OREGON STEEL MILLS, INC.
----------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD
APRIL 27, 2000
9:30 A.M. PACIFIC TIME
------------
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 Sheraton Portland
Airport Hotel, 8235 N.E. Airport Way, Portland, Oregon, on Thursday, April 27,
2000, at 9:30 a.m. Pacific Time.
The meeting is being held for the following purposes:
1. To elect one Class C director.
2. To approve the Oregon Steel Mills, Inc. 2000 Nonqualified Stock
Option Plan ("2000 Plan").
3. 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 1, 2000 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.
Admission to the meeting will be by Admission Ticket only. If you are a
stockholder of record or an ESOP participant and plan to attend the Annual
Meeting, please detach your proxy from the Admission Ticket and present the
ticket for admission to the meeting. If you are a stockholder whose shares are
not registered in your own name and you plan to attend the meeting, please bring
a copy of the voting form sent to you by the stockholder of record (your broker,
bank, etc.) or other evidence of stock ownership.
By Order of the Board of Directors,
LaNelle F. Lee
SECRETARY
March 20, 2000
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 S.W. BROADWAY
SUITE 2200
PORTLAND, OREGON 97205
(503) 223-9228
--------------
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
--------------
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 Sheraton Portland Airport Hotel, 8235 N.E. Airport Way, Portland, Oregon, on
Thursday, April 27, 2000, at 9:30 a.m. Pacific Time, and any adjournments
thereof.
Only stockholders of record at the close of business on March 1, 2000 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 Proposals 1 and 2 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 acton 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. For
Proposal 1, a plurality of the votes cast at the Annual Meeting is required to
elect the director. For Proposal 2, the affirmative vote of the holders of a
majority of shares of the Common Stock present in person or by proxy at the
Annual Meeting and entitled to vote is required for the adoption of the 2000
Plan. For Proposal 1, withholding authority to vote for a director will be
treated as a vote cast against the nominee and a broker non-vote will not be
treated as a vote cast. For Proposal 2, an abstention will have the effect as a
vote against Proposal 2 and a broker non-vote will have no effect in determining
whether the stockholders have approved the 2000 Plan.
The approximate date on which this proxy statement and the accompanying
proxy card are being mailed to the Corporation's stockholders is March 20, 2000.
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 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 C DIRECTOR
NOMINEE
The Corporation has a classified Board consisting of four Class A
directors, Messrs. Corvin, Fulton, Keener and Sproul; three Class B directors,
Messrs. Reynolds, Stathakis and Swindells; and three Class C directors, Messrs.
Boklund, Landis and Maggetti. The Class A and B directors serve until the Annual
Meetings of Stockholders to be held in 2001 and 2002, 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.
-1-
<PAGE>
Two Class C directors who served in that capacity since 1987 will retire
from the Board effective as of the Annual Meeting. The Board has adopted a
resolution, effective as of the Annual Meeting, to reduce the size of the Board
to eight members and the number of Class C directors to one. The nominee for
election as a Class C director is Thomas B. Boklund who is a member of the
present Board. The Class C director to be elected at the 2000 Annual Meeting
will serve until the Annual Meeting of Stockholders in 2003 and until his
successor is elected and qualified. Proxies cannot be voted for the election of
more than one person to the Board at the Annual Meeting.
Unless authority to vote for the director is withheld, the accompanying
proxy, if properly executed and returned, will be voted for the election of the
Class C nominee named below. If authority to vote for the nominee is withheld,
the withheld votes will not be cast for any other nominee. If the nominee is
unable or unwilling to serve as a director, proxies may be voted for such
substitute nominee as may be designated by the Board. The Board has no reason to
believe that the nominee will be unable or unwilling to serve as a director if
elected.
The following table sets forth information with respect to the person
nominated for election as a Class C director and each other director, including
their names and ages as of February 15, 2000, business experience during the
past five years and directorships in other corporations.
<TABLE>
<CAPTION>
Principal Occupation and Director
Name Certain Other Directorships Age Since
---- --------------------------- --- --------
CLASS C (NOMINEE FOR TERM OF OFFICE TO EXPIRE IN 2003):
<S> <C> <C> <C>
Thomas B. Boklund Mr. Boklund is the Chairman of the Board of Directors 60 1982
and former Chief Executive Officer of the Corporation.
He was Chief Operating Officer from May 1982 to July
1985, Chief Executive Officer from August 1985 to
January 2000 and became 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.
CLASS B (DIRECTORS WHOSE TERMS OF OFFICE WILL EXPIRE IN 2002):
Stephen P. Reynolds Mr. Reynolds was the President and Chief Executive Officer 51 1999
of PG&E Gas Transmission-Northwest (formally Pacific Gas
Transmission Company)from 1987 until his retirement in early
1998. Since this time, Mr. Reynolds has been President and
Chief Executive Officer of Reynolds Energy International, an
energy-consulting firm. He is also a director on the Boards
of the Oregon Shakespeare Festival, Portland Center Stage,
the Oregon Independent College Fund, The Nature Conservancy
of Oregon and the Oregon Health Sciences University Foundation.
George J. Stathakis Mr. Stathakis was the Chairman of the Board and Chief 69 1997
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 business in international investment
banking. Prior to 1985, he spent 32 years with General Electric
Company, holding various senior executive positions in that
company. He is also a director on the Board of Calpine
Corporation, an independent power company.
William Swindells Mr. Swindells is the Chairman of the Board of Directors of 69 1994
Willamette Industries, Inc., a diversified wood products company.
He has held the position of Chairman of the Board since 1985
and also held the position of Chief Executive Officer from 1985
until September 1995 and again from November 1997 until December
1998. He is a director on the Boards of Standard Insurance
Company and Airborne Express Company, and serves as a trustee of
Willamette University and the Oregon Health Science University
Foundation.
</TABLE>
-2-
<PAGE>
<TABLE>
<CAPTION>
Principal Occupation and Director
Name Certain Other Directorships Age Since
---- --------------------------- --- --------
CLASS A (DIRECTORS WHOSE TERMS OF OFFICE WILL EXPIRE IN 2001):
<S> <C> <C> <C>
Joe E. Corvin Mr. Corvin is the President and Chief Executive Officer of the 55 1997
Corporation. He was Vice President and General
Manager of the Portland Steelworks from May 1992 to
June 1994, was Senior Vice President of Operations
of the Corporation from June 1994 to May 1996,
Chief Operating Officer of the Corporation from
June 1994 to January 2000, 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 and Chief Executive
Officer in January 2000.
