Exhibit 10.31

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT ( Agreement”), dated effective as of September 24,
2013 (“Effective Date”), between KMG CHEMICALS, INC., a Texas corporation (the
“Company”), with an office at 9555 West Sam Houston Parkway South, Houston, TX
77099 and Christopher T. Fraser (“Executive”), with an address at 9448 Bella
Terra Drive, Fort Worth, TX 76126. In this Agreement, Company and Executive are
sometimes called the “Parties,” or individually referred to as a “Party.”

WITNESSETH:

WHEREAS, the Company wishes to employ the Executive to perform executive duties
for the Company and its subsidiaries (collectively “Company Group”), and the
Executive wishes to accept such employment, all on the terms and conditions set
forth below;

AGREEMENT:

NOW, THEREFORE, in consideration of the mutual covenants, promises, and
obligations herein set forth, the Parties agree as follows:

1. Employment. The Company hereby employs the Executive under this Agreement as
of the Effective Date to serve as President and Chief Executive Officer of the
Company, and the Executive hereby accepts such employment, on the terms and
conditions set forth in this Agreement.

2. Term of Employment. The term of employment under this Agreement shall be for
the period commencing on the Effective Date and continuing until terminated, as
provided herein (the “Employment Term”).

3. Duties.

(a) The Executive shall continue to perform such duties of an executive nature
for the Company Group as may be assigned to him from time to time by the Board
of Directors (the “Board”) and that are customarily performed by an executive
holding the positions of, President and Chief Executive Officer of the Company.
The Executive shall serve the Company Group faithfully and to the best of his
ability and shall devote his full business time and attention to the affairs of
the Company Group, subject to Section 3(b) and to reasonable absences for
vacation and illness in accordance with then-current Company policy, and
Disability. The Executive shall be subject at all times to the direction and
control of the Board and during the term of this Agreement shall continue to be
duly elected by the Board as President and Chief Executive Officer. The
Executive shall give the Board periodic reports on and keep the Board informed
on a current basis concerning the material business affairs of the Company
Group.

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(b) While Executive renders services to the Company, Executive will not engage
in any other employment, consulting or other business activity (whether
full-time or part-time) that would create a conflict of interest with the
Company Group. The Company agrees that during the term of this Agreement the
Executive may continue to provide consulting for Advent International and its
affiliates, and may serve on the board of a private company affiliated with
Advent International or in which it has an investment, directly or indirectly,
but only where such consulting and service will not reasonably create a conflict
of interest with the Company Group and does not exceed a mutually acceptable,
reasonable time commitment. From time to time or upon request during the term of
this Agreement, the Executive will provide the Board with reasonable
confirmation that his activities for Advent International do not constitute a
conflict of interest with the Company Group. The Executive will be permitted to
(a) with the prior written consent of the Board act or serve as a director,
trustee, committee member or principal of any type of business, civic or
charitable organization, which consent shall not unreasonably be withheld,
delayed or conditioned, as long as the Executive is not then serving on the
board of a company affiliated or related to Advent International, such
activities are disclosed in writing to the Board and there is no conflict of
interest; and (b) purchase or own less than five percent (5%) of the publicly
traded securities of any corporation; provided that, such ownership represents a
passive investment and that the Executive is not a controlling person of, or a
member of a group that controls, such corporation; provided further that, the
activities described in clauses (a) and (b) do not interfere with the
performance of the Executive’s duties and responsibilities to the Company as
provided hereunder, including, but not limited to, the obligations set forth
herein.

(c) By signing this Agreement, Executive confirms to the Company that he has no
contractual commitments or other legal obligations that would prohibit Executive
from performing his duties for the Company.

(d) The headquarters for the performance of the Executive’s duties during the
term of this Agreement shall be the principal executive offices of the Company
in Houston, Texas, subject to such reasonable travel as the performance of the
Executive’s duties in the business of the Company Group may require.

(e) During the term of this Agreement the Executive shall, if elected, serve as
a member of the Board of Directors of the Company and such other committees to
which the Executive may be appointed, without any additional compensation.

4. Compensation. Compensation for all duties to be performed by the Executive
hereunder shall limited to what is set forth in this Agreement and shall
comprise the following (aside from Benefits and other consideration noted
herein):

(a) Base Salary. The Company shall pay the Executive a base salary, payable in
accordance with the Company’s normal payroll practices, at a rate per annum
equal to a minimum of $625,000 in gross compensation (“Base Salary”), subject to
the usual tax and other deductions required by law. After the initial year of
this Agreement, Base Salary shall be reviewed annually by the Company on or
before November 30, and Base Salary is subject to increase as may be appropriate
in the discretion of the Board.

(b) Additional Compensation. As additional compensation, the Company shall grant
Executive, upon Executive’s execution of this Agreement, 50,000 shares of Common
Stock of the Company, which shall immediately vest upon execution of this
Agreement, and shall be issued pursuant to the 2009 Long-Term Incentive Plan. In
addition, the Executive shall receive a total of 100,000 restricted shares of
Common Stock of the Company that shall be granted, vest and be earned as
follows:

(i) Time-based restricted stock awards for 30,000 shares will be granted on the
Effective Date, and such shares shall vest over five years, with one-fifth of
such shares to vest on each anniversary of the date hereof (a copy of the form
of such time-based restricted stock award is attached hereto as Exhibit A);

 

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(ii) Performance-based restricted stock awards for 10,000 shares shall be
granted on or before November 30 of each fiscal year during the term of this
Agreement beginning with the current fiscal year and continuing for each of the
following four fiscal years (50,000 shares in total), pursuant to which the
shares will be earned and issued to the Executive if the Company meets, at the
end of the fiscal year to which the grant pertains, certain financial goals
mutually agreed between the Executive and Company (a copy of the form of
performance-based restricted stock award is attached hereto as Exhibit B); and

(iii) Performance-based restricted stock awards for 4,000 shares shall be
granted on or before November 30 of each fiscal year during the term of this
Agreement beginning with the current fiscal year and continuing for each of the
following four fiscal years (20,000 shares in total), pursuant to which the
shares will be earned and issued to the Executive if the Company meets, at the
end of the fiscal year to which the grant pertains, certain organizational goals
mutually agreed between the Executive and Company (a copy of the form of
performance-based restricted stock award is attached hereto as Exhibit C).

