EX-10.2








EXHIBIT 10.2




BRUSH ENGINEERED MATERIALS INC.




2005 DEFERRED COMPENSATION PLAN FOR NONEMPLOYEE DIRECTORS




(EFFECTIVE JANUARY 1, 2005)




Recitals




1. Brush Engineered Materials Inc. (the “Company”) has suspended the 1992 Brush Engineered
Materials Inc. Deferred Compensation Plan for Nonemployee Directors (As Amended as of May 16, 2000)
and as further amended by Amendments No. 1, No. 2, and No. 3.



2. The American Jobs Creation Act of 2004, P.L. 108-357 (the “AJCA”) added a new Section 409A
to the Internal Revenue Code of 1986, as amended (the “Code”), which significantly changed the
Federal tax law applicable to “amounts deferred” under nonqualified deferred compensation plans
after December 31, 2004;



3. Pursuant to the AJCA, the Secretary of the Treasury and the Internal Revenue Service will
issue proposed, temporary or final regulations and/or other guidance with respect to the provisions
of new Section 409A of the Code (collectively, the “AJCA Guidance”);




4. The AJCA Guidance has not yet been issued; and



5. The Company now desires to adopt a new deferred compensation plan for nonemployee
directors, effective January 1, 2005.



ARTICLE I




INTRODUCTION




1.1. Purpose of the Plan. The purpose of the Brush Engineered Materials Inc. 2005 Deferred
Compensation Plan for Nonemployee Directors is to provide the nonemployee Directors of the Company
with the opportunity to defer receipt of compensation payable for services as a Director and to
help solidify the common interest of Directors and shareholders in enhancing the value of the
Company’s Common Shares.




1.2. American Jobs Creation Act (AJCA).



(a) It is intended that the Plan (including any amendments thereto) comply with the provisions
of Section 409A of the Code, as enacted by the AJCA, so as to prevent the inclusion in gross income
of any amount credited to a Director’s Deferred Compensation Account hereunder in a taxable year
that is prior to the taxable year or years in which such amounts would otherwise be actually
distributed or made available to the Director. The Plan shall be administered in a manner that
will comply with Section 409A of the Code, including proposed, temporary or final regulations or
any other guidance issued by the Secretary of the Treasury and the Internal Revenue Service with
respect thereto (collectively with the AJCA, the “AJCA Guidance”). Any Plan provision that would
cause the Plan to fail to satisfy Section 409A of the Code (including, without limitation, any
provisions of this Amendment No. 3) shall have no force and effect until amended to comply with
Code Section 409A (which amendment may be retroactive to the extent permitted by the AJCA
Guidance).




(b) The effective date of the Plan is January 1, 2005.



ARTICLE II




DEFINITIONS




As used herein, the following words shall have the meanings stated after them unless otherwise
specifically provided:




2.1. “Change in Control” shall have the meaning assigned thereto in Section 5.5 hereof.




2.2. “Committee” shall mean the Governance Committee of the Board of Directors.




2.3. “Common Shares” shall mean the Common Shares, without par value, of the Company.




2.4. “Company” shall mean Brush Engineered Materials Inc.



2.5. “Deferred Compensation Account” shall have the meaning assigned thereto in Section 3.1
hereof.




2.6. “Director” shall mean any nonemployee director of the Company.




2.7. “Insolvent” shall have the meaning assigned thereto in Section 6.2 hereof.



2.8. “Plan” shall mean the 2005 Brush Engineered Materials Inc. Deferred Compensation Plan for
Nonemployee Directors, as amended from time to time.




2.9. “Terminated Participant” shall have the meaning assigned thereto in Section 8.3 hereof.




2.10. “Trust” shall have the meaning assigned thereto in Section 4.1 hereof.




2.11. “Trust Account” shall have the meaning assigned thereto in Section 4.2 hereof.



2.12. “Trust Agreement” shall mean the Trust Agreement entered into between the Company and
the Trustee in connection with the Plan.




2.13. “Trust Fund” shall have the meaning assigned thereto in Section 4.2 hereof.



2.14. “Trustee” shall mean such person or entity as may be chosen by the Company from time to
time to act as the trustee under the Trust Agreement, together with the successors of such person
or entity as may be provided in the Trust Agreement.



ARTICLE III




ELECTIONS BY DIRECTORS




3.1. Compensation Reduction for 2005 and Later Years. Not later than December 31 of any
calendar year, beginning with December 31, 2004 for the calendar year 2005, a Director may, by
filing an annual written election with the Committee, direct the Company (a) to reduce the
compensation payable to him or her (determined without regard to the provisions of this Section)
for services as a Director during the next calendar year in such amount as elected by the Director
and (b) to credit the amount of such reduction to the Director’s Deferred Compensation Account.



