Exhibit 10.39


 


AMENDED AND RESTATED CREDIT

AGREEMENT


 


DATED AS OF DECEMBER 31, 2007


 


KMG CHEMICALS, INC.,


KMG-BERNUTH, INC., and


KMG ELECTRONIC CHEMICALS, INC.,


 


AS BORROWERS,


 


WACHOVIA BANK, NATIONAL ASSOCIATION,


 


AS AGENT AND COLLATERAL AGENT,


 


and


 


THE LENDERS IDENTIFIED HEREIN


 





















 


Table of Contents


 


	
   

  	
   

  	
  Page

  
	
  Article I

  	
   

  	
   

  
	
  1.

  	
  DEFINITIONS AND GENERAL PROVISIONS

  	
  1

  
	
   

  	
  1.1

  	
  Intercreditor Agreement

  	
  1

  
	
   

  	
  1.2

  	
  Defined Terms

  	
  1

  
	
   

  	
  1.3

  	
  Accounting Terms

  	
  35

  
	
   

  	
  1.4

  	
  UCC Terms

  	
  35

  
	
   

  	
  1.5

  	
  Construction of Terms

  	
  35

  
	
   

  	
  1.6

  	
  Computation of Time Periods

  	
  35

  
	
   

  	
  1.7

  	
  Computation of ABR Margin, LIBOR Margin, Unused Fee Percentage and
  Financial Covenants

  	
  35

  
	
   

  	
  1.8

  	
  Reference to Borrowers and Borrower Parties

  	
  36

  
	
   

  	
  1.9

  	
  Reference to Lenders and Lender Parties

  	
  36

  
	
   

  	
  1.10

  	
  Joint and Several Liability of Borrowers

  	
  37

  
	
   

  	
  1.11

  	
  Lender Party Swap Documents

  	
  39

  
	
   

  	
  1.12

  	
  Lien Granted For Lender Party Swap Obligations

  	
  39

  
	
  Article II

  	
   

  	
  39

  
	
  2.

  	
  THE REVOLVING LOAN

  	
  39

  
	
   

  	
  2.1

  	
  General Terms

  	
  39

  
	
   

  	
  2.2

  	
  Disbursement of the Revolving Loan

  	
  39

  
	
   

  	
  2.3

  	
  The Revolving Notes

  	
  40

  
	
   

  	
  2.4

  	
  Interest Rate

  	
  40

  
	
   

  	
  2.5

  	
  Payments of Principal and Interest

  	
  41

  
	
   

  	
  2.6

  	
  Use of Proceeds of Revolving Loan

  	
  41

  
	
  Article III

  	
   

  	
  42

  
	
  3.

  	
  THE SWING LINE LOAN

  	
  42

  
	
   

  	
  3.1

  	
  General Terms

  	
  42

  
	
   

  	
  3.2

  	
  Disbursement of the Swing Line Loan

  	
  42

  
	
   

  	
  3.3

  	
  The Swing Line Note

  	
  43

  
	
   

  	
  3.4

  	
  Interest Rate

  	
  43

  
	
   

  	
  3.5

  	
  Payments of Principal and Interest

  	
  43

  
	
   

  	
  3.6

  	
  Use of Proceeds of Swing Line Loan

  	
  44

  
	
   

  	
  3.7

  	
  Failure to Purchase Pro Rata Share of Swing Line Loan Advances

  	
  44

  
	
  Article IV

  	
   

  	
  44

  
	
  4.

  	
  LETTERS OF CREDIT

  	
  44

  
	
   

  	
  4.1

  	
  Issuance of Letters of Credit

  	
  44

  
	
   

  	
  4.2

  	
  Reimbursement and Other Payments

  	
  44

  
	
   

  	
  4.3

  	
  Additional Remedies

  	
  44

  
	
   

  	
  4.4

  	
  No Liability of Issuing Lender

  	
  45

  
	
   

  	
  4.5

  	
  Indemnification

  	
  46

  
	
   

  	
  4.6

  	
  Pro Rata Participation, Drawing and Reimbursement With Respect to
  Letters of Credit

  	
  46

  
	
   

  	
  4.7

  	
  Failure to Purchase Pro Rata Share of Letter of Credit Advances

  	
  47

  
	
   

  	
  4.8

  	
  Letter of Credit Reports

  	
  47

  
	
  Article V

  	
   

  	
  47

  



 


i





















 


	
  5.

  	
  THE TERM LOAN

  	
  47

  
	
   

  	
  5.1

  	
  General Terms

  	
  47

  
	
   

  	
  5.2

  	
  The Term Notes

  	
  47

  
	
   

  	
  5.3

  	
  Interest Rate

  	
  48

  
	
   

  	
  5.4

  	
  Payments of Principal and Interest

  	
  48

  
	
   

  	
  5.5

  	
  Use of Proceeds of Term Loan

  	
  49

  
	
  Article VI

  	
   

  	
  49

  
	
  6.

  	
  PAYMENTS, ADDITIONAL COSTS, ETC.

  	
  49

  
	
   

  	
  6.1

  	
  Payment to Agent

  	
  49

  
	
   

  	
  6.2

  	
  Late Payments

  	
  49

  
	
   

  	
  6.3

  	
  Prepayment

  	
  49

  
	
   

  	
  6.4

  	
  Default Rate

  	
  50

  
	
   

  	
  6.5

  	
  No Setoff or Deduction

  	
  50

  
	
   

  	
  6.6

  	
  Payment on Non-Business Day; Payment Computations

  	
  50

  
	
   

  	
  6.7

  	
  Indemnification

  	
  50

  
	
   

  	
  6.8

  	
  360-Day Year

  	
  51

  
	
   

  	
  6.9

  	
  No Requirement to Actually Obtain Funds

  	
  51

  
	
   

  	
  6.10

  	
  Usury Limitation

  	
  51

  
	
   

  	
  6.11

  	
  Ratable Sharing

  	
  51

  
	
  Article VII

  	
   

  	
  52

  
	
  7.

  	
  CONDITIONS PRECEDENT

  	
  52

  
	
   

  	
  7.1

  	
  Documents Required for the Closing

  	
  52

  
	
   

  	
  7.2

  	
  Certain Events Required for Closing and for all Advances

  	
  54

  
	
   

  	
  7.3

  	
  Legal Matters

  	
  55

  
	
   

  	
  7.4

  	
  Election to Make Advances Prior to Satisfaction of Conditions
  Precedent

  	
  55

  
	
  Article VIII

  	
   

  	
  56

  
	
  8.

  	
  COLLATERAL SECURITY

  	
  56

  
	
   

  	
  8.1

  	
  Grant of Lien

  	
  56

  
	
   

  	
  8.2

  	
  Maintenance of Lien

  	
  56

  
	
  Article IX

  	
   

  	
  56

  
	
  9.

  	
  REPRESENTATIONS AND WARRANTIES.

  	
  56

  
	
   

  	
  9.1

  	
  Existence

  	
  57

  
	
   

  	
  9.2

  	
  Authority

  	
  57

  
	
   

  	
  9.3

  	
  Equity Owners and Equity Agreements

  	
  57

  
	
   

  	
  9.4

  	
  Name

  	
  57

  
	
   

  	
  9.5

  	
  Material Contracts

  	
  57

  
	
   

  	
  9.6

  	
  Consents or Approvals

  	
  57

  
	
   

  	
  9.7

  	
  Violations or Actions Pending

  	
  58

  
	
   

  	
  9.8

  	
  Affiliates

  	
  58

  
	
   

  	
  9.9

  	
  Existing Indebtedness

  	
  58

  
	
   

  	
  9.10

  	
  Defaults Under Material Contracts

  	
  58

  
	
   

  	
  9.11

  	
  Tax Returns

  	
  58

  
	
   

  	
  9.12

  	
  Financial Statements

  	
  59

  
	
   

  	
  9.13

  	
  Good and Marketable Title

  	
  59

  
	
   

  	
  9.14

  	
  Real Property Locations

  	
  59

  
	
   

  	
  9.15

  	
  Solvency

  	
  59

  



 


ii





















 


	
   

  	
  9.16

  	
  ERISA

  	
  59

  
	
   

  	
  9.17

  	
  Priority of Liens

  	
  59

  
	
   

  	
  9.18

  	
  Patents, Copyrights, Etc.

  	
  59

  
	
   

  	
  9.19

  	
  Accuracy of Documents

  	
  60

  
	
   

  	
  9.20

  	
  Environmental Matters

  	
  60

  
	
   

  	
  9.21

  	
  Condemnation

  	
  60

  
	
   

  	
  9.22

  	
  Assigned Agreements

  	
  60

  
	
   

  	
  9.23

  	
  Full Disclosure

  	
  60

  
	
   

  	
  9.24

  	
  Regulated Industries

  	
  61

  
	
   

  	
  9.25

  	
  Insurance

  	
  61

  
	
   

  	
  9.26

  	
  Anti-Terrorism Laws

  	
  61

  
	
   

  	
  9.27

  	
  Securities Laws

  	
  62

  
	
   

  	
  9.28

  	
  Continuing Effectiveness

  	
  62

  
	
  Article X

  	
   

  	
  62

  
	
  10.

  	
  BORROWER’S COVENANTS

  	
  62

  
	
   

  	
  10.1

  	
  Affirmative Covenants

  	
  62

  
	
   

  	
  10.2

  	
  Negative Covenants

  	
  66

  
	
   

  	
  10.3

  	
  Financial Covenants

  	
  68

  
	
   

  	
  10.4

  	
  Insurance and Insurance Proceeds

  	
  69

  
	
   

  	
  10.5

  	
  Borrower’s General Covenants and Agreements Pertaining to the
  Collateral

  	
  70

  
	
   

  	
  10.6

  	
  Collection of Accounts; Segregation of Proceeds, Etc.

  	
  71

  
	
   

  	
  10.7

  	
  Collection Methods

  	
  72

  
	
   

  	
  10.8

  	
  Verification of Accounts

  	
  72

  
	
   

  	
  10.9

  	
  Notice Regarding Disputed Accounts

  	
  72

  
	
   

  	
  10.10

  	
  Records, Schedules and Assignments

  	
  72

  
	
   

  	
  10.11

  	
  Visitation

  	
  72

  
	
   

  	
  10.12

  	
  Use of Tangible Property

  	
  73

  
	
   

  	
  10.13

  	
  Collateral Evidenced by Instruments or Documents

  	
  73

  
	
   

  	
  10.14

  	
  Maintaining Bank Accounts

  	
  73

  
	
   

  	
  10.15

  	
  Filing Fees and Taxes

  	
  74

  
	
   

  	
  10.16

  	
  Assigned Agreements

  	
  74

  
	
   

  	
  10.17

  	
  Air Products APA Documents

  	
  74

  
	
   

  	
  10.18

  	
  Underlying Documentation

  	
  74

  
	
   

  	
  10.19

  	
  Further Assurances

  	
  74

  
	
   

  	
  10.20

  	
  Post-Closing Matters

  	
  75

  
	
  Article XI

  	
   

  	
  75

  
	
  11.

  	
  DEFAULT

  	
  75

  
	
   

  	
  11.1

  	
  Events of Default

  	
  75

  
	
   

  	
  11.2

  	
  No Advances After Default

  	
  77

  
	
   

  	
  11.3

  	
  Acceleration

  	
  78

  
	
   

  	
  11.4

  	
  General Remedies

  	
  78

  
	
   

  	
  11.5

  	
  Agent’s Additional Rights and Remedies

  	
  78

  
	
   

  	
  11.6

  	
  Right of Set-Off

  	
  81

  
	
   

  	
  11.7

  	
  No Limitation on Rights and Remedies

  	
  81

  
	
   

  	
  11.8

  	
  Repossession of the Collateral; Care and Custody of the Collateral,
  Etc.

  	
  82

  



 


iii





















 


	
   

  	
  11.9

  	
  Application of Proceeds

  	
  82

  
	
   

  	
  11.10

  	
  Attorney-in-Fact

  	
  83

  
	
   

  	
  11.11

  	
  Default Costs

  	
  84

  
	
  Article XII

  	
   

  	
  84

  
	
  12.

  	
  THE AGENT

  	
  84

  
	
   

  	
  12.1

  	
  Authorization and Action

  	
  84

  
	
   

  	
  12.2

  	
  Agent’s Notices, Etc.

  	
  86

  
	
   

  	
  12.3

  	
  Agent’s Reliance, Etc.

  	
  86

  
	
   

  	
  12.4

  	
  No Reliance on Agent’s Customer Identification Program

  	
  87

  
	
   

  	
  12.5

  	
  Wachovia and Affiliates

  	
  87

  
	
   

  	
  12.6

  	
  Lender Credit Decision

  	
  87

  
	
   

  	
  12.7

  	
  Indemnification

  	
  87

  
	
   

  	
  12.8

  	
  Successor Agent

  	
  88

  
	
   

  	
  12.9

  	
  No Third Party Beneficiary

  	
  88

  
	
  Article XIII

  	
   

  	
  89

  
	
  13.

  	
  MISCELLANEOUS

  	
  89

  
	
   

  	
  13.1

  	
  Termination of Collateral Agent’s Lien

  	
  89

  
	
   

  	
  13.2

  	
  Construction

  	
  89

  
	
   

  	
  13.3

  	
  Indemnity

  	
  90

  
	
   

  	
  13.4

  	
  Lender Party’s Consent

  	
  90

  
	
   

  	
  13.5

  	
  Enforcement and Waiver by Lender Party

  	
  90

  
	
   

  	
  13.6

  	
  No Representation, Assumption, or Duty

  	
  90

  
	
   

  	
  13.7

  	
  Expenses of Lender Parties

  	
  90

  
	
   

  	
  13.8

  	
  Attorneys’ Fees

  	
  90

  
	
   

  	
  13.9

  	
  Exclusiveness

  	
  91

  
	
   

  	
  13.10

  	
  WAIVER OF PUNITIVE DAMAGES

  	
  91

  
	
   

  	
  13.11

  	
  Waiver and Release by Borrower

  	
  91

  
	
   

  	
  13.12

  	
  Limitation on Waiver of Notice, Etc.

  	
  91

  
	
   

  	
  13.13

  	
  Additional Costs

  	
  92

  
	
   

  	
  13.14

  	
  Illegality and Impossibility

  	
  92

  
	
   

  	
  13.15

  	
  Assignments and Participations

  	
  92

  
	
   

  	
  13.16

  	
  Binding Effect, Assignment

  	
  94

  
	
   

  	
  13.17

  	
  Entire Agreement, Amendments

  	
  95

  
	
   

  	
  13.18

  	
  Severability

  	
  95

  
	
   

  	
  13.19

  	
  Headings

  	
  95

  
	
   

  	
  13.20

  	
  Counterparts

  	
  95

  
	
   

  	
  13.21

  	
  Seal

  	
  95

  
	
  Article XIV

  	
   

  	
  95

  
	
  14.

  	
  SUBMISSION TO JURISDICTION, GOVERNING LAW AND NOTICES

  	
  95

  
	
   

  	
  14.1

  	
  Notices

  	
  95

  
	
   

  	
  14.2

  	
  Governing Law

  	
  97

  
	
   

  	
  14.3

  	
  SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL, ETC.

  	
  97

  
	
  EXHIBIT A  FORM OF ASSIGNMENT AND ACCEPTANCE

  	
   

  
	
  EXHIBIT B  FORM OF COLLATERAL REPORT

  	
   

  
	
  EXHIBIT C  FORM OF COMPLIANCE CERTIFICATE

  	
   

  
	
  EXHIBIT D  LENDERS' CREDIT PERCENTAGES

  	
   

  
					



 


iv





















 


	
  EXHIBIT E FORM OF NOTICE
  OF BORROWING

  	
   

  
	
  EXHIBIT F FORM OF NOTICE
  OF CONVERSION/CONTINUATION

  	
   

  
	
  EXHIBIT G FORM OF NOTICE
  OF FUNDING

  	
   

  
	
  EXHIBIT H PERMITTED
  LIENS

  	
   

  
	
  SCHEDULE 7.2(F)  LITIGATION

  	
   

  
	
  SCHEDULE 9.3  LIST OF EQUITY OWNERS

  	
   

  
	
  SCHEDULE 9.4  LIST OF NAMES USED BY BORROWERS AND
  PERSONS  ACQUIRED IN LAST SIX YEARS

  	
   

  
	
  SCHEDULE 9.5  MATERIAL CONTRACTS

  	
   

  
	
  SCHEDULE 9.8  AFFILIATES

  	
   

  
	
  SCHEDULE 9.14 LISTING OF
  REAL PROPERTY

  	
   

  
	
  SCHEDULE 9.18
  INTELLECTUAL PROPERTY

  	
   

  
	
  SCHEDULE 9.20  ENVIRONMENTAL MATTERS

  	
   

  
	
  SCHEDULE 10.3(E)  LISTING OF AGREEMENTS CURRENTLY IN EFFECT
  WITH AFFILIATES AND PERMITTED POST-CLOSING 

  	
   

  
	
  SCHEDULE 10.20  POST-CLOSING MATTERS

  	
   

  



 


v





















 


AMENDED AND RESTATED CREDIT AGREEMENT


 


THIS
AMENDED AND RESTATED CREDIT AGREEMENT (this “Agreement”)
dated as of December 31, 2007, is made by and among KMG CHEMICALS, INC., a Texas corporation (“KMG Chemicals”), KMG-BERNUTH, INC., a Delaware corporation (“KMG-Bernuth”), KMG ELECTRONIC CHEMICALS, INC., a Texas
corporation (“KMG ECI”) (KMG Chemicals, KMG-Bernuth and KMG ECI hereinafter
referred to as the “Borrowers”), WACHOVIA
BANK, NATIONAL ASSOCIATION, a national banking association,
as Agent (the “Agent”) and as Collateral Agent (the “Collateral Agent”), those
lenders executing this Agreement as Lenders, and such other lenders as may
become a party hereto (collectively, the “Lenders”).  As used herein, capitalized words and phrases
shall have the meanings ascribed thereto in Section 1.2 of this Agreement.


 


W  I  T  N
E  S  S  E  T  H:


 


WHEREAS, pursuant to the Existing Credit Agreement,
Wachovia has previously extended certain credit to KMG Chemicals and
KMG-Bernuth; and


 


WHEREAS,
Borrowers have requested that Lenders extend and continue to extend certain
credit to Borrowers, and Lenders are willing to do so on the condition that,
among other things, Borrowers amend and restate the terms of the Existing
Credit Agreement pursuant to this Agreement; and


 


WHEREAS,
subject to the terms and conditions of this Agreement, Lenders have agreed to
extend to Borrowers (i) a revolving loan of up to $35,000,000.00 (with a
sub-limit for standby/trade letters of credit in the amount of $10,000,000.00
and a sub-limit for a swing line loan of up to $5,000,000.00); and (ii) a
term loan of up to $35,000,000.00.


 


NOW,
THEREFORE, in consideration of the promises herein
contained, and each intending to be legally bound hereby, the parties hereto
agree that the Existing Credit Agreement is hereby amended in its entirety as
follows:


 


ARTICLE I


 


1.             DEFINITIONS AND GENERAL PROVISIONS.


 


1.1           Intercreditor Agreement.  Lender Parties acknowledge that concurrently
with the execution of this Agreement, Agent is entering into the Intercreditor
Agreement which provides for, among other things, the Agent acting as
Collateral Agent under the Intercreditor Agreement, and agree that by virtue of
their execution of this Agreement, Lender Parties authorize Agent to enter into
the Intercreditor Agreement.  Lender
Parties agree that so long as the Intercreditor Agreement remains in effect,
any reference herein or in any other Loan Document to the Collateral Agent
shall mean Agent acting in its capacity as Collateral Agent, and upon
termination of the Intercreditor Agreement, any reference herein or in any
other Loan Document to Collateral Agent shall mean Agent hereunder.


 


1.2           Defined Terms.  As used herein, the following terms shall
have the meanings set forth below (such meanings to be equally applicable to
the singular and plural forms thereof):


 





















 


“ABR Rate
Borrowing” means a borrowing bearing interest based at a rate determined by
reference to the ABR Rate.


 


“ABR Rate”
means the higher of (i) the rate of interest publicly announced by
Wachovia as its “prime rate”, subject to each increase or decrease in such
prime rate, effective as of the first day of the month after any such change
occurs, or (ii) the federal funds effective rate from time to time plus
one-half of one percent (0.50%).


 


“ABR Margin”
means (i) until the delivery of the first Compliance Certificate required
hereunder and the adjustment of the ABR Margin as provided herein, zero percent
(0.00%), and (ii) thereafter, a percentage based upon the ratio of Funded
Debt to EBITDA of the Borrower Consolidated Group, as follows:


 


	
  Ratio of Funded Debt to EBITDA

  	
   

  	
  ABR Margin

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Equal to or greater than 3.0 to 1.0

  	
   

  	
  0.75

  	
  %

  
	
  Equal to or greater than 2.5 to 1.0, but
  less than 3.0 to 1.0

  	
   

  	
  0.50

  	
  %

  
	
  Equal to or greater than 2.0 to 1.0, but
  less than 2.5 to 1.0

  	
   

  	
  0.25

  	
  %

  
	
  Equal to or greater than 1.5 to 1.0, but
  less than 2.0 to 1.0

  	
   

  	
  0.00

  	
  %

  
	
  Less than 1.5 to 1.0

  	
   

  	
  -0.25

  	
  %

  



 


“Acquisition”
means any acquisition (whether in a single transaction or series of related
transactions) of (i) any going business, or all or substantially all of
the assets of any Person, whether through purchase, merger or otherwise; or (ii) Equity
Interests of any Person of five percent (5%) or more of the Equity Interests or
Voting Power of such Person.


 


“Adjusted
ABR Rate” means an interest rate equal to the sum of (i) the ABR Rate,
plus (ii) the ABR Margin.


 


“Adjusted
LIBOR Market Index Rate” means an interest rate equal to the sum of (i) the
LIBOR Market Index Rate, plus (ii) the LIBOR Margin.


 


“Adjusted
LIBOR Rate” means, for each respective LIBOR Rate Interest Period, an
interest rate equal to the sum of (i) the applicable LIBOR Rate, plus (ii) the
LIBOR Margin.


 


“Advance”
means each loan of money or credit made or extended to or for the benefit of
Borrower by any Lender Party pursuant to this Agreement.


 


“Affiliate”
means, with respect to any applicable Person, (a) any officers or
directors of such Person, (b) any Subsidiary of such Person, or (c) any
other Person that has a relationship with the applicable Person whereby either
of such Persons directly or indirectly controls or is controlled by or is under
common control with the other of such Persons. 
The term “control” means the possession, directly or indirectly, of the
power, whether or not exercised, to direct or cause the direction of the
management or policies of any Person, whether through ownership of voting
securities, by contract or otherwise.


 


2





















 


“Agent”
means Wachovia, in its capacity as Agent hereunder, its successors and assigns,
and unless the context may clearly require to the contrary, any reference to “Agent”
in any Loan Document shall mean the Agent in its capacity as the Agent for the
Lenders.


 


“Agent’s
Account” means the account of Agent as established pursuant to the terms of
this Agreement.


 


“Agreement”
means this Amended and Restated Credit Agreement, as amended or supplemented
from time to time.


 


“Air Products
APA” means that certain Asset Purchase Agreement dated as of October 19,
2007 by and between Air Products and Chemicals, Inc. and KMG Chemicals.


 


“Air
Products APA Documents” means the Air Products APA and the other documents
and instruments executed by or in favor of any Member of the Borrower
Consolidated Group in connection therewith.


 


“ALTA”
means the American Land Title Association.


 


“Amortization
Expense” means the amortization expense of an applicable Person for the
applicable period (to the extent included in the computation of Net Income),
according to Generally Accepted Accounting Principles.


 


“Annualized
Rolling Period” means the period from the date one year prior to the
applicable date through the applicable date.


 


“Anti-Terrorism
Laws” means any laws relating to terrorism or money laundering, including
Executive Order No. 13224 and the USA Patriot Act.


 


“Asset
Disposition” means any sale, assignment, transfer or other disposition of
any assets, business units or other properties (including any interests in
property or securities), excluding (i) sales of Inventory in the Ordinary
Course of Business, and (ii) the sale or exchange of used or obsolete
Equipment to the extent (x) the proceeds of such sale are applied towards,
or such Equipment is exchanged for, similar replacement Equipment, or (y) such
Equipment is no longer useful for the operations in the Ordinary Course of
Business.


 


“Assigned
Agreements” means all leases, contracts, agreements, Documents, Instruments
and Chattel Paper included in the Collateral.


 


“Assigned
Leases” means all leases presently existing or hereafter made, whether
written or verbal, or any letting of, or agreement for the use or occupancy of,
any part of the Mortgaged Property, and each modification, extension, renewal
and guarantee thereof, including the Rents.


 


“Assignment
and Acceptance” means an assignment and acceptance entered into by a Lender
and an Eligible Assignee, and accepted by Agent, in accordance with Section 13.15
and in substantially the form of Exhibit “A”
hereto.


 


3





















 


“Assignment
of Claims Act” means the Assignment of Claims Act, as amended (31 U.S.C.
Sections 3727 et. seq. and 41 U.S.C. Sections 15 et. seq.).


 


“Attorneys’
Fees” means attorneys’ fees actually incurred at ordinary and customary
rates.


 


“Available
Amount” of any Letter of Credit means, at any time, the maximum amount
available to be drawn under such Letter of Credit at such time.


 


“Bankruptcy
Law” means Title 11, U.S. Code, or any similar Laws of any Jurisdiction for
the relief of debtors, and “Bankruptcy” means the commencement of any
case or other action for relief under Bankruptcy Law.


 


“Borrower
Consolidated Group” means Borrowers, KMEX, KMG Italia, and any other Person
who becomes a Borrower hereunder (each referred to singularly as a “Member of
the Borrower Consolidated Group”).


 


“Borrower
Parties” means Borrowers and any other Person that hereafter becomes a
party to this Agreement, any other Loan Document or any Lender Party Swap Document,
and which Person is responsible in whole or in part for any of the Credit
Agreement Obligations.


 


“Borrowers”
means KMG Chemicals, KMG-Bernuth and KMG ECI.


 


“Borrower’s
Interest” means all right, title and interest of Borrower of whatever kind,
nature or description.


 


“Borrower’s
Representatives” means the president, chief executive officer, chief
financial officer, and controller of Borrower, and any other Person designated
by Borrower as Borrower’s Representatives under this Agreement.


 


“Borrowing”
means any ABR Rate Borrowing, LIBOR Market Index Rate Borrowing, or LIBOR Rate
Borrowing.


 


“Borrowing
Base” means, at any time, the amount computed on the Collateral Report most
recently delivered to, and accepted by, Bank in accordance with this Agreement
and equal to the aggregate of:


 


(A)          eighty
percent (80%) of Eligible Accounts, plus


 


(B)           fifty
percent (50%) of Eligible Inventory (but not more than $18,000,000.00).


 


“Business
Day” means any day other than a Saturday, a Sunday, a legal holiday or a day
on which banking institutions are authorized or required by Law or other
governmental action to close in Charlotte, North Carolina or New York, New
York; provided that in the case of LIBOR Rate Borrowings such day is also a day
on which dealings between banks are carried on in U.S. dollar deposits in the
London interbank market.


 


“Capital
Expenditures” means the sum of (i) all expenditures made by a Person,
directly or indirectly for equipment, fixed assets, real property or
improvements, or for replacements or substitutions therefore or additions
thereto, that should be, in accordance with Generally 


 


4





















 


Accepted Accounting Principles,
reflected as additions to property, plant or equipment on a balance sheet of
such Person or which have a useful life of more than one year plus (ii) the
aggregate principal amount of all Indebtedness (including Capitalized Leases)
assumed or incurred in connection with any such expenditures.


 


“Capitalized
Lease” means a lease that is required to be capitalized for financial
reporting purposes in accordance with Generally Accepted Accounting Principles.


 


“Cash
Collateral Account” means the special cash collateral account established
pursuant to Section 4.3 of this Agreement.


 


“Cash
Management Agreement” means any and all cash management or similar
agreements entered into or in effect between Borrower and an applicable Lender
(and approved by Agent) during the term of this Agreement.


 


“Casualty
or Condemnation Event” means, with respect to any property of any Member of
the Borrower Consolidated Group, any loss of, damage to or condemnation or
other taking of, such property for which any Member of the Borrower
Consolidated Group is entitled to receive, or receives, insurance proceeds,
condemnation proceeds or other similar proceeds or awards.


 


“Change in
Control” means an event or series of events by which (A) (i) any
Person or group of Persons acting in concert or other group shall, as a result
of a tender or exchange offer, open market purchases, privately negotiated
purchases or otherwise, have become, after the date hereof, the “beneficial
owner” (within the meaning of such term under Rule 13d-3 under the
Exchange Act) of Equity Interests of Borrower representing Voting Power having
the right to elect at least 50% of the members of the Governing Body of
Borrower; or (ii) the Governing Body of KMG Chemicals shall cease to
consist of a majority of the individuals who constituted the Governing Body of
KMG Chemicals as of the date hereof or who shall have become a member thereof
subsequent to the date hereof after having been nominated, or otherwise
approved in writing, by at least a majority of individuals who constitute the
Governing Body of KMG Chemicals as of the date hereof; or (B) Borrower
shall cease to own at least 99% of the Equity Interests and Voting Power of
KMEX and KMG Italia.


 


“Closing”
means the time and place of actual execution and delivery of this Agreement,
the Notes, and except as waived by Agent, the other documents, instruments, and
things required by Section 7.1 hereof.


 


“Closing
Balance Sheet” means an unaudited balance sheet of the Borrower
Consolidated Group dated as of the time immediately following the Closing, such
balance sheet to be calculated based upon the most recent financial statements
available to the Borrower, but on a pro-forma basis after taking into account
the transactions that are to occur on the date of Closing.


 


“Closing
Certificates” means certificates of even date herewith, signed by a duly authorized
representative of each Borrower.


 


“Collateral”
means all of the assets of Borrowers of every kind, nature and description,
wherever located, whether now owned or hereafter acquired (other than the
Excluded Collateral and interests in any Lender Party Swap Documents), and
including the following:


 


5





















 


(A)          All amounts that may be
owing from time to time by any Lender Party to Borrower in any capacity,
including, without limitation, any balance or share belonging to Borrower, of
any Deposit Accounts or other account with any Lender Party;


 


(B)           The Pledged Collateral;


 


(C)           The Mortgaged Property
and the Mortgaged Property Documents;


 


(D)          All of Borrowers’ assets which are or may be
subject to Article 9 of the Uniform Commercial Code, together with all
replacements therefore, additions and accessions thereto, and proceeds
(including, but without limitation, insurance proceeds) and products thereof,
including, without limitation, the following:


 


(1)           Accounts;


 


(2)           Chattel
Paper;


 


(3)           Commercial
Tort Claims;


 


(4)           Deposit
Accounts;


 


(5)           Documents;


 


(6)           Equipment;


 


(7)           General
Intangibles;


 


(8)           Goods;


 


(9)           Instruments;


 


(10)         Intellectual
Property Rights;


 


(11)         Inventory;


 


(12)         Investment
Property;


 


(13)         Letter-of-Credit
Rights;


 


(14)         Payment
Intangibles;


 


(15)         Software;


 


(16)         Supporting
Obligations;


 


(17)         Rights
as seller of Goods and rights to returned or repossessed Goods;


 


6





















 


(18)         All
existing and future leases and use agreements of personal property entered into
by Borrower as lessor with other Persons as lessees, including without
limitation the right to receive and collect all rentals and other monies,
including security deposits, at any time payable under such leases and
agreements;


 


(19)         Any
existing and future leases and use agreements of personal property entered into
by Borrower as lessee with other Persons as lessors, including without
limitation the leasehold interest of Borrower in such property, and all options
to purchase such property or to extend any such lease or agreement;


 


(20)         Fixtures;


 


(21)         All
moneys of Borrower and all bank accounts, deposit accounts, lock boxes and
other accounts in which such moneys may at any time be on deposit or held and all
investments or securities in which such moneys may at any time be invested and
all certificates, instruments and documents from time to time representing or
evidencing any of the same;


 


(22)         All
claims of Borrower in any pending litigation and/or claims for any insurance
proceeds;


 


(23)         All
Records pertaining to any of the Collateral;


 


(E)           Any and all other assets of any Borrower
Party of any kind, nature, or description and which are intended to serve as
collateral for the Loans under any one or more of the Security Documents; and


 


(F)           All interest, dividends, Proceeds, products,
rents, royalties, issues and profits of any of the property described above,
including, without limitation, all monies due and to become due with respect to
such property, together with all right to receive the same, and all notes,
certificates of deposit, checks and other instruments and property from time to
time delivered to or otherwise possessed by Lender Party for or on behalf of
Borrower Party in substitution for or in addition to any of said property.


 


“Collateral
Agent” means Wachovia, in its capacity as Collateral Agent under the
Intercreditor Agreement, its successors and assigns, and unless the context may
clearly require to the contrary, any reference to “Collateral Agent” in any
Loan Document shall mean the Collateral Agent in its capacity as the Collateral
Agent.


 


“Collateral
Agent’s Lien” means the Liens granted to Collateral Agent by any Borrower
Party pursuant to this Agreement and the other Security Documents.


 


“Collateral
Report” means a fully completed and duly executed Collateral Report and
Borrowing Base Certificate delivered by Borrowers to Agent and in the form
attached hereto as Exhibit “B”.


 


“Commitments”
means the Revolving Loan Commitment, the Swing Line Loan Commitment, the Term
Loan Commitment, and the Letter of Credit Commitment.


 


7





















 


“Compliance
Certificate” means a fully completed and duly executed certificate
delivered by Borrowers to Agent and in the form attached hereto as Exhibit “C”.


 


“Consolidated
Basis” means the consolidation of the assets, liabilities, income and
losses, as applicable, of the Borrower Consolidated Group; provided, however,
that there shall be excluded:


 


(A)          KMEX if (i) the
gross revenues of KMEX arising from sales to any Person other than Borrowers
for the trailing twelve (12) months exceeds $2,000,000.00, or (ii) the
Equity Owner’s Equity, as reflected on KMEX’s balance sheet, is more than
$5,000,000.00; and


 


(B)           KMG Italia if (i) the
EBIDA of KMG Italia exceeds 15% of the EBIDA of the Borrower Consolidated Group
(including KMG Italia), or (ii) the Tangible Net Worth of KMG Italia
exceeds 15% of the Tangible Net Worth of the Borrower Consolidated Group
(including KMG Italia).


