficiency or refund litigation. None of the assets or properties of
Bethlehem or any of its subsidiaries is subject to any material Tax
lien other than Permitted Tax Liens.
(j) Brokers. No broker, investment banker, financial advisor or other
person, other than J.P. Morgan Securities Inc., the fees and expenses of
which will be paid by Bethlehem, is entitled to any broker's, finder's,
financial advisor's or other similar fee or commission in connection with
the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of Bethlehem.
(k) Opinion of Financial Advisor. Bethlehem has received the opinion of
J.P. Morgan Securities Inc., dated the date of this Agreement, to the
effect that, as of such date, the Merger Consideration is fair to Bethlehem
from a financial point of view.
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(l) Compliance with Applicable Laws. Each of Bethlehem and its
significant subsidiaries has in effect all Permits necessary for it to own,
lease or operate its properties and assets and to carry on its business as
now conducted, and there has occurred no default under any such Permit,
except for the lack of Permits and for defaults under Permits which lack or
default individually or in the aggregate would not have a material adverse
effect on Bethlehem. Except as disclosed in the Filed Bethlehem SEC
Documents, Bethlehem and its significant subsidiaries are in compliance
with all applicable judgments, orders, decrees, statutes, laws, ordinances,
rules and regulations of any Governmental Entity, except for possible
noncompliance which individually or in the aggregate would not have a
material adverse effect on Bethlehem.
(m) Bethlehem Rights Agreement. Under the terms of the Bethlehem Rights
Agreement, the transactions contemplated by this Agreement will not cause a
Distribution Date (as such term is defined in the Bethlehem Rights
Agreement) to occur or cause the Bethlehem Rights to become exercisable.
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
SECTION 4.01. Conduct of Business. (a) Conduct of Business by the Company.
Except as set forth in Section 4.01 of the Company Disclosure Schedule or
Section 5.06 hereof, and except with the consent of Bethlehem, during the
period from the date of this Agreement to the Effective Time, the Company
shall, and shall cause its subsidiaries to, carry on their respective
businesses in the usual, regular and ordinary course in substantially the same
manner as heretofore conducted and in compliance in all material respects with
all applicable laws and regulations and, to the extent consistent therewith,
use all reasonable efforts to preserve intact their current business
organizations, keep available the services of their current officers and
employees and preserve their relationships with those persons having business
dealings with them to the end that their goodwill and ongoing businesses shall
be unimpaired at the Effective Time. Except as set forth in Section 4.01 of
the Company Disclosure Schedule or Section 5.06 hereof, without limiting the
generality of the foregoing, during the period from the date of this Agreement
to the Effective Time, the Company shall not, and shall not permit any of its
subsidiaries to, without the consent of Bethlehem:
(i) (x) declare, set aside or pay any dividends on, or make any other
distributions in respect of, any of its capital stock, other than dividends
and distributions by a direct or indirect wholly owned subsidiary of the
Company to its parent and other than regular quarterly cash dividends of
$.25 on Company Common Stock and $1.20 on Company Series B Preferred Stock,
(y) split, combine or reclassify any of its capital stock or issue or
authorize the issuance of any other securities in respect of, in lieu of or
in substitution for shares of its capital stock or (z) purchase, redeem or
otherwise acquire any shares of capital stock of the Company or any of its
subsidiaries or any other securities thereof or any rights, warrants or
options to acquire any such shares or other securities;
(ii) issue, deliver, sell, pledge or otherwise encumber any shares of its
capital stock, any other voting securities or any securities convertible
into, or any rights, warrants or options to acquire, any such shares,
voting securities or convertible securities (other than the issuance of
Company Common Stock upon the exercise of Employee Stock Options
outstanding on the date of this Agreement and in accordance with their
present terms or in accordance with the present terms of the Stock Plans);
(iii) amend its Restated Certificate of Incorporation, by-laws, articles
of incorporation, code of regulations or other comparable organizational
documents, as applicable;
(iv) acquire or agree to acquire (x) by merging or consolidating with, or
by purchasing a substantial portion of the assets of, or by any other
manner, any business or any corporation, limited liability company,
partnership, joint venture or other entity or division thereof or (y) any
assets that individually or in the aggregate are material to the Company
and its subsidiaries taken as a whole, except for purchases of inventory in
the ordinary course of business consistent with past practice;
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(v) sell, lease, license, mortgage or otherwise encumber or subject to
any Lien or otherwise dispose of any of its properties or assets other than
in the ordinary course of business consistent with past practice;
(vi) (y) incur any indebtedness for borrowed money or guarantee any such
indebtedness of another person, issue or sell any debt securities or
warrants or other rights to acquire any debt securities of the Company or
any of its subsidiaries, guarantee any debt securities of another person,
enter into any "keep well" or other agreement to maintain any financial
statement condition of another person or enter into any arrangement having
the economic effect of any of the foregoing, except for short-term
borrowings incurred in the ordinary course of business consistent with past
practice, or (z) make any loans, advances or capital contributions to, or
investments in, any other person, other than to the Company or any direct
or direct subsidiary of the Company or to officers and employees of the
Company or any of its subsidiaries for travel, business or relocation
expenses in the ordinary course of business;
(vii) make or agree to make any new capital expenditure or capital
expenditures which individually is in excess of $1,000,000 or in the
aggregate are in excess of $10,000,000;
(viii) make any Tax election that could reasonably be expected to have a
material adverse effect on the Company or settle or compromise any material
Tax liability;
(ix) pay, discharge, settle or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge, settlement or satisfaction,
in the ordinary course of business consistent with past practice or in
accordance with their terms, of liabilities reflected or reserved against
in, or contemplated by, the most recent consolidated financial statements
(or the notes thereto) of the Company included in the Filed SEC Documents,
incurred since the date of such financial statements in the ordinary course
of business consistent with past practice or which do not in the aggregate
have a material adverse effect on the Company;
(x) (x) amend (other than as required by applicable law) any Company
Benefit Plan in any material respect, (y) increase the compensation or
bonus opportunity of any employee of the Company or its subsidiaries,
except for any increases in the ordinary course of business consistent with
past practice, or (z) grant any additional equity based compensation to any
employee of the Company or its subsidiaries, except for grants in the
ordinary course of business consistent with past practice;
(xi) except in the ordinary course of business or except as could not
reasonably be expected to have a material adverse effect on the Company,
modify, amend or terminate any material contract or agreement to which the
Company or any of its subsidiaries is a party or waive, release or assign
any material rights or claims thereunder;
(xii) make any change to its accounting methods, principles or practices,
except as may be required by generally accepted accounting principles; or
(xiii) authorize, or commit or agree to take, any of the foregoing
actions.
(b) Conduct of Business by Bethlehem. During the period from the date of
this Agreement to the Effective Time, Bethlehem shall not (i) amend its
Restated Certificate of Incorporation or by-laws, (ii) make any Tax election
that could reasonably be expected to have a material adverse effect on
Bethlehem or settle or compromise any material Tax liability or (iii)
authorize, or commit or agree to take, any of the foregoing actions.
(c) Other Actions. The Company and Bethlehem shall not, and shall not permit
any of their respective subsidiaries to, take any action that would, or that
could reasonably be expected to, result in (i) any of the representations and
warranties of such party set forth in this Agreement that are qualified as to
materiality becoming untrue, (ii) any of such representations and warranties
that are not so qualified becoming untrue in any material respect or (iii) any
of the conditions to the Merger set forth in Article VI not being satisfied.
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(d) Advice of Changes. The Company and Bethlehem shall promptly advise the
other party orally and in writing of (i) any representation or warranty made
by it contained in this Agreement that is qualified as to materiality becoming
untrue or inaccurate in any respect or any such representation or warranty
that is not so qualified becoming untrue or inaccurate in any material
respect, (ii) the failure by it to comply with or satisfy in any material
respect any covenant, condition or agreement to be complied with or satisfied
by it under this Agreement or (iii) any change or event having, or which could
reasonably be expected to have, a material adverse effect on such party or on
the truth of their respective representations and warranties or the ability of
the conditions set forth in Article VI to be satisfied; provided, however,
that no such notification shall affect the representations, warranties,
covenants or agreements of the parties or the conditions to the obligations of
the parties under this Agreement.
SECTION 4.02. No Solicitation. (a) The Company shall not, nor shall it
permit any of its subsidiaries to, nor shall it authorize or permit any of its
directors, officers or employees or any investment banker, financial advisor,
attorney, accountant or other representative retained by it or any of its
subsidiaries to, directly or indirectly through another person, (i) solicit or
initiate (including by way of furnishing information), or take any other
action designed to facilitate, any inquiries or the making of any proposal
that constitutes any takeover proposal (as defined below) or (ii) participate
in any discussions or negotiations regarding any takeover proposal; provided,
however, that if, at any time prior to the adoption of this Agreement by the
holders of Company Common Stock, the Board of Directors of the Company
determines in good faith, after consultation with outside counsel, that it is
necessary to do so in order to comply with its fiduciary duties to the
Company's shareholders under applicable law, the Company may, in response to a
takeover proposal that was not solicited by it, and subject to compliance with
Section 4.02(c), (x) furnish information with respect to the Company and its
subsidiaries to any person pursuant to a customary confidentiality agreement
(as determined by the Company after consultation with its outside counsel) and
(y) participate in negotiations regarding such takeover proposal. For purposes
of this Agreement, "takeover proposal" means any inquiry, proposal or offer
from any person relating to any direct or indirect acquisition or purchase of
20% or more of the assets of the Company and its subsidiaries or 20% or more
of any class of equity securities of the Company or any of its subsidiaries,
any tender offer or exchange offer that if consummated would result in any
person beneficially owning 20% or more of any class of equity securities of
the Company or any of its subsidiaries, or any merger, consolidation, business
combination, recapitalization, liquidation, dissolution or similar transaction
involving the Company or any of its subsidiaries, other than the transactions
contemplated by this Agreement.
