Exhibit
10.42


 


KMG
CHEMICALS, INC.


 


EXECUTIVE
SEVERANCE PLAN


 


 


(EFFECTIVE
AS OF OCTOBER 10, 2008)


 





















 


TABLE OF CONTENTS


 


	
  SECTION

  	
   

  	
  PAGE

  
	
   

  	
   

  	
   

  
	
  SECTION I
  BACKGROUND AND PURPOSE

  	
  1

  
	
  SECTION II
  DEFINITIONS

  	
  1

  
	
  2.1

  	
  “Base Salary”

  	
  1

  
	
  2.2

  	
  “Cause”

  	
  2

  
	
  2.3

  	
  “Change of Control”

  	
  2

  
	
  2.4

  	
  “Company”

  	
  4

  
	
  2.5

  	
  “Comparable Offer of Employment”

  	
  4

  
	
  2.6

  	
  “Compensation Committee”

  	
  4

  
	
  2.7

  	
  “Eligible Employee”

  	
  4

  
	
  2.8

  	
  “ERISA”

  	
  5

  
	
  2.9

  	
  “Exchange Act”

  	
  5

  
	
  2.10

  	
  “Good Reason”

  	
  5

  
	
  2.11

  	
  “Internal Revenue Code”

  	
  5

  
	
  2.12

  	
  “Participation Level”

  	
  6

  
	
  2.13

  	
  “Plan”

  	
  6

  
	
  2.14

  	
  “Poor Performance”

  	
  6

  
	
  2.15

  	
  “Qualifying Termination”

  	
  6

  
	
  2.16

  	
  “Release Form”

  	
  6

  
	
  2.17

  	
  “Severance Benefits”

  	
  6

  
	
  SECTION III
  ELIGIBILITY

  	
  6

  
	
  3.1

  	
  Eligibility

  	
  6

  
	
  3.2

  	
  Release Form

  	
  7

  
	
  3.3

  	
  Termination of Eligibility for Severance Benefits

  	
  7

  
	
  SECTION IV
  SEVERANCE BENEFITS

  	
  7

  
	
  4.1

  	
  General

  	
  7

  
	
  4.2

  	
  Severance Benefits

  	
  8

  
	
  4.3

  	
  Equity Compensation Benefit

  	
  9

  
	
  4.4

  	
  Section 409A

  	
  10

  
	
  4.5

  	
  Section 280G

  	
  10

  
	
  SECTION V
  FUNDING

  	
  11

  
	
  SECTION VI
  CLAIMS PROCEDURE

  	
  11

  
	
  6.1

  	
  Filing and Initial Determination of Claim

  	
  11

  
	
  6.2

  	
  Duty of Compensation Committee Upon Denial of Claim

  	
  11

  
	
  6.3

  	
  Request for Review of Claim Denial

  	
  11

  
	
  6.4

  	
  Decision on Review of Denial

  	
  12

  
	
  SECTION VII
  ADMINISTRATION OF THE PLAN

  	
  12

  
	
  7.1

  	
  Responsibilities

  	
  12

  
	
  7.2

  	
  Allocation and Delegation of Compensation Committee
  Responsibilities

  	
  12

  
	
  7.3

  	
  Actions of Fiduciaries

  	
  13

  
	
  7.4

  	
  General Administrative Powers

  	
  13

  
	
  7.5

  	
  Appointment of Professional Assistance

  	
  14

  
	
  7.6

  	
  Discretionary Acts

  	
  14

  
	
  7.7

  	
  Responsibility of Fiduciaries

  	
  14

  
	
  7.8

  	
  Indemnity by Company

  	
  14

  
	
  SECTION VIII
  AMENDMENT AND TERMINATION OF THE PLAN

  	
  15

  
	
  SECTION IX
  VESTING

  	
  15

  
	
  SECTION X
  STATUS OF EMPLOYMENT RELATIONS

  	
  15

  
	
  SECTION XI
  RESTRICTIONS ON ASSIGNMENT

  	
  15

  



 





















 


	
  SECTION

  	
   

  	
  PAGE

  
	
   

  	
   

  	
   

  
	
  SECTION XII
  APPLICABLE LAW

  	
  16

  
	
  SECTION XIII
  INTERPRETATION OF THE PLAN

  	
  16

  



 





















 


KMG
CHEMICALS, INC.


 


EXECUTIVE SEVERANCE PLAN


 


KMG CHEMICALS, INC. (the “Company”)
has adopted this severance plan, effective October 10, 2008 (the “Effective
Date”), in accordance with the terms and conditions contained herein.


 


SECTION I

BACKGROUND AND PURPOSE


 


The Plan is an “employee welfare benefit plan”
under Section 3(1) of the Employee Retirement Income Security Act of
1974, as amended (“ERISA”).  The
Plan supersedes any prior severance plans, programs or policies of the Company
covering Eligible Employees, both formal and informal.  Any Eligible Employee who participates in
this Plan shall not be entitled to any benefits under any other severance
policy, plan or practice of the Company or any predecessor thereto.


 


Notwithstanding the foregoing, nothing in
this Plan shall adversely affect the rights an individual Eligible Employee may
have to severance payments under any written agreement executed by and between
the Company and that Eligible Employee (a “Severance Agreement”) or as
required by applicable law; provided, however, that if any
Eligible Employee that is a party to a Severance Agreement suffers a Qualifying
Termination and is entitled to and is receiving the severance benefits intended
to be provided under his or her Severance Agreement or as required by applicable
law, such Eligible Employee shall not be entitled to receive severance benefits
pursuant to this Plan.


 


The Plan is designed to provide an Eligible
Employee with severance pay and benefits in the event that his or her
employment is terminated by the Company.


 


All rights of Eligible Employees to benefits
relating to this Plan shall be governed by a Severance and Release Agreement
(the “Release Form”), as determined and provided by the Company in
connection with an Eligible Employee’s Qualifying Termination and the Plan.


 


If the terms of the Plan are inconsistent
with other documents or other written or verbal communications provided by the
Company or its representatives with respect to this severance program, the
terms of the Plan shall govern.  The Plan
may not be amended or changed except in accordance with the provisions set
forth below.


 


SECTION II

DEFINITIONS


 


As used in the Plan:


 


2.1           “Base Salary” shall mean the
Eligible Employee’s gross annual salary or wages before any deductions,
exclusions or any deferrals or contributions under any Company plan or program,
but excluding overtime, bonuses, incentive compensation, shift and lead premium
payments, employee benefits or any other form of compensation, being received
by an Eligible 


 

















 


Employee immediately prior to employment
termination.  The Base Salary for an
Eligible Employee paid on an hourly basis shall be the individual’s hourly pay
rate in effect immediately prior to the sale multiplied by 40 hours per week
and multiplied by 52 weeks.


 


2.2           “Cause” shall mean:


 


(a)            the willful breach or
habitual neglect of assigned duties related to the Company, including the
willful failure to comply with Company policies;


 


(b)            conviction (including any
plea of nolo contendere) of the Eligible Employee of any felony or crime
involving dishonesty or moral turpitude;


 


(c)            any act of personal
dishonesty knowingly taken by the Eligible Employee in connection with his
responsibilities as an employee and intended to result in personal enrichment
of the Eligible Employee or any other person;


 


(d)            bad faith conduct that is
materially detrimental to the Company;


 


(e)            inability of the Eligible
Employee to perform the Employee’s duties due to alcohol or illegal drug use;


 


(f)             the Eligible Employee’s
failure to comply with any legal written directive of the Board of Directors of
the Company;


 


(g)            any act or omission of the
Eligible Employee which is of substantial detriment to the Company because of
the Eligible Employee’s intentional failure to comply with any statute, rule or
regulation, except any act or omission believed by the Eligible Employee in
good faith to have been in or not opposed to the best interest of the Company
(without intent of the Eligible Employee to gain, directly or indirectly, a
profit to which the Eligible Employee was not legally entitled), and except
that Cause shall not mean bad judgment or negligence other than habitual
neglect of duty; or


 


(h)            any other act or failure to
act or other conduct which is demonstrably and materially injurious to the Company,
monetarily or otherwise.