 


“Credit
Agreement Obligations” means the obligations (including obligations of
performance) and liabilities of any Borrower Party to any Lender Party under
the Loan Documents or any Lender Party Swap Documents of every kind and
description whatsoever, direct or indirect, absolute or contingent, due or to
become due, now existing or hereafter incurred, contracted or arising, or
acquired by any Lender Party from any source, joint or several, liquidated or
unliquidated, regardless of how they arise or by what agreement or instrument
they may be evidenced or whether they are evidenced by any agreement or
instrument, and whether incurred as maker, endorser, surety, guarantor, general
partner, drawer, tort-feasor, indemnitor, account party with respect to a
letter of credit or otherwise, and arising out of or incurred in connection
with the Loans (but specifically excluding the Prudential Obligations), and any
and all extensions and renewals of any of the same, including but not limited
to the obligation:


 


(A)          To pay the principal of
and interest on the Notes in accordance with the respective terms thereof or
hereof, including any and all extensions, modifications, and renewals thereof
and substitutions therefore;


 


(B)           To pay, repay or
reimburse the Lender Parties for all amounts owing hereunder or under any of
the other Loan Documents, including the Reimbursement Obligation and all
Indemnified Losses and Default Costs;


 


(C)           To pay, repay or
reimburse to Lender Parties the Lender Party Swap Obligations; and


 


(D)          To reimburse Lender
Parties, on demand, for all of Lender Parties’ expenses and costs, including
Attorneys’ Fees and expenses of Lender Parties’ counsel, in connection with the
preparation, administration, amendment, modification, or enforcement of this
Agreement and the other Loan Documents, including, without limitation, any
proceeding brought or threatened to enforce payment of any of the obligations
referred to in the foregoing paragraphs (A), (B) and (C).


 


“Credit
Percentage” means, with respect to each Lender, a percentage based on a
fraction, the numerator of which shall be the aggregate principal amount of
Revolving Loan Advances 


 


8





















 


and Term Loan Advances
outstanding at a particular time and owing to such Lender at such time, and the
denominator of which shall be the aggregate principal amount of all Revolving
Loan Advances and Term Loan Advances outstanding at such time and owing to all
the Lenders at such time; provided that in calculating such percentage, the
aggregate principal amount of Swing Line Loan Advances owing to the Swing Line
Lender, the Available Amount of the Letters of Credit, and the aggregate amount
of Letter of Credit Advances owing to Issuing Lender shall, at such time, be
considered to be owed to the Revolving Loan Lenders that purchase (or are
obligated to purchase) Swing Line Loan Advances and Letter of Credit Advances
from the Swing Line Lender and Issuing Lender under the terms of this Agreement
(the Credit Percentages of the Lenders as of the date hereof being as set forth
on the attached Exhibit “D”).


 


“Current
Maturities of Long-Term Indebtedness” means all payments in respect of
Long-Term Indebtedness that are required to be made within one year from the
date of determination, whether or not the obligation to make such payments
would constitute a current Liability of the applicable Person under Generally
Accepted Accounting Principles, excluding, however, any such payment required
to be made on the ultimate maturity date of such Indebtedness.


 


“Default”
means the occurrence of an event described in Section 11.1 hereof
regardless of whether there shall have occurred any passage of time or giving
of notice that would be necessary in order to constitute such event as an Event
of Default.


 


“Default
Costs” means all Indemnified Losses incurred by any Lender Party by reason
of a Default.


 


“Defaulting
Lender” means any Lender that has failed to make any Advance or purchase
its Pro Rata Share of any Swing Line Loan Advance or Letter of Credit Advance
as and when required under the terms of this Agreement.


 


“Default
Rate” means a variable per annum rate of interest equal to the lesser of (1) two
percent (2%) in excess of the highest Interest Rate otherwise payable on any
Loan hereunder, or (2) the maximum rate allowed by applicable Laws.


 


“Deposit
Accounts” means all bank accounts and other deposit accounts and lock boxes
included in the Collateral or established for the benefit of any Lender Party
pursuant to the terms of any of the Loan Documents.


 


“Depreciation
Expense” means the depreciation expense of an applicable Person for the
applicable period (to the extent included in the computation of Net Income),
according to Generally Accepted Accounting Principles.


 


“Dividends”
means dividends and other distributions to the Equity Owners of any applicable
Person on account of owing an Equity Interest.


 


“EBIDA”
means,
with respect to an applicable Person for the applicable period, Net Income,
plus the sum of (without duplication) Interest Expense, Amortization Expense,
Depreciation Expense and all other non-cash charges, all determined in
accordance with Generally Accepted Accounting Principles.


 


9





















 


“EBITDA”
means,
with respect to an applicable Person for the applicable period, Net Income,
plus the sum of (without duplication) Interest Expense, Income Tax Expense,
Amortization Expense, Depreciation Expense and all other non-cash charges, all
determined in accordance with Generally Accepted Accounting Principles.


 


“Eligible Account” means, at any time,
an Account of Borrower that conforms and continues to conform to the following
conditions:


 


(A)          The Account is part of the
Collateral and Collateral Agent’s Lien has been perfected in accordance with
applicable Laws;


 


(B)           All representations and warranties
of Borrower contained in the Loan Documents with respect to such Account are
true and correct in all material respects;


 


(C)           The Account arose from a bona fide
outright sale of Goods by Borrower or from services performed by Borrower in
the Ordinary Course of Business, and such Goods have been shipped to the
appropriate Account Debtor or its designees (or the sale has otherwise been
consummated), or the services have been fully performed for the appropriate Account
Debtor;


 


(D)          The Account is based upon an
enforceable order or contract, written or oral, for Goods shipped or held for
services performed and the same were shipped, held, or performed in accordance
with such order or contract;


 


(E)           The title of Borrower to the Account
is absolute and is not subject to any Lien except Collateral Agent’s Lien;


 


(F)           The amount shown on the books of
Borrower and on any invoice or statement delivered to Agent is owing to
Borrower, less any partial payment that has been made thereon by any Person;


 


(G)           The Account shall be eligible only
to the extent that it is not subject to any claim of reduction, counterclaim,
set off, recoupment, or any claim for credits, allowances, or adjustments by
the Account Debtor because of return, inferior, or damaged goods or
unsatisfactory services, or for any other reason;


 


(H)          The Account Debtor has not returned
or refused to retain, or otherwise notified Borrower of any dispute concerning,
or claimed nonconformity of, any of the Goods or services from the sale of
which the Account arose;


 


(I)            (i) With respect to any Account
generated from other than sales of animal health pesticides or agricultural
chemicals, the Account is due and payable not more than thirty (30) days from
the date of the invoice therefor and is not more than sixty (60) days past due;
and (ii) with respect to any Account generated from sales of animal health
pesticides or agricultural chemicals, the Account is due and payable not more
than ninety (90) days from the date of the invoice therefor and is not more
than sixty (60) days past due.


 


10




















(J)            The Account does not arise out of a contract
with, or order from, a Account Debtor that, by its terms, forbids or makes void
or unenforceable the assignment by Borrower to Agent of the Account arising
with respect thereto;


 


(K)          Borrower has not received any note, trade
acceptance, draft or other instrument with respect to, or in payment of, the
Account nor any Chattel Paper with respect to the Goods giving rise to the
Account, unless, if any such instrument or Chattel Paper has been received,
Borrower immediately notifies Agent and endorses or assigns and delivers the
same to Agent;


 


(L)           Borrower has not received any notice of the
death of the Account Debtor or a partner thereof; nor of the dissolution,
termination of existence, insolvency, business failure, appointment of a
receiver for any part of the property of, assignment for the benefit of
creditors by, or the filing of a petition in bankruptcy, or the commencement of
any proceeding under any Bankruptcy or insolvency laws by or against, the
Account Debtor.  Upon receipt by Borrower
of any such notice, it will immediately give Agent written advice thereof;


 


(M)         The Account Debtor is not a foreign entity;


 


(N)          The Account Debtor is not an Affiliate of
Borrower;


 


(O)          If ten percent (10%) or more of the Accounts
from the Account Debtor do not qualify as Eligible Accounts hereunder (unless
the failure to qualify is solely because of clause (P) immediately
following), none of such Account Debtor’s Accounts qualify as Eligible
Accounts;


 


(P)           To the extent that the total Eligible Accounts
of (i) any Account Debtor other than Intel represent more than ten percent
(10%) of the Eligible Accounts of Borrower at any time, or (ii) Intel
represent more than twenty-five percent (25%) of the Eligible Accounts of
Borrower at any time, such excess shall be deemed to not qualify as Eligible
Accounts; and


 


(Q)          Agent has not deemed such Account ineligible
because of uncertainty about the creditworthiness of the Account Debtor or
because Agent otherwise considers the collateral value thereof to Agent to be
impaired or its ability to realize such value to be insecure.


 


In the event
of any dispute under the foregoing criteria about whether an Account is or has
ceased to be an Eligible Account, the decision of Agent, to be made in Agent’s
discretion, shall control.


 


“Eligible
Assignee” means (i) a Lender (or any other Person that has a
relationship with the applicable Lender whereby Lender directly or indirectly
controls or is controlled by or is under common control with such other
Persons); (ii) a commercial bank organized under the laws of the United
States, or any State thereof, and having combined capital and surplus of at
least $250,000,000.00; (iii) a savings and loan association or savings
bank organized under the laws of the United States, or any State thereof, and
having combined capital and surplus of at least $250,000,000.00; (iv) a
finance company, insurance company or other financial institution or fund
(whether a corporation, partnership, trust or other entity) organized under the
laws of the United States, or any State thereof, that is engaged in making,
purchasing or otherwise investing 


 


11

















 


in commercial loans in the
ordinary course of its business and having combined capital and surplus of at
least $250,000,000.00; and (v) any other Person approved by Agent and
Borrower, such approval not to be unreasonably withheld or delayed provided
that Borrower’s consent shall not be required during the continuance of any Default);
provided, however, that in no event shall any Person constitute an Eligible
Assignee if an assignment to such Person is prohibited by applicable Laws.


 


“Eligible Inventory” means the
Inventory of Borrower which is either raw materials, finished goods or work in process,
valued at the lesser of cost (as established on the FIFO method of accounting)
or fair market value, provided, however, that Agent may consider any of the
following classes of inventory not to be Eligible Inventory:


 


(A)          Inventory which is not part of the Collateral,
or which is part of the Collateral but with respect to which Collateral Agent’s
Lien has not been perfected in accordance with applicable Laws.


 


(B)           Inventory with respect to which any
representation or warranty contained in any of the Loan Documents has been
breached.


 


(C)           Inventory consisting of “perishable
agricultural commodities” within the meaning of the Perishable Agricultural
Commodities Act of 1930, as amended, and the regulations thereunder, or on
which a Lien has arisen or may arise in favor of agricultural producers under
comparable state or local laws;


 


(D)          Inventory located on leaseholds if the value of
Inventory at any particular leasehold location is more than $500,000.00, if the
lessor has not entered into a consent and agreement providing Agent with the
right to receive notice of default, the right to repossess such Inventory at
any time, and such other rights as may be required by Agent;


 


(E)           Inventory to which the title of Borrower is not
absolute, or which is subject to any prior Lien, except Collateral Agent’s
Lien;


 


(F)           Inventory that is obsolete, unusable or
otherwise unavailable for sale;


 


(G)           Inventory consisting of promotional, marketing,
packaging or shipping materials and supplies;


 


(H)          Inventory that fails to meet, in all material
respects, all standards imposed by any governmental agency, or department or
division thereof, having regulatory authority over such Inventory or its use
and sale;


 


(I)            Inventory that is subject to any licensing,
patent, royalty, trademark, trade name or copyright agreement with any Third
Person from whom Borrower has received notice of a dispute in respect of any
such agreement;


 


(J)            Inventory located outside the United States
(except as may be approved by Agent in its discretion);


 


12

















 


(K)          Inventory with a value at any particular
location of more than $500,000.00 that is not in the possession of or under the
sole control of Borrower, unless all Persons exercising dominion or control
over such Inventory shall have entered into such agreements as may be required
by Agent, including agreements providing for the right of Agent to repossess
such Inventory at any time and such other rights as may be required by Agent;


 


(L)           Inventory in transit (unless otherwise
determined to be eligible by Agent in its discretion after a request for such
determination from Borrower); and


 


(M)         Inventory returned or repossessed by Account
Debtors other than Inventory that is resalable in Borrower’s Ordinary Course of
Business.


 


Additionally, Agent may exclude from Eligible Inventory all or a
proportionate part of any particular portion of Borrower’s Inventory which
Agent deems ineligible because its market value has declined or because Agent
otherwise considers the collateral value thereof to Agent to be impaired or its
ability to realize such value to be insecure.


 


“Environmental
Laws” means all Laws of any Jurisdiction relating to the governance or
protection of the environment, including without limitation, the Comprehensive
Environmental Response Compensation and Liability Act of 1980 (“CERCLA”), as
amended (42 U.S.C. Sections 9601, et  seq.), the Hazardous
Materials Transportation Act, as amended (49 U.S.C. Sections 1801, et  seq.),
the Resource Conservation and Recovery Act (“RCRA”), as amended (42 U.S.C.
Sections 6901, et  seq.), the Clean Water Act, as amended (42
U.S.C. Sections 7401, et  seq.), the Toxic Substances Control Act,
as amended (15 U.S.C. Sections 2601, et  seq.).


 


“Equity
Agreements” means any and all agreements of whatever kind by, between and
among Borrower and the Equity Owners of Borrower, and relating to Borrower’s
Equity Interests.


 


“Equity
Interests” means any and all ownership or other equitable interests in the
applicable Person, including any interest represented by any capital stock,
membership interest, partnership interest or similar interest, but specifically
excluding any interest of any Person solely as a creditor of the applicable
Person.


 


“Equity
Owner” means any Person owning an Equity Interest.


 


“Equity
Owners’ Equity” means, at any time, the sum of the following accounts set
forth in a balance sheet of an applicable Person, adjusted to U.S. Dollars by
means of applicable foreign currency exchange rates and prepared in accordance
with Generally Accepted Accounting Principles:


 


(A)          The
par or stated value of all outstanding Equity Interests;


 


(B)           Capital surplus; and


 


(C)           Retained earnings.


 


13

















 


“ERISA”
means the Federal Employee Retirement Income Security Act of 1974, as amended
and in effect from time to time, and the regulations and published
interpretations thereof.


 


“ERISA
Affiliate” means any Person that would be deemed to be under “common
control” with, or a member of the same “controlled group” as, Borrower or any
of its subsidiaries, within the meaning of the Internal Revenue Code (as
applicable to Plans) or ERISA.


 


“ERISA
Event” means any of the following with respect to a Plan: (i) a
Reportable Event, (ii) a complete or partial withdrawal by Borrower or any
ERISA Affiliate from a Plan that results in liability under ERISA, or the
receipt by Borrower or any ERISA Affiliate of notice from a Multiemployer Plan
that it is in reorganization or insolvency pursuant to ERISA or that it intends
to terminate or has terminated under ERISA, (iii) the distribution by
Borrower or any ERISA Affiliate under ERISA of a notice of intent to terminate
any Plan or the taking of any action to terminate any Plan, (iv) the
commencement of proceedings by the PBGC under ERISA for the termination of, or
the appointment of a trustee to administer, any Plan, or the receipt by
Borrower or any ERISA Affiliate of a notice from any Multiemployer Plan that
such action has been taken by the PBGC with respect to such Multiemployer Plan,
(v) the institution of a proceeding by any fiduciary of any Multiemployer
Plan against Borrower or any ERISA Affiliate to enforce Section 515 of
ERISA, which is not dismissed within thirty (30) days, (vi) the imposition
upon Borrower or any ERISA Affiliate of any liability under Title IV of ERISA,
other than for PBGC premiums due but not delinquent under ERISA, or the
imposition or threatened imposition of any Lien upon any assets of Borrower or
any ERISA Affiliate as a result of any alleged failure to comply with the
Internal Revenue Code or ERISA in respect of any Plan, (vii) the engaging
in or otherwise becoming liable for a nonexempt Prohibited Transaction by
Borrower or any ERISA Affiliate, (viii) a violation of the applicable
requirements of Section 404 or 405 of ERISA or the exclusive benefit rule under
Section 401(a) of the Internal Revenue Code by any fiduciary of any
Plan for which Borrower or any of its ERISA Affiliates may be directly or
indirectly liable, or (ix) the adoption of an amendment to any Plan that,
pursuant to the Internal Revenue Code or ERISA, would result in the loss of a
tax-exempt status of the trust of which such Plan is a part of, and Borrower or
an ERISA Affiliate fails to timely provide security to such Plan in accordance
with the provisions of ERISA.


 


“Event of
Default” means the occurrence of an event described in Section 11.1
hereof provided that there shall have occurred any passage of time or giving of
notice that would be necessary in order to constitute such event as an Event of
Default under Section 11.1.


 


“Excluded
Collateral” (i) assets of Borrower to the extent the assignment
thereof is restricted by a contract or applicable Law and would not otherwise
be permitted by Section 9-408 of the UCC; (ii) Borrower’s Real
Property located in Tuscaloosa, Alabama; (iii) Borrower’s Interest in any
leased Real Property; (iv) until such time as Borrower shall have executed
and delivered the Patent and Trademark Security Agreement as provided for in Section 9.18
of this Agreement, Borrower’s patents, trademarks, trade names, service marks
and copyrights, and all applications therefor and licenses thereof (provided
that no such assets shall be excluded to the extent that a Lien in such assets
may be perfected under the Uniform Commercial Code of an applicable state
Jurisdiction); and (v) the Equity Interests of KMEX and KMG Italia to the
extent that the same are not included as part of the Pledged Collateral.


 


14

















 


“Executive
Order No. 13224” means Executive Order No. 13224 on Terrorist
Financing, effective September 24, 2001, as the same has been, or shall
hereafter be, renewed, extended, amended or replaced.


 


“Existing
Credit Agreement” means that certain Credit Agreement dated as of May 16,
2007 among KMG Chemicals, KMG-Bernuth and Wachovia, as amended from time to
time.


 


“Existing
Indebtedness” means Indebtedness of the Borrower Consolidated Group (i) as
reflected on the Most Recent Financial Statements or the Closing Balance Sheet,
and which Indebtedness is not being paid or defeased with the proceeds of the
Loans at Closing; and (ii) incurred in the Ordinary Course of Business of
a Member of the Borrower Consolidated Group subsequent to the date of the Most
Recent Financial Statements, and which Indebtedness is not for borrowed money.


 


“Existing
Investments” means Investments of the Borrower Consolidated Group (i) as
reflected on the Most Recent Financial Statements or the Closing Balance Sheet;
and (ii) made subsequent to the date of the Most Recent Financial
Statements, and which Investments would otherwise be Permitted Investments.


 


“Extraordinary
Receipt” means any consideration received by or paid to or for the account
of an applicable Person not in the Ordinary Course of Business, including,
without limitation, proceeds from dispositions of assets outside the Ordinary
Course of Business, tax refunds, pension plan reversions, proceeds of insurance
(other than proceeds of business interruption insurance to the extent such
proceeds constitute compensation for lost earnings), condemnation awards (and
payments in lieu thereof) and indemnity payments.


 


“Federal
Funds Rate” means, for any period, a fluctuating per annum interest rate
(rounded upwards, if necessary, to the nearest 1/100 of one percentage point)
equal for each day during such period to the weighted average of the rates on
overnight federal funds transactions with members of the Federal Reserve System
arranged by federal funds brokers, as published for such day (or, if such day
is not a Business Day, for the next preceding Business Day) by the Federal
Reserve Bank of New York, or if such rate is not so published for any day that
is a Business Day, the average of the quotations for such day on such transactions
received by Agent from three federal funds brokers of recognized standing
selected by Agent.


 


“Fees”
means the Letter of Credit Facility Fee, the Unused Fee, and the fees owing
under the Wachovia Fee Letter.


 


“Financial
Statements” means the Most Recent Financial Statements and the income
statements, balance sheets and other financial statements required to be
delivered by Borrowers in accordance with this Agreement.


 


“Financing
Statements” means the UCC-1 financing statements (including any amendments
and continuations) and UCC-3 financing statements required hereunder or under
any other Security Document.


 


“Fiscal
Year” means a twelve-month period of time commencing on the first day of
August.


 


15

















 


“Fiscal
Year-End” means the end of each Fiscal Year.


 


“Fixed
Charge Coverage” means the quotient which is obtained by dividing (i) the
sum of EBIDA for the 12-month period preceding the applicable date, plus the
Lease and Rental Expense for the 12-month period preceding the applicable date,
less Dividends for the 12-month period preceding the applicable date, by (ii) the
sum of the Current Maturities of Long-Term Indebtedness as of the applicable
date, plus the Interest Expense and Lease and Rental Expense for the 12-month
period preceding the applicable date.


 


“Foreign Subsidiary”
means a Subsidiary that is organized under the Laws of a Jurisdiction other
than the United States of America or any state thereof or the District of
Columbia.


 


“Funded Debt” means, as of an applicable time,
without duplication, (a) all of the Indebtedness of the applicable Person
which is Indebtedness (i) for borrowed money, or (ii) in respect of
any Capitalized Lease or the deferred purchase price of property, whether or
not interest-bearing and whether or not, in accordance with Generally Accepted
Accounting Principles, classified as a current Liability or Long-Term
Indebtedness at such date, and whether secured or unsecured, excluding,
however, (b) Indebtedness that is accounts payable and accrued expenses
and other similar current Liabilities incurred in such Person’s Ordinary Course
of Business.


 


“Generally
Accepted Accounting Principles” means generally accepted principles of
accounting in effect from time to time in the United States applied in a manner
consistent with those used in preparing such financial statements as have
heretofore been furnished to Agent by the applicable Person.


 


“Governing
Body” means the board of directors of a Person (or any Person or group of
Persons exercising similar authority).


 


“Governmental
Approvals” means all authorizations, consents, approvals, licenses and
exemptions of, registrations and filings with, and reports to, any Governmental
Authority.


 


“Governmental
Authority” means any nation or government and any political subdivision
thereof, and any entity exercising executive, legislative, judicial,
regulatory, or administrative functions of or pertaining thereto, which has or
asserts jurisdiction over Lender Party, Borrower, or any property of any of
them.


 


“Hazardous
Materials” and “Hazardous Substances” means “hazardous materials”
and “hazardous substances” as defined under any applicable Environmental Law.


 


“Improvements”
means the “Improvements” as defined in the Mortgages.


 


“Income Tax
Expense” means the income tax expense of an applicable Person for the
applicable period (to the extent included in the computation of Net Income),
determined in accordance with Generally Accepted Accounting Principles.


 


16

















 


“Indebtedness”
means, with respect to any Person, all items of indebtedness, obligation or
liability, whether matured or unmatured, liquidated or unliquidated, direct or
contingent, joint or several, including, but without limitation or duplication:


 


(A)          All
obligations of such Person for borrowed money;


 


(B)           All
obligations of such Person evidenced by bonds, debentures, notes or similar
instruments, or upon which interest payments are customarily made;


 


(C)           All
indebtedness guaranteed, directly or indirectly, in any manner, or endorsed
(other than for collection or deposit in the Ordinary Course of Business) or
discounted with recourse;


 


(D)          All
indebtedness in effect guaranteed, directly or indirectly, through agreements,
contingent or otherwise:


 


(1)           To purchase such
indebtedness; or


 


(2)           To purchase, sell or
lease (as lessee or lessor) property, products, materials or supplies or to
purchase or sell services, primarily for the purpose of enabling the debtor to
make payment of such indebtedness or to assure the owner of the indebtedness
against loss; or


 


(3)           To supply funds to or
in any other manner invest in the debtor;


 


(E)           All indebtedness secured by (or which the holder of such indebtedness
has a right, contingent or otherwise, to be secured by) any Lien upon property
owned or acquired subject thereto, whether or not the liabilities secured
thereby have been assumed; and


 


(F)           All indebtedness incurred as the lessee of goods or services under
leases that, in accordance with Generally Accepted Accounting Principles,
should be reflected on the lessee’s balance sheet.


 


“Indemnified
Losses” means all damages, dues, penalties, fines, costs, amounts paid in
settlement, taxes, losses, expenses, and fees, including court costs and
Attorneys’ Fees and expenses.


 


“Intercreditor
Agreement” means that certain Intercreditor and Collateral Agency Agreement
of even date herewith among Lenders, Agent, the Prudential Note Holders and
Collateral Agent, as amended from time to time.


 


“Interest
Expense” means the interest expense of an applicable Person for the
applicable period (to the extent included in the computation of Net Income),
determined in accordance with Generally Accepted Accounting Principles.


 


“Interest
Payment Due Date” means (i) with respect to any payment of interest
accruing at the Adjusted LIBOR Market Index Rate or the Adjusted ABR Rate, the
last day of each calendar month during the term of this Agreement; and (ii) with
respect to any payment of 


 


17

















 


interest accruing on any LIBOR
Rate Borrowing, the date of expiration of the applicable LIBOR Rate Interest
Period.


 


“Interest
Rate” means the actual interest rate at which all or any portion of the
outstanding principal amount of a Note bears interest from time to time during
the term of such Note.


 


“Investment”
means any loan or advance to any Person, any purchase or other acquisition of
any capital stock or other ownership or profit interest, warrants, rights,
options, obligations or other securities of such Person, any capital
contribution to such Person or any other investment in such Person.


 


“Issuing
Lender” means Wachovia and any other Person that becomes the Issuing Lender
with respect to a Letter of Credit pursuant to the terms of this Agreement.


 


“Jurisdiction”
means each and every nation or any political subdivision thereof.


 


“KMEX”
means KMG de Mexico S.A. de C.V., organized under the Laws of Mexico.


 


“KMEX Plant”
means the operating facility owned by KMEX and located in Matamoras, Mexico.


 


“KMG-Bernuth”
means KMG-Bernuth, Inc., a Delaware corporation.


 


“KMG
Chemicals” means KMG Chemicals, Inc., a Texas corporation.


 


“KMG ECI”
means KMG Electronic Chemicals, Inc., a Texas corporation.


 


“KMG Italia”
means KMG Italia S.r.l., a company duly organized and existing under the laws
of Italy.


 


“Land”
means the “Land” as defined in the Mortgages.


 


“Laws”
means each and all laws, treaties, ordinances, statutes, rules, regulations,
orders, injunctions, writs or decrees of any Governmental Authority, or any
court or similar entity established by any Governmental Authority, whether now
in effect or hereafter enacted.


 


“Lease and
Rental Expense” means the lease and rental expense of an applicable Person
for the applicable period (to the extent included in the computation of Net
Income), determined in accordance with Generally Accepted Accounting
Principles.


 


“Lender
Parties” means Agent, Collateral Agent, Lenders, Swing Line Lender, Issuing
Lender and any Lender Party (or an Affiliate of a Lender Party) that is now or
hereafter becomes a party to any Lender Party Swap Document.


 


“Lender
Party Swap Documents” means any Swap Documents entered into between any
Borrower Party and any Lender Party and relating to the Loans, and which Swap
Documents are approved by Agent.


 


18

















 


“Lender
Party Swap Obligations” means the obligations (including obligations of
performance) and liabilities of any Borrower Party to any Lender Party of every
kind and description whatsoever, direct or indirect, absolute or contingent,
due or to become due, now existing or hereafter incurred, contracted or
arising, or acquired by Lender Party from any source, joint or several,
liquidated or unliquidated, regardless of how they arise or by what agreement
or instrument they may be evidenced or whether they are evidenced by any
agreement or instrument, and whether incurred as counterparty, maker, endorser,
surety, guarantor, general partner, drawer, tort-feasor, indemnitor, account
party with respect to a letter of credit or otherwise, and arising out of,
incurred pursuant to or in connection with any Lender Party Swap Document, and
any and all extensions and renewals of any of the same.


 


“Lenders”
means those lenders executing this Agreement as Lenders, and any other Person
that shall become a Lender hereunder pursuant to the terms hereof.


 


“Letter of
Credit” means each letter of credit issued pursuant to Section 4.1 of
this Agreement.


 


“Letter of
Credit Advances” means all amounts owing to Issuing Lender under any Letter
of Credit Agreement, including, without limitation, all drafts paid by Issuing
Lender under any Letter of Credit and with respect to which and to the extent
that Issuing Lender has not been reimbursed, and all amounts owing to Lenders
who purchase their Pro Rata Share of Letter of Credit Advances in accordance
with this Agreement.


 


“Letter of
Credit Agreement” means this Agreement and any other agreement of Borrower
with Issuing Lender and relating to Borrower’s obligation to reimburse Issuing
Lender with respect to amounts paid under any Letter of Credit or the granting
of a Lien to Agent to secure any such obligation, together with any and all
extensions, revisions, modifications or amendments at any time made thereto.


 


“Letter of
Credit Commitment” means the lesser of (i) Ten Million and 00/100
Dollars ($10,000,000.00); or (ii) the Unused Revolving Loan Commitment.


 


“Letter of
Credit Facility Fee” means an annual fee payable by Borrowers to Issuing
Lender with respect to each Letter of Credit, in an amount equal to (i) the
Stated Amount of such Letter of Credit, multiplied by (ii) the LIBOR
Margin at the time of issuance or renewal (as applicable) of such Letter of
Credit (but not less than $500.00), such fee to be payable upon the issuance of
such Letter of Credit and upon each anniversary date of the issuance of such
Letter of Credit, so long as the same is outstanding.


 


“Liabilities”
means all Indebtedness that, in accordance with Generally Accepted Accounting
Principles, should be classified as liabilities on a balance sheet of a Person.


 


19

















 


“LIBOR
Margin” means (i) until the delivery of the first Compliance
Certificate required hereunder and the adjustment of the LIBOR Margin as provided
herein, two and one-quarter percent (2.25%), and (ii) thereafter, a
percentage based upon the ratio of Funded Debt to EBITDA of the Borrower
Consolidated Group, as follows:


 


	
  Ratio of Funded Debt to EBITDA

  	
   

  	
  LIBOR Margin

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Equal to or
  greater than 3.0 to 1.0

  	
   

  	
  2.75

  	
  %

  
	
  Equal to or
  greater than 2.5 to 1.0, but less than 3.0 to 1.0

  	
   

  	
  2.50

  	
  %

  
	
  Equal to or
  greater than 2.0 to 1.0, but less than 2.5 to 1.0

  	
   

  	
  2.25

  	
  %

  
	
  Equal to or
  greater than 1.5 to 1.0, but less than 2.0 to 1.0

  	
   

  	
  2.00

  	
  %

  
	
  Less than
  1.5 to 1.0

  	
   

  	
  1.75

  	
  %

  



 


“LIBOR
Market Index Rate” means, for any day, the rate for 1 month U.S. dollar
deposits as reported on Reuters Screen LIBOR01 Page (or any successor
page) as of approximately 11:00 a.m., London time, on such day, or if such
day is not a London business day, then the immediately preceding London
business day (or if not so reported, then as determined by Agent from another
recognized source or interbank quotation).


 


“LIBOR
Market Index Rate Borrowing” means a borrowing bearing interest based at a
rate determined by reference to the LIBOR Market Index Rate.


 


“LIBOR Rate”
means, for the applicable LIBOR Rate Interest Period for each LIBOR Rate
Borrowing comprising part of the same borrowing (including conversions,
extensions and renewals), a per annum interest rate determined pursuant to the
following formula:


 


	
  LIBOR Rate =

  	
   

  	
  London
  Interbank Offered Rate

  
	
   

  	
   

  	
  1 - LIBOR Reserve Percentage

  



 


“LIBOR Rate
Borrowing” means a borrowing bearing interest based at a rate determined by
reference to the LIBOR Rate, each such borrowing to be in the principal amount
of at least $200,000.00 or any larger amount which is an even multiple of
$100,000.00.


 


“LIBOR Rate
Interest Period” means, as to each LIBOR Rate Borrowing, a period of one
month, two months or three months, as selected pursuant to a Notice of
Borrowing or a Notice of Conversion/Continuation, commencing on the date of the
borrowing (including continuations, conversions and extensions thereof);
provided, however, (i) if any LIBOR Rate Interest Period would end on a
day which is not a Business Day, such LIBOR Rate Interest Period shall be
extended to the next succeeding Business Day (except that where the next
succeeding Business Day falls in the next succeeding calendar month, then on
the next preceding Business Day), (ii) no LIBOR Rate Interest Period shall
extend beyond the maturity date of the applicable Loan, and (iii) any
LIBOR Rate Interest Period with respect to a LIBOR Rate Borrowing that begins
on the last Business Day of a calendar month (or on a day for which there is no
numerically corresponding day in the calendar month at the end of such LIBOR
Rate Interest Period) shall end on the last Business Day of the relevant
calendar month at the end of such LIBOR Rate Interest Period.


 


20

















 


“LIBOR
Reserve Percentage” means for any day, that percentage (expressed as a
decimal) which is in effect from time to time under Regulation D of the Board
of Governors of the Federal Reserve System (or any successor), as such
regulation may be amended from time to time or any successor regulation, as the
maximum reserve requirement (including, without limitation, any basic,
supplemental, emergency, special, or marginal reserves) applicable with respect
to Eurocurrency liabilities as that term is defined in Regulation D (or against
any other category of liabilities that includes deposits by reference to which
the interest rate of LIBOR Rate Borrowings is determined), whether or not
Lender Party has any Eurocurrency liabilities subject to such reserve
requirement at that time.  LIBOR Rate
Borrowings shall be deemed to constitute Eurocurrency liabilities and as such
shall be deemed subject to reserve requirements without benefits of credits for
proration, exceptions or offsets that may be available from time to time to
Lender Party.  The LIBOR Rate shall be
adjusted automatically on and as of the effective date of any change in the
LIBOR Reserve Percentage.


 


“Lien”
means any mortgage, pledge, encumbrance, charge, security interest, lien,
assignment or other encumbrance, including any conditional sale agreement or
other title retention agreement.


 


“Liquid
Assets” means, as of an applicable time, the following, so long as the same
is not subject to any Lien (other than Collateral Agent’s Lien) nor subject to
any restriction on transferability, whether imposed under applicable Law, by
agreement, or otherwise: (i) marketable direct obligations issued by, or
unconditionally guaranteed by, the United States Government or issued by any
agency thereof and backed by the full faith and credit of the United States, in
each case maturing within one year from the applicable time; (ii) certificates
of deposit and time deposits having maturities of six months or less from the
applicable time and issued by any commercial bank organized under the laws of
the United States of America or any state thereof having combined capital and
surplus of not less than $500,000,000; (iii) commercial paper of an issuer
rated at least A-1 by Standard & Poor’s Ratings Services (“S&P”)
or P-1 by Moody’s Investor’s Service, Inc. (“Moody’s”), or carrying an
equivalent rating by a nationally recognized rating agency, if both of the two
named rating agencies cease publishing ratings of commercial paper issuers
generally, and maturing within six months from the applicable time; (iv) securities
with maturities of one year or less from the applicable time and issued or
fully guaranteed by any state, commonwealth or territory of the United States,
by any political subdivision or taxing authority of any such state,
commonwealth or territory or by any foreign government, the securities of which
state, commonwealth, territory, political subdivision, taxing authority or
foreign government (as the case may be) are rated at least A by S&P or A by
Moody’s; (v) securities with maturities of six months or less from the
applicable time and backed by standby letters of credit by Lender or any
commercial bank satisfying the requirements of clause (ii) of this
definition; (vi) shares of money market mutual or similar funds which
invest exclusively in assets satisfying the requirements of clauses (i) through
(iii) of this definition; and (vii) publicly traded securities listed
on a nationally recognized securities exchange in the United States.


