UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): November 21, 2006
QUANEX CORPORATION
(Exact name of registrant as specified in its charter)
| Delaware | 1-5725 | 38-1872178 | ||
| (State or other Jurisdiction of Incorporation) | (Commission File Number) | (IRS Employer Identification No.) |
| 1900 West Loop South, Suite 1500, Houston, Texas |
77027 | |
| (Address of Principal Executive Offices) | (Zip Code) |
Registrant’s telephone number, including area code: 713-961-4600
| (Former name or former address if changed since last report.) |
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Item 5.02. Departure of Directors or Principal Officers; Election of Directors; Appointment of Principal Officer; Compensatory Arrangements of Certain Officers.
On November 21, 2006, Quanex Corporation (the “Company”), effected certain amendments to the Company’s Long-Term Incentive Plan and Executive Incentive Compensation Plan, and amended and restated the Company’s Deferred Compensation Plan, Supplemental Benefit Plan, Supplemental Salaried Employees’ Pension Plan and Nichols Homeshield Supplemental 401(k) Savings Plan. Concurrently with these changes, the Company also entered into Amended and Restated Change in Control Agreements with certain of its officers, including Raymond A. Jean, Kevin P. Delaney, Michael R. Bayles, Thomas M. Walker, Mark A. Marcucci, Brent L. Korb, John J. Mannion and Paul A. Hammonds.
The various amendments mentioned above are designed to amend the documents to comply with Section 409A of the Internal Revenue Code (“Section 409A”) and to address recent guidance issued by the Internal Revenue Service (“IRS”) with respect to Section 409A. The Company has effected these amendments in order to ensure that its various plans and compensatory arrangements fully comply with the timing, distribution and other requirements of Section 409A, as interpreted by current IRS guidance. As such, the plan amendments or restatements are generally effective as of January 1, 2005. The Amended and Restated Change in Control Agreements are effective as of January 1, 2005, unless the original Change in Control Agreement was enacted after that date, in which case the Amended and Restated Change in Control Agreement is effective as of the original agreement date.
Attached to this current report on Form 8-K as Exhibits 10.1 through 10.7 are (i) the amendments to the Company’s Long Term Incentive Plan and Executive Incentive Compensation Plan, (ii) the Company’s Amended and Restated Deferred Compensation Plan, Supplemental Benefit Plan, Supplemental Salaried Employees’ Pension Plan and Nichols-Homeshield Supplemental 401(k) Savings Plan, and (iii) the form of Amended and Restated Change in Control Agreements entered into between the Company and each of Raymond A. Jean, Kevin P. Delaney, Michael R. Bayles, Thomas M. Walker, Mark A. Marcucci, Brent L. Korb, John J. Mannion and Paul A. Hammonds.
Item 9.01. Financial Statements and Exhibits.
| (a) | Financial Statements of businesses acquired. |
Not applicable
| (b) | Pro forma financial information. |
Not applicable
| (c) | Exhibits. |
| 10.1 | Amendment to Quanex Corporation Long-Term Incentive Plan. |
| 10.2 | Amendment to Quanex Corporation Executive Incentive Compensation Plan. |
| 10.3 | Quanex Corporation Deferred Compensation Plan (Amended and Restated Effective as of
January 1, 2005). |
| 10.4 | Quanex Corporation Supplemental Benefit Plan (Amended and Restated Effective as of
January 1, 2005). |
| 10.5 | Quanex Corporation Supplemental Salaried Employees’ Pension Plan (Amended and
Restated Effective as of January 1, 2005). |
| 10.6 | Nichols-Homeshield Supplemental 401(k) Savings Plan (Amended and Restated Effective
as of January 1, 2005). |
| 10.7 | Form of Amended and Restated Change in Control Agreement, as entered into by Quanex
Corporation and each of Raymond A. Jean, Kevin P. Delaney, Michael R. Bayles, Thomas M. Walker,
Mark A. Marcucci, Brent L. Korb, John J. Mannion and Paul A. Hammonds. |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| QUANEX CORPORATION | ||
| (Registrant) | ||
November 21, 2006
|
/s/ KEVIN P. DELANEY | |
(Date)
|
Kevin P. Delaney | |
| Senior Vice President – General Counsel and | ||
| Secretary |
Exhibit Index
| 10.1 | Amendment to Quanex Corporation Long-Term Incentive Plan. |
| 10.2 | Amendment to Quanex Corporation Executive Incentive Compensation Plan. |
| 10.3 | Quanex Corporation Deferred Compensation Plan (Amended and Restated Effective as of January 1, 2005). |
| 10.4 | Quanex Corporation Supplemental Benefit Plan (Amended and Restated Effective as of January 1, 2005). |
| 10.5 | Quanex Corporation Supplemental Salaried Employees’ Pension Plan (Amended and Restated Effective as of
January 1, 2005). |
| 10.6 | Nichols-Homeshield Supplemental 401(k) Savings Plan (Amended and Restated Effective as of January 1, 2005). |
| 10.7 | Form of Amended and Restated Change in Control Agreement, as entered into by Quanex Corporation and each of
Raymond A. Jean, Kevin P. Delaney, Michael R. Bayles, Thomas M. Walker, Mark A. Marcucci, Brent L. Korb, John
J. Mannion and Paul A. Hammonds. |
EXHIBIT 10.1
AMENDMENT TO
QUANEX CORPORATION
LONG-TERM INCENTIVE PLAN
QUANEX CORPORATION
LONG-TERM INCENTIVE PLAN
THIS AGREEMENT entered into by Quanex Corporation (“Quanex”) shall be effective as of the
1st day of January 2005.
W I T N E S S E T H :
WHEREAS, Quanex maintains the Quanex Corporation Long-Term Incentive Plan (the “Plan”);
WHEREAS, the Plan is not intended to be subject to section 409A of the Internal Revenue Code
of 1986, as amended by the American Jobs Creation Act of 2004 (“Section 409A”);
WHEREAS, Article VIII of the Plan provides that Quanex may amend the Plan from time to time;
WHEREAS, the Quanex has determined that the Plan should be amended to clarify that it is not
subject to Section 409A;
WHEREAS, the Board of Directors of the Quanex approved resolutions to amend the Plan effective
as stated above;
NOW, THEREFORE, the Plan is hereby amended, effective as stated above, as follows:
Section 5.5 of the Plan is amended and restated in its entirety to read as follows:
5.5 Time of Payment. Unless a Change of Control occurs during the Performance
Period, Quanex shall pay a Grantee the aggregate amount due to the Grantee under the
Plan with respect to such Performance Period as soon as administratively practicable
after the end of the Performance Period and in no event shall payment of the
incentive award be made later than the March 15th following the close of
the calendar year in which the participant no longer has a substantial risk of
forfeiture with respect to the award within the meaning of section 409A of the Code.
If during a Performance Period a Change of Control occurs either prior to the
date of a Grantee’s Separation From Service or within 120 days after the Grantee’s
Separation From Service, Quanex shall pay the Grantee the aggregate amount due the
Grantee under the Plan with respect to such Performance Period as soon as
administratively practicable after the date of the Change of Control and in any
event no later than the earlier of 120 days after the date of the Change of
Control or 21/2 months after the close of the calendar year in which the Change of
Control occurs.
Notwithstanding any other provision of the Plan to the contrary, if the Company
determines that as a result of the application of section 162(m) of the Code the
Company would not be entitled to take a deduction for part or all of the
compensation payable to a Grantee under an Award, then, unless a Change of Control
has occurred, the payment of the compensation, to the extent not currently
deductible, will be delayed until December 1 of the second Fiscal Year that
commences after the expiration of the applicable Performance Period.
IN WITNESS WHEREOF, Quanex has executed this Agreement this 21st day of November, 2006 to be
effective as stated above.
| QUANEX CORPORATION | ||||
| By: | /s/ Kevin P. Delaney | |||
| Title: | Senior Vice President — General Counsel and Secretary | |||
EXHIBIT 10.2
AMENDMENT TO
QUANEX CORPORATION EXECUTIVE INCENTIVE COMPENSATION PLAN
QUANEX CORPORATION EXECUTIVE INCENTIVE COMPENSATION PLAN
THIS AGREEMENT entered into by Quanex Corporation (“Quanex”) shall be effective as of the
1st day of January 2005.
W I T N E S S E T H :
WHEREAS, Quanex maintains the Quanex Corporation Executive Incentive Compensation Plan (the
“Plan”);
WHEREAS, the Plan is not intended to be subject to section 409A of the Internal Revenue Code
of 1986, as amended by the American Jobs Creation Act of 2004 (“Section 409A”);
WHEREAS, Section 10.01 of the Plan provides that Quanex may amend the Plan from time to time;
WHEREAS, the Quanex has determined that the Plan should be amended to clarify that it is not
subject to Section 409A;
WHEREAS, the Board of Directors of the Quanex approved resolutions to amend the Plan effective
as stated above;
NOW, THEREFORE, the Plan is hereby amended, effective as stated above, as follows:
Section 5.1 of the Plan is amended and restated in its entirety to read as follows:
5.1 Payment of Individual Awards. Except to the extent that payments
of Incentive Awards are deferred under the Quanex Corporation Deferred Compensation
Plan, Incentive Awards to be paid to Participants in accordance with the provisions
of Article IV shall be paid in cash as soon as practicable following the release of
the Company’s Consolidated Financial Statements for the Plan Year. In no event
shall payment of such Incentive Awards be made later than the March 15th following
the close of the calendar year in which the Participants no longer have substantial
risks of forfeiture with respect to the Incentive Awards within the meaning of
section 409A of the Code.
IN WITNESS WHEREOF, Quanex has executed this Agreement this 21st day of November, 2006 to be
effective as stated above.
| QUANEX CORPORATION | ||||
| By: | /s/ Kevin P. Delaney | |||
| Title: | Senior Vice President — General Counsel and Secretary | |||
Exhibit 10.3
QUANEX CORPORATION
DEFERRED COMPENSATION PLAN
Amended and Restated
Effective as of January 1, 2005
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 | ||||||
-i-
TABLE OF CONTENTS
(continued)
(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)
(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.
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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.
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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-3
Exhibit 10.4
QUANEX CORPORATION
SUPPLEMENTAL BENEFIT PLAN
SUPPLEMENTAL BENEFIT PLAN
Amended and Restated
Effective as of January 1, 2005
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)
(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.
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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.
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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.
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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.
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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:
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(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.
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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.
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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.
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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.
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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.
