Exhibit 10.2

 

QUANEX CORPORATION

SUPPLEMENTAL BENEFIT PLAN

 

 

Amended and Restated

Effective January 1, 2004

 

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TABLE OF CONTENTS

 

 

 

Section

ARTICLE  I - NAME AND PURPOSE

 

 

 

 

 

ARTICLE II - DEFINITIONS

 

 

 

 

 

Actuarial Equivalent

 

2.01

Board

 

2.02

Change of Control

 

2.03

Code

 

2.04

Committee

 

2.05

Company

 

2.06

Disability

 

2.08

Early Retirement Date

 

2.10

Earnings

 

2.11

Employee

 

2.12

Final Average Earnings

 

2.13

Forfeiting Act

 

2.14

Incentive Bonus or Incentive Bonuses

 

2.15

Normal Retirement Date

 

2.16

Participant

 

2.17

Plan

 

2.18

Plan Year

 

2.19

Qualified Plan

 

2.20

Qualified Plan Benefit

 

2.21

Service

 

2.23

Social Security Benefit

 

2.24

Termination of Employment

 

2.25

 

 

 

ARTICLE III - PARTICIPATION

 

 

 

 

 

Eligibility

 

3.01

Reemployment

 

3.02

 

 

 

ARTICLE IV - RETIREMENT BENEFITS

 

 

 

 

 

Normal Retirement

 

4.01

Deferred Retirement

 

4.02

Early Retirement

 

4.03

Disability Benefit

 

4.04

Deferred Vested Benefit

 

4.05

Change of Control Benefit

 

4.06

Forms of Payment

 

4.07

Forms of Payment Elections

 

4.08

Lump Sum Payment of Small Amounts

 

4.09

Time of Payment of Benefit

 

4.10

 

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ARTICLE V - DEATH BENEFITS

 

 

 

 

 

In General

 

5.01

Death During Employment

 

5.02

Death After Termination of Employment

 

5.03

 

 

 

ARTICLE VI - BENEFICIARIES

 

 

 

 

 

Designation of Beneficiary

 

6.01

Payment of Benefits Upon Death

 

6.02

Minors and Persons Under Legal Disability

 

6.03

 

 

 

ARTICLE VII - FORFEITURE FOR CAUSE

 

 

 

 

 

ARTICLE VIII - AGREEMENT FUNDED THROUGH RABBI TRUST

 

 

 

 

 

ARTICLE IX - PLAN COMMITTEE PROCEDURE

 

 

 

 

 

Committee

 

9.01

General Rights, Powers and Duties of Plan Committee

 

9.02

Rules and Decisions

 

9.03

Committee Procedures

 

9.04

Authorization of Benefit Payments

 

9.05

Application and Forms of Benefits

 

9.06

Facility of Payment

 

9.07

Claims Procedure

 

9.08

Responsibility

 

9.09

 

 

 

ARTICLE X - AMENDMENT AND TERMINATION

 

 

 

 

 

Amendment

 

10.01

Right to Terminate Plan

 

10.02

 

 

 

ARTICLE XI - MISCELLANEOUS

 

 

 

 

 

Inalienability of Benefits

 

11.01

No Implied Rights

 

11.02

Actions by Company

 

11.03

Binding Effect

 

11.04

Number and Gender

 

11.05

Governing Law

 

11.06

 

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ARTICLE I

 

NAME AND PURPOSE

 

This plan, as adopted effective February 28, 1980 and amended and restated
October 22, 1981, November 1, 1988, June 1, 1999, and January 1, 2004, shall be
known as the Quanex Corporation Supplemental Benefit Plan (the “Plan”).

 

The Plan provides retirement benefits for certain designated management
employees in addition to those provided under the benefit plans for salaried
employees of Quanex Corporation, as in effect from time to time.

 

The purpose of the Plan is to supplement those retirement benefits that a
Participant may be entitled to receive as a salaried employee of Quanex
Corporation. Except as may be otherwise provided herein, the terms used in the
Plan shall have the meanings specified in the Quanex Corporation Employees’
Pension Plan.

 

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ARTICLE II

 

DEFINITIONS AND DESIGNATIONS

 

2.01 ”Actuarial Equivalent”  means equality in value of the aggregate amounts
expected to be received under different forms of payment calculated utilizing
the mortality and interest rate assumptions specified in the Qualified Plan at
the time of the calculation.

 

2.02 ”Board” means the Board of Directors of the Company.

