SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant / /
Filed by a party other than the Registrant /X/
Check the appropriate box:
/X/ Preliminary Proxy Statement
/ / CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY (AS PERMITTED BY RULE
14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-12
United States Steel Corporation
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(Name of Registrant as Specified In Its Charter)
Merrill Corp.
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
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(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
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
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previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
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[USS LOGO]
UNITED STATES STEEL CORPORATION
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS AND PROXY STATEMENT
2003
TUESDAY, APRIL 29, 2003
10:00 A.M. EASTERN TIME
Salons III and IV
Townsend Hotel
One Hundred Townsend Street
Birmingham, Michigan 48009
PLEASE VOTE PROMPTLY EITHER BY:
- telephone,
- the Internet, or
- marking, signing and returning your proxy or voting instruction card.
[USS LOGO]
United States Steel Corporation THOMAS J. USHER
600 Grant Street Chairman of the Board of Directors
Pittsburgh, PA 15219-2800 & Chief Executive Officer
March 14, 2003
Dear Fellow U. S. Steel Stockholder,
We will hold the annual meeting of stockholders of United States Steel
Corporation in Salons III and IV of the Townsend Hotel, One Hundred Townsend
Street, Birmingham, Michigan on Tuesday, April 29, 2003 at 10:00 A.M. Eastern
Time.
We will elect directors and independent accountants at the meeting. The Board of
Directors has nominated four of our 12 directors for election this year. They
are all Class II directors, which means their terms will expire at the 2006
annual meeting. You can read about them, and about the other directors who will
continue in office, on pages 14-19 of the proxy statement.
The Board is also recommending the amendment of the Certificate of Incorporation
to increase the number of authorized shares of common stock to 400 million and
the number of authorized shares of preferred stock to 40 million.
We hope you will vote either by telephone, over the Internet or by marking,
signing and returning your proxy or voting instruction card as soon as possible,
whether or not you plan to attend the meeting.
Sincerely,
/s/ Thomas J. Usher
TABLE OF CONTENTS
Notice of Annual Meeting of Stockholders .................................. 4
Proxy Statement ........................................................... 5
Questions and Answers .................................................. 5
The Board of Directors and its Committees .............................. 7
Compensation of Directors .............................................. 12
Proposals of the Board
Proposal No. 1
Election of Directors ................................................ 13
Nominees for Director ................................................ 14
Continuing Directors ................................................. 16
Proposal No. 2
Election of Independent Accountants .................................. 19
Proposal No. 3
Increase in Authorized Shares
of Common Stock and of Preferred Stock ............................... 20
Audit & Finance Committee Report ....................................... 21
Information Regarding the Independence
of the Independent Public Accountants .................................. 22
Security Ownership of Directors
and Executive Officers ................................................. 23
Executive Compensation ................................................. 24
Compensation & Organization Committee
Report on Executive Compensation ..................................... 29
Shareholder Return Performance Presentation .......................... 34
Pension Benefits ..................................................... 35
Change in Control Arrangements
and Employment Contracts ............................................. 37
Appendix A - Audit & Finance Committee Charter ......................... 40
3
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
on April 29, 2003
We will hold our 2003 annual meeting of stockholders in Salons III and IV of the
Townsend Hotel, One Hundred Townsend Street, Birmingham, Michigan 48009 on
Tuesday, April 29, 2003 at 10:00 A.M. Eastern Time, in order to:
- elect four Class II directors,
- elect independent accountants for 2003,
- amend the Certificate of Incorporation to increase the number of authorized
shares of common stock to 400 million and the number of authorized shares of
preferred stock to 40 million, and
- transact any other business that properly comes before the meeting.
You are entitled to vote at the meeting if you were an owner of record of United
States Steel Corporation common stock at the close of business on February 28,
2003. If your ownership is through a broker or other intermediary, you will need
to have proof of your stockholdings in order to be admitted to the meeting. A
recent account statement, letter or proxy from your broker or other intermediary
will suffice.
By order of the Board of Directors,
Dan D. Sandman
Secretary
Dated: March 14, 2003
United States Steel Corporation
600 Grant Street
Pittsburgh, PA 15219-2800
4
PROXY STATEMENT
WE HAVE SENT YOU THIS PROXY STATEMENT BECAUSE THE BOARD OF DIRECTORS IS ASKING
YOU TO GIVE YOUR PROXY (THAT IS, THE AUTHORITY TO VOTE YOUR SHARES) TO OUR PROXY
COMMITTEE SO THEY MAY VOTE YOUR SHARES ON YOUR BEHALF AT OUR ANNUAL MEETING OF
STOCKHOLDERS. The members of the proxy committee are Thomas J. Usher, John P.
Surma, Dan D. Sandman, and Roy G. Dorrance. They will vote your shares as you
instruct.
We will hold the meeting on April 29, 2003 in Salons III and IV of the Townsend
Hotel, One Hundred Townsend Street, Birmingham, Michigan. The proxy statement
contains information about the matters being voted on and other information that
may be helpful to you.
We began the mailing of the proxy statement, the proxy card and the 2002 annual
report on or about March 14, 2003.
QUESTIONS AND ANSWERS
- WHO MAY VOTE?
You may vote if you were a holder of United States Steel Corporation ("U. S.
Steel" or the "Corporation") common stock at the close of business on February
28, 2003.
- WHAT MAY I VOTE ON?
You may vote on:
- the election of four nominees to serve as Class II directors,
- the election of PricewaterhouseCoopers LLP as our independent accountants,
and
- the amendment of the Certificate of Incorporation to increase the authorized
shares of common stock and of preferred stock.
- HOW DOES THE BOARD RECOMMEND I VOTE?
The Board recommends that you vote:
- FOR each of the nominees for director,
- FOR the election of PricewaterhouseCoopers LLP as independent accountants
for 2003, and
- FOR the amendment of the Certificate of Incorporation.
- HOW DO I VOTE?
You may vote by telephone or over the Internet by following the instructions on
the enclosed proxy card (or, if you own your shares through a broker or other
intermediary, on the enclosed voting instruction card). You may also vote by
marking, signing and dating the enclosed proxy card or voting instruction card,
and returning it in the prepaid envelope. The proxy committee will vote your
shares in accordance with your directions. If you return a proxy card but do not
mark the boxes showing how you wish to vote, the proxy committee will vote your
shares FOR each proposal, but only if you have signed and dated the card.
Unsigned proxy cards will not be voted at all. If you are a stockholder of
record (that is, if you are registered on our books), you may also vote in
person by attending the meeting.
- MAY I CHANGE MY VOTE?
If you are a stockholder of record, you may change your vote or revoke your
proxy at any time before your shares are voted at the meeting by:
- voting again by telephone or over the Internet,
- sending us a proxy card dated later than your last vote,
- notifying the Secretary of U. S. Steel in writing, or
- voting at the meeting.
5
- HOW MANY OUTSTANDING SHARES ARE THERE?
At the close of business on February 28, 2003, which is the record date for the
meeting, there were 102,686,272 shares of U. S. Steel common stock (each share
representing one vote and collectively representing 102,686,272 votes)
outstanding.
- HOW BIG A VOTE DO THE PROPOSALS NEED IN ORDER TO BE ADOPTED?
Directors are elected by a plurality of the votes of the shares present in
person at the meeting and those represented by proxy and entitled to vote; that
is, those receiving the most votes are elected, even if they receive less than a
majority of the votes present. Independent accountants are elected by a majority
of the votes of the shares present in person at the meeting and those
represented by proxy and entitled to vote. Amendments to the Certificate of
Incorporation require a majority of the outstanding stock entitled to vote
thereon. Abstentions are counted as votes present and entitled to vote and have
the same effect as votes against a proposal. Broker non-votes are not counted as
either votes for or votes against a proposal. Both abstentions and broker
non-votes are counted in determining that a quorum is present for the meeting.
- WHAT ARE BROKER NON-VOTES?
The New York Stock Exchange permits brokers to vote their customers' shares on
routine matters when the brokers have not received voting instructions from
their customers. The election of directors and the election of independent
accountants are examples of routine matters on which brokers may vote in this
way. Brokers may not vote their customers' shares on non-routine matters such as
amendments to certificates of incorporation, mergers and contested proposals
unless they have received voting instructions from their customers. Non-voted
shares on non-routine matters are called broker non-votes.
- WHAT CONSTITUTES A QUORUM?
Under our by-laws, a quorum is one-third of the voting power of the outstanding
shares of stock entitled to vote.
- WILL MY VOTE BE CONFIDENTIAL?
All voting records which identify stockholders are kept permanently confidential
except as necessary to meet legal requirements and in other limited
circumstances such as proxy contests. The vote tabulators, who are U. S. Steel
employees, and the inspector of election, who is independent, are required to
execute confidentiality agreements.
- HOW WILL VOTING BE CONDUCTED ON OTHER MATTERS RAISED AT THE MEETING?
If any matters are presented at the meeting other than the proposals on the
proxy card, the proxy committee will vote on them using their best judgment.
Your signed proxy card, or your telephone or Internet vote, gives them the
authority to do this. Under our by-laws, notice of any matter to be presented by
a stockholder for a vote at the meeting must have been received by our Corporate
Secretary on or after December 26, 2002 and no later than January 25, 2003, and
it must have been accompanied by certain information about the stockholder
presenting it. We have not received notice of any matter to be presented other
than those on the proxy card.
- WHEN MUST SHAREHOLDER PROPOSALS BE SUBMITTED FOR THE 2004 ANNUAL MEETING?
Shareholder proposals submitted for inclusion in our 2004 proxy statement must
be received in writing by our Corporate Secretary no later than 5:00 P.M.
Eastern Time on November 15, 2003. Shareholder proposals submitted outside the
process for inclusion in the proxy statement must be received from stockholders
of record on or after December 30, 2003 and no later than January 29, 2004 and
must be accompanied by certain information about the stockholders making the
proposals, in accordance with our by-laws.
6
THE BOARD OF DIRECTORS AND ITS COMMITTEES
Under our by-laws and the laws of Delaware, U. S. Steel's state of
incorporation, the business and affairs of U. S. Steel are managed under the
direction of the Board of Directors. The Board met ten times in 2002. The
directors spend considerable time preparing for Board and committee meetings,
and they attend as many meetings as possible. The directors' attendance at
meetings of the Board and its committees averaged 99.5 percent in 2002. The
Board has three principal committees, all the members of which are non-employee
directors. As of January 1, 2003, the Audit Committee and the Committee on
Financial Policy merged to form the Audit & Finance Committee. The table below
shows the current committee memberships of each director and the number of
meetings that each committee of the Board held in 2002.
BOARD COMMITTEE MEMBERSHIPS
CORPORATE
COMPENSATION GOVERNANCE
AUDIT & FINANCE & ORGANIZATION & PUBLIC POLICY
DIRECTOR COMMITTEE COMMITTEE COMMITTEE
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J. Gary Cooper X X *
Robert J. Darnall X X
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John G. Drosdick X X
Shirley Ann Jackson X X
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Charles R. Lee X * X
Frank J. Lucchino X X
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Seth E. Schofield X X *
Douglas C. Yearley X X
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Number of Meetings in 2002 -(1) 4 3
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* Chairman
(1) The Audit Committee met six times, and the Committee on Financial Policy met
four times.
AUDIT & FINANCE COMMITTEE
The Audit & Finance Committee (the "Committee") has a written charter adopted by
the Board, which is attached as Appendix A to this proxy statement. All the
members of the Committee are independent (as defined in the New York Stock
Exchange listing standards.) The charter describes the Committee's purpose as
follows:
- assisting the Board in oversight of
a. the integrity of the Corporation's financial statements,
b. the Corporation's compliance with legal and regulatory requirements,
c. the independent auditor's qualifications and independence, and
d. the performance of the Corporation's internal audit function and of the
independent auditor;
- preparing the report required by the rules of the Securities and Exchange
Commission to be included in the Corporation's annual proxy statement; and
- being directly responsible for the appointment, compensation, and oversight of
the work of the Corporation's independent auditor, which reports directly to
the Committee, and having the sole authority to approve all audit engagement
fees and terms, as well as all non-audit engagements with the independent
auditor.
