Document:

QuickLinks
 -- Click here to rapidly navigate through this document

 
 

Exhibit 4.02    
    

 
  SUBORDINATED PROMISSORY NOTE    
    

	$15,000,000	 	                        , 2004

        FOR
VALUE RECEIVED, KMG AMERICA CORPORATION, a Virginia corporation (the "Maker"),
promises to pay to THE SPRINGS COMPANY (the "Shareholders' Representative"), in its capacity as
representative of the Sellers (the "Sellers") as defined in the Agreement (as defined below), in lawful money of the United States of America, the
principal sum of FIFTEEN MILLION AND 00/100 DOLLARS ($15,000,000.00), subject to adjustment in accordance with the terms herein, together with interest
as described below on the principal balance hereof from time to time outstanding, all in accordance with the following terms and provisions of this Subordinated Promissory Note (as the same may be
amended, modified or supplemented from time to time, this "Note"): 

        BECAUSE
INTEREST ON THIS NOTE IS NOT REQUIRED TO BE PAID UNTIL MATURITY, THIS NOTE WAS ISSUED WITH ORIGINAL ISSUE DISCOUNT (OID) FOR FEDERAL INCOME TAX PURPOSES. THE ISSUE PRICE OF THIS
NOTE IS $15,000,000. THE TOTAL AMOUNT OF OID IS THE TOTAL AMOUNT OF INTEREST PAYABLE ON THIS NOTE, WHICH WILL BE $            IF ALL PRINCIPAL AND INTEREST ARE PAID AS SCHEDULED ON THE
MATURITY
DATE. THE YIELD TO MATURITY OF THIS NOTE IS THE SAME AS THE INTEREST RATE OF 5.0% PER ANNUM, COMPOUNDED ANNUALLY. 

1.    Interest Rate.    The principal balance outstanding from time to time shall bear interest from the
date hereof until paid in full at a rate of 5.0% per annum through and including                        , 2009. Accrued interest
shall be computed for actual days elapsed on the basis of a year of 365 days. 

2.    Interest; Payments.    

        (a)   From
the date hereof, interest shall accrue on the principal balance annually, on the last day of each calendar year, beginning on December 31, 2004, and such
accrued interest shall be added to the principal balance hereof. 

        (b)   The
outstanding principal balance, together with all accrued and unpaid interest thereon, except as provided in Section 6 herein, shall be due and payable on
                       , 2009 (the "Maturity Date"). 

3.    Prepayment.    

        (a)   This
Note may be prepaid in whole or in part, at any time, at the option of the Maker, without premium or penalty. 

        (b)   Any
partial prepayment hereof shall not postpone the due dates of, or relieve the amounts of, any scheduled payments due hereunder. Amounts prepaid hereunder may not be
reborrowed. 

4.    Application of Payments.    Payments made hereunder shall be applied first to accrued interest hereon
and any remainder to the principal balance. 

5.    Subordination.    

        (a)    General.    The Maker, for itself, its successors and assigns, covenants and agrees, and the Shareholders'
Representative and the Sellers, by acceptance of this Note, likewise covenant and agree, that (i) the payment of the principal of and interest on this Note is hereby expressly subordinated, to
the extent and in the manner set forth in this Section 5, in right of payment to the prior payment in full of all Senior Debt (as defined in Section 5(b) hereof), and (ii) this Note is
also subject to any further restrictions contained herein for the protection of the holders of Senior Debt. 

        (b)    Limitations on Debt and Senior Debt.    

        (i)    As
used herein, the term "Senior Debt" shall mean all Debt (as defined in Section 5(b)(ii) below) incurred by the
Maker in accordance with Section 5(b)(iii), but shall not include 

 

any
Debt which by its express terms ranks pari passu with or junior to this Note; provided that no obligation incurred, guaranteed or assumed in violation of Section 5(b)(iii) shall constitute
Senior Debt for purposes of the subordination provisions set forth in this Note. 

        (ii)   As
used herein, the term "Debt" shall mean as to any person or entity, without duplication, (A) all obligations
of borrowed money, (B) all indebtedness, obligations or liability evidenced by notes, bonds, debentures or similar instruments, (C) obligations for the payment of money relating to any lease
which is capitalized on the consolidated balance sheet of such person or entity or its subsidiaries in accordance with generally accepted accounting principles
("GAAP"), (D) all indebtedness referred to in clauses (A)-(C) hereof secured by any lien on any property or asset owned or held by such person or
entity regardless of whether the obligation secured thereby shall have been assumed by such person or entity or is non-recourse to the credit of such person or entity and (E) all obligations
incurred, assumed or guaranteed by such person or entity to a trust in connection with such trust's issuance of (i) common equity securities to such person or entity and (ii) preferred
equity securities to such person or entity or to third parties (such obligations under this clause (E) are referred to as "Trust Preferred Debt"). 

        (iii)  The
Maker may only incur Debt if at the time such Debt is incurred, and giving effect to the incurrence of such Debt, (i) the Maker's ratio of Debt to Shareholders'
Equity shall not exceed 45% and (ii) the Maker's ratio of Debt (less Trust Preferred Debt) to Shareholders' Equity shall not exceed 35%. As used herein, the term "Shareholders'
Equity" shall mean, at any time, the shareholders' equity of the Maker and its subsidiaries at such time, determined on a consolidated basis in accordance with GAAP. 

        (c)    Insolvency Event.    In the event of any insolvency or bankruptcy proceedings, or any receivership,
liquidation, reorganization, arrangement, readjustment, composition or other similar judicial proceedings in connection therewith, relative to the Maker or its respective property, or in the event of
any proceedings for voluntary liquidation, dissolution or other winding-up of the Maker, whether or not involving insolvency or bankruptcy, or in the event of any assignment by the Maker for the
benefit of its creditors or in the event of any other marshalling of the assets of the Maker (collectively referred to as an "Insolvency Event") then
the holders of Senior Debt shall be entitled to receive payment in full of all principal, premium, interest, fees, penalties and charges on all Senior Debt (including interest thereon accruing after
the commencement of any such proceedings) before the Shareholders'
Representative or any Seller is entitled to receive any payment on account of principal, interest or other amounts due under this Note, and to that end the holders of Senior Debt shall be entitled to
receive for application and payment thereof any payment or distribution of any kind or character, whether in cash or property or securities, which may be payable or deliverable in any such proceedings
in respect of this Note. 

        (d)    Senior Debt Default.    Upon receiving written notice from the Maker or a holder of any Senior Debt of a
default or event of default with respect to any payment due under such Senior Debt (a "Senior Debt Default"), the Shareholders' Representative or any
Seller shall not, without the prior written consent of the holders of such Senior Debt, accept any payment from the Maker with respect to this Note until such Senior Debt Default is cured or waived or
shall cease to exist. 

        (e)    Wrongful Payment.    If, notwithstanding the provisions of this Section 5, any payment or distribution of any
character shall be received by the Shareholders' Representative or any Seller in contravention of this Section 5 and, while Senior Debt shall be outstanding, such payment, distribution or security
shall be held in trust for the benefit of, and shall be immediately paid over or delivered or transferred to, the holders of the Senior Debt as their interests may appear, or their duly appointed
agents, for application to the payment of all Senior Debt then outstanding, until all of the Senior Debt shall have been paid in full. 

2

 

        (f)    Reinstatement.    The provisions of this Section 5 shall continue to be effective or be reinstated, as the case
may be, if at any time any payment of Senior Debt is rescinded or must otherwise be returned by any holder of such Senior Debt upon the insolvency, bankruptcy or reorganization of the Maker, as though
such payment had not been made. 

        (g)    Third Party Beneficiaries.    The provisions of this Section 5 are intended solely for the purpose of defining
the relative rights of the Shareholders' Representative and the Sellers and of the holders of the Senior Debt, and nothing herein shall be or is intended, as between the Maker, its creditors, other
than the holders of Senior Debt, and the Shareholders' Representative and the Sellers, to impair or suspend in any manner whatsoever the obligation of the Maker, which, notwithstanding any other
provision of this Section 5 to the contrary, is unconditional and absolute, to pay to the Shareholders' Representative, as representative of the Sellers, principal hereof as and when the same shall
become due, whether at maturity or otherwise, and interest thereon in accordance with the terms hereof, nor shall anything herein, notwithstanding any provisions of this Section 5 to the contrary,
prevent the Shareholders' Representative or the Sellers from exercising any and all remedies permitted by applicable law upon default hereunder. 

        (h)    Additional Subordination Agreement.    The Shareholders' Representative, as representative of the Sellers,
agrees that, if requested by the Maker, it shall enter into subordination agreements with
holders of Senior Debt, on terms and conditions substantially acceptable to the Shareholders' Representative or containing provisions no more favorable to the holders of the Senior Debt, which
agreements shall supersede the provisions of this Section 5 to the extent of any inconsistency or conflict therewith, provided that such holders of Senior Debt shall agree that the Shareholders'
Representative may receive payments when due hereunder for so long as no Senior Debt Default has occurred and is continuing. The Maker shall pay Shareholders' Representative's reasonable attorney's
fees in connection with the review and negotiation of any additional subordination agreements. 

6.    Setoff.    This Note is executed and delivered pursuant to the Amended and Restated Stock Purchase
Agreement between the Maker and the Sellers dated as of August 2, 2004, as amended by the Amendment No. 1 to Amended and Restated Stock Purchase Agreement dated as of November 4, 2004,
as further amended, modified or supplemented through the date hereof (the "Agreement"). The indebtedness evidenced by this Note is subject to setoff and
reduction by the Maker for (i) fifty percent (50%) of the fees and costs of the Independent Accountants (as that term is defined in the Agreement) pursuant to Section 2.5(b) of the
Agreement, (ii) any purchase price adjustments pursuant to Section 2.6 of the Agreement, or (iii) Buyer Claims (as that term is defined in the Agreement) pursuant to Section
8.1(d) of the Agreement. When a claim for setoff exists, the Maker shall provide to Shareholders' Representative a notice in accordance with the notice provisions of this Note of such claim for
setoff against the amounts payable under this Note (a "Claim Notice"). Upon receipt of any Claim Notice, Shareholders' Representative shall promptly
make entries or notations in the account records relating to this Note, indicating the estimated claim amount and identifying the date and number of such Claim Notice. Claims for setoff pursuant to
subsections (i) and (ii) above shall immediately be setoff against amounts payable under this Note as of the date of the Claim Notice, and the Maker shall not be obligated to pay, and
Shareholders' Representative and Sellers shall not be entitled to collect, interest on the amount of such setoff that would have otherwise accrued since the date of the Claim Notice. Within thirty
(30) days of receipt by the Shareholders' Representative of any Claim Notice regarding a Buyer Claim, the Shareholders' Representative shall deliver to the Maker a written notification (a
"Response Notice") in accordance with the notice provisions of this Note setting forth whether or not such Buyer Claim is disputed. If the Buyer Claim
is not disputed, or if the Maker shall not receive a Response Notice within thirty (30) days of the Shareholders' Representative's receipt of the Claim Notice, the Buyer Claim shall immediately be
setoff against amounts payable under this Note as of the date of the Claim Notice, and the Maker shall not be obligated to pay, and Shareholders' Representative and Sellers shall not be entitled to
collect, interest on the amount of such 

3

 

setoff
that would have otherwise accrued since the date of the Claim Notice. In the event that there is a dispute between the Maker and the Sellers with respect to a Buyer Claim (a
"Dispute"), the amounts payable under this Note shall not be setoff, but the Maker shall have no obligation to pay the amounts payable under this Note
attributable to such Buyer Claim until such Dispute is ultimately resolved. If any amount of a Buyer Claim is resolved in favor of the Maker, the amount of the Buyer Claim so resolved shall
immediately be setoff against the amounts payable under this Note as of the date of the Claim Notice, and the Maker shall not be obligated to pay, and Shareholders' Representative shall not be
entitled to collect, interest on the amount of such setoff that would have otherwise accrued during the time of such Dispute, beginning on the date of the Claim Notice. If any amount of a Buyer Claim
is resolved in favor of Shareholders' Representative, the amount of the Buyer Claim so resolved shall not be setoff against the amounts payable under this Note, and the Maker shall remain obligated to
pay, and Shareholders' Representative shall be entitled to collect, interest on such amount. After giving effect to any setoff, the principal amount of this Note shall be permanently reduced by such
amounts, and interest thereafter shall be calculated based on the principal amount of this Note as so reduced. 

