Document:

EX-10.3

Exhibit 10.3

BRUSH ENGINEERED MATERIALS INC.

2006 STOCK INCENTIVE PLAN

(AS AMENDED AND RESTATED EFFECTIVE AUGUST 1, 2008)

 

 

TABLE OF CONTENTS

	 	 	 	 	 	 	 
	 	 	 	 	Page
	1.

	 	Purpose
	 	 	1	 
	2.

	 	Definitions
	 	 	1	 
	3.

	 	Shares Subject to this Plan
	 	 	4	 
	4.

	 	Performance Restricted Shares
	 	 	5	 
	5.

	 	Performance Shares and Performance Units
	 	 	6	 
	6.

	 	Restricted Shares
	 	 	7	 
	7.

	 	Option Rights
	 	 	7	 
	8.

	 	Appreciation Rights
	 	 	9	 
	9.

	 	Restricted Stock Units
	 	 	10	 
	10.

	 	Administration of the Plan
	 	 	10	 
	11.

	 	Adjustments
	 	 	11	 
	12.

	 	Detrimental Activity
	 	 	11	 
	13.

	 	Participation by Employees of Designated Subsidiaries
	 	 	12	 
	14.

	 	Non-U.S. Employees
	 	 	12	 
	15.

	 	Transferability
	 	 	12	 
	16.

	 	Withholding Taxes
	 	 	13	 
	17.

	 	Compliance with Section 409A of the Code
	 	 	13	 
	18.

	 	Effective Date
	 	 	14	 
	19.

	 	Amendments
	 	 	14	 
	20.

	 	Termination of the Plan
	 	 	15	 
	21.

	 	Governing Law
	 	 	15	 
	22.

	 	Miscellaneous Provisions
	 	 	15	 

-i-

 

 

BRUSH ENGINEERED MATERIALS INC.

2006 STOCK INCENTIVE PLAN

(AS AMENDED AND RESTATED EFFECTIVE AUGUST 1, 2008)

     1. Purpose. The purpose of this Plan is to attract and retain officers, other key employees
and consultants of Brush Engineered Materials Inc. (the “Corporation”) and its Subsidiaries and to
provide such persons with incentives and rewards for superior performance and to promote equity
participation by the officers, key employees and consultants of the Corporation, and thereby
reinforcing a mutuality of interest with other shareholders, and permitting officers, key employees
and consultants to share in the Corporation’s growth.

     2. Definitions. As used in this Plan,

     “Appreciation Right” means a right granted pursuant to Section 8 of this Plan, including a
Free-standing Appreciation Right and a Tandem Appreciation Right.

     “Base Price” means the price to be used as the basis for determining the Spread upon the
exercise of a Free-standing Appreciation Right.

     “Board” means the Board of Directors of the Corporation.

     A “Change in Control” of the Corporation shall have the meaning determined by the Committee
from time to time.

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

     “Committee” means the committee described in Section 10(a) of this Plan.

     “Common Shares” means (i) Common Shares without par value of the Corporation and (ii) any
security into which Common Shares may be converted by reason of any transaction or event of the
type referred to in Section 11 of this Plan.

     “Covered Employee” means a Participant who is, or is determined by the Committee to be likely
to become, a “covered employee” within the meaning of Section 162(m) of the Code (or any successor
provision).

     “Date of Grant” means the date specified by the Committee on which a grant of Performance
Restricted Shares, Performance Shares or Performance Units, Option Rights, Appreciation Rights or a
grant or sale of Restricted Shares or Restricted Stock Units shall become effective, which shall
not be earlier than the date on which the Committee takes action with respect thereto.

     “Designated Subsidiary” means a subsidiary that is (i) not a corporation or (ii) a corporation
in which at the time the Corporation owns or controls, directly or indirectly, less than 80 percent
of the total combined voting power represented by all classes of stock issued by such corporation.

     “Evidence of Award” means an agreement, certificate, resolution or other type or form of
writing or other evidence approved by the Committee which sets forth the terms and conditions of
the award granted. An Evidence of Award may be in any electronic medium, may be limited to a
notation on the books and records of the Corporation and, with the approval of the Committee, need
not be signed by a representative of the Corporation or a Participant.

     “Free-standing Appreciation Right” means an Appreciation Right granted pursuant to Section 8
of this Plan that is not granted in tandem with an Option Right.

 

 

     “Incentive Stock Option” means an Option Right that is intended to qualify as an “incentive
stock option” under Section 422 of the Code or any successor provision thereto.

     “Management Objectives” means the measurable performance objective or objectives established
pursuant to this Plan for Participants who have received grants of Performance Restricted Shares,
Performance Shares or Performance Units or, when so determined by the Committee, Option Rights,
Appreciation Rights, Restricted Stock Units or dividend credits. Management Objectives may be
described in terms of Corporation-wide objectives or objectives that are related to the performance
of the individual Participant or of the Subsidiary, division, department, region or function within
the Corporation or Subsidiary in which the Participant is employed. The Management Objectives may
be relative to the performance of other companies. The Management Objectives applicable to any
award to a Participant who is, or is determined by the Committee to be likely, to become, a Covered
Employee shall be limited to specified levels of or growth in one or more of the following
criteria:

     (i) Profits (e.g., operating income, EBIT, EBT, net income, earnings per share,
residual or economic earnings — these profitability metrics could be measured before special
items and/or subject to GAAP definition);

     (ii) Cash Flow (e.g., EBITDA, operating cash flow, total cash flow, free cash flow,
residual cash flow or cash flow return on investment);

     (iii) Returns (e.g., profits or cash flow returns on: assets, invested capital, net
capital employed, and equity);

     (iv) Working Capital (e.g., working capital divided by sales, days’ sales outstanding,
days’ sales inventory, and days’ sales in payables, or any combination thereof);

     (v) Profit Margins (e.g., profits divided by revenues, gross margins and material
margins divided by revenues, and variable margin divided by sales);

     (vi) Liquidity Measures (e.g., debt-to-capital, debt-to-EBITDA, total debt ratio,
EBITDA multiple);

     (vii) Sales Growth, Cost Initiative and Stock Price Metrics (e.g., revenues, revenue
growth, new product sales growth, growth in value added sales, stock price appreciation,
total return to shareholders, sales and administrative costs divided by sales, sales per
employee); and

     (viii) Strategic Initiative Key Deliverable Metrics consisting of one or more of the
following: product development, strategic partnering, research and development, market
penetration, geographic business expansion goals, cost targets, customer satisfaction,
employee satisfaction, management of employment practices and employee benefits, supervision
of litigation and information technology, increase in yield and productivity and goals
relating to acquisitions or divestitures of subsidiaries, affiliates and joint ventures.

If the Committee determines that a change in the business, operations, corporate structure or
capital structure of the Corporation, or the manner in which it conducts its business, or other
events or circumstances render the Management Objectives unsuitable, the Committee may in its
discretion modify such Management Objectives or the related minimum acceptable level of
achievement, in whole or in part, as the Committee deems appropriate and equitable, except in the
case of a Covered Employee where such action would result in the loss of the otherwise available
exemption of the award under Section 162(m) of the Code. In such case, the Committee will not make
any modification of the Management Objectives or minimum acceptable level of achievement with
respect to such Covered Employee.

     “Market Value per Share” means, as of any particular date, unless otherwise determined by the
Committee, the per share closing price of a Common Share on the New York Stock Exchange on the day
such determination is being made (as reported in The Wall Street Journal) or, if there was
no closing price reported on

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such day, on the next day on which such a closing price was reported; or if the Common Shares
are not listed or admitted to trading on the New York Stock Exchange on the day as of which the
determination is being made, the amount determined by the Committee to be the fair market value of
a Common Share on such day.

     “Nonqualified Option” means an Option Right that is not intended to, qualify as a
Tax-qualified Option.

     “Optionee” means the person so designated in an Evidence of Award evidencing an outstanding
Option Right.

     “Option Price” means the purchase price payable upon the exercise of an Option Right.

     “Option Right” means the right to purchase Common Shares from the Corporation upon the
exercise of a Nonqualified Option or a Tax-qualified Option granted pursuant to Section 7 of this
Plan.

     “Participant” means a person who is selected by the Committee to receive benefits under this
Plan and (i) is at that time an officer, including without limitation an officer who may also be a
member of the Board, or other salaried employee or consultant of the Corporation or a Subsidiary or
(ii) has agreed to commence serving in any of such capacities, within 90 days of the Date of Grant.
The term “Participant” shall also include any person who provides services to the Corporation or a
Subsidiary that are equivalent to those typically provided by an employee.

     “Performance Period” means, in respect of a Performance Share or Performance Unit, a period of
time established pursuant to Section 5 of this Plan within, which, the Management Objective
relating thereto is to be achieved.

     “Performance Restricted Shares” means Common Shares granted pursuant to Section 4 of this Plan
as to which neither substantial risk of forfeiture nor the restrictions on transfer referred to in
such Section 4 has expired.

     “Performance Share” means a bookkeeping entry that records the equivalent of one Common Share
and is awarded pursuant to Section 5 of this Plan.

     “Performance Unit” means a bookkeeping entry that records a unit equivalent to the Market
Value per Share of one Common Share on the Date of Grant and is awarded pursuant to Section 5 of
this Plan.

     “Plan” means the Brush Engineered Materials Inc. 2006 Stock Incentive Plan, as may be amended
from time to time.

