Exhibit 10.8


 


FOURTH AMENDMENT TO TERM LOAN AGREEMENT


 


THIS FOURTH AMENDMENT TO TERM LOAN AGREEMENT
(this “Amendment” or “Fourth Amendment to Loan Agreement”) 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 31st day of July, 2004.


 


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, by that certain Second Amendment
to Term Loan Agreement dated as of December 5, 2003, and by that certain
Third Amendment to Term Loan Agreement dated as of June 8, 2004 (as so
amended and as hereby amended, the “Loan Agreement”), whereby Borrower became
indebted to Bank for a Term Loan in the original principal amount of
$6,000,000.00 and thereafter amended to a principal amount of $5,050,000.00 and
a Term Loan No. 2 in the principal amount of $6,000,000.00 and thereafter
amended to a principal amount of $8,600,000.00 (all of the foregoing
capitalized terms together with all other capitalized terms used herein shall
have the respective meanings assigned thereto in the Loan Agreement, unless
otherwise specifically defined herein); and


 


WHEREAS, upon
request of the Borrower, the Bank has agreed to amend certain of the financial
covenants required by the Loan Agreement; 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 by deleting the definitions of
“Coverage Ratio” and “EBITDA”, each as defined therein, in their entirety and
substituting the following new definitions in lieu thereof:


 


“Coverage Ratio” means, for any
period, the ratio of (i) the principal amount of all bank debt and capitalized
lease obligations 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 and the Guarantor 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.


 


2.                                       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) $3,700,000.00 as of July 31, 2004; (b)
$6,000,000.00 as of July 31, 2005; and (c) $11,000,000.00 as of
July 31, 2006, 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) 4.8 to 1.0 as
of July 31, 2004; (b) 2.7 to 1.0 as of July 31, 2005; and (c) 1.5 to
1.0 as of July 31, 2006, and at all times thereafter.


 


(4)                                  A
Coverage Ratio of not greater than: (a) 3.0 to 1.0 as of July 31, 2004;
(b) 2.35 to 1.0 as of July 31, 2005; and (c) 1.5 to 1.0 as of
July 31, 2006, and at all times thereafter; said Coverage Ratio to be
measured quarterly based on a rolling four-quarter basis.


 


3.                                       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.


 


4.                                       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 amendment contained in Paragraph 2 of
this Amendment with any of the terms of the Revolving Loan Agreement,
including, without limitation, Subsection 6.1(F) thereof, the terms and
provisions of the amendment contained in


 


2
















 


Paragraph 2 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.


 


5.                                       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.


 


6.                                       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


 


3
















 


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:

  	
  John V. Sobchak

  	
   

  
	
   

  	
  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 Fourth 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
                  day
of                         ,
2004.


 


	
   

  	
   

  	
  (SEAL)

  
	
   

  	
  Notary Public

  
	
   

  	
  My Commission Expires:

  	
   

  
				



 


4
















 


	
   

  	
  BANK:

  
	
   

  	
   

  
	
   

  	
  SOUTHTRUST BANK

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Haston Simmons

  
	
   

  	
  Its:

  	
   

  
	
   

  	
   

  
	
  STATE OF
  ALABAMA         )

  	
   

  
	
  COUNTY OF JEFFERSON   )

  	
   

  



 


I, the undersigned, a Notary Public in and
for said County in said State, hereby certify that
                                                     ,
whose name as
                                                of
SouthTrust Bank, an Alabama banking corporation, is signed to the foregoing Fourth
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
                  
day of
                      ,
2004.


 


	
   

  	
   

  	
  (SEAL)

  
	
   

  	
  Notary Public

  
	
   

  	
  My Commission Expires:

  	
   

  
				



 


5
















 


	
   

  	
  GUARANTOR:

  
	
   

  	
   

  
	
   

  	
  KMG CHEMICALS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  John V. Sobchak

  	
   

  
	
   

  	
  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 Fourth 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
                  
day
of                        ,
2004.


 


	
   

  	
   

  	
  (SEAL)

  
	
   

  	
  Notary Public

  
	
   

  	
  My Commission Expires:

  	
   

  
				



 


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