EMPLOYMENT AGREEMENT
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THIS AGREEMENT ("Agreement") dated as of January 1, 2000, by and
between OREGON STEEL XXXXX, INC., a Delaware corporation ("OSM") and XXXXXX X.
XXXXXXX (the "Executive").
WITNESSETH:
WHEREAS, the Executive is and has been the Chairman of the Board of
Directors and Chief Executive Officer of OSM for a number of years, and before
that a key senior executive officer of OSM who, through his exceptional efforts,
has contributed materially to its success;
WHEREAS, OSM and the Executive desire that the Executive remain an
employee of OSM and transition his duties and responsibilities as Chief
Executive Officer to Xxx X. Xxxxxx effective January 1, 2000. This will assure
continuity of management and policies responsible for OSM's success in the past
and assure OSM of the efforts of the Executive during the term of this
Agreement, and the Executive desires to remain in the employment of OSM; and
WHEREAS, the Executive might elect at any time to terminate his
employment by OSM in the absence of any Employment Agreement with terms and
provisions set forth herein and OSM considers such a termination to be
detrimental to the future success of OSM;
NOW, THEREFORE, in consideration of the premises and of the mutual
promises herein set forth, the parties agree as follows:
1. This Employment Agreement shall supersede that certain Employment
Agreement dated January 17, 1988, between OSM and Executive (the "Prior
Agreement"), and it is hereby mutually agreed that the Prior Agreement has been
terminated effective upon the execution of this Employment Agreement.
2. Employment.
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2.1 Term. OSM agrees to employ Executive and Executive agrees
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to be employed by OSM as its Chairman of the Board of Directors upon the terms
and conditions set forth herein for a period beginning on the date hereof and
continuing until June 30, 2001. The Executive will retire from employment with
OSM on that date with full employee benefits for retirement at age 62.
2.2 Duties. The Executive agrees faithfully to contribute to
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the management, operations and business of OSM and to perform such other
services as may be consistent with the duties of the Chairman of the Board of
Directors to the best of his ability, subject to the directive of the Board of
Directors of OSM. He is also to devote such time during normal working hours to
such duties as is necessary.
1 - EMPLOYMENT AGREEMENT
3. Compensation.
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3.1 Base Salary. As compensation for the services to be
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performed by the Executive, OSM agrees to pay the Executive a base salary at the
rate of Five Hundred Fifty Thousand Dollars ($550,000) per year for each year of
his employment hereunder. The compensation is payable in substantially equal
monthly installments and reduced on a pro-rata basis for any fraction of a year
or month during which he is not so employed.
3.2 Profit Participation, ESOP, Retirement Benefits, SERP,
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etc. In addition to his base salary, during the term of this Agreement the
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Executive will participate in all compensation and other executive employee
benefit plans of OSM during the period that any existing plans are in effect.
However, he will not participate in the Profit Participation Plan after December
31, 1999. Such compensation and benefits plans presently include, without
limitation, ESOP, qualified retirement plan, Thrift Plan, Oregon Steel Xxxxx
Supplemental Retirement Plan ("SERP") dated May 1, 1994 and health and welfare
benefits plan.
4. Business Expenses. OSM will provide for the payment of, or
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reimbursement to the Executive of, travel and other out-of-pocket expenses
reasonably incurred by him in conjunction with his employment hereunder.
5. Proprietary Rights. The Executive agrees that OSM will own, and the
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Executive hereby waives all right, title, and interest in and to contributions
made to the business and operations of OSM and its subsidiaries by the Executive
during the term of this Agreement or prior thereto during his employment by OSM.
This includes, without limitation, all ideas, suggestions and other
contributions made by the Executive and all results and proceeds derived
therefrom. Upon termination of his employment, the Executive will surrender to
OSM all customer lists, records and other documents that he may have pertaining
to the business of OSM or its subsidiaries and will neither make nor retain
copies of any such documents. The provision of this paragraph will not:
(a) be affected by cessation or termination of
Executive's employment pursuant to the terms hereof or otherwise;
(b) apply to any information, matter or thing
that is in the public domain.
