Exhibit 10.6


 


QUANEX CORPORATION

401(k) SAVINGS PLAN




 


Amendment
and Restatement

Effective January 1, 2005


 

















 


QUANEX CORPORATION 401(k)
SAVINGS PLAN


 


THIS AGREEMENT adopted by Quanex
Corporation, a Delaware corporation (the “Sponsor”),


 


W I T
N E S S E T H:


 


WHEREAS, effective October 1,
1987, Nichols-Homeshield, Inc. established the Nichols-Homeshield, Inc. Savings
Plan (the “Plan”);


 


WHEREAS, the Sponsor assumed
sponsorship of the Plan effective January 1, 1992;


 


WHEREAS, effective January 1,
1999, the name of the Plan was changed to the “Nichols 401(k) Savings Plan”;


 


WHEREAS, effective July 1, 1999,
the Decatur Aluminum Corporation Salaried Employees’ 401(k) Retirement Plan and
Trust was merged into the Plan;


 


WHEREAS, effective January 1,
2002, the name of the Plan was changed to the “Quanex Corporation 401(k)
Savings Plan”;


 


WHEREAS, effective July 1, 2001,
the Temroc Metals, Inc. Nonbargaining Unit Employees 401(k) Plan was merged
into the Plan;


 


WHEREAS, effective December 1,
2005, the Piper Impact 401(k) Plan was merged into the Plan;


 


WHEREAS, the Plan is intended to
be a profit sharing plan;


 


WHEREAS, the pursuant to Section
13.01 of the Plan, the Sponsor retained the right to amend the Plan with
respect to itself and all employers that have adopted the Plan; and


 


WHEREAS, the Sponsor desires to
amend and restate the Plan in its entirety;


 


NOW, THEREFORE, the Plan is
hereby amended and restated as follows, effective as of January 1, 2005, except
to the extent that an earlier effective date is otherwise specified or required
by law.


 

















 


TABLE OF CONTENTS


 


	
   

  	
   

  	
  Section

  
	
   

  	
   

  	
   

  
	
  ARTICLE I - DEFINITIONS

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Account

  	
  1.01

  
	
   

  	
  Active Service

  	
  1.02

  
	
   

  	
  Affiliated Employer

  	
  1.03

  
	
   

  	
  Allocation Period

  	
  1.04

  
	
   

  	
  Annual Compensation

  	
  1.05

  
	
   

  	
  Annuity Starting Date

  	
  1.06

  
	
   

  	
  Applicable Distribution Period

  	
  1.07

  
	
   

  	
  Beneficiary or Beneficiaries

  	
  1.08

  
	
   

  	
  Board

  	
  1.09

  
	
   

  	
  Catch-up Eligible Participant

  	
  1.10

  
	
   

  	
  Claimant

  	
  1.11

  
	
   

  	
  Code

  	
  1.12

  
	
   

  	
  Committee

  	
  1.13

  
	
   

  	
  Considered Compensation

  	
  1.14

  
	
   

  	
  Contribution

  	
  1.15

  
	
   

  	
  Decatur Plan

  	
  1.16

  
	
   

  	
  Direct Rollover

  	
  1.17

  
	
   

  	
  Disability

  	
  1.18

  
	
   

  	
  Distributee

  	
  1.19

  
	
   

  	
  Distribution Calendar Year

  	
  1.20

  
	
   

  	
  Earnings Before Interest and Taxes

  	
  1.21

  
	
   

  	
  Eligible Employee

  	
  1.22

  
	
   

  	
  Eligible Retirement Plan

  	
  1.23

  
	
   

  	
  Eligible Rollover Distribution

  	
  1.24

  
	
   

  	
  Employee

  	
  1.25

  
	
   

  	
  Employer or Employers

  	
  1.26

  
	
   

  	
  Entry Date

  	
  1.27

  
	
   

  	
  ERISA

  	
  1.28

  
	
   

  	
  Final Section 401(a)(9) Regulations

  	
  1.29

  
	
   

  	
  Five Percent Owner

  	
  1.30

  
	
   

  	
  Highly Compensated Employee

  	
  1.31

  
	
   

  	
  Hour of Service

  	
  1.32

  
	
   

  	
  Leased Employee

  	
  1.33

  
	
   

  	
  Maternity or Paternity Absence

  	
  1.34

  
	
   

  	
  Nonforfeitable Interest

  	
  1.35

  
	
   

  	
  Non-Highly Compensated Employee

  	
  1.36

  
	
   

  	
  Participant

  	
  1.37

  
	
   

  	
  Period of Service

  	
  1.38

  
	
   

  	
  Period of Severance

  	
  1.39

  
	
   

  	
  Plan

  	
  1.40

  



 


i

















 


	
   

  	
  Plan Year

  	
  1.41

  
	
   

  	
  QJSA

  	
  1.42

  
	
   

  	
  QPSA

  	
  1.43

  
	
   

  	
  Qualified Domestic Relations Order

  	
  1.44

  
	
   

  	
  Regulation

  	
  1.45

  
	
   

  	
  Required Beginning Date

  	
  1.46

  
	
   

  	
  Retirement Age

  	
  1.47

  
	
   

  	
  Rollover Contribution

  	
  1.48

  
	
   

  	
  Section 401(a)(9) Beneficiary

  	
  1.49

  
	
   

  	
  Separation From Service

  	
  1.50

  
	
   

  	
  Severance From Service Date

  	
  1.51

  
	
   

  	
  Severs Service

  	
  1.52

  
	
   

  	
  Sponsor

  	
  1.53

  
	
   

  	
  Sponsor Stock

  	
  1.54

  
	
   

  	
  Spouse

  	
  1.55

  
	
   

  	
  Temroc Plan

  	
  1.56

  
	
   

  	
  Trust

  	
  1.57

  
	
   

  	
  Trustee

  	
  1.58

  
	
   

  	
  Valuation Date

  	
  1.59

  
	
   

  	
   

  	
   

  
	
  ARTICLE II – ELIGIBILITY

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Eligibility Requirements

  	
  2.01

  
	
   

  	
  Early Participation for Some Purposes

  	
  2.02

  
	
   

  	
  Eligibility Upon Reemployment

  	
  2.03

  
	
   

  	
  Cessation of Participation

  	
  2.04

  
	
   

  	
  Recommencement of Participation

  	
  2.05

  
	
   

  	
   

  	
   

  
	
  ARTICLE III – CONTRIBUTIONS

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Salary Deferral Contributions

  	
  3.01

  
	
   

  	
  Catch-up Salary Deferral Contributions

  	
  3.02

  
	
   

  	
  Matching Contributions

  	
  3.03

  
	
   

  	
  Supplemental Contributions for Hourly Employees
  Other Than Employees of Nichols Aluminum-Alabama, Inc., Temroc Metals, Inc.,
  Imperial Products, Inc. and Colonial Craft, Inc.

  	
  3.04

  
	
   

  	
  Supplemental Contributions for Salaried Employees
  Other Than Employees of Nichols Aluminum-Alabama, Inc., Temroc Metals, Inc.,
  Imperial Products, Inc. and Colonial Craft, Inc.

  	
  3.05

  
	
   

  	
  Supplemental Contributions for Employees of Other
  Than Employees of Nichols Aluminum-Alabama, Inc., Temroc Metals, Inc.,
  Imperial Products, Inc. and Colonial Craft, Inc.

  	
  3.06

  
	
   

  	
  Rollover Contributions and Plan-to-Plan Transfers

  	
  3.07

  
	
   

  	
  QNECS – Extraordinary Employer Contributions

  	
  3.08

  
	
   

  	
  Restoration Contributions

  	
  3.09

  
	
   

  	
  Restorative Payments

  	
  3.10

  
	
   

  	
  Nondeductible Contributions Not Required

  	
  3.11

  
	
   

  	
  Form of Payment of Contributions

  	
  3.12

  



 


ii

















 


	
   

  	
  Deadline for Payment of Contributions

  	
  3.13

  
	
   

  	
  Return of Contributions for Mistake, Disqualification or Disallowance
  of Deduction

  	
  3.14

  
	
   

  	
  Special Rule for Employees of the Piper Impact Divisions

  	
  3.15

  
	
   

  	
   

  	
   

  
	
  ARTICLE IV – ALLOCATION AND VALUATION OF ACCOUNTS

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Information Statements from Employer

  	
  4.01

  
	
   

  	
  Allocation of Salary Deferral Contributions

  	
  4.02

  
	
   

  	
  Allocation of Catch-up Salary Deferral Contributions

  	
  4.03

  
	
   

  	
  Allocation of Matching Contributions

  	
  4.04

  
	
   

  	
  Allocation of Supplemental Contributions

  	
  4.05

  
	
   

  	
  Allocation of QNECs

  	
  4.06

  
	
   

  	
  Allocation of Forfeitures

  	
  4.07

  
	
   

  	
  Valuation of Accounts

  	
  4.08

  
	
   

  	
  No Rights Unless Otherwise Prescribed

  	
  4.09

  
	
   

  	
   

  	
   

  
	
  ARTICLE V - BENEFITS

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Retirement Benefit

  	
  5.01

  
	
   

  	
  Death Benefit

  	
  5.02

  
	
   

  	
  Form of Distribution

  	
  5.03

  
	
   

  	
  Distribution Methods

  	
  5.04

  
	
   

  	
  Immediate Payment of Small Amount Upon Separation From Service

  	
  5.05

  
	
   

  	
  Direct Rollover Option

  	
  5.06

  
	
   

  	
  Consent to Distribution

  	
  5.07

  
	
   

  	
  QJSA Requirements

  	
  5.08

  
	
   

  	
  QPSA Requirements

  	
  5.09

  
	
   

  	
  Information Provided to Participants

  	
  5.10

  
	
   

  	
  Optional Forms of Distribution

  	
  5.11

  
	
   

  	
  Required Distributions

  	
  5.12

  
	
   

  	
  Designation of Beneficiary

  	
  5.13

  
	
   

  	
  Distributions to Minors and Incapacitated Persons

  	
  5.14

  
	
   

  	
  Distributions Pursuant to Qualified Domestic Relations Orders

  	
  5.15

  
	
   

  	
  Claims Review Procedures; Claims Appeal Procedures

  	
  5.16

  
	
   

  	
  Disability Benefit Claims Procedure

  	
  5.17

  
	
   

  	
   

  	
   

  
	
  ARTICLE VI – IN-SERVICE DISTRIBUTIONS

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  In-Service Financial Hardship Distributions

  	
  6.01

  
	
   

  	
  In-Service Distributions for Certain Participants Who Have Attained
  Age 591⁄2

  	
  6.02

  
	
   

  	
  Form of Payment

  	
  6.03

  
	
   

  	
  Method of Payment

  	
  6.04

  
	
   

  	
  Transition Rule for Temroc Metals, Inc. Employees

  	
  6.05

  



 


iii

















 


	
  ARTICLE VII – LOANS

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE VIII – VESTING

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE IX – FORFEITURES AND RESTORATIONS

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Forfeiture on Termination of Participation

  	
  9.01

  
	
   

  	
  Restoration of Forfeited Amounts

  	
  9.02

  
	
   

  	
  Forfeitures by Lost Participants or Beneficiaries

  	
  9.03

  
	
   

  	
  Transition Rule for Decatur Plan Participants

  	
  9.04

  
	
   

  	
   

  	
   

  
	
  ARTICLE X – ACTIVE SERVICE

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  General Rules

  	
  10.01

  
	
   

  	
  Disregard of Certain Service

  	
  10.02

  
	
   

  	
  Certain Brief Absences Counted as Active Service

  	
  10.03

  
	
   

  	
  Special Maternity or Paternity Absence Rules

  	
  10.04

  
	
   

  	
  Employment Records Conclusive

  	
  10.05

  
	
   

  	
  Service Credit Required by Law

  	
  10.06

  
	
   

  	
  Credit for Service With Alumi-Brite Corporation

  	
  10.07

  
	
   

  	
  Credit for Service With Fruehauf Trailer Corporation

  	
  10.08

  
	
   

  	
  Credit for Service With Decatur Aluminum Holdings Corp. and its
  Subsidiaries

  	
  10.09

  
	
   

  	
  Credit for Service With Temroc Metals, Inc.

  	
  10.10

  
	
   

  	
  Credit for Service With Imperial Products, Inc.

  	
  10.11

  
	
   

  	
  Credit for Service With Alcoa, Inc. and Golden Aluminum Company

  	
  10.12

  
	
   

  	
  Special Transitional Rules

  	
  10.13

  
	
   

  	
   

  	
   

  
	
  ARTICLE XI — INVESTMENT ELECTIONS

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Investment Funds Established

  	
  11.01

  
	
   

  	
  Election Procedures Established

  	
  11.02

  
	
   

  	
   

  	
   

  
	
  ARTICLE XII– ADOPTION OF PLAN BY OTHER EMPLOYERS

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Adoption Procedure

  	
  12.01

  
	
   

  	
  No Joint Venture Implied

  	
  12.02

  
	
   

  	
  All Trust Assets Available to Pay All Benefits

  	
  12.03

  
	
   

  	
  Qualification a Condition Precedent to Adoption and Continued
  Participation

  	
  12.04

  
	
   

  	
   

  	
   

  
	
  ARTICLE XIII– AMENDMENT AND TERMINATION

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Right to Amend and Limitations Thereon

  	
  13.01

  
	
   

  	
  Mandatory Amendments

  	
  13.02

  
	
   

  	
  Withdrawal of Employer

  	
  13.03

  
	
   

  	
  Termination of Plan

  	
  13.04

  
	
   

  	
  Partial or Complete Termination or Complete Discontinuance of
  Contributions

  	
  13.05

  
	
   

  	
   

  	
   

  
	
  ARTICLE XIV– MISCELLANEOUS

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Plan Not an Employment Contract

  	
  14.01

  



 


iv

















 


	
   

  	
  Benefits Provided Solely From Trust

  	
  14.02

  
	
   

  	
  Assignments Prohibited

  	
  14.03

  
	
   

  	
  Requirements Upon Merger or Consolidation of Plans

  	
  14.04

  
	
   

  	
  Gender of Words Used

  	
  14.05

  
	
   

  	
  Severability

  	
  14.06

  
	
   

  	
  Reemployed Veterans

  	
  14.07

  
	
   

  	
  Limitations on Legal Actions

  	
  14.08

  
	
   

  	
  Transition Rule Relating to Mergers of Decatur Plan  and Temroc Plan Into the Plan

  	
  14.09

  
	
   

  	
  Governing Law

  	
  14.10

  
	
   

  	
  Special Provisions Applicable to Nichols Aluminum-Golden, Inc.
  Employees

  	
  14.11

  
	
   

  	
   

  	
   

  
	
   

  	
  APPENDIX A -
  LIMITATIONS ON CONTRIBUTIONS AND ALLOCATIONS

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  APPENDIX B - TOP-HEAVY
  REQUIREMENTS

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  APPENDIX C –
  ADMINISTRATION OF THE PLAN

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  APPENDIX D – FUNDING

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  APPENDIX E – OPTIONAL
  FORMS OF DISTRIBUTION

  	
   

  



 


v

















 


ARTICLE I



DEFINITIONS


 


The words and phrases defined in this Article shall
have the meaning set out in the definition unless the context in which the word
or phrase appears reasonably requires a broader, narrower or different meaning.


 


1.01         “Account” means all ledger accounts
pertaining to a Participant which are maintained by the Committee to reflect
the Participant’s interest in the Trust. The Committee shall establish the
following Accounts and any additional Accounts that the Committee considers
necessary to reflect the entire interest of the Participant in the Trust. Each
of the Accounts listed below and any additional Accounts established by the
Committee shall reflect the Contributions or amounts transferred to the Trust,
if any, and the appreciation or depreciation of the assets in the Trust and the
income earned or loss incurred on the assets in the Trust attributable to the
Contributions and/or other amounts transferred to the Account.


 


(a)           Salary Deferral Contribution Account – the Participant’s
before-tax contributions, if any, made pursuant to Section 3.01.


 


(b)           Catch-up Salary Deferral Account – the Participant’s
before-tax contributions, if any, made pursuant to Section 3.02.


 


(c)           Matching Contribution Account – the Employer’s matching
contributions, if any, made pursuant to Section 3.03.


 


(d)           Supplemental Contribution Account – the Employer’s
contributions, if any, made pursuant to Sections 3.04, 3.05 or 3.06, as
applicable.


 


(e)           QNEC Account – the Employer’s contributions, known as “qualified
nonelective employer contributions”, made as a means of passing the actual
deferral percentage test of section 401(k) of the Code.


 


(f)            Rollover Account – funds transferred from another qualified
plan or individual retirement account for the benefit of a Participant.


 


1.02         “Active Service” means the Periods of
Service which are counted for eligibility and vesting purposes as calculated
under Article X.


 


1.03         “Affiliated Employer” means the
Employer and any employer which is a member of the same controlled group of
corporations within the meaning of section 414(b) of the Code or which is a
trade or business (whether or not incorporated) which is under common control
(within the meaning of section 414(c) of the Code), which is a member of
an affiliated service group (within the meaning of section 414(m) of the
Code) with the Employer, or which is required to be aggregated with the
Employer under section 414(o) of the Code. For purposes of the limitation on
allocations contained in Appendix A, the definition of Affiliated Employer is
modified by substituting the phrase “more than 50 percent” in place of the
phrase “at least 80 percent” each place the latter phrase appears in section
1563(a)(1) of the Code.


 


I-1

















 


1.04         “Allocation Period” means one of the
following calendar quarter periods: 
January 1 through March 31; April 1 through June 30; July 1 through
September 30; or October 1 through December 31.


 


1.05         “Annual Compensation” means the
Employee’s wages from the Affiliated Employers as defined in section 3401(a) of
the Code for purposes of federal income tax withholding at the source (but
determined without regard to any rules that limit the remuneration included in
wages based on the nature or location of the employment or the services
performed) modified by including elective contributions under a cafeteria plan
maintained by an Affiliated Employer that are excludable from the Employee’s
gross income pursuant to section 125 of the Code, elective contributions under
a qualified transportation fringe benefit plan maintained by an Affiliated
Employer that are excludable from the Employee’s gross income pursuant to section 132(f)(4)
of the Code and elective contributions made on behalf of the Employee to any
plan maintained by an Affiliated Employer that is qualified under or governed
by section 401(k), 408(k), or 403(b) of the Code. Except for purposes of
Section A.4.1 of Appendix A of the Plan, effective for Plan Years commencing on
or after January 1, 1994, but prior to January 1, 2002, Annual Compensation in
excess of $150,000.00 (as adjusted by the Secretary of Treasury for increases
in the cost of living) shall be disregarded. Except for purposes of Section
A.4.1 of Appendix A of the Plan, effective for Plan Years commencing on or
after January 1, 2002, Annual Compensation in excess of $200,000.00 (as
adjusted by the Secretary of Treasury for increases in the cost of living) will
be disregarded. If the Plan Year is ever less than twelve months, the
$150,000.00 limitation (as adjusted by the Secretary of Treasury for increases
in the cost of living) or, for Plan Years that commence on or after
January 1, 2002, the $200,000.00 limitation (as adjusted by the Secretary
of Treasury for increases in the cost of living) will be prorated by
multiplying the limitation by a fraction, the numerator of which is the number
of months in the Plan Year, and the denominator of which is twelve (12). Effective
January 1, 1997, the family aggregation rules previously contained in section
401(a)(17) of the Code are disregarded.


 


1.06         “Annuity Starting Date” means the
first day of the first period for which an amount is payable as an annuity, or
in the case of a benefit payable in the form of a lump sum, the date on which
the Trustee disburses the lump sum.


 


1.07         “Applicable Distribution Period”
means as follows:


 


(a)           Distributions During the Participant’s or former Participant’s Life.
For Distribution Calendar Years commencing on or after January 1, 2003, up to
and including the Distribution Calendar Year that includes the Participant’s or
former Participant’s death, the “Applicable Distribution
Period” is the Participant’s or former Participant’s life expectancy
determined using the Uniform Lifetime Table in Regulation section 1.401(a)(9)-9
for his age as of his birthday in the relevant Distribution Calendar Year. However,
if the Participant’s or former Participant’s sole Section 401(a)(9) Beneficiary
for the entire Distribution Calendar Year is his Spouse, for distributions
during his lifetime, his “Applicable Distribution
Period” shall not be less than the joint life expectancy of him and
his Spouse using his and his Spouse’s attained ages as of his and his Spouse’s
birthdays in the Distribution Calendar Year.


 


I-2

















 


(b)           Distributions after the Participant’s or former Participant’s Death.
Effective for Distribution Calendar Years commencing on or after January, 1,
2003, if a Participant or former Participant dies on or after his Required
Beginning Date, the “Applicable Distribution
Period” for Distribution Calendar Years after the Distribution
Calendar Year containing the Participant’s or former Participant’s date of
death is the longer of the remaining life expectancy of his Section 401(a)(9)
Beneficiary (if any) determined in accordance with the Final Section 401(a)(9)
Regulations (calculated by using the age of the Section 401(a)(9) Beneficiary
in the year following the year of the former Participant’s death, reduced by
one for each subsequent year) or the remaining life expectancy of the  former Participant determined in accordance
with the Final Section 401(a)(9) Regulations (calculated by using the age of
the former Participant in the year of death, reduced by one or each subsequent
year). However, if the former Participant’s surviving Spouse is the former
Participant’s sole Section 401(a)(9) Beneficiary, the remaining life expectancy
of the surviving Spouse is calculated for each Distribution Calendar Year after
the year of the former Participant’s death using the surviving Spouse’s age as
the surviving Spouse’s birthday in that year; and for distribution calendar
years after the year of the surviving Spouse’s death, the remaining life
expectancy of the surviving Spouse is calculated using the age of the surviving
Spouse as of the surviving Spouse’s birthday in the calendar year of the
surviving Spouse’s death, reduced by one for each subsequent calendar year.


 


1.08         “Beneficiary” or “Beneficiaries”
means the person or persons, or the trust or trusts created for the benefit of
a natural person or persons or the Participant’s or former Participant’s
estate, designated by the Participant or former Participant to receive the
benefits payable under the Plan upon his death.


 


1.09         “Board” means the board of directors
of the Sponsor.


 


1.10         “Catch-up Eligible Participant” means
a Participant who is age 50 or who is projected to attain the age of 50 by December
31 of the applicable Plan Year.


 


1.11         “Claimant” means a Participant,
former Participant or Beneficiary, as applicable.


 


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


 


1.13         “Committee” means the committee
appointed by the Sponsor to administer the Plan.


 


1.14         “Considered Compensation”  means Annual Compensation paid to a
Participant by an Affiliated Employer for a Plan Year, reduced by
all of the following items (even if includable in gross income): all reimbursements
or other expense allowances (such as the payment of moving expenses or
automobile mileage reimbursements), cash and noncash fringe benefits (such as
the use of an automobile owned by the Employer, club memberships, tax
gross-ups, attendance and safety awards, fitness reimbursements, housing
allowances, financial planning benefits and Beneflex dollars), deferred
compensation (such as amounts realized upon the exercise of a nonqualified
stock option or upon the premature disposition of an incentive stock option,
pay for accrued vacation upon Separation From Service, amounts realized when


 


I-3

















 


restricted
property or other property held by a Participant either becomes freely
transferable or no longer subject to a substantial risk of forfeiture under
section 83 of the Code), welfare benefits (such as severance pay). For purposes
of Supplemental Contributions and Matching Contributions, Management Incentive
Plan compensation, Non-RONA bonuses, and, in the case of Employees who are
compensated on a salaried basis, Improshare compensation shall be disregarded. For
purposes of Matching Contributions, an Employee’s Considered Compensation prior
to April 1, 2001, shall be disregarded. An Employee’s Considered Compensation
paid to him during any period in which he is not eligible to participate in the
Plan under Article II shall be disregarded. Effective for Plan Years commencing
on or after January 1, 1994, but prior to January 1, 2002, Considered
Compensation in excess of $150,000.00 (as adjusted by the Secretary of
Treasury) shall be disregarded. Effective for Plan Years commencing on or after
January 1, 2002, Considered Compensation in excess of $200,000.00 (as adjusted
by the Secretary of Treasury for increases in the cost of living) will be
disregarded. If the Plan Year is ever less than twelve months, the $150,000.00
limitation (as adjusted by the Secretary of Treasury for increases in the cost
of living) or, for Plan Years that commence on or after January 1, 2002,
the $200,000.00 limitation (as adjusted by the Secretary of Treasury for
increases in the cost of living) will be prorated by multiplying the limitation
by a fraction, the numerator of which is the number of months in the Plan Year,
and the denominator of which is twelve (12).


