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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 25, 1997
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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HYDROCHEM INDUSTRIAL SERVICES, INC. (*)
(Exact name of registrant as specified in its charter)
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DELAWARE 8980 75-2503906
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code) Identification Number)
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6210 ROTHWAY
HOUSTON, TEXAS 77040
(713) 462-2130
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
MICHAEL P. STEINDLER
SECRETARY AND GENERAL COUNSEL
6210 ROTHWAY
HOUSTON, TEXAS 77040
(713) 462-2130
(Name, address, including zip code, and telephone number, including
area code, of agent for service)
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Copies to:
JANICE V. SHARRY DENNIS R. CASSELL
HAYNES AND BOONE, LLP CASSELL & STONE, L.L.P.
901 MAIN STREET, SUITE 3100 5956 SHERRY LANE,
DALLAS, TEXAS 75202 SUITE 1400
DALLAS, TEXAS 75225
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Approximate date of commencement of proposed sale to the public:
As soon as practicable after the Registration Statement becomes effective.
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If the securities being registered on this Form are to be offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, please check the following box: [ ]
CALCULATION OF REGISTRATION FEE
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Proposed maximum
Titles of each class of securities Amount to be Proposed maximum aggregate offering Amount of
to be registered registered offering price per unit price registration fee
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10 3/8% Senior Subordinated
Notes due 2007 . . . . . $110,000,000 100% $110,000,000 $33,334
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Guarantee . . . . . . . . . . (1) (1) (1) (1)
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(1) Guarantee by HydroChem International, Inc. of the payment of the principal
and interest on the 10 3/8% Senior Subordinated Notes due 2007. Pursuant
to Rule 457(n), no additional fee is required.
* HydroChem International, Inc., a direct and wholly owned subsidiary of
HydroChem Industrial Services, Inc., is a Co-Registrant. It is incorporated
under the laws of the State of Delaware, its SIC number is 8980 and its
I.R.S. Employer Identification Number is 75-2512100.
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
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INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED AUGUST 25, 1997
PROSPECTUS
OFFER TO EXCHANGE
10 3/8% SENIOR SUBORDINATED NOTES DUE 2007, SERIES B
FOR ALL OUTSTANDING
10 3/8% SENIOR SUBORDINATED NOTES DUE 2007, SERIES A
OF
HYDROCHEM INDUSTRIAL SERVICES, INC.
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THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
_________, 1997, UNLESS EXTENDED.
HydroChem Industrial Services, Inc. (the "Company") is offering upon the
terms and subject to the conditions set forth in this Prospectus and the
accompanying letter of transmittal (the "Letter of Transmittal") (which
together constitute the "Exchange Offer") to exchange $1,000 principal amount
of its new 10 3/8% Senior Subordinated Notes due 2007, Series B (the "New
Notes") for each $1,000 principal amount of its outstanding 10 3/8% Senior
Subordinated Notes due 2007, Series A (the "Old Notes") in the aggregate
principal amount of $110,000,000. The form and terms of the New Notes are
identical to the form and terms of the Old Notes, except that the Old Notes
were offered and sold in reliance upon certain exemptions from registration
under the Securities Act of 1933, as amended (the "Securities Act"), while the
offering and sale of the New Notes in exchange for the Old Notes has been
registered under the Securities Act, with the result that the New Notes will
not bear any legends restricting their transfer. The New Notes will evidence
the same debt as the Old Notes and will be issued pursuant to, and entitled to
the benefits of, the Indenture (as defined) governing the Old Notes. The
Exchange Offer is being made in order to satisfy certain contractual
obligations of the Company. See "The Exchange Offer" and "Description of
Notes." The New Notes and the Old Notes are sometimes collectively referred to
herein as the "Notes."
The New Notes will mature on August 1, 2007. The New Notes will be
redeemable at the option of the Company, in whole or in part, at any time on or
after August 1, 2002, at the redemption prices set forth herein, plus accrued
and unpaid interest and Liquidated Damages (as defined), if any, to the date of
redemption. Notwithstanding the foregoing, at any time prior to August 4, 2000,
the Company may redeem up to 35% of the original aggregate principal amount of
the Notes with the net proceeds of one or more Equity Offerings (as defined) at
a redemption price equal to 109.375% of the principal amount thereof, plus
accrued and unpaid interest and Liquidated Damages, if any, to the date of
redemption; provided, that after any such redemption, 65% of the original
aggregate principal amount of the Notes remains outstanding. Upon the
occurrence of a Change of Control (as defined), the Company will be required,
subject to certain conditions, to make an offer to purchase the New Notes at a
price equal to 101% of the principal amount thereof, plus accrued and unpaid
interest and Liquidated Damages, if any, to the date of purchase. See
"Description of Notes."
The New Notes will be senior subordinated unsecured obligations of the
Company and will rank junior in right of payment to all existing and future
Senior Debt (as defined) of the Company, including contemplated borrowings
under the New Credit Facility (as defined). The New Notes will be fully and
unconditionally guaranteed on an unsecured senior subordinated and joint and
several basis (the "Subsidiary Guarantees") by the Company's present subsidiary
and the Company's future subsidiaries that execute a Subsidiary Guarantee
(collectively, the "Subsidiary Guarantors") in accordance with the Indenture.
Each Subsidiary Guarantee will rank junior in right of payment to all existing
and future Senior Debt of the Subsidiary Guarantor. The Indenture permits the
Company and its Restricted Subsidiaries (as defined) to incur additional
Indebtedness (as defined), subject to the satisfaction of certain financial
tests. As of June 30, 1997, on a pro forma basis after giving effect to the
offering of the Old Notes (the
(continued on page 2)
FOR A DISCUSSION OF CERTAIN FACTORS TO BE CONSIDERED IN CONNECTION WITH AN
INVESTMENT IN THE NEW NOTES, SEE "RISK FACTORS" BEGINNING ON PAGE 13.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS ____________, 1997
<PAGE> 3
"Offering"), no Indebtedness would rank senior to the Notes (excluding $2.3
million in outstanding undrawn letters of credit), although the Company
currently contemplates that it will enter into a new credit facility pursuant
to which it could borrow up to $25 million ("New Credit Facility"). See
"Description of Notes."
Each broker-dealer that receives New Notes for its own account in exchange
for Old Notes, where the Old Notes were acquired by that broker-dealer as a
result of market-making activities or other trading activities, must
acknowledge that it will deliver a prospectus in connection with any resale of
such New Notes. This Prospectus, as it may be amended or supplemented from time
to time, may be used by a broker-dealer in connection with resales of New Notes
received in exchange for Old Notes where such Old Notes were acquired as a
result of market-making activities or other trading activities. See "The
Exchange Offer" and "Plan of Distribution."
The Company will accept for exchange any and all validly tendered Old Notes
on or before 5:00 p.m., New York City time, on ____________, 1997, unless
extended (the "Expiration Date"). Tenders of Old Notes may be withdrawn at any
time before 5:00 p.m., New York City time, on the Expiration Date, but after
that time are irrevocable. Norwest Bank, Minnesota, N.A. will be acting as
Exchange Agent in connection with the Exchange Offer. The Exchange Offer is not
conditioned on any minimum principal amount of Old Notes being tendered for
exchange, but is otherwise subject to certain customary conditions.
The New Notes will bear interest from the date of issuance of the New Notes
at a rate per annum of 10 3/8% and on the same terms as the Old Notes. Interest
on the New Notes will be payable semiannually on February 1 and August 1 of
each year commencing on the first such date following the date of issuance of
the New Notes. Old Notes that are accepted for exchange will cease to accrue
interest on and after the date on which interest on the New Notes begins to
accrue. Accrued and unpaid interest on the Old Notes that are tendered in
exchange for the New Notes will be payable on the first February 1 or August 1
following the date of issuance of the New Notes.
The Old Notes were sold by the Company on August 4, 1997, to Donaldson,
Lufkin & Jenrette Securities Corporation (the "Initial Purchaser") in a
transaction not registered under the Securities Act in reliance on the
exemption provided in Section 4(2) of the Securities Act. The Initial Purchaser
subsequently placed the Old Notes with qualified institutional buyers in
reliance on Rule 144A under the Securities Act. Accordingly, the Old Notes may
not be reoffered, resold or otherwise transferred in the United States unless
so registered or unless an applicable exemption from the registration
requirements of the Securities Act is available. The New Notes are being
offered hereunder in order to satisfy the obligations of the Company under a
Registration Rights Agreement entered into among the Company, the Subsidiary
Guarantor and the Initial Purchaser (the "Registration Rights Agreement"). See
"The Exchange Offer."
Based on an interpretation by the staff of the Securities and Exchange
Commission (the "Commission" or the "SEC") set forth in no-action letters
issued to third parties, the Company believes that New Notes issued pursuant to
this Exchange Offer may be offered for resale, resold and otherwise transferred
by a holder who is not an affiliate of the Company or the Subsidiary Guarantor
without compliance with the registration and prospectus delivery provisions of
the Securities Act, provided that the holder is acquiring the New Notes in its
ordinary course of business and is not participating in and has no arrangement
or understanding with any person to participate in the distribution (within the
meaning of the Securities Act) of the New Notes. Persons wishing to exchange
Old Notes in the Exchange Offer must represent to the Company that these
conditions have been met.
The Company does not intend to list the New Notes on any national
securities exchange or to seek the admission thereof to trading in the National
Association of Securities Dealers Automated Quotation System. The Initial
Purchaser has advised the Company that it intends to make a market in the New
Notes; however, it is not obligated to do so and any market-making may be
discontinued at any time without notice. Accordingly, no assurance can be given
that an active public or other market will develop for the New Notes or as to
the liquidity of or the trading market for the New Notes.
Any Old Notes not tendered and accepted in the Exchange Offer will remain
outstanding. To the extent that any Old Notes are tendered and accepted in the
Exchange Offer, a holder's ability to sell untendered Old Notes could be
adversely affected. Following consummation of the Exchange Offer, the holders
of Old Notes will continue to be subject to the existing restrictions on
transfer thereof.
The Company expects that the New Notes issued pursuant to this Exchange
Offer will be issued in the form of a Global New Note (as defined), which will
be deposited with, or on behalf of, The Depository Trust Company ("DTC") and
registered in its name or in the name of Cede & Co., its nominee. Beneficial
interests in the Global New Note representing the New Notes will be shown on,
and transfers thereof to qualified institutional buyers will be effected
through, records maintained by DTC and its participants. After the initial
issuance of the Global New Note, New Notes in certificated form will be issued
in exchange for the Global New Note on the terms set forth in the Indenture.
See "Description of Notes--Book Entry; Delivery and Form."
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TABLE OF CONTENTS
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SUMMARY . . . . . . . . . . . . . . . . . . . . 5
RISK FACTORS . . . . . . . . . . . . . . . . . 13
THE EXCHANGE OFFER . . . . . . . . . . . . . . 18
THE COMPANY . . . . . . . . . . . . . . . . . . 25
USE OF PROCEEDS . . . . . . . . . . . . . . . . 25
CAPITALIZATION . . . . . . . . . . . . . . . . 26
PRO FORMA CONSOLIDATED FINANCIAL
STATEMENTS . . . . . . . . . . . . . . . . . . 26
SELECTED HISTORICAL CONSOLIDATED
FINANCIAL DATA . . . . . . . . . . . . . . . . 31
MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS . . . . . . . . . . . 33
BUSINESS . . . . . . . . . . . . . . . . . . . 39
MANAGEMENT . . . . . . . . . . . . . . . . . . 47
RELATED TRANSACTIONS . . . . . . . . . . . . . 50
PRINCIPAL STOCKHOLDERS . . . . . . . . . . . . 51
DESCRIPTION OF CAPITAL STOCK . . . . . . . . . 52
DESCRIPTION OF NOTES . . . . . . . . . . . . . 53
CERTAIN U.S. FEDERAL
INCOME TAX CONSIDERATIONS . . . . . . . . . . . 77
PLAN OF DISTRIBUTION . . . . . . . . . . . . . 77
LEGAL MATTERS . . . . . . . . . . . . . . . . . 78
EXPERTS . . . . . . . . . . . . . . . . . . . . 78
AVAILABLE INFORMATION . . . . . . . . . . . . . 78
INDEX TO FINANCIAL STATEMENTS . . . . . . . . F-1
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Until _______, 1997 (90 days after the date of this Prospectus), all
dealers offering transactions in the New Notes, whether or not participating in
the Exchange Offer, may be required to deliver a prospectus in connection
therewith. This is in addition to the obligation of dealers to deliver a
prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.
No dealer, salesperson or other person has been authorized to give
information or to make any representations not contained in this Prospectus,
and, if given or made, such information or representations must not be relied
on as having been authorized by the Company. This Prospectus does not
constitute an offer to sell or the solicitation of an offer to buy any security
other than the New Notes offered hereby.
The Exchange Offer is not being made to, nor will the Company accept
surrenders for exchange from, holders of Old Notes in any jurisdiction in which
the Exchange Offer or the acceptance thereof would not be in compliance with
the securities or blue sky laws of such jurisdiction.
THIS PROSPECTUS (THIS "PROSPECTUS") DOES NOT CONSTITUTE AN OFFER TO SELL, OR
A SOLICITATION OF AN OFFER TO BUY, ANY NOTE OFFERED HEREBY BY ANY PERSON IN ANY
JURISDICTION IN WHICH IT IS UNLAWFUL FOR SUCH PERSON TO MAKE SUCH AN OFFER OR
SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL UNDER ANY CIRCUMSTANCES IMPLY THAT THERE HAS BEEN NO CHANGE IN
THE AFFAIRS OF THE COMPANY OR ITS SUBSIDIARIES OR THAT THE INFORMATION SET
FORTH HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF.
This Prospectus includes "forward-looking statements" within the
meaning of various provisions of the Securities Act and the Securities Exchange
Act of 1934 (the "Exchange Act"). All statements, other than statements of
historical facts, included in this Prospectus that address activities, events
or developments that the Company expects or anticipates will or may occur in
the future, including statements regarding future capital expenditures
(including the amount and nature thereof), business strategy and measures to
implement strategy, competitive strengths, goals, expansion and growth of the
Company's business and operations, plans, references to future success,
references to intentions as to future matters and other similar matters are
forward-looking statements. These statements are based on certain assumptions
and analyses made by the Company in light of its experience and its perception
of historical trends, current conditions and expected future developments as
well as other factors it believes are appropriate in the circumstances.
However, whether actual results and developments will conform with the
Company's expectations and predictions is subject to a number of risks and
uncertainties, including the risk factors discussed in this Prospectus; general
economic, market or business conditions; the opportunities (or lack thereof)
that may be presented to and pursued by the Company; competitive actions by
other industrial services companies; changes in laws or regulations; and other
factors, many of which are beyond the control of the Company. Consequently, all
of the forward-looking statements made in this Prospectus are qualified by
these cautionary statements and there can be no assurance that the actual
results or developments anticipated by the Company will be realized or, even if
substantially realized, that they will have the expected consequences to or
effects on the Company or its business or operations.
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SUMMARY
The following summary is qualified in its entirety by reference to and
should be read in conjunction with the more detailed information and financial
statements, including the notes thereto, appearing elsewhere in the Prospectus.
Unless the context otherwise indicates or requires, all references herein to
"HydroChem" or the "Company" are to HydroChem Industrial Services, Inc. and its
consolidated subsidiary.
THE COMPANY
The Company is a leading provider of industrial cleaning services to a wide
range of processing industries, including petrochemical plants, oil refineries,
electric utilities, pulp and paper mills, rubber plants and aluminum plants.
Services provided include high pressure water cleaning ("hydroblasting"),
chemical cleaning, industrial vacuuming, waste minimization, commissioning and
other specialized services. This type of work is typically recurring
maintenance to improve or sustain the operating efficiencies and extend the
useful lives of process equipment and facilities. The Company provides services
to approximately 1,200 customers at approximately 2,500 customer sites from 49
branch locations in the United States and one location in Singapore.
In 1996, 44.5% of the Company's revenue was derived from hydroblasting,
40.2% from chemical cleaning, 7.4% from industrial vacuuming and 7.9% from
other services. Also, in 1996, 45.8% of HydroChem's revenue came from
petrochemical plants, 16.9% from oil refineries, 14.3% from electric utilities,
8.3% from pulp and paper mills and 14.7% from other industries. Approximately
40% of the Company's 1996 revenue was derived from its 15 largest customers,
all of which are Fortune 500 companies, and approximately 60% was derived from
its 40 largest customers, 34 of which are Fortune 500 companies. The Company
has increased revenue from $27.1 million in fiscal 1992 to $157.5 million for
the twelve months ended June 30, 1997, and has increased EBITDA (as defined)
from $4.4 million to $20.1 million over the same period, through strategic
acquisitions, increased market share and geographic expansion.
Demand for HydroChem's industrial cleaning services has been favorably
affected by a variety of market factors. Industrial cleaning is required as
part of the recurring maintenance necessary to improve or sustain operating and
energy efficiencies and to enhance the profitability and useful lives of its
customers' equipment and facilities. For many years, the Company's customers
have increased their use of outside contractors in an attempt to control their
internal labor and insurance costs and to eliminate the need for maintaining
expensive, under-utilized equipment. In recent years, these customers have also
been reducing the number of vendors they utilize to streamline their internal
operations, thus further reducing costs. This trend, together with the high
costs of maintaining an excellent safety record, training employees and
complying with rapidly changing government regulations, is driving the
consolidation of the fragmented industrial cleaning industry. Management
believes that these trends benefit larger industry participants such as
HydroChem. In addition, the enactment of laws and regulations designed to
protect the environment and public health have created additional opportunities
for the Company to offer new services or enhance existing services to help keep
its customers in compliance or lessen their cost of complying with these laws
and regulations.
HydroChem believes it has achieved a strong position in the industrial
cleaning services industry by identifying changing customer needs and industry
trends and successfully providing high-quality, cost-effective services to meet
these needs on a timely basis. The Company's competitive strengths include its
(i) long-term relationships with quality customers; (ii) broad range of
services offered; (iii) excellent safety record; (iv) nationwide network of
strategic locations; (v) master service agreements with most of its major
customers; (vi) customer alliances with some of its largest customers; and
(vii) experienced management personnel, both at the corporate and field levels.
BUSINESS STRATEGY
The Company's business strategy includes the following key elements:
o Expand Services Provided to Existing Customers. The Company generally
does not provide its full range of industrial cleaning services to
each customer. HydroChem believes that expanding the amount of work
performed for existing customers is the most efficient and cost
effective method of achieving growth. The Company actively leverages
its existing customer relationships and the breadth of services it
offers to capitalize on its customers' trend to reduce the number of
vendors utilized and thereby gain additional market share. Also, the
Company seeks to identify opportunities for new services that it can
provide to its extensive customer base.
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<PAGE> 6
o Establish Relationships with New Customers in Existing Geographic
Areas. Most of the geographic areas in which the Company has branch
locations contain concentrations of processing plants that are
potential customers for the Company. The Company seeks to penetrate
these geographic markets further by obtaining contracts at plants
where it does not currently provide services.
o Expand Geographically. The Company identifies attractive geographic
markets for its services based on the number and types of plants
located in those areas, establishes a branch location and then builds
its business over time. This type of expansion often involves securing
at least one contract with a customer before establishing a branch and
then placing a complement of equipment and personnel in the area to
perform this work and pursue other work. These actions establish a
revenue stream to cover overhead costs and provide a base for
expanding throughout the surrounding geographic area.
o Establish Customer Alliances. The Company seeks to increase the number
of its customer alliance relationships. Under this type of
relationship, the Company's strategy is to provide its services as a
sole-source supplier, thereby obtaining additional market share and
strengthening customer relationships.
o Pursue Additional Strategic Acquisitions. The Company has successfully
grown its business in the past through strategic acquisitions.
HydroChem intends to continue to pursue acquisitions that add
additional services and products to market to its existing customer
base or facilitate expansion of the Company's customer base or
geographic coverage.
CORPORATE BACKGROUND
Hydro Environmental Services Limited Partnership ("Hydro Services") was
formed in 1990 by an investor group including B. Tom Carter, Jr., the Company's
Chairman, CEO and President, to acquire an industrial cleaning business that
had been operating since 1961. HydroChem was formed in September 1993 for the
purpose of combining, in December 1993, the business and operations of Hydro
Services with the Dowell Industrial Services division of Dowell Schlumberger
Inc. ("DIS"), a business founded in 1938 and engaged in providing industrial
cleaning services. In January 1995, the Company acquired the business of
Halliburton Industrial Services ("HIS"), a business founded in 1962 and a
division of Brown & Root Industrial Services, Inc., which was also engaged in
providing industrial cleaning services. The Company is a wholly-owned
subsidiary of HydroChem Holding, Inc. ("Parent"), which is owned by Citicorp
Venture Capital, Ltd. ("CVC"), management of the Company, LKCM Venture Partners
I Ltd., BT Capital Partners, Inc. and other investors.
THE NOTE OFFERING
The Old Notes . . . . . . . . The Old Notes were sold by the Company on
August 4, 1997, to the Initial Purchaser
pursuant to a Purchase Agreement. The
Initial Purchaser resold the Old Notes to
qualified institutional buyers pursuant to
Rule 144A under the Securities Act.
Registration Statement . . . The Registration Rights Agreement granted the
holders of the Old Notes certain exchange and
registration rights. The Exchange Offer is
intended to satisfy those exchange rights,
which terminate upon consummation of the
Exchange Offer. If applicable law or
applicable interpretations of the staff of
the Commission do not permit the Company to
effect the Exchange Offer, or in certain
other circumstances, the Company has agreed
to file a shelf registration covering resales
of Transfer Restricted Notes (as defined in
the Registration Rights Agreement).
THE EXCHANGE OFFER
The Exchange Offer applies to $110,000,000 aggregate principal amount of
the Old Notes. The form and terms of the New Notes are identical to the form
and terms of the Old Notes except that the Old Notes were offered and sold in
reliance upon certain exemptions from registration under the Securities Act,
while the offering and sale of the New Notes in exchange for the Old Notes has
been registered under the Securities Act, with the result that the New Notes
will not bear any legends restricting their transfer. See "Description of
Notes."
The Exchange Offer . . . . . $1,000 principal amount of New Notes for each
$1,000 principal amount of Old Notes. As of
the date hereof, Old Notes representing
$110,000,000 aggregate principal amount were
outstanding. The terms of the New Notes and
the Old Notes are substantially identical.
Based on an interpretation by the
Commission's staff set forth in no-action
letters issued to third parties unrelated to
the
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<PAGE> 7
Company, the Company believes that, with the
exceptions discussed herein, New Notes issued
pursuant to the Exchange Offer in exchange
for Old Notes may be offered for resale,
resold and otherwise transferred by any
person receiving the New Notes, whether or
not that person is the holder (other than any
such holder or such other person that is an
"affiliate" of the Company or the Subsidiary
Guarantor within the meaning of Rule 405
under the Securities Act), without compliance
with the registration and prospectus delivery
provisions of the Securities Act, provided
that (i) the New Notes are acquired in the
ordinary course of business of that holder or
such other person, (ii) neither the holder
nor such other person is engaging in or
intends to engage in a distribution of the
New Notes, and (iii) neither the holder nor
such other person has an arrangement or
understanding with any person to participate
in the distribution of the New Notes.
However, the Company has not sought, and does
not intend to seek, its own no-action letter,
and there can be no assurance that the
Commission's staff would make a similar
determination with respect to the Exchange
Offer. Each broker-dealer that receives New
Notes for its own account in exchange for Old
Notes, where those Old Notes were acquired by
the broker-dealer as a result of its
market-making activities or other trading
activities, must acknowledge that it will
deliver a prospectus in connection with any
resale of those New Notes. See "The Exchange
Offer -- Purpose and Effect" and "Plan of
Distribution."
Expiration Date . . . . . . The Exchange Offer will expire at 5:00 p.m.,
New York City time, _____, 1997, or such
later date and time to which it is extended.
Withdrawal Rights . . . . . . The tender of Old Notes pursuant to the
Exchange Offer may be withdrawn at any time
prior to 5:00 p.m., New York City time, on
the Expiration Date. Any Old Notes not
accepted for exchange for any reason will be
returned without expense to the tendering
holder thereof as promptly as practicable
after the expiration or termination of the
Exchange Offer.
Interest on the New Notes
and Old Notes . . . . . . Interest on each New Note will accrue from
the date of issuance of the Old Note for
which the New Note is exchanged or from the
date of the last periodic payment of interest
on such Old Note, whichever is later. No
interest will be paid on Old Notes which are
exchanged for New Notes, and holders of such
Old Notes will be deemed to have waived the
right to receive interest accrued thereon to
the date of exchange.
Conditions to the Exchange
Offer . . . . . . . . The Exchange Offer is subject to certain
customary conditions, certain of which may be
waived by the Company. See "The Exchange
Offer -- Conditions."
Procedures for Tendering
Old Notes . . . . . . . . . Each holder of Old Notes wishing to accept
the Exchange Offer must complete, sign and
date the Letter of Transmittal, or a copy
thereof, in accordance with the instructions
contained herein and therein, and mail or
otherwise deliver the Letter of Transmittal,
or the copy, together with the Old Notes and
any other required documentation, to the
Exchange Agent at the address set forth
herein. Persons holding Old Notes through the
DTC and wishing to accept the Exchange Offer
must do so pursuant to the DTC's Automated
Tender Offer Program, by which each tendering
Participant (as defined) will agree to be
bound by the Letter of Transmittal. By
executing or agreeing to be bound by the
Letter Transmittal, each holder will represent
to the Company that, among other things, (i)
any New Notes to be received by it will be
acquired in the ordinary course of its
business and (ii) it is not an "affiliate," as
defined in Rule 405 of the Securities Act, of
the Company or the Subsidiary Guarantor, or if
it is an affiliate, it will comply with the
registration and prospectus delivery
requirements of the Securities Act to the
extent applicable. If the holder is not a
broker-dealer, it will be required to
represent that it is not engaged in, and does
not intend to engage in, the distribution of
the New Notes and has no arrangement with any
person to participate in the distribution of
the New Notes. If the holder is a
broker-dealer that will receive New Notes for
its own account in exchange for Old Notes that
were acquired as a result of market-making
activities or other
-7-
<PAGE> 8
trading activities, it will be required to
acknowledge that it will deliver a prospectus
in connection with any resale of such New
Notes.
Pursuant to the Registration Rights
Agreement, the Company is required to file a
registration statement for a continuous
offering pursuant to Rule 415 under the
Securities Act in respect of the Old Notes if
existing Commission interpretations are
changed such that the New Notes received by
holders in the Exchange Offer are not or
would not be, upon receipt, transferable by
each such holder (other than an affiliate of
the Company or the Subsidiary Guarantor)
without restriction under the Securities Act.
See "The Exchange Offer -- Purpose and
Effect."
Acceptance of Old Notes and
Delivery of New Notes . . . The Company will accept for exchange any and
all Old Notes which are properly tendered in
the Exchange Offer prior to 5:00 p.m., New
York City time, on the Expiration Date. The
New Notes issued pursuant to the Exchange
Offer will be delivered promptly following
the Expiration Date. See "The Exchange Offer
-- Terms of the Exchange Offer."
Exchange Agent . . . . . . . Norwest Bank, Minnesota, N.A. is serving as
Exchange Agent in connection with the
Exchange Offer and is also serving as Trustee
under the Indenture.
Federal Income Tax
Considerations . . . . . . The exchange pursuant to the Exchange Offer
will not be a taxable event for federal
income tax purposes. See "Certain U.S.
Federal Income Tax Considerations."
Effect of Not Tendering . . . Old Notes that are eligible for exchange in
the Exchange Offer, but are not tendered or
are tendered but not accepted will, following
the completion of the Exchange Offer,
continue to be subject to the existing
restrictions upon transfer thereof. The
Company will have no further obligation to
provide for the registration under the
Securities Act of such Old Notes.
Global Note . . . . . . . . . The New Notes will be issued in fully
registered form and are expected to initially
be represented by one Global Note, registered
in the name of DTC or its nominee and
deposited with DTC. Holders of beneficial
interests in the Global Note will not be
considered the owners or holders of any New
Notes under the Global Note or the Indenture
for any purpose. Holders of beneficial
interests in the Global Note may be unable to
transfer or pledge their interest in the
Global Notes if physical delivery is
required. Payments by the Participants (as
defined) and the Indirect Participants (as
defined) to the beneficial owners of New
Notes will be governed by standing
instructions and customary practice and will
be the responsibility of the Participants or
Indirect Participants and not the Company or
the Trustee. See "Exchange Offer -- Book
Entry; Delivery and Form."
TERMS OF THE NEW NOTES
Notes Offered . . . . . . . . $110,000,000 aggregate principal amount of 10
3/8% Senior Subordinated Notes due 2007,
Series B.
Maturity . . . . . . . . . . August 1, 2007.
Interest and Payment Dates . The New Notes will bear interest at the rate
of 10 3/8% per annum. Interest will accrue
from the date of original issuance of the Old
Notes, or from the most recent date to which
interest has been paid, whichever is later,
and will be payable semi-annually in arrears
on February 1 and August 1 of each year,
commencing on February 1, 1998.
Optional Redemption . . . . On or after August 1, 2002, the New Notes
will be redeemable at the option of the
Company, in whole or in part, at the
redemption prices set forth herein, plus
accrued and unpaid interest and Liquidated
Damages, if any, to the date of redemption.
Notwithstanding the foregoing, prior to
August 4, 2000, the Company may redeem up to
35% of the original aggregate principal
amount of
-8-
<PAGE> 9
the Notes issued in the Offering (including
New Notes exchanged for Old Notes pursuant to
the Exchange Offer) with the net proceeds of
one or more Equity Offerings at a redemption
price of 109.375% of the principal amount
thereof, in each case plus accrued and unpaid
interest and Liquidated Damages, if any, to
the redemption date; provided that at least
65% of the aggregate principal amount of the
Notes originally issued remains outstanding
immediately after such redemption. See
"Description of Notes -- Optional
Redemption."
Subsidiary Guarantees . . . The New Notes will be guaranteed on an
unsecured senior subordinated and joint and
several basis by each of the Subsidiary
Guarantors, which consist of the Company's
current subsidiary and future subsidiaries,
if any, that the Company may designate. The
Subsidiary Guarantees may be released under
certain circumstances. See "Description of
Notes -- Subsidiary Guarantees."
Ranking . . . . . . . . . . The New Notes will be subordinated in right
of payment to all existing and future Senior
Debt of the Company, including borrowings
under the New Credit Facility. Each
Subsidiary Guarantee will be subordinated in
right of payment to all existing and future
Senior Debt of the Subsidiary Guarantor,
including guarantees of the New Credit
Facility. As of June 30, 1997, on a pro forma
basis, the Company and its Subsidiary
Guarantor would have had no Senior Debt
(excluding $2.3 million in outstanding
undrawn letters of credit that are secured by
cash of the Company until the New Credit
Facility is in place). The Indenture permits
the Company and its Restricted Subsidiaries
to incur additional Indebtedness, including
Senior Debt, subject to certain limitations,
and prohibits the incurrence of any
Indebtedness by the Company and each of the
Subsidiary Guarantors that is senior to the
New Notes and the Subsidiary Guarantees, as
the case may be, and subordinated to Senior
Debt and Senior Debt of the Subsidiary
Guarantors, as the case may be. See
"Description of Notes -- Subordination" and
"-- Certain Covenants."
Change of Control . . . . . Upon the occurrence of a Change of Control,
holders of the New Notes will have the right
to require the Company to purchase all or any
part of their Notes at a price equal to 101%
of the aggregate principal amount thereof,
plus accrued and unpaid interest and
Liquidated Damages, if any, to the date of
purchase. See "Description of Notes --
Certain Covenants -- Change of Control."
Certain Covenants . . . . . The Indenture pursuant to which the Old Notes
were issued and the New Notes will be issued
contains certain covenants that, among other
things, limit the ability of the Company and
its Restricted Subsidiaries to: (i) pay
dividends or make certain other Restricted
Payments (as defined); (ii) incur additional
Indebtedness; (iii) encumber or sell assets;
(iv) enter into certain guarantees of
Indebtedness; (v) enter into transactions
with Affiliates (as defined); and (vi) merge
or consolidate with any other entity or
transfer or lease all or substantially all of
their assets. In addition, under certain
circumstances, the Company will be required
to offer to purchase Notes at a price of 100%
of the principal amount thereof, plus accrued
and unpaid interest and Liquidated Damages,
if any, to the date of purchase with the
proceeds of certain Asset Sales (as defined).
See "Description of Notes -- Certain
Covenants."
-9-
<PAGE> 10
RISK FACTORS
For a discussion of certain factors that should be considered by
prospective investors in connection with an investment in the New Notes, see
"Risk Factors."
SUMMARY HISTORICAL AND PRO FORMA CONSOLIDATED FINANCIAL DATA
The following summary historical consolidated financial data of the Company
for the year ended December 31, 1992, and the period from January 1, 1993, to
December 14, 1993, have been derived from the audited financial statements of
Hydro Services, a predecessor to the Company's business and operations. The
summary historical consolidated financial data of the Company for the period
from December 15, 1993, to December 31, 1993, and for each of the years ended
December 31, 1994, 1995 and 1996, have been derived from the Company's audited
consolidated financial statements. The unaudited pro forma consolidated
financial data of the Company for the year ended December 31, 1996, has been
derived from the Company's audited financial statements. The summary unaudited
historical consolidated financial data of the Company for the six months ended
June 30, 1996, and unaudited historical and pro forma consolidated financial
data of the Company as of and for the six months ended June 30, 1997, have been
derived from the Company's unaudited consolidated financial statements. The
Company's unaudited consolidated financial statements include all adjustments,
consisting of normal recurring accruals, that the Company's management
considers necessary for a fair presentation of such data. The results of
operations for any interim period are not necessarily indicative of results of
operations for the fiscal year. The summary historical and pro forma
consolidated financial data set forth below should be read in conjunction with
"The Company," "Pro Forma Consolidated Financial Statements," "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the Company's Consolidated Financial Statements and the Notes thereto included
elsewhere in this Prospectus.
-10-
<PAGE> 11
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------------------
HISTORICAL PRO FORMA
-------------------------------------------------------------- ---------
1992(1) 1993(1) 1994 1995 1996 1996(2)
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue ..................... $27,121 $32,529 $101,103 $156,484 $156,003 $156,003
Gross profit ................ 10,904 12,041 36,521 61,855 61,630 61,630
SG&A expense ................ 6,394 6,881 20,504 39,465 42,103 42,103
Depreciation ................ 1,049 1,616 3,930 6,752 7,765 7,765
Operating income ............ 3,356 3,497 12,087 15,638 11,762 11,762
Interest expense, net ....... 1,613 1,822 5,605 8,693 7,920 11,743
Amortization of
intangibles ............... 468 493 1,151 1,407 1,523 1,523
Income (loss) before
taxes ..................... 1,134 532 5,409 5,903 1,829 (1,994)
Net income (loss) ........... na(1) na(1) 2,950 2,851 545 (1,825)
OTHER FINANCIAL DATA:
Gross margin ................ 40.2% 37.0% 36.1% 39.5% 39.5% 39.5%
EBITDA(3) ................... $ 4,405 $ 5,113 $ 16,017 $ 22,390 $ 19,527 $ 19,527
EBITDA margin(4) ............ 16.2% 15.7% 15.8% 14.3% 12.5% 12.5%
Capital expenditures ........ $ 1,869 $ 3,047 $ 5,576 $ 8,493 $ 6,829 $ 6,829
PRO FORMA DATA:
Cash interest expense(5)..... $ 11,413
Ratio of EBITDA to
cash interest expense ..... 1.7x
Ratio of net debt
to EBITDA(6) .............. 4.1x
<CAPTION>
SIX MONTHS ENDED JUNE 30,
-----------------------------------
HISTORICAL PRO FORMA
-------------------- ---------
1996 1997 1997(2)
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue ..................... $79,201 $80,714 $80,714
Gross profit ................ 31,325 32,924 32,924
SG&A expense ................ 20,184 21,161 21,161
Depreciation ................ 3,712 3,889 3,889
Operating income ............ 7,429 7,874 7,874
Interest expense, net ....... 4,038 3,787 5,871
Amortization of
intangibles ............... 762 779 779
Income (loss) before
taxes ..................... 2,777 3,285 1,201
Net income (loss) ........... 828 1,747 455
OTHER FINANCIAL DATA:
Gross margin ................ 39.6% 40.8% 40.8%
EBITDA(3) ................... $11,141 $11,763 $11,763
EBITDA margin(4) ............ 14.1% 14.6% 14.6%
Capital expenditures ........ $ 3,245 $ 2,847 $ 2,847
PRO FORMA DATA:
Cash interest expense(5)..... $ 5,706
Ratio of EBITDA to
cash interest expense ..... 2.1x
Ratio of net debt
to EBITDA(6) .............. 3.3x
</TABLE>
<TABLE>
<CAPTION>
AS OF JUNE 30, 1997
-------------------------
HISTORICAL PRO FORMA(2)
(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents(7) ........................................................ $ 1,458 $ 32,114
Working capital ..................................................................... 14,212 51,784
Total assets ........................................................................ 117,759 148,488
Total long-term debt, including current maturities .................................. 65,582 110,000
Stockholder's equity ................................................................ 27,517 16,925
</TABLE>
- --------
(1) Results for the years ended December 31, 1992 and 1993, were derived
from (i) the audited financial statements of Hydro Services, a
predecessor to the Company's business and operations, for the year
ended December 31, 1992, and the period from January 1, 1993, to
December 14, 1993, and (ii) the Company's audited financial statements
for the period from December 15, 1993, to December 31, 1993.
