EXHIBIT 10.2
July 31, 2000
Management Representative
Oregon Steel Mills, Inc.
1000 SW Broadway, Suite 2200
Portland, Oregon
Dear Management Representative:
Oregon Steel Mills, Inc. (which, together with its Subsidiaries, is referred to
as the "Company") considers the stability of its key management group to be
essential to the best interests of the Company and its stockholders. The Company
recognizes that, as is the case with many publicly held corporations, the
possibility of a Change in Control may arise and that the attendant uncertainty
may result in the departure or distraction of key management personnel to the
detriment of the Company and its stockholders.
Accordingly, the Board of Directors of Oregon Steel Mills, Inc. (the "Board")
has determined that appropriate steps should be taken to encourage members of
the Company's key management group to continue as employees notwithstanding the
future possibility of a Change in Control of the Company.
The Board also believes it important that, in the event of a proposal for
transfer of control of the Company, you be able to assess the proposal and
advise the Board without being influenced by the uncertainties of your own
situation.
In order to induce you to remain in the employ of the Company, this Agreement,
which has been approved and authorized by the Board, sets forth the severance
compensation which the Company agrees to pay to you in the event your employment
with the Company is terminated subsequent to the occurrence of a Change in
Control of the Company under the circumstances described below. This Agreement
also supercedes any such agreement you may currently have in place.
Capitalized terms not otherwise defined in this Agreement have the meanings set
forth in Section 13.
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1 AGREEMENT TO PROVIDE SERVICES; RIGHT TO TERMINATE.
(a) TERMINATION OF EMPLOYMENT. Except as otherwise provided in paragraph
1(b) of this Agreement or in any written employment agreement between
you and the Company, you are an "at will" employee and the Company or
you may terminate your employment at any time. If, and only if, your
employment terminates after a Change in Control of the Company, the
provisions of this Agreement regarding the payment of severance
compensation and benefits will apply. In all other events, this
Agreement does not provide any additional severance compensation or
benefits to you.
(b) CONTINUATION OF SERVICES SUBSEQUENT TO CERTAIN OFFERS. In the event a
tender offer or exchange offer is made by a Person for more than
twenty-five percent (25%) of the Company's Voting Securities, you
agree that you will not leave the employ of the Company (other than as
a result of disability) and will render services to the Company in the
capacity in which you then serve until such tender offer or exchange
offer has been abandoned or terminated or a Change in Control has
occurred. If, during the period you are obligated to continue in the
employ of the Company pursuant to this Section 1(b), the Company
reduces your compensation to less than 90% of your then-current
compensation, your obligations under this Section 1(b) will
automatically terminate.
(c) OBLIGATIONS AFTER CHANGE IN CONTROL. While employed by the Company (or
its successor) after a Change in Control, you agree to devote
reasonable attention and time to the business and affairs of the
Company and to use your reasonable best efforts to perform your
responsibilities faithfully and efficiently, consistent with your past
practice as an employee of the Company.
2 TERM OF AGREEMENT. This Agreement commences on the date of this Agreement
and will continue in effect until January 1, 2001; provided, however, that
commencing on January 1, 2001, and each January thereafter, the term of
this Agreement will automatically be extended for one additional year
unless at least 60 days prior to such January, the Company or you will have
given notice that this Agreement will not be extended; and provided,
further, that if a Change in Control of the Company occurs while this
Agreement is in effect, this Agreement will automatically be extended for a
period of three calendar years beyond the calendar year in which the Change
in Control occurs. Notwithstanding the preceding sentence, this Agreement
will not extend beyond your normal retirement date under the Company's
retirement plan. This Agreement will terminate if you or the Company
terminates your employment prior to a Change in Control but such
termination will be without prejudice to any remedy the Company may have
for breach of your obligations, if any, under Section 1(b).