The charter describes the Committee's duties and responsibilities as including:
- retaining (subject to shareholder election) and, if necessary, terminating,
the Corporation's independent auditor, while either (a) possessing the sole
authority to pre-approve all audit engagement fees and terms as well as all
non-audit engagements with the independent auditor or (b) setting policies and
procedures permitting management to approve such fees, terms and engagements
below certain specified levels;
7
- at least annually, obtaining and reviewing a report by the independent auditor
describing: the independent auditing firm's internal quality-control
procedures; any material issues raised by the most recent internal
quality-control review, or peer review, of the firm, or by any inquiry or
investigation by governmental or professional authorities, within the
preceding five years, respecting one or more independent audits carried out by
the firm, and any steps taken to deal with any such issues; and (in order to
assess the auditor's independence) all relationships between the independent
auditor and the Corporation;
- discussing the annual audited financial statements and quarterly financial
statements with management and the independent auditor, including the
Corporation's disclosures under "Management's Discussion and Analysis", and
reviewing and approving the annual financial statements, the annual report to
stockholders and the Form 10-K annual report giving special consideration in
such review to any material changes in accounting policy;
- discussing earnings press releases, as well as financial information and
earnings guidance (if any) provided to analysts and rating agencies;
- discussing policies with respect to risk assessment and risk management;
- meeting separately, periodically, with management, with internal auditors, and
with the independent auditor;
- reviewing: (1) with the independent auditor, any audit problems or
difficulties and management's response, including any restrictions on the
scope of the independent auditor's activities or on access to requested
information, and any significant disagreements with management (the Committee
having the direct responsibility to resolve such disagreements regarding
financial reporting practices) and (2) the responsibilities, budget and
staffing of the Corporation's internal audit function;
- setting clear hiring policies for employees or former employees of the
independent auditor, taking into account the pressures that may exist for
auditors consciously or subconsciously seeking a job with the company they
audit;
- reporting regularly to the Board and reviewing with the Board any issues that
arise with respect to the quality or integrity of the Corporation's financial
statements, the Corporation's compliance with legal or regulatory
requirements, the performance and independence of the independent auditor, or
the performance of the internal audit function;
- reviewing and discussing the appropriate capital structure and financial
policies of the Corporation;
- making recommendations to the Board concerning dividends;
- establishing procedures for receiving, retaining and responding to complaints
relating to accounting or auditing concerns, including the confidential,
anonymous submission by employees of concerns about illegal or unethical
behavior; and
- annually reviewing the independence letter issued by the independent auditor
under Independence Standards Board Standard No. 1, actively engaging in a
dialogue with the independent auditor with respect to any relationships
disclosed in that letter, and reporting to the Board of Directors any
appropriate action necessary to maintain the independent auditor's continuing
independence.
The charter requires the Committee to conduct an annual self-evaluation and
to review the charter at the Committee's first meeting of each calendar year.
It also requires that, to the extent practicable, all eligible (i.e.
financially literate) independent directors shall be members of the Committee
and that no director who serves on the audit committees of more than two
other public companies may serve on the Committee unless the Board determines
that such simultaneous service will not impair the ability of such director
to effectively serve on the Committee.
8
COMPENSATION & ORGANIZATION COMMITTEE
The Compensation & Organization Committee (the "Committee") has a written
charter adopted by the Board. The charter describes the Committee's purpose as
including:
- discharging the responsibilities of the Board respecting the compensation of
the Corporation's executives;
- producing an annual report on executive compensation for inclusion in the
Corporation's proxy statement, in accordance with applicable rules and
regulations; and
- reviewing and discussing the Corporation's employee benefit plans.
The charter requires that the Committee be comprised solely of directors who are
independent and qualified under standards established by the New York Stock
Exchange and who, in the opinion of the Board, are free of any relationship that
would interfere with their exercise of independent judgment as members of the
Committee. It further requires that the Committee consist of at least three
members, each of whom shall be appointed by the Board, and that the Board
select, as Committee members, directors whose experience and expertise will
enable them to make substantial contributions to the Committee's endeavors. It
also provides that a Committee member may be removed, with or without cause, at
any time by the Board.
The charter gives the Committee the following duties and responsibilities:
- making recommendations to the Board and to the boards of subsidiaries on all
matters of policy and procedures relating to executive compensation, including
incentive-compensation plans and equity-based plans,
- reviewing and approving corporate goals and objectives relevant to the CEO's
compensation,
- with the Board, annually reviewing the Corporation's management succession
plans and regularly reviewing policies and procedures for the selection and
performance review of the CEO, as well as the policies regarding succession in
the event of an emergency or the retirement of the CEO,
- evaluating the CEO's performance in light of the approved goals and
objectives, and setting the CEO's compensation level based on such evaluation,
- approving the salaries of the other officers of the Corporation,
- administering the Annual Incentive Compensation Plan and the Senior Executive
Officer Annual Incentive Compensation Plan,
- administering the plans under which long-term incentives are granted and
approving grants of options, stock appreciation rights, restricted stock and
other incentives under those plans,
- timely certifying as to the meeting of applicable performance levels under the
foregoing plans,
- approving the annual report on executive compensation for inclusion in the
proxy statement,
- adopting and amending employee benefit plans,
- reviewing the activities of the United States Steel and Carnegie Pension Fund
as administrator of certain benefit plans,
- making recommendations to the Board concerning policy matters relating to
employee benefits,
- conferring with management concerning plans for succession to executive
management positions,
9
- approving the retention and termination of any consulting firm retained to
assist in the evaluation of director, CEO or senior executive compensation,
and approving the consulting firm's fees and other retention terms. The
Committee also may, in appropriate circumstances and at Corporation expense,
hire independent advisors, including counsel,
- conducting an annual self-evaluation of the Committee's performance,
- at its first meeting of each calendar year, reviewing its charter, and
- performing such other duties and responsibilities as may be assigned to the
Committee by the Board or designated in plans approved by the shareholders.
The Committee has the authority to delegate matters to subcommittees.
The Committee meets at least three times annually. It reports to the Board on
all matters relevant to the Committee's discharge of its responsibilities, and
makes such recommendations to the Board as the Committee deems appropriate.
CORPORATE GOVERNANCE & PUBLIC POLICY COMMITTEE
The Corporate Governance & Public Policy Committee (the "Committee") has a
written charter adopted by the Board. The charter gives the Committee the
following duties and responsibilities:
- identifying individuals qualified to become Board members and selecting, or
recommending that the Board select, the director nominees for the next annual
meeting of shareholders, while acknowledging that the CEO exercises the
initiative to identify and recruit candidates with the knowledge and consent
of the Committee,
- considering nominees recommended by shareholders for election as directors,
- making recommendations to the Board concerning the appropriate size and
composition of the Board, including (a) the composition and functions of Board
committees, (b) the compensation of non-employee directors, and (c) all
matters relating to the effective functioning of the Board,
- recommending to the Board a set of corporate governance principles applicable
to the Corporation, reviewing such principles at the Committee's first meeting
of each calendar year and recommending appropriate changes to the Board,
- reviewing matters bearing on the relationship between management and present
or potential stockholders with emphasis on policy and major programs affecting
ownership of the Corporation,
- reviewing communications to and from the investment community, particularly
the Corporation's stockholders,
- reviewing legislative and regulatory issues affecting the Corporation's
businesses and operations,
- reviewing public issues identified by management as likely to generate
expectations of the Corporation by its constituencies, including stockholders,
employees, customers, vendors, governments and the public,
- reviewing the Corporation's position regarding identified public issues
including, but not limited to, employee health and safety, environmental,
energy and trade matters,
- reviewing the Corporation's efforts to affect identified public issues
through research, analysis, lobbying efforts and participation in business and
government programs,
- reviewing and approving codes of conduct applicable to employees of the
Corporation and its principal operating units, and
- assessing and making recommendations concerning overall corporate governance
to the extent specific matters are not the assigned responsibility of other
board committees.
10
The Committee's goals and responsibilities include establishing criteria for
selecting new directors, and exercising oversight of the evaluation of the Board
and management. The criteria for selecting new directors include (a) their
independence, as defined by applicable law and stock exchange listing standards,
(b) their integrity and judgment, (c) their records of public service, (d) their
ability to devote sufficient time to the affairs of the Corporation, (e) the
diversity of backgrounds and experience they will bring to the Board, and (f)
the needs of the Corporation from time to time. The Committee's charter provides
that all directors should be individuals of substantial accomplishment with
demonstrated leadership capabilities and that they should represent all
shareholders and not any special interest group or constituency. It also gives
the Committee the sole authority to retain and terminate any search firm to be
used to identify director candidates, including sole authority to approve the
search firm's fees and other retention terms.
The charter requires the Committee to perform an annual self-evaluation and also
to oversee the process of evaluation of the Board, its committees, and
management. It also requires that all committee members be independent
directors; that they, including the chairman, be appointed by the Board; and
that they be subject to the Board's policy of periodically rotating committee
memberships. The Committee has the authority to delegate tasks to subcommittees,
and it is required to give regular reports to the Board.
The Committee may, in appropriate circumstances and at Corporation expense, hire
independent advisors, including counsel.
The Committee reviews its charter during its first meeting of each calendar
year.
11
COMPENSATION OF DIRECTORS
Our by-laws provide that each non-employee director be paid allowances and
attendance fees as the Board may from time to time determine. Directors who are
employees of U. S. Steel receive no compensation for their service on the Board.
We pay our non-employee directors as follows:
ANNUAL RETAINER $ 60,000
COMMITTEE MEMBERSHIP FEES:
AUDIT & FINANCE $ 10,000 ($11,000 FOR CHAIRMAN)
COMPENSATION & ORGANIZATION AND
CORPORATE GOVERNANCE & PUBLIC POLICY $ 5,000 ($6,000 FOR CHAIRMEN)
MEETING FEE (FOR EACH BOARD OR COMMITTEE MEETING) $ 2,000
Under our Deferred Compensation Plan for Non-Employee Directors, directors may
defer some or all of their annual retainers in the form of Common Stock Units.
Each of our directors is required to defer at least half of his or her retainer
in the form of Common Stock Units, and some have deferred their entire retainers
in this way. A Common Stock Unit is what is sometimes referred to as "phantom
stock" because initially no stock is actually issued. Instead, we keep a book
entry account for each director that shows how many Common Stock Units he or she
has. Then, when a director leaves the Board, he or she must take actual shares
of common stock corresponding to the number of Common Stock Units in his or her
account. We believe this is an effective way to increase the directors' equity
holdings in U. S. Steel and thereby further align their interest with that of
the stockholders.
We credit each non-employee director's deferred stock account with Common Stock
Units every January. The ongoing value of each Common Stock Unit equals the
market price of the common stock. When dividends are paid on the common stock,
we credit each account with equivalent amounts in additional Common Stock Units.
If U. S. Steel were to undergo a change in control resulting in the removal of a
non-employee director from the Board, that director would receive a cash payment
equal to the value of his or her deferred stock account.
Under our Non-Employee Director Stock Plan, each non-employee director may
receive a grant of up to 1,000 shares of common stock. In order to qualify, a
director must first purchase an equivalent number of shares in the open market
during the 60 days following the first date of his or her service on the Board.
Our retirement policy for directors requires non-employee directors to retire at
the end of the month in which they turn 72, even if their terms have not
expired. Employee directors must retire from the Board when they retire as
employees, except that the CEO may remain on the Board, at the Board's request,
through the month in which he or she turns 70. Our policy also provides that
directors who undergo a significant change in their business or professional
careers should volunteer to resign from the Board.
12
PROPOSALS OF THE BOARD
The Board will present the following proposals at the meeting:
PROPOSAL NO. 1
ELECTION OF DIRECTORS
U. S. Steel's Certificate of Incorporation divides the directors into three
classes: Class I, Class II and Class III. Each class must consist, as nearly as
possible, of one-third of the directors. Once elected, directors serve for a
term of three years and until their successors are duly elected and qualified.
At each annual meeting, directors who are elected to succeed directors whose
terms have expired are identified as being of the same class as those they
succeed. A director elected to fill a vacancy is elected to the same class as
the director he or she succeeds, and a director elected to fill a newly created
directorship holds office until the next election of the class to which he or
she is elected.
The current four Class II directors are nominees for election this year for a
three-year term that will expire at the 2006 annual meeting. Of the 12 current
directors, four are officers of U. S. Steel, five have top executive experience
with a wide variety of other businesses, one had a distinguished career in the
military and the diplomatic corps before entering business, one has had a
distinguished career in academia, business and government, and one has had a
distinguished career in public service including the judiciary. A brief
statement about the background of each nominee and each continuing director is
given on the following pages. If any nominee for whom you have voted becomes
unable to serve, your proxy may be voted for another person designated by the
Board.
The Board has affirmatively determined, after considering all relevant facts and
circumstances, that no non-employee director has a material relationship with
the Corporation (either directly or as a partner, shareholder or officer of an
organization that has a relationship with the Corporation). The basis for each
such determination (where any relationship exists) is that revenues from U. S.
Steel constitute a DE MINIMIS portion of such other organization's total
revenues.
Our by-laws describe the procedures that must be used in order for someone
nominated by a stockholder of record to be eligible for election as a director.
They require that notice be received by the Secretary at least 45 days, but not
more than 75 days, before the first anniversary of the date on which we first
mailed our proxy materials for the preceding year's annual meeting of
stockholders. The notice must contain certain information about the nominee,
including his or her age, address, occupation and share ownership, as well as
the name, address and share ownership of the stockholder giving the notice.
The Board recommends a vote for the election of each nominee.
