<PAGE>   1


                                                                   EXHIBIT 10.38


                 WAIVER AND AMENDMENT NO. 2 TO CREDIT AGREEMENT


         WAIVER AND AMENDMENT dated as of May 12, 1998 (the "Amendment") to the
Credit Agreement dated as of August 26, 1997, as amended by Amendment No. 1
dated as of September 30, 1997 (the CREDIT AGREEMENT"), among LAROCHE INDUSTRIES
INC. (the "BORROWER"), the LENDERS party thereto (the "LENDERS") and THE CHASE
MANHATTAN BANK, as Administrative Agent (the "ADMINISTRATIVE AGENT").

                              W I T N E S S E T H :

         WHEREAS, the parties hereto desire to amend the Credit Agreement to
permit certain investments in foreign subsidiaries in the form of debt as well
as equity in an aggregate amount not to exceed $85,000,000, to modify the
leverage ratio and minimum consolidated net worth requirements and to make
certain other changes, primarily relating to foreign subsidiaries;

         WHEREAS, the Borrower has requested that compliance and the effects of
non-compliance by the Borrower with certain provisions of the Credit Agreement
be waived;

         NOW, THEREFORE, the parties hereto agree as follows:

         SECTION 1. Defined Terms; References. Unless otherwise specifically
defined herein, each term used herein which is defined in the Credit Agreement
has the meaning assigned to such term in the Credit Agreement. Each reference to
"hereof", "hereunder", "herein" and "hereby" and each other similar reference
and each reference to "this Agreement" and each other similar reference
contained in the Credit Agreement shall, after this Amendment becomes effective,
refer to the Credit Agreement as amended hereby.

         SECTION 2. Section 1.01. Section 1.01 of the Credit Agreement is
amended by

         (a) amending the definitions of

                  (i) "Asset Sale" by amending clause (iii) thereof to read as
         follows:


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                           (iii) disposition to the Borrower or a Subsidiary
                  Guarantor or by a Foreign Subsidiary (that is not a Direct
                  Foreign Subsidiary) to another Foreign Subsidiary.

                 (ii)  "Borrower Consolidated EBITDA" by amending clause (1)
         thereof in its entirety to read as follows:

                           (1) consolidated net income of the Borrower and its
                  Consolidated Subsidiaries for such period (exclusive of (x)
                  the portion of net income allocable to minority interests in
                  unconsolidated Persons to the extent that cash distributions
                  have not actually been received from such Persons (provided
                  that cash distributions of prior period earnings may be added
                  to net income for such period to the extent not previously
                  reflected), (y) the effect of any extraordinary or non
                  recurring gain or loss and (z) the effect of "marking to
                  market" any notional amount under any Hedging Agreement that
                  exceeds the amount of the Borrower's net investment in the
                  related assets, to the extent such "marking to market" does
                  not reflect a current cash payment to or from the Borrower
                  upon the termination or unwind of such Hedging Agreement),
                  plus

                (iii) "Consolidated Net Worth" in its entirety to read as
         follows:

                           "Consolidated Net Worth" means, at any date, the
                  consolidated stockholders' equity of the Borrower and its
                  Consolidated Subsidiaries determined as of such date, provided
                  there shall be excluded from any computation of such equity
                  the effect of "marking to market" any notional amount under
                  any Hedging Agreement that exceeds the amount of the
                  Borrower's net investment in the related assets, to the extent
                  such "marking to market" does not reflect a current cash
                  payment to or from the Borrower upon the termination or unwind
                  of such Hedging Agreement.

          (b) inserting therein, in proper alphabetical order, the following
defined term:

                  "Direct Foreign Subsidiary" means any Foreign Subsidiary more
         than 50% of the equity, ordinary voting power or general partnership
         interests of which are owned directly by the Borrower.