     “Restricted Shares” means Common Shares granted or sold pursuant to Section 6 of this Plan as
to which neither the substantial risk of forfeiture nor the restrictions on transfer referred to in
such Section 6 has expired. Restricted Shares are not subject to Management Objectives specified
by the Committee.

     “Restriction Period” means the period of time during which Restricted Stock Units are subject
to restrictions under Section 9 of this Plan.

     “Restricted Stock Units” means an award pursuant to Section 9 of this Plan of the right to
receive Common Shares at the end of a specified Restriction Period.

     “Spread” means, in the case of a Free-standing Appreciation Right, the amount by which the
Market Value per Share on the date when any such right is exercised exceeds the Base Price
specified in such right or, in the case of a Tandem Appreciation Right, the amount by which the
Market Value per Share on the date when any such right is exercised exceeds the Option Price
specified in the related Option Right.

     “Subsidiary” means a corporation, company or other entity (i) at least 50 percent of whose
outstanding shares or securities (representing the right to vote for the election of directors or
other managing authority) are, or (ii) which does not have outstanding shares or securities (as may
be the case in a partnership, joint venture or unincorporated association), but at least 50 percent
of whose ownership interest representing the right generally to

3

 

make decisions for such other entity is, now or hereafter, owned or controlled, directly or
indirectly, by the Corporation except that for purposes of determining whether any person may be a
Participant for purposes of any grant of Incentive Stock Options, “Subsidiary” means any
corporation in which at the time the Corporation owns or controls, directly or indirectly, at least
50 percent of the total combined voting power represented by all classes of stock issued by such
corporation.

     “Tandem Appreciation Right” means an Appreciation Right granted pursuant to Section 8 of this
Plan that is granted in tandem with an Option Right.

     “Tax-qualified Option” means an Option Right that is intended to qualify under particular
provisions of the Code, including without limitation an Incentive Stock Option.

     3. Shares Subject to this Plan.

     (a) Maximum Shares Available Under Plan.

     (i) Subject to adjustment as provided in Section 11 of this Plan, the number of
Common Shares that may be issued or transferred (A) upon the exercise of Option
Rights or Appreciation Rights, (B) as Restricted Shares or Performance Restricted
Shares and released from substantial risks of forfeiture thereof, (C) in payment of
Restricted Stock Units, (D) in payment of Performance Shares or Performance Units
that have been earned, or (E) in payment of dividend equivalents paid with respect
to awards made under this Plan will not exceed in the aggregate 1,250,000 Common
Shares, plus any Common Shares relating to awards that expire or are forfeited or
are cancelled under this Plan. Such shares may be shares of original issuance or
treasury shares or a combination of the foregoing.

     (ii) Common Shares covered by an award granted under this Plan shall not be
counted as used unless and until they are actually issued and delivered to a
Participant. Without limiting the generality of the foregoing, upon payment in cash
of the benefit provided by any award granted under this Plan, any Common Shares that
were covered by that award will be available for issue or transfer hereunder.
Notwithstanding anything to the contrary contained herein: (A) Common Shares
tendered in payment of the Option Price of a Option Right shall not be added to the
aggregate plan limit described above; (B) Common Shares withheld by the Corporation
to satisfy the tax withholding obligation shall not be added to the aggregate plan
limit described above; (C) Common Shares that are repurchased by the Corporation
with Option Right proceeds shall not be added to the aggregate plan limit described
above; and (D) all Common Shares covered by an Appreciation Right, to the extent
that it is exercised and settled in Common Shares, whether or not all Common Shares
covered by the award are actually issued to the Participant upon exercise of the
right, shall be considered issued or transferred pursuant to this Plan.

     (b) Life-of-Plan Limits. Notwithstanding anything in this Section 3, or
elsewhere in this Plan, to the contrary and subject to adjustment pursuant to Section 10 of
this Plan:

     (i) The aggregate number of Common Shares actually issued or transferred by the
Corporation upon the exercise of Incentive Stock Options shall not exceed 1,250,000.

     (ii) The aggregate number of Common Shares issued as or in payment of, as the
case may be, Performance Restricted Shares, Performance Shares, Performance Units,
Restricted Shares (and released from substantial risk of forfeiture) or Restricted
Stock Units shall not in the aggregate exceed 850,000.

     (c) Individual Participant Limits. Notwithstanding anything in this Section 3,
or elsewhere in this Plan, to the contrary and subject to adjustment pursuant to Section 10
of this Plan:

4

 

     (i) No Participant shall be granted, Restricted Stock Units that specify
Management Objectives, Performance Restricted Shares, Performance Shares, in the
aggregate, for more than 50,000 Common Shares during any calendar year.

     (ii) Notwithstanding any other provision of this Plan to the contrary, in no
event shall any Participant in any calendar year receive an award of Performance
Units having an aggregate maximum value as of their respective Dates of Grant in
excess of $1,000,000.

     (iii) No Participant shall be granted Option Rights or Appreciation Rights, in
the aggregate, for more than 100,000 Common Shares during any calendar year.

     (d) Exclusion from Certain Restrictions. Notwithstanding anything in this Plan
to the contrary, up to 5% of the maximum number of Common Shares provided for in Section
3(a)(i) above may be used for awards granted under Sections 4 through 10 of this Plan that
do not comply with the three-year requirements set forth in Sections 6(c) and 9(c) of this
Plan and the one-year requirements of Sections 4(b), 5(b) and 9(b) of this Plan.

     4. Performance Restricted Shares. The Committee may from time to time and upon such terms and
conditions as it may determine, authorize grants to Participants of Performance Restricted Shares.
Each such grant may utilize any or all of the authorizations, and will be subject to all of the
requirements contained in the following provisions:

     (a) Each grant shall constitute an immediate transfer of the ownership of Common Shares
to the Participant in consideration of the performance of services, entitling such
Participant to dividend, voting and other ownership rights, subject to the substantial risk
of forfeiture and restrictions on transfer hereinafter referred to.

     (b) Any grant of Performance Restricted Shares shall specify Management Objectives
which, if achieved, will result in termination or early termination of the restrictions
applicable to such Shares and each grant shall specify in respect of the specified
Management Objectives, a minimum acceptable level of achievement and shall set forth a
formula for determining the number of Performance Restricted Shares on which restrictions
will terminate if performance is at or above the minimum level, but falls short of full
achievement of the specified Management Objectives; provided, however, that no such
termination shall occur less than one year after the Date of Grant, except in the event of
retirement, death or disability of the Participant or a Change in Control of the Corporation
or similar transaction or event.

     (c) Each grant may be made without payment of additional consideration from the
Participant.

     (d) Each grant shall provide that the Performance Restricted Shares covered thereby
shall be subject to a “substantial risk of forfeiture” within the meaning of Section 83 of
the Code for a period to be determined by the Committee on the Date of Grant, and any grant
may provide for the earlier termination of such period in the event of retirement, death or
disability of the Participant or a Change in Control of the Corporation or other similar
transaction or event.

     (e) Each grant shall provide that, during the period for which such substantial risk of
forfeiture is to continue, the transferability of the Performance Restricted Shares shall be
prohibited or restricted in the manner and to the extent prescribed by the Committee on the
Date of Grant. Such restrictions may include without limitation rights of repurchase or
first refusal in the Corporation or provisions subjecting the Performance Restricted Shares
to a continuing substantial risk of forfeiture in the hands of any transferee.

     (f) Any grant may require that any or all dividends or other, distributions paid on the
Performance Restricted Shares during the period of such restrictions be automatically
sequestered. Such distribution may be reinvested on an immediate or deferred basis in
additional Common Shares, which may

5

 

be subject to the same restrictions as the underlying award or such other restrictions
as the Committee may determine.

     (g) Each grant of Performance Restricted Shares shall be evidenced by an Evidence of
Award, which shall contain such terms and provisions as the Committee may determine
consistent with this Plan. Unless otherwise directed by the Committee, all certificates
representing Performance Restricted Shares, together with a stock power that shall be
endorsed in blank by the Participant with respect to the Performance Restricted Shares,
shall be held in custody by the Corporation until all restrictions thereon lapse.

     5. Performance Shares and Performance Units. The Committee may also authorize grants of
Performance Shares and Performance Units that shall become payable to the Participant upon the
achievement of specified Management Objectives during the Performance Period. Each such grant may
utilize any or all of the authorizations, and will be subject to all of the requirements contained
in the following provisions:

     (a) Each grant shall specify the number of Performance Shares or Performance Units to
which it pertains, which may be subject to adjustment to reflect changes in compensation or
other factors, provided, however, that no such adjustment will be made in the case of a
Covered Employee where such action would result in the loss of the otherwise available
exemption of the award under Section 162(m) of the Code.

     (b) The Performance Period with respect to each Performance Share or Performance Unit
will be such period of time (not less than one year), commencing with the Date of Grant as
shall be determined by the Committee on the Date of Grant and may be subject to earlier
termination or other modification in the event of retirement, death or disability of the
Participant or a Change in Control of the Corporation or similar transaction or event.

     (c) Each grant shall specify the Management Objectives that are to be achieved by the
Participant and each grant shall specify in respect of the specified Management Objectives a
minimum acceptable level of achievement below which no payment will be made and shall set
forth a formula for determining the amount of any payment to be made if performance is at or
above the minimum acceptable level, but falls short of full achievement of the specified
Management Objective. The grant of Performance Shares or Performance Units shall specify
that, before the Performance Shares or Performance Units will be earned and paid, the
Committee must certify that the Management Objectives have been satisfied.

