Document:

Exhibit 10.8
 

SUBLEASE
AGREEMENT

 

This
Sublease Agreement (this “Sublease”) is made as of the 7th day of
April, 2006, by and between Sheshunoff Management Services, L.P., a Texas
limited partnership (“Sublessor”) formerly known as Alex Sheshunoff Management
Services, L.P., and Matinee Media Corporation, a Texas corporation (“Sublessee”).
Any capitalized tern not defined herein shall have the meaning provided in the
Primary Lease (as defined below).

 

1.                                       Property. In
consideration of the Rent and of the covenants herein contained, and subject to
the contingencies hereinafter set forth, Sublessor does hereby lease, demise
and let unto Sublessee, and Sublessee hereby sublets and rents approximately
742 rentable square feet on the 6th floor (the “Subleased Premises”),
in the building known as The Terrace Building VII, located at 2801 Via Fortuna,
Austin, Texas 78746 (the “Building”), located on the property more fully
described on Exhibit A together with all licenses, rights and
privileges granted to Sublessor under the Primary Lease. Sublessee shall have
the non-exclusive right to use two (2) non-reserved parking spaces.

 

2.                                       Term. The term (the “Sublease Term”) of this Sublease
shall begin on the earlier of Substantial Completion of the Tenant Improvements
as herein defined, and April 15, 2006 (“Commencement Date”), and shall
terminate on May 31, 2013, unless sooner terminated in accordance with the
terms and conditions hereinafter set forth.

 

Possession
of the Subleased Premises shall be delivered to Sublessee upon the date of
delivery (“Delivery Date”) to Sublessor a consent to sublease executed by
Landlord acceptable to Sublessor and Sublessor’ s counsel.

 

3.                                       Rent. The Rent shall commence on the later of the
Commencement Date or Delivery Date (the “Rental Commencement Date”). Beginning
on the next calendar month following the Rental Commencement Date, Sublessee
shall pay, in the manner set forth in the Primary Lease, to Sublessor, monthly
Base Rent in advance on or before the first (1st)
day of each calendar month during the Sublease Term. Annual Base
Rent for the Sublease Term shall equal $20.00 per rentable square foot. Such
Rent is payable at the address for Sublessor stated in Section 13 hereof
and is payable without demand, right of set-off, deduction or reduction by
Sublessee. If the Base Rent shall be due on a day other than the 1st
day of a calendar month, such Base Rent shall be prorated for the number of
days in the month.

 

Sublessee
agrees to pay in addition to Base Rent, to the extent Sublessor is obligated to
pay such amount to Landlord, as Additional Rent, Sublessee’s pro rata share of
the Operating Expenses as determined by Landlord. The Operating Expenses for
the year 2006 are $11.55 per rentable square foot.

 

4.                                       Security Deposit. Sublessee
shall deposit with Sublessor, on or before the execution of this Sublease, the
amount of Three Thousand Nine Hundred Two and 00/100 Dollars ($3,902.00) in
cash. Upon the timely payment of rent to Sublessor for months one through
twelve, the amount of One Thousand Nine Hundred Fifty One and 00/100 Dollars 

 

 

($1,95l.00) of this security deposit shall be
applied to the thirteenth month of rent. Any remaining security deposit amount
will be retained by Sublessor through the duration of this sublease and applied
to the last month’s rent.

 

5.                                       Use of Premises. Sublessee shall
use the Subleased Premises for commercial office space and no other purpose
whatsoever, in compliance with all applicable laws and without disturbing or
interfering with any other tenant or occupant of the Building.

 

6.                                       Damage to or Destruction of Improvements. If the Building in which the Subleased Premises are
located is damaged or destroyed by fire or any other casualty, Sublessor shall
await the determination by Landlord, as herein defined, as to whether Landlord
elects to restore the Subleased Premises to substantially its former condition
or whether Landlord elects to terminate the Primary Lease. If Landlord does not
elect to restore the Subleased Premises to substantially their former condition,
this Sublease shall terminate as of the termination date specified in the
termination notice required to be sent by Landlord pursuant to Article 7
of the Primary Lease, and Sublessor agrees that it will repay to Sublessee any
unearned portion of any Rent paid in advance. Sublessor shall allow Sublessee a
proportionate abatement of Rent as may be determined by Landlord during the
time and to the extent the Subleased Premises are unfit for occupancy for the
purposes permitted under this Sublease and not occupied by Sublessee as a
result thereof (unless Sublessee or its employees or agents caused the damage).