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          SECTION 3. Section 3.16. Article III of the Credit Agreement is
amended to add the following section at the end thereof:

                  SECTION 3.16. Year 2000. Any reprogramming required to permit
         the proper functioning, in and following the year 2000, of (i) the
         computer systems of the Borrower and its Subsidiaries and (ii)
         equipment containing embedded microchips (including systems and
         equipment supplied by others or with which the systems of the Borrower
         and its Subsidiaries interface) and the testing of all such systems and
         equipment, as so reprogrammed, will be completed by July 1, 1999. The
         cost to the Borrower and its Subsidiaries of such reprogramming and
         testing and of the reasonably foreseeable consequences of year 2000 to
         the Borrower and its Subsidiaries (including, without limitation,
         reprogramming errors and the failure of others' systems or equipment)
         will not result in a Default or a Material Adverse Effect. Except for
         such of the reprogramming referred to in the preceding sentence as may
         be necessary, the computer and management information systems of the
         Borrower and its Subsidiaries are and, with ordinary course upgrading
         and maintenance, will continue to be, sufficient to permit the Borrower
         and its Subsidiaries to conduct their business without a Material
         Adverse Effect.

         SECTION 4. Section 5.01. (a) Section 5.01(d) of the Credit Agreement is
amended by deleting the words "95 days" and replacing them with the words "five
months".

          (b) Section 5.01(e) of the Credit Agreement is amended by deleting the
number "50" and replacing it with the number "60".

         SECTION 5. Section 5.09(b)(ii). Section 5.09(b)(ii) of the Credit
Agreement is amended by deleting the word "and" preceding the designation "(y)";
inserting before the term "Foreign Subsidiary" in subclause (y) thereof the word
"Direct" and immediately after the figure "66%" in subclause (y) thereof the
parenthetical phrase "(or, if less, 100% of the Borrower's holdings)"; and
inserting before the period at the end of clause (ii) the following:

         , and (z) any promissory notes issued to the Borrower or any Subsidiary
         other than a Foreign Subsidiary to evidence Indebtedness incurred
         pursuant to Section 6.01(a)(iv)

         SECTION 6. Section 6.01(a). (a) Section 6.01(a)(iv) of the Credit
Agreement is amended by deleting the parenthetical phrase "(other than a Foreign
Subsidiary)" and substituting therefor the parenthetical phrase "(other than a
Foreign Subsidiary, unless such Foreign Subsidiary is a wholly owned
Subsidiary)"; inserting after the words "provided that" the designation "(i)";
and 


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inserting after the words "Administrative Agent" the following:

         and (ii) the aggregate principal amount of Indebtedness of all such
         Foreign Subsidiaries to the Borrower or other Subsidiaries which are
         not Foreign Subsidiaries shall not exceed $85,000,000 (including all
         such Indebtedness permitted by any other provision of this Section
         6.01(a) (other than any such Indebtedness incurred to finance purchases
         of capital stock of JVC permitted pursuant to Section 6.04(i)), and
         computed on a consolidated basis as to all Foreign Subsidiaries) at any
         time outstanding

          (b) Section 6.01(a)(v) of the Credit Agreement is amended by deleting
the parenthetical phrase "(other than a Foreign Subsidiary)" both times it
appears, and substituting therefor the parenthetical phrase "(other than a
Foreign Subsidiary, unless such Foreign Subsidiary is a wholly owned
Subsidiary)"; and

          (c) Section 6.01(a)(xi) of the Credit Agreement is amended by
inserting after the designation "(x)" the word "either" and by inserting before
the word "and" at the end of subclause (x) of the proviso the following:

         or such Indebtedness is of a Foreign Subsidiary to a local bank and is
         denominated in a currency other than Dollars

         SECTION 7. Section 6.02(a). Section 6.02(a) of the Credit Agreement is
amended by deleting the word "and" at the end of clause (iii); replacing the
period at the end of clause (iv) with a semi-colon, followed by the word "and";
and adding the following new clause (v):

                  (v) Liens on inventory or accounts receivable of a Foreign
         Subsidiary securing Indebtedness of such Subsidiary permitted pursuant
         to subclause (x) of the proviso to Section 6.01(a)(xi) or Section
         6.01(a)(xii).

