EXHIBIT 10.18

 

EMPLOYMENT AGREEMENT

 

AGREEMENT, dated effective as of March 8, 2004 (“Effective Date”), between KMG
CHEMICALS, INC., a Texas corporation (the “Company”), with an office at
10611 Harwin, Suite 402, Houston, Texas 77036 and J. NEAL BUTLER (“Executive”),
with an address at 787 Windover Road, Alexander City, Alabama 35010.

 

WITNESSETH:

 

WHEREAS, the Company wishes to employ the Executive to perform executive duties
for the Company and its subsidiaries, 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 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 Vice
President and Chief Operating Officer of the Company and its subsidiary,
KMG-Bernuth, Inc., 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 March 8,
2004, and ending March 8, 2005, subject to earlier termination as provided
herein.  The term of employment under this Agreement shall be automatically
extended for an additional one (1) year period at the end of the initial term of
employment and at the end of any renewal term of employment unless the Company
gives notice at least sixty (60) days prior to the end of the employment period
that the Executive’s employment under this Agreement shall not be so extended.

 

3.                                       Duties.

 

(a)                                  The Executive shall continue to perform
such duties of an executive nature for the Company and its subsidiaries as may
be assigned to him from time to time by the President of the Company and that
are customarily performed by an executive holding positions similar to that of
the Executive.  The Executive shall serve the Company and its subsidiaries
faithfully and to the best of his ability and shall devote his full business
time and attention to the affairs of the Company and its subsidiaries, subject
to reasonable absences for vacation and illness in accordance with then current
Company policy.  The Executive shall be subject at all times to the direction
and control of the President.  The Executive shall give the President periodic
reports on and keep him informed on a current basis concerning the business
affairs of the Company and its subsidiaries.

 

(b)                                 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 or its subsidiaries may require.

 

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(c)                                  During the term of this Agreement the
Executive shall, if elected, serve as a member of the Board of Directors and/or
Executive Committee of the Company or its subsidiaries and such other committees
to which the Executive may be appointed.

 

4.                                       Compensation.

 

(a)                                  As compensation for all of the duties to be
performed by the Executive hereunder, the Company shall pay the Executive:

 

(i)                                     A base salary, payable in accordance
with the Company’s normal payroll practices, at a rate per annum equal to
$175,000 (“Base Salary”), or such greater amount as shall be approved by the
Company in its sole discretion from time to time;

 

(ii)                                  incentive compensation pursuant to an
incentive compensation plan for Company executives (“Executive Incentive Plan”)
as such plan shall be in effect from time to time; and

 

(iii)                               one (1) option to purchase 150,000 shares of
the common stock of the Company subject to vesting and the other terms and
conditions set forth in such Stock Options.

 

(b)                                 The Company shall have the unrestricted
right to modify, amend, terminate or change the Executive Incentive Plan at any
time during the term of this Agreement, provided, that during the term of
employment the Company shall provide the Executive with the opportunity to
receive an award of incentive compensation targeted at fifty percent (50%) of
Base Salary when performance goals established by the Company are met; provided,
further, that the actual award will vary in the sole discretion of the Company
above and below the targeted percentage of Base Salary as achievement of the
performance goals varies above and below the goals and the maximum award payable
will be seventy-five percent (75%) of Base Salary in any given fiscal year.  The
Executive acknowledges and agrees that the exercise price, vesting, and all
other terms and conditions of the Stock Options to be granted under paragraph
4(a)(iii)(B) shall be established by the Company in its sole discretion at the
time of grant.

 

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

 

6.                                       Relocation Expenses.  The Company shall
pay the Executive’s following relocation expenses:

 

(a)                                  All normal and customary closing costs on
Executive’s new residence that by local custom are normally paid by the buyer
and which relate to the purchase, but not the financing of, a residence.

 

(b)                                 Payment for insurance, packing, shipment,
unloading and unpacking of the normal household goods from Executive’s residence
and storage payments for a period not to exceed thirty days from the date of
delivery in the event it is impossible to move into the Executive’ new home.

 

(c)                                  Payment equal to two months base salary for
coverage of normal incidental expenses associated with the establishment of a
new home.

 

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(d)                                 All expenses as applicable shall be grossed
up for tax purposes and the Company shall pay Executive an amount reasonably
necessary to keep Executive whole with respect to tax liabilities incurred
during the relocation.

 

7.                                       Benefits.  The Executive shall be
entitled to four weeks paid vacation in calendar year 2004 and five weeks paid
vacation in subsequent calendar years during the term of his employment.  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 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;.

 

8.                                       Copyright, Patents, Trademarks.  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 all material embodiments of the work subject to such rights; and

 

(ii) 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, 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 paragraph 7, “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.

