Exhibit 10.8

 

FOURTH AMENDMENT TO TERM LOAN AGREEMENT

 

THIS FOURTH AMENDMENT TO TERM LOAN AGREEMENT (this “Amendment” or “Fourth
Amendment to Loan Agreement”) is entered into by and between KMG-BERNUTH, INC.,
a Delaware corporation (hereinafter referred to as “Borrower”) and SOUTHTRUST
BANK, an Alabama banking corporation, successor by conversion to SouthTrust
Bank, National Association (hereinafter referred to as “Bank”) as of the 31st
day of July, 2004.

 

W I T N E S S E T H:

 

WHEREAS, Borrower and Bank are parties to that certain Term Loan Agreement dated
as of June 26, 1998, as amended by that certain First Amendment to Term Loan
Agreement dated as of December 30, 2002, by that certain Second Amendment to
Term Loan Agreement dated as of December 5, 2003, and by that certain Third
Amendment to Term Loan Agreement dated as of June 8, 2004 (as so amended and as
hereby amended, the “Loan Agreement”), whereby Borrower became indebted to Bank
for a Term Loan in the original principal amount of $6,000,000.00 and thereafter
amended to a principal amount of $5,050,000.00 and a Term Loan No. 2 in the
principal amount of $6,000,000.00 and thereafter amended to a principal amount
of $8,600,000.00 (all of the foregoing capitalized terms together with all other
capitalized terms used herein shall have the respective meanings assigned
thereto in the Loan Agreement, unless otherwise specifically defined herein);
and

 

WHEREAS, upon request of the Borrower, the Bank has agreed to amend certain of
the financial covenants required by the Loan Agreement; and

 

WHEREAS, Borrower and the Bank have agreed as to certain amendments of the Loan
Agreement, which amendments are specifically set forth below.

 

NOW, THEREFORE, in consideration of the sum of One and No/100 Dollar ($1.00) and
other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, the parties hereby agree as follows:

 

1.                                       SECTION 1.1 OF THE LOAN AGREEMENT IS
HEREBY AMENDED BY DELETING THE DEFINITIONS OF “COVERAGE RATIO” AND “EBITDA”,
EACH AS DEFINED THEREIN, IN THEIR ENTIRETY AND SUBSTITUTING THE FOLLOWING NEW
DEFINITIONS IN LIEU THEREOF:

 

“Coverage Ratio” means, for any period, the ratio of (i) the principal amount of
all bank debt and capitalized lease obligations of Borrower and Guarantor as of
the end of the applicable period, to (ii) the sum of EBITDA for the Borrower and
Guarantor for the preceding four (4) fiscal quarters.

 

“EBITDA” means, for any period, the income (or deficit) from all operations of
the Borrower and the Guarantor before any deduction for the following items
during such period:  (i) the interest charges paid or accrued (including imputed
interest on lease (capital or operating) obligations, but excluding amortization
of debt discount and expense), (ii) Income Taxes, and (iii) any amounts in
respect of depreciation and amortization.

 

2.                                       SECTION 6.1 OF THE LOAN AGREEMENT IS
HEREBY AMENDED BY DELETING SUBSECTION (F) THEREOF IN ITS ENTIRETY AND
SUBSTITUTING THE FOLLOWING NEW SUBSECTION (F) IN LIEU THEREOF:

 

--------------------------------------------------------------------------------

 

(F)                                 The Borrower will maintain during the term
of this Agreement (determined on a consolidated basis with the Guarantor):

 

(1)                                  Tangible Net Worth of, at minimum: (a)
$3,700,000.00 as of July 31, 2004; (b) $6,000,000.00 as of July 31, 2005; and
(c) $11,000,000.00 as of July 31, 2006, and at all times thereafter.

 

(2)                                  A Fixed Charge Coverage of not less than
1.25 to 1.0 as of April 30, 2004, and at any time thereafter; such Fixed Charge
Coverage to be measured quarterly based on a rolling four-quarter basis.

 

(3)                                  A ratio of Liabilities to Tangible Net
Worth of not more than: (a) 4.8 to 1.0 as of July 31, 2004; (b) 2.7 to 1.0 as of
July 31, 2005; and (c) 1.5 to 1.0 as of July 31, 2006, and at all times
thereafter.