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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 | |||
Exhibit 10.5
QUANEX CORPORATION
SUPPLEMENTAL SALARIED EMPLOYEES’ PENSION PLAN
Amended and Restated
Effective as of January 1, 2005
TABLE OF CONTENTS
| Page | ||||||||
| ARTICLE I | DEFINITIONS AND DESIGNATIONS | I-1 | ||||||
| 1.01 | “Actuarial Equivalent” | I-1 | ||||||
| 1.02 | “Affiliate” | I-1 | ||||||
| 1.03 | “Applicable Covered Employee” | I-1 | ||||||
| 1.04 | “Beneficiary” | I-1 | ||||||
| 1.05 | “Board of Directors” | I-1 | ||||||
| 1.06 | “Cash Balance Participant” | I-1 | ||||||
| 1.07 | “Code” | I-1 | ||||||
| 1.08 | “Committee” | I-1 | ||||||
| 1.09 | “Company” | I-1 | ||||||
| 1.10 | “Covered Employee” | I-1 | ||||||
| 1.11 | “Deferred Compensation Ledger” | I-1 | ||||||
| 1.12 | “Deferred Retirement Date” | I-2 | ||||||
| 1.13 | “Early Retirement Date” | I-2 | ||||||
| 1.14 | “Employee” | I-2 | ||||||
| 1.15 | “Normal Retirement Date” | I-2 | ||||||
| 1.16 | “Participant” | I-2 | ||||||
| 1.17 | “Plan” | I-2 | ||||||
| 1.18 | “Plan Year” | I-2 | ||||||
| 1.19 | “Qualified Plan” | I-2 | ||||||
| 1.20 | “Qualified Plan Benefit” | I-2 | ||||||
| 1.21 | “Restricted Period” | I-2 | ||||||
| 1.22 | “Retirement Date” | I-2 | ||||||
| 1.23 | “Separates From Service” | I-2 | ||||||
| 1.24 | “Separation From Service” | I-2 | ||||||
| 1.25 | “Service” | I-2 | ||||||
| ARTICLE II | ELIGIBILITY | II-4 | ||||||
| ARTICLE III | RETIREMENT BENEFITS | III-1 | ||||||
| 3.01 | Normal Retirement Benefit | III-1 | ||||||
| 3.02 | Deferred Retirement Benefit | III-1 | ||||||
| 3.03 | Early Retirement Benefit | III-1 | ||||||
| 3.04 | Deferred Vested Benefit | III-1 | ||||||
| 3.05 | Cash Balance Participant Benefit | III-1 | ||||||
| 3.06 | Time of Payment of Benefit | III-1 | ||||||
| ARTICLE IV | DEATH BENEFITS | IV-1 | ||||||
| 4.01 | Death Prior to Payment of Plan Benefit | IV-1 | ||||||
| 4.02 | Designation of Beneficiary | IV-1 | ||||||
| ARTICLE V | FORFEITURE FOR CAUSE | V-1 | ||||||
-i-
TABLE OF CONTENTS
(continued)
(continued)
| Page | ||||||||
| ARTICLE VI | PLAN COMMITTEE | VI-1 | ||||||
| 6.01 | Committee | VI-1 | ||||||
| 6.02 | General Rights, Powers and Duties of Plan Committee | VI-1 | ||||||
| 6.03 | Rules and Decisions | VI-1 | ||||||
| 6.04 | Committee Organization and Voting | VI-2 | ||||||
| 6.05 | Committee Discretion | VI-2 | ||||||
| 6.06 | Authorization of Benefit Payments | VI-2 | ||||||
| 6.07 | Application and Forms of Benefits | VI-2 | ||||||
| 6.08 | Facility of Payment | VI-2 | ||||||
| 6.09 | Claims Procedure | VI-2 | ||||||
| ARTICLE VII | AMENDMENT AND TERMINATION | VII-1 | ||||||
| 7.01 | Amendment | VII-1 | ||||||
| 7.02 | Right to Terminate Plan | VII-1 | ||||||
| ARTICLE VIII | FUNDING | VIII-1 | ||||||
| 8.01 | Unfunded Arrangement | VIII-1 | ||||||
| 8.02 | Participants Must Rely Only on General Credit of the Company | VIII-1 | ||||||
| ARTICLE IX | MISCELLANEOUS | IX-1 | ||||||
| 9.01 | Limitation of Rights | IX-1 | ||||||
| 9.02 | Distributions to Incompetents or Minors | IX-1 | ||||||
| 9.03 | Nonalienation of Benefits | IX-1 | ||||||
| 9.04 | Reliance Upon Information | IX-1 | ||||||
| 9.05 | Severability | IX-2 | ||||||
| 9.06 | Notice | IX-2 | ||||||
| 9.07 | Gender and Number | IX-2 | ||||||
| 9.08 | Governing Law | IX-2 | ||||||
| 9.09 | Effect of Amendment and Restatement Effective As of January 1, 2005 | IX-2 | ||||||
| 9.10 | Section 409A | IX-2 | ||||||
-ii-
QUANEX CORPORATION
SUPPLEMENTAL SALARIED EMPLOYEES’ PENSION PLAN
WHEREAS, Quanex Corporation established the Quanex Corporation Supplemental Salaried
Employees’ Pension Plan (the “Plan”) to provide a retirement pay supplement for a select group of
management or highly compensated employees so as to retain their loyalty and to offer a further
incentive to them to maintain and increase their standard of performance;
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 AND DESIGNATIONS
1.01 “Actuarial Equivalent” shall mean a benefit of equivalent value computed on the basis of
the mortality assumptions and interest rate assumptions in effect under the Qualified Plan
immediately prior to the Participant’s Separation From Service with the Company.
1.02 “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.
1.03 “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.
1.04 “Beneficiary” shall mean a person or entity designated by the Participant under the terms
of this Plan to receive any amounts distributed under the Plan upon the death of the Participant.
1.05 “Board of Directors” shall mean the Board of Directors of the Company.
1.06 “Cash Balance Participant” shall mean a Participant who is a Cash Balance Member in the
Qualified Plan.
1.07 “Code” shall mean the Internal Revenue Code of 1986, as amended from time to time.
1.08 “Committee” shall mean the Committee established under Article VI to administer the Plan.
1.09 “Company” shall mean Quanex Corporation, a Delaware corporation.
1.10 “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.
1.11 “Deferred Compensation Ledger” shall mean the ledger maintained by the Committee for each
Participant which reflects the amounts credited by the Company under this Plan to the account of
each Participant.
I-1
1.12 “Deferred Retirement Date” shall mean the first day of the month following the month in
which a Participant retires pursuant to the provisions of Section 3.02.
1.13 “Early Retirement Date” shall mean the first day of any month after a Participant’s
attainment of age 55 and the completion of five years of Service.
1.14 “Employee” shall mean a person who is in a select group of management or a highly
compensated employee of the Company.
1.15 “Normal Retirement Date” shall mean the first day of the month coincident or next
following a Participant’s 65th birthday.
1.16 “Participant” shall mean an Employee of the Company designated by the Board of Directors
as eligible for participation in the Plan, and who meets the requirements of Article II.
1.17 “Plan” shall mean the Quanex Corporation Supplemental Salaried Employees’ Pension Plan.
1.18 “Plan Year” shall mean the 12-month period commencing on November 1 and ending on the
following October 31.
1.19 “Qualified Plan” shall mean the Quanex Corporation Salaried Employees Pension Plan
maintained by the Company which is intended to qualify under section 401 of the Code.
1.20 “Qualified Plan Benefit” shall mean the actuarial equivalent of the Participant’s benefit
under the Qualified Plan assuming that the Participant’s entire benefit under the Qualified Plan
will be paid in a lump sum cash payment. The amount of a Participant’s Qualified Plan Benefit
shall be determined based on the provisions of the Qualified Plan (including provisions relating to
interest and mortality assumptions) as in effect on the date his benefits under this Plan are
determined.
1.21 “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.
1.22 “Retirement Date” shall mean a Participant’s Normal Retirement Date, Early Retirement
Date, or Deferred Retirement Date, as the case may be.
1.23 “Separates From Service” shall mean a Participant incurs a Separation From Service.
1.24 “Separation From Service” shall mean a Participant’s complete separation from service
with the Company and all of its Affiliates. The determination of whether an Participant Separates
From Service will be determined in accordance with section 409A of the Code.
1.25 “Service” shall have the same meaning as given that term under the Qualified Plan. All
Service taken into account under the Qualified Plan will be taken into account under this Plan.
I-2
ARTICLE II
ELIGIBILITY
The Employees who shall be eligible to participate in the Plan shall be those Employees as the
Committee shall determine from time to time. An Employee will become a Participant effective as of
the date specified in writing by the Committee.
II-1
ARTICLE III
RETIREMENT BENEFITS
3.01 Normal Retirement Benefit. If a Participant other than a Cash Balance Participant
Separates From Service on or after his Normal Retirement Date, he will be entitled to the lump sum
Actuarial Equivalent of a monthly benefit payable to the Participant for life only in an amount
equal to:
(a) the amount of the Participant’s Qualified Plan Benefit that would be payable if the
applicable limitation under section 401(a)(17) of the Code for each fiscal year of the
Qualified Plan commencing on or after November 1, 1994, was $235,840 (not indexed for
increases in the cost of living), less
(b) the Participant’s Qualified Plan Benefit.
3.02 Deferred Retirement Benefit. If a Participant other than a Cash Balance Participant
Separates From Service after his Normal Retirement Date, 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 3.01. The benefit will not be actuarially increased to
reflect the later benefit payment date or his shorter life expectancy.
3.03 Early Retirement Benefit. If a Participant other than a Cash Balance Participant
Separates From Service on or after his Early Retirement Date but before age 65, he shall 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 3.01 as of his Early Retirement
Date.
3.04 Deferred Vested Benefit. If a Participant other than a Cash Balance Participant
Separates From Service 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, commencing on his Normal Retirement Date, determined in
accordance with the provisions of Section 3.01.
3.05 Cash Balance Participant Benefit. If a Cash Balance Participant Separates From Service,
he will be entitled to:
(a) the amount of the Participant’s Qualified Plan Benefit that would be payable if the
applicable limitation under section 401(a)(17) of the Code for each fiscal year of the
Qualified Plan commencing on or after November 1, 1994, was $235,840 (not indexed for
increases in the cost of living), less
(b) the Participant’s Qualified Plan Benefit.
3.06 Time of Payment of Benefit. Upon a Participant’s Normal Retirement, Deferred Retirement,
Early Retirement or other Separation From Service, the Participant shall be paid a lump sum cash
payment of his Plan benefit as determined under Section 3.01, 3.02, 3.03 or 3.05 on the first
business which is at least six (6) months after the date of such Employee’s Separation
From Service, or as soon as is administratively practicable thereafter. A terminated
Participant’s deferred vested benefit as determined under Section 3.04 shall be paid on the
90th day after his attainment of age 55 or as soon as administratively practicable
thereafter in a lump sum cash payment but not earlier than the first business which is at least six
(6) months after the date of such Employee’s Separation From Service.
III-1
ARTICLE IV
DEATH BENEFITS
4.01 Death Prior to Payment of Plan Benefit. If a Participant’s death occurs before his Plan
benefit has begun to be paid to him, the following rules shall apply:
(a) Participants Other Than Cash Balance Participants. The Beneficiary of a
Participant other than a Cash Balance Participant shall be entitled to receive a lump sum
benefit Actuarially Equivalent to the Plan benefit payable at the time of death, determined
in accordance with the provisions of Section 3.01. In calculating the lump sum death
benefit under this Section, the benefit shall be reduced in the same manner it is reduced in
Section 3.03 or 3.04, whichever is applicable, for payment earlier than Normal Retirement
Date. Such lump sum payment shall be made on the 90th day after the death of the
Participant or as soon as administratively practicable thereafter.
(b) Cash Balance Participants. The Beneficiary of a Cash Balance Participant shall be
entitled to receive a lump sum benefit of such Participant’s benefit payable at the time of
death, determined in accordance with the provisions of Section 3.05. Such lump sum payment
shall be made on the 90th day after the death of the Participant or as soon as
administratively practicable thereafter.
4.02 Designation of Beneficiary. Each Participant, upon becoming eligible to participate in
the Plan, shall file with the Committee a designation of one or more Beneficiaries to whom the
distribution otherwise due the Participant shall be made in the event of his death prior to the
distribution of the amount credited on his behalf in the Deferred Compensation Ledger. The
designation will be effective upon receipt by the Committee of a properly executed form which the
Committee has approved for that purpose. The Participant may from time to time revoke or change
any designation of Beneficiary by filing another approved Beneficiary designation form with the
Committee. If there is no valid designation of Beneficiary on file with the Committee 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 shall be
the Participant’s spouse, if the spouse survives the Participant, or otherwise the Participant’s
estate. If any Beneficiary survives the Participant but dies or otherwise ceases to exist before
receiving all amounts due the Beneficiary under the Plan, the balance of the amount which would
have been paid to that Beneficiary shall, 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 writing by the
spouse in a form acceptable to the Committee to be effective.
IV-1
ARTICLE V
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 on his behalf in the Deferred Compensation Ledger shall 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.
V-1
ARTICLE VI
PLAN COMMITTEE
6.01 Committee. The Plan shall be administered by a Committee which shall have at least three
members appointed by the Board of Directors. Any person may resign from the Committee upon 30
days’ prior notice to the Board of Directors. The Board of Directors may remove any member of the
Committee at any time.
6.02 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, accounts 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.
6.03 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.