 


For
Eligible Employees who have been designated as having a Participation Level of
I or II, any determination of Cause shall be made by the Company’s Board of
Directors.  For Eligible Employees who
have been designated as having a Participation Level of III, any determination
of Cause shall be made by the Chief Executive Officer of the Company.


 


2.3           “Change of Control” shall mean an
event set forth in any of the following paragraphs:


 


                (a)           any
Person is or becomes the Beneficial Owner, directly or indirectly, of
securities of the Company (not including in the securities beneficially owned
by such Person any securities acquired directly from the Company or its
Affiliates) representing 50% or more of the combined voting power of the
Company’s then outstanding securities, excluding (i) any Person who
becomes such a Beneficial Owner in connection 


 


2





















 


with a transaction described in clause (i) of
paragraph (c) below, (ii) any Person that, as of the Effective Date
of the Plan, holds more than 50% of the combined voting power of the Company’s
then outstanding securities; or


 


(b)           the following individuals cease for any reason to constitute a majority
of the number of directors then serving: 
individuals who, on the Effective Date of this Plan, constitute the
Board and any new director (other than a director whose initial assumption of
office is in connection with an actual or threatened election contest,
including but not limited to a consent solicitation, relating to the election
of directors of the Company) whose appointment or election by the Board or
nomination for election by the Company’s shareholders was approved or
recommended by a vote of at least two-thirds (2/3) of the directors then still
in office who either were directors on the Effective Date of this Plan or whose
appointment, election or nomination for election was previously so approved or
recommended; or


 


(c)           there is consummated a merger or consolidation of the Company or any
direct or indirect subsidiary of the Company with any other corporation, other
than (i) a merger or consolidation which would result in the voting
securities of the Company outstanding immediately prior to such merger or
consolidation continuing to represent (either by remaining outstanding or by
being converted into voting securities of the surviving entity or any parent
thereof) at least 60% of the combined voting power of the securities of the
Company or such surviving entity or any parent thereof outstanding immediately
after such merger or consolidation or (ii) a merger or consolidation
effected to implement a recapitalization of the Company (or similar
transaction) in which no Person is or becomes the Beneficial Owner, directly or
indirectly, of securities of the Company (not including the securities
Beneficially Owned by such Person any securities acquired directly from the
Company or its Affiliates other than in connection with the acquisition by the
Company or its Affiliates of a business) representing 50% or more of the
combined voting power of the Company’s then outstanding securities; or


 


(d)           the shareholders of the Company approve a plan of complete liquidation
or dissolution of the Company or there is consummated an agreement for the sale
or disposition by the Company of all or substantially all of the Company’s
assets, other than a sale or disposition by the Company of all or substantially
all of the Company’s assets to an entity, at least 60% of the combined voting
power of the voting securities of which are owned by shareholders of the
Company in substantially the same proportions as their ownership of the Company
immediately prior to such sale.


 


For purposes hereof:


 


“Affiliate” shall have the meaning
set forth in Rule 12b-2 promulgated under Section 12 of the Exchange
Act.


 


“Beneficial Owner” shall have the
meaning set forth in Rule 13d-3 under the Exchange Act.


 


3





















 


“Person” shall have the meaning
given in Section 3(a)(9) of the Exchange Act, as modified and used in
Sections 13(d) and 14(d) thereof, except that such term shall not
include (i) the Company or any of its subsidiaries, (ii) a trustee or
other fiduciary holding securities under an employee benefit plan of the
Company or any of its Affiliates, (iii) an underwriter temporarily holding
securities pursuant to an offering of such securities or (iv) a
corporation owned, directly or indirectly, by the shareholders of the Company
in substantially the same proportions as their ownership of stock of the
Company.


 


2.4           “Company” shall mean KMG
Chemicals, Inc. and its consolidated subsidiaries.


 


2.5           “Comparable Offer of
Employment” shall mean an offer of employment made to an
Eligible Employee upon a Change of Control which satisfies the following
requirements:


 


(a)            that the proposed Base
Salary and target incentive compensation for the Eligible Employee after a
Change of Control is not materially reduced from the Base Salary and target
incentive compensation of such Eligible Employee prior to the Change of
Control; provided, however, that a change in the compensation
structure or compensation mix (between Base Salary and incentive compensation)
to be paid by the Company, or any successor to the Company upon a Change in
Control is expressly permitted as long as the Base Salary and the target
incentive compensation, taken as a whole, is not materially reduced ;


 


(b)            the Eligible Employee does
not incur a material reduction in his or her position with the Company from the
position the Eligible Employee held immediately prior to the effective date of
the Change of Control;


 


(c)            the Eligible Employee does
not incur a material adverse change in the nature or scope of the authorities,
powers, functions, responsibilities or duties attached to the position or
positions with the Company which the Eligible Employee held immediately prior
to the effective date of the Change of Control, without the prior written
consent of the Eligible Employee; and


 


(d)            the Eligible Employee’s
principal place of work has not changed to any location that is a material
distance (more than fifty (50) miles) from his or her principal place of work
immediately prior to the effective date of the Change of Control, without the
prior written consent of the Eligible Employee.


 


2.6           “Compensation Committee” shall mean the
Compensation Committee of the Board of Directors of the Company.  The Compensation Committee shall be the “named
fiduciary,” as referred to in Section 402(a) of ERISA, with respect
to the management, operation and administration of the Plan.


 


2.7           “Eligible Employee” shall mean a
regular, full-time employee of the Company or any subsidiary of the Company who
has been designated in writing by the Compensation Committee as a participant
in this Plan.


 


4





















 


2.8           “ERISA” shall mean the
Employee Retirement Income Security Act of 1974, as amended from time to
time.  References to any Section of
ERISA shall include any successor provision thereto.


 


2.9           “Exchange Act” shall mean the
Federal Securities Exchange Act of 1934, as amended from time to time.


 


2.10         “Good Reason” shall mean any
of the following events that occur in connection with an Eligible Employee’s
resignation:


 


(a)            the Eligible Employee,
without his or her consent, incurs a demotion in his or her position with the
Company from the position the Eligible Employee previously held and such
demotion constitutes (x) a material diminution in the Eligible Employee’s
authority, duties, or responsibilities; (y) a material diminution in the
budget over which the Eligible Employee retains authority; or (z) a
material diminution in the authority, duties, or responsibilities of the
supervisor to whom the Eligible Employee is required to report;


 


(b)            the Eligible Employee,
without his or her consent, incurs a material reduction in his or her Base
Salary or target incentive compensation; provided, however, that
a change in the compensation structure or compensation mix (between Base Salary
and incentive compensation) is expressly permitted (and shall not constitute “Good
Reason”) as long as the Base Salary and target incentive compensation, taken as
a whole, is not materially reduced;


 


(c)            the Eligible Employee incurs
a significant adverse change in the nature or scope of the authorities, powers,
functions, responsibilities or duties attached to the position or positions
with the Company which the Eligible Employee previously held, without the prior
written consent of the Eligible Employee, and such change constitutes (x) a
material diminution in the Eligible Employee’s authority, duties, or
responsibilities; (y)  a material diminution in the budget over which the
Eligible Employee retains authority; or (z) a material diminution in the
authority, duties, or responsibilities of the supervisor to whom the Eligible
Employee is required to report; or


 


(d)            the Eligible Employee’s
principal place of work changed to any location that is a material distance
(more than fifty (50) miles) from his or her principal place of work, without
the prior written consent of the Eligible Employee.