V. Neil Fulton Mr. Fulton was Vice President of Finance and Chief Financial 71 1983
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 Pipeline Corporation, a 68 1994
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 of Pacific Gas and 75 1989
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.
</TABLE>
DIRECTORS' COMPENSATION, MEETINGS AND STANDING COMMITTEES
The Board has standing Executive, Audit, Strategic Planning and Investment,
and Compensation, Personnel and Succession Planning ("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 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.
For the two Board members who retired effective January 31, 1999, under the
Directors' Plan: 1) Mr. C. Lee Emerson who was an outside director for six years
is scheduled to receive an annual payment of $20,000 for six years commencing in
January 2000; and 2) Mr. Edward C. Gendron has received a January 31, 1999
one-time lump-sum payment of $264,094 for his past 22 years of service as an
outside director. Two Board members will retire in April 2000 under the
Director's Plan: Mr. Richard G. Landis and Mr. James A. Maggetti, who were
outside directors for twelve years. Mr. Landis has elected to receive his
Director's retirement payment of $20,000 for twelve years commencing January 1,
2001. Mr. Maggetti is scheduled to receive a lump sum payment in April 2000 of
$168,692.
-3-
<PAGE>
During 1999, the Board held four meetings, the Audit Committee held three
meetings; the Compensation Committee held two meetings and the Strategic
Planning and Investment Committee held two meetings. Each incumbent director
attended at least 75% of the aggregate number of Board meetings and meetings of
committees of which he is a member which were held during the period for which
he was a director.
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 during 1999 were Messrs.
Boklund, Keener and Stathakis.
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 1999
were Messrs. Fulton, Keener, Landis and Maggetti.
The Compensation Committee establishes the general compensation policies of
the Corporation and the compensation plans and specific compensation levels for
executive officers and establishes guidelines for the compensation of other
personnel, subject to approval of the Board. The members of the Compensation
Committee during 1999 were Messrs. Maggetti, Reynolds, Sproul and Swindells.
The Board of Directors established the Strategic Planning and Investment
Committee in January 1999 to provide guidance, evaluation and planning for the
strategic issues facing the Corporation. The members of the Strategic Planning
and Investment Committee during 1999 were Messrs. Boklund, Corvin, Reynolds,
Stathakis and Swindells.
PROPOSAL 2: PROPOSAL TO ADOPT THE
OREGON STEEL MILLS, INC. 2000 NONQUALIFIED STOCK OPTION PLAN
The Board of Directors has adopted, subject to stockholder approval, the
Oregon Steel Mills, Inc. 2000 Nonqualified Stock Option Plan ("2000 Plan"). The
purposes of the 2000 Plan are to motivate, attract and retain the services of
the participants who make significant contributions to the Corporation, to
further the growth and financial success of the Corporation and its affiliates
by aligning the interests of the participants with the interests of the
Corporation's stockholders; and to provide the participants with an incentive
for long-term value creation.
The following discussion of the material features of the 2000 Plan is
qualified by reference to the text of the 2000 Plan set forth in Appendix A to
this Proxy Statement.
ADMINISTRATION. The 2000 Plan will be administered by the Board of
Directors or a committee of two or more nonemployee directors ("Committee").
Subject to the terms and conditions of the 2000 Plan, the Committee is
authorized to designate participants, grant options, set terms and conditions of
options, determine the performance targets, interpret the 2000 Plan, specify
rules and regulations relating to the 2000 Plan, alter any restrictions or
conditions on options, and make all other determinations which may be necessary
or desirable for the administration of the 2000 Plan.
ELIGIBILITY. Executives and senior corporate and plant managers of the
Corporation or of an affiliate of the Corporation are eligible to receive
options under the 2000 Plan. This group currently consists of approximately five
persons.
SHARES SUBJECT TO THE PLAN. Under the 2000 Plan, 1,000,000 shares of Common
Stock will be available for issuance upon the exercise of options. The number of
shares available under the 2000 Plan is subject to adjustment for any stock
dividend, stock split, reverse stock split, recapitalization or certain other
corporate reorganizations. Shares issued under the 2000 Plan may consist of
authorized but unissued shares or treasury shares. No options have been granted
under the 2000 Plan. The closing price of the Common Stock on March 9, 2000 was
$4.00.
STOCK OPTIONS. All options granted under the 2000 Plan will be nonqualified
stock options. The exercise price per share of Common Stock subject to an option
will be the fair market value of the Common Stock on the date of grant, as
determined by the Committee. Each option will have a term of 10 years, unless
terminated earlier pursuant to the 2000 Plan.
Each option will vest and become fully exercisable under one of the two
following methods, as determined by the Committee: (a) one half of each grant
will vest over 4 years at the rate of 25% per year, with the first 25% vesting
on the first anniversary of the grant date, and an additional 25% on each
anniversary of the grant date thereafter; and one half of each grant will vest
upon the earlier of the Corporation achieving a predetermined performance target
or if the performance target is not met, on the seventh anniversary of the Grant
Date; or (b) each option will vest according to the vesting schedule recommended
by the Chief Executive Officer of the Corporation and approved by the Committee.
If an optionee terminates employment, other than by reason of death, disability
or
-4-
<PAGE>
retirement, then any unvested options will terminate and all vested options
will be exercisable for a period of 90 days following termination. If an
optionee terminates employment because of death or disability, all unvested
options will become vested and all options will be exercisable for a period of
180 days following death or disability. If an optionee retires, all unvested
options will become vested and all options will be exercisable for a period of
90 days following retirement.
Options may be exercised by payment of the exercise price and any
withholding taxes in any combination of cash, other immediately available funds,
cancellation of vested options or Common Stock. In addition, the Committee may
allow other forms of payment determined to be consistent with the purposes of
the 2000 Plan and applicable law.
Each option will be evidenced by a written document which specifies the
applicable terms and conditions of the option. The terms of each option need not
be identical and the Committee need not treat participants uniformly.
ADJUSTMENTS UPON CHANGES IN CAPITALIZATION. The 2000 Plan provides that, in
the event of any change in the capital structure of the Corporation that effects
an increase or decrease in the number of outstanding shares of the Corporation
without receipt of consideration, the aggregate number of shares available under
the 2000 Plan, and the number and the price of shares subject to outstanding
options will be appropriately adjusted. The 2000 Plan further provides that, in
the event of certain capital transactions, all outstanding options will
terminate upon such capital transaction unless they are assumed by a successor
corporation; provided, however, that unless the outstanding options are assumed
by a successor corporation in a merger or consolidation, subject to terms
approved by the Committee, all vested options may be exercised during the 15
days prior to the capital transaction. The Committee may choose to accelerate
the vesting of any option.