 


1.15         “Contribution” means the total amount
of contributions made under the terms of the Plan. Each specific type of
Contribution shall be designated by the type of contribution made as follows:


 


(a)           Salary Deferral Contribution – a before-tax contribution
made by the Employer pursuant to Section 3.01 and the Employee’s salary
deferral agreement.


 


(b)           Catch-up Salary Deferral Contribution – a contribution made
by the Employer pursuant to Section 3.02 and the Participant’s salary deferral
agreement.


 


(c)           Matching Contribution – a contribution made by the Employer
pursuant to Section 3.03.


 


(d)           Supplemental Contribution – a contribution made by the
Employer pursuant to Sections 3.04, 3.05 or 3.06, as applicable.


 


(e)           QNEC – an extraordinary contribution, known as a “qualified
nonelective employer contribution”,  made
by the Employer as a means of passing the actual deferral percentage test of
section 401(k) of the Code or the actual contribution percentage test of
section 401(m) of the Code.


 


(f)            Rollover Contribution - a contribution made by a Participant
which consists of any part of an eligible rollover distribution (as defined in
section 402 of the Code) from a qualified employee trust described in section
401(a) of the Code.


 


1.16         “Decatur Plan” means the Decatur
Aluminum Corporation Salaried Employees’ 401(k) Retirement Plan and Trust.


 


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1.17         “Direct Rollover” means a payment by
the Plan to the Eligible Retirement Plan specified by the Distributee.


 


1.18         “Disability” means a mental or
physical disability which, in the opinion of a physician selected by the
Committee, shall prevent the Participant from earning a reasonable livelihood
with any Affiliated Employer and which can be expected to result in death or
which has lasted or can be expected to last for a continuous period of not less
than 12 months and which: (a) was not contracted, suffered or incurred while
the Participant was engaged in, or did not result from having engaged in, a
felonious criminal enterprise; (b) did not result from alcoholism or addiction
to narcotics; and (c) did not result from an injury incurred while a member of
the Armed Forces of the United States for which the Participant receives a
military pension.


 


1.19         “Distributee” means an Employee or
former Employee. In addition, the Employee’s or former Employee’s surviving
Spouse and the Employee’s or former Employee’s Spouse or former Spouse who is
the alternate payee under a Qualified Domestic Relations Order, are
Distributees with regard to the interest of the Spouse or former Spouse.


 


1.20         “Distribution Calendar Year”
means a calendar year for which a minimum distribution is required to be made
to a Participant or former Participant under section 401(a)(9) of the Code and
Department of Treasury Regulations thereunder. If a Participant’s or former
Participant’s Required Beginning Date is April 1 of the calendar year following
the calendar year in which he attains age 701⁄2, his first Distribution Calendar
Year is the calendar year in which he attains age 701⁄2. If a Participant’s or
former Participant’s Required Beginning Date is April 1 of the calendar year
following the calendar year in which he incurs a Separation From Service, his
first Distribution Calendar Year is the calendar year in which he incurs a
Separation From Service.


 


1.21         “Earnings Before Interest and Taxes”
means gross margin minus selling expenses and general administrative expenses
but before interest income or expense and income taxes determined on a
consolidated basis of the Sponsor’s aluminum facilities and Quanex Metals, Inc.
However, Earnings Before Interest and Taxes shall not be reduced for
contributions made under the Plan.


 


1.22         “Eligible Employee” means an
Employee who is employed by the Sponsor at its plant in Lincolnshire, Illinois,
or primarily in connection with its Nichols Aluminum or HOMESHIELD division. Effective
July 1, 1999, “Eligible Employee” also means an
Employee who is employed by Nichols Aluminum Alabama, Inc., a Delaware corporation.
Effective June 1, 2000, “Eligible Employee”
also means an Employee who is employed by Imperial Products, Inc., a Delaware
corporation. Effective July 1, 2001, “Eligible Employee”
also means an Employee who is employed by Temroc Metals, Inc., a Minnesota
corporation. Effective February 13, 2002, “Eligible Employee”
also means an Employee who is employed by Colonial Craft, Inc., a Delaware
corporation. Effective December 1, 2005, “Eligible Employee”
also means an Employee who is employed by the Sponsor in connection with its
Piper Impact division.


 


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1.23         “Eligible Retirement Plan” means (a)
an individual retirement account described in section 408(a) of the Code, (b)
an individual retirement annuity described in section 408(b) of the Code (other
than an endowment contract), (c) an annuity plan described in section 403(a) of
the Code, (d) a qualified plan described in section 401(a) of the Code that is
a defined contribution plan that accepts the Distributee’s Eligible Rollover
Distribution, (e) effective for a distribution on or after January 1, 2002, an
eligible deferred compensation plan described in section 457(b) of the Code
that is maintained by an eligible employer described in section 457(e)(1)(A) of
the Code but only if the plan agrees to separately account for amounts rolled
into such plan, or (f) effective for a distribution on or after January 1,
2002, an annuity contract described in section 403(b) of the Code. However, in
the case of an Eligible Rollover Distribution made prior to January 1, 2002,
and after the death of a Participant to a Distributee who is the Participant’s
surviving Spouse, an Eligible Retirement Plan is an individual retirement
account or individual retirement annuity.


 


1.24         “Eligible Rollover Distribution”
means any distribution of all or any portion of the balance to the credit of
the Distributee, except that an Eligible Rollover Distribution does not include:  (a) any
distribution that is one of a series of substantially equal periodic payments
(not less frequently than annually) made for the life (or life expectancy) of
the Distributee or the joint lives (or joint life expectancies) of the
Distributee and the Distributee’s Beneficiary, or for a specified period of ten
years or more; (b) any distribution to the extent the distribution is required
under section 401(a)(9) of the Code; (c) the portion of any distribution that
is not includable in gross income (determined without regard to the exclusion
for net unrealized appreciation with respect to employer securities) unless,
for a distribution made on or after January 1, 2002, the Eligible Retirement
Plan to which the distribution is transferred (a) agrees to separately account
for amounts so transferred, including separately accounting for the portion of
such distribution which is not includable in gross income or (b) is an
individual retirement account described in section 408(a) of the Code or an
individual retirement annuity described in section 408(b) of the Code (other
than an endowment contract); and, (d) effective for distributions after
December 31, 1998, and prior to January 1, 2002, any financial hardship
distribution described in section 401(k)(2) of the Code from a Participant’s
Salary Deferral Contribution Account or from the Participant’s QNEC Account (to
the extent that QNECs were treated as Section 401(k) Contributions under
Appendix A) and (e) effective for a distribution made after December 31,
2001, a distribution from any of the Participant’s Accounts due to a financial
hardship of the Participant.


 


1.25         “Employee” means, except as
otherwise specified in this Section, all common law employees of an Affiliated
Employer and all Leased Employees.


 


1.26         “Employer” or “Employers” means the
Sponsor, Nichols Aluminum-Alabama, Inc., a Delaware corporation (previously
named Decatur Aluminum Corp.), a Delaware corporation, Imperial Products, Inc.,
a Delaware corporation, Temroc Metals, Inc., a Minnesota corporation, Colonial
Craft, Inc., a Delaware corporation and any other business organization that
adopts the Plan.


1.27         “Entry Date” means the first day of
each calendar quarter, January 1, April 1, July 1, and October 1.


 


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1.28         “ERISA” means the Employee Retirement
Income Security Act of 1974, as amended from time to time.


 


1.29         “Final Section 401(a)(9) Regulations” means the final
Regulations issued by the Department of Treasury under section 401(a)(9) of the
Code which are effective for the purposes of determining required minimum
distributions for calendar years beginning on or after January 1, 2003. The
final Regulations, other than section 1.401(a)(9)-6, were published in the
Federal Register on April 17, 2002. Section 1.401(a)(9)-6 was finalized and
published in the Federal Register on June 15, 2004.


 


1.30         “Five Percent Owner” means an
Employee who is a five percent owner as defined in section 416(i) of the Code.


 


1.31         “Highly Compensated Employee” means,
effective January 1, 1997, an Employee or an Affiliated Employer who, during
the Plan Year or the preceding Plan Year, (a) was at any time a Five
Percent Owner at any time during the Plan Year or the preceding Plan Year or
(b) had Annual Compensation from the Affiliated Employers in excess of
$80,000.00 (as adjusted from time to time by the Secretary of the Treasury) for
the preceding Plan Year.


 


1.32         “Hour of Service” means each hour
that an Employee is paid or entitled to payment by an Affiliated Employer for
the performance of duties.


 


1.33         “Leased Employee” means, effective
January 1, 1997, any person who (a) is not a common law employee of an
Affiliated Employer, (b) pursuant to an agreement between an Affiliated
Employer and any other person, has performed services for an Affiliated
Employer (or for an Affiliated Employer and related persons determined in
accordance with section 414(n)(6) of the Code) on a substantially full-time
basis for a period of at least one year and (c) performs the services
under primary direction and control of the recipient.


 


1.34         “Maternity or Paternity Absence”
means a period in which an Employee is absent from work (a) by reason of the
pregnancy of the Employee, (b) by reason of the birth of a child of the
Employee, (c) by reason of the placement of a child with the Employee in connection
with the adoption of the child by the Employee, or (d) for purposes of caring
for such child for a period immediately following such birth or placement for
adoption.


 


1.35         “Nonforfeitable Interest” means a
Participant’s nonforfeitable interest in amounts credited to his Account
determined in accordance with Article VIII.


 


1.36         “Non-Highly Compensated Employee”
means an Employee who is not a Highly Compensated Employee.


 


1.37         “Participant” means an Employee who
is eligible to participate in the Plan under the provisions of Article II.


 


1.38         “Period of Service” means a period
of employment with an Affiliated Employer which commences on the day on which
an Employee performs his initial Hour of Service or performs his initial Hour
of Service after he Severs Service, whichever is applicable, and ends on the
date the Employee subsequently Severs Service.


 


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1.39         “Period of Severance” means the
period of time commencing on the Employee’s Severance From Service Date and
ending on the date the Employee subsequently performs an Hour of Service.


 


1.40         “Plan” means the Quanex Corporation
401(k) Savings Plan, as amended from time to time.


 


1.41         “Plan Year” means the calendar year.


 


1.42         “QJSA”
means a qualified joint and survivor annuity which is purchased with the
Participant’s or former Participant’s Nonforfeitable Interest in his Account
balance to provide equal monthly payments for the life of the Participant or
former Participant, and after his death, monthly payments for the life of his
surviving Spouse in a monthly amount equal to one-half the amount of the
monthly payment made while he was alive.


 


1.43         “QPSA”
means a qualified preretirement survivor annuity which is purchased with the
Participant’s or former Participant’s Nonforfeitable Interest in his Account
balance to provide equal monthly payments for the life of his surviving Spouse.


 


1.44         “Qualified Domestic Relations Order”
means a qualified domestic relations order as defined in section 414(p) of the
Code.


 


1.45         “Regulation” means the Department of
Treasury regulation specified, as it may be changed from time to time.


 


1.46         “Required Beginning Date” means:


 


(a)           effective
January 1, 2001, in the case of an individual who is not a Five Percent Owner
in the Plan Year that ends in the calendar year in which he attains age 701⁄2,
the Required Beginning Date is April 1 of the calendar year following the
later of (1) the calendar year in which the individual attains age 701⁄2, or
(2) the calendar year in which the individual incurs a Separation From
Service; and


 


(b)           in
the case of an individual who is a Five Percent Owner in the Plan Year that
ends in the calendar year in which he attains age 701⁄2, the Required Beginning
Date is April 1 of the calendar year following the calendar year in which
he attains age 701⁄2.


 


1.47         “Retirement Age” means age 65.


 


1.48         “Rollover Contribution” means the
amount contributed by a Participant of the Plan which consists of any part of
an Eligible Rollover Distribution from a qualified employee trust described in
section 401(a) of the Code other than an amount that is not includable in
the Participant’s gross income.


 


1.49         “Section 401(a)(9) Beneficiary”
means an individual who is a Participant’s or former Participant’s Beneficiary
on the date of the Participant’s or former Participant’s death and (unless the
Beneficiary dies after the date of the Participant’s or former Participant’s
death and before September 30 of the following calendar year without
disclaiming benefits under the Plan) 


 


I-8

















 


who remains a Beneficiary as of September 30 of the calendar year
following the calendar year of the Participant’s or former Participant’s death.
If the Participant’s or former Participant’s Beneficiary is a trust, an
individual beneficiary of the trust may be a Section 401(a)(9) Beneficiary of
the Participant or former Participant if the requirements of Regulation Section
1.401(a)(9)-4 are satisfied.


 


1.50         “Separation From Service” means an
individual’s termination of employment with an Affiliated Employer without commencing or continuing employment with (a) any
other Affiliated Employer, (b) effective for distributions prior to January 1,
2002, any other entity under circumstances where, under Regulations and
Internal Revenue Service rulings, the individual is not deemed to have incurred
a Separation From Service within the meaning of Section 401(k)(2) of the Code.


 


1.51         “Severance From Service Date”
means the earlier of the date of the Employee’s Separation From Service, or the
first anniversary of the date on which the Employee is absent from service
(with or without pay) for any reason other than his Separation From Service or
a Maternity or Paternity Absence, such as vacation, holiday, sickness, or leave
of absence. The Severance From Service Date of an Employee who is absent beyond
the first anniversary of his first day of absence by reason of a Maternity or
Paternity Absence is the second anniversary of the first day of the absence.


 


1.52         “Severs Service” means the
occurrence of a Participant’s Severance From Service Date.


 


1.53         “Sponsor” means Quanex Corporation,
a Delaware corporation.


 


1.54         “Sponsor Stock” means the common
stock of the Sponsor or such other publicly-traded stock of an Affiliated
Employer as meets the requirements of section 407(d)(5) of ERISA with respect
to the Plan.


 


1.55         “Spouse” means the person to whom
the Participant or former Participant is married under applicable local law. In
addition, to the extent provided in a Qualified Domestic Relations Order, a
surviving former spouse of a Participant or former Participant will be treated
as the Spouse of the Participant or former Participant, and to the same extent
any current spouse of the Participant or former Participant will not be treated
as a Spouse of the Participant or former Participant. For purposes of
Section 5.06, a former Spouse to whom all or a portion of a Participant’s
or former Participant’s Plan benefit is payable under a Qualified Domestic
Order shall, to that extent, be treated as a Spouse or surviving Spouse
regardless of whether the Qualified Domestic Relations Order specifically
provides that the former Spouse is to be treated as the Spouse for purposes of
Sections 401(a)(11) and 417 of the Code.


 


1.56         “Temroc Plan” means the Temroc
Metals, Inc. Nonbargaining Unit Employees 401(k) Plan.


 


1.57         “Trust” means the trust estate
created to fund the Plan.


 


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1.58         “Trustee” means collectively one or
more persons or corporations with trust powers which have been appointed by the
initial Sponsor and have accepted the duties of Trustee and any successor
appointed by the Sponsor.


 


1.59         “Valuation Date” means each business
day of the Plan Year.


 


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ARTICLE II



ELIGIBILITY


 


2.01         Eligibility Requirements. Except as specified below, each
Eligible Employee who is employed by an Employer shall be eligible to
participate in the Plan beginning on the Entry Date that occurs with or next
follows the date on which the Employee completes one year of Active Service. However,
unless the Employee is employed by the Sponsor at its plant in Lincolnshire,
Illinois, an Employee who is included in a unit of Employees covered by a
collective bargaining agreement between the Employees’ representative and the
Employer is not eligible to participate in the Plan if there has been good
faith bargaining between the Employer and the Employees’ representative
pertaining to retirement benefits and the agreement does not require the
Employer to include such Employees in the Plan. In addition, a Leased Employee
shall not be eligible to participate in the Plan unless the Plan’s qualified
status is dependent upon coverage of the Leased Employee. An Employee who is a
nonresident alien (within the meaning of section 7701(b) of the Code) and
receives no earned income (within the meaning of section 911(d)(2) of the
Code) from any Affiliated Employer that constitutes income from sources within
the United States (within the meaning of section 861(a)(3) of the Code) is
not eligible to participate in the Plan. An Employee who is a nonresident alien
(within the meaning of section 7701(b) of the Code) and who does receive earned
income (within the meaning of section 911(d)(2) of the Code) from any
Affiliated Employer that constitutes income from sources within the United
States (within the meaning of section 861(a)(3) of the Code) all of which is
exempt from United States income tax under an applicable tax convention is not
eligible to participate in the Plan. During any period in which an individual
is classified by an Employer as an independent contractor with respect to such
Employer, the individual is not eligible to participate in the Plan (even if he
is subsequently reclassified by the Internal Revenue Service as a common law
employee of the Employer and the Employer acquiesces to the reclassification). During
any period in which an individual is classified by an Employer as an intern or
student with respect to such Employer, the individual is not eligible to
participate in the Plan. Finally, an Employee who is employed outside the
United States is not eligible to participate in the Plan unless the Committee
elects to permit him to participate in the Plan. Notwithstanding any other
provision of the Plan to the contrary, (1) an Employee of Imperial Products,
Inc. who was employed by Imperial Products, Inc. on April 1, 2000, shall be
eligible to participate in the Plan on June 1, 2000, (2) an Employee of
Colonial Craft, Inc, who was employed by Colonial Craft, Inc. on February 2,
2002 shall be eligible to participate in the Plan on February 2, 2002 and (3)
an Employee of the Sponsor employed primarily in connection with its Piper
Impact division on December 1, 2005 shall be eligible to participate in the
Plan on December 1, 2005.


 


2.02         Early Participation for Some Purposes. An Employee who
satisfies the eligibility requirements specified in Section 2.01 other than the
service requirement shall be eligible to participate in the cash or deferred
arrangement portion of the Plan for all purposes relating to Salary Deferral
Contributions and he shall be eligible to make Rollover Contributions to the
Plan, in both cases, on the Entry Date next following (not
coincident with) the date on which he completes an Hour of Service.


 


II-1

















 


2.03         Eligibility Upon Reemployment. If an Employee incurs a
Separation From Service prior to the date he initially begins participating in
the Plan, he shall be eligible to begin participation in the Plan on the later
of the date he would have become a Participant if he did not incur a Separation
From Service or the date on which he performs an Hour of Service after he
incurs a Separation From Service. Subject to Section 2.04, once an Employee
becomes a Participant, his eligibility to participate in the Plan shall
continue until he Severs Service.


 


2.04         Cessation of Participation. An individual who has become a
Participant will cease to be a Participant on the earliest of the date on which
he (a) Severs Service, (b) is transferred from the employ of an Employer to the
employ of an Affiliated Employer that has not adopted the Plan, (c) becomes
included in a unit of employees covered by a collective bargaining agreement
that does not require coverage of those employees under the Plan, (d) becomes a
Leased Employee, or (e) becomes included in another classification of Employees
who, under the terms of the Plan, are not eligible to participate. Under these
circumstances, the Participant’s Account becomes frozen; he cannot contribute
to the Plan or share in the allocation of any Contributions for the frozen
period. However, his Accounts shall continue to share in any Plan income
allocable to his Accounts during the frozen period of time.


 


2.05         Recommencement of Participation. A former Participant will
again become a Participant on the day on which he again becomes included in a
classification of Employees that, under the terms of the Plan, is eligible to
participate.


 


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ARTICLE III



CONTRIBUTIONS


 


3.01         Salary Deferral Contributions. Each Employer shall make a
Salary Deferral Contribution in an amount equal to the amount by which the
Considered Compensation of its Employees who are Participants was reduced on a
pre-tax basis pursuant to salary deferral agreements (excluding amounts of
Considered Compensation deferred pursuant to Section 3.02 that are properly
characterized as Catch-up Salary Deferral Contributions). Any such salary
deferral agreement shall be an agreement in a form satisfactory to the
Committee to prospectively receive Considered Compensation from the Employer in
a reduced amount and to have the Employer contribute an amount equal to the
amount of the reduction to the Trust on account of the Participant. Any such
salary deferral agreement shall be revocable in accordance with its terms,
provided that no revocation shall be retroactive or permit payment to the
Participant of the amount required to be contributed to the Trust. A
Participant’s right to benefits attributable to Salary Deferral Contributions
made to the Plan on his behalf shall be nonforfeitable.


 


The maximum amount a Participant may elect to reduce
his Considered Compensation under his salary deferral agreement and have
contributed to the Plan on a pre-tax basis shall be determined by the
Committee, in its sole discretion from time to time. The election to have
Salary Deferral Contributions made, the ability to change the rate of Salary
Deferral Contributions, the right to suspend Salary Deferral Contributions, and
the manner of commencing new Salary Deferral Contributions shall be permitted
under any uniform method determined by the Committee from time to time.


 


3.02         Catch-up Salary Deferral Contributions. The Employer shall
make a Catch-up Salary Deferral Contribution in an amount equal to the amounts
by which its Catch-up Eligible Participants’ Considered Compensation was
reduced as a result of salary deferral agreements authorizing Catch-up Salary
Deferral Contributions (to the extent that their deferrals are properly
characterized as Catch-up Salary Deferral Contributions). Any such salary
deferral agreement shall be an agreement in a form satisfactory to the
Committee to prospectively receive Considered Compensation from the Employer in
a reduced amount and to have the Employer contribute an amount equal to the
amount of the reduction to the Trust on behalf of the Catch-up Eligible
Participant. Further, any such salary deferral agreement shall be revocable in
accordance with its terms, provided that no revocation shall be retroactive or
permit payment to the Catch-up Eligible Participant of the amount required to
be contributed to the Trust. A Catch-up Eligible Participant’s right to
benefits derived from Catch-up Salary Deferral Contributions made to the Plan
on his behalf shall be nonforfeitable.


 


Catch-up Salary Deferral Contributions on behalf of a Catch-up
Eligible Participant shall be permitted to the extent that the Catch-up Salary
Deferral Contributions do not exceed the lesser of (a) the “applicable dollar
amount” under section 414(v) of the Code for the Plan Year (as adjusted from
time to time by the Secretary of Treasury), or (b) an amount equal to the Catch-up
Eligible Participant’s Annual Compensation for the Plan Year minus the Catch-up
Eligible Participant’s Salary Deferral Contributions for the Plan Year.


 


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A final determination as to whether amounts deferred
under the Plan by a Catch-up Eligible Participant are properly characterized as
Salary Deferral Contributions or Catch-up Salary Deferral Contributions for a
Plan Year shall be made as of the end of the Plan Year. To the extent that
amounts deferred under the Plan on a pre-tax basis at the election of a Catch-up
Eligible Participant exceed the least of (a) the lowest statutory limit on
Salary Deferral Contributions (including limits imposed under sections
401(a)(30) and 415 of the Code), (b) the maximum limitation on Salary Deferral
Contributions, if any, imposed by the Committee pursuant to Section 3.01, or
(c) the highest amount of Salary Deferral Contributions on behalf of the Catch-up
Eligible Participant that may be retained in the Plan under the rules of
section 401(k)(8)(C) of the Code, the amounts deferred shall be characterized
as Catch-up Salary Deferral Contributions. Any amounts deferred under the
Plan  on a pre-tax basis at the election
of a Catch-up Eligible Participant that are not properly characterized as Catch-up
Salary Deferral Contributions pursuant to the rules of the preceding sentence
shall be characterized as Salary Deferral Contributions for all purposes under
the Plan.


 


3.03         Matching Contributions. Except with respect to Employees who
are included in a unit of employees covered by a collective bargaining
agreement between the Employers’ representative and the Sponsor and are
employed at the Sponsor’s plant in Lincolnshire, Illinois, each Employer will
make a Matching Contribution on behalf of each of its Employees who is a
Participant in an amount equal to 50 percent of the first five percent of
such Participant’s Considered Compensation for periods after March 31, 2001
contributed to the Plan pursuant to such Participant’s Salary Deferral
Contributions and Catch-up Salary Deferral Contributions.


