Document:

exv10w3

 

Exhibit 10.3

QUANEX CORPORATION

DEFERRED COMPENSATION PLAN

Amended and Restated

Effective as of January 1, 2005

 

 

 

TABLE OF CONTENTS

	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	Page
	 
	 	 	 	 	 	 	 	 
	ARTICLE I	 	DEFINITIONS	 	I-1
	 
	 	 	 	 	 	 	 	 
	 

	 	 	1.1	 	 	“Account”
	 	I-1
	 

	 	 	1.2	 	 	“Affiliate”
	 	I-1
	 

	 	 	1.3	 	 	“Applicable Covered Employee”
	 	I-1
	 

	 	 	1.4	 	 	“Beneficiary”
	 	I-1
	 

	 	 	1.5	 	 	“Board”
	 	I-1
	 

	 	 	1.6	 	 	“Cash Fund”
	 	I-1
	 

	 	 	1.7	 	 	“Change of Control”
	 	I-1
	 

	 	 	1.8	 	 	“Change of Control Value”
	 	I-3
	 

	 	 	1.9	 	 	“Code”
	 	I-3
	 

	 	 	1.10	 	 	“Committee”
	 	I-3
	 

	 	 	1.11	 	 	“Common Stock”
	 	I-3
	 

	 	 	1.12	 	 	“Common Stock Fund”
	 	I-3
	 

	 	 	1.13	 	 	“Company”
	 	I-3
	 

	 	 	1.14	 	 	“Company Match”
	 	I-3
	 

	 	 	1.15	 	 	“Covered Employee”
	 	I-3
	 

	 	 	1.16	 	 	“Deferred Compensation Ledger”
	 	I-3
	 

	 	 	1.17	 	 	“Director”
	 	I-3
	 

	 	 	1.18	 	 	“Director Fees”
	 	I-3
	 

	 	 	1.19	 	 	“Disability”
	 	I-4
	 

	 	 	1.20	 	 	“Incentive Bonus”
	 	I-4
	 

	 	 	1.21	 	 	“Investment Fund”
	 	I-4
	 

	 	 	1.22	 	 	“LTIP Compensation”
	 	I-4
	 

	 	 	1.23	 	 	“Normal Retirement Date”
	 	I-4
	 

	 	 	1.24	 	 	“NYSE”
	 	I-4
	 

	 	 	1.25	 	 	“Omnibus Compensation”
	 	I-4
	 

	 	 	1.26	 	 	“Participant”
	 	I-4
	 

	 	 	1.27	 	 	“Plan”
	 	I-4
	 

	 	 	1.28	 	 	“Plan Year”
	 	I-4
	 

	 	 	1.29	 	 	“Quanex”
	 	I-4
	 

	 	 	1.30	 	 	“Rabbi Trust”
	 	I-4
	 

	 	 	1.31	 	 	“Restricted Period”
	 	I-5
	 

	 	 	1.32	 	 	“Retirement”
	 	I-5
	 

	 	 	1.33	 	 	“Retirement Plan”
	 	I-5
	 

	 	 	1.34	 	 	“Securities Act”
	 	I-5
	 

	 	 	1.35	 	 	“Separation From Service”
	 	I-5
	 

	 	 	1.36	 	 	“Stock Fund Unit”
	 	I-5
	 

	 	 	1.37	 	 	“Subsidiary”
	 	I-5
	 

	 	 	1.38	 	 	“Term of Deferral”
	 	I-5
	 

	 	 	1.39	 	 	“Valuation Date”
	 	I-5
	 

	 	 	1.40	 	 	“Voting Securities”
	 	I-5
	 
	 	 	 	 	 	 	 	 
	ARTICLE II	 	ELIGIBILITY	 	II-1
	 
	 	 	 	 	 	 	 	 
	ARTICLE III	 	DEFERRALS AND COMPANY CONTRIBUTIONS	 	III-1
	 
	 	 	 	 	 	 	 	 
	 
	 	 	3.1	 	 	Deferral Election	 	III-1
	 
	 	 	3.2	 	 	Company Match	 	III-3
	 
	 	 	3.3	 	 	Mandatory Deferral
	 	III-3

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TABLE OF CONTENTS

(continued)

	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	Page
	 
	 	 	 	 	 	 	 	 
	ARTICLE IV	 	ACCOUNT	 	IV-1
	 
	 	 	 	 	 	 	 	 
	 

	 	 	4.1	 	 	Establishing a Participant’s Account
	 	IV-1
	 

	 	 	4.2	 	 	Credit of the Participant’s Deferral and the Company’s Match
	 	IV-1
	 

	 	 	4.3	 	 	Crediting of Dividends and Distributions on Common Stock
	 	IV-1
	 

	 	 	4.4	 	 	Crediting of Earnings and Losses
	 	IV-1
	 

	 	 	4.5	 	 	Common Stock Conversion Election
	 	IV-2
	 

	 	 	4.6	 	 	Conversion and Cash-Out Upon a Change of Control
	 	IV-3
	 
	 	 	 	 	 	 	 	 
	ARTICLE V	 	VESTING AND EVENTS CAUSING FORFEITURE	 	V-1
	 
	 	 	 	 	 	 	 	 
	 

	 	 	5.1	 	 	Vesting
	 	V-1
	 

	 	 	5.2	 	 	Forfeiture for Cause
	 	V-1
	 

	 	 	5.3	 	 	Forfeiture for Competition
	 	V-1
	 

	 	 	5.4	 	 	Full Vesting in the Event of a Change of Control
	 	V-1
	 
	 	 	 	 	 	 	 	 
	ARTICLE VI	 	DISTRIBUTIONS	 	VI-1
	 
	 	 	 	 	 	 	 	 
	 

	 	 	6.1	 	 	Form of Distributions or Withdrawals
	 	VI-1
	 

	 	 	6.2	 	 	Death
	 	VI-1
	 

	 	 	6.3	 	 	Disability
	 	VI-2
	 

	 	 	6.4	 	 	Expiration of Term of Deferral
	 	VI-2
	 

	 	 	6.5	 	 	Unforeseeable Emergency Withdrawals
	 	VI-2
	 

	 	 	6.6	 	 	Valuation
	 	VI-3
	 

	 	 	6.7	 	 	Mandatory Immediate Lump Sum Payment
	 	VI-3
	 

	 	 	6.8	 	 	Payment Restrictions on Any Portion of a Benefit Determined Not to Be Deductible
	 	VI-3
	 

	 	 	6.9	 	 	Responsibility for Distributions and Withholding of Taxes
	 	VI-3
	 
	 	 	 	 	 	 	 	 
	ARTICLE VII	 	ADMINISTRATION	 	VII-1
	 
	 	 	 	 	 	 	 	 
	 

	 	 	7.1	 	 	Committee Appointment
	 	VII-1
	 

	 	 	7.2	 	 	Committee Organization and Voting
	 	VII-1
	 

	 	 	7.3	 	 	Powers of the Committee
	 	VII-1
	 

	 	 	7.4	 	 	Committee Discretion
	 	VII-2
	 

	 	 	7.5	 	 	Annual Statements
	 	VII-2
	 

	 	 	7.6	 	 	Reimbursement of Expenses
	 	VII-2
	 

	 	 	7.7	 	 	Limitation on Liability
	 	VII-2
	 
	 	 	 	 	 	 	 	 
	ARTICLE VIII	 	ADOPTION BY SUBSIDIARIES	 	VIII-1
	 
	 	 	 	 	 	 	 	 
	 

	 	 	8.1	 	 	Procedure for and Status After Adoption
	 	VIII-1
	 

	 	 	8.2	 	 	Termination of Participation by Adopting Subsidiary
	 	VIII-1
	 
	 	 	 	 	 	 	 	 
	ARTICLE IX	 	AMENDMENT AND/OR TERMINATION	 	IX-1
	 
	 	 	 	 	 	 	 	 
	 

	 	 	9.1	 	 	Amendment or Termination of the Plan
	 	IX-1
	 

	 	 	9.2	 	 	No Retroactive Effect on Awarded Benefits
	 	IX-1
	 

	 	 	9.3	 	 	Effect of Termination
	 	IX-1
	 
	 	 	 	 	 	 	 	 
	ARTICLE X	 	FUNDING	 	X-1
	 
	 	 	 	 	 	 	 	 
	 

	 	 	10.1	 	 	Payments Under This Agreement Are the Obligation of the Company
	 	X-1
	 

	 	 	10.2	 	 	Agreement May Be Funded Through Rabbi Trust
	 	X-1

-ii-

 

 

 

TABLE OF CONTENTS

(continued)

	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	Page
	 
	 	 	 	 	 	 	 	 
	 

	 	 	10.3	 	 	Reversion of Excess Assets
	 	X-1
	 

	 	 	10.4	 	 	Participants Must Rely Only on General Credit of the Company
	 	X-2
	 
	 	 	 	 	 	 	 	 
	ARTICLE XI	 	MISCELLANEOUS	 	XI-1
	 
	 	 	 	 	 	 	 	 
	 

	 	 	11.1	 	 	Limitation of Rights
	 	XI-1
	 

	 	 	11.2	 	 	Distributions to Incompetents or Minors
	 	XI-1
	 

	 	 	11.3	 	 	Nonalienation of Benefits
	 	XI-1
	 

	 	 	11.4	 	 	Expenses Incurred in Enforcing the Plan
	 	XI-1
	 

	 	 	11.5	 	 	Reliance Upon Information
	 	XI-2
	 

	 	 	11.6	 	 	Severability
	 	XI-2
	 

	 	 	11.7	 	 	Notice
	 	XI-2
	 

	 	 	11.8	 	 	Gender and Number
	 	XI-2
	 

	 	 	11.9	 	 	Governing Law
	 	XI-2
	 

	 	 	11.10	 	 	Section 409A
	 	XI-2
	 

	 	 	11.11	 	 	Amendment and Restatement of the Plan
	 	XI-2

-iii-

 

 

 

QUANEX CORPORATION

DEFERRED COMPENSATION PLAN

WHEREAS, Quanex Corporation originally established the Quanex Deferred Compensation Plan (the
“Plan”) effective October 1, 1981, which provides a mechanism by which certain highly compensated
management personnel may defer certain prior to such compensation being earned and directors may
defer their director’s fees prior to their being earned;

WHEREAS, Quanex Corporation amended and restated the Plan effective October 12, 1995, June 1,
1999, November 1, 2001 and July 1, 2004;

WHEREAS, the Plan is required to be amended to comply with the requirements of new section
409A of the Internal Revenue Code of 1986, as amended by the American Jobs Creation Act of 2004;

WHEREAS, it has been determined that the Plan should now be completely amended, restated and
continued without a gap or lapse in coverage, time or effect which would cause any Participant to
be entitled to a distribution in order to fundamentally change the purpose and provisions of the
Plan;

WHEREAS, it has been determined that the amendment and restatement of the Plan shall apply
only to amounts earned and vested on or after January 1, 2005, and that the provisions of the Plan
prior to this amendment and restatement shall apply to any amounts that were earned and vested
under the Plan on or before December 31, 2004;

WHEREAS, Quanex Corporation desires to amend and restate the Plan effective as of January 1,
2005.

NOW, THEREFORE, Quanex Corporation amends and restates the Plan as follows:

 

 

 

ARTICLE I

DEFINITIONS

1.1 “Account” means a Participant’s account in the Deferred Compensation Ledger maintained by
the Committee which reflects the benefits a Participant is entitled to under the Plan.

1.2 “Affiliate” means all business organizations which are members of a controlled group of
corporations (within the meaning of section 414(b) of the Code), or which are trades or businesses
(whether or not incorporated) which is under common control (within the meaning of section 414(c)
of the Code), or which are members of an affiliated service group of employers (within the meaning
of section 414(m) of the Code), which related group of corporations, businesses or employers
includes Quanex.

1.3 “Applicable Covered Employee” means any of the following:

(a) a Covered Employee of Quanex;

(b) a Covered Employee of an Affiliate; and

(c) a former employee who was a Covered Employee at the time of termination of
employment with Quanex or an Affiliate.

1.4 “Beneficiary” means a person or entity designated by the Participant under the terms of
the Plan to receive any amounts distributed under the Plan upon the death of the Participant.

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

1.6 “Cash Fund” means the Plan balances deemed invested in cash.

