-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, ImmfDpsCPshc3CvS000ctfq4oSuMwHnlOtkK19hkNc5rYkuIOC2eaQEj0/rrDRoA sV6yol0tc9+D6NREUnqG5Q== 0001021408-99-000543.txt : 19990325 0001021408-99-000543.hdr.sgml : 19990325 ACCESSION NUMBER: 0001021408-99-000543 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 19981231 FILED AS OF DATE: 19990324 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BETHLEHEM STEEL CORP /DE/ CENTRAL INDEX KEY: 0000011860 STANDARD INDUSTRIAL CLASSIFICATION: STEEL WORKS, BLAST FURNACES ROLLING MILLS (COKE OVENS) [3312] IRS NUMBER: 240526133 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 001-01941 FILM NUMBER: 99571629 BUSINESS ADDRESS: STREET 1: 1170 EIGHTH AVE CITY: BETHLEHEM STATE: PA ZIP: 18016-7699 BUSINESS PHONE: 6106942424 MAIL ADDRESS: STREET 1: 1170 EIGHTH AVE CITY: BETHLEHEM STATE: PA ZIP: 18016-7699 10-K405 1 FORM 10-K405 1998 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 FORM 10-K (Mark One) [X]Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Fiscal Year Ended December 31, 1998 [_]Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Commission file number 1-1941 BETHLEHEM STEEL CORPORATION (Exact name of registrant as specified in its charter) DELAWARE 24-0526133 (State of Incorporation) (I.R.S. Employer Identification No.) 1170 Eighth Avenue BETHLEHEM, PENNSYLVANIA 18016-7699 (Address of principal executive (Zip Code) offices) Registrant's telephone number, including area code: (610) 694-2424 Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered ------------------- ----------------------------------------- Common Stock--$1 par value per New York Stock Exchange share Chicago Stock Exchange Preference Stock Purchase Rights New York Stock Exchange Chicago Stock Exchange Preferred Stock -- $1 par value per share $5.00 Cumulative Convertible New York Stock Exchange (stated value $50.00 per share) $2.50 Cumulative Convertible New York Stock Exchange (stated value $25.00 per share) 8 3/8% Debentures. Due March 1, 2001 New York Stock Exchange 8.45% Debentures. Due March 1, 2005 New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] Aggregate Market Value of Voting Stock held by Non-Affiliates: $1,157,741,902 The amount shown is based on the closing price of Bethlehem Common Stock on the New York Stock Exchange Composite Tape on March 15, 1999. Voting stock held by directors and executive officers of Bethlehem is not included in the computation. However, Bethlehem has made no determination that such individuals are "affiliates" within the meaning of Rule 405 under the Securities Act of 1933. Number of Shares of Common Stock outstanding as of March 15, 1999: 130,370,007 DOCUMENTS INCORPORATED BY REFERENCE: Selected portions of the 1998 Annual Report to Stockholders of Bethlehem Steel Corporation are incorporated by reference into Part I and Part II of this Report on Form 10-K. Selected portions of the 1999 Proxy Statement of Bethlehem Steel Corporation are incorporated by reference into Part III of this Report on Form 10-K. PART I ITEM 1. BUSINESS. Bethlehem/1/ manufactures and sells a wide variety of steel mill products and produces and sells coke and iron ore. The following table shows the percentage of net sales by major classes of product:
1998 1997 1996 ----- ----- ----- Steel mill products: Hot rolled sheets........................................ 13.3% 14.9% 14.3% Cold rolled sheets....................................... 16.8 17.2 16.2 Coated sheets............................................ 28.6 31.5 32.3 Tin mill products........................................ 6.7 7.4 6.9 Plates................................................... 22.3 15.2 15.3 Rail products............................................ 4.4 4.3 3.5 Structural shapes and pilings............................ -- 1.3 3.8 Other steel mill products................................ 4.5 3.2 1.6 Other products and services (including raw materials)..... 3.4 5.0 6.1 ----- ----- ----- 100.0% 100.0% 100.0% ===== ===== =====
Operations Bethlehem produces a wide variety of steel mill products including hot rolled, cold rolled and coated sheets, tin mill products, carbon and alloy plates, rail, specialty blooms, carbon and alloy bars and large-diameter pipe. Bethlehem's operations include the Burns Harbor Division, the Sparrows Point Division, Bethlehem Lukens Plate and Pennsylvania Steel Technologies, Inc. Bethlehem also has iron ore operations (which provide raw materials to Bethlehem's steelmaking facilities or sell such materials to trade customers), railroad and trucking operations (which primarily transport raw materials and semifinished steel products within various Bethlehem operations) and lake shipping operations (which primarily transport raw materials to the Burns Harbor Division). See "ITEM 2. PROPERTIES" of this Report for a description of the facilities of these business units and operations. - -------- /1/ "Bethlehem" when used in this Report means Bethlehem Steel Corporation, a Delaware corporation, and where applicable includes its consolidated subsidiaries. Bethlehem was incorporated in Delaware in 1919. 1 The following table shows production information for Bethlehem and for the domestic steel industry. The information regarding the domestic steel industry is based on data from the American Iron and Steel Institute ("AISI"):
1998 1997 1996 ----- ----- ----- Domestic steel industry raw steel production capability (million of net tons)....................... 125.3 121.4 116.0 Domestic steel industry raw steel production (million of net tons).................................. 107.6* 108.6 105.3 Domestic steel industry average raw steel utilization rate....................................... 86% 89% 91% Bethlehem's raw steel production capability (million of net tons)....................... 10.9 10.5 10.5 Bethlehem's raw steel production (million of net tons).................................. 10.2 9.6 9.4 Bethlehem's average raw steel utilization rate.......... 93% 91% 90% Bethlehem's production as a percent of the domestic steel industry................................ 9.5% 8.9% 9.1%
- -------- * Preliminary Of Bethlehem's 1998 raw steel production, 88 percent was produced by basic oxygen furnaces and 12 percent by electric furnaces. Bethlehem's operations are subject to planned and unplanned outages due to required maintenance, equipment malfunctions, work stoppages, various hazards (including explosions, fires and severe weather conditions) and the availability of raw materials, supplies, utilities and other items needed for the production of steel. These outages could result in reduced production and increased costs. Markets The following table shows the percentage of the total net tons of steel mill products shipped by Bethlehem to each of its principal markets, including shipments to its own manufacturing operations:
1998 1997 1996 ----- ----- ----- Service Centers, Processors and Converters (including semifinished).................... 46.9% 46.9% 45.2% Transportation (including automotive)................... 23.0 24.9 26.0 Construction............................................ 12.1 11.0 12.6 Containers.............................................. 5.2 5.8 5.2 Machinery............................................... 4.9 4.7 5.1 Other................................................... 7.9 6.7 5.9 ----- ----- ----- 100.0% 100.0% 100.0% ===== ===== =====
Many of the markets Bethlehem supplies, such as automotive, machinery and construction, are highly cyclical and subject to downturns in the U.S. economy. Also, many of Bethlehem's customers and suppliers are subject to collective bargaining agreements, and their ability to operate could be impacted by a strike or work stoppage. Bethlehem distributes steel products principally through its own sales organization, which has sales offices at various locations in the United States and Mexico, and through foreign sales agents. In addition to selling to customers who consume steel products directly, Bethlehem sells steel products to steel service centers, distributors, processors and converters. Export sales were 4 percent of total sales in 1998, 2 percent in 1997 and 3 percent in 1996. 2 Trade orders on hand were about $900 million at December 31, 1998, and $1.2 billion at December 31, 1997. Substantially all of the orders on hand at December 31, 1998, are expected to be filled in 1999. Steel Price Sensitivity Bethlehem's financial results are significantly affected by relatively small (on a percentage basis) variations in the realized prices for its products. For example, Bethlehem shipped 8.7 million net tons of steel products and recorded net sales of $4.5 billion during 1998, implying an average realized price per ton of about $516. A one percent increase or decrease in this implied average realized price during 1998 would, on a pro forma basis, have resulted in an increase or decrease in net sales and pre-tax income of about $45 million. Competitive pressures in the steel industry are severe. These pressures could limit Bethlehem's ability to obtain price increases or could lead to a decline in prices, which could have a material adverse effect upon Bethlehem. Competition The domestic steel industry is highly competitive. This competition affects the prices that Bethlehem can charge for its products, the utilization of its production facilities, its ability to sell higher value products and ultimately its profitability. Capacity. There is excess world capacity for many of the products produced by Bethlehem. Moreover, some foreign steel producers are owned, controlled or subsidized by foreign governments. Decisions by these foreign producers to continue marginal facilities may be influenced to a greater degree by political and economic policy considerations than by prevailing market conditions. In addition, overcapacity has been perpetuated by the continued operation, modernization and upgrading of marginal domestic facilities through bankruptcy reorganization proceedings and by the sale of marginal domestic facilities to new owners, which operate such facilities with a lower cost structure. Over the next several years, construction of additional flat rolled production facilities could result in increased domestic capability of 6 million tons over 1998 levels. Electric Furnace Producers. Domestic integrated producers, such as Bethlehem, have lost market share in recent years to domestic electric furnace producers. These companies are relatively efficient, low-cost producers that make steel from scrap in electric furnaces (which are less expensive to build than integrated facilities), have lower employment and environmental costs per ton shipped and target regional markets. Through the use of various higher quality raw materials and thin slab casting technology, electric furnace producers are increasingly able to compete directly with producers of higher value products, including cold rolled and coated sheets. Imports. Domestic steel producers also face significant competition from foreign producers and have been, and may continue to be, adversely affected by unfairly traded imports. In certain cases, foreign producers may be pricing their products below their production costs. Imports of finished steel products accounted for about 26 percent of the domestic market in 1998, 18 percent in 1997 and 17 percent in 1996. The following table, which is based on data reported by the AISI, shows the percentage of the domestic apparent consumption of steel mill products supplied by imports for various classes of products.
1998* 1997 1996 ----- ---- ---- Rail......................................................... 31% 26% 26% Plates....................................................... 29 21 26 Tin mill products............................................ 16 15 14 Hot rolled and cold rolled sheets............................ 31 22 19 Coated sheets................................................ 10 11 10 All products**............................................... 30 24 23
- -------- *Preliminary ** Excludes steel imported in the form of manufactured goods, such as automobiles, but includes semifinished steel. 3 Excluding semifinished steel, imports of steel mill products were about 34.6 million tons in 1998, 24.8 million tons in 1997 and 21.6 million tons in 1996. Antidumping and countervailing duty orders covering imports of corrosion- resistant sheet from six countries, cold rolled sheet from three countries and plates from 11 countries, which resulted from unfair trade cases filed by Bethlehem and 11 other companies in 1992, remain in place. Suspension agreements are also in place limiting the volume of cut-to-length plate from Russia, the Ukraine and the People's Republic of China and setting a price floor for South Africa for a five-year period from 1998. In February 1999, the Commerce Department announced substantial preliminary antidumping margins covering hot rolled sheet from Japan, Brazil and Russia and also announced its intention to enter into (i) a suspension agreement limiting the volume of hot rolled sheet from Russia for five years, and (ii) a comprehensive agreement to limit the volume of other steel products from Russia to essentially 1997 levels. Also in February 1999, Bethlehem and four other producers filed new antidumping and countervailing duty petitions covering cut-to-length plate from Japan, Korea, India, Indonesia, France, Italy, the Czech Republic and Macedonia. For further information on trade-related matters, see "International Steel Trade" under the "Chairman's Letter" in Bethlehem's 1998 Annual Report to Stockholders. The major restructuring of the domestic steel industry, which began in the late 1970s and early 1980s, has removed the steelmaking capacity that once existed to meet market demand during peak periods. During the last few years, domestic producers have met a portion of the demand that exceeded steelmaking capacity by importing semifinished slabs for rolling into finished products in their own mills. Substitute Materials. For many steel products, there is substantial competition from manufacturers of products other than steel, including aluminum, ceramics, concrete, glass, plastic and wood. Changes to the relative competitiveness of these substitute materials and the emergence of additional substitute materials could adversely affect future prices and demand for Bethlehem's products. Capital Expenditures Capital expenditures were $328 million in 1998 (excluding the acquisition of Lukens Inc.) compared with $228 million in 1997 and $259 million in 1996. Capital expenditures for 1999 are currently estimated to be about $450 million. During 1998, Bethlehem started construction of Sparrows Point's new continuous cold rolling mill complex. This $300 million complex, which is scheduled to begin production early in 2000, is expected to lower costs, improve quality and enhance capabilities. About $256 million of capital expenditures were authorized in 1998. At December 31, 1998, the estimated cost of completing authorized capital expenditures was about $640 million compared with $750 million at December 31, 1997. Bethlehem expects to complete these authorized capital expenditures during 1999 to 2001. The domestic integrated steel industry is very capital intensive. As discussed under "ITEM 2. PROPERTIES -- General" of this Report, Bethlehem's principal operations and facilities are of varying ages, technologies and operating efficiencies. Bethlehem will need to continue to make significant capital expenditures in the future to maintain and improve the competitiveness of its operations and facilities. Environment Bethlehem is subject to various federal, state and local environmental laws and regulations concerning, among other things, air emissions, waste water discharges and solid and hazardous waste disposal. During the five years ended December 31, 1998, Bethlehem spent about $136 million for environmental control equipment. Expenditures for new environmental control equipment totaled about $13 million in 1998, $15 million in 1997 and $29 million in 1996. The costs incurred in 1998 to operate and maintain existing environmental control equipment were about $114 million (excluding interest costs but including depreciation charges of $14 million) compared with $112 million in 1997 and $115 million in 1996. In addition, Bethlehem has been required to pay 4 various fines and penalties relating to violations or alleged violations of laws and regulations in the environmental control area. Bethlehem paid about $910,000 in 1998, $830,000 in 1997 and $160,000 in 1996 for such fines and penalties. Under the Clean Air Act, as amended, coke-making facilities will have to meet progressively more stringent standards over the next 25 years. Bethlehem currently operates coke-making facilities in Burns Harbor, Indiana and Lackawanna, New York. Operations at the Coke Division in Bethlehem, Pennsylvania were discontinued in March, 1998. Bethlehem will continue to evaluate the impact of future emission control regulations on its Burns Harbor and Lackawanna operations but believes that these operations will be able to comply. Bethlehem and federal and state regulatory agencies conduct negotiations to resolve differences in interpretation of environmental control requirements. In some instances, those negotiations are held in connection with the resolution of pending environmental proceedings. Bethlehem believes there will not be any significant curtailment or interruptions of any of its important operations as a result of these proceedings and negotiations. Bethlehem cannot predict the future specific environmental control requirements. Based on existing and anticipated regulations under current legislation, Bethlehem estimates that capital expenditures for new environmental control equipment will average about $10 million per year over the next two years. However, estimates of future capital expenditures and operating costs required for environmental compliance are subject to numerous uncertainties, including the evolving nature of regulations, possible imposition of more stringent requirements, availability of new technologies and the timing of expenditures. Under the Resource Conservation and Recovery Act, as amended ("RCRA"), the owners of certain facilities that managed hazardous waste after 1980 are required to investigate and, if appropriate, remediate certain historic environmental contamination found at the facility. All of Bethlehem's major facilities may be subject to this "Corrective Action Program", and Bethlehem has implemented or is currently implementing this program at its facilities located in Steelton, Pennsylvania; Lackawanna, New York; Burns Harbor, Indiana; and Sparrows Point, Maryland. At Steelton, Bethlehem completed a RCRA Facility Investigation ("RFI"), a Corrective Measures Study ("CMS") and a remediation program approved by the United States Environmental Protection Agency (the "EPA") and completed the remediation in 1994. At Lackawanna, Bethlehem is conducting an RFI which is expected to be completed later this year. At Burns Harbor, Bethlehem is conducting an RFI in accordance with an EPA approved work plan that will require several years to complete. At Sparrows Point, Bethlehem, the EPA and the Maryland Department of the Environment have agreed to a phased RFI as part of a comprehensive multimedia pollution prevention agreement which was entered by the U. S. District Court for Maryland on October 8, 1997. The potential costs for possible remediation activities, if any, at Lackawanna, Burns Harbor and Sparrows Point and the timeframe for implementation of these activities cannot be reasonably estimated until the RFIs, and possibly the CMSs, have been completed and approved. At its former plant in Bethlehem, Pennsylvania, Bethlehem is conducting remedial investigations pursuant to the Pennsylvania Land Recycling ("Brownfields") Program in conjunction with comprehensive redevelopment plans. These investigations are being performed with input and oversight from both the Pennsylvania Department of Environmental Protection and the EPA Region III corrective action staff to ensure that the actions taken are acceptable to both state and federal regulatory authorities. Bethlehem does not believe that the operations it acquired as part of the Lukens merger in 1998 are subject to the RCRA Corrective Action Program and, therefore, any remediation associated with those facilities will be addressed as appropriate in the ongoing course of business. Bethlehem may have some residual liability for remediation associated with historic Lukens facilities or those that have been sold or shut down since the merger, but any such liabilities are not anticipated to be material. For example, the electric arc furnace flue dust disposal site at the Coatesville, Pennsylvania, facility that was discussed by Lukens in its 1997 Form 10-K is continuing to be investigated by Bethlehem for remediation pursuant to the Pennsylvania Brownfields program. Bethlehem does not have any information at this time suggesting that the $3 million liability that had been recognized by Lukens for that site is not appropriate. 5 Under the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended ("CERCLA", also known as "Superfund"), the EPA can impose liability for site remediation on generators and transporters of waste, as well as past and present owners and operators of the sites where the waste was disposed of, regardless of fault or the legality of the disposal activities. Bethlehem is actively involved at 26 sites where it has been advised that it may be considered a potentially responsible party under CERCLA or corresponding State Superfund legislation. Based on its experience regarding site remediation and its knowledge of and extent of involvement in such sites, Bethlehem expects that its share of the costs for remediation of these sites will not be material. In its 1997 Form 10-K, Lukens discussed two CERCLA sites in which it was involved. Subsequent to that discussion, the Helen Kramer site settlement was consummated and Lukens paid its settlement amount of approximately $5.6 million before the merger of Bethlehem and Lukens. With regard to the Douglassville site, Lukens and Bethlehem were identified as separate de- minimis potentially responsible parties and are signatories to a consent decree which has been lodged with, but not yet entered by, the U.S. District Court for the Eastern District of Pennsylvania. Within 60 days following entry of the consent decree, payment of approximately $204,000 on behalf of Lukens and $125,000 on behalf of Bethlehem will be made in full resolution of those liabilities. Although it is possible that Bethlehem's future quarterly or annual results of operations could be materially affected by the future costs of environmental compliance, Bethlehem believes that the future costs of environmental compliance will not have a material adverse effect on its consolidated financial position or on its competitive position with respect to other integrated domestic steelmakers that are subject to the same environmental requirements. To the extent that competitors are not required to undertake equivalent costs, Bethlehem's competitive position could be adversely affected. Purchased Materials and Services Bethlehem purchases about $3 billion per year of raw materials, energy, equipment, goods and services from commercial sources in about 40 countries. Bethlehem's profitability could be affected by difficulties in obtaining these items and the prices paid for them. These difficulties could include such things as labor strikes, political instability and natural disasters. Bethlehem made significant progress in 1998 through its Strategic Sourcing initiatives and expects further progress in 1999. See "ITEM 2. PROPERTIES -- Raw Material Properties and Interests" of this Report for a further description of the sources of raw materials essential to Bethlehem's steelmaking business. Technology Research and Development. Bethlehem performs research to improve existing products, develop new products and make operating processes more efficient. During 1998, 1997 and 1996, Bethlehem spent about $23 million, $22 million and $25 million, respectively, for research and development. Bethlehem owns a number of U.S. and foreign patents that relate to a wide variety of products and processes, has pending patent applications and is licensed under a number of patents. During 1998, 11 U.S. patents covering a variety of new developments were awarded to Bethlehem. However, Bethlehem believes that no single patent or license or group of patents or licenses is of material importance to its overall business. Bethlehem also owns registered trademarks for certain of its products and service marks for certain of its services which, unlike patents and licenses, are renewable so long as they are continued in use and properly protected. Year 2000 Computer Issue. Problems created by the once common programming practice of storing date information using only the last two digits to indicate the year will impact all businesses and government organizations as we approach the year 2000. The scope of Bethlehem's Year 2000 Program includes both information technology and non-information technology systems, such as business and manufacturing computer systems, personal computers, technical infrastructure and facilities as well as the Year 2000 readiness of key suppliers, agents, service providers and customers. 6 Bethlehem has been actively working on resolving its Year 2000 problem for over four years. The effort was initiated with a pilot project in late 1994 during which 5 percent of Bethlehem's business applications were converted to be Year 2000 compliant. The pilot project allowed Bethlehem to develop a methodology for solving its Year 2000 problem as well as a structure for effective management and timely correction of the problem within its systems. The major elements of the program are inventory, risk assessment, remediation, testing and contingency planning. In late 1997, Bethlehem conducted a 45-day test of the operability and inter-operability of all converted business applications for Business Unit and Corporate systems as well as all operating system software in a full simulation of the Year 2000. Bethlehem reset the system clock for various dates and tested the processing of date information before and after December 31, 1999, as well as the processing of the Year 2000 as a leap year. This test was completed successfully and validated Bethlehem's processes and methods for addressing its Year 2000 problem. Two additional full-scale tests were conducted in December 1998 and January 1999 to test applications not evaluated during the 1997 test and the main frame applications acquired in Bethlehem's merger with Lukens. The results of these additional tests were positive and reinforced the approach for addressing the Year 2000 problem. Bethlehem has completed the inventory and risk assessment for Year 2000 components in all areas of its business. The risk assessment showed that less than 15 percent of Bethlehem's computer components needed to be fixed or replaced. Remediation and testing of business systems and technical infrastructure are complete except for a few planned replacement systems and upgrades. For manufacturing and environmental (e.g., HVAC, security, etc.) operations, Bethlehem has completed or scheduled all remediation activities. A few replacement systems are planned. In the end-user computing area, Bethlehem has installed hardware patches and standard software upgrades to most systems where necessary. Bethlehem is currently focusing on other personal computer software and user-written applications, spreadsheets and other end-user files. Bethlehem is over 95 percent complete with the entire remediation effort. Remaining remediation and testing will continue throughout the first half of 1999. Bethlehem continues to evaluate the readiness of its key suppliers and customers. Starting in April 1998, Bethlehem surveyed key suppliers, outside processors, warehousers and electronic data interchange trading partners. To date, responses have been received from 650 suppliers. Bethlehem has sent follow-up letters asking those suppliers who indicated compliance by the end of 1998 (54 percent) to confirm their compliance. Additionally, Bethlehem has received correspondence from over 500 key customers regarding their Year 2000 readiness and it will continue to review their readiness during the next two quarters. During 1999, Bethlehem will continue to develop Year 2000 contingency plans for all areas of its business. Bethlehem's contingency plans will address both internal (staffing, computer systems and inventory) and external (suppliers, service providers, agents and customers) risks. Bethlehem's strategies for eliminating internal risk include the development of staffing plans for the Year 2000 roll-over, backup and/or alternate procedures and inventory levels based on anticipated customer and supplier assessments. One of Bethlehem's strategies for reducing external risk is to develop alternate plans for significant areas of its business where a vendor may not be Year 2000 compliant. Bethlehem's target is to develop, during the first half of 1999, contingency plans for critical business processes. The costs associated with Bethlehem's Year 2000 Program continue to be at planned levels. The total estimated incremental cost of this activity is approximately $7 million. The cost will continue to be charged to normal operating expenses. Bethlehem does not expect to incur any extraordinary charges associated with the effort and no major information service projects have been deferred because of its Year 2000 Program. Bethlehem believes that it is taking all reasonable steps to ensure Year 2000 readiness. Bethlehem's ability to meet its projected goals depends, to an extent, on the Year 2000 readiness of its key suppliers and customers, the completion of its final remediation and testing efforts and the successful development and implementation of contingency plans. These and other unanticipated Year 2000 issues could have a material adverse effect on Bethlehem's results of operations or financial condition. 7 Employment At the end of 1998, Bethlehem had about 17,000 employees, three-quarters of whom are covered by agreements with the United Steelworkers of America ("USWA"). Two agreements covering most of Bethlehem's USWA represented employees expire in 1999. A strike or work stoppage could impact Bethlehem's ability to operate if it is unable to negotiate new agreements with its represented employees when the existing agreements expire. Also, Bethlehem's profitability could be adversely affected if increased costs associated with any future contract are not recoverable through productivity improvements or price increases. For further information on Bethlehem's employment-related matters, see "Employment" under "Financial Review and Operating Analysis" in Bethlehem's 1998 Annual Report to Stockholders. Employee Postretirement Obligations At December 31, 1998, Bethlehem had recorded a liability of $415 million for pensions. For further discussion of Bethlehem's pension funding and obligations, see "Liquidity and Capital Structure" under "Financial Review and Operating Analysis" in Bethlehem's 1998 Annual Report to Stockholders. Bethlehem provides health care and life insurance benefits to most retirees and their dependents. Most of these future benefits have not been funded and, therefore, Bethlehem has substantial financial obligations on its balance sheet. At December 31, 1998, Bethlehem had recorded a liability of $1,790 million for postretirement benefits other than pensions. To the extent competitors do not have similar obligations, Bethlehem could be placed at a competitive disadvantage. Also, increases in health care costs could adversely affect Bethlehem's profitability. Joint Ventures, Partnerships, Facility Sharing Arrangements and Mergers Bethlehem has considered, and discussed with others, various opportunities for joint ventures, partnerships, facility sharing arrangements and mergers of all or part of Bethlehem. Bethlehem will continue to explore such opportunities. See "ITEM 2. PROPERTIES." of this Report for a description of joint ventures in which Bethlehem participates. Merger with Lukens Inc. Bethlehem acquired Lukens Inc. in a merger transaction which closed during the second quarter of 1998. For further information regarding the merger, see "Financial Review and Operating Analysis" in Bethlehem's 1998 Annual Report to Stockholders. Businesses Exited In recent years, Bethlehem has shut down or sold several facilities and operations. Since 1996, Bethlehem recorded net charges of $365 million in connection with these actions. During the fourth quarter of 1998, Bethlehem closed Sparrows Point's 160-inch plate mill and increased the output at existing underutilized facilities at Burns Harbor, Coatesville and Conshohocken. Bethlehem recorded a charge of $35 million ($29 million after- tax) during the second quarter of 1998 to write off the book value of equipment to be dismantled and to recognize employee benefit related costs. Bethlehem also sold certain stainless assets to Allegheny Teledyne Incorporated and announced the closing of the former Lukens operations in Massillon, Ohio, and Washington, Pennsylvania. During the first quarter of 1999, Bethlehem sold Washington Specialty Metals Corporation, Lukens' former distribution business, to Ryerson Tull for $70 million. If it becomes necessary for Bethlehem to exit or reduce employment at additional businesses and operations in the future, it could incur substantial additional charges in the process. The charges for employees terminated as a result of facility shutdowns or sales vary depending upon the demographics of the workforce but could be $100,000 per employee. The recording of these charges could have a material adverse impact on Bethlehem's financial condition because of the increase in recorded liabilities, decrease in stockholders' equity and possible increases in required contributions to the pension fund and retiree health care payments. Except as discussed above or previously announced, Bethlehem does not currently anticipate any additional facility shutdowns or other reasons why active Bethlehem employees might be terminated. 8 Capital Structure Bethlehem's capital structure is highly leveraged. Although Bethlehem believes it has sufficient access to funds for the operation of its business, its existing obligations and below investment grade credit ratings may limit its ability to raise capital at reasonable cost and terms in the future. Forward-Looking Statements Bethlehem and its representatives may from time to time make forward-looking statements in reports filed with the Securities and Exchange Commission, reports to stockholders, press releases, other written documents and oral presentations. These forward-looking statements may include, among others, statements concerning projected levels of sales, shipments and income, pricing trends, cost-reduction strategies, product mix, anticipated capital expenditures and other future plans and strategies. As permitted by the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995, Bethlehem is identifying in this Report important factors that could cause Bethlehem's actual results to differ materially from those projected in these forward-looking statements. These factors include, but are not necessarily limited to: . the effect of planned and unplanned outages on Bethlehem's operations; . the potential impact of strikes or work stoppages at facilities of Bethlehem's customers and suppliers; . the sensitivity of Bethlehem's results to relatively small changes in the prices obtained by Bethlehem for its products; . intense competition due to world steel overcapacity, new domestic capacity over the next several years, low-cost electric furnace facilities, imports (especially unfairly traded imports) and substitute materials; . the high capital requirements associated with integrated steel facilities; . the significant costs associated with environmental controls and remediation expenditures and the uncertainty of future environmental control requirements; . availability and prices associated with raw materials, supplies, utilities and other services and items required by Bethlehem's operations; . employment matters, including costs and uncertainties associated with Bethlehem's collective bargaining agreements, and employee postretirement obligations; . the effect of possible future closure or exit of businesses; . Bethlehem's highly leveraged capital structure; . the effect of Bethlehem's customers and suppliers not becoming Year 2000 compliant in a timely manner, the effect of Bethlehem not completing its final remediation and testing efforts and the effect of Bethlehem not successfully developing and implementing contingency plans; and . the effect of existing and possible future lawsuits filed against Bethlehem. "ITEM 1. BUSINESS" and "ITEM 3. LEGAL PROCEEDINGS" of this Report discuss these factors in more detail and are incorporated by reference into this section. Bethlehem does not undertake to update any forward-looking statements that may be made from time to time by Bethlehem or its representatives. ITEM 2. PROPERTIES. Burns Harbor Division Location: In Indiana, on Lake Michigan, about 50 miles southeast of Chicago, Illinois. Principal products and markets: Hot rolled sheet, cold rolled sheet and corrosion-resistant coated sheet, coke and semifinished steel to Bethlehem Lukens Plate. Its principal markets include automotive, service centers, construction, machinery and appliance. 9 Principal facilities: A sintering plant, a coke oven battery (Burns Harbor operates a second coke oven battery for the battery's owner), two blast furnaces, including coal injection facilities, three basic oxygen furnaces with a combined annual raw steel production capability of about 5.6 million tons, a vacuum degassing facility, two continuous slab casters with a combined annual production capability of about 4.0 million tons, an 80-inch hot-strip mill, two continuous pickling lines, an 80-inch five-stand cold reducing mill, sheet finishing mills, a continuous heat treating line, batch annealing facilities and a 72-inch hot-dip galvanizing line. Burns Harbor operates a cold reducing mill, a continuous pickling line, a galvanizing line and two coke oven batteries in Lackawanna, New York. Burns Harbor continuously casts about 80 percent of its total production volume, with the remaining 20 percent being ingot cast. Ingot cast slabs are used primarily by Bethlehem Lukens Plate to make steel plates. Burns Harbor's utilization of raw steel production capability was 94 percent during 1998. Sparrows Point Division Location: On the Chesapeake Bay, near Baltimore, Maryland. Principal products and markets: Hot rolled, cold rolled, hot-dip galvanized and Galvalume(R) sheet, tin mill products and semifinished steel to Bethlehem Lukens Plate. Its principal markets include construction, containers and service centers. Principal facilities: A sintering plant, a large blast furnace, two basic oxygen furnaces with an annual raw steel production capability of about 3.7 million tons, a two-strand continuous slab caster, a 68-inch hot-strip mill, three continuous pickling lines, three cold reducing mills (66-inch, 56-inch and 48-inch), continuous and batch annealing facilities, two galvanizing lines, a Galvalume(R) line, a 48-inch hot-dip galvanizing/Galvalume(R) line and tin mill facilities that include tin and chrome plating lines. Sparrows Point continuously casts essentially 100 percent of its total production volume. Sparrows Point's utilization of raw steel production capability was 99 percent during 1998. Pennsylvania Steel Technologies, Inc. ("PST") Location: In Steelton, Pennsylvania, south of Harrisburg, Pennsylvania. Principal products and markets: Railroad rails, specialty blooms and flat bars. It is one of only two rail producers in the United States. PST also produces large-diameter pipe for the oil and gas industries. Principal facilities: A DC electric arc furnace with an annual raw steel production capability of about 1.1 million tons, a ladle furnace, a vacuum degassing facility, a continuous bloom caster, a 44-inch blooming mill, a 28- inch rail mill, in-line rail head-hardening facilities, finishing and shipping facilities for long-length (80-foot) rails, a 20-inch bar mill and an electric fusion welded pipe mill. PST's utilization of raw steel production capability was 67 percent during 1998. Bethlehem Lukens Plate Location: In Coatesville and Conshohocken, Pennsylvania; Burns Harbor, Indiana. Principal products and markets: Carbon plate, high-strength, low alloy plate, commercial alloy plate, military alloy plate, coiled and cut plate and clad plate. Its principal markets include service centers, transportation, infrastructure, machinery, equipment, environmental and engineering. Principal facilities: Coatesville: an electric arc furnace with an annual raw steel production capability of about 900,000 tons, two plate mills (140- inch and 206-inch) and heat treating facilities. Conshohocken: a 110-inch Steckel mill, two reheat furnaces, a roughing mill, an on-line cooling and cut-to-length line, a quench and temper line and a batch heat-treating system. Burns Harbor: a 50 x 90-inch slabbing mill, a 110-inch sheared 10 plate mill including two continuous reheat furnaces, a roughing mill, a finishing mill and a normalizing furnace, and a 160-inch sheared plate mill including two continuous reheat furnaces, four batch reheat furnaces, a roughing mill, a finishing mill, an in-line accelerated cooling facility, a quench and temper line and a batch normalizing furnace. Bethlehem Lukens Plates' utilization of raw steel production capability was 94 percent during the portion of 1998 that it was operated as a part of Bethlehem. Joint Ventures Bethlehem participates in the following joint ventures: . Double G Coatings Company, L.P. (located near Jackson, Mississippi) -- operates a 270,000 ton per year sheet coating line that produces galvanized and Galvalume(R) coated sheets primarily for the construction market. Sparrows Point provides cold rolled coils for about half of Double G's annual capability and is responsible for marketing its share of the finished product. . Steel Construction Systems (located in Orlando, Florida) -- a joint venture with CSR Rinker, the largest building materials company in Florida. Steel Construction Systems manufactures residential and light commercial buildings. . Walbridge Coatings (located in Walbridge, Ohio) -- owns and operates a 400,000 ton per year electrogalvanizing line. This facility produces corrosion-resistant sheet steel primarily for the automobile industry and other consumer durables markets. Burns Harbor provides cold rolled coils for 85 percent of Walbridge's annual capability and is responsible for marketing its share of the finished product. . Indiana Pickling and Processing Company (located in northern Indiana) -- operates a pickling line. . Chicago Cold Rolling, L.L.C. (located in northern Indiana) -- operates a reversing cold mill complex. . TWB Company (located in Michigan) -- operates the largest plant in North America producing laser-welded blanks for the automotive industry. Bethlehem also has indirect equity interests in various iron ore properties. See "Raw Material Properties and Interests" below. Raw Material Properties and Interests Iron Ore. Bethlehem has indirect equity interests in various iron ore operating properties, which (excluding tonnages applicable to interests owned by others) it estimates contained recoverable reserves at December 31, 1998, sufficient to produce at least 21 million tons of direct shipping iron ore from properties located in Brazil and 191 million tons of iron ore pellets from properties located in Minnesota. During 1997, Bethlehem sold its equity interest in Iron Ore Company of Canada ("IOC"). Bethlehem continues as a customer of IOC and purchases iron ore at prices which approximate market. In addition to the estimated reserves at operating properties, Bethlehem also has indirect equity interests in undeveloped or nonoperating iron ore properties, which (excluding tonnages applicable to interests owned by others) it estimates contained recoverable reserves at December 31, 1998, sufficient to produce at least 9 million tons of direct shipping iron ore from properties located in Brazil and 128 million tons of iron ore pellets from properties located in Minnesota. The iron ore operating properties in which Bethlehem has interests have mining and processing facilities which can supply a majority of Bethlehem's current annual iron ore requirements. The location of Bethlehem's steel operations and the iron ore products best suited to these facilities determine when Bethlehem sells, exchanges and purchases iron ore. These purchases have been from various sources, including sources in which it has ownership interests, under a variety of arrangements. 11 Bethlehem's share of the annual iron ore production by enterprises in which it has ownership interests, for Bethlehem's use or sale to trade customers, was 7.9 million tons in 1998 and 7.7 million tons in 1997. In addition to these sources, Bethlehem purchased 5.1 million tons of iron ore in 1998 and 4.8 million tons of iron ore in 1997 from sources in which it had no ownership interests. In 1998, Bethlehem obtained about 58 percent of its iron ore requirements from operations in which it had ownership interests compared with 61 percent in 1997. Bethlehem had trade sales of iron ore of 0.3 million tons in 1998 and 1997. Iron ore trade sales commitments for 1999 are 0.5 million tons and no sales commitments exist beyond 1999. The interests in foreign iron ore properties described above are subject to the risks associated with investments in foreign countries, including the risk of nationalization. Coal and Coke. Bethlehem has sold all of its coal operating properties. Bethlehem owns undeveloped or nonoperating coal properties in Pennsylvania, which it estimates contained recoverable reserves at December 31, 1998, sufficient to produce at least 158 million tons of coal, of which about 91 percent and 9 percent, respectively, are metallurgical and steam coal. In 1997 and 1998, all of the coal used by Bethlehem was purchased from commercial sources. Through December 31, 2005, Bethlehem is committed to satisfy certain of its coal requirements from a single supplier. Bethlehem operates coke-making facilities at Burns Harbor, Indiana and Lackawanna, New York. Facilities in Bethlehem, Pennsylvania were discontinued in March, 1998. Other Raw Materials. Bethlehem purchases its other raw material requirements from commercial sources. Transportation Bethlehem owns seven subsidiary shortline railroads which transport raw materials and semifinished steel products within various Bethlehem operations and serve other customers on their lines. Bethlehem manages an interstate trucking company serving Bethlehem's operations and other facilities and will manage a rail/truck intermodal facility in Bethlehem, Pennsylvania. The Burns Harbor Division operates two 1,000-foot ore vessels (one owned and one under long-term charter), which are used for the transportation of iron ore on the Great Lakes. General While Bethlehem's principal operations and facilities are adequately maintained, they are of varying ages, technologies and operating efficiencies. Bethlehem believes that most of its operations and facilities currently are competitive with the operations and facilities of its principal competitors. Bethlehem will continue to make capital expenditures to improve and maintain the competitiveness of its operations and facilities. See "ITEM 1. BUSINESS -- Capital Expenditures" of this Report for a discussion of Bethlehem's capital expenditures. Bethlehem owns all principal operations and facilities except for two continuous casters at Sparrows Point and Burns Harbor which are being leased and were capitalized. During 1998, Bethlehem sold its No. 1 Coke Oven Battery to an affiliate of DTE Energy Services, Inc., but Bethlehem will continue to operate the facility for the new owner and purchase its output. Bethlehem financed the construction of two hot-dip galvanizing lines at its Burns Harbor and Sparrows Point Divisions. These two galvanizing lines are pledged as collateral for the borrowings. 12 ITEM 3. LEGAL PROCEEDINGS. Bethlehem is a party to numerous legal proceedings incurred in the ordinary course of its business, including the matter specifically discussed below. On December 3, 1997, the Indiana Department of Environmental Management ("IDEM") issued a notice alleging violations of Indiana Air Pollution Control Regulations and operating permit conditions by Bethlehem at the Burns Harbor Division. The alleged violations involve visible emissions from the basic oxygen furnace roof monitor and iron beaching pits and failure to install baghouses at various emission points. Settlement discussions intended to lead to an agreed order resolving the matter are being held between Bethlehem and IDEM. If settlement discussions are unsuccessful, Bethlehem believes it has meritorious defenses and will vigorously defend the action. See "ITEM 1. BUSINESS -- Environment" of this Report for a discussion of Bethlehem's potential responsibilities for environmental cleanup at certain sites under RCRA and CERCLA. Bethlehem cannot predict with any certainty the outcome of any legal proceedings to which it is a party. However, in the opinion of Bethlehem's management, adequate reserves have been recorded for losses which are likely to result from these proceedings. To the extent that such reserves prove to be inadequate, Bethlehem would incur a charge to earnings which could be material to its future results of operations in particular quarterly or annual periods. The outcome of these proceedings, however, is not currently expected to have a material adverse effect on Bethlehem's consolidated financial position. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. There were no matters submitted to a vote of security holders during the fourth quarter of 1998. - --------------------- 13 Executive Officers of the Registrant. The executive officers of Bethlehem as of March 15, 1999, are as follows:
Name Age Position ---- --- -------- Curtis H. Barnette 64 Chairman (Chief Executive Officer) Roger P. Penny 62 President (Chief Operating Officer) Gary L. Millenbruch 61 Executive Vice President (Chief Financial Officer) and Treasurer Duane R. Dunham 57 Executive Vice President (Commercial and Business Development) and Chief Commercial Officer Dr. Augustine E. Moffitt, Jr. 53 Senior Vice President (Administration) and Chief Administrative Officer Lonnie A. Arnett 53 Vice President (Accounting) and Controller Dr. Walter N. Bargeron 56 President, Burns Harbor Division Stephen G. Donches 53 Vice President (Public Affairs) Andrew R. Futchko 56 President, Pennsylvania Steel Technologies, Inc. William H. Graham 53 Vice President (Law), General Counsel and Secretary Carl W. Johnson 57 President, Sparrows Point Division John L. Kluttz 56 Vice President (Union Relations) Dr. Carl F. Meitzner 59 Vice President (Planning) Van R. Reiner 50 President, Bethlehem Lukens Plate Dr. Malcolm J. Roberts 56 Vice President (Technology) and Chief Technology Officer Robert A. Rudzki 45 Vice President (Purchasing and Transportation) and Chief Procurement Officer Dorothy L. Stephenson 49 Vice President (Human Resources)
All of the executive officers have held responsible management or professional positions with Bethlehem or its subsidiaries for more than the past five years. Bethlehem's By-laws provide that the Board of Directors annually chooses the officers and that each officer holds office until his or her successor is elected, or his or her death, resignation or removal. 14 PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER MATTERS. As of March 15, 1999, about 34,000 stockholders held 130,370,007 shares of Bethlehem Common Stock. The principal market for Bethlehem Common Stock is the New York Stock Exchange. Bethlehem Common Stock is also listed on the Chicago Stock Exchange. Dividends on Bethlehem Common Stock are paid quarterly when declared by Bethlehem's Board of Directors. Under the provisions of Bethlehem's 10 3/8% Senior Notes due 2003, Bethlehem's ability to pay dividends on its Common Stock is restricted. See Note J to the Consolidated Financial Statements. At December 31, 1998, about $520 million was available for the payment of Common Stock dividends under these provisions. Bethlehem has not paid a dividend on its Common Stock since the fourth quarter of 1991. Bethlehem's Board of Directors will determine whether to pay any future dividends (subject to any applicable restrictions) based on attained financial results and business outlook. The following table shows the high and low sales prices of Bethlehem Common Stock as reported in the consolidated transaction reporting system. The closing sale price of Bethlehem Common Stock on March 15, 1999, was $8.938.
1998 1997 --------------- -------------- Period Sales Prices Sales Prices - ------ --------------- -------------- High Low High Low ------- ------- ------- ------ First Quarter.................................... $15.500 $ 8.063 $ 9.375 $7.625 Second Quarter................................... 17.125 11.063 10.750 7.750 Third Quarter.................................... 13.438 7.000 12.938 9.813 Fourth Quarter................................... 10.750 7.313 11.563 7.750
ITEM 6. SELECTED FINANCIAL DATA. The information required by this Item is incorporated by reference from page 31 of Bethlehem's 1998 Annual Report to Stockholders. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. The information required by this Item is incorporated by reference from pages 2 to 7 and 10 to 13 of Bethlehem's 1998 Annual Report to Stockholders. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. The information required by this Item is incorporated by reference from pages 14 to 28 of Bethlehem's 1998 Annual Report to Stockholders. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. None. 15 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. In addition to the information under the caption "Executive Officers of the Registrant" in Part I of this Report, the information required by this Item is incorporated by reference from the material under the heading "Item 1 -- Election of Directors" and "Section 16(a) Beneficial Ownership Reporting Compliance" from pages 3 to 9 and page 12 of Bethlehem's Proxy Statement for the 1999 Annual Meeting of Stockholders. ITEM 11. EXECUTIVE COMPENSATION. The information required by this Item is incorporated by reference from pages 13 to 19 of Bethlehem's Proxy Statement for the 1999 Annual Meeting of Stockholders. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. The information required by this Item is incorporated by reference from pages 11 and 12 of Bethlehem's Proxy Statement for the 1999 Annual Meeting of Stockholders. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. The information required by this Item is incorporated by reference from the material under the heading "Certain Business Relationships and Related Transactions" on page 9 and under the heading "Indemnification Assurance Agreements" on page 22 of Bethlehem's Proxy Statement for the 1999 Annual Meeting of Stockholders. Except for those items specifically incorporated by reference, you should not consider Bethlehem's 1998 Annual Report to Stockholders or Proxy Statement for the 1999 Annual Meeting of Stockholders to be part of this Report. 16 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) Documents filed as part of this Report: The following is an index of the financial statements, schedules and exhibits included in this Report or incorporated herein by reference. (1) Financial Statements. BETHLEHEM STEEL CORPORATION AND CONSOLIDATED SUBSIDIARIES
Page ---- Consolidated Statements of Income for years 1998, 1997 and 1996.......... * Consolidated Balance Sheets as of December 31, 1998, and 1997............ * Consolidated Statements of Cash Flows for the years 1998, 1997 and 1996.. * Notes to Consolidated Financial Statements (Including Quarterly Financial Data)................................................................... * (2) Consolidated Financial Statement Schedules. Report of Independent Auditors On Consolidated Financial Statement Schedule................................................................ F-1 II -- Valuation and Qualifying Accounts and Reserves, years ended December 31, 1998, 1997 and 1996...................................... F-3
- -------- * Incorporated by reference from pages 14 to 28 of Bethlehem's 1998 Annual Report to Stockholders. The Consolidated Financial Statements, together with the report of PricewaterhouseCoopers LLP dated January 27, 1999, on pages 14 to 29 of Bethlehem's 1998 Annual Report to Stockholders are incorporated by reference in this Form 10-K Annual Report. With the exception of those pages, you should not consider Bethlehem's 1998 Annual Report to Stockholders as a part of this Report for this Item. The Schedule listed above should be read in conjunction with the consolidated financial statements in such 1998 Annual Report to Stockholders. Schedules not included have been omitted because they are not applicable or the required information is shown in the consolidated financial statements or notes. Separate financial statements of subsidiaries not consolidated and 50 percent or less owned persons accounted for by the equity method have been omitted because considered in the aggregate as a single subsidiary they do not constitute a significant subsidiary. (3) Exhibits. The following is an index of the exhibits included in this Report or incorporated herein by reference. (3)(a) Second Restated Certificate of Incorporation. (b) Amendment to Second Restated Certificate of Incorporation (Incorporated by reference from Exhibit 3(i) to Bethlehem's quarterly report on Form 10-Q for the quarter ended June 30, 1995). (c) By-laws of Bethlehem Steel Corporation, as amended October 1, 1988. (4)(a) Rights Agreement, dated as of July 29, 1998, between Bethlehem Steel Corporation and First Chicago Trust Company of New York (Incorporated by reference from Bethlehem's Report on Form 8-K filed August 5, 1998).
17 (b) Amendment No. 1 to the Rights Agreement, dated as of March 17, 1999, between Bethlehem Steel Corporation and First Chicago Trust Company of New York (Incorporated by reference from Bethlehem's Amended Registration Statement on Form 8-A/A filed March 19, 1999). (c) Bethlehem is a party to certain long-term debt agreements where the amount involved does not exceed 10 percent of Bethlehem's total consolidated assets. Bethlehem agrees to furnish a copy of any such agreement to the Commission upon request. *(10)(a) Excess Benefit Plan of Bethlehem Steel Corporation and Subsidiary Companies, as amended September 20, 1995 (Incorporated by reference from Exhibit 10 to Bethlehem's Annual Report on Form 10-K for the fiscal year ended December 31, 1997). *(b) 1988 Stock Incentive Plan of Bethlehem Steel Corporation (Incorporated by reference from Exhibit 10 to Bethlehem's Annual Report on Form 10-K for the fiscal year ended December 31, 1997). *(c) 1994 Stock Incentive Plan of Bethlehem Steel Corporation. *(d) 1994 Non-Employee Directors Stock Plan of Bethlehem Steel Corporation. *(e) 1998 Stock Incentive Plan of Bethlehem Steel Corporation (Incorporated by reference from Exhibit 1 to Bethlehem's Proxy Statement in connection with its Annual Meeting of Shareholders held on April 28, 1998). *(f) Special Incentive Compensation Plan of Bethlehem Steel Corporation, which is contained in Article Seven of the Second Restated Certificate of Incorporation referred to in Exhibit 3(a) to this Report. *(g) Supplemental Benefits Plan of Bethlehem Steel Corporation and Subsidiary Companies, as amended September 20, 1995 (Incorporated by reference from Exhibit 10 to Bethlehem's Annual Report on Form 10-K for the fiscal year ended December 31, 1997). *(h) Post-Retirement Retainer Plan for Non-Officer Directors (Incorporated by reference from Exhibit 10 to Bethlehem's Annual Report on Form 10- K for the fiscal year ended December 31, 1997). (i) Form of Indemnification Assurance Agreement between Bethlehem Steel Corporation and each of its directors and executive officers listed on Schedule A thereto. (j) Form of Agreement between Bethlehem Steel Corporation and nine executive officers. Additional agreements have been entered into between Bethlehem Steel Corporation and eight other executive officers. These additional agreements are substantially in the form of said Agreement except for the amount of compensation upon termination, which is two rather than three times annual salary and bonus (Incorporated by reference from Exhibit 10 to Bethlehem's quarterly report on Form 10-Q for the quarter ended September 30, 1998). (11) Statement regarding computation of earnings per share. (13) Those portions of Bethlehem's 1998 Annual Report to Stockholders which are incorporated by reference into this Form 10-K Annual Report. (23) Consent of Independent Auditors (included on page F-2 of this Report). (27) Financial Data Schedule for period ended December 31, 1998.