     (d) Each grant shall specify the time and manner of payment of Performance Shares or
Performance Units that shall have been earned, and any grant may specify that any such
amount may be paid by the Corporation in cash, Common Shares or any combination thereof and
may either grant to the Participant or reserve to the Committee the right to elect among
those alternatives.

     (e) Any grant of Performance Shares may specify that the amount payable with respect
thereto may not exceed a maximum specified by the Committee at the Date of Grant. Any grant
of Performance Units may specify that the amount payable or the number of Common Shares
issued with respect thereto may not exceed maximums specified by the Committee at the Date
of Grant.

     (f) The Committee may at the Date of Grant of Performance Shares, provide for the
payment of dividend equivalents to the holder thereof on either a current, deferred or
contingent basis, either in cash or in additional Common Shares.

     (g) Each grant of Performance Shares or Performance Units shall be evidenced by an
Evidence of Award, which shall contain such terms and provisions as the Committee may
determine consistent with this Plan.

6

 

     6. Restricted Shares. The Committee may also authorize the grant or sale to Participants of
Restricted Shares. Each such grant may utilize an or all of the authorizations, and will be
subject to all of the requirements contained in the following provisions:

     (a) Each grant shall, constitute an immediate transfer of the ownership of Common
Shares to the Participant in consideration of the performance of services entitling such
Participant to dividend, voting and other ownership rights, subject to the substantial risk
of forfeiture and restrictions on transfer hereinafter referred to.

     (b) Each grant or sale may be made without payment of additional consideration or in
consideration of a payment by such Participant that is less than the Market Value per Share
at the Date of Grant.

     (c) Each grant or sale shall provide that the Restricted Shares covered thereby shall
be subject to a “substantial risk of forfeiture” within the meaning of Section 83 of the
Code for a period of at least three years to be determined by the Committee on the Date of
Grant, and any grant may provide for the earlier termination of such period in the event of
retirement, death or disability of the Participant or a Change in Control of the Corporation
or similar transaction or event.

     (d) Each grant or sale shall provide that, during the period for which such substantial
risk of forfeiture is to continue, the transferability of the Restricted Shares shall be
prohibited or restricted in the manner and to the extent prescribed by the Committee on the
Date of Grant. Such restrictions may include, without limitation, rights of repurchase or
first refusal in the Corporation or provisions subjecting the Restricted Shares to a
continuing substantial risk of forfeiture in the hands of any transferee.

     (e) Any grant or sale may require that any or all dividends or other distributions paid
on the Restricted Shares during the period of such restrictions be automatically
sequestered. Such distribution may be reinvested on an immediate or deferred basis in
additional, Common Shares which may be subject to the same restrictions as the underlying
award or such other restrictions as the Committee may determine.

     (f) Each grant of Restricted Shares shall be evidenced by an Evidence of Award, which
shall contain such terms and provisions as the Committee may determine consistent with this
Plan. Unless otherwise directed by the Committee, all certificates representing Restricted
Shares, together with a stock power that shall be endorsed in blank by the Participant with
respect to the Restricted Shares, shall be held in custody by the Corporation until all
restrictions thereon lapse.

     7. Option Rights. The Committee may from time to time authorize grants to Participants of
options to purchase Common Shares. Each such grant may utilize any or all of the authorizations,
and will be subject to all of the requirements contained in the following provisions:

     (a) Each grant of Option Rights shall specify the number of Common Shares to which it
pertains.

     (b) Each grant shall specify an Option Price per Common Share, which shall be equal to
or greater than the Market Value per Share on the Date of Grant.

     (c) Each grant shall specify the form of consideration to be paid in satisfaction of
the Option Price and the manner of payment of such consideration, which may include (i) cash
in the form of currency or check or other cash equivalent acceptable to the Corporation,
(ii) nonforfeitable, unrestricted Common Shares, which are already owned by the Optionee and
having a value at the time of exercise that is equal to the Option Price, (iii) any other
legal consideration that the Committee may deem appropriate, including without limitation
any form of consideration authorized under Section 7(d) below, on such basis as the
Committee may determine in accordance with this Plan and (iv) any combination of the
foregoing.

7

 

     (d) Any grant of a Nonqualified Option may provide that payment of the Option Price may
also be made in whole or in part in the form of Restricted Shares or other Common Shares
that are subject to risk of forfeiture or restrictions on transfer. Unless otherwise
determined by the Committee on or after the Date of Grant, whenever any Option Price is paid
in whole or in part by means of any of the forms of consideration specified in this Section
7(d), the Common Shares received by the Optionee upon the exercise of the Nonqualified
Option shall be subject to the same, risks of forfeiture or restrictions on transfer as
those that applied, to the consideration surrendered by the Optionee; provided, however,
that such risks of forfeiture and restrictions on transfer shall, apply only to the same
number of Common Shares received by the Optionee as applied to the forfeitable or restricted
Common Shares surrendered by the Optionee.

     (e) To the extent permitted by law, any grant may provide for deferred payment of the
Option Price from the proceeds of sale through a broker of some or, all of the Common Shares
to which the exercise relates.

     (f) Successive grants may be made to the same Optionee regardless of whether any Option
Rights previously granted to the Optionee remain unexercised.

     (g) Each grant shall specify the period or periods of continuous employment of the
Optionee by the Corporation or any Subsidiary that are necessary before the Option Rights or
installments thereof shall become exercisable, and any grant may provide for the earlier
exercise of the Option Rights in the event of retirement, death or disability of the
Participant or a Change in Control of the Corporation or similar transaction or event.

     (h) Any grant of Option Rights may specify Management Objectives which, if achieved,
will result in exercisability of such rights.

     (i) Option Rights granted under this Plan may be (i) options that are intended to
qualify under particular provisions of the Code, including without limitation Incentive
Stock Options, (ii) options that are not intended to so qualify or (iii) combinations of the
foregoing. Incentive Stock Options may be granted only to Participants who, on the date of
the grant, are officers or other key employees of the Corporation or any Subsidiary who must
meet the definition of “employees” under Section 3401(c) of the Code.

     (j) The Committee may at the Date of Grant of any Option Rights (other than Incentive
Stock Options), provide for the payment of dividend equivalents to the Optionee on either a
current or deferred or contingent basis, either in cash or in additional Common Shares.

     (k) The exercise of an Option Right will result in the cancellation on a
share-for-share basis of any Tandem Appreciation Right authorized under Section 8 of this
Plan.

     (l) No Option Right granted pursuant to this Section 7 may be exercised more than 10
years from the Date of Grant. Subject to this limit, the Committee may cause Option Rights
to continue to be exercisable after termination of employment of the Participant under
circumstances specified by the Committee.

     (m) The Committee reserves the discretion after the Date of Grant to provide for (i)
the payment of a cash bonus at the time of exercise; (ii) the availability of a loan at
exercise; or (iii) the right to tender in satisfaction of the Option Price nonforfeitable,
unrestricted Common Shares, which are already owned by the Optionee and have a value at the
time of exercise that is equal to the exercise price.

     (n) The Committee may substitute, without receiving Participant permission,
Appreciation Rights payable only in Common Shares (or Appreciation Rights payable in cash,
Common Shares, or in any combination thereof as elected by the Committee) for outstanding
Options; provided, however, that the terms of the substituted Appreciation Rights are
substantially the same as the terms for the Options and the

8

 

difference between the Market Value per Share of the underlying Common Shares and the
Base Price of the Appreciation Rights is equivalent to the difference between the Market
Value Share of the underlying Common Shares and the Option Price of the Options. If, in the
opinion of the Corporation’s auditors, this provision creates adverse accounting
consequences for the Corporation, it shall be considered null and void.

     (o) Each grant of Option Rights shall be evidenced by an Evidence of Award, which shall
contain such terms and provisions as the Committee may determine consistent with this Plan.

     8. Appreciation Rights. The Committee may also authorize grants to Participants of
Appreciation Rights. An Appreciation Right shall be a right of the Participant to receive from the
Corporation an amount, which shall be determined by the Committee and shall be expressed as a
percentage (not exceeding 100 percent) of the Spread at the time of the exercise of such right. An
Appreciation Right awarded in relation to an Incentive Stock Option must be granted concurrently
with such Incentive Stock Option. Each such grant may utilize any or all of the authorizations,
and will be subject to all of the requirements contained in the following provisions:

     (a) Any grant may specify that the amount payable upon the exercise of an Appreciation
Right may be paid by the Corporation in cash, Common Shares or any combination thereof and
may either grant to the Participant or reserve to the Committee the right to elect among
those alternatives.

     (b) Any grant may specify that the amount payable upon the exercise of an Appreciation
Right shall not exceed a maximum specified by the Committee on the Date of Grant.

     (c) Any grant may specify (i) a waiting period or periods before Appreciation Rights
shall become exercisable and (ii) permissible dates or periods on or during which
Appreciation Rights shall be exercisable.

     (d) Any grant may specify that an Appreciation Right may be exercised only in the event
of retirement, death or disability of the Participant or a Change in Control of the
Corporation or similar transaction or event.

     (e) Any grant of Appreciation Rights may specify Management Objectives that must be
achieved as a condition of the exercise of such rights.

     (f) Any grant may provide for the payment to the Participant of dividend equivalents
thereon in cash or Common Shares on a current, deferred or contingent basis.