Operations for 1993 have been combined for purposes of this
presentation. Because Hydro Services was reported on a limited
partnership basis, net income (loss) is not available on a comparable
basis. See "The Company."
(2) Gives effect to (i) the issuance of the Old Notes, (ii) the
application of the net proceeds therefrom, and (iii) the write-off of
the unamortized balance of deferred financing costs relating to the
Senior Credit Facility and Senior Subordinated Debt which were
discharged using a portion of the net proceeds from the sale of the
Old Notes. The Company will record in the quarter in which the
Offering was consummated an extraordinary loss on retirement of debt,
net of related tax benefit. The pro forma statement of operations data
does not give effect to such loss. As of June 30, 1997, the amount of
such loss would have been approximately $2.3 million, net of income
taxes. See "Use of Proceeds" and "Pro Forma Consolidated Financial
Statements."
(3) EBITDA for any relevant period presented above is defined as net
income plus interest expense, income taxes, depreciation,
amortization, and other income and expenses (including a special
charge of $511,000 in 1996) reflected in the determination of net
income. EBITDA should not be construed as a substitute for operating
income, as an indicator of liquidity or as a substitute for net cash
provided by operating activities, which are determined in accordance
with generally accepted accounting principles. EBITDA is included
because management believes that certain investors may find it to be a
useful tool for analyzing operating performance, leverage, liquidity,
and a company's ability to service debt. See "Pro Forma Consolidated
Financial Statements" and the Company's Consolidated Financial
Statements and the Notes thereto included elsewhere in this
Prospectus.
(4) EBITDA margin for any relevant period reflects EBITDA divided by
revenue.
-11-
<PAGE> 12
(5) Cash interest expense represents total interest expense less
amortization of deferred financing costs, on a pro forma basis giving
effect to the issuance of the Old Notes pursuant to the Offering and
the application of the net proceeds therefrom, as if the transaction
had occurred on January 1, 1996.
(6) Ratio of net debt to EBITDA for the six months ended June 30, 1997,
reflects net debt divided by the product of EBITDA times 2. Net debt
represents total long-term debt, including current maturities, less
cash and cash equivalents.
(7) A portion of the Company's cash is required to secure the Company's
outstanding undrawn letters of credit ($2.3 million at June 30, 1997),
which were principally incurred in connection with the Company's
property and casualty insurance program.
-12-
<PAGE> 13
RISK FACTORS
Prospective investors in the New Notes should consider carefully the risk
factors set forth below, as well as the other information in this Prospectus.
LEVERAGE AND COVERAGE
The Company has substantial indebtedness and debt service obligations,
principally represented by the Notes. As of June 30, 1997, the Company's total
indebtedness, including current portion, would have been $110.0 million on a
pro forma basis, exclusive of $2.3 million of outstanding undrawn letters of
credit which were principally incurred in connection with the Company's
property and casualty insurance program and are expected to be secured by cash
of the Company until the New Credit Facility is in place. The Company intends
to enter into the New Credit Facility, pursuant to which the Company
anticipates that it will be able to borrow up to $25.0 million. In addition,
subject to any restrictions under the New Credit Facility and the Indenture,
the Company and its subsidiaries may incur additional indebtedness from time to
time. There can be no assurance that the New Credit Facility will be available
on terms acceptable to the Company, if at all. See "Use of Proceeds,"
"Capitalization" and "Description of Notes -- Certain Covenants."
The Company's indebtedness will have several important consequences to the
holders of the New Notes, including, but not limited to, the following: (i) the
Company will incur significant interest expense and principal repayment
obligations in connection with the Notes; (ii) the Company's ability to obtain
additional or replacement financing in the future, as needed, may be limited;
(iii) the Company's leveraged position and the covenants contained in the
Indenture could limit the Company's ability to expand its business and take
advantage of certain business opportunities; and (iv) the Company's leverage
may make it more vulnerable to economic downturns, limit its ability to
withstand competitive pressures, and reduce its flexibility in responding to
changing business and economic conditions. See "Description of Notes."
The Company's ability to pay interest and principal on the New Notes and to
satisfy its other debt obligations will depend upon its future operating
performance, which will be affected by prevailing economic conditions and
financial, business and other factors, certain of which are beyond its control,
as well as the availability of revolving credit borrowings under the New Credit
Facility or a successor facility. The Company anticipates that its net cash
provided by operating activities will be sufficient to meet its operating
expenses, expenditures for property and equipment, and debt service
requirements as they become due. However, if the Company is unable to service
its debt, it will be forced to pursue one or more alternative strategies such
as selling assets, curtailing any expansion, restructuring or refinancing its
indebtedness, or seeking additional equity capital. There can be no assurance
that any of these strategies could be effected on terms satisfactory to the
Company, if at all. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital Resources."
RANKING OF THE NEW NOTES
The New Notes will be senior subordinated unsecured obligations of the
Company and will rank junior in right of payment to all existing and future
Senior Debt of the Company, including any indebtedness to be incurred under the
New Credit Facility. The Company's obligations under the New Notes will be
jointly and severally guaranteed by the Company's subsidiary; however,
substantially all of the assets of the Company's subsidiary may also be pledged
as security under the New Credit Facility. Although on a pro forma basis, as of
June 30, 1997, after giving effect to the application of the net proceeds from
the Offering, no indebtedness would rank senior to the New Notes (excluding
$2.3 million in outstanding undrawn letters of credit), the Indenture allows
the Company to incur Senior Debt from time to time, including pursuant to the
New Credit Facility. See "Description of Notes -- Certain Covenants."
RESTRICTIVE COVENANTS
The Indenture restricts, among other things, the Company's and its
Restricted Subsidiaries' ability to pay dividends or make certain other
Restricted Payments, to incur additional Indebtedness, to encumber or sell
assets, to enter into transactions with Affiliates, to enter into certain
guarantees of Indebtedness, to make Restricted
-13-
<PAGE> 14
Investments (as defined), to merge or consolidate with any other entity, and to
transfer or lease all or substantially all of their assets. In addition, the
Company believes the New Credit Facility may contain other covenants and may
prohibit the Company and its subsidiaries from prepaying other indebtedness,
including possibly the New Notes. The New Credit Facility may also require the
Company to maintain specified financial ratios and satisfy certain financial
tests. The Company's ability to meet these financial ratios and tests can be
affected by events beyond its control, and there can be no assurance that the
Company will meet these tests. A breach of any of these covenants could result
in a default under the New Credit Facility or the Indenture. Upon the
occurrence of an event of default under the New Credit Facility, the lenders
thereunder could elect to declare all amounts outstanding under the New Credit
Facility, together with accrued interest, to be immediately due and payable. If
the Company were unable to repay those amounts, such lenders could proceed
against the collateral granted to them to secure that indebtedness. If the
Senior Debt were to be accelerated, there can be no assurance that the assets
of the Company would be sufficient to repay in full all Senior Debt or the New
Notes. See "Description of Notes -- Certain Covenants."
PERIODIC FLUCTUATIONS
A variety of factors may cause period-to-period fluctuations in the
operating results of the Company. Many of these factors are beyond the control
of the Company. The majority of the Company's revenue in each quarter results
from orders received in that quarter. As a result, the Company establishes its
staffing levels and operating expenditures based on anticipated revenue levels.
Thus, if revenue does not occur when expected, expenditure levels could be
disproportionately high, and operating results for the period, and potentially
for other periods, would be adversely affected.
Historically, the Company's business has been subject to seasonality.
Typically, the Company's revenue is greater during the second and fourth
calendar quarters. Demand for major industrial cleaning projects tends to be
higher in these periods due to process industry cycles. For example, electric
utilities typically schedule maintenance projects in advance of their peak
summer and winter production seasons.
The majority of the Company's revenue is derived from customers in
processing industries, including petrochemical plants, oil refineries, electric
utilities and pulp and paper mills. Many of the Company's customers are highly
sensitive to the prices paid for commodity inputs and the prices received for
finished processed products. The prices of many of these inputs and products
are highly volatile and cyclical in nature and can greatly impact the operating
profitability of those customers. There can be no assurance that these
companies will continue to use the Company's services in the event of a
cyclical downturn or will utilize the Company's services during peak cyclical
periods.
COMPETITION
The industrial cleaning service industry is highly competitive and includes
companies with significantly greater resources than the Company and a number of
smaller, local or regional companies. These companies at times compete
principally on the basis of price. Reductions in the demand for, or increases
in competition in, certain service lines may cause prices for that service line
to decline. In addition, in connection with certain potential contracts of the
Company, the Company may be required to commit substantial resources over a
long period of time without any assurance of being selected to perform, or
successfully completing, such projects. Such events could have a material
adverse effect on the Company's financial condition and results of operations.
OPERATING RISKS
In the normal course of business, the Company is subject to numerous
operating risks, including risks associated with the safety of its employees
and its customers' employees while providing industrial cleaning services,
potential damage to a customer's property or business in performing such
services, and the potential for an environmental accident. The Company believes
that, subject to policy exclusions and limits, it has adequate insurance to
cover these risks. However, no assurance can be given that the insurance will
adequately protect the Company and, if the Company is only partially insured or
completely uninsured, such a claim could result in a material adverse effect on
the Company's financial condition and results of operations.
-14-
<PAGE> 15
DEPENDENCE ON KEY PERSONNEL
The Company's success depends upon the continued contribution of its
officers and key personnel, many of whom would be difficult to replace.
Although the Company has entered into employment agreements with certain of
such officers, the loss of one or more of these individuals could have a
material adverse effect on the Company. The Company's continued growth depends
on its ability to attract and retain skilled employees. See "Management."
RISKS ATTENDANT TO ACQUISITION STRATEGY
The Company regularly considers the acquisition of other companies. At any
given time, the Company may be in various stages of considering such
opportunities. Such acquisitions are subject to the negotiation of definitive
agreements and to conditions typical in acquisition transactions, certain of
which conditions may be beyond the Company's control. There is no assurance
that the Company will be able to identify desirable acquisition candidates or
will be successful in entering into any definitive agreements with respect to
desirable acquisitions. Moreover, even if definitive agreements are entered
into, there is no assurance that any future acquisition will thereafter be
completed or, if completed, that the anticipated benefits of the acquisition
will be realized. The process of integrating acquired operations into the
Company's operations may result in unforeseen operating difficulties, may
absorb significant management attention, and may require significant financial
resources that would otherwise be available for the ongoing development or
expansion of the Company's existing operations. Future acquisitions by the
Company could result in the incurrence of additional indebtedness and
contingent liabilities which could have a material adverse effect on the
Company's financial condition and results of operations.
GOVERNMENT REGULATION
The Company's operations are subject to various federal, state and local
regulations governing employee health and safety, protection of the
environment, and motor carriers. While the Company believes it operates safely
and prudently and is in substantial compliance with these laws and regulations,
there can be no assurance that accidents will not occur or that the Company
will not incur penalties or fines for violations. In addition, noncompliance
with these laws and regulations may negatively impact the Company's ability to
secure contracts with customers or obtain adequate insurance at reasonable
costs. Any of these factors could have a material adverse effect on the
Company's financial condition or results of operations. See "Business --
Governmental Regulation."
VOTING CONTROL BY OFFICERS, DIRECTORS AND AFFILIATES
The Company is a wholly-owned subsidiary of HydroChem Holding, Inc., a
Delaware corporation which in turn is principally owned by entities that also
hold its outstanding indebtedness. Such owners, should they act together, would
have sufficient voting power to (i) elect the entire Boards of Directors of
Parent and the Company, (ii) exercise control over the business, policies and
affairs of Parent and the Company, and (iii) in general, determine the outcome
of any corporate transaction or other matters submitted to the stockholders for
approval such as (a) any amendment to the Company's Certificate of
Incorporation, (b) the authorization of additional shares of capital stock, and
(c) any merger, consolidation or sale of all or substantially all of the assets
of the Company which could prevent or cause a change of control of the Company.
Pursuant to a Stockholders Agreement, these owners have agreed, among other
things, to elect Mr. Carter and persons designated by certain stockholders as
directors of Parent and the Company. See "Principal Stockholders."
CHANGE OF CONTROL
In the event of a Change of Control, each holder of the New Notes will be
entitled to require the Company to purchase any or all of the New Notes held by
such holder at the prices stated herein. The Company expects that prepayment of
the New Notes pursuant to a Change of Control would constitute a default under
the New Credit Facility and any other agreements relating to Senior Debt to
which the Company may become a party. In the event that a Change of Control
occurs, the Company would likely be required to refinance the indebtedness
outstanding under the New Credit Facility and the New Notes. There can be no
assurance that the Company would be able to refinance such indebtedness or, if
such refinancing were to occur, that such refinancing would be on terms
favorable to the Company. If such refinancing does not occur, the Company would
remain prohibited from purchasing the New
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<PAGE> 16
Notes and such failure to purchase the New Notes would constitute an event of
default under the Indenture which may, in turn, constitute a default under the
New Credit Facility. In such circumstances, the subordination provisions in the
Indenture would likely restrict payments to the holders of the New Notes. See
"Description of Notes -- Certain Covenants -- Change of Control" and "--
Certain Definitions."
LACK OF PUBLIC MARKET
The Old Notes are designated for trading in the PORTAL market. There is no
established trading market for the New Notes. The Company does not currently
intend to list the New Notes on any securities exchange or to seek approval for
quotation through any automated quotation system. Accordingly, there can be no
assurance as to the development of any market or the liquidity of any market
that may develop for the New Notes. If such a market were to exist, no
assurance can be given as to the trading prices of the New Notes, which will
depend on many factors, including, among other things, prevailing interest
rates, the Company's operating results and the market for similar securities.
The liquidity of, and trading market for, the New Notes may be adversely
affected by general declines in the market for similar securities. Such a
decline may adversely affect such liquidity and trading markets independent of
the financial performance of, and prospects for, the Company.
CONSEQUENCES OF FAILURE TO EXCHANGE
The Old Notes were sold pursuant to an exemption from the registration
requirements of the Securities Act and their transfer is subject to certain
restrictions under the Securities Act. In general, Old Notes may not be
offered or sold unless registered under the Securities Act, except pursuant to
an exemption from, or in a transaction not subject to, the Securities Act and
applicable state securities laws. Holders of Old Notes who do not exchange
their Notes for New Notes pursuant to the Exchange Offer will continue to be
subject to such restrictions on transfer of the Old Notes. The Company
currently does not anticipate that it will register the Old Notes under the
Securities Act. To the extent that Old Notes are tendered and accepted in the
Exchange Offer, the trading market for untendered and tendered but unaccepted
Old Notes could be adversely affected. See "The Exchange Offer -- Consequences
of Failure to Exchange."
The New Notes will be issued in exchange for Old Notes only after timely
receipt by the Exchange Agent of such Old Notes, a properly completed and duly
executed Letter of Transmittal and all other required documents. Therefore,
holders of Old Notes desiring to tender such Old Notes in exchange for New
Notes should allow sufficient time to ensure timely delivery. Neither the
Exchange Agent nor the Company is under any duty to give notification of
defects or irregularities with respect to tenders of Old Notes for exchange.
Old Notes that are not tendered or are tendered but not accepted will,
following consummation of the Exchange Offer, continue to be subject to the
existing restrictions upon transfer thereof. In addition, any holder of Old
Notes who tenders in the Exchange Offer for the purpose of participating in a
distribution of the New Notes will be required to comply with the registration
and prospectus delivery requirements of the Securities Act in connection with
any resale transaction. Each broker-dealer that receives New Notes for its own
account in exchange for Old Notes, where the Old Notes were acquired by the
broker-dealer as a result of market-making or any other trading activities,
must acknowledge that it will deliver a prospectus in connection with any
resale of such New Notes. See "Plan of Distribution."
FRAUDULENT TRANSFER CONSIDERATIONS
Under fraudulent transfer law, if a court were to find in a lawsuit by an
unpaid creditor or representative of creditors of the Company or a Subsidiary
Guarantor, that the Company or a Subsidiary Guarantor received less than fair
consideration or reasonable equivalent value for incurring the indebtedness
represented by the New Notes, and, at the time of such incurrence, the Company
or the Subsidiary Guarantor (i) was insolvent or was rendered insolvent by
reason of such incurrence, (ii) was engaged or about to engage in a business or
transaction for which its remaining property constituted unreasonably small
capital or (iii) intended to incur, or believed it would incur, indebtedness
beyond its ability to pay as such indebtedness matures, such court could, among
other things, (a) void all or a portion of the Company's obligations to the
holders of New Notes and/or (b) subordinate the Company's or the Subsidiary
Guarantor's obligations to the holders of the New Notes to other existing and
future indebtedness of the Company or the Subsidiary Guarantor, the effect of
which would be to entitle such other creditors to be paid in full before any
payment could be made on the New Notes. The measure of insolvency for purposes
of determining whether a
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<PAGE> 17
transfer is avoidable as a fraudulent transfer varies depending upon the law of
the jurisdiction which is being applied. Generally, however, a debtor would be
considered insolvent if the sum of all of its liabilities were greater than the
value of all of its property at a fair valuation or if the present fair salable
value of the debtor's assets were less than the amount required to repay its
probable liability on its indebtedness as it becomes absolute and matures.
There can be no assurance as to what standard a court would apply in order to
determine solvency. To the extent that proceeds from the sale of the Old Notes
were used to repay indebtedness under the Company's Senior Credit Facility (as
defined), a court may find that the Company or a Subsidiary Guarantor did not
receive fair consideration or reasonably equivalent value for the incurrence of
the indebtedness represented thereby.
The Indenture contains a savings clause which generally will limit the
obligations of any Subsidiary Guarantor under its Subsidiary Guarantee to the
maximum amount that will, after giving effect to all of the liabilities of such
Subsidiary Guarantor, result in such obligations not constituting a fraudulent
conveyance. To the extent any Subsidiary Guarantee was avoided or limited as a
fraudulent conveyance or held unenforceable for any other reason, holders of
the New Notes would cease to have any claim against such Subsidiary Guarantor
and would be creditors solely of HydroChem. In such event, the claims of
holders of the New Notes against such Subsidiary Guarantor would be subject to
the prior payment of all liabilities (including trade payables) of such
Subsidiary Guarantor. There can be no assurance that, after providing for all
prior claims, there would be sufficient assets to satisfy the claims of the
holders of the New Notes relating to any avoided portion of the Subsidiary
Guarantees.
On the basis of its historical financial information, its recent operating
history and other factors, the Company believes that, at the time of, and after
issuance of the Old Notes and the incurrence of indebtedness pursuant to the
New Credit Facility, each of the Company and the Subsidiary Guarantor was not
and will not be insolvent nor rendered insolvent thereby, had and will have
sufficient capital for the business in which it is engaged and did not and will
not have incurred indebtedness beyond its ability to pay such indebtedness as
it matures. There can be no assurance, however, that a court would necessarily
agree with these conclusions. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
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<PAGE> 18
THE EXCHANGE OFFER
PURPOSE AND EFFECT
The Old Notes were sold by the Company on August 4, 1997, in a private
placement pursuant to an exemption from registration under the Securities Act.
In connection with that private placement, the Company and the Subsidiary
Guarantor entered into the Registration Rights Agreement which requires that
the Company and the Subsidiary Guarantor file the registration statement of
which this Prospectus is a part (the "Registration Statement") under the
Securities Act with respect to the New Notes on or prior to 60 days after the
date of issuance of the Old Notes (the "Issue Date"). The Registration Rights
Agreement further requires that, upon the effectiveness of the Registration
Statement, the Company offer to the holders of the Old Notes the opportunity to
exchange their Old Notes for a like principal amount of New Notes, which will
be issued without a restrictive legend and may be reoffered and resold by the
holder without further registration under the Securities Act. The Company and
the Subsidiary Guarantor have agreed to use their reasonable best efforts to
cause the Registration Statement to be declared effective within 120 days
following the Issue Date and to consummate the Exchange Offer within 30 days
after the Registration Statement is declared effective by the Commission. A
copy of the Registration Rights Agreement has been filed as an exhibit to the
Registration Statement.
In order to participate in the Exchange Offer, a holder must represent to
the Company, among other things, that (i) any New Notes to be received by it
will be acquired in the ordinary course of its business, (ii) if the holder is
not a broker-dealer, that it is not engaged in, and does not intend to engage
in, the distribution of the New Notes and it has no arrangement with any person
to participate in the distribution of the New Notes and (iii) it is not an
"affiliate" (as defined in Rule 405 of the Securities Act) of the Company or
the Subsidiary Guarantor, or if it is an affiliate, it will comply with the
registration and prospectus delivery requirements of the Securities Act to the
extent applicable. Each broker-dealer that receives New Notes for its own
account pursuant to the Exchange Offer should acknowledge that it acquired the
Old Notes for its own account as the result of market making activities or
other trading activities. Any holder who is unable to make the appropriate
representations to the Company will not be permitted to tender the Old Notes in
the Exchange Offer and will be required to comply with the registration and
prospectus delivery requirements of the Securities Act (or an appropriate
exemption therefrom) in connection with any sale or transfer of the Old Notes.
Based on an interpretation by the Commission's staff set forth in no-action
letters issued to third parties unrelated to the Company, the Company believes
that, with the exceptions discussed herein, New Notes issued pursuant to the
Exchange Offer in exchange for Old Notes may be offered for resale, resold and
otherwise transferred by any person receiving the New Notes, whether or not
that person is the holder (other than any such holder or such other person that
is an "affiliate" of the Company or the Subsidiary Guarantor within the meaning
of Rule 405 under the Securities Act), without compliance with the registration
and prospectus delivery provisions of the Securities Act, provided that (i) the
New Notes are acquired in the ordinary course of business of that holder or
such other person, (ii) neither the holder nor such other person is engaging in
or intends to engage in a distribution (within the meaning of the Securities
Act) of the New Notes, and (iii) neither the holder nor such other person has
an arrangement or understanding with any person to participate in the
distribution of the New Notes. See "Plan of Distribution."
CONSEQUENCES OF FAILURE TO EXCHANGE
The Old Notes are designated for trading in the PORTAL market. To the
extent Old Notes are tendered and accepted in the Exchange Offer, the principal
amount of outstanding Old Notes will decrease with a resulting decrease in the
liquidity in the market therefor. Following the consummation of the Exchange
Offer, holders of Old Notes who were eligible to participate in the Exchange
Offer but who did not tender their Old Notes will not be entitled to certain
rights under the Registration Rights Agreement, and such Old Notes will
continue to be subject to certain restrictions on transfer. In general, the
Old Notes may not be offered or sold, unless registered under the Securities
Act and applicable state securities laws, except pursuant to an exemption from,
or in a transaction not subject to, the Securities Act and applicable state
securities laws. The Company does not intend to register the Old Notes under
the Securities Act and, after consummation of the Exchange Offer, will not be
obligated to do so.
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<PAGE> 19
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this Prospectus
and in the Letter of Transmittal, the Company will accept any and all Old Notes
validly tendered and not withdrawn prior to 5:00 p.m., New York City time, on
the Expiration Date. As soon as practicable after the Expiration Date, the
Company will issue $1,000 principal amount of New Notes in exchange for each
$1,000 principal amount of outstanding Old Notes accepted in the Exchange
Offer. Holders may tender some or all of their Old Notes pursuant to the
Exchange Offer. However, Old Notes may be tendered only in integral multiples
of $1,000 in principal amount.
The form and terms of the New Notes are identical to the form and terms of
the Old Notes except that the Old Notes were offered and sold in reliance upon
certain exemptions from registration under the Securities Act, while the
offering and sale of the New Notes in exchange for the Old Notes have been
registered under the Securities Act, with the result that the New Notes will
not bear any legends restricting their transfer. Also, holders of the New Notes
will not be entitled to certain rights under the Registration Rights Agreement.
The New Notes will evidence the same debt as the Old Notes and will be issued
pursuant to, and entitled to the benefits of, the Indenture.
As of the date of this Prospectus, $110,000,000 aggregate principal amount
of the Old Notes was outstanding and registered in the name of Cede & Co., as
nominee for the DTC. The Company has fixed the close of business on
________________, 1997, as the record date for the Exchange Offer for purposes
of determining the persons to whom this Prospectus, together with the Letter of
Transmittal, will initially be sent. Holders of Old Notes do not have any
appraisal or dissenters' rights under the General Corporation Law of the State
of Delaware or the Indenture in connection with the Exchange Offer. The Company
intends to conduct the Exchange Offer in accordance with the applicable
requirements of the Exchange Act and the rules and regulations of the
Commission promulgated thereunder, including Rule 14e-1 thereunder.
The Company shall be deemed to have accepted validly tendered Old Notes
when, as, and if the Company has given oral or written notice thereof to the
Exchange Agent. The Exchange Agent will act as agent for the tendering holders
for the purpose of receiving the New Notes from the Company. If any tendered
Old Notes are not accepted for exchange because of an invalid tender, the
occurrence of certain other events set forth herein or otherwise, the
certificates for such unaccepted Old Notes will be returned, without expense,
to the tendering holder thereof as promptly as practicable after the Expiration
Date.
Holders who tender Old Notes in the Exchange Offer will not be required to
pay brokerage commissions or fees or, subject to the instructions in the Letter
of Transmittal, transfer taxes with respect to the exchange of Old Notes
pursuant to the Exchange Offer. The Company will pay all charges and expenses,
other than transfer taxes, in connection with the Exchange Offer. See "The
Exchange Offer -- Solicitation of Tenders; Fees and Expenses."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" shall mean 5:00 p.m., New York City time, on
__________, 1997, unless the Company, in its sole discretion, extends the
Exchange Offer, in which case the term "Expiration Date" shall mean the latest
date and time to which the Exchange Offer is extended. In order to extend the
Exchange Offer, the Company will notify the Exchange Agent of any extension by
oral or written notice prior to 9:00 a.m., New York City time, on the next
business day after the previously scheduled Expiration Date. The Company
reserves the right, in its sole discretion, (i) to delay accepting any Old
Notes, to extend the Exchange Offer or, if any of the conditions set forth
under "The Exchange Offer -- Conditions" shall not have been satisfied, to
terminate the Exchange Offer, by giving oral or written notice of such delay,
extension or termination to the Exchange Agent, or (ii) to amend the terms of
the Exchange Offer in any manner. If the Exchange Offer is amended in a manner
determined by the Company to constitute a material change, the Company will
promptly disclose such amendment in a manner reasonably calculated to inform
the holders of the Old Notes of such amendment. Without limiting the manner in
which the Company may choose to make public announcements of any delay in
acceptance, extension, termination or amendment of the Exchange Offer, the
Company shall have no obligation to publish, advertise, or otherwise
communicate any such public announcement, other than by making a timely release
to the Dow Jones News Service.
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<PAGE> 20
INTEREST ON THE NEW NOTES
The New Notes will bear interest from August 4, 1997, the date of issuance
of the Old Notes that are tendered for exchange of the New Notes (or the most
recent interest payment date to which interest on such Old Notes has been
paid). Accordingly, holders of Old Notes accepted for exchange will not
receive interest that is accrued but unpaid on the Old Notes at the time of
tender, but such interest will be payable on the first interest payment date
after the consummation of the Exchange Offer. Holders of Old Notes accepted
for exchange in the Exchange Offer will be deemed to have waived the right to
receive interest accrued but unpaid thereon as of the date of exchange.
Interest on the New Notes will be payable semi-annually on February 1 and
August 1 of each year, commencing February 1, 1998.
PROCEDURES FOR TENDERING
Only a registered holder of Old Notes may tender the Old Notes in the
Exchange Offer. Except as set forth under "The Exchange Offer -- Book Entry
Transfer," to tender in the Exchange Offer a holder must complete, sign and
date the Letter of Transmittal, or a copy thereof, have the signatures thereon
guaranteed if required by the Letter of Transmittal, and mail or otherwise
deliver the Letter of Transmittal or copy to the Exchange Agent for receipt
prior to 5:00 p.m. on the Expiration Date. In addition, either (i) certificates
for such Old Notes must be received by the Exchange Agent along with the Letter
of Transmittal, (ii) a timely confirmation of a book-entry transfer (a
"Book-Entry Confirmation") of such Old Notes, if that procedure is available,
into the Exchange Agent's account at DTC (the "Book-Entry Transfer Facility")
pursuant to the procedure for book-entry transfer described below, must be
received by the Exchange Agent prior to the Expiration Date, or (iii) the
holder must comply with the guaranteed delivery procedures described below. To
be tendered effectively, the Old Notes, Letter of Transmittal and other
required documents must be received by the Exchange Agent at the address set
forth under "The Exchange Offer -- Exchange Agent" prior to 5:00 p.m. on the
Expiration Date.
The tender by a holder that is not withdrawn before the Expiration Date
will constitute an agreement between that holder and the Company in accordance
with the terms and subject to the conditions set forth herein and in the Letter
of Transmittal.
THE METHOD OF DELIVERY OF OLD NOTES AND THE LETTER OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND RISK OF
THE HOLDER. INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT HOLDERS USE AN
OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, SUFFICIENT TIME SHOULD BE
ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE 5:00 P.M. ON THE
EXPIRATION DATE AND PROPER INSURANCE SHOULD BE OBTAINED. NO LETTER OF
TRANSMITTAL OR OLD NOTES SHOULD BE SENT TO THE COMPANY. HOLDERS MAY REQUEST
THEIR RESPECTIVE BROKERS, DEALERS, COMMERCIAL BANKS, TRUST COMPANIES, OR
NOMINEES TO EFFECT THESE TRANSACTIONS FOR SUCH HOLDERS.
Any beneficial owner whose Old Notes are registered in the name of a
broker, dealer, commercial bank, trust company, or other nominee and who wishes
to tender should contact the registered holder promptly and instruct the
registered holder to tender on the beneficial owner's behalf. If the
beneficial owner wishes to tender on its own behalf, such owner must, prior to
completing and executing the Letter of Transmittal and delivering the owner's
Old Notes, either make appropriate arrangements to register ownership of the
Old Notes in the beneficial owner's name or obtain a properly completed bond
power from the registered holder. The transfer of registered ownership may take
considerable time.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed by an Eligible Institution (as defined herein)
unless the Old Notes tendered pursuant thereto are tendered (i) by a registered
holder who has not completed the box titled "Special Registration Instructions"
or "Special Delivery Instructions" on the Letter of Transmittal or (ii) for the
account of an Eligible Institution. If signatures on a Letter of Transmittal or
a notice of withdrawal, as the case may be, are required to be guaranteed, the
guarantee must be by any eligible guarantor institution that is a member of or
participant in the Securities Transfer Agents Medallion Program, the New
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<PAGE> 21
York Stock Exchange Medallion Signature Program or the Stock Exchange Medallion
Program (an "Eligible Institution").
If the Letter of Transmittal is signed by a person other than the
registered holder of any Old Notes listed therein, such Old Notes must be
endorsed or accompanied by a properly completed bond power, signed by the
registered holder as that registered holder's name appears on the Old Notes
with the signature thereon guaranteed by an Eligible Institution.
If the Letter of Transmittal or any Old Notes or bond powers are signed by
trustees, executors, administrators, guardians, attorneys-in-fact, officers of
corporations, or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and evidence satisfactory to the
Company of their authority to so act must be submitted with the Letter of
Transmittal unless waived by the Company.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of tendered Old Notes will be determined by
the Company in its sole discretion, which determination will be final and
binding. The Company reserves the absolute right to reject any and all Old
Notes not properly tendered or any Old Notes the Company's acceptance of which
would, in the opinion of counsel for the Company, be unlawful. The Company also
reserves the right to waive any defects, irregularities or conditions of tender
as to particular Old Notes. The Company's interpretation of the terms and
conditions of the Exchange Offer (including the instructions in the Letter of
Transmittal) will be final and binding on all parties. Unless waived, any
defects or irregularities in connection with tenders of Old Notes must be cured
within such time as the Company shall determine. Although the Company intends
to notify holders of defects or irregularities with respect to tenders of Old
Notes, neither the Company, the Exchange Agent nor any other person shall incur
any liability for failure to give such notification. Tenders of Old Notes will
not be deemed to have been made until such defects or irregularities have been
cured or waived. Any Old Notes received by the Exchange Agent that the Company
determines are not properly tendered and as to which the defects or
irregularities have not been cured or waived will be returned by the Exchange
Agent to the tendering holders, unless otherwise provided in the Letter of
Transmittal, as soon as practicable following the Expiration Date.
In addition, the Company reserves the right in its sole discretion to
purchase or make offers for any Old Notes that remain outstanding after the
Expiration Date or, as set forth under "The Exchange Offer -- Conditions," to
terminate the Exchange Offer and, to the extent permitted by applicable law,
purchase Old Notes in the open market, in privately negotiated transactions or
otherwise. The terms of any such purchases or offers could differ from the
terms of the Exchange Offer.
By tendering, each holder will represent to the Company that, among other
things, (i) the New Notes acquired pursuant to the Exchange Offer are being
acquired in the ordinary course of business of the person receiving such New
Notes, whether or not such person is the holder, (ii) if it is not a
broker-dealer, neither the holder nor any such other person is engaging in or
intends to engage in a distribution of such New Notes nor has an arrangement or
understanding with any person to participate in the distribution of such New
Notes, and (iii) neither the holder nor any such other person is an "affiliate"
(as defined in Rule 405 of the Securities Act) of the Company or the Subsidiary
Guarantor. Each broker-dealer that receives New Notes for its own account in
exchange for Old Notes, where such Old Notes were acquired by such
broker-dealer as a result of market-making activities or other trading
activities (other than Old Notes acquired directly from the Company), may
participate in the Exchange Offer but may be deemed an "underwriter" under the
Securities Act and, therefore, must acknowledge in the Letter of Transmittal
that it will deliver a prospectus in connection with any resale of such New
Notes. The Letter of Transmittal states that, by so acknowledging and by
delivering a prospectus, a broker-dealer will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities Act. See "Plan of
Distribution."
In all cases, issuance of New Notes for Old Notes that are accepted for
exchange pursuant to the Exchange Offer will be made only after timely receipt
by the Exchange Agent of certificates for such Old Notes or a timely Book-Entry
Confirmation of such Old Notes into the Exchange Agent's account at the
Book-Entry Transfer Facility, a properly completed and duly executed Letter of
Transmittal (or, with respect to the DTC and its participants, electronic
instructions in which the tendering holder acknowledges its receipt of and
agreement to be bound by the Letter of Transmittal), and all other required
documents. If any tendered Old Notes are submitted for a greater
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<PAGE> 22
principal amount than the holder desires to exchange, such unaccepted or
non-exchanged Old Notes will be returned without expense to the tendering
holder thereof (or, in the case of Old Notes tendered by book-entry transfer
into the Exchange Agent's account at the Book-Entry Transfer Facility pursuant
to the book-entry transfer procedures described below, such non-exchanged Old
Notes will be credited to an account maintained with such Book-Entry Transfer
Facility) as promptly as practicable after the expiration of the Exchange
Offer.
BOOK-ENTRY TRANSFER
The Exchange Agent will make a request to establish an account with respect
to the Old Notes at the Book-Entry Transfer Facility for purposes of the
Exchange Offer within two business days after the date of this Prospectus, and
any financial institution that is a participant in the Book-Entry Transfer
Facility system may make book-entry delivery of Old Notes being tendered by
causing the Book-Entry Transfer Facility to transfer such Old Notes into the
Exchange Agent's account at the Book-Entry Transfer Facility in accordance with
such Book-Entry Transfer Facility's procedures for transfer. However, although
delivery of Old Notes may be effected through book-entry transfer at the
Book-Entry Transfer Facility, the Letter of Transmittal or copy thereof, with
any required signature guarantees and any other required documents, must, in
any case other than as set forth in the following paragraph, be transmitted to
and received by the Exchange Agent at the address set forth under "The Exchange
Offer -- Exchange Agent" on or prior to the Expiration Date or the guaranteed
delivery procedures described below must be complied with.
The DTC's Automated Tender Offer Program ("ATOP") is the only method of
processing exchange offers through the DTC. To accept the Exchange Offer
through ATOP, participants in the DTC must send electronic instructions to the
DTC through the DTC's communication system in lieu of sending a signed, hard
copy Letter of Transmittal. The DTC is obligated to communicate those
electronic instructions to the Exchange Agent. To tender Old Notes through
ATOP, the electronic instructions sent to the DTC and transmitted by the DTC to
the Exchange Agent must contain the character by which the participant
acknowledges its receipt of and agrees to be bound by the Letter of
Transmittal.
