Agreement between NSSMC and Ternium regarding Governance of Usiminas and Settlement of Legal Disputes

Feb. 09, 2018

Nippon Steel & Sumitomo Metal Corporation

Agreement between NSSMC and Ternium regarding Governance of Usiminas
and Settlement of Legal Disputes

On February 8, 2018, Nippon Steel & Sumitomo Metal Corporation (“NSSMC”) and Ternium Investments S.à r.l. (“Ternium”) entered into a binding and immediately effective agreement (the “Agreement“) setting forth the establishment of certain new governance rules of Usinas Siderúrgicas de Minas Gerais S.A. – Usiminas (“Usiminas”) and settlement of legal disputes in connection with Usiminas, with a view to rebuilding their mutual trust and strengthening their joint partnership in Usiminas.

Usiminas, an equity method affiliated company of NSSMC in Brazil, has been steadily improving its profitability and financial strength after overcoming certain financial difficulties by actively implementing various measures, including optimization of production structure, a capital increase and debt restructuring since 2016.

During that time, NSSMC and Ternium, a co-controlling partner of Usiminas, have continued discussing possible solutions for certain outstanding governance matters in respect of Usiminas.

Pursuant to the Agreement, NSSMC and Ternium will use their reasonable best efforts to execute a new agreement to amend and restate the existing Usiminas’ Amended and Restated Shareholders Agreement, dated January 16, 2012 (the “Existing SHA”), with the other parties to the Existing SHA as soon as reasonably possible.

A summary of the Agreement is as below:

(1)New Governance Rules of Usiminas

(i)Alternating nomination of the CEO and the Chairman of the Board of Directors

  The right to nominate the CEO and the Chairman will alternate between Ternium and NSSMC
  at every 4-year interval (two (2) consecutive 2-year terms).  For the initial four (4) years,
  NSSMC will be entitled to nominate the Chairman and Ternium will be entitled to nominate
  the CEO. For Initial two (2) year-term, Ternium intends to nominate Mr. Sergio Leite de
  Andrade as the CEO and NSSMC intends to nominate Mr. Ruy Roberto Hirschheimer as the
  Chairman.

(ii)Composition and nomination of the Executive Board

    The Executive Board will be composed of a total of six (6) members (CEO and five (5)
    Vice-Presidents). NSSMC and Ternium will nominate three (3) members each.

(iii)Exit Provisions

   The Agreement includes certain exit procedures which may lead to either NSSMC or
   Ternium purchasing a certain number of Usiminas shares held by the other party and its
   affiliates, which would terminate the joint control of Usiminas, at some time after five (5)
   years from the coming election of the Executive Board in May 2018.

(2)Settlement of Legal Disputes

   NSSMC and Ternium will take all necessary steps and actions to amicably terminate or
   resolve all pending legal disputes, judicial or administrative,  involving NSSMC, Ternium,
   their affiliates or Usiminas, as well as current and former members of Usiminas’ managerial
   bodies, that have arisen in the past few years in connection with Usiminas.

NSSMC, together with Ternium, is committed to moving forward with the turnaround of Usiminas and the enhancement of its competitiveness and corporate value for the best interest of Usiminas and all of its stakeholders.


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