 

(4)                                  A Coverage Ratio of not greater than: (a)
3.0 to 1.0 as of July 31, 2004; (b) 2.35 to 1.0 as of July 31, 2005; and (c) 1.5
to 1.0 as of July 31, 2006, and at all times thereafter; said Coverage Ratio to
be measured quarterly based on a rolling four-quarter basis.

 

3.                                       BORROWER REPRESENTS AND WARRANTS TO THE
BANK THAT AS OF THE DATE HEREOF:  (A) ALL REPRESENTATIONS AND WARRANTIES GIVEN
BY THE BORROWER IN ARTICLE V OF THE LOAN AGREEMENT ARE TRUE AND CORRECT, EXCEPT
TO THE EXTENT AFFECTED BY THIS AMENDMENT; AND (B) THE BORROWER IS IN FULL
COMPLIANCE WITH ALL OF THE COVENANTS OF THE BORROWER CONTAINED IN ARTICLE VI OF
THE LOAN AGREEMENT, EXCEPT TO THE EXTENT AFFECTED BY THIS AMENDMENT.  THE
BORROWER FURTHER REPRESENTS THAT THE BORROWER HAS FULL POWER AND AUTHORITY TO
ENTER INTO THIS AMENDMENT AND TO CONSUMMATE THE TRANSACTIONS CONTEMPLATED
HEREBY, AND THE BORROWER AGREES TO PAY DIRECTLY, OR REIMBURSE THE BANK FOR, ALL
REASONABLE EXPENSES, INCLUDING THE REASONABLE FEES AND EXPENSES OF LEGAL
COUNSEL, INCURRED IN CONNECTION WITH THE PREPARATION OF THE DOCUMENTATION TO
EVIDENCE THIS AMENDMENT AND ANY DOCUMENTS EXECUTED IN CONNECTION HEREWITH.

 

4.                                       EXCEPT AS EXPRESSLY MODIFIED BY THIS
AMENDMENT, THE PARTIES AGREE THAT:

 

(A)                                  IN ALL OTHER RESPECTS, ALL THE TERMS,
CONDITIONS, OBLIGATIONS AND PROVISIONS OF THE LOAN AGREEMENT SHALL BE UNCHANGED
AND REMAIN THE SAME AND IN FULL FORCE AND EFFECT, AND ALL TERMS OF THE LOAN
AGREEMENT, AS HEREIN MODIFIED, ARE EXPRESSLY RATIFIED AND CONFIRMED IN ALL
RESPECTS; AND

 

(B)                                 IN THE EVENT THAT THERE SHALL BE ANY
CONFLICT BETWEEN THE TERMS OF THIS AMENDMENT AND ANY OF THE TERMS OF ANY OF THE
OTHER LOAN DOCUMENTS NOT AMENDED CONCURRENTLY HEREWITH, THE TERMS AND PROVISIONS
OF THIS AMENDMENT SHALL GOVERN AND EACH OF SUCH OTHER LOAN DOCUMENTS ARE DEEMED
AUTOMATICALLY AMENDED AND MODIFIED WITHOUT ANY FURTHER ACTION UPON THE EXECUTION
AND DELIVERY OF THIS AMENDMENT.

 

(C)                                  IN THE EVENT THAT THERE SHALL BE ANY
CONFLICT BETWEEN THE AMENDMENT CONTAINED IN PARAGRAPH 2 OF THIS AMENDMENT WITH
ANY OF THE TERMS OF THE REVOLVING LOAN AGREEMENT, INCLUDING, WITHOUT LIMITATION,
SUBSECTION 6.1(F) THEREOF, THE TERMS AND PROVISIONS OF THE AMENDMENT CONTAINED
IN

 

2

--------------------------------------------------------------------------------

 

PARAGRAPH 2 OF THIS AMENDMENT SHALL GOVERN AND THE REVOLVING LOAN AGREEMENT IS
HEREBY AUTOMATICALLY AMENDED AND MODIFIED WITHOUT ANY FURTHER ACTION UPON THE
EXECUTION AND DELIVERY OF THIS AMENDMENT.