 

(b)                                 Whenever the Company shall so request,
whether during or after the term of this Agreement, the Executive shall 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, inventions,
ideas, discoveries, designs and improvements; 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 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

 

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requested by the Company pursuant to this subparagraph 7(b).  All registration
and filing fees and similar expense shall be paid by the Company.

 

9.                                       Confidential Information;
Non-competition.

 

(a)                                  Company and its affiliates shall disclose
to Executive, or place Executive in a position to have access to or develop,
trade secrets or confidential information of Company or its affiliates; and/or
shall entrust Executive with business opportunities of Company or its
affiliates; and/or shall place Executive in a position to develop business good
will on behalf of Company or its affiliates.  Executive recognizes and
acknowledges that Executive will have access to certain information of Company
and its affiliates and that such information is confidential and constitutes
valuable, special and unique property of Company or its affiliates.  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 and its affiliates,
successors, assigns or nominees, any Confidential Information of Company or its
affiliates (regardless of whether developed by Executive) without the prior
written consent of Company.  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 or court order 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 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 or its affiliates, 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 or its affiliates, 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 or its affiliates.  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 and the policies established by
Company.  Executive acknowledges that all 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 or other employees or
affiliates of the Company during Executive’s term of employment are the
exclusive property of the Company or its affiliates and shall be delivered by
Executive to Company on termination of Executive’s term of employment for
whatever reason, or at any earlier time requested by Company.

 

(b)                                 As part of the consideration for the
compensation and benefits to be paid to Executive hereunder; to protect the
Confidential Information of Company and its affiliates that has been and will in
the future be disclosed or entrusted to Executive, the business goodwill of
Company and its affiliates that has been and will in the future been developed
in Executive, or the business opportunities that have been and will in the
future be disclosed or entrusted to Executive by Company and its affiliates; and
as an additional incentive for Company to enter into this Agreement, Company and
Executive agree to the non-competition obligations hereunder.  During the term
of employment under this Agreement and for a period of one year thereafter, 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 or the business of any of its subsidiaries in the
United States or Canada.  For the purpose of this paragraph, 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 owns less than a five percent (5%)
block of equity or debt securities of any company traded on a national
securities exchange or in

 

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any established over-the-counter securities market.  For the purpose of this
paragraph, the term “any business then competitive” to the business of the
Company or its subsidiaries shall mean any business that manufactures, sells or
distributes chemicals that were manufactured, sold or distributed by the Company
or any of its affiliates during the one year immediately preceding the
termination of the Executive’s term of employment under this Agreement, the
Executive provided substantial executive services.

 

(c)                                  In the event the Executive shall breach any
provisions of this paragraph 8 (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 paragraph 8 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 paragraph 8 without being
required to prove damages or furnish any bond or other security.

 

(d)                                 Executive understands that the restrictions
set forth in this paragraph 8 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 paragraph 8 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.

 

10.                                 Termination.  The Executive’s employment
under this Agreement shall terminate under the following circumstances:

 

(a)                                  Death or Disability.  The Executive’s
employment shall terminate upon the death or Disability of Executive.  For
purposes of this Agreement, “Disability” shall be the inability to perform
executive-level services, combined with eligibility to receive disability
benefits under the standards used by the Company’s long-term disability benefit
plan.  In the event Executive is a “Qualified Individual with a Disability,” as
such term is defined in the Americans with Disabilities Act, the Company shall
not terminate Executive’s employment hereunder if Executive is able to perform
the essential functions of Executive’s job with reasonable accommodation from
the Company.

 

(b)                                 With “Cause”.  For purposes of this
Agreement, the Company shall have “Cause” to terminate Executive’s employment
hereunder upon the occurrence of any of the following:

 

(i) embezzlement, theft or other misappropriation of any property of the Company
or any of its subsidiaries by Executive,

 

(ii) gross negligence or willful misconduct by Executive resulting in
substantial loss to the Company or any of its subsidiaries or substantial damage
to the reputation of the Company or any of its subsidiaries,

 

(iii) any act by Executive that results in a conviction of, or a pleading nolo
contendere to, a felony or other crime involving moral turpitude, fraud or
misrepresentation,

 

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(iv) willful and continued failure or neglect by Executive to substantially
perform his assigned duties for the Company or any of its subsidiaries,

 

(v) gross breach of Executive’s fiduciary obligations to the Company or any of
its subsidiaries,

 

(vi) any chemical dependence which materially affects the performance of
Executive’s duties and responsibilities to the Company or any of its
subsidiaries; provided, that in the case of the misconduct set forth in clauses
(iv) and (vi) above, such misconduct shall continue for a period of five (5)
days following written notice thereof by the Company to Executive.

