Document:

Agreement made as of this 1st day of July, 2000 between Legred
Struthers Genetics, Inc. (hereinafter referred to as the "Company"
and/or "Employer") with offices at 1 Carriage Lane, Bldg. D, Suite G-E,
Charleston, South Carolina 29407 and Brent Legred (hereinafter referred to as
"Legred" and/or "Employee") residing at 3500 49Oth Avenue, Bricelyn, Minnesota
56014.

Whereas, the Company wishes to employ the Employee; and

Whereas, the Employee wishes to become an employee of the Company.

Now, therefore, the parties hereto agree as follows:

         1. The Company hereby agrees to employ the Employee and the Employee
hereby accepts employment with the Company upon the terms and conditions
hereinafter set forth.

         2. The terms of this Agreement shall commence on the 15th day of
February, 2000 and shall continue for 36 months, unless sooner terminated as
herein provided. This Agreement may be extended by mutual written agreement of
the parties.

         3. The Company agrees to pay Employee during his employment hereunder a
salary at the annual rate of $75,700 payable in 26 equal, bi-weekly
installments. Salary payments shall be subject to "withholding of applicable
taxes and other applicable deductions. Employee in addition to salary shall
receive all benefits as all other Employees as designated in the Employer
handbook.

         4. Employee agrees to serve the Company and faithfully and to the best
of his ability shall devote his entire protessional time, attention and energy
to the business of the Company and except as herein specifically otherwise
provided, shall devote his entire professional time, attention and energy to
the business of the Company during regular business hours and any such other
times as the Company may reasonably request. During the term hereof, and
without the written consent of thc Company, Employee may not be engaged in any
other business or professional activity except that Employee may operate his
own Show Pig Business without such activity being deemed a violation of
Employee's non-compete clause whether or not such business or professional
activity is pursued for gain, profit or for any personal pecuniary advantage.
Entire profession time shall be at least 40 hours per week minimum. Regular
business hours shall be from 9 a.m. to 5 p.m. Monday through Friday of each
week.

         Employee shall be in complete charge of the Company's field office
including its stud boar and laboratory facilities in Bricelyn, Minnesota and
shall have full authority and responsibility in administering the Company's
operations at that location, including the authority to hire and fire personnel
he deems necessary. Employee shall undertake such other additional duties as,
from time to time, are given to him by the Board of Directors. The foregoing
powers and the authority are subject to a general direction, approval and
control of the Company's Board of Directors.

         5. The parties acknow1edge that the Employer is in the business of
providing and breeding genetically superior swine through the use of, among
other things, embryo transplants and semen. The parties further acknowledge that
Employer's business is highly specialized and that Employee has in-depth
experience in this field. Employee acknowledges that documents and other
information regarding Employer's pricing and costs, as well as information
pertaining to Employer's customers, are highly confidential and constitute trade
secrets and that this is so for the purpose of this Agreement even though
Employee may have prior knowledge in these areas.

<PAGE>

         6, During the term of this Agreement, Employee may have access to,
and become familiar with, various trade secrets belonging to Employer,
including and limited to, the documents referred to in Paragraph 5 above.
Although Employee may have prior personal knowledge of the foregoing, Employee
acknowledges that such trade secrets are owned and shall continue to be owed
solely by Employer. During the term of his employment and for thirty-six (36)
months after this Agreement expires by its term or such employment is
terminated for any reason, regardless of whether termination is initiated by
Employer or Employee, Employee agrees not to use, communicate, reveal or
otherwise make available such information for any purpose whatsoever, or to
divulge such information to any person, partnership, corporation or entity other
than Employer or persons expressly designated by Employer, unless such
Employee is compel1ed to disclose it by judicial process.

         7, Under no circumstances shall Employee remove from Employer's office
any of Employer's books, records, documents, or customer lists, or any copies of
such documents, without the Employer's prior written consent; nor shall
Employee make any copies of such books, records, documents, or customer lists
for use outside of Employer's office, except as specifically authorized in
writing by Employer.

         8. Employee agrees that:

         (a)   for a period of twenty-four (24) months after this Agreement
               expires by its term or has been terminated for any reason,
               regardless of whether the termination is initiated by Employer or
               Employee, Employee will not, directly or indirectly, solicit
               any person, company, firm, or corporation who is or was a
               customer of Employer during a period of five (5) years prior to
               the termination of Employee's employment. Employee agrees not to
               solicit such customers on behalf of himself or any other
               person, firm, company, or corporation.