 

7.                                       Sublessor’s Remedies.

 

(a)          Default by Sublessee. The following
shall be deemed to be events of default (“Event of Default”) by Sublessee under
this Sublease: (1) Sublessee shall fail to pay any installment of Rent or
any other payment required pursuant to this Sublease, and the default is not
cured within three (3) business days after written notice thereof to
Sublessee; (2) Sublessee shall abandon any substantial portion of the
Subleased Premises; (3) Sublessee shall fail to comply with any term,
provision or covenant of this Sublease (or the Primary Lease, for which
Sublessee is, through Section 14 of this Sublease, bound) other than the
defaults described in subparts (1) and (2) of this sentence, and the
failure is not cured within ten (10) days after written notice thereof to
Sublessee; provided, if the nature of Sublessee’s failure is non-monetary and
more than ten (10) days are reasonably required in order to cure,
Sublessee shall not be in default if Sublessee commences to cure such failure
within such ten (10) day period and diligently pursues such cure to
completion; (4) Sublessee or any guarantor of Sublessee’s obligations
hereunder shall file a petition or be adjudged bankrupt or insolvent under any
applicable federal or state bankruptcy or insolvency law or admit that it
cannot meet its financial obligations as they become due; or a receiver or
trustee shall be appointed for all or substantially all of the assets of
Sublessee or any guarantor of Sublessee’s obligations hereunder, or Sublessee
or any guarantor of Sublessee’s obligations hereunder shall make a transfer in
fraud of creditors or shall make an assignment for the benefit of creditors; (5) Sublessee
shall do or permit to be done any act which results in a lien being filed
against the Subleased Premises or the Building; or (6) the liquidation,
termination, dissolution of Sublessee or any guarantor of Sublessee’s
obligations hereunder.

 

2

 

(b)                              Remedies. If an
Event of Default occurs and is not cured within the applicable time permitted
under Section 7(a), Sublessor shall have all the rights and remedies
granted to Landlord in the Primary Lease.

 

8.                                       Surrender of Premises. Sublessee
covenants and agrees that it will, at the termination of this Sublease, in
whatever manner such termination may be brought about, promptly surrender and
deliver the Subleased Premises to Sublessor in the same condition as they exist
at the beginning of this Sublease, ordinary wear and tear and damage by any
insured casualty excepted.

 

9.                                       Holding Over. Any holding
over by Sublessee after the expiration or termination of this Sublease, in
whatever manner its termination may be brought about, shall not operate as a
renewal of this Sublease, but during the period of such holding over Sublessee
shall be a tenant at will of Sublessor and Landlord, and shall pay to Sublessor
200% of the amount of Rent then applicable (or the highest amount permitted by
law, whichever shall be less) prorated on a per diem basis for each day
Sublessee occupies the Subleased Premises after the termination of this
Sublease, together with all damages or charges sustained by Sublessor on account
thereof.

 

10.                                 Alterations or Improvements. Except as
herein provided, Sublessee covenants and agrees that it will make no additions,
changes, alterations or improvements in or to the Subleased Premises without
the prior written consent of Sublessor, and which will be conditioned upon the
further approval of Landlord. Such alterations or changes as are approved by
Sublessor shall be made at Sublessee’s expense. Except as herein provided, all
permanent improvements and fixtures installed by Sublessee are subject to the
rights of Landlord under the Primary Lease and shall become the property of
Sublessor upon the termination of this Sublease, unless otherwise agreed in
writing.

 

11.                                 No Waiver of Default. No acceptance
of Rent by Sublessor after it is due, and no delay on the part of Sublessor in
enforcing any obligation of Sublessee, shall be construed as a waiver of any
default then, theretofore, or thereafter existing in the performance of any
other obligation undertaken by Sublessee. No lawful termination of this
Sublease shall release Sublessee from responsibility or liability to Sublessor
for Rents theretofore due and unpaid nor from the performance of any of the
covenants, agreements, or stipulations by Sublessee herein undertaken to be
kept and performed. Similarly, no delay on the part of Sublessee in enforcing
any obligation of Sublessor shall be construed as a waiver of any default then,
theretofore, or thereafter existing in the performance of any other obligation
undertaken by Sublessor.