3.2. Partial Years. If a Director first becomes a Director after January 1st of any calendar
year, the Director may, by filing a written election with the Committee, direct the Company (a) to
reduce the compensation payable to him or her for future services as a Director during the year in
such amount as elected by the Director and (b) to credit the amount of such reduction to the
Director’s Deferred Compensation Account. Any such election shall be made within 30 days after an
individual becomes a Director, and shall apply only to compensation for services as a Director
performed after the date of such election.



3.3. Elections Irrevocable. All elections described in this Article shall be made on an
election form specified by the Committee and filed with the Committee. Once an election becomes
effective pursuant to this Article, such election shall be irrevocable and shall remain in effect
until the end of the calendar year to which it relates.



3.4. Deferred Compensation Accounts. Each Director who has elected to have his or her
compensation reduced pursuant to this Article shall have a nonforfeitable right to the balance from
time to time of his or her Deferred Compensation Account. Each Director’s Deferred Compensation
Account shall be subdivided into separate subaccounts for each year of participation. In addition
to the credits to a Director’s Deferred Compensation Account described in Sections 3.1, 3.2, and
3.3 hereof, a Director’s Deferred Compensation Account (and the appropriate subaccounts) shall be
credited or debited with, amounts equal to the income, earnings, gains or losses on the Trust
Account maintained with respect to the Director under the Trust Agreement at such times as such
items are credited to or debited from such Trust Account and shall be debited for any distributions
to the Director under Article V.



ARTICLE IV




ACCOUNTS AND INVESTMENTS




4.1. Contribution. (a) The Company shall from time to time transfer to the Trustee to be
held under the Trust Agreement in a trust (the “Trust”) cash funds equal to the amounts by which
Directors elect to have their compensation reduced pursuant to this Plan. All such transfers shall
be made within 30 days after such compensation would have been paid to the Director but for the
Director’s compensation reduction election.



(b) Except as provided with respect to the creditors of the Company in Article VI hereof, all
contributions and other transfers by the Company to the Trust pursuant to Section 4.1(a) hereof
shall be irrevocable, and (except as so provided) the Company shall have no right to the return of
any funds so contributed or transferred to the Trust or any earnings thereon.



4.2. Establishment and Adjustment of Accounts. The Trustee shall establish a separate account
under the Trust (a “Trust Account”) for any Director who defers compensation pursuant to the Plan.
As of December 31 of each year and on such other dates as the Committee may direct, the fair market
value of the assets of the Trust allocated to all Trust Accounts (the “Trust Fund”) shall be
determined by the Trustee.



4.3. Investment of Assets. The assets of the Trust Fund shall be held by the Trustee in the
name of the Trust. As amounts are received by the Trustee, it shall invest the funds pursuant to
the Trust Agreement, which shall authorize the Trustee to invest the funds contained in each Trust
Account in Common Shares.



4.4. Assets Held in Cash. The Trustee may, in its sole discretion, maintain in cash such
amounts as it deems necessary to meet the needs of the Trust from time to time. Amounts maintained
in cash by the Trustee shall be kept to a minimum consistent with the duties and obligations of the
Trustee as set forth in the Trust Agreement and shall not be required to be invested at interest.



4.5. Trustee’s Fees. The fees and expenses of the Trustee under the Trust Agreement shall be
paid by the Company.



ARTICLE V




PAYMENT OF ACCOUNTS




5.1. Time of Payment. Distribution of each subaccount included in a Director’s Deferred
Compensation Account shall commence or be made in the manner described in Section 5.2 hereof as
soon as is reasonably practicable, but not later than 60 days, after the earlier of: (i) the date
of termination of service as a Director on account of resignation, retirement, death or otherwise,
(ii) if so specified on the Director’s election form for the particular year (or on the 2005
election form for all current Directors), the date the Director reaches the age of 70 or older, or
(iii) the occurrence of a Change in Control of the Company. However, if the aggregate amount
credited to any Director’s Deferred Compensation Account is less than $17,500, the distribution of
the Director’s entire Deferred Compensation shall be in a lump sum on the applicable date.



5.2. Method of Distribution. Prior to December 31 of end year, beginning with December 31,
2004, a Director shall file an annual election with the Committee to specify whether amounts
credited to his Deferred Compensation Account for the following year shall be distributed to him or
her (or his or her beneficiary) in a single lump sum payment at the time described in Section 5.1,
or in not more than ten annual installments commencing at such time. The amounts credited to the
Director’s Deferred Compensation Account for such year shall be distributed or commence to be
distributed to the Director or the Director’s beneficiary at the time described in Section 5.1 in
the manner so specified. The amount of each installment payment shall be calculated by dividing
the amount credited to the applicable subaccount in the Director’s Deferred Compensation Account at
the time of each such payment (as determined by the Committee) by the number of remaining
installments (including the current installment). If the Company is not Insolvent at the time of
any payment, the payment shall be made from the Trust and charged to the Director’s Trust Account.
The Common Shares shall be distributed in kind.