 

2.03 ”Change of Control”  means the occurrence of one or more of the following
events:

 

(a)           the acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a “ Covered
Person”) of beneficial ownership (within the meaning of rule 13d-3 promulgated
under the Exchange Act) of 20 percent or more of either (i) the then outstanding
shares of the common stock of (the “Outstanding Company Common Stock”), or (ii)
the combined voting power of the then outstanding voting securities of the
Company entitled to vote generally in the election of directors (the
“Outstanding Company Voting Securities”); provided, however, that for purposes
of this subsection (a) of this Section, the following acquisitions shall not
constitute a Change of Control of the Company: (i) any acquisition directly from
the Company, (ii) any acquisition by the Company, (iii) any acquisition by any
employee benefit plan (or related trust) sponsored or maintained by the Company
or any entity controlled by the Company, or (iv) any acquisition by any
corporation pursuant to a transaction which complies with clauses (i), (ii) and
(iii) of subsection (c) of this Section; or

 

(b)           individuals who, as of June 1, 1999, constitute the Board  (the
“Incumbent Board”) cease for any reason to constitute at least a majority of the
Board; provided, however, that any individual becoming a director subsequent to
June 1, 1999  whose election, or nomination for election by the Company’s
stockholders, was approved by a vote of at least a majority of the directors
then comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office occurs as a
result of an actual or threatened election contest with respect to the election
or removal of directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a Covered Person other than the Board; or

 

(c)           the consummation of (xx) a reorganization, merger or consolidation
or sale of the Company  or (yy) a disposition of all or substantially all of the
assets of the Company (a “Business Combination”), in each case, unless,
following such Business Combination, (i) all or substantially all of the
individuals and entities who were the beneficial owners, respectively, of the
Outstanding Company Common Stock and Outstanding Company Voting Securities
immediately prior to such Business Combination beneficially own, direct or
indirectly, more than 80 percent of, respectively, the then outstanding shares
of common stock and the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of

 

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directors, as the case may be, of the corporation resulting from such Business
Combination (including, without limitation, a corporation which as a result of
such transaction owns the Company or all or substantially all of the Company’s
assets either directly or through one or more subsidiaries) in substantially the
same proportions as their ownership immediately prior to such Business
Combination of the Outstanding Company Common Stock and Outstanding Company
Voting Securities, as the case may be, (ii) no Covered Person (excluding any
employee benefit plan (or related trust) of the Company or such corporation
resulting from such Business Combination) beneficially owns, directly or
indirectly, 20 percent  or more of, respectively, the then outstanding shares of
common stock of the corporation resulting from such Business Combination or the
combined voting power of the then outstanding voting securities of such
corporation, except to the extent that such ownership existed prior to the
Business Combination, and (iii) at least a majority of the members of the board
of directors of the corporation resulting from such Business Combination, were
members of the Incumbent Board at the time of the execution of the initial
agreement, or of the action of the Board, providing for such Business
Combination; or

 

(d)           the approval by the stockholders of Quanex of a complete
liquidation or dissolution of Quanex.

 

2.04 “Code” means the Internal Revenue Code of 1986, as amended from time to
time.

 

2.05 “Committee” means the Committee established under Article IX to administer
the Plan.

 

2.06 “Company” means Quanex Corporation, a Delaware corporation.

 

2.07 “Disability” means physical or mental condition which, during the first 24
months of the existence of the condition totally prevents the Participant from
performing each and every duty of his own job. Subsequently, the disabling
physical or mental condition must totally and  permanently prevent the
Participant from engaging for remuneration or profit in any equivalent
occupation for which he is reasonably qualified by education, training, or
experience. Proof of total and permanent disability must be based upon a medical
examination or other evidence submitted in a statement by a licensed physician
or clinic. Notwithstanding any other provision, the Participant will not qualify
for disability benefits as defined herein if the disability results from chronic
alcoholism, self-addiction to narcotics or other drugs, a willfully
self-inflicted

 

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injury, an injury as the result of engaging in a felonious or criminal act or
enterprise; injury or disease sustained during and arising out of employment by
anyone other than the Company, or service in the Armed Forces of the United
States which entitles the Participant to a veteran’s disability pension.

 

2.08 “Early Retirement Date” means the first day of any month after a
Participant’s attainment of age 55 and the completion of five years of Service.

 

2.09 “Earnings” means all wages as defined in section 3401 of the Code (for
purposes of income tax withholding) for services rendered in the course of
employment with the Company; modified by excluding reimbursements or other
expense allowances, fringe benefits (cash and noncash), moving expenses,
deferred compensation, welfare benefits, BeneFlex dollars under the Quanex
Corporation Medical Reimbursement Plan, Incentive Bonuses and restricted stock
awards and stock options; and modified further by including elective
contributions under a cafeteria plan maintained by the Company that is governed
by section 125 of the Code and elective contributions to any plan maintained by
the Company that contains a qualified cash or deferred arrangement under section
401(k) of the Code.