 

12.                                 Attorney’s Fees. If it becomes
necessary for either party to secure the services of an attorney in order to
collect any amount due hereunder or to enforce any of the provisions hereof the
prevailing party shall be entitled to reasonable attorneys’ fees and costs of
court.

 

13.                                 Notices and Rental Payments. Any notice
given to Sublessee by Sublessor under the terms of this Sublease shall be hand
delivered or sent to Sublessee by registered or certified mail return receipt
requested, postage prepaid, addressed to 2801 Via Fortuna, Suite 675,
Austin, Texas 78746, or to such other place as Sublessee may hereafter
designate in writing forwarded in like manner for any other notice. Any notice
given to Sublessor by Sublessee under 

 

3

 

the terms of this Sublease shall be hand delivered
or sent to Sublessor by registered or certified mail, return receipt requested,
postage prepaid, addressed to 2801 Via Fortuna, Suite 600, Austin, Texas
78746 or to such other place as Sublessor may hereafter designate in writing
forwarded in like manner as for any other notice. In computing any kind of time
prescribed by this Sublease, the day on which any notice is mailed or delivered
personally shall be excluded and the last day of the period shall be included,
unless it is a Sunday or legal holiday, in which event the period shall run to
the end of the next day which is neither a Sunday nor such a holiday.

 

14.                                 Primary Lease. Sublessee
understands that Sublessor has possession of the Subleased Premises by virtue
of a Lease Agreement (the “Primary Lease”) dated November 14, 2002, by and
between Sublessor, as tenant and Desta Five Partnership, Ltd., a Texas limited
partnership, as the landlord (“Landlord”). A copy of the Primary Lease is
attached hereto as Exhibit B.  Sublessee understands and acknowledges that
this Sublease is subject and subordinate all of the terms and provisions of the
Primary Lease. Sublessee further hereby agrees to abide by all terms and
provisions of the Primary Lease affecting Sublessor as tenant, and agrees to
assume all obligations and responsibilities of Sublessor thereunder, including,
but not limited to, the maintenance of insurance coverages, the payment of
personal property taxes, late payment charges and other interest owed, and the
prohibition of the release or discharge of any hazardous materials. Further,
Sublessee shall accept the Subleased Premises in an “as is” and “where is”
condition. In the event Landlord shall have the right to modify the terms of
the Primary Agreement or to affect the occupancy of the Subleased Premises by
Sublessor, its assignees or Sublessee, and does so exercise such right, then
Sublessor shall also have the right to take such action and shall be deemed to
have done so also. Any termination of the Primary Lease by Landlord or by
Sublessor under Section 2.02 of the Primary Lease shall be deemed a
termination of this Sublease. Sublessor shall not be liable or responsible to
Sublessee in any manner for a breach or termination of the Primary Lease by
Landlord or Sublessor. Sublessee shall not be entitled to any of Sublessor’s
rights or privileges under Sections 1.04, 2.02, 10.01, 10.02, 13.01, 13.02,
13.03, 13.04, 13.06 and 13.07, Exhibit H or under Exhibit I
of the Primary Lease.

 

15.                                 Repairs and Maintenance. Sublessee
agrees, at Sublessee’s sole expense, to keep the Subleased Premises in good and
sanitary condition, working order and repair, reasonable wear and tear
excepted. Sublessee shall initiate and make, or cause to be made, and pay for all
repairs to and maintenance of the Subleased Premises.

 

16.                                INDEMNIFICATION. EXCEPT TO THE EXTENT ARISING FROM
THEINTENTIONAL OR GROSSLY NEGLIGENT ACTS OF SIJBLESSOR OR SUBLESSOR’S AGENTS OR
EMPLOYEES, SUBLESSEE SHALL DEFEND, INDEMNIFY AND HOLD HARMLESS SUBLESSOR AND
LANDLORD FROM AND AGAINST ANY AND ALL CLAIMS, DEMANDS, LIABILITIES, DAMAGES,
JUDGMENTS, ORDERS, DECREES, ACTIONS, PROCEEDINGS, FINES, PENALTIES, COSTS AND
EXPENSES, INCLUDING WITHOUT LIMITATION, COURT COSTS AND REASONABLE ATTORNEY’S
FEES, ARISING FROM OR RELATED TO ANY LOSS OF LIFE, DAMAGE OR INJURY TO PERSON,
PROPERTY OR BUSINESS OCCURRING IN OR ON THE SUBLEASED PREMISES, COMMON AREAS OR
CAUSED BY OR IN CONNECTION WITH ANY 