7.    Events of Default.    Each of the following shall constitute an "Event of
Default" under this Note: 

        (a)    Failure to Pay.    If the Maker fails to pay within three (3) days of the date due any payment owing to
the Shareholders' Representative, as representative of the Sellers, under the terms of this Note; 

        (b)    Failure to Observe Other Covenants.    If the Maker fails to perform or observe any term, covenant, or
agreement contained in this Note (including Section 5(b)(iii)), and such failure shall continue for a period of thirty (30) days after written notice of such failure has been given to the Maker; 

        (c)    Involuntary Bankruptcy or Receivership Proceedings.    A receiver, conservator, liquidator or trustee of the
Maker or of Kanawha Insurance Company ("Kanawha") is appointed by order or decree of any court or agency or supervisory authority having jurisdiction;
or an order for relief is entered against the Maker or Kanawha under the United States Bankruptcy Code; or the Maker or Kanawha is adjudicated bankrupt or insolvent; or any material portion of the
properties of the Maker or Kanawha is sequestered by court order and such order remains in effect for more than fifty (50) days after the Maker or Kanawha, as applicable, obtains knowledge thereof; or
a petition is filed against the Maker or Kanawha under any state bankruptcy, reorganization, arrangement, insolvency, readjustment of debt, dissolution, liquidation or receivership law of any
jurisdiction, whether now or hereafter in effect, and such petition is not dismissed within sixty (60) days; 

        (d)    Voluntary Petitions.    The Maker or Kanawha files a petition under the federal Bankruptcy Code or seeks relief
under any provision of any state bankruptcy, reorganization, arrangement, insolvency, readjustment of debt, dissolution, liquidation or receivership law of any jurisdiction, whether now or hereafter
in effect, or consents to the filing of any such case or petition against it under any such law; 

        (e)    Assignments for Benefit of Creditors.    The Maker or Kanawha makes a general assignment for the benefit of its
creditors, or admits in writing its inability to pay its debts generally as they become due, or consents to the appointment of a receiver, trustee or liquidator of all or any part of its property; 

        (f)    Change of Control.    The acquisition by any person or group of persons of record or beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Securities Exchange Act of 1934, as amended) of more than 50% of either (i) the common stock of the Maker or Kanawha or
(ii) the combined voting power of the then-outstanding voting securities entitled to vote generally in the election of directors (the "Outstanding Voting
Securities") of the Maker or Kanawha; or 

4

 

        (g)    Merger; Sale of Assets.    Consummation of a merger or consolidation involving Maker or a sale or other
disposition of all or substantially all of the assets of the Maker (a "Business Combination"), in each case, unless, following such Business
Combination, (i) the individuals and entities who were the beneficial owners of the Outstanding Voting Securities of the Maker immediately prior to such Business Combination beneficially own,
directly or indirectly, more than 50% of the then Outstanding Voting Securities of the entity resulting from such Business Combination (including, without limitation, an entity which as a result of
such transaction owns the Maker or all or substantially all of the Maker's assets either directly or through one or more subsidiaries) and (ii) at least a majority of the members of the board
of directors (or equivalent governing body) of the entity resulting from such Business Combination were members of the Maker's board of directors at the time of the execution of the initial agreement,
or of the action of the Maker's board of directors, providing for such Business Combination; 

        (h)    Kanawha's Incurrence of Debt.    If Kanawha (i) incurs, guarantees or assumes any Debt or
(ii) issues any capital stock having any preference over the capital stock of Kanawha held by the Maker as to liquidation, dividends or other distributions; or 

        (i)    Disposition of Kanawha Stock.    The Maker sells, transfers or otherwise disposes of any of the capital stock
of Kanawha owned by the Maker. 

8.    Remedies Upon Default.    If an Event of Default occurs under Section 7, (a), (c), (d) or (e), then
the outstanding principal of and interest on this Note shall automatically become immediately due and payable, without presentment, demand, protest or notice of any kind, all of which are expressly
waived. If any other Event of Default occurs and is continuing, the Shareholders' Representative, by written notice to the Maker, may declare the principal of and interest on the Note to be due and
payable immediately. Upon any such acceleration or declaration of acceleration, (i) such principal and interest (except for amounts with respect to which a Claim Notice is unresolved pursuant
to Section 6) shall become immediately due and payable, (ii) the Shareholders' Representative shall be entitled to exercise all of its rights and remedies hereunder and under this Note whether
at law or in equity and (iii) such acceleration may be rescinded or waived in writing by the Shareholders' Representative. 

9.    Payment into Escrow.    In the event of acceleration of this Note pursuant to Section 8, or prepayment
prior to maturity, (a) the amount of this Note that is no longer subject to setoff under Section 8.1(d)(v) of the Agreement will be paid to the Shareholders' Representative, and (b) the amount
of this Note that remains subject to setoff under Section 8.1(d)(v) of the Agreement shall be paid by Maker into an escrow account pursuant to an escrow agreement in form reasonably agreed by the
parties and providing for the disbursement of funds to the Shareholders' Representative corresponding to the timing and amount of releases from setoff in Section 8.1(d)(v) of the Agreement. Following
acceleration pursuant to Section 8 and prior to establishing an escrow account, the amount to be placed in escrow shall be held by Maker in trust for the benefit of the Shareholders'
Representative. 

10.    Collection Costs and Expenses.    In the event that any suit or action is instituted to enforce any
provision in this Note, the prevailing party in such dispute shall be entitled to recover form the losing party all fees, costs and expenses of enforcing any right of such prevailing party under or
with respect to this Note, including without limitation, such reasonable fees and expenses of attorneys and accountants, which shall include, without limitations, all fees, costs and expenses of
appeals. 

11.    Shareholders' Representative; Transfer.    The Shareholders' Representative shall act as the
representative of the Sellers under this Note pursuant to Section 2.7 of the Agreement. The Maker shall have no liability, including to any Seller, for any action taken or omitted by Shareholders'
Representative under this Note, and shall have no liability to any Seller with respect to any payment made to Shareholders' Representative. Only the Shareholders' Representative shall be entitled to
enforce the provisions of this Note. Shareholders' Representative may not assign this Note or delegate 

5

 

its
obligations hereunder. Upon appointment of a new Shareholders' Representative pursuant to Section 2.7 of the Agreement and surrender of this Note to Maker, Maker will execute and deliver a
replacement Note in the name of the new Shareholders' Representative. 

12.    Notices.    All notices, requests, demands and other communications with respect hereto shall be
delivered as provided in Section 11.5 of the Agreement. 

13.    Severability.    If any provision of this Note, or the application thereof to any person, entity or
circumstance, shall to any extent be invalid or unenforceable, the remainder of the provisions of this Note, or the application of such provision to other persons, entities or circumstances, shall not
be affected thereby, and each provision of this Note shall be valid and enforceable to the fullest extent permitted by law. 

14.    Governing Law.    This Note shall be governed by and construed in accordance with the laws of the
State of North Carolina, without reference to conflict of laws principles. 

15.    Survival.    All agreements, representations and warranties made herein shall survive the delivery of
this Note and the disbursement of any amounts hereunder. 

16.    Captions.    The captions of the various sections and paragraphs of this Note have been inserted only
for the purposes of convenience, such captions are not a part hereof and shall not be deemed in any manner to modify, explain, enlarge or restrict any of the provisions of this Note. 

[SIGNATURES
ON THE FOLLOWING PAGE] 

6

 

        IN
WITNESS WHEREOF, the Maker has caused this Note to be executed by its duly authorized representative as of the day and year first above written. 

	 	 	KMG AMERICA CORPORATION,

a Virginia corporation
	

 	
 	

 	

 	

 
	 	 	By:	    

	 	 	Name:	    

	 	 	Title:	    

7

QuickLinks

Exhibit 4.02

SUBORDINATED PROMISSORY NOTEQuickLinks
 -- Click here to rapidly navigate through this document

 
 

Exhibit 10.01    
    

 
 

KMG AMERICA CORPORATION
  
    2004 EQUITY INCENTIVE PLAN    
    

 

TABLE OF CONTENTS  

	Section
 
	 	 
	 	Page

	ARTICLE I	 	DEFINITIONS	 	1
	1.01.	 	Acquiring Person	 	1
	1.02.	 	Affiliate	 	1
	1.03.	 	Agreement	 	1
	1.04.	 	Award	 	1
	1.05.	 	Board	 	1
	1.06.	 	Cause	 	1
	1.07.	 	Change in Control	 	2
	1.08.	 	Code	 	2
	1.09.	 	Committee	 	2
	1.10.	 	Common Stock	 	2
	1.11.	 	Company	 	2
	1.12.	 	Continuing Director	 	3
	1.13.	 	Control Change Date	 	3
	1.14.	 	Corresponding SAR	 	3
	1.15.	 	Disability	 	3
	1.16.	 	Exchange Act	 	3
	1.17.	 	Fair Market Value	 	3
	1.18.	 	Good Reason	 	3
	1.19.	 	Incentive Award	 	4
	1.20.	 	Initial Value	 	4
	1.21.	 	Named Executive Officer	 	4
	1.22.	 	Option	 	4
	1.23.	 	Participant	 	4
	1.24.	 	Performance Shares	 	4
	1.25.	 	Person	 	5
	1.26.	 	Plan	 	5
	1.27.	 	Related Entity	 	5
	1.28.	 	SAR	 	5
	1.29.	 	Stock Award	 	5
	1.30.	 	Ten Percent Shareholder	 	5
	ARTICLE II	 	PURPOSES	 	6
	ARTICLE III	 	ADMINISTRATION	 	7
	ARTICLE IV	 	ELIGIBILITY	 	9
	ARTICLE V	 	COMMON STOCK SUBJECT TO PLAN	 	10
	5.01.	 	Common Stock Issued	 	10
	5.02.	 	Aggregate Limit	 	10
	5.03.	 	Individual Limit	 	10
	5.04.	 	Reallocation of Shares	 	10
	 	 	 	 	 

i

 