     (g) Each grant shall be evidenced by an Evidence of Award, which shall describe the
subject Appreciation Rights, identify any related Option Rights, state that the Appreciation
Rights are subject to all of the terms and conditions of this Plan and contain such other
terms and provisions as the Committee may determine consistent with this Plan.

     (h) Regarding Tandem Appreciation Rights only: Each grant shall provide that a Tandem
Appreciation Right may be exercised only at a time when the related Option Right (or any
similar right granted under any other plan of the Corporation) is also exercisable and the
Spread is positive and (ii) by surrender of the related Option Right (or such other right)
for cancellation.

     (i) Regarding Free-standing Appreciation Rights only:

     (i) Each grant shall specify in respect of each Free-standing Appreciation
Right a Base Price per Common Share, which shall be equal to or greater than the
Market Value per Share on the Date of Grant;

     (ii) Successive grants may be made to the same Participant regardless of
whether any Free-standing Appreciation Rights previously granted to such Participant
remain unexercised;

9

 

     (iii) Each grant shall specify the period or periods of continuous employment
of the Participant by the Corporation or any Subsidiary that are necessary before
the Free-standing Appreciation Rights or installments thereof shall become
exercisable, and any grant may provide for the earlier exercise of such rights in
the event of retirement, death or disability of the Participant or a Change in
Control of the Corporation or similar transaction or event; and

     (iv) No Free-standing Appreciation Right granted under this Plan may be
exercised more than 10 years from the Date of Grant.

     9. Restricted Stock Units. The Committee may also authorize grants or sales of Restricted
Stock Units to Participants. Each such grant may utilize any or all of the authorizations, and
will be subject to all of the requirements contained in the following provisions:

     (a) Each grant or sale shall constitute the agreement by the Corporation to deliver
Common Shares or cash to the Participant in the future in consideration of the performance
of services, subject to the fulfillment during the Restriction Period of such conditions
(which may include the achievement of Management Objectives) as the Committee may specify.

     (b) If a grant of Restricted Stock Units specifies that the Restriction Period will
terminate upon the achievement of Management Objectives, such Restriction Period may not
terminate sooner than one year from the Date of Grant. Each grant may specify in respect of
such Management Objectives a minimum acceptable level of achievement and may set forth a
formula for determining the number of Restricted Stock Units which restriction will
terminate if performance is at or above the minimum level, but falls short of full
achievement of the specified Management Objectives.

     (c) Each grant or sale may be made without additional consideration from the
Participant or in consideration of a payment by the Participant that is less than the Market
Value per Share on the Date of Grant.

     (d) If the Restriction Period lapses only by the passage of time, each grant or sale
shall provide that the Restricted Stock Units covered thereby shall be subject to a
Restriction Period of at least three years, which shall be fixed by the Committee on the
Date of Grant, and any grant or sale may provide for the earlier termination of such period
in the event of retirement, death or disability of the Participant or a Change in Control of
the Corporation or similar transaction or event.

     (e) During the Restriction Period, the Participant shall not have any right to transfer
any rights under the subject award, shall not have any rights of ownership in the Restricted
Stock Units and shall not have any right to vote such shares, but the Committee may on or
after the Date of Grant authorize the payment of dividend equivalents on such Restricted
Stock Units in cash or in additional Common Shares on a current, deferred or contingent
basis.

     (f) Each grant or sale will specify the time and manner of payment of Restricted Stock
Units that have been earned. Any grant or sale may specify that the amount payable with
respect thereto may be paid by the Corporation in cash, in Common Shares or in any
combination thereof and may either grant to the Participant or retain in the Committee the
right to elect among those alternatives.

     (g) Each grant or sale shall be evidenced by an Evidence of Award, which shall contain
such terms and provisions as the Committee may determine consistent with this Plan.

     10. Administration of the Plan.

     (a) This Plan shall be administered by the Organization and Compensation Committee of
the Board. A majority of the Committee shall constitute a quorum, and the acts of the
members of the Committee who are present at any meeting thereof at which a quorum is
present, or acts unanimously approved by the members of the Committee in writing, shall be
the acts of the Committee.

10

 

     (b) The interpretation and construction by the Committee of any provision of this Plan
or any agreement, notification or document evidencing the grant of Option Rights, Restricted
Shares, Performance Restricted Shares, Performance Shares or Performance Units, Appreciation
Rights or Restricted Stock Units and any determination by the Committee pursuant to any
provision of this Plan or any such agreement, notification or document, shall be final and
conclusive. No member of the Committee shall be liable for any such action taken or
determination made in good faith.

     (c) The Committee may delegate to the appropriate officer or officers of the
Corporation or any Subsidiary, part or all of its authority with respect to the
administration of awards made by the Committee to individuals who are not officers or
directors of the Corporation within the meaning of the Securities Exchange Act of 1934.

     (d) To the extent permitted by Ohio law, the Committee may, from time to time, delegate
to one or more officers of the Corporation the authority of the Committee to grant and
determine the terms and conditions of awards granted under this Plan. In no event shall any
such delegation of authority be permitted with respect to awards to any executive officer or
any person subject to Section 162(m) of the Code.

     11. Adjustments. The Committee may make or provide for such adjustments in the (a) number of
Common Shares covered by outstanding Option Rights, Appreciation Rights, Restricted Stock Units and
Performance Shares and Performance Units granted hereunder, (b) prices per share applicable to such
Option Rights and Appreciation Rights, and (c) kind of shares (including shares of another issuer)
covered thereby, as the Committee in its sole discretion may in good faith determine to be
equitably required in order to prevent dilution or enlargement of the rights of Participants that
otherwise would result from (x) any stock dividend, stock split, combination of shares,
recapitalization or other change in the capital structure of the Corporation, (y) any merger,
consolidation, spin-off, spin-out, split-off, split-up, reorganization, partial or complete
liquidation or other distribution of assets, issuance of rights or warrants to purchase securities
or (z) any other corporate transaction or event having an effect similar to any of the foregoing.
In the event of any such transaction or event, the Committee may provide in substitution for any or
all outstanding awards under this Plan such alternative consideration as it may in good faith
determine to be equitable under the circumstances and may require in connection therewith the
surrender of all awards so replaced in a manner that complies with Section 409A of the Code.
Moreover, the Committee may on or after the Date of Grant provide in the agreement evidencing any
award under this Plan that the holder of the award may elect to receive an equivalent award in
respect of securities of the surviving entity of any merger, consolidation or other transaction or
event having a similar effect, or the Committee may provide that the holder will automatically be
entitled to receive such an equivalent award. The committee may also make or provide for such
adjustments in the numbers and kind of shares specified in Section 3 of this 2006 Plan as the
Committee in its sole discretion, exercised in good faith, may determine is appropriate to reflect
any transaction or event described in this Section 11; provided, however, that any such adjustment
to the number specified in Section 3(b)(i) will be made only if and to the extent that such
adjustment would not cause any option intended to qualify as an Incentive Stock Option to fail so
to qualify. This Section 11 shall not be construed to permit the re-pricing of any Option Rights
in the absence of any of the circumstances described above in contravention of Section 19(b)
hereof. Notwithstanding the foregoing: (i) any adjustments made pursuant to this Section 11 to
awards that are considered “deferred compensation” within the meaning of Section 409A of the Code
shall be made in compliance with the requirements of Section 409A of the Code; (ii) any adjustments
made pursuant to this Section 11 of the Plan to awards that are not considered “deferred
compensation” subject to Section 409A of the Code shall be made in such a manner as to ensure that
after such adjustment, the awards either continue not to be subject to Section 409A of the Code or
comply with the requirements of Section 409A of the Code; and (iii) the Committee shall not have
the authority to make any adjustments pursuant to this Section 11 of the Plan to the extent that
the existence of such authority would cause an award that is not intended to be subject to Section
409A of the Code to be subject thereto.

     12. Detrimental Activity. Any Evidence of Award may provide that if a Participant, either
during employment by the Corporation or a Subsidiary or within a specified period after termination
of such employment, shall engage in any Detrimental Activity (as defined by the Committee in the
Evidence of Award), and the Board shall so find, forthwith upon notice of such finding, the
Participant shall:

     (a) Forfeit any award granted under this Plan then held by the Participant;

11

 

     (b) Return to the Corporation, in exchange for payment by the Corporation of any amount
actually paid therefor by the Participant, all Common Shares that the Participant has not
disposed of that were offered pursuant to this Plan within a specified period prior to the
date of the commencement of such Detrimental Activity; and

     (c) With respect to any Common Shares so acquired that the Participant has disposed of,
pay to the Corporation in cash the difference between:

     (i) Any amount actually paid therefor by the Participant pursuant to this Plan,
and

     (ii) The Market Value per Share of the Common Shares on the date of such
acquisition.

To the extent that such amounts are not paid to the Corporation, the Corporation may set off the
amounts so payable to it against any amounts that may be owing from time to time by the Corporation
or a Subsidiary to the Participant, whether as wages, deferred compensation or vacation pay or in
the form of any other benefit or for any other reason.