 


Notwithstanding anything to the contrary contained herein, a Qualifying
Termination for “Good Reason” shall occur only if (i) the Eligible
Employee provides written notice to the Company of the occurrence of the event
described in this Section 2.11 that constitutes “Good Reason” within
thirty (30) days of the event’s initial existence, (ii) the Company fails
to remedy the event within thirty (30) days of its receipt of such notice, and (iii) the
Eligible Employee terminates his or her employment no later than sixty (60)
days following the end of such cure period.


 


2.11         “Internal Revenue Code” shall mean the
Internal Revenue Code of 1986, as amended from time to time.  References to any Section of the
Internal Revenue Code shall include any successor provision thereto.


 


5





















 


2.12         “Participation Level” shall mean the
participation level of I, II or III which is assigned to an Eligible
Employee by the Compensation Committee.


 


2.13         “Plan” shall mean the
KMG Chemicals, Inc. Executive Severance Plan, as set forth in this
document, and as hereafter amended.


 


2.14         “Poor Performance”
shall mean the failure of an Eligible Employee to substantially perform such
Eligible Employee’s duties and responsibilities with the Company (other than
any such failure resulting from incapacity due to physical or mental
illness).  For Eligible Employees who
have been designated as having a Participation Level of I or II, any
determination by the Company of Poor Performance shall be made by the Company’s
Board of Directors.  For Eligible
Employees who have been designated as having a Participation Level of III, any
determination by the Company of Poor Performance shall be made by the Chief
Executive Officer of the Company.  Solely
for purposes of determining Severance Benefits, no termination within 30 days
prior to the effective date of a Change in Control, or during the two (2) year
period immediately following a Change in Control, shall be deemed to be for
Poor Performance.


 


2.15         “Qualifying Termination”
shall mean a termination from the Company which results from either (i) an
affirmative discharge from employment by the Company, other than a discharge
for Cause or Poor Performance, or (ii) a voluntary termination of
employment for Good Reason.  An Eligible
Employee shall not be deemed to have incurred a Qualifying Termination by
reason of the transfer of the Eligible Employee’s employment between the
Company and any subsidiary or among subsidiaries (or among any department or
business unit of the Company).  For
Eligible Employees who have been designated as having a Participation Level of
I or II, the Compensation Committee shall determine whether an Eligible
Employee’s termination from the Company constitutes a “Qualifying Termination.”  For Eligible Employees who have been
designated as having a Participation Level of III, the Chief Executive Officer
shall determine whether an Eligible Employee’s termination from the Company
constitutes a “Qualifying Termination.”


 


2.16         “Release Form” shall mean a
release agreement which is to be signed by the Eligible Employee releasing any
and all claims against the Company and which is in such form as approved
by the Company.


 


2.17         “Severance Benefits” shall mean the
amount of compensation paid to an Eligible Employee who has a Qualifying
Termination, as described in Section IV.


 


Wherever appropriate,
words used in the Plan in the singular may mean the plural, the plural may mean
the singular, and the masculine may mean the feminine.


 


SECTION III

ELIGIBILITY


 


3.1           Eligibility.  Subject to Sections 3.2 and 3.3 of this Plan,
any Eligible Employee is eligible for Severance Benefits in the amount
described in Section IV following his or her Qualifying Termination.


 


6





















 


3.2           Release Form.  An Eligible Employee otherwise eligible to
receive Severance Benefits under this Plan shall be paid such Severance
Benefits only if the Eligible Employee executes and delivers the appropriate
Release Form (substantially in the form of Exhibit A-1 or Exhibit A-2,
as the case may be, attached hereto) to the Company, in accordance with the
instructions and on or before the date specified on the Release Form or
any document accompanying the Release Form, and in the case of an Eligible
Employee age 40 or over, does not revoke the Release Form within seven (7)  days
of executing the Release Form.


 


3.3           Termination of Eligibility
for Severance Benefits.  An
Eligible Employee will cease to be eligible to receive Severance Benefits under
this Plan upon the earlier of the following:


 


(a)            the Eligible Employee’s
death or permanent disability, unless it occurs after the date the Release Form is
executed;


 


(b)            the Eligible Employee’s
voluntary termination of employment for any reason other than Good Reason;


 


(c)            the Eligible Employee’s
discharge for Cause;


 


(d)            the Eligible Employee’s
failure to execute and deliver the Release Form by the date specified on
the Release Form, or such other applicable time period if the Eligible Employee
has made a claim under the claims procedures under Section VI herein; or


 


(e)            upon a Change of Control,
the Eligible Employee has rejected a Comparable Offer of Employment from any
other operation of the Company or any of its affiliate organizations.


 


Notwithstanding anything
herein to the contrary, the Company shall have the right to cease all Severance
Benefit payments and to recover payments previously made to the Eligible
Employee should the Eligible Employee at any time breach the Eligible Employee’s
undertakings under the terms of the Plan, the Release Form executed by the
Eligible Employee to obtain the Severance Benefits under the Plan or the
provisions of the Non-Disclosure, Non-Competition, and Work Product Disclosure
Agreement (or other comparable agreement) executed by the Eligible Employee.


 


SECTION IV

SEVERANCE BENEFITS


 


4.1           General.  If an Eligible Employee has a Qualifying
Termination, the Eligible Employee shall be entitled to the following Severance
Benefits if such Eligible Employee complies with the requirements of Section III.  Notwithstanding the foregoing, if, pursuant
to any applicable law or regulation, the Eligible Employee is entitled to
severance benefits that exceed those described herein, such statutory severance
benefits shall be paid in lieu of the severance benefits payable under the
Plan.


 


7
















 


4.2           Severance Benefits.  The amount of Severance Benefits that an
Eligible Employee is permitted to receive under the terms of this Plan shall be
determined based on (i) the Participation Level that the Eligible Employee
has been assigned to by the Compensation Committee, (ii) whether the
Eligible Employee’s Qualifying Termination occurred within 30 days prior to the
effective date of a Change in Control, and (iii) whether the Eligible
Employee’s employment was terminated for Poor Performance.