GUARANTEED DELIVERY PROCEDURES
If a registered holder of the Old Notes desires to tender such Old Notes
and the Old Notes are not immediately available, or time will not permit such
holder's Old Notes or other required documents to reach the Exchange Agent
before the Expiration Date, or the procedure for book-entry transfer cannot be
completed on a timely basis, a tender may be effected if (i) the tender is made
through an Eligible Institution, (ii) prior to the Expiration Date, the
Exchange Agent received from such Eligible Institution a properly completed and
duly executed Letter of Transmittal (or a facsimile thereof) and Notice of
Guaranteed Delivery, substantially in the form provided by the Company (by
telegram, telex, facsimile transmission, mail or hand delivery), setting forth
the name and address of the holder of Old Notes and the amount of Old Notes
tendered, stating that the tender is being made thereby and guaranteeing that
within three New York Stock Exchange ("NYSE") trading days after the date of
execution of the Notice of Guaranteed Delivery, the certificates for all
physically tendered Old Notes, in proper form for transfer, or a Book-Entry
Confirmation, as the case may be, and any other documents required by the
Letter of Transmittal will be deposited by the Eligible Institution with the
Exchange Agent, and (iii) the certificates for all physically tendered Old
Notes, in proper form for transfer, or a Book-Entry Confirmation, as the case
may be, and all other documents required by the Letter of Transmittal, are
received by the Exchange Agent within three NYSE trading days after the date of
execution of the Notice of Guaranteed Delivery. Upon request to the Exchange
Agent, a Notice of Guaranteed Delivery will be sent to holders who wish to
tender their Old Notes according to the guaranteed delivery procedures set
forth above.
WITHDRAWAL RIGHTS
Tenders of Old Notes may be withdrawn at any time prior to 5:00 p.m., New
York City time, on the Expiration Date.
For a withdrawal of a tender of Old Notes to be effective, a written or
(for DTC participants only) electronic ATOP transmission notice of withdrawal
must be received by the Exchange Agent at its address set forth herein prior
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<PAGE> 23
to 5:00 p.m., New York City time, on the Expiration Date. Any such notice of
withdrawal must (i) specify the name of the person having deposited the Old
Notes to be withdrawn (the "Depositor"), (ii) identify the Old Notes to be
withdrawn (including the certificate number or numbers and principal amount of
such Old Notes), (iii) be signed by the holder in the same manner as the
original signature on the Letter of Transmittal by which such Old Notes were
tendered (including any required signature guarantees) or be accompanied by
documents of transfer sufficient to have the Trustee with respect to the Old
Notes register the transfer of such Old Notes into the name of the person
withdrawing the tender, and (iv) specify the name in which any such Old Notes
are to be registered, if different from that of the Depositor. All questions as
to the validity, form and eligibility (including time of receipt) of such
notices will be determined by the Company, in its sole discretion, whose
determination shall be final and binding on all parties. Any Old Notes so
withdrawn will be deemed not to have been validly tendered for exchange for
purposes of the Exchange Offer. Any Old Notes which have been tendered for
exchange but which are not exchanged for any reason will be returned to the
holder thereof without cost to such holder as soon as practicable after
withdrawal, rejection of tender or termination of the Exchange Offer. Properly
withdrawn Old Notes may be retendered by following one of the procedures
described under "The Exchange Offer -- Procedures for Tendering" at any time on
or prior to the Expiration Date.
CONDITIONS
Notwithstanding any other term of the Exchange Offer, the Company shall not
be required to accept for exchange, or exchange New Notes for, any Old Notes,
and may terminate the Exchange Offer as provided herein before the acceptance
of such Old Notes, if (i) the Exchange Offer shall violate applicable law or
any applicable interpretation of the staff of the Commission, (ii) any action
or proceeding is instituted or threatened in any court or by any governmental
agency that might materially impair the ability of the Company to proceed with
the Exchange Offer or any material adverse development has occurred in any
existing action or proceeding with respect to the Company, or (iii) any
governmental approval has not been obtained, which approval the Company shall
deem necessary for the consummation of the Exchange Offer. If the Company
determines in its sole discretion that any of the conditions are not satisfied,
the Company may (i) refuse to accept any Old Notes and return all tendered Old
Notes to the tendering holders (or, in the case of Old Notes tendered by
book-entry transfer into the Exchange Agent's account at the Book-Entry
Transfer Facility pursuant to the book-entry transfer procedures described
above, such Old Notes will be credited to an account maintained with such
Book-Entry Transfer Facility), (ii) extend the Exchange Offer and retain all
Old Notes tendered prior to the expiration of the Exchange Offer, subject,
however, to the rights of holders to withdraw such Old Notes (see "--
Withdrawal Rights") or (iii) waive such unsatisfied conditions with respect to
the Exchange Offer and accept all properly tendered Old Notes which have not
been withdrawn. If such waiver constitutes a material change to the Exchange
Offer, the Company will promptly disclose such waiver by means of a prospectus
supplement that will be distributed to the registered holders, and the Company
will extend the Exchange Offer for a period of five to ten business days,
depending upon the significance of the waiver and the manner of disclosure to
the registered holders, if the Exchange Offer would otherwise expire during
such five-to-ten-business-day period.
EXCHANGE AGENT
All executed Letters of Transmittal should be directed to the Exchange
Agent. Norwest Bank, Minnesota, N.A. has been appointed as Exchange Agent for
the Exchange Offer. Questions, requests for assistance and requests for
additional copies of this Prospectus or of the Letter of Transmittal should be
directed to the Exchange Agent addressed as follows:
By Registered or Certified Mail:
Norwest Bank Minnesota, National Association
Corporate Trust Operations
P. O. Box 1517
Minneapolis, MN 55480-1517
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<PAGE> 24
By Overnight Courier:
Norwest Bank Minnesota, National Association
Corporate Trust Operations
Norwest Center
Sixth and Marquette
Minneapolis, MN 55479-0069
By Hand:
Norwest Bank Minnesota, National Association
Corporate Trust Operations
Northstar East, 12th Floor
608 2nd Avenue
Minneapolis, MN 55479-0113
By Facsimile:
Norwest Bank Minnesota, National Association
Corporate Trust Operations
(612) 667-4927
Confirm by Telephone: (612) 667-9764
SOLICITATIONS OF TENDERS; FEES AND EXPENSES
The expenses of soliciting acceptances to the Exchange Offer will be borne
by the Company. The principal solicitation is being made by mail; however,
additional solicitations may be made in person or by telephone by officers and
employees of the Company. The Company has not retained any dealer-manager or
similar agent in connection with the Exchange Offer and will not make any
payments to brokers, dealers or others soliciting acceptances of the Exchange
Offer. The Company, however, will pay the Exchange Agent reasonable and
customary fees for its services and will reimburse it for its reasonable
out-of-pocket expenses in connection therewith. Other cash expenses to be
incurred in connection with the Exchange Offer and to be paid by the Company
include registration, accounting and legal fees and printing costs, among
others.
ACCOUNTING TREATMENT
For accounting purposes, the Company will recognize no gain or loss as a
result of the Exchange Offer. The expenses of the Exchange Offer will be
amortized over the term of the New Notes.
TRANSFER TAXES
Holders who tender their Old Notes for exchange will not be obligated to
pay any transfer taxes in connection therewith, except that holders who
instruct the Company to register New Notes in the name of, or request that Old
Notes not tendered or not accepted in the Exchange Offer be returned to, a
person other than the registered tendering holder will be responsible for the
payment of any applicable transfer tax thereon.
-24-
<PAGE> 25
THE COMPANY
Hydro Environmental Services Limited Partnership was formed in 1990 by an
investor group including B. Tom Carter, Jr., the Company's Chairman, CEO and
President, to acquire an industrial cleaning business that had been operating
since 1961. HydroChem was formed in September 1993 for the purpose of
combining, in December 1993, the business and operations of Hydro Services with
the Dowell Industrial Services division of Dowell Schlumberger Inc., a business
founded in 1938 and engaged in providing industrial cleaning services. In
January 1995, the Company acquired the business of Halliburton Industrial
Services, a business founded in 1962 and a division of Brown & Root Industrial
Services, Inc., which was also engaged in providing industrial cleaning
services. The Company is a wholly-owned subsidiary of HydroChem Holding, Inc.,
which is owned by Citicorp Venture Capital, Ltd., management of the Company,
LKCM Venture Partners I Ltd., BT Capital Partners, Inc. and other investors.
Parent's sole assets are all the outstanding shares of stock of the
Company. Unless the context indicates otherwise, references to the "Company" or
"HydroChem" include HydroChem Industrial Services, Inc. and its wholly-owned
subsidiary, HydroChem International, Inc., a Subsidiary Guarantor of the Notes.
HydroChem Industrial Services, Inc. was incorporated in 1993 under the laws of
the State of Delaware. HydroChem's principal executive office is located at
6210 Rothway, Houston, Texas 77040, and its telephone number at that address is
(713) 462-2130.
USE OF PROCEEDS
There will be no cash proceeds to the Company from the Exchange Offer.
The Company used the $110.0 million of the gross proceeds from sale of the
Old Notes (i) to repay in full the Company's outstanding indebtedness,
including accrued interest and fees, of $45.7 million under a credit facility
with a financial institution which included a revolving loan and term loans (the
"Senior Credit Facility"), (ii) to repay in full the Company's outstanding
indebtedness, including a prepayment premium and accrued interest, of $18.7
million under a Senior Subordinated Credit Agreement in the principal amount of
$18.0 million (the "Senior Subordinated Debt"), (iii) to fund a dividend to
Parent of $8.5 million which was used by Parent to discharge accrued interest on
its indebtedness and accrued dividends on its preferred stock, and (iv) to pay
fees and expenses associated with sale of the Old Notes of $3.3 million. The
remaining $33.8 million of gross proceeds from the sale of the Old Notes will be
used for general corporate purposes, including expanding the Company's
industrial vacuuming and other business lines through expenditures for property
and equipment, increasing the Company's marketing and sales efforts and
potentially funding acquisitions. The Company continually evaluates possible
acquisitions but has no present understanding, commitments or agreements
relating thereto.
-25-
<PAGE> 26
CAPITALIZATION
The following table sets forth the historical consolidated capitalization
of the Company at June 30, 1997, as adjusted to give effect to (i) the issuance
of the Old Notes and the exchange of Old Notes for New Notes, (ii) the
application of the net proceeds from the sale of the Old Notes, and (iii) the
write-off of the unamortized balance of deferred financing costs relating to
the Senior Credit Facility and the Senior Subordinated Debt which were
discharged using a portion of the net proceeds of the Offering. The table
should be read in conjunction with "Use of Proceeds," "Pro Forma Consolidated
Financial Statements," "Selected Historical Consolidated Financial Data," and
the Consolidated Financial Statements of the Company and the Notes thereto
included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
AT JUNE 30, 1997
--------------------
AS
ACTUAL ADJUSTED
(IN THOUSANDS)
<S> <C> <C>
Cash and cash equivalents ............................................... $ 1,458 $ 32,114
======= ========
Long-term debt (including current maturities):
Senior Credit Facility ................................................ 47,582 $ --
Senior Subordinated Debt .............................................. 18,000 --
Notes ................................................................. -- 110,000
------- --------
Total long-term debt .......................................... 65,582 110,000
Stockholder's equity:
Common stock, $.01 par value:
1,000 shares authorized, 100 shares outstanding .................... 1 1
Additional paid-in-capital ............................................ 19,670 16,924
Retained earnings ..................................................... 7,846 --
------- --------
Total stockholder's equity .................................... 27,517 16,925
------- --------
Total capitalization .......................................... $93,099 $126,925
======= ========
</TABLE>
PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
The following unaudited Pro Forma Consolidated Financial Statements are
derived from the Company's unaudited consolidated financial statements as of
and for the six months ended June 30, 1997, and the historical consolidated
financial statements for the year ended December 31, 1996, included elsewhere
in this Prospectus. The pro forma information gives effect to (i) the issuance
of the Old Notes and the exchange of Old Notes for New Notes, (ii) the
application of the net proceeds from the sale of the Old Notes and (iii) the
write-off of the unamortized balance of deferred financing costs relating to
the Senior Credit Facility and Senior Subordinated Debt which were discharged
using a portion of the net proceeds from the sale of the Old Notes.
The unaudited pro forma consolidated balance sheet gives effect to the
Offering and the application of proceeds therefrom as if such transactions had
occurred on June 30, 1997. The unaudited pro forma consolidated statements of
operations give effect to the Offering and the application of proceeds
therefrom as if such transactions had occurred on January 1, 1996. The pro
forma adjustments are based upon available information and certain assumptions
which the Company's management believes are reasonable. The unaudited pro forma
financial data does not purport to represent what the Company's results of
operations or financial position would actually have been had the Offering in
fact occurred at such prior times or to project the Company's results of
operations or financial position for or at any future period or date.
The unaudited Pro Forma Consolidated Financial Statements should be read in
conjunction with "Use of Proceeds," "Management's Discussion and Analysis of
Financial Condition and Results of Operations"and the Company's Consolidated
Financial Statements and the Notes thereto included elsewhere in this
Prospectus.
-26-
<PAGE> 27
HYDROCHEM INDUSTRIAL SERVICES, INC. AND SUBSIDIARY
PRO FORMA CONSOLIDATED BALANCE SHEET
JUNE 30, 1997
(UNAUDITED)
ASSETS
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents ................................ $ 1,458 $106,700 (a) $ 32,114
(65,582) b)
(1,666)(c)
(540)(d)
(8,256)(e)
Receivables, net ......................................... 27,220 27,220
Inventories .............................................. 3,621 3,621
Prepaid expenses and other current assets ................ 1,938 1,938
Deferred income taxes .................................... 1,823 1,823
-------- --------
Total current assets ............................. 36,060 30,656 66,716
Property and equipment, at cost ............................ 57,065 57,065
Accumulated depreciation ................................... (20,882) (20,882)
-------- --------
36,183 -- 36,183
Intangible assets, net ..................................... 45,516 3,300 (a) 45,589
(3,227)(f)
-------- -------- --------
Total assets ..................................... $117,759 $ 30,729 $148,488
======== ======== ========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable ......................................... $ 6,296 $ $ 6,296
Income taxes payable ..................................... 795 795
Accrued liabilities ...................................... 9,507 (1,666)(c) 7,841
Current portion of long-term debt ........................ 5,250 (5,250 (b) --
-------- -------- --------
Total current liabilities ........................ 21,848 (6,916) 14,932
Long-term debt ............................................. 60,332 (60,332)(b) --
Notes ...................................................... -- 110,000 (a) 110,000
Deferred income taxes ...................................... 8,062 (205)(d) 6,631
(1,226)(f)
Stockholder's equity:
Common stock, $.01 par value:
1,000 shares authorized, 100 shares outstanding ....... 1 1
Additional paid-in capital ............................... 19,670 (2,746)(e) 16,924
Retained earnings ........................................ 7,846 (335)(d) --
(5,510)(e)
(2,001)(f)
-------- -------- --------
Total stockholder's equity ....................... 27,517 (10,592) 16,925
-------- -------- --------
Total liabilities and stockholder's equity ....... $117,759 $ 30,729 $148,488
======== ======== ========
</TABLE>
See accompanying notes.
-27-
<PAGE> 28
HYDROCHEM INDUSTRIAL SERVICES, INC. AND SUBSIDIARY
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Revenue ............................................................. $80,714 $ $80,714
Cost of revenue ..................................................... 47,790 47,790
------- -------
Gross profit ........................................................ 32,924 -- 32,924
Selling, general and administrative expense ......................... 21,161 21,161
Depreciation ........................................................ 3,889 3,889
------- -------
Operating income .................................................... 7,874 -- 7,874
Other (income) expense:
Interest expense, net ............................................. 3,787 2,211 (g) 5,871
(292)(h)
165 (i)
Other expense, net ................................................ 23 23
Amortization of intangibles ....................................... 779 779
------- -------
Income before taxes ................................................. 3,285 (2,084) 1,201
Income tax provision ................................................ 1,538 (792)(j) 746
------- -------- -------
Net income ................................................ $ 1,747 $ (1,292) $ 455
======= ======== =======
</TABLE>
See accompanying notes.
-28-
<PAGE> 29
HYDROCHEM INDUSTRIAL SERVICES, INC. AND SUBSIDIARY
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Revenue ............................................................. $156,003 $ $156,003
Cost of revenue ..................................................... 94,373 94,373
-------- --------
Gross profit ........................................................ 61,630 -- 61,630
Selling, general and administrative expense ......................... 42,103 42,103
Depreciation ........................................................ 7,765 7,765
-------- --------
Operating income .................................................... 11,762 -- 11,762
Other (income) expense:
Interest expense, net ............................................. 7,920 4,077 (g) 11,743
(584)(h)
330 (i)
Special charge .................................................... 511 511
Other income, net ................................................. (21) (21)
Amortization of intangibles ....................................... 1,523 1,523
-------- --------
Income (loss) before taxes .......................................... 1,829 (3,823) (1,994)
Income tax provision ................................................ 1,284 (1,453)(j) (169)
-------- -------- --------
Net income (loss) ......................................... $ 545 $ (2,370) $ (1,825)
======== ======== ========
</TABLE>
See accompanying notes.
-29-
<PAGE> 30
HYDROCHEM INDUSTRIAL SERVICES, INC. AND SUBSIDIARY
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Adjustments have been made to the accompanying unaudited Pro Forma
Consolidated Balance Sheet as of June 30, 1997 and the unaudited Pro Forma
Consolidated Statements of Operations for the six months ended June 30, 1997
and the year ended December 31, 1996 to reflect the following:
(a) The Offering of the Old Notes and the net proceeds received therefrom,
after deduction and capitalization of discounts, commissions, fees and
other related expenses.
(b) The repayment in full of all outstanding debt of the Company pursuant
to its Senior Credit Facility and its Senior Subordinated Debt.
(c) The payment of all accrued interest and fees related to the Senior
Credit Facility and Senior Subordinated Debt.
(d) The payment of a prepayment premium related to the Senior Subordinated
Debt.
(e) The dividend to Parent which was used to discharge interest and
dividends accrued on Parent's securities.
(f) The write-off of the unamortized balance of deferred financing costs
relating to the Senior Credit Facility and Senior Subordinated Debt
which were discharged with a portion of the net proceeds of the
Offering.
(g) Interest expense from the issuance of the Notes, net of the
elimination of interest expense on the Senior Credit Facility and
Senior Subordinated Debt.
(h) The reduction in interest expense related to the write-off of the
unamortized balance of deferred financing costs relating to the Senior
Credit Facility and Senior Subordinated Debt which were discharged
with a portion of the net proceeds of the Offering.
(i) Interest expense for the amortization of estimated deferred financing
costs in connection with the issuance of the Notes.
(j) To adjust the income tax provision related to the pro forma
adjustments.
-30-
<PAGE> 31
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
The following selected historical consolidated financial data of the
Company as of December 31, 1992, and for the year ended December 31, 1992, and
the period from January 1, 1993, to December 14, 1993, have been derived from
the audited financial statements of Hydro Services, a predecessor to the
Company's business and operations. The selected historical consolidated
financial data of the Company as of and for the period from December 15, 1993,
to December 31, 1993, and for each of the years ended December 31, 1994, 1995
and 1996, have been derived from the Company's audited consolidated financial
statements. The selected historical consolidated financial data of the Company
as of June 30, 1997, and for the six months ended June 30, 1996 and 1997, have
been derived from the Company's unaudited consolidated financial statements.
The Company's unaudited consolidated financial statements include all
adjustments, consisting of normal recurring accruals, that the Company's
management considers necessary for a fair presentation of such data. The
results of operations for any interim period are not necessarily indicative of
results of operations for the fiscal year. The selected historical consolidated
financial data set forth below should be read in conjunction with "The
Company," "Pro Forma Consolidated Financial Statements," "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
with the Company's Consolidated Financial Statements and the Notes thereto
included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30,
-------------------------------------------------------- -------------------
1992(1) 1993(1) 1994 1995 1996 1996 1997
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue . . . . . . . . . . $27,121 $ 32,529 $101,103 $ 156,484 $ 156,003 $79,201 $80,714
Gross profit . . . . . . . 10,904 12,041 36,521 61,855 61,630 31,325 32,924
SG&A expense . . . . . . . 6,394 6,881 20,504 39,465 42,103 20,184 21,161
Depreciation . . . . . . . 1,049 1,616 3,930 6,752 7,765 3,712 3,889
Operating income . . . . . 3,356 3,497 12,087 15,638 11,762 7,429 7,874
Interest expense, net . . . 1,613 1,822 5,605 8,693 7,920 4,038 3,787
Amortization of
intangibles . . . . . . . 468 493 1,151 1,407 1,523 762 779
Income before taxes . . . . 1,134 532 5,409 5,903 1,829 2,777 3,285
Net income . . . . . . . . na(1) na(1) 2,950 2,851 545 828 1,747
OTHER FINANCIAL DATA:
Gross margin . . . . . . . 40.2% 37.0% 36.1% 39.5% 39.5% 39.6% 40.8%
EBITDA(2) . . . . . . . . . $ 4,405 $ 5,113 $ 16,017 $ 22,390 $ 19,527 $11,141 $11,763
EBITDA margin(3) . . . . . 16.2% 15.7% 15.8% 14.3% 12.5% 14.1% 14.6%
Capital expenditures . . . $ 1,869 $ 3,047 $ 5,576 $ 8,493 $ 6,829 $ 3,245 $ 2,847
Ratio of earnings before
taxes to fixed
charges(4) . . . . 1.6x 1.2x 1.9x 1.6x 1.2x 1.6x 1.7x
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31, AS OF
--------------------------------------------------- JUNE 30,
1992(1) 1993 1994 1995 1996 1997
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents . . . . . . . . $ 983 $ 4,292 $ 2,529 $ 1,088 $ 671 $ 1,458
Working capital . . . . . . . . . . . . . 3,747 10,458 10,170 17,961 13,216 14,212
Total assets . . . . . . . . . . . . . . 19,032 83,519 87,146 121,216 115,522 117,759
Total long-term debt, including current
maturities . . . . . . . . . . . . . . 12,884 57,000 52,739 76,894 68,325 65,582
Stockholder's equity . . . . . . . . . . na(1) 14,737 17,687 25,225 25,770 27,517
</TABLE>
__________
(1) Results for the years ended December 31, 1992 and 1993, were derived from
(i) the audited financial statements of Hydro Services, a predecessor to
the Company's business and operations, for the year ended December 31,
1992, and the period from January 1, 1993, to December 14, 1993, and (ii)
the Company's audited financial statements for the period from December 15,
1993, to December 31, 1993. Operations for 1993 have been combined for
purposes of this presentation. Because Hydro Services was reported on a
limited partnership basis, net income is not available on a comparable
basis. See "The Company."
-31-
<PAGE> 32
(2) EBITDA for any relevant period presented above represents net income plus
interest expense, income taxes, depreciation, amortization, and other
income and expenses (including a special charge of $511,000 in 1996)
reflected in the determination of net income. EBITDA should not be
construed as a substitute for operating income, as an indicator of
liquidity or as a substitute for net cash provided by operating activities,
which are determined in accordance with generally accepted accounting
principles. EBITDA is included because management believes that certain
investors may find it to be a useful tool for analyzing operating
performance, leverage, liquidity, and a company's ability to service debt.
See "Pro Forma Consolidated Financial Statements" and the Company's
Consolidated Financial Statements and the Notes thereto included elsewhere
in this Prospectus.
(3) EBITDA margin for any relevant period reflects EBITDA divided by revenue.
(4) For purposes of determining the ratio of earnings to fixed charges,
earnings are defined as earnings before income taxes, plus fixed charges.
Fixed charges consist of interest expense on all indebtedness, amortization
of deferred financing costs, and the portion of rental expense on operating
leases which represents that portion deemed by the Company to be
attributable to interest.
-32-
<PAGE> 33
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the Selected
Historical Consolidated Financial Data, the Company's Consolidated Financial
Statements and the Notes thereto, and the other financial and operating
information included elsewhere in this Prospectus. This Prospectus contains, in
addition to historical information, forward-looking statements that include
risks and uncertainties. The Company's actual results may differ materially
from the results discussed in the forward-looking statements. Factors that
might cause such a difference include those discussed below, as well as those
discussed elsewhere in this Prospectus. The Company undertakes no obligation to
release publicly the result of any revisions to these forward-looking
statements that may be made to reflect events or circumstances after the date
hereof or to reflect the occurrence of unanticipated events.
OVERVIEW
The Company is a leading provider of industrial cleaning services to a wide
range of processing industries, including petrochemical plants, oil refineries,
electric utilities, pulp and paper mills, rubber plants and aluminum plants.
This type of work is typically recurring maintenance to improve or sustain the
operating efficiencies and extend the useful lives of process equipment and
facilities. Services provided include hydroblasting, chemical cleaning,
industrial vacuuming, waste minimization, commissioning and other specialized
services. In 1996, 44.5% of the Company's revenue was derived from
hydroblasting, 40.2% from chemical cleaning, 7.4% from industrial vacuuming and
7.9% from other services. Also, in 1996, 45.8% of HydroChem's revenue came from
petrochemical plants, 16.9% from oil refineries, 14.3% from electric utilities,
8.3% from pulp and paper mills and 14.7% from other industries. Customers are
generally billed on a monthly basis.
Cost of revenue primarily consists of direct costs for employee
compensation and benefits, contract labor, travel, equipment, supplies,
chemicals, site services and insurance. In 1996, 44.5% of these costs related
to employee compensation and benefits.
Selling, general and administrative ("SG&A") expense includes employee
compensation and benefits, travel, facilities, supplies, insurance,
advertising, training, professional fees and doubtful accounts expense. In
1996, 56.7% of these expenses related to employee compensation and benefits.
Depreciation and amortization charges result primarily from the
capital-intensive nature of the industrial cleaning industry and the
acquisitions the Company has completed. The principal components of
depreciation relate to vehicles, hydroblasting pumps and chemical pumps and
circulators. Amortization relates to goodwill, customer lists and other
intangibles. In 1993, the Company purchased substantially all of the assets and
assumed certain liabilities of the Dowell Industrial Services division of
Dowell Schlumberger Incorporated and merged with Hydro Environmental Services
Limited Partnership. In 1995, the Company purchased substantially all of the
assets and assumed certain liabilities of Halliburton Industrial Services, a
division of Brown & Root Industrial Services, Inc. The Company accounted for
all of the above transactions under the purchase method. Because the purchase
price of acquired assets exceeded their fair value, the Company recorded
significant amounts of goodwill and other intangibles. As a result, the Company
has incurred significant levels of amortization.
-33-
<PAGE> 34
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, information
derived from the Company's consolidated statements of operations, expressed as
a percentage of revenue. There can be no assurance that the trends in operating
results will continue in the future.
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30,
-------------------------- ---------------
1994 1995 1996 1996 1997
<S> <C> <C> <C> <C> <C>
Revenue . . . . . . . . . . . . . . 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of revenue . . . . . . . . . . 63.9 60.5 60.5 60.4 59.2
----- ----- ----- ----- -----
Gross profit . . . . . . . . . 36.1 39.5 39.5 39.6 40.8
SG&A expense . . . . . . . . . . . 20.3 25.2 27.0 25.5 26.2
Depreciation . . . . . . . . . . . 3.8 4.3 5.0 4.7 4.8
----- ----- ----- ----- -----
Operating income . . . . . . . 12.0 10.0 7.5 9.4 9.8
Other (income) expense:
Interest expense, net . . . . . . 5.6 5.5 5.0 5.1 4.7
Special charge . . . . . . . . . -- -- 0.3 -- --
Other income, net . . . . . . . . (0.1) (0.2) -- (0.2) --
Amortization of intangibles . . . 1.2 0.9 1.0 1.0 1.0
----- ----- ----- ----- -----
Income before taxes . . . . . 5.3 3.8 1.2 3.5 4.1
Income tax provision . . . . . . . 2.4 2.0 0.9 2.5 1.9
----- ----- ----- ----- -----
Net income . . . . . . . . . . 2.9% 1.8% 0.3% 1.0% 2.2%
===== ===== ===== ===== =====
EBITDA . . . . . . . . . . . . . . 15.8% 14.3% 12.5% 14.1% 14.6%
</TABLE>
Six Months Ended June 30, 1997 Compared to Six Months Ended June 30, 1996
Revenue. Revenue increased from $79.2 million in the first six months of
1996 to $80.7 million in the first six months of 1997, an increase of $1.5
million, or 1.9%. Hydroblasting revenue increased $3.9 million, or 11.1%, while
chemical cleaning revenue decreased $3.5 million, or 10.9%, from the first six
months of 1996 compared to the first six months of 1997. Industrial vacuuming
revenue increased $2.2 million, or 38.7%, while revenue from all other services
decreased $1.1 million, or 17.1%, for the same period. The increase in
hydroblasting revenue principally resulted from a few large projects completed
early in the year. The decrease in chemical cleaning revenue was primarily
caused by a delayed spring electric utility boiler cleaning season, normally
concentrated in the months of March through May. Growth in industrial vacuuming
revenue resulted from increased customer demand for services provided by vacuum
trucks placed in service in 1996. The decrease in other services was
principally the result of reduced activity with one customer.
Gross profit. The Company's cost of revenue decreased $86,000, or 0.2% to
$47.8 million in the first six months of 1997 from $47.9 million in the first
six months of 1996. Gross profit increased $1.6 million, or 5.1%, to $32.9
million in the first six months of 1997 from $31.3 million in the year earlier
period. As a result of the revenue increases described above and slightly
decreased cost of revenue, gross profit margins increased to 40.8% from 39.6%.
SG&A expense. SG&A expense in the six months ended June 30, 1997, increased
$977,000, or 4.8%, to $21.2 million from $20.2 million in the year earlier
period. This increase primarily resulted from increases in employee
compensation and benefits expense. SG&A expense was 26.2% and 25.5% of revenue
for the first six months of 1997 and 1996, respectively.
EBITDA. Increased gross profit, partially offset by increased SG&A
expense, resulted in a $622,000, or 5.6%, increase in EBITDA to $11.8 million
from $11.1 million in the year earlier period. As a percentage of revenue,
EBITDA was 14.6%, which was up from 14.1% in the prior year period.
Depreciation. Depreciation expense increased $177,000 to $3.9 million in
the first six months of 1997 from $3.7 million in the first six months of 1996.
Operating income. Operating income increased $445,000 to $7.9 million in
the first six months of 1997 from $7.4 million in the first six months of 1996.
Operating income was 9.8% of revenue in the first six months of 1997 and 9.4%
in the first six months of 1996.
-34-
<PAGE> 35
Interest expense. Interest expense decreased $251,000, or 6.2%, to $3.8
million from $4.0 million. Reduced interest expense resulted from (i) lower
revolving loan balances due to cumulative increases in net cash provided by
operating activities and (ii) lower term loan balances following $3.9 million
in principal payments since June 30, 1996.
Amortization. Amortization expense of $779,000 was relatively unchanged
from $762,000 in the prior year's comparable period.
Income before taxes. Income before taxes increased $508,000, or 18.3%, to
$3.3 million in the first six months of 1997 from $2.8 million in the
comparable 1996 period.
Income tax provision. The effective tax rate decreased to 46.8% of income
before taxes in the first six months of 1997 from 70.2% in the year earlier
period. This decrease principally resulted from higher projected income before
taxes in the year ending December 31, 1997 than was realized in the year ended
December 31, 1996, and comparable amounts of expense projected for 1997 and
incurred in 1996 but not deductible for income tax purposes.
Net income. Net income increased $919,000, or 111.0%, to $1.7 million in
the first six months of 1997 from $828,000 in the first six months of 1996.
Year Ended December 31, 1996 Compared to Year Ended December 31, 1995
Revenue. Revenue decreased from $156.5 million in the year ended December
31, 1995, to $156.0 million in the year ended December 31, 1996, a decrease of
$481,000, or 0.3%. The decrease in 1996 revenue principally resulted from
reduced services to three large customers. Revenue from other customers,
excluding these three large customers, increased $8.8 million, or 6.9%, in 1996
as compared to 1995. Revenue from the Company's 40 largest customers, excluding
the three large customers referenced above, increased $11.8 million, or 19.2%,
in 1996, as compared to 1995. Revenue from one of the three large customers
cited above declined $4.0 million in 1996 as the customer evaluated alternative
industrial cleaning vendors prior to entering into a managed services
arrangement with the Company on March 1, 1997. Pursuant to this arrangement,
HydroChem became the sole provider of industrial cleaning services for this
customer's five largest production facilities. As a result of this new
arrangement, the Company expects 1997 revenue from this customer to be
comparable to or greater than 1995 levels.
During 1996, hydroblasting revenue decreased $1.1 million, or 1.5%,
primarily as a result of the customer revenue declines with two of the three
large customers discussed above. Chemical cleaning revenue increased $1.3
million, or 2.1%, during 1996, principally due to the Company's expansion of
this service offering in certain geographic regions. During 1996, industrial
vacuuming revenue increased $3.4 million, or 41.6%, as the Company
significantly increased its fleet of vacuum trucks by leasing 25 additional
vehicles. Revenue from all other services decreased $4.1 million, or 24.9%,
during 1996. The decrease in other services was principally the result of
reduced activity with one large customer.
Gross profit. The Company's cost of revenue was $94.4 million in 1996, down
$256,000, or 0.3%, from $94.6 million in 1995. Gross profit decreased $225,000,
or 0.4%, to $61.6 million in 1996 from $61.9 million in 1995. Gross profit
margins were unchanged at 39.5% for both years.
SG&A expense. SG&A expense increased $2.6 million, or 6.7%, to $42.1
million in 1996 from $39.5 million in 1995. This primarily resulted from
increases in (i) insurance costs, (ii) travel, communications, vehicle and
facilities costs associated with new branch locations and implementation of the
Company's customer alliance strategy, and (iii) property taxes related to
increased amounts of property and equipment. SG&A expense was 27.0% and 25.2%
of revenue for 1996 and 1995, respectively.
EBITDA. The combination of decreased gross profit and increased SG&A
expense resulted in a $2.9 million, or 12.8%, decline in EBITDA to $19.5
million in 1996 from $22.4 million in 1995. As a percentage of revenue, EBITDA
was 12.5% in 1996, down from 14.3% in 1995.
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<PAGE> 36
Depreciation. Depreciation expense was $7.8 million in 1996, up $1.0
million, or 15.0%, from $6.8 million in 1995. The increase in depreciation
expense resulted from productive assets placed in service in 1995 and 1996. See
"Liquidity and Capital Resources."
Operating income. Operating income declined $3.9 million, or 24.8%, to
$11.8 million in 1996 from $15.6 million in 1995. Operating income was 7.5% and
10.0% of revenue in 1996 and 1995, respectively.
Interest expense. Interest expense decreased $773,000, or 8.9%, to $7.9
million in 1996 from $8.7 million in 1995. Reduced 1996 interest expense
resulted from (i) lower revolving loan balances due to cumulative increases in
net cash provided by operating activities, and (ii) lower term loan balances
following $3.3 million and $2.5 million in principal payments in 1996 and 1995,
respectively.
Special charge. In 1996, the Company incurred approximately $511,000 of
expenses relating to merger negotiations between the Company and a
publicly-traded company, which were terminated prior to consummating the
merger.
Amortization. Amortization expense of $1.5 million in 1996 increased
$116,000, or 8.2%, from $1.4 million in 1995. The increase resulted from the
amortization of acquisition costs incurred in 1995.
Income before taxes. Income before taxes decreased $4.1 million, or 69.0%,
to $1.8 million in 1996 from $5.9 million in 1995.
Income tax provision. The effective tax rate in 1996 increased to 70.2%
from 51.7% in 1995. This increase principally resulted from lower income before
taxes in 1996, and comparable amounts of expense in both periods which was not
deductible for income tax purposes.
Net income. Net income decreased $2.3 million, or 80.9%, to $545,000 in
1996 from $2.9 million in 1995.
Year Ended December 31, 1995 Compared to Year Ended December 31, 1994
Revenue. Revenue increased from $101.1 million in the year ended December
31, 1994, to $156.5 million in the year ended December 31, 1995, an increase of
$55.4 million, or 54.8%. The increase in 1995 revenue principally resulted from
revenue derived from the operations of HIS acquired by the Company in January
1995.
Gross profit. Principally as a result of the acquired HIS operations, the
Company's cost of revenue increased $30.0 million, or 46.5%, in 1995 to $94.6
million from $64.6 million in 1994. Gross profit increased $25.3 million, or
69.4%, to $61.9 million in 1995 from $36.5 million in 1994. Gross profit margin
increased from 36.1% to 39.5%.
SG&A expense. Primarily due to the acquired HIS operations, SG&A expense
increased $19.0 million, or 92.5%, to $39.5 million in 1995 from $20.5 million
in 1994. SG&A expense was 25.2% and 20.3% of revenue for 1995 and 1994,
respectively.
