OREGON STEEL MILLS, INC.
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
ON APRIL 29, 2004
8:00 A.M. PACIFIC TIME
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TO THE STOCKHOLDERS:
You are invited to attend the Annual Meeting of Stockholders of
Oregon Steel Mills, Inc. (the "Corporation") to be held in the
Cambridge/Oxford Room at the Benson Hotel, 309 SW Broadway,
Portland, Oregon, on Thursday, April 29, 2004, at 8:00 a.m. Pacific
Time.
The meeting is being held for the following purposes:
1. To elect three Class A directors; and
2. To consider and transact such other business, including one
stockholder proposal as may properly come before the meeting or any
adjournment thereof.
Only stockholders of record at the close of business on March 8,
2004, 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 keep your Admission Ticket, which
is enclosed, 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,
Jennifer R. Murray
SECRETARY
March 29, 2004
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.
OREGON STEEL MILLS, INC.
1000 S.W. BROADWAY
SUITE 2200
PORTLAND, OREGON 97205
(503) 223-9228
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PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
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This proxy statement is furnished in connection with the solicitation of proxies
by the Board of Directors (the "Board") of Oregon Steel Mills, Inc. (the
"Corporation") to be voted at the Annual Meeting of Stockholders to be held in
the Cambridge/Oxford Room at the Benson Hotel, 309 SW Broadway, Portland,
Oregon, on Thursday, April 29, 2004, at 8:00 a.m. Pacific Time, and any
adjournments thereof.
Only stockholders of record at the close of business on March 8, 2004, are
entitled to notice of, and to vote at, the meeting. At the close of business on
that date, the Corporation had 26,495,172 shares of Common Stock, $0.01 par
value per share ("Common Stock"), outstanding. Holders of Common Stock are
entitled to one vote for each share of Common Stock held. There are no
cumulative voting rights.
When a proxy in the form accompanying this proxy statement is properly executed
and returned, the shares represented will be voted at the meeting in accordance
with the instructions specified in the proxy. If no instructions are specified,
the shares will be voted FOR Proposal 1 and AGAINST Proposal 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
action as they deem appropriate. Any person giving a proxy in the form
accompanying this proxy statement has the power to revoke it at any time before
its exercise. A stockholder may revoke a proxy by (i) written notice of such
revocation to the Secretary of the Corporation at the above address; (ii) a
later-dated proxy received by the Corporation; or (iii) attending the meeting
and voting in person. Attendance at the meeting will not by itself revoke a
proxy.
Each share of Common Stock outstanding on the record date is entitled to one
vote per share at the Annual Meeting of Stockholders. Shares of Common Stock
represented in person or by proxy at the Annual Meeting (including abstentions
and broker non-votes) will be tabulated by the inspector of election appointed
for the meeting and will be counted in determining that a quorum is present. For
Proposal 1, (i) the nominees receiving a plurality of the votes cast at the
Annual Meeting are elected as directors; (ii) withholding authority to vote for
a director will be treated as a vote cast against the nominee; and (iii) 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 stockholder
proposal was approved.
The approximate date on which this proxy statement and the accompanying proxy
card are being mailed to the Corporation's stockholders is March 29, 2004.
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 A DIRECTORS
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NOMINEES
The Corporation has a classified Board consisting of two Class A directors,
Messrs. Parkinson, and Sproul; three Class B directors, Messrs. Demorest,
Reynolds, and Swindells; and three Class C directors, Messrs. Declusin, Neun,
and Walker. Class B and C directors serve until the Annual Meetings of
Stockholders to be held in 2005 and 2006, respectively, and until their
successors are elected and qualified. At each Annual Meeting of Stockholders,
directors are elected for a term of three years to succeed those directors whose
terms expire at that annual meeting.
The nominees for election as Class A directors are William Kinnune, David
Parkinson, and Brett Wilcox. Mr. Parkinson is a member of the present Board.
Messrs. Kinnune and Wilcox are new nominees and were recommended to the
Nominating/Corporate Governance and Compensation Committee for nomination by
non-management directors. Each of the nominees has consented to serve if
elected. The Corporation does not pay a fee to any third party to identify or
evaluate or assist in identifying or evaluating potential nominees. The Class A
directors to be elected at the 2004 Annual Meeting will serve until the Annual
Meeting of Stockholders in 2007 and until their successors are elected and
qualified.
Mr. Sproul who has served as a director since 1989 will retire from the Board
effective as of the Annual Meeting. The Board has adopted a resolution,
effective as of the Annual Meeting, to increase the size of the Board to nine
members and the number of Class A directors to three.
Unless authority to vote for a director is withheld, the accompanying proxy, if
properly executed and returned, will be voted for the election of the Class A
nominees named below. If authority to vote for the nominees is withheld, the
withheld votes will not be cast for any other nominee. If any 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 any nominee will be unable or unwilling to serve as a director if elected.
The following table sets forth information with respect to the persons nominated
for election as Class A directors and each other director, including their names
and ages as of February 27, 2004, business experience during the past five
years, and directorships in other corporations.
Principal Occupation and Director
Certain Other Directorships Age Since
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CLASS A (NOMINEES WHOSE TERM OF OFFICE WILL EXPIRE IN 2007):
William P. Kinnune Mr. Kinnune is a former Executive Vice President of Willamette 64 --
Industries, Inc., a diversified wood products company. While at Willamette
Industries, Inc., he held the position of Executive Vice President of the
Corrugated, Bags, Specialty Products, Board and Paper from 1985 to 2002. He is a
director on the board of AGE Industries, Inc., and serves as director and
chairman of the Development Committee of the Portland Oregon Hearing and Speech
Institute, a trustee of Willamette University and on the Advisory Board of the
University of Washington Business School.
David L. Parkinson Mr. Parkinson is Chairman and Chief Financial Officer of the 65 2001
Arizona Railway Group, a short line railroad
holding company. He was Chairman and Chief
Executive Officer of ParkSierra Rail Group from
1998 to 2002. Mr. Parkinson is on the board of
directors for Napa Landmarks and the Foundation of
Intermodal Research.
Brett Wilcox Mr. Wilcox is President and owner of Golden Northwest Aluminum, 50 --
Inc., which owns and operates Northwest Aluminum Company and Goldendale Aluminum
Company. He is also Managing Member of Northwest Energy Development, LLC, that
is developing efficient natural gas and wind power generating projects. Mr.
Wilcox serves as Vice President of the Oregon Progress Board, and on the Boards
of Reed College, Oregon Business Council, Citizens for the Columbia River
Discovery Center, the Bonneville Environmental Foundation, and the Washington
Business Roundtable.
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Principal Occupation and Director
Certain Other Directorships Age Since
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CLASS B (DIRECTORS WHOSE TERM OF OFFICE WILL EXPIRE IN 2005):
Harry L. Demorest Mr. Demorest is President and Chief Executive Officer and a 62 2001
director of Columbia Forest Products, Inc., a leading manufacturer of hardwood
plywood, veneer, and flooring, a position he has held since March 1996. He is
also a director on the boards of the Oregon Museum of Science and Industry,
Friends of the Children, and the Portland Police Foundation.
Stephen P. Reynolds Mr. Reynolds is President and Chief Executive Officer and a 56 1999
director of Puget Energy and Puget Sound Energy, Bellevue, Washington. Prior to
joining Puget Energy in January of 2002, Mr. Reynolds served as President and
Chief Executive Officer of Reynolds Energy International, an energy advisory firm
in Houston, Texas. From 1987 to 1997, he served as President and Chief Executive
Officer of Pacific Gas Transmission Company. He also serves on the boards of the
Corporate Council for the Arts, the Nature Conservancy of Washington, the
Washington Business Roundtable, the Edison Electric Institute and the American Gas
Association.
William Swindells Mr. Swindells is the Chairman of the Board of Directors and is the former 73 1994
Chairman of the Board of Directors of Willamette Industries, Inc., a
diversified wood products company. While at Willamette Industries, Inc., he held
the position of Chairman of the Board from 1985 to February 2002 and also held
the position of Chief Executive Officer from 1985 until September 1995 and again
from November 1997 until December 1998. He serves as a trustee of Willamette
University and the Oregon Health & Science University Foundation.
CLASS C (DIRECTORS WHOSE TERM OF OFFICE WILL EXPIRE IN 2006):
James E. Declusin Mr. Declusin is the President and Chief Executive Officer of the 61 2000
Corporation serving since August 2003. Mr. Declusin spent sixteen years with
California Steel Industries, most recently serving as Senior Executive Vice
President and Chief Operating Officer, retiring on October 31, 2000. Prior to
that time, Mr. Declusin spent seventeen years in various management positions
in the commercial area of Kaiser Steel Corporation.
Carl W. Neun Mr. Neun was Senior Vice President and Chief Financial Officer 60 2002
for Tektronix, Inc., an electronics manufacturing company, from 1993 until his
retirement in 2000. Mr. Neun also serves on the boards of RadiSys Corporation,
Planar Systems, and Powerwave Technologies.
Frank M. Walker Mr. Walker is President, Chief Executive Officer and a director of 58 2002
Feralloy Corporation, a steel processing and distribution corporation.
He has held these positions since 1993. He also serves on the Board of Delta
Steel, Inc.
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THE BOARD OF DIRECTORS AND ITS COMMITTEES
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The Board has standing Executive, Audit, and Nominating/Corporate Governance and
Compensation Committees.