         (b)   The Emp1oyee agrees that for a period of twelve (12) months after
               the termination of his employment with Employer, regardless of
               whether the termination was initiated by Employer or Employee, he
               will not accept employment with, or act as a consultant,
               contractor, advisor, or in any other capacity for, a competitor
               of the Employer, or enter into competition with the Employer,
               either by himself or through any entity owned or managed in whole
               or in part by the Employee.

         (c)   The parties have attempted to limit Employee's right to compete
               only to the extent necessary to protect Employer from unfair
               competition. The parties recognize, however, that reasonable
               people may differ in making such a determination. Consequently,
               the parties hereby agree that, if the scope or enforceability
               of the restrictive covenant is in any way disputed at any time.
               a court or other trier of fact may modify and enforce the
               covenant to the extent that it believes the covenant is
               reasonable under the circumstances existing at that time.

                                       2

<PAGE>

         (d)   Paragraphs 5 through 8 herein shall be only restrictive upon
               Employee if Employer pays to Employee by cash or check in an
               amount equal to Employee's full monthly salary plus a cost of
               living increase equal to the cost of living index for Minnesota,
               at the beginning of each mont, for each month for which the
               restrictions provided for in Paragraphs 5 through 8 apply. Full
               salay shall be the salary provided for in this agreement plus all
               benefits to which employees are entitled. Once restrictions
               provided for in Paragraphs 5 throuoh 8 are lifted due to
               non-payment by Employer of the monthly payments above provided
               for, such restrictions wi11 not be reinstated without the consent
               of Employee.

         9. Emp1oyee acknowledges that: (1) compliance with Paragraph 5
through 8 herein is necessary to protect the Employer's business and good will
and Employee's right to payment for services and covenants; (2) a breach of
those Paragraphs will irreparably and continually damage Employer and Employee;
and (3) an award of money damages will not be adequate to remedy such harm.

         (a)   Consequently, Employee agrees that, in the event he breaches
               this agreement Employer shall be entitled to both: (1) a
               preliminary or permanent injunction in order to prevent the
               continuation of such harm; (2) money damages, insofar as they
               can be determined and (3) reasonable costs and attorney fees
               incurred in enforcing such provisions.

         (b)   Employer agrees that in the event it breaches this agreement,
               Employee shall be entitled to payment of all sums due him plus
               reasonable costs and attorney fees incurred in enforcing such
               provisions.

         (c)   As money damages for the period of time during which Employee
               violates these covenants, Employer shall be entitled to recover
               the full amount of any fees, compensation, or other remuneration
               earned by Employee as a result of any such breach except for
               payments made by Employer to Employee pursuant to this agreement.

         10. If, in one or more instances, either party fails to insist that the
other party perform any of the terms of this Agreement, such failure shall not
be construed as a waiver by such party of any past, present, or future right
granted under this Agreement, and the obligations of both parties under this
Agreement shall continue in full force and effect.

         11. This Agreement shall terminate pursuant to Paragraph 2 or upon any
one of the following events:

         (a)   The mutual agreement of the parties;

                                       3

<PAGE>

         (b)   The voluntary or involuntary dissolution of Employer; or of
               Struther's Inc.;

         (c)   Termination by the Board of Directors if Employee is not acting
               to the best of his ability and/or in the best interests of the
               Company;

         (d)   Termination by Employee in the event of a bulk transfer of assets
               owned by Employer or a change in majority ownership of
               Employer's stock;

         (e)   Except for Paragraph 11 (4) above unilateral termination by
               Employee without just cause, in which event payments provided for
               in Paragraph 8 (4) shall not be required for the restrictions on
               Employee contained in Paragraphs 5 through 8 to apply.

         12. The Company now has, and shall continue to have, the sole right to
use the name "Legred Struthers Genetics, Inc." as its corporate name and title.
This right shall not be affectcd bg the termination of Employee's association
with the Company either as shareholder or employee, nor by any other cause.

         13. The obligations contained in Paragraphs 5-8 shall survive the
termination of this Agreement. In addition, the termination of this Agreement
shall not affect any of the rights or obligations of either party arising
prior to, or at the time of, the termination of this Agreement, or which may
arise by any event causing the termination of this Agreement.

         14. Employce shall not have the right to assign any of his rights or
obligations under this Agreement without the prior written approval of the
Employer.