VI-1
6.04 Committee Organization and Voting. The Committee shall select from among its members a
chairman who shall preside at all of its meetings and shall elect a secretary without regard to
whether that person is a member of the Committee. The secretary shall 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 shall constitute a quorum for the transaction of business and the vote
of a majority of the members present at any meeting shall 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. A member of the Committee who is also a Participant shall not vote or act
on any matter relating solely to himself.
6.05 Committee Discretion. The Committee in exercising any power or authority granted under
this Plan or in making any determination under this 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.
6.06 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.
6.07 Application and Forms of Benefits. The Committee may require a 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 current mailing
address.
6.08 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.
6.09 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, spouse or retired Participant (collectively referred to herein as
“Claimant”) shall be stated in writing by the Committee and 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 a 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 may include in his request a request for 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.
VI-2
ARTICLE VII
AMENDMENT AND TERMINATION
7.01 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 and
each beneficiary of a deceased Participant. No such amendment however shall have the effect of
reducing that portion of the benefit the Participant ultimately becomes entitled to below that
amount he would have received to the date of the amendment under the formula set out in the Plan
prior to the amendment . In addition, no such amendment shall apply to amounts accrued and vested
on or before December 31, 2004, unless the amendment instrument explicitly states that the
amendment shall apply to such amounts.. An amendment to the Plan shall be made by a written
instrument executed by an officer of the Company. The Board of Directors of the Company must
authorize the amendment in order for the amendment to be effective.
7.02 Right to Terminate Plan. The Company intends to maintain the Plan for an indefinite
period of time, but necessarily must, and hereby does, reserve the right to terminate the Plan at
any time. The Company shall not have any further financial obligations under the Plan from and
after such termination of the Plan except those that have accrued up to the date of termination and
have not been satisfied. Upon termination of the Plan, any benefits vested under the Plan shall be
payable at the time and in the manner provided hereunder; provided, however, that the Board may
terminate the Plan within the 30 days preceding or 12 months following a change in control, as
defined by section 409A of the Code, or as otherwise permitted under section 409A of the Code, and
distribute the Participants’ accrued vested benefits to Participants in the manner and the time as
determined by the Committee, in its sole discretion, as permitted by section 409A of the Code. The
termination of the Plan shall be accomplished by a resolution of the Board of Directors of the
Company and shall be evidenced by a written instrument executed by an officer of the Company.
VII-1
ARTICLE VIII
FUNDING
8.01 Unfunded Arrangement. It is intended that this Plan shall be unfunded for tax purposes
and for purposes of Title 1 of the Employee Retirement Income Security Act of 1974, as amended.
The Committee will establish a bookkeeping account for each Participant in a special Deferred
Compensation Ledger which shall be maintained by the Company.
8.02 Participants Must Rely Only on General Credit of the Company. It is specifically
recognized by both the Company and the Participants that this 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 hereunder. 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 shall constitute a guarantee by the Company that the assets of
the Company will be sufficient to pay any benefits under this Plan or would place the Participant
in a secured position ahead of general creditors of the Company; the Participants are only
unsecured creditors of the Company with respect to their Plan benefits and the Plan constitutes a
mere promise by the Company to make benefit payments in the future. No specific assets of the
Company have been or shall be set aside, or shall in any way be transferred to the trust or shall
be pledged in any way for the performance of the Company’s obligations under this Plan which would
remove such assets from being subject to the general creditors of the Company.
In addition, 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
MISCELLANEOUS
9.01 Limitation of Rights. Nothing in this Plan shall be construed:
(a) to give any employee of the Company any right to be designated a Participant in the
Plan;
(b) to give a Participant any right with respect to the amounts and interest credited
in the Deferred Compensation Ledger on behalf of the Participant, except in accordance with
the terms of this 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 this Plan other than that of an unsecured general creditor of the Company.
9.02 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 pay the funds 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 funds for the benefit of the minor or
incompetent in any manner the Committee determines in its sole discretion.
9.03 Nonalienation of Benefits. No right or benefit provided in this Plan shall be
transferable by the Participant except, upon his death, to a named Beneficiary as provided in this
Plan. No right or benefit under this Plan shall be subject to anticipation, alienation, sale,
transfer, assignment, pledge, encumbrance, attachment, or garnishment by creditors of the
Participant or the Participant’s Beneficiary. Any attempt to anticipate, alienate, sell, assign,
pledge, encumber, or charge the same shall be void. No right or benefit under this Plan shall 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 this
Plan, that right or benefit shall, 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.
9.04 Reliance Upon Information. The Committee shall not be liable for any decision or action
taken in good faith in connection with the administration of this 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
this Plan shall be deemed to have been taken in good faith.
IX-1
9.05 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 shall remain in full force and
effect and shall in no way be affected, impaired or invalidated.
9.06 Notice. Any notice or filing required or permitted to be given to the Committee or a
Participant shall 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.
9.07 Gender and Number. If the context requires it, words of one gender when used in this
Plan will include the other genders, and words used in the singular or plural will include the
other.
9.08 Governing Law. The Plan will be construed, administered and governed in all respects by
the laws of the State of Texas.
9.09 Effect of Amendment and Restatement Effective As of January 1, 2005. Unless otherwise
explicitly provided herein, the amendment and restatement of the Plan effective as of January 1,
2005 shall apply only to amounts earned 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 accrued 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.
9.10 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.
IX-2
IN WITNESS WHEREOF, the Company has amended and restated this Plan on the 21st day of November
2006.
| QUANEX CORPORATION | ||||
| By: | /s/ Kevin P. Delaney | |||
| Title: | Senior Vice President — General Counsel and Secretary | |||
Exhibit 10.6
NICHOLS-HOMESHIELD
SUPPLEMENTAL 401(k) SAVINGS PLAN
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 of Directors | I-1 | ||||||
| 1.6 | Code | I-1 | ||||||
| 1.7 | Committee | I-1 | ||||||
| 1.8 | Company | I-1 | ||||||
| 1.9 | Covered Employee | I-1 | ||||||
| 1.10 | Deferred Compensation Ledger | I-1 | ||||||
| 1.11 | Disability | I-2 | ||||||
| 1.12 | Participant | I-2 | ||||||
| 1.13 | Plan | I-2 | ||||||
| 1.14 | Plan Year | I-2 | ||||||
| 1.15 | Restricted Period | I-2 | ||||||
| 1.16 | Separation From Service | I-2 | ||||||
| 1.17 | Valuation Date | I-2 | ||||||
| ARTICLE II | ELIGIBILITY | II-1 | ||||||
| ARTICLE III | CREDITS TO PARTICIPANTS’ ACCOUNTS | III-1 | ||||||
| 3.1 | Establishing a Participant’s Account | III-1 | ||||||
| 3.2 | Crediting of Deferred Compensation | III-1 | ||||||
| 3.3 | Crediting of Interest | III-1 | ||||||
| ARTICLE IV | VESTING | IV-1 | ||||||
| ARTICLE V | DISTRIBUTIONS | V-1 | ||||||
| 5.1 | Death | V-1 | ||||||
| 5.2 | Disability | V-1 | ||||||
| 5.3 | Separation From Service Prior to Death or Disability | V-1 | ||||||
| 5.4 | Forfeiture For Cause | V-2 | ||||||
| 5.5 | Responsibility for Withholding of Taxes | V-2 | ||||||
| ARTICLE VI | ADMINISTRATION | VI-1 | ||||||
| 6.1 | Committee Appointment | VI-1 | ||||||
| 6.2 | Committee Organization and Voting | VI-1 | ||||||
| 6.3 | Powers of the Committee | VI-1 | ||||||
| 6.4 | Committee Discretion | VI-2 | ||||||
| 6.5 | Annual Statements | VI-2 | ||||||
| 6.6 | Reimbursement of Expenses | VI-2 | ||||||
| 6.7 | Claims Procedure | VI-2 | ||||||
-i-
TABLE OF CONTENTS
(continued)
(continued)
| Page | ||||||||
| ARTICLE VII | AMENDMENT AND/OR TERMINATION | VII-1 | ||||||
| 7.1 | Amendment or Termination of the Plan | VII-1 | ||||||
| 7.2 | No Retroactive Effect on Awarded Benefits | VII-1 | ||||||
| 7.3 | Effect of Termination | VII-1 | ||||||
| ARTICLE VIII | FUNDING | VIII-1 | ||||||
| 8.1 | Unfunded Arrangement | VIII-1 | ||||||
| 8.2 | Participants Must Rely Only on General Credit of the Company | VIII-1 | ||||||
| ARTICLE IX | MISCELLANEOUS | IX-1 | ||||||
| 9.1 | Limitation of Rights | IX-1 | ||||||
| 9.2 | Distributions to Incompetents or Minors | IX-1 | ||||||
| 9.3 | Nonalienation of Benefits | IX-1 | ||||||
| 9.4 | Reliance Upon Information | IX-1 | ||||||
| 9.5 | Severability | IX-2 | ||||||
| 9.6 | Notice | IX-2 | ||||||
| 9.7 | Gender and Number | IX-2 | ||||||
| 9.8 | Governing Law | IX-2 | ||||||
| 9.9 | Section 409A | IX-2 | ||||||
| 9.10 | Effect of Amendment and Restatement of the Plan | IX-2 | ||||||
-ii-
NICHOLS-HOMESHIELD
SUPPLEMENTAL 401(k) SAVINGS PLAN
WHEREAS, Quanex Corporation established the Nichols-Homeshield Supplemental 401(k) Savings
Plan (the “Plan”) to provide a retirement pay supplement for a select group of management or highly
compensated employees so as to retain their loyalty and to offer a further incentive to them to
maintain and increase their standard of performance;
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:
1
ARTICLE I
DEFINITIONS
1.1 Account. “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 this
Plan.
1.2 Affiliate. “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. “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. “Beneficiary” means a person or entity designated by the Participant under
the terms of this Plan to receive any amounts distributed under the Plan upon the death of the
Participant.
1.5 Board of Directors. “Board of Directors” means the Board of Directors of the Company.
1.6 Code. “Code” means the Internal Revenue Code of 1986, as amended from time to time.
1.7 Committee. “Committee” means the persons who are serving as members of the Committee
administering this Plan.
1.8 Company. “Company” means Quanex Corporation.
1.9 Covered Employee. “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.
1.10 Deferred Compensation Ledger. “Deferred Compensation Ledger” means the ledger maintained
by the Committee for each Participant which reflects the amounts credited by the Company under this
Plan to the account of each Participant.
I-1
1.11 Disability. “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.
1.12 Participant. “Participant” means an employee of the Company who has been designated by
the Committee as participating in the Plan.
1.13 Plan. “Plan” means the Nichols-Homeshield Supplemental 401(k) Savings Plan set forth in
this document, as amended from time to time.
1.14 Plan Year. “Plan Year” means the twelve-month period which ends on December 31.
1.15 Restricted Period. “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.
1.16 Separation From Service. “Separation From Service” shall mean 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.
1.17 Valuation Date. “Valuation Date” means the last day of each Plan Year, or, if earlier,
the date on which the Participant terminates employment, incurs a Disability or dies. Effective
January 1, 2007, “Valuation Date” means the last day of the Plan Year, the last day of the month in
which the Participant’s or former Participant’s Separation From Service occurs or the last day of
the month immediately preceding the date of a lump sum distribution of a former Participant’s Plan
benefit, as applicable.
I-2
ARTICLE II
ELIGIBILITY
The individuals who shall be eligible to participate in the Plan shall be those individuals as
the Committee shall determine from time to time. The Board of Directors may designate one or more
individuals who shall not be eligible to participate in the Plan. An individual will become a
Participant effective as of the date specified in writing by the Committee.
Each individual who was participating in the Plan on December 31, 2006 shall be eligible to
participate in the Plan on or after January 1, 2007. No other individual shall be eligible to
participate in the Plan on or after January 1, 2007.
Once an individual has become a Participant, he will continue to participate in the Plan until
he is no longer a common law employee of the Company or the Committee determines that he is no
longer in a select group of management or a highly compensated employee of the Company.
