<PAGE>   1



                                  EXHIBIT 10.37

                                 AMENDMENT NO. 2



         This Amendment No. 2 dated as of October 29, 1998 ("Agreement") is
among Denali Incorporated, a Delaware corporation, Fluid Containment, Inc., a
Delaware corporation, Ershigs, Inc., a Washington corporation, Ershigs Biloxi,
Inc., a Mississippi corporation, and SEFCO, Inc., an Oklahoma corporation
(collectively, "Borrowers"), the banks party to the Credit Agreement described
below ("Banks"), and NationsBank, N.A. (successor by merger to NationsBank of
Texas, N.A.), as agent for the Banks ("Agent").

                                  INTRODUCTION

         A. The Borrowers, the Agent, and the Banks are parties to the Amended
and Restated Credit Agreement dated as of March 23, 1998, as amended by
Amendment No. 1 and Consent dated as of June 5, 1998 (as so amended, the "Credit
Agreement").

         B. The Borrowers have requested that the Banks agree to increase the
Revolving Commitments under the Credit Agreement and to make certain other
amendments to the Credit Agreement.

         THEREFORE, the Borrowers, the Agent, and the Banks hereby agree as
follows:

         Section 1. Definitions. Unless otherwise defined in this Agreement,
terms used in this Agreement which are defined in the Credit Agreement shall
have the meanings assigned to such terms in the Credit Agreement.

         Section 2. Amendments.

         (a) Section 5.22 of the Credit Agreement is hereby deleted in its 
             entirety.

         (b) Section 5.3 is amended by adding the following sentence at the end
             of such Section:

                  Prior to the occurrence of an Event of Default, the Banks
         shall be responsible for any costs and expenses of any such audit,
         except that during the period from January 1, 1999 through December 31,
         2000, the Agent or any of its agents or representatives thereof may
         conduct one field audit of the Credit Parties' accounting procedures
         with respect to the Credit Parties' Receivables and Inventory at the
         Company's cost and expense.

         Section 3. Increase in Revolving Commitments. The Borrowers, the Agent,
and the Banks hereby agree that the Revolving Commitments of the Banks under the
Credit Agreement shall be modified to reflect the Revolving Commitments for the
Banks set forth on the attached Schedule 1 and upon the effectiveness of this
Agreement pursuant to Section 5 below, each such Bank's Revolving Commitment
shall be the Revolving Commitment set forth on the attached Schedule 1 and
replace for all purposes the amount provided below each such Bank's name on the
signature pages of the Credit Agreement.

         Section 4. Representations and Warranties. The Borrowers represent and
warrant to the Agent and the Banks that, after giving effect hereto:

         (a) the representations and warranties of the Borrowers set forth in
the Credit Agreement and in the other Loan Documents are true and correct in all
material respects as of the date of this Agreement, except those that by their
terms relate only to a specific date;

         (b) (i) the execution, delivery, and performance of this Agreement are
within the corporate power and authority of the Borrowers and have been duly
authorized by appropriate proceedings, and (ii) this Agreement constitutes a
legal, valid, and binding obligation of the Borrowers enforceable in accordance
with its terms, except as limited by applicable bankruptcy, insolvency,
reorganization, moratorium, or similar laws affecting the rights of creditors
generally and general principles of equity; and


<PAGE>   2




         (c) as of the effectiveness of this Agreement, no Default or Event of
Default has occurred and is continuing.

         Section 5. Effectiveness. This Agreement shall become effective and the
Credit Agreement shall be amended as provided in this Agreement upon the
occurrence of the following conditions precedent:

         (a) the Borrowers and the Banks shall have delivered duly and validly
executed originals of this Agreement to the Agent;

         (b) the representations and warranties in this Agreement shall be true
and correct in all material respects;

         (c) the following documents shall have been executed and delivered to
the Agent:

                  (i) Replacement Revolving Notes to each of the Banks whose
         Revolving Commitment has increased under the terms of this Agreement in
         the maximum principal amount of such Bank's Revolving Commitment after
         such increase; and

                  (ii) A Guarantors' reaffirmation in form satisfactory to the
         Agent; and

         (d) the Borrowers shall have paid all reasonable expenses payable to
the Agent and the Banks under the Loan Documents, including all reasonable
attorneys' fees which have been invoiced, and any fees agreed on between the
Company and the Agent in connection with this Agreement.

         Section 6. Effect on Loan Documents.

         (a) Except as amended herein, the Credit Agreement and the Loan
Documents remain in full force and effect as originally executed. Nothing herein
shall act as a waiver of any of the Agent's or Banks' rights under the Loan
Documents, as amended, including the waiver of any Default or Event of Default,
however denominated.

         (b) This Agreement is a Loan Document for the purposes of the
provisions of the other Loan Documents. Without limiting the foregoing, any
breach of representations, warranties, and covenants under this Agreement may be
a Default or Event of Default under other Loan Documents.

         Section 7. Choice of Law. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of Texas.

         Section 8. Counterparts. This Agreement may be signed in any number of
counterparts, each of which shall be an original.

         PURSUANT TO SECTION 26.02 OF THE TEXAS BUSINESS AND COMMERCE CODE, A
LOAN AGREEMENT IN WHICH THE AMOUNT INVOLVED IN THE LOAN AGREEMENT EXCEEDS
$50,000 IN VALUE IS NOT ENFORCEABLE UNLESS THE LOAN AGREEMENT IS IN WRITING AND
SIGNED BY THE PARTY TO BE BOUND OR THAT PARTY'S AUTHORIZED REPRESENTATIVE. THE
RIGHTS AND OBLIGATIONS OF THE PARTIES TO AN AGREEMENT SUBJECT TO THE PRECEDING
PARAGRAPH SHALL BE DETERMINED SOLELY FROM THE WRITTEN LOAN AGREEMENT, AND ANY
PRIOR ORAL AGREEMENTS BETWEEN THE PARTIES ARE SUPERSEDED BY AND MERGED INTO THE
LOAN AGREEMENT. THIS WRITTEN AGREEMENT AND THE LOAN DOCUMENTS, AS DEFINED IN THE
CREDIT AGREEMENT, REPRESENT THE FINAL AGREEMENT AMONG THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE
PARTIES.


<PAGE>   3





         EXECUTED to be effective as of the date first above written.

                                    BORROWERS:

                                    DENALI INCORPORATED

                                    By:   /S/ R. Kevin Andrews
                                          --------------------------
                                          R. Kevin Andrews
                                          Treasurer

                                    ERSHIGS BILOXI, INC.

                                    By:   /S/ R. Kevin Andrews
                                          --------------------------
                                          R. Kevin Andrews
                                          Treasurer

                                    FLUID CONTAINMENT, INC.

                                    By:   /S/ Cathy L. Smith
                                          --------------------------
                                          Cathy L. Smith
                                          Secretary

                                    ERSHIGS, INC.

                                    By:   /S/ R. Kevin Andrews
                                          --------------------------
                                          R. Kevin Andrews
                                          Treasurer

                                    SEFCO, INC.

                                    By:   /S/ R. Kevin Andrews
                                          --------------------------
                                          R. Kevin Andrews
                                          Treasurer




<PAGE>   4





                                   AGENT AND BANK:

                                   NATIONSBANK, N.A., as Agent and Bank

                                   By:   /S/ Mark W. Montgomery
                                          --------------------------
                                         Mark W. Montgomery
                                         Vice President


<PAGE>   5




                                   Schedule 1

                              Revolving Commitments


              Bank                                Revolving Commitment
              ----                                -------------------- 
         NationsBank, N.A.                            $26,000,000