EXECUTIVE COMMITTEE.
The Executive Committee may exercise all the authority of the Board, subject to
the 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 January 2003
through July 2003 were Messrs. Corvin, Demorest and Reynolds and during August
2003 through December 2003 were Messrs. Declusin, Demorest and Reynolds. Mr.
Swindells as Chairman of the Board is an ex officio member of each Committee.
AUDIT COMMITTEE.
The Audit Committee's purpose is to assist Board oversight of: (i) the integrity
of the Corporation's financial statements, (ii) the Corporation's compliance
with legal and regulatory requirements, (iii) the independence and qualification
of the outside auditors and (iv) the performance of the Corporation's internal
audit function and outside auditor. The members of the Audit Committee during
2003 were Messrs. Demorest, Neun, Parkinson, and Sproul.
NOMINATING/CORPORATE GOVERNANCE AND COMPENSATION COMMITTEE.
In 2002, the functions of the Nominating Committee and Compensation Committee
were combined into the Nominating/Corporate Governance and Compensation
("Nominating/Compensation") Committee. The members of the
Nominating/Compensation Committee during January 2003 through July 2003 were
Messrs. Reynolds, Declusin and Walker, from August 2003 through December 2003
were Messrs. Reynolds, Swindells and Walker. The Board has determined that each
member of the Nominating/Compensation Committee is independent, as independence
is defined in the New York Stock Exchange listing standards. In 2004, the
Corporation adopted a Nominating and Compensation Committee charter, which is
attached as Appendix A and is also available on the Corporation's website at
www.osm.com.
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[BULLET] NOMINATING/CORPORATE GOVERNANCE.
The purposes of this Committee in the areas of Nominating/Corporate
Governance are to (i) identify individuals qualified to become Board
members, consistent with criteria approved by the Board, and to select
or to recommend that the Board select, the director nominees for the
next annual meeting of stockholders, (ii) develop and recommend to the
Board a set of corporate governance principles applicable to the
Corporation and (iii) oversee the evaluation of the Board and
Corporation management.
The Nominating/Compensation Committee will, with direct input from the
Chairman and CEO, identify qualified individuals to become directors,
and make recommendations to the full Board for approval. It is expected
that all directors will be alert to potential board candidates with
appropriate skills and characteristics and communicate such information
to the Committee. The Committee will consider stockholder suggestions
as to nominees for directors, such suggestions should be addressed to
the Secretary of the Corporation at its principal executive offices and
contain the information required by Section 1.2 of the Corporation's
bylaws. The information required includes the name, age, business
address and residence address of the proposed nominee, the principal
occupation or employment of the proposed nominee, the number of shares
of the Corporation held by the proposed nominee, any other information
required by the SEC rules to be disclosed in a proxy statement and a
written consent of the proposed nominee to being named as a nominee and
to serve as a director if elected. In addition, the proposing
stockholder must provide such stockholder's name and address, the
number of shares of the Corporation held by the stockholder, a
description of any arrangement between the proposed nominee and the
stockholder, confirm that the stockholder will appear at the meeting to
nominate the proposed nominee and any other information required by the
SEC rules to be disclosed in a proxy statement. In 2004, the
Corporation adopted Corporate Governance Guidelines that specify that
the Board seeks directors from diverse professional backgrounds who
combine a broad spectrum of experience and expertise with a reputation
of integrity and are selected based upon contributions such nominees
can make to the Board and management. In addition, any nominee should
have experience in positions with a high degree of responsibility, be a
leader in the organization with which the nominee is affiliated,
understand the Corporation's business environment and be free from
relationships or conflicts of interest that could interfere with the
director's duties to the Corporation and its stockholders. The nominee
must be willing to devote sufficient time to carrying out the
director's duties and responsibilities effectively and should be
committed to serve on the board for an extended period of time. The
Committee may also develop and recommend to the Board additional
criteria for selecting new directors, including background, skills,
experience, age, diversity, time availability (including the number of
other boards the person sits on), needs of the Board and current and
further business directions of the Corporation. Although the Committee
has not adopted specific criteria, any proposed
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nominees must meet the qualifications set forth in the Corporate
Governance Guidelines and additional criteria, when adopted. Assuming
compliance with the procedures, there would be no differences in the
evaluation of a proposed nominee if the proposed nominee is recommend
by a stockholder. The Corporation received no notice of a director
candidate recommended by a stockholder or group with 120 days before
the anniversary of the prior year's release of the proxy statement.
In order to be considered for the 2005 Annual Meeting of Stockholders,
such suggestions should be received by no later than November 30, 2004.
[BULLET] COMPENSATION.
The purposes of the Committee in the areas of compensation are to have
direct responsibility to (i) review and approve corporate goals and
objectives relevant to CEO compensation, evaluate the CEO's performance
in light of those goals and objectives, and either as a committee or
together with the other independent directors (as directed by the
Board), determine and approve the CEO's compensation based on this
examination; (ii) make recommendations to the Board with respect to
non-CEO compensation, incentive compensation plans and equity-based
plans; and (iii) produce an annual report on executive compensation as
required by the SEC for inclusion in the proxy statement or Form 10-K.
MEETINGS.
During 2003, the Board held 6 meetings, the Audit Committee held 5 meetings, and
the Nominating/Compensation Committee held 5 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.
EXECUTIVE SESSIONS.
The Board meets in executive session without management at the conclusion of
each regular Board meeting. Mr. Swindells as chairman of the Board was selected
to preside at the executive sessions of non-management directors.
COMMUNICATIONS WITH NON-MANAGEMENT DIRECTORS.
Anyone who has a concern about the Corporation's conduct, accounting, internal
accounting controls or auditing matters may communicate that concern directly to
the non-management directors, or to the Audit Committee. Concerns may be
submitted confidentially or anonymously. Submissions may be emailed, submitted
in writing, or reported by phone to a toll-free phone number - 1-800-826-6762.
This contact information is published on the Corporation's website, www.osm.com.
Submissions for non-management directors will be reviewed by the presiding
director of the non-management directors, Mr. Swindells and submissions for the
Audit Committee will be reviewed by the chair of the Audit Committee, Mr.
Demorest.
GOVERNANCE DOCUMENTS AND DIRECTORS' POLICIES.
The Corporation has adopted Corporate Governance Guidelines, a Code of Business
Conduct and Ethics, Codes of Ethics for the Chief Executive Officer and Senior
Financial Professionals, Audit Committee Charter and Nominating/Compensation
Committee Charter. Each of these documents is available on the Corporation's
website, www.osm.com, and the information is available in print to any
stockholder who requests it. In addition to these guidelines, codes and
charters, and the Corporation's bylaws and certificate of incorporation, the
Board's policy is that all directors should attend the Annual Meeting and in
2003, all directors attended the Annual Meeting.
OTHER RELATIONSHIPS
Oregon Feralloy Partners is a joint venture between Feralloy Corporation
("Feralloy") and the Corporation that processes plate from hot roll coil product
produced by the Corporation. Feralloy is the operating partner and owns 40% and
the Corporation owns 60% and leases certain real property in Portland, Oregon.
During 2003, plate processing transactions amounted to approximately $5.4
million. Mr. Walker is the President and Chief Executive Officer of Feralloy.
INDEPENDENCE
In January 2004, the Board affirmatively determined that each of the current
directors, except Mr. Declusin, is "independent" as required by the New York
Stock Exchange listing standards. In making that determination, the Board
concluded that except for Messrs. Walker and Declusin, the other directors had
no relationships with the Corporation (either directly or indirectly as a
partner, stockholder or officer of an organization that has a relationship with
the Corporation) except as a director. With respect to Mr. Walker, the Board
separately determined that Mr. Walker was independent finding that Mr. Walker's
and Feralloy's relationship with the Corporation was not material. The bases of
that determination were (i) the relationship did not fall within any of the
disqualification provisions specified by the New York Stock Exchange listing
standards; (ii) the relationship between the Corporation and Ferralloy is not
material in the Board's opinion in that it represents less than 1% of the
Cor-
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poration's business and less than 2% of Ferralloy's business; and (iii)
except for the Oregon Feralloy Partners ~relationship, there were no other
material relationships between Mr. Walker and the Corporation, including
commercial, industrial, banking, consulting, legal, accounting, charitable, and
familial.
COMPENSATION OF DIRECTORS
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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 Board established, effective April 26, 2002, the Non-Employee Directors'
Stock Option Plan (the "Directors' Stock Option Plan"). The Directors' Stock
Option Plan provides for outside directors to receive initial grants of options
to purchase 4,000 shares of common stock on the effective date and annual grants
of options to purchase 1,500 shares of the common stock on the day of the annual
meeting, at an exercise price equal to the closing price on the grant date, and
vesting over three years. New directors receive an initial grant of options to
purchase 2,000 shares on the day after their appointment. On May 1, 2003, each
non-employee director received annual grants of options to purchase 1,500
shares.
The Board terminated the Oregon Steel Mills, Inc. Directors' Retirement Plan
(the "Retirement Plan") as of December 31, 2001. Under the Retirement Plan, in
effect since January 1, 1998, retiring directors who had completed five years of
service as an outside director were paid $20,000 annually until the number of
payments equals the number of full years of service as an outside director. The
payment terms were convertible to a lump-sum present value payment if so elected
by the retiring director and approved by the Compensation Committee.