         15. If any provision, paragraph, or subparagraph of this Agreement is
adjudged by any court to be void or unenforceable in whole or in part, this
adjudication shall not affect the validity or the remainder of the Agreement,
including any other provision, paragraph, or subparagraph. Each provision,
paragraphs and subparagraph of this Agreement is sepatable from every other
provision, paragraph, and subparagraph, and constitutes a separate and distinct
covenant.

         16. This Agreement shall be binding upon, and shall inure to the
benefit of, the parties and their respective successors, assigns, executors,
administrators, and personal representatives.

         17. Any notice to be given herein shall be in writing and sent by
postage prepaid, certified mail, return receipt requested, to the party to
whom notice is being sent at the address as set forth in this Agreement.
Either party may change the address to which notices are to be sent by so
notifying the other party in writing as set forth in this Paragraph. If mailed
as provided in this Agreement, notice shall bc deemed to have been given as of
the date of mailing.

         18. This Agreement constitutes the complete understanding between
the parties, all prior representations or agreements having been merged into
this Agreement.

                                       4

<PAGE>

         19. No alteration of or modification to any of the provisions of this
Agreement shall be valid unless made in writing and signed by both parties.

         20. This Agreement shall be subject to and governed by the laws of
the State of Minnesota without giving effect to the principles of conflicts of
law.

In witness whereof, the parties hereto have executed this Agreement
as of the date set forth above.

                                        LEGRED STRUTHERS GENETICS, INC.

                                        By /s/ DOUGLAS W. BEATTY
                                           -----------------
                                        Douglas W. Beatty, President/CEO,
                                        Legred Struthers Genetics, Inc.

                                           /s/ BRENT LEGRED
                                           ------------------
                                         Brent Legred Individually

The performance of this agreement by Legred Struthers Genetics, Inc. is
hereby guaranteed by Struthers, Inc.

                                        STRUTHERS, INC.

                                        By /s/ DOUGLAS W. BEATTY
                                           -----------------
                                        Douglas W. Beatty, President/CEO,
                                        Legred Struthers Genetics, Inc.

                                       5

<PAGE>

STATE OF SOUTH CAROLINA )
                        )SS.:   MY COMMISSION EXPIRES MARCH 18, 2008
COUNTY OF CHARLESTON    )

         On the 16th day of July, 2000 before me personally came Douglas W.
Beatty, to me known, who being by me duly sworn, did depose and say that he
is the CEO of Struthers, Inc., the corporation described in and which
executed the foregoing instrument and that he signed his name thereto
by order of the Board of Directors of said corporation.

                                                /s/ RHETT SEABROOK
                                                ------------------
                                                Notary Public

STATE OF MINNESOTA      )
                        )SS.:
COUNTY OF FARIBAULT     )

         On the 9th day of August, 2000 before me personally came Brent Legred,
to me known to be the individual described in and who executed the foregoing
instrument, and acknowledged that he executed the same.

                                                /s/ CHARLES FRUNDT
                                                ------------------
                                                Notary Public

NOTARY PUBLIC -- MINNESOTA
My commission expires Jan. 31, 2005

STATE OF SOUTH CAROLINA )
                        )SS.:   MY COMMISSION EXPIRES MARCH 18, 2008
COUNTY OF CHARLESTON    )

         On the 16th day of July, 2000 before me personally came Douglas W.
Beatty, to me known, who being by me duly sworn, did depose and say that he is
the CEO of Legred Struthers Genetics, Inc., the corporation described in and
which executed the foregoing instrument and that he signed his name thereto by
order of the Board of Directors of said corporation.

                                                /s/ RHETT SEABROOK
                                                ------------------
                                                Notary Public

                                       8<PAGE>

               VOID AFTER 5:00 P.M. CENTRAL TIME, ON MARCH 6, 2009

NEITHER THIS WARRANT NOR THE WARRANT STOCK HAS BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933. THE COMPANY WILL NOT TRANSFER THIS WARRANT OR THE
WARRANT STOCK UNLESS (i) THERE IS AN EFFECTIVE REGISTRATION COVERING SUCH
WARRANT OR SUCH WARRANT STOCK, AS THE CASE MAY BE, UNDER THE SECURITIES ACT
OF 1933 AND APPLICABLE STATE SECURITIES LAWS, (ii) IT FIRST RECEIVES A LETTER
FROM AN ATTORNEY, ACCEPTABLE TO THE BOARD OF DIRECTORS OR ITS AGENTS, STATING
THAT IN THE OPINION OF THE ATTORNEY THE PROPOSED TRANSFER IS EXEMPT FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933 AND UNDER ALL APPLICABLE STATE
SECURITIES LAWS, OR (iii) THE TRANSFER IS MADE PURSUANT TO RULE 144 UNDER THE
SECURITIES ACT OF 1933.

