1
================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): December 3, 1997
QUANEX CORPORATION
------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 1-5725 38-1872178
- ----------------------------------------- -------------------------------- -------------------------------------------------
(State of Incorporation) (Commission File No.) (I.R.S. Employer Identification No.)
1900 West Loop South, Suite 1500
Houston, Texas 77027
- ------------------------------------------------------------------------------ -------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (713) 961-4600
================================================================================
Page 1
Exhibit Index Appears on Page 13
2
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On December 3, 1997, Quanex Corporation, a Delaware corporation (the
"Company"), completed the sale of Michigan Seamless Tube Company
("MST"), Gulf States Tube Division and Tube Group Administrative
Office operations (collectively the "Tubing Operations"), to Vision
Metals, Inc., a new company formed by certain management of the Tubing
Operations, and Citicorp Venture Capital, Ltd., pursuant to a Purchase
Agreement dated as of December 3, 1997 (the "Agreement"). Under the
terms of the Agreement, the Company received cash consideration of
approximately $30 million, subject to post-closing adjustments.
The disposition of the Tubing Operations was structured as a sale of
all of the capital stock of MST and substantially all of the assets of
other Tubing Operations. The principle followed in fixing the purchase
price for the Tubing Operations under the Agreement was based on
negotiations between the parties.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements of Business Acquired.
Not applicable.
(b) Pro Forma Financial Information.
The following unaudited pro forma consolidated statements of income
for the years ended October 31, 1994, 1995 and 1996 give effect to the
disposition of LaSalle Steel Company ("LaSalle") and the Tubing
Operations as if these sales and the resulting increased cash balances
occurred on November 1, 1993, 1994, and 1995, respectively. The
Company completed the sale of LaSalle on April 18, 1997. Certain pro
forma financial information with respect to the sale of LaSalle was
included in the Company's Form 8-K dated April 18, 1997.
The following unaudited pro forma consolidated statements of income
for the nine months ended July 31, 1996 and 1997 give effect to the
disposition of the Tubing Operations as if the sale and the resulting
increased cash balance or debt reduction occurred on November 1, 1995,
and 1996, respectively.
The following unaudited pro forma consolidated balance sheet as of
July 31, 1997 gives effect to the disposition of the Tubing Operations
as if the sale and the reduction of long-term debt with the net
proceeds thereof occurred as of that date.
The pro forma financial information does not purport to be indicative
of either a) the results of operations which would have actually been
obtained if the disposition had occurred on the dates indicated, or b)
the results of operations which will be reported in the future.
The pro forma income statements do not reflect the anticipated gain on
the sale of LaSalle or Tubing Operations. Quanex treated LaSalle and
Tubing Operations as a discontinued operation and, accordingly, the
gain is not part of the pro forma requirements.
Page 2
3
Quanex Corporation
Pro Forma Consolidated Statement of Income
Year Ended October 31, 1994
(In Thousands, Except Per Share Amounts)
(Unaudited)
Quanex Tubing Pro Forma Pro Forma
Corporation LaSalle Operations Adjustments Consolidated
----------- ------- ---------- ----------- ------------
Net Sales ................................... $ 699,314 ($160,010) ($103,321) $ - $ 435,983
Costs and expenses:
Cost of sales ............................ 586,587 (143,510) (91,015) - 352,062
Selling, general and administrative ...... 44,515 (6,614) (6,008) - 31,893
Depreciation and amortization ............ 28,296 (1,268) (1,747) - 25,281
--------- --------- --------- --------- ---------
Operating income ............................ 39,916 (8,618) (4,551) - 26,747
Other income (expense):
Interest expense ......................... (13,944) - - - (13,944)
Capitalized interest ..................... 3,766 - - - 3,766
Other, net ............................... 2,765 - - 5,044 7,809
--------- --------- --------- --------- ---------
Income from continuing operations before
income taxes ............................. 32,503 (8,618) (4,551) 5,044 24,378
Income tax expense .......................... (13,651) 3,620 1,911 (2,118) (10,238)
--------- --------- --------- --------- ---------
Income from continuing operations ........... $ 18,852 ($ 4,998) ($ 2,640) $ 2,926 $ 14,140
========= ========= ========= ========= =========
Earnings per common share from
continuing operations:
Primary ............................ $ 0.96 $ 0.61
========= =========
Fully diluted ...................... $ 0.96 $ 0.61
========= =========
Weighted average number
of shares outstanding:
Primary ............................ 13,496 13,496
Assuming full dilution ............. 13,496 13,496
SEE NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS.
Page 3
4
Quanex Corporation
Pro Forma Consolidated Statement of Income
Year Ended October 31, 1995
(In Thousands, Except Per Share Amounts)
(Unaudited)
Quanex Tubing Pro Forma Pro Forma
Corporation LaSalle Operations Adjustments Consolidated
----------- ------- ---------- ----------- ------------
Net Sales......................................... $891,195 $(170,675) $(116,535) $ - $ 603,985
Costs and expenses:
Cost of sales.................................. 747,572 (152,242) (101,336) - 493,994
Selling, general and administrative............ 46,286 (5,662) (6,878) - 33,746
Depreciation and amortization.................. 31,808 (1,310) (1,713) - 28,785
-------- --------- --------- --------- ----------
Operating income.................................. 65,529 (11,461) (6,608) - 47,460
Other income (expense):
Interest expense............................... (10,742) - - - (10,742)
Capitalized interest........................... 1,872 - - - 1,872
Other, net..................................... 1,721 - - 5,044 6,765
-------- --------- --------- --------- ----------
Income from continuing operations before
income taxes................................... 58,380 (11,461) (6,608) 5,044 45,355
Income tax expense................................ (24,520) 4,814 2,775 (2,118) (19,049)
-------- --------- --------- --------- ----------
Income from continuing operations................. $ 33,860 $ (6,647) $ (3,833) $ 2,926 $ 26,306
======== ========= ========= ========= ==========
Earnings per common share from
continuing operations:
Primary..................................... $ 2.20 $ 1.65
======== ==========
Fully diluted............................... $ 2.20 $ 1.65
======== ==========
Weighted average number
of shares outstanding:
Primary..................................... 13,580 13,580
Assuming full dilution...................... 13,580 13,580
SEE NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS.
Page 4
5
Quanex Corporation
Pro Forma Consolidated Statement of Income
Year Ended October 31, 1996
(In Thousands, Except Per Share Amounts)
(Unaudited)
Quanex Tubing Pro Forma Pro Forma
Corporation LaSalle Operations Adjustments Consolidated
----------- ------- ---------- ----------- ------------
Net Sales......................................... $895,710 $(158,549) $(117,092) $ - $ 620,069
Costs and expenses:
Cost of sales.................................. 736,376 (141,700) (102,082) - 492,594
Selling, general and administrative............ 56,438 (5,037) (6,442) - 44,959
Depreciation and amortization.................. 39,373 (1,453) (1,837) - 36,083
-------- --------- --------- --------- ----------
Operating income.................................. 63,523 (10,359) (6,731) - 46,433
Other income (expense):
Interest expense............................... (11,929) - - - (11,929)
Capitalized interest........................... 569 - - - 569
Other, net..................................... 4,544 - - 5,044 9,588
-------- --------- --------- --------- ----------
Income from continuing operations before
income taxes................................... 56,707 (10,359) (6,731) 5,044 44,661
Income tax expense................................ (23,817) 4,351 2,827 (2,118) (18,757)
-------- --------- --------- --------- ----------
Income from continuing operations................. $ 32,890 $ (6,008) $ (3,904) $ 2,926 $ 25,904
======== ========= ========= ========= ==========
Earnings per common share from
continuing operations:
Primary..................................... $ 2.41 $ 1.90
======== ==========
Fully diluted............................... $ 2.20 $ 1.78
======== ==========
Weighted average number
of shares outstanding:
Primary..................................... 13,658 13,658
Assuming full dilution...................... 16,585 16,585
SEE NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS.
Page 5
6
Quanex Corporation
Pro Forma Consolidated Statement of Income
Nine Months Ended July 31, 1996
(In Thousands, Except Per Share Amounts)
(Unaudited)
Pro- Pro-
Quanex Tubing Forma Forma
Corporation Operations Adjustments Consolidated
----------- ---------- ----------- ------------
Net Sales......................................... $ 511,747 $(86,111) $ - $ 425,636
Costs and expenses:
Cost of sales.................................. 416,732 (75,558) - 341,174
Selling, general and administrative............ 35,690 (4,850) - 30,840
Depreciation and amortization.................. 27,663 (1,392) - 26,271
----------- -------- --------- ----------
Operating income.................................. 31,662 (4,311) - 27,351
Other income (expense):
Interest expense............................... (7,453) - - (7,453)
Capitalized interest........................... 287 - - 287
Other, net..................................... 4,394 - 1,147 5,541
----------- -------- --------- ----------
Income from continuing operations before
income taxes................................... 28,890 (4,311) 1,147 25,726
Income tax expense................................ (12,134) 1,811 (482) (10,805)
----------- -------- --------- ----------
Income from continuing operations................. $ 16,756 $ (2,500) $ 665 $ 14,921
=========== ======== ========= ==========
Earnings per common share from
continuing operations:
Primary..................................... $ 1.23 $ 1.09
=========== ==========
Fully diluted............................... $ 1.19 $ 1.08
=========== ==========
Weighted average number
of shares outstanding:
Primary..................................... 13,630 13,630
Assuming full dilution...................... 16,326 16,326
SEE NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS.
Page 6
7
Quanex Corporation
Pro Forma Consolidated Statement of Income
Nine Months Ended July 31, 1997
(In Thousands, Except Per Share Amounts)
(Unaudited)
Pro- Pro-
Quanex Tubing Forma Forma
Corporation Operations Adjustments Consolidated
----------- ---------- ----------- ------------
Net Sales......................................... $ 637,068 $(86,525) $ - $ 550,543
Costs and expenses:
Cost of sales.................................. 526,276 (77,613) - 448,663
Selling, general and administrative............ 37,874 (4,604) - 33,270
Depreciation and amortization.................. 30,262 (1,510) - 28,752
----------- -------- --------- ----------
Operating income.................................. 42,656 (2,798) - 39,858
Other income (expense):
Interest expense............................... (13,808) - 1,329 (12,479)
Capitalized interest........................... 2,231 - - 2,231
Other, net..................................... 1,440 - - 1,440
----------- -------- --------- ----------
Income from continuing operations before
income taxes................................... 32,519 (2,798) 1,329 31,050
Income tax expense................................ (11,382) 979 (465) (10,868)
----------- -------- --------- ----------
Income from continuing operations................. $ 21,137 $ (1,819) $ 864 $ 20,182
=========== ======== ========= ==========
Earnings per common share from
continuing operations:
Primary..................................... $ 1.52 $ 1.45
=========== ==========
Fully diluted............................... $ 1.44 $ 1.38
=========== ==========
Weighted average number
of shares outstanding:
Primary..................................... 13,933 13,933
Assuming full dilution...................... 16,737 16,737
SEE NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS.
Page 7
8
Quanex Corporation
Pro Forma Consolidated Balance Sheet
July 31, 1997
(In Thousands)
(Unaudited)
Quanex Tubing Pro forma Pro Forma
ASSETS Corporation Operations Adjustments Consolidated
- ------ ----------- ---------- ----------- ------------
Current assets:
Cash and equivalents........................... $ 25,672 $ (14) $ - $ 25,658
Accounts and notes receivable, net............. 88,469 (9,091) 958 80,336
Inventories.................................... 89,106 (12,326) - 76,780
Deferred income taxes.......................... 10,014 (427) 975 10,562
Prepaid expenses............................... 1,422 (101) - 1,321
--------- --------- --------- ----------
Total current assets................... 214,683 (21,959) 1,933 194,657
Property, plant and equipment.................... 674,000 (70,558) - 603,442
Less accumulated depreciation
and amortization........................... (310,561) 53,948 - (256,613)
--------- --------- --------- ----------
Property, plant and equipment, net............... 363,439 (16,610) - 346,829
Goodwill, net.................................... 82,017 - - 82,017
Net assets of discontinued operations............ - 11,526 (11,526) -
Other assets..................................... 17,061 (3,183) - 13,878
--------- --------- --------- ----------
$ 677,200 $ (30,226) $ (9,593) $ 637,381
========= ========= ========= ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current liabilities:
Notes payable.................................. $ - $ - $ - $ -
Accounts payable............................... 72,091 (7,278) - 64,813
Income taxes payable........................... 15,540 - 1,662 17,202
Accrued expenses............................... 42,147 (3,768) - 38,379
Current maturities of long-term debt........... 402 - - 402
--------- --------- --------- ----------
Total current liabilities.............. 130,180 (11,046) 1,662 120,796
Long-term debt................................... 194,273 - (27,800) 166,473
Deferred pension credits......................... 11,746 (4,760) - 6,986
Deferred postretirement welfare benefits......... 28,875 (22,131) - 6,744
Deferred income taxes............................ 33,951 6,643 - 40,594
Other liabilities................................ 19,569 - - 19,569
--------- --------- --------- ----------
Total liabilities...................... 418,594 (31,294) (26,138) 361,162
Stockholders' equity:
Common stock, $.50 par value................... 7,002 - - 7,002
Additional paid-in capital..................... 103,574 - - 103,574
Retained earnings.............................. 149,573 - 16,545 166,118
Unearned compensation.......................... - - - -
Adjustment for minimum pension liability....... (1,543) 1,068 - (475)
--------- --------- --------- ----------
Total stockholders' equity............. 258,606 1,068 16,545 276,219
--------- --------- --------- ----------
$ 677,200 $ (30,226) $ (9,593) $ 637,381
========= ========= ========= ==========
SEE NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS.
Page 8
9
Quanex Corporation
Notes to Pro Forma Consolidated Financial Statements
For the Years Ended October 31, 1994, 1995 and 1996
(Unaudited)
The pro forma adjustments to the consolidated statements of income reflect the
following:
a) The elimination of LaSalle and the Tubing Operations for the years ended
October 31, 1994, 1995 and 1996.
b) The increase in interest income for the years ended October 31, 1994,
1995 and 1996 resulting from the net proceeds of $91.7 million at an
interest rate of 5.5%. Net proceeds consist of $65.5 million, net of
transaction costs of $1.6 million for LaSalle and $28.8 million, net of
transaction costs of $1.0 million for the Tubing Operations.
c) The tax effect of pro forma adjustments at the Company's effective rate
of 42% for the years ended October 31, 1994, 1995 and 1996.
Page 9
10
Quanex Corporation
Notes to Pro Forma Consolidated Financial Statements
For the Nine Months Ended July 31, 1996 and 1997
(Unaudited)
General
The sale of LaSalle, completed on April 18, 1997, has been previously reflected
in the Company's Form 10-Q for the quarterly period ended July 31, 1997.
Accordingly, the pro forma income statement and balance sheet for the nine
months ended July 31, 1996 and 1997 reflect only the elimination of the Tubing
Operations.
Income Statement
The pro forma adjustments to the consolidated statements of income reflect the
following:
a) The elimination of the Tubing Operations for the nine months ended July
31, 1996 and 1997.
b) The increase in interest income for the nine months ended July 31, 1996,
resulting from increased cash of $27.8 million, at an interest rate
of 5.5%. The decrease in interest expense for the nine months ended July
31, 1997, resulting from the debt repayment of $27.8 million at an
interest rate of 6.375%.
c) The tax effect of pro forma adjustments at the Company's effective rate
of 42% for the nine months ended July 31, 1996 and 35% for the nine
months ended July 31, 1997.
Balance Sheet
The pro forma adjustments to the consolidated balance sheet as of July 31, 1997
reflect the following:
a) Record accounts receivable from Tubing Operations, which previously was
eliminated in consolidation.
b) The disposition of Tubing Operations for $28.8 million, net of
transaction costs of $1.0 million, and the resulting reduction of debt of
$27.8 million.
c) The recognition of anticipated gain from the sale and related income
taxes.
Page 10
11
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS (CONT.)
(c) Exhibits
2.1 - Purchase Agreement dated as of December 3, 1997, by and among Quanex
Corporation, Vision Metals Holdings, Inc.and Vision Metals, Inc.
Page 11
12
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
QUANEX CORPORATION
----------------------------------
Dated: December 17, 1997 Viren M. Parikh
Corporate Controller
Page 12
13
INDEX TO EXHIBITS
Number Exhibit
- ------ -------
2.1 Purchase Agreement dated as of December 3, 1997, by and among Quanex
Corporation, Vision Metals Holdings, Inc.and Vision Metals, Inc.
1
EXHIBIT 2.1
PURCHASE AGREEMENT
Dated December 3, 1997
And effective September 30, 1997
Among
QUANEX CORPORATION,
a Delaware corporation,
VISION METALS HOLDINGS, INC.,
a Delaware corporation,
and
VISION METALS, INC.
a Delaware corporation
2
TABLE OF CONTENTS
This Table of Contents is solely for convenience of reference and shall be
given no effect in the construction or interpretation of this Agreement.