	ARTICLE VI	 	OPTIONS	 	11
	6.01.	 	Grant	 	11
	6.02.	 	Option Price	 	11
	6.03.	 	Maximum Option Period	 	11
	6.04.	 	Nontransferability	 	11
	6.05.	 	Transferable Options	 	11
	6.06.	 	Exercise	 	11
	6.07.	 	Payment	 	12
	6.08.	 	Employee Status	 	12
	6.09.	 	Change in Control	 	12
	6.10.	 	Stockholder Rights	 	13
	6.11.	 	Disposition of Shares	 	13
	6.12.	 	No Liability of Company	 	13
	ARTICLE VII	 	SARS	 	14
	7.01.	 	Grant	 	14
	7.02.	 	Maximum SAR Period	 	14
	7.03.	 	Nontransferability	 	14
	7.04.	 	Transferable SARs	 	14
	7.05.	 	Exercise	 	14
	7.06.	 	Change in Control	 	15
	7.07.	 	Employee Status	 	15
	7.08.	 	Settlement	 	16
	7.09.	 	Stockholder Rights	 	16
	ARTICLE VIII	 	STOCK AWARDS	 	17
	8.01.	 	Award	 	17
	8.02.	 	Vesting	 	17
	8.03.	 	Performance Objectives	 	17
	8.04.	 	Employee Status	 	18
	8.05.	 	Change in Control	 	18
	8.06.	 	Stockholder Rights	 	18
	ARTICLE IX	 	PERFORMANCE SHARE AWARDS	 	19
	9.01.	 	Grant	 	19
	9.02.	 	Earning the Award	 	19
	9.03.	 	Maximum Performance Share Award Period	 	19
	9.04.	 	Payment	 	20
	9.05.	 	Stockholder Rights	 	20
	9.06.	 	Nontransferability	 	20
	9.07.	 	Transferable Performance Shares	 	20
	9.08.	 	Employee Status	 	20
	9.09.	 	Change in Control	 	20
	ARTICLE X	 	INCENTIVE AWARDS	 	22
	10.01.	 	Grant	 	22
	10.02.	 	Terms and Conditions	 	22
	10.03.	 	Maximum Incentive Award Period	 	22
	10.04.	 	Nontransferability	 	23
	10.05.	 	Transferable Incentive Awards	 	23
	10.06.	 	Employee Status	 	23
	10.07.	 	Change in Control	 	23
	10.08.	 	Stockholder Rights	 	23
	ARTICLE XI	 	ADJUSTMENT UPON CHANGE IN COMMON STOCK	 	24
	 	 	 	 	 

ii

 

	ARTICLE XII	 	COMPLIANCE WITH LAW AND APPROVAL OF REGULATORY BODIES	 	25
	12.01.	 	Compliance	 	25
	12.02.	 	Postponement of Exercise or Payment	 	25
	12.03.	 	Forfeiture of Payment	 	25
	ARTICLE XIII	 	GENERAL PROVISIONS	 	26
	13.01.	 	Effect on Employment and Service	 	26
	13.02.	 	Unfunded Plan	 	26
	13.03.	 	Rules of Construction	 	26
	13.04.	 	Tax Withholding and Reporting	 	26
	13.05.	 	Reservation of Shares	 	26
	13.06.	 	Governing Law	 	27
	13.07.	 	Other Actions	 	27
	13.08.	 	Other Conditions	 	27
	13.09.	 	Forfeiture Provisions	 	27
	ARTICLE XIV	 	AMENDMENT	 	28
	ARTICLE XV	 	DURATION OF PLAN	 	29
	ARTICLE XVI	 	EFFECTIVE DATE OF PLAN	 	30

iii

   ARTICLE I

DEFINITIONS  

1.01.    Acquiring Person  

        Acquiring Person means that a Person, considered alone or as part of a "group" within the meaning of Section 13(d)(3) of the Securities Exchange Act of
1934, as amended, is or becomes directly or indirectly the beneficial owner (as defined in Rule 13d-3 under the Exchange Act) of securities representing more than fifty percent
(50%) of the Company's then outstanding securities entitled to vote generally in the election of the Board. 

1.02.    Affiliate  

        Affiliate means any "subsidiary" or "parent" corporation (as such terms are defined in Section 424 of the Code) of the Company. 

1.03.    Agreement  

        Agreement means a written agreement (including any amendment or supplement thereto) between the Company and a Participant specifying the terms and conditions of
an Award granted to such Participant. 

1.04.    Award  

        Award means an Incentive Award, Option, Performance Share, SAR or Stock Award granted under this Plan. 

1.05.    Board  

        Board means the Board of Directors of the Company. 

1.06.    Cause  

        Cause has the same definition as under any employment or service agreement between the Company or any Affiliate and the Participant or, if no such employment or
service agreement exists or if such employment or service agreement does not contain any such definition, Cause means that the Participant (i) has committed fraud or misappropriated, stolen or
embezzled funds or property from the Company or an Affiliate or secured or attempted to secure personally any profit in connection with any transaction entered into on behalf of the Company or any
Affiliate, (ii) has been convicted of, or entered a plea of guilty or "nolo contendere" to, any criminal act or has committed any other act of
willful misconduct which brings the Participant into disrepute or is likely to cause material harm to the Company's (or any Affiliate's) reputation, business, customer or supplier relations, financial
condition or prospects, (iii) has, notwithstanding not less than 30 days' prior written notice, willfully failed to comply with any lawful directives of the Board, the Board of Directors
of any Affiliate or any supervisory personnel of the Participant or otherwise failed to perform in a satisfactory manner his or her duties with the Company or any Affiliate (other than by reason of
illness or temporary disability), (iv) has violated or breached any material law or regulation to the material detriment of the Company or any Affiliate or its or their business, (v) has
breached any non-competition, non-disclosure or non-solicitation agreement which causes or is reasonably likely to cause material harm to the Company or any
Affiliate or (vi) has committed any act of willful malfeasance or gross negligence in a matter of material importance to the Company or any Affiliate. For purposes of the Plan, other than where
the definition of Cause is determined under any employment or service agreement between the Company or any Affiliate and the Participant in which case such employment or service agreement shall
control, in no event shall any termination of employment or service be deemed for Cause unless the Company's 

1

 

Chief
Executive Officer concludes that the situation warrants a determination that the Participant's employment or service terminated for Cause; in the case of the Chief Executive Officer, any
determination that the Chief Executive Officer's employment terminated for Cause shall be made by the Board acting without the Chief Executive Officer. 

1.07.    Change in Control  

        "Change in Control" means (i) a Person is or becomes an Acquiring Person; (ii) a transfer of all or substantially all of the Company's assets on a
consolidated basis, as reported in the Company's consolidated financial statements; (iii) a merger, consolidation or statutory share exchange with a Person, regardless of whether the Company is
intended to be the surviving or resulting entity after the merger, consolidation or statutory share exchange, other than a transaction that results in
the voting securities of the Company carrying the right to vote in elections of persons to the Board outstanding immediately prior to the closing of the transaction continuing to represent (either by
remaining outstanding or by being converted into voting securities of the surviving entity) more than 50% (fifty percent) of the Company's voting securities carrying the right to vote in elections of
persons to the Company's Board, or such securities of such surviving entity, outstanding immediately after the closing
of such transaction; (iv) the Continuing Directors cease for any reason to constitute a majority of the Board; (v) a liquidation of the Company or the commencement of actions
constituting a plan of liquidation or the closing of a liquidation agreement); or (vi) a majority of the independent members of the Board adopt a resolution to the effect that, in their
judgment, as a consequence of any one or more transactions or events or series of transactions or events, a change in control of the Company has effectively occurred. The independent members of the
Board shall be entitled to exercise their sole and absolute discretion in exercising their judgment and in the adoption of such resolution, whether or not any such transaction(s) or event(s) might be
deemed, individually or collectively, to satisfy any of the criteria set forth in subparagraphs (i) through (v) above. Notwithstanding the foregoing, no event resulting from the initial
public offering of the Company's securities as contemplated by the Company's Form S-1 Registration Statement under the Securities Act of 1933,
dated                        , 2004 (the
"Initial Public Offering"), shall constitute a Change in Control. 

1.08.    Code  

        Code means the Internal Revenue Code of 1986, and any amendments thereto. 

1.09.    Committee  

        Committee means the Compensation Committee of the Board if the Board appoints one to administer the Plan, or the Board itself if no such Compensation Committee is
appointed. If such Compensation Committee is appointed, if and to the extent deemed necessary by the Board, such Compensation Committee shall consist of two or more directors, all of whom are
"non-employee directors" within the meaning of Rule 16b-3 under the Exchange Act and, after the transition period prescribed by the regulations under Code
Section 162(m), "outside directors" within the meaning of Code Section 162(m). 

1.10.    Common Stock  

        Common Stock means the common stock, par value $0.01 per share, of the Company. 

1.11.    Company  

        Company means KMG America Corporation, a Virginia corporation, or any successor thereto. 

2

 

1.12.    Continuing Director  

        Continuing Director means any member of the Board, while a member of the Board and (i) who was a member of the Board at the time of the Initial Public
Offering or (ii) whose nomination for or election to the Board was recommended or approved by a majority of the Continuing Directors. 

1.13.    Control Change Date  

        Control Change Date means the date on which a Change in Control occurs. If a Change in Control occurs on account of a series of transactions, the "Control Change
Date" is the date of the last of such transactions. 

1.14.    Corresponding SAR  

        Corresponding SAR means an SAR that is granted in relation to a particular Option and that can be exercised only upon the surrender to the Company, unexercised,
of that portion of the Option to which the SAR relates. 

1.15.    Disability  

        Disability has the same definition as under the Company's long-term disability insurance plan or, if the Participant does not participate in such plan
or the Company does not sponsor such plan
or discontinues to sponsor such plan, the Participant shall be considered to have a disability if he or she qualifies for and receives Social Security disability benefits; provided, however, that with
respect to an incentive stock option, Disability means the inability of a Participant to engage in any substantial gainful activity by reason of any medically determinable physical or mental
impairment which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than 12 months as defined in Code Section 22(e)(3). 

1.16.    Exchange Act  

        Exchange Act means the Securities Exchange Act of 1934, as amended. 