     13. Participation by Employees of Designated Subsidiaries. As a condition to the
effectiveness of any grant or award to be made hereunder to a Participant who is an employee of a
Designated Subsidiary, whether or not such Participant is also employed by the Corporation or
another Subsidiary, the Board may require such Designated Subsidiary to agree to transfer to such
employee (when, as and if provided for under this Plan, and any applicable Agreement entered into
with any such employee pursuant to this Plan) the Common Shares that would otherwise be delivered
by the Corporation, upon receipt by such Designated Subsidiary of any consideration then otherwise
payable by such Participant to the Corporation. Any such award shall be evidenced by an agreement
between the Participant and the Designated Subsidiary, in lieu of the Corporation, on terms
consistent with this Plan and approved by the Board and such Designated Subsidiary. All such
Common Shares so delivered by or to a Designated Subsidiary shall be treated as if they had been
delivered by or to the Corporation for purposes of Section 3 of this Plan, and all references to
the Corporation in this Plan shall be deemed to refer to such Designated Subsidiary, except for
purposes of the definition of “Board” and except in other cases where the context otherwise
requires.

     14. Non-U.S. Employees. In order to facilitate the making of any grant or combination of
grants under this Plan, the Committee may provide for such special terms for awards to Participants
who are foreign nationals or who are employed by the Corporation or any Subsidiary or Designated
Subsidiary outside of the United States of America or who provide services to the Corporation under
an agreement with a foreign nation or agency, as the Committee may consider necessary or
appropriate to accommodate differences in local law; tax policy or custom. Moreover, the Committee
may approve such supplements to or amendments, restatements or alternative versions of this Plan
(including, without limitation, sub-plans) as it may consider necessary or appropriate for such
purposes, without thereby affecting the terms of this Plan as in effect for any other purpose, and
the Secretary or other appropriate officer of the Corporation may certify any such document as
having been approved and adopted in the same manner as this Plan. No such special terms,
supplements, amendments or restatements, however, shall include any provisions that are
inconsistent with the terms of this Plan as then in effect unless this Plan could have been amended
to eliminate such inconsistency without further approval by the shareholders of the Corporation.

     15. Transferability. (a) Except as provided in Section 15(c) below, no Option Right or
Appreciation Right or other derivative security granted under this Plan may be transferred by a
Participant except by will or the laws of descent and distribution. Except as otherwise determined
by the Committee, Option Rights and Appreciation Rights granted under this Plan may not be
exercised during a Participant’s lifetime except by the Participant or, in the event of the
Participant’s legal incapacity, by his guardian or legal representative acting in a fiduciary
capacity on behalf of the Participant under state law and court supervision.

     (b) The Committee may specify at the Date of Grant, that all or any part of the Common
Shares that are (i) to be issued or transferred by the Corporation upon the exercise of
Option Rights or Appreciation Rights, or in payment of Performance Shares or Performance
Unit or upon the termination of the Restriction Period applicable to Restricted Stock Units,
or (ii) no longer subject to the substantial risk of

12

 

forfeiture and restriction on transfer referred to in Sections 46 and 6 of this Plan,
shall be subject to further restrictions upon transfer.

     (c) The Committee may determine that Option Rights (other than Incentive Stock Options)
and Appreciation Rights may be transferable by a Participant, without payment of
consideration therefor by the transferee, only to any one or more members of the
Participant’s immediate family; provided, however, that (i) no such transfer shall be
effective unless reasonable prior notice thereof is delivered to the Corporation and such
transfer is thereafter effected in accordance with any terms and conditions that shall have
been made applicable thereto by the Corporation or the Committee and (ii) any such
transferee shall be subject to the same terms and conditions hereunder as the Participant.
For the purposes of this Section 15(c), the term “immediate family” means any child,
stepchild, grandchild, parent, stepparent, grandparent, spouse, sibling, mother-in-law,
father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law, including
adoptive relationships, any person sharing the Participant’s household (other than a tenant
or employee), a trust in which these persons have more than fifty percent of the beneficial
interest, a foundation in which these persons (or the Participant) control the management of
assets, and any other entity in which these persons (or the Participant) own more than fifty
percent of the voting interests.

     16. Withholding Taxes. To the extent that the Corporation is required to withhold federal,
state, local or foreign taxes in connection with any payment made or benefit realized by a
Participant or other person under this Plan, and the amounts available the Corporation for the
withholding are insufficient, it shall be a condition to the receipt of any such payment or the
realization of any such benefit that the Participant or such other person make arrangements
satisfactory to the Corporation for payment of the balance of any taxes required to be withheld.
At the discretion of the Committee, any such arrangements may without limitation include
relinquishment of a portion of any such payment or benefit. Participants shall also make such
arrangements as the Corporation may require for the payment of any withholding tax obligation that
may arise in connection with the disposition of Common Shares acquired upon the exercise of Option
Rights. In no event shall the Market Value per Share of the Common Shares to be withheld and/or
delivered pursuant to this Section to satisfy applicable withholding taxes in connection with the
benefit exceed the minimum amount of taxes required to be withheld.

     17. Compliance with Section 409A of the Code.

     (a) To the extent applicable, it is intended that this Plan and any grants made
hereunder comply with the provisions of Section 409A of the Code, so that the income
inclusion provisions of Section 409A(a)(1) of the Code do not apply to the Participant. This
Plan and any grants made hereunder shall be administered in a manner consistent with this
intent. Any reference in this Plan to Section 409A of the Code will also include any
regulations or any other formal guidance promulgated with respect to such Section by the
U.S. Department of the Treasury or the Internal Revenue Service.

     (b) Neither a Participant nor any of a Participant’s creditors or beneficiaries shall
have the right to subject any deferred compensation (within the meaning of Section 409A of
the Code) payable under this Plan and grants hereunder to any anticipation, alienation,
sale, transfer, assignment, pledge, encumbrance, attachment or garnishment. Except as
permitted under Section 409A of the Code, any deferred compensation (within the meaning of
Section 409A of the Code) payable to a Participant or for a Participant’s benefit under this
Plan and grants hereunder may not be reduced by, or offset against, any amount owing by a
Participant to the Corporation or any of its affiliates.

     (c) If, at the time of a Participant’s separation from service (within the meaning of
Section 409A of the Code), (i) the Participant shall be a specified employee (within the
meaning of Section 409A of the Code and using the identification methodology selected by the
Corporation from time to time) and (ii) the Corporation shall make a good faith
determination that an amount payable hereunder constitutes deferred compensation (within the
meaning of Section 409A of the Code) the payment of which is required to be delayed pursuant
to the six-month delay rule set forth in Section 409A of the Code in order to avoid taxes or
penalties under Section 409A of the Code, then the Corporation shall not pay such amount on
the otherwise scheduled payment date but shall instead pay it, without interest, on the
first business day of the seventh month after such six-month period.

13

 

     (d) Notwithstanding any provision of this Plan and grants hereunder to the contrary, in
light of the uncertainty with respect to the proper application of Section 409A of the Code,
the Corporation reserves the right to make amendments to this Plan and grants hereunder as
the Corporation deems necessary or desirable to avoid the imposition of taxes or penalties
under Section 409A of the Code. In any case, a Participant shall be solely responsible and
liable for the satisfaction of all taxes and penalties that may be imposed on a Participant
or for a Participant’s account in connection with this Plan and grants hereunder (including
any taxes and penalties under Section 409A of the Code), and neither the Corporation nor any
of its affiliates shall have any obligation to indemnify or otherwise hold a Participant
harmless from any or all of such taxes or penalties.

     18. Effective Date. This Plan was originally effective as of May 2, 2006, the date the Plan
was approved by shareholders, and this amended and restatement is effective August 1, 2008.

     19. Amendments.

     (a) The Committee may at any time and from time to time amend this Plan in whole or in
part; provided, however, that if an amendment to this Plan (i) would materially increase the
benefits accruing to participants under this Plan, (ii) would materially increase the number
of securities which may be issued under this Plan, (iii) would materially modify the
requirements for participation in this Plan or (iv) must otherwise be approved by the
shareholders of the Corporation in order to comply with applicable law or the rules of the
New York Stock Exchange or, if the Common Shares are not traded on the New York Stock
Exchange, the principal national securities exchange upon which the Common Shares are traded
or quoted, then, such amendment will be subject to shareholder approval and will not be
effective unless and until such approval has been obtained.

     (b) The Committee shall not, without the further approval of the shareholders of the
Corporation, authorize the amendment of any outstanding Option Right to reduce the Option
Price. Furthermore, no Option Right will be cancelled and replaced with awards having a
lower Option Price without further approval of the shareholders of the Corporation. This
Section 19(b) is intended to prohibit the repricing of “underwater” Option Rights and shall
not be construed to prohibit the adjustments provided for in Section 11 of this Plan.

     (c) If permitted by Section 409A of the Code and except in the case of a Covered
Employee where such action would result in the loss of an otherwise available exemption
under Section 162(m) of the Code, in case of termination of employment by reason of death,
disability or normal or early retirement, or in the case of unforeseeable emergency or other
special circumstances, of a Participant who holds an Option Right or Appreciation Right not
immediately exercisable in full, or any Performance Restricted Shares, Restricted Shares as
to which the substantial risk of forfeiture or the prohibition or restriction on transfer
has not lapsed, or any Restricted Stock Units as to which the Restriction Period has not
been completed, or any Performance Shares or Performance Units which have not been fully
earned, or who holds Common Shares subject to any transfer restriction imposed pursuant to
Section 15 of this Plan, the Committee may, in its sole discretion, accelerate the time at
which such Option Right or Appreciation Right may be exercised or the time at which such
substantial risk of forfeiture or prohibition or restriction on transfer will lapse or the
time when such Restriction Period will end or the time at which such Performance Shares or
Performance Units will be deemed to have been fully earned or the time when such transfer
restriction will terminate or may waive any other limitation or requirement under any such
award.