 

2.10 “Employee” means any person hired by the Company who is receiving
remuneration in the form of a salary for personal services rendered to the
Company.

 

2.11 “Final Average Earnings” means the highest monthly average of a
Participant’s Earnings which is produced by averaging his Earnings and Incentive
Bonuses over any 36 consecutive month period during the 60 consecutive month
period immediately preceding the date of the Participant’s Termination of
Employment.  However, for the purposes of this definition, no more than three
Incentive Bonuses shall be taken into account in calculating a Participant’s
earnings over any 36 consecutive month period.

 

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2.12 “Forfeiting Act” means the Participant’s fraud, dishonesty, willful
destruction of Company property, committing of a felony, revealing Company trade
secrets, acts of competition against the Company or acts in aid of a competitor
of the Company.

 

2.13 “Incentive Bonus” or “Incentive Bonuses” means compensation earned under
the Quanex Corporation Executive Incentive Compensation Plan, whether or not
deferred under the Quanex Corporation Deferred Compensation Plan.

 

2.14 “Normal Retirement Date”  means the first day of the month coincident with
or next following a Participant’s 65th birthday.

 

2.15 “Participant” means an Employee designated by the Board as eligible for
participation in the Plan, and who meets the requirements of Article III.

 

2.16 “Plan” means the Quanex Corporation Supplemental Benefit Plan.

 

2.17 “Plan Year” means the period commencing on November 1 and ending on October
31.

 

2.18 “Qualified Plan” means the Quanex Corporation Employees’ Pension Plan
maintained by the Company.

 

2.19 “Qualified Plan Benefit” means the aggregate of all benefits which would be
payable to the Participant from the Qualified Plan payable on or after his
Normal Retirement Date.  In calculating the amount of the Qualified Plan
Benefit, for the purposes of the Plan the following shall apply:

 

(a)           If the normal form of benefit of the Qualified Plan is other than
a straight life annuity, the benefit shall be expressed in the form of a
straight life annuity by using the actuarial assumptions contained in the
Qualified Plan.

 

(b)           If benefits under the Qualified Plan are paid or are payable to
the Participant prior to the date his benefits commence under the Plan, the
Actuarial Equivalent of such benefits as of his Normal Retirement Date (as
defined in the Qualified Plan) shall be used.

 

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(c)           The amount of a Participant’s Qualified Plan Benefit shall be
determined based on the provisions of the Qualified Plan as in effect on the
date his benefits under the Plan are determined.

 

(d)           The amount of a Participant’s Qualified Plan Benefit shall be
determined by disregarding any offset for benefits payable under a terminated
retirement plan that was previously maintained by the Company or one of its
affiliates.

 

2.20 “Service” means service for purposes of the Qualified Plan. In determining
a Participant’s Service, all  years of Service after the Participant’s date of
hire shall be taken into account.

 

2.21 “Social Security Benefit” means, for all purposes other than determining
the Disability benefit, the monthly amount payable commencing on the later of
the Participant’s 65th birthday or the date of his Termination of Employment
under the provisions of Title II of the Social Security Act. Such benefit shall
be determined based on (1) the Participant’s average monthly wage or indexed
earnings (as defined in the Social Security Act, as amended) on the date of his
Termination of Employment, computed under the Social Security Act as in effect
on the January 1 of the calendar year in which benefits are determined and using
the Participant’s annual total wages from the Company for the prior calendar
year, as defined in section 3121(b), assuming his wages increased prior thereto
at the rate of increase in the average per worker total wages reported by the
Social Security Administration, and assuming continuation of such wages without
increase thereafter until his Termination of Employment  (with no wages
thereafter); and (2) the Table of Primary Social Security Benefits under the
Social Security Act as in effect on the January 1 of the calendar year in which
his Termination of Employment actually occurs. “Social Security Benefit” means,
for purposes of determining a Disability benefit, any actual disability benefit
for which the Participant is eligible under Title II of the Social Security Act.

 

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2.22 “Termination of Employment” means the complete severance of the employment
relationship between the Company and every entity that is required to be treated
as a single employer together with the Company for certain employee benefit
purposes pursuant to section 414 of the Code.

 

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ARTICLE III

 

PARTICIPATION

 

3.01 Eligibility to Participate. An Employee shall become eligible to become a
Participant in the Plan by designation of the Board. The Committee shall notify
each Participant of his eligibility.  Each designated Employee shall furnish
such information and perform such acts as the Committee may require prior to
becoming a Participant.

 

3.02 Reemployment. Any person who terminates employment with the Company shall
not be eligible to participate in the Plan upon his reemployment by the Company
unless the Board so determines. In such event, the Board shall specify whether
and under what conditions the person shall receive credit for all or any of his
Service completed prior to reemployment.