The additional compensation provided for in this Section 4(b) shall not be
considered as having been granted for purposes of making future long-term
incentive compensation awards to the Executive.

(c) Annual Incentive Compensation Plan. Each fiscal year of the Company (which
currently ends on July 31), the Executive shall be eligible to participate in
the Company’s Annual Incentive Compensation Plan established for the Company’s
executives, when performance goals established by the Compensation and
Development Committee of the Board of Directors (“Compensation Committee”) are
met for such fiscal year, as determined by the Compensation Committee in its
sole discretion. The Compensation Committee shall have the sole and absolute
right to modify, amend, terminate or change the Annual Incentive Compensation
Plan at any time during the term of this Agreement. For the fiscal year ending
July 31, 2014, the payments under the Annual Incentive Compensation Plan shall
be payable for full fiscal year. The awarding of any payments under the Annual
Incentive Compensation Plan, including whether any performance goals have been
met, and all other relevant practices and policies, are subject to the sole and
absolute discretion of the Compensation Committee. Anything contained in this
Agreement or the exhibits hereto or any Company policy to the contrary
notwithstanding, (i) the Executive shall have a target annual incentive each
year under the Annual Incentive Compensation Plan of no less than 90% of
Executive’s Base Salary, and (ii) any award that is earned shall be payable
(x) no later than the November 30th next following the last day of the reference
fiscal year, and (y) whether or not Executive is a director or employed by or
serving as the Chief Executive Officer or President of the Company on the
payment date.

(d) Long-Term Incentive Plan. Each fiscal year the Executive shall be eligible
to participate in the applicable Company “Long-Term Incentive Plan,” currently
its 2009 Long-Term Incentive Plan. The Committee shall have the sole and
absolute discretionary right to modify, amend, terminate or change the Company’s
then-existing Long-Term Incentive Plans or programs, at any time. The Executive
acknowledges and agrees that the exercise price, vesting, and all other terms
and conditions of grants under the Long-Term Incentive Plan, except as provided
in this Section 4 hereof, shall be established by the Compensation Committee in
its sole and absolute discretion at the time of grant. Anything contained in
this Agreement or the exhibits hereto or any Company policy to the contrary
notwithstanding, (i) the Executive shall have a target annual incentive each
year under the Long Term Incentive Plan of no less than 150% of Executive’s Base
Salary, with the potential to earn up to a maximum of 250% of Executive’s Base
Salary, and (ii) any award that is earned through the end of the vesting period
shall be payable (x) no later than the November 30th next following the last day
of the vesting period, and (y) whether or not Executive is a director or
employed by or serving as the Chief Executive Officer or President of the
Company on the payment date after the end of the vesting period.

 

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5. Expenses. The Company shall reimburse the Executive for all out-of-pocket
expenses reasonably incurred by the Executive in the performance of his duties
to the Company upon receipt of appropriate vouchers and receipts therefor, in
accordance with the Company’s current policies and practices, as such policies
and practices may exist from time to time.

6. Relocation Expenses. Subject to the Company’s policies, the submission of
acceptable receipts and other documentation, as reasonably requested by the
Company, and the approval of the Chair of the Compensation Committee, the
Company shall pay, or reimburse the Executive for, the following relocation
expenses:

(a) It is understood that the Executive’s permanent residence will be in Fort
Worth, Texas for one year after the Effective Date plus a reasonable period
thereafter to enable the Executive to relocate to Houston, Texas. The Company
will pay, or reimburse the Executive for, Executive’s reasonable travel expenses
between Executive’s permanent residence (in Fort Worth, Texas) and the Company’s
Houston office (on a weekly basis) prior to such relocation.

(b) For one (1) year plus a reasonable additional time not to exceed 60 days,
the Company will pay, or reimburse the Executive for, the rent and other
associated costs incurred by Executive for renting a furnished two-bedroom
apartment (with cleaning services) located near the Company’s headquarters in
Houston, Texas.

(c) Within a reasonable period after the first anniversary of the Effective Date
(see Section 6 (a) and (b)), and unless the Parties agree otherwise or this
Agreement is terminated for any reason, Executive will be expected to relocate
permanently to Houston. The Company agrees, therefore, to pay, or reimburse the
Executive for, expenses associated with such permanent relocation, in accordance
with the Company’s Transfer and Relocation Assistance-Domestic Policy, assuming
that Executive signs and agrees to a Relocation Repayment Agreement.

(d) In accordance with the Company’s Transfer and Relocation Assistance-Domestic
Policy, the Company will make Executive whole for any employment and income
taxes associated with these relocation expenses, as set forth in Section 6(c)
above.

7. Benefits. The Executive shall be entitled to five weeks paid vacation each
fiscal year during the Employment Term. The Executive shall be entitled to
participate in all Company group health (including family major medical plans),
life insurance, pension, profit-sharing, stock purchase or stock option plan,
annuity or other benefit programs that may, from time to time, be available to
employees of the Company or its executive group generally, subject to
eligibility, vesting requirements and other terms and conditions from time to
time in effect in respect of such benefit programs; provided, however, that
nothing herein shall require the Company at any time to create or continue any
such plan, program or arrangement, so long as Executive and his dependents are
not excluded from eligibility in a discriminatory fashion.

