Exhibit 10.32


 


SECOND AMENDMENT TO TERM LOAN AGREEMENT


 


THIS
SECOND AMENDMENT TO TERM LOAN AGREEMENT (this
“Amendment”) is entered into by and between KMG-BERNUTH,
INC., a Delaware corporation (hereinafter referred to as “Borrower”)
and SOUTHTRUST BANK, an Alabama
banking corporation, successor by conversion to SouthTrust Bank, National
Association (hereinafter referred to as “Bank”) as of the 5th day of December,
2003.


 


W I T N E S S E T H:


 


WHEREAS,
Borrower and Bank are parties to that certain Term Loan Agreement dated as of
June 26, 1998, as amended by that certain First Amendment to Term Loan
Agreement dated as of December 30, 2002 (as so amended and as hereby
amended, the “Loan Agreement”), whereby Borrower became indebted to Bank for a
term loan (the “Term Loan”) made by Bank to Borrower in the original principal
amount of $6,000,000.00 and thereafter amended to a principal amount of
$5,050,000.00; and


 


WHEREAS,
Borrower’s payment and performance obligations in connection with the Term Loan
are evidenced by that certain Term Note dated as of June 26, 1998, as
amended by that certain First Amendment to Term Note dated as of
January 8, 2002, and as amended and restated by that certain Amended and
Restated Promissory Note dated as of December 30, 2002 (together with any
and all amendments thereto, the “Term Note”); and


 


WHEREAS, Borrower has requested that the Bank make available to Borrower an
additional sum of up to Six Million and No/100 Dollars ($6,000,000.00) on a
term loan basis as a second term loan, and the Bank is willing to do so upon
the terms and subject to the conditions hereinafter set forth; and


 


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


 


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


 


1.                                       Section 1.1
of the Loan Agreement is hereby amended as follows:


 


(a)                                  Section 1.1
is hereby amended to add the following definitions as defined terms:


 


“Compliance
Certificate” means the Compliance Certificate in the form of Exhibit “E”
hereto, to be furnished by the Borrower to the Bank pursuant to
Section 6.1(B)(3) hereof.


 


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


 


“EBITDA”
means, for any period, the income (or deficit) from all operations of the
Borrower before any deduction for the following items during such period:  (i) the interest charges paid or accrued
(including imputed interest on lease


 

















 


(capital or
operating) obligations, but excluding amortization of debt discount and
expense), (ii) Income Taxes, and (iii) any amounts in respect of depreciation
and amortization.


 


“Income
Taxes” means any income, profit, franchise, corporate, capital stock or
other tax based upon or measured by the income of Borrower, including any
liability for income taxes of direct or indirect individual owners of Borrower
or direct or indirect entity members of Borrower because of pass through of
income taxes to the individual owners.


 


“Term Loan
Guaranty” means the Guaranty of Payment, dated as of June 26, 1998,
executed by the Guarantor in favor of the Bank, guaranteeing the payment and
performance to the Bank of the Borrower’s obligations hereunder relating to the
Term Loan, as amended or modified from time to time.


 


“Term Loan No. 2”
means the aggregate unpaid principal balance from time to time of the loan made
to the Borrower pursuant to Section 2A.1 of this Agreement.


 


“Term Loan
No. 2 Guaranty” means the Guaranty of Payment, dated as of December 5,
2003, executed by the Guarantor in favor of the Bank, guaranteeing the payment
and performance to the Bank of the Borrower’s obligations hereunder relating to
the Term Loan No. 2, as amended or modified from time to time.


 


“Term Note No. 2”
means the promissory note, in substantially the form of Exhibit “D” to this
Agreement, dated as of December 5, 2003, made by the Borrower to evidence
the Borrower’s obligation to repay the Term Loan No. 2 and the interest
thereon, 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.


 


“Term Rate No. 2” is
defined in Section 2A.4(A) of this Agreement.


 


(b)                                 Section 1.1
is hereby amended by deleting the definitions of “Guaranty”, “Loan”, “Loan
Documents”, “Loan Fee”, “Note”, “Obligations”, “Participant”, and “Security
Agreement”, each as defined therein, in their entirety and substituting the
following new definitions in lieu thereof:


 


“Guaranty” means,
singularly and collectively, the Term Loan Guaranty and the Term Loan No. 2
Guaranty.


 


“Loan” means,
singularly and collectively, the Term Loan and the Term Loan No. 2.