1.17.    Fair Market Value  

        Fair Market Value of a share of Common Stock means, on any given date, the fair market value of a share of Common Stock as the Committee in its discretion shall
determine; provided, however, that the Committee shall determine Fair Market Value without regard to any restriction other than a restriction which, by its terms, will never lapse and, if the shares
of Common Stock are traded on any national stock exchange or quotation system, the Fair Market Value of a share of Common Stock shall be the closing price of a share of Common Stock as reported on
such stock exchange or quotation system on such date, or if the shares of Common Stock are not traded on such stock exchange or quotation system on such date, then on the next preceding day that the
shares of Common Stock were traded on such stock exchange or quotation system, all as reported by such source as the Committee shall select. The Fair Market Value that the Committee determines shall
be final, binding and conclusive on the Company, any Affiliate and each Participant. 

1.18.    Good Reason  

        Good Reason has the same definition as under any employment or service agreement between the Company or any Affiliate and the Participant or, if no such
employment or service agreement exists or if such employment or service agreement does not contain any such definition, Good Reason means the Participant voluntarily terminates employment or service
on account of and within ninety (90) days of (i) a failure by the Company or any Affiliate to comply with any material provision of any employment 

3

 

or
service agreement between the Company or the Affiliate and the Participant (other than the payment obligations referred to in clause (v) below) which has not been cured within thirty
(30) days after notice of such noncompliance has been given by the Participant to the Company or the Affiliate, as applicable; (ii) the assignment to the Participant of any material
duties inconsistent with the Participant's position with the Company or any Affiliate or a substantial adverse alteration in the nature or status of the Participant's responsibilities, in either event
without the Participant's consent; (iii) a material reduction in employee benefits, other than a reduction generally applicable to similarly situated employees of the Company or the Affiliate,
as applicable, without the Participant's consent; (iv) relocation of the Participant's principal place of employment outside a fifty (50) mile radius of the Participant's then current
principal place of employment without the Participant's consent; or (v) any failure by the Company or an applicable Affiliate to pay the Participant's base salary or any incentive bonus to
which he or she is entitled, which failure has not been cured within ten (10) days after notice of such noncompliance has been given by the Participant to the Company or the Affiliate, as
applicable. For purposes of the Plan, other than where the definition of Good Reason is determined under any employment or service agreement between the Company or any Affiliate and the Participant in
which case such employment of service agreement shall control, the Committee shall determine whether any termination of employment or service shall be deemed for Good Reason. 

1.19.    Incentive Award  

        Incentive Award means an award stated with reference to a specified dollar amount which, subject to such terms and conditions as may be prescribed by the
Committee, entitles the Participant to receive shares of Common Stock from the Company or an Affiliate. 

1.20.    Initial Value  

        Initial Value means, with respect to a Corresponding SAR, the option price per share of the related Option and, with respect to an SAR granted independently of an
Option, the Fair Market Value of one share of Common Stock on the date of grant. 

1.21.    Named Executive Officer  

        Named Executive Officer means a Participant who, as of the last day of a taxable year, is the Chief Executive Officer of the Company (or is acting in such
capacity) or one of the four highest compensated officers of the Company (other than the Chief Executive Officer) or is otherwise one of the group of "covered employees", as defined in the Treasury
Regulations promulgated under Code Section 162(m). 

1.22.    Option  

        Option means a stock option that entitles the holder to purchase from the Company a stated number of shares of Common Stock at the price set forth in an
Agreement. 

1.23.    Participant  

        Participant means an employee of the Company or an Affiliate, a non-employee member of the Board, or a person or entity that provides services to the
Company or an Affiliate and who satisfies the requirements of Article IV and is selected by the Committee to receive an Award. 

1.24.    Performance Shares  

        Performance Shares means an award, in the amount determined by the Committee, stated with reference to a specified number of shares of Common Stock, that in
accordance with the terms of an 

4

 

Agreement
entitles the holder to receive a cash payment or shares of Common Stock or a combination thereof. 

1.25.    Person  

        "Person" means any human being, firm, corporation, partnership, or other entity. "Person" also includes any human being, firm, corporation, partnership, or other
entity as defined in sections 13(d)(3) and 14(d)(2) of the Exchange Act. The term "Person" does not include the Company or any Related Entity, and the term Person does not include any employee-benefit
plan maintained by the Company or any Related Entity, or any person or entity organized, appointed, or established by the Company or any Related Entity for or pursuant to the terms of any such
employee-benefit plan, unless the Board determines that such an employee-benefit plan or such person or entity is a "Person". 

1.26.    Plan  

        Plan means this KMG America Corporation 2004 Equity Incentive Plan, in its current form and as hereafter amended. 

1.27.    Related Entity  

        Related Entity means any entity that is part of a controlled group of corporations or is under common control with the Company within the meaning of Sections
1563(a), 414(b) or 414(c) of the Code. 

1.28.    SAR  

        SAR means a stock appreciation right that in accordance with the terms of an Agreement entitles the holder to receive a number of shares of Common Stock, or in
the discretion of the Committee, a cash award, or a combination of shares of Common Stock and cash, based on the increase in the Fair Market Value of the shares underlying the stock appreciation right
during a stated period specified by the Committee. References to "SARs" include both Corresponding SARs and SARs granted independently of Options, unless the context requires otherwise. 

1.29.    Stock Award  

        Stock Award means shares of Common Stock granted to a Participant under Article VIII. 

1.30.    Ten Percent Shareholder  

        Ten Percent Shareholder means any individual who (considering the stock attribution rules described in Code Section 424(d)) owns stock possessing more than
10 percent of the total combined voting power of all classes of stock of the Company or any Affiliate. 

5

 
ARTICLE II

PURPOSES  

        The Plan is intended to assist the Company and its Affiliates in recruiting and retaining individuals and other service providers with ability and initiative by
enabling such persons or entities to participate in the future success of the Company and its Affiliates and to associate their interests with those of the Company and its stockholders. The Plan is
intended to permit the grant of both Options qualifying under Section 422 of the Code ("incentive stock options") and Options not so qualifying, and the grant of SARs, Stock Awards, Performance
Shares and Incentive Awards in accordance with the Plan and procedures that may be established by the Committee. No Option that is intended to be an incentive stock option shall be invalid for failure
to qualify as an incentive stock option. The proceeds received
by the Company from the sale of shares of Common Stock pursuant to this Plan shall be used for general corporate purposes. 

6

 
ARTICLE III

ADMINISTRATION  

        The Plan shall be administered by the Committee. The Committee shall have authority to grant Awards upon such terms (not inconsistent with the provisions of this
Plan) as the Committee may consider appropriate. Such terms may include conditions (in addition to those contained in this Plan) on the exercisability of all or any part of an Option or SAR, the
transferability or forfeitability of a Stock Award, or the grant or settlement of Performance Shares or an Incentive Award. Notwithstanding any such conditions, the Committee may, in its discretion,
accelerate the time at which any Option or SAR may be exercised, or the time at which a Stock Award may become transferable or nonforfeitable or the time at which an Incentive Award or award of
Performance Shares may be settled. In addition, the Committee shall have complete authority to interpret all provisions of this Plan; to prescribe the form of Agreements; to adopt, amend, and rescind
rules and regulations pertaining to the administration of the Plan; and to make all other determinations necessary or advisable for the administration of this Plan. The express grant in the Plan of
any specific power to the Committee shall not be construed as limiting any power or authority of the Committee. Any decision made, or action taken, by the Committee in connection with the
administration of this Plan shall be final and conclusive. The members of the Committee shall not be liable for any act done in good faith with respect to this Plan or any Agreement or Award. All
expenses of administering this Plan shall be borne by the Company. 

        To
the extent applicable law so permits, the Committee, in its discretion, may delegate to one or more officers of the Company all or part of the Committee's authority and duties with
respect to Awards to be granted to individuals who are not subject to the reporting and other provisions of Section 16 of the Exchange Act and, after the transition period prescribed by the
regulations under Code Section 162(m), who are not Named Executive Officers. The Committee may revoke or amend the terms of a delegation at any time but such action shall not invalidate any
prior actions of the Committee's delegate or delegates that were consistent with the terms of the Plan and the Committee's prior delegation. If and to the extent deemed necessary by the Board, all
Awards granted to any individual who is subject to the reporting and other provisions of Section 16 of the Exchange Act shall be made by a Committee comprised solely of two or more directors,
all of whom are "non-employee directors" within the meaning of Rule 16b-3 under the Exchange Act and, after the transition period prescribed by the regulations under
Code Section 162(m), all Awards granted to any individual who is a Named Executive Officer shall be made by a Committee comprised solely of two or more directors, all of whom are "outside
directors" within the meaning of Code Section 162(m). 

        The
Company shall bear all expenses of administering this Plan. The Company shall indemnify and hold harmless each person who is or shall have been a member of the Committee acting as
administrator of the Plan, or any delegate of such, against and from any cost, liability, loss or expense that may be imposed upon or reasonably incurred by such person in connection with or resulting
from any action, claim, suit, or proceeding to which such person may be a party or in which such person may be involved by reason of any action taken or not taken under the Plan and against and from
any and all amounts paid by such person in settlement thereof, with the Company's approval, or paid by such person in satisfaction of any judgment in any such action, suit, or proceeding against such
person, provided he or she shall give the Company an opportunity, at its own expense, to handle and defend the same before he or she undertakes to handle and defend it on his or her own behalf.
Notwithstanding the foregoing, the Company shall not indemnify and hold harmless any such person if (i) applicable law or the Company's Articles of Incorporation or Bylaws prohibit such
indemnification or (ii) such person did not act in good faith and in a manner that such person believed to be consistent with the Plan or such person's conduct constituted gross negligence or
willful misconduct. The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such persons may be entitled under the Company's Articles of
Incorporation or Bylaws, as a matter of 

7

 

law
or otherwise, or under any other power that the Company may have to indemnify such person or hold him or her harmless. The provisions of the foregoing indemnity shall survive indefinitely the term
of this Plan. 

8

 
ARTICLE IV

ELIGIBILITY  

        Any employee of the Company or an Affiliate (including a corporation that becomes an Affiliate after the adoption of this Plan) and any non-employee
member of the Board is eligible to participate in this Plan. In addition, any other person or entity that provides services to the Company or an Affiliate is eligible to participate in this Plan if
the Board, in its sole discretion, determines that it is in the best interest of the Company. 

9

 
ARTICLE V

COMMON STOCK SUBJECT TO PLAN  

5.01.    Common Stock Issued  

        Upon the issuance of shares of Common Stock pursuant to an Award, the Company may deliver to the Participant shares of Common Stock or treasury shares from its
authorized but unissued Common Stock. 

5.02.    Aggregate Limit  

        The maximum aggregate number of shares of Common Stock that may be issued under this Plan shall be the lesser of (i) 2,336,903 shares or (ii) that
number that equals nine and one-half percent (9.5%) of the outstanding shares of Common Stock as of the Initial Public Offering. One hundred percent (100%) of such shares may be issued
pursuant to Options or any other type of Award. In addition, the maximum aggregate number of shares of Common Stock that may be issued under this Plan and the foregoing limits shall be subject to
adjustment as provided in Article XI. 

