STOCK PURCHASE AGREEMENT
by and among
NIAGARA CORPORATION
NIAGARA COLD DRAWN CORP.
and
QUANEX CORPORATION
APRIL 18, 1997
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (this "Agreement"), dated
April 18, 1997, is made by and among NIAGARA CORPORATION, a
Delaware corporation ("Niagara"), NIAGARA COLD DRAWN CORP., a
Delaware corporation and wholly owned subsidiary of Niagara (the
"Buyer"), and QUANEX CORPORATION, a Delaware corporation (the
"Seller," and together with Niagara and the Buyer, the
"Parties").
WHEREAS, the Seller is the beneficial and record owner of
all of the issued and outstanding shares of common stock, par
value $1.00 per share (collectively, the "Shares"), of LaSalle
Steel Company, a Delaware corporation (the "Company");
WHEREAS, the Company is engaged in the business of
manufacturing cold drawn and chrome-plated steel bars for a
variety of applications (the "Business");
WHEREAS, the Buyer desires to purchase, and the Seller
desires to sell, all of the Shares, upon the terms and conditions
set forth herein; and
WHEREAS, prior to Closing (as defined in Section 1.1 hereof)
(i) the Seller obtained the consent to its sale of the Shares to
the Buyer from each of the banks who are parties to the Seller's
Revolving Credit and Term Loan Agreement, dated July 23, 1996
(the "Credit Agreement"), (ii) the Guaranty, dated July 23, 1996,
executed and delivered by the Company in connection with the
Credit Agreement (the "Guaranty"), was terminated and (iii) the
Seller and the Company executed and delivered an agreement (the
"Termination Agreement") terminating each of (x) the Intercompany
Interest Bearing Open Account Agreement, dated February 24, 1993,
by and between the Seller and the Company and (y) the Management
Agreement, dated February 24, 1993, between the Seller and the
Company.
NOW, THEREFORE, in consideration of the mutual agreements,
covenants, representations and warranties set forth herein, and
intending to be legally bound hereby, the Parties agree as
follows:
ARTICLE I
PURCHASE AND SALE OF THE SHARES; THE CLOSING
1.1 Purchase and Sale Upon the terms and subject to the
conditions hereof, at the closing referred to in Section 1.3
hereof and taking place simultaneously herewith (the "Closing"),
the Seller is selling, assigning, transferring and delivering to
the Buyer, and the Buyer is accepting and purchasing from the
Seller, free and clear of all Encumbrances (as defined in
Section 2.5(b) hereof), the Shares.
1.2 Consideration Upon the terms and subject to the
conditions hereof, in reliance on the representations,
warranties, covenants and agreements of the Seller contained
herein, and in consideration of the aforementioned sale,
assignment, transfer and delivery of the Shares (i) the Buyer is
delivering to the Seller, at the Closing, $65,500,000 (the
"Estimated Purchase Price"), by interbank or wire transfer of
immediately available funds and (ii) on the Adjustment Date (as
defined in Section 1.7(e) hereof), the Buyer or the Seller, as
the case may be, shall make the payment called for in Section
1.7(e) hereof.
1.3 The Closing The Closing of the transactions
contemplated hereby is taking place at the offices of Skadden,
Arps, Slate, Xxxxxxx & Xxxx LLP, 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx
Xxxx on April 18, 1997 (the "Closing Date"), simultaneously with
the execution of this Agreement and the other agreements,
documents, instruments and writings (collectively, the "Other
Documents") executed and delivered by the Parties pursuant hereto
or in connection herewith. At the Closing, the actions described
in Sections 1.5 and 1.6 hereof are being taken. All such actions
shall be deemed to have occurred simultaneously.
1.4 Actions Taken Prior to the Closing Prior to the
Closing, the following actions were taken (which occurred in the
order set forth below):
(a) the banks who are parties to the Credit Agreement
executed and delivered their consent to the sale of the Shares to
the Buyer;
(b) the Guaranty was terminated; and
(c) the Seller and the Company entered into the
Termination Agreement, attached hereto as Exhibit A.
1.5 Deliveries by the Seller At the Closing, the Seller is
delivering to the Buyer (unless delivered previously) the
following:
(a) stock certificates representing the Shares
accompanied by stock powers duly endorsed in blank or accompanied
by duly executed instruments of transfer, with all necessary
transfer tax and other revenue stamps affixed thereto;
(b) a receipt for the Estimated Purchase Price;
(c) copies of the Certificates of Incorporation and By-
laws of the Seller and the Company, certified by the Secretaries
of the Seller and the Company, respectively, as being complete
and correct;
(d) the stock books, stock ledgers and minute books of
the Company (all other records of the Company being located on
the premises of the Company);
(e) copies of the resolutions adopted by the Board of
Directors of the Seller, certified by the Secretary of the Seller
as having been duly and validly adopted and as being in full
force and effect, authorizing, among other things, the execution
and delivery by the Seller of this Agreement, the Termination
Agreement and the Other Documents executed and delivered by the
Seller pursuant hereto or in connection herewith, and the
performance by the Seller of its obligations hereunder and
thereunder;
(f) copies of the resolutions adopted by the Board of
Directors of the Company, certified by the Secretary of the
Company as having been duly and validly adopted and as being in
full force and effect, authorizing, among other things, the
termination of the Guaranty and the execution and delivery by the
Company of the Termination Agreement, and the performance by the
Company of its obligations thereunder;
(g) certificates evidencing the good standing of the
Seller and the Company under the laws of the State of Delaware;
(h) the resignations of the officers and directors of
the Company as requested by the Buyer prior to the Closing;
(i) a duly executed Certificate of Non-Foreign Status
duly executed by the Seller, attached hereto as Exhibit B; and
(j) executed counterparts (or, in the case of the
consents referred to in Section 1.4(a) hereof, copies thereof) of
all Consents (as defined in Section 2.6 hereof) obtained by the
Seller and the Company in connection with this Agreement and the
Other Documents.
1.6 Deliveries by Niagara and the Buyer At the Closing,
Niagara or the Buyer, as the case may be, is delivering to the
Seller (unless delivered previously) the following:
(a) the Estimated Purchase Price;
(b) certificates evidencing the good standing of Niagara
and the Buyer under the laws of the State of Delaware;
(c) copies of the Certificates of Incorporation and By-
laws of Niagara and the Buyer, certified by the Secretaries of
Niagara and the Buyer, respectively, as being complete and
correct;
(d) copies of the resolutions adopted by the Board of
Directors of Niagara, certified by the Secretary of Niagara as
having been duly and validly adopted and as being in full force
and effect, authorizing, among other things, the execution and
delivery by Niagara of this Agreement and the Other Documents
executed and delivered by Niagara pursuant hereto or in
connection herewith, and the performance by Niagara of its
obligations hereunder and thereunder; and
(e) copies of the resolutions adopted by the Board of
Directors of the Buyer, certified by the Secretary of the Buyer
as having been duly and validly adopted and as being in full
force and effect, authorizing, among other things, the execution
and delivery by the Buyer of this Agreement and the Other
Documents executed and delivered by the Buyer pursuant hereto or
in connection herewith, and the performance by the Buyer of its
obligations hereunder and thereunder.
1.7 Post-Closing Adjustment
(a) As soon as reasonably practicable, and in any event
within 60 days of the Closing Date, the Seller shall deliver to
Niagara and the Buyer, in accordance with the provisions of
Section 7.9 hereof, the audited balance sheet of the Company as
of March 31, 1997 (the "Closing Financial Statement Date") (once
finalized and binding in accordance with this Section 1.7, the
"Closing Balance Sheet"), together with the related audited
statements of (i) income and retained earnings and (ii) cash
flows, each for the period November 1, 1996 through the Closing
Financial Statement Date (collectively with the Closing Balance
Sheet, once finalized and binding in accordance with this Section
1.7, the "Closing Financial Statements"), prepared (i) from the
books and records of the Company, (ii) in accordance with
generally accepted accounting principles applicable to a fiscal
year end ("GAAP"), (iii) on a basis consistent with (x) the
audited balance sheet of the Company as at October 31, 1996 (the
"1996 Balance Sheet") and the related audited statements of (A)
income and retained earnings and (B) cash flows, each for the
fiscal year then ended and (y) the unaudited balance sheet of the
Company as at January 31, 1997, and the related unaudited
statements of (A) income and retained earnings and (B) cash
flows, each for the three months ending January 31, 1997, (iv)
with respect to pension and post-retirement welfare benefits, on
an ongoing basis using the actuarial assumptions and procedures
used in connection with the 1996 Balance Sheet and without
reflecting any adjustment for settlements, curtailments or
business combinations relating to the sale of the Shares to the
Buyer pursuant to this Agreement and (v) fairly presenting the
financial condition and results of operations of the Company as
of the Closing Financial Statement Date and for the portion of
the fiscal year then ending; provided,however, that the Closing
Balance Sheet (which shall be prepared in accordance with GAAP)
shall not reflect any reserves, provisions, or accruals for any
Taxes (other than deferred income Taxes) relating to any
consolidated federal income Tax Returns or any consolidated,
combined, affiliated or unitary state, local or foreign income
Tax Returns (including, but not limited to, Indiana Corporation
Income Tax Returns filed on a combined basis) which include the
Company, including, but not limited to, such reserves, provisions
or accruals for "Income Taxes Payable to Parent" (which the
Parties acknowledge and agree will be subtracted from any
intercompany receivable to the Company from the Seller or added
to any intercompany payable by the Company to the Seller, as the
case may be, in connection with the preparation and finalization
of the Closing Balance Sheet). The costs and expenses incurred
in connection with the preparation and delivery of the Closing
Financial Statements shall be borne by the Seller.
(b) From time to time following the Closing and until
the Closing Financial Statements have been finalized in
accordance with this Section 1.7, Niagara and the Buyer on the
one hand, and the Seller on the other hand, shall give each
other, and any of its or their independent accountants and
authorized representatives, reasonable access during normal
business hours to the properties, books, records and personnel of
the Seller and the Company, and shall use its or their reasonable
best efforts (which shall not be deemed to require the Seller to
make any unreasonable expenditures) to cause the Company's
independent accountants to make available to each such Party, and
its or their authorized representatives, their work papers
generated in connection with their review and audit of the
Company's financial statements, in each case relating to periods
ending on or prior to the Closing Date, for purposes of
preparing, reviewing and resolving any disputes concerning the
Closing Financial Statements. All such information and access
shall be conducted in a manner which does not unreasonably
interfere with such other Party's business and operations and
shall be subject to the provisions of Section 4.4(a) hereof.
(c) Niagara and the Buyer shall have 45 days following
delivery of the financial statements referred to in Section
1.7(a) hereof during which to submit to the Seller, in accordance
with Section 7.9 hereof, a written statement (a "Buyer's
Statement") setting forth any disputed item (and shall provide,
in reasonable detail, the basis for such dispute) in such
financial statements. In this regard, it is understood and
agreed that Niagara and the Buyer may themselves prepare
financial statements of the Company as of the Closing Date and
for the portion of the fiscal year then ended or submit specific
changes to the financial statements delivered by the Seller to
Niagara and the Buyer pursuant to Section 1.7(a) hereof. The
Seller shall cooperate with Niagara and the Buyer as reasonably
requested in the preparation of any such financial statements.
The costs and expenses incurred in connection with the
preparation and delivery of a Buyer's Statement shall be borne by
the Buyer. If Niagara and the Buyer fail to submit a Buyer's
Statement within such 45-day period, then the financial
statements delivered by the Seller to Niagara and the Buyer
pursuant to Section 1.7(a) hereof shall be deemed the Closing
Financial Statements.
(d) In the event Niagara and the Buyer deliver to the
Seller a Buyer's Statement, the Parties shall consult and attempt
to resolve, as soon as practicable, all disputes set forth
therein. In the event the Parties are unable to resolve any such
dispute within 30 days of the delivery of the Buyer's Statement,
such disputes shall be resolved by Xxxxxx Xxxxxxxx & Co. (the
"Independent Accounting Firm"). If, for any reason, Xxxxxx
Xxxxxxxx & Co. cannot serve as the Independent Accounting Firm or
declines to so serve, then such dispute shall be resolved by
Coopers & Xxxxxxx and such accounting firm shall be the
Independent Accounting Firm for purposes of this Agreement. If,
for any reason, Coopers & Xxxxxxx cannot serve as the Independent
Accounting Firm or declines to so serve, then such disputes shall
be resolved by KPMG Peat Marwick and such accounting firm shall
be the Independent Accounting Firm for purposes of this
Agreement. The Independent Accounting Firm shall be instructed
to make its determination as promptly as practicable and such
determination shall be final and binding upon the Parties
enforceable by appropriate judicial proceedings. The fees and
expenses of the Independent Accounting Firm in performing such
function shall be shared equally by Niagara or the Buyer, on the
one hand, and the Seller, on the other hand. The financial
statements delivered by the Seller to Niagara and the Buyer
pursuant to Section 1.7(a) hereof, as modified to reflect the
resolution of disputes by the Parties or by the Independent
Accounting Firm in accordance with this Section 1.7, shall be the
"Closing Financial Statements."
(e) On the tenth business day following the delivery of
the Closing Financial Statements (the "Adjustment Date") either
(i) the Buyer shall pay to the Seller the difference between the
Purchase Price (as defined below) and the Estimated Purchase
Price, if the Purchase Price exceeds the Estimated Purchase Price
or (ii) the Seller shall pay to the Buyer the difference between
the Purchase Price and the Estimated Purchase Price, if the
Estimated Purchase Price exceeds the Purchase Price, in either
case by interbank or wire transfer of immediately available funds
to an account designated in writing by the recipient of such
payment at least two business days prior to the Adjustment Date.
In this regard, it is understood and agreed that any payable to
or receivable from the Seller as of the Closing Financial
Statement Date shall be cancelled without any payment by one
Party to another Party in respect thereof. For purposes of this
Agreement, (i) "Purchase Price" shall mean the sum of (x)
$58,862,000 and (y) Total Equity (as defined below) reduced by
Estimated Total Equity (as defined below); (ii) "Total Equity"
shall mean the sum of (x) total stockholder's equity stated on
the Closing Balance Sheet and (y) the amount of any intercompany
payable from the Company to the Seller stated on the Closing
Balance Sheet reduced by the amount of any intercompany
receivable of the Company from the Seller stated on the Closing
Balance Sheet and (iii) "Estimated Total Equity" shall mean
$4,709,000, which is the total stockholder's equity stated on the
1996 Balance Sheet reduced by the amount of the intercompany
receivable due the Company from the Seller (other than in respect
of Taxes) stated on the 1996 Balance Sheet.
(f) The rights to indemnification in favor of any Buyer
Indemnified Party (as defined in Section 6.3 hereof) pursuant to
Section 6.3(i) hereof (and any limitations on such rights) shall
not be deemed to limit, supersede or otherwise affect the rights
of the Buyer and the Seller for a full purchase price adjustment
pursuant to this Section 1.7, provided that no claim for
indemnification may be made pursuant to Section 6.3(i) hereof
with respect to any Losses (as defined in Section 6.3 hereof) to
the extent that such Losses are included as a liability on the
Closing Balance Sheet.
