Document:

Exhibit 10.03

 

KMG
AMERICA CORPORATION

2004
EQUITY INCENTIVE PLAN

 

Nonqualified
Stock Option Agreement

 

No. of shares subject to

Incentive Stock Option:          

 

THIS NONQUALIFIED STOCK OPTION AGREEMENT
(this “Agreement”) dated as of the     day of        ,
20   , by and between KMG AMERICA CORPORATION, a Virginia corporation
(the “Company”), and                      
(the “Participant”), is made pursuant and subject to the provisions of the
Company’s 2004 Equity Incentive Plan (the “Plan”), which is available on the
Company’s website at http://www.kmgamerica.com. 
All terms used but not defined herein that are defined in the Plan have
the same meaning given them in the Plan.

 

1.             Grant of Option.  Pursuant to the Plan, effective as of the
fifth business day prior to the last calendar day of the third calendar quarter
of 2005, the Company grants to the Participant, subject to the terms and
conditions of the Plan and subject further to the terms and conditions herein
set forth, the right and option to purchase from the Company all or any part of
an aggregate of        shares of the common stock
of the Company (the “Common Stock”) at an exercise price per share equal to the
Fair Market Value of a share of the Common Stock on the Date of Grant.  This Option is intended to be treated as a
nonqualified stock option, which is not subject to Code Section 422.  This Option is exercisable as hereinafter
provided.

 

2.             Terms and Conditions.  This Option is subject to the following terms
and conditions:

 

(a)                                  Expiration Date.  This Option shall expire at 11:59 p.m.
on the tenth annual anniversary of the Date of Grant (the “Expiration Date”).  In no event shall the Expiration Date be
later than 10 years from the Date of Grant.

 

(b)                                 Vesting and Exercise of Option.  Except as provided herein, this Option shall
become exercisable at the time or times set forth on Schedule A
attached hereto.  Once this Option has
become exercisable in accordance with the preceding sentence, it shall continue
to be exercisable until the earlier of the termination of the Participant’s
rights hereunder as set forth on Schedule A attached hereto or
until the Expiration Date.  A partial
exercise of this Option shall not affect the Participant’s right to exercise
the Option with respect to the remaining shares, subject to the conditions of
the Plan and this Agreement.

 

(c)                                  Method of Exercise and Payment
for Shares.  This Option shall be exercised by delivering
written notice of exercise to the attention of the Company’s Secretary at the
Company’s address specified in paragraph 7

 

 

below. 
The exercise date shall be (i) in the case of notice by mail, the
date of postmark; or (ii) if delivered in person, the date of
delivery.  Such notice shall be
accompanied by payment of the Option price in full.  The Participant may pay part or all of the
Option price (i) in cash; (ii) by certified check; (iii) by
tendering shares of Common Stock (which, if acquired from the Company, have
been held by the Participant for at least six months); (iv) by a
broker-assisted cashless exercise; or (v) by any combination of the
aforementioned methods of payment.  Such
notice of exercise shall be accompanied by payment, in cash or any other method
allowed for payment of the Option price, of any required income and employment
withholding taxes attributable to the exercise of the Option.

 

(d)                                 Transferability.  This Option generally is
nontransferable.  Generally, during the
Participant’s lifetime, only the Participant may exercise this Option, except
that notwithstanding the foregoing, this Option may be transferred by will or
by the laws of descent and distribution, and during the Participant’s lifetime,
may be transferred by the Participant to the Participant’s children,
grandchildren, spouse, one or more trusts for the benefit of such family
members or a partnership in which such family members are the only partners,
which transferees comprise the class of transferees who may rely on a Form S-8
Registration Statement under the Securities Act of 1933 to sell shares issuable
upon exercise of Options granted under the Plan.  Any such transferee to whom this Option is
transferred shall be bound by the same terms and conditions that govern this
Option; provided, however, that the transferee may not transfer this Option
except by will or the laws of descent and distribution.  If this Option is transferred, the Option
must be transferred in its entirety to the same person or persons or entity or
entities.  No right or interest of the
Participant in this Option shall be liable for, or subject to, any lien,
obligation or liability of the Participant.