 

4

 

VIOLATION OF THIS SUBLEASE, THE PRIMARY LEASE
OR USE OF THE COMMON AREAS BY, OR ANY OTHER ACT OR OMISSION OF, SUBLESSEE, OR
ANY OF SUBLESSEE’S RESPECTIVE AGENTS, EMPLOYEES, CONTRACTORS ORINVITEES.

 

EXCEPT TO THE EXTENT ARISING
FROM THE INTENTIONAL OR NEGLIGENT ACTS OR OMISSIONS OF SUBLESSEE OR SUBLESSEE’S AGENTS
OR EMPLOYEES, SUBLESSOR SHALL DEFEND, INDEMNIFY AND HOLD HARMLESS SUBLESSEE
FROM AND AGAINST ANY AND ALL CLAIMS, DEMANDS, LIABILITIES, DAMAGES, JUDGEMENTS,
ORDERS, DECREES, ACTIONS, PROCEEDINGS, FINES, PENALTIES, COSTS AND EXPENSES,
INCLUDING WITHOUT LIMITATION, COURT COSTS AND REASONABLE ATTORNEY’S FEES,
ARISING FROM OR RELATED TO ANY LOSS OF LIFE, DAMAGE OR INJURY TO PERSON,
PROPERTY OR BUSINESS OCCURRING IN OR ON THE COMMON AREAS AND CAUSED BY THE USE
OF THE COMMON AREAS BY SUBLESSOR, OR ANY OF SUBLESSOR’S RESPECTIVE AGENTS,
EMPLOYEES, CONTRACTORS OR INVITEES.

 

17.                                 Assignment and Subletting. Sublessee shall
not assign all or any portion of this Sublease, nor sublet the Subleased
Premises or any part thereof.

 

18.                                 Subordination. Sublessee
agrees that this Sublease is subordinate to any and all rights of the holders
of any deed of trust, mortgage or other instrument of security including but
not limited to that Subordination, Attornment and Non-Disturbance Agreement (“SNDA”)
dated December 18, 2002 by and among Alex Sheshunoff Management Services,
L.P., Desta Five Partnership, Ltd. and Metropolitan Life Insurance Company and
Massachusetts Mutual Life Insurance Company. Notwithstanding the foregoing
provision, Sublessee agrees that any such mortgagee will have the right at any
time to subordinate any rights of its mortgage or deed of trust to the rights
of Sublessee under this Sublease. Sublessee further agrees to be bound to the
terms of the SNDA.

 

19.                               Tenant Improvements. Sublessee
shall, at Sublessee’s sole cost and expense, cause a partitioning wall to be
built to deck and the other improvements shown in the Exhibit C
attached hereto (“Tenant Improvements”). All Tenant Improvements are subject to
the prior written approval of Sublessor and Prime Landlord. On or before March 15,
2006, Sublessee shall provide to Sublessor for its and Landlord’s approval
final working drawings, prepared by STG Partners, of all improvements that
Sublessee proposes to install in the Subleased Premises; such working drawings
shall include the partition layout, ceiling plan, electrical outlets and
switches, telephone outlets, drawings for any modifications to the mechanical
and plumbing systems of the Building, and detailed plans and specifications for
the construction of the improvements called for under the Exhibit C
in accordance with all laws, rules and ordinances. As used herein, “Working
Drawings” shall mean the final working drawings approved by Sublessor and
Landlord, and “Work” shall mean all Tenant Improvements to be constructed in
accordance with and as indicated on the Working Drawings. Neither Sublessor’s
or Landlord’s approval of the Working Drawings shall be a representation or
warranty by either that such drawings are adequate for any use or comply with
any laws, rules and ordinances, but shall merely be the consent of
Sublessor and Landlord thereto. The Work shall be performed only by contractors
and subcontractors approved in writing by Sublessor, which shall be employed by
Sublessee. The 

 

5

 