(g) Within two business days of the Closing Date, the
Seller shall deliver to Niagara and the Buyer, by overnight
delivery (Federal Express) to the addresses set forth in Section
7.9 hereof, a statement (the "Intercompany Statement") of the
results of the cash activity in the intercompany account between
the Seller and the Company (taking into account (i) cash
transfers to and from the Seller and (ii) non-cash xxxxxxxx from
the Seller only to the extent that such xxxxxxxx result from cash
disbursements made by the Seller on behalf of the Company) from
(but not including) the Closing Financial Statement Date through
(and including) the Closing Date (the "Interim Period"), together
with appropriate supporting documentation (including any such
supporting documentation that Niagara or the Buyer may reasonably
request). Within seven business days of the Closing Date, and
notwithstanding the delivery of a Buyer's Intercompany Statement
(as defined below), the Buyer shall pay to the Seller, or the
Seller shall pay to the Buyer, the amount of the intercompany
payable in respect of such activity as set forth on such
statement (the "Intercompany Payment"), in either case by
interbank or wire transfer of immediately available funds to an
account designated in writing by the recipient of such payment at
least one business day prior to such date. From and after the
Closing, the Seller shall promptly deliver all funds and mail of
any kind or form relating to the Business or the Company to the
Company's administrative offices in Hammond, Indiana. Niagara
and the Buyer shall have 30 days following delivery of the
Intercompany Statement during which to submit to the Seller, in
accordance with Section 7.9 hereof, a written statement (a
"Buyer's Intercompany Statement") setting forth any disputed item
(and shall provide, in reasonable detail, the basis for such
dispute) in the Intercompany Statement. In the event Niagara and
the Buyer deliver to the Seller a Buyer's Intercompany Statement,
the Parties shall consult and attempt to resolve, as soon as
practicable, all disputes set forth therein. In the event the
Parties are unable to resolve any such dispute within 15 days of
the delivery of a Buyer's Intercompany Statement, such disputes
shall be resolved by the Independent Accounting Firm. The
Independent Accounting Firm shall be instructed to make its
determination as promptly as practicable and such determination
shall be final and binding upon the Parties enforceable by
appropriate judicial proceedings. The fees and expenses of the
Independent Accounting Firm in performing such function shall be
shared equally by Niagara or the Buyer, on the one hand, and the
Seller, on the other hand. On the fifth business day following
the resolution of all disputes set forth in the Buyer's
Intercompany Statement (either by the Parties or by the
Independent Accounting Firm) in accordance with this Section
1.7(g), the Buyer or the Seller, as the case may be, shall make a
payment to the other in an amount that reflects the resolution of
all such disputes. Such payment shall be made by interbank or
wire transfer of immediately available funds to an account
designated in writing by the recipient of such payment at least
two business days prior to such payment date.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE SELLER
The Seller represents and warrants to Niagara and the Buyer
as follows:
2.1 Organization and Standing Each of the Seller and the
Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware and has all
requisite corporate power and authority to own, lease and operate
its properties and assets and to carry on its business and
operations as now being and, in the case of the Company, as
heretofore conducted. The Company received its Certificate of
Authority to transact business in the State of Indiana on January
5, 1982, and is currently duly authorized to transact business in
such State. The Company has filed its most recent annual report
required by Indiana law to be filed with the Indiana Secretary of
State, or is not yet required to file such annual report, and the
Company has not filed an Application for a Certificate of
Withdrawal with the Indiana Secretary of State. The Company is
duly qualified or licensed to do business as a foreign
corporation and is in good standing in each other jurisdiction
set forth on Schedule 2.1 of the disclosure schedule delivered by
the Seller to Niagara and the Buyer concurrently herewith (the
"Disclosure Schedule"), which, in addition to Indiana, are the
only jurisdictions in which the property owned, leased or
operated by the Company or the conduct of the Business makes such
qualification necessary.
2.2 Organizational Documents and Corporate Records (a)
The Seller is concurrently delivering to Niagara and the Buyer
complete and correct copies of the Certificate of Incorporation
and By-laws of the Company as currently in effect. The minute
books of the Company (and with respect to the Business, excerpts
of the minutes of the Seller) have been made available to Niagara
and the Buyer for their inspection, and such minute books (and
excerpts) contain complete and correct records in all material
respects of all meetings (or, in the case of the Seller, all
portions thereof) and consents in lieu of a meeting, of the
respective Boards of Directors (and any committees thereof) and,
in the case of the Company, its stockholders, and accurately
reflect in all material respects all transactions referred to
therein. The stock books and ledgers of the Company have been
made available to Niagara and the Buyer for their inspection, and
such books and ledgers are complete and correct in all material
respects.
(b) The Seller has made available to Niagara and the
Buyer all of the accounting, corporate and financial books and
records relating to the Business. Such books and records are, in
the aggregate, true, accurate and complete in all material
respects and fairly reflect the basis for the Company's financial
condition and results of operations as set forth in the Audited
Financial Statements (as defined in Section 2.7 hereof) and the
Unaudited Financial Statements (as defined in Section 2.7
hereof).
2.3 Equity Investments The Company does not directly or
indirectly own or control any capital stock or other securities
of or other interests or investments in any other individual,
partnership, firm, trust, association, corporation, joint
venture, joint stock company, unincorporated organization,
Governmental Authority (as defined in Section 2.6 hereof), or
other entity (each of which, a "Person") nor does the Company
have any obligation or right to acquire any such capital stock,
securities interest or investment.
2.4 Authorization; Binding Obligation The Seller, and to
the extent it is a party thereto, the Company, have all requisite
corporate power and authority to execute and deliver this
Agreement and the Other Documents executed and delivered by such
parties pursuant hereto or in connection herewith, and to
consummate the transactions contemplated hereby and thereby and
to perform their obligations hereunder and thereunder. The
execution and delivery of this Agreement and the Other Documents
executed and delivered by the Seller and the Company pursuant
hereto or in connection herewith, and the consummation of the
transactions contemplated hereby and thereby by such parties,
have been duly and validly authorized by the Boards of Directors
of such parties, and no other corporate proceedings on the part
of the Seller or the Company are necessary to authorize this
Agreement or the Other Documents executed and delivered by such
parties pursuant hereto or in connection herewith, or for such
parties to consummate the transactions contemplated hereby and
thereby. This Agreement and the Other Documents executed and
delivered by the Seller and the Company pursuant hereto or in
connection herewith have been duly and validly executed and
delivered by such parties and, assuming the due authorization,
execution and delivery by Niagara, the Buyer and any other party
thereto, constitute legal, valid and binding obligations of the
Seller and the Company, as the case may be, enforceable against
such parties in accordance with their respective terms. Except
as and to the extent set forth on Schedule 2.4 of the Disclosure
Schedule, no power of attorney has been granted by the Seller or
the Company and is currently in force with respect to any matter
relating to the Company, the Shares, the Business or the
Company's assets.
2.5 Capitalization; Title to the Shares (a) The
capitalization of the Company consists of 100,000 shares of
common stock, par value $1.00 per share, of which 1,000 shares
are issued and outstanding. The Company has no other classes of
capital stock authorized or outstanding. None of the Company's
shares of capital stock have been reserved for any purpose. All
of the Shares are duly authorized and validly issued, fully paid,
nonassessable and were not issued in violation of any preemptive
rights. There are no (i) options, warrants, calls, commitments
or rights of any character to purchase or otherwise acquire from
the Company shares of capital stock of the Company of any class,
(ii) outstanding securities of the Company that are convertible
into or exchangeable or exercisable for shares of any class of
capital stock of the Company, (iii) options, warrants or other
rights to purchase from the Company any such convertible or
exchangeable securities or (iv) Contracts (as defined in Section
2.13 hereof) of any kind relating to the issuance of any capital
stock of the Company, or any such options, warrants or rights,
pursuant to which, in any of the foregoing cases, the Company is
subject or bound.
(b) Immediately prior to the Closing, the Seller was the
record and beneficial owner of, and had good and marketable title
to, the Shares, free and clear of all Encumbrances (as defined
below). The Shares are not subject to any restrictions on
transferability other than those imposed by the Securities Act of
1933, as amended (the "Securities Act") and applicable state
securities laws. There are no options, warrants, calls,
commitments or rights of any character to purchase or otherwise
acquire Shares from the Seller pursuant to which the Seller may
be obligated to sell or transfer any of the Shares, other than
this Agreement. At the Closing, the Seller is transferring good
and marketable title to the Shares, free and clear of all
Encumbrances. For purposes of this Agreement, "Encumbrances"
shall mean and include all liens (including any liens filed under
the Internal Revenue Code of 1986, as amended (the "Code") or
under the tax laws of any foreign, state or local Governmental
Authority), encumbrances, proxies, voting trust arrangements,
pledges, security interests, collateral security agreements,
financing statements (and similar notices) filed with any
Governmental Authority, claims, charges, mortgages, equities,
title defects, options, restrictive covenants or restrictions on
transfer of any nature whatsoever.
2.6 Consents and Approvals; No Violation Except as and to
the extent set forth on Schedule 2.6 of the Disclosure Schedule,
neither the execution and delivery of this Agreement and the
Other Documents executed and delivered by the Seller and the
Company pursuant hereto or in connection herewith, nor the
consummation by the Seller or the Company of the transactions
contemplated hereby or thereby, nor compliance by the Seller or
the Company with any of the provisions hereof or thereof (a)
conflicts with any provision of the Certificate of Incorporation
or By-laws or other similar organizational documents of the
Company or the Seller, (b) requires any consent, Permit (as
defined in Section 2.14 hereof) or waiver (collectively,
"Consents") of, filing with or notification to, or any other
action by, any Governmental Authority (as defined below) by the
Company or the Seller, (c) violates any law, rule, regulation,
restriction (including zoning), code, statute, ordinance, order,
writ, injunction, judgment or decree (collectively, "Laws") of a
government or political subdivision thereof, whether federal,
state, local or foreign, or any agency, department, commission,
board, bureau, court, tribunal, body, administrative or
regulatory authority or instrumentality of any such government or
political subdivision (collectively, "Governmental Authorities")
applicable to the Company or the Seller, or by which any of their
businesses, properties or assets (including, without limitation,
the Shares) is bound or affected or (d) violates, breaches, or
conflicts with, or constitutes (with or without due notice or
lapse of time or both) a default (or give rise to any right of
termination, cancellation or acceleration or any obligation to
pay or result in the imposition of any Encumbrance upon any of
the property (including, without limitation, the Shares)) under
any of the terms, conditions or provisions of any credit
agreement (including, without limitation, the Credit Agreement),
letter of credit, guaranty obligation (including, without
limitation, the Guaranty), note, bond, mortgage, indenture,
Encumbrance, contract, Permit, Order (as defined in Section 2.14
herein), or other instrument or obligation to which the Seller or
the Company is a party or by which any of their businesses,
properties or assets (including, without limitation, the Shares)
is bound or affected.
2.7 Financial Statements Schedule 2.7 of the Disclosure
Schedule consists of complete and correct copies of (i) the
audited balance sheets of the Company as at October 31 in each of
the years 1994 through 1996, and the related audited statements
of (x) income and retained earnings and (y) cash flows, each for
the fiscal years then ended (together with the notes thereto),
certified by Deloitte & Touche, LLP, the Company's independent
public accountants, and accompanied by their reports thereon
(collectively, the "Audited Financial Statements") and (ii) the
unaudited balance sheet of the Company as at January 31, 1997
(the "January 97 Balance Sheet") and the related unaudited
statements of (x) income and retained earnings and (y) cash
flows, each for the quarter ended January 31, 1997 (collectively
with the January 97 Balance Sheet, the "Unaudited Financial
Statements"). The Audited Financial Statements and the Unaudited
Financial Statements (i) have been prepared from the books and
records of the Company in accordance with GAAP consistently
applied and maintained throughout the periods indicated (except
as indicated in the notes thereto and subject in the case of the
Unaudited Financial Statements to adjustments and accruals
normally made in the preparation of year-end financial
statements) and (ii) and fairly presents the financial condition
and results of operations of the Company, as at the date thereof
and for the periods then ended.
2.8 Absence of Undisclosed Liabilities The Company has no
liabilities or obligations of any nature arising from or relating
to its business and operations (whether absolute, accrued, fixed,
contingent, liquidated, unliquidated or otherwise and whether due
or to become due) that are required to be reflected or reserved
against on the 1996 Balance Sheet (or the notes thereto) in
accordance with GAAP which were not reflected or reserved against
on the 1996 Balance Sheet, except for liabilities or obligations
incurred since October 31, 1996 in the ordinary course of
business consistent with past practice. Schedule 2.8 of the
Disclosure Schedule sets forth a complete and correct list of all
obligations (the "Indebtedness") of the Company at the Closing
with respect to borrowed money and letters of credit, and any
notes, bonds or similar instruments or under any capitalized
lease or guarantee of the Company, and the balances due
thereunder. The transfer of the Shares pursuant hereto will not
cause the acceleration of or otherwise adversely affect the terms
or conditions of such obligations.
2.9 Accounts Receivable Schedule 2.9(a) of the Disclosure
Schedule sets forth a complete and correct list of all accounts
and notes receivable ("Accounts Receivable"), together with the
customer name, aging and dollar amount, as of the Closing
Financial Statement Date. All Accounts Receivable reflected on
the 1996 Balance Sheet and the January 97 Balance Sheet, and all
Accounts Receivable as of the Closing Date, are (i) except as and
to the extent set forth on Schedule 2.9(b) of the Disclosure
Schedule, in respect of sales actually made in the ordinary
course of business, (ii) subject to no prior assignment or,
except as and to the extent set forth on Schedule 2.9(c) of the
Disclosure Schedule, Encumbrance and (iii) to the knowledge of
those Persons identified on Schedule 2.9(d) of the Disclosure
Schedule, subject to no counterclaim or setoff.
2.10 Inventory All inventory owned or held by the Company
and used in the conduct of the Business, including manufacturing
supplies, raw materials, components, repair parts, work-in-
progress, finished goods and other similar items, whether raw or
used ("Inventory") which is reflected on the 1996 Balance Sheet
and the January 97 Balance Sheet, and all such Inventory as of
the Closing Financial Statement Date, is valued at the lower of
cost or market value. To the knowledge of those Persons
identified on Schedule 2.10(a) of the Disclosure Schedule, the
Inventory reflected on the 1996 Balance Sheet and the January 97
Balance Sheet, and the Inventory as of the Closing Financial
Statement Date, 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 1996 Balance Sheet, have been written
off or written down to the Company's best estimate of net
realizable value and (ii) items which, after the Closing
Financial Statement Date, the Company has a right to return to
the respective vendor or supplier. The Inventory reflected on
the 1996 Balance Sheet and the Inventory as of the Closing Date
does not include any materials held by the Company on consignment
from any third parties. All Inventory disposed of by the Company
since October 31, 1996 has been disposed of only in the ordinary
course of the Company's business consistent with past practice.
To the knowledge of those Persons identified on Schedule 2.10(b)
of the Disclosure Schedule, all Inventory is free from any defect
or other deficiency except for items of obsolete materials and
materials of below-standard quality which have been written off
or written down to the Company's best estimate of net realizable
value. The quantities of all Inventory are reasonable under the
current circumstances of the Company's business and operations.
Except as and to the extent set forth on Schedule 2.10(c) of the
Disclosure Schedule, none of the Inventory is in the possession
of others.