 


3.04         Supplemental Contributions for Hourly Employees Other Than Employees of
Nichols Aluminum-Alabama, Inc., Temroc Metals, Inc., Imperial Products, Inc.
and Colonial Craft, Inc. Each Employer other than Nichols
Aluminum-Alabama, Inc., Temroc Metals, Inc., Imperial Products, Inc. and
Colonial Craft, Inc. may contribute for an Allocation Period a Supplemental Contribution
to be allocated among Employees who receive hourly remuneration and are
eligible to participate in the Plan in such amount, if any, as shall be
determined by the Employer. The rate of the Supplemental Contribution need not
be uniform among all divisions of the Employer. Unless the Employer determines
otherwise by a resolution of its board of directors, the Employer shall not
make a Supplemental Contribution to the Plan for an Allocation Period on behalf
of its Employees who are compensated on an hourly basis and are eligible to
participate in the Plan unless during the fiscal year of the Sponsor
immediately preceding the Allocation Period the Sponsor had positive Earnings
Before Interest and Taxes.


 


3.05         Supplemental Contributions for Salaried Employees Other Than Employees
of Nichols Aluminum-Alabama, Inc., Temroc Metals, Inc., Imperial Products, Inc.
and Colonial Craft, Inc. If during the fiscal year of the Sponsor
immediately preceding an Allocation Period the Sponsor had positive Earnings
Before Interest and Taxes, each Employer other than Nichols Aluminum-Alabama,
Inc., Temroc Metals, Inc., Imperial Products, Inc. and Colonial Craft, Inc.
shall contribute for such Allocation Period on behalf of its Employees who are
compensated on a salaried basis and are eligible to participate in the Plan an
amount equal to 61⁄2 percent of such Participants or former Participants’
Considered Compensation for the Allocation Period.


 


III-2

















 


3.06         Supplemental Contributions for Employees of Nichols Aluminum-Alabama,
Inc., Temroc Metals, Inc., Imperial Products, Inc. and Colonial Craft, Inc. Notwithstanding
Sections 3.04 or 3.05, Nichols Aluminum-Alabama, Inc., Temroc Metals, Inc.,
Imperial Products, Inc. and Colonial Craft, Inc. may contribute for an
Allocation Period a Supplemental Contribution to be allocated among its
Employees who are Participants in such amount, if any, as shall be determined
by it.


 


3.07         Rollover Contributions and Plan-to-Plan Transfers. The
Committee may permit Rollover Contributions by Participants and/or direct
transfers to or from another qualified plan on behalf of Participants from time
to time. If Rollover Contributions and/or direct transfers to or from another
qualified plan are permitted, the opportunity to make those contributions
and/or direct transfers must be made available to Participants on a
nondiscriminatory basis. For this purpose only, all Employees who are included
in a classification of Employees who are eligible to participate in the Plan
shall be considered to be Participants of the Plan even though they may not
have met the Active Service requirements for eligibility. However, they shall
not be entitled to elect to have Salary Deferral Contributions made or to share
in Employer Contributions or forfeitures unless and until they have met the
requirements for eligibility, contributions and allocations. A Rollover
Contribution shall not be accepted unless it is directly rolled over to the
Plan in a rollover described in section 401(a)(31) of the Code. A
Participant shall not be permitted to make a Rollover Contribution if the property
he intends to contribute is for any reason unacceptable to the Trustee. A
Participant’s right to benefits attributable to his Rollover Contributions made
to the Plan shall be nonforfeitable.


 


3.08         QNECS - Extraordinary Employer Contributions. Any Employer
may make a QNEC in such amount, if any, as shall be determined by it. A
Participant’s right to benefits attributable to QNECs made to the Plan on his
behalf shall be nonforfeitable. In no event will QNECs be distributed before
Salary Deferral Contributions may be distributed from the Plan.


 


3.09         Restoration Contributions. The Employer shall, for each Plan
Year, make a restoration contribution in an amount equal to the sum of (a) such
amount, if any, as shall be necessary to fully restore all Matching
Contribution Accounts and Supplemental Contribution Accounts required to be
restored pursuant to the provisions of Section 9.02 after the application of
all forfeitures available for such restoration; plus (b) an amount equal in
value to the value of forfeited benefits required to be restored under Section
9.03, after the application of all forfeitures available for such restoration.


 


3.10         Restorative Payments. If due to an oversight or inadvertent
error an Employer fails to make a Contribution to the Plan on behalf of an
Employee, as soon as administratively practicable following the Employee’s
discovery of the error, the Employer shall make a restorative payment to the
Plan on behalf of the Employee in an amount equal to the amount of required
Contributions the Employer should have made to the Plan on behalf of the
Employee plus interest thereon (both determined in a manner that is consistent
with then current guidance from the Department of Treasury concerning such
restorative payments) after the application of forfeitures available for such
restoration.


 


III-3

















 


3.11         Nondeductible Contributions Not Required. Notwithstanding
any other provision of the Plan, no Employer shall be required to make any
contribution that would be a “nondeductible contribution” within the meaning of
section 4972 of the Code.


 


3.12         Form of Payment of Contributions. Contributions may be paid
to the Trustee either in cash or in qualifying employer securities (as such
term is defined in section 407(d) of ERISA) or any combination thereof,
provided that payment may not be made in any form constituting a prohibited
transaction under section 4975 of the Code or section 406 of ERISA.


 


3.13         Deadline for Payment of Contributions. Salary Deferral
Contributions and Catch-up Salary Deferral Contributions shall be paid to the
Trustee in installments. The installment for each payroll period shall be paid
as soon as administratively feasible. The Matching Contributions, Supplemental
Contributions and QNECs for a Plan Year shall be paid to the Trustee in one or
more installments, as the Employer may from time to time determine; provided,
however, that such contributions may not be paid later than the time prescribed
by law (including extensions thereof) for filing the Employer’s income tax
return for its taxable year ending with or within such Plan Year.


 


3.14         Return of Contributions for Mistake, Disqualification or Disallowance
of Deduction. Subject to the limitations of section 415 of the
Code, the assets of the Trust shall not revert to any Employer or be used for
any purpose other than the exclusive benefit of Participants, former
Participants and their Beneficiaries and the reasonable expenses of
administering the Plan except:


 


(a)           any
Employer Contribution made because of a mistake of fact may be repaid to the
Employer within one year after the payment of the Contribution; and


 


(b)           all
Employer Contributions are conditioned upon their deductibility under
section 404 of the Code; therefore, to the extent the deduction is
disallowed, the Contributions may be repaid to the Employer within one year
after the disallowance.


 


The Employer has the exclusive right to determine if a
Contribution or any part of it is to be repaid or is to remain as a part of the
Trust except that the amount to be repaid is limited, if the Contribution is
made by mistake of fact or if the deduction for the Contribution is disallowed,
to the excess of the amount contributed over the amount that would have been
contributed had there been no mistake or over the amount disallowed. Earnings
which are attributable to any excess contribution cannot be repaid. Losses
attributable to an excess contribution must reduce the amount that may be
repaid. All repayments of Contributions made due to a mistake of fact or with
respect to which a deduction is disallowed are limited so that the balance in a
Participant’s or former Participant’s Account cannot be reduced to less than
the balance that would have been in the Participant’s or former Participant’s
Account had the mistaken amount or the amount disallowed never been
contributed.


 


3.15         Special Rule for Employees of the Piper Impact Divisions. Employees
eligible to participate in the Plan because they are employed by the Sponsor in
connection with its Piper Impact division are not entitled to Supplemental
Contributions under Sections 3.04, 3.05 or 3.06.


 


III-4

















 


ARTICLE IV



ALLOCATION AND VALUATION OF ACCOUNTS


 


4.01         Information Statements from Employer. Upon request by the
Committee, the Employer shall provide the Committee with a schedule setting
forth the amount of its Salary Deferral Contribution, Supplemental
Contribution, QNEC, and restoration contribution; the names of its
Participants, the number of years of Active Service of each of its
Participants, the amount of Considered Compensation and Annual Compensation
paid to each Participant, and the amount of Considered Compensation and Annual
Compensation paid to all its Participants. Such schedules shall be conclusive
evidence of such facts.


 


4.02         Allocation of Salary Deferral Contributions. The Committee
or its designee shall allocate the Salary Deferral Contribution among the
Participants by allocating to each 
Participant the amount by which his Considered Compensation was reduced
pursuant to a salary deferral agreement (as described in Section 3.01) and
shall credit each such Participant’s share to his Salary Deferral Contribution
Account.


 


4.03         Allocation of Catch-up Salary Deferral Contribution. The
Committee shall allocate the Catch-up Salary Deferral Contribution among the
Participants by allocating to each 
Participant the amount by which his Considered Compensation was reduced
pursuant to a salary deferral agreement under Section 3.02 and shall
credit each such Participant’s share to his Catch-up Salary Deferral
Contribution Account.


 


4.04         Allocation of Matching Contributions. The Committee or its
designee shall separately allocate the Matching Contribution made by an
Employer among the Employer’s Participants in the proportion which the matched
Salary Deferral Contributions and matched Catch-up Salary Deferral
Contributions of each such Participant bear to the total matched Salary
Deferral Contributions and matched Catch-up Salary Deferral Contributions of
all such Participants. Each Participant’s proportionate share shall be credited
to his Matching Contribution Account.


 


4.05         Allocation of Supplemental Contributions. For each
Allocation Period, the Committee shall allocate the Supplemental Contribution,
if any, made by an Employer on behalf of Participants or former Participants
who receive hourly remuneration from the Employer (or in connection with a
division specified by the Employer) for the Allocation Period among the
Participants or former Participants who (1) are eligible to participate in the
Plan, (2) receive hourly remuneration, (3) are employed by the Employer (or in
connection with a division specified by the Employer) with respect to which the
Supplemental Contribution is made, (4) are entitled to a Supplemental
Contribution under Section 3.4 and (5) are employed by the Employer (or in
connection with a division specified by the Employer) during the Allocation
Period based upon each such Participant’s or former Participant’s Considered
Compensation paid by the Employer as compared to the Considered Compensation
for all such Participants or former Participants employed by the Employer and
eligible for the allocation applicable to that division of the Employer under
Section 3.04.


 


IV-1

















 


For each Allocation Period, the Committee shall
allocate the Supplemental Contribution, if any, made by Employers on behalf of
Participants or former Participants who receive salaried remuneration in accordance
with Section 3.05 for the Allocation Period among the Participants or former
Participants who (1) are eligible to participate in the Plan, (2) receive
salaried remuneration, (3) are entitled to a Supplemental Contribution under
Section 3.05 and (4) are employed by an Employer during the Allocation Period
based upon each such Participant’s or former Participant’s Considered
Compensation paid by the Employer as compared to the Considered Compensation
for all such Participants or former Participants employed by the Employer and
eligible for the allocation under Section 3.05.


 


For each Allocation Period, the Committee shall
allocate the Supplemental Contribution, if any, made by the Employers specified
in Section 3.06 on behalf of Participants or former Participants of those
Employers for the Allocation Period among the Participants or former
Participants who (1) are eligible to participate in the Plan, (2) are employed
at the Employer with respect to which the Supplemental Contribution is made, (3)
are entitled to a Supplemental Contribution under Section 3.06 and (5) are
employed by the Employer during the Allocation Period based upon each such
Participant’s or former Participant’s Considered Compensation paid by the
Employer as compared to the Considered Compensation for all such Participants
or former Participants employed by the Employer and eligible for the allocation
applicable to that Employer under Section 3.06.


 


This Section 4.05 shall not apply to Participants or
former Participants who are not entitled to Supplemental Contributions under
Section 3.15 or any other provision of the Plan.


 


4.06         Allocation of QNECs. The 
Committee or its designee shall separately allocate the QNEC among the
Non-Highly Compensated Employees who are Participants based upon each such
Participant’s Considered Compensation as compared to the Considered
Compensation of all such Participants.


 


4.07         Allocation of Forfeitures. At the time a forfeiture occurs
pursuant to Article VIII, Section A.3.2 of Appendix A or Section A.3.3 of
Appendix A, the amount forfeited will first be used to reinstate any Account
required to be reinstated under Article IX, and any remaining amount will
be applied to reduce the Employer’s obligation to make future Matching
Contributions or Supplemental Contributions. However, in no event will amounts
forfeited pursuant to Section A.3.2 or Section A.3.3 of Appendix A be allocated
to the Accounts of Participants whose Matching Contributions are forfeited
pursuant to Section A.3.2 or Section A.3.3 of Appendix A.


 


4.08         Valuation of Accounts. A Participant’s or former Participant’s
Accounts shall be valued by the Trustee at fair market value on each Valuation
Date. The earnings and losses attributable to any asset in the Trust will be
allocated solely to the Account of the Participant or former Participant on
whose behalf the investment in the asset was made. In determining the fair
market value of the Participant’s or former Participant’s Accounts, the Trustee
shall utilize such sources of information as it may deem reliable including,
but not limited to, stock market quotations, statistical evaluation services,
newspapers of general circulation, financial publications, advice from
investment counselors or brokerage firms, or any combination of sources which in
the opinion of the Trustee will provide the price such assets were last traded
at


 


IV-2

















 


on a registered stock exchange; provided, however, that with respect to
regulated investment company shares, the Trustee shall rely exclusively on
information provided to it by the investment adviser to such funds.


 


4.09         No Rights Unless Otherwise Prescribed. No allocations,
adjustments, credits, or transfers shall ever vest in any Participant or former
Participant any right, title, or interest in the Trust except at the times and
upon the terms and conditions set forth in the Plan.


 


IV-3

















 


ARTICLE V



BENEFITS


 


5.01         Retirement Benefit. Upon his Separation From Service, a
Participant or former Participant is entitled to receive his Nonforfeitable
Interest in his Account balances.


 


5.02         Death Benefit. If a Participant or former Participant dies,
the death benefit payable to his Beneficiary shall be the Participant’s
Nonforfeitable Interest in 100 percent of the remaining amount of his Account
balances.


 


5.03         Form of Distribution. Any distribution under the Plan shall
be made in the form of a cash lump sum. However, a Participant who accrued any
benefits under the Decatur Plan has the right to elect to receive payments in
the form of property instead of cash, but only with respect to his Decatur Plan
account balances that were transferred to the Plan.


 


5.04         Distribution Methods. Subject to Sections 5.05 and 5.11, the
distribution methods available under the Plan are (a) a lump sum payment and
(b) periodic installment payments.


 


If a Participant or former Participant elects periodic
installments payments, his Account balances shall be paid in substantially
equal monthly, quarterly, semi-annual or annual periodic installments (as
elected by him) for a specified number of years which may not exceed his life
expectancy or the joint and last survivor life expectancy of him and his
Beneficiary. Life expectancies will be determined, under Regulations issued
under section 79 of the Code, as of the time payments commence. If installments
are elected, the Committee may direct that the Participant’s or former Participant’s
interest in the Plan be segregated and invested separately. Upon the death of a
Participant or former Participant prior to the complete distribution of his
Account balances, his Beneficiary may elect to receive the Beneficiary’s
interest in the Account in (a) an immediate lump sum cash payment or (b)
installment payments for any period not in excess of the period (if any)
selected by the Participant or former Participant.


 


Notwithstanding the foregoing, until July 1, 2001, the
only distribution method available for a Participant who was a participant in
the Temroc Plan is a lump sum payment.


 


Notwithstanding the foregoing, if a Participant is
only eligible to participate in the Plan because he is employed by the Sponsor
in connection with its Piper Impact division, the only distribution method
available for such a Participant is a lump sum payment.


 


5.05         Immediate Payment of Small Amount Upon Separation From Service.
Effective as of March 28, 2005, each Participant or former Participant whose Nonforfeitable
Interest in his Account balance at the time of a distribution to him on account
of his Separation From Service is, in the aggregate, less than or equal to
$1,000.00, shall be paid in the form of an immediate single sum cash payment
and/or as a Direct Rollover, as elected by him under section 5.06. However, if
a Distributee who is subject to this Section 5.04 does not furnish instructions
in accordance with Plan procedures to directly roll over his Plan benefit
within 45 days after he has been given direct rollover forms, he will be deemed
to have elected to receive an immediate lump sum cash distribution of his
entire Plan benefit. If a Participant’s or former Participant’s


 


V-1

















 


Nonforfeitable Interest
in his Account balance payable upon his Separation From Service is zero
(because he has no Nonforfeitable Interest in his Account balance), he will be
deemed to have elected and to have received an immediate distribution of his
entire Nonforfeitable Interest in his Account balance.


 


5.06         Direct Rollover Option. To the extent required under
Regulations, a Distributee has the right to direct that any portion of his
Eligible Rollover Distribution will be directly paid to an Eligible Retirement
Plan specified by him that will accept the Eligible Rollover Distribution.


 


5.07         Consent to Distribution. Notwithstanding any other provision
of the Plan, no benefit shall be distributed or commence to be distributed to a
Participant or former Participant prior to his attainment of the later of
age 62 or Retirement Age without his consent, unless the benefit is
payable immediately under Section 5.05. Any such consent shall be valid only if
given not more than 90 days prior to the Participant’s or former Participant’s
Annuity Starting Date and after his receipt of the notice regarding benefits
described in Section 5.10(a).


 


5.08         QJSA Requirements. On and after the date on which the
Sponsor elects to treat the Plan and the Quanex Corporation Salaried Employees’
Pension Plan as one plan for purposes of section 410(b) of the Code, this
Section 5.08 will apply. Except for small benefits payable under Section 5.05,
each Participant or former Participant who (a) is married on his Annuity
Starting Date and (b) does not die before his Annuity Starting Date will be
paid in the form of a QJSA, unless he and his Spouse make a valid election to
waive this form of payment. Except for small benefits payable under Section
5.05, each other Participant who does not die before the Annuity Starting Date,
will be paid in the form of a life only annuity unless he makes a valid
election to waive this form of payment. A Participant’s waiver of the QJSA form
of payment will not be effective unless the waiver (1) designates a specific
nonspouse Beneficiary who will receive Plan benefits and (2) specifies the
particular optional form of benefits selected instead of the QJSA. Also, a
Participant’s or former Participant’s waiver of the QJSA will not be effective
unless his Spouse signs either a specific or a general consent to his waiver. A
specific spousal consent must (1) be in writing, (2) consent to the waiver of
the QJSA, (3) consent to the specific nonspouse Beneficiary designated by the
Participant or former Participant to receive Plan benefits, (4) consent to the
particular optional form of benefit selected by the Participant or former
Participant, (5) acknowledge the effect of the Spouse’s consent to the
Participant’s or former Participant’s waiver of the QJSA, and (6) be witnessed
by a notary public or a Plan representative. A general spousal consent must (1)
be in writing, (2) consent to the Participant’s or former Participant’s waiver
of the QJSA, (3) specify that the Participant or former Participant can change
the Beneficiary designated by him to receive Plan benefits, without any
requirement of further consent by the Spouse, (4) specify that the Participant
or former Participant can change the optional form of benefit elected by the
Participant or former Participant, without any requirement of further consent
by the Spouse, (5) acknowledge that the Spouse has the right to limit consent
to a specific Beneficiary and a specific optional form of benefit, and that the
Spouse voluntarily elects to relinquish both of those rights, (6) acknowledge
the effect of the Spouse’s consent to the Participant’s or former Participant’s
waiver of the QJSA, and (7) be witnessed by a notary public or a Plan
representative. However, a Participant’s or former Participant’s election to
waive the QJSA shall be effective if it is established to the satisfaction of
the Committee that spousal consent to his waiver may not be obtained because
(1) there is no


 


V-2

















 


Spouse, (2) the
Spouse cannot be located, or (3) there exist such other circumstances which
obviate the necessity of obtaining the spousal consent. Any consent by the
Participant’s or former Participant’s Spouse (or establishment that the consent
of the Participant’s or former Participant’s Spouse may not be obtained) shall
be effective only with respect to such Spouse.


 


5.09         QPSA Requirements.


 


(a)           General Rules. On and after the date on which the Sponsor
elects to treat the Plan and the Quanex Corporation Salaried Employees’ Pension
Plan as one plan for purposes of section 410(b) of the Code, this Section 5.09
will apply. Except for small benefits payable under Section 5.05, the death
benefit of a Participant or former Participant who (1) is married on the date
of his death and (2) dies before his Annuity Starting Date will be paid in the
form of a QPSA, unless he and his Spouse make a valid election to waive this
form of payment. Subject to Section 5.12, the surviving Spouse of such a
Participant or former Participant may elect to have payments commence to her as
soon as administratively practicable, or at any later date selected by her.


 


(b)           Waivers. Any valid election to waive the QPSA must be made
in writing by the Participant or former Participant and consented to by the
Participant’s or former Participant’s Spouse. Any spousal consent to the waiver
must:  (1) be witnessed by a member of
the Committee, the Trustee, or a notary public, and (2) consent to the specific
nonspouse Beneficiary or Beneficiaries selected by the Participant or former
Participant (or permit future changes in designations by the Participant or
former Participant provided that general consent requirements similar to those
described in Section 5.08 are satisfied). However, if the Participant or former
Participant establishes to the satisfaction of the Committee or the Trustee
that the spouse’s written consent cannot be obtained because there is no Spouse
or the Spouse cannot be located, a waiver signed only by the Participant or
former Participant will be considered a valid election. The consent to a waiver
is valid only with respect to the Spouse who signs it; therefore, if the
Participant or former Participant remarries after executing a waiver, the
Participant’s or former Participant’s new Spouse must execute a new consent.
The Participant or former Participant may revoke a prior waiver without his
Spouse’s consent at any time before benefit payments begin. Except as specified
below, an election to waive the QPSA will be valid only if it is made after the
first day of the Plan Year in which the Participant or former Participant
attains age 35 and before the Participant’s or former Participant’s death.


 


(c)           Pre-Age 35 Waivers. A Participant or former Participant may
waive the QPSA, with spousal consent, before the first day of the Plan Year in
which he attains age 35 if the Sponsor provides him a written explanation of
the QPSA (that meets the requirements of Section 5.10(e)) within the period
beginning one year before he Severs Service and ending one year after he Severs
Service. However, any such waiver will expire and become invalid beginning on
the first day of the Plan Year in which the Participant or former Participant
attains age 35.


 


V-3

















 


5.10         Information Provided to Participants.
Information regarding the form of benefits available under the Plan shall be
provided to Participants or former Participants in accordance with the
following provisions:


 


(a)           QJSA Notice and Notice of Right to Defer Receipt of Distribution. Except as otherwise provided in paragraph (c), the Sponsor
shall provide a Participant or former Participant a written notice explaining
the terms and conditions of each retirement option and the Participant’s or
former Participant’s right to defer receipt of the Participant’s or former
Participant’s distribution. On and after the date on which an Employer elects
to treat the Plan and the Quanex Corporation Salaried Employees’ Pension Plan
as one plan for purposes of section 410(b) of the Code, the Sponsor shall also
provide a Participant or former Participant a written notice explaining (1) the
QJSA requirements under Section 5.08 (including: (i) the Participant or former
Participant’s right to make, and the effect of, a waiver of the QJSA, (ii) the
right of the Participant or former Participant’s Spouse to consent or not to
consent to such a waiver and (iii) the right to make, and the effect of, a
revocation of a previous waiver or election) and (2) the eligibility conditions
and other material features of the optional forms of benefit. The notice shall
also either contain (1) a description, that is specific to the Participant or
former Participant, of the financial effect of the Participant or former
Participant selecting an optional form of benefit or (2) a general description of
the financial effect of the election that complies with the requirements of
Department of Treasury Regulations issued under section 417 of the Code. If a
general description of the financial effect of the election is included in the
notice, the notice must also be accompanied by a statement that includes an
offer to provide, upon the Participant or former Participant’s request, a
statement of financial effect and a description of how the Participant or
former Participant may obtain this additional information. The notice shall
also either contain (1) a description, that is specific to the Participant or
former Participant, of the relative values of the optional forms of benefit
compared to the value of the QJSA or (2) a general description of the relative
values that complies with the requirements of Department of Treasury
Regulations issued under section 417 of the Code. If a general description of
the relative values is included in the notice, the notice must also be
accompanied by a statement that includes an offer to provide, upon the
Participant or former Participant’s request, a comparison of relative values
that is specific to the Participant or former Participant for any presently
available optional form of benefit and a description of how the Participant or
former Participant may obtain this additional information. The notice
requirements set forth in this paragraph (a) are collectively referred to as
the “QJSA Notice”.