13
NOMINEES FOR CLASS II DIRECTOR
Terms Expire 2006
[PHOTO OF J. GARY COOPER]
J. GARY COOPER DIRECTOR SINCE 2001 AGE 66
CHAIRMAN AND CHIEF EXECUTIVE OFFICER, COMMONWEALTH NATIONAL BANK
(COMMERCIAL BANK)
Ambassador Cooper graduated from the University of Notre Dame with a BS degree
in finance and attended Harvard University's Senior Managers in Government
program. He was awarded an honorary doctor of law degree from Troy University. A
retired Major General in the U. S. Marine Corps, Ambassador Cooper was twice
elected to the Alabama legislature, was commissioner of the Alabama Department
of Human Resources and was appointed Assistant Secretary of the Air Force during
the George H. W. Bush administration. He was the United States Ambassador to
Jamaica from 1994 to 1997. Ambassador Cooper is a director of PNC Financial
Services Group, GenCorp Inc. and Protective Life Corporation.
[PHOTO OF FRANK J. LUCCHINO]
FRANK J. LUCCHINO DIRECTOR SINCE JANUARY 1, 2003 AGE 63
JUDGE, ORPHANS' COURT DIVISION, COURT OF COMMON PLEAS, ALLEGHENY COUNTY,
PENNSYLVANIA
Judge Lucchino earned a bachelor's degree in engineering in 1961, and a law
degree in 1964, from the University of Pittsburgh. He is an alumnus of Harvard
Business School's Executive Education program on corporate governance. He served
on the boards of National Steel Corporation and Allegheny Teledyne Incorporated.
Judge Lucchino currently serves as a judge in the Orphans' Court Division of the
Court of Common Pleas in Allegheny County, Pennsylvania. Prior to being elected
to the Court, he was a senior partner at the law firm of Grogan, Graffam,
McGinley and Lucchino in Pittsburgh, Pennsylvania. He also served five four-year
terms as Allegheny County Controller, an elected position. In 1993, Judge
Lucchino was named to the United States National Commission on Libraries and
Information Science (NCLIS) by President Clinton and was confirmed by the
Senate. He served on the Commission until July 1999.
14
[PHOTO OF SETH E. SCHOFIELD]
SETH E. SCHOFIELD DIRECTOR SINCE 2001 AGE 63
RETIRED CHAIRMAN AND CHIEF EXECUTIVE OFFICER, USAIR GROUP
Mr. Schofield graduated from the Harvard Business School Program for Management
Development in 1975. He served in various corporate staff positions after
joining USAir in 1957 and became Executive Vice President-Operations in 1981.
Mr. Schofield served as President and Chief Operating Officer from 1990 until
1991. He was elected President and Chief Executive Officer in 1991 and became
Chairman of the boards of USAir Group and USAir, Inc. in 1992. He retired in
January 1996. Mr. Schofield is a director of Marathon Oil Corporation, Calgon
Carbon Corporation, and Candlewood Hotel Company, Inc. He is also an Advisory
Board member of Desai Capital Management.
[PHOTO OF JOHN P. SURMA]
JOHN P. SURMA DIRECTOR SINCE 2001 AGE 48
PRESIDENT, UNITED STATES STEEL CORPORATION
Mr. Surma received a BS degree in accounting from Pennsylvania State University
in 1976 and joined Price Waterhouse LLP at that time. He was admitted to the
partnership in 1987. He joined Marathon Oil Company in February, 1997 as Senior
Vice President, Finance and Accounting. He was named Senior Vice President,
Finance & Administration in January 1998; President of Speedway SuperAmerica LLC
in September 1998, and Senior Vice President, Supply & Transportation in January
2000. Effective January 1, 2001 he became President of Marathon Ashland
Petroleum LLC, and in September 2001 Mr. Surma was elected Assistant to the
Chairman of USX Corporation. He became Vice Chairman and Chief Financial Officer
of U. S. Steel effective December 31, 2001, and President effective March 1,
2003. Mr. Surma is a director of Calgon Carbon Corporation. He is also a
director of the Pennsylvania Business Roundtable, a member of the Board of
Visitors of the Katz School of Business of the University of Pittsburgh, and a
member of the American Institute of Certified Public Accountants.
15
CONTINUING CLASS III DIRECTORS
Terms Expire 2004
[PHOTO OF ROBERT J. DARNALL]
ROBERT J. DARNALL DIRECTOR SINCE 2001 AGE 64
RETIRED CHAIRMAN AND CHIEF EXECUTIVE OFFICER, INLAND STEEL INDUSTRIES
Mr. Darnall graduated from DePauw University with a BA degree in mathematics,
from Columbia University with a BS degree in civil engineering and from the
University of Chicago with an MBA. He began his career with Inland Steel
Industries in 1962. He was elected Executive Vice President in 1982 and at that
time joined Inland's Board of Directors. In 1986 Mr. Darnall became President
and Chief Operating Officer. In 1992 he became Chairman, President and Chief
Executive Officer. He retired as Chairman and Chief Executive Officer in 1998
and immediately joined Ispat International N.V., which acquired Inland Steel
Company in 1998, as head of their North American operations. Mr. Darnall left
Ispat in 2000 and soon thereafter became Chairman and Interim CEO of Prime
Advantage Corporation, a procurement services startup. He left Prime Advantage
in January 2002. Mr. Darnall is a director of Cummins, Inc., Household
International, Inc., Pactiv Corporation and Sunoco, Inc. He is Chairman of the
Federal Reserve Bank of Chicago. He is also former Chairman of the American Iron
and Steel Institute and a Director of the International Iron and Steel
Institute, and he serves on the Board of Trustees of the Museum of Science and
Industry and Rush Presbyterian St. Luke's Medical Center in Chicago.
[PHOTO OF ROY G. DORRANCE]
ROY G. DORRANCE DIRECTOR SINCE 2001 AGE 57
VICE CHAIRMAN AND CHIEF OPERATING OFFICER, UNITED STATES STEEL CORPORATION
Mr. Dorrance graduated from the Massachusetts Institute of Technology with a BS
degree in management and received a masters degree from Carnegie Mellon
University in industrial administration. Mr. Dorrance began his career with
United States Steel in 1968 in the Mon Valley operation. He served on financial,
international and resource development staffs before being appointed vice
president-commercial for U. S. Steel Mining Company in 1982. Mr. Dorrance was
named manager of plate products in 1985, appointed vice president of U. S. Steel
International, Inc. in 1989 and elected president of USX Engineers and
Consultants in 1992. Mr. Dorrance was named vice president-purchasing and
technology in 1994 and appointed vice president-operations in 1995, executive
vice president-sheet products in 1997 and executive vice president responsible
for new business development in January 2001. He was elected Vice Chairman and
Chief Operating Officer of U. S. Steel effective December 31, 2001. Mr. Dorrance
is a member of the Association of Iron & Steel Engineers.
16
[PHOTO OF CHARLES R. LEE]
CHARLES R. LEE DIRECTOR SINCE 2001 AGE 63
NON-EXECUTIVE CHAIRMAN, VERIZON COMMUNICATIONS (TELECOMMUNICATIONS)
Mr. Lee received a Bachelor's degree in metallurgical engineering from Cornell
University and an MBA with distinction from the Harvard Graduate School of
Business. He served in various financial and management positions before
becoming Senior Vice President-Finance for Penn Central Corporation and then
Columbia Pictures Industries Inc. In 1983 he joined GTE Corporation (which
merged with Bell Atlantic Corporation to form Verizon Communications in 2000) as
Senior Vice President of Finance and in 1986 was named Senior Vice President of
Finance and Planning. He was elected President, Chief Operating Officer and
director in December 1988 and was elected Chairman of the Board and Chief
Executive Officer of GTE in May 1992. Mr. Lee served as Chairman and Co-CEO of
Verizon from June 2000 to March 2002. Mr. Lee is a director of Marathon Oil
Corporation, The Procter & Gamble Company, United Technologies Corporation, the
Stamford Hospital Foundation, and the New American Schools Development
Corporation. He is a member of The Business Council, the Business Roundtable,
The Conference Board, the President's National Security Telecommunications
Advisory Committee, the Advisory Committee to the President's Commission on
Critical Infrastructure Protection, and the New American Realities Committee of
the National Planning Association. He is also a Trustee Emeritus and
Presidential Councillor of Cornell University.
[PHOTO OF JOHN G. DROSDICK]
JOHN G. DROSDICK DIRECTOR SINCE FEBRUARY 25, 2003 AGE 59
CHAIRMAN, CHIEF EXECUTIVE OFFICER AND PRESIDENT, SUNOCO, INC. (PETROLEUM AND
PETROCHEMICAL PRODUCTS)
Mr. Drosdick graduated from Villanova University with a BS degree in chemical
engineering and received a masters in chemical engineering from the University
of Massachusetts. Mr. Drosdick began his career with Exxon Corporation in 1968
and held a wide variety of management positions for 15 years. He was named
President of Tosco Corporation in 1987 and President of Ultramar Corporation in
1992. In 1996 Mr. Drosdick became President and Chief Operating Officer of
Sunoco and was elected Chairman in May 2000. He is a director of Lincoln
National Corporation and Sunoco Logistic Partners L.P. He is chairman of the
Board of Trustees of Villanova University and serves on the Board of Trustees of
the Philadelphia Museum of Art and Kimmel Center for the Performing Arts.
17
CONTINUING CLASS I DIRECTORS
Terms Expire 2005
[PHOTO OF SHIRLEY ANN JACKSON]
SHIRLEY ANN JACKSON DIRECTOR SINCE 2001 AGE 56
PRESIDENT, RENSSELAER POLYTECHNIC INSTITUTE
Dr. Jackson received a BS degree in physics in 1968, and a Ph.D. in theoretical
elementary particle physics in 1973, from the Massachusetts Institute of
Technology. She was a research associate at the Fermi National Accelerator
Laboratory, a visiting scientist at the European Center for Nuclear Research
and, from 1976 to 1991, a theoretical physicist at the former AT&T Bell
Laboratories. She was a professor of theoretical physics at Rutgers University
from 1991 to 1995. After nomination by President Clinton and confirmation by the
U. S. Senate, she was Chairman of the U. S. Nuclear Regulatory Commission from
1995 to 1999. Dr. Jackson became President of Rensselaer Polytechnic Institute
in 1999. Dr. Jackson is a director of Marathon Oil Corporation, Federal Express
Corporation, AT&T, Medtronic, Inc., Public Service Enterprise Group, Sealed Air
Corp., and KeyCorp. She is a member of the National Academy of Engineering, a
Fellow of the American Academy of Arts and Sciences and a Fellow of the American
Physical Society. She holds 18 honorary degrees, was awarded the New Jersey
Governor's Award in Science in 1993, and was inducted into the National Women's
Hall of Fame in 1998. In 2003 Dr. Jackson was named by ESSENCE magazine as one
of the 50 most inspiring African-Americans. She has also been named by DISCOVER
magazine as one of the top 50 women in science, and she has been elected
President of the American Association for the Advancement of Science. Dr.
Jackson is also a trustee of the Brookings Institution, a member of the national
advisory committee of the National Institute of Biomedical Imaging and
Bioengineering of the National Institutes of Health, a Life Trustee of M.I.T.,
and a trustee of Georgetown University and Rockefeller University.
[PHOTO OF DAN D. SANDMAN]
DAN D. SANDMAN DIRECTOR SINCE 2001 AGE 54
VICE CHAIRMAN AND CHIEF LEGAL & ADMINISTRATIVE OFFICER, GENERAL COUNSEL AND
SECRETARY UNITED STATES STEEL CORPORATION
Mr. Sandman graduated from Ohio State University with a BA in 1970 and a law
degree in 1973. He attended the Stanford Executive Program in 1989 and is a
member of the Ohio and Pennsylvania bar associations. He began working for
Marathon Oil Company in 1973 and served in a series of positions in the
marketing, antitrust and oil & gas law areas in Findlay, Ohio, Houston, Texas
and London, England. In 1981 he was named senior marketing counsel, and he was
promoted to general attorney, refining & marketing in 1983. Mr. Sandman was
named general attorney, U. S. exploration & production law in February 1986 and
elected general counsel and secretary of Marathon Oil Company later that year.
He was elected secretary and assistant general counsel of USX Corporation in
December 1992 and general counsel and secretary in February 1993. In 1997 he was
elected senior vice president-human resources and in 1998 he assumed
responsibility for public affairs. Mr. Sandman was elected Vice Chairman and
Chief Legal & Administrative Officer, General Counsel and Secretary of U. S.
Steel effective December 31, 2001. Mr. Sandman is a director of Roppe
Corporation of Fostoria, Ohio.