 


“Loan Fee” means any
and all loan fees at any time charged by the Bank to the Borrower in connection
with the Loan, including, without limitation, a fee of $10,000.00 paid by
Borrower to paid concurrently with the execution of this Agreement, a fee of
$19,100.00 paid by the Borrower to the Bank concurrently with the execution of
the First Amendment to Term Loan Agreement, and a fee of $45,000.00 payable by
the Borrower to the Bank concurrently with the execution of the Second
Amendment to Term Loan Agreement.


 


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“Loan Documents”
means this Agreement, each Note, each Security Agreement, each Guaranty, 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, any Loan, whether heretofore, simultaneously herewith or hereafter
delivered, together with any and all extensions, revisions, modifications or
amendments at any time made to any of the foregoing.


 


“Note” means,
singularly and collectively, the Term Note and the Term Note No. 2.


 


“Obligations” means
the obligations of Borrower:


 


(A)                              To pay the principal of and interest on each
Note in accordance with the respective terms thereof and to satisfy all of
Borrower’s other liabilities to the Bank, whether hereunder or otherwise,
whether now existing or hereafter incurred, matured or unmatured, direct or
contingent, joint or several, including any and all extensions, modifications,
and renewals thereof and substitutions therefor;


 


(B)                                To repay to the Bank all amounts advanced by
the Bank hereunder, under any of the other Loan Documents or otherwise on
behalf of the Borrower, including, but without limitation, advances for principal
or interest payments to prior secured parties, 
mortgagees, or lienors, or for taxes, levies, insurance, rent, or
repairs to or maintenance or storage of, any of the Collateral; and


 


(C)                                To reimburse the Bank, on demand, for all of
the Bank’s expenses and costs, including the reasonable fees and expenses of
its counsel, in connection with the preparation, administration, amendment,
modification, or enforcement of this Agreement and the documents required
hereunder, including, without limitation, any proceeding brought or threatened
to enforce payment of any of the obligations referred to in the foregoing
paragraphs (A) and (B).


 


“Participant” means
any bank, financial institution, Affiliate of the Bank, or other entity which
purchases an interest in any Note from the Bank.


 


“Security Agreement”
means, singularly and collectively, each and every document and instrument
heretofore, simultaneously herewith, or hereafter executed or delivered by
Borrower in favor of Bank, granting Bank a security interest in any property or
collateral of Borrower in order to secure Borrower’s payment of any
indebtedness owed to Bank or performance of any obligations owed to Bank,
whether under any Note or any of the other Loan Documents, including, but not
limited to, that certain Security Agreement executed by Borrower in favor of
Bank dated as of December 30, 2002, as amended by that certain First
Amendment to Security Agreement dated as of December 5, 2003, that certain
Purchase Money Security Agreement executed by Borrower in favor of Bank dated
as of June 26, 1998, and that certain Security Agreement executed by
Borrower in favor of Bank dated as of August 1, 1996, together with any
and all modifications or amendments at any time made to any of said documents
or instruments.


 


(c)                                  All
other capitalized terms used herein shall have the respective meanings assigned
thereto in the Loan Agreement, unless otherwise specifically defined herein.


 


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2.                                       The
Loan Agreement is hereby amended by adding the following as a new
Article II(A) thereto:


 


ARTICLE II(A).


 


2A.                             THE TERM LOAN NO. 2


 


2A.1                       General Terms. 
Subject to the terms hereof, the Bank will lend the Borrower the
principal sum of Six Million and No/100 Dollars ($6,000,000.00) on a term
basis.


 


2A.2                       Disbursement of the Term Loan No. 2.  The
Bank will credit the proceeds of the Term Loan No. 2 to the principal deposit
account of the Borrower with the Bank, or in such other manner as the Borrower
and the Bank may agree.


 


2A.3                       The Term Note No. 2.  The
Borrower’s obligation to repay the Term Loan No. 2 shall be evidenced by the
Term Note No. 2.


 


2A.4                       Term Loan No. 2 Interest Rate and Payment of
Interest.


 


(A)                              Interest on the Term Loan No. 2 shall be
calculated and paid at such rate(s) and on such date(s) as provided in the Term
Note No. 2 (the rate of interest as may from time to time be accruing under the
Term Note No. 2 being herein referred to as the “Term Rate No. 2”).