 


(b)           Time for Giving Notice. Except as specified below in this
paragraph (b) or as permitted under paragraph (d), the QJSA Notice shall be
provided to a Participant or former Participant no less than thirty days and no
more than ninety days before his Annuity Starting Date. If the Participant or
former Participant, after having received the QJSA Notice, affirmatively elects
a form of distribution with the consent of the Participant or former
Participant’s Spouse (if necessary), the thirty-day timing requirement of this
paragraph (b) will not apply if all of the following conditions are
satisfied:  (1) the Sponsor informs the
Participant or former Participant in writing that the Participant or former
Participant has a right to at least thirty days to consider whether to waive
the QJSA and consent to a form of distribution other than a QJSA, (2) the


 


V-4

















 


Participant or former
Participant is permitted to revoke an affirmative distribution election at
least until the Annuity Starting Date, or, if later, at any time prior to the
expiration of the seven-day period that begins the day after the QJSA Notice is
provided to the Participant or former Participant, (3) the Annuity Starting
Date is after the date the QJSA Notice is provided to the Participant or former
Participant, and (4) a distribution of the Participant or former Participant’s
benefit in accordance with the Participant or former Participant’s affirmative
election does not commence before the expiration of the seven-day period that
begins the day after the QJSA Notice is provided to the Participant or former
Participant. The ninety-day timing requirement of this paragraph (b) will not
be failed merely because, due solely to administrative delay, a distribution
commences more than ninety days after the QJSA Notice is provided to the Participant
or former Participant.


 


(c)           Exception for Participants with Small Benefit Amounts.
Notwithstanding the preceding provisions of this Section, no QJSA Notice shall
be provided to the Participant or former Participant if his benefit is payable
in a lump sum under Section 5.05.


 


(d)           QPSA Notice. This paragraph applies on and after the date on
which an Employer elects to treat the Plan and the Quanex Corporation Salaried
Employees’ Pension Plan as one plan for purposes of section 410(b) of the Code.
The Sponsor will provide each Participant or former Participant who is subject
to Section 5.09 a written explanation of: 
(a) the terms and conditions of the QPSA, (b) the Participant’s or
former Participant’s right to waive the QPSA and the effect of the waiver, (c)
the rights of the Participant’s or former Participant’s Spouse, and (d) the
right to revoke a prior waiver and the effect of the revocation. This written
explanation will be provided within the latest of the period (a) beginning on
the first day of the Plan Year in which the Participant or former Participant
attains age 32 and ending with the close of the Plan Year preceding the Plan
Year in which the Participant or former Participant attains age 35, (b) ending
one year after the individual becomes a Participant, or (c) ending one year
after the QPSA rules first become effective with respect to the Participant or
former Participant.


 


5.11         Optional Forms of Distribution. On and after the date on
which the Sponsor elects to treat the Plan and the Quanex Corporation Salaried
Employees’ Pension Plan as one plan for purposes of section 410(b) of the
Code, all of the optional forms of payment available under the Quanex
Corporation Salaried Employees’ Pension Plan (as discussed more fully in
Appendix E hereto) will be available under the Plan.


 


5.12         Required Distributions. Notwithstanding
any other provision of the Plan, all benefits payable under the Plan shall be
distributed, or commence to be distributed, in compliance with the following
provisions:


 


(a)           Required Distributions for Certain Persons Who are 701⁄2 or Older.
Unless a Participant’s or former Participant’s entire nonforfeitable interest
in his Plan benefit is distributed to him in a single sum no later than his
Required Beginning Date or in the form of an annuity purchased from an
insurance company, the Participant’s or former Participant’s nonforfeitable
interest in his Plan benefit must begin to be


 


V-5

















 


distributed, not later
than his Required Beginning Date, over the life of the Participant or former
Participant, or the joint lives of the Participant or former Participant and
his Section 401(a)(9) Beneficiary, or over a period not extending beyond the
life expectancy of the Participant or former Participant or the joint and last
survivor expectancy of the Participant or former Participant and his Section
401(a)(9) Beneficiary. The distribution required to be made on or before the
Participant’s or former Participant’s Required Beginning Date shall be the
distribution required for his first Distribution Calendar Year. The minimum
required distribution for other Distribution Calendar Years, including the
required minimum distribution for the Distribution Calendar Year in which the
Participant’s or former Participant’s Required Beginning Date occurs must be
made on or before December 31 of that Distribution Calendar Year. In the case
of a benefit payable in a form other than a single sum or an annuity purchased
from an insurance company, the amount that must be distributed for a
Distribution Calendar Year is an amount equal to the amount specified in
Paragraph (b) of this Section 5.12.


 


(b)           Required Minimum Distributions. If a Participant’s or former
Participant’s Required Beginning Date is before the date on which he incurs a
Separation From Service, the Participant or former Participant (if he is then
alive) must be paid either the entire amount credited to his Account or annual
distributions from the Plan in the amounts required under section 401(a)(9) of
the Code and Regulations thereunder commencing no later than his Required
Beginning Date until his entire interest under the Plan has been distributed
under this Article V. The distribution required to be made on or before the
Participant’s or former Participant’s Required Beginning Date shall be the
distribution required for his first Distribution Calendar Year. The minimum
required distribution for other Distribution Calendar Years, including the
required minimum distribution for the Distribution Calendar Year in which the
Participant’s or former Participant’s Required Beginning Date occurs must be
made on or before December 31 of that Distribution Calendar Year. The amount
that must be distributed for a Distribution Calendar Year is an amount equal to
(1) the Participant’s or former Participant’s Account balance as of the last
Valuation Date in the calendar year immediately preceding the Distribution
Calendar Year, increased by any contributions or forfeitures allocated and made
to the Account during such immediately preceding calendar year after the
Valuation Date, and decreased by distributions made during such immediately
preceding calendar year after the Valuation Date, divided by (2) the
Participant’s or former Participant’s Applicable Distribution Period.


 


(c)           Distribution Deadline for Death Benefit When Participant or Former
Participant Dies Before His Distributions Begin. If a Participant or
former Participant dies before the date distribution of his nonforfeitable
interest in his Plan benefit begins, his entire nonforfeitable interest in his
Plan benefit will be distributed, or begin to be distributed, to his Section
401(a)(9) Beneficiary no later than as follows:


 


(1)           If
the Participant’s or former Participant’s surviving Spouse is the Participant’s
or former Participant’s sole Section 401(a)(9) Beneficiary, then distributions
to the surviving Spouse will begin by December 31 of the calendar year
immediately following the calendar year in which the Participant or former


 


V-6

















 


Participant died, or by
December 31 of the calendar year in which the Participant or former
Participant would have attained age 70 1/2 , if later.


 


(2)           If
the Participant’s or former Participant’s surviving Spouse is not the Participant’s
or former Participant’s sole Section 401(a)(9) Beneficiary and the payment of
Plan death benefits to the Section 401(a)(9) Beneficiary will not be in the
form of a single sum or a commercial annuity, then distributions to the Section
401(a)(9) Beneficiary will begin by December 31 of the calendar year
immediately following the calendar year in which the Participant or former
Participant died.


 


(3)           If
the Participant’s or former Participant’s surviving Spouse is the Participant’s
or former Participant’s sole Section 401(a)(9) 
Beneficiary, and the payment of a Plan death benefit to the Section
401(a)(9) Beneficiary will be in the form of a single sum, then the
Participant’s or former Participant’s entire nonforfeitable interest in his
Plan benefit will be distributed by December 31 of the calendar year containing
the fifth anniversary of the Participant’s or former Participant’s death.


 


(4)           If
there is no Section 401(a)(9) Beneficiary as of September 30 of the
calendar year following the calendar year of the Participant’s or former
Participant’s death, then the Participant’s or former Participant’s entire
nonforfeitable interest in his Plan benefit will be distributed by
December 31 of the calendar year containing the fifth anniversary of the
Participant’s or former Participant’s death.


 


(5)           If
the Participant’s or former Participant’s surviving Spouse is the Participant’s
or former Participant’s sole Section 401(a)(9) Beneficiary and the surviving
Spouse dies after the Participant or former Participant but before
distributions to the surviving Spouse begin, this Section 5.12(e), other than
Section 5.12(e)(1), will apply as if the surviving Spouse were the Participant.


 


Unless the Participant’s or former Participant’s
interest is distributed in the form of an annuity or in a single sum on or
before the Required Beginning Date, as of the first Distribution Calendar Year
distributions will be made in accordance with Paragraph (b) of this Section
5.12.


 


(d)           Distribution of Death Benefit When Participant or Former Participant
Dies On or After His Required Beginning Date. If a Participant or
former Participant dies on or after his Required Beginning Date, his Plan
benefit must be distributed to his Section 401(a)(9) Beneficiary at least as
rapidly as the method of payment of minimum required distributions being used
as of the date of his death.


 


(e)           Limitations on Death Benefits. Benefits payable under the
Plan shall not be provided in any form that would cause a Participant’s or
former Participant’s death benefit to be more than incidental. Any distribution
required to satisfy the incidental


 


V-7

















 


benefit requirement shall
be considered a required distribution for purposes of section 401(a)(9) of the
Code.


 


(f)            Requirements in the Case of a Commercial Annuity. If a
Participant’s or former Participant’s nonforfeitable interest in his Plan
benefit is distributed in the form of an annuity purchased from an insurance
company, distributions under the annuity contract will be made in accordance
with the requirements of section 401(a)(9) of the Code and Department of
Treasury Regulations.


 


(g)           Compliance with Section 401(a)(9). All distributions under
the Plan will be made in accordance with the requirements of section 401(a)(9)
of the Code and all Regulations promulgated thereunder, including, effective
January 1, 2003, the Final Section 401(a)(9) Regulations, including
sections 1.401(a)(9)-1 through 1.401(a)(9)-9 of the Final Section 401(a)(9)
Regulations. The provisions of the Plan reflecting section 401(a)(9) of the
Code override any distribution options in the Plan inconsistent with section
401(a)(9) of the Code.


 


(h)           Compliance with Section 401(a)(14).  Unless the
Participant or former Participant otherwise elects, the payment of benefits
under the Plan to the Participant or former Participant will begin not later
than the 60th day after the close of the Plan Year in which occurs the latest
of (a) the date on which the Participant or former Participant attains the
later of age 62 or Retirement Age, (b) the tenth anniversary of the year in
which the Participant or former Participant commenced participation in the
Plan, or (c) the Participant’s or former Participant’s Separation From Service.


 


5.13         Designation of Beneficiary. Each Participant and former
Participant has the right to designate and to revoke the designation of his
Beneficiary or Beneficiaries. Each designation or revocation must be evidenced
by a written document in the form required by the Committee, signed by the
Participant or former Participant and filed with the Committee. If no
designation is on file at the time of a Participant’s or former Participant’s
death or if the Committee determines that the designation is ineffective, the
designated Beneficiary shall be the Participant’s or former Participant’s
Spouse, if living, or if not, the executor, administrator or other personal
representative of the Participant’s or former Participant’s estate. If a
Participant or former Participant is considered to be married under local law,
his designation of any Beneficiary, other than his Spouse, shall not be valid
unless the Spouse acknowledges in writing that the Spouse understands the
effect of the Participant’s or former Participant’s beneficiary designation and
consents to it. The consent must be to a specific Beneficiary. The written
acknowledgement and consent must be filed with the Committee, signed by the
Spouse and at least two witnesses, one of whom must be a member of the
Committee or a notary public. However, if the Spouse cannot be located or there
exist other circumstances as described in sections 401(a)(11) and
417(a)(2) of the Code, the requirement of the Participant’s or former
Participant’s Spouse’s acknowledgement and consent may be waived. If a Beneficiary
other than the Participant’s or former Participant’s Spouse is named, the
designation shall become invalid if the Participant or former Participant is
later determined to be married under local law, the Participant’s or former
Participant’s missing Spouse is located or the circumstances which resulted in
the waiver of the requirement of obtaining the consent of his Spouse no longer
exist.


 


V-8

















 


5.14         Distributions to Minors and Incapacitated Persons. If the Committee
determines that any person to whom a payment is due is a minor or is unable to
care for his affairs because of physical or mental disability, it shall have
the authority to cause the payments to be made to the Spouse, brother, sister
or other person the Committee determines to have incurred, or to be expected to
incur, expenses for that person unless a prior claim is made by a qualified
guardian or other legal representative. The Committee and the Trustee shall not
be responsible to oversee the application of those payments. Payments made
pursuant to this power shall be a complete discharge of all liability under the
Plan and the Trust and the obligations of the Employer, the Trustee, the Trust
and the Committee.


 


5.15         Distributions Pursuant to Qualified Domestic Relations Orders. The
Committee will instruct the Trustee to pay benefits in accordance with the
terms of any order that has been determined, in accordance with Plan
procedures, to be a Qualified Domestic Relations Order. A Qualified Domestic
Relations Order may require the payment of an immediate cash lump sum to an
alternate payee even if the Participant or former Participant is not then
entitled to receive an immediate payment of Plan benefits.


 


5.16         Claims Review Procedures; Claims Appeal Procedures.


 


(a)           Claims Review Procedures. When a benefit is due, the
Claimant should submit a claim to the Committee. Under normal circumstances,
the Committee will make a final decision as to a claim within 90 days after
receipt of the claim. If the Committee notifies the Claimant in writing during
the initial 90-day period, it may extend the period up to 180 days after the
initial receipt of the claim. The written notice must indicate the
circumstances necessitating the extension and the anticipated date for the
final decision. If a claim is denied during the claims period, the Committee
must notify the Claimant in writing, and the written notice must set forth in a
manner calculated to be understood by the Claimant:


 


(1)           the
specific reason or reasons for denial;


 


(2)           specific
reference to the Plan provisions on which the denial is based;


 


(3)           a
description of any additional material or information necessary for the
Claimant to perfect the claim and an explanation of why such material or
information is necessary; and


 


(4)           an
explanation of the Plan claims review procedures and time limits, including a
statement of the Claimant’s right to bring a civil action under section 502(a)
of ERISA.


 


If a decision is not given to the Claimant within the
claims review period, the claim is treated as if it were denied on the last day
of the claims review period.


 


(b)           Claims Appeals Procedures. If a Claimant’s claim made
pursuant to Section 5.16(a) is denied and he wants a review, he must apply to
the Committee in writing. That application can include any arguments, written
comments, documents,


 


V-9

















 


records, and other
information relating to the claim for benefits. In addition, the Claimant is
entitled to receive on request and free of charge reasonable access to and
copies of all information relevant to the claim. For this purpose, “relevant”
means information that was relied on in making the benefit determination or
that was submitted, considered or generated in the course of making the
determination, without regard to whether it was relied on, and information that
demonstrates compliance with the Plan’s administrative procedures and
safeguards for assuring and verifying that Plan provisions are applied
consistently in making benefit determinations. The Committee must take into
account all comments, documents, records, and other information submitted by
the Claimant relating to the claim, without regard to whether the information
was submitted or considered in the initial benefit determination. The Claimant
may either represent himself or appoint a representative, either of whom has
the right to inspect all documents pertaining to the claim and its denial. The
Committee can schedule any meeting with the Claimant or his representative that
it finds necessary or appropriate to complete its review.


 


(c)           This
Section 5.16 does not apply in connection with determinations as to whether a
Participant or former Participant has incurred a Disability. Rather, such
determinations shall be subject to the procedures specified in Section 5.17.


 


5.17         Disability Benefit Claims Procedure.


 


(a)           Disability Benefit Initial Determination Procedure. In the
case of a claim for Disability benefits, the Claimant should submit a claim to
the office designated by the Committee to receive claims. Under normal
circumstances, the Committee shall notify the Claimant of any Disability claims
denial (wholly or partially) within 45 days after receipt of the claim.


 


The Committee retains the authority to unilaterally
extend the initial 45 day Disability claims determination period by a period
not to exceed an additional 30 days, if the Committee determines that such
extension is necessary due to matters beyond the control of the Committee. If
the initial Disability claims determination period is extended by the
unilateral action of the Committee, the Committee shall, prior to the
expiration of the initial 45 day Disability claims determination period, notify
the Claimant in writing of the extension and of the circumstances requiring the
extension of the Disability claims determination period.


 


If, prior to the end of the first 30-day extension,
the Committee determines that, due to matters beyond the control of the Plan, a
decision cannot be rendered within the extension period, the Disability claims
determination period may be extended for an additional 30 days, provided the
Committee, prior to the expiration of the first 30-day extension period,
notifies the Claimant in writing of the circumstances requiring the extension
and the date on which the Plan expects to render a decision. In the case of any
notice extending the Disability claims determination period, the notice must be
in writing and shall specifically explain the standards on which the
entitlement to a benefit is based; the unresolved issues that prevent a
determination on a claim; additional information that is needed to resolve
those issues; and, if additional information is required from the


 


V-10

















 


Claimant, a statement as
to the amount of time the Claimant has to supply that information.


 


Calculation of Time Periods. The
period of time within which a Disability benefit determination is required to
be made shall begin on that date the claim is filed in accordance with this
Section, without regard to whether all the information necessary to make the
Disability benefits determination accompanies the filing. In the event the
Disability claims determination period is extended due to the Claimant’s
failure to submit information necessary to such determination, the Disability
claims determination period shall be tolled from the date on which the
notification of the extension is sent to the Claimant until the date on which
the Claimant responds to the request for additional information. The Claimant
shall be afforded at least 45 days from receipt of the notice of extension to
provide the specified information. If the Claimant fails to supply the
specified information within the 45-day period, the claim determination process
shall continue and the specified information shall be deemed not to exist.


 


(b)           Disability Claims Appeal Procedure. If a Claimant’s claim
for a Disability benefit is denied (in whole or in part), he is entitled to a
full and fair review of that denial. A full and fair review of a Disability
benefit claim denial shall provide the Claimant with 180 days from the receipt
of any adverse claim determination to appeal the denial. If the Claimant does
not file an appeal within 180 days of the adverse claim determination, such
denial becomes final.


 


Under the full and fair review, the Claimant shall be
afforded an opportunity to submit written comments, documents, records, and
other information relating to the claim for benefits to the reviewing
fiduciary. The Claimant shall be entitled to receive upon request and free of
charge reasonable access to and copies of all information relevant to the
claim. For purposes of a Disability benefit claim denial, the term “relevant”
shall mean information that was relied on in making the benefit determination
or that was submitted, considered or generated in the course of making the
determination, without regard to whether it was relied on, and information that
demonstrates compliance with the Plan’s administrative procedures and
safeguards for assuring and verifying that Plan provisions are applied
consistently in making benefit determinations. For this purpose, the term
“relevant” shall also include a statement of policy or guidance with respect to
the Plan concerning the Disability benefit for the diagnoses of the Claimant,
without regard to whether such advice or statement was relied upon in making
the claims determination. The review of a benefit claim denial shall not afford
any deference to the initial adverse claim determination.


 


The review of the Disability claims denial shall be
conducted by the appropriate named fiduciary who is neither
the named fiduciary who made the initial adverse claim determination nor subordinate to such individual.


 


In reviewing a denial of a claim for a Disability
benefit, in which the denial was based in whole or in part on medical judgment,
the appropriate named fiduciary shall consult with a health care professional
who has appropriate training and experience in the field of medicine involved
in the medical judgment. The health care professional


 


V-11

















 


consulted upon review of
an adverse benefit claim denial shall be neither the
health care professional that was consulted in connection with the adverse
benefit determination that is the subject of the appeal nor
a subordinate of any such individual. The reviewing fiduciary shall provide the
identification of the medical or vocational experts whose advice was obtained
on behalf of the Plan in connection with Claimant’s Disability benefit claim
denial, without regard as to whether the advice was relied upon in making the
benefit determination.


 


The appropriate reviewing fiduciary must take into
account all comments, documents, records, and other information submitted by
the Claimant relating to the claim, without regard as to whether the
information was submitted or considered in the initial benefit determination.
The Claimant may either represent himself or appoint a representative, either of
whom has the right to inspect all documents pertaining to the claim and its
denial. The reviewing fiduciary can schedule any meeting with the Claimant or
his representative that it finds necessary or appropriate to complete its
review.


 


If a timely request is made, the reviewing fiduciary
shall notify the Claimant of the determination upon appeal within 45 days after
receipt of the request for review (without regard to whether all the
information necessary to make the benefit determination accompanies the filing).
The reviewing fiduciary retains the authority to unilaterally extend the
initial 45-day review period by a period not to exceed an additional 45 days,
if the fiduciary determines that special circumstances exist requiring
additional time for reviewing the claim. If the initial review period is
extended by the unilateral action of the appropriate reviewing fiduciary, the
fiduciary shall, prior to the expiration of the initial 45 day review period,
notify the Claimant in writing of the extension. The written notice of
extension shall identify the special circumstances necessitating the extension
and provide the anticipated date by which the Plan expects to render the
determination on review.


 


Calculation of Time Periods Upon Appeal.
The period of time within which a determination on a Disability claims appeal
is required to be made shall begin on that date the appeal is filed in
accordance with this Section, without regard to whether all the information
necessary to make the Disability benefits determination accompanies the filing.
In the event the Disability claims review period is extended due to the
Claimant’s failure to submit information necessary to such determination, the
Disability claims review period shall be tolled from the date on which the notification
of the extension is sent to the Claimant until the date on which the Claimant
responds to the request for additional information. The Claimant shall be
afforded at least 45 days from receipt of the notice of extension to provide
the requested information. If the Claimant fails to supply the requested
information within the 45-day period, the claims review process shall continue
and the specified information shall be deemed not to exist.


 


The reviewing fiduciary shall provide the Claimant
with a written notice of the Plan’s benefit determination upon review. The
notice shall set forth the specific reasons for its action, the Plan provisions
on which its decision is based, and a statement that the Claimant is entitled
to receive, upon request and free of charge, reasonable access to, and


 


V-12

















 


copies of, all documents,
records, and other information relevant to the Claimant’s claim for benefits,
and a statement of the Claimant’s right to bring an action under section 502(a)
of ERISA. The notice shall also include the following statement,


 


“You and the Plan may have
other voluntary alternative dispute resolution options, such as mediation. One
way to find out what may be available is to contact your local U.S. Department
of Labor Office and your State insurance regulatory agency.”


 


If a decision is not given to the Claimant within the
review period, the claim is treated as if it were denied on the last day of the
review period.


 


The request for review must be filed within 90 days
after the denial. If it is not, the denial becomes final. If a timely request
is made, the reviewing fiduciary must make its decision, under normal
circumstances, within 60 days of the receipt of the request for review. However,
if the reviewing fiduciary notifies the Claimant prior to the expiration of the
initial review period, it may extend the period of review up to 120 days
following the initial receipt of the request for a review. The written notice
must indicate the circumstances necessitating the extension and the anticipated
date for the final decision. All decisions of the reviewing fiduciary must be
in writing and must include the specific reasons for its action, the Plan
provisions on which its decision is based, and a statement that the Claimant is
entitled to receive, upon request and free of charge, reasonable access to, and
copies of, all documents, records, and other information relevant to the
Claimant’s claim for benefits, and a statement of the Claimant’s right to bring
an action under section 502(a) of ERISA. If a decision is not given to the
Claimant within the review period, the claim is treated as if it were denied on
the last day of the review period.


 


V-13

















 


ARTICLE VI



IN-SERVICE DISTRIBUTIONS


 


6.01         In-Service Financial Hardship Distributions.


 


(a)           General. Prior to his Separation From Service, a Participant
is entitled to receive a distribution from his Salary Deferral Contribution
Account (except for income that was not credited to his Salary Deferral Account
as of December 31, 1988), his Catch-up Salary Deferral Contribution Account
(except for income credited to his Catch-up Salary Deferral Contribution
Account), his Rollover Account, his Nonforfeitable Interest in his Matching
Contribution Account and his Nonforfeitable Interest in his Supplemental
Contribution Account in the event of an immediate and heavy financial need
incurred by the Participant and the Committee’s determination that the
withdrawal is necessary to alleviate that hardship.