18
[PHOTO OF THOMAS J. USHER]
THOMAS J. USHER DIRECTOR SINCE 2001 AGE 60
CHAIRMAN OF THE BOARD OF DIRECTORS & CHIEF EXECUTIVE OFFICER UNITED STATES STEEL
CORPORATION
Mr. Usher graduated from the University of Pittsburgh with a BS degree in
industrial engineering, an MS degree in operations research and a Ph.D. in
systems engineering. He joined U. S. Steel in 1965 and held various positions in
industrial engineering. From 1975 through 1979, he held a number of management
positions at U. S. Steel's South and Gary Works. He was elected Executive Vice
President-Heavy Products in 1986, President-U. S. Steel Group and director of
USX in 1991, President & Chief Operating Officer of USX in 1994 and Chairman of
the Board & Chief Executive Officer of USX effective July 1, 1995. He became
Chairman & CEO of U. S. Steel effective December 31, 2001. He is Chairman of the
Board of Directors of Marathon Oil Corporation and a director of H. J. Heinz
Co., PNC Financial Services Group, and PPG Industries, Inc. He is Vice Chairman
of the International Iron and Steel Institute; former Chairman and current
director of the U. S.-Korea Business Council; Chairman and member of the
Executive Committee of TheSteelAlliance and a member of the Board of Trustees of
the University of Pittsburgh and of the Board of the Extra Mile Education
Foundation.
[PHOTO OF DOUGLAS C. YEARLEY]
DOUGLAS C. YEARLEY DIRECTOR SINCE 2001 AGE 67
CHAIRMAN EMERITUS, PHELPS DODGE CORPORATION
Mr. Yearley graduated from Cornell University with a Bachelor's degree in
metallurgical engineering and attended the Program for Management Development at
Harvard Business School. He joined Phelps Dodge in 1960 in project development.
He held several key positions before being elected Executive Vice President and
a director in 1987, Chairman and Chief Executive Officer in 1989 and President
in 1991. He retired in May, 2000. He is a director of Marathon Oil Corporation
and Lockheed Martin Corporation. He was a director of J.P. Morgan & Co.
Incorporated and Morgan Guaranty Trust Company of New York from 1993 to 2000,
and Southern Peru Copper Corporation from 1991 to 2000. He is a member of the
National Council of the World Wildlife Fund, and a graduate member of The
Business Council.
PROPOSAL NO. 2
ELECTION OF INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP (PwC) has served as independent accountants of U. S.
Steel since its creation in 2001 and served as independent accountants of USX
Corporation, which included the U. S. Steel Group, for many years. We believe
that their knowledge of U. S. Steel's business and its organization gained
through this period of service is very valuable. In accordance with the
established policy of the firm, partners and employees of PwC assigned to the
U. S. Steel engagement are periodically rotated, thus giving U. S. Steel the
benefit of new thinking and approaches in the audit area. We expect
representatives of PwC to be present at the meeting with an opportunity to make
a statement if they desire to do so and to be available to respond to
appropriate questions.
For the year 2002, PwC performed professional services for U. S. Steel in
connection with audits of the financial statements of U. S. Steel, certain
subsidiaries and certain pension and other employee benefit plans. PwC has also
reviewed quarterly reports and other filings with the Securities and Exchange
Commission and other agencies.
The Board recommends a vote for the election of PwC.
19
PROPOSAL NO. 3
INCREASE IN AUTHORIZED SHARES OF COMMON STOCK AND OF PREFERRED STOCK
The Board of Directors unanimously recommends an amendment to the Certificate of
Incorporation increasing (a) the number of authorized shares of common stock
from 200,000,000 to 400,000,000 and (b) the number of authorized shares of
preferred stock from 14,000,000 to 40,000,000. On February 28, 2003, 102,686,272
shares of common stock were issued and outstanding and an additional 34,436,073
shares were reserved for issuance for various purposes. Also on February 28,
2003, 5,000,000 shares of 7.00% Series B Mandatory Convertible Preferred Stock
were issued and outstanding and an additional 2,000,000 shares of preferred
stock were reserved for issuance in connection with the Rights Agreement. Under
Delaware law and the Certificate of Incorporation, approval of this proposal
requires approval of a majority of the issued and outstanding shares of common
stock. Holders of preferred stock are not entitled to vote on this matter.
Since the separation from Marathon Oil Corporation, U. S. Steel has raised over
$450 million from the issuance of new equity securities. This increased equity
capital has strengthened our balance sheet. The Board believes that
participation in the continuing consolidation of steelmaking assets will reduce
the domestic steel industry's cost basis, creating a more globally competitive
industry structure. U. S. Steel has recently stated that it remains interested
in acquiring the assets of National Steel Corporation if we are able to reach a
new labor agreement with the USWA for the steelworkers at the National
facilities and acquire the assets at a price that we view to be appropriate in
light of conditions in the steel and financial markets at the time. We have also
announced our interest in various central European opportunities.
While we have no commitments at this time to issue any equity securities in
connection with any acquisition, the Board believes that equity financing of all
or a portion of certain acquisitions would be in the best interest of the
Corporation and its shareholders. In light of the cyclical nature of the steel
business, it is important that the Corporation not incur high amounts of debt.
Equity financing of acquisitions also could allow the Corporation to offer
existing stakeholders in other steel companies the opportunity to participate in
the value enhancing synergies that the Board believes exist in current
consolidation opportunities.
The Board also believes that future compensation of all employees will be more
closely tied to financial results and that stock ownership plans are one way to
accomplish this objective.
Therefore, the Board recommends a vote for the following proposal:
That the First Paragraph of Article Fourth of the Certificate of Incorporation
be amended to read as follows:
FOURTH: The total number of shares of capital stock which the Corporation
shall have authority to issue is Four Hundred Forty Million (440,000,000),
of which Four Hundred Million (400,000,000) shares shall be Common Stock
having a par value of one dollar ($1.00) per share and Forty Million
(40,000,000) shares shall be shares of Preferred Stock, without par value
(hereinafter called "Preferred Stock").
20
AUDIT & FINANCE COMMITTEE REPORT
Our committee has reviewed and discussed U. S. Steel's audited financial
statements for 2002 with U. S. Steel's management. We have discussed with the
independent auditor, PricewaterhouseCoopers LLP (PwC), the matters required to
be discussed by Statements on Auditing Standards No. 61, as amended by
Statements No. 89 and No. 90 (Communication with Audit Committees), as may be
modified or supplemented. We have received the written disclosures and the
letter from PwC required by Independence Standards Board Standard No. 1
(Independence Discussions with Audit Committees), as may be modified or
supplemented, and we have discussed with PwC its independence. Based on the
review and discussions referred to above, we recommended to the Board that the
audited financial statements for U. S. Steel be included in U. S. Steel's
Annual Report on Form 10-K for 2002 for filing with the Securities and Exchange
Commission.
Charles R. Lee, Chairman
J. Gary Cooper
Robert J. Darnall
Shirley Ann Jackson
Frank J. Lucchino
Seth E. Schofield
Douglas C. Yearley
21
INFORMATION REGARDING THE INDEPENDENCE OF THE INDEPENDENT PUBLIC ACCOUNTANTS
AUDIT FEES
Aggregate fees for professional services rendered for PwC's audit of
U. S. Steel's annual financial statements for 2002 and for its reviews of the
financial statements included in U. S. Steel's Forms 10-Q for 2002 were $1.6
million.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES
Aggregate fees for professional services rendered by PwC for 2002 as described
in Paragraph (c)(4)(ii) of Rule 2-01 of Regulation S-X were zero.
ALL OTHER FEES
Aggregate fees for services rendered for 2002 by PwC, other than the services
described in the previous two paragraphs, were $1.9 million. These fees were
primarily for audit-related services provided to prepare for the potential sale
of the raw materials and transportation businesses and for tax advisory
services.
COMPATIBILITY OF PRICEWATERHOUSECOOPERS' SERVICES WITH ITS INDEPENDENCE
The Audit & Finance Committee has considered whether PwC's provision of the
services covered under the headings "Financial Information Systems Design and
Implementation Fees" and "All Other Fees" above is compatible with maintaining
PwC's independence, and the committee has determined that it is.
22
SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the number of shares of U. S. Steel common stock
beneficially owned as of January 31, 2003 (February 25, 2003 for Mr. Drosdick,
who joined the Board on that date) by each director, by each executive officer
named in the Summary Compensation Table and by all directors and executive
officers as a group. No director or executive officer beneficially owned, as of
the applicable date, any equity securities of U. S. Steel other than those
shown.
NAME SHARES
--------------------------------------------------------------------
J. Gary Cooper(1)(2) .................................... 5,806
Robert J. Darnall(1) .................................... 9,251
Roy G. Dorrance(2)(3) ................................... 427,788
John G. Drosdick(1) ..................................... 2,083
John H. Goodish(2)(3) ................................... 100,176
Shirley Ann Jackson(1)(2) ............................... 5,765
Charles R. Lee(1) ....................................... 13,418
Frank J. Lucchino(1) .................................... 4,286
Dan D. Sandman(2)(3) .................................... 353,594
Seth E. Schofield(1)(2) ................................. 7,823
John P. Surma(2)(3) ..................................... 195,658
Thomas J. Usher(2)(3) ................................... 1,454,793
Douglas C. Yearley(1) ................................... 7,623
All Directors and Executive Officers as a group ......... 3,785,293
(21 persons)(1)(2)(3)(4)
--------------------------------------------------------------------
(1) Includes Common Stock Units credited under the United States Steel
Corporation Deferred Compensation Plan for Non-Employee Directors as
follows:
NAME COMMON STOCK UNITS
-----------------------------------------------------------------------------
J. Gary Cooper ....................................... 4,753
Robert J. Darnall .................................... 6,251
John G. Drosdick ..................................... 2,083
Shirley Ann Jackson .................................. 4,729
Charles R. Lee ....................................... 12,218
Frank J. Lucchino .................................... 2,286
Seth E. Schofield .................................... 6,664
Douglas C. Yearley ................................... 6,623
-----------------------------------------------------------------------------
(2) Includes shares held under the U. S. Steel Savings Fund Plan, the U. S.
Steel Dividend Reinvestment and Direct Stock Purchase Plan, the Marathon Oil
Company Thrift Plan and the 2002 Stock Plan.
(3) Includes shares which may be acquired upon exercise of outstanding options
as follows (all options other than those granted on May 28, 2002 are
currently exercisable): Mr. Usher: 1,281,400; Mr. Surma: 150,000; Mr.
Sandman: 292,325; Mr. Dorrance: 361,000; Mr. Goodish: 86,750; and all
directors and executive officers as a group: 3,253,395.
(4) Total shares beneficially owned in each case constitute less than one
percent of the outstanding shares except that Mr. Usher beneficially owned
1.4 percent and all directors and executive officers as a group owned 3.7
percent of the common stock.
23
EXECUTIVE COMPENSATION
2002 was United States Steel Corporation's first year of operation. Accordingly,
the following table sets forth certain information concerning the compensation
awarded to, earned by or paid by U. S. Steel to Mr. Usher and to the other four
most highly compensated current executive officers of U. S. Steel who were
serving as executive officers at the end of 2002 for services rendered to U. S.
Steel or its subsidiaries in all capacities during 2002, and corresponding
information concerning the compensation awarded to, earned by or paid by USX
Corporation to these officers for services rendered during 2001 and 2000:
SUMMARY COMPENSATION TABLE
LONG-TERM
ANNUAL COMPENSATION COMPENSATION(4)
-------------------------------------------------------------- ----------------------
NAME SALARY AND OTHER RESTRICTED ALL
AND BONUS ANNUAL STOCK OPTIONS/ OTHER
PRINCIPAL SALARY BONUS TOTAL COMPENSATION AWARD(S) SARs COMPENSATION
POSITION YEAR ($) ($) ($) ($) ($)(1) (#)(2) ($)(3)
-----------------------------------------------------------------------------------------------------------------------------------
T. J. USHER 2002 1,100,000 1,243,000 2,343,000 12,858 663,488 500,000 74,957
Chairman of the 2001 1,400,000 3,000,000 4,400,000 12,252 2,844,737 500,000 109,115
Board & Chief 2000 1,325,000 2,500,000 3,825,000 7,729 4,925,000 400,000 112,406
Executive Officer
-----------------------------------------------------------------------------------------------------------------------------------
J. P. SURMA 2002 450,000 509,000 959,000 2,491 918,675 153,935 30,616
President 2001 416,667 1,000,000 1,416,667 11,572 357,720 94,200 92,592
2000 350,000 650,000 1,000,000 1,781 0 43,850 42,750
-----------------------------------------------------------------------------------------------------------------------------------
D. D. SANDMAN 2002 520,000 588,000 1,108,000 5,688 768,625 150,000 35,429
Vice Chairman and 2001 481,667 700,000 1,181,667 10,206 31,607 100,000 47,694
Chief Legal & 2000 459,167 650,000 1,109,167 4,597 923,438 80,000 47,693
Administrative Officer,
General Counsel and
Secretary
-----------------------------------------------------------------------------------------------------------------------------------
R. G. DORRANCE 2002 420,000 475,000 895,000 10,050 747,189 150,000 29,522
Vice Chairman and 2001 350,000 190,000 540,000 1,735 8,948 62,500 33,824
Chief Operating 2000 328,333 340,000 668,333 1,677 345,000 50,000 32,615
Officer
-----------------------------------------------------------------------------------------------------------------------------------
J. H. GOODISH 2002 310,750* 350,000 660,750 493,191** 38,789 50,000 21,045
Executive Vice 2001 289,167* 250,000 539,167 58,937** 63,393 18,750 25,421
President - 2000 196,126* 220,000 416,126 0 143,750 5,000 16,099
International and
Diversified Businesses
* Includes foreign service premium.