1.7 “Change of Control” means the occurrence of one or more of the following events after
October 1, 2006:

(a) the acquisition by any individual, entity or group (within the meaning of Section
13(d)(3) or 14(d)(2) of the Securities Act) (a “Covered Person”) of beneficial ownership
(within the meaning of rule 13d-3 promulgated under the Securities Act) of 20 percent (20%)
or more of either (i) the then outstanding shares of the common stock of Quanex (the
“Outstanding Quanex Common Stock”), or (ii) the combined voting power of the then
outstanding voting securities of Quanex entitled to vote generally in the election of
directors (the “Outstanding Quanex Voting Securities”); provided, however, that for purposes
of this subsection (a) of this Section, the following acquisitions shall not constitute a
Change of Control of Quanex: (i) any acquisition directly from Quanex, (ii) any acquisition
by Quanex, (iii) any acquisition by any employee benefit plan (or related trust) sponsored
or maintained by Quanex or any entity controlled by Quanex, or (iv) any
acquisition by any corporation pursuant to a transaction which complies with clauses
(i), (ii) and (iii) of subsection (c) of this Section; or

 

I-1

 

(b) individuals who, as of October 1, 2006, constitute the Board (the “Incumbent
Board”) cease for any reason to constitute at least a majority of the Board; provided,
however, that any individual becoming a director subsequent to October 1, 2006, whose
election, or nomination for election by Quanex’s stockholders, was approved by a vote of at
least a majority of the directors then comprising the Incumbent Board shall be considered as
though such individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office occurs as a result of an
actual or threatened election contest with respect to the election or removal of directors
or other actual or threatened solicitation of proxies or consents by or on behalf of a
Covered Person other than the Board; or

(c) the consummation of (xx) a reorganization, merger or consolidation or sale of
Quanex or (yy) a disposition of all or substantially all of the assets of the Company (a
“Business Combination”), in each case, unless, following such Business Combination, (i) all
or substantially all of the individuals and entities who were the beneficial owners,
respectively, of the Outstanding Quanex Common Stock and Outstanding Quanex Voting
Securities immediately prior to such Business Combination beneficially own, direct or
indirectly, more than 80 percent (80%) of, respectively, the then outstanding shares of
common stock and the combined voting power of the then outstanding voting securities
entitled to vote generally in the election of directors, as the case may be, of the
corporation resulting from such Business Combination (including, without limitation, a
corporation which as a result of such transaction owns Quanex or all or substantially all of
Quanex’s assets either directly or through one or more subsidiaries) in substantially the
same proportions as their ownership immediately prior to such Business Combination of the
Outstanding Quanex Common Stock and Outstanding Quanex Voting Securities, as the case may
be, (ii) no Covered Person (excluding any employee benefit plan (or related trust) of Quanex
or such corporation resulting from such Business Combination) beneficially owns, directly or
indirectly, 20 percent (20%) or more of, respectively, the then outstanding shares of common
stock of the corporation resulting from such Business Combination or the combined voting
power of the then outstanding voting securities of such corporation, except to the extent
that such ownership existed prior to the Business Combination, and (iii) at least a majority
of the members of the board of directors of the corporation resulting from such Business
Combination, were members of the Incumbent Board at the time of the execution of the initial
agreement, or of the action of the Board of Directors, providing for such Business
Combination; or

(d) the approval by the stockholders of Quanex of a complete liquidation or dissolution
of Quanex.

Notwithstanding the foregoing, for purposes of a distribution from the Plan, including upon
termination of the Plan, the term “Change of Control” means a “change in the
ownership or effective control” of the Company, or a “change in the ownership of a substantial
portion of the assets” of the Company as described in section 409A of the Code.

 

I-2

 

1.8 “Change of Control Value” means the amount determined in clause (i), (ii) or (iii),
whichever is applicable, as follows: (i) the per share price offered to stockholders of Quanex in
the merger, consolidation, reorganization, sale of assets or dissolution transaction that
constitutes a Change of Control, (ii) the price per share offered to stockholders of Quanex in any
tender offer or exchange offer that constitutes a Change of Control, or (iii) if a Change of
Control occurs other than a Change of Control specified in clause (i) or (ii), the fair market
value per share of the Common Stock on the date of the Change of Control, based on the closing
quotation as described in Section 4.2, on that day. If the consideration offered to stockholders
of the Company in any transaction described above consists of anything other than cash, the
Committee shall determine the cash equivalent of the fair market value of the portion of the
consideration offered that is other than cash.

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

1.10 “Committee” means the persons who are from time to time serving as members of the
committee administering the Plan.

1.11 “Common Stock” means Quanex’s common stock, $.50 par value (or such other par value as
may be designated by the vote of Quanex stockholders or such other equity securities of Quanex into
which such common stock may be converted, reclassified or exchanged).

1.12 “Common Stock Fund” means an Investment Fund which is invested exclusively in Common
Stock and which is accounted for as a unitized stock fund.

1.13 “Company” means Quanex and any Subsidiary adopting the Plan.

1.14 “Company Match” means the 20 percent (20%) match which the Company makes to the amount
deferred by a Participant under the Plan for three or more Plan Years and deemed credited in the
form of Stock Fund Units during a Plan Year.

1.15 “Covered Employee” means an individual (i) described in section 162(m)(3) of the Code or
(ii) subject to the requirements of Section 16(a) of the Securities Act.

1.16 “Deferred Compensation Ledger” means the ledger maintained by the Committee for each
Participant which reflects the amount of compensation deferred for the Participant under the Plan,
the Company match, and the amount of income or losses credited on each of these amounts.

1.17 “Director” means any person serving as a member of the Board of Directors.

1.18 “Director Fees” means any amount paid to a Director for services in such capacity.

 

I-3

 

1.19 “Disability” means the Participant (i) is unable to engage in any substantial gainful
activity by reason of any medically determinable physical or mental impairment which can be
expected to result in death or can be expected to last for a continuous period of not less than 12
months, or (ii) is, by reason of any medically determinable physical or mental impairment which can
be expected to result in death or can be expected to last for a continuous period of not less than
12 months, receiving income replacement benefits for a period of not less than three months under
an accident and health plan covering employees of the Participant’s employer.

1.20 “Incentive Bonus” means a bonus awarded or to be awarded to the Participant under the
Quanex Corporation Executive Incentive Compensation Plan or the Quanex Corporation Management
Incentive Program.

1.21 “Investment Fund” means a mutual fund or other investment option that is designated by
the Committee for purposes of determining the amount of the Company’s deferred compensation
obligation to a Participant under the Plan.

1.22 “LTIP Compensation” means compensation earned under the Quanex Corporation Long-Term
Incentive Plan.

1.23 “Normal Retirement Date” means the first day of the month that coincides with or next
follows the date on which the Participant or former Participant attains age 65.

1.24 “NYSE” means the New York Stock Exchange.

1.25 “Omnibus Compensation” means compensation earned under an annual incentive award, long
term incentive award or other cash-based award granted under the Quanex Corporation 2006 Omnibus
Incentive Plan (as each are defined under such plan).

1.26 “Participant” means an employee or director of a Company who is participating in the
Plan.

1.27 “Plan” means the Quanex Corporation Deferred Compensation Plan set forth in this
document, as amended from time to time.

1.28 “Plan Year” means a one-year period that coincides with the fiscal year of Quanex, which
begins on the first day of November of each calendar year and ends on October 31 of the next
ensuing calendar year.

1.29 “Quanex” means the Quanex Corporation, a Delaware corporation, the sponsor of the Plan.

1.30 “Rabbi Trust” means the Quanex Corporation Deferred Compensation Trust, which agreement
was entered into between NBD Bank and Quanex.

 

I-4

 

1.31 “Restricted Period” means, for any qualified defined benefit plan sponsored by Quanex or
an Affiliate, any period during which the plan is in at-risk status as described in section 409A of
the Code.

1.32 “Retirement” means a Participant’s Separation From Service that meets the requirements of
retirement from any Company covered by the Plan under the terms of the Retirement Plan.

1.33 “Retirement Plan” means the Quanex Corporation Employees’ Pension Plan, or if the
Participant does not participate in that plan, the defined contribution plan maintained by the
Company that is intended to satisfy the requirements of section 401(a) of the Code in which the
Participant participates.

1.34 “Securities Act” means the Securities Exchange Act of 1934, as amended from time to time.

1.35 “Separation From Service” means a Participant’s complete separation from service with the
Company and of its Affiliates. The determination of whether a Participant incurs a Separation From
Service will be determined in accordance with section 409A of the Code.

1.36 "Stock Fund Unit” means each unit of the Common Stock Fund, which unit shall be equal in
value to a share of Common Stock.

1.37 “Subsidiary” means any wholly-owned subsidiary of Quanex.

1.38 “Term of Deferral” means the period of deferral chosen by the Participant under the
election procedure established in Section 3.1 or by the Committee which pertains to that portion of
the Incentive Bonus, LTIP Compensation, Omnibus Compensation or Director Fees for each given Plan
Year and its accumulated income accrued that has been deferred under an election made prior to the
commencement of the period during which it is earned.

1.39 “Valuation Date” means the date as of which an Investment Fund is valued for purposes of
the Plan. Until the Committee determines otherwise, the Valuation Dates shall be each business
day. The Valuation Date for purposes of a distribution shall be determined as set forth in Section
6.6.

1.40 “Voting Securities” means any security which ordinarily possesses the power to vote in
the election of the Board without the happening of any precondition or contingency.

 

I-5

 

ARTICLE II

ELIGIBILITY

Except as specified below, all participants in the Quanex Corporation Executive Incentive
Compensation Plan, the Quanex Corporation Management Incentive Program, the Quanex Corporation
Long-Term Incentive Plan, the Quanex Corporation 2006 Omnibus Incentive Plan, all Directors, and
all members of the Quanex Corporation Business Leader’s Council will be eligible to participate in
the Plan. The Committee retains the right to establish such additional eligibility requirements
for participation in the Plan as it may determine are appropriate or necessary from time to time
and has the right to determine, in its sole discretion, that any one or more persons who meet the
eligibility requirements will not be eligible to participate for one or more Plan Years beginning
after the date they are notified of this decision by the Committee.

 

II-1

 

ARTICLE III

DEFERRALS AND COMPANY CONTRIBUTIONS

3.1 Deferral Election. A Participant may elect during the election period established by the
Committee prior to the beginning of any Plan Year or calendar year, if applicable, or, in the case
of a newly eligible Participant, within 30 days of notification that he is eligible to participate
in the Plan:

(1) the percentage of his Incentive Bonus earned during and relating to the
ensuing Plan Year which is to be deferred under the Plan;

(2) the percentage of his LTIP Compensation earned during the performance
period that begins during the ensuing Plan Year which is to be deferred under the
Plan;

(3) the percentage of his Omnibus Compensation earned during the performance
period that begins during the ensuing Plan Year which is to be deferred under the
Plan;

(4) the percentage of his Director Fees earned during and relating to the
ensuing calendar year which is to be deferred under the Plan;

(5) the percentage of the amount deferred, if any, to be deferred and deemed
credited in the form of Stock Fund Units and the percentages, if any, to be deferred
in the form of cash and deemed credited to the Cash Fund and Investment Funds;

(6) the length of the period of deferral, if any amount has been elected to be
deferred (which amount shall include any corresponding matching contributions or any
mandatory deferrals for such Plan Year), which deferral shall be:

A. to a date certain,

B. to Separation From Service with the Company or

C. to his Retirement (in the case of a Participant who is an employee
of a Company); and

(7) the form of payment of the amount that has been elected to be deferred for
such Plan Year (and earnings thereon) — a lump sum, or quarterly or annual
installment payments of the principal amount adjusted for earnings and losses
accrued after the distribution date, or last installment paid, if later, over no
less than three nor more than 20 years.

 

III-1

 

Notwithstanding the foregoing, in the case of any LTIP Compensation or Omnibus Compensation
that is performance-based and based on services performed over a period of at least 12 months, an
initial deferral election may be made during the election period established by the Committee which
may occur prior to or after the beginning of any Plan Year, provided, that such election must be
made no later than six months before the end of the performance period.

If a Participant who is an employee of a Company elects a deferral period to Retirement, he
shall also specify whether the deferral period shall end at the date of his Separation From Service
with the Company or at his Normal Retirement Date, in the event of termination other than as a
result of death, Disability or Retirement. If a Participant elects a deferral period to a date
certain, the deferral period shall end upon the Participant’s death, Disability, Separation From
Service or Retirement (as determined in accordance with the preceding sentence, if applicable), if
earlier.

In the event a Participant fails to make a time of payment election under Section 3.1(7) with
respect to any amounts deferred under the Plan, such amounts shall be distributed upon the earlier
of the Participant’s death, Disability or Separation from Service and such distribution shall be
made in the form of a lump sum payment.

The deferrals deemed credited to the Common Stock Fund in Stock Fund Units as elected by
Participants in any Plan Year must not exceed one percent (1%) of the shares of Common Stock
outstanding on the first day of the Plan Year. In the event this maximum would be exceeded, each
Participant who is an employee of a Company and elected to defer in the form of Stock Fund Units
shall have his election reduced on a pro rata basis as compared to all Participants who elected to
defer in the form of Stock Fund Units until those deferrals in the aggregate for that Plan Year
equal the maximum and the portion of his Incentive Bonus, LTIP Compensation and Omnibus
Compensation which would have been deferred in the form of Stock Fund Units shall instead be
distributed to the Participant as provided in the Quanex Corporation Executive Incentive
Compensation Plan, the Quanex Corporation Management Incentive Program, the Quanex Corporation
Long-Term Incentive Plan and the Quanex Corporation 2006 Omnibus Incentive Plan, as applicable.

Once an election has been made it becomes irrevocable for that Plan Year, except that a
Participant may change his deemed investment selections in accordance with Section 4.5 and
procedures established by the Committee and may change the election of the time and form of payment
he previously elected under Section 3.1(6) or (7); provided that all changes of election of a
Participant’s time or form of payment shall be effective only if the election change is received by
the Committee or its designee in proper form 12 months prior to the event which would require a
distribution under the Plan, such election change does not provide for a payment or commencement of
payment that is earlier than five (5) years after the date on which such payment would otherwise
have been made, and during the 12-month period prior to the effective date of such election change,
the last effective election made by the Participant shall continue to remain in force; provided
further, that with respect to amounts deferred and vested on or before December 31, 2004, all
changes of election of a Participant’s time or form of payment with respect to such amounts shall
be effective only if the election change is received by the
Committee or its designee in proper form during the 30-day period ending 12 months prior to
the event which would require a distribution under the Plan.

 

III-2

 

The election to participate in the Plan for a given Plan Year will be effective only upon
receipt by the Committee or its designee of the Participant’s properly executed election on such
form or in accordance with such procedures as will be determined by the Committee from time to
time. If the Participant does not exercise his right to defer, subject to Section 3.3 below, the
Participant will be deemed to have elected not to defer any part of his Incentive Bonus, LTIP
Compensation, Omnibus Compensation or Director Fees for that Plan Year and all of his Incentive
Bonus, LTIP Compensation, Omnibus Compensation and Director Fees will be paid in cash.