 

(c)                                  Without “Cause”.  Notwithstanding any
provisions of this Agreement to the contrary, the Company may terminate
Executive’s employment hereunder for any reason other than those specified in
the foregoing paragraphs (a) and (b), or for no reason, at any time, effective
upon delivery of five (5) day’s notice by the Company.

 

(d)                                 Voluntary Resignation.  Executive may
terminate his employment hereunder at any time during the 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”).

 

(e)                                  With “Good Reason”.  Notwithstanding any
provision of this Agreement to the contrary, Executive may terminate his
employment hereunder for Good Reason, subject to the requirement that Executive
shall provide the Company with a minimum of sixty (60) days prior written notice
and subject to the requirement that such notice is given within thirty (30) days
(plus the applicable cure period, if any) after the occurrence of the events
constituting a Good Reason.  For purposes of this Agreement, Executive shall
have “Good Reason” to terminate his employment hereunder upon the occurrence,
without Executive’s written consent, of any of the following:

 

(i) a failure by the Company to pay to Executive any amounts due to Executive
(including but not limited to Base Salary and incentive compensation payable
under the Company’s Executive Incentive Compensation Plan), which failure is not
cured within thirty (30) days following receipt by the Company of written notice
from Executive of such failure,

 

(ii) demotion of Executive from his position as Chief Financial Officer of the
Company or a change in his management reporting relationship such that he no
longer reports to the Chief Executive Officer of the Company,

 

(iii)  a relocation of the headquarters for the performance of the Executive’s
duties during the term of this Agreement more than fifty miles outside the
limits of Houston, Texas, or

 

(iv) any other material breach by the Company of this Agreement that remains
uncured for thirty (30) days after written notice thereof by Executive to the
Company.

 

11.                                 Compensation upon Termination.  Executive
shall be entitled to the following compensation from Company, in lieu of all
compensation or other sums or benefits owed or payable to Executive under
paragraph 4 of this Agreement, upon the termination of Executive’s employment
during the term of this Agreement.

 

(a)                                  Death or Disability.  In the event of the
death or Disability of Executive during the term of this Agreement, except for
amounts of Base Salary and accrued vacation time earned by Executive as

 

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of the date of termination but not yet paid by the Company, the Company shall
have no obligation to make payments to Executive or his estate for the periods
after the date Executive’s employment with the Company terminates on account of
death or Disability.

 

(b)                                 With Cause.  In the event that Executive’s
employment is terminated by the Company for Cause, except for the amounts of
Base Salary and accrued vacation time earned by Executive as of the date of
termination but not yet paid by the Company, the Company shall have no
obligation to make payments to Executive for the periods before or after the
date Executive’s employment with the Company terminates for Cause.

 

(c)                                  Without Cause.  In the event that
Executive’s employment is terminated by the Company without Cause at any time
during the term of this Agreement, Executive shall be entitled to receive (A) if
the termination was not within one year after a Change of Control,

 

(i) the amounts of Base Salary and accrued vacation time earned by Executive as
of the date of termination but not yet paid by the Company,

 

(ii) an amount equal to two times the Base Salary then in effect in a lump sum
45 days after the date of termination, and

 

(iii) the Stock Options that are vested as of the date of termination may be
exercised within two years of such termination as provided therein; or

 

(B)  if the termination was within one year after a Change of Control

 

(i) the amounts of Base Salary and accrued vacation time earned by Executive as
of the date of termination but not yet paid by the Company,

 

(ii) an amount equal to two times the Base Salary then in effect in a lump sum
45 days after the date of termination, and

 

(iii) the Stock Options shall be deemed fully vested as of the date of
termination and may be exercised within two years of such termination as
provided therein.

 

(d)                                 Voluntary Resignation.

 

(i)                                     Without Good Reason.  In the event that
Executive’s employment is terminated by Executive as a Voluntary Resignation
pursuant to paragraph 9(d), except for amounts of Base Salary and accrued
vacation time earned by Executive as of the date of termination but not yet paid
by the Company, the Company shall have no obligation to make payments to
Executive for the periods after the date Executive’s employment with the Company
terminates on account of Voluntary Resignation.