PAGE
1. STOCK AND ASSETS BEING PURCHASED AND LIABILITIES BEING ASSUMED . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 STOCK AND ASSETS BEING PURCHASED . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
(a) REAL PROPERTY, BUILDINGS AND IMPROVEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . 2
(b) LEASES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
(c) OTHER TANGIBLE ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
(d) INVENTORY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
(e) ACCOUNTS RECEIVABLE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
(f) INTELLECTUAL PROPERTY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
(g) AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
(h) PREPAID EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
(i) CASH AND CASH EQUIVALENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
(j) WARRANTY RIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
(k) RECORDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
(l) LICENSES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
(m) OTHER ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.2 ASSETS RELATING TO THE BUSINESS NOT BEING PURCHASED PURSUANT TO THIS AGREEMENT . . . . . . . . . . . . 4
(a) TAX MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
(b) RIGHTS TO CLAIMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
(c) CERTAIN RECEIVABLES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
(d) CERTAIN PREPAID AMOUNTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
(e) CERTAIN NON-EXCLUSIVE ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.3 LIABILITIES AND OBLIGATIONS TO BE ASSUMED . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
(a) LEASES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
(b) EQUIPMENT LEASES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
(c) PURCHASE ORDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
(d) SALES COMMITMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
(e) PAYABLES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
(f) AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
(g) PRODUCT REPLACEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
(h) PRODUCT LIABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
(i) GENERAL LIABILITIES AFTER THE EFFECTIVE TIME . . . . . . . . . . . . . . . . . . . . . . . . 5
(j) CERTAIN EMPLOYEE BENEFITS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(k) PERMITS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(l) ENVIRONMENTAL CONDITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(m) TAX MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.4 LIABILITIES NOT BEING ASSUMED . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(a) TAX MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(b) CERTAIN CLAIMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(c) PRODUCT LIABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(i)
3
(d) RELATED PERSON OBLIGATIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(e) GENERAL OBLIGATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(f) QUANEX DEBT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2. CASH CONSIDERATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.1 PAYMENT OF CASH PURCHASE PRICE AT CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.2 POST-CLOSING ADJUSTMENT TO CASH PURCHASE PRICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3. CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.1 TIME AND PLACE OF THE CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.2 ACTIONS BEING TAKEN AT THE CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(a) DOCUMENTS TRANSFERRING MST STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(b) DOCUMENTS TRANSFERRING ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(c) PAYMENT OF CASH PURCHASE PRICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(d) ASSUMPTION AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(e) CERTIFICATES OF INCUMBENCY AND AUTHORITY . . . . . . . . . . . . . . . . . . . . . . . . . 10
(f) GUARANTY AND MANAGEMENT AGREEMENT TERMINATIONS . . . . . . . . . . . . . . . . . . . . . . 10
(g) THIRD PARTY CONSENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
(h) TIMING OF ACTIONS TAKEN AT THE CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.3 CERTAIN ACTIONS TO BE TAKEN AFTER THE CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
(a) DEMANDS TO QUANEX FOR PURCHASING PARTIES' OBLIGATIONS . . . . . . . . . . . . . . . . . . . 10
(b) DEMANDS TO PURCHASING PARTIES FOR QUANEX'S OBLIGATIONS . . . . . . . . . . . . . . . . . . 10
(c) PAYMENTS TO QUANEX TO WHICH VMI IS ENTITLED . . . . . . . . . . . . . . . . . . . . . . . . 11
(d) PAYMENTS TO PURCHASING PARTIES TO WHICH QUANEX IS ENTITLED . . . . . . . . . . . . . . . . 11
(e) ACTIONS WITH RESPECT TO CERTAIN AGREEMENTS REQUIRING CONSENT . . . . . . . . . . . . . . . 11
4. REPRESENTATIONS AND WARRANTIES OF QUANEX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.1 ORGANIZATION AND EXISTENCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.2 AUTHORITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.3 CAPITALIZATION OF MST . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.4 INTERESTS IN OTHER ENTITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.5 NO CONFLICT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.6 NO CONSENTS OR GOVERNMENTAL APPROVALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.7 FINANCIAL CONDITION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.8 TITLE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.9 PROPERTIES AND ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
(a) TITLE TO REAL PROPERTY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
(b) USE OF REAL PROPERTY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
(c) TITLE TO PERSONAL PROPERTY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
(d) CONDITION AND SUFFICIENCY OF ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
4.10 COMPLIANCE WITH ENVIRONMENTAL LAWS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
(a) PROVISION OF INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
(b) STANDARD FOR DETERMINING WHAT INFORMATION HAS BEEN PROVIDED . . . . . . . . . . . . . . . . 16
(c) EXCLUSIVITY OF ENVIRONMENTAL REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . . . 16
(d) CERTAIN DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.11 CERTAIN CONTRACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.12 LITIGATION AND ARBITRATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(a) EXISTENCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(b) EFFECT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(ii)
4
4.13 ABSENCE OF CERTAIN CHANGES OR EVENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(a) ORDINARY COURSE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(b) NO MATERIAL CHANGE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(c) NO MATERIAL DAMAGES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(d) RIGHTS TO INTELLECTUAL PROPERTY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(e) PERMITS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
(f) DISPOSITION OF PROPERTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
(g) CHANGE IN CONTRACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
(h) CAPITAL EXPENDITURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
(i) OBLIGATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
(j) PAYMENTS OF LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
(k) EMPLOYEE MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
(l) DISTRIBUTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
(m) ADDITIONAL STOCK AND LOANS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
(n) ACCOUNTING METHODS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
(o) AFFILIATE TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
(p) SETTLEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
(q) CERTAIN ORDERS OF MATERIALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
(r) CERTAIN AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
4.14 CERTAIN TRANSACTIONAL FEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
4.15 EMPLOYEE BENEFIT PLANS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
(a) IDENTIFICATION OF PLANS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
(b) INFORMATION PROVIDED . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
(c) LIENS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
(d) TERMINATION PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
(e) FUNDING DEFICIENCIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
(f) MULTIEMPLOYER PLANS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
(g) QUALIFICATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
(h) CLAIMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
(i) PENALTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
(j) COMPLIANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
(k) CERTAIN REQUIREMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
(l) EFFECT OF TRANSACTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
(m) CERTAIN LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
4.16 COMPLIANCE WITH LAWS AND PERMITS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
(a) COMPLIANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
(b) POSSESSION OF PERMITS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
4.17 NO UNDISCLOSED LIABILITY; INDEBTEDNESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
4.18 ACCOUNTS RECEIVABLE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
4.19 INVENTORY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
4.20 PERSONNEL INFORMATION; LABOR RELATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
(a) IDENTIFICATION OF EMPLOYEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
(b) CERTAIN MATTERS RELATING TO EMPLOYEES . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
(c) WARN OBLIGATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
(d) COMPLIANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
4.21 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
(a) FILING OF RETURNS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
(b) PAYMENT OF TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
(c) WITHHOLDING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
(iii)
5
(d) ENCUMBRANCES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
(e) EXTENSIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
(f) THIRD-PARTY TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
(g) STATUTES OF LIMITATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
(h) CLAIMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
(i) AUDITS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
(j) TAX SHARING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
(k) POWERS OF ATTORNEY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
(l) PARACHUTE PAYMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
(m) 341(F) CONSENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
(n) CERTAIN PROPERTY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
(o) 481(A) ADJUSTMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
(p) BOYCOTTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
(q) PAST AUDITS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
(r) INFORMATION PROVIDED . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
(s) DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
4.22 INTELLECTUAL PROPERTY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
(a) RIGHT TO USE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
(b) AGREEMENTS AND LICENSES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
(c) IDENTIFICATION OF CERTAIN INTELLECTUAL PROPERTY . . . . . . . . . . . . . . . . . . . . . . 33
(d) INFRINGEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
(e) DEFINITION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
4.23 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
4.24 BANK ACCOUNTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
4.25 CUSTOMERS AND SUPPLIERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
4.26 AFFILIATE TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
4.27 DISCLOSURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
5. REPRESENTATIONS AND WARRANTIES OF THE PURCHASING PARTIES. . . . . . . . . . . . . . . . . . . . . . . . . . 35
5.1 ORGANIZATION AND GOOD STANDING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
5.2 AUTHORITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
5.3 NO CONFLICT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
5.4 NO CONSENTS OR GOVERNMENTAL APPROVALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
5.5 CERTAIN TRANSACTIONAL FEES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
6. ADDITIONAL AGREEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
6.1 CERTAIN EMPLOYEE BENEFIT MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
(a) QUANEX CORPORATION SALARIED EMPLOYEES' PENSION PLAN . . . . . . . . . . . . . . . . . . . . 36
(b) QUANEX CORPORATION EMPLOYEE SAVINGS PLAN . . . . . . . . . . . . . . . . . . . . . . . . . 38
(c) QUANEX CORPORATION HOURLY BARGAINING UNIT EMPLOYEES SAVINGS PLAN . . . . . . . . . . . . . 39
(d) PENSION PLAN BETWEEN GULF STATES TUBE DIVISION OF QUANEX CORPORATION AND UNITED STEELWORKERS
OF AMERICA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
(e) QUANEX CORPORATION GROUP BENEFITS PLAN . . . . . . . . . . . . . . . . . . . . . . . . . . 39
(f) GULF STATES TUBE UNION GROUP BENEFIT PLAN . . . . . . . . . . . . . . . . . . . . . . . . . 40
(g) QUANEX CORPORATION MANAGEMENT INCENTIVE PROGRAM . . . . . . . . . . . . . . . . . . . . . . 40
(h) VACATION POLICIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
6.2 TRANSFER OF WORK FORCE EMPLOYED IN CONNECTION WITH THE BUSINESS . . . . . . . . . . . . . . . . . . 40
(iv)
6
6.3 SUPPLYING OF INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
6.4 EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
6.5 PUBLICITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
6.6 TAX REPORTING AND COOPERATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
6.7 ALLOCATION OF CASH PURCHASE PRICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
6.8 TRANSFER TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
6.9 ALLOCATION OF CERTAIN STRADDLE PERIOD TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
(a) CAPITAL AND AD VALOREM TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
(b) OTHER NON-INCOME TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
6.10 NON-SOLICITATION; NON-COMPETE PROVISION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
6.11 USE OF CERTAIN NAMES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
6.12 CERTAIN ASSURANCES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
6.13 INTERCOMPANY ACCOUNTS AND CASH . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
7. INDEMNIFICATION AND REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
7.1 QUANEX'S INDEMNIFICATION OF THE PURCHASING PARTIES . . . . . . . . . . . . . . . . . . . . . . . . . 44
(a) BREACHES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
(b) CERTAIN CLAIMS BEFORE EFFECTIVE TIME . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
(c) NON-ASSUMED LIABILITIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
(d) CERTAIN TAX MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
(e) PRODUCT REPLACEMENT OBLIGATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
7.2 PURCHASING PARTIES' INDEMNIFICATION OF QUANEX . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
(a) BREACHES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
(b) CERTAIN CLAIMS AFTER EFFECTIVE TIME . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
(c) ASSUMED LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
(d) EMPLOYEE BENEFIT MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
(e) CERTAIN TAXES MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
7.3 THIRD PARTY CLAIMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
7.4 SURVIVAL OF REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
7.5 LIMITATION ON INDEMNIFICATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
7.6 LIMITATION ON TYPE OF REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
8. GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
8.1 AMENDMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
8.2 NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
8.3 WAIVER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
8.4 HEADINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
8.5 SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
8.6 ENTIRE AGREEMENT; SCHEDULES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
8.7 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
8.8 COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
8.9 NO THIRD-PARTY BENEFICIARIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
8.10 VENUE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
8.11 ASSIGNABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
(v)
7
INDEX OF DEFINITIONS
This Index of Definitions is solely for convenience of reference and shall be
given no effect in the construction or interpretation of this Agreement.
TERMS DEFINED IN THIS AGREEMENT: SECTION WHERE DEFINED
Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.1.1(i)
Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.4.18
Affiliated Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.4.21(a)
Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . [Introduction]
Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.1.1
Assumed Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.1.3
Assumption Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.3.2(d)
Basket Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.7.5
Businesses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.4.1
Buyer Group Benefits Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.6.1(e)
Buyer Salaried Pension Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.6.1(a)(i)
Buyer Savings Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.6.1(b)
Buyer's Intercompany Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.2.2
Buyer's Transfer Amount Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.6.1(a)(ii)
Cash Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.2.1
Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.1.1
Closing Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.1.1(d)
Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.4.13(k)
Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.4.3
Designated Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.4.15(a)
Disclosure Schedule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.1.1
Effective Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.1.2(a)
Effective Date Balance Sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.1.2(a)
Effective Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . [Introduction]
Encumbrances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.1.1
Environmental Claim . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.4.10(d)(i)
Environmental Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.4.10(d)(ii)
Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.4.10(d)(iii)
ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.4.13(k)
ERISA Affiliate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.4.15(c)
Government Authorities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.4.5
Group Benefit Plan Participants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.6.1(e)
Group Office . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . [Recitals]
GST Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.1.1(g)
GST Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . [Recitals]
Hazardous Materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.4.10(d)(iv)
Income Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.3(m)
Indemnified Party . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.7.3
Indemnifying Party . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.7.3
Independent Actuarial Firm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.6.1(a)(ii)
Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.4.22(e)
(vi)
8
INDEX OF DEFINITIONS (CONT'D)
TERMS DEFINED IN THIS AGREEMENT SECTION WHERE DEFINED
Intercompany Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.2.2
Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.4.19
Knowledge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Knowledge Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.9(b)
Legal Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.4.5
Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.7.1
Maximum Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.7.5
Material Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.4.11
MST . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . [Recitals]
MST Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . [Recitals]
MST Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . [Recitals]
Non-Income Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.3(m)
Office Lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.1.1(b)
Orders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.4.5
Owned Real Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.1.1(a)
PBGC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.4.15(d)
Permits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.4.5
Post-9/30/97 period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.9
Pre-10/1/97 period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.9
Purchased Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2
Purchasing Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . [Recitals]
Quanex . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . [Introduction]
Real Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.4.9(a)
Restricted Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.10
Salaried Participants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.6.1(a)(i)
Seller's Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.4.26
Seller's Transfer Amount Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.6.1(a)(ii)
Straddle Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.6.9
Subsequent Net Cash Outflow . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2
Tax Accrual . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.3(m)
Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.4.21(s)
Tax Returns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.4.21(s)
Transfer Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.6.1(a)(ii)
Transfer Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.6.8
VMHI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . [Introduction]
VMI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . [Introduction]
WARN Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.4.20(c)
(vii)
9
INDEX OF SCHEDULES FORMING PART OF THE DISCLOSURE SCHEDULE
Schedule 1.1 -- Encumbrances Permitted on Transferred Assets . . . . Section 1.1
Schedule 1.1(a) -- Description of Owned Real Property . . . . . . . . . Section 1.1(a)
Schedule 1.1(g) -- GST Agreements . . . . . . . . . . . . . . . . . . . Section 1.1(g)
Schedule 4.5 -- Certain Conflict Exceptions . . . . . . . . . . . . . Section 4.5
Schedule 4.6 -- Certain Required Permits . . . . . . . . . . . . . . Section 4.6
Schedule 4.9 -- Matters Relating to Properties and Assets . . . . . . Section 4.9(a),(b),(c),(d)
Schedule 4.10 -- Certain Environmental Matters . . . . . . . . . . . . Section 4.10(b)
Schedule 4.11 -- Matters Relating to Contracts . . . . . . . . . . . . Section 4.11
Schedule 4.12 -- Matters Relating to Litigation and Arbitration . . . Section 4.12(a),(b)
Schedule 4.13 -- Absence of Certain Changes or Events . . . . . . . . Section 4.13
Schedule 4.15 -- Employee Benefit Plans . . . . . . . . . . . . . . . Section 4.15(a),(k),(l),(m)
Schedule 4.16 -- Certain Permit Matters . . . . . . . . . . . . . . . Section 4.16
Schedule 4.17 -- Liabilities and Indebtedness . . . . . . . . . . . . Section 4.17
Schedule 4.18 -- Accounts Receivable . . . . . . . . . . . . . . . . . Section 4.18
Schedule 4.19 -- Inventory Matters . . . . . . . . . . . . . . . . . . Section 4.19
Schedule 4.20(a) -- Identification of Employees . . . . . . . . . . . . . Section 4.20(a),(b),(c)
Schedule 4.20(b) -- Certain Matters Relating to Employees . . . . . . . . Section 4.20(b)
Schedule 4.20(c) -- WARN Matters . . . . . . . . . . . . . . . . . . . . Section 4.20(c)
Schedule 4.21 -- Tax Matters . . . . . . . . . . . . . . . . . . . . . Section 4.21
Schedule 4.22 -- Intellectual Property Matters . . . . . . . . . . . . Section 4.22(b),(c),(d)
Schedule 4.23 -- Insurance Policies . . . . . . . . . . . . . . . . . Section 4.23
Schedule 4.24 -- Bank Accounts . . . . . . . . . . . . . . . . . . . . Section 4.24
Schedule 4.25 -- Customers and Suppliers Matters . . . . . . . . . . . Section 4.25
Schedule 4.26 -- Affiliate Transactions . . . . . . . . . . . . . . . Section 4.26
(viii)
10
Schedule 6.1 -- Certain Employees . . . . . . . . . . . . . . . . . . Section 6.1(a)(i),
Section 6.1(e)
Schedule 6.2 -- Employees to be Hired . . . . . . . . . . . . . . . . Section 6.2
Schedule 6.7 -- Allocation of Cash Purchase Price . . . . . . . . . . Section 6.2
Schedule 6.10 -- Proposal Relating to Certain Products . . . . . . . . Section 6.10
//
(ix)
11
PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT (this "Agreement") dated December 3, 1997, and
effective at 00:01 a.m. Michigan time on September 30, 1997 (the "Effective
Time") is by and between QUANEX CORPORATION, a Delaware corporation ("Quanex"),
VISION METALS HOLDINGS, INC., a Delaware corporation ("VMHI"), and VISION
METALS, INC., a Delaware corporation ("VMI").
WHEREAS, Quanex owns all of the outstanding shares (the "MST Stock")
of common stock, $.01 par value of Michigan Seamless Tube Company, a Delaware
corporation ("MST");
WHEREAS, MST is engaged in the business of producing cold drawn tubes
and line pipes at its South Lyon, Michigan, facility (the "MST Business"), and
Quanex, through its Gulf States Tube Division, is engaged in the business of
producing seamless hot finished tubes, welded tubes, cold drawn tubes and line
pipes at its Rosenberg, Texas, facility (the "GST Business");
WHEREAS, Quanex maintains administrative offices for the operation of
its Tube Group in Ann Arbor, Michigan (the "Group Office");
WHEREAS, Quanex wishes to sell, and VMI wishes to purchase, the MST
Stock and substantially all of the assets relating to the GST Business and the
Group Office and VMI wishes to assume substantially all of the liabilities
relating to the GST Business and the Group Office, in each case effective as of
the Effective Time, as set forth more specifically in this Agreement; and
WHEREAS, VMHI owns all of the outstanding shares of capital stock of
VMI;
NOW THEREFORE, in consideration of the mutual agreements and covenants
contained in this Agreement and for other good, fair and valuable
consideration, the receipt and sufficiency of which are acknowledged, VMHI and
VMI (together, the "Purchasing Parties"), and Quanex agree as follows:
1. STOCK AND ASSETS BEING PURCHASED AND LIABILITIES BEING
ASSUMED.
1.1 STOCK AND ASSETS BEING PURCHASED. On the terms and
subject to the conditions set forth in this Agreement, at the closing described
in Article 3 of this Agreement (the "Closing"), and taking place simultaneously
with the execution and delivery of this Agreement, VMI is purchasing from
Quanex, and Quanex is selling, assigning, transferring, conveying and
delivering to VMI, the MST Stock, free and clear of all liens, claims, security
interests, pledges, attachments, proxies, voting arrangements, collateral
security agreements, claims, charges, mortgages, restrictions on transfer and
other encumbrances (collectively, "Encumbrances"), and all of Quanex's right,
title and interest to the following assets, subject to the provisions of
Section 0.1.2 of this Agreement, free and clear of any Encumbrances (other than
those Encumbrances described in SCHEDULE 1.1 to the disclosure schedule that is
being delivered to VMI
1
12
separately from this Agreement concurrently with the execution and delivery of
this Agreement (the "Disclosure Schedule"):
(a) REAL PROPERTY, BUILDINGS AND IMPROVEMENTS.