5.3. Designation of Beneficiary. Each Director participating in this Plan shall designate a
beneficiary or beneficiaries to whom distribution shall be made pursuant to Section 5.2 in the
event of the death of the Director before his or her entire Deferred Compensation Account is
distributed. If there is no designated beneficiary, or no designated beneficiary surviving at a
Director’s death the Director’s beneficiary shall be his or her estate. Beneficiary designations
shall be made in writing. A Director may designate a new beneficiary or beneficiaries at any time
by filing a new election with the Committee.



5.4. Taxes. In the event any taxes are required by law to be withheld or paid from any
distributions made pursuant to the Plan, the Company or Trustee (as applicable) shall deduct such
amounts from such distributions and shall transmit the withheld amounts to the appropriate taxing
authority.



5.5. Definition of Change in Control. A “Change in Control” of the Company shall have
occurred if at any time any of the following events shall occur:




(a) The Board of Directors of the Company at any time shall fail to include a majority
of directors who are either “Original Directors” or “Approved Directors”. An Original
Director is a director who is serving on January 1, 1995. An Approved Director is a
director who, after such date, is elected to the Board of Directors of Brush Wellman Inc. or
the Board of Directors of the Company, or is nominated for election by the shareholders, by
a vote of at least two-thirds of the Original Directors and the previously elected Approved
Directors, if any;




(b) Any person (as the term “person” is defined in Section 1701.01(G) of the Ohio
Revised Code) shall have made a “control share acquisition” (as the term “control share
acquisition” is defined in Section 1701.01(Z) of the Ohio Revised Code) of shares of the
Company without having first complied with Section 1701.831 of the Ohio Revised Code
(dealing with control share acquisitions); or




(c) The Board of Directors shall at any time determine in the good faith exercise of
its judgment that (i) any particular actual or proposed accumulation of shares of the
Company, tender offer for shares of the Company, merger, consolidation, sale of assets,
proxy contest, or other transaction or event or series of transactions or events will, or is
likely to, if carried out, result in a Change in Control falling within Sections 5.5(a) or
5.5(b) hereof and (ii) it is in the best interests of the Company and its shareholders, and
will serve the intended purposes of this Plan and the Trust, for distributions of Deferred
Compensation Accounts to commence immediately as herein provided.



ARTICLE VI




CREDITORS AND INSOLVENCY




6.1. Claims of the Company’s Creditors. All assets held in the Trust pursuant to the Plan,
and any payment to be made by the Trustee pursuant to the Plan and Trust Agreement, shall be
subject to the claims of the general creditors of the Company, including judgment creditors and
bankruptcy creditors. The rights of a Director or his or her beneficiaries to any assets of the
Trust Fund shall be no greater than the rights of an unsecured creditor of the Company.



6.2. Notification of Insolvency. In the event the Company becomes Insolvent (as hereinafter
defined), the Board of Directors of the Company and the chief executive officer of the Company
shall immediately notify the Trustee of that fact. The Trustee shall not make any payments from
the Trust Fund to any Director or any beneficiary under the Plan after such notification is
received or at any time after the Trustee has knowledge of such Insolvency. Under any such
circumstance, the Trustee shall deliver any property held in the Trust Fund only as a court of
competent jurisdiction may direct to satisfy the claims of the Company’s creditors. For purposes
of this Plan, the Company shall be deemed to be “Insolvent” if the Company is subject to a pending
voluntary or involuntary proceeding as a debtor under the United States Bankruptcy Code, as
amended, or is unable to pay its debts as they mature.



ARTICLE VII




ADMINISTRATION




7.1. Powers of the Committee. The Committee shall administer the Plan and resolve all
questions of interpretation arising under the Plan. Whenever elections, directions, designations,
applications, requests or other notices are to be given or made by a Director under the Plan, they
shall be filed with the Committee. Except as provided in Section 8.3 hereof, the Committee shall
have no discretion with respect to Plan contributions or distributions, but shall act in an
administrative capacity only.



7.2. Indemnity of Committee. The Company shall indemnify the members of the Committee against
all claims, losses, damages, expenses and liabilities arising from any action or failure to act
with respect to the Plan to the extent provided in the Regulations of the Company and any
applicable indemnification agreement between the Company and such member.