 

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ARTICLE IV

 

RETIREMENT BENEFITS

 

4.01 Normal Retirement Benefit. Subject to Article VIII, if a Participant
terminates employment with the Company on or after his Normal Retirement Date,
he will be entitled to a monthly benefit payable to the Participant for life
only in an amount equal to:

(a)           2.75 percent of his Final Average Earnings multiplied by his years
of Service (not in excess of 20 years), less

 

(b)           the sum of:

(1)           the Participant’s Qualified Plan Benefit, and

(2)           one-half of the Participant’s Social Security Benefit multiplied
by a fraction (which shall not exceed one) the numerator of which is the
Participant’s number of years of Service and the denominator of which is 20.

 

Notwithstanding any other provision of the Plan, a Participant’s monthly benefit
under this Section 4.01 shall not be less than his monthly benefit accrued as of
the date of the execution of this Agreement.

 

4.02 Deferred Retirement Benefit. If a Participant terminates employment with
the Company on or after his Normal Retirement Date, he will be entitled to a
monthly benefit payable to the Participant for life only determined in
accordance with the provisions of Section 4.01. The benefit will not be
actuarially increased to reflect the later benefit payment date or his shorter
life expectancy. In determining a Participant’s deferred retirement benefit, his
Service subsequent to his Normal Retirement Date and the computation of his
Final Average Earnings shall take into account his Service after his Normal
Retirement Date.

 

4.03 Early Retirement Benefit. If a Participant terminates employment with the
Company on or after his Early Retirement Date but before age 65, he shall be
entitled to a monthly benefit payable to the Participant for life only
determined in accordance with the

 

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provisions of Section 4.01 based upon his years of Service and Final Average
Earnings on the date of his Termination of Employment. The monthly amount shall
be reduced by five percent for each year (and fractional year) that the
Participant’s benefit commencement precedes the Participant’s 65th birthday.

 

4.04 Disability Benefit. If a Participant who has completed six months of
Service terminates employment with the Company prior to his Early Retirement
Date due to his Disability, he shall receive a monthly Disability benefit, for
so long as he has a Disability but no longer than his Normal Retirement Date (on
which date the Participant shall be treated as a retiree entitled to benefits
under Section 4.01), in an amount equal to:

 

(a)           50 percent of the sum of his monthly Earnings in effect at the
date of his Disability and the monthly equivalent of the average of his
Incentive Bonuses for the prior three Plan Years, less

 

(b)           the sum of:

 

(1)           the Participant’s Qualified Plan Benefit;

 

(2)           the Participant’s Social Security Benefit;

 

(3)           the Participant’s benefit under the Company’s group long-term
disability insurance plan;

 

(4)           the Participant’s benefit under an individual disability policy
provided by the Company, and;

 

(5)           the Participant’s benefit under the Company’s wage continuation
policy plan.

 

Upon the occurrence of the Normal Retirement Date of a former Participant with a
Disability, he will be entitled to a monthly benefit payable to him for life
only determined in accordance with the provisions of Section 4.01.  In
determining his benefit payable upon the occurrence of his Normal Retirement
Date, his Final Average Earnings and his years of Service shall be determined as
of the date of his Disability.

 

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4.05 Deferred Vested Benefit. If a Participant terminates employment with the
Company prior to his Early Retirement Date but has five or more years of
Service, he will upon attaining age 55 be entitled to the lump sum Actuarial
Equivalent of a monthly benefit payable to the Participant for life only
determined in accordance with the provisions of Section 4.01 based upon his
years of Service and Final Average Earnings at his Termination of Employment.
The benefit calculated under Section 4.01 however, shall be reduced, using the
factors described in Section 4.03.  If the Participant has fewer than five years
of Service when he terminates employment prior to his Early Retirement Date, he
shall not be entitled to any benefits under the Plan.

 

4.06 Change of Control Benefit.  Notwithstanding any other provisions of the
Plan, if a Participant’s Termination of Employment occurs after a Change of
Control, he will be entitled to the lump-sum Actuarial Equivalent of a monthly
benefit payable to the Participant for life only determined in accordance with
the provisions of Section 4.01 based upon his years of Service and Final Average
Earnings at his Termination of Employment.  The benefit calculated under Section
4.01 shall not be reduced because of the Participant’s age or early payment of
his benefit under the Plan.  Any benefit paid pursuant to this Section 4.06
shall be in lieu of any other benefit otherwise payable to the Participant under
the Plan.

