OREGON STEEL MILLS, INC.
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
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TO BE HELD
APRIL 30, 1998
9:30 A.M. PACIFIC TIME
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TO THE STOCKHOLDERS:
You are invited to attend the Annual Meeting of Stockholders of Oregon
Steel Mills, Inc. (the "Corporation") to be held at the DoubleTree Hotel -
Portland Columbia River, 1401 N. Hayden Island Drive, Portland, Oregon, on
Thursday, April 30, 1998, at 9:30 a.m. Pacific Time.
The meeting is being held for the following purposes:
1. To elect four Class A directors.
2. To consider and transact such other business as may properly
come before the meeting or any adjournment thereof.
Only stockholders of record at the close of business on March 2, 1998
are entitled to notice of, and to vote at, the meeting and any adjournment or
postponement thereof. A list of stockholders entitled to vote at the meeting is
available for inspection at the offices of the Corporation.
By Order of the Board of Directors,
LaNelle F. Lee
Secretary
March 13, 1998
Portland, Oregon
YOU ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON. WHETHER OR NOT YOU
PLAN TO ATTEND THE MEETING, PLEASE SIGN AND PROMPTLY MAIL THE ENCLOSED PROXY IN
THE ENVELOPE PROVIDED. YOUR PROMPT RESPONSE COULD SAVE THE CORPORATION THE
EXPENSE OF A FOLLOW-UP MAILING.
<PAGE>
OREGON STEEL MILLS, INC.
1000 SW BROADWAY BUILDING,
SUITE 2200
PORTLAND, OREGON 97205
(503) 223-9228
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PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
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This proxy statement is furnished in connection with the solicitation of
proxies by the Board of Directors (the "Board") of Oregon Steel Mills, Inc. (the
"Corporation") to be voted at the Annual Meeting of Stockholders to be held at
the DoubleTree Hotel - Portland Columbia River, 1401 N. Hayden Island Drive,
Portland, Oregon, on Thursday, April 30, 1998, at 9:30 a.m. Pacific Time, and
any adjournments thereof.
Only stockholders of record at the close of business on March 2, 1998, are
entitled to notice of, and to vote at, the meeting. At the close of business on
that date, the Corporation had 25,776,804 shares of Common Stock, $0.01 par
value per share ("Common Stock"), outstanding. Holders of Common Stock are
entitled to one vote for each share of Common Stock held. There are no
cumulative voting rights.
When a proxy in the form accompanying this proxy statement is properly
executed and returned, the shares represented will be voted at the meeting in
accordance with the instructions specified in the proxy. If no instructions are
specified, the shares will be voted FOR Proposal 1 in the accompanying Notice of
Annual Meeting of Stockholders, and such votes will be counted toward
determining a quorum. Shares held of record by the Trustees of the Corporation's
Employee Stock Ownership Plan Trust (the "ESOP") will be voted by the Trustees
in accordance with instructions received from ESOP participants or, if no such
instructions are received, the Trustees shall vote or take other action as they
deem appropriate. Any person giving a proxy in the form accompanying this proxy
statement has the power to revoke it at any time before its exercise. A
stockholder may revoke a proxy by (i) written notice of such revocation to the
Secretary of the Corporation at the above address; (ii) a later-dated proxy
received by the Corporation; or (iii) attending the meeting and voting in
person. Attendance at the meeting will not by itself revoke a proxy.
Each share of Common Stock outstanding on the record date is entitled to
one vote per share at the Annual Meeting of Stockholders. Shares of Common Stock
represented in person or by proxy at the Annual Meeting (including abstentions
and broker non-votes) will be tabulated by the inspector of election appointed
for the meeting and will be counted in determining that a quorum is present. A
plurality of the votes cast at the Annual Meeting is required to elect the
directors. Proxies withholding authority to vote for a nominee will be treated
as votes cast against. Broker non-votes will not be treated as votes cast and
therefore, will not be counted in calculating a plurality.
The approximate date on which this proxy statement and the accompanying
proxy card are being mailed to the Corporation's stockholders is March 13, 1998.
Solicitation material will be furnished to brokerage houses, fiduciaries and
custodians holding shares in their names that are beneficially owned by others
to forward to such beneficial owners. Original solicitation of proxies by
1
<PAGE>
mail may be supplemented by one or more telephone, telegram or personal
solicitations by directors, officers or employees of the Corporation. No
additional compensation will be paid for any such services. Except as described
above, the Corporation does not intend to solicit proxies other than by mail.
Costs of solicitation will be borne by the Corporation.
PROPOSAL 1: NOMINATION AND ELECTION OF CLASS A DIRECTORS
NOMINEES
The Corporation has a classified Board consisting of four Class A
directors, Messrs. Corvin, Fulton, Keener and Sproul; four Class B directors,
Messrs. Emerson, Gendron, Stathakis and Swindells; and three Class C directors,
Messrs. Boklund, Landis and Maggetti. The Class B and C directors serve until
the Annual Meetings of Stockholders to be held in 1999 and 2000, respectively,
and until their successors are elected and qualified. At each Annual Meeting of
Stockholders, directors are elected for a term of three years to succeed those
directors whose terms expire at that annual meeting.
The nominees for election as Class A directors are Joe E. Corvin, V. Neil
Fulton, Robert W. Keener, and John A. Sproul all of whom are members of the
present Board. The Class A directors to be elected at the 1998 Annual Meeting
will serve until the Annual Meeting of Stockholders in 2001 and until their
successors are elected and qualified.
