EXHIBIT 2.1
TRANSACTION AGREEMENT
BETWEEN
GERDAU STEEL INC.
AND
XXXXXX X.X.
AND
CO-STEEL INC.
AUGUST 12, 2002
TABLE OF CONTENTS
ARTICLE 1.
INTERPRETATION
1.1. Definitions........................................................................ 1
1.2. Interpretation Not Affected by Headings, etc....................................... 10
1.3. Rules of Construction.............................................................. 10
1.4. Date For Any Action................................................................ 10
1.5. Subsidiaries....................................................................... 10
1.6. Schedules.......................................................................... 10
1.7. Accounting Matters................................................................. 10
1.8. Material Adverse Effect............................................................ 11
ARTICLE 2.
THE TRANSACTION
2.1. The Transaction.................................................................... 11
2.2. Approvals and Recommendations...................................................... 11
2.3. Calling of Meeting................................................................. 12
2.4. Circular........................................................................... 12
ARTICLE 3.
AMERISTEEL PLAN OF MERGER
3.1. Creation of Florida Co............................................................. 14
3.2. Merger of Gerdau USA and FLS Holdings.............................................. 14
3.3. Registration Statement............................................................. 14
3.4. Gerdau USA Approval................................................................ 14
3.5. Issuance of Co-Steel Shares........................................................ 15
3.6. Notice of the Plan of Merger....................................................... 15
ARTICLE 4.
PUBLICITY AND PROXY SOLICITATION
4.1. Publicity.......................................................................... 15
4.2. Proxy Solicitation................................................................. 16
ARTICLE 5.
REPRESENTATIONS AND WARRANTIES OF CO-STEEL
5.1. Organization and Standing.......................................................... 16
5.2. Capitalization..................................................................... 17
5.3. Authority and No Conflicts......................................................... 17
5.4. Consents and Approvals............................................................. 18
5.5. No Defaults........................................................................ 19
5.6. Absence of Certain Changes or Events............................................... 19
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5.7. Public Disclosure.................................................................. 20
5.8. Financial Statements and Financial Matters......................................... 20
5.9. Inventory Valuation................................................................ 21
5.10. Indebtedness....................................................................... 21
5.11. As to Certain Contracts In and Out of the Ordinary Course.......................... 21
5.12. Employment Matters................................................................. 22
5.13. Litigation......................................................................... 23
5.14. Tax Matters........................................................................ 23
5.15. Pension and Employee Benefits...................................................... 24
5.16. Title to Assets.................................................................... 25
5.17. Title to Owned Real Property....................................................... 26
5.18. Leased Real Property............................................................... 26
5.19. Zoning and Other Matters Relating to Real Property................................. 26
5.20. Environmental Matters.............................................................. 26
5.21. Compliance with Laws and Permits; Regulatory Matters............................... 28
5.22. Restrictions on Business Activities................................................ 28
5.23. Customers and Suppliers............................................................ 29
5.24. Insurance.......................................................................... 29
5.25. Brokerage and Finders' Fees........................................................ 29
5.26. Representations Complete........................................................... 29
ARTICLE 6.
REPRESENTATIONS AND WARRANTIES OF GERDAU
6.1. Organization and Standing.......................................................... 30
6.2. Capitalization..................................................................... 31
6.3. Authority and No Conflicts......................................................... 32
6.4. Consents and Approvals............................................................. 33
6.5. No Defaults........................................................................ 33
6.6. Absence of Certain Changes or Events............................................... 33
6.7. Public Disclosure.................................................................. 34
6.8. Financial Statements............................................................... 34
6.9. Inventory Valuation................................................................ 36
6.10. Indebtedness....................................................................... 36
6.11. As to Certain Contracts In and Out of the Ordinary Course.......................... 36
6.12. Employment Matters................................................................. 37
6.13. Litigation......................................................................... 38
6.14. Tax Matters........................................................................ 38
6.15. Pension and Employee Benefits...................................................... 39
6.16. Title to Assets.................................................................... 40
6.17. Title to Owned Real Property....................................................... 40
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6.18. Leased Real Property............................................................... 41
6.19. Zoning and Other Matters Relating to Real Property................................. 41
6.20. Environmental Matters.............................................................. 41
6.21. Compliance with Laws and Permits; Regulatory Matters............................... 42
6.22. Restriction on Business Activities................................................. 43
6.23. Customers and Suppliers............................................................ 43
6.24. Insurance.......................................................................... 44
6.25. Brokerage and Finders' Fees........................................................ 44
6.26. Representations Complete........................................................... 44
ARTICLE 7.
REPRESENTATIONS AND WARRANTIES OF XXXXXX X.X.
7.1. Public Disclosure.................................................................. 44
ARTICLE 8.
COVENANTS RELATING TO THE TRANSACTION
8.1. Covenants of Co-Steel.............................................................. 45
8.2. Covenants of Xxxxxx X.X. and Gerdau................................................ 49
8.3. Access to Information.............................................................. 54
8.4. Physical Due Diligence............................................................. 56
8.5. Mutual Standstill.................................................................. 56
8.6. Regulatory Approvals............................................................... 57
8.7. Third Party Consents............................................................... 58
8.8. Non-Solicitation of Alternative Proposals.......................................... 58
8.9. Notice of Superior Proposal........................................................ 60
8.10. Adjourning or Postponing the Meeting............................................... 61
8.11. Corporate Governance Matters....................................................... 61
8.12. Directors' and Officers' Insurance................................................. 63
ARTICLE 9.
CONDITIONS
9.1. Mutual Conditions.................................................................. 63
9.2. Additional Conditions to the Obligations of Gerdau................................. 64
9.3. Additional Conditions to the Obligations of Co-Steel............................... 64
9.4. Closing Matters.................................................................... 65
ARTICLE 10.
TERMINATION, AMENDMENT AND WAIVER
10.1. Termination........................................................................ 65
10.2. Effect of Termination.............................................................. 67
10.3. Termination Fee and Expenses....................................................... 67
10.4. Amendment.......................................................................... 68
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10.5. Waiver............................................................................. 68
ARTICLE 11.
GENERAL
11.1. Investigation...................................................................... 68
11.2. Survival of Representations and Warranties......................................... 68
11.3. Notices............................................................................ 68
11.4. Assignment......................................................................... 70
11.5. Binding Effect..................................................................... 70
11.6. Further Assurances................................................................. 70
11.7. Expenses........................................................................... 70
11.8. Governing Law...................................................................... 71
11.9. Time of Essence.................................................................... 71
11.10. Entire Agreement................................................................... 71
11.11. Severability....................................................................... 71
11.12. Remedies........................................................................... 71
11.13. Counterparts....................................................................... 72
SCHEDULE A - REGULATORY APPROVALS AND CONSENTS
SCHEDULE B - AMERISTEEL PLAN OF MERGER
TRANSACTION AGREEMENT
This agreement between Gerdau Steel Inc. ("Gerdau"), Xxxxxx X.X. and
Co-Steel Inc. ("Co-Steel") dated as of August 12, 2002, as amended and restated
on August 23, 2002, on September 12, 2002 and on September 30, 2002.
WHEREAS:
A. The board of directors of Co-Steel has determined that the Transaction is
in the best interests of Co-Steel and fair to its shareholders and has
agreed to recommend to Co-Steel Shareholders that they vote in favour of
the Transaction and has determined to take all reasonable action to support
and effect the Transaction.
B. The board of directors of Gerdau has determined that it is in the best
interests of Gerdau to enter into this agreement and has determined to take
all reasonable action to support and effect the Transaction.
The parties agree as follows.
ARTICLE 1.
INTERPRETATION
1.1. DEFINITIONS.
In this agreement:
"AFFILIATE" has the meaning specified in the Securities Act;
"ALTERNATIVE PROPOSAL" means (other than the Transaction or transactions
permitted by section 8.1 of this agreement) (i) any merger, amalgamation,
arrangement, share exchange, take-over bid, recapitalization, consolidation
or business combination involving, directly or indirectly, Co-Steel or any
of its Material Subsidiaries, (ii) any acquisition of assets representing
20% or more of the consolidated net revenues, net income or assets of
Co-Steel and its Subsidiaries, taken as a whole (or any lease, long-term
supply agreement, exchange, mortgage, pledge or other arrangement having a
similar economic effect) in a single transaction or a series of related
transactions, (iii) any acquisition of beneficial ownership of 20% or more
of the then issued and outstanding Co-Steel Shares in a single transaction
or a series of related transactions, (iv) any acquisition by Co-Steel of
any assets or securities of another person (other than acquisitions of
capital stock or assets or securities of any other person that,
individually or in the aggregate, are not material to Co-Steel and its
Subsidiaries, taken as a whole), or (v) any bona fide proposal, or public
announcement of an intention, to do any of the foregoing, and includes any
amendment to an Alternative Proposal;
"AMERISTEEL" means AmeriSteel Corporation;
"AMERISTEEL CREDIT FACILITY" has the meaning specified in the Gerdau
Disclosure Letter;
"AMERISTEEL FINANCIAL STATEMENTS" has the meaning specified in section
6.8.3;
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"AMERISTEEL MANAGEMENT INCENTIVE PLANS" means AmeriSteel Equity Ownership
Plan, AmeriSteel Employee Stock Purchase/SAR Plan, AmeriSteel Corporation
2000 Long Term Incentive Stakeholder Plan, AmeriSteel Corporation Strategic
Value Added Executive Short-Term Incentive Plan and 1995 AmeriSteel Stock
Purchase/Stock Option Plan;
"AMERISTEEL OPTIONS" means the options to purchase shares of AmeriSteel
granted under the AmeriSteel Management Incentive Plans;
"AMERISTEEL PUBLIC DISCLOSURE DOCUMENTS" has the meaning specified in
section 6.7.2;
"APPROVAL DATE" means the date on which all of the approvals specified in
sections 9.1.1, 9.1.3 and 9.1.4 have been obtained;
"BUSINESS DAY" means any day other than a Saturday, Sunday or statutory
holiday in Ontario;
"CANADIAN GROUP FINANCIAL STATEMENTS" has the meaning specified in section
6.8.1;
"CERCLA" has the meaning specified in section 5.20.1.5;
"CHARGE" means any security interest, lien, charge, pledge, encumbrance,
mortgage, hypothec, option, lease, license, right of possession,
restrictive covenant, adverse claim or title retention agreement of any
nature or kind;
"CIRCULAR" means the notice of the Meeting and accompanying management
information circular prepared by Co-Steel to be delivered to the Co-Steel
Shareholders in connection with the Meeting;
"CLOSING DATE" means the third Business Day after the Approval Date;
"CLOSING TIME" means 8:00 a.m. on the Closing Date;
"COMMISSIONER" means the Commissioner of Competition appointed under the
Competition Act;
"COMPETITION ACT" means the Competition Act (Canada), as amended, and
includes the Regulations promulgated thereunder;
"CONFIDENTIALITY AGREEMENT" means the confidentiality agreement dated May
17, 2002 between Co-Steel and Gerdau;
"CO-STEEL CREDIT FACILITIES" means the credit agreements dated as of April
30, 2002 entered into as part of the debt restructuring of Co-Steel and
certain of its Subsidiaries;
"CO-STEEL DEBENTURES" means the 6.5% convertible unsecured subordinated
debentures issued by Co-Steel pursuant to a Trust Indenture between
Co-Steel and The R-M Trust Company dated April 23, 1997;
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"CO-STEEL DISCLOSURE LETTER" means the letter of disclosure dated the date
of this agreement and signed by an authorized senior officer of Co-Steel
and delivered by Co-Steel to Gerdau concurrently with this agreement;
"CO-STEEL MANAGEMENT INCENTIVE PLANS" means the Co-Steel Executive Annual
Incentive Plan, the Co-Steel Executive Long-Term Incentive Plan, the
Co-Steel Executive Share Purchase Plan, the Amended and Restated Key
Employee Share Loan Plan, the Stock Option Plan, the Co-Steel Annual
Incentive Plan and the Equity Based (DSU) Incentive Plan for Non-Employee
Directors;
"CO-STEEL OPTIONS" means the options to purchase Co-Steel Shares granted
under the Co-Steel Stock Option Plan;
"CO-STEEL PLAN" has the meaning specified in section 5.15.1;
"CO-STEEL PREMISES" means all real property, buildings and facilities,
including any part of any such property, building or facility, owned,
leased, or operated by Co-Steel and its Subsidiaries in connection with
their businesses;
"CO-STEEL PUBLIC DISCLOSURE DOCUMENTS" has the meaning specified in section
5.7.2;
"CO-STEEL SHAREHOLDERS" means the holders of Co-Steel Shares;
"CO-STEEL SHARES" means the common shares in the capital of Co-Steel;
"ENVIRONMENT" means the ambient air, all layers of the atmosphere, surface
water, underground water, all land, all living organisms and the
interacting natural systems that include components of air, land, water,
organic and inorganic matter and living organisms, and includes indoor
spaces;
"ENVIRONMENTAL LAW" means all federal, provincial, state, municipal or
local statues, regulations, by-laws, Environmental Permits, orders, decrees
or rules, and any policies or guidelines of any Regulatory Authority, and
any requirements or obligations arising under the common law, relating to
the Environment, the transportation of dangerous goods and occupational
health and safety;
"ENVIRONMENTAL PERMITS" means all permits, licences, approvals, consents,
authorizations, registrations and certificates issued by or provided to, as
the case may be, any Regulatory Authority pursuant to an Environmental Law;
"EXPENSE FEE" means a payment in the amount of $2,500,000;
"FLORIDA ACT" means the Florida Business Corporation Act;
"FLORIDA CO." has the meaning specified in section 3.1;
"FLS HOLDINGS" means FLS Holdings, Inc.;
"GALLATIN" means the partnership between Co-Steel C.S.M. Corp. and Dofasco
Gallatin Inc., carrying on business as Gallatin Steel Company;
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"XXXXXX X.X. PUBLIC DISCLOSURE DOCUMENTS" has the meaning specified in
section 7.1;
"GERDAU COMPANIES" means Xxxxxx XX, Xxxxxx XX, Gerdau USA, AmeriSteel and
each of their respective Subsidiaries including Gerdau MRM Steel Inc.,
GUSAP Partners, FLS Holdings, Inc., Gerdau MRM America Holding Corp.,
3038482 Nova Scotia Company, Xxxxxx Bros. Corporation, MFT Acquisition
Corp., PASUG Inc., AmeriSteel Bright Bar, Inc. and Mandak Car Crusher Inc.;
"GERDAU CREDIT FACILITY" has the meaning given to the term in the Gerdau
Disclosure Letter;
"XXXXXX XX" means Gerdau Courtice Steel Inc.;
"GERDAU DISCLOSURE LETTER" means the letter of disclosure dated the date of
this agreement and signed by an authorized senior officer of Gerdau and
delivered by Gerdau to Co-Steel concurrently with this agreement;
"XXXXXX XX" means Gerdau MRM Holdings Inc.;
"GERDAU PARTIES" means Gerdau and Xxxxxx X.X.;
"GERDAU PLAN" has the meaning specified in section 6.15.1;
"GERDAU PREMISES" means all real property, buildings and facilities,
including any part of any such property, building or facility, owned,
leased, or operated by the Gerdau Companies in connection with their
businesses;
"GERDAU USA" means Gerdau USA Inc.;
"GOVERNING DOCUMENTS" means, with respect to any person, the letters
patent, certificate or articles of incorporation, amalgamation, continuance
or amendment, by-laws, articles of organization, limited liability company
agreement, partnership agreement, formation agreement, joint venture
agreement, unanimous shareholder agreement or declaration or other similar
governing documents of such person;
"HSR ACT" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976 of
the United States of America;
"ICA" means the Investment Canada Act;
"INDEPENDENT" means, for the purposes of section 8.11 a director that is
not related (as defined by the TSX's Guidelines on Corporate Governance) to
Co-Steel, Xxxxxx X.X. or their respective affiliates;
"INFORMATION" has the meaning specified in section 8.3.1;
"INTELLECTUAL PROPERTY" means trade marks and trade xxxx applications,
trade names, certification marks, patents and patent applications,
copyrights, know-how, formulae, processes, inventions, technical expertise,
research data, trade secrets, industrial designs
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and other similar property, whether registered or unregistered, and
includes computer software;
"KNOWLEDGE" means, with respect to Gerdau, to the knowledge, after
reasonable inquiry, of the individuals identified for this purpose in the
Gerdau Disclosure Letter, and with respect to Co-Steel, to the knowledge,
after reasonable inquiry, of the individuals identified for this purpose in
the Co-Steel Disclosure Letter;
"LAWS" means any law, statute, rule, regulation, by-law, judgment or order
of general application, or any direction, policy, guideline, bulletin,
ruling, judgment, order or requirement, including of a Regulatory Authority
(whether or not having the force of law, but if it does not have the force
of law being of a nature with which a prudent person would comply);
"LIABILITY" means any liability, obligation, claim or cause of action of
any kind or nature, whether absolute, accrued, contingent or other,
including any liability, obligation, claim or cause of action arising
pursuant to or as a result of any contract;
"MANDAK" means Mandak Car Crusher Inc.;
"MATERIAL CONTRACT" means any contract, agreement or commitment requiring
payment of or having a fair market value in excess of $2,000,000 that is
(i) made in the ordinary course of business if it requires or may require
the provision to any person of goods or services, (ii) for the purchase of
materials, supplies or services, (iii) for the purchase or sale of any
equipment or fixed or capital assets or (iv) in the nature of a lease or
agreement to lease whether as lessor or lessee, and whether in respect of
real property or personal property;
"MATERIAL PROPOSAL" means (other than the Transaction or transactions
permitted by section 8.1 of this agreement): (i) any merger, amalgamation,
arrangement, share exchange, take-over bid, recapitalization, consolidation
or business combination involving, directly or indirectly, Co-Steel or any
of its Material Subsidiaries, in any case with the effect that Co-Steel
Shareholders own less than 50% of the resulting entity or the combined
business; (ii) any acquisition of assets representing 50% or more of the
consolidated net revenues, net income or assets of Co-Steel and its
Subsidiaries, taken as a whole (or any lease, long-term supply agreement,
exchange, mortgage, pledge or other arrangement having a similar economic
effect) in a single transaction or a series of related transactions; (iii)
any acquisition of beneficial ownership of 50% or more of the then issued
and outstanding Co-Steel Shares in a single transaction or a series of
related transactions; (iv) any acquisition by Co-Steel of any assets or
securities of another person (other than acquisitions of capital stock or
assets or securities of any other person that, individually or in the
aggregate, have a value of 50% or less of the consolidated net revenues,
net income or assets of Co-Steel and its Subsidiaries, taken as a whole);
(v) any sale by Co-Steel or any of its Subsidiaries of two or more minimill
facilities (or any lease, long-term supply agreement, exchange, mortgage,
pledge or other arrangement having a similar economic effect) in a single
transaction or a series of related transactions; or (vi) any bona fide
proposal, or public announcement of an intention, to do any of the
foregoing, and includes any amendment to a Material Proposal;
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"MATERIAL SUBSIDIARY" means a Subsidiary if (i) the assets of the
Subsidiary and its Subsidiaries exceed 5% of the total assets of Co-Steel
and its Subsidiaries on a consolidated basis as at December 31, 2001 or
(ii) Co-Steel's direct or indirect equity interest in the income (before
income taxes and extraordinary items) of the Subsidiary and its
Subsidiaries exceeds 5% of such income of Co-Steel and its Subsidiaries on
a consolidated basis during the fiscal year ended December 31, 2001;
"MEETING" means the special meeting of Co-Steel Shareholders to consider
the Transaction Resolution and the Name Change Resolution;
"MONTEFERRO" means Monteferro Latina;
"MRM AMERICA" means Gerdau MRM America Holding Corp.;
"NAME CHANGE RESOLUTION" means a special resolution of the Co-Steel
Shareholders to approve the change of Co-Steel's corporate name to Gerdau
AmeriSteel Corporation at the Closing Time;
"OBCA" means the Business Corporations Act (Ontario);
"OSC" means the Ontario Securities Commission;
"PERMITS" has the meaning specified in section 5.21.2.1;
"PERMITTED CHARGES" means, with respect to any property or asset of any
person, the following Charges:
(a) any Charge for taxes, local improvement charges, levies, rates,
assessments or utility charges not yet due or being contested in
good faith by appropriate proceedings and for which a provision
has been taken in accordance with Canadian or United States
generally accepted accounting principles, as applicable;
(b) any carriers, warehousemen, mechanics or materialmen's lien in
respect of charges accruing in favour of any Person, so long as
the charges are not yet due or are being contested in good faith
by appropriate proceedings and for which a provision has been
taken in accordance with Canadian or United States generally
accepted accounting principles, as applicable;
(c) undetermined or inchoate liens, privileges or charges incidental
to current operations which have not at such time been filed
pursuant to law against the Person's property or assets or which
relate to obligations not due or delinquent;
(d) any Charges in connection with all statutory liens, deemed trusts
and preferred claims of any Person, including claims for employee
wages, vacation pay, termination or severance pay, employee
withholdings, pension plan contributions, workers' compensation
assessments, municipal Taxes and claims by public utilities,
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(e) minor encumbrances and those municipal agreements, easements,
rights of way, servitudes, rights in the nature of an easement,
reservations, restrictions and other similar rights in land
granted to or reserved by other persons, rights of way for
sewers, electric lines, telegraph and telephone lines and other
similar purposes, or zoning or other restrictions as to the use
of real properties which do not in the aggregate materially
detract from the value of the real properties or materially
impair their use or operation as they are currently used;
(f) Charges arising out of judgments or awards against such person
with respect to which enforcement has been stayed and such person
at the time shall currently be prosecuting an appeal or
proceeding for review in good faith by appropriate proceedings
diligently conducted and with respect to which such person has
created adequate reserves or has adequate insurance protection;
provided, however, that at no time may the aggregate dollar
amount of such liens exceed $2,000,000;
(g) any right reserved to or vested in any governmental authority by
the terms of any lease, license, franchise, grant or permit
acquired by the person, or by an statutory provision to terminate
any such lease, license, franchise, grant or permit, or to
require annual or other periodic payments as a condition of the
continuance thereof;
(h) security given by the person to a utility or any governmental
authority when required by such utility or governmental authority
in connection with the operations of the person and in the
ordinary course of its business;
(i) reservations, limitations, provisos and conditions, if any,
expressed in any original grants from the Crown or State, as
applicable;
(j) any Charge granted securing the obligations of any of the Gerdau
Companies in connection with the Gerdau Credit Facility or the
AmeriSteel Credit Facility;
(k) any Charge granted securing the obligations of Co-Steel in
connection with the Co-Steel Credit Facilities; and
(l) any Charge securing a purchase money obligation, provided that
(a) no such Charge affects any property other than the property
acquired by the incurring of such purchase money obligation; and
(b) such Charge does not secure an amount in excess of the
original purchase price of such property, less repayments made
from time to time;
provided, however, that no Charge described in clauses (a) through (l)
above shall constitute a Permitted Charge, if such Charge materially
detracts from the value of property of the person or materially impairs its
use in the operation of the business of the person;
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"PERSON" includes any individual, firm, partnership, joint venture, limited
liability company, unlimited liability company, association, trust,
trustee, executor, administrator, legal personal representative, estate,
body corporate, corporation, unincorporated association or organization,
Regulatory Authority, syndicate or other entity, whether or not having
legal status;
"PLAN OF MERGER" has the meaning specified in section 3.4;
"PURCHASED SHARES" means (a) all of the issued and outstanding shares of
Xxxxxx XX and Xxxxxx XX and (b) all of the issued and outstanding shares of
Gerdau USA owned directly or indirectly by Gerdau;
"RARITAN" means Co-Steel Raritan Inc.;
"REGULATORY APPROVALS" means the rulings, consents, orders, exemptions,
permits and other approvals of Regulatory Authorities as set out in
Schedule A;
"REGULATORY AUTHORITY" means any (i) supranational, multinational, federal,
provincial, state, regional, municipal, local or other government,
governmental or public department, central bank, court, tribunal, arbitral
body, commission, board, bureau, agency, association, institution, or other
similar authority, (ii) any quasi-governmental or private body exercising
any regulatory, expropriation or taxing authority under, delegated by, or
for the account of any of the foregoing, (iii) any industry self-regulatory
organization or any stock exchange or (iv) any minister, secretary or other
governmentally appointed individual, in each case whether domestic or
foreign, and includes the Commissioner;
"REPRESENTATIVES" means all employees, directors, officers, agents,
lawyers, accountants and financial advisors of a party or the party's
Subsidiaries;
"SAYREVILLE" means Co-Steel Sayreville Inc.;
"SEC" means the U.S. Securities and Exchange Commission;
"SECURITIES ACT" means the Securities Act (Ontario);
"SECURITIES LAWS" means the Securities Act, other Canadian provincial
securities laws, United States federal and state securities laws and any
other applicable Laws regulating the issuance of or the trading in
securities;
"SOLICITING AGENTS" has the meaning specified in section 4.2;
"SUBSIDIARY" of any person means (i) any corporation or other entity of
which securities or other owner ownership interests having voting power to
elect a majority of the board of directors or of other persons performing
similar functions are directly or indirectly owned or controlled by such
person, (ii) any partnership of which such person or another of its
Subsidiaries is a general partner or owns or controls, directly or
indirectly, more than 50% of the ownership interests and (iii) in the case
of the representations and warranties of Co-Steel contained in Article 5,
includes Gallatin;
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"SUBSTANCE" means any substance or material which under any Environmental
Law is defined to be "hazardous", "toxic", "deleterious", "caustic",
"dangerous", a "contaminant", a "pollutant", a "dangerous good", a "waste",
a "source of contamination" or a source of a "pollutant";
"SUPERIOR PROPOSAL" means (other than the Transaction or transactions
permitted by section 8.1 of this agreement) (i) any merger, amalgamation,
arrangement, share exchange, take-over bid, recapitalization, consolidation
or business combination involving, directly or indirectly, Co-Steel, (ii)
any acquisition of assets representing 65% or more of the consolidated net
revenues, net income or assets of Co-Steel and its Subsidiaries, taken as a
whole (or any lease, long-term supply agreement, exchange, mortgage, pledge
or other arrangement having a similar economic effect) in a single
transaction or a series of related transactions, or (iii) any acquisition
of beneficial ownership of 65% or more of the then issued and outstanding
Co-Steel Shares in a single transaction or a series of related
transactions; that (a) if completed in accordance with its terms, would
result in or would reasonably be expected to result in a transaction more
favourable to Co-Steel and its shareholders than the Transaction and (b) is
reasonably capable of completion without undue delay;
"TAX" and "TAXES" have the respective meanings specified in section 5.14.5;
"TAX ACT" means the Income Tax Act (Canada);
"TAX RETURNS" has the meaning specified in section 5.14.5;
"TERMINATION FEE" means a fee of $8,000,000 payable in cash or, at the
option of Co-Steel, Co-Steel Shares with the number of Co-Steel Shares
being calculated based on 95% of the average closing price of a Co-Steel
Share on the TSX on the three trading days prior to the termination date;
"TRANSACTION" means the sale by Gerdau of the Gerdau Companies in exchange
for Co-Steel Shares pursuant to this agreement;
"TRANSACTION RESOLUTION" means a resolution of the Co-Steel Shareholders to
approve the Transaction;
"TSX" means the Toronto Stock Exchange;
"USA FINANCIAL STATEMENTS" has the meaning specified in section 6.8.2;
"U.S. EXCHANGE ACT" means the United States Securities Exchange Act of
1934, as amended; and
"U.S. TAX CODE" has the meaning specified in section 5.14.3.