EBITDA. Increased gross profit, partially offset by increased SG&A expense,
resulted in a $6.4 million, or 39.8%, increase in EBITDA to $22.4 million in
1995 from $16.0 million in 1994. As a percentage of revenue, EBITDA was 14.3%
in 1995, down from 15.8% in 1994.
Depreciation. Depreciation expense was $6.8 million in 1995, up $2.8
million, or 71.8%, from $3.9 million in 1994. The increase in depreciation
expense primarily resulted from the HIS assets acquired in January 1995.
Operating income. Operating income increased $3.6 million, or 29.4%, to
$15.6 million in 1995 from $12.1 million in 1994. Operating income was 10.0%
and 11.9% of revenue in 1995 and 1994, respectively.
Interest expense. Interest expense increased $3.1 million, or 55.1%, to
$8.7 million in 1995 from $5.6 million in 1994. Increased 1995 interest expense
principally resulted from additional debt of approximately $21.0 million
incurred to finance the HIS acquisition.
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<PAGE> 37
Amortization. Amortization expense of $1.4 million in 1995 increased
$256,000, or 22.2%, from $1.2 million in 1994. The increase resulted from the
amortization of acquisition costs incurred in connection with the HIS
acquisition.
Income before taxes. Income before taxes increased $494,000, or 9.1%, to
$5.9 million in 1995 from $5.4 million in 1994.
Income tax provision. The effective tax rate in 1995 increased to 51.7%
from 45.5% in 1994. This increase principally resulted from a proportionately
higher amount of expense in 1995 which was not deductible for income tax
purposes.
Net income. Net income decreased $99,000, or 3.4%, to $2.9 million in 1995
from $3.0 million in 1994.
SEASONALITY AND RECENT QUARTERLY FINANCIAL DATA
Historically, the Company's business has been subject to seasonality.
Typically, the Company's revenue is greater during the second and fourth
calendar quarters. Demand for major industrial cleaning projects tends to be
higher in these periods due to process industry cycles. For example, electric
utilities typically schedule maintenance projects in advance of their peak
summer and winter production seasons.
The following table sets forth certain consolidated statement of operations
and other supplemental data of the Company for the quarterly periods shown. The
unaudited quarterly information has been prepared on the same basis as the
annual financial information and, in management's opinion, includes all
adjustments, consisting of normal recurring accruals, necessary to present
fairly the information for the quarters presented. The operating results for
any quarter are not necessarily indicative of results for the year or for any
future period.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
---------------------------------------------------------------------------------------------
1995 1996 1997
----------------------------------- ----------------------------------- -----------------
MAR. 31 JUNE 30 SEPT. 30 DEC. 31 MAR. 31 JUNE 30 SEPT. 30 DEC. 31 MAR. 31 JUNE 30
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue . . . . . . . $36,769 $43,404 $36,657 $39,654 $38,035 $41,166 $35,450 $41,352 $38,388 $42,326
Cost of revenue . . . 21,757 26,308 22,741 23,823 22,936 24,940 22,183 24,314 22,919 24,871
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Gross profit. . . 15,012 17,096 13,916 15,831 15,099 16,226 13,267 17,038 15,469 17,455
SG&A expense . . . . 8,989 10,545 9,286 10,645 10,011 10,173 10,518 11,401 10,298 10,863
Depreciation . . . . 1,499 1,718 1,738 1,797 1,812 1,900 1,982 2,071 1,911 1,978
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Operating income. 4,524 4,833 2,892 3,389 3,276 4,153 767 3,566 3,260 4,614
Other (income)
expense:
Interest expense,
net . . . . . . . 2,167 2,210 2,165 2,151 2,041 1,997 1,955 1,927 1,862 1,925
Special charge. . . -- -- -- -- -- -- 500 11 -- --
Other (income)
expense, net. . . (19) (187) (80) (79) (41) (107) (11) 138 4 19
Amortization of
intangibles . . . 352 352 352 351 381 381 381 380 388 391
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Income (loss)
before taxes . . 2,024 2,458 455 966 895 1,882 (2,058) 1,110 1,006 2,279
Income tax provision
(benefit) . . . . . 1,046 1,271 235 500 628 1,321 (1,444) 779 447 1,091
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Net income
(loss) . . . . . $978 $1,187 $220 $466 $267 $561 $(614) $331 $559 $1,188
======= ======= ======= ======= ======= ======= ======= ======= ======= =======
EBITDA . . . . . . . $6,023 $6,551 $4,630 $5,186 $5,088 $6,053 $2,749 $5,637 $5,171 $6,592
</TABLE>
LIQUIDITY AND CAPITAL RESOURCES
The Company has financed its operations through net cash provided by
operating activities, existing cash balances, available credit facilities and
capital contributions from its Parent. At June 30, 1997, the Company had $1.5
million of cash and cash equivalents, total borrowings and letters of credit of
$7.1 million against an available revolving loan borrowing base of $19.8
million, and $60.8 million of other long-term obligations in the form of term
loans and subordinated debt. Borrowings under the Company's revolving loan and
term loans were secured by substantially all assets of the Company. In August
1997, the Company issued $110.0 million of Old Notes and used
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<PAGE> 38
a portion of the net proceeds therefrom to repay indebtedness, accrued interest
and fees under the Company's Senior Credit Facility ($45.7 million) and under
its Senior Subordinated Debt ($18.7 million).
For the six months ended June 30, 1997, the Company provided net cash of
$3.5 million from operating and investing activities which consisted of $6.2
million provided by operating activities and $2.7 million used in investing
activities. For the six months ended June 30, 1996, $2.3 million of net cash
was provided by operating and investing activities which consisted of $5.4
million provided by operating activities and $3.1 million used in investing
activities. For the year ended December 31, 1996, $8.2 million of net cash was
provided by operating and investing activities which consisted of $14.9 million
provided by operating activities and $6.7 million used in investing activities.
For the year ended December 31, 1995, the Company used $29.6 million of net
cash for operating and investing activities which consisted of $10.1 million
provided by operating activities and $39.7 million used in investing
activities. For the year ended December 31, 1994, $518,000 of net cash was
provided by operating and investing activities which consisted of $8.5 million
provided by operating activities and $8.0 million used in investing activities.
For all periods presented, investing activities consisted primarily of
expenditures for property and equipment, except for 1995 which also included
the purchase of substantially all of the assets and the assumption of certain
liabilities of HIS for $24.8 million. The following table sets forth, for the
periods indicated, certain information regarding expenditures for property and
equipment:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
---------------------------- ---------------------
1994 1995 1996 1996 1997
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Office facilities, furniture,
fixtures and computer equipment... $ 403 $ 831 $ 1,111 $ 480 $ 394
Machinery and equipment ........... 5,035 7,646 5,263 2,765 2,386
Vehicles .......................... 138 16 455 -- 67
------- ------- ------- ------- -------
$ 5,576 $ 8,493 $ 6,829 $ 3,245 $ 2,847
======= ======= ======= ======= =======
</TABLE>
As of June 30, 1997, on a pro forma basis following the issuance of the
Notes pursuant to the Offering and the application of the net proceeds
therefrom, the Company would have had cash and cash equivalents totaling $32.1
million, $2.3 million of which will be required to secure its outstanding
letters of credit until the New Credit Facility is in place. The remaining cash
balances would be available for general corporate purposes, including expanding
the Company's industrial vacuuming and other business lines through
expenditures for property and equipment, increasing the Company's marketing and
sales efforts, and funding potential acquisitions. The Company continually
evaluates possible acquisitions, but has no present understandings, commitments
or agreements relating thereto. See "Use of Proceeds."
Management believes that cash and cash equivalents at June 30, 1997,
remaining net proceeds from the Offering, net cash expected to be provided by
operating activities and borrowings, if necessary, under the New Credit
Facility will be sufficient to meet its cash requirements for operations and
expenditures for property and equipment for the foreseeable future.
INFLATION
Certain of the Company's expenses, such as compensation and benefits,
chemicals and supplies, and equipment repair and replacement, are subject to
normal inflationary pressures. Although the Company to date has been able to
offset inflationary cost increases through increased operating efficiencies and
modest price increases, there can be no assurance that the Company will be able
to offset any future inflationary cost increases through these or similar
means.
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<PAGE> 39
BUSINESS
GENERAL
The Company is a leading provider of industrial cleaning services to a wide
range of processing industries, including petrochemical plants, oil refineries,
electric utilities, pulp and paper mills, rubber plants and aluminum plants.
Services provided include hydroblasting, chemical cleaning, industrial
vacuuming, waste minimization, commissioning and other specialized services.
This type of work is typically recurring maintenance to improve or sustain the
operating efficiencies and extend the useful lives of process equipment and
facilities. The Company provides services to approximately 1,200 customers at
approximately 2,500 customer sites from 49 branch locations in the United
States and one location in Singapore.
In 1996, 44.5% of the Company's revenue was derived from hydroblasting,
40.2% from chemical cleaning, 7.4% from industrial vacuuming and 7.9% from
other services. Also in 1996, 45.8% of HydroChem's revenue came from
petrochemical plants, 16.9% from oil refineries, 14.3% from electric utilities,
8.3% from pulp and paper mills and 14.7% from other industries. Approximately
40% of the Company's 1996 revenue was derived from its 15 largest customers,
all of which are Fortune 500 companies, and approximately 60% was derived from
its 40 largest customers, 34 of which are Fortune 500 companies.
MARKET FACTORS
The Company believes that the following factors have favorably affected
demand for its industrial cleaning services.
o Maintenance for Improved Efficiency. The equipment and facilities
owned by companies in process industries require periodic cleaning to
maintain or improve operating and energy efficiencies. Industrial
cleaning is part of the recurring maintenance necessary to prevent
equipment breakdowns, as well as to provide safer working conditions
for customers' employees and enhance the profitability and useful
lives of equipment and facilities. As companies strive to maximize
efficiencies and reduce costs to compete more effectively, industrial
cleaning services, such as those provided by HydroChem, become even
more important.
o Trend Towards Outsourcing. At one time, many of the Company's
customers performed industrial cleaning services using their own
equipment and employees. For many years, industrial companies have
increased the volume and type of maintenance services that they
outsource to contractors in an attempt to control labor and insurance
costs and to eliminate the need for expensive, under-utilized
equipment. More recently, these businesses have been attempting to
reduce the number of industrial cleaning vendors they utilize to
streamline their internal operations, thus reducing costs. HydroChem's
nationwide network of branches, breadth of services offered, technical
capabilities and experience position the Company to capitalize on
these trends.
o Industry Consolidation. While the industrial cleaning industry has
consolidated to some degree over the last decade, the industry is
still fragmented and the consolidation process is continuing. Factors
driving this consolidation include: (i) the costs of meeting
customers' requirements for an excellent safety record and a high
level of employee training; (ii) the high costs associated with
complying with rapidly changing government regulations; and (iii) the
increasing trend by customers to reduce the number of service
providers. This environment works to the advantage of larger companies
within the industrial cleaning industry, such as HydroChem, with the
capital and financial flexibility to offer a broad range of services
across multiple facilities and to support extensive safety and
training programs.
o Environmental Regulations. The enactment and increased enforcement of
laws and regulations designed to protect the environment and public
health, as well as concern by HydroChem's customers for their
potential liability for environmental or toxic damage to people and
property, have increased demand for the Company's services.
Compliance with such laws and regulations requires the Company's
customers to
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<PAGE> 40
establish systems for the regular inspection, cleaning and maintenance
of their process and storage facilities. These more stringent
environmental regulations have created additional opportunities for
the Company to offer new services or enhance existing services to help
keep its customers in compliance with or lessen their cost of
complying with the regulations.
COMPETITIVE STRENGTHS
The Company believes that it benefits from the following competitive
strengths:
o Industry Experience and Long-Term Relationships with Quality
Customers. The businesses that were combined to form HydroChem each
had in excess of 30 years of industrial cleaning experience and many
long-term relationships with large, well-established customers. The
Company believes it benefits from its reputation for providing
reliable, quality service to its customers, which has been established
as a result of HydroChem's extensive industry experience and its
commitment to service and quality.
o Broad Range of Services and Industry Expertise. As a result of
providing a broad range of services, the Company is well-positioned to
capitalize on the trend by many of its customers to reduce the number
of vendors utilized. The Company also has the necessary expertise,
experience, equipment and support services, including a chemical
research laboratory and an equipment manufacturing facility, to
respond to the complex and changing needs of its diverse customer
base.
o Excellent Safety Record. The industries served by the Company
emphasize safety. The Company provides extensive initial and
continuing safety training to its employees and works closely with its
customers to develop and meet mutual safety goals. In addition, the
annual bonus of each operating manager depends, in part, upon the
safety record of that individual's territory. Management believes that
the Company's safety indices are among the best in the industry,
giving the Company a competitive advantage in securing new contracts
and managing expenses.
o Strategic Locations. The Company has established a nationwide network
of 49 branch offices strategically located in selected geographical
areas characterized by higher concentrations of existing and potential
customers. These locations allow the Company to meet the immediate and
continuing needs of its customers and respond to the trend by many of
its larger customers with multiple plant locations to consolidate
vendor relationships. Fourteen of the Company's branch offices are
located within customer facilities. These on-site locations reduce
HydroChem's servicing costs and make it easier to develop customer
relationships and maximize the services provided at these locations.
o Customer Contracts. The Company has succeeded in obtaining master
service agreements or contracts with most of its major customers and
many of its other customers. Although these contracts do not guarantee
a specific amount of business, they: (i) enable HydroChem personnel to
gain entry more easily to the plants to market the Company's services
and develop relationships with plant personnel; and (ii) make it
easier for a customer to select HydroChem for a particular job since
pricing and other terms and conditions have already been established.
o Customer Alliances. To reduce costs and gain operating efficiencies,
many of the Company's larger customers are considering establishing
alliances with vendors. In an alliance, the Company provides a more
comprehensive outsourcing solution to the customer, with the Company
integrally involved in scheduling, managing and benchmarking the
delivery of services in a manner that reduces costs for the customer
and HydroChem and provides for a continuous improvement process over
time. Generally, the customer will further benefit from additional
savings resulting from reduced downtime for maintenance and increased
production. HydroChem has initiated alliances with three of its
largest customers and believes it is the only industrial cleaning
company that has implemented a program of this type.
o Experienced Management. HydroChem benefits from the quality and depth
of its management personnel, both at the corporate and field level,
who are dedicated to building customer relationships and delivering
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<PAGE> 41
quality services to meet those customers' needs. Generally, the
Company's field operations are managed at the branch level. Day-to-day
operating decisions have been delegated to experienced branch managers
who are closest to the Company's customers and can be most responsive
to their specific needs. HydroChem's branch managers have an average
of over 13 years of experience in the industrial cleaning industry.
The Company's senior operating management team averages over 17 years
in the industry.
BUSINESS STRATEGY
The Company's business strategy includes the following key elements:
o Expand Services Provided To Existing Customers. The Company generally
does not provide its full range of industrial cleaning services to
each customer. HydroChem believes that expanding the amount of work
performed for existing customers is the most efficient and cost
effective method of achieving growth. The Company actively leverages
its existing customer relationships and the breadth of services it
offers to capitalize on its customers' trend to reduce the number of
vendors utilized and thereby gain additional market share. Also, the
Company seeks to identify opportunities for new services that it can
provide to its extensive customer base.
o Establish Relationships with New Customers in Existing Geographic
Areas. Most of the geographic areas in which the Company has branch
locations contain concentrations of processing plants which are
potential customers for the Company. The Company seeks to penetrate
these geographic markets further by obtaining contracts at plants
where it does not currently provide services.
o Expand Geographically. The Company identifies attractive geographic
markets for its services based on the number and type of plants
located in those areas, establishes a branch location and then builds
its business over time. This type of expansion often involves securing
at least one contract with a customer before establishing a branch and
then placing a complement of equipment and personnel in the area to
perform this work and pursue other work. These actions establish a
revenue stream to cover overhead costs and provide a base for
expanding throughout the surrounding geographic area.
o Establish Customer Alliances. The Company seeks to increase the number
of its customer alliance relationships. Under this type of
relationship, the Company's strategy is to provide its services as a
sole-source supplier, thereby obtaining additional market share and
strengthening customer relationships.
o Pursue Additional Strategic Acquisitions. The Company has successfully
grown its business in the past through strategic acquisitions.
HydroChem intends to continue to pursue acquisitions that add
additional services and products to market to its existing customer
base, or facilitate expansion of the Company's customer base or
geographic coverage.
SERVICES
Hydroblasting and chemical cleaning are HydroChem's largest sources of
revenue, but the Company also offers a variety of other services, including
industrial vacuuming, waste minimization and commissioning services, as
described below. These services are typically part of a recurring maintenance
program and may be provided on a time and materials basis or bid on a project
basis. The Company believes that its ability to offer a broad range of services
is an attractive feature to customers as they seek to reduce the number of
contractors with which they do business. In addition, certain jobs can only be
accomplished using a combination of cleaning methods, and the Company is able
to perform such tasks without subcontracting.
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<PAGE> 42
The Company's revenue from its major service lines for 1995
and 1996 is set forth in the following table:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------
1995 1996
------------------- -------------------
REVENUE % REVENUE %
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Hydroblasting . . . . . . . $ 70,565 45.1% $ 69,504 44.5%
Chemical cleaning . . . . . 61,365 39.2 62,661 40.2
Industrial vacuuming . . . 8,113 5.2 11,484 7.4
Other . . . . . . . . . . . 16,441 10.5 12,354 7.9
-------- ----- -------- -----
Total . . . . . . $156,484 100.0% $156,003 100.0%
======== ===== ======== =====
</TABLE>
Hydroblasting Services
The Company's hydroblasting services involve the application of high
pressure streams of water to clean the interior and exterior surfaces of
process equipment, storage tanks and other vessels and to unplug piping, tubes
and lines. Hydroblasting is particularly effective in cleaning deposits that
cannot be chemically dissolved or that are located on surfaces where the
circulation of chemical cleaning solvents is not feasible.
Hydroblasting is primarily used for the removal of scale and other fouling
deposits to improve the operating or energy efficiency of equipment, prevent
contamination of finished products and clean equipment in preparation for, or
subsequent to, other maintenance work. Hydroblasting is also used to prepare
surfaces for welding, inspection or painting, to clean exterior surfaces
cosmetically and, with special additives and equipment, to cut steel or
concrete.
The Company performs its hydroblasting services using equipment that
includes an engine, pump and high-pressure hoses that are attached to
specialized application devices. Water typically emerges at pressures of from
5,000 to 10,000 pounds per square inch, although ultra-high pressures of up to
40,000 pounds per square inch are used for certain cleaning and cutting jobs.
The deposits and wastes removed by hydroblasting, along with water used in the
process, are typically deposited into the customer's waste treatment system for
further processing and disposal by the customer.
Chemical Cleaning Services
Chemical cleaning typically involves circulating chemical solvents through
process equipment, piping, and tanks or other storage vessels under controlled
conditions of temperature, pressure and time to remove fouling deposits from
interior surfaces. Chemical cleaning is generally performed in a closed loop
process and employed to dissolve substances on surfaces that are inaccessible
to hydroblasting or where chemical cleaning is more effective or safer than
hydroblasting. Chemical cleaning also may involve the application of chemical
solvents to deposits on exterior surfaces that cannot be cleaned with water or
the addition of chemicals to by-products or waste products.
Chemical cleaning has many of the same uses and applications as
hydroblasting in industrial cleaning. It is also used for "degassing" process
equipment to remove volatile substances. In addition, the Company's chemical
cleaning services are required from time-to-time in connection with the
commissioning, or pre-operational cleaning, of new equipment or an entire plant
to remove soil, debris and other substances that accumulate during
construction.
Most of the Company's chemical cleaning services involve circulation of
chemical solvents through process equipment, piping, and tanks or other storage
vessels. For many of these jobs, a sample of the fouling deposit or substance
to be removed is sent to the Company's laboratory facility in Houston, Texas,
where the Company's chemists determine its chemical make-up, the combination
and concentration of chemicals best suited for the cleaning process and the
appropriate temperature, pressure and timing parameters for circulation of the
chemicals. The Company also has mobile laboratory units, which are used to
perform limited chemical analysis on-site and to assist in monitoring ongoing
chemical cleaning jobs. After the proper procedure for the on-site work has
been determined, a field crew mixes the chemicals, typically on the customer's
premises. Using pumping and circulating equipment, the field crew then
circulates the solution through the process equipment and, in most cases,
collects the waste material and used chemical solution. During the circulation
process, the concentration levels of the substance to be removed and the
chemicals that have been introduced into the system are monitored to determine
the rate at which the deposits are being removed and to ensure that proper
conditions are being maintained. After collection, the waste
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<PAGE> 43
typically is emptied at the customer's on-site disposal or storage facility, or
it may be pumped into holding tanks that remain on the customer's property for
later disposal or treatment by the customer.
Industrial Vacuuming Services
Industrial vacuuming is the process of removing industrial waste and debris
by conveyance of air or by traditional vacuuming techniques. The Company's
vacuuming services typically are required to recover these materials for
disposal or recycling, to move them within a plant, to remove waste from sumps,
to prepare tanks or other storage facilities for routine maintenance and to
assist in other types of cleaning and maintenance services.
The Company provides air-moving services using specialized, truck and
trailer-mounted equipment to collect and remove a variety of solid and
semi-solid materials, including dust, powder, oil, resins, wood chips, steel
pellets, solid catalysts and bricks. The Company also furnishes liquid
vacuuming services using conventional vacuum trucks, which maintain a
continuous negative tank pressure, for the removal of liquid waste, sludge or
spent process fluids from pits, ponds, tanks or process equipment. The Company
often provides vacuuming services in connection with its other services.
Waste Minimization Services
HydroChem employs several techniques to reduce customer waste volumes
collected in the cleaning process before customer disposal, including
de-watering and chemical treatment techniques, as well as on-line water
recycling. Equipment often employed in these processes are plate and frame
filter presses and centrifuges, which are used to reduce the customer's cost of
disposing of these substances. Revenue from waste minimization services is
generally included in the other services category.
Commissioning Services
Commissioning services cover a variety of services utilized to clean newly
constructed systems of industrial processing plants prior to their initial
operation. These services include the Company's SILENTSTEAM(R) process for
cleaning steam path components, as well as the application of flushing,
cleaning and passivation technologies to piping, vessels, boilers and
lubrication and hydraulic oil systems. Depending on the nature of the
commissioning services, the revenue derived therefrom may be attributable to
hydroblasting, chemical cleaning, industrial vacuuming or other services.
Project Services
Given the Company's reputation for excellent service and the ability to
solve complex problems, HydroChem also applies its technologies, individually
or in combination, to address unique market opportunities in several business
and industry segments, including services and project management for large
projects in the marine, utility, defense and other industries. These projects
vary in scope from major cleanings of aircraft carriers to replacing commercial
building fluid coolant systems. Depending upon the nature of the project, the
revenue derived therefrom may be attributable to hydroblasting, chemical
cleaning, industrial vacuuming or other services.
FACILITIES AND FIELD ORGANIZATIONAL STRUCTURE
The Company's field organization is primarily based on geography. Two
divisions, the East Division and the West Division, which comprised over 90% of
the Company's 1996 revenue, are further subdivided into areas, regions and
branches. Branches, including certain on-site locations, are the primary
business or operating units. The Company currently has 49 branch locations in
the United States and one in Singapore.
The Company maintains operating and sales personnel at each of its branch
locations and operates each location under the direction of a branch manager in
accordance with policies, procedures and objectives established by the
Company's management. Subject to these guidelines, branch personnel have
significant autonomy in dealing with customers and employees in their
geographic area. Each branch operates as a separate profit center and is
responsible for collecting accounts receivable, although cash receipts are
collected via lockbox. Each branch location is also allotted certain equipment,
including pumps, vehicles and various types of specialized equipment. However,
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<PAGE> 44
equipment and personnel are shifted among branches as work loads dictate,
enabling the Company to realize better utilization of its resources.
The Company leases its executive offices, a fully-equipped chemical
laboratory and a manufacturing facility, all located in the greater Houston,
Texas, area. The Company also leases other administrative locations in the
greater Houston area, and certain of these leases, including the executive
office lease, will expire in 1998. The Company is currently pursuing a
consolidation of some or all of these locations in a new facility that may be
owned or leased by HydroChem. The Company owns nine of the field offices, with
the remainder of the offices leased or otherwise provided by a major customer
in that area.
MARKETING, SALES AND SERVICE CONTRACTS
The Company's sales and marketing success is characterized by long-term
customer relationships resulting from the consistent delivery of high quality,
dependable service, advanced technical capabilities, a broad service offering,
competitive pricing and a strong customer service orientation among its
employees. The Company's services are marketed and sold through a tiered
approach, targeting both maintenance and purchasing personnel at the plant
level as well as corporate purchasing managers. Direct selling at the plant
level is the primary marketing thrust, and the Company has approximately 170
people involved in selling and marketing the Company's services. This group
maintains consistent communications with plant contacts to position the Company
better to obtain upcoming work and to ensure that on-going work is being
performed to meet or exceed customer expectations. The Company's national
marketing effort is focused on (i) servicing existing accounts, (ii)
establishing new customer accounts, (iii) obtaining multi-plant contracts
(regional or national in scope) and (iv) implementing alliance relationships.
These efforts are supplemented by advertising in industry publications and
participating in selected industry trade shows.
Most of the Company's customers, or prospective customers, have procedures
by which they qualify contractors to become approved vendors in their plants.
Customers award master service contracts or contracts for individual projects
only to such approved vendors. Contractors may be selected at the individual
plant level or on a regional or national basis, covering multiple plant
locations. A particular plant will typically have two or more approved
industrial cleaning providers. One of these may be designated as the primary
service provider and receive a majority of the work. Alternatively, the work
may be spread evenly between the contractors by the customer or market share
within the plant may be determined by the sales and marketing capabilities of
the different service providers. Plants also may have approved service
companies for specific services (for example, they may have hydroblasting
contracts with one or more vendors and separate industrial vacuuming contracts
with one or more other vendors) or may have contracts covering multiple
services provided by the same vendor.
Master service agreements typically establish general terms and conditions,
as well as time and material pricing for services. These contracts do not
guarantee a particular amount of work, but they do allow Company personnel to
enter the plants more easily, fostering the development of relationships with
plant personnel and the marketing of the Company's services. Specific jobs may
be performed on a time and materials basis or granted as part of a competitive
bid process. Daily or more frequently recurring maintenance work tends to be
performed on a time and materials basis, while larger, less frequent projects
tend to be bid. The Company estimates that approximately two-thirds of its
revenue comes from services performed under its master service agreements or
separately bid projects in plants where it has master service agreements. These
agreements enhance the consistency and stability of the Company's revenue
stream.
The Company's alliance or managed services process is an additional, newer
method of providing services to its customers. In an alliance, the Company
provides a more comprehensive outsourcing solution to the customer, with the
Company more involved in scheduling, managing and benchmarking the delivery of
services in a manner that reduces costs for the customer and HydroChem and
provides for a continuous improvement process over time. Generally, the
customer will further benefit from additional savings resulting from reduced
downtime for maintenance and increased production.
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<PAGE> 45
SAFETY AND TRAINING
Industrial cleaning involves exposure to potentially dangerous conditions.
For liability and other reasons, customers are very concerned with the safety
records of contractors used to perform services at their plants. To minimize
the dangers inherent in this type of work, the Company conducts broad training
and educational programs and has developed comprehensive safety policies and
regulations. The main factors driving the Company's investment in these
programs and policies are: (i) achieving employee and customer safety; (ii)
controlling insurance costs; (iii) satisfying customers' growing safety and
training requirements; (iv) meeting increasing governmental and regulatory
requirements; and (v) improving the Company's overall performance.
HydroChem's safety program includes:
o Educating Company personnel
o Implementing and monitoring Company safety policies
o Safety personnel at most field locations
o Proactive support by senior management
o Working with insurance companies and safety organizations to make
use of their resources and expertise
o Process improvement teams and safety audits
o Cash incentive programs for employees and a component of management
bonuses tied to safety
o Substance abuse screening
o Investigating all accidents and company-wide dissemination of
information, without using names, of accidents that have occurred and
how they could have been avoided
Management believes that the Company's safety indices are among the best in
the industry. As an example, HydroChem's workers' compensation interstate
experience modification rate ("EMR") is 0.38, which compares to an EMR of 1.0
for an average company in the Company's industry. The EMR, calculated by a
private advisory rating organization supporting the insurance industry, is one
of the most widely observed safety statistics. The EMR is a method of
reflecting a company's actual loss experience relative to the normal expected
loss experience of companies within a particular industry.
COMPETITION
The industrial cleaning service business is highly competitive. The Company
believes that the principal competitive factors in this business are price,
quality of service, safety record, reputation, responsiveness of personnel,
efficiency of service, and knowledge of customer plants and operations.
Location is an important factor in being able to provide timely and
cost-effective services, although this is more of a factor with respect to
daily or more frequently recurring maintenance services than project work. In
addition, competitors tend to be stronger in certain services and weaker in
others or may not offer a full range of services.
The Company competes with a large number of companies in substantially all
of the regions in which it operates. Many of these competitors are local or
regional operations servicing a limited geographic area; however, others are
larger companies with broader geographic coverage, such as the Company.
Accordingly, HydroChem's competitors in any particular geographic market may
differ. While most of the Company's competitors do not offer as extensive a
line of services as the Company, future expansion by such companies or the
development of alternative cleaning methods represent potential competition for
the Company. See "Risk Factors -- Competition."
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<PAGE> 46
CUSTOMERS
Due to the nature of HydroChem's services, its customers tend to be
concentrated in certain processing industries. In 1996, 45.8% of the Company's
revenue came from petrochemical plants, 16.9% from oil refineries, 14.3% from
electric utilities, 8.3% from pulp and paper mills and 14.7% from other
industries. Approximately 40% of the Company's 1996 revenue was derived from
its 15 largest customers, all of which are Fortune 500 companies, and
approximately 60% was derived from its 40 largest customers, 34 of which are
Fortune 500 companies. No single customer represented 10% or more of the
Company's revenue in 1996. In 1995 and 1994, The Dow Chemical Company and its
affiliates represented 10.9% and 11.2% of total revenue, respectively.
GOVERNMENTAL REGULATION
Occupational Safety and Health Act. The operations of the Company are
subject to the requirements of the Occupational Safety and Health Act ("OSHA")
and comparable state laws. Regulations promulgated under OSHA by the Department
of Labor require employers in the industries that the Company serves to
implement work practices, medical surveillance systems and personnel protection
programs in order to protect employees from workplace hazards and exposure to
hazardous chemicals. The Company has established comprehensive programs for
complying with health and safety regulations. While the Company believes it
operates safely and prudently, there can be no assurance that accidents will
not occur or that the Company will not incur substantial fines.
Federal, State and Local Environmental Regulations. The Company performs
substantially all of its industrial cleaning services at industrial process
facilities owned by its customers. Although chemicals may be stored at the
Company's branch offices and are transported by the Company to its customers'
plants, no industrial cleaning services are performed at the branches.
Typically, all hazardous waste handled by the Company is disposed of by the
customer using the customer's waste disposal facilities. However, on a very
limited basis, HydroChem will transport the customer's waste collected in
connection with the Company's cleaning services from one point in the
customer's plant to another point within the plant, which may involve crossing
a public road. As a part of its services to the customer, the Company may treat
the customer's hazardous waste that was collected by the Company in the
cleaning process to neutralize, minimize or separate it into its components,
thus facilitating disposal or recycling by the customer. At all times, the
waste belongs to and is the responsibility of the customer. The Company does
not believe that its activities subject it to the duties pertaining to
hazardous waste treatment, storage or disposal facilities. However, if it were
determined that HydroChem was a "transporter" of the hazardous wastes that it
collects in the cleaning process, the Company would be responsible for
compliance with all duties imposed on such persons under applicable
environmental statutes and regulations.
Department of Transportation. Certain of the Company's vehicles are subject
to the regulations of the Department of Transportation, which address, among
other things, maintenance of the vehicles, driver qualification and
recordkeeping. Failure to comply with these regulations may result in fines or
modification of the Company's current procedures with respect to its vehicles.
Certain of the laws and regulations applicable to the Company require that
it obtain permits and licenses. The Company believes that it has obtained the
permits and licenses material to its business and believes that it is in
substantial compliance with all federal, state and local laws and regulations
governing it. To date, the Company has not been subject to any significant
fines, penalties or other labilities under these laws and regulations.
INTELLECTUAL PROPERTY
While the Company has numerous patents and proprietary techniques related
to its products and services, it does not believe the ongoing success of its
operations is dependent on these patents or techniques, individually or taken
as a whole.
INSURANCE
The Company currently has in force insurance policies covering general
liability, workers' compensation/ employers liability, automobile liability,
environmental liability and property damage, as well as an umbrella policy.
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<PAGE> 47
All of these policies are in amounts the Company believes are consistent with
industry practices and provide for the Company to pay a deductible or self
insured retention on each claim.
EMPLOYEES
As of July 31, 1997, the Company had approximately 1,570 full-time
employees, of which approximately 1,170 were paid on an hourly basis. None of
the Company's employees are covered by collective bargaining agreements.
Management believes that relations between the Company and its employees are
good.
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The directors and executive officers of the Company are as follows:
<TABLE>
<CAPTION>
NAMES OF DIRECTORS
AND EXECUTIVE OFFICERS AGE POSITION
- ---------------------- --- --------
<S> <C> <C>
B. Tom Carter, Jr . . . . . . . . 53 Chairman of the Board of Directors,
Chief Executive Officer,
and President
Robert B. Crates . . . . . . . . 35 Director
Thomas F. McWilliams . . . . . . 54 Director
Selby F. Little, III . . . . . . 43 Executive Vice President,
Chief Financial Officer
J. Pat DeBusk . . . . . . . . . . 56 Executive Vice President
Gary D. Noto . . . . . . . . . . 42 Executive Vice President
Craig A. Kaple . . . . . . . . . 38 Executive Vice President
Pelham H. A. Smith . . . . . . . 40 Vice President
Michael P. Steindler . . . . . . 49 Secretary and General Counsel
</TABLE>
Subject to the terms of a Stockholders Agreement entered into by Parent and
all of its stockholders, the Board of Directors of the Company currently
consists of three directors who hold office until the next annual meeting of
the stockholders of the Company or until their successors are duly elected and
qualified. Pursuant to the terms of the Stockholders Agreement, one director,
Mr. McWilliams, has been designated by Citicorp Venture Capital, Ltd. and one
director, Mr. Crates, has been designated by LKCM Venture Partners I Ltd. The
stockholders also agreed to elect Mr. Carter as a director so long as he
serves as Chief Executive Officer. The Stockholders Agreement further provides
that CVC has the right to designate an additional director, and that the
holders of a majority of the shares of Parent's capital stock owned by such
stockholders may designate a director, but neither CVC nor the majority
stockholders have exercised these rights.
The executive officers are elected annually by the Board of Directors and
serve at the discretion of the Board until their successors are duly elected
and qualified.
B. Tom Carter, Jr. has been Chairman of the Board, Chief Executive Officer
and President of the Company or Hydro Services since 1990. As a private
investor, he assembled the investment groups which acquired Hydro Services in
1990 and DIS in 1993.
Robert B. Crates has been a director of the Company since 1993. Since
December 1995, Mr. Crates has been a principal of Crates Thompson Capital,
Inc., an investment company engaged in the management of private equity funds.
From May 1988 to November 1995, Mr. Crates served as vice president of Luther
King Capital Management, an investment advisory firm. In that capacity, Mr.
Crates, individually and as President of RBC Investment Corp, served as general
partner of LKCM Venture Partners I Ltd. From October 1994 to January 1995, Mr.
Crates concurrently served as interim Chairman and Chief Executive Officer of
Eddie Haggar Limited, Inc., a company in which LKCM had an investment that
subsequently filed for protection under federal bankruptcy laws. Mr. Crates is
also a director of HealthCor Holdings Inc.
Thomas F. McWilliams has been a director of the Company since 1993. Mr.
McWilliams is a Managing Director of CVC where he has been employed since 1983.
He also serves as a director of Chase Industries, Inc., MMI Products, Inc.,
Ergo Science Corporation, Pen-Tab Industries, Inc. and various privately held
companies.
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<PAGE> 48
Selby F. Little, III has been an Executive Vice President and Chief
Financial Officer of the Company since December 1996 and served as Vice
President and Chief Financial Officer of the Company from June 1996 until
December 1996. From September 1992 to May 1996, he was Vice President and Chief
Financial Officer of Ross Systems, Inc., a publicly held computer software
company. Prior thereto, Mr. Little had served in various executive, management
or other positions, including, since April 1989, as Vice President and Chief
Financial Officer of Unify Corporation, a computer software company.
J. Pat DeBusk has been an Executive Vice President of the Company since
December 1993. He has also held various executive or other management positions
since 1964 with Hydro Services or the predecessor to its operations.