 

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8. Termination; Participation in Executive Severance Plan. The Executive’s
employment under this Agreement is “at will,” in the sense that Company and the
Executive may terminate Executive’s employment relationship with Company at any
time, for any reason, “Cause” or “Good Reason” not being required. The
“Termination Date” shall be the later of either the last day that Executive
actually provides services to Company or the date that is designated by notice
as the final employment date for Executive (regardless of whether Executive
actually provides services during any notice period or is paid in lieu of any
such notice, as Company, in its sole discretion, may decide). The Executive
shall participate as a Level I executive in the Company’s Amended and Restated
Executive Severance Plan dated effective September 24, 2013 as amended and
restated on or before the Effective Date (as amended, the “Executive Severance
Plan”). Executive acknowledges having received a copy of the Amended and
Restated Executive Severance Plan,. Further requirements of termination for each
Party are as follows:

(a) By the Company. Prior notice of termination by the Company is not required
except for a termination without “Cause,” in which case five (5) days’ notice of
termination (or compensation in lieu thereof) shall be provided to Executive.
“Cause” is defined in the Executive Severance Plan, and that definition is
incorporated herein by reference.

(b) Death or Disability. The Executive’s employment shall terminate upon the
death of Executive or upon the Board’s reasonable determination that the
Executive has a Disability. For purposes of this Agreement, “Disability” means
any physical or mental condition that prevents him from performing the essential
functions of the required executive-level services, with or without reasonable
accommodation, for a period that is no shorter than that required under the
Company’s long term disability insurance policy.

(c) Voluntary Resignation. Executive may terminate his employment hereunder at
any time during the Employment Term subject only to the requirement that
Executive shall provide the Company with a minimum of sixty (60) days prior
written notice (a “Voluntary Resignation”).

(d) With “Good Reason”. Notwithstanding any provision of this Agreement to the
contrary, Executive may terminate his employment hereunder for “Good Reason,” if
such Good Reason and termination notice meet the definition and requirements of
“Good Reason” as set forth in the Executive Severance Plan, which definition is
incorporated herein by reference; provided, that if the Executive ceases to be
(i) elected by the shareholders to serve continuously during the term of this
Agreement as a director of the Company, or (ii) if while serving as a member of
the Board of the Company, the Executive is not selected by the board as the
Board’s executive chairman (unless the failure is due to the requirements of
applicable law or the rules of the New York Stock Exchange or another exchange
where the securities of the Company are listed), or (iii) appointed as the
Company’s president and chief executive officer, such circumstance shall be
deemed to be a “Good Reason” under the Executive Severance Plan and “Severance
Benefits” under the Section 4.2(a)(iii) of the Executive Severance Plan for a
“Qualifying Termination” based on such “Good Reason” shall be calculated by a
“Level Multiple” equal to 1.0.

9. Compensation upon Termination.

(a) Payments Upon Termination. Upon the termination of Executive’s employment
for any reason, Executive shall be paid his Base Salary through the date of
termination and any accrued but unpaid vacation time earned by Executive as of
the date of termination. In addition, for those events deemed a “Qualifying
Termination” under the Executive Severance Plan, Executive shall be entitled to
receive (i) the, benefits under the Executive Severance Plan, subject to meeting
the applicable requirements under the Executive Severance Plan; and (ii) if not
already provided for in the Executive Severance Plan, any unpaid amounts earned
under the Annual Incentive Compensation Plan for the fiscal year prior to the
fiscal year in which the Qualifying Termination occurred whether or not employed
subsequent to the end of said fiscal year or on the payment date. Except as set
forth above, upon the termination of Executive’s employment during the term of
this Agreement, the Company shall have no further obligations to compensate or
provide benefits to the Executive at termination or after termination,
regardless of the reason for such termination.

 

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(b) Release. Payment of the amounts payable on the termination of the employment
of the Executive under this Section 9 and the Executive Severance Plan, other
than Base Salary and accrued vacation time earned by Executive as of the date of
termination but not yet paid by the Company, shall be conditioned upon the
execution by the Executive of a mutual release (the “Mutual Release”), pursuant
to which the Parties shall release each other, to the maximum extent permitted
by law, from any and all claims each has against the other as of the date of
termination that relate to or arise out of the employment or termination of
employment of the Executive, except, (i) with respect to the Executive, such
claims arising under this Agreement, the Executive Severance Plan, any other
employee benefit plan, any other written plan or agreement, or for payment under
any Executive Risk Insurance, and (ii) with respect to the Company, such matters
as would permit a termination for “Cause”; provided that (x) said condition
shall not apply unless the Company also executes and delivers the Mutual
Release, and (y) the provisions of this subsection (f) are in substitution for
the obligation to deliver any other release, including without limitation
pursuant to the Executive Severance Plan.

10. Resignation of All Other Positions. Upon termination of the Executive’s
employment hereunder for any reason, the Executive shall resign, effective on
the Termination Date, or shall be deemed to have resigned (if Executive fails to
submit a formal resignation), from all positions that the Executive holds as an
officer or member of the board of directors (or a committee thereof) of the
Company Group.