 


(a)            For a Qualifying Termination
that occurs more than 30 days prior to the effective date of a Change in
Control, an Eligible Employee shall receive:


 


(i)            payment of all accrued but
unpaid salary,


 


(ii)           a prorated portion of the
Eligible Employee’s target annual short-term incentive award or bonus for the
fiscal year in which the Qualifying Termination occurred, with such proration
to be based on the number of days in such year that the Eligible Employee was
employed, divided by 365; and


 


(iii)          a lump sum payment equal to
the Level Multiple designated below times the Eligible Employee’s Base
Salary.  For purposes of this Subsection,
the following Level Multiples shall apply:


 


	
  Participation Level

  	
   

  	
  Level Multiple

  
	
   

  	
   

  	
   

  
	
  I

  	
   

  	
   

  	
  2.0

  
	
   

  	
   

  	
   

  	
   

  
	
  II

  	
   

  	
   

  	
  1.5

  
	
   

  	
   

  	
   

  	
   

  
	
  III

  	
   

  	
   

  	
  1.0

  



 


(b)            For a Qualifying Termination
that occurs either within 30 days prior to the effective date of a Change in
Control, or during the two (2) year period immediately following a Change
in Control, an Eligible Employee shall receive:


 


(i)            payment of all accrued but
unpaid salary,


 


(ii)           a prorated portion of the
Eligible Employee’s target annual short-term incentive award or bonus for the
fiscal year in which the Qualifying Termination occurred, with such proration
to be based on the number of days in such year that the Eligible Employee was
employed, divided by 365; and


 


(iii)          a lump sum payment equal to
the Level Multiple designated below times the sum of (A) the Eligible
Employee’s Base Salary, plus (B) the Eligible Employee’s target annual
short-term incentive award or bonus for the fiscal year in which the Qualifying
Termination occurs (which shall in no event be lower than the target annual
short-term incentive award or bonus for the fiscal year in which the Change of
Control occurred).  For purposes of this
Subsection, the following Level Multiples shall apply:


 


8

















 


	
  Participation Level

  	
   

  	
  Level Multiple

  
	
   

  	
   

  	
   

  
	
  I

  	
   

  	
   

  	
  2.5

  
	
   

  	
   

  	
   

  	
   

  
	
  II

  	
   

  	
   

  	
  2.0

  
	
   

  	
   

  	
   

  	
   

  
	
  III

  	
   

  	
   

  	
  1.5

  



 


(c)            If an Eligible Employee’s
employment with the Company is terminated for Poor Performance more than 30
days prior to the effective date of a Change in Control, an Eligible Employee
shall receive:


 


(i)            payment of all accrued but
unpaid salary, and


 


(ii)           a lump sum payment equal to
the Level Multiple designated below times the Eligible Employee’s Base
Salary.  For purposes of this Subsection,
the following Level Multiples shall apply:


 


	
  Participation Level

  	
   

  	
  Level Multiple

  
	
   

  	
   

  	
   

  
	
  I

  	
   

  	
   

  	
  1.0 

  
	
   

  	
   

  	
   

  	
   

  
	
  II

  	
   

  	
   

  	
  0.75

  
	
   

  	
   

  	
   

  	
   

  
	
  III

  	
   

  	
   

  	
  0.5 

  



 


(d)            Severance Benefits under this Section 4.2
shall be paid in the form of a single lump sum payment in cash ten (10) days
following receipt by the Company of an executed Release Form or, where
applicable, following the expiration of the revocation period provided for on
such Release Form.  If an Eligible
Employee fails to return an executed Release Form to the Company within
thirty (30) days following his or her Qualifying Termination, or such other
applicable time period if the Eligible Employee has made a claim under the
claims procedures under Section VI herein, such Eligible Employee’s rights
to Severance Benefits shall be immediately forfeited and he or she shall not be
entitled to any payments pursuant to this Plan.


 


(e)            If an Eligible Employee dies
following execution of the Release Form, but before receiving all or part of
the Severance Pay to which he is entitled, the Company shall pay such Eligible
Employee’s Severance Pay to the Eligible Employee’s estate.


 


4.3           Equity Compensation Benefit.


 


(a)            An Eligible Employee who
incurs a Qualifying Termination more than 30 days prior to the effective date
of a Change of Control shall be permitted to exercise any and all of his or her
vested stock options under any of the Company’s equity compensation plans for a
period equal to the lesser of (i) twenty-four (24) months after the date
of the Qualifying Termination, or (ii) the remaining exercise period
provided under the option agreement and/or equity compensation plan.


 


(b)            Upon a Change of Control, an
Eligible Employee who incurs a Qualifying Termination on the effective date of
a Change of Control (or within 30 days prior thereto) 


 


9

















 


shall have all of his or her stock options,
shares of restricted stock and other equity compensation awards become fully
vested and immediately exercisable.


 


(c)            Upon a Change of Control, an
Eligible Employee whose employment is not subject to a Qualifying Termination
upon such Change of Control shall have all of his or her stock options, shares
of restricted stock and other equity compensation awards become fully vested
and immediately exercisable.


 


The
provisions of this Section 4.3 shall not reduce or otherwise adversely
affect any benefits that an Eligible Employee may have under the terms of any
of the Company’s equity compensation plans, or any individual award agreement
issued to an Eligible Employee pursuant to any of such plans.


 


4.4           Section 409A.  Notwithstanding any provision of this Plan,
to the extent that any amount payable hereunder is classified as “nonqualified
deferred compensation” under Code Section 409A and Treasury Regulation Section 1.409A-1(b)(1) and
such amount is payable to a “specified employee” as described in Code Section 409A(a)(2)(B),
then the payment of such amount shall be delayed for six (6) months and
one day.


 


4.5           Section 280G.  In the event that the payments and other
benefits provided for in this Plan or otherwise payable to an Eligible Employee
(i) constitute “parachute payments” within the meaning of Code Section 280G(b)(2),
and (ii) but for this Section 4.5, would be subject to the excise tax
imposed by Code Section 4999 (or any corresponding provisions of state
income tax law), then the Eligible Employee’s Severance Benefits hereunder
shall be either:


 


(a)           delivered in full, or


 


(b)           delivered as to such lesser extent which would result
in no portion of such benefits being subject to excise tax under Code Section 4999,


 


whichever of the foregoing amounts, taking into account the applicable
federal, state and local income taxes and the excise tax imposed by Code Section 4999,
results in the receipt by the Eligible Employee on an after-tax basis, of the
greater amount of benefits, notwithstanding that all or some portion of such
benefits may be taxable under Code Section 4999.  Any determination required under this Section 4.5
shall be made in writing by the Company’s independent public accountants (the “Accountants”),
whose determination shall be conclusive and binding upon the Executive and the
Company for all purposes.  For purposes
of making the calculations required by this Section 4.5, the Accountants
may make reasonable assumptions and approximations concerning applicable taxes
and may rely on reasonable, good faith interpretations concerning the
application of Code Sections 280G and 4999. 
The Company and the Eligible Employee shall furnish to the Accountants
such information and documents as the Accountants may reasonably request in
order to make a determination under this Section.  The Company shall bear all costs the
Accountants may reasonably incur in connection with any calculations
contemplated by this Section 4.5. 
In the event that Subsection (a) above applies, then the Eligible
Employee shall be responsible for any excise taxes imposed with respect to such
benefits.  In the event that Subsection (b) above
applies, then the amount payable under Section 4.2 shall be reduced to the
extent necessary to avoid imposition of such excise taxes.


 


10

















 


SECTION V

FUNDING


 


Funding for this Plan shall come solely from
the general assets of the Company.  All
payments of Severance Pay shall be paid from the general assets of the
Company.  Neither the Company nor the
Compensation Committee shall have any obligation to establish a trust or fund
for the payment of benefits under the Plan or to insure any of the benefits
under the Plan.  None of the officers,
members of the Board of Directors, or agents of the Company or the Compensation
Committee guarantees in any manner the payment of benefits hereunder.