Work shall be performed in a good and workmanlike
manner free of defects, shall conform strictly with the Working Drawings, and
shall be performed in such a manner and at such times as and not to interfere
with or delay Sublessor’s or Landlord’s other contractors, the operation of the
Building, and the occupancy thereof by other tenants. All Work performed
relating to the partitioning wall and Sublessor’s premises shall be done on
weekends and after 5:00 p.m. on weekdays to minimize the interference with
Sublessor’s business operations. All contractors and subcontractors shall
contact Sublessor and schedule time periods during which they may use Building
facilities in connection with the Work. Sublessee shall diligently pursue and
complete construction of the Work in a good and workmanlike manner in
accordance with the Working Drawings and all laws, rules and ordinances.
Sublessee shall not allow any mechanic’s liens to be filed against the Subleased
Premises or Building and failure to remove any such filing shall be an Event of
Default hereunder. For purposes of this Lease, the Work shall be deemed to be “Substantially
Complete” at such time as (i) the Tenant’s Improvements have been
substantially completed in accordance with the Working Drawings and all laws, rules and
ordinances, and (ii) the City of Austin has delivered a certificate of
occupancy to Sublessee for the Subleased Premises. Sublessee agrees to pay for
costs and expenses for completion of the trim and punch work on Sublessor’s
side of the partitioning wall including, but not limited to the installation of
any fire extinguishers and the completion of any partitioning ceiling, riser or
floor work.

 

20.                                 Landlord’s Consent. Sublessor’s execution
of this Sublease shall not be effective unless and until a consent to sublease,
acceptable to Sublessor and Sublessor’s counsel, is executed and delivered by
Landlord.

 

21.                                 Insurance. Sublessee
shall, at its expense, maintain a policy or policies in accordance with Exhibit E
to the Primary Lease. Sublessee’s policies shall be the primary insurance for
the Subleased Premises and Sublessee’s or any other named insured’s acts or
omissions. Upon Sublessee’s execution of this Sublease and at any time from
time to time thereafter when Sublessor so requests, Sublessee shall furnish a
certificate of insurance and such other evidence satisfactory to Sublessor of
the maintenance of all insurance coverages required hereunder. In addition to
those requirements of the Primary Lease, Sublessor shall be also named as an
additional insured and loss payee and be provided the same certificates as
Primary Landlord.

 

22.                                 Miscellaneous.

 

(a)                               All of the
covenants and agreements contained in this Sublease shall extend to and be
binding upon the heirs, executors, administrators, successors and assigns of
the parties hereto, including without limitation each assignee or Sublessee of
Sublessee.

 

(b)                                THIS SUBLEASE
SHALL BE CONSTRUED AND INTERPRETED UNDER THE LAWS OF THE STATE OF TEXAS AND ALL
OBLIGATIONS OF THE PARTIES HEREUNDER ARE PERFORMABLE IN TRAVIS COUNTY, TEXAS.

 

(c)                               This Sublease,
the Primary Lease to the extent incorporated and adopted herein, and all
Exhibits attached hereto and thereto contain the entire agreement between 

 

6

 

Sublessor and Sublessee.
Time is of the essence in the performance of all obligations of the parties.

 

(d)                              Sublessee shall
be responsible for all expenses incurred by Sublessor associated with this
Sublease, including but not limited to Sublessor’s attorney’s fees.

 

EXECUTED in counterparts, each of which shall have the force and effect
of an original, this 7th day of April, 2006.

 

	
   

  	
  SUBLESSOR:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  SHESHUNOFF
  MANAGEMENT SERVICES, L.P.,

  
	
   

  	
  a
  Texas limited partnership

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
                     /s/Gabrielle
  Sheshunoff

  
	
   

  	
  Name:

  	
               Gabrielle
  Sheshunoff

  	
   

  
	
   

  	
  Title:

  	
                  CEO &
  Partner

  
						

 

 

	
   

  	
  SUBLESSEE:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  MATINEE
  MEDIA CORPORATION, a Texas corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
                     /s/Robert
  Walker

  
	
   

  	
  Name:

  	
               Robert
  Walker

  	
   

  
	
   

  	
  Title:

  	
                  President

  
						

 

7

 

LANDLORD’S CONSENT

 

Desta
Five Partnership, Ltd., a Texas limited partnership (“Landlord”) hereby
certifies to Sheshunoff Management Services, L.P., a Texas limited partnership
(“Sublessor”) and Matinee Media Corporation, a Texas corporation (“Sublessee”),
that the following statements are true:

 

I.                                         Landlord and
Sublessor entered into that certain Lease Agreement dated November 14,
2002 (the “Lease”) for certain premises consisting of approximately 18,313
square feet known as Suites 600 and 625 (the “Leased Premises”) located on the
6th Floor at 2801 Via Fortuna, Austin, Texas 78746 (the “Center”).