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1.2. INTERPRETATION NOT AFFECTED BY HEADINGS, ETC.
The division of this agreement into articles, sections and other parts and
the use of headings are for convenience of reference only and do not affect the
construction or interpretation of this agreement.
1.3. RULES OF CONSTRUCTION.
Unless otherwise specifically indicated or the context otherwise requires,
(i) all references to "dollars" or "$" mean Canadian dollars, (ii) all
references to "US$" means U.S. dollars, (iii) words importing the singular
include the plural and vice versa and words importing any gender include all
genders, (iv) "include," "includes" and "including" are deemed to be followed by
the words "without limitation" and (v) references to a statute are to the
statute as amended or replaced from time to time and include any regulations,
rules, guidelines, bulletins and policy statements made under the statute.
1.4. DATE FOR ANY ACTION.
If the date on which any action is required to be taken under this
agreement by either party is not a Business Day, that action will be required to
be taken on the next day that is a Business Day.
1.5.SUBSIDIARIES.
1.5.1. To the extent any covenants in this agreement relate, directly or
indirectly, to a Subsidiary of either party, each such provision will be
construed as a covenant by such party to cause such Subsidiary to perform the
required action.
1.5.2. To the extent any representations and warranties of Co-Steel in this
agreement relate to Gallatin: (i) each such representation and warranty will be
read as being given to the knowledge of Co-Steel; (ii) "knowledge" means the
actual knowledge, after reasonable inquiries, of the individuals identified in
the Co-Steel Disclosure Letter for this purpose; and (iii) "reasonable inquiry"
is limited to review of the management reports provided to Co-Steel and its
Subsidiaries (other than Gallatin) in respect of Gallatin.
1.6. SCHEDULES.
The following are the Schedules attached to and forming part of this
agreement:
Schedule A -- Regulatory Approvals and Consents
Schedule B -- AmeriSteel Plan of Merger
1.7. ACCOUNTING MATTERS.
Unless otherwise stated, all accounting terms used in this agreement have
the meanings attributed to them under Canadian generally accepted accounting
principles and all determinations of an accounting nature required to be made
will be made in a manner consistent with Canadian generally accepted accounting
principles.
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1.8. MATERIAL ADVERSE EFFECT.
The term "material adverse effect" means, in respect of Gerdau or Co-Steel,
any change, effect, event, occurrence or change in state of facts that is, or
would reasonably be expected to be, material and adverse to the business,
assets, Liabilities, financial condition, results of operations or prospects of
the Gerdau Companies or Co-Steel and its Subsidiaries, in each case, taken as a
whole, other than any change, effect, event, occurrence or change in state of
facts relating to (i) general political, financial or economic conditions or the
state of securities markets in general, including any reduction in major market
indices, (ii) the North American steel industry in general, and not specifically
relating to the Gerdau Companies or Co-Steel and its Subsidiaries, respectively,
or (iii) changes in Laws of general applicability or interpretations of those
Laws by Regulatory Authorities. For the purposes of interpreting the term
"material adverse effect", a decrease in the market price or trading volume of
the Co-Steel Shares will not constitute a "material adverse effect" unless such
decrease is attributable to or arises as a consequence of any change, effect,
event, occurrence or change in state of facts that would otherwise have a
material adverse effect on Co-Steel.
ARTICLE 2.
THE TRANSACTION
2.1. THE TRANSACTION.
2.1.1. At the Closing Time, Gerdau or one of its wholly-owned Subsidiaries
shall sell, assign and transfer the Purchased Shares (or the shares of a
wholly-owned Subsidiary that owns the Purchased Shares) to Co-Steel in
exchange for 146,588,194 Co-Steel Shares less the number of Co-Steel Shares
to be issued pursuant to section 3.5, on the terms and conditions set out
in this agreement.
2.1.2. Subject to the terms and conditions of this agreement, Co-Steel and
the Gerdau Parties agree to the Transaction and will use, and each agrees
that it will cause its respective Subsidiaries to use, its commercially
reasonable efforts to take, or cause to be taken, all actions and to do, or
cause to be done, all things necessary or advisable to support approval of
and to complete the Transaction.
2.1.3. Gerdau and Co-Steel agree to file a joint election under subsection
85(1) of the Tax Act within the time prescribed in subsection 85(6) of the
Tax Act, electing proceeds on the disposition of the Purchased Shares (or
the shares of a wholly-owned Subsidiary that owns the Purchased Shares)
equal to the adjusted cost base of those shares as determined for purposes
of the Tax Act.
2.2. APPROVALS AND RECOMMENDATIONS.
2.2.1. Co-Steel confirms that its board of directors, following
consultation with its advisors, has determined unanimously:
2.2.1.1. that the Transaction is fair to the Co-Steel Shareholders;
2.2.1.2. that the Transaction is in the best interests of Co-Steel;
and
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2.2.1.3. to recommend to the Co-Steel Shareholders that they vote to
approve the Transaction Resolution and the Name Change Resolution.
2.2.2. Co-Steel represents and warrants that its board of directors has
obtained advice from its financial advisors, CIBC World Markets Inc., that
the consideration to be received by Co-Steel in exchange for the Co-Steel
Shares to be issued by Co-Steel pursuant to the Transaction is fair, from a
financial point of view, to Co-Steel.
2.2.3. Co-Steel covenants that the Circular will include, among other
things, (i) the unanimous recommendation of the board of directors of
Co-Steel as described in section 2.2.1.3, (ii) a statement that the members
of the board of directors of Co-Steel have informed Co-Steel that they
intend to vote the Co-Steel Shares held directly or indirectly by them in
favour of the Transaction Resolution and the Name Change Resolution at the
Meeting and (iii) the fairness opinion of CIBC World Markets Inc. to the
effect that the consideration to be received by Co-Steel in exchange for
the Co-Steel Shares to be issued by Co-Steel pursuant to the Transaction is
fair, from a financial point of view, to Co-Steel.
2.2.4. The parties agree that the approval of the Name Change Resolution or
any other items requested by Gerdau to be put before Co-Steel Shareholders
at the Meeting pursuant to section 2.3 at the Meeting is not a condition to
closing the Transaction.
2.3. CALLING OF MEETING.
Co-Steel will take all actions necessary under the OBCA and other
applicable Laws to call, give notice of and hold the Meeting as soon as
reasonably practicable, and in any event no later than 60 days after the date of
this agreement (subject to (a) extension by mutual agreement of the parties, (b)
delay caused by any failure of Gerdau to provide such information as it is
required to provide pursuant to this agreement as may be requested by Co-Steel
for purposes of the Circular or (c) as may result as a consequence of TSX prior
review), on a date selected by Co-Steel, in consultation with Gerdau. The
purpose of the Meeting will be to consider and vote on the Transaction
Resolution, the Name Change Resolution and any other routine items of business
or items dealing with options as reasonably requested by Gerdau and agreed by
Co-Steel acting reasonably.
2.4. CIRCULAR.
2.4.1. As soon as reasonably practicable and in any event within 15 days
after the date of this agreement (subject to (a) extension by mutual
agreement of the parties, (b) delay caused by any failure of Gerdau to
provide such information as it is required to provide pursuant to this
agreement and as may be requested by Co-Steel for purposes of the Circular
or (c) as may result as a consequence of TSX prior review), Co-Steel will
prepare the Circular together with any other documents required by the
Securities Laws or other applicable Laws in connection with the approval of
the Transaction Resolution and the Name Change Resolution by the Co-Steel
Shareholders.
2.4.2. Co-Steel will give Gerdau a reasonable opportunity to review and
comment on the Circular and all other documentation referred to in section
2.4.1(including the form of proxy) and the Circular and any other documents
must be in form and content satisfactory
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to Gerdau, acting reasonably, before the Circular or such documentation is
sent to the Co-Steel Shareholders or filed as required by applicable
Securities Laws.
2.4.3. Co-Steel will cause the Circular and any other documentation
required in connection with the Meeting to be sent to each Co-Steel
Shareholder as required by applicable Laws and filed as required by
applicable Securities Laws, in each case as soon as reasonably practicable
after the date of this agreement and in any event no later than 20 days
after the date of this agreement (subject to (a) extension by mutual
agreement of the parties, (b) delay caused by any failure of Gerdau to
provide such information as it is required to provide pursuant to this
agreement as may be requested by Co-Steel for purposes of the Circular or
(c) as may result as a consequence of TSX prior review).
2.4.4. Except with respect to the information relating to and provided by
Gerdau for inclusion in the Circular, Co-Steel will ensure that the
Circular complies with all applicable Laws and, in particular, that the
Circular does not contain any misrepresentation (as defined in the
Securities Act). Gerdau will ensure that all information provided by it or
the Gerdau Companies for inclusion in the Circular complies with all
applicable Laws and does not contain any misrepresentation (as defined in
the Securities Act). Gerdau will prepare all historical financial
statements of the Gerdau Companies and will co-operate with Co-Steel in the
preparation of all pro forma financial statements required by applicable
Laws to be included in the Circular. Gerdau and Co-Steel will ensure that
the historical and pro forma financial statements prepared by them for
inclusion in the Circular present fairly the financial position of the
applicable entity at the applicable time and are prepared in accordance
with applicable Securities Laws and with Canadian generally accepted
accounting principles. Co-Steel will ensure that the Circular provides
Co-Steel Shareholders with information in sufficient detail to permit them
to form a reasoned judgment concerning the matters to be placed before them
at the Meeting; provided, however, that Gerdau will provide all information
required in respect of Gerdau and its affiliates (including the Gerdau
Companies) in order that Co-Steel Shareholders will be provided with
information in respect of Gerdau and its affiliates (including the Gerdau
Companies) in sufficient detail to permit them to form a reasoned judgment
concerning the matters to be placed before them at the Meeting. For this
purpose, the parties shall refer to the disclosure that would be required
in a prospectus if the Circular were a prospectus for guidance as to what
is material, except as otherwise agreed by the other parties hereto, acting
reasonably.
2.4.5. Each of Gerdau and Co-Steel will promptly notify the other if at any
time before or after the Meeting it becomes aware that the Circular or any
application for any Regulatory Approval contains any misrepresentation (as
defined in the Securities Act) or otherwise requires an amendment or
supplement to the Circular or such application. In any such event, Gerdau
and Co-Steel will cooperate in the preparation of a supplement or amendment
to the Circular or other document and, if required, will cause it to be
distributed to the Co-Steel Shareholders or filed with the relevant
securities regulatory authorities.
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ARTICLE 3.
AMERISTEEL PLAN OF MERGER
3.1. CREATION OF FLORIDA CO.
As soon as practicable after the Closing Date, and in any event no later
than 3 days after the Closing Date, Co-Steel and Gerdau agree to, and shall
cause Gerdau USA to, incorporate a wholly-owned subsidiary under the laws of the
State of Florida ("Florida Co.").
3.2. MERGER OF GERDAU USA AND FLS HOLDINGS.
On or before the Closing Date, Gerdau agrees to cause Gerdau USA to
liquidate or wind-up FLS Holdings or complete a plan of merger which has the
effect of making AmeriSteel a direct subsidiary of Gerdau USA.
3.3. REGISTRATION STATEMENT
Co-Steel shall as soon as practicable and in any event no later than
October 31, 2002, prepare and file with the SEC a registration statement
containing a preliminary version of the prospectus to be sent to minority
shareholders of AmeriSteel in connection with the Plan of Merger, Gerdau shall
cooperate with Co-Steel in such preparation and filing, and Co-Steel and Gerdau
will each use their commercially reasonable efforts to respond to the comments
of the SEC in connection therewith and to furnish all information and to file
any amendments or supplements thereto as may be requested by the SEC or required
by applicable Law. Co-Steel shall use commercially reasonable efforts to have
such registration statement declared effective under the United States
Securities Act of 1933, as amended, as promptly as practicable after such
filing. Co-Steel shall also take any other action reasonably required to be
taken under any applicable state Securities Laws in connection with the issuance
of Co-Steel Shares under section 3.5.
3.4. GERDAU USA APPROVAL.
As soon as practicable after the later of the Closing Date, the completion
of the actions required by sections 3.1, 3.2 and 3.3 and the effective date of
the registration statement referred to in section 3.3, Co-Steel and Gerdau agree
to, and shall cause Gerdau USA and its Subsidiaries to, approve a plan of
merger, substantially in the form attached as Schedule B (the "Plan of Merger"),
with the effect that:
3.4.1. AmeriSteel will be the surviving corporation (as such term is
defined in the Florida Act);
3.4.2. the common shares of Florida Co. will be cancelled;
3.4.3. the common shares of AmeriSteel, other than the common shares of
AmeriSteel owned by Gerdau USA, will be converted into Co-Steel Shares
based on the exchange ratio set out in the Plan of Merger; and
3.4.4. the common shares of AmeriSteel owned by Gerdau USA will remain as
common shares of the surviving corporation.
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3.5. ISSUANCE OF CO-STEEL SHARES.
Subject to approval of the Plan of Merger as contemplated by section 3.4,
Co-Steel agrees to issue the required number of Co-Steel Shares to the
shareholders of AmeriSteel, other than Gerdau USA, pursuant to the Plan of
Merger.
3.6. NOTICE OF THE PLAN OF MERGER.
3.6.1. As soon as practicable after the later of the approval of the Plan
of Merger as contemplated in section 3.4, and the effective date of the
registration statement referred to in section 3.3, Gerdau USA and Co-Steel
agree to give notice of the Plan of Merger to the shareholders of Florida
Co. and AmeriSteel, unless a shareholder waives such notice requirement,
all in accordance with all applicable Laws.
3.6.2. Co-Steel agrees not to deliver the articles of merger to the
Department of State (as such term is defined in the Florida Act) for filing
until at least 30 days after the date the notice was mailed to the
shareholders of Florida Co. and AmeriSteel.
ARTICLE 4.
PUBLICITY AND PROXY SOLICITATION
4.1. PUBLICITY.
4.1.1. The Gerdau Parties and Co-Steel will consult with the other with
respect to any press release or other public written statements by
themselves or their respective Subsidiaries (including any statements to
any of their respective employees, customers or suppliers) relating to the
Transaction or this agreement with a view to achieving co-ordinated and
consistent public news releases and other public written statements. None
of the Gerdau Parties, Co-Steel nor their respective Subsidiaries will
issue any such press release or make any such public written statement
prior to consulting with the other, except as may be required by applicable
Laws or by obligations pursuant to any listing agreement with a stock
exchange, but only after using its commercially reasonable efforts to
consult the other party, taking into account the time constraints to which
it is subject as a result of such Laws or obligations.
4.1.2. Gerdau and Co-Steel will issue a joint press release immediately
following the execution of this agreement.
4.1.3. Co-Steel will provide Gerdau with a reasonable opportunity to review
and comment on any material change report filed pursuant to applicable
Canadian Securities Laws in respect of this agreement and the Transaction.
4.1.4. Gerdau will provide Co-Steel with a reasonable opportunity to review
and comment on any material change report, or similar report, filed by
AmeriSteel pursuant to applicable Securities Laws in respect of this
agreement and the Transaction.
4.1.5. None of the Gerdau Parties, Co-Steel nor their respective
Subsidiaries will make any public oral statements or announcements
(including statements to any of their respective employees, customers or
suppliers) which are inconsistent, as determined by
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the other party acting reasonably, with any of the public written
statements issued under this section 4.1.
4.2. PROXY SOLICITATION.
Co-Steel will retain, in consultation with Gerdau, one or more firms to act
as proxy solicitation agents (the "Soliciting Agents") in connection with the
Meeting to solicit proxies in favour of the Transaction. Co-Steel will be
responsible for the cost of the Soliciting Agents.
ARTICLE 5.
REPRESENTATIONS AND WARRANTIES OF CO-STEEL
Co-Steel represents and warrants to Gerdau and Xxxxxx X.X. as follows, in
each case except as set forth in the Co-Steel Disclosure Letter (and each
disclosure in the Co-Steel Disclosure Letter shall be deemed to be disclosure
for all purposes of this agreement):
5.1. ORGANIZATION AND STANDING.
5.1.1. Co-Steel and each of its Material Subsidiaries has been duly
incorporated, organized or formed and is validly existing under the Laws of
its jurisdiction of incorporation, organization or formation and has full
corporate power and authority to own, lease and operate its properties and
to conduct its businesses as currently conducted, and is duly qualified,
licensed or registered to carry on business in each jurisdiction in which
the nature of the business conducted by it or the ownership, leasing or
operation of its properties requires it to be so qualified, licensed or
registered, except where, individually or in the aggregate, the failure to
be so qualified, licensed or registered would not have a material adverse
effect on Co-Steel or materially impair its ability to perform its
obligations under this agreement or prevent or materially delay the
consummation of the Transaction.
5.1.2. The Co-Steel Disclosure Letter contains a complete and accurate list
of each of Co-Steel's Subsidiaries, together with (i) the nature of the
legal organization of such person and (ii) the jurisdiction of organization
or formation of such person. Except as set out in the Co-Steel Disclosure
Letter, Co-Steel owns beneficially, directly or indirectly, all the
outstanding shares (or equivalent equity or ownership interests) of its
Subsidiaries and all such shares (or equivalent equity or ownership
interests) are owned free of any Charges other than Permitted Charges.
5.1.3. Co-Steel has made available to Gerdau complete and accurate copies
of the governing documents (including all minutes and resolutions) for
itself and Sayreville, Raritan, Co-Steel Distribution Canada Limited and
Co-Steel USA Distribution Inc.
5.1.4. None of Co-Steel or its Subsidiaries has any ownership interest in,
or has agreed to acquire any ownership interest in, any person, other than
a Subsidiary of Co-Steel or Gallatin, that is material to the consolidated
financial position of Co-Steel.
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5.2. CAPITALIZATION.
5.2.1. The authorized capital of Co-Steel consists of (i) an unlimited
number of non-voting preferred shares, issuable in series, and (ii) an
unlimited number of Co-Steel Shares, of which the only shares outstanding
are 51,503,960 Co-Steel Shares. 1,391,900 Co-Steel Options have been duly
granted and are outstanding permitting the holders to purchase a total of
1,391,900 Co-Steel Shares and $125,000,000 principal amount of Co-Steel
Debentures are outstanding and are convertible into 4,761,905 Co-Steel
Shares. The Co-Steel Disclosure Letter includes an accurate list of
outstanding Co-Steel Options that includes details about the date of grant,
the option holders, the exercise prices, the expiry dates and other similar
terms.
5.2.2. All of the outstanding Co-Steel Shares have been duly authorized and
were validly issued as fully paid and non-assessable shares, were not
issued in violation of pre-emptive or similar rights or any other agreement
binding on Co-Steel and were issued in compliance with all applicable
Securities Laws and the governing documents of Co-Steel.
5.2.3. Other than the Co-Steel Options and the Co-Steel Debentures and
except as set out in the Co-Steel Disclosure Letter, there are no
outstanding options, warrants or other rights, agreements, arrangements or
commitments (pre-emptive, contingent or otherwise) obligating Co-Steel or
any of its Subsidiaries to offer, issue, sell, redeem, repurchase,
otherwise acquire or transfer, pledge or encumber any shares of Co-Steel or
any of its Subsidiaries nor are there outstanding any securities or
obligations of any kind of Co-Steel or any of its Subsidiaries which are
convertible into or exercisable or exchangeable for any shares of Co-Steel
or any of its Subsidiaries or any other person and none of Co-Steel or any
of its Subsidiaries has any obligation of any kind to issue any additional
securities or to pay for or repurchase any securities (except in connection
with internal financing transactions among Co-Steel and its wholly-owned
operating Subsidiaries or as otherwise specifically permitted by sections
10.01(10), (11) and (12) of the Co-Steel Credit Facilities). Except as
disclosed in the Co-Steel Disclosure Letter or pursuant to the Co-Steel
Management Incentive Plans, none of Co-Steel or any of its Subsidiaries has
outstanding any stock appreciation rights, phantom equity or similar
rights, agreements, arrangements or commitments.
5.2.4. No holder of securities issued by Co-Steel has any right to compel
Co-Steel to register or otherwise qualify such securities for public sale
in Canada or the United States.
5.3. AUTHORITY AND NO CONFLICTS.
5.3.1. Co-Steel has all requisite corporate power and authority to enter
into and to perform its obligations under this agreement. Co-Steel has
taken all necessary corporate action to authorize the execution and
delivery by it of, and the performance of its obligations under, this
agreement.