** Allowances, reimbursements and tax settlements associated with foreign
service.
(1) Grants of restricted stock under the USX 1990 Stock Plan (for 2000 and 2001)
and under the U. S. Steel 2002 Stock Plan (for 2002). The amount shown for
Mr. Usher for 2001 includes 90,000 Marathon Oil Corporation ("Marathon")
shares granted under an August 8, 2001 Completion and Retention Agreement
between Mr. Usher and USX. On February 13, 2003, Mr. Usher surrendered all
of his U. S. Steel restricted stock except that which is eligible for
vesting in May 2003. The amount shown for 2002 reflects such surrender. The
amounts shown for Messrs. Usher, Surma and Sandman for 2001 and 2000 include
grants of Marathon restricted stock valued as of applicable grant dates at
$2,802,978 (2001) and $3,315,000 (2000) for Mr. Usher, $357,720 (2001) for
Mr. Surma, and $23,772 (2001) and $621,563 (2000) for Mr. Sandman. In 2002,
in light of the separation of the steel and energy businesses of USX
Corporation, the Marathon Compensation Committee cancelled all unvested
performance-based restricted stock awards previously granted to Messrs.
Usher, Surma and Sandman in exchange for cash settlements of $3,778,164,
$225,869, and $400,403, respectively. Grants are subject to conditions
including continued employment and achievement of business performance
standards. Dividends are paid on restricted stock. Shown below is the
vesting schedule for restricted stock scheduled to vest less than three
years from the date of grant, together with the number and value, as of
December 31, 2002, of the aggregate holdings of restricted stock for each of
the executive officers named in the Summary Compensation Table. Vesting
shown assumes achievement of business performance at peer-group standard (as
described in the Compensation & Organization Committee Report).
24
FOOTNOTES TO SUMMARY COMPENSATION TABLE CONTINUED:
FOOTNOTE 1 CONTINUED:
UNVESTED RESTRICTED SHARES
VESTING SCHEDULE FOR RESTRICTED STOCK AGGREGATE HOLDINGS
----------------------------------------------------------------- ---------------------------------------
MAY MAY MAY VALUE AS OF
2003 2004 2005 DECEMBER 31,
NAME DATE GRANTED STOCK (SHARES) (SHARES) (SHARES) STOCK SHARES 2002($)
-----------------------------------------------------------------------------------------------------------------------------------
T. J. Usher May 28, 2002 U. S. Steel 26,000 0 0 U. S. Steel 32,500 425,263
May 30, 2000 U. S. Steel 14,000 0 0 U. S. Steel 17,500 228,988
----------------------------------------------------------------------------------------------------------------------------------
J. P. Surma May 28, 2002 U. S. Steel 15,000 15,000 15,000 U. S. Steel 45,000 588,825
----------------------------------------------------------------------------------------------------------------------------------
D. D. Sandman May 28, 2002 U. S. Steel 12,375 12,375 12,375 U. S. Steel 37,125 485,781
May 30, 2000 U. S. Steel 2,625 2,625 2,625 U. S. Steel 7,875 103,044
----------------------------------------------------------------------------------------------------------------------------------
R. G. Dorrance May 28, 2002 U. S. Steel 12,000 12,000 12,000 U. S. Steel 36,000 471,060
May 30, 2000 U. S. Steel 3,000 3,000 3,000 U. S. Steel 9,000 117,765
----------------------------------------------------------------------------------------------------------------------------------
J. H. Goodish May 28, 2002 U. S. Steel 500 500 500 U. S. Steel 1,500 19,628
May 29, 2001 U. S. Steel 750 750 750 U. S. Steel 2,250 29,441
May 30, 2000 U. S. Steel 1,250 1,250 1,250 U. S. Steel 3,750 49,069
----------------------------------------------------------------------------------------------------------------------------------
(2) All option shares listed except (a) those granted to Mr. Surma by
Marathon and by Ashland, Inc. in 2000 and 2001, and by Ashland, Inc. in
2002, (b) 6,000 granted to Mr. Dorrance, and (c) 18,000 granted to Mr.
Goodish, were granted with tandem stock appreciation rights ("SARs").
(3) This column includes amounts contributed by U. S. Steel under the U. S.
Steel Savings Fund Plan, and for 2000 and 2001 by USX under the USX Savings
Fund Plan or the Marathon Thrift Plan, and the related supplemental savings
plans. Such amounts for 2002 were $66,000 for Mr. Usher, $27,000 for Mr.
Surma, $31,200 for Mr. Sandman, $25,200 for Mr. Dorrance and $16,200 for Mr.
Goodish. Also included are amounts representing the imputed income
attributable to (and, for 2000 and 2001, premiums paid for) split-dollar
life insurance protection provided by U. S. Steel. Such amounts for 2002
were $6,207 for Mr. Usher, $866 for Mr. Surma, $1,479 for Mr. Sandman,
$1,572 for Mr. Dorrance and $720 for Mr. Goodish. Also included are amounts
attributable to a mandatory tax compliance program. For 2002, these amounts
were $2,750 for each of Messrs. Usher, Surma, Sandman and Dorrance, and
$4,125 for Mr. Goodish.
25
FOOTNOTES TO SUMMARY COMPENSATION TABLE CONTINUED:
(4) Restricted stock and stock options/SAR shares granted by stock are as
follows:
RESTRICTED
STOCK* STOCK OPTION/
NAME STOCK ($) SAR SHARES
-----------------------------------------------------------------------------------------
T. J. Usher 2002 U. S. Steel 663,488 500,000
--------------------------------------------------------------
2001 Marathon - 325,000
U. S. Steel 41,759 175,000
--------------------------------------------------------------
2000 Marathon - 260,000
U. S. Steel 1,610,000 140,000
-----------------------------------------------------------------------------------------
J. P. Surma 2002 U. S. Steel 918,675 150,000
Ashland, Inc. - 3,935
--------------------------------------------------------------
2001 Marathon - 50,000
Ashland, Inc. - 44,200
--------------------------------------------------------------
2000 Marathon 30,000
Ashland, Inc. - 13,850
-----------------------------------------------------------------------------------------
D. D. Sandman 2002 U. S. Steel 768,625 150,000
--------------------------------------------------------------
2001 Marathon - 65,000
U. S. Steel 7,835 35,000
--------------------------------------------------------------
2000 Marathon - 52,000
U. S. Steel 301,875 28,000
-----------------------------------------------------------------------------------------
R. G. Dorrance 2002 U. S. Steel 747,189 150,000
--------------------------------------------------------------
2001 U. S. Steel 8,948 62,500
--------------------------------------------------------------
2000 U. S. Steel 345,000 50,000
-----------------------------------------------------------------------------------------
J. H. Goodish 2002 U. S. Steel 38,789 50,000
--------------------------------------------------------------
2001 U. S. Steel 63,393 18,750
--------------------------------------------------------------
2000 U. S. Steel 143,750 5,000
-----------------------------------------------------------------------------------------
* Reflects cancellation of Marathon restricted stock described in footnote (1)
above.
26
2002 OPTION/SAR GRANTS
The following table sets forth certain information concerning options and stock
appreciation rights ("SARs") granted during 2002 to each executive officer named
in the Summary Compensation Table:
INDIVIDUAL GRANTS
-----------------------------------------------------------
NUMBER OF % OF TOTAL POTENTIAL REALIZABLE VALUE
SECURITIES OPTIONS/ EXERCISE AT ASSUMED ANNUAL RATES OF
UNDERLYING SARs OR BASE STOCK PRICE APPRECIATION
OPTIONS/ GRANTED TO PRICE PER FOR OPTION TERM ($)(4)
SARs EMPLOYEES SHARE EXPIRATION ---------------------------------
NAME OR GROUP STOCK GRANTED(1) IN 2002(3) ($) DATE 0% 5% 10%
----------------------------------------------------------------------------------------------------------------------------------
T. J. Usher U.S. Steel 500,000(2) 27.4% 20.4150 May 28, 2010 0 4,873,500 11,673,000
J. P. Surma U.S. Steel 150,000(2) 8.2% 20.4150 May 28, 2010 0 1,462,050 3,501,900
Ashland, Inc. 3,935 .5% 28.13 October 20, 2011 0 38,354 91,867
D. D. Sandman U.S. Steel 150,000(2) 8.2% 20.4150 May 28, 2010 0 1,462,050 3,501,900
R. G. Dorrance U.S. Steel 150,000(2) 8.2% 20.4150 May 28, 2010 0 1,462,050 3,501,900
J. H. Goodish U.S. Steel 50,000(2) 2.7% 20.4150 May 28, 2010 0 487,350 1,167,300
----------------------------------------------------------------------------------------------------------------------------------
All Stockholders U.S. Steel N/A N/A 20.4150 N/A 0 999,067,500 2,392,965,000
Ashland, Inc. N/A N/A 28.13 N/A 0 665,171,607 1,593,218,051
----------------------------------------------------------------------------------------------------------------------------------
All Optionees U.S. Steel 1,825,200 100.0% 20.4150 May 28, 2010 0 17,790,224 42,611,119
Ashland, Inc. 844,842 100.0% 28.13 October 20, 2011 0 8,234,675 19,723,681
----------------------------------------------------------------------------------------------------------------------------------
All Optionees' U.S. Steel N/A N/A 20.4150 N/A 0 1.8% 1.8%
Gain as % of Ashland, Inc. N/A N/A 28.13 N/A 0 1.2% 1.2%
All Stockholders'
Gain
----------------------------------------------------------------------------------------------------------------------------------
(1) All options are exercisable on May 28, 2003.
(2) These options were granted with tandem SARs, which have the same exercise
date as the underlying options. Upon the exercise of an SAR, an optionee
receives an amount, in cash and/or shares, equal to the excess, for a
specified number of shares, of (a) the fair market value of a share on the
date the SAR is exercised (except that for any SAR exercised during the
10-business-day period beginning on the third business day following the
release of U. S. Steel's quarterly earnings, the Compensation & Organization
Committee may, in its sole discretion, establish a uniform fair market value
of a share for such period which shall not be more than the highest daily
fair market value and shall not be less than the lowest daily fair market
value during such 10-business-day period) over (b) the exercise or base
price per share.
(3) Indicates percentage of total option shares granted.
(4) The dollar amounts under these columns are the result of calculations at 0%
and at the 5% and 10% rates set by the Securities and Exchange Commission
and therefore are not intended to forecast possible future appreciation, if
any, of the price of the stock. We have not used an alternative formula for
a grant date valuation, as we are not aware of any formula which will
determine with reasonable accuracy a present value based on future unknown
or volatile factors. Amounts shown for All Stockholders represent the
potential realizable value assuming appreciation at the rates indicated
based on the exercise or base price per share, the expiration date
applicable to the May 28, 2002 grants and the number of outstanding shares
as of December 31, 2002.
27
OPTION EXERCISES AND YEAR-END VALUES
The following table sets forth certain information concerning options to
purchase common stock and stock appreciation rights ("SARs") exercised by each
executive officer named in the Summary Compensation Table during 2002 together
with the total number of options and SARs outstanding at December 31, 2002 and
the value of such options.
AGGREGATED 2002 OPTION/SAR EXERCISES
AND
DECEMBER 31, 2002 OPTION/SAR VALUES
NO. OF
SECURITIES TOTAL VALUE
NO. OF UNDERLYING OF UNEXERCISED
SHARES UNEXERCISED IN-THE-MONEY
UNDERLYING TOTAL VALUE OPTIONS/SARs AT OPTIONS/SARs AT
OPTIONS/SARs REALIZED DECEMBER 31, DECEMBER 31, 2002
NAME EXERCISED ($) 2002 ($)
-------------------------------------------------------------------------------------------------
T. J. Usher 0 - 2,382,500(1) 0
J. P. Surma 0 - 393,885(2) 0
D. D. Sandman 0 - 510,725(3) 0
R. G. Dorrance 0 - 361,000 0
J. H. Goodish 0 - 86,750 0
-------------------------------------------------------------------------------------------------
Note: All options listed above except those granted in 2002 are currently
exercisable. All options listed above, except (a) those granted to
Mr. Surma by Marathon and by Ashland, Inc. in 2000 and 2001 and by
Ashland, Inc. in 2002 (see page 26), (b) 6,000 options granted to
Mr. Dorrance and (c) 18,000 options granted to Mr. Goodish, were
granted with SARs.