In terminating the Retirement Plan, terms of payment of vested benefits were
arranged for the two current outside directors with more than five years of
service on the Board. Beginning in January 2002, Mr. John A. Sproul, who began
as an outside director in 1989, will receive six annual payments of $34,505, and
Mr. William Swindells, an outside director since 1994, will receive six annual
payments of $22,752.
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PERFORMANCE GRAPH
Set forth below is a line graph comparing the 5-year cumulative total
stockholder return [ASTERISK] 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 Russell 2000 Index, the Standard &
Poor's Diversified Metals & Mining Index and the Standard & Poor's Steel Index.
STOCKHOLDERS RETURN RUSSEL
MEASUREMENT PERIOD OREGON 2000 S&P STEEL
(FISCAL YEAR COVERED) STEEL INDEX INDEX
--------------------- ------ ------ ---------
MEASUREMENT POINT - 12/31/98 $100.00 $100.00 $100.00
FYE 12/31/99 70.34 121.26 109.99
FYE 12/31/00 9.61 117.59 69.14
FYE 12/31/01 44.76 120.52 88.74
FYE 12/31/02 36.35 95.83 67.76
FYE 12/31/03 52.54 141.11 114.91
[ASTERISK] $100 invested on 12/31/98 in stock or index-including reinvestment
of dividends. Fiscal year ending December 31.
Copy right (C) 2002, Standard & Poor's, a division of the McGraw-Hill Companies,
Inc. All rights reserved.
www.researchdatagroup.com/S&P.htm
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based on the Corporation's review of Forms 3, 4, and 5 furnished to the
Corporation pursuant to Section 16 of the Securities Exchange Act of 1934, as
amended, all such forms were filed on a timely basis.
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PRINCIPAL STOCKHOLDERS
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The following table sets forth certain information regarding the beneficial
ownership of shares of the Common Stock as of February 18, 2004 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
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First Pacific Advisors, Inc. (FN1) 3,797,400 (FN1) 14.4%
11400 West Olympic Boulevard, Suite 1200,
Los Angeles, CA 90064
Jeffrey L. Gendell, et al. (FN2) 1,980,900 (FN2) 7.5%
55 Railroad Avenue, 3rd Floor, Greenwich, CT 06830
Dimensional Fund Advisors, Inc. (FN3) 1,812,628 (FN3) 6.9%
1299 Ocean Avenue, 11th Floor, Santa Monica, CA 90401
Royce & Associates, L.L.C. (FN4) 1,575,400 (FN4) 6.0%
1414 Avenue of the Americas, New York, NY 10019
RS Investment Management Co. (FN5) 1,014,300 (FN5) 3.4%
388 Market Street, Suite 200, San Francisco, CA 94111
DIRECTORS:
Harry L. Demorest 47,833 (FN7) [ASTERISK]
Carl W. Neun 3,333 (FN7) [ASTERISK]
David L. Parkinson 11,333 (FN7) [ASTERISK]
Stephen P. Reynolds 1,433 (FN7) [ASTERISK]
John A. Sproul 3,333 (FN7) [ASTERISK]
William Swindells 37,333 (FN7) [ASTERISK]
Frank M. Walker 2,083 (FN7) [ASTERISK]
NOMINEES:
William P. Kinnune -- [ASTERISK]
Brett Wilcox -- [ASTERISK]
NAMED EXECUTIVE OFFICERS:
James E. Declusin (FN6) 21,333 (FN7) [ASTERISK]
L. Ray Adams 69,044 (FN7) [ASTERISK]
Steven M. Rowan 41,349 (FN7) [ASTERISK]
Robert A. Simon 40,501 (FN7) [ASTERISK]
Michael D. Buckentin 17,292 (FN7) [ASTERISK]
Joe E. Corvin 96,584 (FN7) [ASTERISK]
All current directors and executive officers as a group (23 persons) 548,720 (FN7) 2.1%
[ASTERISK] Less than 1% of the outstanding Common Stock.
(FN1) Based upon information obtained from Schedule 13G Amendment No. 7 dated
February 5, 2004, filed by First Pacific Advisors, Inc. with the Securities and
Exchange Commission: First Pacific Advisors, Inc. has the shared power to
dispose of 3,797,400 shares and the shared power to vote 1,603,700 shares.
(FN2) Based upon information obtained from Schedule 13G/Amendment No. 1, dated
February 10, 2004, filed by Jeffrey L. Gendell, et al. with the Securities and
Exchange Commission: Tontine Management, L.L.C. and Tontine Partners L.P. have
shared power to vote and dispose of 1,071,800 shares; Tontine Capital
Management, L.L.C. has shared power to vote and dispose of 56,200 shares;
Tontine Overseas Associates, L.L.C. has shared power to vote and dispose of
852,900 shares; and Jeffrey Gendell has shared power to vote and dispose of
1,980,900 shares.
(FN3) Based on the information obtained from Schedule 13G/A dated February 6,
2004 filed by Dimensional Fund Advisors Inc. with the Securities and Exchange
Commission.
(FN4) Based upon information obtained from Schedule 13G, dated February 5, 2004,
filed by Royce & Associates, L.L.C. with the Securities and Exchange Commission.
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(FN5) Based upon information obtained from Schedule 13G Amendment No. 2 filed
with the Securities and Exchange Commission February 14, 2004, filed by RS
Investment Management Co. L.L.C., RS Investment Management L.P. and G. Randall
Hecht. Each filer has shared voting and dispositive power over 1,014,300 shares.
(FN6) Also member of the Board of Directors.
(FN7) Includes the following numbers of shares:
Beneficially owned that Held by the
may be acquired ESOP for
within 60 days of the named
Owned February 18, 2004 persons
directly pursuant to stock options account (FN1)
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DIRECTORS:
Harry L. Demorest 46,500 1,333 --
William P. Kinnune -- -- --
Carl W. Neun 2,000 1,333 --
David L. Parkinson 10,000 1,333 --
Stephen P. Reynolds 100 1,333 --
John A. Sproul 2,000 1,333 --
William Swindells 36,000 1,333 --
Frank M. Walker 750 1,333 --
Brett Wilcox -- -- --
EXECUTIVE OFFICERS:
James E. Declusin 20,000 1,333 --
L. Ray Adams 10,600 57,334 1,110
Steven M. Rowan -- 29,434 11,915
Robert A. Simon 100 40,200 201
Michael D. Buckentin -- 15,916 1,376
Joe E. Corvin -- 96,584 --
All directors and executive
officers as a group (23 persons) 134,150 399,968 14,602
(FN1) 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.
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EXECUTIVE COMPENSATION
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SUMMARY COMPENSATION TABLE
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, 2003.
LONG TERM ALL OTHER
ANNUAL COMPENSATION(FN1) COMPENSATION COMPENSATION
------------------------------------------------------------------------------------------------------------------------------------
Shares
All Other Underlying
Name and Annual Stock Restricted Thrift Plan
Principal Position Year Salary Bonus(FN2)(FN3) Compensation(FN5) Options(#) Shares(FN3) Contribution(FN4)
------------------------------------------------------------------------------------------------------------------------------------
JAMES E. DECLUSIN 2003 $187,000 $ 57,000 $174,600 -- $57,000 $2,813
President and 2002 -- -- -- -- -- --
Chief Executive Officer 2001 -- -- -- -- -- --
L. RAY ADAMS 2003 $280,000 -- -- -- -- $3,000
Vice President Finance, 2002 $280,000 $ 80,000 -- -- -- $2,750
Chief Financial Officer 2001 $269,063 -- -- 43,400 -- $4,800
and Treasurer
ROBERT A. SIMON 2003 $220,000 -- -- -- -- --
Vice President and General 2002 $220,000 $ 69,000 -- -- -- --
Manager, RMSM Division 2001 $213,750 -- -- 31,000 -- --
STEVEN M. ROWAN 2003 $200,000 -- -- -- -- $1,617
Vice President Mat'l and 2002 $200,000 $ 48,000 -- -- -- $2,750
Transportation 2001 $200,000 -- -- 22,400 -- $4,800
MICHAEL D. BUCKENTIN(FN6) 2003 $230,000 -- -- -- -- $3,000
Former Vice President 2002 $230,000 $ 35,000 -- -- -- $2,750
Operations, OSM Division 2001 $217,500 -- -- 31,600 -- $4,800
JOE E. CORVIN(FN7) 2003 $550,000 -- -- -- -- --
Former President and 2002 $550,000 $200,000 -- -- -- --
Chief Executive Officer 2001 $550,000 -- -- 112,900 -- --
------------
(FN1) Pension benefits accrued in 2001-2003 are not included in this Summary
Compensation Table.
(FN2) Year 2002 amounts were earned under the 2002 Annual
Incentive Plan and paid in 2003.
(FN3) 40,000 restricted shares granted 8-1-03 as an inducement to accept the
position of President and Chief Executive Officer valued at the closing market
price of $2.85 on the date of grant. The bonus amount reported is the value on
8-1-03 of the 20,000 shares that vested immediately. The remaining 20,000 shares
vest 8-1-04, and are reported under Long Term Compensation. The value of the
restricted shares as of 12-31-02 was $232,000.
(FN4) Matching contributions made by the Corporation on behalf of the named
executive to the Corporation's Thrift Plan.