Gary D. Noto has been an Executive Vice President of the Company since
December 1996. Prior thereto, he had served as a Vice President of the Company
since December 1993 and in various executive, management or other positions
with Hydro Services or the predecessor to its operations since 1978.
Craig A. Kaple has been an Executive Vice President of the Company since
June 1997. Prior thereto, he had served as a Vice President of the Company
since November 1994 and in various executive, management or other positions
with Hydro Services or the predecessor to its operations since 1981.
Pelham H. A. Smith has been a Vice President of the Company since December
1993. Prior thereto, he had been assisting Mr. Carter since 1990 in various
private investment activities.
Michael P. Steindler has functioned as the General Counsel of the Company
since April 1994 and also has been a partner in the law firm of Cassell &
Stone, L.L.P. in Dallas, Texas since August 1993. Mr. Steindler has served as
Secretary of Parent and the Company since March 1995. From October 1988 to
January 1993, he was Vice President, General Counsel and Secretary of Rexene
Corporation, a publicly held petrochemical manufacturer.
DIRECTORS AND OFFICERS OF PARENT
The directors of Parent are the same as those of the Company. The executive
officers of Parent are B. Tom Carter, Jr. (Chief Executive Officer and
President), Selby F. Little, III (Executive Vice President and Chief Financial
Officer), and Pelham H. A. Smith (Vice President).
EXECUTIVE COMPENSATION
The following table provides certain information concerning compensation
earned by the Chief Executive Officer and the Company's next four most highly
compensated executive officers serving in such capacity at December 31, 1996
who received compensation in excess of $100,000 (the "Named Executive
Officers") for the period indicated.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
Annual Compensation -----------------------------------
------------------------------ NUMBER OF SHARES ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS UNDERLYING OPTIONS COMPENSATION(1)
- --------------------------- ---- ------ ----- ---------- ------- ---------------
<S> <C> <C> <C> <C> <C>
B. Tom Carter, Jr . . . . . . 1996 $239,231 $100,000 25,000 $ 250
Chairman of the Board,
Chief Executive Officer and
President
J. Pat DeBusk . . . . . . . . 1996 136,000 45,000 -- 250
Executive Vice President
Gary D. Noto . . . . . . . . 1996 103,200 50,000 -- 250
Executive Vice President
Craig A. Kaple . . . . . . . 1996 95,000 45,600 -- 250
Executive Vice President
Pelham H. A. Smith . . . . . 1996 93,000 42,400 -- 250
Vice President
</TABLE>
- ----------
(1) Consists of the Company's 401(k) matching contribution.
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<PAGE> 49
DIRECTOR COMPENSATION
Directors who are employees of the Company do not receive additional
compensation for serving as directors. All directors of the Company are
reimbursed for out-of-pocket expenses incurred in attending meetings of the
Board of Directors and for other expenses incurred in their capacities as
directors of the Company.
STOCK OPTION INFORMATION
Parent has adopted the HydroChem Holding, Inc. 1994 Stock Option Plan (the
"Plan"). The Plan is administered by a committee of Parent's Board of Directors
(the "Committee"), which currently consists of Messrs. McWilliams and Crates.
The purpose of the Plan is to advance the interests of Parent and its
subsidiaries (including the Company) by encouraging certain employees and
non-employee directors to acquire a proprietary interest in Parent through
ownership of Parent's Class A Common Stock ("Class A Common"). The total number
of shares of Class A Common that may be subject to options under the Plan is
620,779. As of May 31, 1997, options for 611,890 shares of Class A Common were
outstanding and options for 8,889 shares were available for grant. The duration
of each option and the exercise schedule therefor is determined by the
Committee at the time of grant, but in no event can an option intended to
qualify as an incentive stock option (an "ISO") under Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"), be exercisable after
the expiration of ten years after the date of grant. In the case of an employee
who owns (or is considered to own under Section 424(d) of the Code) stock
representing more than 10% of the total combined voting power of classes of
stock of Parent and its subsidiaries, no ISO shall be exercisable after
expiration of five years from the date of grant.
The following table sets forth certain information concerning the grant of
options to Mr. Carter during 1996. None of the other Named Executive Officers
were granted options in 1996.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Potential Realizable
Value At Assumed
NUMBER OF % OF TOTAL Annual Stock
SECURITIES OPTIONS Appreciation for
UNDERLYING GRANTED TO EXERCISE Option Term
OPTIONS EMPLOYEES IN PRICE -------------------
NAME GRANTED FISCAL YEAR PER SHARE EXPIRATION DATE 5% ($) 10% ($)
---- --------- ------------ --------- --------------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
B. Tom Carter, Jr . . 25,000 43.5% $2.50 February 11, 2006 (1) (1)
</TABLE>
- ----------
(1) There is no established trading market for the Class A Common, and the
Company has not attempted to determine the market value thereof by
appraisal or otherwise.
The following table sets forth certain information with respect to the
unexercised options granted to the Named Executive Officers. None of the Named
Executive Officers exercised any stock options during the year ended December
31, 1996.
FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY-OPTIONS
AT DECEMBER 31, 1996 AT DECEMBER 31, 1996
------------------------- --------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
B. Tom Carter, Jr . . . . 248,312 87,078 (1) (1)
J. Pat DeBusk . . . . . . 5,000 15,000 (1) (1)
Gary D. Noto . . . . . . 4,375 13,125 (1) (1)
Craig A. Kaple . . . . . 3,750 11,250 (1) (1)
Pelham H. A. Smith . . . 7,500 22,500 (1) (1)
</TABLE>
- ----------
(1) There is no established trading market for the Class A Common, and the
Company has not attempted to determine the market value thereof by
appraisal or otherwise.
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<PAGE> 50
EMPLOYMENT AGREEMENTS
Parent has an employment agreement with Mr. Carter under which he serves as
the Chairman of the Board, Chief Executive Officer and President of Parent and
the Company (collectively, the "Employer"). The term of Mr. Carter's agreement
is for five years through December 14, 1998. His current base compensation
under this Agreement is $240,000 per year and is subject to review and may be
increased periodically at the discretion of the Board. Mr. Carter's agreement
provided for an initial bonus of $150,000 in recognition of his efforts in the
DIS acquisition. For calendar years 1994 and thereafter, bonuses are payable at
the sole discretion of the Board. In connection with his agreement, the Parent
also granted Mr. Carter in March 1995 an option to purchase 310,390 shares of
Class A Common Stock at an exercise price of $1.00 per share under the Parent's
1994 Stock Option Plan. See "Stock Option Information." If the Employer
terminates Mr. Carter's employment without cause as defined in his agreement,
then he is entitled to a lump sum severance payment equal to one year of his
then current base compensation. Mr. Carter's agreement contains a covenant not
to compete and other customary restrictions. The covenant not to compete does
not apply if there is a termination without cause or a resignation by Mr.
Carter after a change in control as defined in his agreement or after a
diminution in his duties. The Company has guaranteed Parent's obligations under
the employment agreement.
The Company also has employment agreements with Messrs. DeBusk, Noto and
Kaple. Each of these agreements renew automatically on an annual basis unless
either the Company or the employee gives 30 days' notice to the contrary. The
current annual base compensation under these agreements for Messrs. DeBusk,
Noto and Kaple is $150,000, $127,500 and $120,000, respectively. Such amounts
are subject to review and may be increased periodically at the discretion of
the Company. Bonuses are also payable at the sole discretion of the Company. If
the Company terminates the employment of any of these individuals without cause
as defined in their respective agreements, then such individual is entitled to
a continuation of his then current base compensation for six months. Each of
the agreements for Messrs. DeBusk, Noto and Kaple contain covenants not to
compete and other customary restrictions.
RELATED TRANSACTIONS
In May 1995, the Company paid $100,000 to Argent Capital Corporation
("Argent") for investment banking services rendered in connection with the HIS
acquisition. Mr. Carter is the sole shareholder of Argent.
Argent is the tenant under a lease in Dallas, Texas, for office space used
by the Company. The Company pays the rent for this office directly to the
landlord. Total rental payments for 1994, 1995 and 1996 were $43,937, $46,330
and $48,419, respectively.
The Company leases its manufacturing facility in Missouri City, Texas, from
Gracey Corporation ("Gracey"). The spouse of Mr. DeBusk is the beneficial owner
of 7 2/3% of the outstanding capital stock of Gracey held in a trust. Total
rental payments made by the Company to Gracey for 1994, 1995 and 1996 for this
facility were $56,100 in each year.
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<PAGE> 51
PRINCIPAL STOCKHOLDERS
All of the outstanding capital stock of the Company is owned by Parent. The
following table sets forth certain information known to Parent with respect to
beneficial ownership of Parent's equity securities (rounded to the nearest
share) by (i) each director; (ii) each Named Executive Officer; (iii) all
executive officers and directors of the Company as a group; and (iv) each
stockholder known by the Company to be the beneficial owner of more than five
percent of any class of voting securities of Parent. Such information is
presented as of July 31, 1997. See "Description of Capital Stock."
<TABLE>
<CAPTION>
CLASS A COMMON CLASS B COMMON SERIES A PREFERRED
-------------- -------------- ------------------
NO. OF % OF NO. OF % OF NO. OF % OF
NAME SHARES CLASS SHARES CLASS SHARES CLASS
---- ------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C>
EXECUTIVE OFFICERS AND DIRECTORS:
B. Tom Carter, Jr.(1) . . . . . 357,212 32.2% -- -- 360,993 7.2%
6210 Rothway
Houston, Texas 77040
Robert B. Crates . . . . . . . -- -- -- -- -- --
Thomas F. McWilliams(2)(3) . . 67,343 7.3 67,343 1.7% 33,871 *
399 Park Avenue
New York, New York 10043
J. Pat DeBusk(3)(4) . . . . . . 46,727 5.4 1,540 * 55,103 1.1
1145 Highway 90-A
Missouri City, Texas 77489
Gary D. Noto(3)(5) . . . . . . 27,330 3.2 880 * 31,488 *
Craig A. Kaple(3)(6) . . . . . 23,184 2.7 660 * 23,616 *
Pelham H. A. Smith(7) . . . . . 15,000 1.7 -- -- -- --
All directors and executive
officers as a group
(8 persons)(3)(8) . . . . . . 536,796 44.0 70,424 1.8 505,070 10.1
OTHER PRINCIPAL STOCKHOLDERS:
LKCM Venture Partners I Ltd . . 673,993 79.0 -- -- 2,100,628 42.0
301 Commerce Street,
Suite 1600
Fort Worth, Texas 76102
Citicorp Venture Capital,
Ltd.(3) . . . . . . . . . . . 2,461,712 74.3 2,461,712 62.7 1,250,861 25.0
399 Park Avenue
New York, New York 10043
BT Capital Partners, Inc.(3). . 705,154 45.2 705,154 18.0 793,959 15.9
280 Park Avenue (32W)
New York, New York 10017
World Equity Partners, L.P.(9). 496,623 36.8 -- -- -- --
399 Park Avenue
New York, New York 10043
CCT Partners II, L.P.(3)(10). . 434,420 33.7 434,420 11.1 220,740 4.4
c/o Citicorp Venture Capital,
Ltd.
399 Park Avenue
New York, New York 10043
Heller Financial, Inc.(11). . . 310,390 26.7 -- -- -- --
500 West Monroe Street
Chicago, Illinois 60661
HES Management, Inc . . . . . . 102,650 12.0 -- -- 360,993 7.2
5956 Sherry Lane, Suite 930
Dallas, Texas 75225
</TABLE>
- ----------
* Less than one percent.
(1) Includes 102,650 shares of Class A Common and 360,993 shares of Series
A Preferred held in the name of HES Management, Inc., of which Mr.
Carter may be deemed the beneficial owner as the sole stockholder of
HES Management, Inc.; and 254,562 shares of Class A Common that Mr.
Carter may acquire upon the exercise of options within 60 days of May
31, 1997.
(2) Includes 56,393 shares of Class B Common held in the name of Alchemy,
L.P., of which Mr. McWilliams may be deemed the beneficial owner as
the sole general partner of Alchemy, L.P.
(3) Includes a number of shares of Class A Common that the stockholder may
acquire upon the conversion of shares of Class B Common on a 1-for-1
basis.
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(4) Includes 10,000 shares of Class A Common that Mr. DeBusk may acquire
upon the exercise of options within 60 days of May 31, 1997.
(5) Includes 8,750 shares of Class A Common that Mr. Noto may acquire upon
the exercise of options within 60 days of May 31, 1997.
(6) Includes 7,500 shares of Class A Common that Mr. Kaple may acquire
upon the exercise of options within 60 days of May 31, 1997.
(7) Represents 15,000 shares of Class A Common that Mr. Smith may acquire
upon the exercise of options within 60 days of May 31, 1997.
(8) Includes 295,812 shares of Class A Common that may be acquired upon
the exercise of options within 60 days of May 31, 1997, and 70,424
shares of Class A Common that may be acquired upon the conversion of
Class B Common.
(9) Represents 496,623 of Class A Common that World Equity Partners, L.P.,
may purchase upon the exercise of a warrant within 60 days of May 31,
1997.
(10) William T. Comfort, whose address is c/o Citicorp Venture Capital,
Ltd., 399 Park Avenue, New York, New York, 10043, is the sole
director, the sole executive officer, and the sole stockholder of the
general partner of CCT Partners II, L.P., and may be deemed the
beneficial owner of the securities held in the name of CCT Partners
II, L.P.
(11) Heller Financial, Inc. may acquire 310,390 shares of Class C Common
upon the exercise of a warrant within 60 days of May 31, 1997. Heller
Financial, Inc. may acquire 310,390 shares of Class A Common within 60
days of May 31, 1997, upon exercise of its right to convert all of its
shares of Class C Common into Class A Common on a 1- for-1 basis.
DESCRIPTION OF CAPITAL STOCK
COMPANY CAPITAL STOCK
The authorized capital stock of the Company consists of 1,000 shares of
common stock, par value $.01 per share (the "Company Common Stock"). There
currently are 100 shares of the Company Common Stock outstanding, all of which
are owned of record and beneficially by Parent.
PARENT CAPITAL STOCK
The authorized capital stock of Parent consists of 14,000,000 shares of
Parent Common Stock and 5,000,000 shares of Preferred Stock. The authorized
shares include (i) 8,000,000 shares of Class A Common, par value $.00005 per
share, of which 853,402 shares are issued and outstanding; (ii) 5,000,000
shares of Class B Common Stock, par value $.00005 per share (the "Class B
Common"), of which 3,926,598 shares are issued and outstanding; (iii) 1,000,000
shares of Class C Common Stock, par value $.00005 per share (the "Class C
Common"), of which no shares are issued and outstanding; and (iv) 5,000,000
shares of Series A 13% Cumulative Preferred Stock, par value $.00005 per share
(the "Series A Preferred"), all of which are issued and outstanding.
Certain Voting and Conversion Rights
Holders of Class A Common are entitled to one vote for each share held of
record on all matters submitted to a vote of stockholders. Holders of Class B
Common are entitled, as a class, to 49% of the total votes on all matters
submitted to a vote of stockholders, except as otherwise required by law, and
except for voting on any sale of all or substantially all of Parent's assets,
any amendment to the Certificate of Incorporation, any merger or consolidation
of Parent or any recapitalization or reorganization of Parent in which holders
of Class B Common are treated differently from holders of Class A Common, in
which case the holders of the Class B Common have the right to vote as a
separate class. The holders of the Class C Common and the Series A Preferred
have no voting rights, except as otherwise provided by law.
The Series A Preferred had an initial liquidation value of $1 per share.
Dividends accrue semi-annually at 13% per annum regardless of declaration or
profitability. To the extent not paid on each January 1 and July 1, dividends
increase the liquidation value. The Series A Preferred may be redeemed by the
Parent at the then-liquidation value at any time prior to the scheduled
redemption date, which has been extended to June 15, 2010, conditioned upon
consummation of the Offering. Upon the occurrence of certain events, the Series
A Preferred is redeemable at the holders' option prior to the redemption date.
A portion of the net proceeds of the Offering (estimated to be $2.9
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million upon the closing of the Offering) will be dividended to the Parent and
used to discharge accrued and unpaid dividends that have been added to the
liquidation value of the Series A Preferred since issuance.
As and when dividends are declared or paid thereon, the holders of Class A
Common, Class B Common and Class C Common are entitled to participate in such
dividends ratably on a per share basis. They also participate ratably, subject
to the rights of holders of Series A Preferred, in any distributions upon the
liquidation of the Company. The shares of the Class B Common and the Class C
Common are convertible into an equal number of shares of Class A Common. The
Series A Preferred has no conversion rights.
Parent Stockholders Agreement
The stockholders of Parent have entered into a Stockholders Agreement. The
Stockholders Agreement provides for, among other things: (i) establishing the
composition of the Boards of Directors for Parent and the Company, (ii)
limiting the manner and terms by which Parent's capital stock may be
transferred, (iii) the waiver of dissenters' rights in respect of a sale of the
Parent, if such sale has been approved by a majority of stockholders, and (iv)
preemptive rights among the stockholders upon the issuance of capital stock by
Parent.
DESCRIPTION OF NOTES
GENERAL
The Old Notes were, and the New Notes will be, issued under an Indenture,
dated as of August 1, 1997 (the "Indenture"), among the Company, the Subsidiary
Guarantor and Norwest Bank, Minnesota, N.A., as Trustee (the "Trustee"), a copy
of which is available upon request to the Company as set forth below. The terms
of the New Notes are identical in all material respects to the Old Notes,
except that the New Notes have been registered under the Securities Act and,
therefore, will not bear legends restricting their transfer. Upon the issuance
of the New Notes, the Indenture will be subject to and governed by the Trust
Indenture Act of 1939, as amended (the "Trust Indenture Act"). The following
summary of certain provisions of the Indenture and the Notes does not purport
to be complete and is subject to, and is qualified in its entirety by reference
to, all the provisions of the Indenture (including the definitions of certain
terms therein and those terms made a part thereof by the Trust Indenture Act)
and the Notes. The definitions of certain terms used in the following summary
are set forth below under "-- Certain Definitions." For purposes of this
summary, the term "Company" refers only to HydroChem and not to the Company's
Subsidiary.
The Old Notes are, and the New Notes will be, subordinated in right of
payment to all current and future Senior Debt, including borrowings under the
New Credit Facility. Each of the Subsidiary Guarantees are and will be
subordinated in right of payment to all existing and future Senior Debt of the
Subsidiary Guarantor, including any potential guarantees of the New Credit
Facility. As of June 30, 1997, on a pro forma basis giving effect to the
application of the net proceeds from the Offering, the Company had no Senior
Debt outstanding (excluding $2.3 million in outstanding undrawn letters of
credit, which were principally incurred in connection with the Company's
property and casualty insurance programs). The Indenture permits the Company
and its Subsidiaries to incur additional indebtedness, including Senior Debt,
subject to certain limitations, and will prohibit the incurrence of any
indebtedness that is senior to the Notes and subordinated to Senior Debt.
The Old Notes are, and the New Notes will be, general unsecured obligations
of the Company, are and will be limited in aggregate principal amount to $110.0
million and will mature on August 1, 2007. Interest on the Notes will accrue at
the rate of 10 3/8% per annum and will be payable semi-annually in arrears on
February 1 and August 1 of each year, commencing on February 1, 1998, to
Holders of record on the immediately preceding January 15 and July 15. Interest
on the Notes will accrue from the most recent date to which interest has been
paid or, if no interest has been paid, from the Issue Date. Interest will be
computed on the basis of a 360-day year comprised of twelve 30-day months.
Principal of, and premium, if any, interest and Liquidated Damages, if any,
on, the Notes will be payable at the office or agency of the Company maintained
for such purpose within the City and State of New York or, at the option of the
Company, payment of interest and Liquidated Damages, if any, may be made by
check mailed to the Holders of the Notes at their respective addresses set
forth in the register of Holders of Notes; provided that all
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payments of principal, premium, if any, interest and Liquidated Damages, if
any, with respect to the Global Note and with respect to Certificated Notes the
Holders of which have given wire transfer instructions to the Company, will be
required to be made by wire transfer of immediately available funds to the
accounts specified by the Holders thereof. Until otherwise designated by the
Company, the Company's office or agency in New York will be the office of the
Trustee maintained for such purpose. The Notes will be issued in denominations
of $1,000 and integral multiples thereof.
SUBSIDIARY GUARANTEES
The Company's payment obligations under the Old Notes are, and its
obligations under the New Notes will be, jointly and severally guaranteed (the
"Subsidiary Guarantees") on an unsecured senior subordinated basis by the
Company's existing Subsidiary (HydroChem International, Inc. ("HII")), and all
future Restricted Subsidiaries (other than the Excluded Restricted
Subsidiaries). The Subsidiary Guarantee of each Subsidiary Guarantor will be
subordinated to the prior payment in full of all Senior Debt of the Subsidiary
Guarantor. The obligations of each Subsidiary Guarantor under its Subsidiary
Guarantee are and will be limited so as not to constitute a fraudulent
conveyance under applicable law. See, however, "Risk Factors -- Fraudulent
Transfer Considerations."
The Indenture provides that no Subsidiary Guarantor may consolidate with or
merge with or into (whether or not such Subsidiary Guarantor is the surviving
Person) another corporation, Person or entity whether or not affiliated with
such Subsidiary Guarantor unless: (i) subject to the provisions of the
following paragraph, the Person formed by or surviving any such consolidation
or merger (if other than such Subsidiary Guarantor) assumes all the obligations
of such Subsidiary Guarantor, pursuant to a supplemental indenture in form and
substance reasonably satisfactory to the Trustee, under the Subsidiary
Guarantee and the Indenture; (ii) immediately after giving effect to such
transaction, no Default or Event of Default exists; and (iii) the Company would
be permitted by virtue of the Company's pro forma Fixed Charge Coverage Ratio,
immediately after giving effect to such transaction, to incur at least $1.00 of
additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set
forth in the covenant described below under the caption "-- Certain Covenants
- -- Incurrence of Indebtedness and Issuance of Preferred Stock." The
requirements of clause (iii) of this paragraph will not apply in the case of a
consolidation or merger of a Subsidiary Guarantor with or into the Company or
another Subsidiary Guarantor.
The Indenture provides that in the event of a sale or other disposition of
all of the assets of any Subsidiary Guarantor, by way of merger, consolidation
or otherwise, or a sale or other disposition of all of the Capital Stock of any
Subsidiary Guarantor, then such Subsidiary Guarantor (in the event of a sale or
other disposition, by way of such a merger, consolidation or otherwise, of all
of the Capital Stock of such Subsidiary Guarantor) or the corporation acquiring
the property (in the event of a sale or other disposition of all of the assets
of such Subsidiary Guarantor) will be released and relieved of any obligations
under its Subsidiary Guarantee; provided that the Net Proceeds of such sale or
other disposition are applied in accordance with the applicable provisions of
the Indenture. See "-- Certain Covenants -- Asset Sales."
SUBORDINATION
The payment of principal of, and premium, if any, interest and Liquidated
Damages, if any, on, the Notes is and will be subordinated in right of payment,
as set forth in the Indenture, to the prior payment in full in cash of all
Senior Debt, whether outstanding on the date of the Indenture or thereafter
incurred.
Upon any distribution to creditors of the Company in a liquidation or
dissolution of the Company or in a bankruptcy, reorganization, insolvency,
receivership or similar proceeding relating to the Company or its property, an
assignment for the benefit of creditors or any marshalling of the Company's
assets and liabilities, the holders of Senior Debt will be entitled to receive
payment in full in cash of all Obligations due in respect of such Senior Debt
(including interest after the commencement of any such proceeding at the rate
specified in the applicable Senior Debt whether or not allowable as a claim in
any such proceeding) before the Holders of Notes will be entitled to receive
any payment with respect to the Notes, and until all Obligations with respect
to Senior Debt are paid in full, any distribution to which the Holders of Notes
would be entitled shall be made to the holders of Senior Debt (except that
Holders of Notes may receive Permitted Junior Securities and payments made from
the trust described under "-- Legal Defeasance and Covenant Defeasance").
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The Company also may not make any payment upon or in respect of the Notes
(except in Permitted Junior Securities or from the trust described under "--
Legal Defeasance and Covenant Defeasance") if (i) a default in the payment of
the principal of, and premium, if any, or interest on, Senior Debt occurs and
is continuing or (ii) any other default occurs and is continuing with respect
to Senior Debt that permits holders of the Senior Debt as to which such default
relates to accelerate its maturity and the Trustee receives a notice of such
default (a "Payment Blockage Notice") from the Company or the holders of any
Designated Senior Debt. Payments on the Notes may and shall be resumed (a) in
the case of a payment default, upon the date on which such default is cured or
waived and (b) in case of a nonpayment default, on the earlier of the date on
which such nonpayment default is cured or waived or 179 days after the date on
which the applicable Payment Blockage Notice is received, unless a payment
default on any Senior Debt then exists. No new period of payment blockage may
be commenced unless and until 365 days have elapsed since the delivery of the
immediately prior Payment Blockage Notice. No nonpayment default that existed
or was continuing on the date of delivery of any Payment Blockage Notice to the
Trustee shall be, or be made, the basis for a subsequent Payment Blockage
Notice unless such default shall have been cured or waived for a period of not
less than 90 consecutive days.
The Indenture further requires that the Company promptly notify holders
of Senior Debt if payment of the Notes is accelerated because of an Event of
Default.
As a result of the subordination provisions described above, in the event
of a liquidation or insolvency, Holders of Notes may recover less ratably than
creditors of the Company who are holders of Senior Debt. As of June 30, 1997,
on a pro forma basis giving effect to the application of the net proceeds from
the Offering, no Senior Debt was outstanding (excluding $2.3 million in
outstanding undrawn letters of credit). The Indenture does not limit, subject
to the satisfaction of certain financial tests, the amount of additional
Indebtedness, including Senior Debt, that the Company and its Subsidiaries can
incur. See "-- Certain Covenants -- Incurrence of Indebtedness and Issuance of
Preferred Stock."
OPTIONAL REDEMPTION
Except as set forth below, the Notes will not be redeemable at the
Company's option prior to August 1, 2002. Thereafter, the Notes will be
subject to redemption at any time at the option of the Company, in whole or in
part, upon not less than 30 nor more than 90 days' notice, at the redemption
prices (expressed as percentages of principal amount) set forth below, plus
accrued and unpaid interest and Liquidated Damages, if any, to the applicable
redemption date, if redeemed during the twelve-month period beginning on August
1 of the years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- ---- ----------
<S> <C>
2002 . . . . . . . . . . . . . . . . . 105.188%
2003 . . . . . . . . . . . . . . . . . 103.458%
2004 . . . . . . . . . . . . . . . . . 101.729%
2005 and thereafter . . . . . . . . . . 100.000%
</TABLE>
Notwithstanding the foregoing, at any time prior to August 4, 2000, the
Company may on any one or more occasions redeem up to an aggregate of 35% of
the original aggregate principal amount of Notes at a redemption price of
109.375% of the principal amount thereof, plus accrued and unpaid interest and
Liquidated Damages, if any, to the redemption date, with the net proceeds of
one or more Equity Offerings; provided that at least 65% of the original
aggregate principal amount of Notes remains outstanding immediately after any
such redemption; and provided, further, that any such redemption shall occur
within 90 days of the date of the closing of any such Equity Offering.
If less than all of the Notes are to be redeemed at any time, selection of
Notes for redemption will be made by the Trustee in compliance with the
requirements of the principal national securities exchange, if any, on which
the Notes are listed, or, if the Notes are not so listed, on a pro rata basis,
by lot or by such method as the Trustee shall deem fair and appropriate;
provided that no Notes of $1,000 or less shall be redeemed in part. Notices of
redemption shall be mailed by first class mail at least 30 but not more than 90
days before the redemption date to each Holder of Notes to be redeemed at its
registered address. Notices of redemption may not be conditional. If any Note
is to be redeemed in part only, the notice of redemption that relates to such
Note shall state the portion of the principal amount thereof to be redeemed. A
new Note in principal amount equal to the unredeemed portion thereof will be
issued in the name of the Holder thereof upon cancellation of the original
Note. Notes called for redemption become
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due on the date fixed for redemption. On and after the redemption date,
interest ceases to accrue on Notes or portions of them called for redemption.
CERTAIN COVENANTS
Change of Control
Upon the occurrence of a Change of Control, each Holder of Notes will have
the right to require the Company to repurchase all or any part (equal to $1,000
or an integral multiple thereof) of such Holder's Notes pursuant to the offer
described below (the "Change of Control Offer") at an offer price in cash equal
to 101% of the aggregate principal amount thereof plus accrued and unpaid
interest and Liquidated Damages, if any, to the date of purchase (the "Change
of Control Payment"). Within 30 days following any Change of Control, the
Company will mail a notice to each Holder describing the transaction or
transactions that constitute the Change of Control and offering to repurchase
Notes on the date specified in such notice, which date shall be no earlier than
30 days and no later than 60 days from the date such notice is mailed (the
"Change of Control Payment Date"), pursuant to the procedures required by the
Indenture and described in such notice. The Company will comply with the
requirements of Rule 14e-1 under the Exchange Act and any other securities laws
and regulations thereunder to the extent such laws and regulations are
applicable in connection with the repurchase of the Notes as a result of a
Change of Control.
On the Change of Control Payment Date, the Company will, to the extent
lawful, (i) accept for payment all Notes or portions thereof properly tendered
pursuant to the Change of Control Offer, (ii) deposit with the Paying Agent an
amount equal to the Change of Control Payment in respect of all Notes or
portions thereof so tendered, and (iii) deliver or cause to be delivered to the
Trustee for cancellation the Notes so accepted together with an Officer's
Certificate stating the aggregate principal amount of Notes or portions thereof
being purchased by the Company. The Paying Agent will promptly mail to each
Holder of Notes so tendered the Change of Control Payment for such Notes, and
the Trustee will promptly authenticate and mail (or cause to be transferred by
book entry) to each Holder a new Note equal in principal amount to any
unpurchased portion of the Notes surrendered, if any; provided that each such
new Note will be in a principal amount of $1,000 or an integral multiple
thereof. The Company will publicly announce the results of the Change of
Control Offer on or as soon as practicable after the Change of Control Payment
Date.
The Change of Control provisions described above will be applicable whether
or not any other provisions of the Indenture are applicable. Except as
described above with respect to a Change of Control, the Indenture does not
contain provisions that permit the Holders of the Notes to require that the
Company repurchase or redeem the Notes in the event of a takeover,
recapitalization or similar transaction.
The New Credit Facility may prohibit the Company from purchasing any Notes
and may also provide that certain change of control events with respect to the
Company would constitute a default thereunder. Any future credit agreements or
other agreements relating to Senior Debt to which the Company becomes a party
may contain similar restrictions and provisions. In the event a Change of
Control occurs at a time when the Company is prohibited from purchasing Notes,
then prior to purchasing the Notes in a Change of Control Offer, the Company
shall either repay all outstanding Senior Debt that contains such prohibitions
or obtain the requisite consents, if any, under all agreements governing such
outstanding Senior Debt. If the Company does not obtain such a consent or repay
such borrowings, the Company will remain prohibited from purchasing Notes. In
such case, the Company's failure to purchase all Notes validly tendered and not
withdrawn under such Change of Control Offer would constitute an Event of
Default under the Indenture which may, in turn, constitute a default under the
New Credit Facility. In such circumstances, the subordination provisions in the
Indenture would likely restrict payments to the Holders of Notes. See "Risk
Factors -- Change of Control."
The Company will not be required to make a Change of Control Offer upon a
Change of Control if a third party makes the Change of Control Offer in the
manner, at the times and otherwise in compliance with the requirements set
forth in the Indenture applicable to a Change of Control Offer made by the
Company, including any requirement to repay in full any Senior Debt or obtain
the consents of such lenders to such Change of Control Offer as set forth in
the preceding paragraph, and purchases all Notes validly tendered and not
withdrawn under such Change of Control Offer.
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The definition of Change of Control includes a phrase relating to the sale,
lease, transfer, conveyance, barter or other disposition of "all or
substantially all" of the assets of the Company and its Subsidiaries taken as a
whole. Although there is a developing body of case law interpreting the phrase
"substantially all," there is no precise established definition of the phrase
under applicable law. Accordingly, the ability of a Holder of Notes to require
the Company to repurchase such Notes as a result of a sale, lease, transfer,
conveyance, barter or other disposition of less than all of the assets of the
Parent or the Company and its Restricted Subsidiaries taken as a whole to
another Person or group may be uncertain.
Asset Sales
The Indenture provides that the Company will not, and will not permit any
of its Restricted Subsidiaries to, consummate an Asset Sale unless (i) the
Company (or the Restricted Subsidiary, as the case may be) receives
consideration at the time of such Asset Sale at least equal to the fair market
value, as determined in good faith by the Company (evidenced by a resolution of
the Board of Directors set forth in an Officer's Certificate delivered to the
Trustee), of the assets or Equity Interests issued or sold or otherwise
disposed of, and (ii) at least 75% of the consideration received therefor by
the Company or such Restricted Subsidiary is in the form of (a) cash or Cash
Equivalents, or (b) property or assets useful in the Company's or such
Restricted Subsidiary's business or any business similar or reasonably related
thereto, or (c) stock if the acquired entity becomes a Restricted Subsidiary
and is engaged in a business similar or reasonably related to that of the
Company or any Restricted Subsidiary; provided that the amount of (x) any
liabilities (as shown on the Company's or such Restricted Subsidiary's most
recent balance sheet) of the Company or any Restricted Subsidiary (other than
contingent liabilities and liabilities that are by their terms subordinated to
the Notes or any guarantee thereof) that are assumed by the transferee of any
such assets pursuant to a customary novation agreement that releases the
Company or such Restricted Subsidiary from further liability, and (y) any
securities, notes or other obligations received by the Company or any such
Restricted Subsidiary from such transferee that are converted by the Company or
such Restricted Subsidiary into cash or Cash Equivalents (to the extent of the
cash received) within 180 days following the closing of the Asset Sale, shall
be deemed to be cash for purposes of this provision.
Within 365 days after the receipt of any Net Proceeds from an Asset Sale,
the Company may apply such Net Proceeds, at its option, (a) to repay
permanently Senior Debt or Senior Debt of the Restricted Subsidiaries, or (b)
to the acquisition of an interest in another business, the making of a capital
expenditure or the acquisition of other long- term assets, in each case, in the
same business as the Company or any Restricted Subsidiary or any business
similar or reasonably related thereto. Pending the final application of any
such Net Proceeds, the Company or the Restricted Subsidiaries, as the case may
be, may temporarily reduce indebtedness under the New Credit Facility or
otherwise invest such Net Proceeds in any manner that is not prohibited by the
Indenture. Any Net Proceeds from Asset Sales that are not applied or invested
as provided in the first sentence of this paragraph will be deemed to
constitute "Excess Proceeds." When the aggregate amount of Excess Proceeds
exceeds $5.0 million, the Company shall make an offer to all Holders of Notes
(an "Asset Sale Offer") to purchase the maximum principal amount of Notes that
may be purchased out of the Excess Proceeds, at an offer price in cash in an
amount equal to 100% of the principal amount thereof, plus accrued and unpaid
interest and Liquidated Damages, if any, to the date of purchase, in accordance
with the procedures set forth in the Indenture. If the aggregate principal
amount of Notes tendered by Holders thereof exceeds the amount of Excess
Proceeds, the Trustee shall select the Notes to be purchased on a pro rata
basis. If the aggregate principal amount of Notes tendered pursuant to an Asset
Sale Offer is less than the Excess Proceeds, the Company may use any remaining
Excess Proceeds for general corporate purposes. Upon completion of such offer
to purchase, the amount of Excess Proceeds shall be reset at zero.