3.2 Company Match. The Company will credit to the Account of each Participant who makes an
election under the Plan to defer a portion of his Incentive Bonus, Omnibus Compensation or Director
Fees in the form of Stock Fund Units for a period of five full years or more from the effective
date of the deferral election additional Stock Fund Units equal to 20 percent (20%) of the amount
which is deferred in the form of Stock Fund Unit. There shall be no such credit with respect to
LTIP Compensation that is deferred under the Plan.

3.3 Mandatory Deferral. If a Participant becomes entitled to a cash payment of part or all of
an Incentive Bonus or his LTIP Compensation because the Participant did not elect to defer all of
the Incentive Bonus or LTIP Compensation and the Company determines that section 162(m) of the Code
may not allow the Company to take a deduction for part or all of the Incentive Bonus or LTIP
Compensation, then, unless a Change of Control has occurred after October 1, 2006, the payment of
the Incentive Bonus or LTIP Compensation otherwise payable hereunder will be delayed to the extent
any such payment would not be deductible by the Company by reason of section 162(m) of the Code.
The Committee may waive the mandatory deferral required by this Section 3.3 with respect to a
Participant who is not a member of the Committee but such waiver shall only be made on an
individual basis. In accordance with procedures established by the Committee, a Participant whose
Incentive Bonus or LTIP Compensation is in whole or in part mandatorily deferred pursuant to this
Section 3.3 shall be permitted to have the amount of such mandatory deferral deemed invested in the
Common Stock Fund, the Cash Fund or the Investment Funds in such proportions as he shall designate.

 

III-3

 

ARTICLE IV

ACCOUNT

4.1 Establishing a Participant’s Account. The Committee will establish an Account for each
Participant in a special Deferred Compensation Ledger which will be maintained by the Company. The
Account will reflect the amount of the Company’s obligation to the Participant at any given time.

4.2 Credit of the Participant’s Deferral and the Company’s Match. Upon completion of the Plan
Year or quarter, as applicable, the Committee will determine, as soon as administratively
practicable, the amount of a Participant’s Incentive Bonus, LTIP Compensation, Omnibus Compensation
or Director Fees that has been deferred for that Plan Year or quarter, as applicable, and the
amount of the Company Match, if any, and will credit that or those amounts to the Participant’s
Account as of the end of the Plan Year or quarter, as applicable, during which the Incentive Bonus,
LTIP Compensation, Omnibus Compensation or Director Fees were earned. If the Participant elected
his deferral to be in Stock Fund Units, the number of full and fractional Stock Fund Units credited
to his Account shall be the number of full and fractional shares of Common Stock that could have
been purchased with the dollar amount deferred and the related Company Match, if any, without
taking into account any brokerage fees, taxes or other expenses which might be incurred in such a
transaction, based upon the closing quotation on the NYSE, or if not traded on the NYSE, the
principal market in which the Common Stock is traded on the date the amount would have been paid
had it not been deferred pursuant to Article III.

4.3 Crediting of Dividends and Distributions on Common Stock. When dividends are declared and
paid, or other distributions, whether stock, property, cash or other rights, are made with respect
to the Common Stock, those dividends and other distributions shall be accrued in a Participant’s
Account based upon the number of Stock Fund Units credited to his Account. The dividends or other
distributions on shares of Common Stock shall be credited to the Participant’s Account as
additional Stock Fund Units. The number of additional Stock Fund Units credited to the
Participant’s Account shall be the number of full and fractional shares of Common Stock that could
have been purchased with the dollar amount of the dividend or other distribution, without taking
into account any brokerage fees, taxes or other expenses which might be incurred in such a
transaction, based upon the closing quotation at the NYSE or if not traded on the NYSE, the
principal market in which the Common Stock is traded, on the date of the dividend or other
distribution.

4.4 Crediting of Earnings and Losses. Each Participant shall be awarded by the Committee
earnings and losses on his deferred compensation as part of his total deferred compensation under
the Plan equal to the amount which is deemed to be earned and lost on his bookkeeping Account
established to enable the Company to determine its obligations under the Plan. For the purpose of
determining the earnings and losses to be credited to the Participant’s Account under the Plan, the
Committee shall assume that the Participant’s Account is invested in units or shares of the
Investment Funds and the Cash Fund in the proportions selected by the Participant in accordance
with procedures established by the Committee. This amount accrued by the Committee as deferred
compensation shall be a part of the Company’s obligation to the Participant and payment of it shall be a general obligation of the Company. The determination
of earnings and losses based on the income and appreciation of the Participant’s Account shall in no way

 

IV-1

 

affect the ability of the general creditors of the Company to reach the assets of the
Company or the Rabbi Trust in the event of the insolvency or bankruptcy of the Company or place the
Participants in a secured position ahead of the general creditors of the Company. Although a
Participant’s investment selections made in accordance with the terms of the Plan and such
procedures as may be established by the Committee shall be relevant for purposes of determining the
Company’s obligation to the Participant under the Plan, there is no requirement that any assets of
the Company (including those held in the Rabbi Trust) shall be invested in accordance with the
Participant’s investment selections.

Earnings and losses will be accrued on each Valuation Date on each portion of a Participant’s
Account deemed invested in an Investment Fund from the later of (a) the time the amount is deemed
credited to the Investment Fund or (b) the last previous Valuation Date.

Interest will be accrued on the last day of each calendar month on each portion of a
Participant’s Account deemed invested in the Cash Fund from the later of (a) the time it is deemed
credited to the Cash Fund or (b) the last previous calendar month end at a rate equal to (x) the
rate of interest announced by Chase Manhattan Bank, N.A., or its successor, if applicable as its
prime rate of interest on the last business day of the calendar quarter preceding the calendar
quarter in which the month falls divided by (y) four. Interest so accrued on the last day of each
calendar month shall be deemed credited to the Participant’s Account and shall thereafter accrue
interest. Interest will continue to be credited to the Participant’s Account deemed invested in
the Cash Fund until the entire balance in the Participant’s Account deemed credited to the Cash
Fund has been distributed.

4.5 Common Stock Conversion Election. At any time during a period of three years prior to the
earliest time a Participant who is an employee of a Company could retire under the Retirement Plan
and ending on that Participant’s Normal Retirement Date, a Participant who is an employee of a
Company may elect a Retirement date under the Retirement Plan and may elect to have all or a
portion of the Stock Fund Units in his Account converted to cash and deemed to be invested in the
Cash Fund and/or any Investment Fund(s) selected by him. In that event, all such Stock Fund Units
shall be converted on the date notice is received by the Company based upon the closing quotation
as described in Section 4.2, on that day, unless the Participant has specified no more than five
different dates after the date of the notice on which the Participant desires all or a portion of
the Stock Fund Units to be converted and the percentage of units to be converted on each date. If
the Participant has specified dates for and the percentage of units to be converted, then the
designated percentage of Stock Fund Units to be converted on each date shall be converted on the
specified date based on the closing quotation as described in Section 4.2 on such specified dates.

At any time that is at least five years after a Stock Fund Unit is credited to his Account
pursuant to Section 4.2, a Participant may elect to have such Stock Fund Unit converted to cash and
deemed to be invested in the Cash Fund and/or any Investment Fund(s) selected by him. In that
event, all such Stock Fund Units specified by the Participant in a written notice to the Company
which have been credited to the Participant’s Account for at least five years prior
to the giving of such notice shall be converted on the date notice is received by the Company
based upon the closing quotation as described in Section 4.2, on that day.

 

IV-2

 

A Participant may elect at any time to have each Stock Fund Unit that is credited to his
Account pursuant to Section 4.3 converted to cash and deemed to be invested in the Cash Fund and/or
any Investment Fund(s) selected by him. In that event, all such Stock Fund Units specified by the
Participant in a written notice to the Company which were credited to the Participant’s Account
pursuant to Section 4.3 shall be converted on the date notice is received by the Company based upon
the closing quotation as described in Section 4.2, on that day.

4.6 Conversion and Cash-Out Upon a Change of Control. Notwithstanding any other provision of
the Plan, including but not limited to Section 6.6, immediately upon the occurrence of a Change of
Control, all Stock Fund Units credited to a current or former Participant’s Account shall be
converted to cash based on the Change of Control Value of such Stock Fund Units. If such Change of
Control meets the requirements of a “change of control” as defined by section 409A of the Code,
within five days after the date on which such Change of Control occurs, all current and former
Participants shall be paid in cash lump sum payments the balances credited to their Accounts. If
such Change of Control does not meet the requirements of a “change of control” as defined by
section 409A of the Code, no payments shall be made to the current and former Participants in the
Plan as a result of such Change of Control.

 

IV-3

 

ARTICLE V

VESTING AND EVENTS CAUSING FORFEITURE

5.1 Vesting.

(a) Deferrals. All deferrals of the Incentive Bonus, LTIP Compensation, Omnibus
Compensation and Director Fees and all income accrued on the deferrals will be 100 percent
(100%) vested except for the events of forfeiture described in Sections 5.2 and 5.3.

(b) Company Match and Dividends. Except as provided in Sections 5.2 and 5.3, each
Stock Fund Unit accrued under Section 3.2 as a Company Match and credited to the
Participant’s account pursuant to Section 4.2 (including any dividends or other property or
rights accumulated because of such Unit and credited on such Stock Fund Unit under Section
4.3) shall vest on the third anniversary of the date on which such Stock Fund Unit was
credited to the Participant’s account. If a Participant ceases to be an employee within
three years after a Company Matching accrual of Stock Fund Units is credited to the
Participant’s account, such Company Matching accruals (including any dividends or other
property or rights accumulated because of those Stock Fund Units) shall be immediately
forfeited.

5.2 Forfeiture for Cause. If the Committee finds, after full consideration of the facts
presented on behalf of both the Company and a former Participant, that the Participant was
discharged by the Company for fraud, embezzlement, theft, commission of a felony, proven dishonesty
in the course of his employment by the Company which damaged the Company, or for disclosing trade
secrets of the Company, the entire amount credited to his Account, exclusive of an amount equal to
the total balance of deferrals of the Participant, will be forfeited. The decision of the
Committee as to the cause of a former Participant’s discharge and the damage done to the Company
will be final. No decision of the Committee will affect the finality of the discharge of the
Participant by the Company in any manner.

5.3 Forfeiture for Competition. If at the time a distribution is being made or is to be made
to a Participant or former Participant, the Committee finds after full consideration of the facts
presented on behalf of the Company and the Participant or former Participant, that the Participant
or former Participant at any time within two years from his Separation From Service from the
Company, and without written consent of the Company, directly or indirectly owns, operates,
manages, controls or participates in the ownership, management, operation or control of or is
employed by, or is paid as a consultant or other independent contractor by a business which
competes or at any time did compete with the Company by which he was formerly employed in a trade
area served by the Company at the time distributions are being made or to be made and in which the
Participant or former Participant had represented the Company while employed by it; and, if the
Participant or former Participant continues to be so engaged 60 days after written notice has been
given to him, the Committee will forfeit all amounts otherwise due the Participant or former
Participant, exclusive of an amount equal to the total balance of deferrals of the Participant or
former Participant.

5.4 Full Vesting in the Event of a Change of Control. The forfeitures created by Sections
5.1(b), 5.2 and 5.3 shall not apply with respect to any amounts credited to the Accounts of current
or former Participants after the occurrence of a Change of Control.

 

V-1

 

ARTICLE VI

DISTRIBUTIONS

6.1 Form of Distributions or Withdrawals. Upon a distribution or withdrawal, the number of
Stock Fund Units credited to the Participant’s Account, if any, and the amounts credited to the
Participant’s Account and deemed invested in the Cash Fund and/or Investment Funds, if any,
required to be distributed shall be distributed in cash, whether the distribution or withdrawal is
in a lump sum or in installments. For this purpose, the amount per unit in the Company Stock Fund
deemed credited to Participant’s Account shall equal the closing quotation for the Common Stock on
the NYSE (or if not traded on the NYSE, the principal market in which the Common Stock is traded)
on the third business day prior to the date of distribution. If the distribution is in
installments, all dividends and other property or rights accumulating on the shares still
undistributed will be credited as provided in Section 4.3 and distributed with the next
installment. If there are periodic installments to be made of the portion, if any, deferred as
cash and deemed credited to the Cash Fund, income shall accumulate on that portion of the Account
as described in Section 4.6 until the balance credited to the cash portion of the Participant’s
Account has been distributed. In that event, income accumulating on the cash portion of the
Account shall be distributed with the next installment to be distributed. A lump sum or
installment distribution of amounts deemed invested in an Investment Fund shall be based upon the
value of the Investment Fund as of the close of the Valuation Date immediately preceding such
distribution.

6.2 Death. Upon the death of a Participant prior to the expiration of the Term of Deferral,
the Participant’s Beneficiary or Beneficiaries will receive in cash as required by Section 6.1 the
balance then credited to the Participant’s Account in the Deferred Compensation Ledger. The lump
sum distribution or the first installment of the periodic distribution will be made 90 days after
the Participant’s death, or, if later, as soon as administratively practicable following the
Participant’s death.

