Exhibit 10.1


 


Execution Copy


 


$100,000,000


 


QUANEX CORPORATION


 


2.50% Convertible Senior Debentures
due May 15, 2034


 


PURCHASE AGREEMENT


 


April 29,
2004


 


	
  CREDIT SUISSE FIRST
  BOSTON LLC

  
	
  BEAR, STEARNS & CO.
  INC.

  
	
  As Representatives of
  the Several Purchasers,

  
	
  c/o Credit
  Suisse First Boston LLC,

  
	
  Eleven Madison Avenue,

  
	
  New York, N.Y.
  10010-3629

  



 


Ladies and Gentlemen:


 


1.  Introductory.  Quanex Corporation, a Delaware corporation (the “Company”),
proposes, subject to the terms and conditions stated herein, to issue and sell
to the several initial purchasers named in Schedule A hereto (the “Purchasers”)
U.S.$100,000,000 aggregate principal amount of its 2.50% Convertible Senior
Debentures due May 15, 2034 (the “Firm Securities”) and also proposes to
grant to the Purchasers an option, exercisable by Credit Suisse First Boston
LLC as set forth in Section 3 hereof to purchase an aggregate of up to an
additional $25,000,000 aggregate principal amount (“Optional Securities”) of its
2.50% Convertible Senior Debentures due May 15, 2034, each to be issued under
an indenture dated as of May 5, 2004 (the “Indenture”), between the Company and Union Bank of California, N.A., as
Trustee.  The Firm Securities and the
Optional Securities which the Purchasers may elect to purchase pursuant to
Section 3 hereof are herein collectively called the “Offered Securities”.  The United States Securities Act of 1933, as
amended, is herein referred to as the “Securities Act.”


 


The holders of the
Offered Securities will be entitled to the benefits of a Registration Rights
Agreement dated as of May 5, 2004, among the Company and the Purchasers (the “Registration Rights Agreement”), pursuant
to which the Company agrees to file a registration statement with the
Securities and Exchange Commission (the “Commission”)
registering the resale of the Offered Securities and the Underlying Shares, as
hereinafter defined, under the Securities Act.


 


The Company hereby agrees
with the several Purchasers as follows:


 


2.  Representations and Warranties of the Company.  The Company represents and warrants to, and
agrees with, the several Purchasers that:


 


(a)  A preliminary offering circular and an
offering circular relating to the Offered Securities to be offered by the
Purchasers have been prepared by the Company. 
Such preliminary offering


 


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circular, including all
documents incorporated by reference therein (the “Preliminary Offering Circular”),
and offering circular, including all documents incorporated by reference
therein (the “Offering Circular”), are hereinafter collectively referred to
as the “Offering
Document”.  On the date of
this Agreement, the Offering Document does not include any untrue statement of
a material fact or omit to state any material fact necessary in order to make
the statements therein, in the light of the circumstances under which they were
made, not misleading.  The preceding
sentence does not apply to statements in or omissions from the Offering
Document based upon written information furnished to the Company by any
Purchaser through Credit Suisse First Boston LLC (“CSFB”) specifically for use
therein, it being understood and agreed that the only such information is that
described as such in Section 7(b) hereof. 
The Company’s Annual Report on Form 10-K most recently filed with
the Commission and all subsequent reports (collectively, the “Exchange Act
Reports”) which have been filed by the Company with the Commission
or sent to stockholders pursuant to the United States Securities Exchange Act
of 1934, as amended (the “Exchange Act”), when they were filed with
the Commission, conformed in all material respects to the requirements of the
Exchange Act and the rules and regulations of the Commission thereunder.


 


(b)  The Company has been duly incorporated and
is an existing corporation in good standing under the laws of the State of
Delaware, with corporate power and authority to own its properties and conduct
its business as described in the Offering Document; and the Company is duly qualified
to do business as a foreign corporation in good standing in all other
jurisdictions in which its ownership or lease of property or the conduct of its
business requires such qualification, except where the failure to so qualify
would not, individually or in the aggregate, have a material adverse effect on
the condition (financial or other), business, properties or results of
operations of the Company and its subsidiaries taken as a whole (“Material
Adverse Effect”).


 


(c)  Each subsidiary of the Company has been duly
incorporated and is an existing corporation in good standing under the laws of
the jurisdiction of its incorporation, with corporate power and authority (to
own its properties and conduct its business as described in the Offering
Document; and each subsidiary of the Company is duly qualified to do business
as a foreign corporation in good standing in all other jurisdictions in which
its ownership or lease of property or the conduct of its business requires such
qualification except where the failure to so qualify would not, individually or
in the aggregate, have a Material Adverse Effect; all of the issued and
outstanding capital stock of each subsidiary of the Company has been duly
authorized and validly issued and is fully paid and nonassessable; and the
capital stock of each subsidiary owned by the Company, directly or through
subsidiaries, is owned free from liens, encumbrances and defects.


 


(d)  The Indenture has been duly authorized by
the Company; the Offered Securities have been duly authorized by the Company;
and when the Offered Securities are delivered and paid for pursuant to this
Agreement on each Closing Date (as defined below), the Indenture will have been
duly executed and delivered by the Company, such Offered Securities will have
been duly executed, authenticated, issued and delivered and will conform to the
description thereof contained in the Offering Document and to the terms thereof
contained in the Indenture, and such Offered Securities will constitute valid
and legally binding obligations of the Company, enforceable in accordance with
their terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general applicability relating
to or affecting creditors’ rights and to general equity principles.


 


(e) The
outstanding shares of Common Stock, $.50 par value (the “Common Stock”), of the Company have been
duly authorized and validly issued, are fully paid and nonassessable and
conform to the description thereof contained in the Offering Document; when the
Offered Securities are delivered and paid for pursuant to this Agreement on
each Closing Date, such Offered Securities will


 


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be convertible into
shares of Common Stock (“Underlying Shares”) of the Company in
accordance with the terms of the Indenture; the Underlying Shares initially
issuable upon conversion of such Offered Securities have been duly authorized
and reserved for issuance upon such conversion and, when issued upon such
conversion, will be validly issued, fully paid and nonassessable; and the
stockholders of the Company have no preemptive rights with respect to the
Offered Securities or the Common Stock (including the Underlying Shares).


 


(f) Except as
disclosed in the Offering Document, there are no contracts, agreements or
understandings between the Company and any person that would give rise to a
valid claim against the Company or any Purchaser for a brokerage commission,
finder’s fee or other like payment in connection with the Offered Securities.


 


(g)  No consent, approval, authorization, order,
registration or qualification of, or filing with, any governmental agency or
body or any court is required for the consummation of the transactions
contemplated by this Agreement and the Registration Rights Agreement in
connection with the issuance and sale of the Offered Securities by the Company
and the issuance of the Underlying Shares by the Company upon conversion of the
Offered Securities in accordance with the terms of the Indenture and the
compliance by the Company with all of the provisions of this Agreement, the
Registration Rights Agreement and the Indenture, except as may be required
under state securities or Blue Sky laws and except for the order of the Commission
declaring the Shelf Registration Statement (as defined in the Registration
Rights Agreement) effective.