 


“Loan
Documents” means this Agreement, the Notes, the Security Documents, the
Letter of Credit Agreements, the Closing Certificates, and any and all other
agreements, documents and instruments of any kind executed or delivered in
connection with, or evidencing, securing, guaranteeing or relating to, the
Loans, whether heretofore, simultaneously herewith or hereafter 


 


21

















 


delivered,
together with any and all extensions, revisions, modifications or amendments at
any time made to any of the foregoing (but specifically excluding any Lender
Party Swap Documents).


 


“Loans”
means the Revolving Loan, the Swing Line Loan, the Term Loan, and the Letters
of Credit.


 


“London
Interbank Offered Rate” means, for any LIBOR Rate Borrowing for any LIBOR
Rate Interest Period therefor, either (a) the rate of interest per annum
determined by Agent (rounded upward to the nearest 1/100 of 1%) appearing on
the Reuters Screen LIBOR01 (or any successor page) as the London interbank
offered rate for deposits in Dollars at approximately 11:00 A.M. (London
time), on the second full Business Day preceding the first day of such LIBOR
Rate Interest Period, and in an amount approximately equal to the amount of the
LIBOR Rate Borrowing and for a period approximately equal to such LIBOR Rate
Interest Period, (b) if such rate is for any reason not available, the
rate of interest per annum determined by Agent (rounded upward to the nearest
1/100 of 1%) appearing on Reuters Screen LIBO page as the London interbank
offered rate for deposits in Dollars at approximately 11:00 A.M. (London
time), on the second full Business Day preceding the first day of such LIBOR
Rate Interest Period, and in an amount approximately equal to the amount of the
LIBOR Rate Borrowing and for a period approximately equal to such LIBOR Rate
Interest Period (provided, however, if more than one rate is specified on
Reuters Screen LIBO page, the applicable rate shall be the arithmetic mean of
all such rates (rounded upwards, if necessary to the nearest 1/100 of 1%)), or (c) if
neither of such rates is for any reason available, the rate per annum equal to
the rate at which Agent or its designee is offered deposits in Dollars at or
about 11:00 A.M. (London time), two Business Days prior to the beginning
of such LIBOR Rate Interest Period in the interbank eurodollar market where the
eurodollar and exchange operations in respect of its LIBOR Rate Borrowings are
then being conducted for settlement in immediately available funds, for delivery
on the first day of such LIBOR Rate Interest Period for the number of days
comprised therein, and in an amount comparable to the amount of the LIBOR Rate
Borrowing to be outstanding during such LIBOR Rate Interest Period.


 


“Long-Term
Indebtedness” means at any date any Indebtedness which matures (or the
maturity of which may at the option of the applicable Person be extended such
that it matures) more than one year after such date.


 


“Material
Adverse Change” means the occurrence of an event giving rise to a Material
Adverse Effect.


 


“Material
Adverse Effect” means a material adverse effect on (a) the business,
financial condition, operations or properties of any Borrower Party; (b) the
rights and remedies of Lender Party under any Loan Document, (c) the ability
of any Borrower Party to perform its obligations under any Loan Document to
which it is or is to be a party, or (d) the priority of Collateral Agent’s
Lien.


 


“Material
Contract” means any contract or agreement (other than contracts or
agreements with respect to Asset Acquisitions) to which Borrower is a party, by
which Borrower or its properties are bound, or to which Borrower is subject and
which contract or agreement (i) 


 


22

















 


pursuant to
its terms provides for payments or receipts by Borrower which might reasonably
be expected to exceed $5,000,000.00 during any Fiscal Year; or (ii) if on
account of any breach or termination thereof, would reasonably be expected to
cause a Material Adverse Effect.


 


“Mortgaged
Property” means the “Mortgaged Property” as defined in the Mortgages.


 


“Mortgaged
Property Documents” means (i) the Assigned Leases; (ii) any and
all other agreements entered into by Borrower with any Person relating to the
Mortgaged Property; (iii) any and all Governmental Approvals with respect
to the Mortgaged Property; and (iv) any and all operating, service,
supply, and maintenance contracts with respect to the Mortgaged Property.


 


“Mortgages”
means (i) that certain Deed of Trust and Security Agreement of even date
herewith executed by KMG ECI in favor of Collateral Agent, with respect to the
Mortgaged Property located in Pueblo County, Colorado; and (ii) that
certain Mortgage and Security Agreement of even date herewith executed by
KMG-Bernuth in favor of Collateral Agent, with respect to the Mortgaged
Property located in Doniphan County, Kansas, and includes any and all
extensions, revisions, modifications or amendments at any time made to any of
the foregoing.


 


“Most
Recent Financial Statements” means the audited balance sheet and income
statement of Borrowers dated as of July 31, 2007, as supplemented by
management-prepared financial statements dated as of each Quarter-End through
the Quarter-End of October 31, 2007.


 


“Net Cash
Proceeds” means (i) in the case of any Casualty or Condemnation Event,
the aggregate cash proceeds of insurance, condemnation awards and other
compensation received by Borrower in respect of such Casualty or Condemnation
Event less (x) reasonable fees and expenses incurred by Borrower in
connection therewith, (y) contractually required repayments of
Indebtedness to the extent secured by Liens on the property subject to such
Casualty or Condemnation Event, and (z) any income or transfer taxes paid
or payable by Borrower as a result of such Casualty or Condemnation Event; and (ii) in
the case of any Asset Disposition, the aggregate cash payments received by
Borrower in connection therewith, less (x) reasonable fees and expenses
incurred by Borrower in connection therewith, (y) Indebtedness to the
extent the amount thereof is secured by a Lien on the property that is the
subject of such Asset Disposition and the transferee of (or holder of the Lien
on) such property requires that such Indebtedness be repaid as a condition to such
Asset Disposition, and (z) any income or transfer taxes paid or payable by
Borrower as a result of such Asset Disposition.


 


“Net Income”
means the net income of an applicable Person for the applicable period as
determined in accordance with Generally Accepted Accounting Principles, but
excluding for purposes of determining any financial ratios under this
Agreement, all Extraordinary Receipts and any Income Tax Expense on such
Extraordinary Receipts and any tax deductions or credits on account of such Extraordinary
Receipts.


 


“Notes”
means the Revolving Notes, the Swing Line Note, and the Term Notes.


 


“Notice of
Borrowing” means a notice from a Borrower’s Representative in form and
substance satisfactory to Agent (and, in the case of a Swing Line Loan Advance,
in form and substance satisfactory to Swing Line Lender), to be made by
telephone and confirmed in writing, specifying therein the information as may
be reasonably required by Agent (and, in the case of a 


 


23

















 


Swing Line
Loan Advance, as may be reasonably required by Swing Line Lender) with respect
to any borrowing under this Agreement, such Notice of Borrowing to be
substantially in the form attached hereto as Exhibit “E”.


 


“Notice of
Conversion/Continuation” means a notice from a Borrower’s Representative in
form and substance satisfactory to Agent, such Notice of
Conversion/Continuation to be substantially in the form attached hereto as Exhibit “F”.


 


“Notice of
Funding” means a notice from Agent to Revolving Loan Lenders, to be made by
telephone and confirmed in writing, specifying therein the information as may
be reasonably required by Revolving Loan Lenders with respect to any Revolving
Loan Borrowing under this Agreement, such Notice of Funding to be substantially
in the form attached hereto as Exhibit “G”.


 


“Notice of
Issuance” means a notice from Borrower to Agent and Issuing Lender to be
made by telephone and confirmed in writing, specifying therein the information
as may be reasonably required by Agent and Issuing Lender with respect to the
issuance of any Letter of Credit under this Agreement.


 


“Ordinary
Course of Business” means an action taken by a Person only if:


 


(A)          Such
action is consistent with the past practices of such Person and is taken in the
ordinary course of the normal day-to-day operations of such Person; and


 


(B)           Such
action is not required to be authorized by the Governing Body of such Person
under applicable Laws.


 


“Organizational
Documents” means (i) the articles of incorporation and the bylaws of a
corporation, (ii) the partnership agreement and any statement of
partnership of a general partnership, (iii) the limited partnership
agreement and the certificate of limited partnership of a limited partnership, (iv) the
articles of organization and the operating agreement of a limited liability
company, (v) any charter or similar document adopted or filed in
connection with the creation, formation, or organization of a Person, and (vi) any
amendment to any of the foregoing.


 


“Permitted
Acquisition” means:


 


(A)          The
Acquisition being made pursuant to the Air Products APA Documents;


 


(B)           Any
Acquisition if the total consideration paid or payable is less than
$15,000,000.00 and if (i) Borrower gives Agent not less than ten (10) days
prior written notice of such Acquisition; (ii) no later than thirty (30)
days after the Acquisition, Borrower shall have executed and delivered such
documentation (if any) as may be required by Agent so that Collateral Agent
shall have a first Lien with respect to any assets acquired in connection with
such Acquisition (other than real property); and (iii) no Default shall
have occurred and be continuing at the time of the consummation of such
Acquisition or would exist immediately after such Acquisition;


 


24
















 


(C)           Any
Acquisition made by any Borrower if the total consideration paid or payable is
equal to or greater than $15,000,000.00 and if (i) Borrower gives Agent
not less than thirty (30) days prior written notice of such Acquisition, which
written notice shall be accompanied by a pro-forma compliance certificate
demonstrating that, on a pro-forma basis, after giving effect to the
Acquisition, such Acquisition would not give rise to a Default as of the
consummation of the Acquisition, or during the one-year period following the
consummation of such Acquisition; (ii) Agent consents to such Acquisition
(and in granting or denying such consent, Agent may consider, among other
things, whether (x) the business acquired is a Permitted Line of Business;
(y) immediately after the Acquisition, the business so acquired (and the
assets constituting such business) shall be owned and operated by Borrower; (z) immediately
after the Acquisition, Borrower shall have executed and delivered such
documentation (if any) as may be required by Agent so that Collateral Agent
shall have a first Lien with respect to any assets acquired in connection with
such Acquisition (other than real property with a value of less than
$1,000,000.00); and provided that in any event Agent may withhold such consent
if any Default shall have occurred and be continuing at the time of the
consummation of such Acquisition or would exist immediately after such
Acquisition; and


 


(D)          Any
Acquisition made by any Member of the Borrower Consolidated Group (other than a
Borrower), whether in a single transaction or a series of related transactions,
if the total consideration paid or payable is equal to or greater than
$15,000,000.00 and if (i) Borrower gives Agent not less than thirty (30)
days prior written notice of such Acquisition, which written notice shall be
accompanied by a pro-forma compliance certificate demonstrating that, on a
pro-forma basis, after giving effect to the Acquisition, such Acquisition would
not give rise to a Default as of the consummation of the Acquisition, or during
the one-year period following the consummation of such Acquisition; and (ii) Agent
consents to such Acquisition (and in granting or denying such consent, Agent
may consider, among other things, whether the business acquired is a Permitted
Line of Business); and provided that in any event Agent may withhold such
consent if any Default shall have occurred and be continuing at the time of the
consummation of such Acquisition or would exist immediately after such
Acquisition.


 


“Permitted
Indebtedness” means:


 


(A)          The
Credit Agreement Obligations;


 


(B)           The
Prudential Obligations;


 


(C)           The
Existing Indebtedness;


 


(D)          Any
Indebtedness arising under any Swap Document entered into as a result of the
compliance with any affirmative covenant of any Borrower Party set forth in any
Loan Document;


 


(E)           Indebtedness
incurred in the Ordinary Course of Business of the Borrower Consolidated Group
and not incurred through the borrowing of money, provided that such
Indebtedness is either Unsecured Indebtedness or Indebtedness secured by a
Permitted Lien;


 


(F)           Indebtedness
of any Member of the Borrower Consolidated Group owed (i) to any Member of
the Borrower Consolidated Group (other than Borrower) and (ii) to 


 


25

















 


Borrower so long as the same
constitutes a Permitted Investment by Borrower under clause (ii) of clause
(F) of the definition of Permitted Investment; and


 


(G)           Indebtedness
(other than Indebtedness specified in clauses (A) through (F) above)
incurred by any Member of the Borrower Consolidated Group in an aggregate
amount not to exceed $15,000,000 at any time outstanding.


 


“Permitted
Investments” means:


 


(A)          Liquid
Assets;


 


(B)           Purchases
and acquisitions of inventory, supplies, materials and equipment in the
Ordinary Course of Business;


 


(C)           Investments
consisting of loans and advances to employees for reasonable travel, relocation
and business expenses in the Ordinary Course of Business or prepaid expenses
incurred in the Ordinary Course of Business;


 


(D)          Without
duplication, Investments consisting of Permitted Indebtedness and Permitted
Acquisitions;


 


(E)           Existing
Investments;


 


(F)           Investments
made by a Member of the Borrower Consolidated Group (i) in Borrower and (ii) in
any Member of the Borrower Consolidated Group (other than Borrower), provided that the sum of (x) the
aggregate amount of Investments made pursuant to this clause (ii) plus (y) the
aggregate value of assets transferred to Members of the Borrower Consolidated
Group (other than Borrower) pursuant to clause (ii) of clause (G) of
the definition of Permitted Transfers of Assets is equal to or less than
$5,000,000;


 


(G)           Investments
(other than Investments specified in clauses (A) through (F) above)
in an aggregate amount that shall not exceed $15,000,000.00; and


 


(H)          Any
other Investments that may be approved in writing by Agent from time to time
(including, without limitation, any approval of an investment policy
established by Borrower).


 


“Permitted
Liens” means:


 


(A)          Collateral
Agent’s Lien;


 


(B)           Liens,
if any, as reflected on the Title Insurance Policies;


 


(C)           Those
Liens identified on the attached Exhibit “H”;


 


(D)          The
following Liens, if the granting of such Lien or the attachment of such Lien to
the Collateral (i) does not otherwise constitute a Default under the terms
of this Agreement, and (ii) does not give rise to a Material Adverse
Change:


 


26

















 


(1)           If the validity or
amount thereof is being contested in good faith by appropriate and lawful
proceedings, so long as levy and execution thereon have been stayed and
continue to be stayed, and with respect to which adequate reserves or other
appropriate provisions are being maintained to the extent required by Generally
Accepted Accounting Principles:


 


(a)           Liens for taxes,
assessments or charges due and payable and subject to interest or penalty;


 


(b)           Liens upon, and defects
of title to, real or personal property, including any attachment of personal or
real property or other legal process prior to adjudication of a dispute on the
merits;


 


(c)           Liens of mechanics,
materialmen, warehousemen, carriers, or other like Liens; and


 


(d)           Adverse judgments on
appeal;


 


(2)           Pledges or deposits
made in the Ordinary Course of Business to secure payment of workmen’s
compensation, or to participate in any fund in connection with workmen’s
compensation, unemployment insurance, old-age pensions or other social security
programs;


 


(3)           Good faith pledges or
deposits made in the Ordinary Course of Business to secure performance of bids,
tenders, Contracts (other than for the repayment of borrowed money) or leases,
not in excess of ten percent (10%) of the aggregate amount due thereunder, or
to secure statutory obligations, or surety, appeal, indemnity, performance,
payment, bid or other similar bonds required in the Ordinary Course of
Business; and


 


(4)           Purchase money security
interests granted in the Ordinary Course of Business to secure not more than
one hundred percent (100%) of the purchase price of assets; and


 


(E)           Easements
over the Mortgaged Property arising by reason of zoning restrictions,
easements, licenses, reservations, covenants, rights-of-way, utility easements,
building restrictions and other similar encumbrances on the use of real
property which do not materially detract from the value of such Mortgaged
Property or interfere with the ordinary conduct of the business conducted and
proposed to be conducted at such Mortgaged Property.


 


“Permitted
Line of Business” means the business engaged in by Borrower as of the date
of this Agreement, and businesses reasonably ancillary thereto.


 


27

















 


“Permitted
Transfers of Assets” means:


 


(A)          Sales
of Inventory in the Ordinary Course of Business;


 


(B)           The
sale or exchange of used or obsolete Equipment to the extent (i) the
proceeds of such sale are applied towards, or such Equipment is exchanged for,
similar replacement Equipment, or (ii) such Equipment is no longer
necessary for the operations of Borrower in the Ordinary Course of Business;


 


(C)           The
sale or disposition of assets outside the Ordinary Course of Business, provided
that (i) the aggregate value of assets sold or disposed of pursuant to
this clause (C) in any Fiscal Year shall not exceed $5,000,000.00, (ii) the
aggregate value of assets sold or disposed of pursuant to this clause (C) on
or after the date of Closing shall not exceed $10,000,000.00, and (iii) immediately
prior to such sale or disposition, and after giving effect to such sale or
disposition, no Default or Event of Default would exist;


 


(D)          Any
transfer arising from the termination of any Swap Document, if such termination
does not give rise to a Default;


 


(E)           Dividends
if immediately prior and subsequent to the payment of any such Dividend, no
Default would exist;


 


(F)           Any
transfer of assets by a Member of the Borrower Consolidated Group (i) to
Borrower, so long as such transfer of assets would not otherwise give rise to a
Default, and (ii) to a Member of the Borrower Consolidated Group (other
than Borrower), so long as such transfer of assets would not otherwise give
rise to a Default, provided that
the sum of (x) the aggregate value of assets transferred to Members of the
Borrower Consolidated Group (other than Borrower) pursuant to this clause (ii) plus
(y) the amount of Investments made pursuant to clause (ii) of clause (F) of
Permitted Investments is equal to or less than $5,000,000; and


 


(G)           The
lease of a portion of the Mortgaged Property located in Doniphan County,
Kansas, pursuant to that certain Lease dated as of February 22, 2006
between KMG-Bernuth, as lessor, and Boehringer Ingelheim Vetmedica, Inc.,
as lessee, as amended from time to time.


 


“Person”
means any individual, corporation, partnership, limited partnership, limited
liability company, association, joint-stock company, trust, unincorporated
organization, joint venture, court or Governmental Authority.


 


“Petroleum
Products” means “petroleum products” as defined under any applicable
Environmental Law.


 


“Place for
Payment” means a place for payment as from time to time designated by
Agent, which place for payment currently is at the address of Agent as
hereinafter provided for with respect to notices.


 


“Plans”
means all Single Employer Plans and Multiple Employer Plans, both as defined in
ERISA.


 


28

















 


“Pledge
Agreement” means that certain Amended and Restated Pledge Agreement of even
date herewith from Borrowers to Collateral Agent, together with any and all
extensions, revisions, modifications or amendments at any time made thereto.


 


“Pledged
Collateral” means the “Pledged Collateral” as defined in the Pledge
Agreement.


 


“Principal
Payment Due Date” means, with respect to any payment of principal on any
Loan (other than the Revolving Loan), the last day of each calendar month
during the term of this Agreement.


 


“Prohibited
Transaction” means a “prohibited transaction” as defined in ERISA.


 


“Pro Rata”
or “Pro Rata Share” of any amount means, with respect to any Lender at
any time (A) when referring to the Advances, the Loans or the Lenders, the
product of such amount times such Lender’s Credit Percentage; (B) when
referring to Revolving Loan Advances, Revolving Loan Borrowings, the Revolving
Loan, or the Revolving Loan Lenders, the product of such amount times such
Revolving Loan Lender’s Revolving Loan Credit Percentage; (C) when
referring to Term Loan Advances, Term Loan Borrowings, the Term Loan, or the
Term Loan Lenders, the product of such amount times such Term Loan Lender’s
Term Loan Credit Percentage; and (D) when referring to Letter of Credit
Advances or the Available Amount of the Letters of Credit, the product of such
amount times such Lender’s Revolving Loan Credit Percentage.


 


“Prudential
Loan Documents” means the Prudential Term Note and the Prudential Note
Agreement.


 


“Prudential
Note Holders” means the Noteholders under and as defined in the
Intercreditor Agreement.


 


“Prudential
Note Agreement” means the Note Agreement under and as defined in the
Intercreditor Agreement.


 


“Prudential
Obligations” means the “Note Agreement Obligations” as defined in the
Intercreditor Agreement, including, but not limited to, the Make Whole Amount
(as defined in the Prudential Loan Documents), if any.


 


“Prudential
Term Note” means each of those certain 7.43% Senior Secured Notes of even
date herewith, given by Borrowers in favor of the Prudential Note Holders in
the aggregate principal amount of $20,000,000.00, and includes any amendment to
or modification of any such note and any promissory note given in extension or
renewal of, or in substitution for, such note.


 


“Purchase
Order” means a valid and binding order for goods to be purchased from
Borrower, which order shall be evidenced by an executed purchase order of the
respective Account Debtor.


 


“Quarter”
means a period of time of three consecutive calendar months.


 


“Quarter-End”
means the last day of each of January, April, July and October.


 


29

















 


“Real
Property” means the real property owned by Borrower or in which Borrower
has a leasehold interest, which Real Property is described on Schedule 10.13 of this Agreement.


 


“Records”
means correspondence, memoranda, tapes, discs, microfilm, microfiche, papers,
books and other documents, or transcribed information of any type, whether
expressed in ordinary or machine language, and all filing cabinets and other
containers in which any of the foregoing is stored or maintained.


 


“Regulation
“T”, Regulation “U”, and Regulation “X” means Regulation T, Regulation U,
and Regulation X, respectively, of the Board of Governors of the Federal
Reserve System as now or from time to time hereafter in effect and shall
include any successor or other regulation or official interpretation of said
Board of Governors relating to the extension of credit by banks for the purpose
of purchasing or carrying margin stocks applicable to member banks of the
Federal Reserve System.


 


“Reimbursement
Obligation” means the obligation of Borrower to pay the amounts required
under Section 4.2 of this Agreement.


 


“Rents”
means all the rents, issues, and profits now due and which may hereafter become
due under or by virtue of the Assigned Leases, together with all claims and
rights to the payment of money at any time arising in connection with any
rejection or breach of any of the Assigned Leases under Bankruptcy Law,
including without limitation, all rights to recover damages arising out of such
breach or rejection, all rights to charges payable by a tenant or trustee in
respect of the leased premises following the entry of an order for relief under
Bankruptcy Law in respect of a tenant and all rentals and charges outstanding
under the Assigned Leases as of the date of entry of such order for relief.


 


“Reportable
Event” means a “reportable event” as defined in ERISA, but excluding events
for which reporting has been waived.


 


“Required
Endorsements” means any endorsements of any Title Insurance Policy
reasonably required by Collateral Agent.


 


“Required
Lenders” means, at any time, Lenders (collectively) holding Credit
Percentages of at least sixty-six and two-thirds percent; provided, however,
that in determining the foregoing, a Defaulting Lender shall not be considered
a Required Lender, and a Defaulting Lender’s Credit Percentage shall be deemed
to be zero percent (0%).


 


“Responsible
Officer” means, individually and collectively, the president, chief
executive officer and chief financial officer of Borrower.


 


“Revolving
Loan” means the loan which the Revolving Loan Lenders have agreed to advance
to Borrowers in accordance with the terms of Article 2 of this Agreement.


 


“Revolving
Loan Advances” means all the Advances of the Revolving Loan.


 


“Revolving
Loan Borrowing” means a borrowing consisting of simultaneous Revolving Loan
Advances made by the Revolving Loan Lenders.


 


30

















 


“Revolving
Loan Commitment” means (A) until April 30, 2008, Thirty-Five
Million and 00/100 Dollars ($35,000,000.00); and (B) thereafter, the
lesser of (i) Thirty-Five Million and 00/100 Dollars ($35,000,000.00), or (ii) the
Borrowing Base.


 


“Revolving
Loan Credit Percentage” means a percentage based on a fraction, the
numerator of which shall be the aggregate principal amount of Revolving Loan
Advances outstanding at a particular time and owing to a particular Revolving
Loan Lender at such time, and the denominator of which shall be the aggregate
principal amount of all Revolving Loan Advances outstanding at such time and
owing to all the Revolving Loan Lenders at such time; provided that in
calculating such percentage, the aggregate principal amount of Swing Line Loan
Advances owing to the Swing Line Lender, the Available Amount of the Letters of
Credit, and the aggregate amount of Letter of Credit Advances owing to Issuing
Lender shall, at such time, be considered to be owed to the Revolving Loan
Lenders that purchase (or are obligated to purchase) Swing Line Loan Advances
and Letter of Credit Advances from the Swing Line Lender and Issuing Lender
under the terms of this Agreement (the Revolving Loan Credit Percentages of the
Revolving Loan Lenders as of the date hereof being as set forth on the attached
Exhibit “D”).


 


“Revolving
Loan Lenders” means the Revolving Loan Lenders identified on Exhibit “D”
attached to this Agreement, and any other Person that becomes a Revolving Loan
Lender pursuant to the terms of this Agreement.


 


“Revolving
Loan Maturity Date” means the date five (5) years from the date of
this Agreement (viz., December 31, 2012).


 


“Revolving
Notes” means those certain Revolving Notes of even date herewith, given by
Borrowers in favor of the Revolving Loan Lenders in the aggregate principal
amount of $35,000,000.00, and includes any amendment to or modification of any
such note and any promissory note given in extension or renewal of, or in
substitution for, such note.


 


“Secured
Obligations” means, collectively, the Credit Agreement Obligations and the
Prudential Obligations.


 


“Security
Documents” means all documents or instruments of any kind executed or
delivered in connection with the Loans, whether delivered prior to, at, or
after the Closing, wherein Collateral Agent is granted a Lien in any Borrower
Party’s assets, and all documents and instruments executed and delivered in
connection with any of the foregoing, together with any and all extensions,
revisions, modifications or amendments at any time made to any of such
documents or instruments, including but not limited to this Agreement, the
Mortgages, the Pledge Agreement and the Financing Statements.


 


“Solid
Wastes” means “solid wastes” as defined under any applicable Environmental
Law.


 


“Solvent”
and “Solvency” mean, with respect to any Person on a particular date,
that on such date (a) the fair value of the property of such Person is
greater than the total amount of liabilities, including, without limitation,
contingent liabilities, of such Person, (b) the present fair salable value
of the assets of such Person is not less than the amount that will be required
to pay 


 


31

















 


the probable liability of such
Person on its debts as they become absolute and matured, (c) such Person
does not intend to, and does not believe that it will, incur debts or
liabilities beyond such Person’s ability to pay such debts and liabilities as
they mature and (d) such Person is not engaged in business or a
transaction, and is not about to engage in business or a transaction, for which
such Person’s property would constitute an unreasonably small capital.  The amount of contingent liabilities at any
time shall be computed as the amount that, in the light of all the facts and
circumstances existing at such time, represents the amount that is reasonably
expected to become an actual or matured liability.


 


“Subsidiary”
means, as to any Person (the “first person”), another Person (the “second
person”) with respect to which such first person directly or indirectly through
one or more intermediaries, controls such second person (and a first person
shall be deemed to have control if such first person, directly or indirectly,
has rights to exercise Voting Power to elect a majority of the members of the
Governing Body of the second person).


 


“Swap
Documents” means (A) any agreement (including terms and conditions
incorporated by reference therein) which is a rate swap agreement, basis swap,
forward rate agreement, commodity swap, interest rate option, forward foreign
exchange agreement, spot foreign exchange agreement, rate cap agreement, rate
floor agreement, rate collar agreement, currency swap agreement, cross-currency
rate swap agreement, currency option, any other similar agreement (including
any option to enter into any of the foregoing); (B) any combination of the
foregoing; or (C) any master agreement for any of the foregoing, as any of
the foregoing may be amended or supplemented from time to time.


 


“Swing Line
Lender” means Wachovia.


 


“Swing Line
Loan” means the loan which the Swing Line Lender has agreed to advance to
Borrower in accordance with the terms of Article 3 of this Agreement.


 


“Swing Line
Loan Advances” means all the Advances of the Swing Line Loan.


 


“Swing Line
Loan Commitment” means the lesser of (i) Five Million and 00/100
Dollars ($5,000,000.00), or (ii) the Unused Revolving Loan Commitment.


 


“Swing Line
Loan Maturity Date” means the date one (1) Business Day prior to the
Revolving Loan Maturity Date.


 


“Swing Line
Note” means that certain Swing Line Note of even date herewith, given by
Borrowers in favor of Swing Line Lender in the principal amount of
$5,000,000.00, and includes any amendment to or modification of such note and
any promissory note given in extension or renewal of, or in substitution for,
such note.


 


“Tangible
Net Worth” means, at any time with respect to an applicable Person, Equity
Owner’s Equity, less the sum of:


 


(A)          Any
surplus resulting from any write-up of assets subsequent to the date of
Closing;


 


32

















 


(B)           Goodwill, including any amounts, however designated
on a balance sheet of such Person, representing the excess of the purchase
price paid for assets or stock acquired over the value assigned thereto;


 


(C)           Patents, trademarks, trade names and copyrights;


 


(D)          Any amount at which Equity Interests appear as an
asset on a balance sheet of such Person;


 


(E)           Loans and advances to Affiliates, stockholders,
directors, officers or employees;


 


(F)           Deferred expenses (to the extent included as an
asset on a balance sheet);


 


(G)           Investments in Affiliates of any nature; and


 


(H)          Any other amount
in respect of an intangible that, in accordance with Generally Accepted
Accounting Principles, should be classified as an asset on a balance sheet of
the applicable Person.


 


“Tangible
Property” means all equipment, machinery, goods, furniture, furnishings,
fixtures, supplies, tools, materials, vehicles, books, records, and other
tangible personal property.


 


“Term Loan”
means the loan which the Term Loan Lenders have agreed to advance to Borrowers
in accordance with the terms of Article 5 of this Agreement.


 


“Term Loan
Advances” means all the Advances of the Term Loan.


 


“Term Loan
Borrowing” means a borrowing consisting of simultaneous Term Loan Advances
made by the Term Loan Lenders.


 


“Term Loan
Commitment” means Thirty-Five Million and 00/100 Dollars ($35,000,000.00).


 


“Term Loan
Credit Percentage” means a percentage based on a fraction, the numerator of
which shall be the aggregate principal amount of Term Loan Advances outstanding
at a particular time and owing to a particular Term Loan Lender at such time,
and the denominator of which shall be the aggregate principal amount of all
Term Loan Advances outstanding at such time and owing to all the Term Loan
Lenders at such time (the Term Loan Credit Percentages of the Term Loan Lenders
as of the date hereof being as set forth on the attached Exhibit “D”).


 


“Term Loan
Maturity Date” means the date five (5) years from the date of this
Agreement (viz., December 31, 2012).


 


“Term Notes”
means those certain Term Notes of even date herewith, given by Borrowers to the
Term Loan Lenders in the aggregate principal amount of $35,000,000.00, and
includes any amendment to or modification of any such note and any promissory
note given in extension or renewal of, or in substitution for, such note.


 


33

















 


“Term Loan
Lenders” means the Term Loan Lenders identified on Exhibit “D”
attached to this Agreement, and any other Person that becomes a Term Loan
Lender pursuant to the terms of this Agreement.


 


“Title
Insurance Company” means a title insurance company acceptable to Agent in
its reasonable discretion and authorized under applicable Law to issue a Title
Insurance Policy.


 


“Title
Insurance Policies” means standard ALTA form title insurance policies with
respect to the Mortgaged Property and acceptable to Collateral Agent in its
discretion, dated the date of Closing, and issued by a Title Insurance Company
to Collateral Agent upon the applicable Mortgaged Property, subject only to
those exceptions and matters of title acceptable to Collateral Agent, in
Collateral Agent’s discretion.


 


“Third
Person” means a Person not a party to this Agreement.


 


“Transition Services
Agreement” means any agreement between Borrower and Air Products and
Chemicals, Inc. relating to the provision of administrative and other
services for the orderly transition of the assets the subject of the Air
Products APA Documents.


 


“Unfunded
Pension Liability” means, with respect to any Plan or Multiemployer Plan of
any applicable Person as of an applicable date, the excess of its benefit
liabilities under ERISA over the current value of its assets, as determined by
Agent.


 


“Unsecured
Indebtedness” means Indebtedness not secured by any Lien.


 


“Unused Fee”
means the fee payable by Borrowers to Agent for the account of the Revolving
Loan Lenders (based on each such Revolving Loan Lender’s Pro Rata Share of the
Revolving Loan Commitment at the applicable time) on each Quarter-End, as
determined by Agent as of such Quarter-End in an amount equal to (i) the
daily average of the Unused Revolving Loan Commitment during such Quarter,
multiplied by (ii) a percentage based upon the ratio of Funded Debt to
EBITDA of the Borrower Consolidated Group, as set forth in the chart below,
divided by (iii) four (4).


 


	
  Ratio of Funded Debt to EBITDA

  	
   

  	
  Unused Fee Percentage

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Equal to or
  greater than 3.0 to 1.0

  	
   

  	
  0.25

  	
  %

  
	
  Equal to or
  greater than 2.5 to 1.0, but less than 3.0 to 1.0

  	
   

  	
  0.20

  	
  %

  
	
  Equal to or
  greater than 2.0 to 1.0, but less than 2.5 to 1.0

  	
   

  	
  0.175

  	
  %

  
	
  Equal to or
  greater than 1.5 to 1.0, but less than 2.0 to 1.0

  	
   

  	
  0.15

  	
  %

  
	
  Less than
  1.5 to 1.0

  	
   

  	
  0.125

  	
  %

  



 


“Unused
Revolving Loan Commitment” means, as determined by Agent at any time, an
amount equal to (i) the Revolving Loan Commitment, minus (ii) the
outstanding Revolving Loan Advances, minus (iii) the Available Amount of the
Letters of Credit, minus (iii) any outstanding Letter of Credit Advances.


 


34

















 


“USA
Patriot Act” means the Uniting and Strengthening America by Providing
Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001,
Pub. L. No. 107-56, 115 Stat. 272 (2001), as the same has been, or shall
hereafter be, renewed, extended, amended or replaced.


 


“Voting
Power” means, with respect to any Person, the right to vote for the
election of the Governing Body of such Person under ordinary circumstances.


 


“Wachovia”
means Wachovia Bank, National Association, a national banking association, its
successors and assigns.


 


“Wachovia
Fee Letter” means that certain letter dated November 15, 2007 from
Wachovia to KMG Chemicals and KMG-Bernuth, and providing for the payment of
certain fees as more particularly described therein.


 


“Without
Notice” means without demand of performance or other demand, advertisement,
or notice of any kind to or upon the applicable Person, except as may be
required under applicable Laws or by express provision of any Loan Document.


 


1.3           Accounting Terms.  Accounting terms used and not otherwise
defined in this Agreement have the meanings determined by, and all calculations
with respect to accounting or financial matters unless otherwise provided
herein shall be computed in accordance with, Generally Accepted Accounting
Principles.


 


1.4           UCC Terms.  As used herein, unless the context clearly
requires to the contrary, terms not specifically defined herein shall have the
same respective meanings as are given to those terms in the Uniform Commercial
Code as presently adopted and in effect in (i) with respect to KMG
Chemicals and KMG ECI, the State of Texas, and (ii) with respect to
KMG-Bernuth, the State of Delaware (except in cases and with respect to
Collateral when the perfection, the effect of perfection or nonperfection, and
the priority of a Lien in the Collateral is governed by another Jurisdiction,
in which case such terms shall have the meanings attributed to those terms
under such other Jurisdiction).