 

4.07         Forms of Payment.  Subject to the provisions of Section 4.09, a
Participant who is entitled to a benefit under Section 4.01, 4.02 or 4.03 may
elect, in accordance with procedures established by the Committee, to have his
benefit paid in one of the following forms, each of which shall be the Actuarial
Equivalent of the Participant’s benefit accrued under Section 4.01, 4.02, or
4.03, as applicable:

 

(a)           A lump sum payment.

 

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(b)           An optional form of payment permitted under the Qualified Plan.

 

(c)           Monthly, quarterly, or annual installment payments for a specified
number of years (not in excess of 20).  Such payments shall be made to the
Participant while he is alive, and the balance of the payments shall be paid on
an installment basis to his designated beneficiary if he dies prior to the
payment of all the installment payments.

 

If a Participant fails to make a valid election concerning the form of his
payment, his benefit shall be paid in the form of a lump sum.

 

All payments under the Plan shall be made in cash.

 

4.08         Forms of Payment Elections.  In order to be valid, a Participant’s
form of payment election must be made in accordance with procedures established
by the Committee and must be filed with the Committee at least 12 months prior
to the date on which the Participant’s Plan benefit is to be paid or commence to
be paid.  In accordance with procedures established by the Committee, a
Participant may make a one-time irrevocable election to change the form of
payment he previously selected.  In order to be effective, any such change
election must be filed with the Committee at least 12 months prior to the date
on which the Participant’s Plan benefit is to be paid or commence to be paid.

 

4.09         Lump Sum Payment Of Small Amounts.  Notwithstanding any other
provision of the Plan, if the present value of a benefit payable under Section
4.01, 4.02 or 4.03 of the Plan is less than or equal to $20,000, such benefit
shall be paid in the form of a lump sum in cash.

 

4.10         Time of Payment of Benefit.  The payments provided for Normal
Retirement, Deferred Retirement, and Early Retirement shall be paid or commence
to be paid on the 90th day after the Participant’s Termination of Employment. 
The monthly Disability benefit shall commence being paid on the first day of the
month coincident with or next following the

 

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Participant’s Termination of Employment  due to Disability and shall cease with
the last payment prior to his recovery or attainment of his Normal Retirement
Date.  If a former Participant who terminated employment with the Company due to
Disability continues to have a Disability until his Normal Retirement Date, the
lump sum payment then due shall be paid on his Normal Retirement Date.  A
Participant’s Change of Control benefit shall be payable on the 90th day after
the  later of his attainment of age 55 or the date of his Termination of
Employment.  A Participant’s deferred vested benefit shall be payable on the
90th day after the Participant’s Termination of Employment.

 

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ARTICLE V

 

DEATH BENEFITS

 

5.01 In General. The benefits under the Plan payable subsequent to a
Participant’s or former Participant’s death shall be limited to those contained
in this Article, and shall in any case be subject to Article VII.

 

5.02 Death During Employment. If a Participant’s death occurs while he is in the
employ of the Company, no death benefit shall be payable under the Plan with
respect to the Participant.

 

5.03 Death After Termination of Employment.

 

(a)           In General. Except as provided in this Section, no benefits shall
be payable to or on behalf of a Participant or former Participant whose death
occurs subsequent to his Termination of Employment.

 

(b)           Before Benefits Commence. If a former Participant dies before his
benefit is paid or commences to be paid but after his Termination of Employment
on or after his Normal Retirement Date, his Early Retirement Date or a Change of
Control, or after he has become entitled to a deferred vested benefit under
Section 4.05, his designated beneficiary, if any, shall be entitled to receive a
lump sum benefit equal to the benefit which he would have received had he lived
to the date his benefit would have been paid out. If a former Participant dies
before his benefit commences to be paid and he was eligible for a Disability
benefit, his designated beneficiary, if any, shall be entitled to receive a lump
sum benefit which is Actuarially Equivalent to a survivor annuity equal to the
survivor portion of a qualified joint and 50 percent survivor annuity as if the
former Participant had been entitled to elect and had elected such survivor
annuity on the day before his death. The survivor lump sum death benefit shall
be payable on the 90th day following the date of the Former Participant’s
death.  In calculating the survivor portion for the survivor lump sum benefit,
the benefit shall be reduced in the same manner it is reduced under Section
4.03, 4.04 or 4.05, whichever is applicable, for payment earlier than Normal
Retirement Date.  In the event of a Participant’s Termination of Employment
after a Change of Control, the death benefits payable under this Section 5.03 on
his behalf will not be reduced for payment before the Participant’s Normal
Retirement Date.

 

(c)           After Disability Benefits Commence. If a former Participant who is
receiving a Disability benefit dies prior to reaching his Normal Retirement Date
but while he still has a Disability, his designated beneficiary shall receive a
lump sum benefit which is Actuarially Equivalent to the survivor portion of a
qualified joint and 50 percent survivor annuity as if the

 

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former Participant had been entitled to elect and had elected such survivor
annuity on the day before his death. Such benefit shall be payable on the 90th
day after his death.