3 EFFECT OF TERMINATION FOLLOWING CHANGE IN CONTROL. In the event your
employment with the Company is terminated, whether by you or the Company,
within three years following the date of occurrence of any event
constituting a Change in Control (recognizing that more than one such event
may occur in which case the three-year period will run from the date of
occurrence of each such event), you will be eligible to receive the
following respective benefits:
(a) TERMINATION FOR CAUSE OR WITHOUT GOOD REASON. If your employment is
terminated by the Company for Cause, or by you other than for Good
Reason, the Company will pay you your Base Salary through the Date of
Termination at the rate in effect on the Date of Termination, together
with all benefits to which you are then entitled under Plans in which
you are a participant, and the Company will have no further
obligations to you under this Agreement.
(b) TERMINATION WITH GOOD REASON OR OTHER THAN FOR CAUSE. If your
employment with the Company is terminated (other than for disability
or upon your death) by you for Good Reason by you giving two (2) weeks
prior written notice specifying the "Good Reason" or by the Company
other than for cause, then the Company will pay to you the following
amounts (the "Severance Payments"), less applicable withholding:
(i) Your Base Salary through the Date of Termination at the rate
in effect on the Date of Termination and a buyout of all
unused and accrued vacation.
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(ii) In lieu of any further salary payments to you for the periods
subsequent to the Date of Termination, an amount of severance
pay equal, at the time specified in Section 8, to the
following amounts:
(1) A lump sum severance payment equal to three (3)
times your Base Salary as in effect at the Date of
Termination or immediately prior to the Change in
Control, whichever is greater; and,
(2) An additional amount equal to the lump sum present
actuarial value of the excess, if any, of (x) over
(y) where:
(x) is the normal retirement allowance to which you
would have been entitled under the Company's Pension
Plan assuming that you continued as an active
participant under such plan, without change in your
Base Salary, until the earlier of your 65th birthday
or the 10th anniversary of the date of Change of
Control; and
(y) is the normal retirement allowance to which you
are actually entitled under the Company's Pension
Plan as of the date a Notice of Termination.
Present actuarial value shall be computed using a six and
one-half (6.5%) interest assumption and the 1994 Group Annuity
Male Mortality Table set back two (2) years and shall reflect
the value of any applicable early retirement subsidies under
the Company's Pension Plan.
(iii) your group health insurance benefits substantially similar to
those which you were receiving immediately prior to a Notice
to Termination at the same cost to you as the Company charges
other employees whose employment terminates at age 55 or older
with at least fifteen (15) years service. Benefits otherwise
receivable by you pursuant to this subparagraph shall be
reduced to the extent similar benefits are actually received
by you from any other source, and any such similar benefits
shall be reported to the Company.
The amount of Severance Payments otherwise payable pursuant to this Agreement
will be reduced by (A) amounts payable to you pursuant to any other Plan or
agreement providing severance benefits to you or to the Company's salaried
employees generally and (B) amounts payable to you (after any adjustment or
reduction to reflect payments described in clause (A)) as salary continuation
and incentive compensation pursuant to any employment agreement between you and
the Company that is in effect as of the Date of Termination.
(c) RELEASE OF CLAIMS. Your receipt of these severance benefits is
conditioned upon your execution and nonrevocation of a release of
claims in a form to be provided by the Company.
2 ADDITIONAL PAYMENT.
(a) GROSS-UP. In the event any portion of the Total Payments will be
subject to the Excise Tax, the Company will pay you an additional
amount (the "Gross-Up Payment") equal to (1) the Excise Tax imposed on
you with respect to the portion of the Total Payments that constitutes
an "excess parachute payment" (as that term is described in Section
280G(b)(1) of the Code), plus (2) all federal, state, and local income
taxes and Excise Tax imposed on you with respect to the Gross-Up
Payment.