5.3.2. This agreement has been duly executed and delivered by Co-Steel and
constitutes its legal, valid and binding obligation, enforceable against it
in accordance with its terms, except as enforceability may be limited by
bankruptcy, insolvency and other
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applicable Laws affecting creditors' rights generally and by general
principles of equity.
5.3.3. None of the execution and delivery of this agreement by Co-Steel,
the performance by it of its obligations under this agreement or the
completion of the Transaction will:
5.3.3.1. conflict with, or violate any provision of, the governing
documents of Co-Steel or any of its Material Subsidiaries;
5.3.3.2. subject to the consents, approvals, orders, authorizations,
registrations, declarations or filings referred to in Schedule A being
made or obtained, violate or conflict with or result in a breach of
any Laws applicable to Co-Steel or any of its Material Subsidiaries;
5.3.3.3. subject to the consents, approvals, orders, authorizations,
registrations, declarations or filings referred to in section 8.6 and
Schedule A being made or obtained, violate or conflict with or result
in the breach of, or constitute a default (or an event that with the
giving of notice, the passage of time or both would constitute a
default) under, or entitle any party (with the giving of notice, the
passage of time or both) to terminate or accelerate, or require any
consent or waiver under, any agreement, mortgage, indenture, lease,
license or other obligation or instrument to which Co-Steel or any of
its Material Subsidiaries is a party or by which Co-Steel or any of
its Material Subsidiaries or any of its or their property is bound or
subject;
5.3.3.4. result in the imposition of any Charge on any of Co-Steel's
assets or the assets of any of its Material Subsidiaries; or
5.3.3.5. result in any payment (including severance, unemployment
compensation, golden parachute, bonus or otherwise) becoming due to
any director, officer or employee of Co-Steel or any Subsidiary or
increase any benefits under any Co-Steel Plan or result in the
acceleration of time of payments or vesting of any such benefits,
including the time of exercise of Co-Steel Options,
except, in the case of sections 5.3.3.2 through 5.3.3.5, as set out in the
Co-Steel Disclosure Letter, and for any of the foregoing that would not,
individually or in the aggregate, have a material adverse effect on
Co-Steel or materially impair its ability to perform its obligations under
this agreement or prevent or materially delay the consummation of the
Transaction.
5.4. CONSENTS AND APPROVALS.
Except as set out in the Co-Steel Disclosure Letter, no consent, approval,
order or authorization of, or registration, declaration or filing with, any
third party or Regulatory Authority is required by or with respect to Co-Steel
or any of its Material Subsidiaries in connection with the execution and
delivery of this agreement by Co-Steel, the performance of its obligations under
this agreement or the completion of the Transaction other than (i) filings
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required under Securities Laws as contemplated by this agreement, (ii) any
filings by Co-Steel in connection with the Regulatory Approvals, (iii) the
Regulatory Approvals and consents relating to Co-Steel as set out in Schedule A
to this agreement and (iv) any other consents, approvals, orders,
authorizations, registrations, declarations or filings which, if not obtained or
made, would not, individually or in the aggregate, have a material adverse
effect on Co-Steel or materially impair its ability to perform its obligations
under this agreement or prevent or materially delay the consummation of the
Transaction.
5.5. NO DEFAULTS.
None of Co-Steel or any of its Material Subsidiaries is in default under or
in violation of, and there has been no event, condition or occurrence which,
after notice or lapse of time or both, would constitute such a default or
violation of, or permit the termination or acceleration of, any term, condition
or provision of (i) their respective governing documents or (ii) any agreement,
mortgage, indenture, lease, license or other obligation or instrument to which
Co-Steel or any of its Material Subsidiaries is a party or by which Co-Steel or
any of its Material Subsidiaries or any of its or their property is bound or
subject, except, defaults, violations, terminations or accelerations that,
individually or in the aggregate, would not have a material adverse effect on
Co-Steel or materially impair its ability to perform its obligations under this
agreement or prevent or materially delay the consummation of the Transaction.
5.6. ABSENCE OF CERTAIN CHANGES OR EVENTS.
Except as publicly announced or as disclosed in the Co-Steel Disclosure
Letter or the Co-Steel Public Disclosure Documents filed prior to the date of
this agreement, since December 31, 2001, each of Co-Steel and its Subsidiaries
has conducted its business only in the ordinary course in a manner consistent
with past practice and there has not been:
5.6.1. any material change (as defined in the Securities Act) in its
affairs or in its business, assets, liabilities, financial condition,
results of operations or prospects;
5.6.2. any acquisition, sale or transfer of any material assets of Co-Steel
or any of its Subsidiaries other than in the ordinary course of business
and consistent with past practice;
5.6.3. any change in accounting methods, practices, policies or principles
(including any change in depreciation or amortization policies or rates) by
Co-Steel or any of its Subsidiaries or any revaluation by Co-Steel of any
of its or any of its Subsidiaries' assets;
5.6.4. any declaration, setting aside, or payment of a dividend or other
distribution with respect to the shares of Co-Steel, or any direct or
indirect redemption, purchase or other acquisition by Co-Steel of any of
its shares;
5.6.5. any failure by Co-Steel or any of its Subsidiaries to replenish its
respective inventory in a usual and customary manner consistent with past
practices over the last five years;
5.6.6. any material contract entered into by Co-Steel or any of its
Subsidiaries, other than in the ordinary course of business, or any
material amendment or termination of, or
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default under, any material contract to which Co-Steel or any of its
Subsidiaries is a party or by which it is bound;
5.6.7. any agreement by Co-Steel or any of its Subsidiaries to do any of
the things described in the preceding sections 5.6.1 through 5.6.6 (other
than negotiations with Gerdau and its representatives regarding the
Transaction); or
5.6.8. any agreement or arrangement to take any action which, if taken
prior to the date of this agreement, would have made any representation or
warranty set forth in this agreement materially untrue or incorrect as of
the date when made.
5.7. PUBLIC DISCLOSURE.
5.7.1. Co-Steel is a reporting issuer under the Securities Act and other
applicable Securities Laws and is not in material default of the
requirements of the Securities Act or any such other applicable Canadian
Securities Laws. The Co-Steel Shares and the Co-Steel Debentures are not
listed on any stock exchange or to the knowledge of Co-Steel traded in any
over-the-counter market other than the TSX.
5.7.2. After giving effect to subsequent filings in relation to matters
covered in earlier filings, the public filings made by Co-Steel under the
Securities Act and other applicable Canadian Securities Laws since December
31, 2000 (the "Co-Steel Public Disclosure Documents") do not contain any
misrepresentation (as defined in the Securities Act). The Co-Steel Public
Disclosure Documents are all the filings required to be made since December
31, 2000 and, at the time filed, complied in all material respect with
applicable Canadian Securities Laws. Co-Steel has not filed any
confidential material change report with the OSC or any other securities
authority or stock exchange which remains confidential.
5.8. FINANCIAL STATEMENTS AND FINANCIAL MATTERS.
5.8.1. The consolidated financial statements of Co-Steel (including any
related notes) included in any Co-Steel Public Disclosure Documents (i)
have been prepared in accordance with Canadian generally accepted
accounting principles applied on a consistent basis during the periods
involved, (ii) comply in all material respects with the requirements of
applicable Securities Laws and (iii) fairly present, in all material
respects, the consolidated financial position of Co-Steel and the results
of operations, changes in equity and changes in cash flows of Co-Steel on a
consolidated basis as of the respective dates thereof and for the
respective periods covered thereby, subject, in the case of unaudited
financial statements, to normal recurring year end adjustments, none of
which will be material.
5.8.2. Except as set out in the Co-Steel Disclosure Letter, none of
Co-Steel or any of its Subsidiaries has any Liabilities or is a party to or
bound by any agreement of guarantee, support, indemnification, assumption,
or endorsement of, or any other similar commitment with respect to
Liabilities, other than (i) Liabilities reflected in accordance with
Canadian generally accepted accounting principles in Co-Steel's audited
consolidated financial statements for the year ended December 31, 2001 and
Co-Steel's unaudited financial statements for the periods ending March 31,
2002 and June 30, 2002,
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(ii) Liabilities incurred or arising since the date of such financial
statements in the ordinary course of business consistent with past practice
or (iii) Liabilities which would not, individually or in the aggregate,
have a material adverse effect on Co-Steel or materially impair its ability
to perform its obligations under this agreement or prevent or materially
delay the consummation of the Transaction.
5.9. INVENTORY VALUATION.
The inventory of Co-Steel and it Subsidiaries reflected on the balance
sheet forming part of Co-Steel's consolidated financial statements for the year
ended December 31, 2001 was, and the current inventory of Co-Steel is, in usable
and saleable condition in the ordinary course of business (other than alloys,
refractories, rolls and guides used in the manufacturing process) and in the
case of inventory reflected on such balance sheet at an amount not less than the
amounts carried therein. The finished goods, work in process, raw materials and
other materials and supplies included in such inventory are of a standard which
is not lower than the generally accepted standard prevailing in the steel
industry.
5.10. INDEBTEDNESS.
Except as set out in the Co-Steel Public Disclosure Documents, neither
Co-Steel nor any Subsidiary has outstanding any bonds, debentures, notes,
mortgages or other indebtedness which mature more than one year after the date
of their original creation or issuance and neither Co-Steel nor any Subsidiary
has agreed to create or issue any bonds, debentures, notes, mortgages or other
indebtedness which will mature more than one year after the date of their
creation or issuance, other than with respect to internal financings among
Co-Steel and its wholly-owned operating Subsidiaries or as otherwise
specifically permitted by sections 10.01(10), (11) and (12) of the Co-Steel
Credit Facilities.
5.11. AS TO CERTAIN CONTRACTS IN AND OUT OF THE ORDINARY COURSE.
Except as set out in the Co-Steel Disclosure Letter, neither Co-Steel nor
any of its Subsidiaries is a party to or bound by any:
5.11.1. contracts or agreements with any officer, director, employee,
shareholder or any other person with whom Co-Steel or any of its
Subsidiaries is not dealing at arm's length (within the meaning of the Tax
Act) or any affiliate of any of the foregoing, other than contracts of
employment or contracts or agreements made solely between Co-Steel and any
of its Subsidiaries or between any of the Subsidiaries;
5.11.2. management agreement or similar contract, agreement or commitment;
5.11.3. consulting, agency or similar contract, agreement or commitment
which requires payment of more than $1,000,000;
5.11.4. contract, agreement or commitment to make any gift of any of its
property, other than donations made in the ordinary course of business,
consistent with past practice;
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5.11.5. contract, agreement or commitment which materially adversely
affects or could materially adversely affect Co-Steel or any of its
Subsidiaries or their financial condition or any of their assets or is or
could be materially burdensome to Co-Steel or any of its Subsidiaries;
5.11.6. Material Contract; or
5.11.7. contract, agreement or commitment which was not made in the
ordinary course of business, consistent with past practice.
For the purposes of the foregoing, if a particular contract, agreement or
commitment falls within more than one of the categories established by
sections 5.11.1 through 5.11.7, it need not be set out more than once in
the Co-Steel Disclosure Letter.
5.12. EMPLOYMENT MATTERS.
5.12.1. Except as described in the Co-Steel Disclosure Letter, none of
Co-Steel or any of its Subsidiaries is a party to any employment,
consulting, retention, severance or termination of employment agreement,
oral or written, other than agreements providing for annual compensation of
less than $150,000 or that may be terminated on reasonable notice or
payment in lieu of notice in accordance with applicable Laws.
5.12.2. Except for the Co-Steel Management Incentive Plans and as described
in the Co-Steel Disclosure Letter, none of Co-Steel or any of its
Subsidiaries have established and there are no current or former employees
of Co-Steel entitled to participate in any incentive compensation, profit
sharing, bonus, option, share purchase or share compensation plan.
5.12.3. Except as described in the Co-Steel Disclosure Letter, none of
Co-Steel or any of its Subsidiaries is a party to, or bound by, any
collective bargaining agreement or any other labour contract applicable to
any employees of Co-Steel or its Subsidiaries. There is no strike or labour
dispute, slowdown, lockout or stoppage pending or, to the knowledge of
Co-Steel, threatened against or affecting Co-Steel or any of its
Subsidiaries. Except as disclosed in the Co-Steel Disclosure Letter, to the
knowledge of Co-Steel, there are no current union organizing activities
involving employees of Co-Steel.
5.12.4. None of Co-Steel or any of its Subsidiaries is a party to, or bound
by, any collective bargaining agreement or any other labour contract
applicable to any employees of Co-Steel or its Subsidiaries that contains
an extension of recognition clause or other provision requiring the
employer to recognize the existing union as the bargaining agent for
employees of any business acquired by the employer other than as a result
of Co-Steel or its Subsidiaries employing such employees or as a result of
a successful related or successor employer application being brought before
the applicable Regulatory Authority as a result of such acquisition.
5.12.5. Except as disclosed in the Co-Steel Disclosure Letter, there are no
current or pending or, to the knowledge of Co-Steel, threatened proceedings
involving Co-Steel or its Subsidiaries before any board or tribunal or
claims with respect to employment and labour Laws, including employment and
labour standards, unfair labour practices,
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employment discrimination, occupational health and safety, employment
equity, pay equity, workers' compensation, human rights and labour
relations, other than such proceedings and claims which, individually or in
the aggregate, would not have a material adverse effect on Co-Steel or
materially impair its ability to perform its obligations under this
agreement or prevent or materially delay the consummation of the
Transaction.
5.13. LITIGATION.
Except as disclosed in the Co-Steel Disclosure Letter and as described in
the Co-Steel Public Disclosure Documents, there are no claims, actions,
proceedings or investigations pending or, to the knowledge of Co-Steel,
threatened against Co-Steel or any of its Subsidiaries before any arbitrator or
Regulatory Authority (and Co-Steel has no knowledge of any facts that are likely
to give rise to any such claim, action, proceeding or investigation), including
in relation to the sales or marketing of its products or the Environment, that
would be reasonably expected to have a material adverse effect on Co-Steel or
materially impair its ability to perform its obligations under this agreement or
prevent or materially delay the consummation of the Transaction.
5.14. TAX MATTERS.
5.14.1. Except as disclosed in the Co-Steel Disclosure Letter, Co-Steel and
each of its Subsidiaries has duly and timely filed all Tax Returns required
to be filed by it and all such Tax Returns are complete and correct in all
material respects based on Co-Steel's reasonable filing position. Co-Steel
and each of its Subsidiaries has paid all Taxes which are due and payable
by it as reasonably determined by Co-Steel, other than those which are
being contested in good faith and in respect of which adequate reserves
have been provided, based on quantifiable Taxes assessed, in the most
recently published financial statements of Co-Steel. Co-Steel's audited
consolidated financial statements contain adequate provision, in accordance
with Canadian generally accepted accounting principles, for Taxes payable
in respect of each period covered by such financial statements and all
prior periods to the extent such Taxes have not been paid, whether or not
due and whether or not shown as being due on any Tax Returns. Co-Steel and
each of its Subsidiaries has made adequate provision, in accordance with
Canadian generally accepted accounting principles, in its books and records
for any amount of Taxes material to Co-Steel on a consolidated basis and
accruing in respect of any accounting period ending after the period
covered by such financial statements.
5.14.2. Except as disclosed in the Co-Steel Disclosure Letter, there are no
actions, suits, proceedings, investigations or claims made (or, to the
knowledge of Co-Steel, threatened) against Co-Steel or any of its
Subsidiaries in respect of Taxes or any matters under discussion with any
Regulatory Authority relating to Taxes asserted by any such authority, in
each case, which may have a material adverse effect on Co-Steel or
materially impair its ability to perform its obligations under this
agreement or prevent or materially delay the consummation of the
Transaction. There have been no waivers of statutes of limitations or
objections to any assessments or reassessments involving Taxes given, filed
or requested with respect to Co-Steel or any of its Subsidiaries except in
circumstances where the Taxes under objection have been paid or adequate
provision for the payment thereof has been made.
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5.14.3. None of Co-Steel or any of its Subsidiaries (i) has made an
election to be treated as a "consenting corporation" under section 341(f)
of the United States Internal Revenue Code of 1986 (the "U.S. Tax Code") or
(ii) is a party to any Tax sharing or other similar agreement or
arrangement or any Tax indemnification agreement of any nature with any
other person (other than in agreements with Co-Steel or any of its
Subsidiaries) pursuant to which Co-Steel or any of its Subsidiaries has or
could have any material liabilities in respect of Taxes. Co-Steel has not
made an election under section 897(i) of the U.S. Tax Code to be treated as
a domestic corporation for purposes of section 897, 1445 and 6039C of the
U.S. Tax Code.
5.14.4. Except as set out in the Co-Steel Disclosure Letter, Co-Steel and
each of its Subsidiaries has collected, withheld and remitted all Taxes
required to be collected, withheld and remitted by it in accordance with
applicable Laws.
5.14.5. "Tax" and "Taxes" means, with respect to any person (i) all taxes,
charges, fees, levies or other assessments, including income taxes
(including any tax on or based on net income, gross income, income as
specially defined, earnings, profits or selected items of income, earning
or profits), taxes under Part XII.3 of the Tax Act, capital taxes, gross
receipts taxes, environmental taxes, taxes on registered investments or in
respect of excessive holdings of foreign property, sales taxes, use taxes,
ad valorem taxes, value added taxes, transfer taxes, franchise taxes,
license taxes, disability taxes, withholding taxes, payroll taxes,
employment taxes, employer health, pension plan premiums, excise taxes,
severance, social security premiums, workers' compensation premiums,
unemployment insurance or compensation premiums, stamp taxes, occupation
taxes, premium taxes, property taxes, alternative or add-on minimum taxes,
goods and services taxes, customs duties or other taxes, fees, imposts,
assessment or charges of any kind whatsoever, together with any interest
and any penalties or additional amounts imposed by any taxing authority
(Canadian or foreign) on such entity, and any interest, fines, penalties,
additional taxes and additions to tax imposed with respect to the foregoing
and (ii) any Liability for the payment of any amount of the type described
in the immediately preceding clause (i) as a result of being a "transferee"
(within the meaning of section 6901 of the United States Internal Revenue
Code or any other applicable Laws) of another entity or a member of an
affiliated or combined group. "Tax Returns" means all returns, reports,
information returns, tax slips and statements filed or required to be filed
in connection with Taxes.
5.15. PENSION AND EMPLOYEE BENEFITS.
5.15.1. The Co-Steel Disclosure Letter lists each registered or
supplementary pension, retirement, profit sharing, bonus, savings, deferred
compensation, stock option, purchase, appreciation, group insurance or
other material employee or retiree benefit plan, program or arrangement,
formal or informal, oral or written, maintained or contributed to by
Co-Steel or any of its Subsidiaries (each plan, program or arrangement,
together with the Co-Steel Management Incentive Plans a "Co-Steel Plan").
Each Co-Steel Plan has been administered, established, invested, operated
and funded in material compliance with its terms and all applicable Laws
and there are no unfunded liabilities in respect of such pension or
retirement plans and all required contributions thereunder have been made
in material compliance with all applicable Laws and the terms of such
Co-Steel Plan. Correct and complete copies of all the Co-Steel Plans and
all related documents
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(including current actuarial reports and draft actuarial reports relating
to such Co-Steel Plans), or, where oral, correct and complete written
summaries of their terms as set out in the Co-Steel Disclosure Letter have
been provided to Gerdau.
5.15.2. No amendments or improvements have been made or promised respecting
(i) any Co-Steel Plan for which actuarial reports are prepared since the
effective date of the last actuarial report relating to such plan, and (ii)
any other Co-Steel Plan since December 31, 2001, in each case, other than
those required by any Laws or the terms of any collective agreement.
5.15.3. There have been no withdrawals of, or applications made to
withdraw, surplus from any Co-Steel Plan, and all withdrawals and transfer
of assets, and contribution holidays respecting any Co-Steel Plan, have
been undertaken and completed in accordance with the relevant terms of each
plan and all Laws.
5.15.4. There has been no partial or full wind-up of any Co-Steel Plan, no
event has occurred which would entitle any person to partially or fully
wind-up, or require the partial or full winding-up, any Co-Steel Plan or
which could adversely affect the registered or qualified tax status of, any
Co-Steel Plan and the Transaction will not constitute a basis for a partial
or full wind-up of any Co-Steel Plan.
5.15.5. Except as disclosed in the Co-Steel Disclosure Letter, the assets
of each Co-Steel Plan which is a registered pension plan are at least equal
to the liabilities, contingent or otherwise, of such Co-Steel Plan on a
going concern, solvency and wind-up basis and each such Co-Steel Plan is
fully funded on a going concern, solvency and wind-up basis in accordance
with its terms, applicable actuarial assumptions and methods and applicable
Laws. Member data and asset information used in making the foregoing
determinations was accurate and complete in all material respects at the
time the foregoing determinations were made.
5.15.6. Except as disclosed in the Co-Steel Disclosure Letter, no Co-Steel
Plan is a multi-employer plan within the meaning of applicable pension Laws
or the terms of any collective agreement. No commitments have been made to
increase the benefits under any Co-Steel Plan, except as required by
applicable Laws. No Co-Steel Plan may be required to be wound up, in whole
or in part, have its registration revoked or be required to pay any
material amounts of Taxes, fees or penalties under applicable Laws.
5.15.7. Liabilities under the Co-Steel Plans which provide supplemental
retirement benefits are properly accrued in Co-Steel's most recent
financial statements.
5.16. TITLE TO ASSETS.
5.16.1. Co-Steel and its Subsidiaries are the absolute beneficial owners
of, and have good and marketable title, free of all Charges other than
Permitted Charges, to all the assets (other than the real property referred
to in section 5.17) owned by Co-Steel and its Subsidiaries used in
connection with their respective businesses.
5.16.2. All the physical assets of Co-Steel and its Subsidiaries are in
reasonably good operating condition and in a state of reasonably good
maintenance and repair having
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regard to the use to which the assets are put and the age thereof, except
for such immaterial assets whose condition, taken individually or in the
aggregate, would not have a material adverse effect on Co-Steel.
5.17. TITLE TO OWNED REAL PROPERTY.
The Co-Steel Disclosure Letter contains a complete list of the municipal
addresses (including a brief description of the size of parcel and type of
improvements located on the property), and legal descriptions to the extent
possible, for all of the real property owned by Co-Steel and its Subsidiaries.
Co-Steel or one of its Subsidiaries is the absolute beneficial owner of, and has
good and marketable title in fee simple to, such real property, free of all
Charges, except for:
5.17.2. Permitted Charges; and
5.17.2. title defects which do not, in the aggregate, materially adversely
affect the use of such real property as it is presently used by Co-Steel
and its Subsidiaries.
Each of the Charges has been complied with and is in good standing in all
material respects.
5.18. LEASED REAL PROPERTY.
The Co-Steel Disclosure Letter contains the municipal addresses for all of
the premises used by Co-Steel and its Subsidiaries which are leased, subleased,
licenced or otherwise occupied by Co-Steel and its Subsidiaries.
5.19. ZONING AND OTHER MATTERS RELATING TO REAL PROPERTY.
5.19.1. The buildings, improvements and other structures located on the
real property owned or leased by Co-Steel or its Subsidiaries and the
operation and maintenance thereof, as now operated and maintained, comply
in all material respects with all applicable Laws (except with respect to
any non-compliance with Environmental Laws, as otherwise disclosed pursuant
to this agreement); none of such buildings, improvements or other
structures encroaches upon any land not owned or leased by Co-Steel or any
of its Subsidiaries; and there are no restrictive covenants, municipal
by-laws or other Laws which in any material way restrict or prohibit the
use of such land, buildings, improvements or structures for the purposes
for which they are presently being used.
5.19.2. Except as set out in the Co-Steel Disclosure Letter, there are no
expropriation, condemnation or similar proceedings, actual or threatened,
of which Co-Steel or any of its Subsidiaries has received notice against
any of the real property owned or leased by Co-Steel or any of its
Subsidiaries or any part thereof.