5.03.    Individual Limit  

        The maximum number of shares of Common Stock that can be issued under the Plan to any Participant pursuant to Options, SARs, Stock Awards or Performance Shares or
any combination thereof is 350,000 shares in any calendar year. This Section 5.03 applies only with respect to Awards that are made at the end of the transition period prescribed by the
regulations under Code Section 162(m). 

5.04.    Reallocation of Shares  

        If an Option is terminated, in whole or in part, for any reason other than its exercise or the exercise of a Corresponding SAR that is settled with shares of
Common Stock, the number of shares of Common
Stock allocated to the Option or portion thereof may be reallocated to other Awards to be granted under this Plan. If an SAR is terminated, in whole or in part, for any reason other than its exercise
that is settled with shares of Common Stock or the exercise of a related Option, the number of shares of Common Stock allocated to the SAR or portion thereof may be reallocated to other Awards to be
granted under this Plan. If an award of Performance Shares is terminated, in whole or in part, for any reason other than its settlement with shares of Common Stock, the number of shares allocated to
the Performance Shares or portion thereof may be reallocated to other Awards to be granted under this Plan. If a Stock Award is forfeited, in whole or in part, for any reason, the number of shares of
Common Stock allocated to the Stock Award or portion thereof may be reallocated to other Awards to be granted under this Plan. 

10

 
ARTICLE VI

OPTIONS  

6.01.    Grant  

        In accordance with the provisions of Article IV, the Committee will designate each individual or entity to whom an Option is to be granted and will specify
the number of shares of Common Stock covered by such grant. Notwithstanding any other provision of the Plan or any Agreement, the Committee may only grant an incentive stock option to an individual
who is an employee of the Company or an Affiliate. 

6.02.    Option Price  

        The price per share of Common Stock purchased on the exercise of an Option shall be determined by the Committee on the date of grant, but shall not be less than
the Fair Market Value of a share of Common Stock on the date the Option is granted. However, if at the time of grant of an Option that is intended to be an incentive stock option the Participant is a
Ten Percent Shareholder, the price per share of Common Stock purchased on the exercise of such Option shall not be less than 110% of the Fair Market Value of a share of Common Stock on the date the
Option is granted. 

6.03.    Maximum Option Period  

        The maximum period in which an Option may be exercised shall be determined by the Committee on the date of grant, except that no Option shall be exercisable after
the expiration of ten years from the date such Option was granted (five years from the date such Option was granted in the event of an incentive stock option granted to a Ten Percent Shareholder). 

6.04.    Nontransferability  

        Except as provided in Section 6.05, each Option granted under this Plan shall be nontransferable except by will or by the laws of descent and distribution.
In the event of any transfer of an Option (by the Participant or his transferee), the Option and any Corresponding SAR that relates to such Option must be transferred to the same person or persons or
entity or entities. Except as provided in Section 6.05, during the lifetime of the Participant to whom the Option is granted, the Option may be exercised only by the Participant. No right or
interest of a Participant in any Option shall be liable for, or subject to, any lien, obligation, or liability of such Participant. 

6.05.    Transferable Options  

        Section 6.04 to the contrary notwithstanding, if the Agreement provides, an Option that is not an incentive stock option may be transferred by a
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, on such
terms and conditions as may be permitted under Rule 16b-5 under the Exchange Act as in effect from time to time. The holder of an Option transferred pursuant to this Section shall
be bound by the same terms and conditions that governed the Option during the period that it was held by the Participant; provided, however, that such transferee may not transfer the Option except by
will or the laws of descent and distribution. In the event of any transfer of an Option (by the Participant or his transferee), the Option and any Corresponding SAR that relates to such Option must be
transferred to the same person or persons or entity or entities. 

6.06.    Exercise  

        Subject to the provisions of this Plan and if an applicable Agreement does not provide for when Options shall become exercisable, a Participant's Options shall
become exercisable with respect to 

11

 

one-fourth
of the shares of Common Stock subject to the Options on each of the first, second, third and fourth anniversaries of the date of grant, provided the Participant has been
continuously employed by or has continuously provided services to the Company or an Affiliate as of each such date. Additionally, if the Committee so provides in an applicable Agreement, the
Participant's outstanding Options shall become exercisable with respect to one hundred percent (100%) of the shares of Common Stock subject to the Options that have not previously become exercisable
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 the Participant's
employment or service with the Company or an Affiliate by the Participant for Good Reason, (iii) the Participant's death while still employed by or providing services to the Company or an
Affiliate or (iv) the Participant's Disability while still employed by or providing services to the Company or an Affiliate. Notwithstanding the foregoing, incentive stock options (granted
under the Plan and all plans of the Company and its Affiliates) may not be first exercisable in a calendar year for shares of Common Stock having a Fair Market Value (determined as of the date the
Option is granted) exceeding $100,000. If the limitation is exceeded, the Options that cause the limitation to be exceeded shall be treated as nonqualified stock options. An Option shall be exercised
in such a manner and in compliance with such requirements as the Committee shall determine. An Option granted under this Plan may be exercised with respect to any number of whole shares less than the
full number for which the Option could be exercised. A partial exercise of an Option shall not affect the right to exercise the Option from time to time in accordance with this Plan and the applicable
Agreement with respect to the remaining shares subject to the Option. The exercise of an Option shall result in the termination of any Corresponding SAR to the extent of the number of shares with
respect to which the Option is exercised. 

6.07.    Payment  

        Subject to rules established by the Committee and unless provided otherwise in an Agreement, payment of all or part of the Option price may be made in cash,
certified check, by tendering shares of Common Stock (which, if acquired from the Company, have been held by the Participant for at least six months) or by a broker-assisted cashless exercise. If
shares of Common Stock are used to pay all or part of the Option price, the sum of the cash and cash equivalent and the Fair Market Value (determined as of the day preceding the date of exercise) of
the shares surrendered must not be less than the Option price of the shares for which the Option is being exercised. 

6.08.    Employee Status  

        For purposes of determining the applicability of Section 422 of the Code (relating to incentive stock options), or in the event that the terms of any
Option provide that it may be exercised only during employment or continued service or within a specified period of time after termination of employment or continued service, the Committee may decide
to what extent leaves of absence for governmental or military service, illness, temporary disability, or other reasons shall not be deemed interruptions of continuous employment or service. 

6.09.    Change in Control  

        Notwithstanding any provision of any Agreement, in the event of or in anticipation of a Change in Control, the Committee in its discretion (i) may declare
that some or all outstanding Options previously granted under the Plan, whether or not then exercisable, shall terminate as of a date before or on the Control Change Date without any payment to the
holder of the Option, provided the Committee gives prior written notice to the Participants of such termination and gives such Participants the right to exercise their outstanding Options before such
date to the extent then exercisable or (ii) may terminate before or on the Control Change Date some or all outstanding Options previously granted under the Plan, whether or not then
exercisable, in consideration of payment to the holder of 

12

 

the
Option, with respect to each share of Common Stock for which the Option is then exercisable, of the excess, if any, of the Fair Market Value on such date of the Common Stock subject to the
exercisable portion of the Option over the Option price. The payment described in (ii) above may be made in any manner the Committee determines, including in cash, stock or other property. The
Committee may take the actions described in (i) or (ii) above with respect to Options that are not then exercisable whether or not the Participant will receive any payment therefor. The
Committee in its discretion may take the actions described in (i) or (ii) above contingent on consummation of the Change in Control and with respect to some or all outstanding Options,
whether or not then exercisable, or on an Option-by-Option basis, which actions need not be uniform with respect to all outstanding Options. However, the Options shall not be
terminated to the extent that written provision is made for their continuance, assumption or substitution by the Company or a successor employer or its parent or subsidiary in connection with the
Change in Control. If the Committee so provides in an applicable Agreement, a Participant's outstanding Options shall be fully exercisable on and after a Control Change Date or immediately before the
date the Options will be terminated in connection with the Change in Control, as described above, provided the Participant has been continuously employed by or has continuously provided services to
the Company or an Affiliate as of such time. 

6.10.    Stockholder Rights  

        No Participant shall have any rights as a stockholder with respect to shares subject to his Option until the date of exercise of such Option. 

6.11.    Disposition of Shares  

        A Participant shall notify the Company of any sale or other disposition of shares of Common Stock acquired pursuant to an Option that was an incentive stock
option if such sale or disposition occurs (i) within two years of the grant of an Option or (ii) within one year of the issuance of shares of Common Stock to the Participant. Such notice
shall be in writing and directed to the Secretary of the Company. 

6.12.    No Liability of Company  

        The Company shall not be liable to any Participant or any other person if the Internal Revenue Service or any court or other authority having jurisdiction over
such matter determines for any reason that an Option intended to be an incentive stock option and granted hereunder does not qualify as an incentive stock option. 

13

 
ARTICLE VII

SARS  

7.01.    Grant  

        In accordance with the provisions of Article IV, the Committee will designate each individual or entity to whom SARs are to be granted and will specify the
number of shares of Common Stock covered by such grant. For purposes of the foregoing limit, an Option and Corresponding SAR shall be treated as a single Award. In addition, no Participant may be
granted Corresponding SARs (under this Plan and all other incentive stock option plans of the Company and its Affiliates) that are related to incentive stock options which are first exercisable in any
calendar year for shares of Common Stock having an aggregate Fair Market Value (determined as of the date the related Option is granted) that exceeds $100,000. 

7.02.    Maximum SAR Period  

        The term of each SAR shall be determined by the Committee on the date of grant, except that no SAR shall have a term of more than ten years from the date such SAR
was granted (five years for a Corresponding SAR that is related to an incentive stock option and that is granted to a Ten Percent Shareholder). 

7.03.    Nontransferability  

        Except as provided in Section 7.04, each SAR granted under this Plan shall be nontransferable except by will or by the laws of descent and distribution. In
the event of any such transfer, a Corresponding SAR and the related Option must be transferred to the same person or persons or entity or entities. Except as provided in Section 7.04, during
the lifetime of the Participant to whom the SAR is granted, the SAR may be exercised only by the Participant. No right or interest of a Participant in any SAR shall be liable for, or subject to, any
lien, obligation, or liability of such Participant. 

7.04.    Transferable SARs  

        Section 7.03 to the contrary notwithstanding, if the Agreement so provides, an SAR, other than a Corresponding SAR that is related to an incentive stock
option, may be transferred by a 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, on such terms and conditions as may be permitted under Rule 16b-5 under the Exchange Act as in effect from time to time. The holder of an SAR
transferred pursuant to this Section shall be bound by the same terms and conditions that governed the SAR during the period that it was held by the Participant;
provided, however, that such transferee may not transfer the SAR except by will or the laws of descent and distribution. In the event of any transfer of a Corresponding SAR (by the Participant or his
transferee), the Corresponding SAR and the related Option must be transferred to the same person or person or entity or entities. 