- -------- * Compensatory plans in which Bethlehem's directors and executive officers participate. (b) Reports on Form 8-K. Bethlehem did not file any reports on Form 8-K during the fourth quarter of 1998. 18 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, Bethlehem Steel Corporation has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized, on the 24th day of March, 1999. BETHLEHEM STEEL CORPORATION, /s/ Lonnie A. Arnett By: _________________________________ Lonnie A. Arnett Vice President and Controller Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this Report has been signed below by the following persons on behalf of Bethlehem Steel Corporation and in the capacities indicated on the 24th day of March, 1999. /s/ Curtis H. Barnette /s/ Harry P. Kamen - --------------------------------- --------------------------------- Curtis H. Barnette Harry P. Kamen Chairman and Director Director (principal executive officer) /s/ Gary L. Millenbruch /s/ William M. Landuyt - --------------------------------- --------------------------------- Gary L. Millenbruch William M. Landuyt Executive Vice President, Treasurer Director and Director (principal financial officer) /s/ Lonnie A. Arnett /s/ Robert McClements, Jr. - --------------------------------- --------------------------------- Lonnie A. Arnett Robert McClements, Jr. Vice President and Controller Director (principal accounting officer) /s/ Benjamin R. Civiletti /s/ Roger P. Penny - --------------------------------- --------------------------------- Benjamin R. Civiletti Roger P. Penny Director Director /s/ Worley H. Clark /s/ Shirley D. Peterson - --------------------------------- --------------------------------- Worley H. Clark Shirley D. Peterson Director Director /s/ John B. Curcio /s/ Dean P. Phypers - --------------------------------- --------------------------------- John B. Curcio Dean P. Phypers Director Director /s/ Lewis B. Kaden /s/ John F. Ruffle - --------------------------------- --------------------------------- Lewis B. Kaden John F. Ruffle Director Director 19 REPORT OF INDEPENDENT AUDITORS ON FINANCIAL STATEMENT SCHEDULE To the Board of Directors of Bethlehem Steel Corporation Our audits of the consolidated financial statements referred to in our report dated January 27, 1999 appearing on page 29 of the 1998 Annual Report to Stockholders of Bethlehem Steel Corporation (which report and consolidated financial statements are incorporated by reference in this Annual Report on Form 10-K) also included an audit of the Financial Statement Schedule listed in Item 14 (a)(2) of this Form 10-K. In our opinion, this Financial Statement Schedule presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. /s/ PricewaterhouseCoopers LLP 1177 Avenue of the Americas New York, NY 10036 January 27, 1999 F-1 CONSENT OF INDEPENDENT AUDITORS We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (No. 2-90795, No. 2-71699, No. 2-53880, No. 2-90796, No. 2-67314, No. 33-23516, No.33-23688, No. 33-52267, No. 33-58019, No. 33- 58021, No. 33-60507, No. 33-53895 and No. 33-57157) of Bethlehem Steel Corporation of our report dated January 27, 1999 appearing on page 29 of the 1998 Annual Report to Stockholders which is incorporated in this Annual Report on Form 10-K. We also consent to the incorporation by reference of our report on the Financial Statement Schedule, which appears on page F-1 of this Form 10-K. /s/ PricewaterhouseCoopers LLP 1177 Avenue of the Americas New York, NY 10036 March 24, 1999 F-2 BETHLEHEM STEEL CORPORATION 10-K SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS AND RESERVES ($ in Millions)
Charged Balance at (Credited) Balance at 12/31/97 to Income Deductions Other 12/31/98 ---------- ---------- ---------- ----- ---------- Classification Doubtful Receivables & Returns.............. $ 18.8 $ (0.4) $ 1.6 (a) -- $ 20.0 Long-term Receivables.......... 2.0 -- -- (a) (2.0)(c) -- Deferred Income Tax Asset................ 350.0 (22.0) -- (8.0)(d) 320.0 Charged Balance at (Credited) Balance at 12/31/96 to Income Deductions Other 12/31/97 ---------- ---------- ---------- ----- ---------- Classification Doubtful Receivables & Returns.............. $ 20.8 $ (2.8) $ 0.8 (a) -- $ 18.8 Long-term Receivables.......... 4.4 -- (2.4)(a) -- 2.0 Deferred Income Tax Asset................ 410.0 (60.0) -- -- 350.0 Charged Balance at (Credited) Balance at 12/31/95 to Income Deductions Other 12/31/96 ---------- ---------- ---------- ----- ---------- Classification Doubtful Receivables & Returns.............. $ 19.5 $ 0.1 $1.2 (a) -- $ 20.8 Long-term Receivables.......... 4.5 (0.1) -- -- 4.4 Deferred Income Tax Asset................ 360.2 67.0 -- (17.2)(b) 410.0
- -------- (a) Amounts written-off less collections and reinstatements. (b) Represents eliminating the valuation allowance recorded for an $82 million ($67 million after-tax) adjustment to equity at December 31, 1995 required to recognize the minimum pension liability. See Notes G and J to the Consolidated Financial Statements. (c) The property for which this receivable relates to was forclosed on by Bethlehem and the receivable and related allowance was included in the basis of the property. (d) Allowance on taxable temporary differences acquired through Bethlehem's purchase of Lukens. F-3 EX-3.A 2 SECOND RESTATED CERTIFICATE OF INCORPORATION EXHIBIT 3(A) SECOND RESTATED CERTIFICATE OF INCORPORATION OF BETHLEHEM STEEL CORPORATION SECOND RESTATED CERTIFICATE OF INCORPORATION OF BETHLEHEM STEEL CORPORATION Bethlehem Steel Corporation, a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware, does hereby certify that: 1. The name of the Corporation is BETHLEHEM STEEL CORPORATION. The Corporation was originally incorporated under the name Redington Standard Fittings Company by filing its Certificate of Incorporation with the Secretary of State of Delaware on July 1, 1919. 2. This Second Restated Certificate of Incorporation only restates and integrates and does not further amend the provisions of the Corporation's restated certificate of incorporation as previously amended and supplemented, and there is no discrepancy between those provisions and the provisions of this Second Restated Certificate of Incorporation. 3. This Second Restated Certificate of Incorporation of the Corporation has been duly adopted in accordance with Section 242 of the General Corporation Law of the State of Delaware. 4. The text of the Restated Certificate of Incorporation of Bethlehem Steel Corporation, as previously amended and supplemented, is hereby restated in full as follows: FIRST. The name of the Corporation (which is hereinafter referred to as the "Corporation") is BETHLEHEM STEEL CORPORATION. SECOND. The address of the registered office of the Corporation in the State of Delaware is 1209 Orange Street, in the City of Wilmington, County of New Castle. The name of the Corporation's registered agent at such address is The Corporation Trust Company. THIRD. The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware. FOURTH. The total number of shares of all classes of stock which the Corporation shall have authority to issue is one hundred ninety million (190,000,000), of which (i) twenty million (20,000,000) shares are to be Preferred Stock (hereinafter called the "Preferred Stock"), of the par value of one dollar ($1) each; (ii) twenty million (20,000,000) shares are to be Preference Stock (hereinafter called the "Preference Stock"), of the par value of one dollar ($1) each; and (iii) one hundred fifty million (150,000,000) shares are to be Common Stock (hereinafter called the "Common Stock"), of the par value of one dollar ($1) each. The designations and the powers, preferences and rights, and the qualifications, limitations or restrictions thereof, of each class of stock of the Corporation which are fixed by this Second Restated Certificate of Incorporation, and the express grant of authority to the Board of Directors to fix by resolution or resolutions the designations, and the powers, preferences and rights, and the qualifications, limitations or restrictions thereof, of the Preferred Stock and the Preference Stock which are not fixed by this Second Restated Certificate of Incorporation, are as follows: 1. The Preferred Stock may be issued from time to time in any amount, not exceeding in the aggregate, including all shares theretofore issued and then outstanding of any and all series thereof, the total number of shares of the Preferred Stock hereinabove authorized, as Preferred Stock of one or more series, as hereinafter provided. All shares of any one series of the Preferred Stock shall be identical in all respects, each series thereof shall be distinctively designated by letter or descriptive words and, except as permitted by the provisions of this Article Fourth, all series of the Preferred Stock shall rank equally and be identical in all respects. 2. Authority is hereby expressly granted to the Board of Directors from time to time to issue the Preferred Stock as Preferred Stock of any series and in connection with the creation of each such series to fix by the resolution or resolutions providing for the issue of shares thereof the designations and powers, preferences and rights, and the qualifications, limitations or restrictions thereof, of such series, to the full extent now or hereafter permitted by the laws of the State of Delaware, in respect of the matters set forth in the following subdivisions (a) to (g), inclusive: (a) the designation of such series; (b) the dividend rate of such series; (c) the date or dates upon or after which the shares of such series shall be subject to redemption at the election of the Corporation and the redemption price or prices per share of such series on such redemption; (d) the preference of the shares of such series over the Preference Stock and the Common Stock as to assets in the event of any liquidation, dissolution or winding up of the Corporation; (e) whether or not the shares of such series shall be entitled to the benefit of a sinking fund or purchase fund to be applied to the redemption or purchase of such series and, if so entitled, the amount of such fund and the manner of its application; (f) whether or not the shares of such series shall be convertible into, or exchangeable for, shares of any other class or classes or of any other series of the same class or of any series of any other class or classes of stock of the Corporation and, if so convertible or exchangeable, the conversion price or prices or rate or rates, or the rate or rates of exchange, and the adjustments, if any, in the price or prices or rate or rates at which such conversion or exchange may be made; and (g) whether the holders of shares of such series shall have voting powers in addition to the voting powers provided for in Section 6 of this Article Fourth and, if they are to have such additional voting powers, the extent thereof. 3. The powers, preferences and rights, and the qualifications, limitations and restrictions thereof, applicable to the Preferred Stock of all series are as follows: (a) Out of the surplus or net profits of the Corporation legally available for dividends the holders of the Preferred Stock of each series shall be entitled to receive, when and as declared by the Board of Directors, dividends at the per annum rate determined as in this Article Fourth provided for such series, and no more, payable quarterly on the tenth days of March, June, September and December in each year (each such day being hereinafter called a "dividend date" and each quarterly period ending with a dividend date being hereinafter called a "dividend period"), in each case from the date of cumulation, as hereinafter in subdivision (e) of this Section 3 defined, of such series (provided, however, that, if the date of cumulation of such series shall be a date less than thirty (30) days prior to a dividend date, the dividend that would otherwise be payable on such dividend date shall be payable on the next succeeding dividend date), before any sum or sums shall be set aside pursuant to subdivisions (b) or (f) of this Section 3 for the purchase or redemption of Preferred Stock -2- of any series and before any dividend shall be declared or paid upon or set apart for, or any other distribution shall be ordered or made in respect of, or any payment shall be made on account of the purchase or redemption of, the Preference Stock or the Common Stock; and such dividends upon the Preferred Stock shall be cumulative (whether or not in any dividend period or periods there shall be surplus or net profits of the Corporation legally available for the payment of such dividends), so that, if at any time dividends upon the outstanding Preferred Stock of all series at the respective per annum rates determined as hereinabove specified for such series from the date of cumulation of each such series to the end of the then current dividend period shall not have been paid or declared and a sum sufficient for the payment thereof set apart for such payment, the amount of the deficiency shall be fully paid, but without interest, or dividends in such amount declared on each such series and a sum sufficient for the payment thereof set apart for such payment, before any sum or sums shall be set aside pursuant to subdivisions (b) or (f) of this Section 3 for the purchase or redemption of Preferred Stock of any series and before any dividend shall be declared or paid upon or set apart for, or any other distribution shall be ordered or made in respect of, or any payment shall be made on account of the purchase or redemption of, the Preference Stock or the Common Stock. All dividends declared on the Preferred Stock for any dividend period shall be declared pro rata so that the amounts of dividends per share declared for such period on the Preferred Stock of different series that shall have been outstanding during such period shall in all cases bear to each other the same proportions that the respective dividend rates of such series for such period shall bear to each other. (b) Out of any surplus or net profits of the Corporation legally available for dividends remaining after full cumulative dividends upon the Preferred Stock of all series then outstanding shall have been paid for all past dividend periods, and after or concurrently with making payment of, or declaring and setting apart for payment, full dividends on the Preferred Stock of all series then outstanding to the end of the then current dividend period and before any dividends shall be declared or paid upon or set apart for, or any other distribution shall be ordered or made in respect of, or any payment shall be made on account of the purchase or redemption of, the Preference Stock or the Common Stock, the Corporation shall set aside on its books when and as required, in respect of each series of the Preferred Stock any shares of which shall at the time be outstanding and in respect of which a sinking fund or purchase fund for the redemption or purchase thereof shall have been provided for in the resolution or resolutions providing for the issue of such shares, the sum or sums required by the terms of such resolution or resolutions as a sinking fund or purchase fund to be applied in the manner specified above. (c) Out of any surplus or net profits of the Corporation legally available for dividends remaining after full cumulative dividends upon the Preferred Stock of all series then outstanding shall have been paid for all past dividend periods, and after or concurrently with making payment of, or declaring and setting apart for payment, full dividends on the Preferred Stock of all series then outstanding to the end of the then current dividend period and after the Corporation shall have complied with the provisions of the foregoing subdivision (b) of this Section 3 in respect of any and all amounts then or theretofore required to be set aside or applied in respect of any sinking fund or purchase fund mentioned in said subdivision (b) and shall have made provision for compliance with said subdivision (b) in respect of the current sinking fund or purchase fund period for each series of Preferred Stock then outstanding and entitled to the benefit of a sinking fund or purchase fund, then and not otherwise, the holders of the Preference Stock and the Common Stock shall, subject to the provisions hereof, be entitled to receive such dividends as may from time to time be declared by the Board of Directors. (d) The Preferred Stock of all series shall be preferred over the Preference Stock and the Common Stock as to assets in the event of any liquidation or dissolution or winding up of the Corporation, and in that event the holders of the Preferred Stock of each series shall be entitled to receive, out of the assets of the Corporation available for distribution to its stockholders, an amount determined as provided in this Article -3- Fourth for every share of their holdings of the Preferred Stock of such series before any distribution of the assets shall be made to the holders of the Preference Stock or the Common Stock; and, if in the event of any such liquidation or dissolution or winding up the holders of all series of the Preferred Stock shall have received all the amounts to which they shall be entitled as aforesaid, the holders of the Preference Stock and the Common Stock shall be entitled, to the exclusion of the holders of the Preferred Stock of all series, to share ratably in all the assets of the Corporation available for distribution to the stockholders then remaining according to the number of shares and terms of the Preference Stock and the Common Stock held by them respectively. If upon any liquidation or dissolution or winding up of the Corporation the amounts payable on or with respect to the Preferred Stock of all series shall not be paid in full, the holders of the shares of the Preferred Stock of all series shall share ratably in any distribution of assets according to the respective amounts which would be payable in respect of the shares held by them upon such distribution if all amounts payable on or with respect to the Preferred Stock of all series were to be paid in full. (e) The term "date of cumulation" as used in this Article Fourth with reference to the Preferred Stock of any series shall be deemed to mean the date on which shares of the Preferred Stock of such series shall first be issued (or such later date if so established in the resolution or resolutions authorizing such series). In the event of the issue of additional shares of the Preferred Stock of any then existing series, all dividends paid on the Preferred Stock of such series prior to the issue of such additional shares, and all dividends declared and payable to holders of record of the Preferred Stock of such series on any date prior to the issue of such additional shares, shall be deemed to have been paid on such additional shares. (f) All the Preferred Stock, or any series thereof, or any part of any series thereof, at any time outstanding may be redeemed by the Corporation (except as otherwise provided by the Board of Directors in accordance with Section 2 of this Article Fourth), at its election expressed by resolution of the Board of Directors, upon not less than thirty (30) days previous notice to the holders of record of the Preferred Stock to be redeemed, given by mail or by publication in such manner as may be prescribed by resolution of the Board of Directors, at the applicable redemption price, determined as provided in this Article Fourth, of the Preferred Stock to be redeemed; provided, however, that Preferred Stock may be redeemed only after full cumulative dividends upon the Preferred Stock of all series then outstanding shall have been paid for all past dividend periods, and after or concurrently with making payment of, or declaring and setting apart for payment, full dividends on the Preferred Stock of all series then outstanding (except the shares of the Preferred Stock to be redeemed) to the end of the current dividend period. If less than all the outstanding Preferred Stock of any series is to be redeemed, the redemption may be made either by lot or pro rata or in such fair and equitable other manner as may be prescribed by resolution of the Board of Directors. From and after the date fixed in any such notice as the date of redemption (unless default shall be made by the Corporation in providing moneys for the payment of the redemption price pursuant to such notice), or, if the Corporation shall so elect, from and after a date (hereinafter called the date of deposit), prior to the date fixed as the date of redemption, on which the Corporation shall provide moneys for the payment of the redemption price by depositing the amount thereof for the account of the holders of the Preferred Stock entitled thereto with a bank or trust company doing business in the Borough of Manhattan, in The City of New York, and having capital and surplus of at least ten million dollars ($10,000,000) pursuant to notice of such election included in the notice of redemption specifying the date on which such deposit will be made, all dividends on the Preferred Stock called for redemption shall cease to accrue and all rights of the holders thereof as stockholders of the Corporation, except the right to receive the redemption price as hereinafter provided and, in the case of such deposit, any conversion rights not theretofore expired, shall cease and terminate. After the deposit of such amount with such bank or trust company, the respective holders of record of the Preferred Stock to be redeemed shall be entitled to receive the redemption price at any time upon actual delivery to such bank or trust company of certificates for the number of shares to be redeemed, duly endorsed in blank or accompanied by proper instruments of assignment and transfer thereof duly endorsed in blank. Any moneys so deposited which shall remain unclaimed by the holders of such -4- Preferred Stock at the end of six (6) years after the redemption date, together with any interest thereon which shall be allowed by the bank or trust company with which the deposit shall have been made, shall be paid by such bank or trust company to the Corporation. Preferred Stock redeemed pursuant to the provisions of this subdivision shall have the status of authorized but unissued Preferred Stock. (g) So long as any shares of the Preferred Stock of any series shall be outstanding, (i) the Corporation shall not, without the affirmative vote or written consent of the holders of two-thirds of the aggregate number of shares of the Preferred Stock of all series at the time outstanding, considered as a class without regard to series, (A) alter or change the powers, preferences or rights given to the Preferred Stock by this Second Restated Certificate of Incorporation, so as to affect the Preferred Stock adversely, or (B) authorize or create any class of stock ranking, either as to payment of dividends or distribution of assets, prior to the Preferred Stock; and (ii) the Corporation shall not, without the affirmative vote or written consent of the holders of a majority of the aggregate number of shares of the Preferred Stock of all series at the time outstanding, considered as a class without regard to series, increase the authorized amount of the Preferred Stock or authorize or create any class of stock ranking, either as to payment of dividends or distribution of assets, on a parity with the Preferred Stock. 4. The Preference Stock may be issued from time to time in any amount, not exceeding in the aggregate, including all shares theretofore issued and then outstanding of any and all series thereof, the total number of shares of the Preference Stock hereinabove authorized, as Preference Stock of one or more series, as hereinafter provided. All shares of any one series of the Preference Stock shall be identical in all respects, except that shares of any one series providing for cumulative dividends issued at different times may differ as to the dates from which dividends shall be cumulative, and each series thereof shall be distinctively designated by letter or descriptive words. If any of the Preference Stock shall be subject to redemption, any redeemed Preference Stock shall have the status of authorized but unissued Preference Stock unless the Board of Directors otherwise determines in connection with the issuance or redemption of such Preference Stock. 5. All series of the Preferred Stock shall have preference and priority over all series of the Preference Stock in the payment of dividends and in the distribution of assets in the event of any liquidation, dissolution or winding up of the Corporation and the Preference Stock shall be subject to all the powers, preferences and rights of the Preferred Stock as shall be set forth herein and in the resolution or resolutions fixing the terms of each series of Preferred Stock adopted by the Board of Directors of this Corporation pursuant to Section 2 of this Article Fourth. Subject to the foregoing, authority is hereby expressly granted to the Board of Directors from time to time to issue the Preference Stock as Preference Stock of any series and in connection with the creation of each such series to fix by the resolution or resolutions providing for the issue of shares thereof the designations and the powers, preferences and rights, and the qualifications, limitations or restrictions thereof, of such series, to the full extent now or hereafter permitted by the laws of the State of Delaware, including, without limitation, the matters set forth in the following subdivisions (a) to (h), inclusive: (a) the designation of such series; (b) the amount and timing of the declaration and payment of dividends, if any (including any dividends which may be determined from time to time at the discretion of the Board of Directors), which shall be payable on the shares of such series, whether the dividends, if any, of such series shall be cumulative and, if so, the date from which they shall be cumulative, and any preferences as to dividends of the shares of such series over the Common Stock or over any other series of Preference Stock; -5- (c) whether or not the shares of such series shall be subject to redemption and, if so, the date or dates upon or after which the shares of such series shall be subject to redemption at the election of the Corporation, the redemption price or prices per share of such series on such redemption and any other terms or conditions relating to such redemption; (d) any preferences of the shares of such series over the Common Stock or over any other series of Preference Stock as to assets in the event of any liquidation, dissolution or winding up of the Corporation and whether or not shares of such series are to participate in any distribution of assets in the event of any such liquidation, dissolution or winding up after the payment of any preference of such shares as to such assets; (e) whether or not the shares of such series shall be entitled to the benefit of a sinking fund or purchase fund to be applied to the redemption or purchase of such series and, if so entitled, the amount of such fund and the manner of its application; (f) whether or not the shares of such series shall be convertible into, or exchangeable for, shares of any other class or classes or of any other series of the same class or of any series of any other class or classes of stock of the Corporation and, if so convertible or exchangeable, the conversion price or prices or rate or rates, or the rate or rates of exchange, and the adjustments, if any, in the price or prices or rate or rates at which such conversion or exchange may be made; (g) whether the holders of shares of such series shall have voting powers and, if they are to have such voting powers, the extent thereof (subject to the limitation set forth in Section 6 of this Article Fourth); and (h) the limitations and restrictions, if any, to be effective while any shares of such series shall be outstanding upon the payment of dividends or the making of other distributions on, and upon the purchase, redemption or other acquisition by the Corporation of, the Common Stock or any other class of stock (other than the Preferred Stock) or any other series of Preference Stock. 6. Except for such voting powers, if any, as are granted to the holders of the Preferred Stock by this Section 6 and by subdivision (g) of Section 3 of this Article Fourth or by law, or as may be granted by the Board of Directors to the holders of any one or more series of Preferred Stock or Preference Stock in accordance with Sections 2 and 5 of this Article Fourth, or as may be granted to the holders of the Preference Stock by law, voting power shall be vested exclusively in the Common Stock. Holders of stock of whatever class entitled to vote shall be entitled to one vote for each share of stock held by them. If at the time of any annual meeting of stockholders of the Corporation for the election of directors a default in preference dividends, as the term "default in preference dividends" is hereinafter defined, shall exist, (i) the holders of the Preferred Stock, voting separately as a class and without regard to series, shall have the right to elect two members of the Board of Directors but, except as provided in the following clause (ii), shall not be entitled to vote in the election of any of the other directors of the Corporation and (ii) if at the time of such meeting there shall be outstanding shares of more than one series of the Preferred Stock, the holders of the Preferred Stock of each series, if any, of which more than 5,000,000 shares shall then be outstanding, voting separately as a series, shall have the right to elect one member of the Board of Directors but, except as provided in the foregoing clause (i), shall not be entitled to vote in the election of any of the other directors of the Corporation; and the holders of the Common Stock voting separately as a class, shall be entitled to elect the other directors of the Corporation, subject to the voting rights, if any, granted to the holders of the Preference Stock, but shall not be entitled to vote in the election of the directors of the Corporation to be elected as provided in the foregoing clauses (i) and (ii). Whenever a default in preference dividends shall commence to -6- exist, the Corporation, upon the written request of the holders of 5% or more of the outstanding shares of Preferred Stock or the holders of 5% or more of the outstanding shares of any series of Preferred Stock that would be entitled to elect a director of the Corporation pursuant to clause (ii) of the preceding sentence if an annual meeting of the stockholders of the Corporation for the election of directors were then being held, shall call a special meeting of the holders of the Preferred Stock and if, at the time of such request, there shall be outstanding shares of more than one series of the Preferred Stock, shall also call a special meeting of the holders of the Preferred Stock of each series, if any, of which more than 5,000,000 shares shall then be outstanding, such special meeting or meetings to be held within 120 days after the date on which such request shall be received by the Corporation for the purpose of enabling such holders to elect members of the Board of Directors as provided in clauses (i) and (ii) of the preceding sentence; provided, however, that such special meeting or meetings need not be called if an annual meeting of stockholders of the Corporation for the election of directors shall be scheduled to be held within such 120 days; and provided further that in lieu of any such special meeting, the election of the directors to be elected thereat may be effected by the written consent of the holders of a majority of the outstanding shares that would be entitled to be voted upon at such special meeting. Prior to any such special meeting or meetings, the number of directors of the Corporation shall be increased to the extent necessary to provide as additional places on the Board of Directors the directorships to be filled by the directors to be elected thereat. Any director elected as aforesaid by the holders of shares of the Preferred Stock or of any series thereof shall cease to serve as such director whenever a default in preference dividends shall cease to exist. If, prior to the end of the term of any director elected as aforesaid by the holders of shares of the Preferred Stock or of any series thereof, or elected by the holders of any other class of stock or series thereof, a vacancy in the office of such director shall occur by reason of death, resignation, removal or disability, or for any other cause, such vacancy shall be filled for the unexpired term in the manner provided in the By-laws; provided, however, that if such vacancy shall be filled by election by the stockholders at a meeting thereof, the right to fill such vacancy shall be vested in the holders of that class of stock or series thereof which elected the director the vacancy in the office of whom is so to be filled, unless, in any such case, no default in preference dividends shall exist at the time of such election. For the purposes of this Section 6 of Article Fourth, a "default in preference dividends" shall be deemed to have occurred whenever the amount of dividends in arrears upon any series of the Preferred Stock shall be equivalent to six full quarter-yearly dividends or more, and, having so occurred, such default in preference dividends shall be deemed to exist thereafter until, but only until, all dividends in arrears on all shares of the Preferred Stock then outstanding, of each and every series, shall have been paid. The term "dividends in arrears" whenever used in this Section 6 of Article Fourth with reference to the Preferred Stock of any series shall be deemed to mean (whether or not in any dividend period in respect of which such term is used there shall have been surplus or net profits of the Corporation legally available for the payment of dividends) that amount which shall be equal to cumulative dividends at the rate expressed in the certificates for the Preferred Stock of such series for all past quarterly dividend periods less the amount of all dividends paid, or deemed paid, for all such periods upon such Preferred Stock. Nothing herein contained shall be deemed to prevent an increase in the number of directors of the Corporation pursuant to its By-laws as from time to time in effect so as to provide as additional places on the Board of Directors the directorships to be filled by the directors so to be elected by the holders of the Preferred Stock or of any series thereof, or to prevent any other change in the number of the directors of the Corporation. 7. Pursuant to the grant of authority to the Board of Directors specified above, it is hereby expressly acknowledged that any of the powers, designations, preferences, rights, qualifications, limitations or restrictions of any series of Preference Stock may be made dependent upon any aspect of the results of operations of the Corporation or any of its divisions, subsidiaries or other affiliates (or upon any other facts ascertainable outside this Second Restated Certificate of Incorporation or the resolution or resolutions providing for the issuance of such series). -7- 8. A holder of stock of the Corporation of any class shall not have any right as such holder (other than such right, if any, as the Board of Directors in its discretion may by resolution determine) to purchase, subscribe for or otherwise acquire any shares of stock of the Corporation of any class now or hereafter authorized, or any securities convertible into or exchangeable for any such shares, or any warrants or any instruments evidencing rights or options to subscribe for, purchase or otherwise acquire any such shares, whether such shares, securities, warrants or other instruments are now, or shall hereafter be, authorized, unissued or issued and thereafter acquired by the Corporation. 9. $5.00 Cumulative Convertible Preferred Stock (Par Value $1 Per Share). The following are the voting powers, designation, preferences and relative, participating, optional or other special rights, and the qualifications, limitations or restrictions thereof, of the series of Preferred Stock designated by the Board of Directors of the Corporation as the "$5.00 Cumulative Convertible Preferred Stock" by resolution dated March 17, 1983, consisting of 2,500,000 shares: (a) Designation. The designation of the series of Preferred Stock created by such resolution shall be $5.00 Cumulative Convertible Preferred Stock (hereinafter in this Section 9 of Article Fourth called this Series). (b) Dividend Rate. Out of the surplus or net profits of the Corporation legally available for dividends the holders of this Series shall be entitled to receive, when and as declared by the Board of Directors, dividends at the rate of $5.00 per share per annum, and no more, payable quarterly on the tenth days of March, June, September and December in each year (each such day being hereinafter called a dividend date and each quarterly or shorter (in the case of the first such period) period ending with a dividend date being hereinafter called a dividend period), in each case from the date of cumulation (as defined in subdivision (h) of this Section 9) of this Series (provided, however, that, if the date of cumulation of this Series shall be a date less than thirty (30) days prior to a dividend date, the dividend that would otherwise be payable on such dividend date shall be payable on the next succeeding dividend date), before any sum or sums shall be set aside pursuant to subdivision (c) of this Section 9 or subdivision (b) or (f) of Section 3 of Article Fourth of this Second Restated Certificate of Incorporation for the purchase or redemption of Preferred Stock of any series and before any dividend shall be declared or paid upon or set apart for, or any other distribution shall be ordered or made in respect of, or any payment shall be made on account of the purchase of, the Common Stock; and such dividends upon the Preferred Stock shall be cumulative (whether or not in any dividend period or periods there shall be surplus or net profits of the Corporation legally available for the payment of such dividends), so that, if at any time dividends upon the outstanding Preferred Stock of all series at the respective per annum rates determined for such series from the date of cumulation of each such series to the end of the then current dividend period shall not have been paid or declared and a sum sufficient for the payment thereof set apart for such payment, the amount of the deficiency shall be fully paid, but without interest, or dividends in such amount declared on each such series and a sum sufficient for the payment thereof set apart for such payment, before any sum or sums shall be set aside pursuant to subdivision (c) of this Section 9 or subdivision (b) or (f) of Section 3 of Article Fourth of this Second Restated Certificate of Incorporation for the purchase or redemption of Preferred Stock of any series and before any dividend shall be declared or paid upon or set apart for, or any other distribution shall be ordered or made in respect of, or any payment shall be made on account of the purchase of, the Common Stock. All dividends declared on the Preferred Stock for any dividend period shall be declared pro rata so that the amounts of dividends per share declared for such period on the Preferred Stock of different series that were outstanding during such period shall in all cases bear to each other the same proportions that the respective dividend rates of such series for such period bear to each other (adjusted, as appropriate, if shares of any series were not outstanding during all such period). No interest, or sum of money in lieu of interest, shall be payable in respect of any dividend payment or payments which may be in arrears. Dividends payable on this Series for -8- any period less than a full quarterly period shall be computed on the basis of the number of days elapsed in a 360 day year consisting of twelve months of thirty days each. (c) Redemption. (1) Shares of this Series shall be redeemable at the option of the Corporation at any time, either in whole or in part, at a price equal to the sum of (a) the redemption price per share set forth below for the date fixed for redemption for such shares:
REDEMPTION DATE DURING 12-MONTH REDEMPTION PERIOD BEGINNING MARCH 10 PRICE - ------------------------------- ----- 1983............................................................... $55.00 1984............................................................... $54.50 1985............................................................... $54.00 1986............................................................... $53.50 1987............................................................... $53.00 1988............................................................... $52.50 1989............................................................... $52.00 1990............................................................... $51.50 1991............................................................... $51.00 1992............................................................... $50.50 1993 and thereafter................................................ $50.00
plus (b) in each case a sum equal to all dividends (whether or not earned or declared) on such shares accrued and unpaid thereon to the redemption date; provided, however, that shares of this Series shall be redeemed only after full cumulative dividends upon the Preferred Stock of all series then outstanding shall have been paid for all past dividend periods, and after or concurrently with making payment of, or declaring and setting apart for payment, full dividends on the Preferred Stock of all series then outstanding (except the shares of the Preferred Stock to be redeemed) to the end of the current dividend period; and provided further, however, that shares of this Series shall not be redeemable prior to March 10, 1986, unless the Closing Price (as defined in subdivision (f) of this Section 9 shall have equaled or exceeded 150% of the then applicable conversion prices (as defined in subdivision (f) of this Section 9 for at least 20 consecutive Trading Days (as defined in subdivision (f) of this Section 9 ending within five Trading Days prior to the date of the notice of redemption. (2) If less than all the outstanding shares of this Series are to be redeemed by the Corporation, the number of shares to be redeemed shall be determined by the Board of Directors and the shares to be redeemed shall be determined by lot or pro rata or in such fair and equitable other manner as may be prescribed by resolution of the Board of Directors. (3) Notice of any redemption of shares of this Series, specifying the time and place of redemption, the redemption price and that the dividends on the shares to be redeemed shall cease to accrue on the redemption date or date of deposit referred to below, shall be mailed by first class mail, postage prepaid, to each holder of record of the shares to be redeemed, at such holder's address of record, not less than 30 days prior to the redemption date; if less than all the shares owned by a stockholder are then to be redeemed, the notice shall also specify the number of shares thereof which are to be redeemed and the numbers of the certificates representing such shares. Upon surrender in accordance with such notice of the certificates for the number of shares to be redeemed, duly endorsed in blank or accompanied by proper instruments of assignment or transfer thereof duly endorsed in blank, such shares shall be redeemed by the Corporation at the applicable redemption price. If less than all the shares represented by any such certificate shall be redeemed, a new certificate shall be issued representing the unredeemed shares without cost to the holder thereof. From and after the date fixed in any such notice as the date of redemption (unless default shall be made by the Corporation in -9- providing moneys for the payment of the redemption price pursuant to such notice), or, if the Corporation shall so elect, from and after a date (hereinafter called the date of deposit), prior to the date fixed as the date of redemption, on which the Corporation shall provide moneys for the payment of the redemption price by depositing the amount thereof for account of the holders of the shares of this Series entitled thereto with a bank or trust company doing business in the Borough of Manhattan in The City of New York, and having capital and surplus of at least ten million dollars ($10,000,000) pursuant to notice of such election included in the notice of redemption specifying the date on which such deposit will be made, all dividends on the shares of this Series called for redemption shall cease to accrue and all rights of the holders thereof as stockholders of the Corporation, except the right to receive the redemption price as hereinafter provided and, in the case of such deposit, any conversion rights not theretofore expired, shall cease and terminate, and such shares shall not after the redemption date be deemed to be outstanding. After the deposit of such amount with such bank or trust company, the respective holders of record of the shares of this Series to be redeemed shall be entitled to receive the redemption price at any time upon actual delivery to such bank or trust company of certificates for the number of shares to be redeemed, duly endorsed in blank or accompanied by proper instruments of assignment and transfer thereof duly endorsed in blank. Any moneys so deposited which shall remain unclaimed by the holders of such shares of this Series at the end of six (6) years after the redemption date, together with any interest thereon which shall be allowed by the bank or trust company with which the deposit shall have been made, shall be paid by such bank or trust company to the Corporation, and thereafter the holders of shares of this Series redeemed on such redemption date shall look only to the Corporation for the payment of the redemption price thereof. Any interest accrued on any funds deposited with any such bank or trust company shall belong to the Corporation, and shall be paid to it from time to time on demand. (4) Any shares of this Series which shall at any time have been redeemed, shall, after such redemption, have the status of authorized but unissued shares of Preferred Stock, without designation as to series until such shares are once more designated as part of a particular series by the Board of Directors. (5) The holders of this Series shall be entitled to receive the redemption payments specified in this subdivision (c) if, when and as such payments shall be authorized by the Board of Directors, out of the assets of the Corporation legally available therefor. (d) Distributions to Holders of Common Stock. Out of any surplus or net profits of the Corporation legally available for dividends remaining after full cumulative dividends upon the Preferred Stock of all series then outstanding shall have been paid for all past dividend periods, and after or concurrently with making payment of, or declaring and setting apart for payment, full dividends on the Preferred Stock of all series then outstanding to the end of the then current dividend period and after the Corporation shall have complied with the provisions in respect of any and all amounts then or theretofore required to be set aside or applied in respect of any sinking fund or purchase fund with respect to the Preferred Stock of each series then outstanding and entitled to the benefit of a sinking fund or purchase fund, and shall have made provision for compliance in respect of the current sinking fund or purchase fund period for each such series of Preferred Stock, then and not otherwise, the holders of the Common Stock shall, subject to the provisions of this Second Restated Certificate of Incorporation, be entitled to receive such dividends as may from time to time be declared by the Board of Directors. (e) Voting. (1) Except for such voting powers as shall be granted to the holders of shares of this Series by this subdivision (e) or by law, and except for such voting powers, if any, as shall be granted to holders of shares of other series of Preferred Stock, voting power shall be vested exclusively in the Common Stock. Holders of stock of whatever class entitled to vote shall be entitled to one vote for each share of stock held by them. -10- (2) If at the time of any annual meeting of stockholders of the Corporation for the election of directors a default in preference dividends, as the term "default in preference dividends" is hereinafter defined, shall exist, (i) the holders of the Preferred Stock, voting separately as a class and without regard to series, shall have the right to elect two members of the Board of Directors but, except as provided in the following clause (ii), shall not be entitled to vote in the election of any of the other directors of the Corporation and (ii) if at the time of such meeting there shall be outstanding shares of more than one series of the Preferred Stock, the holders of the Preferred Stock of each series, if any, of which more than 5,000,000 shares are then outstanding, voting separately as a series, shall have the right to elect one member of the Board of Directors but, except as provided in the foregoing clause (i), shall not be entitled to vote in the election of any of the other directors of the Corporation; and the holders of the Common Stock, voting separately as a class, shall be entitled to elect the other directors of the Corporation but shall not be entitled to vote in the election of the directors of the Corporation to be elected as provided in the foregoing clauses (i) and (ii). Whenever a default in preference dividends shall commence to exist, the Corporation, upon the written request of the holders of 5% or more of the outstanding shares of Preferred Stock or the holders of 5% or more of the outstanding shares of any series of Preferred Stock that would be entitled to elect a director of the Corporation pursuant to clause (ii) of the preceding sentence if an annual meeting of the stockholders of the Corporation for the election of directors were then being held, shall call a special meeting of the holders of the Preferred Stock and if, at the time of such request, there shall be outstanding shares of more than one series of the Preferred Stock, shall also call a special meeting of the holders of the Preferred Stock of each series, if any, of which more than 5,000,000 shares are then outstanding, such special meeting or meetings to be held within 120 days after the date on which such request is received by the Corporation for the purpose of enabling such holders to elect members of the Board of Directors as provided in clauses (i) and (ii) of the preceding sentence; provided, however, that such special meeting or meetings need not be called if an annual meeting of stockholders of the Corporation for the election of directors shall be scheduled to be held within such 120 days; and provided further that in lieu of any such special meeting, the election of the directors to be elected thereat may be effected by the written consent of the holders of a majority of the outstanding shares that would be entitled to be voted upon at such special meeting. Prior to any such special meeting or meetings, the number of directors of the Corporation shall be increased to the extent necessary to provide as additional places on the Board of Directors the directorships to be filled by the directors to be elected thereat. Any director elected as aforesaid by the holders of shares of the Preferred Stock or of any series thereof shall cease to serve as such director whenever a default in preference dividends shall cease to exist. If, prior to the end of the term of any director elected as aforesaid by the holders of shares of the Preferred Stock or of any series thereof, or elected by the holders of the Common Stock, a vacancy in the office of such director shall occur by reason of death, resignation, removal or disability, or for any other cause, such vacancy shall be filled for the unexpired term in the manner provided in the By-laws; provided, however, that if such vacancy shall be filled by election by the stockholders at a meeting thereof, the right to fill such vacancy shall be vested in the holders of that class of stock or series thereof which elected the director the vacancy in the office of whom is so to be filled, unless, in any such case, no default in preference dividends shall exist at the time of such election. For the purposes of this subdivision (e), a "default in preference dividends" shall be deemed to have occurred whenever the amount of dividends in arrears upon any series of the Preferred Stock shall be equivalent to six full quarter-yearly dividends or more, and, having so occurred, such default in preference dividends shall be deemed to exist thereafter until, but only until, all dividends in arrears on all shares of the Preferred Stock then outstanding, of each and every series, shall have been paid. The term "dividends in arrears" whenever used in this subdivision (e) with reference to the Preferred Stock of any series shall be deemed to mean (whether or not in any dividend period in respect of which such term is used there shall have been surplus or net profits of the Corporation legally available for the payment of dividends) that amount which shall be equal to cumulative dividends at the rate for the Preferred Stock of such series for all past quarterly dividend periods less the amount of all dividends paid, or deemed paid, for all such periods upon such Preferred Stock. Nothing herein contained shall be deemed to prevent an increase in the number of directors of the Corporation pursuant to its By-laws as from time to time in effect so as to provide as additional places on the Board of Directors the directorships to be filled by the directors so to be elected by the holders -11- of the Preferred Stock or of any series thereof, or to prevent any other change in the number of the directors of the Corporation. (3) So long as any shares of the Preferred Stock of any series shall be outstanding, (i) the Corporation shall not, without the affirmative vote or written consent of the holders of two-thirds of the aggregate number of shares of the Preferred Stock of all series at the time outstanding, considered as a class without regard to series, (A) alter or change the powers, preferences or rights given to the Preferred Stock by this Second Restated Certificate of Incorporation so as to affect the Preferred Stock adversely, or (B) authorize, create or increase the number of authorized shares of any class of stock ranking, either as to payment of dividends or distribution of assets, prior to the Preferred Stock; and (ii) the Corporation shall not, without the affirmative vote or written consent of the holders of a majority of the aggregate number of shares of the Preferred Stock of all series at the time outstanding, considered as a class without regard to series, increase the authorized amount of the Preferred Stock or authorize or create any class of stock ranking, either as to payment of dividends or distribution of assets, on a parity with the Preferred Stock. (4) So long as any shares of this Series shall be outstanding, the Corporation shall not, without the affirmative vote or written consent of the holders of two-thirds of the number of shares of this Series at the time outstanding, alter or change the powers, preferences or rights given to the shares of this Series by this Second Restated Certificate of Incorporation or by this Section 9 so as to affect the shares of this Series adversely. (f) Conversion Rights. The holders of shares of this Series shall have the right, at their option, to convert each share of this Series into 1.7699 shares of Common Stock of the Corporation at any time on and subject to the following terms and conditions: (1) The shares of this Series shall be convertible at the office of any transfer agent for this Series, and at such other office or offices, if any, as the Board of Directors may designate, into fully paid and nonassessable shares (calculated as to each conversion to the nearest 1/100th of a share) of Common Stock of the Corporation, at the conversion price, determined as hereinafter provided, in effect at the time of conversion, each share of this Series being taken at $50.00 for the purpose of such conversion. The price at which shares of Common Stock shall be delivered upon conversion (herein called the conversion price) shall be initially $28.25 per share of Common Stock. The conversion price shall be adjusted as provided in paragraph (4) below. (2) In order to convert shares of this Series into Common Stock the holder thereof shall surrender at any office hereinabove mentioned the certificate or certificates therefor, duly endorsed in blank or accompanied by proper instruments of assignment and transfer thereof duly endorsed in blank, together with any payment required by this paragraph (2) and transfer tax stamps or funds therefor, if required pursuant to paragraph (8) of this subdivision (f), and give written notice to the Corporation at said office that he elects to convert such shares. Shares of this Series surrendered for conversion during the period from the close of business on any record date for the payment of a dividend on such shares to the opening of business on the date for payment of such dividend shall (except in the case of shares which have been called for redemption on a redemption date within such period) be accompanied by payment of an amount equal to the dividend payable on such dividend payment date on the shares of this Series being surrendered for conversion. Except as provided in the preceding sentence, no payment or adjustment shall be made upon any conversion on account of any dividends accrued on the shares of this Series surrendered for conversion or on account of any dividends on the Common Stock issued upon such conversion. -12- Shares of this Series shall be deemed to have been converted immediately prior to the close of business on the day of the surrender of such shares for conversion in accordance with the foregoing provisions, and the person or persons entitled to receive the Common Stock issuable upon such conversion shall be treated for all purposes as the record holder or holders of such Common Stock at such time; provided, however, that any such surrender on any date when the stock transfer books of the Corporation shall be closed shall constitute the person or persons in whose name or names the certificates for such shares of Common Stock are to be issued as the record holder or holders thereof for all purposes immediately prior to the close of business on the next succeeding day on which such stock transfer books are opened and such conversion shall be at the conversion price in effect at such time on such succeeding day. As promptly as practicable on or after the conversion date, the Corporation shall issue and shall deliver at said office a certificate or certificates for the number of full shares of Common Stock issuable upon such conversion, together with a cash payment in lieu of any fraction of a share, as hereinafter provided, to the person or persons entitled to receive the same. In case shares of this Series are called for redemption, the right to convert such shares shall cease and terminate at the close of business on the redemption date, unless default shall be made in payment of the redemption price. (3) No fractional shares of Common Stock shall be issued upon conversion of shares of this Series, but, instead of any fraction of a share of Common Stock which would otherwise be issuable in respect of the aggregate number of shares of this Series surrendered for conversion at one time by the same holder, the Corporation shall pay a cash adjustment of such fraction in an amount equal to the same fraction of the Closing Price of a share of Common Stock on the date on which such shares of this Series were duly surrendered for conversion, or, if such date is not a Trading Day, on the next Trading Day. (4) The conversion price shall be adjusted from time to time as follows: (A) In case the Corporation shall (i) pay a dividend or make a distribution on its outstanding shares of Common Stock in Common Stock, (ii) subdivide its outstanding shares of Common Stock, (iii) combine its outstanding shares of Common Stock into a smaller number of shares, or (iv) issue any shares by reclassification of its shares of Common Stock, the conversion price in effect at the time of the record date for such dividend or distribution or the effective date of such subdivision, combination or reclassification shall be adjusted, effective at the opening of business on the business day next following such record date or effective date, so that the holder of any shares of this Series surrendered for conversion after such record date or effective date shall be entitled to receive the number of shares of capital stock of the Corporation which he would have owned or been entitled to receive had such shares of this Series been converted immediately prior to such time. If, as a result of an adjustment made pursuant to this clause (A), the holder of any share thereafter surrendered for conversion shall become entitled to receive shares of two or more classes of capital stock of the Corporation, the Board of Directors (whose determination shall be conclusive) shall determine the allocation of the adjusted conversion price between or among shares of such classes of capital stock. (B) In case the Corporation shall hereafter issue rights or warrants to all holders of its Common Stock entitling them (for a period expiring within forty-five days after the record date mentioned below) to subscribe for or purchase shares of Common Stock at a price per share less than the current market price per share (as determined pursuant to clause (D) of this paragraph (4)) on the record date mentioned below, the conversion price shall be adjusted so that the same shall equal the price determined by multiplying the conversion price in effect immediately prior to such record date by a fraction, of which the numerator shall be the number of shares of Common Stock outstanding on such record date plus the number of shares of Common Stock which the aggregate offering price of the total number of shares of Common Stock so offered would purchase at such current market price and of which the denominator shall be the number of shares of Common Stock outstanding on such record date plus the number of additional shares of Common Stock offered for subscription or purchase. Such adjustment shall become effective at the opening of business on the business day next following the record date for the determination of stockholders entitled to receive such rights or warrants; -13- and to the extent that shares of Common Stock are not delivered after the expiration of such rights or warrants, the conversion price shall be readjusted (but only with respect to shares of this Series converted after such expiration) to the conversion price which would then be in effect had the adjustments made upon the distribution of such rights or warrants been made upon the basis of delivery of only the number of shares of Common Stock actually delivered. The right to acquire shares of Common Stock pursuant to the Corporation's Dividend Reinvestment Plan as in effect on February 1, 1983, as the same may be amended from time to time, or pursuant to any successor dividend reinvestment plan, shall not be deemed to be a right giving rise to any adjustment to the conversion price. For the purposes of this clause (B), the number of shares of Common Stock at any time outstanding shall not include shares held in the treasury of the Corporation. The Corporation shall not issue any rights or warrants in respect of shares of Common Stock held in the treasury of the Corporation. (C) In case the Corporation shall distribute to all holders of its Common Stock evidences of its indebtedness or assets (including securities, but excluding any cash dividend or distributions out of surplus or net profits legally available therefor and dividends referred to in clause (A) of this paragraph (4)) or subscription rights or warrants (excluding those referred to in clause (B) of this paragraph (4)), then in each such case the conversion price shall be adjusted so that the same shall equal the price determined by multiplying the conversion price in effect immediately prior to the record date mentioned below by a fraction of which the numerator shall be the current market price per share (determined as provided in clause (D) of this paragraph (4)) of the Common Stock on such record date less the then fair market value (as determined by the Board of Directors of the Corporation, whose determination shall be conclusive) of the portion of the assets or evidences of indebtedness so distributed or of such subscription rights or warrants applicable to one share of Common Stock, and the denominator shall be such current market price per share of the Common Stock. Such adjustment shall become effective on the opening of business on the business day next following the record date for the determination of stockholders entitled to receive such distribution. (D) For the purpose of any computation under clause (B) or (C) of this paragraph (4), the current market price per share of Common Stock on any date shall be deemed to be the average of the daily Closing Price for the thirty consecutive Trading Days selected by the Corporation commencing not more than forty-five Trading Days before the day in question. (E) In any case in which this paragraph (4) shall require that an adjustment as a result of any event become effective at the opening of business on the business day next following a record date, the Corporation may elect to defer until after the occurrence of such event (i) issuing to the holder of any shares of this Series converted after such record date and before the occurrence of such event the additional shares of Common Stock issuable upon such conversion over and above the shares of Common Stock issuable upon such conversion on the basis of the conversion price prior to adjustment and (ii) paying to such holder any amount in cash in lieu of a fractional share of Common Stock pursuant to paragraph (3) of this subdivision (f); and, in lieu of the shares the issuance of which is so deferred, the Corporation shall issue or cause its transfer agents to issue due bills or other appropriate evidence of the right to receive such shares should such event occur. (F) Any adjustment in the conversion price otherwise required by this paragraph (4) to be made may be postponed up to, but not beyond, three years from the date on which it would otherwise be required to be made provided that such adjustment (plus any other adjustments postponed pursuant to this clause (F) and not theretofore made) would not require an increase or decrease of more than $0.50 in such price and would not, if made, entitle the holders of all then outstanding shares of this Series upon conversion to receive additional shares of Common Stock equal in the aggregate to 3% or more of the then issued and outstanding shares of Common Stock. All calculations under this subdivision (f) shall be made to the nearest cent or to the nearest 1/100th of a share, as the case may be. -14- (G) The Corporation may (but shall not be obligated to) make such reductions in the conversion price, in addition to those required by clauses (A), (B) and (C) of this paragraph (4), as it considers to be advisable in order that any event treated for Federal income tax purposes as a dividend of stock or stock rights shall not be taxable to the recipients. (5) Whenever the conversion price is adjusted as herein provided: (A) the Corporation shall compute the adjusted conversion price in accordance with this subdivision (f) and shall prepare a certificate signed by the Treasurer of the Corporation setting forth the adjusted conversion price, and such certificate shall forthwith be filed with the transfer agent or agents for this Series; and (B) a notice stating that the conversion price has been adjusted and setting forth the adjusted conversion price shall, as soon as practicable, be mailed to the holders of record of the outstanding shares of this Series. (6) In case: (A) the Corporation shall declare a dividend (or any other distribution) on its Common Stock payable otherwise than in cash out of its retained earnings; or (B) the Corporation shall authorize the granting to the holders of its Common Stock of rights to subscribe for or purchase any shares of capital stock of any class or of any other rights; or (C) of any reclassification of the capital stock of the Corporation (other than a subdivision or combination of its outstanding shares of Common Stock), or of any consolidation or merger to which the Corporation is a party and for which approval of any stockholders of the Corporation is required, or of the sale or transfer of all or substantially all the assets of the Corporation; or (D) of the voluntary or involuntary dissolution, liquidation or winding up of the Corporation; then the Corporation shall cause to be mailed to the transfer agent or agents for this Series and to the holders of record of the outstanding shares of this Series, at least 20 days (or 10 days in any case specified in clause (A) or (B) of this paragraph (6)) prior to the applicable record date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution or rights, or, if a record is not to be taken, the date as of which the holders of Common Stock of record to be entitled to such dividend, distribution or rights are to be determined, or (y) the date on which such reclassification, consolidation, merger, sale, transfer, dissolution, liquidation or winding up is expected to become effective, and the date as of which it is expected that holders of Common Stock of record shall be entitled to exchange their shares of Common Stock for securities or other property deliverable upon such reclassification, consolidation, merger, sale, transfer, dissolution, liquidation or winding up. (7) The Corporation shall at all times reserve and keep available, free from pre-emptive rights, out of its authorized but unissued Common Stock, for the purpose of effecting the conversion of the shares of this Series, the full number of shares of Common Stock then deliverable upon the conversion of all shares of this Series then outstanding, provided, that nothing contained herein shall be construed to preclude the Corporation from satisfying its obligations in respect of the conversion of the shares by delivery of purchased shares of Common Stock which are held in the treasury of the Corporation. -15- (8) The Corporation shall pay any and all taxes that may be payable in respect of the issuance or delivery of shares of Common Stock on conversion of shares of this Series pursuant hereto. The Corporation shall not, however, be required to pay any tax which may be payable in respect of any transfer involved in the issue and delivery of shares of Common Stock in a name other than that in which the shares of this Series so converted were registered, and no such issue or delivery shall be made unless and until the person requesting such issue shall have paid to the Corporation the amount of any such tax, or shall have established, to the satisfaction of the Corporation, that such tax shall have been paid. (9) For the purpose of this subdivision (f) the term "Common Stock" shall include any stock of any class of the Corporation which has no preference in respect of dividends or of amounts in the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation, and which is not subject to redemption by the Corporation. However, except as otherwise provided in paragraph (11), shares issuable on conversion of shares of this Series shall include only shares of the class designated as Common Stock of the Corporation as of the original date of issue of this Series or shares of any class or classes resulting from any reclassification or reclassifications thereof and which have no preference in respect of dividends or of amounts payable in the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation and which are not subject to redemption by the Corporation, provided that if at any time there shall be more than one such resulting class, the shares of each such class then so issuable shall be substantially in the proportion which the total number of shares of such class resulting from all such reclassifications bears to the total number of shares of all such classes resulting from all such reclassifications. (10) As used in this subdivision (f), the term "Closing Price" on any day shall mean the reported last sales price regular way on such day on the New York Stock Exchange, or, if not reported for such Exchange, on the Composite Tape, or, in case no such reported sale takes place on such day, the average of the reported closing bid and asked prices regular way on the New York Stock Exchange, or, if the Common Stock is not listed or admitted to trading on such Exchange, on the principal national securities exchange on which the Common Stock is listed or admitted to trading, or, if not listed or admitted to trading on any national securities exchange, the average of the closing bid and asked prices in the over-the-counter market as furnished by any New York Stock Exchange member firm selected from time to time by the Corporation for that purpose, or, if no such quotations are available, the fair market price as determined by the Corporation (whose determination shall be conclusive); and the term "Trading Day" shall mean, so long as the Common Stock is listed or admitted to trading on the New York Stock Exchange (or any successor to such Exchange), a date on which the New York Stock Exchange (or such successor) is open for the transaction of business, or, if the Common Stock is not listed or admitted to trading on such Exchange, a date on which the principal national securities exchange on which the Common Stock is listed is open for the transaction of business, or, if the Common Stock is not listed or admitted to trading on any national securities exchange, a date on which any New York Stock Exchange member firm is open for the transaction of business. (11) If either of the following shall occur, namely: (a) any consolidation or merger to which the Corporation is a party, other than a consolidation or a merger in which consolidation or merger the Corporation is a continuing corporation and which does not result in any reclassification of, or change (other than a change in par value or from par value to no par value or from no par value to par value, or as a result of a subdivision or combination) in, outstanding shares of the Common Stock, or (b) any sale or conveyance to another corporation of the property of the Corporation as an entirety or substantially as an entirety; then the holder of each share then outstanding shall have the right to convert such share only into the kind and amount of shares of stock and other securities and property receivable upon such consolidation, merger, sale or conveyance by a holder of the number of shares of Common Stock issuable upon conversion of such share immediately prior to such consolidation, merger, sale or conveyance, subject to adjustments which shall be as nearly equivalent as may be practicable to the adjustments provided for in paragraph (4) of this subdivision (f). -16- The provisions of this paragraph (11) shall similarly apply to successive consolidations, mergers, sales or conveyances. (12) Notwithstanding anything elsewhere contained in this Section 9, any funds which at any time shall have been deposited by the Corporation or on its behalf with any paying agent for the purpose of paying dividends on or the redemption price of any of the shares of this Series and which shall not be required for such purposes because of the conversion of such shares, as provided in this subdivision (f), shall, upon delivery to the paying agent of evidence satisfactory to it of such conversion, after such conversion be repaid to the Corporation by the paying agent. (13) Any shares of this Series which shall at any time have been converted into shares of Common Stock shall, after such conversion, have the status of authorized but unissued shares of Preferred Stock, without designation as to series until such shares are once more designated as part of a particular series by the Board of Directors. (g) Liquidation Rights. (1) Upon the liquidation, dissolution or winding up of the Corporation, the holders of the shares of this Series shall be entitled to receive out of the assets of the Corporation available for distribution to its stockholders, before any payment or distribution shall be made on the Common Stock, the amount of $50 per share, plus a sum equal to all dividends (whether or not earned or declared) on such shares accrued and unpaid thereon to the date of final distribution. (2) The Preferred Stock of all series shall be preferred over the Common Stock as to assets in the event of any liquidation, dissolution or winding up of the Corporation, and in that event the holders of the Preferred Stock of each series shall be entitled to receive, out of the assets of the Corporation available for distribution to its stockholders, an amount determined as provided in this Section 9 or pursuant to Article Fourth of this Second Restated Certificate of Incorporation, as the case may be, for every share of their holdings of the Preferred Stock of such series before any distribution of the assets shall be made to the holders of the Common Stock; and, if in the event of any such liquidation, dissolution or winding up the holders of all series of the Preferred Stock shall have received all the amounts to which they shall be entitled as aforesaid, the holders of the Common Stock shall be entitled, to the exclusion of the holders of the Preferred Stock of all series, to share ratably in all the assets of the Corporation available for distribution to the stockholders then remaining according to the number of shares of the Common Stock held by them respectively. If upon any liquidation, dissolution or winding up of the Corporation the amounts payable on or with respect to the Preferred Stock of all series are not paid in full, the holders of shares of the Preferred Stock of all series shall share ratably in any distribution of assets according to the respective amounts which would be payable in respect of the shares held by them upon such distribution if all amounts payable on or with respect to the Preferred Stock of all series were paid in full. (3) Neither the sale, lease or exchange (for cash, shares of stock, securities or other consideration) of all or substantially all the property and assets of the Corporation nor the merger or consolidation of the Corporation into or with any other corporation or the merger or consolidation of any other corporation into or with the Corporation shall be deemed to be a liquidation, dissolution or winding up of the Corporation for the purposes of this subdivision (g). (h) Date of Cumulation. The term "date of cumulation" as used in this Section 9 with reference to the Preferred Stock of any series shall be deemed to mean the date on which shares of the Preferred Stock of such series are first issued. In the event of the issue of additional shares of the Preferred Stock of any then existing series, all dividends paid on the Preferred Stock of such series prior to the issue of such additional shares, and all -17- dividends declared and payable to holders of record of the Preferred Stock of such series on any date prior to the issue of such additional shares, shall be deemed to have been paid on such additional shares. 10. $2.50 Cumulative Convertible Preferred Stock (Par Value $1 Per Share). The following are the voting powers, designation, preferences and relative, participating, optional or other special rights, and the qualifications, limitations or restrictions thereof, of the series of Preferred Stock designated by the Board of Directors of the Corporation as the "$2.50 Cumulative Convertible Preferred Stock" by resolution dated October 3, 1983, consisting of 4,000,000 shares: (a) Designation. The designation of the series of Preferred Stock created by such resolution shall be $2.50 Cumulative Convertible Preferred Stock (hereinafter in this Section 10 of Article Fourth called "this Series"). (b) Dividend Rate. Out of the surplus or net profits of the Corporation legally available for dividends the holders of this Series shall be entitled to receive, when and as declared by the Board of Directors, dividends at the rate of $2.50 per share per annum, and no more, payable quarterly on the tenth days of March, June, September and December in each year (each such day being hereinafter called a dividend date and each quarterly or shorter (in the case of the first such period) period ending with a dividend date being hereinafter called a dividend period), in each case from the date of cumulation (as defined in subdivision (h) of this Section 10) of this Series (provided, however, that, if the date of cumulation of this Series shall be a date less than thirty (30) days prior to a dividend date, the dividend that would otherwise be payable on such dividend date shall be payable on the next succeeding dividend date), before any sum or sums shall be set aside pursuant to subdivision (c) of this Section 10 or subdivision (b) or (f) of Section 3 of Article Fourth of this Second Restated Certificate of Incorporation for the purchase or redemption of Preferred Stock of any series and before any dividend shall be declared or paid upon or set apart for, or any other distribution shall be ordered or made in respect of, or any payment shall be made on account of the purchase of, the Common Stock; and such dividends upon the Preferred Stock shall be cumulative (whether or not in any dividend period or periods there shall be surplus or net profits of the Corporation legally available for the payment of such dividends), so that, if at any time dividends upon the outstanding Preferred Stock of all series at the respective per annum rates determined for such series from the date of cumulation of each such series to the end of the then current dividend period shall not have been paid or declared and a sum sufficient for the payment thereof set apart for such payment, the amount of the deficiency shall be fully paid, but without interest, or dividends in such amount declared on each such series and a sum sufficient for the payment thereof set apart for such payment, before any sum or sums shall be set aside pursuant to subdivision (c) of this Section 10 or subdivision (b) or (f) of Section 3 of Article Fourth of this Second Restated Certificate of Incorporation for the purchase or redemption of Preferred Stock of any series and before any dividend shall be declared or paid upon or set apart for, or any other distribution shall be ordered or made in respect of, or any payment shall be made on account of the purchase of, the Common Stock. All dividends declared on the Preferred Stock for any dividend period shall be declared pro rata so that the amounts of dividends per share declared for such period on the Preferred Stock of different series that were outstanding during such period shall in all cases bear to each other the same proportions that the respective dividend rates of such series for such period bear to each other (adjusted, as appropriate, if shares of any series were not outstanding during all such period). No interest, or sum of money in lieu of interest, shall be payable in respect of any dividend payment or payments which may be in arrears. Dividends payable on this Series for any period less than a full quarterly period shall be computed on the basis of the number of days elapsed in a 360-day year consisting of twelve months of thirty days each. (c) Redemption. (1) Shares of this Series shall be redeemable at the option of the Corporation at any time, either in whole or in part, at a price equal to the sum of (a) the redemption price per share set forth -18- below for the date fixed for redemption for such shares:
REDEMPTION DATE DURING 12-MONTH REDEMPTION PERIOD BEGINNING SEPTEMBER 10 PRICE - ------------------------------- ----- 1983............................................. $27.50 1984............................................. $27.25 1985............................................. $27.00 1986............................................. $26.75 1987............................................. $26.50 1988............................................. $26.25 1989............................................. $26.00 1990............................................. $25.75 1991............................................. $25.50 1992............................................. $25.25 1993 and thereafter.............................. $25.00
plus (b) in each case a sum equal to all dividends (whether or not earned or declared) on such shares accrued and unpaid thereon to the redemption date; provided, however, that shares of this Series shall be redeemed only after full cumulative dividends upon the Preferred Stock of all series then outstanding shall have been paid for all past dividend periods, and after or concurrently with making payment of, or declaring and setting apart for payment, full dividends on the Preferred Stock of all series then outstanding (except the shares of the Preferred Stock to be redeemed) to the end of the current dividend period; and provided further, however, that shares of this Series shall not be redeemable prior to September 10, 1986, unless the Closing Price (as defined in subdivision (f) of this Section 10) shall have equaled or exceeded 150% of the then applicable conversion price (as defined in subdivision (f) of this Section 10) for at least 20 consecutive Trading Days (as defined in subdivision (f) of this Section 10) ending within five Trading Days prior to the date of the notice of redemption. (2) If less than all the outstanding shares of this Series are to be redeemed by the Corporation, the number of shares to be redeemed shall be determined by the Board of Directors and the shares to be redeemed shall be determined by lot or pro rata or in such fair and equitable other manner as may be prescribed by resolution of the Board of Directors. (3) Notice of any redemption of shares of this Series, specifying the time and place of redemption, the redemption price and that the dividends on the shares to be redeemed shall cease to accrue on the redemption date or date of deposit referred to below, shall be mailed by first class mail, postage prepaid, to each holder of record of the shares to be redeemed, at such holder's address of record, not less than 30 days prior to the redemption date; if less than all the shares owned by a stockholder are then to be redeemed, the notice shall also specify the number of shares thereof which are to be redeemed and the numbers of the certificates representing such shares. Upon surrender in accordance with such notice of the certificates for the number of shares to be redeemed, duly endorsed in blank or accompanied by proper instruments of assignment or transfer thereof duly endorsed in blank, such shares shall be redeemed by the Corporation at the applicable redemption price. If less than all the shares represented by any such certificate shall be redeemed, a new certificate shall be issued representing the unredeemed shares without cost to the holder thereof. From and after the date fixed in any such notice as the date of redemption (unless default shall be made by the Corporation in providing moneys for the payment of the redemption price pursuant to such notice), or, if the Corporation shall so elect, from and after a date (hereinafter called the date of deposit), prior to the date fixed as the date of redemption, on which the Corporation shall provide moneys for the payment of the redemption price by depositing the amount thereof for account of the holders of the shares of this Series entitled thereto with a bank or trust company doing business in the Borough of Manhattan, in The City of New York, and having capital -19- and surplus of at least ten million dollars ($10,000,000) pursuant to notice of such election included in the notice of redemption specifying the date on which such deposit will be made, all dividends on the shares of this Series called for redemption shall cease to accrue and all rights of the holders thereof as stockholders of the Corporation, except the right to receive the redemption price as hereinafter provided and, in the case of such deposit, any conversion rights not theretofore expired, shall cease and terminate, and such shares shall not after the redemption date be deemed to be outstanding. After the deposit of such amount with such bank or trust company, the respective holders of record of the shares of this Series to be redeemed shall be entitled to receive the redemption price at any time after the redemption date upon actual delivery to such bank or trust company of certificates for the number of shares to be redeemed, duly endorsed in blank or accompanied by proper instruments of assignment and transfer thereof duly endorsed in blank. Any moneys so deposited which shall remain unclaimed by the holders of such shares of this Series at the end of six (6) years after the redemption date, together with any interest thereon which shall be allowed by the bank or trust company with which the deposit shall have been made, shall be paid by such bank or trust company to the Corporation, and thereafter the holders of shares of this Series redeemed on such redemption date shall look only to the Corporation for the payment of the redemption price thereof. Any interest accrued on any funds deposited with any such bank or trust company shall belong to the Corporation, and shall be paid to it from time to time on demand. (4) Any shares of this Series which shall at any time have been redeemed, shall, after such redemption, have the status of authorized but unissued shares of Preferred Stock, without designation as to series until such shares are once more designated as part of a particular series by the Board of Directors. (5) The holders of this Series shall be entitled to receive the redemption payments specified in this subdivision (c), if, when and as such payments shall be authorized by the Board of Directors, out of the assets of the Corporation legally available therefor. (d) Distributions to Holders of Common Stock. Out of any surplus or net profits of the Corporation legally available for dividends remaining after full cumulative dividends upon the Preferred Stock of all series then outstanding shall have been paid for all past dividend periods, and after or concurrently with making payment of, or declaring and setting apart for payment, full dividends on the Preferred Stock of all series then outstanding to the end of the then current dividend period and after the Corporation shall have complied with the provisions in respect of any and all amounts then or theretofore required to be set aside or applied in respect of any sinking fund or purchase fund with respect to the Preferred Stock of each series then outstanding and entitled to the benefit of a sinking fund or purchase fund, and shall have made provision for compliance in respect of the current sinking fund or purchase fund period for each such series of Preferred Stock, then and not otherwise, the holders of the Common Stock shall, subject to the provisions of this Second Restated Certificate of Incorporation, be entitled to receive such dividends as may from time to time be declared by the Board of Directors. (e) Voting. (1) Except for such voting powers as shall be granted to the holders of shares of this Series by this subdivision (e) or by law, and except for such voting powers, if any, as shall be granted to holders of shares of other series of Preferred Stock, voting power shall be vested exclusively in the Common Stock. Holders of stock of whatever class entitled to vote shall be entitled to one vote for each share of stock held by them. (2) If at the time of any annual meeting of stockholders of the Corporation for the election of directors a default in preference dividends, as the term "default in preference dividends" is hereinafter defined, shall exist, (i) the holders of the Preferred Stock, voting separately as a class and without regard to series, shall have the right to elect two members of the Board of Directors but, except as provided in the following clause (ii), shall not be entitled to vote in the election of any of the other directors of the Corporation and (ii) if at the time of such meeting there shall be outstanding shares of more than one series of the Preferred Stock, the -20- holders of the Preferred Stock of each series, if any, of which more than 5,000,000 shares are then outstanding, voting separately as a series, shall have the right to elect one member of the Board of Directors but, except as provided in the foregoing clause (i), shall not be entitled to vote in the election of any of the other directors of the Corporation; and the holders of the Common Stock, voting separately as a class, shall be entitled to elect the other directors of the Corporation but shall not be entitled to vote in the election of the directors of the Corporation to be elected as provided in the foregoing clauses (i) and (ii). Whenever a default in preference dividends shall commence to exist, the Corporation, upon the written request of the holders of 5% or more of the outstanding shares of Preferred Stock or the holders of 5% or more of the outstanding shares of any series of Preferred Stock that would be entitled to elect a director of the Corporation pursuant to clause (ii) of the preceding sentence if an annual meeting of the stockholders of the Corporation for the election of directors were then being held, shall call a special meeting of the holders of the Preferred Stock and if, at the time of such request, there shall be outstanding shares of more than one series of the Preferred Stock, shall also call a special meeting of the holders of the Preferred Stock of each series, if any, of which more than 5,000,000 shares are then outstanding, such special meeting or meetings to be held within 120 days after the date on which such request is received by the Corporation for the purpose of enabling such holders to elect members of the Board of Directors as provided in clauses (i) and (ii) of the preceding sentence; provided, however, that such special meeting or meetings need not be called if an annual meeting of stockholders of the Corporation for the election of directors shall be scheduled to be held within such 120 days; and provided further that in lieu of any such special meeting, the election of the directors to be elected thereat may be effected by the written consent of the holders of a majority of the outstanding shares that would be entitled to be voted upon at such special meeting. Prior to any such special meeting or meetings, the number of directors of the Corporation shall be increased to the extent necessary to provide as additional places on the Board of Directors the directorships to be filled by the directors to be elected thereat. Any director elected as aforesaid by the holders of shares of the Preferred Stock or of any series thereof shall cease to serve as such director whenever a default in preference dividends shall cease to exist. If, prior to the end of the term of any director elected as aforesaid by the holders of shares of the Preferred Stock or of any series thereof, or elected by the holders of the Common Stock, a vacancy in the office of such director shall occur by reason of death, resignation, removal or disability, or for any other cause, such vacancy shall be filled for the unexpired term in the manner provided in the By-laws; provided, however, that if such vacancy shall be filled by election by the stockholders at a meeting thereof, the right to fill such vacancy shall be vested in the holders of that class of stock or series thereof which elected the director the vacancy in the office of whom is so to be filled, unless, in any such case, no default in preference dividends shall exist at the time of such election. For the purposes of this subdivision (e), a "default in preference dividends" shall be deemed to have occurred whenever the amount of dividends in arrears upon any series of the Preferred Stock shall be equivalent to six full quarter-yearly dividends or more, and, having so occurred, such default in preference dividends shall be deemed to exist thereafter until, but only until, all dividends in arrears on all shares of the Preferred Stock then outstanding, of each and every series, shall have been paid. The term "dividends in arrears" whenever used in this subdivision (e) with reference to the Preferred Stock of any series shall be deemed to mean (whether or not in any dividend period in respect of which such term is used there shall have been surplus or net profits of the Corporation legally available for the payment of dividends) that amount which shall be equal to cumulative dividends at the rate for the Preferred Stock of such series for all past quarterly dividend periods less the amount of all dividends paid, or deemed paid, for all such periods upon such Preferred Stock. Nothing herein contained shall be deemed to prevent an increase in the number of directors of the Corporation pursuant to its By-laws as from time to time in effect so as to provide as additional places on the Board of Directors the directorships to be filled by the directors so to be elected by the holders of the Preferred Stock or of any series thereof, or to prevent any other change in the number of the directors of the Corporation. (3) So long as any shares of the Preferred Stock of any series shall be outstanding, (i) the Corporation shall not, without the affirmative vote or written consent of the holders of two-thirds of the aggregate number of shares of the Preferred Stock of all series at the time outstanding, considered as a class without regard to series, -21- (A) alter or change the powers, preferences or rights given to the Preferred Stock by this Second Restated Certificate of Incorporation so as to affect the Preferred Stock adversely, or (B) authorize, create or increase the number of authorized shares of any class of stock ranking, either as to payment of dividends or distribution of assets, prior to the Preferred Stock; and (ii) the Corporation shall not, without the affirmative vote or written consent of the holders of a majority of the aggregate number of shares of the Preferred Stock of all series at the time outstanding, considered as a class without regard to series, increase the authorized amount of the Preferred Stock or authorize or create any class of stock ranking, either as to payment of dividends or distribution of assets, on a parity with the Preferred Stock. (4) So long as any shares of this Series shall be outstanding, the Corporation shall not, without the affirmative vote or written consent of the holders of two-thirds of the number of shares of this Series at the time outstanding, alter or change the powers, preferences or rights given to the shares of this Series by this Second Restated Certificate of Incorporation or by this Section 10 so as to affect the shares of this Series adversely. (f) Conversion Rights. The holders of shares of this Series shall have the right, at their option, to convert each share of this Series into 0.8403 shares of Common Stock of the Corporation at any time on and subject to the following terms and conditions: (1) The shares of this Series shall be convertible at the office of any transfer agent for this Series, and at such other office or offices, if any, as the Board of Directors may designate, into fully paid and nonassessable shares (calculated as to each conversion to the nearest 1/100th of a share) of Common Stock of the Corporation, at the conversion price, determined as hereinafter provided, in effect at the time of conversion, each share of this Series being taken at $25.00 for the purpose of such conversion. The price at which shares of Common Stock shall be delivered upon conversion (herein called the conversion price) shall be initially $29.75 per share of Common Stock. The conversion price shall be adjusted as provided in paragraph (4) of this subdivision (f). (2) In order to convert shares of this Series into Common Stock the holder thereof shall surrender at any office hereinabove mentioned the certificate or certificates therefor, duly endorsed in blank or accompanied by proper instruments of assignment and transfer thereof duly endorsed in blank, together with any payment required by this paragraph (2) and transfer tax stamps or funds therefor, if required pursuant to paragraph (8) of this subdivision (f), and give written notice to the Corporation at said office that he elects to convert such shares. Shares of this Series surrendered for conversion during the period from the close of business on any record date for the payment of a dividend on such shares to the opening of business on the date for payment of such dividend shall (except in the case of shares which have been called for redemption on a redemption date within such period) be accompanied by payment of an amount equal to the dividend payable on such dividend payment date on the shares of this Series being surrendered for conversion. Except as provided in the preceding sentence, no payment or adjustment shall be made upon any conversion on account of any dividends accrued on the shares of this Series surrendered for conversion or on account of any dividends on the Common Stock issued upon such conversion. Shares of this Series shall be deemed to have been converted immediately prior to the close of business on the day of the surrender of such shares for conversion in accordance with the foregoing provisions, and the person or persons entitled to receive the Common Stock issuable upon such conversion shall be treated for all purposes as the record holder or holders of such Common Stock at such time; provided, however, that any such surrender on any date when the stock transfer books of the Corporation shall be closed shall constitute the person or persons in whose name or names the certificates for such shares of Common Stock are to be issued -22- as the record holder or holders thereof for all purposes immediately prior to the close of business on the next succeeding day on which such stock transfer books are opened and such conversion shall be at the conversion price in effect at such time on such succeeding day. As promptly as practicable on or after the conversion date, the Corporation shall issue and shall deliver at said office a certificate or certificates for the number of full shares of Common Stock issuable upon such conversion, together with a cash payment in lieu of any fraction of a share, as hereinafter provided, to the person or persons entitled to receive the same. In case shares of this Series are called for redemption, the right to convert such shares shall cease and terminate at the close of business on the redemption date, unless default shall be made in payment of the redemption price. (3) No fractional shares of Common Stock shall be issued upon conversion of shares of this Series, but, instead of any fraction of a share of Common Stock which would otherwise be issuable in respect of the aggregate number of shares of this Series surrendered for conversion at one time by the same holder, the Corporation shall pay a cash adjustment of such fraction in an amount equal to the same fraction of the Closing Price of a share of Common Stock on the date on which such shares of this Series were duly surrendered for conversion, or, if such date is not a Trading Day, on the next Trading Day. (4) The conversion price shall be adjusted from time to time as follows: (A) In case the Corporation shall (i) pay a dividend or make a distribution in its outstanding shares of Common Stock in Common Stock, (ii) subdivide its outstanding shares of Common Stock, (iii) combine its outstanding shares of Common Stock into a smaller number of shares, or (iv) issue any shares by reclassification of its shares of Common Stock, the conversion price in effect at the time of the record date for such dividend or distribution or the effective date of such subdivision, combination or reclassification shall be adjusted, effective at the opening of business on the business day next following such record date or effective date, so that the holder of any shares of this Series surrendered for conversion after such record date or effective date shall be entitled to receive the number of shares of capital stock of the Corporation which he would have owned or been entitled to receive had such shares of this Series been converted immediately prior to such time. If, as a result of an adjustment made pursuant to this clause (A), the holder of any share thereafter surrendered for conversion shall become entitled to receive shares of two or more classes of capital stock of the Corporation, the Board of Directors (whose determination shall be conclusive) shall determine the allocation of the adjusted conversion price between or among shares of such classes of capital stock. (B) In case the Corporation shall hereafter issue rights or warrants to all holders of its Common Stock entitling them (for a period expiring within forty-five days after the record date mentioned below) to subscribe for or purchase shares of Common Stock at a price per share less than the current market price per share (as determined pursuant to clause (D) of this paragraph (4)) on the record date mentioned below, the conversion price shall be adjusted so that the same shall equal the price determined by multiplying the conversion price in effect immediately prior to such record date by a fraction, of which the numerator shall be the number of shares of Common Stock outstanding on such record date plus the number of shares of Common Stock which the aggregate offering price of the total number of shares of Common Stock so offered would purchase at such current market price and of which the denominator shall be the number of shares of Common Stock outstanding on such record date plus the number of additional shares of Common Stock offered for subscription of purchase. Such adjustment shall become effective at the opening of business on the business day next following the record date for the determination of stockholders entitled to receive such rights or warrants; and to the extent that shares of Common Stock are not delivered after the expiration of such rights or warrants, the conversion price shall be readjusted (but only with respect to shares of this Series converted after such expiration) to the conversion price which would then be in effect had the adjustments made upon the distribution of such rights or warrants been made upon the basis of delivery of only the number of shares of Common Stock actually delivered. The right to acquire shares of Common Stock pursuant to the Corporation's Dividend Reinvestment Plan as in effect on September 1, 1983, as the same may be amended from time to time, or -23- pursuant to any successor dividend reinvestment plan, shall not be deemed to be a right giving rise to any adjustment to the conversion price. For the purposes of this clause (B), the number of shares of Common Stock at any time outstanding shall not include shares held in the treasury of the Corporation. The Corporation shall not issue any rights or warrants in respect of shares of Common Stock held in the treasury of the Corporation. (C) In case the Corporation shall distribute to all holders of its Common Stock evidences of its indebtedness or assets (including securities, but excluding any cash dividend or distributions out of surplus or net profits legally available therefor and dividends referred to in clause (A) of this paragraph (4)) or subscription rights or warrants (excluding those referred to in clause (B) of this paragraph (4)), then in each such case the conversion price shall be adjusted so that the same shall equal the price determined by multiplying the conversion price in effect immediately prior to the record date mentioned below by a fraction of which the numerator shall be the current market price per share (determined as provided in clause (D) of this paragraph (4)) of the Common Stock on such record date less the then fair market value (as determined by the Board of Directors of the Corporation, whose determination shall be conclusive) of the portion of the assets or evidences of indebtedness so distributed or of such subscription rights or warrants applicable to one share of Common Stock, and the denominator shall be such current market price per share of the Common Stock. Such adjustment shall become effective on the opening of business on the business day next following the record date for the determination of stockholders entitled to receive such distribution. (D) For the purpose of any computation under clause (B) or (C) of this paragraph (4), the current market price per share of Common Stock on any date shall be deemed to be the average of the daily Closing Price for the thirty consecutive Trading Days selected by the Corporation commencing not more than forty-five Trading Days before the day in question. (E) In any case in which this paragraph (4) shall require that an adjustment as a result of any event become effective at the opening of business on the business day next following a record date, the Corporation may elect to defer until after the occurrence of such event (i) issuing to the holder of any shares of this Series converted after such record date and before the occurrence of such event the additional shares of Common Stock issuable upon such conversion over and above the shares of Common Stock issuable upon such conversion on the basis of the conversion price prior to adjustment and (ii) paying to such holder any amount in cash in lieu of a fractional share of Common Stock pursuant to paragraph (3) of this subdivision (f); and, in lieu of the shares the issuance of which is so deferred, the Corporation shall issue or cause its transfer agents to issue due bills or other appropriate evidence of the right to receive such shares should such event occur. (F) Any adjustment in the conversion price otherwise required by this paragraph (4) to be made may be postponed up to, but not beyond, three years from the date on which it would otherwise be required to be made provided that such adjustment (plus any other adjustments postponed pursuant to this clause (F) and not theretofore made) would not require an increase or decrease of more than $0.50 in such price and would not, if made, entitle the holders of all then outstanding shares of this Series upon conversion to receive additional shares of Common Stock equal in the aggregate to 3% or more of the then issued and outstanding shares of Common Stock. All calculations under this subdivision (f) shall be made to the nearest cent or to the nearest 1/100th of a share, as the case may be. (G) The Corporation may (but shall not be obligated to) make such reductions in the conversion price, in addition to those required by clauses (A), (B) and (C) of this paragraph (4), as it considers to be advisable in order that any event treated for Federal income tax purposes as a dividend of stock or stock rights shall not be taxable to the recipients. -24- (5) Whenever the conversion price is adjusted as herein provided: (A) the Corporation shall compute the adjusted conversion price in accordance with this subdivision (f) and shall prepare a certificate signed by the Treasurer of the Corporation setting forth the adjusted conversion price, and such certificate shall forthwith be filed with the transfer agent or agents for this Series; and (B) a notice stating that the conversion price has been adjusted and setting forth the adjusted conversion price shall, as soon as practicable, be mailed to the holders of record of the outstanding shares of this Series. (6) In case: (A) the Corporation shall declare a dividend (or any other distribution) on its Common Stock payable otherwise than in cash out of its retained earnings; or (B) the Corporation shall authorize the granting to the holders of its Common Stock of rights to subscribe for or purchase any shares of capital stock of any class or of any other rights; or (C) of any reclassification of the capital stock of the Corporation (other than a subdivision or combination of its outstanding shares of Common Stock), or of any consolidation or merger to which the Corporation is a party and for which approval of any stockholders of the Corporation is required, or of the sale or transfer of all or substantially all the assets of the Corporation; or (D) of the voluntary or involuntary dissolution, liquidation or winding up of the Corporation; then the Corporation shall cause to be mailed to the transfer agent or agents for this Series and to the holders of record of the outstanding shares of this Series, at least 20 days (or 10 days in any case specified in clause (A) or (B) of this paragraph (6)) prior to the applicable record date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution or rights, or, if a record is not to be taken, the date as of which the holders of Common Stock of record to be entitled to such dividend, distribution or rights are to be determined, or (y) the date on which such reclassification, consolidation, merger, sale, transfer, dissolution, liquidation or winding up is expected to become effective, and the date as of which it is expected that holders of Common Stock of record shall be entitled to exchange their shares of Common Stock for securities or other property deliverable upon such reclassification, consolidation, merger, sale, transfer, dissolution, liquidation or winding up. (7) The Corporation shall at all times reserve and keep available, free from pre-emptive rights, out of its authorized but unissued Common Stock, for the purpose of effecting the conversion of the shares of this Series, the full number of shares of Common Stock then deliverable upon the conversion of all shares of this Series then outstanding, provided, that nothing contained herein shall be construed to preclude the Corporation from satisfying its obligations in respect of the conversion of the shares by delivery of purchased shares of Common Stock which are held in the treasury of the Corporation. (8) The Corporation shall pay any and all taxes that may be payable in respect of the issuance or delivery of shares of Common Stock on conversion of shares of this Series pursuant hereto. The Corporation shall not, however, be required to pay any tax which may be payable in respect of any transfer involved in the issue and delivery of shares of Common Stock in a name other than that in which the shares of this Series so converted were registered, and no such issue or delivery shall be made unless and until the person requesting -25- such issue shall have paid to the Corporation the amount of any such tax, or shall have established, to the satisfaction of the Corporation, that such tax shall have been paid. (9) For the purpose of this subdivision (f) the term "Common Stock" shall include any stock of any class of the Corporation which has no preference in respect of dividends or of amounts in the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation, and which is not subject to redemption by the Corporation. However, except as otherwise provided in paragraph (11), shares issuable on conversion of shares of this Series shall include only shares of the class designated as Common Stock of the Corporation as of the original date of issue of this Series or shares of any class or classes resulting from any reclassification or reclassifications thereof and which have no preference in respect of dividends or of amounts payable in the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation and which are not subject to redemption by the Corporation, provided that if at any time there shall be more than one such resulting class, the shares of each such class then so issuable shall be substantially in the proportion which the total number of shares of such class resulting from all such reclassifications bears to the total number of shares of all such classes resulting from all such reclassifications. (10) As used in this subdivision (f), the term "Closing Price" on any day shall mean the reported last sales price regular way on such day on the New York Stock Exchange, or, if not reported for such Exchange, on the Composite Tape, or, in case no such reported sale takes place on such day, the average of the reported closing bid and asked prices regular way on the New York Stock Exchange, or, if the Common Stock is not listed or admitted to trading on such Exchange, on the principal national securities exchange on which the Common Stock is listed or admitted to trading, or, if not listed or admitted to trading on any national securities exchange, the average of the closing bid and asked prices in the over-the-counter market as furnished by any New York Stock Exchange member firm selected from time to time by the Corporation for that purpose, or, if no such quotations are available, the fair market price as determined by the Corporation (whose determination shall be conclusive); and the term "Trading Day" shall mean, so long as the Common Stock is listed or admitted to trading on the New York Stock Exchange (or any successor to such Exchange), a date on which the New York Stock Exchange (or such successor) is open for the transaction of business, or, if the Common Stock is not listed or admitted to trading on such Exchange, a date on which the principal national securities exchange on which the Common Stock is listed is open for the transaction of business, or, if the Common Stock is not listed or admitted to trading on any national securities exchange, a date on which any New York Stock Exchange member firm is open for the transaction of business. (11) If either of the following shall occur, namely: (a) any consolidation or merger to which the Corporation is a party, other than a consolidation or a merger in which consolidation or merger the Corporation is a continuing corporation and which does not result in any reclassification of, or change (other than a change in par value or from par value to no par value or from no par value to par value, or as a result of a subdivision or combination) in, outstanding shares of the Common Stock, or (b) any sale or conveyance to another corporation of the property of the Corporation as an entirety or substantially as an entirety; then the holder of each share then outstanding shall have the right to convert such share only into the kind and amount of shares of stock and other securities and property receivable upon such consolidation, merger, sale or conveyance by a holder of the number of shares of Common Stock issuable upon conversion of such share immediately prior to such consolidation, merger, sale or conveyance, subject to adjustments which shall be as nearly equivalent as may be practicable to the adjustments provided for in paragraph (4) of this subdivision (f). The provisions of this paragraph (11) shall similarly apply to successive consolidations, mergers, sales or conveyances. (12) Notwithstanding anything else contained in this Section 10, any funds which at any time shall have been deposited by the Corporation or on its behalf with any paying agent for the purpose of paying dividends on or the redemption price of any of the shares of this Series and which shall not be required for such -26- purposes because of the conversion of such shares, as provided in this subdivision (f), shall, upon delivery to the paying agent of evidence satisfactory to it of such conversion, after such conversion be repaid to the Corporation by the paying agent. (13) Any shares of this Series which shall at any time have been converted into shares of Common Stock shall, after such conversion, have the status of authorized but unissued shares of Preferred Stock, without designation as to series until such shares are once more designated as part of a particular series by the Board of Directors. (g) Liquidation Rights. (1) Upon the liquidation, dissolution or winding up of the Corporation, the holders of the shares of this Series shall be entitled to receive out of the assets of the Corporation available for distribution to its stockholders, before any payment or distribution shall be made on the Common Stock, the amount of $25 per share, plus a sum equal to all dividends (whether or not earned or declared) on such shares accrued and unpaid thereon to the date of final distribution. (2) The Preferred Stock of all series shall be preferred over the Common Stock as to assets in the event of any liquidation, dissolution or winding up of the Corporation, and in that event the holders of the Preferred Stock of each series shall be entitled to receive, out of the assets of the Corporation available for distribution to its stockholders, an amount determined as provided in this Section 10 or pursuant to Article Fourth of this Second Restated Certificate of Incorporation, as the case may be, for every share of their holdings of the Preferred Stock of such series before any distribution of the assets shall be made to the holders of the Common Stock; and, if in the event of any such liquidation, dissolution or winding up the holders of all series of the Preferred Stock shall have received all the amounts to which they shall be entitled as aforesaid, the holders of the Common Stock shall be entitled, to the exclusion of the holders of the Preferred Stock of all series, to share ratably in all the assets of the Corporation available for distribution to the stockholders then remaining according to the number of shares of the Common Stock held by them respectively. If upon any liquidation, dissolution or winding up of the Corporation the amounts payable on or with respect to the Preferred Stock of all series are not paid in full, the holders of shares of the Preferred Stock of all series shall share ratably in any distribution of assets according to the respective amounts which would be payable in respect of the shares held by them upon such distribution if all amounts payable on or with respect to the Preferred Stock of all series were paid in full. (3) Neither the sale, lease or exchange (for cash, shares of stock, securities or other consideration) of all or substantially all the property and assets of the Corporation nor the merger or consolidation of the Corporation into or with any other corporation or the merger or consolidation of any other corporation into or with the Corporation shall be deemed to be a liquidation, dissolution or winding up of the Corporation for the purposes of this subdivision (g). (h) Date of Cumulation. The term "date of cumulation" as used herein with reference to the Preferred Stock of any series shall be deemed to mean the date on which shares of the Preferred Stock of such series are first issue. In the event of the issue of additional shares of the Preferred Stock of any then existing series, all dividends paid on the Preferred Stock of such series prior to the issue of such additional shares, and all dividends declared and payable to holders of record of the Preferred Stock of such series on any date prior to the issue of such additional shares, shall be deemed to have been paid on such additional shares. 11. $3.50 Cumulative Convertible Preferred Stock (Par Value $1 Per Share). The following are the voting powers, designation, preferences and relative, participating, optional or other special rights, and the -27- qualifications, limitations or restrictions thereof, of the series of Preferred Stock designated by the Board of Directors of the Corporation as the "$3.50 Cumulative Convertible Preferred Stock" by resolution dated February 25, 1993, consisting of 5,123,200 shares: (a) Designation. The designation of the series of Preferred Stock created by such resolution shall be $3.50 Cumulative Convertible Preferred Stock (hereinafter in this Section 11 of Article Fourth called "this Series"). (b) Dividend Rate. Out of the surplus or net profits of the Corporation legally available for dividends the holders of this Series shall be entitled to receive, when and as declared by the Board of Directors, dividends at the rate of $3.50 per share per annum, and no more, payable quarterly on the tenth days of March, June, September and December in each year (each such day being hereinafter called a dividend date and each quarterly or shorter (in the case of the first such period) period ending with a dividend date being hereinafter called a dividend period), in each case from the date of cumulation (as defined in subdivision (h) of this Section 11) of this Series (provided, however, that, if the date of cumulation of this Series shall be a date less than 30 days prior to a dividend date, the dividend that would otherwise be payable on such dividend date shall be payable on the next succeeding dividend date), before any sum or sums shall be set aside pursuant to subdivision (c) of this Section 11 or subdivision (b) or (f) of Section 3 of Article Fourth of this Second Restated Certificate of Incorporation for the purchase or redemption of Preferred Stock of any series and before any dividend shall be declared or paid upon or set apart for, or any other distribution shall be ordered or made in respect of, or any payment shall be made on account of the purchase or redemption of, the Preference Stock (as such term is defined in this Second Restated Certificate of Incorporation) or the Common Stock; and such dividends upon the Preferred Stock shall be cumulative (whether or not in any dividend period or periods there shall be surplus or net profits of the Corporation legally available for the payment of such dividends), so that, if at any time dividends upon the outstanding Preferred Stock of all series at the respective per annum rates determined for such series from the date of cumulation of each such series to the end of the then current dividend period shall not have been paid or declared and a sum sufficient for the payment thereof set apart for such payment, the amount of the deficiency shall be fully paid, but without interest, or dividends in such amount declared on each such series and a sum sufficient for the payment thereof set apart for such payment, before any sum or sums shall be set aside pursuant to subdivision (c) of this Section 11 or subdivision (b) or (f) of Section 3 of Article Fourth of this Second Restated Certificate of Incorporation for the purchase or redemption of Preferred Stock of any series and before any dividend shall be declared or paid upon or set apart for, or any other distribution shall be ordered or made in respect of, or any payment shall be made on account of the purchase or redemption of, the Preference Stock or the Common Stock. All dividends declared on the Preferred Stock for any dividend period shall be declared pro rata so that the amounts of dividends per share declared for such period on the Preferred Stock of different series that were outstanding during such period shall in all cases bear to each other the same proportions that the respective dividend rates of such series for such period bear to each other (adjusted, as appropriate, if shares of any series were not outstanding during all such period). No interest, or sum of money in lieu of interest, shall be payable in respect of any dividend payment or payments which may be in arrears. Dividends payable on this Series for any period less than a full quarterly period shall be computed on the basis of the number of days elapsed in a 360-day year consisting of twelve months of 30 days each. (c) Redemption. (1) Shares of this Series shall be redeemable at any time on or after March 10, 1996, at the option of the Corporation, either in whole or in part, at a price equal to the sum of (a) the -28- redemption price per share set forth below for the date fixed for redemption for such shares:
REDEMPTION DATE DURING 12-MONTH REDEMPTION PERIOD BEGINNING MARCH 10 PRICE - -------------------------------- ----- 1996........................................................ $52.45 1997........................................................ $52.10 1998........................................................ $51.75 1999........................................................ $51.40 2000........................................................ $51.05 2001........................................................ $50.70 2002........................................................ $50.35 2003 and thereafter......................................... $50.00
plus (b) in each case a sum equal to all dividends (whether or not earned or declared) on such shares accrued and unpaid thereon to the redemption date; provided, however, that shares of this Series shall be redeemed only after full cumulative dividends upon the Preferred Stock of all series then outstanding shall have been paid for all past dividend periods, and after or concurrently with making payment of, or declaring and setting apart for payment, full dividends on the Preferred Stock of all series then outstanding (except the shares of the Preferred Stock to be redeemed) to the end of the current dividend period. (2) If less than all the outstanding shares of this Series are to be redeemed by the Corporation, the number of shares to be redeemed shall be determined by the Board of Directors and the shares to be redeemed shall be determined by lot or pro rata or in such fair and equitable other manner as may be prescribed by resolution of the Board of Directors. (3) Notice of any redemption of shares of this Series, specifying the time and place of redemption, the redemption price and that the dividends on the shares to be redeemed shall cease to accrue on the redemption date or date of deposit referred to below, shall be mailed by first-class mail, postage prepaid, to each holder of record of the shares to be redeemed, at such holder's address of record, not less than 30 days prior to the redemption date; if less than all the shares owned by a stockholder are then to be redeemed, the notice shall also specify the number of shares thereof which are to be redeemed and the numbers of the certificates representing such shares. Upon surrender in accordance with such notice of the certificates for the number of shares to be redeemed, duly endorsed in blank or accompanied by proper instruments of assignment or transfer thereof duly endorsed in blank, such shares shall be redeemed by the Corporation at the applicable redemption price. If less than all the shares represented by any such certificate shall be redeemed, a new certificate shall be issued representing the unredeemed shares without cost to the holder thereof. From and after the date fixed in any such notice as the date of redemption (unless default shall be made by the Corporation in providing moneys for the payment of the redemption price pursuant to such notice), or, if the Corporation shall so elect, from and after a date (hereinafter called the date of deposit), prior to the date fixed as the date of redemption, on which the Corporation shall provide moneys for the payment of the redemption price by depositing the amount thereof for the account of the holders of the shares of this Series entitled thereto with a bank or trust company doing business in the Borough of Manhattan in The City of New York, and having capital and surplus of at least ten million dollars ($10,000,000) pursuant to notice of such election included in the notice of redemption specifying the date on which such deposit will be made, all dividends on the shares of this Series called for redemption shall cease to accrue and all rights of the holders thereof as stockholders of the Corporation, except the right to receive the redemption price as hereinafter provided and, in the case of such deposit, any conversion rights not theretofore expired, shall cease and terminate, and such shares shall not after the redemption date be deemed to be outstanding. After the deposit of such amount with such bank or trust company, the respective holders of record of the shares of this Series to be redeemed shall be entitled to receive -29- the redemption price at any time upon actual delivery to such bank or trust company of certificates for the number of shares to be redeemed, duly endorsed in blank or accompanied by proper instruments of assignment and transfer thereof duly endorsed in blank. Any moneys so deposited which shall remain unclaimed by the holders of such shares of this Series at the end of six (6) years after the redemption date, together with any interest thereon which shall be allowed by the bank or trust company with which the deposit shall have been made, shall be paid by such bank or trust company to the Corporation, and thereafter the holders of shares of this Series redeemed on such redemption date shall look only to the Corporation for the payment of the redemption price thereof. Any interest accrued on any funds deposited with any such bank or trust company shall belong to the Corporation, and shall be paid to it from time to time on demand. (4) Any shares of this Series which shall at any time have been redeemed, shall, after such redemption, have the status of authorized but unissued shares of Preferred Stock, without designation as to series until such shares are once more designated as part of a particular series by the Board of Directors. (5) The holders of this Series shall be entitled to receive the redemption payments specified in this subdivision (c) if, when and as such payments shall be authorized by the Board of Directors, out of the assets of the Corporation legally available therefor. (d) Distributions to Holders of Preference Stock and Common Stock. Out of any surplus or net profits of the Corporation legally available for dividends remaining after full cumulative dividends upon the Preferred Stock of all series then outstanding shall have been paid for all past dividend periods, and after or concurrently with making payment of, or declaring and setting apart for payment, full dividends on the Preferred Stock of all series then outstanding to the end of the then current dividend period and after the Corporation shall have complied with the provisions in respect of any and all amounts then or theretofore required to be set aside or applied in respect of any sinking fund or purchase fund with respect to the Preferred Stock of each series then outstanding and entitled to the benefit of a sinking fund or purchase fund, and shall have made provision for compliance in respect of the current sinking fund or purchase fund period for each such series of Preferred Stock, then and not otherwise, the holders of the Preference Stock and the Common Stock shall, subject to the provisions of this Second Restated Certificate of Incorporation, be entitled to receive such dividends as may from time to time be declared by the Board of Directors. (e) Voting. (1) Except for such voting powers as shall be granted to the holders of shares of this Series by this subdivision (e) or by law, and except for such voting powers, if any, as shall be granted to holders of shares of other series of Preferred Stock or Preference Stock, as contemplated by this Second Restated Certificate of Incorporation or by law, voting power shall be vested exclusively in the Common Stock. Holders of stock of whatever class entitled to vote shall be entitled to one vote for each share of stock held by them. (2) If at the time of any annual meeting of stockholders of the Corporation for the election of directors a default in preference dividends, as the term "default in preference dividends" is hereinafter defined, shall exist, (i) the holders of the Preferred Stock, voting separately as a class and without regard to series, shall have the right to elect two members of the Board of Directors but, except as provided in the following clause (ii), shall not be entitled to vote in the election of any of the other directors of the Corporation and (ii) if at the time of such meeting there shall be outstanding shares of more than one series of the Preferred Stock, the holders of the Preferred Stock of each series, if any, of which more than 5,000,000 shares are then outstanding, voting separately as a series, shall have the right to elect one member of the Board of Directors but, except as provided in the foregoing clause (i), shall not be entitled to vote in the election of any of the other directors of the Corporation; and the holders of the Common Stock, voting separately as a class, shall be entitled to elect the other directors of the Corporation, subject to the voting rights, if any, granted to the holders of the Preference Stock, but shall not be entitled to vote in the election of the directors of the Corporation to be elected as provided in the foregoing clauses (i) and (ii). Whenever a default in preference dividends shall commence -30- to exist, the Corporation, upon the written request of the holders of 5% or more of the outstanding shares of Preferred Stock or the holders of 5% or more of the outstanding shares of any series of Preferred Stock that would be entitled to elect a director of the Corporation pursuant to clause (ii) of the preceding sentence if an annual meeting of the stockholders of the Corporation for the election of directors were then being held, shall call a special meeting of the holders of the Preferred Stock and if, at the time of such request, there shall be outstanding shares of more than one series of the Preferred Stock, shall also call a special meeting of the holders of the Preferred Stock of each series, if any, of which more than 5,000,000 shares are then outstanding, such special meeting or meetings to be held within 120 days after the date on which such request is received by the Corporation for the purpose of enabling such holders to elect members of the Board of Directors as provided in clauses (i) and (ii) of the preceding sentence; provided, however, that such special meeting or meetings need not be called if an annual meeting of stockholders of the Corporation for the election of directors shall be scheduled to be held within such 120 days; and provided further that in lieu of any such special meeting, the election of the directors to be elected thereat may be effected by the written consent of the holders of a majority of the outstanding shares that would be entitled to be voted upon at such special meeting. Prior to any such special meeting or meetings, the number of directors of the Corporation shall be increased to the extent necessary to provide as additional places on the Board of Directors the directorships to be filled by the directors to be elected thereat. Any director elected as aforesaid by the holders of shares of the Preferred Stock or of any series thereof shall cease to serve as such director whenever a default in preference dividends shall cease to exist. If, prior to the end of the term of any director elected as aforesaid by the holders of shares of the Preferred Stock or of any series thereof, or elected by the holders of any other class of stock or series thereof, a vacancy in the office of such director shall occur by reason of death, resignation, removal or disability, or for any other cause, such vacancy shall be filled for the unexpired term in the manner provided in the By-laws; provided, however, that if such vacancy shall be filled by election by the stockholders at a meeting thereof, the right to fill such vacancy shall be vested in the holders of that class of stock or series thereof which elected the director the vacancy in the office of whom is so to be filled, unless, in any such case, no default in preference dividends shall exist at the time of such election. For the purposes of this subdivision (e), a "default in preference dividends" shall be deemed to have occurred whenever the amount of dividends in arrears upon any series of the Preferred Stock shall be equivalent to six full quarter-yearly dividends or more, and, having so occurred, such default in preference dividends shall be deemed to exist thereafter until, but only until, all dividends in arrears on all shares of the Preferred Stock then outstanding, of each and every series, shall have been paid. The term "dividends in arrears" whenever used in this subdivision (e) with reference to the Preferred Stock of any series shall be deemed to mean (whether or not in any dividend period in respect of which such term is used there shall have been surplus or net profits of the Corporation legally available for the payment of dividends) that amount which shall be equal to cumulative dividends at the rate for the Preferred Stock of such series for all past quarterly dividend periods less the amount of all dividends paid, or deemed paid, for all such periods upon such Preferred Stock. Nothing herein contained shall be deemed to prevent an increase in the number of directors of the Corporation pursuant to its By-laws as from time to time in effect so as to provide as additional places on the Board of Directors the directorships to be filled by the directors so to be elected by the holders of the Preferred Stock or of any series thereof, or to prevent any other change in the number of the directors of the Corporation. (3) So long as any shares of the Preferred Stock of any series shall be outstanding, (i) the Corporation shall not, without the affirmative vote or written consent of the holders of two-thirds of the aggregate number of shares of the Preferred Stock of all series at the time outstanding, considered as a class without regard to series, (A) alter or change the powers, preferences or rights given to the Preferred Stock by this Second Restated Certificate of Incorporation so as to affect the Preferred Stock adversely, or (B) authorize, create or increase the number of authorized shares of any class of stock ranking, either as to payment of dividends or distribution of assets, prior to the Preferred Stock; and -31- (ii) the Corporation shall not, without the affirmative vote or written consent of the holders of a majority of the aggregate number of shares of the Preferred Stock of all series at the time outstanding, considered as a class without regard to series, increase the authorized amount of the Preferred Stock or authorize or create any class of stock ranking, either as to payment of dividends or distribution of assets, on a parity with the Preferred Stock. (4) So long as any shares of this Series shall be outstanding, the Corporation shall not, without the affirmative vote or written consent of the holders of two-thirds of the number of shares of this Series at the time outstanding, alter or change the powers, preferences or rights given to the shares of this Series by this Second Restated Certificate of Incorporation so as to affect the shares of this Series adversely. (f) Conversion Rights. The holders of shares of this Series shall have the right, at their option, to convert each share of this Series into 2.392 shares of Common Stock of the Corporation at any time after 40 days from the date of cumulation on and subject to the following terms and conditions. (1) The shares of this Series shall be convertible at the office of any transfer agent for this Series, and at such other office or offices, if any, as the Board of Directors may designate, into fully paid and nonassessable shares (calculated as to each conversion to the nearest 1/100th of a share) of Common Stock of the Corporation, at the conversion price, determined as hereinafter provided, in effect at the time of conversion, each share of this Series being taken at $50.00 for the purpose of such conversion. The price at which shares of Common Stock shall be delivered upon conversion (herein called the "conversion price") shall be initially $20.90 per share of Common Stock. The conversion price shall be adjusted as provided in paragraph (4) of this subdivision (f). (2) In order to convert shares of this Series into Common Stock the holder thereof shall surrender at any office hereinabove mentioned the certificate or certificates therefor, duly endorsed in blank or accompanied by proper instruments of assignment and transfer thereof duly endorsed in blank, together with any payment required by this paragraph (2) and transfer tax stamps or funds therefor, if required pursuant to paragraph (8) of this subdivision (f), and give written notice to the Corporation at said office that he elects to convert such shares. Shares of this Series surrendered for conversion during the period from the close of business on any record date for the payment of a dividend on such shares to the opening of business on the date for payment of such dividend shall (except in the case of shares which have been called for redemption on a redemption date within such period) be accompanied by payment of an amount equal to the dividend payable on such dividend payment date on the shares of this Series being surrendered for conversion. Except as provided in the preceding sentence, no payment or adjustment shall be made upon any conversion on account of any dividends accrued on the shares of this Series surrendered for conversion or on account of any dividends on the Common Stock issued upon such conversion. Shares of this Series shall be deemed to have been converted immediately prior to the close of business on the day of the surrender of such shares for conversion in accordance with the foregoing provisions, and the person or persons entitled to receive the Common Stock issuable upon such conversion shall be treated for all purposes as the record holder or holders of such Common Stock at such time; provided, however, that any such surrender on any date when the stock transfer books of the Corporation shall be closed shall constitute the person or persons in whose name or names the certificates for such shares of Common Stock are to be issued as the record holder or holders thereof for all purposes immediately prior to the close of business on the next succeeding day on which such stock transfer books are opened and such conversion shall be at the conversion price in effect at such time on such succeeding day. As promptly as practicable on or after the conversion date, the Corporation shall issue and shall deliver at said office a certificate or certificates for the number of full shares of Common Stock issuable upon such conversion, together with a cash payment in lieu of any fraction of a share, as hereinafter provided, to the person or persons entitled to receive the same. In case shares of this -32- Series are called for redemption, the right to convert such shares shall cease and terminate at the close of business on the redemption date, unless default shall be made in payment of the redemption price. (3) No fractional shares of Common Stock shall be issued upon conversion of shares of this Series, but, instead of any fraction of a share of Common Stock which would otherwise be issuable in respect of the aggregate number of shares of this Series surrendered for conversion at one time by the same holder, the Corporation shall pay a cash adjustment of such fraction in an amount equal to the same fraction of the Closing Price of a share of Common Stock on the date on which such shares of this Series were duly surrendered for conversion, or, if such date is not a Trading Day, on the next Trading Day. (4) The conversion price shall be adjusted from time to time as follows: (A) In case the Corporation shall (i) pay a dividend or make a distribution on its outstanding shares of Common Stock in Common Stock, (ii) subdivide its outstanding shares of Common Stock, (iii) combine its outstanding shares of Common Stock into a smaller number of shares, or (iv) issue any shares by reclassification of its shares of Common Stock, the conversion price in effect at the time of the record date for such dividend or distribution or the effective date of such subdivision, combination or reclassification shall be adjusted, effective at the opening of business on the business day next following such record date or effective date, so that the holder of any shares of this Series surrendered for conversion after such record date or effective date shall be entitled to receive the number of shares of capital stock of the Corporation which he would have owned or been entitled to receive had such shares of this Series been converted immediately prior to such time. If, as a result of an adjustment made pursuant to this clause (A), the holder of any share thereafter surrendered for conversion shall become entitled to receive shares of two or more classes of capital stock of the Corporation, the Board of Directors (whose determination shall be conclusive) shall determine the avocation of the adjusted conversion price between or among shares of such classes of capital stock. (B) In case the Corporation shall hereafter issue rights or warrants to all holders of its Common Stock entitling them (for a period expiring within 45 days after the record date mentioned below) to subscribe for or purchase shares of Common Stock at a price per share less than the current market price per share (as determined pursuant to clause (D) of this paragraphp (4)) on the record date mentioned below, the conversion price shall be adjusted so that the same shall equal the price determined by multiplying the conversion price in effect immediately prior to such record date by a fraction, of which the numerator shall be the number of shares of Common Stock outstanding on such record date plus the number of shares of Common Stock which the aggregate offering price of the total number of shares of Common Stock so offered would purchase