2.11 Absence of Certain Changes or Events Except as and to
the extent set forth on Schedule 2.11(a) of the Disclosure
Schedule, since October 31, 1996:
(i) the Company has operated its business in the
ordinary course consistent with past practice;
(ii) there has not been any material adverse change
in the business, results of operations, assets, liabilities,
financial condition or prospects of the Company;
(iii) the Company has not incurred any material
damage, destruction or loss (whether or not covered by
insurance) to its owned or leased property or assets;
(iv) the Company has not transferred, licensed,
sublicensed, disposed of, abandoned or permitted to lapse or
otherwise failed to preserve any material rights to use any
Intellectual Property (as defined in Section 2.19 hereof) or
disclosed to any third party, other than representatives of
Niagara and the Buyer, any trade secret, process or know-how
not theretofore a matter of public knowledge relating to the
Company's business or operations;
(v) the Company has not transferred, disposed of,
abandoned or permitted to lapse or otherwise failed to
preserve any Permit issued by a Governmental Authority;
(vi) the Company has not sold, assigned, leased,
transferred, incurred any Encumbrance on or license with
respect to, or disposed of, abandoned, or conveyed any of
its properties or assets (whether real, personal or mixed,
tangible or intangible) with a book value of $100,000 or
more, except in the ordinary course of business consistent
with past practice;
(vii) the Company has not modified, amended or
terminated any Material Contract (as defined in Section 2.13
hereof) other than Material Contracts that are Designated
Plans, or, to the knowledge of those Persons identified on
Schedule 2.11(b) of the Disclosure Schedule, canceled any
debts or claims or waived any rights of substantial value;
(viii) the Company has not made, or committed to
make, any capital expenditures except capital expenditures
made in the ordinary course of business consistent with past
practice, of which no such expenditure for a single project
exceeds $25,000 and which in the aggregate do not exceed
$100,000 and has no uncommitted capital expenditures for
projects;
(ix) the Company has not incurred any liabilities
or obligations of any nature (whether absolute, accrued or
contingent, for borrowed money or otherwise, and whether due
or to become due) other than (a) Contracts entered into in
the ordinary course of business consistent with past
practice or (b) Contracts which do not involve monetary
obligations by or to the Company of more than $100,000;
(x) the Company has not paid, discharged or
satisfied any Encumbrance or liability (whether absolute,
accrued, contingent or otherwise and whether due or to
become due), other than Encumbrances or liabilities which
are (a) incurred in the ordinary course of business or (b)
reflected or reserved against on (or in the notes to) the
1996 Balance Sheet and the related audited statements of
income and retained earnings, and cash flows;
(xi) the Company has not (a) created or entered
into any employment agreements that are not terminable at
will, (b) granted or agreed to an increase in the
compensation of the current or former employees of the
Company (other than increases for employees who are not and
were not officers of the Company made in the ordinary course
of business and consistent with past practices), (c) created
or entered into a Designated Plan (as defined in Section
2.16 hereof), or (d) amended any Designated Plan to increase
any benefits payable thereunder except as required by the
Code or ERISA (as defined in Section 2.16 hereof);
(xii) the Seller has not created or entered into a
Designated Plan or amended any Designated Plan to increase
benefits payable thereunder except as required by the Code
or ERISA;
(xiii) the Company has not declared, paid or made
or set aside for payment or making, any dividend or other
payment or distribution of any kind 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;
(xiv) the Company 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 such shares or other convertible
securities or acquired any capital stock or other securities
or interests of any Person, or otherwise made a loan or
advance to or investment in any Person;
(xv) neither the Company nor, with respect to the
Business, the Seller, has made any change in any accounting
methods, principles or practices (including, without
limitation, changes in depreciation or amortization policies
or rates or relating to the establishment or accrual of
reserves) or any material election with respect to Taxes (as
defined in Section 2.18 hereof);
(xvi) except as will be reflected in the Closing
Financial Statements, the Company 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 an
amount in excess of $25,000 to, or entered into any
agreement, arrangement or transaction with, the Seller or
any of the Seller's Affiliates (as defined in Section 2.24
hereof);
(xvii) neither the Company nor, with respect to the
Business, the Seller, has instituted, settled or agreed to
settle any litigation, action or proceeding by or before any
Governmental Authority;
(xviii) the Company has not ordered any materials
from the Seller or any Seller's Affiliate; and
(xix) neither the Company nor, with respect to the
Business, the Seller, has agreed, whether in writing or
otherwise, to take any action described in this Section
2.11.
2.12 Properties and Assets (a) The Company has good,
valid, marketable and fee simple title to, or a valid leasehold
interest in, all of the real property owned or leased by the
Company as more particularly described on Schedule 2.12(a)-1 of
the Disclosure Schedule (the "Real Property"). Except as and to
the extent set forth on Schedule 2.12(a)-2 of the Disclosure
Schedule, the Real Property owned or, in respect of the Real
Property leased by the Company, its leasehold interest, is
subject to no Encumbrance, encroachment, building or use
restriction, zoning violation, exception, reservation or
limitation.
(b) Except as and to the extent set forth on Schedule
2.12(b)-1 of the Disclosure Schedule, the Company and the Seller
have not received any written notice advising them 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 the Company or the Seller)
or, to the knowledge of those Persons identified on Schedule
2.12(b)-2 of the Disclosure Schedule, 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 the Company with, or, to the knowledge of those Persons
identified on Schedule 2.12(b)-3 of the Disclosure Schedule,
enforceable by, any Governmental Authority. Except as and to the
extent set forth on Schedule 2.12(b)-4 of the Disclosure
Schedule, no written notice from any Governmental Authority has
been provided to the Company or the Seller 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 those Persons identified on
Schedule 2.12(b)-5 of the Disclosure Schedule, the current
operations of the Company are permitted uses under applicable
zoning regulations and there is no requirement for any special
exception, variance or other conditional approval to permit the
Company to continue to operate at the respective locations where
the Company currently operates.
(c) Except as and to the extent set forth in Items 3, 4
and 5 on Schedule 2.12(c)-1, the Company 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 Business, and such items are subject to no
Encumbrance except as and to the extent set forth in Items 1 and
2 on Schedule 2.12(c)-1 of the Disclosure Schedule. All
buildings, improvements, equipment or other material assets
currently used in connection with the business and operations of
the Company are structurally sound, and to the knowledge of those
Persons identified on Schedule 2.12(c)-2 of the Disclosure
Schedule, 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 2.12(c)-3 of the
Disclosure Schedule and except for the Inventory, none of the
Company's tangible assets are in the possession of others.
(d) Except as and to the extent set forth on Schedule
2.12(d) of the Disclosure Schedule, the equipment and other items
of tangible personal property of the Company are in good and
normal operating condition and repair (ordinary wear and tear
excepted).
2.13 Certain Contracts Schedule 2.13(a) of the Disclosure
Schedule sets forth a complete and correct list of all Material
Contracts (as defined below). Complete and correct copies of all
written Material Contracts, including any and all amendments and
other modifications thereto, have been delivered to or been made
available for inspection by Niagara and the Buyer. All Material
Contracts (x) are valid and binding obligations of the Company
and, to the knowledge of those Persons identified on Schedule
2.13(b) of the Disclosure Schedule, the other parties thereto,
(y) are in full force and effect and are enforceable as to the
Company and, to the knowledge of those Persons identified on
Schedule 2.13(c) of the Disclosure Schedule, the other parties
thereto, in accordance with their respective terms and (z) except
for any Material Contract that is a Designated Plan, have not
been amended or terminated except in the ordinary course of
business consistent with past practice. The Company is not in
default under nor has it breached in any respect any Material
Contract. No other party to any Material Contract (i) has, to
the knowledge of those Persons identified on Schedule 2.13(d) of
the Disclosure Schedule, breached or is in default thereunder,
(ii) has given notice that it intends to terminate such Material
Contract or (iii) has altered, in any way adverse to the Company,
its performance under such Material Contract. No event or
condition has occurred (or is alleged by any other party to a
Material Contract to have occurred) which, with or without due
notice or lapse of time or both, would constitute, a breach or
event of default on the part of the Company, would provide a
basis for a valid claim or acceleration under any Material
Contract as against the Company or would prevent the Company from
exercising and obtaining the full benefits of any rights or
options contained therein. For purposes of this Agreement,
"Contracts" shall mean and include all leases, contracts,
agreements, license agreements, purchase orders, invoices, sales
orders, instruments evidencing indebtedness for borrowed money,
mortgages or other documents securing any indebtedness for
borrowed money, commitments and understandings, written or oral,
and all amendments or modifications thereto, to which the Company
is a party or by which the Company, or any of the Company's
business, properties or assets, is bound; and "Material
Contracts" shall mean and include 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, the license agreements set forth on
Schedule 2.19(b) of the Disclosure Schedule and assignments of
any Intellectual Property, (d) leases of personal property by or
to the Company involving monetary obligations of more than
$25,000 per year, (e) purchase or supply Contracts with terms
extending for a period of more than three months involving
monetary obligations by or to the Company of more than $25,000
per year ( but specifically excluding the informal arrangement
identified on Schedule 2.13(a)-1 of the Disclosure Schedule), (f)
Contracts with any other direct or indirect subsidiary of the
Seller providing for payments in excess of $25,000 or Contracts
with any Seller's Affiliate other than such subsidiaries, (g) any
employment, severance, retention, consulting, non-competition or
confidentiality Contract, (h) Contracts relating to the shipment
or transport of the Company's finished goods involving monetary
obligations exceeding $25,000 per year and (i) Contracts which
otherwise are material to the Business.
2.14 Compliance with Laws and Permits (a) The Business
has been conducted and is now being conducted in all material
respects in compliance with all Laws and orders, judgments,
injunctions, awards, decrees, writs and similar actions
("Orders") of all Governmental Authorities having jurisdiction
over the Company and all franchises, licenses, certificates,
registrations, permits, authorizations, approvals of, and any
required registration with, all Governmental Authorities
("Permits") relating to any of its properties or applicable to
the Business.
(b) To the knowledge of those Persons identified on
Schedule 2.14(a) of the Disclosure Schedule, the Company
possesses all Permits necessary to own and operate its properties
and assets and to conduct its business as it is currently
conducted. To the knowledge of those Persons identified on
Schedule 2.14(b) of the Disclosure Schedule, such Permits are
valid, subsisting and in full force and effect, and the Company
has fulfilled its obligations under each of such Permits, and no
event has occurred or condition or state of facts exists which
constitutes or, after notice or lapse of time or both, would
constitute, a default or violation under any of such Permits or
would permit revocation or termination of any of such Permits.
In respect of any such Permits, no proceeding is pending for
which notice has been provided to the Company or the Seller or,
to the knowledge of those Persons identified on Schedule 2.14(c)
of the Disclosure Schedule, threatened, looking toward revocation
or termination of any such Permits.
2.15 Litigation and Arbitration (a) Neither the Company
nor the Seller is subject to any Order affecting the Company or
the Business. Neither the Company nor, with respect to the
Company, the Seller, is a party to, is bound by, or has any
obligation under any settlement agreement affecting the Business
or any agreement, waiver or Consent tolling any statute of
limitations. Except as and to the extent set forth on Schedule
2.15(a) 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 the Seller or the Company)
or, to the knowledge of those Persons identified on Schedule
2.15(b) of the Disclosure Schedule, threatened against the
Company or affecting the Business, and no such claim, action,
suit, inquiry, proceeding or investigation has been pending (for
which notice was provided to the Seller or the Company) during
the three-year period preceding the date hereof except as and to
the extent set forth on Schedule 2.15(c) of the Disclosure
Schedule. Schedule 2.15(d) of the Disclosure Schedule sets forth
a complete and correct list of all workers compensation claims in
excess of $10,000 brought by employees of the Company during the
three years prior to the date hereof, together with the amount of
all workers compensation claims brought by employees of the
Company for each such year. None of the Persons identified on
Schedule 2.15(e) of the Disclosure Schedule has knowledge of any
fact or circumstance which could reasonably be expected to result
in any other claim, action, cause of action, suit, proceeding,
inquiry, investigation or Order against the Company or the
Business.
(b) No claim, action, suit, proceeding, inquiry or
investigation set forth on Schedules 2.15(a) or (d) of the
Disclosure Schedule, individually or in the aggregate, if
adversely decided, could have a material adverse affect on the
Company or the Business or prevent the consummation of the
transactions contemplated by this Agreement or the Other
Documents executed and delivered pursuant hereto or in connection
herewith.
2.16 Employee Benefit Plans (a) Schedule 2.16(a) of the
Disclosure Schedule contains a complete and correct list of (i)
all employee welfare benefit and employee pension benefit plans
as defined in Sections 3(1) and 3(2) of the Employee Retirement
Income Security Act of 1974, as amended ("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
("Plans") and (ii) all other material employee benefit agreements
or arrangements that are not Plans ("Benefit Arrangements"),
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, non-
competition 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 of the date hereof, or have been
approved before this date but are not yet effective, for the
benefit of directors, officers, employees or former employees (or
their beneficiaries) of the Company (Plans and Benefit
Arrangements being collectively referred to herein as "Designated
Plans"). Schedule 2.16(a) 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) With respect to each Designated Plan, the Seller or
the Company has heretofore delivered to Niagara and the Buyer,
complete and correct copies of each of the following documents:
(i) the Designated Plan and any
amendments thereto (or if the Designated Plan is not a
written Plan, a description thereof);
(ii) the three most recent annual
Form 5500 reports;
(iii) the three most recent actuarial
reports;
(iv) the three most recent reports
prepared in accordance with Statement of Financial
Accounting Standards No. 87;
(v) the most recent summary plan
description;
(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 Internal Revenue Service
("IRS") with respect to each Designated Plan that is
intended to qualify under Section 401 of the Code.
(c) No asset of the Company, or any entity (whether or
not incorporated) that is treated as a single employer together
with the Company under Section 414 of the Code (an "ERISA
Affiliate"), is the subject of any lien arising under Section
302(f) of ERISA or Section 412(n) of the Code; no Company or
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 be expected to give
rise to any such lien or requirement to post any such security.
(d) 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 the Company or any ERISA Affiliate and no
condition exists that presents a material risk that such
proceedings will be instituted.
(e) Except as and to the extent set forth on Schedule
2.16(b) of the Disclosure Schedule, no pension benefit plan as
defined in Section 3(1) of ERISA that is maintained or
contributed to by the Company 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
prior to the Closing Date. All contributions required to be made
with respect to any Plan on or prior to the Closing Date have
been timely made or will be reflected on the Closing Balance
Sheet.
(f) Neither the Company nor any entity that was at any
time during the six-year period ending on the date hereof an
ERISA Affiliate has ever maintained, had an obligation to
contribute to, contributed to, or incurred any liability with
respect to a plan that is both a multiemployer plan (as defined
in Section 3(37) of ERISA) and a pension benefit plan (as defined
in Section 3(1) of ERISA) or a plan described in Section 4063(a)
of ERISA.
(g) To the knowledge of the Seller and the Company,
neither the Company nor any other entity has engaged in a
transaction that could reasonably be expected to result in the
imposition upon the Company of 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.
(h) Each Designated Plan has been operated and
administered in all material respects in accordance with its
terms and applicable Law, including but not limited to ERISA and
the Code.