Unless authority to vote for a director or directors is withheld, the
accompanying proxy, if properly executed and returned, will be voted for the
election of the Class A nominees named below. If authority to vote for one or
more of the nominees is withheld, the withheld votes will not be cast for any of
the other nominees unless the stockholder otherwise indicates on the proxy. If
any nominee is unable or unwilling to serve as a director, proxies may be voted
for such substitute nominees as may be designated by the Board. The Board has no
reason to believe that any of the nominees will be unable or unwilling to serve
as a director if elected.
The following table sets forth information with respect to each person
nominated for election as a Class A director and each other director, including
their names and ages as of February 15, 1998, business experience during the
past five years and directorships in other corporations.
Principal Occupation and Director
Name Certain Other Directorships Age Since
---- --------------------------- --- -------
CLASS A (NOMINEES FOR TERMS OF OFFICE TO EXPIRE IN 2001):
Joe E. Corvin* Mr. Corvin is the President and 53 1997
Chief Operating Officer of the
Corporation. He was Vice President and
General Manager of the Portland
Steelworks from May 1992 to June 1994,
was Senior Vice President of Operations
from June 1994 to May 1996, became Chief
Operating Officer in June 1994, was
President of the Corporation's Oregon
Steel Mills Division from May 1996 to
November 1996 and became President of
the Corporation in December 1996.
2
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Principal Occupation and Director
Name Certain Other Directorships Age Since
---- --------------------------- --- -------
V. Neil Fulton Mr. Fulton was Vice President of Finance 69 1983
and Chief Financial Officer of the
Corporation from October 1980 until
February 1991. He continued as an
employee of the Corporation until December
1992.
Robert W. Keener Mr. Keener was employed by Northwest 66 1994
Pipeline Corporation, a natural gas
transmission company, from 1973 to
January 1994. In 1975 he became Vice
President - Gas Supply, and was named
Senior Vice President - Gas Supply and
Operations in 1980. He served as President
and Chief Operating Officer from 1983 to
1992, and as Chief Executive Officer from
1992 until his retirement in January 1994.
He is a former director and executive
committee member of Key Bank Corporation
of Utah.
John A. Sproul Mr. Sproul was an Executive Vice President 73 1989
of Pacific Gas and Electric Company from
1977 to 1989. During most of that period,
he was also Chairman of the Board and
Chief Executive Officer of Pacific Gas
Transmission Company, an interstate pipeline
company.
CLASS B (DIRECTORS WHOSE TERMS OF OFFICE WILL EXPIRE IN 1999):
C. Lee Emerson Mr. Emerson was the Chairman of the Board 80 1976
of Directors of the Corporation from May
1982 through January 1992. He formerly
served as President and Chief Executive
Officer of the Corporation.
Edward C. Gendron Mr. Gendron was the President, Chief 69 1976
Operating Officer and a director of
Midland-Ross Corporation from 1976 to
April 1983. In April 1983 Mr. Gendron
became Vice Chairman of the Board of
Directors and Chief Administrative
Officer of Midland-Ross Corporation,
positions he held until August 1986.
Since 1986 Mr. Gendron has been
President of E. C. Gendron Enterprises,
a financial consulting firm.
3
<PAGE>
Principal Occupation and Director
Name Certain Other Directorships Age Since
---- --------------------------- --- -------
George J. Stathakis* Mr. Stathakis was the Chairman of the 67 1997
Board and Chief Executive Officer of
Ramtron International Corporation, a
semi-conductor company, from March 1990
until June 1994. From 1986 until 1989
Mr. Stathakis served as Chairman of the
Board and Chief Executive Officer of
International Capital Corporation, a
subsidiary of American Express. Since
1985 Mr. Stathakis has had his own
international investment banking
business. Prior to 1985, he spent 32
years with General Electric Company,
holding various senior executive positions
in that company. He is also a director
of Ramtron International Corporation,
Calpine Corporation, an independent
power company, and Racom Systems
Incorporated, an electronics company.
William Swindells Mr.Swindells is the Chairman of the 67 1994
Board of Directors and Chief Executive
Officer of Willamette Industries, Inc.,
a diversified wood products company. He
has held the position of Chairman of the
Board since 1985 and was reappointed as
Chief Executive Officer in November 1997,
a position he formally held from 1985
until September 1995. He is a director of
Standard Insurance Company and Airborne
Express Company, and serves as a trustee
of Willamette University and the Oregon
Health Science University Foundation.
CLASS C (DIRECTORS WHOSE TERMS OF OFFICE WILL EXPIRE IN 2000):
Thomas B. Boklund Mr. Boklund is the Chairman of the Board 58 1982
of Directors and Chief Executive Officer
of the Corporation. He was Chief Operating
Officer from May 1982 to July 1985, became
Chief Executive Officer in August 1985,
and Chairman of the Board of Directors in
February 1992. He also served as President
from May 1982 to February 1992, and was
re-appointed as President from April 1994
to December 1996. He is a director of
Paragon Trade Brands, Inc., a manufacturer
of private label infant disposable diapers,
since April 1993 and a director of Oregon
Metallurgical Corporation, an integrated
manufacturer of titanium products, since
April 1996.