 


(h)  The execution, delivery and performance by
the Company of the Indenture, this Agreement and the Registration Rights
Agreement, and the issuance and sale of the Offered Securities and compliance
with the terms and provisions thereof and the issuance of the Underlying Shares
by the Company upon conversion of the Offered Securities in accordance with the
terms of the Indenture will not result in a breach or violation of any of the
terms and provisions of, or constitute a default under, any statute, rule,
regulation or order of any governmental agency or body or any court, domestic
or foreign, having jurisdiction over the Company or any subsidiary of the
Company or any of their properties, or any agreement or instrument to which the
Company or any such subsidiary is a party or by which the Company or any such
subsidiary is bound or to which any of the properties of the Company or any
such subsidiary is subject, or the charter or by-laws of the Company or any
such subsidiary, and the Company has full power and authority to authorize,
issue and sell the Offered Securities as contemplated by this Agreement.


 


(i)  This Agreement has been duly authorized, executed
and delivered by the Company.


 


(j)  The Registration Rights Agreement has been
duly authorized by the Company, and when duly executed and delivered by the
parties thereto, will constitute the valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms, subject
to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general applicability relating to or affecting creditors’
rights and to general equity principles.


 


(k)  Except as disclosed in the Offering Document
(including liens and encumbrances pursuant to the Revolving Credit Agreement
dated as of November 26, 2002, as amended, by and among the Company, the
financial institutions party thereto and Comerica Bank, as agent), the Company
and its subsidiaries have good and marketable title to all real properties and
all other properties and assets owned by them, in each case free from liens,
encumbrances and defects that would materially affect the value thereof or materially
interfere with the use made or to be made thereof by them; and except as
disclosed in the Offering Document, the Company and its subsidiaries


 


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hold any leased real or
personal property under valid and enforceable leases with no exceptions that
would materially interfere with the use made or to be made thereof by them.


 


(l)  The Company and its subsidiaries possess
adequate certificates, authorities or permits issued by appropriate
governmental agencies or bodies necessary to conduct the business now operated
by them and have not received any notice of proceedings relating to the
revocation or modification of any such certificate, authority or permit that,
if determined adversely to the Company or any of its subsidiaries, would
individually or in the aggregate have a Material Adverse Effect.


 


(m)  No labor dispute with the employees of the
Company or any subsidiary exists or, to the knowledge of the Company, is
imminent that might have a Material Adverse Effect.


 


(n)  The Company and its subsidiaries own,
possess or can acquire on reasonable terms, adequate trademarks, trade names
and other rights to inventions, know-how, patents, copyrights, confidential
information and other intellectual property (collectively, “intellectual
property rights”) necessary to conduct the business now operated by
them, or presently employed by them, and have not received any notice of
infringement of or conflict with asserted rights of others with respect to any
intellectual property rights that, if determined adversely to the Company or
any of its subsidiaries, would individually or in the aggregate have a Material
Adverse Effect.


 


(o)  Except
as disclosed in the Offering Document, neither the Company nor any of its
subsidiaries is in violation of any statute, any rule, regulation, decision or
order of any governmental agency or body or any court, domestic or foreign,
relating to the use, disposal or release of hazardous or toxic substances or
relating to the protection or restoration of the environment or human exposure
to hazardous or toxic substances (collectively, “environmental laws”), owns or
operates any real property contaminated with any substance that is subject to
any environmental laws, is liable for any off-site disposal or contamination
pursuant to any environmental laws, or is subject to any claim relating to any
environmental laws, which violation, contamination, liability or claim would
individually or in the aggregate have a Material Adverse Effect; and the Company
is not aware of any pending investigation which might lead to such a claim.


 


(p)  Except as disclosed in the Offering
Document, there are no pending actions, suits or proceedings against or
affecting the Company, any of its subsidiaries or any of their respective
properties that, if determined adversely to the Company or any of its
subsidiaries, would individually or in the aggregate have a Material Adverse
Effect, or would materially and adversely affect the ability of the Company to
perform its obligations under the Indenture, this Agreement or the Registration
Rights Agreement; and no such actions, suits or proceedings are threatened or,
to the Company’s knowledge, contemplated.


 


(q)  The financial statements included in the
Offering Document present fairly the financial position of the Company and its
consolidated subsidiaries as of the dates shown and their results of operations
and cash flows for the periods shown, and such financial statements have been
prepared in conformity with the generally accepted accounting principles in the
United States applied on a consistent basis.


 


(r)  Except as disclosed in the Offering
Document, since the date of the latest audited financial statements included in
the Offering Document there has been no material adverse change, nor any
development or event involving a prospective material adverse change, in the
condition (financial or other), business, properties or results of operations
of the Company and its subsidiaries taken as a whole, and, except as disclosed in
or contemplated by the Offering Document, there has


 


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been no dividend or
distribution of any kind declared, paid or made by the Company on any class of
its capital stock.


 


(s)  The Company is subject to the reporting
requirements of Section 13 of the Exchange Act and files reports with the
Commission on the Electronic Data Gathering, Analysis, and Retrieval (EDGAR)
system.


 


(t)  The Company is not an open-end investment
company, unit investment trust or face-amount certificate company that is or is
required to be registered under Section 8 of the United States Investment
Company Act of 1940 (the “Investment Company Act”); and the Company
is not and, after giving effect to the offering and sale of the Offered
Securities and the application of the proceeds thereof as described in the
Offering Document, will not be an “investment company” as defined in the
Investment Company Act.


 


(u)  No securities of the same class (within the
meaning of Rule 144A(d)(3) under the Securities Act) as the Offered
Securities are listed on any national securities exchange registered under
Section 6 of the Exchange Act or quoted in a U.S. automated inter-dealer
quotation system.


 


(v)  The offer and sale of the Offered Securities
in the manner contemplated by this Agreement will be exempt from the
registration requirements of the Securities Act by reason of Section 4(2)
thereof and it is not necessary to qualify an indenture in respect of the
Offered Securities under the United States Trust Indenture Act of 1939, as
amended (the “Trust Indenture Act”).


 


(w)  Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf (i) has, within the
six-month period prior to the date hereof, offered or sold the Offered
Securities or any security of the same class or series as the Offered
Securities or (ii) has offered or will offer or sell the Offered Securities in
the United States by means of any form of general solicitation or general
advertising within the meaning of Rule 502(c) under the Securities Act.  The Company has not entered and will not
enter into any contractual arrangement with respect to the distribution of the
Offered Securities except for this Agreement.


 


3.  Purchase, Sale and Delivery of Offered Securities.  On the basis of the representations,
warranties and agreements herein contained, but subject to the terms and
conditions herein set forth, the Company agrees to sell to the Purchasers, and
the Purchasers agree, severally and not jointly, to purchase from the Company,
at a purchase price of 97.25% of the principal amount thereof plus accrued
interest from May 5, 2004 to the First Closing Date (as hereinafter defined),
the respective principal amounts of Firm Securities as set forth opposite the names
of the several Purchasers in Schedule A hereto.