11. Clawback Provisions. Notwithstanding any other provisions in this Agreement
to the contrary, any incentive-based compensation, or any other compensation,
paid to the Executive pursuant to this Agreement or any other agreement or
arrangement with the Company which is subject to recovery under any law,
government regulation or stock exchange listing requirement, will be subject to
such deductions and clawback as may be required to be made pursuant to such law,
government regulation or stock exchange listing requirement (or any policy
adopted by the Company pursuant to any such law, government regulation or stock
exchange listing requirement, provided that such policy shall not require any
deduction or clawback that is not specifically required by such law, government
regulation or stock exchange listing requirement.

12. Sections 280G and 4999. The terms and provisions of Section 4.5 of the
Executive Severance Plan are hereby incorporated herein by reference, and shall
apply to the payments hereunder to the extent they do not already apply.

13. Cooperation. The Parties agree that certain matters in which the Executive
will be involved during the Employment Term may necessitate the Executive’s
cooperation in the future after Executive’s employment termination. Accordingly,
following the termination of the Executive’s employment for any reason, to the
extent reasonably requested by the Board, the Executive shall cooperate with the
Company, at the Company’s expense, in connection with matters arising out of the
Executive’s service to the Company; provided that, the Company shall make
reasonable efforts to minimize disruption of the Executive’s other activities.
The Company shall reimburse the Executive for reasonable expenses incurred in
connection with such cooperation and, to the extent that the Executive is
required to spend substantial time on such matters, the Company shall provide
reasonable compensation to the Executive.

 

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14. Exit Obligations. Upon (a) voluntary or involuntary termination of the
Executive’s employment or (b) the Company’s request at any time during the
Executive’s employment, if a notice of termination has been delivered as
contemplated by Section 8, the Executive shall (i) provide or return to the
Company any and all Company Group property, including keys, key cards, access
cards, identification cards, security devices, employer credit cards, network
access devices, computers, cell phones, smartphones, PDAs, pagers, fax machines,
equipment, speakers, webcams, manuals, reports, files, books, compilations, work
product, e-mail messages, recordings, tapes, disks, thumb drives, hard drives,
any electronic storage devices, negatives and data and all Company Group
documents and materials belonging to the Company Group and stored in any
fashion, including but not limited to those that constitute or contain any
Confidential Information or Work Product (see below), that are in the possession
or control of the Executive, whether they were provided to the Executive by the
Company Group or any of its business associates or created by the Executive in
connection with his employment by the Company; and (ii) delete or destroy all
copies of any such documents and materials not returned to the Company that
remain in the Executive’s possession or control, including those stored on any
non-Company devices, networks, storage locations and media in the Executive’s
possession or control.

15. Section 409A.

(a) This Agreement is intended to comply with Section 409A or an exemption
thereunder and shall be construed and administered in accordance with
Section 409A. Notwithstanding any other provision of this Agreement, payments
provided under this Agreement may only be made upon an event and in a manner
that complies with Section 409A or an applicable exemption. Any payments under
this Agreement that may be excluded from Section 409A either as separation pay
(or Severance Benefits) due to an involuntary separation from service or as a
short-term deferral shall be excluded from Section 409A to the maximum extent
possible. For purposes of Section 409A, each installment payment provided under
this Agreement shall be treated as a separate payment. Any payments to be made
under this Agreement upon a termination of employment shall only be made upon a
“separation from service” under Section 409A. Notwithstanding the foregoing, the
Company makes no representations that the payments and benefits provided under
this Agreement comply with Section 409A and in no event shall the Company be
liable for all or any portion of any taxes, penalties, interest or other
expenses that may be incurred by the Executive on account of non-compliance with
Section 409A.

(b) Notwithstanding any other provision of this Agreement, if any payment or
benefit provided to the Executive in connection with his termination of
employment is determined to constitute “nonqualified deferred compensation”
within the meaning of Section 409A and the Executive is determined to be a
“specified employee” as defined in Section 409A(a)(2)(b)(i), then, upon an
involuntary separation for purposes of Section 409A, Executive may receive
within the first six months (a) two times the Executive’s annualized
compensation, based on the Executive’s annual rate of pay for the calendar year
before the year in which the Executive separates from service, adjusted for any
increase during the prior year that was expected to continue indefinitely, or
(b) if less, two times the annual dollar limit on compensation taken into
account under qualified retirement plans in effect for the year of separation.
Any payments or benefits in excess of such amounts shall not be paid until the
first payroll date to occur following the six-month anniversary of the
Termination Date (the “Specified Employee Payment Date”). The aggregate of any
payments that would otherwise have been paid before the Specified Employee
Payment Date shall be paid to the Executive in a lump sum on the Specified
Employee Payment Date, and, thereafter, any remaining payments shall be paid
without delay in accordance with their original schedule. All payments must be
made no later than the end of the second calendar year following the year in
which the Executive terminates service.

 

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16. Notification to Subsequent Employer. When the Executive’s employment with
the Company terminates, the Executive agrees to notify any subsequent employer
during the Restricted Period of the restrictive covenants section contained in
this Agreement (Section 22). In addition, the Executive authorizes the Company
to provide a copy of the restrictive covenants section of this Agreement to
third parties, including, but not limited to, the Executive’s subsequent,
anticipated or possible future employer.

17. Work Product.

(a) The Executive acknowledges and agrees that any and all writings, works of
authorship, technology, inventions, discoveries, ideas and other work product of
any nature whatsoever, that are created, prepared, produced, authored, edited,
amended, conceived or reduced to practice by the Executive individually or
jointly with others during the period of his employment by the Company and
relating in any way to the business or contemplated business, research or
development of the Company (regardless of when or where the Work Product is
prepared or whose equipment or other resources is used in preparing the same)
and all printed, physical and electronic copies, all improvements, rights and
claims related to the foregoing, and other tangible embodiments thereof
(collectively, “Work Product”), as well as any and all rights in and to
copyrights, trade secrets, trademarks (and related goodwill), patents and other
intellectual property rights therein arising in any jurisdiction throughout the
world and all related rights of priority under international conventions with
respect thereto, including all pending and future applications and registrations
therefor, and continuations, divisions, continuations-in-part, reissues,
extensions and renewals thereof (collectively, “Intellectual Property Rights”),
shall, as between the Executive and the Company, be the sole and exclusive
property of the Company.