Restricted Payments
The Indenture provides that the Company will not, and will not permit any
of its Restricted Subsidiaries to, directly or indirectly: (i) declare or pay
any dividend or make any other payment or distribution on account of the
Company's or any of its Restricted Subsidiaries' Equity Interests (including,
without limitation, any payment in connection with any merger or consolidation
involving the Company) or to the direct or indirect holders of the Company's or
any of its Restricted Subsidiaries' Equity Interests in their capacity as such
(other than dividends or distributions payable in Equity Interests (other than
Disqualified Stock) of the Company), (ii) purchase, redeem or otherwise acquire
or retire for value (including without limitation, in connection with any
merger or consolidation involving the Company) any Equity Interests of the
Company or any direct or indirect parent of the Company, (other
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than any such Equity Interests owned by the Company or any Wholly-Owned
Restricted Subsidiary of the Company), (iii) make any payment on or with
respect to, or purchase, redeem, defease or otherwise acquire or retire for
value any Indebtedness that is subordinated to the Notes, except a payment of
interest or principal at Stated Maturity, or (iv) make any Restricted
Investment (all such payments and other actions set forth in clauses (i)
through (iv) above being collectively referred to as "Restricted Payments"),
unless, at the time of and after giving effect to such Restricted Payment:
(a) no Default or Event of Default shall have occurred and be continuing
or would occur as a consequence thereof; and
(b) the Company would, at the time of such Restricted Payment and after
giving pro forma effect thereto as if such Restricted Payment had been
made at the beginning of the applicable four-quarter period, have been
permitted to incur at least $1.00 of additional Indebtedness pursuant
to the Fixed Charge Coverage Ratio test set forth in the first
paragraph of the covenant described below under the caption "--
Incurrence of Indebtedness and Issuance of Preferred Stock"; and
(c) such Restricted Payment, together with the aggregate amount of all
other Restricted Payments made by the Company and its Restricted
Subsidiaries after the date of the Indenture (excluding Restricted
Payments permitted by clauses (ii), (iii) and (iv) of the next
succeeding paragraph), is less than the sum of (i) 50% of the
Consolidated Net Income of the Company for the period (taken as one
accounting period) from the beginning of the first fiscal quarter
commencing after the date of the Indenture to the end of the Company's
most recently ended fiscal quarter for which internal financial
statements are available at the time of such Restricted Payment (or,
if such Consolidated Net Income for such period is a deficit, less
100% of such deficit), plus (ii) 100% of the aggregate net cash
proceeds received by the Company since the date of the Indenture from
(A) contributions to the Company's capital, and (B) the issue or sale
of Equity Interests of the Company (other than Disqualified Stock) or
of Disqualified Stock or debt securities of the Company that have been
converted into such Equity Interests (other than Equity Interests (or
Disqualified Stock or convertible debt securities) sold to a
Restricted Subsidiary of the Company and other than Disqualified Stock
or convertible debt securities that have been converted into
Disqualified Stock), plus (iii) to the extent that any Restricted
Investment that was made after the date of the Indenture is sold for
cash or otherwise liquidated or repaid for cash, the lesser of (A) the
cash return of capital with respect to such Restricted Investment
(less the cost of disposition, if any), and (B) the initial amount of
such Restricted Investment, plus (iv) the aggregate amount of $5.0
million.
The foregoing provisions did not and will not prohibit (i) the payment of
the dividend of approximately $8.5 million to Parent with a portion of the net
proceeds from the Offering, (ii) the payment of any dividend within 60 days
after the date of declaration thereof, if at said date of declaration such
payment would have complied with the provisions of the Indenture, (iii) the
redemption, repurchase, retirement, defeasance or other acquisition of any
subordinated Indebtedness or Equity Interests of the Company in exchange for,
or out of the net cash proceeds of the substantially concurrent sale (other
than to a Restricted Subsidiary of the Company) of, other Equity Interests of
the Company (other than any Disqualified Stock); provided that the amount of
any such net cash proceeds that are utilized for any such redemption,
repurchase, retirement, defeasance or other acquisition shall be excluded from
clause (c) (ii) of the preceding paragraph, (iv) the defeasance, redemption,
repurchase or other acquisition of subordinated Indebtedness with the net cash
proceeds from an incurrence of Permitted Refinancing Indebtedness, (v) the
payment of any dividend by a Restricted Subsidiary of the Company to the
holders of its common Equity Interests on a pro rata basis, (vi) the repurchase
of any Indebtedness subordinated or pari passu in right of payment to the Notes
at a purchase price not greater than 101% of the principal amount of such
Indebtedness in the event of a Change of Control in accordance with provisions
of the "Change of Control" covenant; provided that prior to or
contemporaneously with such repurchase the Company has made the Change of
Control Offer as provided in such covenant with respect to the Notes and has
repurchased all Notes validly tendered for payment and not withdrawn in
connection with such Change of Control Offer, (vii) the repurchase, redemption
or other acquisition or retirement for value of any Equity Interests of the
Company or any Restricted Subsidiary of the Company held by any current or
former employee or director of the Company (or any of its Restricted
Subsidiaries) pursuant to any management equity subscription agreement or stock
option agreement; provided that the aggregate price paid for all such
repurchased, redeemed, acquired or retired Equity Interests shall not exceed
$1.0 million in any twelve month period or $5.0 million in total and no Default
or Event of Default shall have occurred and be continuing immediately after
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such transaction, (viii) any loans, advances, distributions from the Company to
any Restricted Subsidiary, or any loans, advances, distributions or payments by
a Restricted Subsidiary to the Company or to another Restricted Subsidiary, in
each case pursuant to intercompany Indebtedness, intercompany management
agreements and other intercompany agreements and obligations entered into in
the ordinary course of business, including reasonable advisory and service fees
and any indemnity obligations, (ix) if Parent files tax returns which include
the Company, payments to Parent under any customary and reasonable tax sharing
arrangement, and (x) payments to Parent, not to exceed $100,000 in any 12-month
period, in respect of customary and reasonable accounting, legal or other
professional or administrative expenses or reimbursements for franchise or
similar taxes and governmental charges incurred which relate to the business,
operations or finances of the Company or Restricted Subsidiary and in respect
of fees, offering costs and related expenses associated with any future
registration statements filed with the Commission and subsequent ongoing public
reporting requirements.
The amount of all Restricted Payments (other than cash) shall be the fair
market value on the date of the Restricted Payment of the asset(s) or
securities proposed to be transferred or issued by the Company or such
Restricted Subsidiary, as the case may be, pursuant to the Restricted Payment.
The fair market value of any non-cash Restricted Payment shall be determined by
the Board of Directors whose resolution with respect thereto shall be delivered
to the Trustee. Not later than the date of making any Restricted Payment, the
Company shall deliver to the Trustee an Officer's Certificate stating that such
Restricted Payment is permitted and setting forth the basis upon which the
calculations required under the covenant described in "-- Restricted Payments"
were computed.
Incurrence of Indebtedness and Issuance of Preferred Stock
The Indenture provides that the Company will not, and will not permit any
of its Restricted Subsidiaries to, directly or indirectly, create, incur,
issue, assume, guarantee or otherwise become directly or indirectly liable,
contingently or otherwise, with respect to (collectively, "incur") any
Indebtedness (including Acquired Debt) and that the Company will not issue any
Disqualified Stock and will not permit any of its Restricted Subsidiaries to
issue any shares of Disqualified Stock; provided that the Company may incur
Indebtedness (including Acquired Debt) or issue shares of Disqualified Stock
and may permit any Restricted Subsidiary to incur any Indebtedness (including
Acquired Debt) or issue shares of Disqualified Stock if the Fixed Charge
Coverage Ratio for the Company's most recently ended four full fiscal quarters
for which internal financial statements are available immediately preceding the
date on which such additional Indebtedness is incurred or such Disqualified
Stock is issued would have been at least 2.0 to 1, determined on a pro forma
basis (including a pro forma application of the net proceeds therefrom), as if
the additional Indebtedness had been incurred, or the Disqualified Stock had
been issued, as the case may be, at the beginning of such four-quarter period.
The provisions of the first paragraph of this covenant will not apply to
the incurrence of any of the following items of Indebtedness (collectively,
"Permitted Debt"):
(i) the incurrence by the Company of Indebtedness and letters of credit
(with letters of credit being deemed to have a principal amount equal to the
maximum potential liability of the Company and its Subsidiaries thereunder)
under the New Credit Facility (or pursuant to any successor facility, which
successor facility need not constitute Permitted Refinancing Indebtedness),
along with any Guarantee thereof by any of the Restricted Subsidiaries, up to
an amount at any time incurred equal to the greater of (a) $25 million, less
the aggregate amount of all Net Proceeds of Asset Sales applied to permanently
repay any such Indebtedness or, in the case of any such revolving Indebtedness,
permanently reduce commitments therefor pursuant to the covenant described
above under the caption "-- Asset Sales" or (b) the sum of 85% of the Company's
consolidated accounts receivable and 60% of its consolidated inventory, in each
case, from time to time, as determined in accordance with GAAP;
(ii) the incurrence by the Company or any of its Restricted Subsidiaries of
Hedging Obligations that are incurred for the purpose of fixing or hedging
interest rate risk with respect to any floating rate Indebtedness that is
permitted by the terms of this Indenture to be outstanding or that are incurred
by the Company or any of its Restricted Subsidiaries to protect against
currency exchange rate risk in the conduct of its operations;
(iii) the incurrence by the Company and its Restricted Subsidiaries of the
Existing Indebtedness;
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(iv) the incurrence by the Company of Indebtedness represented by the Notes
and the incurrence by the Subsidiary Guarantors of Indebtedness represented by
the Subsidiary Guarantees;
(v) the incurrence by the Company or any of its Restricted Subsidiaries of
Permitted Refinancing Indebtedness in exchange for, or the net proceeds of
which are used to refund, refinance or replace Indebtedness that was permitted
by the Indenture to be incurred;
(vi) the incurrence of Indebtedness in respect of performance bonds or
surety or appeal bonds in the ordinary course of business;
(vii) the incurrence by the Company or any of its Restricted Subsidiaries
of intercompany Indebtedness between or among the Company and any of its
Wholly-Owned Restricted Subsidiaries; provided that (a) if the Company is the
obligor on such Indebtedness, such Indebtedness is expressly subordinated to
the prior payment in full in cash of all Obligations with respect to the Notes
and if a Subsidiary Guarantor is the obligor on such Indebtedness, such
Indebtedness is expressly subordinated to the prior payment in full in cash of
all Obligations with respect to the Subsidiary Guarantees and (b)(1) any
subsequent issuance or transfer of Equity Interests that results in any such
Indebtedness being held by a Person other than the Company or a Wholly-Owned
Restricted Subsidiary and (2) any sale or other transfer of any such
Indebtedness to a Person that is not either the Company or a Wholly-Owned
Restricted Subsidiary shall be deemed, in each case, to constitute an
incurrence of such Indebtedness by the Company or such Restricted Subsidiary,
as the case may be;
(viii) the incurrence by the Company or any of its Restricted Subsidiaries
of Indebtedness represented by Capital Lease Obligations, mortgage financings
or purchase money obligations, in each case incurred for the purpose of
financing all or any part of the purchase price or cost of construction or
improvements of property used in the business of the Company or such Restricted
Subsidiaries, in an aggregate principal amount not to exceed $7.5 million at
any time outstanding;
(ix) the incurrence by the Company or any of its Restricted Subsidiaries of
additional Indebtedness in an aggregate principal amount (or accreted value, as
applicable) at any time outstanding, including all Permitted Refinancing
Indebtedness incurred to refund, refinance or replace any other additional
Indebtedness incurred pursuant to this clause (ix), not to exceed $10 million;
and
(x) the incurrence of Indebtedness by any Restricted Subsidiary pursuant to
a Guarantee of Indebtedness permitted to be incurred.
For purposes of determining compliance with this covenant, in the event
that an item of Indebtedness meets the criteria of more than one of the
categories of Permitted Debt described in clauses (i) through (x) above or is
entitled to be incurred pursuant to the first paragraph of this covenant, the
Company shall, in its sole discretion, classify such item of Indebtedness in
any manner that complies with this covenant and such item of Indebtedness will
be treated as having been incurred pursuant to only one of such clauses or
pursuant to the first paragraph hereof. Any Indebtedness that may be incurred
pursuant to this covenant may be incurred under the New Credit Facility.
Accrual of interest, the accretion of accreted value and the payment of
interest in the form of additional Indebtedness will not be deemed to be an
incurrence of Indebtedness for purposes of this covenant.
Liens
The Indenture provides that neither the Company nor any of its Restricted
Subsidiaries will, directly or indirectly, create, incur, assume or suffer to
exist any Lien (except Permitted Liens) on any asset now owned or hereafter
acquired, or any income or profits therefrom or assign or convey any right to
receive income therefrom, unless the Notes are equally and ratably secured with
the obligation or liability secured by such Lien until such time as such
obligations are no longer secured by a Lien.
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Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries
The Indenture provides that the Company will not, and will not permit any
of its Restricted Subsidiaries to, directly or indirectly, create or otherwise
cause or suffer to exist or become effective any encumbrance or restriction on
the ability of any Restricted Subsidiary to (i)(a) pay dividends or make any
other distributions to the Company or any of its Restricted Subsidiaries (1) on
its Capital Stock or (2) with respect to any other interest or participation
in, or measured by, its profits, or (b) pay any Indebtedness owed to the
Company or any of its Restricted Subsidiaries, (ii) make loans or advances to
the Company or any of its Restricted Subsidiaries, or (iii) transfer any of its
properties or assets to the Company or any of its Restricted Subsidiaries,
except for such encumbrances or restrictions existing under or by reason of (a)
Existing Indebtedness, (b) the New Credit Facility and any amendments,
modifications, restatements, renewals, increases, supplements, refundings,
replacements or refinancings thereof; provided that such amendments,
modifications, restatements, renewals, increases, supplements, refundings,
replacements or refinancings are no more restrictive in the aggregate with
respect to such dividend and other payment restrictions than those contained in
the New Credit Facility (or any successor facility thereof), (c) the Indenture,
the Notes and the Subsidiary Guarantees, (d) applicable law, (e) any instrument
regarding the sale, lease or purchase of any asset or governing Indebtedness or
Capital Stock of a Person acquired by the Company or any of its Restricted
Subsidiaries as in effect at the time of such acquisition (except to the extent
such Indebtedness was incurred in connection with or in contemplation of such
acquisition), which encumbrance or restriction is not applicable to any Person,
or the properties or assets of any Person, other than the Person, or the
property or assets of the Person, so acquired; provided that, in the case of
Indebtedness, such Indebtedness was permitted by the terms of the Indenture to
be incurred, (f) by reason of customary non-assignment provisions in licenses
or leases entered into in the ordinary course of business and consistent with
past practices, (g) mortgages or other purchase money obligations or Capital
Lease Obligations for property acquired in the ordinary course of business that
impose restrictions of the nature described in clause (iii) above on the
property so acquired, (h) contracts for the sale of assets, including
restrictions with respect to a Restricted Subsidiary under an agreement for the
sale or disposition of all the stock or assets of such Restricted Subsidiary,
or (i) Permitted Refinancing Indebtedness; provided that the restrictions
contained in the agreements governing such Permitted Refinancing Indebtedness
are no more restrictive in the aggregate than those contained in the agreements
governing the Indebtedness being refinanced.
Limitation on Layering Debt
The Indenture provides that the Company will not incur, create, issue,
assume, guarantee or otherwise become liable for any Indebtedness that is
subordinate or junior in right of payment to any Senior Debt and senior in any
respect in right of payment to the Notes. In addition, the Indenture provides
that each of the Subsidiary Guarantors will not incur, create, issue, assume,
guarantee or otherwise become liable for any Indebtedness that is subordinate
or junior in right of payment to any Senior Debt of the Subsidiary Guarantor
and senior in any respect in right of payment to its Subsidiary Guarantee.
Additional Subsidiary Guarantees
The Indenture provides that if any entity (other than an Excluded
Restricted Subsidiary) shall become a Restricted Subsidiary after the date of
the Indenture, then such Restricted Subsidiary shall execute a Subsidiary
Guarantee and deliver an Opinion of Counsel with respect thereto, in accordance
with the terms of the Indenture.
Unrestricted Subsidiaries
The Board of Directors may designate any Subsidiary (including any
Restricted Subsidiary or any newly acquired or newly formed Subsidiary) to be
an Unrestricted Subsidiary so long as: (i) neither the Company nor any
Restricted Subsidiary is directly or indirectly liable for any Indebtedness of
such Subsidiary, (ii) no default with respect to any Indebtedness of such
Subsidiary would permit (upon notice, lapse of time or otherwise) any holder of
any other Indebtedness of the Company or any Restricted Subsidiary to declare a
default on such other Indebtedness or cause the payment thereof to be
accelerated or payable prior to its stated maturity, (iii) any Investment in
such Subsidiary deemed to be made as a result of designating such Subsidiary an
Unrestricted Subsidiary will not violate the provisions of the covenant
entitled "Restricted Payments," (iv) neither the Company nor any Restricted
Subsidiary has a contract, agreement, arrangement, understanding or obligation
of any kind, whether written or oral, with such Subsidiary other than (A) those
that might be obtained at the time from Persons who are not Affiliates of the
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Company or (B) administrative, tax sharing and other ordinary course contracts,
agreements, arrangements and understandings or obligations entered into in the
ordinary course of business, and (v) neither the Company nor any Restricted
Subsidiary has any obligation to subscribe for additional shares of Capital
Stock or other Equity Interests in such Subsidiary, or to maintain or preserve
such Subsidiary's financial condition or to cause such Subsidiary to achieve
certain levels of operating results other than as permitted under the covenant
entitled "Restricted Payments." Notwithstanding the foregoing, the Company may
not designate as an Unrestricted Subsidiary any Subsidiary which, on the date
of the Indenture, is a Significant Subsidiary, and may not sell, transfer or
otherwise dispose of any properties or assets of any such Significant
Subsidiary to an Unrestricted Subsidiary, other than in the ordinary course of
business. Any Investment made by the Company or any Restricted Subsidiary
which is designated from a Restricted Subsidiary to an Unrestricted Subsidiary
shall thereafter be considered as having been a Restricted Payment (to the
extent not previously included as a Restricted Payment) made on the day such
Subsidiary is designated an Unrestricted Subsidiary in the amount of the
greater of (i) the fair market value (as determined by the Board of Directors
of the Company in good faith) of the Equity Interests of such Subsidiary held
by the Company and its Restricted Subsidiaries on such date, and (ii) the
amount of the Investments determined in accordance with GAAP made by the
Company and any of its Restricted Subsidiaries in such Subsidiary.
The Board of Directors may designate any Unrestricted Subsidiary as a
Restricted Subsidiary; provided that such designation will be deemed to be an
incurrence of Indebtedness by a Restricted Subsidiary of any outstanding
Indebtedness of such Unrestricted Subsidiary and such designation will only be
permitted if (i) such Indebtedness is permitted under the covenant described in
"-- Incurrence of Indebtedness and Issuance of Preferred Stock" covenant, and
(ii) no Default or Event of Default would occur as a result of such
designation.
Transactions with Affiliates
The Indenture provides that the Company will not, and will not permit any
of its Restricted Subsidiaries to, make any payment to, or sell, lease,
transfer or otherwise dispose of any of its properties or assets to, or
purchase any property or assets from, or enter into or make or amend any
transaction, contract, agreement, understanding, loan, advance or guarantee
with, or for the benefit of, any Affiliate (each of the foregoing, an
"Affiliate Transaction"), unless (i) such Affiliate Transaction is on terms
that are at least as favorable as those that could reasonably be expected to be
obtained by the Company or the relevant Restricted Subsidiary in a comparable
transaction by the Company or such Restricted Subsidiary with an unrelated
Person, and (ii) the Company delivers to the Trustee (a) with respect to any
Affiliate Transaction or series of related Affiliate Transactions involving
aggregate consideration in excess of $1.0 million, a resolution of the Board of
Directors set forth in an Officer's Certificate certifying that such Affiliate
Transaction complies with clause (i) above and that such Affiliate Transaction
has been approved by a majority of the disinterested members of the Board of
Directors, and (b) with respect to any Affiliate Transaction or series of
related Affiliate Transactions involving aggregate consideration in excess of
$5.0 million, an opinion as to the fairness to the Company of such Affiliate
Transaction from a financial point of view issued by an accounting, appraisal
or investment banking firm of national standing; provided that the following
shall not be deemed to be Affiliate Transactions: (u) any employment agreement
entered into by the Company or any of its Restricted Subsidiaries in the
ordinary course of business and consistent with the past practice of the
Company or such Restricted Subsidiary, (v) transactions between or among the
Company and/or its Restricted Subsidiaries; (w) Restricted Payments that are
permitted by the provisions of the Indenture described above under the caption
"-- Restricted Payments", (x) reasonable and customary fees paid by the Company
or such Restricted Subsidiary to members of their respective Boards of
Directors; (y) transactions or agreements existing as of the date of the
Indenture, including those described under "Related Transactions", and (z)
reasonable and customary grants of stock, stock options or other Equity
Interests to employees and directors of the Company in accordance with duly
adopted stock grant, stock option and similar plans.
Reports
The Indenture provides that, whether or not required by the rules and
regulations of the Commission, so long as any Notes are outstanding, the
Company will furnish to the Holders of Notes (i) all quarterly and annual
financial information that would be required to be contained in a filing with
the Commission on Forms 10-Q and 10-K if the Company were required to file such
Forms, including a "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and, with respect to the annual information only, a
report thereon by the Company's certified independent auditors and (ii) all
current reports that would be required to be filed with the
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Commission on Form 8-K if the Company were required to file such reports. In
addition, whether or not required by the rules and regulations of the
Commission, the Company will file a copy of all such information and reports
with the Commission for public availability (unless the Commission will not
accept such a filing) and make such information available to securities
analysts and prospective investors upon request. In addition, the Company has
agreed that, for so long as any Old Notes remain outstanding, it will furnish
to the Holders and to prospective purchasers designated by such Holders, upon
their request, the information required to be delivered pursuant to Rule
144A(d)(4) under the Securities Act.
Merger; Consolidation or Sale of Assets
The Indenture provides that the Company will not consolidate or merge with
or into (whether or not the Company is the surviving corporation), or sell,
assign, transfer, lease, convey or otherwise dispose of all or substantially
all of its properties or assets in one or more related transactions, to another
corporation, Person or entity unless (i) the Company is the surviving
corporation or the entity or the Person formed by or surviving any such
consolidation or merger (if other than the Company) or to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made is a corporation organized or existing under the laws of the United
States, any state thereof or the District of Columbia, (ii) the entity or
Person formed by or surviving any such consolidation or merger (if other than
the Company) or the entity or Person to which such sale, assignment, transfer,
lease, conveyance or other disposition shall have been made assumes all the
obligations of the Company under the Notes and the Indenture pursuant to a
supplemental indenture in a form reasonably satisfactory to the Trustee, (iii)
immediately after such transaction no Default or Event of Default exists, and
(iv) except in the case of a merger of the Company with or into a Wholly-Owned
Restricted Subsidiary of the Company, the Company or the entity or Person
formed by or surviving any such consolidation or merger (if other than the
Company), or to which such sale, assignment, transfer, lease, conveyance or
other disposition shall have been made (a) will have Consolidated Net Worth
immediately after the transaction equal to or greater than the Consolidated Net
Worth of the Company immediately preceding the transaction, and (b) will, after
giving pro forma effect thereto as if such transaction had occurred at the
beginning of the applicable four-quarter period, be permitted to incur at least
$1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio
test set forth in the first paragraph of the covenant described above under the
caption "-- Incurrence of Indebtedness and Issuance of Preferred Stock."
EVENTS OF DEFAULT AND REMEDIES
The Indenture provides that each of the following constitutes an Event of
Default: (i) default for 30 days in the payment when due of interest on, or
Liquidated Damages with respect to, the Notes (whether or not prohibited by the
subordination provisions of the Indenture), (ii) default in payment when due of
the principal of or premium, if any, on the Notes (whether or not prohibited by
the subordination provisions of the Indenture), (iii) failure by the Company to
comply with the provisions described under the captions "-- Certain Covenants
- -- Change of Control," "-- Asset Sales," or "-- Merger; Consolidation or Sale
of Assets," (iv) failure by the Company for 30 days after written notice from
the Trustee or the Holders of at least 30% in principal amount of the then
outstanding Notes to comply with the provisions described under the captions,
"-- Restricted Payments" or "-- Incurrence of Indebtedness and Issuance of
Preferred Stock", (v) failure by the Company for 60 days after written notice
from the Trustee or Holders of 30% in principal amount of the then outstanding
Notes to comply with any of its other agreements in the Indenture or the Notes,
(vi) except as permitted by the Indenture, any Subsidiary Guarantee shall be
held in any judicial proceeding to be unenforceable or invalid or shall cease
for any reason to be in full force and effect or any Subsidiary Guarantor, or
any Person acting on behalf of any Subsidiary Guarantor, shall deny or
disaffirm its obligations under its Subsidiary Guarantee, (vii) default under
any mortgage, indenture or instrument under which there may be issued or by
which there may be secured or evidenced any Indebtedness for money borrowed by
the Company or any of its Restricted Subsidiaries (or the payment of which is
guaranteed by the Company or any of its Restricted Subsidiaries) whether such
Indebtedness or guarantee now exists, or is created after the Issue Date, which
default (a) is caused by a failure to pay principal when due at final stated
maturity (a "Payment Default"), or (b) results in the acceleration of such
Indebtedness prior to its express maturity and, in each case, the principal
amount of any such Indebtedness, together with the principal amount of any
other such Indebtedness under which there has been a Payment Default or the
maturity of which has been so accelerated, aggregates $7.5 million or more,
(viii) failure by the Company or any of its Restricted Subsidiaries to pay
final judgments aggregating in excess of $7.5 million, which judgments are not
paid, discharged or stayed for a period of 60 days, and (ix) certain events of
bankruptcy or insolvency with respect to the Company or any of its Significant
Subsidiaries.
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If any Event of Default occurs and is continuing (other than certain events
of bankruptcy and insolvency), the Trustee or the Holders of at least 30% in
principal amount of the then outstanding Notes may declare all the Notes to be
due and payable by notice in writing to the Company and the Trustee specifying
the respective Event of Default and that it is a notice of acceleration (the
"Acceleration Notice"), and the same (i) shall become immediately due and
payable, or (ii) if there are any amounts outstanding under the New Credit
Facility, shall become immediately due and payable upon the first to occur of
an acceleration under the New Credit Facility or five Business Days after
receipt by the Company and the Representative under the New Credit Facility of
such Acceleration Notice but only if such Event of Default is then continuing.
Notwithstanding the foregoing, in the case of an Event of Default arising from
certain events of bankruptcy or insolvency, with respect to the Company, any
Significant Subsidiary or any group of Restricted Subsidiaries that, taken
together, would constitute a Significant Subsidiary, all outstanding Notes will
become due and payable without declaration or other action or notice. Holders
of the Notes may not enforce the Indenture or the Notes, except as provided in
the Indenture. Subject to certain limitations, Holders of a majority in
principal amount of the then outstanding Notes may direct the Trustee in its
exercise of any trust or power. In the event of a declaration of acceleration
of the Notes because an Event of Default has occurred and is continuing as a
result of the acceleration of any Indebtedness described in clause (vii) of the
preceding paragraph, the declaration of acceleration of the Notes shall be
automatically annulled if the holders of any Indebtedness described in clause
(vii) have rescinded the declaration of acceleration in respect of such
Indebtedness within 30 days of the date of such declaration and if (i) the
annulment of the acceleration of the Notes would not conflict with any judgment
or decree of a court of competent jurisdiction, and (ii) all existing Events of
Default, except nonpayment of principal or interest or Liquidated Damages on
the Notes that became due solely because of the acceleration of the Notes, have
been cured or waived. The Trustee may withhold from Holders of the Notes notice
of any continuing Default or Event of Default (except a Default or Event of
Default relating to the payment of principal or interest) if it determines that
withholding notice is in their interest.
In the case of any Event of Default occurring by reason of any willful
action (or inaction) taken (or not taken) by or on behalf of the Company with
the intention of avoiding payment of the premium that the Company would have
had to pay if the Company then had elected to redeem the Notes pursuant to the
optional redemption provisions of the Indenture, an equivalent premium shall
also become and be immediately due and payable to the extent permitted by law
upon the acceleration of the Notes. If an Event of Default occurs prior to
August 1, 2002, by reason of any willful action (or inaction) taken (or not
taken) by or on behalf of the Company with the intention of avoiding the
prohibition on redemption of the Notes prior to August 1, 2002, then the
premium specified in the Indenture shall also become immediately due and
payable to the extent permitted by law upon the acceleration of the Notes.
The Holders of a majority in aggregate principal amount of the Notes then
outstanding by notice to the Trustee may on behalf of the Holders of all of the
Notes waive any existing Default or Event of Default and its consequences under
the Indenture except a continuing Default or Event of Default in the payment of
interest on, or the principal of, the Notes.
The Company is required to deliver to the Trustee annually a statement
regarding compliance with the Indenture, and the Company is required upon
becoming aware of any Default or Event of Default, to deliver to the Trustee a
statement specifying such Default or Event of Default.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS
No director, officer, employee, incorporator or stockholder of the Company
or any Restricted Subsidiary, as such, shall have any liability for any
obligations of the Company or any Restricted Subsidiary under the Notes, the
Indenture or any Subsidiary Guarantee or for any claim based on, in respect of,
or by reason of, such obligations or their creation. Each Holder of Notes by
accepting a Note waives and releases all such liability. The waiver and release
are part of the consideration for issuance of the Notes. Such waiver may not be
effective to waive liabilities under the federal securities laws and it is the
view of the Commission that such a waiver is against public policy.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Company and the Subsidiary Guarantors may, at their option and at any
time, elect to have all of their obligations discharged with respect to the
outstanding Notes and Subsidiary Guarantees ("Legal Defeasance") except for (i)
the rights of Holders of outstanding Notes to receive payments in respect of
the principal of, premium, if any,
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and interest and Liquidated Damages on such Notes when such payments are due
from the trust referred to below, (ii) the Company's obligations with respect
to the Notes concerning issuing temporary Notes, registration of Notes,
mutilated, destroyed, lost or stolen Notes and the maintenance of an office or
agency for payment and money for security payments held in trust, (iii) the
rights, powers, trusts, duties and immunities of the Trustee, and the Company's
obligations in connection therewith, and (iv) the Legal Defeasance provisions
of the Indenture. In addition, the Company may, at its option and at any time,
elect to have the obligations of the Company released with respect to certain
covenants that are described in the Indenture ("Covenant Defeasance") and
thereafter any omission to comply with such obligations shall not constitute a
Default or Event of Default with respect to the Notes. In the event Covenant
Defeasance occurs, certain events (not including non-payment, bankruptcy,
receivership, rehabilitation and insolvency events) described under "Events of
Default" will no longer constitute an Event of Default with respect to the
Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance, (i)
the Company must irrevocably deposit with the Trustee, in trust, for the
benefit of the Holders of the Notes, cash in U.S. dollars, non-callable
Government Securities, or a combination thereof, in such amounts as will be
sufficient, in the opinion of a nationally recognized firm of independent
public accountants, to pay the principal of, premium, if any, interest and
Liquidated Damages, if any, on the outstanding Notes on the stated maturity or
on the applicable redemption date, as the case may be, and the Company must
specify whether the Notes are being defeased to maturity or to a particular
redemption date, (ii) in the case of Legal Defeasance, the Company shall have
delivered to the Trustee an Opinion of Counsel reasonably acceptable to the
Trustee confirming that (a) the Company has received from, or there has been
published by, the Internal Revenue Service a ruling, or (b) since the date of
the Indenture, there has been a change in the applicable federal income tax
law, in either case to the effect that, and based thereon such opinion of
counsel shall confirm that, the Holders of the outstanding Notes will not
recognize income, gain or loss for federal income tax purposes as a result of
such Legal Defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been the case
if such Legal Defeasance had not occurred, (iii) in the case of Covenant
Defeasance, the Company shall have delivered to the Trustee an Opinion of
Counsel reasonably acceptable to the Trustee confirming that the Holders of the
outstanding Notes will not recognize income, gain or loss for federal income
tax purposes as a result of such Covenant Defeasance and will be subject to
federal income tax on the same amounts, in the same manner and at the same
times as would have been the case if such Covenant Defeasance had not occurred,
(iv) no Default or Event of Default shall have occurred and be continuing on
the date of such deposit (other than a Default or Event of Default resulting
from the borrowing of funds to be applied to such deposit) or insofar as Events
of Default from bankruptcy or insolvency events are concerned, at any time in
the period ending on the 91st day after the date of deposit, (v) such Legal
Defeasance or Covenant Defeasance will not result in a breach or violation of,
or constitute a default under the New Credit Facility or any other material
agreement or instrument (other than the Indenture) to which the Company or any
of its Restricted Subsidiaries is a party or by which the Company or any of its
Restricted Subsidiaries is bound, (vi) the Company must deliver to the Trustee
an Officer's Certificate stating that the deposit was not made by the Company
with the intent of preferring the Holders of Notes over the other creditors of
the Company with the intent of defeating, hindering, delaying or defrauding
creditors of the Company or others, and (vii) the Company must deliver to the
Trustee an Officer's Certificate and an Opinion of Counsel, each stating that
all conditions precedent provided for relating to the Legal Defeasance or the
Covenant Defeasance have been complied with.
TRANSFER AND EXCHANGE
A Holder may transfer or exchange Notes in accordance with the Indenture.
The Registrar and the Trustee may require a Holder, among other things, to
furnish appropriate endorsements and transfer documents and the Company may
require a Holder to pay any taxes and fees required by law or permitted by the
Indenture. The Company is not required to transfer or exchange any Note
selected for redemption. Also, the Company is not required to transfer or
exchange any Note for a period of 15 days before a selection of Notes to be
redeemed.
The registered Holder of a Note will be treated as the owner of it for all
purposes.
AMENDMENT, SUPPLEMENT AND WAIVER
Except as provided in the next two succeeding paragraphs, the Indenture or
the Notes may be amended or supplemented with the consent of the Holders of at
least a majority in principal amount of the Notes then outstanding
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(including, without limitation, consents obtained in connection with a purchase
of, or tender offer or exchange offer for, Notes), and any existing default or
compliance with any provision of the Indenture or the Notes may be waived with
the consent of the Holders of a majority in principal amount of the then
outstanding Notes (including consents obtained in connection with a tender
offer or exchange offer for Notes).
Without the consent of each Holder affected, an amendment or waiver may not
(with respect to any Notes held by a non-consenting Holder): (i) reduce the
principal amount of Notes whose Holders must consent to an amendment,
supplement or waiver, (ii) reduce the principal of or change the fixed maturity
of any Note or alter the provisions with respect to the redemption of the Notes
(other than provisions relating to the covenants described above under the
caption "-- Certain Covenants -- Change of Control" and "-- Asset Sales"),
(iii) reduce the rate of or change the time for payment of interest on any
Note, (iv) waive a Default or Event of Default in the payment of principal of
or premium, if any, or interest on the Notes (except a rescission of
acceleration of the Notes by the Holders of at least a majority in aggregate
principal amount of the Notes and a waiver of the payment default that resulted
from such acceleration), (v) make any Note payable in money other than that
stated in the Notes, (vi) make any change in the provisions of the Indenture
relating to waivers of past Defaults or the rights of Holders of Notes to
receive payments of principal of or premium, if any, or interest on the Notes,
(vii) waive a redemption payment with respect to any Note (other than a payment
required by the covenants described above under the captions "-- Certain
Covenants -- Change of Control" and "-- Asset Sales"), or (viii) make any
change in the foregoing amendment and waiver provisions. In addition, any
amendment to the provisions of Article 11 of the Indenture (which relate to
subordination) will require the consent of the Holders of at least 66 2/3% in
aggregate principal amount of the Notes then outstanding if such amendment
would adversely affect the rights of Holders of Notes.
Notwithstanding the foregoing, without the consent of any Holder of Notes,
the Company and the Trustee may amend or supplement the Indenture or the Notes
to cure any ambiguity, defect or inconsistency, to provide for uncertificated
Notes in addition to or in place of Certificated Notes, to provide for the
assumption of the Company's obligations to Holders of Notes in the case of a
merger or consolidation, to make any change that would provide any additional
rights or benefits to the Holders of Notes or that does not adversely affect
the legal rights under the Indenture of any such Holder, or to comply with
requirements of the Commission in order to effect or maintain the qualification
of the Indenture under the Trust Indenture Act.
CONCERNING THE TRUSTEE
The Indenture contains certain limitations on the rights of the Trustee,
should it become a creditor of the Company, to obtain payment of claims in
certain cases, or to realize on certain property received in respect of any
such claim as security or otherwise. The Trustee will be permitted to engage in
other transactions; however, if it acquires any conflicting interest it must
eliminate such conflict within 90 days, apply to the Commission for permission
to continue or resign.
The Holders of a majority in principal amount of the then outstanding Notes
will have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to the Trustee, subject to
certain exceptions. The Indenture provides that in case an Event of Default
shall occur (which shall not be cured), the Trustee will be required, in the
exercise of its power, to use the degree of care of a prudent man in the
conduct of his own affairs. Subject to such provisions, the Trustee will be
under no obligation to exercise any of its rights or powers under the Indenture
at the request of any Holder of Notes, unless such Holder shall have offered to
the Trustee security and indemnity satisfactory to it against any loss,
liability or expense.
ADDITIONAL INFORMATION
Anyone who receives this Prospectus may obtain a copy of the Indenture
without charge by writing to HydroChem Industrial Services, Inc., 6210 Rothway,
Houston, Texas 77040, Attention: Chief Financial Officer.
BOOK-ENTRY, DELIVERY AND FORM
The Old Notes have been, and the New Notes initially will be, issued in the
form of a Global Note (the "Global Note"). The Global Note will be deposited
with, or on behalf of, DTC and registered in the name of DTC or its nominee.