 

(d)           After Benefits Under Section 4.01, 4.02 or 4.03 Commence.  If a
former Participant dies after receiving payments pursuant to Section 4.01, 4.02,
or 4.03 of the Plan, his designated beneficiary shall be entitled to receive any
death benefit payable under the optional form of payment selected by the former
Participant.

 

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ARTICLE VI

 

BENEFICIARIES

 

6.01 Designation of Beneficiary. Each Participant or former Participant shall
designate as his beneficiary the person or persons who shall, upon his death,
receive the death benefits, if any, payable pursuant to Article V. The
designation shall be in such form as the Committee requires and may include
contingent beneficiaries. A beneficiary designation shall be effective when
filed with the Committee during the Participant’s or former Participant’s life,
and shall cancel and revoke all prior designations.

 

6.02 Payment of Benefits Upon Death. If a Participant’s or former Participant’s
death occurs prior to payment of his benefit, the benefit payable upon his
death, if any, shall be paid to the persons or persons designated as his primary
beneficiary, but if the primary beneficiary does not survive him, then to the
person or persons designated as the contingent beneficiary.  If no primary or
contingent beneficiary survives him or if no beneficiary designation is in
effect upon his death, then the benefit under Article V shall be paid to his
spouse.  If his spouse does not survive him, then the benefit shall be paid to
his descendants who survive him by right of representation, and if no
descendants of the Participant or former Participant survive him, then to his
estate.

 

6.03 Minors and Persons Under Legal Disability. Payments to a minor or a person
under a legal disability shall be made by the Company at the direction of the
Committee as follows:

 

(a)           to the natural or adoptive parents or legal guardian or
conservator of such person, or to any other person in loco parentis;

 

(b)           to a custodian for such person under the Uniform Gifts to Minors
Act or Gifts of Securities to Minors Act; or

 

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(c)           by expending amounts directly for the education and support of
such person.

 

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ARTICLE VII

 

FORFEITURE FOR CAUSE

 

Except with respect to persons whose terminations of employment with the Company
occur after a Change of Control, notwithstanding any other provision of the Plan
to the contrary, in all cases where a written document is executed by the
Company expressly making acts of competition against the Company or acts in aid
of a competitor of the Company by the Participant or former Participant a
Forfeiting Act, if the Participant commits one or more Forfeiting Acts during
his employment with the Company or following his Termination of Employment, any
and all unpaid benefits due the Participant or his designated beneficiary shall
be forfeited. This provision shall apply regardless of the date the Company
first learns of the occurrence of a Forfeiting Act.

 

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ARTICLE VIII

 

AGREEMENT FUNDED THROUGH RABBI TRUST

 

The Company shall pay the benefits due the Participants and former Participants
under the Plan; however, should it fail to do so when a benefit is due, such
benefit shall be paid by the trustee of that certain Trust Agreement entered
into, by and between the Company and Fleet National Bank  (the “Trust”). In any
event, if the Trust fails to pay for any reason, the Company still remains
liable for the payment of all benefits provided by the Plan. The Company may
contribute at any time and from time to time such assets to the Trust as it, in
its sole discretion, shall determine and shall have the right at any time and
from time to time to borrow from the Trust the fair market value of assets held
in the Trust which are in excess of the net present value of the largest benefit
all Participants and former Participants are entitled to under the Plan as of
the beginning of the Plan Year during which the loan is made (exclusive of any
Disability or death benefit).  Any such loan shall be evidenced by an instrument
in writing, shall bear interest at such rate as the Company would be required to
pay to its prime lender under the same terms (except for the security), shall
provide a repayment schedule which would repay but only to the extent of the
funds so borrowed, such amount as is necessary to maintain at the beginning of
each Plan Year during the existence of the loan, non-borrowed funds in the Trust
at a level at least equal to the net present value of all benefits calculated
under the preceding sentence and shall provide for prepayment at the Company’s
election, without penalty. The above calculations shall use the same actuarial
factors set out in the definition of Actuarial Equivalent under Section 2.01.
All assets contributed shall be held in and administered according to the terms
of the Trust which are incorporated by reference in the Plan for all purposes.
However, in no event shall the rights of Participants and former Participants in
the assets held by the Trust be greater than the

 

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rights of unsecured creditors of the Company. Nothing contained in the Plan or
the Trust constitutes a secured promise by the Company that the assets of the
Company will be sufficient to pay any benefit to any person.