         SECTION 8. Section 6.04. (a) Section 6.04(c) of the Credit Agreement is
amended in its entirety to read as follows:

                  (c) subject to Section 5.09, Investments by the Borrower or
         any of its wholly owned Subsidiaries in capital stock and, if such
         Investments are in connection with a Permitted Acquisition, promissory
         notes of wholly owned Subsidiaries; provided that the aggregate amount
         (including all such Investments permitted by any other provision of
         this Section 6.04 (other than Section 6.04(i)), and computed on a
         consolidated basis as to all Foreign Subsidiaries) of such Investments
         in Foreign Subsidiaries will not exceed $85,000,000;



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<PAGE>   5


          (b) Section 6.04(i) of the Credit Agreement is amended in its entirety
to read in its entirety as follows:

                  (i) purchases of capital stock of JVC by LII Europe pursuant
         to the Put/Call Arrangements or pursuant to other arrangements, and
         loans or advances by the Borrower to LII Europe to finance such
         purchases; provided that any such purchase made by LII Europe pursuant
         to any such other arrangements is on substantially the same material
         terms (including without limitation price) as the terms set forth in
         the Put/Call Arrangements;

          (c) Section 6.04(k) of the Credit Agreement is amended by inserting
after the words "subject to" the words "Section 6.04(c) and",

          (d) Section 6.04 is further amended by deleting from the final proviso
thereto the words "on or" (appearing after the phrase "made at any time")
therein, and by adding the following additional sentence at the end thereof:

         For purposes of this Section 6.04, the amount of any Investment in a
         Foreign Subsidiary denominated in a currency other than Dollars shall
         be the amount thereof converted to Dollars at the spot rate on the date
         such Investment is made (without adjustment for subsequent currency
         fluctuations).

         SECTION 9. Section 6.12. Section 6.12 of the Credit Agreement is
amended in its entirety to read as follows:

                  SECTION 6.12. Leverage Ratio. At the last day of any fiscal
         quarter of the Borrower in any period (both dates inclusive) set forth
         below, the Leverage Ratio will not exceed the ratio set forth below
         opposite such period.

<TABLE>
<CAPTION>
                        Period                                    Ratio
                        <S>                                       <C>
                        3/01/98-5/31/98                           5.20:1
                        6/01/98-11/29/98                          5:00:1
                        11/30/98-2/27/99                          4.90:1
                        2/28/99-5/30/00                           4.50:1
                        5/31/00-5/30/01                           4.00:1
                        5/31/01-5/30/02                           3.50:1
                        Thereafter                                3.25:1
</TABLE>



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<PAGE>   6

         SECTION 10. Section 6.13. Section 6.13 of the Credit Agreement is
amended in its entirety to read as follows:

                  SECTION 6.13. Minimum Consolidated Net Worth. At the last day
         of any fiscal quarter of the Borrower ending on or after May 31, 1998,
         Consolidated Net Worth will not be less than an amount equal to the sum
         of (i) $31,000,000 and (ii) an amount equal to 50% of consolidated net
         income for each successive period of two consecutive fiscal quarters
         ended after May 31, 1998 and on or before such day, in each case, for
         which consolidated net income is positive (but with no deduction on
         account of negative consolidated net income for any such period of two
         consecutive fiscal quarters) plus (iii) 100% of the aggregate net
         proceeds, including the fair market value of property other than cash
         (as determined in good faith by the Borrower's board of directors),
         received by the Borrower from the issuance and sale after the date
         hereof of any capital stock of the Borrower (other than the proceeds of
         any issuance and sale of any capital stock (x) to a Subsidiary or (y)
         which is required to be redeemed, or is redeemable at the option of the
         holder, if certain events or conditions occur or exist or otherwise) or
         in connection with the conversion or exchange of any Indebtedness of
         the Borrower into capital stock of the Borrower after February 28,
         1997.

         SECTION 11. Waivers. The Administrative Agent and the Required Lenders
hereby waive compliance and the effects of non-compliance by the Borrower with
the following provisions of the Credit Agreement: (a) Section 5.01(c) with
respect to the financial statements of the Borrower referred to therein for the
calendar month ended March 31, 1998, to the extent that such statements are
delivered not later than May 31, 1998, and are otherwise as provided therein,
(b) Section 5.11 with respect to the title insurance policy delivered as to the
Borrower's Gramercy, Louisiana property, to the extent that exception 3 of
Schedule B, Section 11 thereof is unchanged from the original title commitment
therefor, (c) Section 6.01(a)(iv) to the extent that upon the effectiveness of
Section 6 of this Amendment no breach thereof will be continuing, (d) Section
6.12 with respect to the Leverage Ratio as of November 30, 1997, to the extent
that the Leverage Ratio as of such date did not exceed 5.50:1, and (e) Section
6.13 with respect to Consolidated Net Worth as of February 28, 1998, to the
extent that Consolidated Net Worth as of such date was not less than
$31,000,000.