(b) Except as expressly permitted by this Section 4.02, neither the Board of
Directors of the Company nor any committee thereof shall (i) (unless it
determines in good faith, after consultation with outside counsel, that it is
necessary to do so in order to comply with its fiduciary duties to the
Company's shareholders under applicable law) withdraw or modify, or propose
publicly to withdraw or modify, in a manner adverse to Bethlehem, the approval
or recommendation by such Board of Directors or such committee of the Merger
or this Agreement, (ii) approve or recommend, or propose publicly to approve
or recommend, any takeover proposal or (iii) cause the Company to enter into
any letter of intent, agreement in principle, acquisition agreement or other
similar agreement (each, an "Acquisition Agreement") related to any takeover
proposal. Notwithstanding the foregoing, in the event that prior to the
adoption of this Agreement by the holders of Company Common Stock the Board of
Directors of the Company receives a superior proposal (as defined below), the
Board of Directors of the Company may (x) (if it determines in good faith,
after consultation with outside counsel, that it is necessary to do so in
order to comply with its fiduciary duties to the Company's shareholders under
applicable law) withdraw or modify its approval or recommendation of the
Merger or this Agreement or (y) approve or recommend such superior proposal or
terminate this Agreement (and concurrently with or after such termination, if
it so chooses, cause the Company to enter into any Acquisition Agreement with
respect to any superior proposal) but only at a time that is after the fifth
business day following Bethlehem's receipt of written notice from the Company
advising Bethlehem that the Board of Directors of the Company has received a
superior proposal, specifying the terms and conditions of such superior
proposal and identifying the person making such superior proposal. For
purposes of this Agreement, a "superior proposal" means any proposal or offer
made by a third party to acquire, directly or indirectly, for consideration
consisting of cash and/or securities, more than 50% of the combined
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voting power of the shares of Company Common Stock then outstanding or a
substantial portion of the assets of the Company and its subsidiaries and
otherwise on terms which the Board of Directors of the Company determines in
its good faith judgment to be more favorable to the Company's shareholders
than the Merger and for which financing, to the extent required, is then
committed or which, in the good faith judgment of the Board of Directors of
the Company, is reasonably capable of being obtained by such third party.
(c) In addition to the obligations of the Company set forth in paragraphs
(a) and (b) of this Section 4.02, the Company shall immediately advise
Bethlehem of any takeover proposal, the material terms and conditions of such
takeover proposal and the identity of the person making such request or
takeover proposal. The Company will keep Bethlehem reasonably informed of the
status and details (including amendments) of any such takeover proposal.
(d) Nothing contained in this Section 4.02 shall prohibit the Company from
taking and disclosing to its shareholders a position contemplated by Rule 14e-
2(a) promulgated under the Exchange Act or from making any disclosure to the
Company's shareholders if, in the good faith judgment of the Board of
Directors of the Company, after consultation with outside counsel, failure so
to disclose would be inconsistent with its fiduciary duties to the Company's
shareholders under applicable law; provided, however, that neither the Company
nor its Board of Directors nor any committee thereof shall, except as
permitted by Section 4.02(b), withdraw or modify, or propose publicly to
withdraw or modify, its position with respect to this Agreement or the Merger
or approve or recommend, or propose publicly to approve or recommend, a
takeover proposal.
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.01. Preparation of the Form S-4 and the Proxy
Statement/Prospectus; Company Shareholders Meeting. (a) As soon as practicable
following the date of this Agreement, the Company and Bethlehem shall prepare
and file with the SEC the Proxy Statement/Prospectus and Bethlehem shall
prepare and file with the SEC the Form S-4, in which the Proxy
Statement/Prospectus will be included as a prospectus. Each of the Company and
Bethlehem shall use all reasonable efforts to have the Form S-4 declared
effective under the Securities Act as promptly as practicable after such
filing. The Company will use all reasonable efforts to cause the Proxy
Statement/Prospectus to be mailed to the Company's shareholders as promptly as
practicable after the Form S-4 is declared effective under the Securities Act.
Bethlehem shall also take any action (other than qualifying to do business in
any jurisdiction in which it is not now so qualified or to file a general
consent to service of process) required to be taken under any applicable state
securities laws in connection with the issuance of Bethlehem Common Stock in
connection with the Merger and the Company shall furnish all information
concerning the Company and the holders of the Company Common Stock as may be
reasonably requested in connection with any such action.
(b) Subject to the fiduciary duties of the directors under applicable law,
the Company will, as soon as practicable following the date of this Agreement,
duly call, give notice of, convene and hold a meeting of its shareholders (the
"Company Shareholders Meeting") for the purpose of obtaining the Company
Shareholder Approval. Subject to the fiduciary duties of the directors under
applicable law, the Company will, through its Board of Directors, recommend to
its shareholders the adoption of this Agreement and the approval of the
transactions contemplated hereby.
SECTION 5.02. Letters of the Company's Accountants. The Company shall use
all reasonable efforts to cause to be delivered to Bethlehem a letter of
Arthur Andersen LLP, the Company's independent public accountants, dated a
date within two business days before the date on which the Form S-4 shall
become effective and a letter of Arthur Andersen LLP dated a date within two
business days before the Closing Date, each addressed to Bethlehem, in form
and substance reasonably satisfactory to Bethlehem and customary in scope
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and substance for letters delivered by independent public accountants in
connection with registration statements similar to the Form S-4.
SECTION 5.03. Letters of Bethlehem's Accountants. Bethlehem shall use all
reasonable efforts to cause to be delivered to the Company a letter of Price
Waterhouse LLP, Bethlehem's independent public accountants, dated a date
within two business days before the date on which the Form S-4 shall become
effective and a letter of Price Waterhouse LLP dated a date within two
business days before the Closing Date, each addressed to the Company, in form
and substance reasonably satisfactory to the Company and customary in scope
and substance for letters delivered by independent public accountants in
connection with registration statements similar to the Form S-4.
SECTION 5.04. Access to Information; Confidentiality. Each of the Company
and Bethlehem shall, and shall cause each of its respective subsidiaries to,
afford to the other party and to the officers, employees, financial advisors,
attorneys, accountants and other representatives of such other party,
reasonable access during normal business hours during the period prior to the
Effective Time to all their respective properties, books, contracts,
commitments, personnel and records and, during such period, each of the
Company and Bethlehem shall, and shall cause each of its respective
subsidiaries to, furnish promptly to the other party (a) a copy of each
report, schedule, form, statement and other document filed by it during such
period pursuant to the requirements of U.S. Federal or state securities laws
and (b) all other information concerning its business, properties and
personnel as such other party may reasonably request. Each of the Company and
Bethlehem will hold, and will cause its respective officers, employees,
financial advisors, attorneys, accountants and other representatives and
affiliates to hold, any nonpublic information in accordance with the terms of
the Confidentiality Agreement between Bethlehem and the Company (the
"Confidentiality Agreement").
SECTION 5.05. Reasonable Efforts. (a) Upon the terms and subject to the
conditions set forth in this Agreement, each of the parties agrees to use all
reasonable efforts to take, or cause to be taken, all actions, and to do, or
cause to be done, and to assist and cooperate with the other parties in doing,
all things necessary, proper or advisable to consummate and make effective, in
the most expeditious manner practicable, the Merger and the other transactions
contemplated by this Agreement, including (i) the obtaining of all necessary
actions or nonactions, waivers, consents and approvals from Governmental
Entities and the making of all necessary registrations and filings (including
filings with Governmental Entities, such as those referred to in Sections
3.01(d)(1)-(5) and 3.02(c)(1)-(5)) and the taking of all reasonable steps as
may be necessary to obtain an approval or waiver from, or to avoid an action
or proceeding by, any Governmental Entity, (ii) the obtaining of all necessary
waivers, consents or approvals from third parties, (iii) the defending of any
lawsuits or other legal proceedings, whether judicial or administrative,
challenging this Agreement or the consummation of the transactions
contemplated by this Agreement, including seeking to have any stay or
temporary restraining order entered by any court or other Governmental Entity
vacated or reversed and (iv) the execution and delivery of any additional
instruments necessary to consummate the transactions contemplated by, and to
fully carry out the purposes of, this Agreement. Notwithstanding the
foregoing, in connection with any filing or submission required or action to
be taken by either Bethlehem or the Company to effect the Merger and to
consummate the other transactions contemplated hereby, the Company shall not,
without Bethlehem's prior written consent, commit to any divestiture
transaction, and neither Bethlehem nor any of its affiliates shall be required
to divest or hold separate or otherwise take or commit to take any action that
limits its freedom of action with respect to, or its ability to retain, the
Company or any of its businesses, product lines or assets or any of the
businesses, product lines or assets of Bethlehem or any of its affiliates or
that otherwise would have a material adverse effect on Bethlehem.
(b) In connection with and without limiting the foregoing, the Company and
its Board of Directors shall (i) take all reasonable action necessary to
ensure that no state takeover statute or similar statute or regulation is or
becomes applicable to the Merger, this Agreement, or any of the other
transactions contemplated by this Agreement and (ii) if any state takeover
statute or similar statute or regulation becomes applicable to the Merger,
this Agreement, or any other transaction contemplated by this Agreement, take
all action necessary to ensure that the Merger and the other transactions
contemplated by this Agreement may be consummated as promptly as
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practicable on the terms contemplated by this Agreement and otherwise to
minimize the effect of such statute or regulation on the Merger and the other
transactions contemplated by this Agreement.