 


(B)                                If, at any time, the Term Rate No. 2 shall be
deemed by any competent court of law, governmental agency or tribunal to exceed
the maximum rate of interest permitted by any applicable laws, then, for such
time as the Term Rate No. 2 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 the
Bank shall be credited as a partial prepayment of principal.


 


2A.5                       Payments of Principal. 
Borrower shall make to Bank such payments of principal on the Term Loan
No. 2 as are required by the terms of the Term Note No. 2.


 


2A.6                       Payment to the Bank.  All
sums payable to the Bank hereunder shall be paid directly to the Bank in United
States Dollars and in immediately available funds at the place payment is
due.  If the Bank shall send the
Borrower statements of amounts due hereunder, such statements shall be
considered correct and conclusively binding on the Borrower unless the Borrower
notifies the Bank to the contrary within ninety (90) days of its receipt of any
statement which it deems to be incorrect.


 


2A.7                       Use of Proceeds of Term Loan No. 2.  The
proceeds of the Term Loan No. 2 shall be used by the Borrower solely to provide
financing for the purchase of the assets of the pentachlorophenol business
owned by Wood Protection Products, Inc.


 


3.                                       Article III
of the Loan Agreement is hereby amended by deleting Sections 3.2 thereof in its
entirety and substituting the following new Section 3.2 in lieu thereof:


 


3.2                                 Certain
Events.  At the time of disbursement
of each Loan:


 


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(A)                              No
Event of Default shall have occurred
and be continuing, and no event shall have occurred and be continuing that,
with the giving of notice or passage or time or both, would be an Event of
Default;


 


(B)                                No
material adverse change shall have occurred in the financial condition of the
Borrower since the date of this Agreement;


 


(C)                                All
of the Loan Documents shall have remained in full force and effect;


 


(D)                               The
Borrower shall have paid any Loan Fee then due and payable.


 


4.                                       Article III
of the Loan Agreement is hereby amended by deleting Sections 3.3 thereof in its
entirety and substituting the following new Section 3.3 in lieu thereof:


 


3.3                                 Legal
Matters.  At the time of
disbursement of each Loan, all legal matters incidental thereto shall be
satisfactory to Sirote & Permutt, P.C., counsel to the Bank.


 


5.                                       Article V
of the Loan Agreement is hereby amended by deleting Section 5.8 thereof in
its entirety and substituting the following new Section 5.8 in lieu
thereof:


 


5.8                                 Environmental
Matters.  Neither any property of
the Borrower nor Borrower is in violation of or subject to any existing,
pending or threatened investigation or inquiry by any governmental authority or
any remedial obligations under any applicable laws, rules or regulations
pertaining to health or the environment, including, without limitation, the
Comprehensive Environmental Response, Compensation and Liability Act of 1980,
as amended (“CERCLA”), the Resource Conservation and Recovery Act of 1976, as
amended (“RCRA”), and the Superfund Amendments and Reauthorization Act of 1986,
as amended (“SARA”), or any other federal, state, local or municipal laws,
statutes, regulations, rules or ordinances imposing liability or establishing
standards of conduct for protection of human health and the environment, and
there are no facts, conditions or circumstances known to Borrower which could
result in any such investigation or inquiry if such facts, conditions and circumstances,
if any, were fully disclosed to the applicable governmental authority, and
Borrower will promptly notify Bank if Borrower becomes aware of any such facts,
conditions or circumstances or any such investigation or inquiry; Borrower has
obtained any and all permits, licenses, or similar authorizations necessary to
construct, repair, occupy, operate or use any buildings, improvements, fixtures
or equipment in connection with any of Borrower’s property constructed or to be
constructed by reason of any environmental laws, statutes, ordinances, rules or
regulations and is in full compliance with the terms and conditions of such
permits, licenses, or similar authorizations; no oil, toxic or hazardous
substances, or toxic or hazardous wastes have been used, stored, generated or
otherwise handled at any of Borrower’s property except in quantities customary
and necessary for the intended use of such property, including but not limited
to cleaning supplies, insecticides, paints, paint removers, toner for copiers,
etc., provided the use, storing or handling of such amounts is in compliance
with all applicable federal, state, local or municipal laws, statutes,
regulations, rules or ordinances imposing liability or establishing standards
of conduct for protection of human health and the environment; and no oil,
toxic or hazardous substances, toxic or hazardous wastes, or solid wastes have


 