 

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ARTICLE IX

 

PLAN COMMITTEE

 

9.01 Committee. The Plan shall be administered by the Committee, which shall
have three members designated in writing by the Company. Any person may resign
from the Committee upon 30 days’ prior notice to the Company and to any other
member of the Committee. The Company may remove any member of the Committee by
written notice to him and to any other member of the Plan Committee. The Company
shall fill any vacancy and shall give written notice thereof to the other
members of the Committee. In the interim, the other member(s) of the Committee
shall have full authority to act. If, at any time, there are no members of the
Committee, then the Board  shall serve as the Committee.

 

9.02 General Rights, Powers and Duties of Plan Committee. The Committee shall be
responsible for the management, operation and administration of the Plan. In
addition to any powers, rights and duties set forth elsewhere in the Plan, it
shall have the following powers and duties:

 

(a)           to adopt such rules and regulations consistent with the provisions
of the Plan as it deems necessary for the proper and efficient administration of
the Plan;

 

(b)           to enforce the Plan in accordance with its terms and any rules and
regulations it establishes;

 

(c)           to maintain records concerning the Plan sufficient to prepare
reports, returns and other information required by the Plan or by law;

 

(d)           to construe and interpret the Plan and to resolve all questions
arising under the Plan;

 

(e)           to direct the Company to pay benefits under the Plan, and to give
such other directions and instructions as may be necessary for the proper
administration of the Plan;

 

(f)            to employ or retain agents, attorneys, actuaries, accountants or
other persons, who may also be employed by or represent the Company, and

 

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(g)           to be responsible for the preparation, filing and disclosure on
behalf of the Plan of such documents and reports as are required by any
applicable federal or state law.

 

The Committee shall have no power to add to, subtract from or modify any of the
terms of the Plan, or to change or add to any benefits provided by the Plan, or
to waive or fail to apply any requirements of eligibility for benefits under the
Plan.

 

9.03 Rules and Decisions. The Committee may adopt such rules and actuarial
tables as it deems necessary, desirable or appropriate. All rules and decisions
of the Committee shall be uniformly and consistently applied to all Participants
in similar circumstances. When making a determination or calculation, the
Committee shall be entitled to rely upon information furnished to it by a
Participant or beneficiary, the Company, and the legal counsel, actuary and
accountant for the Company.

 

9.04 Committee Procedures. The Committee may act at a meeting or in writing
without a meeting. The Committee shall elect one of its members as chairman and
appoint a secretary, who may or may not be a Committee member.  The Secretary
shall keep a record of all meetings and forward all necessary communications to
the Company.  The Committee may adopt such bylaws and regulations as it deems
desirable for the conduct of its affairs. All decisions of the Committee shall
be made by the vote of the majority, including actions in writing taken without
a meeting. A dissenting Committee member who, within a reasonable time after he
has knowledge of any action or failure to act by the majority, registers his
dissent in writing delivered to the other Committee members and the Company,
shall not, to the extent permitted by law, be responsible for any such action or
failure to act.

 

9.05 Authorization of Benefit Payments. The Committee shall issue directions to
the Company concerning all benefits which are to be paid pursuant to the
provisions of the Plan. The

 

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Company shall furnish the Committee such data and information as it may require.
The records of the Company shall be determinative of each Participant’s period
of employment, Termination of Employment and the reason therefor, leave of
absence, reemployment, years of Service, Earnings, and Final Average Earnings.
Participants and their beneficiaries shall furnish to the Committee such
evidence, data, or information, and execute such documents, as the Committee
requests.

 

9.06 Application and Forms of Benefits. The Committee may require a Participant
or former Participant to complete and file with the Committee an application for
retirement benefits and all other forms approved by the Committee, and to
furnish all pertinent information requested by the Committee. The Committee may
rely upon all such information so furnished it, including the Participant’s or
former Participant’s current mailing address.

 

9.07 Facility of Payment. Whenever, in the Committee’s opinion, a person
entitled to receive any payment of a benefit or installment thereof hereunder is
under a legal disability or is incapacitated in any way so as to be unable to
manage his financial affairs, the Committee may direct the Company to make
payments to such person or to his legal representative or to a relative or
friend of such person for his benefit, or the Committee may direct the Company
to apply the payment for the benefit of such person in such manner as the
Committee considers advisable. Any payment of a benefit or installment thereof
in accordance with the provisions of this Section shall be a complete discharge
of any liabilities for the making of such payment under the provisions of the
Plan.