SECTION 5.06. Employee Matters. (a) Bethlehem agrees that the Company shall
honor in accordance with their respective terms and, on and after the
Effective Time, Bethlehem shall cause the Surviving Corporation to honor,
without offset, deduction, counterclaim, interruption or deferment, all
Company Plans and all other written employment, severance, termination and
retirement agreements to which the Company is a party as of the Effective
Time, including those Company Plans set forth in the Company Disclosure
Schedule. Bethlehem acknowledges that, for the purposes of certain of such
Company Plans and certain of such other employment, severance, termination and
retirement agreements to which the Company is currently a party, the
consummation or shareholder approval (depending upon the terms of the
applicable plan or agreement) of the Merger will constitute a "change in
control" of the Company (as such term is defined in such plans and agreements)
at the Effective Time and "Good Reason" (as such term is defined in the
Severance Agreements referred to in Section 3.01(j) of the Company Disclosure
Schedule) with respect to the 12 executive officers of the Company identified
in Section 3.01(j) of the Company Disclosure Schedule at, and subject to, the
times specified therein. Subject to the preceding sentence, Bethlehem agrees
to cause the Surviving Corporation, after consummation of the Merger, to pay
all amounts provided under such Company Plans and agreements in accordance
with their respective terms and to honor, and to cause the Surviving
Corporation to honor, all rights, privileges and modifications to or with
respect to any such Company Plans or agreements that become effective as a
result of such change in control.
(b) Bethlehem agrees that, for a period of no less than one year after the
Effective Time, it shall, or shall cause the Surviving Corporation to, provide
employee pension and welfare plans for the benefit of employees and former
employees of the Company, that, in the aggregate, are not materially less
favorable than the Company Plans in effect immediately prior to the Effective
Time. To the extent any benefit plan of Bethlehem (or any plan of the
Surviving Corporation) shall be made applicable to any employee or former
employee of the Company, Bethlehem shall, or shall cause the Surviving
Corporation to, grant to employees and former employees of the Company credit
for service with the Company prior to the Effective Time for the purposes of
determining eligibility to participate and the employee's nonforfeitable
interest in benefits thereunder and, unless a duplication of benefits would
thereby result, for calculating benefits (including benefits the amount or
level of which is determined by reference to an employee's vesting service)
thereunder. In addition, to the extent any Bethlehem Plan (or any plan of the
Surviving Corporation) that constitutes a "welfare plan," as defined in
Section 3.01(j) hereof, shall be made applicable to any employee or former
employee of the Company, Bethlehem shall, or shall cause the Surviving
Corporation to, (i) waive all preexisting condition exclusions and waiting
periods otherwise applicable to employees and former employees of the Company,
except to the extent any such limitations or waiting periods in effect under
comparable Company Plans have not been satisfied as of the date such plan is
made so applicable and (ii) credit each employee and former employee of the
Company for any co-payments and deductibles paid by such employee or former
employee under comparable Company Plans prior to the date such plan is made so
applicable. Nothing in this Agreement shall be interpreted as limiting the
power of the Surviving Corporation to amend or terminate any Company Plan or
any other employee benefit plan, program, agreement or policy or as requiring
the Surviving Corporation or Bethlehem to offer to continue (other than as
required by its terms) any written employment contract.
SECTION 5.07. Employee Stock Options. At the Effective Time or such earlier
time as is provided in the applicable stock option plan or employee or
director stock option or agreement as in effect on the date hereof all
Employee Stock Options shall become vested and exercisable in full. At the
Effective Time, each of the Employee Stock Options which is outstanding and
unexercised at the Effective Time shall be converted automatically into an
option to purchase shares of Bethlehem Common Stock in an amount and at an
exercise price determined as provided below (and otherwise subject to the
terms of the stock option plans of the Company governing the Employee Stock
Options (the "Company Stock Option Plans")):
(1) The number of shares of Bethlehem Common Stock to be subject to the
new option shall be equal to the product of the number of shares of Company
Common Stock subject to the original option and the
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Conversion Number; provided, however, that any fractional shares of
Bethlehem Common Stock resulting from such multiplication shall be rounded
down to the nearest share; and
(2) The exercise price per share under the new option shall be equal to
(a) the aggregate exercise price of the original option divided by (b) the
total number of shares of Bethlehem Common Stock subject to the option;
provided, however, that such exercise price shall be rounded up to the
nearest cent.
The adjustment provided herein with respect to any incentive stock options
shall be and is intended to be effected in a manner that is consistent with
Section 424(a) of the Code. The duration and other terms of the new option
shall be the same as that of the original option, except that all references
to the Company shall be deemed to be references to Bethlehem and the vesting
of all options shall be accelerated to the Effective Time. Bethlehem shall
file with the SEC a registration statement on Form S-8 (or other appropriate
form) or a post-effective amendment to the Registration Statement as promptly
as practicable after the date hereof for purposes of registering all shares of
Bethlehem Common Stock issuable after the Effective Time upon exercise of the
Employee Stock Options, and shall have such registration statement or post-
effective amendment become effective and comply, to the extent applicable,
with state securities or blue sky laws with respect thereto at the Effective
time.
SECTION 5.08. Rights Agreement. The Board of Directors of the Company shall
take all further action (in addition to that referred to in Section 3.01(o))
reasonably requested in writing by Bethlehem (including redeeming the Rights
immediately prior to the Effective Time or amending the Rights Agreement) in
order to render the Rights inapplicable to the Merger and the other
transactions contemplated by this Agreement.
SECTION 5.09. Continuance of Existing Indemnification Rights. (a) For six
years after the Effective Time, Bethlehem shall, or shall cause the Surviving
Corporation to, indemnify, defend and hold harmless any person who is now, or
has been at any time prior to the date hereof, or who becomes prior to the
Effective Time, a director, officer, employee or agent (an "Indemnified
Person") of the Company or any of its subsidiaries against all losses, claims,
damages, liabilities, costs and expenses (including attorneys' fees and
expenses), judgments, fines, losses and amounts paid in settlement in
connection with any actual or threatened action, suit, claim, proceeding or
investigation (each a "Claim") to the extent that any such Claim is based on,
or arises out of: (i) the fact that such Indemnified Person is or was a
director, officer, employee or agent of the Company or any of its subsidiaries
or is or was serving at the request of the Company or any of its subsidiaries
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise; or (ii) this Agreement or any of the
transactions contemplated hereby, in each case to the extent that any such
Claim pertains to any matter or fact arising, existing or occurring prior to
or at the Effective Time, regardless of whether such Claim is asserted or
claimed prior to, at or after the Effective Time, to the full extent permitted
under the DGCL, the Company's Restated Certificate of Incorporation or By-laws
or any indemnification agreement in effect at the date hereof, including
provisions relating to advancement of expenses incurred in the defense of any
such Claim; provided, however, that neither Bethlehem nor the Surviving
Corporation shall be required to indemnify any Indemnified Person in
connection with any proceeding (or portion thereof) involving any Claim
initiated by such Indemnified Person unless the initiation of such proceeding
(or portion thereof) was authorized by the Board of Directors of Bethlehem or
unless such proceeding is brought by an Indemnified Person to enforce rights
under this Section 5.09. Without limiting the generality of the preceding
sentence, in the event any Indemnified Person becomes involved in any Claim,
after the Effective Time, Bethlehem shall, or shall cause the Surviving
Corporation to, periodically advance to such Indemnified Person its legal and
other expenses (including the cost of any investigation and preparation
incurred in connection therewith), subject to the providing by such
Indemnified Person of an undertaking to reimburse all amounts so advanced in
the case of a final nonappealable determination by a court of competent
jurisdiction that such Indemnified Person is not entitled to be indemnified
therefor.
(b) Bethlehem and the Company agree that all rights to indemnification or
liabilities, and all limitations with respect thereto, existing in favor of
any Indemnified Person, as provided in the Company's Restated Certificate of
Incorporation or By-laws and any indemnification agreement in effect at the
date hereof, shall
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survive the Merger and shall continue in full force and effect, without any
amendment thereto, for a period of six years from the Effective Time to the
extent such rights, liabilities and limitations are consistent with the DGCL;
provided, however, that in the event any Claim is asserted or made within such
six-year period, all such rights, liabilities and limitations in respect of
any such Claim shall continue until disposition thereof; provided further that
any determination required to be made with respect to whether an Indemnified
Person's conduct complies with the standards set forth under the DGCL, the
Company's Restated Certificate or Incorporation or By-laws or any such
agreement, as the case may be, shall be made by independent legal counsel
selected by such Indemnified Person and reasonably acceptable to Bethlehem;
provided further that nothing in this Section 5.09 shall impair any rights or
obligations of any current or former director or officer of the Company; and
provided further that nothing in this Section 5.09 shall require Bethlehem to
amend its certificate of incorporation or by-laws.
(c) Bethlehem or the Surviving Corporation shall maintain the company's
existing directors' and officers' liability insurance policy ("D&O Insurance")
for a period of not less than six years after the Effective Time; provided,
however, that Bethlehem may substitute therefor policies of substantially
similar coverage (including pursuant to Bethlehem's own policy) and amounts
containing terms no less advantageous to such former directors or officers;
provided further that, subject to the preceding proviso, if the existing D&O
Insurance expires or is canceled during such period, Bethlehem or the
Surviving Corporation shall use their best efforts to obtain substantially
similar D&O Insurance; and provided further that neither Bethlehem nor the
Surviving Corporation shall be required to pay an annual premium for D&O
Insurance in excess of 200% of the last annual premium paid prior to the date
hereof, but in such case shall purchase as much coverage as possible for such
amount.
SECTION 5.10. Fees and Expenses. (a) Except as set forth in this Section
5.10, all fees and expenses incurred in connection with the Merger, this
Agreement and the other transactions contemplated by this Agreement shall be
paid by the party incurring such fees or expenses, whether or not the Merger
is consummated. Bethlehem shall file any return with respect to and shall pay,
any state or local taxes (including any penalties or interest with respect
thereto), if any, which are attributable to the transfer of the beneficial
ownership of the Company's real property (collectively, the "Real Estate
Transfer Taxes") as a result of the Merger. The Company shall cooperate with
Bethlehem in the filing of such returns including, in the case of the Company,
supplying in a timely manner a complete list of all real property interests
held by the Company and any information with respect to such property that is
reasonably necessary to complete such returns. The fair market value of any
real property of the Company subject to Real Property Transfer Taxes shall be
determined by Bethlehem.