II-1
ARTICLE III
CREDITS TO PARTICIPANTS’ ACCOUNTS
3.1 Establishing a Participant’s Account. The Committee shall establish a bookkeeping Account
for each Participant in a special Deferred Compensation Ledger which shall be maintained by the
Company. The Account shall reflect the amount of the Company’s obligation to the Participant as of
each Valuation Date.
3.2 Crediting of Deferred Compensation. For each Plan Year, the Board of Directors shall
determine the amount, if any, to be allocated to a Participant’s Plan Account and will credit that
amount to the Participant’s Account in the Deferred Compensation Ledger as of the end of the Plan
Year. The amount, if any, credited by the Company on behalf of a Participant need not be the same
as the amount credited by the Company on behalf of any other Participant. The fact that a
Participant receives a credit to his Account in the Deferred Compensation Ledger for deferred
compensation in one Plan Year does not mean that he shall receive a credit for deferred
compensation in a subsequent Plan Year. Until the Board of Directors determines otherwise, the
amount that shall be credited to a Participant’s Account as of the end of the Plan Year is the
amount equal to (A) minus (B) where (A) is the amount that would have been credited to the
Participant’s account under the Nichols-Homeshield 401(k) Savings Plan for the Plan Year as a
Company profit sharing contribution if the applicable limitation under section 401(a)(17) of the
Code for the Plan Year was $235,840 (not indexed for increases in the cost of living), and (B) is
the amount that was actually credited to the Participant’s account under the Nichols-Homeshield
401(k) Savings Plan for the Plan Year as a Company profit sharing contribution.
Effective January 1, 2007, no additional amounts shall be credited to a Participant’s Account
under this Section of the Plan.
3.3 Crediting of Interest. As of the last day of each calendar quarter of each Plan Year in
which an individual is a Participant, after deferred compensation has been credited under Section
3.2, the Committee shall credit the balance of the Participant’s Account in the Deferred
Compensation Ledger with interest as specified in this Section. This amount credited by the
Committee shall be a part of the Company’s obligation to the Participant. Interest will be accrued
on the last day of each calendar quarter on each Participant’s Account 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 preceding the last day of the calendar quarter
divided by (y) four. Interest so accrued on the last day of each calendar quarter shall be
credited to the Participant’s Account and shall thereafter accrue interest. Interest will continue
to be credited on the balance in the Participants Account until the entire cash balance has been
distributed.
III-1
ARTICLE IV
VESTING
Except for the event of forfeiture described in Section 5.4, Participant shall have a
nonforfeitable interest in amounts credited to his Account to the extent that he has a
nonforfeitable interest in the amounts credited to his account under the Nichols-Homeshield 401(k)
Savings Plan or, effective January 1, 2007, the Quanex Corporation Employees 401(k) Savings Plan.
IV-1
ARTICLE V
DISTRIBUTIONS
5.1 Death. Upon the death of a Participant, the Participant’s Beneficiary or Beneficiaries
shall receive the balance credited to the Participant’s Account in the Deferred Compensation Ledger
as of the Valuation Date coincident with or next preceding the date of death. The death benefit
shall be paid in a lump sum cash payment 30 days after the Participant’s death or, if later, as
soon as administratively practicable following the Participant’s death..
Each Participant, upon becoming eligible to participate in the Plan, shall file with the
Committee a designation of one or more Beneficiaries to whom distributions otherwise due the
Participant shall 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 of a properly executed form which the Committee has
approved for that purpose. The Participant may from time to time revoke or change any designation
of Beneficiary by filing another approved Beneficiary designation form with the Committee. If
there is no valid designation of Beneficiary on file with the Committee 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 shall be the
Participant’s spouse, if the spouse survives the Participant, or otherwise the Participant’s
estate. 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 shall, 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 writing
by the spouse in a form acceptable to the Committee to be effective.
5.2 Disability. Upon the Disability of a Participant, the Participant shall receive the
entire amount credited to the Participant’s Account in the Deferred Compensation Ledger as of the
Valuation Date coincident with or next preceding the date of Disability. The Disability benefit
shall be paid in a lump sum cash payment 30 days after the Participant’s Disability or, if later,
as soon as administratively practicable following the Participant’s Disability.
5.3 Separation From Service Prior to Death or Disability. Upon a Participant’s Separation
From Service prior to Death or Disability, subject to Section 5.4, the Participant shall receive
his vested interest in the amount credited to his Account in the Deferred Compensation Ledger as of
the Valuation Date coincident with or next preceding the date of Separation From Service in a lump
sum cash payment. The benefit shall be paid in a lump sum cash payment 30 days after the
Participant’s Separation From Service or, if later, as soon as administratively practicable
following the Participant’s Separation From Service. Any amounts not vested upon the Participant’s
Separation From Service will be forfeited.
V-1
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.
5.4 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 in the Deferred Compensation
Ledger shall be forfeited, even though it may have been previously vested under Article IV. 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.
5.5 Responsibility for Withholding of Taxes. The Committee will 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 shall cause them to be withheld.
V-2
ARTICLE VI
ADMINISTRATION
6.1 Committee Appointment. The Committee shall be appointed by the Board of Directors. Each
Committee member will serve until his or her resignation or removal. The Board of Directors shall
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.
6.2 Committee Organization and Voting. The Committee shall select from among its members a
chairman who shall preside at all of its meetings and shall elect a secretary without regard to
whether that person is a member of the Committee. The secretary shall 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 shall constitute a quorum for the transaction of business and the vote
of a majority of the members present at any meeting shall 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. A member of the Committee who is also a Participant shall not vote or act
on any matter relating solely to himself.
6.3 Powers of the Committee. The Committee shall have the exclusive responsibility for the
general administration of the Plan according to the terms and provisions of the Plan and shall 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;
(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; 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; and
(f) to delegate by written notice those clerical and recordation duties of the
Committee, as it deems necessary or advisable for the proper and efficient administration of
the Plan.
VI-1
6.4 Committee Discretion. The Committee in exercising any power or authority granted under
this Plan or in making any determination under this 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.
6.5 Annual Statements. The Committee shall cause each Participant to receive an annual
statement as of each Valuation Date as soon as administratively feasible after the conclusion of
each Plan Year. The statement shall indicate the credit by the Company to the Participant’s
Account for that Plan Year; credits for all prior Plan Years, if any, and the interest applicable
to those amounts; the total Account balance of the Participant in the Deferred Compensation Ledger,
and the amount vested as of the end of that Plan Year.
6.6 Reimbursement of Expenses. The Committee members shall serve without compensation for
their services but shall be reimbursed by the Company for all expenses properly and actually
incurred in the performance of their duties under the Plan.
6.7 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, spouse or retired Participant (collectively referred to herein as
“Claimant”) shall be stated in writing by the Committee and 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 a 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 may include in his request a request for 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.
VI-2
ARTICLE VII
AMENDMENT AND/OR TERMINATION
7.1 Amendment or Termination of the Plan. The Company may amend or terminate this Plan at any
time. Any amendment or termination shall be made by an instrument in writing executed by an
authorized officer of the Company, and shall be supported by a resolution of the Board of
Directors; 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.
7.2 No Retroactive Effect on Awarded Benefits. No amendment shall affect the rights of any
Participant to the amounts then credited to his Account in the Deferred Compensation Ledger or
change the method of calculating the interest applicable to such amounts. However, the Board of
Directors shall retain the right at any time to change in any manner the method of calculating the
interest to accrue to amounts of deferred compensation credited after the date of an amendment, if
it has been announced to the Participants.
7.3 Effect of Termination. If the Plan is terminated, all amounts credited to the Account of
each Participant shall immediately vest. No interest shall be applied to the Account after the date
the Plan terminated. Payment of the Participant’s Account balance would be made in accordance with
the terms of the Plan. The Board may terminate the Plan within the 30 days preceding or 12 months
following a change in 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 the time as determined by the Committee, in its sole discretion, as
permitted by section 409A of the Code.
VII-1
ARTICLE VIII
FUNDING
8.1 Unfunded Arrangement. It is intended that this Plan shall be unfunded for tax purposes
and for purposes of Title 1 of the Employee Retirement Income Security Act of 1974, as amended.
8.2 Participants Must Rely Only on General Credit of the Company. It is specifically
recognized by both the Company and the Participants that this 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 hereunder. 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 shall constitute a guarantee by the Company that the assets of
the Company will be sufficient to pay any benefits under this Plan or would place the Participant
in a secured position ahead of general creditors of the Company; the Participants are only
unsecured creditors of the Company with respect to their Plan benefits, and the Plan constitutes a
mere promise by the Company to make benefit payments in the future. No specific assets of the
Company have been or shall be set aside, or shall in any way be transferred to the trust or shall
be pledged in any way for the performance of the Company’s obligations under this Plan which would
remove such assets from being subject to the general creditors of the Company.
In addition, 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
MISCELLANEOUS
9.1 Limitation of Rights. Nothing in this Plan shall be construed:
(a) to give any employee of the Company any right to be designated a Participant in the
Plan;
(b) to give a Participant any right with respect to the amounts and interest credited
in the Deferred Compensation Ledger to Participant’s Account, except in accordance with the
terms of this 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 this Plan other than that of an unsecured general creditor of the Company.
9.2 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 pay the funds 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 funds for the benefit of the minor or
incompetent in any manner the Committee determines in its sole discretion.
9.3 Nonalienation of Benefits. No right or benefit provided in this Plan shall be
transferable by the Participant except, upon his death, to a named Beneficiary as provided in this
Plan. No right or benefit under this Plan shall be subject to anticipation, alienation, sale,
transfer, assignment, pledge, encumbrance, attachment, or garnishment by creditors of the
Participant or the Participant’s Beneficiary. Any attempt to anticipate, alienate, sell, assign,
pledge, or encumber the same shall be void. No right or benefit under this Plan shall 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, or encumber any right or benefit under this Plan, that
right or benefit shall, 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.
9.4 Reliance Upon Information. The Committee shall not be liable for any decision or action
taken in good faith in connection with the administration of this 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 this
Plan shall be deemed to have been taken in good faith.
IX-1
9.5 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 shall remain in full force and
effect and shall in no way be affected, impaired or invalidated.
9.6 Notice. Any notice or filing required or permitted to be given to the Committee or a
Participant shall 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.
9.7 Gender and Number. If the context requires it, words of one gender when used in this Plan
will include the other genders, and words used in the singular or plural will include the other.
9.8 Governing Law. The Plan will be construed, administered and governed in all respects by
the laws of the State of Texas.
9.9 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.
9.10 Effect of Amendment and Restatement of the Plan. Unless otherwise explicitly provided,
the amendment and restatement of the Plan effective as of January 1, 2005 shall apply only to
amounts earned 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.
IX-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 | |||
Exhibit 10.7
AMENDED AND RESTATED
CHANGE IN CONTROL AGREEMENT
BETWEEN QUANEX CORPORATION
AND
CHANGE IN CONTROL AGREEMENT
BETWEEN QUANEX CORPORATION
AND
This Agreement between Quanex Corporation, a Delaware corporation (the “Company”),
and (the “Executive”) is effective as of . Certain capitalized terms
used herein are defined in Section 21.
W I T N E S S E T H:
Whereas, the Company considers it to be in the best interests of its stockholders to
encourage the continued employment of certain key employees of the Company notwithstanding the
possibility, threat or occurrence of a Change in Control of the Company (as that phrase is defined
in Section 2); and
Whereas, the Executive is a key employee of the Company; and
Whereas, the Company believes that the possibility of the occurrence of a Change in
Control of the Company may result in the termination by the Executive of the Executive’s employment
by the Company or in the distraction of the Executive from the performance of his duties to the
Company, in either case to the detriment of the Company and its stockholders; and
Whereas, the Company previously recognized that the Executive could suffer adverse
financial and professional consequences if a Change in Control of the Company were to occur and
entered into this Agreement to protect the Executive if a Change in Control of the Company occurs;
Whereas, under current Internal Revenue Service guidance, the Agreement is subject to
section 409A of the Internal Revenue Code of 1986, as amended by the American Jobs Creation Act of
2004 (“Section 409A”);
Whereas, the Company and the Executive have determined that the Agreement should be
amended to comply with Section 409A and the guidance promulgated thereunder;
Now, Therefore, the parties agree that the Agreement is hereby amended and restated,
effective as stated above, as follows:
Section 1. Other Employment Arrangements.
