1
EXHIBIT 4.8
QUANEX CORPORATION
DEFERRED COMPENSATION TRUST
This Agreement made by and between QUANEX CORPORATION (the
"Company") and NBD Bank (the "Trustee");
WHEREAS, Company has adopted the nonqualified deferred
compensation Plan named "Quanex Corporation Deferred Compensation Plan" (the
"Plan");
WHEREAS, Company has incurred or expects to incur liability
under the terms of such Plan with respect to the individuals participating in
such Plan;
WHEREAS, Company wishes to establish a trust (the "Trust") and
to contribute to the Trust assets that shall be held therein, subject to the
claims of Company's creditors in the event of Company's Insolvency, as herein
defined, until paid to Plan participants and their beneficiaries in such manner
and at such times as specified in the Plan;
WHEREAS, it is the intention of the parties that this Trust
shall constitute an unfunded arrangement and shall not affect the status of the
Plan as an unfunded plan maintained for the purpose of providing deferred
compensation for a select group of management or highly compensated employees
for purposes of Title I of the Employee Retirement Income Security Act of 1974;
WHEREAS, it is the intention of Company to make contributions
to the Trust to provide itself with a source of assets to assist it in the
meeting of its liabilities under the Plan;
NOW, THEREFORE, the parties do hereby establish the Trust and
agree that the Trust shall be comprised, held and disposed of as follows:
2
SECTION 1. ESTABLISHMENT OF TRUST
(a) Company hereby deposits with Trustee in trust 1,925 shares of
the common stock of the Company which shall become the principal of the Trust
to be held, administered and disposed of by Trustee as provided in this Trust
Agreement.
(b) The Trust hereby established shall be irrevocable.
(c) The Trust is intended to be a grantor trust, of which Company
is the grantor, within the meaning of subpart E, part I, subchapter J, chapter
1, subtitle A of the Internal Revenue Code of 1986, as amended, and shall be
construed accordingly.
(d) The principal of the Trust, and any earnings thereon shall be
held separate and apart from other assets of Company and shall be used
exclusively for the uses and purposes of Plan participants and general
creditors as herein set forth. Plan participants and their beneficiaries shall
have no preferred claim on, or any beneficial ownership interest in, any assets
of the Trust. Any rights created under the Plan and this Trust Agreement shall
be mere unsecured contractual rights of Plan participants and their
beneficiaries against Company. Any assets held by the Trust will be subject to
the claims of Company's general creditors under federal and state law in the
event of Insolvency, as defined in Section 3(a) herein.
(e) Company, in its sole discretion, may at any time, or from time
to time, make additional deposits of cash, shares of common stock of Company or
other property in trust with Trustee to augment the principal, which together
with the assets purchased with earnings on the principal of the Trust, shall be
held, administered and disposed of by Trustee as provided in this Trust
Agreement. Neither Trustee nor any Plan participant or beneficiary shall have
any right to compel such additional deposits except as provided in Section
1(f).
-2-
3
(f) Upon a Change of Control, Company shall, as soon as possible,
but in no event longer than 30 days following the Change of Control, as defined
herein, make an irrevocable contribution to the Trust in an amount that is
sufficient to distribute each Plan participant or beneficiary the benefits to
which Plan participants or their beneficiaries would be entitled pursuant to
the terms of the Plan as of the date on which the Change of Control occurred.
SECTION 2. PAYMENTS TO PLAN PARTICIPANTS AND THEIR BENEFICIARIES.
(a) Company shall deliver to Trustee a schedule (the "Payment
Schedule") that indicates the amounts payable or assets distributable in
respect of each Plan participant (and his or her beneficiaries), that provides
a formula or other instruction, acceptable to Trustee for determining the
amounts or assets so payable or distributable, the form in which such amount or
asset is to be paid or distributed (as provided for or available under the
Plan), and the time of commencement for payment or distribution of such amounts
or assets. Except as otherwise provided herein, Trustee shall make payments or
distributions to the Plan participants and their beneficiaries in accordance
with such Payment Schedule. The Trustee shall make provision for the reporting
and withholding of any federal, state or local taxes that may be required to be
withheld with respect to the payment or distribution of benefits pursuant to
the terms of the Plan and shall pay amounts withheld to the appropriate taxing
authorities or determine that such amounts have been reported, withheld and
paid by Company.
(b) The entitlement of a Plan participant or his or her
beneficiaries to benefits under the Plan shall be determined by Company or such
party as it shall designate under the Plan, and any claim for such benefits
shall be considered and reviewed under the procedures set out in the Plan.