 


1.5           Construction of Terms.  Whenever used in this Agreement, the singular
number shall include the plural and the plural the singular, pronouns of one
gender shall include all genders, use of the terms “herein”, “hereof”, and “hereunder”
shall be deemed to be references to this Agreement in its entirety unless
otherwise specifically provided, and the word “discretion” means in the sole
and absolute discretion of the applicable Person(s).


 


1.6           Computation of Time Periods.  For purposes of computation of periods of
time hereunder, the word “from” means “from and including”, the words “to” and “until”
each mean “to but excluding”, and the word “through” means “through and
including”.


 


1.7           Computation of ABR
Margin, LIBOR Margin, Unused Fee Percentage and Financial Covenants.


 


(A)          For
purposes of computation of the ABR Margin, the LIBOR Margin, the amount of the
Unused Fee, and the financial covenants set forth in this Agreement, such 


 


35

















 


computation shall be (i) determined
by Agent as of each Quarter-End, based on the Compliance Certificate most
recently delivered by Borrowers in accordance with the terms of this Agreement,
(ii) determined on a Consolidated Basis, (iii) based on an Annualized
Rolling Period, if applicable, and (iv) exclusive of any and all expenses
paid or incurred by Borrower (up to a maximum of $1,000,000.00) under any
Transition Services Agreement.


 


(B)           Notwithstanding
the foregoing or anything in this Agreement to the contrary, with respect to
any Acquisition for consideration in excess of $15,000,000.00 (including the
Acquisition being made pursuant to the Air Products APA Documents), for
purposes of computation of the financial covenants set forth in this Agreement,
such computation shall be made in good faith by Borrower (but subject to the
approval of Agent) by taking into account the historical results relating to
such Acquisition as follows:  (i) for
the Quarter-End immediately following the closing of such Acquisition, the
foregoing computation shall be made by adding the income and deducting the
expenses for the twelve-month period immediately preceding such Quarter-End,
excluding the days from the date of such Acquisition to such Quarter-End; (ii) for
the second Quarter-End following the closing of such Acquisition, the foregoing
computation shall be made by adding the income and deducting the expenses for
the twelve-month period immediately preceding such Quarter-End, excluding the
days from the date of such Acquisition to such Quarter-End; (iii) for the
third Quarter-End following the closing of such Acquisition, the foregoing
computation shall be made by adding the income and deducting the expenses for
the twelve-month period immediately preceding such Quarter-End, excluding the
days from the date of such Acquisition to such Quarter-End; and (iv) for
the fourth Quarter-End following the closing of such Acquisition, the foregoing
computation shall be made by adding the income and deducting the expenses for
the twelve-month period immediately preceding such Quarter-End, excluding the
days from the date of such Acquisition to such Quarter-End.


 


(C)           Any
adjustment in the ABR Margin, the LIBOR Margin or the amount of the Unused Fee
shall be prospective and shall commence as of the Business Day that the
delivery of a Compliance Certificate by Borrowers is required pursuant to Section 10.1(C) of
this Agreement (provided that should Borrowers fail to timely deliver a
required Compliance Certificate, Agent at its option may adjust the ABR Margin,
LIBOR Margin and the amount of the Unused Fee to the highest applicable
percentage).


 


1.8           Reference to Borrowers and Borrower Parties.  Any reference in this Agreement to (i) “Borrower”
shall mean each and any Borrower, singularly; (ii) “Borrowers” shall mean
all of the Borrowers; (iii) “Borrower Party” shall mean each and any
Borrower Party, singularly; and (iv) “Borrower Parties” shall mean all of
the Borrower Parties.


 


1.9           Reference to Lenders and Lender Parties.  Any reference in this Agreement to (i) “Lender”,
“Lender Party”, “Revolving Loan Lender” and “Term Loan Lender” shall mean,
respectively, each and any Lender, Lender Party, Revolving Loan Lender and Term
Loan Lender, singularly; and (ii) “Lenders”, “Lender Parties”, “Revolving
Loan Lenders” and “Term Loan Lenders” shall mean, respectively, all Lenders,
Lender Parties, Revolving Loan Lenders and Term Loan Lenders, collectively (and
shall include any Person becoming a Lender, Lender Party, Revolving Loan Lender
or Term Loan Lender pursuant to an Assignment and Acceptance).  The obligations and commitments of each
Lender under this Agreement and the 


 


36

















 


other Loan Documents are
several, and neither Agent nor any Lender shall be responsible for the
performance by the other Lenders of its obligations or commitments hereunder or
thereunder.


 


1.10         Joint and Several Liability of Borrowers.


 


(A)          Each
Borrower is accepting joint and several liability hereunder in consideration of
the financial accommodation to be provided by Lenders under this Agreement, for
the mutual benefit, directly and indirectly, of each Borrower and in
consideration of the undertakings of each Borrower to accept joint and several
liability for the obligations of each other Borrower.


 


(B)           Each
Borrower jointly and severally irrevocably and unconditionally accepts, not
merely as a surety but also as a co-debtor, joint and several liability with
the other Borrowers with respect to the payment and performance of all of the
Credit Agreement Obligations, it being the intention of the parties hereto that
all the Credit Agreement Obligations shall be the joint and several obligations
of each and all of the Borrowers without preferences or distinction among them.


 


(C)           If
and to the extent that any Borrower shall fail to make any payment with respect
to any of the Credit Agreement Obligations as and when due or to perform any of
the Credit Agreement Obligations in accordance with the terms thereof, then in
each such event, the other Borrowers will make such payment with respect to, or
perform, such Credit Agreement Obligations.


 


(D)          The
obligations of each Borrower under any Loan Document constitute full recourse
obligations of such Borrower, enforceable against it to the full extent of its
properties and assets, irrespective of the validity, regularity or
enforceability of this Agreement or any other circumstances whatsoever.


 


(E)           Except
as otherwise expressly provided in any Loan Document, each Borrower hereby
waives notice of acceptance of its joint and several liability, notice of any
borrowing made under this Agreement, notice of occurrence of any Default or
Event of Default, or of any demand for any payment under this Agreement or any
other Loan Document, notice of any action at any time taken or omitted by any
Lender Party under or in respect of any of the Credit Agreement Obligations,
any requirement of diligence and, generally, all demands, notice and other
formalities of every kind in connection with this Agreement or any other Loan
Document.  Each Borrower hereby assents
to, and waives notice of, any extension or postponement of the time for the
payment of any of the Credit Agreement Obligations, the acceptance of any
partial payment thereon, any waiver, consent or other action or acquiescence by
any Lender Party at any time or times in respect of any default by any Borrower
in the performance or satisfaction of any term, covenant, condition or
provision of this Agreement or any other Loan Document, any and all other
indulgences whatsoever by any Lender Party in respect of any of the Credit
Agreement Obligations, and the taking, addition, substitution or release, in
whole or in part, at any time or times, of any security for any of the Credit
Agreement Obligations or in part, at any time or times, of any security for any
of the Credit Agreement Obligations or the addition, substitution or release,
in whole or in part, of any Borrower. 
Without limiting the generality of the foregoing, each Borrower assents
to any other action or 


 


37

















 


delay in acting or failure to
act on the part of any Lender Party, including, without limitation, any failure
strictly or diligently to assert any right or to pursue any remedy or to comply
fully with the applicable laws or regulations thereunder which might, but for
the provisions of this Section, afford grounds for terminating, discharging or
relieving such Borrower, in whole or in part, from any of its obligations under
this Agreement or any other Loan Document, it being the intention of each
Borrower that, so long as any of the Credit Agreement Obligations remain
unsatisfied, the obligations of such Borrower under this Agreement or any other
Loan Document shall not be discharged except by performance and then only to
the extent of such performance.  The
obligations of each Borrower under this Agreement and the other Loan Documents
shall not be diminished or rendered unenforceable by any winding up, reorganization,
arrangement, liquidation, reconstruction or similar proceeding with respect to
any Borrower Party or any Lender Party. 
The joint and several liability of Borrowers hereunder shall continue in
full force and effect notwithstanding any absorption, merger, amalgamation or
any other change whatsoever in the name, membership, constitution or place of
formation of any Borrower Party or any Lender Party.


 


(F)           The
provisions of this Section are made for the benefit of Lender Parties and
their respective successors and assigns, and may be enforced from time to time
against any of the Borrowers as often as occasion therefor may arise and
without requirement on the part of any Lender Party first to marshal any of its
claims or to exercise any of its rights against any Borrower Party or to
exhaust any remedies available against any other Borrower Party or to resort to
any other source or means of obtaining payment of any of the Credit Agreement
Obligations or to elect any other remedy. 
The provisions of this Section shall remain in effect until all the
Credit Agreement Obligations shall have been paid in full or otherwise fully
satisfied.  If at any time, any payment,
or any part thereof, made in respect of any of the Credit Agreement
Obligations, is rescinded or must otherwise be restored or returned by any
Lender Party upon the insolvency, bankruptcy or reorganization of any Borrower,
or otherwise, the provisions of this Section will forthwith be reinstated
in effect, as though such payment had not been made.


 


(G)           Notwithstanding
any provision of any Loan Document, the liability of each Borrower under the
Loan Documents as of any date shall be limited to an amount equal to the
greatest amount that would not render such Borrower’s obligations under the
Loan Documents subject to avoidance, discharge or reduction as of such date as
a fraudulent transfer or conveyance under applicable Bankruptcy Laws or other
Laws, in each instance after giving effect to all other liabilities of such
Borrower, contingent or otherwise, that are relevant under applicable
Bankruptcy Laws or other Laws (specifically excluding, however, any liabilities
of such Borrower to the extent that such liabilities would be discharged by
payments made by such Borrower hereunder, and after giving effect to any rights
of subrogation, contribution, reimbursement, indemnity or similar rights of
such Borrower pursuant to applicable Laws or otherwise, including any agreement
of such Borrower with any other Person providing for an equitable allocation of
such liability).  Each Borrower
acknowledges and agrees that the Credit Agreement Obligations may from time to
time exceed the limitation of liability set forth in the preceding sentence
without discharging, limiting or otherwise affecting the obligations of any
Borrower under the Loan Documents or the rights and remedies of Lender Parties.


 


38
















 


1.11         Lender Party Swap Documents.  Notwithstanding any provision of this
Agreement, any Loan Document or any Lender Party Swap Document to the contrary,
(i) no covenant or agreement of Borrower Party shall prohibit Borrower
Party from entering into any Lender Party Swap Document; and (ii) the
right of Lender Parties to accelerate any of the Credit Agreement Obligations
shall not be construed to require the termination or unwinding of any
transactions the subject of any Lender Party Swap Documents.


 


1.12         Lien Granted For Lender Party Swap
Obligations.  To the extent
that any Lien is granted to any Lender Party as security for any Lender Party
Swap Obligation of any Borrower Party to any Lender Party other than Collateral
Agent, the Lien so granted shall be deemed to be a Lien granted to Collateral
Agent as security for the Secured Obligations, without the necessity of any act
or consent of any Person.


 


ARTICLE II


 


2.             THE REVOLVING LOAN


 


2.1           General Terms.  Subject to the terms hereof, Revolving Loan
Lenders will lend Borrowers, from time to time until the Revolving Loan
Maturity Date, such amounts which shall not exceed, in the aggregate principal
amount at any one time outstanding the Unused Revolving Loan Commitment, less
the outstanding Swing Line Loan Advances.


 


(A)          Each Revolving Loan
Lender severally agrees, on the terms and conditions hereinafter set forth, to
make Revolving Loan Advances to Borrowers from time to time on any Business Day
during the period from the date hereof until the Revolving Loan Maturity Date
in an amount for each such Revolving Loan Advance not to exceed such Revolving
Loan Lender’s Pro Rata Share of the applicable aggregate Revolving Loan
Borrowing.  Each Revolving Loan Borrowing
shall be in the amount of $100,000.00 or an integral multiple of $50,000.00 in
excess thereof (other than a Revolving Loan Borrowing the proceeds of which
shall be used solely to repay or prepay in full outstanding Swing Line Loan
Advances and a Revolving Loan Borrowing in an amount equal to the entire Unused
Revolving Loan Commitment) and shall consist of Revolving Loan Advances made
simultaneously by the Revolving Loan Lenders Pro Rata.


 


(B)           Subject to the terms
hereof, Borrowers may borrow, repay without penalty or premium, and reborrow
hereunder, from the date of this Agreement until the Revolving Loan Maturity
Date.  If at any time the unpaid
principal balance of the Revolving Loan exceeds the amount Borrowers could
borrow at such time as set forth herein, Borrowers shall immediately upon
demand of Agent pay or cause to be paid such amounts to Agent for the account
of the Revolving Loan Lenders (based on each Revolving Loan Lender’s Pro Rata
Share of the Revolving Loan Commitment at such time), to the extent necessary
to reduce the Revolving Loan to an amount which Borrowers could borrow at that
time.


 


2.2           Disbursement
of the Revolving Loan.


 


(A)          Except for Revolving
Loan Borrowings under Section 3.2 of this Agreement and subject to the
terms of any other agreement among Agent, Revolving Loan Lenders and Borrowers
to the contrary, in order to obtain a Revolving Loan Borrowing, a 


 


39

















 


Borrower’s Representative shall
deliver a Notice of Borrowing to Agent (i) with respect to a Revolving
Loan Borrowing to be made at Closing, not later than the time of Closing, and (ii) with
respect to any other Revolving Loan Borrowing, (x) if the Revolving Loan
Borrowing is to accrue interest at the Adjusted LIBOR Rate, no later than 1:00 p.m.
(Charlotte, North Carolina time) on a date not less than three (3) Business
Days prior to the date such Revolving Loan Borrowing is sought, and (y) if
the Revolving Loan Borrowing is to accrue interest at the Adjusted LIBOR Market
Index Rate or the Adjusted ABR Rate, no later than 1:00 p.m. (Charlotte,
North Carolina time) on a date not less than one (1) Business Day prior to
the date such Revolving Loan Borrowing is sought.


 


(B)           Upon Agent’s receipt of
a Notice of Borrowing, Agent shall deliver a Notice of Funding to each
Revolving Loan Lender by (x) if the applicable Revolving Loan Borrowing is
to accrue interest at the Adjusted LIBOR Rate, 1:00 p.m. (Charlotte, North
Carolina time) on a date not less than two (2) Business Days prior to the
date the Revolving Loan Borrowing is to be made, and (y) if the applicable
Revolving Loan Borrowing is to accrue interest at the Adjusted LIBOR Market
Index Rate or the Adjusted ABR Rate, 5:00 p.m. (Charlotte, North Carolina
time) on a date not less than one (1) Business Day prior to the date the
Revolving Loan Borrowing is to be made, and each Revolving Loan Lender shall,
before 11:00 a.m. (Charlotte, North Carolina time) on the date of such
Revolving Loan Borrowing, make available to Agent at Agent’s Account, in same
day funds, such Revolving Loan Lender’s Pro Rata Share of such Revolving Loan
Borrowing.


 


(C)           After Agent’s receipt
of such funds and upon fulfillment of any applicable conditions set forth in
this Agreement, Agent will make such funds available to Borrowers by crediting
a Borrower’s deposit account with Wachovia; provided, however, that upon (i) written
notice to Agent from Swing Line Lender given prior to the funding of the
Revolving Loan Borrowing, Agent shall first make a portion of such funds equal
to the aggregate principal amount of any Swing Line Loan Advances (plus
interest accrued and unpaid thereon) available to the Swing Line Lender (and,
if applicable, each other Lender that has made a Swing Line Loan Advance that
remains outstanding) for repayment of such Swing Line Loan Advances; and (ii) written
notice to Agent from Issuing Lender given prior to the funding of the Revolving
Loan Borrowing, Agent shall first make a portion of such funds equal to the
aggregate principal amount of any Letter of Credit Advances (plus interest accrued
and unpaid thereon) available to Issuing Lender (and, if applicable, each other
Lender that has made a Letter of Credit Advance that remains outstanding) for
repayment of such Letter of Credit Advances.


 


2.3           The
Revolving Notes.  Borrowers’
obligation to repay the Revolving Loan shall be evidenced by the Revolving
Notes.


 


2.4           Interest Rate.  Interest on the Revolving Loan shall be
calculated as follows:


 


(A)          Except as provided in the immediately
succeeding subparagraphs (B) and (C), during the entire term of the
Revolving Notes, the outstanding principal balance of the Revolving Notes shall
bear interest at the Adjusted LIBOR Market Index Rate.


 


(B)           A Borrower’s Representative may from time to
time deliver to Agent a Notice of Borrowing or a Notice of Continuation/Conversion,
electing to have all or a portion of 


 


40

















 


the outstanding principal balance of the
Revolving Loan accrue interest based on the LIBOR Rate, in which case the
applicable LIBOR Rate Borrowing shall bear interest at the Adjusted LIBOR Rate
during the applicable LIBOR Rate Interest Period.  Following the expiration of any applicable
LIBOR Rate Interest Period, if a Borrower’s Representative shall not have
timely and properly delivered a Notice of Conversion/Continuation electing a
LIBOR Rate Interest Period to commence as of the expiration of the applicable
expiring LIBOR Rate Interest Period, then the applicable LIBOR Rate Borrowing
shall automatically bear interest at the Adjusted LIBOR Market Index Rate.


 


(C)           A Borrower’s Representative may from time to
time deliver to Agent a Notice of Borrowing or a Notice of
Continuation/Conversion, electing to have all or a portion of the outstanding
principal balance of the Revolving Loan accrue interest based on the ABR Rate,
in which case such ABR Rate Borrowing shall bear interest at the Adjusted ABR
Rate.  Such ABR Rate Borrowing shall
continue to bear interest at the Adjusted ABR Rate until such time as a Borrower’s
Representative shall have delivered to Agent a Notice of
Continuation/Conversion, electing to have such ABR Borrowing bear interest at
the Adjusted LIBOR Market Index Rate or the Adjusted LIBOR Rate.


 


(D)          Notwithstanding the foregoing, there shall not be more than four (4) Borrowings
outstanding at any time with respect to the Revolving Loan.


 


2.5           Payments of Principal and Interest.  Principal and interest on the Revolving Loan
shall be payable as follows:


 


(A)          On the first Interest Payment Due Date
following the date of the Revolving Notes, and on each successive Interest
Payment Due Date thereafter until the entire indebtedness evidenced by the
Revolving Notes is paid in full, Borrowers shall pay to Agent for the account
of the Revolving Loan Lenders (based on each Revolving Loan Lender’s Revolving
Loan Credit Percentage at such time) all accrued and unpaid interest on the
outstanding principal balance of the Revolving Notes.


 


(B)           If not earlier demanded pursuant to Section 11.3
hereof, the outstanding principal balance of the Revolving Loan, together with
all accrued and unpaid interest thereon, shall be due and payable to Agent for
the account of the Revolving Loan Lenders (based on each Revolving Loan Lender’s
Revolving Loan Credit Percentage at such time) on the Revolving Loan Maturity
Date.


 


2.6           Use of Proceeds of Revolving Loan.  The proceeds of the Revolving Loan shall be
used to refinance Existing Indebtedness, to purchase certain assets in
accordance with the terms of the Air Products APA, to finance Borrowers’
general working capital needs, to pay fees and expenses associated with the
closing of the Loans, to repay Letter of Credit Advances, and to repay Swing
Line Loan Advances.


 


41

















 


ARTICLE III


 


3.             THE SWING LINE LOAN.


 


3.1           General
Terms.


 


(A)          Subject to the terms
hereof, Swing Line Lender will lend Borrowers, from time to time until the Swing Line Loan Maturity Date,
such amounts which shall not exceed, in the aggregate principal amount at any
one time outstanding, the Swing Line Loan Commitment.


 


(B)           Subject to the terms
hereof, Borrowers may borrow, repay without penalty or premium, and reborrow
hereunder, from the date of this Agreement until the Swing Line Loan Maturity
Date.  If at any time the unpaid principal
balance of the Swing Line Loan exceeds the amount Borrowers could borrow at
such time as set forth herein, Borrowers shall immediately and Without Notice
pay or cause to be paid such amounts to Swing Line Lender, to the extent
necessary to reduce the Swing Line Loan to an amount which Borrowers could
borrow at that time.


 


3.2           Disbursement of the
Swing Line Loan.


 


(A)          Swing Line Lender will credit or pay the proceeds
of each Swing Line Loan Advance to a Borrower’s deposit account with Wachovia,
or in such other manner as Borrowers and Swing Line Lender may agree.


 


(B)           Subject to the terms of
any other agreement between Swing Line Lender and Borrowers to the contrary
(including any Cash Management Agreement), in order to obtain a Swing Line Loan
Advance, a Borrower’s Representative shall deliver a Notice of Borrowing to Agent and Swing Line
Lender not later than 1:00 p.m. (Charlotte, North Carolina time) on the
Business Day such Swing Line Loan Advance is sought.  Upon Swing Line Lender’s receipt of such
Notice of Borrowing and upon satisfaction of the terms and conditions of this
Agreement, Swing Line Lender will make such funds available to Borrowers as
provided for above.  Notwithstanding
anything contained herein to the contrary, Borrowers shall not be entitled to
receive nor shall Swing Line Lender be required to disburse any Swing Line Loan
Advance after the Swing Line Loan Maturity Date.


 


(C)           Upon written demand by
Swing Line Lender to Agent (a “Swing Line Put”), each Revolving Loan Lender
shall purchase from Swing Line Lender, and Swing Line Lender shall sell and
assign (without recourse except for the representations and warranties of Swing
Line Lender set forth in this paragraph) to each such Revolving Loan Lender,
such Revolving Loan Lender’s Pro Rata Share of any outstanding Swing Line Loan
Advance as so demanded by Swing Line Lender, by making available for the
account of Swing Line Lender, by deposit to Agent’s Account in same day funds,
an amount equal to the portion of the outstanding principal amount of such Swing
Line Loan Advance to be purchased by such Revolving Loan Lender on (i) a
Business Day on which notice of any such Swing Line Put is given by Agent to
Revolving Loan Lenders, provided that such notification is given by Agent not
later than 1:00 p.m. (Charlotte, North Carolina time) on such Business
Day, or (ii) the first Business Day thereafter if such notification is
given by Agent later than 1:00 p.m. (Charlotte, North Carolina time).  If such Revolving Loan Lender shall pay to
Agent such amount for the account of Swing 


 


42

















 


Line Lender, such amount so
paid in respect of principal shall constitute a Revolving Loan Advance made by
such Revolving Loan Lender for purposes of this Agreement evidenced by such Revolving
Loan Lender’s Revolving Note, and the outstanding principal balance of the
Swing Line Loan shall be reduced by such amount on such Business Day.  Borrower hereby agrees to each such sale and
assignment.  Upon any such assignment by
Swing Line Lender to any Revolving Loan Lender of a portion of a Swing Line
Loan Advance, Swing Line Lender represents and warrants to such Revolving Loan
Lender that Swing Line Lender is the legal and beneficial owner of such
interest being assigned by it, but makes no other representation or warranty
and assumes no responsibility or liability with respect to such Swing Line Loan
Advance or the Loan Documents.  Each
Revolving Loan Lender’s obligation to purchase its Pro Rata Share of an
outstanding Swing Line Loan Advance pursuant to this Section 3.2(C) shall
be absolute and unconditional and shall not be affected by any circumstance,
including (A) any setoff, counterclaim, recoupment, defense or other right
which such Revolving Loan Lender may have against Swing Line Lender, Borrower
or any other Person for any reason whatsoever, (B) the occurrence or
continuance of a Default, or (c) the failure to satisfy any condition
precedent of this Agreement, or (d) any other occurrence, event or
condition, whether or not similar to any of the foregoing.


 


If any
Revolving Loan Lender fails to make available to Agent for the account of Swing
Line Lender any amount required to be paid by such Revolving Loan Lender
pursuant to the foregoing provisions of this Article 3 by the time specified
in this Section, Swing Line Lender shall be entitled to recover from such
Revolving Loan Lender (acting through Agent), on demand, such amount with
interest thereon for the period from the date such payment is required to the
date on which such payment is immediately available to Swing Line Lender at a
rate per annum equal to the greater of (i) the Federal Funds Rate, or (ii) the
Adjusted LIBOR Market Index Rate, plus any administrative, processing or
similar fees customarily charged by Swing Line Lender in connection with the
foregoing.  A certificate of Swing Line
Lender submitted to any Revolving Loan Lender (through Agent) with respect to
any amounts owing under this paragraph shall be conclusive absent manifest
error.


 


3.3           The
Swing Line Note.  Borrowers’
obligation to repay the Swing Line Loan shall be evidenced by the Swing Line
Note.


 


3.4           Interest
Rate.  During the entire term of the
Swing Line Note, the outstanding principal balance of the Swing Line Note shall
bear interest at the Adjusted LIBOR Market Index Rate.


 


3.5           Payments
of Principal and Interest.


 


(A)          On the first Interest Payment Due Date following the date of the Swing
Line Note, and on each successive Interest Payment Due Date thereafter until
the entire indebtedness evidenced by the Swing Line Note is paid in full,
Borrowers shall pay to Agent for the account of Swing Line Lender all accrued
and unpaid interest on the outstanding principal balance of the Swing Line
Note.


 


(B)           If not earlier demanded
by Swing Line Lender pursuant to Section 11.3 hereof, the outstanding
principal balance of the Swing Line Loan, together with all accrued and 


 


43

















 


unpaid interest thereon, shall
be due and payable to Agent for the account of Swing Line Lender on the Swing
Line Loan Maturity Date.


 


3.6           Use
of Proceeds of Swing Line Loan.  The
proceeds of the Swing Line Loan shall be used for Borrowers’ general short-term
working capital and general corporate purposes.


 


3.7           Failure to Purchase Pro Rata Share of Swing
Line Loan Advances.  The
failure of any Revolving Loan Lender to purchase its Pro Rata Share of any
Swing Line Loan Advance as required in Section 3.2(C) shall not
relieve any other Revolving Loan Lender of its obligation hereunder to purchase
its Pro Rata Share of such Swing Line Loan Advance, but no Revolving Loan
Lender shall be responsible for the failure of any other Revolving Loan Lender
to purchase its Pro Rata Share of any Swing Line Loan Advance.


 


ARTICLE IV


 


4.             LETTERS OF CREDIT


 


4.1           Issuance of Letters of Credit.  Subject to the terms hereof, from time to
time until the Revolving Loan Maturity Date, Borrower may request Issuing
Lender to issue, and Issuing Lender agrees to issue, Letters of Credit for the
account of Borrower from time to time on any Business Day in an aggregate
Available Amount for all Letters of Credit not to exceed at any time the Letter
of Credit Commitment on such Business Day. 
No Letter of Credit shall have an expiration date (including all rights
of Borrower or the beneficiary to require renewal) later than the earlier of (i) 30
days before the Revolving Loan Maturity Date, or (ii) one year after the
date of issuance thereof.  In order for a
Letter of Credit to be issued, a Borrower’s Representative shall deliver a
Notice of Issuance to Agent and Issuing Lender not later than 1:00 p.m.
(Charlotte, North Carolina time) on a date not less than three (3) Business
Days prior to the date the issuance of such Letter of Credit is sought, such
Notice of Issuance to be accompanied by the form of the Letter of Credit to be
issued.  If (i) the requested form
of such Letter of Credit is acceptable to Issuing Lender in its discretion, and
(ii) if required by Agent and Issuing Lender, upon execution and delivery
of a Letter of Credit Agreement in form and substance satisfactory to Agent and
Issuing Lender, Issuing Lender will, subject to the other terms and conditions
of this Agreement, issue such Letter of Credit. 
In the event and to the extent that the provisions of any Letter of Credit
Agreement shall conflict with this Agreement, the provisions of this Agreement
shall govern.


 


4.2           Reimbursement and Other Payments.
Borrowers agree to pay to Agent immediately upon demand of Agent or Issuing
Lender for reimbursement to Issuing Lender (i) at the time when Issuing
Lender shall pay any draft presented under any Letter of Credit, a sum equal to
the amount so paid under such Letter of Credit, plus (ii) interest on any
amount remaining unpaid by Borrowers to Issuing Lender under clause (i) above
from such time until payment in full at an interest rate equal to (x) until
the end of the Business Day next following the payment of any draft, the
Adjusted LIBOR Market Index Rate, and (y) thereafter, the Adjusted LIBOR
Market Index Rate plus two percent (2.0%).


 


4.3           Additional Remedies.  In addition to any rights and remedies the
Lender Parties may otherwise have under this Agreement, if (i) any Default
shall have occurred, Agent or Issuing Lender may in their discretion by notice
to Borrowers, declare the obligation of Issuing 


 


44

















 


Lender to issue any Letter of Credit to be
terminated, whereupon the obligation of Issuing Lender to issue any Letter of
Credit shall forthwith terminate, and (ii) any Event of Default shall have
occurred, Agent may make demand upon Borrowers to, and forthwith upon such
demand Borrowers will pay to Agent in same day funds at Agent’s office
designated in such demand, for deposit in a special Cash Collateral Account to
be maintained with Collateral Agent, an amount equal to the maximum amount then
available to be drawn under the Letters of Credit.   The Cash Collateral Account shall be in the
name of Borrowers, but under the sole dominion and control of Collateral Agent,
and shall be held and disbursed as follows:


 


(A)          Collateral Agent may from time to time invest
funds on deposit in the Cash Collateral Account, reinvest proceeds of any such
investments which may mature or be sold, and invest interest or other income
received from any such investments, and all such investments and reinvestments
shall, for purposes of this Agreement, constitute part of the funds held in the
Cash Collateral Account.


 


(B)           If at any time Agent or Collateral Agent
determines that any funds held in the Cash Collateral Account are subject to
any right or claim of any Person other than claims arising under this Agreement
or that the total amount of such funds is less than the maximum amount at such
time available to be drawn under the Letters of Credit, Borrowers will,
forthwith upon demand by Agent or Collateral Agent, pay to Collateral Agent, as
additional funds to be deposited and held in the Cash Collateral Account, an
amount equal to the excess of (i) such maximum amount at such time
available to be drawn under the Letters of Credit over (ii) the total
amount of funds, if any, then held in the Cash Collateral Account which Agent
or Collateral Agent determine to be free and clear of any such right and claim.


 


(C)           Borrower hereby assigns, transfers and sets
over, and grants to Collateral Agent a Lien on and upon, the Cash Collateral
Account, including all funds held in the Cash Collateral Account from time to
time and all proceeds thereof, as security for the Secured Obligations.  Borrower agrees that, to the extent notice of
sale of any securities shall be required by Law, at least five Business Days’
Notice to Borrower of the time and place of any public sale or the time after
which any private sale is to be made shall constitute reasonable
notification.  Collateral Agent may
adjourn any public or private sale from time to time by announcement at the
time and place fixed therefor, and such sale may, without further notice, be
made at the time and place to which it may be so adjourned.


 


(D)          Subject to the provisions of the
Intercreditor Agreement, Collateral Agent may, at any time or from time to
time, apply funds from time to time held in the Cash Collateral Account to the
payment of (i) any Reimbursement Obligation, and (ii) upon
termination of all Letters of Credit and payment in full of all the
Reimbursement Obligation, to the other Secured Obligations in such order as
Collateral Agent may elect.


 


(E)           Neither Borrower nor any Person claiming on
behalf of or through Borrower shall have any right to withdraw any of the funds
held in the Cash Collateral Account.


 


4.4           No Liability of Issuing Lender.  Borrowers assume all risks of the acts or
omissions of any beneficiary or transferee of any Letter of Credit with respect
to its use of such Letter of Credit. Neither Issuing Lender nor any of its
officers or directors shall be liable or 


 


45

















 


responsible for (a) the use that may be
made of any Letter of Credit or any acts or omissions of any beneficiary or
transferee in connection therewith; (b) the validity, sufficiency or
genuineness of documents, or of any endorsement thereon, even if such documents
should prove to be in any or all respects invalid, insufficient, fraudulent or
forged; (c) payment by Issuing Lender against presentation of documents
that do not comply with the terms of a Letter of Credit, including failure of
any documents to bear any reference or adequate reference to the Letter of
Credit; or (d) any other circumstances whatsoever in making or failing to
make payment under any Letter of Credit. 
In furtherance and not in limitation of the foregoing, Issuing Lender
may accept documents that appear on their face to be in order, without
responsibility for further investigation, regardless of any notice or
information to the contrary.


 


4.5           Indemnification.  In addition to any other indemnification
obligation of Borrower under this Agreement or any other Loan Document,
Borrowers hereby agree to indemnify and hold the Lender Parties harmless from
and against any and all Indemnified Losses which the Lender Parties may incur
or which may be claimed against the Lender Parties by any Person by reason of
or in connection with the execution and delivery or transfer of, or payment or
failure to make lawful payment under, any Letter of Credit.


 


4.6           Pro Rata Participation, Drawing and
Reimbursement With Respect to Letters of Credit.


 


(A)          Without
any further action on the part of any Lender Party, effective immediately upon
the issuance of any Letter of Credit issued under this Agreement, Issuing
Lender will be deemed to have sold, transferred, and assigned to each Revolving
Loan Lender at such time, and each Revolving Loan Lender will have been deemed
to have purchased and accepted from Issuing Lender, such Revolving Loan Lender’s
Pro Rata Share of Issuing Lender’s interest in the applicable Letter of Credit
(such Pro Rata Share to be determined without taking into account such
Revolving Loan Lender’s obligation to purchase as provided in this Section 4.6),
which purchase shall unconditionally obligate each Revolving Loan Lender to
purchase from Issuing Lender such Revolving Loan Lender’s Pro Rata Share of any
Letter of Credit Advance in accordance with the provisions of Section 4.6(C) below,
and upon such purchase, shall entitle each Revolving Loan Lender, in accordance
with and subject to the provisions of this Agreement, to receive such Revolving
Loan Lender’s Pro Rata Share of any and all payments made by Borrower with
respect to the applicable Letter of Credit and whether required hereunder or
under any Letter of Credit Agreement.


 


(B)           The payment by Issuing Lender of a draft
drawn under any Letter of Credit shall constitute for all purposes of this
Agreement the making by Issuing Lender of a Letter of Credit Advance in the
amount of such draft.