4
<PAGE>
Principal Occupation and Director
Name Certain Other Directorships Age Since
---- --------------------------- --- -------
Richard G. Landis Mr. Landis was Chairman, President and 77 1987
Chief Executive Officer of the Del Monte
Corporation, a food and beverage company,
from 1971 to November 1981 and President
of the Pacific area of R.J. Reynolds
Industries, Inc., a tobacco, food, beverage
and transportation conglomerate, from
November 1981 until his retirement in July
1983.
James A. Maggetti Mr. Maggetti was employed by Kaiser 73 1987
Steel Corporation from 1955 until his
retirement in December 1983, where his
last position was as a Vice President
responsible for fabricating operations.
He was Chairman of the Board of Napa
Valley Bank from 1984 through April
1992 and Vice Chairman of the Board
of Napa Valley Bancorp, the bank's holding
company, from April 1982 through December
1991. Mr. Maggetti served as a director of
Napa Valley Bank from June 1971 until April
1995 and as a director of WestAmerica
Bancorporation from July 1993 until April
1995.
- ------------
* Mr. Corvin was appointed to the Board in July 1997 and Mr. Stathakis was
appointed to the Board in October 1997.
DIRECTORS' COMPENSATION, MEETINGS AND STANDING COMMITTEES
The Board has standing Executive, Audit and Compensation Committees.
The Board does not have a nominating committee. Directors who are not full-time
employees of the Corporation receive an annual fee of $21,000, plus $1,200 for
each Board and committee meeting attended and reimbursement of expenses.
Directors who are full-time employees of the Corporation do not receive fees for
serving on the Board or on committees.
The Corporation has a deferred compensation plan for directors, by
which all former and present outside directors of the Corporation who have
served in the capacity of Director for five years or less since the 1986 Annual
Meeting of Stockholders will be paid a benefit by the Corporation of $6,000 per
year for each year served as an outside director up to a maximum of ten years.
This benefit is to be paid commencing with the calendar year following the year
such person ceases to be a director of the Corporation and is payable to either
the director, the director's estate, or other designated beneficiary.
On July 31, 1997, the Board established and adopted, effective January
1, 1998, The Oregon Steel Mills, Inc. Directors' Retirement Plan (the
"Directors' Plan") to provide retirement benefits to directors. Starting with
the first business day in January following a director's retirement, and
continuing on an annual basis, retiring directors who have completed five years
of service as an outside director are paid $20,000 annually until the number of
payments equals the number of full years of service served as an outside
director. For directors who have met the five year service
5
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requirement, this Directors' Plan supersedes and replaces the deferred
compensation plan mentioned in the preceding paragraph. The payment terms may
be converted to a present value lump-sum payment and paid at anytime; 1) by the
sole discretion of the Compensation Committee; 2) by a director terminating
service with the Corporation within three years following a Change in Control
(as defined in the Plan); or 3) upon the death of a director or ex-director.
During 1997, the Board held five meetings, the Audit Committee held two
meetings and the Compensation Committee held four meetings. During the portion
of 1997 for which he was a director, each incumbent director attended at least
75%, except Mr. Maggetti who attended 73%, of the total of (i) the meetings of
the Board and (ii) the meetings held by all committees of the Board on which he
served.
The Executive Committee may exercise all the authority of the
Board, subject to actions of the full Board and except as otherwise provided
by the Corporation's restated certificate of incorporation, the Corporation's
bylaws or applicable law. The members of the Executive Committee are Messrs.
Boklund, Emerson and Fulton.
The Audit Committee reviews services provided by the Corporation's
independent auditors, reviews with them the results of their audit, the adequacy
of internal accounting controls, the quality of financial reporting and any
recommendations they may have, and makes recommendations to the Board concerning
their engagement or discharge. The members of the Audit Committee during 1997
were Messrs. Emerson, Fulton, Gendron, Keener, Landis, Maggetti, Sproul,
Stathakis and Swindells.
The Compensation Committee establishes the general compensation
policies of the Corporation and the compensation plans and specific compensation
levels for executive officers, subject to approval of the Board. The members of
the Compensation Committee during 1997 were Messrs. Emerson, Fulton, Gendron,
Keener, Landis, Maggetti, Sproul, Stathakis and Swindells.
6
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the
beneficial ownership of shares of the Common Stock as of January 31, 1998, by
(i) each director, director nominee and named executive officer; (ii) each
person known to the Corporation to be a beneficial owner of more than 5% of the
outstanding shares of Common Stock; and (iii) all current directors and
executive officers as a group. The persons named in the table have sole voting
and investment power with respect to all shares shown as beneficially owned by
them, subject to community property laws where applicable and to the information
contained in the footnotes to the table.
Number Percentage
Name of Shares of Class
---- --------- ----------
Thomas B. Boklund (1)(2) 79,770 (3) *
L. Ray Adams (2) 3,556 (4) *
Joe E. Corvin (1)(2) 31,820 (3) *
C. Lee Emerson (1) 87,810 *
V. Neil Fulton (1) 6,568 (4) *
Edward C. Gendron (1) 2,000 *
Richard J. Kasten (2) 12,989 (4) *
Robert W. Keener (1) 1,000 *
Richard G. Landis (1) 5,600 *
James A. Maggetti (1) 7,000 *
Steven M. Rowan (2) 19,802 (3) *
John A. Sproul (1) 2,000 *
George J. Stathakis (1) 2,000 *
William Swindells (1) 5,000 *
Oregon Steel Mills, Inc.