                               KMG CHEMICALS, INC.
                              (a Texas corporation)

                    Warrant for the Purchase of 25,000 Shares
                                 of Common Stock
                            par value $0.01 per share

FOR VALUE RECEIVED, KMG CHEMICALS, INC. ("Company"), a Texas corporation,
hereby certifies that JGIS, LTD., or assigns ("Holder"), is entitled, subject
to the provisions of this Warrant, to purchase from the Company at any time,
or from time to time during the period commencing on the date hereof and
expiring at 5:00 p.m. Central Time, on March 6, 2009 ("Expiration Date"), up
to TWENTY-FIVE THOUSAND (25,000) fully paid and non-assessable shares of
Common Stock at a price of $5.50 per share ("Exercise Price"), which price
constitutes the fair market value on the Nasdaq SmallCap Market for Common
Stock on the date hereof, in accordance with the terms and conditions hereof.

The term "Common Stock" means the Common Stock, par value $0.01 per share, of
the Company as constituted on March 6, 2000 ("Base Date"), together with any
other equity securities that may be issued by the Company in respect thereof
or in substitution therefor. The number of shares of Common Stock to be
received upon the exercise of this Warrant may be adjusted from time to time
as hereinafter set forth. The shares of Common Stock deliverable or delivered
upon such exercise, as adjusted from time to time, are hereinafter referred
to as "Warrant Stock."

Upon receipt by the Company of evidence reasonably satisfactory to it of the
loss, theft, destruction or mutilation of this Warrant certificate, and (in
the case of loss, theft or destruction) of satisfactory indemnification, and
upon surrender and

                                       1
<PAGE>

cancellation of this Warrant certificate, if mutilated, the Company shall
execute and deliver a new Warrant certificate of like tenor and date.

         1.       EXERCISE OF WARRANT. This Warrant may be exercised, subject
to the requirements set forth below, in whole, or in part, at any time during
the period commencing on the date hereof and expiring at 5:00 p.m. Central
Time on the Expiration Date set forth above, or, if such day is a day on
which banking institutions in Houston, Texas are authorized by law to close,
then on the next succeeding day that shall not be such a day, by presentation
and surrender of this Warrant certificate to the Company at its principal
office, or at the office of its stock transfer agent, if any, with the
Warrant Exercise Form attached hereto duly executed and accompanied by
payment (either in cash or by certified or official bank check, payable to
the order of the Company) of the aggregate Exercise Price for the number of
shares specified in such form and instruments of transfer, if appropriate,
duly executed by the Holder. If this Warrant should be exercised in part
only, the Company shall, upon surrender of this Warrant certificate for
cancellation, execute and deliver a new Warrant certificate evidencing the
rights of the Holder thereof to purchase the balance of the shares
purchasable hereunder. Upon receipt by the Company of this Warrant
certificate, together with the Exercise Price, at its office, or by the stock
transfer agent of the Company at its office, if any, in proper form for
exercise as described above, together with an agreement to comply with the
restrictions on transfer and related covenants contained herein and a
representation as to investment intent and any other matter required by
counsel to the Company, signed by the Holder (and if other than the original
Holder accompanied by proof, satisfactory to counsel for the Company, of the
right of such person or persons to exercise the Warrant), the Holder shall be
deemed to be the holder of record of the shares of Common Stock issuable upon
such exercise, even if the stock transfer books of the Company shall then be
closed or certificates representing such shares of Common Stock shall not
have been delivered to the Holder. The Holder shall pay any and all
documentary stamp or similar issue or transfer taxes payable in respect of
the issue or delivery of shares of Common Stock on exercise of this Warrant.
The Company shall promptly thereafter issue certificate(s) evidencing the
Common Stock so purchased.

         2.       RESERVATION OF SHARES. The Company shall at all times
reserve for issuance and delivery upon exercise of this Warrant all shares of
Common Stock or other shares of capital stock of the Company (and other
securities) from time to time receivable upon exercise of this Warrant. All
such shares (and other securities) shall be duly authorized and, when issued
upon exercise, shall be validly issued, fully paid and non-assessable.