5.20. ENVIRONMENTAL MATTERS.
5.20.1. Except as disclosed in the Co-Steel Disclosure Letter or except as
would not have a material adverse effect on Co-Steel,
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5.20.1.1. none of Co-Steel or any of its Subsidiaries, or any person
has emitted, discharged, deposited or released or caused or permitted
to be emitted, discharged, deposited or released, any Substances on or
to the Co-Steel Premises, or in connection with the operation of the
business of Co-Steel or any of its Subsidiaries, except in compliance
with Environmental Law;
5.20.1.2. the soil and subsoil, and the surface and ground water in,
on or under the Co-Steel Premises do not contain any Substances, nor
do the Co-Steel Premises contain any underground storage tanks; all
Substances which have been or are being treated or stored on the
Co-Steel Premises have been generated, treated and stored in
compliance with Environmental Law;
5.20.1.3. no polychlorinated biphenyls, asbestos containing materials,
lead or urea-formaldehyde or has ever been on, at, or in under the
Co-Steel Premises;
5.20.1.4. none of Co-Steel or any of its Subsidiaries has permitted
the Co-Steel Premises to be used for the disposal of any Substance;
5.20.1.5. none of the Co-Steel Premises, nor any real property
formerly owned by Co-Steel or any of its Subsidiaries, nor any real
property to which Co-Steel or any of its Subsidiaries transported or
arranged for the transportation of any Substances, are listed or
proposed for listing on the National Priorities List promulgated
pursuant to the U.S. Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended ("CERCLA"), or on
any similar state, provincial or foreign list of sites requiring
investigation or remediation;
5.20.1.6. none of Co-Steel or any of its Subsidiaries has generated,
treated, transported, stored, recycled, discharged, emitted, disposed
of or released any Substances, or arranged for the generation,
treatment, transport, storage, recycling, discharge, emission,
disposal or release of any Substances, at any onsite or offsite
location, so as to give rise to any corrective or remedial obligation
under any Environmental Law;
5.20.1.7. none of Co-Steel or any of its Subsidiaries has received any
notification that it is a potentially responsible party for
investigation or remediation of any site, nor has it received any
request for information with respect to such potential responsibility;
5.20.1.8. all environmental Permits obtained by Co-Steel and its
Subsidiaries in connection with the business of each are valid and in
full force and effect; and
5.20.1.9. there are no proceedings against or involving Co-Steel or
any of its Subsidiaries, either in progress, pending or, to the
knowledge of Co-Steel, threatened which allege the violation of, or
non-compliance with, any Environmental Law.
5.20.2. Co-Steel and its Subsidiaries have delivered or made available to
Gerdau copies of all environmental reports and environmental audits, in
each case disclosing any
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material environmental matter and in their possession, custody or control
with respect to the Co-Steel Premises, their former real properties, and
their operations.
5.20.3. For greater certainty, the representations and warranties contained
in sections 5.3.3, 5.4 and section 5.21 apply to Environmental Permits.
5.21. COMPLIANCE WITH LAWS AND PERMITS; REGULATORY MATTERS.
5.21.1. Co-Steel and its Subsidiaries are in compliance with all applicable
Laws (including Environmental Laws) except for any non-compliance which
(alone or together with any other such non-compliance) has not had and
would not reasonably be expected to have a material adverse effect on
Co-Steel or materially impair its ability to perform its obligations under
this agreement or prevent or materially delay the consummation of the
Transaction.
5.21.2. Except as disclosed in the Co-Steel Disclosure Letter or as would
not reasonably be expected to have a material adverse effect on Co-Steel,
5.21.2.1. Co-Steel and its Subsidiaries hold all authorizations,
licenses, registrations, permits, consents, certificates, approvals
and orders (including all Environmental Permits) (collectively
"Permits");
5.21.2.2. all Permits are valid and in good standing, and are not
subject to any qualifications or restrictions except for such standard
qualifications and restrictions ordinarily imposed in connection with
the issuance of these permits which qualifications or restrictions do
not in any manner restrict or impair the business currently conducted
by Co-Steel;
5.21.2.3. no Permits are, and (on the basis of facts or circumstances
known to Co-Steel at the date of this agreement) none would reasonably
be expected to be, the subject of any suspension, modification or
revocation or proceedings related thereto; and
5.21.2.4. to the knowledge of Co-Steel, no facts, circumstances or
conditions exist that would prevent the timely renewal of any Permits.
5.21.3. Co-Steel and its Subsidiaries are not, and (on the basis of
facts or circumstances known to Co-Steel at the date of this
agreement) would not reasonably be expected to be, subject to any
restrictive injunction or order of, or agreement with, any Regulatory
Authority that (alone or together with other such matters) would
reasonably be expected to have a material adverse effect on Co-Steel
or materially impair its ability to perform its obligations under this
agreement or prevent or materially delay the consummation of the
Transaction.
5.22. RESTRICTIONS ON BUSINESS ACTIVITIES.
Except as set out in the Co-Steel Disclosure Letter, there is no agreement,
judgment, injunction, order or decree binding on Co-Steel or any of its
Subsidiaries that has, or could be reasonably expected to have, the effect of
prohibiting, restricting or materially
- 29 -
impairing any current business practice of Co-Steel or any of its Material
Subsidiaries or the conduct of business by Co-Steel or any of its Material
Subsidiaries.
5.23. CUSTOMERS AND SUPPLIERS.
Since December 31, 2001, there has been no termination or cancellation of,
and no material modification or change in, the business relationship with any
customer or group of customers which singly or in the aggregate provided more
than 10% of the consolidated gross revenues of Co-Steel and its Subsidiaries for
the fiscal year ended on December 31, 2001. Co-Steel has no reason to believe
that the benefits of any relationship with any of the customers or suppliers of
Co-Steel and its Subsidiaries will not continue after the Closing Date in
substantially the same manner as prior to the date of this agreement.
5.24. INSURANCE.
Co-Steel has furnished or made available to Gerdau true and complete copies
of all the existing insurance policies of Co-Steel and its Material
Subsidiaries, or evidence of the existence of such policies with accurate
particulars of the policies of insurance maintained by Co-Steel and its Material
Subsidiaries at the date of this agreement, including the name of the insurer,
the risks insured against and the amount of coverage. All such policies are in
full force and effect. None of Co-Steel or its Material Subsidiaries or, to the
knowledge of Co-Steel, any of the other parties thereto, is in default or breach
of, whether as to the payment of premiums or otherwise, nor has Co-Steel or its
Material Subsidiaries received any notice of material default or termination
under, any such policy and, to the knowledge of Co-Steel, there exists no state
of facts which after notice or lapse of time or both would constitute such a
material default or breach. There is no reason to believe that any of the
existing insurance policies of Co-Steel and its Material Subsidiaries will not
be renewed by the insurer upon the scheduled expiry of the policy or will be
renewed by the insurer only on the basis that there will be a material increase
in the premiums payable in respect of the policy.
5.25. BROKERAGE AND FINDERS' FEES.
Except for Co-Steel's obligations to CIBC World Markets Inc., none of
Co-Steel or any of its Subsidiaries has incurred or will incur any brokerage,
finders' or similar fee in connection with the Transaction. Co-Steel has
disclosed to Gerdau all the material financial and other terms of the retainer
agreement with CIBC World Markets Inc. At the Closing Date, there will not be
any material obligations of Co-Steel in favour of CIBC World Markets Inc.,
except as disclosed in the Co-Steel Disclosure Letter.
5.26. REPRESENTATIONS COMPLETE.
None of the representations or warranties made by Co-Steel herein,
including the Co-Steel Disclosure Letter, or in the Co-Steel Public Disclosure
Documents, when all such documents are read together in their entirety, contains
any untrue statement of a material fact, or omits to state any material fact
necessary in order to make the statements contained herein or therein, in the
light of the circumstances under which made, not misleading.
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ARTICLE 6.
REPRESENTATIONS AND WARRANTIES OF GERDAU
Gerdau represents and warrants to Co-Steel as follows, in each case except
as set forth in the Gerdau Disclosure Letter (and each disclosure in the Gerdau
Disclosure Letter shall be deemed to be disclosure for all purposes of this
agreement):
6.1 ORGANIZATION AND STANDING.
6.1.1. Each of Gerdau and the Gerdau Companies has been duly incorporated,
organized or formed and is validly existing under the Laws of its
jurisdiction of incorporation, organization or formation and has full
corporate power and authority to own, lease and operate its properties and
to conduct its businesses as currently conducted, and is duly qualified,
licensed or registered to carry on business in each jurisdiction in which
the nature of the business conducted by it or the ownership, leasing or
operation of its properties requires it to be so qualified, licensed or
registered, except where, individually or in the aggregate, the failure to
be so qualified, licensed or registered would not have a material adverse
effect on Gerdau or materially impair its ability to perform its
obligations under this agreement or prevent or materially delay the
consummation of the Transaction.
6.1.2. The Gerdau Disclosure Letter contains a complete and accurate list
of each of the Gerdau Companies, together with (i) the nature of the legal
organization of such person and (ii) the jurisdiction of organization or
formation of such person. Except as set out in the Gerdau Disclosure
Letter, Gerdau or one or more of the Gerdau Companies owns beneficially,
directly or indirectly, all the outstanding shares (or equivalent equity or
ownership interests) of the Gerdau Companies and all such shares (or
equivalent equity or ownership interests) are owned free of any Charges
except for Permitted Charges.
6.1.3. Except as disclosed in the Gerdau Disclosure Letter, Gerdau owns
beneficially, directly or indirectly, all the outstanding Purchased Shares
(or equivalent equity or ownership interests) and all such shares (or
equivalent equity or ownership interests) are owned free of any Charges
except for Permitted Charges.
6.1.4. Except as disclosed in the Gerdau Disclosure Letter, after
completion of the Transaction, Co-Steel will own, directly or indirectly,
all of the shares of the Gerdau Companies.
6.1.5. Gerdau has made available to Co-Steel complete and accurate copies
of the governing documents (including all minutes and resolutions) for
itself and each of Xxxxxx XX, Xxxxxx XX and Gerdau USA.
6.1.6. Gerdau has made available to Co-Steel complete and accurate copies
of the governing documents (including any minutes and resolutions since
January 1, 1996) for AmeriSteel.
6.1.7. None of the Gerdau Companies has any ownership interest in, or has
agreed to acquire an ownership interest in, any person other than a Gerdau
Company, that is material to the consolidated financial position of the
Gerdau Companies.
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6.2. CAPITALIZATION.
6.2.1. The authorized capital of Xxxxxx XX consists of an unlimited number
of common shares, of which the only shares outstanding are the 632,122
common shares held by Gerdau.
6.2.2. The authorized capital of Xxxxxx XX consists of an unlimited number
of common shares, of which the only shares outstanding are the 100,000
common shares held by Gerdau.
6.2.3. The authorized capital of Gerdau USA consists of 1,000 common shares
(with a par value of $0.01 per share) and 2,500 preferred shares (with a
par value of $0.01 per share), of which the only shares outstanding are the
750 common shares held by Gerdau and the 250 common shares held by 3038482
Nova Scotia Company.
6.2.4. The authorized capital of AmeriSteel consists of 100,000,000 shares
of common stock, par value US$0.01 per share, and 10,000,000 shares of
preferred stock, par value US$0.01 per share. The only shares outstanding
are 10,336,372 common shares, of which 9,000,000 are held by FLS Holdings.
The Gerdau Disclosure Letter lists all of the shareholders of AmeriSteel
and the number of shares held by each. As of August 9, 2002, 297,457
AmeriSteel Options have been duly granted and are outstanding under the
AmeriSteel Management Incentive Plans permitting the holders to purchase a
total of 297,457 shares of AmeriSteel. Except as disclosed in the Gerdau
Disclosure Letter, the Gerdau Disclosure Letter includes an accurate list
of outstanding AmeriSteel Options that includes details about the date of
grant, the option holders, the exercise prices, the expiry dates and other
similar terms.
6.2.5. The authorized capital of FLS Holdings consists of 1,000 common
shares (with a par value of $0.1 per share), of which the only shares
outstanding are the 200 common shares held by Gerdau USA.
6.2.6. All of the Purchased Shares have been duly authorized and were
validly issued as fully paid and non-assessable shares, were not issued in
violation of pre-emptive or similar rights or any other agreement binding
on any of the Gerdau Companies and were issued in compliance with all
applicable Securities Laws and the governing documents of each of Xxxxxx
XX, Xxxxxx XX and Gerdau USA.
6.2.7. Except as set out in section 6.2.4 or as disclosed in the Gerdau
Disclosure Letter, there are no outstanding options, warrants or other
rights, agreements, arrangements or commitments (pre-emptive, contingent or
otherwise) obligating Gerdau or any of the Gerdau Companies to offer,
issue, sell, redeem, repurchase, otherwise acquire or transfer, pledge or
encumber any shares of Gerdau or any of the Gerdau Companies nor are there
outstanding any securities or obligations of any kind of Gerdau or any of
the Gerdau Companies which are convertible into or exercisable or
exchangeable for any shares of Gerdau or any of the Gerdau Companies or any
other person and none of Gerdau or any of the Gerdau Companies has any
obligation of any kind to issue any additional securities or to pay for or
repurchase any securities. Except as disclosed in the Gerdau Disclosure
Letter, none of Gerdau or any of the Gerdau
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Companies has outstanding any stock appreciation rights, phantom equity or
similar rights, agreements, arrangements or commitments.
6.2.8. No holder of securities issued by Gerdau or any of the Gerdau
Companies has any right to compel Gerdau or any of the Gerdau Companies to
register or otherwise qualify such securities for public sale in Canada or
the United States.
6.3. AUTHORITY AND NO CONFLICTS.
6.3.1. Gerdau has all requisite corporate power and authority to enter into
and to perform its obligations under this agreement. Gerdau has taken all
necessary corporate action to authorize the execution and delivery by it
of, and the performance of its obligations under, this agreement.
6.3.2. This agreement has been duly executed and delivered by Gerdau and
constitutes its legal, valid and binding obligation, enforceable against it
in accordance with its terms, except as enforceability may be limited by
bankruptcy, insolvency and other applicable Laws affecting creditors'
rights generally and by general principles of equity.
6.3.3. None of the execution and delivery of this agreement by Gerdau, the
performance by it of its obligations under this agreement or the completion
of the Transaction will:
6.3.3.1. conflict with, or violate any provision of, the governing
documents of Gerdau or the Gerdau Companies;
6.3.3.2. subject to the consents, approvals, orders, authorizations,
registrations, declarations or filings referred to in Schedule A being
made or obtained, violate or conflict with or result in a breach of
any Laws applicable to Gerdau or the Gerdau Companies;
6.3.3.3. subject to the consents, approvals, orders, authorizations,
registrations, declarations or filings referred to in Section 8.6 and
Schedule A being made or obtained, violate or conflict with or result
in the breach of, or constitute a default (or an event that with the
giving of notice, the passage of time or both would constitute a
default) under, or entitle any party (with the giving of notice, the
passage of time or both) to terminate or accelerate, or require any
consent or waiver under, any agreement, mortgage, indenture, lease,
license or other obligation or instrument to which any of Gerdau or
the Gerdau Companies is a party or by which any of Gerdau or the
Gerdau Companies or any of its property is bound or subject;
6.3.3.4. result in the imposition of any Charge on any of Gerdau's
assets or the assets of the Gerdau Companies; or
6.3.3.5. result in any payment (including severance, unemployment
compensation, golden parachute, bonus or otherwise) becoming due to
any director, officer or employee of the Gerdau Companies or increase
any benefits
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under any Gerdau Plan or result in the acceleration of time of
payments or vesting of any such benefits, including the time of
exercise of AmeriSteel Options,
except, in the case of sections 6.3.3.2 through 6.3.3.5, for any of the
foregoing that would not, individually or in the aggregate, have a material
adverse effect on Gerdau or materially impair its ability to perform its
obligations under this agreement or prevent or materially delay the
consummation of any of the Transaction.
6.4. CONSENTS AND APPROVALS.
No consent, approval, order or authorization of, or registration,
declaration or filing with, any third party or Regulatory Authority is required
by or with respect to Gerdau or the Gerdau Companies in connection with the
execution and delivery of this agreement by Gerdau, the performance of its
obligations under this agreement, or the completion of the Transaction other
than (i) filings required under Securities Laws as contemplated by this
agreement, (ii) any filings by Gerdau in connection with the Regulatory
Approvals, (iii) the Regulatory Approvals and consents relating to Gerdau as set
out in Schedule A to this agreement and (iv) any other consents, approvals,
orders, authorizations, registrations, declarations or filings which, if not
obtained or made, would not, individually or in the aggregate, have a material
adverse effect on Gerdau or materially impair its ability to perform its
obligations under this agreement or prevent or materially delay the consummation
of any of the Transaction.
6.5. NO DEFAULTS.
None of Gerdau or the Gerdau Companies is in default under or in violation
of, and there has been no event, condition or occurrence which, after notice or
lapse of time or both, would constitute such a default or violation of, or
permit the termination or acceleration of, any term, condition or provision of
(i) its governing documents or (ii) any agreement, mortgage, indenture, lease,
license or other obligation or instrument to which Gerdau or any of the Gerdau
Companies is a party or by which any of Gerdau or the Gerdau Companies or any of
its property is bound or subject, except defaults, violations, terminations or
accelerations that, individually or in the aggregate, would not have a material
adverse effect on Gerdau or materially impair its ability to perform the
obligation under this agreement or prevent or materially delay the consummation
of any of the Transaction.
6.6. ABSENCE OF CERTAIN CHANGES OR EVENTS.
Except as publicly announced or as disclosed in the Gerdau Disclosure
Letter or in the AmeriSteel Public Disclosure Documents filed prior to the date
of this agreement, since December 31, 2001, each of the Gerdau Companies has
conducted its respective business only in the ordinary course in a manner
consistent with past practice and there has not been:
6.6.1. any material change (as defined in the Securities Act) in its
affairs or in its business, assets, liabilities, financial condition,
results of operations or prospects;
6.6.2. any acquisition, sale or transfer of any material assets of any of
the Gerdau Companies other than in the ordinary course of business and
consistent with past practice;
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6.6.3. any change in accounting methods, practices, policies or principles
(including any change in depreciation or amortization policies or rates),
by any of the Gerdau Companies or any revaluation by any of the Gerdau
Companies assets;
6.6.4. any declaration, setting aside, or payment of a dividend or other
distribution with respect to the shares of any of the Gerdau Companies, or
any direct or indirect redemption, purchase or other acquisition by any of
the Gerdau Companies of any of its shares;
6.6.5. any failure by any of the Gerdau Companies to replenish its
respective inventory in a usual and customary manner consistent with past
practice over the last five years;
6.6.6. any material contract entered into by any of the Gerdau Companies,
other than in the ordinary course of business, or any material amendment or
termination of, or default under, any material contract to which any of the
Gerdau Companies is a party or by which it is bound;
6.6.7. any agreement by any of the Gerdau Companies to do any of the things
described in the preceding sections 6.6.1 through 6.6.6 (other than
negotiations with Co-Steel and its representatives regarding the
Transaction); or
6.6.8. any agreement or arrangement to take any action which, if taken
prior to the date of this agreement, would have made any representation or
warranty set forth in this agreement materially untrue or incorrect as of
the date when made.
6.7. PUBLIC DISCLOSURE.
6.7.1. AmeriSteel is a registrant under the U.S. Exchange Act and is not in
material default of the requirements of the U.S. Exchange Act or any such
other applicable Securities Laws. The shares of AmeriSteel are not listed
on any stock exchange or to the knowledge of Gerdau traded in any
over-the-counter market.
6.7.2. After giving effect to subsequent filings in relation to matters
covered in earlier filings, the public filings made by AmeriSteel with the
SEC since December 31, 2000 (the "AmeriSteel Public Disclosure Documents")
do not contain any misrepresentation (as defined under applicable
Securities Laws). The AmeriSteel Public Disclosure Documents are all the
filings required to be made since December 31, 2000 and, at the time filed,
complied in all material respect with applicable Securities Laws.
AmeriSteel has not filed any confidential material change report with any
securities authority or stock exchange which remains confidential.
6.8. FINANCIAL STATEMENTS.
6.8.1. The combined financial statements of Xxxxxx XX and Xxxxxx XX
(including any related notes) listed in the Gerdau Disclosure Letter (the
"Canadian Group Financial Statements") (i) except as disclosed in the notes
thereto, have been prepared in accordance with Canadian generally accepted
accounting principles applied on a consistent basis during the periods
involved (ii) except as disclosed in the notes thereto,
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represent the combined businesses of Xxxxxx XX, Xxxxxx XX and each of their
respective Subsidiaries (excluding, for greater certainty, Gerdau USA and
AmeriSteel and their respective Subsidiaries) and (iii) fairly present, in
all material respects, the combined financial position of Xxxxxx XX and
Xxxxxx XX and the results of operations, changes in equity and changes in
cash flows of Xxxxxx XX and Xxxxxx XX as of the respective dates thereof
and for the respective periods covered thereby, subject, in the case of
unaudited financial statements, to normal recurring year end adjustments,
none of which will be material. Gerdau has made available to Co-Steel true
and complete copies of the Canadian Group Financial Statements.
6.8.2. The consolidated financial statements of Gerdau USA (including any
related notes) listed in the Gerdau Disclosure Letter (the "USA Financial
Statements") (i) have been prepared in accordance with U.S. generally
accepted accounting principles applied on a consistent basis during the
periods involved, which, as applied to these companies, does not differ
materially from Canadian generally accepted accounting principles except as
Gerdau will disclose in the Circular and (ii) fairly present, in all
material respects, the consolidated financial position of Gerdau USA and
its Subsidiaries and the results of operations, changes in equity and
changes in cash flows of Gerdau USA and its Subsidiaries on a consolidated
basis as of the respective dates thereof and for the respective periods
covered thereby, subject, in the case of unaudited financial statements, to
normal recurring year end adjustments, none of which will be material.
Gerdau has made available to Co-Steel true and complete copies of the USA
Financial Statements.
6.8.3. The consolidated financial statements of AmeriSteel (including any
related notes) (the "AmeriSteel Financial Statements") included in any
AmeriSteel Public Disclosure Documents (i) have been prepared in accordance
with U.S. generally accepted accounting principles applied on a consistent
basis during the periods involved, (ii) comply in all material respects
with the requirements of applicable Securities Laws and (iii) fairly
present, in all material respects, the consolidated financial position of
AmeriSteel and the results of operations, changes in equity and changes in
cash flows of AmeriSteel on a consolidated basis as of the respective dates
thereof and for the respective periods covered thereby, subject, in the
case of unaudited financial statements, to normal recurring year end
adjustments, none of which will be material. Gerdau has made available to
Co-Steel true and complete copies of the AmeriSteel Financial Statements.
6.8.4. None of the Gerdau Companies has any Liabilities or is a party to or
bound by any agreement of guarantee, support, indemnification, assumption
or endorsement of, or any other similar commitment with respect to
Liabilities, other than (i) Liabilities reflected in accordance with
Canadian generally accepted accounting principles in the Canadian Group
Financial Statements and Liabilities reflected in accordance with U.S.
generally accepted accounting principles in the USA Financial Statements or
the AmeriSteel Financial Statements, (ii) Liabilities incurred or arising
since the date of such financial statements in the ordinary course of
business consistent with past practice or (iii) Liabilities which would
not, individually or in the aggregate, have a material adverse effect on
Gerdau or materially impair its ability to perform its obligations under
this agreement or prevent or materially delay the consummation of the
Transaction.
- 36 -
6.8.5. There is no material information regarding the financial position
and results of operations of the Gerdau Companies not reflected in any of
the Canadian Group Financial Statements, the USA Financial Statements and
the AmeriSteel Financial Statements taken together.