6. Confidential Information. The Executive acknowledges that while
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employed by OSM, he will have access to confidential records, customer lists,
data, drawings, writings and other materials owned by OSM or its subsidiaries.
The Executive agrees that, during the term of his employment, he will not
directly or indirectly disclose to others or use for his own benefit, or the
benefit of others, any of the foregoing information, except in the course of his
employment and for the benefit of OSM and its subsidiaries. All records, files,
writings, drawings, lists, data and similar materials and information that the
Executive will prepare, use or otherwise come into contact with during the
course of his employment by OSM will, as between OSM and the Executive, at all
times remain the sole property of OSM. The provisions of this paragraph will
not:
2- EMPLOYMENT AGREEMENT
(a) apply to the operation of OSM or its
business to the extent that the Executive acquires information from parties
other than OSM or its subsidiaries;
(b) apply to any information, matter or thing
that is in the public domain.
7. Covenant Not to Compete.
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7.1 Constraints. During the term of this Agreement, and for a
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period of three (3) years from the termination or expiration of his employment,
the Executive will not, within the geographical area of the United States,
directly or indirectly:
(a) own, manage, operate, join, control or be
employed by,
(b) participate in the ownership, management,
operation or control of, or
(c) be connected in any manner with any business
of the type and character of business engaged in by OSM or its subsidiaries
during the term of the Executive's employment.
The above constraint will not prevent the Executive from making passive
investments in enterprises engaged in the steel business or the manufacture of
pipe products. Executive acknowledges that the imposition of these constraints
are a continuation of the constraints imposed on Executive under the Prior
Agreement when Executive was promoted to the position of Chief Executive Officer
of OSM and will not work an undue hardship on him.
7.2 Enforceability. In the event any of the provisions of
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paragraph 7.1 above finally are determined by any court to be void or
unenforceable in any particular geographic area or as to any particular
constraints, this Agreement will be deemed modified so as to eliminate therefrom
the unenforceable constraint or its application to the area in which it is
enforceable and, except as so modified, the Agreement will remain in full force
and effect.
8. Offices and Directorships. While employed by OSM, the
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Executive will be named Chairman of the Board of Directors of OSM, and the
Executive agrees to so serve.
9. Termination of Employment.
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9.1 Termination by OSM. OSM may terminate the employment
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of Executive:
(a) for "Cause" as hereinafter defined; or
(b) by reason of the death or Permanent
Disability of Executive.
9.2 Termination by Executive. Executive may terminate
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his employment under this Employment Agreement for "Good Reason" as hereinafter
defined.
3 - EMPLOYMENT AGREEMENT
10. Definitions.
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10.1 "Cause," for the purposes of the Agreement, shall
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mean severance from OSM's employment because of:
(a) the reduction in OSM's work force due to a
substantial decrease in OSM's business and the absence of any need during the
foreseeable future for the continued performance of the Executive's duties,
(b) the willful and continued failure by the
Executive to substantially perform his assigned duties with OSM (other than any
such failure resulting from incapacity due to physical or mental illness or any
actual or anticipated failure after the issuance of a Notice of Termination by
the Executive for Good Reason) after a written demand for substantial
performance is delivered to the Executive by OSM, which demand specifically
identifies the manner in which OSM believes that the Executive has not
substantially performed his duties, or
(c) willful engagement by the Executive in
conduct which is demonstrably and materially injurious to OSM, monetarily or
otherwise. For purposes of this Section, no act, or failure to act, on the part
of the Executive without good faith and without reasonable belief that the
action or omission was in the best interest of OSM.
10.2 "Good Reason" shall mean the occurrence, of any of the
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following circumstances without the express written consent of the Executive,
unless such circumstances are fully corrected prior to the Date of Termination
specified in the Notice of Termination given in respect thereof:
(a) the harassment by OSM or the executives
thereof of Executive so as to adversely affect the ability of Executive to
perform his assigned duties and responsibilities;
(b) a geographical relocation of Executive is
ordered by OSM to areas other than Portland, Oregon, or Napa, California;
(c) the failure by OSM to pay any portion of
Executive's current compensation or to pay to Executive any portion of an
installment of deferred compensation under any deferred compensation agreement
of OSM within seven (7) days of the date such compensation is due; or
(d) any purported termination of Executive's
employment by OSM that is not effected pursuant to a Notice of Termination
satisfying the requirements of Section 11.2.