(1) Includes 1,101,100 Marathon shares.
(2) Includes 170,000 Marathon shares and 73,885 Ashland shares.
(3) Includes 218,400 Marathon shares.
28
COMPENSATION & ORGANIZATION COMMITTEE
REPORT ON EXECUTIVE COMPENSATION
The Compensation & Organization Committee (the "Committee") of U. S. Steel was
established on January 2, 2002 following the separation of the steel and energy
businesses of USX Corporation (the "Separation"). The Committee sets policies
and administers programs on executive compensation. When action should be taken
on a specific compensation item, we either make a recommendation to the U. S.
Steel Board or a subsidiary company board or take action on our own, whichever
is appropriate. The Committee reports to the Board actions that do not require
the Board's approval. The purpose of this report is to summarize the philosophy,
specific program objectives and other relevant factors to be considered by the
Committee in decision making with respect to the compensation of U. S. Steel
executive officers, including the officers named in the Summary Compensation
Table. Prior to January 2, 2002, decisions respecting executive compensation
were made by the Compensation Committee of USX Corporation (the "USX
Committee").
Compensation programs for U. S. Steel's executive officers are designed to
attract, retain and motivate employees who will make significant contributions
to the achievement of corporate goals and objectives. The principal elements of
our executive officers' compensation are:
- Salary
- Short-term incentive (bonus) awards and
- Long-term incentive awards (stock options with stock appreciation rights and
restricted stock).
For each of the above elements of compensation, the Committee exercises its
discretion in the subjective consideration of the factors described below and
within the limitations of the various plans.
SALARY
Salary administration at U. S. Steel begins with the development, and periodic
adjustment, of salary structures for executive officers employed at the
corporate level and at each major business unit. Each executive officer's
position is assigned a salary grade with an associated salary range. The two
major objectives in developing salary structures and assigning grades are to
maintain:
1. external competitiveness - the midpoint of the salary range for each position
is near the average midpoint for similar positions at comparable companies
and
2. internal equity - each position's grade in the unit's hierarchy of positions
accurately reflects its relative "value".
The data used in developing and adjusting salary structures are obtained from
surveys coordinated by independent consultants, with each unit having its own
sources of relevant data.
The Committee makes decisions on salary increases and, occasionally - when
business conditions dictate - salary decreases. When we determine salary
increases, the highest weighting is given to performance; but other factors are
also considered, such as experience and time in position. Once an executive
officer's salary has passed the midpoint for the position, increases seldom
exceed amounts necessary to maintain the salary near the midpoint, assuming
performance merits such increases. Therefore, incentive
29
opportunities provide the primary basis for significant increases in
compensation. The salaries shown for the officers named in the Summary
Compensation Table reflect the results of salary reviews and related actions
taken by the Committee.
SHORT-TERM INCENTIVE AWARDS
U. S. Steel's short-term incentive (bonus) opportunities for executive officers
are designed to provide awards near the average of those provided by similar
companies for on-target performance. However, our incentive plans are designed
to provide exceptional rewards for superior performance and lower rewards for
below-average performance. The Committee intends to make bonus awards under the
Annual Incentive Compensation Plan, as well as under the Senior Executive
Officer Annual Incentive Compensation Plan, the latter of which was developed
specifically to retain the Corporation's tax deduction for awards made to the
officers named in the Summary Compensation Table and was approved by the
stockholders of USX and of the U. S. Steel Group on October 25, 2001.
SENIOR EXECUTIVE OFFICER ANNUAL INCENTIVE COMPENSATION PLAN
This plan provides for awards based on pre-established performance measures
specifically related to steel shipments, worker safety, workforce diversity,
environmental emissions improvements and common stock performance. For each
performance measure, the applicable portion of the bonus will only be awarded if
performance reaches the minimum, or threshold, level for that measure.
The Committee certified in writing prior to payment of awards for the year 2002
that the pre-established, applicable performance levels (measured for incentive
compensation purposes) required under the Senior Executive Officer Annual
Incentive Compensation Plan were satisfied.
OTHER PLANS
The Committee also administers other bonus plans in which corporate and business
unit executive officers participate. These plans were developed specifically for
U. S. Steel employees. The Committee makes awards based on performance
comparisons with the current business plan, with previous years' results and
with peer groups on the basis of such financial measures as income, cash flow
and return on capital employed, as measured for incentive compensation purposes,
as well as individual objectives. In addition, non-financial measures, such as
safety performance (compared with the prior year's industry average) and
environmental and diversity performance are considered. In determining awards
under these plans, consideration is also given to the absolute levels of income
and cash flow. When making awards to executive officers under these plans, the
Committee gives such weight to the various factors as it deems appropriate.
Based on consideration of other factors, the Committee may reduce or eliminate a
short-term incentive award that would otherwise be payable under the above
discussed plans.
30
LONG-TERM INCENTIVE AWARDS
Long-term incentive awards are of major importance in the mix of compensation
elements because these awards provide the most direct link to the returns that
you, as U. S. Steel stockholders, receive. The USX and the U. S. Steel Group
stockholders approved the 2002 Stock Plan on October 25, 2001. We administer
this plan, under which we may grant (1) stock options, (2) stock appreciation
rights and/or (3) restricted stock. Our stock options and restricted stock meet
the requirements for deductibility under the tax laws.
STOCK OPTION GRANTS
The Committee makes stock option grants that we believe to be reasonable and in
line with other compensation. The number of shares granted will generally
reflect an employee's level of responsibility. Following normal annual grant
practices, the Committee granted stock options in May 2002.
RESTRICTED STOCK GRANTS
The Committee established, for each recipient, an annual target level of
restricted stock shares based on the same factors as those considered in
granting stock options. A major grant is made to cover five years, with the
intention that one fifth of the shares will vest each year if performance is at
the target level. The Committee vests restricted stock at levels higher or lower
than annual targets, depending on performance.
A major grant was made in 2000 by the USX Committee, to cover the five-year
performance period ending with 2004. We will make interim grants only to permit
vesting at the target level for the number of years remaining in the period. To
emphasize the long-term nature of the awards, vesting decisions have been and
will continue to be based on three-year average performance, which is compared
with three-year peer-group performance for relevant businesses.
Vesting of restricted stock shares is based on pre-established performance
measures specifically related to the responsibilities of plan participants. We
can vest a portion of the annual target shares only if performance reaches the
minimum, or threshold, level established for that period.
In May 2002, the three-year (1999-2001) average performance of U. S. Steel was
compared by the Committee with that of competitors for the measures shown below.
This comparison has provided the primary basis for the determination of vesting
levels for restricted stock. However, vesting levels may be reduced (or
eliminated entirely) based on other factors considered relevant by the
Committee.
PERFORMANCE MEASURE
- Income from operations as a percent of capital employed
- Income from operations per ton shipped
- Operating cash flow as a percent of capital employed
- Safety performance
31
Prior to vesting restricted stock shares in the year 2002, the Committee
certified in writing that the pre-established applicable performance levels
required under the 2002 Stock Plan were satisfied.
The Committee periodically compares data on long-term incentive grants made at
other companies with those made at U. S. Steel. Our objective in making grants
under the 2002 Stock Plan is to provide opportunities to receive above-average
compensation (compared with that of similar companies) when performance is above
the target level.
Overall, executive compensation at U. S. Steel is designed to provide total pay
that is above average when both short- and long-term incentive goals are
exceeded.
In addition to the compensation comparisons described above, the Committee
annually compares the salary, bonus and long-term incentive payouts for the CEO
and U. S. Steel's other top officers with the same elements for similar
positions at comparable companies.
With respect to the compensation comparisons that we make, we believe that the
companies with which U. S. Steel competes for employees are not necessarily
limited to the companies with which shareholder returns would logically be
compared. The comparison groups used in the performance graphs include the
Standard & Poor's 500 Stock Index and the Standard & Poor's Steel Index. The
companies used for comparing compensation reflect similarities to U. S. Steel
and its operating groups in such factors as line of business (when relevant),
size and complexity. Therefore, the compositions of the groups of companies used
for compensation comparisons are not identical to those of the comparison groups
shown in the Shareholder Return Performance Presentation.
Mr. Usher's 2002 compensation reflects the same elements and the same factors
as those described above. His leadership and effectiveness in dealing with major
corporate problems and opportunities will also be considered in determining his
future salary increases, as will (1) the comparability of his salary with CEOs
of other companies of similar size and complexity and (2) the position of his
salary in the range for his position.
On February 13, 2003, the Committee approved an Employment and Consulting
Agreement (the "Agreement") with Mr. Usher in order to assure that the
Corporation will have his continued guidance and direction for the balance of
his employment and after his retirement. The terms and conditions of the
Agreement are as follows:
- For the remainder of Mr. Usher's employment by the Corporation, he will (a)
continue to serve as Chairman of the Board & Chief Executive Officer, (b)
receive an annual salary and (c) be eligible for bonuses under the Senior
Executive Officer Annual Incentive Compensation Plan. He will not receive any
new grants of stock options or restricted stock other than a grant, as of the
date of the Agreement, of options for 800,000 shares of U. S. Steel common
stock under the 2002 Stock Plan. The options have a term of eight years and a
grant price equal to the average of the high and low New York Stock Exchange
trading prices on the date of the Agreement, which price
32
was $12.21. Mr. Usher surrendered on the date of the Agreement all of his
restricted shares of U. S. Steel common stock (except those which are
eligible for vesting in May 2003, for a surrender of 70,000 shares) and
received 150,000 shares of phantom stock (i.e. book entry units, each
representing a share of U. S. Steel common stock). Dividends will be paid on
the phantom shares. Shortly after each of the first and second anniversary
dates of the Agreement, Mr. Usher will receive a cash payment equal to the
then fair market value of 75,000 of the phantom shares.
- After Mr. Usher retires from active employment with the Corporation, he will
serve as the Corporation's non-executive Chairman. He will receive an annual
retainer fee equal to his annualized monthly salary at the time of his
retirement. He will not be eligible for bonuses under the Senior Executive
Officer Annual Incentive Compensation Plan.
- After his retirement as Chairman, which is expected to be on April 30, 2007
and which will coincide with his retirement from the Board, Mr. Usher will
serve as a consultant to the Corporation for two years. He will receive an
annual consulting fee equal to half his annualized monthly salary at the time
of his retirement from active employment.
- While serving both as non-executive Chairman and as a consultant, Mr. Usher
will be entitled to the same working condition fringes and other benefits as
those provided to him as Chief Executive Officer.
- If Mr. Usher elects to receive his benefits under the Corporation's non
tax-qualified pension programs in the form of a lump sum distribution, those
benefits will be calculated as if his total pension benefits were determined
using the applicable interest rates and mortality tables in effect for
retirements on January 31, 2003, instead of the rates and tables in effect at
the date of his retirement.
- Mr. Usher will not become employed by, act as a director or consultant for,
or otherwise provide any services for any competitor of the Corporation
through April 30, 2010.
- The Board may terminate the Agreement at any time, in which case the
Corporation will pay Mr. Usher the present value of the remaining amounts to
be paid and the value of the working condition fringes and other benefits to
be provided during the remaining term of the Agreement. The Board may also
terminate the Agreement in the event of illegal conduct or gross misconduct
by Mr. Usher, or by his failure to satisfy the non-compete provision
described above. In the event of termination for any of the reasons in the
preceding sentence, the Corporation will be relieved of any obligation to pay
the remaining amounts under the Agreement. The Agreement will immediately
terminate upon Mr. Usher's death, and the Corporation will pay to Mr. Usher's
surviving spouse, or his estate if there is no surviving spouse, the annual
compensation, retainer fee or consulting fee.
- The retention bonus payable by the Corporation to Mr. Usher at the end of
2004 under the Retention Agreement dated August 8, 2001 between USX
Corporation (now Marathon Oil Corporation) and Mr. Usher will be payable upon
Mr. Usher's retirement as an employee of the Corporation, provided that the
performance measures required for such payment, adjusted if necessary for a
shorter time period, are, in the judgment of the Committee, met.
Seth E. Schofield, Chairman
Robert J. Darnall
Charles R. Lee
Douglas C. Yearley
33
SHAREHOLDER RETURN PERFORMANCE PRESENTATION
The line graph below compares the yearly change in cumulative total stockholder
return of our common stock with the cumulative total return of the Standard &
Poor's 500 Stock Index and the S&P Steel Index. The S&P Steel Index is made up
of U. S. Steel, Nucor Corporation, Allegheny Technologies Incorporated and
Worthington Industries, Inc. This is the first year we have used the S&P Steel
Index. Until this year, we used a group of peer issuers selected by us in good
faith which we called the "Steel Index". This Steel Index is defined in a
footnote to the graph. We decided to stop using it because so many of the
companies in it have filed for bankruptcy. This is the last year we will show
it.