at such current market price and of which the denominator shall be the number of shares of Common Stock outstanding on such record date plus the number of additional shares of Common Stock offered for subscription or purchase. Such adjustment shall become effective at the opening of business on the business day next following the record date for the determination of stockholders entitled to receive such rights or warrants; and to the extent that shares of Common Stock are not delivered after the expiration of such rights or warrants, the conversion price shall be readjusted (but only with respect to shares of this Series converted after such expiration) to the conversion price which would then be in effect had the adjustments made upon the distribution of such rights or warrants been made upon the basis of delivery of only the number of shares of Common Stock actually delivered. The right to acquire shares of Common Stock pursuant to the Corporation's Dividend Reinvestment Plan as in effect on March 2, 1993, as the same may be amended from time to time, or pursuant to any successor dividend reinvestment plan, shall not be deemed to be a right giving rise to any adjustment to the conversion price. For the purposes of this clause (B), the number of shares of Common Stock at any time outstanding shall not include shares held in the treasury of the Corporation. The Corporation shall not issue any rights or warrants in respect of shares of Common Stock held in the treasury of the Corporation. -33- (C) In case the Corporation shall distribute to all holders of its Common Stock evidences of its indebtedness or assets (including securities, but excluding any cash dividend or distributions out of surplus or net profits legally available therefor and dividends referred to in clause (A) of this paragraph (4)) or subscription rights or warrants (excluding those referred to in clause (B) of this paragraph (4)), then in each such case the conversion price shall be adjusted so that the same shall equal the price determined by multiplying the conversion price in effect immediately prior to the record date mentioned below by a fraction of which the numerator shall be the current market price per share (determined as provided in clause (D) of this paragraph (4)) of the Common Stock on such record date less the then fair market value (as determined by the Board of Directors of the Corporation, whose determination shall be conclusive) of the portion of the assets or evidences of indebtedness so distributed or of such subscription rights or warrants applicable to one share of Common Stock, and the denominator shall be such current market price per share of the Common Stock. Such adjustment shall become effective on the opening of business on the business day next following the record date for the determination of stockholders entitled to receive such distribution. The right of holders of Common Stock to acquire Series A Junior Participating Preferred Stock of Bethlehem pursuant to the Corporation's Stockholder Rights Plan, as the same may be amended from time to time, shall not be deemed to be a right giving rise to any adjustment to the conversion price. (D) For the purpose of any computation under clause (B) or (C) of this paragraph (4), the current market price per share of Common Stock on any date shall be deemed to be the average of the daily Closing Price for the 30 consecutive Trading Days selected by the Corporation commencing not more than 45 Trading Days before the day in question. (E) In any case in which this paragraph (4) shall require that an adjustment as a result of any event become effective at the opening of business on the business day next following a record date, the Corporation may elect to defer until after the occurrence of such event (i) issuing to the holder of any shares of this Series converted after such record date and before the occurrence of such event the additional shares of Common Stock issuable upon such conversion over and above the shares of Common Stock issuable upon such conversion on the basis of the conversion price prior to adjustment and (ii) paying to such holder any amount in cash in lieu of a fractional share of Common Stock pursuant to paragraph (3) of this subdivision (f); and, in lieu of the shares the issuance of which is so deferred, the Corporation shall issue or cause its transfer agents to issue due bills or other appropriate evidence of the right to receive such shares should such event occur. (F) Any adjustment in the conversion price otherwise required by this paragraph (4) to be made may be postponed up to, but not beyond, three years from the date on which it would otherwise be required to be made provided that such adjustment (plus any other adjustments postponed pursuant to this clause (F) and not theretofore made) would not require an increase or decrease of more than $0.50 in such price and would not, if made, entitle the holders of all then outstanding shares of this Series upon conversion to receive additional shares of Common Stock equal in the aggregate to 3% or more of the then issued and outstanding shares of Common Stock. All calculations under this subdivision (f) shall be made to the nearest cent or to the nearest 1/l00th of a share, as the case may be. (G) The Corporation may (but shall not be obligated to) make such reductions in the conversion price, in addition to those required by clauses (A), (B) and (C) of this paragraph (4), as it considers to be advisable in order to avoid or diminish any income tax to a recipient of any dividend of stock (or rights to acquire stock) or from any event treated as such for Federal income tax purposes. (5) Whenever the conversion price is adjusted as herein provided: (A) the Corporation shall compute the adjusted conversion price in accordance with this subdivision (f) and shall prepare a certificate signed by the Treasurer of the Corporation setting forth the -34- adjusted conversion price, and such certificate shall forthwith be filed with the transfer agent or agents for this Series; and (B) a notice stating that the conversion price has been adjusted and setting forth the adjusted conversion price shall, as soon as practicable, be mailed to the holders of record of the outstanding shares of this Series. (6) In case: (A) the Corporation shall declare a dividend (or any other distribution) on its Common Stock payable otherwise than in cash out of its retained earnings; or (B) the Corporation shall authorize the granting to the holders of its Common Stock of rights to subscribe for or purchase any shares of capital stock of any class or of any other rights; or (C) of any reclassification of the capital stock of the Corporation (other than a subdivision or combination of its outstanding shares of Common Stock), or of any consolidation or merger to which the Corporation is a party and for which approval of any stockholders of the Corporation is required, or of the sale or transfer of all or substantially all the assets of the Corporation; or (D) of the voluntary or involuntary dissolution, liquidation or winding up of the Corporation; then the Corporation shall cause to be mailed to the transfer agent or agents for this Series and to the holders of record of the outstanding shares of this Series, at least 20 days (or 10 days in any case specified in clause (A) or (B) of this paragraph (6)) prior to the applicable record date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution or rights, or, if a record is not to be taken, the date as of which the holders of Common Stock of record to be entitled to such dividend, distribution or rights are to be determined, or (y) the date on which such reclassification, consolidation, merger, sale, transfer, dissolution, liquidation or winding up is expected to become effective, and the date as of which it is expected that holders of Common Stock of record shall be entitled to exchange their shares of Common Stock for securities or other property deliverable upon such reclassification, consolidation, merger, sale, transfer, dissolution, liquidation or winding up. (7) The Corporation shall at all times reserve and keep available, free from preemptive rights, out of its authorized but unissued Common Stock, for the purpose of effecting the conversion of the shares of this Series, the full number of shares of Common Stock then deliverable upon the conversion of all shares of this Series then outstanding, provided, that nothing contained herein shall be construed to preclude the Corporation from satisfying its obligations in respect of the conversion of the shares by delivery of purchased shares of Common Stock which are held in the treasury of the Corporation. (8) The Corporation shall pay any and all taxes that may be payable in respect of the issuance or delivery of shares of Common Stock on conversion of shares of this Series pursuant hereto. The Corporation shall not, however, be required to pay any tax which may be payable in respect of any transfer involved in the issue and delivery of shares of Common Stock in a name other than that in which the shares of this Series so converted were registered, and no such issue or delivery shall be made unless and until the person requesting such issue shall have paid to the Corporation the amount of any such tax, or shall have established, to the satisfaction of the Corporation, that such tax shall have been paid. -35- (9) For the purpose of this subdivision (f) the term "Common Stock" shall include any stock of any class of the Corporation which has no preference in respect of dividends or of amounts in the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation, and which is not subject to redemption by the Corporation. However, except as otherwise provided in paragraph (11) of this subdivision (f), shares issuable on conversion of shares of this Series shall include only shares of the class designated as Common Stock of the Corporation as of the original date of issue of this Series or shares of any class or classes resulting from any reclassification or reclassifications thereof and which have no preference in respect of dividends or of amounts payable in the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation and which are not subject to redemption by the Corporation, provided that if at any time there shall be more than one such resulting class, the shares of each such class then so issuable shall be substantially in the proportion which the total number of shares of such class resulting from all such reclassification bears to the total number of shares of all such classes resulting from all such reclassifications. (10) As used in this subdivision (f), the term "Closing Price" on any day shall mean the reported last sales price regular way on such day on the New York Stock Exchange, or, if not reported for such Exchange, on the New York Stock Exchange Composite Tape, or, in case no such reported sale takes place on such day, the average of the reported closing bid and asked prices regular way on the New York Stock Exchange, or, if the Common Stock is not listed or admitted to trading on such Exchange, on the principal national securities exchange on which the Common Stock is listed or admitted to trading, or, if not listed or admitted to trading on any national securities exchange, the average of the closing bid and asked prices in the over-the-counter market as furnished by any New York Stock Exchange member firm selected from time to time by the Corporation for that purpose, or, if no such quotations are available, the fair market price as determined by the Corporation (whose determination shall be conclusive); and the term "Trading Day" shall mean, so long as the Common Stock is listed or admitted to trading on the New York Stock Exchange (or any successor to such Exchange), a date on which the New York Stock Exchange (or such successor) is open for the transaction of business, or, if the Common Stock is not listed or admitted to trading on such Exchange, a date on which the principal national securities exchange on which the Common Stock is listed is open for the transaction of business, or, if the Common Stock is not listed or admitted to trading on any national securities exchange, a date on which any New York Stock Exchange member firm is open for the transaction of business. (11) If either of the following shall occur, namely: (a) any consolidation or merger to which the Corporation is a party, other than a consolidation or a merger in which consolidation or merger the Corporation is a continuing corporation and which does not result in any reclassification of, or change (other than a change in par value or from par value to no par value or from no par value to par value, or as a result of a subdivision or combination) in, outstanding shares of the Common Stock, or (b) any sale or conveyance to another corporation of the property of the Corporation as an entirety or substantially as an entirety; then the holder of each share then outstanding shall have the right to convert such share only into the kind and amount of shares of stock and other securities and property receivable upon such consolidation, merger, sale or conveyance by a holder of the number of shares of Common Stock issuable upon conversion of such share immediately prior to such consolidation, merger, sale or conveyance, subject to adjustments which shall be as nearly equivalent as may be practicable to the adjustments provided for in paragraph (4) of this subdivision (f). The provisions of this paragraph (11) shall similarly apply to successive consolidations, mergers, sales or conveyances. (12) Notwithstanding anything elsewhere contained in this Section 11, any funds which at any time shall have been deposited by the Corporation or on its behalf with any paying agent for the purpose of paying dividends on or the redemption price of any of the shares of this Series and which shall not be required for such purposes because of the conversion of such shares, as provided in this subdivision (f), shall, upon delivery to the paying agent of evidence satisfactory to it of such conversion, after such conversion be repaid to the Corporation by the paying agent. -36- (13) Any shares of this Series which shall at any time have been converted into shares of Common Stock shall, after such conversion, have the status of authorized but unissued shares of Preferred Stock, without designation as to series until such shares are once more designated as part of a particular series by the Board of Directors. (g) Liquidation Rights. (1) Upon the liquidation, dissolution or winding up of the Corporation, the holders of the shares of this Series shall be entitled to receive out of the assets of the Corporation available for distribution to its stockholders, before any payment or distribution shall be made to the holders of the Preference Stock or the Common Stock, the amount of $50 per share, plus a sum equal to all dividends (whether or not earned or declared) on such shares accrued and unpaid thereon to the date of final distribution. (2) The Preferred Stock of all series shall be preferred over the Preference Stock and the Common Stock as to assets in the event of any liquidation, dissolution or winding up of the Corporation, and in that event the holders of the Preferred Stock of each series shall be entitled to receive, out of the assets of the Corporation available for distribution to its stockholders, an amount determined as provided in this Section 11 or pursuant to Article Fourth of this Second Restated Certificate of Incorporation, as the case may be, for every share of their holdings of the Preferred Stock of such series before any distribution of the assets shall be made to the holders of the Preference Stock or the Common Stock; and, if in the event of any such liquidation, dissolution or winding up the holders of all series of the Preferred Stock shall have received all the amounts to which they shall be entitled as aforesaid, the holders of the Preference Stock and the Common Stock shall be entitled, to the exclusion of the holders of the Preferred Stock of all series, to share ratably in all the assets of the Corporation available for distribution to the stockholders then remaining according to the number of shares and terms of the Preference Stock and the Common Stock held by them respectively. If upon any liquidation, dissolution or winding up of the Corporation the amounts payable on or with respect to the Preferred Stock of all series are not paid in full, the holders of shares of the Preferred Stock of all series shall share ratably in any distribution of assets according to the respective amounts which would be payable in respect of the shares held by them upon such distribution if all amounts payable on or with respect to the Preferred Stock of all series were paid in full. (3) Neither the sale, lease or exchange (for cash, shares of stock, securities or other consideration) of all or substantially all the property and assets of the Corporation nor the merger or consolidation of the Corporation into or with any other corporation or the merger or consolidation of any other corporation into or with the Corporation shall be deemed to be a liquidation, dissolution or winding up of the Corporation for the purposes of this subdivision (g). (h) Date of Cumulation. The term "date of cumulation" as used in this Section 11 with reference to the Preferred Stock of any series shall be deemed to mean the date on which shares of the Preferred Stock of such series are first issued. In the event of the issue of additional shares of the Preferred Stock of any then existing series, all dividends paid on the Preferred Stock of such series prior to the issue of such additional shares, and all dividends declared and payable to holders of record of the Preferred Stock of such series on any date prior to the issue of such additional shares, shall be deemed to have been paid on such additional shares. 12. Employee Stock Ownership Plan Convertible Preference Stock, Series A (Par Value $1 Per Share; Stated Value $32 Per Share). The following are the voting powers, designation, preferences and relative, participating, optional or other special rights, and the qualifications, limitations or restrictions thereof, of the series of Preference Stock designated by the Board of Directors of the Corporation as the "Employee Stock Ownership Plan Convertible Preference Stock, Series A" by resolution dated September 30, 1987, consisting of 6,000,000 shares: -37- (a) Designation and Issuance. The designation of the series of Preference Stock created by such resolution shall be Employee Stock Ownership Plan Convertible Preference Stock, Series A (hereinafter in this Section 12 of Article Fourth called "this Series"). As more fully described in the Employee Stock Ownership Plan (the "ESOP") established in connection with the USWA- Bethlehem 1986 Labor Agreement (the "Labor Agreement"), there has been established a trust (the "Trust") for the benefit of Employees (as defined in the ESOP) participating in the ESOP, and all shares of this Series shall be issued to and shall be held by the Trust and shall not, without the prior written consent of the Corporation, be transferable (other than to the Corporation upon redemption or conversion, as provided herein) by the Trust. (b) Dividend Rate and Payments. (1) Out of the surplus or net profits of the Corporation legally available for the payment of dividends, the holders of shares of this Series shall be entitled to receive, when and as such dividends may be declared by the Board of Directors, dividends at the rate of $1.60 per share per year, payable annually on April 1 of each year (each such day being hereinafter called a dividend date and each annual or shorter (in the case of the first such period) period ending with a dividend date being hereinafter called a dividend period), in each case from the date of cumulation (as defined in subdivision (h) of this Section 12) of such shares of this Series, before any payment shall be made on account of the purchase or redemption of the shares of any series of the Preference Stock, or any dividend shall be declared or paid upon or set apart for, or any other distribution shall be made in respect of, or any payment shall be made on account of the purchase of the Common Stock. (2) Only those shares of this Series outstanding on any record date established by the Board of Directors shall be entitled to the dividend payable on the following dividend date, but all such outstanding shares shall be entitled to the full annual dividend, even if some of or all such shares were not outstanding during all of the preceding year. (3) No dividend shall be declared or paid upon or set apart for, and no other distribution shall be ordered or made in respect of, nor shall any payment be made on account of the purchase or redemption of, any shares of this Series at any time that the Corporation, due to any failure to make payments with respect to any outstanding shares of Preferred Stock, shall be precluded from paying any dividends on or making other payments with respect to its Preference Stock. The full amount of dividends which holders of shares of this Series shall be entitled to receive shall be paid in full before any dividend, other than a dividend payable in shares of Common Stock, shall be declared or paid upon or set apart for, or any other distribution shall be ordered or made in respect of, or any payment shall be made on account of the purchase of, the Common Stock of the Corporation. No interest, or sum of money in lieu of interest, shall be payable in respect of any dividend payment or payments which may be in arrears. (4) Dividends payable upon the shares of this Series shall be cumulative (whether or not in any dividend period or periods there shall be surplus or net profits of the Corporation legally available for the payment of such dividends), so that, if at any time dividends upon the outstanding shares of this Series at the per annum rate set forth above from the date of cumulation through the preceding dividend date shall not have been paid or declared and a sum sufficient for the payment thereof set apart for such payment, the amount of the deficiency shall be fully paid, but without interest, or dividends in such amount declared on the shares of this Series and a sum sufficient for the payment thereof set apart for such payment, before any payment shall be made on account of the purchase or redemption of the shares of any series of the Preference Stock, or any dividend shall be declared or paid upon or set apart for, or any other distribution shall be made in respect of, or any payment shall be made in respect of, or any payment shall be made on account of the purchase of, the Common Stock. (5) Each such annual dividend shall be payable, at the option of the Board of Directors of the Corporation, either (i) in shares of this Series, with such shares being valued for such purpose at their stated -38- value of $32.00 per share, (ii) in shares of Common Stock of the Corporation, with the Common Stock being valued for such purpose at the average Closing Price (as defined in subdivision (f) of this Section 12) on the New York Stock Exchange for the 20 Trading Days (as defined in subdivision (f) of this Section 12) ended on the last business day in March preceding the date of payment or (iii) in cash. (6) Shares of this Series shall rank on a parity as to dividends with any other series of Preference Stock unless the provisions of such other series provide otherwise; provided, however, that each such series of Preference Stock so ranking on a parity may bear dividends payable at rates and on dates different from any other such series of Preference Stock. (c) Redemption and Mandatory Conversion. (1) Shares of this Series shall be redeemable at the option of the Corporation at any time, either in whole or in part, at a redemption price (the "Redemption Price") of $32.00 per share; provided, however, that shares of this Series shall be redeemed only after full cumulative dividends upon all shares of this Series then outstanding shall have been paid for all past dividend periods, and after or concurrently with making payment of, or declaring or setting apart for payment, full dividends on all shares of this Series then outstanding (except the shares of this Series to be redeemed) to the end of the current dividend period. In the case of any redemption of less than all the outstanding shares of this Series, such redemption shall be made on a pro rata basis among the holders of shares. In addition, should the Closing Price of the Common Stock on the New York Stock Exchange exceed the Conversion Price (as hereinafter defined) for 20 consecutive Trading Days, the Corporation may, by notice mailed at any time within 30 days after the end of any such 20-day period, require that any of or all the then outstanding shares of this Series be converted into Common Stock, as more fully provided in subdivision (f) of this Section 12. (2) Notice of any redemption or mandatory conversion of shares of this Series, specifying the time and place of redemption or conversion and that the dividends on the shares to be redeemed or converted shall cease to accrue on the redemption or conversion date, shall be mailed by first class mail, postage prepaid, to each holder of record of the shares to be redeemed, at such holder's address of record, not less than 30 days prior to the redemption or conversion date; and if less than all the shares owned by a stockholder are then to be redeemed or converted, the notice shall also specify the number of shares thereof which are to be redeemed or converted and the numbers of the certificates representing such shares. Upon surrender in accordance with such notice of the certificates for the number of shares to be redeemed or converted, duly endorsed in blank or accompanied by proper instruments of assignment or transfer thereof duly endorsed in blank, such shares shall be redeemed or converted by the Corporation as provided herein. If less than all the shares represented by any such certificate shall be redeemed or converted, a new certificate shall be issued representing the unredeemed or unconverted shares without cost to the holder thereof. From and after the date fixed in any such notice as the date of redemption or conversion (unless default shall be made by the Corporation in providing moneys or Common Stock for the payment of the redemption price or completion of conversion pursuant to such notice), all dividends on the shares of this Series subject to such notice shall cease to accrue and all rights of any holder thereof as a stockholder of the Corporation (except the right to receive the Redemption Price or Common Stock as hereinafter provided) shall cease and terminate, and such shares shall not after the redemption or conversion date be deemed to be outstanding. (3) Any shares of this Series which shall at any time have been redeemed, shall, after such redemption, have the status of authorized but unissued shares of Preference Stock without designation as to series until such shares are once more designated as a part of a particular series by the Board of Directors. The Board of Directors may, at any time, adopt a resolution providing that no further shares of this Series shall be issued and directing that the authorized number of shares of this Series be reduced to the number of shares of this Series then outstanding, in which case (upon compliance with any applicable requirements of law) any authorized shares of this Series not theretofore issued shall have the status of authorized but unissued shares of Preference Stock without designation as to series until such shares are once more designated as a part of a particular series. -39- (d) Distributions to Holders of Preference Stock and Common Stock. Out of any surplus or net profits of the Corporation legally available for dividends remaining after full cumulative dividends upon the Preferred Stock of all series then outstanding shall have been paid for all past dividend periods, and after or concurrently with making payment of, or declaring and setting apart for payment, full dividends on the Preferred Stock of all series then outstanding to the end of the then current dividend period and after the Corporation shall have complied with the provisions in respect of any and all amounts then or theretofore required to be set aside in respect of any sinking fund or purchase fund with respect to the Preferred Stock of each series then outstanding and entitled to the benefit of a sinking fund or purchase fund, and shall have made provision for compliance in respect of the current sinking fund or purchase fund period for each such series of Preferred Stock, then and not otherwise the holders of this Series shall be entitled to or may receive dividends and redemption payments as provided by subdivisions (b) and (c) of this Section 12. Out of any surplus or net profits of the Corporation legally available for dividends remaining after full cumulative dividends upon the shares of this Series then outstanding shall have been paid through the preceding dividend date, and after the Corporation shall have complied with the provisions in respect of any and all amounts then or theretofore required to be set aside or applied in respect of any redemption payments in respect of shares of this Series, then and not otherwise, the holders of the Common Stock shall, subject to the rights of any other series of Preference Stock then outstanding and to the provisions of this Second Restated Certificate of Incorporation, be entitled to receive such dividends as may from time to time be declared by the Board of Directors. (e) Voting. (1) Holders of shares of this Series shall be entitled to one vote per share with respect to the election of Directors and all other matters required to be submitted to holders of Common Stock. Except as provided in paragraph (2) of this subdivision (e) and except as may be required by applicable law, holders of shares of this Series shall not be entitled to vote as a separate class with respect to any matter. (2) So long as any shares of this Series shall be outstanding, the Corporation shall not, without the affirmative vote or written consent of the holders of a majority of the aggregate number of shares of this Series at the time outstanding (or such greater percentage as may be required under applicable law), acting as a single class. (A) alter or change the powers, preferences or rights given to this Series by this Second Restated Certificate of Incorporation so as to affect such powers, preferences or rights adversely; (B) authorize, create or increase the number of authorized shares of any class of stock ranking, either as to payment of dividends or distribution of assets, prior to the Preference Stock; (C) increase the authorized amount of the Preference Stock or authorize or create any class of stock ranking, either as to payment of dividends or distribution of assets, on a parity with the Preference Stock; or (D) authorize or create any series of Preference Stock ranking, either as to payment of dividends or distribution of assets, prior to this Series. (f) Conversion Rights. The holders of shares of this Series shall have the right, at their option, at any time, to convert each share of this Series into one share (adjusted as provided below) of Common Stock, and the Corporation shall have the right to require such conversion as provided in subdivision (c) of this Section 12, on and subject to the following terms and conditions: (1) The shares of this Series shall be convertible at the office of any transfer agent for this Series, and at such other office or offices, if any, as the Board of Directors may designate, upon surrender of -40- such shares as provided in this subdivision (f), into fully paid and nonassessable shares (calculated as to each conversion to the nearest 1/100th of a share) of Common Stock, at the Conversion Price (as hereinafter defined) in effect at the time of conversion, each share of this Series being valued, for purposes of such conversion, at $32.00 plus (i) the amount of any unpaid dividends accrued to the next preceding dividend date or (ii) in the case of a mandatory conversion by the Corporation pursuant to subdivision (c) of this Section 12, the amount of unpaid dividends accrued to the date of conversion. The price at which shares of Common Stock shall be delivered upon conversion initially shall be $32.00 per share, subject to adjustment as provided in paragraph (4) of this subdivision (f) (the "Conversion Price"). (2) In order to convert shares of this Series into Common Stock the holder thereof shall surrender at any office hereinabove mentioned the certificate or certificates therefor, duly endorsed in blank or accompanied by proper instruments of assignment and transfer thereof duly endorsed in blank, together with any payment required by this paragraph (2) and transfer tax stamps or funds therefor, if required pursuant to paragraph (8) of this subdivision (f), and shall state in writing the name or names in which the holder wishes the certificate or certificates for shares of Common Stock to be issued. In the case of conversion at the option of such holder, such holder shall give written notice to the Corporation at said office that he elects to convert such shares. Except as provided in paragraph (1) of this subdivision (f), no payment or adjustment shall be made upon any conversion on account of any dividends accrued on the shares of this Series surrendered for conversion or on account of any dividends on the Common Stock issued upon such conversion. Shares of this Series shall be deemed to have been converted immediately prior to the close of business on the day of the surrender (or the date specified in the notice referred to in subdivision (c) of this Section 12 in the case of a mandatory conversion) of such shares for conversion in accordance with the foregoing provisions, and the person or persons entitled to receive the Common Stock issuable upon such conversion shall be treated for all purposes as the record holder or holders of such Common Stock at such time; provided, however, that any such surrender on any date when the stock transfer books of the Corporation shall be closed shall constitute the person or persons in whose name or names the certificates for such shares of Common Stock are to be issued as the record holder or holders thereof for all purposes immediately prior to the close of business on the next succeeding day on which such stock transfer books are opened and such conversion shall be at the conversion price in effect at such time on such succeeding day. As promptly as practicable on or after the conversion date, the Corporation shall issue and shall deliver at said office a certificate or certificates for the number of full shares of Common Stock issuable upon such conversion, together with a cash payment in lieu of any fraction of a share, as hereinafter provided, to the person or persons entitled to receive the same. In case shares of this Series are called for redemption, the right to convert such shares shall cease and terminate at the close of business on the redemption date, unless default shall be made in payment of the redemption price. (3) No fractional shares of Common Stock shall be issued upon conversion of shares of this Series, but, instead of any fraction of a share of Common Stock which would otherwise be issuable in respect of the aggregate number of shares of this Series surrendered for conversion at one time by the same holder, the Corporation shall pay a cash adjustment of such fraction in an amount equal to the same fraction of the Closing Price of a share of Common Stock on the date on which such shares of this Series were duly surrendered for conversion, or, if such date is not a Trading Day, on the next Trading Day. (4) The Conversion Price shall be adjusted from time to time as follows: (A) In case the Corporation shall (i) pay a dividend or make a distribution on its outstanding shares of Common Stock in Common Stock, (ii) subdivide its outstanding shares of Common Stock, (iii) combine its outstanding shares of Common Stock into a smaller number of shares, or (iv) issue any shares by reclassification of its shares of Common Stock, the Conversion Price in effect at the time of the record date for such dividend or distribution or the effective date of such subdivision, combination or reclassification shall -41- be adjusted, effective at the opening of business on the business day next following such record date or effective date, so that the holder of any shares of this Series surrendered for conversion after such record date or effective date shall be entitled to receive the number of shares of capital stock of the Corporation which he would have owned or been entitled to receive had such shares of this Series been converted immediately prior to such time. If, as a result of an adjustment made pursuant to this clause (A), the holder of any share thereafter surrendered for conversion shall become entitled to receive shares of two or more classes of capital stock of the Corporation, the Board of Directors (whose determination shall be conclusive) shall determine the allocation of the adjusted Conversion Price between or among shares of such classes of capital stock. (B) In case the Corporation shall hereafter issue rights or warrants to all holders of its Common Stock entitling them (for a period expiring within 45 days after the record date mentioned below) to subscribe for or purchase shares of Common Stock at a price per share less than the current market price per share (as determined pursuant to clause (D) of paragraph (4) of this subdivision (f)) on the record date mentioned below, the Conversion Price shall be adjusted so that the same shall equal the price determined by multiplying the Conversion Price in effect immediately prior to such record date by a fraction, of which the numerator shall be the number of shares of Common Stock outstanding on such record date plus the number of shares of Common Stock which the aggregate offering price of the total number of shares of Common Stock so offered would purchase at such current market price and of which the denominator shall be the number of shares of Common Stock outstanding on such record date plus the number of additional shares of Common Stock offered for subscription or purchase. Such adjustment shall become effective at the opening of business on the business day next following the record date for the determination of stockholders entitled to receive such rights or warrants; and to the extent that shares of Common Stock are not delivered after the expiration of such rights or warrants, the Conversion Price shall be readjusted (but only with respect to shares of this Series converted after such expiration) to the Conversion Price which would then be in effect had the adjustments made upon the distribution of such rights or warrants been made upon the basis of delivery of only the number of shares of Common Stock actually delivered. The right to acquire shares of Common Stock pursuant to the Corporation's Dividend Reinvestment Plan as the same may be amended from time to time, or pursuant to any successor dividend reinvestment plan, shall not be deemed to be a right giving rise to any adjustment to the Conversion Price. For the purposes of this clause (B), the number of shares of Common Stock at any time outstanding shall not include shares held in the treasury of the Corporation. (C) In case the Corporation shall distribute to all holders of its Common Stock evidences of its indebtedness or assets (including securities, but excluding any cash dividend or distributions out of surplus or net profits legally available therefor and dividends referred to in clause (A) of paragraph (4) of this subdivision (f)) or subscription rights or warrants (excluding those referred to in clause (B) of paragraph (4) of this subdivision (f)) then in each such case the Conversion Price shall be adjusted so that the same shall equal the price determined by multiplying the Conversion Price in effect immediately prior to the record date mentioned below by a fraction of which the numerator shall be the current market price per share (determined as provided in clause (D) of paragraph (4) of this subdivision (f)) of the Common Stock on such record date less the then fair market value (as determined by the Board of Directors of the Corporation, whose determination shall be conclusive) of the portion of the assets or evidences of indebtedness so distributed or of such subscription rights or warrants applicable to one share of Common Stock, and the denominator shall be such current market price per share of the Common Stock. Such adjustment shall become effective on the opening of business on the business day next following the record date for the determination of stockholders entitled to receive such distribution. (D) For the purpose of any computation under clause (B) or (C) of paragraph (4) of this subdivision (f), the current market price per share of Common Stock on any date shall be deemed to be the average of the daily Closing Price for the 30 consecutive Trading Days selected by the Corporation commencing not more than 45 Trading Days before the day in question. -42- (E) In any case in which this paragraph (4) shall require that an adjustment as a result of any event become effective at the opening of business on the business day next following a record date, the Corporation may elect to defer until after the occurrence of such event (i) issuing to the holder of any shares of this Series converted after such record date and before the occurrence of such event the additional shares of Common Stock issuable upon such conversion over and above the shares of Common Stock issuable upon such conversion on the basis of the Conversion Price prior to adjustment and (ii) paying to such holder any amount in cash in lieu of a fractional share of Common Stock pursuant to paragraph (3) of this subdivision (f); and, in lieu of the shares the issuance of which is so deferred, the Corporation shall issue or cause its transfer agents to issue due bills or other appropriate evidence of the right to receive such shares should such event occur. (F) Any adjustment in the Conversion Price otherwise required by this paragraph (4) to be made may be postponed, provided that such adjustment (plus any other adjustments postponed pursuant to this clause (F) and not theretofore made) would not require an increase or decrease of more than $0.50 in such price and would not, if made, entitle the holders of all then outstanding shares of this Series upon conversion to receive additional shares of Common Stock equal in the aggregate to 3% or more of the then issued and outstanding shares of Common Stock. All calculations under this subdivision (f), shall be made to the nearest cent or to the nearest 1/100th of a share, as the case may be. (G) The Corporation may (but shall not be obligated to) make such reductions in the Conversion Price, in addition to those required by clauses (A), (B) and (C) of paragraph (4) of this subdivision (f), as it considers to be advisable in order that any event treated for Federal income tax purposes as a dividend of stock or stock rights shall not be taxable to the recipients. (5) Whenever the Conversion Price is adjusted as herein provided: (A) the Corporation shall compute the adjusted Conversion Price in accordance with this subdivision (f) and shall prepare a certificate signed by the Treasurer of the Corporation setting forth the adjusted Conversion Price, and such certificate shall forthwith be filed with the transfer agent or agents for this Series; and (B) a notice stating that the Conversion Price has been adjusted and setting forth the adjusted Conversion Price shall, as soon as practicable, be mailed to the holders of record of the outstanding shares of this Series. (6) In case: (A) the Corporation shall declare a dividend (or any other distribution) on its Common Stock payable otherwise than in cash out of funds legally available therefor; or (B) the Corporation shall authorize the granting to the holders of its Common Stock of rights to subscribe for or purchase any shares of capital stock of any class or of any other rights; or (C) of any reclassification of the capital stock of the Corporation (other than a subdivision or combination of its outstanding shares of Common Stock), or of any consolidation or merger to which the Corporation is a party and for which approval of any stockholders of the Corporation is required, or of the sale or transfer of all or substantially all the assets of the Corporation; or (D) of the voluntary or involuntary dissolution, liquidation or winding up of the Corporation; then the Corporation shall cause to be mailed to the transfer agent or agents for this Series and to the holders of record of the outstanding shares of this Series, at least 20 days (or 10 days in any case specified in -43- clause (A) or (B) of paragraph (4) of this subdivision (f)) prior to the applicable record date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend or distribution of rights, or, if a record is not to be taken, the date as of which the holders of Common Stock of record to be entitled to such dividend or distribution of rights are to be determined, or (y) the date on which such reclassification, consolidation, merger, sale, transfer, dissolution, liquidation or winding up is expected to become effective, and the date as of which it is expected that holders of Common Stock of record shall be entitled to convert or exchange their shares of Common Stock for securities or other property deliverable upon such reclassification, consolidation, merger, sale, transfer, dissolution, liquidation or winding up. (7) The Corporation shall at all times reserve and keep available, free from preemptive rights, out of its authorized but unissued Common Stock, for the purpose of effecting the conversion of the shares of this Series, the full number of shares of Common Stock then deliverable upon the conversion of all shares of this Series then outstanding, provided, however, that nothing contained in this paragraph (7) shall be construed to preclude the Corporation from satisfying its obligations in respect of the conversion of the shares by delivery of purchased shares of Common Stock which are held in the treasury of the Corporation. (8) The Corporation shall pay any and all taxes that may be payable in respect of the issuance or delivery of shares of Common Stock on conversion of shares of this Series pursuant hereto. The Corporation shall not, however, be required to pay any tax which may be payable in respect of any transfer involved in the issue and delivery of shares of Common Stock in a name other than that in which the shares of this Series so converted were registered, and no such issue or delivery shall be made unless and until the person requesting such issue shall have paid to the Corporation the amount of any such tax, or shall have established, to the satisfaction of the Corporation, that such tax shall have been paid. (9) For the purpose of this subdivision (f) the term "Common Stock" shall include any stock of any class of the Corporation which has no preference in respect of dividends or of amounts in the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation, and which is not subject to redemption by the Corporation. However, except as otherwise provided in paragraph (11) of this subdivision (f), shares issuable on conversion of shares of this Series shall include only shares of the class designated as Common Stock of the Corporation as of the original date of issue of this Series or shares of any class or classes resulting from any reclassification or reclassifications thereof and which have no preference in respect of dividends or of amounts payable in the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation and which are not subject to redemption by the Corporation, provided that if at any time there shall be more than one such resulting class, the shares of each such class then so issuable shall be substantially in the proportion which the total number of shares of such class resulting from all such reclassifications bears to the total number of shares of all such classes resulting from all such reclassifications. (10) As used in this Section 12, the term "Closing Price" on any day shall mean the reported last sales price regular way on such day on the New York Stock Exchange, or, if not reported for such Exchange, on the Composite Tape, or, in case no such reported sale takes place on such day, the average of the reported closing bid and asked prices regular way on the New York Stock Exchange, or, if the Common Stock is not listed or admitted to trading on such Exchange, on the principal national securities exchange on which the Common Stock is listed or admitted to trading, or, if not listed or admitted to trading on any national securities exchange, the average of the closing bid and asked prices in the over-the-counter market as furnished by any New York Stock Exchange member firm selected from time to time by the Corporation for that purpose, or, if no such quotations are available, the fair market price as determined by the Corporation (whose determination shall be conclusive); and the term "Trading Day" shall mean, so long as the Common Stock is listed or admitted to trading on the New York Stock Exchange (or any successor to such Exchange), a date on which the New York Stock Exchange (or such successor) is open for the transaction of business, or, if the Common Stock is not listed or admitted to trading on such Exchange, a date on which the principal national -44- securities exchange on which the Common Stock is listed is open for the transaction of business, or, if the Common Stock is not listed or admitted to trading on any national securities exchange, a date on which any New York Stock Exchange member firm is open for the transaction of business. (11) If either of the following shall occur, namely: (A) any consolidation or merger to which the Corporation is a party, other than a consolidation or a merger in which the Corporation is a continuing corporation and which does not result in any reclassification of, or change (other than a change in par value or from par value to no par value or from no par value to par value, or as a result of a subdivision or combination) in, outstanding shares of the Common Stock, or (B) any sale or conveyance to another corporation of the property of the Corporation as an entirety or substantially as an entirety; then the right of the holders of shares of this Series then outstanding to convert such shares into shares of Common Stock as herein provided shall terminate, and such holders shall have the right to convert such shares into the kind and amount of shares of stock and other securities and property receivable upon such consolidation, merger, sale or conveyance by a holder of the number of shares of Common Stock issuable upon conversion of such shares immediately prior to such consolidation, merger, sale or conveyance, subject to adjustments which shall be as nearly equivalent as may be practicable to the adjustments provided for in paragraph (4) of this subdivision (f). The provisions of this paragraph (11) shall similarly apply to successive consolidations, mergers, sales or conveyances. (12) Notwithstanding anything elsewhere contained in this Section 12, any funds which at any time shall have been deposited by the Corporation or on its behalf with any paying agent for the purpose of paying dividends on or the redemption price of any of the shares of this Series and which shall not be required for such purposes because of the conversion of such shares, as provided in this subdivision (f), shall, upon delivery to the paying agent of evidence satisfactory to it of such conversion, after such conversion be repaid to the Corporation by the paying agent. (13) Any shares of this Series which shall at any time have been converted into shares of Common Stock shall, after such conversion, have the status of authorized but unissued shares of Preference Stock, without designation as to series until such shares are once more designated as part of a particular series by the Board of Directors. (g) Liquidation Rights. (1) Upon any liquidation, dissolution or winding up of the Corporation ("Liquidation"), the holders of shares of this Series shall be entitled to receive out of the assets of the Corporation available for distribution to its stockholders, before any payment or distribution shall be made on the shares of any series of Preference Stock subordinate to this Series as to assets in the event of any Liquidation ("Junior Series") or on the Common Stock, the amount of $32.00 per share, plus a sum equal to all dividends (whether or not earned or declared) on such shares accrued and unpaid thereon through the date of final distribution. (2) The Preferred Stock of all series shall be preferred over this Series in the event of any Liquidation, and in that event the holders of the Preferred Stock of each series shall be entitled to receive, out of the assets of the Corporation available for distribution to its stockholders, an amount determined as provided in the applicable Certificate of Designation or pursuant to Article Fourth of this Second Restated Certificate of Incorporation, as the case may be, for every share of their holdings of the Preferred Stock of such series before any distribution of the assets shall be made to the holders of shares of this Series. The shares of this Series shall be on a parity with any other series of Preference Stock unless the provisions of such other series provide otherwise, and shall be preferred over the Common Stock, as to assets in the event of any Liquidation. In the event of any Liquidation, the holders of the shares of this Series shall be entitled to receive, out of the assets of the Corporation available for distribution to its stockholders (after payment in full of all amounts payable in respect of the Preferred Stock of all series and any series of Preference Stock ranking senior to this Series), an amount determined as provided in this Section 12 for every share of this Series before any distribution of the -45- assets shall be made to the holders of any Junior Series or to the holders of the Common Stock. If, in the event of any Liquidation, the holders of the Preferred Stock of all series and the holders of the Preference Stock of this Series (and any other series of Preference Stock not subordinate to this Series as to assets in the event of any Liquidation ("Senior Series")) shall have received all the amounts to which they shall be entitled in accordance with the terms of their respective shares, the holders of shares of any Junior Series shall be entitled, to the exclusion of the holders of the Preferred Stock and the holders of the shares of this Series and any Senior Series, to share ratably in all the assets of the Corporation available for distribution to such holders then remaining according to the number of shares of the Junior Series held by them respectively. If, in the event of any Liquidation, the holders of the Preferred Stock of all series and the holders of the Preference Stock of all series shall have received all the amounts to which they shall be entitled in accordance with the terms of their respective shares, the holders of the Common Stock shall be entitled, to the exclusion of the holders of the Preferred Stock and Preference Stock, to share ratably in all the assets of the Corporation available for distribution to the stockholders then remaining according to the number of shares of the Common Stock held by them respectively. If, upon any Liquidation, the amounts payable on or with respect to the Preference Stock of this Series and any series ranking on a parity with this Series are not paid in full, the holders of shares of such Preference Stock shall share ratably in any distribution of assets according to the respective amounts which would be payable in respect of the shares held by them upon such distribution if all amounts payable on or with respect to such Preference Stock were paid in full. (3) Neither the sale, lease or exchange (for cash, shares of stock, securities or other consideration) of all or substantially all the property and assets of the Corporation nor the merger or consolidation of the Corporation into or with any other corporation or the merger or consolidation of any other corporation into or with the Corporation shall be deemed to be a Liquidation for the purposes of this subdivision (g). (h) Date of Cumulation. The term "date of cumulation" as used in this Section 12 of Article Fourth with reference to shares of this Series (i) with respect to any such shares issued subsequent to any record date and prior to the next succeeding dividend date shall be the March 31 of the year of that dividend date; and (ii) with respect to any such shares issued subsequent to any dividend date and prior to the next succeeding record date shall be March 31 of the year of that dividend date. In the event of the issue of additional shares of this Series, all dividends paid on this Series prior to the issue of such additional shares, and all dividends declared and payable to holders of record of this Series on any date prior to the issue of such additional shares, shall be deemed to have been paid on such additional shares. 13. Employee Stock Ownership Plan Convertible Preference Stock, Series B (Par Value $1 Per Share; Stated Value $40 Per Share). The following are the voting powers, designation, preferences and relative, participating, optional or other special rights, and the qualifications, limitations or restrictions thereof, of the series of Preference Stock designated by the Board of Directors of the Corporation as "Employee Stock Ownership Plan Convertible Preference Stock, Series B" by resolution dated January 30, 1991, consisting of 5,000,000 shares: (a) Designation and Issuance. The designation of the series of Preference Stock created by such resolution shall be Employee Stock Ownership Plan Convertible Preference Stock, Series B (hereinafter in this Section 13 of Article Fourth called "this Series"). As more fully described in the Employee Stock Ownership Plan (the "ESOP") established in connection with the USWA- Bethlehem 1986 and 1989 Labor Agreements (the "Labor Agreements"), there has been established a trust (the "Trust") for the benefit of Employees (as defined in the ESOP) participating in the ESOP, and all shares of this Series shall be issued to and shall be held by the Trust and shall not, without the prior written consent of the Corporation, be transferable (other than to the Corporation upon redemption or conversion, as provided herein) by the Trust. -46- (b) Dividend Rate and Payments. (1) Out of the surplus or net profits of the Corporation legally available for the payment of dividends, the holders of shares of this Series shall be entitled to receive, when and as such dividends may be declared by the Board of Directors, dividends at the rate of $2.00 per share per year, payable annually on April 1 of each year (each such day being hereinafter called a dividend date and each annual or shorter (in the case of the first such period) period ending with a dividend date being hereinafter called a dividend period), in each case from the date of cumulation (as defined in subdivision (h) of this Section 13) of such shares of this Series, before any payment shall be made on account of the purchase or redemption of the shares of any series of the Preference Stock, or any dividend shall be declared or paid upon or set apart for, or any other distribution shall be made in respect of, or any payment shall be made on account of the purchase of the Common Stock. (2) Only those shares of this Series outstanding on any record date established by the Board of Directors shall be entitled to the dividend payable on the following dividend date, but all such outstanding shares shall be entitled to the full annual dividend, even if some of or all such shares were not outstanding during all of the preceding year. (3) No dividend shall be declared or paid upon or set apart for, and no other distribution shall be ordered or made in respect of, nor shall any payment be made on account of the purchase or redemption of, any shares of this Series at any time that the Corporation, due to any failure to make payments with respect to any outstanding shares of Preferred Stock, shall be precluded from paying any dividends on or making other payments with respect to its Preference Stock. The full amount of dividends which holders of shares of this Series shall be entitled to receive shall be paid in full before any dividend, other than a dividend payable in shares of Common Stock, shall be declared or paid upon or set apart for, or any other distribution shall be ordered or made in respect of, or any payment shall be made on account of the purchase of, the Common Stock of the Corporation. No interest, or sum of money in lieu of interest, shall be payable in respect of any dividend payment or payments which may be in arrears. (4) Dividends payable upon the shares of this Series shall be cumulative (whether or not in any dividend period or periods there shall be surplus or net profits of the Corporation legally available for the payment of such dividends), so that, if at any time dividends upon the outstanding shares of this Series at the per annum rate set forth above from the date of cumulation through the preceding dividend date shall not have been paid or declared and a sum sufficient for the payment thereof set apart for such payment, the amount of the deficiency shall be fully paid, but without interest, or dividends in such amount declared on the shares of this Series and a sum sufficient for the payment thereof set apart for such payment, before any payment shall be made on account of the purchase or redemption of the shares of any series of the Preference Stock, or any dividend shall be declared or paid upon or set apart for, or any other distribution shall be made in respect of, or any payment shall be made in respect of, or any payment shall be made on account of the purchase of, the Common Stock. (5) Each such annual dividend shall be payable, at the option of the Board of Directors of the Corporation, either (i) in shares of this Series, with such shares being valued for such purpose at their stated value of $40.00 per share, (ii) in shares of Common Stock of the Corporation, with the Common Stock being valued for such purpose at the average Closing Price (as defined in subdivision (f) of this Section 13) on the New York Stock Exchange for the 20 Trading Days (as defined in subdivision (f) of this Section 13) ended on the last business day in March preceding the date of payment or (iii) in cash. (6) Shares of this Series shall rank on a parity as to dividends with the Employee Stock Ownership Plan Convertible Preference Stock, Series A (Par Value $1 Per Share; Stated Value $32 Per Share) of the Corporation, and with any other series of Preference Stock unless the provisions of such other series provide otherwise; provided, however, that each such series of Preference Stock so ranking on a parity may bear dividends payable at rates and on dates different from any other such series of Preference Stock. -47- (c) Redemption and Mandatory Conversion. (1) Shares of this Series shall be redeemable at the option of the Corporation at any time, either in whole or in part, at a redemption price (the "Redemption Price") of $40.00 per share; provided, however, that shares of this Series shall be redeemed only after full cumulative dividends upon all shares of this Series then outstanding shall have been paid for all past dividend periods, and after or concurrently with making payment of, or declaring or setting apart for payment, full dividends on all shares of this Series then outstanding (except the shares of this Series to be redeemed) to the end of the current dividend period. In the case of any redemption of less than all the outstanding shares of this Series, such redemption shall be made on a pro rata basis among the holders of shares. In addition, should the Closing Price of the Common Stock on the New York Stock Exchange exceed the Conversion Price (as hereinafter defined) for 20 consecutive Trading Days, the Corporation may, by notice mailed at any time within 30 days after the end of any such 20-day period, require that any of or all the then outstanding shares of this Series be converted into Common Stock, as more fully provided in subdivision (f) of this Section 13. (2) Notice of any redemption or mandatory conversion of shares of this Series, specifying the time and place of redemption or conversion and that the dividends on the shares to be redeemed or converted shall cease to accrue on the redemption or conversion date, shall be mailed by first class mail, postage prepaid, to each holder of record of the shares to be redeemed, at such holder's address of record, not less than 30 days prior to the redemption or conversion date; and if less than all the shares owned by a stockholder are then to be redeemed or converted, the notice shall also specify the number of shares thereof which are to be redeemed or converted and the numbers of the certificates representing such shares. Upon surrender in accordance with such notice of the certificates for the number of shares to be redeemed or converted, duly endorsed in blank or accompanied by proper instruments of assignment or transfer thereof duly endorsed in blank, such shares shall be redeemed or converted by the Corporation as provided herein. If less than all the shares represented by any such certificate shall be redeemed or converted, a new certificate shall be issued representing the unredeemed or unconverted shares without cost to the holder thereof. From and after the date fixed in any such notice as the date of redemption or conversion (unless default shall be made by the Corporation in providing moneys or Common Stock for the payment of the redemption price or completion of conversion pursuant to such notice), all dividends on the shares of this Series subject to such notice shall cease to accrue and all rights of any holder thereof as a stockholder of the Corporation (except the right to receive the Redemption Price or Common Stock as hereinafter provided) shall cease and terminate, and such shares shall not after the redemption or conversion date be deemed to be outstanding. (3) Any shares of this Series which shall at any time have been redeemed, shall, after such redemption, have the status of authorized but unissued shares of Preference Stock without designation as to series until such shares are once more designated as a part of a particular series by the Board of Directors. The Board of Directors may, at any time, adopt a resolution providing that no further shares of this Series shall be issued and directing that the authorized number of shares of this Series be reduced to the number of shares of this Series then outstanding, in which case (upon compliance with any applicable requirements of law) any authorized shares of this Series not theretofore issued shall have the status of authorized but unissued shares of Preference Stock without designation as to series until such shares are once more designated as a part of a particular series. (d) Distributions to Holders of Preference Stock and Common Stock. Out of any surplus or net profits of the Corporation legally available for dividends remaining after full cumulative dividends upon the Preferred Stock of all series then outstanding shall have been paid for all past dividend periods, and after or concurrently with making payment of, or declaring and setting apart for payment, full dividends on the Preferred Stock of all series then outstanding to the end of the then current dividend period and after the Corporation shall have complied with the provisions in respect of any and all amounts then or theretofore required to be set aside in respect of any sinking fund or purchase fund with respect to the Preferred Stock of each series then outstanding and entitled to the benefit of a sinking fund or purchase fund, and shall have made provision for -48- compliance in respect of the current sinking fund or purchase fund period for each such series of Preferred Stock, then and not otherwise the holders of this Series shall be entitled to or may receive dividends and redemption payments as provided by subdivisions (b) and (c) of this Section 13. Out of any surplus or net profits of the Corporation legally available for dividends remaining after full cumulative dividends upon the shares of this Series then outstanding shall have been paid through the preceding dividend date, and after the Corporation shall have complied with the provisions in respect of any and all amounts then or theretofore required to be set aside or applied in respect of any redemption payments in respect of shares of this Series, then and not otherwise, the holders of the Common Stock shall, subject to the rights of any other series of Preference Stock then outstanding and to the provisions of this Second Restated Certificate of Incorporation, be entitled to receive such dividends as may from time to time be declared by the Board of Directors. (e) Voting. (1) Holders of shares of this Series shall be entitled to one vote per share with respect to the election of Directors and all other matters required to be submitted to holders of Common Stock. Except as provided in paragraph (2) of this subdivision (e) and except as may be required by applicable law, holders of shares of this Series shall not be entitled to vote as a separate class with respect to any matter. (2) So long as any shares of this Series shall be outstanding, the Corporation shall not, without the affirmative vote or written consent of the holders of a majority of the aggregate number of shares of this Series at the time outstanding (or such greater percentage as may be required under applicable law), acting as a single class, (A) alter or change the powers, preferences or rights given to this Series by this Second Restated Certificate of Incorporation so as to affect such powers, preferences or rights adversely; (B) authorize, create or increase the number of authorized shares of any class of stock ranking, either as to payment of dividends or distribution of assets, prior to the Preference Stock; (C) increase the authorized amount of the Preference Stock or authorize or create any class of stock ranking, either as to payment of dividends or distribution of assets, on a parity with the Preference Stock; or (D) authorize or create any series of Preference Stock ranking, either as to payment of dividends or distribution of assets, prior to this Series. (f) Conversion Rights. The holders of shares of this Series shall have the right, at their option, at any time, to convert each share of this Series into one share (adjusted as provided below) of Common Stock, and the Corporation shall have the right to require such conversion as provided in subdivision (c) of this Section 13, on and subject to the following terms and conditions: (1) The shares of this Series shall be convertible at the office of any transfer agent for this Series, and at such other office or offices, if any, as the Board of Directors may designate, upon surrender of such shares as provided in this subdivision (f), into fully paid and nonassessable shares (calculated as to each conversion to the nearest 1/100th of a share) of Common Stock, at the Conversion Price (as hereinafter defined) in effect at the time of conversion, each share of this Series being valued, for purposes of such conversion, at $40.00 plus (i) the amount of any unpaid dividends accrued to the next preceding dividend date or (ii) in the case of a mandatory conversion by the Corporation pursuant to subdivision (c) of this Section 13, the amount of unpaid dividends accrued to the date of conversion. The price at which shares of Common Stock shall be delivered upon conversion initially shall be $40.00 per share, subject to adjustment as provided in paragraph (4) of this subdivision (f) (the "Conversion Price"). -49- (2) In order to convert shares of this Series into Common Stock the holder thereof shall surrender at any office hereinabove mentioned the certificate or certificates therefor, duly endorsed in blank or accompanied by proper instruments of assignment and transfer thereof duly endorsed in blank, together with any payment required by this paragraph (2) and transfer tax stamps or funds therefor, if required pursuant to paragraph (8) of this subdivision (f), and shall state in writing the name or names in which the holder wishes the certificate or certificates for shares of Common Stock to be issued. In the case of conversion at the option of such holder, such holder shall give written notice to the Corporation at said office that he elects to convert such shares. Except as provided in paragraph (1) of this subdivision (f), no payment or adjustment shall be made upon any conversion on account of any dividends accrued on the shares of this Series surrendered for conversion or on account of any dividends on the Common Stock issued upon such conversion. Shares of this Series shall be deemed to have been converted immediately prior to the close of business on the day of the surrender (or the date specified in the notice referred to in subdivision (c) of this Section 13 in the case of a mandatory conversion) of such shares for conversion in accordance with the foregoing provisions, and the person or persons entitled to receive the Common Stock issuable upon such conversion shall be treated for all purposes as the record holder or holders of such Common Stock at such time; provided, however, that any such surrender on any date when the stock transfer books of the Corporation shall be closed shall constitute the person or persons in whose name or names the certificates for such shares of Common Stock are to be issued as the record holder or holders thereof for all purposes immediately prior to the close of business on the next succeeding day on which such stock transfer books are opened and such conversion shall be at the conversion price in effect at such time on such succeeding day. As promptly as practicable on or after the conversion date, the Corporation shall issue and shall deliver at said office a certificate or certificates for the number of full shares of Common Stock issuable upon such conversion, together with a cash payment in lieu of any fraction of a share, as hereinafter provided, to the person or persons entitled to receive the same. In case shares of this Series are called for redemption, the right to convert such shares shall cease and terminate at the close of business on the redemption date, unless default shall be made in payment of the redemption price. (3) No fractional shares of Common Stock shall be issued