The land more specifically described in SCHEDULE 1.1(A) to the
Disclosure Schedule and located at Rosenberg, Texas (the "Owned Real
Property") and all buildings and other improvements located on the
Owned Real Property;
(b) LEASES. The real property lease agreement
dated May 24, 1993, between Quanex, as lessee, and Domino's Pizza,
Inc., as lessor, relating to the Group Office (the "Office Lease");
(c) OTHER TANGIBLE ASSETS. All furniture,
fixtures, tools, dies, machinery, equipment, vehicles and other
rolling stock, and all other tangible assets owned by Quanex relating
to the GST Business; all other furniture, fixtures, machinery,
equipment and other tangible assets owned by Quanex and located at the
Group Office; and any rights and interests of Quanex, as lessee, under
any leases of such furniture, fixtures, tools, dies, machinery,
equipment, vehicles, rolling stock and other tangible assets;
(d) INVENTORY. All inventory (including
manufacturing supplies, raw materials, components, repair parts,
work-in-progress, finished goods and other similar items, whether raw
or used) relating to the GST Business as of 00:01 a.m. Michigan time
on the date of the Closing (the "Closing Time");
(e) ACCOUNTS RECEIVABLE. All accounts receivable
(including without limitation notes receivable) of Quanex relating to
the GST Business as of the Closing Time;
(f) INTELLECTUAL PROPERTY. The following
intellectual property: (i) the trade names "Gulf States Tube" and
"Michigan Seamless Tube", including package design and the right to
use all existing packages, invoices, letterhead, envelopes and similar
printed material using those names, (ii) any other trade names owned
by Quanex and used exclusively in the GST Business, (iii) any
trademarks and similar rights owned by Quanex and used exclusively in
the GST Business, (iv) copyrights owned by Quanex and used exclusively
in the GST Business and (v) processes, know-how, tool and die
technology, other technology, inventions, formulae, trade secrets,
patents, computer programs and all other proprietary rights (including
without limitation all registrations and applications therefor) owned
by Quanex and used exclusively in the GST Business;
(g) AGREEMENTS. The contracts and agreements
described in SCHEDULE 1.1(G) to the Disclosure Schedule, which
describes those agreements relating exclusively to the GST Business or
the Group Office
2
13
to be sold and transferred to the Purchasing Parties at the Closing
(the "GST Agreements");
(h) PREPAID EXPENSES. All prepaid expenses and
deposits of Quanex relating exclusively to the GST Business as of the
Closing Time;
(i) CASH AND CASH EQUIVALENTS. All cash and cash
equivalents of Quanex relating exclusively to the GST Business and any
bank, money market, investment, brokerage or other accounts
("Accounts") of Quanex relating exclusively to the GST Business as of
the Closing Time;
(j) WARRANTY RIGHTS. All rights of Quanex
relating to the GST Business under express or implied warranties from
suppliers;
(k) RECORDS. All books, records and
correspondence owned by Quanex relating exclusively to the GST
Business, including, but not limited to, customer and supplier
records, production records, employment records and any information
that has been reduced to writing or stored electronically;
(l) LICENSES. The transferable licenses, permits
and registrations held by Quanex and used exclusively in the GST
Business, issued by governmental authorities (including without
limitation administrative governmental authorities); and
(m) OTHER ASSETS. All other assets (whether
tangible or intangible) used exclusively in the GST Business and owned
by Quanex as of the Closing Time, including, without limitation,
goodwill, supplies, contract rights, other tangible assets and all
other assets used by Quanex exclusively in the GST Business (to the
extent Quanex owns the assets or has any rights with respect to the
assets).
The term "Assets" as used in this Agreement shall mean the assets described in
this Section 0.1.1, excluding the assets described in Section 0.1.2 of this
Agreement.
1.2 ASSETS RELATING TO THE BUSINESS NOT BEING PURCHASED
PURSUANT TO THIS AGREEMENT. Specifically excluded from any assets being
purchased pursuant to this Agreement are:
(a) TAX MATTERS. All amounts representing any
rights to Non-Income Tax refunds or other Non-Income Tax payments
existing as of September 30, 1997, and to Income Tax refunds or other
Income Tax payments existing as of the close of business on November
30, 1997, whether or not reflected or accrued on that certain audited
combined balance sheet of MST, the GST Business and the Group Office
as of September 30, 1997 (the "Effective Date") prepared by Deloitte &
Touche
3
14
LLP, copies of which have been provided to the Purchasing Parties and
Quanex (the "Effective Date Balance Sheet");
(b) RIGHTS TO CLAIMS. All rights of Quanex (i)
pursuant to any lawsuits or other claims involving the GST Business or
the Group Office based on events occurring before the Effective Time
other than those rights included within the Assumed Liabilities
described in subsections 1.3(g) and 1.3(j) of this Agreement and (ii)
related to those liabilities not being assumed by VMI as described in
Section 0.1.4 of this Agreement;
(c) CERTAIN RECEIVABLES. Amounts reflected on
Quanex's books and records as of the Effective Time as receivables by
Quanex from any person affiliated with Quanex;
(d) CERTAIN PREPAID AMOUNTS. Any prepaid
insurance premiums relating to the GST Business or the Group Office;
and
(e) CERTAIN NON-EXCLUSIVE ASSETS. All assets of
Quanex used by Quanex in any of its businesses other than the GST
Business and other than the assets comprising the Group Office,
including without limitation all rights to the use of the name
"Quanex".
1.3 LIABILITIES AND OBLIGATIONS TO BE ASSUMED. On the
terms and subject to the conditions set forth in this Agreement, at the
Closing, VMI is assuming the following liabilities and obligations, subject to
the provisions of Section 0.1.4 of this Agreement:
(a) LEASES. All of Quanex's liabilities and
obligations accrued after the Effective Time under the Office Lease
(excluding liabilities arising out of breach or nonperformance
thereunder);
(b) EQUIPMENT LEASES. All of Quanex's
liabilities and obligations accrued after the Effective Time pursuant
to the equipment leases and other leases described in subsection
1.1(c) to this Agreement (excluding liabilities arising out of breach
or nonperformance thereunder);
(c) PURCHASE ORDERS. All contracts or purchase
orders to acquire goods or services of Quanex relating to the GST
Business as of the Closing Time (excluding liabilities arising out of
breach or nonperformance thereunder);
(d) SALES COMMITMENTS. All sales orders and
obligations of Quanex providing for the manufacture and delivery of
products to Quanex's customers relating to the GST Business as of the
Closing Time;
(e) PAYABLES. All of Quanex's accounts payable,
accrued expenses and other items payable relating to the GST Business
or the
4
15
Group Office as of the Closing Time and incurred in the ordinary
course of business;
(f) AGREEMENTS. All of Quanex's liabilities and
obligations under the GST Agreements (excluding liabilities arising
out of breach or nonperformance thereunder);
(g) PRODUCT REPLACEMENT. All obligations to
repurchase or replace products produced by Quanex in the GST Business
and returned by the purchasers of those products after the Closing
Time;
(h) PRODUCT LIABILITY. Any product related
liability (other than obligations assumed pursuant to subsection
1.3(g) of this Agreement, relating solely to repurchase and
replacement obligations) relating to products produced in the GST
Business after the Closing Time;
(i) GENERAL LIABILITIES AFTER THE EFFECTIVE TIME.
All obligations and liabilities relating to the GST Business properly
reflected or accrued on the Effective Date Balance Sheet and all
obligations and liabilities relating to the GST Business accrued or
based on events occurring after the Effective Time, other than product
liability relating to products produced by Quanex in the GST Business
before the Effective Time, which is governed by subsections 1.3(g) and
1.3(h) of this Agreement;
(j) CERTAIN EMPLOYEE BENEFITS. Those obligations
and liabilities with respect to employee benefit matters described in
Section 0.6.1 of this Agreement;
(k) PERMITS. All obligations and liabilities
arising in connection with Permits held by the Businesses as of the
Closing Time, such permits including without limitation NPDES Permit
No. MI0001902, Opt-Out Permit No. 599-96, Fort Bend Subsidence
District Permit Nos. 003573 and 003574, Compliance Plan No. CP-50129,
Permit No. HW-50129 and any modification thereof, NPDES Permit No.
TX0003026, and TNRCC Permit No. 01237, and including those obligations
and liabilities of the defendant in the Consent Judgment entered in
Kelley v. Quanex, Civil Action No. 91-70706-CZ (Ingham County,
Michigan, November 25, 1991);
(l) ENVIRONMENTAL CONDITIONS. All obligations
and liabilities related to environmental conditions existing at the
Businesses' facilities as of the Closing Time. Without limiting the
generality of the immediately preceding sentence, these liabilities
and obligations shall include, without limitation, closure of the
landfarm area at the facilities used by the GST Business, and closure
of the sludge drying beds and boneyard/landfill areas at the
facilities used by the MST Business; and
5
16
(m) TAX MATTERS. Any amounts representing Taxes
other than income Taxes and Michigan Single Business Taxes
(collectively "Non-Income Taxes") with respect to any taxable period
or portion thereof ending on or before September 30, 1997, up to the
aggregate amount of the reserves, provisions and accruals for
Non-Income Taxes reflected on the Effective Date Balance Sheet (the
"Tax Accrual"), any amounts representing Non-Income Taxes with respect
to any taxable period or portion beginning and ending after September
30, 1997, and any amounts representing income Taxes and Michigan
Single Business Taxes (collectively "Income Taxes") with respect to
any taxable period or portion thereof beginning and ending after
November 30, 1997.
The term "Assumed Liabilities" as used in this Agreement shall mean the
liabilities and obligations described in this Section 0.1.3, excluding the
liabilities and obligations described in Section 0.1.4 of this Agreement.
1.4 LIABILITIES NOT BEING ASSUMED. The Purchasing
Parties are not assuming the following liabilities and obligations pursuant to
this Agreement:
(a) TAX MATTERS. Any amounts representing
Non-Income Taxes with respect to any taxable period or portion thereof
ending on or before September 30, 1997, but only to the extent the
aggregate amount of such Non-Income Taxes exceeds the Tax Accrual, and
any amounts representing Income Taxes with respect to any taxable
period or portion thereof ending on or before November 30, 1997.
(b) CERTAIN CLAIMS. Any liability or obligation
arising out of the following claims: (i) Jackson and Miller v. Quanex
Corporation, Cause No. 95-70507 in the U.S. District Court (Eastern
District, Michigan) (originally filed on February 9, 1995) or (ii)
Bernander v. Quanex Corporation et al., Cause No. 90938 in the 268th
Judicial District Court of Fort Bend County, Texas (originally filed
on May 24, 1995);
(c) PRODUCT LIABILITY. Any product liability
(other than obligations described in subsection 1.3(g) of this
Agreement, relating solely to repurchase and replacement obligations)
relating to products produced by Quanex in the GST Business before the
Closing Time, unless and to the extent accrued and reflected on the
Effective Date Balance Sheet;
(d) RELATED PERSON OBLIGATIONS. All obligations
to Quanex or any person affiliated with Quanex reflected on the books
and records of the Gulf States Tube Division and the Group Office as
of the Closing Time (other than trade payables);
(e) GENERAL OBLIGATIONS. Except as specified in
subsections 1.3(j), 1.3(k) and 1.3(l) of this Agreement, obligations
and liabilities relating to the GST Business accrued or based on
events occurring before the Effective Time; and
6
17
(f) QUANEX DEBT. Any indebtedness of Quanex for
borrowed money.
2. CASH CONSIDERATION.
2.1 PAYMENT OF CASH PURCHASE PRICE AT CLOSING. On the
terms and subject to the conditions set forth in this Agreement, at the Closing
the Purchasing Parties are to pay Quanex, as consideration for the transfer and
delivery of the MST Stock and the Assets pursuant to Section 0.1.1 of this
Agreement, a cash purchase price (the "Cash Purchase Price") of $29,519,618.00.
2.2 POST-CLOSING ADJUSTMENT TO CASH PURCHASE PRICE.
Within five business days after the date of the Closing, Quanex shall deliver
to VMI, by overnight delivery (Federal Express) to the addresses set forth in
subsection 8.2(a) of this Agreement, a statement (the "Intercompany Statement")
of the results, in reasonable detail, of the cash activity in the intercompany
accounts between Quanex, on the one hand, and MST, the Gulf States Tube
Division and the Tube Group Office Division, on the other hand, together with
appropriate supporting documentation. The Intercompany Statement shall set
forth the sum of the following (the "Subsequent Net Cash Outflow"):
(a) cash transfers made to Quanex by MST, the Gulf States
Tube Division and the Tube Group Office (together, the "Purchased
Group") after the Effective Date through (and including) the date of
the Closing (the "Interim Period"), less
(b) cash transfers made by Quanex to the Purchased Group
during the Interim Period, less
(c) noncash billings made by Quanex during the Interim
Period with respect to the Purchased Group resulting from cash
disbursements made by Quanex on behalf of the Purchased Group
VMI shall have 15 business days following delivery of the Intercompany
Statement during which to submit to Quanex, in accordance with subsection
8.2(b) of this Agreement, a written statement (a "Buyer's Intercompany
Statement") either agreeing with the amount of the Subsequent Net Cash Outflow,
in which case that amount shall be the final Subsequent Net Cash Outflow, or
setting forth any disputed item (which shall provide, in reasonable detail, the
basis for that dispute) in the Intercompany Statement. If VMI does not deliver
a Buyer's Intercompany Statement within that 15 business day period, then the
Subsequent Net Cash Flow set forth in the Intercompany Statement shall be the
final Subsequent Net Cash Outflow for purposes of this Section 2.2. If VMI
delivers to Quanex a Buyer's Intercompany Statement setting forth any disputed
item, then the parties shall consult and attempt to resolve, as soon as
practicable, all disputes set forth in the Buyer's Intercompany Statement. If
the parties are unable to resolve those disputes within 15 days of the delivery
of the Buyer's Intercompany Statement, then those disputes shall be resolved by
Deloitte & Touche LLP. Deloitte & Touche LLP shall be instructed to make its
determination of the specific items in dispute as promptly as practicable
(which determination shall be
7
18
within the range of values established for each item in the Intercompany
Statement and Buyer's Intercompany Statement); its determination shall be final
and binding on the parties and enforceable by appropriate judicial proceedings,
and the final Subsequent Net Cash Outflow shall be based on the determination
of Deloitte & Touche LLP. The fees and expenses of Deloitte & Touche LLP in
performing those functions shall be paid one-half by VMI and one-half by
Quanex. All calculations made in the Intercompany Statement, the Buyer's
Intercompany Statement and any report by Deloitte & Touche LLP shall be made
consistent with Quanex's past practices. On the fifth business day after the
determination of the final Subsequent Net Cash Flow in accordance with this
Section 2.2 (whether by means of a Buyer's Intercompany Statement agreeing with
the Intercompany Statement, the expiration of the 15 business day period
without delivery of a Buyer's Intercompany Statement, the resolution of any
dispute over the Intercompany Statement by mutual agreement by Quanex and VMI
or the resolution of any dispute over the Intercompany Statement by Deloitte &
Touche LLP), a payment of the difference between the final Subsequent Net Cash
Outflow and $2,024,518.00 shall be made as follows: If the final Subsequent
Net Cash Outflow exceeds $2,024,518.00, then Quanex shall pay to VMI the amount
of that excess; if $2,024,518.00 exceeds the final Subsequent Net Cash Outflow,
then VMI shall pay to Quanex the amount of that excess. The payment shall be
made by means of a wire transfer of immediately available funds to an account
designated in writing by the person to receive the payment at least two
business days before the date of payment.
3. CLOSING
3.1 TIME AND PLACE OF THE CLOSING. The closing of the
transactions described in this Agreement is taking place at the offices of
Kirkland & Ellis, Citicorp Center, 153 East 53rd Street, New York, New York, on
December 3, 1997, simultaneously with the execution and delivery of this
Agreement.
3.2 ACTIONS BEING TAKEN AT THE CLOSING.
(a) DOCUMENTS TRANSFERRING MST STOCK. At the
Closing, Quanex is delivering to VMI the stock certificate
representing the MST Stock accompanied by a stock power endorsed by
Quanex in blank, the stock ledger and minute book of MST and the
resignations of the directors and officers of MST.
(b) DOCUMENTS TRANSFERRING ASSETS. At the
closing, Quanex is delivering to VMI a deed and a general form of
assignment and bill of sale conveying the Assets to VMI.
(c) PAYMENT OF CASH PURCHASE PRICE. At the
Closing, VMI is paying Quanex the Cash Purchase Price by wire transfer
of immediately available funds at Comerica Bank, Detroit, ABA No. 072
000 096, for the credit of Quanex Corporation, Account No.
2000-009270.
(d) ASSUMPTION AGREEMENT. At the Closing, VMI is
delivering to Quanex an assumption agreement (the "Assumption
8
19
Agreement") pursuant to which VMI is assuming and agreeing to be
liable for the performance of the Assumed Liabilities.
(e) CERTIFICATES OF INCUMBENCY AND AUTHORITY. At
the Closing, (i) Quanex is delivering to the Purchasing Parties a
certificate of corporate incumbency and resolutions authorizing the
individuals signing this Agreement and all related documents to do so
on behalf of Quanex and (ii) the Purchasing Parties are delivering to
Quanex certificates of corporate incumbency and resolutions
authorizing the individuals signing this Agreement and all related
documents to do so on behalf of the Purchasing Parties.
(f) GUARANTY AND MANAGEMENT AGREEMENT
TERMINATIONS. At the Closing, Quanex is delivering to the Purchasing
Parties satisfactory evidence of the termination of (i) MST's guaranty
of the obligations of Quanex and certain of its subsidiaries under the
Quanex Corporation $250,000,000 Credit Agreement dated June 23, 1997,
between Quanex and Comerica Bank, as agent, (ii) that certain
Intercompany Interest Bearing Open Account Agreement dated February
24, 1993, between Quanex and MST and (iii) that certain Management
Agreement dated February 23, 1993 between Quanex and MST.
(g) THIRD PARTY CONSENTS. At the Closing, Quanex
is delivering to VMI copies of consents of co-contracting parties to
the assignment of those contracts requiring such consent, to the
extent those consents have been obtained and are available as of the
Closing Time.
(h) TIMING OF ACTIONS TAKEN AT THE CLOSING. All
actions taken at the Closing shall be deemed to occur concurrently.
3.3 CERTAIN ACTIONS TO BE TAKEN AFTER THE CLOSING.
(a) DEMANDS TO QUANEX FOR PURCHASING PARTIES'
OBLIGATIONS. If, at any time after the Closing, demand is made on
Quanex for payment or performance under any contract, agreement,
commitment, plan, arrangement or obligation in respect of the MST
Business or the GST Business that, after the Closing Time, is to be
satisfied by VMI under the terms of this Agreement or the Assumption
Agreement, Quanex shall immediately notify the Purchasing Parties of
the demand in writing so that VMI shall have the opportunity to
satisfy the payment or performance.
(b) DEMANDS TO PURCHASING PARTIES FOR QUANEX'S
OBLIGATIONS. If, at any time after the Closing, demand is made on a
Purchasing Party for payment or performance under any contract,
agreement, commitment, plan, arrangement or obligation relating to the
MST Business or the GST Business that, after the Closing Time, is to
be satisfied by Quanex under the terms of this Agreement, the
Purchasing
9
20
Parties shall immediately notify Quanex of the demand in writing so
that Quanex shall have the opportunity to satisfy the payment or
performance.
(c) PAYMENTS TO QUANEX TO WHICH VMI IS ENTITLED.
If, at any time after the Closing, Quanex receives any payment with
respect to the MST Business or the GST Business that should have been
paid to VMI under the terms of this Agreement, Quanex shall
immediately remit the amount of that payment to VMI.