6.9. INVENTORY VALUATION.
The inventory reflected on the balance sheet forming part of each of the
Canadian Group Financial Statements, USA Financial Statements and AmeriSteel
Financial Statements, in each case for the year ended December 31, 2001, was,
and the current inventory of the Gerdau Companies is, in usable and saleable
condition in the ordinary course of business (other than alloys, refractories,
rolls and guides used in the manufacturing process) and in the case of inventory
reflected on such balance sheet at an amount not less than the amounts carried
therein. The finished goods, work in process, raw materials and other materials
and supplies included in such inventory are of a standard which is not lower
than the generally accepted standard prevailing in the steel industry.
6.10. INDEBTEDNESS.
Except as set out in the USA Financial Statements, the Canadian Group
Financial Statements or the AmeriSteel Financial Statements, none of the Gerdau
Companies has outstanding any bonds, debentures, notes, mortgages or other
indebtedness which mature more than one year after the date of their original
creation or issuance and none of the Gerdau Companies has agreed to create or
issue any bonds, debentures, notes, mortgages or other indebtedness which will
mature more than one year after the date of their creation or issuance, other
than with respect to internal financings among Gerdau and the Gerdau Companies.
6.11. AS TO CERTAIN CONTRACTS IN AND OUT OF THE ORDINARY COURSE.
Except as set out in the Gerdau Disclosure Letter, none of the Gerdau
Companies is a party to or bound by any:
6.11.1. contracts or agreements with any officer, director, employee,
shareholder or any other person with whom any of the Gerdau Companies or
any of their Subsidiaries is not dealing at arm's length (within the
meaning of the Tax Act) or any affiliate of any of the foregoing, other
than contracts of employment or contracts or agreements made solely between
any of the Gerdau Companies and any of their Subsidiaries or between any of
the Subsidiaries;
6.11.2. management agreement or similar contract, agreement or commitment;
6.11.3. consulting, agency or similar contract, agreement or commitment
which requires payment of more than $1,000,000;
6.11.4. contract, agreement or commitment to make any gift of any of its
property, other than donations made in the ordinary course of business,
consistent with past practice;
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6.11.5. contract, agreement or commitment which materially adversely
affects or could materially adversely affect any of the Gerdau Companies or
any of their Subsidiaries or their financial condition or any of their
assets or is or could be materially burdensome to any of the Gerdau
Companies or any of their Subsidiaries;
6.11.6. Material Contract; or
6.11.7. contract, agreement or commitment which was not made in the
ordinary course of business, consistent with past practice.
For the purposes of the foregoing, if a particular contract, agreement or
commitment falls within more than one of the categories established by sections
6.11.1 through 6.11.7, it need not be set out more than once in the Gerdau
Disclosure Letter.
6.12. EMPLOYMENT MATTERS.
6.12.1. Except as described in the Gerdau Disclosure Letter or disclosed in
writing to Co-Steel, none of the Gerdau Companies is a party to any
employment, consulting, retention, severance or termination of employment
agreement, oral or written, other than agreements providing for annual
compensation of less than $150,000 or that may be terminated on reasonable
notice or payment in lieu of notice in accordance with applicable Laws.
6.12.2. Except for the AmeriSteel Management Incentive Plans and as
disclosed in the Gerdau Disclosure Letter, none of the Gerdau Companies has
established and there are no current or former employees of any of the
Gerdau Companies entitled to participate in any incentive compensation,
profit sharing, bonus, option, share purchase or share compensation plan.
6.12.3. Except as disclosed in the Gerdau Disclosure Letter, none of the
Gerdau Companies is a party to, or bound by, any collective bargaining
agreement or any other labour contract applicable to any employees of the
Gerdau Companies. There is no strike or labour dispute, slowdown, lockout
or stoppage pending or, to the knowledge of Gerdau, after appropriate
inquiries and investigations, threatened against or affecting any of the
Gerdau Companies. To the knowledge of Gerdau, there are no current union
organizing activities involving employees of the Gerdau Companies.
6.12.4. None of the Gerdau Companies is a party to, or bound by, any
collective bargaining agreement or any other labour contract applicable to
any employees of the Gerdau Companies that contains an extension of
recognition clause or other provision requiring the employer to recognize
the existing union as the bargaining agent for employees of any business
acquired by the employer other than as a result of the Gerdau Companies
employing such employees or as a result of a successful related or
successor employer application being brought before the applicable
Regulatory Authority as a result of such acquisition.
6.12.5. There are no current or pending or, to the knowledge of Gerdau,
threatened proceedings involving the Gerdau Companies before any board or
tribunal or claims with respect to employment and labour Laws, including
employment and labour standards,
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unfair labour practices, employment discrimination, occupational health and
safety, employment equity, pay equity, workers' compensation, human rights
and labour relations, other than such proceedings and claims which,
individually or in the aggregate, would not have a material adverse effect
on Gerdau or materially impair its ability to perform its obligations under
this agreement or prevent or materially delay the consummation of the
Transaction.
6.13. LITIGATION.
Except as disclosed in the Gerdau Disclosure Letter, there are no claims,
actions, proceedings or investigations pending or, to the knowledge of Gerdau,
threatened against any of the Gerdau Companies before any arbitrator or
Regulatory Authority (and Gerdau has no knowledge of any facts that are likely
to give rise to any such claim, action, proceeding or investigation), including
in relation to the sales or marketing of its products or the Environment, that
would be reasonably expected to have a material adverse effect on any of the
Gerdau Companies or materially impair Gerdau's ability to perform its
obligations under this agreement or prevent or materially delay the consummation
of the Transaction.
6.14. TAX MATTERS.
6.14.1. Except as disclosed in the Gerdau Disclosure Letter, each of the
Gerdau Companies has duly and timely filed all Tax Returns required to be
filed by it and all such Tax Returns are complete and correct in all
material respects based on such Gerdau Company's reasonable filing
position. Each of the Gerdau Companies has paid all Taxes which are due and
payable by it as reasonably determined by such Gerdau Company, other than
those which are being contested in good faith and in respect of which
adequate reserves have been provided, based on quantifiable Taxes assessed
in the audited financial statements of each of the Gerdau Companies. Each
of the Canadian Group Financial Statements, USA Financial Statements and
AmeriSteel Financial Statements for the most recent period contains
adequate provision, in accordance with U.S. or Canadian generally accepted
accounting principles, as applicable, for Taxes payable in respect of each
period covered by such financial statements and all prior periods to the
extent such Taxes have not been paid, whether or not due and whether or not
shown as being due on any Tax Returns and there is nothing material not
reflected in such financial statements. Each of the Gerdau Companies has
made adequate provision, in accordance with U.S. or Canadian generally
accepted accounting principles, as applicable, in its respective books and
records for any amount of Taxes material to the Gerdau Companies on a
consolidated basis and accruing in respect of any accounting period ending
after the period covered by such financial statements.
6.14.2. Except as described in the Gerdau Disclosure Letter, there are no
actions, suits, proceedings, investigations or claims made (or, to the
knowledge of Gerdau, threatened) against any of the Gerdau Companies in
respect of Taxes or any matters under discussion with any Regulatory
Authority relating to Taxes asserted by any such authority, in each case,
which may have a material adverse effect on Gerdau or materially impair its
ability to perform its obligations under this agreement or prevent or
materially delay the consummation of the Transaction. There have been no
waivers of statutes of limitations or objections to any assessments or
reassessments involving Taxes given, filed or requested with respect to any
of the Gerdau Companies except in circumstances where
- 39 -
the Taxes under objection have been paid or adequate provision for the
payment thereof has been made.
6.14.3. None of the Gerdau Companies (i) has made an election to be treated
as a "consenting corporation" under section 341(f) of the United States
Internal Revenue Code of 1986 (the "U.S. Tax Code") or (ii) is a party to
any Tax sharing or other similar agreement or arrangement or any Tax
indemnification agreement of any nature with any other person (other than
in agreements with any of the Gerdau Companies) pursuant to which any of
the Gerdau Companies has or could have any material liabilities in respect
of Taxes. None of the Gerdau Companies has made an election under section
897(i) of the U.S. Tax Code to be treated as a domestic corporation for
purposes of section 897, 1445 and 6039C of the U.S. Tax Code.
6.14.4. Each of the Gerdau Companies has collected, withheld and remitted
all Taxes required to be collected, withheld and remitted by it in
accordance with applicable Laws.
6.15. PENSION AND EMPLOYEE BENEFITS.
6.15.1. The Gerdau Disclosure Letter lists each registered or supplementary
pension, retirement, profit sharing, bonus, savings, deferred compensation,
stock option, purchase, appreciation, group insurance or other material
employee or retiree benefit plan, program or arrangement, formal or
informal, oral or written, maintained or contributed to by any of the
Gerdau Companies (each plan, program or arrangement, together with the
AmeriSteel Management Incentive Plans an "Gerdau Plan"). Except as
disclosed in the Gerdau Disclosure Letter, each Gerdau Plan has been
administered, established, invested, operated and funded in material
compliance with its terms and all applicable Laws and there are no unfunded
liabilities in respect of such pension or retirement plans and all required
contributions thereunder have been made in material compliance with all
applicable Laws and the terms of such Gerdau Plan. Correct and complete
copies of all the Gerdau Plans and all related documents (including current
actuarial reports and draft actuarial reports relating to such Gerdau
Plans), or, where oral, correct and complete written summaries of their
terms as set out in the Gerdau Disclosure Letter have been provided to
Co-Steel.
6.15.2. Except as disclosed in the Gerdau Disclosure Letter or as permitted
by section 8.2 no amendments or improvements have been made or promised
respecting (i) any Gerdau Plan for which actuarial reports are prepared
since the date of the last actuarial report relating to such plan, and (ii)
any other Gerdau Plan since December 31, 2001, in each case, other than
those required by any Laws or the terms of any collective agreement.
6.15.3. There have been no withdrawals of, or applications made to
withdraw, surplus from any Gerdau Plan, and all withdrawals and transfer of
assets, and contribution holidays respecting any Gerdau Plan, have been
undertaken and completed in accordance with the relevant terms of each plan
and all Laws.
6.15.4. Except as disclosed in the Gerdau Disclosure Letter, there has been
no partial or full wind-up of any Gerdau Plan, no event has occurred which
would entitle any person to partially or fully wind-up, or require the
partial or full winding-up, any Gerdau
- 40 -
Plan or which could adversely affect the registered or qualified tax status
of, any Gerdau Plan and the Transaction will not constitute a basis for a
partial or full wind-up of any Gerdau Plan.
6.15.5. Except as disclosed in the Gerdau Disclosure Letter, the assets of
each Gerdau Plan which is a registered pension plan are at least equal to
the liabilities, contingent or otherwise, of such Gerdau Plan on a going
concern, solvency and wind-up basis and each such Gerdau Plan is fully
funded on a going concern, solvency and wind-up basis in accordance with
its terms, applicable actuarial assumptions and methods and applicable
Laws. Member data and asset information used in making the foregoing
determinations was accurate and complete in all material respects at the
time the foregoing determinations were made.
6.15.6. No Gerdau Plan is a multi-employer plan within the meaning of
applicable pension Laws or the terms of any collective agreement. No
commitments have been made to increase the benefits under any Gerdau Plan,
except as required by applicable Laws. No Gerdau Plan may be required to be
wound up, in whole or in part, have its registration revoked or be required
to pay any material amounts of Taxes, fees or penalties under applicable
Laws.
6.15.7. Liabilities under the Gerdau Plans which provide supplemental
retirement benefits are properly accrued in the most recent Canadian Group
Financial Statements or AmeriSteel Financial Statements.
6.16. TITLE TO ASSETS.
6.16.1. Except as disclosed in the Gerdau Disclosure Letter, the Gerdau
Companies are the absolute beneficial owners of, and have good and
marketable title, free of all Charges other than Permitted Charges, to all
the assets (other than the real property referred to in section 6.17) owned
by the Gerdau Companies used in connection with their respective
businesses.
6.16.2. Except as disclosed in the Gerdau Disclosure Letter, all the
physical assets of the Gerdau Companies are in reasonably good operating
condition and in a state of reasonably good maintenance and repair having
regard to the use to which the assets are put and the age thereof, except
for such immaterial assets whose condition, taken individually or in the
aggregate, would not have a material adverse effect on Gerdau.
6.17. TITLE TO OWNED REAL PROPERTY.
The Gerdau Disclosure Letter contains a complete list of municipal
addresses (including a brief description of the size of parcel and type of
improvements located on the property), and legal descriptions to the extent
possible, for all of the real property owned by the Gerdau Companies. One or
more of the Gerdau Companies is the absolute beneficial owner of, and has good
and marketable title in fee simple to, its respective real property, free of all
Charges, except for:
6.17.1. the Charges set out in the Gerdau Disclosure Letter;
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6.17.2. Permitted Charges; and
6.17.3. title defects which do not, in the aggregate, materially adversely
affect the use of such real property as it is presently used by the Gerdau
Companies.
Each of the Charges has been complied with and is in good standing in all
material respects.
6.18. LEASED REAL PROPERTY.
The Gerdau Disclosure Letter contains the municipal addresses for all of
the premises used by the Gerdau Companies which are leased, subleased, licenced
or otherwise occupied by the Gerdau Companies.
6.19. ZONING AND OTHER MATTERS RELATING TO REAL PROPERTY.
6.19.1. The buildings, improvements and other structures located on the
real property owned or leased by the Gerdau Companies and the operation and
maintenance thereof, as now operated and maintained, comply in all material
respects with all applicable Laws (except with respect to any
non-compliance with Environmental Laws, as otherwise disclosed pursuant to
this agreement); none of such buildings, improvements or other structures
encroaches upon any land not owned or leased by Co-Steel or any of its
Subsidiaries; and there are no restrictive covenants, municipal by-laws or
other Laws which in any material way restrict or prohibit the use of such
land, buildings, improvements or structures for the purposes for which they
are presently being used.
6.19.2. There are no expropriation, condemnation or similar proceedings,
actual or threatened, of which any of the Gerdau Companies has received
notice against any of the real property owned or leased by Co-Steel or any
of its subsidiaries or any part thereof.
6.20. ENVIRONMENTAL MATTERS.
6.20.1. Except as disclosed in the Gerdau Disclosure Letter or except as
would not have a material adverse effect on Gerdau,
6.20.1.1. none of the Gerdau Companies, or any person has emitted,
discharged, deposited or released or caused or permitted to be
emitted, discharged, deposited or released, any Substances on or to
the Gerdau Premises, or in connection with the operation of the
business of any of the Gerdau Companies, except in compliance with
Environmental Law;
6.20.1.2. the soil and subsoil, and the surface and ground water in,
on or under the Gerdau Premises do not contain any Substances, nor do
the Gerdau Premises contain any underground storage tanks; all
Substances which have been or are being treated or stored on the
Gerdau Premises have been generated, treated and stored in compliance
with Environmental Law;
6.20.1.3. no polychlorinated biphenyls, asbestos containing materials,
lead or urea-formaldehyde or has ever been on, at, or in under the
Gerdau Premises;
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6.20.1.4. none of the Gerdau Companies has permitted the Gerdau
Premises to be used for the disposal of any Substance;
6.20.1.5. none of the Gerdau Premises, nor any real property formerly
owned by the Gerdau Companies or any of their Subsidiaries, nor any
real property to which the Gerdau Companies or any of the Subsidiaries
transported or arranged for the transportation of any Substances, are
listed or proposed for listing on the National Priorities List
promulgated pursuant to the CERCLA, or on any similar state,
provincial or foreign list of sites requiring investigation or
remediation;
6.20.1.6. none of the Gerdau Companies has generated, treated,
transported, stored, recycled, discharged, emitted, disposed of or
released any Substances, or arranged for the generation, treatment,
transport, storage, recycling, discharge, emission, disposal or
release of any Substances, at any onsite or offsite location, so as to
give rise to any corrective or remedial obligation under any
Environmental Law;
6.20.1.7. none of the Gerdau Companies has received any notification
that any of them are a potentially responsible party for investigation
or remediation of any site, nor have any of them received any request
for information with respect to such potential responsibility;
6.20.1.8. all Environmental Permits obtained by the Gerdau Companies
in connection with the business of each are valid and in full force
and effect; and
6.20.1.9. there are no proceedings against or involving any of the
Gerdau Companies, either in progress, pending or, to the knowledge of
Gerdau, threatened which allege the violation of, or non-compliance
with, any Environmental Law.
6.20.2. The Gerdau Companies and their Subsidiaries have delivered or
made available to Co-Steel copies of all environmental reports and
environmental audits, in each case disclosing any material
environmental matter and in their possession, custody or control with
respect to the Gerdau Premises, their former real properties, and
their operations.
6.20.3. For greater certainty, the representations and warranties
contained in sections 6.3.3, 6.4 and section 6.21 apply to
Environmental Permits.
6.21. COMPLIANCE WITH LAWS AND PERMITS; REGULATORY MATTERS.
6.21.1. Except as disclosed in the Gerdau Disclosure Letter, each of the
Gerdau Companies is in compliance with all applicable Laws (including
Environmental Laws) except for any non-compliance which (alone or together
with any other such non-compliance) has not had and would not reasonably be
expected to have a material adverse effect on Gerdau or materially impair
its ability to perform its obligations under this agreement or prevent or
materially delay the consummation of the Transaction.
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6.21.2. Except as would not reasonably be expected to have a material
adverse effect on the Gerdau Companies,
6.21.2.1. Gerdau Companies and their Subsidiaries hold all Permits
(including Environmental Permits);
6.21.2.2. all Permits are valid and in good standing and are not
subject to any qualifications or restrictions except for such standard
qualifications and restrictions ordinarily imposed in connection with
the issuance of these permits which qualifications or restrictions do
not in any manner restrict or impair the business currently conducted
by the Gerdau Companies;
6.21.2.3. no Permits are, and (on the basis of facts or circumstances
known to any of the Gerdau Companies at the date of this agreement)
none would reasonably be expected to be, the subject of any
suspension, modification or revocation or proceedings related thereto;
and
6.21.2.4. to the knowledge of the Gerdau Companies, no facts,
circumstances or conditions exist that would prevent the timely
renewal of any Permits.
6.21.3. The Gerdau Companies and their Subsidiaries are not, and (on the
basis of facts or circumstances known to any of the Gerdau Companies at the
date of this agreement) would not reasonably be expected to be, subject to
any restrictive injunction or order of, or agreement with, any Regulatory
Authority that (alone or together with other such matters) would reasonably
be expected to have a material adverse effect on any of the Gerdau
Companies or materially impair their ability to perform their obligations
under this agreement or prevent or materially delay the consummation of the
Transaction.
6.22. RESTRICTION ON BUSINESS ACTIVITIES.
There is no agreement, judgment, injunction, order or decree binding on any
of the Gerdau Companies that has, or could reasonably be expected to have, the
effect of prohibiting, restricting or materially impairing any current business
practice of Gerdau or the Gerdau Companies or the conduct of business by Gerdau
or the Gerdau Companies.
6.23. CUSTOMERS AND SUPPLIERS.
Since December 31, 2001, there has been no termination or cancellation of,
and no material modification or change in, the business relationship with any
customer or group of customers which singly or in the aggregate provided more
than 10% of the gross revenues of any of the Gerdau Companies for the fiscal
year ended on December 31, 2001. Gerdau has no reason to believe that the
benefits of any relationship with any of the customers or suppliers of any of
the Gerdau Companies will not continue after the Closing Date in substantially
the same manner as prior to the date of this agreement.
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6.24. INSURANCE.
Gerdau has furnished or made available to Co-Steel true and complete copies
of all the existing insurance policies of the Gerdau Companies, or evidence of
the existence of such policies with accurate particulars of the policies of
insurance maintained by the Gerdau Companies at the date of this agreement,
including the name of the insurer, the risks insured against and the amount of
coverage. All such policies are in full force and effect. None of the Gerdau
Companies or, to the knowledge of Gerdau, any of the other parties thereto, is
in default or breach of, whether as to the payment of premiums or otherwise, nor
has any of the Gerdau Companies received any notice of material default or
termination under, any such policy and, to the knowledge of Gerdau, there exists
no state of facts which after notice or lapse of time or both would constitute
such a material default or breach. There is no reason to believe that any of the
existing insurance policies of the Gerdau Companies will not be renewed by the
insurer upon the scheduled expiry of the policy or will be renewed by the
insurer only on the basis that there will be a material increase in the premiums
payable in respect of the policy.
6.25. BROKERAGE AND FINDERS' FEES.
Except for Gerdau's obligations to TD Securities Inc., Gerdau has not
incurred or will incur any brokerage, finders' or similar fee in connection with
the Transaction. Gerdau has disclosed to Co-Steel all the material financial and
other terms of the retainer agreement with TD Securities Inc. At the Closing
Date, there will not be any material obligations of Gerdau in favour of TD
Securities Inc., except as disclosed in the Gerdau Disclosure Letter.
6.26. REPRESENTATIONS COMPLETE.
None of the representations or warranties made by Gerdau herein, including
the Gerdau Disclosure Letter, or in the AmeriSteel Public Disclosure Documents,
when all such documents are read together in their entirety, contains any untrue
statement of a material fact, or omits to state any material fact necessary in
order to make the statements contained herein or therein, in the light of the
circumstances under which made, not misleading.
ARTICLE 7.
REPRESENTATIONS AND WARRANTIES OF XXXXXX X.X.
Xxxxxx X.X. represents and warrants to Co-Steel as follows:
7.1. PUBLIC DISCLOSURE.
After giving effect to subsequent filings in relation to matters covered in
earlier filings, the public filings made by Xxxxxx X.X. with the SEC since
December 31, 2000 (the "Xxxxxx X.X. Public Disclosure Documents") do not contain
any misrepresentation (as defined under applicable Securities Laws) with respect
to the Gerdau Companies; it being understood that the materiality standard
applied in the Xxxxxx X.X. Public Disclosure Documents is the appropriate
standard at the Xxxxxx X.X. level but may differ from the standard that would be
appropriate at the Gerdau Companies level, and that the financial information
contained in the Xxxxxx X.X. Public Disclosure Documents is not based on U.S.
generally accepted accounting principles. The Xxxxxx X.X. Public Disclosure
Documents are all the filings required to be made since December 31, 2000 and,
at the time filed, complied in all material respect with applicable
- 45 -
Securities Laws. Xxxxxx X.X. has not filed any confidential material change
report with any securities authority or stock exchange which remains
confidential.
ARTICLE 8.