Executive's continued employment shall not constitute consent
to, or a waiver of rights with respect to, any circumstance constituting Good
Reason hereunder.
10.3 "Permanent Disability" shall mean a medically determined
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physical or mental impairment which prevents the Executive from performing every
duty of his occupation, and a prognosis that such impairment will continue for
at least one (1) year.
4 - EMPLOYMENT AGREEMENT
10.4 "Change in Control" shall mean any of the following:
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(a) Any time less than a majority of the
Directors of OSM are individuals who were either elected by the Board of
Directors or nominated by the Board of Directors (or a committee of the Board of
Directors) for election by the stockholders.
(b) Any time a majority of the Board of
Directors of OSM are individuals who, in connection with a single transaction or
series of related transactions that effects a change in the ownership of OSM,
were either elected by the Board of Directors (or a committee of the Board of
Directors) for election by the stockholders.
(c) Any time any person is or becomes the
Beneficial Owner, directly or indirectly of securities of OSM representing
twenty-five percent (25%) or more of the combined voting power of OSM's then
outstanding securities. Or,
(d) The stockholders of OSM approve a plan of
complete liquidation of OSM, other than in connection with the complete
cessation of the business activities conducted with OSM's operating assets, or
(b) an agreement is entered for the sale or disposition by OSM of all or
substantially all of OSM's assets except pursuant to an order of a bankruptcy
court having jurisdiction of OSM. For purposes of clause (b), the term "the sale
or disposition by OSM of all or substantially all of OSM's assets" shall mean a
sale or other disposition transaction or series of related transactions
involving assets of OSM or of any direct or indirect subsidiary of OSM
(including the stock of any direct or indirect subsidiary of OSM) in which the
value of the assets or stock being sold or otherwise disposed of (as measured by
the purchase price being paid therefore or by such other method as the Board of
Directors determines is appropriate in a case where there is no readily
ascertainable purchased price) constitutes more than two-thirds (2/3) of the
fair market value of OSM (as hereinafter defined). For purposes of the preceding
sentence, the "fair market value of OSM" shall be the aggregate market value of
OSM's outstanding common stock (on a fully diluted basis) plus the aggregate
market value of OSM's other outstanding equity securities, if any. The aggregate
market value of OSM's common stock shall be determined by multiplying the number
of shares of OSM's common stock (on a fully diluted basis) outstanding on the
date of the execution and delivery of a definitive agreement with respect to the
transaction or series of related transactions (the "Transaction Date") by the
average closing price of OSM's common stock for the ten (10) trading days
immediately preceding the Transaction Date. The aggregate market value of any
other equity securities of OSM shall be determined in a manner similar to that
prescribed in the immediately preceding sentence for determining the aggregate
market value of OSM's common stock or by such other method as the Board of
Directors shall determine is appropriate; provided that, in the event that on
the Transaction Date there is no public market for such common stock or other
equity security, the fair market value of the equity securities or common stock
shall be as reasonably determined by the Board of Directors.
10.5 "Directors" shall mean those individuals who are
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members of the Board of Directors of OSM.
11. Termination Benefits.
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5 - EMPLOYMENT AGREEMENT
11.1 Eligibility for Benefits. The Executive shall be eligible
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for the additional benefits described in Section 11.2 if from the effective date
of this Employment Agreement until June 30, 2001 there is a Change in Control of
OSM or termination of the Executive's employment.