OTHER TERMS OF OPTIONS. No options may be granted under the 2000 Plan after
December 31, 2009. The exercise of an option is conditioned on the withholding
of taxes and certain other requirements. Options granted under the 2000 Plan may
not be pledged or otherwise encumbered and are not transferable except by will
or by the laws of descent and distribution. The Board of Directors may, subject
to any stockholder approval required by applicable law, amend the 2000 Plan with
respect to any shares of Common Stock at that time not subject to options. The
Committee may, with the consent of the optionee, modify an option and cancel and
regrant an option.
EFFECTIVE DATE. The effective date of the 2000 Plan is January 1, 2000,
subject to stockholder approval. Unless sooner terminated by the Board, the 2000
Plan will terminate on December 31, 2009; provided, that any option outstanding
at the time of such termination will continue in full force and effect and will
continue to be governed by the 2000 Plan and its applicable agreement until the
option expires or is discharged by its terms.
FEDERAL TAX CONSEQUENCES OF THE 2000 PLAN. The federal income tax
consequences of the grant, exercise and disposition of stock options are
complex. The following discussion of the federal income tax consequences of
issuance and exercise of options under the 2000 Plan is limited to the tax
consequences on United States citizens and the tax consequences may vary
depending upon the personal circumstances of individual holders of options.
A participant who is granted a nonqualified option under the 2000 Plan will
not recognize taxable income upon the grant of the option. Upon exercise of a
nonqualified option, the optionee will recognize compensation taxable as
ordinary income in an amount equal to the excess of the fair market value of the
Common Stock at the time of exercise over the exercise price. This income is
subject to withholding and other employment taxes, if applicable. A deduction
for federal income tax purposes will be allowed to the Corporation in an amount
equal to the ordinary income taxable to an optionee upon exercise, provided that
such amount constitutes an ordinary and necessary business expense to the
Corporation.
An optionee's tax basis in the Common Stock received on exercise of a
nonqualified option will be equal to the amount of any cash paid by the optionee
on exercise, plus the amount of ordinary income recognized as a result of the
exercise of an option. Any gain or loss recognized upon the disposition of
shares received on the exercise of the nonqualified option will be short-term or
long-term capital gain or loss, depending on how long the shares are held by the
optionee. The tax-holding period for such shares will begin on the date of
exercise. The foregoing statement is based on present federal tax laws and
regulations, and does not purport to be a complete description of the federal
income tax aspects of the 2000 Plan. In addition, participants may be subject to
certain state taxes, which are not described in this Proxy Statement.
VOTE REQUIRED. The affirmative vote of the holders of a majority of shares
of the Common Stock present in person or by proxy at the Annual Meeting and
entitled to vote is required for the adoption of the 2000 Plan. An abstention
will have the effect as a vote against Proposal 2 and a broker non-vote will
have no effect in determining whether the stockholders have approved the 2000
Plan.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" ADOPTION OF
THE 2000 PLAN. SHARES OF COMMON STOCK REPRESENTED AT THE ANNUAL MEETING BY
SIGNED BUT UNMARKED PROXIES WILL BE VOTED "FOR" ADOPTION OF THE 2000 PLAN.
-5-
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of shares of the Common Stock as of February 1, 2000, 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 (FN1) (FN2) 86,323(FN4) *
L. Ray Adams (FN2) 1,109(FN3) *
Joe E. Corvin (FN1) (FN2) 31,872(FN3) *
V. Neil Fulton (FN1) 7,568 *
Robert W. Keener (FN1) 5,000 *
Richard G. Landis (FN1) 5,600 *
LaNelle F. Lee (FN2) 18,680(FN5) *
James A. Maggetti (FN1) 7,000 *
Stephen P. Reynolds (FN1) 100 *
Steven M. Rowan (FN2) 19,855(FN3) *
John A. Sproul (FN1) 2,000 *
George J. Stathakis (FN1) 2,000 *
William Swindells (FN1) 17,000 *
Oregon Steel Mills, Inc.
Employee Stock Ownership Plan Trust
1000 S.W. Broadway, Suite 2200
Portland, Oregon 97205 1,485,332 5.79%
Dimensional Fund Advisors, Inc. (FN7)
1299 Ocean Avenue, 11th Floor
Santa Monica, California 90401 1,795,061 6.96%
First Pacific Advisors, Inc. (FN8)
11400 West Olympic Boulevard, Suite 1200
Los Angeles, California 90064 2,902,100 11%
All directors and executive officers
as a group (16 persons) 204,107(FN6) *
- -------------
* Less than 1% of the outstanding Common Stock.
(FN1) Member of the Board of Directors
(FN2) Named executive officer.
(FN3) All shares are held by the ESOP for Messrs. Adams, 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.
(FN4) Includes 6,500 shares and 79,823 shares held by the ESOP for the account
of Mr. Boklund. Mr. Boklund has the power to vote the shares under the
terms of the ESOP, but he does not have investment power with respect to
such shares.
(FN5) Includes 3,400 shares and 15,280 shares held by the ESOP for the account
of Ms. Lee. Ms. Lee has the power to vote the shares under the terms of
the ESOP, but she does not have investment power with respect to such
shares.
(FN6) Includes 147,939 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-
<PAGE>
(FN7) Based on the information obtained from Schedule 13G, dated February 11,
2000, filed by Dimensional Fund Advisors with the Securities and Exchange
Commission.
(FN8) Based on the information obtained from an amendment #3 to Schedule 13G
dated February 11, 2000, filed by First Pacific Advisors, Inc. with the
Securities and Exchange Commission: First Pacific Advisors, Inc. has the
shared power to dispose of 2,902,100 shares and the shared power to vote
964,000 shares.
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
four most highly paid executive officers of the Corporation and its subsidiaries
as of December 31, 1999.