(FN5) Other compensation reported for Mr. Declusin was $125,000 for relocation
expenses, $7,000 automobile allowance, $30,600 directors' fees for service as an
outside director and $12,000 consulting fees for sales and marketing consulting
before his 8-1-04 appointment as President and CEO.
(FN6) Mr. Buckentin became inactive on 11-25-03 and resigned on 2-15-04.
(FN7) Mr. Corvin is an inactive employee of the Corporation, having resigned
from his position as President and CEO on 7-31-03.
-10-
OPTION GRANTS DURING FISCAL 2003
In April 2000, the stockholders approved the Corporation's 2000 Long-Term
Incentive Nonqualified Stock Option Plan ("Option Plan"). The Option Plan is
administered by the Compensation Committee of the Board of Directors and
provides for grants to officers and employees of options to acquire up to one
million shares of the Common Stock, subject to the limitations set forth in the
Option Plan. Pursuant to the Option Plan, the granting of options is at the
discretion of the Board of Directors, and it has the authority to set the terms
and conditions of the options granted. No options were granted under the plan in
2003. As of February 16, 2004, options to purchase 451,116 shares of the Common
Stock were outstanding under the Option Plan.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION VALUES
The following table sets forth certain information concerning each exercise of
stock options during the last completed fiscal year by each of the named
executive officers and the fiscal year-end value of unexercised options:
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options
Shares Options at FY-End (#) at FY-End ($) (FN1)
Acquired on Value Exercisable/ Exercisable/
Name Exercise (#) Realized ($) Unexercisable Unexercisable
------------------------------------------------------------------------------------------------------------------------------------
James E. Declusin -- -- 1,333 / 4,167 -- / $ 5,220
L. Ray Adams 0 0 56,168 / 7,232 $135,080 / $11,524
Robert A. Simon 0 0 39,034 / 5,166 $ 85,760 / $ 6,927
Steven M. Rowan 0 0 28,668 / 3,732 $ 68,506 / $ 5,953
Michael D. Buckentin 0 0 39,534 / 5,266 $ 86,790 / $ 7,133
Joe E. Corvin 0 0 149,048 / 8,900 $345,425 / $26,487
(FN1) Based on $5.81 per share, which is the price last sold of the Corporation's
Common Stock on 12/31/03.
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
-11-
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. 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 DEFINED BENEFIT PLAN PLUS SERP) (FN2)
ANNUAL BENEFITS FOR YEARS OF SERVICE
-------------------- ------------- ------------- ------------- ------------- -------------
REMUNERATION(FN1) 15 Years 20 Years 25 Years 30 Years 35 Years
-------------------- ------------- ------------- ------------- ------------- -------------
$125,000 $ 27,375 $36,500 $45,625 $ 54,750 $ 63,875
150,000 33,750 45,000 56,250 67,500 78,750
175,000 40,125 53,500 66,875 80,250 93,625
200,000 46,500 62,000 77,500 93,000 108,500
225,000 52,875 70,500 88,125 105,750 123,375
250,000 59,250 79,000 98,750 118,500 138,250
300,000 72,000 96,000 120,000 144,000 168,000
350,000 84,750 113,000 141,250 169,500 197,750
400,000 97,500 130,000 162,500 195,000 227,500
450,000 110,250 147,000 183,750 220,500 257,250
500,000 123,000 164,000 205,000 246,000 287,000
550,000 135,750 181,000 226,250 271,500 316,750
600,000 148,500 198,000 247,500 297,000 346,500
650,000 161,250 215,000 268,750 322,500 376,250
700,000 174,000 232,000 290,000 348,000 406,000
750,000 186,750 249,000 311,250 373,500 435,750
800,000 199,500 266,000 332,500 399,000 465,500
850,000 212,250 283,000 353,750 424,500 495,250
--------------------
(FN1) Represents at least 125% of the maximum compensation for the year
ended December 31, 2004.
(FN2) Estimates assume all service is after January 1, 1994, and Social
Security Covered Compensation as defined above is $60,000 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, pension benefits are reported in the following table.
Credited Years Assumed Lifetime Annual Payments ESOP Benefits
of Service as of Retirement under the Pension Plan pursuant to the
12-31-03 Age and SERP (FN1) SERP (FN2)
-----------------------------------------------------------------------------------------------------------------------------------
James E. Declusin .5 65 $ 34,473 --
L. Ray Adams 15.5 65 $107,259 $1,590
Robert A. Simon 11.7 65 $ 95,902 --
Steven M. Rowan 32.0 65 $ 96,623 $ 838
Michael D. Buckentin 14.9 62 $ 40,734 $ 158
Joe E. Corvin 34.6 62 $155,360 --
--------------
(FN1) Upon their retirement, assuming no increase in current rates of annual
compensation, and based upon years of service shown above. The applicable
compensation each year is the sum of the "Salary" and "Annual Incentive
Plan" compensation shown Summary Compensation Table, limited as described
above.
(FN2) Include dividends and the equivalent value of shares of Common Stock
accrued through December 31, 2003. Future ESOP benefit additions, if any,
would be derived from discretionary annual ESOP allocations set by the
Board of Directors.
-12-
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT
AND CHANGE IN CONTROL ARRANGEMENTS
EMPLOYMENT AGREEMENT.
Mr. Declusin entered into an employment agreement with the Corporation dated
August 1, 2003, to serve as President and Chief Executive Officer. The agreement
expires on December 31, 2005. The compensation provisions of the employment
agreement are described in the accompanying report of the Compensation Committee
of the Board of Directors. The other provisions covered in the employment
agreement are vacation, benefit plans expenses, fringe benefits and termination.
As part of the agreement, Mr. Declusin has agreed not to compete with the
Corporation for a one-year period following any voluntary termination without
"good reason" (as defined in the agreement). Except as described below, no other
named executive has an agreement related to employment with the Corporation.
SEVERANCE AGREEMENT.
Mr. Corvin entered into a separation agreement and general release with the
Corporation effective July 31, 2003, and resigned as an officer and director of
the Corporation and each of its subsidiaries. Under the agreement, Mr. Corvin is
on paid administrative leave through the earlier of April 6, 2006, or until he
becomes employed on a full-time basis with another employer. During the period,
the Corporation will pay Mr. Corvin $550,000 annually, provide outplacement
services and allow Mr. Corvin to participate in certain of the Corporation's
health and welfare benefit programs; however, Mr. Corvin will not be eligible to
participate in any bonus, vacation, stock options, ESOP contributions and other
similar programs. Mr. Corvin also agreed not to compete with the Corporation.
CHANGE IN CONTROL AGREEMENTS.
The Corporation entered into change-in-control agreements ("Agreements") with
Messrs. Declusin, Adams, Lawrence, Rowan, Simon and certain other key employees
("Employees"). 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 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 Agreements, during the three-year period following a
Change in Control. Severance compensation is to be calculated as the sum of (i)
three times the Employee's annual base salary as of the date of termination or
immediately prior to the Change in Control, whichever is greater; (ii) 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 or her rate of annual pay, until the
earlier of his or her 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; and (iii) group
health benefits substantially similar to what the Employee was receiving
immediately prior to the date of termination. In addition, the Corporation will
pay an additional amount to the Employee to compensate for excise taxes the
Employee is required to pay on "excess parachute payments."
INDEMNIFICATION AGREEMENTS.
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 to the
fullest extent permitted by applicable law or the Corporation's Restated
Certificate of Incorporation, including 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 will purchase and maintain director and officer insurance 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
-13-
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 2003 the Compensation Committee members were Stephen P. Reynolds,
Chairman, and Frank M. Walker. William Swindells was an ex officio member until
August 2003, when he became a member of the Committee. James E. Declusin was a
member of the Committee until his appointment as President and CEO on August 1,
2003.
BOARD COMPENSATION COMMITTEE REPORT
ON EXECUTIVE COMPENSATION
--------------------------------------------------------------------------------
During 2003, subject to approval of the Board, the Compensation Committee (the
"Committee") of the Board established the general compensation policies of the
Corporation and the compensation plans and specific compensation levels for
executive officers and established guidelines for the compensation of other
personnel. The 2003 Committee was composed of independent, non-employee
directors. In January 2004, the Committee adopted a new charter, which expanded
and clarified its purposes, duties and responsibilities in light of the New York
Stock Exchange listing standards.
COMPENSATION PRINCIPLES
The Corporation believes that the compensation program 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
Corporation periodically collects and analyzes compensation practices of
companies and competitors in its location and industry and uses that information
as the basis to determine whether the Corporation's compensation program is in a
competitive range.
The Corporation maintains the philosophy that compensation of all employees
should be directly and materially linked to operating and financial performance
of the Corporation, and that incentive compensation should be a greater part of
total compensation for more senior positions. To achieve this linkage, incentive
compensation programs are provided based upon performance measures relevant to
the employee or executive participants, for example quality production, cost
reduction, net income, operating income, or return on assets.
These principles align all employee compensation with the Corporation's
objectives, operating strategy, management initiatives, and financial
performance. Within this overall philosophy, the Corporation'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] 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 employees and
executive officers with that of comparable executive positions in other
manufacturing and steel companies. In 2001, the Corporation retained an
independent consulting firm to review and benchmark executive and employee
compensation. Overall, employee compensation was found to be at or slightly
above market. The consultant's report to the committee on executive compensation
compared the base salary, incentive compensation, and other benefits of the
Corporation to other durable goods manufacturing companies (the "Report"). The
Report focused on total compensation for the eight 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). The Report
concluded that while executive base salaries were competitive, the Corporation's
incentive compensation for executives was below market for comparable positions.