COVENANTS RELATING TO THE TRANSACTION
8.1. COVENANTS OF CO-STEEL.
8.1.1. Co-Steel agrees that, until the earlier of the Closing Time and the
termination of this agreement in accordance with section 10.1, unless
Gerdau otherwise agrees in writing or except as contemplated by this
agreement or disclosed in the Co-Steel Disclosure Letter:
8.1.1.1. it will conduct, and will cause each of its Subsidiaries to
conduct, its and their respective businesses only in, and not take any
action except in, the ordinary course of business and consistent with
past practice;
8.1.1.2. it will not, and it will not permit any of its Subsidiaries
to, do any of the following:
8.1.1.2.1. enter into, or make any commitment to enter into, any
significant new line of business;
8.1.1.2.2. authorize, or enter into, any agreement, arrangement or
understanding with respect to, (A) any acquisition of businesses,
assets or securities, the value of the consideration for which
(including assumed debt or other obligations) would exceed $2,000,000
(including in a series of related transactions) or, taken together
with any other acquisitions made in reliance on this clause, would
exceed $5,000,000 in the aggregate or (B) any disposition of
businesses, assets or securities, the value of the consideration for
which (including assumed debt or other obligations) would exceed
$2,000,000 (including in a series of related transactions) or, taken
together with any other dispositions made in reliance on this clause,
would exceed $5,000,000 in the aggregate, other than, in either case,
(x) any transactions in the ordinary course effected at fair market
value, at arm's length and in the exercise of reasonable business
judgment and (y) any transactions in the course of implementation at
the date of this agreement;
8.1.1.2.3. amend or propose to amend its or their governing documents;
8.1.1.2.4. subdivide, consolidate or reclassify any of its or their
outstanding securities, or declare, set aside or pay any dividend or
other distribution (in cash or any other property) with respect to its
or their securities, except as among Co-Steel and its wholly-owned
operating Subsidiaries or as otherwise specifically permitted by
sections 10.01(10), (11) and (12) of the Co-Steel Credit Facilities;
- 46 -
8.1.1.2.5. issue, sell, pledge, reserve, set aside, dispose of or
encumber, repurchase, redeem or otherwise acquire, any of its or their
shares or any securities or obligations convertible into, exercisable
or exchangeable for, or any rights, warranties or options to acquire,
any such shares, except (A) as required by the terms of any securities
outstanding on the date of this agreement, (B) pursuant to fully
vested Co-Steel Options granted prior to the date of this agreement
and (C) and as among Co-Steel and its wholly-owned operating
Subsidiaries or as otherwise specifically permitted by sections
10.01(10), (11) and (12) of the Co-Steel Credit Facilities (provided
that it does not increase the number of Co-Steel Shares issued and
outstanding);
8.1.1.2.6. reorganize, amalgamate or merge with any other person,
except as among Co-Steel and its wholly-owned operating Subsidiaries
or as otherwise specifically permitted by sections 10.01(10), (11) and
(12) of the Co-Steel Credit Facilities (provided that it does not
increase the number of Co-Steel Shares issued and outstanding); or
8.1.1.2.7. incur or commit to incur, in excess of $2,000,000 in any
single transaction or series of related transactions or $5,000,000 in
the aggregate, any indebtedness for borrowed money or purchase money
indebtedness or assume or guarantee any indebtedness except for
borrowings in the ordinary course of business and consistent with past
practice;
8.1.1.3. it will use commercially reasonable efforts, and cause each of its
Subsidiaries to use commercially reasonable efforts, to preserve intact its
respective business organizations and goodwill, to keep available the
services of its officers and employees and to maintain satisfactory
relations with suppliers, agents, distributors, customers and others having
business relationships with it or its Subsidiaries;
8.1.1.4. subject to the exercise by the board of directors of its fiduciary
duties as provided herein, it will use commercially reasonable efforts, and
shall cause its Subsidiaries to use commercially reasonable efforts, to
perform all obligations required or desirable to be performed by it or any
of its Subsidiaries under this agreement, it will not take any action that
would be inconsistent with this agreement or which would reasonably be
expected to prevent or materially delay the consummation of the Transaction
and, without limiting the generality of the foregoing, it will and where
appropriate, cause its Subsidiaries to:
8.1.1.4.1. use all commercially reasonable efforts to obtain the
approvals of its shareholders to the Transaction Resolution;
8.1.1.4.2. not change the date of or adjourn, postpone or cancel (or
propose to adjourn, postpone or cancel) the Meeting without Gerdau's
prior written consent (not to be unreasonably withheld), except as
provided in section 8.10 or as required by valid shareholder action or
applicable Laws;
- 47 -
8.1.1.4.3. defend all lawsuits or other legal, regulatory or other
proceedings challenging or affecting this agreement or the
consummation of the Transaction;
8.1.1.4.4. use all commercially reasonable efforts to have lifted or
rescinded any injunction or restraining order or other order which may
adversely affect the ability of the parties to consummate the
Transaction;
8.1.1.4.5. cooperate with the other party to this agreement in
connection with the performance by them of their obligations
hereunder;
8.1.1.4.6. subject to section 8.3 hereof and applicable Laws, make and
cooperate in the making of all filings and applications and
submissions of information under all Laws which are applicable in
connection with the Transaction and take all commercially reasonable
actions in connection therewith, including without limitation, in
connection with the Regulatory Approvals and by participating and
appearing in any proceedings of either party before Regulatory
Authorities, and use its reasonable best efforts to coordinate the
parties' discussions with and responses to all Regulatory Authorities
where both parties are seeking to obtain material approvals or make
material filings; and
8.1.1.4.7. conduct its affairs so as to satisfy the condition
precedent with respect to the accuracy of its representations and
warranties contained in section 9.2;
8.1.1.5. except as disclosed in the Co-Steel Disclosure Letter or as
required by applicable Laws or any agreement to which Co-Steel or any of
its Subsidiaries is a party at the date of this agreement (including the
Co-Steel Management Incentive Plans) and, in the case of sections 8.1.1.5.1
and 8.1.1.5.2 except for ordinary course salary and compensation increases
for 2002 as have already been approved by Co-Steel, it will, and cause each
of its Subsidiaries to, not do any of the following:
8.1.1.5.1. increase the amount of (or accelerate the payment or
vesting of) any benefit or amount payable under any employee benefit
plan or any other contract, agreement, commitment, arrangement, plan
or policy providing for compensation or benefits to any former,
present or future director, officer or employee of Co-Steel or any of
its Subsidiaries;
8.1.1.5.2. increase (or enter into any commitment or arrangement to
increase) the compensation or benefits, or otherwise extend, expand or
enhance the engagement, employment or any related rights, of any
former, present or future director, officer, employee or consultant of
Co-Steel or any of its Subsidiaries, except for normal increases for
persons who are not directors or officers made in the ordinary course
of business consistent with past practice, provided that the overall
compensation budget will not increase by more than 3% on an annual
basis;
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8.1.1.5.3. no amendments or improvements will be made or promised
prior to the Closing Date respecting (i) any Co-Steel Plan for which
actuarial reports are prepared since the effective date of the last
actuarial report relating to such plan, and (ii) any other Co-Steel
Plan since December 31, 2001, in each case, other than those required
by any Laws or the terms of any collective agreement;
8.1.1.5.4. accelerate the release of, or the expiry date of any hold
period relating to, any Co-Steel Shares held in the Co-Steel Plans, or
otherwise amend, vary or modify such plans or the Co-Steel Management
Incentive Plans; or
8.1.1.5.5. adopt, establish, enter into or implement, or permit any of
its Subsidiaries to adopt, establish, enter into or implement, any
employee benefit plan, policy, severance or termination agreement
providing for any form of benefits or other compensation to any
former, present or future director, officer or employee of Co-Steel or
any of its Subsidiaries holding, in the case of any officer or
employee, a position of vice president or any position senior thereto
or amend, or permit any of its Subsidiaries to amend, any employee
benefit plan, policy, severance or termination agreement;
8.1.1.6. it will, and cause each of its Subsidiaries to, not pay,
discharge, satisfy, compromise or settle any claims or Liabilities prior to
their being due which, individually or in the aggregate, are in excess of
$5,000,000 or unless required by Law;
8.1.1.7. it will, and cause each of its Subsidiaries to, not settle or
compromise any claim brought by any present, former or purported holder of
any of its securities in connection with the Transaction prior to the
Closing Date without the prior written consent of Gerdau, which shall not
be unreasonably withheld;
8.1.1.8. except as required by applicable Laws, it will, and will cause
each of its Subsidiaries to, not enter into, terminate or waive any
provision of, exercise any option or relinquish any contractual rights
under, or modify in any material respect, any agreement, guarantee, lease
or other commitment or obligation which is material to Co-Steel or any of
its Subsidiaries or any agreement or commitment which involves payments or
receipts, individually or in the aggregate, by Co-Steel or any of its
Subsidiaries of more than $5,000,000 over the term of such agreement or
commitment;
8.1.1.9. it will use commercially reasonable efforts, and cause each of its
Subsidiaries to use commercially reasonable efforts, to comply promptly
with all material requirements which applicable Laws may impose on it or
its Subsidiaries with respect to the Transaction;
8.1.1.10. it will, and cause each of its Subsidiaries to, not make any
change to its existing accounting practices, methods and principles except
as required by
- 49 -
Canadian generally accepted accounting principles as advised by Co-Steel's
independent auditors; and
8.1.1.11. except as permitted by section 8.8, it will, and cause each
of its Subsidiaries to, not enter into any confidentiality or
standstill agreement, amend, release any third party from its
obligations or grant any consent under any confidentiality or
standstill provision or fail to enforce fully any such provision;
provided that the restrictions contained in this section 8.1.1.11
shall not apply to confidentiality agreements (i) that relate only to
confidential information about entities other than Co-Steel and its
Subsidiaries and are not entered into in connection with or
contemplation of transactions not permitted by this agreement; and
(ii) entered into with financial institutions in connection with
Co-Steel's financing activities permitted hereunder.
8.1.2. Co-Steel will promptly advise Gerdau in writing:
8.1.2.1. of any event, condition or circumstance that might reasonably
be expected to cause any representation or warranty of Co-Steel in
this agreement to be untrue or inaccurate at the Closing Time (or, in
the case of any representation or warranty made as of a specified
date, as of such specified date);
8.1.2.2. of any breach by Gerdau of any representation, warranty or
covenant or event, condition or circumstance that has come to the
attention of Co-Steel and might reasonably be expected to cause any
representation or warranty of Co-Steel in this agreement to be untrue
or inaccurate, in either case, at the Closing Time (or, in the case of
any representation or warranty made as of a specified date, as of such
specified date);
8.1.2.3. of any change affecting Co-Steel or any event, occurrence or
development or any Regulatory Authority's or third party's complaints,
investigations or hearings (or communications indicating that the same
may be contemplated) which would be reasonably expected to have a
material adverse effect on Co-Steel or to prevent or materially delay
the consummation of the Transaction; and
8.1.2.4. of any material breach by Co-Steel of any of its covenants,
obligations or agreements contained in this agreement.
8.2. COVENANTS OF XXXXXX X.X. AND GERDAU.
8.2.1. Each of the Gerdau Parties agrees that, until the earlier of the
Closing Time and the termination of this agreement in accordance with
section 10.1, unless Co-Steel otherwise agrees in writing or except as
contemplated by this agreement or disclosed in the Gerdau Disclosure
Letter:
8.2.1.1. it will cause each of the Gerdau Companies to conduct their
respective businesses only in, and not take any action except in, the
ordinary course of business and consistent with past practice;
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8.2.1.2. it will not permit any of the Gerdau Companies to do any of
the following:
8.2.1.2.1. enter into, or make any commitment to enter into, any
significant new line of business;
8.2.1.2.2. authorize, or enter into, any agreement, arrangement
or understanding with respect to, (A) any acquisition of
businesses, assets or securities, the value of the consideration
for which (including assumed debt or other obligations) would
exceed $2,000,000 (including in a series of related transactions)
or, taken together with any other acquisitions made in reliance
on this clause, would exceed $5,000,000 in the aggregate or (B)
any disposition of businesses, assets or securities, the value of
the consideration for which (including assumed debt or other
obligations) would exceed $2,000,000 (including in a series of
related transactions) or, taken together with any other
dispositions made in reliance on this clause, would exceed
$5,000,000 in the aggregate, other than, in either case, (x) any
transactions in the ordinary course effected at fair market
value, at arm's length and in the exercise of reasonable business
judgment and (y) any transactions in the course of implementation
at the date of this agreement;
8.2.1.2.3. amend or propose to amend its or their governing
documents;
8.2.1.2.4. subdivide, consolidate or reclassify any of its or
their outstanding securities, or declare, set aside or pay any
dividend or other distribution (in cash or any other property)
with respect to its or their securities, except as among Gerdau
and the Gerdau Companies;
8.2.1.2.5. issue, sell, pledge, reserve, set aside, dispose of or
encumber, repurchase, redeem or otherwise acquire, any of its or
their shares or any securities or obligations convertible into,
exercisable or exchangeable for, or any rights, warranties or
options to acquire, any such shares, except (A) as required by
the terms of any securities outstanding on the date of this
agreement, (B) pursuant to vested AmeriSteel Options granted
prior to the date of this agreement and (C) as among Gerdau and
the Gerdau Companies;
8.2.1.2.6. reorganize, amalgamate or merge with any other person,
except as among the Gerdau Companies; or
8.2.1.2.7. incur or commit to incur, in excess of $2,000,000 in
any single transaction or series of related transactions or
$5,000,000 in the aggregate, any indebtedness for borrowed money
or purchase money indebtedness or assume or guarantee any
indebtedness except for borrowings in the ordinary course of
business and consistent with past practice;
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8.2.1.3. it will use commercially reasonable efforts to cause each of
the Gerdau Companies to use commercially reasonable efforts, to
preserve intact their respective business organizations and goodwill,
to keep available the services of its officers and employees and to
maintain satisfactory relations with suppliers, agents, distributors,
customers and others having business relationships with the Gerdau
Companies;
8.2.1.4. it will use commercially reasonable efforts, and cause each
of the Gerdau Companies to use commercially reasonable efforts, to
perform all obligations required or desirable to be performed by it
under this agreement, the Gerdau Companies will not take any action
that would be inconsistent with this agreement or which would
reasonably be expected to prevent or materially delay the consummation
of the Transaction and, without limiting the generality of the
foregoing, it will and will cause the Gerdau Companies to:
8.2.1.4.1. defend all lawsuits or other legal, regulatory or
other proceedings challenging or affecting this agreement or the
consummation of the Transaction;
8.2.1.4.2. use all commercially reasonable efforts to have lifted
or rescinded any injunction or restraining order or other order
which may adversely affect the ability of the parties to
consummate the Transaction;
8.2.1.4.3. cooperate with the other party to this agreement in
connection with the performance by them of their obligations
hereunder, including the obligations under Article 3 and the Plan
of Merger;
8.2.1.4.4. subject to section 8.3 hereof and applicable Laws,
make and cooperate in the making of all filings and applications
and submissions of information under all Laws which are
applicable in connection with the Transaction and take all
commercially reasonable actions in connection therewith,
including without limitation, in connection with the Regulatory
Approvals and by participating and appearing in any proceedings
of either party before Regulatory Authorities, and use its
reasonable best efforts to coordinate the parties' discussions
with and responses to all Regulatory Authorities where both
parties are seeking to obtain material approvals or make material
filings; and
8.2.1.4.5. conduct its affairs so as to satisfy the condition
precedent with respect to the accuracy of its representations and
warranties contained in section 9.3;
8.2.1.5. except as described in the Gerdau Disclosure Letter or as
required by applicable Laws or any agreement to which each of the
Gerdau Companies is a party at the date of this agreement and, in the
case of sections 8.2.1.5.1 and 8.2.1.5.2 except for ordinary course
salary and compensation increases for 2002 as have already been
approved by each of the Gerdau Companies will cause each of the Gerdau
Companies not to do any of the following:
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8.2.1.5.1. increase the amount of (or accelerate the payment
or vesting of) any benefit or amount payable under any
employee benefit plan or any other contract, agreement,
commitment, arrangement, plan or policy providing for
compensation or benefits to any former, present or future
director, officer or employee of any of the Gerdau
Companies;
8.2.1.5.2. increase (or enter into any commitment or
arrangement to increase) the compensation or benefits, or
otherwise extend, expand or enhance the engagement,
employment or any related rights, of any former, present or
future director, officer, employee or consultant of any of
the Gerdau Companies, except for normal increases for
persons who are not directors or officers made in the
ordinary course of business consistent with past practice,
provided that the overall compensation budget will not
increase by more than 3% on an annual basis;
8.2.1.5.3. no amendments or improvements will be made or
promised prior to the Closing Date respecting (i) any Gerdau
Plan for which actuarial reports are prepared since the date
of the last actuarial report relating to such plan, and (ii)
any other Gerdau Plan since December 31, 2001, in each case,
other than those required by any Laws or the terms of any
collective agreement;
8.2.1.5.4. accelerate the release of, or the expiry date of
any hold period relating to, any shares held in the Gerdau
Plans, or otherwise amend, vary or modify such plans or the
AmeriSteel Management Incentive Plans; or
8.2.1.5.5. adopt, establish, enter into or implement, or
permit any of its Subsidiaries to adopt, establish, enter
into or implement, any employee benefit plan, policy,
severance or termination agreement providing for any form of
benefits or other compensation to any former, present or
future director, officer or employee of the Gerdau Companies
holding, in the case of any officer or employee, a position
of vice president or any position senior thereto or amend,
or permit any of its Subsidiaries to amend, any employee
benefit plan, policy, severance or termination agreement;
8.2.1.6. the Gerdau Parties will cause each of the Gerdau
Companies not to pay, discharge, satisfy, compromise or settle
any claims or Liabilities prior to their being due which,
individually or in the aggregate, are in excess of $5,000,000;
8.2.1.7. the Gerdau Parties will cause each of the Gerdau
Companies not to settle or compromise any claim brought by any
present, former or purported holder of any of its securities in
connection with the Transaction prior to the Closing Date without
the prior written consent of Co-Steel, which shall not be
unreasonably withheld;
8.2.1.8. except as required by applicable Laws, the Gerdau
Parties will cause each of the Gerdau Companies not to enter
into, terminate or waive any provision of, exercise any option or
relinquish any contractual rights under, or modify in
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any material respect, any agreement, guarantee, lease or other
commitment or obligation which is material to any of the Gerdau
Companies or any agreement or commitment which involves payments
or receipts, individually or in the aggregate, by any of the
Gerdau Companies of more than $5,000,000 over the term of such
agreement or commitment;
8.2.1.9. it will use commercially reasonable efforts to cause
each of the Gerdau Companies to use commercially reasonable
efforts to comply promptly with all material requirements which
applicable Laws may impose on each of the Gerdau Companies with
respect to the Transaction;
8.2.1.10. the Gerdau Parties will cause each of the Gerdau
Companies not to, make any change to its existing accounting
practices, methods and principles except as required by Canadian
or U.S. generally accepted accounting principles, as applicable,
as advised by Gerdau's independent auditors; and
8.2.1.11. except as permitted by section 8.8, the Gerdau Parties
will cause each of the Gerdau Companies not to enter into any
confidentiality or standstill agreement, amend, release any third
party from its obligations or grant any consent under any
confidentiality or standstill provision or fail to enforce fully
any such provision;
8.2.2. the Gerdau Parties will promptly advise Co-Steel in writing:
8.2.2.1. of any event, condition or circumstance that might reasonably
be expected to cause any representation or warranty of the Gerdau
Parties in this agreement to be untrue or inaccurate at the Closing
Time (or, in the case of any representation or warranty made as of a
specified date, as of such specified date);
8.2.2.2. of any breach by Co-Steel of any representation, warranty or
covenant or event, condition or circumstance that has come to the
attention of the Gerdau Parties and might reasonably be expected to
cause any representation or warranty of Gerdau in this agreement to be
untrue or inaccurate, in either case, at the Closing Time (or, in the
case of any representation or warranty made as of a specified date, as
of such specified date);
8.2.2.3. of any change affecting the Gerdau Companies or any event,
occurrence or development or any Regulatory Authority's or third
party's complaints, investigations or hearings (or communications
indicating that the same may be contemplated) which would be
reasonably expected to have a material adverse effect on Gerdau or to
prevent or materially delay the consummation of the Transaction;
8.2.2.4. of any material breach by either of the Gerdau Parties of any
of its covenants, obligations or agreements contained in this
agreement.
8.2.3. On or before the Closing Date, the Gerdau Parties will, and will
cause each of their respective Subsidiaries to, suspend and waive the
rights to receive all payments (other than the payments of amounts owing
with respect to the period prior to the Closing
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Date) under all agreements, arrangements and understandings, whether
written or oral, among them and any of their non-arm's length parties
(including the Gerdau Parties and their respective Subsidiaries other than
the Gerdau Companies) and the Gerdau Companies, unless and until the
members of the board of directors of Co-Steel not appointed or nominated by
Gerdau otherwise agree.
8.2.4. Each of the Gerdau Parties covenants and agrees that, at the Closing
Time, all of the net debt of the Gerdau Companies to related parties,
except for the accounts payable to related parties owing under agreements
described in the Gerdau Disclosure Letter, will have been converted to
equity in a manner consistent with the assumptions and presentation of the
pro forma financial statements of Gerdau AmeriSteel Corporation contained
in the Circular.
8.2.5. Each of the Gerdau Parties represents and warrants that Gerdau has
not borrowed under the Gerdau Credit Facility and covenants and agrees as
follows:
8.2.5.1. Gerdau will not borrow under such facility in future;
8.2.5.2. Gerdau will comply with the covenants in the Gerdau Credit
Facility; and
8.2.5.3. Gerdau will provide Co-Steel, after the Closing Date, with
access to the information necessary to enable Co-Steel and its
Subsidiaries to satisfy the covenants under the Gerdau Credit
Facility.
8.3. ACCESS TO INFORMATION.
8.3.1. Subject to sections 8.3.2 to and including 8.3.10 and applicable
Laws, upon reasonable notice, each of Co-Steel and Gerdau will (and will
cause each of its Subsidiaries to) afford the Representatives of the other
party hereto access, during normal business hours from the date hereof and
until the earlier of the Closing Date or the termination of this agreement,
to its properties, books, contracts and records as well as to its
management personnel, and, during such period, each party will (and will
cause each of its Subsidiaries to) furnish promptly to the other party all
information concerning its business, properties and personnel as such party
may reasonably request (the "Information").
8.3.2. The Information will be kept strictly confidential and shall not,
without the prior written consent of the disclosing party, be disclosed by
the receiving party, or by its Representatives, in any manner whatsoever,
in whole or in part, and shall not be used by the receiving party or its
Representatives other than in connection with the Transaction. Moreover,
the receiving party agrees to reveal the Information only to its
Representatives who have a reasonable need to know the Information for the
purposes of evaluating or implementing the Transaction, who are informed by
the receiving party of the confidential nature of the Information and who
have agreed to act in accordance with the terms and conditions of this
agreement. Notwithstanding such agreement, the receiving party shall
continue to be responsible for any breach of this agreement by its
Representatives and shall indemnify and save the disclosing party harmless
from any breach by any of the receiving party's Representatives.
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8.3.3. The receiving party shall keep a record of the Information delivered
to it, in any medium other than oral, and the location of such Information.
All copies of the Information, except for that portion of the Information
which consists of analyses, compilations, forecasts, studies or other
documents prepared by the receiving party or its Representatives will be
returned to the disclosing party immediately upon its request. That portion
of the Information which consists of analyses, compilations, forecasts,
studies or other documents prepared by the receiving party or its
Representatives, will be destroyed upon the disclosing party's request and
any oral Information will continue to be subject to the terms of this
agreement. Upon the request of the disclosing party, the receiving party
shall provide a certificate certifying as to the complete return and
destruction of all Information in accordance with the terms of this
paragraph.
8.3.4. The receiving party shall keep all of the Information disclosed or
delivered to it, whether electronically stored or in a tangible form,
segregated from all of its property and in a safe and secure environment
and will use commercially reasonable efforts to protect and keep safe all
of the Information disclosed from any loss, harm, theft, unauthorized use,
tampering, sabotage, unauthorized duplication, destruction, addition,
deletion, damage or interference whatsoever.
8.3.5. The receiving party acknowledges that the Information is
confidential and a valuable asset of the disclosing party and all right,
title and interest in and to the Information (including all intellectual
property) is and at all time shall remain the exclusive property of the
disclosing party.
8.3.6. If the receiving party or anyone to whom the receiving party
transmits the Information pursuant to this agreement becomes legally
compelled to disclose any of the Information, the receiving party will
provide the disclosing party with prompt notice so that the disclosing
party may seek a protection order or other appropriate remedy and/or waive
compliance with the provisions of this agreement. If such protective order
or other remedy is not obtained or the disclosing party waives compliance
with the provisions of this agreement, the receiving party will furnish
only that portion of the Information which it is advised, by written
opinion of counsel, addressed to the receiving party and to the disclosing
party, is legally required and will exercise its best efforts to obtain
reliable assurance that confidential treatment will be accorded the
Information.
8.3.7. The parties each acknowledge that disclosure of any Information may
cause significant damage and harm to a disclosing party, its affiliates,
Subsidiaries and shareholders and that remedies at law may be inadequate to
protect against breach of this agreement, and the parties hereby in advance
agree to the granting of injunctive relief in favour of the disclosing
party without proof of actual damages, in addition to any other remedy the
disclosing party may be entitled to.
8.3.8. The parties acknowledge that certain information may be
competitively sensitive and that disclosure thereof will be limited to that
which is reasonably necessary for the purpose of (i) preparing submissions
or applications in order to obtain any appropriate Regulatory Approvals and
(ii) preparing the Circular.