     (d) Subject to Section 19(b) hereof, the Committee may amend the terms of any award
theretofore granted under this Plan prospectively or retroactively and except in the case of
a Covered Employee where such action would result in the loss of an otherwise available
exemption under Section 162(m) of the Code, but subject to Section 11 above, no such
amendment shall impair the rights of any Participant without his or her consent. The
Committee may, in its discretion, terminate this Plan at any time. Termination of this Plan
will not affect the rights of Participants or their successors under any awards outstanding
hereunder and not exercised in full on the date of termination.

14

 

     20. Termination of the Plan. No further awards shall be granted under this Plan after the
passage of 10 years from the date on which this Plan was first approved by the shareholders of the
Corporation.

     21. Governing Law. The Plan and all grants and awards and actions taken thereunder shall be
governed by and construed in accordance with the internal substantive laws of the State of Ohio.

     22. Miscellaneous Provisions.

     (a) The Corporation shall not be required to issue any fractional Common Shares
pursuant to this Plan. The Committee may provide for the elimination of fractions or for
the settlement of fractions in cash.

     (b) This Plan shall not confer upon any Participant any right with respect to
continuance of employment or other service with the Corporation or any Subsidiary, nor shall
it interfere in any way with any right the Corporation or any Subsidiary would otherwise
have to terminate such Participant’s employment or other service at any time.

     (c) To the extent that any provision of this Plan would prevent any Option Right that
was intended to qualify as a Tax-qualified Option from qualifying as such, that provision
shall be null and void with respect to such Option Right. Such provision, however, will
remain in effect for other Option Rights and there will be no further effect on any
provision of this Plan.

     (d) No award under this Plan may be exercised by the holder thereof if such exercise,
and the receipt of cash or stock thereunder, would be, in the opinion of counsel selected by
the Committee, contrary to law or the regulations of any duly constituted authority having
jurisdiction over this Plan.

     (e) Leave of absence approved by a duly constituted officer of the Corporation or any
of its Subsidiaries shall not be considered interruption or termination of service of any
employee for any purposes of this Plan or awards granted hereunder, except that no awards
may be granted to an employee while he or she is on a leave of absence.

     (f) No Participant shall have any rights as a shareholder with respect to any shares
subject to awards granted to him or her under this Plan prior to the date as of which he or
she is actually recorded as the holder of such shares upon the stock records of the
Corporation.

     (g) The Committee may condition the grant of any award or combination of awards
authorized under this Plan on the surrender or deferral by the Participant of his or her
right to receive a cash bonus or other compensation otherwise payable by the Corporation or
a Subsidiary to the Participant.

     (h) If any provision of this Plan is or becomes invalid, illegal or unenforceable in
any jurisdiction, or would disqualify this Plan or any award under any law deemed applicable
by the Board, such provision shall be construed or deemed amended or limited in scope to
conform to applicable laws or, in the discretion of the Board, it shall be stricken and the
remainder of this Plan shall remain in full force and effect.

/s/ Michael C. Hasychak

Vice President, Treasurer and Secretary

15EX-10.4

EXHIBIT
10.4

BRUSH ENGINEERED MATERIALS INC.

AMENDED AND RESTATED EXECUTIVE DEFERRED COMPENSATION PLAN II

ARTICLE 1

PURPOSE

     The Brush Engineered Materials Inc. Executive Deferred Compensation Plan II (the “Plan”),
adopted by the Board on December 7, 2004, for years beginning after December 31, 2004, is
maintained for the purpose of providing deferred compensation to eligible employees, which plan is
intended to be a non-qualified deferred compensation arrangement for a select group of management
and highly compensated employees. Effective January 1, 2008, the Plan is amended and restated in
the form of this Amended and Restated Executive Deferred Compensation Plan II to provide as
follows:

ARTICLE 2

DEFINITIONS

     The following terms shall have the following meanings described in this Article unless the
context clearly indicates another meaning. All references in the Plan to specific Articles or
Sections shall refer to Articles or Sections of the Plan unless otherwise stated.

     2.1 Account means the record or records established for each Participant in accordance
with Section 5.1.

     2.2 Annual Excess Compensation means for a Plan Year a Participant’s Base Salary for
services performed during the Plan Year, performance compensation payable in the Plan Year under
the Brush Engineered Materials Inc. and Subsidiaries Management Performance Compensation Plan, and
incentive compensation payable in cash and cash equivalents in the Plan Year under the Brush
Engineered Materials Inc. and Subsidiaries Long-Term Incentive Plan, whether or not such
compensation is reportable on Form W-2 for the Plan Year, but only to the extent that such
compensation exceeds the limit imposed on compensation taken into account under the Brush
Engineered Materials Inc. Savings and Investment Plan by reason of Code Section 401(a)(17) as
determined by the Plan Administrator.

     2.3 Base Salary means for a Plan Year the annual cash compensation relating to
services performed during such Plan Year, whether or not paid in such Plan Year or included on the
Federal Income Tax Form W-2 for such year, excluding bonuses, commissions, overtime, special
awards, tax planning stipends, fringe benefits, stock options, relocation expenses, incentive
payments, non-monetary awards, fees, and automobile and other allowances paid to a Participant for
employment services rendered (whether or not such allowances are included in the Employee’s gross
income). Base Salary shall be calculated before reduction for compensation voluntarily deferred or
contributed by the Participant pursuant to all qualified or non-qualified plans of any Employer and
shall be calculated to include amounts not otherwise included in the Participant’s gross income
under Code Sections 125, 402(e)(3), 402(h), or 403(b) pursuant to plans established by any
Employer; provided, however, that all such amounts will be

 

 

included in compensation only to the extent that, had there been no such plan, the amount
would have been payable in cash to the Employee.

     2.4 Board means the Board of Directors of Company.

     2.5 Bonus means for a Plan Year any compensation payable in the form of cash to a
Participant with respect to the Plan Year pursuant to the Brush Engineered Materials Inc. and
Subsidiaries Management Performance Compensation Plan, whether or not paid in a calendar year or
included on the Federal Income Tax Form W-2 for a calendar year.

     2.6 Code means the Internal Revenue Code of 1986, as amended.

     2.7 Company means Brush Engineered Materials Inc., an Ohio corporation.

     2.8 Compensation Committee means the Compensation Committee of the Board or, at any
time that no such committee exists, the Board.

     2.9 Deferred Compensation means the portion of a Participant’s Base Salary or Bonus
allocated to the Participant’s Account in accordance with Section 4.1.

     2.10 Election Agreement means the written agreement entered into by an Employee, which
shall be irrevocable, pursuant to which the Employee becomes a Participant in the Plan and makes an
election relating to Deferred Compensation and the period over which Deferred Compensation and
Nonelective Deferred Compensation and investment return thereon will be paid.

     2.11 Employee means, with respect to each Employer, management and highly compensated
employees.

     2.12 Employer means the Company and any other corporation in a controlled group of
corporations (under Code Section 414(b)) of which Company is a member which, with the authorization
of the Board, adopts the Plan for the benefit of its employees pursuant to resolution of its board
of directors.

     2.13 Nonelective Deferred Compensation means a Participant’s nonelective deferred
compensation allocated to the Participant’s Account in accordance with Section 5.1.

     2.14 Participant means an Employee or former Employee of an Employer who has met the
requirements for participation under Section 3.1 and who is or may become eligible to receive a
benefit from the Plan or whose beneficiary may be eligible to receive a benefit from the Plan.

     2.15 Plan means the plan, the terms and provisions of which are herein set forth, and
as it may be amended or restated from time to time, designated as the “Brush Engineered Materials
Inc. Executive Deferred Compensation Plan II.”

     2.16  Plan Administrator means the Company.

     2.17 Plan Year means the period beginning on January 1 and ending on December 31 of
each year.

 

 

     2.18 Separation from Service means a termination of employment with the Company and
all entities with which the Company would be considered a single employer under Section 414(b) and
414(c) of the Code in a manner such as to constitute a separation from service as defined under
Section 409A of the Code; provided that in applying Section 1563(a)(1), (2), and (3) for purposes
of determining a controlled group of corporations under Section 414(b) of the Code, the language
“at least 50 percent” is used instead of “at least 80 percent” each place it appears in Section
1563(a)(1), (2), and (3), and in applying Treasury Regulation Section 1.414(c)-2 for purposes of
determining trades or businesses (whether or not incorporated) that are under common control for
purposes of Section 414(c), “at least 50 percent” is used instead of “at least 80 percent” each
place it appears in that regulation.

     2.19 Trust means any domestic trust that may be maintained in the United States
pursuant to Article 8.

     2.20 Valuation Date means the last business day of each calendar month.

ARTICLE 3

PARTICIPATION

     3.1 Eligibility. An Employee shall be eligible to participate in the Plan if he or she
is an Employee designated as eligible by the Compensation Committee. Individuals not specifically
designated by the Compensation Committee are not eligible to participate in the Plan.

     3.2 Participation. An Employee shall become a Participant as of the date he or she
satisfies the eligibility requirements of Section 3.1 and completes all administrative forms
required by the Plan Administrator. A Participant’s participation in the Plan shall terminate upon
Separation from Service or upon such other events as determined by the Compensation Committee.