Each Participant, upon making his initial deferral election, will file with the Committee or
its designee a designation of one or more Beneficiaries to whom distributions otherwise due the
Participant will be made in the event of his death prior to the complete distribution of the amount
credited to his Account in the Deferred Compensation Ledger. The designation will be effective
upon receipt by the Committee or its designee of a form which the Committee has approved for that
purpose and which has been completed in accordance with procedures approved by the Committee. The
Participant may from time to time revoke or change any designation of Beneficiary by filing another
approved Beneficiary designation form with the Committee or its designee. If there is no valid
designation of Beneficiary on file with the Committee or its designee at the time of the
Participant’s death, or if all of the Beneficiaries designated in the last Beneficiary designation
have predeceased the Participant or otherwise ceased to exist, the Beneficiary will be the
Participant’s spouse, if the spouse survives the Participant, or otherwise the Participant’s
estate. A Beneficiary must survive the Participant by 60 days in order to be considered to be
living on the date of the Participant’s death. If any Beneficiary survives the Participant but
dies or otherwise ceases to exist before receiving all amounts due the Beneficiary from the
Participant’s Account, the balance of the amount which would have been paid to that Beneficiary will, unless the Participant’s designation provides otherwise, be distributed to the individual deceased Beneficiary’s estate or to the Participant’s
estate in the case of a Beneficiary which is not an individual. Any Beneficiary designation which
designates any person or entity other than the Participant’s spouse must be consented to in a form
and in accordance with procedures acceptable to the Committee in order to be effective.

 

VI-1

 

6.3 Disability. Upon the Disability of a Participant prior to the expiration of the Term of
Deferral, the Participant will receive in cash as required by Section 6.1 the balance then credited
to the Participant’s Account. The lump sum distribution or the first installment of the periodic
distribution will be made 90 days after the Participant is determined to be disabled, or, if later,
as soon as administratively practicable following such date.

6.4 Expiration of Term of Deferral. Upon the expiration of the Term of Deferral, the
Participant shall be entitled to receive in cash as required by Section 6.1 the balance credited to
the Participant’s Account. Except as provided below, the lump sum distribution or the first
installment of the periodic distribution will be made 90 days after the expiration of the Term of
Deferral, or, if later, as soon as administratively practicable following such expiration, without
regard to whether the Participant is still employed by the Company or not. Payments due to the
Separation From Service of a Participant who is an employee of a Company, excluding a Separation
From Service due to death or Disability but including due to Retirement, shall be made on the first
business day following the six-month anniversary of the Participant’s Separation From Service or as
soon as administratively practicable thereafter.

6.5 Unforeseeable Emergency Withdrawals. Any Participant who is in the employ of a Company
and is not entitled to a distribution from the Plan may request an unforeseeable emergency
withdrawal. No unforeseeable emergency withdrawal can exceed the lesser of the amount credited to
the Participant’s Account or the amount reasonably needed to satisfy the unforeseeable emergency
need. Whether an unforeseeable emergency exists and the amount reasonably needed to satisfy the
unforeseeable emergency need will be determined by the Committee based upon the evidence presented
by the Participant and the rules established in this Section. If a hardship withdrawal is approved
by the Committee it will be made in cash as required in Section 6.1 within ten days of the
Committee’s determination. An unforeseeable emergency for this purpose is a severe financial
hardship to the Participant resulting from an illness or accident of the Participant, the
Participant’s spouse, or a dependent (as defined in section 152(a)) of the Participant, loss of the
Participant’s property due to casualty, or other similar extraordinary and unforeseeable
circumstances arising as a result of events beyond the control of the Participant. The
circumstances that will constitute an unforeseeable emergency will depend upon the facts of each
case, but, in any case, payment under this Section shall not be made to the extent that such
emergency is or may be relieved: (i) through reimbursement or compensation by insurance; (ii) by
liquidation of the Participant’s assets, to the extent the liquidation of such assets would not
itself cause a severe financial hardship; or (iii) by cessation of deferrals under this Plan and
any other plan in which the Participant participates. Such foreseeable needs for funds as the need
to send a Participant’s child to college or the desire to purchase a home will not be considered to
be an unforeseeable emergency.

 

VI-2

 

6.6 Valuation.

(a) For purposes of a distribution under Sections 6.2, 6.3 or 6.5, the Valuation Date
shall be the first business day coincident with or immediately preceding the date of the
distribution.

(b) For purposes of a distribution under Section 6.4, the Valuation Date shall be as
follows:

(1) the first business day following the date which is 90 days following the
expiration of the Term of Deferral or

(2) in the case of a distribution due to a Separation From Service, the date
which is the six-month anniversary of such Separation From Service or

(3) in the case of a distribution due to a Separation From Service that occurs
within three years after a Change of Control, which Change of Control did not meet
the requirements of a “change of control” as defined by section 409A of the Code,
the first business day coincident with or following the date of the closing of such
Change of Control, but only if the value of the Participant’s account on such
Valuation Date would be greater than the value as determined under clause (2) above.

6.7 Mandatory Immediate Lump Sum Payment. Notwithstanding any other provisions of the Plan,
if the balance then credited to the Participant’s Account on the date the Participant would
commence payment of his benefits under Sections 6.2, 6.3. or 6.4 is less than or equal to
$10,000.00, the benefit shall be paid in the form of a lump sum payment.

6.8 Payment Restrictions on Any Portion of a Benefit Determined Not to Be Deductible. Except
for hardship withdrawals under Section 6.5, if a Participant has a benefit that is due during a
Plan Year and the Committee determines that section 162(m) of the Code could affect the Company’s
deduction on the amount paid, the distribution of his benefit will be delayed until December 1
following the end of the Plan Year. Then on December 1 if the Company’s deduction is determined by
the Committee not to be affected, the benefit in total will be distributed immediately; however, if
the Committee determines that some portion of the benefit is affected, then only that portion of
the benefit which is deductible by the Company shall be distributed on December 1st and the
distribution of the remaining portion of the benefit will be delayed to the first day of the first
complete month of the Plan Year or Years on which a portion or all of the remaining distribution
can be made and deducted by the Company on its federal income tax return. The Committee may waive
the mandatory deferral required by this Section 6.8 with respect to a Participant who is not a
member of the Committee, but such waiver shall only be made on an individual basis and at the time
the distribution is to be made.

6.9 Responsibility for Distributions and Withholding of Taxes. The Committee will furnish
information to the Company last employing the Participant, concerning the amount and form of
distribution to any Participant entitled to a distribution so that the Company may make or cause
the Rabbi Trust to make the distribution required. It will also calculate the
deductions from the amount of the benefit paid under the Plan for any taxes required to be
withheld by federal, state or local government and will cause them to be withheld. If a
Participant has deferred compensation under the Plan while in the service of more than one Company,
each Company for which the Participant was working will reimburse the disbursing agent for the
amount attributable to compensation deferred while the Participant was in the service of that
Company if it has not already provided that funding to the disbursing agent.

 

VI-3

 

ARTICLE VII

ADMINISTRATION

7.1 Committee Appointment. The Committee will be appointed by the Board. The initial
Committee members will be Compensation Committee of the Board. Each Committee member will serve
until his or her resignation or removal. The Board will have the sole discretion to remove any one
or more Committee members and appoint one or more replacement or additional Committee members from
time to time.

7.2 Committee Organization and Voting. The Committee will select from among its members a
chairman who will preside at all of its meetings and will elect a secretary without regard to
whether that person is a member of the Committee. The secretary will keep all records, documents
and data pertaining to the Committee’s supervision and administration of the Plan. A majority of
the members of the Committee will constitute a quorum for the transaction of business and the vote
of a majority of the members present at any meeting will decide any question brought before the
meeting. In addition, the Committee may decide any question by vote, taken without a meeting, of a
majority of its members. If a member of the Committee is ever appointed who is or becomes a
Participant, that Committee member will not vote or act on any matter relating solely to himself.

7.3 Powers of the Committee. The Committee will have the exclusive responsibility for the
general administration of the Plan according to the terms and provisions of the Plan and will have
all powers necessary to accomplish those purposes, including but not by way of limitation the
right, power and authority:

(a) to make rules and regulations for the administration of the Plan;

(b) to construe all terms, provisions, conditions and limitations of the Plan;

(c) to correct any defect, supply any omission or reconcile any inconsistency that may
appear in the Plan in the manner and to the extent it deems expedient to carry the Plan into
effect for the greatest benefit of all parties at interest;

(d) to designate the persons eligible to become Participants and to establish the
maximum and minimum amounts that may be elected to be deferred;

(e) to determine all controversies relating to the administration of the Plan,
including but not limited to:

(1) differences of opinion arising between the Company and a Participant except
when the difference of opinion relates to the entitlement to, the amount of or the
method or timing of a distribution of a benefit affected by a Change of Control, in
which event it shall be decided by judicial action; and

(2) any question it deems advisable to determine in order to promote the
uniform administration of the Plan for the benefit of all parties at interest;

(f) to select the menu of Investment Funds available for purposes of determining the
amount of the Company’s obligation to any Participant under the Plan; and

(g) to delegate by written notice those duties of the Committee, as it deems necessary
or advisable for the proper and efficient administration of the Plan.

 

VII-1

 

7.4 Committee Discretion. The Committee, in exercising any power or authority granted under
the Plan or in making any determination under the Plan, shall perform or refrain from performing
those acts using its sole discretion and judgment. Any decision made by the Committee or any
refraining to act or any act taken by the Committee in good faith shall be final and binding on all
parties. The Committee’s decision shall never be subject to de novo review. Notwithstanding the
foregoing, the Committee’s decision, refraining to act or acting is to be subject to judicial
review for those incidents occurring during the Plan Year in which a Change of Control occurs and
during the next three succeeding Plan Years.

7.5 Annual Statements. The Committee will cause each Participant to receive an annual
statement as soon as administratively possible after the conclusion of each Plan Year containing
the amounts deferred, the Company match, if any, and the income accrued on the deferred and matched
amounts.

7.6 Reimbursement of Expenses. The Committee will serve without compensation for their
services but will be reimbursed by Quanex for all expenses properly and actually incurred in the
performance of their duties under the Plan.

7.7 Limitation on Liability. Neither the Committee nor its designees will be liable for any
decision or action taken in good faith in connection with the administration of the Plan. Without
limiting the generality of the foregoing, any decision or action taken by the Committee when it
relies upon information supplied it by any officer of the Company, the Company’s legal counsel, the
Company’s independent accountants or other advisors in connection with the administration of the
Plan will be deemed to have been taken in good faith. None of the Company, the Committee or any
designee of the Committee shall bear any liability with respect to the investment performance of
any of the Investment Funds and none of them are under any obligation to furnish the Participants
any financial information concerning the Investment Funds. Each Participant is solely responsible
for the results of any investment selections and none of the Company, the Committee or any designee
of the Committee makes any representations concerning the advisability of investing or refraining
from investing in any particular Investment Fund.

 

VII-2

 

ARTICLE VIII

ADOPTION BY SUBSIDIARIES

8.1 Procedure for and Status After Adoption. Any Subsidiary may, with the approval of the
Committee, adopt the Plan by appropriate action of its board. The terms of the Plan will apply
separately to each Subsidiary adopting the Plan and its Participants in the same manner as is
expressly provided for Quanex and its Participants except that the powers of the Board and the
Committee under the Plan will be exercised by the Board alone. Quanex and each Subsidiary adopting
the Plan will bear the cost of providing plan benefits for its own Participants. It is intended
that the obligation of Quanex and each Subsidiary with respect to its Participants will be the sole
obligation of the Company that is employing the Participant and will not bind any other Company.

8.2 Termination of Participation by Adopting Subsidiary. Any Subsidiary adopting the Plan
may, by appropriate action of its board of directors, terminate its participation in the Plan. The
Committee may, in its discretion, also terminate a Subsidiary’s participation in the Plan at any
time. The termination of the participation in the Plan by a Subsidiary will not, however, affect
the rights of any Participant who is working or has worked for the Subsidiary as to amounts or
Stock Fund Units previously standing to his credit in his Account or reduce the income accrued on
amounts deferred by him or matched by the Company and credited to his Account whether in cash or in
Stock Fund Units, prior to the distribution of the benefit to the Participant without his consent.

 

VIII-1

 

ARTICLE IX

AMENDMENT AND/OR TERMINATION

9.1 Amendment or Termination of the Plan. The Board may amend or terminate the Plan at any
time by an instrument in writing without the consent of any adopting Company; provided, however,
that no amendment of the Plan shall apply to amounts deferred and vested on or before December 31,
2004, unless the instrument explicitly states that the amendment shall apply to such amounts.

9.2 No Retroactive Effect on Awarded Benefits. No amendment will affect the rights of any
Participant to the amounts, whether deemed invested in the Company Stock Fund, the Cash Fund or the
Investment Funds, then standing to his credit in his Account, to change the method of calculating
the income already accrued or to accrue in the future on amounts already deferred by him or matched
by the Company prior to the date of the amendment or to change a Participant’s right under any
provision relating to a Change of Control after a Change of Control has occurred, without the
Participant’s consent. However, the Board shall retain the right at any time to change in any
manner the method of calculating the match by the Company and the income to accrue on all amounts
to be deferred in the future by a Participant and/or to be matched in the future by the Company
after the date of the amendment if it has been announced to the Participants.

9.3 Effect of Termination. If the Plan is terminated, all amounts, whether deemed invested in
the Company Stock Fund, the Cash Fund or the Investment Funds, deferred by Participants and matched
by the Company will continue to be held under the terms of the Plan until all amounts have been
distributed according to the elections made by the Participants or the directives made by the
Committee prior to the deferrals. The forfeiture provisions of Sections 5.1(b), 5.2 and 5.3 and
the restriction set out in Section 6.8 would continue to apply throughout the period after the
termination of the Plan but prior to the completed distribution of all benefits. The Board may
terminate the Plan within the 30 days preceding or the 12 months following a Change of Control, as
defined by section 409A of the Code, or as otherwise permitted under section 409A of the Code, and
distribute the value of the Participants’ Accounts to Participants in the manner and at the time
determined by the Committee, in its sole discretion, subject to Section 9.2 and as permitted by
section 409A of the Code.