(b) For purposes of this Agreement, Work Product includes, but is not limited
to, Company Group information, including plans, publications, research,
strategies, techniques, agreements, documents, contracts, terms of agreements,
negotiations, know-how, computer programs, computer applications, software
design, work in process, databases, manuals, results, developments, reports,
graphics, drawings, sketches, market studies, formulae, notes, communications,
algorithms, product plans, product designs, styles, models, audiovisual
programs, inventions, unpublished patent applications, original works of
authorship, discoveries, experimental processes, experimental results,
specifications, customer information, client information, customer lists, client
lists, manufacturing information, marketing information, advertising
information, and sales information.

18. Work Made for Hire; Assignment. The Executive acknowledges that, by reason
of being employed by the Company at the relevant times, to the extent permitted
by law, any and all of the Work Product that consists of copyrightable subject
matter is “work made for hire” as defined in 17 U.S.C. § 101 and such copyrights
are therefore owned by the Company. To the extent that the foregoing does not
apply, the Executive hereby irrevocably assigns to the Company, for no
additional consideration, the Executive’s entire right, title and interest in
and to all Work Product and Intellectual Property Rights therein, including the
right to sue, counterclaim and recover for all past, present and future
infringement, misappropriation or dilution thereof, and all rights corresponding
thereto throughout the world. Nothing contained in this Agreement shall be
construed to reduce or limit the Company’s rights, title or interest in any Work
Product or Intellectual Property Rights so as to be less in any respects than
that the Company would have had in the absence of this Agreement.

 

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19. Further Assurances; Power of Attorney. During and after his employment,
Executive agrees to reasonably cooperate with the Company at the Company’s
expense to (a) apply for, obtain, perfect and transfer to the Company the Work
Product as well as an Intellectual Property Right in the Work Product in any
jurisdiction in the world; and (b) maintain, protect and enforce the same,
including, without limitation, executing and delivering to the Company any and
all applications, oaths, declarations, affidavits, waivers, assignments and
other documents and instruments as reasonably shall be requested by the Company.
The Executive hereby irrevocably grants the Company power of attorney to execute
and deliver any such documents on the Executive’s behalf in his name and to do
all other lawfully permitted acts to transfer the Work Product to the Company
and further the transfer, issuance, prosecution and maintenance of all
Intellectual Property Rights therein, to the full extent permitted by law, if
the Executive does not promptly cooperate with the Company’s reasonable request
(without limiting the rights the Company shall have in such circumstances by
operation of law). The power of attorney is coupled with an interest and shall
not be affected by the Executive’s subsequent incapacity.

20. No License. The Executive understands that this Agreement does not, and
shall not be construed to, grant the Executive any license or right of any
nature with respect to any Work Product or Intellectual Property Rights or any
Confidential Information, materials, software or other tools made available to
Executive by the Company.

21. Copyright, Patents, Trademarks.

(a) All right, title and interest, of every kind whatsoever, in the United
States and throughout the world, in

(i) any work, including the copyright thereof (for the full terms and extensions
thereof in every jurisdiction), created by the Executive at any time during the
term hereof and relating in any way to the business or contemplated business,
research or development of the Company and all material embodiments of the work
subject to such rights; and

(ii) any and all inventions, ideas, discoveries, designs and improvements,
patentable or not, made or conceived by the Executive at any time during the
term of his employment under this Agreement and relating in any way to the
business or contemplated business, research or development of the Company, shall
be and remain the sole property of the Company without the payment to the
Executive or any other person of any further consideration, and each such work
shall, for United States copyright law (“Copyright Law”) purposes, be deemed
created by the Executive pursuant to his duties under this Agreement and within
the scope of his employment and shall be deemed a work made for hire; and the
Executive agrees to assign, at the Company’s expense, and the Executive does
hereby assign, all of his right, title and interest in and to all such works,
copyrights, materials, inventions, ideas, discoveries, designs and improvements,
patentable or not, and any copyrights, letters patent, trademarks, trade
secrets, and similar rights, and the applications therefore, which may exist or
be issued with respect thereto. For the purposes of this Section 21 “works”
shall include all materials created during the term hereof, whether or not ever
used by or submitted to the Company, including, without limitation, any work
which may be the subject matter of copyright under the Copyright Law of the
United States. In addition to its other rights, the Company may copyright any
such work in its name in the United States in accordance with the requirements
of the United States Copyright Law and the Universal Copyright Convention and
any other Convention or treaty to which the United States is or may become a
party.

 

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(b) Whenever the Company shall so request, whether during or after the term of
this Agreement, the Executive shall, at the Company’s expense, execute,
acknowledge and deliver all applications, assignments or other instruments; make
or cause to be made all rightful oaths; testify in all legal proceedings;
communicate all known facts which relate to such works, copyrights, materials,
inventions, ideas, discoveries, designs and improvements, letters patent,
trademarks, trade secrets and similar rights described in Section 21(a) above;
perform all lawful acts and otherwise render all such assistance as the Company
may deem necessary to apply for, obtain, register, enforce and maintain any such
copyrights, letters patent and trademark registrations of the United States or
any foreign jurisdiction or under the Universal Copyright Convention (or any
other convention or treaty to which the United States is or may become a party),
or otherwise to protect the Company’s interests therein, including any which the
Company shall deem necessary in connection with any proceeding or litigation
involving the same. The Company shall reimburse the Executive for all reasonable
out-of-pocket costs incurred by the Executive in testifying at the Company’s
request or in rendering any other assistance requested by the Company pursuant
to this Section 21. All registration and filing fees and similar expense shall
be paid by the Company.