(d) PAYMENTS TO PURCHASING PARTIES TO WHICH
QUANEX IS ENTITLED. If, at any time after the Closing, a Purchasing
Party receives any payment with respect to the MST Business or the GST
Business that should have been paid to Quanex under the terms of this
Agreement, the VMI shall immediately remit the amount of that payment
to Quanex.
(e) ACTIONS WITH RESPECT TO CERTAIN AGREEMENTS
REQUIRING CONSENT. The Purchasing Parties acknowledge that Quanex's
ability to assign certain of the contracts and agreements included
within the Assets is subject to receipt of consent from other parties,
which consent has not been obtained at the time of the Closing.
Quanex shall use commercially reasonable efforts to obtain those
consents as soon as possible after the Closing. This Agreement shall
not constitute an agreement to assign a contract or agreement if the
attempted assignment would constitute a breach of the contract or
agreement. If Quanex is unable to obtain the consent of a
co-contracting party or other third party, Quanex shall be obligated
to assure VMI of the benefits of the contract or agreement at Quanex's
cost and expense, and VMI shall be obligated to assure Quanex that it
will fulfill Quanex's obligations under the contract.
4. REPRESENTATIONS AND WARRANTIES OF QUANEX. For purposes of the
following representations, "knowledge" of a matter by a Knowledge Party means
that individual's actual current knowledge, after reasonable investigation
regarding the matter, including the individual's discussions with appropriate
members of the management employees of the Businesses. Quanex represents and
warrants to the Purchasing Parties that:
4.1 ORGANIZATION AND EXISTENCE. Each of Quanex and MST
is a corporation duly organized, validly existing and in good standing under
the laws of Delaware and has the corporate power and authority to own, operate
and lease its properties and assets and carry on its business and operations in
all material respects as now owned, operated, leased or conducted. Each of
Quanex and MST is duly qualified to conduct its business and is in good
standing in each jurisdiction in which the failure to be so qualified would
have an adverse effect on the GST Business and the MST Business, taken as a
whole (together, the "Businesses"). True and correct copies of the
certificates of incorporation and bylaws of each of Quanex and MST have been
provided to the Purchasing Parties.
4.2 AUTHORITY. Quanex has all requisite corporate power
and authority to enter into, deliver and perform this Agreement and any other
agreement or
10
21
document necessary to perform this Agreement and to consummate the transactions
described in this Agreement. This Agreement has been duly executed and
delivered by Quanex pursuant to all necessary corporate action. Assuming the
due authorization, execution and delivery by the Purchasing Parties, this
Agreement constitutes a legal, valid and binding obligation of Quanex,
enforceable against Quanex in accordance with its terms. No power of attorney
has been granted by Quanex or MST and is currently in force with respect to any
matter relating to MST, the MST Stock, the Businesses, the Assets or the
Assumed Liabilities.
4.3 CAPITALIZATION OF MST. The capitalization of MST
consists of 10,000 authorized shares of common stock, $1.00 par value. Quanex
owns beneficially and of record 1,000 shares of the common stock, $1.00 par
value of MST, which constitutes all of the outstanding capital stock of MST.
No shares of the capital stock of MST have been reserved for any purpose. Each
issued and outstanding share of the MST Stock is duly authorized, validly
issued, fully paid and nonassessable and has not been issued and is not owned
or held in violation of any preemptive right of stockholders of MST. There are
no (i) options, warrants, calls, commitments or rights to purchase or otherwise
acquire shares of capital stock of MST, (ii) outstanding securities of MST that
are convertible into or exchangeable or exercisable for shares of capital stock
of MST, (iii) options, warrants or other rights to purchase from MST any
convertible or exchangeable securities issued by MST, (iv) leases, contracts,
agreements, license agreements, purchase orders, invoices, sales orders,
instruments evidencing indebtedness for borrowed money, mortgages or other
documents securing indebtedness for borrowed money, commitments or
understandings (written or oral) or any amendments or modifications
(collectively, "Contracts"), to which Quanex is a party or its assets are bound
relating to the Businesses or to which MST is a party or its assets are bound
and relating to the issuance of any capital stock of MST, or any options,
warrants or rights pursuant to which MST is subject or bound, (vi) phantom
stock, stock appreciation rights or similar rights outstanding with respect to
securities issued by MST or (vii) voting rights agreements, registration rights
agreements or repurchase obligations with respect to the MST Stock.
4.4 INTERESTS IN OTHER ENTITIES. MST does not own or
control any securities or other ownership interest in any corporation,
association, joint venture, limited liability company, partnership or other
business entity.
4.5 NO CONFLICT. Neither the execution and delivery by
Quanex of this Agreement, the consummation of the transactions described in
this Agreement by Quanex, nor compliance by Quanex with any of the provisions
of this Agreement will (a) conflict with any provision of the certificates of
incorporation or bylaws of Quanex and MST, (b) except as disclosed in SCHEDULE
4.5 of the Disclosure Schedule, violate, breach or conflict with, or constitute
a default or require any consents under, any Contract, any Encumbrances, any
orders, judgments, injunctions, awards, decrees, writs and similar actions
(collectively, "Orders") of a government or political subdivision of a
government, or any agency, department, commission, board, bureau, court,
tribunal, body administrative or regulatory authority or instrumentality of a
government or political subdivision of a government (collectively, "Government
Authorities") having jurisdiction over Quanex relating to the Businesses or
MST, or any franchise, license, certificate, registration, permit,
authorization, approval of, or any required regulation
11
22
with, a Governmental Authority (collectively, "Permits") relating to the
Businesses, or (c) violate any law, statute, code, restriction, writ,
ordinance, order, judgment, decree, injunction, rule or regulation
(collectively, "Legal Requirements") of a Governmental Authority applicable to
Quanex or MST, or by which the MST Stock, the Assets or the Businesses are
bound.
4.6 NO CONSENTS OR GOVERNMENTAL APPROVALS. Except as set
forth on SCHEDULE 4.6 of the Disclosure Schedule, Quanex is not required to
obtain any consent, Permit or waiver of, make any filing with, submit any
notification to or seek to obtain any action by, any Governmental Authority in
connection with the execution, delivery or performance of this Agreement by
Quanex and the consummation of the transactions described in this Agreement.
4.7 FINANCIAL CONDITION. Quanex has delivered to the
Purchasing Parties true and correct copies of audited combined financial
statements of MST, the GST Business and the Group Office for the fiscal years
ended on October 31, 1995 and October 31, 1996, and the 11-month period ended
on September 30, 1997. Each set of those financial statements presents fairly
the financial condition and results of operations of MST, the GST Business and
the Group Office, on a combined basis, as of its date, subject, in the case of
interim statements, to normal year-end adjustments. Each of the financial
statements referred to in this Section 0.4.7 has been prepared from the books
and records of Quanex and MST in accordance with generally accepted accounting
principles consistently applied throughout the periods indicated (except as
indicated in the notes thereto and subject, in the case of interim statements,
to normal year-end adjustments).
4.8 TITLE. Quanex is the record and beneficial owner of,
and has good title to, the MST Stock, and has good title to the Assets, in each
case free and clear of all Encumbrances (other than those Encumbrances
described in Schedule 1.1 of the Disclosure Schedule). The MST Stock is not
subject to any restrictions on transferability other than those imposed by
applicable securities laws. There are no options, warrants, calls, commitments
or rights of any character to purchase or otherwise acquire the MST Stock from
Quanex pursuant to which Quanex may be obligated to sell or transfer the MST
Stock, other than pursuant to this Agreement.
4.9 PROPERTIES AND ASSETS.
(a) TITLE TO REAL PROPERTY. MST has good, valid,
fee simple title to, or a valid leasehold interest in, all of the real
property owned or leased by it as more particularly described on
SCHEDULE 4.9 of the Disclosure Schedule. Quanex has good, valid,
marketable and fee simple title to, or a valid leasehold interest in,
all of the real property owned or leased by Quanex with respect to the
GST Business or the Group Office, as more particularly described in
SCHEDULE 4.9 of the Disclosure Schedule. Except as and to the extent
set forth on SCHEDULE 4.9 of the Disclosure Schedule, the real
property described in SCHEDULE 4.9 of the Disclosure Schedule
(collectively, the "Real Property") that is owned by MST or Quanex is
subject to no Encumbrance, encroachment, building or use restriction,
zoning violation, exception, reservation or limitation.
12
23
(b) USE OF REAL PROPERTY. Except as and to the
extent set forth on SCHEDULE 4.9 of the Disclosure Schedule, neither
MST nor Quanex has received any written notice advising it of any
general or special assessment relating to the Real Property. There
are no condemnation or eminent domain proceedings pending (for which
written notice has been provided to MST or Quanex) or, to the
knowledge of Vernon E. Oechsle, James H. Davis, Wayne M. Rose and
Viren M. Parikh (the "Knowledge Parties"), threatened, against the
Real Property by any Governmental Authority. There are no variances,
special exceptions, conditions or agreements pertaining to the Real
Property imposed or granted by or entered into by MST or, with respect
to the GST Business and the Group Office, Quanex, with, or, to the
knowledge of the Knowledge Parties, enforceable by, any Governmental
Authority. Except as and to the extent set forth on SCHEDULE 4.9 of
the Disclosure Schedule, no written notice from any Governmental
Authority has been provided to Quanex or MST requiring or calling
attention to the need for any work, repair, construction, alteration
or installation on, or in connection with, the Real Property. To the
knowledge of the Knowledge Parties, the current operations of MST or,
with respect to the GST Business and the Group Office, Quanex, are
permitted uses under applicable zoning regulations and there is no
requirement for any special exception, variance or other conditional
approval to permit the continued operations on the Real Property.
(c) TITLE TO PERSONAL PROPERTY. Except as and to
the extent set forth in SCHEDULE 4.9 of the Disclosure Schedule, each
of MST and, with respect to the GST Business and the Group Office,
Quanex, has good, valid and marketable title to, or a valid leasehold
interest in, all items of personal property, buildings, improvements,
equipment and all other assets and properties (whether personal or
mixed, tangible or intangible (and whether or not fully depreciated,
amortized or expensed)) used in the Businesses, and those items are
subject to no Encumbrance except as and to the extent set forth on
SCHEDULE 4.9 of the Disclosure Schedule. All buildings, improvements,
equipment or other material assets currently used in connection with
the Businesses are structurally sound, and to the knowledge of the
Knowledge Parties, contain no material defects. Such buildings,
improvements, equipment and other material assets are suitable for
their intended use and are subject to no commitment or other
arrangement for their sale or use by any third party. Except as and
to the extent set forth on SCHEDULE 4.9 of the Disclosure Schedule and
except for inventory, no tangible assets of MST or, with respect to
the GST Business and the Group Office, Quanex, are in the possession
of others.
(d) CONDITION AND SUFFICIENCY OF ASSETS. Except
as and to the extent set forth on SCHEDULE 4.9 of the Disclosure
Schedule, the equipment and other items of tangible personal property
of MST and, with respect to the GST Business and the Group Office,
Quanex, are in good and normal operating condition and repair
(ordinary wear and tear
13
24
excepted). The Assets being transferred to VMI pursuant to this
Agreement constitute all of the assets necessary to operate the GST
Business as currently operated, and none of those Assets is owned by
any affiliate of Quanex. The assets (whether tangible or intangible)
currently owned by MST, or leased or licensed by MST, constitute all
of the assets necessary to operate the MST Business, as currently
operated, and none of those assets (other than the supply agreements
described in subsection 3.2(g) of this Agreement) is owned by Quanex
or any affiliate of Quanex (other than MST).
4.10 COMPLIANCE WITH ENVIRONMENTAL LAWS.
(a) PROVISION OF INFORMATION. To the knowledge
of the Knowledge Parties, Quanex has provided to the Purchasing
Parties or their representatives all material information necessary to
put the Purchasing Parties on notice of the following environmental
conditions affecting the Facilities:
(i) any actual or alleged non-compliance
with Environmental Laws (as defined
below); and
(ii) any pending or threatened
Environmental Claim (as defined
below).
(b) STANDARD FOR DETERMINING WHAT INFORMATION HAS
BEEN PROVIDED. For purposes of this Agreement, information shall be
deemed to have been provided to the Purchasing Parties if (i) it is
set forth on SCHEDULE 4.10 of the Disclosure Schedule, (ii) it is set
forth in documents made available by Quanex or its agents for
inspection by the Purchasing Parties or their agents, (iii) it is
identified in writing to VMHI, VMI or their agents or (iv) VMHI or VMI
has knowledge of, or is on notice of, the information from any other
source. Without limiting the means by which the Purchasing Parties
may have knowledge of, or be on notice of, information, the Purchasing
Parties shall be deemed to have knowledge of, or to be on notice of,
information known to James C. Hill, Dennis P. Lasker or Leslie H.
Whitver. Nothing in this Agreement shall require Quanex to disclose
communications protected from disclosure by attorney-client privilege
or any other lawful privilege, it being agreed that a claim of
privilege does not absolve Quanex of any obligation to make disclosure
of factual information if required by subsection 0.4.10(a) of this
Agreement.
(c) EXCLUSIVITY OF ENVIRONMENTAL REPRESENTATIONS.
Notwithstanding any other provision of this Agreement, the
representations and warranties set forth in subsection 0.4.10(a) of
this Agreement are the only representations and warranties relating to
Environmental Matters made by Quanex in connection with the
transactions contemplated by this Agreement. Notwithstanding any
other provision of this Agreement and notwithstanding any disclosure
contained
14
25
in any of the various schedules to this Agreement, Quanex shall have
no responsibility with respect to any Environmental Matter other than
claims based on a breach of the representations and warranties
contained in subsection 0.4.10(a) of this Agreement. Without limiting
the generality of the immediately preceding two sentences, Quanex
shall have no responsibility for any Environmental Matter pursuant to
Sections 0.1.4, 0.3.3, 0.4.6, 0.4.7, 0.4.9, 0.4.12, 0.4.13, 0.4.16,
0.4.17, 0.4.20(d), 0.4.27, 0.7.1(b) and 0.7.1(c) of this Agreement.
(d) CERTAIN DEFINITIONS. For purposes of this
Agreement:
(i) "Environmental Claim" shall mean and
include any notice from any person (including any
employee of Quanex) of the existence of, or potential
liability (including without limitation potential
liability for investigatory costs, cleanup costs,
governmental response costs, natural resources
damages, property damages, personal injuries, or
penalties) arising out of, based on, or resulting
from (a) the presence or release into the environment
of any Hazardous Material at any location, whether or
not owned by Quanex or MST or (b) any violation or
alleged violation of any Environmental Law.
(ii) "Environmental Laws" shall mean and
include all federal state, local and foreign laws and
regulations relating to pollution or protection of
human health or the environment (including, without
limitation, ambient air, surface water, ground water,
land surface or subsurface strats), including without
limitation, laws relating to emissions, discharges,
releases or threatened releases of Hazardous
Materials, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage,
disposal, transport or handling of Hazardous
Materials.
(iii) "Environmental Matters" shall mean
and include all costs, liabilities, obligations and
proceedings arising under the Environmental Laws or
related to emissions, discharges, releases or
threatened releases of Hazardous Materials, or
otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal,
transport or handling of Hazardous Materials, and
shall include without limitation all Environmental
Claims.
(iv) "Hazardous Materials" shall mean and
include all chemicals, pollutants, contaminants,
wastes, toxic substances, and any other substances
regulated as having
15
26
potentially deleterious effects on human health,
natural resources or the environment.
4.11 CERTAIN CONTRACTS. SCHEDULE 4.11 of the Disclosure
Schedule sets forth a complete and correct list of all (a) Contracts evidencing
or relating to indebtedness for borrowed money, (b) Contracts relating to the
Real Property, (c) Contracts for the development of the intellectual property
and the license agreements and assignments of any intellectual property, (d)
operating leases of personal property relating to the Businesses and involving
monetary obligations of more than $50,000 per year, (e) leases of personal
property relating to the Businesses that are reflected as capital leases on the
Effective Date Balance Sheet and involving monetary obligations of more than
$50,000 per year, (f) purchase or supply Contracts with terms extending for a
period of more than three months involving monetary obligations by or to the
Businesses of more than $50,000 per year, (g) Contracts with any other direct
or indirect subsidiary of Quanex providing for payments in excess of $50,000 or
Contracts with any affiliate of Quanex other than such subsidiaries, (h) any
employment, severance, retention, consulting, non-competition or
confidentiality Contract, (i) Contracts relating to the shipment or transport
of finished goods involving monetary obligations exceeding $50,000 per year and
(j) Contracts which otherwise are material to the Business, in each case of
clauses (a) through (j), to which Contract Quanex is a party or its assets are
bound relating to the Businesses or to which MST is a party or its assets are
bound (collectively, the "Material Contracts"). Complete and correct copies of
all written Material Contracts, including any amendments and other
modifications, have been delivered to or made available for inspection by the
Purchasing Parties. All Material Contracts (x) are valid and binding
obligations of Quanex or MST, as applicable, and, to the knowledge of the
Knowledge Parties, the other parties to those contracts, (y) are in full force
and effect and are enforceable as to Quanex or MST, as applicable, and, to the
knowledge of the Knowledge Parties, the other parties to those contracts, in
accordance with their terms and (z) except for any Material Contract that is a
Designated Plan (as defined in Section 0.4.15(a)), have not been amended or
terminated except in the ordinary course of business consistent with past
practice. Neither Quanex nor MST is in default under or has breached any
Material Contract. No other party to any Material Contract (i) has, to the
knowledge of the Knowledge Parties, breached the contract or is in default
under the contract, (ii) has given notice that it intends to terminate the
Material Contract or (iii) has altered, in any way adverse to the Businesses
its performance under the Material Contract. No event or condition has
occurred (or is alleged by any other party to a Material Contract to have
occurred) that, with or without due notice or lapse of time or both, would
constitute, a breach or event of default on the part of Quanex or MST, as
applicable, would provide a basis for a valid claim or acceleration under any
Material Contract as against Quanex or MST, as applicable, or would prevent
Quanex or MST, as applicable, from exercising and obtaining the full benefits
of any rights or options contained therein.
16
27
4.12 LITIGATION AND ARBITRATION.
(a) EXISTENCE. Except as set forth in SCHEDULE
4.12, neither Quanex nor MST is subject to any Order affecting the
Businesses. Except as set forth in SCHEDULE 4.12, neither MST nor,
with respect to the Businesses, Quanex, is a party to, is bound by, or
has any obligation under any settlement agreement affecting the
Businesses or any agreement, waiver or consent tolling any statute of
limitations. Except as and to the extent set forth on SCHEDULE 4.12
of the Disclosure Schedule and except for workers compensation claims,
there are no claims, actions, causes of action, suits proceedings,
inquiries or investigations pending (for which notice has been
provided to MST or Quanex) or, to the knowledge of the Knowledge
Parties, threatened against MST or Quanex or affecting the Businesses,
and no such claim, action, suit, inquiry, proceeding or investigation
has been pending (for which notice was provided to MST or Quanex)
during the three-year period preceding the date of this Agreement
except as and to the extent set forth on SCHEDULE 4.12 of the
Disclosure Schedule. SCHEDULE 4.12 of the Disclosure Schedule sets
forth a complete and correct list of all workers compensation claims
in excess of $50,000 brought by employees of the Businesses during the
three years before the date of this Agreement, together with the
amount of all workers compensation claims brought by employees of the
Businesses for each such year. None of the Knowledge Parties has
knowledge of any fact or circumstance that could reasonably be
expected to result in any other claim, action, cause of action, suit,
proceeding, inquiry, investigation or Order against MST or, with
respect to the Businesses, Quanex.