(b) In the event that (i) a takeover proposal shall have been made known to
the Company or any of its subsidiaries or has been made directly to its
shareholders generally or any person shall have publicly announced an
intention (whether or not conditional) to make a takeover proposal and
thereafter this Agreement is terminated by either Bethlehem or the Company
pursuant to Section 7.01(b)(i) (including without limitation because of the
failure to satisfy the condition set forth in Section 6.03(c)), Section
7.01(b)(ii) or Section 7.01(d) or (ii) this Agreement is terminated by the
Company pursuant to Section 7.01(c) then the Company shall promptly pay
Bethlehem a fee equal to $13.5 million (the "Termination Fee") payable by wire
transfer of same day funds; provided, however, that no Termination Fee shall
be payable to Bethlehem pursuant to clause (i) of this paragraph (b) unless
and until within 12 months of such termination the Company or any of its
subsidiaries enters into any Acquisition Agreement or consummates any takeover
proposal (for the purposes of the foregoing proviso the terms "Acquisition
Agreement" and "takeover proposal" shall have the meanings assigned to such
terms in Section 4.02).
SECTION 5.11. Public Announcements. Bethlehem and the Company will consult
with each other before issuing, and provide each other the opportunity to
review, comment upon and concur with, any press release or other public
statements with respect to the transactions contemplated by this Agreement,
including the Merger, and shall not issue any such press release or make any
such public statement prior to such consultation,
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except as may be required by applicable law, court process or by obligations
pursuant to any listing agreement with any national securities exchange. The
parties agree that the initial press release to be issued with respect to the
transactions contemplated by this Agreement shall be in the form heretofore
agreed to by the parties.
SECTION 5.12. Affiliates. Prior to the Closing Date, the Company shall
deliver to Bethlehem a letter identifying all persons who are, at the time
this Agreement is submitted for adoption to the shareholders of the Company,
"affiliates" of the Company for purposes of Rule 145 under the Securities Act.
The Company shall use all reasonable efforts to cause each such person to
deliver to Bethlehem on or prior to the Closing Date a written agreement
substantially in the form attached as Exhibit A hereto.
SECTION 5.13. Stock Exchange Listings. Bethlehem shall use all reasonable
efforts to cause the shares of Bethlehem Common Stock to be issued in the
Merger and under the Stock Plans to be approved for listing on the NYSE and
the CSE, subject to official notice of issuance, prior to the Closing Date.
SECTION 5.14. Shareholder Litigation. The Company shall give Bethlehem the
opportunity to participate in the defense or settlement of any shareholder
litigation against the Company and its directors relating to the transactions
contemplated by this Agreement; provided, however, that no such settlement
shall be agreed to without Bethlehem's consent, which consent shall not be
unreasonably withheld.
SECTION 5.15. Merger Sub. Promptly, but in no event later than three
business days after the date hereof, (a) Bethlehem shall cause Merger Sub to
be formed as a Delaware corporation and its wholly owned subsidiary; (b)
Bethlehem shall cause Merger Sub to adopt and execute and become a party to
this Agreement, all in accordance with Section 251 of the DGCL; and (c)
Bethlehem shall notify the Company of its compliance with the foregoing by
written notice delivered in accordance with Section 8.02 hereof.
ARTICLE VI
CONDITIONS PRECEDENT
SECTION 6.01. Conditions to Each Party's Obligation To Effect the
Merger. The respective obligation of each party to effect the Merger is
subject to the satisfaction or waiver on or prior to the Closing Date of the
following conditions:
(a) Shareholder Approvals. The Company Shareholder Approval shall have
been obtained.
(b) HSR Act. The waiting period (and any extension thereof) applicable to
the Merger under the HSR Act shall have been terminated or shall have
expired.
(c) No Injunctions or Restraints. No judgment, decree, statute, law,
ordinance, rule, regulation, temporary restraining order, preliminary or
permanent injunction or other order enacted, entered, promulgated, enforced
or issued by any court of competent jurisdiction or other Governmental
Entity or other legal restraint or prohibition (collectively, "Restraints")
preventing the consummation of the Merger shall be in effect; provided,
however, that each of the parties shall have used all reasonable efforts to
prevent the entry of any such Restraints and to appeal as promptly as
possible any such Restraints that may be entered.
(d) Form S-4. The Form S-4 shall have become effective under the
Securities Act and shall not be the subject of any stop order or
proceedings seeking a stop order, and Bethlehem shall have received all
state securities or "blue sky" authorizations necessary to issue the
Bethlehem Common Stock issuable pursuant to this Agreement.
(e) Stock Exchange Listings. The shares of Bethlehem Common Stock
issuable to the Company's shareholders pursuant to this Agreement and under
the Stock Plans shall have been approved for listing on the NYSE and the
CSE, subject to official notice of issuance.
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SECTION 6.02. Conditions to Obligations of Bethlehem and Merger Sub. The
obligations of Bethlehem and Merger Sub to effect the Merger are further
subject to satisfaction or waiver (by Bethlehem) on or prior to the Closing
Date of the following conditions:
(a) Representations and Warranties. The representations and warranties of
the Company set forth in this Agreement shall be true and correct (without
regard to any materiality qualifications or references to material adverse
effect contained in any specific representation or warranty), as of the
date of this Agreement and as of the Closing Date as though made on and as
of the Closing Date, except to the extent such representations and
warranties expressly relate to an earlier date (in which case as of such
date); provided that this paragraph (a) shall be deemed satisfied so long
as the failure of all such representations and warranties to be true and
correct would not have a material adverse effect on the Company, and
Bethlehem shall have received a certificate signed on behalf of the Company
by the chief executive officer and the chief financial officer of the
Company to such effect.
(b) Performance of Obligations of the Company. The Company shall have
performed in all material respects all obligations required to be performed
by it under this Agreement at or prior to the Closing Date, and Bethlehem
shall have received a certificate signed on behalf of the Company by the
chief executive officer and the chief financial officer of the Company to
such effect.
(c) No Litigation. There shall not be pending or threatened by any
Governmental Entity any suit, action or proceeding, (i) challenging the
acquisition by Bethlehem of any shares of capital stock of the Company or
the Surviving Corporation, seeking to restrain or prohibit the consummation
of the Merger or any of the other transactions contemplated by this
Agreement or seeking to obtain from the Company or Bethlehem any damages
that are material in relation to the Company and its subsidiaries taken as
a whole or Bethlehem and its subsidiaries taken as a whole, as applicable,
(ii) seeking to prohibit or limit the ownership or operation by the
Company, Bethlehem or any of their respective subsidiaries of any material
portion of the business or assets of the Company, Bethlehem or any of their
respective subsidiaries, or to compel the Company, Bethlehem or any of
their respective subsidiaries to dispose of or hold separate any material
portion of the business or assets of the Company, Bethlehem or any of their
respective subsidiaries, as a result of the Merger or any of the other
transactions contemplated by this Agreement, (iii) seeking to impose
limitations on the ability of Bethlehem to acquire or hold, or exercise
full rights of ownership of, any shares of capital stock of the Company or
the Surviving Corporation, (iv) seeking to prohibit Bethlehem or any of its
subsidiaries from effectively controlling in any material respect the
business or operations of the Company or its subsidiaries or (v) which
otherwise would reasonably be expected to have a material adverse effect on
the Company or Bethlehem. In addition, there shall not be any judgment,
order, decree, statute, law, ordinance, rule or regulation, enacted,
entered, promulgated or enforced that is reasonably likely to result,
directly or indirectly, in any of the consequences referred to in clauses
(ii) through (v) above.
(d) No Material Adverse Change. At any time after the date of this
Agreement there shall not have occurred any material adverse change
relating to the Company.
SECTION 6.03. Conditions to Obligation of the Company. The obligation of the
Company to effect the Merger is further subject to satisfaction or waiver on
or prior to the Closing Date of the following conditions:
(a) Representations and Warranties. The representations and warranties of
Bethlehem set forth in this Agreement shall be true and correct (without
regard to any materiality qualifications or references to material adverse
effect contained in any specific representation or warranty) as of the date
of this Agreement and as of the Closing Date as though made on and as of
the Closing Date, except to the extent such representations expressly
relate to an earlier date (in which case as of such date); provided that
this paragraph (a) shall be deemed satisfied so long as the failure of all
such representations and warranties to be true and correct would not have a
material adverse effect on Bethlehem, and the Company shall have received a
certificate signed on behalf of Bethlehem by the chief executive officer of
Bethlehem and the chief financial officer of Bethlehem to such effect.
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(b) Performance of Obligations of Bethlehem. Bethlehem shall have
performed in all material respects all obligations required to be performed
by it under this Agreement at or prior to the Closing Date, and the Company
shall have received a certificate signed on behalf of Bethlehem by the
chief executive officer of Bethlehem and the chief financial officer of
Bethlehem to such effect.
(c) Average Market Price. The Average Market Price shall be greater than
or equal to $6.906.