[CHART]
COMPARISON OF CUMULATIVE TOTAL RETURN(1)
ON $100 INVESTED IN U. S. STEEL STOCK ON DECEMBER 31, 1997
VS.
S&P 500 INDEX, S&P STEEL INDEX AND STEEL INDEX
PLOT POINTS FOR 2003 PROXY CHARTS
U.S. STEEL
COMM STOCK S&P 500 INDEX STEEL INDEX(2) S&P STEEL INDEX
---------- --------------- ---------------- ------------------
12/31/97 100 100 100 100
12/31/98 76 129 96 87
12/31/99 114 156 84 95
12/31/0 65 141 30 60
12/31/1 68 125 32 77
12/31/2 50 97 21 66
(1) Total return assumes reinvestment of dividends.
(2) The Steel Index consists in part of the common stocks of AK Steel
Corporation, Bethlehem Steel Corporation and National Steel Corporation for
the period December 31, 1997 through December31, 2002. It also includes the
common stock of LTV Corporation for the period December 31, 1997 through
December 31, 2001. LTV Corporation filed for bankruptcy protection and its
former steel assets are now operated by International Steel Group, which is
not publicly traded. Bethlehem Steel Corporation and National Steel
Corporation are currently in bankruptcy.
TRANSACTIONS
In the regular course of its business since January 1, 2002, U. S. Steel and its
subsidiaries have had transactions with entities with which certain directors
were affiliated. Such transactions were in the ordinary course of business and
at competitive prices and terms. We do not consider any such director to have a
material interest in any such transaction. We anticipate that similar
transactions will occur in 2003.
34
PENSION BENEFITS
The United States Steel Corporation Plan for Non-Union Employee Pension Benefits
("Steel Pension Plan") is comprised of two defined benefits. One is based on
final earnings and the other on career earnings. Directors who have not been
employees of U. S. Steel do not receive any benefits under the Plan. The
following table shows the annual final earnings pension benefits which would be
payable for retirement at age 65 (or earlier under certain circumstances) with
the various levels of eligible earnings and years of service shown. The benefits
are based on a formula of a specified percentage (dependent on years of service)
of average monthly earnings in the five consecutive years of the ten years prior
to retirement in which earnings are highest. Years of service include service
accrued as an employee of Marathon Oil Company, its subsidiaries and joint
ventures ("Marathon"), and earnings for purposes of determining average monthly
earnings include salary earned as an employee of Marathon. As of December 31,
2002, Messrs. Usher, Surma, Sandman, Dorrance, and Goodish had 37, 5, 29, 31,
and 32 years of service, respectively.
TABLE OF PENSION BENEFITS
AVERAGE ELIGIBLE FINAL EARNINGS PENSION BENEFITS
EARNINGS FOR HIGHEST
FIVE CONSECUTIVE YEARS ANNUAL BENEFITS FOR YEARS OF SERVICE
IN TEN-YEAR PERIOD -------------------------------------------------------------------------------------
PRECEDING RETIREMENT 15 YEARS 20 YEARS 25 YEARS 30 YEARS 35 YEARS 40 YEARS 45 YEARS
--------------------------------------------------------------------------------------------------------------
$ 100,000 17,325 23,100 28,875 34,650 40,950 47,250 53,550
300,000 51,975 69,300 86,625 103,950 122,850 141,750 160,650
500,000 86,625 115,500 144,375 173,250 204,750 236,250 267,750
700,000 121,275 161,700 202,125 242,550 286,650 330,750 374,850
900,000 155,925 207,900 259,875 311,850 368,550 425,250 481,950
1,100,000 190,575 254,100 317,625 381,150 450,450 519,750 589,050
1,300,000 225,225 300,300 375,375 450,450 532,350 614,250 696,150
1,500,000 259,875 346,500 433,125 519,750 614,250 708,750 803,250
The annual career earnings pension is equal to one percent of total career
earnings plus a 30 percent supplement. Total career earnings include salary
earned as an employee of Marathon. The estimated annual career earnings benefit
payable at normal retirement age 65, assuming no increase in annual earnings,
will be $233,400 for Mr. Usher, $121,298 for Mr. Surma, $136,835 for Mr.
Sandman, $89,320 for Mr. Dorrance, and $80,218 for Mr. Goodish. Earnings for the
purpose of calculating both the final earnings and career earnings pensions are
limited to base salary (which includes any foreign service premium) as reflected
in the Summary Compensation Table.
Pensions payable under the Steel Pension Plan to participants with Marathon
service include service and earnings that are also used in the calculation of
benefits payable under the defined benefit pension plans sponsored by
Marathon ("Marathon Pension Plans"); therefore, the Steel Pension Plan
benefits for such participants are reduced by their Marathon Pension Plan
benefits. Because Messrs. Surma and Sandman have earned benefits under the
Marathon Pension Plans, their U.S. Steel pension benefits will be reduced, at
age 65, by estimated annual Marathon pensions (assuming no increase in annual
earnings) of $6,340 and $29,365, respectively. However the pension payable
under the Steel Pension Plan cannot be reduced below the amount calculated
with only U.S. Steel service and earnings.
In addition to the pension benefits described above, Messrs. Usher, Surma,
Sandman, Dorrance, and Goodish participate in the United States Steel
Corporation Executive Management Supplemental Pension Program ("Supplemental
Pension Program") and are entitled, upon retirement after age 60, or before age
60 with U. S. Steel's consent, to the benefits shown in the table below. The
benefits are based on a formula of a specific percentage, determined by years of
U. S. Steel service, of the average of the three
35
highest annual bonuses paid under the applicable incentive compensation plans in
the ten years prior to retirement. The three most recent bonuses are reported in
the Summary Compensation Table. The following table shows the annual
supplemental pension which would be payable for retirement at age 65 (or earlier
under certain circumstances) with the various levels of average annual bonus and
years of service shown.
AVERAGE ANNUAL BONUS SUPPLEMENTAL PENSION BENEFITS
FOR THREE HIGHEST YEARS ANNUAL BENEFITS FOR YEARS OF SERVICE
IN TEN-YEAR PERIOD -------------------------------------------------------------------------------------------
PRECEDING RETIREMENT 15 YEARS 20 YEARS 25 YEARS 30 YEARS 35 YEARS 40 YEARS 45 YEARS
--------------------------------------------------------------------------------------------------------------------
$ 100,000 23,100 30,800 38,500 46,200 53,900 61,600 69,300
300,000 69,300 92,400 115,500 138,600 161,700 184,800 207,900
500,000 115,500 154,000 192,500 231,000 269,500 308,000 346,500
700,000 161,700 215,600 269,500 323,400 377,300 431,200 485,100
900,000 207,900 277,200 346,500 415,800 485,100 554,400 623,700
1,100,000 254,100 338,800 423,500 508,200 592,900 677,600 762,300
1,300,000 300,000 400,400 500,500 600,600 700,700 800,800 900,900
1,500,000 346,500 462,200 577,500 693,000 808,500 924,000 1,039,500
1,700,000 392,700 523,600 654,500 785,400 916,300 1,047,200 1,178,100
1,900,000 438,900 585,200 731,500 877,800 1,024,100 1,170,400 1,316,700
2,100,000 485,100 646,800 808,500 970,200 1,131,900 1,293,600 1,455,300
2,300,000 531,300 708,400 885,500 1,062,600 1,239,700 1,416,800 1,593,900
2,500,000 577,500 770,000 962,500 1,155,000 1,347,500 1,540,000 1,732,500
--------------------------------------------------------------------------------------------------------------------
U. S. Steel has entered into an employment and consulting agreement with
Mr. Usher which provides that if he elects to receive his pension under the
Supplemental Pension Program and the non tax-qualified portion of his Steel
Pension as a lump sum distribution, such distribution will be calculated as if
his total pension benefits were determined using the interest rates and
mortality tables in effect for retirements on January 31, 2003, instead of the
rates and mortality tables in effect at the date of his retirement, which could
result in a greater or lesser amount.
U. S. Steel has agreed to provide Mr. Surma with pension benefits consisting of
the difference between (1) his pension under the Steel Pension Plan and
Supplemental Pension Program determined by increasing the service Mr. Surma
actually accrues under such plans by (a) 15 years for the purpose of computing
his benefit eligibility and vesting and (b) a number of years equal to the
product of 15 multiplied by the ratio of his actual accrued service under the
Steel Pension Plan to his actual accrued service under both the Steel and
Marathon Pension Plans for the purpose of calculating his pension benefits, and
(2) his pension benefits under the Steel Pension Plan and the Supplemental
Pension Program determined with his actual accrued service. The pension benefits
so calculated will be paid to Mr. Surma upon his retirement or, in the event of
his death before retirement, to his surviving spouse or, if there is no
surviving spouse, to his estate.
U. S. Steel has entered into a retention agreement with Mr. Sandman which
provides enhanced pension benefits in return for his continued employment. If
Mr. Sandman continues his employment through 2006, the Corporation will provide
a pension equal to the difference between (1) his Steel Pension Plan benefits
calculated with his actual service and age at retirement each increased by three
years, a $4,800 annual social security supplement payable to the earlier of
death or age 62, a lump sum distribution of these pension benefits calculated
with the more favorable of the interest and mortality factors applicable to
December 31, 2001 retirements or such factors applicable to his actual
retirement date, and (2) his Steel Pension Plan benefits at his retirement. In
addition he will have the Corporation's consent to retire with respect to the
Supplemental Pension Program. Should Mr. Sandman die prior to retirement the
enhanced pension would be paid to his surviving spouse or survivor.
36
CHANGE IN CONTROL ARRANGEMENTS AND EMPLOYMENT CONTRACTS
We believe that if a change in control of U. S. Steel became possible our
officers should be encouraged to continue their dedication to their assigned
duties. For that reason, we have entered into agreements with each of our
officers that provide that, if an officer's employment is terminated under
certain circumstances following a change in control, the officer will be
entitled to the following severance benefits:
- a lump sum payment of up to three times salary plus bonus;
- life and health insurance benefits for up to three years;
- three years of additional credit towards eligibility for retiree medical and
life insurance;
- a lump sum payment equal to the difference between amounts payable under the
U. S. Steel pension plans and the amounts that would be payable if the officer
worked three additional years;
- a lump sum payment of any unvested amounts under U. S. Steel's savings and
thrift plans; and
- additional payments sufficient to compensate for certain federal excise taxes.
Also, in the event of a change in control, any stock options, stock appreciation
rights, or restricted stock granted to the officer would become fully vested.
Each agreement is automatically extended each year unless we notify the officer
that we do not wish it extended. In any event, however, each agreement continues
for two years after a change in control. The severance benefits are payable if,
any time after a change in control, the officer's employment is terminated for
good reason or is terminated for other than cause or disability. The severance
benefits are not payable if termination is due to the officer's death or
disability or occurs after the officer reaches age 65.
The definition of a change in control for purposes of these agreements is
complex but is summarized as follows. It includes any change in control required
to be reported in response to Item 6 (e) of Schedule 14A under the Securities
Exchange Act of 1934 and provides that a change in control will have occurred
if:
- any person not affiliated with U. S. Steel acquires 20 percent or more of
the voting power of our outstanding securities,
- the Board no longer has a majority made up of (1) individuals who were
directors on the date of the agreements and (2) new directors (other than
directors who join the Board in connection with an election contest) approved
by two-thirds of the directors then in office who (a) were directors on the
date of the agreements or (b) were themselves previously approved by the Board
in this manner,
- U. S. Steel merges with another company and U. S. Steel s stockholders end up
with less than 50 percent of the voting power of the new parent entity,
- our stockholders approve a plan of complete liquidation of U. S. Steel, or
- we sell all or substantially all of U. S. Steel's assets.
37
On February 13, 2003 U. S. Steel entered into an Employment and Consulting
Agreement with Mr. Usher that is described in the Compensation & Organization
Committee Report on Executive Compensation on pages 32-33.
USX Corporation entered into agreements with Mr. Surma and Mr. Sandman in
consideration for their agreeing to serve as vice chairmen of U. S. Steel. The
agreement with Mr. Surma calls for U. S. Steel, Marathon, Marathon Ashland
Petroleum LLC ("MAP") and Speedway SuperAmerica LLC ("SSA") to provide certain
non-qualified benefit supplements in addition to the pension and savings
benefits and non-qualified deferred compensation to which he is otherwise
entitled. Unless he elects otherwise, such supplements will be paid by U. S.