 


SECTION VI

CLAIMS PROCEDURE


 


6.1           Filing and Initial
Determination of Claim.  An
Eligible Employee or his/her duly authorized representative may file a claim
for a benefit to which the claimant believes that he or she is entitled.  Such a claim must be in writing and delivered
to the Compensation Committee by postage prepaid certified mail.  Within fifteen (15) days after receipt of a
claim, the Compensation Committee shall send to the claimant by certified mail,
postage prepaid, notice of the granting or denying, in whole or in part, of
such claim, unless special circumstances require an extension of time for
processing the claim.  In no event
may the extension exceed fifteen (15) days from the end of the initial
period.  If such extension is necessary,
the claimant will be given a written notice to this effect prior to the
expiration of the initial fifteen (15)-day period.  The extension notice shall indicate the
special circumstances requiring an extension of time and the date by which the
Plan expects to render the benefit determination.  The Compensation Committee shall have full
discretion to deny or grant a claim in whole or in part.  If notice of the denial of a claim is not
furnished in accordance with this Section 6.1, the claim shall be deemed
denied and the claimant shall be permitted to exercise his/or right to review
pursuant to Section 6.3.


 


6.2           Duty of Compensation
Committee Upon Denial of Claim.  If a claim for benefits is denied, the
Compensation Committee shall provide to the claimant written notice setting
forth in a manner calculated to be understood by the claimant:  (i) the specific reason or reasons for
the denial; (ii) specific reference to pertinent Plan provisions on which
the denial is based; (iii) a description of any additional material or
information necessary for the claimant to perfect the claim and an explanation
of why such material is necessary; and (iv) a description of the Plan’s
claims review procedure and the time limits applicable to such procedures,
including a statement of the claimant’s right to bring a civil action under Section 502(a) of
ERISA following a denial of the claim on review.


 


6.3           Request for Review of Claim
Denial.  If an Eligible Employee
receives written notification of the denial in whole or in part of his/her
claim pursuant to Section 6.1, within sixty (60) days of the Eligible
Employee’s receipt of claim denial or the date the employee becomes aware that
he is not eligible for benefits under this Plan, if the claimant disagrees with
such action, the claimant or his/her authorized representative shall file a
written request with the Compensation Committee that it conduct a full and fair
review of the denial of the claim for benefits. 
In connection with any request for a review of the denial of a claim for
benefits, the claimant shall have the opportunity to submit written comments,
documents, records, and other information relating to the claim for
benefits.  The Compensation Committee
shall provide the 


 


11

















 


claimant, upon request and free of charge,
reasonable access to, and copies of, all documents, records, and other
information relevant to the claimant’s claim for benefits.  A document, record, or other information
shall be considered “relevant” to a claim for benefits if that document, record
or other information:  (i) was
relied upon in making the benefit determination; (ii) was submitted,
considered, or generated in the course of making the benefit determination,
without regard to whether such document, record or other information was relied
upon in making the benefit determination; or (iii) demonstrates compliance
with the administrative process and safeguards required by ERISA in making the
benefit determination.  The review of a
denial shall take into account all comments, documents, records, and other
information submitted by the claimant, without regard to whether such
information was submitted or considered in the initial benefit determination.


 


6.4           Decision on Review of Denial.  Upon receipt of the request for review, the
Compensation Committee shall review the claim and shall deliver to the claimant
a written decision on the claim for benefits within sixty (60) days after the
receipt of the aforesaid request for review, except that if there are special
circumstances (such as the need to hold a hearing, if necessary) that require
an extension of time for processing, the aforesaid sixty (60) day period shall
be extended to one hundred twenty (120) days and the claimant will be given
written notice of the extension prior to the expiration of the initial 60-day
period.  In no event shall such extension
exceed a period of sixty (60) days from the end of the initial 60-day
period.  The extension notice shall
indicate the special circumstances requiring an extension of time and the date
by which the Plan expects to render the determination on review.


 


The Compensation Committee’s decision shall
be written in a manner calculated to be understood by the claimant.  Any notice of a denial on review shall
include (i) the specific reason or reasons for the denial on review; (ii) reference
to the specific plan provisions on which the denial is based; (iii) a
statement that the claimant is entitled to receive, upon request and free of
charge, reasonable access to, and copies of all documents, records, and other
information relevant to the claimant’s claim for benefits; and (iv) a
statement of the claimant’s right to bring an action under Section 502(a) of
ERISA.  If notice of the decision on the
review is not furnished in accordance with this Section 6.4, the claim
shall be deemed denied and the Compensation Committee will have no further duty
to review such claim.


 


SECTION VII

ADMINISTRATION OF THE PLAN


 


7.1           Responsibilities.  The Compensation Committee shall be the “administrator”
(as defined in Section 3(16)(A) of ERISA) of the Plan, and shall be
responsible for all obligations under the Internal Revenue Code and ERISA and
all other obligations required or permitted to be performed by the Compensation
Committee and not otherwise delegated pursuant to the Plan.  The Compensation Committee shall be the
designated agent for service of legal process.


 


7.2           Allocation and Delegation of
Compensation Committee Responsibilities.  The Compensation Committee may appoint
such assistants or representatives as it deems necessary for the effective
exercise of its duties in administering the Plan and may delegate to such
assistants and representatives any powers and duties, both ministerial and
discretionary, as it deems expedient or appropriate.  The Compensation Committee also
may designate any person, firm or corporation to carry out any of the
other responsibilities of the Compensation Committee 


 


12

















 


under the Plan.  Any such allocation or designation shall be
made pursuant to a written instrument executed by the Compensation Committee.


 


7.3           Actions of Fiduciaries.  The Compensation Committee may authorize or
approve any action by written instrument signed by a person duly authorized to
act on behalf of the Compensation Committee. 
Any written memorandum signed by any such duly authorized person or by
any other person duly authorized by the Compensation Committee to act in
respect of the subject matter of the memorandum, shall have the same force and
effect as a formal resolution adopted by the Compensation Committee.  All acts and determinations with respect to
the administration of the Plan made by the Compensation Committee and any
assistants or representatives appointed by it shall be duly recorded by the
Compensation Committee or by the assistant or representative appointed by it to
keep such records.  All records, together
with such other documents as may be necessary for the administration of
the Plan, shall be preserved in the custody of the Compensation Committee or
the assistants or representatives appointed by it.


 


7.4           General Administrative
Powers.  Except as otherwise provided
herein, the Compensation Committee is authorized to take such actions as
may be necessary to carry out the provisions and purposes of the Plan and
shall have the authority to control and manage the operation and administration
of the Plan.  In order to effectuate the
purposes of the Plan, the Compensation Committee shall have the discretionary
authority and power to construe and interpret the Plan, to supply any omissions
therein, to reconcile and correct any errors or inconsistencies, to decide any
questions in the administration and application of the Plan, and to make
equitable adjustments for any mistakes or errors made in the administration of
the Plan.  All such actions or
determinations made in good faith by the Compensation Committee, and the
application of rules and regulations to a particular case or issue by the
Compensation Committee shall, subject to the claims procedures set forth in Section VI
hereof, be final, binding and conclusive on all persons ever interested
hereunder.  In construing the Plan and in
exercising its power under provisions requiring the Compensation Committee’s
approval, the Compensation Committee shall attempt to ascertain the purpose of
the provisions in question and when such purpose is known or reasonably
ascertainable, such purpose shall be given effect to the extent feasible.  In the discharge of this discretionary
authority the Compensation Committee shall have all necessary powers and
duties, including but not limited to the following:


 


(a)            to require any person to
furnish such information as is reasonably necessary or appropriate for
administration of the Plan as a condition to receiving benefits under the Plan;


 


(b)            to make such rules and
regulations and prescribe the use of such forms as he shall deem necessary for
the efficient administration of the Plan;


 


(c)            to establish or cause to be
established such procedures, protocols and guidelines as he shall deem
necessary to interpret the terms and conditions of the Plan;


 


(d)            to decide on questions
concerning eligibility and employment termination in accordance with the terms
of the Plan;


 


13
















 


(e)           to determine the amount
of benefits payable to an Eligible Employee, in accordance with the Plan, and
to provide a full and fair review to any Eligible Employee whose claim for
benefits has been denied in whole or in part; and


 


(f)            to designate other persons
to carry out any duty or power which would otherwise be a fiduciary
responsibility of the Compensation Committee, under the terms of the Plan.