Employee Stock Ownership Plan Trust
1000 SW Broadway, Suite 2200
Portland, Oregon 97205 1,933,228 7.5%
Scudder Kemper Investments (6)
345 Park Avenue
New York, New York 10154 2,311,500 9.0%
The Crabbe Huson Group, Inc. (5)
121 SW Morrison, Suite 1400
Portland, Oregon 97204 2,270,000 8.8%
First Pacific Advisors, Inc. (8)
11400 West Olympic Boulevard, Suite 1200
Los Angeles, California 90064 2,413,800 9.4%
All directors and executive officers
as a group (18 persons) 313,024 (5) 1.2%
- ------------
* Less than 1% of the outstanding Common Stock.
7
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(1) Member of the Board of Directors.
(2) Named executive officer.
(3) All shares are held by the ESOP for Messrs. Boklund, Corvin and Rowan.
Participants in the ESOP have the power to vote these shares under the
terms of the ESOP, but they do not have investment power with respect
to such shares.
(4) Includes 1,056 shares, 773 shares and 12,589 shares held by the ESOP for
the accounts of Messrs. Adams, Fulton, and Kasten, respectively. Messrs.
Adams, Fulton and Kasten have the power to vote these shares under the
terms of the ESOP, but they do not have investment power with respect to
such shares.
(5) Includes 186,854 shares held by the ESOP for the accounts as to which
the respective beneficial owners have the power to direct the vote under
the terms of the ESOP, but they do not have investment power with
respect to such shares.
(6) Based on the information obtained from an Amendment #4 to Schedule 13G
dated February 12, 1998 filed by Scudder Kemper Investments ("Scudder")
with the Securities and Exchange Commission: Scudder has the sole power
to dispose of 2,311,500 shares and the sole and shared power to vote
1,669,100 and 151,400, respectively, of such shares.
(7) Based on the information obtained from an Amendment #2 to Schedule 13G
dated April 7, 1997, filed by The Crabbe Huson Group, Inc., with the
Securities and Exchange Commission: The Crabbe Huson Group, Inc. has the
shared power to dispose of and to vote 2,270,000 shares.
(8) Based on the information obtained from a Schedule 13G dated February 13,
1998, filed by First Pacific Advisors, Inc. with the Securities and
Exchange Commission: First Pacific Advisors, Inc. has the shared power
to dispose of 2,413,800 shares and the shared power to vote 813,800 shares.
8
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth the compensation paid to or accrued by
the Corporation and its subsidiaries for the Chief Executive Officer and each of
the five most highly paid executive officers of the Corporation and its
subsidiaries as of December 31, 1997.
<TABLE>
SUMMARY COMPENSATION TABLE
ALL OTHER
ANNUAL COMPENSATION(5) COMPENSATION(5)
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<CAPTION>
Name and ESOP Thrift Plan
Principal Position Year Salary Bonus(1) Contribution(2) SERP(3) Contribution(4)
- ------------------ ---- ------ -------- --------------- ------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Thomas B. Boklund 1997 $500,000 $ 50,687 $ 4,608 $2,750 -
Chairman of the 1996 451,875 47,341 318 2,687 -
Board and CEO 1995 450,000 28,676 1,986 - -
Joe E. Corvin 1997 $356,250 $ 38,480 $ 4,608 $ 129 -
President and Chief 1996 242,250 35,647 318 108 -
Operating Officer 1995 240,000 15,294 1,986 48 -
L. Ray Adams 1997 $225,000 $ 22,809 $ 4,608 $ 70 $1,600
Vice President of 1996 198,938 20,724 318 59 1,500
Finance and Chief 1995 195,000 12,426 1,986 26 924
Financial Officer
Steven M. Rowan 1997 $185,000 $ 18,754 $ 4,608 $ 39 $1,600
Vice President, 1996 174,375 18,408 318 32 1,500
Materials and 1995 174,996 11,151 1,986 12 924
Transportation
Richard J. Kasten 1997 $175,000 $ 15,307 $ 4,608 $ 41 $1,600
Vice President, 1996 170,625 25,246 318 34 1,500
International 1995 174,996 11,151 1,986 14 924
Sales
</TABLE>
<PAGE>
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(1) Amounts earned pursuant to the Corporation's Profit Participation Plan.
(2) Value of stock contributions made by the Corporation on behalf of the
named executive to the Employee Stock Ownership Plan Trust, as determined
at the time of such contribution.
(3) Amounts paid under the Corporation's Supplemental Retirement Plan.
(4) Matching contributions made by the Corporation on behalf of the named
executive to the Corporation's Thrift Plan.
(5) Pension benefits accrued in 1997 are not included in this Summary
Compensation Table.
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DEFINED BENEFIT RETIREMENT PLANS
The Corporation's pension plans are defined benefit plans qualified under
section 401(a) of the Internal Revenue Code (the "Code"). Executive officers and
most other domestic employees of the Corporation are eligible to participate in
the Oregon Steel Mills, Inc. Pension Plan (the "Plan") or similar plans. Normal
retirement is at age 65.