 


(C)           Upon written demand by Issuing Lender, with a
copy of such demand to Agent, each Revolving Loan Lender shall purchase from
Issuing Lender, and Issuing Lender shall sell and assign to each such Revolving
Loan Lender, such Revolving Loan Lender’s Pro Rata Share of any outstanding
Letter of Credit Advance as of the date of such purchase, by making available
to Agent for the account of Issuing Lender, by deposit to the Agent’s Account,
in same day funds, an amount equal to the portion of the outstanding principal
amount of such Letter of Credit Advance to be purchased by such Revolving Loan
Lender.  If such Revolving 


 


46

















 


Loan Lender shall pay to Agent such amount
for the account of Issuing Lender, such amount so paid in respect of principal
shall constitute a Revolving Loan Advance made by such Revolving Loan Lender
for purposes of this Agreement, and the outstanding amount of the Letter of
Credit Advances shall be reduced by such amount.  Promptly after receipt thereof, Agent shall
transfer such funds to Issuing Lender. 
Borrower hereby agrees to each such sale and assignment.  Each Revolving Loan Lender unconditionally
agrees to purchase its Pro Rata Share of an outstanding Letter of Credit
Advance on (i) the Business Day on which demand therefor is made by
Issuing Lender, provided notice of such demand is given not later than 11:00 a.m.
(Charlotte, North Carolina time) on such Business Day, or (ii) the first
Business Day next succeeding such demand if notice of such demand is given
after such time.  Upon any such
assignment by Issuing Lender to any Revolving Loan Lender of a portion of a
Letter of Credit Advance, Issuing Lender represents and warrants to such
Revolving Loan Lender that Issuing Lender is the legal and beneficial owner of
such interest being assigned by it, free and clear of any Liens, but makes no
other representation or warranty and assumes no responsibility with respect to
such Letter of Credit Advance, the Loan Documents or any Lender Party.  If and to the extent that any Revolving Loan
Lender shall not have so made the amount of such Letter of Credit Advance
available to the Agent, such Revolving Loan Lender agrees to pay to Agent
forthwith on demand of Agent such amount together with interest thereon, for
each day from the date of demand by Issuing Lender until the date such amount
is paid to Agent for its account or the account of Issuing Lender, as
applicable, at a rate per annum equal to the greater of (i) the Federal
Funds Rate, or (ii) the Adjusted ABR Rate.


 


4.7           Failure to Purchase Pro Rata Share of Letter
of Credit Advances.  The
failure of any Lender to purchase its Pro Rata Share of any Letter of Credit
Advance as required in Section 4.6 shall not relieve any other Lender of
its obligation hereunder to purchase its Pro Rata Share of such Letter of
Credit Advance, but no Lender shall be responsible for the failure of any other
Lender to purchase its Pro Rata Share of any Letter of Credit Advance.


 


4.8           Letter of Credit Reports.  Issuing Lender shall furnish to Agent and
each Revolving Loan Lender on request (such request to be made not more
frequently than monthly) a written report summarizing issuance and expiration
dates of the Letters of Credit issued by Issuing Lender and drawings under all
Letters of Credit.


 


ARTICLE V


 


5.             THE TERM LOAN


 


5.1           General Terms.  Subject to the terms hereof, Term Loan
Lenders will lend to Borrowers in a single Term Loan Borrowing at the Closing,
an amount which shall not exceed the Term Loan Commitment, which Term Loan
Borrowing shall consist of Term Loan Advances made simultaneously by the Term
Loan Lenders Pro Rata.


 


5.2           The
Term Notes.  Borrowers’ obligation to
repay the Term Loan shall be evidenced by the Term Notes.


 


47

















 


5.3           Interest Rate.  Interest on the Term Loan shall be calculated
as follows:


 


(A)          Except as provided in the immediately
succeeding subparagraphs (B) and (C), during the entire term of the Term
Notes, the outstanding principal balance of the Term Notes shall bear interest
at the Adjusted LIBOR Market Index Rate.


 


(B)           A Borrower’s Representative may from time to
time deliver to Agent a Notice of Borrowing or a Notice of
Continuation/Conversion, electing to have all or a portion of the outstanding
principal balance of the Term Loan accrue interest based on the LIBOR Rate, in
which case the applicable LIBOR Rate Borrowing shall bear interest at the
Adjusted LIBOR Rate during the applicable LIBOR Rate Interest Period.  Following the expiration of any applicable
LIBOR Rate Interest Period, if a Borrower’s Representative shall not have
timely and properly delivered a Notice of Conversion/Continuation electing a
LIBOR Rate Interest Period to commence as of the expiration of the applicable
expiring LIBOR Rate Interest Period, then the applicable LIBOR Rate Borrowing
shall automatically bear interest at the Adjusted LIBOR Market Index Rate.


 


(C)           A Borrower’s Representative may from time to
time deliver to Agent a Notice of Borrowing or a Notice of
Continuation/Conversion, electing to have all or a portion of the outstanding
principal balance of the Term Loan accrue interest based on the ABR Rate, in
which case such ABR Rate Borrowing shall bear interest at the Adjusted ABR Rate.  Such ABR Rate Borrowing shall continue to
bear interest at the Adjusted ABR Rate until such time as a Borrower’s
Representative shall have delivered to Agent a Notice of
Continuation/Conversion, electing to have such ABR Borrowing bear interest at
the Adjusted LIBOR Market Index Rate or the Adjusted LIBOR Rate.


 


(D)          Notwithstanding the foregoing, there shall not be more than four (4) Borrowings
outstanding at any time with respect to the Term Loan.


 


5.4           Payments of Principal and Interest.  Principal and interest on the Term Loan shall
be payable as follows:


 


(A)          On the first Interest Payment Due Date
following the date of the Term Notes, and on each successive Interest Payment
Due Date thereafter until the entire indebtedness evidenced by the Term Notes is
paid in full, Borrowers shall pay to Agent for the account of the Term Loan
Lenders (based on each Term Loan Lender’s Term Loan Credit Percentage at such
time) all accrued and unpaid interest on the outstanding principal balance of
the Term Notes.


 


(B)           On the first Principal Payment Due Date
following the date of the Term Notes, and on each successive Principal Payment
Due Date thereafter until the entire indebtedness evidenced by the Term Notes
is paid in full, Borrowers shall pay to Agent for the account of the Term Loan
Lenders (based on each Term Loan Lender’s Term Loan Credit Percentage at such
time) a principal payment each in the amount of (i) on the first
twenty-four (24) Principal Payment Due Dates, $458,333.33; and (ii) thereafter,
$666,667.00.


 


(C)           If not earlier demanded pursuant to Section 11.3
hereof, the outstanding principal balance of the Term Loan, together with all
accrued and unpaid interest thereon, shall 


 


48

















 


be due and payable to Agent for the account
of the Term Loan Lenders (based on each Term Loan Lender’s Term Loan Credit
Percentage at such time) on the Term Loan Maturity Date.


 


5.5           Use of Proceeds of Term Loan.  The proceeds of the Term Loan shall be used
to refinance Existing Indebtedness of Borrowers and to purchase certain assets
in accordance with the terms of the Air Products APA.


 


ARTICLE VI


 


6.             PAYMENTS, ADDITIONAL COSTS, ETC.


 


6.1           Payment
to Agent.


 


(A)          All monies payable to Lender Parties under
this Agreement or under any other Loan Document shall be paid directly to Agent
in immediately available funds at the Place for Payment.  If Agent shall send Borrowers statements of
amounts due hereunder, such statements shall be considered correct and
conclusively binding on Borrowers unless Borrower notifies Agent to the
contrary within thirty (30) days of its receipt of any statement which it deems
to be incorrect.  Alternatively, at its
discretion, Agent may charge against any deposit account of Borrower all or any
part of any amount owed by Borrower hereunder.


 


(B)           All payments to be made by Borrower hereunder
will be made to Agent not later than 1:00 p.m. at the Place for
Payment.  Payments received after 1:00 p.m.
at the Place for Payment shall be deemed to be payments made prior to 1:00 p.m.
at the Place for Payment on the next succeeding Business Day.  Borrower hereby authorizes Agent to charge
its accounts with Agent in order to cause timely payment of amounts due
hereunder to be made.


 


(C)           At the time of making each such payment,
Borrower shall, subject to the other terms and conditions of this Agreement,
specify to Agent the Loan or other obligation of Borrower hereunder to which
such payment is to be applied.  In the
event that Borrower fails to so specify the relevant Loan or if an Event of
Default shall have occurred and be continuing, Agent may apply such payments as
it may determine in its discretion.


 


6.2           Late Payments.  If any scheduled payment, whether principal,
interest or principal and interest, is late fifteen (15) days or more, Borrower
agrees to pay a late charge equal to five percent (5%) of the amount of the
payment which is late, but not more than the lesser of $10,000.00 or the
maximum amount allowed by applicable Laws. 
The foregoing provision shall not be deemed to excuse a late payment or
be deemed a waiver of any other rights Lender Parties may have under this
Agreement, including, subject to the terms hereof, the right to declare the
entire unpaid principal and interest on all Loans immediately due and payable.


 


6.3           Prepayment.


 


(A)          Borrower may prepay or
cause to be prepaid the principal of the Loans in whole or, from time to time,
in part, without premium or penalty; provided, however, that except as may be
agreed between Borrower and Swing Line Lender with respect to the Swing Line
Loan, partial prepayments shall be in an aggregate principal amount of not less
than $25,000.00 (or, if greater, in integral multiples of $25,000.00 in excess
thereof).


 


49

















 


(B)           All partial
prepayments, whether voluntary or mandatory, shall be applied against principal
and interest as Agent may determine in its discretion (subject to the
provisions of the Intercreditor Agreement), provided that no prepayment shall
entitle Borrowers to cease making any payment as otherwise scheduled hereunder.


 


(C)           No prepayment of any
Loan shall alter the notional amount of any transaction under any Lender Party
Swap Document or otherwise affect any Borrower Party’s obligations under any
Lender Party Swap Documents, which shall remain in full force and effect
notwithstanding such prepayment, subject to the terms of such Lender Party Swap
Documents.


 


6.4           Default Rate.  Notwithstanding any provision herein or in
any other Loan Document to the contrary, upon the occurrence and during the
continuance of an Event of Default, the Interest Rate payable on the Loans
shall be the Default Rate.


 


6.5           No Setoff or Deduction.  All payments of principal of and interest on
the Loans and other amounts payable by Borrowers hereunder shall be made by
Borrowers without setoff or counterclaim, and, subject to the next succeeding
sentence, free and clear of, and without deduction or withholding for, or on
account of, any present or future taxes, levies, imposts, duties, fees,
assessments, or other charges of whatever nature, imposed by any Governmental
Authority, or by any department, agency or other political subdivision or
taxing authority.  If any such taxes,
levies, imposts, duties, fees, assessments or other charges are imposed,
Borrowers will pay such additional amounts as may be necessary so that payment
of principal of and interest on the Loans and other amounts payable hereunder,
after withholding or deduction for or on account thereof, will not be less than
any amount provided to be paid hereunder and, in any such case, Borrowers will
furnish to Agent certified copies of all tax receipts evidencing the payment of
such amounts within 30 days after the date any such payment is due pursuant to
applicable Laws.


 


6.6           Payment on Non-Business Day; Payment
Computations.  Except as
otherwise provided in this Agreement to the contrary, whenever any installment
of principal of, or interest on, any Loan or other amount due hereunder becomes
due and payable on a day which is not a Business Day, the maturity thereof
shall be extended to the next succeeding Business Day (unless such next
succeeding Business Day does not fall within the same calendar month, in which
case the maturity thereof shall be shortened to the immediately preceding
Business Day).  In the case of any
extension in the time for payment of any installment of principal, interest
shall be payable thereon at the rate per annum determined in accordance with
this Agreement during such extension.


 


6.7           Indemnification.  If Borrowers make any payment of principal
with respect to any LIBOR Rate Borrowing on any other date than the last day of
a LIBOR Rate Interest Period applicable thereto, or if Borrowers fail to borrow
any LIBOR Rate Borrowing after notice has been given to Agent in accordance
with this Agreement, or if Borrowers fail to make any payment of principal or
interest in respect of any LIBOR Rate Borrowing when due, Borrowers shall
reimburse the applicable Lender on demand for any resulting loss or expense
incurred by such Lender, including without limitation any loss incurred in
obtaining, liquidating or employing deposits from third parties, whether or not
such Lender shall have funded or committed to fund such LIBOR Rate Borrowing.  A statement as to the amount of such loss or 


 


50

















 


expense, prepared in good faith and in
reasonable detail by such Lender and submitted by such Lender to Borrowers,
shall be conclusive and binding for all purposes absent manifest error in
computation.  Calculation of all amounts
payable to a Lender under this Section shall be made as though such Lender
shall have actually funded or committed to fund such LIBOR Rate Borrowing
through the purchase of an underlying deposit in an amount equal to the amount
of such LIBOR Rate Borrowing in the relevant market and having a maturity
comparable to the related LIBOR Rate Interest Period and through the transfer
of such deposit to a domestic office of such Lender in the United States;
provided, however, that each Lender may fund such LIBOR Rate Borrowing in any
manner it sees fit and the foregoing assumption shall be utilized only for the
purpose of calculation of amounts payable under this Section.


 


6.8           360-Day Year.  All interest payable under the Notes and all
fees payable to Lender Parties shall be calculated on the basis of a 360-day
year by multiplying the applicable amount by the applicable per annum rate,
multiplying the product thereof by the actual number of days elapsed, and
dividing the product so obtained by 360.


 


6.9           No Requirement to Actually Obtain Funds.  Notwithstanding the fact that the Interest
Rate pursuant to the Loans may be calculated based upon Lender’s cost of funds,
Borrowers agree that Lender shall not be required actually to obtain funds from
such source at any time.


 


6.10         Usury Limitation.  If at any time the Interest Rate payable on
the Loans shall be deemed by any competent court of law or any Governmental
Authority to exceed the maximum rate of interest permitted by any applicable
Laws, then, for such time as the Interest Rate would be deemed excessive, its
application shall be suspended and there shall be charged instead the maximum
rate of interest permissible under such Laws, and any excess interest actually
collected by Lender shall be credited as a partial prepayment of principal.


 


6.11         Ratable Sharing.  If any Lender shall obtain any payment or
reduction (including any amounts received as adequate protection of a bank
account deposit treated as cash collateral under the Bankruptcy Code) of any
Credit Agreement Obligation hereunder (whether voluntary, involuntary, through
the exercise of any right of set off or otherwise) in excess of its Pro Rata
Share of payments or reductions on account of such Credit Agreement Obligations
obtained by all of the Lenders, such Lender shall forthwith (i) notify the
other Lenders and Agent of such receipt and (ii) purchase from the other
Lenders such participations in the affected Credit Agreement Obligations as
shall be necessary to cause such purchasing Lender to share the excess payment
or reduction, net of costs incurred in connection therewith, on a Pro Rata
basis, provided that if all or any portion of such excess payment or reduction
is thereafter recovered from such purchasing Lender or additional costs are
incurred, the purchase shall be rescinded and the purchase price restored to
the extent of such recovery or such additional costs, but without
interest.  Borrower agrees that any
Lender so purchasing a participation from another Lender pursuant to this Section 6.11
may, to the fullest extent permitted by Applicable Law, exercise all of its
rights of payment (including the right of set off) with respect to such
participation as fully as if such Lender were the direct creditor of Borrower
in the amount of such participation.


 


51

















 


ARTICLE VII


 


7.             CONDITIONS PRECEDENT


 


The obligation
of Lenders to make the Loans and any Advance hereunder, and the obligation of
Issuing Lender to issue any Letter of Credit, is subject to the following
conditions precedent:


 


7.1           Documents Required for the Closing.  Prior to or concurrently with the Closing,
the following instruments and documents, duly executed by all proper Persons
and in form and substance satisfactory to Agent and Collateral Agent, shall
have been delivered to Agent:


 


(A)          This Agreement;


 


(B)           The Notes;


 


(C)           The Intercreditor
Agreement and copies of the Prudential Loan Documents;


 


(D)          The Pledge Agreement,
together with the original stock certificates, stock powers and other items required to be delivered thereunder;


 


(E)           The Mortgages, together
with the following:


 


(1)           Evidence
that the Mortgages have been duly recorded in all filing or recording offices
that Collateral Agent may deem necessary or desirable in order to create a
valid Lien on the Mortgaged Property in favor of Collateral Agent subject to no
other Liens, and that all filing and recording taxes and fees have been paid;


 


(2)           The
Title Insurance Policies, with the Required Endorsements and in an amount
acceptable to Collateral Agent, issued, coinsured and reinsured by the Title
Insurance Companies, insuring the Mortgages to be a valid Lien on the Mortgaged
Property, free and clear of all Liens (including, but not limited to, mechanics’
and materialmen’s Liens), excepting only Permitted Liens and other Liens
approved by Collateral Agent in its discretion, and providing for such other
affirmative insurance and such coinsurance and direct access reinsurance as
Collateral Agent may deem necessary or desirable;


 


(3)           Such
consents and agreements of lessors, lessees, and other Third Parties, and such
estoppel letters and other confirmations, as Collateral Agent may deem
necessary or desirable;


 


(4)           Evidence
that all other action that Collateral Agent may deem necessary or desirable in
order to create a valid Lien on the Mortgaged Property has been taken;


 


(F)           The Closing Certificates;


 


52

















 


(G)           The Financing Statements, together with
evidence that such Financing Statements have been duly recorded in all filing
or recording offices that Collateral Agent may deem necessary or desirable in
order to perfect Collateral Agent’s Lien on the Collateral, and that all filing
and recording taxes and fees have been paid;


 


(H)          With respect to each
Borrower Party (other than a Borrower Party that is an individual), a
certificate of an officer or other representative acceptable to Agent dated as
of the date of this Agreement, certifying as to the incumbency and signatures
of the representative(s) of such Borrower Party signing, as applicable,
this Agreement and each of the other Loan Documents, and each other document to
be delivered pursuant hereto, together with the following documents attached
thereto:


 


(1)           A copy of the resolutions of such applicable
Person’s Governing Body authorizing the execution, delivery and performance of
this Agreement, each of the Loan Documents, and each other document to be
delivered pursuant hereto, as applicable;


 


(2)           A copy, certified as of the most recent date
practicable by the secretary of state (or similar Governmental Authority) of
the state, province, or other Jurisdiction where such Person is organized, of
such Person’s Organizational Documents filed with such secretary of state (or
similar Governmental Authority);


 


(3)           A copy of such Person’s other Organizational
Documents;


 


(I)            A certificate, as of the most recent date
practicable, of the secretary of state (or similar appropriate Governmental
Authority) and department of revenue or taxation (or similar appropriate
Governmental Authority) of each Jurisdiction in which each Borrower Party
(other than a Borrower Party that is an individual) is organized as to the
existence and good standing of each such Person within such Jurisdiction, and a
certificate, as of the most recent date practicable, of the secretary of state
(or similar appropriate Governmental Authority) of each state where any of the
Collateral is located as to the qualification and good standing of Borrower Party
as a foreign entity doing business in each such state;


 


(J)            A written opinion of counsel to Borrowers,
dated as of the date of Closing and addressed to Lender Parties, in form and
substance acceptable to Agent;


 


(K)          The Most Recent Financial Statements and the
Closing Balance Sheet, each in form and substance acceptable to Agent;


 


(L)           Certificates, in form and substance
satisfactory to Agent, attesting to the Solvency of Borrowers and after giving
effect to the transactions contemplated hereby;


 


(M)         UCC-11 reports showing no Liens superior to
the Collateral Agent’s Lien, except for the Permitted Liens;


 


(N)          An ALTA form survey of
each parcel of Mortgaged Property, each such survey to be in form and substance
reasonably satisfactory to Collateral Agent, certified to Collateral Agent and
the applicable Title Insurance Company and prepared by a land surveyor duly
registered and licensed in the state in which the applicable Mortgaged Property
is located 


 


53

















 


and acceptable to Collateral
Agent, showing all buildings and other improvements, the location of any
easements, rights of way, building set back lines and other dimensional
regulations and the absence of encroachments, either by such improvements or on
to such property, and other defects, other than encroachments and other defects
acceptable to Collateral Agent, and either (i) evidence satisfactory to
Collateral Agent that none of the Mortgaged Property is located in a flood
hazard area, or (ii) a flood insurance policy satisfactory to Collateral
Agent;


 


(O)          An appraisal of the
Equipment and Mortgaged Property to be owned by the Borrower Consolidated Group
after the Closing, made at Borrower’s
expense, which must be by an appraiser engaged and approved by Agent, and in
form and substance satisfactory to Agent, and reflecting a value of the
Collateral satisfactory to Agent;


 


(P)           An
environmental/hazardous substances survey
and report with respect to the Mortgaged Property, as approved by Collateral
Agent;


 


(Q)          Except as may be waived
by Collateral Agent, copies of any Assigned Leases then in effect, together
with any guaranties of such Assigned Leases and estoppel certificates and
subordination, attornment and non-disturbance agreements with respect thereto,
all in form and substance acceptable to Collateral Agent;


 


(R)           Copies of the Air
Products APA Documents, and evidence of the closing of the purchase and sale
the subject thereof;


 


(S)           Evidence satisfactory to Collateral Agent
that Borrowers have obtained all insurance policies as required under this
Agreement or any of the other Loan Documents, together with evidence
satisfactory to Collateral Agent that all premiums therefore have been paid and
that all such policies are in full force and effect; and


 


(T)           Receipt and approval by Agent and Collateral
Agent of all other items reasonably required to be provided to Agent and
Collateral Agent, and not otherwise set forth above.


 


7.2           Certain Events Required for Closing and for
all Advances.  At the time of
the Closing and at the time of each Advance, Agent shall be satisfied that:


 


(A)          No Default shall have occurred and be
continuing;


 


(B)           No Material Adverse Change shall have
occurred;


 


(C)           All of the Loan Documents shall have remained
in full force and effect, and no Borrower Party shall have questioned or
challenged the enforceability of any provision of any of the Loan Documents;


 


(D)          Borrowers shall have paid the Fees and all
other fees, expenses, costs and other amounts then owing to Lender Parties;


 


(E)           All Indebtedness to be prepaid, redeemed or
defeased with the proceeds of any Advance shall have been satisfied and
extinguished contemporaneously therewith;


 


54
















 


(F)           There shall exist no action, suit,
investigation, litigation or proceeding affecting any Borrower Party pending or
threatened before any court, governmental agency or arbitrator that (i) except
as set forth on the attached Schedule
7.2(F), would reasonably be expected to have a Material Adverse
Effect, or (ii) purports to affect the legality, validity or
enforceability of this Agreement or any other Loan Document or the consummation
of the transactions contemplated hereby;


 


(G)           All Governmental Approvals necessary
in connection with the Loan Documents and the transactions contemplated hereby
and thereby shall have been obtained (without the imposition of any conditions
that are not acceptable to Agent) and shall remain in effect other than such
Governmental Approvals the failure to obtain which shall not affect the
enforceability, validity or binding effect of any of the Loan Documents; all
applicable waiting periods shall have expired without any action being taken by
any competent authority; and no Law shall be applicable in the judgment of
Agent that restrains, prevents or imposes materially adverse conditions upon
the Loan Documents and the transactions contemplated hereby and thereby;


 


(H)          Borrower will be able to meet its
obligations under all Plans, that the Plans are, in all material respects,
funded in accordance with the minimum statutory requirements, that no material “reportable
event” (as defined in ERISA, but excluding events for which reporting has been
waived) has occurred as to any such Plan and that no termination of, or
withdrawal from, any such Plan has occurred or is contemplated that could
result in a material liability;


 


(I)            There shall have been delivered to
Collateral Agent evidence of insurance naming Collateral Agent as insured and
loss payee (as applicable) with such responsible and reputable insurance
companies or associations, and in such amounts and covering such risks, as is
satisfactory to Collateral Agent or as otherwise required under any Loan
Document; and


 


(J)            There shall have been delivered to
Agent the Collateral Reports and Compliance Certificates as required under this
Agreement and reflecting compliance with the terms of this Agreement.


 


7.3           Legal Matters.  At the time of Closing, and the disbursement
of each Advance, all legal matters incidental thereto shall be satisfactory to
Burr & Forman LLP, counsel to Agent and Collateral Agent.


 


7.4           Election to Make Advances Prior to Satisfaction of
Conditions Precedent.  In the
event Lender Party, at its option, elects to make one or more Advances prior to
receipt and approval of all items required by this Article, such election shall
not constitute any commitment or agreement of Lender Party to make any
subsequent Advance until all items required by this Article have been delivered.


 


55

















 


ARTICLE VIII


 


8.             COLLATERAL SECURITY


 


8.1           Grant
of Lien.


 


(A)          As security for the prompt satisfaction of
all Secured Obligations, Borrower hereby assigns, transfers, and sets over to Collateral
Agent all of Borrower’s Interest in and
to, and grants Collateral Agent
a Lien on, upon and in the Collateral.


 


(B)           No submission by Borrower to Collateral
Agent of a schedule or other particular
identification of Collateral shall be necessary to vest in Collateral Agent security title to and a security
interest in each and every item of Collateral now existing or hereafter created
and acquired, but rather such title and security interest shall vest in Collateral
Agent immediately upon the creation or
acquisition or any item of Collateral hereafter created or acquired, without
the necessity for any other or further action by Borrower or by Collateral
Agent.


 


8.2           Maintenance of Lien.


 


(A)          Borrower authorizes
Collateral Agent to file one or more Financing Statements (including initial
financial statements and continuation and amendment statements) to perfect
Collateral Agent’s Lien in the Collateral pursuant to the Uniform Commercial
Code, such Financing Statements to be in form and substance as required by Collateral
Agent.


 


(B)           Borrower hereby
appoints Collateral Agent as its attorney-in-fact (without requiring Collateral
Agent to act as such) to file any Financing Statement in the name of Borrower,
and to perform all other acts that Collateral Agent deems appropriate to
perfect and continue Collateral Agent’s Lien and to protect and preserve the
Collateral.


 


(C)           In connection with
Collateral Agent’s Lien, Borrower will:


 


(1)           Execute
and deliver, and cause to be executed and delivered, such documents and instruments,
including amendments to the Security Documents and Financing Statements
(including amendments thereto and continuation statements thereof) in form
satisfactory to Collateral Agent as Collateral Agent, from time to time, may
specify, and pay, or reimburse Collateral Agent upon demand for paying, all
costs and taxes of filing or recording the same in such Jurisdictions as
Collateral Agent may designate; and


 


(2)           Take
such other steps as Collateral Agent, from time to time, may direct to protect,
perfect, and maintain Collateral Agent’s Lien.


 


ARTICLE IX


 


9.             REPRESENTATIONS AND WARRANTIES.


 


Each Borrower
represents and warrants to Lender Parties (provided that it is understood that
each Borrower is making its representations only on its own behalf, and only to
the extent of 


 


56

















 


its knowledge with respect to any other Borrower), knowing that Lender
Parties will rely on such representations and warranties as an inducement to
make the Loans, that:


 


9.1           Existence. 
Each of KMG Chemicals and KMG ECI is a duly organized and existing Texas
corporation in good standing, is duly qualified and in good standing as a
foreign corporation in each other Jurisdiction where the failure to be so
qualified might reasonably be expected to have a Material Adverse Effect.  KMG-Bernuth is a duly organized and existing
Delaware corporation in good standing, is duly qualified and in good standing
as a foreign corporation in each other Jurisdiction where the failure to be so
qualified might reasonably be expected to have a Material Adverse Effect.  Each of KMG Chemicals, KMG-Bernuth and KMG
ECI has full power and authority to consummate the transactions contemplated by
this Agreement.  Each other Member of the
Borrower Consolidated Group is duly organized, validly existing and in good
standing under the Laws of its Jurisdiction of organization, and is duly
qualified and in good standing as a foreign corporation or other entity in each
other Jurisdiction where the failure to be so qualified might reasonably be
expected to have a Material Adverse Effect.


 


9.2           Authority. 
The execution, delivery and performance of all of the Loan Documents
have been duly authorized by all requisite action by each Borrower Party a
party thereto.  All of the Loan Documents
have been duly executed and delivered and constitute valid and binding
obligations of each Borrower Party a party thereto, enforceable in accordance
with their respective terms (except as may be limited by applicable Bankruptcy
Laws and other Laws affecting the enforceability of creditors’ rights generally
and principles of equity), and Lender Parties will be entitled to the benefits
of all of the Loan Documents.


 


9.3           Equity Owners and Equity Agreements.  Set forth on Schedule
9.3 is a complete and accurate list of (i) all holders of
the Equity Interests of the Members of the Borrower Consolidated Group (other
than KMG Chemicals), showing as of the Closing the Equity Interests owned by
each Equity Owner, which Equity Interests have been validly issued, are fully
paid and non-assessable, and are owned by such Persons free and clear of all
Liens; and (ii) all the Equity Agreements.


 


9.4           Name. 
Set forth on Schedule 9.4
is a complete and accurate list of (i) all names under which Borrowers
have done business in the last six years; and (ii) the names of all
Persons whose assets (x) were acquired in the last six years by Borrower
outside of Borrower’s Ordinary Course of Business, (y) were included as
assets of Borrowers on the Most Recent Financial Statements with a market value
of more than $250,000.00, and (z) constitute part of the Collateral.


 


9.5           Material Contracts.  Set forth on Schedule
9.5 is a complete and accurate list of all of the Material
Contracts.


 


9.6           Consents or Approvals.


 


(A)          Except for approvals,
authorizations already obtained and remaining in effect, and notices to and
filings already given and made, no consent or approval of any Third Person, and no authorization,
approval or other action by, and no notice to or filing with, any Governmental
Authority or other Third Person is required with respect to the operation of


 


57

















 


Borrower’s business (unless
the failure to obtain or file such approvals, authorizations, notices and
filings would not reasonably be expected to have a Material Adverse Effect).


 


(B)           No consent of any Third Person and no
authorization, approval or other action by, and no notice to or filing with,
any Governmental Authority or other Third Person that is required has not been
obtained either (i) for the due execution, delivery, recordation, filing
or performance by any Borrower Party of this Agreement or any other Loan
Document or for the consummation of the transaction contemplated hereby, (ii) for
the mortgage, pledge, assignment, or grant by Borrower of Collateral Agent’s
Lien, (iii) for the perfection or maintenance of Collateral Agent’s Lien,
except for the recording of the Mortgages and the Financing Statements, or (iv) for
the exercise by Lender Parties of their rights or remedies provided for in this
Agreement or in any of the other Loan Documents (except as may be required by
applicable Laws in connection with the foreclosure and disposition of the
Collateral).  All applicable waiting
periods, if any, in connection with the transactions contemplated hereby have
expired without any action having been taken by any Person restraining,
preventing or imposing materially adverse conditions upon the rights of
Borrower to enter into and perform its obligations under this Agreement.


 


9.7           Violations or Actions Pending.  There are no actions, suits, or proceedings
pending or, to the best of Borrower’s knowledge, threatened, which might
reasonably be expected to have a Material Adverse Effect or which might
reasonably be expected to impair the value of the Collateral.  No Member of the Borrower Consolidated Group
is in violation of any agreement the violation of which will have, or might
reasonably be expected to have, a Material Adverse Effect, and no Member of the
Borrower Consolidated Group is in violation of any order, judgment or decree of
any court, or any statute or governmental regulation to which such Member of
the Borrower Consolidated Group is subject with respect to which the violation
thereof which will have, or might reasonably be expected to have, a Material
Adverse Effect.  The execution and
performance of any Loan Document by Borrower will not result in any breach of
or default under any mortgage, lease, credit or loan agreement or any other
instrument which may bind or affect Borrower.


 


9.8           Affiliates.  Borrower has no Affiliates (other than
officers and directors) except (i) as disclosed on the attached Schedule 9.8, or (ii) Affiliates
with a Tangible Net Worth of less than $1,000,000.00.


 


9.9           Existing Indebtedness.  No Member of the Borrower Consolidated Group
is in default with respect to any of the Existing Indebtedness.


 


9.10         Defaults Under Material Contracts.  There is not existing any default or event of
default under any Material Contract which might reasonably be expected to have
a Material Adverse Effect.


 


9.11         Tax Returns.  All federal, state, local and other tax
returns and reports of the Borrower Consolidated Group required by Laws to have
been completed and filed have been completed and duly filed, and all taxes,
assessments and withholdings shown on such returns or billed to a Member of the
Borrower Consolidated Group have been paid, and the Borrower Consolidated Group
maintains adequate provisions and accruals in respect of all such federal,


 


58

















 


state, local and other taxes, assessments and
withholdings.  There are no unpaid
assessments pending against any Member of the Borrower Consolidated Group for
any taxes or withholdings, and Borrower knows of no basis therefor.


 


9.12         Financial Statements. All
Financial Statements heretofore given and hereafter given to Lender Parties are
and will be true and complete in all material respects as of their respective
dates and prepared in accordance with Generally Accepted Accounting Principles,
and fairly represent and will fairly represent the financial conditions of the
Persons to which they pertain as of the respective dates thereof, and upon
delivery to Lender Parties, no Material Adverse Change has or will have
occurred after the respective date thereof, except as may be disclosed in
writing to Bank.


 


9.13         Good and Marketable Title.
Borrower has good and marketable title to all of its assets, including, without
limitation, Borrower’s Interest in the Collateral, subject to no Liens, except
for Permitted Liens.


 


9.14         Real Property Locations.  Set forth on Schedule
9.14 is a complete and accurate list of the Real Property,
showing as of the date hereof the street address, county or other relevant
jurisdiction, state, and record owner thereof.


 


9.15         Solvency.  Borrower is Solvent.


 


9.16         ERISA.  Each Plan is and has been administered in
compliance in all material respects with all applicable Laws, including without
limitation, the applicable provisions of ERISA and the Internal Revenue
Code.  No ERISA Event has occurred and is
continuing or, to the knowledge of Borrower, is reasonably expected to occur
with respect to any Plan, in either case that would be reasonably likely, individually
or in the aggregate, to have a Material Adverse Effect.   No Plan has any Unfunded Pension Liability,
and neither Borrower nor any ERISA Affiliate has engaged in a transaction that
could be subject to Section 4069 or 4212(c) of ERISA, in either
instance where the same would be reasonably likely, individually or in the
aggregate, to have a Material Adverse Effect..


 


9.17         Priority of Liens.  Collateral Agent’s Lien constitutes a first
Lien against the Collateral, prior to all other Liens, including those which
may hereafter accrue, except for the Permitted Liens.


 


9.18         Patents, Copyrights, Etc.  Except as disclosed on Schedule
9.18 (i) Borrower has no patents, trademarks, trade names,
service marks or copyrights, and (ii) no Collateral is subject to any
license agreement relating to patents, trademarks, trade names, service marks,
or copyrights, which could, directly or indirectly, preclude or render
impracticable the realization of Collateral Agent’s Lien or materially diminish
the value of such Collateral.  Upon the
occurrence of any Default and demand of Collateral Agent, Borrower shall
promptly execute and deliver to Collateral Agent a Patent and Trademark
Security Agreement in form and substance as may be reasonably required by
Collateral Agent, in order to grant to Collateral Agent a Lien in all of
Borrower’s patents, trademarks, trade names, service marks and copyrights, and
all applications therefor and licenses thereof.


 


59

















 


9.19         Accuracy of Documents.  All documents furnished to Lender Parties by
or on behalf of any Borrower Party as part of or in support of the application
for the Loans or the Loan Documents are true, correct, complete and accurately
represent the matters to which they pertain.