Steel and Marathon in a lump sum distribution within 90 days of the date of his
termination of employment from all four companies - U. S. Steel, Marathon, MAP
and SSA. Mr. Surma's pension benefit supplements payable by U. S. Steel are
described on page 36. In addition to the pension enhancements, 15 years will be
added to his actual U. S. Steel service solely for the purpose of determining
vesting and eligibility for company contributions under the U. S. Steel
Supplemental Thrift Program. In connection with Mr. Surma's promotion to
President, he was granted a promotional award on March 1, 2003, in the amount of
$300,000. The agreement with Mr. Sandman calls for U. S. Steel to provide
enhanced pension benefits to Mr. Sandman if he remains employed by U. S. Steel
at least through 2006. These benefits are described on page 36.
38
STATEMENT REGARDING THE DELIVERY OF A SINGLE SET OF PROXY MATERIALS TO
HOUSEHOLDS WITH MULTIPLE U. S. STEEL SHAREHOLDERS
If you have consented to the delivery of only one set of proxy materials to
multiple U. S. Steel shareholders who share your address, then only one proxy
statement and only one annual report are being delivered to your household
unless we have received contrary instructions from one or more of the
shareholders sharing your address. We will deliver promptly upon oral or written
request a separate copy of the proxy statement or the annual report to any
shareholder at your address. If you wish to receive a separate copy of the proxy
statement or the annual report, you may call us toll-free at 1-866-433-4801 or
write to us at U. S. Steel Shareholder Services, Room 611, 600 Grant Street,
Pittsburgh, PA 15219-2800. Shareholders sharing an address who now receive
multiple copies of the proxy statement or the annual report may request delivery
of a single copy by calling us at the above number or writing to us at the above
address.
SOLICITATION STATEMENT
We will bear the cost of this solicitation of proxies. In addition to soliciting
proxies by mail, our directors, officers and employees may solicit proxies by
telephone, in person or by other means. They will not receive any extra
compensation for this work. We will also make arrangements with brokerage firms
and other custodians, nominees and fiduciaries to forward proxy solicitation
material to the beneficial owners of our common stock, and we will reimburse
them for reasonable out-of-pocket expenses that they incur in connection with
forwarding the material.
By order of the Board of Directors,
Dan D. Sandman
Secretary
March 14, 2003
39
APPENDIX A
Audit & Finance Committee Charter
PURPOSE
The purpose of the Audit & Finance Committee (the "Committee") shall be to:
1. assist the Board in oversight of
a. the integrity of the Corporation's financial statements,
b. the Corporation's compliance with legal and regulatory requirements,
c. the independent auditor's qualifications and independence, and
d. the performance of the Corporation's internal audit function and of the
independent auditor;
2. prepare the report required by the rules of the Securities and Exchange
Commission to be included in the Corporation s annual proxy statement; and
3. be directly responsible for the appointment, compensation, and oversight of
the work of the Corporation's independent auditor, who shall report
directly to the Committee, and have the sole authority to approve all audit
engagement fees and terms, as well as all non-audit engagements with the
independent auditor.
DUTIES AND RESPONSIBILITIES
The duties and responsibilities of the Committee shall be to:
1. retain (subject to shareholder election) and, if necessary, terminate, the
Corporation's independent auditor, while either (a) possessing the sole
authority to pre-approve all audit engagement fees and terms as well as all
non-audit engagements with the independent auditor or (b) setting policies
and procedures permitting management to approve such fees, terms and
engagements below certain specified levels;
2. at least annually, obtain and review a report by the independent auditor
describing: the independent auditing firm's internal quality-control
procedures; any material issues raised by the most recent internal
quality-control review, or peer review, of the firm, or by any inquiry or
investigation by governmental or professional authorities, within the
preceding five years, respecting one or more independent audits carried out
by the firm, and any steps taken to deal with any such issues; and (in order
to assess the auditor's independence) all relationships between the
independent auditor and the Corporation; all of which will put the Committee
in a position to evaluate the auditor's qualifications, performance and
independence, which evaluation shall include the review and evaluation of
the lead partner of the independent auditor and take into account the
opinions of management and the Corporation's internal auditors, and which
shall also include consideration of whether, in order to assure continuing
auditor independence, there should be regular rotation of the audit firm
itself and not just the regular rotation of the lead audit partner as
required by law. The Committee shall present its conclusions with respect to
the independent auditor to the Board;
3. discuss the annual audited financial statements and quarterly financial
statements with management and the independent auditor, including the
Corporation's disclosures under "Management's Discussion and Analysis", and
review and approve the annual financial statements, the annual report to
stockholders and the Form 10-K annual report giving special consideration in
such review to any material changes in accounting policy;
4. discuss earnings press releases, as well as financial information and
earnings guidance (if any) provided to analysts and rating agencies, which
discussions may be done generally (i.e. discussion of the types of
information to be disclosed and the type of presentation to be made). The
Committee need not discuss in advance each earnings release or each instance
in which the Corporation may provide earnings guidance;
40
5. in appropriate circumstances, obtain advice and assistance from outside
legal, accounting or other advisors;
6. discuss policies with respect to risk assessment and risk management,
including
(1) guidelines and policies to govern the process by which the assessment
and management of the Corporation's exposure to risk is handled by senior
management, and
(2) the Corporation's major risk exposures and the steps management has
taken to monitor and control such exposures;
7. meet separately, periodically, with management, with internal auditors, and
with the independent auditor;
8. review: (1) with the independent auditor, any audit problems or difficulties
and management's response, including any restrictions on the scope of the
independent auditor's activities or on access to requested information, and
any significant disagreements with management (the Committee having the
direct responsibility to resolve such disagreements regarding financial
reporting practices) and (2) the responsibilities, budget and staffing of
the Corporation's internal audit function;
9. set clear hiring policies for employees or former employees of the
independent auditor, taking into account the pressures that may exist for
auditors consciously or subconsciously seeking a job with the company they
audit;
10. report regularly to the Board and review with the Board any issues that
arise with respect to the quality or integrity of the Corporation's
financial statements, the Corporation's compliance with legal or regulatory
requirements, the performance and independence of the independent auditor,
or the performance of the internal audit function;
11. review and discuss the appropriate capital structure and financial policies
of the Corporation;
12. make recommendations to the Board concerning dividends;
13. review and report to the Board concerning the Corporation's compliance with
financial covenants and other terms of loans and other agreements;
14. within the authority levels established by the Board, approve financings by
the Corporation (except financings which involve the issuance of common
stock), including the recommendation of action to subsidiaries, partnerships
and joint ventures;
15. within the authority levels established by the Board, authorize loans to
outside entities, guarantees by the Corporation of the credit of others, and
other uses of the Corporation's credit;
16. approve the Corporation's funding policy for its pension and other
post-employment benefit plans;
17. review the performance of the United States Steel & Carnegie Pension Fund as
investment manager and/or trustee of the Corporation s employee benefit
plans;
18. receive reports and make recommendations to the Board on various financial
matters;
19. establish procedures for receiving, retaining and responding to complaints
relating to accounting or auditing concerns, including the confidential,
anonymous submission by employees of concerns about illegal or unethical
behavior;
20. continually explore ways to improve its working relationship with the
independent auditor, including processes that permit informal discussion of
accounting treatments well in advance of reporting deadlines;
21. determine that the Corporation's administrative, operational and internal
accounting controls have been periodically reviewed and examined to
determine whether the Corporation is operating in accordance with its
prescribed procedures and codes of conduct;
41
22. provide direction to the internal audit staff and annually review its
activities;
23. review the appointment of the director of the internal audit function;
24. understand the scope of the Corporation's internal review, and the
independent auditor's review, of internal control over financial reporting,
and obtain reports on significant findings, together with management's
responses;
25. annually review the independence letter issued by the independent auditor
under Independence Standards Board Standard No. 1, actively engage in a
dialogue with the independent auditor with respect to any relationships
disclosed in that letter, and report to the Board of Directors any
appropriate action necessary to maintain the independent auditor's
continuing independence;
26. review significant accounting, auditing and Securities and Exchange
Commission pronouncements;
27. receive and review reports from management concerning compliance with
corporate policies dealing with business conduct;
28. receive and review the audit plans and audit reports of the Corporation's
benefit plans;
29. annually review the business expense reporting of the officers of the
Corporation; and
30. annually review a report outlining the activities undertaken by the
Committee over the past year to meet the requirements of this charter.
While the fundamental responsibility for the Corporation's financial statements
and disclosures rests with management and the independent auditor, the Committee
shall review (a) major issues regarding accounting principles and financial
statement presentations, including any significant changes in the Corporation s
selection or application of accounting principles, and major issues as to the
adequacy of the Corporation s internal controls and any special audit steps
adopted in light of material control deficiencies; (b) analyses prepared by
management and/or the independent auditor setting forth significant financial
reporting issues and judgments made in connection with the preparation of the
financial statements, including analyses of the effects of alternative GAAP
methods on the financial statements; (c) the effect of regulatory and accounting
initiatives, as well as off-balance sheet structures, on the financial
statements of the Corporation; and (d) earnings press releases (paying
particular attention to any use of PRO FORMA, or "adjusted" non-GAAP,
information), as well as financial information and earnings guidance provided to
analysts and rating agencies.
ANNUAL PERFORMANCE EVALUATION OF THE COMMITTEE
The Committee shall conduct an annual self-evaluation.
MEMBERSHIP
To the extent practicable, all eligible (i.e. financially literate)
independent directors shall be members of the Committee. No director who
serves on the audit committees of more than two other public companies may
serve on the Committee unless the Board determines that such simultaneous
service will not impair the ability of such director to effectively serve on
the Committee. Such determinations will be disclosed in the proxy statement.
ANNUAL REVIEW
The Committee shall review this charter during its first meeting of each
calendar year.
Last reviewed and approved by the Audit & Finance Committee on January 28, 2003.
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[USS LOGO]
United States Steel Corporation
600 Grant Street
Pittsburgh, PA 15219-2800
[LOGO] UNITED STATES STEEL CORPORATION
2003 ANNUAL MEETING OF STOCKHOLDERS
ATTENDANCE CARD
You are invited to attend the Annual Meeting of Stockholders on April 29,
2003. The Meeting will be held in Salons III and IV of the Townsend Hotel,
One Hundred Townsend Street, Birmingham, MI 48009 at 10:00 AM Eastern Time.
Use of this attendance card is for our mutual convenience and your right to
attend the meeting without this attendance card is not affected upon
presentation of identification.
Attached below is your 2003 Proxy Card.
Dan D. Sandman
Secretary
FOR THE PERSONAL USE OF THE NAMED STOCKHOLDER(S) - NOT TRANSFERABLE. PLEASE
PRESENT THIS CARD AT REGISTRATION DESK UPON ARRIVAL.
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You may vote A) By completing the proxy card
attached below and returning it
in the enclosed envelope, or
B) By toll-free telephone call, or
C) On the Internet
TO VOTE BY TELEPHONE OR INTERNET USE THE CONTROL
NUMBER IN THE BOX BELOW.
YOUR CONTROL NUMBER
/ /
BY TELEPHONE BY INTERNET
Toll-free 1-888-216-1303 https://www.proxyvotenow.com/uss
Have your control number available when you call or visit
the Internet site and follow the prompts.
Voting is available 24 hours a day, 7 days a week.
Do NOT return the proxy card if you have voted
by telephone or Internet.
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The undersigned hereby appoint(s) Thomas J. Usher, Roy G. Dorrance, Dan D.
Sandman and John P. Surma, Jr., or any of them, proxies to vote as herein
directed on behalf of the undersigned at the Annual Meeting of Stockholders
of United States Steel Corporation on April 29, 2003 and at any meeting
resulting from an adjournment or postponement thereof and upon all other
matters properly coming before the Meeting, including the proposals set forth
in the proxy statement for such Meeting with respect to which the proxies are
instructed to vote as follows:
PROPOSALS OF THE BOARD OF DIRECTORS --The directors recommend a vote "FOR"
Proposal No. 1--Election of directors--Nominees: (01)J. Gary Cooper, FOR ALL NOMINEES ---> / / WITHHOLD AUTHORITY ---> / /
(02)Frank J. Lucchino, (03)Seth E. Schofield, (except as indicated) to vote for ALL nominees
(04)John P. Surma
(To withhold authority to vote for any individual nominee strike out that nominee's name.)
Proposal No. 2--Election of PricewaterhouseCoopers LLP as independent FOR ---> / / AGAINST ---> / / ABSTAIN ---> / /
accountants.
Proposal No. 3--Amendment of the Certificate of Incorporation to FOR ---> / / AGAINST ---> / / ABSTAIN ---> / /
increase the number of authorized shares of common
stock to 400 million and the authorized shares of
preferred stock to 40 million.
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SIGNATURE(S) ___________________________
________________________________________
DATED ____________ 2003
Please sign exactly as your name
appears hereon, including representative
capacity where applicable. Joint owners
should both sign.
This proxy is solicited by the Board
of Directors and represents your
holdings of United States Steel
Corporation Common Stock. Unless
otherwise marked, the proxies will
vote FOR Proposals 1, 2 and 3.