 


(b)           Permitted Reasons For Financial Hardship Distributions. A
distribution shall be made on account of financial hardship only if the
distribution is for:  (i) expenses
for medical care described in section 213(d) of the Code previously
incurred by the Participant, the Participant’s Spouse, or any dependents of the
Participant (as defined in section 152 of the Code) or necessary for these
persons to obtain medical care described in section 213(d) of the Code,
(ii) costs directly related to the purchase (excluding mortgage payments)
of a principal residence for the Participant, (iii) payment of tuition and
related educational fees for the next 12 months of post-secondary education for
the Participant, his Spouse, children, or dependents (as defined in
section 152 of the Code), (iv) payments necessary to prevent the
eviction of the Participant from his principal residence or foreclosure on the
mortgage of the Participant’s principal residence, or (v) any other event
added to this list by the Commissioner of Internal Revenue.


 


(c)           Amount. A distribution to satisfy an immediate and heavy
financial need shall not be made in excess of the amount of the immediate and
heavy financial need of the Participant and the Participant must have obtained
all distributions, other than hardship distributions, and all nontaxable (at
the time of the loan) loans currently available under all plans maintained by
the Employer. The amount of a Participant’s immediate and heavy financial need
includes any amounts necessary to pay any federal, state or local income taxes
or penalties reasonably anticipated to result from the financial hardship
distribution.


 


(d)           Suspension of Participation in Certain Benefit Programs. The
Participant’s hardship distribution shall terminate his right to have the
Employer make any Salary Deferral Contributions on his behalf until the next
time Salary Deferral Contributions are permitted after (1) the lapse of 12
months following the hardship distribution, and (2) his timely filing of a
written request to resume his Salary Deferral Contributions. In addition, for
12 months after he receives a hardship distribution from the Plan, the
Participant is prohibited from making elective contributions and employee
contributions to or under all other qualified and nonqualified plans of
deferred compensation maintained by the Employer, including stock option plans,
stock purchase


 


VI-1

















 


plans and Code
section 401(k) cash or deferred arrangements that are part of cafeteria
plans described in section 125 of the Code. However, the Participant is
not prohibited from making contributions to a health or welfare benefit plan,
including one that is part of a cafeteria plan within the meaning of
section 125 of the Code.


 


(e)           Resumption of Salary Deferral Contributions. Effective for
Plan Years that commence prior to January 1, 2002, when the Participant resumes
Salary Deferral Contributions, he cannot have the Employer make any Salary
Deferral Contributions in excess of the limit in section 402(g) of the
Code for that taxable year reduced by the amount of Salary Deferral
Contributions made by the Employer on the Participant’s behalf during the
taxable year of the Participant in which he received the hardship distribution.


 


(f)            Order of Distributions. Financial hardship distributions
will be made in the following order: 
First withdrawals will be made from the Participant’s Rollover
Contribution Account, then from his Matching Contribution Account, then from
his Supplemental Contribution Account, then from his Salary Deferral
Contribution Account, and finally, from his Catch-up Salary Deferral
Contribution Account. A Participant shall not be entitled to receive a
financial hardship distribution of any amount credited to his QNEC Account.


 


6.02         In-Service Distributions for Certain Participants Who Have Attained Age
591⁄2. Prior to his Separation From Service, a Participant who is at
least age 591⁄2 is entitled to withdraw all or any portion of his Nonforfeitable
Interest in amounts credited to his Accounts.


 


6.03         Form of Payment. Any distribution made pursuant to this
Article VI, will be paid in the form of cash.


 


6.04         Method of Payment. Distributions pursuant to this Article VI
will normally be paid in lump sums. However, the QJSA requirements of Section
5.08 will apply to any distributions made under this Article VI on or after the
date as of which the Sponsor elects to treat the Plan and the Quanex
Corporation Salaried Employees Pension Plan as one plan for purposes of section
410(b) of the Code. Until July 1, 1999, the preceding sentence shall not apply
to Participants who were participants in the Decatur Plan.


 


6.05         Transition Rule for Temroc Metals, Inc. Employees. Until
July 1, 2001, this Article VI shall not apply to Participants who were in the
Temroc Plan.


 


VI-2

















 


ARTICLE VII



LOANS


 


Except as specified below, the Committee may direct
the Trustees to make loans to Participants (and Beneficiaries who are “parties
in interest” within the meaning of ERISA) who have Nonforfeitable Interests in
their Account balances. The Loan Committee established by the Committee will be
responsible for administering the Plan loan program. All loans will comply with
the following requirements:


 


(a)           All
loans will be made solely from the Participant’s or Beneficiary’s Account.


 


(b)           Loans
will be available on a nondiscriminatory basis to all Beneficiaries who are
“parties in interest” within the meaning of ERISA, and to all Participants.


 


(c)           Loans
will not be made for less than $1,000.00.


 


(d)           The
maximum amount of a loan may not exceed the lesser of (A) $50,000.00
reduced by the person’s highest outstanding loan balance from the Plan during
the preceding one-year period, or (B) one-half of the person’s Nonforfeitable
Interest in his Account balance under the Plan determined as of the date on
which the loan is approved by the Loan Committee.


 


(e)           Any
loan from the Plan will be evidenced by a note or notes (signed by the person applying
for the loan) having such maturity, bearing such rate of interest, and
containing such other terms as the Loan Committee will require by uniform and
nondiscriminatory rules consistent with this Article and proper lending
practices.


 


(f)            All
loans will bear a reasonable rate of interest which will be established by the
Loan Committee. In determining the proper rate of interest to be charged, at
the time any loan is made or renewed, the Loan Committee will contact at least
two of the largest banks in the geographic location in which the Participant or
Beneficiary resides to determine what interest rate the banks would charge for
a similar loan taking into account the collateral offered.


 


(g)           Each
loan will be fully secured by a pledge of the borrowing person’s Nonforfeitable
Interest in his Account balance. No more than 50 percent of the person’s
Nonforfeitable Interest in his Account balance (determined immediately after
the origination of the loan) will be considered as security for any loan.


 


(h)           The
term of the loan will not be less than 18 months. Generally, the term of the
loan will not be more than five years. The Loan Committee may agree to a longer
term (but not more than seven years) only if such term is otherwise reasonable
and the proceeds of the loan are to be used to acquire a dwelling which will be
used within a reasonable time (determined at the time the loan is made) as the
principal residence of the borrowing person.


 


VII-1

















 


(i)            The
terms of each Plan loan agreement will require substantially level amortization
of the loan (with payments not less frequently than quarterly) over the term of
the loan. However, the level amortization requirement will not apply for a
period, not longer than one year (or such longer period as may apply under the
Uniformed Services Employment and Reemployment Rights Act of 1994) that an
eligible borrower is on a bona fide leave of absence, either without pay from
the District or at a rate of pay (after income and employment tax withholding)
that is less than the amount of the installment payments required under the
terms of the loan. However, the loan (including interest that accrues during
the leave of absence) must be repaid by the five-year loan maturity deadline
specified in paragraph (h) above (unless the loan was a home loan described in
paragraph (h) above), and the amount of the installments due after the leave
ends (or, if earlier, after the first anniversary of the leave or such longer
period as may apply under the Uniformed Services Employment and Reemployment
Rights Act of 1994) must not be less than the amount required under the terms
of the original loan.


 


(j)            A
Participant’s loan agreement will require that loan repayments be made through
payroll deductions.


 


(k)           If
a person fails to make a required payment within 30 days of the due date set
forth in the loan agreement, the loan will be in default.


 


(l)            If
a Participant or former Participant has an outstanding loan from the Plan at
the time of his Separation From Service, the outstanding loan principal balance
and any accrued but unpaid interest will become immediately due in full. The
Participant or former Participant will have the right to immediately pay the
Trustee that amount. If the Participant or former Participant fails to repay
the loan, the Trustee will foreclose on the loan and the Participant will be
deemed to have received a Plan distribution of the amount foreclosed upon. The
Trustee will not foreclose upon a Participant’s or former Participant’s Salary
Deferral Contribution Account or Catch-up Salary Deferral Contributions Account
until the Participant’s Separation From Service.


 


(m)          If
a Beneficiary defaults on his loan, the Trustee will foreclose on the loan and
the Beneficiary will be deemed to have received a Plan distribution of the
amount foreclosed upon.


 


(n)           No
amount that is pledged as collateral for a Plan loan to a Participant will be
available for withdrawal before he has fully repaid his loan.


 


(o)           The
Spouse of a Participant must consent to any loan from the Plan that is made,
extended or renewed after the date on which the Sponsor elects to treat the
Plan and the Quanex Corporation Salaried Employees’ Pension Plan as one plan
for purposes of section 410(b) of the Code. The Spouse’s consent must (1) be in
writing, (2) consent to the loan, (3) acknowledge the effect of the Spouse’s
consent to the Participant’s borrowing from the Plan, and (4) be witnessed by a
notary public or a Plan representative.


 


VII-2

















 


(p)           All
interest payments made pursuant to the terms of the loan agreement will be
credited to the borrowing person’s Account and will not be considered as
general earnings of the Trust Fund to be allocated to other Participants.


 


VII-3

















 


ARTICLE VIII



VESTING


 




                A Participant or
former Participant has a fully nonforfeitable interest in his entire Account
balance when he (a) incurs a Disability on or prior to the date of his
Separation From Service, (b) attains his Normal Retirement Age on or prior
to the date of his Separation From Service, or (c) incurs a Separation
From Service due to death. A Participant or former Participant shall at all
times have a fully nonforfeitable interest in amounts credited to his Salary
Deferral Contribution Account, his Catch-up Salary Deferral Contribution
Account, his QNEC Account, and his Rollover Account. A Participant or former
Participant shall have a nonforfeitable interest in the following percentage of
amounts credited to his Matching Contribution Account and his Supplemental
Contribution Account:


 


	
  Years of Active Service Completed by the

  Participant or Former Participant

  	
   

  	
  Vested
  Percentage

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Less than one

  	
   

  	
  0

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  One but less than two

  	
   

  	
  20

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Two but less than three

  	
   

  	
  40

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Three but less than four

  	
   

  	
  60

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Four but less than five

  	
   

  	
  80

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Five or more

  	
   

  	
  100

  	
   

  



 


Subject to the possible application of Section B.2.3
of Appendix B or Section 13.05, except as specified above, a Participant or
former Participant has no vested interest in his Account balance and shall not
be entitled to any benefits under the Plan upon or following his Separation
From Service.


 


VIII-1

















 


ARTICLE IX



FORFEITURES AND RESTORATIONS


 


9.01         Forfeiture on Termination of Participation.


 


(a)           If
as a result of his Separation From Service a Participant or former Participant
receives (or is deemed to receive under Section 5.04), a distribution of his
entire Nonforfeitable Interest in the Plan not later than the end of the second
Plan Year following the Plan Year in which his Separation From Service occurs,
the remaining nonvested portion of his Account balance will be immediately
forfeited upon the distribution.


 


(b)           If
a Participant or former Participant neither receives nor is deemed to receive a
distribution as a result of his Separation From Service, the nonvested portion
of his Account balance will be permanently forfeited (with no right of
reinstatement under Section 9.02) on the later of the
date of his Separation From Service or the date on which he has incurred a
Period of Severance of five consecutive years.


 


9.02         Restoration of Forfeited Amounts. If a Participant or former
Participant who forfeited any portion of his Account balance pursuant to the
provisions of Section 8.01 subsequently performs an Hour of Service, then the
following provisions shall apply:


 


(a)           Repayment Requirement. The Participant’s Account balance
(unadjusted for gains or losses subsequent to the forfeiture) shall be restored
if he repays to the Trustee the full amount of any distribution with respect to
which the forfeiture arose prior to the earlier of
(1) the date on which he incurs a Period of Severance of five years
commencing after his distribution, or (2) the fifth anniversary of the
first date on which the Participant subsequently performs his first Hour of
Service after his Separation From Service. A Participant who is deemed to have
received a distribution under Section 5.04 (because he had no Nonforfeitable
Interest in his Account balance) will be deemed to have repaid his Account
balance upon his reemployment if he is reemployed before the earlier of the
dates specified in clauses (1) and (2) in the preceding sentence.


 


(b)           Amount Restored. The amount to be restored under the
preceding provisions of this Section 9.02 shall be the dollar value of the
Account balance, both the amount distributed and the amount forfeited. The
Participant’s Account balance shall be restored as soon as administratively
practicable after the later of the date the Participant first performs an Hour
of Service after his Separation From Service or the date on which any required
repayment is completed.


 


(c)           No Other Basis for Restoration. Except as otherwise provided
above, a Participant’s Account balance shall not be restored after it has been
forfeited pursuant to Section 9.01.


 


9.03         Forfeitures by Lost Participants or Beneficiaries. If a
person who is entitled to a distribution cannot be located during a reasonable
search after the Committee has initially attempted making payment, his Account
balance shall be forfeited. However, if at any time prior


 


IX-1

















 


to the termination
of the Plan and the complete distribution of the Trust assets, the missing
former Participant or Beneficiary files a claim with the Committee for the
forfeited Account balance, that Account balance shall be reinstated (without
adjustment for trust income or losses during the period of forfeiture)
effective as of the date of the receipt of the claim.


 


9.04         Transition Rule for Decatur Plan Participants. Any Plan
forfeitures occurring during or prior to the 1999 Plan Year that are
attributable to persons who are or were employed by Nichols Aluminum-Alabama,
Inc. will be allocated to the Supplemental Contribution Accounts of Members who
are Employees of Nichols Aluminum-Alabama, Inc. in the manner specified in the
provisions of the Decatur Plan as in effect immediately prior to January 1,
1999. Any forfeitures that occur during the 2000 Plan Year or subsequent Plan
Years will be applied as specified in the other provisions of this Article IX.


 


IX-2

















 


ARTICLE X



ACTIVE SERVICE


 


10.01       General Rules. For purposes of determining an Employee’s
eligibility to participate in the Plan and his Nonforfeitable Interest in his
Account balance, the Employee shall receive credit for Active Service
commencing on the date he first performs an Hour of Service and ending on his
Severance From Service Date. If such an Employee Severs Service, he shall
recommence earning Active Service when he again performs an Hour of Service. If
such an Employee performs an Hour of Service within twelve months after his
Severance From Service Date, the intervening Period of Severance shall be
counted as Active Service. When determining such an Employee’s Active Service,
all Periods of Service, whether or not completed consecutively, shall be
aggregated on a per-day basis. In aggregating service for purposes of
determining such an Employee’s Nonforfeitable Interest in amounts credited to
his Account, 365 days shall be counted as one year of Active Service. Except to
the extent expressly provided otherwise in the Plan, such an Employee shall be
granted credit for all Periods of Service with Affiliated Employers (including
Periods of Service performed while the Employee is not eligible to participate
in the Plan because he does not satisfy the requirements of Section 2.01).


 


10.02       Disregard of Certain Service. If such an Employee incurs a
Separation From Service at a time when he does not have a Nonforfeitable
Interest in a portion of his Supplemental Contribution Account balance and his
Period of Severance continues for a continuous period of five years or more,
the Period of Service completed by the Employee before the Period of Severance
shall not be taken into account as Active Service, if his Period of Severance
equals or exceeds his Period of Service, whether or not consecutive, completed before
the Period of Severance.


 


10.03       Certain Brief Absences Counted as Active Service. If an
Employee performs an Hour of Service within 365 days after he Severs Service,
the intervening Period of Severance shall be counted as a Period of Service.


 


10.04       Special Maternity or Paternity Absence Rules. Except as
specified below, the period of time between (a) the first anniversary of the
first day of a Maternity or Paternity Absence of such an Employee and (b) the
second anniversary of the first day of the absence shall not be counted as a
Period of Severance or as Active Service. However, if the Employee returns to
active employment with an Affiliated Employer prior to the expiration of twelve
months following the earlier of (1) the date of his Separation From Service or
(2) the second anniversary of the first day of his Maternity or Paternity
Absence, he shall be granted Active Service for the entire period of his
Maternity or Paternity Absence.


 


10.05       Employment Records Conclusive. The employment records of the
Employer shall be conclusive for all determinations of Active Service.


 


10.06       Service Credit Required by Law. An Employee will be granted
credit for Active Service for time he is not actively performing services for
an Affiliated Employer to the extent required under federal law. An Employee
will be granted credit for Active Service for 


 


X-1

















 


services performed
for a predecessor employer to the extent required by section 414(a) of the Code
and Regulations issued thereunder.


 


10.07       Credit for Service With Alumi-Brite Corporation. For
purposes of determining an Employee’s Active Service for eligibility to
participate and vesting, his service with Alumi-Brite Corporation, an Illinois
corporation, will be counted as Active Service under the Plan.


 


10.08       Credit for Service With Fruehauf Trailer Corporation. For
purposes of determining an Employee’s Active Service for eligibility to
participate and vesting, his service with Fruehauf Trailer Corporation, a Delaware
corporation, will be counted as Active Service under the Plan.


 


10.09       Credit for Service With Decatur Aluminum Holdings Corp. and its
Subsidiaries. For purposes of determining an Employee’s Active
Service for eligibility to participate and for purposes of determining an
Employee’s Nonforfeitable Interest in amounts credited to his Account, his
service with Decatur Aluminum Holdings Corp., a Delaware corporation, and its
wholly-owned subsidiaries will be counted as Active Service under the Plan.


 


10.10       Credit for Service With Temroc Metals, Inc. For purposes of
determining an Employee’s Active Service for eligibility to participate and for
purposes of determining an Employee’s Nonforfeitable Interest in amounts
credited to his Account, his service with Temroc Metals, Inc., a Minnesota
corporation, will be counted as Active Service under the Plan.


 


10.11       Credit for Service With Imperial Products, Inc. For purposes
of determining an Employee’s Active Service for eligibility to participate and
for purposes of determining an Employee’s Nonforfeitable Interest in amounts
credited to his Account, his service with Imperial Products, Inc., a Delaware
corporation, will be counted as Active Service under the Plan.


 


10.12       Credit for Service With Alcoa, Inc. and Golden Aluminum Company. For
purposes of determining an Employee’s Active Service for eligibility to
participate and for purposes of determining an Employee’s Nonforfeitable
Interest in amounts credited to his Account, his service with Alcoa, Inc., a
Pennsylvania corporation, and Golden Aluminum Company, while owned by ACX
Technologies, Inc. or Crown, Cork & Seal Company, Inc., will be counted as
Active Service under the Plan.


 


10.13       Special Transitional Rules. Any Employee of the Sponsor who
was an Employee prior to January 20, 1995, shall have his Active Service for
all purposes calculated under the provisions of the Plan in effect before
January 20, 1995, if that method of calculating his Active Service is more
beneficial for him than the method otherwise set out in this Article X. In
addition, any Employee of Nichols Aluminum-Alabama who was a participant in the
Decatur Plan shall have his Active Service for all purposes calculated under
the provisions of the Decatur Plan in effect before July 1, 1999, if that method
of calculating his Active Service is more beneficial for him than the method
otherwise set out in this Article X.


 


X-2

















 


ARTICLE XI



INVESTMENT ELECTIONS


 


11.01       Investment Funds Established. It is contemplated that the
assets of the Plan shall be invested in such categories of assets as may be
determined from time to time by the Committee and announced and made available
on an equal basis to all Participants and former Participants. In accordance
with procedures established by the Committee, each Participant and former
Participant may designate the percentage of his Account to be invested in each
investment fund available under the Plan. Up to one hundred percent of the
Trust assets may be invested in Sponsor Stock.


 


11.02       Election Procedures Established. The Committee shall, from
time to time, establish rules to be applied in a nondiscriminatory manner as to
all matters relating to the administration of the investment of funds
including, but not limited to, the following:


 


(a)           the
percentage of a Participant’s or former Participant’s Account as it exists,
from time to time, that may be transferred from one fund to another and the
limitations based on amounts, percentages, time, or frequency, if any, on such
transfers;


 


(b)           the
percentage of a Participant’s future contributions, when allocated to his
Account, that may be invested in any one or more funds and the limitations
based upon amounts, percentages, time, or frequency, if any, on such
investments in various funds;


 


(c)           the
procedures for making investment elections and changing existing investment
elections;


 


(d)           the
period of notice required for making investment elections and changing existing
investment elections;


 


(e)           the
handling of income and change of value in funds when funds are in the process
of being transferred between investment funds and to investment funds; and


 


(f)            all
other matters necessary to permit the orderly operation of investment funds
within the Plan.


 


When the Committee
changes any previous applicable rule, it shall state the effective time of the
change and the procedures for complying with any such change. Any change shall
remain effective until such date as stated in the change, or if none is stated,
then until revoked or changed in a like manner.


 


XI-1

















 


ARTICLE XII



ADOPTION OF PLAN BY OTHER EMPLOYERS


 


12.01       Adoption Procedure. Any business organization may, with the
approval of the Board, adopt the Plan by:


 


(a)           a
certified resolution or consent of the board of directors of the adopting
Employer or an executed adoption instrument (approved by the board of directors
of the adopting Employer) agreeing to be bound as an Employer by all the terms,
conditions and limitations of the Plan except those, if any, specifically
described in the adoption instrument; and


 


(b)           providing
all information required by the Committee and the Trustee.


 


12.02       No Joint Venture Implied. The document which evidences the
adoption of the Plan by an Employer shall become a part of the Plan. However,
neither the adoption of the Plan and the Trust by an Employer nor any act
performed by it in relation to the Plan and the Trust shall ever create a joint
venture or partnership relation between it and any other Employer.


 


12.03       All Trust Assets Available to Pay All Benefits. The Accounts
of Participants employed by the Employers that adopt the Plan shall be
commingled for investment purposes. All assets in the Trust shall be available
to pay benefits to all Participants employed by any Employer.


 


12.04       Qualification a Condition Precedent to Adoption and Continued
Participation. The adoption of the Plan and the Trust by a business
organization is contingent upon and subject to the express condition precedent
that the initial adoption meets all statutory and regulatory requirements for
qualification of the Plan and the exemption of the Trust that are applicable to
it and that the Plan and Trust continue in operation to maintain their
qualified and exempt status. In the event the adoption fails to initially
qualify, the adoption shall fail retroactively for failure to meet the
condition precedent and the portion of the Trust assets applicable to the
adoption shall be immediately returned to the adopting business organization
and the adoption shall be void ab initio. In the event the adoption as to a
given business organization later becomes disqualified and loses its exemption
for any reason, the adoption shall fail retroactively for failure to meet the
condition precedent and the portion of the Trust assets allocable to the
adoption by that business organization shall be immediately spun off,
retroactively as of the last date for which the Plan qualified, to a separate
trust for its sole benefit and an identical but separate Plan shall be created,
retroactively effective as of the last date the Plan as adopted by that
business organization qualified, for the benefit of the Participants covered by
that adoption.


 


XII-1

















 


ARTICLE XIII



AMENDMENT AND TERMINATION


 


13.01       Right to Amend and Limitations Thereon. The Sponsor has the
sole right to amend the Plan. An amendment may be made by a certified
resolution or consent of the Board, or by an instrument in writing executed by the
appropriate officer of the Sponsor. The amendment must describe the nature of
the amendment and its effective date. No amendment shall:


 


(a)           vest
in an Employer any interest in the Trust;


 


(b)           cause
or permit the Trust assets to be diverted to any purpose other than the
exclusive benefit of the present, former or future Participants and their
Beneficiaries except under the circumstances described in Section 3.13;


 


(c)           decrease
the Account of any Participant or former Participant, or eliminate an optional
form of payment in violation of section 411(d)(6) of the Code; or


 


(d)           change
the vesting schedule to one which would result in a Participant’s or former
Participant’s Nonforfeitable Interest in his Account balance (determined as of
the later of the date of the adoption of the amendment or of the effective date
of the amendment) of any Participant or former Participant being less than his
Nonforfeitable Interest computed under the Plan without regard to the
amendment. If the Plan’s vesting schedule is amended or if the Plan is deemed
amended by an automatic change to or from a top-heavy vesting schedule, each
Participant or former Participant who has at least three years of Active
Service as of the date of the amendment or change shall have his nonforfeitable
percentage computed under the Plan without regard to the amendment or the
change if that results in a higher Nonforfeitable Interest in his Account
balance.