(d) No Material Adverse Change. At any time after the date of this
Agreement there shall not have occurred any material adverse change
relating to Bethlehem.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
SECTION 7.01. Termination. This Agreement may be terminated at any time
prior to the Effective Time, whether before or after the Company Shareholder
Approval:
(a) by mutual written consent of Bethlehem and the Company;
(b) by either Bethlehem or the Company:
(i) if the Merger shall not have been consummated on or before June
30, 1998, unless the failure to consummate the Merger is the result of
a willful and material breach of this Agreement by the party seeking to
terminate this Agreement; provided, however, that the passage of such
period shall be tolled for any part thereof (but not exceeding 30
calendar days in the aggregate) during which any party shall be subject
to a nonfinal order, decree, ruling, injunction or action restraining,
enjoining or otherwise prohibiting the consummation of the Merger or
the calling or holding of the Company Shareholders Meeting;
(ii) if the Company Shareholder Approval shall not have been obtained
at a Company Shareholders Meeting duly convened therefor;
(iii) if any Governmental Entity shall have issued an order, decree,
ruling or injunction or taken any other action permanently enjoining,
restraining or otherwise prohibiting the Merger and such order, decree,
ruling, injunction or other action shall have become final and
nonappealable; or
(iv) in the event of a breach by the other party of any
representation, warranty, covenant or other agreement contained in this
Agreement which (A) would give rise to the failure of a condition set
forth in Section 6.02(a) or (b) or Section 6.03(a) or (b), as
applicable, and (B) cannot be or has not been cured within 30 days
after the giving of written notice to the breaching party of such
breach (a "Material Breach") (provided that the terminating party is
not then in Material Breach of any representation, warranty, covenant
or other agreement contained in this Agreement);
(c) by the Company in accordance with Section 4.02(b); provided that it
has complied with all provisions thereof and that it complies with the
applicable requirements of Section 5.10; or
(d) by Bethlehem if (i) the Board of Directors of the Company or any
committee thereof shall have withdrawn or modified in a manner adverse to
Bethlehem its approval or recommendation of the Merger or this Agreement,
or approved or recommended any superior proposal or (ii) the Board of
Directors of the Company or any committee thereof shall have resolved to
take any of the foregoing actions.
SECTION 7.02. Effect of Termination. In the event of termination of this
Agreement by either the Company or Bethlehem as provided in Section 7.01, this
Agreement shall forthwith become void and have no effect, without any
liability or obligation on the part of Bethlehem, Merger Sub or the Company,
other than the provisions of Section 3.01(p), Section 3.02(j), the last
sentence of Section 5.04, Section 5.10, this Section 7.02 and Article VIII and
except to the extent that such termination results from the willful and
material breach by a party of any of its representations, warranties,
covenants or agreements set forth in this Agreement.
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SECTION 7.03. Amendment. This Agreement may be amended by the parties at any
time before or after the Company Shareholder Approval; provided, however, that
after any such approval, there shall not be made any amendment that by law
requires further approval by the stockholders of the Company without the
further approval of such stockholders. This Agreement may not be amended
except by an instrument in writing signed on behalf of each of the parties.
SECTION 7.04. Extension; Waiver. At any time prior to the Effective Time, a
party may (a) extend the time for the performance of any of the obligations or
other acts of the other parties, (b) waive any inaccuracies in the
representations and warranties of the other parties contained in this
Agreement or in any document delivered pursuant to this Agreement or (c)
subject to the proviso of Section 7.03, waive compliance by the other parties
with any of the agreements or conditions contained in this Agreement. Any
agreement on the part of a party to any such extension or waiver shall be
valid only if set forth in an instrument in writing signed on behalf of such
party. The failure of any party to this Agreement to assert any of its rights
under this Agreement or otherwise shall not constitute a waiver of such
rights.
SECTION 7.05. Procedure for Termination, Amendment, Extension or Waiver. A
termination of this Agreement pursuant to Section 7.01, an amendment of this
Agreement pursuant to Section 7.03 or an extension or waiver pursuant to
Section 7.04 shall, in order to be effective, require action by its Board of
Directors or, with respect to any amendment to this Agreement, to the extent
permitted by applicable law, a duly authorized committee of its Board of
Directors.
ARTICLE VIII
GENERAL PROVISIONS
SECTION 8.01. Nonsurvival of Representations and Warranties. None of the
representations and warranties in this Agreement or in any instrument
delivered pursuant to this Agreement shall survive the Effective Time. This
Section 8.01 shall not limit any covenant or agreement of the parties which by
its terms contemplates performance after the Effective Time.
SECTION 8.02. Notices. All notices, requests, claims, demands and other
communications under this Agreement shall be in writing and shall be deemed
given if delivered personally, telecopied (which is confirmed) or sent by
overnight courier (providing proof of delivery) to the parties at the
following addresses (or at such other address for a party as shall be
specified by like notice):
(a) if to Bethlehem or Merger Sub, to
Bethlehem Steel Corporation
1170 Eighth Avenue
Bethlehem, PA 18016
Fax: (610) 694-1500
Attention: Stephen J. Selden
with a copy to:
Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, New York 10019
Attention: Robert A. Kindler
Fax: (212) 474-3700; and
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(b) if to the Company, to
Lukens Inc.
50 South First Avenue
Coatesville, PA 19320
Fax: (610) 383-2004
Attention: William D. Sprague, Vice President and General Counsel
with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
One Rodney Square
P.O. Box 636
Wilmington, DE 19899
Attention: Steven J. Rothschild
Fax: (302) 651-3001
SECTION 8.03. Definitions. For purposes of this Agreement:
(a) an "affiliate" of any person means another person that directly or
indirectly, through one or more intermediaries, controls, is controlled by,
or is under common control with, such first person;
(b) "material adverse change" or "material adverse effect" means, when
used in connection with the Company or Bethlehem, any change, effect, event
or occurrence that is materially adverse to the business, financial
condition or results of operations of such party and its subsidiaries taken
as a whole, other than any change, effect, event or occurrence relating to
the United States economy in general or to the Company's or Bethlehem's, as
applicable, industry or industries in general;
(c) "person" means an individual, corporation, limited liability company,
partnership, joint venture, association, trust, unincorporated organization
or other entity;
(d) a "subsidiary" of any person means another person, an amount of the
voting securities, other voting ownership or voting partnership interests
of which is sufficient to elect at least a majority of its Board of
Directors or other governing body (or, if there are no such voting
interests, 50% or more of the equity interests of which) is owned directly
or indirectly by such first person;
(e) a "significant subsidiary" of any person means any subsidiary of such
person that constitutes a significant subsidiary within the meaning of Rule
1-02 of Regulation S-X promulgated by the SEC;
(f) "takeover proposal" has the meaning assigned thereto in Section
4.02(a);
(g) "superior proposal" has the meaning assigned thereto in Section
4.02(b); and
(h) "Taxes" has the meaning assigned thereto in Section 3.01(k)(iv).
SECTION 8.04. Interpretation. When a reference is made in this Agreement to
an Article, Section, Exhibit or Schedule, such reference shall be to an
Article or Section of, or an Exhibit or Schedule to, this Agreement unless
otherwise indicated. The table of contents and headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. Whenever the words "include",
"includes" or "including" are used in this Agreement, they shall be deemed to
be followed by the words "without limitation". The words "hereof", "herein"
and "hereunder" and words of similar import when used in this Agreement shall
refer to this Agreement as a whole and not to any particular provision of this
Agreement. All terms defined in this Agreement shall have the defined meanings
when used in any certificate or other document made or delivered pursuant
hereto unless otherwise defined herein. The definitions contained in this
Agreement are applicable to the singular as well as the plural forms of such
terms and to the masculine as well as to the feminine and neuter genders of
such term. Any agreement, instrument or
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<PAGE>
statute defined or referred to herein or in any agreement or instrument that
is referred to herein means such agreement, instrument or statute as from time
to time amended, modified or supplemented, including (in the case of
agreements or instruments) by waiver or consent and (in the case of statutes)
by succession of comparable successor statutes and references to all
attachments thereto and instruments incorporated therein. References to a
person are also to its permitted successors and assigns.
SECTION 8.05. Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each
of the parties and delivered to the other parties.
SECTION 8.06. Entire Agreement; No Third-Party Beneficiaries. This Agreement
(including the documents and instruments referred to herein) and the
Confidentiality Agreement (a) constitute the entire agreement, and supersede
all prior agreements and understandings, both written and oral, among the
parties with respect to the subject matter of this Agreement and (b) except
for the provisions of Article II, Section 5.06(a) and Section 5.09, are not
intended to confer upon any person other than the parties any rights or
remedies.
SECTION 8.07. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware, regardless of
the laws that might otherwise govern under applicable principles of conflicts
of laws thereof.
SECTION 8.08. Assignment. Neither this Agreement nor any of the rights,
interests or obligations under this Agreement shall be assigned, in whole or
in part, by operation of law or otherwise by either party without the prior
written consent of the other party. Any assignment in violation of the
preceding sentence shall be void. Subject to the preceding sentence, this
Agreement will be binding upon, inure to the benefit of, and be enforceable
by, the parties and their respective successors and assigns.
SECTION 8.09. Disclosure Schedules. Matters reflected on the Company
Disclosure Schedule and the Bethlehem Disclosure Schedule are not necessarily
limited to matters required by this Agreement to be reflected therein and the
inclusion of such matters shall not be deemed an admission that such matters
were required to be reflected on the Company Disclosure Schedule or the
Bethlehem Disclosure Schedule, as the case may be. Such additional matters are
set forth for informational purposes only and do not necessarily include other
matters of a similar nature.
SECTION 8.10. Severability. If any provision of this Agreement or the
application thereof to any person or circumstance is determined by a court of
competent jurisdiction to be invalid, void or unenforceable, the remaining
provisions hereof, or the application of such provision to persons or
circumstances other than those as to which it has been held invalid or
unenforceable, shall remain in full force and effect and shall in no way be
affected, impaired or invalidated thereby. Upon any such determination, the
parties shall negotiate in good faith in an effort to agree upon a suitable
and equitable substitute provision to effect the original intent of the
parties.
SECTION 8.11. Enforcement. The parties agree that irreparable damage would
occur and that the parties would not have any adequate remedy at law in the
event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties will be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in any Federal court located in the
State of Delaware or in Delaware state court, the foregoing being in addition
to any other remedy to which they are entitled at law or in equity.
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<PAGE>
IN WITNESS WHEREOF, Bethlehem and the Company have caused this Agreement to
be signed by their respective officers thereunto duly authorized, all as of
the date first written above.
Bethlehem Steel Corporation
/s/ Curtis H. Barnette
By___________________________________
Name: Curtis H. Barnette
Title:Chairman and Chief Executive
Officer
Lukens Inc.