 


The Company will deliver
against payment of the purchase price the Firm Securities in the form of one or
more permanent global Securities in definitive form (the “Firm  Global Securities”) deposited
with the Trustee as custodian for The Depository Trust Company (“DTC”)
and registered in the name of Cede & Co., as nominee for DTC.  Interests in any permanent global Securities
will be held only in book-entry form through DTC, except in the limited
circumstances described in the Offering Document. Payment for the Firm
Securities shall be made by the Purchasers in Federal (same day) funds by wire
transfer to an account at a bank acceptable to CSFB drawn to the order of
Quanex Corporation at 10:00 A.M. (New York time), on May 5, 2004, or at
such other time not later than seven full business days thereafter as CSFB and
the Company determine, such time being herein referred to as the “First
Closing
Date”, against delivery to the Trustee as custodian for DTC of the
Firm Global Securities representing all of the Firm Securities. The Firm Global
Securities will be made available for checking at the office of Simpson Thacher
& Bartlett LLP, 425 Lexington Avenue, New York, New York  10017 at least 24 hours prior to the First
Closing Date.


 


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In addition, upon written
notice from CSFB given to the Company from time to time, the Purchasers may
purchase, not more than 13 days after the First Closing Date, all or less than
all of the Optional Securities at the purchase price per principal amount of
Offered Securities (including any accrued interest thereon to the related
Optional Closing Date) to be paid for the Firm Securities.  The Company agrees to sell to the Purchasers
the principal amount of Optional Securities specified in such notice and the
Purchasers agree, severally and not jointly, to purchase such Optional
Securities.  Such Optional Securities
shall be purchased from the Company for the account of each Purchaser in the
same proportion as the principal amount of Firm Securities set forth opposite
such Purchaser’s name in Schedule A hereto bears to the total principal
amount of Firm Securities (subject to adjustment by CSFB to eliminate
fractions).  No Optional Securities
shall be sold or delivered unless the Firm Securities previously have been, or
simultaneously are, sold and delivered. 
The right to purchase the Optional Securities or any portion thereof may
be exercised from time to time and to the extent not previously exercised may
be surrendered and terminated at any time upon notice by CSFB to the Company.


 


Each time for the
delivery of and payment for the Optional Securities, being herein referred to
as the “Optional
Closing Date”, which may be the First Closing Date (the First
Closing Date and each Optional Closing Date, if any, being sometimes referred
to as a “Closing
Date”), shall be determined by CSFB on behalf of the several
Purchasers but shall not be later than seven full business days after written
notice of election to purchase Optional Securities is given.  The Company will deliver against payment of
the purchase price the Optional Securities being purchased on each Optional
Closing Date in the form of one or more permanent global Securities in definitive
form (each, an “Optional Global Security”) deposited with the Trustee as
custodian for DTC and registered in the name of Cede & Co., as nominee for
DTC.  Payment for such Optional
Securities shall be made by the Purchasers in Federal (same day) funds by wire
transfer to an account at a bank acceptable to CSFB drawn to the order of
Quanex Corporation at the above office of Simpson Thacher & Bartlett LLP,
against delivery to the Trustee as custodian for DTC of the Optional Global
Securities representing all of the Optional Securities being purchased on such
Optional Closing Date.


 


4.  Representations by Purchasers; Resale by Purchasers.


 


(a)   
Each Purchaser severally represents and warrants to the Company that it is an
“accredited investor” within the meaning of Regulation D under the
Securities Act.


 


(b)  Each Purchaser severally acknowledges that
the Offered Securities have not been registered under the Securities Act and
may not be offered or sold within the United States or to, or for the account
or benefit of, U.S. persons except pursuant to an exemption from the
registration requirements of the Securities Act.  Each Purchaser severally represents and agrees that it has
offered and sold the Offered Securities, and will offer and sell the Offered
Securities only in accordance with Rule 144A under the Securities Act (“Rule 144A”).  Accordingly, such Purchaser, its affiliates
and all persons acting on its or their behalf, have complied and will comply
with the offering restrictions requirement of Rule 144A.


 


(c)  Each Purchaser severally agrees that it and
each of its affiliates has not entered and will not enter into any contractual
arrangement with respect to the distribution of the Offered Securities except
for any such arrangements with the other Purchasers or affiliates of the other
Purchasers or with the prior written consent of the Company.


 


(d)  Each Purchaser severally agrees that it and
each of its affiliates will not offer or sell the Offered Securities in the
United States by means of any form of general solicitation or general
advertising within the meaning of Rule 502(c) under the Securities Act,
including, but not limited to (i) any advertisement, article, notice or other
communication published in any newspaper, magazine or similar media or broadcast
over television or radio, or (ii) any seminar or meeting whose attendees have
been invited by any general solicitation or general advertising.  Each Purchaser severally agrees,


 


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with respect to resales
made in reliance on Rule 144A of any of the Offered Securities, to deliver
either with the confirmation of such resale or otherwise prior to settlement of
such resale a notice to the effect that the resale of such Offered Securities
has been made in reliance upon the exemption from the registration requirements
of the Securities Act provided by Rule 144A.


 


5.  Certain Agreements of the Company.  The Company agrees with the several
Purchasers that:


 


(a)  The Company will advise CSFB promptly of any
proposal to amend or supplement the Offering Document and will not effect such
amendment or supplementation without CSFB’s consent. If, at any time prior to
the completion of the resale of the Offered Securities by the Purchasers, any
event occurs as a result of which the Offering Document as then amended or
supplemented would include an untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading, the
Company promptly will notify CSFB of such event and promptly will prepare, at
its own expense, an amendment or supplement which will correct such statement
or omission. Neither CSFB’s consent to, nor the Purchasers’ delivery to
offerees or investors of, any such amendment or supplement shall constitute a
waiver of any of the conditions set forth in Section 6.


 


(b)  The Company will furnish to CSFB copies of
the Preliminary Offering Circular, the Offering Circular and all amendments and
supplements to such documents, in each case as soon as available and in such
quantities as CSFB requests.  At any
time when the Company is not subject to Section 13 or 15(d) of the
Exchange Act, the Company will promptly furnish or cause to be furnished to
CSFB (and, upon request, to each of the other Purchasers) and, upon request of
holders and prospective purchasers of the Offered Securities, to such holders
and purchasers, copies of the information required to be delivered to holders
and prospective purchasers of the Offered Securities pursuant to
Rule 144A(d)(4) under the Securities Act (or any successor provision
thereto) in order to permit compliance with Rule 144A in connection with
resales by such holders of the Offered Securities.  The Company will pay the expenses of printing and distributing to
the Purchasers all such documents.


 


(c)  The Company will arrange for the
qualification of the Offered Securities for sale and the determination of their
eligibility for investment under the laws of such jurisdictions in the United
States and Canada as CSFB designates and will continue such qualifications in
effect so long as required for the resale of the Offered Securities by the
Purchasers, provided that the Company will not be required to qualify as a
foreign corporation or to file a general consent to service of process in any
such jurisdiction.


 


(d)  During the period of two years after the
later of the First Closing Date and the last Optional Closing Date, the Company
will, upon request, furnish to CSFB, each of the other Purchasers and any
holder of Offered Securities a copy of the restrictions on transfer applicable
to the Offered Securities.