         3.       NO FRACTIONAL SHARES. No fractional shares or script
representing fractional shares shall be issued upon the exercise of this
Warrant, but the Company

                                       2
<PAGE>

shall pay the Holder an amount equal to the fair market value of such
fractional share of Common Stock in lieu of each fraction of a share
otherwise called for upon any exercise of this Warrant. For purposes of this
Warrant, the fair market value of a share of Common Stock shall equal the
closing sale price (or if not available the average of the closing bid and
asked prices) on the business day prior to exercise of this Warrant, or, if
the Common Stock is then not publicly traded, then the price determined in
good faith by the Board of Directors of the Company.

         4.       TRANSFER.

         4.1      SECURITIES LAWS. Neither this Warrant nor the Warrant Stock
have been registered under the securities act of 1933. The Company will not
transfer this Warrant or the Warrant Stock unless (a) there is an effective
registration covering such Warrant or such shares, as the case may be, under
the Securities Act of 1933 and applicable states securities laws, (b) it
first receives, if requested by the Company, a letter from an attorney,
acceptable to the Company's board of directors or its transfer agents,
stating that in the opinion of the attorney the proposed transfer is exempt
from registration under the Securities Act of 1933 and under all applicable
state securities laws, or (c) the transfer is made pursuant to Rule 144 under
the Securities Act of 1933.

         4.2      CONDITIONS TO TRANSFER. Prior to any proposed transfer of
this Warrant or Warrant Stock, and as a condition thereto, if such transfer
is not made pursuant to an effective registration statement under the
Securities Act, the Holder will, if requested by the Company, deliver to the
Company (a) an investment covenant signed by the proposed transferee, (b) an
agreement by such transferee that the restrictive investment legend set forth
ove be placed on the certificate or certificates representing the securities
acquired by such transferee, (c) an agreement by such transferee that the
Company may place a "stop transfer order" with its transfer agent or
registrar, and (d) an agreement by the transferee to indemnify the Company to
the same extent as set forth in the next succeeding paragraph.

         4.3      INDEMNITY. The Holder acknowledges that the Holder
understands the meaning and legal consequences of this Section, and the
Holder hereby agrees to indemnify and hold harmless the Company, its
representatives and each officer and director thereof from and against any
and all loss, damage or liability (including all attorneys' fees and costs
incurred in enforcing this indemnity provision) due to or arising out of (a)
the inaccuracy of any representation or the breach of any warranty of the
Holder contained in, or any other breach of, this Warrant, (b) any transfer
of any of this Warrant or the Warrant Stock in violation of the Securities
Act, the Securities Exchange Act of 1934, as amended, or the rules and
regulations promulgated under either of such acts, (c) any transfer of this
Warrant or any of the Warrant Stock not

                                       3
<PAGE>

in accordance with this Warrant or (d) any untrue statement or omission to
state any material fact in connection with the investment representations or
with respect to the facts and representations supplied by the Holder to
counsel to the Company upon which its opinion as to a proposed transfer shall
have been based.

         4.4      TRANSFER. Except as specifically restricted hereby, this
Warrant and the Warrant Stock issued may be transferred by the Holder in
whole or in part at any time or from time to time. Upon surrender of this
Warrant certificate to the Company or at the office of its stock transfer
agent, if any, with an assignment form annexed hereto duly executed and funds
sufficient to pay any transfer tax, and upon compliance with the foregoing
provisions, the Company shall, without charge, execute and deliver a new
Warrant certificate in the name of the assignee named in such instrument of
assignment, and this Warrant certificate shall promptly be canceled. Any
assignment, transfer, pledge, hypothecation or other disposition of this
Warrant attempted contrary to the provisions of this Warrant, or any levy of
execution, attachment or other process attempted upon this Warrant, shall be
null and void and without effect.

         5.       RIGHTS OF THE HOLDER. The Holder shall not, by virtue
hereof, be entitled to any rights of a stockholder in the Company, either at
law or in equity, and the rights of the Holder are limited to those expressed
in this Warrant.

         6.       ANTI-DILUTION PROVISIONS.

         6.1      STOCK SPLITS, DIVIDENDS, ETC.

         6.1.1    If the Company shall at any time subdivide its outstanding
shares of Common Stock (or other securities at the time receivable upon the
exercise of the Warrant) by recapitalization, reclassification or split-up
thereof, or if the Company shall declare a stock dividend or distribute
shares of Common Stock to its stockholders, the number of shares of Common
Stock subject to this Warrant immediately prior to such subdivision shall be
proportionately increased, and if the Company shall at any time combine the
outstanding shares of Common Stock by recapitalization, reclassification or
combination thereof, the number of shares of Common Stock subject to this
Warrant immediately prior to such combination shall be proportionately
decreased. Any such adjustment and adjustment to the Exercise Price pursuant
to this Section shall be effective at the close of business on the effective
date of such subdivision or combination or if any adjustment is the result of
a stock dividend or distribution then the effective date for such adjustment
based thereon shall be the record date therefor.