(a) Except as specified below in this paragraph, this Agreement does not affect the
Executive’s existing or future employment arrangements with the Company unless a Change in Control
of the Company shall have occurred before the expiration of the term of this Agreement. The
Executive’s employment with the Company shall continue to be governed by the Executive’s existing
or future employment agreements with the Company, if any, or, in the absence of any employment
agreement, shall continue to be at the will of the Board of Directors or, if the Executive is not
an officer of the Company at the time of the termination of the Executive’s employment with the
Company, the will of the Chief Executive Officer of the Company, except that if (i) a Change in
Control of the Company shall have occurred before the expiration of the term of this Agreement, and
(ii) the Executive’s employment with the Company is terminated (whether by the Executive or the
Company or automatically as provided in Section 3) after the occurrence of that Change in Control
of the Company, then the Executive shall be entitled to receive certain benefits as provided in
this Agreement.
(b) Notwithstanding anything contained in this Agreement to the contrary, if following the
commencement of any discussion with a third person that ultimately results in a Change in Control
of the Company, (i) the Executive’s employment with the Company is terminated, (ii) the Executive
is removed from any material duties or position with the Company, (iii) the Executive’s Base Salary
is reduced, or (iv) the Executive’s annual bonus is reduced to an amount less than the Benchmark
Bonus, then for all purposes of this Agreement, such Change in Control of the Company shall be
deemed to have occurred on the date immediately prior to the date of such termination, removal, or
reduction.
(c) Nothing in this Agreement shall prevent or limit the Executive’s continuing or future
participation in any plan, program, policy or practice of or provided by the Company or any of its
Affiliates and for which the Executive may qualify, nor shall anything herein limit or otherwise
affect such rights as the Executive may have under any contract or agreement with the Company or
any of its Affiliates. Amounts which are vested benefits or which the Executive is otherwise
entitled to receive under any plan, program, policy or practice of or provided by, or any contract
or agreement with, the Company or any of its Affiliates at or subsequent to the date of termination
of the Executive’s employment with the Company shall be payable or otherwise provided in accordance
with such plan, program, policy or practice or contract or agreement except as explicitly modified
by this Agreement.
Section 2. Change in Control of the Company. For purposes of this Agreement,
a “Change in Control of the Company” shall mean the occurrence of any of the following after the
Effective Date:
(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 Company (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 2, the
following acquisitions shall not constitute a Change in 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 2; or
(b) individuals who, as of the Effective Date, constitute the Board of Directors (the
“Incumbent Board”) cease for any reason to constitute at least a majority of the Board of
Directors; provided, however, that any individual becoming a director subsequent to
the Effective Date 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 of Directors,
providing for such Business Combination; or
(d) the approval by the stockholders of the Company of a complete liquidation or dissolution
of the Company.
Section 3. Term of This Agreement. The term of this Agreement shall begin on
the Effective Date and, unless automatically extended pursuant to the second sentence of this
Section 3, shall expire on the first to occur of:
(i) the Executive’s death or the Executive’s Disability, which events shall also be deemed
automatically to terminate Executive’s employment by the Company;
(ii) the termination by the Executive or the Company of the Executive’s employment by the
Company; or
(iii) the end of the last day (the “Expiration Date”) of:
(x) the three-year period beginning on the Effective Date (or
any period for which the term of this Agreement shall have been
automatically extended pursuant to the second sentence of this
Section 3) if no Change in Control of the Company shall have
occurred during that three-year period (or any period for which the
term of this Agreement shall have been automatically extended
pursuant to the second sentence of this Section 3); or
(y) if one or more Changes in Control of the Company shall have
occurred during the three-year period beginning on the Effective
Date (or any period for which the term of this Agreement shall have
been automatically extended pursuant to the second sentence of this
Section 3), the three-year period beginning on the date on which the
last Change in Control of the Company occurred.
If (i) the term of this Agreement shall not have expired as a result of the occurrence of one of
the events described in clause (i) or (ii) of the immediately preceding sentence, and (ii) the
Company shall not have given notice to the Executive at least ninety (90) days before the
Expiration Date that the term of this Agreement will expire on the Expiration Date, then the term
of this Agreement shall be automatically extended for successive one-year periods (the first such
period to begin on the day immediately following the Expiration Date) unless the Company shall have
given notice to the Executive at least ninety (90) days before the end of any one-year period for which the term of this Agreement shall have been
automatically extended that such term will expire at the end of that one-year period. The
expiration of the term of this Agreement shall not terminate this Agreement itself or affect the
right of the Executive or the Executive’s legal representatives to enforce the payment of any
amount or other benefit to which the Executive was entitled before the expiration of the term of
this Agreement or to which the Executive became entitled as a result of the event (including the
termination, whether by the Executive or the Company or automatically as provided in this Section
3, of the Executive’s employment by the Company) that caused the term of this Agreement to expire.
Section 4. Event of Termination for Cause. An “Event of Termination for
Cause“shall have occurred if, after a Change in Control of the Company, the Executive shall have
committed:
(i) gross negligence or willful misconduct in connection with his duties or in
the course of his employment with the Company;
(ii) an act of fraud, embezzlement or theft in connection with his duties or in
the course of his employment with the Company;
(iii) intentional wrongful damage to property of the Company;
(iv) intentional wrongful disclosure of secret processes or confidential
information of the Company; or
(v) an act leading to a conviction of a felony or a misdemeanor involving moral
turpitude.
For purposes of this Agreement, no act, or failure to act, on the part of the Executive shall be
deemed “intentional“if it was due primarily to an error in judgment or negligence, but shall be
deemed “intentional” only if done, or omitted to be done, by the Executive not in good faith and
without reasonable belief that his action or omission was in the best interest of the Company.
Notwithstanding the foregoing, the Executive shall not be deemed to have been terminated as a
result of an “Event of Termination for Cause” hereunder unless and until there shall have been
delivered to the Executive a copy of a resolution duly adopted by the affirmative vote of not less
than three-quarters of the Board of Directors then in office at a meeting of the Board of Directors
called and held for such purpose (after reasonable notice to the Executive and an opportunity for
the Executive, together with his counsel, to be heard before the Board of Directors), finding that,
in the good faith opinion of the Board of Directors, the Executive had committed an act set forth
above in this Section 4 and specifying the particulars thereof in detail. Nothing herein shall
limit the right of the Executive or his legal representatives to contest the validity or propriety
of any such determination.
Section 5. An Event of Termination for Good Reason. An “Event of Termination
for Good Reason” shall mean the occurrence of any of the following on or after a Change in Control
of the Company:
(i) the Company or the Successor assigns to the Executive any duties
inconsistent with the Executive’s position (including offices, titles and reporting
requirements), authority, duties or responsibilities with the Company in effect
immediately before the occurrence of the first Change in Control of the Company or
otherwise make any change in any such position, authority, duties or
responsibilities;
(ii) the Company or the Successor removes the Executive from, or fails to
re-elect or appoint the Executive to, any duties or position with the Company that
were assigned or held by the Executive immediately before the occurrence of the
first Change in Control of the Company, except that a nominal change in the
Executive’s title that is merely descriptive and does not affect rank or status
shall not constitute such an event;
(iii) the Company or the Successor takes any other action that results in a
material diminution in such position, authority, duties or responsibilities or
otherwise take any action that materially interferes therewith;
(iv) the Company or the Successor reduces the Executive’s annual base salary as
in effect immediately before the occurrence of the first Change in Control of the
Company or as the Executive’s annual base salary may be increased from time to time
after that occurrence (the “Base Salary”);
(v) the Company or the Successor reduces the Executive’s annual bonus (x) to an
amount less than $ at any time on or prior to the third anniversary of the
Effective Date, or (y) to an amount less than the average of the two annual bonuses
earned by such Executive with respect to the two preceding years at any time after
the third anniversary of the Effective Date (the amount determined pursuant to
clause (x) or (y), as applicable, is referred to herein as the “Benchmark Bonus”);
(vi) the Company or the Successor relocates the Executive’s principal office
outside of the portion of the metropolitan area of the City of Houston, Texas that
is located within the highway known as “Beltway 8”;
(vii) the Company or the Successor fails to (x) continue in effect any bonus,
incentive, profit sharing, performance, savings, retirement or pension policy, plan,
program or arrangement (such policies, plans, programs and arrangements collectively
being referred to herein as “Basic Benefit Plans”), including, but not limited to,
any deferred compensation, supplemental executive retirement or other retirement
income, stock option, stock purchase, stock appreciation, or similar policy, plan,
program or arrangement of the Company, in which the Executive was a participant
immediately before the occurrence of the first Change in Control of the Company, or
any substitute plan adopted by the Board of Directors and in which the Executive was
a participant immediately before the occurrence of the last Change in Control of the
Company, unless an equitable and reasonably comparable arrangement (embodied in a
substitute or alternative benefit or plan) shall have been made with respect to such
Basic Benefit Plan promptly following the occurrence of the last Change in Control
of the Company, or (y) continue the Executive’s participation in any Basic Benefit
Plan (or any substitute or alternative plan) on substantially the same basis, both
in terms of the amount of benefits provided to the Executive (which are in any event
always subject to the terms of any applicable Basic Benefit Plan) and the level of
the Executive’s participation relative to other participants, as existed immediately
before the occurrence of the first Change in Control of the Company;
(viii) the Company or the Successor fails to continue to provide the Executive
with benefits substantially similar to those enjoyed by the Executive under any of
the Company’s other Executive benefit plans, policies, programs and arrangements,
including, but not limited to, life insurance, medical, dental, health, hospital,
accident or disability plans, in which the Executive was a participant immediately before
the occurrence of the first Change in Control of the Company;
(ix) the Company or the Successor takes any action that would directly or
indirectly materially reduce any other non-contractual benefits that were provided
to the Executive by the Company immediately before the occurrence of the first
Change in Control of the Company or deprive the Executive of any material fringe
benefit enjoyed by the Executive immediately before the occurrence of the first
Change in Control of the Company;
(x) the Company or the Successor fails to provide the Executive with the number
of paid vacation days to which the Executive was entitled in accordance with the
Company’s vacation policy in effect immediately before the occurrence of the first
Change in Control of the Company;
(xi) the Company or the Successor fails to continue to provide the Executive
with office space, related facilities and support personnel (including, but not
limited to, administrative and secretarial assistance) (y) that are both
commensurate with Executive’s responsibilities to and position with the Company
immediately before the occurrence of the first Change in Control of the Company and
not materially dissimilar to the office space, related facilities and support
personnel provided to other Executives of the Company having comparable
responsibility to the Executive, or (z) that are physically located at the Company’s
principal executive offices;
(xii) the Company or the Successor requires the Executive to perform a majority
of his duties outside the Company’s principal executive offices for a period of more
than 21 consecutive days or for more than 90 days in any calendar year;
(xiii) the Company or the Successor fails to honor any provision of any
employment agreement Executive has or may in the future have with the Company or
fail to honor any provision of this Agreement;
(xiv) the Company or the Successor gives effective notice of an election to
terminate at the end of the term or extended the term of any employment agreement
Executive has or may in the future have with the Company or the Successor in
accordance with the terms of any such agreement; or
(xv) the Company or the Successor purports to terminate the Executive’s
employment by the Company unless notice of that termination shall have been given to
the Executive pursuant to, and that notice shall meet the requirements of, Section
6.