 

3.             Representations and Warranties
of Participant.  The Participant
represents and warrants to the Company at the time of exercise of the Option
that:

 

(a)                                  Agrees to Terms of the Plan and
Agreement.  The Participant has received or has access to
copies of the Company’s most recently filed Form 10-K, a summary of the
Plan and the Plan.  The Participant has
read the Form 10-K, and has read and understands the terms of the summary
of the Plan, the Plan and this Agreement, and agrees to be bound by their terms
and conditions.  The Participant
acknowledges that there may be adverse tax consequences upon acquisition or
disposition of the shares of Common Stock received upon exercise of this
Option, and that Participant should consult a tax adviser prior to such
acquisition or disposition.

 

(b)                                 Purchase for Own Account for
Investment.  The shares of Common Stock received upon
exercise of this Option will be acquired for the Participant’s own account for
investment purposes only and not with a view to, or for

 

2

 

sale in connection with, a distribution of
such shares within the meaning of the Securities Act of 1933, as amended (the “Securities
Act”).  The Participant has no present
intention of selling or otherwise disposing of all or any portion of such
shares.

 

(c)                                  Access to Information.  The Participant has had access to all
information regarding the Company and its present and prospective business,
assets, liabilities and financial condition that the Participant reasonably
considers important in making a decision to acquire the shares of Common Stock
and the Participant has had ample opportunity to ask questions of the Company’s
representatives concerning such matters and this investment.

 

(d)                                 Understanding of Risks.  The Participant is fully aware of: (i) the
highly speculative nature of an investment in the Common Stock; (ii) the
financial hazards involved in an investment in the Common Stock; (iii) the
lack of liquidity of the Common Stock and the restrictions on transferability
of the Common Stock (e.g., that the Participant may not be able to sell
or dispose of the Common Stock or use it as collateral for loans); (iv) the
qualifications and backgrounds of the management of the Company; and (v) the
tax consequences of investment in the Common Stock.  The Participant is capable of evaluating the
merits and risks of this investment, has the ability to protect his own
interests in this transaction and is financially capable of bearing a total loss of this investment.

 

(e)                                  No General Solicitation.  At no time was the Participant presented with
or solicited by any publicly issued or circulated newspaper, mail, radio,
television or other form of general advertising or solicitation in connection
with the offer, sale and purchase of the shares of Common Stock.

 

(f)                                    Compliance with Securities Laws.  The shares of Common Stock received upon
exercise of this Option have been registered with the Securities and Exchange Commission
(“SEC”) under the Securities Act and, notwithstanding any other provision of
this Agreement or the Plan to the contrary, the right to acquire any such
shares is expressly conditioned upon compliance with the Securities Act and all
applicable state securities laws.  The Participant agrees
to cooperate with the Company to ensure compliance with such laws.

 

(g)                                 No Transfer Unless Registered or
Exempt.  The Participant understands that he may not
transfer any shares of Common Stock received upon exercise of this Option
unless such shares are registered under the Securities Act or qualified under
applicable state securities laws or unless, in the opinion of counsel to the
Company, exemptions from such registration and qualification requirements are
available.  The Participant understands
that only the Company may file a registration statement with the SEC and that
the Company is under no obligation to do so with respect to the shares.  The Participant has also been advised that

 

3

 

exemptions from registration and
qualification may not be available or may not permit the Participant to
transfer all or any of the shares of Common Stock in the amounts or at the
times proposed by him.

 

4.             Minimum Exercise.  This Option may not be exercised for less
than 500 shares of Common Stock unless it is exercised for the full number of
shares that remain subject to the Option.

 

5.             Fractional Shares.  Fractional shares shall not be issuable
hereunder, and when any provision hereof may entitle the Participant to a
fractional share, such fractional share shall be disregarded.

 

6.             Change in Capital Structure.  The terms of this Option shall be adjusted in
accordance with the terms and conditions of the Plan as the Committee determines
is equitably required in the event the Company effects one or more stock
dividends, stock splits, subdivisions or consolidations of shares or other
similar changes in capitalization.

 

7.             Notice.  Any notice or other communication given
pursuant to this Agreement, or in any way with respect to this Option, shall be
in writing and shall be personally delivered or mailed by United States
registered or certified mail, postage prepaid, return receipt requested, to the
following addresses:

 

	
  If to the
  Company:

  	
  KMG America Corporation

  
	
   

  	
  12600
  Whitewater Drive

  
	
   

  	
  Minnetonka,
  MN 55343

  
	
   

  	
  Attn:
  Secretary

  
	
   

  	
   

  
	
  If to the
  Participant:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  

 

Either party
may change its notice address by delivering to the other party notice of such
change in accordance with this Paragraph 7.