As a result, the Corporation planned to gradually increase the opportunity for
incentive compensation.
In 2003, the Corporation performed an internal review and benchmark of executive
and employee compensation using the Report as guidance. Based on the
information, the Committee found that executive base salaries were competitive,
but that incentive compensation for executives was still below market for
comparable positions. For 2004, the Annual Incentive Plan target bonus levels
were increased.
-14-
EXECUTIVE COMPENSATION ELEMENTS
There are four elements in the Corporation's executive officer compensation
program, all determined by position, individual performance, and corporate
performance and profitability.
BASE SALARY
The Committee sets base salary levels for all officers at levels that are
competitive with similar positions at other comparable companies, and that
reflect the responsibilities and performance of the individuals.
INCENTIVE COMPENSATION
Executive officers participate in the Annual Incentive Plan ("AIP") and
are excluded from the employee profit participation and gainsharing
incentive plans. The AIP is designed to reward participants with an annual
bonus if the results of certain pre-determined financial measurements meet
or exceed the benchmarks set by the Board of Directors. From 2000 to
2003, the annual incentive compensation was determined based upon the
Division's and Corporation's actual return on assets for the year, and
calculated for each participant at a predetermined percentage of base
salary. For 2004, AIP is based on the Corporation's Net Income.
LONG-TERM INCENTIVE (STOCK OPTION) PLAN
In April 2000, stockholders approved a long-term incentive plan which is a
non-qualified stock option plan. No options were granted during 2003. See
section entitled "Option Grants During Fiscal 2003" on page 11.
EMPLOYEE STOCK OWNERSHIP PLAN (ESOP)
The Corporation has an ESOP for qualified employees 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. No contributions have been made to the ESOP since
1997. 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 used these compensation principles with respect to the
compensation of Mr. Declusin, who became President and CEO of the Corporation on
August 1, 2003. Mr. Declusin and the Corporation entered into an employment
agreement which expires on December 31, 2005. Under the agreement, Mr.
Declusin's base salary is $500,000 and he receives 40,000 restricted shares of
the Corporation's stock, 20,000 of which vested on August 1, 2003, and 20,000
will vest on August 1, 2004, subject to forfeiture. In addition, Mr. Declusin is
eligible to participate in the Annual Incentive Plan (at an initial target bonus
of 37% for 2003) and other incentive programs, including stock options. Stock
options to purchase 1,500 shares of the Corporation's stock were issued to Mr.
Declusin in April 2003 under the non-management director plan and no stock
options were granted to Mr. Declusin in 2003 as CEO. For the 2003 period, Mr.
Declusin will not receive any additional compensation under the AIP or ESOP
plans.
The Corporation does not have any "Excessive Employee Remuneration" as defined
in section 162(m) of the Code.
COMPENSATION COMMITTEE DURING 2003
Stephen P. Reynolds, Chairman
Frank M. Walker
William Swindells
-15-
AUDIT COMMITTEE REPORT OF THE BOARD OF DIRECTORS
--------------------------------------------------------------------------------
The Board of Directors has a separately designated audit committee established
in accordance with Section 3(a)(58) of the Securities Exchange Act. The Audit
Committee members in 2003 were Mr. Demorest, Chair, Messrs. Neun, Parkinson and
Sproul as members and Mr. Swindells as ex officio member. As determined by the
Board, each Audit Committee member is "independent" as defined by the New York
Stock Exchange listing standards. The Board also determined that Mr. Demorest is
an "audit committee financial expert" and he is independent. Furthermore, the
Board determined that Mr. Neun's simultaneous service on the audit committees of
more than two other public companies would not impair his ability to effectively
serve on the Corporation's Audit Committee. The Board of Directors and the Audit
Committee believe that the Audit Committee's current member composition
satisfies the New York Stock Exchange listing standards.
The Audit Committee oversees the accounting and financial reporting processes of
the Corporation and audits of the financial statements of the Corporation.
Management has the primary responsibility for the financial statements and the
reporting process, including the systems of internal controls. In fulfilling its
oversight responsibilities, the Audit Committee reviewed the audited financial
statements in the Annual Report with management including a discussion of the
quality, not just the acceptability, of the accounting principles, the
reasonableness of significant judgments, and the clarity of disclosures in the
financial statements. The Corporation has adopted an amended and restated
written charter of the Audit Committee, a copy of which was attached as Appendix
B to this 2004 Proxy Statement.
The Audit Committee reviewed with the independent auditors, who are responsible
for expressing an opinion on the conformity of the Corporation's audited
financial statements to generally accepted accounting principles, their
judgments as to the quality, not just the acceptability, of the Corporation's
accounting principles and such other matters as are required to be discussed
with the Committee under generally accepted auditing standards, including
Statement on Auditing Standards No. 61, Communication with Audit Committees. In
addition, the Audit Committee received from the independent auditors the written
disclosures and letter required by Independence Standards Board No. 1
(Independence Discussions with Audit Committees) and discussed with them their
independence from the Corporation and its management. The Audit Committee has
considered whether the independent auditor's provision of non-audit services to
the Corporation is compatible with maintaining the auditor's independence, and
determined that it is.
The Audit Committee's pre-approval policies and procedures require pre-approval
of all non-prohibited audit and non-audit services provided by the independent
auditors to the Corporation and require specific written pre-approval relating
to any type of non-prohibited services where fees in the aggregate are expected
to exceed $10,000 ("Material Services"). The Audit Committee may delegate the
authority to grant pre-approval of Material Services to a designated member of
the Audit Committee and Mr. Demorest was named the designated member. The
Corporation has determined that certain non-audit services are prohibited. At
each Audit Committee meeting, the Audit Committee reviews a report summarizing
the services provided by the independent auditors and a list of services to be
pre-approved since its last regularly scheduled meeting.
The function of the Audit Committee members is not intended to duplicate or to
certify the activities of management and the independent auditor, nor can the
Committee certify that the independent auditor is "independent" under applicable
rules. The Committee serves a board-level oversight role, in which it provides
advice, counsel, and direction to management and the auditors on the basis of
the information it receives, discussions with management and the auditors, and
the experience of the Committee's members in business, financial and accounting
matters.
In reliance on the reviews and discussions referred to above, the Audit
Committee recommended to the Board of Directors, and the Board has approved,
that the audited financial statements be included in the Corporation's Annual
Report on SEC Form 10-K for the year ended December 31, 2003, for filing with
the Securities and Exchange Commission.
RELATIONSHIP WITH INDEPENDENT ACCOUNTANTS
On July 7, 2003, PricewaterhouseCoopers LLP ("PricewaterhouseCoopers") was
dismissed as certifying accountants by the Audit Committee. The audit reports of
PricewaterhouseCoopers on the Corporation's financial statements for the years
ended December 31, 2002 and 2001, did not contain any adverse opinion or
disclaimer of opinion and were not qualified or modified as to uncertainty,
audit scope or accounting principles. During the Corporation's two most recent
fiscal years and through July 7, 2003, there were no disagreements with
PricewaterhouseCoopers on any matter of accounting principles or practices,
financial statement disclosure or auditing scope or procedure, which
disagreements, if not resolved to the satisfaction of PricewaterhouseCoopers,
would have caused PricewaterhouseCoopers to make reference thereto in connection
with its reports on the finan-
-16-
cial statements for such years. During the two most recent fiscal years and
through July 7, 2003, there have been no reportable events (as defined in
Regulation S-K Item 304(a)(1)(v)). The Corporation delivered a draft copy of its
Form 8-K report to PricewaterhouseCoopers on July 7, 2003. Concurrently with
that delivery, the Corporation requested that PricewaterhouseCoopers furnish it
with a letter addressed to the Securities and Exchange Commission (the "SEC")
stating whether PricewaterhouseCoopers agrees with the above statements and, if
not, stating the respects in which PricewaterhouseCoopers does not agree. The
letter of PricewaterhouseCoopers to the SEC dated July 7, 2003, indicating that
they agree with the statements concerning PricewaterhouseCoopers in such Form
8-K was attached as Exhibit 16.1 to the Form 8-K filed on July 10, 2003.
On July 7, 2003, KPMG LLP ("KPMG") was engaged as new independent accountant by
the Audit Committee. During the Corporation's two most recent fiscal years and
through July 7, 2003, the Corporation did not consult with KPMG regarding either
(1) the application of accounting principles to a specified transaction, either
completed or proposed; or the type of audit opinion that might be rendered on
the Corporation's financial statements, and neither a written report was
provided to the Corporation or oral advice was provided that KPMG concluded was
an important factor considered by the Corporation in reaching a decision as to
the accounting, auditing, or financial reporting issue; or (2) any matter that
was either the subject of a disagreement, as defined in Item 304(a)(1)(iv) of
Regulation S-K, or a reportable event pursuant to Item 304(a)(1)(v) of
Regulation S-K.
In addition to performing the audit of the Corporation's consolidated financial
statements, PricewaterhouseCoopers LLP and/or KPMG LLP provided various other
services during the last two years. The aggregate fees billed for the last two
years for each of the following categories of services are set forth below:
2003 Audit Fees(FN1) $472,000
Audit Related Fees(FN2) $ 37,700
Tax Fees(FN3) $ 36,000
All Other Fees --
2002 Audit Fees(FN1) $370,900
Audit Related Fees(FN2) $176,100
Tax Fees(FN3) $122,700
All Other Fees --
------------
(FN1) Audit fees include annual audit of the Corporation's consolidated
financial statements and review of interim financial statements in the
Corporation's Reports on Form 10Q.