22. Confidential Information; Non-competition.

(a) Company Group shall disclose to Executive, or place Executive in a position
to have access to or develop, trade secrets or confidential information of
Company Group; and/or shall entrust Executive with business opportunities of
Company Group; and/or shall place Executive in a position to develop business
good will on behalf of Company Group. Executive recognizes and acknowledges that
Executive will have access to certain information of Company Group and that such
information is confidential and constitutes valuable, special and unique
property of Company Group. Executive shall not at any time, either during or
subsequent to the term of employment with Company, disclose to others, use, copy
or permit to be copied, except in pursuance of Executive’s duties for and on
behalf of Company Group, successors, assigns or nominees, any Confidential
Information of Company Group (regardless of whether developed by Executive)
without the prior written consent of Company Group. The Executive may make
disclosure of Confidential Information if, and solely to the extent that, the
Executive is advised in writing by legal counsel prior to disclosure that such
disclosure is required by law, court order or the rules of a securities exchange
or national interdealer market system, and a copy of such advice is provided to
the Company. The term “Confidential Information” means any secret or
confidential information or know-how and shall include, but shall not be limited
to, the secret or confidential plans, customers, costs, prices, uses, corporate
opportunities, research, financial data, evaluations, prospects, and
applications of products and services, results of investigations or studies
owned or used by Company Group, and all apparatus, products, processes,
compositions, samples, formulas, computer programs, computer hardware designs,
computer firmware designs, and servicing, marketing or manufacturing methods and
techniques at any time used, developed, investigated, made or sold by Company
Group, before or during the term of employment with Company, that are not
generally available to the public or that are maintained as confidential by
Company Group. Executive shall maintain in confidence any Confidential
Information of third parties received as a result of Executive’s employment with
Company in accordance with Company’s obligations to such third parties of which
he is aware or should reasonably be aware and the policies established by
Company. Executive acknowledges that all nonpublic books, records, documents,
manuals, computer data, notes, files, customer lists, marketing studies and any
other similar or dissimilar information or data, whether or not containing
Confidential Information, that are used by the Executive during Executive’s
Employment Term are the exclusive property of the Company Group and shall be
delivered by Executive to Company on the Termination Date for whatever reason,
or at any earlier time requested by Company, if a notice of termination has been
delivered as contemplated by Section 8.

 

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(b) As part of the consideration for the compensation and benefits to be paid to
Executive hereunder, to protect the Confidential Information of Company Group
that has been and will in the future be disclosed or entrusted to Executive, the
business goodwill of Company Group that has been and will in the future be
developed by Executive, or the business opportunities that have been and will in
the future be disclosed or entrusted to Executive by Company Group, and as an
additional incentive for Company to enter into this Agreement, Company and
Executive agree to the non-competition obligations hereunder. During the
Employment Term and for a period of one year after the Termination Date (the
“Restricted Period”), the Executive shall not, without the Company’s prior
written consent, directly or indirectly engage or be interested in any business
which is then competitive to the business of the Company Group in the United
States or Canada, or any other specific geographic areas in the world that
Company conducts its business during the term of this Agreement. For the purpose
of this Section 22, the Executive will be considered to have been directly or
indirectly engaged or interested in a business if the Executive is engaged or
interested in such business as a stockholder, director, officer, employee,
agent, broker, partner, individual proprietor, lender, consultant, licensor,
independent contractor or otherwise, except that nothing herein will prevent the
Executive from owning or participating as a member of a group which is a
tax-qualified savings or investment plan or which owns less than a five percent
(5%) block of equity or debt securities of any company traded on a national
securities exchange or national interdealer market system. For the purpose of
this Section 22, the term “any business which is then competitive” to the
business of the Company Group shall mean any business that manufactures, sells
or distributes chemicals (i) that were manufactured, sold or distributed by the
Company Group during the one year period immediately preceding the termination
of the Executive’s term of employment, and (ii) that were sold or distributed by
such business to persons or entities to whom the Company Group sold or
distributed such chemicals during the one year period immediately preceding the
termination of the Executive’s term of employment.

(c) In the event the Executive shall breach any provisions of this Section 22
(which provisions the Executive hereby acknowledges are reasonable and
equitable), the Company shall be entitled to terminate any payments then owing
to the Executive under this Agreement and/or to seek specific performance and
injunctive relief for such breach or threatened breach. This termination of
payments shall be in addition to and not in substitution for any and all other
rights of the Company at law or in equity against the Executive arising out of
any such breach. The Executive acknowledges that his breach or attempted or
threatened breach of any provisions of this Section 22 would cause irreparable
injury to the Company not compensable in money damages and that the Company
shall be entitled, in addition to all other applicable remedies, to obtain a
temporary and a permanent injunction and a decree for specific performance of
Section 22 without being required to prove damages or furnish any bond or other
security.

(d) Non-solicitation of Employees. The Executive agrees and covenants not to
directly or indirectly solicit, hire, recruit, attempt to hire or recruit, or
induce the termination of employment of any employee of the Company Group during
the Restricted Period.