 


Each Employer shall be deemed to have adopted any
amendment made by the Sponsor unless the Employer notifies the Committee of its
rejection in writing within 30 days after it receives a copy of the amendment.
A rejection shall constitute a withdrawal from the Plan by that Employer unless
the Sponsor acquiesces in the rejection.


 


13.02       Mandatory Amendments. The Contributions of each Employer to
the Plan are intended to be:


 


(a)           deductible
under the applicable provisions of the Code;


 


(b)           except
as otherwise prescribed by applicable law, exempt from the Federal Social
Security Act;


 


(c)           except
as otherwise prescribed by applicable law, exempt from with- holding under the
Code; and


 


(d)           excludable
from any Employee’s regular rate of pay, as that term is defined under the Fair
Labor Standards Act of 1938, as amended.


 


XIII-1

















 


The Sponsor shall make any amendment necessary to
carry out this intention, and it may be made retroactively.


 


13.03       Withdrawal of Employer. An Employer may withdraw from the
Plan and the Trust if the Sponsor does not acquiesce in its rejection of an
amendment or by giving written notice of its intent to withdraw to the
Committee. The Committee shall then determine the portion of the Trust assets
that is attributable to the Participants employed by the withdrawing Employer
and shall notify the Trustee to segregate and transfer those assets to the
successor trustee when it receives a designation of the successor from the
withdrawing Employer.


 


A withdrawal shall not terminate the Plan and the
Trust with respect to the withdrawing Employer, if the Employer either appoints
a successor trustee and reaffirms the Plan and the Trust as its new and
separate plan and trust intended to qualify under section 401(a) of the
Code, or establishes another plan and trust intended to qualify under
section 401(a) of the Code.


 


The determination of the Committee, in its sole
discretion, of the portion of the Trust assets that is attributable to the
Participants employed by the withdrawing Employer shall be final and binding
upon all parties; and, the Trustee’s transfer of those assets to the designated
successor Trustee shall relieve the Trustee of any further obligation,
liability or duty to the withdrawing Employer, the Participants employed by
that Employer and their Beneficiaries, and the successor trustee.


 


13.04       Termination of Plan. The Sponsor may terminate the Plan and
the Trust with respect to all Employers by executing and delivering to the
Committee and the Trustee, a notice of termination, specifying the date of
termination.


 


13.05       Partial or Complete Termination or Complete Discontinuance of
Contributions. Without regard to any other provision of the Plan, if
there is a partial or total termination of the Plan or there is a complete
discontinuance of the Employer’s Contributions, each of the affected
Participants shall immediately have a fully Nonforfeitable Interest in his
Account as of the end of the last Plan Year for which a substantial Employer
Contribution was made and in any amounts later allocated to his Account. If the
Employer then resumes making substantial Contributions at any time, the
appropriate vesting schedule shall again apply to all amounts allocated to each
affected Participant’s Account beginning with the Plan Year for which they were
resumed.


 


XIII-1

















 


ARTICLE XIV



MISCELLANEOUS


 


14.01       Plan Not an Employment Contract. The maintenance of the Plan
and the Trust is not a contract between any Employer and its Employees which
gives any Employee the right to be retained in its employment. Likewise, it is
not intended to interfere with the rights of any Employer to discharge any
Employee at any time or to interfere with the Employee’s right to terminate his
employment at any time.


 


14.02       Benefits Provided Solely From Trust. All benefits payable
under the Plan shall be paid or provided for solely from the Trust. No Employer
assumes any liability or responsibility to pay any benefit provided by the
Plan.


 


14.03       Assignments Prohibited. No principal or income payable or to
become payable from the Trust Fund shall be subject to anticipation or
assignment by a Participant, former Participant or Beneficiary to attachment
by, interference with, or control of any creditor of a Participant, former
Participant or Beneficiary; or to being taken or reached by any legal or equitable
process in satisfaction of any debt or liability of a Participant, former
Participant, or Beneficiary prior to its actual receipt by the Participant,
former Participant or Beneficiary. Any attempted conveyance, transfer,
assignment, mortgage, pledge, or encumbrance of any Trust assets, any part of
it, or any interest in it by a Participant, former Participant or Beneficiary
prior to distribution shall be void, whether that conveyance, transfer,
assignment, mortgage, pledge, or encumbrance is intended to take place or
become effective before or after any distribution of Trust assets or the
termination of the Trust itself. The Trustee shall never under any
circumstances be required to recognize any conveyance, transfer, assignment,
mortgage, pledge or encumbrance by a Participant , former Participant, or
Beneficiary of the Trust, any part of it, or any interest in it, or to pay any
money or thing of value to any creditor or assignee of a Participant, former
Participant or Beneficiary for any cause whatsoever. These prohibitions against
the alienation of a Participant’s Account shall not apply to a Qualified
Domestic Relations Order or to a voluntary revocable assignment of benefits not
in excess of ten percent of the amount of any payment from the Plan if such
assignment complies with Regulations issued under section 401(a)(13) of the
Code. Further, effective for judgments, orders and decrees issued, and
settlement agreements entered into, on or after August 5, 1997, these
prohibitions shall not apply to any offset of a Participant’s or former
Participant’s benefits provided under a Plan against an amount that the
Participant or former Participant is ordered or required to pay to the Plan
if—(a) the order or requirement to pay arises—(1) under a judgment of conviction
for a crime involving the Plan, (2) under a civil judgment (including a consent
order or decree) entered by a court in an action brought in connection with an
alleged violation of part 4 of subtitle B of title I of ERISA, or (3) pursuant
to a settlement agreement between the Secretary of Labor and the Participant or
former Participant in connection with a violation (or alleged violation) of
part 4 of subtitle B of ERISA by a fiduciary or any other person, and (b) the
judgment, order, decree, or settlement agreement expressly provides for the
offset of all or part of the amount ordered or required to be paid to the Plan
against the Participant’s or former Participant’s benefits provided under the
Plan.


 


XIV-1

















 


14.04       Requirements Upon Merger or Consolidation of Plans. The Plan
shall not merge or consolidate with or transfer any assets or liabilities to
any other plan unless each Participant would receive a benefit immediately
after the merger, consolidation, or transfer which is equal to or greater than
the benefit he would have been entitled to receive immediately before the
merger, consolidation, or transfer (if the Plan had then terminated).


 


14.05       Gender of Words Used. If the context requires it, words of
one gender when used in the Plan shall include the other gender, and words used
in the singular or plural shall include the other.


 


14.06       Severability. Each provision of this Agreement may be
severed. If any provision is determined to be invalid or unenforceable, that
determination shall not affect the validity or enforceability of any other
provision.


 


14.07       Reemployed  Veterans.
Effective January 12, 1994, the requirements of the Uniformed Services
Employment and Reemployment Rights Act of 1994 will be complied with in the
operation of the Plan in the manner permitted under section 414(u) of the Code.


 


14.08       Limitations on Legal Actions. No person may bring an action
pertaining to the Plan or Trust until he has exhausted his administrative
claims and appeal remedies identified in section 5.16. Further, no person may
bring an action pertaining to a claim for benefits under the Plan or the Trust
following 180 days after the Committee’s final denial of his claim for
benefits.


 


14.09       Transition Rule Relating to Mergers of Decatur Plan and Temroc Plan
Into the Plan. The provisions of the Decatur Plan and the Temroc
Plan relating to eligibility to participate, service credit for vesting
purposes (solely in the case of persons who were participants in the Decatur
Plan), allocations of contributions, distributions and loans that were in
effect prior to the mergers of such plans into the Plan shall remain in effect
until the effective dates of the mergers. However, as the Decatur Plan and the
Temroc Plan are amended, restated and continued in the form of the Plan, to the
extent required by law, the provisions of the Plan, as amended and restated in
the form of the Agreement shall apply to the Decatur Plan and the Temroc Plan,
as merged into the Plan, on a retroactive basis.


 


14.10       Governing Law. The provisions of the Plan shall be
construed, administered, and governed under the laws of the United States
unless the specific matter in question is governed by state law in which event
the laws of the State of Texas shall apply.


 


14.11       Special Provisions Applicable to Nichols Aluminum-Golden, Inc.
Employees.


 


(a)           Cessation of Participation. Upon the closing of the sale by
the Sponsor of the stock of Nichols Aluminum-Golden, Inc., (the “NAG Sale”), an individual who is employed by Nichols
Aluminum-Golden, Inc. shall cease to be eligible to participate in the Plan.


 


(b)           Sale is Distribution Event. An individual who continues to
be employed by Nichols Aluminum-Golden, Inc. following the NAG Sale shall be
deemed to have incurred a “Separation From Service” for all purposes under the
Plan.


 


XIV-2

















 


(c)           Vesting. Notwithstanding any other provision of the Plan to
the contrary, an individual who continues to be employed by Nichols Aluminum-Golden,
Inc. immediately following the NAG Sale shall have a fully nonforfeitable
interest in his Account balance upon the Sale.


 


(d)           Loans.  Notwithstanding any other provision of the
Plan to the contrary, an individual who on the date of the NAG Sale
(i) has an outstanding loan from the Plan and (ii) is deemed to incur
a Separation From Service as a result of the Sale, will be allowed to repay to
the Trustee the outstanding loan principal balance and any accrued but unpaid
interest over the remaining term of the loan in accordance with the
amortization schedule provided in his loan agreement as if he had not incurred
a Separation From Service. The individual’s loan repayments will not be
required to be made on a payroll deduction basis; but rather may be made
utilizing a loan coupon procedure established by the Loan Committee.


 


XIV-3

















 


IN WITNESS WHEREOF, Quanex
Corporation has caused this Agreement to be executed this 19th day of December,
2005, in multiple counterparts, each of which shall be deemed to be an
original, to be effective the 1st day of January, 2005, except for those
provisions which have an earlier effective date provided by law, or as
otherwise provided under applicable provisions of the Plan.


 


	
   

  	
   

  	
  QUANEX CORPORATION

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  /s/ Kevin P. Delaney

  	
   

  
	
   

  	
   

  	
  By:

  	
  Kevin P. Delaney

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Senior Vice President – General

  Counsel and Secretary

  



 

















 


APPENDIX A



LIMITATIONS ON CONTRIBUTIONS AND ALLOCATIONS


 


PART
A.1  Definitions


 


Definitions. As used herein the
following words and phrases have the meaning attributed to them below:


 


A.1.1       “Actual Contribution Ratio” shall
mean the ratio of Section 401(m) Contributions actually paid into the
Trust on behalf of an Employee for a Plan Year to the Employee’s Annual
Compensation for the same Plan Year. For this purpose, Annual Compensation for
any portion of the Plan Year in which the Employee was not an eligible Employee
(as defined in Section A.2.4) will not be taken into account.


 


A.1.2       “Actual Deferral Percentage”
means, for a specified group of Employees for a Plan Year, the average of the
ratios (calculated separately for each Employee in the group) of the amount of
Section 401(k) Contributions actually paid into the Trust on behalf of the
Employee for the Plan Year to the Employee’s Annual Compensation for the Plan
Year.


 


A.1.3       “Actual Deferral Ratio” means
the ratio of Section 401(k) Contributions actually paid into the Trust on
behalf of an Employee for a Plan Year to the Employee’s Annual Compensation for
the same Plan Year. For this purpose, Annual Compensation for any portion of
the Plan Year in which the Employee was not an eligible Employee (as defined in
Section A.2.3) will not be taken into account.


 


A.1.4       “Annual Additions”  means the sum of the following amounts
credited on behalf of a Participant for the Limitation Year:  (a) Employer contributions excluding Catch-up
Salary Deferral Contributions and including Salary Deferral Contributions, (b)
Employee after-tax contributions, and (c) forfeitures. For this purpose,
Employee contributions are determined without regard to any rollover
contributions (as defined in sections 402(c), 403(a)(4), 403(b)(8), 408(d)(3)
and 457(e)(16) of the Code without regard to employee contributions to a simplified
employee pension which are excludable from gross income under section 408(k)(6)
of the Code). Excess 401(k) Contributions for a Plan Year are treated as Annual
Additions for that Plan Year even if they are corrected through distribution.
Excess Deferrals that are timely distributed as set forth in Section A.3.1 will
not be treated as Annual Additions.


 


A.1.5       “Contribution Percentage” shall mean,
for a specified group of Employees for a Plan Year, the average of the ratios
(calculated separately for each Employee in the group) of the amount of
Section 401(m) Contributions actually paid into the Trust on behalf of the
Employee for the Plan Year to the Employee’s Annual Compensation for the Plan
Year.


 


A.1.6       “Excess Aggregate 401(m) Contributions”
means, with respect to any Plan Year, the excess of (a) the aggregate
amount of Section 401(m) Contributions actually paid into the Trust on
behalf of Highly Compensated Employees for the Plan Year over (b) the
maximum amount of those contributions permitted under the limitations set out
in the first sentence of Section A.2.4.


 


A.1.7       “Excess Amount” shall mean the excess
of the Annual Additions credited to the Participant’s Account for the
Limitation Year over the Maximum Permissible Amount.


 


A.1.8       “Excess 401(k) Contributions”
means, with respect to any Plan Year, the excess of (a) the aggregate
amount of Section 401(k) Contributions actually paid to the Trustee on
behalf of Highly Compensated Employees for the Plan Year over (b) the
maximum amount of those contributions permitted under the limitations set out
in the first sentence of Section A.2.3.A or Section A.2.3.B as applicable.


 


A.1.9       “Limitation Year” shall mean the Plan
Year. All qualified plans maintained by any Affiliated Employer must use the
same Limitation Year. If the Limitation Year is amended to a different
12-consecutive


 


A-1

















 


month period, the
new Limitation Year must begin on a date within the Limitation Year in which
the amendment is made.


 


A.1.10     “Maximum Permissible Amount” means,
for Limitation Years that commence prior to January 1, 2002, the lesser of (1)
$30,000.00 as adjusted by the Secretary of Treasury for increases in the cost
of living, or (2) 25 percent of the Participant’s Annual Compensation for the
Limitation Year. “Maximum Permissible Amount”
means, for Limitation Years that commence on or after January 1, 2001, the
lesser of (1) $40,000.00 as adjusted by the Secretary of Treasury for increases
in the cost of living or (2) 100 percent of the Participant’s Annual
Compensation for the Limitation Year. The Annual Compensation limitation
referred to in clauses (2) of the immediately preceding sentences shall not
apply to any contribution for medical benefits (within the meaning of section 401(h)
or section 419A(f)(2) of the Code) that is otherwise treated as an Annual
Addition under section 415(l)(1) or
section 419A(d)(2) of the Code. If a short Limitation Year is created
because of an amendment changing the Limitation Year to a different 12-consecutive
month period, the Maximum Permissible Amount shall not exceed the dollar
limitation in effect under section 415(c)(1)(A) of the Code multiplied by
a fraction, the numerator of which is the number of months in the short
Limitation Year, and the denominator of which is 12.


 


A.1.11     “Section 401(k) Contributions”
means the sum of Salary Deferral Contributions made on behalf of the
Participant during the Plan Year, and QNECs that the Employer elects to have
treated as section 401(k) Contributions pursuant to section 401(k)(3)(d)(ii) of
the Code.


 


A.1.12     “Section 401(m) Contributions”
shall mean the Matching Contributions made on behalf of the Participant during
the Plan Year and other amounts that the Employer elects to have treated as
Section 401(m) Contributions pursuant to section 401(m)(3)(B) of the
Code. However, effective for Plan Years that commence prior to January 1, 2002,
Matching Contributions and Salary Deferral Contributions that the Employer
could otherwise elect to have treated as Section 401(m) Contributions are
not Section 401(m) Contributions to the extent that they are used to
enable the Plan to satisfy the minimum contribution requirements of
section 416 of the Code.


 


PART
A.2  Limitations on
Contributions


 


A.2.1       Limitations Based upon Deductibility and the Maximum Allocation
Permitted to a Participant’s Account. Notwithstanding any other
provision of the Plan, no Employer shall make any contribution that would be a
nondeductible contribution within the meaning of section 4972 of the Code or
that would cause the limitation on allocations to each Participant’s Account
under section 415 of the Code and Section A.4.1 to be exceeded.


 


A.2.2       Dollar Limitation upon Salary Deferral Contributions. The
maximum Salary Deferral Contribution that a Participant may elect to have made
on his behalf during a calendar year may not, when added to his elective
deferrals under other plans or arrangements which are both (1) described in
sections 401(k), 403(b), 408(k) and 408(p)(2) of the Code and (2) maintained by
the Employer or an Affiliated Employer, exceed the amount of the limitation in
effect under section 402(g)(1) of the Code for the Participant’s taxable year
beginning in such calendar year. For purposes of applying the requirements of
Section A.2.3, Excess Deferrals shall not be disregarded merely because
they are Excess Deferrals or because they are distributed in accordance with
this Section. However, Excess Deferrals made to the Plan on behalf of
Non-Highly Compensated Employees are not to be taken into account under
Section  A.2.3.


 


A.2.3.A. Limitation Based upon
Actual Deferral Percentage for Employees Other Than Certain Persons Working In
Lincolnshire, Illinois. The following rules of this Section A.2.3.A
are applicable for Employees other than Employees who are working in
Lincolnshire, Illinois and are included in a unit of employees covered by a
collective bargaining agreement between the Sponsor and the employees’
representative. Effective for Plan Years commencing on or after January 1, 1997,
the Actual Deferral Percentage for eligible Highly Compensated Employees for
any Plan Year must bear a relationship to the Actual Deferral Percentage for
all other eligible Employees for (1) the preceding Plan
Year in the case of testing for the 1997 Plan Year and Plan Years commencing on
or after January 1, 2001, or (2) the current Plan
Year in the case of testing for Plan Years commencing prior to January 1, 2001,
other than the 1997 Plan Year, which meets either of the following tests:


 


A-2

















 


(a)           the Actual
Deferral Percentage of the eligible Highly Compensated Employees is not more
than the Actual Deferral Percentage of all other eligible Employees multiplied
by 1.25; or


 


(b)           the excess
of the Actual Deferral Percentage of the eligible Highly Compensated Employees
over that of all other eligible Employees is not more than two percentage
points, and the Actual Deferral Percentage of the eligible Highly Compensated
Employees is not more than the Actual Deferral Percentage of all other eligible
Employees multiplied by two.


 


For purposes of this test an eligible Employee is an
Employee who is directly or indirectly eligible to make Salary Deferral
Contributions for all or part of the Plan Year. A person who is suspended from
making Salary Deferral Contributions because he has made a withdrawal is an
eligible Employee. If no Salary Deferral Contributions are made for an eligible
Employee, the Actual Deferral Ratio that shall be included for him in
determining the Actual Deferral Percentage is zero. If the Plan and any other
plan or plans which include cash or deferred arrangements are considered as one
plan for purposes of section 401(a)(4) or 410(b) of the Code, the cash or
deferred arrangements included in the Plan and the other plans shall be treated
as one plan for purposes of this Section. If any Participant who is a Highly
Compensated Employee is a participant in any other cash or deferred
arrangements of the Employer, when determining the deferral percentage of such
Participant, all such cash or deferred arrangements are treated as one plan for
these dates.


 


Notwithstanding the foregoing, effective for Plan
Years commencing on or after January 1, 1998, an individual who is not a Highly
Compensated Employee and who has not satisfied the minimum age and service
requirements of section 410(a)(1)(A) of the Code will not
be treated as an eligible Employee for purposes of this Section A.2.3.A if the
Sponsor elects to apply section 410(b)(4)(3) of the Code in determining whether
the Plan meets the requirements of section 401(k)(3) of the Code.


 


A Salary Deferral Contribution will be taken into
account under the Actual Deferral Percentage test of section 401(k) of the
Code and this Section for a Plan Year only if it relates to Considered
Compensation that either would have been received by the Employee in the Plan
Year (but for the deferral election) or is attributable to services performed
by the Employee in the Plan Year and would have been received by the Employee within
21⁄2 months after the close of the Plan Year (but for the deferral election). In
addition, a Section 401(k) Contribution will be taken into account under
the Actual Deferral Percentage test of section 401(k) of the Code and this
Section for a Plan Year only if it is allocated to an Employee as of a
date within that Plan Year. For this purpose a Section 401(k) Contribution
is considered allocated as of a date within a Plan Year if the allocation is
not contingent on participation or performance of services after such date and
the Section 401(k) Contribution is actually paid to the Trust no later
than 12 months after the Plan Year to which the Section 401(k)
Contribution relates.


 


Failure to correct Excess 401(k) Contributions by the
close of the Plan Year following the Plan Year for which they were made will
cause the Plan’s cash or deferred arrangement to be disqualified for the Plan
Year for which the Excess 401(k) Contributions were made and for all subsequent
years during which they remain in the Trust. Also, the Employer will be liable
for a ten percent excise tax on the amount of Excess 401(k) Contributions
unless they are corrected within 21⁄2 months after the close of the Plan Year for
which they were made.


 


For the Plan Year that commences on January 1, 2001,
the Actual Deferral Percentage of persons who are not Highly Compensated
Employees will be determined by taking into account only (1) Salary Deferral
Contributions for such persons that were taken into account for purposes of the
actual deferral percentage test set forth in section 401(k) of the Code and
this Section A.2.3.A for the Plan Year that commenced on January 1, 2000 and
(2) QNECS that were allocated to the Accounts of such persons for the Plan Year
that commenced on January 1, 2000 but that were not used to satisfy the actual
deferral percentage test set forth in section 401(k) of the Code and this
Section A.2.3.A or the actual contribution percentage test set forth in section
401(m) of the Code and Section A.2.4 for the Plan Year that commenced on
January 1, 2000.


 


A.2.3.B.  Limitation Based
upon Actual Deferral Percentage for Certain Employees Working In Lincolnshire,
Illinois. The following rules of this Section A.2.3.B are applicable for
Employees other than Employees who are working in Lincolnshire, Illinois and
are included in a unit of employees covered by a collective bargaining
agreement between the Sponsor and the employees’ representative. Effective for
Plan Years


 


A-3

















 


commencing on or after January 1, 1997, the Actual
Deferral Percentage for eligible Highly Compensated Employees for any Plan Year
must bear a relationship to the Actual Deferral Percentage for all other
eligible Employees for the preceding Plan
Year, which meets either of the following tests:


 


(c)           the Actual
Deferral Percentage of the eligible Highly Compensated Employees is not more
than the Actual Deferral Percentage of all other eligible Employees multiplied
by 1.25; or


 


(d)           the excess
of the Actual Deferral Percentage of the eligible Highly Compensated Employees
over that of all other eligible Employees is not more than two percentage
points, and the Actual Deferral Percentage of the eligible Highly Compensated
Employees is not more than the Actual Deferral Percentage of all other eligible
Employees multiplied by two.


 


For purposes of this test an eligible Employee is an
Employee who is directly or indirectly eligible to make Salary Deferral
Contributions for all or part of the Plan Year. A person who is suspended from
making Salary Deferral Contributions because he has made a withdrawal is an
eligible Employee. If no Salary Deferral Contributions are made for an eligible
Employee, the Actual Deferral Ratio that shall be included for him in
determining the Actual Deferral Percentage is zero. If the Plan and any other
plan or plans which include cash or deferred arrangements are considered as one
plan for purposes of section 401(a)(4) or 410(b) of the Code, the cash or
deferred arrangements included in the Plan and the other plans shall be treated
as one plan for purposes of this Section. If any Participant who is a Highly
Compensated Employee is a participant in any other cash or deferred
arrangements of the Employer, when determining the deferral percentage of such Participant,
all such cash or deferred arrangements are treated as one plan for these dates.