-3-
4
(c) Company may distribute benefits directly to Plan participants
or their beneficiaries as they become due under the terms of the Plan. Company
shall notify Trustee of its decision to distribute benefits directly prior to
the time amounts are payable to participants or their beneficiaries. In
addition, if the principal of the Trust, and any earnings thereon, are not
sufficient to make distributions of benefits in accordance with the terms of
the Plan, Company shall make the balance of each such distribution as it falls
due. Trustee shall notify Company where assets (principal and earnings) are
not sufficient.
SECTION 3. TRUSTEE RESPONSIBILITY REGARDING PAYMENTS TO TRUST
BENEFICIARY WHEN COMPANY IS INSOLVENT.
(a) Trustee shall cease distribution of benefits to Plan
participants and their beneficiaries if the Company is Insolvent. Company
shall be considered "Insolvent" for purposes of this Trust Agreement if (i)
Company is unable to pay its debts as they become due, or (ii) Company is
subject to a pending proceeding as a debtor under the United States Bankruptcy
Code.
(b) At all times during the continuance of this Trust, as provided
in Section 1(d) hereof, the principal and income of the Trust shall be subject
to claims of general creditors of Company under federal and state law as set
forth below.
(1) The Board of Directors and the Chief Executive
Officer of Company shall have the duty to inform Trustee in writing of
Company's Insolvency. If a person claiming to be a creditor of
Company alleges in writing to Trustee that Company has become
Insolvent, Trustee shall determine whether Company is Insolvent and,
pending such determination, Trustee shall discontinue distribution of
benefits to Plan participants or their beneficiaries.
-4-
5
(2) Unless Trustee has actual knowledge of Company's
Insolvency, or has received notice from Company or a person claiming
to be a creditor alleging that Company is Insolvent, Trustee shall
have no duty to inquire whether Company is Insolvent. Trustee may in
all events rely on such evidence concerning Company's solvency as may
be furnished to Trustee and that provides Trustee with a reasonable
basis for making a determination concerning Company's solvency.
(3) If at any time Trustee has determined that Company is
Insolvent, Trustee shall discontinue distributions to Plan
participants or their beneficiaries and shall hold the assets of the
Trust for the benefit of Company's general creditors. Nothing in this
trust Agreement shall in any way diminish any rights of Plan
participants or their beneficiaries to pursue their rights as general
creditors of Company with respect to benefits due under the Plan or
otherwise.
(4) Trustee shall resume the distribution of benefits to
Plan participants or their beneficiaries in accordance with Section 2
of this Trust Agreement only after Trustee has determined that Company
is not Insolvent (or is no longer Insolvent).
(c) Provided that there are sufficient assets, if Trustee
discontinues the distribution of benefits from the Trust pursuant to Section
3(b) hereof and subsequently resumes such distributions, the first distribution
following such discontinuance shall include the aggregate amount of all
distributions due to Plan participants or their beneficiaries under the terms
of the Plan for the period of such discontinuance, less the aggregate amount of
any distributions made to Plan participants or their beneficiaries
-5-
6
by Company in lieu of the distributions provided for hereunder during any such
period of discontinuance.
SECTION 4. PAYMENTS TO COMPANY.
Except as provided in Section 3 hereof or the terms of the
Plan, after the Trust has become irrevocable, Company shall have no right or
power to direct Trustee to return to Company or to divert to others any of the
Trust assets before all distributions of benefits have been made to Plan
participants and their beneficiaries pursuant to the terms of the Plan.
SECTION 5. INVESTMENT AUTHORITY.
(a) Trustee may invest in securities (including stock or rights to
acquire stock) or obligations issued by Company. All rights associated with
assets of the Trust shall be exercised by Trustee or the person designated by
Trustee, and shall in no event be exercisable by or rest with Plan
participants. However, the Trustee shall have no investment authority with
respect to Company stock that is contributed to the Trust by the Company in
accordance with the terms of the Plan. The Trustee shall hold such Company
stock until the Company directs the Trustee to dispose of such Company stock.
Any such direction shall be in writing and shall specify the number of shares
to be sold.
(b) Company shall have the right at anytime, and from time to time
in its sole discretion, to substitute assets of equal fair market value for any
asset held by the Trust. This right is exercisable by Company in a
nonfiduciary capacity without the approval or consent of any person in a
fiduciary capacity.
-6-
7
SECTION 6. DISPOSITION OF INCOME.