ARTICLE 4

BENEFITS

     4.1 Deferred Compensation. Subject to any limitations established by the Compensation
Committee or the Plan Administrator, a Participant may elect for a Plan Year to have his or her
Base Salary and/or Bonus deferred in any amount not to exceed (i) the Participant’s Base Salary in
excess of the dollar limitation provided for under Code Section 401(a)(17) as determined by the
Plan Administrator, except that this dollar limitation will not be applied with respect to the 2005
Plan Year, and (ii) the Participant’s full Bonus, less applicable tax withholding, and to have that
amount credited to his or her Account as Deferred Compensation. Deferred Compensation shall be
credited to a Participant’s Account monthly.

     4.2 Nonelective Deferred Compensation. There shall be credited to each Participant’s
Account for each Plan Year an amount equal to three percent of his or her Annual Excess
Compensation, or such other percent as may be established from time to time by action of the Board
to maintain parity with the matching contribution rate available under the Brush Engineered
Materials Inc. Savings and Investment Plan. Moreover, the Compensation Committee may in its
discretion determine for any Plan Year to make an additional credit to a Participant’s Account as
Nonelective Deferred Compensation, which amount may be a different amount or percentage (including
no amount) for each Participant, as the Compensation

 

 

Committee shall in its sole and absolute discretion determine. Nonelective Deferred
Compensation shall be credited to a Participant’s Account monthly.

     4.3 Election Procedures.

     (a) Except as provided in paragraphs (b) and (c) below, compensation for services
performed during a taxable year may be deferred at the Participant’s election only if the
election to defer such compensation is made not later than the close of the preceding
taxable year.

     (b) In the case of the first year in which a Participant becomes eligible to
participate in the Plan, the Participant’s election with respect to amounts deferred
pursuant to Sections 4.1 and 4.2 may be made with respect to services to be performed
subsequent to the election within 30 days after the date the Participant becomes eligible to
participate in the Plan. Except as provided in paragraph (c) below, when an election to
defer is made in the first year of eligibility but after commencement of a performance
period during which compensation is earned under an incentive plan, the deferral election
shall apply only to that portion of such compensation earned under the incentive plan for
such performance period equal to the total amount of the incentive compensation earned
during such performance period multiplied by a fraction, the numerator of which is the
number of days beginning on the day immediately after the day the election to defer becomes
irrevocable and ending on the last day of the performance period, and the denominator of
which is the total number of days in the performance period.

     (c) In the case of any performance-based compensation based on services performed over
a period of at least 12 months as determined by the Plan Administrator in accordance with
regulatory guidance under Code Section 409A, an election may be made no later than six
months before the end of the period.

     (d) Each Participant shall specify on his or her Election Agreement with respect to
each Plan Year (i) the percentage of Base Salary and/or the percentage of Bonus the
Participant elects to defer for such Plan Year; and (ii) whether the Deferred Compensation
and Nonelective Deferred Compensation for such Plan Year plus investment return credited to
such amounts will be paid in a single lump sum, annual installments payable over three
years, or annual installments payable over five years upon the Participant’s Separation from
Service; subject to the further provisions of Article 6.

     (e) A Participant can change his or her Election Agreement and an eligible Employee who
is not a Participant may become a Participant, as of any January 1 by completing, signing,
and filing an Election Agreement with the Plan Administrator not later than the preceding
December 31 (subject, however, to the provisions of paragraph (b) above in the case of a
Participant who becomes newly eligible during the Plan Year). A Participant who does not
complete a new Election Agreement for a Plan Year will be deemed to have elected not to have
any Deferred Compensation for the Plan Year and will be deemed to have elected a single lump
sum method of payment for any Nonelective Deferral Compensation for such Plan Year. In the
event any amount is credited to the Account of Participant with respect to which no timely
election concerning method of payment has been made, such amount shall be payable in the
single lump sum method of payment.

 

 

     (f) All Election Agreements shall be in a form acceptable to the Plan Administrator and
shall be completed, signed, and filed with the Plan Administrator as provided herein.

ARTICLE 5

ACCOUNTS

     5.1 Participant Accounts. The Plan Administrator shall establish a separate Account in
the name of each Participant in respect of each Employer of such Participant for all amounts
attributable to Deferred Compensation for each Plan Year for which the Participant has elected to
defer compensation otherwise payable by such Employer and all Nonelective Deferred Compensation for
each Plan Year. A Participant’s Account shall be maintained by the Plan Administrator in accordance
with the terms of this Plan until all of the Deferred Compensation, Nonelective Deferred
Compensation, and investment return to which a Participant is entitled has been distributed to a
Participant or his or her beneficiary in accordance with the terms of the Plan. A Participant shall
be fully vested in his or her Account at all times.

     5.2 Investment Return. Each Account shall be deemed to bear an investment return as if
invested in the manner elected by the Participant from a list of investment funds from time to time
determined by the Compensation Committee. The Compensation Committee may delegate to the Company’s
Retirement Plan Investment Committee the duty and authority to determine the investment funds to be
used for this purpose under the Plan, including the discretion to eliminate, add, or substitute
investment funds from time to time. Deemed investment return under the Plan shall be determined
from the date of crediting of an amount to the Participant’s Account (including deemed income
thereon) through the date of complete distribution of the Account. A Participant shall be
permitted to change his investment election under the Plan for any portion or all of his Account as
of the first business day of any calendar quarter in accordance with such rules and procedures as
the Company shall establish for this purpose. The Company shall have no obligation to actually
invest funds pursuant to a Participant’s elections, and if the Company does invest funds, a
Participant shall have no right to any invested assets other than as a general unsecured creditor
of the Company. During any period in which a Participant has not made an election relating to the
investment of some portion of his Account, such as in the case of an investment fund previously
selected by the Participant ceasing to be available under the Plan, the Retirement Plan Investment
Committee shall determine the investment fund or funds to be used in determining investment return
for that portion of his Account.

     5.3 Valuation of Accounts. The value of an Account as of any Valuation Date shall
equal the amounts previously credited to such Account less any payments debited to such Account
plus the investment return deemed to be earned on such Account in accordance with Section 5.2
through the Valuation Date.

ARTICLE 6

DISTRIBUTIONS

     6.1 Separation from Service. Upon Separation from Service for any reason other than
death, a Participant’s Account with respect to a Plan Year shall be distributed to the Participant
in a single lump sum payment, annual installments payable over three years, or annual installments

 

 

payable over five years, as elected by the Participant on his or her Election Agreement with
respect to deferrals for the Plan Year. Payment will be made or begin on the business day
coinciding with or next following the 60th day after the Participant’s Separation from Service;
subject, however, to the provisions of Section 6.3. Remaining installment payments after the first
annual payment shall be paid on March 31 of each subsequent year (subject, however, to the
provisions of Section 6.3) and shall be calculated and recalculated annually by multiplying the
balance credited to the Participant’s Account (including any increase or decrease resulting from
investment return) as of the most recent Valuation Date preceding the payment by a fraction, the
numerator of which is one and the denominator of which is the remaining number of payments to be
made to the Participant.

     6.2 Death. If a Participant dies prior to Separation from Service or complete
distribution of his or her Account, the amounts credited to his or her Account will be distributed
in a single lump sum payment to the beneficiary named by the Participant on a beneficiary
designation form filed with the Company. Payment of a death benefit will begin on the business day
coinciding with or next following the 60th day after a Participant’s death. The Participant may
change the beneficiary designation at any time by signing and filing a new beneficiary designation
form with the Plan Administrator. If for any reason no beneficiary is designated or no beneficiary
survives the Participant, the beneficiary shall be the Participant’s estate. If the Participant
designates a trust as beneficiary, the Plan Administrator shall determine the rights of the trustee
without responsibility for determining the validity, existence or provisions of the trust. Further,
neither the Plan Administrator nor the Company nor any Employer shall have responsibility for the
application of sums paid to the trustee or for the discharge of the trust.

     6.3 Distribution Limitations. Notwithstanding any provision of the Plan to the
contrary, compensation deferred under the Plan shall not be distributed earlier than

     (a) separation from service as determined by the Secretary of the Treasury (except as
provided below with respect to a key employee of an Employer);

     (b) the date the Participant becomes disabled (within the meaning of
Section 409A(a)(2)(C) of the Code);

     (c) death of the Participant;

     (d) a specified time (or pursuant to a fixed schedule) specified under the Plan at the
date of the deferral of such compensation;

     (e) to the extent provided by the Secretary of the Treasury, a change in the ownership
or effective control of the Company, or in the ownership of a substantial portion of the
assets of the Company; or

     (f) the occurrence of an unforeseeable emergency as defined in
Section 409A(a)(2)(B)(ii) of the Code.

In the case of any key employee (as defined in Section 416(i) of the Code without regard to
paragraph (5) thereof) of an Employer, distributions may not be made before the date which is six
months after the date of Separation from Service (or, if earlier, the date of death of the
Participant), provided that in the case of any distribution which would be made on an earlier date

 

 

but for this restriction, such distribution shall be made on the first day of the month following
the date which is six months after the date of the key employee’s Separation from Service.

ARTICLE 7

ADMINISTRATION

     7.1 Plan Administrator. The Company shall have the sole responsibility for the
administration of the Plan and is designated as Plan Administrator.

     7.2 Appointment of Administrative Committee. The Company may delegate its duties as
Plan Administrator to an Administrative Committee. The members of the Administrative Committee
shall be selected by the Board.