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been disposed
of or released on any of Borrower’s property, and Borrower covenants and agrees
that it will not cause there to be, and will use its best efforts to prevent,
any violation of CERCLA, RCRA and/or SARA and any other federal, state, local
or municipal laws, statutes, regulations, rules or ordinances imposing liability
or establishing standards of conduct for protection of human health and the
environment in connection with the ownership and/or use of any of Borrower’s
property by the Borrower or any tenant of any of Borrower’s property, including
any violation arising from the disposal or release of oil, toxic or hazardous
substances, toxic or hazardous wastes, or solid wastes on any such property
(the terms “hazardous substance,” “hazardous waste,” and “release” shall have
the meanings specified in CERCLA, and the terms “solid waste” and “disposal”,
“dispose” or “disposed” shall have the meanings specified in RCRA, except that
if such acts are amended to broaden the meanings thereof, the broader meaning
shall apply herein).  Borrower hereby
further covenants and agrees that it will take all reasonable steps necessary
to avoid liability under CERCLA, including (1) taking reasonable steps to stop
and prevent any future continuing releases of pollutants which would subject
the Borrower or others associated with any of Borrower’s property to CERCLA
liability, (2) granting access for and fully cooperating with the performance
of environmental response actions by others on or about any of Borrower’s
property, and (3) complying with any applicable use restrictions imposed upon any
of Borrower’s property due to environmental conditions.  Notwithstanding anything to the contrary herein, Borrower shall
indemnify, defend and hold Bank harmless from and against any fines, charges,
claims, demands, penalties, liability (including strict liability), damages,
losses, expenses (including, without limitation, legal expenses, consultant
fees and laboratory fees), fees, attorney fees and costs incurred by Bank in
the event the Borrower or any of Borrower’s property (whether or not due to any
fault of Borrower) is hereafter determined to be in violation of any
environmental laws, statutes, ordinances, rules or regulations applicable
thereto (excluding, however, any conditions caused by materials placed on any
of Borrower’s property following foreclosure or acceptance by Bank of a deed in
lieu of foreclosure), and this indemnity shall survive any foreclosure or deed
in lieu of foreclosure and repayment of the Loan.


 


6.                                       Section 6.1
of the Loan Agreement is hereby amended by deleting Subsection (A) thereof
in its entirety and substituting the following new Subsection (A) in lieu
thereof:


 


(A)                              The Borrower will use the proceeds of the
Term Loan only for the purposes set forth in Section 2.7, will use the
proceeds of Term Loan No. 2 only for the purposes set forth in
Section 2A.7, and will furnish the Bank such evidence as it may reasonably
require with respect to such uses.


 


7.                                       Section 6.1
of the Loan Agreement is hereby amended by deleting Subsection (B) thereof
in its entirety and substituting the following new Subsection (B) in lieu
thereof:


 


(B)                                The
Borrower will furnish, or cause to be furnished, the Bank:


 


(1)                                  Within
forty-five (45) days after the close of each calendar month (a) an income
statement of the Borrower for such period and (b) a balance sheet of the
Borrower as of the end of such period, adjusted to U.S. Dollars, all in
reasonable detail with Bank having full access to all supporting schedules and
comments, subject to year-end audit adjustments, and certified by the
Borrower’s president or principal financial officer to have been prepared in
accordance with Generally


 


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Accepted
Accounting Principles consistently applied by the Borrower, except for any
inconsistencies explained in such certificate;


 


(2)                                  Within
one hundred twenty (120) days after the close of each fiscal year (a) a
statement of Stockholders’ Equity and a statement of cash flows of the Borrower
for such fiscal year, (b) an income statement of the Borrower for such fiscal year,
and (c) a balance sheet of the Borrower as of the end of such fiscal year;
adjusted to U. S. Dollars, all in reasonable detail, including all supporting
schedules and comments; and certified by the Borrower’s president or principal
financial officer to have been prepared in accordance with Generally Accepted
Accounting Principles consistently applied by the Borrower, except for any
inconsistencies explained in such certificate;


 


(3)                                  Contemporaneously
with each monthly and year-end financial report required by the foregoing
paragraphs, a Compliance Certificate of the principal financial officer of the
Borrower stating that, to the best of his knowledge, the Borrower has observed
and performed each and every undertaking contained in this Agreement and is not
at the time in default in the observance or performance of any of the terms and
conditions hereof or, if the Borrower shall be so in default, specifying all
such defaults and events of which he may have knowledge;


 


(4)                                  Monthly,
within forty-five (45) days after the end of the prior month, and at such other
times as the Bank may request, a Collateral Report (as required by, and as
defined in, the Revolving Loan Agreement) for the immediately preceding month,
certified to be correct by the president or controller of the Borrower.