 


9.20         Environmental Matters. Except as disclosed
on Schedule 9.20, or except as would
not reasonably be expected to give rise to a Material Adverse Change, (a) no
Member of the Borrower Consolidated Group nor the Mortgaged Property is in
material violation of or subject to any existing, pending or threatened
investigation or inquiry by any Governmental Authority or any remedial
obligations under any applicable Environmental Laws, and Borrower will promptly
notify Agent if any Responsible Officer becomes aware of any such investigation
or inquiry; (b) except for Governmental Approvals already obtained, no
Member of the Borrower Consolidated Group has obtained or is required to obtain
any Governmental Approvals to construct, occupy, operate or use any buildings,
improvements, fixtures or equipment by reason of any Environmental Laws; and (c) Borrower
covenants and agrees that it will not cause there to be any material violation
of any Environmental Law in connection with the disposal or release of
Petroleum Products, Hazardous Substances, Hazardous Materials or Solid Wastes.


 


9.21         Condemnation. There are no
proceedings pending, or, to the best of Borrower’s knowledge, threatened, to
exercise any power of condemnation or eminent domain, with respect to the
Mortgaged Property, or any interest therein, or to enjoin or similarly prevent
the use of the Mortgaged Property.


 


9.22         Assigned
Agreements.


 


(A)          Borrower is (or, with
respect to any Assigned Agreement hereafter made, will be) the sole owner and
holder of Borrower’s Interest in each Assigned Agreement, and Borrower has not
transferred or otherwise assigned any interest of Borrower as a party to any
Assigned Agreement;


 


(B)           Each of the Assigned
Agreements is (or, with respect to any Assigned Agreements hereafter made, will
be) valid and enforceable in accordance with its respective terms, and in full
force and effect, and has not been (or, with respect to any Assigned Agreements
hereafter made, will not be) altered, modified or amended in any manner
whatsoever except as permitted in this Agreement;


 


(C)           None of the Rents have
been or will be assigned, pledged or in any manner transferred or hypothecated,
except pursuant to this Agreement, and


 


(D)          None of the Rents, for
any period subsequent to the date of this Agreement, has been or will be
collected more than thirty (30) days in advance of the time when such Rents
become due under the terms of the Assigned Leases.


 


9.23         Full Disclosure.  All material factual information heretofore
or contemporaneously furnished to Lender Parties by or on behalf of the Borrower
Consolidated Group for purposes of or in connection with this Agreement and the
transactions contemplated hereby is, and all other such factual information
hereafter furnished to Lender Parties in writing by or on behalf of the
Borrower Consolidated Group will be, true and accurate in all material respects
on the date as of which such information is dated or certified (or, if such
information has 


 


60

















 


been amended or supplemented, on the date as
of which any such amendment or supplement is date or certified) and not made
incomplete by omitting to state a material fact necessary to make the
statements contained therein, in light of the circumstances under which such
information was provided, not materially misleading.


 


9.24         Regulated Industries.  Borrower is not an “investment company,” a
company “controlled” by an “investment company,” or an “investment advisor,”
within the meaning of the Investment Company Act of 1940, as amended.


 


9.25         Insurance.  The assets, properties and business of the
Borrower Consolidated Group are insured against such hazards and liabilities,
under such coverages and in such amounts, as are required under Section 10.4
of this Agreement.


 


9.26         Anti-Terrorism Laws.


 


(A)          General.  Neither Borrower nor any Affiliate of
Borrower is in violation of any Anti-Terrorism Law or engages in or conspires
to engage in any transaction
that evades or avoids, or has the purpose of evading or avoiding, or attempts
to violate, any of the prohibitions set forth in any Anti-Terrorism Law.


 


(B)           Executive
Order No. 13224.


 


(1)           Neither Borrower nor
any Affiliate of Borrower is any of the following (each a “Blocked Person”):


 


(a)           A Person that is listed
in the annex to, or is otherwise subject to the provisions of, Executive Order No. 13224;


 


(b)           A Person owned or
controlled by, or acting for or on behalf of, any Person that is listed in the
annex to, or is otherwise subject to the provisions of, Executive Order No. 13224;


 


(c)           A Person with which any
bank or other financial institution is prohibited from dealing or otherwise
engaging in any transaction by any Anti-Terrorism Law;


 


(d)           A Person that commits,
threatens or conspires to commit or supports “terrorism” as defined in
Executive Order No. 13224;


 


(e)           A Person that is named
as a “specially designated national” on the most current list published by the
U.S. Treasury Department Office of Foreign Asset Control at its official
website or any replacement website or other replacement official publication of
such list; or


 


(f)            A Person who is
affiliated with a Person listed above.


 


(2)           Neither Borrower nor
any Affiliate of Borrower (i) conducts any business or engages in making
or receiving any contribution of funds, goods or services 


 


61

















 


to or for the benefit of any Blocked Person or (ii) deals in, or
otherwise engages in any transaction relating to, any property or interests in
property blocked pursuant to Executive Order No. 13224.


 


9.27         Securities Laws.  Borrower has filed and will continue to file
when and as due all reports required under Section 15(b) of the
Securities Exchange Act of 1934 (provided that any delayed filing shall not
constitute a Default so long as (x) such delayed filing does not continue for
more than one hundred eighty (180) days, (y) Agent is notified of the
delayed filing within thirty (30) days of the original filing due date and is
provided a writing setting forth with reasonable particularity the reasons for
such delayed filing) and (z) if requested by Agent, Borrower will provide
periodic updates with respect to the status of the delayed filing.


 


9.28         Continuing Effectiveness.  All representations and warranties contained
herein shall be deemed continuing, continually republished, and in effect at
all times while Borrower remains indebted to Lender Parties pursuant to the
Loans and shall be deemed to be incorporated by reference at the time of each
Advance unless Borrower specifically notifies Agent of any change therein.


 


ARTICLE X


 


10.           BORROWER’S
COVENANTS


 


Each Borrower
does hereby covenant and agree with each Lender Party that, so long as any of
the Credit Agreement Obligations remain unsatisfied or any commitments
hereunder remain outstanding, such Borrower at all times will comply or cause
to be complied with the following covenants:


 


10.1         Affirmative Covenants.


 


(A)          Borrower will duly and promptly pay and
perform all of Borrower’s Credit Agreement Obligations to Lender Parties
according to the terms of this Agreement, the other Loan Documents and the
Lender Party Swap Documents, and will cause each other Borrower Party to
perform such other Borrower Party’s Credit Agreement Obligations to Lender
Parties according to the terms of this Agreement, the other Loan Documents and
the Lender Party Swap Documents.


 


(B)           Borrower will use the proceeds of the Loans
only for the purposes permitted herein, or as Required Lenders may have
otherwise approved from time to time; and Borrower will furnish Agent such
evidence as it may reasonably require with respect to such uses.


 


(C)           Borrower will furnish or cause to be
furnished to the Lender Parties:


 


(1)           Within forty-five days
after each Quarter-End (a) an unaudited (management-prepared) income
statement of the Borrower Consolidated Group for such Quarter, and (b) an
unaudited (management-prepared) balance sheet of the Borrower Consolidated
Group for such Quarter, all in reasonable detail with Agent having full access
to all supporting schedules and comments, such income statements and balance 


 


62

















 


sheets to be prepared in accordance with
Generally Accepted Accounting Principles consistently applied by the Borrower
Consolidated Group, except for any inconsistencies explained therein; provided,
however, that Borrower providing Bank with a copy of the Form 10-Q filed
with the Securities and Exchange Commission within three (3) Business Days
of such filing shall satisfy the requirements of this paragraph (1);


 


(2)           Within one hundred
twenty (120) days after each Fiscal Year-End (a) a statement of Equity
Owners’ Equity for the Borrower Consolidated Group, (b) an income
statement of the Borrower Consolidated Group for such Fiscal Year, and (c) a
balance sheet of the Borrower Consolidated Group as of the end of such Fiscal
Year, all in reasonable detail, including all supporting schedules and
comments; the statements and balance sheets to be audited by an independent
certified public accountant selected by the Borrower Consolidated Group and
acceptable to Agent, and certified by such accountants to have been prepared in
accordance with Generally Accepted Accounting Principles consistently applied
by the Borrower Consolidated Group, except for any inconsistencies explained in
such certificate; and Agent shall have the right, from time to time, to discuss
any Member of the Borrower Consolidated Group’s affairs directly with such
Person’s accountants, and any such accountants are authorized and directed to
give Agent any information Agent may request at any time regarding the
financial affairs of the Borrower Consolidated Group, and are authorized and
directed to furnish Agent with copies of any documents in their possession
related thereto; provided, however, that Borrower providing Bank with a copy of
the Form 10-K filed with the Securities and Exchange Commission within
three (3) Business Days of such filing shall satisfy the requirements of
this paragraph (2);


 


(3)           Promptly after sending
or making available or filing of the same, copies of all reports, proxy statements
and financial statements (if any) that Borrower sends or makes available to its
Equity Owners and all registration statements and reports that Borrower files
with the Securities and Exchange Commission (or any other similar Governmental
Authority) or any successor Person; and


 


(4)           Within forty-five (45)
days after each Quarter-End, a Compliance Certificate; and


 


(5)           Within forty-five (45)
days after each Quarter-End beginning the Quarter-End of April 30, 2008, a
Collateral Report as of such Quarter-End, certified to be correct by the
principal financial officer of Borrowers (together with a Schedule of Accounts
and Schedule of Inventory if required under Section 10.10 of this
Agreement).


 


(D)          Borrower will pay or cause to be paid when due (i) the Fees and
all other fees and expenses owing to Lender Parties; and (ii) all expenses
involved in perfecting Collateral Agent’s Lien or the priority of Collateral
Agent’s Lien and all other expenses of Lender Parties related to the Loans, or
the protection and preservation of the Collateral, or the interpretation,
administration and enforcement of any provision of this Agreement, or the
preparation and negotiation of this Agreement, any of the other Loan Documents,
or amendments to any of them, including, without limitation, recording fees and
taxes, tax, title and lien search charges, and 


 


63

















 


Attorneys’ Fees (including
Attorneys’ Fees at trial and on any appeal by Borrower or Lender Party), real
property taxes and insurance premiums.


 


(E)           Borrower will permit
Agent, Collateral Agent and their respective agents to have access to the
Collateral at reasonable times.


 


(F)           After the occurrence of a Default and upon demand of Agent or
Collateral Agent, Borrower will cause, or permit Agent or Collateral Agent to
cause, all or any part of the Mortgaged Property and other Tangible Property
comprising part of the Collateral to be appraised (or reappraised) at Borrower’s
expense at any time (but not more than once during any twelve-month period
except (i) after an Event of Default, (ii) if required on account of
the requirements of any Governmental Authority or regulatory authority, or (iii) if
Agent or Collateral Agent in its reasonable discretion determines that there
may have been a material diminution in the value of such Tangible Property).


 


(G)           If any of the information or disclosures provided on any Schedule
originally attached hereto become outdated or incorrect in any material
respect, Borrower shall deliver to Agent as part of a Compliance Certificate
such revision or updates to such Schedule as may be necessary or appropriate to
update or correct such Schedule; provided, that such revisions or updates to
any such Schedule shall only be deemed to have amended, modified or superseded
such Schedule as originally attached hereto, and to have cured any breach of
warranty or misrepresentation resulting from the inaccuracy or incompleteness
of any such Schedule if such revisions or updates to such Schedule would not
otherwise result in a separate and independent Event of Default under the other
terms and provisions of this Agreement.


 


(H)          Borrower will certify to Agent upon request by Agent that:


 


(1)           Borrower has complied
with and is in compliance with all terms, covenants and conditions of this
Agreement which are binding upon it;


 


(2)           There exists no
Default; or, if such is not the case, that one or more specified Defaults have
occurred; and


 


(3)           The representations and
warranties contained in this Agreement are true with the same effect as though
made on the date of such certificate, except for those representations and
warranties which relate to a specific date.


 


(I)            Borrower will, when requested so to do, make
available for inspection and audit by duly authorized representatives of Agent
or Collateral Agent any of its Records, and will furnish Agent and Collateral
Agent any information regarding its business affairs and financial condition
within a reasonable time after written request therefore.  Borrower shall reimburse Agent and Collateral
Agent for all costs associated with such audit if the audit reveals a material
discrepancy in any financial report, statement or other document provided to
Lender Party pursuant to this Agreement.


 


(J)            Borrower will keep accurate and complete
Records, consistent with customary industry practices.


 


64

















 


(K)          Within ten (10) days of Agent’s request therefore, Borrower will
furnish or cause to be furnished to Agent copies of income tax returns filed by
each Member of the Borrower Consolidated Group.


 


(L)           Borrower will pay when due (or within applicable grace periods) all
Indebtedness due Third Parties, unless the failure so to pay such Indebtedness
would not give rise to a Material Adverse Change.


 


(M)         Borrower will notify Agent and Collateral Agent thirty (30) days in
advance of any change in the Jurisdiction of organization of Borrower, any
change in the location of any place of business of Borrower or of the
establishment of any new place of business, or the discontinuance of any
existing place of business.


 


(N)          Borrower
will promptly notify Agent and Collateral Agent in writing if any Responsible
Officer of Borrower obtains knowledge of any of the following:


 


(1)           The occurrence of any
Default or Event of Default, together with a written statement of a Responsible
Officer specifying the nature of such Default or Event of Default, the period
of existence thereof and the action that Borrower has taken and proposes to
take with respect thereto;


 


(2)           The cancellation or
termination of any Material Contract (other than upon the expiration of its
term); and


 


(3)           Any default or event of
default (after the expiration of any applicable grace and cure period) under
any agreement of any Borrower Party with any Person and relating to the
borrowing of money.


 


(O)          Borrower will collect its Accounts and sell its Inventory only in the
Ordinary Course of Business (except in connection with Permitted Transfers of
Assets).


 


(P)           Borrower will:


 


(1)           Fund all its Plans in
accordance with no less than the minimum funding standards of Section 302
of ERISA;


 


(2)           Furnish Bank, upon
request, with copies of all material reports or other statements filed with the
United States Department of Labor or the Internal Revenue Service with respect
to all such Plans; and


 


(3)           Promptly advise Agent
of the occurrence of any Reportable Event or Prohibited Transaction with
respect to any such Plan.


 


(Q)          Borrower
will notify Agent promptly upon Borrower (i) registering securities under Section 12
of the Securities Exchange Act of 1934 or (ii) filing a registration
statement under the Securities Act of 1933.


 


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10.2         Negative Covenants.


 


(A)          No Borrower will permit any Member of the Borrower Consolidated Group
to engage in any business other than the Permitted Lines of Business.


 


(B)           No Borrower will:


 


(1)           permit any Member of the Borrower Consolidated Group to wind up,
liquidate or dissolve its affairs or merge or consolidate with any other Person,
except that the following shall be permitted: (i) Permitted Acquisitions; (ii) Permitted
Transfers of Assets; (iii) any Subsidiary of KMG Chemicals (other than
Borrower) may merge or consolidate with or into any other Subsidiary of KMG
Chemicals; and (iv) any Subsidiary of KMG Chemicals (other than Borrower)
may dissolve, liquidate or wind up its affairs at any time, provided that such dissolution,
liquidation or winding up, as applicable, would not otherwise give rise to a
Default or could not reasonably be expected to have a Material Adverse Effect;


 


(2)           change (i) its legal name or (ii) its jurisdiction of
organization (in each case, including by merging with or into any other entity,
reorganizing, dissolving, liquidating, reorganizing or organizing in any other
Jurisdiction), until (A) it shall have given Collateral Agent not less
than 10 Business Days’ prior written notice, or such lesser notice period
agreed to by Collateral Agent, of its intention so to do, clearly describing
such change and providing such other information in connection therewith as
Collateral Agent may reasonably request and (B) it shall have taken all
action reasonably satisfactory to Collateral Agent to maintain the perfection
and priority of Collateral Agent’s Lien in the Collateral, if applicable.


 


(C)           No Borrower will permit any Member of the Borrower Consolidated Group
to sell, transfer, lease or otherwise dispose of, or enter into any agreement
to sell, lease, transfer, assign or otherwise dispose of, all or any part of
its assets, including, without limitation, the Collateral (other than Permitted
Transfers of Assets).


 


(D)          No Borrower will permit any Member of the Borrower Consolidated Group
to consummate any Acquisition (other than Permitted Acquisitions).


 


(E)           Except for Subsidiaries with a Tangible Net Worth of less than
$1,000,000.00 (each, an “Immaterial Subsidiary”), no Borrower will permit any
Member of the Borrower Consolidated Group to create, acquire or own any
Subsidiary in connection with an Acquisition or otherwise, provided that the sum of the Tangible Net
Worth of all Immaterial Subsidiaries does not exceed $5,000,000.


 


(F)           No Borrower will permit any Member of the Borrower Consolidated Group
to become liable, directly or indirectly, as guarantor or otherwise for any
obligation of any other Person, provided that a Borrower may guaranty
Indebtedness of any other Member of the Borrower Consolidated Group so long as
such guaranty does not otherwise give rise to a Default (and for purposes of
this paragraph (F), such contingent liability shall be included as Indebtedness
of Borrower unless the same is already reflected as Indebtedness on a
Consolidated Basis).


 


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(G)           No Borrower will permit any Member of the Borrower Consolidated Group
to directly or indirectly grant, make, create, incur, assume or suffer to exist
(or enter into or suffer to exist any agreement or restriction that prohibits
or conditions the creation, incurrence or assumption of), any Lien upon or with
respect to any part of the Collateral, whether now owned or hereafter acquired,
or agree to do any of the foregoing, other than Permitted Liens.


 


(H)          No Borrower will issue, redeem, purchase or retire any of its Equity
Interests or grant or issue any warrant, right or option pertaining thereto or
any other security convertible into any of the foregoing, nor otherwise permit
any voluntary transfer, sale, redemption, retirement, or other change in the
ownership of any Equity Interests of Borrower by Borrower if the same would
result in a Change in Control.


 


(I)            No Borrower will permit any Member of the
Borrower Consolidated Group to amend or modify in any material respect any of
its Organizational Documents.


 


(J)            No Borrower will directly or indirectly apply
any part of the proceeds of any Loan to the purchasing or carrying of any “margin
stock” within the meaning of Regulation T, Regulation U or Regulation X, or any
regulations, interpretations or rulings thereunder.


 


(K)          No Borrower will permit any Member of the Borrower Consolidated Group
to treat, store, handle, discharge, or dispose of any Hazardous Materials,
Petroleum Products, or Solid Wastes except in material compliance with all
Environmental Laws or where any such failure in compliance could not reasonably
be expected to result in a Material Adverse Effect.


 


(L)           No Borrower will permit any Member of the Borrower Consolidated Group
to (i) conduct any business or engage in any transaction or dealing with
any Blocked Person, including the making or receiving any contribution of
funds, goods or services to or for the benefit of any Blocked Person; (ii) deal
in, or otherwise engage in any transaction relating to, any property or
interests in property blocked pursuant to Executive Order No. 13224; or (iii) engage
in on conspire to engage in any transaction that evades or avoids, or has the
purpose of evading or avoiding, or attempts to violate, any of the prohibitions
set forth in Executive Order No. 13224 or the USA Patriot Act.  Borrower shall deliver to Agent any
certification or other evidence requested from time to time by Agent, in its
discretion, confirming compliance with this Section 10.2(L).


 


(M)         No Borrower will permit any Member of the Borrower Consolidated Group
to make or permit any material changes in its accounting policies or reporting
practices, except as may be permitted or required by Law or Generally Accepted
Accounting Principles.


 


(N)          Borrower shall not allow KMEX to (i) cease operations of the KMEX
Plant or sell, transfer, lease or otherwise dispose of the KMEX Plant, or (ii) so
long as KMEX’s assets, liabilities, income and losses are included within the
definition of “Consolidated Basis”, sell, transfer, lease or otherwise dispose
of, or enter into any agreement to sell, lease, transfer, assign or otherwise
dispose of, all or any material part of KMEX’s assets (other than the KMEX
Plant) except in KMEX’s Ordinary Course of Business.


 


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10.3         Financial Covenants.


 


(A)          Borrowers will cause the Borrower Consolidated Group to maintain at all
times during the term of this Agreement:


 


(1)           A Fixed Charge Coverage
of not less than (i) from the date of this Agreement through July 31,
2008, 1.25 to 1.0, and (ii) thereafter, 1.5 to 1.0;


 


(2)           A ratio of (i) Funded
Debt to (ii) the sum of Funded Debt plus Equity Owners’ Equity of not more
than (x) from the date of this Agreement through April 30, 2009, 60%,
(y) from May 1, 2009 through April 30, 2010, 50%, and (z) thereafter,
45%; and


 


(3)           A ratio of Funded Debt
to EBITDA of not more than (i) from the date of this Agreement through October 31,
2008, 3.5 to 1.0, and (ii) thereafter, 3.0 to 1.0.


 


(B)           No Borrower will permit any Member of the Borrower Consolidated Group
to declare or pay any Dividends in an amount such that such declaration or
payment would give rise to a Default arising out of the failure to maintain the
covenants required under Section 10.3(A).


 


(C)           No Borrower will permit any Member of the Borrower Consolidated Group
to make any Investment, other than Permitted Investments.


 


(D)          No Borrower will permit any Member of the Borrower Consolidated Group
to incur, create, assume, or permit to exist any Indebtedness, other than
Permitted Indebtedness.


 


(E)           Except
for agreements reflected in the Most Recent Financial Statements, agreements
currently in effect and listed on Schedule
10.3 (E) attached hereto, agreements which provide only for
either Permitted Investments or Permitted Indebtedness, and agreements between
or among Members of the Borrower Consolidated Group, no Borrower will permit any Member of the Borrower
Consolidated Group to enter into any agreement, transaction or series of
transactions where any Affiliate of any Member of the Borrower Consolidated
Group is a party thereto, (i) except in the Ordinary Course of Business or
(ii) unless the Governing Body of the applicable Member of the Borrower
Consolidated Group has approved such agreement or transaction.


 


(F)           No
Borrower will permit any Member of the
Borrower Consolidated Group to enter into any agreement with respect to
the Prudential Obligations, nor any of its Existing Indebtedness which is
Indebtedness for borrowed money, if the effect of such agreement is to:


 


(1)           Increase the interest
rate on such Indebtedness or Prudential Obligations, or materially change the
computation or component of the interest rate or yield provisions;


 


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(2)           Change the dates upon
which payments of principal, interest or other scheduled payments are due on such
Indebtedness or Prudential Obligations (other than to extend such dates);


 


(3)           Change any default or
event of default or any definition thereof (other than to delete or make less
restrictive any default provision), or shorten any grace or cure period with
respect to such Indebtedness or Prudential Obligations;


 


(4)           Add any material
covenant with respect to such Indebtedness or Prudential Obligations;


 


(5)           Change the redemption
or prepayment provisions of such Indebtedness or Prudential Obligations (other
than to extend the dates therefore or to reduce the premiums payable in
connection therewith); or


 


(6)           Materially increase the
obligations of the applicable Member of the Borrower Consolidated Group
(including any increase in the principal amount of any such Indebtedness) or
confer additional material rights to the holder of such Indebtedness or
Prudential Obligations in a manner adverse to any Member of the Borrower
Consolidated Group or Lender Party.


 


(G)           Borrower
shall not permit the Borrower Consolidated Group to make Capital Expenditures
in an aggregate amount in excess of $10,000,000.00 in any consecutive
twelve-month period.


 


10.4         Insurance and
Insurance Proceeds.


 


(A)          Borrower
shall cause the assets, properties and business of the Borrower Consolidated
Group to be insured against such hazards and liabilities, under such coverages
and in such amounts, as are customarily maintained by prudent companies
similarly situated and under policies issued by insurers of recognized
responsibility.  Upon request of
Collateral Agent, Borrower shall provide (and shall cause the other Members of
the Borrower Consolidated Group to provide) Collateral Agent with insurance
certificates and copies of insurance policies then in effect (it being agreed
that no Member of the Borrower Consolidated Group shall be required to maintain
coverages for (i) products liability insurance on Borrowers’ wood treating
products, nor (ii) business interruption insurance, except for the
Mortgaged Property located in Pueblo, Colorado).


 


(B)           Borrower
shall cause (i) each general liability insurance policy to name Collateral
Agent as additional insured, (ii) each casualty insurance policy insuring
any Collateral to name Collateral Agent as loss payee (and with respect to any
Mortgaged Property, a mortgagee), and (iii) all such policies to provide
that such policies will not be canceled or materially changed without thirty
(30) days prior written notice to Collateral Agent.


 


(C)           Any
Net Cash Proceeds payable under any insurance policy on account of damage or
destruction to the Mortgaged Property shall be paid to Collateral Agent as a
prepayment of the principal indebtedness owing under the Term Note; provided
that such Net Cash Proceeds shall be paid to Borrower so long as (1) no
Event of Default exists at the time of 


 


69

















 


payment, and Collateral Agent
determines in its reasonable discretion that the occurrence of such casualty
event would not reasonably be expected to result in an Event of Default (including
an Event of Default on account of loss of income occasioned by such casualty
event); and (2) as soon as reasonably practicable following the casualty
event, Borrower provides evidence reasonably satisfactory to Collateral Agent
that such Net Cash Proceeds will be applied (i) to the repair or
restoration of the Mortgaged Property so damaged, or to the construction of a
replacement facility for the property damaged or condemned, or to the expansion
of the productive capacity of an existing facility in lieu thereof (and, unless
waived by Required Lenders, Borrower shall execute such documents and
instruments as may be necessary or appropriate in Collateral Agent’s reasonable
discretion to cause such replacement facility or expanded facility to constitute
part of the Collateral); or (ii) if approved by Collateral Agent, to the
purchase of other assets to be used in the operation of the business of a
Member of the Borrower Consolidated Group.


 


10.5         Borrower’s General
Covenants and Agreements Pertaining to the Collateral.  Borrower covenants and agrees that:


 


(A)          The addresses of Borrower’s principal place of business (or chief
executive office if more than one), the office where Borrower keeps and will
keep Borrower’s Records, including, without limitation, those Records
concerning all of Borrower’s Accounts and the other Collateral, and the place
or places at which all of Borrower’s Inventory, Equipment and other Tangible
Property is and will be located are correctly set forth on Schedule 10.5(A); and Borrower shall
immediately advise Agent and Collateral Agent in writing of any change in any
of said addresses.  Borrower shall not
remove such Records from the place or places set forth on Schedule 10.5(A), nor
shall Borrower keep any of such Records at any other locations unless (i) Borrower
gives Agent and Collateral Agent at least 10 days’ written notice thereof and
of the new location, and (ii) the new location is within the continental
United States of America.  Borrower shall
give Agent and Collateral Agent at least 10 days’ prior written notice of
Borrower’s opening of any new office or place of business, and any such office
or place of business shall be within the continental United States of America.


 


(B)           Subject to any Permitted Transfers of Assets, Borrower is and shall
remain the owner of all real estate on which any of the locations described in
subparagraph (A) next above are located; or if not, except as otherwise
agreed to by Agent or Collateral Agent, Borrower has heretofore obtained from
each owner of said real estate a written waiver or subordination (in form and
substance reasonably satisfactory to Agent and/or Collateral Agent) of any
landlord’s Lien or other Lien said owner might have with respect to the
Collateral, and Borrower has delivered the same to Collateral Agent.


 


(C)           Upon request of Agent or Collateral Agent, Borrower shall promptly
deliver to Collateral Agent the
certificates of title for any motor vehicles now or hereafter included in the
Collateral that are subject to the title Laws of any state of the United States
of America or any other Jurisdiction and shall join with Collateral Agent in executing any applications and other
documents and taking any other actions necessary or desirable in Collateral
Agent’s opinion to perfect Collateral
Agent’s Lien in such vehicles.  Collateral
Agent may retain possession of such
certificates of title until payment in full of all the Secured Obligations
and/or until Collateral Agent’s Lien is terminated.


 


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(D)          Agent and Collateral Agent may correct any and all patent errors in any
financing statements filed in connection herewith.


 


(E)           Borrower shall furnish to Agent and Collateral Agent from time to time
statements and schedules further identifying and describing the Collateral and
such other reports in connection with the Collateral as Agent or Collateral
Agent may request, all in reasonable detail.


 


(F)           Borrower shall keep and maintain at its own cost and expense
satisfactory and complete Records of the Collateral, including without
limitation, a record of all payments received and all credits granted with
respect to the Collateral and all other dealings with the Collateral.  Upon request of Agent or Collateral Agent, Borrower shall make proper entries in its
books disclosing the assignment of the Collateral to Collateral Agent, and Borrower shall segregate its
Records concerning the Collateral and mark the Collateral with Collateral
Agent’s name or in such other manner as
shall be satisfactory to Agent and Collateral Agent.  After the occurrence of
and during the continuance of any Default, Borrower shall deliver and turn over
to Agent or Collateral Agent any
such Records at any time on demand of Agent or Collateral Agent.


 


(G)           Promptly upon written request of Agent or Collateral Agent, Borrower
shall exercise commercially reasonable efforts to obtain a waiver of any lien
claims or rights that any owners or mortgagees of any real estate (or of any
possessory interest therein) on which the Collateral, or any part thereof, is
now or hereafter may be located, may have with respect to the Collateral, or
shall secure an agreement wherein such Persons subordinate their rights,
titles, interests and lien claims to Collateral Agent’s Lien in, on and upon
the Collateral.


 


(H)          Promptly upon written request of Agent or Collateral Agent, Borrower
shall provide Agent and Collateral Agent with copies of all agreements between
Borrower and any warehouse at which any Collateral may, from time to time, be
kept and all lease or similar agreements between Borrower and any other Person,
whether Borrower is lessor or lessee thereunder.


 


(I)            If any Account arises out of a contract with
the United States of America, or any other Governmental Authority, Borrower
shall promptly notify Agent and Collateral Agent thereof in writing and execute
any instruments and take any other action required or requested by Agent or
Collateral Agent to perfect Collateral Agent’s Lien on and right to collect
such Account under the provisions of the Assignment of Claims Act or other
applicable Law.


 


(J)            Borrower shall promptly notify Agent and
Collateral Agent in writing of the initiation of any Commercial Tort Claim
seeking damages on behalf of Borrower in excess of $500,000.00.  Borrower shall execute and deliver such
statements, documents and notices and do and cause to be done all such things
as Agent or Collateral Agent may reasonably deem necessary or appropriate to
create, perfect and maintain Collateral Agent’s Lien upon any Commercial Tort
Claim.


 


10.6         Collection of Accounts; Segregation of
Proceeds, Etc.  Borrower
covenants and agrees that, except to the extent that Agent’s or Collateral
Agent’s exercise of its rights and remedies hereunder or under any other Loan
Document shall prevent Borrower from doing so, 


 


71

















 


Borrower will, at Borrower’s sole expense,
collect from the Account Debtor on each Account all amounts due thereon as and
when the same shall become due; and in the event of any default by any Account
Debtor justifying such action, Borrower shall have the authority, at Borrower’s
sole expense, to repossess any merchandise covered by any such Account in
accordance with the terms thereof and any applicable Law and to take such other
action with respect to any such Account or the merchandise covered thereby as
Borrower, in the absence of instructions from Agent or Collateral Agent, may
deem advisable.


 


10.7         Collection Methods.  Borrower agrees that no court action or other
legal proceedings for garnishment, attachment, repossession of property,
detinue, or any attempt to repossess any merchandise covered by any Account
other than through legal proceedings, shall be done or attempted to be done by
Borrower except by or under the direction of competent legal counsel.  Borrower agrees to indemnify and hold Lender
Party harmless from any loss or liability of any kind or character which may be
asserted or sought to be asserted against Lender Party by virtue of any suit
filed, process issued or any repossession or attempted repossession done or
attempted by Borrower or at Borrower’s direction or any endeavors that Borrower
may make to collect or enforce any Accounts or repossess any goods covered by
any Account.


 


10.8         Verification of Accounts.  Borrower agrees that any of Agent’s or
Collateral Agent’s officers, employees or agents shall have the right, at any
time or times hereafter, in Agent’s or Collateral Agent’s name or in the name
of Borrower, to verify with any Account Debtor the validity or amount of, or
any other matter relating to, any Accounts by mail, telephone, telegraph or
otherwise.


 


10.9         Notice Regarding Disputed Accounts.  Borrower covenants and agrees that in the
event any Eligible Account is subject to a dispute between any Account Debtor
and Borrower where the amount in controversy exceeds $500,000.00, Borrower
shall promptly provide Agent and Collateral Agent with written notice thereof,
explaining in detail the reason for the dispute, all claims related thereto and
the amount in controversy.


 


10.10       Records, Schedules and Assignments.  Borrower covenants and agrees that Borrower
shall keep accurate Records of Borrower’s Accounts and Inventory, and shall
promptly deliver to Agent and/or Collateral Agent, within 15 days after demand
of Agent and/or Collateral Agent (i) a detailed aged trial balance, in
form and substance acceptable to Agent and Collateral Agent, of all
then-existing Accounts (“Schedule of Accounts”), (ii) a current schedule
of Inventory (“Schedule of Inventory”), (iii) the original or a copy of
all Documents evidencing or relating to the Accounts or Inventory so scheduled,
(iv) such other information relating to the then-existing Accounts and
Inventory as Agent or Collateral Agent shall reasonably request, and (v) formal
written assignments or schedules specifically describing the Accounts and
Inventory and confirming Collateral Agent’s Lien thereon.


 


10.11       Visitation.  Borrower
agrees to permit representatives of Agent and Collateral Agent from time to
time to visit and inspect the Collateral, all Records related thereto, the
premises upon which any of the Collateral is located, and any of the other
offices and properties of Borrower; to examine the assets, books of account,
and Records of Borrower; to discuss the affairs and finances of Borrower with
and be advised as to the same by the officers thereof; and 


 


72

















 


to verify the amount, quantity, value and
condition of, or any other matter relating to, the Collateral, all at such
reasonable times and intervals as Agent and Collateral Agent may desire.


 


10.12       Use of Tangible Property. 
Borrower covenants and agrees (a) to comply with all applicable
Laws governing the use of all Tangible Property (except where a failure to so
comply with such Laws would cause a Material Adverse Effect), (b) to
maintain all Tangible Property in good condition and repair (normal wear and
tear excepted), (c) to comply with the material terms of any lease
covering the premises wherein any Tangible Property is located and to comply
with all material requirements of any Governmental Authority concerning such
premises or the conduct of business therein where a failure to so comply with
such lease terms or Laws would cause a Material Adverse Effect; and (d) not
to lease any of the Tangible Property to any Person or permit the same to be
leased or used for hire otherwise than pursuant to any Permitted Liens.


 


10.13       Collateral Evidenced by Instruments or Documents.  Borrower covenants and agrees that upon Borrower’s
receipt of any Collateral which is evidenced or secured by an agreement,
Instrument, Document or Chattel Paper and upon demand of Agent or Collateral
Agent, Borrower shall deliver the original thereof (or each executed or
original counterpart if more than one) to Collateral Agent, together with
appropriate endorsements and/or assignments in form and substance acceptable to
Collateral Agent.


 


10.14       Maintaining Bank Accounts. 
Borrower covenants and agrees that until the termination of Collateral
Agent’s Lien:


 


(A)          Except for bank accounts that have average monthly collected balances
of less than $100,000.00 (in the aggregate), Borrower shall maintain all of its
bank accounts (collectively, the “Bank Accounts”), including any Deposit
Accounts and disbursement accounts, only with Wachovia  (the “Approved Bank Accounts”); provided
however, during the period of time that a Transition Services Agreement is in
effect, Borrowers may maintain and make deposits to and disbursements from the
bank accounts established and maintained thereunder.