(FN2) Audit related fees include audits of the Corporation's employee benefit
plans, review of registration statements and issuance of comfort letters.
(FN3) Tax-related services include review and assistance with tax returns for
various legal entities of the Corporation, and tax advice and planning for
income and other taxes. Representatives of KPMG LLP will be present at the
Annual Meeting, will have an opportunity to make any statements they
desire, and will also be available to respond to appropriate questions
from stockholders.
AUDIT COMMITTEE DURING 2003
Harry L. Demorest, Chairman
Carl W. Neun
David L. Parkinson
John A. Sproul
William Swindells, ex officio
-17-
PROPOSAL 2: STOCKHOLDER PROPOSAL
--------------------------------------------------------------------------------
Mr. Mark Latham, 177 Telegraph Road, #302, Bellingham, WA 98226, owner of 2,000
shares of the Corporation, has proposed the adoption of the following resolution
and has furnished the following statement in support of his proposal:
PROXY ADVISORY PROPOSAL
WHEREAS, many shareowners lack the time and expertise to make the best
voting decisions, yet prefer not to always follow directors'
recommendations, because of possible conflicts of interest;
WHEREAS, shareowners have a common interest in obtaining sound independent
advice, but often insufficient private interest to justify paying for it
individually (the "free-rider" problem);
THEREFORE, BE IT RESOLVED that Oregon Steel Mills, Inc. shareowners
request the Board of Directors to hire a proxy advisory firm for one year,
to be chosen by shareowner vote. Shareowners request the Board to take all
necessary steps to enact this resolution in time to hold the vote at
year-2005 shareowner meeting, with the following features:
To insulate advisor selection from influence by the Corporation's
management, any proxy advisory firm could put itself on the ballot by
paying an entry fee, declaring the price (no more than $8,000) for
advisory services for the coming year, and providing the address of a
website describing their proposed services and qualifications.
The winning candidate would be paid its declared price by the Corporation,
and make advice freely available to all Corporation shareowners for the
subsequent year, on all matters put to shareowner vote except director
elections. (Advice on director elections is excluded to satisfy SEC rule
14a-8(i)(8).)
Performance of the advisory firm would not be policed by the Corporation's
management, but rather by gain or loss of the advisor's reputation and
future business.
Brief summary advice could be included in the Corporation proxy, with
references to a website and/or a toll-free phone number for more detail.
The decision of whether to hire proxy advisory firms in later years would
be left open.
SUPPORTING STATEMENT:
---------------------
The proxy advisor would be paid with Corporation funds to give
shareowners an independent professional opinion. Independence would be
further enhanced by having shareowners choose the proxy advisor. This
could also increase competition in the proxy advisory business, because
new entrants could earn fees on a company-by-company basis, without
covering thousands of companies.
WALL STREET JOURNAL (July 26, 2001)article "After This Deal, Is Anyone
Left to Give Advice?":
"...Proxy Monitor Inc. has agreed to buy Institutional Shareholder
Services... A monopoly of shareholder advice doesn't sit well with some."
SAN FRANCISCO CHRONICLE (May 18, 2003) article "Battle of the Ballot":
"State Street out-sources its proxy voting operation to Institutional
Shareholder Services."
Example of lack of time and expertise:
http://boards.fool.com/Message.asp?mid=19682916: "I tried to read the
-----------------------------------------------
proxy statement, but I still don't understand whether the change is
shareholder friendly or not."
Mistrust of boards: Harris Poll, September 2003, at
www.sec.gov/rules/proposed/s71903/gmcentee092403.pdf: "Support
----------------------------------------------------
for corporate management nominees is also mixed with majorities of
shareholders having WITHHELD SUPPORT from a management nominee."
The conflicts of interest among managers, directors and shareowners are
described in Robert Monks and Nell Minow's 1996 book Watching the
Watchers, along with shareowners "free rider" and "rational ignorance"
problems.
Articles discussing the company-pay system for proxy advice are
on the Corporate Monitoring website at www.corpmon.com/publications.htm.
-18-
CORPORATION'S RESPONSE TO STOCKHOLDER PROPOSAL
The Board of Directors recommends a vote AGAINST approval of the Stockholder
Proposal as the implementation of the proposal described above would not be in
the best interests of the Corporation or you, our stockholders. In the opinion
of the Board of Directors:
[BULLET] The Board consists of eight Directors, seven of whom are "independent
directors" and one is a member of management. The directors are
experienced individuals who are familiar with the Corporation's
business and the markets in which the Corporation operates. The Board
of Directors believes it is sufficiently independent of management to
avoid conflicts of interest. Adding the advice of an outside firm (at
the Corporation's expense) would not assist the Board or stockholders
in furthering the Corporation's objectives or otherwise be in the
stockholder's best interests.
[BULLET] The Board of Directors is committed to providing Corporation
stockholders with useful voting recommendations and information on
which to make voting decisions. The Board bases its recommendations on
its knowledge of the Corporation, its strategic plans for the business
and input from management and outside advisers. We do not believe
adding the advice of an unsupervised firm at our expense would be in
the interests of our stockholders.
[BULLET] This proposal calls for the Corporation to hire a proxy advisory firm
without screening, input or review by the Board or management of the
quality of the firm or its work product. Even our independent auditors
are selected and reviewed by the Audit Committee. The Board of
Directors does not believe it is in the best interests of our
stockholders to spend funds to hire a proxy advisory firm without first
evaluating the need for such advice and the quality of the firm's
work, its recommendations and the process by which such recommendations
are made.
[BULLET] The proposal calls for the firm to be paid without regard to the
reasonableness of this compensation for the work performed. While the
proposal purports to cap the fees paid to the elected proxy advisory
firms, we believe the actual costs of the proposal will be greater. We
do not believe it is a good idea for us to abdicate our
responsibilities to evaluate the engagement, services and compensation
of outside advisers, and do not believe we should provide an open forum
in our proxy materials for an unknown and unsupervised firm.
[BULLET] The Stockholder Proposal involves additional cost to the proxy process.
[BULLET] There is a significant volume of published research and other
literature regarding the Corporation and issues of importance to the
Corporation's stockholders (made even more accessible by the Internet),
and a proxy advisory firm would offer little marginal benefit in
communicating with stockholders.
THEREFORE, FOR ALL OF THE REASONS STATED ABOVE, THE BOARD OF DIRECTORS URGES
STOCKHOLDERS TO VOTE "AGAINST" THIS PROPOSAL 2.
REQUIRED VOTE
The affirmative vote of the majority of the shares present in person or
represented by proxy at the meeting and entitled to vote on the stockholder
proposal is required to approve the stockholder proposal, which is framed as a
"recommendation" to the Board. An abstention is treated as being present and
entitled to vote on the matter and, therefore, has the effect of a vote against
the stockholder proposal. A broker "non-vote" is treated as not being entitled
to vote on the matter and, therefore, is not counted for purposes of determining
whether the stockholder proposal has been approved.
-19-
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 2005 ANNUAL MEETING
Stockholder proposals submitted for inclusion in the 2005 proxy materials and
consideration at the 2005 Annual Meeting of Stockholders must be received by the
Corporation no later than November 30, 2004, and no earlier than October 31,
2004. 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 2005 Annual Meeting of Stockholders, written
notice of a non-Rule 14a-8 stockholder proposal or director nomination must
contain the information required by the Corporation's bylaws and must be
received by the Corporation no later than November 30, 2004 and no earlier than
October 31, 2004.
Jennifer R. Murray
SECRETARY
Portland, Oregon
March 29, 2004
-20-
2004 ANNUAL MEETING GUIDELINES
----------------------------------------------------------------------
In the interest of an orderly and constructive meeting, the
following guidelines will apply for the 2004 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 noisemaking
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
29, 2004. 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.
-21-
APPENDIX A
OREGON STEEL MILLS, INC.
NOMINATING / CORPORATE GOVERNANCE AND COMPENSATION COMMITTEE CHARTER
--------------------------------------------------------------------------------
The Nominating/Corporate Governance and Compensation Committee ("Committee") is
a committee of the Board of Directors ("Board") of Oregon Steel Mills, Inc.
("Company").
PURPOSES
The purposes of the Committee in the areas of Nominating/Corporate Governance
are to (a) identify individuals qualified to become Board members, consistent
with criteria approved by the Board, and to select, or to recommend that the
Board select, the director nominees for the next annual meeting of stockholders;
(b) develop and recommend to the Board a set of corporate governance principles
applicable to the Company; and (c) oversee the evaluation of the Board and
Company management.
The purposes of the Committee in the areas of Compensation are to have a direct
responsibility to (a) review and approve corporate goals and objectives relevant
to CEO compensation, evaluate the CEO's performance in light of those goals and
objectives, and either as a committee or together with the other independent
directors (as directed by the Board), determine and approve the CEO's
compensation based on this examination; (b) make recommendations to the Board
with respect to non-CEO compensation, incentive compensation plans and
equity-based plans; and (c) produce an annual report on executive compensation
as required by the SEC for inclusion in the proxy statement or Form 10-K.