 


7.5           Appointment
of Professional Assistance.  The
Compensation Committee may engage accountants, attorneys and such other
personnel as it deems necessary or advisable. 
The functions of any such persons engaged by the Compensation Committee
shall be limited to the specific services and duties for which they are
engaged, and such persons shall have no other duties, obligations or
responsibilities under the Plan.  Unless
otherwise specifically so delegated, such persons shall exercise no
discretionary authority or discretionary control respecting the management of
the Plan.


 


7.6           Discretionary
Acts.  Any discretionary actions of
the Compensation Committee with respect to the administration of the Plan shall
be made in a manner which does not discriminate in favor of stockholders,
officers and highly compensated employees.


 


7.7           Responsibility
of Fiduciaries.  The Compensation
Committee and its assistants and representatives shall be free from all
liability for their acts and conduct in the administration of the Plan except
for acts of gross negligence, fraud or willful misconduct; provided, however,
that the foregoing shall not relieve any of them from any responsibility or
liability for any responsibility, obligation or duty that they may have
pursuant to ERISA.


 


7.8           Indemnity
by Company.  In the event and to the
extent not insured against by any insurance company pursuant to provisions of
any applicable insurance policy, the Company shall indemnify and hold harmless
the Compensation Committee and its assistants and representatives from any and
all claims, demands, suits or proceedings in connection with the Plan that may
be brought by the Company’s employees or their legal representatives, or by any
other person, corporation, entity, government or agency thereof, including any
amounts paid in settlement, with the approval of the Compensation Committee,
and any and all other losses, damages, interest, expenses, including counsel
fees approved by the Compensation Committee, and penalties, including any
penalties imposed by the Secretary of Labor pursuant to Section 502(l) of ERISA
relating to any breaches of fiduciary responsibility under Part 4 of Title I of
ERISA, arising from any action or failure to act, except where the same is
judicially determined to be due to gross negligence, fraud, or willful
misconduct of such individual in connection with the Plan.


 


The indemnification contained in this Section shall
apply regardless of whether the event causing the liability arises in whole or
in part from the negligence (other than judicially determined gross negligence)
or other fault on the part of the individual, specifically including breaches
of fiduciary responsibility under ERISA.


 


14

















 


SECTION VIII


AMENDMENT
AND TERMINATION OF THE PLAN


 


The Plan, and any part thereof, is subject to
amendment, waiver, individual adjustment or termination by the Compensation
Committee at any time and from time to time, for any reason; provided, however,
that, without an Eligible Employee’s written consent, no such amendment,
waiver, adjustment or termination shall decrease or otherwise adversely affect (i) the
rights or entitlements under the Plan possessed by an Eligible Employee,
whether prior to or after the Qualifying Termination of such Eligible Employee,
or (ii) the benefits under the Plan to which an Eligible Employee is then
entitled or with respect to which such Eligible Employee may become entitled
upon a Qualifying Termination.  If not
sooner terminated, this Plan shall terminate when all liabilities provided for
hereunder have been fully discharged.


 


Any amendment to this Plan shall be
effectuated by a written instrument signed by the Compensation Committee and
shall be incorporated into the Plan document. 
Any amendment or restatement may be made retroactive if, in the judgment
of the Compensation Committee, such retroactivity is necessary or advisable for
any reason.  Notwithstanding the above,
this Plan may not be terminated or amended within two (2) years following
a Change in Control.


 


SECTION IX


VESTING


 


No Eligible Employee shall have a vested
right to any benefit under this Plan prior to the time a determination is made
by the Compensation Committee that the particular Eligible Employee is entitled
to receive benefits under the Plan.


 


SECTION X


STATUS
OF EMPLOYMENT RELATIONS


 


The adoption and maintenance of the Plan
shall not be deemed to constitute a contract between any Company and its
employees or to be consideration for, or an inducement or condition of, the
employment of any person.  Nothing herein
contained shall be deemed: (i) to give to any employee the right to be retained
in the employ of the Company; (ii) to affect the right of the Company to
discipline or discharge any employee at any time; (iii) to give the
Company the right to require any employee to remain in its employ; or (iv) to
affect any employee’s right to terminate his employment at any time.


 


SECTION XI


RESTRICTIONS
ON ASSIGNMENT


 


The benefits provided hereunder are not
subject in any manner to the debts or other obligations of the persons to whom
they are payable.  The interest of an
Eligible Employee may not be sold, transferred, assigned or encumbered in any
manner, either voluntarily or involuntarily, and any attempt so to anticipate,
alienate, sell, transfer, assign, pledge, encumber, or charge the same shall be
null and void.


 


15

















 


SECTION XII


APPLICABLE
LAW


 


To the extent not preempted by ERISA, the
Plan shall be construed, regulated, interpreted and administered under and in
accordance with the laws of the State of Texas.


 


SECTION XIII


INTERPRETATION
OF THE PLAN


 


It is the intention of the Company that the
Plan shall comply with the Internal Revenue Code, and the regulations
thereunder, the requirements of ERISA and the corresponding provisions of any
subsequent laws; the provisions of the Plan shall be construed to effectuate
such intention.


 


IN WITNESS WHEREOF, KMG
Chemicals, Inc. has caused the Plan to be signed by its duly authorized
officer on this 10th day of October, 2008.


 


 


	
   

  	
   

  	
  KMG CHEMICALS, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ J. Neal Butler

  
	
   

  	
   

  	
  Name:

  	
  J. Neal Butler

  
	
   

  	
   

  	
  Title:

  	
  President and CEO

  
						



 


16

















 


EXHIBIT A - 1


 


Release Forms


 


SEVERANCE AND RELEASE AGREEMENT
FOR EMPLOYEES 40 AND OVER


 


This Severance and Release Agreement (“Agreement”)
is by and between                           
(“Employee”) and KMG Chemicals, Inc. (“Employer”).


 


1.             Termination of Employment; Unpaid
Wage and Benefits.  Employee acknowledges that his/her employment
is terminated effective
                      ,
200    .  Employee
acknowledges that all wages, unused but accrued vacation pay or other paid time
off owing to Employee under Employer’s policies, and unpaid expense
reimbursements due to Employee (if any) have been paid to Employee or will be
paid to Employee within six days of the date of termination.  Any expense reimbursements which have not
been submitted yet, should be submitted within 5 days of termination and will
be paid within 10 business days after submission.


 


2.             Severance.  In
exchange for Employee’s promises in this Agreement and pursuant to Employer’s
Executive Severance Plan, Employer will provide the severance payment to
Employee in the sum of
$                      
(the “Severance”), less applicable withholdings, the receipt and
sufficiency of which is hereby acknowledged, to be paid within 5 business days
after the expiration of the revocation period discussed in paragraph 4
below.  Employee understands and
acknowledges that the Severance from Employer stated above is only made available
to him/her in exchange for his/her promises made in this Agreement and is not
otherwise due to Employee under the Executive Severance Plan or otherwise.  Employee understands that he/she is
responsible for the payment of all taxes due because of the Severance.