         6.1.2    Whenever the number of shares of Common Stock purchasable
upon the exercise of this Warrant is adjusted, as provided in this Section,
the Exercise Price shall

                                       4
<PAGE>

be adjusted to the nearest cent by multiplying such Exercise Price
immediately prior to such adjustment by a fraction (x) the numerator of which
shall be the number of shares of Common Stock purchasable upon the exercise
immediately prior to such adjustment, and (y) the denominator of which shall
be the number of shares of Common Stock so purchasable immediately thereafter.

         6.2      ADJUSTMENT FOR REORGANIZATION, CONSOLIDATION, MERGER, ETC.
In case of any reorganization of the Company (or any other corporation, the
securities of which are at the time receivable on the exercise of this
Warrant) after the Base Date or in case after such date the Company (or any
such other corporation) shall consolidate with or merge into another
corporation or convey all or substantially all of its assets to another
corporation, then, and in each such case, the Holder of this Warrant upon the
exercise as provided in Section 1 at any time after the consummation of such
reorganization, consolidation, merger or conveyance, shall be entitled to
receive, in lieu of the securities and property receivable upon the exercise
of this Warrant prior to such consummation, the securities or property to
which such Holder would have been entitled upon such consummation if such
Holder had exercised this Warrant immediately prior thereto; in each such
case, the terms of this Warrant shall be applicable to the securities or
property received upon the exercise of this Warrant after such consummation.

         6.3      CERTIFICATE AS TO ADJUSTMENTS. In each case of an
adjustment in the number of shares of Common Stock receivable on the exercise
of this Warrant, the Company at its expense shall promptly compute such
adjustment in accordance with the terms of the Warrant and prepare a
certificate executed by an officer of the Company setting forth such
adjustment and showing the facts upon which such adjustment is based. The
Company shall forthwith mail a copy of each such certificate to each Holder.

         6.4      NOTICES OF RECORD DATE, ETC. In case:

         6.4.1    If the Company shall take a record of the holders of its
Common Stock (or other securities at the time receivable upon the exercise of
the Warrant) for the purpose of entitling them to receive any dividend (other
than a cash dividend at the same rate as the rate of the last cash dividend
theretofore paid) or other distribution, or any right to subscribe for,
purchase or otherwise acquire any shares of stock of any class or any other
securities, or to receive any other right; or

         6.4.2    of any voluntary or involuntary dissolution, liquidation or
winding-up of the Company,

                                       5
<PAGE>

then, and in each such case, the Company shall mail or cause to be mailed to
each Holder a notice specifying, as the case may be, (A) the date on which a
record is to be taken for the purpose of such dividend, distribution or
right, and stating the amount and character of such dividend, distribution or
right, or (B) the date on which such reorganization, reclassification,
consolidation, merger, conveyance, dissolution, liquidation or winding-up is
to take place, and the time, if any, to be fixed, as to which the holders of
record of Common Stock (or such other securities at the time receivable upon
the exercise of this Warrant) shall be entitled to exchange their shares of
Common Stock (or such other securities) for securities or other property
deliverable upon such reorganization, reclassification, consolidation,
merger, conveyance, dissolution, liquidation or winding-up. Such notice shall
be mailed at least ten (10) days prior to the date therein specified, and
this Warrant may be exercised prior to said date during the term of the
Warrant.

         6.5      THRESHOLD FOR ADJUSTMENTS. Anything in this Section to the
contrary notwithstanding, the Company shall not be required to give effect to
any adjustment until the cumulative resulting adjustment in the Exercise
Price pursuant to Subsection 6 shall have required a change of the Exercise
Price by at least $0.125, but when the cumulative net effect of more than one
adjustment so determined shall be to change the Exercise Price by at least
$0.125, such full change in the Exercise Price shall thereupon be given
effect. No adjustment shall be made by reason of the issuance of shares upon
conversion rights, stock issuance rights or similar rights currently
outstanding or any change in the number of treasury shares held by the
Company.