 


(e)  During the period of two years after the
later of the First Closing Date and the last Optional Closing Date, the Company
will not, and will not permit any of its officers, directors or controlled
affiliates (as defined in Rule 144 under the Securities Act) to, resell
any of the Offered Securities that have been reacquired by any of them.


 


(f)  During the period of two years after the
later of the First Closing Date and the last Optional Closing Date, the Company
will not be or become, an open-end investment company, unit investment trust or
face-amount certificate company that is or is required to be registered under
Section 8 of the Investment Company Act.


 


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(g)  The Company will pay all expenses incidental
to the performance of its obligations under this Agreement, the Indenture and
the Registration Rights Agreement, including (i) the fees and expenses of the
Trustee and its professional advisers; (ii) all expenses in connection with the
execution, issue, authentication, packaging and initial delivery of the Offered
Securities, the preparation and printing of this Agreement, the Registration
Rights Agreement, the Offered Securities, the Indenture, the Offering Document
and amendments and supplements thereto, and any other document relating to the
issuance, offer, sale and delivery of the Offered Securities; (iii) the cost of
qualifying the Offered Securities for trading in The PortalSM Market
(“PORTAL”)
and any expenses incidental thereto; (iv) the cost of any advertising approved
by the Company in connection with the issue of the Offered Securities; (v) any
expenses (including reasonable fees and disbursements of counsel) incurred in
connection with qualification of the Offered Securities for sale under the laws
of such jurisdictions in the United States and Canada as CSFB designates and
the printing of memoranda relating thereto; and (vi) expenses incurred in
distributing preliminary offering circulars and the Offering Document
(including any amendments and supplements thereto) to the Purchasers.


 


(h)  In connection with the offering, until CSFB
shall have notified the Company and the other Purchasers of the completion of
the resale of the Offered Securities, neither the Company nor any of its
officers, directors or controlled affiliates has or will, either alone or with
one or more other persons, bid for or purchase for any account in which it or
any of its affiliates has a beneficial interest any Offered Securities or
attempt to induce any person to purchase any Offered Securities, and neither it
nor any of its officers, directors or controlled affiliates will make bids or
purchases for the purpose of creating actual, or apparent, active trading in,
or of raising the price of, the Offered Securities.


 


(i)  For a period of 90 days after the date of
the Offering Circular of the Offered Securities by the Purchasers, the Company
will not offer, sell, contract to sell, pledge or otherwise dispose of,
directly or indirectly, or file with the Commission a registration statement
under the Securities Act relating to, any debt securities issued or guaranteed
by the Company and having a maturity of more than one year from the date of
issue, or any shares of Common Stock of the Company or securities convertible
into or exchangeable or exercisable for shares of Common Stock of the Company,
including the Offered Securities, or warrants or other rights to purchase
shares of Common Stock of the Company, or publicly disclose the intention to
make any such offer, sale, pledge, disposition or filing, without the prior
written consent of CSFB and Bear, Stearns & Co. Inc. except (i) the filing
of the shelf registration statement covering resales of the Offered Securities
or the Common Stock of the Company issuable upon conversion of the Offered
Securities, (ii) issuances of shares of Common Stock of the Company pursuant to
the conversion or exchange of convertible or exchangeable securities or the
exercise of warrants or options, in each case outstanding on the date hereof,
(iii) grants of employee stock options pursuant to the terms of a plan in
effect on the date hereof or (iv) issuances of shares of Common Stock of the
Company pursuant to the exercise of such options.  The Company will not at any time offer, sell, contract to sell,
pledge or otherwise dispose of, directly or indirectly, any securities under
circumstances where such offer, sale, pledge, contract or disposition would
cause the exemption afforded by Section 4(2) of the Securities Act to
cease to be applicable to the offer and sale of the Offered Securities.


 


6.  Conditions of the Obligations of the Purchasers.
 The obligations of the several Purchasers to purchase and pay for the
Firm Securities on the First Closing Date and for the Optional Securities on
each Optional Closing Date will be subject to the accuracy of the
representations and warranties on the part of the Company herein, to the
accuracy of the statements of officers of the Company made pursuant to the
provisions hereof, to the performance by the Company of its obligations
hereunder and to the following additional conditions precedent:


 


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(a) The
Purchasers shall have received a letter, dated the date of this Agreement, of
Deloitte & Touche LLP confirming that they are independent public
accountants under Rule 101 of the AICPA’s Code of Professional Conduct and its
interpretations and rulings to the effect that:


 


(i)  in their opinion the financial statements
examined by them and included in the Exchange Act Reports comply as to form in
all material respects with the applicable accounting requirements of the
Securities Act and the applicable published rules and regulations thereunder
(the “Rules and Regulations”);


 


(ii) they
have performed the procedures specified by the American Institute of Certified
Public Accountants for a review of interim financial information as described
in Statement of Auditing Standards No. 100, Interim Financial Information,
on the unaudited financial statements included in the Exchange Act Reports;


 


(iii)  on the basis of the review referred to in
clause (ii) above, a reading of the latest available interim financial
statements of the Company, inquiries of officials of the Company who have
responsibility for financial and accounting matters and other specified
procedures, nothing came to their attention that caused them to believe that:


 


(A)  the unaudited financial statements  included
in the Exchange Act Reports do not comply as to form in all material respects
with the applicable accounting requirements of the Securities Act and the
related published Rules and Regulations or any material modifications should be
made to such unaudited financial statements for them to be in conformity with
generally accepted accounting principles;


 


(B)  at the date of the latest available balance
sheet read by such accountants, or at a subsequent specified date not more than
three business days prior to the date of this Agreement, there was any change
in the capital stock or any increase in short-term indebtedness or long-term
debt of the Company and its consolidated subsidiaries or, at the date of the
latest available balance sheet read by such accountants, there was any decrease
in consolidated net current assets or net assets, as compared with amounts
shown on the latest balance sheet included in the Exchange Act Reports; or


 


(C)  for the period from the closing date of the
latest income statement included in the Exchange Act Reports to the closing
date of the latest available income statement read by such accountants there
were any decreases, as compared with the corresponding period of the previous
year, in consolidated net sales, net operating income or in the total or per
share amounts of consolidated income before extraordinary items or net income
or in the ratio of earnings to fixed charges;


 


except in all cases set
forth in clauses (B) and (C) above for changes, increases or decreases which
the Offering Document discloses have occurred or may occur or which are
described in such letter; and


 


(iv)  they have compared specified dollar amounts
(or percentages derived from such dollar amounts) and other financial
information contained in the Offering Document and the Exchange Act Reports (in
each case to the extent that such dollar amounts, percentages and other
financial information are derived from the general accounting records


 


9

















 


of the Company and its
subsidiaries subject to the internal controls of the Company’s accounting
system or are derived directly from such records by analysis or computation)
with the results obtained from inquiries, a reading of such general accounting
records and other procedures specified in such letter and have found such
dollar amounts, percentages and other financial information to be in agreement
with such results, except as otherwise specified in such letter.