 

(ii)                                  With Good Reason.  Notwithstanding any
provision of this Agreement to the contrary, if Executive’s employment with the
Company terminates on account of Voluntary Resignation for Good Reason,
Executive shall be entitled to receive (1) if the termination was not within one
year after a Change of Control, (a) the amounts of Base Salary and accrued
vacation time earned by Executive as of the date of termination but not yet paid
by the Company, (b) an amount equal to two times the Base Salary then in effect
in then in effect in a lump sum 45 days after the date of termination, and (c)
the Stock Options that are vested as of the date of termination may be exercised
within two years of such termination as provided therein; or (2)  if the
termination was within one year after a Change of

 

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Control, (a) the amounts of Base Salary and accrued vacation time earned by
Executive as of the date of termination but not yet paid by the Company, (b) an
amount equal to two times the Base Salary then in effect in a lump sum 45 days
after the date of termination, and (c) the Stock Options shall be deemed fully
vested as of the date of termination and may be exercised within two years of
such termination as provided therein.

 

(e)                                  Change of Control.  For purposes of this
Agreement, a “Change of Control” shall be deemed to exist upon the occurrence of
any of the following:

 

(i)                                     any “person” as such term is used in
Sections 13(d) and 14(d) of the Securities Exchange Act of 1934 (“Act”) (other
than (i) the Company, (ii) any trustee or other fiduciary holding securities
under any employee benefit plan of the Company, (iii) any company owned,
directly or indirectly, by the stockholders of the Company in substantially the
same proportions as their ownership of the common stock of the Company) is or
becomes the “beneficial owner” (as defined in Rule 13d-3 under the Act),
directly or indirectly, of securities of the Company representing more than
fifty percent (50%) of the combined voting power of the Company’s then
outstanding securities;

 

(ii)                                  a merger or consolidation of the Company
with any other corporation, other than a merger or consolidation that would
result in the voting securities of the Company outstanding immediately prior
thereto continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity) more than fifty
percent (50%) of the combined voting power of the voting securities of the
Company or such surviving entity outstanding immediately after such merger or
consolidation; provided, however, that a merger or consolidation effected to
implement a recapitalization of the Company (or similar transaction) in which no
person, not already the beneficial owner of less than fifty percent (50%) of the
combined voting power of the Company’s then outstanding securities, acquires
more than fifty percent (50%) of the combined voting power of the Company’s then
outstanding securities shall not constitute a Change in Control of the Company;
and provided, further, a merger or consolidation in which the Company is the
surviving entity (other than as a wholly owned subsidiary or another entity) and
in which the Board of the Company after giving effect to the merger or
consolidation is comprised of a majority of members who are either (x) directors
of the Company immediately preceding the merger or consolidation, or (y)
appointed to the Board of the Company by the Company (or its Board) as an
integral part of such merger or consolidation, shall not constitute a Change in
Control of the Company; or

 

(iii)                               the consummation of a plan of complete
liquidation of the Company or of a sale or disposition by the Company of all or
substantially all of the Company’s assets other than (i) the sale or disposition
of all or substantially all of the assets of the Company to a person or persons
who beneficially own, directly or indirectly, more than fifty percent (50%) of
the combined voting power of the outstanding voting securities of the Company at
the time of the sale or (ii) pursuant to a dividend in kind or spin-off type
transactions, directly or indirectly, of such assets to the stockholders of the
Company.

 

(f)                                    Mutual Release.  Payment of the amounts
payable on the termination of the employment of the Executive under this
paragraph 10,  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 and the Company of a valid
mutual release, pursuant  to which the Executive and the Company shall  each
mutually  release each other, to the maximum extent permitted  by law, from  any
and all claims either party may have 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 such claims arising under this Agreement,
any employee benefit  plan, or any other written plan or agreement (a  “Mutual
Release”).

 

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12.                                 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
pursuant to this paragraph 11 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.  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 not be empowered to award punitive or exemplary
damages 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 and the costs of the arbitrator will be borne by
the party who the arbitrator determines did not prevail in the matter.  Unless
otherwise expressly set forth in this Agreement, the procedures specified in
this paragraph 11 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.

 

13.                                 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: President”) 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.

 

(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 and
inure to the benefit of the parties and their respective heirs, executors,
administrators, personal representatives, successors 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.

 

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(g)                                 The Company may setoff any amounts owed by
it or its subsidiaries 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 the Company or any of its
subsidiaries under a promissory note or for any loans or advances made by the
Company or its subsidiaries to the Executive, including but not limited to loans
or advances of compensation hereunder.

 

(h)                                 This Agreement has a term co-extensive with
the term of employment provided in paragraph 2.  Termination shall not affect
any right or obligation of any party which is accrued or vested prior to such
termination.  Without limiting the scope of the preceding sentence, the
provisions of paragraphs 8 and 11 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.

 

10

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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/ David L. Hatcher

 

 

 

David L. Hatcher, President

 

 

 

 

 

EXECUTIVE:

 

 

 

 

 

/s/ J. Neal Butler

 

 

J. Neal Butler

 

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