 

IX-1

 

ARTICLE X

FUNDING

10.1 Payments Under This Agreement Are the Obligation of the Company. The Company will
distribute the benefits due the Participants under the Plan; however, should it fail to do so when
a benefit is due and the funding trust contemplated by Section 10.2 exists, the benefit will be
distributed by the trustee of that funding trust. In any event, if the trust fails to distribute a
benefit for any reason, the Company still remains liable for all benefits provided by the Plan.

10.2 Agreement May Be Funded Through Rabbi Trust. It is specifically recognized by both the
Company and the Participants that the Company may, but is not required to transfer any funds,
shares of Common Stock or other assets that it finds desirable to a trust established to accumulate
assets sufficient to fund the obligations of all of the Companies signatory to the Plan. However,
under all circumstances, the Participants will have no rights to any of those assets; and likewise,
under all circumstances, the rights of the Participants to the assets held in the trust will be no
greater than the rights expressed in this agreement. Nothing contained in the trust agreement
which creates the funding trust will constitute a guarantee by any Company that assets of the
Company transferred to the trust will be sufficient to fund all benefits under the Plan or would
place the Participant in a secured position ahead of general creditors should the Company become
insolvent or bankrupt. Any trust agreement prepared to fund the Company’s obligations under this
agreement must specifically set out these principles so it is clear in that trust agreement that
the Participants in the Plan are only unsecured general creditors of the Company in relation to
their benefits under the Plan.

Notwithstanding the foregoing, no assets shall be set aside or reserved (directly or
indirectly) in a trust (or other arrangement as determined by the Internal Revenue Service), or
transferred to a trust or other arrangement established to fund the Company’s obligations under the
Plan during any Restricted Period for purposes of paying benefits to an Applicable Covered
Employee. The rule contained in the preceding sentence does not apply to assets set aside,
reserved or transferred before or after a Restricted Period.

10.3 Reversion of Excess Assets. Any adopting Company may, at any time, request the actuary,
who last performed the annual actuarial valuation of the Quanex Corporation Employees’ Pension
Plan, to determine the present Account balance, assuming the accrual rate for income not to be
reduced (whether it actually is or not), as of the month end coincident with or next preceding the
request, of all Participants and Beneficiaries of deceased Participants for which all Companies are
or will be obligated to make benefit distributions under the Plan. If the fair market value of the
assets held in the trust, as determined by the Trustee as of that same date, exceeds the total of
the Account balances of all Participants and Beneficiaries by 25 percent (25%), any Company may
direct the trustee to return to each Company its proportionate part of the assets which are in
excess of 125 percent (125%) of the Account balances. Each Company’s share of the excess assets
will be the Participants’ Accounts accrued while in the employ of that Company as compared to the
total of the Account balances accrued by all Participants under the Plan times the excess assets.
If there has been a Change of Control, for the purpose of
determining if there are excess funds, all contributions made prior to the Change of Control
will be subtracted from the fair market value of the assets held in the trust as of the
determination date but before the determination is made.

 

X-1

 

10.4 Participants Must Rely Only on General Credit of the Company. It is also specifically
recognized by both the Company and the Participants that the Plan is only a general corporate
commitment and that each Participant must rely upon the general credit of the Company for the
fulfillment of its obligations under the Plan. Under all circumstances the rights of Participants
to any asset held by the Company will be no greater than the rights expressed in this agreement.
Nothing contained in this agreement will constitute a guarantee by the Company that the assets of
the Company will be sufficient to distribute any benefits under the Plan or would place the
Participant in a secured position ahead of general creditors of the Company. Though the Company
may establish or become a signatory to a Rabbi Trust, as indicated in Section 10.1, to accumulate
assets to fulfill its obligations, the Plan and any such trust will not create any lien, claim,
encumbrance, right, title or other interest of any kind in any Participant in any asset held by the
Company, contributed to any such trust or otherwise designated to be used in fulfillment of any of
its obligations created in this agreement. No specific assets of the Company have been or will be
set aside, or will in any way be transferred to the trust or will be pledged in any way for the
performance of the Company’s obligations under the Plan which would remove such assets from being
subject to the general creditors of the Company.

 

X-2

 

ARTICLE XI

MISCELLANEOUS

11.1 Limitation of Rights. Nothing in the Plan will be construed:

(a) to give any employee of any Company any right to be designated a Participant in the
Plan;

(b) to give a Participant any right with respect to the compensation deferred, the
Company match or the income accrued and credited in the Deferred Compensation Ledger except
in accordance with the terms of the Plan;

(c) to limit in any way the right of the Company to terminate a Participant’s
employment with the Company at any time;

(d) to evidence any agreement or understanding, expressed or implied, that the Company
will employ a Participant in any particular position or for any particular remuneration; or

(e) to give a Participant or any other person claiming through him any interest or
right under the Plan other than that of any unsecured general creditor of the Company.

11.2 Distributions to Incompetents or Minors. Should a Participant become incompetent or
should a Participant designate a Beneficiary who is a minor or incompetent, the Committee is
authorized to distribute the benefit due to the parent of the minor or to the guardian of the minor
or incompetent or directly to the minor or to apply those assets for the benefit of the minor or
incompetent in any manner the Committee determines in its sole discretion.

11.3 Nonalienation of Benefits. No right or benefit provided in the Plan will be transferable
by the Participant except, upon his death, to a named Beneficiary as provided in the Plan. No
right or benefit under the Plan will be subject to anticipation, alienation, sale, assignment,
pledge, encumbrance or charge, and any attempt to anticipate, alienate, sell, assign, pledge,
encumber, or charge the same will be void. No right or benefit under the Plan will in any manner
be liable for or subject to any debts, contracts, liabilities or torts of the person entitled to
such benefits. If any Participant or any Beneficiary becomes bankrupt or attempts to anticipate,
alienate, sell, assign, pledge, encumber or charge any right or benefit under the Plan, that right
or benefit will, in the discretion of the Committee, cease. In that event, the Committee may have
the Company hold or apply the right or benefit or any part of it to the benefit of the Participant
or Beneficiary, his or her spouse, children or other dependents or any of them in any manner and in
any proportion the Committee believes to be proper in its sole and absolute discretion, but is not
required to do so.

11.4 Expenses Incurred in Enforcing the Plan. The Company will, in addition, pay a
Participant for all legal fees and expenses incurred by him in contesting or disputing his
termination or in seeking to obtain or enforce any benefit provided by the Plan if the termination
occurs in the Plan Year in which a Change of Control occurs or during the next three succeeding
Plan Years following the Plan Year in which a Change of Control occurs except to the extent
that the payment of those fees or expenses are restricted under Section 6.8.

 

XI-1

 

11.5 Reliance Upon Information. The Committee will not be liable for any decision or action
taken or not taken in good faith in connection with the administration of the Plan. Without
limiting the generality of the foregoing, any decision or action taken or not taken by the
Committee when it relies upon information supplied it by any officer of the Company, the Company’s
legal counsel, the Company’s independent accountants or other advisors in connection with the
administration of the Plan will be deemed to have been taken in good faith.

11.6 Severability. If any term, provision, covenant or condition of the Plan is held to be
invalid, void or otherwise unenforceable, the rest of the Plan will remain in full force and effect
and will in no way be affected, impaired or invalidated.

11.7 Notice. Any notice or filing required or permitted to be given to the Committee or a
Participant will be sufficient if in writing and hand-delivered or sent by U.S. mail to the
principal office of the Company or to the residential mailing address of the Participant. Notice
will be deemed to be given as of the date of hand-delivery or if delivery is by mail, as of the
date shown on the postmark.

11.8 Gender and Number. If the context requires it, words of one gender when used in the Plan
will include the other genders, and words used in the singular or plural will include the other.

11.9 Governing Law. The Plan will be construed, administered and governed in all respects by
the laws of the State of Texas.

11.10 Section 409A. The Plan is intended to be a nonqualified deferred compensation
arrangement and is not intended to meet the requirements of section 401(a) of the Code. The Plan
is intended to meet the requirements of section 409A of the Code and may be administered in a
manner that is intended to meet those requirements and shall be construed and interpreted in
accordance with such intent. To the extent that a deferral, accrual, vesting or payment of an
amount under the Plan is subject to section 409A of the Code, except as the Committee otherwise
determines in writing, the amount will be deferred, accrued, vested or paid in a manner that will
meet the requirements of section 409A of the Code, including regulations or other guidance issued
with respect thereto, such that the deferral, accrual, vesting or payment shall not be subject to
the excise tax applicable under section 409A of the Code. Any provision of the Plan that would
cause the deferral, accrual, vesting or payment of an amount under the Plan to fail to satisfy
section 409A of the Code shall be amended (in a manner that as closely as practicable achieves the
original intent of the Plan) to comply with section 409A of the Code on a timely basis, which may
be made on a retroactive basis, in accordance with regulations and other guidance issued under
section 409A of the Code. In the event additional regulations or other guidance is issued under
section 409A of the Code or a court of competent jurisdiction provides additional authority
concerning the application of section 409A of the Code with respect to the distributions under the
Plan, then the provisions of the Plan regarding distributions shall be automatically amended to
permit such distributions to be made at the earliest time
permitted under such additional regulations, guidance or authority that is practicable and
achieves the intent of the Plan prior to its amendment to comply with section 409A of the Code.

11.11 Amendment and Restatement of the Plan. The amendment and restatement of the Plan
effective as of January 1, 2005, shall apply only to amounts deferred and vested on or after
January 1, 2005. The provisions of the Plan prior to this amendment and restatement shall apply to
any amounts that were earned and vested under the Plan on or before December 31, 2004. The
amendment and restatement of the Plan is not intended to be a material modification of the Plan
with respect to amounts deferred and vested on or before December 31, 2004, and, any provision of
the Plan that is considered to be a material modification of the Plan shall be retroactively
amended to the extent required to prevent such provision from being considered a material
modification of the Plan with respect to such amounts.

 

XI-2

 

IN WITNESS WHEREOF, effective January 1, 2005, the Company has adopted this amendment and
restatement of the Plan on the 21st day of November, 2006.

	 	 	 	 	 
	 	 	QUANEX CORPORATION
	 
	 	 	 	 
	 

	 	By:
	 	                    /s/ Kevin P. Delaney
	 

	 	 	 	 
	 

	 	Title:
	 	Senior Vice President — General Counsel and Secretary

 

XI-3exv10w4

 

Exhibit 10.4

QUANEX CORPORATION

SUPPLEMENTAL BENEFIT PLAN

Amended and Restated

Effective as of January 1, 2005

 

 

 

TABLE OF CONTENTS

	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	Page
	 
	 	 	 	 	 	 	 	 
	ARTICLE I	 	NAME AND PURPOSE	 	I-1
	 
	 	 	 	 	 	 	 	 
	ARTICLE II	 	DEFINITIONS AND DESIGNATIONS	 	II-1
	 

	 	 	2.01	 	 	“Actuarial Equivalent”
	 	II-1
	 

	 	 	2.02	 	 	“Affiliate”
	 	II-1
	 

	 	 	2.03	 	 	“Applicable Covered Employee”
	 	II-1
	 

	 	 	2.04	 	 	“Board”
	 	II-1
	 

	 	 	2.05	 	 	“Change of Control”
	 	II-1
	 

	 	 	2.06	 	 	“Code”
	 	II-3
	 

	 	 	2.07	 	 	“Committee”
	 	II-3
	 

	 	 	2.08	 	 	“Company”
	 	II-3
	 

	 	 	2.09	 	 	“Covered Employee”
	 	II-3
	 

	 	 	2.10	 	 	“Disability”
	 	II-3
	 

	 	 	2.11	 	 	“Early Retirement Date”
	 	II-3
	 

	 	 	2.12	 	 	“Earnings”
	 	II-3
	 

	 	 	2.13	 	 	“Employee”
	 	II-3
	 

	 	 	2.14	 	 	“Final Average Earnings”
	 	II-3
	 

	 	 	2.15	 	 	“Forfeiting Act”
	 	II-3
	 

	 	 	2.16	 	 	“Incentive Bonus” or “Incentive Bonuses”
	 	II-4
	 

	 	 	2.17	 	 	“Normal Retirement Date”
	 	II-4
	 

	 	 	2.18	 	 	“Participant”
	 	II-4
	 

	 	 	2.19	 	 	“Plan”
	 	II-4
	 

	 	 	2.20	 	 	“Plan Year”
	 	II-4
	 

	 	 	2.21	 	 	“Qualified Plan”
	 	II-4
	 

	 	 	2.22	 	 	“Qualified Plan Benefit”
	 	II-4
	 

	 	 	2.23	 	 	“Restricted Period”
	 	II-4
	 

	 	 	2.24	 	 	“Service”
	 	II-5
	 

	 	 	2.25	 	 	“Social Security Benefit”
	 	II-5
	 

	 	 	2.26	 	 	“Separation From Service”
	 	II-5
	 
	 	 	 	 	 	 	 	 
	ARTICLE III	 	PARTICIPATION	 	III-1
	 

	 	 	3.01	 	 	Eligibility to Participate
	 	III-1
	 

	 	 	3.02	 	 	Reemployment
	 	III-1
	 
	 	 	 	 	 	 	 	 
	ARTICLE IV	 	RETIREMENT BENEFITS	 	IV-1
	 

	 	 	4.01	 	 	Normal Retirement Benefit
	 	IV-1
	 

	 	 	4.02	 	 	Deferred Retirement Benefit
	 	IV-1
	 

	 	 	4.03	 	 	Early Retirement Benefit
	 	IV-1
	 

	 	 	4.04	 	 	Disability Benefit
	 	IV-1
	 

	 	 	4.05	 	 	Deferred Vested Benefit
	 	IV-2
	 

	 	 	4.06	 	 	Change of Control Benefit
	 	IV-2
	 

	 	 	4.07	 	 	Forms of Payment
	 	IV-2
	 

	 	 	4.08	 	 	Forms of Payment Elections
	 	IV-3
	 

	 	 	4.09	 	 	Lump Sum Payment Of Small Amounts
	 	IV-3
	 

	 	 	4.10	 	 	Time of Payment of Benefit
	 	IV-3
	 
	 	 	 	 	 	 	 	 