During the term of this Trust, all income received by the
Trust, net of expenses and taxes, shall be accumulated and reinvested.
SECTION 7. ACCOUNTING BY TRUSTEE.
Trustee shall keep accurate and detailed records of all
investments, receipts, disbursements, and all other transactions required to be
made, including such specific records as shall be agreed upon in writing
between Company and Trustee. Within 90 days following the close of each fiscal
year of the Trust (November 1 - October 31) and within 90 days after the
removal or resignation of Trustee, Trustee shall deliver to Company a written
account of its administration of the Trust during such year or during the
period from the close of the last preceding year to the date of such removal or
resignation, setting forth all investments, receipts, disbursements and other
transactions effected by it, including a description of all securities and
investments purchased and sold with the cost or net proceeds of such purchases
or sales (accrued interest paid or receivable being shown separately), and
showing all cash, securities and other property held in the Trust at the end of
such year or as of the date of such removal or resignation, as the case may be.
SECTION 8. RESPONSIBILITY OF TRUSTEE.
(a) Trustee shall act with the care, skill, prudence and diligence
under the circumstances then prevailing that a prudent person acting in like
capacity and familiar with such matters would use in the conduct of an
enterprise of a like character and with like aims; provided, however, that
Trustee shall incur no liability to any person for any action taken pursuant to
a direction, request or approval given by Company which is contemplated by, and
in conformity with, the terms of the Plan or this Trust
-7-
8
and is given in writing by Company. In the event of a dispute between Company
and a party, Trustee may apply to a court of competent jurisdiction to resolve
the dispute.
(b) If Trustee undertakes or defends any litigation arising in
connection with this Trust, Company agrees to indemnify Trustee against
Trustee's costs, expenses and liabilities (including, without limitation,
attorneys' fees and expenses) relating thereto and to be primarily liable for
such payments. If Company does not pay such costs, expenses and liabilities in
a reasonably timely manner, Trustee may obtain payment from the Trust.
(c) Trustee may consult with legal counsel (who may also be
counsel for Company generally) with respect to any of its duties or obligations
hereunder.
(d) Trustee may hire agents, accountants, actuaries, investment
advisors, financial consultants or other professionals to assist it in
performing any of its duties or obligations hereunder.
(e) Trustee shall have, without exclusion, all powers conferred on
Trustees by applicable law, unless expressly provided otherwise herein;
provided, however, that if an insurance policy is held as an asset of the
Trust, Trustee shall have no power to name a beneficiary of the policy other
than the Trust, to assign the policy (as distinct from conversion of the policy
to a different form) other than to a successor Trustee, or to loan to any
person the proceeds of any borrowing against such policy.
(f) Notwithstanding any powers granted to Trustee pursuant to this
Trust Agreement or to applicable law, Trustee shall not have any power that
could give this Trust the objective of carrying on a business and dividing the
gains therefrom, within the meaning of section 301.7701-2 of the Procedure and
Administrative Regulations promulgated pursuant to the Internal Revenue Code.
-8-
9
SECTION 9. COMPENSATION AND EXPENSES OF TRUSTEE.
Company shall pay all administrative and Trustee's fees and
expenses. If not so paid, the fees and expenses shall be paid from the Trust.
SECTION 10. RESIGNATION AND REMOVAL OF TRUSTEE.
(a) Trustee may resign at any time by written notice to Company,
which shall be effective 90 days after receipt of such notice unless Company
and Trustee agree otherwise.
(b) Trustee may be removed by Company on 90 days notice or upon
shorter notice accepted by Trustee.
(c) Upon a Change of Control, as defined herein, Trustee may not
be removed by Company for three years.
(d) If Trustee resigns within three years after a Change of
Control, as defined herein, Company shall apply to a court of competent
jurisdiction for the appointment of a successor Trustee or for instructions.
(e) Upon resignation or removal of Trustee and appointment of a
successor Trustee, all assets shall subsequently be transferred to the
successor Trustee. The transfer shall be completed within 90 days after
receipt of notice of resignation, removal or transfer, unless Company extends
the time limit.
(f) If Trustee resigns or is removed, a successor shall be
appointed, in accordance with Section 11 hereof, by the effective date of
resignation or removal under paragraph (a) or (b) of this section. If no such
appointment has been made, Trustee may apply to a court of competent
jurisdiction for appointment of a successor or for instructions. All expenses
of Trustee in connection with the proceeding shall be allowed as administrative
expenses of the Trust.
-9-
10
SECTION 11. APPOINTMENT OF SUCCESSOR.