(e) Non-solicitation of Customers. The Executive understands and acknowledges
that because of the Executive’s experience with and relationship to the Company
Group, Executive will have access to and learn about much or all of the Company
Group’s Customer Information. “Customer Information” includes, but is not
limited to, names, phone numbers, addresses, e-mail addresses, order history,
order preferences, chain of command, pricing information and other information
identifying facts and circumstances specific to the customer and relevant to
sales. The Executive understands and acknowledges that loss of this customer
relationship and/or goodwill will cause significant and irreparable harm.
Therefore, the Executive agrees and covenants, during the Restricted Period, not
to directly or indirectly solicit, contact (including but not limited to e-mail,
regular mail, express mail, telephone, fax, and instant message), attempt to
contact or meet with the Company Group’s current, former or prospective (if
known by Executive from his work at Company) customers for purposes of offering
or accepting chemicals of the same kind offered by the Company Group.

 

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(f) Executive understands that the restrictions set forth in this Section 22 may
limit Executive’s ability to engage in certain businesses anywhere in the world
during the period provided for above, but acknowledges that Executive will
receive sufficiently high remuneration and other benefits under this Agreement
to justify such restriction. It is expressly understood and agreed that Company
and Executive consider the restrictions contained in this Section 22 to be
reasonable and necessary to protect the Confidential Information of Company.
Nevertheless, if any of the aforesaid restrictions are found by a court having
jurisdiction to be unreasonable, or overly broad as to geographic area or time,
or otherwise unenforceable, the Parties intend for the restrictions therein set
forth to be modified by such court so as to be reasonable and enforceable and,
as so modified by the court, to be fully enforced.

23. Exculpation and Indemnification. As provided in the Company’s Amended and
Restated Articles of Incorporation and its Amended and Restated Bylaws, the
Company hereby agrees to exculpate from personal liability and to hold harmless
and indemnify Executive to the fullest extent permitted by law, as such may be
amended from time to time. Executive will also be named as an insured in his
capacities as President, CEO and a director of the Company on the directors’ and
officers’ liability, fiduciary and any other executive risk insurance policies
currently maintained or as may be maintained by the Company from time to time.
Within 60 days after the Effective Date, the Company shall also provide
indemnification to Executive pursuant to a separate Indemnification Agreement,
on terms mutually agreeable to Executive and the Company.

24. Required Employment Forms. Executive will be required, as a condition of his
employment with the Company, to sign all of the Company’s standard forms
applicable to new employees. Executive agrees and acknowledges that, as an
employee of the Company, he will be subject to the Company’s policies as in
effect from time to time (including, but not limited to, policies related to
ethics, insider trading, confidentiality and proprietary information), and
Executive agrees to execute any agreements as reasonably requested by the
Company to acknowledge his agreement to such policies.

25. Tax Matters. All forms of compensation referred to in this Agreement are
subject to applicable withholding and payroll taxes and other deductions
required by law. Company is authorized to withhold a number of the shares of
Common Stock to be issued under the first sentence of Section 4(b) before their
issuance to Executive to satisfy such tax withholding requirements, and
transferring the resulting net number of shares to Executive in satisfaction of
its obligations under this Agreement.

26. Non-disparagement. The Company and the Executive each agree and covenant
that at all times following the Effective Date, they shall not defame,
disparage, or make or solicit, or encourage others to make or solicit, to any
person or entity or in any public forum, any derogatory or negative statement or
communication about the other, any of the other’s affiliates, or any of the
other’s or its or his affiliates’ businesses, investors, customers, suppliers,
products, services, activities, to the extent known to the Company or the
Executive, respectively; provided, however, that this Section 26 does not, in
any way, restrict or impede either the Company or the Executive from exercising
protected rights to the extent that such rights cannot be waived by agreement,
from enforcing its rights under this Agreement, or from complying with any
applicable fiduciary duty, law or regulation, or a valid order of a court of
competent jurisdiction or an authorized government agency or self-regulatory
body, provided that such compliance does not exceed that required by the law,
regulation or order. The Company or the Executive, as the case may be, shall
promptly provide written notice of any such order to the other.

 

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27. Publicity. The Executive hereby irrevocably consents to any and all uses and
displays, by the Company and its agents, representatives and licensees, of the
Executive’s name, voice, likeness, image, appearance and biographical
information in, on or in connection with any pictures, photographs, audio and
video recordings, digital images, websites, television programs and advertising,
other advertising and publicity, sales and marketing brochures, books,
magazines, other publications, CDs, DVDs, tapes and all other printed and
electronic forms and media throughout the world, at any time during or after the
period of his employment by the Company, for all legitimate commercial and
business purposes of the Company, so long as (i) the Executive has approved in
writing any associated statement by the Executive with respect to the Company’s
or a Competitor’s business affairs, condition, employees, products or services,
and (ii) the Executive’s voice, likeness, image or appearance is not altered in
a manner that significantly distorts or misrepresents the original content
(“Permitted Uses”), without further consent from or royalty, payment or other
compensation to the Executive. The Executive hereby forever waives and releases
the Company and its directors, officers, employees and agents from any and all
claims, actions, damages, losses, costs, expenses and liability of any kind,
arising under any legal or equitable theory whatsoever at any time during or
after the period of his employment by the Company, arising directly or
indirectly from the Company’s and its agents’, representatives’ and licensees’
exercise of their rights in connection with any Permitted Uses.