11.2 Termination Benefits.
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11.2.1 After a Change in Control OSM shall pay to
Executive his full base compensation from the date of Change of Control or
termination of employment to June 30, 2001, at the Rate of $550,000 per annum
together with all other amounts due under this Section not later than the
thirtieth (30th) day following said Change in Control or termination of
employment, plus all other amounts to which the Executive is entitled under any
other compensation or benefit plan of OSM at the time such payments are due,
and;
11.2.2 OSM shall pay an additional amount equal to
the lump sum present actuarial value of the excess, if any, of A over B where
(a) is the normal retirement benefit to
which executive would have been entitled under the OSM Pension Plan assuming
that such Executive continued as an active participant until age 62 without
change in his rate of annual pay; and
(b) is the normal retirement benefit to
which the Executive is actually entitled under the OSM Pension Plan as of the
date of Change of Control or termination of employment, and;
11.2.3 OSM shall pay an additional amount equal to
the lump sum present actuarial value of all the amounts the Executive would be
entitled under the SERP, assuming that such Executive had continued as an active
participant until age 62 without a change in his rate of annual pay.
Present actuarial value shall be computed using a 6.5
percent interest and the current GATT mortality table as required since 1994.
11.2.4 OSM shall pay all legal fees and expenses
incurred by Executive in seeking to obtain or enforce any right or benefit
provided to the Executive pursuant to this Agreement.
12. Miscellaneous.
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12.1 Binding Commitment. Rights of Executive under this
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Agreement shall inure to the benefit of and be enforceable by the Executive and
his personal or legal representatives, executors, administrators, successors,
heirs, distributees, devises and legatees. If Executive should die while any
amount would still be payable to him hereunder, all such amount, unless
otherwise provided herein, shall be paid in accordance with the terms of this
Agreement to his designee, or if there is no such designee, to his estate.
6 - EMPLOYMENT AGREEMENT
12.2 Notice. Any termination of Executive's employment by OSM
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or the Executive shall be communicated by written Notice of Termination to the
Executive or OSM, as the case may be in accordance with the terms hereof.
"Notice of Termination" shall mean a notice that shall indicate the specific
termination provision of this Agreement relied upon and shall set forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of employment under the provision so indicated.
12.3 Date of Termination. "Date of Termination" shall mean
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thirty (30) days after Notice of Termination is given unless it is given by
Executive in which event it means 6 months after the Notice is given. If, prior
to the Date of Termination (as determined without regard to this proviso), the
party receiving such Notice of Termination notifies the other party that a
dispute exists concerning the termination, then the Date of Termination shall be
the date on which the dispute is finally resolved, either by mutual written
agreement of the parties, by a binding arbitration award, or by a final
judgment, order or decree of a court of competent jurisdiction (which is not
appealable or with respect to which the time for appeal therefore has expired
and no appeal has been perfected); and provided, further, that the Date of
Termination shall be extended by a notice of dispute only if such notice is
given in good faith and the party giving such notice pursues the resolution of
such dispute with reasonable diligence. If the Date of Termination occurs after
June 30, 2001, because of the operation of the preceding sentence, the
employment of the Executive shall be considered to have been terminated on the
date of death, disability or June 30, 2001, as the case may be.
12.4 Form of Notice. Except as otherwise provided herein,
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notices and all other communications provided for under this Agreement shall be
in writing and shall be deemed to have been duly given when delivered or mailed
by United States certified or registered mail, return receipt requested, postage
prepaid, addressed to OSM or the Executive, as the case may be. Notices to OSM
shall be at its principal office in Portland, Oregon. Notices to Executive shall
be addressed to him at his last known address as shown in the records of OSM.
12.5 Applicable Law. The validity, interpretation,
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construction and performance of the obligations created under this Agreement
shall be governed by the laws of the State of Oregon unless preempted by federal
law. Any payments provided for hereunder shall be paid net of any applicable
withholding required under federal, state or local law.
7 - EMPLOYMENT AGREEMENT
12.6 Validity. The invalidity or unenforceability of any
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provision of this Agreement shall not affect the validity or enforceability of
any other provision hereof, which shall remain in full force and effect.
IN WITNESS WHEREOF the parties have executed this Agreement on the date
first hereinabove set forth.
OREGON STEEL XXXXX, INC.
By: /s/ L. Xxx Xxxxx
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L. XXX XXXXX
By: /s/ Xxxxxx X. Xxxxxxx
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XXXXXX X. XXXXXXX
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