7.05.    Exercise  

        Subject to the provisions of this Plan and if an applicable Agreement does not provide for when an SAR shall become exercisable, an SAR shall become exercisable
with respect to one-fourth of the shares of Common Stock covered by the grant on each of the first, second, third and fourth anniversaries of the date of grant, provided the Participant
has been continuously employed by or has continuously provided services to the Company or an Affiliate as of each such date. Additionally, if the Committee so provides in an applicable Agreement, an
SAR shall become exercisable with respect to one hundred percent (100%) of the shares of Common Stock covered by the grant that have not previously become exercisable upon (i) involuntary
termination of the Participant's employment or 

14

 

service
by the Company or an Affiliate other than for Cause, (ii) voluntary termination of the Participant's employment or service with the Company or an Affiliate by the Participant for Good
Reason, (iii) the Participant's death while still employed by or providing services to the Company or an Affiliate or (iv) the Participant's Disability while still employed by or
providing services to the Company or an Affiliate. Notwithstanding the foregoing, an SAR may be exercised only to the extent that the related Option (in the case of a Corresponding SAR) is exercisable
and only when the Fair Market Value of the Common Stock that is subject to the exercise exceeds the Initial Value of the SAR. An SAR granted under this Plan may be exercised with respect to any number
of whole shares less than the full number for which the SAR could be exercised. A partial exercise of an SAR shall not affect the right to exercise the SAR from time to time in accordance with this
Plan and the applicable Agreement with respect to the remaining shares subject to the SAR. The exercise of a Corresponding SAR shall result in the termination of the related Option to the extent of
the number of shares with respect to which the SAR is exercised. 

7.06.    Change in Control  

        Notwithstanding any provision of any Agreement, in the event of or in anticipation of a Change in Control, the Committee in its discretion (i) may declare
that some or all outstanding SARs previously granted under the Plan, whether or not then exercisable, shall terminate as of a date before or on the Control Change Date without any payment to the
holder of the SAR, provided the Committee gives prior written notice to the Participants of such termination and gives such Participants the right to exercise their outstanding SARs before such
termination date to the extent then exercisable or (ii) may terminate before or on the Control Change Date some or all outstanding SARs previously granted
under the Plan, whether or not then exercisable, in consideration of payment to the holder of the SAR, with respect to each share of Common Stock for which the SAR is then exercisable, of the excess,
if any, of the Fair Market Value of such Common Stock on such date over the Initial Value of the SAR. The payment described in (ii) above may be made in any manner the Committee determines,
including in cash, stock or other property. The Committee may take the actions described in (i) or (ii) above with respect to SARs that are not then exercisable whether or not the
Participant will receive any payment therefor. The Committee in its discretion may take the actions described in (i) or (ii) above contingent on consummation of the Change in Control and
with respect to some or all outstanding SARs, whether or not then exercisable, or on an SAR-by-SAR basis, which actions need not be uniform with respect to all outstanding
SARs. Notwithstanding the foregoing, no payment shall be made with respect to a Corresponding SAR to the extent the Committee made a payment with respect to the Option that relates to the
Corresponding SAR. No SARs shall be terminated to the extent that written provision is made for their assumption, continuance or substitution by the Company or a successor employer or its parent or
subsidiary in connection with the Change in Control. If the Committee so provides in an applicable Agreement, a Participant's outstanding SARs shall be fully exercisable on and after a Control Change
Date or immediately before the date the SARs will be terminated in connection with the Change in Control, as described above, provided the Participant has been continuously employed by or has
continuously provided services to the Company or an Affiliate as of such time. 

7.07.    Employee Status  

        If the terms of any SAR provide that it may be exercised only during employment or continued service or within a specified period of time after termination of
employment or continued service, the Committee may decide to what extent leaves of absence for governmental or military service, illness, temporary disability or other reasons shall not be deemed
interruptions of continuous employment or service. 

15

 

7.08.    Settlement  

        At the Committee's discretion, the amount payable as a result of the exercise of an SAR may be settled in cash, shares of Common Stock, or a combination of cash
and Common Stock. No fractional share will be deliverable upon the exercise of an SAR but a cash payment will be made in lieu thereof. 

7.09.    Stockholder Rights  

        No Participant shall, as a result of receiving an SAR, have any rights as a stockholder of the Company or any Affiliate until the date that the SAR is exercised
and then only to the extent that the SAR is settled by the issuance of Common Stock. 

16

   ARTICLE VIII

STOCK AWARDS  

8.01.    Award  

        In accordance with the provisions of Article IV, the Committee will designate each individual or entity to whom a Stock Award is to be granted and will
specify the number of shares of Common Stock covered by such grant. 

8.02.    Vesting  

        The Committee, on the date of grant, may prescribe that a Participant's rights in the Stock Award shall be forfeitable and nontransferable for a period of time
and subject to such conditions as may be set forth in the Agreement. By way of example and not of limitation, the Committee may prescribe that a Participant's rights in a Stock Award shall be
forfeitable and nontransferable subject to (a) the attainment of objectives stated with reference to the Company's, an Affiliate's or a business unit's attainment of objectives stated with
respect to performance criteria listed in Section 8.03, (b) the Participant's completion of a specified period of employment or service with the Company or an Affiliate, (c) the
Participant's death, disability or retirement or (d) satisfaction of a combination of any of the foregoing factors. To the extent the Participant's rights in a Stock Award are forfeitable and
nontransferable for a period of time, the Committee on the date of grant shall determine the maximum period over which the rights may become nonforfeitable and transferable, except that such period
shall not exceed ten years. If an applicable Agreement does not provide for when a Participant's rights in a Stock Award will become nonforfeitable and transferable, a Participant's rights in a Stock
Award will become nonforfeitable and transferable with respect to one-fourth of the shares of Common Stock covered by the grant on each of the first, second, third and fourth anniversaries
of the date of grant, provided the Participant has been continuously employed by or has continuously provided services to the Company or an Affiliate as of each such date. Additionally, if the
Committee so provides in an applicable Agreement, an outstanding Stock Award shall become nonforfeitable and transferable 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 while
still employed by or providing services to the Company or an Affiliate or (iv) the Participant's Disability while still employed by or providing services to the Company or an Affiliate. 

8.03.    Performance Objectives  

        In accordance with Section 8.02, the Committee may prescribe in an applicable Agreement that Stock Awards will become nonforfeitable and transferable based
on objectives stated with respect to the Company's, an Affiliate's or a business unit's (a) total stockholder return; (b) total stockholder return as compared to total return (on a
comparable basis) of a publicly available index; (c) net income; (d) gross, operating or net earnings before or after taxes; (e) funds from operations; (f) earnings before
interest expense, taxes, depreciation and amortization; (g) operating margin; (h) earnings per share; (i) return on equity, capital, assets, net assets, sales or investment;
(j) working capital; (k) ratio of debt to stockholders equity; (l) revenue; (m) cash flow or cash flow per share; (n) book value per share; (o) earnings
growth; (p) sales growth; (q) customer growth; (r) Fair Market Value of the Company or any Affiliate or shares of Common Stock; (s) share price; (t) market share;
(u) economic value added; (v) market value added; (w) productivity; (x) level of expenses; (y) quality; (z) safety; (aa) customer satisfaction or (bb) peer
group comparisons of any of the aforementioned performance objectives. If the Committee, on the date of grant, prescribes that a Stock Award shall become nonforfeitable and transferable only upon the
attainment of any of the above performance objectives, the shares of 

17

 

Common
Stock subject to such Stock Award shall become nonforfeitable and transferable only to the extent that the Committee certifies in writing that such objectives have been achieved. 

8.04.    Employee Status  

        In the event that the terms of any Stock Award provide that shares shall become nonforfeitable and transferable thereunder only after completion of a specified
period of employment or continuous service, the Committee may decide in each case to what extent leaves of absence for governmental or military service, illness, temporary disability, or other reasons
shall not be deemed interruptions of continuous employment or service. 

8.05.    Change in Control  

        Notwithstanding any provision of any Agreement, in the event of or in anticipation of a Change in Control, the Committee in its discretion may terminate before or
on the Control Change Date
outstanding Stock Awards previously granted under the Plan that are not then nonforfeitable and transferable without any payment to the holder of the Stock Awards. The Committee in its discretion may
take the action described in this Section 8.05 contingent on the consummation of the Change in Control and with respect to some or all outstanding Stock Awards or on a Stock
Award-by-Stock Award basis, which actions need not be uniform with respect to all outstanding Stock Awards. The preceding sentences to the contrary notwithstanding, the Stock
Awards shall not be terminated to the extent that written provision is made for their assumption, continuance or substitution by the Company or a successor employer or its parent or subsidiary in
connection with the Change in Control. If the Committee so provides in an applicable Agreement, a Participant's outstanding Stock Awards shall become nonforfeitable and transferable on and after a
Control Change Date or immediately before the date the Stock Awards would otherwise be terminated in connection with the Change in Control, as described above, provided the Participant has been
continuously employed by or has continuously provided services to the Company or an Affiliate as of such time. 

8.06.    Stockholder Rights  

        Prior to their forfeiture (in accordance with the applicable Agreement and while the shares of Common Stock granted pursuant to the Stock Award may be forfeited
and are nontransferable), a Participant will have all rights of a stockholder with respect to a Stock Award, including the right to receive dividends and vote the shares; provided, however, that
during such period (i) a Participant may not sell, transfer, pledge, exchange, hypothecate, or otherwise dispose of shares granted pursuant to a Stock Award, (ii) the Company shall
retain custody of the certificates evidencing shares granted pursuant to a Stock Award, and (iii) the Participant will deliver to the Company a stock power, endorsed in blank, with respect to
each Stock Award. The limitations set forth in the preceding sentence shall not apply after the shares granted under the Stock Award are transferable and are no longer forfeitable. 

18

 
ARTICLE IX

PERFORMANCE SHARE AWARDS  

9.01.    Grant  

        In accordance with the provisions of Article IV, the Committee will designate each individual or entity to whom a grant of Performance Shares is to be made
and will specify the number of shares covered by such grant. 