-i-

 

 

 

TABLE OF CONTENTS

(continued)

	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	Page
	 
	 	 	 	 	 	 	 	 
	ARTICLE V	 	DEATH BENEFITS	 	V-1
	 

	 	 	5.01	 	 	In General
	 	V-1
	 

	 	 	5.02	 	 	Death During Employment
	 	V-1
	 

	 	 	5.03	 	 	Death After Separation From Service
	 	V-1
	 
	 	 	 	 	 	 	 	 
	ARTICLE VI	 	BENEFICIARIES	 	VI-1
	 

	 	 	6.01	 	 	Designation of Beneficiary
	 	VI-1
	 

	 	 	6.02	 	 	Payment of Benefits Upon Death
	 	VI-1
	 

	 	 	6.03	 	 	Minors and Persons Under Legal Disability
	 	VI-1
	 
	 	 	 	 	 	 	 	 
	ARTICLE VII	 	FORFEITURE FOR CAUSE	 	VII-1
	 
	 	 	 	 	 	 	 	 
	ARTICLE VIII	 	AGREEMENT FUNDED THROUGH RABBI TRUST	 	VIII-1
	 
	 	 	 	 	 	 	 	 
	ARTICLE IX	 	PLAN COMMITTEE	 	IX-1
	 

	 	 	9.01	 	 	Committee
	 	IX-1
	 

	 	 	9.02	 	 	General Rights, Powers and Duties of Plan Committee
	 	IX-1
	 

	 	 	9.03	 	 	Rules and Decisions
	 	IX-1
	 

	 	 	9.04	 	 	Committee Procedures
	 	IX-2
	 

	 	 	9.05	 	 	Authorization of Benefit Payments
	 	IX-2
	 

	 	 	9.06	 	 	Application and Forms of Benefits
	 	IX-2
	 

	 	 	9.07	 	 	Facility of Payment
	 	IX-2
	 

	 	 	9.08	 	 	Claims Procedure
	 	IX-2
	 

	 	 	9.09	 	 	Responsibility
	 	IX-3
	 
	 	 	 	 	 	 	 	 
	ARTICLE X	 	AMENDMENT AND TERMINATION	 	X-1
	 

	 	 	10.01	 	 	Amendment
	 	X-1
	 

	 	 	10.02	 	 	Right to Terminate Plan
	 	X-1
	 
	 	 	 	 	 	 	 	 
	ARTICLE XI	 	MISCELLANEOUS	 	XI-1
	 

	 	 	11.01	 	 	Inalienability of Benefits
	 	XI-1
	 

	 	 	11.02	 	 	No Implied Rights
	 	XI-1
	 

	 	 	11.03	 	 	Actions By Company
	 	XI-1
	 

	 	 	11.04	 	 	Binding Effect
	 	XI-1
	 

	 	 	11.05	 	 	Number and Gender
	 	XI-1
	 

	 	 	11.06	 	 	Governing Law
	 	XI-1
	 
	 	 	11.07	 	 	Section 409A	 	XI-1

-ii-

 

 

 

ARTICLE I

NAME AND PURPOSE

This plan, as adopted effective February 28, 1980 and amended and restated October 22, 1981,
November 1, 1988, June 1, 1999, January 1, 2004 and January 1, 2005, shall be known as the Quanex
Corporation Supplemental Benefit Plan (the “Plan”).

The Plan provides retirement benefits for certain designated management employees in addition
to those provided under the benefit plans for salaried employees of Quanex Corporation, as in
effect from time to time.

The purpose of the Plan is to supplement those retirement benefits that a Participant may be
entitled to receive as a salaried employee of Quanex Corporation. Except as may be otherwise
provided herein, the terms used in the Plan shall have the meanings specified in the Quanex
Corporation Employees’ Pension Plan.

 

I-1

 

ARTICLE II

DEFINITIONS AND DESIGNATIONS

2.01 “Actuarial Equivalent” means equality in value of the aggregate amounts expected to be
received under different forms of payment calculated utilizing the mortality and interest rate
assumptions specified in the Qualified Plan at the time of the calculation.

2.02 "Affiliate” means all business organizations which are members of a controlled group of
corporations (within the meaning of section 414(b) of the Code), or which are trades or businesses
(whether or not incorporated) which is under common control (within the meaning of section 414(c)
of the Code), or which are members of an affiliated service group of employers (within the meaning
of section 414(m) of the Code), which related group of corporations, businesses or employers
includes Quanex.

2.03 “Applicable Covered Employee” means any of the following:

(a) a Covered Employee of Quanex;

(b) a Covered Employee of an Affiliate; and

(c) a former employee who was a Covered Employee at the time of termination of
employment with Quanex or an Affiliate.

2.04 “Board” means the Board of Directors of the Company.

2.05 “Change of Control” means the occurrence of one or more of the following events:

(a) the acquisition by any individual, entity or group (within the meaning of Section
13(d)(3) or 14(d)(2) of the Exchange Act) (a “Covered Person”) of beneficial ownership
(within the meaning of rule 13d-3 promulgated under the Exchange Act) of 20 percent or more
of either (i) the then outstanding shares of the common stock of (the “Outstanding Company
Common Stock”), or (ii) the combined voting power of the then outstanding voting securities
of the Company entitled to vote generally in the election of directors (the “Outstanding
Company Voting Securities”); provided, however, that for purposes of this subsection (a) of
this Section, the following acquisitions shall not constitute a Change of Control of the
Company: (i) any acquisition directly from the Company, (ii) any acquisition by the Company,
(iii) any acquisition by any employee benefit plan (or related trust) sponsored or
maintained by the Company or any entity controlled by the Company, or (iv) any acquisition
by any corporation pursuant to a transaction which complies with clauses (i), (ii) and (iii)
of subsection (c) of this Section; or

 

II-1

 

(b) individuals who, as of June 1, 1999, constitute the Board (the “Incumbent Board”)
cease for any reason to constitute at least a majority of the Board; provided, however, that
any individual becoming a director subsequent to June 1, 1999 whose election, or nomination
for election by the Company’s stockholders, was approved by a vote of at least a majority of
the directors then comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for this purpose, any such
individual whose initial assumption of office occurs as a result of an actual or threatened
election contest with respect to the election or removal of directors or other actual or
threatened solicitation of proxies or consents by or on behalf of a Covered Person other
than the Board; or

(c) the consummation of (xx) a reorganization, merger or consolidation or sale of the
Company or (yy) a disposition of all or substantially all of the assets of the Company (a
“Business Combination”), in each case, unless, following such Business Combination, (i) all
or substantially all of the individuals and entities who were the beneficial owners,
respectively, of the Outstanding Company Common Stock and Outstanding Company Voting
Securities immediately prior to such Business Combination beneficially own, direct or
indirectly, more than 80 percent of, respectively, the then outstanding shares of common
stock and the combined voting power of the then outstanding voting securities entitled to
vote generally in the election of directors, as the case may be, of the corporation
resulting from such Business Combination (including, without limitation, a corporation which
as a result of such transaction owns the Company or all or substantially all of the
Company’s assets either directly or through one or more subsidiaries) in substantially the
same proportions as their ownership immediately prior to such Business Combination of the
Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may
be, (ii) no Covered Person (excluding any employee benefit plan (or related trust) of the
Company or such corporation resulting from such Business Combination) beneficially owns,
directly or indirectly, 20 percent or more of, respectively, the then outstanding shares of
common stock of the corporation resulting from such Business Combination or the combined
voting power of the then outstanding voting securities of such corporation, except to the
extent that such ownership existed prior to the Business Combination, and (iii) at least a
majority of the members of the board of directors of the corporation resulting from such
Business Combination, were members of the Incumbent Board at the time of the execution of
the initial agreement, or of the action of the Board, providing for such Business
Combination; or

(d) the approval by the stockholders of Quanex of a complete liquidation or dissolution
of Quanex.

Notwithstanding the foregoing, for purposes of a distribution from the Plan, including upon a
termination of the Plan, the term “Change of Control” shall means a change in the ownership or
effective control of the Company, or a change in the ownership of a substantial portion of the
assets of the Company as described in Section 409A of the Code.

 

II-2

 

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

2.07 “Committee” means the Committee established under Article IX to administer the Plan.

2.08 “Company” means Quanex Corporation, a Delaware corporation.

2.09 "Covered Employee” means an individual (i) described in section 162(m)(3) of the Code or
(ii) subject to the requirements of Section 16(a) of the Securities Act.

2.10 “Disability” shall mean the Participant (i) is unable to engage in any substantial
gainful activity by reason of any medically determinable physical or mental impairment which can be
expected to result in death or can be expected to last for a continuous period of not less than 12
months, or (ii) is, by reason of any medically determinable physical or mental impairment which can
be expected to result in death or can be expected to last for a continuous period of not less than
12 months, receiving income replacement benefits for a period of not less than three months under
an accident and health plan covering employees of the Participant’s employer.

2.11 “Early Retirement Date” means the first day of any month after a Participant’s attainment
of age 55 and the completion of five years of Service.

2.12 “Earnings” means all wages as defined in section 3401 of the Code (for purposes of income
tax withholding) for services rendered in the course of employment with the Company; modified by
excluding reimbursements or other expense allowances, fringe benefits (cash and noncash), moving
expenses, deferred compensation, welfare benefits, BeneFlex dollars under the Quanex Corporation
Medical Reimbursement Plan, Incentive Bonuses and restricted stock awards and stock options; and
modified further by including elective contributions under a cafeteria plan maintained by the
Company that is governed by section 125 of the Code and elective contributions to any plan
maintained by the Company that contains a qualified cash or deferred arrangement under section
401(k) of the Code.

2.13 “Employee” means any person hired by the Company who is receiving remuneration in the
form of a salary for personal services rendered to the Company.

2.14 “Final Average Earnings” means the highest monthly average of a Participant’s Earnings
which is produced by averaging his Earnings and Incentive Bonuses over any 36 consecutive month
period during the 60 consecutive month period immediately preceding the date of the Participant’s
Separation From Service. However, for the purposes of this definition, no more than three
Incentive Bonuses shall be taken into account in calculating a Participant’s earnings over any 36
consecutive month period.

2.15 “Forfeiting Act” means the Participant’s fraud, dishonesty, willful destruction of
Company property, committing of a felony, revealing Company trade secrets, acts of competition
against the Company or acts in aid of a competitor of the Company.

 

II-3

 

2.16 “Incentive Bonus” or “Incentive Bonuses” means compensation earned under the Quanex
Corporation Executive Incentive Compensation Plan or the Quanex Corporation Omnibus Incentive Plan,
whether or not deferred under the Quanex Corporation Deferred Compensation Plan.

2.17 “Normal Retirement Date” means the first day of the month coincident with or next
following a Participant’s 65th birthday.

2.18 “Participant” means an Employee designated by the Board as eligible for participation in
the Plan, and who meets the requirements of Article III.

2.19 “Plan” means the Quanex Corporation Supplemental Benefit Plan.

2.20 “Plan Year” means the period commencing on November 1 and ending on October 31.

2.21 “Qualified Plan” means the Quanex Corporation Employees’ Pension Plan maintained by the
Company.

2.22 “Qualified Plan Benefit” means the aggregate of all benefits which would be payable to
the Participant from the Qualified Plan payable on or after his Normal Retirement Date. In
calculating the amount of the Qualified Plan Benefit, for the purposes of the Plan the following
shall apply:

(a) If the normal form of benefit of the Qualified Plan is other than a straight life
annuity, the benefit shall be expressed in the form of a straight life annuity by using the
actuarial assumptions contained in the Qualified Plan.

(b) If benefits under the Qualified Plan are paid or are payable to the Participant
prior to the date his benefits commence under the Plan, the Actuarial Equivalent of such
benefits as of his Normal Retirement Date (as defined in the Qualified Plan) shall be used.

(c) The amount of a Participant’s Qualified Plan Benefit shall be determined based on
the provisions of the Qualified Plan as in effect on the date his benefits under the Plan
are determined.

(d) The amount of a Participant’s Qualified Plan Benefit shall be determined by
disregarding any offset for benefits payable under a terminated retirement plan that was
previously maintained by the Company or one of its Affiliates.

2.23 "Restricted Period” means, for any qualified defined benefit plan sponsored by Quanex or
an Affiliate, any period during which the plan is in at-risk status as described in section 409A of
the Code.

 

II-4

 

2.24 “Service” means service for purposes of the Qualified Plan. In determining a
Participant’s Service, all years of Service after the Participant’s date of hire shall be taken
into account.