(b) DETERMINING AMOUNT OF EXCISE TAX. For purposes of determining whether
any portion of the Total Payments will be subject to the Excise Tax
and the amount of any Excise Tax:
(i) The entire amount of the Total Payments will be treated as an
Excess Parachute Payment unless and to the extent, in the
written opinion of Outside Tax Counsel, the Total Payments, in
whole or in part, are not subject to the Excise Tax;
(ii) The value of any non-cash benefits or any deferred payments
that are part of the Total Payments will be determined by the
Company's independent accountants in accordance with
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the requirements of Sections 280G(d)(3) and 280G(d)(4) of the
Code and any regulations promulgated under those sections.
(c) DETERMINING AMOUNT OF GROSS-UP PAYMENT. For purposes of determining
the amount of the Gross-Up Payment:
(i) You will be deemed to pay federal income taxes at the highest
marginal rate of federal income taxation applicable to
individuals (including any applicable surtaxes and taking into
account any applicable loss or reduction of deductions or
exemptions) for the calendar year in which the Gross-Up
Payment is to be made; and
(ii) You will be deemed to pay state and local income taxes at the
highest marginal rates of taxation applicable to individuals
(including any applicable surtaxes and taking into account any
applicable loss or reduction of deductions or exemptions) in
the state and locality of your residence at the date the
Gross-Up Payment will be made.
(d) SUBSEQUENT ADJUSTMENT - REPAYMENT. In the event that the amount of
Excise Tax you are required to pay is subsequently determined to be
less than the amount taken into account under this Agreement, you
agree that promptly after the amount of such reduction in Excise Tax
is finally determined, such excess will constitute a loan by the
Company to you and you will repay to the Company, at 6% interest, the
amount of such reduction, plus the net federal income tax benefit, if
any, you actually will receive (in the opinion of Outside Tax Counsel)
as a result of making the repayment described in this Section 4(d).
(e) SUBSEQUENT ADJUSTMENT - ADDITIONAL PAYMENT. In the event that the
amount of Excise Tax you are required to pay is subsequently
determined to exceed the amount taken into account under this
Agreement, the Company will make an additional Gross-Up Payment in the
manner setforth in this Section 4 in respect of such additional Excise
Tax, plus any interest, additions to tax, or penalties payable by you
with respect to the additional Excise Tax, promptly after the time
that the amount can be reasonably determined.
5 SETOFF. To the extent permissible under applicable law, without prejudice
to other remedies, the Company may offset any amounts you owe the Company
against any amounts due upon termination or thereafter.
6 NOTICE. For the purposes of this Agreement, notices and all other
communications provided for in the Agreement must be in writing and will
be deemed to have been duly given when delivered or mailed by United
States certified or registered mail, return receipt requested, postage
prepaid, if to the Company, addressed to it at Oregon Steel Mills, Inc.,
1000 SW Broadway #2200, Portland OR 97205, Attention: Chief Executive
Officer, and if to you, addressed to you at the address set forth on the
first page of this Agreement, or to such other address as either party may
have furnished to the other in writing in accordance with this Agreement,
except that notices of change of address will be effective only upon
receipt.
7 SUCCESSORS; BINDING AGREEMENT.
(a) SUCCESSORS AND ASSIGNS. This Agreement will inure to the benefit of,
and be binding upon, any corporate or other successor or assignee of
the Company which acquires, directly or indirectly, by merger,
consolidation or purchase, or otherwise, all or substantially all of
the business or assets of the Company. The Company agrees to require
any such successor, by an agreement in form and substance reasonably
satisfactory to you, expressly to assume and agree to perform this
Agreement in the same manner and to the same extent as the Company
would be required to perform if no such succession had taken place.
(b) PERSONAL REPRESENTATIVES. This Agreement will inure to the benefit of
and be enforceable by your personal or legal representatives,
executors, administrators, successors, heirs, distributees, devisees,
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and legatees and any amounts payable to you in accordance with the
terms of this Agreement after your death will be paid to your estate.