 


(5)                                  Within
forty-five (45) days after the close of each calendar month (a) a consolidated
income statement of the Guarantor such period and (b) a consolidated balance
sheet of the Guarantor as of the end of such period, adjusted to U.S. Dollars,
all in reasonable detail with Bank having full access to all supporting
schedules and comments, subject to year-end audit adjustments, and certified by
the Guarantor’s president or principal financial officer to have been prepared
in accordance with Generally Accepted Accounting Principles consistently
applied by the Guarantor, except for any inconsistencies explained in such
certificate;


 


(6)                                  Within
one hundred twenty (120) days after the close of each fiscal year (a) a
consolidated statement of Stockholders’ Equity and a consolidated statement of
cash flows of the Guarantor for such fiscal year, (b) a consolidated income
statement of the Guarantor for such fiscal year, and (c) a consolidated balance
sheet of the Guarantor as of the end of such fiscal year; adjusted to U. S.
Dollars, 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


 


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Guarantor and
acceptable to the Bank, and certified by such accountants to have been prepared
in accordance with Generally Accepted Accounting Principles consistently
applied by the Guarantor, except for any inconsistencies explained in such
certificate; the Bank shall have the right, from time to time, to discuss the
Guarantor’s affairs directly with the Guarantor’s independent certified public
accountant after notice to the Guarantor and opportunity of the Guarantor to be
present at any such discussions;


 


(7)                                  Promptly
after sending or making available or filing of the same, copies of all reports,
proxy statements and financial statements that the Borrower or Guarantor sends
or makes available to its stockholders and all registration statements and
reports that the Borrower or Guarantor files with the Securities and Exchange
Commission or any successor Person, including, without limitation, the delivery
to Bank of all Form 10-Qs within sixty (60) days of the end of each fiscal quarter
and all Form 10-Ks within one hundred twenty (120) days of the end of each
fiscal year.


 


8.                                       Section 6.1
of the Loan Agreement is hereby amended by deleting Subsection (F) thereof
in its entirety and substituting the following new Subsection (F) in lieu
thereof:


 


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


 


(1)                                  Tangible
Net Worth of, at minimum: (a) $8,700,000.00 as of July 31, 2004; (b)
$11,000,000.00 as of July 31, 2005; (c) $15,000,000.00 as of July 31,
2006; and (d) $17,000,000.00 as of July 31, 2007, and at all times
thereafter.


 


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


 


(3)                                  A
ratio of Liabilities to Tangible Net Worth of not more than: (a) 2.0 to 1.0 as
of July 31, 2004; (b) 1.65 to 1.0 as of July 31, 2005; and (c) 1.25
to 1.0 as of July 31, 2006, and at all times thereafter.


 


(4)                                  A
Coverage Ratio of not greater than: (a) 2.25 to 1.0 as of July 31, 2004;
(b) 1.75 to 1.0 as of October 31, 2004, and through July 31, 2005;
and (c) 1.5 to 1.0 as of October 31, 2005, and at all times thereafter;
said Coverage Ratio to be measured quarterly based on a rolling four-quarter
basis.


 


9.                                       Section 7.1
of the Loan Agreement is hereby amended by deleting Subsection (A) thereof
in its entirety and substituting the following new Subsection (A) in lieu
thereof:


 


(A)                              The
Borrower shall fail to pay any installment of principal or interest or fee
payable hereunder or under any Note within ten (10) days of the due date
thereof.


 


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10.                                 Section 7.1
of the Loan Agreement is hereby amended by deleting Subsection (J) thereof
in its entirety and substituting the following new Subsection (J) in lieu
thereof:


 


(J)                                   The
validity or enforceability of this Agreement, any Note, or any of the other
Loan Documents shall be contested by the Borrower or the Guarantor and/or
Borrower or Guarantor shall deny that such party has any or further liability
or obligation hereunder or thereunder.


 


11.                                 Section 7.1
of the Loan Agreement is hereby amended by adding thereto the following new
Subsections (N) and (O) as additional Events of Default:


 


(N)                               If
all tangible assets purchased from Wood Protection Products, Inc. are not located or, in the case of motor vehicles,
principally garaged, at Borrower’s place of business in Tuscaloosa, Alabama, by
March 31, 2004.