/s/ R. W. Van Sant
By___________________________________
Name: R. W. Van Sant
Title:Chairman and Chief Executive
Officer
I-39
<PAGE>
IN WITNESS WHEREOF, Lukens Acquisition Corporation hereby adopts and
executes, and agrees to become a party to, this Agreement and Plan of Merger
dated as of December 15, 1997 between Bethlehem Steel Corporation and Lukens
Inc. and to undertake the obligations of "Merger Sub" in accordance with
Section 5.15 herein and has caused this Agreement to be signed by its officer
thereunto duly authorized, all as of the date first written above.
Lukens Acquisition Corporation
/s/ Stephen J. Selden
By___________________________________
Name: Stephen J. Selden
Title:Secretary
I-40
<PAGE>
EXHIBIT A
TO THE AGREEMENT AND PLAN OF MERGER
FORM OF AFFILIATE LETTER
Dear Sirs:
The undersigned, a holder of shares of common stock, par value $.01 per
share ("Company Common Stock"), or Lukens Series B Preferred Stock ("Company
Preferred Stock") of Lukens Inc., a Delaware corporation (the "Company"),
acknowledges that the undersigned may be deemed an "affiliate" of the Company
within the meaning of Rule 145 ("Rule 145") promulgated under the Securities
Act of 1933, as amended (the "Securities Act"), by the Securities and Exchange
Commission (the "SEC"), although nothing contained herein should be construed
as an admission of such fact. Pursuant to the terms of the Agreement and Plan
of Merger dated as of December 15, 1997, between Bethlehem Steel Corporation,
a Delaware corporation ("Bethlehem") and the Company, a subsidiary of
Bethlehem ("Merger Sub") will be merged with and into the Company (the
"Merger"), and in connection with the Merger, the undersigned is entitled to
receive common stock, par value $1.00 per share ("Bethlehem Common Stock"), of
Bethlehem.
If in fact the undersigned were an affiliate under the Securities Act, the
undersigned's ability to sell, assign or transfer the Bethlehem Common Stock
received by the undersigned in exchange for any shares of Company Common Stock
in connection with the Merger may be restricted unless such transaction is
registered under the Securities Act or an exemption from such registration is
available. The undersigned understands that such exemptions are limited and
the undersigned has obtained or will obtain advice of counsel as to the nature
and conditions of such exemptions, including information with respect to the
applicability to the sale of such securities of Rules 144 and 145(d)
promulgated under the Securities Act. The undersigned understands that
Bethlehem will not be required to maintain the effectiveness of any
registration statement under the Securities Act for the purposes of resale of
Bethlehem Common Stock by the undersigned.
The undersigned hereby represents to and covenants with Bethlehem that the
undersigned will not sell, assign or transfer any of the Bethlehem Common
Stock received by the undersigned in exchange for shares of Company Common
Stock or Company Preferred Stock in connection with the Merger except (i)
pursuant to an effective registration statement under the Securities Act, (ii)
in conformity with the volume and other limitations of Rule 145 or (iii) in a
transaction which, in the opinion of the general counsel of Bethlehem or other
counsel reasonably satisfactory to Bethlehem (it being expressly agreed that
Skadden, Arps, Slate, Meagher & Flom LLP shall be considered reasonably
satisfactory for all purposes under this Agreement) or as described in a "no-
action" or interpretive letter from the Staff of the SEC specifically issued
with respect to a transaction to be engaged in by the undersigned, is not
required to be registered under the Securities Act.
In the event of a sale or other disposition by the undersigned of Bethlehem
Common Stock pursuant to Rule 145, the undersigned will supply Bethlehem with
evidence of compliance with such Rule, in the form of a letter in the form of
Annex I hereto (or other reasonably satisfactory documentation evidencing
compliance with Rule 145) and the opinion of counsel or no-action letter
referred to above. The undersigned understands that Bethlehem may instruct its
transfer agent to withhold the transfer of any Bethlehem Common Stock disposed
of by the undersigned, but that (provided such transfer is not prohibited by
any other provision of this letter agreement) upon receipt of such evidence of
compliance, Bethlehem shall cause the transfer agent to effectuate the
transfer of the Bethlehem Common Stock sold as indicated in such letter.
Bethlehem covenants that it will take all such actions as may be reasonably
available to it to permit the sale or other disposition of Bethlehem Common
Stock by the undersigned under Rule 145 in accordance with the terms thereof.
The undersigned acknowledges and agrees that the legends set forth below
will be placed on certificates representing Bethlehem Common Stock received by
the undersigned in connection with the Merger or held by a transferee thereof,
which legends will be removed by delivery of substitute certificates upon
receipt of an opinion
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<PAGE>
in form and substance reasonably satisfactory to Bethlehem from counsel
reasonably satisfactory to Bethlehem to the effect that such legends are no
longer required for purposes of the Securities Act.
There will be placed on the certificates for Bethlehem Common Stock issued
to the undersigned, or any substitutions therefor, a legend stating in
substance:
"The shares represented by this certificate were issued pursuant to a
transaction to which Rule 145 promulgated under the Securities Act of 1933
applies. The shares have not been acquired by the holder with a view to, or
for resale in connection with, any distribution thereof within the meaning
of the Securities Act of 1933. The shares may not be sold, pledged or
otherwise transferred except in accordance with an exemption from the
registration requirements of the Securities Act of 1933."
The undersigned acknowledges that (i) the undersigned has carefully read
this letter and understands the requirements hereof and the limitations
imposed upon the distribution, sale, transfer or other disposition of
Bethlehem Common Stock and (ii) the receipt by Bethlehem of this letter is an
inducement to Bethlehem's obligations to consummate the Merger.
Very truly yours,
Dated:
I-42
<PAGE>
ANNEX I
TO EXHIBIT A
[Date]
[Name]
On , the undersigned sold the securities of Bethlehem Steel Corporation
("Bethlehem") described below in the space provided for that purpose (the
"Securities"). The Securities were received by the undersigned in connection
with the merger of a subsidiary of Bethlehem with and into Lukens Inc., a
Delaware corporation.
Based upon the most recent report or statement filed by Bethlehem with the
Securities and Exchange Commission, the Securities sold by the undersigned
were within the prescribed limitations set forth in paragraph (e) of Rule 144
promulgated under the Securities Act of 1933, as amended (the "Securities
Act").
The undersigned hereby represents that the Securities were sold in "brokers'
transactions" within the meaning of Section 4(4) of the Securities Act or in
transactions directly with a "market maker" as that term is defined in Section
3(a)(38) of the Securities Exchange Act of 1934, as amended. The undersigned
further represents that the undersigned has not solicited or arranged for the
solicitation of orders to buy the Securities, and that the undersigned has not
made any payment in connection with the offer or sale of the Securities to any
person other than to the broker who executed the order in respect of such
sale.
Very truly yours,
[Space to be provided for description of the Securities.]
I-43
<PAGE>
AMENDMENT dated as of January 4, 1998, to the Agreement and Plan of Merger
dated as of December 15, 1997, among BETHLEHEM STEEL CORPORATION, a Delaware
corporation ("Bethlehem"), LUKENS ACQUISITION CORPORATION, a Delaware
corporation ("MERGER SUB") and LUKENS INC., a Delaware corporation (the
"Company").
WHEREAS Bethlehem and the Company have entered into an Agreement and Plan of
Merger dated as of December 15, 1997 (the "Merger Agreement"; all terms used
herein that are defined in the Merger Agreement have the meanings set forth
therein);
WHEREAS Merger Sub has become a party to the Merger Agreement pursuant to
Section 5.15 thereof;
WHEREAS the parties wish to amend certain terms of the Merger Agreement as
hereinafter provided.
NOW, THEREFORE, the parties hereto agree as follows:
Section 1. The dollar amount set forth in Section 2.01(c)(i) is hereby
amended to be $30.
Section 2. The reference to 3.62 in the proviso in Section 2.01(c)(ii) shall
be amended to be 4.317 and the reference to 2.797 in such proviso shall be
amended to be 2.878.
Section 3. The reference to .62 in clause (z) of Section 2.03(a) and to .38
in clause (z) of Section 2.03(c) shall be amended to be .68 and .32,
respectively.
Section 4. The reference to $6.906 in Section 6.03(c) shall be amended to be
$6.950.
Section 5. Section 8.11 shall be amended by adding at the end thereof the
following: "The parties agree to the exclusive jurisdiction of the Federal and
state courts in the State of Delaware for any disputes arising under this
Agreement or the transactions contemplated hereby."
Section 6. Except as amended hereby, the Merger Agreement continues to be,
and shall remain, in full force and effect in accordance with its terms. The
General Provisions set forth in Article VIII of the Merger Agreement are
incorporated herein by reference and deemed made a part hereof, mutatis
mutandis.
IN WITNESS WHEREOF, the parties have executed this Amendment by their
respective officers thereunto duly authorized as of the date first above
written,
Bethlehem Steel Corporation,
/s/ C.H. Barnette
by___________________________________
C.H. Barnette
Lukens Inc.,
/s/ R.W. Van Sant
by___________________________________
Name: R.W. Van Sant
Title:
Lukens Acquisition Corporation,
/s/ C.H. Barnette
by___________________________________
C.H. Barnette
I-44
<PAGE>
ANNEX II
CREDIT FIRST [LETTERHEAD CREDIT SUISSE FIRST BOSTON]
SUISSE BOSTON
January 4, 1998
The Board of Directors
Lukens Inc.