8.3.9. The provisions of section 8.3.2 to and including section 8.3.8 and
this section 8.3.9 will survive the termination of this agreement.
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8.3.10. The provisions of this section 8.3 will supersede the terms of the
Confidentiality Agreement.
8.4. PHYSICAL DUE DILIGENCE
8.4.1. In addition to the obligations under section 8.3.1, Co-Steel will
afford Gerdau, any of the Gerdau Companies and their affiliates and
Gerdau's Representatives full and complete access, whether during normal
business hours or not, from the date hereof and until the earlier of 10
days after the date hereof or the termination of this agreement, to (i) any
of the properties and plants of Co-Steel or its Subsidiaries in order for
Gerdau to conduct or cause to be conducted physical due diligence
(including environmental testing) on the property and plants of Co-Steel
and its Subsidiaries solely for the purpose of confirming the accuracy of
the representations and warranties contained in this agreement and other
information provided by Co-Steel prior to the date hereof, and (ii) any of
the personnel and management of Co-Steel and its Subsidiaries to whom
access is reasonably required in connection with the physical due diligence
referred to in (i).
8.4.2. In addition to the obligations under section 8.3.1, Gerdau will
afford Co-Steel, any of its Material Subsidiaries and their affiliates and
Co-Steel's Representatives full and complete access, whether during normal
business hours or not, from the date hereof and until the earlier of 10
days after the date hereof or the termination of this agreement, to (i) any
of the properties and plants of the Gerdau Companies in order for Co-Steel
to conduct or cause to be conducted physical due diligence (including
environmental testing) on the property and plants of the Gerdau Companies
solely for the purpose of confirming the accuracy of the representations
and warranties contained in this agreement and other information provided
by Gerdau prior to the date hereof, and (ii) any of the personnel and
management of the Gerdau Companies to whom access is reasonably required in
connection with the physical due diligence referred to in (i).
8.4.2. In the event that a material inaccuracy of the representations and
warranties given by either party pursuant to this agreement is revealed to
either party during, or as a result of, the physical due diligence pursuant
to this section, such party shall give prompt notice of such inaccuracy to
the other party.
8.5. MUTUAL STANDSTILL
Until the Closing Date or the termination of this agreement, each of the
Gerdau Parties and Co-Steel agrees that it will not, alone or jointly or in
concert with any third party, directly or indirectly, otherwise than pursuant to
this agreement (including without limitation section 8.9), or with the prior
approval of the other, which approval may be given on such terms as the other
may determine:
8.5.1. in any manner acquire, agree to acquire or make any proposal or
offer to acquire, directly or indirectly, any securities or property of the
other;
8.5.2. propose or offer to enter into, directly or indirectly, any merger
or business combination involving the other;
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8.5.3. solicit, or participate or join with any person in the solicitation
of any proxies to vote, to seek to advise or to influence any person with
respect to the voting of any voting securities of the other (but for
greater certainty (a) Co-Steel acknowledges that Gerdau and its agents and
advisors (including TD Securities Inc.) will be entitled to solicit proxies
and otherwise influence any person to vote in favour of the Transaction
Resolution at the Meeting and (b) Gerdau acknowledges that Co-Steel and its
agents and advisors (including CIBC World Markets Inc.) will be entitled to
solicit proxies and otherwise influence any person to vote in favour of the
Transaction Resolution at the Meeting);
8.5.4. otherwise act alone or in concert with others to seek to control or
to influence the management, board of directors or policies of the other;
8.5.5. make any public or private disclosure of any consideration,
intention, plan or arrangement inconsistent with any of the foregoing; or
8.5.6. advise, assist or encourage any of the foregoing or work in concert
with others in respect of the forgoing.
For the purpose of this section 8.5, each reference to Gerdau or Co-Steel shall
include the Gerdau Companies and Co-Steel's Subsidiaries, respectively, and each
of their successors. The termination of this Agreement shall also terminate
sections 5(a), (b) and (c) of the Confidentiality Agreement.
8.6. REGULATORY APPROVALS.
8.6.1. Each of Gerdau and Co-Steel will use its commercially reasonable
efforts to obtain all Regulatory Approvals and all other approvals under
Laws that are applicable in connection with the Transaction as soon as is
reasonably practicable.
8.6.2. Subject to sections 2.4 and 8.3 and applicable Laws, each of Gerdau
and Co-Steel will make and cooperate in the making of all filings and
applications and submissions of information under all Laws which are
applicable in connection with the Transaction (including obligations under
applicable Securities Laws, the ICA, the HSR Act and the Competition Act)
and will take all reasonable actions in connection therewith, including in
connection with the Regulatory Approvals, and by participating and
appearing in any proceedings of either party before Regulatory Authorities,
and will use its commercially reasonable efforts to co-ordinate the
parties' discussions with and responses to all Regulatory Authorities where
both parties are seeking to obtain significant approvals or make
significant filings.
8.6.3. Subject to sections 2.4 and 8.3 and applicable Laws, each of Gerdau
and Co-Steel will (i) consult with each other in making any filings with
any Regulatory Authority, (ii) enable the other party to review and comment
on all such filings that are significant prior to their release, (iii)
consider all such comments reasonably and in good faith, (iv) provide a
copy of each such filing to the other party, (v) consult with the other
party in connection with all material enquiries from or with any material
Regulatory Authority and the possible resolution of all material issues and
(vi) not participate in any substantive meeting or discussion with any
Regulatory Authority in connection with any
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proceedings under or relating to any applicable Laws as they concern the
Transaction, unless it consults with the other party in advance and, to the
extent permitted by the Regulatory Authority, gives the other party the
opportunity to attend or participate therein.
8.6.4. Each of the Gerdau Parties and Co-Steel will promptly furnish to the
other all information concerning it and its affiliates as may be required
to effect the actions described in section 2.4 and this section 8.6 and
each covenants that none of the information furnished or to be furnished by
it in connection with such actions or otherwise in connection with the
Transaction will contain any misrepresentation (as defined in the
Securities Act).
8.7. THIRD PARTY CONSENTS.
Each of Gerdau and Co-Steel will use its commercially reasonable efforts to
obtain consents, waivers or approvals from other parties to contracts,
agreements, guarantees, leases, debt obligations or other commitments or
obligations to which it is or any of its Subsidiaries is a party or by which it
or they are bound that are applicable in connection with the Transaction as soon
as is reasonably practicable.
8.8. NON-SOLICITATION OF ALTERNATIVE PROPOSALS.
8.8.1. Co-Steel will immediately cease and cause to be terminated any
existing solicitation, encouragement, activity, discussion or negotiation
with any person by Co-Steel, any of its Subsidiaries or any of their
Representatives with respect to any Alternative Proposal, whether or not
initiated by Co-Steel, and, in connection therewith, Co-Steel will request
(and exercise all rights it has to require) the return or destruction of
information regarding Co-Steel and its Subsidiaries previously provided to
any such person or any other person and will request (and exercise all
rights it has to require) the destruction of all materials including or
incorporating any information regarding Co-Steel and its Subsidiaries.
8.8.2. Subject to sections 8.8.3, 8.8.5, 8.8.6 and 8.9, Co-Steel will not
do any of the following or permit any of its Subsidiaries or any of their
Representatives to do any of the following:
8.8.2.1. solicit, initiate or encourage any inquiry or the making of
any proposal to it or its shareholders from any person which
constitutes, or may reasonably be expected to lead to (in either case
in one transaction or a series of transactions), an Alternative
Proposal;
8.8.2.2. enter into or participate in or continue any discussions or
negotiations regarding, agree to or endorse or recommend, or enter
into or propose to enter into any agreement, arrangement or
understanding in relation to, an Alternative Proposal; or
8.8.2.3. furnish to any person any information with respect to the
business, properties, operations, prospects or condition (financial or
otherwise) of Co-Steel or any of its Subsidiaries in circumstances
under which it knows, or it ought
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reasonably to know, that such information will be used by the
recipient in connection with, or in order to make or evaluate making,
an Alternative Proposal.
8.8.3. Subject to section 8.8.5, at any time after the date of this
agreement and before the Meeting, the directors of Co-Steel may consider,
participate in discussions or negotiations with, or provide information to,
any person who has delivered to Co-Steel a bona fide written Alternative
Proposal (with respect to which Co-Steel is not in violation of section
8.8.2) provided that the board of directors of Co-Steel, after consultation
with its financial and legal advisors, has determined that it is necessary
for the directors to take that action in order to discharge properly their
fiduciary duties and that such Alternative Proposal is or, if consummated
in accordance with its terms, would reasonably be expected to be a Superior
Proposal.
8.8.4. Co-Steel will not release any person from any confidentiality
agreement or standstill agreement by which such person is bound unless such
person has made a Superior Proposal.
8.8.5. Co-Steel will notify Gerdau as soon as possible (and in any event
within 24 hours of receipt) of any bona fide written Alternative Proposal
of which its senior management or board of directors becomes aware, or any
request for non-public information relating to it or any of its
Subsidiaries in connection with an Alternative Proposal or for access to
the properties, books or records of it or any of its Subsidiaries by any
person that informs it or any of its Subsidiaries or any of its
Representatives that such person is considering making, or has made, an
Alternative Proposal. Such notice must include a description of the
material terms and conditions of any proposal, including the identity of
the person making such proposal, inquiry or contact.
8.8.6. If Co-Steel receives a request for material non-public information
from a person who proposes a bona fide written Alternative Proposal, and
its directors determine that such Alternative Proposal is or, if
consummated in accordance with its terms, would reasonably be expected to
be a Superior Proposal, then, and only in that case, but subject to the
execution of a confidentiality agreement substantially similar to the
Confidentiality Agreement, the directors of Co-Steel may provide such
person with access to information regarding Co-Steel, provided that
Co-Steel sends a copy of any such confidentiality agreement to Gerdau
immediately on its execution and Gerdau is provided with a list of the
information provided to such person and immediately provided with access to
similar information to which such person was provided.
8.8.7. Co-Steel shall promptly reaffirm its recommendation of the
Transaction by press release after: (a) any Alternative Proposal (which is
subsequently determined by Co-Steel not to be a Superior Proposal) is
publicly announced or made; or (b) Gerdau and Co-Steel enter into an
amendment to this agreement pursuant to section 8.9.1.6; any such press
release shall be prepared in accordance with section 4.1.
8.8.8. Co-Steel will be responsible for the breach of this section 8.8 by
any of its Subsidiaries or Representatives.
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8.9. NOTICE OF SUPERIOR PROPOSAL.
8.9.1. Co-Steel may accept, approve, recommend or enter into an agreement,
arrangement or understanding in respect of an Alternative Proposal
(provided that this section 8.9 shall not apply to a confidentiality
agreement that complies with section 8.8.6) on the basis that it
constitutes or, if consummated in accordance with its terms, would
reasonably be expected to constitute a Superior Proposal, provided that:
8.9.1.1. it gives notice to Gerdau that it proposes to do so, promptly
after so determining;
8.9.1.2. after consultation with its financial advisors, the board of
directors of Co-Steel has determined in good faith, after the
consultation with its outside legal counsel, that it is necessary for
the directors to take that action in order to discharge properly their
fiduciary duties;
8.9.1.3. it provides to Gerdau a copy of the agreement relating to the
Alternative Proposal, if any;
8.9.1.4. it provides Gerdau with the opportunity, for a period of five
Business Days from the later of the date Gerdau received notice under
(i) section 8.9.1.1 and (ii) section 8.8.5, to negotiate to amend this
agreement and the terms of the Transaction to provide for terms that
to Co-Steel and the Co-Steel Shareholders are (in the good faith
determination of the directors of Co-Steel) as favourable as, or
superior to, the terms of the Superior Proposal;
8.9.1.5. if at any time during but not later than the end of the five
Business Day period referred to in section 8.9.1.4 Gerdau elects to
make a proposal that (in the good faith determination of the directors
of Gerdau) provides for terms that to Co-Steel and the Co-Steel
Shareholders are as favourable as, or superior to, the terms of the
Superior Proposal and delivers to Co-Steel an executed amendment to
this agreement reflecting the new proposal, the directors of Co-Steel
will:
8.9.1.5.1. call and hold a meeting of the directors to consider
Gerdau's proposal as soon as reasonably possible but not later
than three Business Days after receipt of such proposal;
8.9.1.5.2. in good faith consider such proposal and permit Gerdau
and its Representatives to make a presentation to the meeting in
respect of the relative merits of Gerdau's proposal and the
Superior Proposal but not otherwise to attend or participate in
the meeting or the deliberation of the directors; and
8.9.1.5.3. not later than the date the meeting is required to be
held under section 8.9.1.5.1, determine in good faith and advise
Gerdau as to whether Co-Steel's board of directors has determined
that Gerdau's proposal provides for terms that to Co-Steel and
the Co-Steel Shareholders are as favourable as, or superior to,
the terms of the Superior Proposal; and
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8.9.1.6. in the event that the determination referred to in section
8.9.1.5.3 is made by Co-Steel's board of directors, immediately
thereafter execute the amendment to this agreement delivered by Gerdau
pursuant to section 8.9.1.5 and not take any actions in furtherance or
support of the Superior Proposal.
8.9.2. If despite its consideration of any proposal made by Gerdau under
section 8.9.1.5, the board of directors of Co-Steel continues to believe,
in good faith, and after consultation with its financial advisor and
outside counsel, that the Superior Proposal continues to be a Superior
Proposal in respect of the Gerdau proposal made pursuant to section
8.9.1.5, and therefore rejects Gerdau's amended proposal, then, subject to
payment of the Termination Fee to Gerdau as provided in section 10.3.6,
Co-Steel may thereupon terminate this agreement.
8.9.3. Each successive material modification of any Alternative Proposal
will constitute a new Alternative Proposal for purposes of sections 8.8 and
8.10 and the requirement under section 8.9.1.4 to start an additional five
Business Day notice period.
8.9.4. Co-Steel will not have any rights under sections 8.8.3, 8.8.6 and
8.9.1 after the Meeting if the Transaction Resolution is approved at the
Meeting.
8.10. ADJOURNING OR POSTPONING THE MEETING.
8.10.1. Where at any time before the Meeting (i) Co-Steel has provided
Gerdau with a notice under section 8.8.5, (ii) an Alternative Proposal has
been publicly disclosed or announced or (iii) Gerdau reasonably believes
that a person intends to make an Alternative Proposal, and the five
Business Day period under section 8.9.1.4 has not elapsed, then, subject to
applicable Laws, at Gerdau's request, Co-Steel will postpone or adjourn the
Meeting at the Meeting (but not beforehand without Gerdau's consent) to a
date acceptable to Gerdau but not later than 20 days after the scheduled
date of the Meeting.
8.10.2. If Co-Steel provides Gerdau with notice under section 8.9.1.1 on a
date that is less than five Business Days before the date of the Meeting
and Gerdau has not made a proposal in accordance with section 8.9.1.5 that
the directors of Co-Steel have determined in accordance with section
8.9.1.5 provides for terms that to Co-Steel and the Co-Steel Shareholders
are as favourable as, or superior to, the terms of the Superior Proposal in
respect of which notice was given under section 8.9.1.1, subject to
applicable Laws, Co-Steel will postpone or adjourn the Meeting to a date
that is at least five Business Days but not more than 10 Business Days
after the scheduled date of the Meeting.
8.11. CORPORATE GOVERNANCE MATTERS
8.11.1. The parties agree that the following corporate governance
arrangements will become effective on the Closing Date:
8.11.1.1 on the Closing Date, the Chief Executive Officer of
AmeriSteel shall be the Chief Executive Officer of Co-Steel;
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8.11.1.2 on the Closing Date, the Chief Executive Officer of Co-Steel
shall be the Vice Chairman of Co-Steel;
8.11.1.3 the board of directors of Co-Steel will be reconstituted to
be comprised of a majority of independent directors, and will include
such number of individuals appointed by Gerdau as would not cause the
board to be comprised of a majority of non-independent directors.
Co-Steel will take all steps legally available to it (but on a
commercially reasonable basis) to cause the appointment of all such
individuals by the Closing Date. The parties agree to seek approval of
Co-Steel's shareholders to increase the size of the board by fixing it
at thirteen persons. The board of directors of Co-Steel agrees to
recommend that the shareholders approve such resolution. If the
shareholders approve such resolution (it being agreed that the
Transaction is not conditional upon this increase being approved by
shareholders), Co-Steel will take all steps legally available to it
(but on a commercially reasonable basis) to give effect to the
resolution;
8.11.1.4. the audit committee and human resources (compensation)
committee of the Co-Steel board of directors will consist only of
independent directors;
8.11.1.5. following the Closing Date, the registered office of
Co-Steel will be in Whitby, Ontario with its executive office in
Tampa, Florida;
8.11.1.6. following the Closing Date, subject to the receipt of TSX
approval, the securities of Co-Steel will remain listed on the TSX;
and
8.11.1.7. during the first fiscal year following the Closing Date, the
board of directors of Co-Steel will review any policies, mandates or
other guidelines governing the board of directors and certain of its
committees, in particular the audit committee and human resources
(compensation) committee, to ensure compliance with North American
corporate governance guidelines, including the TSX.
8.11.2. For the four years after the Closing Date, the Gerdau Parties agree
to vote and to cause their affiliates to vote all the Co-Steel Shares
beneficially owned or controlled by them and to take and to cause their
affiliates to take all such other commercially reasonable actions as are in
their power to cause:
8.11.2.1. the board of directors of Co-Steel to be comprised of a
majority of independent directors (including by (a) taking all
commercially reasonable actions as are in the Gerdau Parties' power to
cause Co-Steel to put forward a slate of directors comprised of a
majority of independent directors and voting for such directors and
(b) by taking all commercially reasonable actions as are in the Gerdau
Parties' power to cause the Co-Steel board of directors to fill any
vacancies created by the death, resignation or removal of an
independent director by the appointment of an independent director, it
being acknowledged that the number of directors may be changed from
time to time);
8.11.2.2. the audit committee of the Co-Steel board of directors to
consist only of independent directors; and
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8.11.2.3. the human resources (compensation) committee of the Co-Steel
board of directors to consist of a majority of independent directors.
8.12. DIRECTORS' AND OFFICERS' INSURANCE
The Gerdau Parties agree that, for the period from and including the
Closing Date until six years after the Closing Date, it will cause Co-Steel or
any successor to Co-Steel to maintain Co-Steel's current directors' and
officers' insurance policy or an equivalent policy subject in either case to
terms and conditions no less advantageous to the directors and officers of
Co-Steel than those contained in the policy in effect on the date hereof, for
all present and former directors and officers of Co-Steel, covering claims made
prior to or within six years from and after the Closing Date, to the extent that
directors' and officers' liability insurance coverage is commercially available
at a cost no less than two times the cost as of the date hereof. The Gerdau
Parties also agree that after the expiration of such six-year period it will use
commercially reasonable efforts to cause such directors and officers (other than
former directors and officers of Co-Steel as at the date of this agreement) to
be covered under its then existing director's and officer's insurance policy, if
any, to the extent that directors' and officers' liability insurance coverage is
commercially available at a cost no less than two times the cost as of the date
hereof. After the Closing Date, the Gerdau Parties will cause Co-Steel (or its
successor) to indemnify the directors and officers of Co-Steel in accordance
with its existing governing documents and any contracts of indemnity and
consistent with the practice of Xxxxxx X.X. in respect of its own directors and
officers.
ARTICLE 9.
CONDITIONS
9.1. MUTUAL CONDITIONS.
The obligations of Gerdau and Co-Steel to complete the Transaction are
subject to the satisfaction of the following conditions (each of which is for
their mutual benefit) on or before the Closing Date:
9.1.1. the Transaction Resolution has been approved by the Co-Steel
Shareholders at the Meeting in the manner required by the TSX or other
applicable Laws;
9.1.2. no provision of any applicable Laws and no judgment, injunction,
order or decree is in effect which restrains or enjoins or otherwise
prohibits the Transaction;
9.1.3. the Regulatory Approvals in Schedule A have been obtained and such
Regulatory Approvals do not impose or contain terms and conditions which
would, individually or in the aggregate, have a material adverse effect on
Gerdau and Co-Steel and their Subsidiaries on a combined basis, or
materially impair either Gerdau or Co-Steel's ability to perform its
respective obligations under this agreement or prevent or materially delay
the consummation of the Transaction;
9.1.4. the lenders under the existing debt facilities of each of Co-Steel,
Sayreville, Raritan, Gerdau, Xxxxxx X.X and the Gerdau Companies shall have
each consented to the Transaction, provided such waivers, consents and
amendments as required pursuant to those facilities and confirmed that the
Transaction will not result in the maturity date of
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those facilities occurring on a date that is prior to January 15, 2004, on
terms and conditions acceptable to the parties, acting reasonably; and
9.1.5. this agreement has not been terminated pursuant to Article 10.
9.2. ADDITIONAL CONDITIONS TO THE OBLIGATIONS OF GERDAU.
The obligation of Gerdau to complete the Transaction will be subject to the
satisfaction of the following conditions (each of which is for the exclusive
benefit of Gerdau and may be waived by it on or before the Closing Date):
9.2.1. Co-Steel has performed or complied with, in all material respects,
each of its obligations, agreements and covenants in this agreement to be
performed and complied with by it on or before the Closing Time;
9.2.2. the representations and warranties of Co-Steel under this agreement
(which for purposes of this section 9.2.2 shall be read as though none of
them contained any material adverse effect or other materiality
qualification), shall be true and correct in all respects on the date of
this agreement and as of the Closing Date as if made on and as of such date
(except for such representations and warranties made as of a specified
date, which shall be true and correct as of such specified date) except
where the failure of such representations and warranties in the aggregate
to be true and correct in all respects would not be reasonably expected to
have a material adverse effect on Co-Steel;
9.2.3. the board of directors of Co-Steel has adopted all necessary
resolutions, and all other necessary corporate action has been taken by
Co-Steel, to approve and permit the Transaction and to enable Co-Steel to
perform its obligations under this agreement; and
9.2.4. the Co-Steel Shares issuable as consideration for the Purchased
Shares, pursuant to the Plan of Merger and on exercise of the options into
which the AmeriSteel Options will be converted thereunder have been
conditionally approved for listing on the TSX, subject to the filing of
required documentation and payment of applicable fees.
9.3. ADDITIONAL CONDITIONS TO THE OBLIGATIONS OF CO-STEEL.
The obligation of Co-Steel to complete the Transaction will be subject to
satisfaction of the following conditions (each of which is for the exclusive
benefit of Co-Steel and may be waived by it on or before the Closing Date):
9.3.1. Each of the Gerdau Parties has performed or complied with, in all
material respects, each of its obligations, agreements and covenants under
this agreement to be performed and complied with by it on or before the
Closing Time;
9.3.2. the representations and warranties of each of the Gerdau Parties
under this agreement (which for purposes of this section 9.3.2 shall be
read as though none of them contained any material adverse effect or other
materiality qualification), shall be true and correct in all respects on
the date of this agreement and as of the Closing Date as if made on and as
of such date (except for such representations and warranties made as of a
specified date, which shall be true and correct as of such specified date)
except where the
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failure of such representations and warranties in the aggregate to be true
and correct in all respects would not be reasonably expected to have a
material adverse effect on Gerdau;
9.3.3. except for the guarantees provided by the Gerdau Companies under the
Gerdau Credit Facility, none of the Gerdau Companies shall be party to or
bound by any agreement of guarantee, support, indemnification, assumption
or endorsement of, or any other similar commitment with respect to
Liabilities, other than Liabilities of other Gerdau Companies; and
9.3.4. the board of directors of Gerdau has adopted all necessary
resolutions, and all other necessary corporate action has been taken by
Gerdau, to enable Gerdau to perform its obligations under this agreement.