<TABLE>
SUMMARY COMPENSATION TABLE
ALL OTHER
ANNUAL COMPENSATION(FN5) COMPENSATION(FN5)
----------------------------------------------------------------------- ----------------
<CAPTION>
Name and ESOP Thrift Plan
Principal Position Year Salary Bonus(FN1) Contribution(FN2) SERP(FN3) Contribution(FN4)
------------------ ---- ------ ---------- ----------------- --------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Thomas B. Boklund 1999 $531,251 $96,087 $ 28 $ 2,335 --
Chairman of the 1998 500,000 30,938 168 3,785 --
Board and CEO 1997 500,000 50,687 4,608 2,750 --
Joe E. Corvin 1999 $431,250 $78,026 $ 28 $ 263
President and Chief 1998 398,333 24,750 168 371 --
Operating Officer 1997 356,250 38,480 4,608 129 --
L. Ray Adams 1999 $257,813 $46,600 $ 28 $ 115 $4,800
Vice President of 1998 248,958 15,469 168 167 4,800
Finance and Chief 1997 225,000 22,809 4,608 70 1,600
Financial Officer
Steven M. Rowan 1999 $200,000 $36,125 $ 28 $ 61 $4,800
Vice President, 1998 186,875 11,523 168 89 4,800
Materials and 1997 185,000 18,754 4,608 39 1,600
Transportation
LaNelle F. Lee 1999 $131,250 $23,754 $ 21 -- $4,574
Vice President, 1998 111,250 6,831 120 -- 2,690
Administration and 1997 103,750 10,560 3,322 -- 1,369
Corporate Secretary
</TABLE>
- ------------
(FN1) Amounts earned pursuant to the Corporation's Profit Participation Plan.
(FN2) 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.
(FN3) Amounts paid under the Corporation's Supplemental Retirement Plan.
(FN4) Matching contributions made by the Corporation on behalf of the named
executive to the Corporation's Thrift Plan.
(FN5) Pension benefits accrued in 1997-1999 are not included in this Summary
Compensation Table.
-7-
<PAGE>
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 section 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.
-8-
<PAGE>
The following Pension Plan Table shows the estimated annual benefits
payable upon retirement at age 65 (including benefits under the SERP) in the
specified compensation and years of service classifications.
PENSION PLAN TABLE
(QUALIFIED PLAN PLUS SERP)(FN2)
YEARS OF SERVICE
-------------------------------------------------------
REMUNERATION(FN2) 15 20 25 30 35
- --------------------------------------------------------------------------------
$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
$600,000 150,000 200,000 250,000 300,000 350,000
$650,000 162,750 217,000 271,250 325,500 379,750
$700,000(FN1) 175,500 234,000 292,500 351,000 409,500
$750,000 188,250 251,000 313,750 376,500 439,250
$800,000 201,000 268,000 335,000 402,000 469,000
$850,000 213,750 285,000 356,250 427,500 498,750
(FN1) Represents at least 125% of the maximum compensation for the year
ended December 31, 1999.
(FN2) Estimates assume all service is after January 1, 1994 and Social
Security Covered Compensation as defined above is $40,000 for all
years. The estimates do 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. The plan benefits are not subject to deduction for Social
Security or other offset amounts.
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, 1999, Messrs. Boklund, Corvin,
Adams and Rowan and Ms. Lee would receive lifetime annual payments under the
Plan and pension benefits pursuant to the SERP combined of $261,384, $179,848,
$113,653, $105,403 and $32,814, respectively. Their credited years of service as
of December 31, 1999 are twenty-six, thirty, eleven, twenty-seven and
twenty-four, 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, 1999 of $44,191, $5,017, $2,197, $1,158 and $0,
respectively. Future ESOP benefit additions, if any, would be derived from
discretionary annual ESOP allocations set by the Board of Directors.
-9-
<PAGE>
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, namely Messrs. 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.
Effective January 2000, the Corporation and Mr. Boklund entered into an
employment arrangement, under which Mr. Boklund will serve as Chairman of the
Board until June 30, 2001. Under the arrangement, Mr. Boklund will receive a
base salary of $550,000 plus certain benefits, and payment of his full base
salary and benefits through the termination date of the arrangement in the event
that his employment is terminated without cause or by Mr. Boklund with good
reason. Under the arrangement, Mr. Boklund agrees not to compete with the
Corporation during the term of the arrangement and for a period of one year
after termination of his employment.
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 1999 the Compensation Committee members were William Swindells,
Chairman, James A. Maggetti, Stephen P. Reynolds and John A. Sproul.
-10-
<PAGE>
BOARD COMPENSATION, PERSONNEL AND SUCCESSION PLANNING COMMITTEE REPORT
ON EXECUTIVE COMPENSATION
The Compensation, Personnel and Succession Planning Committee (the
"Committee") of the Board establishes the general compensation policies of the
Corporation and the compensation plans and specific compensation levels for
executive officers and establishes guidelines for the compensation of other
personnel, subject to approval of the Board. The 1999 Committee was composed
of four 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 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 1998, the 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 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 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.
-11-
<PAGE>
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 Committee has used the aforementioned compensation principles with
respect to the salary of Mr. Boklund. In determining Mr. Boklund's base salary
for 1999, the Committee reviewed the Report, the Corporation's financial
results, and Mr. Boklund's performance and responsibilities. As a result of this
review, the Committee adjusted his compensation. In 1999, Mr. Boklund shared 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, PERSONNEL AND SUCCESSION PLANNING COMMITTEE DURING 1999
William Swindells, Chairman
James A. Maggetti
Stephen P. Reynolds
JohnA. Sproul
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' 400 Midcap Stock Index ("S&P MID Index")
and the Standard & Poors' Midcap Iron and Steel Index ("S&P MIDIRON Index").
STOCKHOLDER RETURN
MEASUREMENT PERIOD OREGON S&P MID S&P MIDIRON
(FISCAL YEAR COVERED) STEEL INDEX INDEX
- --------------------- ------ ------- -----------
MEASUREMENT POINT - 12/31/94 $100.00 $100.00 $100.00
FYE 12/31/95 94.00 130.00 102.00
FYE 12/31/96 109.00 154.00 118.00
FYE 12/31/97 149.00 196.00 119.00
FYE 12/31/98 90.00 217.00 83.00
FYE 12/31/99 65.00 263.00 79.00
-12-
<PAGE>
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.
INDEPENDENT ACCOUNTANTS
During the fiscal year 1999, PricewaterhouseCoopers LLP ("PWC") served as
independent accountants to the Corporation. They have been appointed as the
Corporation's independent accountants for the fiscal year 2000 by the Board.
Representatives of PWC 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 2001 ANNUAL MEETING
Stockholder proposals submitted for inclusion in the 2001 proxy materials
and consideration at the 2001 Annual Meeting of Stockholders must be received by
the Corporation no later than November 20, 2000 and no earlier than October 21,
2000. Any such proposal should comply with the rules promulgated by the
Securities and Exchange Commission governing stockholder proposals submitted for
inclusion in proxy materials.