50 South First Avenue
Coatsville, PA 19320
Members of the Board:
You have asked us to advise you with respect to the fairness to the holders of
the common stock of Lukens Inc. ("Lukens") from a financial point of view of
the consideration to be received by such holders pursuant to the terms of the
Agreement and Plan of Merger, dated as of December 15, 1997, as amended as of
January 4, 1998 (the "Merger Agreement"), among Bethlehem Steel Corporation
("BSC"), Lukens Acquisition Corporation ("Merger Sub") and Lukens. The Merger
Agreement provides for, among other things, the merger of Merger Sub with and
into Lukens (the "Merger") pursuant to which Lukens will become a wholly owned
subsidiary of BSC and each outstanding share of the common stock, par value
$0.01 per share, of Lukens (the "Lukens Common Stock") will be converted into
the right to receive, at the election of the holder thereof and subject to
certain proration procedures, either (i) $30.00 in cash (the "Cash
Consideration") or (ii) that number of shares (the "Stock Consideration" and,
together with the Cash Consideration, the "Merger Consideration") of the
common stock, par value $1.00 per share, of BSC (the "BSC Common Stock") equal
to the quotient obtained by dividing $30.00 by the average of the daily
closing prices per share of BSC Common Stock as reported on the New York Stock
Exchange ("NYSE") Composite Transactions Tape for the 15 consecutive full NYSE
trading days immediately preceding the third full NYSE trading day prior to
the effective time of the Merger, subject to adjustment, as more fully
described in the Merger Agreement (the number of shares of BSC Common Stock
into which each share of Lukens Common Stock will be so converted, the
"Conversion Number"); provided that the Conversion Number will not be greater
than 4.317 or less than 2.878.
In arriving at our opinion, we have reviewed the Merger Agreement and certain
publicly available business and financial information relating to Lukens and
BSC. We have also reviewed certain other information, including financial
forecasts, provided to or otherwise discussed with us by Lukens and BSC, and
have met with the managements of Lukens and BSC to discuss the businesses and
prospects of Lukens and BSC.
We have also considered certain financial and stock market data of Lukens and
BSC, and we have compared those data with similar data for other publicly held
companies in businesses similar to Lukens and BSC and we have considered, to
the extent publicly available, the financial terms of certain other business
combinations and other transactions which have recently been effected. We also
considered such other information, financial studies, analyses and
investigations and financial, economic and market criteria which we deemed
relevant.
In connection with our review, we have not assumed any responsibility for
independent verification of any of the foregoing information and have relied
on its being complete and accurate in all material respects. With respect to
the financial forecasts, you have informed us, and we have assumed, that they
have been reasonably prepared on bases reflecting the best currently available
estimates and judgments as to the future financial performance of Lukens and
BSC and the cost savings and other potential synergies (including the amount,
timing and achievability thereof) anticipated to result from the Merger. In
addition, we have not made an independent evaluation or appraisal of the
assets or liabilities (contingent or otherwise) of Lukens or BSC, nor have we
been furnished with any such evaluations or appraisals. Our opinion is
necessarily based upon information available
II-1
<PAGE>
CREDIT FIRST
SUISSE BOSTON
The Board of Directors
Lukens Inc.
January 4, 1998
Page 2
to us, and financial, economic, market and other conditions as they exist and
can be evaluated, on the date hereof. We are not expressing any opinion as to
what the value of the BSC Common Stock actually will be when issued pursuant
to the Merger or the prices at which such BSC Common Stock will trade
subsequent to the Merger. In connection with our engagement, we were requested
to approach third parties to solicit indications of interest in a possible
acquisition of Lukens, and held preliminary discussions with certain of these
parties prior to the date hereof.
We have acted as financial advisor to Lukens in connection with the Merger and
will receive a fee for our services, a significant portion of which is
contingent upon the consummation of the Merger. We will also receive a fee
upon the delivery of this opinion. During the past several years, we have
performed certain investment banking services for Lukens unrelated to the
proposed Merger, for which services we have received compensation. In the
ordinary course of business, Credit Suisse First Boston and its affiliates may
actively trade the debt and equity securities of both Lukens and BSC for their
own accounts and for the accounts of customers and, accordingly, may at any
time hold a long or short position in such securities.
It is understood that this letter is for the information of the Board of
Directors of Lukens in connection with its evaluation of the Merger, does not
constitute a recommendation to any stockholder as to how such stockholder
should vote on the proposed Merger or the form of consideration to be elected
by such stockholder in the Merger, and is not to be quoted or referred to, in
whole or in part, in any registration statement, prospectus or proxy
statement, or in any other document used in connection with the offering or
sale of securities, nor shall this letter be used for any other purposes,
without our prior written consent.
Based upon and subject to the foregoing, it is our opinion that, as of the
date hereof, the Merger Consideration is fair to the holders of Lukens Common
Stock from a financial point of view.
Very truly yours,
CREDIT SUISSE FIRST BOSTON CORPORATION
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<PAGE>
ANNEX III
DELAWARE CODE ANNOTATED
TITLE 8. CORPORATIONS
CHAPTER 1. GENERAL CORPORATION LAW
SUBCHAPTER IX. MERGER OR CONSOLIDATION
Copyright (c) 1975-1997 by The State of Delaware. All rights reserved.
Current through End of 1997 Reg. Sess.
(S)262 Appraisal rights.
(a) Any stockholder of a corporation of this State who holds shares of stock
on the date of the making of a demand pursuant to subsection (d) of this
section with respect to such shares, who continuously holds such shares
through the effective date of the merger or consolidation, who has otherwise
complied with subsection (d) of this section and who has neither voted in
favor of the merger or consolidation nor consented thereto in writing pursuant
to (S)228 of this title shall be entitled to an appraisal by the Court of
Chancery of the fair value of the stockholder's shares of stock under the
circumstances described in subsections (b) and (c) of this section. As used in
this section, the word "stockholder" means a holder of record of stock in a
stock corporation and also a member of record of a nonstock corporation; the
words "stock" and "share" mean and include what is ordinarily meant by those
words and also membership or membership interest of a member of a nonstock
corporation; and the words "depository receipt" mean a receipt or other
instrument issued by a depository representing an interest in one or more
shares, or fractions thereof, solely of stock of a corporation, which stock is
deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to
be effected pursuant to (S)251 (other than a merger effected pursuant to
(S)251(g) of this title), (S)252, (S)254, (S)257, (S)258, (S)263 or (S)264 of
this title:
(1) Provided, however, that no appraisal rights under this section shall
be available for the shares of any class or series of stock, which stock,
or depository receipts in respect thereof, at the record date fixed to
determine the stockholders entitled to receive notice of and to vote at the
meeting of stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or (ii) held
of record by more than 2,000 holders; and further provided that no
appraisal rights shall be available for any shares of stock of the
constituent corporation surviving a merger if the merger did not require
for its approval the vote of the stockholders of the surviving corporation
as provided in subsection (f) of (S)251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or series
of stock of a constituent corporation if the holders thereof are required
by the terms of an agreement of merger or consolidation pursuant to
(S)(S)251, 252, 254, 257, 258, 263 and 264 of this title to accept for such
stock anything except:
a. Shares of stock of the corporation surviving or resulting from
such merger or consolidation, or depository receipts in respect
thereof;
b. Shares of stock of any other corporation, or depository receipts
in respect thereof, which shares of stock (or depository receipts in
respect thereof) or depository receipts at the effective date of the
merger or consolidation will be either listed on a national securities
exchange or designated as a national market system security on an
interdealer quotation system by the National Association of Securities
Dealers, Inc. or held of record by more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a. and b. of this
paragraph; or
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<PAGE>
d. Any combination of the shares of stock, depository receipts and
cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a., b. and c. of this
paragraph.
(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under (S)253 of this title is not owned by the
parent corporation immediately prior to the merger, appraisal rights shall
be available for the shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of
any class or series of its stock as a result of an amendment to its
certificate of incorporation, any merger or consolidation in which the
corporation is a constituent corporation or the sale of all or
substantially all of the assets of the corporation. If the certificate of
incorporation contains such a provision, the procedures of this section,
including those set forth in subsections (d) and (e) of this section, shall
apply as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights
are provided under this section is to be submitted for approval at a
meeting of stockholders, the corporation, not less than 20 days prior
to the meeting, shall notify each of its stockholders who was such on
the record date for such meeting with respect to shares for which
appraisal rights are available pursuant to subsection (b) or (c) hereof
that appraisal rights are available for any or all of the shares of the
constituent corporations, and shall include in such notice a copy of
this section. Each stockholder electing to demand the appraisal of his
shares shall deliver to the corporation, before the taking of the vote
on the merger or consolidation, a written demand for appraisal of his
shares. Such demand will be sufficient if it reasonably informs the
corporation of the identity of the stockholder and that the stockholder
intends thereby to demand the appraisal of his shares. A proxy or vote
against the merger or consolidation shall not constitute such a demand.
A stockholder electing to take such action must do so by a separate
written demand as herein provided. Within 10 days after the effective
date of such merger or consolidation, the surviving or resulting
corporation shall notify each stockholder of each constituent
corporation who has complied with this subsection and has not voted in
favor of or consented to the merger or consolidation of the date that
the merger or consolidation has become effective; or
(2) If the merger or consolidation was approved pursuant to (S)228 or
(S)253 of this title, each constituent corporation, either before the
effective date of the merger or consolidation or within ten days
thereafter, shall notify each of the holders of any class or series of
stock of such constituent corporation who are entitled to appraisal
rights of the approval of the merger or consolidation and that
appraisal rights are available for any or all shares of such class or
series of stock of such constituent corporation, and shall include in
such notice a copy of this section; provided that, if the notice is
given on or after the effective date of the merger or consolidation,
such notice shall be given by the surviving or resulting corporation to
all such holders of any class or series of stock of a constituent
corporation that are entitled to appraisal rights. Such notice may,
and, if given on or after the effective date of the merger or
consolidation, shall, also notify such stockholders of the effective
date of the merger or consolidation. Any stockholder entitled to
appraisal rights may, within 20 days after the date of mailing of such
notice, demand in writing from the surviving or resulting corporation
the appraisal of such holder's shares. Such demand will be sufficient
if it reasonably informs the corporation of the identity of the
stockholder and that the stockholder intends thereby to demand the
appraisal of such holder's shares. If such notice did not notify
stockholders of the effective date of the merger or consolidation,
either (i) each such constituent corporation shall send a second notice
before the effective date of the merger or consolidation notifying each
of the holders of any class or series of stock of such constituent
corporation that are entitled to appraisal rights of the effective date
of the merger or consolidation or (ii) the surviving or resulting
corporation shall send such a second notice to all such holders on or
within 10 days after such effective date; provided, however, that if
such second notice is sent more
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<PAGE>
than 20 days following the sending of the first notice, such second
notice need only be sent to each stockholder who is entitled to
appraisal rights and who has demanded appraisal of such holder's shares
in accordance with this subsection. An affidavit of the secretary or
assistant secretary or of the transfer agent of the corporation that is
required to give either notice that such notice has been given shall,
in the absence of fraud, be prima facie evidence of the facts stated
therein. For purposes of determining the stockholders entitled to
receive either notice, each constituent corporation may fix, in
advance, a record date that shall be not more than 10 days prior to the
date the notice is given, provided, that if the notice is given on or
after the effective date of the merger or consolidation, the record
date shall be such effective date. If no record date is fixed and the
notice is given prior to the effective date, the record date shall be
the close of business on the day next preceding the day on which the
notice is given.