8 TIME OF PAYMENT; ESTIMATED PAYMENT. The Severance Payments and any
applicable Gross-Up Payment provided for in this Agreement will be made to
you not later than the 15th business day following the Date of Termination;
provided, however, that if the amounts of such payments cannot be finally
determined on or before such day, the Company will pay to you on such day
an estimate, as determined in good faith by the Company, of the minimum
amount of such payments, and will pay the remainder of such payments as
soon as the amount of such payments can be determined. In the event that
the amount of the estimated payments exceeds the amount subsequently
determined to have been due, such excess will constitute a loan by the
Company to you, payable on the fifth day after demand by the Company
(together with interest at the rate of 6 percent per annum).
9 MISCELLANEOUS. No provision of this Agreement may be modified, waived, or
discharged unless such modification, waiver, or discharge is specifically
approved by the Board and agreed to in a writing signed by you and the
Chief Executive Officer or the Vice President - Finance, Chief Financial
Officer of the Company. No waiver by either party to this Agreement at any
time of any breach by the other party of, or of compliance with, any
condition or provision of this Agreement to be performed by such other
party will be deemed a waiver of similar or dissimilar provisions or
conditions at the same, or at any prior or subsequent, time. No agreements
or representations, oral or otherwise, expressed or implied, with respect
to the subject matter of this Agreement have been made by either party
which are not expressly set forth in this Agreement. The validity,
interpretation, construction, and performance of this Agreement will be
governed by the laws of the State of Oregon. All obligations of the Company
to make payments or to provide benefits will be subject to all applicable
payroll taxes, withholding and reporting requirements.
10 LEGAL FEES AND EXPENSES. The Company will pay or reimburse any reasonable
legal fees and expenses you may incur in connection with any legal advice
or legal action to enforce your rights under, or to defend the validity of,
this Agreement (including all such fees and expenses, if any, incurred in
contesting or disputing your termination or in seeking to obtain or enforce
any right or benefit under this Agreement). The Company will pay or
reimburse such legal fees and expenses on a regular, periodic basis upon
presentation by you of a statement or statements prepared by your counsel
in accordance with its usual practices.
11 VALIDITY. The invalidity or unenforceability of any provision of this
Agreement will not affect the validity or enforceability of any other
provision of this Agreement, which will remain in full force and effect.
12 DISPUTE RESOLUTION. You and the Company agree that any dispute concerning
the interpretation or construction of this Agreement or otherwise related
to this Agreement will be resolved by confidential mediation or binding
arbitration. The parties will first attempt mediation with a neutral
mediator agreed upon by the parties. If mediation is unsuccessful or if the
parties are unable to agree upon a mediator, the dispute will be submitted
to arbitration pursuant to the procedures of the American Arbitration
Association ("AAA") or other procedures agreed to by the parties. All
arbitration proceedings will be conducted by a neutral arbitrator mutually
agreed upon by the parties. The decision of the arbitrator will be final
and binding on all parties. The costs of mediation and arbitration will be
borne by the Company as provided in Section 10 of this Agreement.
13 DEFINITIONS OF CERTAIN TERMS. For the purposes of this Agreement, the terms
defined below and used in this Agreement will have the following meanings:
(a) BASE SALARY. "Base Salary" means your annual salary which is payable
in equal periodic installments according to the Company's customary
payroll practices.
(b) CAUSE. Termination of your employment by the Company for "Cause" means
any act or omission that is: a breach of your obligations to the
Company, including but not limited to substantial absence without
cause, serious breach of confidence, criminal offenses committed at the
place of work or outside of it, personal dishonesty, incompetence,
willful misconduct, breach of fiduciary duty involving
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personal profit, intentional failure to perform stated duties, willful
violation of any law, rule, or regulation (other than traffic
violations or similar offenses). OSM may terminate this Agreement
effective as of the date a written Notice of Termination is given
specifying the cause.