28. Arbitration. The Parties will attempt to promptly resolve any dispute or
controversy arising out of or relating to this Agreement or termination of the
Executive by the Company. Any negotiations related to this Agreement and/or any
dispute about this Agreement are confidential and will be treated as compromise
and settlement negotiations for all purposes. If the Parties are unable to reach
a settlement amicably, the dispute will be submitted to binding arbitration
before a single arbitrator in accordance with the Employment Dispute Resolution
Rules of the American Arbitration Association (“AAA”). The arbitrator will be
instructed and empowered to take reasonable steps to expedite the arbitration
and the arbitrator’s judgment will be final and binding upon the Parties,
subject solely to challenge on the grounds of fraud or gross misconduct. The
Parties agree that the arbitrator shall follow the Federal Rules of Evidence
during the arbitration and that the arbitrator shall not be empowered to award
punitive or exemplary damages, and each Party hereby irrevocably waives any such
damages. The arbitration will be held in Harris County, Texas. Judgment upon any
verdict in arbitration may be entered in any court of competent jurisdiction and
the Parties hereby consent to the jurisdiction of, and proper venue in, the
federal and state courts located in Harris County, Texas. Each Party will bear
its own costs in connection with the arbitration, including attorneys’ fees, and
the costs of the arbitrator (and/or any fees from the AAA) will be split by the
Parties. Unless otherwise expressly set forth in this Agreement, the procedures
specified in this Section 28 will be the sole and exclusive procedures for the
resolution of disputes and controversies between the Parties arising out of or
relating to this Agreement. Notwithstanding the foregoing, a Party may seek a
preliminary injunction or other provisional judicial relief if in such Party’s
judgment such action is necessary to avoid irreparable damage or to preserve the
status quo.

29. Miscellaneous.

(a) Any notice required or permitted under this Agreement shall be in writing
and shall be deemed given when delivered personally or three days after being
sent by first-class registered or certified mail, return receipt requested, to
the Party for which intended at its or his address set forth at the beginning of
this Agreement (which, in the case of the Company, shall be sent “Attention:
General Counsel”) or to such other address as either Party may hereafter specify
by similar notice to the other.

(b) This Agreement shall be governed by and construed in accordance with the
laws of the State of Texas governing contracts made and to be performed in
Texas.

 

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(c) This Agreement supersedes all prior agreements between the Parties, written
or oral, and cannot be amended or modified except by a writing signed by both
Parties. It may be executed in one or more counterpart copies, each of which
shall be deemed an original, but all of which shall constitute the same
instrument.

(d) This Agreement, which is personal in nature, may not be assigned by either
Party without the prior written consent of the other Party, but the Executive
may, upon reasonable prior notice to the Company, assign his right to receive
any payment previously due and owing provided, that, such assignment shall be
subject to all claims and defenses of the Company against the Executive.

(e) This Agreement shall be binding upon , inure to the benefit of, and be
enforceable by the Parties and their respective heirs, executors,
administrators, personal representatives, successors (including any direct or
indirect successor by purchase, merger, consolidation or otherwise to all or
substantially all of the business or assets of the Company) and permitted
assigns. The term “personal representative” as used in this Agreement with
respect to an individual shall mean such individual’s guardian, committee,
executor, administrator or other legal representative duly empowered to act on
his behalf following his death or legal incapacity.

(f) Captions used in this Agreement are for convenience of reference only and
shall not be deemed a part of this Agreement nor used in the construction of its
meaning. Exhibits attached to this Agreement shall be deemed as fully a part of
this Agreement as if set forth in full herein.

(g) The Company may setoff any amounts owed by the Company Group to the
Executive (or to the personal representative of the Executive’s estate),
including, but not limited to, amounts owed hereunder, against amounts owed by
the Executive or his estate to any member of the Company Group under a
promissory note or for any loans or advances made by any member of the Company
Group to the Executive, including, but not limited to, loans or advances of
compensation hereunder.

(h) This Agreement has a term co-extensive with the Employment Term provided in
Section 2. Termination shall not affect any right or obligation of any Party
which is accrued or vested prior to such termination or any rights that may
exist as a result of any termination (e.g., the Severance Benefits, if
applicable). Without limiting the scope of the preceding sentence, the
confidentiality, noncompetition, nonsolicitation, nondisparagement and
arbitration provisions of this Agreement specifically (Sections 22, 26 and 28)
shall survive the termination of the employment relationship and/or of this
Agreement.

(i) If any provision of this Agreement shall be deemed invalid or unenforceable
as written it shall be construed, to the greatest extent possible, in a manner
which shall render it valid and enforceable and any limitations on the scope or
duration of any such provision necessary to make it valid and enforceable shall
be deemed to be part thereof; no invalidity or unenforceability shall affect any
other portion of this Agreement unless the provision deemed to be so invalid or
unenforceable is a material element of this Agreement, taken as a whole.

(j) In the event of any conflict or inconsistency between the terms of this
Agreement and any other agreement, plan or policy, this Agreement shall govern
the interpretation and determination of the rights and obligations of the
Executive and the Company with respect to the subject matter hereof.

 

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30. Acknowledgment of Full Understanding. THE EXECUTIVE ACKNOWLEDGES AND AGREES
THAT HE HAS FULLY READ, UNDERSTANDS AND VOLUNTARILY ENTERS INTO THIS AGREEMENT.
THE EXECUTIVE ACKNOWLEDGES AND AGREES THAT EXECUTIVE HAS HAD AN OPPORTUNITY TO
ASK QUESTIONS AND CONSULT WITH AN ATTORNEY OF HIS CHOICE BEFORE SIGNING THIS
AGREEMENT.

IN WITNESS WHEREOF, the Parties have executed this Agreement effective as of the
day and year first above written.

 

COMPANY: KMG CHEMICALS, INC. By:   /s/ Fred C. Leonard

Fred Leonard, Chairman of the Compensation

Committee, duly authorized

EXECUTIVE: /s/ Christopher T. Fraser Christopher T. Fraser

 

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