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EXHIBIT B
CONFIDENTIAL
AGREEMENT IN PRINCIPLE
BETWEEN
XXXX X. XXXXXXXX AND THE UNITED COMPANY
REGARDING EMPLOYMENT BY BIRMINGHAM STEEL CORPORATION AND RELATED MATTERS
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This Agreement in Principle states the principal terms under which Xxxx X.
Xxxxxxxx ("Executive") will agree (i) to be employed as a temporary consultant
by a shareholder group ("Shareholder Group"), or by The United Company as lead
shareholder of the Shareholder Group ("Lead Shareholder"), which intends to
undertake a proxy solicitation for the election of directors constituting at
least a majority of directors of Birmingham Steel Corporation (the "Company"),
and (ii) Executive will agree to serve as Chairman and Chief Executive Officer
of the Company if the proxy solicitation is successful. This Agreement in
Principle is not a complete statement of all relevant terms of the contemplated
agreements and is not binding on any party, except for the provision below
regarding confidentiality. Executive will not be bound to the consulting
agreement except upon the negotiation and execution of a complete and definitive
Consulting Agreement, which will be undertaken promptly. The parties
contemplate, however, that the Consulting Agreement will contain a form of
employment agreement that Executive will agree to accept if approved by the
directors of the Company after the successful proxy contest. The employment
agreement will be negotiated by Executive and the Shareholder Group, and
presented to the board of the Company for adoption after the next election of
directors of Company.
INTERIM CONSULTING
AGREEMENT Until the Company's annual shareholder meeting,
Executive (through International Steel Associates,
Inc., an Arkansas corporation) will be employed as a
consultant to Shareholder Group on the following
terms:
- Term: Maximum term through December
31, 1999, unless extended by
agreement, with earlier termination
on the first to occur of (i) notice
to Executive of abandonment of
proxy action referred to below or
(ii) the execution of an employment
agreement between Executive and
Company.
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- Rate: $ 50,000 per calendar month
(or portion thereof, paid by Lead
Shareholder monthly.
- Payment of monthly fee is
guaranteed, regardless of number of
consulting hours requested.
- Services on request.
- Reimbursement by Lead Shareholder
for out-of-pocket expenses (travel,
etc.).
- Non-exclusive; Executive may engage
in other consulting work but (i)
such other work must not interfere
with reasonable demands for
services under Consulting
Agreement, (ii) must not involve
any transaction, activity or group
competing with Shareholder Group
proxy action, and (iii) must not be
conducted for any company that
produces steel products in the
United States that are competitive
with products currently sold by
Company.
- Executive to be reimbursed for
legal fees related to negotiation
of Consulting and Employment
Agreements, federal and state
governmental filings, proxy action,
related consultation, etc.
- All fees and expense reimbursements
will be paid or guaranteed by Lead
Shareholder.
- Lead Shareholder will grant
Executive options to buy 100,000
shares of Company common stock
owned by Lead Shareholder. The
options will be exerciseable in
whole or in part from time to time,
at an exercise price equal to the
NYSE closing price for Company
common stock on the day before this
Agreement in Principle is signed by
both parties. The exercise term
will be agreed upon, but will
extend until the earlier to occur
of (i) six months after the annual
meeting of Company shareholders for
which the contemplated proxy
solicitation will be made or (ii)
June 30, 2000. Lead Shareholder
will finance the exercise (interest
free until the Company
shareholder's meeting, and at a
favorable rate thereafter, and for
a repayment term to be agreed). The
option agreement will be negotiated
and executed in connection with the
Consulting Agreement.
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CONSULTING AGREEMENT
TERMINATION - The Consulting Agreement may be
terminated by Lead Shareholder at
any time if the proposed proxy
action is announced but abandoned
prior to the Company's 1999
shareholder meeting.
- The Consulting Agreement will
terminate automatically if the
Shareholder Group's director
nominees numbering at least a
majority of the new Company board
are not elected at the next annual
meeting.
- Executive may terminate Consulting
Agreement, and be relieved of
further obligation, if the Company
Employment Agreement is not adopted
by the new Company board by
December 31, 1999.
CONSULTING AGREEMENT PROXY
MATTERS - Director: Executive will be
included in Shareholders' proposed
director slate.
- Composition of Director State:
Director slate will include
Executive, Xxxxx Xxxx and Xxxxx
XxXxxxxxxx (designees of the
Shareholder Group), and these three
individuals will serve as a
nominating committee for the
remainder of the nominees. All
other director nominees will be
selected from a list of candidates
developed by such nominating
committee, and each nominee must be
approved by all members of the
nominating committee. Upon the
failure of the nominating committee
to reach unanimous agreement on the
director slate, each of Executive
and Shareholder Group may declare
the Consulting Agreement
terminated, and all parties shall
have no further obligations or
liability under it, under this
Agreement in Principle or
otherwise.
- Lead Shareholder will indemnify
Executive from liability resulting
from proxy matters (other than from
information given by Executive for
inclusion in proxy statement).
Executive has the right to review
and consent to the form of proxy
statement and related materials, at
least to the extent they describe
Executive, Executive's proposed
Employment Agreement, and
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other matters reasonably related to
Executive's interest or potential liability.
- Executive's prior consent is necessary for
all public communications regarding
Executive's participation or regarding the
Consulting Agreement and Employment
Agreement. Except and until disclosed as
required by law, including the Executive's
and the Shareholder Group's good faith
determination of disclosure obligations
under federal and state securities laws and
other applicable laws, the terms of this
Agreement in Principle, the Consulting
Agreement and form of proposed Employment
Agreement will be held in confidence by
Shareholder Group and Executive, and neither
will make any public announcement about the
subject matter except by mutual consent.