(i) 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 (ii) of the applicable remedial amendment periods under
Section 401(b) of the Code will not have expired prior to the
Closing Date. The Seller and the Company have no knowledge of
any event or circumstance that could reasonably be expected to
cause the IRS to disqualify any Designated Plan that is intended
to qualify under Section 401(a) of the Code. To the knowledge of
the Seller and the Company, each Designated Plan that is intended
to satisfy the requirements of Section 501(c)(9) of the Code has
satisfied such requirements.
(j) Schedule 2.16(a) of the Disclosure Schedule
identifies each Designated Plan that provides medical, surgical,
hospitalization, or life insurance benefits (whether or not
insured by a third party) for employees or former employees of
the Company for periods extending beyond their retirements or
other terminations of service, other than (i) coverage mandated
by applicable Law, (ii) death benefits under any pension benefit
plan as defined in Section 3(1) of ERISA, or (iii) benefits the
full cost of which is borne by the current or former employee (or
his beneficiary).
(k) Except as and to the extent set forth on Schedule
2.16(c) of the Disclosure Schedule, the consummation of the
transactions contemplated by this Agreement and the Other
Documents, 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 the Company, 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.
(l) There is no litigation, action, proceeding, or claim
pending, or to the knowledge of the Seller and the Company,
threatened or contemplated relating to any Designated Plan (other
than routine claims for benefits).
(m) Except as and to the extent set forth on Schedule
2.16(d) of the Disclosure Schedule, neither the Company nor any
entity that was at any time during the six-year period ending on
the date hereof 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 the Company or an ERISA
Affiliate a late payment charge under Section 4007(b) of ERISA.
Except as and to the extent set forth on Schedule 2.16(e) of the
Disclosure Schedule, no condition exists that presents a risk
that the Company 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).
(n) During the six-year period ending on the day before
the Closing Date, no "reportable event" within the meaning of
Section 4043(c) of ERISA with respect to which the 30-day notice
requirement has not been waived by the PBGC has occurred with
respect to the LaSalle Steel Company Pension Plan for Hourly
Employees.
2.17 Personnel Information; Labor Relations
(a) Schedule 2.17(a) of the Disclosure Schedule sets
forth a complete and correct list of all directors and officers
of the Company and all other individuals employed by the Company
as of the close of business on the day prior to the date hereof,
together with such individual's title and/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 (as defined in Section 2.16 hereof). Except
as and to the extent set forth on Schedule 2.17(a) of the
Disclosure Schedule, as of the date prior to the date hereof,
neither the Company nor the Seller has received notification that
any of the current employees of the Company presently plans to
terminate his or her employment during the 1997 calendar year,
whether by reason of the transactions contemplated by this
Agreement (and the Other Documents) or otherwise.
(b) Except as and to the extent set forth on Schedule
2.17(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 those Persons identified
on Schedule 2.17(c) of the Disclosure Schedule, threatened
against the Company, and there has not been any such action
during the last three years; (ii) the Company is not a party to
or bound by any (A) collective bargaining or similar agreement
with any labor organization (complete and correct copies of which
have heretofore been delivered to the Buyer and Niagara) or (B)
written work rules or practices agreed to with any labor
organization or employee association applicable to employees of
the Company (complete and correct copies of which have hereto
been delivered to the Buyer and Niagara); (iii) no employee of
the Company is represented by any labor organization and, to the
knowledge of those Persons identified on Schedule 2.17(d) of the
Disclosure Schedule, there are no current union organizing
activities among the employees of the Company; (iv) there are no
material written personnel policies, rules or procedures
applicable to employees of the Company (complete and correct
copies of which have heretofore been delivered to the Buyer and
Niagara); (v) the Company 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 the Company
pending (for which notice has been provided to the Seller or the
Company) or, to the knowledge of those Persons identified on
Schedule 2.17(e) of the Disclosure Schedule, 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 the Company are pending
(for which notice has been provided to the Seller or the Company)
before the Equal Employment Opportunity Commission or any other
agency responsible for the prevention of unlawful employment
practices; (ix) neither the Company nor the Seller 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 the Company 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 the Seller or the Company) or, to the
knowledge of those Persons identified on Schedule 2.17(f) of the
Disclosure Schedule, threatened in any forum by or on behalf of
any present or former employee of the Company, any applicant for
employment or classes of the foregoing, alleging breach of 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.
(c) During the last four years, the Company has not
effectuated (i) a "plant closing" (as defined in the Worker
Adjustment Retraining Notification Act of 1988 (the "WARN Act"))
affecting any site of employment or one or more facilities or
operating units within any site of employment or facility of the
Company; or (ii) a "mass layoff" (as defined in the WARN Act)
affecting any site of employment or facility of the Company; nor
has the Company been 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 2.17(g) of the Disclosure
Schedule, none of the Company's employees has suffered an
"employment loss" (as defined in the WARN Act) in the six-month
period preceding the date hereof.
(d) The Company is in compliance in all material
respects with all Laws relating to employment or labor,
including, without limitation, ERISA, the WARN Act and those Laws
relating to wages, hours, collective bargaining, unemployment
insurance, workers' compensation, equal employment opportunity
and payment and withholding of Taxes.
2.18 Taxes Except as and to the extent set forth in
Schedule 2.18(a) of the Disclosure Schedule:
(a) The Company 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 the Company is or
has been a member ("Affiliated Group") have filed, or caused to
be filed, or there have been filed on their behalf, in a timely
manner, all Tax Returns (as defined below) required to be filed
on or before the date hereof (taking into account any and all
extensions) by or including the Company and all such Tax Returns
are complete and correct in all material respects.
(b) All Taxes (as defined below) due and payable or
claimed to be due and payable from the Company have been timely
paid in full or are not yet delinquent. Since October 31, 1996,
the Company has not incurred any Taxes other than in the ordinary
course of business.
(c) The Company has complied in all respects with all
applicable Laws relating to the withholding of Taxes (including,
without limitation, withholding of Taxes pursuant to Sections
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.
(d) Except for liens for ad valorem Taxes and real and
personal property Taxes not yet delinquent, there are no
Encumbrances for Taxes upon the Company's assets.
(e) In respect of the Company's Taxes, the Company has
not 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) Except for Taxes in connection with leases of
personal property by or to the Company, the Company has no
liability for the Taxes of any other Person by Contract or as
transferor or successor.
(g) There are no outstanding waivers or extensions of
time regarding the application of the statute of limitations with
respect to any Taxes of the Company or Tax Returns required to be
filed by or including the Company.
(h) No deficiency or claim has been formally proposed,
asserted or assessed with regard to any Taxes of the Company or
Tax Returns including or required to be filed by the Company,
which has not been resolved and paid in full.
(i) No audits or other administrative proceedings or
court proceedings are presently pending, and no written
notification of such proceedings has been received by the Seller
or the Company, with regard to any Taxes of the Company or Tax
Returns required to be filed by or including the Company.
(j) Except for leases of personal property by or to the
Company, the Company is not a party to, is not bound by, and has
no obligation under, any Contract providing for the allocation or
sharing of Taxes.
(k) No power of attorney has been granted with respect
to any matter relating to Taxes of the Company which is currently
in force.
(l) The Company is not 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.
(m) The Company has not filed a consent pursuant to
Section 341(f) of the 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 is defined in
Section 341(f)(4) of the Code) owned by the Company.
(n) No property of the Company is property that the
Company 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 prior to amendment by the Tax
Reform Act of 1986) or is "tax-exempt use property" within the
meaning of Section 168(h) of the Code.
(o) The Company has not agreed to make, or is not
required to make, any adjustment under Section 481(a) of the
Code.
(p) The Company has not participated in or cooperated
with an international boycott within the meaning of Section 999
of the Code.
(q) The consolidated federal income Tax Returns of the
affiliated group (within the meaning of Section 1504 of the Code)
of which the Seller is the common parent (within the meaning of
Section 1504 of the Code) and which includes the Company have
been audited by the IRS for all taxable periods through the
taxable period ended October 31, 1992, and the Company has been a
member of such affiliated group since December 30, 1981. The
Indiana Corporation Income Tax Returns which included the Company
and which have been filed on a combined basis with the Seller
have been audited for all taxable periods through the taxable
period ended October 31, 1994 and the Michigan Single Business
Tax Return filed on behalf of the Company has not been audited
for any taxable periods. The Company does not file and, to the
knowledge of those Persons identified on Schedule 2.18(b) of the
Disclosure Schedule, is not required to file, income Tax Returns
in any other jurisdiction.
(r) The Seller has provided to Niagara and the Buyer 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 the Company for
the taxable periods ended October 31, 1993, 1994 and 1995, (ii)
complete and correct copies of the state, local and foreign
income Tax Returns, (or, in the case of consolidated or combined
state, local, and foreign income Tax Returns the relevant
portions thereof) relating to the Company and filed by or
including the Company for the taxable periods ended October 31,
1993, 1994 and 1995, 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) 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 taxing 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; and "Tax Returns" shall mean and
include all federal, state, local and foreign tax returns,
declarations, statements, reports, schedules, forms, or
information returns relating to Taxes or other written
information required to be supplied to a taxing authority in
connection with Taxes (including any amended Tax Returns).
2.19 Intellectual Property
(a) The Company has the right and authority to use all
of the Intellectual Property (as defined below) that is used in
the Business as currently conducted or is the subject of an
issued patent or registration, and the Company had the right and
authority to use all of the Intellectual Property used in the
Business as heretofore conducted, and, to the knowledge of those
Persons identified on Schedule 2.19(a) of the Disclosure
Schedule, 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 the Company and
third parties concerning the Intellectual Property or any third
parties' intellectual property.
(b) 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 2.19(b) 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 the Company is a party or by which
it is 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. The Seller does
not have, and will not retain after the Closing, any interest in
the Intellectual Property.
(c) Schedule 2.19(c) 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 (or application number), the U.S.
patent title, the date issued, and the expiry date; (ii)
registered trademark, servicemark, or tradename and application
therefor, indicating, as to each, the country, the xxxx, 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; in each case owned in whole or in part by the
Company. Except as and to the extent set forth on Schedule
2.19(c) of the Disclosure Schedule, the Company is the current
record owner of all registrations and applications set forth on
the Disclosure Schedule, the patents, applications and
registrations set forth on Schedule 2.19(c) 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) To the knowledge of those Persons identified on
Schedule 2.19(d) of the Disclosure Schedule, the items of
Intellectual Property are valid and enforceable and there are no
infringements of the Company's rights in and to the Intellectual
Property by any third party. The Company has not entered into
any consent, indemnification, forbearance to xxx 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 and the Other
Documents will not result in the loss or impairment of any of the
Company's rights to own or use any Intellectual Property.
(e) 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 the Company in the conduct
of the Business including, the name "LaSalle Steel Company" in
those countries 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 the Company in the
conduct of the Business, together with the goodwill of the
Business symbolized thereby, the right to xxx 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 Business, together with the
Company's proprietary rights therein and the right to xxx for
past infringement or misappropriation thereof and (iii)
proprietary information, technology, trade secrets, know-how,
inventions, drawings and technical or marketing information
relating to the Business, together with the Company's proprietary
rights therein and the right to xxx for past infringement or
misappropriation thereof and (iv) any licenses relating to the
use of any of the items contained in (i)-(iii) of this Section
2.19(e).
2.20 Compliance with Environmental Laws
(a) To the knowledge of those Persons identified on
Schedule 2.20(b) of the Disclosure Schedule, the Seller has
provided to Niagara or the Buyer all material information
necessary to put Niagara or the Buyer on notice of any and all of
the following environmental conditions affecting the Company's
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) For purposes of this Agreement, information shall be
deemed to have been provided to Niagara and the Buyer if (i) it
is set forth on Schedule 2.20(a) of the Disclosure Schedule, (ii)
it is set forth in documents made available by the Seller, the
Company or their agents for inspection by Niagara, the Buyer or
their agents, (iii) it is identified in writing to Niagara, the
Buyer or their agents or (iv) Niagara or the Buyer has knowledge
of, or is on notice of, the information from any other source.
Nothing in this Agreement shall require the Seller 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 the Seller of any obligation
to make disclosure of factual information if required by Section
2.20(a) hereof.
(c) Notwithstanding any other provision of this
Agreement, the representations and warranties set forth in
Section 2.20(a) are the only representations and warranties
relating to Environmental Matters made by the Seller in
connection with the transactions contemplated by this Agreement,
and the Seller shall have no responsibility with respect to any
Environmental Matter other than claims based on a breach of the
representations and warranties contained in Section 2.20(a)
hereof.
(d) For purposes of this Agreement:
(i) "Environmental Claim" shall mean and include
any notice from any Person (including any employee of the
Company) 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 the Company or the Seller 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
strata), 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 hazardous
under Environmental Laws.
2.21 Insurance Schedule 2.21(a) of the Disclosure Schedule
sets forth a complete and correct list as of the Closing Date 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
Company, copies of which have previously been provided to Niagara
and the Buyer 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 the Company (or the Seller with respect to the
Business) to the insurer under such policies are set forth on
Schedule 2.21(b) of the Disclosure Schedule.
2.22 Bank Accounts Schedule 2.22 of the Disclosure
Schedule sets forth a complete and correct list of (i) the names
and locations of all financial institutions at which the Company
(or the Seller with respect to the Business) 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.
2.23 Customers and Suppliers There have been no material
adverse changes in the relationships between the Company and its
customers and suppliers since October 31, 1996. Except as and to
the extent set forth on Schedule 2.23(a) of the Disclosure
Schedule, the Company and, with respect to the Business, the
Seller, have not been provided with any notice that any
significant supplier, manufacturer or customer intends to cease
doing business with the Company. To the knowledge of those
Persons identified on Schedule 2.23(b) of the Disclosure
Schedule, there are no facts or circumstances (including, without
limitation, the transactions contemplated by this Agreement and
the Other Documents) that could reasonably be expected to have a
material adverse affect on the Company's relationships with its
customers, suppliers and manufacturers.
2.24 Affiliate Transactions Schedule 2.24 of the
Disclosure Schedule sets forth a correct and complete list of all
arrangements or transactions since October 31, 1993 between the
Company, on the one hand, and the Seller or any affiliate or
associate of the Company or the Seller, or any business or entity
in which the Seller, the Company, 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 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 of the Company or
such Seller's Affiliate of more than $10,000 in any fiscal year.
The Company and the Seller have terminated each of the Quanex
Management Agreement and the Intercompany Interest Bearing Open
Account Agreement, each dated February 24, 1993, by and between
the Company and the Seller, and such agreements are of no further
force or effect.
2.25 Brokers Neither the Buyer nor the Company has or will
have any obligation to pay any broker's, finder's, investment
banker's, financial advisor's or similar fee or expenses in
connection with this Agreement or the Other Documents, or the
transactions contemplated hereby or thereby, by reason of any
action taken by or on behalf of the Seller or, with respect to
actions taken on or before the Closing Date, the Company.
2.26 Disclosure The Seller has not knowingly failed to
disclose to the Buyer any facts material to the Company's
business, results of operations, assets, liabilities or financial
condition. No representation or warranty by the Seller in this
Agreement and no statement by the Seller or the Company in any
Other Document (including the Schedules of the Disclosure
Schedule), 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.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF NIAGARA AND THE BUYER
Each of Niagara and the Buyer severally represents and
warrants to the Seller with respect to such Party as follows:
3.1 Organization and Standing Such Party is a corporation
duly organized, validly existing and in good standing under the
laws of the State of Delaware and such Party has all requisite
corporate power and authority to own, lease and operate its
properties and assets and to carry on its business and operations
as it is now being conducted.