 


Notwithstanding the foregoing, effective for Plan
Years commencing on or after January 1, 1998, an individual who is not a Highly
Compensated Employee and who has not satisfied the minimum age and service
requirements of section 410(a)(1)(A) of the Code will not
be treated as an eligible Employee for purposes of this Section A.2.3.B if the
Sponsor elects to apply section 410(b)(4)(3) of the Code in determining whether
the Plan meets the requirements of section 401(k)(3) of the Code.


 


A Salary Deferral Contribution will be taken into
account under the Actual Deferral Percentage test of section 401(k) of the
Code and this Section for a Plan Year only if it relates to Considered
Compensation that either would have been received by the Employee in the Plan
Year (but for the deferral election) or is attributable to services performed
by the Employee in the Plan Year and would have been received by the Employee
within 21⁄2 months after the close of the Plan Year (but for the deferral
election). In addition, a Section 401(k) Contribution will be taken into
account under the Actual Deferral Percentage test of section 401(k) of the
Code and this Section for a Plan Year only if it is allocated to an
Employee as of a date within that Plan Year. For this purpose a
Section 401(k) Contribution is considered allocated as of a date within a
Plan Year if the allocation is not contingent on participation or performance
of services after such date and the Section 401(k) Contribution is
actually paid to the Trust no later than 12 months after the Plan Year to which
the Section 401(k) Contribution relates.


 


Failure to correct Excess 401(k) Contributions by the
close of the Plan Year following the Plan Year for which they were made will
cause the Plan’s cash or deferred arrangement to be disqualified for the Plan
Year for which the Excess 401(k) Contributions were made and for all subsequent
years during which they remain in the Trust. Also, the Employer will be liable
for a ten percent excise tax on the amount of Excess 401(k) Contributions
unless they are corrected within 21⁄2 months after the close of the Plan Year for
which they were made.


 


For the Plan Year that commences on January 1, 1997,
the Actual Deferral Percentage of persons who are not Highly Compensated
Employees will be determined by taking into account only (1) Salary Deferral
Contributions for such persons that were taken into account for purposes of the
actual deferral percentage test set forth in section 401(k) of the Code and
this Section A.2.3.A for the Plan Year that commenced on January 1, 1996 and
(2) QNECS that were allocated to the Accounts of such persons for the Plan Year
that commenced on January 1, 1996 but that were not used to satisfy the actual
deferral percentage test set forth in section 401(k) of the Code and this
Section A.2.3.B.


 


A-4

















 


A.2.4       Limitation
Based upon Contribution Percentage.  The following rules are
applicable for Employees other than Employees who are working in Lincolnshire,
Illinois and are included in a unit of employees covered by a collective
bargaining agreement between the Sponsor and the employees’ representative.
Effective for Plan Years commencing on or after January 1, 1997, the
Contribution Percentage for eligible Highly Compensated Employees for any Plan
Year must bear a relationship to the Actual Contribution Percentage for all
other eligible Employees for (1) the preceding Plan
Year in the case of testing for Plan Years commencing on or after January 1,
2001, or (2) the current Plan Year in the case of
testing for Plan Years commencing prior to January 1, 2001, which meets either
of the following tests:


 


(e)           the
Contribution Percentage for all other eligible Employees multiplied by 1.25; or


 


(f)            the
lesser of the Contribution Percentage for all other eligible Employees
multiplied by two, or the Contribution Percentage for all other eligible
Employees plus two percentage points.


 


For purposes of this test an eligible Employee is an
Employee who is directly or indirectly eligible to receive an allocation of
Matching Contributions for all or part of the Plan Year. Except as provided
below, an Employee who would be eligible to receive an allocation of Matching
Contributions but for his election not to participate is an eligible Employee.
An Employee who would be eligible to receive an allocation of Matching
Contributions but for the limitations on his Annual Additions imposed by
section 415 of the Code is an eligible Employee.


 


Notwithstanding the foregoing, effective for Plan
Years commencing on or after January 1, 1998, an individual who is not a Highly
Compensated Employee and who has not satisfied the minimum age and service
requirements of section 410(a)(1)(A) of the Code will not
be treated as an eligible Employee for purposes of this Section A.2.4 if the
Sponsor elects to apply section 410(b)(4)(B) of the Code in determining whether
the Plan meets the requirements of section 401(m)(2) of the Code.


 


If no Section 401(m) Contributions are made on
behalf of an eligible Employee the Actual Contribution Ratio that shall be
included for him in determining the Contribution Percentage is zero. If the
Plan and any other plan or plans to which Section 401(m) Contributions are
made are considered as one plan for purposes of section 401(a)(4) or
410(b) of the Code, the Plan and those plans are to be treated as one. The
Actual Contribution Ratio of a Highly Compensated Employee who is eligible to
participate in more than one plan of an Affiliated employer to which employee
or matching contributions are made is calculated by treating all the plans in
which the Employee is eligible to participate as one plan. However, plans that
are not permitted to be aggregated under Regulation
section 1.410(m)-1(b)(3)(ii) are not aggregated for this purpose.


 


A Matching Contribution will be taken into account
under this Section for a Plan Year only if (1) it is allocated to the
Employee’s Account as of a date within the Plan Year, (2) it is paid to
the Trust no later than the end of the 12-month period beginning after the
close of the Plan Year, and (3) it is made on behalf of an Employee on
account of his Salary Deferral Contributions for the Plan Year.


 


At the election of the Employer, a Participant’s
Salary Deferral Contributions, and QNECs made on behalf of the Participant
during the Plan Year shall be treated as Section 401(m) Contributions that
are Matching Contributions provided that the conditions set forth in Regulation
section 1.401(m)-1(b)(5) are satisfied. Salary Deferral Contributions may
not be treated as Matching Contributions for purposes of the contribution
percentage test set forth in this Section unless such contributions,
including those taken into account for purposes of the test set forth in this
Section, satisfy the actual deferral percentage test set forth in
Section A.2.3. Moreover, Salary Deferral Contributions and QNECs may not
be taken into account for purposes of the test set forth in this Section to
the extent that such contributions are taken into account in determining
whether any other contributions satisfy the actual deferral percentage test set
forth in Section A.2.3. Finally, Salary Deferral Contributions and QNECs
may be taken into account for purposes of the test set forth in this
Section only if they are allocated to the Employee’s Account as of a date
within the Plan Year being tested within the meaning of Regulation
section 1.401(k)-1(b)(4).


 


Failure to correct Excess Aggregate 401(m) Contributions
by the close of the Plan Year following the Plan Year for which they were made
will cause the Plan to fail to be qualified for the Plan Year for which the
Excess


 


A-5

















 


Aggregate 401(m) Contributions were made and for all
subsequent years during which they remain in the Trust. Also, the Employer will
be liable for a ten percent excise tax on the amount of Excess Aggregate 401(m)
Contributions unless they are corrected within 21⁄2 months after the close of the
Plan Year for which they were made.


 


For the Plan Year that commences on January 1, 2001,
the Contribution Percentage of persons who are not Highly Compensated Employees
will be determined by taking into account only Matching Contributions made on
behalf of such persons that were taken into account for purposes of the actual
contribution percentage test set forth in section 401(m) of the Code and this
Section A.2.4 for the Plan Year that commenced on January 1, 2000 and QNECS
that were allocated to the Accounts of such persons for the Plan Year that
commenced on January 1, 2000 but that were not used to satisfy the actual
deferral percentage test set forth in section 401(k) of the Code and Section
A.2.3 or the actual contribution percentage that set forth in section 401(m) of
the Code and this Section A.2.4 for the Plan Year that commenced on January 1,
2000.


 


A.2.5       Additional
Test in the Event of Multiple Use of the Alternative Limitation. Effective
for Plan Years that commence prior to January 1, 2002, if the second
alternative permitted in Sections A.2.3 and A.2.4 is used for both the
actual deferral percentage test and the contribution percentage test the
following additional limitation on Salary Deferral Contributions shall apply.
The Actual Deferral Percentage plus the Contribution Percentage of the eligible
Highly Compensated Employees cannot exceed the greater of (a) or (b), where


 


(g)           is the sum
of:


 


(i)      1.25 times the
greater of the Actual Deferral Percentage or the Contribution Percentage of the
eligible Non-Highly Compensated Employees for the preceding Plan Year, and


 


(ii)     the lesser of
(x) two percentage points plus the lesser of the Actual Deferral Percentage or
the Contribution Percentage of the eligible Non-Highly Compensated Employees
for the preceding Plan Year or (y) two times the lesser of the Actual Deferral
Percentage or the Contribution Percentage of the group of eligible Non-Highly
Compensated Employees for the preceding Plan Year; and


 


(h)           is the sum
of:


 


(i)      1.25 times the
lesser of the Actual Deferral Percentage or the Contribution Percentage of the
eligible Non-Highly Compensated Employees for the preceding Plan Year, and


 


(ii)     the lesser of
(x) two percentage points plus the greater of the Actual Deferral Percentage or
the Contribution Percentage of the eligible Non-Highly Compensated
Employees  for the preceding Plan Year or
(y) two times the greater of the Actual Deferral Percentage or the Contribution
Percentage of the group of eligible Non-Highly Compensated Employees for the preceding
Plan Year.


 


Notwithstanding the foregoing, the references in this
Section A.2.5 to “the preceding Plan Year” shall be deemed to be references to
“the current Plan Year” in the case of testing for Plan Years commencing prior
to January 1, 2001.


 


PART
A.3  Correction
Procedures For Erroneous Contributions


 


A.3.1       Excess Deferral Fail Safe Provision. As soon as practical
after the close of each Plan Year, the Committee shall determine if there would
be any Excess Deferrals. If there would be an Excess Deferral by a Participant,
the Excess Deferral as adjusted by any earnings or losses, will be distributed
to the Participant no later than April 15 following the Participant’s
taxable year in which the Excess Deferral was made. The income allocable to the
Excess Deferrals for the taxable year of the Participant shall be determined by
multiplying the income for the taxable year of the Participant allocable to
Salary Deferral Contributions by a fraction. The numerator of the fraction is
the amount of the Excess Deferrals made on behalf of the Participant for the
taxable year. The


 


A-6

















 


denominator of the
fraction is the Participant’s total Salary Deferral Account balance as of the
beginning of the taxable year plus the Participant’s Salary Deferral
Contributions for the taxable year.


 


A.3.2       Actual Deferral Percentage Fail Safe Provision.  As
soon as practicable after the close of each Plan Year, the Committee shall
determine whether the Actual Deferral Percentage for the Highly Compensated
Employees would exceed the limitation set forth in Section A.2.3. If the
limitation would be exceeded for a Plan Year, before the close of the following
Plan Year (a) the amount of Excess 401(k) Contributions for that Plan Year (and
any income allocable to those contributions as calculated in the specific
manner required by Section A.3.5) shall be distributed or (b) the
Employer may make a QNEC which it elects to have treated as a
Section 401(k) Contribution. However, in the case of testing for any Plan
Year that commences on or after January 1, 2001, a QNEC shall not be taken into
account for purposes of the test set forth in section 401(k) of the Code and
Section A.2.3 for such Plan Year unless it is made and allocated by the
close of such Plan Year.


 


The amount of Excess 401(k) Contributions to be
distributed shall be determined in the following manner:


 


First, the Plan will determine how much the Actual
Deferral Ratio of the Highly Compensated Employee with the highest Actual Deferral
Ratio would have to be reduced to satisfy the Actual Deferral Percentage Test
or cause such Actual Deferral Ratio to equal the Actual Deferral Ratio of the
Highly Compensated Employee with the next highest Actual Deferral Ratio. If a
lesser reduction would enable the Plan to satisfy the Actual Deferral
Percentage Test, only this lesser reduction may be made. Second, this process
is repeated until the Actual Deferral Percentage Test is satisfied. The amount
of Excess 401(k) Contributions is equal to the sum of these hypothetical
reductions multiplied, in each case, by the Highly Compensated Employee’s
Annual Compensation.


 


Then, effective for Plan Years that commence on or
after January 1, 1997, the total amount of Excess 401(k) Contributions shall be
distributed on the basis of the respective amounts attributable to each Highly
Compensated Employee. The Highly Compensated Employees subject to the actual
distribution are determined using the “dollar leveling method.”  The Salary Deferral Contributions of the
Highly Compensated Employee with the greatest dollar amount of Salary Deferral
Contributions and other contributions treated as Section 401(k) Contributions
for the Plan Year are reduced by the amount required to cause that Highly
Compensated Employee’s Salary Deferral Contributions to equal the dollar amount
of the Salary Deferral Contributions and other contributions treated as Section
401(k) Contributions for the Plan Year of the Highly Compensated Employee with
the next highest dollar amount. This amount is then distributed to the Highly
Compensated Employee with the highest dollar amount. However, if a lesser
reduction, when added to the total dollar amount already distributed under this
Section A.3.2, would equal the total Excess 401(k) Contributions, the lesser
reduction amount shall be distributed. This process shall be continued until
the amount of the Excess 401(k) Contributions have been distributed.


 


QNECs will be treated as Section 401(k)
Contributions only if:  (a) the conditions described in Regulation
section 1.401(k)-1(b)(5) are satisfied and (b) they are allocated to
Participants’ Accounts as of a date within that Plan Year and are actually paid
to the Trust no later than the end of the 12-month period immediately following
the Plan Year to which the contributions relate. If the Employer makes a QNEC
that it elects to have treated as a Section 401(k) Contribution, the
Contribution will be in an amount necessary to satisfy the Actual Deferral
Percentage test and will be allocated first to those Non-Highly Compensated
Employees who had the lowest Actual Deferral Ratio.


 


Any distributions of the Excess 401(k) Contributions
for any Plan Year are to be made to Highly Compensated Employees on the basis
of the amount of contributions by, or on behalf of, each Highly Compensated
Employee. The amount of Excess 401(k) Contributions to be distributed for any
Plan Year must be reduced by any excess Salary Deferral Contributions
previously distributed for the taxable year ending in the same Plan Year. To
the extent that Excess Section 401(k) Contributions are distributed pursuant to
this Section A.3.2, the Matching Contributions made with respect to those
Excess Section 401(k) Contributions shall be forfeited.


 


A.3.3       Contribution Percentage Fail Safe Provision. If the
limitation set forth in Section A.2.4 would be exceeded for any Plan Year
any one or more of the following corrective action shall be taken before the
close of the following Plan Year as determined by the Committee in its sole
discretion: (a) the amount of the Excess


 


A-7

















 


Aggregate 401(m)
Contributions for that Plan Year (and any income allocable to those
Contributions as calculated in the manner set forth in Section A.3.5)
shall be forfeited or (b) the Employer may make a QNEC which it elects to have
treated as a Section 401(m) Contribution. However, in the case of testing
for any Plan Year that commences on or after January 1, 2001, a QNEC shall not
be taken into account for purposes of the test set forth in section 401(m) of
the Code and Section A.2.4 for such Plan Year unless it is made and allocated
by the close of such Plan Year.


 


The amount of Excess Aggregate 401(m) Contributions to
be distributed shall be determined in the following manner:


 


First, the Plan will determine how much the Actual
Contribution Ratio of the Highly Compensated Employee with the highest Actual
Contribution Ratio would have to be reduced to satisfy the Actual Contribution
Percentage Test or cause such Actual Contribution Ratio to equal the Actual
Contribution Ratio of the Highly Compensated Employee with the next highest
Actual Contribution Ratio. If a lesser reduction would enable the Plan to
satisfy the Actual Contribution Percentage Test, only this lesser reduction may
be made. Second, this process is repeated until the Actual Contribution Test is
satisfied. The amount of Excess Aggregate 401(m) Contributions is equal to the
sum of these hypothetical reductions multiplied, in each case, by the Highly
Compensated Employee’s Annual Compensation.


 


Then, effective for the Plan Years that commence on or
after January 1, 1997, the total amount of Excess Aggregate 401(m)
Contributions shall be forfeited on the basis of the respective amounts
attributable to each Highly Compensated Employee. The Highly Compensated
Employees subject to the forfeitures are determined using the “dollar leveling
method.” The Matching Contributions of the Highly Compensated Employee with the
greatest dollar amount of Matching Contributions and other contributions
treated as matching contributions for the Plan Year are reduced by the amount
required to cause that Highly Compensated Employee’s Matching Contributions and
other contributions treated as Section 401(m) Contributions for the Plan Year to
equal the dollar amount of the Matching Contributions and other contributions
treated as Section 401(m) Contributions for the Plan Year of the Highly
Compensated Employee with the next highest dollar amount. This amount is then
forfeited from the Account of the Highly Compensated Employee with the highest
dollar amount. However, if a lesser reduction, when added to the total dollar
amount already forfeited under this Section A.3.3, would equal the total Excess
Aggregate 401(m) Contributions, the lesser reduction amount shall be forfeited.
This process shall be continued until the amount of the Excess Aggregate 401(m)
Contributions have been forfeited.


 


A.3.4       Alternative Limitation Fail Safe. As soon as practicable
after the close of each Plan Year, the Committee shall determine whether the
alternative limitation would be exceeded. If the limitation would be exceeded
for any Plan Year, before the close of the following Plan Year the Actual
Deferral Percentage or Contribution Percentage of the eligible Highly
Compensated Employees, or a combination of both, shall be reduced by
distributions made in the manner described in the Regulations. These
distributions shall be in addition to and not in lieu of distributions required
for Excess 401(k) Contributions and Excess Aggregate 401(m) Contributions.


 


A.3.5       Income Allocable to Excess 401(k) Contributions and Excess Aggregate
401(m) Contributions. The income allocable to Excess 401(k)
Contributions for the Plan Year shall be determined by multiplying the income
for the Plan Year allocable to Section 401(k) Contributions by a fraction.
The numerator of the fraction shall be the amount of Excess 401(k)
Contributions made on behalf of the Participant for the Plan Year. The
denominator of the fraction shall be the Participant’s total Account balance
attributable to Section 401(k) Contributions as of the beginning of the
Plan Year plus the Participant’s Section 401(k) Contributions for the Plan
Year. The income allocable to Excess Aggregate 401(m) Contributions for a Plan
Year shall be determined by multiplying the income for the Plan Year allocable
to Section 401(m) Contributions by a fraction. The numerator of the
fraction shall be the amount of Excess Aggregate 401(m) Contributions made on
behalf of the Participant for the Plan Year. The denominator of the fraction
shall be the Participant’s total Account balance attributable to
Section 401(m) Contributions as of the beginning of the Plan Year plus the
Participant’s Section 401(m) Contributions for the Plan Year.


 


A-8

















 


PART
A.4  Limitation on
Allocations


 


A.4.1       Basic Limitation on Allocations. The Annual Additions which
may be credited to a Participant’s Accounts under the Plan for any Limitation
Year will not exceed the Maximum Permissible Amount reduced by the Annual
Additions credited to a Participant’s Account for the same Limitation Year
under any other qualified defined contribution plans maintained by any
Affiliated Employer. If the Annual Additions with respect to the Participant
under such other qualified defined contribution plans are less than the Maximum
Permissible Amount and the Employer Contribution that would otherwise be
contributed or allocated to the Participant’s Accounts under the Plan would
cause the Annual Additions for the Limitation Year to exceed this limitation,
the amount contributed or allocated under the Plan will be reduced so that the
Annual Additions under all qualified defined contribution plans maintained by
any Affiliated Employer for the Limitation Year will equal the Maximum
Permissible Amount. If the Annual Additions with respect to the Participant
under such other qualified defined contribution plans maintained by any
Affiliated Employer in the aggregate are equal to or greater than the Maximum
Permissible Amount, no amount will be contributed or allocated to the
Participant’s Account under the Plan for the Limitation Year. Effective as of
January 1, 1987, until January 1, 2000 (the effective date of the repeal of
section 415(e) of the Code) a permanent adjustment shall be made to the defined
contribution fraction for purposes of applying the limitation of section 415(e)
of the Code to the Plan. The adjustment is to permanently subtract from the
defined contribution numerator an amount equal to the product of (1) the sum of
the defined contribution fraction plus the defined benefit fraction as of the
determination date minus one, times (2) the denominator of the defined
contribution fraction as of the determination date. For this purpose, the
determination date is December 31, 1986. Both fractions in clauses (1) and (2)
above are computed in accordance with section 415 of the Code as amended by the
Tax Reform Act of 1986 and section 1106(i)(3) of the Tax Reform Act of 1986.


 


A.4.2       Estimation of Maximum Permissible Amount. Prior to
determining the Participant’s actual Annual Compensation for the Limitation
Year, the Employer may determine the Maximum Permissible Amount on the basis of
a reasonable estimation of the Participant’s Annual Compensation for such
Limitation Year, uniformly determined for all Participants similarly situated.
As soon as is administratively feasible after the end of the Limitation Year,
the Maximum Permissible Amount for the Limitation Year shall be determined on
the basis of the Participant’s actual Annual Compensation for such Limitation
Year.


 


A.4.3       Attribution of Excess Amounts. If a Participant’s Annual
Additions under the Plan and all other qualified defined contribution plans
maintained by any Affiliated Employer result in an Excess Amount, the total
Excess Amount shall be attributed to the Plan.


 


A.4.4       Treatment of Excess Amounts. If an Excess Amount attributed
to the Plan is held or contributed as a result of or because of (i) the
allocation of forfeitures, (ii) reasonable error in estimating a Participant’s
Considered Compensation, (iii) reasonable error in calculating the maximum
Salary Deferral Contribution that may be made with respect to a Participant
under section 415 of the Code or (iv) any other facts and circumstances
which the Commissioner of Internal Revenue finds to be justified, the Excess
Amount shall be reduced as follows:


 


(a)           First, the
Excess Amount shall be reduced to the extent necessary by distributing to the
Participant all Salary Deferral Contributions together with their earnings.
These distributed amounts are disregarded for purposes of the testing and
limitations contained in this Appendix A.


 


(b)           Second, if
the Participant is still employed by the Employer at the end of the Limitation
Year, then such Excess Amounts shall not be distributed to the Participant, but
shall be reallocated to a suspense account and shall be reapplied to reduce
future Employer Contributions (including any allocation of forfeitures) under
the Plan for such Participant in the next Limitation Year, and for each
succeeding Limitation Year, if necessary.


 


(c)           If, after
application of paragraph (b) of this Section, an Excess Amount still exists,
and the Participant is not still employed by the Employer at the end of the Limitation
Year, then such Excess Amounts in the Participant’s Accounts shall not be
distributed to the Participant, but shall be reallocated to a suspense account
and shall be reapplied to reduce future Employer Contributions (including
allocation of


 


A-9

















 


any forfeitures),
for all remaining Participants in the next Limitation Year and each succeeding
Limitation Year if necessary.


 


(d)           If a
suspense account is in existence at any time during the Limitation Year
pursuant to this Section, it will not participate in the allocation of the
Trust Fund’s investment gains and losses. If a suspense account is in existence
at any time during a particular Limitation Year, all amounts in the suspense
account must be allocated and reallocated to Participants’ Accounts before any
Employer Contribution may be made to the Plan for that Limitation Year. Excess
Amounts may not be distributed to Participants or former Participants. If the
Plan is terminated while a suspense account described in this Section is
in existence, the amount in such suspense account shall revert to the
Employer(s) to which it is attributable.


 


A-10

















 


APPENDIX B



TOP-HEAVY REQUIREMENTS


 


PART
B.1  Definitions


 


Definitions. As used herein, the
following words and phrases have the meaning attributed to them below:


 


B.1.1       “Aggregate Accounts” means the total
of all account balances.


 


B.1.2       “Aggregation Group” means
(a) each plan of the Employer or any Affiliated Employer in which a Key
Employee is a Participant and (b) each other plan of the Employer or any
Affiliated Employer which enables any plan in (a) to meet the requirements of
either section 401(a)(4) or 410 of the Code. Any Employer may treat a plan
not required to be included in the Aggregation Group as being a part of the
group if the group would continue to meet the requirements of
section 401(a)(4) and 410 of the Code with that plan being taken into
account.


 


B.1.3       “Determination Date” means for
a given Plan Year the last day of the preceding Plan Year or in the case of the
first Plan Year the last day of that Plan Year.