EMPLOYMENT
AGREEMENT TERMS
POSITION - If proxy action is successful as
contemplated herein, Executive agrees to
become Chairman of the Board and Chief
Executive Officer of Company under terms of
Employment Agreement.
TERM - Five year term, subject to annual renewal
unless terminated by either party.
INDUCEMENT STOCK GRANT - 100,000 shares of Company common stock, with
full tax gross-up cash payment(s); subject
to forfeiture if Executive's employment
terminates before 3rd anniversary (except
termination without cause by Company,
termination by Executive for good reason, or
after change of control, or
death/disability, other equitable reasons to
be set forth in employment agreement).
Forfeiture restrictions lapse as to 1/3 of
total at each annual anniversary.
ANNUAL BASE COMPENSATION - $600,000 per year ($50,000/month)
- Subject to annual increase
consistent with senior executive
management increases
ANNUAL CASH BONUS - 1% of EBITDA
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- Extraordinary charges, goodwill
write-offs, other unusual
write-offs disregarded
INDUCEMENT PHANTOM STOCK
RIGHTS Phantom Stock Options for a total of 1
million shares, vesting over 5 years
(200,000 shares per year). Agreement would
allow Executive to receive a cash
compensation payment with respect to any
vested phantom shares at any time prior to
the expiration of the phantom option equal
to the number of phantom shares he desires
to exercise times the difference between the
strike price (closing price last trading day
before Agreement in Principle is confirmed;
adjusted for splits, etc.) and the market
price of the stock of the Company on the
date of the exercise (or value received by
common shareholders in any tender offer or
other transaction involving exchange or
conversion of common stock). Exercise would
be limited by Company's xxxxxxx xxxxxxx
restrictions (as applicable to directors and
executive officers generally) as if the
phantom shares were real shares and the
exercise were the exercise of real options
and the sale of the shares received upon
exercise. Shareholder Group director
designees will support Company Board's
approval of a final employment agreement by
which Executive receives actual stock
options in lieu of phantom options.
- The options would expire ten years after the
date of grant. All unvested options would
vest upon termination of employment other
than termination for cause. Vested options
will be exercisable at any time through 120
days after termination of employment.
PARTICIPATION IN SENIOR
MANAGEMENT PROGRAMS - Stock Accumulation Plan
- Executive Retirement and Compensation
Deferral Plan
- 401 (K)
- Life Insurance Plan
- Health, etc.
- Other Company Incentive and Fringe Benefit
Programs as adopted by Board for senior
management
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TERMINATION WITHOUT CAUSE
OR FOR GOOD REASON OR UPON
CHANGE OF CONTROL - Executive receives all compensation earned
to date, an incentive bonus based on last
fiscal year, pro rated, and all previously
deferred compensation
- Executive receives severance payment equal
to 3 times (i) currently effective annual
base compensation plus (ii) average of
aggregate of last 3 years incentive
compensation; parachute excise tax indemnity
- Insurance benefits continued for up to one
year
- Vesting of all unvested options is
accelerated; all are exercisable
- No forfeiture of restricted/forfeitable
stock or options
TERMINATION WITH CAUSE - Executive receives accrued and unpaid base
compensation for current year; no current
year incentive compensation is payable
- All exercisable options may be exercised;
forfeitable/unvested restricted stock or
unvested incentive options are forfeited
TERMINATION ON DEATH OR
DISABILITY - Accrued compensation paid (incentive pro
rated based on last year)
- All unvested options accelerate and may be
exercised
- No restricted stock is forfeited; forfeiture
restrictions lapse
RELOCATION EXPENSES - Moving expense reimbursement
- Brokers' fees (Arkansas residence
sale, Birmingham residence
purchase)
- Moving expenses (Charlotte to
Arkansas or Birmingham; and
Arkansas to Birmingham)
- Relocation expenses covered for any
time during term
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- Special Relocation Expenses
- Price protection on sale of Arkansas
residence if Executive relocates, based on
appraisals (appraisals to be paid by
Company); protection of up to 100% of cost
- Reimbursement of Birmingham city living
expenses for up to 2 years (apartment,
furniture, utilities, meals)
MISCELLANEOUS
COMPENSATION - Automobile Allowance in accordance with
Company policy
- Club Reimbursement
- Country Club initiation/equity and
monthly dues. Equity vests in
Executive after 3 years
- City Club initiation/equity and
monthly dues. Equity vests in
Executive after 3 years
- Reimbursement of reasonable business
expenses, in accordance with Company
policies
MISCELLANEOUS
- May continue other permitted
consulting agreements through
December 31, 1999 or, if earlier,
date of hire by Company
- May serve on boards of other
companies, with the approval of the
Company's Nominations Committee of
the board (not to be withheld
unreasonably); may participate in
trade organizations, speeches, etc.
- Maintenance of adequate D&O
insurance
- Indemnification provisions
acceptable to Executive
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The foregoing Agreement in Principle is confirmed, effective when signed by each
party, below.
/s/ Xxxx X. Xxxxxxxx
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Executive
Date: 7/16/99
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Lead Shareholder
The United Company
By: /s/ Xxxxx X. Xxxx
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Xxxxx X. Xxxx
Its: Executive Vice President and General Counsel
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Date: 7-16-99
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