 

8.             No Right to Continued Employment.  This Option does not confer upon the
Participant any right with respect to continued employment by the Company or
any Affiliate, nor shall it interfere in any way with the right of the Company
or any Affiliate to terminate the Participant’s employment at any time without
assigning a reason therefor.

 

9.             Participant Bound by Plan.  The Participant hereby acknowledges receipt
of a copy of the Plan and agrees to be bound by all the terms and provisions of
the Plan.

 

10.           Binding Effect.  Subject to the limitations stated above and
in the Plan, this Agreement shall be binding upon and inure to the benefit of
the legatees, distributees, transferees and personal representatives of the
Participant and the successors of the Company.

 

4

 

11.           Conflicts.  In the event of any conflict between the
provisions of the Plan and the provisions of this Agreement, the provisions of
the Plan shall govern.  All references
herein to the Plan shall mean the Plan as in effect on the date hereof.

 

12.           Governing Law.  This Agreement shall be governed by the laws
of the Commonwealth of Virginia, except to the extent federal law applies.

 

IN WITNESS WHEREOF, the Company has caused this
Agreement to be signed by a duly authorized officer, and the Participant has
affixed his signature hereto.

 

	
   

  	
  COMPANY:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  KMG America Corporation

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
  Kenneth U. Kuk

  
	
   

  	
  Title:

  	
  Chairman, President and Chief

  Executive Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  PARTICIPANT:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
				

 

5

 

SCHEDULE A

Vesting Schedule

 

All terms used
in this Schedule A to the Agreement that are not defined in the
Agreement shall have the same meaning given them in the Company’s 2004 Equity
Incentive Plan (the “Plan”).

 

This Option shall vest and become exercisable with respect to 1/4 of
the underlying shares of Common Stock on the first, second, third and fourth
anniversaries, respectively, of the Date of Grant; provided, however, that this Option shall become
exercisable with respect to 100% of the underlying shares of Company common
stock subject to this Option, and this Option shall be exercisable with respect
to all underlying shares of common stock, upon (i) termination of the
Participant’s service by the Company or the Board, other than a termination for
“Cause,” following a Change in Control, (ii) a termination of the
Participant’s service by the Company without Cause, (iii) Participant’s termination
of service at the end of his term as a director, provided Participant is not
terminating service due to Cause, (iv) a termination of the Participant’s
service due to the Participant’s death, or (v) a termination of the
Participant’s service due to the Disability of the Participant, and that the
Participant will forfeit this Option with respect to all underlying shares of
Company common stock for which this Option has not vested and become
exercisable if his service is terminated for cause or he terminates his service
as a result of Cause.  This Option shall
not be exercisable any later than 90 days after the termination of Participant’s
service.

 

6Exhibit 10.04

 

KMG AMERICA CORPORATION

2004 EQUITY INCENTIVE PLAN

 

Stock Award Agreement

 

No. of shares covered by

Stock Award: 
                              

 

THIS STOCK AWARD AGREEMENT (this “Agreement”) dated as of the            
day of                               ,
20     , between KMG America Corporation, a Virginia
corporation (the “Company”), and                                                                              (the
“Participant”), is made pursuant and subject to the provisions of the Company’s
2004 Equity Incentive Plan (the “Plan”), a copy of which is attached
hereto.  All terms used herein that are
defined in the Plan have the same meaning given them in the Plan.

 

1.                                       Grant of
Stock Award. 
Pursuant to the Plan, the Company, on                            ,
20      (the “Date of Grant”), granted to the
Participant, subject to the terms and conditions of the Plan and subject
further to the terms and conditions set forth herein, an award of                                 
shares of the common stock of the Company (the “Common Stock”), hereinafter
described as the “Stock Award.”

 

2.                                       Restrictions.  Except as otherwise provided in this
Agreement, the shares of Common Stock covered by the Stock Award are
nontransferable and are subject to a substantial risk of forfeiture.

 

3.                                       Limited
Shareholder Rights. 
Prior to forfeiture as described in paragraph 5 below, and before the
shares of Common Stock covered by the Stock Award become nonforfeitable and
transferable (“Vested”), the Participant will have all rights of a shareholder
in such shares as provided under the Articles of Incorporation of the Company
and applicable law for holders of Common Stock, including without limitation,
the right to vote the shares of Common Stock and to receive dividends thereon;
provided, however, that during such period (i) the Participant may not
sell, transfer, pledge, exchange, hypothecate or otherwise dispose of such
shares, which shall remain subject to a substantial risk of forfeiture and
nontransferable as described in this Agreement and (ii) the Company shall
retain custody of the certificates evidencing such shares until they become
Vested.