upon conversion of shares of this Series, but, instead of any fraction of a share of Common Stock which would otherwise be issuable in respect of the aggregate number of shares of this Series surrendered for conversion at one time by the same holder, the Corporation shall pay a cash adjustment of such fraction in an amount equal to the same fraction of the Closing Price of a share of Common Stock on the date on which such shares of this Series were duly surrendered for conversion, or, if such date is not a Trading Day, on the next Trading Day. (4) The Conversion Price shall be adjusted from time to time as follows: (A) In case the Corporation shall (i) pay a dividend or make a distribution on its outstanding shares of Common Stock in Common Stock, (ii) subdivide its outstanding shares of Common Stock, (iii) combine its outstanding shares of Common Stock into a smaller number of shares, or (iv) issue any shares by reclassification of its shares of Common Stock, the Conversion Price in effect at the time of the record date for such dividend or distribution or the effective date of such subdivision, combination or reclassification shall be adjusted, effective at the opening of business on the business day next following such record date or effective date, so that the holder of any shares of this Series surrendered for conversion after such record date or effective date shall be entitled to receive the number of shares of capital stock of the Corporation which he would have owned or been entitled to receive had such shares of this Series been converted immediately prior to such time. If, as a result of an adjustment made pursuant to this clause (A), the holder of any share thereafter surrendered for conversion shall become entitled to receive shares of two or more classes of capital stock of the Corporation, the Board of Directors (whose determination shall be conclusive) shall determine the allocation of the adjusted Conversion Price between or among shares of such classes of capital stock. -50- (B) In case the Corporation shall hereafter issue rights or warrants to all holders of its Common Stock entitling them (for a period expiring within 45 days after the record date mentioned below) to subscribe for or purchase shares of Common Stock at a price per share less than the current market price per share (as determined pursuant to clause (D) of paragraph (4) of this subdivision (f)) on the record date mentioned below, the Conversion Price shall be adjusted so that the same shall equal the price determined by multiplying the Conversion Price in effect immediately prior to such record date by a fraction, of which the numerator shall be the number of shares of Common Stock outstanding on such record date plus the number of shares of Common Stock which the aggregate offering price of the total number of shares of Common Stock so offered would purchase at such current market price and of which the denominator shall be the number of shares of Common Stock outstanding on such record date plus the number of additional shares of Common Stock offered for subscription or purchase. Such adjustment shall become effective at the opening of business on the business day next following the record date for the determination of stockholders entitled to receive such rights or warrants; and to the extent that shares of Common Stock are not delivered after the expiration of such rights or warrants, the Conversion Price shall be readjusted (but only with respect to shares of this Series converted after such expiration) to the Conversion Price which would then be in effect had the adjustments made upon the distribution of such rights or warrants been made upon the basis of delivery of only the number of shares of Common Stock actually delivered. The right to acquire shares of Common Stock pursuant to the Corporation's Dividend Reinvestment Plan as the same may be amended from time to time, or pursuant to any successor dividend reinvestment plan, shall not be deemed to be a right giving rise to any adjustment to the Conversion Price. For the purposes of this clause (B), the number of shares of Common Stock at any time outstanding shall not include shares held in the treasury of the Corporation. (C) In case the Corporation shall distribute to all holders of its Common Stock evidences of its indebtedness or assets (including securities, but excluding any cash dividend or distributions out of surplus or net profits legally available therefor and dividends referred to in clause (A) of paragraph (4) of this subdivision (f)) or subscription rights or warrants (excluding those referred to in clause (B) of paragraph (4) of this subdivision (f)), then in each such case the Conversion Price shall be adjusted so that the same shall equal the price determined by multiplying the Conversion Price in effect immediately prior to the record date mentioned below by a fraction of which the numerator shall be the current market price per share (determined as provided in clause (D) of paragraph (4) of this subdivision (f)) of the Common Stock on such record date less the then fair market value (as determined by the Board of Directors of the Corporation, whose determination shall be conclusive) of the portion of the assets or evidences of indebtedness so distributed or of such subscription rights or warrants applicable to one share of Common Stock, and the denominator shall be such current market price per share of the Common Stock. Such adjustment shall become effective on the opening of business on the business day next following the record date for the determination of stockholders entitled to receive such distribution. (D) For the purpose of any computation under clause (B) or (C) of paragraph (4) of this subdivision (f), the current market price per share of Common Stock on any date shall be deemed to be the average of the daily Closing Price for the 30 consecutive Trading Days selected by the Corporation commencing not more than 45 Trading Days before the day in question. (E) In any case in which this paragraph (4) shall require that an adjustment as a result of any event become effective at the opening of business on the business day next following a record date, the Corporation may elect to defer until after the occurrence of such event (i) issuing to the holder of any shares of this Series converted after such record date and before the occurrence of such event the additional shares of Common Stock issuable upon such conversion over and above the shares of Common Stock issuable upon such conversion on the basis of the Conversion Price prior to adjustment and (ii) paying to such holder any amount in cash in lieu of a fractional share of Common Stock pursuant to paragraph (3) of this subdivision (f); and, in lieu of the shares the issuance of which is so deferred, the Corporation shall issue or cause its transfer agents to issue due bills or other appropriate evidence of the right to receive such shares should such event occur. -51- (F) Any adjustment in the Conversion Price otherwise required by this paragraph (4) to be made may be postponed, provided that such adjustment (plus any other adjustments postponed pursuant to this clause (F) and not theretofore made) would not require an increase or decrease of more than $0.50 in such price and would not, if made, entitle the holders of all then outstanding shares of this Series upon conversion to receive additional shares of Common Stock equal in the aggregate to 3% or more of the then issued and outstanding shares of Common Stock. All calculations under this subdivision (f) shall be made to the nearest cent or to the nearest 1/100th of a share, as the case may be. (G) The Corporation may (but shall not be obligated to) make such reductions in the Conversion Price, in addition to those required by clauses (A), (B) and (C) of paragraph (4) of this subdivision (f), as it considers to be advisable in order that any event treated for Federal income tax purposes as a dividend of stock or stock rights shall not be taxable to the recipients. (5) Whenever the Conversion Price is adjusted as herein provided: (A) the Corporation shall compute the adjusted Conversion Price in accordance with this subdivision (f) and shall prepare a certificate signed by the Treasurer of the Corporation setting forth the adjusted Conversion Price, and such certificate shall forthwith be filed with the transfer agent or agents for this Series; and (B) a notice stating that the Conversion Price has been adjusted and setting forth the adjusted Conversion Price shall, as soon as practicable, be mailed to the holders of record of the outstanding shares of this Series. (6) In case: (A) the Corporation shall declare a dividend (or any other distribution) on its Common Stock payable otherwise than in cash out of funds legally available therefor; or (B) the Corporation shall authorize the granting to the holders of its Common Stock of rights to subscribe for or purchase any shares of capital stock of any class or of any other rights; or (C) of any reclassification of the capital stock of the Corporation (other than a subdivision or combination of its outstanding shares of Common Stock), or of any consolidation or merger to which the Corporation is a party and for which approval of any stockholders of the Corporation is required, or of the sale or transfer of all or substantially all the assets of the Corporation; or (D) of the voluntary or involuntary dissolution, liquidation or winding up of the Corporation; then the Corporation shall cause to be mailed to the transfer agent or agents for this Series and to the holders of record of the outstanding shares of this Series, at least 20 days (or 10 days in any case specified in clause (A) or (B) of paragraph (4) of this subdivision (f)) prior to the applicable record date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend or distribution of rights, or, if a record is not to be taken, the date as of which the holders of Common Stock of record to be entitled to such dividend or distribution of rights are to be determined, or (y) the date on which such reclassification, consolidation, merger, sale, transfer, dissolution, liquidation or winding up is expected to become effective, and the date as of which it is expected that holders of Common Stock of record shall be entitled to convert or exchange their shares of Common Stock for securities or other property deliverable upon such reclassification, consolidation, merger, sale, transfer, dissolution, liquidation or winding up. -52- (7) The Corporation shall at all times reserve and keep available, free from preemptive rights, out of its authorized but unissued Common Stock, for the purpose of effecting the conversion of the shares of this Series, the full number of shares of Common Stock then deliverable upon the conversion of all shares of this Series then outstanding, provided, however, that nothing contained herein shall be construed to preclude the Corporation from satisfying its obligations in respect of the conversion of the shares by delivery of purchased shares of Common Stock which are held in the treasury of the Corporation. (8) The Corporation shall pay any and all taxes that may be payable in respect of the issuance or delivery of shares of Common Stock on conversion of shares of this Series pursuant hereto. The Corporation shall not, however, be required to pay any tax which may be payable in respect of any transfer involved in the issue and delivery of shares of Common Stock in a name other than that in which the shares of this Series so converted were registered, and no such issue or delivery shall be made unless and until the person requesting such issue shall have paid to the Corporation the amount of any such tax, or shall have established, to the satisfaction of the Corporation, that such tax shall have been paid. (9) For the purpose of this subdivision (f) the term "Common Stock" shall include any stock of any class of the Corporation which has no preference in respect of dividends or of amounts in the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation, and which is not subject to redemption by the Corporation. However, except as otherwise provided in paragraph (11) of this subdivision (f), shares issuable on conversion of shares of this Series shall include only shares of the class designated as Common Stock of the Corporation as of the original date of issue of this Series or shares of any class or classes resulting from any reclassification or reclassifications thereof and which have no preference in respect of dividends or of amounts payable in the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation and which are not subject to redemption by the Corporation, provided that if at any time there shall be more than one such resulting class, the shares of each such class then so issuable shall be substantially in the proportion which the total number of shares of such class resulting from all such reclassifications bears to the total number of shares of all such classes resulting from all such reclassifications. (10) As used in this Section 13 of Article Fourth, the term "Closing Price" on any day shall mean the reported last sales price regular way on such day on the New York Stock Exchange, or, if not reported for such Exchange, on the Composite Tape, or, in case no such reported sale takes place on such day, the average of the reported closing bid and asked prices regular way on the New York Stock Exchange, or, if the Common Stock is not listed or admitted to trading on such Exchange, on the principal national securities exchange on which the Common Stock is listed or admitted to trading, or, if not listed or admitted to trading on any national securities exchange, the average of the closing bid and asked prices in the over-the-counter market as furnished by any New York Stock Exchange member firm selected from time to time by the Corporation for that purpose, or, if no such quotations are available, the fair market price as determined by the Corporation (whose determination shall be conclusive); and the term "Trading Day" shall mean, so long as the Common Stock is listed or admitted to trading on the New York Stock Exchange (or any successor to such Exchange), a date on which the New York Stock Exchange (or such successor) is open for the transaction of business, or, if the Common Stock is not listed or admitted to trading on such Exchange, a date on which the principal national securities exchange on which the Common Stock is listed is open for the transaction of business, or, if the Common Stock is not listed or admitted to trading on any national securities exchange, a date on which any New York Stock Exchange member firm is open for the transaction of business. (11) If either of the following shall occur, namely: (A) any consolidation or merger to which the Corporation is a party, other than a consolidation or a merger in which the Corporation is a continuing corporation and which does not result in any reclassification of, or change (other than a change in par value or from par value to no par value or from no par value to par value, or as a result of a subdivision or combination) in, outstanding shares of the Common Stock, or (B) any sale or conveyance to another corporation of the -53- property of the Corporation as an entirety or substantially as an entirety; then the right of the holders of shares of this Series then outstanding to convert such shares into shares of Common Stock as herein provided shall terminate, and such holders shall have the right to convert such shares into the kind and amount of shares of stock and other securities and property receivable upon such consolidation, merger, sale or conveyance by a holder of the number of shares of Common Stock issuable upon conversion of such shares immediately prior to such consolidation, merger, sale or conveyance, subject to adjustments which shall be as nearly equivalent as may be practicable to the adjustments provided for in paragraph (4) of this subdivision (f). The provisions of this paragraph (11) shall similarly apply to successive consolidations, mergers, sales or conveyances. (12) Notwithstanding anything elsewhere contained in this Section 13, any funds which at any time shall have been deposited by the Corporation or on its behalf with any paying agent for the purpose of paying dividends on or the redemption price of any of the shares of this Series and which shall not be required for such purposes because of the conversion of such shares, as provided in this subdivision (f), shall, upon delivery to the paying agent of evidence satisfactory to it of such conversion, after such conversion be repaid to the Corporation by the paying agent. (13) Any shares of this Series which shall at any time have been converted into shares of Common Stock shall, after such conversion, have the status of authorized but unissued shares of Preference Stock, without designation as to series until such shares are once more designated as part of a particular series by the Board of Directors. (g) Liquidation Rights. (1) Upon any liquidation, dissolution or winding up of the Corporation ("Liquidation"), the holders of shares of this Series shall be entitled to receive out of the assets of the Corporation available for distribution to its stockholders, before any payment or distribution shall be made on the shares of any series of Preference Stock subordinate to this Series as to assets in the event of any Liquidation ("Junior Series") or on the Common Stock, the amount of $40.00 per share, plus a sum equal to all dividends (whether or not earned or declared) on such shares accrued and unpaid thereon through the date of final distribution. (2) The Preferred Stock of all series shall be preferred over this Series in the event of any Liquidation, and in that event the holders of the Preferred Stock of each series shall be entitled to receive, out of the assets of the Corporation available for distribution to its stockholders, an amount determined as provided in the applicable Certificate of Designation or pursuant to Article Fourth of this Second Restated Certificate of Incorporation, as the case may be, for every share of their holdings of the Preferred Stock of such series before any distribution of the assets shall be made to the holders of shares of this Series. The shares of this Series shall be on a parity with the Employee Stock Ownership Plan Convertible Preference Stock, Series A (Par Value $1 Per Share; Stated Value $32 Per Share) of the Corporation and with any other series of Preference Stock unless the provisions of such other series provide otherwise, and shall be preferred over the Common Stock, as to assets in the event of any Liquidation. In the event of any Liquidation, the holders of the shares of this Series shall be entitled to receive, out of the assets of the Corporation available for distribution to its stockholders (after payment in full of all amounts payable in respect of the Preferred Stock of all series and any series of Preference Stock ranking senior to this Series), an amount determined as provided in this Section 13 for every share of this Series before any distribution of the assets shall be made to the holders of any Junior Series or to the holders of the Common Stock. If, in the event of any Liquidation, the holders of the Preferred Stock of all series and the holders of the Preference Stock of this Series (and any other series of Preference Stock not subordinate to this Series as to assets in the event of any Liquidation ("Senior Series")) shall have received all the amounts to which they shall be entitled in accordance with the terms of their respective shares, the holders of shares of any Junior Series shall be entitled, to the exclusion of the holders of the Preferred Stock and the holders of the shares of this Series and any Senior Series, to share ratably in all the assets of the Corporation available for distribution to such holders then remaining according to the number of shares of the Junior Series held by them -54- respectively. If, in the event of any Liquidation, the holders of the Preferred Stock of all series and the holders of the Preference Stock of all series shall have received all the amounts to which they shall be entitled in accordance with the terms of their respective shares, the holders of the Common Stock shall be entitled, to the exclusion of the holders of the Preferred Stock and Preference Stock, to share ratably in all the assets of the Corporation available for distribution to the stockholders then remaining according to the number of shares of the Common Stock held by them respectively. If, upon any Liquidation, the amounts payable on or with respect to the Preference Stock of this Series and any series ranking on a parity with this Series are not paid in full, the holders of shares of such Preference Stock shall share ratably in any distribution of assets according to the respective amounts which would be payable in respect of the shares held by them upon such distribution if all amounts payable on or with respect to such Preference Stock were paid in full. (3) Neither the sale, lease or exchange (for cash, shares of stock, securities or other consideration) of all or substantially all the property and assets of the Corporation nor the merger or consolidation of the Corporation into or with any other corporation or the merger or consolidation of any other corporation into or with the Corporation shall be deemed to be a Liquidation for the purposes of this subdivision (g). (h) Date of Cumulation. The term "date of cumulation" as used in this Section 13 with reference to shares of this Series (i) with respect to any such shares issued subsequent to any record date and prior to the next succeeding dividend date shall be the March 31 of the year of that dividend date; and (ii) with respect to any such shares issued subsequent to any dividend date and prior to the next succeeding record date shall be March 31 of the year of that dividend date. In the event of the issue of additional shares of this Series, all dividends paid on this Series prior to the issue of such additional shares, and all dividends declared and payable to holders of record of this Series on any date prior to the issue of such additional shares, shall be deemed to have been paid on such additional shares. 14. Series A Junior Participating Preference Stock (Par Value $1 Per Share). The following are the voting powers, designation, preferences and relative, participating, optional or other special rights, and the qualifications, limitations or restrictions thereof, of the series of Preference Stock designated by the Board of Directors of the Corporation as the "Series A Junior Participating Preference Stock" by resolution dated September 28, 1988, consisting of 1,500,000 shares: (a) Designation and Amount. The designation of the series of Preference Stock created by this resolution shall be "Series A Junior Participating Preference Stock" and the number of shares constituting such series shall be 1,500,000. (b) Dividends and Distributions. (1) Out of the surplus or net profits of the Corporation legally available for the payment of dividends, the holders of shares of Series A Junior Participating Preference Stock shall be entitled to receive, when and as such dividends may be declared by the Board of Directors, quarterly dividends payable in cash on the tenth days of March, June, September and December in each year (each such date being referred to herein as a "Quarterly Dividend Payment Date"), commencing on the first Quarterly Dividend Payment Date after the first issuance of a share or fraction of a share of Series A Junior Participating Preference Stock, in an amount per share (rounded to the nearest cent) equal to the greater of (a) $.50 or (b) subject to the provision for adjustment hereinafter set forth, 100 times the aggregate per share amount of all cash dividends, and 100 times the aggregate per share amount (payable in kind) of all non-cash dividends or other distributions other than a dividend payable in shares of Common Stock or a subdivision of the outstanding shares of Common Stock (by reclassification or otherwise), declared on the Common Stock, par value $1.00 per share, of the Corporation (the "Common Stock") since the immediately preceding Quarterly Dividend Payment Date, or, with respect to the first Quarterly Dividend Payment Date, since the first issuance of any share or -55- fraction of a share of Series A Junior Participating Preference Stock. In the event the Corporation shall at any time after September 28, 1988 (the "Rights Declaration Date") (i) declare any dividend on Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock, (iii) combine the outstanding Common Stock into a smaller number of shares or (iv) issue any shares by reclassification of its shares of Common Stock, then in each such case the amount to which holders of shares of Series A Junior Participating Preference Stock shall have been entitled immediately prior to such event under clause (b) of the preceding sentence shall be adjusted by multiplying such amount by a fraction the numerator of which shall be the number of shares of Common Stock outstanding immediately after such event and the denominator of which shall be the number of shares of Common Stock that shall have been outstanding immediately prior to such event. (2) Dividends shall begin to accrue and be cumulative on outstanding shares of Series A Junior Participating Preference Stock from the Quarterly Dividend Payment Date next preceding the date of issue of such shares of Series A Junior Participating Preference Stock, unless the date of issue of such shares shall be prior to the record date for the first Quarterly Dividend Payment Date, in which case dividends on such shares shall begin to accrue from the date of issue of such shares, or unless the date of issue shall be a Quarterly Dividend Payment Date or shall be a date after the record date for the next Quarterly Dividend Payment Date and before such Quarterly Dividend Payment Date, in either of which events such dividends shall begin to accrue and be cumulative from such Quarterly Dividend Payment Date. No interest, or sum of money in lieu of interest, shall be payable in respect of any dividend payment or payments which may be in arrears. Dividends paid on shares of Series A Junior Participating Preference Stock in an amount less than the total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on a share-by-share basis among all such shares at the time outstanding. (3) Dividends payable upon the shares of Series A Junior Participating Preference Stock shall be cumulative (whether or not in any dividend period or periods there shall be surplus or net profits of the Corporation legally available for the payment of such dividends) so that, if on any Quarterly Dividend Payment Date dividends upon the outstanding shares of Series A Junior Participating Preference Stock shall not have been paid, or declared and a sum sufficient for the payment thereof set apart for such payment, the amount of the deficiency shall be fully paid, but without interest, or dividends in such amount declared on the shares of Series A Junior Participating Preference Stock and a sum sufficient for the payment thereof set apart for such payment, before any dividend shall be declared or paid upon or set apart for, or any other distribution shall be made in respect of, or any payment shall be made in respect of, or any payment shall be made on account of the purchase of, the Common Stock or any series of Preference Stock subordinate to the Series A Junior Participating Preference Stock. (c) Distributions to Holders of Series A Junior Participating Preference Stock and Common Stock. Out of any surplus or net profits of the Corporation legally available for dividends remaining after full cumulative dividends upon the Preferred Stock of all series then outstanding and of any series of Preference Stock ranking senior to Series A Junior Participating Preference Stock shall have been paid for all past dividend periods, and after or concurrently with making payment of, or declaring and setting apart for payment, full dividends on the Preferred Stock of all series then outstanding and of any series of Preference Stock ranking senior to the Series A Junior Participating Preference Stock then outstanding to the most recent Quarterly Dividend Payment Date and after the Corporation shall have complied with the provisions in respect of any and all amounts then or theretofore required to be set aside in respect of any sinking fund or purchase fund with respect to the Preferred Stock and any series of Preference Stock ranking senior to Series A Junior Participating Preference Stock then outstanding and entitled to the benefit of a sinking fund or purchase fund, and shall have made provision for compliance in respect of the current sinking fund or purchase fund period for each such series of Preferred Stock or any series of Preference Stock ranking senior to Series A Junior Participating Preference Stock, then and not otherwise the holders of Series A Junior Participating Preference Stock shall be entitled to or may receive dividends and redemption payments as provided herein. Out of any surplus or net -56- profits of the Corporation legally available for dividends remaining after full cumulative dividends upon the shares of Series A Junior Participating Preference Stock then outstanding shall have been paid through the preceding Quarterly Dividend Payment Date, and after the Corporation shall have complied with the provisions in respect of any and all amounts then or theretofore required (if any) to be set aside or applied in respect of any redemption payments in respect of shares of Series A Junior Participating Preference Stock, then and not otherwise, the holders of Common Stock and of any series of Preference Stock ranking subordinate to Series A Junior Participating Preference Stock shall, subject to the rights of any other series of Preference Stock then outstanding, to paragraph (1) of subdivision (b) of this Section 14 and to the provisions of the Second Restated Certificate of Incorporation, be entitled to receive such dividends as may from time to time be declared by the Board of Directors. (d) Voting. (1) Holders of shares of Series A Junior Participating Preference Stock shall be entitled to one vote for each share of stock held. Except as provided in this subdivision (d) and except as may be required by applicable law, holders of shares of Series A Junior Participating Preference Stock shall vote with the Common Stock on all matters required to be submitted to holders of Common Stock and shall not be entitled to vote as a separate class with respect to any matter. (2) So long as any shares of Series A Junior Participating Preference Stock shall be outstanding, the Corporation shall not, without the affirmative vote or written consent of the holders of a majority of the aggregate number of shares of Series A Junior Participating Preference Stock at the time outstanding (or such greater percentage as may be required under applicable law), acting as a single class, alter or change the powers, preferences or rights given to the Series A Junior Participating Preference Stock by this Second Restated Certificate of Incorporation so as to affect such powers, preferences or rights adversely. (3) If at the time of any annual meeting of stockholders of the Corporation for the election of directors a default in preference dividends, as the term "default in preference dividends" is hereinafter defined with respect to the Series A Junior Participating Preference Stock, shall exist, the holders of the Series A Junior Participating Preference Stock, voting separately as a class with the holders of any other series of Preference Stock so entitled to vote, shall have the right to elect two members of the Board of Directors; and the holders of the Common Stock shall not be entitled to vote in the election of the directors of the Corporation to be elected as provided in the foregoing clause. Whenever a default in preference dividends shall commence to exist, the Corporation, upon the written request of the holders of 5% or more of the outstanding shares of Preference Stock so entitled to vote, shall call a special meeting of the holders of the Preference Stock so entitled to vote, such special meeting to be held within 120 days after the date on which such request shall be received by the Corporation for the purpose of enabling such holders to elect members of the Board of Directors as provided in the immediately preceding sentence; provided, however, that such special meeting need not be called if an annual meeting of stockholders of the Corporation for the election of directors shall be scheduled to be held within such 120 days; and provided further that in lieu of any such special meeting, the election of the directors to be elected thereat may be effected by the written consent of the holders of a majority of the outstanding shares that would be entitled to be voted upon at such special meeting. Prior to any such special meeting or meetings, the number of directors of the Corporation shall be increased to the extent necessary to provide as additional places on the Board of Directors the directorships to be filled by the directors to be elected thereat. Any director elected as aforesaid by the holders of shares of the Preference Stock or of any series thereof shall cease to serve as such director whenever a default in preference dividends shall cease to exist. If, prior to the end of the term of any director elected as aforesaid by the holders of shares of the Preference Stock or of any series thereof, or elected by the holders of the Common Stock, a vacancy in the office of such director shall occur by reason of death, resignation, removal or disability, or for any other cause, such vacancy shall be filled for the unexpired term in the manner provided in the By-laws; provided, however, that if such vacancy shall be filled by election by the stockholders at a meeting thereof, the right to fill such vacancy shall be vested in the holders of that class of stock or series thereof which elected the director the vacancy in the office of whom -57- is so to be filled, unless, in any such case, no default in preference dividends shall exist at the time of such election. For the purposes of this paragraph (3), a "default in preference dividends" with respect to the Series A Junior Participating Preference Stock shall be deemed to have occurred whenever the amount of dividends in arrears upon the Series A Junior Participating Preference Stock shall be equivalent to six full quarterly dividends or more, and, having so occurred, such default in preference dividends shall be deemed to exist thereafter until, but only until, all dividends in arrears on all shares of the Series A Junior Participating Preference Stock then outstanding shall have been paid. The term "dividends in arrears" whenever used in this paragraph (3) with reference to the Series A Junior Participating Preference Stock shall be deemed to mean (whether or not in any dividend period in respect of which such term is used there shall have been surplus or net profits of the Corporation legally available for the payment of dividends) that amount which shall be equal to cumulative dividends at the rate for the Series A Junior Participating Preference Stock for all past quarterly dividend periods less the amount of all dividends paid, or deemed paid, for all such periods upon such Series A Junior Participating Preference Stock. Nothing herein contained shall be deemed to prevent an increase in the number of directors of the Corporation pursuant to its By-laws as from time to time in effect so as to provide as additional places on the Board of Directors directorships to be filled by the directors so to be elected by the holders of the Series A Junior Participating Preference Stock, or to prevent any other change in the number of the directors of the Corporation. (4) Except as set forth herein, holders of Series A Junior Participating Preference Stock shall have no special voting rights and their consent shall not be required (except to the extent they are entitled to vote with holders of Common Stock as set forth herein) for taking any corporate action. (e) Reacquired Shares. Any shares of Series A Junior Participating Preference Stock purchased or otherwise acquired by the Corporation in any manner whatsoever shall be retired and cancelled promptly after the acquisition thereof. All such shares shall upon their cancellation become authorized but unissued shares of Preference Stock and may be reissued as part of a new series of Preference Stock to be created by resolution or resolutions of the Board of Directors, subject to the conditions and restrictions on issuance set forth herein. (f) Liquidation Rights. (1) Upon any liquidation (voluntary or otherwise), dissolution or winding up of the Corporation ("Liquidation"), the holders of shares of Series A Junior Participating Preference Stock shall be entitled to receive out of the assets of the Corporation available for distribution to its stockholders, before any payment or distribution shall be made on the shares of any series of Preference Stock subordinate to Series A Junior Participating Preference Stock as to assets in the event of any Liquidation ("Junior Series") or on the Common Stock, the amount of $100.00 per share, plus a sum equal to all dividends (whether or not earned or declared) on such shares accrued and unpaid thereon through the date of final distribution (the "Series A Liquidation Preference"). (2) The Preferred Stock of all series shall be preferred over Series A Junior Participating Preference Stock in the event of any Liquidation, and in that event the holders of the Preferred Stock of each series shall be entitled to receive, out of the assets of the Corporation available for distribution to its stockholders, an amount determined as provided in the applicable Certificate of Designation or pursuant to Article Fourth of this Second Restated Certificate of Incorporation, as the case may be, for every share of their holdings of the Preferred Stock of such series before any distribution of the assets shall be made to the holders of shares of Series A Junior Participating Preference Stock. The shares of Series A Junior Participating Preference Stock shall be subordinate to any other series of Preference Stock unless the provisions of such other series provide otherwise, and shall be preferred over the Common Stock, as to assets in the event of any Liquidation. In the event of any Liquidation, the holders of the shares of Series A Junior Participating Preference Stock shall be entitled to receive, out of the assets of the Corporation available for distribution to its stockholders (after payment in full of all amounts payable in respect of the Preferred Stock of all series and any series of Preference Stock ranking senior to Series A Junior Participating Preference Stock), an amount -58- determined as provided in paragraph (1) of this subdivision (f) for every share of Series A Junior Participating Preference Stock before any distribution of assets shall be made to the holders of any Junior Series or to the holders of the Common Stock. If, in the event of any Liquidation, the holders of the Preferred Stock of all series and the holders of the Preference Stock of all series shall have received all the amounts to which they shall be entitled in accordance with the terms of their respective shares, no additional distributions shall be made to the holders of shares of Preferred Stock or Preference Stock unless, prior thereto, the holders of shares of Common Stock shall have received an amount per share (the "Common Adjustment") equal to the quotient obtained by dividing (i) the Series A Liquidation Preference by (ii) 100 (as appropriately adjusted as set forth in paragraph (3) of this subdivision (f) to reflect such events as stock splits, stock dividends and recapitalizations with respect to the Common Stock) (such number in clause (ii), the "Adjustment Number"). Following the payment of the full amount of the Common Adjustment in respect of all outstanding shares of Common Stock, holders of Series A Junior Participating Preference Stock and holders of shares of Common Stock shall receive their ratable and proportionate share of the remaining assets to be distributed in the ratio of the Adjustment Number to 1 with respect to such Preference Stock and Common Stock, on a per share basis, respectively. If, upon any Liquidation, the amounts payable on or with respect to Series A Junior Participating Preference Stock and any series of Preference Stock ranking on a parity with Series A Junior Participating Preference Stock are not paid in full, the holders of shares of such Preference Stock shall share ratably in any distribution of assets according to the respective amounts which would be payable in respect of the shares held by them upon such distribution if all amounts payable on or with respect to such Preference Stock were paid in full. (3) In the event the Corporation shall at any time after the Rights Declaration Date (i) declare any dividend on Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock, (iii) combine the outstanding Common Stock into a smaller number of shares or (iv) issue any shares by reclassification of its shares of Common Stock, then in each such case the Adjustment Number in effect immediately prior to such event shall be adjusted by multiplying such Adjustment Number by a fraction the numerator of which shall be the number of shares of Common Stock outstanding immediately after such event and the denominator of which shall be the number of shares of Common Stock that were outstanding immediately prior to such event. (4) Neither the sale, lease or exchange (for cash, shares of stock, securities or other consideration) of all or substantially all the property and assets of the Corporation nor the merger or consolidation of the Corporation into or with any other corporation or the merger or consolidation of any other corporation into or with the Corporation shall be deemed to be a Liquidation for the purposes of this subdivision (f). (g) Consolidation, Merger, etc. In case the Corporation shall enter into any consolidation, merger, combination or other transaction in which the shares of Common Stock shall be exchanged for or changed into other stock or securities, cash and/or any other property, then in any such case the shares of Series A Junior Participating Preference Stock shall at the same time be similarly exchanged or changed in an amount per share (subject to the provision for adjustment hereinafter set forth) equal to 100 times the aggregate amount of stock, securities, cash and/or any other property (payable in kind), as the case may be, into which or for which each share of Common Stock is changed or exchanged. In the event the Corporation shall at any time after the Rights Declaration Date (i) declare any dividend on Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock, (iii) combine the outstanding Common Stock into a smaller number of shares or (iv) issue any shares by reclassification of its shares of Common Stock, then in each such case the amount set forth in the preceding sentence with respect to the exchange or change of shares of Series A Junior Participating Preference Stock shall be adjusted by multiplying such amount by a fraction the numerator of which shall be the number of shares of Common Stock outstanding immediately after such event and the denominator of which shall be the number of shares of Common Stock that were outstanding immediately prior to such event. -59- (h) Optional Redemption. (1) The Corporation shall have the option to redeem the whole or any part of the Series A Junior Participating Preference Stock at any time at a redemption price equal to, subject to the provision for adjustment hereinafter set forth, 100 times the "current per share market price" of the Common Stock on the date of the mailing of the notice of redemption, together with unpaid accumulated dividends to the date of such redemption. In the event the Corporation shall at any time after the Rights Declaration Date (i) declare any dividend on Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock, (iii) combine the outstanding Common Stock into a smaller number of shares or (iv) issue any shares by reclassification of its shares of Common Stock, then in each such case the amount to which holders of shares of Series A Junior Participating Preference Stock shall be otherwise entitled immediately prior to such event under the immediately preceding sentence shall be adjusted by multiplying such amount by a fraction the numerator of which shall be the number of shares of Common Stock outstanding immediately after such event and the denominator of which shall be the number of shares of Common Stock that shall have been outstanding immediately prior to such event. The "current per share market price" on any date shall be deemed to be the average of the closing prices per share of such Common Stock for the 10 consecutive Trading Days (as such term is hereinafter defined) immediately prior to such date. The closing price for each day shall be the last sale price, regular way, or, in case no such sale shall take place on such day, the average of the closing bid and asked prices, regular way, in either case as reported in the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on the New York Stock Exchange or, if the Common Stock shall not be listed or admitted to trading on the New York Stock Exchange, as reported in the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on the principal national securities exchange on which the Common Stock shall not be listed or admitted to trading or, if the Common Stock shall not be listed or admitted to trading on any national securities exchange, the last quoted price or, if not so quoted the average of the high bid and low asked prices in the over-the-counter market, as reported by the National Association of Securities Dealers, Inc. Automated Quotation System ("NASDAQ") or such other system then in use or, if on any such date the Common Stock shall not be quoted by any such organization, the average of the closing bid and asked prices as furnished by a professional market maker making a market in the Common Stock selected by the Board of Directors of the Corporation. If on such date no such market maker shall be making a market in the Common Stock, the fair value of the Common Stock on such date as determined in good faith by the Board of Directors of the Corporation shall be used. The term "Trading Day" shall mean a day on which the principal national securities exchange on which the Common Stock shall be listed or admitted to trading shall be open for the transaction of business or, if the Common Stock shall not be listed or admitted to trading on any national securities exchange, a Monday, Tuesday, Wednesday, Thursday or Friday on which banking institutions in the State of New York shall not be authorized or obligated by law or executive order to close. (2) Notice of any such redemption shall be given by mailing to the holders of the Series A Junior Participating Preference Stock a notice of such redemption, first class postage prepaid, not later than the thirtieth day and not earlier than the sixtieth day before the date fixed for redemption, at their last address as the same shall appear upon the books of the Corporation. Any notice which shall be mailed in the manner herein provided shall be conclusively presumed to have been duly given, whether or not the stockholder shall have received such notice, and failure duly to give such notice by mail, or any defect in such notice, to any holder of Series A Junior Participating Preference Stock shall not affect the validity of the proceedings for the redemption of such Series A Junior Participation Preference Stock. (3) If less than all the outstanding shares of the Series A Junior Participating Preference Stock are to be redeemed by the Corporation, the number of shares to be redeemed shall be determined by the Board of Directors and the shares to be redeemed shall be determined by lot or pro rata or in such fair and equitable other manner as may be prescribed by resolution of the Board of Directors. -60- (4) The notice of redemption to each holder of Series A Junior Participating Preference Stock shall specify (i) the number of shares of Series A Junior Participating Preference Stock of such holder to be redeemed, (ii) the date fixed for redemption, (iii) the redemption price and (iv) the place of payment of the redemption price. (5) If any such notice of redemption shall have been duly given or if the Corporation shall have given to the bank or trust company hereinafter referred to irrevocable written authorization promptly to give or complete such notice, and if on or before the redemption date specified therein the funds necessary for such redemption shall have been deposited by the Corporation with the bank or trust company designated in such notice, doing business in the United States of America and having a capital, surplus and undivided profits aggregating at least $25,000,000 according to its last published statement of condition, in trust for the benefit of the holders of Series A Junior Participating Preference Stock called for redemption, then, notwithstanding that any certificate for such shares so called for redemption shall not have been surrendered for cancellation, from and after the time of such deposit all such shares called for redemption shall no longer be deemed outstanding, all rights with respect to such shares shall no longer be deemed outstanding and all rights with respect to such shares shall forthwith cease and terminate, except the right of the holders thereof to receive from such bank or trust company at any time after the time of such deposit the funds so deposited, without interest, and the right to exercise, up to the close of business on the fifth day before the date fixed for redemption, all privileges of conversion or exchange if any. In case less than all the shares represented by any surrendered certificate shall be redeemed, a new certificate shall be issued representing the unredeemed shares. Any interest accrued on such funds so deposited shall be paid to the Corporation from time to time. Any funds so deposited and unclaimed at the end of six years from such redemption date shall be repaid to the Corporation, after which the holders of shares of Series A Junior Participating Preference Stock called for redemption shall look only to the Corporation for payment thereof; provided, however, that any funds so deposited which shall not be required for redemption because of the exercise of any privilege of conversion or exchange subsequent to the date of deposit shall be repaid to the Corporation forthwith. (i) Ranking. The Series A Junior Participating Preference Stock shall rank junior to all other series of the Corporation's Preference Stock as to the payment of dividends and the distribution of assets, unless the terms of any such series shall provide otherwise. (j) Fractional Shares. Series A Junior Participating Preference Stock may be issued in fractions of a share which shall entitle the holder, in proportion to such holder's fractional shares, to exercise voting rights, receive dividends, participate in distributions and to have the benefit of all other rights of holders of Series A Junior Participating Preference Stock. FIFTH. The number of directors of the Corporation shall be fixed from time to time by, or in the manner provided in, its By-laws and may be increased or decreased as therein provided and shall be increased for the period or periods established by Section 6 of Article Fourth of this Second Restated Certificate of Incorporation as therein provided; but the number thereof shall not be less than three. SIXTH. The Board of Directors is expressly authorized to adopt, amend and repeal by-laws of the Corporation. SEVENTH. In order to provide an incentive to increased efficient and profitable management there is hereby established a Special Incentive Compensation Plan. The persons who shall be eligible to receive special compensation under said Plan shall be the persons who shall be in the employ of the Corporation or of one or more of its subsidiary companies and shall be directors of the Corporation (said persons being hereinafter in this Article Seventh collectively referred to as -61- Executives of the Corporation) and the other Employees, if any, to whom a part of such special compensation shall be credited pursuant to the provisions of the next succeeding paragraph. The special compensation under said Plan shall consist of "dividend units", as follows: For each fiscal year commencing with the year ending December 31, 1975, and terminating with the year ending December 31, 1980, there shall be credited to the Executives of the Corporation (or, if some of such "dividend units" are to be credited to other Employees pursuant to the provisions of this paragraph, to the Executives of the Corporation and such other Employees), promptly after the publication by the Corporation of its Annual Report to Stockholders for such year, "dividend units" hereinafter described representing 1-1/2% of the consolidated net income for such year. The Board of Directors may determine that a specified part of the "dividend units" to be credited for any fiscal year shall be credited to persons who shall have been important Employees in that year other than Executives of the Corporation. If the Board shall so determine, it shall also determine the other important Employees to whom such "dividend units" are to be credited and the number of such "dividend units" to be credited to each of them (or to the estates of any of them who shall have died in the meantime). The Executives of the Corporation and such other Employees, if any, are hereinafter in this Article Seventh collectively referred to as the Key Employees. The "dividend units" to be credited to the Executives of the Corporation for any fiscal year shall be credited to the persons who shall have been the Executives of the Corporation in that year (or to the estates of any of them who shall have died in the meantime) and shall be divided among such Executives (or their estates) as shall be determined by the Board of Directors. For the purpose of determining the number of "dividend units" to be credited to the Key Employees for any fiscal year each unit shall be taken at a value equal to the average of the high and low prices of a share of Common Stock of the Corporation on the New York Stock Exchange on the first business day of such fiscal year. Fractional units shall not be credited. Each "dividend unit" will entitle the holder to receive from the Corporation a cash payment equal to each cash dividend that shall be paid on one share of Common Stock of the Corporation after the crediting of the unit and during the lifetime of the Key Employee (but in any event until the fifteenth anniversary of the termination, by death or otherwise, of his service with the Corporation and its subsidiary companies). The payments to be so made on the "dividend units" will be subject to the earlier termination of such units as hereinafter described. In the event of any stock dividend, split-up reclassification, or analogous change in capitalization, a corresponding change shall be made in the number of "dividend units" then outstanding. During the lifetime of the Key Employee to whom "dividend units" shall be credited, such "dividend units" shall not be transferable or assignable, and said payments thereon shall be made only to him, but if he dies before the expiration of the aforesaid 15-year period, the rights under his "dividend units" shall pass to his estate. If authorized by the Board of Directors, the Corporation may enter into an agreement with an estate to which "dividend units" shall have so passed providing for a lump-sum payment to the estate in cancellation of such "dividend units". All rights under "dividend units" credited to a Key Employee shall be terminated if the service of such Key Employee shall be terminated for any reason other than death or normal or permanent incapacity retirement pursuant to the Pension Plan of the Corporation or voluntary termination of service with the consent of his employer, or if at any time the Board of Directors shall find that he has willfully engaged in any activity which is harmful to the interests of the Corporation. For the purposes of this Article Seventh (a) the term "consolidated net income" for any fiscal year shall mean the consolidated net income of the Corporation and its subsidiary companies consolidated as shown in its Annual Report to Stockholders for such year, -62- (b) the term "Employees" shall mean individuals in the employ of the Corporation or of one or more of its subsidiary companies but shall not be deemed to include any person who shall have reached age 70 at the time of making the credit, and (c) the term "Compensation Committee" shall mean a committee which shall be appointed by the Board of Directors and shall consist of not less than three members of the Board. The amounts of the respective fixed salaries of the Executives of the Corporation shall be determined by the Board of Directors. The Board of Directors may delegate to one or more Compensation Committees any of or all its powers under the provisions of this Article Seventh, except its power to authorize the entering into an agreement with an estate pursuant to the last sentence of the sixth paragraph hereof. Anything in this Article Seventh to the contrary notwithstanding, none of the Executives shall as a member of the Board of Directors or as a member of a Compensation Committee have any vote in the determination of (a) the amount that shall be paid to him as a fixed salary or (b) the number of "dividend units" that shall be credited to him. Anything herein contained to the contrary notwithstanding, the aggregate amounts paid subsequent to July 1, 1959, on all "dividend units" that shall have been credited to Executives of the Corporation as such, plus the aggregate fixed salaries paid to the Executives of the Corporation in excess of an amount equal to $90,000 per month for the period elapsed subsequent to such date, shall not at any time exceed 4% of the aggregate cash dividends paid on the Common Stock of the Corporation subsequent to such date. The Board of Directors, acting for the Corporation as the owner, direct or indirect, of capital stock in any other corporation, shall have power in its discretion to approve any plan for the payment of incentive compensation to the officers and employees of said other corporation which shall be based on the net earnings of said other corporation or in any other manner which will make the amount of said incentive compensation dependent upon the results accomplished by them or any of them, and the Board of Directors shall also have power to adopt similar plans for the payment of incentive compensation to officers and employees of the Corporation engaged in the conduct and operation of businesses relating to physical properties directly owned or operated by it. When all payments under this Article Seventh shall have been made, this Article Seventh shall terminate and shall be of no further force or effect. EIGHTH. The Corporation may indemnify and hold harmless and advance expenses to, to the fullest extent permitted by applicable law as it presently exists or may hereafter be amended, any person who was or is made or is threatened to be made a party or is otherwise involved in any threatened, pending or completed action, suit, or proceeding, whether civil, criminal, administrative or investigative by reason of the fact that he, or a person for whom he is the legal representative, is or was a director, officer, employee or agent of the Corporation or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust, enterprise or non-profit entity, including service with respect to employee benefit plans, against all expenses, judgments, fines, liability, amounts paid in settlement and loss reasonably incurred or suffered by such person. The rights conferred by this Article shall not be exclusive of any other rights under any statute, provision of this Second Restated Certificate of Incorporation, by-law, agreement, vote of stockholders or disinterested directors or otherwise. NINTH. No director of the Corporation shall be personally liable to the Corporation or any stockholder for monetary damages for breach of fiduciary duty as a director, except for any matter in respect of which such director shall be liable under Section 174 of Title 8 of the Delaware Code (relating to the Delaware General -63- Corporation Law) or any amendment thereto or successor provision thereto or shall be liable by reason that, in addition to any and all other requirements for such liability, such director (i) shall have breached the duty of loyalty to the Corporation or its stockholders, (ii) shall not have acted in good faith or, in failing to act, shall not have acted in good faith, (iii) shall have acted in a manner involving intentional misconduct or a knowing violation of law or, in failing to act, shall have acted in a manner involving intentional misconduct or a knowing violation of law or (iv) shall have derived an improper personal benefit. Neither the amendment nor repeal of this Article Ninth, nor the adoption of any provision of this Second Restated Certificate of Incorporation inconsistent with this Article Ninth, shall eliminate or reduce the effect of this Article Ninth in respect of any matter occurring, or any cause of action, suit or claim that, but for this Article Ninth would accrue or arise, prior to such amendment, repeal or adoption of any inconsistent provision. TENTH. The Corporation reserves the right at any time and from time to time to amend, alter, change or repeal any provision contained in this Second Restated Certificate of Incorporation in the manner now or hereafter prescribed by law; and all rights, preferences and privileges of whatsoever nature conferred upon stockholders, directors or any other persons whomsoever by and pursuant to this Second Restated Certificate of Incorporation in its present form or as hereafter amended are granted subject to the right reserved in this Article Tenth. IN WITNESS WHEREOF, Bethlehem Steel Corporation has caused this Second Restated Certificate of Incorporation to be executed by Curtis H. Barnette, its Chairman, and attested by G. Penn Holsenbeck, its Secretary, this 4th day of April, 1994. BETHLEHEM STEEL CORPORATION, by /s/ Curtis H. Barnette Curtis H. Barnette Chairman Attest: /s/ G. Penn Holsenbeck Secretary -64- EX-3.C 3 BYLAWS EXHIBIT 3(C) BY-LAWS OF BETHLEHEM STEEL CORPORATION --------------- INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE --------------- AS AMENDED OCTOBER 1, 1988 BY-LAWS OF BETHLEHEM STEEL CORPORATION Table of Contents
Page ARTICLE I - Meetings of Stockholders, Etc. Section 1.01 Annual Meeting............................................ 1 Section 1.02 Business to be Brought Before an Annual Meeting of Stockholders................................... 1 Section 1.03 Special Meeting........................................... 2 Section 1.04 Place of Meetings......................................... 2 Section 1.05 Notice of Meetings........................................ 2 Section 1.06 Quorum.................................................... 4 Section 1.07 Organization.............................................. 4 Section 1.08 Order of Business......................................... 4 Section 1.09 Voting.................................................... 4 Section 1.10 List of Stockholders...................................... 5 Section 1.11 Inspectors of Votes....................................... 6 Section 1.12 Consent of Stockholders in lieu of Meeting................ 6 ARTICLE II - Board of Directors Section 2.01 General Powers............................................ 8 Section 2.02 Number and Term of Office................................. 8 Section 2.03 Nominations for the Election of Directors................. 8 Section 2.04 Election of Directors..................................... 9 Section 2.05 Organization.............................................. 9 Section 2.06 Resignations.............................................. 9 Section 2.07 Vacancies, etc............................................ 9 Section 2.08 Place of Meeting, etc..................................... 9 Section 2.09 First Meeting............................................. 10 Section 2.10 Regular Meetings.......................................... 10 Section 2.11 Special Meetings; Notice.................................. 10 Section 2.12 Quorum and Manner of Acting............................... 10
Section 2.13 Removal of Directors...................................... 11 Section 2.14 Compensation.............................................. 11 ARTICLE III - Committees Section 3.01 Executive Committee; How Constituted and Powers........... 12 Section 3.02 Organization, etc......................................... 12 Section 3.03 Meetings.................................................. 12 Section 3.04 Quorum and Manner of Acting............................... 13 Section 3.05 Resignations; Removal; Vacancies.......................... 13 Section 3.06 Other Committees.......................................... 13 Section 3.07 Procedures................................................ 14 Section 3.08 Action by Consent in Writing.............................. 14 ARTICLE IV - Officers Section 4.01 Number.................................................... 15 Section 4.02 Election and Term of Office............................... 15 Section 4.03 Agents, etc............................................... 15 Section 4.04 Removal................................................... 15 Section 4.05 Resignations.............................................. 15 Section 4.06 Vacancies................................................. 16 Section 4.07 Chief Executive Officer................................... 16 Section 4.08 Chairman.................................................. 16 Section 4.09 President................................................. 16 Section 4.10 Vice Chairmen............................................. 16 Section 4.11 Executive Office.......................................... 17 Section 4.12 Vice Presidents........................................... 17 Section 4.13 Assistant Vice Presidents................................. 17 Section 4.14 Controller................................................ 17 Section 4.15 Assistant Controllers..................................... 18 Section 4.16 General Counsel........................................... 18 Section 4.17 Treasurer................................................. 18 Section 4.18 Assistant Treasurers...................................... 19 Section 4.19 Secretary................................................. 19 Section 4.20 Assistant Secretaries..................................... 20 Section 4.21 Salaries.................................................. 20
ARTICLE V - Contracts, Checks, Drafts, Bank Accounts, Etc. Section 5.01 Contracts with Governmental Authorities................... 20 Section 5.02 Appointment of Agents..................................... 21 Section 5.03 Execution of Other Contracts, etc......................... 21 Section 5.04 Loans..................................................... 21 Section 5.05 Checks, Drafts, etc....................................... 22 Section 5.06 Deposits.................................................. 22 Section 5.07 General and Special Bank Accounts......................... 22 Section 5.08 Proxies in Respect of Stock or Other Securities of Other Corporations.......................... 22 ARTICLE VI - Shares and Their Transfer Section 6.01 Certificates for Stock.................................... 23 Section 6.02 Transfer of Stock......................................... 23 Section 6.03 Regulations............................................... 24 Section 6.04 Lost, Stolen, Destroyed and Mutilated Certificates........ 24 Section 6.05 Fixing Date for Determination of Stockholders of Record in Certain Case................................. 24 ARTICLE VII - Offices, Etc. Section 7.01 Registered Office......................................... 25 Section 7.02 Other Offices............................................. 25 ARTICLE VIII - Dividends, Surplus, Etc. Section 8.01 Dividends, Surplus, etc................................... 25 ARTICLE IX - Indemnification of Directors, Officers, Employees and Agents Section 9.01 Third Party Actions....................................... 26 Section 9.02 Derivative Actions........................................ 27 Section 9.03 Determination of Entitlement to Indemnification........... 28 Section 9.04 Right to Indemnification Upon Successful Defense and For Service as a Witness...................... 28 Section 9.05 Advance of Expenses....................................... 29 Section 9.06 Indemnification Not Exclusive............................. 29
Section 9.07 Accrual of Claims; Successors............................. 30 Section 9.08 Corporate Obligations; Reliance........................... 30 Section 9.09 Insurance................................................. 30 Section 9.10 Definitions of Certain Terms.............................. 30 Section 9.11 Saving Clause............................................. 31 ARTICLE X - Seal Section 10.01 Seal....................................................... 31 ARTICLE XI - Fiscal Year Section 10.01 Fiscal Year................................................ 31 ARTICLE XII - Waiver of Notices Section 12.01 Waiver of Notices.......................................... 32 ARTICLE XIII - Gender Section 13.01 Gender..................................................... 32 ARTICLE XIV - Amendments Section 14.01 Amendments................................................. 32