Section 6. Notice of Termination. If a Change in Control of the Company shall
have occurred before the expiration of the term of this Agreement, any subsequent termination by
the Executive or the Company of the Executive’s employment by the Company, or any determination of
the Executive’s Disability, shall be communicated by notice to the other party that shall indicate
the specific paragraph of Section 7 pursuant to which the Executive is to receive benefits as a
result of the termination. If the notice states that the Executive’s employment by the Company has
been automatically terminated as a result of the Executive’s Disability, the notice shall (i)
specifically describe the basis for the determination of the Executive’s Disability, and (ii) state
the date of the determination of the Executive’s Disability, which date shall be not more than ten
(10) days before the date such notice is given. If the notice is from the Company and states that
the Executive’s employment by the Company is terminated by the Company as a result of the occurrence of an Event of Termination for Cause,
the notice shall specifically describe the action or inaction of the Executive that the Company
believes constitutes an Event of Termination for Cause and shall be accompanied by a copy of the
resolution satisfying Section 4. If the notice is from the Executive and states that the
Executive’s employment by the Company is terminated by the Executive as a result of the occurrence
of an Event of Termination for Good Reason, the notice shall specifically describe the action or
inaction of the Company that the Executive believes constitutes an Event of Termination for Good
Reason. Each notice given pursuant to this Section 6 (other than a notice stating that the
Executive’s employment by the Company has been automatically terminated as a result of the
Executive’s Disability) shall state a date, which shall be not fewer than thirty (30) days nor more
than sixty (60) days after the date such notice is given, on which the termination of the
Executive’s employment by the Company is effective. The date so stated in accordance with this
Section 6 shall be the “Termination Date”. If a Change in Control of the Company shall have
occurred before the expiration of the term of this Agreement, any subsequent purported termination
by the Company of the Executive’s employment by the Company, or any subsequent purported
determination by the Company of the Executive’s Disability, shall be ineffective unless that
termination or determination shall have been communicated by the Company to the Executive by notice
that meets the requirements of the foregoing provisions of this Section 6 and the provisions of
Section 9.
Section 7. Benefits Payable on Change in Control and Termination. (a) If (x)
a Change in Control of the Company shall have occurred before the expiration of the term of this
Agreement, and (y) the Executive’s employment by the Company is terminated (whether by the
Executive or the Company or automatically as provided in Section 3) after the occurrence of that
Change in Control of the Company, the Executive shall be entitled to the following benefits:
(i) If the Executive’s employment by the Company is terminated (x) by the
Company as a result of the occurrence of an Event of Termination for Cause, or (y)
by the Executive before the occurrence of an Event of Termination for Good Reason,
then the Company shall pay to the Executive the Base Salary accrued through the
Termination Date but not previously paid to the Executive, and the Executive shall
be entitled to any other amounts or benefits provided under any plan, policy,
practice, program, contract or arrangement of or with the Company, including, but
not limited to, the Basic Benefit Plans and the Other Benefit Plans, which shall be
governed by the terms thereof (except as explicitly modified by this Agreement).
(ii) If the Executive’s employment by the Company is automatically terminated
as a result of the Executive’s death or the Executive’s Disability, then (x) the
Company shall pay to the Executive the Base Salary accrued through the date of the
occurrence of that event but not previously paid to the Executive, and (y) the
Executive shall be entitled to any other amounts or benefits provided under any
plan, policy, practice, program, contract or arrangement of or with the Company,
including, but not limited to, the Basic Benefit Plans and the Other Benefit Plans,
which shall be governed by the terms thereof (except as explicitly modified by this
Agreement).
(iii) If the Executive’s employment by the Company is terminated (x) by the
Company otherwise than as a result of the occurrence of an Event of Termination for
Cause, or (y) by the Executive after the occurrence of an Event of Termination for
Good Reason, then the Executive shall be entitled to the following:
(1) the Company shall pay to the Executive the Base Salary and
compensation for earned but unused vacation time accrued through the
Termination Date but not previously paid to the Executive;
(2) the Company shall pay to the Executive an amount equal to
the product of (A) the greater of (I) the Executive’s target
performance bonus for the Fiscal Year in which the Termination Date
occurs and (II) the Executive’s performance bonus for the Fiscal
Year preceding the Fiscal Year in which the Termination Date occurs
(including any deferred portion thereof) (the greater of the amounts
described in clauses (I) and (II) of this Section 7(a)(iii)(2)(A)
being referred to herein as the “Highest Bonus”), and (B) a
fraction, the numerator of which is the number of days in the
current Fiscal Year through the Termination Date and the denominator
of which is 365;
(3) the Company shall pay to the Executive, as a lump sum, an
amount (the “Severance Payment”) equal to times the sum
of:
(A) the amount (including any deferred portion
thereof) of the Base Salary that would have been
paid to the Executive during the Fiscal Year in
which the Termination Date occurs based on the
assumption that the Executive’s employment by the
Company had continued throughout that Fiscal Year at
the Base Salary rate in effect in the Fiscal Year in
which the Termination Date occurs, or in the
immediately preceding Fiscal Year, whichever is
higher;
(B) the amount of the Highest Bonus;
(4) the Company (at its sole expense) shall take the following
actions:
(A) throughout the Relevant Period, the Company
shall maintain in effect, and not materially reduce
the benefits provided by, each of the Other Benefit
Plans in which the Executive was a participant
immediately before the Termination Date; and
(B) the Company shall arrange for the
Executive’s uninterrupted participation throughout
the Relevant Period in each of such Other Benefit
Plans,
provided that if the Executive’s participation after the
Termination Date in any such Other Benefit Plan is not permitted by
the terms of that Other Benefit Plan, then throughout the Relevant
Period, the Company (at its sole expense) shall provide the
Executive with substantially the same benefits that were provided to
the Executive by that Other Benefit Plan immediately before the
Termination Date; and
(5) the Executive shall be entitled to any other amounts or
benefits provided under any plan, policy, practice, program,
contract or arrangement of or with the Company, including, but not
limited to, the
Basic Benefit Plans and the Other Benefit Plans, which shall be
governed by the terms thereof (except as explicitly modified by this
Agreement).
(b) Each payment required to be made to the Executive pursuant to the foregoing provisions of
this Section 7(a) above (i) shall be made by check drawn on an account of the Company at a bank
located in the United States of America, and (ii) shall be paid (x) if the Executive’s employment
by the Company was terminated as a result of the Executive’s death or the Executive’s Disability,
not more than thirty (30) days immediately following the date of the occurrence of that event, and
(y) if the Executive’s employment by the Company was terminated for any other reason, on the
Termination Payment Date.
(c) The following shall occur immediately upon the occurrence of a Change in Control of the
Company:
(i) all options to acquire Voting Stock and all stock
appreciation rights pertaining to Voting Stock held by the Executive
immediately prior to a Change in Control of the Company shall
become fully exercisable, regardless of whether or not the vesting
conditions set forth in the relevant stock option agreements have
been satisfied in full; and
(ii) all restrictions on any restricted Voting Stock granted to
the Executive prior to a Change in Control of the Company shall be
removed and the stock shall be freely transferable, regardless of
whether the conditions set forth in the relevant restricted stock
agreements have been satisfied in full.
Section 8. Successors. If a Change in Control of the Company shall have
occurred before the expiration of the term of this Agreement,
(i) the Company shall not, directly or indirectly, consolidate with, merge into
or sell or otherwise transfer its assets as an entirety or substantially as an
entirety to, any person, or permit any person to consolidate with or merge into the
Company, unless immediately after such consolidation, merger, sale or transfer, the
Successor shall have assumed in writing the Company’s obligations under this
Agreement; and
(ii) not fewer than ten (10) days before the consummation of any consolidation
of the Company with, merger by the Company into, or sale or other transfer by the
Company of its assets as an entirety or substantially as an entirety to, any person,
the Company shall give the Executive notice of that proposed transaction.
Section 9. Notice. Notices required or permitted to be given by either party
pursuant to this Agreement shall be in writing and shall be deemed to have been given when
delivered personally to the other party or when deposited with the United States Postal Service as
certified or registered mail with postage prepaid and addressed:
(i) if to the Executive, at the Executive’s address last shown on the Company’s
records, and
(ii) if to the Company, at 1900 West Loop West, Suite 1500, Houston, Texas
77027, directed to the attention of the Chief Financial Officer.
or, in either case, to such other address as the party to whom or which such notice is to be given
shall have specified by notice given to the other party.
Section 10. Withholding Taxes. The Company may withhold from all payments to
be paid to the Executive pursuant to this Agreement all taxes that, by applicable federal or state
law, the Company is required to so withhold.
Section 11. Certain Additional Payments by the Company.
(a) Anything in this Agreement to the contrary notwithstanding, in the event it shall be
determined that any payment or distribution by, or benefit from, the Company or any of its
Affiliates to or for the benefit of the Executive, whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or otherwise (any such payments,
distributions or benefits being individually referred to herein as a “Payment,” and any two or more
of such payments, distributions or benefits being referred to herein as “Payments”), would be
subject to the excise tax imposed by Section 4999 of the Code (such excise tax, together with any
interest thereon, any penalties, additions to tax, or additional amounts with respect to such
excise tax, and any interest in respect of such penalties, additions to tax or additional amounts,
being collectively referred herein to as the “Excise Tax”), then the Executive shall be entitled to
receive an additional payment or payments (individually referred to herein as a “Gross-Up Payment”
and any two or more of such additional payments being referred to herein as “Gross-Up Payments”) in
an amount such that after payment by the Executive of all taxes (as defined in Section 11(k))
imposed upon the Gross-Up Payment, the Executive retains an amount of such Gross-Up Payment equal
to the Excise Tax imposed upon the Payments. The purpose of this Section 11 and the intent of the
parties to this Agreement is to place the Executive in the same economic position the Executive
would have been in had no Excise Tax been imposed with respect to the Payments.
(b) Subject to the provisions of Section 11(c) through (i), any determination (individually, a
“Determination”) required to be made under this Section 11(b), including whether a Gross-Up Payment
is required and the amount of such Gross-Up Payment, shall initially be made, at the Company’s
expense, by nationally recognized tax counsel mutually acceptable to the Company and the Executive
(“Tax Counsel”). Tax Counsel shall provide detailed supporting legal authorities, calculations,
and documentation both to the Company and the Executive within 15 business days of the termination
of the Executive’s employment, if applicable, or such other time or times as is reasonably
requested by the Company or the Executive. If Tax Counsel makes the initial Determination that no
Excise Tax is payable by the Executive with respect to a Payment or Payments, it shall furnish the
Executive with an opinion reasonably acceptable to the Executive that no Excise Tax will be imposed
with respect to any such Payment or Payments. The Executive shall have the right to dispute any
Determination (a “Dispute”) within 15 business days after delivery of Tax Counsel’s opinion with
respect to such Determination. The Gross-Up Payment, if any, as determined pursuant to such
Determination shall, at the Company’s expense, be paid by the Company to the Executive within five
business days of the Executive’s receipt of such Determination. The existence of a Dispute shall
not in any way affect the Executive’s right to receive the Gross-Up Payment in accordance with such
Determination. If there is no Dispute, such Determination shall be binding, final and conclusive
upon the Company and the Executive, subject in all respects, however, to the provisions of Section
11(c) through (i) below. As a result of the uncertainty in the application of Sections 4999 and
280G of the Code, it is possible that Gross-Up Payments (or portions thereof) which will not have
been made by the Company should have been made (“Underpayment”), and if upon any reasonable written
request from the Executive or the Company to Tax Counsel, or upon Tax Counsel’s own initiative, Tax
Counsel, at the Company’s expense, thereafter determines that the Executive is required to make a
payment of any Excise Tax or any additional Excise Tax, as the case may be, Tax Counsel shall, at
the Company’s expense, determine the amount of the Underpayment that has occurred and any such
Underpayment shall be promptly paid by the Company to the Executive.
(c) The Company shall defend, hold harmless, and indemnify the Executive on a fully grossed-up
after tax basis from and against any and all claims, losses, liabilities, obligations, damages,
impositions, assessments, demands, judgements, settlements, costs and expenses (including
reasonable attorneys’, accountants’, and experts’ fees and expenses) with respect to any tax
liability of the Executive resulting from any Final Determination (as defined in Section 11(j))
that any Payment is subject to the Excise Tax.
(d) If a party hereto receives any written or oral communication with respect to any question,
adjustment, assessment or pending or threatened audit, examination, investigation or
administrative, court or other proceeding which, if pursued successfully, could result in or give
rise to a claim by the Executive against the Company under this Section 11 (“Claim”), including,
but not limited to, a claim for indemnification of the Executive by the Company under Section
11(c), then such party shall promptly notify the other party hereto in writing of such Claim (“Tax
Claim Notice”).