(b) EFFECT. No claim, action, suit, proceeding,
inquiry or investigation set forth on SCHEDULE 4.12 of the Disclosure
Schedule, individually or in the aggregate, if adversely decided,
could have a material adverse affect on the Businesses or prevent the
consummation of the transactions contemplated by this Agreement or the
other documents executed and delivered pursuant to this Agreement.
4.13 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set
forth on SCHEDULE 4.13 or as contemplated by those matters described in Section
6.13 of this Agreement of the Disclosure Schedule, since the Effective Date:
(a) ORDINARY COURSE. Quanex and MST, as
applicable, have operated the Businesses in the ordinary course
consistent with past practice;
(b) NO MATERIAL CHANGE. There has not been any
material change in the results of operations, assets, liabilities,
financial condition or prospects of the Businesses;
(c) NO MATERIAL DAMAGES. The Businesses have not
incurred any material damage, destruction or loss (whether or not
covered by insurance) to any assets relating to the Businesses;
17
28
(d) RIGHTS TO INTELLECTUAL PROPERTY. Neither
Quanex nor MST has transferred, licensed, sublicensed, disposed of,
abandoned or permitted to lapse or otherwise failed to preserve any
material rights to use any intellectual property or disclosed to any
third party, other than representatives of the Purchasing Parties, any
trade secret, process or know-how not theretofore a matter of public
knowledge relating to the Businesses;
(e) PERMITS. Neither Quanex nor MST has
transferred, disposed of, abandoned or permitted to lapse or otherwise
failed to preserve any Permit issued by a Governmental Authority
relating to the Businesses;
(f) DISPOSITION OF PROPERTIES. Neither Quanex
nor MST has sold, assigned, leased, transferred or incurred any
Encumbrance on or license with respect to, or disposed of, abandoned,
or conveyed any of its properties or assets relating to the Businesses
with a book value of $50,000 or more, except in the ordinary course of
business consistent with past practice;
(g) CHANGE IN CONTRACTS. Neither Quanex nor MST
has modified, amended or terminated any Material Contract relating to
the Businesses other than Material Contracts that are Designated
Plans, or, to the knowledge of the Knowledge Parties, canceled any
debts or claims or waived any rights of substantial value;
(h) CAPITAL EXPENDITURES. Neither Quanex nor MST
has made, or committed to make, any capital expenditures relating to
the Businesses, except capital expenditures made in the ordinary
course of business consistent with past practice, of which no capital
expenditure for a single project exceeds $25,000 and which in the
aggregate do not exceed $75,000;
(i) OBLIGATIONS. Neither Quanex nor MST has
incurred any liabilities or obligations relating to the Businesses
other than (a) Contracts entered into in the ordinary course of
business consistent with past practice or (b) Contracts that do not
involve monetary obligations by or to Quanex or MST;
(j) PAYMENTS OF LIABILITIES. Neither Quanex nor
MST has paid, discharged or satisfied any Encumbrance or liability
with respect to the Businesses other than Encumbrances or liabilities
that are (a) incurred in the ordinary course of business or (b)
reflected or reserved against on (or in the notes to) the Effective
Date Balance Sheet and the related statements of income and retained
earnings and cash flows;
(k) EMPLOYEE MATTERS. Neither Quanex nor MST has
(a) created or entered into any employment agreements for employees of
the Business that are not terminable at will, (b) granted or agreed to
an
18
29
increase in the compensation of the current or former employees of the
Businesses (other than increases for employees who are not and were
not officers of MST or Quanex made in the ordinary course of business
and consistent with past practices), (c) created or entered into a
Designated Plan or (d) amended any Designated Plan to increase any
benefits payable under the plan except as required by the Internal
Revenue Code of 1986, as amended (the "Code") or the Employee
Retirement Income Security Act of 1974, as amended ("ERISA");
(l) DISTRIBUTION. MST has not declared, paid or
made or set aside for payment or making, any dividend or other payment
or distribution in respect of its capital stock or other securities,
or to its securityholder, or directly or indirectly retired, redeemed,
purchased or otherwise acquired any shares of its capital stock or
other securities;
(m) ADDITIONAL STOCK AND LOANS. MST has not
issued, authorized or proposed the issuance of, reclassified, or sold
any shares of its capital stock, or securities convertible into or
exchangeable or exercisable for, or rights, warrants or options to
acquire, any shares of its capital stock or other convertible
securities or acquired any capital stock or securities or interests of
any person, or otherwise made a loan or advance to or investment in
any person;
(n) ACCOUNTING METHODS. Neither MST nor, with
respect to the Businesses, Quanex, has made any change in any
accounting methods, principles or practices (including, without
limitation changes in depreciation or amortization policies or rates,
changes in cash management practices or changes relating to the
establishment or accrual of reserves) or any material election with
respect to taxes;
(o) AFFILIATE TRANSACTIONS. MST has not paid,
loaned or advanced any amount to or in respect of, or sold,
transferred or leased any properties or assets (whether real, personal
or mixed, tangible or intangible) in any amount in excess of $50,000
to, or entered into any agreement, arrangement or transaction with,
Quanex or any of Quanex's affiliates;
(p) SETTLEMENTS. Neither MST nor, with respect
to the Businesses, Quanex, has instituted, settled or agreed to settle
any litigation, action or proceeding by or before any Governmental
Authority;
(q) CERTAIN ORDERS OF MATERIALS. MST has not
ordered any materials from Quanex or any affiliate of Quanex;
(r) CERTAIN AGREEMENTS. Neither MST nor, with
respect to the Businesses, Quanex, has agreed, whether in writing or
otherwise, to take any action described in this Section 0.4.13;
19
30
4.14 CERTAIN TRANSACTIONAL FEES. Neither of the
Purchasing Parties has or will have an obligation to pay any broker's,
finder's, investment banker's, financial advisor's or similar fee or expense in
connection with the transactions described in this Agreement by reason of any
action taken by or on behalf of Quanex or, with respect to actions taken on or
before the Closing Time, MST.
4.15 EMPLOYEE BENEFIT PLANS.
(a) IDENTIFICATION OF PLANS. SCHEDULE 4.15 of
the Disclosure Schedule contains a complete and correct list of (1)
all employee welfare benefit and employee pension benefit plans as
defined in sections 3(1) and 3(2) of the ERISA, including without
limitation plans that provide retirement income or result in a
deferral of income by employees for periods extending to termination
of employment or beyond, and plans that provide medical, surgical or
hospital care benefits or benefits in the event of sickness, accident,
disability, death or unemployment and (2) all other material employee
benefit agreements or arrangements that are not ERISA plans, including
without limitation deferred compensation plans, incentive plans, bonus
plans or arrangements, stock option plans, stock purchase plans, stock
award plans, golden parachute agreements, severance pay plans,
dependent care plans, cafeteria plans, employee assistance programs,
scholarship programs, employment contracts, retention incentive
agreements, noncompetition agreements, consulting agreements,
confidentiality agreements, vacation policies, and other similar
plans, agreements and arrangements that are currently in effect or
were maintained within three years before the date of this Agreement,
or have been approved before the date of this Agreement but are not
yet effective, for the benefit of directors, officers, employees or
former employees of MST, or Quanex in connection with the Businesses,
or their beneficiaries (collectively, "Designated Plans"). SCHEDULE
4.15 of the Disclosure Schedule identifies each of the Plans that is
subject to Section 302 or Title IV of ERISA or Section 412 of the
Code.
(b) INFORMATION PROVIDED. With respect to each
Designated Plan, Quanex has delivered to the Purchasing Parties
complete and correct copies of each of the following documents (as
applicable):
(i) the Designated Plan and any
amendments;
(ii) the three most recent annual Form
5500 reports filed with the IRS;
(iii) the three most recent actuarial
reports;
(iv) the three most recent reports
prepared in accordance with Statement of Financial Accounting
Standards Nos. 87, 88, 106 and 112;
20
31
(v) the most recent summary plan
description and summaries of material modifications;
(vi) the trust agreement, group annuity
contract or other funding agreement that provides for the
funding of the Designated Plan;
(vii) the most recent financial statement;
and
(viii) the most recent determination letter
received from the IRS with respect to each Designated Plan
that is intended to qualify under section 401 of the Code.
(c) LIENS. No asset of Quanex, MST, or any
entity that is treated as a single employer together with either
Quanex or MST under Section 414 of the Code ("ERISA Affiliate") is the
subject of any lien arising under Section 302(f) of ERISA or Section
412(n) of the Code; none of Quanex, MST, or any ERISA Affiliate has
been required to post any security under Section 307 of ERISA or
Section 401(a)(29) of the Code; and no fact or event exists that could
reasonably by expected to give rise to any such lien or requirement to
post any such security.
(d) TERMINATION PROCEEDINGS. The Pension Benefit
Guaranty Corporation ("PBGC") has not instituted proceedings to
terminate any pension benefit plan as defined in Section 3(1) of ERISA
that is maintained or contributed to by Quanex, MST or any ERISA
Affiliate and no condition exists that presents a material risk that
such proceedings will be instituted.
(e) FUNDING DEFICIENCIES. No pension benefit
plan as defined in Section 3(1) of ERISA that is maintained or
contributed to by Quanex, MST or any ERISA Affiliate had an
accumulated funding deficiency as defined in Section 302 of ERISA and
Section 412 of the Code, whether or not waived, as of the last day of
the most recent fiscal year of the plan ending on or before the
Effective Date. All contributions required to be made with respect to
any Designated Plan for plan years beginning on or before the date of
the Closing have been timely made.
(f) MULTIEMPLOYER PLANS. Neither MST nor any
entity that was at any time during the six year period ending on the
date of this Agreement an ERISA Affiliate has ever maintained, had an
obligation to contribute to, contributed to, or incurred any liability
with respect to a multiemployer plan, as defined in Section 3(37) of
ERISA, or a plan described in Section 4063(a) of ERISA.
(g) QUALIFICATIONS. The terms of all Designated
Plans that are intended to qualify under Section 401(a) of the Code
(i) have been determined by the IRS to qualify under Section 401(a) of
the Code, or
21
32
(ii) the applicable remedial amendment periods under Section 401(b) of
the Code will not have expired prior to the date of the Closing.
(h) CLAIMS. There is no litigation, action,
proceeding, audit, examination or claim pending, or to the knowledge
of the Knowledge Parties, threatened or contemplated relating to any
Designated Plan (other than routine claims for benefits).
(i) PENALTIES. Neither MST nor any other entity
has engaged in a transaction that could reasonably be expected to
result in the imposition upon MST or a civil penalty under Section 409
or 502(i) of ERISA or a tax under Section 4975 or 4976 of the Code
with respect to any Designated Plan.
(j) COMPLIANCE. Each Designated Plan has been
operated and administered in all material respects in accordance with
its terms and applicable laws, including but not limited to ERISA and
the Code.
(k) CERTAIN REQUIREMENTS. To the knowledge of
the Knowledge Parties, each Designated Plan that is intended to
satisfy the requirements of Section 501(c)(9) of the Code has
satisfied such requirements. SCHEDULE 4.15 of the Disclosure Schedule
identifies each Designated Plan that is intended to satisfy the
requirements of Section 501(c)(9) of the Code.
(l) EFFECT OF TRANSACTION. Except as and to the
extent set forth on SCHEDULE 4.15 of the Disclosure Schedule, the
consummation of the transactions contemplated by this Agreement,
either alone or in conjunction with another event (such as a
termination of employment), will not (i) entitle any current or former
employee or officer of MST to severance pay, or any other payment
under a Designated Plan, (ii) accelerate the time of payment or
vesting of benefits under a Designated Plan or (iii) increase the
amount of compensation due any such employee or officer.
(m) CERTAIN LIABILITIES. Except as and to the
extent set forth on SCHEDULE 4.15 of the Disclosure Schedule, neither
MST nor any entity that was at any time during the six-year period
ending on the date of this Agreement an ERISA Affiliate has incurred
any liability under Title IV of ERISA that has not been satisfied in
full (other than liability to the PBGC for the payment of premiums
pursuant to Section 4007 of ERISA). No condition exists for which the
PBGC is authorized to seek from MST or an ERISA Affiliate a late
payment charge under Section 4007(b) of ERISA. Except as and to the
extent set forth on SCHEDULE 4.15 of the Disclosure Schedule, no
condition exists that presents a risk that MST or an ERISA Affiliate
will incur any liability under Title IV of ERISA (other than liability
to the PBGC for the payment of premiums pursuant to Section 4007 of
ERISA).
22
33
4.16 COMPLIANCE WITH LAWS AND PERMITS.
(a) COMPLIANCE. Except as set forth in SCHEDULE
4.16, the Businesses have been conducted and are now being conducted
in all material respects in compliance with all Legal Requirements,
Orders of Governmental Authorities having jurisdiction over them and
all Permits relating to the Businesses.
(b) POSSESSION OF PERMITS. Except as set forth
in SCHEDULE 4.16, to the knowledge of the Knowledge Parties, MST and,
with respect to the Businesses, Quanex, possess all Permits necessary
to own and operate their properties and assets and to conduct their
Businesses as they are currently conducted. Except as set forth in
SCHEDULE 4.16, to the knowledge of the Knowledge Parties, those
Permits are valid, subsisting and in full force and effect, and MST or
Quanex, as applicable, has fulfilled its obligations under each of
those Permits, and no event has occurred or condition or state of
facts exists that constitutes or, after notice or lapse of time or
both, would constitute, a default or violation under any of those
Permits or would permit revocation or termination of any of those
Permits. Except as set forth in SCHEDULE 4.16, in respect of those
Permits, no proceeding is pending for which notice has been provided
to Quanex or MST or, to the knowledge of the Knowledge Parties,
threatened, looking toward revocation or termination of any of those
Permits.
4.17 NO UNDISCLOSED LIABILITY; INDEBTEDNESS. Except as
set forth in SCHEDULE 4.17, MST has no liabilities or obligations relating to
the MST Business, and Quanex has no liabilities or obligations relating to the
Businesses, that are required to be reflected or reserved against in the
financial statements described in Section 0.4.7 of this Agreement, except for
liabilities or obligations incurred since the Effective Date, in the ordinary
course of business consistent with past practices. Except as set forth on
SCHEDULE 4.17 of the Disclosure Schedule, MST has no obligations with respect
to borrowed money, letters of credit, notes, bonds or similar instruments, with
respect to any capitalized lease or with respect to any guaranty of debt for
borrowed money. Neither the transfer of the MST Stock and the Assets nor the
assumption of the Assumed Liabilities pursuant to this Agreement will cause the
acceleration of or otherwise adversely affect the terms or conditions of those
obligations described in the immediately preceding sentence.
4.18 ACCOUNTS RECEIVABLE. SCHEDULE 4.18 of the Disclosure
Schedule sets forth a list of all accounts and notes receivable of MST and,
with respect to the Businesses, Quanex ("Accounts Receivable"), together with
the customer name, aging and dollar amount, as of the Effective Date. All
Accounts Receivable reflected on the balance sheets described in Section 0.4.7
are (i) in respect of sales made in the ordinary course of business, except as
and to the extent set forth on SCHEDULE 4.18 of the Disclosure Schedule, (ii)
subject to no prior assignment or Encumbrance, except as and to the extent set
forth on SCHEDULE 4.18 of the Disclosure Schedule, and (iii) subject to no
counterclaim or setoff, to the knowledge of the Knowledge Parties.
23
34
4.19 INVENTORY. All inventory owned or held by Quanex or
MST and relating to the Businesses, including manufacturing supplies, raw
materials, components, repair parts, work-in-progress, finished goods and other
similar items, whether raw or used ("Inventory") that is reflected on the
Effective Date Balance Sheet, is valued at the lower of cost or market value.
To the knowledge of the Knowledge Parties, the Inventory reflected on the
Effective Date Balance Sheet consists of items salable in the ordinary course
of business except for (i) items of obsolete materials and materials of
below-standard quality, which, in the case of Inventory reflected on the
Effective Time balance sheet, have been written off or written down to the best
estimate of net realizable value of Quanex or MST, as applicable, and (ii)
items that Quanex or MST, as applicable, has a right to return to the vendor or
supplier. The Inventory reflected on the Effective Date Balance Sheet does not
include any materials held by Quanex or MST on consignment from any third
parties. All Inventory disposed of by Quanex or MST relating to the Businesses
since the Effective Time has been disposed of only in the ordinary course of
business consistent with past practice. To the knowledge of the Knowledge
Parties, all Inventory is free from any defect or other deficiency except for
items of obsolete materials and materials of below-standard quality that have
been written off or written down to the best estimate of net realizable value
of Quanex or MST, as applicable. The quantities of all Inventory are
reasonable under the current circumstances of the Businesses. Except as and to
the extent set forth on SCHEDULE 4.19 of the Disclosure Schedule, none of the
Inventory is in the possession of others.
4.20 PERSONNEL INFORMATION; LABOR RELATIONS.
(a) IDENTIFICATION OF EMPLOYEES. SCHEDULE
4.20(A) of the Disclosure Schedule sets forth a complete and correct
list of all directors and officers of MST and all other individuals
employed by MST or, with respect to the Businesses, Quanex, as of the
close of business on the day before the date of this Agreement,
together with such individual's title or job description and date of
hire, and, for each salaried individual, such individual's salary
(with last date of increase) and incentive compensation paid in
respect of the last calendar year, and benefit arrangements. Except
as and to the extent set forth on SCHEDULE 4.20(A) of the Disclosure
Schedule, as of the day before the date of this Agreement, neither MST
nor Quanex has received notification that any of the employees named
in SCHEDULE 4.20(A) of the Disclosure Schedule plans to terminate his
or her employment during the 1997 calendar year, whether by reason of
the transactions contemplated by this Agreement or otherwise.
(b) CERTAIN MATTERS RELATING TO EMPLOYEES.