         7.       LEGEND AND STOP TRANSFER ORDERS. Unless the shares of
Warrant Stock have been registered under the Securities Act, upon exercise of
any of this Warrant and the issuance of any of the shares of Warrant Stock,
the Company shall instruct its transfer agent, if any, to enter stop transfer
orders with respect to such shares, and all certificates representing shares
of Warrant Stock shall bear on the face thereof substantially the following
legend, insofar as is consistent with Texas law:

         The shares represented by this certificate have not been registered
         under the Securities Act of 1933 (the "Act") and are "restricted
         securities" as that term is defined in Rule 144 under the Act. The
         shares may not be offered for sale, sold or otherwise transferred
         except pursuant to an effective registration statement under the Act,
         or pursuant to an exemption from registration under the Act, the
         availability of which is to be established to the satisfaction of the
         Company.

                                       6
<PAGE>

         8.       REGISTRATION.

         8.1      REGISTRABLE SHARES. For purposes of this Section 8, the
term "Registrable Shares " means the shares of Common Stock issued pursuant
to this Warrant; PROVIDED, HOWEVER, that a share of Common Stock shall cease
to be Registrable Shares when (a) it has been effectively registered under
the Securities Act and disposed of in accordance with the registration
statement covering it, (b) it has been distributed to the public pursuant to
Rule 144 under the Securities Act, or any similar provision then in effect,
or (c) it has otherwise been transferred to another person and a new
certificate or other evidence of ownership for it not bearing a restrictive
legend and not subject to any stop transfer order with respect to Securities
Act matters has been delivered by or on behalf of Company. The Company shall
not be obligated to register any Warrant under the Securities Act.

         8.2      INCIDENTAL REGISTRATION RIGHTS. If at any time prior to the
Expiration Date the Company proposes on its behalf to register any Common
Stock under the Securities Act in connection with a public offering of such
securities solely for cash in a form that would also permit the registration
of any of the Registrable Shares, Company will, each such time, prior to
filing give a holder of this Warrant and record owners of Registrable Shares
written notice of such determination. Upon the written request of any such
holder or record owner given within fifteen (15) days after the such notice
by Company, Company shall use its reasonable best efforts to register under
the Securities Act such of the Registrable Shares as a holder of this Warrant
or record owner of Registrable Shares has requested be registered; PROVIDED,
HOWEVER, that Company may postpone or withdraw any registration pursuant to
this Section without obligation to requesting holders or record owners.

         8.3      UNDERWRITING REQUIREMENTS. If the proposed registration of
Registrable Shares which Company has been requested by a holder of this
Warrant or record owner of Registrable Shares to register is to be
distributed by or through an underwriter or underwriters, the underwriter or
underwriters shall be chosen in the discretion of Company, and with regard to
the inclusion of Registrable Shares therein, the holder and/or record owner
must agree (a) to sell such Registrable Shares on the same basis as provided
in the underwriting arrangement approved by Company and (b) to complete and
execute, in a timely manner, all questionnaires, powers of attorney,
indemnities, hold-back agreements, underwriting agreements and other
documents required either under the terms of such arrangement or by the
Securities and Exchange Commission. If, in the opinion of the managing
underwriter for an underwritten offering, the registration of all, or part
of, the Registrable Shares requested to be included in such offering would
have an adverse effect thereon, then Company shall be required to include in
the underwriting only that number of Registrable Shares, if any, which the
managing underwriter reasonably believes may

                                       7
<PAGE>

be sold without causing such adverse effect. If the number of shares to be
included in the underwriting in accordance with the foregoing is less than
the number of shares which the holder and/or record owner of Registrable
Shares and all other persons entitled to participate in the registration have
requested be included (whether pursuant to the exercise of registration
rights or otherwise), the Company shall be entitled to include all shares
which it had intended to register, after which holders and/or record owners
of Registrable Shares shall participate in the underwriting pro rata with the
holders of all other shares entitled to participate in the underwriting
pursuant to registration rights or otherwise, based upon their respective
total ownership of shares of Common Stock, and if any holder and/or record
owner of Registrable Shares would thus be entitled to include more shares
than such holder and/or record owner requested to be registered, the excess
shall be allocated among other requesting holders and shareholders pro rata
based upon their respective total ownership of shares of Common Stock. If
requested by any underwriter or underwriters, holders and/or record owners of
Registrable Shares shall agree to sell Registrable Shares which are subject
to the registration to or through such underwriter or underwriters at the
same price to be paid to Company or other selling holders.