 


(b) Subsequent to the execution and delivery of this
Agreement, there shall not have occurred (i) any change, or any development or
event involving a prospective change, in the condition (financial or other),
business, properties or results of operations of the Company and its
subsidiaries taken as one enterprise which, in the judgment of a majority in
interest of the Purchasers including CSFB, is material and adverse and makes it
impractical or inadvisable to proceed with completion of the offering or the
sale of and payment for the Offered Securities; (ii) any change in U.S. or
international financial, political or economic conditions or currency exchange
rates or exchange controls as would, in the judgment of a majority in interest
of the Purchasers including CSFB, be likely to prejudice materially the success
of the proposed issue, sale or distribution of the Offered Securities, whether
in the primary market or in respect of dealings in the secondary market; (iii)
any material suspension or material limitation of trading in securities
generally on the New York Stock Exchange, or any setting of minimum prices for
trading on such exchange; (iv) or any suspension of trading of any securities
of the Company on any exchange or in the over-the-counter market; (v) any banking
moratorium declared by U.S. Federal or, New York authorities; (vi) any major
disruption of settlements of securities or clearance services in the United
States or (vii) any attack on, outbreak or escalation of hostilities or act of
terrorism involving the United States, any declaration of war by Congress or
any other national or international calamity or emergency if, in the judgment
of a majority in interest of the Purchasers including CSFB, the effect of any
such attack, outbreak, escalation, act, declaration, calamity or emergency
makes it impractical or inadvisable to proceed with completion of the offering
or sale of and payment for the Offered Securities.


 


(c) The Purchasers
shall have received an opinion, dated such Closing Date, of Fulbright &
Jaworski L.L.P., counsel for the Company, that:


 


(i)
The Company has been duly incorporated and is an existing corporation in good
standing under the laws of the State of Delaware, with corporate power and
authority to own its properties and conduct its business as described in the
Offering Circular;


 


(ii)
The Indenture has been duly authorized, executed and delivered by the Company;
the Offered Securities delivered on such Closing Date have been duly
authorized, executed, authenticated, issued and delivered and conform to the
description thereof contained in the Offering Circular; and the Indenture and
the Offered Securities delivered on such Closing Date constitute valid and
legally binding obligations of the Company enforceable against the Company in accordance
with their terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general applicability relating
to or affecting creditors’ rights and to general equity principles;


 


(iii)
The Registration Rights Agreement has been duly authorized, executed and
delivered by the Company; and the Registration Rights Agreement constitutes the
valid and binding obligation of the Company, enforceable against the Company in
accordance with its terms, subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors’ rights and to general equity principles;


 


10

















 


(iv)
The Offered Securities delivered on such Closing Date are convertible into
Common Stock of the Company in accordance with the terms of the Indenture; and
the shares of such Common Stock initially issuable upon conversion of the
Offered Securities delivered on such Closing Date have been duly authorized and
reserved for issuance upon such conversion and, when issued upon such
conversion, will be validly issued, fully paid and nonassessable; and the
stockholders of the Company have no preemptive rights with respect to the
Offered Securities or the Common Stock (including the Underlying Shares); and
the outstanding shares of Common Stock of the Company conform to the
description thereof contained in the Offering Circular;


 


(v) No
consent, approval, authorization, order, registration or qualification of, or
filing with, any governmental agency or body or any court is required for the
consummation of the transactions contemplated by this Agreement and the
Registration Rights Agreement in connection with the issuance or sale of the
Offered Securities by the Company and the issuance of the Underlying Shares by
the Company upon conversion of the Offered Securities in accordance with the
terms of the Indenture and the compliance by the Company with all of the
provisions of this Agreement, the Registration Rights Agreement and the
Indenture, except such as may be required under state securities or Blue Sky
laws and except for the order of the Commission declaring the Shelf
Registration Statement effective;


 


(vi)
The execution, delivery and performance of the Indenture, this Agreement and
the Registration Rights Agreement and the issuance and sale of the Offered
Securities and compliance with the terms and provisions thereof and the
issuance of the Underlying Shares by the Company upon conversion of the Offered
Securities in accordance with the terms of the Indenture will not result in a
breach or violation of any of the terms and provisions of, or constitute a
default under, any statute, any rule, regulation or order of any governmental
agency or body or any court having jurisdiction over the Company or any
subsidiary of the Company or any of their properties, or any agreement or
instrument to which the Company or any such subsidiary is a party or by which
the Company or any such subsidiary is bound or to which any of the properties
of the Company or any such subsidiary is subject, or the charter or by-laws of
the Company or any such subsidiary, and the Company has full power and
authority to authorize, issue and sell the Offered Securities as contemplated
by this Agreement;


 


(vii)
This Agreement has each been duly authorized, executed and delivered by the
Company;


 


(viii)
The statements in the Offering Circular under the caption “Material U.S.
Federal Income Tax Considerations” insofar as they purport to constitute
summaries of matters of United States federal tax law as applied to the Offered
Securities, constitute accurate summaries of the matters described therein as
applied to the Offered Securities in all material respects, assuming the
Offered Securities are treated as indebtedness subject to the Treasury
regulations governing contingent payment debt instruments;


 


(ix)
It is not necessary in connection with (i) the offer, sale and delivery of the
Offered Securities by the Company to the several Purchasers pursuant to this
Agreement or (ii) the resales of the Offered Securities by the several
Purchasers in the manner contemplated by this Agreement, to register the
Offered Securities under the Securities Act or to qualify an indenture in
respect thereof under the Trust Indenture Act; and


 


11

















 


(x) In
addition to such counsel’s participation in the preparation of the Offering
Circular, such counsel has participated in conferences with officers and other
representatives of the Company, counsel to the Purchasers, representatives of
the independent public accountants for the Company and representatives of the
Purchasers at which the contents of the Offering Circular and related matters
were discussed and, although such counsel is not passing upon and does not
assume any responsibility for the accuracy, completeness or fairness of the
factual statements contained in the Offering Circular and such counsel has not
checked the accuracy or completeness of, or otherwise verified any information,
including statistical information, contained in the Offering Circular, no facts
have come to such counsel’s attention that lead such counsel to believe that
the Offering Circular (including the documents incorporated by reference
therein), as of its date and as of the date hereof, contained or contains an
untrue statement of a material fact or omitted or omits to state any material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading
(except with respect to the financial statements, schedules and other financial
data included in the Offering Circular as to which such counsel expresses no
opinion).