BY-LAWS OF BETHLEHEM STEEL CORPORATION ------------------------ ARTICLE I. Meetings of Stockholders, Etc. SECTION 1.01. Annual Meeting. The annual meeting of the stockholders of Bethlehem Steel Corporation (herein called the "Corporation") shall, unless the Board of Directors (herein called the "Board") shall designate another time or place, be held on the Tuesday immediately preceding the last Wednesday in April in each year (or, if that day shall be a legal holiday, then on the next preceding business day) at such hour as may be specified in the notice thereof, in the City of Wilmington, in the State of Delaware, and at such place within said City as shall be fixed by the Board, for the purpose of electing directors and for the transaction of such other business as may properly be brought before such meeting. If any annual meeting shall not be held on the day designated herein or the directors shall not have been elected thereat or at any adjournment thereof, the Board shall cause a special meeting of the stockholders to be held as soon thereafter as practicable for the election of directors. At such special meeting, the stockholders may elect directors and transact other business with the same force and effect as at an annual meeting of the stockholders duly called and held. SECTION 1.02. Business to be Brought Before an Annual Meeting of Stockholders. Any business properly brought before an annual meeting of the stockholders of the Corporation may be transacted at such meeting. To be properly brought before an annual meeting, business must be (i) specified in the notice of the meeting (or any supplement thereto) given by or at the direction of the Board, (ii) brought before the meeting by or at the direction of the Board pursuant to a vote of not less than four-fifths of the whole Board or (iii) otherwise properly brought before the meeting by a stockholder. For business to be properly brought before an annual meeting by a stockholder, the stockholder must have given such written notice of the proposed business, either by personal delivery or by United States mail, postage prepaid, to the Secretary of the Corporation, that the Secretary shall receive such notice at least 90 days prior to the anniversary date of the immediately preceding annual meeting or not later than ten days after notice or public disclosure of the date of the annual meeting shall be given or made to stockholders, whichever date shall be earlier. 2 Subject to Section 2.03 hereof, any such notice shall set forth as to each item of business the stockholder shall propose to bring before the annual meeting (i) a brief description of such item of business and the reasons for conducting it at such meeting and, in the event that such item of business shall include a proposal to amend or to recommend the amendment of either the Restated Certificate of Incorporation of the Corporation (which term as used herein shall include any amendments to the Restated Certificate) or these By-laws, the text of the proposed amendment, (ii) the name and address of the stockholder proposing such item of business, (iii) a representation that the stockholder is a holder of record of stock of the Corporation entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to propose such item of business and (iv) any material interest of the stockholder in such item of business. Only business which shall have been properly brought before an annual meeting of stockholders in accordance with these By-laws shall be conducted at such meeting, and the Chairman of such meeting may refuse to permit any business to be brought before such meeting which shall not have been properly brought before it in accordance with these By-laws. SECTION 1.03. Special Meeting. Except as otherwise required by law, special meetings of the stockholders for any purpose or purposes may be called only by (i) the Chairman, (ii) the President, (iii) the Secretary or (iv) the majority of the whole Board. Only such business as shall be specified in the notice of any special meeting of the stockholders shall come before such meeting. SECTION 1.04. Place of Meetings. Any meeting of the stockholders for the election of directors shall, unless the Board shall designate another place, be held in the City of Wilmington, in the State of Delaware, and at such place within said City as shall be fixed by the Board. All other meetings of the stockholders shall be held at such places, within or without the State of Delaware, as may from time to time be designated by the Board or in the respective notices or waivers of notice thereof. SECTION 1.05. Notice of Meetings. Every stockholder shall furnish the Secretary with an address at which notices of meetings and all other corporate notices may be served on or mailed to him. Except as otherwise expressly required by law, notice of each meeting of the stockholders, whether annual or special, shall, not less than ten (10) nor more than sixty (60) days before the date of the meeting, be given to each stockholder of record entitled to vote at such meeting by delivering a typewritten or printed notice thereof to him personally or by depositing such notice in the United States mail, in a postage prepaid envelope, directed to him at his post-office address furnished by him to the Secretary for such purpose, or, if he shall not have furnished to the Secretary his post-office address for such purpose, but his address shall otherwise appear on the records of the Corporation, then at his address as it shall so 3 appear on the records of the Corporation, or, if he shall not have furnished to the Secretary his post-office address for such purpose and his address shall not otherwise appear on the records of the Corporation, then at the registered office of the Corporation in the State of Delaware. If mailed, notice shall be deemed given when deposited in the United States mail, postage prepaid. Except when expressly required by law, no publication of any notice of a meeting of the stockholders shall be required. Every notice of a meeting of the stockholders shall state the place, date and hour of the meeting and, in the case of a special meeting, the purpose or purposes for which the meeting shall be called. Nevertheless, notice of any meeting of the stockholders shall not be required to be given to any stockholder who shall attend such meeting in person or by proxy except a stockholder who shall attend such meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business on the grounds that the meeting shall not have been lawfully called or convened; and, if any stockholder shall, in person or by attorney thereunto authorized, in writing or by telegraph, cable, wireless, telex, telefax or other form of recorded communication, waive notice of any meeting of the stockholders, notice thereof need not be given to him. It shall not be necessary to state in any notice of a meeting of the stockholders as a purpose thereof any matter relating to the conduct of such meeting. Except when expressly required by law, notice of any adjourned meeting of the stockholders need not be given if the time and place thereof shall be announced at the meeting at which the adjournment shall be taken, unless such adjournment shall be for more than 30 days or a new record date shall be fixed for an adjourned meeting. SECTION 1.06. Quorum. At each meeting of the stockholders, with the exception of any meeting for the election of directors summarily ordered as provided by the General Corporation Law of the State of Delaware, stockholders holding of record a majority of the shares of stock of the Corporation entitled to be voted thereat shall be present in person or by proxy to constitute a quorum for the transaction of business. In the absence of a quorum at any such meeting or any adjournment or adjournments thereof, a majority in voting interest of those present in person or by proxy and entitled to vote thereat, or in the absence therefrom of all the stockholders, any officer entitled to preside at, or to act as secretary of, such meeting may adjourn such meeting from time to time. At any such adjourned meeting at which a quorum may be present any business may be transacted which might have been transacted at the meeting as originally called. The absence from any meeting of stockholders holding the number of shares of stock of the Corporation required by the laws of the State of Delaware or by the Restated Certificate of Incorporation of the Corporation or by these By-laws for action upon any given matter shall not prevent action at such meeting upon any other matter or matters which may properly come before the meeting, if there shall be present thereat in person or by proxy stockholders holding the number of shares of stock of the Corporation required in respect of such other 4 matter or matters. SECTION 1.07. Organization. At each meeting of the stockholders the Chairman, or, if he shall be absent therefrom, the President, or if he shall be absent therefrom, a Vice Chairman, or, if there shall not be any Vice Chairman in office or if all the Vice Chairmen also shall be absent therefrom, a Vice President or another officer of the Corporation chosen as chairman of such meeting by a majority in voting interest of the stockholders present in person or by proxy and entitled to vote thereat, or, if all the officers of the Corporation shall be absent therefrom, a stockholder holding of record shares of stock of the Corporation so chosen, shall act as chairman of the meeting and preside thereat; and the Secretary, or, if he shall be absent from such meeting or shall be required pursuant to the provisions of this Section 1.07 to act as chairman of such meeting, the person (who shall be an Assistant Secretary, if an Assistant Secretary shall be present thereat) whom the chairman of such meeting shall appoint shall act as secretary of such meeting and keep the minutes thereof. SECTION 1.08. Order of Business. The order of business at each meeting of the stockholders shall be determined by the chairman of such meeting, but such order of business may be changed by the vote of a majority in voting interest of those present in person or by proxy at such meeting and entitled to vote thereat. SECTION 1.09. Voting. Except as otherwise provided in the Restated Certificate of Incorporation of the Corporation, each stockholder shall be entitled to one vote in person or by proxy for each share of stock of the Corporation held by him and registered in his name on the books of the Corporation on the date fixed pursuant to the provisions of Section 6.05 hereof as the record date for the determination of stockholders who shall be entitled to notice of and to vote at the meeting of stockholders, or to express consent to corporate action in writing without a meeting, as the case may be. Shares of its own stock belonging to the Corporation or to another corporation, if a majority of the shares entitled to vote in the election of directors of such other corporation shall be held by the Corporation, shall not be entitled to vote. Persons holding in a fiduciary capacity stock of the Corporation shall be entitled to vote such stock so held, and persons whose stock shall be pledged shall be entitled to vote such stock, unless in the transfer by the pledgor on the books of the Corporation he shall have expressly empowered the pledgee to vote thereon, in which case only the pledgee, or his proxy, may represent such stock and vote thereon. If shares of stock of the Corporation shall stand of record in the names of two or more persons, whether fiduciaries, members of a partnership, joint tenants, tenants in common, tenants by the entirety or otherwise, or if two or more persons shall have the same fiduciary relationship respecting the same shares of stock of the Corporation, unless the Secretary shall have been given written notice to the contrary and have been furnished 5 with a copy of the instrument or order appointing them or creating the relationship wherein it is so provided, their acts with respect to voting shall have the following effect: (i) if only one shall vote, his act shall bind all; (ii) if more than one shall vote, the act of the majority so voting shall bind all; and (iii) if more than one shall vote, but the vote shall be evenly split on any particular matter, then, except as otherwise required by the General Corporation Law of the State of Delaware, each faction may vote the shares in question proportionally. If the instrument so filed shall show that any such tenancy shall be held in unequal interests, the majority or even-split for the purpose of the next foregoing sentence shall be a majority or even-split in interest. Any vote on stock of the Corporation at any meeting of the stockholders by the stockholder entitled thereto, and any expression of consent or dissent to corporate action without a meeting by the stockholder entitled to express such consent or dissent, may be given in person or by his proxy appointed by an instrument in writing subscribed by such stockholder or by his attorney thereunto authorized and delivered to the Secretary of the Corporation or in the case of a vote at a meeting to such Secretary or to the Secretary of the meeting; provided, however, that no proxy shall be voted or acted upon after three (3) years from its date, unless said proxy shall provide for a longer period. At all meetings of the stockholders all matters, except those specified in Section 2.04 of these By- laws, and except also those the manner of deciding upon which shall be otherwise expressly regulated by law or by the Restated Certificate of Incorporation of the Corporation, shall be decided by the vote of a majority in voting interest of the stockholders present in person or by proxy and entitled to vote thereat, a quorum being present. Except in the case of votes for the election of directors, unless demanded by a stockholder of the Corporation present in person or by proxy at any meeting of the stockholders and entitled to vote thereat or so directed by the chairman of the meeting, the vote thereat on any other question need not be by ballot. Upon a demand of any such stockholder for a vote by ballot on any question or at the direction of such chairman that a vote by ballot be taken on any question, such vote shall be taken. On a vote by ballot each ballot shall be signed by the stockholder voting, or by his proxy, if there be such proxy, and shall state the number of shares voted. SECTION 1.10. List of Stockholders. It shall be the duty of the Secretary or other officer of the Corporation who shall have charge of its stock ledger, either 6 directly or through another officer of the Corporation designated by him or through a transfer agent appointed by the Board, to prepare and make, at least ten (10) days before every meeting of the stockholders, a complete list of the stockholders entitled to vote thereat, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten (10) days prior to said meeting, either at a place within the city where said meeting is to be held, which place shall be specified in the notice of said meeting, or, if not so specified, at the place where said meeting is to be held. The list shall also be produced and kept at the time and place of said meeting during the whole time thereof, and may be inspected by any stockholder who shall be present thereat. Upon the willful neglect or refusal of the directors to produce such list at any meeting for the election of directors, they shall be ineligible for election to any office at such meeting. The stock ledger shall be the only evidence as to who are the stockholders entitled to examine the stock ledger, such list or the books of the Corporation, or to vote in person or by proxy at any meeting of stockholders. SECTION 1.11. Inspectors of Votes. At each meeting of the stockholders the chairman of such meeting may appoint two Inspectors of Votes to act thereat. Each Inspector of Votes so appointed shall first subscribe an oath or affirmation faithfully to execute the duties of an Inspector of Votes at such meeting with strict impartiality and according to the best of his ability. Such Inspectors of Votes, if any, shall take charge of the ballots at such meeting and after the balloting thereat on any question shall count the ballots cast thereon and shall make a report in writing to the secretary of such meeting of the results thereof. An Inspector of Votes need not be a stockholder of the Corporation, and any officer of the Corporation may be an Inspector of Votes on any question other than a vote for or against his election to any position with the Corporation or on any other question in which he may be directly interested. SECTION 1.12. Consent of Stockholders in lieu of Meeting. (a) Anything in these By-laws to the contrary notwithstanding, any action required by the General Corporation Law of the State of Delaware to be, or which may be, taken at any annual or special meeting of the stockholders may be taken without a meeting, without prior notice and without a vote, if a consent or consents in writing, setting forth the action so taken, shall be signed in person or by proxy by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted and if the procedures in this Section 1.12 shall be complied with. 7 (b) A record date for determining stockholders entitled to express consent to stockholder action in writing without a meeting shall be fixed by the Board of Directors of the Corporation (a "Consent Record Date"), which record date shall not precede the date upon which the resolution fixing the Consent Record Date shall be adopted by the Board and which shall not be more than ten days after the date upon which such resolution shall have been adopted. Any stockholder seeking to have the stockholders authorize or take action by written consent without a meeting shall give written notice either by personal delivery or by United States mail, postage prepaid, to the Secretary, of the intent of such stockholder to take action by written consent, which notice shall request the Board of Directors to fix a Consent Record Date. The Board of Directors shall, within 10 days of the receipt of such notice, fix as the Consent Record Date a date which shall not precede the date upon which the resolution fixing the Consent Record Date shall be adopted by the Board and which shall not be more than ten days after the date upon which such resolution shall have been adopted. (c) Every written consent pursuant to this Section 1.12 shall bear the date of signature of each stockholder who shall sign such consent and no written consent shall be effective to take the corporate action referred to therein unless, within sixty (60) days of the date of earliest dated consent delivered to the Corporation in the manner required by this Section 1.12, written consents signed by a sufficient number of stockholders to take action shall be delivered to the Corporation by delivery to its registered office in the State of Delaware, its principal place of business or to an officer or agent of the Corporation having custody of the books in which meetings and proceedings of the stockholders shall be recorded. Delivery made to said registered office of the Corporation shall be by hand or by certified or registered mail, return receipt requested. (d) The date for determining if an action shall have been validly consented to by the holders of shares of outstanding stock of the Corporation having the requisite voting power to authorize or take such action shall be the earliest of (i) the date on which the required minimum number of votes have been received and the validity of the actions have been reviewed, (ii) the 60th day after the Consent Record Date or (iii) the 60th day after the date of the earliest consent delivered to the Corporation. (e) Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who shall not have consented in writing. 8 ARTICLE II. Board of Directors. SECTION 2.01. General Powers. The property, business and affairs of the Corporation shall be managed by or under the direction of the Board. SECTION 2.02. Number and Term of Office. Subject to the requirements of the laws of the State of Delaware and of the Restated Certificate of Incorporation of the Corporation, the Board may from time to time by the vote of the majority of the whole Board determine the number of directors. Until the Board shall otherwise so determine or Section 6 of Article FOURTH of such Restated Certificate of Incorporation shall otherwise so require, the number of directors shall be fifteen (15). Each of the directors of the Corporation shall hold office until his successor shall be elected and shall qualify, or until his death or until he shall resign or shall have been removed in the manner hereinafter provided. SECTION 2.03. Nominations for the Election of Directors. Subject to the rights of the holders of any class or series of stock having a preference over the Common Stock as to dividends or upon liquidation and otherwise subject to the rights of stockholders under the General Corporation Law of the State of Delaware, nominations for the election of directors shall be made by the Board. Any stockholder entitled to vote for the election of directors at a meeting may recommend for nomination by the Board persons for election as directors. Written notice of the recommendation of such stockholder shall be given, either by personal delivery or by United States mail, postage prepaid, to the Secretary of the Corporation not later than (i) with respect to an election to be held at an annual meeting of stockholders, on the date designated in Section 1.01 hereof, 90 days in advance of such meeting and (ii) with respect to an election to be held at a special meeting of stockholders for the election of directors, the close of business on the tenth day following the date on which notice of such meeting shall first be given to stockholders. Each such notice shall set forth: (a) the name and address of the stockholder who shall make such recommendation and of the person or persons to be nominated; (b) a representation that the stockholder is a holder of record of stock of the Corporation entitled to vote at such meeting; (c) a description of all arrangements or understandings between the stockholder and each nominee and any other person or persons (naming such person or persons) pursuant to which the nomination or nominations are recommended by the stockholder; (d) such other information regarding each recommended person proposed by such stockholder as would have been required to be included in a proxy statement filed pursuant to the proxy rules of the Securities and Exchange Commission had each such person been nominated, or intended to be nominated, by the Board of Directors; 9 and (e) the consent in writing of each such person to serve as a director of the Corporation if so elected. The chairman of the meeting may refuse to acknowledge the nomination of any person not recommended in compliance with the foregoing procedure. SECTION 2.04. Election of Directors. At each meeting of the stockholders entitled to vote for the election of directors at which a quorum shall be present, the persons receiving the greatest number of votes, up to the number of directors to be elected, shall be the directors. Such election shall be by ballot in accordance with the provisions of Section 1.09 hereof. SECTION 2.05. Organization. At each meeting of the Board the Chairman, or, if he shall be absent therefrom, the President, or, if he shall be absent therefrom, a Vice Chairman or, if there shall not be any Vice Chairman in office or if all the Vice Chairmen also shall be absent therefrom, a director chosen by a majority of the directors present thereat, shall act as chairman of such meeting and preside thereat. The Secretary, or in case of his absence the person whom the chairman of such meeting shall appoint, shall act as secretary of such meeting and keep the minutes thereof. SECTION 2.06. Resignations. Any director may resign at any time by giving written notice of his resignation to the Corporation. Any such resignation shall take effect at the time specified therein, or, if the time when it shall become effective shall not be specified therein, then it shall take effect immediately upon its receipt by the Chairman, the President, any of the Vice Chairmen, or the Secretary; and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. SECTION 2.07. Vacancies, etc. In case of any increase in the number of directors, the additional director or directors, and, in case of any vacancy in the Board due to death, resignation, disqualification, removal or any other cause, the successor to fill the vacancy shall be elected by the holders of shares of stock entitled to vote at an annual or special meeting of said holders or by a majority of the directors then in office, though less than a quorum, or by a sole remaining director. When one or more directors shall resign from the Board, effective at a future date, a majority of the directors then in office, including those who shall have so resigned, shall have the power to fill such vacancy or vacancies, the vote thereon to take effect when such resignation or resignations shall become effective. SECTION 2.08. Place of Meeting, etc. The Board may hold its meetings at such place or places within or without the State of Delaware as the Board may from 10 time to time by resolution determine or as shall be designated in the respective notices or waivers of notice thereof. SECTION 2.09. First Meeting. As soon as practicable after each annual election of directors, the Board shall meet for the purpose of organization and the transaction of other business. SECTION 2.10. Regular Meetings. Regular meetings of the Board shall be held at such times as the Board shall from time to time by resolution determine. If any day fixed for a regular meeting shall be a legal holiday at the place where the meeting is to be held, then the meeting which would otherwise be held on that day shall be held at the same hour on the next succeeding business day. Except as otherwise provided by law, notices of regular meetings need not be given. SECTION 2.11. Special Meetings; Notice. Special meetings of the Board shall be held whenever called by the Chairman, the President, the Secretary or a majority of the directors at the time in office. A notice shall be given as hereinafter in this Section 2.11 provided of each such special meeting, in which shall be stated the time and place of such meeting, but, except as otherwise expressly provided by law or by these By-laws, the purposes thereof need not be stated in such notice. Except as otherwise provided by law, notice of each such meeting shall be mailed to each director, addressed to him at his residence or usual place of business, at least two (2) days before the day on which such meeting is to be held, or shall be sent addressed to him at such place by telegraph, cable, wireless, telex, telefax or other form of recorded communication or be delivered personally or by telephone not later than the day before the day on which such meeting is to be held. Notice of any meeting of the Board need not, however, be given to any director who shall attend such meeting except a director who shall attend such meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business on the grounds that the meeting shall not have been lawfully called or convened; and, if any director shall, in writing or by telegraph, cable, wireless, telex, telefax or other form of recorded communication, waive notice of any meeting of the Board, notice thereof need not be given to him. SECTION 2.12. Quorum and Manner of Acting. Subject to the provisions of Section 2.07 hereof, a majority of the whole Board shall be present in person at any meeting of the Board (participation in a meeting by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other to constitute presence in person at such meeting) in order to constitute a quorum for the transaction of business at such meeting and, except as specified in Sections 1.02, 1.03, 2.02, 2.07, 3.01, 3.05, 3.06, 3.07, 3.08, 4.01, 4.04, 4.07, and 4.21 hereof, and except also as otherwise expressly provided by law, the vote 11 of a majority of the directors present at any such meeting at which a quorum is present shall be the act of the Board; provided, however, that any person who shall both be in the employ of the Corporation or of one or more of its subsidiary companies and be a director of the Corporation (herein "Executives of the Corporation") shall not as a member of the Board have any vote in the determination of the amount that shall be paid to him as a fixed salary or as any other form of compensation and provided further that in the case of a vote in good faith authorizing any contract or transaction between the Corporation and one or more of its directors or officers, or between the Corporation and any other corporation, partnership, association or other organization in which one or more of its directors or officers are directors or officers or have a financial interest, if the material facts as to the relationship or interest of the directors or officers of the Corporation as to the contract or transaction are disclosed or known to the Board, the affirmative votes of a majority of the disinterested directors of the Corporation, even though the disinterested directors shall be less than a quorum, shall be the act of the Board. In the absence of a quorum from any such meeting, a majority of the directors present thereat may adjourn such meeting from time to time until a quorum shall be present thereat. Notice of any adjourned meeting need not be given. The directors shall act only as a board and the individual directors shall have no power as such. Anything in these By-laws to the contrary notwithstanding, any action required or permitted to be taken at any meeting of the Board may be taken without a meeting if all members of the Board consent thereto in writing and the writing or writings are filed with the minutes of proceedings of the Board. SECTION 2.13. Removal of Directors. Any director may be removed, either with or without cause, at any time, by the affirmative vote of stockholders of record of the Corporation holding of record a majority of the shares then entitled to vote at an election of directors; and the vacancy in the Board caused by any such removal may be filled as provided in Section 2.07 hereof. In the case of the removal of a director for cause, "Cause" is hereby defined as the willful and continuous failure substantially to perform one's duties to the Corporation or the willful engaging in gross misconduct materially and demonstrably injurious to the Corporation. SECTION 2.14. Compensation. Unless otherwise expressly provided by resolution adopted by the Board, neither any of the directors nor any of the members of any committee of the Corporation contemplated by these By-laws or otherwise provided for by resolution of the Board shall, as such, receive any stated compensation for his services; but the Board may at any time or from time to time by resolution provide that a specified sum shall be paid to any director of the Corporation or to any member of any such committee who shall not otherwise be in the employ of the Corporation or of any of its subsidiary companies, either as his annual compensation as such director or member or as compensation for his attendance at meetings of the 12 Board or of such committee. The Board may also likewise provide that the Corporation shall reimburse each such director or member of such committee for any expenses paid by him on account of his attendance at any such meeting. Nothing in this Section 2.14 contained shall be construed to preclude any director from serving the Corporation in any other capacity and receiving compensation therefor. ARTICLE III. Committees. SECTION 3.01. Executive Committee; How Constituted and Powers. The Board, by resolution adopted by a majority of the whole Board, may designate not less than two (2) of the directors then in office, who shall include the Chairman and the President, to constitute an Executive Committee (herein called the "Executive Committee") which during the intervals between meetings of the Board of Directors shall have and may exercise all the delegable powers of the Board to the extent permitted by law and as provided in said resolution or in another resolution or other resolutions so adopted by the Board; and it shall have power to authorize the seal of the Corporation to be affixed to all papers which may require it. SECTION 3.02. Organization, etc. The Chairman or, if he shall be absent therefrom, the President shall act as chairman at all meetings of the Executive Committee and the Secretary shall act as secretary thereof. In case of the absence from any meeting of the Committee of the Chairman, the President, or the Secretary, the Committee may appoint a chairman or secretary, as the case may be, of the meeting. SECTION 3.03. Meetings. Regular meetings of the Executive Committee, of which notice shall not be necessary, shall be held on such days and at such places, within or without the State of Delaware, as shall be fixed by resolution adopted by a majority of the Committee and communicated to all its members. Special meetings of the Committee shall be held whenever called by the Chairman, the President, the Secretary or a majority of the members of such Committee then in office. Notice of each special meeting of the Committee shall be given by mail, telegraph, cable, wireless, telex, telefax or other form of recorded communication or be delivered personally or by telephone to each member of the Committee not later than the day before the day on which such meeting is to be held. Notice of any such meeting need not, however, be given to any member of the Committee who shall attend such meeting except a member of the Committee who shall attend such meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any 13 business on the grounds that the meeting shall not have been lawfully called or convened; and, if any member of the Committee shall, in writing or by telegraph, cable, wireless, telex, telefax or other form of recorded communication, waive notice of any meeting of the Committee, notice thereof need not be given to him. Subject to provisions of this Article III, the Committee, by resolution adopted by a majority of the whole Committee, shall fix its own rules of procedure, and it shall keep a record of its proceedings and report them to the Board at the next regular meeting thereof after such proceedings shall have been taken. All such proceedings shall be subject to revision or alteration by the Board; provided, however, that third parties shall not be prejudiced by any such revision or alteration. SECTION 3.04. Quorum and Manner of Acting. A majority of the Executive Committee shall be present in person at any meeting of the Committee (participation in a meeting by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other to constitute presence in person at such meeting) in order to constitute a quorum for the transaction of business, and the act of a majority of those present at a meeting thereof at which a quorum shall be present shall be the act of the Committee; provided, however, that in the case of a vote in good faith authorizing any contract or transaction between the Corporation and one or more of its directors or officers, or between the Corporation and any other corporation, partnership, association or other organization in which one more of its directors or officers shall be directors or officers or have a financial interest, if the material facts as to the relationship or interest of the directors or officers of the Corporation as to the contract or transaction shall be disclosed or known to the Executive Committee, the vote of a majority of the disinterested members of the Committee, even though the disinterested members shall be less than a quorum, shall be the act of the Committee. The members of the Committee shall act only as a committee, and the individual members shall have no power as such. SECTION 3.05. Resignations; Removal; Vacancies. Any member of the Executive Committee may resign therefrom at any time by giving written notice of his resignation to the Corporation. Any such resignation shall take effect at the time specified therein, or, if the time when it shall become effective shall not be specified therein, then it shall take effect immediately upon its receipt by the Corporation; and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. The Board by resolution adopted by a majority of the whole Board may remove any member of the Executive Committee. Any vacancy in the Executive Committee shall be filled by the vote of a majority of the whole Board. SECTION 3.06. Other Committees. The Board, by resolution adopted by a majority of the whole Board, shall constitute a Finance Committee, which shall consist 14 of not less than three (3) members, the majority of whom shall be directors and one of whom shall be designated by the Board to act as chairman of such Committee. Subject to any limitations prescribed by the Board, the Finance Committee shall have authority to advise with the Board, the Executive Committee and the officers and employees of the Corporation with respect to all activities, plans and policies affecting the financial affairs of the Corporation. The Board, by resolution adopted by a majority of the whole Board, shall constitute an Audit Committee, an Executive Compensation Committee, a Nominating Committee and such other committees as it may determine, which shall in each case consist of such directors and, at the discretion of the Board, such officers of the Corporation who shall not be directors and shall have and may exercise such powers as the Board may by resolution determine and specify in the respective resolutions appointing them; provided, however, that (a) unless all the members of any committee shall be directors, such committee shall not have authority to exercise any of the powers of the Board in the management of the business and affairs of the Corporation, and (b) if any committee shall have the power to determine the amounts of the respective fixed salaries of the Executives of the Corporation or any of them, such committee shall consist of not less than three (3) members and none of its members shall have any vote in the determination of the amount that shall be paid to him as a fixed salary. SECTION 3.07. Procedures. A majority of all the members of the Finance Committee or of any other Committee organized pursuant to Section 3.06 hereof may fix its rules of procedure, determine its action and fix the time and place, whether within or without the State of Delaware, of its meetings (participation in a meeting by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other to constitute presence in person at such meeting) and specify what notice thereof, if any, shall be given, unless the Board shall otherwise by resolution provide. The Board, by resolution adopted by a majority of the whole Board, shall have power to change the members of any committee referred to in this Section 3.07 at any time, to fill vacancies therein and to discharge any such committee, either with or without cause, at any time. SECTION 3.08. Action by Consent in Writing. Anything in these By- laws to the contrary notwithstanding, any action required or permitted to be taken at any meeting of any committee referred to in this Article III may be taken without a meeting if all members of the committee shall consent thereto in writing and the writing or writings shall be filed with the minutes of proceedings of the committee. 15 ARTICLE IV. Officers. SECTION 4.01. Number. The Corporation shall have the following officers as determined by a resolution or resolutions adopted by a majority of the whole Board: a Chairman (who shall be a director), a President (who shall be a director), one or more Vice Chairmen (one or more of whom may be directors), one or more Vice Presidents (one or more of whom may be directors and may be designated an Executive Vice President, a Group Executive Vice President or a Senior Vice President), one or more Assistant Vice Presidents, a Controller, one or more Assistant Controllers, a General Counsel, a Treasurer, one or more Assistant Treasurers, a Secretary and one or more Assistant Secretaries. SECTION 4.02. Election and Term of Office. The officers determined as in Section 4.01 hereof provided shall be chosen annually by the Board. Each such officer shall hold office until his successor shall have been elected and shall qualify or until his earlier death or his earlier resignation or removal in the manner hereinafter provided. SECTION 4.03. Agents, etc. In addition to the officers determined as in Section 4.01 hereof provided, the Board may appoint such agents as the Board may deem necessary or advisable, each of which agents shall have such authority and perform such duties as are provided in these By-laws or as the Board may from time to time determine. The Board may delegate to any officer or to any committee the power to appoint or remove any such agents. SECTION 4.04. Removal. Any officer may be removed, either with or without cause, at any time, by resolution adopted by a majority of the whole Board. In the case of the removal of an officer for cause, "Cause" is hereby defined as the willful and continuous failure substantially to perform one's duties to the Corporation or the willful engaging in gross misconduct materially and demonstrably injurious to the Corporation. SECTION 4.05. Resignations. Any officer may resign at any time by giving written notice of his resignation to the Corporation. Any such resignation shall take effect at the time specified therein, or, if the time when it shall become effective shall not be specified therein, then it shall take effect immediately upon its receipt by the Corporation; and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. 16 SECTION 4.06. Vacancies. A vacancy in any office due to death, resignation, removal, disqualification or any other cause may be filled for the unexpired portion of the term in the manner prescribed in these By-laws for regular appointments or elections to such office. SECTION 4.07. Chief Executive Officer. The Chief Executive Officer shall be designated from time to time by a resolution adopted by a majority of the whole Board and shall, unless otherwise determined by the Board, be either the Chairman or the President. He shall have, subject to the direction and control of the Board, general and active supervision over the business and affairs of the Corporation and over its several officers. He shall perform all duties incident to his position and such other duties as from time to time may be assigned to him by the Board. He shall see that all orders and resolutions of the Board shall be carried into effect. He may sign, execute and deliver in the name of the Corporation all deeds, mortgages, bonds, contracts or other instruments authorized by the Board, except in cases where the signing, execution or delivery thereof shall be expressly delegated by the Board or by a duly authorized committee of the Board or by these By-laws to some other officer or agent of the Corporation or where any of them shall be required by law otherwise to be signed, executed or delivered, and he may cause the seal of the Corporation to be affixed to any documents the execution of which on behalf of the Corporation shall have been duly authorized. SECTION 4.08. Chairman. The Chairman shall perform such duties as from time to time may be assigned to him by the Board. He shall, if present, preside at all meetings of the stockholders and at all meetings of the Board. He shall make a report of the state of the business of the Corporation at each annual meeting of the stockholders and from time to time he shall report to the stockholders and to the Board all matters within his knowledge which in his judgment the interests of the Corporation may require to be brought to their notice. SECTION 4.09. President. The President shall perform such duties as from time to time may be assigned to him by the Board. At the request of the Chairman or in the case of his absence or inability to act, the President shall perform the duties of the Chairman and, when so acting, shall have the powers of, and shall be subject to all restrictions upon, the Chairman. SECTION 4.10. Vice Chairmen. Each of the Vice Chairmen shall have such powers and perform such duties as the Chief Executive Officer or the Board may from time to time assign to him and shall perform such other duties as may be prescribed by these By-laws. At the request of the Chairman or the President, or in case of their absence or inability to act, any Vice Chairman shall perform the duties of the 17 Chairman or the President and, when so acting, shall have the powers of, and be subject to all the restrictions upon, the Chairman and the President. SECTION 4.11. Executive Office. The Chairman, the President and such other officers as shall from time to time be designated by the Chief Executive Officer, shall constitute the Executive Office of the Corporation. Each officer in the Executive Office shall consult with the Chief Executive Officer as to matters relating to the business and affairs of the Corporation, and each shall have such powers and perform such duties as the Chief Executive Officer or the Board may from time to time assign to him and each shall perform such other duties as may be prescribed for him by these By-laws. SECTION 4.12. Vice Presidents. Each of the Vice Presidents (including each of the Executive Vice Presidents, Group Executive Vice Presidents and Senior Vice Presidents) shall have such powers and perform such duties as the officer in the Executive Office to whom he shall report, the Chief Executive Officer or the Board may from time to time assign to him and shall perform such other duties as may be prescribed by these By-laws. At the request of any officer in the Executive Office, or, in case of their absence or inability to act, any Vice President (including any Executive Vice President, Group Executive Vice President and any Senior Vice President) who shall report to an officer in the Executive Office shall perform the duties of that officer and, when so acting, shall have all the powers of, and be subject to all the restrictions upon, that officer. SECTION 4.13. Assistant Vice Presidents. At the request of any Vice President, or in case of his absence or inability to act, the Assistant Vice President, if there shall be one, or, if there shall be more than one, any of the Assistant Vice Presidents shall perform the duties of the Vice President to whom he shall report, and, when so acting, shall have all the powers of, and be subject to all the restrictions upon, that Vice President. Each of the Assistant Vice Presidents shall perform such other duties as from time to time may be assigned to him by the Vice President to whom he shall report, the officer in the Executive Office to whom such Vice President shall report, the President, the Chairman or the Board. SECTION 4.14. Controller. The Controller shall keep or cause to be kept correct records of the business and transactions of the Corporation and shall, upon request, at all reasonable times exhibit or cause to be exhibited such records to any of the directors of the Corporation at the place where such records shall be kept. He shall perform such other duties as from time to time may be assigned to him by the officer to whom he shall report, any officer in the Executive Office, the Chief Executive Officer or the Board. 18 SECTION 4.15. Assistant Controllers. At the request of the Controller, or in case of his absence or inability to act, the Assistant Controller, or, if there be more than one, any of the Assistant Controllers, shall perform the duties of the Controller, and, when so acting, shall have all the powers of, and be subject to all the restrictions upon, the Controller. Each of the Assistant Controllers shall perform such other duties as from time to time may be assigned to him by the Controller, the officer to whom the Controller shall report, any officer in the Executive Office, the Chief Executive Officer or the Board. SECTION 4.16. General Counsel. The General Counsel shall be the chief legal officer of the Corporation and shall have, subject to the control of the Chief Executive Officer, the officer to whom he shall report, and the Board, general and active supervision and direction over the legal affairs of the Corporation. He shall have such other powers and perform such other duties as the Chief Executive Officer, the officer to whom he shall report, or the Board may from time to time prescribe and shall perform such other duties as may be prescribed by these By-laws. SECTION 4.17. Treasurer. If required by the Board, the Treasurer shall give a bond for the faithful discharge of his duties in such sum and with such surety or sureties as the Board shall determine. He shall: (a) have charge and custody of, and be responsible for, all funds, securities, notes and valuable effects of the Corporation; receive and give receipt for moneys due and payable to the Corporation from any sources whatsoever; deposit all such moneys to the credit of the Corporation or otherwise as any Chairman, the President, the officer to whom he shall report, or the Board shall direct in such banks, trust companies or other depositaries as shall be selected in accordance with the provisions of Section 5.07 hereof; cause such funds to be disbursed by checks or drafts on the authorized depositaries of the Corporation signed as provided in Section 5.05 hereof; and be responsible for the accuracy of the amounts of, and cause to be preserved proper vouchers for, all moneys so disbursed; (b) have the right to require from time to time reports or statements giving such information as he may desire with respect to any and all financial transactions of the Corporation from the officers or agents transacting the same; (c) render to the Chairman, the President, the officer to whom he shall report, or the Board, whenever they, respectively, shall request him so to do, an account of the financial condition of the Corporation and of all his transactions as Treasurer; 19 (d) upon request, exhibit or cause to be exhibited at all reasonable times, at the place where they shall be kept, his cash books and other records to the Controller, the Chairman, the President, the officer to whom he shall report, or the Board; and (e) in general, perform all duties incident to the office of Treasurer and such other duties as from time to time may be assigned to him by the Chairman, the President, the officer to whom he shall report, or the Board. SECTION 4.18. Assistant Treasurers. If required by the Board, each of the Assistant Treasurers shall give a bond for the faithful discharge of his duties in such sums and with such surety or sureties as the Board shall determine. At the request of the Treasurer, or in case of his absence or inability to act, the Assistant Treasurer, or, if there be more than one, any of the Assistant Treasurers, shall perform the duties of the Treasurer, and, when so acting, shall have all the powers of, and be subject to all the restrictions upon, the Treasurer. Each of the Assistant Treasurers shall perform such other duties as from time to time may be assigned to him by the Treasurer, the Chairman, the President or the Board. SECTION 4.19. Secretary. The Secretary shall: (a) record all the proceedings of the meetings of the stockholders, the Board, the Executive Committee and the Finance Committee in one or more books kept for that purpose; (b) see that all notices shall be duly given in accordance with the provisions of these By-laws or as required by law; (c) be custodian of the seal of the Corporation, and shall see that such seal, or, if authorized by the Board, a facsimile thereof, shall be affixed to any documents the execution of which on behalf of the Corporation shall be duly authorized and may attest such seal when so affixed; (d) have charge, directly or through the transfer agent or transfer agents and registrar or registrars appointed as in Section 6.03 hereof provided, of the issue, transfer and registration of certificates for stock of the Corporation and of the records thereof, such records to be kept in such manner as to show the information specified in Section 6.01 hereof; (e) upon request, exhibit or cause to be exhibited at all reasonable times to the Board, at the place where they shall be kept, such records of the 20 issue, transfer and registration of the certificates for stock of the Corporation; (f) sign with a Vice President, a Vice Chairman, the Chairman or the President certificates for stock of the Corporation; (g) see that the books, reports, statements, certificates and all other documents and records required by law shall be properly kept and filed; (h) see that the duties prescribed by Section 1.09 hereof shall be performed; and (i) in general, perform all duties incident to the office of Secretary and such other duties as from time to time may be assigned to him by the Chairman, the President, the officer to whom he shall report, or the Board. SECTION 4.20. Assistant Secretaries. At the request of the Secretary, or in case of his absence or inability to act, the Assistant Secretary, or, if there shall be more than one, any of the Assistant Secretaries, shall perform the duties of the Secretary and, when so acting, shall have all the powers of, and be subject to all the restrictions upon, the Secretary. Each of the Assistant Secretaries shall perform such other duties as from time to time may be assigned to him by the Secretary, the Chairman, the President or the Board. SECTION 4.21. Salaries. The salaries and other forms of compensation (other than those the fixing of which shall have been specifically delegated to a committee of the Board) of the officers of the Corporation shall be fixed from time to time by the Board or by any one or more committees (none of which shall consist of less than three (3) members) appointed by a resolution passed by a majority of the whole Board with power to fix such salaries or such compensation, and none of such officers shall be prevented from receiving a salary by reason of the fact that he shall be also a member of the Board or of any such committee; but none of such officers who shall also be a member of the Board or of any such committee shall have any vote in the determination of the amount of salary that shall be paid to him. ARTICLE V. Contracts, Checks, Drafts, Bank Accounts, Etc. SECTION 5.01. Contracts with Governmental Authorities. All bids and proposals for contracts with the Federal or with any municipal, county, territorial or 21 state government or with any authority, branch or division thereof, or with any foreign government or with any authority, branch or division thereof, and all contracts between the Corporation and any such government or authority, branch or division thereof, and all bonds and undertakings for the faithful performance of such contracts, and all vouchers and receipts in connection therewith, may be executed and delivered in the name of the Corporation and on its behalf by the Chairman, the President, a Vice Chairman, a Vice President, the Treasurer or the Secretary; and no further authority, whether by resolution of the Board or otherwise, shall be necessary to make such instrument valid and binding upon the Corporation. SECTION 5.02. Appointment of Agents. The Board, by resolution, or the Chairman, the President, a Vice Chairman, a Vice President, the Treasurer or the Secretary, by an instrument in writing filed with the Secretary, may from time to time appoint agents and grant to such agents the power to execute and deliver in the name of the Corporation and on its behalf (i) any bid or proposal for any contract with the Federal or with any municipal, county, territorial or state government or with any authority, branch or division thereof, or with any foreign government or with any authority, branch or division thereof, (ii) any contract between the Corporation and any such government or authority, branch or division thereof, (iii) any bond or undertaking for the faithful performance of any such contract and (iv) any voucher or receipt in connection therewith. SECTION 5.03. Execution of Other Contracts, etc. Except as otherwise required by law or by these By-laws, any contract or other instrument may be executed and delivered in the name of the Corporation and on its behalf by the Chairman, the President, a Vice Chairman, a Vice President, the Treasurer or the Secretary; and the Board, by resolution, or the Chairman, the President, a Vice Chairman, a Vice President, the Treasurer or the Secretary, by an instrument in writing filed with the Secretary, may authorize any other officer or officers or agent or agents to execute and deliver any contract or other instrument in the name of the Corporation and on its behalf, and such authority may be general or confined to specific instances. SECTION 5.04. Loans. Unless the Board shall otherwise determine, any two (2) of the following officers, to wit: the Chairman, the President, a Vice Chairman, a Vice President, the Treasurer and the Secretary, acting together, or any officer or officers authorized by a resolution of the Board may effect loans and advances at any time for the Corporation from any bank, trust company or other institution or from any firm or individual and for such loans and advances may make, execute and deliver promissory notes or other evidences of indebtedness of the Corporation, but no officer or officers shall mortgage, pledge, hypothecate or otherwise transfer for security any property whatsoever owned or held by the Corporation except when authorized by 22 resolution adopted by the Board. SECTION 5.05. Checks, Drafts, etc. All checks, drafts, orders for the payment of money, bills of lading, warehouse receipts, obligations, bills of exchange and insurance certificates shall be signed or endorsed (except endorsements for collection for the account of the Corporation or for deposit to its credit) by such officer or officers or agent or agents of the Corporation and in such manner as shall from time to time be determined by resolution of the Board. SECTION 5.06. Deposits. All funds of the Corporation not otherwise employed shall be deposited from time to time to the credit of the Corporation or otherwise as the Board, the Chairman, the President, any Vice Chairman, or the Treasurer shall direct in such banks, trust companies or other depositaries as the Board may select or as may be selected by any officer or officers or agent or agents of the Corporation to whom power in that respect shall have been delegated by the Board. For the purpose of deposit and for the purpose of collection for the account of the Corporation, checks, drafts and other orders for the payment of money which shall be payable to the order of the Corporation may be endorsed, assigned and delivered by any officer or agent of the Corporation. SECTION 5.07. General and Special Bank Accounts. The Board may from time to time authorize the opening and keeping of general and special bank accounts with such banks, trust companies or other depositaries as the Board may select, or as may be selected by any officer or officers or agent or agents of the Corporation to whom power in that respect shall have been delegated by the Board. The Board may make such special rules and regulations with respect to such bank accounts, not inconsistent with the provisions of these By-laws, as it may deem expedient. SECTION 5.08. Proxies in Respect of Stock or Other Securities of Other Corporations. Unless otherwise provided by resolution adopted by the Board, the Chairman, the President, a Vice Chairman, a Vice President or the Secretary may from time to time appoint an attorney or attorneys or an agent or agents of the Corporation to exercise in the name and on behalf of the Corporation the powers and rights which the Corporation may have as the holder of stock or other securities in any other corporation to vote or consent in respect of such stock or other securities, and the Chairman, the President, a Vice Chairman, a Vice President or the Secretary may instruct the person or persons so appointed as to the manner of exercising such powers and rights; and the Chairman, the President, a Vice Chairman, a Vice President or the Secretary may execute or cause to be executed in the name and on behalf of the Corporation and under its corporate seal, or otherwise, all such written proxies or other instruments as he may deem necessary or proper in order that the Corporation may 23 exercise its said powers and rights. ARTICLE VI. Shares and Their Transfer. SECTION 6.01. Certificates for Stock. Every owner of stock of the Corporation of any class (or, if stock of any class shall be issuable in series, any series of such class) shall be entitled to have a certificate registered in his name in such form as the Board shall prescribe, certifying the number of shares of stock of the Corporation of such class, or such class and series, owned by him. The certificates representing shares of stock of each class (or, if there shall be more than one series of any class, each series of such class) shall be numbered in the order in which they shall be issued and shall be signed in the name of the Corporation by the Chairman or the President or a Vice Chairman or a Vice President and by the Secretary or an Assistant Secretary. Any of or all the signatures on any such certificate may be facsimiles. In case any officer or officers or transfer agent or registrar of the Corporation who shall have signed, or whose facsimile signature or signatures shall have been placed upon, any such certificate shall cease to be such officer or officers or transfer agent or registrar before such certificate shall have been issued, such certificate may be issued by the Corporation with the same effect as though the person or persons who shall have signed such certificate, or whose facsimile signature or signatures shall have been placed thereupon, were such officer or officers or transfer agent or registrar at the date of issue. Records shall be kept of the amount of the stock of the Corporation issued and outstanding, the manner in which and the time when such stock was paid for, the respective names, alphabetically arranged, and the addresses, of the persons, firms or corporations owning of record the stock represented by certificates for stock of the Corporation, the number, class and series of shares represented by such certificates, respectively, the time when each became an owner of record thereof, and the respective dates of such certificates, and in case of cancellation, the respective dates of cancellation. Every certificate surrendered to the Corporation for exchange or transfer shall be canceled and a new certificate or certificates shall not be issued in exchange for any existing certificate until such existing certificate shall have been so canceled except in cases provided for in Section 6.04 hereof. SECTION 6.02. Transfers of Stock. Transfers of shares of stock of the Corporation shall be made only on the books of the Corporation by the registered owner thereof, or by his attorney thereunto authorized by power of attorney duly executed and filed with the Secretary, or with a transfer agent appointed as in Section 6.03 hereof provided, and upon surrender of the certificate or certificates for 24 such shares properly endorsed and payment of all taxes thereon. The person in whose name shares of stock shall be registered on the books of the Corporation shall be deemed the owner thereof for all purposes as regards the Corporation. Whenever any transfer of shares shall be made for collateral security and not absolutely, such fact shall be so expressed in the entry of transfer if, when the certificate or certificates shall be presented to the Corporation for transfer, both the transferor and the transferee shall in writing request the Corporation to do so. SECTION 6.03. Regulations. The Board may make such rules and regulations as it may deem expedient, not inconsistent with these By-laws, concerning the issue, transfer and registration of certificates for stock of the Corporation. The Board may appoint, or authorize any officer or officers to appoint, one or more transfer agents and one or more registrars, and may require all certificates for stock to bear the signature or signatures of any of them. SECTION 6.04. Lost, Stolen, Destroyed and Mutilated Certificates. The registered owner of any stock of the Corporation shall immediately notify the Corporation of any loss, theft, destruction or mutilation of the certificate therefor, and the Corporation may issue a new certificate for stock in the place of any certificate theretofore issued by it and alleged to have been lost, stolen or destroyed, and the Corporation may, in its discretion, require the registered owner of the lost, stolen or destroyed certificate or his legal representatives to give the Corporation a bond in such sum, limited or unlimited, and in such form and with such surety or sureties, as the Corporation shall in its uncontrolled discretion determine, to indemnify the Corporation against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate, or the issuance of such new certificate. The Corporation may, however, in its discretion refuse to issue any such new certificate except pursuant to legal proceedings under the laws of the State of Delaware in such case made and provided. SECTION 6.05. Fixing Date for Determination of Stockholders of Record in Certain Case. (a) In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, the Board may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date shall be adopted by the Board, and which record date shall not be more than sixty (60) nor less than ten (10) days before the date of such meeting. If no record date shall be fixed by the Board the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice shall be given, or, if notice shall be waived, at the close of business on the day next preceding the day on which the meeting is held. A determination of 25 stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board may fix a new record date for the adjourned meeting. (b) In order that the Corporation may determine the stockholders entitled to receive payment of any dividend or other distribution or allotment of any rights or the stockholders entitled to exercise any rights in respect of any change, conversion or exchange of stock, or for the purpose of any other lawful action, the Board may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date shall be adopted, and which record date shall be not more than sixty (60) days prior to such action. If no record date shall be fixed, the record date for determining stockholders for any such purpose shall be at the close of business on the day on which the Board shall adopt the resolution relating thereto. ARTICLE VII. Offices, Etc. SECTION 7.01. Registered Office. The registered office of the Corporation in the State of Delaware shall be in the City of Wilmington, County of New Castle, and the registered agent of the Corporation in said State is The Corporation Trust Company. SECTION 7.02. Other Offices. The Corporation may also have one or more offices other than said registered office at such place or places, either within or without the State of Delaware, as the Board may from time to time appoint or as the business of the Corporation may require and may keep the books and records of the Corporation in such place or places within or without said State as the Board may from time to time by resolution determine. ARTICLE VIII. Dividends, Surplus, Etc. SECTION 8.01. Dividends, Surplus, Etc. Subject to the provisions of law, of the Restated Certificate of Incorporation of the Corporation and of these By-laws, the Board may declare and pay dividends upon the shares of the stock of the Corporation either (a) out of its surplus as defined in and computed in accordance with the provisions of the laws of the State of Delaware or (b), in case it shall not have any 26 such surplus, out of its net profits for the fiscal year in which the dividend shall be declared and/or the preceding fiscal year, whenever and in such amounts as, in the opinion of the Board, the condition of the affairs of the Corporation shall render it advisable. The Board in its discretion may use and apply any of such surplus or such net profits in purchasing or acquiring any of the shares of the stock of the Corporation in accordance with law, or any of its bonds, debentures, notes, scrip or other securities or evidences of indebtedness, or from time to time may set aside from such surplus or such net profits such sum or sums as it, in its absolute discretion, may think proper, as a reserve fund to meet contingencies, or for equalizing dividends, or for the purpose of maintaining or increasing the property or business of the Corporation, or for any other purpose it may think conducive to the best interests of the Corporation; provided, however, that the Corporation shall not use its funds or property for the purchase of shares of its stock when the capital of the Corporation shall be impaired or when such use would cause any impairment of its capital. All such surplus or such net profits, until actually declared in dividends, or used and applied as aforesaid, shall be deemed to have been so set aside by the Board for one or more of said purposes. ARTICLE IX. Indemnification of Directors, Officers, Employees and Agents. SECTION 9.01. Third Party Actions. (a) The Corporation, to the full extent permitted, and in the manner required, by the laws of the State of Delaware as in effect at the time of the adoption of this Article IX or as such laws may be amended from time to time, shall indemnify any person who shall have been or shall be made a party to or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding (including any appeal thereof), whether civil, criminal, administrative or investigative (other than an action by or in the right of the Corporation), by reason of the fact that such person shall have been or shall be a director or officer of the Corporation, or, if at a time when he shall have been or shall be a director or officer of the Corporation, shall have been or shall be serving at the request of the Corporation as a director, officer, partner, trustee, fiduciary, employee or agent (a "Subsidiary Officer") of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise (an "Affiliated Entity"), against expenses (including attorneys' fees), costs, judgments, fines, penalties and amounts paid in settlement actually and reasonably incurred by such person in connection with such action, suit or proceeding if such person shall have acted in good faith and in a manner such person shall have reasonably believed to be in or not opposed to the best interest of the Corporation, and, with respect to any criminal action or proceeding, shall have had no reasonable cause to believe his or her conduct was unlawful; provided, 27 however, that the Corporation shall not be obligated to indemnify against any amount paid in settlement unless the Corporation shall have consented to such settlement, which consent shall not be unreasonably withheld. The termination of any action, suit or proceeding by judgment, order, settlement, conviction or upon a plea of nolo contendere or its equivalent shall not, of itself, create a presumption that the person shall not have acted in good faith and in a manner which such person shall have reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, that such person shall have had reasonable cause to believe that his conduct was unlawful. Notwithstanding anything to the contrary in the foregoing provisions of this paragraph (a), a person shall not be entitled, as a matter of right, to indemnification pursuant to this paragraph (a) against costs or expenses incurred in connection with any action, suit or proceeding commenced by such person against any person who shall have been or shall be a director, officer, fiduciary, employee or agent of the Corporation or a Subsidiary Officer of an Affiliated Entity, but such indemnification may be provided by the Corporation in any specific case as permitted by Section 9.06 hereof. (b) The Corporation may indemnify any employee or agent of the Corporation in the manner and to the extent that it shall indemnify any director or officer under this Section 9.01, including indemnity in respect of service at the request of the Corporation as a Subsidiary Officer of an Affiliated Entity. SECTION 9.02. Derivative Actions. (a) The Corporation, to the full extent permitted, and in the manner required, by the laws of the State of Delaware as in effect at the time of the adoption of this Article IX or as such laws may be amended from time to time, shall indemnify any person who shall have been or shall be made a party to or shall be threatened to be made a party to any threatened, pending or completed action or suit (including any appeal thereof) brought in the right of the Corporation to procure a judgment in its favor by reason of the fact that such person shall have been or shall be a director or officer of the Corporation, or, if at a time when he shall have been or shall be a director or officer of the Corporation shall have been or shall be serving at the request of the Corporation as a Subsidiary Officer of an Affiliated Entity against expenses (including attorneys' fees) and costs actually and reasonably incurred by such person in connection with such action or suit if such person shall have acted in good faith and in a manner such person shall have reasonably believed to be in or not opposed to the best interests of the Corporation, except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the Corporation unless, and except to the extent that, the Court of Chancery of the State of Delaware or the court in which such judgment shall have been rendered shall determine upon application that despite the adjudication of liability but in view of all the circumstances 28 of the case, such person shall be fairly and reasonably entitled to indemnity for such expenses and costs as the Court of Chancery of the State of Delaware or such other court shall deem proper. Notwithstanding anything to the contrary in the foregoing provisions of this paragraph (a), a person shall not be entitled, as a matter of right, to indemnification pursuant to this paragraph (a) against costs and expenses incurred in connection with any action or suit in the right of the Corporation commenced by such person, but such indemnification may be provided by the Corporation in any specific case as permitted by Section 9.06 hereof. (b) The Corporation may indemnify any employee or agent of the Corporation in the manner and to the extent that it shall indemnify any director or officer under this Section 2, including indemnity in respect of service at the request of the Corporation as a Subsidiary Officer of an Affiliated Entity. SECTION 9.03. Determination of Entitlement to Indemnification. Any indemnification under Section 9.01 or Section 9.02 hereof (unless ordered by a court) shall be made by the Corporation only as authorized in the specific case upon a determination that indemnification of the director, officer, employee or agent is proper under the circumstances because such person has met the applicable standard of conduct set forth in Section 9.01 or Section 9.02 hereof. Such determination shall be made (i) by the Board of Directors by a majority vote of a quorum consisting of directors who shall not have been and shall not be parties to the action, suit or proceeding in respect of which indemnification shall be sought or by majority vote of the members of a committee of the Board of Directors composed of at least three members each of whom shall not have been and shall not be a party to such action, suit or proceeding, or (ii) if such a quorum shall not be obtainable and/or such a committee shall not be established or obtainable, or, even if obtainable, if a quorum of disinterested directors shall so direct, by independent legal counsel in a written opinion, or (iii) by the stockholders. In the event a request for indemnification shall be made by any person referred to in paragraph (a) of Section 9.01 hereof or paragraph (a) of Section 9.02 hereof, the Corporation shall cause such determination to be made not later than 60 days after such request shall be made. SECTION 9.04. Right to Indemnification Upon Successful Defense and For Service as a Witness. (a) Notwithstanding the other provisions of this Article IX to the extent that a director, officer, employee or agent of the Corporation shall have been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in Section 9.01 or Section 9.02 hereof or in defense of any claim, issue or matter therein, such person shall be indemnified against expenses (including attorneys' fees) and costs actually and reasonably incurred by such person in connection therewith. 