Except as and to the extent set forth on SCHEDULE 4.20(B) of the
Disclosure Schedule: (i) there is no labor strike, stoppage, lockout
or material dispute or material slowdown pending or, to the knowledge
of the Knowledge Parties, threatened against MST or, with respect to
the Businesses, Quanex, and there has not been any action during the
last three years; (ii) neither MST nor, with respect to the
Businesses, Quanex, is a party to or bound by any (A) collective
bargaining or similar agreement with any labor organization or (B)
written work rules or practices agreed to
24
35
with any labor organization or employee association applicable to
employees named in SCHEDULE 4.20(A) of the Disclosure Schedule; (iii)
no employee named in SCHEDULE 4.20(A) of the Disclosure Schedule who
is compensated on a salaried basis is represented by any labor
organization and, to the knowledge of the Knowledge Parties, there are
no current union organizing activities among those employees; (iv)
there are no material written personnel policies, rules or procedures
applicable to employees named in SCHEDULE 4.20(A) of the Disclosure
Schedule (complete and correct copies of which have been delivered to
the Purchasing Parties; (v) each of MST or, with respect to the
Businesses, Quanex is, and during the last three years has been, in
material compliance with all applicable laws in respect of employment
and employment practices, terms and conditions of employment, wages,
hours of work and occupational safety and health, and is not engaged
in any unfair labor practices as defined in the National Labor
Relations Act; (vi) there is no unfair labor practice charge or
complaint against MST or, with respect to the Businesses, Quanex,
pending (for which notice has been provided to Quanex or MST) or, to
the knowledge of the Knowledge Parties, threatened before the National
Labor Relations Board or any similar state or foreign agency; (vii)
there have been no arbitration proceedings or material grievance
proceedings arising out of any collective bargaining agreement during
the last three years; (viii) no charges with respect to or relating to
MST or, with respect to the Businesses, Quanex, are pending (for which
notice has been provided to MST or Quanex) before the Equal Employment
Opportunity Commission or any other agency responsible for the
prevention of unlawful employment practices; (ix) neither MST nor,
with respect to the Businesses, Quanex, has received notice of the
intent of any Governmental Authority responsible for the enforcement
of labor or employment laws to conduct an investigation with respect
to or relating to MST nor, with respect to the Businesses, Quanex, and
no such investigation is in progress; and (x) there are no complaints,
lawsuits or other proceedings pending (for which notice has been
provided to MST or Quanex) or, to the knowledge of the Knowledge
Parties, threatened in any forum by or on behalf of any present or
former employee of MST or, with respect to the Businesses, Quanex, any
applicant for employment or classes of the foregoing, alleging breach
or any express or implied contract of employment, any law governing
employment or the termination thereof or other discriminatory,
wrongful or tortious conduct in connection with the employment
relationship. Complete and correct copies of any collective
bargaining or similar agreements with labor organizations and any
written work rules and practices agreed to with a labor organization
or employee association described in SCHEDULE 4.20(B) have been
previously delivered to the Purchasing Parties.
(c) WARN OBLIGATIONS. During the last four
years, neither MST nor, with respect to the Businesses, Quanex, has
effected (i) a "plant closing" (as defined in the Worker Adjustment
Retraining Notification Act of 1988, as in effect on the date of the
Closing (the "WARN Act")) affecting any site of employment or one or
more facilities
25
36
or operating units within any site of employment or facility of MST or
Quanex, as applicable; or (ii) a "mass layoff" (as defined in the WARN
Act) affecting any site of employment or facility of MST or Quanex, as
applicable, not affected by any transaction or engaged in layoffs or
employment terminations sufficient in number to trigger application of
any similar state or local law. Except as and to the extent set forth
on SCHEDULE 4.20(C) of the Disclosure Schedule, none of the employees
identified in SCHEDULE 4.20(A) of the Disclosure Schedule has suffered
an "employment loss" (as defined in the WARN Act) in the six-month
period preceding the date of this Agreement.
(d) COMPLIANCE. Each of MST and, with respect to
the Businesses, Quanex, is in compliance in all materials respects
with all laws relating to employment or labor, including, without
limitation, ERISA, the WARN Act, and those Legal Requirements relating
to wages, hours, collective bargaining, unemployment insurance,
workers' compensation, equal employment opportunity and payment and
withholding of Taxes.
4.21 TAXES. Except as and to the extent set forth in
SCHEDULE 4.21 of the Disclosure Schedule:
(a) FILING OF RETURNS. Quanex, MST and any
affiliated group (within the meaning of Section 1504 of the Code) or
similar group under state, local or other applicable Law of which
Quanex is or has been a member ("Affiliated Group") has filed, or
caused to be filed in a timely manner, all Tax Returns (as defined
below) required to be filed on or before the date of this Agreement
(taking into account any and all extensions) by Quanex or MST, and all
such Tax Returns are complete and correct in all material respects.
(b) PAYMENT OF TAXES. All Taxes (as defined
below) due and payable or claimed to be due and payable from MST or,
with respect to the Businesses, Quanex, have been timely paid in full
or are not yet delinquent. Since the Effective Date, neither MST nor,
with respect to the Businesses, Quanex, has incurred any Taxes other
than in the ordinary course of business.
(c) WITHHOLDING. Each of MST and, with respect
to the Businesses, Quanex, has complied with all applicable laws
relating to the withholding of Taxes (including, without limitation,
withholding of Taxes pursuant to Section 1441 and 1442 of the Code or
similar provisions under any foreign laws), has, within the time and
in the manner prescribed by such laws, withheld and paid over to the
proper Governmental Authorities all amounts required to be so withheld
and paid over under all such applicable laws and has, within the time
and within the manner prescribed by such laws, filed all Tax Returns
with respect to such withholding.
26
37
(d) ENCUMBRANCES. Except for items for ad
valorem Taxes and real and personal property Taxes not yet delinquent,
there are no Encumbrances for Taxes upon assets of the Businesses.
(e) EXTENSIONS. Neither MST nor, with respect to
the Businesses, Quanex, has requested, nor has any person requested on
its behalf, any extension of time within which to file any Tax Return
in respect of any taxable year which has not since been filed.
(f) THIRD-PARTY TAXES. Except for Taxes in
connection with leases of personal property by or to MST or, with
respect to the Businesses, Quanex, neither Quanex nor MST, as
applicable, has any liability for the Taxes of any other person by
Contract or as transferor or successor or otherwise.
(g) STATUTES OF LIMITATIONS. There are no
outstanding waivers or extensions of time regarding the application of
the statute of limitations with respect to any Taxes of MST or, with
respect to the Businesses, Quanex, or tax returns required to be filed
by MST or Quanex.
(h) CLAIMS. No deficiency or claim has been
formally proposed, asserted or assessed nor, to the knowledge of the
Knowledge Parties, threatened with regard to any Taxes of MST or, with
respect to the Businesses, Quanex, which has not been received and
paid in full.
(i) AUDITS. No audits or other administrative
proceedings or court proceedings are pending and no written
notification of such proceedings has been received by Quanex or MST
with regard to any Taxes of Quanex or MST or Tax Returns required to
be filed by or including Quanex or MST.
(j) TAX SHARING. Except for leases of personal
property by or to MST or, with respect to the Businesses, Quanex,
neither MST nor Quanex, as applicable, is a party to, is bound by, or
has an obligation under, any Contract providing for the allocation or
sharing of Taxes.
(k) POWERS OF ATTORNEY. No power of attorney has
been granted with respect to any matter relating to Taxes of MST or,
with respect to the Businesses, Quanex, which is currently in force.
(l) PARACHUTE PAYMENTS. Neither MST nor, with
respect to the Businesses, Quanex (i) is a party to any Contract that
could result, separately or in the aggregate, in the payment of any
"excess parachute payments" within the meaning of Section 280G of the
Code or (ii) has made any such payments.
(m) 341(f) CONSENTS. Neither MST nor, with
respect to the Businesses, Quanex, has filed a consent pursuant to
Section 341(f) of the
27
38
Code (or any predecessor provision) or agreed to have Section
341(f)(2) of the Code apply to any disposition of a subsection (f)
asset (as such term in defined in Section 341(f)(4) of the Code) owned
by the Company.
(n) CERTAIN PROPERTY. No property of MST or,
with respect to the Businesses, Quanex, is property that MST or
Quanex, as applicable, or any party is or will be required to treat as
being owned by another person pursuant to the provisions of Section
168(f)(8) of the Code (as in effect before amendment by the Tax Reform
Act of 1986) or is "tax-exempt use property" within the meaning of
Section 168(f) of the Code.
(o) 481(a) ADJUSTMENTS. Neither MST nor, with
respect to the Businesses, Quanex has agreed to make, or is not
required to make, any adjustment under Section 481(a) of the Code.
(p) BOYCOTTS. Neither MST nor, with respect to
the Businesses, Quanex, has participated in or cooperated with an
international boycott within the meaning of Section 999 of the Code.
(q) PAST AUDITS. The consolidated federal income
tax returns of the affiliated group (within the meaning of Section
1504 of the Code) of which Quanex is the common parent (within the
meaning of Section 1504 of the Code) and which includes MST have been
audited by the IRS for all taxable periods through the taxable period
ended October 31, 1994, and MST has been a member of such affiliated
group since December 28, 1992. The combined Michigan single business
Tax Returns of the affiliated group that includes MST have been
audited for all taxable periods through the taxable period ended
October 31, 1992.
(r) INFORMATION PROVIDED. Quanex has provided to
the Purchasing Parties or their representatives (i) complete and
correct copies of the relevant portions of the consolidated federal
income Tax Returns relating to the Company and filed by or including
Quanex or MST for the taxable periods ended October 31, 1994, 1995 and
1996, (ii) complete and correct copies of relevant portions of the
state, local and foreign income tax returns relating to MST for the
taxable periods ended October 31, 1994, 1995 and 1996, and (iii) all
examination reports, closing agreements and statements of
deficiencies, if any, relating to the audit of such tax returns or
relevant portions thereof by the IRS or the relevant state, local or
foreign taxing authorities.
(s) DEFINITIONS. For purposes of this Agreement,
"Taxes" shall mean and include all taxes, charges, fees, duties,
levies, penalties or other assessments imposed by any federal state,
local or foreign authority, including, but not limited to, income,
gross receipts, excise, property, sales, gains, use, license, capital
stock, transfer, franchise, payroll, withholding, social security or
other taxes, including any interest, penalties or additions
attributable thereto (whether or not disputed); and "Tax Returns"
shall mean and include all federal, state, local and foreign tax
returns,
28
39
declarations, statements, reports, schedules, forms or information
returns or claims for refunds relating to Taxes or other written
information required to be supplied to any taxing authority in
connection with Taxes (including any amended Tax Returns).
4.22 INTELLECTUAL PROPERTY.
(a) RIGHT TO USE. MST and, with respect to the
Businesses, Quanex, owns all right, title and interest in and to, or
has the right to use, all of the Intellectual Property (as defined
below) that is used in the Businesses as currently conducted or is the
subject of an issued patent or registration or an application
therefor, and, to the knowledge of the Knowledge Parties, such use
does not and did not conflict with, infringe upon or violate any
patent, trademark, copyright, trade secret or other proprietary,
personal or other right of any other person and no claim is existing
or has been made in the past three years to that effect. There are
no, and, in the past three years, have not been, any administrative,
judicial, arbitration or other adversary proceedings in any court,
intellectual property registry or other adjudicatory forum involving
MST and, with respect to the Businesses, Quanex, and third parties
concerning the Intellectual Property or any third parties'
intellectual property. To the knowledge of the Knowledge Parties,
none of those persons has received, during the last year, any written
notice specifically claiming that legal grounds exist to support a
claim that the use of Intellectual Property used in the Businesses
infringes upon or violates the rights of any other person. All
Intellectual Property used by the Businesses immediately before the
Closing will be owned by, or available for use pursuant to license or
similar arrangement by, VMI immediately after the Closing.
(b) AGREEMENTS AND LICENSES. The Intellectual
Property is not subject to any Encumbrances, licenses or sublicenses
in favor of third parties or other Contracts, except the license
agreements and other Contracts set forth on SCHEDULE 4.22 of the
Disclosure Schedule, which sets forth a complete and correct list of
each Intellectual Property license agreement and such other Contract
presently in force, to which MST and, with respect to the Businesses,
Quanex, is a party or by which they are bound (whether as the licensor
or licensee), indicating, as to each, the parties (specifying which
party is the licensor and which party is the licensee), the title of
the agreement, the date executed, and the general subject matter.
Quanex will not retain after the Closing, any interest in the
Intellectual Property.
(c) IDENTIFICATION OF CERTAIN INTELLECTUAL
PROPERTY. SCHEDULE 4.22 of the Disclosure Schedule sets forth a
complete and correct list of each United States and foreign (i) patent
and patent application, indicating as to each, the country, the patent
number (of application number), the U.S. patent title, the date
issued, and the expiry date; (ii) registered trademark, servicemark or
tradename and application
29
40
therefor, indicating, as to each, the country, the mark, the
registration number (or application number); (iii) copyright
registration and copyright application indicating, as to each, the
country, the title of the work, the date issued, and the copyright
number; (iv) computer software and databases (other than mass marketed
software with a license fee of less than $1,000); in each case owned
in whole or in part by MST or, with respect to the Businesses, Quanex.
Except as and to the extent set forth on SCHEDULE 4.22 of the
Disclosure Schedule, MST or Quanex, as applicable, is the current
record owner of all registrations and applications set forth on
SCHEDULE 4.22 of the Disclosure Schedule, the patent, trademark and
copyright applications and registrations set forth on SCHEDULE 4.22 of
the Disclosure Schedule are subsisting and in good standing, all
maintenance fees currently due have been paid, and no challenges to
title thereto are pending before the applicable intellectual property
registry.
(d) INFRINGEMENTS. To the knowledge of the
Knowledge Parties, the items of Intellectual Property identified in
SCHEDULE 4.22 of the Disclosure Schedule are valid and enforceable and
there are no infringements of, misappropriation of, or conflicts with
the rights of MST or Quanex, as applicable, in and to the Intellectual
Property identified in SCHEDULE 4.22 by any third party. Neither MST
nor, with respect to the Businesses, Quanex, has entered into any
consent, indemnification, forbearance to sue or settlement agreement
with any person relating to any item of Intellectual Property or those
of any third party. The consummation of the transactions contemplated
by this Agreement will not result in the loss or impairment of any
rights to own or use any Intellectual Property of MST or, with respect
to the Businesses, Quanex.
(e) DEFINITION. For purposes of this Agreement,
"Intellectual Property" shall mean and include all (i) U.S. and
foreign (registered and unregistered) patents, copyrights, trademarks,
logos, proprietary designs, phrases and other identifications,
tradenames and service marks used by MST or, with respect to the
Businesses, Quanex, in the conduct of the Businesses including without
limitation the name "Michigan Seamless Tube" and "Gulf States Tube" in
those countries in which it is registered or currently in use and all
variations thereon and all logos, designs, phrases and other
identifications or derivations thereof used by MST or, with respect to
the Businesses, Quanex, in the conduct of the Businesses, together
with the goodwill of the Businesses symbolized thereby, the right to
sue for past infringement or misappropriation thereof, and all
applications and registrations therefor, (ii) software and computer
programs, and all user manuals, training manuals and technical
documentation relating to the Businesses, together with proprietary
rights of MST or Quanex, as applicable, therein and the right to sue
for past infringement or misappropriation thereof, (iii) proprietary
information, technology, trade secrets, know-how, inventions, drawings
and technical or marketing information relating to the Businesses,
together with proprietary rights of MST or Quanex, as applicable,
therein and the right
30
41
to sue for past infringement or misappropriation thereof, (iv) any
licenses relating to the use of the items contained in (i) through
(iii) of this Section 0.4.22 and (v) without limiting the foregoing,
all of the Assets described in subsection 1.1(f) of this Agreement.
However, "Intellectual Property" shall not include any right to use
the name "Quanex" or any intellectual property not used exclusively by
the Businesses.
4.23 INSURANCE. SCHEDULE 4.23 of the Disclosure Schedule
sets forth a complete and correct list as of the date of the Closing of all
primary, excess and umbrella policies, bonds and other forms of insurance, and
renewals thereof, owned or held by or on behalf of or providing insurance
coverage to or for the benefit of the Businesses, copies of which have
previously been provided to the Purchasing Parties or their representatives.
All of such insurance policies are in full force and effect, all premiums
currently payable or previously due have been paid, no notice of cancellation
or termination has been received with respect to any such policy and no
assignment of proceeds or Encumbrance exists with respect to the proceeds of
any such policy. The unpaid claims reported by MST or Quanex with respect to
the Businesses to the insurer under such policies are set forth on SCHEDULE
4.23 of the Disclosure Schedule.
4.24 BANK ACCOUNTS. SCHEDULE 4.24 of the Disclosure
Schedule sets forth a complete and correct list of (i) the names and locations
of all financial institutions at which MST or Quanex with respect to the
Businesses maintains a checking account, deposit account, securities account,
safety deposit box or other deposit or safekeeping arrangement, (ii) the number
or other identification of all such accounts and arrangements and (iii) the
names of all persons authorized to draw thereon or have access thereto.
4.25 CUSTOMERS AND SUPPLIERS. There have been no material
adverse changes in the relationships between MST and, with respect to the
Businesses, Quanex and their customers and suppliers since the Effective Date.
Except as and to the extent set forth on SCHEDULE 4.25 of the Disclosure
Schedule, MST and, with respect to the Businesses, Quanex have not been
provided with any notice that any significant supplier, manufacturer or
customer intends to cease doing business with MST or, with respect to the
Businesses, Quanex. To the knowledge of the Knowledge Parties, there are no
facts or circumstances (including, without limitation, the transactions
contemplated by this Agreement) that could reasonably be expected to have a
material adverse effect on relationships with the customers, suppliers and
manufacturers of MST or, with respect to the Businesses, Quanex.
4.26 AFFILIATE TRANSACTIONS. SCHEDULE 4.26 of the
Disclosure Schedule and Section 6.13 of this Agreement sets forth a correct and
complete list of all arrangements or transactions since the Effective Date
between MST, on the one hand, and Quanex or any affiliate, director, officer or
associate of Quanex, or any business or entity in which MST, Quanex with
respect to the Businesses, or any affiliate or associate thereof, has or had
any direct or indirect interest (collectively, the "Seller's Affiliates"), on
the other hand (other than (i) dividends and distributions of profits as
reflected on the audited financial statements described in Section 4.7 of this
Agreement and (ii) transactions entered into in the ordinary course of business
consistent with past practice), that involves an obligation or commitment on
the part of or for the benefit
31
42
of MST or, with respect to the Businesses, Quanex or any Seller's Affiliate of
more than $50,000 in any fiscal year. MST and Quanex have terminated each of
the Quanex Management Agreement and the Intercompany Interest Bearing Open
Account Agreement, each dated February 24, 1993, by and between MST and Quanex,
and such agreements are of no further force or effect.
4.27 DISCLOSURE. To the knowledge of the Knowledge
Parties, Quanex has not failed to disclose to the Purchasing Parties any facts
material to Businesses. No representation or warranty by Quanex in this
Agreement or the Schedules of the Disclosure Schedule, when taken together,
contains any untrue statement of a material fact or omits to state any material
fact necessary, in order to make the statements made herein or therein, in
light of the circumstances under which they were made, not misleading.
5. REPRESENTATIONS AND WARRANTIES OF THE PURCHASING PARTIES. The
Purchasing Parties jointly and severally represent and warrant to Quanex as
follows:
5.1 ORGANIZATION AND GOOD STANDING. Each of VMHI and VMI
is a corporation duly organized, validly existing and in good standing under
the laws of Delaware and has the corporate power and authority to own, operate
and lease its properties and assets and carry on its business and operations in
all material respects as now owned, operated, leased or conducted. True and
correct copies of the certificate of incorporation and bylaws of each
Purchasing Party have been provided to Quanex.
