QUANEX CORPORATION

DIRECTOR [STOCK-][CASH]SETTLED
PERFORMANCE UNIT AWARD AGREEMENT

<<Name>>
Grantee

AWARD OF PERFORMANCE UNITS

1.             GRANT OF PERFORMANCE UNITS. Quanex Corporation, a Delaware corporation (the ?Company?), pursuant to the Quanex Corporation 2006 Omnibus Incentive Plan (the ?Plan?), hereby awards to you, the above-named Grantee, effective as of the Date of Award set forth above, that number of Performance Units set forth above (each, a ?Performance Unit?, and collectively, the ?Performance Units?), on the terms and conditions set forth in this Performance Unit Award Agreement (this ?Agreement?).

[The][Each] Performance [Units provide][Unit provides] you an opportunity to [receive shares of the Company?s common stock, $0.50 par value per share (the ?Common Stock?),][earn a cash payment] based upon attainment of the Performance Goals during the Performance Period. For purposes of this Agreement, the term ?Performance Period? means the       -year period beginning                     , 20    , and ending                   , 20     , and the term ?Performance Goals? means              .

2.             FINAL PERFORMANCE FACTOR. The aggregate [number of shares of the Common Stock to be issued to you][amount payable] under this Agreement [(the ?Shares?)] is equal to the number of Performance Units multiplied by the Target Value of each Performance Unit multiplied by the Final Performance Factor (which is determined as provided below)[divided by the Fair Market Value of a Share of Common Stock on the first business day immediately preceding the Payment Date]:

2.1           The Final Performance Factor shall be equal to one (1) if (a) the Company achieves the Target Milestone during the Performance Period and does not achieve the Maximum Milestone during the Performance Period, (b) ?a change in the ownership or effective control of the corporation? or a ?change in the ownership of a substantial portion of the assets of the corporation? (within the meaning of section 409A of the Internal Revenue Code of 1986, as amended) (?Section 409A Change in Control?) has not occurred on or before the last day of the Performance Period, and (c) you remain an active member of the Board of Directors of the Company (the ?Board?) through the last day of the Performance Period. For purposes of this Agreement, the ?Target Milestone? means                             and the ?Maximum Milestone? means                    .

2.2           The Final Performance Factor shall be equal to two (2) if (a) the Company achieves the Maximum Milestone during the Performance Period, (b) a Change in Control has not occurred on

Director
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