In order to be considered at the 2001 Annual Meeting of Stockholders,
written notice of a non-Rule 14a-8 stockholder proposal or director nomination
must contain the information required by the Company's bylaws and must be
received by the Company no later than November 20, 2000 and no earlier than
October 21, 2000.
LaNelle F. Lee
SECRETARY
Portland, Oregon
March 20, 2000
-13-
<PAGE>
This page intentionally left blank.
-14-
<PAGE>
APPENDIX A
OREGON STEEL MILLS, INC.
2000 NONQUALIFIED STOCK OPTION PLAN
(Effective Date: January 1, 2000)
1. Purposes. The purposes of this Plan are to motivate, attract and retain
--------
the services of the Participants who make significant contributions to the
Company; to further the growth and financial success of the Company and its
Affiliates by aligning the interests of the Participants with the interests of
the Company's stockholders; and to provide the Participants with an incentive
for long-term value creation.
2. Definitions. As used in this Plan, the terms defined in this Section 2
-----------
will have the following meanings:
2.1 "Affiliate" means any corporation or any other entity (including,
---------
but not limited to, partnerships, limited liability companies, joint ventures
and Subsidiaries) controlling, controlled by or under common control with the
Company.
2.2 "Board" or "Board of Directors" means the Board of Directors of
----- ------------------
the Company.
2.3 "Capital Transaction" is defined in Section 13.2.
-------------------
2.4 "CEO" means the Chief Executive Officer of the Company.
---
2.5 "Code" means the Internal Revenue Code of 1986, as amended, and
----
regulations and rulings thereunder. References to a particular section of, or
rule under, the Code will include references to successor provisions.
2.6 "Committee" means the Board or a Committee which has been
---------
established to administer the Plan in accordance with Section 4.1; provided that
the composition of such Committee shall at all times meet the requirements of
Rule 16b-3 under the 1934 Act, and Code Section 162(m), each as amended.
2.7 "Common Stock" means the common stock of the Company, $.01 par
------------
value.
2.8 "Company" means Oregon Steel Mills, Inc., a Delaware corporation
-------
and any successor, whether by merger, ownership of all or substantially all of
its assets, or otherwise.
2.9 "Disability" means a mental or physical condition which, in the
----------
opinion of the Committee, renders the Participant unable or incompetent to carry
out the job responsibilities which such Participant held or the tasks to which
such the Participant was assigned at the time the disability was incurred, and
which is expected to be permanent or for an indefinite duration exceeding ninety
days.
2.10 "Effective Date" means January 1, 2000.
--------------
2.11 "Exercise Price" means the Fair Market Value per Share as of the
--------------
Grant Date.
2.12 "Fair Market Value" means, on any given date, the closing price
-----------------
of a share of Common Stock as reported by the New York Stock Exchange composite
tape on such day, or if the Common Stock is not traded on such day, then on the
next preceding day that the Common Stock was traded, all as reported by such
source as the Committee may select.
2.13 "Grant Date" means the date on which the Option is granted.
----------
2.14 "1934 Act" means the Securities Exchange Act of 1934, as amended.
--------
References to a particular section of, or rule under, the 1934 Act will include
references to successor provisions.
2.15 Nonstatutory Stock Option ("NSO") means a stock option, which
---------------------------------
does not qualify for special tax treatment under Section
421 or 422 of the Code.
2.16 "Option" means the right to purchase Common Stock under this
------
Plan as granted pursuant to the provisions of Section 7 of this Plan.
2.17 "Option Shares" means Common Stock covered by and subject to any
-------------
outstanding unexercised Option granted pursuant to this Plan.
2.18 "Performance Period" means the Year or Years with respect to
------------------
which the Performance Targets are set by the Committee.
2.19 "Performance Target" means the specific objective goal or goals
-------------------
(which may be cumulative and/or alternative) that are set in writing by the
Committee for each Participant for the Performance Period based on Return on
Assets or any other business factor or criteria as determined by the Committee.
2.20 "Plan" means this Oregon Steel Mills, Inc. 2000 Nonqualified
----
Stock Option Plan, as amended from time to time.
A-1
<PAGE>
2.21 "Participant" means executives and senior corporate and plant
-----------
managers of the Company or of an Affiliate, selected to participate in the
Plan by the Committee.
2.22 "Retirement" means termination of employment with the Company
----------
or an Affiliate after attaining age 65 with at least 5 years of service with
either the Company or an Affiliate, or both.
2.23 "Return on Assets" means, for any Year, operating income divided
----------------
by average of the total assets of the Company (assets at the beginning of year
plus assets at the end of the year divided by 2).
2.24 "Shares" mean shares of Common Stock or any securities or
------
property, including rights into which the same may be converted by operation of
law or otherwise.
2.25 "Subsidiary" means any entity in which the Company directly or
----------
through intervening subsidiaries owns more than fifty percent (50%) or more of
the total combined voting power or value of all classes of stock or, in the case
of an unincorporated entity, owns more than a fifty percent (50%) interest in
the capital and profits.
2.26 "Withholding Taxes" means all income taxes, FICA, FUTA, or
-----------------
similar employment taxes and any other taxes or assessments payable as the
result of an exercise of the Option.
2.27 "Year" means any one or more fiscal years of the Company
----
commencing on or after January 1, 2000 that represent(s) the applicable
Performance Period and end(s) no later than December 31, 2009.
3. Selection of Participants. For each Performance Period, the Committee
-------------------------
shall determine, at the time the Performance Target(s) are set, those
Participants who will participate in the Plan.
4. Administration.
--------------
4.1 The Committee.
-------------
4.1.1 This Plan will be administered by the Board of Directors
directly, acting as a Committee, or if the Board elects, by the Compensation
Committee or a separate Committee appointed by the Board for that purpose and
consisting of two or more Board members who must be "Non-Employee Directors" as
that term is defined in Rule 16b-3 promulgated under the 1934 Act. Once
appointed, any such Committee will continue to serve until otherwise directed by
the Board. From time to time, the Board may increase the size of the Committee
and appoint additional members, remove members (with or without cause), appoint
new members in substitution, and fill vacancies however caused, except that any
new member must be a "Non-Employee Director" as that term is defined in Rule
16b-3. The Committee may select one of its members as its chairperson, and will
hold meetings at such times and places as the chairperson or a majority of the
Committee may determine. At all times, the Board will have the power to remove
all members of the Committee and thereafter to directly administer this Plan as
a Committee of the whole. A majority of the members of the Committee will
constitute a quorum. All actions of the Committee will be taken by a majority
vote of the members constituting a quorum or by unanimous written consent of all
members of the Committee without a meeting. Any action may be taken by a written
instrument signed by all Committee members, and all actions so taken will be
fully effective as if it has been taken by a vote of a majority of the members
at a meeting duly called and held.