 


(B)           Upon the occurrence and during the continuance of a Default and the
demand of Collateral Agent, Borrower shall maintain lockboxes and blocked
deposit accounts (each a “Lockbox Account”) only with Wachovia and with other
banks (each a “Lockbox Bank”) that have entered into letter or other agreements
(each a “Lockbox Agreement”) approved by and acceptable to Collateral Agent in
its discretion.


 


(C)           Upon the occurrence and during the continuance of a Default and the
demand of Collateral Agent, Borrower shall promptly instruct each Person
obligated at any time to make any payment to Borrower for any reason to make
such payment to a Lockbox Account, and shall pay to Collateral Agent for
deposit in an Approved Bank Account as may be from time to time designated by
Collateral Agent, at the end of each Business Day, all proceeds of Collateral
and all other cash received by it on such day.


 


(D)          Borrower shall instruct each Lockbox Bank to transfer to an Approved
Bank Account designated by Collateral Agent, at the end of each Business Day,
in same day funds, an amount equal to the credit balance of the Lockbox Account
in such Lockbox Bank.


 


73

















 


(E)           Upon any termination of any Lockbox Agreement or other agreement with
respect to the maintenance of a Lockbox Account by Borrower or any Lockbox
Bank, Borrower shall immediately notify all Persons that were making payments
to such Lockbox Account to make all future payments to another Lockbox Account
or to an Approved Bank Account designated by Collateral Agent.  Borrower agrees to terminate any or all
Lockbox Account and Lockbox Agreements upon request by Collateral Agent.


 


10.15       Filing Fees and Taxes. 
Borrower covenants and agrees to pay all recording and filing fees,
revenue stamps, taxes and other expenses and charges payable in connection with
the execution and delivery to Lender Parties of this Agreement and the other
Loan Documents, and the recording, filing, satisfaction, continuation and
release of any mortgages, financing statements or other instruments filed or
recorded in connection herewith or therewith.


 


10.16       Assigned Agreements. 
Except in Borrower’s Ordinary Course of Business, Borrower covenants and
agrees that it shall not (a) cancel or terminate any Assigned Agreement or
consent to or accept any cancellation or termination thereof; (b) amend or
otherwise modify any Assigned Agreement or give any consent, waiver or approval
thereunder; (c) waive any default or breach of any Assigned Agreement; or (d) take
any other action in connection with any Assigned Agreement, and,
notwithstanding the foregoing, in each case where any such action may give rise
to a Material Adverse Change, such action shall only be taken with Agent’s
prior written consent.


 


10.17       Air Products APA Documents. 
Borrower shall (a) observe and perform in all material respects all
the obligations imposed upon Borrower under the Air Products APA Documents; (b) promptly
send to Agent copies of each material notice which Borrower shall send or
receive under the Air Products APA Documents (including, but not limited to,
the “Statement” as defined in Section 2.01(a) of the Air Products
APA, any “Notice of Disagreement” as defined in Section 2.01(b) of
the Air Products APA, any updates to the Seller Disclosure Letter as provided
for in Section 5.02(b)(i) of the Air Products APA, and any notice of
termination as provided for in Section 8.01(a)(i) of the Air Products
APA); (c) enforce the performance and observance of the material
provisions of the Air Products APA Documents; (d) not alter, modify or
change the material terms of the Air Products APA Documents, without the prior
written consent of Agent in each such case; and (e) not cancel or
terminate any material Air Products APA Document except in accordance with its
terms.


 


10.18       Underlying Documentation. 
Borrower covenants and agrees that Borrower will, at any time a Default
exists and upon the request therefor by Agent or Collateral Agent, promptly
deliver possession to Collateral Agent of any or all of the Material Contracts.


 


10.19       Further Assurances. 
Borrower covenants and agrees that, at Borrower’s cost and expense, upon
request of Agent or Collateral Agent, Borrower shall duly execute and deliver,
or cause to be duly executed and delivered, to Agent and/or Collateral Agent
such further instruments and documents and do and cause to be done such further
acts as may be reasonably necessary or proper in the opinion of Agent,
Collateral Agent or its respective counsel to carry out more effectively the
provisions and purposes of this Agreement.


 


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10.20       Post-Closing Matters. 
Borrower shall satisfy the requirements set forth on Schedule 10.20 on or before the date
specified for such requirements or such later date to be determined by the
Required Lenders.


 


ARTICLE XI


 


11.           DEFAULT


 


11.1         Events of Default.  The occurrence of any one or more of the
following events shall constitute an Event of Default hereunder:


 


(A)          Borrower
shall fail to pay any installment of principal or interest or fee or any other
amount payable under this Agreement or any other Loan Document within three (3) days
after the same becomes due.


 


(B)           Borrower
shall fail to timely perform the covenants set forth in Section 10.1(N), Section 10.2(B),
Section 10.2(C), 10.2(F), Section 10.2(G), Section 10.2(H), Section 10.3(A),
Section 10.3(B), Section 10.3(C), Section 10.3(D), or Section 10.20.


 


(C)           Borrower
shall default in the performance of or compliance with any term contained
herein (other than those referred to in Sections 11.1(A) or (B)) or in any
other Loan Document and such default is not remedied within 30 days after the
earlier of (i) a Responsible Officer obtaining actual knowledge of such
default and (ii) Borrower receiving written notice of such default from
any holder of the Notes (any such written notice to be identified as a “notice
of default” and to refer specifically to this Section 11.1(C)); provided that, with respect to any default
in the performance of or compliance with any term contained in Section 10.1(C),
such 30 day cure period shall be extended for up to an additional 30 days so
long as on or before the 30th day after such default Borrower has provided the
holders of the Notes with unaudited financial statements of the type required
by Section 10.1(C) and Borrower has commenced and continues to
diligently pursue a cure of such default; provided,
further, that with respect to any default in the performance of or
compliance with any term contained herein (other than those referred to in
Sections 11.1 (A) or (B)) or in any other Loan Document resulting from
Borrower’s failure to cause any Foreign Subsidiary to comply with any such
term, such 30 day cure period shall be extended for up to an additional 30 days
so long as such default is capable of being cured and Borrower has commenced
and continues to diligently pursue a cure of such default.


 


(D)          There
shall occur any default, Default, event of default, or Event of Default as
defined and provided under any other Loan Document or any Prudential Loan
Document (after the expiration of any applicable grace and cure period).


 


(E)           There
shall occur any default or event of default (after the expiration of any
applicable grace and cure period) under any agreement of any Borrower Party
with any Person and relating to the borrowing of money.


 


(F)           The
validity or enforceability of this Agreement or any other Loan Document shall
be contested by any Borrower Party, and/or any Borrower Party shall deny that it
has any or further liability or obligation hereunder or thereunder.


 


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(G)           Assignment
or attempted assignment by Borrower of this Agreement, any rights hereunder, or
any Advance to be made hereunder, or the conveyance, lease, mortgage, or any
other alienation or encumbrance of the Collateral or any interest therein
without the prior written consent of Agent and Collateral Agent, except for
transfers permitted hereunder or under any other Loan Document.


 


(H)          Except
as otherwise permitted herein, the transfer of Borrower’s interest in, or
rights under, this Agreement by operation of law or otherwise, including,
without limitation, such transfer by Borrower as debtor in possession under the
Bankruptcy Code, or by a trustee for Borrower under the Bankruptcy Code, to any
Third Person, whether or not the obligations of Borrower under this Agreement
are assumed by such Third Person.


 


(I)            The
institution of a foreclosure or other possessory action against (i) the Mortgaged
Property, or (ii) any of the Collateral other than the Mortgaged Property,
except where such action would not be reasonably expected to have a Material
Adverse Effect.


 


(J)            The
death or dissolution of any Borrower Party, or any Change in Control.


 


(K)          Any
financial statement, representation, warranty or certificate made or furnished
by any Borrower Party to any Lender Party in connection with this Agreement, or
as inducement to any Lender Party to enter into this Agreement, or in any
separate statement or document to be delivered hereunder to any Lender Party,
shall be materially false, incorrect, or incomplete when made.


 


(L)           The
occurrence of any event, act, condition or occurrence of whatever nature
wherein the legality, validity, or enforceability of any provision of any Loan
Document is questioned or challenged.


 


(M)         Any
Borrower Party shall admit its inability to pay its debts as they mature, or
shall make an assignment for the benefit of itself or any of its creditors.


 


(N)          Proceedings
in Bankruptcy, or for reorganization of any Borrower Party, or for the
readjustment of any of its debts, under the Bankruptcy Code, as amended, or any
part thereof, or under any other Laws, whether state or federal, for the relief
of debtors, now or hereafter existing, shall be commenced by any Borrower
Party, or shall be commenced against any Borrower Party and shall not be
discharged within sixty (60) days of commencement.


 


(O)          A
receiver or trustee shall be appointed for any Borrower Party or for any
substantial part of its assets, or any proceedings shall be instituted for the
dissolution or the full or partial liquidation of any Borrower Party, and such
receiver or trustee shall not be discharged within thirty (30) days of his
appointment, or such proceedings shall not be discharged within sixty (60) days
of its commencement, or any Borrower Party shall discontinue business or
materially change the nature of its business.


 


(P)           Any
Borrower Party shall suffer a final judgment for payment of money in excess of
$1,000,000.00 and shall not discharge the same within a period of thirty (30)
days unless, pending further proceedings, execution has not been commenced or
if commenced has been effectively stayed.


 


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(Q)          A
judgment creditor of any Borrower Party shall obtain possession of any of the
Collateral with an aggregate value of more than $1,000,000.00 by any means,
including, without limitation, levy, distraint, replevin or self-help.


 


(R)           (i) Any
Member of the Borrower Consolidated Group shall be in default (as principal or
as guarantor or other surety) in the payment of any principal of or premium or
make-whole amount or interest on any Indebtedness that is outstanding in an
aggregate principal amount of at least $3,000,000 beyond any period of grace
provided with respect thereto, or (ii) any Member of the Borrower
Consolidated Group shall be in default in the performance of or compliance with
any term of any evidence of any Indebtedness in an aggregate outstanding principal
amount of at least $3,000,000 or of any mortgage, indenture or other agreement
relating thereto or any other condition exists, and as a consequence of such
default or condition such Indebtedness has become, or has been declared  (or one or more Persons are entitled to
declare such Indebtedness to be), due and payable before its stated maturity or
before its regularly scheduled dates of payment, or (iii) as a consequence
of the occurrence or continuation of any event or condition (other than the passage
of time or the right of the holder of Indebtedness to convert such Indebtedness
into equity interests), (x) any Member of the Borrower Consolidated Group
has become obligated to purchase or repay Indebtedness before its regular
maturity or before its regularly scheduled dates of payment in an aggregate
outstanding principal amount of at least $3,000,000, or (y) one or more
Persons have the right to require any Member of the Borrower Consolidated Group
so to purchase or repay such Indebtedness.


 


(S)           There
shall occur any Casualty or Condemnation Event that results in the loss of
value in the assets the subject of such Casualty or Condemnation Event(s) (i) in
an aggregate amount of more than $5,000,000 in any Fiscal Year (after taking
into account any insurance or condemnation proceeds paid or payable on account
of such Casualty or Condemnation Event(s)); or (ii) in an aggregate amount
of more than $10,000,000.00 subsequent to the date of this Agreement (after
taking into account any insurance or condemnation proceeds paid or payable on
account of such Casualty or Condemnation Event(s)); unless, in each case,
within 30 days after the occurrence thereof, Required Lenders have agreed in
writing that such Casualty or Condemnation Event does not constitute an Event
of Default.


 


(T)           There
shall occur any default, event of default or termination event under any Lender
Party Swap Document for which Borrower Party is a defaulting party or an
affected party.


 


Provided that with respect to each of the
foregoing, an Event of Default will be deemed to have occurred upon the
occurrence of the applicable event without notice being required if Agent or
Collateral Agent is prevented from giving notice by Bankruptcy or other
applicable Law.


 


11.2         No Advances After Default.  Upon the occurrence and during the
continuance of any Default, and notwithstanding any provision contained herein
or in any other Loan Document to the contrary (i) the Swing Line Lender
and the Revolving Loan Lenders shall have the absolute right to refuse to make,
and shall be under no obligation to make, any further Swing Line Loan Advances
or Revolving Loan Advances (other than Advances under Section 3.2(C)); and
(ii) the Issuing Lender shall have the right to refuse to issue any
Letters of Credit.


 


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11.3         Acceleration.  All Credit Agreement Obligations shall, at
the option of Agent (or at the written direction to Agent from the Required
Lenders), become immediately due and payable, Without Notice, upon the
occurrence of an Event of Default without further action of any kind.


 


11.4         General Remedies.  Upon the occurrence of any Event of Default,
Lender Parties shall have, in addition to the rights and remedies given them by
this Agreement and the other Loan Documents, all those allowed by all
applicable Laws, including but without limitation, the Uniform Commercial
Code.  Without limiting the generality of
the foregoing, Agent may (and, at the written direction of the Required
Lenders, shall) immediately, Without Notice, cause Collateral Agent to sell at
public or private sale or otherwise realize upon, the whole or, from time to
time, any part of the Collateral, or any interest which Borrower may have
therein.


 


11.5         Agent’s Additional Rights and Remedies.  Upon the occurrence of any Event of Default
and except as may otherwise be prohibited or expressly provided for to the
contrary under applicable Law, in addition to any rights or remedies Lender
Parties may otherwise have under this Agreement, any other Loan Documents, or
under applicable Laws, Without Notice, Agent shall have the right to (and, at
the written direction of the Required Lenders, shall) take any or all of the
following actions at the same or different times:


 


(A)          To cancel Lender Parties’ obligations arising under this Agreement;


 


(B)           To institute appropriate proceedings to specifically enforce
performance of the terms and conditions of this Agreement;


 


(C)           To cause Collateral Agent to take immediate possession of the
Collateral;


 


(D)          To cause Collateral Agent to appoint or seek appointment of a receiver,
Without Notice and without regard to the solvency of Borrower or the adequacy
of the security, for the purpose of preserving the Collateral, preventing
waste, and to protect all rights accruing to Lender Parties by virtue of this
Agreement and the other Loan Documents. 
All expenses incurred in connection with the appointment of such
receiver, or in protecting, preserving, or improving the Collateral, shall be
charged against Borrower and shall be secured by the Collateral Agent’s Lien;


 


(E)           To cause Collateral Agent to proceed to perform any and all of the
duties and obligations and exercise all the rights and remedies of Borrower
contained in the Assigned Agreements as fully as Borrower could itself;


 


(F)           To
cause Collateral Agent to take possession of the Mortgaged Property and/or the
Rents and have, hold, manage, lease and operate the Mortgaged Property on such
terms and for such period of time as Collateral Agent may in its discretion
deem proper, and, either with or without taking possession of the Mortgaged
Property in Collateral Agent’s own name:


 


(1)           Make any payment or
perform any act which Borrower has failed to make or perform, in such manner
and to such extent as Collateral Agent may deem necessary to protect the
security provided for in this Agreement, or otherwise, including 


 


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without limitation, the right to appear in and defend any action or
proceeding purporting to affect the security provided for in this Agreement, or
the rights or powers of Collateral Agent;


 


(2)           Lease the Mortgaged
Property or any portion thereof in such manner and for such Rents as Collateral
Agent shall determine in its discretion; or


 


(3)           Demand, sue for, or otherwise
collect and receive from all Persons all Rents, including those past due and
unpaid, with full power to make from time to time all alterations, renovations,
repairs or replacements of and to the Mortgaged Property (or any part thereof)
as may seem proper to Collateral Agent and to apply the Rents to the payment of
(in such order of priority as Collateral Agent, in its discretion, may
determine):


 


(a)           All expenses of
managing the Mortgaged Property, including, without limitation, the salaries,
fees and wages of a managing agent and such other employees as Collateral Agent
may deem necessary or desirable;


 


(b)           All taxes, charges,
claims, assessments, water rents, sewer rents, and any other liens, and
premiums for all insurance which Collateral Agent may deem necessary or
desirable, and the cost of all alterations, renovations, repairs, or
replacements, and all expenses incidental to taking and retaining possession of
the Mortgaged Property;


 


(c)           All or any portion of
the Loans; and/or


 


(d)           All costs and Attorneys’
Fees incurred in connection therewith.


 


In connection
with the foregoing, Borrower hereby authorizes and directs each party to any
Assigned Agreement (other than Borrower), upon receipt from Agent or Collateral
Agent of written notice to the effect that an Event of Default exists, to
perform all of its obligations under the Assigned Agreements as directed by
Collateral Agent, and to continue to do as so directed until otherwise notified
by Collateral Agent.


 


(G)           To cause Collateral Agent to notify Account Debtors that Accounts have
been assigned to Collateral Agent,
demand and receive information from Account Debtors with respect to Accounts,
forward invoices to Account Debtors directing them to make payments to Collateral
Agent, collect all Accounts in Collateral
Agent’s or Borrower’s name and take
control of any cash or non-cash proceeds of Collateral;


 


(H)          To cause Collateral Agent to enforce payment of any Accounts, to
prosecute any action or proceeding with respect to Accounts, to extend the time
of payment of any and all Accounts, to make allowances and adjustments with
respect thereto and to issue credits in the name of Collateral Agent or Borrower;


 


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(I)            To cause Collateral Agent to settle,
compromise, extend, renew, release, terminate or discharge, in whole or in
part, any Account or deal with the same as Collateral Agent may deem advisable;


 


(J)            To cause Collateral Agent to require Borrower
to open all mail only in the presence of a representative of Collateral Agent, who may take therefrom any remittance
on Collateral;


 


(K)          To cause Collateral Agent to charge, set-off and otherwise apply all or
any part of the Secured Obligations against the Deposit Accounts, or any part
thereof;


 


(L)           To cause Collateral Agent to exercise any and all rights and remedies
of Borrower under or in connection with any Assigned Agreement or otherwise in
respect of the Collateral, including, without limitation, any and all rights of
Borrower to demand or otherwise require payment of any amount under, or
performance of any provision of, any Assigned Agreement;


 


(M)         To cause Collateral Agent to enter upon the premises of Borrower or any
other place or places where the Collateral is located and kept, and through
self-help and without judicial process, without first obtaining a final
judgment or giving Borrower notice and opportunity for a hearing on the
validity of Collateral Agent’s
claim, without any pre-seizure hearing as a condition to repossession through
court action and without any obligation to pay rent to Borrower, to remove the
Collateral therefrom to the premises of Collateral Agent or of any agent of Collateral Agent, for such time as Collateral Agent may desire, in order effectively to
collect or liquidate the Collateral;


 


(N)          To cause Collateral Agent to require Borrower, upon the request of Collateral
Agent, to assemble the Inventory,
Equipment and any other property included in the Collateral and make it
available to Collateral Agent at
places which Collateral Agent
shall select, whether at Borrower’s premises or elsewhere, and to make
available to Collateral Agent
all of Borrower’s premises and facilities for the purpose of Collateral Agent’s taking possession of, removing or
putting the Inventory and such other goods in salable form;


 


(O)          To cause Collateral Agent to collect, receive, appropriate, repossess
and realize upon the Collateral, or any part thereof, and to sell, lease,
assign, give option or options to purchase, or sell or otherwise dispose of and
deliver the Collateral (or contract to do so), or any part thereof, in one or
more parcels, at public or private sale or sales, at any exchange broker’s
board or at any of Collateral Agent’s
offices or elsewhere, at such prices as Collateral Agent may deem best, for cash or on credit or
for future delivery without assumption of any credit risk.  Collateral Agent shall have the right upon any such public sale or sales, and to
the extent permitted by Law, to purchase the whole or any part of the Collateral
so sold, free of any right or equity of redemption, which equity of redemption
Borrower hereby releases, and Borrower waives all claims, damages and demands
against Collateral Agent arising
out of the repossession, retention or sale of the Collateral;


 


(P)           To cause Collateral Agent to use, and to permit any purchaser of any of
the Collateral from Collateral Agent
to use without charge, Borrower’s labels, General Intangibles, and advertising
matter or any property of a similar nature, as it pertains to, or is 


 


80

















 


included in, any of the Collateral, in
advertising for sale, preparing for sale and selling any Collateral, and
finishing the manufacture, processing, fabrication, packaging and delivery of
the Inventory, and Borrower’s rights under all licenses and all franchise
agreements shall inure to Collateral Agent’s benefit;


 


(Q)          To cause Collateral Agent to send any written notice to Borrower
required by Law or this Agreement in the manner set forth in this Agreement;
and any notice sent by Collateral Agent
in such manner at least ten (10) Business Days (counting the date of
sending) prior to the date of a proposed disposition of the Collateral shall be
deemed to be reasonable notice (provided, however, that nothing contained
herein shall be deemed to require ten (10) Business Days’ notice if, under
the applicable circumstances, a shorter period of time would be allowed under
applicable Law); and


 


(R)           To exercise, and to cause Collateral Agent to exercise, in addition to
all other rights which it has under this Agreement or other applicable Law, all
of the rights and remedies of a secured party upon default under the Uniform
Commercial Code or other applicable Law.


 


11.6         Right of Set-Off.  Upon the occurrence of and during the
continuance of any Default, Lender Party may, and is hereby authorized by
Borrower, at any time and from time to time, to the fullest extent permitted by
applicable Laws, and Without Notice to Borrower, set-off and apply any and all
deposits (general or special, time or demand, provisional or final) at any time
held and any other Indebtedness at any time owing by Lender Party to, or for
the credit or the account of, Borrower against any or all of the Credit
Agreement Obligations now or hereafter existing whether or not such Credit
Agreement Obligations have matured and irrespective of whether Lender Party has
exercised any other rights that it has or may have with respect to such Credit
Agreement Obligations, including without limitation any acceleration
rights.  The aforesaid right of set-off
may be exercised by Lender Party against Borrower or against any trustee in
Bankruptcy, debtor in possession, assignee for the benefit of the creditors,
receiver, or execution, judgment or attachment creditor of Borrower, or such
trustee in Bankruptcy, debtor in possession, assignee for the benefit of
creditors, receiver, or execution, judgment or attachment creditor,
notwithstanding the fact that such right of set-off shall not have been
exercised by Lender Party prior to the making, filing or issuance, or service
upon Lender Party of, or of notice of, any such petition; assignment for the
benefit of creditors; appointment or application for the appointment of a
receiver; or issuance of execution, subpoena, order or warrant.  Lender Party agrees to promptly notify
Borrower after any such set-off and application, provided that the failure to
give such notice shall not affect the validity of such set-off and application.  The rights of Lender Party under this Section are
in addition to the other rights and remedies (including, without limitation,
other rights of set-off) which Lender Party may have.


 


11.7         No Limitation on Rights and Remedies.  The enumeration of the powers, rights and
remedies in this Article shall not be construed to limit the exercise
thereof to such time as an Event of Default occurs if, under applicable Law or
any other provision of this Agreement or any other Loan Document, Lender Party
has any of such powers, rights and remedies regardless of whether an Event of
Default has occurred, and any limitation contained herein or in any of the
other Loan Documents as to Lender Party’s exercise of any power, right or
remedy for a period of time only during the continuance of an Event of Default
shall only be applicable at such time 


 


81

















 


as Lender Party shall have actual knowledge
that such Event of Default is no longer continuing and for a reasonable time
thereafter as may be necessary for Lender Party to cease the exercise of such
powers, rights and remedies (it being expressly understood and agreed that
until such time as Lender Party shall obtain such knowledge and after the
expiration of such reasonable time, Lender Party shall have no liability whatsoever
for the commencement of or continuing exercise of any such power, right or
remedy).


 


11.8         Repossession of the Collateral; Care and
Custody of the Collateral, Etc. 
Borrower agrees to give Collateral Agent notice in the manner set forth
in this Agreement within 24 hours of the time of repossession of the
Collateral, or any part thereof, by Collateral Agent as to any other property
of Borrower alleged to have been left on, upon or in the repossessed Collateral
at the time of repossession; and such notice shall be an express condition
precedent to any action or suit for loss or damages in connection
therewith.  Borrower further agrees that
Collateral Agent may hold any such property of Borrower without liability for a
reasonable time after any such notice is received, and that Collateral Agent
will have a reasonable time to notify Borrower as to where Borrower can collect
such property.  Borrower agrees that if
Collateral Agent shall repossess the Collateral, or any part thereof, at a time
when no Event of Default shall have occurred hereunder, and the repossessed
Collateral is thereafter returned to Borrower, the damages therefor, if any,
shall not exceed the fair rental value of the repossessed Collateral for the
time it was in Collateral Agent’s possession. 
Borrower hereby expressly and irrevocably consents to, and to the extent
that Borrower may lawfully do so, invites Collateral Agent and its agents to
come upon any premises on which the Collateral, or any part thereof, is now or
hereafter located for any and all purposes related to the Collateral including
without limitation repossession of the Collateral, or any part thereof.  To the extent that Borrower may lawfully do
so, Borrower further covenants and warrants that (a) any entry by
Collateral Agent and its agents upon such premises for the purpose of
repossessing the Collateral, or any part thereof, shall not be trespass upon
such premises, and (b) any such repossession shall not constitute
conversion of the Collateral, or any part thereof, and Borrower further agrees
to indemnify and hold Collateral Agent harmless against, and hereby releases
Collateral Agent from any actions, costs, obligations or expenses arising
directly, indirectly or remotely from any attempt to enter such premises and repossess
the Collateral, or any part thereof. 
Collateral Agent shall be deemed to have exercised reasonable care in
the custody and preservation of the Collateral in its possession if it takes
such reasonable actions for that purpose as Borrower shall request in writing,
but Collateral Agent shall have sole power to determine whether such actions
are reasonable.  Any omission to do any
act not requested by Borrower shall not be deemed a failure to exercise
reasonable care.  Borrower shall at all
times be responsible for the preservation of the Collateral and shall be liable
for any failure to realize upon, or to exercise any right or power with respect
to, the Collateral, or for any delay in so doing, whether or not the Collateral
is in Borrower’s possession.


 


11.9         Application of Proceeds.  Except as otherwise expressly required to the
contrary by applicable Law, any Loan Document or the Intercreditor Agreement,
the proceeds and avails of any sale of the Collateral or the exercise of any of
the rights and remedies of Lender Parties under this Agreement shall be applied
by Agent (i) first, to the payment of all charges, expenses, costs and
Attorneys’ Fees owing to Agent or Collateral Agent hereunder or under any other
Loan Document; (ii) second, to the payment of all charges, expenses, costs
and Attorneys’ Fees owing to Lender Parties (other than Agent or Collateral
Agent) hereunder or under any other Loan Document; and (iii) third, to the
pro rata payment of the other Credit Agreement Obligations 


 


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(based on the total amount of the Credit
Agreement Obligations owing to Lender Parties), and Borrower shall remain
liable to Lender Parties for any deficiency.


 


11.10       Attorney-in-Fact. 
Borrower hereby constitutes and appoints each of Agent and Collateral
Agent, or any other Person whom Agent or Collateral Agent may designate upon
notice to Borrower, as Borrower’s attorney-in-fact (such appointment being
coupled with an interest and being irrevocable until Collateral Agent’s Lien
shall have been terminated in writing as set forth in this Agreement), at
Borrower’s sole cost and expense, to exercise any one or more of the following
rights and powers at any time after the occurrence and during the continuance
of an Event of Default (and all acts of such attorney-in-fact taken pursuant to
this Section are hereby ratified and approved by Borrower, and said
attorney shall not be liable for any acts or omissions nor for any error of
judgment or mistake of fact or law):


 


(A)          To take or to bring, in the name of Agent or Collateral Agent or in the name of Borrower, all steps,
action, suits or proceeding deemed by Agent or Collateral Agent necessary or desirable to effect
collection of the Accounts;


 


(B)           To settle, adjust, compromise, extend, renew, discharge, terminate or
release the Accounts in whole or in part;


 


(C)           To settle, adjust or compromise any legal proceedings brought to
collect the Accounts;


 


(D)          To notify Account Debtors to make payments on the Accounts directly to Collateral
Agent or to a Lockbox designated by
Agent or Collateral Agent;


 


(E)           To transmit to Account Debtors notice of Collateral Agent’s interest in the Accounts and to
demand and receive from such Account Debtors at any time, in the name of Agent,
Collateral Agent or Borrower,
information concerning the Accounts and the amounts owing thereon;


 


(F)           To use Borrower’s stationery and sign the name of Borrower to
verifications of the Accounts and notices thereof to Account Debtors;


 


(G)           To sell or assign any of the Collateral upon such terms, for such
amounts and at such time or times as Collateral Agent deems advisable, and to execute any bills of sale or assignments
in the name of Borrower in relation thereto;


 


(H)          To take control, in any manner, of any item of payment on, or proceeds
of, Collateral;


 


(I)            To prepare, file and sign Borrower’s name on
any proof of claim in Bankruptcy or similar document against any Account
Debtor;


 


(J)            To prepare, file and sign Borrower’s name on
any notice of lien, assignment or satisfaction of lien or similar document in
connection with the Collateral;


 


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(K)          To sign or endorse the name of Borrower upon any Chattel Paper,
Document, Instrument, invoice, freight bill, bill of lading, warehouse receipt
or similar document or agreement relating to the Collateral;


 


(L)           To use the information recorded on or contained in any data processing
equipment and computer hardware and software relating to the Collateral to
which Borrower has access;


 


(M)         To enter into contracts or agreements for the processing, fabrication,
packaging and delivery of the Collateral as said attorney-in-fact, Agent or Collateral
Agent may from time to time deem
appropriate and charge Borrower’s account for any costs thereby incurred;


 


(N)          To receive, take, endorse, assign and deliver in Agent, Collateral
Agent’s or Borrower’s name any and all checks, notes, drafts and other
instruments;


 


(O)          To receive, open and dispose of all mail addressed to Borrower and to
notify postal authorities to change the address for the delivery thereof to
such address as Agent or Collateral Agent may designate; and


 


(P)           To do all acts and things necessary, in Agent’s and Collateral Agent’s
discretion, to fulfill Borrower’s obligations under this Agreement and to
otherwise carry out the purposes of this Agreement.


 


11.11       Default Costs. 
Borrower hereby agrees to pay to each Lender Party upon demand all
Default Costs incurred by such Lender Party, which agreement shall be a
continuing agreement and shall survive payment of the Loans and termination of
this Agreement.


 


ARTICLE XII


 


12.           THE
AGENT.


 


12.1         Authorization and
Action.


 


(A)          Each
Lender hereby appoints and authorizes Agent to take such action as agent on its
behalf and to exercise such powers and discretion under this Agreement and the
other Loan Documents as are delegated to Agent by the terms hereof and thereof,
together with such powers and discretion as are reasonably incidental
thereto.  As to any matters provided for
in the Loan Documents as being subject to the consent, direction or approval of
Agent, such matters shall be subject to the sole discretion of Agent, its
directors, officers, agents and employees, without the approval of any
Lender.  Agent shall not be required to
exercise any discretion or take any action, but shall be required to act or to
refrain from acting (and shall be fully protected in so acting or refraining
from acting) upon the instructions of the Required Lenders, and such
instructions shall be binding upon all Lender Parties and all holders of
Notes.  Agent shall be entitled to
request instructions from the Required Lenders in exercising any discretion or
taking any action and shall be fully protected in so acting or refraining from
acting upon the instructions of the Required Lenders, and such instructions
shall be binding upon all 


 


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Lender Parties and all holders
of Notes.  In no event shall Agent be
required to take any action that Agent believes to be contrary to this
Agreement or applicable Law.


 


(B)           Notwithstanding
the preceding, each of the following shall require the approval or consent of
the Required Lenders:


 


(1)           The exercise of
any rights and remedies under the Loan Documents following an Event of Default,
provided that absent any direction from the Required Lenders, Agent may
exercise any right or remedy under the Loan Documents as Agent may determine in
good faith to be necessary or appropriate to protect the Lenders or the
Collateral;


 


(2)           Appointment of a
successor Agent;


 


(3)           Approval of any
amendment or modification of this Agreement or any of the other Loan Documents,
or issuance of any waiver of any provision of this Agreement or any of the
other Loan Documents; and


 


(4)           Any waiver of any
Default or Event of Default.


 


(C)           Notwithstanding
the preceding, each of the following shall require the approval or consent of
all the Lenders:


 


(1)           Any extension of the
Revolving Loan Maturity Date, the Swing Line Loan Maturity Date, or the Term
Loan Maturity Date, any forgiveness of all or any portion of the principal
amount of any Loan or any accrued interest thereon, or any other amendment of
this Agreement or the other Loan Documents which would reduce the ABR Margin,
the LIBOR Margin, the amount of the Unused Fee, or the rate at which interest,
the Letter of Credit Facility Fee or the Unused Fee are calculated, or forgive
any Letter of Credit Facility Fee or Unused Fee, or extend the time of payment
of or of any grace or cure period with respect to the payment of any principal,
interest, Letter of Credit Facility Fee or Unused Fee;


 


(2)           Any modification of the
definition of “Required Lenders” or any other provision hereof specifying the
number or percentage of Lenders required to amend, waiver or otherwise modify
any rights hereunder or make any determination or grant any consent hereunder;


 


(3)           Any increase of the
amount of any Loan or any Commitment;


 


(4)           Any release of
Collateral Agent’s Lien on all or any material portion of the Collateral,
except as otherwise expressly permitted under the terms of the Loan Documents;


 


(5)           Any release of any
Borrower Party;


 


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(6)           Any modification of the
Intercreditor Agreement which would have the effect of materially reducing
payments paid or payable to the Lender Parties as set forth in Section 4.3
of the Intercreditor Agreement; and


 


(7)           Any amendment of
the provisions of this Article 12.


 


(D)          Notwithstanding
the preceding, no amendment, waiver or consent shall, unless in writing and
signed by the Swing Line Lender in addition to the Lenders required above,
affect the rights or duties of Swing Ling Lender under this Agreement.


 


12.2         Agent’s Notices, Etc.  In the event that Agent has knowledge of a
Default or Event of Default or receives a notice thereof from a Lender or
Borrower Party, Agent shall give prompt notice thereof to Lenders (provided
that Agent shall be deemed to have knowledge only if the officers of Agent
primarily responsible for administration of the Loans have actual knowledge of
such Default or Event of Default, and in no event shall any knowledge of a
Default or Event of Default be imputed to Agent).  Agent may, in its discretion, or shall upon
direction of the Required Lenders, give any notice pursuant to this Agreement
that is necessary for commencement of any cure period.  Agent shall take such action with respect to
such Default or Event of Default as shall reasonably be directed by the
Required Lenders; provided that, unless and until Agent shall have received
such directions, Agent may (but shall not be obligated to) take such action, or
refrain from taking such action, with respect to such Default or Event of
Default as it shall deem advisable in the best interests of Lenders.  Lenders agree that any actions taken by Agent
pursuant to this paragraph shall be deemed a reasonable course of conduct, and
Lenders hereby, approve, ratify and affirm such actions.