(e) If a Claim is asserted against the Executive (“Executive Claim”), the Executive shall take
or cause to be taken such action in connection with contesting such Executive Claim as the Company
shall reasonably request in writing from time to time, including the retention of counsel and
experts as are reasonably designated by the Company (it being understood and agreed by the parties
hereto that the terms of any such retention shall expressly provide that the Company shall be
solely responsible for the payment of any and all fees and disbursements of such counsel and any
experts) and the execution of powers of attorney, provided that:
(i) within 30 calendar days after the Company receives or delivers, as the case
may be, the Tax Claim Notice relating to such Executive Claim (or such earlier date
that any payment of the taxes claimed is due from the Executive, but in no event
sooner than five calendar days after the Company receives or delivers such Tax Claim
Notice), the Company shall have notified the Executive in writing (“Election
Notice”) that the Company does not dispute its obligations (including, but not
limited to, its indemnity obligations) under this Agreement and that the Company
elects to contest, and to control the defense or prosecution of, such Executive
Claim at the Company’s sole risk and sole cost and expense; and
(ii) the Company shall have advanced to the Executive on an interest-free
basis, the total amount of the tax claimed in order for the Executive, at the
Company’s request, to pay or cause to be paid the tax claimed, file a claim for
refund of such tax and, subject to the provisions of the last sentence of Section
11(g), sue for a refund of such tax if such claim for refund is disallowed by the
appropriate taxing authority (it being understood and agreed by the parties hereto
that the Company shall only be entitled to sue for a refund and the Company shall
not be entitled to initiate any proceeding in, for example, United States Tax Court)
and shall indemnify and hold the Executive harmless, on a fully grossed-up after tax
basis, from any tax imposed with respect to such advance or with respect to any
imputed income with respect to such advance; and
(iii) the Company shall reimburse the Executive for any and all costs and
expenses resulting from any such request by the Company and shall indemnify and hold
the Executive harmless, on fully grossed-up after-tax basis, from any tax imposed as
a result of such reimbursement.
(f) Subject to the provisions of Section 11(e) hereof, the Company shall have the right to
defend or prosecute, at the sole cost, expense and risk of the Company, such Executive Claim by all
appropriate proceedings, which proceedings shall be defended or prosecuted diligently by the
Company to a Final Determination; provided, however, that (i) the Company shall not,
without the Executive’s prior written consent, enter into any compromise or settlement of such
Executive Claim that would adversely affect the Executive, (ii) any request from the Company to the
Executive regarding any extension of the statute of limitations relating to assessment, payment, or
collection of taxes for the taxable year of the Executive with respect to which the contested
issues involved in, and amount of, the Executive Claim relate is limited solely to such contested
issues and amount, and (iii) the Company’s control of any contest or proceeding shall be limited to
issues with respect to the Executive Claim and the Executive shall be entitled to settle or
contest, in his sole and absolute discretion, any other issue raised by the Internal Revenue
Service or any other taxing authority. So long as the Company is diligently defending or
prosecuting such Executive Claim, the Executive shall provide or cause to be provided to the
Company any information reasonably requested by the Company that relates to such Executive Claim,
and shall otherwise cooperate with the Company and its representatives in good faith in order to
contest effectively such Executive Claim. The Company shall keep the Executive informed of all
developments and events relating to any such Executive Claim (including, without limitation,
providing to the Executive copies of all written materials pertaining to any such Executive Claim),
and the Executive or his authorized representatives shall be entitled, at the Executive’s expense,
to participate in all conferences, meetings and proceedings relating to any such Executive Claim.
(g) If, after actual receipt by the Executive of an amount of a tax claimed (pursuant to an
Executive Claim) that has been advanced by the Company pursuant to Section 11(e)(ii) hereof, the
extent of the liability of the Company hereunder with respect to such tax claimed has been
established by a Final Determination, the Executive shall promptly pay or cause to be paid to the
Company any refund actually received by, or actually credited to, the Executive with respect to
such tax (together with any interest paid or credited thereon by the taxing authority and any
recovery of legal fees from such taxing authority related thereto), except to the extent that any
amounts are then due and payable by the Company to the Executive, whether under the provisions of
this Agreement or otherwise. If, after the receipt by the Executive of an amount advanced by the
Company pursuant to Section 11(e)(ii), a determination is made by the Internal Revenue Service or
other appropriate taxing authority that the Executive shall not be entitled to any refund with
respect to such tax claimed and the Company does not notify the Executive in writing of its intent
to contest such denial of refund prior to the expiration of 30 days after such determination, then
such advance shall be forgiven and shall not be required to be repaid and the amount of such
advance shall offset, to the extent thereof, the amount of any Gross-Up Payments and other payments
required to be paid hereunder.
(h) With respect to any Executive Claim, if the Company fails to deliver an Election Notice to
the Executive within the period provided in Section 11(e)(i) hereof or, after delivery of such
Election Notice, the Company fails to comply with the provisions of Section 11(e)(ii) and (iii) and
(f) hereof, then the Executive shall at any time thereafter have the right (but not the
obligation), at his election and in his sole and absolute discretion, to defend or prosecute, at
the sole cost, expense and risk of the Company, such Executive Claim. The Executive shall have
full control of such defense or prosecution and such proceedings, including any settlement or
compromise thereof. If requested by the Executive, the Company shall cooperate, and shall cause
its Affiliates to cooperate, in good faith with the Executive and his authorized representatives in
order to contest effectively such Executive Claim. The Company may attend, but not participate in
or control, any defense, prosecution, settlement or compromise of any Executive Claim controlled by
the Executive pursuant to this Section 11(h) and shall bear its own costs and expenses with respect
thereto. In the case of any Executive Claim that is defended or prosecuted by the Executive, the
Executive shall, from time to time, be entitled to current payment, on a fully grossed-up after tax
basis, from the Company with respect to costs and expenses incurred by the Executive in connection
with such defense or prosecution.
(i) In the case of any Executive Claim that is defended or prosecuted to a Final Determination
pursuant to the terms of this Section 11(i), the Company shall pay, on a fully grossed-up after tax
basis, to the Executive in immediately available funds the full amount of any taxes arising or
resulting from or incurred in connection with such Executive Claim that have not theretofore been
paid by the Company to the Executive, together with the costs and expenses, on a fully grossed-up
after tax basis, incurred in connection therewith that have not theretofore been paid by the
Company to the Executive, within ten calendar days after such Final Determination. In the case of
any Executive Claim not covered by the preceding sentence, the Company shall pay, on a fully
grossed-up after tax basis, to the Executive in immediately available funds the full amount of any
taxes arising or resulting from or incurred in connection with such Executive Claim at least ten
calendar days before the date payment of such taxes is due from the Executive, except where payment
of such taxes is sooner required under the provisions of this Section 11(i), in which case payment
of such taxes (and payment, on a fully grossed-up after tax basis, of any costs and expenses
required to be paid under this Section 11(i) shall be made within the time and in the manner
otherwise provided in this Section 11(i).
(j) For purposes of this Agreement, the term “Final Determination” shall mean (A) a decision,
judgment, decree or other order by a court or other tribunal with appropriate jurisdiction, which
has become final and non-appealable; (B) a final and binding settlement or compromise with an
administrative agency with appropriate jurisdiction, including, but not limited to, a closing
agreement under Section 7121 of the Code; (C) any disallowance of a claim for refund or credit in
respect to an overpayment of tax unless a suit is filed on a timely basis; or (D) any final
disposition by reason of the expiration of all applicable statutes of limitations.
(k) For purposes of this Agreement, the terms “tax” and “taxes” mean any and all taxes of any
kind whatsoever (including, but not limited to, any and all Excise Taxes, income taxes, and
employment taxes), together with any interest thereon, any penalties, additions to tax, or
additional amounts with respect to such taxes and any interest in respect of such penalties,
additions to tax, or additional amounts.
(l) If any additional payment required pursuant to this Section 11 is determined by the Board
(or its delegate) to be subject to section 409A of the Code, such payment shall be made as follows:
(i) if such payment is made or deemed made due to a Change in Control (i.e., such
payment or deemed payment is made without taking into account Executive’s termination of
employment), then the Company shall pay such payment on the date of the Change in Control
or, if later, as soon as administratively practicable following the Tax Counsel’s
Determination described in Section 11(a);
(ii) if such payment is made on or after, and due to, Executive’s termination of
employment, then the Company shall pay such payment incurred during the Six-Month Delay
Period in a lump sum on the Termination Payment Date, and for each calendar month
thereafter in which such a payment becomes due in monthly installments on the corresponding
Termination Payment Date(s) (i.e., the last business day of the calendar month following the
month such payment becomes due);
(iii) if such payment is due pursuant to Section 11(e), then the Company shall pay such
payment no later than March 15th of the calendar year following the calendar year
in which the Executive Claim, as reflected by Executive’s receipt of a claim by the Internal
Revenue Service, is received by Executive; and
(iv) notwithstanding Sections 11(l)(i) or (ii), if a payment due under Section 11 is
paid pursuant to Section 11(b) or (c), such payment will be considered a distribution
payable on the date of the Change in Control or the Executive’s Termination Date,
respectively, as permitted under Section 409A and proposed Treasury Regulation § 1.409-3(d) (because such payment
was not administratively practicable due to events beyond the control of the Executive) and,
as such, shall be made as soon as administratively practicable (but in no event shall it be
made later than the end of the first calendar year in which the payment becomes
administratively practicable).
Section 12. Expenses of Enforcement. If a Change in Control of the Company
shall have occurred before the expiration of the term of this Agreement, then, upon demand by the
Executive made to the Company, the Company shall reimburse the Executive for the reasonable
expenses (including attorneys’ fees and expenses) incurred by the Executive in enforcing or seeking
to enforce the payment of any amount or other benefit to which the Executive shall have become
entitled pursuant to this Agreement, including those incurred in connection with any arbitration
initiated pursuant to Section 20. To the extent that any such reimbursement would be subject to
the Excise Tax, then the Executive shall be entitled to receive Gross-Up Payments in an amount such
that after payment by the Executive of all taxes imposed on such Gross-Up Payments, the Executive
retains an amount equal to the Excise Tax imposed upon the reimbursement, and the other provisions
of Section 11 hereof shall also apply to such circumstance unless the context thereof otherwise
indicates.
Section 13. Employment by Wholly Owned Entities. If, at or after the
Effective Date, the Executive is or becomes an Executive of one or more corporations, partnerships,
limited liability companies or other entities that are, directly or indirectly, wholly owned by the
Company (“Wholly Owned Entities”), references in this Agreement to the Executive’s employment by
the Company shall include the Executive’s employment by any such Wholly Owned Entity.
Section 14. No Obligation to Mitigate; No Rights of Offset.
(a) The Executive shall not be required to mitigate the amount of any payment or other benefit
required to be paid to the Executive pursuant to this Agreement, whether by seeking other
employment or otherwise, nor shall the amount of any such payment or other benefit be reduced on
account of any compensation earned by the Executive as a result of employment by another person.
(b) The Company’s obligation to make the payments provided for in this Agreement and otherwise
to perform its obligations hereunder shall not be affected by any set-off, counterclaim,
recoupment, defense or other claim, right or action which the Company may have against the
Executive or others.
Section 15. Amendment and Waiver. No provision of this Agreement may be
amended or waived (whether by act or course of conduct or omission or otherwise) unless that
amendment or waiver is by written instrument signed by the parties hereto. No waiver by either
party of any breach of this Agreement shall be deemed a waiver of any other or subsequent breach.
Section 16. Governing Law. The validity, interpretation, construction and
enforceability of this Agreement shall be governed by the laws of the State of Texas.
Section 17. Validity. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other provision of this
Agreement, which shall remain in full force and effect.
Section 18. Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original but all of which together will constitute the same
instrument.