 


(d) The Purchasers
shall have received an opinion, dated such Closing Date, of Kevin P. Delaney,
General Counsel for the Company, that:


 


(i)
The Company is duly qualified to do business as a foreign corporation in good
standing in all other jurisdictions in which its ownership or lease of property
or the conduct of its business requires such qualification, except where the
failure to so qualify would not, individually or in the aggregate, have a
Material Adverse Effect;


 


(ii)
Each of MACSTEEL Monroe
(“MACSTEEL”) and TruSeal Technologies, Inc. (“TruSeal”) has been duly incorporated and is
an existing corporation in good standing under the laws of the jurisdiction of
its incorporation, with power and authority (corporate and other) to own its
properties and conduct its business as described in the Offering Circular; and
each of MACSTEEL and TruSeal is duly qualified to do
business as a foreign corporation in good standing in all other jurisdictions
in which its ownership or lease of property or the conduct of its business requires
such qualification, except where the failure to so qualify would not,
individually or in the aggregate, have a Material Adverse Effect; all of the
issued and outstanding capital stock of each of MACSTEEL and TruSeal has
been duly authorized and validly issued and is fully paid and nonassessable;
and the capital stock of each of MACSTEEL
and TruSeal is owned free
from liens, encumbrances and defects;


 


(iii)
There are no pending actions, suits or proceedings against or affecting the
Company, any of its subsidiaries or any of their respective properties that, if
determined adversely to the Company or any of its subsidiaries, would
individually or in the aggregate have a Material Adverse Effect, or would
materially and adversely affect the ability of the Company to perform its
obligations under the Indenture, this Agreement or the Registration Rights
Agreement; and no such actions, suits or proceedings are, to such counsel’s
knowledge, threatened or contemplated;


 


(iv)
To such counsel’s knowledge, there are no statutes or regulations, or
agreements, contracts, leases or other documents to which the Company is a
party of a character that would be required to be disclosed in or filed as an
exhibit to a report under the Exchange Act (if such report were filed on and as
of the date hereof) that are not described or incorporated in the Offering
Circular; and


 


12

















 


(v)                                 In
addition to such counsel’s participation in the preparation of the Offering
Circular, such counsel has participated in conferences with counsel to the
Company, counsel to the Purchasers, representatives of the independent public
accountants for the Company and representatives of the Purchasers at which the
contents of the Offering Circular and related matters were discussed and,
although such counsel is not passing upon and does not assume any
responsibility for the accuracy, completeness or fairness of the factual
statements contained in the Offering Circular and such counsel has not checked
the accuracy or completeness of, or otherwise verified any information,
including statistical information, contained in the Offering Circular, no facts
have come to such counsel’s attention that lead such counsel to believe that
the Offering Circular (including the documents incorporated by reference
therein), as of its date and as of the date hereof, contained or contains an
untrue statement of a material fact or omitted or omits to state any material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading
(except with respect to the financial statements, schedules and other financial
data included in the Offering Circular as to which such counsel expresses no
opinion).


 


(e) The Purchasers
shall have received from Simpson Thacher & Bartlett LLP, counsel for the
Purchasers, such opinion or opinions, dated such Closing Date, with respect to
the incorporation of the Company, the validity of the Offered Securities, the Offering
Circular, the exemption from registration for the offer and sale of the Offered
Securities by the Company to the several Purchasers and the resales by the
several Purchasers as contemplated hereby and other related matters as CSFB may
require, and the Company shall have furnished to such counsel such documents as
they request for the purpose of enabling them to pass upon such matters.


 


(f) The Purchasers
shall have received a certificate, dated such Closing Date, of the President or
any Vice President and a principal financial or accounting officer of the
Company in which such officers, to the best of their knowledge after reasonable
investigation, shall state that the representations and warranties of the
Company in this Agreement are true and correct, that the Company has complied
with all agreements and satisfied in all material respects all conditions on
its part to be performed or satisfied hereunder at or prior to such Closing
Date, and that, subsequent to the dates of the most recent financial statements
in the Offering Document there has been no material adverse change, nor any
development or event involving a prospective material adverse change, in the
condition (financial or other), business, properties or results of operations
of the Company and its subsidiaries taken as a whole except as set forth in the
Offering Document or as described in such certificate.


 


(g) The Purchasers
shall have received a letter, dated such Closing Date, of Deloitte & Touche
LLP which meets the requirements of subsection (a) of this Section, except
that the specified date referred to in such subsection will be a date not
more than three days prior to such Closing Date for the purposes of this
subsection.


 


(h) On or prior to
the date of this Agreement, the Purchasers shall have received lockup letters
in the form of Schedule B from each of the officers and directors of the
Company listed on Schedule C attached hereto.


 


(i) The Company
and the Purchasers shall have entered into the Registration Rights Agreement,
in form and substance satisfactory to the Purchasers.


 


The Company will furnish
the Purchasers with such conformed copies of such opinions, certificates,
letters and documents as the Purchasers reasonably request. CSFB may in its
sole discretion waive on behalf of


 


13

















 


the Purchasers compliance
with any conditions to the obligations of the Purchasers hereunder, whether in
respect of an Optional Closing Date or otherwise.


 


7.  Indemnification and Contribution. (a) The
Company will indemnify and hold harmless each Purchaser, its officers,
partners, members, directors and each person, if any, who controls such
Purchaser within the meaning of Section 15 of the Securities Act, against
any losses, claims, damages or liabilities, joint or several, to which such
Purchaser may become subject, under the Securities Act or the Exchange Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions
in respect thereof) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in the Offering
Document, or any amendment or supplement thereto, or any related preliminary
offering circular, or arise out of or are based upon the omission or alleged
omission to state therein a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, including any losses, claims, damages or liabilities
arising out of or based upon the Company’s failure to perform its obligations
under Section 5(a) of this Agreement, and will reimburse each Purchaser
for any legal or other expenses reasonably incurred by such Purchaser in
connection with investigating or defending any such loss, claim, damage, liability
or action as such expenses are incurred; provided, however, that the Company
will not be liable in any such case to the extent that any such loss, claim,
damage or liability arises out of or is based upon an untrue statement or
alleged untrue statement in or omission or alleged omission from any of such
documents in reliance upon and in conformity with written information furnished
to the Company by any Purchaser through CSFB specifically for use therein, it
being understood and agreed that the only such information consists of the
information described as such in subsection (b) below; provided further, that with respect to any
such untrue statement or alleged untrue statement or omission or alleged
omission made in the Preliminary Offering Circular, the indemnity agreement
contained in this Section 7(a) shall not inure to the benefit of such
Purchaser from whom the person asserting any such loss, claim, damage or
liability purchased the Offered Securities concerned if, to the extent that
such sale was an initial sale by such Purchaser and any such loss, claim,
damage or liability of that Purchaser is a result of the fact that both (A) a
copy of the Offering Circular was not sent or given to such person at or prior
to written confirmation of the sale of such Offered Securities to such person
and (B) the untrue statement or omission in the Preliminary Offering Circular
was corrected in the Offering Circular unless, in either case, such failure to
deliver the Offering Circular was a result of (x) of noncompliance by the
Company with Section 5(b) hereof or (y) the Company not previously
furnishing copies of the Offering Circular to such Purchaser on a timely basis
to permit the Offering Circular to be sent or given to such person at or prior
to written confirmation of the sale of such Offered Securities to such person.