3.2 Authorization; Binding Obligation Such Party has all
requisite corporate power and authority to execute and deliver
this Agreement and the Other Documents executed and delivered by
such Party pursuant hereto or in connection herewith and to
consummate the transactions contemplated hereby and thereby and
to perform its obligations hereunder and thereunder. The
execution and delivery by such Party of this Agreement and the
Other Documents executed and delivered by such Party pursuant
hereto or in connection herewith and the consummation of the
transactions contemplated hereby and thereby by such Party have
been duly and validly authorized by the Board of Directors of
such Party and no other corporate proceedings on the part of such
Party are necessary to authorize this Agreement or the Other
Documents executed and delivered by such Party pursuant hereto or
in connection herewith or to consummate the transactions
contemplated hereby or thereby. This Agreement and the Other
Documents executed and delivered by such Party pursuant hereto or
in connection herewith have been validly executed and delivered
by such Party and, assuming the due authorization, execution and
delivery by the Seller, the Company and any other party thereto,
constitute legal, valid and binding obligations of such Party,
enforceable against such Party in accordance with their
respective terms.
3.3 Consents and Approvals; No Violation Except for (i)
filings or recordings in public offices necessary in connection
with the financing arrangements of the Buyer and its affiliates
and (ii) post-Closing securities law filings, neither the
execution and delivery of this Agreement and the Other Documents
executed and delivered by such Party pursuant hereto or in
connection herewith, nor the consummation by such Party of the
transactions contemplated hereby or thereby, nor compliance by
such Party with any of the provisions hereof or thereof (a)
conflicts with any provision of the Certificate of Incorporation
or By-laws of such Party, (b) requires any Consent of, filing
with or notification to, or any other action by, any Governmental
Authority by such Party, (c) violates any Law of any Governmental
Authority applicable to such Party, or by which any of its
businesses, property or assets is bound or affected or (d)
violates, breaches, or conflicts with, or constitutes (with or
without due notice or lapse of time or both) a default (or gives
rise to any right of termination, cancellation or acceleration or
any obligation to pay or result in the imposition of any
Encumbrance upon any of the property) under, any of the terms,
conditions or provisions of any note, bond, mortgage, indenture,
Encumbrance, Contract, Permit, Order, or other instrument or
obligation to which such Party is a party or by which any of its
businesses, property or assets is bound or affected.
3.4 Brokers The Seller does not have, nor will the Seller
have, any obligation to pay any broker's, finder's, investment
banker's, financial advisor's or similar fee or expenses in
connection with this Agreement or the Other Documents, or the
transactions contemplated hereby or thereby, by any action taken
by or on behalf of such Party.
ARTICLE IV
ADDITIONAL COVENANTS
4.1 Benefit Matters
(a) Salaried Pension Plan.
(i) As soon as practicable following the
determination of the Permitted Transfer Amount (as defined
below) in accordance with Section 4.1(a)(ii) hereof, the
Seller shall direct the trustee of the Quanex Corporation
Salaried Employees' Pension Plan to transfer, in cash, from
the trust maintained under the Quanex Corporation Salaried
Employees' Pension Plan to the trust maintained under the
LaSalle Steel Company 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 Date) with respect
to current and former employees of the Company set forth on
Schedule 4.1(a) of the Disclosure Schedule (the "Salaried
Participants") and their beneficiaries calculated utilizing
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 (the
"Permitted Transfer Amount"), provided, however, that to the
extent permitted by Section 414(1) of the Code, the
Permitted Transfer Amount shall be equal to $6,709,000
adjusted for (i) contributions reflected on the Closing
Balance Sheet and benefit distributions made to the Salaried
Participants and their beneficiaries during the period (the
"Adjustment Period") commencing on October 31, 1996 and
ending on the date on which the transfer occurs (the
"Transfer Date") and (ii) a pro rata share of the Quanex
Corporation Salaried Employees' Pension Plan actual
investment earnings or losses occurring during the
Adjustment Period and Plan administrative expenses actually
paid from the Quanex Corporation Salaried Employees' Pension
Plan during the Adjustment Period (the "Fixed Transfer
Amount"); provided, further, that (i) if the Permitted
Transfer Amount is less than the Fixed Transfer Amount, then
the Permitted Transfer Amount shall be transferred from
trust to trust, and the Seller shall pay to the Buyer, in
cash on the Transfer Date, the excess of the Fixed Transfer
Amount over the Permitted Transfer Amount and (ii) if the
Permitted Transfer Amount exceeds the Fixed Transfer Amount,
then the Permitted Transfer Amount shall be transferred
trust to trust, and the Buyer shall pay to the Seller, in
cash on the Transfer Date, the excess of the Permitted
Transfer Amount over the Fixed Transfer Amount.
(ii) The Seller shall deliver to Niagara and the
Buyer (in accordance with the provisions of Section 7.9
hereof) as soon as reasonably practicable, and in any event
within 60 days of the Closing Date, a statement setting
forth the proposed Fixed Transfer Amount and Permitted
Transfer Amount (collectively, the "Transfer Amounts") 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.
Niagara and the Buyer shall have 45 days following the
delivery of the Seller's Transfer Amount Statement during
which to submit to the Seller, in accordance with the
provisions of Section 7.9 hereof, a written statement
setting forth any dispute therewith (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 Buyer. If Niagara and the
Buyer fail to submit a Buyer's Transfer Amount Statement
within such 45-day period, then the proposed Transfer
Amounts set forth on the Seller's Transfer Amount Statement,
as further adjusted in accordance with Section 4.1(a)
hereof, shall be deemed the Transfer Amounts. In the event
Niagara and the Buyer deliver a Buyer's Transfer Amount
Statement, the Parties shall consult and attempt to resolve,
as soon as practicable, all disputes set forth therein. In
the event the Parties are unable to resolve any such dispute
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 the 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 the
Parties enforceable by appropriate judicial proceedings.
The fees and expenses of the Independent Actuarial Firm
shall be shared equally by the Buyer and the Seller. The
proposed Transfer Amounts set forth in the Seller's Transfer
Amount Statement, as modified to reflect the resolution of
disputes by the Parties or by the Independent Actuarial Firm
in accordance with this Section 4.1, shall be the "Transfer
Amounts".
(iii) From time to time during the Adjustment
Period, Niagara and the Buyer on the one hand, and the
Seller on the other hand, shall give the other, and any of
its or their independent actuaries and authorized
representatives, reasonable access during normal business
hours to the properties, books, records and personnel of the
Seller and the Company, and shall use all reasonable efforts
to cause their independent actuaries to make available to
each such other Party and its or their authorized
representatives their 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
Amounts.
(iv) As soon as reasonably practicable, the
Parties shall cooperate with each other in making any
required filings, including Forms 5310-A (with all
attachments), reflecting the transfer of assets and
assumption of liabilities pursuant to this Section 4.1(a).
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) Savings Plans. As soon as reasonably practicable,
and in any event within 90 days of the Closing Date, each
participant in the Quanex Corporation Employee Savings Plan or
the Quanex Corporation Hourly Bargaining Unit Employee Savings
Plan (collectively, the "Seller Savings Plans") who is an
employee or former employee of the Company shall have the right
to elect to receive a distribution of all or a portion of such
employee's account balance in the applicable Seller Savings Plan
(subject to, and in accordance with, the provisions of the
respective plan and applicable Law). The Buyer shall take any
and all necessary action to cause the trustee of the Niagara Cold
Drawn 401(k) Retirement Plan (the "Buyer Savings Plan"), if
requested to do so by a distributee, to accept the "roll over" of
all or a portion of any such distribution from the applicable
Seller Savings Plan.
(c) Group Benefits Plan. The Buyer hereby assumes all
liabilities under the Quanex Corporation Group Benefits Plan for
all participants who are employees or former employees of the
Company, as set forth on Schedule 4.1(b) of the Disclosure
Schedule, and their dependents, as of the Closing Date (the
"LaSalle Group Benefit Plan Participants") subject to the terms
and conditions of such plan. Effective as of the Closing, the
Seller shall (i) cause the Company 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 covering the LaSalle Group
Benefits Plan Participants to be spun-off into a new welfare
benefit plan entitled the "LaSalle Steel Company Group Benefits
Plan" which shall be sponsored by the Company and which, as of
the Closing, shall otherwise be substantially identical to the
Quanex Corporation Group Benefits Plan.
(d) Deferred Compensation Plan. Effective as of the
Closing, the Seller shall cause the Company to terminate its
participation as an adopting employer with respect to the Quanex
Corporation Deferred Compensation Plan maintained for the benefit
of current and former key salaried employees of the Seller and
its subsidiaries and their beneficiaries. None of the Company,
the Buyer or Niagara shall assume any liability with respect to
the Quanex Corporation Deferred Compensation Plan.
(e) Executive Incentive Compensation Plan. Effective as
of the Closing, the Seller shall cause the Company to terminate
its participation as an adopting employer with respect to the
Quanex Corporation Executive Incentive Compensation Plan
maintained for the benefit of current and former key salaried
employees of the Seller and its subsidiaries and their
beneficiaries. None of the Company, the Buyer or Niagara shall
assume any liability with respect to the Quanex Corporation
Executive Incentive Compensation Plan.
(f) Management Incentive Program. Effective as of the
Closing, the Seller shall cause the Company to terminate its
participation as an adopting employer with respect to the Quanex
Corporation Management Incentive Program maintained for the
benefit of current and former employees of the Seller and its
subsidiaries and their beneficiaries. Effective as of the
Closing, the Seller shall cause that portion of the Quanex
Corporation Management Incentive Program covering current and
former salaried employees of the Company and their beneficiaries
to be spun-off into a new deferred compensation plan entitled the
"LaSalle Steel Company Management Incentive Program" which shall
be solely a contractual obligation of the Company and which, as
of the Closing, shall otherwise be substantially identical to the
Quanex Corporation Management Incentive Program.
(g) Supplemental Salaried Employees' Pension Plan.
Effective as of the Closing, the Seller shall cause the Company
to terminate its participation as an adopting employer with
respect to the Quanex Corporation Supplemental Salaried
Employees' Pension Plan maintained for the benefit of current and
former key salaried employees of the Seller and its subsidiaries
and their beneficiaries. Except as and to the extent reflected
as a liability on the Closing Balance Sheet, none of the Company,
the Buyer or Niagara shall assume any liability with respect to
the Quanex Corporation Supplemental Salaried Employees' Pension
Plan.
(h) Severance Allowance Policy. Effective as of the
Closing, the Seller shall cause the Company to terminate its
participation as an adopting employer with respect to the Quanex
Corporation Severance Allowance Policy maintained for the benefit
of current employees of the Seller and its subsidiaries. None of
the Company, the Buyer or Niagara shall assume any liability with
respect to the Quanex Corporation Severance Allowance Policy.
4.2 Further Assurances; Cooperation
(a) Each of the Parties shall from time to time after
the Closing, upon the request of any other Party and without
further consideration, execute, acknowledge and deliver in proper
form such further instruments, and take such further actions, as
such other Party may reasonably require, to carry out effectively
the intent of this Agreement and the Other Documents.
(b) The Seller shall, from time to time after the
Closing, upon the request of Niagara, the Buyer or their
designee, and without further consideration, execute, acknowledge
and deliver in proper form such further instruments and take such
further actions as Niagara or the Buyer may reasonably require,
to record the Company or its designee as the record owner of any
and all Intellectual Property owned by the Company which may
currently be standing, as of record, in the name of the Company's
predecessor in interest.
(c) The Parties shall cooperate with each other in
connection with any claim, action, suit, proceeding, inquiry or
investigation by any other Person which relates to the execution
and delivery of this Agreement or the Other Documents, or the
consummation of the transactions contemplated hereunder and
thereunder.
(d) For a period of seven years following the Closing
Date, each of the Parties will retain any records or files within
its control after the Closing relating to the operations of the
Company prior to the Closing (including those relating to the
Taxes of the Company). During such seven-year period, each Party
shall afford any other Party, and such Party's counsel,
accountants and other representatives, reasonable access to such
records during normal business hours for any proper purpose.
4.3 Notification of Certain Matters Niagara and the Buyer
on the one hand, and the Seller on the other hand, shall promptly
notify the other, in the manner provided in Section 7.9 hereof,
of (i) any claim, action, suit, proceeding, inquiry or
investigation pending or, to such Party's knowledge, threatened
which relates to the execution and delivery of this Agreement or
the Other Documents, or the consummation of the transactions
contemplated hereunder or thereunder, (ii) any circumstance or
development which could adversely impair or affect its ability to
perform its obligations under this Agreement or the Other
Documents, (iii) any notice or other communication from any
Person alleging that the consent of such Person is or may be
required in connection with the transactions contemplated by this
Agreement or the Other Documents or (iv) any notice or other
communication from any Governmental Authority in connection with
the transactions contemplated by this Agreement or the Other
Documents.
4.4 Confidentiality/Non-Competition
(a) The Seller acknowledges that Niagara and the Buyer
would be irreparably damaged if Company Information (as defined
below) were to be disclosed to or utilized on behalf of any
Person, firm, corporation or other business organization that
competes in any respect with the Business. As used herein,
"Company Information" shall include, without limitation, any and
all proprietary or confidential information pertaining to the
Company or its business or activities of any nature, including,
without limitation, any information relating to (i) the Company's
operation or management, finances or financial affairs, profits,
profit margins, capital requirements, business methods,
organization, procedures or Contracts, (ii) the Company's
customers (including customer lists), suppliers or sources of
supply, marketing strategies or data, products, product plans,
service lines or pricing, (iii) the Company's personnel
(including medical and salary information) and (iv) the
Intellectual Property. The Seller covenants and agrees that it
will not, and will cause its agents, affiliates, advisors,
directors, officers and employees (collectively,
"Representatives") not to, at any time, without the prior written
consent of Niagara, use or disclose any Company Information,
except to employees and other authorized Representatives of
Niagara or the Buyer; provided, however, that Company Information
shall not include any information which (i) was or becomes
generally available to or known by the public (other than as a
result of a disclosure directly or indirectly by the Seller or
its Representatives) or (ii) is available to the Seller on a non-
confidential basis from a source other than Niagara, the Buyer or
their Representatives; provided, further, however, that the
Seller may use or disclose Company Information to the extent (i)
required by Law and (ii) necessary in connection with its Tax
filing obligations. In the event that the Seller or any of its
Representatives are legally compelled (by deposition,
interrogatory, request for documents, subpoena, civil
investigative demand or otherwise) to disclose any Company
Information, such Person shall provide Niagara and the Buyer with
prompt prior written notice of such demand so that Niagara or the
Buyer may seek a protective order or other appropriate remedy or
waive compliance with the provisions of this Section 4.4(a). If
a protective order or other remedy is not obtained and Niagara
has not waived compliance with these provisions, the Seller or
its Representatives, as the case may be, shall furnish only that
portion of such Company Information which it is advised by its
legal counsel is legally required to be disclosed.