 

4.                                       Vesting.  Except as provided in Section 5 below,
the Participant’s interest in the shares of Common Stock covered by this Stock
Award shall become Vested at the time or times set forth on Schedule A
attached hereto.

 

5.                                       Forfeiture.  [Except as set forth in Schedule A,]  If the Participant ceases to be employed by
or provide services to the Company or any Affiliate for any reason, all shares
of Common Stock that are covered by this Stock Award that are not then Vested
shall be forfeited without any payment whatsoever to the Participant.

 

 

6.                                       Stock Power.  With respect to any shares of Common Stock
covered by this Stock Award that are forfeited under this Agreement, the
Participant does hereby irrevocably constitute and appoint                                
or any successor Secretary of the Company (the “Secretary”) as his attorney to
transfer the forfeited shares on the books of the Company with full power of
substitution in the premises.  The
Secretary shall use the authority granted in this paragraph to cancel any such
shares of Common Stock that are forfeited under this Agreement.

 

7.                                       Additional
Restrictions. 
The Participant can only become Vested in the shares of Common Stock
covered by this Stock Award during the Participant’s lifetime.  Neither this Stock Award nor the Participant’s
right or interest in any shares of Common Stock covered by this Stock Award
shall be liable for, or subject to, any lien, obligation or liability of the
Participant.

 

8.                                       Custody of
Certificates. 
The Company shall retain custody of stock certificates evidencing the
shares of Common Stock covered by this Stock Award.  The Company shall deliver to the Participant
the stock certificates evidencing such shares of Common Stock that become
Vested.

 

9.                                       Representations
and Warranties of Participant. 
The Participant represents and warrants to the Company that:

 

(a)          Agrees to
Terms of the Plan and Agreement. 
The Participant has received a copy of the Plan, has read and
understands the terms of the Plan and this Agreement, and agrees to be bound by
their terms and conditions.  The Participant
acknowledges that there may be adverse tax consequences upon acquisition or
disposition of the shares of Common Stock covered by this Stock Award, and that
Participant should consult a tax adviser prior to such acquisition or
disposition.

 

(b)         Purchase for
Own Account for Investment. 
The shares of Common Stock covered by this Stock Award will be acquired
for the Participant’s own account for investment purposes only and not with a
view to, or for sale in connection with, a distribution of such shares within
the meaning of the Securities Act of 1933, as amended (the “Securities Act”).  The Participant has no present intention of
selling or otherwise disposing of all or any portion of such shares.

 

(c)          Access to
Information. 
The Participant has had access to all information regarding the Company
and its present and prospective business, assets, liabilities and financial
condition that the Participant reasonably considers important in making a
decision to acquire the shares of Common Stock and the Participant has had
ample opportunity to ask questions of the Company’s representatives concerning
such matters and this investment.

 

(d)         Understanding
of Risks.  The Participant is
fully aware of: (i) the highly speculative nature of the investment in the
Common Stock; (ii) the financial hazards involved in an investment in the
Common Stock; (iii) the lack of

 

2

 

liquidity
of the Common Stock and the restrictions on transferability of the Common Stock
(e.g., that the Participant may not be able to sell or dispose of the Common
Stock or use it as collateral for loans); (iv) the qualifications and
backgrounds of the management of the Company; and (v) the tax consequences
of investment in the Common Stock.  The
Participant is capable of evaluating the merits and risks of this investment,
has the ability to protect his own interests in this transaction and is
financially capable of bearing a total loss
of this investment.

 

(e)          No General
Solicitation. 
At no time was the Participant presented with or solicited by any
publicly issued or circulated newspaper, mail, radio, television or other form
of general advertising or solicitation in connection with the offer, sale and
purchase of the shares of Common Stock.

 

(f)            Compliance
with Securities Laws. 
The shares of Common Stock covered by this Stock Award have been
registered with the Securities and Exchange Commission (“SEC”) under the
Securities Act and, notwithstanding any other provision of this Agreement or
the Plan to the contrary, the right to acquire any such shares is expressly
conditioned upon compliance with the Securities Act and all applicable state
securities laws.  The Participant agrees to
cooperate with the Company to ensure compliance with such laws.