 


(b) Each Purchaser will
severally and not jointly indemnify and hold harmless the Company, its
directors and officers and each person, if any, who controls the Company within
the meaning of Section 15 of the Securities Act, against any losses,
claims, damages or liabilities to which the Company may become subject, under
the Securities Act or the Exchange Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of or
are based upon any untrue statement or alleged untrue statement of any material
fact contained in the Offering Document, or any amendment or supplement
thereto, or any related preliminary offering circular, or arise out of or are
based upon the omission or the alleged omission to state therein a material
fact necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading, in each case to the
extent, but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made in reliance upon and in
conformity with written information furnished to the Company by such Purchaser
through CSFB specifically for use therein, and will reimburse any legal or
other expenses reasonably incurred by the Company in connection with
investigating or defending any such loss, claim, damage, liability or action as
such expenses are incurred, it being understood and agreed that the only such
information furnished by any Purchaser consists of the following information in
the Offering Document:  the third and
fourth sentences under the ninth paragraph with respect to market-making and
the tenth paragraph with respect to penalty bids, stabilizing and covering
under the caption “Plan of Distribution” in the Offering Circular; provided,
however, that the


 


14

















 


Purchasers shall not be
liable for any losses, claims, damages or liabilities arising out of or based upon
the Company’s failure to perform its obligations under Section 5(a) of
this Agreement.


 


(c)  Promptly after receipt by an indemnified
party under this Section of notice of the commencement of any action, such
indemnified party will, if a claim in respect thereof is to be made against the
indemnifying party under subsection (a) or (b) above, notify the
indemnifying party of the commencement thereof; but the failure to notify the
indemnifying party shall not relieve it from any liability that it may have
under subsection (a) or (b) above except to the extent that it has been
materially prejudiced (through the forfeiture of substantive rights or
defenses) by such failure; and provided further that the failure to notify the
indemnifying party shall not relieve it from any liability that it may have to
an indemnified party otherwise than under subsection (a) or (b)
above.  In case any such action is
brought against any indemnified party and it notifies the indemnifying party of
the commencement thereof, the indemnifying party will be entitled to
participate therein and, to the extent that it may wish, jointly with any other
indemnifying party similarly notified, to assume the defense thereof, with
counsel satisfactory to such indemnified party (who shall not, except with the
consent of the indemnified party, be counsel to the indemnifying party), and
after notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party will not be
liable to such indemnified party under this Section for any legal or other
expenses subsequently incurred by such indemnified party in connection with the
defense thereof other than reasonable costs of investigation. No indemnifying
party shall, without the prior written consent of the indemnified party, effect
any settlement of any pending or threatened action in respect of which any
indemnified party is or could have been a party and indemnity could have been
sought hereunder by such indemnified party unless such settlement includes (i)
an unconditional release of such indemnified party from all liability on any
claims that are the subject matter of such action and (ii) does not include a
statement as to or an admission of fault, culpability or failure to act by or on
behalf of any indemnified party.


 


(d)  If the indemnification provided for in this
Section is unavailable or insufficient to hold harmless an indemnified
party under subsection (a) or (b) above, then each indemnifying party
shall contribute to the amount paid or payable by such indemnified party as a
result of the losses, claims, damages or liabilities referred to in
subsection (a) or (b) above (i) in such proportion as is appropriate
to reflect the relative benefits received by the Company on the one hand and
the Purchasers on the other from the offering of the Offered Securities or
(ii) if the allocation provided by clause (i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault
of the Company on the one hand and the Purchasers on the other in connection
with the statements or omissions which resulted in such losses, claims, damages
or liabilities as well as any other relevant equitable considerations. The
relative benefits received by the Company on the one hand and the Purchasers on
the other shall be deemed to be in the same proportion as the total net
proceeds from the offering (before deducting expenses) received by the Company
bear to the total discounts and commissions received by the Purchasers from the
Company under this Agreement. The relative fault shall be determined by
reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the Company or the Purchasers
and the parties’ relative intent, knowledge, access to information and
opportunity to correct or prevent such untrue statement or omission. The amount
paid by an indemnified party as a result of the losses, claims, damages or
liabilities referred to in the first sentence of this subsection (d) shall
be deemed to include any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any action or claim which
is the subject of this subsection (d). Notwithstanding the provisions of
this subsection (d), no Purchaser shall be required to contribute any
amount in excess of the amount by which the total price at which the Offered
Securities purchased by it were resold exceeds the amount of any damages which
such Purchaser has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission.  The Purchasers’ obligations in this
subsection (d) to contribute are several in proportion to their respective
purchase obligations and not joint.


 


15

















 


(e)  The obligations of the Company under this
Section shall be in addition to any liability which the Company may
otherwise have and shall extend, upon the same terms and conditions, to each
person, if any, who controls any Purchaser within the meaning of the Securities
Act or the Exchange Act; and the obligations of the Purchasers under this
Section shall be in addition to any liability which the respective
Purchasers may otherwise have and shall extend, upon the same terms and
conditions, to each person, if any, who controls the Company within the meaning
of the Securities Act or the Exchange Act.


 


8.  Default of Purchasers.  If any Purchaser or Purchasers default in
their obligations to purchase Offered Securities hereunder on either the First
Closing Date or any Optional Closing Date and the aggregate principal amount of
Offered Securities that such defaulting Purchaser or Purchasers agreed but
failed to purchase does not exceed 10% of the total principal amount of Offered
Securities that the Purchasers are obligated to purchase on such Closing Date, CSFB
may make arrangements satisfactory to the Company for the purchase of such
Offered Securities by other persons, including any of the Purchasers, but if no
such arrangements are made by such Closing Date, the non-defaulting Purchasers
shall be obligated severally, in proportion to their respective commitments
hereunder, to purchase the Offered Securities that such defaulting Purchasers
agreed but failed to purchase on such Closing Date. If any Purchaser or
Purchasers so default and the aggregate principal amount of Offered Securities
with respect to which such default or defaults occur exceeds 10% of the total
principal amount of Offered Securities  that
the Purchasers are obligated to purchase on such Closing Date and arrangements
satisfactory to CSFB and the Company for the purchase of such  Offered Securities by other persons are not
made within 36 hours after such default, this Agreement will terminate
without liability on the part of any non-defaulting Purchaser or the Company,
except as provided in Section 9 (provided that if such default occurs with
respect to Optional Securities after the First Closing Date, this Agreement
shall not terminate as to the Firm Securities or any Optional  Securities purchased prior to such
termination). As used in this Agreement, the term “Purchaser” includes any
person substituted for a Purchaser under this Section. Nothing herein will
relieve a defaulting Purchaser from liability for its default.


 


9.  Survival of Certain Representations and Obligations.  The respective indemnities, agreements,
representations, warranties and other statements of the Company or its officers
and of the several Purchasers set forth in or made pursuant to this Agreement
will remain in full force and effect, regardless of any investigation, or
statement as to the results thereof, made by or on behalf of any Purchaser, the
Company or any of their respective representatives, officers or directors or
any controlling person, and will survive delivery of and payment for the  Offered Securities. If this Agreement is
terminated pursuant to Section 8 or if for any reason the purchase of the
Offered Securities by the Purchasers is not consummated, the Company shall
remain responsible for the expenses to be paid or reimbursed by it pursuant to
Section 5 and the respective obligations of the Company and the Purchasers
pursuant to Section 7 shall remain in effect and if any Offered Securities
have been purchased hereunder the representations and warranties in
Section 2 and all obligations under Section 5 shall also remain in
effect. If the purchase of the Offered Securities by the Purchasers is not
consummated for any reason other than solely because of the termination of this
Agreement pursuant to Section 8 or the occurrence of any event specified
in clause (ii), (iii), (v), (vi) or (vii) of Section 6(b), the Company
will reimburse the Purchasers for all out-of-pocket expenses (including fees
and disbursements of counsel) reasonably incurred by them in connection with
the offering of the Offered Securities.