2.25 “Social Security Benefit” means, for all purposes other than determining the Disability
benefit, the monthly amount payable commencing on the later of the Participant’s 65th birthday or
the date of his Separation From Service under the provisions of Title II of the Social Security
Act. Such benefit shall be determined based on (1) the Participant’s average monthly wage or
indexed earnings (as defined in the Social Security Act, as amended) on the date of his Separation
From Service, computed under the Social Security Act as in effect on the January 1 of the calendar
year in which benefits are determined and using the Participant’s annual total wages from the
Company for the prior calendar year, as defined in section 3121(b), assuming his wages increased
prior thereto at the rate of increase in the average per worker total wages reported by the Social
Security Administration, and assuming continuation of such wages without increase thereafter until
his Separation From Service (with no wages thereafter); and (2) the Table of Primary Social
Security Benefits under the Social Security Act as in effect on the January 1 of the calendar year
in which his Separation From Service actually occurs. “Social Security Benefit” means, for
purposes of determining a Disability benefit, any actual disability benefit for which the
Participant is eligible under Title II of the Social Security Act.

2.26 “Separation From Service” means a Participant’s complete separation from service with the
Company and all of its Affiliates. The determination of whether an Participant incurs a Separation
From Service will be determined in accordance with section 409A of the Code.

 

II-5

 

ARTICLE III

PARTICIPATION

3.01 Eligibility to Participate. An Employee shall become eligible to become a Participant in
the Plan by designation of the Board. The Committee shall notify each Participant of his
eligibility. Each designated Employee shall furnish such information and perform such acts as the
Committee may require prior to becoming a Participant.

3.02 Reemployment. Any person who Separates From Service with the Company shall not be
eligible to participate in the Plan upon his reemployment by the Company unless the Board so
determines. In such event, the Board shall specify whether and under what conditions the person
shall receive credit for all or any of his Service completed prior to reemployment.

 

III-1

 

ARTICLE IV

RETIREMENT BENEFITS

4.01 Normal Retirement Benefit. Subject to Article VIII, if a Participant Separates From
Service with the Company on or after his Normal Retirement Date, he will be entitled to a monthly
benefit payable to the Participant for life only in an amount equal to:

(a) 2.75 percent of his Final Average Earnings multiplied by his years of Service (not
in excess of 20 years), less

(b) the sum of:

(1) the Participant’s Qualified Plan Benefit, and

(2) one-half of the Participant’s Social Security Benefit multiplied by a
fraction (which shall not exceed one) the numerator of which is the Participant’s
number of years of Service and the denominator of which is 20.

Notwithstanding any other provision of the Plan, a Participant’s monthly benefit under this
Section 4.01 shall not be less than his monthly benefit accrued as of the date of the execution of
this Agreement.

4.02 Deferred Retirement Benefit. If a Participant Separates From Service with the Company on
or after his Normal Retirement Date, he will be entitled to a monthly benefit payable to the
Participant for life only determined in accordance with the provisions of Section 4.01. The
benefit will not be actuarially increased to reflect the later benefit payment date or his shorter
life expectancy. In determining a Participant’s deferred retirement benefit, his Service
subsequent to his Normal Retirement Date and the computation of his Final Average Earnings shall
take into account his Service after his Normal Retirement Date.

4.03 Early Retirement Benefit. If a Participant Separates From Service with the Company on or
after his Early Retirement Date but before age 65, he shall be entitled to a monthly benefit
payable to the Participant for life only determined in accordance with the provisions of Section
4.01 based upon his years of Service and Final Average Earnings on the date of his Separation From
Service. The monthly amount shall be reduced by five percent for each year (and fractional year)
that the Participant’s benefit commencement precedes the Participant’s 65th birthday.

4.04 Disability Benefit. If a Participant who has completed six months of Service Separates
From Service with the Company prior to his Early Retirement Date due to his Disability, he shall
receive a monthly Disability benefit, for so long as he has a Disability but no longer than his
Normal Retirement Date (on which date the Participant shall be treated as a retiree entitled to
benefits under Section 4.01), in an amount equal to:

 

IV-1

 

(a) 50 percent of the sum of his monthly Earnings in effect at the date of his
Disability and the monthly equivalent of the average of his Incentive Bonuses for the prior
three Plan Years, less

(b) the sum of:

(1) the Participant’s Qualified Plan Benefit;

(2) the Participant’s Social Security Benefit;

(3) the Participant’s benefit under the Company’s group long-term disability
insurance plan;

(4) the Participant’s benefit under an individual disability policy provided by
the Company, and;

(5) the Participant’s benefit under the Company’s wage continuation policy
plan.

Upon the occurrence of the Normal Retirement Date of a former Participant with a Disability,
he will be entitled to a monthly benefit payable to him for life only determined in accordance with
the provisions of Section 4.01. In determining his benefit payable upon the occurrence of his
Normal Retirement Date, his Final Average Earnings and his years of Service shall be determined as
of the date of his Disability.

4.05 Deferred Vested Benefit. If a Participant Separates From Service with the Company prior
to his Early Retirement Date but has five or more years of Service, he will upon attaining age 55
be entitled to the lump sum Actuarial Equivalent of a monthly benefit payable to the Participant
for life only determined in accordance with the provisions of Section 4.01 based upon his years of
Service and Final Average Earnings at his Separation From Service. The benefit calculated under
Section 4.01 however, shall be reduced, using the factors described in Section 4.03. If the
Participant has fewer than five years of Service when he Separates From Service prior to his Early
Retirement Date, he shall not be entitled to any benefits under the Plan.

4.06 Change of Control Benefit. Notwithstanding any other provisions of the Plan, if a
Participant’s Separation From Service occurs after a Change of Control, he will be entitled to the
lump-sum Actuarial Equivalent of a monthly benefit payable to the Participant for life only
determined in accordance with the provisions of Section 4.01 based upon his years of Service and
Final Average Earnings at his Separation From Service. The benefit calculated under Section 4.01
shall not be reduced because of the Participant’s age or early payment of his benefit under the
Plan. Any benefit paid pursuant to this Section 4.06 shall be in lieu of any other benefit
otherwise payable to the Participant under the Plan.

4.07 Forms of Payment. Subject to the provisions of Section 4.09, a Participant who is
entitled to a benefit under Section 4.01, 4.02, or 4.03 may elect, in accordance with procedures
established by the Committee, to have his benefit paid in one of the following forms, each of
which shall be the Actuarial Equivalent of the Participant’s benefit accrued under Section 4.01,
4.02, or 4.03, as applicable:

(a) A lump sum payment.

(b) An optional form of payment permitted under the Qualified Plan.

(c) Monthly, quarterly, or annual installment payments for a specified number of years
(not in excess of 20). Such payments shall be made to the Participant while he is alive,
and the balance of the payments shall be paid on an installment basis to his designated
beneficiary if he dies prior to the payment of all the installment payments.

 

IV-2

 

If a Participant fails to make a valid election concerning the form of his payment as required
under Section 4.08, his benefit shall be paid in the form of a lump sum.

All payments under the Plan shall be made in cash.

4.08 Forms of Payment Elections. Except as provided below, any election under Sections 4.07
with respect to the form of payment of Plan benefits (an “Initial Payment Election”) by a
Participant who became a Participant on or before December 31, 2006 must be made in accordance with
procedures established by the Committee and must be received by the Committee no later than
December 31, 2006. A newly eligible Participant may make an Initial Payment Election within the
30-day period after he becomes eligible to participate in the Plan. The last timely Initial
Payment Election received by the Committee shall be irrevocable, unless changed in accordance with
this Section. Any Initial Payment Election that is not timely received shall be treated as not
having been made and the Participant shall be deemed to have elected a lump sum payment of his or
her benefit under the Plan.

A Participant may elect to change the form of payment of his or her Plan benefits if such
election is received by the Committee at least 12 months prior to the date payment of the benefit
will be made or commence. Such an election change shall not take effect until at least 12 months
after the date on which the change in payment election is received by the Committee and the payment
may not be made or commence no earlier than five years following the date on which the payments
would otherwise have been made or commenced. A change from one form of an annuity to another form
of annuity that is Actuarially Equivalent shall not constitute a change in form of payment and may
be made at any time before the payment is to be made or commence.

4.09 Lump Sum Payment Of Small Amounts. Notwithstanding any other provision of the Plan, if
the present value of a benefit payable under Section 4.01, 4.02, or 4.03 of the Plan is less than
or equal to $20,000, such benefit shall be paid in the form of a lump sum in cash.

4.10 Time of Payment of Benefit. The payments provided for Normal Retirement, Deferred
Retirement, and Early Retirement shall be paid or commence to be paid on the 90th day
after the Participant’s Separation From Service. The monthly Disability benefit shall commence being paid on the first day of the month coincident with or next following the Participant’s
Separation From Service due to Disability and shall cease with the last payment prior to his
recovery or attainment of his Normal Retirement Date. If a former Participant who terminated
employment with the Company due to Disability continues to have a Disability until his Normal
Retirement Date, the lump sum payment then due shall be paid on his Normal Retirement Date. A
Participant’s Change of Control benefit shall be payable on the 90th day after the later
of his attainment of age 55 or the date of his Separation From Service. A Participant’s deferred
vested benefit shall be payable on the 90th day after the Participant’s Separation From
Service.

Notwithstanding anything to the contrary in this Plan, payments due to the Separation From
Service of an Employee, excluding due to death or Disability but including due to Retirement, may
not be made before the date which is six (6) months after the date of such Employee’s Separation
From Service (a “Six-Month Delay”). In the event of a Six-Month Delay, the benefits that would
have been paid during such delay if the delay had not been imposed, shall be paid in a lump sum as
soon as is administratively practicable following the expiration of the Six-Month Delay and any
other benefits to be paid after the end of the Six Month Delay shall be paid in accordance with the
terms of the Plan.

 

IV-3

 

ARTICLE V

DEATH BENEFITS

5.01 In General. The benefits under the Plan payable subsequent to a Participant’s or former
Participant’s death shall be limited to those contained in this Article, and shall in any case be
subject to Article VII.

5.02 Death During Employment. If a Participant’s death occurs while he is in the employ of
the Company, no death benefit shall be payable under the Plan with respect to the Participant.

5.03 Death After Separation From Service.

(a) In General. Except as provided in this Section, no benefits shall be payable to or
on behalf of a Participant or former Participant whose death occurs subsequent to his
Separation From Service.

(b) Before Benefits Commence. If a former Participant dies before his benefit is paid
or commences to be paid but after his Separation From Service on or after his Normal
Retirement Date, his Early Retirement Date or a Change of Control, or after he has become
entitled to a deferred vested benefit under Section 4.05, his designated beneficiary, if
any, shall be entitled to receive a lump sum benefit equal to the benefit which he would
have received had he lived to the date his benefit would have been paid out. If a former
Participant dies before his benefit commences to be paid and he was eligible for a
Disability benefit, his designated beneficiary, if any, shall be entitled to receive a lump
sum benefit which is Actuarially Equivalent to a survivor annuity equal to the survivor
portion of a qualified joint and 50 percent survivor annuity as if the former Participant
had been entitled to elect and had elected such survivor annuity on the day before his
death. The survivor lump sum death benefit shall be payable on the 90th day following the
date of the Former Participant’s death. In calculating the survivor portion for the
survivor lump sum benefit, the benefit shall be reduced in the same manner it is reduced
under Section 4.03, 4.04, or 4.05, whichever is applicable, for payment earlier than Normal
Retirement Date. In the event of a Participant’s Separation From Service after a Change of
Control, the death benefits payable under this Section 5.03 on his behalf will not be
reduced for payment before the Participant’s Normal Retirement Date.

(c) After Disability Benefits Commence. If a former Participant who is receiving a
Disability benefit dies prior to reaching his Normal Retirement Date but while he still has
a Disability, his designated beneficiary shall receive a lump sum benefit which is
Actuarially Equivalent to the survivor portion of a qualified joint and 50 percent survivor
annuity as if the former Participant had been entitled to elect and had elected such
survivor annuity on the day before his death. Such benefit shall be payable on the 90th day
after his death.

(d) After Benefits Under Section 4.01, 4.02 or 4.03 Commence. If a former Participant
dies after receiving payments pursuant to Section 4.01, 4.02, or 4.03 of the Plan, his
designated beneficiary shall be entitled to receive any death benefit payable under the
optional form of payment selected by the former Participant.

 

V-1

 

ARTICLE VI

BENEFICIARIES

6.01 Designation of Beneficiary. Each Participant or former Participant shall designate as
his beneficiary the person or persons who shall, upon his death, receive the death benefits, if
any, payable pursuant to Article V. The designation shall be in such form as the Committee
requires and may include contingent beneficiaries. A beneficiary designation shall be effective
when filed with the Committee during the Participant’s or former Participant’s life, and shall
cancel and revoke all prior designations.

6.02 Payment of Benefits Upon Death. If a Participant’s or former Participant’s death occurs
prior to payment of his benefit, the benefit payable upon his death, if any, shall be paid to the
persons or persons designated as his primary beneficiary, but if the primary beneficiary does not
survive him, then to the person or persons designated as the contingent beneficiary. If no primary
or contingent beneficiary survives him or if no beneficiary designation is in effect upon his
death, then the benefit under Article V shall be paid to his spouse. If his spouse does not
survive him, then the benefit shall be paid to his descendants who survive him by right of
representation, and if no descendants of the Participant or former Participant survive him, then to
his estate.

6.03 Minors and Persons Under Legal Disability. Payments to a minor or a person under a legal
disability shall be made by the Company at the direction of the Committee as follows:

(a) to the natural or adoptive parents or legal guardian or conservator of such person,
or to any other person in loco parentis;

(b) to a custodian for such person under the Uniform Gifts to Minors Act or Gifts of
Securities to Minors Act; or

(c) by expending amounts directly for the education and support of such person.