The amount of an employee's pension benefit and the resulting monthly
payments an employee receives upon retirement are based upon the level of the
employee's prior annual compensation, the employee's number of years of benefit
service and other factors. The employee's annual pension benefit is equal to the
sum of:
(i) for each full or partial year of benefit service prior to January 1,
1994, 1% of the first $22,800 of Past Service Compensation, plus
1.6% of Past Service Compensation in excess of $22,800. ("Past
Service Compensation" is the employee's average compensation for
the years 1991, 1992 and 1993); plus,
(ii) for each full or partial year of benefit service beginning on or
after January 1, 1994, 1.2% of the employee's compensation during
such year up to the employee's "Covered Compensation" amount for the
year, plus 1.7% of the employee's compensation in excess of such
"Covered Compensation" amount. ("Covered Compensation" for each year
is determined by the employee's age and is taken from a Social
Security Covered Compensation Table published annually in
accordance with IRS regulations. For any given age, the "Covered
Compensation" amount in the Table represents the average of the
Social Security taxable wage bases over the 35-year period ending in
the year someone that age will reach Social Security normal
retirement age.)
In addition to the Plan, the Corporation initiated effective May 1, 1994
a Supplemental Retirement Plan (the "SERP") to supplement the Plan and ESOP and
make up for benefits which were lost because of the dollar limits imposed by
sections 401(a)(17) and 415 of the Code on benefits and contributions under
those plans. The SERP results in highly-compensated employees receiving
retirement benefits calculated on the same basis as other employees. Employees
become eligible for benefits under the SERP whenever: (a) the employee has
service after the effective date; (b) the employee becomes eligible for benefits
under the Plan or an allocation under the ESOP; and (c) the employee's benefit
or allocation is limited by sections 401(a)(17) of the Code or by the dollar
amount under section 415 of the Code, or both. The benefit paid under the SERP
is the difference between the Plan benefit calculated as described above and the
amount that would have been paid under the Plan in the absence of the dollar
limits in sections 401(a)(17) and 415 of the Code; plus the difference between
the amount of ESOP benefit allocated to the participant under the ESOP after
1988 and the amount that would have been allocated in the absence of the dollar
limits in sections 401(a)(17) and 415 of the Code, plus dividends that would
have been paid on such shares after May 1994. Such benefit payments are made at
the time that the benefits under the Plan or ESOP, as applicable, are paid, or
earlier upon an adverse IRS ruling. The Compensation Committee of the Board of
Directors may amend or terminate the SERP at any time so long as rights already
accrued at the time of such amendment or termination are preserved.
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The following Pension Plan Table shows the "Covered Compensation" portion
of the estimated annual benefits payable upon retirement at age 65 (including
benefits under the SERP) in the specified compensation and years of service
classifications.
<TABLE>
PENSION PLAN TABLE
(QUALIFIED PLAN PLUS SERP)(3)
YEARS OF SERVICE
------------------------------------------------------------------------------
<CAPTION>
REMUNERATION (2) 15 20 25 30 35
---------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
$125,000 $ 28,875 $ 38,500 $ 48,125 $ 57,750 $ 67,375
$150,000 35,250 47,000 58,750 70,500 82,250
$175,000 41,625 55,500 69,375 83,250 97,125
$200,000 48,000 64,000 80,000 96,000 112,000
$225,000 54,375 72,500 90,625 108,750 126,875
$250,000 60,750 81,000 101,250 121,500 141,750
$300,000 73,500 98,000 122,500 147,000 171,500
$350,000 86,250 115,000 143,750 172,500 201,250
$400,000 99,000 132,000 165,000 198,000 231,000
$450,000 111,750 149,000 186,250 223,500 260,750
$500,000 124,500 166,000 207,500 249,000 290,500
$550,000 137,250 183,000 228,750 274,500 320,250
$600,000 150,000 200,000 250,000 100,000 350,000
$650,000 162,750 217,000 271,250 325,500 379,750
$700,000(1) 175,500 234,000 292,500 351,000 409,500
</TABLE>
<PAGE>
(1) Represents at least 120% of the maximum compensation for the year ended
December 31, 1997.
(2) Based on the estimated straight-life annuity amounts for future service
using 1998 as the first year of benefit service. Social Security Covered
Compensation as defined above is assumed to be $40,000.
(3) Does not include the ESOP benefit pursuant to the SERP which is not
determined by years of service and final compensation.
The portion of an employee's benefit attributable to years of benefit
service in excess of 35 years, is limited to 1.0% of his Past Service
Compensation for purposes of (i) above; and to 1.2% of his annual compensation
for purposes of (ii) above. Notwithstanding the foregoing, an employee's
compensation taken into account for any Plan year after 1993 shall not exceed
$150,000 (or such other amount as may be prescribed for the relevant plan year
by the Secretary of the Treasury pursuant to section 401(a)(17) of the Code). As
previously described, the SERP will pay benefits on the additional compensation
above that amount.
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The employee's annual pension benefit is reduced to the extent of the
annuity value of: (i) any portion of the employee's account balances under the
Corporation's Profit Participation Plan and the ESOP as of January 1, 1981
attributable to allocations on the basis of compensation in excess of the Social
Security taxable wage base; and (ii) any retirement benefits paid to the
employee under the Corporation's Pension Plan for Union Employees which was
terminated January 23, 1984. The Plan benefits are not subject to deduction for
social security.
For each named executive officer listed on the Summary Compensation
Table, the applicable compensation each year is the sum of the "Salary" and
"Bonus" compensation shown, limited as described above. Upon their retirement,
assuming retirement at age 65 and no increase in current rates of annual
compensation, and based upon years of service at December 31, 1997, Messrs.