29 (b) To the extent any person who shall have been or shall be a director or officer of the Corporation shall have served or prepared to serve as a witness in any action, suit or proceeding, whether civil, criminal, administrative or investigative, or in any investigation by the Corporation or the Board of Directors thereof or a committee thereof or by any securities exchange on which securities of the Corporation shall have been or shall be listed on any national securities association, by reason of his services as a director or officer of the Corporation or, if at a time when he shall have been a director or officer of the Corporation shall have been or shall be serving at the request of the Corporation as a Subsidiary Officer of an Affiliated Entity, the Corporation shall indemnify such person against expenses (including attorneys' fees) and costs actually and reasonably incurred by such person in connection therewith within 30 days after the receipt by the Corporation from such person of a statement requesting such indemnification, averring such service and reasonably evidencing such expenses and costs. The Corporation may indemnify any employee or agent of the Corporation to the same extent it is required to indemnify any director or officer of the Corporation pursuant to the foregoing sentence of this paragraph (b). SECTION 9.05. Advance of Expenses. (a) Expenses and costs incurred by any person referred to in paragraph (a) of Section 9.01 hereof or paragraph (a) of Section 9.02 hereof in defending a civil, criminal, administrative or investigative action, suit or proceeding shall be paid by the Corporation in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of such person to repay such amount if it shall ultimately be determined that such person shall not be entitled to be indemnified by the Corporation as authorized by this Article IX. (b) Expenses and costs incurred by any person referred to in paragraph (b) of Section 9.01 hereof or paragraph (b) of Section 9.02 hereof in defending a civil, criminal, administrative or investigative action, suit or proceeding may be paid by the Corporation in advance of the final disposition of such action, suit or proceeding as authorized by the Board of Directors, a committee thereof or an officer of the Corporation or a committee thereof authorized to so act by the Board of Directors upon receipt of an undertaking by or on behalf of such person to repay such amount if it shall ultimately be determined that such person shall not be entitled to be indemnified by the Corporation as authorized by this Article IX. SECTION 9.06. Indemnification Not Exclusive. The provision of indemnification to or the advancement of expenses and costs to any person under this Article IX, or the entitlement of any person to indemnification or advancement of expenses and costs under this Article IX, shall not limit or restrict in any way the 30 power of the Corporation to indemnify or advance expenses and costs to such person in any other way permitted by law or be deemed exclusive of any right to which any person seeking indemnification or advancement of expenses and costs may be entitled under any law, agreement, vote of stockholders or disinterested directors or otherwise, both as to any action relating to such person in the capacity of an officer, director, employee or agent of the Corporation and any action relating to him in any other capacity while holding any such position. SECTION 9.07. Accrual of Claims; Successors. The indemnification provided or permitted under this Article IX shall apply in respect of any expense, cost, judgment, fine, penalty or amount paid in settlement, whether or not the claim or cause of action in respect thereof accrued or arose before or after the effective date of this Article IX. The right of any person who shall have been or shall be a director, officer, employee or agent of the Corporation to indemnification under this Article IX shall continue after he shall have ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, distributees, executors, administrators and other legal representatives of such person. SECTION 9.08. Corporate Obligations; Reliance. This Article IX shall be deemed to create a binding obligation on the part of the Corporation to its current and former officers and directors and their heirs, distributees, executors, administrators and other legal representatives, and each director or officer in acting in such capacity shall be entitled to rely on the provisions of this Article IX, without giving notice thereof to the Corporation. SECTION 9.09. Insurance. The Corporation may purchase and maintain insurance on behalf of any person who shall have been or shall be a director, officer, employee or agent of the Corporation, or shall have been or shall be serving at the request of the Corporation as a Subsidiary Officer of any Affiliated Entity, against any liability asserted against such person and incurred by such person in any such capacity, or arising out of such person's status as such, whether or not the Corporation would have had the power to indemnify such person against such liability under the provisions of this Article IX or applicable law. SECTION 9.10. Definitions of Certain Terms. (a) For purposes of this Article IX, references to "the Corporation" shall include, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its corporate existence had continued, would have been permitted under applicable law to indemnify its directors, officers, employees or agents, so that any person who shall have been or shall be a director, officer, employee or agent of such constituent corporation, or shall have been or shall 31 be serving at the request of such constituent corporation as a Subsidiary Officer of any Affiliated Entity shall stand in the same position under the provisions of this Article IX with respect to the resulting or surviving corporation as such person would have had with respect to such constituent corporation if its separate existence had continued. (b) For purposes of this Article IX, references to "fines" shall include any excise taxes assessed on a person with respect to an employee benefit plan; references to "serving at the request of the Corporation" shall include any service as a director, officer, employee or agent of the Corporation which shall impose duties on, or involves services by, such director, officer, employee or agent with respect to an employee benefit plan, its participants, or beneficiaries; and a person who shall have acted in good faith and in a manner such person shall have reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner "not opposed to the best interest of the Corporation" as referred to in this Article IX. SECTION 9.11. Saving Clause. In the event any provision of this Article IX shall be held invalid by any court of competent jurisdiction, such holding shall not invalidate any other provision of this Article IX, and the remaining provisions of this Article IX shall be construed as if such invalid provision had not been included in these By-laws. ARTICLE X. Seal. SECTION 10.01. Seal. The Board shall provide a corporate seal, which shall be in the form of a circle and shall bear the full name of the Corporation and the words and figures "Incorporated 1919 Delaware", or words and figures of similar import. ARTICLE XI. Fiscal Year. SECTION 11.01. Fiscal Year. The fiscal year of the Corporation shall end on the thirty-first day of December in each year. 32 ARTICLE XII. Waiver of Notices. SECTION 12.01. Waiver of Notices. Whenever notice shall be required to be given by these By-laws or by the Restated Certificate of Incorporation of the Corporation or by the General Corporation Law of the State of Delaware, a written waiver thereof, signed by the person or persons entitled to said notice, whether before or after the time stated therein, shall be deemed equivalent to notice. ARTICLE XIII. Gender. SECTION 13.01. Gender. Any words in the masculine gender in these By-laws shall be deemed to include the feminine gender. ARTICLE XIV. Amendments. SECTION 14.01. Amendments. These By-laws as they shall be at any time, may be amended or repealed by the Board. EX-10.C 4 STOCK INCENTIVE PLAN Exhibit 10(c) 1994 STOCK INCENTIVE PLAN OF BETHLEHEM STEEL CORPORATION 1. PURPOSE OF THE PLAN. This Stock Incentive Plan (the Plan) is intended to encourage ownership of Common Stock of Bethlehem Steel Corporation (Bethlehem) by key employees of Bethlehem and its subsidiaries and to provide additional incentive for them to promote the success of the business. 2. STOCK SUBJECT TO THE PLAN. Subject to certain adjustments as set forth in Section 15 hereof, there shall be reserved for issuance upon the exercise or surrender of the right to exercise options to be granted under the Plan (Options) and pursuant to stock awards (Grants) an aggregate of 4,000,000 shares of the Common Stock of Bethlehem (Common Stock); provided, however, that the number of such shares issued pursuant to Grants shall not exceed 1,000,000. Such shares may be, in whole or in part, as the Board of Directors of Bethlehem (Board) shall from time to time determine, issued shares of Common Stock which have been reacquired by Bethlehem or authorized but unissued shares of Common Stock. Except as otherwise provided in Section 7 hereof, if any Option shall expire, terminate or be forfeited or canceled for any reason without having been exercised or the right to exercise it surrendered in full, the remaining shares covered thereby shall again be available for the purposes of the Plan, and if any Grant shall be forfeited before the restrictions provided for in such Grant shall lapse in full, the remaining shares covered thereby shall again be available for the purposes of the Plan. Options under the Plan may be incentive stock options within the meaning of Section 422(b) of the Internal Revenue Code of 1986, as the same may be amended from time to time, or nonqualified stock options and shall be designated accordingly in the applicable option agreement. 3. PERSONS TO WHOM AWARDS SHALL BE GRANTED. Options and Grants (Awards) may be granted, separately or in such combinations as the Board may in any individual case determine, to regular key employees (including officers) of Bethlehem or of any subsidiary of Bethlehem who shall be selected as provided in Section 20 hereof. A director of Bethlehem or of a subsidiary who shall not at the time also be an employee of Bethlehem or a subsidiary shall not be eligible to receive an Award. An employee who shall have been granted an Award may be granted one or more additional Awards; however, no employee may receive Awards under the Plan over the period the Plan is in effect for an aggregate of more than 400,000 shares, subject to adjustment as set forth in Section 15 hereof. The term "subsidiary" as used in this Plan means a corporation more than 50% of the voting stock of which shall at the time be owned directly or indirectly by Bethlehem. OPTIONS ------- 4. OPTION PRICES. The purchase price of the Common Stock covered by each Option shall be not less than 100% of the fair market value of the Common Stock at the time of granting the Option. Such fair market value shall be determined by the Board but shall not be less than the mean of the high and low prices of the Common Stock on the New York Stock Exchange on the day the Option shall be granted. No outstanding Option may be amended to lower the purchase price of the Common Stock covered thereby. 5. TERM OF OPTIONS. The term of each Option shall be not more than ten years from the date of granting thereof and shall be subject to earlier termination or forfeiture as herein provided. 6. EXERCISE OF OPTIONS. An Option may be made exercisable at any time or from time to time, in one or more installments, as the Board in its discretion shall determine; provided, however, that an Option may not be exercised as to less than 100 shares at any one time (or the remaining shares then covered by the Option, if less than 100 shares). The Board may also establish 2 conditions to exercise based upon continued employment, the attainment of specified financial performance goals and other relevant factors. The Board may waive any or all such conditions with respect to any or all Option recipients and may accelerate the expiration of the period during which any Option or portion of an Option shall not be exercisable. The purchase price of the shares of Common Stock purchased upon the exercise of an Option shall be paid in full at the time of exercise in cash or in whole or in part with shares of Common Stock. The value of any share delivered in payment of all or part of the purchase price upon the exercise of an Option shall be the closing sale price of a share of Common Stock on the New York Stock Exchange on the date the Option shall be exercised. Except as provided in Sections 10 and 11 hereof, an Option may not be exercised in whole or in part unless the holder thereof shall then be an employee of Bethlehem or of a subsidiary. The holder of an Option shall not have any of the rights of a stockholder with respect to the shares covered by his Option until and except to the extent that the Option shall have been duly exercised or the right to exercise the Option shall have been surrendered in whole or in part for shares of Common Stock as provided in Section 7 hereof. 7. SURRENDER OF OPTIONS. The Board, upon such terms and conditions as it shall deem appropriate, may (but shall not be obligated to) authorize on behalf of Bethlehem the acceptance of the surrender of the right to exercise an Option or a portion thereof (but only to the extent and in the amounts that such Option shall then be exercisable) and the payment by Bethlehem therefor of an amount equal to the excess of the fair market value of the shares of Common Stock covered by such Option or portion thereof over the option price of such shares. Such payment shall be made in shares of Common Stock (valued at fair market value), or in cash, or partly in cash and partly in shares of Common Stock, as the Board shall determine. For the purposes of this Section 7, such fair market value shall be deemed to be the closing sale price of the Common Stock on the New York Stock Exchange on the date of surrender or, with respect to surrenders during the period beginning on the third business day following the date of release by Bethlehem of its quarterly financial results and ending on the twelfth business day following the date of such release, such fair market value shall be determined by the Board but shall not exceed the highest closing sale price or be less than the lowest closing sale price of the Common Stock on the New York Stock Exchange during such period. The shares of Common Stock covered by an Option or portion thereof the right to 3 exercise which shall have been so surrendered shall not again be available for the purposes of the Plan. 8. OPTION AGREEMENTS. Each Option shall be evidenced by a written option agreement which agreement (and any amendment thereof) shall contain such terms and provisions, consistent with the requirements of the Plan, as the Board in its discretion shall determine. Option agreements need not be identical. 9. CONTINUING EMPLOYMENT OF OPTION RECIPIENTS. An option agreement may provide that (i) any shares of Common Stock issued upon the exercise of the Option provided for therein, (ii) any payment (whether in shares of Common Stock, or in cash, or some combination thereof) made by Bethlehem upon the surrender as provided in Section 7 hereof of the right to exercise the Option provided for therein, (iii) the Option itself provided for therein or (iv) any combination of the foregoing shall be forfeited and returned to Bethlehem if the recipient shall cease to remain in the employ of Bethlehem or one or more of its subsidiaries during the period or periods specified by such agreement. The holder of an Option shall, as one of the terms of the option agreement relating thereto, agree to remain in the employ of Bethlehem or one or more of its subsidiaries in order to exercise the Option. Such employment shall be at the pleasure of each employing corporation and at such compensation as such employing corporation shall reasonably determine. Any such condition to remain in the employ of Bethlehem or its subsidiaries shall not apply (i) if employment shall terminate or be terminated by reason of retirement, death or permanent disability or (ii) if a change in control as defined in this Section 9 shall have occurred. For purposes of this Plan, the term change in control shall mean (i) the first purchase of shares pursuant to a tender offer or exchange (other than a tender offer or exchange by Bethlehem) for all or part of Bethlehem's Common Stock or any securities convertible into such Common Stock, (ii) the receipt by Bethlehem of a Schedule 13D or other advice indicating that a person is the "beneficial owner" (as that term is defined in Rule 13d-3 under the Securities Exchange Act of 1934) of 20% or more of Bethlehem's Common Stock calculated as provided in paragraph (d) of said Rule 13d-3, (iii) the date of approval by stockholders of Bethlehem of an agreement providing for any consolidation or merger of Bethlehem in which Bethlehem will not be the continuing or surviving corporation or pursuant to which shares of Common Stock of Bethlehem would be converted into cash, securities or other property, other than a merger of Bethlehem in which the holders of Common Stock of Bethlehem immediately 4 prior to the merger would have the same proportion of ownership of common stock of the surviving corporation immediately after the merger, (iv) the date of the approval by stockholders of Bethlehem of any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all or substantially all of the assets of Bethlehem or (v) the adoption of any plan or proposal for the liquidation or dissolution of Bethlehem. 10. RETIREMENT OR TERMINATION OF EMPLOYMENT OF OPTION RECIPIENTS BY REASON OF PERMANENT DISABILITY. If an employee to whom an Option shall have been granted shall retire, or if his employment shall terminate or be terminated by reason of permanent disability, such employee (and, if he shall die within five years after such retirement or such termination by reason of permanent disability, then the estate of such employee or a person who shall have acquired the right to exercise such Option by bequest or inheritance) may exercise such Option in whole or in part, and/or the Board may authorize the acceptance of the surrender of the right to exercise such Option or any portion thereof as provided in Section 7 hereof, at any time within five years after such retirement or after such termination by reason of permanent disability, but not after the expiration of the term of the Option. If an employee to whom an Option shall have been granted shall die after such retirement or such termination by reason of permanent disability and during the applicable period during which such Option may be exercised, his estate or the person who shall have acquired the right to exercise such Option by bequest or inheritance shall be deemed to have offered, immediately prior to the termination of such period, to surrender the right to exercise such Option pursuant to the provisions of Section 7 hereof, unless such Option shall have theretofore been exercised, or the right to exercise such Option shall have theretofore been so surrendered, or such Option shall have been forfeited. If the employment of an employee to whom an Option shall have been granted shall be terminated otherwise than by reason of retirement, death or permanent disability, such Option shall, to the extent not theretofore forfeited or exercised or the right to exercise it theretofore surrendered, be canceled upon such termination of employment, and, if so provided in the related option agreement, the shares of Common Stock issued upon the exercise of the Option or the shares of Common Stock, or cash, or combination thereof paid by Bethlehem upon the surrender of the Option shall be forfeited and returned to Bethlehem. An Option shall not be affected by any change of duties or position of the holder or any temporary leave of absence granted to him by the employing corporation. Nothing in 5 the Plan or in any option agreement entered into pursuant to the Plan shall confer upon any employee any right to continue in the employ of Bethlehem or of any of its subsidiaries or interfere in any way with the right of Bethlehem or any such subsidiary to terminate the employment of such employee at any time. For purposes of this Plan the term "permanent disability" means disability by bodily injury or disease, either occupational or non-occupational in cause, preventing the employee on the basis of satisfactory medical evidence from engaging in any employment of the type normally performed by the employee. 11. DEATH OF OPTION RECIPIENT; CHANGE IN CONTROL. If an employee to whom an Option shall have been granted shall die while employed by Bethlehem or one or more of its subsidiaries, such Option may be exercised in whole or in part, and/or the Board may authorize the acceptance of the surrender of the right to exercise such Option or any portion thereof as provided in Section 7 hereof, by the estate of such employee (or by a person who shall have acquired the right to exercise such Option by bequest or inheritance), at any time within five years after the death of such employee, but not after the expiration of the term of the Option. Anything in this Plan to the contrary notwithstanding, if a change in control (as defined in Section 9 hereof) shall occur, the right to exercise all outstanding Options to the extent such Options shall not theretofore have been forfeited or exercised or the right to exercise such Options theretofore surrendered shall automatically vest in accordance with their respective terms. Upon the occurrence of a change in control, an employee to whom an Option shall have been granted may exercise the portion, if any, of such Option that shall then be exercisable, and any and all installments of such Option that shall not then be exercisable and shall not theretofore have been forfeited shall automatically become exercisable on the date or dates established in the option agreement relating thereto as the date or dates on which such installment or installments shall become exercisable, regardless of whether the conditions, if any, to exercise based upon continued employment, the attainment of specified financial performance goals or any other factor shall have been or shall thereafter be satisfied. Such employee or, if such employee shall die, the estate of such employee (or a person who shall have acquired the right to exercise such Option by bequest or inheritance) may exercise each such portion that shall become exercisable pursuant to the immediately preceding sentence during the six-month period after it shall have become exercisable, but not after the expiration of the term of the Option. 6 GRANTS ------ 12. GRANTS. A Grant shall be subject to such terms and conditions as the Board in its discretion shall determine, which may include, without limitation, conditions for issuance of shares of Common Stock pursuant thereto at any time subsequent to the granting thereof or in installments from time to time or providing for forfeiture of such Grant or the shares issued or theretofore issued pursuant thereto in designated circumstances; provided, however, that upon the issuance of shares pursuant to a Grant, the recipient shall, with respect to such shares, be and become a Bethlehem stockholder except to the extent otherwise provided in such Grant. The Board may in its discretion award unrestricted shares of Common Stock in consideration of services theretofore rendered by the recipient. The Board in its discretion may require, among other things, that the recipient pay the par value for the shares to be issued pursuant to a Grant. Each Grant shall be evidenced by a written instrument in such form as the Board shall determine, including, without limitation, a certificate for shares of Common Stock bearing a legend indicating the restrictions of the Grant. In the event of a recipient's termination of employment for any reason prior to the lapse of restrictions applicable to a Grant made to such recipient, the Board may determine in its sole discretion that any or all rights to shares of Common Stock as to which there shall still remain unlapsed restrictions shall be forfeited by such recipient to Bethlehem without payment or any consideration by Bethlehem, and neither the recipient nor any successors, heirs, assigns or personal representatives of such recipient shall thereafter have any further rights or interest in such shares, or that the restrictions with respect to all or a portion of such shares shall terminate. 13. RESTRICTED STOCK AGREEMENTS. Each Grant of restricted shares shall be evidenced by a written restricted stock agreement which agreement (and any amendment thereof) may contain such terms and provisions, consistent with the requirements of the Plan, as the Board in its discretion shall determine. Restricted stock agreements need not be identical. Such agreements shall contain the following terms and conditions: (a) Restriction Period. A Grant of restricted shares made pursuant ------------------ to this Plan may be subject to such terms, conditions and restrictions, including, without limitation, substantial risks of forfeiture based upon requirements relating to 7 continued employment, the attainment of specified financial performance goals or other relevant factors and for such period or periods as shall be determined by the Board at the time that the Grant shall be awarded. The Board shall have the power to permit, in its discretion, an acceleration of the expiration of the applicable restriction period with respect to any part of or all the restricted Common Stock awarded to any recipient, and to waive any or all terms, conditions or restrictions contained in any or all restricted stock agreements. (b) Lapse of Restrictions. Each restricted stock agreement shall --------------------- specify the terms and conditions upon which any restrictions on the right to receive shares representing restricted stock awarded under the Plan shall lapse, as determined by the Board. Upon the lapse of such restrictions, a certificate or certificates for shares of Common Stock without any restriction shall be issued to the recipient or his legal representative. TERMS OF GENERAL APPLICABILITY ------------------------------ 14. NONTRANSFERABILITY OF AWARDS. An Award shall not be transferable otherwise than by will or the laws of descent and distribution, and an Option may be exercised or the right to exercise an Option surrendered during the lifetime of the employee only by him, or if he shall be incompetent his legal representative. 15. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION. In the event of changes in the outstanding Common Stock of Bethlehem by reason of stock dividends, stock splits, recapitalizations, mergers, consolidations, combinations or exchanges of shares, separations, reorganizations or liquidations, the number and class of shares to be issued pursuant to outstanding Awards and as to which Awards may be granted under the Plan shall be appropriately adjusted by the Board. An adjustment shall not be made in the minimum number of shares which may be purchased at any time. 16. NO LOANS IN CONNECTION WITH AWARDS. Neither Bethlehem nor any subsidiary may directly or indirectly lend money to any 8 employee to acquire or carry shares of Common Stock purchased upon the exercise of an Option or to pay in whole or in part for shares to be issued pursuant to a Grant. 17. TAX WITHHOLDING. Bethlehem or a subsidiary shall have the power and the right to deduct or withhold or require a recipient of an Award to remit to Bethlehem or the subsidiary the amount of any taxes required to be withheld in connection with the grant, vesting or exercise of an Award. The Board may permit any taxes required to be withheld to be paid in cash, in already-owned shares of Common Stock or by the withholding of shares of Common Stock otherwise issuable upon the exercise or vesting of any such award, or any combination of the foregoing. The Board may from time to time establish procedures with respect to stock withholding consistent with applicable requirements of Rule 16b-3 promulgated by the Securities and Exchange Commission. 18. EFFECTIVENESS OF THE PLAN. The Plan shall become effective on April 26, 1994, upon its approval by the stockholders at the 1994 Annual Meeting of Stockholders or at any adjournment thereof. Unless the Plan shall be so approved, it shall be null and void. 19. TIME OF GRANTING OF AWARDS. Nothing contained in the Plan or in any resolution adopted or to be adopted by the Board or by any committee to which the Board shall have delegated power pursuant to Section 20 hereof or by the stockholders of Bethlehem with respect to the Plan shall constitute the granting of an Award. The granting of an Award shall take place on the date on which the Board shall approve the granting of such Award or such later date as the Board shall designate as the date of granting of such Award. 20. ADMINISTRATION OF THE PLAN. Subject to the express provisions of the Plan, the Board shall have plenary authority, in its discretion, to determine the terms and conditions to be included in any Award (which terms and conditions may differ with respect to recipients), the time or times at which, and the employees of Bethlehem and its subsidiaries to whom, Awards shall be granted, the type 9 of such Awards, the purchase price (if any, in the case of Grants), and the number of the shares to be covered by each Award, the conditions of continuing employment, the time or times when each Option may be exercised or the right to exercise such Option may be surrendered and when restrictions provided for by any Grant may lapse and whether in whole or in installments; to interpret the Plan; to prescribe, amend and rescind the rules and regulations relating to it; and to make all other determinations which the Board shall deem necessary or advisable for the administration of the Plan. The Board may, however, at any time or from time to time, delegate to the Management Development and Compensation Committee or such other committee or committees (each of which shall consist of not less than three members of the Board) appointed by the Board any of or all the powers and duties of the Board under the Plan (except those relating to (i) the determination whether the shares of Common Stock reserved for use in connection with the Plan shall be issued shares or unissued shares, (ii) the appointment of any such committee and (iii) the termination or amendment of the Plan). The Board may from time to time appoint members of any such committee in substitution for or in addition to members previously appointed, may fill vacancies, however caused, in any such committee and may discharge any such committee. So long as any such delegation shall be in force, any action by the Management Development and Compensation Committee or any other such committee within the scope of such delegation shall be and be deemed to be action by the Board under the Plan. Anything herein to the contrary notwithstanding, none of the employees of Bethlehem or any subsidiary shall as a member of the Board or of the Management Development and Compensation Committee or of any such other committee have any vote with regard to the granting of an Award to such employee, the purchase price (if any, in the case of Grants) of the shares of Common Stock covered by any such Award, the time at which any such Award shall be granted, the number of shares covered thereby, when an Option may be exercised or the right to exercise it surrendered or when restrictions with respect to shares of restricted stock shall lapse and whether in whole or in installments, the conditions under which the Award or shares of Common Stock issued pursuant thereto shall be forfeited or the provisions of the related option or restricted stock agreement. Words in the masculine gender used herein shall be deemed to include the feminine gender. 21. GOVERNMENT AND OTHER REGULATIONS. The obligation of Bethlehem to sell and deliver shares of Common Stock under the Options and pursuant to the Grants shall be subject to (i) all applicable laws, rules and regulations and such approvals by any governmental agencies as may be required, 10 including, without limitation, the effectiveness of a registration statement under the Securities Act of 1933, as deemed necessary or appropriate by counsel for Bethlehem, and (ii) the condition that such shares shall have been duly listed on the New York Stock Exchange. 22. NONEXCLUSIVITY OF THE PLAN. Neither the adoption of the Plan by the Board nor the submission of the Plan to the stockholders of Bethlehem for approval shall be construed as creating any limitations on the power of the Board to adopt such other incentive arrangements as it may deem desirable, including, without limitation, the granting of stock options or stock otherwise than under the Plan, and such arrangements may be either applicable generally or only in specific cases. 23. AMENDMENT OF THE PLAN. The Plan may be amended by the stockholders of Bethlehem. The Board may also amend the Plan in such respects as it shall deem advisable; provided, however, that the Board may not, without approval of the stockholders of Bethlehem (i) (except as provided in Section 15 hereof) increase the maximum number of shares of Common Stock as to which Awards may be granted under the Plan, (ii) change the manner of determining the Option prices except to change the manner of determining the fair market value of the Common Stock as set forth in Sections 4 and 7 hereof, (iii) increase the maximum term of each Option as provided in Section 5 hereof, (iv) change the provisions of the second paragraph of Section 20 hereof or (v) extend the term of the Plan as provided in Section 24 hereof. No amendment of the Plan may adversely affect any rights under an outstanding Option or Grant without the consent of the holder thereof. 24. TERMINATION OF THE PLAN. Unless extended by approval of the stockholders, the Plan will terminate on December 31, 2001; provided that the Board or the stockholders may terminate the Plan at an earlier date. No termination of the Plan may adversely affect any rights under an outstanding Option or Grant without the consent of the holder thereof. 11 25. GOVERNING LAW. To the extent that Federal laws do not otherwise control, the 1994 Plan and all determinations made and actions taken pursuant hereto shall be governed by the law of the State of Delaware. 12 EX-10.D 5 NON-EMPLOYEE DIRECTORS STOCK PLAN Exhibit 10(d) 1994 NON-EMPLOYEE DIRECTORS STOCK PLAN OF BETHLEHEM STEEL CORPORATION 1. PURPOSE OF THE PLAN. The purpose of the 1994 Non-Employee Directors Stock Plan (the "Plan") is to increase the compensation of non-employee directors of Bethlehem Steel Corporation ("Bethlehem") to a level more competitive with other companies and in a manner that links the directors' interests with those of the stockholders. 2. PARTICIPANTS. Participants in the Plan shall consist of directors of Bethlehem who are not employees of Bethlehem or any of its subsidiaries. The term "subsidiary" as used in the Plan means a corporation more than 50% of the voting stock of which shall at the time be owned directly or indirectly by Bethlehem. 3. SHARES RESERVED UNDER THE PLAN. Subject to certain adjustments as set forth in Section 8 hereof, there shall be reserved for issuance under the Plan an aggregate of 100,000 shares of Common Stock of Bethlehem ("Common Stock"). Shares of Common Stock to be issued under the Plan may be authorized and unissued shares of Common Stock, Common Stock held in treasury, or any combination thereof. 4. ADMINISTRATION OF THE PLAN. The Plan shall be administered by the Management Development and Compensation Committee of the Board of Directors of Bethlehem or such other committee of the Board as may be appointed by the Board consisting of not less than three members of the Board of Directors (the "Committee"). The Committee shall have authority to interpret the Plan, to prescribe, amend and rescind the rules and regulations relating to the administration of the Plan, and all such interpretations, rules and regulations shall be conclusive and binding on all persons. 5. EFFECTIVE DATE OF THE PLAN. The Plan shall be submitted to the stockholders of Bethlehem for approval at the Annual Meeting of Stockholders to be held on April 26, 1994, or any adjournment thereof, and, if approved by the stockholders, shall be deemed to have become effective on the date of such approval. 6. AWARD OF SHARES. For each calendar year beginning with the calendar year commencing January 1, 1994, each non-employee director of Bethlehem who is elected a director at the Annual Meeting of Stockholders for such year or at any time thereafter during such year and continues to be a director as of December 1 of such year shall receive an award of 500 shares of Common Stock effective as of such December 1. A participant shall not be required to make any payment for any shares of Common Stock issued under the Plan. Upon the issuance of shares of Common Stock under the Plan, the recipient shall have the entire beneficial ownership interest in, and all rights and privileges of a stockholder as to, such shares, including the right to vote such shares and the right to receive dividends. 7. RESTRICTION ON TRANSFER OF SHARES. No shares of Common Stock received by a participant under the Plan may be sold, assigned, transferred, assigned, pledged or otherwise encumbered or disposed of for a period of six months after receipt of such shares, except in the case of the death or disability of such participant prior to the expiration of such six-month period. 8. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION. In the event of changes in the outstanding Common Stock of Bethlehem by reason of stock dividends, stock splits, recapitalizations, mergers, consolidations, combinations or exchanges of shares, separations, reorganizations or liquidations, the number and class of 2 shares to be issued under the Plan shall be appropriately adjusted by the Committee. 9. GOVERNMENT AND OTHER REGULATIONS. The obligation of Bethlehem to deliver shares of Common Stock under the Plan shall be subject to (i) all applicable laws, rules and regulations and such approvals by any governmental agencies as may be required, including, without limitation, the effectiveness of a registration statement under the Securities Act of 1933, as amended, as deemed necessary or appropriate by counsel for Bethlehem, and (ii) the condition that such shares shall have been duly listed on the New York Stock Exchange. 10. AMENDMENT AND TERMINATION OF THE PLAN. The Plan may be amended by the Board of Directors of Bethlehem in any respect, provided that, without stockholder approval, no amendment shall (i) -------- materially increase the maximum number of shares of Common Stock available for issuance under the Plan, (ii) materially increase the benefits accruing to participants under the Plan, or (iii) materially modify the requirements as to eligibility for participation in the Plan, and provided, further, that the Plan ------------------ may not be amended more than once every six months except to comport with changes in the Internal Revenue Code of 1986, as amended, or the rules thereunder. The Plan may also be terminated at any time by the Board of Directors. 11. MISCELLANEOUS. (a) No Right to Continue as Director. Nothing contained in this Plan -------------------------------- shall be deemed to confer upon any person any right to continue as a director of or to be associated in any other way with Bethlehem. (b) Governing Law. To the extent that Federal laws do not otherwise ------------- control, the Plan and all determinations made and actions taken pursuant hereto shall be governed by the law of the State of Delaware. 3 EX-10.I 6 FORM OF INDEMNIFICATION ASSURANCE Exhibit 10(i) FORM OF INDEMNIFICATION ASSURANCE AGREEMENT ------------------------------------------- [BETHLEHEM STEEL CORPORATION] [Name and Address of Director or Officer] Dear : This letter will confirm the agreement and understanding between Bethlehem Steel Corporation (the "Company") and you regarding your service as a [Director/Officer] of the Company. It is and has been the policy of the Company to indemnify its officers and directors against any costs, expenses and other liabilities to which they may become subject by reason of their service to the Company, and to insure its directors and officers against such liabilities, as and to the extent permitted by applicable law and in accordance with the principles of good corporate governance. In this regard, the Company's By-laws (Article IX) require that the Company indemnify and advance costs and expenses to (collectively, "indemnify") its directors and officers as permitted by Delaware law. A copy of the relevant provisions of the Company's By-laws, as amended, is attached hereto. In consideration of your service as a [Director/Officer] of the Company, the Company shall indemnify you, and hereby confirms its agreement to indemnify you, to the full extent provided by applicable law and the By-laws of the Company as currently in effect. In particular, as provided by the By-laws, the Company shall make any necessary determination as to your entitlement to indemnification in respect of any liability within 60 days of receiving a written request from you for indemnification against such liability. You have agreed to provide the Company with such information or documentation as the Company may reasonably request to evidence the liabilities against which indemnification is sought or as may be necessary to permit the Company to submit a claim in respect thereof under any applicable directors and officers liability insurance or other liability insurance policy. You have further agreed to cooperate with the Company in the making of any determination regarding your entitlement to indemnification. If the Company does not make a determination within the required 60-day period, a favorable determination will be deemed to be made, and you shall be entitled to payment, subject only to your written agreement to refund such payment if a contrary determination is later made and the delay was by reason of the inability of the Company to make such determination within the 60-day period. In the event the Company shall determine that you are not entitled to indemnification, the Company shall give you written notice thereof specifying the reason therefor, including any determinations of fact or conclusions of law relied upon in reaching such determination. Notwithstanding any determination made by the Company that you are not entitled to indemnification, you shall be entitled to seek a de novo judicial determination of your right to indemnification under the -- ---- By-laws and this agreement by commencing an appropriate action therefor within 180 days after the Company shall notify you of its determination. The Company shall not oppose any such action by reason of any prior determination made by it as to your right to indemnification or, except in good faith, raise any objection not specifically relating to the merits of your indemnification claim or not considered by the Company in making its own determination. In any such proceeding, the Company shall bear the burden of proof in showing that your conduct did not meet the applicable standard of conduct required by the By-laws or applicable law for indemnification. It is understood that, as provided in Section 4 of Article IX of the By-laws, any expenses incurred by you in any investigation or proceeding by the Company or before any court commenced for the purpose of making any such determination shall be reimbursed by the Company. No future amendment of the By-laws shall diminish your rights under this agreement, unless you shall have consented to such amendment. Your right to indemnification as aforesaid shall be in addition to any right to remuneration to which you may from time to time be entitled as a [Director/Officer]. It is understood and agreed that your right to indemnification shall not entitle you to continue in your present position with the Company or any future position to which you may be appointed or elected and that you shall be entitled to indemnification under the By-laws only in respect to liabilities arising out of acts or omissions or alleged acts or omissions by you as a [Director/Officer] or as otherwise provided by the By-laws, but you shall be entitled to such indemnification with respect to any such liability, whether incurred or arising during or after your service as a [Director/Officer] and whether before or after the date of this letter, in respect of any claim, cause, action, proceeding or investigation, whether commenced, accruing or arising during or after your service as a [Director/Officer] and whether before or after the date of this letter. In further consideration of your service as a [Director/Officer] of the Company, the Company in connection with its indemnification policy has arranged for the issuance of, and you shall be entitled to the benefits of, an "Irrevocable Straight Standby Letter of Credit" issued by Morgan Guaranty Trust Company of New York. Said letter of credit has been arranged for the purpose of assuring payment to you, certain other current and former directors and officers of the Company and future directors, officers and employees of the Company and its affiliates designated by the Board of Directors of the Company ("Indemnitees") of any amounts to which you and they may become entitled as indemnification pursuant to the By-laws in the event that, for any reason, the Company shall 2 fail promptly to pay to you, upon written request therefor, any such indemnification, said assurance for all Indemnitees being limited at any time to $5,000,000 in aggregate amount. The Company understands that there has been established an irrevocable trust, the Bethlehem Indemnification Trust, for which First Valley Bank, Bethlehem, Pennsylvania, acts as trustee, for the purpose, among other things, of administering the respective interests of the Indemnitees in said letter of credit, and the Company has consented to the issuance and delivery of said letter of credit to the Bethlehem Indemnification Trust. Unless renewed or replaced by a comparable letter of credit in the amount of $5,000,000, the full undrawn amount of said letter of credit may be drawn upon prior to the expiration thereof. Drawings on said letter of credit may be arranged through the Bethlehem Indemnification Trust, as provided by the trust agreement therefor, by contacting the First Valley Bank, One Bethlehem Plaza, Bethlehem, Pennsylvania 18018. You have agreed to repay to the Bethlehem Indemnification Trust any amount paid to you by such trust (i) if it shall ultimately be determined (by the Company and upon expiration of the 180-day period for commencement of a judicial proceeding for a de novo determination or -- ---- by a final judicial determination) that you are not entitled under this agreement or otherwise to indemnification from Bethlehem in respect of the liability for which you shall have received payment or (ii) if you shall subsequently receive payment in respect of such liability from any liability insurer or from Bethlehem or any successor thereto. It is agreed that, in addition to the rights of any other person to do so, the Company shall have the right to compel any repayment to the Bethlehem Indemnification Trust so required. This agreement shall terminate upon the later of (i) the tenth anniversary of the date on which you shall cease to be a director or officer of the Company or (ii) the final termination or resolution of all actions, suits, proceedings or investigations commenced within such ten-year period and relating to the Company or any of its affiliates or your services thereto to which you may be or become a party and of all claims for indemnification by you under this agreement or against the Bethlehem Indemnification Trust asserted within such ten-year period. This agreement supersedes any and all prior agreements between the Company and you relating to the subject matter hereof. It is understood and agreed that this agreement is binding upon the Company and its successors and shall inure to your benefit and that of your heirs, distributees and legal representatives. This agreement, and the interpretation and enforcement hereof, shall be governed by the laws of the State of Delaware. In confirmation of the provisions of the Company's By-laws, the Company hereby agrees to pay, and you shall be held harmless from and indemnified against, any costs and expenses (including attorneys' fees) which you may reasonably incur in connection with any challenge to the validity of, or the performance and enforcement of, this agreement, in the same manner as provided by the Company's By-laws. 3 If the foregoing is in accordance with your understanding of our agreement, kindly countersign the enclosed copies of this letter, whereupon this letter shall become a binding agreement in accordance with the laws of the State of Delaware. Very truly yours, BETHLEHEM STEEL CORPORATION By: ________________________ _______________________________ [Signature of Director/Officer] 4 Schedule A ---------- 1. Indemnification Assurance Agreement dated August 22, 1986 between Bethlehem Steel Corporation and Curtis H. Barnette. 2. Indemnification Assurance Agreement dated August 22, 1986 between Bethlehem Steel Corporation and George P. Jenkins. 3. Indemnification Assurance Agreement dated August 22, 1986 between Bethlehem Steel Corporation and Reginald H. Jones. 4. Indemnification Assurance Agreement dated August 22, 1986 between Bethlehem Steel Corporation and Winthrop Knowlton. 5. Indemnification Assurance Agreement dated August 22, 1986 between Bethlehem Steel Corporation and Dean P. Phypers. 6. Indemnification Assurance Agreement dated August 22, 1986 between Bethlehem Steel Corporation and Walter F. Williams. 7. Indemnification Assurance Agreement dated August 22, 1986 between Bethlehem Steel Corporation and Lonnie A. Arnett. 8. Indemnification Assurance Agreement dated August 22, 1986 between Bethlehem Steel Corporation and D. Sheldon Arnot. 9. Indemnification Assurance Agreement dated August 22, 1986 between Bethlehem Steel Corporation and Robert W. Cooney. 10. Indemnification Assurance Agreement dated August 22, 1986 between Bethlehem Steel Corporation and George T. Fugere. 11. Indemnification Assurance Agreement dated August 22, 1986 between Bethlehem Steel Corporation and John A. Jordan, Jr. 12. Indemnification Assurance Agreement dated August 22, 1986 between Bethlehem Steel Corporation and James F. Kegg. 13. Indemnification Assurance Agreement dated August 22, 1986 between Bethlehem Steel Corporation and David H. Klinges. 14. Indemnification Assurance Agreement dated August 22, 1986 between Bethlehem Steel Corporation and Gary L. Millenbruch. 15. Indemnification Assurance Agreement dated August 22, 1986 between Bethlehem Steel Corporation and C. Adams Moore. 16. Indemnification Assurance Agreement dated December 29, 1986 between Bethlehem Steel Corporation and Larry L. Adams. 17. Indemnification Assurance Agreement dated December 29, 1986 between Bethlehem Steel Corporation and Benjamin C. Boylston. 18. Indemnification Assurance Agreement dated January 28, 1987 between Bethlehem Steel Corporation and Herman E. Collier. 19. Indemnification Assurance Agreement dated January 28, 1987 between Bethlehem Steel Corporation and Edwin A. Gee. 20. Indemnification Assurance Agreement dated January 28, 1987 between Bethlehem Steel Corporation and Thomas L. Holton. 21. Indemnification Assurance Agreement dated March 1, 1987 between Bethlehem Steel Corporation and Roger P. Penny. 22. Indemnification Assurance Agreement dated May 27, 1987 between Bethlehem Steel Corporation and Andrew M. Weller. 23. Indemnification Assurance Agreement dated January 27, 1988 between Bethlehem Steel Corporation and John B. Curcio. 24. Indemnification Assurance Agreement dated January 27, 1988 between Bethlehem Steel Corporation and William C. Hittinger. 25. Indemnification Assurance Agreement dated January 27, 1988 between Bethlehem Steel Corporation and William A. Pogue. 26. Indemnification Assurance Agreement dated September 27, 1989 between Bethlehem Steel Corporation and Robert McClements, Jr. 27. Indemnification Assurance Agreement dated September 27, 1989 between Bethlehem Steel Corporation and John L. Kluttz. 2 28. Indemnification Assurance Agreement dated June 27, 1990 between Bethlehem Steel Corporation and Duane R. Dunham. 29. Indemnification Assurance Agreement dated September 26, 1990 between Bethlehem Steel Corporation and John F. Ruffle. 30. Indemnification Assurance Agreement dated May 1, 1991 between Bethlehem Steel Corporation and Carl F. Meitzner. 31. Indemnification Assurance Agreement dated July 1, 1991 between Bethlehem Steel Corporation and Walter N. Bargeron. 32. Indemnification Assurance Agreement dated March 1, 1992 between Bethlehem Steel Corporation and David P. Post. 33. Indemnification Assurance Agreement dated November 1, 1992 between Bethlehem Steel Corporation and Stephen G. Donches. 34. Indemnification Assurance Agreement dated November 1, 1992 between Bethlehem Steel Corporation and William H. Graham. 35. Indemnification Assurance Agreement dated November 1, 1992 between Bethlehem Steel Corporation and G. Penn Holsenbeck. 36. Indemnification Assurance Agreement dated March 1, 1993 between Bethlehem Steel Corporation and Benjamin R. Civiletti. 37. Indemnification Assurance Agreement dated March 1, 1993 between Bethlehem Steel Corporation and Worley H. Clark. 38. Indemnification Assurance Agreement dated March 1, 1993 between Bethlehem Steel Corporation and Harry P. Kamen. 39. Indemnification Assurance Agreement dated April 28, 1993 between Bethlehem Steel Corporation and Joseph F. Emig. 40. Indemnification Assurance Agreement dated April 28, 1993 between Bethlehem Steel Corporation and Andrew R. Futchko. 3 41. Indemnification Assurance Agreement dated April 28, 1993 between Bethlehem Steel Corporation and Timothy Lewis. 42. Indemnification Assurance Agreement dated April 28, 1993 between Bethlehem Steel Corporation and William E. Wickert, Jr. 43. Indemnification Assurance Agreement dated March 1, 1994 between Bethlehem Steel Corporation and Augustine E. Moffitt, Jr. 44. Indemnification Assurance Agreement dated March 16, 1994 between Bethlehem Steel Corporation and Lewis B. Kaden. 45. Indemnification Assurance Agreement dated January 31, 1996 between Bethlehem Steel Corporation and Shirley D. Peterson. 46. Indemnification Assurance Agreement dated May 1, 1996 between Bethlehem Steel Corporation and Gregory F. Paolini. 47. Indemnification Assurance Agreement dated May 1, 1996 between Bethlehem Steel Corporation and Malcolm J. Roberts. 48. Indemnification Assurance Agreement dated May 1, 1996 between Bethlehem Steel Corporation and Robert A. Rudzki. 49. Indemnification Assurance Agreement dated May 1, 1996 between Bethlehem Steel Corporation and Dorothy L. Stephenson. 50. Indemnification Assurance Agreement dated June 5, 1998 between Bethlehem Steel Corporation and Van R. Reiner. 51. Indemnification Assurance Agreement dated June 17, 1998 between Bethlehem Steel Corporation and William M. Landuyt. 52. Indemnification Assurance Agreement dated February 19, 1999 between Bethlehem Steel Corporation and Carl W. Johnson. 4 EX-11 7 STATEMENT REGARDING COMPUTATION OF EARNINGS EXHIBIT (11) BETHLEHEM STEEL CORPORATION STATEMENT REGARDING COMPUTATION OF EARNINGS PER SHARE (dollars in millions and shares in thousands, except per share data)
THREE MONTHS YEAR ENDED DECEMBER 31 ENDED DECEMBER 31 ------------------------ ---------------------------- 1998 1997 BASIC EARNINGS PER SHARE 1998 1997 -------- -------- ------------------------ --------- -------- ($ 23.2) $ 41.7 NET INCOME $ 120.1 $ 280.7 LESS DIVIDEND REQUIREMENTS: (2.5) (2.5) $2.50 Preferred Dividend (10.0) (10.0) (3.1) (3.1) $5.00 Preferred Dividend (12.5) (12.5) (4.5) (4.5) $3.50 Preferred Dividend (17.9) (17.9) (0.2) (0.3) 5% Preference Dividend (1.3) (1.2) ------- -------- -------- -------- (10.3) (10.4) TOTAL PREFERRED AND PREFERENCE DIVIDENDS (41.7) (41.6) ------- -------- -------- -------- ($ 33.5) $ 31.3 NET INCOME APPLICABLE TO COMMON STOCK $ 78.4 $ 239.1 ======= ======== ======== ======== 129,299 112,863 AVERAGE SHARES OF COMMON STOCK 122,585 112,439 ($ 0.26) $ 0.28 BASIC EARNINGS PER SHARE $ 0.64 $ 2.13 ======= ======== ======== ======== DILUTED EARNINGS PER SHARE --------------------------- ($ 23.2) $ 41.7 NET INCOME $ 120.1 $ 280.7 LESS DIVIDEND REQUIREMENTS: (2.5) (2.5) $2.50 Preferred Dividend (10.0) (10.0) (3.1) (3.1) $5.00 Preferred Dividend (12.5) (12.5) (4.5) (4.5) $3.50 Preferred Dividend (17.9) - - - 5% Preference Dividend - - -------- -------- -------- -------- ($ 33.3) $ 31.6 NET INCOME APPLICABLE TO COMMON STOCK $ 79.7 $ 258.2 ======= ======== ======== ======== AVERAGE SHARES OF COMMON STOCK AND OTHER POTENTIALLY DILUTIVE SECURITIES OUTSTANDING: 129,299 112,863 Common Stock 122,585 112,439 94 - Stock Options 429 - * * $2.50 Preferred Stock * * * * $5.00 Preferred Stock * * * * $3.50 Preferred Stock * 12,255 * 2,346 5% Preference Stock 2,175 2,346 ------- -------- -------- -------- 129,393 115,209 TOTAL 125,189 127,040 ======= ======== ======== ======== ($ 0.26) $ 0.27 DILUTED EARNINGS PER SHARE $ 0.64 $ 2.03 ======= ======== ======== ========
* ANTIDILUTIVE EX-13 8 PORTIONS OF 1998 ANNUAL REPORT Chairman's Letter To Our Stockholders We made further progress during 1998 toward our Vision to Be the Premier Steel Company. During the first half of the year, our financial performance was strong. However, during the second half, we were adversely affected by unprecedented levels of unfairly traded steel imports. As a result, we ended the year with a sense of both disappointment and concern over the serious injury to Bethlehem and the American steel industry caused by these imports. Nevertheless, we are proud of the many accomplishments we achieved during 1998, including the following: . We reported net income for the year of $120 million, including an after-tax charge of $29 million related to the closing of the 160-inch plate mill at Sparrows Point. . Our safety and environmental performance was the best ever recorded in the history of the Company. . We completed our acquisition of Lukens Inc. and established the Bethlehem Lukens Plate Division. . We started construction of Sparrows Point's new continuous Cold Rolling Mill complex. . We received the General Motors "Supplier of the Year" award for the third consecutive year, and won similar awards from other customers. . We established our Premier Supplier Recognition Program. . We increased the size of our revolving credit arrangement and extended its term. . Our credit ratings improved one level. . We completed a number of asset sales, generating cash proceeds of about $310 million. To realize our Vision to Be the Premier Steel Company, we must achieve our overall Objective of increasing stockholder value. We will accomplish this by achieving and sustaining superior rates of return on the capital we have invested in each of our businesses, by effectively serving our customers, by having partnerships among our employees, and by being a good corporate citizen. Our Strategy for achieving this Vision is to concentrate on steel, focusing on being a low-cost, high-quality producer, to rebuild our financial strength, and to improve continuously in everything that we do. In order to successfully implement this Strategy, we will continue to practice our Core Values of integrity, safety and personal accountability; continuous learning; total quality; customer satisfaction; and maximizing stockholder value. They are the permanent foundation to guide us in achieving our Vision. Concentrating on Steel We believe that our four core steel businesses -- the Burns Harbor Division, the Sparrows Point Division, Pennsylvania Steel Technologies, Inc. and our newest division, Bethlehem Lukens Plate -- are well positioned in their markets. However, each is facing intense competition from other steel companies -- domestic and foreign -- and from producers of competitive materials. We will best meet these challenges by following our Strategy and concentrating on producing the highest quality products at competitive costs. During 1998, we continued to strengthen the competitive position of our four core steel businesses. Bethlehem's Core Steel Products (Sheets, Plates and Rail) percentage of our total sales [GRAPH GOES HERE] 2 Burns Harbor Our Burns Harbor Division represents about 40% of our sales, and it ships about four million tons per year of flat rolled sheet products, primarily to the automotive and service center markets. It has a number of competitive strengths, including its location relative to its markets and low-cost raw materials, its efficient facility layout and its modern facilities. Currently, we are taking steps to further enhance Burns Harbor's competitiveness by making a series of improvements to its hot strip mill, and we approved a $70 million capital appropriation to modernize one of its two continuous casters to improve slab quality, increase productivity and reduce costs. These and other actions will help Burns Harbor achieve and sustain a superior rate of return on its assets. Sparrows Point Our Sparrows Point Division represents about 30% of our sales, and it ships about three million tons per year of sheets and tin mill products, primarily to the construction, service center and container markets. It also has a number of competitive strengths including its tidewater location and a number of highly competitive facilities, such as its primary ironmaking and steelmaking operations. During 1998, we started construction of a new continuous Cold Rolling Mill complex, which we expect will begin production early in 2000. This $300 million investment in Sparrows Point's future is part of the Division's comprehensive plan to achieve and sustain a superior rate of return on its assets. This investment will be combined with Division-wide cost competitiveness initiatives including a reduction in the workforce; reduced energy, material and service costs; and improved yield. During 1999, several additional significant projects will be completed -- including the reline of "L" blast furnace and the construction of a new roll grinding facility -- and construction will begin on a pulverized coal injection facility at "L" blast furnace, which will be completed in 2000. Pennsylvania Steel Technologies, Inc. (PST) PST represents about 10% of our sales, and it ships about 750,000 tons per year of railroad rails, specialty blooms, flat bars and large-diameter pipe. It sells to a wide variety of markets including transportation, forging, machinery, gas cylinder and energy. PST is the largest rail producer in the United States and it is benefiting from the growth in the domestic rail market. During 1998, PST set a number of production records, especially in rail making, improved its safety performance, and started up a new scrap handling and sorting facility. PST returned to profitability in 1998 and is focusing on achieving and sustaining a superior rate of return on its assets. Bethlehem Lukens Plate On May 29, 1998, we completed the acquisition of Lukens Inc. and established our newest Division, Bethlehem Lukens Plate. As a result of this combination, we believe that we have established the premier plate business. We have expanded our product offerings and strengthened our position as the leading producer and supplier of carbon and alloy steel plate products. This combination has produced, and will produce, significant operating and administrative synergies. Bethlehem Lukens Plate represents about 20% of our sales, and it will ship about two million tons of carbon and alloy plate per year. Several important initiatives will benefit its business in the future, including a 20-year conversion agreement with Allegheny Teledyne, capital projects such as improvements to its Steckel mill at Conshohocken, reallocating the order book among its plate mills, and integrating business processes and systems. Domestic Steel Industry Shipments millions of tons [GRAPH GOES HERE] 3 Improving Continuously We are committed to continuously improve every aspect of our business, and during this past year we did improve in many important areas, as discussed below. Customers In 1998, we launched a Customer Success Process initiative to better integrate our selling and supply functions with our customers' requirements and to help us to be their supplier of choice. We also continued to strengthen our Total Quality initiative in which we intensely focus on performance excellence in every aspect of our business. This enables us to reliably provide what our customers need, when they need it. It involves all of our employees and all of our processes -- purchasing, order entry, steel production, product delivery, billing and other services. The success of Total Quality is evidenced by the fact that we received the General Motors "Supplier of the Year" award for the third consecutive year. We have also been recognized by many of our other customers with awards for outstanding quality and service. Employees We continue to educate and train our employees at all locations so that we can develop the skilled and knowledgeable workforce required to compete in an increasingly competitive, global business environment. During 1998, our education and training programs provided over 500,000 employee training hours, an average of about 39 hours per employee. We are in the process of having all of our employees complete a financial management program designed to help them focus their efforts on increasing our return on net assets and stockholder value. More than half of all of our employees have completed this training. We also have trained more than 10,000 employees in our Employee Safety Process. Our labor agreements with the United Steelworkers of America, covering our represented employees at Burns Harbor, Sparrows Point and PST, expire on August 1 of this year. We are prepared to commence early negotiations and hope to reach a mutually satisfactory new competitive long-term labor agreement. Suppliers In early 1998, we began a Premier Supplier Recognition Program and recognized nine suppliers as the "Best of the Best" for their outstanding performance during 1997 in the areas of quality, service and cost. For 1998, 17 suppliers earned this recognition. Overall costs and performance from suppliers during 1998 further improved through the ongoing implementation of our Strategic Sourcing process. Cross- functional sourcing teams were able to smoothly integrate the former Lukens activities. These cross-functional and cross-location efforts are continuing to help advance "strategic change" throughout our Company. We are especially proud that during 1998 we were formally recognized by Purchasing Magazine as one of the purchasing profession's "Best Places to Work." Only five other companies in the United States were so honored. Safety, Environment and Good Citizenship Our safety and environmental performance for 1998 was the best ever recorded by our Company. Compared with 1997, our lost workday case incidence rate declined by 23%, our all-injury rate declined by 20%, and our recordable case rate declined by 15%. Since 1994, when we began a joint safety performance effort with the United Steelworkers of America, our lost workday case incidence rate Bethlehem's Lost Workday Case Incidence Rate per 200,000 hours worked [GRAPH GOES HERE] 4 Bethlehem's Environmental Compliance Index Average number of incidents per month [GRAPH GOES HERE] declined by 58%, and our all-injury and recordable case rates both declined by 49%. A major corporate objective is to have zero lost workdays. We continue to focus our efforts on improving our environmental performance to reach the ultimate goal of zero environmental incidents. During 1998, we reduced our Environmental Compliance Index, our corporate method of measuring environmental compliance, by 73% over 1997. Also during 1998, we became the first integrated steel producer to join EPA's Climate Wise Program which focuses on voluntary actions to improve energy efficiency and environmental performance. We were also recognized as a Program Champion for our participation and achievements in EPA's Wastewise Program, and we continued our environmental stewardship activities with local community groups, key customers and the Coalition for Environmentally Responsible Economies (CERES). We practice good citizenship with an emphasis on charitable contributions, volunteerism and economic development. Giving to the United Way at all of our facilities and individual volunteerism at educational, health services and other nonprofit organizations are regular practices of our employees. Among our industry-leading examples of the public-private partnerships that can help revitalize entire communities are the Brownfields economic development initiatives involving almost 3,000 acres at former steel operating sites in Bethlehem and Johnstown, Pennsylvania and in Lackawanna, New York. We are also working closely with public officials in Cambria and Somerset counties in Pennsylvania and with the state's Department of Conservation and Natural Resources to sell to the counties The Manufacturers Water Company, including over 5,000 acres and five dams, to assure future generations added resources for personal recreation and economic development. Technology Six years ago, we entered into a strategic partnership with EDS, a leader in the information technology area. This partnership has allowed us to leverage its very significant technology capabilities. As a result, we believe we stand at the forefront of information technology in the steel industry. Every technology officer's immediate objective is to develop a timely and cost-effective solution to the Year 2000 (Y2K) computer issue. Because of early planning, we have already completed about 95% of our overall resolution efforts, at a very low cost. We have also received two independent audits of our Y2K efforts with highly satisfactory results. We will continue with the remaining remediation and testing throughout the first half of 1999. We have also begun contingency planning in all areas of our business, and we will focus on this issue during 1999. The objective of all these activities is to continue to serve our customers with no adverse Y2K impact on our business. We continue to maintain a strong research and development effort in the firm belief that this ultimately translates into added value for our customers and stockholders. The research effort is directed primarily at achieving quality improvements and cost reductions in operations and also providing new or improved products and technical 5 Bethlehems's Pension Liability millions of dollars [GRAPH GOES HERE] support for customers. Examples of new value-added products include high- strength weathering plate grades for use in bridges; patented dent-resistant, formable hot dip galvanized sheet grades for light-weight automotive body applications; and a new acrylic coated sheet product for the metal building industry. Rebuilding Our Financial Strength We made further progress during 1998 in improving our financial condition, especially in reducing our unfunded pension obligation. Over the past five years, we have reduced our pension liability by over $1.2 billion, from just over $1.6 billion at the end of 1993 to $415 million at the end of 1998. Additionally, we had a net unrecognized gain that is not reflected in the pension liability shown on our balance sheet. This unrecognized gain reflects, among other factors, investment performance that is better than the performance we had assumed would occur in our actuarial and accounting assumptions. While accounting rules do not permit immediate recognition of these investment gains, the current market value of our pension trust assets of about $6 billion is essentially equal to our current pension obligation. Our liquidity totaled about $480 million at the end of last year. This consisted of about $140 million in cash and $340 million of available borrowings under our revolving credit arrangement. During 1998, we increased the size of our revolving credit arrangement by $75 million to $600 million and extended its term to June 2003. As to our capital structure, at the end of last year, our debt as a percent of invested capital was 31%, down from 50% at the end of 1992. In recognition of the progress we have made in improving our operating performance and strengthening our financial condition, both Standard & Poor's and Moody's Investor Services raised our credit ratings early last year by one level. Our objective is to achieve a capital structure that will earn us an investment- grade credit rating. Profitable Growth During the last several years, we have transformed Bethlehem by eliminating underperforming operations, strengthening our core businesses and improving our financial condition. As we approach the 21st century, we are positioned to take advantage of future opportunities and to grow our profitability. Our program for profitable growth focuses on three areas. First, we will continue to grow our existing core steel businesses. Our goal is for each business to achieve and sustain superior rates of return on its net assets. Second, we will acquire companies or enter into joint ventures in businesses similar to our core steel businesses. The acquisition of Lukens was a major step in this direction. We have also benefited by entering into joint ventures such as Double G Coatings, Chicago Cold Rolling, Indiana Pickling and Processing, Walbridge Coatings and TWB. Third, we will acquire or establish new businesses that are related to our core steel businesses. Our recent joint venture with Steel Construction Systems is an example of progress in this area. 6 Total Steel Imports millions of tons [GRAPH GOES HERE] International Steel Trade The unprecedented level of unfairly traded steel imports being dumped into the United States continues to cause serious injury to Bethlehem and the American steel industry. The high levels of imports have adversely affected production, shipment levels and prices, and workforce schedules have been reduced at all of our operations. On January 7, 1999, the Clinton Administration submitted a "Comprehensive Plan for Responding to the Increased Steel Imports" to the United States Congress. While the Plan reviews certain helpful actions that have been taken and others that may be taken, it falls short of what is required and is not yet sufficiently comprehensive, timely or effective, given the significant increase in imports, the precipitous decline in prices due to the dumping of foreign steel and the financial losses by the American steel industry. Under these circumstances, we are taking three actions: . Legal -- We have filed, and will continue to file, all appropriate legal actions. . Public Affairs -- We have joined with the United Steelworkers of America, leading steel companies and other concerned parties in an educational campaign called "Stand Up For Steel -- Stand Up for America." . Governmental -- We are continuing our review of the Plan submitted by the Clinton Administration, and we will continue to work with the Administration and Congress in an effort to restore fair trade in steel. We believe that the actions that we are taking, along with those to be taken by Congress and the Administration, will help to resolve this very serious issue that threatens our Company, stockholders, employees, customers and the communities in which we operate. Business Outlook We believe that the U.S. economy will continue on a course of moderate and sustainable growth and low inflation, although growth will be somewhat slower compared with the past several years. We also believe that domestic shipments in 1999 will be about 100 million tons, slightly lower than the estimated 102 million tons shipped in 1998. Competition will be intense in 1999 due to excess global steel capacity and new domestic supply. Additionally, we continue to be very concerned about the high levels of unfairly traded steel imports, which we expect will adversely affect our 1999 results. While our current business conditions remain difficult, we will continue our Strategy of concentrating on steel and rebuilding our financial strength, and we will take all necessary actions to reduce costs and improve our overall competitiveness. For Bethlehem, 1998 was a year of contrast. Despite significant adverse effects from unfair international steel trade, we still made important progress toward our Vision to Be the Premier Steel Company. /s/ Hank Barnette Curtis H. Barnette, Chairman January 27, 1999 7 Financial Review and Operating Analysis Net income for 1998 was $120 million, or $.64 per common share - basic, including an after-tax charge of $29 million related to closing our Sparrows Point plate mill. Net income for 1997 was $281 million, or $2.13 per common share - basic, including an after-tax gain of $113 million related to the sale of our equity interest in Iron Ore Company of Canada (IOC). Our net loss for 1996 was $309 million, or $3.15 per common share - basic, including after-tax charges of $382 million in connection with our exiting six underperforming businesses. See Note B, Estimated (Loss) Gain on Exiting Businesses, to the Consolidated Financial Statements. Excluding the effects of these charges and gain, net income for 1998 was $149 million ($.88 per common share - basic) compared with $168 million ($1.12 per common share - basic) for 1997 and $73 million ($.28 per common share - basic) for 1996. Sales in 1998 were $4.48 billion compared with $4.63 billion in 1997 and $4.68 billion in 1996. Lukens Acquisition During 1998, we acquired Lukens Inc., strengthening our position as the leading producer and supplier of carbon and alloy steel plate products. We acquired all of the outstanding stock of Lukens for an aggregate purchase price of about $560 million on May 29, 1998. See Note C, Acquisition of Lukens Inc., to the Consolidated Financial Statements. We have exited or intend to exit all of the former Lukens' stainless and distribution businesses. During 1998, we completed the sale of certain stainless assets to Allegheny Teledyne Incorporated (Allegheny) for $175 million. We also entered into agreements to provide Allegheny with conversion services to produce stainless steel slabs and coiled plate. We received $105 million in cash and a non-interest bearing note for the remaining $70 million. The note will become payable upon the completion of certain agreed upon improvements that will enhance the performance of the facilities that will be used to provide conversion services to Allegheny. We expect to complete the improvements and receive payment of the $70 million note during the fourth quarter of 1999. Bethlehem and Allegheny will share in the cost of these improvements, which is expected to be about $25 million. In January 1999, we signed an agreement with Ryerson Tull, Inc. for the sale of the stainless distribution business, Washington Specialty Metals Corporation, for about $70 million. We expect to complete this transaction in early first quarter 1999. At the same time, we announced that we would permanently close the stainless sheet operations in Massillon, Ohio and Washington, Pennsylvania. We expect the facilities to close in the first quarter of 1999, and we will continue our efforts to sell these assets. During the fourth quarter of 1998, we closed the Sparrows Point 160" plate mill and increased output at existing underutilized plate facilities at Burns Harbor, Coatesville and Conshohocken to take advantage of the merged facilities' capabilities. We recorded a charge of $35 million ($29 million after-tax) during 1998 to write-off the net book value of equipment to be dismantled and to recognize employee benefit related costs. Operating Results Excluding the charges and gain from exiting businesses, income from operations was $225 million in 1998 compared with $239 million in 1997 and $137 million in 1996. Income from operations for 1998 declined from 1997 primarily due to lower shipments and lower realized prices resulting from high levels of unfairly traded steel imports. The negative impact of imports was partially offset by increased shipments resulting from our acquisition of Lukens and by lower costs. Costs improved principally from exiting underperforming businesses, reduced pension expense and improved operating performance at Pennsylvania Steel Technologies, Inc. (PST). Results improved in 1997 over 1996 primarily due to lower costs from improved operations at Sparrows Point and PST, exiting Bethlehem Structural Products and lower pension expense. The 1997 results were also affected by higher employment and raw material costs at Burns Harbor. The effects of changes in average realized steel prices, shipments and product mix on sales during the last two years were as follows:
Increase (decrease) from prior year 1998 1997 - ------------------------------------------------------- Realized Prices (2)% --% Shipments (1) (1) Product Mix -- 1 - ------------------------------------------------------- (3)% -- =======================================================
Raw steel production was 10.2 million tons in 1998, 9.6 million tons in 1997, and 9.4 million tons in 1996. The increase in 1998 was due to the acquisition of Lukens, while the increase in 1997 was due to improved operations at Sparrows Point. The Burns Harbor Division shipped 3.6 million tons of sheet and strip products in 1998 compared with 3.9 million tons in both 1997 and 1996. Burns Harbor's 1998 operating results declined principally from lower realized prices and decreased shipments. Shipments and prices for 1998 were reduced primarily because of the unprecedented level of unfairly traded imports, and also because of the 1998 work stoppages at certain General Motors' plants. The Sparrows Point Division shipped 2.6 million tons of sheet and tin mill products in 1998 10 compared with 2.8 million tons in 1997 and 2.7 million tons in 1996. Sparrows Point's 1998 operating results declined principally from lower realized prices and decreased shipments caused primarily by unfairly traded imports. Results improved at PST in 1998 primarily due to lower costs resulting from improved operating performance and lower raw material prices. Shipments and realized prices also increased at PST during 1998 and offset the effects of a less favorable product mix. Bethlehem shipped 1.7 million tons of plate products in 1998, including 425,000 tons from the Coatesville and Conshohocken facilities acquired in the Lukens acquisition, compared with 1.4 million tons in 1997 and 1996. Percentage Of Bethlehem's Net Sales By Major Product
1998 1997 1996 - ------------------------------------------------------------------------- Steel mill products: Hot rolled sheets 13.3% 14.9% 14.3% Cold rolled sheets 16.8 17.2 16.2 Coated sheets 28.6 31.5 32.3 Tin mill products 6.7 7.4 6.9 Plates 22.3 15.2 15.3 Rail products 4.4 4.3 3.5 Structural shapes and pilings -- 1.3 3.8 Other steel mill products 4.5 3.2 1.6 Other products and services (including raw materials) 3.4 5.0 6.1 - ------------------------------------------------------------------------- 100.0% 100.0% 100.0% =========================================================================
Percentage Of Steel Mill Product Shipments By Principal Market
(Based on tons shipped) 1998 1997 1996 - ------------------------------------------------------------------------- Service Centers, Processors and Converters (including semifinished) 46.9% 46.9% 45.2% Transportation (including automotive) 23.0 24.9 26.0 Construction 12.1 11.0 12.6 Containers 5.2 5.8 5.2 Machinery 4.9 4.7 5.1 Other 7.9 6.7 5.9 - ------------------------------------------------------------------------- 100.0% 100.0% 100.0% =========================================================================
Liquidity And Capital Structure At December 31, 1998, total liquidity, comprising cash, cash equivalents and funds available under our bank credit arrangement, totaled $479 million compared with $612 million at December 31, 1997. At December 31, 1998, funds available under our credit arrangement totaled $341 million. Cash provided from operations before pension activities in 1998 decreased to $487 million from $551 million in 1997 due to changes in working capital, principally inventory, and lower earnings. Cash provided from operations before pension activities in 1997 increased to $551 million from $341 million in 1996 due to higher earnings and changes in working capital, principally inventory. Cash from asset sales of $309 million in 1998 included $105 million from the sale of certain stainless assets acquired in the Lukens acquisition and the sale of the No.1 Coke Oven Battery at Burns Harbor for about $190 million. See Note F, Commitments and Contingent Liabilities, to the Consolidated Financial Statements. Principal uses of cash during 1998 included the Lukens acquisition, capital expenditures, debt repayments and pension funding. We repaid $290 million of debt including a $200 million short-term borrowing used to complete the Lukens acquisition and $48 million of the debt assumed in the Lukens acquisition. We contributed $150 million to our pension fund in 1998 compared with $425 million in 1997 and $170 million in 1996. As a result of these contributions, our pension liability decreased to $415 million at December 31, 1998 from $440 million at December 31, 1997, despite assuming a net obligation of $35 million in our acquisition of Lukens. Over the past five years, our pension liability has been reduced by about $1.2 billion, or about 75%, from $1.6 billion at December 31, 1993. We have contributed amounts to our pension fund substantially in excess of amounts required under current laws and regulations. Because of these contributions and better than expected earnings performance on our pension fund assets, we currently have a funding standard credit balance that would allow us to defer pension funding for several years, although we presently have no plans to do so. Major uses of cash for 1999 are expected to be capital expenditures of about $450 million, pension funding, and debt payments of about $40 million. We expect to maintain an adequate level of liquidity throughout 1999 with cash flow from operations, reductions in working capital, available funds under our credit arrangement and proceeds from the sale of assets, including the remaining Lukens' stainless assets. Derivative Financial Instruments And Related Market Risk Bethlehem is exposed to certain risks associated with the change in foreign currency rates, interest rates and commodity prices. We seek to minimize the potential adverse impact of those market risks through the use of appropriate management techniques including derivative financial instruments. Although Bethlehem occasionally purchases goods and services denominated in a foreign currency and 11 has investments in other countries, the amounts involved are not material. Also, most export sales are denominated in U.S. dollars. Therefore, foreign currency exposure is not typically a material risk to Bethlehem. We are exposed to interest rate risk arising from having certain variable rate financing arrangements. Under our bank credit arrangement, we sold $142 million of receivables to banks at a discount based on variable interest rates, as described in Note E, Long-term Debt, to the Consolidated Financial Statements. We have interest rate swaps maturing in 2000 and 2001 with notional amounts totaling $62 million that effectively fix a portion of the interest rates on these financings, leaving about $80 million exposed to changes in interest rates. The fair value of these swaps at December 31, 1998 was a liability of $4.6 million. We also have exposure to changes in interest rates because long-term interest rates are used to determine our obligations for employee postretirement plans for pensions and healthcare and affect the performance of our pension fund assets. In our manufacturing process, we use certain metals to coat our products or as additives in our steelmaking process. For a portion of our energy needs, we consume natural gas. We use derivative financial instruments to manage the price risk for a portion of our annual requirements for natural gas, zinc and other metals. At December 31, 1998, we had outstanding futures contracts for natural gas, zinc, aluminum, nickel and tin. The fair value of these contracts at December 31, 1998 was a liability of $9.7 million. These contracts mature at various times in 1999 and 2000 and coincide with expected purchases of the commodities and effectively establish the price we will pay at the time we entered into the futures contracts. To the extent we have not entered into contracts, the price Bethlehem will pay will increase or decrease as the market price for the commodities rises or falls. Changes in market prices for most of these commodities are typically affected by the same factors affecting changes in steel prices over time. Common Stock Market And Dividend Information
1998 Prices* 1997 Prices* Period High Low High Low - --------------------------------------------------- First Quarter $15.500 $ 8.063 $ 9.375 $7.625 Second Quarter 17.125 11.063 10.750 7.750 Third Quarter 13.438 7.000 12.938 9.813 Fourth Quarter 10.750 7.313 11.563 7.750 - ---------------------------------------------------
* The principal market for Bethlehem Common Stock is the New York Stock Exchange. Bethlehem Common Stock is also listed on the Chicago Stock Exchange. The high and low sales prices of Bethlehem's Common Stock as reported in the consolidated transaction system are shown. The trading symbol for Bethlehem Common Stock is BS. Bethlehem has not paid a dividend on its Common Stock since the fourth quarter of 1991. Exit Of Businesses As previously explained under Lukens Acquisition, we recorded a $35 million ($29 million after-tax) charge in connection with closing the Sparrows Point 160" plate mill during 1998. During 1997, we recorded a $135 million ($113 million after-tax) gain related to the sale of our equity interest in IOC. We also sold our High Power Mountain coal assets during 1997. In 1996, we recorded a $465 million ($382 million after-tax) charge to exit six underperforming businesses: Bethlehem Structural, BethForge, CENTEC, BethShip's Sparrows Point Yard, Bethlehem Coke and our Eagle Nest coal mine. Subsequently, we sold or closed all of these businesses eliminating the significant losses they were incurring. Future charges relating to any of these former businesses are not expected to be material. Certain of these businesses operated facilities on about 1,800 acres of contiguous property in Bethlehem, Pennsylvania. Bethlehem is redeveloping the land where the facilities were located. Future proceeds are expected to at least equal any future costs incurred to maintain and develop the property. Capital Expenditures Capital expenditures (excluding the acquisition of Lukens Inc.) were $328 million in 1998 compared with $228 million in 1997 and $259 million in 1996. In October 1997, we announced a plan to build a new continuous cold rolling mill complex at Sparrows Point. The $300 million complex, which is scheduled to begin production early in 2000, is expected to lower costs, improve quality and enhance capabilities. At December 31, 1998, the estimated cost of completing all authorized capital expenditures was about $640 million, compared with $750 million at December 31, 1997. Authorized capital expenditures at December 31, 1998 included the planned 1999 reline of our "L" Blast Furnace at Sparrows Point. During the reline, that will take place mid-year, Sparrows Point will incur higher costs because of lower raw steel production. We expect such authorized capital expenditures to be com-pleted during the 1999-2001 period. Employees And Employment Costs At the end of 1998, we had about 17,000 employees (including stainless) compared with about 15,600 employees at the end of 1997 and 17,500 employees at the end of 1996. About three-quarters of our employees are covered by our labor agreements with the United Steelworkers of America (USWA). The agreements with the USWA, covering USWA represented employees at Burns Harbor, 12 Sparrows Point and PST, expire on August 1, 1999. Bethlehem is prepared to commence early negotiations with the USWA to reach a new mutually satisfactory competitive long-term agreement. Under the terms of our 1993 labor agreement with the USWA, most represented employees at Burns Harbor and Sparrows Point receive profit sharing of 8% of adjusted consolidated annual income before taxes, unusual items and expenses applicable to the plan plus 2% of adjusted profits of certain operations, payable in the following year. Profit sharing is also paid to salaried employees based on specific Corporate and Business Unit plans and performance. Under other provisions of the labor agreement, we are required to pay "shortfall amounts" each year up to 10% of the first $100 million and 20% in excess of $100 million of consolidated income before taxes, unusual items and expenses applicable to the shortfall plan. Shortfall amounts arise when employees terminate employment and ESOP Preference Stock, held in trust for employees in reimbursement for wage and benefit reductions in prior years, is converted into Common Stock and sold for amounts less than the stated value of the Preference Stock ($32 for Series A and $40 for Series B). We issued approximately 18,000 shares of Series B Preference Stock in 1998 and approximately 37,000 shares in 1997 to a trustee for the benefit of employees for 1997 and 1996, respectively, and expect to issue about 1,500 shares in early 1999 for the 1998 plan year. We paid about $58 million in 1998 for income-related bonus, profit sharing and shortfall amounts, and expect to pay about $36 million in early 1999. Employment Cost Summary*
(Dollars in millions) 1998 1997 1996 - --------------------------------------------------- Salaries and Wages $ 899 $ 914 $ 966 - --------------------------------------------------- Employee Benefits: Pension Plans: Actives 80 95 111 Retirees 5 60 81 Medical and Insurance: Actives 122 135 148 Retirees 140 122 115 Payroll Taxes 74 74 85 Workers' Compensation 27 21 28 Savings Plan and Other 20 18 21 - --------------------------------------------------- Total Benefit Costs 468 525 589 - --------------------------------------------------- Total Employment Costs $1,367 $1,439 $1,555 ===================================================
*Excluding Discontinued Stainless Operations. Environmental Matters We are subject to various federal, state and local environmental laws and regulations concerning, among other things, air emissions, waste water discharges and solid and hazardous waste disposal. During the five years ended December 31, 1998, we spent approximately $136 million for environmental control equipment. Expenditures for new environmental control equipment totaled approximately $13 million in 1998, $15 million in 1997 and $29 million in 1996. The costs incurred in 1998 to operate and maintain existing environmental control equipment were approximately $114 million (excluding interest costs but including depreciation charges of $14 million) compared with $110 million in 1997 and $115 million in 1996. Bethlehem and federal and state regulatory agencies conduct negotiations to resolve differences in interpretation of certain environmental control requirements. In some instances, those negotiations are being held in connection with the resolution of pending environmental proceedings. We believe that there will not be any significant curtailment or interruptions of any of our operations as a result of these proceedings and negotiations. We cannot predict the specific environmental control requirements that we will face in the future. Based on existing and anticipated regulations promulgated under presently enacted legislation, we currently estimate that capital expenditures for installation of new environmental control equipment will average about $10 million per year over the next two years. However, estimates of future capital expenditures and operating costs required for environmental compliance are subject to numerous uncertainties, including the evolving nature of regulations, possible imposition of more stringent requirements, availability of new technologies and the timing of expenditures. Although it is possible that our future results of operations, in particular quarterly or annual periods, could be materially affected by the future costs of environmental compliance, we believe that the future costs of environmental compliance will not have a material adverse effect on our consolidated financial position or on our competitive position with respect to other integrated domestic steelmakers which are subject to the same environmental requirements. 13 Consolidated Statements of Income
Year Ended December 31 (Dollars in millions, except per share data) 1998 1997 1996 - ----------------------------------------------------------------------------------------------------- Net Sales $4,477.8 $4,631.2 $4,679.0 - ----------------------------------------------------------------------------------------------------- Costs and Expenses: Cost of sales 3,883.2 4,053.3 4,168.2 Depreciation and amortization (Note A) 246.5 231.0 268.7 Selling, administration and general expense 123.6 107.9 105.5 Estimated loss (gain) on exiting businesses (Note B) 35.0 (135.0) 465.0 - ----------------------------------------------------------------------------------------------------- Total Costs and Expenses 4,288.3 4,257.2 5,007.4 - ----------------------------------------------------------------------------------------------------- Income (Loss) from Operations 189.5 374.0 (328.4) Financing Income (Expense): Interest and other financing costs (Note A) (55.4) (47.5) (53.3) Interest income 10.0 9.2 5.9 - ----------------------------------------------------------------------------------------------------- Income (Loss) Before Income Taxes 144.1 335.7 (375.8) Benefit (Provision) for Income Taxes (Note D) (24.0) (55.0) 67.0 - ----------------------------------------------------------------------------------------------------- Net Income (Loss) 120.1 280.7 (308.8) Dividends on Preferred and Preference Stock 41.7 41.6 41.9 - ----------------------------------------------------------------------------------------------------- Net Income (Loss) Applicable to Common Stock $ 78.4 $ 239.1 $ (350.7) ===================================================================================================== Net Income (Loss) per Common Share (Note J): Basic $ .64 $ 2.13 $ (3.15) Diluted $ .64 $ 2.03 $ (3.15) =====================================================================================================
The accompanying Notes are an integral part of the Consolidated Financial Statements. 14 Consolidated Balance Sheets
December 31 (Dollars in millions, except per share data) 1998 1997 - ------------------------------------------------------------------------------------------------------ Assets Current Assets: Cash and cash equivalents (Note A) $ 137.8 $ 252.4 Receivables (Notes C and E) 307.2 306.0 Inventories (Notes A and E) Raw materials and supplies 319.9 324.5 Finished and semifinished products 720.7 569.3 - ------------------------------------------------------------------------------------------------------ Total Inventories 1,040.6 893.8 Other current assets 9.2 11.8 - ------------------------------------------------------------------------------------------------------ Total Current Assets 1,494.8 1,464.0 Investments and Miscellaneous Assets 98.0 100.9 Property, Plant and Equipment, less accumulated depreciation of $4,119.4 and $4,095.5 (Note A) 2,655.7 2,357.7 Deferred Income Tax Asset--net (Note D) 920.0 880.0 Net Assets of Discontinued Stainless Operations (Note C) 100.0 -- Goodwill, less accumulated amortization of $7.0 (Notes A and C) 353.0 -- - ------------------------------------------------------------------------------------------------------ Total Assets $5,621.5 $4,802.6 ====================================================================================================== Liabilities and Stockholders' Equity Current Liabilities: Accounts payable $ 417.9 $ 371.2 Accrued employment costs 147.7 173.9 Postretirement benefits other than pensions (Note G) 160.0 150.0 Accrued taxes (Note D) 53.4 60.0 Debt (Note E) 44.4 41.8 Other current liabilities 161.8 113.9 - ------------------------------------------------------------------------------------------------------ Total Current Liabilities 985.2 910.8 Pension Liability (Notes B and G) 415.0 440.0 Postretirement Benefits Other Than Pensions (Notes B and G) 1,630.0 1,445.0 Long-term Debt (Note E) 627.7 451.6 Deferred Gain on Sales (Note F) 136.0 4.1 Other Long-term Liabilities 338.1 336.1 Stockholders' Equity (Notes H, I and J): Preferred Stock--at $1 per share par value (aggregate liquidation preference of $481.2); Authorized 20,000,000 shares 11.6 11.6 Preference Stock--at $1 per share par value (aggregate liquidation preference of $80.6); Authorized 20,000,000 shares 2.2 2.3 Common Stock--at $1 per share par value; Authorized 250,000,000 Issued 132,227,787 and 115,047,810 shares 132.2 115.0 Common Stock--Held in treasury, 2,080,799 and 2,056,571 shares at cost (60.3) (60.0) Additional Paid-in Capital 1,991.6 1,854.0 Accumulated Deficit (587.8) (707.9) - ------------------------------------------------------------------------------------------------------ Total Stockholders' Equity 1,489.5 1,215.0 - ------------------------------------------------------------------------------------------------------ Total Liabilities and Stockholders' Equity $5,621.5 $4,802.6 ======================================================================================================
The accompanying Notes are an integral part of the Consolidated Financial Statements. 15 Consolidated Statements of Cash Flows
Year Ended December 31 (Dollars in millions, except per share data) 1998 1997 1996 - --------------------------------------------------------------------------------------------------------------- Operating Activities: Net Income (Loss) $ 120.1 $ 280.7 $ (308.8) Adjustments for items not affecting cash from operating activities: Depreciation and amortization (Note A) 246.5 231.0 268.7 Estimated loss (gain) on exiting businesses (Note B) 35.0 (135.0) 465.0 Deferred income taxes (Note D) 18.0 53.0 (67.0) Other--net 16.1 28.2 9.1 Working capital (excluding investing and financing activities): Receivables - operating 99.4 11.6 9.1 Receivables - sold (Note E) 64.0 (6.0) 54.0 Inventories (59.0) 115.6 (58.8) Accounts payable (13.1) (24.5) 28.9 Employment costs and other (40.5) (3.7) (59.4) - --------------------------------------------------------------------------------------------------------------- Cash Provided from Operations Before Pension Activities 486.5 550.9 340.8 - --------------------------------------------------------------------------------------------------------------- Pension Activities (Note G): Pension expense 85.0 155.0 192.0 Pension funding (150.0) (425.0) (170.0) - --------------------------------------------------------------------------------------------------------------- Cash Provided from Continuing Operating Activities 421.5 280.9 362.8 - --------------------------------------------------------------------------------------------------------------- Cash Provided from Operating Activities of Discontinued Stainless Operations (Note C) 22.2 -- -- - --------------------------------------------------------------------------------------------------------------- Investing Activities: Capital expenditures (328.0) (228.2) (259.0) Purchase of Lukens (Note C): Paid to Lukens stockholders, net of cash acquired (327.8) -- -- Transaction and other related payments (41.4) -- -- Cash proceeds from asset sales and other 308.8 191.8 7.7 - --------------------------------------------------------------------------------------------------------------- Cash Used for Investing Activities (388.4) (36.4) (251.3) - --------------------------------------------------------------------------------------------------------------- Financing Activities: Borrowings (Note E) 201.6 1.9 3.1 Debt and capital lease payments (Note E) (290.4) (53.4) (91.8) Cash dividends paid (Note J) (40.4) (40.4) (40.4) Other payments (40.7) (36.8) (25.8) - --------------------------------------------------------------------------------------------------------------- Cash Used for Financing Activities (169.9) (128.7) (154.9) - --------------------------------------------------------------------------------------------------------------- Net Increase (Decrease) in Cash and Cash Equivalents (114.6) 115.8 (43.4) Cash and Cash Equivalents - Beginning of Period 252.4 136.6 180.0 - --------------------------------------------------------------------------------------------------------------- - End of Period $ 137.8 $ 252.4 $ 136.6 =============================================================================================================== Supplemental Information: Interest paid, net of amount capitalized $ 50.2 $ 52.6 $ 52.8 Income taxes paid (received) - net (Note D) $ (14.2) $ 7.6 $ 3.7 - ---------------------------------------------------------------------------------------------------------------
The accompanying Notes are an integral part of the Consolidated Financial Statements. 16 Notes to Consolidated Financial Statements A. Accounting Policies Principles of Consolidation - The Consolidated Financial Statements include the accounts of Bethlehem Steel Corporation and all majority-owned subsidiaries and joint ventures. Cash and Cash Equivalents - Cash equivalents consist primarily of overnight investments, certificates of deposit and other short-term, highly liquid instruments generally with original maturities at the time of acquisition of three months or less. Cash equivalents are stated at cost plus accrued interest, which approximates market. Inventories - Inventories are valued at the lower of cost (principally FIFO) or market. Property, Plant and Equipment - Property, plant and equipment is stated at cost. Maintenance, repairs and renewals that neither materially add to the value of the property nor appreciably prolong its life are charged to expense. Gains or losses on dispositions of property, plant and equipment are recognized in income. Interest is capitalized on significant construction projects and totaled $7 million in each of the last three years. Our property, plant and equipment by major classification is:
December 31 (Dollars in millions) 1998 1997 ------------------------------------------------- Land (net of depletion) $ 33.2 $ 25.4 Buildings 649.2 637.4 Machinery and equipment 5,720.7 5,553.5 Accumulated depreciation (4,119.4) (4,095.5) ------------------------------------------------- 2,283.7 2,120.8 Construction-in-progress 372.0 236.9 ------------------------------------------------- Total $ 2,655.7 $ 2,357.7 =================================================
Depreciation - Depreciation is based upon the estimated useful lives of each asset group. The estimated useful life is 18 years for most steel producing assets. Steel producing assets, other than blast furnace linings, are depreciated on a straight-line basis adjusted by an activity factor. This factor is based on the ratio of production and shipments for the current year to the average production and shipments for the current and preceding four years at each operating location. Annual depreciation after adjustment for this activity factor is not less than 75% nor more than 125% of straight-line depreciation. Depreciation after adjustment for this activity factor was $1 million less than straight-line in 1998 and $5 million and $13 million more than straight-line in 1997 and 1996. Through December 31, 1998, $9 million more accumulated depreciation has been recorded under this method than would have been recorded under straight-line depreciation. The cost of blast furnace linings is depreciated on a unit-of- production basis. Amortization - Goodwill, resulting primarily from the acquisition of Lukens, is being amortized over a 30-year life using the straight-line method. Amortization was about $8 million in 1998. See Note C, Acquisition of Lukens Inc. Asset Impairment - We periodically evaluate the carrying value of property, plant and equipment and goodwill when events and circumstances warrant such a review. Property, plant and equipment is considered impaired when the anticipated undiscounted future cash flows from a logical grouping of assets is less than its carrying value. In that event, we recognize a loss equal to the amount by which the carrying value exceeds the fair market value of assets (less estimated costs to dispose, for assets to be disposed of). See Note B, Estimated (Loss) Gain on Exiting Businesses. Foreign Currency, Interest Rate and Commodity Price Risk Management - Periodically, we enter into financial contracts to manage risks. We use foreign currency exchange contracts to manage the cost of firm purchase commitments for capital equipment or other purchased goods and services denominated in a foreign currency. We use interest rate swap agreements to fix the interest rate on certain floating rate financings. We use commodity contracts to fix the cost of a portion of our annual requirements for natural gas, zinc and other metals. Generally, foreign currency and commodity contracts are for periods of less than a year. The gains or losses on these contracts are reflected in the cost of goods or services purchased. Net payments or receipts on interest rate swaps are reflected in interest expense. Gains or losses on swaps settled or terminated are deferred and amortized to interest expense over the life of the related debt. 17 In June 1998, the Financial Accounting Standards Board issued Statement No. 133, Accounting for Derivative Instruments and Hedging Activities. We must adopt the statement by January 1, 2000. Adoption will require us to recognize all derivative instruments as either assets or liabilities on the balance sheet and measure those instruments at fair value. At December 31, 1998, the fair value of all derivative instruments was a liability of $14.3 million. Gains or losses on these contracts, to the extent they have been effective as hedges, would continue to be recognized as they are now. Gains or losses on interest rate swaps settled or terminated would no longer be deferred but recognized in income immediately. Adoption of Statement No. 133 is not expected to have a material impact on our operating results or financial position. Environmental Expenditures - Environmental expenditures that increase the life or efficiency of property, plant and equipment, or that will reduce or prevent future environmental contamination are capitalized. Expenditures that relate to existing conditions caused by past operations and that have no significant future economic benefit are expensed. Environmental expenses are accrued at the time the expenditure becomes probable and the cost can be reasonably estimated. We do not discount any recorded obligations for future remediation expenditures to their present value nor do we record recoveries of environmental remediation costs from insurance carriers and other third parties, if any, as assets until their receipt is deemed probable. Revenue Recognition - We recognize substantially all revenues when products are shipped to customers and risks of ownership change. Use of Estimates - In preparing these financial statements, we make estimates and use assumptions that affect some of the reported amounts and disclosures. See, for example, Note D, Taxes; Note F, Commitments and Contingent Liabilities; and Note G, Pension and Other Postretirement Benefits. In the future, actual amounts received or paid could differ from those estimates. Segment Information - In prior years, we reported the results of operations and other information for two segments, Basic Steel and Steel Related, in accordance with FASB Statement No. 14, Financial Reporting for Segments of a Business Enterprise. The Steel Related segment was composed of BethForge, CENTEC, and BethShip, all of which were sold in 1997. The FASB issued Statement No. 131, Disclosures about Segments of an Enterprise and Related Information, which became effective in 1998 and replaces disclosures previously required by Statement No. 14. Under this new standard, all of our remaining businesses can be aggregated into a single segment. B. Estimated (Loss) Gain On Exiting Businesses In 1998, we recorded a $35 million ($29 million after-tax, or $.24 per common share - basic) charge in connection with closing the Sparrows Point 160" plate mill. This loss included $25 million for the net book value of the equipment to be dismantled and $10 million for employee benefit related costs ($5 million for pensions, $2 million for postretirement benefits other than pensions, and $3 million for severance and other employee benefits). We expect to reduce our workforce by about 150 employees as a result of this decision. In 1997, we sold our 37.57 percent interest in the Iron Ore Company of Canada for about $145 million. This sale resulted in a gain of $135 million ($113 million after-tax, or $1.01 per common share - basic). During 1996, we announced a plan to improve financial performance and stockholder value by exiting our Bethlehem Structural, BethForge, CENTEC, and BethShip businesses. These businesses were subsequently either sold or closed in 1997. We also sold and leased assets of our Eagle Nest coal mine and wrote down as an impaired asset our Coke Division in Bethlehem, Pennsylvania. Accordingly, we recorded losses in 1996 totaling $465 million ($382 million after-tax or $3.43 per common share - basic). These losses included $250 million for the related property and equipment, $180 million for employee benefit related costs ($120 million for pensions, $30 million for postretirement benefits other than pensions, and $30 million for severance and other employee benefits) and $35 million for future contractual and other costs. 18 In December 1997, we announced a decision to cease operations at our Bethlehem Coke Division and it was closed during the first quarter of 1998. Because of an arbitration decision, we could offer employment to certain affected potential early retirees at other Bethlehem locations. Charges recognized in 1996 were therefore sufficient to cover employment and other related charges related to the closing of Bethlehem Coke. Accordingly, no additional charges were recorded. These businesses had trade sales of about $205 million in 1997 and about $340 million in 1996 and operating losses of about $60 million in 1997 and about $130 million in 1996. This is not necessarily indicative of the impact on consolidated results because Bethlehem Structural consumed steel produced by Bethlehem's Pennsylvania Steel Technologies, Inc. and Bethlehem Coke supplied a portion of the coke consumed by Bethlehem's Sparrows Point Division. We reduced our workforce by about 3,000 employees as a result of exiting these businesses. The amounts charged to the liability for these closed or sold businesses, other than employment related costs, were about $27 million in 1998 and $8 million in 1997. Future amounts to be charged to this liability are not expected to be material. C. Acquisition Of Lukens Inc. On May 29, 1998, Bethlehem acquired all of the outstanding capital stock of Lukens Inc. The aggregate purchase price of $560.6 million comprised cash of $327.8 million, the issuance of 15.1 million shares of Bethlehem Common Stock valued at $184.8 million, and transaction related costs of $48.0 million. The acquisition was accounted for as a purchase. Accordingly, Lukens' results are included in the Consolidated Financial Statements from the date of acquisition. The fair value (in millions) of the assets acquired and liabilities assumed is as follows:
Current assets $ 184.7 Property, plant and equipment 277.3 Net assets of discontinued stainless operations 310.0 Deferred tax asset, other 70.5 Goodwill 360.0 Current liabilities (113.5) Pension and other postretirement benefit liabilities (220.0) Debt (268.5) Other long-term liabilities (39.9) ------------------------------------------- Total $ 560.6 ===========================================
We expect to finalize all purchase accountimillion in 1997. Future amounts to be charged to this liability are not expectedng adjustments, e.g., ultimate net proceeds on disposal of the stainless operatto be material. ions, within one year of the acquisition. Any difference between the amounts reflected above and the final amounts could result in an adjustment to goodwill. Bethlehem has sold or intends to sell the former Luken stainless and distribution businesses. Accordingly, we are accounting for the stainless and distribution businesses as discontinued operations. Income or losses from these operations are not included in our operating results. Since the date of acquisition, these operations have incurred operating losses of about $26 million. The net assets of the remaining operations are shown separately on the balance sheet and consist primarily of property, plant and equipment and working capital. During the fourth quarter of 1998, we completed the sale of certain stainless assets to Allegheny Teledyne Inc. Bethlehem received $105 million in cash and a non-interest bearing note for $70 million. Upon completion of the sale, a 20-year agreement to provide Allegheny with conversion services to produce stainless steel and coiled plate became effective. The note will become payable upon the completion of certain agreed upon improvements to the facilities used to provide conversion services to Allegheny. Bethlehem and Allegheny will share in the cost of these improvements that are expected to cost about $25 million and be completed in the fourth quarter of 1999. In January 1999, we signed a purchase and sale agreement with Ryerson Tull, Inc. to sell the stainless distribution business, Washington Specialty Metals Corporation, for about $70 million. We expect to complete this transaction in early 1999. We also announced that we would permanently close the stainless sheet and strip operations in Massillon, Ohio and Washington, Pennsylvania. We will continue with our efforts to sell these assets. The unaudited pro forma combined historical results (excluding stainless and distribution businesses) as if Lukens had been acquired at the beginning of 1997 are estimated to be:
December 31 (Dollars in millions, except per share) 1998 1997 ------------------------------------------------------------- Net Sales $4,717.5 $5,147.7 Income from Operations 200.1 404.3 Net Income 121.4 286.2 Net Income per Share: Basic $ .62 $ 1.92 Diluted .62 1.86 --------------------------------------------------------------
19 D. Taxes
Our benefit (provision) for income taxes consisted of: (Dollars in millions) 1998 1997 1996 ----------------------------------------------------------------- Federal--deferred $ (18) $ (53) $ 67 Federal, state and foreign--current (6) (2) -- ----------------------------------------------------------------- Total benefit (provision) $ (24) $ (55) $ 67 =================================================================
The benefit (provision) for income taxes differs from the amount computed by applying the federal statutory rate to pre-tax income (loss). The computed amounts and the items comprising the total differences follow:
(Dollars in millions) 1998 1997 1996 ------------------------------------------------------------------- Pre-tax income (loss): United States $ 142 $ 333 $ (392) Foreign 2 3 16 ------------------------------------------------------------------- Total $ 144 $ 336 $ (376) =================================================================== Computed amounts $ (50) $(118) $ 132 Change in valuation allowance 25 55 (67) Percentage depletion 6 5 5 Dividend received deduction -- 3 2 Other differences -- net (5) -- (5) ---------------------------------------------------------------------- Total benefit (provision) $ (24) $ (55) $ 67 ======================================================================
The components of our net deferred income tax asset are as follows:
December 31 (Dollars in millions) 1998 1997 --------------------------------------------------------------------- Temporary differences: Employee benefits $ 910 $ 765 Depreciable assets (350) (300) Other 210 140 --------------------------------------------------------------------- Total 770 605 Operating loss carryforward 470 625 --------------------------------------------------------------------- Deferred income tax asset 1,240 1,230 Valuation allowance (320) (350) --------------------------------------------------------------------- Deferred income tax asset--net $ 920 $ 880 =====================================================================
Temporary differences represent the cumulative taxable or deductible amounts recorded in our financial statements in different years than recognized in our tax returns. Our employee benefits temporary difference includes amounts expensed in our financial statements for pensions, health care, life insurance and other postretirement benefits that become deductible in our tax return upon payment or funding in qualified trusts. The depreciable assets temporary difference represents principally tax depreciation in excess of financial statement depreciation. Other temporary differences represent principally various expenses accrued for financial reporting purposes that are not deductible for tax reporting purposes until paid. At December 31, 1998, we had regular tax net operating loss carryforwards of $1.3 billion and alternative minimum tax loss carryforwards of $350 million. Regular federal tax net operating loss carryforwards of $70 million expire in 1999, with the balance expiring in varying amounts from 2000 through 2011. FASB Statement No. 109, Accounting for Income Taxes, requires that we record a valuation allowance when it is "more likely than not that some portion or all of the deferred tax assets will not be realized." It further states, "forming a conclusion that a valuation allowance is not needed is difficult when there is negative evidence such as cumulative losses in recent years." The ultimate realization of this deferred tax asset depends on our ability to generate sufficient taxable income in the future. Excluding estimated (losses) gains on exiting businesses, Bethlehem has reported net income for five consecutive years, and has undergone substantial restructuring and made strategic capital expenditures during the last several years. Also, we have tax planning opportunities that could affect taxable income including selection of depreciation methods and timing of contributions to our pension trust fund. We believe that our deferred tax asset will be realized by future operating results together with tax planning opportunities. However, our significant net operating loss carryforwards and future tax deductions from temporary differences make it appropriate to record a valuation allowance. Accordingly, we have provided a valuation allowance equal to 50% of the total deferred tax asset related to our operating loss carryforward and our temporary differences exclusive of postretirement benefits other than pensions. If we have a tax loss in any year in which our tax deduction for postretirement benefits other than pensions exceeds our financial statement expense, the tax law currently provides for a 20-year carryforward of that loss against future taxable income. We, therefore, have sufficient time to realize these future tax benefits. We believe, therefore, a valuation allowance is not appropriate for the deferred tax asset related to our temporary difference for postretirement benefits other than pensions. 20 If we are unable to generate sufficient taxable income in the future through operating results or tax-planning opportunities, we will be required to increase our valuation allowance through a charge to expense (reducing our stockholders' equity). On the other hand, if we achieve sufficient profitability to use all of our deferred income tax asset, we will reduce the valuation allowance through a decrease to expense (increasing our stockholders' equity). In addition to income taxes, we incurred costs for certain other taxes as follows:
(Dollars in millions) 1998 1997 1996 ---------------------------------------------------- Employment taxes $ 73.8 $ 74.0 $ 85.1 Property taxes 34.4 26.5 25.1 State taxes and other 12.2 11.9 13.0 ----------------------------------------------------- Total other taxes $120.4 $112.4 $123.2 =====================================================
E. Long-Term Debt
December 31 (Dollars in millions) 1998 1997 ----------------------------------------------------- 5.69%--5.99% Galvanizing lines financing $ 74.9 $ 112.3 Notes and loans: 10-3/8%, Due 2003 105.0 105.0 7-5/8%, Due 2004 150.0 -- 6-1/2%, Due 2006 75.0 -- 2% - 9.64%, Due 1999-2009 7.5 10.5 Debentures: 6-7/8%, Due 1999 4.0 5.4 8-3/8%, Due 2001 41.6 41.6 8.45%, Due 2005 90.8 90.8 Pollution control and industrial revenue bonds: 7-1/2% - 8%, Due 2015-2024 128.9 128.9 Unamortized debt discount (5.6) (1.1) ----------------------------------------------------- Total 672.1 493.4 Amounts due within one year (44.4) (41.8) ----------------------------------------------------- Long-term $ 627.7 $ 451.6 =====================================================
Maturities and sinking fund requirements for the next five years are $44 million in 1999, $48 million in 2000, $50 million in 2001, $11 million in 2002 and $116 million in 2003. The galvanizing lines financing is collateralized by such equipment at our Sparrows Point and Burns Harbor Divisions and will be repaid in equal semiannual installments through 2000. The 10-3/8% Notes are senior in right of payment to all existing and future subordinated indebtedness of Bethlehem. As unsecured senior obligations, the Notes will effectively be subordinate to secured senior indebtedness of Bethlehem. These Notes contain covenants that impose certain limitations on our ability to incur or repay debt, to pay dividends and make other distributions on or redeem capital stock, or to sell, merge, transfer or encumber assets. See Note J, Stockholders' Equity. We have a credit arrangement, through June 2003, with a group of 13 domestic and international banks for $600 million, $150 million of which can be used for letters of credit. The arrangement consists of a $340 million receivables sale/purchase agreement through a wholly-owned special purpose subsidiary and a $260 million secured credit inventory agreement. As of December 31, 1998, we had sold to the banks an ownership interest in trade receivables of $210 million in exchange for $142 million in cash, $32 million in letters of credit and required reserves of $36 million. The receivables were sold at a discount, based on defined short-term, investment grade, interest rates and a fixed fee per annum for the letters of credit. The banks are required to pay us cash for the face amount of the letters of credit upon expiration. We pay a .15% per annum fee on the daily available commitment. Receivables from banks are for cash and required reserves that will be returned to us upon expiration of the letters of credit and liquidation of receivable ownership. Supplemental information on the receivable balances at December 31, 1998 and 1997 follows:
December 31 (Dollars in millions) 1998 1997 ------------------------------------------------------- Trade and other $ 258.9 $ 227.6 Banks 68.3 97.2 Allowances (20.0) (18.8) ------------------------------------------------------- Total receivables-net $ 307.2 $ 306.0 =======================================================
Under the secured credit agreement, inventories are pledged as collateral for any borrowings and letters of credit. Borrowings under the agreement are subject to collateral coverage requirements and incur interest based on defined short-term interest rates. No borrowings were outstanding under this agreement at December 31, 1998. We pay a .375% per annum fee on the daily available commitment. 21 Our secured credit agreement and galvanizing lines financing agreements contain restrictive covenants that require Bethlehem to maintain a minimum adjusted consolidated tangible net worth. At December 31, 1998, our adjusted tangible net worth as defined by these agreements exceeded the more restrictive of these requirements by about $500 million. At December 31, 1998, outstanding interest rate swap agreements with notional amounts totaling $62 million effectively fix a portion of the interest rate on our floating rate financings at 5.75% to 8.70%. These interest rate swap agreements expire in 2000 and 2001. At December 31, 1998 and 1997, the estimated fair value of our debt was not materially different from the recorded amounts. F. Commitments And Contingent Liabilities In July 1998, we sold the No. 1 Coke Oven Battery at Burns Harbor to a third party. We will continue to operate the facility for the new owner and also entered into a nine-year agreement to purchase about 800,000 tons of coke per year through year 2008. During 1998, we purchased 370,000 tons of coke at a cost of $44 million. The gain on the sale of about $160 million is being deferred and recognized over the life of the operating and purchase agreements. In April 1997, we sold our interest in Iron Ore Company of Canada (IOC) and entered into a 14-year agreement to purchase up to 1.8 million tons of iron ore per year through the year 2004 and about 500,000 tons in the years 2005 through 2011. In 1998, we purchased 1.9 million net tons from IOC at a cost of $62 million. At December 31, 1998, we had outstanding approximately $240 million of purchase orders for additions and improvements to our properties. We, as well as other steel companies, are subject to various environmental laws and regulations imposed by federal, state and local governments. Because of the continuing evolution of the specific regulatory requirements and available technology to comply with the requirements, we cannot reasonably estimate the future capital expenditures and operating costs required to comply with these laws and regulations. Although it is possible that our future operating results in a particular quarterly or annual period could be materially affected by the future costs of environmental compliance, we believe that such costs will not have a material adverse effect on our consolidated financial position or on our competitive position compared with other integrated domestic steelmakers subject to the same environmental requirements. In the ordinary course of our business, we are involved in various pending or threatened legal actions. In our opinion, adequate reserves have been recorded for losses that are likely to result from these proceedings. If such reserves prove to be inadequate, however, we would incur a charge to earnings that could be material to the results of operations in a particular future quarterly or annual period. We believe that any ultimate liability arising from these actions will not have a material adverse effect on our consolidated financial position. Future minimum payments under noncancellable operating leases at December 31, 1998 were $17 million in 1999, $13 million in 2000, $8 million in 2001, $6 million in 2002, $6 million in 2003 and $11 million thereafter. Total rental expense under operating leases was $41 million, $40 million and $40 million in 1998, 1997 and 1996. G. Pension And Other Postretirement Benefits We have noncontributory defined benefit pension plans that provide benefits for substantially all our employees. Defined benefits are based on years of service and the five highest consecutive years of pensionable earnings during the last ten years prior to retirement or a minimum amount based on years of service. We fund annually the amount required under ERISA minimum funding standards plus additional amounts as appropriate. In addition to providing pension benefits, we currently provide health care and life insurance benefits for most retirees and their dependents. The following sets forth the plans' actuarial assumptions used and funded status at our valuation date, together with the amounts recognized in our consolidated balance sheets and income statements: 22
Pension Benefits Other Benefits (Dollars in millions) 1998 1997 1998 1997 - --------------------------------------------------------------------------------------------------------------------------- Change in benefit obligation: Projected benefit obligation -- beginning of year $ 5,495 $ 5,325 $ 2,055 $ 2,000 Current service cost 55 48 9 7 Interest cost 407 395 153 148 Actuarial adjustments 25 85 72 8 Discount rate change 354 165 119 70 Lukens acquisition 460 -- 195 -- Other 4 -- 2 -- Benefits/administration fees paid (545) (523) (175) (178) - ---------------------------------------------------------------------------------------------------------------------------- Projected benefit obligation -- November 30 6,255 5,495 2,430 2,055 - ---------------------------------------------------------------------------------------------------------------------------- Change in plan assets: Fair value of plan assets -- beginning of year 4,930 4,215 120 130 Actual return on plan assets 959 833 9 10 Lukens acquisition 425 -- 10 -- Employer contribution 153 429 -- -- Benefits/administration fees paid (552) (547) (19) (20) - ---------------------------------------------------------------------------------------------------------------------------- Fair value of plan assets -- November 30 5,915 4,930 120 120 - ---------------------------------------------------------------------------------------------------------------------------- Unfunded projected benefit obligation 340 565 2,310 1,935 Unrecognized: Net gain (loss) 315 176 (520) (340) Initial net obligation (105) (139) -- -- Prior service from plan amendments (142) (172) -- -- December accruals/contributions -- net 7 10 -- -- - --------------------------------------------------------------------------------------------------------------------------- Total recognized obligation at December 31 415 440 1,790 1,595 Current -- -- (160) (150) - ---------------------------------------------------------------------------------------------------------------------------- Long-term $ 415 $ 440 $ 1,630 $ 1,445 ============================================================================================================================ Unfunded pension obligation at November 30: Accumulated benefit obligation $ 5,970 $ 5,185 Fair value of plan assets 5,915 4,930 - --------------------------------------------------------------------------------------------- Unfunded pension obligation $ 55 $ 255 ============================================================================================= Discount rate 6.750% 7.375% 6.750% 7.375%
23
Pension Benefits Other Benefits (Dollars in millions) 1998 1997 1996 1998 1997 1996 ---------------------------------------------------------------------------------------------------------- Components of net expense: Current service cost $ 55 $ 48 $ 59 $ 9 $ 7 $ 10 Interest cost 407 395 372 153 148 140 Expected return on plan assets (447) (375) (329) (9) (11) (12) Amortizations: Initial net obligation 34 34 36 -- -- -- Plan amendments 29 29 32 -- -- -- Unrecognized loss -- -- -- 12 6 8 Administration fees, PBGC premiums, other 7 24 22 -- -- -- ---------------------------------------------------------------------------------------------------------- Net expense $ 85 $ 155 $ 192 $ 165 $ 150 $ 146 ========================================================================================================== Assumptions: Expected return on plan assets 9.00% 9.00% 8.75% 7.375% 9.00% 8.75% Discount rate 7.375% 7.75% 7.25% 7.375% 7.75% 7.25% Rate of compensation increase 3.10% 3.10% 3.10% 3.10% 3.10% 3.10% Trend rate -- beginning next year n/a n/a n/a 5.00% 6.00% 7.00% -- ending year 2000 n/a n/a n/a 4.60% 4.60% 4.60%
A one percentage point change in assumed health care cost trend rates would have an effect of $15 million on total service and interest cost components and a $190 million effect on the accumulated postretirement benefit obligation. H. Stockholder Rights Agreement In July 1998, we replaced our 1988 Stockholder Rights Agreement with a new agreement under which holders of Common Stock have rights to purchase a series of Preference Stock. When exercisable, each right entitles the holder to purchase one one-hundredth of a share of Series A Junior Participating Preference Stock at an exercise price of $60 per unit. The rights will become exercisable if a person or group acquires 15% or more of Bethlehem Common Stock. Subsequently, upon the occurrence of certain events, holders of rights will be entitled to purchase Common Stock of Bethlehem or a third-party acquirer worth twice the right's exercise price. Bethlehem may redeem the new rights under certain circumstances at one cent per right. If the rights are not redeemed or extended, they will expire in October 2008. I. Stock Options At December 31, 1998, we had options outstanding under Plans approved by our stockholders in 1988, 1994 and 1998. New options can be granted only under the 1998 Plan, which reserved 5,000,000 shares of Common Stock for such use. At December 31, 1998, options on 3,837,250 shares of Common Stock were available for granting. Under the Bethlehem plans, the option price is the fair market value of our Common Stock on the date the option is granted. Options issued under the 1998 Plan become exercisable one to four years after the date granted and expire ten years from the date granted. Exercisable options may be surrendered for the difference between the option price and the quoted market price of the Common Stock on the date of surrender. Depending on the circumstances, option holders receive either Common Stock, cash, or a combination of Common Stock and cash. Because of the surrender component in our options, related expense is recognized periodically based on the difference between the option price and current quoted market prices. Compensation expense recognized and weighted average fair value for the options granted in 1998, 1997 and 1996 were not material. At the time of our acquisition of Lukens, all outstanding and unexercised stock options of Lukens converted into options to purchase Bethlehem Common Stock and immediately vested. 24 Changes in options outstanding during 1998, 1997 and 1996 were as follows:
Weighted Number of Average Options Price - ------------------------------------------------------------------------------- Balance December 31, 1995 3,017,075 $ 18 Granted 620,600 14 Terminated or canceled (144,025) 19 Surrendered or exercised (2,000) 8 - ------------------------------------------------------------------- Balance December 31, 1996 3,491,650 17 Granted 656,200 8 Terminated or canceled (377,100) 17 - ------------------------------------------------------------------- Balance December 31, 1997 3,770,750 15 Granted 736,250 15 Assumed in Lukens acquisition 3,834,539 9 Terminated or canceled (240,576) 20 Surrendered or exercised (2,880,665) 9 - ------------------------------------------------------------------- Balance December 31, 1998 5,220,298 14 ===============================================================================
Options exercisable at the end of 1998, 1997 and 1996 were 3,379,823; 2,083,250; and 1,976,300.
Information on our stock options at December 31, 1998 follows: Range of Number of Average Average Number of Average Exercise Options Exercise Contractual Options Exercise Prices Outstanding Price Life Exercisable Price - ------------------------------------------------------------------------------------------ $ 6.41 -- 8.61 927,579 $ 8 8 Years 440,904 $ 7 9.23 -- 11.12 484,390 10 6 Years 484,390 10 12.38 -- 14.53 1,678,247 14 6 Years 1,060,197 14 15.25 -- 16.47 797,622 15 9 Years 61,872 16 17.625 -- 21.75 1,332,460 20 6 Years 1,332,460 20 --------- --------- Total 5,220,298 14 6 Years 3,379,823 15 ========================================================================================
25 J. Stockholders' Equity Preferred Stock Preference Stock Common Stock Common Stock Additional (Shares in thousands and dollars $1.00 Par Value $1.00 Par Value $1.00 Par Value Held in Treasury Paid-In Accumulated in millions, except per share data) Shares Amount Shares Amount Shares Amount Shares Amount Capital Deficit --------------------------------------------------------------------------------------------------------------------------------- Balance December 31, 1995 11,623 $11.6 2,588 $ 2.6 112,700 $112.7 1,992 $59.4 $1,850.6 $(679.8) Net loss for year (308.8) Minimum pension liability adjustment 67.0 Dividends on Preferred Stock (40.4) Preference Stock: Stock dividend 129 0.1 (0.1) Issued 62 0.1 0.8 Converted (261) (0.3) 261 0.3 Common Stock: Acquired 26 0.3 Issued 890 0.9 8.4 --------------------------------------------------------------------------------------------------------------------------------- Balance December 31, 1996 11,623 11.6 2,518 2.5 113,851 113.9 2,018 59.7 1,886.3 (988.6) Net income for year 280.7 Dividends on Preferred Stock (40.4) Preference Stock: Stock dividend 124 0.1 (0.1) Issued 35 0.3 Converted (331) (0.3) 331 0.3 Common Stock: Acquired 39 0.3 Issued 866 0.8 7.9 --------------------------------------------------------------------------------------------------------------------------------- Balance December 31, 1997 11,623 11.6 2,346 2.3 115,048 115.0 2,057 60.0 1,854.0 (707.9) Net income for year 120.1 Dividends on Preferred Stock (40.4) Preference Stock: Stock dividend 116 0.1 (0.1) Issued 18 0.1 0.1 Converted (305) (0.3) 305 0.3 Common Stock: Acquired 24 0.3 Issued 16,875 16.9 178.0 --------------------------------------------------------------------------------------------------------------------------------- Balance December 31, 1998 11,623 $11.6 2,175 $ 2.2 132,228 $132.2 2,081 $60.3 $1,991.6 $(587.8) ---------------------------------------------------------------------------------------------------------------------------------
With the adoption of FASB Statement No. 130, Reporting Comprehensive Income, we must report total non-owner changes in equity. As shown above, it was an increase of $120.1 million in 1998, an increase of $280.7 million in 1997, and a decrease of $241.8 million (loss of $308.8 million and minimum pension adjustment of $67.0 million) in 1996. 26 Preferred and Preference Stock issued and outstanding:
December 31 (Shares in thousands) 1998 1997 - --------------------------------------------------------- Preferred Stock -- Authorized 20,000 shares $5.00 Cumulative Convertible Preferred Stock 2,500 2,500 $2.50 Cumulative Convertible Preferred Stock 4,000 4,000 $3.50 Cumulative Convertible Preferred Stock 5,123 5,123 Preference Stock -- Authorized 20,000 shares Series "A" 5% Cumulative Convertible Preference Stock 1,514 1,655 Series "B" 5% Cumulative Convertible Preference Stock 661 691 =========================================================
Each share of $3.50 Cumulative Convertible Preferred Stock issued in 1993 is convertible into 2.39 shares of Common Stock, subject to certain events. Each share of the $5.00 Cumulative Convertible Preferred Stock and the $2.50 Cumulative Convertible Preferred Stock issued in 1983 is convertible into 1.77 and .84 shares of Common Stock, subject to certain events. In accordance with our labor agreements, we issue Preference Stock to a trustee under the Employee Investment Program. Series "A" and Series "B" of Preference Stock have a cumulative dividend of 5% per annum payable at our option in cash, Common Stock or additional shares of Preference Stock. Each share of Preference Stock is entitled to vote with Common Stock on all matters and is convertible into one share of Common Stock. The following presents the details of our earnings per share calculations:
(Shares in thousands and dollars in millions, except per share data) 1998 1997 1996 - ------------------------------------------------------------------------------------------------------ Basic Earnings Per Share Net income (loss) $ 120.1 $ 280.7 $ (308.8) Less dividend requirements: $2.50 Preferred dividend--cash (10.0) (10.0) (10.0) $5.00 Preferred dividend--cash (12.5) (12.5) (12.5) $3.50 Preferred dividend--cash (17.9) (17.9) (17.9) 5% Preference dividend--stock (1.3) (1.2) (1.5) - ------------------------------------------------------------------------------------------------------ Total preferred and preference dividends (41.7) (41.6) (41.9) - ------------------------------------------------------------------------------------------------------ Net income (loss) applicable to Common Stock $ 78.4 $ 239.1 $ (350.7) - ------------------------------------------------------------------------------------------------------ Average shares of Common Stock outstanding 122,585 112,439 111,286 - ------------------------------------------------------------------------------------------------------ Basic Earnings Per Share $ .64 $ 2.13 $ (3.15) ======================================================================================================
27
(Shares in thousands and dollars in millions, except per share data) 1998 1997 1996 ------------------------------------------------------------------------------------------------------ Diluted Earnings Per Share Net income (loss) $ 120.1 $ 280.7 $ (308.8) Less dividend requirements: $2.50 Preferred dividend (10.0) (10.0) (10.0) $5.00 Preferred dividend (12.5) (12.5) (12.5) $3.50 Preferred dividend (17.9) -- (17.9) 5% Preference dividend -- -- (1.5) ------------------------------------------------------------------------------------------------------ Net income (loss) applicable to Common Stock $ 79.7 $ 258.2 $ (350.7) ====================================================================================================== Average shares of Common Stock and equivalents and other potentially dilutive securities outstanding: Common Stock 122,585 112,439 111,286 Stock options 429 -- 2 $2.50 Preferred Stock * * * $5.00 Preferred Stock * * * $3.50 Preferred Stock * 12,255 * 5% Preference Stock 2,175 2,346 * ------------------------------------------------------------------------------------------------------ Total 125,189 127,040 111,288 ====================================================================================================== Diluted Earnings Per Share $ .64 $ 2.03 $ (3.15) ------------------------------------------------------------------------------------------------------
* Antidilutive Under the covenants of our 10-3/8% Notes, we can pay future dividends on our Common Stock, among certain other restrictions, only if such cumulative dividends do not exceed the aggregate net cash proceeds from the sale of capital stock plus 50% of our consolidated net income and minus 100% of our consolidated net loss since the second quarter of 1993, excluding certain restructuring charges and other adjustments. The amount available at December 31, 1998 under this covenant was about $500 million. K. Quarterly Financial Data (Unaudited)
(Dollars in millions, except per share data) 1998 1997 ----------------------------------------------------------------------------------------------------- 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q ----------------------------------------------------------------------------------------------------- Net sales $1,132.5 $1,189.7 $1,143.1 $1,012.5 $1,192.5 $1,206.9 $1,113.4 $1,118.4 Cost of sales 957.0 1,008.8 988.4 929.0 1,052.5 1,053.4 971.8 975.6 Net income (loss) 68.6 37.6 37.1 (23.2) 38.4 160.0 40.6 41.7 Net income (loss) per Common Share -- basic $ .51 $ .23 $ .21 $ (.26) $ .25 $ 1.33 $ .27 $ .28 -- diluted $ .49 $ .23 $ .21 $ (.26) $ .25 $ 1.19 $ .26 $ .27 -----------------------------------------------------------------------------------------------------
28 Report of Independent Auditors To the Board of Directors and Stockholders of Bethlehem Steel Corporation In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of income and of cash flows present fairly, in all material respects, the financial position of Bethlehem Steel Corporation and its subsidiaries at December 31, 1998 and 1997, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1998, in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. /s/ PricewaterhouseCoopers LLP 1177 Avenue of the Americas New York, NY 10036 January 27, 1999 29 Five-Year Financial and Operating Summaries
(Dollars in millions, except per share data) 1998 1997 1996 1995 1994 - --------------------------------------------------------------------------------------------------------- Earnings Statistics Net sales $4,477.8 $4,631.2 $4,679.0 $ 4,867.5 $ 4,819.4 - --------------------------------------------------------------------------------------------------------- Costs and Expenses: Employment costs 1,367.0 1,439.0 1,555.0 1,683.5 1,633.0 Materials and services 2,593.2 2,683.8 2,680.6 2,592.7 2,754.8 Depreciation and amortization 246.5 231.0 268.7 284.0 261.1 Taxes (other than employment and income taxes) 46.6 38.4 38.1 38.4 36.9 Estimated loss (gain) on exiting businesses 35.0 (135.0) 465.0 -- -- - --------------------------------------------------------------------------------------------------------- Total Costs and Expenses 4,288.3 4,257.2 5,007.4 4,598.6 4,685.8 - --------------------------------------------------------------------------------------------------------- Income (loss) from operations 189.5 374.0 (328.4) 268.9 133.6 Financing income (expense): Interest and other financing costs (55.4) (47.5) (53.3) (60.0) (46.2) Interest income 10.0 9.2 5.9 7.7 7.1 Benefit (provision) for income taxes (24.0) (55.0) 67.0 (37.0) (14.0) - --------------------------------------------------------------------------------------------------------- Net income (loss) 120.1 280.7 (308.8) 179.6 80.5 Dividends on Preferred and Preference Stock 41.7 41.6 41.9 42.4 43.1 - --------------------------------------------------------------------------------------------------------- Net income (loss) applicable to Common Stock $ 78.4 $ 239.1 $ (350.7) $ 137.2 $ 37.4 ========================================================================================================= Net income (loss) per Common share -- basic $ .64 $ 2.13 $ (3.15) $ 1.24 $ 0.35 -- diluted $ .64 $ 2.03 $ (3.15) $ 1.23 $ 0.35 - --------------------------------------------------------------------------------------------------------- Balance Sheet Statistics Cash and cash equivalents $ 137.8 $ 252.4 $ 136.6 $ 180.0 $ 159.5 Receivables, inventories and other current assets 1,357.0 1,211.6 1,351.8 1,345.8 1,409.6 Current liabilities (985.2) (910.8) (957.4) (1,049.6) (1,011.2) - --------------------------------------------------------------------------------------------------------- Working capital $ 509.6 $ 553.2 $ 531.0 $ 476.2 $ 557.9 Current ratio 1.5 1.6 1.6 1.5 1.6 Property, plant and equipment - net $2,655.7 $2,357.7 $2,419.8 $ 2,714.2 $ 2,759.3 Total assets 5,621.5 4,802.6 5,109.9 5,700.3 5,782.4 Total debt and capital lease obligations 672.1 493.4 546.7 638.3 757.3 Stockholders' equity 1,489.5 1,215.0 966.0 1,238.3 1,155.8 Total debt as a percent of invested capital 31% 29% 36% 34% 40% - --------------------------------------------------------------------------------------------------------- Other Statistics Capital expenditures $ 328.0 $ 228.2 $ 259.0 $ 266.8 $ 444.6 Raw steel production capability at year end (net tons in thousands) 11,300 10,500 10,500 11,500 11,500 Raw steel production (net tons in thousands) 10,191 9,599 9,447 10,449 9,817 Steel products shipped (net tons in thousands) 8,683 8,802 8,782 8,986 9,262 Pensioners receiving benefits at year end 74,300 70,400 70,100 71,000 71,700 Average number of employees receiving pay (excluding stainless employees) 15,900 16,400 17,800 19,500 19,900 Common Stock outstanding at year end (shares in thousands) 129,490 112,991 111,834 110,708 109,886 Common stockholders at year end 35,000 35,000 37,000 39,000 41,000 - ---------------------------------------------------------------------------------------------------------
31 EX-27 9 FINANCIAL DATA SCHEDULE
5 1,000,000 12-MOS DEC-31-1998 DEC-31-1998 138 0 327 20 1041 9 6775 4119 5622 985 628 0 14 132 1343 5622 4478 4478 3883 4288 0 0 55 144 24 120 0 0 0 78 0.64 0.64
-----END PRIVACY-ENHANCED MESSAGE-----