9.4. CLOSING MATTERS.
Each of Gerdau and Co-Steel will deliver, at the Closing Time, any
customary certificates, resolutions, legal opinions and other closing documents
as may be required by the other party, acting reasonably, including a
certificate signed by two senior officers of each party confirming compliance
with the condition in sections 9.2.1 to 9.2.4, in the case of Co-Steel, and
sections 9.3.1 to 9.3.4, in the case of Gerdau.
ARTICLE 10.
TERMINATION, AMENDMENT AND WAIVER
10.1. TERMINATION.
This agreement may be terminated at any time prior to the Closing Time
(even if the Co-Steel Shareholders have approved the Transaction Resolution at
the Meeting):
10.1.1. by mutual agreement of Gerdau and Co-Steel acting reasonably;
10.1.2. by Gerdau or Co-Steel, if any Laws make the Transaction or any part
of it illegal or otherwise prohibited, or if any judgment, injunction,
order or decree of a competent Regulatory Authority enjoining Gerdau or
Co-Steel from proceeding with or completing the Transaction or any part of
it is entered and such judgment, injunction, order or decree has become
final and non-appealable;
10.1.3. by Gerdau or Co-Steel, if the Closing Date does not occur on or
prior to December 31, 2002; provided, however, that if the Closing Date is
delayed by (x) an injunction or order made by a Regulatory Authority of
competent jurisdiction or (y) the parties not having obtained any
Regulatory Approval which is necessary to permit the completion of the
Transaction then, provided that such injunction or order is being contested
or appealed or such regulatory waiver, consent or approval is being
actively sought, and there is a reasonable prospect that it will be
obtained, as applicable, this agreement may not be terminated pursuant to
this section 10.1.3 until February 28, 2003; and further provided that the
right to terminate this agreement pursuant to this paragraph will not be
available to a party whose failure to perform any material covenant,
agreement or obligation under this agreement has been the cause of, or
resulted in, the failure of the Closing Date to occur on or before such
date;
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10.1.4. by Gerdau if: (i) the board of directors of Co-Steel fails to
unanimously recommend or withdraws, modifies or changes its approval or
recommendation of this agreement or the Transaction in a manner adverse to
Gerdau; (ii) the board of directors of Co-Steel fails to affirm its
approval or recommendation of this agreement or the Transaction within five
Business Days after any written request to do so from Gerdau, unless the
request is made after an Alternative Proposal is publicly disclosed or
made, in which case such affirmation shall be in accordance with section
8.8.7; (iii) Co-Steel has breached its obligations under section 8.8 or
8.9; (iv) the board of directors of Co-Steel accepts, approves, recommends
or enters into an agreement (other than a confidentiality agreement that
complies with section 8.8.6) with any person with respect to a Superior
Proposal; or (v) subject to section 8.10, through the fault (whether by
commission or omission) of Co-Steel, the Transaction Resolution is not,
prior to the later of 90 days after the date hereof and 35 days after the
mailing of the Circular in accordance with section 2.4.3, submitted for the
approval of the holders of the Co-Steel Shares at the Meeting;
10.1.5. by either Gerdau or Co-Steel, if at the Meeting the requisite votes
of the holders of Co-Steel Shares to approve the Transaction Resolution are
not obtained;
10.1.6. by Gerdau, in the event that the results of the investigations
conducted pursuant to section 8.4.1 shall have, in the determination of
Gerdau, acting reasonably, revealed any material inaccuracy of the
representations and warranties given by Co-Steel pursuant to this
agreement, which inaccuracy is not cured to the satisfaction of Gerdau,
acting reasonably, within 30 days of notice thereof given by Gerdau to
Co-Steel pursuant to section 8.4.3;
10.1.7. by Co-Steel, in the event that the results of the investigations
conducted pursuant to section 8.4.2 shall have, in the determination of
Co-Steel, acting reasonably, revealed any material inaccuracy of the
representations and warranties given by Gerdau pursuant to this agreement,
which inaccuracy is not cured to the satisfaction of Co-Steel, acting
reasonably, within 30 days of notice thereof given by Co-Steel to Gerdau
pursuant to section 8.4.3;
10.1.8. by Co-Steel, in the circumstances described in section 8.9.2;
10.1.9. by Gerdau, if Co-Steel or any of its Subsidiaries has breached any
of its representations, warranties, agreements or obligations in this
agreement (other than those referred to in section 10.1.4), the breach of
which would result in the failure to satisfy one or more conditions in
section 9.2.1 or 9.2.2 and such breach is not curable or if curable is not
cured within 30 days after notice of the breach has been received by
Co-Steel; and
10.1.10. by Co-Steel, if the Gerdau Parties or any of the Gerdau Companies
has breached any of its representations, warranties, agreements or
obligations in this agreement, the breach of which would result in the
failure to satisfy one or more conditions set forth in sections 9.3.1 and
9.3.2 and such breach is not curable or if curable is not cured within 30
days after notice of the breach has been received by Gerdau.
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10.2. EFFECT OF TERMINATION.
If this agreement is terminated in accordance with section 10.1, neither
party will have any further Liability to perform its obligations under this
agreement except for those under section 8.3, this section and sections 10.3 and
11.7, which will continue in effect, but nothing in this agreement (including
payment of the Termination Fee or the Expense Fee) will relieve either party
from Liability for any breach of any agreement or covenant contained in this
agreement prior to such termination.
10.3. TERMINATION FEE AND EXPENSES.
10.3.1. If this agreement is terminated by Gerdau pursuant to section
10.1.4, then, within three Business Days following any such termination,
Co-Steel will pay the Termination Fee to Gerdau.
10.3.2. If (i) prior to the date of the Meeting any proposal or expression
of interest by a third party regarding an Alternative Proposal has been
publicly disclosed or announced, and (ii) this agreement is terminated by
either party pursuant to section 10.1.5, Co-Steel will pay the Termination
Fee to Gerdau forthwith.
10.3.3. If (i) prior to the date of the Meeting no proposal or expression
of interest by a third party regarding an Alternative Proposal has been
publicly disclosed or announced, (ii) this agreement is terminated by
either party pursuant to section 10.1.5 and (iii) within 12 months after
the date of such termination a bona fide Material Proposal is consummated,
Co-Steel will pay the Termination Fee to Gerdau forthwith.
10.3.4. If this agreement is terminated (i) by Gerdau pursuant to section
10.1.9 and prior to such termination no proposal or expression of interest
by a third party regarding an Alternative Proposal has been publicly
disclosed or announced, or (ii) by Co-Steel pursuant to section 10.1.10,
then, within three Business Days following notice of such termination,
Co-Steel or Gerdau, as applicable, will pay to the terminating party in
cash by wire transfer in immediately available funds to an account
designated by the terminating party an amount equal to the Expense Fee as
payment in full of the terminating party's costs and expenses in connection
with the Transaction.
10.3.5. If this agreement is terminated by Gerdau pursuant to section
10.1.9 and prior to such termination a proposal or expression of interest
by a third party regarding an Alternative Proposal has been publicly
disclosed or announced, then (i) within three Business Days following any
such termination, Co-Steel will pay to Gerdau in cash by wire transfer in
immediately available funds to an account designated by Gerdau an amount
equal to the Expense Fee as payment in full of Gerdau's costs and expenses
in connection with the Transaction and (ii) if at any time within 12 months
following the date of such termination, Co-Steel enters into any agreement
for such Alternative Proposal or a bona fide Material Proposal is
consummated, then, immediately prior to such agreement being entered into
or such consummation, Co-Steel will pay to Gerdau forthwith the Termination
Fee minus the amount of the Expense Fee previously paid under this section
10.3.5.
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10.3.6. If this agreement is terminated (i) by Gerdau pursuant to section
10.1.6 or (ii) by Co-Steel pursuant to section 10.1.7, then, within three
Business Days following notice of such termination, Co-Steel or Gerdau, as
applicable, will pay to the terminating party in cash by wire transfer in
immediately available funds to an account designated by the terminating
party an amount equal to the Expense Fee as payment in full of the
terminating party's costs and expenses in connection with the Transaction.
10.3.6. If this agreement is terminated by Co-Steel pursuant to section
10.1.8, then, prior to such termination, Co-Steel will pay the Termination
Fee to Gerdau.
10.4. AMENDMENT.
This agreement may not be amended except by mutual written agreement of the
parties.
10.5. WAIVER.
Gerdau or Co-Steel, as applicable, may (i) extend the time for the
performance by the other of any of its obligations or other acts, (ii) waive
compliance by the other with any of its agreements or the fulfilment of any
conditions to its own obligations contained in this agreement or (iii) waive
inaccuracies in any of the other's representations or warranties contained in
this agreement or in any document delivered pursuant to this agreement.
ARTICLE 11.
GENERAL
11.1. INVESTIGATION.
Any investigation by either party and its advisors will not mitigate,
diminish or affect the representations and warranties of the other party.
11.2. SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
Except as otherwise provided in this agreement, the representations,
warranties, agreements and covenants contained herein and in any certificate or
other writing delivered pursuant hereto shall not survive the Closing Time
except Article 3, which shall survive until the effective date of the
registration statement, Article 4 and sections 8.1, 8.2, 8.11.1.7, 8.11.2, 8.12
and 11.7.
11.3. NOTICES.
All notices and other communications under this agreement must be in
writing and may be delivered personally or sent by telecopier or by a nationally
recognized overnight courier service with overnight delivery instructions, in
each case addressed to the particular party at: (a) in the case of Gerdau:
Gerdau Steel Inc.
c/o Gerdau Courtice Steel Inc.
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000 Xxxxx Xxxxx
Xxxxxxxxx, Xxxxxxx
X0X 0X0
Attention: General Manager
Telecopier No: (000) 000-0000
with a copy to:
AmeriSteel Corporation
0000 Xxxx Xxxxx Xxxxxx
Xxxxx 000
Xxxxx, Xxxxxxx 00000
U.S.A.
Attention: President
Telecopier No: (000) 000-0000
with a copy to:
Xxxxx XXX
Xxxxx 0000
00 Xxxxxxxxxx Xxxxxx West
Box 270, TD Centre
Xxxxxxx, Xxxxxxx
X0X 0X0
Attention: Xxxxx X.X. Xxxxxx
Telecopier No: (000) 000-0000
(b) in the case of Xxxxxx X.X.:
Xxxxxx X.X.
Av. Farrapos
1811 - 90220 - 005
Porto Alegre, RS
Brazil
Attention: General Counsel
Telecopier No: (011-55) (00) 0000-0000
(c) in the case of Co-Steel:
Co-Steel Inc.
Xxxxxxx Xxxxxx Xxxxx
Xxxxxx, Xxxxxxx
X0X 0X0
Attention: Xxxxx Xxxxxxxx
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Telecopier No: (000) 000-0000
with a copy to:
Goodmans LLP
0000 - 000 Xxxxx Xxxxxx
Xxxxxxx, Xxxxxxx
X0X 0X0
Attention: Xxxx Xxxxxxx
Telecopier No: (000) 000-0000
or at such other address of which either party may advise, from time to time,
the other party by notice in writing given in accordance with the foregoing. Any
such notice or other communication if delivered personally will be deemed to
have been given and received on the date on which it was delivered to the
relevant address (if a Business Day and, if not, on the next Business Day), if
sent by telecopier, will be deemed to have been given and received at the time
of receipt and despite the foregoing, if any notice or other communication is
received after 4:00 p.m. (Toronto time) on any Business Day or on a day other
than a Business Day, it will be deemed to have been given and received the next
Business Day.
11.4. ASSIGNMENT.
Neither party may assign this agreement or any of its rights, interests or
obligations under this agreement (whether by operation of law or otherwise).
11.5. BINDING EFFECT.
This agreement is binding on, enures to the benefit of and is enforceable
by, the parties and their respective successors and permitted assigns.
11.6. FURTHER ASSURANCES.
Each party from time to time will and will at all times hereafter, at the
request of the other party, but without further consideration, do all such
further acts and execute and deliver all such further documents and instruments
as reasonably required in order to fully perform and carry out the terms and
intent of this agreement.
11.7. EXPENSES.
11.7.1. If the Transaction closes and subject to section 10.3, Co-Steel
will be responsible for all expenses in relation to this agreement and the
Transaction, including legal fees, accounting fees, financial advisory
fees, regulatory filing fees, all disbursements of advisors, and printing
and mailing costs.
11.7.2. If the Transaction does not close and subject to section 10.3, each
party will be responsible for its own costs and expenses in relation to
this agreement and the Transaction, including legal fees, accounting fees,
financial advisory fees, regulatory filing fees, all disbursements of
advisors, and printing and mailing costs, provided that all
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such costs and expenses related to the HSR Act filing will be split equally
between Co-Steel and Gerdau. In particular, Co-Steel will be responsible
for all costs associated with the Meeting, including printing and mailing
costs and Gerdau will be responsible for any costs incurred in relation to
the Plan of Merger under Article 3.
11.8. GOVERNING LAW.
This agreement will be governed by and construed in accordance with the
Laws of Ontario and the Laws of Canada applicable in Ontario.
11.9. TIME OF ESSENCE.
Time is of the essence of this agreement.
11.10. ENTIRE AGREEMENT.
This agreement, including the disclosure letters, constitutes the entire
agreement of the parties and supersedes all other prior agreements (other than
the Confidentiality Agreement, except as specifically amended by this
agreement), understandings, negotiations and discussions (oral or written)
between the parties with respect to the subject matter hereof and thereof.
11.11. SEVERABILITY.
If any provision of this agreement is invalid, illegal or incapable of
being enforced by any rule of law or public policy, all other conditions and
provisions of this agreement will nevertheless remain in full force and effect
so long as the economic or legal substance of the Transaction is not affected in
any manner materially adverse to either party. Upon such determination that any
term or other provision is invalid, illegal or incapable of being enforced, the
parties will negotiate in good faith to modify this agreement so as to effect
the original intent of the parties as closely as possible in an acceptable
manner to the end that the Transaction is fulfilled to the maximum extent
possible.
11.12. REMEDIES.
Gerdau and Co-Steel acknowledge and agree that an award of money damages
would be inadequate for any breach of this agreement by the other party or its
Representatives and any such breach would cause the non-breaching party
irreparable harm. Accordingly, Gerdau and Co-Steel agree that, in the event of
any breach or threatened breach of this agreement by the other party or its
Representatives, the non-breaching party will also be entitled, without the
requirement of posting a bond or other security, to equitable relief, including
injunctive relief and specific performance, provided it is not in material
default under this agreement.
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11.13. COUNTERPARTS.
This amended and restated agreement may be executed in counterparts, each
of which will be deemed to be an original but all of which together will
constitute one and the same instrument.
The parties have executed this amended and restated agreement.
GERDAU STEEL INC.
By:
--------------------------------------------------
Name:
Title:
XXXXXX X.X.
By:
--------------------------------------------------
Name:
Title:
CO-STEEL INC.
By:
--------------------------------------------------
Name:
Title:
SCHEDULE A
REGULATORY APPROVALS AND CONSENTS
(a) any required approvals under the ICA;
(b) either the Commissioner shall have issued an advance ruling certificate
pursuant to section 102 of the Competition Act in respect of the
Transaction, or the applicable waiting period under Part IX of the
Competition Act shall have expired (or shall have been waived by the
Commissioner or a person authorized by him) and the Commissioner shall have
advised Gerdau in writing that he does not, at that time, have grounds on
which to apply to the Competition Tribunal for an order under the merger
provisions of the Competition Act in respect of the Transaction, such
advice being on terms and in a form satisfactory to Gerdau, acting
reasonably, and not having been rescinded or amended;
(c) the expiry or termination of any applicable waiting periods, and the
receipt of any required approvals, under the HSR Act and other applicable
competition or anti-trust Laws in the U.S. or elsewhere;
(d) conditional approval of the TSX of (i) the listing of the Co-Steel Shares
issuable as consideration for the Purchased Shares, (ii) the listing of the
Co-Steel Shares issuable pursuant to the Plan of Merger and on exercise of
the options into which the AmeriSteel Options will be converted thereunder
and (iii) the Transaction;
(e) consents under each of Co-Steel's and Gerdau's debt facilities as described
in section 9.1.4; and
(f) apply for and obtain (i) an amendment to the existing remediation agreement
under New Jersey Industrial Site Recovery Act ("ISRA") for Sayreville's
properties in Keasbey, New Jersey and Sayreville, New Jersey and (ii) a
remediation agreement under ISRA for Raritan's property in Perth Amboy, New
Jersey.
SCHEDULE B
AMERISTEEL PLAN OF MERGER
PLAN OF MERGER
BETWEEN
AMERISTEEL CORPORATION
AND
GERDAU FLORIDA, INC.
ARTICLE 1
GENERAL
A. The Merger. Upon the terms and subject to the conditions set forth in
this Agreement, at the Effective Time (as hereinafter defined), Gerdau Florida,
Inc., a Florida corporation, ("Florida Co.") shall be merged (the "Merger") with
and into AmeriSteel Corporation, a Florida corporation, (the "Corporation"),
whereupon the separate corporate existence of Florida Co. shall cease and the
Corporation shall be the surviving corporation (sometimes, the "Surviving
Corporation") and shall continue to be governed by the laws of the State of
Florida. Each of the Corporation and Florida Co. is a subsidiary of Gerdau USA,
with such parent corporation owning at least 80% of the outstanding shares of
each class of outstanding stock of each subsidiary. Accordingly, the Merger
shall be effected pursuant to the provisions of Section 607.1104, Florida
Statutes.
B. Articles of Merger; Effective Time. Thirty one days (or the next
business day thereafter if such 31st day is a Saturday, Sunday or holiday) after
notice of this Plan of Merger has been mailed to the stockholders of Florida Co.
and the Corporation, in accordance with the provisions of Section 607.1104,
Florida Statutes, the parties hereto shall cause the Merger to be consummated by
the execution and filing of Articles of Merger with the Secretary of State of
the State of Florida (the "Articles of Merger"), together with the appropriate
fees. The merger shall become effective immediately upon the acceptance of the
filing of the Articles of Merger by the Secretary of State of the State of
Florida. The time and date when the Merger shall become effective is hereinafter
referred to as the "Effective Time."
C. Articles of Incorporation and Bylaws. At the Effective Time, the
Articles of Incorporation of the Corporation as in effect immediately prior to
the Effective Time shall be and remain the Articles of Incorporation of the
Surviving Corporation, until amended. At the Effective Time, the Bylaws of the
Corporation as in effect immediately prior to the Effective Time, shall be and
remain the Bylaws of the Surviving Corporation until amended.
D. Property and Liabilities of Constituent Corporations. The identity,
existence, purposes, powers, objects, franchises, privileges, rights and
immunities of the Corporation shall continue unaffected and unimpaired by the
Merger and the corporate franchises, existence and rights of Florida Co. shall
be merged into the Corporation. The Surviving Corporation shall, from and after
the Effective Time, possess all the rights, privileges, powers, and franchises
of whatsoever nature and description, of a public as well as of a private
nature, of Florida Co. and of the Corporation; all rights, privileges, powers,
and franchises of each of the Corporation and of Florida Co., and all property,
real, personal, and mixed, and debts due to either of the Corporation or of
Florida Co. on whatever account shall be vested in the
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Surviving Corporation; and all property, rights, privileges, powers, and
franchises, and all and every other interest shall be thereafter as effectually
the property of the Surviving Corporation as they were of the Corporation and
Florida Co. The title to any real estate vested by deed or otherwise in either
of the Corporation or Florida Co. shall not revert or be in any way impaired by
reason of the Merger. From and after the Effective Time, all rights of creditors
and all liens upon the property of Florida Co. shall be preserved unimpaired,
and all debts, liabilities, and duties of Florida Co. shall thenceforth attach
to the Surviving Corporation, and may be enforced against it to the same extent
as if said debts, liabilities, and duties had been incurred or contracted by it.
ARTICLE 2
CONVERSION AND EXCHANGE OF STOCK
A. Stock of the Corporation.
(a) Each share of common stock of the Corporation issued and outstanding
immediately prior to the Effective Time, other than the shares owned by Gerdau
USA Inc. ("Gerdau USA"), shall, by virtue of the Merger and without any action
on the part of the holder thereof, be cancelled and converted into the right to
receive 9.4617 common shares of Co-Steel Inc. (to be renamed Gerdau AmeriSteel
Corporation) ("Newco"). No fractional shares of Newco shall be issued, but each
holder who would otherwise be entitled to a fractional share shall instead be
entitled to receive an amount in cash (rounded to the nearest whole cent) equal
to the product of (i) the fraction multiplied by (ii) the closing price of a
Newco share on the Toronto Stock Exchange on the last business day immediately
prior to the Effective Time multiplied by (iii) the exchange rate for the U.S.
Dollar Equivalent of a Canadian Dollar on the last business day immediately
prior to the Effective Time as reported in the Exchange Rate chart in the Wall
Street Journal.
(b) Each share of common stock of the Corporation issued and outstanding
immediately prior to the Effective Time that is owned by Gerdau USA shall, by
virtue of the Merger and without any action on the part of the holder thereof,
remain outstanding as one share of common stock of the Corporation.
B. Stock of Florida Co. Each share of common stock of Florida Co. issued
and outstanding immediately prior to the Effective Time shall, by virtue of the
Merger and without any action on the part of the holder thereof, be cancelled.
C. Options of the Corporation. Each issued and outstanding stock option to
purchase shares of the Corporation's common stock (an "Option") granted under
any stock option or compensation plan or arrangement of the Corporation, whether
or not then exercisable, shall at the Effective Time be converted into an option
(the "Newco Option") to acquire, on substantially the same terms and conditions
as were applicable under such Option immediately prior to the Effective Time and
which option shall be considered issued under and subject to the terms of the
applicable stock option plan, the number of Newco common shares determined by
multiplying the number of shares of the Corporation's common stock that were
covered by such Option immediately prior to the Effective Time by 9.4617 (the
"Option Exchange Ratio") (rounded as hereinafter provided) at a price per share
(rounded up to the nearest whole cent) equal to (i) the exercise price per share
of the Corporation's common stock immediately prior to the Effective Time under
such Option divided by (ii) the Option Exchange Ratio; provided,
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however, that with respect to Options with the same exercise price and option
term, the number of Newco common shares to be represented by the Newco Option
shall be computed on an aggregate basis so as to create options for whole Newco
common shares, with any then remaining fractional share rounded up the nearest
whole share. As soon as practicable after the Effective Time, Newco shall
deliver to each holder of an Option a stock option agreement or certificate
issued under the applicable stock option plan as a replacement for the stock
option certificate previously provided to such holder by the Corporation and
evidencing the Newco Option and setting forth such holder's rights pursuant
thereto, including the number of Newco common shares purchasable under the
converted stock option and replacement option agreement or certificate and the
corresponding exercise price thereunder. In addition, Newco shall take all
corporate action necessary to reserve for issuance a sufficient number of Newco
common shares for delivery upon exercise of a Newco Option. As soon as
practicable after the Effective Time, Newco shall file a registration statement
on Form S-8 (or any successor or appropriate forms), or another appropriate
form, with respect to the shares of Newco common stock subject to the Newco
Options and shall use its reasonable best efforts to maintain the effectiveness
of such registration statement or registration statements (and maintain the
current status of the prospectus or prospectuses contained therein) for so long
as such Newco Options remain outstanding.
D. Exchange of Stock Certificates. As of the Effective Time, all shares of
the Corporation's common stock previously outstanding, other than the shares
owned by Gerdau USA, shall no longer be outstanding and shall automatically be
cancelled and retired and shall cease to exist. Each holder of a certificate
representing any such shares shall cease to have any rights with respect
thereto, except the right to receive with respect to each share represented
thereby the consideration, if any, set forth in Section 2.1(a) and any cash in
lieu of fractional shares of Newco common stock to be issued or paid in
consideration therefor upon the surrender of such certificate, without interest.
Immediately after the Effective Time, each holder of an outstanding certificate
or certificates theretofore representing shares of the Corporation's common
stock shall surrender the same to the Surviving Corporation or to an agent or
agents designated by the Surviving Corporation, and shall thereupon be entitled
to receive such consideration, without interest.