Boklund, Corvin, Adams, Rowan and Kasten would receive lifetime annual payments
under the Plan and pension benefits pursuant to the SERP combined of $252,143,
$158,348, $97,933, $78,013 and $71,909, respectively. Their credited years of
service as of December 31, 1997 are twenty-four, twenty-eight, nine, twenty-five
and thirteen, respectively. In addition, ESOP benefits pursuant to the SERP
would include dividends and the equivalent value of shares of common stock
accrued through December 31, 1997 of $116,643, $21,159, $5,393, $2,872 and
$2,663, respectively. Future ESOP benefit additions, if any, would be derived
from discretionary annual ESOP allocations set by the Board of Directors.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT
AND CHANGE IN CONTROL ARRANGEMENTS
The Corporation has employment agreements (the "Employment Agreements")
with certain of its key employees, including Messrs. Boklund, Corvin, and Adams
("Employees"). Each Employment Agreement is effective until June 1 of each year,
with (a) automatic one-year extensions until the Employee reaches the age of 65
unless either the Corporation or the Employee provides prior notice that the
Employment Agreement will not be extended, and (b) an automatic three-year
extension in the event of a change of control of the Corporation (a "Change in
Control"). Change in Control is defined to include, among other things, the
transfer of 25% or more of the Corporation's voting securities to any person or
entity other than the ESOP or the election of a majority of directors who were
not nominated by the then current Board. The Employment Agreements provide,
among other things, for severance compensation in the event that an Employee's
employment is terminated by the employer without cause or by the Employee with
good reason, all as defined in the Employment Agreements, during the three-year
period following a Change in Control. Such severance compensation is to be
calculated as the sum of (i) three times the Employee's annual base salary as of
the date of the Change in Control, (ii) the four most recent quarterly cash
distributions to such Employee from the Corporation's Profit Participation Plan,
and (iii) an amount equal to the lump sum present actuarial value of the excess,
if any, of the normal retirement allowance to which the Employee would have been
entitled under the Pension Plan, assuming that the Employee continued as an
active participant under such plan, without change in his rate of annual pay,
until the earlier of his 65th birthday or the tenth anniversary of the date of
the Change in Control, over the normal retirement allowance to which the
Employee is actually entitled under such plan as of the date of termination.
Under the Employment Agreements, any terminated Employee would also receive full
base salary through the date of such termination of employment, reimbursement
for any legal fees or expenses incurred by the Employee in seeking to enforce
the Employment Agreement and certain non-cash employee benefits as specified in
the Employment Agreement.
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The Corporation has entered into Indemnification Agreements with each
director and certain executive officers (an "Indemnified Person"). Each
agreement provides that the Corporation shall indemnify the Indemnified Person
if and when the Indemnified Person is or was a party or is threatened to be made
a party to any action, suit, arbitration, investigation, administrative hearing
or any other proceeding (a "Proceeding") because of the Indemnified Person's
status or former status as a director, officer or other agent of the Corporation
or because of anything done or not done by the Indemnified Person in such
capacity, against all expenses and liabilities actually and reasonably incurred
by the Indemnified Person or on the Indemnified Person's behalf in connection
with the investigation, defense, settlement or appeal of such Proceeding. The
Corporation will advance to the Indemnified Person all reasonable defense
expenses incurred in defense of any Proceeding. Further, each agreement provides
that upon the acquisition of 30% or more of the outstanding shares of Common
Stock, other than by the Corporation or the ESOP, without approval by a majority
of the Corporation's Board prior to such acquisition, the Corporation will
obtain and maintain over the term of the agreement an irrevocable standby letter
of credit on terms satisfactory to the Indemnified Person in an appropriate
amount (but not less than $500,000) naming the Indemnified Person as the
beneficiary in order to secure the Corporation's obligation under the agreement.
Finally, each agreement provides that the Corporation must maintain director and
officer insurance in the amount of at least $2.0 million with coverage at least
comparable to its then current insurance for the Indemnified Person for the term
of the agreement. The Corporation may elect to not purchase the required
insurance if the insurance is not reasonably available or if, in the reasonable
business judgment of the directors of the Corporation, either the premium cost
for such insurance is disproportionate to the amount of coverage or the coverage
provided by such insurance is so limited that there is insufficient benefit from
such insurance.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1997 the Compensation Committee members were John A. Sproul,
Chairman, C. Lee Emerson, V. Neil Fulton, Edward C. Gendron, Robert W.
Keener, Richard G. Landis, James A. Maggetti, George J. Stathakis and William
Swindells. Mr. Emerson was Chairman of the Board and an employee of the
Corporation through January 1992. Mr. Fulton was the Corporation's Vice
President of Finance and Chief Financial Officer until February 1991, and was
an employee of the Corporation through December 1992.
BOARD COMPENSATION COMMITTEE REPORT
ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board establishes the general
compensation policies of the Corporation and the compensation plans and
specific compensation levels for executive officers, subject to approval of
the Board. The Compensation Committee is composed of nine independent,
non-employee directors.