 


12.3         Agent’s Reliance, Etc.  Neither Agent nor any of its directors,
officers, agents or employees shall be liable for any action taken or omitted
to be taken under or in connection with the Loan Documents.  Without limitation of the generality of the
foregoing, Agent (a) may treat the payee of any Note as the holder thereof
until Agent receives and accepts an Assignment and Acceptance entered into by
the Lender that is the payee of such Note, as assignor, and an Eligible
Assignee, as assignee; (b) may consult with legal counsel (including
counsel for any Lender Party), independent public accountants and other experts
selected by it and shall not be liable for any action taken or omitted to be
taken in good faith by it in accordance with the advice of such counsel,
accountants or experts; (c) makes no warranty or representation to any
Lender and shall not be responsible to any Lender for any statements,
warranties or representations (whether written or oral) made in or in
connection with the Loan Documents; (d) shall not have any duty to
ascertain or to inquire as to the performance or observance of any of the
terms, covenants or conditions of any Loan Document on the part of any Lender
Party or to inspect the property (including the books and records) of any
Lender Party; (e) shall not be responsible to any Lender for the due
execution, legality, validity, enforceability, genuineness, sufficiency or
value of, or the perfection or priority of any Lien created or purported to be
created under or in connection with, any Loan Document or any other instrument
or document furnished pursuant thereto; and (f) shall incur no liability
under or in respect of any Loan Document by acting upon any notice, consent,
certificate or other instrument or writing (which may be by telegram, telecopy
or telex) believed by it to be genuine and signed or sent by the proper Person.


 


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12.4         No Reliance on Agent’s Customer
Identification Program.  Each
Lender acknowledges and agrees that neither such Lender, nor any of its
Affiliates, participants, transferees or assignees, may rely on Agent to carry
out such Lender’s, Affiliate’s, participant’s, Transferee’s or assignee’s
customer identification program, or other obligations required or imposed under
or pursuant to the USA Patriot Act or the regulations thereunder, or any other
Anti-Terrorism Law, including any programs involving any of the following items
relating to or in connection with Borrower, its Affiliates or its agents, the
Loan Documents or the Loans hereunder:  (1) any
identity verification procedures, (2) any recordkeeping, (3) any
comparisons with government lists, (4) any customer notices, or (5) any
other procedures required under the applicable laws.


 


12.5         Wachovia and Affiliates.  With respect to its Commitments, the Advances
made by it and the Notes issued to it, Wachovia shall have the same rights and
powers under the Loan Documents as any other Lender and may exercise the same
as though it were not an Agent; and the term “Lender” shall, unless otherwise
expressly indicated, include Wachovia in its capacity as a lender under this
Agreement.  Wachovia and its Affiliates
may accept deposits from, lend money to, act as trustee under indentures of,
accept investment banking engagements from and generally engage in any kind of
business with, Borrower and any other Lender, any of their respective
Subsidiaries and any Person who may do business with or own securities of any
such Person, all as if Wachovia were not Agent and without any duty to account
therefor to any Person.


 


12.6         Lender Credit Decision.  Each Lender acknowledges that it has,
independently and without reliance upon Agent or any other Lender and based on
the financial statements of Borrower and such other documents and information
as it has deemed appropriate, made its own credit analysis and decision to
enter into this Agreement.  Each Lender
also acknowledges that it will, independently and without reliance upon Agent
or any other Lender and based on such documents and information as it shall
deem appropriate at the time, continue to make its own credit decisions in
taking or not taking action under this Agreement.


 


12.7         Indemnification.


 


(A)          Each
Lender severally agrees to indemnify Agent (to the extent not promptly
reimbursed by Borrower) from and against such Lender’s Pro Rata Share of any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind or nature whatsoever that may be imposed on, incurred by, or
asserted against Agent in any way relating to or arising out of the Loan
Documents or any action taken or omitted by Agent under the Loan Documents; provided,
however, that no Lender shall be liable for any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements resulting from Agent’s gross negligence
or willful misconduct.  Without
limitation of the foregoing, each Lender agrees to reimburse Agent promptly
upon demand for its Pro Rata Share of any costs and expenses (including,
without limitation, Attorneys’ Fees and expenses) payable by Borrower under
this Agreement, to the extent that Agent is not promptly reimbursed for such
costs and expenses by Borrower.  The
failure of any Lender to reimburse Agent promptly upon demand for its Pro Rata
Share of any amount required to be paid by Lender to Agent as provided herein
shall not relieve any other Lender of its obligation hereunder to reimburse
Agent for its Pro Rata Share of such amount, but 


 


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no Lender shall be responsible
for the failure of any other Lender to reimburse Agent for such other Lender’s
Pro Rata Share of such amount.  Without
prejudice to the survival of any other agreement of any Lender hereunder, the
agreement and obligations of each Lender contained in this Section shall
survive the payment in full of principal, interest and all other amounts
payable hereunder and under the other Loan Documents.


 


(B)           Each
Lender severally agrees to indemnify Issuing Lender (to the extent not promptly
reimbursed by Borrower) from and against such Lender’s Pro Rata Share of any
and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind or nature
whatsoever that may be imposed on, incurred by, or asserted against Issuing
Lender in any way relating to or arising out of the Loan Documents or any
action taken or omitted by Issuing Lender under the Loan Documents.  Without limitation of the foregoing, each
Lender agrees to reimburse Issuing Lender promptly upon demand for its Pro Rata
Share of any costs and expenses (including, without limitation, Attorneys’ Fees
and expenses) payable by Borrower under this Agreement, to the extent that
Issuing Lender is not promptly reimbursed for such costs and expenses by
Borrower.  The failure of any Lender to
reimburse Issuing Lender promptly upon demand for its Pro Rata Share of any
amount required to be paid by the Lender Parties to Issuing Lender as provided
herein shall not relieve any other Lender of its obligation hereunder to
reimburse Issuing Lender for its Pro Rata Share of such amount, but no Lender
shall be responsible for the failure of any other Lender to reimburse Issuing
Lender for such other Lender’s Pro Rata Share of such amount.  Without prejudice to the survival of any
other agreement of any Lender hereunder, the agreement and obligations of each
Lender contained in this Section shall survive the payment in full of
principal, interest and all other amounts payable hereunder and under the other
Loan Documents.


 


12.8         Successor Agent.  Agent may resign at any time by giving
written notice thereof to Lender Parties and Borrower, and may be removed at
any time with or without cause by the Required Lenders.  Upon any such resignation or removal, the
Required Lenders shall have the right to appoint a successor Agent.  If no successor Agent shall have been so
appointed by the Required Lenders, and shall have accepted such appointment,
within 30 days after the retiring Agent’s giving of notice of resignation or
the Required Lenders’ removal of the retiring Agent, then the retiring Agent
may, on behalf of Lender Parties, appoint a successor Agent, which shall be a
commercial bank organized under the laws of the United States or of any State
thereof and having a combined capital and surplus of at least $500,000,000.00.  Upon the acceptance of any appointment as
Agent hereunder by a successor Agent and upon the execution and filing or
recording of such financing statements, or amendments thereto, and such
amendments or supplements to the Security Documents, and such other instruments
or notices, as may be necessary or desirable, or as the Required Lenders may
request, in order to continue the perfection of the Liens granted or purported
to be granted by the Security Documents, such successor Agent shall succeed to
and become vested with all the rights, powers, discretion, privileges and
duties of the retiring Agent, and the retiring Agent shall be discharged from
its duties and obligations under the Loan Documents.  After any retiring Agent’s resignation or
removal hereunder as Agent, the provisions of this Article 12 shall inure
to its benefit as to any actions taken or omitted to be taken by it while it
was Agent under this Agreement.


 


12.9         No Third Party Beneficiary.  The provisions of this Article 12 are
solely for the benefit of Lender Parties, and no Person other than Lender
Parties is intended to be a beneficiary 


 


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of the rights and obligations of Lender
Parties under this Article 12, and Lender Parties shall have the right to
amend or modify this Article 12 or waive any requirement under this Article 12,
without the consent or approval of any other Person (except Lender Parties
shall notify Borrower as to any such amendment or modification).


 


ARTICLE XIII


 


13.           MISCELLANEOUS


 


13.1         Termination of Collateral Agent’s Lien.  This Agreement and the Collateral Agent’s
Lien will not be terminated until one of Collateral Agent’s officers signs a
written termination or satisfaction agreement to such effect.  Even if all of the Secured Obligations owing
to Lender Parties at any time should be paid, Collateral Agent’s Lien will
continue to secure any Secured Obligations of any Borrower Party thereafter
arising until the written termination or satisfaction agreement referred to
above has been executed by Collateral Agent (provided that Collateral Agent
agrees to promptly provide a written termination or satisfaction agreement upon
request of Borrower, provided that all the Secured Obligations have been fully
paid and performed and Lender Parties have no obligation to make any further
Advances, and there is not existing any Default).  Except as otherwise expressly provided for in
this Agreement, no termination of this Agreement shall in any way affect or
impair the representations, warranties, agreements, covenants, obligations,
duties and Secured Obligations of any Borrower Party or the powers, rights, and
remedies of Lender Party under this Agreement with respect to any transaction
or event occurring prior to such termination, all of which shall survive such
termination.  Except as may otherwise
expressly be provided herein to the contrary, in no event shall Collateral
Agent be obligated to terminate Collateral Agent’s Lien or return or release
the Collateral or any portion thereof to Borrower (a) until payment in
full of the Secured Obligations (including termination of all transactions
outstanding under any Lender Party Swap Documents and payment in full of all
amounts payable thereunder), or (b) if Lender Party is obligated to extend
credit to or for the benefit of Borrower under this Agreement (including any
obligation that might arise on account of any Letter of Credit).


 


13.2         Construction.  The provisions of this Agreement shall be in
addition to those of any other Loan Document and any guaranty, pledge or
security agreement, mortgage, deed of trust, security deed, note or other
evidence of liability given by any Borrower Party to or for the benefit of any
Lender Party, all of which shall be construed as complementary to each other,
and all existing liabilities and obligations of any Borrower Party to any
Lender Party and any Liens heretofore granted to or for the benefit of any
Lender Party shall, except and only to the extent expressly provided herein to
the contrary, remain in full force and effect, and shall not be released,
impaired, diminished, or in any other way modified or amended as a result of
the execution and delivery of this Agreement or any other Loan Document or by
the agreements and undertaking of any Borrower Party contained herein and
therein.  Nothing herein contained shall
prevent any Lender Party from enforcing any or all other notes, guaranties,
pledges or security agreements, mortgages, deeds of trust, or security deeds in
accordance with their respective terms. 
In the event of a conflict between any of the provisions of this
Agreement, the Notes, any one or more of the Security Documents or any other
Loan Document, the provisions most favorable to Lender Parties shall control.


 


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13.3         Indemnity.  Borrower hereby agrees to indemnify Lender
Parties and their respective officers, directors, agents, and attorneys
against, and to hold Lender Parties and all such other Persons harmless from
all Indemnified Losses resulting from any representation or warranty made by
any Borrower Party or on any Borrower Party’s behalf pursuant to this Agreement
having been false when made, or resulting from Borrower’s breach of any of the
covenants set forth in this Agreement, which indemnification is in addition to,
and not in derogation of, any statutory, equitable, or common law right or
remedy Lender Parties may have for breach of representation, warranty,
statement or covenant or otherwise may have under any of the Loan Documents.  This agreement of indemnity shall be a
continuing agreement and shall survive payment of the Loans and termination of
this Agreement.


 


13.4         Lender Party’s Consent.  Except where otherwise expressly provided in
the Loan Documents, in any instance where the approval, consent, or the
exercise of Lender Party’s judgment or discretion is required or permitted, the
granting or denial of such approval or consent and the exercise of such
judgment or discretion shall be (a) within the sole discretion of Lender
Party; and (b) deemed to have been given only by a specific writing
intended for the purpose given and executed by Lender Party.


 


13.5         Enforcement and Waiver by Lender Party.  Lender Party shall have the right at all
times to enforce the provisions of this Agreement, the Notes, and each of other
Loan Documents in strict accordance with the terms hereof and thereof,
notwithstanding any conduct or custom on the part of Lender Party in refraining
from so doing at any time or times.  The
failure of Lender Party at any time or times to enforce its rights under such
provisions, strictly in accordance with the same, shall not be construed as
having created a custom in any way or manner contrary to specific provisions of
this Agreement or as having in any way or manner modified or waived the
same.  All rights and remedies of Lender
Party are cumulative and the exercise of one right or remedy shall not be
deemed a waiver or release of any other right or remedy.


 


13.6         No Representation, Assumption, or Duty.  Nothing, including any Advance or acceptance
of any document or instrument, shall be construed as a representation or
warranty, express or implied, to any Person by any Lender Party.  Any inspection or audit of the Collateral or
the Records of Borrower, or the procuring of documents and financial and other
information, by or on behalf of any Lender Party shall be for Lender Parties’
protection only, and shall not constitute any assumption of responsibility by
any Lender Party with respect thereto or relieve Borrower of any of Borrower’s
obligations.


 


13.7         Expenses of Lender Parties.  Borrower will, on demand, reimburse Lender
Parties for all expenses incurred by Lender Parties in connection with the
closing of the Loans and the preparation, negotiation, amendment, modification,
interpretation, administration or enforcement of this Agreement and the other
Loan Documents and/or in the collection of any amounts owing from any Borrower
Party or any other Person to Lender Parties under this Agreement or any other
Loan Document and, until so paid, the amount of such expenses shall be added to
and become part of the amount of the Credit Agreement Obligations.


 


13.8         Attorneys’ Fees.  If at any time or times hereafter Lender
Party, employs counsel to advise or provide other representation with respect
to this Agreement, any Loan Document, or any other agreement, document or
instrument heretofore, now or hereafter executed by any 


 


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Borrower Party and delivered to Lender Party
with respect to the Credit Agreement Obligations, or to commence, defend or
intervene, file a petition, complaint, answer, motion or other pleadings or to
take any other action in or with respect to any pending, threatened or
anticipated suit or proceeding relating to this Agreement, any Loan Document,
or any other agreement, instrument or document heretofore, now or hereafter
executed by Borrower Party and delivered to Lender Party with respect to the
Credit Agreement Obligations, or to represent Lender Party in any litigation
with respect to the affairs of Borrower Party, or to enforce any rights of
Lender Party or obligations of Borrower Party or any other Person which may be
obligated to Lender Party by virtue of this Agreement, any Loan Document, or any
other agreement, document or instrument heretofore, now or hereafter delivered
to Lender Party by or for the benefit of Borrower Party with respect to the
Credit Agreement Obligations, or to collect from Borrower Party any amounts
owing hereunder, then in any such event, all of the Attorneys’ Fees incurred by
Lender Party arising from such services and any expenses, costs and charges
relating thereto shall constitute additional obligations of Borrower payable on
demand and, until so paid, shall be added to and become part of the Credit
Agreement Obligations.


 


13.9         Exclusiveness.  This Agreement, the Notes, the Security
Documents, and any other Loan Documents made pursuant hereto are made for the
sole protection of Borrower Parties, Lender Parties, and Lender Parties’
successors and assigns, and no other Person shall have any right of action
hereunder.


 


13.10       WAIVER OF PUNITIVE DAMAGES. 
BORROWER AGREES THAT WITH RESPECT TO ANY CLAIM OF BORROWER ARISING UNDER
THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, IN NO EVENT SHALL BORROWER HAVE A
REMEDY OF, OR SHALL ANY LENDER PARTY BE LIABLE FOR, INDIRECT, SPECIAL,
CONSEQUENTIAL, PUNITIVE OR EXEMPLARY DAMAGES, AND BORROWER WAIVES ANY RIGHT OR
CLAIM TO SUCH DAMAGES BORROWER MAY HAVE OR WHICH MAY ARISE IN THE
FUTURE IN CONNECTION WITH THE LOANS OR THE LOAN DOCUMENTS, WHETHER THE SAME IS
RESOLVED BY ARBITRATION, MEDIATION, JUDICIAL PROCESS OR OTHERWISE.


 


13.11       Waiver and Release by Borrower.  Borrower (A) waives protest of all
commercial paper at any time held by Lender Party on which Borrower is any way
liable; (B) waives notice of acceleration and of intention to accelerate; (C) waives
notice and opportunity to be heard, after acceleration, before exercise by
Lender Party of the remedies of self-help, set-off, or of other summary
procedures permitted by any applicable Laws or by any agreement with Borrower,
and except where required hereby or by any applicable Laws which requirement
cannot be waived, notice of any other action taken by Lender Party; and (D) releases
Lender Parties and their respective officers, attorneys, agents and employees
from all claims for loss or damage caused by any act or omission on the part of
any of them in connection with the Credit Agreement Obligations, the Loan
Documents or the Lender Party Swap Documents.


 


13.12       Limitation on Waiver of Notice, Etc.  Notwithstanding any provision of this
Agreement to the contrary, to the extent that any applicable Law expressly
limits any waiver of any right contained herein or in any other Loan Document
(including any waiver of any notice or other demand), such waiver shall be
ineffective to such extent.


 


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13.13       Additional Costs.  In
the event that any applicable Law now or hereafter in effect and whether or not
presently applicable to Lender Party, or any interpretation or administration
thereof by any Governmental Authority charged with the interpretation or
administration thereof, or compliance by Lender Party with any guideline,
request or directive of any such Governmental Authority (whether or not having
the force of law), shall (i) affect the basis of taxation of payments to
Lender Party of any amounts payable by Borrower under this Agreement (other
than taxes imposed on the overall net income of Lender Party), or (ii) impose,
modify or deem applicable any reserve, special deposit or similar requirement
against assets of, deposits with or for the account of, or credit extended by
Lender Party, or (iii) impose any other condition with respect to this
Agreement, the Notes or the Loans, or (iv) affect the amount of capital
required or expected to be maintained by Lender Party, and the result of any of
the foregoing is to increase the cost to Lender Party of making, funding or
maintaining the Loans or to reduce the amount of any amount receivable by
Lender Party thereon, then Borrower shall pay to Lender Party from time to
time, upon request by Lender Party, additional amounts sufficient to compensate
Lender Party for such increased cost or reduced amount receivable to the extent
Lender Party is not compensated therefor in the computation of the interest
rate applicable to the Loans.  A
statement as to the amount of such increased cost or reduced amount receivable,
prepared in good faith and in reasonable detail by Lender Party and submitted
by Lender Party to Borrower, shall be conclusive and binding for all purposes
absent manifest error in computation.


 


13.14       Illegality and Impossibility.  In the event that any applicable Law now or
hereafter in effect and whether or not presently applicable to Lender Party, or
any interpretation or administration thereof by any Governmental Authority
charged with the interpretation or administration thereof, or compliance by
Lender Party with any guideline, request or directive of such Governmental
Authority (whether or not having the force of law), including without
limitation exchange controls, shall make it unlawful or impossible for Lender
Party to maintain any Loan under this Agreement, Borrower shall upon receipt of
reasonable notice thereof from Lender Party repay in full the then outstanding
principal amount of such Loan, together with all accrued interest thereon to
the date of payment and all amounts owing to Lender Party, (a) on the last
day of the then current interest period applicable to such Loan if Lender Party
may lawfully continue to maintain such Loan to such day, or (b) immediately
if Lender Party may not continue to maintain such Loan to such day.


 


13.15       Assignments and Participations.


 


(A)          Each Lender may assign to one or more Eligible Assignees all or a
portion of its rights and obligations under this Agreement (including, without
limitation, all or a portion of its Commitment or Commitments, the Advances
owing to it and the Note or Notes held by it); provided, however,
that (i) each such assignment shall be of a uniform, and not a varying,
percentage of all rights and obligations under this Agreement and the other
Loan Documents; (ii) except in the case of an assignment to a Person that,
immediately prior to such assignment, was a Lender or an assignment of all of a
Lender’s rights and obligations under this Agreement, the amount of the
Commitment of the assigning Lender being assigned pursuant to each such
assignment (determined as of the date of the Assignment and Acceptance with
respect to such assignment) shall in no event be less than $1,000,000.00; (iii) each
such assignment shall be to an Eligible Assignee; (iv) the parties to each
such assignment shall execute and deliver to Agent, for its acceptance, an
Assignment and Acceptance, together with any Note or Notes subject to 


 


92

















 


such assignment and a processing fee of
$5,000.00; and (v) until the occurrence of a Default, Borrowers shall
approve the Eligible Assignee (such approval not to be unreasonably withheld or
delayed).


 


(B)           Upon such execution, delivery, acceptance and recording, from and after
the effective date specified in such Assignment and Acceptance, (i) the
assignee thereunder shall be a party hereto and, to the extent that rights and
obligations hereunder have been assigned to it pursuant to such Assignment and
Acceptance, have the rights and obligations of a Lender hereunder, and (ii) the
Lender assignor thereunder shall, to the extent that rights and obligations
hereunder have been assigned by it pursuant to such Assignment and Acceptance,
relinquish its rights and be released from its obligations under this Agreement
(and, in the case of an Assignment and Acceptance covering all or the remaining
portion of an assigning Lender’s rights and obligations under this Agreement,
such Lender shall cease to be a party hereto).


 


(C)           By executing and delivering an Assignment and Acceptance, the Lender
assignor thereunder and the assignee thereunder confirm to and agree with each
other and the other parties hereto as follows: 
(i) other than as provided in such Assignment and Acceptance, such
assigning Lender makes no representation or warranty and assumes no
responsibility with respect to any statements, warranties or representations
made in or in connection with this Agreement or any other Loan Document or the
execution, legality, validity, enforceability, genuineness, sufficiency or
value of, or the perfection or priority of any Lien created or purported to be
created under or in connection with, this Agreement or any other Loan Document
or any other instrument or document furnished pursuant hereto or thereto; (ii) such
assigning Lender makes no representation or warranty and assumes no
responsibility with respect to the financial condition of Borrower or any other
Lender Party or the performance or observance by any Lender Party of any of its
obligations under any Loan Document or any other instrument or document
furnished pursuant thereto; (iii) such assignee confirms that it has
received a copy of this Agreement, together with copies of the Financial
Statements and such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter into such
Assignment and Acceptance; (iv) such assignee will, independently and
without reliance upon Agent, such assigning Lender or any other Lender and
based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit decisions in taking or not taking action
under this Agreement; (v) such assignee confirms that it is an Eligible
Assignee; (vi) such assignee appoints and authorizes Agent to take such
action as agent on its behalf and to exercise such powers and discretion under the
Loan Documents as are delegated to Agent by the terms hereof, together with
such powers and discretion as are reasonably incidental thereto; and (vii) such
assignee agrees that it will perform in accordance with their terms all of the
obligations which by the terms of this Agreement are required to be performed
by it as a Lender.


 


(D)          Agent shall maintain at its principal office a copy of each Assignment
and Acceptance delivered to and accepted by it and a record of the names and
addresses of the Lender Parties and the Commitment of, and principal amount of
the Advances owing to, each Lender from time to time (the “Register”).  The entries in the Register shall be
conclusive and binding for all purposes, absent manifest error, and Borrower,
Agent and Lender Parties may treat each Person whose name is recorded in the
Register as a Lender hereunder for all purposes 


 


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of this Agreement.  The Register shall be available for
inspection by Borrower or Lender at any reasonable time and from time to time
upon reasonable prior notice.


 


(E)           Upon its receipt of an Assignment and Acceptance executed by an
assigning Lender and an assignee, together with any Note or Notes subject to
such assignment, Agent shall, if such Assignment and Acceptance has been
completed and is in substantially the form as required by this Agreement, (i) accept
such Assignment and Acceptance, (ii) record the information contained
therein in the Register and (iii) give prompt notice thereof to Borrower
and each Lender.  In the case of any
assignment by Lender, within five Business Days after its receipt of such
notice, Borrower, at its own expense, shall execute and deliver to Agent in
exchange for the surrendered Note or Notes a new Note to the order of such
Eligible Assignee in an amount equal to the Commitment assumed by it pursuant
to such Assignment and Acceptance and, if the assigning Lender has retained a
Commitment hereunder, a new Note to the order of the assigning Lender in an
amount equal to the Commitment retained by it hereunder.  Such new Note or Notes shall be in an
aggregate principal amount equal to the aggregate principal amount of such
surrendered Note or Notes, shall be dated the effective date of such Assignment
and Acceptance and shall otherwise be in substantially the form of the Note or
Notes so surrendered.


 


(F)           Each Lender may sell participations to one or more Persons (other than
any Lender Party or any of its Affiliates) in or to all or a portion of its
rights and obligations under this Agreement (including, without limitation, all
or a portion of its Commitments, the Advances owing to it and the Note or Notes
(if any) held by it); provided, however, that (i) such
Lender’s obligations under this Agreement (including, without limitation, its
Commitments) shall remain unchanged; (ii) such Lender shall remain solely
responsible to the other parties hereto for the performance of such
obligations; (iii) such Lender shall remain the holder of any such Note
for all purposes of this Agreement; (iv) Borrower, Agent and the other
Lender Parties shall continue to deal solely and directly with such Lender in
connection with such Lender’s rights and obligations under this Agreement; (v) no
participant under any such participation shall have any right to approve any
amendment or waiver of any provision of any Loan Document, or any consent to
any departure by any Lender Party therefrom, except to the extent that such
amendment, waiver or consent would reduce the principal of, or interest on, the
Notes or any fees or other amounts payable hereunder, in each case to the
extent subject to such participation, postpone any date fixed for any payment
of principal of, or interest on, the Notes or any fees or other amounts payable
hereunder, in each case to the extent subject to such participation, or release
all or substantially all of the Collateral; and (vi) until the occurrence
of a Default, Borrowers shall approve the participant (such approval not to be
unreasonably withheld or delayed).


 


(G)           Any Lender may, in connection with any assignment or participation or
proposed assignment or participation pursuant to this Section, disclose to the
assignee or participant or proposed assignee or participant, any information
relating to Borrower furnished to such Lender by or on behalf of any Borrower
Party; provided, however, that, prior to any such disclosure, the
assignee or participant or proposed assignee or participant shall agree to
preserve the confidentiality of any confidential information received by it
from such Lender.


 


13.16       Binding Effect, Assignment. 
This Agreement shall inure to the benefit of, and shall be binding upon,
the respective successors and permitted assigns of the parties hereto.  


 


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Borrower has no right to assign any of its
rights or obligations hereunder without the prior written consent of the Lender
Parties.


 


13.17       Entire Agreement, Amendments.  This Agreement, including the Exhibits
hereto, all of which are hereby incorporated herein by reference, and the
documents executed and delivered pursuant hereto, constitute the entire
agreement between the parties, and may be amended only by a writing signed on
behalf of each party.


 


13.18       Severability.  If any
provision of this Agreement, the Notes, or any of the other Loan Documents
shall be held invalid under any applicable Laws, such invalidity shall not
affect any other provision of this Agreement or such other instrument or
agreement that can be given effect without the invalid provision, and, to this
end, the provisions hereof are severable.


 


13.19       Headings.  The section
and paragraph headings hereof are inserted for convenience of reference only,
and shall not alter, define, or be used in construing the text of such sections
and paragraphs.


 


13.20       Counterparts.  This
Agreement may be executed in any number of counterparts, each of which shall be
deemed to be an original, but all of which together shall constitute but one
and the same instrument.


 


13.21       Seal.  This Agreement
is intended to take effect as an instrument under seal.


 


ARTICLE XIV


 


14.           SUBMISSION TO
JURISDICTION, GOVERNING LAW AND NOTICES


 


14.1         Notices.  Any notices or consents required or permitted
by this Agreement shall be in writing and shall be deemed delivered if
delivered in person or if sent by certified mail, postage prepaid, return
receipt requested, or by nationally recognized overnight courier (such as
Federal Express), as follows, unless such address is changed by written notice
hereunder:


 


(A)          If to Borrowers:


 


KMG Chemicals, Inc.


10611 Harwin Drive, Suite 402


Houston, Texas  77036-1534


Attention:  Mr. John V. Sobchak


 


KMG-Bernuth, Inc.


10611 Harwin Drive, Suite 402


Houston, Texas  77036-1534


Attention:  Mr. John V. Sobchak


 


KMG Electronic Chemicals, Inc.


10611 Harwin Drive, Suite 402


Houston, Texas  77036-1534


Attention:  Mr. John V. Sobchak


 


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with a copy to:


 


Joseph Vilardo, Esq.


Haynes and Boone, LLP


One Houston Center


1221 McKinney, Suite 2100


Houston, Texas  77010


 


(B)           If to Wachovia (whether as a Lender, Agent or
Collateral Agent):


 


Wachovia Bank, National Association


P.O. Box 2554


Birmingham, Alabama  35290


Mail Code: 
AL0028


 


with a copy to:


 


Ray D. Gibbons, Esq.


Burr & Forman LLP


420 North 20th Street


Suite 3400


Birmingham, Alabama  35203


 


(C)           If to Lenders (other than Wachovia):


 


Bank of America, N.A.


700 Louisiana, 7th Floor


Houston, Texas  77002


Attention: Adam Rose


 


The Prudential Insurance Company of America


c/o Prudential Capital Group


2200 Ross Avenue, Suite 4200E


Dallas, Texas 
75201


Attention: 
Brian N. Thomas


 


Pruco Life Insurance Company


c/o Prudential Capital Group


2200 Ross Avenue, Suite 4200E


Dallas, Texas 
75201


Attention: 
Brian N. Thomas


 


and with a copy to Agent:


 


Wachovia Bank, National Association


P.O. Box 2554


Birmingham, Alabama  35290


Mail Code: 
AL0028


 


96

















 


with a copy to:


 


Ray D. Gibbons, Esq.


Burr & Forman LLP


420 North 20th Street


Suite 3400


Birmingham, Alabama  35203


 


14.2         Governing Law.  This Agreement is entered into and
performable in Jefferson County, Alabama, and the substantive Laws, without
giving effect to principles of conflict of laws, of the United States and the
State of Alabama shall govern the construction of this Agreement and the
documents executed and delivered pursuant hereto, and the rights and remedies
of the parties hereto and thereto, except to the extent that the Uniform
Commercial Code or other applicable Law requires that the perfection, the
effect of perfection or non-perfection, the priority of Collateral Agent’s
Lien, or the enforcement of certain of Collateral Agent’s remedies with respect
to the Collateral, be governed by the Laws of another Jurisdiction.


 


14.3         SUBMISSION TO JURISDICTION; WAIVER OF JURY
TRIAL, ETC.


 


(A)          BORROWER HEREBY IRREVOCABLY AND UNCONDITIONALLY:


 


(1)           SUBMITS FOR ITSELF AND
ITS PROPERTY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT, OR
FOR RECOGNITION AND ENFORCEMENT OF ANY JUDGMENT IN RESPECT THEREOF, TO THE
NON-EXCLUSIVE GENERAL JURISDICTION OF THE COURTS OF THE STATE OF ALABAMA, THE
COURTS OF THE UNITED STATES OF AMERICA FOR THE NORTHERN DISTRICT OF ALABAMA,
AND APPELLATE COURTS FROM ANY THEREOF;


 


(2)           CONSENTS THAT ANY SUCH
ACTION OR PROCEEDING MAY BE BROUGHT IN SUCH COURTS, AND WAIVES ANY
OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH
ACTION OR PROCEEDING IN ANY SUCH COURT OR THAT SUCH ACTION OR PROCEEDING WAS
BROUGHT IN AN INCONVENIENT COURT AND AGREES NOT TO PLEAD OR CLAIM THE SAME;


 


(3)           AGREES THAT SERVICE OF
PROCESS IN ANY SUCH ACTION OR PROCEEDING MAY BE EFFECTED BY MAILING A COPY
THEREOF BY REGISTERED OR CERTIFIED MAIL (OR ANY SUBSTANTIALLY SIMILAR FORM OF
MAIL), POSTAGE PREPAID, TO BORROWER AT ITS ADDRESS SET FORTH IN THIS AGREEMENT
OR AT SUCH OTHER ADDRESS OF WHICH AGENT SHALL HAVE BEEN NOTIFIED PURSUANT
THERETO; AND


 


(4)           AGREES THAT NOTHING
HEREIN SHALL AFFECT THE RIGHT TO EFFECT SERVICE OF PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW OR SHALL LIMIT THE RIGHT TO SUE IN ANY OTHER JURISDICTION.


 


97

















 


(B)           EACH OF BORROWER AND LENDER PARTY HEREBY:


 


(1)           IRREVOCABLY AND
UNCONDITIONALLY WAIVES THE RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING
OR COUNTERCLAIM OF ANY TYPE AS TO ANY MATTER ARISING DIRECTLY OR INDIRECTLY OUT
OF OR WITH RESPECT TO THIS AGREEMENT, THE NOTES, ANY OF THE OTHER LOAN
DOCUMENTS OR ANY OTHER DOCUMENT EXECUTED IN CONNECTION HEREWITH OR THEREWITH;
AND


 


(2)           AGREES THAT ANY OF THEM
MAY FILE A COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF
THE KNOWING, VOLUNTARY AND BARGAINED FOR AGREEMENT AMONG THE PARTIES
IRREVOCABLY TO WAIVE TRIAL BY JURY, AND THAT ANY DISPUTE OR CONTROVERSY OF ANY
KIND WHATSOEVER BETWEEN OR AMONG THEM SHALL INSTEAD BE TRIED IN A COURT OF COMPETENT
JURISDICTION BY A JUDGE SITTING WITHOUT A JURY.


 


* * * * *


 


98

















 


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


 


[SIGNATURE PAGES TO FOLLOW]


 


99

















 


SIGNATURE PAGES - BORROWERS


 


 


	
   

  	
  KMG CHEMICALS, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Its:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  KMG-BERNUTH, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Its:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  KMG ELECTRONIC CHEMICALS, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Its:

  	
   

  



 


100

















 


SIGNATURE PAGE - WACHOVIA


 


	
   

  	
  WACHOVIA BANK, NATIONAL

  
	
   

  	
  ASSOCIATION,

  
	
   

  	
  as Agent, Collateral Agent,

  
	
   

  	
  Lender and Issuing Lender

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Its:

  	
   

  



 


Instructions for Wire Transfers to Agent:


 


Wachovia Bank, National Association


Charlotte, NC


ABA Number:  053 000 219


Account Number:  01459670001944


Account Name:  Agency Svcs Synd
Clearing


Payment Details:  KMG Chemicals


 


101

















 


SIGNATURE PAGE
– BANK OF AMERICA


 


	
   

  	
  BANK OF AMERICA, N.A., as a Lender

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Its:

  	
   

  



 


102

















 


SIGNATURE PAGE – THE PRUDENTIAL INSURANCE
COMPANY OF AMERICA


 


	
   

  	
  THE PRUDENTIAL INSURANCE

  
	
   

  	
  COMPANY OF AMERICA, as a Lender

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Its:

  	
   

  



 


103

















 


SIGNATURE PAGE – PRUCO LIFE INSURANCE COMPANY


 


	
   

  	
  PRUCO LIFE INSURANCE COMPANY,

  
	
   

  	
  as a Lender

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Its:

  	
   

  



 


104