 

9.08 Claims Procedure. The Committee shall make all determinations as to the
right of any person to receive benefits under the Plan. Any denial by the
Committee of a claim for benefits under the Plan by a Participant, former
Participant beneficiary of a former Participant

 

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(collectively referred to herein as “Claimant”) shall be stated in writing by
the Committee and delivered or mailed to the Claimant on the 90th day after
receipt of the claim, unless special circumstances require an extension of time
for processing the claim. If such an extension of time is required, written
notice of the extension shall be furnished to the Claimant on the 90th day after
receipt of the claim and the claim shall thereafter be paid on the 180th day
after the date of receipt of the initial claim.  Such notice shall set forth the
specific reasons for the denial, specific reference to pertinent provisions of
the Plan upon which the denial is based, a description of any additional
material or information necessary for the Claimant to perfect his claim with an
explanation of why such material or information is necessary, and an explanation
of claim review procedures under the Plan written to the best of the Committee’s
ability in a manner that may be understood without legal or actuarial counsel. A
Claimant whose claim for benefits has been wholly or partially denied by the
Committee may, within 90 days following the date of such denial, request a
review of such denial in writing addressed to the Committee. The Claimant shall
be entitled to submit such issues or comments, in writing or otherwise, as he
shall consider relevant to a determination of his claim, and he may request a
hearing in person before the Committee. Prior to submitting his request, the
Claimant shall be entitled to review such documents as the Committee shall agree
are pertinent to his claim. The Claimant may, at all stages of review, be
represented by counsel, legal or otherwise, of his choice, provided that the
fees and expenses of such counsel shall be borne by the Claimant. All requests
for review shall be promptly resolved. The Committee’s decisions with respect to
any such review shall be set forth in writing and shall be mailed to the
Claimant on the 60th day following receipt by the Committee of the Claimant’s
request unless special circumstances, such as the need to hold a

 

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hearing, require an extension of time for processing, in which case the
Committee’s decision shall be so mailed on the 120th day after receipt of such
request.

 

9.09 Responsibility. No member of the Committee or of the Board shall be liable
to any person for any action taken or omitted in connection with the
administration of the Plan unless attributable to his own fraud or willful
misconduct; nor shall the Company be liable to any person for any such action
unless attributable to fraud or willful misconduct on the part of a director,
officer or employee of the Company.

 

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ARTICLE X

 

AMENDMENT AND TERMINATION

 

10.01 Amendment. The Plan may be amended in whole or in part by the Company at
any time. Notice of any such amendment shall be given in writing to the
Committee and to each Participant, former Participant, and beneficiary of a
deceased former Participant. No such amendment, however, shall have the effect
of reducing that portion of the benefit the Participant or former Participant
ultimately becomes entitled to below that amount he would have received for
Service to the date of the amendment under the formula set out in the Plan prior
to the amendment.

 

10.02 Right to Terminate Plan. The Company reserves the right to terminate the
accrual or vesting of additional benefits under the Plan by any or all
Participants at any time by written notice to the Committee. The Committee shall
notify any Participant affected by such termination of such action and its
effective date within 30 days after it receives notice from the Company. A
Participant whose accrual of additional benefits is terminated shall not lose
any previously earned and vested benefits, and, subject to Article VII, any such
vested benefits shall be payable at the time and in the manner provided
hereunder.

 

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ARTICLE XI

 

MISCELLANEOUS

 

11.01 Inalienability of Benefits. The right of any Participant, former
Participant or beneficiary to any benefit or payment under the Plan shall not be
subject to voluntary or involuntary transfer, alienation, pledge, assignment,
garnishment, sequestration or other legal or equitable process. Any attempt to
transfer, alienate, pledge, assign or otherwise dispose of such right or any
attempt to subject such right to attachment, execution, garnishment,
sequestration or other legal or equitable process shall be null and void.

 

11.02 No Implied Rights. Neither the establishment of the Plan nor any
modification thereof shall be construed as giving any Participant, former
Participant beneficiary or other person any legal or equitable right unless such
right shall be specifically provided for in the Plan or conferred by affirmative
action of the Company in accordance with the terms and provisions of the Plan.

 

11.03 Actions By Company. All actions by the Company under the Plan shall be
taken by the Board or by a person or persons designated by the Board.

 

11.04 Binding Effect. The provisions of the Plan shall be binding on the
Company, the Committee, and all persons entitled to benefits under the Plan,
together with their respective heirs, legal representatives and successors in
interest.

 

11.05 Number and Gender. Wherever appropriate, the singular shall include the
plural, the plural shall include the singular, and the masculine shall include
the feminine or neuter.

 

11.06 Governing  Law. The Plan shall be construed and administered according to
the laws of the State of Texas.

 

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IN WITNESS WHEREOF, effective January 1, 2004, the Company has adopted this
amendment and restatement of the Plan on the            day of
                          , 2004.

 

 

QUANEX CORPORATION

 

 

 

 

 

By:

 

 

Title:

 

 

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