Except as set forth below, the Global Note may be transferred, in whole or in
part, only to DTC or another
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nominee of DTC. Investors may hold their beneficial interest in the Global Note
directly through DTC if they are participants in such system or indirectly
through organizations which are participants in such system.
DTC is a limited-purpose trust company that was created to hold securities
for its participating organizations (collectively, the "Participants") and to
facilitate the clearance and settlement of transactions in such securities
between Participants through electronic book-entry changes in accounts of its
Participants. The Participants include securities brokers and dealers
(including the Initial Purchaser), banks and trust companies, clearing
corporations and certain other organizations. Access to DTC's system is also
available to other entities such as banks, brokers, dealers and trust companies
(collectively, the "Indirect Participants") that clear through or maintain a
custodial relationship with a Participant, either directly or indirectly.
Persons who are not Participants may beneficially own securities held by or on
behalf of DTC only through the Participants or Indirect Participants.
Upon the issuance of the Global Note, DTC will credit the accounts of
Participants designated by the Trustee with portions of the principal amount of
the Global Note. Ownership of the Notes evidenced by the Global Note will be
shown on, and the transfer of ownership thereof will be effected only through,
records maintained by DTC (with respect to the interest of Participant), the
Participants and the Indirect Participants. Prospective purchasers are advised
that the laws of some states require that certain persons take physical
delivery in definitive form of securities they own. Consequently, the ability
to transfer Notes evidenced by the Global Note will be limited to such extent.
So long as the nominee of DTC is the registered owner or holder of any
Notes, such nominee will be considered the sole owner or Holder under the
Indenture of any Notes evidenced by the Global Note. Beneficial owners of Notes
evidenced by the Global Note will not be considered the owners or Holders
thereof under the Indenture for any purpose, including with respect to the
giving of any directions, instructions or approvals to the Trustee thereunder.
Neither the Company nor the Trustee will have any responsibility or liability
for any aspect of the records of DTC or for maintaining, supervising or
reviewing any records of DTC relating to the Notes. No beneficial owner of an
interest in any Global Note will be able to transfer that interest except in
accordance with DTC's procedures in addition to those provided for under the
Indenture.
Payments in respect of the principal of, premium, if any, interest and
Liquidated Damages, if any, on, any Notes registered in the name of the nominee
of DTC on the applicable record date will be payable by the Trustee to or at
the direction of DTC or its nominee in its capacity as the registered Holder
under the Indenture. Under the terms of the Indenture, the Company and the
Trustee may treat the person in whose names Notes, including the Global Note,
are registered as the owners thereof for the purpose of receiving such
payments. Consequently, neither the Company, the Trustee nor any paying agent
of the Company has or will have any responsibility or liability for the payment
of such amounts to beneficial owners of Notes (including principal, premium, if
any, interest and Liquidated Damages, if any). The Company believes, however,
that it is currently the policy of DTC or its nominee, to immediately credit
the accounts of the relevant Participants with such payments, in amounts
proportionate to their respective holdings of beneficial interests in the
relevant security as shown on the records of DTC or its nominee. Payments by
the Participants and the Indirect Participants to the beneficial owners of
Notes will be governed by standing instructions and customary practice and will
be the responsibility of the Participants or the Indirect Participants.
The laws of some states require that certain persons take physical delivery
in definitive, certificated form of securities that they own. This may limit or
curtail the ability to transfer beneficial interests in the Global Note to such
persons. Because DTC can act only on behalf of Participants, which in turn act
on behalf of other parties, the ability of a person having a beneficial
interest in the Global Note to pledge such interest to persons or entities that
are not Participants in DTC, or to otherwise take actions in respect of such
interests, may be affected by the lack of physical certificates evidencing such
interests.
CERTIFICATED NOTES
If (i) the Company notifies the Trustee in writing that DTC or its nominee
is no longer willing or able to act as a depository and the Company is unable
to locate a qualified successor within 90 days, or (ii) the Company, at its
option, notifies the Trustee in writing that it elects to cause the issuance of
Notes in the form of Certificated Securities under the Indenture, then, upon
surrender by DTC or its nominee of the Global Note, Notes in such form
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will be issued to each person that DTC or its nominee identify as being the
beneficial owner of the corresponding Notes.
Neither the Company nor the Trustee will be liable for any delay by a
holder of a Global Note or DTC or its nominee in identifying the beneficial
owners of Notes and the Company and the Trustee may conclusively rely on, and
will be protected in relying on, instructions from DTC or its nominee for all
purposes.
REGISTRATION RIGHTS; LIQUIDATED DAMAGES
In connection with the Offering of the Old Notes, the Company, HII and the
Initial Purchaser entered into the Registration Rights Agreement whereby the
Company and HII agreed to file with the Commission the registration statement,
of which this Prospectus is a part, under the Securities Act with respect to the
New Notes (the "Exchange Offer Registration Statement"). The Registration
Rights Agreement provides that, if (i) the Company is not required to file the
Exchange Offer Registration Statement or permitted to consummate the Exchange
Offer because the Exchange Offer is not permitted by applicable law or
Commission policy, or (ii) any Holder of Transfer Restricted Securities
notifies the Company within the specified time period that (a) it is prohibited
by law or Commission policy from participating in the Exchange Offer, or (b)
that it may not resell the New Notes acquired by it in the Exchange Offer to
the public without delivering a prospectus and the prospectus contained in the
Exchange Offer Registration Statement is not appropriate or available for such
resales, or (c) that it is a broker-dealer and owns Notes acquired directly
from the Company or an Affiliate of the Company, the Company and HII will file
with the SEC a shelf registration statement (the "Shelf Registration
Statement") to cover resales of the Old Notes by the Holders thereof who
satisfy certain conditions relating to the provision of information in
connection with the Shelf Registration Statement. For purposes of the
foregoing, "Transfer Restricted Securities" means each Note until (i) the date
on which such Note has been exchanged by a person other than a restricted
broker-dealer for a New Note in the Exchange Offer, (ii) the date on which such
Note has been disposed of in accordance with the Shelf Registration Statement,
(iii) the date on which such Note has been disposed of in accordance with the
provisions under "Plan of Distribution" (including delivery of the Prospectus
contained therein), or (iv) the date on which such Note is distributed to the
public pursuant to Rule 144 under the Securities Act or otherwise saleable
under Rule 144(k).
The Registration Rights Agreement provides that (i) the Company and HII
will file an Exchange Offer Registration Statement with the SEC on or prior to
60 days after the Issue Date, (ii) the Company and HII will use their
reasonable best efforts to have the Exchange Offer Registration Statement
declared effective by the SEC on or prior to 120 days after the Issue Date,
(iii) unless the Exchange Offer would not be permitted by applicable law or SEC
policy, the Company and HII will commence the Exchange Offer and use their
reasonable best efforts to issue on or prior to 30 Business Days after the date
on which the Exchange Offer Registration Statement was declared effective by
the SEC, New Notes in exchange for Old Notes tendered prior thereto in the
Exchange Offer, and (iv) if obligated to file the Shelf Registration Statement,
the Company and HII will use their reasonable best efforts to file the Shelf
Registration Statement with the SEC on or prior to 60 days after such filing
obligation arises and to cause the Shelf Registration Statement to be declared
effective by the SEC on or prior to 120 days after such filing obligation
arises. If (a) the Company or HII fails to file any of the Registration
Statements required by the Registration Rights Agreement on or before the date
specified for such filing, (b) any of such Registration Statements is not
declared effective by the SEC on or prior to the date specified for such
effectiveness (the "Effectiveness Target Date"), (c) the Company or HII fails
to consummate the Exchange Offer within 30 Business Days of the Effectiveness
Target Date with respect to the Exchange Offer Registration Statement, or (d)
the Shelf Registration Statement or the Exchange Offer Registration Statement
is declared effective but thereafter ceases to be effective or usable in
connection with resales of Transfer Restricted Securities during the periods
specified in the Registration Rights Agreement (each such event referred to in
clauses (a) through (d) above a "Registration Default"), then the Company and
HII, jointly and severally, will pay Liquidated Damages to each Holder of
Notes, with respect to the first 90-day period immediately following the
occurrence of such Registration Default in an amount equal to $.0481 per week
per $1,000 principal amount of Transfer Restricted Securities held by such
Holder. The amount of the Liquidated Damages will increase by an additional
$.0481 per week per $1,000 principal amount of Transfer Restricted Securities
with respect to each subsequent 90-day period until all Registration Defaults
have been cured, up to a maximum amount of Liquidated Damages of $.1924 per
week per $1,000 principal amount of Transfer Restricted Securities. All accrued
Liquidated Damages will be paid by the Company to the Global Note Holder by
wire transfer of immediately available funds or by federal funds check and to
Holders of Certificated Securities by
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wire transfer to the accounts specified by them or by mailing checks to their
registered addresses if no such accounts have been specified. Following the
cure of all Registration Defaults, the accrual of Liquidated Damages will
cease.
Holders of Old Notes will be required to make certain representations to
the Company and HII (as described in the Registration Rights Agreement) in
order to participate in the Exchange Offer and will be required to deliver
information to be used in connection with the Shelf Registration Statement and
to provide comments on the Shelf Registration Statement within the time periods
set forth in the Registration Rights Agreement in order to have their Old Notes
included in the Shelf Registration Statement and benefit from the provisions
regarding Liquidated Damages set forth above.
CERTAIN DEFINITIONS
Set forth below are certain defined terms used in the Indenture. Reference
is made to the Indenture for a full disclosure of all such terms, as well as
any other capitalized terms used herein for which no definition is provided.
"Acquired Debt" means (i) Indebtedness of any Person existing at the time
such Person became a Restricted Subsidiary or is merged with or into the
Company or a Restricted Subsidiary, including, without limitation, Indebtedness
incurred in connection with, or in contemplation of such other Person becoming
a Restricted Subsidiary or merging with or into the Company or a Restricted
Subsidiary, and (ii) Indebtedness secured by a Lien encumbering any asset
acquired by the Company or any Restricted Subsidiary.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, shall
mean the possession, directly or indirectly, of the power to direct or cause
the direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise; provided that, with
respect to Parent and the Company only, beneficial ownership of 10% or more of
the voting securities of Parent or the Company shall be deemed to be control.
"Asset Sale" means (i) the sale, lease, conveyance or other disposition of
any assets (including, without limitation, by way of a sale and leaseback)
other than sales or dispositions of Cash Equivalents and inventory in the
ordinary course of business (provided that the sale, lease, conveyance or other
disposition of all or substantially all of the assets of the Company and its
Restricted Subsidiaries taken as a whole will be governed by the provisions of
the Indenture described above under the caption "-- Certain Covenants -- Change
of Control" and/or the provisions described above under the caption "-- Certain
Covenants -- Merger, Consolidation or Sale of Assets" and not by the provisions
of the Asset Sale covenant), and (ii) the issue or sale by the Company or any
of its Restricted Subsidiaries of Equity Interests of any of the Company's
Restricted Subsidiaries, in the case of either clause (i) or (ii), whether in a
single transaction or a series of related transactions (a) that have a fair
market value in excess of $2.0 million or (b) for net proceeds in excess of
$2.0 million. Notwithstanding the foregoing: (i) a transfer of assets by the
Company to a Wholly-Owned Restricted Subsidiary or by a Wholly-Owned Restricted
Subsidiary to the Company or to another Wholly-Owned Restricted Subsidiary,
(ii) an issuance of Equity Interests by a Wholly-Owned Restricted Subsidiary to
the Company or to another Wholly-Owned Restricted Subsidiary, and (iii) a
Restricted Payment that is permitted by the covenant described above under the
caption "-- Certain Covenants -- Restricted Payments" will not be deemed to be
Asset Sales. Notwithstanding the foregoing, "Asset Sale" does not include any
sale lease, conveyance or other transfer or disposal of all or any part of the
assets of HII's Singapore branch, having a cumulative value not to exceed $2.5
million, in exchange for any combination of cash, Cash Equivalents, assets or
Equity Interests in a Person having operations in Southeast Asia; provided that
if assets or Equity Interests are received in connection with such disposition,
such assets must be useful in, or the Person whose Equity Interests are
received must be in, the Company's or HII's business or any business similar or
reasonably related thereto.
"Capital Lease Obligation" means, at the time any determination thereof is
to be made, the discounted present value of the liability in respect of a
capital lease that would at such time be required to be capitalized on a
balance sheet of such Person in accordance with GAAP.
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"Capital Stock" means (i) in the case of a corporation, corporate stock,
(ii) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock, (iii) in the case of a partnership or limited liability
company, partnership or membership interests (whether general or limited), and
(iv) any other interest or participation that confers on a Person the right to
receive a share of the profits and losses of, or distributions of assets of,
the issuing Person.
"Cash Equivalents" means (i) United States dollars or foreign currency that
is readily exchangeable into United States dollars, (ii) securities issued or
directly and fully guaranteed or insured by the United States government or any
agency or instrumentality thereof having maturities of not more than 12 months
from the date of acquisition, (iii) certificates of deposit and Eurodollar time
deposits with maturities of 12 months or less from the date of acquisition,
bankers' acceptances with maturities not exceeding 12 months and overnight bank
deposits, in each case with any domestic commercial bank having capital and
surplus in excess of $500 million and a Keefe Bank Watch Rating of "B" or
better, (iv) repurchase obligations with a term of not more than seven days for
underlying securities of the types described in clauses (ii) and (iii) above
entered into with any financial institution meeting the qualifications
specified in clause (iii) above, and (v) commercial paper having the highest
rating obtainable from Moody's Investors Service, Inc. or Standard & Poor's
Corporation and in each case maturing within 12 months after the date of
acquisition.
"Change of Control" means the occurrence of any of the following events:
(i) the sale, lease, transfer, conveyance, barter or other disposition (other
than by way of merger or consolidation), in one or a series of related
transactions, of all or substantially all of the assets of Parent or the
Company and its Restricted Subsidiaries taken as a whole to any "person" (as
such term is used in Section 13(d)(3) of the Exchange Act) other than the
Principals or their Related Parties (as defined below), (ii) the consummation
of any transaction (including, without limitation, any merger or consolidation)
the result of which is that any "person" (as defined above), other than the
Principals and their Related Parties, becomes the "beneficial owner" (as such
term is defined in Rule 13d-3 and Rule 13d-5 under the Exchange Act, except
that a person shall be deemed to have "beneficial ownership" of all securities
that such person has the right to acquire, whether such right is currently
exercisable or is exercisable only upon the occurrence of a subsequent
condition), directly or indirectly, of more than 50% of the Voting Stock of
Parent or the Company (measured by voting power rather than number of shares),
(iii) the first day on which a majority of the members of the Board of
Directors of Parent or the Company are not Continuing Directors, or (iv) Parent
or the Company consolidates with, or merges with or into, any Person (other
than a consolidation or merger of the Parent and the Company) or any Person
consolidates with, or merges with or into, Parent or the Company, pursuant to a
transaction in which any of the outstanding Voting Stock of Parent or the
Company is converted into or exchanged for cash, securities or other property,
other than any such transaction where the majority of the members of the Board
of Directors of such Person are Continuing Directors.
"Consolidated Cash Flow" means, with respect to the Company for any period,
the Consolidated Net Income of the Company and its Restricted Subsidiaries for
such period plus (i) an amount equal to any extraordinary loss, extraordinary
provision or provision for restructuring operations plus any net loss realized
in connection with an Asset Sale (to the extent such losses were deducted in
computing such Consolidated Net Income), plus (ii) provision for taxes based on
income or profits of the Company and its Restricted Subsidiaries for such
period, to the extent that such provision for taxes was included in computing
such Consolidated Net Income, plus (iii) consolidated interest expense of the
Company and its Restricted Subsidiaries for such period, whether paid or
accrued and whether or not capitalized (including, without limitation,
amortization of debt issuance costs and original issue discount, non-cash
interest payments, the interest component of any deferred payment obligations,
the interest component of all payments associated with Capital Lease
Obligations, commissions, discounts and other fees and charges incurred in
respect of letter of credit or bankers' acceptance financings, and net payments
(if any) pursuant to Hedging Obligations), to the extent that any such expense
was deducted in computing such Consolidated Net Income, plus (iv) depreciation,
amortization (including amortization of goodwill and other intangibles but
excluding amortization of prepaid cash expenses that were paid in a prior
period) and other non-cash expenses (excluding any such non-cash expense to the
extent that it represents an accrual of or reserve for cash expenses in any
future period or amortization of a prepaid cash expense that was paid in a
prior period) of the Company and its Restricted Subsidiaries for such period to
the extent that such depreciation, amortization and other non-cash expenses
were deducted in computing such Consolidated Net Income minus (v) non-cash
write-ups increasing such Consolidated Net Income for such period, in each
case, on a consolidated basis and determined in accordance with GAAP; provided
that Consolidated Net Income shall exclude the impact of foreign currency
translations. Notwithstanding the foregoing, the provision
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for taxes on the income or profits of, and the depreciation and amortization
and other non-cash charges of, a Restricted Subsidiary of the referenced Person
shall be added to Consolidated Net Income to compute Consolidated Cash Flow
only to the extent that a corresponding amount would be permitted at the date
of determination to be distributed to the Company by such Restricted Subsidiary
either (i) without prior governmental approval or (ii) with governmental
approval that has been obtained or that could readily and reasonably be
obtained, and without direct or indirect restriction pursuant to the terms of
its charter and all agreements, instruments, judgments, decrees, orders,
statutes, rules and governmental regulations applicable to that Restricted
Subsidiary or its stockholders.
"Consolidated Net Income" means, with respect to the Company for any
period, the aggregate of the Net Income of the Company and its Restricted
Subsidiaries for such period, on a consolidated basis, determined in accordance
with GAAP and excluding any extraordinary loss that will be incurred as a
result of the application of the net proceeds from the issuance of the Notes;
provided that (i) the Net Income (but excluding, in all events, any loss) of
any Person that is not a Restricted Subsidiary or that is accounted for by the
equity method of accounting shall be included only to the extent of the amount
of dividends or distributions paid in cash to the referenced Person or a
Wholly-Owned Restricted Subsidiary thereof, (ii) the Net Income of any
Restricted Subsidiary shall be excluded to the extent that the declaration or
payment of dividends or similar distributions by that Restricted Subsidiary of
that Net Income is not at the date of determination permitted without any prior
governmental approval (unless such governmental approval could be readily and
reasonably obtained) or, directly or indirectly, by operation of the terms of
its charter or any agreement, instrument, judgment, decree, order, statute,
rule or governmental regulation applicable to that Subsidiary or its
stockholders, (iii) the Net Income of any Person acquired in a pooling of
interests transaction for any period prior to the date of such acquisition
shall be excluded, and (iv) the cumulative effect of a change in accounting
principles shall be excluded.
"Consolidated Net Worth" means, with respect to any Person as of any date,
the sum of (i) the consolidated equity of the common stockholders of such
Person and its consolidated Subsidiaries as of such date plus (ii) the
respective amounts reported on such Person's balance sheet as of such date with
respect to any series of preferred stock (other than Disqualified Stock) that
by its terms is not entitled to the payment of dividends unless such dividends
may be declared and paid only out of net earnings in respect of the year of
such declaration and payment, but only to the extent of any cash received by
such Person upon issuance of such preferred stock, less (x) all write-ups
(other than write-ups resulting from foreign currency translations and
write-ups of tangible assets of a going concern business made within 12 months
after the acquisition of such business) subsequent to the date of the Indenture
in the book value of any asset owned by such Person or a consolidated
Subsidiary of such Person, (y) all investments as of such date in
unconsolidated Subsidiaries and in Persons that are not Subsidiaries (except,
in each case, Permitted Investments), and (z) all unamortized debt discount and
expense and unamortized deferred charges, excluding goodwill and other
purchased intangibles, as of such date, all of the foregoing determined in
accordance with GAAP.
"Continuing Directors" means, as of any date of determination, any member
of the Board of Directors of the Company or the Parent who (i) was a member of
such Board of Directors on the date of the Indenture, (ii) was nominated for
election or elected to such Board of Directors pursuant to the Stockholders'
Agreement at any time or from time to time, or (iii) was nominated or elected
by a majority of the Continuing Directors who were members of such Board at the
time of such nomination or election.
"Default" means any event that is or with the passage of time or the giving
of notice or both would be an Event of Default.
"Designated Senior Debt" means (i) any Indebtedness outstanding under the
New Credit Facility and (ii) any other Senior Debt permitted under the
Indenture, the principal amount of which is $25.0 million or more and that has
been designated by the Company as "Designated Senior Debt" pursuant to the
terms of the Indenture.
"Disqualified Stock" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable
at the option of the Holder thereof, in whole or in part, on or prior to the
date that is 91 days after the date on which the Notes mature; provided that
Capital Stock issued to employees pursuant to agreements providing that the
employee may require the Company to repurchase such Capital Stock in certain
circumstances shall not be deemed to be Disqualified Stock if such
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agreements provide that the repurchase rights are subject to the limitations on
such repurchases set forth in the covenant entitled "-- Restricted Payments."
"Equity Interests" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Equity Offering" means a public or private offering of the Capital Stock
of the Company, Parent or any Subsidiary of the Company or Parent.
"Existing Indebtedness" means up to $3.0 million in aggregate principal
amount of Indebtedness (including outstanding undrawn letters of credit) of the
Company and its Restricted Subsidiaries in existence on the date of the
Indenture after application of the net proceeds from the Offering of the Notes,
until such amounts are repaid.
"Excluded Restricted Subsidiary" means any Wholly-Owned Restricted
Subsidiary principally engaged in a business similar to that of the Company or
any of its Restricted Subsidiaries or any business reasonably related thereto
and domiciled outside the United States of America so long as the issuance of a
Subsidiary Guarantee by such Subsidiary would, as determined in a resolution of
the Board of Directors (based on written advice from an independent accounting
firm of national standing) set forth in an Officers' Certificate delivered to
the Trustee, create a material tax disadvantage.
"Fixed Charges" means, with respect to the Company for any period, the sum,
without duplication, of (i) the consolidated interest expense of the Company
and its Restricted Subsidiaries for such period, whether paid or accrued
(including, without limitation, amortization of debt issuance costs and
original issue discount, non-cash interest payments, the interest component of
any deferred payment obligations, the interest component of all payments
associated with Capital Lease Obligations, commissions, discounts and other
fees and charges incurred in respect of letter of credit or bankers' acceptance
financings, and net payments (if any) pursuant to Hedging Obligations), and
(ii) the consolidated interest expense of the Company and its Restricted
Subsidiaries that was capitalized during such period, and (iii) any interest
expense on Indebtedness of another Person that is Guaranteed by the Company or
one of its Restricted Subsidiaries or secured by a Lien on assets of the
Company or one of its Restricted Subsidiaries (whether or not such Guarantee or
Lien is called upon), and (iv) the product of (a) all dividend payments,
whether or not in cash, on any series of preferred stock of the Company or any
of its Restricted Subsidiaries, other than dividend payments on Equity
Interests payable solely in Equity Interests of the Company and dividend
payments from Restricted Subsidiaries to the Company, times (b) a fraction, the
numerator of which is one and the denominator of which is one minus the then
current combined federal, state and local statutory tax rate of the Company,
expressed as a decimal, in each case, on a consolidated basis and in accordance
with GAAP.
"Fixed Charge Coverage Ratio" means with respect to the Company for any
period, the ratio of the Consolidated Cash Flow of the Company for such period
to the Fixed Charges of the Company for such period. In the event that the
Company or any of its Restricted Subsidiaries incurs, assumes, Guarantees or
redeems any Indebtedness (other than revolving credit borrowings) or issues
preferred stock subsequent to the commencement of the period for which the
Fixed Charge Coverage Ratio is being calculated but prior to the date on which
the event for which the calculation of the Fixed Charge Coverage Ratio is made
(the "Calculation Date"), then the Fixed Charge Coverage Ratio shall be
calculated giving pro forma effect to such incurrence, assumption, Guarantee or
redemption of Indebtedness, or such issuance or redemption of preferred stock,
as if the same had occurred at the beginning of the applicable four-quarter
reference period. In addition, for purposes of making the computation referred
to above, (i) acquisitions that have been made by the Company or any of its
Restricted Subsidiaries, including through mergers or consolidations and
including any related financing transactions, during the four-quarter reference
period or subsequent to such reference period and on or prior to the
Calculation Date shall be deemed to have occurred on the first day of the
four-quarter reference period and Consolidated Cash Flow for such reference
period shall be calculated without giving effect to clause (iii) of the proviso
set forth in the definition of Consolidated Net Income, and (ii) the
Consolidated Cash Flow attributable to discontinued operations, as determined
in accordance with GAAP, and operations or businesses disposed of prior to the
Calculation Date, shall be excluded, and (iii) the Fixed Charges attributable
to discontinued operations, as determined in accordance with GAAP, and
operations or businesses disposed of prior to the Calculation Date, shall be
excluded, but only to the extent that the obligations giving rise to such Fixed
Charges will not be obligations of the Company or any of its Restricted
Subsidiaries following the Calculation Date.
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"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect on the date of the Indenture; provided, that
all reports and other financial information provided by the Company to the
Holders, the Trustee and/or the Commission shall be prepared in accordance with
GAAP, as in effect on the date of such report or other financial information.
"Guarantee" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any
Indebtedness.
"Hedging Obligations" means, with respect to any Person, the obligations of
such Person under (i) interest rate swap agreements, interest rate cap
agreements and interest rate collar agreements, (ii) other agreements or
arrangements designed to protect such Person against fluctuations in interest
rates, or (iii) agreements or arrangements designed to protect such Person
against fluctuations in foreign currency exchange rates in the conduct of its
operations.
"Indebtedness" means, with respect to any Person, any indebtedness of such
Person, whether or not contingent, in respect of borrowed money or evidenced by
bonds, notes, debentures or similar instruments or letters of credit (or,
without double counting, reimbursement agreements in respect thereof) or
bankers' acceptances or representing Capital Lease Obligations or the balance
deferred and unpaid of the purchase price of any property or representing any
Hedging Obligations, except any such balance that constitutes an accrued
expense or trade payable, if and to the extent any of the foregoing
indebtedness (other than letters of credit and Hedging Obligations) would
appear as a liability upon a balance sheet of such Person prepared in
accordance with GAAP, as well as all indebtedness of others secured by a Lien
on any asset of such Person (whether or not such indebtedness is assumed by
such Person) and, to the extent not otherwise included, the Guarantee by such
Person of any indebtedness of any other Person.
"Initial Purchaser" means Donaldson, Lufkin & Jenrette Securities
Corporation.
"Investments" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including guarantees of Indebtedness or other obligations),
advances or capital contributions (excluding any advances to customers and any
commission, travel, moving, relocation or similar advances to officers and
employees made in the ordinary course of business), purchases or other
acquisitions for consideration of Indebtedness, Equity Interests or other
securities, together with all items that are or would be classified as
investments on a balance sheet prepared in accordance with GAAP. If the Company
or any Restricted Subsidiary of the Company sells or otherwise disposes of any
Equity Interests of any direct or indirect Restricted Subsidiary of the Company
such that, after giving effect to any such sale or disposition, such Person is
no longer a Restricted Subsidiary of the Company, the Company shall be deemed
to have made an Investment on the date of any such sale or disposition equal to
the fair market value of the Equity Interests of such Restricted Subsidiary not
sold or disposed of in an amount determined as provided in the final paragraph
of the covenant described above under the caption "Certain Covenants --
Restricted Payments."
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, any lease
in the nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement
under the Uniform Commercial Code (or equivalent statutes) of any jurisdiction)
(other than with respect to an operating lease).
"Net Income" means, with respect to the Company, the net income or loss of
the Company and its Restricted Subsidiaries, determined in accordance with GAAP
and before any reduction in respect of preferred stock dividends, excluding,
however, (i) any gain (but not loss), together with any related provision for
taxes on such gain (but not loss), realized in connection with (a) any Asset
Sale (including, without limitation, dispositions pursuant to sale and
leaseback transactions), or (b) the disposition of any securities by the
Company or any of its Restricted Subsidiaries or the extinguishment of any
Indebtedness of the Company or any of its Restricted Subsidiaries, and (ii) any
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extraordinary or nonrecurring gain (but not loss), together with any related
provision for taxes on such extraordinary or nonrecurring gain (but not loss).
"Net Proceeds" means the aggregate cash proceeds received by the Company or
any of its Restricted Subsidiaries in respect of any Asset Sale (including,
without limitation, any cash received upon the sale or other disposition of any
non-cash consideration received in any Asset Sale), net of the direct costs
relating to such Asset Sale (including, without limitation, legal, accounting
and investment banking fees, and sales commissions) and any travel or
relocation expenses incurred as a result thereof, taxes (including income
taxes) paid or payable as a result thereof, or as a result of required
prepayments or repayments of Indebtedness resulting in the permanent reduction
thereof (after taking into account any available tax credits or deductions and
any tax sharing arrangements), amounts required to be applied to repay
Indebtedness secured by a Lien on such assets (other than pursuant to the New
Credit Facility) and any reserve for adjustment in respect of the sale price of
such asset or assets established in accordance with GAAP.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, costs, expenses, damages and other
liabilities payable under the documentation governing any Indebtedness.
"Permitted Investments" means: (i) any Investments in the Company or in a
Restricted Subsidiary (other than an Excluded Restricted Subsidiary) of the
Company, (ii) any Investments in Cash Equivalents, to the extent that any such
Investment is not made for speculative investment purposes, (iii) any
Investments by the Company or any Restricted Subsidiary of the Company in a
Person, if as a result of any such Investment (a) such Person becomes a
Restricted Subsidiary (other than an Excluded Restricted Subsidiary) of the
Company, or (b) such Person is merged, consolidated or amalgamated with or
into, or transfers or conveys substantially all of its assets to, or is
liquidated into, the Company or a Restricted Subsidiary (other than an Excluded
Restricted Subsidiary) of the Company, (iv) any Restricted Investment made as a
result of the receipt of non-cash consideration from an Asset Sale that was
made pursuant to and in compliance with the covenant described above under the
caption "Certain Covenants -- Asset Sales", (v) any acquisition of assets in
exchange for the issuance of Equity Interests (other than Disqualified Stock)
of the Company, (vi) loans and advances to officers, directors and employees
for business-related travel expenses, moving or relocation expenses and other
similar expenses, in each case incurred in the ordinary course of business;
(vii) Hedging Obligations included in the definition of Permitted Debt, (viii)
advances to employees not exceeding $500,000 outstanding at any one time, in
the aggregate, (ix) Investments, including the acquisition of assets, Equity
Interests or other securities, the payment for which consists of Equity
Interests of the Company (exclusive of Disqualified Stock), and (x) Investments
by the Company or its Restricted Subsidiaries in its Excluded Restricted
Subsidiaries, the aggregate outstanding amount of which does not exceed 7.5% of
the first $500 million of consolidated total assets of the Company and its
Restricted Subsidiaries plus 5% of such total assets in excess of $500 million.
"Permitted Junior Securities" means Equity Interests in the Company or
unsecured debt securities that (i) are subordinated to all Senior Debt (and any
debt securities issued in exchange for Senior Debt) on terms at least as
favorable to the Senior Debt as those contained in Article 11 of the Indenture,
(ii) may be guaranteed by the Subsidiary Guarantors on terms at least as
favorable to the Senior Debt as those contained in the Subsidiary Guarantees,
and (iii) have a final maturity and weighted average life to maturity which is
the same as or greater than, the Notes.
"Permitted Liens" means: (i) Liens securing Senior Debt or Senior Debt of
any Restricted Subsidiary that are permitted by the terms of the Indenture to
be incurred, (ii) Liens in favor of the Company or any Restricted Subsidiary,
(iii) Liens on property of a Person existing at the time such Person is merged
into or consolidated with the Company or any Restricted Subsidiary of the
Company; provided that such Liens were in existence prior to the contemplation
of such merger or consolidation and do not extend to any assets other than
those of the Person merged into or consolidated with the Company or any
Restricted Subsidiary, (iv) Liens on property existing at the time of
acquisition thereof by the Company or any Restricted Subsidiary of the Company,
provided that such Liens were in existence prior to the contemplation of such
acquisition, (v) Liens to secure the performance of statutory obligations,
surety or appeal bonds, performance bonds or other obligations of a like nature
incurred in the ordinary course of business, (vi) Liens existing on the date of
the Indenture, (vii) Liens to secure Indebtedness (including Capital Lease
Obligations) permitted by clause (viii) of the second paragraph of the covenant
entitled "Incurrence of Indebtedness and Issuance of Preferred Stock" covering
only the assets acquired with such Indebtedness and accessions, modifications,
products and proceeds thereof, (viii) Liens for taxes, assessments or
governmental charges
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or claims that are not yet delinquent or that are being contested in good faith
by appropriate proceedings promptly instituted and diligently concluded;
provided that any reserve or other appropriate provision as shall be required
in conformity with GAAP shall have been made therefor, (ix) encumbrances and
restrictions consisting of zoning restrictions, easements, or other
restrictions on the use of real property, which do not materially impair the
use thereof for the purpose intended, and none of which is violated by existing
or proposed structures or land use, and (x) Liens incurred in the ordinary
course of business of the Company or any Restricted Subsidiary with respect to
obligations that do not exceed $5.0 million at any one time outstanding and
that (a) are not incurred in connection with the borrowing of money or the
obtaining of advances or credit (other than trade credit in the ordinary course
of business), and (b) do not in the aggregate materially detract from the value
of the property or materially impair the use thereof in the operation of
business by the Company or such Restricted Subsidiary.
"Permitted Refinancing Indebtedness" means any Indebtedness of the Company
or any Restricted Subsidiary issued in exchange for, or the net proceeds of
which are used to extend, refinance, renew, replace, defease or refund other
Indebtedness of the Company or any Restricted Subsidiary, provided that: (i)
the principal amount (or accreted value, if applicable) of such Permitted
Refinancing Indebtedness does not exceed the principal amount of (or accreted
value, if applicable), plus accrued interest on, the Indebtedness so extended,
refinanced, renewed, replaced, defeased or refunded (plus the amount of
premiums, prepayments, penalties, and reasonable expenses incurred in
connection therewith), (ii) such Permitted Refinancing Indebtedness has a final
maturity date equal to or later than the final maturity date of, and has a
Weighted Average Life to Maturity equal to or greater than the Weighted Average
Life to Maturity of, the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded, (iii) if the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded is subordinated in right of
payment to the Notes, such Permitted Refinancing Indebtedness has a final
maturity date later than the final maturity date of, and is subordinated in
right of payment to, the Notes on terms at least as favorable to the Holders of
Notes as those contained in the documentation governing the Indebtedness being
extended, refinanced, renewed, replaced, defeased or refunded, and (iv) such
Indebtedness is incurred either by the Company or by the Restricted Subsidiary
who is the obligor on the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded.
"Principals" means Citicorp Venture Capital, Ltd., BT Capital Partners,
Inc., LKCM Venture Partners I Ltd., World Equity Partners, L.P., CCT Partners
II, L.P., HES Management, Inc., Heller Financial, Inc. and B. Tom Carter, Jr.
"Related Party" with respect to any Principal means (i) any controlling
stockholder, 80% (or more) owned Subsidiary, or any spouse or immediate family
member (in the case of an individual) of such Principal, or (ii) any trust,
corporation, partnership or other entity, the beneficiaries, stockholders,
partners, owners or Persons beneficially holding an 80% or more controlling
interest of which consist of such Principal and/or such other Persons referred
to in the immediately preceding clause (i).
"Representative" means (a) the administrative agent under the New Credit
Facility or (b) the indenture trustee or other trustee, agent or representative
for any other Senior Debt.
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Subsidiary" means (a) each direct or indirect Subsidiary of the
Company existing on the date of the Indenture and (b) any other direct or
indirect Subsidiary of the Company formed, acquired or existing after the date
of the Indenture, in each case which is not designated by the Board of
Directors as an "Unrestricted Subsidiary."
"Senior Debt" means (i) all Obligations (including without limitation
interest accruing after a filing of a petition in bankruptcy whether or not
such interest is an allowable claim in such proceeding) of the Company under
the New Credit Facility, and (ii) any other Indebtedness permitted to be
incurred by the Company under the terms of the Indenture, unless the instrument
under which such Indebtedness is incurred expressly provides that it is on a
parity with or subordinated in right of payment to the Notes. Notwithstanding
anything to the contrary in the foregoing, Senior Debt will not include (w) any
liability for federal, state, local or other taxes owed or owing by the
Company, (x) any Indebtedness of the Company to any of its Subsidiaries or
other Affiliates, (y) any trade payables or instruments evidencing such
liability, or (z) any Indebtedness that is incurred in violation of the
Indenture.
