Exhibit
10.7


 


NONQUALIFIED STOCK OPTION
AGREEMENT


Quanex Corporation


1996 Employee Stock Option
and Restricted Stock Plan


 


 


This STOCK OPTION
AGREEMENT (the “Agreement”) is made between QUANEX
CORPORATION, a Delaware corporation (the “Company”), and                         
(the “Optionee”).  The Board of Directors
of the Company has adopted the Quanex Corporation 1996 Employee Stock Option
and Restricted Stock Plan (the “Plan”), which is incorporated by reference
herein.  The Company considers that its
interests will be served by granting the Optionee an option to purchase shares
of common stock of the Company as an inducement for [his] [her] continued and
effective performance of services for the Company or an Affiliate.  Any term used in this Agreement that is not
specifically defined herein shall have the meaning specified in the Plan.


 


IT IS
AGREED:


 


1.             Subject to the terms of the Plan
and this Agreement, on                               ,
200   (the “Date of Grant”), the Company hereby grants to the Optionee
a nonqualified stock option (the “Option”) to purchase                          
shares of the common stock of the Company, $.50 par value per share, at a price
of
$                    
per share, subject to adjustment as provided in the Plan.  The Option is exercisable in accordance with
the following schedule:


 


(a)           on the day after the first
anniversary of the Date of Grant, the Option may be exercised with respect to
up to 1/3 of the shares subject to the Option;


 


(b)           after each succeeding anniversary of
the Date of Grant, the Option may be exercised with respect to up to an
additional 1/3 of the shares subject to the Option, so that after the
expiration of the third anniversary of the Date of Grant the Option shall be
exercisable in full; and


 


(c)           to the extent not exercised,
installments shall be cumulative and may be exercised in whole or in part.


 


However, the Option shall
be exercisable in full on the date a Change in Control occurs, provided that
the Optionee’s employment with the Company has not terminated prior to such
date.  For purposes of this Section 1,
the term “Change in Control” shall have the
meaning ascribed to that term in the individual change in control agreement
between the Company and the Optionee in effect on the Date of Grant.


 


2.             Except as specified below, the
Option granted to the Optionee under this Agreement shall not be transferable
or assignable by the Optionee other than by will or the laws of descent and
distribution, and shall be exercisable during the Optionee’s lifetime only by
[him] [her].  The Optionee may transfer
this Option to a member or members of [his] [her] immediate family, a trust
under which [his] [her] immediate family members are the only beneficiaries and
a partnership of which [his] [her] immediate family members are the only
partners.  For this purpose, “immediate
family” means the Optionee’s spouse, children, stepchildren, grandchildren,


 





















 


parents, grandparents,
siblings (including half brothers and sisters), and individuals who are family
members by adoption.  Notwithstanding any
other provision of this Agreement, such a transferee of the Option granted
under this Agreement may exercise the Option during the Optionee’s
lifetime.  None of the Company, its
employees or directors makes any representations or guarantees concerning the
tax consequences associated with the inclusion of this provision in this
Agreement, the Optionee’s transfer of the Option granted under this Agreement
or transferee’s exercise of the Option. 
It is the sole responsibility of the Optionee to seek advice from [his]
[her] own tax advisors concerning those tax consequences.  The Optionee is entitled to rely upon only
the tax advice of his own tax advisors.


 


3.             The Option shall terminate and
become null and void on the earliest of (a) the last day of the ten year
period commencing on the Date of Grant, (b) the last day of the
three-month period commencing on the date of the severance of the employment
relationship between the Optionee and the Company and all Affiliates for any
reason other than death, Disability or Retirement, or (c) the last day of the
three-year period commencing o the date of the severance of the employment
relationship between the Optionee and the Company and all Affiliates due to
death, Disability or Retirement.  In the
event of the Optionee’s severance of the employment relationship between the
Employee and the Company and all Affiliates for any reason other than death,
Disability or Retirement, the Option shall not continue to vest after such
severance of employment.  In the event of
the severance of the employment relationship between the Employee and all
Affiliates due to the death, Disability or Retirement of the Optionee, the
Option shall continue to vest after such severance of employment until the
expiration of the Option.


 


Upon the death of the
Optionee prior to the expiration of [his] [her] Option, [his] [her] executors,
administrators or any person or persons to whom [his] [her] Option may be
transferred by will or by the laws of descent and distribution, shall have the
right, at any time prior to the expiration date of the Option to exercise the
Option with respect to the number of shares that the Optionee would have been
entitled to exercise if [he] [she] were still alive.


 


4.             This Agreement may not be changed
or terminated orally but only by an agreement in writing signed by the party
against whom enforcement of any such change or termination is sought.


 


5.             The Company shall not be deemed by
the grant of the Option (as distinguished from a separate employment agreement
or service contract, if any) to be required to retain the services of the
Optionee for any period.


 


6.             The Optionee shall not have any
rights as a stockholder with respect to any shares covered by the Option until
the date of the issuance of the stock certificate or certificates to [him]
[her] for such shares following his exercise of the Option pursuant to its
terms and conditions and payment for the shares.  No adjustment shall be made for dividends or
other rights for which the record date is prior to the date such certificate or
certificates are issued.


 


7.             The Optionee consents to the
placing on the certificate for any shares covered by the Option of an
appropriate legend restricting resale or other transfer of such shares except
in accordance with the Securities Act of 1933 and all applicable rules
thereunder.


 


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8.             In the event of any difference of
opinion concerning the meaning or effect of the Plan or this Agreement, such
difference shall be resolved by the committee referred to in the Plan.


 


9.             The validity, construction and
performance of this agreement shall be governed by the laws of the State of
Texas.  Any invalidity of any provision
of this Agreement shall not affect the validity of any other provision.


 


10.           All offers, notices, demands,
requests, acceptances or other communications hereunder shall be in writing and
shall be deemed to have been duly made or given if mailed by registered or
certified mail, return receipt requested. 
Any such notice mailed to the Company shall be addressed to its
principal office, and any notice mailed to the Optionee shall be addressed to
the Optionee’s residence address as it appears on the books and records of the
Company or to such other address as either party may hereafter designate in writing
to the other.


 


11.           This Agreement shall, except as
herein stated to the contrary, inure to the benefit of and bind the legal
representatives, successors and assigns of the parties hereto.


 


12.           This Option is a nonqualified stock
option which is not intended to be governed by section 422 of the Internal
Revenue Code of 1986, as amended.


 


13.           In accepting this Option, the
Optionee accepts and agrees to be bound by all the terms and conditions of the
Plan which pertain to nonqualified stock options granted under the Plan.


 


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IN WITNESS WHEREOF, this Agreement has been duly executed
and delivered to be effective as of the day and year first above written.


 


 


	
   

  	
  QUANEX CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Raymond A. Jean

  
	
   

  	
   

  	
  Chairman, President and CEO

  
	
   

  	
   

  
	
  Accepted:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Optionee

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Date