         SECTION 12. Representations of Borrower. The Borrower represents and
warrants that after giving effect to the foregoing provisions of this Amendment
(i) the representations and warranties of the Borrower set forth in Article 3 of
the Credit Agreement will be true and correct on and as of the Amendment
Effective Date (as hereinafter defined) to the same extent as they would be
required to be under Section 4.03(b) on the occasion of any Borrowing and (ii)
no Default will have occurred and be continuing on such date.


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         SECTION 13. Governing Law. This Amendment shall be governed by and
construed in accordance with the laws of the State of New York.

         SECTION 14. Counterparts. This Amendment may be signed in any number of
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.

         SECTION 15. Effectiveness. This Amendment shall become effective as of
the date hereof on the date (the "AMENDMENT EFFECTIVE DATE") when the
Administrative Agent shall have received from each of the Borrower and the
Required Lenders a counterpart hereof signed by such party or facsimile or other
written confirmation (in form satisfactory to the Administrative Agent) that
such party has signed a counterpart hereof.



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<PAGE>   8


         IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed as of the date first above written.

                                    LAROCHE INDUSTRIES INC.


                                    By:   /s/ Harold W. Ingalls
                                          -----------------------------
                                          Name:  Harold W. Ingalls
                                          Title:  Chief Financial Officer
                                                   & Vice President

                                    THE CHASE MANHATTAN BANK


                                    By:   /s/ Robert T. Sacks
                                          -----------------------------
                                          Name:  Robert T. Sacks
                                          Title:  Managing Director


                                    HIBERNIA NATIONAL BANK


                                    By:   /s/ Trudy W. Nelson
                                          -----------------------------
                                          Name: Trudy W. Nelson
                                          Title: Vice President


                                    WACHOVIA BANK, N.A.


                                    By:   /s/ W. Tompkins Rison, Jr.
                                          -----------------------------
                                          Name:  W. Tompkins Rison, Jr.
                                          Title:  Vice President



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                                    THE BANK OF NOVA SCOTIA


                                    By:   /s/ F.C.H. Ashby
                                          --------------------------------------
                                          Name:  F. C. H. Ashby
                                          Title:  Senior Manager Loan Operations


                                    PNC BANK, NATIONAL ASSOCIATION


                                    By:   /s/ Rose M. Crump
                                          --------------------------------------
                                          Name:  Rose M. Crump
                                          Title:  Vice-President


                                    AMSOUTH BANK


                                    By:
                                          --------------------------------------
                                          Name:
                                          Title:


                                    BHF-BANK AKTIENGESELLSCHAFT


                                    By:   /s/ Linda Pace
                                          --------------------------------------
                                          Name:  Linda Pace
                                          Title:  Vice President


                                    By:   /s/ Anthony Heyman
                                          --------------------------------------
                                          Name:  Anthony Heyman
                                          Title:  Assistant Vice President



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<PAGE>   10


                                    COMERICA BANK


                                    By:   /s/ Kristine L. Andersen
                                          --------------------------------------
                                          Name:  Kristine L. Andersen
                                          Title:  Account Officer


                                    NATIONAL BANK OF CANADA


                                    By:   /s/ Susan K. Gadrix
                                          --------------------------------------
                                          Name:  Susan K. Gadrix
                                          Title:  Assistant Vice President

                                    By:   /s/ J. F. Hannon
                                          --------------------------------------
                                          Name:  J.F. Hannon
                                          Title:  Vice President


                                    BANQUE PARIBAS


                                    By:   /s/ Duane Helkowski
                                          --------------------------------------
                                          Name:  Duane Helkowski
                                          Title: Vice President

                                    By:   /s/ David Canavan
                                          --------------------------------------
                                          Name:  David Canavan
                                          Title: Director




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