         8.4      REGISTRATION EXPENSES. In the case of a registration
pursuant to this Section 8, Company shall bear all usual and customary costs
and expenses incidental to the preparation of a registration statement,
including registration, filing and qualification fees, underwriters fees and
expenses and the fees and disbursements of printers, counsel and accountants
for Company. Any cost or expense which is attributable solely to a selling
holder and/or record owner of Registrable Shares and does not constitute a
normal cost or expense shall be allocated to that seller. In addition, each
selling holder or record owner or Registrable Shares shall bear the fees and
costs of its own counsel and fees and expenses of underwriters that are
customarily paid by selling shareholders such as selling expenses and
underwriter commissions attributable to the Registrable Shares.

         8.5      INDEMNIFICATION. Company agrees to indemnify and hold
harmless the seller and each other person who controls such seller within the
meaning of the Securities Act, against all losses, damages, liabilities and
expenses (including attorney's fees) arising out of or based upon any untrue
or allegedly untrue statement of a material fact, or any omission or alleged
omission to state a material fact required to be stated or necessary to make
the statements not misleading, contained in any registration statement or
prospectus pursuant to which any of the Registrable Shares are offered or
sold pursuant to this Section, except insofar as such losses, claims,
liabilities or expenses arise out of or are based upon any such untrue
statement or omission or allegation thereof which has been included therein
or omitted therefrom in reliance upon and in conformity with information
relating to the seller or its controlling persons furnished to Company by
such seller or controlling person for use

                                       8
<PAGE>

therein, as to which losses, claims, liabilities and expenses (including
attorney's fees) seller agrees to indemnify and hold harmless Company and
each person who controls Company within the meaning of the Securities Act. If
any claim or action shall be brought for which indemnification may be sought
hereunder, the party or controlling person claiming indemnification shall
promptly notify the party from which indemnification is sought in writing,
and such party shall be entitled at its option to assume the defense thereof,
including the employment of counsel and the payment of all expenses. The
indemnified party or controlling person shall have the right to employ
separate counsel and participate in the defense thereof, but the fees and
expenses of such counsel shall be at the expense of the indemnified party or
controlling person unless the employment thereof has been specifically
authorized by the other party in writing or the party has failed to assume
the defense and employ counsel.

         9.       OFFICER'S CERTIFICATE. Whenever the number or kind of
securities purchasable upon exercise of this Warrant or the Exercise Price
shall be adjusted as required by the provisions hereof, the Company shall
forthwith file with its Secretary or Assistant Secretary at its principal
office and with its stock transfer agent, if any, an officer's certificate
showing the adjusted number of kind of securities purchasable upon exercise
of this Warrant and the adjusted Exercise Price determined as herein provided
and setting forth in reasonable detail such facts as shall be necessary to
show the reason for and the manner of computing such adjustments. Each such
officer's certificate shall be made available at all reasonable times for
inspection by the Holder and the Company shall, forthwith after each such
adjustment, mail by certified mail a copy of such certificate to the Holder.

         10.      NOTICE. Any notice or other communication required or
permitted to be given hereunder shall be in writing and shall be mailed by
certified mail, return receipt requested, or delivered against receipt, if to
the Holder, at his/her address as shown on the books of the Company, and if
to the Company, at its principal office, 10611 Harwin, Suite 402, Houston,
Texas 77036. Any notice or other communication given by certified mail shall
be deemed given at the time of certification thereof, except for a notice
changing a party's address which shall be deemed given at the time of receipt
thereof.

         11.      BINDING EFFECT. The provisions of this Warrant shall be
binding upon and inure to the benefit of (a) the parties hereto, (b) the
successors and assigns of the Company, (c) if the Holder is a corporation,
partnership, or other business entity, the successors and assignee of the
Holder, and (d) if the Holder is a natural person, the assignees, heirs, and
personal representative of the Holder.

                                       9
<PAGE>

         12.      PRONOUNS. Any masculine personal pronoun shall be
considered to mean the corresponding feminine or neuter personal pronoun, as
the context requires.

                                            KMG CHEMICALS, INC.
                                            a Texas corporation

                                            By:   /s/ David L. Hatcher
                                               ------------------------------
Date:    March 6, 2000                      David L. Hatcher, President

                                       10
<PAGE>

                              WARRANT EXERCISE FORM

The undersigned hereby irrevocably elects to exercise the within Warrant to
the extent of purchasing [NUMBER] shares of Common Stock of KMG CHEMICALS,
INC. and hereby makes payment of $[AMOUNT] in payment therefor.

        ----------------------------        -------------------------
                  Date                           Signature

                                            -------------------------
                                                 Signature
                                                (if jointly held)

                                       11

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