5.2 AUTHORITY. Each of the Purchasing Parties has all
requisite corporate power and authority to enter into, deliver and perform this
Agreement and any other agreement or document necessary to perform this
Agreement and to consummate the transactions described in this Agreement. This
Agreement has been duly executed and delivered by the Purchasing Parties
pursuant to all necessary corporate action. Assuming the due authorization,
execution and delivery by Quanex, this Agreement constitutes a legal, valid and
binding obligation of the Purchasing Parties, enforceable against the
Purchasing Parties in accordance with its terms.
5.3 NO CONFLICT. Neither the execution and delivery by
the Purchasing Parties of this Agreement, the consummation of the transactions
described in this Agreement by the Purchasing Parties nor compliance by the
Purchasing Parties with any of the provisions of this Agreement will (a)
conflict with any provision of the certificates of incorporation or the bylaws
of the Purchasing Parties, (b) violate, breach or conflict with, or constitute
a default or require any consents under, any Contract, any Encumbrance, any
Orders of a Governmental Authority having jurisdiction over VMHI or VMI or
their assets and businesses, or any Permit relating to VMHI, VMI or their
businesses, or (c) violate any Legal Requirement of a Governmental Authority
applicable to VMHI or VMI or by which their assets or businesses are bound.
5.4 NO CONSENTS OR GOVERNMENTAL APPROVALS. Neither
Purchasing Party is required to obtain any consent, Permit or waiver of, make
any filing with, submit any notification to, or seek to obtain any action by,
any Governmental Authority in connection with the execution, delivery or
performance of this Agreement by the
32
43
Purchasing Parties and the consummation of the transactions described in this
Agreement.
5.5 CERTAIN TRANSACTIONAL FEES. Neither Quanex nor MST
has or will have any obligation to pay any broker's, finder's, investment
banker's, financial advisor's or similar fee or expense in connection with the
transactions described in this Agreement by reason or any action taken by or on
behalf of a Purchasing Party.
6. ADDITIONAL AGREEMENTS. Quanex and the Purchasing Parties
jointly and severally covenant and agree with each other that:
6.1 CERTAIN EMPLOYEE BENEFIT MATTERS.
(a) QUANEX CORPORATION SALARIED EMPLOYEES'
PENSION PLAN.
(i) As soon as practicable following the
determination of the Transfer Amount (as defined below) in
accordance with subsection 6.1(a)(ii) hereof, Quanex shall
direct the trustee of the Quanex Corporation Salaried
Employees' Pension Plan to transfer, in cash or in kind, from
the trust maintained under the Quanex Corporation Salaried
Employees' Pension Plan to the trust maintained for the Vision
Metals, Inc. Salaried Employees' Pension Plan (the "Buyer
Salaried Pension Plan"), an amount equal to the amount
required to be transferred pursuant to Section 414(1) of the
Code (determined as of the Closing Time) with respect to
current and former employees of MST, and with respect to the
Businesses, Quanex, the names of whom are set forth on
SCHEDULE 0.6.1 of the Disclosure Schedule (the "Salaried
Participants") and their beneficiaries calculated by using
such actuarial assumptions as are agreed upon by the enrolled
actuaries for the Quanex Corporation Salaried Employees'
Pension Plan and the Buyer Salaried Pension Plan, which
agreement shall not be withheld unreasonably. If the enrolled
actuaries cannot agree on the actuarial assumptions, the
assumptions set forth in PBGC Regulation Section 2619 shall be
used for purposes of determining the amount to be transferred
to the Buyer Salaried Pension Plan.
(ii) Quanex shall deliver to the
Purchasing Parties as soon as reasonably practicable, and in
any event within 60 days after the Closing Date, a statement
setting forth the proposed Transfer Amount as certified by the
Seller's actuaries (the "Seller's Transfer Amount Statement").
The costs and expenses incurred in connection with the
preparation and delivery of the Seller's Transfer Amount
Statement shall be borne by the Seller. The Purchasing
Parties shall have 45 days following the delivery of the
Seller's Transfer Amount Statement during which to submit to
Quanex, in accordance with the provisions of Article 8 hereof,
a written statement setting forth any dispute concerning the
Seller's
33
44
Transfer Amount Statement (a "Buyer's Transfer Amount
Statement"). The costs and expenses incurred in connection
with the preparation of a Buyer's Transfer Amount Statement
shall be borne by the Purchasing Parties. If the Purchasing
Parties fail to submit a Buyer's Transfer Amount Statement
within such 45- day period, then the proposed Transfer Amount
set forth on the Seller's Transfer Amount Statement, shall be
deemed the Transfer Amount. If the Purchasing Parties timely
deliver a Buyer's Transfer Amount Statement, Quanex and the
Purchasing Parties shall consult and attempt to resolve, as
soon as practicable, all disputes set forth therein. If
Quanex and the Purchasing Parties are unable to resolve any
such dispute regarding the actuarial computations (but not
with respect to any dispute regarding the contractual
interpretation of this section) within 30 days of the delivery
of the Buyer's Transfer Amount Statement, such dispute shall
be resolved by a nationally recognized independent actuarial
firm mutually acceptable to Quanex and the Purchasing Parties
(the "Independent Actuarial Firm"). The Independent Actuarial
Firm shall be instructed to make its determination as promptly
as practicable and such determination shall be final and
binding upon Quanex and the Purchasing Parties enforceable by
appropriate judicial proceedings. The fees and expenses of
the Independent Actuarial Firm shall be shared equally by
Quanex and the Purchasing Parties. The proposed Transfer
Amount set forth in the Seller's Transfer Amount Statement, as
modified to reflect the resolution of disputes between the
Seller and the Buyer or by the Independent Actuarial Firm in
accordance with this Section 0.6.1, shall be the "Transfer
Amount". A pro rata share of the Quanex Corporation Salaried
Employees' Pension Plan actual investment earnings or losses
occurring between the date of the Closing and the date on
which the Transfer Amount is transferred to the Buyer Salaried
Pension Plan shall be transferred to the Buyer Salaried
Pension Plan together with the Transfer Amount.
(iii) To effect the purpose of this
Section 0.6.1, Quanex and the Purchasing Parties shall give
the other party, and any of its independent actuaries and
authorized representatives, reasonable access, during normal
business hours, to its properties, books, records and
personnel, and shall use all reasonable efforts to cause its
independent actuaries to make available to the other party and
its authorized representatives work papers generated in
connection with the preparation of the Seller's Transfer
Amount Statement and any Buyer's Transfer Amount Statement for
purposes of resolving any disputes concerning the Transfer
Amount.
(iv) As soon as reasonably practicable,
Quanex and the Purchasing Parties shall cooperate with each
other in making any required filings, including Forms 5310-A
(with all
34
45
attachments), reflecting the transfer of assets and assumption
of liabilities pursuant to this Section 0.6.1. In connection
and concurrent with such transfer, the liabilities under the
Quanex Corporation Salaried Employees' Pension Plan in respect
of the Salaried Participants shall be transferred to the Buyer
Salaried Pension Plan.
(b) QUANEX CORPORATION EMPLOYEE SAVINGS PLAN. As
soon as reasonably practicable, and in any event within 90 days after
the Closing Date, each participant in the Quanex Corporation Employee
Savings Plan who is an employee or former employee of MST or an
employee of Quanex, with respect to the Businesses, shall have the
right to elect to receive a distribution of all or a portion of such
employee's account balance in that plan (subject to, and in accordance
with, the provisions of that plan and applicable laws). The
Purchasing Parties shall take any and all necessary actions to cause
the trustee of the Vision Metals, Inc. Savings Plan (the "Buyer
Savings Plan") to accept the "roll over" of all or a portion of any
such distributions from the Quanex Corporation Employee Savings Plan,
if requested to do so by a distributee who is employed by the
Purchasing Parties, or an affiliate of the Buyer in connection with
the transactions contemplated hereby. Each participant in the Quanex
Corporation Employee Savings Plan who ceases participation thereunder
as a result of the transactions contemplated by this Agreement will
have a fully nonforfeitable interest in his benefit accrued under the
plan.
(c) QUANEX CORPORATION HOURLY BARGAINING UNIT
EMPLOYEES SAVINGS PLAN. Quanex will terminate its participation as an
adopting employer with respect to the Quanex Corporation Hourly
Bargaining Unit Employees Savings Plan effective as of the Closing
Time. The parties will take such actions as are necessary to cause a
qualified defined contribution plan maintained by the Purchasing
Parties or one of their affiliates to accept a transfer of the Quanex
Corporation Hourly Bargaining Unit Employees Savings Plan assets (in
cash or in kind) and liabilities attributable to current and former
employees of MST and persons working at the GST Business or the Group
Office who are employed by the Purchasing Parties or one of their
affiliates, in a trustee-to-trustee transfer that complies with the
requirements of the Code.
(d) PENSION PLAN BETWEEN GULF STATES TUBE
DIVISION OF QUANEX CORPORATION AND UNITED STEELWORKERS OF AMERICA.
The Purchasing Parties will assume all liabilities with respect to the
Pension Plan Between Gulf States Tube Division of Quanex Corporation
and United Steelworkers of America effective as of the Effective Time.
The Purchasing Parties or one of their affiliates will assume
sponsorship of the Pension Plan Between Gulf States Tube Division of
Quanex Corporation and United Steel Workers of America as of the
Closing Time.
35
46
(e) QUANEX CORPORATION GROUP BENEFITS PLAN. The
Purchasing Parties hereby assume all liabilities under the Quanex
Corporation Group Benefits Plan for all participants who are employees
or former employees of MST or Quanex in connection with the
Businesses, as set forth on SCHEDULE 0.6.1 of the Disclosure Schedule,
and their dependents, as of the Effective Time (the "Group Benefit
Plan Participants") subject to the terms and conditions of such plan.
Effective as of the Closing Time, Quanex shall (i) cause MST to
terminate its participation as an adopting employer with respect to
the Quanex Corporation Group Benefits Plan and (ii) cause that portion
of the Quanex Corporation Group Benefit Plan and its constituent
benefit programs, the Quanex Corporation Medical Reimbursement Plan
and the Quanex Corporation Cafeteria Plan, covering the Group Benefits
Plan Participants to be spun-off into a new welfare benefit plan, the
"Buyer Group Benefits Plan", which shall be sponsored by MST or the
Purchasing Parties and which, as of the Closing, shall otherwise be
substantially identical to the Quanex Corporation Group Benefits Plan.
(f) GULF STATES TUBE UNION GROUP BENEFIT PLAN.
The Purchasing Parties will assume all liabilities with respect to the
Gulf States Tube Union Group Benefit Plan effective as of the
Effective Time provided that liabilities for incurred but not reported
claims are properly reflected on the Effective Date Balance Sheet.
The Purchasing Parties or one of their affiliates will assume
sponsorship of the Gulf States Tube Union Group Benefit Plan effective
as of the Closing Time.
(g) QUANEX CORPORATION MANAGEMENT INCENTIVE
PROGRAM. Effective as of the Effective Time, all contractual
obligations under the Quanex Corporation Management Incentive Program
that are attributable to current or former employees of Quanex, in
connection with the Businesses, or current or former employees of MST,
will be assumed by Purchasing Parties to the extent that all
liabilities for such obligations are properly reflected on the
Effective Date Balance Sheet.
(h) VACATION POLICIES. The Purchasing Parties
will honor and assume all liabilities for the vacation benefits earned
under a Designated Plan through the Effective Time by employees of MST
or Quanex with respect to the Business, to the extent that such
liabilities are properly reflected on the Effective Date Balance
Sheet.
6.2 TRANSFER OF WORK FORCE EMPLOYED IN CONNECTION WITH
THE BUSINESS. On the date of the Closing, and effective as of the Closing
Time, the Purchasing Parties shall make an offer of employment at will to each
person listed on SCHEDULE 0.6.2 of the Disclosure Schedule and, upon acceptance
by any such person, enter into an employer- employee relationship with such
person. The annual base salary or base wages contained in each offer referred
to in this Section 0.6.2 will be substantially similar to the annual base
salary or base wages in effect with respect to the individual immediately
before the Closing.
36
47
6.3 SUPPLYING OF INFORMATION. Quanex shall furnish to
the Purchasing Parties and their representatives such information with respect
to the Businesses, the Assets and the Assumed Liabilities as they may
reasonably request. The Purchasing Parties shall furnish Quanex and its
representatives such information with respect to the Businesses, the Assets and
the Assumed Liabilities as they were operated or used before the Closing Time
as Quanex may reasonably request. For a period of six months after the
Closing, the Purchasing Parties shall afford Quanex and its representatives
upon prior oral or written notice reasonable access to the facilities of the
Businesses during normal business hours for the purposes of performing
appraisals and for any other reasonable purpose.
6.4 EXPENSES. Except as otherwise specified in this
Agreement, each party to this Agreement shall pay its own costs and expenses
(including without limitation all legal and accounting fees) relating to this
Agreement, the negotiations leading up to this Agreement and the transactions
described in this Agreement; provided that Quanex will not allocate to, or
burden MST with, any of those costs and expenses of Quanex. Notwithstanding
the foregoing sentence, the cost of preparing the September 30, 1997, audited
financial statements described in Section 0.4.7 of this Agreement shall be
borne one-half by Quanex and one-half by the Purchasing Parties, and the cost
of preparing the 1995 and 1996 audited financial statements described in
Section 0.4.7 of this Agreement shall be borne by the Purchasing Parties.
6.5 PUBLICITY. Quanex and the Purchasing Parties shall
issue mutually acceptable press releases as soon as practicable after the
Closing.
6.6 TAX REPORTING AND COOPERATION. Quanex will cause
MST, the GST Business and the Group Office to be included in its consolidated
federal Income Tax returns and its state, local or foreign consolidated,
combined affiliated or unitary Income Tax returns for periods or portions
thereof ending on or before November 30, 1997. VMHI and VMI will cause MST,
the GST Business, and the Group Office to be included in VMHI's consolidated
federal Income Tax returns and its state, local or foreign consolidated,
combined, affiliated or unitary Income Tax returns for periods or portions
thereof beginning after November 30, 1997. The parties to this Agreement
shall, and VMHI and VMI shall cause MST to, cooperate, and shall cause their
employees, agents, accountants and representatives to cooperate, in preparing
and filing all tax returns (including amended tax returns and claims for
refund) to which this Agreement relates, in handling audits, examinations,
investigations and administrative, court or other proceedings relating to Taxes
covered by this Agreement, and in all other Tax matters to which this Agreement
relates, in each case making employees available to assist the requesting
party, timely providing information reasonably requested, and maintaining and
making available to each other all records reasonably necessary in connection
therewith.
6.7 ALLOCATION OF CASH PURCHASE PRICE. The allocation of
the Cash Purchase Price shall be as set forth in SCHEDULE 0.6.7 of the
Disclosure Schedule. The parties to this Agreement shall prepare and file all
tax returns to be filed with any taxing authority in a manner consistent with
that allocation and shall take no position inconsistent with that allocation,
except in connection with a resolution of a tax dispute. If the allocation is
disputed by a taxing authority, the party receiving notice
37
48
of the dispute shall promptly notify and consult with the other parties
concerning the dispute.
6.8 TRANSFER TAXES. Any sales, use, transfer, stamp,
documentary, gains and other similar taxes and any transfer, recording or
similar fees and charges imposed in connection with the consummation of the
transactions described in this Agreement (collectively, the "Transfer Taxes")
shall be borne one-half by the Purchasing Parties and one-half by Quanex. The
Purchasing Parties and Quanex shall use commercially reasonable efforts to
minimize the Transfer Taxes. The Purchasing Parties and Quanex shall cause to
be prepared and timely filed all tax returns relating to the Transfer Taxes
that such party has primary responsibility for filing under applicable law and
shall cause all Transfer Taxes to be duly and timely paid in full.
6.9 ALLOCATION OF CERTAIN STRADDLE PERIOD TAXES. In the
case of any Non-Income Tax that relates to a taxable period beginning on or
before and ending after September 30, 1997 (a "Straddle Period"), the portion
of such Tax attributable to the portion of such Straddle Period ending on and
including September 30, 1997 (the "pre-10/1/97 period") and the portion of such
Straddle Period beginning after September 30, 1997 (the "post-9/30/97 period")
shall be determined as follows:
(a) CAPITAL AND AD VALOREM TAXES. In the case of
any Non-Income Tax based on capital or the value of any asset, the
portion attributable to such pre-10/1/97 period portion of the
Straddle Period shall be the amount of the Tax for the entire taxable
period multiplied by a fraction, the numerator of which is the number
of days in the pre-10/1/97 period, and the denominator of which is the
number of days in the entire taxable period. The amount of such
Non-Income Tax remaining after subtracting the portion attributable to
the pre-10/1/97 period shall be the amount of the tax attributable to
the post-9/30/97 period.
(b) OTHER NON-INCOME TAXES. In the case of any
other Non-Income Taxes, the portion attributable to the pre-10/1/97
period shall be determined on the basis of an interim closing of the
books as of and including September 30, 1997.
6.10 NON-SOLICITATION; NON-COMPETE PROVISION. Quanex
shall not either alone or jointly with, through or as manager, adviser,
consultant or agent for any person or entity, directly or indirectly (a) for a
period of five years after the Effective Date be engaged in, or have an
investment in, the business (the "Restricted Business") of producing tubular
products that are (i) greater than two feet in length in the following product
categories: hot finished and cold drawn seamless tubing up through five-inch
outside diameter, welded and drawn over mandrel welded tubing up through
five-inch outside diameter and (ii) the same products as those products that
are currently manufactured by the Businesses or will be manufactured by the
Businesses under the terms of the proposal attached to this Agreement as
SCHEDULE 6.10 within the United States or any geographical area in which the
Businesses are currently conducted; or (b) for a period of three years after
the Effective Date of this Agreement directly solicit the services of any
person who was an employee of MST or, with respect to the Businesses, Quanex
engaged in skilled or managerial work at any time in the
38
49
period of 12 months immediately prior to the Closing Time; provided, however,
Quanex or its affiliates may own securities or other interests and have
investments in a Restricted Business as long as (i) it owns no more than a 20
percent equity interest in the Restricted Business and (ii) it is not actively
participating in the management of the Restricted Business. For these
purposes, "direct" solicitation shall not include advertising through general
publication including, without limitation, commercial publications and
newspapers. The parties acknowledge that the remedy at law for any breach of
the foregoing provisions of this Section 6.10 will be inadequate and that the
Purchasing Parties, in addition to any other relief available to them, shall be
entitled to temporary and permanent injunctive relief without the necessity of
proving actual damage or posting a bond. If the provisions of this Section
6.10 should ever be deemed to exceed the limitation provided by applicable law,
then the parties agree that such provisions shall be reformed to set forth the
maximum limitations permitted.
6.11 USE OF CERTAIN NAMES. The Purchasing Parties shall
not use the name "Quanex" or any similar name and shall cause the Businesses to
be operated without use of that name in any manner and without use of any other
name used by Quanex that is not intended to be transferred pursuant to this
Agreement; provided, however, that to the extent necessary to continue the
operation of the Businesses, (a) VMI may use stationery, letterhead, invoice
forms, purchase order forms and similar materials bearing the name "Quanex" for
a period of up to 30 days after the Closing and (b) VMI may ship packaged
inventory ready for shipment bearing banding clips with the name "Quanex" if
the inventory had been so packaged as of the Closing Time.