 


10.  Notices. 
All communications hereunder will be in writing and, if sent to the
Purchasers will be mailed, delivered or faxed and confirmed to the Purchasers
c/o Credit Suisse First Boston LLC, Eleven Madison Avenue, New York, NY
10010-3629, Attention:  Transactions
Advisory Group, (fax:  (212) 325-4296)
or, if sent to the Company, will be mailed, delivered or faxed and confirmed to
it at 1900 West Loop South, Suite 1500, Houston, TX  77027, Attention:  Chief
Financial Officer (fax :  (713)
522-1630), with a copy to the General Counsel at the same address (fax:  (713) 626-7549); provided, however, that any
notice to a Purchaser pursuant to Section 7 will be mailed, delivered or
faxed and confirmed to such Purchaser.


 


16

















 


11.  Successors.  This Agreement will inure to the benefit of and be binding upon
the parties hereto and their respective successors and the controlling persons
referred to in Section 7, and no other person will have any right or
obligation hereunder, except that holders of Offered Securities shall be
entitled to enforce the agreements for their benefit contained in the second
and third sentences of Section 5(b) hereof against the Company as if such
holders were parties hereto.


 


12.  Representation of Purchasers.  You will act for the several Purchasers in
connection with this purchase, and any action under this Agreement taken by you
jointly or by CSFB will be binding upon all the Purchasers.


 


13.  Counterparts. 
This Agreement may be executed in any number of counterparts, each of
which shall be deemed to be an original, but all such counterparts shall
together constitute one and the same Agreement.


 


14. 
Applicable
Law.  This Agreement shall be
governed by, and construed in accordance with, the laws of the State of New
York.


 


The Company hereby
submits to the non-exclusive jurisdiction of the Federal and state courts in
the Borough of Manhattan in The City of New York in any suit or proceeding
arising out of or relating to this Agreement or the transactions contemplated
hereby.


 


17

















 


If the foregoing is in
accordance with the Purchasers’ understanding of our agreement, kindly sign and
return to the Company one of the counterparts hereof, whereupon it will become
a binding agreement between the Company and the several Purchasers in
accordance with its terms.


 


	
   

  	
  Very truly yours,

  
	
   

  	
   

  
	
   

  	
  QUANEX CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
					



 


 


CREDIT SUISSE FIRST
BOSTON LLC


BEAR, STEARNS & CO.
INC.


 


Acting on behalf of
itself


and as the Representative
of


the several Purchasers


 


 


	
  By CREDIT SUISSE FIRST
  BOSTON LLC

  
	
   

  
	
   

  
	
   

  	
  By

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  



 


18

















 


SCHEDULE A


 




	
  Purchaser

  	
   

  	
  Principal
  Amount of

  Firm Securities

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Credit
  Suisse First Boston LLC

  	
   

  	
  $

  	
  45,000,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Bear,
  Stearns & Co. Inc.

  	
   

  	
  45,000,000 

  	
    

  
	
   

  	
   

  	
   

  	
   

  
	
  KeyBanc
  Capital Markets, A Division of McDonald Investments Inc.

  	
   

  	
  5,000,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Robert
  W. Baird & Co. Incorporated

  	
   

  	
  5,000,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Total

  	
   

  	
  $

  	
  100,000,000

  	
   

  






 


19

















 


SCHEDULE B


 


                     ,
2004


 


Quanex Corporation


1900 West Loop South


Suite 1500


Houston, Texas  77027


 


	
  Credit Suisse First
  Boston LLC

  
	
  Bear, Stearns & Co.
  Inc.

  
	
   

  	
  as Representatives of
  the several Purchasers

  
	
  c/o

  	
  Credit Suisse First
  Boston LLC

  
	
   

  	
  Eleven Madison Avenue

  
	
   

  	
  New York,
  NY 10010-3629

  



 


Ladies and Gentlemen:


 


As an inducement to the
Purchasers to execute the Purchase Agreement, pursuant to which an offering will
be made that is intended to result in an orderly market for $100,000,000 in
aggregate principal amount of Senior Convertible Debentures due 2034 (the “Debentures”)
of Quanex Corporation, and any successor (by merger or otherwise) thereto (the
“Company”),
the undersigned hereby agrees that from the date hereof and until 60 days after
the offering date set forth on the final offering circular used to sell the
Debentures (the “Offering Date”) pursuant to the Purchase Agreement, to which
you are or expect to become parties, the undersigned will not offer, sell,
contract to sell, pledge or otherwise dispose of, directly or indirectly, any
shares of Common Stock, $.50 par value, of the Company (the “Common Stock”) or securities convertible
into or exchangeable or exercisable for any shares of Common Stock (the “Securities”), or enter into any transaction
which would have the same effect, or enter into any swap, hedge or other
arrangement that transfers, in whole or in part, any of the economic
consequences of ownership of Common Stock, whether any such aforementioned
transaction is to be settled by delivery of Common Stock or such other
securities, in cash or otherwise, or publicly disclose the intention to make
any such offer, sale, pledge or disposition, or to enter into any such
transaction, swap, hedge or other arrangement, without, in each case, the prior
written consent of Credit Suisse First Boston LLC and Bear, Stearns & Co.
Inc.  In addition, the undersigned agrees
that, without the prior written consent of Credit Suisse First Boston LLC and
Bear, Stearns & Co. Inc., he or she will not, during the period commencing
on the date hereof and ending 60  days
after the Offering Date, make any demand for or exercise any right with respect
to, the registration of any Common Stock or any Securities.


 


Any Common Stock or
Securities received upon exercise of options granted to the undersigned will
also be subject to this Agreement.  Any
Common Stock or Securities acquired by the undersigned in the open market after
the date of this Agreement will not be subject to this Agreement.  A transfer of Common Stock or Securities to
a family member or trust may be made, provided the transferee agrees to be
bound in writing by the terms of this Agreement prior to such transfer and such
transfer shall not involve a disposition for value.


 


In furtherance of the
foregoing, the Company and its transfer agent and registrar are hereby
authorized to decline to make any transfer of shares of Common Stock or
Securities if such transfer would constitute a violation or breach of this
Agreement.


 


20

















 


This Agreement shall be
binding on the undersigned and the successors, heirs, personal representatives
and assigns of the undersigned.  This
Agreement shall lapse and become null and void if the Offering Date shall not
have occurred on or before April 30,
2004.


 


	
   

  	
  Very truly yours,

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  



 


21

















 


SCHEDULE C


 


List of Officers and Directors to be Locked Up


 


Officers:


Raymond
A. Jean


Terry
M. Murphy


Michael
R. Bayles


Robert
C. Ballou


Kevin
P. Delaney


Ricardo
Arredondo


Jeffrey
A. Pugh


Geoffrey
G. Galow


 


Directors:


Vincent R. Scorsone


Joseph J. Ross


Richard L. Wellek


Donald G. Barger, Jr.


Susan F. Davis


Russell M. Flaum


Michael J. Sebastian


 


22