 

2.                                       The Lease is in
full force and effect and has not been amended, modified, extended or renewed,
whether verbally or in writing. To the best of Landlord’s knowledge, no default
on the part of Landlord or Sublessor exists, and, as of the date hereof, no
circumstances or state of facts exist which would give Landlord the right to
declare Sublessor in default under the Lease.

 

3.                                       Landlord
consents to the Sublease Agreement by Sublessor to Sublessee of the Subleased
Premises.

 

4.                                       Landlord agrees
to provide Sublessee any notice of default sent to Sublessor as Tenant under
the Lease and Sublessee’s right to cure such default.

 

 

	
   

  	
  DESTA FIVE PARTNERSHIP, LTD., a Texas

  
	
   

  	
  limited partnership

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Desta Five Management Corp., a Texas

  
	
   

  	
   

  	
  corporation, its General Partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
                    /s/L.
  Paul Latham

  
	
   

  	
   

  	
  Name:

  	
               L.
  Paul Latham

  
	
   

  	
   

  	
  Title:

  	
                  President

  
	
   

  	
   

  
	
   

  	
  Dated:

  	
  April 20, 2006

  
						

 

8

 

EXHIBIT A

 

Lot
1, Block “E”, THE TERRACE, SECTION SIX, a subdivision in Travis County,
Texas, according to the map or plat thereof, recorded under Document No. 200000362
of the Official Public Records of Travis County, Texas; TOGETHER WITH a
non-exclusive easement for vehicular and pedestrian traffic, created in that certain
Declaration of Easements and Restrictions dated December 4, 2000, recorded
in Document No. 2000193470 of the Official Public Records of Travis
County, Texas, and being over and across a 0.3109 acre parcel of land, more or
less, as described in Exhibit “A-2” therein, the same being a portion of
Lot 3, Block “B”, THE TERRACE, SECTION SEVEN, a subdivision in Travis
County, Texas, according to the map or plat thereof, recorded under Document No. 200100072
of the Official Public Records of Travis County, Texas.

 

9

 

EXHIBIT B

 

Copy of Primary Lease

 

10

 

EXHIBIT C

 

Tenant Improvements

(Partitioning Wall)

 

11EXHIBIT 4.02

 

GERDAU S.A.

 

CNPJ/MF No 33.611.500/0001-19

 

NIRE No 33300032266

 

A Publicly Listed Company

 

EXECUTIVE STOCK OPTION PLAN TO BE DENOMINATED THE ‘LONG-TERM
INCENTIVE PROGRAM’ – FOR APPROVAL BY THE EXTRAORDINARY SHAREHOLDER’S MEETINGS
TO BE HELD ON APRIL 30, 2003.

 

1. OBJECTIVES OF THE PROGRAM

 

1.1.
THE LONG-TERM INCENTIVE PROGRAM (hereafter the “PROGRAM”), which grants call
options for the purchase of shares of GERDAU S.A. (hereafter, “GERDAU”), has
the objectives of:

 

a
– Attracting and retaining strategic executives;

 

b
– Offering a long-term system of remuneration;

 

c
– Sharing the growth and success of GERDAU and its directly and indirectly
controlled subsidiaries;

 

d
– Strengthening the feeling of participation and collaboration in the company’s
business.

 

2. ADMINISTRATION

 

2.1.
The administration of the PROGRAM shall be the responsibility of the
Compensation and Succession Committee (the “COMMITTEE”).

 

2.2.
The COMMITTEE shall have full authority power regarding the organization,
execution and administration of the PROGRAM, in accordance with the terms and
basic conditions of this plan, the directives of the Board of Directors of
GERDAU and legislation.

 

2.3.
The COMMITTEE’s powers shall include the right to establish the rules relating
to the granting of stock options on a year-to-year basis.