4.1.2 The Committee may authorize any one or more of their number
or the Secretary or any other officer of the Company to execute and deliver
documents on behalf of the Committee. The Board authorizes the Secretary to
execute and deliver all documents to be delivered by the Committee pursuant to
this Plan.
4.1.3 The CEO will present grant recommendations annually to the
Committee.
4.2 Powers of the Committee. Subject to the express provisions of this
Plan, the Committee will have full and final authority, in its discretion, as
follows:
4.2.1 to establish the terms and conditions upon which Options
may be granted, vested or exercised, including establishing the Performance
Target(s);
4.2.2 to grant Options;
4.2.3 to interpret this Plan and to make all determinations
necessary or advisable for the administration of this Plan;
4.2.4 to determine those persons who will participate in this
Plan;
4.2.5 to determine the Fair Market Value on any applicable
valuation date;
4.2.6 to determine whether an event of termination of employment,
death, Disability, or Retirement has occurred under Section 12 of this Plan;
4.2.7 to prescribe, amend, and rescind rules and regulations
relating to this Plan, including rules with respect to the exercisability and
nonforfeitability of Options upon the termination of employment of a
Participant;
A-2
<PAGE>
4.2.8 to authorize any person or persons to execute and deliver
Option grant agreements or to take any other actions deemed by the Committee to
be necessary or appropriate to effectuate the grant of Options;
4.2.9 to determine the terms and provisions and any restrictions
or conditions, which need not be identical, of grants under the Plan and with
the consent of the Participant, to modify any such grant at any time;
4.2.10 to cancel, with the consent of the Participant,
outstanding Options and to grant new Options in substitution therefor;
4.2.11 to alter any restrictions or conditions upon any Option;
4.2.12 to correct any defect or supply any omission or reconcile
any inconsistency in the Plan or in any grant under the Plan in the manner and
to the extent it may deem expedient;
4.2.13 to establish, define and/or interpret any terms and
conditions of this Plan; and
4.2.14 to make all other determinations (which may be on a
case-by-case basis) deemed necessary or desirable for the administration of the
Plan.
The determination of the Committee on all matters relating to this Plan
will be conclusive and final. No member of the Committee or of the Board will be
liable for any actions taken or omitted and made in good faith with respect to
this Plan or any Option.
5. Shares Subject to this Plan.
---------------------------
5.1 Subject to adjustment as provided in Section 13 of this Plan, an
aggregate of 1,000,000 Shares will be available for issuance to the Participants
under this Plan. No fractional shares will be issued.
5.2 The Shares deliverable upon exercise of the Option granted under
this Plan may be made available from authorized but unissued Shares or Shares
reacquired by the Company, including Shares purchased in the open market or in
private transactions.
6. Nonstatutory Options.
--------------------
All Options granted to the Participants pursuant to this Plan will be NSOs.
7. Grants to Participants.
----------------------
7.1 The Committee may grant Options to the Participants from time to
time. With respect to each grant of Options, the Committee will set forth:
7.1.1 the Participant to receive the Options;
7.1.2 the number of Options granted to each Participant;
7.1.3 the Grant Date;
7.1.4 the Performance Target(s);
7.1.5 the Exercise Price; and
7.1.6 the vesting schedule.
7.2 Each Option granted under this Plan will be evidenced by a written
Option grant agreement. Each grant agreement will be subject to, and
incorporated by reference or otherwise, the applicable terms of this Plan.
7.3 The terms of an Option need not be identical, and the Committee
need not treat Participants uniformly.
8. Duration and Vesting of Options.
-------------------------------
8.1 The term of each Option granted to a Participant will be for ten
(10) years from the Grant Date, unless terminated earlier pursuant to the
provisions of Section 12 of this Plan.
8.2 The Participant must be employed on each vesting date for each
Option to vest and be exercisable.
8.3 Subject to Sections 12 and 13, each Option will vest and become
fully exercisable under one of the two methods provided below as determined by
the Committee:
8.3.1 (a) one half of each grant will vest over 4 years at the
rate of 25% per year, with the first 25% vesting on the first anniversary of the
Grant Date, and an additional 25% on each anniversary of the Grant Date
thereafter; and (b) one half of each grant will vest upon the earlier of the
Company achieving the Performance Target or if the Performance Target is not
met, on the seventh anniversary of the Grant Date; or
8.3.2 the vesting schedule as recommended by the CEO and approved
by the Committee.
A-3
<PAGE>
9. Exercise Price; Exercise.
------------------------
9.1 The price per Share of the Option Shares which may be purchased
upon exercise of an Option will be equal to the Exercise Price. The Exercise
Price per Share will be paid in full at the time the Option is exercised in
accordance with Section 10.
9.2 The Exercise Price per Share will be subject to adjustment as
provided in Section 13 of this Plan.
9.3 To the extent that it is exercisable, an Option will be exercised
by written notice to the Company stating the number of Shares with respect to
which the Option is being exercised and be accompanied by full payment for the
Shares. The date that the payment in full is received by the Company will be the
exercise date.
9.4 Any person or persons exercising an Option on behalf of the
Participant will be required to furnish to the Company appropriate documentation
that such person or persons have the full legal right and power to exercise the
Option on behalf of and for the Participant.
10. Payment by the Participant. Payment by the Participant of the Exercise
--------------------------
Price per Share and any taxes required to be withheld on the Participant's
behalf incident to exercise of the Option will be by any combination of cash,
other immediately available funds, cancellation of vested Options or Common
Stock. If the Participant chooses to make payment by canceling vested Options,
such payment will be credited towards the amount due from the Participant at the
then Fair Market Value per Share minus the Exercise Price per Share, multiplied
by the number of Options cancelled. If the Participant chooses to make payment
with Common Stock, such payment will be credited towards the amount due from the
Participant at the then Fair Market Value per Share.
Notwithstanding the foregoing, the Committee also may allow exercises by
any other means which the Committee determines to be consistent with the Plan's
purpose and applicable law.
11. Taxes. Any Option granted under this Plan will provide for payment by
-----
the Participant on exercise of all federal, state, local or other Withholding
Taxes payable by the Company incident to exercise of an Option.