(b) The Seller agrees that for a period of two years
following the Closing Date, it shall not directly or indirectly
manufacture or invest in any entity which manufactures cold drawn
or chrome-plated steel bars.
(c) The Seller agrees that for a period of one year
following the Closing Date, it shall neither solicit, persuade or
induce any person employed by the Company to terminate his or her
employment with the Company, nor, except for Persons whose
employment has been terminated by the Company, employ any person
employed by the Company as of the Closing Date or in the three-
month period prior thereto without the consent of Niagara.
(d) The Seller acknowledges and agrees that the
provisions of this Section 4.4 are reasonable and necessary for
the protection of Niagara, the Buyer and the Company. It is
understood and agreed that money damages would not be a
sufficient remedy for any breach of this Section 4.4 by the
Seller or its Representatives, and that Niagara and the Buyer
shall be entitled to specific performance as a remedy for any
such breach. Such remedy shall not be deemed to be the exclusive
remedy for any breach of this Section 4.4 but shall be in
addition to all other remedies available pursuant to the terms of
this Agreement.
4.5 Expenses Except as otherwise specifically provided
for herein or in Paragraph 7 of the Letter of Intent (as defined
in Section 7.3 hereof), each Party shall be solely responsible
for all expenses incurred by it or on its behalf in connection
with the preparation and execution of this Agreement and the
Other Documents and the consummation of the transactions
contemplated hereby and thereby, including, without limitation,
the fees and expenses of its counsel, consultants, accountants,
brokers, finders, investment bankers, financial advisors and
other representatives and advisors.
ARTICLE V
TAX MATTERS
5.1 Section 338(h)(10) Election
(a) The Parties shall jointly make a timely election
pursuant to Section 338(h)(10) of the Code and Section
1.338(h)(10)-1 of the United States Treasury Regulations (the
"Regulations") and any comparable election under applicable state
or local Law (collectively, the "Section 338(h)(10) Election")
with respect to the purchase by the Buyer of the Shares pursuant
hereto. Subject to subsection (b) of this Section 5.1, as soon
as practicable after the Closing, with respect to such federal
Section 338(h)(10) Election, the Parties shall prepare a Form
8023-A (with all attachments), Niagara and the Seller shall
execute such Form 8023-A, and Niagara shall promptly file or
cause to be filed such executed Form 8023-A and provide written
evidence of such filing to the Seller. In addition, the Seller,
the Company, Niagara and the Buyer shall, as promptly as
practicable following the Closing, cooperate with each other to
take all actions necessary and appropriate (including filing such
additional forms, returns, elections, schedules and other
documents as may be required by applicable state or local Law) to
effect and preserve a timely Section 338(h)(10) Election in
accordance with any comparable provision of applicable state or
local Law, and the Parties responsible for filing any such
Section 338(h)(10) Election under applicable state or local Law
shall promptly file or cause to be filed such Section 338(h)(10)
Election with the appropriate taxing authority and provide
written evidence of such filing to the other Parties. The
Parties shall report the purchase by the Buyer of the Shares
consistent with the Section 338(h)(10) Election, and no Party
shall take any position to the contrary thereto in any Tax
Return, any proceeding before any taxing authority or otherwise,
except in connection with the resolution of a Tax Dispute (as
defined in Section 5.7 hereof) in accordance with the provisions
of Section 5.7 hereof. In the event that any Section 338(h)(10)
Election is disputed by any taxing authority, the Party receiving
notice of such dispute shall promptly notify and consult with the
other Parties concerning such dispute.
(b) In connection with the Section 338(h)(10) Election,
the Parties shall determine, as promptly as reasonably
practicable following the Closing, the allocation of the Purchase
Price and the liabilities of the Company (and the liabilities to
which the Company's assets are subject) as of the beginning of
the day after the Closing Financial Statement Date (other than
liabilities that were neither liabilities of the Company nor
liabilities to which the Company's assets were subject before
the day after the Closing Financial Statement Date) among the
assets of the Company. The Parties shall prepare and file all
Tax Returns to be filed with any taxing authority in a manner
consistent with such allocation and shall take no position
inconsistent with such allocation in any Tax Return, any
proceeding before any taxing authority or otherwise, except in
connection with the resolution of a Tax Dispute in accordance
with the provisions of Section 5.7 hereof. In the event that
such allocation is disputed by any taxing authority, the Party
receiving notice of such dispute shall promptly notify and
consult with the other Parties concerning such dispute.
5.2 Tax Indemnity by the Seller
(a) Without duplication, and subject to the provisions
of this Article V, the Seller shall indemnify, defend and hold
harmless each Buyer Indemnified Party (as defined in Section 6.2
hereof), from and against any and all Losses (as defined in
Section 6.2 hereof) asserted against, resulting to, imposed upon,
or incurred by such Buyer Indemnified Party, directly or
indirectly, by reason of or resulting from:
(i) any and all Taxes imposed with respect to (A)
any consolidated federal income Tax Return of any
"affiliated group" (as such term is defined in Section 1504
of the Code) which includes or included the Company for all
periods or portions thereof ending on or before the Closing
Financial Statement Date, 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 the Company for all periods or portions
thereof ending on or before the Closing Financial Statement
Date, such Tax Returns described in clauses (A) and (B) of
this Section 5.2(a)(i) including, but not being limited to,
the Tax Returns described in Section 5.6(a);
(ii) any and all Taxes (other than Taxes described
in Section 5.2(a)(i)) imposed upon the Company with respect
to any taxable period ending on or before the Closing
Financial Statement Date ("Pre-Closing Periods");
(iii) any and all Taxes (other than Taxes described
in Section 5.2(a)(i)) imposed upon the Company with respect
to any taxable period beginning before and ending after the
Closing Financial Statement Date ("Straddle Periods") with
respect to the portion of such Straddle Period ending on the
Closing Financial Statement Date (the "Pre-Closing" portion
of such Straddle Period);
(iv) the breach of or any inaccuracy in any of the
representations and warranties of the Seller contained in or
made pursuant to Section 2.18 (Taxes) hereof;
(v) the breach or nonperformance of any covenant or
agreement of the Seller contained in or made pursuant to
this Article V;
(vi) any and all Taxes imposed upon the Company
pursuant to Treasury Regulations Section 1.1502-6 (or any
comparable provision under state, local, or foreign Tax Law
imposing several liability upon members of a consolidated,
combined, affiliated or unitary group (a "Group")) by virtue
of the Company having been a member of a Group that includes
the Seller; and
(vii) any and all Taxes imposed upon the Company as
a result of the Section 338(h)(10) Election.
(b) The indemnifications in favor of the Buyer
Indemnified Parties contained in subsections (ii), (iii), (iv)
and (v) of Section 5.2(a) hereof shall not be effective until the
aggregate amount of all Losses in respect thereof exceeds the Tax
Accrual (as defined herein), and then only to the extent such
Losses exceed the Tax Accrual. For purposes of this Agreement,
"Tax Accrual" shall mean and include the aggregate amount of
accruals, reserves and provisions for Taxes on the Closing
Balance Sheet and the worksheets thereto, it being understood
that the Tax Accrual shall not include amounts on the Closing
Balance Sheet for "Deferred Income Taxes."
(c) Except as provided in Sections 5.2(a)(vi) and (vii)
hereof, nothing contained in this Section 5.2 shall require the
Seller to indemnify any Buyer Indemnified Party for any Losses
with respect to any Taxes with respect to any taxable period
beginning after the Closing Financial Statement Date (a "Post-
Closing Period") or any portion beginning after the Closing
Financial Statement Date of any Straddle Period (a "Post-Closing"
portion of such Straddle Period).
5.3 Tax Indemnity by Niagara and the Buyer
(a) Without duplication, and subject to the provisions
of this Article V, Niagara and the Buyer shall, jointly and
severally, indemnify, defend and hold harmless each Seller
Indemnified Party (as defined in Section 6.3 hereof) from and
against any and all Losses asserted against, resulting to,
imposed upon or incurred by such Seller Indemnified Party,
directly or indirectly, by reason of or resulting from:
(i) to the extent provided in Section 5.3(b), any
and all Taxes imposed upon the Company with respect to any
Pre-Closing Period and for the Pre-Closing portion of any
Straddle Period other than Taxes described in Sections
5.2(a)(i), (vi) and (vii) hereof;
(ii) any and all Taxes imposed upon the Company
with respect to any Post-Closing Period and the Post-Closing
portion of any Straddle Period, other than Taxes described
in Sections 5.2(a)(vi) and (vii) hereof;
(iii) the breach or nonperformance of any covenant
or agreement of Niagara or the Buyer contained in or made
pursuant to this Article V.
(b) The indemnifications in favor of the Seller
Indemnified Parties contained in subsection (i) of Section 5.3(a)
hereof shall not exceed, in the aggregate, the amount of the Tax
Accrual.
5.4 Transfer Taxes Notwithstanding anything contained in
this Agreement to the contrary, any and all 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 contemplated
by this Agreement (collectively, "Transfer Taxes") shall be borne
one-half by the Buyer and one-half by the Seller. The Parties
agree to use their commercially reasonable efforts to minimize
the Transfer Taxes. Each of the Buyer and the Seller shall cause
to be prepared and timely filed all Tax Returns relating to
Transfer Taxes ("Transfer Tax Returns") which such Party has
primary responsibility for filing under applicable Law and shall
cause all such Transfer Taxes to be duly and timely paid in full.
The Party that has prepared any such Transfer Tax Return shall
cause each such Transfer Tax Return, together with all relevant
work papers and other information, to be delivered to the other
Parties for their review and approval no later than 30 days prior
to the due date for the filing of such Transfer Tax Return
(giving effect to any and all extensions thereof). As between
the Buyer and the Seller, the Party not required to file such
Transfer Tax Return under this Section 5.4 shall pay to the other
such Party's share of the Transfer Taxes due and payable not
later than seven days prior to the due date for payment of such
Transfer Taxes (giving effect to any and all extensions thereof).
5.5 Allocation of Certain Taxes In the case of any Tax
that relates to any Straddle Period, the portion of such Tax
attributable to the Pre-Closing and Post-Closing portions of such
Straddle Period shall be determined as follows (provided,
however, that this Section 5.5 shall not apply with respect to
any and all Taxes described in Sections 5.2(a)(vi) or (vii)
hereof):
(a) In the case of any franchise Tax based on capital
and any ad valorem Tax, the portion attributable to the Pre-
Closing portion of such Straddle Period shall be the amount of
such Tax for the entire taxable period multiplied by a fraction
the numerator of which is the number of days (including the
Closing Financial Statement Date) in the Pre-Closing portion of
such Straddle Period and the denominator of which is the number
of days in the entire taxable period. The amount of such Tax
remaining after subtracting the portion attributable to the Pre-
Closing portion of such Straddle Period (as determined in
accordance with the preceding sentence) shall be the amount of
such Tax attributable to the Post-Closing portion of such
Straddle Period.
(b) In the case of any such Tax not described in
Section 5.5(a) above, the portion attributable to the Pre-Closing
portion of such Straddle Period shall be determined on the basis
of an interim closing of the books as of and including the
Closing Financial Statement Date, provided, however, that for
purposes of this Section 5.5(b), no amount attributable to the
Section 338(h)(10) Election shall be taken into account.
5.6 Return Filings, Refunds and Credits
(a) The Seller shall (i) cause the Company to be
included in the consolidated federal income Tax Returns of the
affiliated group (within the meaning of Section 1504 of the Code)
of which the Seller is the common parent (within the meaning of
Section 1504 of the Code) and the Indiana Corporation Income Tax
Returns (filed on a combined basis) that include the Seller and
the Company for (A) the taxable year of the Seller ended October
31, 1996 and (B) the taxable year of the Seller that will end on
October 31, 1997 (the "1997 Consolidated Returns"), which 1997
Consolidated Returns will include the tax items of the Company
for the portion of such taxable year ending on the Closing
Financial Statement Date, (ii) timely file such Tax Returns and
(iii) timely pay any Taxes shown as due on such Tax Returns.
(b) With respect to each Tax Return (other than the Tax
Returns described in Section 5.6(a) hereof) of the Company for
Pre-Closing Periods which have not been filed on or before the
Closing Date,
(i) the Seller shall prepare or cause to be
prepared each such income Tax Return and franchise Tax
Return; and
(ii) the Buyer shall prepare or cause the Company
to prepare all Tax Returns not described in Section
5.6(b)(i) hereof (to the extent not prepared before the
Closing Date).
Subject to Sections 5.2, 5.3, 5.6(d) and 5.6(e) hereof, the Buyer
shall timely file or cause the Company to timely file the Tax
Returns described in this Section 5.6(b) and shall timely pay or
cause to be timely paid all Taxes shown as due thereon. Subject
to Sections 5.6(d) and 5.6(e) hereof, seven days prior to the due
date for the filing of each Tax Return referred to in this
Section 5.6(b), the Seller shall pay to the Company the excess,
if any, of (i) the aggregate amount which will have been paid
(when the amount of Taxes shown as due on such Tax Return has
been paid) by Niagara, the Buyer or the Company (to any Seller
Indemnified Party or to any taxing authority, as applicable)
pursuant to Section 5.3(a)(i) (including, but not limited to,
payments made under this Section 5.6) over (ii) the sum of (x)
the Tax Accrual and (y) the total aggregate amount previously
paid to any Buyer Indemnified Party pursuant to this Section 5.6.
(c) Subject to Sections 5.2, 5.3 and 5.6(d) and 5.6(e)
hereof, the Buyer shall prepare or cause to be prepared each Tax
Return (other than the Tax Returns described in Section 5.6(a)
hereof) with respect to the Company for Straddle Periods, shall
timely file or cause the Company to timely file all such Tax
Returns, and shall timely pay or cause to be timely paid all
Taxes shown as due thereon. Subject to Section 5.6(d) and 5.6(e)
hereof, seven days prior to the due date for the filing of each
Tax Return referred to in this Section 5.6(c), the Seller shall
pay to the Company the excess, if any, of (i) the aggregate
amount which will have been paid (when the amount of Taxes shown
as due on such Tax Return has been paid) by the Buyer or the
Company (to a Seller Indemnified Party or to any taxing
authority, as applicable) pursuant to Section 5.3(a)(i)
(including, but not limited to, payments made under this Section
5.6) over (ii) the sum of (x) the Tax Accrual and (y) the total
aggregate amount previously paid to any Buyer Indemnified Party
pursuant to this Section 5.6.
(d) The Tax Returns referred to in Sections 5.6(b) and
5.6(c) hereof shall be prepared in a manner consistent with past
practice (including, without limitation, as to accounting methods
and methods of measuring sales, income, property values or other
relevant items), unless a contrary treatment is required by an
intervening change in applicable Law. The Seller shall cause any
Tax Return that is described in Section 5.6(b)(i) hereof,
together with all relevant work papers and any other information,
to be delivered to Niagara and the Buyer (in accordance with the
provisions of Section 7.9 hereof) for their review and approval
at least 30 calendar days prior to the due date (giving effect to
any and all extensions thereof) for filing such Tax Return. The
Buyer shall cause any Tax Return that is described in Section
5.6(b)(ii) or 5.6(c) hereof, together with all relevant work
papers and other information, to be delivered to the Seller (in
accordance with the provisions of Section 7.9 hereof) for its
review and approval at least 30 calendar days prior to the due
date (giving effect to any and all extensions thereof) for filing
such Tax Return. With respect to any Tax Return described in
Section 5.6(c) hereof which is delivered to the Seller pursuant
to the previous sentence, the Buyer shall simultaneously deliver
to the Seller (in accordance with the provisions of Section 7.9
hereof) a statement (the "Buyer's Tax Statement") calculating the
portion of the Taxes shown as due on such Tax Return that is
attributable to the Pre-Closing portion of the Straddle Period
under Section 5.5 hereof. The costs and expenses incurred in
connection with the preparation and delivery of the Tax Returns
referred to in Section 5.6(a) and (b)(i) hereof shall be borne by
the Seller. The costs and expenses incurred in connection with
the preparation and delivery of the Tax Returns referred to in
Section 5.6(b)(ii) and (c) hereof and the Buyer's Tax Statement
shall be borne by the Buyer.