 


3.             Release of all Claims.  In
consideration for the Severance from Employer stated above, Employee
voluntarily and knowingly waives, releases, and discharges the Employer, its
parent, predecessor, successor, subsidiary, and affiliate companies, and all of
their employees, officers, directors, owners, agents and assigns from all
claims, liabilities, demands, and causes of action, known or unknown, fixed or
contingent, which Employee may have or claim to have against any of them as a
result of Employee’s employment and/or termination from employment and/or as a
result of any other matter arising through the date of Employee’s signature on
this Agreement.  Employee agrees not to
file a lawsuit to assert any such released claims and Employee agrees not to
accept any monetary damages or other personal relief (including legal or
equitable relief) in connection with any administrative claim or lawsuit filed
by any person or entity.


 


This waiver, release and discharge includes,
but is not limited to: (1) claims arising under federal, state, or local
laws regarding employment or prohibiting employment discrimination such as,
without limitation, Title VII of the Civil Rights Act of 1964, the Equal Pay
Act, the Age Discrimination in Employment Act, the Older Workers’ Benefit
Protection Act, the National Labor Relations Act, Section 1981 of the
Civil Rights Act of 1866, the Americans with Disabilities Act, the Fair Labor
Standards Act, the Family and Medical Leave Act (FMLA), Chapters 21, 61 and 451
of the Texas Labor Code, the Sarbanes Oxley Act of 2002, the Comprehensive
Omnibus Budget Reconciliation act of 1985 (COBRA), and the Worker Adjustment
and Retraining Notification (WARN) Act, (2) claims for breach of oral or
written express or implied contract or promissory estoppel or quantum meruit, (3) claims
for personal injury, harm, or other damages (whether intentional or
unintentional and whether occurring on the job or not, including, without
limitation, negligence, defamation, misrepresentation, fraud, intentional
infliction of emotional distress, assault, battery, invasion of privacy, and
other such claims), (4) claims growing out of any legal restrictions on
the Employer’s right to terminate its employees including any claims based on 


 


17

















 


any violation of public policy or retaliation for filing a workers’
compensation claim, (5) claims for workers compensation, wages or any
other compensation other than any pending workers’ compensation benefits claim,
or (6) claims for benefits including, without limitation, those arising
under the Employee Retirement Income Security Act.


 


Nothing in this Section 3 shall be
construed to restrict or prevent Employee from filing a charge or claim with
the Equal Employment Opportunity Commission (“EEOC”)or any other state
or federal administrative agency or from participating in an investigation
conducted by such administrative agency. 
However, Employee understands and recognizes that even if a charge is
filed by Employee or on Employee’s behalf with an administrative agency,
Employee will not be entitled to any damages relating to any event which
occurred prior to Employee’s execution of this Agreement.


 


4.             Release of Age Discrimination
Claims.  In addition, Employee acknowledges that this
Agreement is written in a manner calculated to be understood by Employee and
that Employee in fact understands the terms, conditions and effect of this
Agreement.  This Agreement refers to
rights or claims arising under the Age Discrimination in Employment Act and
Older Workers’ Benefit Protection Act. 
This Agreement does not impose any condition precedent, any penalty, or
any other limitation adversely affecting the Employee’s right to file a charge
or complaint, including a challenge to the validity of this Agreement, with the
EEOC, or to participate in any investigation or proceeding conducted by the
EEOC.


 


Employee further agrees and acknowledges the
following:


 


·      Employee does not waive rights or claims that
may arise after the date this Agreement is executed;


 


·      Employee waives rights or claims only in
exchange for consideration in addition to anything of value to which Employee
is already entitled;


 


·      Employee is hereby advised in writing to
consult with an attorney prior to executing the Agreement;


 


·      Employee acknowledges that he/she had
reasonable and sufficient time to consult with an attorney prior to executing
this Agreement, and has either done so or has freely chosen not to do so;


 


·      Employee acknowledges that Employer provided
him/her with Annex I as an attachment to this Agreement;


 


·      Annex I informs the Employee in writing in a manner calculated to be
understood by the Employee, as to all employees considered for termination and
offer of severance, all eligibility factors by which employees were selected
for termination and offer of severance, any time limits applicable to the
termination and offer of severance, the job titles and ages of all employees
selected for termination and offer of severance, and the ages of all employees
considered, but not selected for termination and offer of severance;


 


·      Employee has forty-five (45) days in which to
consider this Agreement and Annex I to this Agreement before accepting,
but need not take that long if the Employee does not wish to (and Employee
acknowledges that any decision to sign this Agreement prior to the expiration
of the 45 day period was knowing and voluntary and not because of Employer’s
fraud, misrepresentation or a threat to withdraw or alter the offer);


 


·      this Agreement allows a period of seven (7) days
following execution of the Agreement in which Employee may revoke this
Agreement;


 


·      this Agreement shall not become effective or
enforceable until the seven (7) day revocation period has expired; and,


 


·      Employee fully understands all of the terms
of this waiver agreement and knowingly and voluntarily enters into this
Agreement.


 


18

















 


Employee has been given this Agreement to
consider on
                  ,
200     and any notice of acceptance or revocation should
be made by Employee by hand delivery, mail, fax or email to
                                            
[insert name, address, fax and email]. 
Nothing in Section 3 shall be construed to restrict or prevent
Employee from filing a charge or complaint, including a challenge to the
validity of this Agreement, with the EEOC or from participating in an
investigation or proceeding conducted by the EEOC.  However, Employee understands and recognizes
that even if a charge is filed by Employee or on Employee’s behalf with an
administrative agency, Employee will not be entitled to any damages relating to
any event which occurred prior to Employee’s execution of this Agreement.


 


5.             No Admission. 
Employee understands this Agreement is not and shall not be deemed or
construed to be an admission by Employer of any wrongdoing of any kind or of
any breach of any contract, law, obligation, policy, or procedure of any kind
or nature.


 


6.             Entire Agreement. 
Employee has carefully read and fully understands all of the terms of
this Agreement.  Employee agrees that
this Agreement sets forth the entire agreement between the Employer and
Employee regarding all issues except that it does not replace existing
agreements (if any) regarding confidentiality, non-disclosure or
non-solicitation obligations.


 


7.             Representations; Modifications;
Severability.  Employee acknowledges that Employee has not
relied upon any representations or statements, written or oral, not set forth
in this Agreement.  This Agreement cannot
be modified except in writing and signed by both parties.  If any part of this Agreement is found to be
unenforceable by a court of competent jurisdiction, then such unenforceable
portion will be severed from and shall have no effect upon the remaining
portions of the Agreement.


 


8.             Applicable Law.  This
Agreement shall be governed by and interpreted under the laws of the State of
Texas without regard to conflict of laws. 
The parties agree that any dispute concerning this Agreement shall be
brought only in a court of competent jurisdiction in Harris County, Houston,
Texas unless applicable law requires the filing in another forum.


 


[Rest of Page Intentionally
Left Blank]


 


19

















 


9.             Employee and Employer.  The
benefits and obligations of this Agreement apply not only to the Employer and
Employee, but also, respectively, to the Employer’s parent, predecessor,
successor, subsidiary, and affiliate companies, and all of their employees,
officers, directors, owners, agents and assigns, and the Employee’s children,
spouse, family, heirs, executors, legal representatives, and/or successors or
assigns and any claims they may have regarding Employee’s employment with
Employer.  Employee represents and
warrants that Employee has full power, authority, and capacity to make the commitments
contained in this Agreement and that Employee has not assigned or transferred
all or any portion of any claim released by this Agreement.