9.02.    Earning the Award  

        The Committee, on the date of grant of the Performance Shares, shall prescribe that the Performance Shares will be earned and become payable subject to such
conditions as are set forth in the Agreement. By way of example and not of limitation, the Committee may prescribe that the Performance Shares will be earned and become payable upon (a) the
satisfaction of performance objectives as described below, (b) the Participant's completion of a specified period of employment or service with the Company or an Affiliate, (c) the
Participant's death, disability or retirement or (d) satisfaction of a combination of any of the foregoing factors. The performance objectives may be stated with respect to the Company's, an
Affiliate's or a business unit's (a) total stockholder return; (b) total stockholder return as compared to total return (on a comparable basis) of a publicly available index;
(c) net income; (d) gross, operating or net earnings before or after taxes; (e) funds from operations; (f) earnings before interest expense, taxes, depreciation and
amortization; (g) operating margin; (h) earnings per share; (i) return on equity, capital, assets, net assets, sales or investment; (j) working capital; (k) ratio of
debt to stockholders equity; (l) revenue; (m) cash flow or cash flow per share; (n) book value per share; (o) earnings growth; (p) sales growth; (q) customer
growth; (r) Fair Market Value of the Company or any Affiliate or shares of Common Stock; (s) share price; (t) market share; (u) economic value added; (v) market
value added; (w) productivity; (x) level of expenses; (y) quality; (z) safety; (aa) customer satisfaction or (bb) peer group comparisons of any of the aforementioned
performance objectives. If the Committee, on the date of grant, prescribes that Performance Shares will be earned and payable only upon the attainment of such performance objectives, no Performance
Shares will be considered earned and no payments will be made with respect to such Performance Shares unless, and then only to the extent that, the Committee certifies in writing that such objectives
have been achieved. If an applicable Agreement does not provide for when a Participant's rights in Performance Shares will be earned and become payable, a Participant's rights in Performance Shares
will be earned and become payable with respect to one-fourth of the shares of Common Stock covered by the grant on each of the first, second, third and fourth anniversaries of the date of
grant, provided the Participant has been continuously employed by or has continuously provided services to the Company or an Affiliate as of each such date. Additionally, if the Committee so provides
in an applicable Agreement, outstanding Performance Shares shall be earned and become payable 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 while still employed by or providing services to the Company or an Affiliate or
(iv) the Participant's Disability while still employed by or providing services to the Company or an Affiliate. 

9.03.    Maximum Performance Share Award Period  

        The Committee, on the date of grant, shall determine the maximum period over which Performance Share Awards may be earned, except that such period shall not
exceed ten years. 

19

 

9.04.    Payment  

        In the discretion of the Committee, the amount payable when an award of Performance Shares is earned may be settled in cash, by the issuance of shares of Common
Stock, or a combination thereof. A fractional share of Common Stock shall not be deliverable when an award of Performance Shares is earned, but a cash payment will be made in lieu thereof. 

9.05.    Stockholder Rights  

        No Participant shall, as a result of receiving a grant of Performance Shares, have any rights as a stockholder until and then only to the extent that the
Performance Shares are earned and settled in shares of Common Stock. After Performance Shares are earned and settled in shares, a Participant will have all the rights of a stockholder with respect to
such shares, including the right to receive dividends and vote the shares. 

9.06.    Nontransferability  

        Except as provided in Section 9.07 Performance Shares granted under this Plan shall be nontransferable except by will or by the laws of descent and
distribution. No right or interest of a Participant in any Performance Shares shall be liable for, or subject to, any lien, obligation, or liability of such Participant. 

9.07.    Transferable Performance Shares  

        Section 9.06 to the contrary notwithstanding, if the Agreement so provides, an award of Performance Shares may be transferred by a 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, on such terms and
conditions as may be permitted under Rule 16b-5 under the Exchange Act as in effect from time to time. The holder of Performance Shares transferred pursuant to this Section shall be
bound by the same terms and conditions that governed the Performance Shares during the period that they were held by the Participant; provided, however that such transferee may not transfer
Performance Shares except by will or the laws of descent and distribution. 

9.08.    Employee Status  

        In the event that the terms of any Performance Share award provide that no payment will be made unless the Participant completes a stated period of employment or
continued service, the Committee may decide to what extent leaves of absence for government or military service, illness, temporary disability, or other reasons shall not be deemed interruptions of
continuous employment or service. 

9.09.    Change in Control  

        Notwithstanding any provision of any Agreement, in the event of or in anticipation of a Change in Control, the Committee in its discretion may terminate before or
on the Control Change Date some or all outstanding Performance Shares previously granted under the Plan that are not then earned and payable without any payment to the holder of the Performance
Shares. The Committee in its discretion may take the action described in this Section 9.09 contingent on consummation of the Change in Control and with respect to some or all outstanding
Performance Shares or on a Performance Share-by-Performance Share basis, which actions need not be uniform with respect to all outstanding Performance Shares. The Performance
Shares shall not be terminated to the extent that written provision is made for their assumption, continuance or substitution by the Company or a successor employer or its parent or subsidiary in
connection with the Change in Control. If the Committee so provides in an applicable Agreement, a Participant's outstanding Performance Shares shall be deemed 

20

 

earned
(and any shares of Common Stock to be paid in settlement of such Performance Shares shall be nonforfeitable and transferable) as of a Control Change Date or immediately before the date the
Performance Shares would otherwise be terminated in connection with the Change in Control, as described above, provided the Participant has been continuously employed by or has continuously provided
services to the Company or an Affiliate as of such time. 

21

 
ARTICLE X

INCENTIVE AWARDS  

10.01.    Grant  

        The Committee shall designate Participants to whom Incentive Awards are to be granted. All Incentive Awards shall be finally determined exclusively by the
Committee under the procedures established by the Committee; provided, however, that no Participant may receive an Incentive Award payment in any calendar year that exceeds $750,000. 

10.02.    Terms and Conditions  

        The Committee, on the date of grant of an Incentive Award, shall specify in the applicable Agreement the terms and conditions which govern the grant. By way of
example and not of limitation, the Committee may prescribe that the Incentive Award shall be earned and payable upon (a) the satisfaction of performance objectives as described below,
(b) the Participant's completion of a specified period of employment or service with the Company or an Affiliate, (c) the Participant's death, disability or retirement or
(d) satisfaction of a combination of any of the foregoing factors. The performance objectives may be stated with respect to the Company's, an Affiliate's or a business unit's (a) total
stockholder return; (b) total stockholder return as compared to total return (on a comparable basis) of a publicly available index; (c) net income; (d) gross, operating or net
earnings before or after taxes; (e) funds from operations; (f) earnings before interest expense, taxes, depreciation and amortization; (g) operating margin; (h) earnings
per share; (i) return on equity, capital, assets, net assets, sales or investment; (j) working capital; (k) ratio of debt to stockholders equity; (l) revenue;
(m) cash flow or cash flow per share; (n) book value per share; (o) earnings growth; (p) sales growth; (q) customer growth; (r) Fair Market Value of the
Company or any Affiliate or shares of Common Stock; (s) share price; (t) market share; (u) economic value added; (v) market value added; (w) productivity;
(x) level of expenses; (y) quality; (z) safety; (aa) customer satisfaction or (bb) peer group comparisons of any of the aforementioned performance objectives. If the Committee, on
the date of grant, prescribes that the Incentive Awards will be earned and payable only upon the attainment of such performance objectives, no Incentive Awards will be considered earned and no
payments will be made with respect to such Incentive Awards unless, and then only to the extent that, the Committee certifies in writing that such objectives have been achieved. If an applicable
Agreement does not provide for when a Participant's rights in an Incentive Award will become earned and payable, a Participant's rights in an Incentive Award will be earned and payable with respect to
one-fourth of the value of the Incentive Award on each of the first, second, third and fourth anniversaries of the date of grant, provided the Participant has been continuously employed by
or has continuously provided services to the Company or an Affiliate as of each such date. Additionally, if the Committee so provides in an applicable Agreement, an outstanding Incentive Award shall
be earned and payable with respect to one hundred percent (100%) of the value of the Incentive Award that was not previously earned and payable 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 while still employed by or providing services to the Company or an Affiliate or (iv) the Participant's Disability while
still employed by or providing services to the Company or an Affiliate. 

10.03.    Maximum Incentive Award Period  

        The Committee, at the time an Incentive Award is made, shall determine the maximum period over which the Incentive Award may be earned, except that such period
shall not exceed ten years. 

22

 

10.04.    Nontransferability  

        Except as provided in Section 10.05, Incentive Awards granted under this Plan shall be nontransferable except by will or by the laws of descent and
distribution. No right or interest of a Participant in an Incentive Award shall be liable for, or subject to, any lien, obligation, or liability of such Participant. 

10.05.    Transferable Incentive Awards  

        Section 10.04 to the contrary notwithstanding, if so provided in an Agreement, an Incentive Award may be transferred by a Participant to the Participant's
children, grandchildren, spouse, one or more trusts for the benefit of such family members or to a partnership in which such family members are the only partners, on such terms and conditions as may
be permitted by Rule 16b-5 under the Exchange Act as in effect from time to time. The holder of an Incentive Award transferred pursuant to this Section shall be bound by the same
terms and conditions that governed the Incentive Award during the period that it was held by the Participant; provided, however, that such transferee may not transfer the Incentive Award except by
will or the laws of descent and distribution. 

10.06.    Employee Status  

        If the terms of an Incentive Award provide that a payment will be made thereunder only if the Participant completes a stated period of employment or continuous
service, the Committee may decide to what extent leaves of absence for governmental or military service, illness, temporary disability or other reasons shall not be deemed interruptions of continuous
employment or service. 

10.07.    Change in Control  

        Notwithstanding any provision of any Agreement, in the event of or in anticipation of a Change in Control, the Committee in its discretion may terminate before or
on the Control Change Date some or all outstanding Incentive Awards previously granted under the Plan that are not then earned and payable without any payment to the holder of the Incentive Award. The
Committee in its discretion may take the action described in this Section contingent on consummation of the Change in Control and with respect to some or all outstanding Incentive Awards or on an
Incentive Award-by-Incentive Award basis, which actions need not be uniform with respect to all outstanding Incentive Awards. The Incentive Awards shall not be terminated to
the extent
that written provision is made for their assumption, continuance or substitution by the Company or a successor employer or its parent or subsidiary in connection with the Change in Control. If the
Committee so provides in an applicable Agreement, a Participant's outstanding Incentive Awards shall be deemed earned (and shares of Common Stock to be paid in settlement of such Incentive Awards
shall be nonforfeitable and transferable) as of a Control Change Date or immediately before the date the Incentive Awards would otherwise be terminated in connection with the Change in Control, as
described above, provided the Participant has been continuously employed by or has continuously provided services to the Company or an Affiliate as of such time. 

10.08.    Stockholder Rights  

        No Participant shall, as a result of receiving an Incentive Award, have any rights as a stockholder of the Company or any Affiliate on account of such Incentive
Award, unless and until the Incentive Award is earned and shares of Common Stock paid in settlement thereof. After an Incentive Award is earned and settled in shares, a Participant will have all the
rights of a stockholder with respect to such shares, including the right to receive dividends and vote the shares. 

23

 
ARTICLE XI

ADJUSTMENT UPON CHANGE IN COMMON STOCK  

        The maximum number of shares that may be issued pursuant to Awards, the terms of outstanding Awards, and the per individual limitations on the number of shares of
Common Stock that may be issued pursuant to for which Awards shall be adjusted as the Board shall determine to be equitably required in the event that (i) the Company (a) effects one or
more stock dividends, stock split-ups, subdivisions or consolidations of shares or (b) engages in a transaction described under Section 424 of the Code or (ii) there
occurs any other event which, in the judgment of the Board, necessitates such action. In addition, the Committee may make such other adjustments to the terms of any Awards to the extent equitable and
necessary to prevent an enlargement or dilution of the Participant's rights thereunder as a result of any such event or similar transaction. Any determination made under this Article XI by the
Board shall be final and conclusive. 