(a) If Trustee resigns or is removed in accordance with Section
10(a) or (b) hereof, Company may appoint any third party, such as a bank trust
department or other party that may be granted corporate trustee powers under
state law, as a successor to replace Trustee upon resignation or removal. The
appointment shall be effective when accepted in writing by the new Trustee, who
shall have all of the rights and powers of the former Trustee, including
ownership rights in the Trust assets. The former Trustee shall execute any
instrument necessary or reasonably requested by Company or the successor
Trustee to evidence the transfer.
(b) The successor Trustee need not examine the records and acts of
any prior Trustee and may retain or dispose of existing Trust assets, subject
to Sections 7 and 8 hereof. The successor Trustee shall not be responsible for
and Company shall indemnify and defend the successor Trustee from any claim or
liability resulting from any action or inaction of any prior Trustee or from
any other past event, or any condition existing at the time it becomes
successor Trustee.
SECTION 12. AMENDMENT OR TERMINATION.
(a) This Trust Agreement may be amended by a written instrument
executed by Trustee and Company. Notwithstanding the foregoing, no such
amendment shall conflict with the terms of the Plan or shall make the Trust
revocable.
(b) The Trust shall not terminate until the date on which Plan
participants and their beneficiaries are no longer entitled to benefits
pursuant to the terms of the Plan. Upon termination of the Trust any assets
remaining in the Trust shall be returned to Company.
-10-
11
(c) Upon written approval of participants or beneficiaries
entitled to payment of benefits pursuant to the terms of the Plan, Company may
terminate this Trust prior to the time all benefit payments under the Plan have
been made. All assets in the Trust at termination shall be returned to
Company.
SECTION 13. MISCELLANEOUS.
(a) Any provision of this Trust Agreement prohibited by law shall
be ineffective to the extent of any such prohibition, without invalidating the
remaining provisions hereof.
(b) Benefits payable to Plan participants and their beneficiaries
under this Trust Agreement may not be anticipated, assigned (either at law or
in equity), alienated, pledged, encumbered or subjected to attachment,
garnishment, levy, execution or other legal or equitable process.
(c) This Trust Agreement shall be governed by and construed in
accordance with the laws of the State of Texas.
(d) For purposes of this Trust, Change of Control shall mean the
occurrence of one or more of the following events:
(1) Any "person", including a "syndication" or "group" as
those terms are used in Section 13(d)(3) of the Securities Act, is or
becomes the beneficial owner, directly or indirectly, of securities of
the Company representing 20% or more of the combined voting power of
the Company's then outstanding Voting Securities;
(2) The Company is merged or consolidated with another
corporation and immediately after giving effect to the merger or
consolidation either (i) less than 80% of the outstanding Voting
Securities of the surviving or resulting entity
-11-
12
are then beneficially owned in the aggregate by (x) the stockholders
of the Company immediately prior to such merger or consolidation, or
(y) if a record date has been set to determine the stockholders of the
Company entitled to vote on such merger or consolidation, the
stockholders of the Company as of such record date, or (ii) the Board
of Directors, or similar governing body, of the surviving or resulting
entity does not have as a majority of its members the persons
specified in clause (3)(i) and (ii) below;
(3) If at any time the following do not constitute a
majority of the Board of Directors of the Company (or any successor
entity referred to in clause (2) above):
(i) persons who are directors of the Company on
January 1, 1995; and
(ii) persons who, prior to their election as a
director of the Company (or successor entity if applicable)
were nominated, recommended or endorsed by a formal resolution
of the Board of Directors of the Company;
(4) If at any time during a calendar year a majority of
the directors of the Company are not persons who were directors at the
beginning of the calendar year; and
(5) The Company transfers substantially all of its assets
to another corporation which is a less than 80% owned subsidiary of
Quanex.
(e) For purposes of this Trust "Voting Securities" means any
security which ordinarily possesses the power to vote in the election of the
Board of Directors without the happening of any precondition or contingency.
-12-
13
SECTION 14. EFFECTIVE DATE.
The effective date of this Trust Agreement shall be August 1, 1996.
-13-
14
IN WITNESS WHEREOF, the Company and the Trustee have caused their duly
authorized officers to execute this Agreement.
QUANEX CORPORATION
By /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
------------------------------------
COMPANY
Date: September 26, 1996
---------------------------------
NBD BANK
By /s/ ▇. ▇. ▇▇▇▇▇▇
------------------------------------
TRUSTEE
Date: October 3, 1996
---------------------------------
-14-