COMPENSATION PRINCIPLES
The Committee believes that the compensation program for the
Corporation should be designed to attract, retain and motivate talented
employees to contribute to the Corporation's long-term success. To ensure that
compensation is competitive, the Committee periodically collects and analyzes
compensation practices of companies and competitors in its industry and uses
that information as the basis to determine whether the Corporation's
compensation program is in a competitive range. The Committee maintains the
philosophy that compensation of all employees should be
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directly and materially linked to operating and financial performance of the
Corporation. To achieve this linkage, employee compensation is weighted towards
compensation paid on the basis of pre-tax profit. The Committee has also
established stock ownership as part of non-union employee compensation to
promote the alignment of employee long range interests with those of the
stockholders. In addition, the Committee believes that whenever possible the
compensation and benefit program provided to the executive officers should be
based on similar principles as for all other non-union employees. These
principles align all employee compensation with the Corporation's objectives,
operating strategy, management initiatives and financial performance. Within
this overall philosophy, the Committee's objectives are to:
[BULLET] Offer a total compensation program that takes into consideration the
compensation practices of comparable companies with whom the
Corporation competes for executive talent.
[BULLET] Support a performance-oriented environment in which everyone is
working together in pursuit of the Corporation's short term and
long term goals.
[BULLET] To maximize the Corporation's long-term growth and profitability
and the enhancement of stockholder value.
COMPARATIVE EVALUATION
The Corporation seeks to align total compensation for its executive
officers with that of comparable executive positions in other manufacturing
companies and other steel companies.
In 1997, the Compensation Committee benchmarked its compensation
program by retaining an independent outside consulting firm to prepare a report
that compared the base salary and other benefits of the Corporation to other
durable goods manufacturing companies (the "Report"). The Report focused on
total compensation for the 14 most senior executive positions. In preparing the
Report, the consulting firm reviewed the executive position descriptions and
competitive practices and pay levels for numerous durable goods manufacturing
companies (including steel companies).
COMPENSATION ELEMENTS
There are three elements in the Corporation's executive officer
compensation program, all determined by individual performance and corporate
profitability.
BASE SALARY COMPENSATION
The Compensation Committee adjusts base salary levels within
pre-established ranges to reflect the responsibilities and performance of
individuals. The responsibilities assumed, the skills and experience required by
the job, and the performance of the individual are relatively equal
considerations in determining base salary.
ANNUAL INCENTIVE COMPENSATION
As noted above, the Corporation believes that all employees share in
the responsibility for achieving profits. Accordingly, the Corporation has
discretionary Profit Participation Plans under which it distributes quarterly to
most of its U.S. employees with over three months of employment 12% to 20%,
depending on location, of its domestic pre-tax earnings after adjustments for
certain non-operating items. Each employee, including executive officers,
receives a share of the distribution based on the level of the employee's base
compensation compared with the total base compensation of all eligible
employees. The Corporation may modify, amend or terminate the plans at the
discretion of the Board of Directors, subject to the terms of various labor
agreements.
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EMPLOYEE STOCK OWNERSHIP PLAN (ESOP)
The Corporation has an ESOP for qualified employees (generally those
employees with six months of employment) of Oregon Steel Mills, Inc. Annual
contributions to the ESOP, which are at the discretion of the Board, are based
upon the financial performance of the Corporation. The annual contribution may
be in cash or Common Stock but historically has been in Common Stock. Shares are
allocated to the accounts of qualified employees, including executive officers,
at the end of each year in proportion to each eligible employee's total eligible
compensation compared with the total eligible compensation of all eligible
employees. As noted above, the purpose of this program is to provide additional
incentive for employees to work to maximize stockholder value. The ESOP program
utilizes vesting periods and diversification features that encourage employees
to retain ownership of the Corporation's Common Stock and continue in the employ
of the Corporation.
The Corporation also has a SERP (as discussed previously under the
heading "Defined Benefit Retirement Plans") whereby the SERP supplements pension
and ESOP benefits, making up for benefits which were lost because of the dollar
limits imposed by sections 401(a)(17) and 415 of the Code.
CHIEF EXECUTIVE OFFICER ("CEO") COMPENSATION
The Compensation Committee has used the aforementioned compensation
principles with respect to the salary of Mr. Boklund. In determining Mr.
Boklund's base salary for 1997, the Committee reviewed the Report, the
Corporation's less than planned financial results due to operating difficulties,
and Mr. Boklund's performance and responsibilities. As a result of this review,
the Committee determined to make no changes in his compensation. Mr. Boklund
shares in the profit Participation Plan of the Corporation and the ESOP under
the same provisions and formulas as other domestic employees of the Corporation.
The Corporation does not have any "Excessive Employee Remuneration" as
defined in section 162(m) of the Code.
COMPENSATION COMMITTEE DURING 1997
John A. Sproul, Chairman
C. Lee Emerson
V. Neil Fulton
Edward C. Gendron
Robert W. Keener
Richard G. Landis
James A. Maggetti
George J. Stathakis
William Swindells
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<PAGE>
PERFORMANCE GRAPH
Set forth below is a line graph comparing the cumulative total
stockholder return of the Corporation's Common Stock, based on the market price
of Common Stock and assuming reinvestment of dividends, with the cumulative
total return of companies on the Standard and Poors' 500 Stock Index ("S&P 500
Index") and the Standard & Poors' Steel Index ("S&P Steel Index").
STOCKHOLDER RETURN
MEASUREMENT PERIOD OREGON S&P 500 S&P STEEL
(FISCAL YEAR COVERED) STEEL INDEX INDEX
- --------------------- ------ ------- ---------
MEASUREMENT POINT - 12/31/92 $100.00 $100.00 $100.00
FYE 12/31/93 100.94 110.01 131.53
FYE 12/31/94 64.71 111.51 127.96
FYE 12/31/95 59.48 153.26 118.63
FYE 12/31/96 74.53 188.35 105.73
FYE 12/31/97 97.38 251.12 107.52
- ----------
(a) Dividends are reinvested at the end of the month in which they are paid.
