KMG Chemicals, Inc. (NYSE:KMG) Files An 8-K Entry into a Material Definitive Agreement

Item 1.01Entry into a Material Definitive Agreement.

On June 15, 2017, KMG Chemicals, Inc. (the Company) entered into
a new credit agreement (the Credit Agreement), by and among the
Company, KeyBank National Association, as agent, KeyBanc Capital
Markets Inc., HSBC Securities (USA) Inc., and JPMorgan Chase
Bank, N.A., as joint lead arrangers and joint bookrunners and ING
Capital LLC, as documentation agent. The Credit Agreement
provides for (i) a seven year syndicated senior secured term loan
of $550 million and (ii) a five year senior secured revolving
credit facility of $50 million.

The Credit Agreement and related loan documents replace the
Companys prior second amended and restated credit agreement with
Wells Fargo Bank, National Association, Bank of America, N.A.,
HSBC Bank USA, National Association and JPMorgan Chase Bank, N.A.
(the Prior Credit Facility). The Prior Credit Facility, and all
commitments thereunder, were terminated effective June 15, 2017.

The proceeds from the term loan under the Credit Agreement was
used to finance the acquisition of Flowchem Holdings LLC
(Flowchem), pay the costs and expenses related to the
acquisition, and to repay in full the $31 million outstanding
indebtedness under the Prior Credit Facility. At the closing of
the Credit Agreement on June 15, 2017, the Company had $550
million borrowed under the new facility. The Company did not draw
upon the revolving credit facility at the closing.

The term loan under the Credit Agreement bears interest at a
varying rate of LIBOR plus a margin based on net funded debt to
adjusted earnings before interest, taxes, depreciation and
amortization (EBITDA), as described in the table below.

Revolving loans under the Credit Agreement bear interest at a
varying rate of LIBOR plus a margin based on net funded debt to
adjusted EBITDA, as described in the table below.

We also incur an unused commitment fee on the unused amount of
commitments under the revolving loan facility of 0.50%.

Loans under the Credit Agreement are secured by the Companys
assets, including stock in subsidiaries, inventory, accounts
receivable, equipment, intangible assets, and real property. The
Credit Agreement includes a covenant that the Company must
maintain a consolidated net leverage ratio of 6.50 to 1.0 through
the fiscal quarter ended April 30, 2018, which ratio is reduced
each year thereafter by an amount set forth in the Credit
Agreement, until the twelve months ended April 30, 2022,
following which the Company must maintain a consolidated net
leverage ratio of 4.00 to 1.0. A copy of the Credit Agreement is
attached as Exhibit 10.1 hereto and incorporated herein by
reference.

Item 1.02Termination of a Material Definitive Agreement.

The disclosure set forth above in Item 1.01 of this Current
Report on Form 8-K is incorporated herein by reference.

Item 2.01Completion of Acquisition or Disposition of Assets.

On June 15, 2017, the Company completed the acquisition of
Flowchem to the terms of a previously announced Purchase
Agreement and Plan of Merger (the Purchase Agreement) among the
Company, KMG FC, LLC, a wholly owned subsidiary of the Company
(Merger Sub), Flowchem, Arsenal Capital Partners III-B, LP
(Blocker Seller) and ACP Flowchem LLC in its capacity as the
representative. At the closing, Merger Sub merged into Flowchem,
with Flowchem surviving as a wholly owned subsidiary of the
Company. The Company also acquired all of the outstanding shares
of capital stock of ACPFlowchem Blocker Inc. from Blocker Seller.

Flowchem is the parent company of Flowchem LLC, a global provider
of drag reducing agents, related support services and equipment
to midstream crude oil and refined fuel pipeline operators. The
consideration paid to the former owners of Flowchem was $495
million, including net working capital of approximately $15.5
million. The purchase price is subject to adjustment following
closing for reconciliation of net working capital.

Item 2.03Creation of a Direct Financial Obligation or an
Obligation under an Off-Balance Sheet Arrangement of a
Registrant.

The disclosure set forth above in Item 1.01 of this Current
Report on Form 8-K is incorporated herein by reference.

Item 7.01Regulation FD Disclosure.

On June 15, 2017, the Company issued a press release announcing
the completion of the acquisition of Flowchem and entry into the
Credit Agreement. A copy of the press release is furnished as
Exhibit 99.1 to this Current Report on Form 8-K.

Item 9.01Financial Statements and Exhibits.

About KMG Chemicals, Inc. (NYSE:KMG)

KMG Chemicals, Inc. manufactures, formulates and globally distributes specialty chemicals. The Company operates businesses selling electronic chemicals, industrial wood treating chemicals, and industrial valve lubricants and sealants. The Company operates through two segments: Electronic chemicals and Other chemicals. The Company operates through its subsidiaries, KMG Electronic Chemicals, Inc. (KMG EC), KMG-Bernuth, Inc. (KMG Bernuth) and KMG Val-Tex, LLC (Val-Tex). The Company’s Electronic chemicals business sells high purity and ultra-purity wet process chemicals primarily to the semiconductor industry. The Company’s Other chemicals segment includes its industrial lubricants business and wood treating chemicals business. The Company’s products sulfuric, phosphoric, nitric and hydrofluoric acids, ammonium hydroxide, hydrogen peroxide, isopropyl alcohol, other specialty organic solvents and various blends of chemicals.