ARTICLE VIII




MISCELLANEOUS




8.1. Funding. Neither any Director, nor his or her beneficiaries, nor his or her heirs,
successors or assigns, shall have any secured interest in or, claim on any property or assets of
the Company or the Trust. The Company’s obligation under the Plan shall be merely that of an
unfunded and unsecured promise of the Company to pay money in the future. The Company shall create
the Trust to hold funds to be used in payment of its obligations under the Plan and to provide a
measure of the benefits payable to the Director hereunder, and shall fund such Trust in accordance
with the terms of the Plan, but all funds contained therein shall remain subject to the claims of
the Company’s general creditors as provided in Article VI hereof.



8.2. Term of Plan. The Company reserves the right to amend the Plan or Trust Agreement or
terminate the Plan at any time; provided, however, that no amendment or termination shall affect
the rights of Directors to amounts previously credited to their Deferred Compensation Accounts or
to additional credits to their Deferred Compensation Accounts pursuant to Section 3.4 hereof for
additional earnings of the Trust following such termination; and provided further, that no
amendment or termination shall apply to the then current plan year, except as permitted under
Section 409A of the Code. The Trust shall remain in effect until such time as the entire corpus of
the Trust Fund has been distributed pursuant to the terms of the Plan, and the Plan shall remain in
effect until such time as all amounts credited to Directors’ Deferred Compensation Accounts are
distributed pursuant to Article V hereof.



8.3. Assignment. No right or interest of any Director or his or her beneficiary (or any
person claiming through or under such Director or his or her beneficiary) in any benefit or payment
herefrom shall be assignable or transferable in any manner or be subject to alienation,
anticipation, sale, pledge, encumbrance or other legal process or in any manner be liable for or
subject to the debts or liabilities of such Director.



If any Director or any such person (other than the surviving spouse of such Director after he
or she is deceased) shall attempt to or shall transfer, assign, alienate, anticipate, sell, pledge
or otherwise encumber his or her benefits hereunder or any part thereof, or if by reason of his or
her bankruptcy or other event happening at any time such benefits would devolve upon anyone else or
would not be enjoyed by him or her, then the Committee, in its discretion, may terminate his or her
interest in any such benefit, to the extent the Committee considers necessary or advisable to
prevent or limit the effects of such occurrence, by filing a written “termination declaration” with
the Committee records and making reasonable efforts to deliver a copy to such Director or his or
her beneficiary whose interest is adversely affected (the “Terminated Participant”).



As long as any Terminated Participant is alive, any benefits affected by the termination
declaration shall be retained by the Company and, in the Committee’s sole and absolute judgment,
may be paid to or expended for the benefit of such Terminated Participant, his or her spouse, his
or her children or any other person or persons in fact dependent upon him or her in such a manner
as the Committee shall deem proper. Upon the death of any Terminated Participant, all benefits
withheld from him or her and not paid to others in accordance with the preceding sentence shall be
distributed to such Terminated Participant’s surviving spouse or, if there is no surviving spouse,
to such Terminated Participant’s then living descendants, including adopted children, per stirpes,
or if there is no surviving spouse and no surviving descendants, to such Terminated Participant’s
estate. Payments described in this paragraph shall be made from the Trust if the Company is not
Insolvent at the time for any such payment.



8.4. Tax Effect. This Plan is intended to be treated as an unfunded deferred compensation
plan under the Internal Revenue Code. It is the intention of the Company that the amounts by which
Directors elect to have their compensation reduced pursuant to this Plan shall not be included in
the gross income of the Directors or their beneficiaries until such time as the amounts credited to
Directors’ Deferred Compensation Accounts hereunder are distributed from the Plan. If, at any
time, it is determined by the Company that amounts attributable to Directors’ compensation
reduction elections or Deferred Compensation Accounts are includible in the gross income of the
Directors or their beneficiaries before distribution pursuant to Article V hereof, all amounts
credited to Directors’ Deferred Compensation Accounts shall be immediately distributed to the
respective Directors or, in the case of deceased Directors, their beneficiaries. Distributions
described in the preceding sentence shall be made from the Trust if the Company is not Insolvent at
the time for such distribution.



8.5. Governing Law. This Plan shall be governed by and construed in accordance with the
internal substantive laws of the State of Ohio.



8.6. Successors. The provisions of this Plan shall bind and inure to the benefit of the
Company and its successors and assigns. The term “successors” as used herein shall include any
corporate or other business entity which shall, whether by merger, consolidation, purchase or
otherwise, acquire all or substantially all of the business and assets of the Company and
successors of any such corporation or other business entity.



8.7. No Right to Continued Service. Nothing contained herein shall be construed to confer
upon any Director the right to continue to serve as a Director of the Company or in any other
capacity.



IN WITNESS WHEREOF, Brush Engineered Materials, Inc. has executed this Plan this 7th day of
December, 2004.




BRUSH ENGINEERED MATERIALS INC.




By: /s/ Michael C. Hasychak   




	 	 	 	Name: Michael C. Hasychak

Title: Vice President, Treasurer and Secretary