(c) CHANGE IN CONTROL. A "Change in Control" of the Company means:
(i) Any time less than a majority of the directors of the Company
are individuals who were either elected by the Board or
nominated by the Board of (or a committee of the Board) for
election by the stockholders of the Company.
(ii) At any time a majority of the Board are individuals who, in
connection with a single transaction or a series of related
transactions that effects a change in the ownership of the
Company, were either not elected by the Board or nominated by
the Board (or a committee of the Board) for election by the
stockholders of the Company;
(iii) Any person (other than (a) an employee benefit plan of the
Company, or (b) a corporation owned directly or indirectly, by
the stockholders of the Company in substantially the same
proportions as their ownership of stock of the Company) is or
becomes the beneficial owner (as defined in Rule 13d of the
Securities Exchange Act of 1934, as amended), directly or
indirectly, of securities of the Company representing
twenty-five percent (25%) or more of the combined voting power
of the Company's then outstanding securities;
(iv) The stockholders of the Company approve (a) a plan of complete
liquidation of the Company, other than in connection with the
complete cessation of the business activities conducted with
the Company's operating assets, or (b) an agreement is entered
for the sale or disposition by the Company of all or
substantially all of the Company's assets except pursuant to
an order of a bankruptcy court having jurisdiction of the
Company. For purposes of clause (b), the term "the sale or
disposition by the Company of all or substantially all of the
Company's assets" shall mean a sale or other disposition
transaction or series of related transactions involving assets
of the Company or of any direct or indirect subsidiary of the
Company (including the stock of any direct or indirect
subsidiary of the Company) in which the value of the assets or
stock being sold or otherwise disposed of (as measured by the
purchase price being paid therefore or by such other method as
the Board determines is appropriate in a case where there is
no readily ascertainable purchase price) constitutes more than
two-thirds (2/3) of the fair market value of the Company (as
hereinafter defined). For purposes of the preceding sentence,
the "fair market value of the Company" shall be the aggregate
market value of the Company's outstanding common stock (on a
fully diluted basis) plus the aggregate market value of the
Company's other outstanding equity securities, if any. The
aggregate market value of the Company's common stock shall be
determined by multiplying the number of shares of the
Company's common stock (on a fully diluted basis)outstanding
on the date of the execution and delivery of a definitive
agreement with respect to the transaction or series of related
transactions (the "TRANSACTION DATE") by the average closing
price of the Company's common stock for the ten (10) trading
days immediately preceding the Transaction Date. The aggregate
market value of any other equity securities of the Company
shall be determined in a manner similar to that prescribed in
the immediately preceding sentence for determining the
aggregate market value of the Company's common stock or by
such other method as the Board shall determine is appropriate;
provided that, in the event that on the Transaction Date there
is no public market for such common stock or other equity
security, the fair market value of the equity securities or
common stock shall be as reasonably determined by the Board;
or
A Change in Control "occurs" on the date the Change in Control first
occurs; provided, however, that if (A) your employment is terminated by
the Company after an offer described in the first sentence of Section
1(b) of this Agreement is made, (B) it is reasonably demonstrated that
your termination was at the request of a third party who is seeking to
effect a Change in Control or otherwise occurred as a result of an
anticipated Change in Control, and (C) a Change in Control in fact
occurs within 120 days
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after your termination, then for purposes of determining your right to
any severance compensation and benefits under this Agreement, your
termination shall be deemed to have occurred after a Change in Control.
(d) CODE. "Code" means the Internal Revenue Code of 1986, as amended, or
corresponding provisions of subsequent superseding federal revenue
laws.
(e) DATE OF TERMINATION. "Date of Termination" means the date on which a
Notice of Termination is given.
(f) EXCISE TAX. "Excise Tax" means a tax imposed by Section 4999(a) of the
Code, or any successor provision, with respect to "excess parachute
payments" as described in Section 280(G)(b) of the Code.