 

2.4.
The COMMITTEE shall be responsible for the indication of individuals who
fulfill the requirements and are in the position to be selected as participants
of the PROGRAM, who will be receiving call options to purchase shares, as well
as the relevant number of shares forming the object of the options within the
time limits established herein.

 

2.5.
In exercising its attributions and its authority with regards to the PROGRAM,
the COMMITTEE shall be subject only to the limits established in item 2.2
above, not being obliged by analogy or rule of isonomy to extend to other
directors, officers or employees in similar situations and conditions it
understands are applicable only to one or more specific beneficiaries.

 

3 – ELIGIBILITY

 

3.1.
Individuals eligible for the PROGRAM shall include directors, executive
officers and high-level employees of GERDAU and its
directly or indirectly controlled subsidiaries (which are included in the
concept of the Company for the purposes of this plan). The selection of
directors, executive officers and employees (hereafter, 

 

 

“EXECUTIVE”
or “EXECUTIVES”) that may be entitled to stock options shall be made
exclusively by the COMMITTEE.

 

4 – ENTRY
TO THE PROGRAM

 

4.1.
Admission to the PROGRAM by eligible EXECUTIVES, as defined in the preceding
item, shall, in general, take place during the month of December of each
year unless, exceptionally, the COMMITTEE decides otherwise.

 

4.2.
The COMMITTEE shall establish, in each case, the periods and conditions for the
right to exercise call options on the basis of the terms stated in the “Option
Contract for the Purchase of Shares under the terms of the Long-Term Incentive
Program for Executives of Gerdau” (The “OPTION CONTRACT”), to be signed by the
EXECUTIVE, in which the following points shall be defined:

 

a)
the number of shares object of each option and the
purchase price per share;

 

b)
the periods and conditions for the exercise of the
call options;

 

c)
other terms and conditions that the COMMITTEE
considers to be relevant that have not been specified herein.

 

4.3.
The contracts to which this item refers shall be executed under the
specification hereby determined and in accordance with the terms of Art. 118 of
Law N(o). 6,404/76 and shall be recorded in the
Company’s registers.

 

5 – SHARES INCLUDED IN THE PROGRAM

 

5.1.
The granting of call options shall only apply to GERDAU preferred shares, in an
amount equivalent from 10% (ten per cent) to 20% (twenty per cent) per annum of
the basic annual salary of each of the EXECUTIVES selected to take part in the
PROGRAM. For this program, the basic annual salary of these EXECUTIVES shall be
defined as equal to 13 (thirteen) times the monthly salary paid by the company
in the month of December. In the case of directors, the strike price of the
call options may be equivalent to up to 100% (one hundred per cent) of their
annual compensation paid by the Company. The underlying shares of the option
shall be valued at the average market price on the date of the granting of the
option.

 

6 – ACQUISITION OF THE RIGHT TO EXERCISE OPTIONS

 

6.1.
As a general rule that may be altered by the COMMITTEE, in each case, the
acquisition of the right to exercise options shall take the following form and
refer to the following periods:

 

a)
After 5 (five) years elapsed from the first day of the month following the date
of granting of the call options, the EXECUTIVE may exercise his call options.
To this end, he/she shall pay, in accordance with the terms of Item 5.1, a
price per share equivalent to the average market price of the same shares on
the date of the granting of the option.

 

b)
The exercise of the call option must happen within a maximum period of 5 (five)
years, after which the EXECUTIVE shall no longer be entitled to the right to
this specific tranche of the option.

 

c)
In the event that GERDAU issues stock bonus during the period until the
effective exercise of the right to buy, the number of shares relating to the
right of exercise of the options shall be increased in proportion to the stock
bonus issues, diluting the price of exercise of the option in the same
proportion.

 

d)
During this first year of the PROGRAM, call options on company’s shares shall
be granted in the month of April, with the starting date for the grace period
set retroactively at January 1, 2003.

 

 

7 – EXERCISE OF THE OPTION

 

7.1.
The Option may be exercised by the EXECUTIVE in full or in part, in accordance
with the terms of Item 7.2. below.

 

7.2.
In the event of the partial exercise of the option, the exercising EXECUTIVE
may exercise the remaining portion of his/her rights within the period and in
accordance with the conditions specified in the OPTION CONTRACT.

 

8 – CONDITIONS OF PAYMENT

 

8.1.
The price of the acquired shares shall be immediately due, in Brazilian
national currency, unless the COMMITTEE establishes provisions to the contrary,
as specified in the OPTION CONTRACT.