(e) The amount of Taxes shown to be due on any Tax
Return described in Section 5.6(b) or 5.6(c) hereof and on any
Buyer's Tax Statement related thereto described in Section 5.6(d)
hereof shall be final and binding upon the Parties, unless
whichever of the Parties did not prepare or cause the preparation
of such Tax Return or the Buyer's Tax Statement, as the case may
be (the "Other Party"), shall have delivered to the Party that
prepared or caused the preparation of such Tax Return (within 10
calendar days after the date of the Other Party's receipt of such
Tax Return and, if applicable, the Buyer's Tax Statement related
thereto) a written report containing all changes that the Other
Party proposes to make to such Tax Return and, if applicable, to
the Buyer's Tax Statement related thereto, which report shall set
forth in reasonable detail the basis for such changes. The
Parties shall undertake to resolve any issues raised in any such
report described in the first sentence of this paragraph prior to
the due date (including any extension thereof) for filing such
Tax Return and to mutually consent to the filing of such Tax
Return and, if applicable, to agree on the determination to be
set forth in the Buyer's Tax Statement related thereto, in which
case the information and total amount of Taxes shown to be due on
such agreed Tax Return or, if applicable, shown on such Buyer's
Tax Statement (as agreed to) shall be final and binding on the
Parties. In the event the Parties are unable to resolve any
dispute by the date that is 15 calendar days prior to the due
date for filing of the Tax Return in question (including any
extension thereof), the Parties shall jointly engage the
Independent Accounting Firm to make its independent determination
with respect to the item or items in dispute and the amount or
amounts related thereto. The Buyer and the Seller shall each
bear and pay one-half of the fees and other costs charged by the
Independent Accounting Firm to perform such function. If the
Independent Accounting Firm is so engaged, the Parties agree to
provide the Independent Accounting Firm with all books, records
and other information relevant to the determination of the
disputed items and the Independent Accounting Firm shall be
instructed to make its determination as soon as possible. The
Independent Accounting Firm's determination with respect to the
Tax treatment of any disputed item shall be made on the basis of
the Tax treatment for which the Independent Accounting Firm
determines there is substantial authority (or, if there is
substantial authority for two or more Tax treatments of such
disputed item, the Tax treatment for which the weight of the
authorities supporting such Tax treatment is most substantial in
relation to the weight of authorities supporting the other Tax
treatment or treatments). The determination of the Independent
Accounting Firm shall be final and binding on the Parties
enforceable by appropriate judicial proceedings. In any case
where a disputed item has not been resolved (either by mutual
agreement of the Parties or by a determination of the Independent
Accounting Firm) 10 calendar days prior to the due date
(including any extension thereof) for filing such Tax Return,
then the Party required to file such Tax Return under Section
5.6(b) or 5.6(c) hereof, as the case may be, shall cause such Tax
Return to be filed on the due date (including any extension
thereof) for filing such Tax Return without the Parties' mutual
agreement or the Independent Accounting Firm's determination with
respect thereto and (i) the Independent Accounting Firm shall
make a determination with respect to any such disputed item and
(ii) the amount of Taxes determined to be due with respect to
such Tax Return or, if applicable, determined to be properly set
forth on the Buyer's Tax Statement related to such Tax Return,
shall be the amount of Taxes that would have been due on such Tax
Return or, if applicable, be the amount of Taxes that would be
properly set forth on the Buyer's Tax Statement related to such
Tax Return, after giving effect to the Independent Accounting
Firm's determination. Any overpayments or underpayments as
between the Parties shall be equitably adjusted to take into
account the determination of the Independent Accounting Firm,
with interest on any such payments to be paid, from the date of
payment, at the rate charged by the IRS for underpayments under
Section 6621 of the Code.
(f) Any refunds or credits of Taxes of the Company for
any Pre-Closing Period or any Pre-Closing portion of any Straddle
Period together with any after-tax interest received or credited
thereon shall be for the account of the Seller and shall be paid
by Niagara, the Buyer or the Company to the Seller within 10 days
after such Person receives or utilizes such refund or credit (or
interest thereon). Any refunds or credits of Taxes of the
Company for any Post-Closing Period or any Post-Closing portion
of any Straddle Period together with any after-tax interest
received or credited thereon shall be for the account of the
Buyer and shall be paid by the Seller to the Buyer within ten
days after the Seller receives or utilizes such refund or credit
(or interest thereon). In applying the provisions of the first
two sentences of this Section 5.6(f), any refunds or credits of
Taxes of the Company for any Straddle Period together with any
after-tax interest received or credited thereon shall be
allocated between the Seller and the Buyer in a manner consistent
with Section 5.5 hereof.
5.7 Tax Contests
(a) If any taxing authority proposes any adjustment or
questions the treatment of any item, which adjustment or question
could, if pursued successfully, result in or give rise to solely
a claim for indemnification against the Seller by any Buyer
Indemnified Party under Section 5.2 hereof (a "Seller Tax
Claim"), solely a claim for indemnification against Niagara or
the Buyer by any Seller Indemnified Party under Section 5.3
hereof (a "Buyer Tax Claim"), or both a Seller Tax Claim and a
Buyer Tax Claim (a "Joint Tax Claim"), then the Party first
receiving notice of such adjustment or question (a "Tax Dispute")
shall promptly notify the other Parties in writing of such Tax
Dispute.
(b) In the case of a Buyer Tax Claim, the Buyer shall
have the right, at its sole cost and expense, to control the
defense, prosecution, settlement or compromise of the Tax Dispute
underlying such Buyer Tax Claim.
(c) In the case of a Seller Tax Claim, the Seller shall
have the right, at its sole cost and expense, to control the
defense, prosecution, settlement or compromise of the Tax Dispute
underlying such Seller Tax Claim.
(d) In the case of a Joint Tax Claim, the Buyer
Indemnified Party and the Seller Indemnified Party shall first
attempt to separate such Joint Tax Claim into two, one involving
the Buyer Tax Claim portion thereof (which shall be subject to
the provisions of Section 5.7(b) hereof) and the other involving
the Seller Tax Claim portion thereof (which shall be subject to
the provisions of Section 5.7(c) hereof). If the Buyer
Indemnified Party and the Seller Indemnified Party are not
successful in accomplishing such separation, the Buyer
Indemnified Party and the Seller Indemnified Party shall, and
shall cause their respective affiliates to, consult and cooperate
with each other in controlling such audit, examination,
investigation, or administrative, court, or other proceeding,
shall not compromise or settle such Joint Tax Claim without the
other's prior written consent (which consent shall not be
unreasonably withheld or delayed), and shall share the costs and
expenses associated with such Joint Tax Claim on such equitable
basis as the Parties shall mutually agree. If the Buyer
Indemnified Party and the Seller Indemnified Party cannot agree
with respect to any matter involving any such Joint Tax Claim,
the Buyer Indemnified Party and the Seller Indemnified Party
shall jointly engage independent tax counsel that is mutually
acceptable to the Buyer Indemnified Party and the Seller
Indemnified Party to make its decision with respect to such
matter, which decision shall be final and binding on the Parties,
the Buyer Indemnified Party and the Seller Indemnified Party.
The Buyer and the Seller shall each bear and pay one-half of the
fees and other costs charged by such counsel.
(e) The Party that controls a Tax Dispute under the
provisions of this Section 5.7 shall keep the other Parties
informed of all significant events and developments relating to
such Tax Dispute and the other Parties, or their authorized
representatives, shall be entitled, at their own expense, to
attend (but not control) all conferences, meetings and
proceedings with the relevant taxing authority relating to such
Tax Dispute.
5.8 Cooperation The Parties shall, and Niagara and the
Buyer shall cause the Company to, cooperate, and shall cause
their respective directors, officers, employees, agents,
accountants and representatives to cooperate, in preparing and
filing all Tax Returns (including amended Tax Returns and claims
for refund), in handling audits, examinations, investigations,
and administrative, court or other proceedings relating to Taxes
covered by this Agreement, in resolving all disputes, audits and
refund claims with respect to such Tax Returns and Taxes, and any
earlier Tax Returns and Taxes of the Company, and in all other
Tax matters to which this Agreement relates, in each case
including making employees available to assist the requesting
Party, timely providing information reasonably requested,
maintaining and making available to each other all records
necessary in connection therewith, and the execution and delivery
of IRS Form 2848 (or a successor form or forms) and comparable
forms for foreign, state and local Tax purposes, as appropriate,
when the requesting party reasonably requires such forms in
connection with any Tax Dispute and claims for refund. Any
information obtained by a Party or its affiliates from another
Party or its affiliates in connection with any Tax matters to
which this Agreement relates shall be kept confidential, except
(i) as may be otherwise necessary in connection with the filing
of Tax Returns or claims for refund or in conducting an audit or
other proceeding relating to Taxes or as may be otherwise
reasonably required by applicable Law, (ii) for any external
disclosure in audited financial statements or regulatory filings
which a Party reasonably believes is required by applicable law
or stock exchange rules or (iii) for any disclosure which a Party
or its affiliates, as the case may be, reasonably believes is
required by an entity which has made financing available to such
Party or affiliate or to which such Party or affiliate has
applied for financing in connection with this Agreement or with
any other agreement (a "Lender"), provided that such Lender shall
have agreed to keep all such information confidential.
5.9 Termination of Tax Sharing Agreements Except as
provided in this Agreement, any and all Tax allocation
agreements, Tax sharing agreements, intercompany agreements,
intercompany Indebtedness, or other agreements or arrangements
between the Company and the Seller or any of the Seller's
Affiliates and relating to any Tax matters shall be terminated
with respect to the Company as of the Closing Financial Statement
Date, and from and after such time will have no further force or
effect for any taxable period (whether past, current, or future
taxable periods).
5.10 Purchase Price Unless otherwise required by
applicable Law, the Parties shall treat any payments of Taxes
made pursuant to this Article V as an adjustment to the Purchase
Price for federal, state and local Tax purposes.
5.11 Payments Except as otherwise provided in this Article
V, any amount to which a Party is entitled under this Article V
shall be promptly paid in immediately available funds to such
Party by the Party or Parties obligated to make such payment
within five business days after written notice to the Party so
obligated stating that the Taxes to which such amount relates are
due or have been paid and providing details supporting the
calculation of such amount, but in no event shall such payment be
required to be made earlier than seven calendar days before the
due date (giving effect to any and all valid extensions) for
payment of such Taxes.
5.12 Survival All representations and warranties contained
in Section 2.18 hereof, and all covenants and agreements
contained in or made pursuant to this Article V, shall survive
until 90 calendar days following expiration of the applicable
statute of limitations (including any and all valid extensions
thereof), provided, however, that a claim for indemnification
made within the applicable survival period in respect of any such
representation, warranty, covenant or agreement may continue to
be asserted beyond such period.
5.13 Exclusivity of Article V Notwithstanding anything in
this Agreement to the contrary, this Article V shall be the
exclusive agreement among the Parties with respect to
indemnification for any Losses in respect of Taxes.
ARTICLE VI
SURVIVAL OF REPRESENTATIONS AND
WARRANTIES; INDEMNIFICATION
6.1 Survival of Representations and Warranties All
representations and warranties of the Parties contained herein
shall survive the Closing and any investigation at any time made
by or on behalf of any Party for a period of two years after the
Closing Date; provided, however, that the representations and
warranties contained in Section 2.18 (Taxes) hereof shall
survive in accordance with the provisions of Section 5.12 hereof.
Provided that a claim with respect to a breach of representation
or warranty is made within the applicable period, it may continue
to be asserted beyond such period with respect to the
representation or warranty to which such claim relates.
6.2 Indemnification by the Seller Subject to the
provisions of this Article VI, and in addition to the obligations
of the Seller pursuant to Section 5.2 hereof, the Seller shall
indemnify, defend and hold harmless Niagara, the Buyer, any
parent, subsidiary or affiliate of, and any director, officer,
employee, agent or advisor of, any of them, or any of their
respective heirs, successors or assigns (a "Buyer Indemnified
Party"), from and against any and all demands, claims, actions,
causes of action, assessments, losses, damages, liabilities,
judgments, settlements, fines, penalties, sanctions, costs,
deficiencies and expenses (including, without limitation,
reasonable attorneys' fees and disbursements, interest and
penalties, and all other reasonable costs of investigating and
defending third party claims as incurred) (collectively,
"Losses") asserted against, resulting to, imposed upon or
incurred by any Buyer Indemnified Party, directly or indirectly,
by reason of or resulting from:
(i) the breach of or any inaccuracy in any of the
representations and warranties of the Seller contained in or
made pursuant to this Agreement;
(ii) the breach or nonperformance of any covenant
or agreement of the Seller contained in or made pursuant to
this Agreement; and
(iii) any guarantee by the Company, made prior to
the Closing, of Indebtedness of the Seller or any Seller's
Affiliate.
6.3 Indemnification by Niagara and the Buyer Subject to
the provisions of this Article VI, and in addition to the
obligations of Niagara and the Buyer under Section 5.3 hereof,
Niagara and the Buyer shall, jointly and severally, indemnify,
defend and hold harmless the Seller, any parent, subsidiary or
affiliate of the Seller, and any director, officer, employee,
agent or advisor of any of them or any of their respective heirs,
successors or assigns (a "Seller Indemnified Party"), from and
against any and all Losses asserted against, resulting to,
imposed upon or incurred by any Seller Indemnified Party,
directly or indirectly, by reason of or resulting from:
(i) the breach of or any inaccuracy in any of the
representations and warranties of Niagara or the Buyer
contained in or, made pursuant to this Agreement;
(ii) the breach or non-performance of any covenant
or agreement of Niagara or the Buyer contained in or made
pursuant to this Agreement; and
(iii) any actions or omissions by a Buyer
Indemnified Party or the Company following the Closing with
respect to any Designated Plan that is sponsored by the
Company immediately prior to the Closing; and
(iv) any matter relating to the Buyer Salaried
Pension Plan (as defined in Section 4.1(a) hereof), the
Buyer's Savings Plan (as defined in Section 4.1(b) hereof),
the LaSalle Steel Company Group Benefit Plan, and the
LaSalle Steel Company Management Incentive Program.
6.4 Limitations on Indemnification (a) The
indemnifications in favor of the Buyer Indemnified Parties
contained in Section 6.2(i) hereof shall not be effective until
the aggregate dollar amount of all Losses indemnified against
under such Section exceeds $250,000 (the "Seller's Threshold
Amount"), and then only to the extent such aggregate amount
exceeds the Seller's Threshold Amount. The indemnifications in
favor of the Buyer Indemnified Parties contained in Section
6.2(i) hereof shall terminate once the dollar amount of all
Losses indemnified against under such Section aggregates
$35,000,000.