(g) GOOD REASON. Termination by you of your employment for "Good Reason"
means termination based on any of the following, without your express
written consent, unless, such circumstances are fully corrected prior
to the Date of Termination specified in the Notice of Termination given
in respect thereof:
(i) a significant reduction by the Company in the duties and
responsibilities assigned to you from those assigned
immediately before the Change in Control;
(ii) the unlawful harassment by the Company or the owners thereof
of you so as to adversely affect the performance of your
assigned duties and responsibilities;
(iii) a reduction by the Company of 90% or more in your annual base
pay as in effect on the date the Change in Control occurs;
(iv) a geographical relocation of you is ordered by the Company or
its successor to an area other than a 50 mile radius of
Portland, Oregon; or
(v) the failure by the Company to pay any portion of your current
compensation or to pay you any portion of an installment of
deferred compensation under any deferred compensation
agreement of the Company within seven (7) days of the date of
such compensation is due.
(h) GROSS-UP PAYMENT. "Gross-Up Payment" means a payment described in
Section 4 of this Agreement with respect to an Excise Tax.
(i) NOTICE OF TERMINATION. "Notice of Termination" means a written notice
communicated by the Company to you or by you to the Company of
termination of your employment with the Company. For purposes of this
Agreement, Notice of Termination of your employment given by the
Company must indicate the specific termination provision in this
Agreement relied upon, and must set forth in reasonable detail the
facts and circumstances claimed to provide a basis for termination of
your employment under the provision so indicated.
(j) OUTSIDE TAX COUNSEL. "Outside Tax Counsel" means Schwabe, Williamson
& Wyatt, P.C., or in the event such counsel are unavailable by reason
of conflict or for any other reason, another law firm in Portland,
Oregon, selected by you that is reasonably satisfactory to the Company.
The Company will not unreasonably withhold its approval of counsel
selected by you as Outside Tax Counsel.
(k) PERSON. "Person" means and includes any individual, corporation,
limited liability company, partnership, trust, group, association, or
other "person," as such term is used in Section 13(d)(3) or 14(d) of
the Securities Exchange Act of 1934, as amended.
(l) PLAN. "Plan" means any compensation plan such as a plan, program,
policy, or arrangement providing for incentive or deferred
compensation, stock options, other stock or stock-related grants or
awards severance or separation benefit, any employee benefit plan such
as a thrift, investment, savings,
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pension, supplemental retirement plan, profit sharing, 401(k), medical,
disability, long-term care, accident, life insurance, cafeteria, or
relocation plan or any other plan, program, policy, or arrangement of
the Company providing similar types of benefits to employees of the
Company.
(m) SEVERANCE PAYMENTS. "Severance Payments" means the payments to be paid
to you as described in Section 3(b) of this Agreement. All severance
and other payments made by the Company to you are subject to applicable
tax withholding.
(n) SUBSIDIARY. "Subsidiary" means an entity of which more than 50 percent
of the outstanding voting stock is owned, directly or indirectly, by
the Company, by one or more other Subsidiaries, or by the Company and
one or more other Subsidiaries. For the purposes of this definition,
"voting stock" means stock which ordinarily has voting power for the
election of directors or managers, whether at all times or only so long
as no senior class of stock has such voting power by reason of any
contingency.
(o) TOTAL PAYMENTS. "Total Payments" means all payments or benefits
payable to you in connection with a Change in Control of the Company,
including Severance Payments under this Agreement and Other Payments.
(p) VOTING SECURITIES. "Voting Securities" means all issued and
outstanding securities ordinarily having the right to vote at elections
of the Company's directors, including without limitation the Company
shares.
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If you accept and agree to the terms of this Agreement, kindly sign and return
to the Company the enclosed copy of this Agreement, which will then constitute
our agreement on this subject.
Sincerely,
OREGON STEEL MILLS, INC.
---------------------------------
Name:
Title:
Agreed to this day of
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, 2000
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Management Representative
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