 


B.1.4       “Key Employee” means, for Plan
Years commencing prior to January 1, 2002, an Employee or former Employee
(including a deceased Employee) or Beneficiary of an Employee who at any time
during the Plan Year or any of the four preceding Plan Years is (a) an officer
of an Employer or any Affiliated Employer having Annual Compensation greater
than 50 percent of the annual addition limitation of section 415(b)(1)(A) of
the Code for the Plan Year, (b) one of the ten employees having Annual
Compensation from an Employer or any Affiliated Employer of greater than 100
percent of the annual addition limitation of section 415(c)(1)(A) of the Code for
the Plan Year and owning or considered as owning (within the meaning of section
318 of the Code) the largest interest in an Employer or any Affiliated
Employer, treated separately, (c) a Five Percent Owner of an Employer or any
Affiliated Employer, treated separately, or (d) a one percent owner of an
Employer or any Affiliated Employer, treated separately, having Annual
Compensation from an Employer or any Affiliated Employer of more than
$150,000.00. For this purpose no more than 50 employees or, if lesser, the
greater of three employees or ten percent of the employees shall be treated as
officers. Section 416(i) of the Code shall be used to determine percentage of
ownership. For the purpose of the test set out in (b) above, if two or more
employees have the same interest in an Employer, the employee with the greater
Annual Compensation from the Employer shall be treated as having the larger
interest.


 


“Key Employee” means for Plan Years commencing on or after
January 1, 2002, an Employee or former Employee (including a deceased Employee)
who at any time during the Plan Year is (a) an officer of any Affiliated
Employer having Annual Compensation greater than $130,000.00 (as adjusted by
the Secretary of Treasury from time to time for increases in the cost of
living), (b) a Five Percent Owner of any Affiliated Employer, treated
separately, or (c) a One Percent Owner of any Affiliated Employer, treated
separately, having Annual Compensation greater than $150,000.00. For this
purpose no more than fifty (50) employees or, if lesser, the greater of three
(3) employees or ten percent (10%) of the employees shall be treated as
officers.


 


For purposes of determining the number of officers
taken into account, the following employees shall be excluded:  (1) employees who have not completed six (6)
months of Vesting Service, (2) employees who normally work less than seventeen
and one-half (17-1/2) hours per week, (3) employees who normally work not more
than six (6) months during any year, (4) employees who have not attained the
age of twenty-one (21), and (5) except to the extent provided in Regulations,
employees who are included in a unit of employees covered by an agreement which
the Secretary of Labor finds to be a collective bargaining agreement between
employee representatives and an Affiliated Employer. Section 416(i) of the Code
shall be used to determine percentage of ownership.


 


The determination of who is a Key Employee will be
made in accordance with section 416(i) of the Code and applicable Regulations.


 


B-1

















 


B.1.5       “Non-Key Employee” means any
Employee who is not a Key Employee.


 


B.1.6       “Top-Heavy Plan” means any
plan which has been determined to be top-heavy under the test described in
Appendix B of the Plan.


 


PART
B.2  Application


 


B.2.1       Application. The requirements described in this Appendix B
shall apply to each Plan Year that the Plan is determined to be a Top-Heavy
Plan.


 


B.2.2       Top-Heavy Test. If on the Determination Date the Aggregate
Accounts of Key Employees in the Plan exceed 60 percent of the Aggregate
Accounts of all Employees in the Plan, the Plan shall be a Top-Heavy Plan for
that Plan Year. In addition, if the Plan is required to be included in an
Aggregation Group and that group is a top-heavy group, the Plan shall be
treated as a Top-Heavy Plan. An Aggregation Group is a top-heavy group if on
the Determination Date the sum of (a) the present value of the cumulative
accrued benefits for Key Employees under all defined benefit plans in the Aggregation
Group which contains the Plan, plus (b) the total of all of the accounts
of Key Employees under all defined contribution plans included in the
Aggregation Group (which contains the Plan) is more than 60 percent of a
similar sum determined for all employees covered in the Aggregation Group which
contains the Plan.


 


In applying the above tests, the following rules shall
apply:


 


(a)           effective
for Plan Years that begin on or after January 1, 2002, in determining the
present value of the accumulated accrued benefits for any Employee or the
amount in the account of any Employee, the value or amount shall be increased
by all distributions made to or for the benefit of the Employee under the Plan
after his Separation From Service and during the one-year period ending on the
Determination Date;


 


(b)           effective
for Plan Years that begin on or after January 1, 2002, in determining the
present value of the accumulated accrued benefits for any Employee or the
amount in the account of any Employee, the value or amount shall be increased
by all distributions made to or for the benefit of the Employee under the Plan
prior to his Separation From Service and during the five-year period ending on
the Determination Date;


 


(c)           effective
for Plan Years that begin prior to January 1, 2002, in determining the
present value of the accumulated accrued benefits for any Employee or the
amount in the account of any Employee, the value or amount shall be increased
by all distributions made to or for the benefit of the Employee under the Plan
during the five-year period ending on the Determination Date;


 


(d)           all
rollover contributions made by the Employee to the Plan shall not be considered
by the Plan for either test;


 


(e)           if an
Employee is a Non-Key Employee under the Plan for the Plan Year but was a Key
Employee under the Plan for a prior Plan Year, his Account shall not be
considered;


 


(f)            effective
for Plan Years that begin on or after January 1, 2002, notwithstanding any
other provision of the Plan, benefits shall not be taken into account in
determining the top-heavy ratio for any Employee who has not performed services
for the Employer during the last one-year period ending upon the Determination
Date; and


 


(g)           effective
for Plan Years that begin prior to January 1, 2002, notwithstanding any
other provision of the Plan, benefits shall not be taken into account in
determining the top-heavy ratio for any


 


B-2

















 


Employee who has
not performed services for the Employer during the last five-year period ending
upon the Determination Date.


 


B.2.3       Vesting Restrictions if Plan Becomes Top-Heavy. If a
Participant has at least one Hour of Service during a Plan Year when the Plan
is a Top-Heavy Plan, he shall either vest under each of the normal vesting
provisions of the Plan or under the following vesting schedule, whichever is
more favorable:


 


	
  Completed Years of Active
  Service

  	
   

  	
  Percentage of Amount Invested

  In Accounts Containing

  Employer Contributions

  
	
   

  	
   

  	
   

  
	
  Less than two years

  	
   

  	
  0

  
	
  Two years but less than three years

  	
   

  	
  20

  
	
  Three years but less than four years

  	
   

  	
  40

  
	
  Four years but less than five years

  	
   

  	
  60

  
	
  Five years but less than six years

  	
   

  	
  80

  
	
  Six years or more

  	
   

  	
  100

  



 


If the Plan ceases to be a Top-Heavy Plan, this
requirement shall no longer apply. After that date, the normal vesting
provisions of the Plan shall be applicable to all subsequent Contributions by
the Employer. For purposes of this Section B.2.3 Years of Active Service shall
be determined under the rules of section 411(a)(4), (5) and (6) of the Code
except that Years of Active Service beginning prior to January 1, 1984 and
Years of Active Service for any Plan Year for which the Plan was not top-heavy
shall be disregarded. Also, any Year of Active Service shall be disregarded to
the extent that such Year of Active Service occurs during a Plan Year when the
Plan benefits (within the meaning of section 410(b) of the Code) no Key
Employee or former Key Employee.


 


B.2.4       Minimum Contributions if Plan Becomes Top-Heavy. If the Plan
is a Top-Heavy Plan and the normal allocation of the Employer Contribution and
forfeitures is less than five percent of any Non-Key Employee Participant’s
Annual Compensation, the Committee, without regard to the normal allocation
procedures, shall allocate the Employer Contribution and the forfeitures among
the Participants who are Non-Key Employees and who are in the employ of the
Employer at the end of the Plan Year in proportion to each such Participant’s
Annual Compensation until each Non-Key Employee Participant has had an amount
equal to five percent of his Annual Compensation allocated to his Account. At
that time, any more Employer Contributions or forfeitures shall be allocated
under the normal allocation procedures described earlier in the Plan. Amounts
that may be treated as Section 401(k) Contributions made on behalf of
Non-Key Employees may not be included in determining the minimum contribution
required under this Section to the extent that they are treated as
Section 401(k) Contributions for purposes of the Actual Deferral
Percentage test.


 


In applying this restriction, the following rules
shall apply:


 


(a)           Each
Employee who is eligible for participation (without regard to whether he has
made mandatory contributions, if any are required, or whether his compensation
is less than a stated amount) shall be entitled to receive an allocation under
this Section; and


 


(b)           All
defined contribution plans required to be included in the Aggregation Group
shall be treated as one plan for purposes of meeting the three percent maximum;
this required aggregation shall not apply if the Plan is also required to be
included in an Aggregation Group which includes a defined benefit plan and the
Plan enables that defined benefit plan to meet the requirements of
sections 401(a)(4) or 410 of the Code.


 


B.2.5       Disregard of Government Programs. If the Plan is a Top-Heavy
Plan, it must meet the vesting and benefit requirements described in this
Article without taking into account contributions or benefits under


 


B-3

















 


Chapter 2 of
the Code (relating to the tax on self-employment income), Chapter 21 of
the Code (relating to the Federal Insurance Contributions Act), Title II
of the Social Security Act, or any other Federal or State law.


 


B.2.6       Modification of the Section 415(e) Limit if Plan Becomes Top-Heavy.
For Plan Years beginning before January 1, 2000, in any Plan Year that the Plan
is a Top-Heavy Plan the limitations in section 415(e) of the Code and Appendix
A of the Plan shall be applied by substituting the number “1.00” for the number
“1.25” wherever it appears therein. Such substitution shall not cause a
reduction in any accrued benefit attributable to contributions for a Plan Year
prior to the Plan Year in which the Plan is a Top-Heavy Plan.


 


B-4

















 


APPENDIX C



ADMINISTRATION OF THE PLAN


 


C.1          Appointment, Term, Resignation, and Removal. The Board shall
appoint a Committee of not less than two persons, the members of which shall
serve until their resignation, death, or removal. The Sponsor shall notify the
Trustee in writing of its composition from time to time. Any member of the
Committee may resign at any time by giving written notice of such resignation
to the Sponsor. Any member of the Committee may be removed by the Board, with
or without cause. Vacancies in the Committee arising by resignation, death,
removal, or otherwise shall be filled by such persons as may be appointed by
the Board.


 


C.2          Powers. The Committee shall have exclusive responsibility
for the administration of the Plan, according to the terms and provisions of
this document, and shall have all powers necessary to accomplish such purposes,
including, but not by way of limitation, the right, power, and authority:


 


(a)           to make rules
and regulations for the administration of the Plan which are not inconsistent
with the terms and provisions thereof, provided such rules and regulations are
evidenced in writing;


 


(b)           to
construe all terms, provisions, conditions, and limitations of the Plan; and
its construction thereof made in good faith and without discrimination in favor
of or against any Participant or former Participant shall be final and
conclusive on all parties at interest;


 


(c)           to correct
any defect, supply any omission, or reconcile any inconsistency which may
appear in the Plan in such manner and to such extent as it shall deem expedient
to carry the Plan into effect for the greatest benefit of all parties at
interest, and its judgment in such matters shall be final and conclusive as to
all parties at interest;


 


(d)           to select,
employ, and compensate from time to time such consultants, actuaries,
accountants, attorneys, and other agents and employees as the Committee may
deem necessary or advisable for the proper and efficient administration of the
Plan, and any agent, firm, or employee so selected by the Committee may be a
disqualified person, but only if the requirements of section 4975(d) of
the Code have been met;


 


(e)           to resolve
all questions relating to the eligibility of Employees to become Participants,
and to determine the period of Active Service and the amount of Considered
Compensation upon which the benefits of each Participant shall be calculated;


 


(f)            to
resolve all controversies relating to the administration of the Plan, including
but not limited to (1) differences of opinion arising between the Employer and
a Participant or former Participant, and (2) any questions it deems advisable
to determine in order to promote the uniform and nondiscriminatory administration
of the Plan for the benefit of all parties at interest;


 


(g)           to direct
and instruct or to appoint an investment manager or managers which would have
the power to direct and instruct the Trustee in all matters relating to the
preservation, investment, reinvestment, management, and disposition of the
Trust assets; provided, however, that the Committee shall have no authority
that would prevent the Trustee from being an “agent independent of the issuer,”
as that term is defined in Rule 10b-18 promulgated under the Securities
Exchange Act of 1934, at any time that the Trustee’s failure to maintain such
status would result in the Sponsor or any other person engaging in a
“manipulative or deceptive device or contrivance” under the provisions of Rule
10b-6 of such Act;


 


(h)           to direct
and instruct the Trustee in all matters relating to the payment of Plan
benefits and to determine a Participant’s or former Participant’s entitlement
to a benefit should he appeal a denial of his claim for a benefit or any
portion thereof; and


 


C-1

















 


(i)            to
delegate such of its clerical and recordation duties under the Plan as it may
deem necessary or advisable for the proper and efficient administration of the
Plan.


 


C.3          Organization. The Committee shall select from among its
members a chairman, who shall preside at all of its meetings, and shall select
a secretary, without regard as to whether that person is a member of the
Committee, who shall keep all records, documents, and data pertaining to its
supervision of the administration of the Plan.


 


C.4          Quorum and Majority Action. A majority of the members of the
Committee shall constitute a quorum for the transaction of business, and the
vote of a majority of the members present at any meeting will decide any
question brought before that meeting. In addition, the Committee may decide any
question by a vote, taken without a meeting, of a majority of its members.


 


C.5          Signatures. The chairman, the secretary, and any one or more
of the members of the Committee to which the Committee has delegated the power,
shall each, severally, have the power to execute any document on behalf of
the  Committee, and to execute any
certificate or other written evidence of the action of the Committee. The Trustee,
after being notified of any such delegation of power in writing, shall
thereafter accept and may rely upon any document executed by such member or
members as representing the action of the Committee until the Committee files
with the Trustee a written revocation of that delegation of power.


 


C.6          Disqualification of Committee Members. A member of the
Committee who is also a Participant of the Plan shall not vote or act upon any
matter relating solely to himself.


 


C.7          Disclosure to Participants. The Committee shall make
available to each Participant, former Participant, and Beneficiary for his
examination such records, documents, and other data as are required under
ERISA, but only at reasonable times during business hours. No Participant,
former Participant, or Beneficiary shall have the right to examine any data or
records reflecting the compensation paid to any other Participant, former
Participant, or Beneficiary, and the Committee shall not be required to make
any data or records available other than those required by ERISA.


 


C.8          Standard of Performance. The Committee and each of its
members shall use the care, skill, prudence, and diligence under the
circumstances then prevailing that a prudent man acting in a like capacity and
familiar with such matters would use in conducting his business as the
administrator of the Plan; shall, when exercising its power to direct
investments, diversify the investments of the Plan so as to minimize the risk
of large losses, unless under the circumstances it is clearly prudent not to do
so; and shall otherwise act in accordance with the provisions of the Plan and
ERISA.


 


C.9          Liability of Administrative Committee and Liability Insurance.
No member of the Committee shall be liable for any act or omission of any other
member of the Committee, the Trustee, any investment manager, or any
Participant or former Participant who directs the investment of his Account or
other agent appointed by the Committee except to the extent required by the
terms of ERISA, and any other applicable state or federal law, which liability
cannot be waived. No Participant of the Committee shall be liable for any act
or omission on his own part except to the extent required by the terms of
ERISA, and any other applicable state or federal law, which liability cannot be
waived. In this connection, each provision hereof is severable and if any
provision is found to be void as against public policy, it shall not affect the
validity of any other provision hereof.


 


Further, it is specifically provided that the Trustee
may, at the direction of the Committee, purchase out of the Trust assets
insurance for the members of the Committee and any other fiduciaries appointed
by the Committee, and for the Trust itself to cover liability or losses
occurring by reason of the act or omission of any one or more of the members of
the Committee or any other fiduciary appointed by them under the Plan, provided
such insurance permits recourse by the insurer against the members of the
Committee or the other fiduciaries concerned in the case of a breach of a
fiduciary obligation by one or more members of the Committee or other fiduciary
covered thereby.


 


C-2

















 


C.10        Bonding. No member of the Committee shall be required to
give bond for the performance of his duties hereunder unless required by a law
which cannot be waived.


 


C.11        Compensation. The Committee shall serve without compensation
for their services, but shall be reimbursed by the Employers for all expenses
properly and actually incurred in the performance of their duties under the
Plan unless the Employers elect to have such expenses paid out of the Trust
assets.


 


C.12        Persons Serving in Dual Fiduciary Roles. Any person, group
of persons, corporations, firm, or other entity may serve in more than one
fiduciary capacity with respect to the Plan, including the ability to serve
both as a successor trustee and as a member of the Committee.


 


C.13        Administrator. For all purposes of ERISA, the administrator
of the Plan within the meaning of ERISA shall be the Sponsor. The Sponsor shall
have final responsibility for compliance with all reporting and disclosure
requirements imposed with respect to the Plan under any federal or state law,
or any regulations promulgated thereunder.


 


C.14        Named Fiduciary. The members of the Committee shall be the
“named fiduciary” for purposes of section 402(a)(1) of ERISA, and as such
shall have the authority to control and manage the operation and administration
of the Plan, except to the extent such authority and control is allocated or
delegated to other parties pursuant to the terms of the Plan.


 


C.15        Standard of Judicial Review of Committee Actions. The
Committee has full and absolute discretion in the exercise of each and every
aspect of its authority under the Plan, including without limitation, the
authority to determine any person’s right to benefits under the Plan, the
correct amount and form of any such benefits; the authority to decide any
appeal; the authority to review and correct the actions of any prior
administrative committee; and all of the rights, powers, and authorities
specified in this Appendix and elsewhere in the Plan. Notwithstanding any
provision of law or any explicit or implicit provision of this document, any
action taken, or ruling or decision made, by the Committee in the exercise of
any of its powers and authorities under the Plan will be final and conclusive
as to all parties other than the Sponsor or Trustee, including without
limitation all Participants, former Participants and Beneficiaries, regardless
of whether the Committee or one or more members thereof may have an actual or
potential conflict of interest with respect to the subject matter of such
action, ruling, or decision. No such final action, ruling, or decision of the
Committee will be subject to de novo review in any judicial proceeding; and no
such final action, ruling, or decision of the Committee may be set aside unless
it is held to have been arbitrary and capricious by a final judgment of a court
having jurisdiction with respect to the issue.


 


C.16        Indemnification of Committee by the Sponsor. The Sponsor
shall indemnify and hold harmless the Committee, the Committee members, and any
persons to whom the Committee has allocated or delegated its responsibilities
in accordance with the provisions hereof, as well as any other fiduciary who is
also an officer, director, or Employee of an Employer, and hold each of them
harmless from and against all claims, loss, damages, expense, and liability
arising from their responsibilities in connection with the administration of
the Plan which is not otherwise paid or reimbursed by insurance, unless the
same shall result from their own willful misconduct.


 


C-3

















 


APPENDIX D



FUNDING


 


D.1          Benefits Provided Solely by Trust. All benefits payable
under the Plan shall be paid or provided for solely from the Trust, and the
Employer assumes no liability or responsibility therefor.


 


D.2          Funding of Plan. The Plan shall be funded by one or more separate
Trusts. If more than one Trust is used, each Trust shall be designated by the
name of the Plan followed by a number assigned by the Committee at the time the
Trust is established.


 


D.3          Incorporation of Trust. Each Trust is a part of the Plan.
All rights or benefits which accrue to a person under the Plan shall be subject
also to the terms of the agreements creating the Trust or Trusts and any
amendments to them which are not in direct conflict with the Plan.


 


D.4          Authority of Trustee. Each Trustee shall have full title and
legal ownership of the assets in the separate Trust which, from time to time,
are in his separate possession. No other Trustee shall have joint title to or
joint legal ownership of any asset in one of the other Trusts held by another
Trustee. Each Trustee shall be governed separately by the trust agreement
entered into between the Employer and that Trustee and the terms of the Plan
without regard to any other agreement entered into between any other Trustee
and the Employer as a part of the Plan.


 


D.5          Allocation of Responsibility. To the fullest extent
permitted under section 405 of ERISA, the agreements entered into between
the Employer and each of the Trustees shall be interpreted to allocate to each
Trustee its specific responsibilities, obligations and duties so as to relieve
all other Trustees from liability either through the agreement, Plan or ERISA,
for any act of any other Trustee which results in a loss to the Plan because of
his act or failure to act.


 


D.6          Trustee’s Fees and Expenses. The Trustee shall receive for
its services as Trustee hereunder the compensation which from time to time may
be agreed upon by the Sponsor and the Trustee. All of such compensation,
together with the expenses incurred by the Trustee in connection with the
administration of this Trust, including fees for legal services rendered to the
Trustee, all other charges and disbursements of the Trustee, and all other
expenses of the Plan shall be charged to and deducted from the Trust Fund,
unless the Sponsor elects in writing to have any part or all of such
compensation, expenses, charges, and disbursements paid directly by the
Sponsor. The Trustee shall deduct from and charge against the Trust assets any
and all taxes paid by it which may be levied or assessed upon or in respect of
the Trust hereunder or the income thereof, and shall equitably allocate the
same among the several Participants and former Participants.


 


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APPENDIX E


 


OPTIONAL FORMS OF DISTRIBUTION


 


Subject to Sections 5.04, 5.07 and 5.08 of the Plan,
in addition to the forms of distribution available under Section 5.03 of the
Plan, the optional forms of distributions set forth below shall be available on
and after the date on which the Sponsor elects to treat the Plan and the Quanex
Corporation Salaried Employees’ Pension Plan as one plan for purposes of
section 410(b) of the Code:


 


1.             Option A. A pension under which the Participant or former
Participant shall receive equal monthly payments for his lifetime.


 


2.             Option B. A last survivor pension under which the
Participant or former Participant shall receive 85 percent of the monthly
pension benefit otherwise payable under Option A, and upon the death of the
Participant or former Participant, the Beneficiary shall receive 1⁄2 of the
monthly pension benefit paid to the Participant or former Participant prior to
this death, provided however, that if the Beneficiary is younger than the
Participant or former Participant, the 85 percent factor shall be reduced by
one percent for each full year’s difference in the age of the Participant or
former Participant and the Beneficiary, and if the Beneficiary is older than
the Participant or former Participant, the 85 percent factor shall be increased
by one percent for each full years difference in the age of the Participant or
former Participant and the Beneficiary (up to a maximum of 100 percent).


 


3.             Option C. A last survivor pension under which the
Participant or former Participant shall receive 70 percent of the monthly
pension benefit otherwise payable under Option A, and upon the death of the
Participant or former Participant, the Beneficiary shall receive a monthly
pension benefit equal to that paid to the Participant or former Participant.


 


4.             Option D. A reduced monthly pension payable to the
Participant or former Participant during his lifetime, provided that, if the
Participant or former Participant dies prior to his receipt of an amount equal
to 120 monthly payments, the then-present value of the remainder of such 120
monthly payments shall be payable to his Beneficiary in a lump sum. If the
former Participant dies prior to his receipt of all of such 120 payments
without having designated a Beneficiary, of if the Beneficiary predeceases the
former Participant, the then-present value of any remaining payments shall be
paid in a lump sum to the former Participant’s estate. If the designated
Beneficiary dies after the former Participant and before all of such 120
monthly payments have been made, the then-present value of the unpaid balance
of such payments shall be paid in a lump sum to the Beneficiary’s estate.


 


5.             Limitations on Options B, C and D.


 


(a)           Options A,
B and C will not be available to any Participant if the reduced pension is less
than $10 per month.


 


(b)           Except as
otherwise provided elsewhere in the Plan, any election shall be automatically
revoked if either the Participant or former Participant or Beneficiary dies
before the Participant’s or former Participant’s Annuity Starting Date.


 


(c)           Where the
Beneficiary is a person other than the Participant’s or former Participant’s
Spouse, the Beneficiary under either Option B or Option C must be of such age
and sex that the amount payable to the Participant or former Participant will
exceed 50 percent of the amount that would otherwise be payable if the
Participant or former Participant had elected a life annuity for his life.


 


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No pension can exceed the life of the Participant or
former Participant or the life of the Participant or former Participant and his
designated Beneficiary, or in the case of a period certain, the life expectancy
of the Participant or former Participant or the life expectancy of the
Participant or former Participant and his designated Beneficiary.


 


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