 

5.                                       THE UNDERSIGNED KMG CHEMICALS, INC.
(THE “GUARANTOR”), EXECUTES THIS AMENDMENT TO EXPRESSLY EVIDENCE ITS ASSENT TO
ALL THE TERMS OF THIS AMENDMENT, AND TO FURTHER ACKNOWLEDGE AND AGREE THAT THE
GUARANTY OF PAYMENT DATED AS OF JUNE 26, 1998 (THE “GUARANTY”), DELIVERED BY IT
TO THE BANK REMAINS IN FULL FORCE AND EFFECT AND THAT THE “OBLIGATIONS” OF THE
GUARANTOR AS THE “GUARANTOR” UNDER THE GUARANTY SHALL INCLUDE, WITHOUT
LIMITATION, ALL OBLIGATIONS OF THE BORROWER UNDER THE LOAN AGREEMENT, AS AMENDED
BY THIS AMENDMENT.

 

6.                                       THIS AMENDMENT MAY BE EXECUTED IN
SEVERAL COUNTERPARTS, EACH OF WHICH SHALL BE DEEMED AN ORIGINAL, AND ALL OF SUCH
COUNTERPARTS TOGETHER SHALL CONSTITUTE ONE AND THE SAME INSTRUMENT.  SIGNATURE
AND ACKNOWLEDGMENT PAGES, IF ANY, MAY BE DETACHED FROM THE COUNTERPARTS AND
ATTACHED TO A SINGLE COPY OF THIS DOCUMENT TO PHYSICALLY FORM ONE DOCUMENT.

 

SIGNATURES FOLLOW ON SEPARATE PAGES

 

3

--------------------------------------------------------------------------------

 

IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their respective duly authorized officers effective as of the day
and year first above written.

 

 

BORROWER:

 

 

 

KMG-BERNUTH, INC.

 

 

 

 

 

By:

John V. Sobchak

 

 

Its:  Vice President and Chief Financial Officer

 

 

STATE OF TEXAS         )

 

COUNTY OF HARRIS   )

 

 

I, the undersigned, a Notary Public in and for said County in said State, hereby
certify that John V. Sobchak, whose name as Vice President and Chief Financial
Officer of KMG-Bernuth, Inc., a Delaware corporation, is signed to the foregoing
Fourth Amendment to Term Loan Agreement, and who is known to me, acknowledged
before me on this day that, being informed of the contents of said instrument,
he, as such officer and with full authority, executed the same voluntarily for
and as the act of said corporation.

 

Given under my hand and official seal this the                   day
of                         , 2004.

 

 

 

(SEAL)

 

Notary Public

 

My Commission Expires:

 

 

4

--------------------------------------------------------------------------------

 

 

BANK:

 

 

 

SOUTHTRUST BANK

 

 

 

 

 

By:

Haston Simmons

 

Its:

 

 

 

STATE OF ALABAMA         )

 

COUNTY OF JEFFERSON   )

 

 

I, the undersigned, a Notary Public in and for said County in said State, hereby
certify that                                                      , whose name
as                                                 of SouthTrust Bank, an
Alabama banking corporation, is signed to the foregoing Fourth Amendment to Term
Loan Agreement, and who is known to me, acknowledged before me on this day that,
being informed of the contents of said instrument, he, as such officer and with
full authority, executed the same voluntarily for and as the act of said banking
corporation.

 

Given under my hand and official seal this the                    day of
                      , 2004.

 

 

 

(SEAL)

 

Notary Public

 

My Commission Expires:

 

 

5

--------------------------------------------------------------------------------

 

 

GUARANTOR:

 

 

 

KMG CHEMICALS, INC.

 

 

 

 

 

By:

John V. Sobchak

 

 

Its:  Vice President and Chief Financial Officer

 

 

STATE OF TEXAS         )

 

COUNTY OF HARRIS   )

 

 

I, the undersigned, a Notary Public in and for said County in said State, hereby
certify that John V. Sobchak, whose name as Vice President and Chief Financial
Officer of KMG Chemicals, Inc., a Texas corporation, is signed to the foregoing
Fourth Amendment to Term Loan Agreement, and who is known to me, acknowledged
before me on this day that, being informed of the contents of said instrument,
he, as such officer and with full authority, executed the same voluntarily for
and as the act of said corporation.

 

Given under my hand and official seal this the                    day
of                        , 2004.

 

 

 

(SEAL)

 

Notary Public

 

My Commission Expires:

 

 

6

--------------------------------------------------------------------------------