12. Effect of Termination of Employment, Death, Disability or Retirement.
--------------------------------------------------------------------
12.1 Termination of Employment. Except as provided otherwise in this
-------------------------
Section 12, if the Participant terminates employment with the Company or any
Affiliate, then, any unvested Options held by the Participant will terminate, be
forfeited and have no value. Any vested and unexercised Options held by the
Participant to the extent exercisable on the date of the Participant's
termination of employment, may be exercised in whole or in part by the
Participant, not later than the 90th day following the Participant's termination
of employment. Transfer of the Participant from employment by the Company to
employment by an Affiliate, or vice versa, will not be deemed a termination of
employment.
12.2 On Account of Disability or Death. If the Participant terminates
---------------------------------
employment with the Company or any Affiliate on account of Disability or death,
then any unvested Options held by the Participant will be deemed vested on the
date of such termination of employment. Any exercisable Options may be exercised
in whole or in part by the Participant in the case of Disability, or by the
Participant's personal representative in the case of death, no later than the
180th day following the Participant's date of Disability or death.
12.3 On Account of Retirement. If the Participant terminates
------------------------
employment with the Company or any Affiliate on account of Retirement, then any
unvested Options held by the Affiliate will be deemed vested on the date of such
termination of employment. Any exercisable Options may be exercised in whole or
in part by the Participant no later than the 90th day following the
Participant's date of Retirement.
13. Adjustments and Changes in the Common Stock.
-------------------------------------------
13.1 If there is any change in the Common Stock by reason of any
subdivision or consolidation of Shares, including, a stock dividend, stock
split, reverse stock split, recapitalization, continuation or reclassification,
or any other increase or decrease in the number of Shares effected without
receipt of consideration by the Company, the aggregate number of Shares
available under this Plan, and the number and the price of Shares subject to
outstanding Options will be appropriately adjusted automatically.
13.2 Upon a sale or exchange of all or substantially all of the assets
of the Company, a merger or consolidation in which the Company is not the
surviving corporation, a merger, reorganization or consolidation in which the
Company is the surviving corporation and stockholders of the Company exchange
their stock for securities or property, a liquidation of the Company, or a
similar transaction as determined by the Committee ("Capital Transaction"), this
Plan and each Option issued, whether vested or unvested, shall terminate, unless
such Options are assumed by a successor corporation in a merger or
consolidation, immediately prior to such Capital Transaction; provided, however,
that unless the outstanding Options are assumed by a successor corporation in a
merger or consolidation, subject to terms approved by the Committee, all
Participants will have the right, during
A-4
<PAGE>
the 15 days prior to such Capital Transaction, to exercise all vested
Options. The Company shall, subject to any nondisclosure provisions, attempt to
provide Participants at least 15 days' notice of the Option termination date.
The Committee may (but shall not be obligated to) (a) accelerate the vesting of
any Option, or (b) apply the foregoing provisions, including but not limited to
termination of this Plan and the Options granted pursuant to the Plan, in the
event there is a sale of 51% or more of the stock of the Company in any two-year
period or a transaction similar to a Capital Transaction.
13.3 No right to purchase fractional shares will result from any
adjustment in Options pursuant to this Section 13. In case of any such
adjustment, the Shares subject to the Option will be rounded down to the nearest
whole share.
13.4 Notice of any adjustment will be given by the Company to each
Participant whose Options have been so adjusted and such adjustment (whether or
not such notice is given) will be effective and binding for all purposes of this
Plan.
14. Compliance With Law. No Share will be issued upon exercise of any
-------------------
Option, and the Participant will have no right or claim to such Shares, unless
and until: (a) payment in full as provided in this Plan has been received by the
Company; (b) in the opinion of counsel for the Company, all applicable
requirements of law and of regulatory bodies having jurisdiction over such
issuance and delivery have been fully complied with; and (c) if required by
federal or state law or regulation, the Participant has paid to the Company the
amount, if any, required to be withheld on the amount deemed to be compensation
to the Participant as a result of the exercise of his or her Option, or made
other arrangements satisfactory to the Company, in its sole discretion, to
satisfy applicable income tax withholding requirements.
15. Amendment or Termination of this Plan. This Plan will terminate ten
-------------------------------------
(10) years from the Effective Date or such earlier time as the Board may
determine. The Board may from time to time in its discretion amend or modify
this Plan without the approval of the stockholders of the Company, except as
such approval as may be required under the 1934 Act, the Code or by the national
securities exchange on which the Shares are being traded. Any amendment or
termination, whether in whole or in part, will not affect any Options then
outstanding under this Plan.
16. Securities Law Matters. If the Committee deems it necessary, the
----------------------
Company may require a written investment intent representation by the
Participant and may require that a restrictive legend be affixed to certificates
for Shares. If the Committee determines that the exercise or vesting of, or
delivery of benefits pursuant to, any Option would violate any applicable
provisions of federal or state securities law or the listing requirements of any
national securities exchange on which are listed any of the Company's equity
securities, then the Committee may postpone any such exercise, vesting, or
delivery, as the case may be, but the Company will use its best efforts to cause
such exercise, vesting or delivery to comply with all such provisions at the
earliest practicable date.
17. Registration, Listing, Qualification, Approval of Shares and Options.
--------------------------------------------------------------------
If the Committee determines, in its discretion, that it is necessary or
desirable that the Shares subject to any Option (a) be registered, listed or
qualified on any securities exchange or the Nasdaq Stock Market or under any
applicable law, or (b) be approved by any governmental regulatory body, or (c)
be approved by the stockholders of the Company, as a condition of, or in
connection with, the granting of such Option, or the issuance or purchase of
Shares upon exercise of the Option, the Option may not be exercised in whole or
in part unless such registration, listing, qualification or approval has been
obtained free of any condition not acceptable to the Committee.
18. Nontransferability of Options. No Option granted under this Plan may be
-----------------------------
sold, transferred, pledged, assigned or otherwise alienated or hypothecated,
other than by will or by the laws of descent and distribution. Further, all
Options granted to the Participant under this Plan shall be exercisable during
his or her lifetime only by such Participant.
19. Nonuniform Determinations. Neither the Committee's nor the Board's
-------------------------
determinations under this Plan need be uniform and may be made by the Committee
or the Board selectively among persons who receive, or are eligible to receive,
Options (whether or not such persons are similarly situated).