 

(g)         No Transfer
Unless Registered or Exempt. 
The Participant understands that he may not transfer any shares of
Common Stock covered by this Stock Award unless such shares are registered
under the Securities Act or qualified under applicable state securities laws or
unless, in the opinion of counsel to the Company, exemptions from such
registration and qualification requirements are available.  The Participant understands that only the
Company may file a registration statement with the SEC and that the Company is
under no obligation to do so with respect to the shares.  The Participant has also been advised that
exemptions from registration and qualification may not be available or may not
permit the Participant to transfer all or any of the shares of Common Stock in
the amounts or at the times proposed by him.

 

10.                                 Notice.  Any notice or other communication given
pursuant to this Agreement, or in any way with respect to this Stock Award,
shall be in writing and shall be personally delivered or mailed by United
States registered or certified mail, postage prepaid, return receipt requested,
to the following addresses:

 

	
  If to the Company:

  	
  KMG America Corporation

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  

 

3

 

	
  If to the Participant:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  

 

11.                                 Fractional
Shares.  Fractional shares
shall not be issuable hereunder, and when any provision hereof may entitle the
Participant to a fractional share, such fractional share shall be disregarded.

 

12.                                 No Right to
Continued Employment or Service. 
This Stock Award does not confer upon the Participant any right with
respect to continued employment by or service with the Company or any
Affiliate, nor shall it interfere in any way with the right of the Company or
any Affiliate to terminate the Participant’s employment or service at any time
without assigning a reason therefor.

 

13.                                 Change in
Capital Structure. 
The terms of this Stock Award shall be adjusted in accordance with the
terms and conditions of the Plan as the Committee determines is equitably
required in the event the Company effects one or more stock dividends, stock
splits, subdivisions or consolidations of shares or other similar changes in
capitalization.

 

14.                                 Participant
Bound by Plan. 
The Participant hereby acknowledges receipt of a copy of the Plan and
agrees to be bound by all its terms and provisions.

 

15.                                 Conflicts.  In the event of any conflict between the
provisions of the Plan and the provisions of this Agreement, the provisions of
the Plan shall govern.  All references
herein to the Plan shall mean the Plan as in effect on the date hereof.

 

16.                                 Binding
Effect.  Subject to the
limitations stated above and in the Plan, this Agreement shall be binding upon
and inure to the benefit of the legatees, distributees, transferees and
personal representatives of the Participant and the successors of the Company.

 

17.                                 Withholding
Taxes.  At the applicable
time, the Participant shall remit to the Company amounts sufficient to satisfy
any federal, state or local withholding tax requirements by making payment (i) in
cash, (ii) by certified check, (iii) by tendering shares of Common
Stock (which, if acquired from the Company, have been held by the Participant
for at least six months and which do not exceed the Company’s minimum
withholding obligation), (iii) by a broker-assisted cashless exercise or (iv) by
any combination of the aforementioned methods of payment.

 

18.                                 Governing
Law.  This Agreement
shall be governed by the laws of the Commonwealth of Virginia, except to the
extent federal law governs.

 

4

 

IN WITNESS WHEREOF, the Company has caused this Agreement to be signed
by a duly authorized officer, and the Participant has affixed his or her
signature hereto.

 

	
   

  	
   

  	
  KMG America Corporation

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Title

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  PARTICIPANT:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
							

 

5

 

SCHEDULE A

Vesting Schedule

 

This Stock
Award shall become Vested with respect to one-fourth (1/4) of the shares of
Common Stock covered by the Stock Award on each of the first, second, third and
fourth anniversaries of the Date of Grant, provided that the Participant has
been continuously employed by the Company or any Affiliate through each such
time.  Additionally, the Stock Award
shall become Vested with respect to one hundred percent (100%) of the shares of
Common Stock covered by the grant upon (i) involuntary termination of the
Participant’s employment or service by the Company or an Affiliate other than
for Cause, (ii) voluntary termination of a Participant’s employment or
service with the Company or an Affiliate by the Participant for Good Reason, (iii) the
Participant’s death or (iv) the Participant’s Disability.

 

Notwithstanding
the preceding paragraph, in the event of a Change in Control or at the time
this Stock Award would otherwise be forfeited in connection with a Change in
Control, the remaining shares of Common Stock covered by the Stock Award that
have not yet become Vested will become Vested at such time to the extent not
previously exercisable, provided the Participant has been continuously employed
by the Company or an Affiliate until such time.

 

6

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