 

9 —  TAXES

 

9.1.
Operations to be effected as part of the PROGRAM shall be subject to taxation
in the form established in the law.

 

10 – EXPIRATION OF THE OPTION

 

10.1.
The option shall be considered to have expired for all intents and purposes:

 

a)
as a result of its exercise in full, as established in
this PROGRAM;

 

b)
as a result of the expiration of the exercise period;

 

c)
as a result of the EXECUTIVE’s departure from the
Company.

 

10.2.
In the event of the involuntary departure of the EXECUTIVE from the Company:

 

a)
when the EXECUTIVE is dismissed by decision of the
Company with no due cause, the EXECUTIVE that has already acquired the right to
exercise as a result of the ending of the grace period, shall retain this right
of exercise for the contractual period;

 

b)
when the EXECUTIVE is dismissed with due cause, the EXECUTIVE shall lose the
right to receive any amount relating to the PROGRAM, regardless of whether the
grace period has ended or not.

 

11 – RETIREMENT OF THE EXECUTIVE

 

11.1.
In the event of retirement of the EXECUTIVE, as part of the Company’s
retirement plan, the same EXECUTIVE shall be granted the right to exercise the
call options attributed to him/her immediately after the end of his/her work
contract.

 

12 – DECEASE OF THE EXECUTIVE

 

12.1.
In the event of the decease of the EXECUTIVE, his/her heirs/heiresses shall
immediately be granted the right to exercise the call options assigned to the
deceased individual, which must be exercised within 2 (two) years of the date
of passing away. In the event of option rights the grace period for which has
already ended in full on a date prior to his/her death, the corresponding
period for the exercise of the options shall be maintained.

 

13 – PERIOD OF VALIDITY

 

13.1.
The PROGRAM shall take effect after it is approved by Gerdau’s General
Shareholder’s Meeting, becoming retroactive to January 1, 2003. It may be
terminated at any time by decision of the Board of Directors, albeit honoring
the OPTION CONTRACTS that have already been signed.

 

 

14 – ALTERATIONS OR TERMINATION OF THE PROGRAM

 

14.1.
By decision of the Board of Directors, alterations may be made to the PROGRAM,
in the event that the gains proposed under the Compensation Policy diverge
significantly from the objective established for Direct Remuneration.

 

14.2.
In the event that it is necessary to implement changes or to terminate the
PROGRAM, such events shall be announced to the EXECUTIVES in writing with at
least 30 (thirty) days’ prior notice, as of the date of modification or
termination.

 

14.3.
The modifications to or termination of the PROGRAM shall not affect OPTION
CONTRACTS that have already been signed.

 

14.4  In the event of
modifications to or the termination of the PROGRAM:

 

a)
GERDAU shall not be under any obligation to reestablish the PROGRAM or
compensate the EXECUTIVES for expected future gains or losses;

 

b)
in the event that the PROGRAM is modified, any
subsequent profit opportunity may be implemented in accordance with terms that
differ from those previously established.

 

15 – GENERAL CONDITIONS

 

15.1.
In the event of a change in control of GERDAU, options attributed to EXECUTIVES
more than 12 months prior to the event shall be considered as free for
exercise, regardless of whether their respective grace period has ended.

 

15.2.
Whenever the EXECUTIVE decides to sell shares of his/her property, the Company
shall have priority in buying these shares at the market price of the day of
the operation. When the EXECUTIVE decides to divest his/her shares, he/she must
give 2 (two) business days prior notice to GERDAU, the Company having a
preferential right to purchase these shares until the immediately preceding
business day, with the Company undertaking to pay the EXECUTIVE the purchase
price within 2 (two) business days of the date of exercise of its preferential
right.

 

15.3.
EXECUTIVES who are beneficiaries of the PROGRAM shall be subject to restrictive
rules on the use of privileged information applying to publicly listed
companies in general, as well as to rules for the trading of securities of
publicly listed companies within the special segment of the São Paulo Stock
Exchange (“BOVESPA”) that apply to GERDAU.

 

15.4.
In the event of the granting and subsequent exercise of the call options object
of this PROGRAM, shareholders shall not enjoy preference rights in accordance
with the terms of Art. 171, §3 of Law 6,404/76.

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