20. Relationship Between the Parties.
--------------------------------
20.1 This Plan will not be deemed to constitute a contract of
employment between the Company or any Affiliate and any Participant, nor will
any provision of this Plan be interpreted to restrict the right of the Company
or any Affiliate to discharge any Participant or restrict the right of any
Participant to terminate his or her employment.
20.2 No Participant or other person will have any claim or right to be
granted an Option under the Plan, except as expressly provided in this Plan.
A-5
<PAGE>
20.3 Neither the Participant, the Participant's legal representative,
nor any person who acquires the right to exercise an Option by reason of the
Participant's death will be, or have any of the rights or privileges of, a
stockholder of the Company in respect of any Share receivable upon the exercise
of any Option granted under this Plan, in whole or in part, unless and until
certificates for such Shares will have been issued.
21. Accounting. All accounting issues arising due to the existence of this
----------
Plan will be determined in accordance with generally accepted accounting
principles.
22. Governing Law. The validity, construction, interpretation,
-------------
administration and effect of this Plan and any rules, regulations and actions
relating to this Plan will be governed by and construed exclusively in
accordance with the laws of the State of Delaware.
23. Severability. If all or any part of this Plan is declared by any court,
------------
governmental authority or arbitrator to be unlawful or invalid, such
unlawfulness or invalidity will not serve to invalidate any portion of this Plan
not declared to be unlawful or invalid. Any Section or part of a Section so
declared to be unlawful or invalid will, if possible, be construed in a manner
which will give effect to the terms of such Section or part of a Section to the
fullest extent possible while remaining lawful and valid.
24. Notices. All notices and demands of any kind which the Committee, any
-------
Participant, or other person may be required or desires to give under the terms
of this Plan will be in writing and shall be personally delivered or sent by
mail, postage prepaid, addressed to the Company at its principal place of
business and to the Participant at the address shown in the Option grant
agreement or at any other address the Participant indicates by notice to the
Company. Delivery by mail will be deemed made at the expiration of the third day
after the day of mailing, except for notice of the exercise of an Option and
payment of the Exercise Price, both of which must be actually received by the
Company.
OREGON STEEL MILLS, INC.,
a Delaware corporation
/s/ Joe E. Corvin
--------------------------------
Joe E. Corvin, President and CEO
A-6
<PAGE>
2000 ANNUAL MEETING GUIDELINES
In the interest of an orderly and constructive meeting, the following
guidelines will apply for the 2000 Oregon Steel Mills, Inc. Annual Meeting of
Stockholders:
1. To gain entrance at the meeting, you must present the enclosed
Admission Ticket or evidence of ownership of Oregon Steel Mills, Inc.
stock.
2. Except those employed by the Corporation to provide a record of the
proceedings, the use of cameras, sound recording equipment,
microphones, megaphones and other noise making devices is prohibited.
Briefcases, purses and parcels may be examined or searched before you
are admitted to the meeting. No signs, placards, banners, leaflets or
similar materials may be brought into the meeting.
3. The business of the meeting is set forth in the Notice of Annual
Meeting of Stockholders and Proxy Statement dated March 20, 2000.
Whether or not you plan to attend the meeting, please sign, date and
return the proxy form in the envelope provided. If you wish to change
your vote or have not voted by proxy, a ballot will be distributed to
you at the meeting.
4. Please register your attendance at the meeting on the sign-up sheet at
the registration table. If you wish to comment on a proposal which
will be voted on at the meeting or ask an appropriate question about
the business of the Corporation at the end of the meeting, please
register your intention to do so on the sign-up sheet at the
registration table.
5. Time has been reserved at the end of the meeting for stockholder
questions that relate to the business of the Corporation. After you
have registered and at the appropriate time, please go to the
microphone, state your name and confirm that you are a stockholder
before asking your question. Please direct all comments or questions
to the Chairman. Comments or questions from the floor are limited to
two minutes to provide an opportunity for as many stockholders as
possible.
6. Personal grievances or claims are not appropriate subjects for the
meeting.
7. The Chairman in his sole discretion shall have authority to conduct
the meeting and rule on any questions or procedures that may arise.
Voting results announced by the Inspector of Election at the meeting
are preliminary. Final results will be included in the summary of the
results of the meeting included in the Corporation's first Quarterly
Report on Form 10-Q.
<PAGE>
OREGON STEEL MILLS, INC.
ANNUAL MEETING - APRIL 27, 2000
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 27, 2000
and any adjournment thereof, with all powers that the undersigned would possess
if personally present, with respect to the items 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 PROPOSALS 1 AND 2. 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]
ADMISSION TICKET
ADMISSION TICKET FOR THE 2000 OREGON STEEL MILLS, INC.
ANNUAL MEETING OF STOCKHOLDERS,
THURSDAY, APRIL 27, 2000, AT 9:30 A.M. PACIFIC TIME
AT THE SHERATON PORTLAND AIRPORT HOTEL,
8235 N.E. AIRPORT WAY, PORTLAND, OREGON 97220.
<PAGE>
Please mark [Square box
your votes in which an
as indicated "X" has been
in this example. marked]
1. Election of Class C Director
FOR
[ ] FOR all nominees listed below
WITHHOLD
[ ] WITHHOLD AUTHORITY to vote for nominee listed below.
THOMAS B. BOKLUND
2. To approve the Oregon Steel Mills, Inc. 2000 Nonqualified Stock Option
Plan.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1 AND 2.
Date: , 2000
-----------
[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]
ADMISSION TICKET
ADMISSION TICKET FOR THE 2000 OREGON STEEL MILLS, INC. ANNUAL MEETING OF
STOCKHOLDERS, THURSDAY, APRIL 27, 2000, AT 9:30 A.M. PACITIC TIME AT THE
SHERATON PORTLAND AIRPORT HOTEL, 8235 N.E. AIRPORT WAY, PORTLAND, OREGON
97220.
THIS IS NOT A PROXY
Admits stockholder(s) or duly appointed proxy(ies) of record only.
NON-TRANSFERABLE.
THIS TICKET, OR OTHER EVIDENCE OF STOCK OWNERSHIP, MUST BE PRESENTED TO ENTER
THE MEETING.
Admittance will be based upon availability of seating.
THE DISTRIBUTION OF LEAFLETS AND OTHER MATERIAL IS NOT PERMITTED. CAMERAS,
TAPE RECORDERS, MICROPHONES, MEGAPHONES, AND OTHER NOISE MAKING DEVICES ARE
PROHIBITED IN THE MEETING. THANK YOU FOR YOUR COOPERATION.