 


AGREED AND ACCEPTED on this
          day of
                    ,
200    .


 


I have read, and understand, and
voluntarily agree to enter into, the Agreement set forth above.


 


 


	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Employee Signature & Printed Name

  



 


AGREED AND ACCEPTED on this
        day of
                ,
200    .


 


	
   

  	
   

  	
  KMG Chemicals, Inc.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Printed Name:

  	
   

  
	
   

  	
   

  	
  Printed Title:

  	
   

  
						



 


Annex I


[Please consult your attorney
about the information to be disclosed in Annex I]


 


This Annex I includes information relevant to
the employment termination program of which your termination is a part.  Annex I includes information regarding:


 


(a) Any class, unit, or group of
individuals covered by such program, any eligibility factors for such program,
and any time limits applicable to such program; and


 


(b) the job titles and ages of all
individuals eligible or selected for the program, and the ages of all
individuals in the same job classification or organizational unit who are not
eligible or selected for the program.


 


20

















 


EXHIBIT A - 2


 


SEVERANCE AND RELEASE AGREEMENT
FOR EMPLOYEES UNDER 40


 


This Severance and Release Agreement (“Agreement”)
is by and between
                          
(“Employee”) and KMG Chemicals, Inc. (“Employer”).


 


1.             Termination of Employment; Unpaid
Wage and Benefits.  Employee acknowledges that his/her employment
is terminated effective
                      ,
200    .  Employee
acknowledges that all wages, unused but accrued vacation pay or other paid time
off owing to Employee under Employer’s policies, and unpaid expense
reimbursements due to Employee (if any) have been paid to Employee or will be
paid to Employee within six days of the date of termination.  Any expense reimbursements which have not
been submitted yet, should be submitted within 5 days of termination and will
be paid within 10 business days after submission.


 


2.             Severance.  In
exchange for Employee’s promises in this Agreement and pursuant to Employer’s
Executive Severance Plan, Employer will provide the severance payment to
Employee in the sum of
$                      
(the “Severance”), less applicable withholdings, the receipt and
sufficiency of which is hereby acknowledged, to be paid within 5 business days
after Employee signs this Agreement. 
Employee understands and acknowledges that the Severance from Employer
stated above is only made available to him/her in exchange for his/her promises
made in this Agreement and is not otherwise due to Employee under the Executive
Severance Plan or otherwise.  Employee
understands that he/she is responsible for the payment of all taxes due because
of the Severance.


 


3.             Release of all Claims.  In
consideration for the Severance from Employer stated above, Employee
voluntarily and knowingly waives, releases, and discharges the Employer, its
parent, predecessor, successor, subsidiary, and affiliate companies, and all of
their employees, officers, directors, owners, agents and assigns from all
claims, liabilities, demands, and causes of action, known or unknown, fixed or
contingent, which Employee may have or claim to have against any of them as a
result of Employee’s employment and/or termination from employment and/or as a
result of any other matter arising through the date of Employee’s signature on
this Agreement.  Employee agrees not to
file a lawsuit to assert any such released claims and Employee agrees not to
accept any monetary damages or other personal relief (including legal or
equitable relief) in connection with any administrative claim or lawsuit filed
by any person or entity.


 


This waiver, release and discharge includes,
but is not limited to: (1) claims arising under federal, state, or local
laws regarding employment or prohibiting employment discrimination such as,
without limitation, Title VII of the Civil Rights Act of 1964, the Equal Pay
Act, the Age Discrimination in Employment Act, the Older Workers’ Benefit
Protection Act, the National Labor Relations Act, Section 1981 of the
Civil Rights Act of 1866, the Americans with Disabilities Act, the Fair Labor
Standards Act, the Family and Medical Leave Act (FMLA), Chapters 21, 61 and 451
of the Texas Labor Code and, the Sarbanes Oxley Act of 2002, Comprehensive
Omnibus Budget Reconciliation act of 1985 (COBRA), the Worker Adjustment and
Retraining Notification (WARN) Act, (2) claims for breach of oral or
written express or implied contract or promissory estoppel or quantum meruit, (3) claims
for personal injury, harm, or other damages (whether intentional or
unintentional and whether occurring on the job or not, including, without
limitation, negligence, defamation, misrepresentation, fraud, intentional
infliction of emotional distress, assault, battery, invasion of privacy, and
other such claims), (4) claims growing out of any legal restrictions on
the Employer’s right to terminate its employees including any claims based on
any violation of public policy or retaliation for filing a workers’
compensation claim, (5) claims for workers compensation, wages or any
other compensation other than any pending workers’ compensation 


 


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benefits claim, or (6) claims for benefits including, without
limitation, those arising under the Employee Retirement Income Security Act.


 


Nothing in this Section 3 shall be construed to
restrict or prevent Employee from filing a charge or claim with the Equal
Employment Opportunity Commission or any other state or federal administrative
agency or from participating in an investigation conducted by such
administrative agency.  However, Employee
understands and recognizes that even if a charge is filed by Employee or on
Employee’s behalf with an administrative agency, Employee will not be entitled
to any damages relating to any event which occurred prior to Employee’s
execution of this Agreement.


 


4.             No Admission. 
Employee understands this Agreement is not and shall not be deemed or
construed to be an admission by Employer of any wrongdoing of any kind or of
any breach of any contract, law, obligation, policy, or procedure of any kind
or nature.


 


5.             Entire Agreement. 
Employee has carefully read and fully understands all of the terms of
this Agreement.  Employee agrees that
this Agreement sets forth the entire agreement between the Employer and
Employee regarding all issues except that it does not replace existing
agreements (if any) regarding confidentiality, non-disclosure or
non-solicitation obligations.


 


6.             Representations; Modifications;
Severability.  Employee acknowledges that Employee has not
relied upon any representations or statements, written or oral, not set forth
in this Agreement.  This Agreement cannot
be modified except in writing and signed by both parties.  If any part of this Agreement is found to be
unenforceable by a court of competent jurisdiction, then such unenforceable
portion will be severed from and shall have no effect upon the remaining
portions of the Agreement.


 


7.             Applicable Law.  This
Agreement shall be governed by and interpreted under the laws of the State of
Texas without regard to Conflict of Laws. 
The parties agree that any dispute concerning this Agreement shall be
brought only in a court of competent jurisdiction in Harris County, Houston,
Texas unless applicable law requires the filing in another forum.


 


8.             Employee and Employer.  The
benefits and obligations of this Agreement apply not only to the Employer and
Employee, but also, respectively, to the Employer’s parent, predecessor,
successor, subsidiary, and affiliate companies, and all of their employees,
officers, directors, owners, agents and assigns, and the Employee’s children,
spouse, family, heirs, executors, legal representatives, and/or successors or
assigns and any claims they may have regarding Employee’s employment with
Employer.  Employee represents and
warrants that Employee has full power, authority, and capacity to make the
commitments contained in this Agreement and that Employee has not assigned or
transferred all or any portion of any claim released by this Agreement.


 


AGREED AND ACCEPTED on this
          day of
                    ,
200    .


 


I have
read, and understand, and voluntarily agree to enter into, the Agreement set
forth above.


 


 


	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Employee Signature & Printed Name

  



 


AGREED AND ACCEPTED on this
        day of
                ,
200    .


 


	
   

  	
   

  	
  KMG Chemicals, Inc.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Printed Name:

  	
   

  
	
   

  	
   

  	
  Printed Title:

  	
   

  
						



 


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