(b) The indemnifications in favor of the Seller
Indemnified Parties contained in Section 6.3(i) hereof shall not
be effective until the aggregate dollar amount of all Losses
indemnified against under such Section exceeds $250,000 (the
"Buyer's Threshold Amount"), and then only to the extent such
aggregate amount exceeds the Buyer's Threshold Amount. The
indemnifications in favor of the Seller Indemnified Persons
contained in Section 6.3(i) hereof shall terminate once the
dollar amount of all Losses indemnified against under such
Section aggregates $35,000,000.
6.5 Indemnification Procedures
(a) Notice. If any legal proceeding shall be threatened
or instituted or any claim or demand shall be asserted by any
Buyer Indemnified Party or Seller Indemnified Party in respect of
which indemnification may be sought under the provisions of this
Agreement, the Party seeking indemnification (the "Claiming
Party") shall promptly cause written notice of the assertion of
any such claim, demand or proceeding of which it has knowledge to
be forwarded to the Party from whom it is claiming
indemnification (the "Indemnitor"). Such notice shall contain a
reference to the provisions hereof or of such other agreement,
instrument or certificate delivered pursuant hereto, in respect
of which such claim is being made, and shall specify, in
reasonable detail, the amount of such Loss if determinable at
such time. The Claiming Party's failure to give the Indemnitor
prompt notice shall not preclude the Claiming Party from seeking
indemnification from the Indemnitor unless the Claiming Party's
failure has materially prejudiced the Indemnitor's ability to
defend the claim, demand or proceeding.
(b) Third Party Claims. If the Claiming Party seeks
indemnification from the Indemnitor as a result of a claim or
demand being made by a third party (a "Third Party Claim"), the
Indemnitor shall have the right to promptly assume the control of
the defense of such Third Party Claim, including, at its own
expense, employment by it of counsel reasonably satisfactory to
the Claiming Party. The Claiming Party may, in its sole
discretion and at its own expense, employ counsel to represent it
in the defense of the Third Party Claim, and in such event
counsel for the Indemnitor shall cooperate with counsel for the
Claiming Party in such defense, provided that the Indemnitor
shall direct and control the defense of such Third Party Claim or
proceeding. The Indemnitor shall not consent to the entry of any
judgment, except with the written consent of the Claiming Party,
and shall not enter into any settlement of such Third Party Claim
without the written consent of the Claiming Party which (i) does
not include as an unconditional term thereof the release of the
Claiming Party from all liability in respect of such Third Party
Claim or (ii) results in the imposition on the Claiming Party of
any remedy other than money damages. If the Indemnitor elects
not to exercise its rights to assume the defense of the Third
Party Claim, or if injunctive relief is sought which would have
an adverse effect on the Claiming Party (or the Company if a
Buyer Indemnified Party is the Claiming Party), the Claiming
Party may, but shall have no obligation to, defend against such
Third Party Claim or legal proceeding in such manner as it may
deem appropriate, and the Claiming Party may compromise or settle
such Third Party Claim and proceeding without the Indemnitor's
consent.
(c) Payment. After any final judgment or award shall
have been rendered by a court, arbitration board or
administrative agency of competent jurisdiction and the time in
which to appeal therefrom shall have expired, or a settlement
shall have been consummated, or the Claiming Party and the
Indemnitor shall arrive at a mutually binding agreement with
respect to each separate matter alleged to be indemnified by the
Indemnitor hereunder, the Claiming Party shall forward to the
Indemnitor notice of any sums due and owing by it with respect to
such matter (in accordance with Section 7.9 hereof) and the
Indemnitor shall pay all of the sums so owing to the Claiming
Party by wire transfer, certified or bank cashier's check within
10 days after the date of such notice.
6.6 Application to Taxes. Notwithstanding anything in this
Agreement to the contrary, Article V shall be the exclusive
agreement among the Parties with respect to indemnification for
any Losses in respect of Taxes.
6.7 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.
Without limiting the foregoing, each of Niagara and the Buyer
waives any rights and remedies it may have against the Seller
under any Environmental Law, including without limitation the
Comprehensive Environmental Response, Compensation and Liability
Act, the Indiana Responsible Property Transfer Law and the
Indiana Hazardous Substances Response Trust Fund Law. For
purposes of this Agreement, any statement made by the Company in
a notice delivered or filed pursuant to the Indiana Responsible
Property Transfer Law in connection with the financing
arrangements of the Buyer and its affiliates shall not be deemed
to be a representation, warranty, agreement or covenant pursuant
to this Agreement and the Parties acknowledge that the Seller
shall not have any responsibility concerning the preparation,
delivery or filing of such notice.
ARTICLE VII
MISCELLANEOUS
7.1 Parties in Interest; No Third Party Beneficiaries (a)
This Agreement shall be binding upon, inure to the benefit of,
and be enforceable by, the Parties and their respective
successors and permitted assigns. This Agreement and the rights
and obligations of the Parties hereunder may not be assigned by
any of the Parties without the prior written consent of the other
Parties.
(b) This Agreement is not intended, nor shall it be
construed, to confer upon any Person, except the Parties and
their respective successors and permitted assigns, any rights or
remedies under or by reason of this Agreement.
7.2 Exhibits and Disclosure Schedule All Exhibits annexed
hereto and the Disclosure Schedule referred to herein are hereby
incorporated in and made a part of this Agreement as if set forth
in full herein.
7.3 Entire Agreement This Agreement (including the
Exhibits hereto and the Disclosure Schedule) and the other
documents, certificates and instruments referred to herein,
together with the letter agreement dated the date hereof by and
among the Parties, embody the entire agreement and understanding
of the Parties in respect of the transactions contemplated by
this Agreement, and, except as provided in Section 4.5 hereof,
supersedes all prior agreements, arrangements and understandings
of the Parties with respect to such transactions, including (i)
the Confidentiality Agreement, dated December 19, 1995, by and
between the Seller and Niagara and (ii) the Letter of Intent,
dated January 23, 1997, by and among Niagara, the Seller and the
Company, as amended.
7.4 Waiver of Compliance No amendment, modification,
alteration, supplement or waiver of compliance with any
obligation, covenant, agreement or provision hereof or consent
pursuant to this Agreement shall be effective unless evidenced by
an instrument in writing executed by both of the Parties or in
the case of a waiver, the Party against whom enforcement of any
waiver, is sought. Any waiver or failure to insist upon strict
compliance with such obligation, covenant, agreement, or
provision shall not operate as a waiver of, or estoppel with
respect to, any subsequent or other failure.
7.5 Validity The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or
enforceability of any other provisions of this Agreement, each of
which shall remain in full force and effect.
7.6 Counterparts This Agreement may be executed in
counterparts, each of which shall be deemed an original but all
of which together shall constitute one and the same instrument.
7.7 Headings The table of contents, article and section
headings contained in this Agreement or any Exhibit hereto or the
Disclosure Schedule are for convenience only and shall not
control or affect in any way the meaning or interpretation of
this Agreement.
7.8 Governing Law This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware
without giving effect to the principles of conflicts of law of
such jurisdiction.
7.9 Notices All notices, requests, claims, demands and
other communications hereunder shall be in writing and shall be
deemed to have been duly given if delivered personally (which is
confirmed) or sent by registered or certified mail (postage
prepaid, return receipt requested) and, in the case of the
Intercompany Statement, by overnight delivery (Federal Express),
to the Parties at the following addresses:
(a) If to Niagara:
Mr. Xxxxxxx Xxxxxx
President
Niagara Corporation
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
with a copy to:
Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Attention: Xxxxxx X. Xxxxx, Esq.
(b) If to the Buyer to:
Mr. Xxxxx Xxxxxx
President
Niagara Cold Drawn Corp.
000 Xxxxxxx Xxxxxx
X.X. Xxx 000
Xxxxxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Copies to:
Mr. Xxxxxxx Xxxxxx
President
Niagara Corporation
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
and
Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Attention: Xxxxxx X. Xxxxx, Esq.
(c) If to the Seller:
Xx. Xxxxx X. Xxxx
Vice President
Quanex Corporation
0000 Xxxx Xxxx Xxxxx
Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
With a copy to:
Fulbright & Xxxxxxxx L.L.P.
0000 XxXxxxxx Xxxxxx
Xxxxxxx, Xxxxx 00000-0000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Attention: Xxxxx X. Xxxxxxx, Esq.
or to such other address as the Person to whom notice is to be
given may have previously furnished to the other in writing in
the manner set forth above, provided that notice of a change of
address shall be deemed given only upon receipt.
IN WITNESS WHEREOF, the Parties have executed this
Agreement, on the day and year first above written.
QUANEX CORPORATION
By: /s/Xxxxx X. Xxxx
_________________________
Name: Xxxxx X. Xxxx
Title: Vice President
NIAGARA CORPORATION
By: /s/Xxxxxxx Xxxxxx
________________________
Name: Xxxxxxx Xxxxxx
Title: President
NIAGARA COLD DRAWN CORP.
By: /s/Xxxxx Xxxxxx
_________________________
Name: Xxxxx Xxxxxx
Title: President
TABLE OF CONTENTS
Page
ARTICLE I
PURCHASE AND SALE OF THE SHARES; THE CLOSING . . . . . . . . 1
1.1 Purchase and Sale . . . . . . . . . . . . . . . . . . . 1
1.2 Consideration . . . . . . . . . . . . . . . . . . . . . 1
1.3 The Closing . . . . . . . . . . . . . . . . . . . . . . 1
1.4 Actions Taken Prior to the Closing . . . . . . . . . . . 2
1.5 Deliveries by the Seller . . . . . . . . . . . . . . . . 2
1.6 Deliveries by Niagara and the Buyer . . . . . . . . . . 2
1.7 Post-Closing Adjustment . . . . . . . . . . . . . . . . 3
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE SELLER . . . . . . . . 5
2.1 Organization and Standing . . . . . . . . . . . . . . . 5
2.2 Organizational Documents and Corporate Records . . . . . 6
2.3 Equity Investments . . . . . . . . . . . . . . . . . . . 6
2.4 Authorization; Binding Obligation . . . . . . . . . . . 6
2.5 Capitalization; Title to the Shares . . . . . . . . . . 6
2.6 Consents and Approvals; No Violation . . . . . . . . . . 7
2.7 Financial Statements . . . . . . . . . . . . . . . . . . 7
2.8 Absence of Undisclosed Liabilities . . . . . . . . . . . 7
2.9 Accounts Receivable . . . . . . . . . . . . . . . . . . 8
2.10 Inventory . . . . . . . . . . . . . . . . . . . . . . . 8
2.11 Absence of Certain Changes or Events . . . . . . . . . 8
2.12 Properties and Assets . . . . . . . . . . . . . . . . 10
2.13 Certain Contracts . . . . . . . . . . . . . . . . . . . 11
2.14 Compliance with Laws and Permits . . . . . . . . . . . 11
2.15 Litigation and Arbitration . . . . . . . . . . . . . . 11
2.16 Employee Benefit Plans . . . . . . . . . . . . . . . . 12
2.17 Personnel Information; Labor Relations . . . . . . . . 14
2.18 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . 15
2.19 Intellectual Property . . . . . . . . . . . . . . . . . 17
2.20 Compliance with Environmental Laws . . . . . . . . . . 18
2.21 Insurance . . . . . . . . . . . . . . . . . . . . . . . 19
2.22 Bank Accounts . . . . . . . . . . . . . . . . . . . . . 19
2.23 Customers and Suppliers . . . . . . . . . . . . . . . . 19
2.24 Affiliate Transactions . . . . . . . . . . . . . . . . 19
2.25 Brokers . . . . . . . . . . . . . . . . . . . . . . . . 19
2.26 Disclosure . . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF NIAGARA AND THE BUYER . . . 20
3.1 Organization and Standing . . . . . . . . . . . . . . . 20
3.2 Authorization; Binding Obligation . . . . . . . . . . . 20
3.3 Consents and Approvals; No Violation . . . . . . . . . . 20
3.4 Brokers . . . . . . . . . . . . . . . . . . . . . . . . 20
ARTICLE IV
ADDITIONAL COVENANTS . . . . . . . . . . . . . . . . . . . . 21
4.1 Benefit Matters . . . . . . . . . . . . . . . . . . . . 21
4.2 Further Assurances; Cooperation . . . . . . . . . . . . 23
4.3 Notification of Certain Matters . . . . . . . . . . . . 23
4.4 Confidentiality/Non-Competition . . . . . . . . . . . . 23
4.5 Expenses . . . . . . . . . . . . . . . . . . . . . . . . 24
ARTICLE V
TAX MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.1 Section 338(h)(10) Election . . . . . . . . . . . . . . 24
5.2 Tax Indemnity by the Seller . . . . . . . . . . . . . . 25
5.3 Tax Indemnity by Niagara and the Buyer . . . . . . . . . 26
5.4 Transfer Taxes . . . . . . . . . . . . . . . . . . . . . 26
5.5 Allocation of Certain Taxes . . . . . . . . . . . . . . 27
5.6 Return Filings, Refunds and Credits . . . . . . . . . . 27
5.7 Tax Contests . . . . . . . . . . . . . . . . . . . . . . 29
5.8 Cooperation . . . . . . . . . . . . . . . . . . . . . . 29
5.9 Termination of Tax Sharing Agreements . . . . . . . . . 30
5.10 Purchase Price . . . . . . . . . . . . . . . . . . . . 30
5.11 Payments . . . . . . . . . . . . . . . . . . . . . . . 30
5.12 Survival . . . . . . . . . . . . . . . . . . . . . . . 30
5.13 Exclusivity of Article V . . . . . . . . . . . . . . . 30
ARTICLE VI
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION . 30
6.1 Survival of Representations and Warranties . . . . . . . 30
6.2 Indemnification by the Seller . . . . . . . . . . . . . 31
6.3 Indemnification by Niagara and the Buyer . . . . . . . . 31
6.4 Limitations on Indemnification . . . . . . . . . . . . . 31
6.5 Indemnification Procedures . . . . . . . . . . . . . . . 32
6.6 Application to Taxes. . . . . . . . . . . . . . . . . . 32
6.7 Remedies . . . . . . . . . . . . . . . . . . . . . . . . 32
ARTICLE VII
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . 33
7.1 Parties in Interest; No Third Party Beneficiaries . . . 33
7.2 Exhibits and Disclosure Schedule . . . . . . . . . . . . 33
7.3 Entire Agreement . . . . . . . . . . . . . . . . . . . . 33
7.4 Waiver of Compliance . . . . . . . . . . . . . . . . . . 33
7.5 Validity . . . . . . . . . . . . . . . . . . . . . . . . 33
7.6 Counterparts . . . . . . . . . . . . . . . . . . . . . . 33
7.7 Headings . . . . . . . . . . . . . . . . . . . . . . . . 33
7.8 Governing Law . . . . . . . . . . . . . . . . . . . . . 33
7.9 Notices . . . . . . . . . . . . . . . . . . . . . . . . 33
Exhibit A - Termination Agreement
Exhibit B - Certificate of Non-Foreign Status