     7.3 Powers of Plan Administrator. The Plan Administrator shall have the full and
exclusive power, discretion and authority to administer the Plan. The determinations and decisions
of the Plan Administrator are final and binding on all persons. The Plan Administrator’s powers
shall include but shall not be limited to, the power to:

     (a) Maintain records pertaining to the Plan.

     (b) Interpret the terms and provisions of the Plan, and to construe ambiguities and
correct omissions.

     (c) Establish procedures by which Participants may apply for benefits under the Plan
and appeal a denial of benefits.

     (d) Determine the rights under the Plan of any Participant applying for or receiving
benefits.

     (e) Administer the claims procedure provided in this Article.

     (f) Perform all acts necessary to meet the reporting and disclosure obligations imposed
by the Employee Retirement Income Security Act of 1974, as amended (“ERISA”).

     (g) Delegate specific responsibilities for the operation and administration of the Plan
to such employees or agents as it deems advisable and necessary.

     In the exercise of its powers, the Plan Administrator shall be entitled to rely upon all
tables, valuations, certificates and reports furnished by any accountant or consultant and upon
opinions given by any legal counsel in each case duly selected by the Plan Administrator.

     7.4 Limitation of Liability. The Plan Administrator and the Company and all other
Employers, and their respective officers and directors (including but not limited to the members of
the Board), shall not be liable for any act or omission relating to their duties under the Plan,
unless such act or omission is attributable to their own willful misconduct or lack of good faith.

     7.5 Claims Procedures.

 

 

     (a) All claims under the Plan shall be directed to the attention of the Plan
Administrator. Any Participant or beneficiary whose application for benefits or other claim
under the Plan has been denied, in whole or in part, shall be given written notice of the
denial by the Plan Administrator within 60 days after the receipt of the claim. The notice
shall explain that the Participant or beneficiary may request a review of the denial and the
procedure for requesting review. The notice shall describe any additional information
necessary to perfect the Participant’s or beneficiary’s claim and explain why such
information is necessary. If a Participant or beneficiary does not receive a written
response to a claim within 60 days after receipt of the claim by the Plan Administrator, the
claim will be deemed to be denied.

     (b) A Participant or beneficiary may make a written request to the Plan Administrator
for a review of any denial of claims under this Plan. The request for review must be in
writing and must be made within 60 days after the mailing date of the notice of denial or
the deemed denial. The request shall refer to the provisions of the Plan on which it is
based and shall set forth the facts relied upon as justifying a reversal or modification of
the determination being appealed.

     (c) A Participant or beneficiary who requests a review of denial of claims in
accordance with this claims procedure may examine pertinent documents and submit pertinent
issues and comments in writing. A Participant or beneficiary may have a duly authorized
representative act on his or her behalf in exercising his or her right to request a review
and any other rights granted by this claims procedure. The Plan Administrator shall provide
a review of the decision denying the claim within 60 days after receiving the written
request for review. If a Participant or beneficiary does not receive a written response to a
request for a review within the foregoing time limit, such request will be deemed to be
denied. A decision by the Plan Administrator for review shall be final and binding on all
persons.

ARTICLE 8

MISCELLANEOUS

     8.1 Unfunded Plan.

     (a) The Plan shall be an unfunded plan maintained by the Company and the other
Employers for the purpose of providing benefits for a select group of management or highly
compensated employees. Neither the Company nor any other Employer shall be required to set
aside, earmark or entrust any fund or money with which to pay their obligations under this
Plan or to invest in any particular investment vehicle and may change investments of Company
assets at any time.

     (b) The Company may establish a Trust to hold property that may be used to pay benefits
under the Plan. The Trust shall be a domestic trust maintained in the United States. The
Trust shall be intended to be a grantor trust, within the meaning of Section 671 of the
Code, of which the Company is the grantor, and the Plan is to be construed in accordance
with that intention. Notwithstanding any other provision of this Plan, the assets of the
Trust will remain the property of the Company and will be subject to the claims of creditors
in the event of bankruptcy or insolvency, as provided in the Trust Agreement. No Participant
or person claiming through a Participant will have any

 

 

priority claim on the assets of the Trust or any security interest or other right
superior to the rights of a general creditor of the Company or the other Employers as
provided in the Trust Agreement.

     (c) Subject to the following provisions of this paragraph (c), all benefits under this
Plan shall be paid by the Participant’s Employer(s) from its general assets and/or the
assets of the Trust, which assets shall, at all times, remain subject to the claims of
creditors as provided in the Trust Agreement. No Employer, other than the Company as
provided below, shall have any obligation to pay benefits hereunder in respect of any
Participants who are not Employees or former Employees of such Employer. The obligation of
each Employer hereunder in respect of any Participant shall be limited to the amounts
payable to such Participant from the Account established for such Participant in respect of
employment with that Employer, except that if an Employer shall fail to make or cause to be
made any benefit payment hereunder when due, the Company shall promptly make such benefit
payment from its general assets and/or the assets of the Trust.

     (d) Neither Participants, their beneficiaries nor their legal representatives shall
have any right, other than the right of an unsecured general creditor, against the Company
or any other Employer in respect of any portion of a Participant’s Account and shall have no
right, title or interest, legal or equitable, in or to any asset of the Company or any other
Employer or the Trust.

     8.2 Spendthrift Provision. The Plan shall not in any manner be liable for or subject
to the debts or liabilities of any Participant or beneficiary. No benefit or interest under the
Plan is subject to assignment, alienation, pledge, or encumbrance, whether voluntary or
involuntary, and any purported or attempted assignment, alienation, pledge, or encumbrance of
benefits shall be void and will not be recognized by the Company or any other Employer.

     8.3 Employment Rights. The existence of the Plan shall not grant a Participant any
legal or equitable right to continue as an Employee nor affect the right of the Company or any
other Employer to discharge a Participant.

     8.4 Withholding of Taxes. To the extent required by applicable law, the Company or
another Employer will withhold from Compensation and/or Deferred Compensation and any payment
hereunder all taxes required to be withheld for federal, state, or local government purposes.

     8.5 Amendment or Termination. Subject to the provisions of Section 8.4 and 9.12, the
Company reserves the right to amend, modify, suspend or terminate the Plan at any time by action of
its Board or of the Compensation Committee of its Board; provided that no prior notice to any
Participant shall be required, and provided further, that no such action may deprive a Participant
of his rights to receive a benefit pursuant to the Plan with respect to compensation deferred prior
to such action.

     8.6 No Fiduciary Relationship Created. Nothing contained in this Plan, and no action
taken pursuant to the provisions of this Plan, shall create or be deemed to create a fiduciary
relationship between the Company or any other Employer or the Plan Administrator and any
Participant, beneficiary or any other person.

 

 

     8.7 Release. Any payment to any Participant or beneficiary in accordance with the
provisions of this Plan shall, to the extent thereof, be in full satisfaction of all claims against
the Plan Administrator, the Company, the other Employers and any of their respective officers,
directors, shareholders, employees or agents.

     8.8 No Warranty or Representation. Neither the Company nor any other
Employer makes any warranty or representation regarding the effect of deferrals made or benefits
paid under this Plan for any purpose.

     8.9 Construction. Words used in the masculine shall apply to the feminine where
applicable; and wherever the context of the Plan dictates, the plural shall be read as the singular
and the singular as the plural.

     8.10 Governing Law. To the extent that Ohio law is not preempted by ERISA, the
provisions of the Plan shall be governed by the laws of the State of Ohio.

     8.11 Counterparts. This Plan may be signed in any one or more counterparts each of
which together shall constitute one instrument.

     8.12 American Jobs Creation Act of 2004. The Plan is intended to provide for the
deferral of compensation in accordance with the provisions of Section 409A of the Code and Treasury
Regulations and published guidance issued pursuant thereto. Accordingly, the Plan shall be
construed in a manner consistent with those provisions and may at any time be amended in the manner
and to the extent determined necessary or desirable by the Company to reflect or otherwise
facilitate compliance with such provisions with respect to amounts deferred on and after January 1,
2005, including as contemplated by Section 885(f) of the American Jobs Creation Act of 2004.
Moreover, to the extent permitted in guidance issued by the Secretary of the Treasury and in
accordance with procedures established by the Committee, a Participant may be permitted to
terminate participation in the Plan or cancel an outstanding deferral election with regard to
amounts deferred after December 31, 2004. Notwithstanding any provision of the Plan to the
contrary, no otherwise permissible election or distribution shall be made or given effect under the
Plan that would result in taxation of any amount under Section 409A of the Code.

     8.13 Effect of Restatement. The terms of the Plan are amended and restated as set
forth in this document effective January 1, 2008, to govern all compensation deferred after
December 31, 2004. Notwithstanding the foregoing, however, for the period prior to January 1,
2008, the Plan shall operate based upon Notice 2005-1, additional notices published by the Treasury
Department and the Internal Revenue Service providing transition guidance, and a good faith,
reasonable interpretation of Section 409A of the Internal Revenue Code and its purpose.

     IN WITNESS WHEREOF, Brush Engineered Materials, Inc. has executed this Plan this
 29c day of July, 2008.

	 	 	 	 	 
	 	BRUSH ENGINEERED MATERIALS INC.

 	 
	 	By:  	/s/ Michael C. Hasychak
 	 
	 	 	Vice President, Treasurer and Secretary

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