(e) Within 120 days after the effective date of the merger or
consolidation, the surviving or resulting corporation or any stockholder
who has complied with subsections (a) and (d) hereof and who is otherwise
entitled to appraisal rights, may file a petition in the Court of Chancery
demanding a determination of the value of the stock of all such
stockholders. Notwithstanding the foregoing, at any time within 60 days
after the effective date of the merger or consolidation, any stockholder
shall have the right to withdraw his demand for appraisal and to accept the
terms offered upon the merger or consolidation. Within 120 days after the
effective date of the merger or consolidation, any stockholder who has
complied with the requirements of subsections (a) and (d) hereof, upon
written request, shall be entitled to receive from the corporation
surviving the merger or resulting from the consolidation a statement
setting forth the aggregate number of shares not voted in favor of the
merger or consolidation and with respect to which demands for appraisal
have been received and the aggregate number of holders of such shares. Such
written statement shall be mailed to the stockholder within 10 days after
his written request for such a statement is received by the surviving or
resulting corporation or within 10 days after expiration of the period for
delivery of demands for appraisal under subsection (d) hereof, whichever is
later.
(f) Upon the filing of any such petition by a stockholder, service of a
copy thereof shall be made upon the surviving or resulting corporation,
which shall within 20 days after such service file in the office of the
Register in Chancery in which the petition was filed a duly verified list
containing the names and addresses of all stockholders who have demanded
payment for their shares and with whom agreements as to the value of their
shares have not been reached by the surviving or resulting corporation. If
the petition shall be filed by the surviving or resulting corporation, the
petition shall be accompanied by such a duly verified list. The Register in
Chancery, if so ordered by the Court, shall give notice of the time and
place fixed for the hearing of such petition by registered or certified
mail to the surviving or resulting corporation and to the stockholders
shown on the list at the addresses therein stated. Such notice shall also
be given by 1 or more publications at least 1 week before the day of the
hearing, in a newspaper of general circulation published in the City of
Wilmington, Delaware or such publication as the Court deems advisable. The
forms of the notices by mail and by publication shall be approved by the
Court, and the costs thereof shall be borne by the surviving or resulting
corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become
entitled to appraisal rights. The Court may require the stockholders who
have demanded an appraisal for their shares and who hold stock represented
by certificates to submit their certificates of stock to the Register in
Chancery for notation thereon of the pendency of the appraisal proceedings;
and if any stockholder fails to comply with such direction, the Court may
dismiss the proceedings as to such stockholder.
(h) After determining the stockholders entitled to an appraisal, the
Court shall appraise the shares, determining their fair value exclusive of
any element of value arising from the accomplishment or expectation of the
merger or consolidation, together with a fair rate of interest, if any, to
be paid upon the amount determined to be the fair value. In determining
such fair value, the Court shall take into account all relevant factors. In
determining the fair rate of interest, the Court may consider all relevant
factors, including the rate of interest which the surviving or resulting
corporation would have had to pay to borrow money
III-3
<PAGE>
during the pendency of the proceeding. Upon application by the surviving or
resulting corporation or by any stockholder entitled to participate in the
appraisal proceeding, the Court may, in its discretion, permit discovery or
other pretrial proceedings and may proceed to trial upon the appraisal
prior to the final determination of the stockholder entitled to an
appraisal. Any stockholder whose name appears on the list filed by the
surviving or resulting corporation pursuant to subsection (f) of this
section and who has submitted his certificates of stock to the Register in
Chancery, if such is required, may participate fully in all proceedings
until it is finally determined that he is not entitled to appraisal rights
under this section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation
to the stockholders entitled thereto. Interest may be simple or compound,
as the Court may direct. Payment shall be so made to each such stockholder,
in the case of holders of uncertificated stock forthwith, and the case of
holders of shares represented by certificates upon the surrender to the
corporation of the certificates representing such stock. The Court's decree
may be enforced as other decrees in the Court of Chancery may be enforced,
whether such surviving or resulting corporation be a corporation of this
State or of any state.
(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and
the fees and expenses of experts, to be charged pro rata against the value
of all the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded his appraisal rights as provided in subsection
(d) of this section shall be entitled to vote such stock for any purpose or
to receive payment of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of record at a
date which is prior to the effective date of the merger or consolidation);
provided, however, that if no petition for an appraisal shall be filed
within the time provided in subsection (e) of this section, or if such
stockholder shall deliver to the surviving or resulting corporation a
written withdrawal of his demand for an appraisal and an acceptance of the
merger or consolidation, either within 60 days after the effective date of
the merger or consolidation as provided in subsection (e) of this section
or thereafter with the written approval of the corporation, then the right
of such stockholder to an appraisal shall cease. Notwithstanding the
foregoing, no appraisal proceeding in the Court of Chancery shall be
dismissed as to any stockholder without the approval of the Court, and such
approval may be conditioned upon such terms as the Court deems just.
(l) The shares of the surviving or resulting corporation to which the
shares of such objecting stockholders would have been converted had they
assented to the merger or consolidation shall have the status of authorized
and unissued shares of the surviving or resulting corporation.
(8 Del. C. 1953, (S)262; 56 Del. Laws, c. 50; 56 Del. Laws, c. 186, (S)24; 57
Del. Laws, c. 148, (S)(S)27-29; 59 Del. Laws, c. 106, (S)12; 60 Del. Laws, c.
371, (S)(S)3-12; 63 Del. Laws, c. 25, (S)14; 63 Del. Laws, c. 152, (S)(S)1, 2;
64 Del. Laws, c. 112, (S)(S)46-54; 66 Del. Laws, c. 136, (S)(S)30-32; 66 Del.
Laws, c. 352, (S)9; 67 Del. Laws, c. 376, (S)(S)19, 20; 68 Del. Laws, c. 337,
(S)(S)3, 4; 69 Del. Laws, c. 61, (S)10; 69 Del. Laws, c. 262, (S)(S)1-9; 70
Del. Laws, c. 79, (S)16; 70 Del. Laws, c. 186, (S)1; 70 Del. Laws, c. 299,
(S)(S)2, 3; 70 Del. Laws, c. 349, (S)22; 71 Del. Laws, c. 120, (S)15.)
III-4
<PAGE>
LUKENS INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR SPECIAL MEETING OF STOCKHOLDERS
May 28, 1998
The undersigned:
(i) as a holder of record of Lukens Inc. Common Stock and/or Lukens Inc. Series
B ESOP Convertible Preferred Stock hereby appoints Ronald M. Gross, William
H. Nelson and R. W. Van Sant the proxies of the undersigned (each with
power to act alone and with power of substitution) to represent and vote,
in the manner directed herein, the shares of such stock of Lukens Inc.
which the undersigned would be entitled to vote if personally present; or
(ii) as a participant (and, where applicable, a named fiduciary) in the capital
accumulation plan specified on the reverse side hereby instructs the
trustee of such plan to vote all shares of Lukens Inc. Common Stock and/or
Lukens Inc. Series B ESOP Convertible Preferred Stock which are credited to
the undersigned's account in such plan in the manner directed herein
at the Special Meeting of Stockholders of Lukens Inc. to be held at the Hotel
DuPont, 11th and Market Streets, Wilmington, Delaware, on May 28, 1998, at 9:00
A.M., local time, or at any and all adjournments, postponements or continuations
thereof, and in the proxies' or the trustee's discretion, as applicable, upon
such other business as may properly come before the Special Meeting, all as set
forth in the Notice of Special Meeting and in the Proxy Statement/Prospectus
furnished herewith.
The shares represented hereby will be voted in accordance with the
specifications made on the reverse side or, IF NO SPECIFICATION IS MADE, THEY
WILL BE VOTED FOR PROPOSALS 1 AND 2 SET FORTH ON THE REVERSE SIDE.
---
(PLEASE FILL IN, SIGN AND DATE ON REVERSE SIDE) [SEE REVERSE]
<PAGE>
[X]Please mark
your votes
as this
This Proxy, when properly executed, will be voted in the manner directed herein
by the undersigned. IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED FOR
---
PROPOSALS 1 AND 2.
1. Adoption of the Agreement and Plan of Merger dated as of December 15, 1997,
as amended as of January 4, 1998, (as so amended, the "Merger Agreement")
among Bethlehem Steel Corporation, Lukens Acquisition Corporation and Lukens
Inc. providing for the acquisition of Lukens Inc. by Bethlehem Steel
Corporation, and pursuant to which stockholders of Lukens Inc. will receive
the shares of common stock of Bethlehem Steel Corporation, cash or a
combination thereof that such stockholder has the right to receive pursuant
to the Merger Agreement, all as described in the Proxy Statement/Prospectus
dated April 27, 1998.
2. In their discretion on any other matter which may properly come before the
Special Meeting, including any adjournments, postponements or continuations
thereof.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
[ ] [ ] [ ]
Note: Please sign exactly as your name appears on this Proxy. Joint owners
should each sign. When signing as corporate officer, attorney, executor,
administrator, trustee or guardian, please give full title as such.
- -----------------------------
Signature
- -----------------------------
Signature, if held jointly
Date ________________________ , 1998