COMMITTEE MEMBERSHIP
The Committee shall consist of no fewer than three directors, each of whom shall
meet the "independence" requirements set forth in the Company's Corporate
Governance Guidelines and all other legal and exchange requirements.
The members of the Committee shall be appointed and removed by the Board in
consultation with the Chair of the Board and CEO. The Chair of the Committee
shall be designated by the Chair of the Board.
The Committee shall meet at least two times per year or more frequently as
circumstances require. A majority of the members constitute a quorum of the
Committee. Once a quorum is established, a majority of the members present shall
decide any question brought before the Committee.
The Committee may ask members of management or others to attend the meeting and
provide pertinent information as necessary. The CEO and the Vice President of
Administration will meet with the Committee as required. However, the Committee
shall deliberate upon the CEO's performance and compensation when no members of
management are present. The Committee is empowered to retain independent
counsel, accountants, employment consultants or others to assist it in the
conduct of its functions. The Committee may allocate the responsibilities of the
Committee to committees of its own denomination, provided that the subcommittees
are composed entirely of independent directors. Any such subcommittee must also
have a published charter.
The Committee, and each member of the Committee, shall be entitled to rely, in
good faith, on information, opinions, reports or statements, or other
information prepared or presented to them by (i) officers and other employees of
the Company, whom the committee or such member believes to be reliable and
competent in the matters presented, and (ii) counsel, public accountants or
other person as to matters which the member believes to be within the
professional competence of such person.
COMMITTEE'S DUTIES AND RESPONSIBILITIES
In addition to the purposes set forth above, the primary duties and
responsibilities of the Committee shall be to:
NOMINATING/CORPORATE GOVERNANCE
1. DIRECTOR SELECTION
(a) Make recommendations to the Board regarding all nominees for Board
membership, whether for the slate of director nominees to be proposed
by the Board to the stockholders in the annual proxy statement or any
director nominees to be elected by the Board to fill interim director
vacancies consistent with criteria approved by the Board. It is
expected that all directors will be alert to potential board candidates
with appropriate skills and characteristics and communicate such
information to the Committee. The CEO, while not a member of the
Committee, shall have a significant role in recommending board
candidates and the recruitment process of new members.
A-1
(b) Develop and recommend to the Board criteria for selecting new
directors. Criteria could include background, skills, experience, age,
diversity, time availability (including the number of other boards the
person sits on), needs of the Board and current and future business
directions of the Company.
(c) Have the sole authority to retain and terminate any search firm to be
used to identify director candidates, including sole authority to
approve the search firm's fees and other retention terms.
(d) Provide the disclosure to stockholders in the annual meeting proxy
statement as required by the SEC.
2. BOARD AND BOARD PERFORMANCE
(a) Periodically review and recommend the appropriate size of the Board.
(b) Periodically review appropriateness of any restrictions on Board
service, such as term limits and retirement policy.
(c) Oversee the evaluation of the Board.
(i) Establish, coordinate and review with the Chair of the Board
criteria and process for evaluating the effectiveness of the
Board.
(ii) Establish performance criteria/expectations for directors in
areas of attendance, preparedness, candor and participation.
(iii) Solicit input from the Board and periodically review the
effectiveness of the Board and its committees, including the
composition and functionality of the Board and its committees.
(d) After consultation with other nonmanagement directors, recommend
frequency of regular meetings of non-management directors, develop
format for such meetings, including selection of presiding director at
such meetings, and determine method of communications between
i) employees, stockholders and other interested parties and
ii) nonmanagement directors and/or the presiding non-~management
director.
3. BOARD LEADERSHIP
(a) Develop and recommend to the Board procedures for selection of the
Chair of the Board and/or Lead Director.
(b) Develop and recommend to the Board procedures for the Board's review of
the Chair of the Board and/or Lead Director, and for communicating such
review.
4. BOARD COMMITTEES
(a) Make recommendations to the Board regarding committee structures and
delegated responsibilities.
(b) Recommend to the Board, on an annual basis,
nominees for appointment to committees of the Board.
5. GOVERNANCE POLICIES
(a) Develop and periodically review and recommend to the Board appropriate
revisions to the Company's Corporate Governance Guidelines.
(b) Develop and periodically review and recommend to the Board in
conjunction with the Audit Committee appropriate revisions to a code of
business conduct and ethics applicable to the Company's directors,
officers and employees.
(c) Develop and periodically review and recommend to the Board in
conjunction with the Audit Committee appropriate revisions to a code of
ethics applicable to the Company's senior financial officers and CEO.
COMPENSATION
1. CEO AND EXECUTIVE COMPENSATION
(a) Review and approve corporate goals and objectives relevant to CEO
compensation, evaluate the CEO's performance in light of those goals
and objectives and either as a committee or together with the other
independent directors (as directed by the Board), determine and
approve the CEO's compensation level based on this evaluation. In
determining the long-term incentive component of CEO compensation, the
Committee should consider, among other factors, the Company's
performance and relative stockholder return, the value of similar
incentive awards to CEOs at comparable companies, and the awards given
to the Company's CEO in past years. To avoid confusion, the Committee
is not precluded from approving awards (with or without ratification
of the Board) as may be required to comply with applicable tax laws
(i.e., Rule 162(m)).
A-2
(b) Oversee the evaluation of Company's management.
(c) Review the CEO's recommendations and approve annual compensation for
the Company's other senior executives.
(d) Establish and administer annual and long-term incentive compensation
plans for key executives.
(e) Review and recommend to the Board for its approval changes to
executive compensation policies and programs.
(f) Review and take action, if necessary, to set performance standards
required by any Company compensation arrangements applicable to the
CEO and the Company's other executives.
2. EQUITY-BASED COMPENSATION
(a) Recommend to the Board for its approval and, where required,
submission to the Company's stockholders, incentive compensation
plans and equity-based plans.
(b) Determine awards under the Company's stock option plans and exercise
such other power and authority as may be permitted or required under
such plans.
(c) Make recommendations to the Board regarding reservation of shares for
issuance under the stock option plans.
3. DIRECTOR COMPENSATION
Review and recommend to the Board programs or changes to programs for
director compensation, including indemnification and insurance.
4. GENERAL COMPENSATION DUTIES
(a) Prepare and publish a report to stockholders in the annual meeting
proxy statement as required by the SEC.
(b) Retain a compensation consultant, from time to time, to advise the
Committee on executive compensation practices and policies, or any
other matters within the charter of the Committee.
(c) Have the sole authority to retain and terminate any compensation
consultant used to assist in the evaluation of a director, CEO or
senior executive compensation of the Company and have sole authority
to approve the consultant's fees and other retention terms.
GENERAL RESPONSIBILITIES
1. Make regular reports to the Board.
2. Review and reassess the adequacy of the Committee's charter annually and
recommend any proposed changes to the Board for approval.
3. Make recommendations to the Board as to Committee member qualifications,
appointment and removal.
4. Make recommendations to the Board regarding Committee structure and
operations (including authority to delegate to subcommittees).
5. Perform an annual performance evaluation of the Committee.
6. Perform such other functions as assigned by law, the Company's bylaws,
or the Board.
The Committee does not have administrative or oversight responsibility over
the pension fund, which is administered by its trustees.
A-3
APPENDIX B
OREGON STEEL MILLS, INC.
AUDIT COMMITTEE CHARTER
--------------------------------------------------------------------------------
The Audit Committee is a committee of the Board of Directors. The Audit
Committee's purpose is to assist Board oversight of: (a) the integrity of the
Company's financial statements, (b) the Company's compliance with legal and
regulatory requirements, (c) the independence and qualifications of the outside
auditor, and (d) the performance of the Company's internal audit function and
outside auditor.
The Audit Committee shall have the power to conduct or authorize investigations
into any matters within the Committee's scope of responsibilities. The Committee
shall be empowered to retain independent counsel, accountants, and other
advisers, as it determines necessary to carry out its duties. The Committee will
perform such other functions as assigned by law, the Company's charter or
bylaws, or the Board of Directors.
The Company must provide for appropriate funding, as determined by the Audit
Committee, in its capacity as a committee of the Board of Directors, for payment
of: (a) compensation to any registered public accounting firm engaged for the
purpose of preparing or issuing an audit report or performing other audit,
review or attest services for the Company; (b) compensation to any advisers
employed by the Audit Committee; and (c) ordinary administrative expenses of the
Audit Committee that are necessary or appropriate in carrying out the Audit
Committee's duties.
MEMBERSHIP
The membership of the Audit Committee shall consist of three or more independent
members of the Board of Directors who shall be appointed by the Board of
Directors. Independence shall be as determined in accordance with New York Stock
Exchange standards and the Securities and Exchange Commission rules. Each member
must be financially literate, as such qualification is interpreted by the Board
of Directors in its business judgment. At least one member must have accounting
or related financial management expertise as the Board of Directors interprets
such qualification in its business judgment and if such person meets the
definition of a financial expert set out in the rules and regulations of the
Securities and Exchange Commission, it will be presumed that such person has
accounting or related financial management expertise. Committee members will not
serve simultaneously on the audit committees of more than two other public
companies, unless the board determines that such simultaneous service would not
impair the ability of such member to effectively serve on the Company's Audit
Committee.