 


(O)                               If all title vehicles are not re-titled in
Borrower’s name in the State of Alabama with the Bank’s lien noted thereon by
March 31, 2004.


 


12.                                 Article VIII
of the Loan Agreement is hereby amended by deleting Section 8.4 thereof in
its entirety and substituting the following new Section 8.4 in lieu
thereof:


 


8.4                                 Enforcement
and Waiver by the Bank.  The Bank
shall have the right at all times to enforce the provisions of this Agreement,
each Note, and each of the other Loan Documents in strict accordance with the
terms hereof and thereof, notwithstanding any conduct or custom on the part of
the Bank in refraining from so doing at any time or times.  The failure of the Bank 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 the Bank are cumulative and concurrent and the exercise
of one right or remedy shall not be deemed a waiver or release of any other
right or remedy.


 


13.                                 Article VIII
of the Loan Agreement is hereby amended by deleting Section 8.5 thereof in
its entirety and substituting the following new Section 8.5 in lieu
thereof:


 


8.5                                 Expenses
of the Bank.  The Borrower will, on
demand, reimburse the Bank for all expenses, including the fees and expenses of
legal counsel for the Bank, incurred in connection with the preparation,
administration, amendment, modification or enforcement of this Agreement and
the other Loan Documents and the collection or attempted collection of any Loan
and any Note.


 


14.                                 Section 8.10
of the Loan Agreement is hereby amended by deleting Subsection (B) thereof
in its entirety and substituting the following new Subsection (B) in lieu
thereof:


 


(B)                               THE
BORROWER AND THE BANK HEREBY:


 


(1)                                 IRREVOCABLY
AND UNCONDITIONALLY WAIVE 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


 


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THIS AGREEMENT, ANY NOTE, ANY OF THE OTHER
LOAN DOCUMENTS OR ANY OTHER DOCUMENT EXECUTED IN CONNECTION HEREWITH OR
THEREWITH; AND


 


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


 


15.                                 Article VIII
of the Loan Agreement is hereby amended by deleting Section 8.13 thereof
in its entirety and substituting the following new Section 8.13 in lieu
thereof:


 


8.13                           Severability.  If any provision of this Agreement, any
Note, 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.


 


16.                                 The
Loan Agreement is hereby amended by adding as Exhibit “D” thereto the attached
Exhibit “D”, which provides the form of the Term Note No. 2.


 


17.                                 The
Loan Agreement is hereby amended by adding as Exhibit “E” thereto the attached
Exhibit “E”, which provides the form of the Compliance Certificate.


 


18.                                 Borrower
represents and warrants to the Bank that as of the date hereof:  (a) all representations and warranties given
by the Borrower in Article V of the Loan Agreement are true and correct,
except to the extent affected by this Amendment; and (b) the Borrower is in
full compliance with all of the covenants of the Borrower contained in
Article VI of the Loan Agreement, except to the extent affected by this
Amendment.  The Borrower further
represents that the Borrower has full power and authority to enter into this
Amendment and to consummate the transactions contemplated hereby, and the
Borrower agrees to pay directly, or reimburse the Bank for, all reasonable
expenses, including the reasonable fees and expenses of legal counsel, incurred
in connection with the preparation of the documentation to evidence this
Amendment and any documents executed in connection herewith.


 


19.                                 Except
as may be modified or waived by the Bank, in its sole discretion, the
effectiveness of this Amendment shall be subject to full and complete
satisfaction of the following conditions:


 


(a)                                  Payment
of Fees and Expenses.  Bank shall
have received from Borrower payment of the additional Loan Fee in the amount of
$45,000.00 and all other fees and expenses required by the Loan Agreement, as
further amended by this Amendment, and any of the other Loan Documents then
due.


 


(b)                                 Term
Note No. 2.  The Bank shall have
received the Term Note No. 2, duly executed and delivered by the Borrower.


 


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(c)                                  Borrower’s
Resolutions.  The Bank shall have
received from Borrower resolutions of the Borrower’s board of directors, in a
form satisfactory to Bank, authorizing the Borrower to enter into the
transactions contemplated by this Amendment.


 


(d)                                 Term
Loan No. 2 Guaranty.  The Bank shall
have received the Term Loan No. 2 Guaranty, in a form satisfactory to Bank,
duly executed and delivered by the Guarantor.