(b) Assumes $100 invested in Oregon Steel, the S&P 500 Index companies and
the S&P Steel Index companies on December 31, 1992.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based on the Corporation's review of Forms 3, 4, and 5 furnished to the
Corporation pursuant to Section 16 of the Securities Exchange Act of 1934, as
amended, all such forms were filed on a timely basis.
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<PAGE>
INDEPENDENT ACCOUNTANTS
During the fiscal year 1997, Price Waterhouse L.L.P. ("PW") served as
independent accountants to the Corporation. On July 25, 1996, the Corporation
dismissed its prior independent accountants, Coopers & Lybrand L.L.P. ("C&L")
and engaged PW as its independent accountants. The reports of C&L on the
financial statements of the Corporation for the two fiscal years preceding the
dismissal contained no adverse opinion or disclaimers of opinion and were not
qualified or modified as to uncertainty, audit scope or accounting principles.
The decision to dismiss C&L and engage PW was approved by the Corporation's
Audit Committee and ratified by the entire Board of Directors. During the two
most recent fiscal years and the subsequent interim periods preceding the
dismissal, there were no disagreements with C&L on any matter of accounting
principles or practices, financial statement disclosure, or auditing scope or
procedure, which disagreements if not resolved to the satisfaction of C&L would
have caused them to make reference thereto in their report on the financial
statements for such years. During the two most recent fiscal years and
subsequent interim periods preceding the dismissal, there were no reportable
events (as such term is defined in Item 304 (a)(1)(v) of Regulation S-K).
Representatives of PW will be present at the Annual Meeting and will be
available to respond to appropriate questions. They do not expect to make any
statement but will have the opportunity to make a statement if they desire to do
so.
OTHER MATTERS
The Board knows of no other matters to be brought before the Annual
Meeting. However, if any other business properly comes before the meeting, the
persons named in the accompanying form of proxy will vote or refrain from voting
thereon in accordance with their judgment pursuant to the discretionary
authority given them in the proxy.
STOCKHOLDER PROPOSALS FOR 1999 ANNUAL MEETING
Stockholder proposals submitted for inclusion in the 1999 proxy
materials and consideration at the 1999 Annual Meeting of Stockholders must be
received by the Corporation by November 13, 1998. Any such proposal should
comply with the rules promulgated by the Securities and Exchange Commission
governing stockholder proposals submitted for inclusion in proxy materials.
LaNelle F. Lee
SECRETARY
Portland, Oregon
March 13, 1998
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OREGON STEEL MILLS, INC.
ANNUAL MEETING -- APRIL 30, 1998
PROXY SOLICITED BY BOARD OF DIRECTORS
The undersigned hereby appoints Thomas B. Boklund and L. Ray Adams, and
each of them, proxies with power of substitution to vote on behalf of the
undersigned all shares which the undersigned may be entitled to vote at the
Annual Meeting of Stockholders of Oregon Steel Mills, Inc. on April 30, 1998 and
any adjournment thereof, with all powers that the undersigned would possess if
personally present, with respect to the item on the reverse side.
THE SHARES REPRESENTED BY THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED
AS SPECIFIED ON THE REVERSE HEREOF. IF NO SPECIFICATION IS MADE, THIS PROXY WILL
BE VOTED FOR PROPOSAL 1. THE PROXIES MAY VOTE IN THEIR DISCRETION AS TO OTHER
MATTERS WHICH MAY PROPERLY COME BEFORE THE MEETING.
PLEASE MARK, DATE, SIGN, AND RETURN THE PROXY CARD PROMPTLY.
(CONTINUED AND TO BE SIGNED ON REVERSE)
[TRIANGLE]FOLD AND DETACH HERE[TRIANGLE]
OREGON STEEL MILLS, INC.
ANNUAL MEETING OF STOCKHOLDERS
Thursday, April 30, 1998
<PAGE>
Please mark [Square box
your votes in which an
as indicated "X" has been
in this example. marked]
1. Election of Class A Directors
FOR
[ ] FOR all nominees listed below (except as marked to the contrary
below) or, if any named nominee is unable to serve, for a
substitute nominee.
WITHHOLD
[ ] WITHHOLD AUTHORITY to vote for all nominees listed below.
Joe E. Corvin, V. Neil Fulton, Robert W. Keener, John A. Sproul
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, WRITE
THAT NOMINEE'S NAME ON THE LINE BELOW.)
- -------------------- --------------------- ------------------- ----------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE NOMINEES LISTED ABOVE.
Date: , 1998
-----------
[To the left of "Date" -----------------------
appears a 3/8-inch,
horizontal black line; -----------------------
a perpendicular 3/8-inch Signature or Signatures
black line extends
downward from the right
corner of the horizontal
line.)
Please date and sign exactly as name is imprinted hereon, including designation
as executor, trustee, etc., if applicable. When shares are held jointly, each
joint owner should sign. If a corporation, please sign in full corporate name by
the president or other authorized officer. If a partnership, please sign in
partnership name by authorized person.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
[TRIANGLE]FOLD AND DETACH HERE[TRIANGLE]
OREGON STEEL MILLS, INC.
ANNUAL MEETING OF STOCKHOLDERS
Thursday, April 30, 1998
