<PAGE>   1
                                                                   EXHIBIT 10.27

                                  AMENDMENT TO
                             THE QUANEX CORPORATION
              1996 EMPLOYEE STOCK OPTION AND RESTRICTED STOCK PLAN


         THIS AGREEMENT by Quanex Corporation (the "Company"),

                              W I T N E S S E T H:

         WHEREAS, the Board of Directors of the Company previously adopted the
plan agreement known as the "Quanex Corporation 1996 Employee Stock Option and
Restricted Stock Plan" (the "Plan"); and

         WHEREAS, the Board of Directors of the Company retained the right in
Section 12 of the Plan to amend the Plan from time to time; and

         WHEREAS, the Board of Directors of the Company has approved the
following amendment to the Plan;

         NOW, THEREFORE, effective January 1, 2000, the Board of Directors of
the Company agrees that Paragraph H. of Section 7 of the Plan is hereby amended,
effective with respect to all Options issued in the future under this Plan, as
follows:

         H. TERMINATION OF EMPLOYMENT OR DEATH OF OPTIONEE. Except as may be
         otherwise expressly provided herein with respect to an Option that is a
         Non-Incentive Stock Option, all Options shall terminate on the earlier
         of the date of the expiration of the Option or one day less than three
         months after the date of severance, upon severance of the employment
         relationship between the Company and the optionee, whether with or
         without cause, for any reason other than the death, Disability or, in
         the case of Non-Incentive Stock Options only, Retirement of the
         optionee, during which period the optionee shall be entitled to
         exercise the Option in respect of the number of shares that the
         optionee would have been entitled to purchase had the optionee
         exercised the Option on the date of such severance of employment.
         Whether authorized leave of absence, or absence on military or
         government service, shall constitute severance of the employment
         relationship between the Company and the optionee shall be determined
         by the Committee at the time thereof. In the event of severance because
         of the Disability of the holder of any Incentive Stock Option while in
         the employ of the Company and before the date of expiration of such
         Incentive Stock Option, such Incentive Stock Option shall terminate on
         the earlier



<PAGE>   2


         of such date of expiration or one year following the date of such
         severance because of Disability, during which period the optionee shall
         be entitled to exercise the Incentive Stock Option in respect to the
         number of shares that the optionee would have been entitled to purchase
         had the optionee exercised the Incentive Stock Option on the date of
         such severance because of Disability. In the event of the death of the
         holder of any Incentive Stock Option while in the employ of the Company
         and before the date of expiration of such Incentive Stock Option, such
         Incentive Stock Option shall terminate on the earlier of such date of
         expiration or one year following the date of death. After the death of
         the optionee, his executors, administrators or any person or persons to
         whom his Incentive Stock Option may be transferred by will or by the
         laws of descent and distribution, shall have the right, at any time
         prior to the termination of an Incentive Stock Option to exercise the
         Incentive Stock Option, in respect to the number of shares that the
         optionee would have been entitled to exercise if he had exercised the
         Incentive Stock Option on the date of his death while in employment.
         For purposes of Incentive Stock Options issued under this Plan, an
         employment relationship between the Company and the optionee shall be
         deemed to exist during any period in which the optionee is employed by
         the Company, a corporation issuing or assuming an option in a
         transaction to which Section 424(a) of the Code applies, or a parent or
         subsidiary corporation of such corporation issuing or assuming an
         option. For this purpose, the phrase "corporation issuing or assuming
         an option" shall be substituted for the word "Company" in the
         definitions of parent and subsidiary corporations in Section 5 and the
         parent-subsidiary relationship shall be determined at the time of the
         corporate action described in Section 424(a) of the Code.

                  In the event of the death, Disability or Retirement of a
         holder of a Non-Incentive Stock Option, before the date of expiration
         of such Non-Incentive Stock Option, such Non-Incentive Stock Option
         shall continue fully in effect, including provisions providing for
         subsequent vesting of such Option, for a period of not more than three
         years commencing on the date of the optionee's death, Disability or
         Retirement and shall terminate on the earlier of the date of the
         expiration of such three-year period or the date of expiration of the
         Non-Incentive Stock Option. After the death of the optionee, his
         executors, administrators or any person or persons to whom his
         Non-Incentive Stock Option may be transferred by will or by the laws of
         descent and distribution, shall have the right, at any time prior to
         the termination of the Non-Incentive Stock Option to exercise the
         Non-Incentive Stock Option, in respect to the number of shares that the
         optionee would have been entitled to exercise if he were still alive.
         Notwithstanding the foregoing provisions of this Section, in the case
         of a Non-Incentive Stock Option the Committee may provide for a
         different option termination date in the Option Agreement with respect
         to such Option.

Dated: December 9, 1999.


                                       -2-