MEETINGS
The Committee shall meet at least two times per year or more frequently as it
deems necessary to fulfill its responsibilities. The Committee may request
members of management or others to attend the meeting and provide pertinent
information as necessary. The Audit Committee shall meet separately,
periodically, with the outside auditor, the manager of internal audit, and
management.
DUTIES, RESPONSIBILITIES AND AUTHORITY
In meeting its responsibilities, the Audit Committee shall have the following
duties and authority:
WITH RESPECT TO THE OUTSIDE AUDITOR,
[BULLET] To have ultimate authority and direct responsibility for the
appointment, compensation, retention and oversight of the work of any
registered public accounting firm employed or engaged by the Company
(including resolution of disagreements between management and the
auditor regarding financial reporting) for the purpose of preparing or
issuing an audit report or performing other audit, review or attest
services for the Company, and the outside auditor must report directly
to the Audit Committee.
[BULLET] At least annually, to obtain and review a report by the outside auditor
describing: the firm's internal quality-control procedures; any
material issues raised by the most recent internal quality-control
review, or peer review, of the firm, or by any inquiry or investigation
by governmental or professional authorities, within the preceding five
years, respecting one or more independent audits carried out by the
firm, and any steps taken to deal with any such issues, and (to assess
the auditor's independence) all relationships between the outside
auditor and the Company.
[BULLET] After reviewing the report described above and the outside auditor's
work throughout the year, to evaluate the outside auditor's
qualifications, performance and independence and to review and evaluate
the lead partner of the outside auditor. In making its evaluation, the
Audit Committee will take into account the opinions of management and
the Company's internal auditor. The Audit Committee will assure the
regular rotation of the lead audit partner as required by law and will
consider whether, in order to assure continu-
B-1
ing auditor independence, there should be regular rotation of the audit
firm itself. The Audit Committee will present its conclusions with
respect to the outside auditor to the full board.
[BULLET] To pre-approve engagements of permitted nonaudit services performed by
the outside auditor, and establish policies and procedures for the
engagement of the outside auditor to provide permitted nonaudit
services.
[BULLET] To review the outside auditor's scope and plan of the annual audit.
[BULLET] To review with the outside auditor any audit problem or difficulties
and management's response, including any restrictions on the scope of
the outside auditor's activities or on access to requested information,
and any significant disagreements with management. The review will also
include a discussion of the responsibilities, budget and staffing of
the Company's internal audit function.
[BULLET] To set clear hiring policies for employees or former employees of the
outside auditors.
[BULLET] To review (a) major issues regarding accounting principles and
financial statement presentations, including any significant changes in
the Company's selection or application of accounting principles, and
major issues as to the adequacy of the Company's internal controls and
any special audit steps adopted in light of material control
deficiencies; (b) analyses prepared by management and/or the outside
auditor setting forth significant financial reporting issues and
judgments made in connection with the preparation of the financial
statements, including analyses of the effects of alternative GAAP
methods on the financial statements; and (c) the effect of regulatory
and accounting initiatives as well as off-balance sheet structures, on
the financial statements of the Company.
WITH RESPECT TO THE INTERNAL AUDIT FUNCTION,
[BULLET] To review and ratify the appointment, replacement, reassignment, or
dismissal of the manager of internal audit.
[BULLET] To review the quarterly audit plan and any difficulties encountered in
the course of audits, including any restrictions on the scope of the
internal audit work or access to required information.
[BULLET] To review the internal audit budget, staffing, and department charter.
[BULLET] To review significant findings during the year and management's
responses to such findings.
WITH RESPECT TO THE COMPANY'S FINANCIAL REPORTING PROCESS,
[BULLET] To review and discuss any reports or communications submitted to the
Audit Committee by the outside auditor, whether or not required by
SAS 61, Independence Standards Board Standard No. 1 or Securities and
Exchange Commission rules, including reports and communications related
to:
(a) Deficiencies noted in the audit in the design or operation of
internal controls,
(b) Consideration of fraud in a financial audit,
(c) Detection of illegal acts,
(d) The outside auditor's responsibility under GAAP,
(e) Significant accounting policies,
(f) Management judgments and accounting estimates,
(g) Adjustments arising from the audit,
(h) The responsibility of the outside auditor for other information in
documents containing audited financial statements,
(i) Major issues discussed with management,
(j) Disagreements with management,
(k) The outside auditor's judgment about the quality of the Company's
accounting principles,
(l) Reviews of interim financial information conducted by the outside
auditor,
(m) Critical accounting policies and practices to be used,
(n) Alternative treatments of financial information within GAAP that
have been discussed with management officials of the Company,
ramifications of the use of such alternative disclosures and
treatments, and the treatment preferred by the outside auditor;
and
(o) Other material written communications between the outside auditor
and the management of the Company, such as any management letter
or schedule of unadjusted differences.
B-2
[BULLET] Based on the outside auditor's reports and review of the audited
financial statement, to recommend or not recommend to the Board of
Directors that the audited financial statements be included in the
Company's Annual Report on Form 10-K.
[BULLET] To meet with the outside auditor, the manager of internal audit, and
management:
(a) To consider the audit scope and plan of the internal auditors and
the outside auditor. Review with the manager of internal audit and
the outside auditor the coordination of audit effort to assure
completeness of coverage, reduction of redundant efforts, and the
effective use of audit resources; and
(b) The outside auditor's audit of the financial statements and the
form of opinion the outside auditor proposes to render to the Board
of Directors.
[BULLET] To review legal and regulatory matters identified by legal counsel that
may have a material impact on the financial statements.
[BULLET] To review and discuss the Company's annual audited financial statements
and quarterly financial statements with management and the outside
auditor, including the Company's disclosures under "Management's
Discussion and Analysis of Financial Condition and Results of
Operations."
[BULLET] To discuss generally the Company's earnings press releases (that is the
type and presentation of information to be included in earnings press
releases), as well as review any financial information and earnings
guidance provided to analysts and rating agencies.
[BULLET] To discuss policies with respect to risk assessment and risk
management.
WITH RESPECT TO REPORTING,
[BULLET] To review any report or other disclosures required by the rules of the
Securities and Exchange Committee to be included in the Company's
annual proxy statement.
[BULLET] To review this charter at least annually and recommend any changes to
the full Board of Directors.
[BULLET] To report regularly to the full Board of Directors.
[BULLET] To make such recommendations with respect to the above and other
matters as the Audit Committee may deem necessary or appropriate.
WITH RESPECT TO EVALUATIONS,
[BULLET] To perform an annual performance evaluation of the Audit Committee.
WITH RESPECT TO COMPLAINTS,
[BULLET] To establish procedures for (a) the receipt, retention, and treatment
of complaints received by the Company regarding accounting, internal
accounting controls, or auditing matters; and (b) the confidential,
anonymous submission by employees of the Company of concerns regarding
questionable accounting or auditing matters.
B-3
OREGON STEEL MILLS, INC.
ANNUAL MEETING - April 29, 2004
PROXY SOLICITED BY BOARD OF DIRECTORS
The undersigned hereby appoints James E. Declusin 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 29, 2004
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 PROPOSAL 1 AND AGAINST PROPOSAL 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)
[BOX]
ADDRESS CHANGE/COMMENTS (MARK THE CORRESPONDINGBOX ON THE REVERSE SIDE)
[END OF BOX]
[TRIANGLE]FOLD AND DETACH HERE[TRIANGLE]
YOU CAN NOW ACCESS YOUR OREGON STEEL MILLS, INC. ACCOUNT ONLINE.
Access your Oregon Steel Mills, Inc. shareholder/stockholder account online via
Investor ServiceDirect (R)(ISD).
Mellon Investor Services LLC, Transfer Agent for Oregon Steel Mills, Inc., now
makes it easy and convenient to get current information on your shareholder
account.
[BULLET] View account status [BULLET] View payment history for dividends
[BULLET] View certificate history [BULLET] Make address changes
[BULLET] View book-entry information [BULLET] Obtain a duplicate 1099 tax form
[BULLET] Establish/change our PIN
VISIT US ON THE WEB AT HTTP://WWW.MELLONINVESTOR.COM
CALL 1-877-978-7778 BETWEEN 9AM-7PM
MONDAY-FRIDAY EASTERN TIME
INVESTOR SERVICE DIRECT (R) IS A REGISTERED TRADEMARK OF MELLON INVESTOR
SEVICES LLC
-End of first page of Proxy card-
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL 1 AND AGAINST PROPOSAL 2.
Mark Here for Address [Empty Square
Change or Comments Box]
1. Election of Class A Directors FOR WITHHOLD
01 WILLIAM P. KINNUNE [ ] [ ]
02 DAVID L. PARKINSON
03 BRETT WILCOX
2. Stockholder proposal to hire proxy advisory firm.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE,
WRITE THAT NOMINEE'S NAME ON THE LINE BELOW.)
------------------ ------------------ ----------------------
Dated: , 2004
-----------
[To the left of "Date" -----------------------
appears a 3/8-inch, Signature of Shareholder
horizontal black line;
a perpendicular 3/8-inch -----------------------
black line extends Signature or Signatures
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 2004 OREGON STEEL MILLS, INC. ANNUAL MEETING OF
STOCKHOLDERS, THURSDAY, APRIL 29, 2004, AT 8:00 A.M. PACITIC TIME IN THE
CAMBRIDGE/OXFORD ROOM AT THE BENSON HOTEL, 309 SW BROADWAY, PORTLAND,
OREGON.
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.
- End of second side of Proxy card-