Section 19. Assignment; Binding Effect. This Agreement shall inure to the
benefit of and be enforceable by the Executive’s legal representative. This Agreement shall be
binding upon any
Successor. The Company may not assign any of its obligations under this Agreement unless (i)
such assignment is to a Successor and (ii) the requirements of Section 8 are fulfilled.
Section 20. Arbitration. Except as otherwise explicitly provided in Section
11, any dispute between the parties arising out of this Agreement, whether as to this Agreement’s
construction, interpretation or enforceability or as to any party’s breach or alleged breach of any
provision of this Agreement, shall be submitted to arbitration in accordance with the following
procedures:
(i) Either party may demand such arbitration by giving notice of that demand to
the other party. The notice shall state (x) the matter in controversy, and (y) the
name of the arbitrator selected by the party giving the notice.
(ii) Not more than 15 days after such notice is given, the other party shall
give notice to the party who demanded arbitration of the name of the arbitrator
selected by the other party. If the other party shall fail to timely give such
notice, the arbitrator that the other party was entitled to select shall be named by
the Arbitration Committee of the American Arbitration Association. Not more than 15
days after the second arbitrator is so named, the two arbitrators shall select a
third arbitrator. If the two arbitrators shall fail to timely select a third
arbitrator, the third arbitrator shall be named by the Arbitration Committee of the
American Arbitration Association.
(iii) The dispute shall be arbitrated at a hearing that shall be concluded
within ten days immediately following the date the dispute is submitted to
arbitration unless a majority of the arbitrators shall elect to extend the period of
arbitration. Any award made by a majority of the arbitrators (x) shall be made
within ten days following the conclusion of the arbitration hearing, (y) shall be
conclusive and binding on the parties, and (z) may be made the subject of a judgment
of any court having jurisdiction.
(iv) All expenses of the arbitration shall be borne by the Company.
The agreement of the parties contained in the foregoing provisions of this Section 20 shall be a
complete defense to any action, suit or other proceeding instituted in any court or before any
administrative tribunal with respect to any dispute between the parties arising out of this
Agreement.
Section 21. Interpretation.
(a) As used in this Agreement, the following terms and phrases have the indicated meanings:
(i) “Affiliate” and “Affiliates” mean, when used with respect to any entity,
individual, or other person, any other entity, individual, or other person which,
directly or indirectly, through one or more intermediaries controls, or is
controlled by, or is under common control with such entity, individual or person.
(ii) “Base Salary” has the meaning assigned to that term in Section 5.
(iii) “Basic Benefit Plans” has the meaning assigned to that term in Section 5.
(iv) “Benchmark Bonus” has the meaning assigned to that term in Section 5.
(v) “Board of Directors” means the Board of Directors of the Company.
(vi) “Business Combination” has the meaning assigned to that term
in Section 2.
(vii) “Change in Control of the Company” has the meaning assigned to that
phrase in Section 2.
(viii) “Claim” has the meaning assigned to such term in Section 11.
(ix) “Code” means the Internal Revenue Code of 1986, as amended from time to
time.
(x) “Commission” means the United States Securities and Exchange Commission or
any successor agency.
(xi) “Company” has the meaning assigned to that term in the preamble to this
Agreement. The term “Company” shall also include any Successor, whether the
liability of such Successor under this Agreement is established by contract or
occurs by operation of law.
(xii) “ Covered Person” has the meaning assigned to that term in Section 2.
(xiii) “Determination” has the meaning assigned to that term in Section 11.
(xiv) “Dispute” has the meaning assigned to that term in Section 11.
(xv) “Effective Date” means August 26, 2003.
(xvi) “Election Notice” has the meaning assigned to such term in Section 11.
(xvii) “Executive” has the meaning assigned to such term in the preamble to
this Agreement.
(xviii) “Executive Claim” has the meaning assigned to such term in Section 11.
(xix) “Executive’s Disability” means:
(A) if no Change in Control of the Company shall have occurred
before the date of determination, the physical or mental disability
of the Executive determined in accordance with the disability policy
of the Company at the time in effect and generally applicable to its
salaried Executives; and
(B) if a Change in Control of the Company shall have occurred
at that date, the physical or mental disability of the Executive
determined in accordance with the disability policy of the Company
in effect immediately before the occurrence of the first Change in
Control of the Company and generally applicable to its salaried
Executives.
The Executive’s Disability, and the automatic termination of the Executive’s
employment by the Company by reason of the Executive’s Disability, shall be deemed
to have occurred on the date of determination, provided that if (1) a Change
in Control of the Company shall have occurred before the expiration of the term of
this Agreement, (2) the Company shall have subsequently given notice pursuant to
Section 6 of the Company’s determination of the Executive’s Disability, and (3) the Executive shall have given
notice to the Company that the Executive disagrees with that determination, then (A)
whether the Executive’s Disability shall have occurred shall be submitted to
arbitration pursuant to Section 20, and (B) if a majority of the arbitrators decide
that the Executive’s Disability had not occurred, at the date of determination by
the Company, then (I) the Executive’s Disability, and the automatic termination of
the Executive’s employment by the Company by reason of the Executive’s Disability,
shall be deemed not to have occurred, and (II) on demand by the Executive made to
the Company, the Company shall reimburse the Executive for the reasonable expenses
(including attorneys’ fees and expenses) incurred by the Executive in obtaining that
decision.
(xx) “Event of Termination for Good Reason” has the meaning assigned to that
phrase in Section 5.
(xxi) “Event of Termination for Cause” has the meaning assigned to that phrase
in Section 4.
(xxii) “Exchange Act” means the Securities Exchange Act of 1934, as amended
from time to time.
(xxiii) “Excise Tax” has the meaning assigned to that term in Section 11.
(xxiv) “Expiration Date” has the meaning assigned to that term in Section 3.
(xxv) “Final Determination” has the meaning assigned to such term in Section 11.
(xxvi) “Fiscal Year” means the fiscal year of the Company.
(xxvii) “Gross-Up Payment” has the meaning assigned to that term in Section 11.
(xxviii) “Other Benefit Plan” means any employee welfare benefit plan (within
the meaning of section 3(1) of the Employee Retirement Income Security Act of 1974,
as amended) maintained by the Company.
(xxix) “Outstanding Company Common Stock” has the meaning assigned to that term
in Section 2.
(xxx) “Outstanding Company Voting Securities” has the meaning assigned to that
term in Section 2.
(xxxi) “Payment” has the meaning assigned to that term in Section 11.
(xxxii) “Person” means any individual, corporation, partnership, joint venture,
association, joint-stock company, limited partnership, limited liability company,
trust, unincorporated organization, government, or agency or political subdivision
of any government.
(xxxiii) “Relevant Period” means a period beginning on the Termination Date
and ending on the first to occur of (x) the third anniversary of the Termination
Date, or
(y) the date on which the Executive becomes employed on a full-time basis by
another person.
(xxxiv) “Severance Payment” has the meaning assigned to that term in Section 7.
(xxxv) “Successor” means a person with or into which the Company shall have
been merged or consolidated or to which the Company shall have transferred its
assets as an entirety or substantially as an entirety.
(xxxvi) “Tax” has the meaning assigned to that term in Section 11.
(xxxvii) “Tax Claim Notice” has the meaning assigned to that term in Section 11.
(xxxviii) “Tax Counsel” has the meaning assigned to that term in Section 11.
(xxxix) “Termination Date” has the meaning assigned to that term in Section 6.
(xl) “Termination Payment Date” means
(A) if the Board (or its delegate) determines in its sole discretion
that as of the Termination Date, other than a termination due to death or
Disability, the Executive is a specified employee (as defined in section
409A(a)(2)(B)(i) of the Code, and Department of Treasury regulations and
other interpretive guidance issued thereunder) as of such date (a “Specified
Employee”) and that section 409A of the Code applies with respect to a
portion of the payments hereunder, then with respect to such portion, the
first business day following the six-month anniversary of the Termination
Date or
(B) if the Board (or its delegate) determines in its sole discretion
that as of the Termination Date, other than a termination due to death or
Disability, the Executive is not a Specified Employee as of such date or
that section 409A of the Code does not apply with respect to a portion of
the payments hereunder, then with respect to such portion, not more than ten
(10) days immediately following the Termination Date and
With respect to any amount payable to or on behalf of the Executive
under a welfare or benefit plan program of the Company, including but not
limited to a Basic Benefit Plan or Other Benefit Plan, then any amount
payable to or on behalf of the Executive under such plan or program that is
payable for any calendar month during the Relevant Period shall be paid in
monthly installments on the last business day of the calendar month
following such month.
If the Board (or its delegate) determines in its sole discretion that
as of the Termination Date, other than a termination due to death or
Disability, the Executive is a Specified Employee as of such date and that
section 409A of the Code applies with respect to a portion of the payments
hereunder, then with respect to such portion, the following rules shall
apply:
(A) with respect to such portion that is payable to or on behalf of the
Executive under a welfare or benefit plan program of the Company, including
but not limited to a Basic Benefit Plan or Other Benefit Plan, then in lieu
of such benefit(s) being provided during the period commencing on the
Termination Date and ending on the six-month anniversary of such date (the
“Six-Month Delay Period”), Executive and his dependents shall be eligible to
participate in and may elect to receive continued coverage under the
Company’s health plans in which he previously participated in accordance
with the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended
(“COBRA”) or any successor law during the Six-Month Delay Period, and the
Company will reimburse Executive on the Termination Payment Date the total
amount of COBRA premiums Executive paid during such period. After the
expiration of the Six-Month Delay Period, for the remainder of the Relevant
Period, the Corporation shall, at its expense, arrange for the Executive’s
uninterrupted participation throughout the Relevant Period in each affected
Other Benefit Plan or shall, at its expense, provide the Executive with
substantially the same benefits that were provided to the Executive by that
affected Other Benefit Plan immediately before the Termination Date; and.
(B) any such amount(s) payable during the Six-Month Delay Period,
including but not limited to any payments under Section 11 or any
reimbursements for COBRA coverage, shall be transferred to a rabbi trust
(which shall be a rabbi trust previously created by the Company that
contains other amounts of deferred compensation payable by the Company to
the Executive or a rabbi trust created by the Company or its successor, on
terms reasonably acceptable to the Executive) as soon as administratively
feasible following the occurrence of an event giving rise to the Executive’s
right to such payment, except to the extent such transfer would subject the
Executive to penalties under the funding restriction provisions of Section
409A of the Code, as amended by the Pension Protection Act of 2006, and such
amounts (together with earnings thereon determined in accordance with the
terms of the trust agreement) shall be transferred from the trust to the
Executive upon the earlier of (i) the expiration of the Six-Month Delay
Period, or (ii) any other earlier date permitted under Section 409A of the
Code.
(xli) “This Agreement” means this Change in Control Agreement as it may be
amended from time to time in accordance with Section 15.
(xlii) “Underpayment” has the meaning assigned to that term in Section 11.
(xliii) “Wholly Owned Entities” has the meaning assigned to that term in
Section 13.
(b) In the event of the enactment of any successor provision to any statute or rule cited in
this Agreement, references in this Agreement to such statute or rule shall be to such successor
provision.
(c) The headings of Sections of this Agreement shall not control the meaning or interpretation
of this Agreement.
(d) References in this Agreement to any Section are to the corresponding Section of this
Agreement unless the context otherwise indicates.
(e) This Agreement is intended to meet the requirements of section 409A of the Code and shall
be administered, construed and interpreted in a manner that is intended to meet those requirements.
To the extent that the provision of a benefit or payment under the Agreement is subject to section
409A of the Code, except as the Company and Executive otherwise determine in writing, the provision
or payment shall be provided 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
provisions or payment shall not be subject to the excise tax or interest applicable under section
409A of the Code. Any provision of this Agreement that would cause the provision or payment to
fail to satisfy section 409A of the Code shall be amended 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 Agreement, then the provisions of the Agreement 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 Agreement prior to its amendment to comply with section 409A of the Code.
In Witness Whereof, the Company and the Executive have executed this Agreement this
day of , to be effective as of the date first written above.
| QUANEX CORPORATION | ||||
| By: | ||||
| Name: | ||||
| Title | ||||
| EXECUTIVE | ||||
| Name: | ||||