 

V1-1

 

ARTICLE VII

FORFEITURE FOR CAUSE

Except with respect to persons whose Separations From Service with the Company occur after a
Change of Control, notwithstanding any other provision of the Plan to the contrary, in all cases
where a written document is executed by the Company expressly making acts of competition against
the Company or acts in aid of a competitor of the Company by the Participant or former Participant
a Forfeiting Act, if the Participant commits one or more Forfeiting Acts during his employment with
the Company or following his Separation From Service, any and all unpaid benefits due the
Participant or his designated beneficiary shall be forfeited. This provision shall apply
regardless of the date the Company first learns of the occurrence of a Forfeiting Act.

 

VII-1

 

ARTICLE VIII

AGREEMENT FUNDED THROUGH RABBI TRUST

The Company shall pay the benefits due the Participants and former Participants under the
Plan; however, should it fail to do so when a benefit is due, such benefit shall be paid by the
trustee of that certain Trust Agreement entered into, by and between the Company and Fleet National
Bank (the “Trust”). In any event, if the Trust fails to pay for any reason, the Company still
remains liable for the payment of all benefits provided by the Plan. The Company may contribute at
any time and from time to time such assets to the Trust as it, in its sole discretion, shall
determine and shall have the right at any time and from time to time to borrow from the Trust the
fair market value of assets held in the Trust which are in excess of the net present value of the
largest benefit all Participants and former Participants are entitled to under the Plan as of the
beginning of the Plan Year during which the loan is made (exclusive of any Disability or death
benefit). Any such loan shall be evidenced by an instrument in writing, shall bear interest at
such rate as the Company would be required to pay to its prime lender under the same terms (except
for the security), shall provide a repayment schedule which would repay but only to the extent of
the funds so borrowed, such amount as is necessary to maintain at the beginning of each Plan Year
during the existence of the loan, non-borrowed funds in the Trust at a level at least equal to the
net present value of all benefits calculated under the preceding sentence and shall provide for
prepayment at the Company’s election, without penalty. The above calculations shall use the same
actuarial factors set out in the definition of Actuarial Equivalent under Section 2.01. All assets
contributed shall be held in and administered according to the terms of the Trust which are
incorporated by reference in the Plan for all purposes. However, in no event shall the rights of
Participants and former Participants in the assets held by the Trust be greater than the rights of
unsecured creditors of the Company. Nothing contained in the Plan or the Trust constitutes a
secured promise by the Company that the assets of the Company will be sufficient to pay any benefit
to any person.

Notwithstanding the foregoing, no assets shall be set aside or reserved (directly or
indirectly) in a trust (or other arrangement as determined by the Internal Revenue Service), or
transferred to a trust or other arrangement established to fund the Company’s obligations under the
Plan during any Restricted Period for purposes of paying benefits to an Applicable Covered
Employee. The rule contained in the preceding sentence does not apply to assets set aside,
reserved or transferred before or after a Restricted Period.

 

VIII-1

 

ARTICLE IX

PLAN COMMITTEE

9.01 Committee. The Plan shall be administered by the Committee, which shall have three
members designated in writing by the Company. Any person may resign from the Committee upon 30
days’ prior notice to the Company and to any other member of the Committee. The Company may remove
any member of the Committee by written notice to him and to any other member of the Plan Committee.
The Company shall fill any vacancy and shall give written notice thereof to the other members of
the Committee. In the interim, the other member(s) of the Committee shall have full authority to
act. If, at any time, there are no members of the Committee, then the Board shall serve as the
Committee.

9.02 General Rights, Powers and Duties of Plan Committee. The Committee shall be responsible
for the management, operation and administration of the Plan. In addition to any powers, rights
and duties set forth elsewhere in the Plan, it shall have the following powers and duties:

(a) to adopt such rules and regulations consistent with the provisions of the Plan as
it deems necessary for the proper and efficient administration of the Plan;

(b) to enforce the Plan in accordance with its terms and any rules and regulations it
establishes;

(c) to maintain records concerning the Plan sufficient to prepare reports, returns and
other information required by the Plan or by law;

(d) to construe and interpret the Plan and to resolve all questions arising under the
Plan;

(e) to direct the Company to pay benefits under the Plan, and to give such other
directions and instructions as may be necessary for the proper administration of the Plan;

(f) to employ or retain agents, attorneys, actuaries, accountants or other persons, who
may also be employed by or represent the Company, and

(g) to be responsible for the preparation, filing and disclosure on behalf of the Plan
of such documents and reports as are required by any applicable federal or state law.

The Committee shall have no power to add to, subtract from or modify any of the terms of the
Plan, or to change or add to any benefits provided by the Plan, or to waive or fail to apply any
requirements of eligibility for benefits under the Plan.

9.03 Rules and Decisions. The Committee may adopt such rules and actuarial tables as it deems
necessary, desirable or appropriate. All rules and decisions of the Committee shall
be uniformly and consistently applied to all Participants in similar circumstances. When
making a determination or calculation, the Committee shall be entitled to rely upon information
furnished to it by a Participant or beneficiary, the Company, and the legal counsel, actuary and
accountant for the Company.

 

IX-1

 

9.04 Committee Procedures. The Committee may act at a meeting or in writing without a
meeting. The Committee shall elect one of its members as chairman and appoint a secretary, who may
or may not be a Committee member. The Secretary shall keep a record of all meetings and forward
all necessary communications to the Company. The Committee may adopt such bylaws and regulations
as it deems desirable for the conduct of its affairs. All decisions of the Committee shall be made
by the vote of the majority, including actions in writing taken without a meeting. A dissenting
Committee member who, within a reasonable time after he has knowledge of any action or failure to
act by the majority, registers his dissent in writing delivered to the other Committee members and
the Company, shall not, to the extent permitted by law, be responsible for any such action or
failure to act.

9.05 Authorization of Benefit Payments. The Committee shall issue directions to the Company
concerning all benefits which are to be paid pursuant to the provisions of the Plan. The Company
shall furnish the Committee such data and information as it may require. The records of the
Company shall be determinative of each Participant’s period of employment, Separation From Service
and the reason therefor, leave of absence, reemployment, years of Service, Earnings, and Final
Average Earnings. Participants and their beneficiaries shall furnish to the Committee such
evidence, data, or information, and execute such documents, as the Committee requests.

9.06 Application and Forms of Benefits. The Committee may require a Participant or former
Participant to complete and file with the Committee an application for retirement benefits and all
other forms approved by the Committee, and to furnish all pertinent information requested by the
Committee. The Committee may rely upon all such information so furnished it, including the
Participant’s or former Participant’s current mailing address.

9.07 Facility of Payment. Whenever, in the Committee’s opinion, a person entitled to receive
any payment of a benefit or installment thereof hereunder is under a legal disability or is
incapacitated in any way so as to be unable to manage his financial affairs, the Committee may
direct the Company to make payments to such person or to his legal representative or to a relative
or friend of such person for his benefit, or the Committee may direct the Company to apply the
payment for the benefit of such person in such manner as the Committee considers advisable. Any
payment of a benefit or installment thereof in accordance with the provisions of this Section shall
be a complete discharge of any liabilities for the making of such payment under the provisions of
the Plan.

9.08 Claims Procedure. The Committee shall make all determinations as to the right of any
person to receive benefits under the Plan. Any denial by the Committee of a claim for benefits
under the Plan by a Participant, former Participant beneficiary of a former Participant
(collectively referred to herein as “Claimant”) shall be stated in writing by the Committee and

 

IX-2

 

delivered or mailed to the Claimant on the 90th day after receipt of the claim, unless special
circumstances require an extension of time for processing the claim. If such an extension of time
is required, written notice of the extension shall be furnished to the Claimant on the 90th day
after receipt of the claim and the claim shall thereafter be paid on the 180th day after the date
of receipt of the initial claim. Such notice shall set forth the specific reasons for the denial,
specific reference to pertinent provisions of the Plan upon which the denial is based, a
description of any additional material or information necessary for the Claimant to perfect his
claim with an explanation of why such material or information is necessary, and an explanation of
claim review procedures under the Plan written to the best of the Committee’s ability in a manner
that may be understood without legal or actuarial counsel. A Claimant whose claim for benefits has
been wholly or partially denied by the Committee may, within 90 days following the date of such
denial, request a review of such denial in writing addressed to the Committee. The Claimant shall
be entitled to submit such issues or comments, in writing or otherwise, as he shall consider
relevant to a determination of his claim, and he may request a hearing in person before the
Committee. Prior to submitting his request, the Claimant shall be entitled to review such
documents as the Committee shall agree are pertinent to his claim. The Claimant may, at all stages
of review, be represented by counsel, legal or otherwise, of his choice, provided that the fees and
expenses of such counsel shall be borne by the Claimant. All requests for review shall be promptly
resolved. The Committee’s decisions with respect to any such review shall be set forth in writing
and shall be mailed to the Claimant on the 60th day following receipt by the Committee of the
Claimant’s request unless special circumstances, such as the need to hold a hearing, require an
extension of time for processing, in which case the Committee’s decision shall be so mailed on the
120th day after receipt of such request.

9.09 Responsibility. No member of the Committee or of the Board shall be liable to any person
for any action taken or omitted in connection with the administration of the Plan unless
attributable to his own fraud or willful misconduct; nor shall the Company be liable to any person
for any such action unless attributable to fraud or willful misconduct on the part of a director,
officer or employee of the Company.

 

IX-3

 

ARTICLE X

AMENDMENT AND TERMINATION

10.01 Amendment. The Plan may be amended in whole or in part by the Company at any time.
Notice of any such amendment shall be given in writing to the Committee and to each Participant,
former Participant, and beneficiary of a deceased former Participant; provided, however, that no
such amendment shall have the effect of reducing that portion of the benefit the Participant or
former Participant ultimately becomes entitled to below that amount he would have received for
Service to the date of the amendment under the formula set out in the Plan prior to the amendment.

10.02 Right to Terminate Plan. The Company reserves the right to terminate the accrual or
vesting of additional benefits under the Plan by any or all Participants at any time by written
notice to the Committee. The Committee shall notify any Participant affected by such termination
of such action and its effective date within 30 days after it receives notice from the Company. A
Participant whose accrual of additional benefits is terminated shall not lose any previously
accrued and vested benefits, and, subject to Article VII, any such vested benefits shall be payable
at the time and in the manner provided hereunder. The Board may terminate the Plan within the 30
days preceding or 12 months following a Change of Control, as defined by section 409A of the Code,
or as otherwise permitted under section 409A of the Code, and distribute the accrued vested
benefits of the Participants’ to Participants in the manner and the time as determined by the
Committee, in its sole discretion, subject to the preceding sentence and as permitted by section
409A of the Code.

 

X-1

 

ARTICLE XI

MISCELLANEOUS

11.01 Inalienability of Benefits. The right of any Participant, former Participant or
beneficiary to any benefit or payment under the Plan shall not be subject to voluntary or
involuntary transfer, alienation, pledge, assignment, garnishment, sequestration or other legal or
equitable process. Any attempt to transfer, alienate, pledge, assign or otherwise dispose of such
right or any attempt to subject such right to attachment, execution, garnishment, sequestration or
other legal or equitable process shall be null and void.

11.02 No Implied Rights. Neither the establishment of the Plan nor any modification thereof
shall be construed as giving any Participant, former Participant beneficiary or other person any
legal or equitable right unless such right shall be specifically provided for in the Plan or
conferred by affirmative action of the Company in accordance with the terms and provisions of the
Plan.

11.03 Actions By Company. All actions by the Company under the Plan shall be taken by the
Board or by a person or persons designated by the Board.

11.04 Binding Effect. The provisions of the Plan shall be binding on the Company, the
Committee, and all persons entitled to benefits under the Plan, together with their respective
heirs, legal representatives and successors in interest.

11.05 Number and Gender. Wherever appropriate, the singular shall include the plural, the
plural shall include the singular, and the masculine shall include the feminine or neuter.

11.06 Governing Law. The Plan shall be construed and administered according to the laws of
the State of Texas.

11.07 Section 409A. The Plan is intended to be a nonqualified deferred compensation
arrangement and is not intended to meet the requirements of section 401(a) of the Code. The Plan
is intended to meet the requirements of section 409A of the Code and may be administered in a
manner that is intended to meet those requirements and shall be construed and interpreted in
accordance with such intent. To the extent that a deferral, accrual, vesting or payment of an
amount under the Plan is subject to section 409A of the Code, except as the Committee otherwise
determines in writing, the amount will be deferred, accrued, vested or paid in a manner that will
meet the requirements of section 409A of the Code, including regulations or other guidance issued
with respect thereto, such that the deferral, accrual, vesting or payment shall not be subject to
the excise tax applicable under section 409A of the Code. Any provision of the Plan that would
cause the deferral, accrual, vesting or payment of an amount under the Plan to fail to satisfy
section 409A of the Code shall be amended (in a manner that as closely as practicable achieves the
original intent of the Plan) to comply with section 409A of the Code on a timely basis, which may
be made on a retroactive basis, in accordance with regulations and other guidance issued under section 409A of the Code. In the event additional regulations or
other guidance is issued under section 409A of the Code or a court of competent jurisdiction
provides additional authority concerning the application of section 409A of the Code with respect
to the distributions under the Plan, then the provisions of the Plan regarding distributions shall
be automatically amended to permit such distributions to be made at the earliest time permitted
under such additional regulations, guidance or authority that is practicable and achieves the
intent of the Plan prior to its amendment to comply with section 409A of the Code.

 

XI-1

 

IN WITNESS WHEREOF, effective January 1, 2005, the Company has adopted this amendment and
restatement of the Plan on the 21st day of November, 2006.

	 	 	 	 	 
	 	 	QUANEX CORPORATION
	 
	 	 	 	 
	 

	 	By:
	 	                    /s/ Kevin P. Delaney
	 

	 	 	 	 
	 

	 	Title:
	 	Senior Vice President — General Counsel and Secretary

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