 


20.                                 Except
as expressly modified by this Amendment, the parties agree that:


 


(a)                                  In
all other respects, all the terms, conditions, obligations and provisions of
the Loan Agreement shall be unchanged and remain the same and in full force and
effect, and all terms of the Loan Agreement, as herein modified, are expressly
ratified and confirmed in all respects; and


 


(b)                                 In
the event that there shall be any conflict between the terms of this Amendment
and any of the terms of any of the other Loan Documents not amended
concurrently herewith, the terms and provisions of this Amendment shall govern
and each of such other Loan Documents are deemed automatically amended and
modified without any further action upon the execution and delivery of this
Amendment.


 


(c)                                  In
the event that there shall be any conflict between the amendments contained in
Paragraphs 6 and 7 of this Amendment with any of the terms of the Revolving
Loan Agreement, the terms and provisions of Paragraphs 6 and 7 of this
Amendment shall govern and the Revolving Loan Agreement is hereby automatically
amended and modified without any further action upon the execution and delivery
of this Amendment.


 


21.                                 Borrower
hereby acknowledges that the preparation, negotiation, execution and delivery
of this Amendment have been completed on an expedited basis, in order to
accommodate Borrower’s purchase of certain assets from Wood Protection
Products, Inc. in a timely fashion. 
Borrower agrees to undertake any additional action, to execute and
deliver to Bank any additional document and to cooperate fully with Bank as may
be reasonably required to address and resolve, to Bank’s sole satisfaction, any
issue or concern of Bank.


 


22.                                 The
undersigned KMG Chemicals, Inc. (the “Guarantor”), executes this Amendment to
expressly evidence its assent to all the terms of this Amendment, and to
further acknowledge and agree that the Guaranty of Payment dated as of
June 26, 1998 (the “Guaranty”), delivered by it to the Bank remains in
full force and effect and that the “Obligations” of the Guarantor as the
“Guarantor” under the Guaranty shall include, without limitation, all
obligations of the Borrower under the Loan Agreement, as amended by this Amendment.


 


23.                                 This
Amendment may be executed in several counterparts, each of which shall be
deemed an original, and all of such counterparts together shall constitute one
and the same instrument.  Signature and
acknowledgment pages, if any, may be detached from the counterparts and
attached to a single copy of this document to physically form one document.


 


SIGNATURES FOLLOW ON SEPARATE PAGES


 


11

















 


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


 


	
   

  	
  BORROWER:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  KMG-BERNUTH, INC.

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   /s/

  	
   

  
	
   

  	
  Its:

  	
  Vice President and Chief Financial Officer

  
	
   

  	
   

  	
   

  
	
  STATE OF TEXAS

  	
  )

  	
   

  	
   

  
	
  COUNTY OF HARRIS

  	
  )

  	
   

  	
   

  
						



 


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


 


Given under my hand and official seal this
the 5th day of December, 2003.


 


	
   

  	
   
  /s/

  	
  (SEAL)

  
	
   

  	
  Notary Public

  	
   

  
	
   

  	
  My Commission Expires:

  	
   

  	
   

  	
   

  
						



 


12

















 


	
   

  	
  BANK:

  
	
   

  	
   

  
	
   

  	
  SOUTHTRUST BANK

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   /s/

  	
   

  
	
   

  	
  Its:

  	
  Group Vice President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  STATE OF ALABAMA

  	
  )

  	
   

  	
   

  
	
  COUNTY OF JEFFERSON

  	
  )

  	
   

  	
   

  



 


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


 


Given under my hand and official seal this
the 5th day of December, 2003.


 


	
   

  	
   
  /s/

  	
  (SEAL)

  
	
   

  	
  Notary Public

  	
   

  
	
   

  	
  My Commission Expires:

  	
   

  	
   

  	
   

  
						



 


13

















 


	
   

  	
  GUARANTOR:

  
	
   

  	
   

  
	
   

  	
  KMG CHEMICALS, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
   /s/

  	
   

  
	
   

  	
  Its:

  	
  Vice President and Chief Financial Officer

  
	
   

  	
   

  
	
  STATE OF TEXAS

  	
  )

  	
   

  
	
  COUNTY OF HARRIS

  	
  )

  	
   

  



 


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


 


Given under my hand and official seal this
the 5th day of December, 2003.


 


 


	
   

  	
   
  /s/

  	
  (SEAL)

  
	
   

  	
  Notary Public

  	
   

  
	
   

  	
  My Commission Expires:

  	
   

  	
   

  	
   

  
						



 


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