        The
issuance by the Company of stock of any class, or securities convertible into stock of any class, for cash or property, or for labor or services, either upon direct sale or upon the
exercise of rights or warrants to subscribe therefor, or upon conversion of stock or obligations of the Company convertible into such stock or other securities, shall not affect, and no adjustment by
reason thereof shall be made with respect to, the maximum number of shares that may be issued pursuant to Awards may be
granted, the per individual limitations on the number of shares that may be issued pursuant to Awards, or the terms of outstanding Awards. 

        The
Committee may grant Awards in substitution for performance shares, incentive awards, stock awards, stock options, stock appreciation rights, or similar awards held by an individual
who becomes an employee of the Company or an Affiliate in connection with a transaction described in the first paragraph of this Article XI. Notwithstanding any provision of the Plan (other
than the limitation of Section 5.02), the terms of such substituted Awards shall be as the Committee, in its discretion, determines is appropriate. 

24

 
ARTICLE XII

COMPLIANCE WITH LAW AND APPROVAL OF REGULATORY BODIES  

12.01.    Compliance  

        No Option or SAR shall be exercisable, no shares of Common Stock shall be issued, no certificates for shares of Common Stock shall be delivered, and no payment
shall be made under this Plan except in compliance with all applicable federal and state laws and regulations (including, without limitation, withholding tax requirements), any listing agreement to
which the Company is a party, and the rules of all domestic stock exchanges on which the Company's shares may be listed. The Company shall have the right to rely on an opinion of its counsel as to
such compliance. Any stock certificate evidencing shares of Common Stock issued pursuant to an Award may bear such legends and statements as the Committee may deem advisable to assure compliance with
federal and state laws and regulations. No Option or SAR shall be exercisable, no Stock Award or Performance Share shall be granted, no shares of Common Stock shall be issued, no certificate for
shares of Common Stock shall be delivered, and no payment shall be made under this Plan until the Company has obtained such consent or approval as the Committee may deem advisable from regulatory
bodies having jurisdiction over such matters. 

12.02.    Postponement of Exercise or Payment  

        The Committee may postpone any grant, exercise, vesting or payment of an Award for such time as the Committee in its sole discretion may deem necessary in order
to permit the Company (i) to effect, amend or maintain any necessary registration of the Plan or the shares of Common Stock issuable pursuant to the Award under the securities laws;
(ii) to permit any action to be taken in order to (A) list such shares of Common Stock or other shares of stock of the Company on a stock exchange if shares of Common Stock or other
shares of stock of the Company are not then listed on such exchange or (B) comply with restrictions or regulations incident to the maintenance of a public market for its shares of Common Stock
or other shares of stock of the Company, including any rules or regulations of any stock exchange on which the shares of Common Stock or other shares of stock of the Company are listed;
(iii) to determine that such shares of Common Stock in the Plan are exempt from such registration or that no action of the kind referred to in (ii)(B) above needs to be taken; (iv) to
comply with any other applicable law, including without limitation, securities laws; (v) during any such time the Company or any Affiliate is prohibited from doing any of such acts under
applicable law, including without limitation, during the course of an investigation of the Company or any Affiliate, or under any contract, loan agreement or covenant or other agreement to which the
Company or any Affiliate is a party or (vi) to otherwise comply with any prohibition on such acts or payments during any applicable blackout period; and the Company shall not be obligated by
virtue of any terms and conditions of any Agreement or any provision of the Plan to recognize the grant, exercise, vesting or payment of an Award or to grant, sell or issue shares of Common Stock or
make any such payments in violation of the securities laws or the laws of any government having jurisdiction thereof or any of the provisions hereof. Any such postponement shall not extend the term of
the Award and neither the Company nor its directors and officers nor the Committee shall have any obligation or liability to any Participant or to any other person with respect to shares of Common
Stock or payments as to which the Award shall lapse because of such postponement. 

12.03.    Forfeiture of Payment  

        A Participant shall be required to forfeit any and all rights under Awards or to reimburse the Company for any payment under any Award (with interest as necessary
to avoid imputed interest or original issue discount under the Code or as otherwise required by applicable law) to the extent applicable law requires such forfeiture or reimbursement. 

25

 
ARTICLE XIII

GENERAL PROVISIONS  

13.01.    Effect on Employment and Service  

        Neither the adoption of this Plan, its operation, nor any documents describing or referring to this Plan (or any part thereof), shall confer upon any individual
or entity any right to continue in the employ or service of the Company or an Affiliate or in any way affect any right and power of the Company or an Affiliate to terminate the employment or service
of any individual or entity at any time with or without assigning a reason therefor. 

13.02.    Unfunded Plan  

        This Plan, insofar as it provides for Awards, shall be unfunded, and the Company shall not be required to segregate any assets that may at any time be represented
by Awards under this Plan. Any liability of the Company to any person with respect to any Award under this Plan shall be based solely upon any contractual obligations that may be created pursuant to
this Plan. No such obligation of the Company shall be deemed to be secured by any pledge of, or other encumbrance on, any property of the Company. 

13.03.    Rules of Construction  

        Headings are given to the articles and sections of this Plan solely as a convenience to facilitate reference. The reference to any statute, regulation, or other
provision of law shall be construed to refer to any amendment to or successor of such provision of law. 

13.04.    Tax Withholding and Reporting  

        Unless an Agreement provides otherwise, each Participant shall be responsible for satisfying in cash or cash equivalent acceptable to the Committee any income and
employment (including without limitation Social Security and Medicare) tax withholding obligations attributable to participation in the Plan and
the grant, exercise, vesting or payment of Awards granted thereunder. In accordance with procedures that the Committee establishes, the Committee, to the extent applicable law permits, may allow a
Participant to pay such amounts (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 statutory withholding obligation, (iv) by a broker-assisted cashless exercise or (v) by any combination
of the aforementioned methods of payment. The Company shall comply with all such reporting and other requirements relating to the administration of this Plan and the grant, exercise, vesting or
payment of any Award hereunder as applicable law requires. 

13.05.    Reservation of Shares  

        The Company, during the term of this Plan, shall at all times reserve and keep available such number of shares of Common Stock as shall be sufficient to satisfy
the requirements of the Plan. Additionally, the Company, during the term of this Plan, shall use its best efforts to seek to obtain from appropriate regulatory agencies any requisite authorizations
needed in order to issue and to sell such number of shares of Common Stock as shall be sufficient to satisfy the requirements of the Plan. However, the inability of the Company to obtain from any such
regulatory agency the requisite authorizations the Company's counsel deems to be necessary for the lawful issuance and sale of any shares of Common Stock hereunder, or the inability of the Company to
confirm to its satisfaction that any issuance and sale of any shares of Common Stock hereunder will meet applicable legal requirements, shall relieve the Company of any liability in respect to the
failure to issue or to sell such shares of Common Stock as to which such requisite authority shall not have been obtained. 

26

 

13.06.    Governing Law  

        This Plan and all Awards granted hereunder shall be governed by the laws of the Commonwealth of Virginia, except to the extent federal law applies. 

13.07.    Other Actions  

        Nothing in the Plan shall be construed to limit the authority of the Company to exercise its corporate rights and powers, including, by way of illustration and
not by way of limitation, the right to grant options, stock appreciation rights, stock awards, incentive awards or performance shares for proper
corporate purposes otherwise than under the Plan to any employee or to any other person, firm, corporation, association or other entity, or to grant options, stock appreciation rights, stock awards,
incentive awards or performance shares to, or assume such awards of any person in connection with, the acquisition, purchase, lease, merger, consolidation, reorganization or otherwise, of all or any
part of the business and assets of any person, firm, corporation, association or other entity. 

13.08.    Other Conditions  

        The Committee, in its discretion, may, as a condition to the grant, exercise, payment or settlement of an Award, require the Participant on or before the date of
grant, exercise, payment or settlement of the Award to enter into (i) a covenant not to compete (including a confidentiality, non-solicitation, non-competition or other
similar agreement) with the Company or any Affiliate, which may become effective on the date of termination of employment or service of the Participant with the Company or any Affiliate or any other
date the Committee may specify and shall contain such terms and conditions as the Committee shall otherwise specify, (ii) an agreement to cancel any other employment agreement, service
agreement, fringe benefit or compensation arrangement in effect between the Company or any Subsidiary and such Participant and/or (iii) a shareholders' agreement with respect to shares of
Common Stock to be issued pursuant to the Award. If the Participant shall fail to enter into any such agreement at the Committee's request, then no Award shall be granted, exercised, paid or settled
and the number of shares of Common Stock that would have been subject to such Award, if any, shall be added to the remaining shares of Common Stock available under the Plan. 

13.09.    Forfeiture Provisions  

        Notwithstanding any other provisions of the Plan or any Agreement, all rights to any Award that a Participant has will be immediately discontinued and forfeited,
and the Company shall not have any further obligation hereunder to the Participant with respect to any Award and the Award will not be exercisable (whether or not previously exercisable) or become
vested or payable on and after the time the Participant is discharged from employment or service with the Company or any Affiliate for Cause. 

27

 
ARTICLE XIV

AMENDMENT  

        The Board may amend or terminate this Plan at any time; provided, however, that no amendment may adversely impair the rights of a Participant with respect to
outstanding Awards without the Participant's consent. In addition, an amendment will be contingent on approval of the Company's stockholders, to the extent required by law or by the rules of any stock
exchange on which the Company's securities are traded or if the amendment would (i) increase the benefits accruing to Participants under the Plan, including without limitation, any amendment to
the Plan or any Agreement to permit a repricing or a decrease in the exercise price of any outstanding Options, (ii) increase the aggregate number of shares of Common Stock that may be issued
under the Plan, (iii) modify the requirements as to eligibility for participation in the Plan or, (iv) after the transition period prescribed by the regulations under Code
Section 162(m), change the performance objectives set forth in Sections 8.03, 9.02 or 10.02. 

28

 
ARTICLE XV

DURATION OF PLAN  

        No Award may be granted under this Plan
after                        , 2014. Awards granted before that date shall remain valid in accordance with their terms.

29

 
ARTICLE XVI

EFFECTIVE DATE OF PLAN  

        Awards
may be granted under this Plan upon its adoption by the Board; provided that, this Plan shall not be effective unless approved by unanimous consent of the Company's stockholders
or by a majority of the votes cast by the Company's stockholders, voting either in person or by proxy, at a duly held stockholders' meeting at which a stockholder quorum is present, before
                        , 2004. 

30

QuickLinks

Exhibit 10.01

KMG AMERICA CORPORATION 2004 EQUITY INCENTIVE PLAN

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00073-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00073-of-00352.parquet"}]]