6.12 CERTAIN ASSURANCES. Within three months of the date
of Closing, (a) the Purchasing Parties at their sole expense shall demonstrate
to the satisfaction of the relevant Government Authorities that the Purchasing
Parties (without relying on, and without reference to, Quanex or any affiliate
of Quanex (other than MST)) are in compliance with all financial assurance and
responsibility requirements applicable to the acquired facilities, and (b) the
Purchasing Parties shall take such measures as are necessary to relieve Quanex
of any continuing obligations under such financial assurance and responsibility
requirements. The Purchasing Parties shall cooperate with Quanex in seeking
modification of the Consent Judgment entered in Kelley v. Quanex, Civil Action
No. 91-70706-CZ (Ingham County, Michigan, November 25, 1991) to remove Quanex
as a party or otherwise to terminate Quanex's liability to the State of
Michigan thereunder. The parties shall use commercially reasonable efforts to
cooperate with each other to effect the transfer of those permits that may be
transferred from Quanex to the Purchasing Parties in connection with the
Businesses, and Quanex shall cooperate with VMI in VMI's efforts in connection
with the Businesses to obtain those Permits that are not transferrable.
6.13 INTERCOMPANY ACCOUNTS AND CASH. Prior to or
effective as of the date of the Closing, Quanex has or shall net, to the extent
possible, and settle, forgive, dividend or contribute all intercompany accounts
(the "Eliminated Accounts") between (a) Quanex and its subsidiaries and
affiliates which are not constituents of the Purchased Group, and (b) the
Purchased Group, except for trade accounts payable and receivable for goods or
services incurred in the ordinary course of business which shall remain
obligations or assets of the Purchased Group. The effect of such settling and
netting will be to remove the Eliminated Accounts which exist between (a)
Quanex and
39
50
its subsidiaries and affiliates that are not constituents of the Purchased
Group, and (b) the Purchased Group. Prior to the Closing, and subject to the
provisions of Section 2.2, all cash or cash equivalents held by any of the
Purchased Group have and shall be deemed to be an asset of Quanex, and Quanex
may use such cash to pay advances, make dividends or distributions to Quanex
and its affiliates and subsidiaries other than the Purchased Group without
affecting the sale of the Businesses. For purposes of filing its Tax Returns,
and for purposes of determining the parties liabilities for Income Taxes
hereunder, all the transactions contemplated by this Section 6.13 shall be
treated as having occurred before or effective as of the close of business on
November 30, 1997. Any Income Taxes arising from events or actions outside the
ordinary course of business of the Businesses occurring between November 30,
1997 and the Closing Date shall be the responsibility of Quanex. Such Income
Taxes shall be deemed to arise and accrue immediately before close of business
on November 30, 1997, for all purposes of this Agreement, including, without
limitation, Sections 1.3(m), 1.4(a), 6.6 and 7.1(d).
7. INDEMNIFICATION AND REMEDIES.
7.1 QUANEX'S INDEMNIFICATION OF THE PURCHASING PARTIES.
Quanex shall defend, indemnify and hold harmless each of the Purchasing Parties
and any of their officers, directors, employees, agents, affiliates and
successors, heirs and assigns against any claim, loss, cost, damage, expense,
fine, debt, penalty action, cause of action, proceeding or obligation,
including without limitation any amounts paid in investigation, defense or
settlement ("Loss") that any such person may suffer or incur, including without
limitation court costs and expenses and reasonable attorneys' fees and
expenses, arising out of or in connection with:
(a) BREACHES. Any breach of the representations,
warranties, covenants and agreements contained in this Agreement or in
any document signed by Quanex referred to in Article 3 of this
Agreement;
(b) CERTAIN CLAIMS BEFORE EFFECTIVE TIME. Any
claim with regard to the conduct of the Business or the ownership or
use of the Assets based on events occurring before the Effective Time,
except to the extent expressly assumed by the Purchasing Parties;
(c) NON-ASSUMED LIABILITIES. Those liabilities
relating to the Assets that the Purchasing Parties are not assuming
pursuant to this Agreement and that are specified in Section 1.4 of
this Agreement;
(d) CERTAIN TAX MATTERS. Any Income Taxes
imposed with respect to (a) any consolidated Income Tax return of an
"affiliated group" (as such term is defined in Section 1504 of the
Code) that includes or included MST, the GST Business or the Group
Office for all periods or portions of periods ending on or before
November 30, 1997, and (b) any state, local or foreign consolidated,
combined, affiliated or unitary Income Tax return of an applicable
group of corporations that includes or included MST, the GST Business
or the Group Office for all periods or portions of periods ending on
or before November 30, 1997; any
40
51
Non-Income Taxes imposed on MST, the GST Business or the Group Office
with respect to any taxable period or portion thereof ending on or
before September 30, 1997, but only to the extent the aggregate amount
of such Non-Income Taxes exceeds the Tax Accrual; and
(e) PRODUCT REPLACEMENT OBLIGATIONS. VMI's
obligation, pursuant to subsection 1.3(g) of this Agreement, to
repurchase or replace products produced by Quanex in the GST Business
before the Closing Date.
7.2 PURCHASING PARTIES' INDEMNIFICATION OF QUANEX. Each
Purchasing Party shall jointly and severally defend, indemnify and hold
harmless Quanex and each of its officers, directors, employees, agents,
affiliates and successors, heirs and assigns against any Loss that any such
person may suffer or incur, including without limitation court costs and
expenses and reasonable attorneys' fees and expenses, arising out of or in
connection with:
(a) BREACHES. Any breach of the representations,
warranties, covenants and agreements contained in this Agreement or in
any document signed by a Purchasing Party referred to in Article 3 of
this Agreement;
(b) CERTAIN CLAIMS AFTER EFFECTIVE TIME. Any
claim with regard to the conduct of the Businesses or the ownership of
the Assets based on events occurring after the Effective Time;
(c) ASSUMED LIABILITIES. The Assumed
Liabilities; and
(d) EMPLOYEE BENEFIT MATTERS. (1) Any actions or
omissions by VMI, VMHI or MST following the Closing (other than such
actions taken in accordance with Section 6.1 of this Agreement, which
is governed by subsection (c) of this Section 7.2) with respect to (A)
any Designated Plan that is sponsored by MST immediately prior to the
Closing, (B) the Buyer Salaried Pension Plan (as defined in Section
0.6.1 of this Agreement), (C) the Buyer Savings Plan (as defined in
Section 0.6.1 of this Agreement) or (D) the Buyer Group Benefit Plan
(as defined in Section 0.6.1 of this Agreement); (2) any application
of section 4062 of ERISA, or any successor statutory provision, with
respect to any termination of the Buyer Salaried Pension Plan, the
Pension Plan between Gulf States Tube Division of Quanex Corporation
and United Steelworkers of America, or the Pension Plan for Michigan
Seamless Tube Company Hourly Employees; or (3) the medical benefit
liabilities assumed by the Purchasing Parties pursuant to this
Agreement and any related documents; and
(e) CERTAIN TAXES MATTERS. Any Non-Income Taxes
imposed on MST, the GST Business or the Group Office with respect to
any taxable period or portion thereof ending on or before September
30, 1997, up to the aggregate amount of the Tax Accrual; any
Non-Income
41
52
Taxes imposed upon MST, the GST Business or the Group Office with
respect to any taxable period or portion thereof beginning after
September 30, 1997; and any Income Taxes imposed with respect to MST,
the GST Business or the Group Office for any taxable period or portion
thereof beginning after November 30, 1997.
7.3 THIRD PARTY CLAIMS. If any claim covered by this
Article 7 is made by any third party, the party receiving that claim (the
"Indemnified Party") shall promptly notify the party to indemnify the
Indemnified Party (the "Indemnifying Party") and the Indemnifying Party shall
have an opportunity to defend or settle the claim, with counsel reasonably
acceptable to the Indemnified Party. If the Indemnifying Party assumes the
defense of an Indemnified Party's claim and, under applicable standards of
professional conduct, a conflict of interest exists on any significant issue
between the positions of the Indemnified Party and the Indemnifying Party, such
that counsel chosen by the Indemnifying Party is ethically prohibited from
representing both the Indemnified Party and the Indemnifying Party, then the
Indemnified Party may retain counsel reasonably satisfactory to the
Indemnifying Party to represent the Indemnified Party with respect to the issue
as to which there is a conflict, and the Indemnifying Party shall pay all fees
and expenses of that counsel. If the Indemnifying Party fails to promptly
assume the defense of a claim covered by this Article 7 after notice or to
thereafter diligently defend against the claim or if any such claim is
determined valid by a court having proper jurisdiction, the Indemnified Party
shall have the right to pay or settle such claim and demand immediate payment
from the Indemnifying Party. All amounts paid under this Section 0.7.3 are
payable on demand or, in the case of a third party claim, upon settlement or
final judgment. The Indemnified Party shall also be entitled to recover any
costs or expenses incurred in enforcing the rights to indemnity hereby granted.
7.4 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties set forth in this Agreement shall survive the
Closing Time for a period of two years, except with respect to the
representations contained in Section 0.4.3 (relating to the MST Stock),
Sections 4.14 and 5.5 (relating to certain transactional fees) and Section
0.4.21 (relating to certain tax matters) of this Agreement, which shall survive
except as may be limited by any applicable statutes of limitations.
7.5 LIMITATION ON INDEMNIFICATIONS. The indemnifications
in favor of the Purchasing Parties and others contained in subsections 0.7.1(a)
and (b) of this Agreement shall not be effective until the aggregate amount of
all Losses indemnified against under subsections 0.7.1(a) and (b) of this
Agreement exceeds $150,000 (the "Basket Amount"), and then only to the extent
which that aggregate amount exceeds the Basket Amount (except with respect to
the representations contained in the penultimate sentence of Section 4.17 of
this Agreement (relating to indebtedness) and the representations contained in
Section 4.21 of this Agreement (relating to tax matters), as to which the
Basket Amount shall not apply). The indemnification in favor of Quanex and
others contained in subsections 0.7.2(a) and (b) of this Agreement shall not be
effective until the aggregate amount of all Losses indemnified against under
subsections 0.7.2(a) and (b) exceeds the Basket Amount, and then only to the
extent which that aggregate amount exceeds the Basket Amount. The total amount
of indemnification to be paid by Quanex under Section 0.7.1 of this Agreement
shall not
42
53
exceed an amount equal to the Cash Purchase Price, as adjusted pursuant to
Section 0.2.2 of this Agreement (the "Maximum Amount"). The total amount of
indemnification to be paid by the Purchasing Parties under Section 0.7.2 of
this Agreement shall not exceed the Maximum Amount. Quanex shall not be
required to indemnify the Purchasing Parties for any Loss or portion of a Loss
to the extent that (a) the Loss (or portion thereof) occurs as a result of a
breach of a representation or warranty contained in Article 4 of this Agreement
and (b) the amount of Loss (or portion thereof) is reflected within the
applicable category on the Effective Time Balance Sheet and is an Assumed
Liability. Quanex shall not be required to indemnify the Purchasing Parties
for any Loss or portion of a Loss to the extent that (c) the Loss (or portion
thereof) occurs as a result of a breach of Quanex's representations concerning
competition law matters contained in Section 0.4.6 of this Agreement and (d)
the Loss (or portion thereof) results from inaccurate information provided to
Quanex by the Purchasing Parties. The Purchasing Parties shall not be required
to indemnify Quanex for any Loss or portion of a Loss to the extent that (e)
the Loss (or portion thereof) occurs as a result of a breach of the Purchasing
Parties' representations concerning competition law matters contained in
Section 0.5.4 of this Agreement and (f) the Loss (or portion thereof) results
from inaccurate information provided to the Purchasing Parties by Quanex.
7.6 LIMITATION ON TYPE OF REMEDIES. Except for Losses
resulting from fraud, the rights and remedies specifically provided for in this
Agreement shall be the exclusive rights and remedies of the parties to this
Agreement. However, the foregoing sentence shall not preclude a party from
applying for and obtaining injunctive relief to enforce any rights under this
Agreement. The Purchasing Parties waive any rights and remedies they may have
against Quanex under any Environmental Law, including without limitation the
Comprehensive Environmental Response, Compensation and Liability Act, Part 201
of the Natural Resources and Environmental Protection Act of Michigan 1994 PA
451, as amended, and the Texas Solid Waste Disposal Act.
8. GENERAL PROVISIONS.
8.1 AMENDMENTS. This Agreement may be amended only by a
written agreement signed by Quanex and Purchasing Parties.
8.2 NOTICES. Unless specifically provided otherwise in
this Agreement, all notices, requests, demands and other communications made in
connection with this Agreement shall be in writing and shall be deemed to have
been duly given on the date delivered, if delivered personally or sent by
facsimile to the persons identified below, or three days after mailing if
mailed by certified or registered mail, postage prepaid, return receipt
requested, addressed as follows:
43
54
(a) If to VMI or VMHI:
c/o Citicorp Venture Capital, Ltd.
399 Park Avenue, 14th Floor-Zone 4
New York, New York 10043
Attention: Mr. Joseph Silvestri
Fax No.: (212) 888-2940
with a copy to the following legal counsel:
Kirkland & Ellis
153 E. 53rd Street
New York, New York 10022
Attention: Eunu Chun
Fax No.: (212) 446-4900
(b) if to Quanex,
Quanex Corporation
1900 West Loop South, Suite 1500
Houston, Texas 77027
Attention: Mr. Wayne M. Rose
Fax No. (713) 877-5333
with a copy to the following legal counsel:
Fulbright & Jaworski L.L.P.
2200 Ross Avenue, Suite 2800
Dallas, Texas 75201
Attention: Ms. Harva R. Dockery
Fax No. (214) 855-8200
Provided, however, that no notice shall be deemed ineffective solely because it
was not received by any party designated above as legal counsel. The addresses
and numbers may be changed by means of a notice given in the manner provided in
this Section 0.8.2.
8.3 WAIVER. Waiver of any term or condition of this
Agreement by any party shall only be effective if in writing and shall not be
construed as a waiver of any subsequent breach or failure of the same term or
condition, or a waiver of any other term or condition of this Agreement.
8.4 HEADINGS. The headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
8.5 SEVERABILITY. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all
44
55
other conditions and provisions of this Agreement shall nevertheless remain in
full force and effect so long as the economic or legal substance of the
transactions contemplated by this Agreement is not affected in a manner adverse
to a party to this Agreement. Upon a determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties to
this Agreement shall negotiate in good faith to modify this Agreement to effect
the original intent of the parties to this Agreement as closely as possible in
an acceptable manner to the end that transactions contemplated by this
Agreement are fulfilled to the extent possible.
8.6 ENTIRE AGREEMENT; SCHEDULES. This Agreement and the
Disclosure Schedule constitute the entire agreement and supersede all other
prior agreements and undertakings, both written and oral, among the parties, or
any of them, with respect to the subject matter of this Agreement. The
Schedules identified in this Agreement have been delivered to the Purchasing
Parties and Quanex separate from this Agreement; those Schedules, however,
shall constitute a part of this Agreement and are incorporated by reference
into this Agreement.
8.7 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED AS
TO ALL MATTERS BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF DELAWARE,
EXCLUDING (TO THE GREATEST EXTENT PERMISSIBLE BY LAW) ANY RULE OF LAW THAT
WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY JURISDICTION OTHER THAN
DELAWARE. TO THE GREATEST EXTENT POSSIBLE, ALL UNDEFINED TERMS USED IN THIS
AGREEMENT SHALL BE CONSTRUED TO HAVE THE MEANING ASCRIBED TO THEM UNDER THE
LAWS OF DELAWARE.
8.8 COUNTERPARTS. This Agreement and all agreements
executed and delivered pursuant to this Agreement may be executed in one or
more counterparts, and by the different parties to this Agreement in separate
counterparts, each of which when executed shall be deemed to be an original but
all of which shall constitute one and the same agreement.
8.9 NO THIRD-PARTY BENEFICIARIES. This Agreement does
not create, and shall not be construed as creating, any rights enforceable by
any person who is not a party to this Agreement.
8.10 VENUE. The exclusive situs for any resolution of
disputes under this Agreement shall be in the appropriate federal, state or
local court in or for the State of Delaware.
8.11 ASSIGNABILITY. No party to this Agreement may assign
any or all of its rights under this Agreement, in whole or in part, without the
written consent of the other parties to this Agreement; provided that the
Purchasing Parties may assign their rights under this Agreement, without
written consent, to an affiliate of a Purchasing Party, to a party providing
financing for the purchase of the Assets pursuant to this Agreement and any
subsequent purchasers of the Businesses.
[SIGNATURE PAGE FOLLOWS]
45
56
IN WITNESS WHEREOF, VMI, VMHI and Quanex have caused this
Agreement to be executed on the day and year first above written, acknowledging
that this Agreement shall be effective at the Effective Time.
VISION METALS, INC.
By: /s/ James C. Hill
-------------------------------------
Name: James C. Hill
--------------------------------
Title: President
-------------------------------
VISION METALS HOLDINGS, INC.
By: /s/ James C. Hill
-------------------------------------
Name: James C. Hill
--------------------------------
Title: President
-------------------------------
QUANEX CORPORATION
By: /s/ Wayne M. Rose
-------------------------------------
Name: Wayne M. Rose
--------------------------------
Title: Vice President
-------------------------------
46
57
As permitted by Item 601(b)(2) of Regulation S-K, the Company
has not filed any schedules with this Exhibit No. 2.1. Listed below is a
brief description of the omitted schedules. The Company agrees to furnish
supplementally a copy of any of such omitted schedules to the Commission upon
request.
Schedules
- ---------
Schedule 1.1 Encumbrances Permitted on Transferred Assets
Schedule 1.1(a) Description of Owned Real Property
Schedule 1.1(g) GST Agreements
Schedule 4.5 Certain Conflict Exceptions
Schedule 4.6 Certain Required Permits
Schedule 4.9 Matters Relating to Properties and Assets
Schedule 4.10 Certain Environmental Matters
Schedule 4.11 Matters Relating to Contracts
Schedule 4.12 Matters Relating to Litigation and Arbitration
Schedule 4.13 Absence of Certain Changes or Events
Schedule 4.15 Employee Benefit Plans
Schedule 4.16 Certain Permit Matters
Schedule 4.17 Liabilities and Indebtedness
Schedule 4.18 Accounts Receivable
Schedule 4.19 Inventory Matters
Schedule 4.20(a) Identification of Employees
Schedule 4.20(b) Certain Matters Relating to Employees
Schedule 4.20(c) WARN Matters
Schedule 4.21 Tax Matters
Schedule 4.22 Intellectual Property Matters
Schedule 4.23 Insurance Policies
Schedule 4.24 Bank Accounts
Schedule 4.25 Customers and Suppliers Matters
Schedule 4.26 Affiliate Transactions
Schedule 6.1 Certain Employees
Schedule 6.2 Employees to be Hired
Schedule 6.7 Allocation of Cash Purchase Price
Schedule 6.10 Proposal Relating to Certain Products