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"Senior Debt of the Subsidiary Guarantor" means (i) all Guarantees by the
Subsidiary Guarantor of Obligations (including without limitation interest
accruing after a filing of a petition in bankruptcy whether or not such
interest is an allowable claim in such proceeding) of the Company under the New
Credit Facility and (ii) any Indebtedness permitted to be incurred by the
Subsidiary Guarantor under the terms of the Indenture, unless the instrument
under which such Indebtedness is incurred expressly provides that such
Guarantee is on a parity with or subordinated in right of payment to the
Subsidiary Guarantees. Notwithstanding anything to the contrary in the
foregoing, Senior Debt of the Subsidiary Guarantor will not include (x) any
liability for federal, state, local or other taxes owed by the Company, any of
its Subsidiaries or other Affiliates thereof, (y) any trade payables or
instruments evidencing such liability, or (z) any Indebtedness that is incurred
in violation of the Indenture.
"Significant Subsidiary" means any Restricted Subsidiary that would be a
"significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X,
promulgated pursuant to the Securities Act, as such Regulation is in effect on
the date hereof.
"Stated Maturity" means, with respect to any installment of interest or
principal on any series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness or as amended on or prior to the date of this
Indenture, and shall not include any contingent obligations to repay, redeem or
repurchase any such interest or principal prior to the date originally
scheduled for the payment thereof.
"Stockholders Agreement" means the Stockholders Agreement dated as of
December 15, 1993, and as amended on January 10, 1995, by and among Parent and
all of its stockholders.
"Subsidiary" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Capital Stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
Person or one or more of the other Subsidiaries of that Person (or a
combination thereof), and (ii) any partnership (a) the sole general partner or
the managing general partner of which is such Person or a Subsidiary of such
Person or (b) the only general partners of which are such Person or of one or
more Subsidiaries of such Person (or any combination thereof).
"Subsidiary Guarantors" means HII and all future direct or indirect
subsidiaries of the Company or any Subsidiary Guarantor that execute a
Subsidiary Guarantee in accordance with the provisions of the Indenture, and
their respective successors and assigns.
"Unrestricted Subsidiary" means (i) any Subsidiary that is designated by
the Board of Directors as an Unrestricted Subsidiary in accordance with the
"Unrestricted Subsidiaries" covenant, and (ii) any Subsidiary of an
Unrestricted Subsidiary.
"Voting Stock" of any Person as of any date means the Capital Stock of such
Person that is at the time entitled to vote in the election of the Board of
Directors of such Person.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (i) the sum of the
products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse
between such date and the making of such payment, by (ii) the then outstanding
principal amount of such Indebtedness.
"Wholly-Owned Restricted Subsidiary" of any Person means any Restricted
Subsidiary of such Person all of the outstanding Capital Stock or other
ownership interests of which (other than directors' qualifying shares or any
similar de minimis requirements of applicable law) shall at the time be owned
by such Person or by one or more Wholly-Owned Restricted Subsidiaries of such
Person.
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CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS
In the opinion of Haynes and Boone, LLP, special counsel to the Company,
the following discussion describes the material federal income tax consequences
expected to result to holders whose Old Notes are exchanged for New Notes in
the Exchange Offer. Such opinion is based upon current provisions of the
Internal Revenue Code of 1986, as amended, applicable Treasury regulations,
judicial authority and administrative rulings and practice. There can be no
assurance that the Internal Revenue Service (the "Service") will not take a
contrary view, and no ruling from the Service has been or will be sought with
respect to the Exchange Offer. Legislative, judicial administrative changes or
interpretations may be forthcoming that could alter or modify the statements
and conclusions set forth herein. Any such changes or interpretations may or
may not be retroactive and could affect the tax consequences to holders.
Certain holders (including insurance companies, tax exempt organizations,
financial institutions, broker-dealers, foreign corporations and persons who
are not citizens or residents of the United States) may be subject to special
rules not discussed below. EACH HOLDER OF OLD NOTES SHOULD CONSULT ITS OWN TAX
ADVISOR AS TO THE PARTICULAR TAX CONSEQUENCES OF EXCHANGING OLD NOTES FOR NEW
NOTES, INCLUDING THE APPLICABILITY AND EFFECT OF ANY STATE, LOCAL OR FOREIGN
LAWS.
The exchange of Old Notes for New Notes will be treated as a "non-event"
for federal income tax purposes because the New Notes will not be considered to
differ materially in kind or extent from the Old Notes. As a result, no
material federal income tax consequences will result to holders exchanging Old
Notes for New Notes.
PLAN OF DISTRIBUTION
Based on an interpretation by the Commission's staff set forth in no-action
letters issued to third parties unrelated to the Company, the Company believes
that, with the exceptions set forth below, New Notes issued pursuant to the
Exchange Offer in exchange for Old Notes may be offered for resale, resold and
otherwise transferred by any person receiving such New Notes, whether or not
such person is the holder (other than any such holder or such other person
which is an "affiliate" of the Company or the Subsidiary Guarantor within the
meaning of Rule 405 under the Securities Act), without compliance with the
registration and prospectus delivery provisions of the Securities Act; provided
that, the New Notes are acquired in the ordinary course of business of the
holder or such other person and neither the holder nor such other person is
engaging or intends to engage in a distribution of the New Notes or has an
arrangement or understanding with any person to participate in the distribution
of such New Notes. The Company, however, has not sought, and does not intend to
seek, its own no-action letter and there can be no assurance that the
Commission's staff would make a similar determination with respect to the
Exchange Offer. Any holder who tenders in the Exchange Offer for the purpose of
participating in a distribution of the New Notes cannot rely on this
interpretation by the Commission's staff and must comply with the registration
and prospectus delivery requirements of the Securities Act in connection with a
secondary resale transaction.
Each broker-dealer that holds Old Notes that were acquired by that
broker-dealer as a result of market-making activities or other trading
activities may exchange such Old Notes (other than for Old Notes that were
acquired directly from the Company or any affiliate of the Company) pursuant to
the Exchange Offer; provided however, such broker-dealer may be deemed to be an
"underwriter" within the meaning of the Securities Act and must, therefore,
deliver a prospectus meeting the requirements of the Securities Act in
connection with its initial resale of each New Note received in the Exchange
Offer. This Prospectus, as it may be amended or supplemented from time to
time, may be used by a broker-dealer in connection with resales of New Notes in
such circumstances. The Company and the Subsidiary Guarantor have agreed that
they will make this Prospectus, as amended or supplemented, available to any
broker-dealer for use in connection with any such resale for a period of one
year following the Expiration Date, or such shorter period ending on the date
that all New Notes received in the Exchange Offer have been resold by any such
broker-dealer.
Neither the Company nor the Subsidiary Guarantor will receive any proceeds
from any sale of New Notes by broker-dealers. New Notes received by
broker-dealers for their own account pursuant to the Exchange Offer may be sold
from time to time in one or more transactions in the over-the-counter market,
in negotiated transactions, through the writing of options on the New Notes or
a combination of such methods of resale, at market prices prevailing at the
time of resale, at prices related to such prevailing market prices or
negotiated prices. Any such resale may be made directly to purchasers or to or
through brokers or dealers who may receive compensation in the form of
commissions or concessions from any such broker-dealer or the purchasers of any
such New Notes. Because
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any broker-dealer that resells New Notes that were received by it for its own
account pursuant to the Exchange Offer and any broker or dealer that
participates in a distribution of such New Notes may be deemed to be an
"underwriter" within the meaning of the Securities Act, any profit on any such
resale of New Notes and any commissions or concessions received by any such
persons may be deemed to be underwriting compensation under the Securities Act.
The Letter of Transmittal states that, by acknowledging that it will deliver,
and by delivering, a prospectus, a broker-dealer will not be deemed to admit
that it is an "underwriter" within the meaning of the Securities Act.
The Company will promptly send additional copies of this Prospectus and any
amendment or supplement to this Prospectus to any broker-dealer that requests
such documents in the Letter of Transmittal for such period of time as such
persons must comply with such requirements in order to resell the New Notes.
The Company and the Subsidiary Guarantor have agreed to pay all expenses
relating to their performance under the Registration Rights Agreement,
including the costs of providing this Prospectus, and to indemnify the holders
of the Old Notes against certain liabilities, including liabilities under the
Securities Act.
LEGAL MATTERS
The validity of the New Notes offered hereby will be passed upon for the
Company by Haynes and Boone, LLP, Dallas, Texas.
EXPERTS
The consolidated financial statements of HydroChem Industrial Services,
Inc. as of December 31, 1995 and 1996 and for each of the three years in the
period ended December 31, 1996, appearing in this Prospectus have been audited
by Ernst & Young LLP, independent auditors, as set forth in their report
thereon appearing elsewhere herein and in the Registration Statement, and are
included in reliance upon such report given upon the authority of such firm as
experts in accounting and auditing.
AVAILABLE INFORMATION
The Company has filed with the Commission a registration statement under
the Securities Act with respect to the New Notes offered hereby. As permitted
by the rules and regulations of the Commission, this Prospectus does not
contain all of the information set forth in the Registration Statement. For
further information with respect to the Company and the New Notes offered
hereby, reference is made to the Registration Statement, including the exhibits
and schedules filed therewith. Statements contained in this Prospectus
concerning the provisions of any contract, agreement or other document referred
to herein or therein are not necessarily complete, but contain a summary of the
material terms of such contracts, agreements or other documents. With respect
to each contract, agreement or other document filed as an exhibit to the
Registration Statement, reference is made to the exhibit for the complete
contents of the exhibit, and each statement concerning its provisions is
qualified in its entirety by such reference. The Registration Statement may be
inspected, without charge, at the offices of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549 and at its regional offices at 7 World
Trade Center, New York, New York, 10048 and Citicorp Center, 500 West Madison
Street, Chicago, Illinois 60661-2551. Copies of such materials may also by
obtained by mail at prescribed rates from the Public Reference Section of the
Commission at its principal office at 450 Fifth Street, N.W., Washington, D.C.
20549. Copies of such materials may also be obtained from the web site that
the Commission maintains at www.sec.gov.
As a result of the Exchange Offer, the Company will become subject to the
informational requirements of the Exchange Act. Pursuant to the Indenture, the
Company has agreed that, whether or not required by the rules and regulations
of the Commission, so long as any Notes are outstanding, the Company shall
furnish to the registered holders of Notes copies of (i) all quarterly and
annual financial information that would be required to be contained in a filing
with the Commission on Forms 10-Q and 10-K if the Company were required to file
such Forms, including a "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and, with respect to the annual
information only, a report thereon by the Company's certified independent
accountants and (ii) all current reports that would be required to be filed
with the Commission on Form 8-K if the Company were required to file such
reports. In addition, whether or not required by the rules and regulations of
the Commission, the Company will file a copy of all such information and
reports with the Commission for public availability (unless the Commission will
not accept such a filing) within the time periods that would have been
applicable had the Company been subject to such rules and regulation and make
such information available to securities analysts and prospective investors
upon request.
-78-
<PAGE> 79
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
CONSOLIDATED FINANCIAL STATEMENTS:
<S> <C>
Report of Independent Auditors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-2
Consolidated Balance Sheets as of December 31, 1995 and 1996 . . . . . . . . . . . . . . . . . . . . . F-3
Consolidated Statements of Operations for each of the years ended F-4
December 31, 1994, 1995 and 1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Stockholder's Equity for each of the years ended F-5
December 31, 1994, 1995 and 1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Cash Flows for each of the years ended F-6
December 31, 1994, 1995 and 1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-7
INTERIM CONSOLIDATED FINANCIAL STATEMENTS:
Consolidated Balance Sheets as of December 31, 1996, and June 30, 1997 (unaudited) . . . . . . . . . F-14
Consolidated Statements of Operations for each of the three month periods F-15
ended June 30, 1996 and 1997 (unaudited) . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Operations for each of the six month periods F-16
ended June 30, 1996 and 1997 (unaudited) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statement of Stockholder's Equity for the six month period F-17
ended June 30, 1997 (unaudited) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Cash Flows for each of the three month periods F-18
ended June 30, 1996 and 1997 (unaudited) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Cash Flows for each of the six month periods ended F-19
June 30, 1996 and 1997 (unaudited) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Notes to Consolidated Financial Statements (unaudited) . . . . . . . . . . . . . . . . . . . . . . . . F-20
</TABLE>
F-1
<PAGE> 80
REPORT OF INDEPENDENT AUDITORS
Board of Directors
HydroChem Industrial Services, Inc.
We have audited the accompanying consolidated balance sheets of HydroChem
Industrial Services, Inc. and Subsidiary (the "Company") as of December 31,
1995 and 1996, and the related consolidated statements of operations,
stockholder's equity and cash flows for each of the three years in the period
ended December 31, 1996. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of HydroChem
Industrial Services, Inc. and Subsidiary at December 31, 1995 and 1996, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1996, in conformity with generally
accepted accounting principles.
ERNST & YOUNG LLP
Houston, Texas
February 5, 1997
F-2
<PAGE> 81
HYDROCHEM INDUSTRIAL SERVICES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
------------
1995 1996
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Current assets:
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,088 $ 671
Receivables, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27,549 24,357
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,139 3,569
Prepaid expenses and other current assets . . . . . . . . . . . . . . . . . . . . 1,210 1,140
Deferred income taxes (Note 8) . . . . . . . . . . . . . . . . . . . . . . . . . 1,064 1,791
-------- --------
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . 34,050 31,528
Property and equipment, at cost (Note 4) . . . . . . . . . . . . . . . . . . . . . 49,074 54,772
Accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
-------- --------
(10,341) (17,360)
-------- --------
38,733 37,412
Intangible assets, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48,433 46,582
-------- --------
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $121,216 $115,522
======== ========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,927 $ 5,704
Income taxes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 385 12
Accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,527 7,971
Current portion of long-term debt (Note 5) . . . . . . . . . . . . . . . . . . . 3,250 4,625
-------- --------
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . 16,089 18,312
Long-term debt (Note 5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73,644 63,700
Deferred income taxes (Note 8) . . . . . . . . . . . . . . . . . . . . . . . . . . 6,258 7,740
Commitments and contingencies (Note 9)
Stockholder's equity:
Common stock, $.01 par value:
1,000 shares authorized, 100 shares outstanding . . . . . . . . . . . . . . . 1 1
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,670 19,670
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,554 6,099
-------- --------
Total stockholder's equity . . . . . . . . . . . . . . . . . . . . . . . 25,225 25,770
-------- --------
Total liabilities and stockholder's equity . . . . . . . . . . . . . . . $121,216 $115,522
======== ========
</TABLE>
See accompanying notes.
F-3
<PAGE> 82
HYDROCHEM INDUSTRIAL SERVICES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1994 1995 1996
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $101,103 $156,484 $156,003
Cost of revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64,582 94,629 94,373
-------- -------- --------
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36,521 61,855 61,630
Selling, general and administrative expense . . . . . . . . . . . . . . 20,504 39,465 42,103
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,930 6,752 7,765
-------- -------- --------
Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,087 15,638 11,762
Other (income) expense:
Interest expense, net . . . . . . . . . . . . . . . . . . . . . . . . 5,605 8,693 7,920
Special charge (Note 7) . . . . . . . . . . . . . . . . . . . . . . . -- -- 511
Other income, net . . . . . . . . . . . . . . . . . . . . . . . . . . (78) (365) (21)
Amortization of intangibles . . . . . . . . . . . . . . . . . . . . . 1,151 1,407 1,523
-------- -------- --------
Income before taxes . . . . . . . . . . . . . . . . . . . . . . . . . . 5,409 5,903 1,829
Income tax provision (Note 8) . . . . . . . . . . . . . . . . . . . . . 2,459 3,052 1,284
-------- -------- --------
Net income . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,950 $ 2,851 $ 545
======== ======== ========
</TABLE>
See accompanying notes.
F-4
<PAGE> 83
HYDROCHEM INDUSTRIAL SERVICES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
<TABLE>
<CAPTION>
ADDITIONAL RETAINED
COMMON PAID-IN EARNINGS
STOCK CAPITAL (DEFICIT) TOTAL
------- ------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Balance at December 31, 1993 . . . . . . . . . . . . . . . $ 1 $14,983 $ (247) $14,737
Net income . . . . . . . . . . . . . . . . . . . . . . . -- -- 2,950 2,950
------- ------- ------- -------
Balance at December 31, 1994 . . . . . . . . . . . . . . . 1 14,983 2,703 17,687
Equity contribution from parent . . . . . . . . . . . . . -- 4,000 -- 4,000
Value of warrants issued (Note 6) . . . . . . . . . . . . -- 687 -- 687
Net income . . . . . . . . . . . . . . . . . . . . . . . -- -- 2,851 2,851
------- ------- ------- -------
Balance at December 31, 1995 . . . . . . . . . . . . . . . 1 19,670 5,554 25,225
Net income . . . . . . . . . . . . . . . . . . . . . . . -- -- 545 545
------- ------- ------- -------
Balance at December 31, 1996 . . . . . . . . . . . . . . . $ 1 $19,670 $ 6,099 $25,770
======= ======= ======= =======
</TABLE>
See accompanying notes.
F-5
<PAGE> 84
HYDROCHEM INDUSTRIAL SERVICES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1994 1995 1996
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Operating activities
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,950 $ 2,851 $ 545
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,930 6,752 7,765
Amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,151 1,407 1,523
Amortization of deferred financing costs . . . . . . . . . . . . . 251 484 584
Deferred income tax expense . . . . . . . . . . . . . . . . . . . 1,745 2,468 755
Loss (gain) on sale of property and equipment . . . . . . . . . . (63) (296) 9
Changes in operating assets and liabilities:
Receivables, net . . . . . . . . . . . . . . . . . . . . . . . . . (3,476) (2,256) 3,192
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . (975) 26 (430)
Prepaid expenses and other current assets . . . . . . . . . . . . (183) 733 70
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . 2,742 (2,060) 777
Income taxes payable . . . . . . . . . . . . . . . . . . . . . . . 463 (263) (373)
Accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . (12) 276 444
-------- -------- --------
Net cash provided by operating activities . . . . . . . . . . 8,523 10,122 14,861
Investing activities
Purchase of assets, net of cash acquired . . . . . . . . . . . . . . (2,597) (31,750) (256)
Expenditures for property and equipment . . . . . . . . . . . . . . . (5,576) (8,493) (6,829)
Proceeds from sale of property and equipment . . . . . . . . . . . . 168 525 376
-------- -------- --------
Net cash used in investing activities . . . . . . . . . . . . (8,005) (39,718) (6,709)
Financing activities
Proceeds from (repayments of) long-term debt, net . . . . . . . . . . (2,281) 24,155 (8,569)
Equity contribution from parent . . . . . . . . . . . . . . . . . . . -- 4,000 --
-------- -------- --------
Net cash provided by (used in) financing
activities . . . . . . . . . . . . . . . . . . . . . . . . (2,281) 28,155 (8,569)
-------- -------- --------
Net decrease in cash . . . . . . . . . . . . . . . . . . . . . . . . . (1,763) (1,441) (417)
Cash at beginning of year . . . . . . . . . . . . . . . . . . . . . . . 4,292 2,529 1,088
-------- -------- --------
Cash at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,529 $ 1,088 $ 671
======== ======== ========
Supplemental disclosure
Cash paid during the year for interest . . . . . . . . . . . . . . . $ 3,554 $ 8,640 $ 7,409
Cash paid during the year for income taxes,
net of refunds . . . . . . . . . . . . . . . . . . . . . . . . . . $ -- $ 852 $ 902
Discount recognized on note issued to seller . . . . . . . . . . . . $ 1,980 $ -- $ --
</TABLE>
See accompanying notes.
F-6
<PAGE> 85
HYDROCHEM INDUSTRIAL SERVICES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
1. ORGANIZATION, FORMATION AND BASIS OF PRESENTATION
The consolidated financial statements include the accounts of HydroChem
Industrial Services, Inc. ("HydroChem") and its wholly owned subsidiary,
HydroChem International, Inc. ("International"), collectively referred to as
the "Company." HydroChem is a wholly owned subsidiary of HydroChem Holding,
Inc. ("Holding").
HydroChem and International are engaged in the business of providing
industrial cleaning services to a wide range of processing industries,
including petrochemical plants, oil refineries, electric utilities, pulp and
paper mills, rubber plants, and aluminum plants. This type of work is typically
recurring maintenance to improve or sustain the operating efficiencies and
extend the useful lives of process equipment and facilities. Services provided
include high-pressure water cleaning, chemical cleaning, industrial vacuuming,
waste minimization, commissioning, and other specialized services.
2. SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of
HydroChem and International. All significant intercompany accounts and
transactions have been eliminated in consolidation.
Inventories
Inventories are stated at the lower of cost (weighted-average cost) or
market.
Property and Equipment
Property and equipment are recorded at cost. Costs assigned to property and
equipment of acquired businesses are based on estimated fair value at the date
of acquisition. Depreciation is provided for using the straight-line method
over estimated useful lives ranging from 3 to 20 years.
When property is retired or otherwise disposed of, the related cost and
accumulated depreciation are removed from the accounts and any resulting gain
or loss is reflected in income.
Intangible Assets
Intangible assets, which relate primarily to costs in excess of the fair
value of net assets acquired, are primarily being amortized over 40 years on a
straight-line basis. Intangible assets also include costs allocated to other
specifically identifiable assets arising from business acquisitions which are
being amortized on a straight-line basis over their estimated useful lives,
which range from 3 to 40 years. These intangible assets amounted to $44,331,000
and $43,064,000, net of accumulated amortization of $2,595,000 and $4,116,000,
at December 31, 1995 and 1996, respectively. The Company continually evaluates
whether events or circumstances have occurred that indicate the remaining
estimated useful lives of the intangible assets may warrant revision or that
the remaining balances may not be recoverable. Should factors indicate that the
intangible assets should be evaluated for possible impairment, the Company
would use an estimate of the acquired business's undiscounted future cash flows
compared to the carrying value of the assets to determine whether the assets
are deemed impaired. Management believes there have been no events or
circumstances which warrant revision to the remaining useful lives or which
affect the recoverability of the Company's intangible assets.
Other intangibles include deferred financing costs of $4,102,000 and
$3,518,000, net of accumulated amortization of $563,000 and $1,149,000, at
December 31, 1995 and 1996, respectively, which are being amortized over
financing terms of seven to ten years. Amortization of deferred financing costs
is recorded with interest expense.
Income Taxes
Income taxes are provided based on the liability method of accounting.
Deferred income taxes are recorded to reflect the tax consequences of
differences between the financial statement basis and the tax basis of assets
and liabilities.
F-7
<PAGE> 86
Stock-Based Compensation
The Company grants stock options to employees for a fixed number of shares
with an exercise price no less than the fair value of the shares at the date of
grant. The Company accounts for stock option grants in accordance with APB
Opinion 25, Accounting for Stock Issued to Employees, and, accordingly,
recognizes no compensation expense for the stock option grants.
Reclassifications
Certain 1994 and 1995 amounts have been reclassified to conform with the
1996 presentation.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Concentration of Credit Risk
During 1994 and 1995, one customer accounted for approximately 11% of
consolidated revenues, which resulted in an increased exposure to credit risk
because of a proportionately higher concentration of receivables being sourced
from one customer. The Company believes its portfolio of accounts receivable is
well diversified and, as a result, its credit risks are minimal. The Company
continually evaluates the creditworthiness of its customers and monitors
accounts on a periodic basis, but typically does not require collateral.
3. ACQUISITION
On January 10, 1995, HydroChem purchased substantially all of the assets
and assumed certain liabilities of Halliburton Industrial Services ("HIS") for
$24,773,000 in cash, excluding $2,255,000 of direct cash acquisition costs.
HIS was a leading provider of industrial cleaning services to the refining,
petrochemical, utility and pulp and paper industries. The acquisition was
financed through a $4,000,000 private placement of Holding's Class A and Class
B Common Stock, the proceeds of which were subsequently contributed to
HydroChem, and additional borrowings under an amended $76,000,000 senior credit
facility. Direct costs of the acquisition totaled $3,848,000. The assets
acquired primarily included property and equipment, accounts receivable,
customer lists and inventories.
The above-mentioned transaction has been accounted for using the purchase
method of accounting and, accordingly, the operating results have been included
in the consolidated financial statements since the acquisition date. The cost
of the transaction has been allocated on the basis of the estimated fair market
value of the assets acquired and liabilities assumed.
The following unaudited pro forma results of operations have been prepared
assuming the acquisition described above had occurred on January 1, 1994. The
unaudited pro forma results are not necessarily indicative of results of future
operations nor of results that would have occurred had the acquisition been
consummated as of the beginning of 1994. The selected pro forma results of HIS
operations for the year ended December 31, 1994 is presented below. There is no
significant effect on 1995 since the acquisition was consummated on January 10,
1995.
<TABLE>
<S> <C>
Revenue . . . . . . . . . . . . . . . . . . . . . $39,980,000
Net income . . . . . . . . . . . . . . . . . . . $ 263,000
</TABLE>
4. PROPERTY AND EQUIPMENT
Property and equipment at December 31, 1995 and 1996 consisted of the
following (in thousands):
<TABLE>
<CAPTION>
1995 1996
---- ----
<S> <C> <C>
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 617 $ 617
Office facilities, furniture, fixtures and computer equipment . . . . . . . . . . . 3,589 4,747
Machinery and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40,932 46,043
Vehicles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,243 2,254
Construction in progress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,693 1,111
----- -----
$49,074 $54,772
======= =======
</TABLE>
F-8
<PAGE> 87
5. LONG-TERM DEBT
Senior Debt
Senior debt at December 31, 1995 and 1996 consisted of the following (in
thousands):
<TABLE>
<CAPTION>
1995 1996
---- ----
<S> <C> <C>
Revolving loan . . . . . . . . . . . . . . . . $10,769 $ 5,450
Term loan A . . . . . . . . . . . . . . . . . . 23,125 19,875
Term loan B . . . . . . . . . . . . . . . . . . 25,000 25,000
------ ------
Total senior debt . . . . . . . . . . . . . . . 58,894 50,325
Less current portion of senior debt . . . . . . 3,250 4,625
----- -----
$55,644 $45,700
======= =======
</TABLE>
HydroChem's senior credit facility includes a revolving loan, a term loan A
and a term loan B. The revolving loan bears interest at prime plus 1.50% per
annum or LIBOR plus 3.25% per annum (9.24% and 9.46% at December 31, 1995 and
1996, respectively). The revolving loan allows for borrowings up to $26,000,000
based on a borrowing base, as defined, and matures on January 10, 2000. The
term loan A bears interest at prime plus 1.50% per annum or LIBOR plus 3.25%
per annum (8.99% and 8.92% at December 31, 1995 and 1996, respectively). The
term loan A principal is due in specified quarterly payments through maturity
on January 1, 2000. Term loan B bears interest at prime plus 2.00% per annum or
LIBOR plus 3.75% per annum (9.70% and 9.39% at December 31, 1995 and 1996,
respectively), and principal is due in specified quarterly payments beginning
April 1, 2000 through maturity on July 1, 2002.
A commitment fee of .5% per annum is payable on the unused portion of the
revolving commitment. The agreement also allows for letters of credit and
guarantees to be issued on behalf of HydroChem. Outstanding letters of credit,
which amounted to $1,017,000 and $1,606,000 at December 31, 1995 and 1996,
respectively, reduce the borrowing base. A fee of 2% per annum of the amount of
outstanding letters of credit and guarantees is due quarterly.
The term and revolving loans are secured by all assets of the Company and
Holding. Customary financial covenants and restrictions are included in the
credit agreement.
Maturities of senior debt for years ended December 31 are as follows (in
thousands):
<TABLE>
<S> <C>
1997 . . . . . . . . . . . . . . . . . . . . $ 4,625
1998 . . . . . . . . . . . . . . . . . . . . 5,750
1999 . . . . . . . . . . . . . . . . . . . . 7,500
2000 . . . . . . . . . . . . . . . . . . . . 13,450
2001 . . . . . . . . . . . . . . . . . . . . 9,500
Thereafter . . . . . . . . . . . . . . . . . 9,500
-----
$50,325
=======
</TABLE>
Senior Subordinated Debt
On December 15, 1993, HydroChem entered into a Senior Subordinated Credit
Agreement in the principal amount of $18,000,000. The note bears interest at
12% per annum and requires a principal payment of $9,000,000 on July 1, 2003
and a final payment of $9,000,000 on July 1, 2004, with interest being paid
semiannually on each January 1 and July 1. The credit agreement restricts
dividend payments and includes customary financial covenants.
6. STOCKHOLDER'S EQUITY
A warrant has been issued by Holding on behalf of HydroChem to provide an
option to purchase up to 496,623 shares of Holding's Class A Common Stock at an
exercise price of $.01 per share. This warrant currently expires on July 1,
2004 and has not been exercised as of December 31, 1996. An additional warrant
has been issued which provides an option to purchase up to 310,390 shares of
Holding's Class C Common Stock at an exercise price of $.01 per share. This
warrant expires on January 10, 2005 and has not been exercised as of December
31, 1996. The value of these warrants is associated with deferred financing
costs and is included in other intangible assets.
F-9
<PAGE> 88
7. SPECIAL CHARGE
In April 1996, the Company signed a letter of intent to merge with a
publicly traded company. The terms of the letter of intent included provisions
which would have resulted in a transfer of a majority of the shares of the
combined companies to Holding's stockholders. Upon subsequent negotiations and
the completion of due diligence, it was determined that the merger would not be
beneficial to both parties and it was agreed to terminate negotiations. The
Company incurred $511,000 of expenses relating to legal, accounting and
financial services which were provided in connection with the negotiation and
due diligence efforts. These expenses have been recorded as a special charge in
1996.
8. INCOME TAXES
The Company files a consolidated tax return with Holding. Current and
deferred taxes are allocated on a separate company basis. Significant
components of the Company's deferred tax liabilities and assets as of December
31, 1995 and 1996 are as follows (in thousands):
<TABLE>
<CAPTION>
1995 1996
------ ------
<S> <C> <C>
Deferred tax liabilities:
Property and equipment . . . . . . . . . . . . . . . . . $ 3,113 $4,686
Intangibles . . . . . . . . . . . . . . . . . . . . . . . 3,565 3,747
------ ------
Total deferred tax liabilities . . . . . . . . . . . . . . 6,678 8,433
Deferred tax assets:
Alternative minimum tax . . . . . . . . . . . . . . . . . 374 676
Foreign tax credit . . . . . . . . . . . . . . . . . . . 234 329
Accrued liabilities . . . . . . . . . . . . . . . . . . . 666 1,257
Receivables . . . . . . . . . . . . . . . . . . . . . . . 193 205
Inventory . . . . . . . . . . . . . . . . . . . . . . . . 17 17
------ ------
Total deferred tax assets . . . . . . . . . . . . . . . . . 1,484 2,484
------ ------
Net deferred tax liability . . . . . . . . . . . . . . . . $5,194 $5,949
====== ======
</TABLE>
The provision for income taxes for the years ended December 31, 1994, 1995
and 1996 consisted of the following (in thousands):
<TABLE>
<CAPTION>
1994 1995 1996
------ ------ ------
<S> <C> <C> <C>
Current . . . . . . . . . . . . . . . . . . . . . . $ 714 $ 584 $ 529
Deferred . . . . . . . . . . . . . . . . . . . . . 1,745 2,468 755
------ ------ ------
$2,459 $3,052 $1,284
====== ====== ======
</TABLE>
The differences between income taxes computed at the federal statutory
income tax rate and the provision for income taxes for the years ended December
31, 1994, 1995 and 1996 consisted of the following (in thousands):
<TABLE>
<CAPTION>
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
Income taxes computed at federal income tax rate . . . . $1,839 $2,007 $ 622
State income taxes, net of federal tax benefit . . . . . 200 414 222
Nondeductible permanent differences . . . . . . . . . . . 318 579 730
Effects of tax rate changes on existing temporary
differences . . . . . . . . . . . . . . . . . . . . . . 77 -- --
Tax credits and other, net . . . . . . . . . . . . . . . 25 52 (290)
------ ------- ------
Provision for income taxes . . . . . . . . . . . . . . . $2,459 $ 3,052 $1,284
====== ======= ======
</TABLE>
9. COMMITMENTS AND CONTINGENCIES
The Company leases most of its locations and certain automobiles and trucks
under operating leases. The leases contain various renewal options, rent
escalation provisions and insurance requirements. Lease expense for the years
ended December 31, 1994, 1995 and 1996 was $2,155,000, $4,402,000 and
$6,191,000, respectively.
F-10
<PAGE> 89
Future minimum rental commitments under operating leases with initial terms
of one year or more at December 31, 1996 are as follows (in thousands):
<TABLE>
<S> <C>
1997 . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,093
1998 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,607
1999 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,558
2000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,563
2001 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 366
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . 64
-------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . $16,251
=======
</TABLE>
HydroChem is a defendant in various lawsuits arising in the normal course
of business. Substantially all of these suits are being defended vigorously by
HydroChem's insurance carriers. While the results of litigation cannot be
predicted with certainty, management believes the final outcome of such
litigation will not have a material adverse effect on the Company's
consolidated financial position.
10. 401(K) AND PROFIT SHARING PLAN
HydroChem maintains the HydroChem Industrial Services Discretionary Profit
Sharing Plan and 401(k) Plan (the "401(k) Plan"). Profit sharing contributions
to the 401(k) Plan are at the discretion of the Board of Directors of
HydroChem. All profit sharing contributions are allocated to the accounts of
the individual participants based upon a formula. Eligible employees, at their
option, may also make contributions to their separate 401(k) accounts within
the 401(k) Plan. In 1995 and 1996, HydroChem matched, on a 50% basis, all
employee contributions up to $500. All profit sharing and 401(k) contributions
and any earnings thereon are tax-deferred.
For the years ended December 31, 1994, 1995 and 1996, HydroChem recognized,
as expense, profit-sharing contributions to the 401(k) Plan of $655,000,
$800,000 and $100,000, respectively. Also, there were employer 401(k) matching
contributions to the 401(k) Plan of $111,000 and $207,000 for 1995 and 1996,
respectively. There were no matching contributions for 1994.
11. STOCK OPTION PLAN
In 1994, the Board of Directors of Holding (the "Board") adopted, and the
stockholders approved, the HydroChem Holding, Inc. 1994 Stock Option Plan (the
"Plan"), pursuant to which options to purchase up to an aggregate of 620,779
shares of Holding's Class A Common Stock may be granted. The Plan is
administered by a committee of not fewer than two directors appointed by the
Board. Among other things, the committee decides which employees will receive
options, the number of shares covered by any option granted and the exercise
price and other terms and conditions of each such option. The committee also
decides if each option granted shall be an incentive stock option under Section
422 of the Internal Revenue Code of 1986 (the "Code") or an option that does
not qualify under that section of the Code ("Non- Qualified Stock Options").
The Board may at any time suspend or terminate the Plan or revise or amend it
in any respect.
All options granted under the Plan are nontransferable except by the laws
of descent and distribution. All options also expire ten years after the date
of grant or upon earlier termination of employment unless due to death,
disability or retirement, in which case the option remains exercisable for an
additional three months in the case of retirement and one year in the case of
death or disability, but, in all cases, only to the extent it was exercisable
at the time of termination of employment. All options granted since the
inception of the Plan have been Non-Qualified Stock Options and become
exercisable in installments over three- to four-year periods after the date of
grant. The weighted-average remaining contractual life of the options at
December 31, 1996 was 8.9 years. The exercise price of the options was equal to
the fair value of the common stock on the date of grant and, accordingly, no
compensation expense was recorded. The weighted-average fair value at grant
date for options granted during the years ended December 31, 1995 and 1996 is
$0.46 per share.
F-11
<PAGE> 90
No options were granted during the year ended December 31, 1994, and a
summary of Holding's stock option activity since that date is as follows:
<TABLE>
<CAPTION>
NUMBER OF WEIGHTED-
SHARES COVERED AVERAGE
BY OPTIONS EXERCISE PRICE
---------- --------------
<S> <C> <C>
Outstanding at January 1, 1995 . . . . . . . . . . . . . . . . . . . -- $ --
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 584,390 1.00
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- --
Canceled . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,500 1.00
------- ------
Outstanding at December 31, 1995 . . . . . . . . . . . . . . . . . . 579,890 1.00
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57,500 1.65
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- --
Canceled . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,500 1.00
------- ------
Outstanding at December 31, 1996 . . . . . . . . . . . . . . . . . . 618,890 $ 1.06
======= ======
Exercisable at:
December 31, 1995 . . . . . . . . . . . . . . . . . . . . . . . . . 186,234 $ 1.00
December 31, 1996 . . . . . . . . . . . . . . . . . . . . . . . . . 313,562 $ 1.00
</TABLE>
The Company has elected to follow Accounting Principles Board Opinion No.
25, Accounting for Stock Issued to Employees ("APB 25"), and related
interpretations in accounting for employee stock options. Pro forma information
regarding net income and earnings per share is required by FASB Statement No.
123, Accounting for Stock-Based Compensation ("FAS 123"), which also requires
that the information be determined as if the Company had accounted for its
employee stock options granted subsequent to December 31, 1994 under the fair
value method of FAS 123. The fair value for these options was estimated at the
date of grant using a minimum value option pricing model. The minimum value
method calculated a fair value that is approximately the same as recorded by
the Company according to APB 25; therefore, pro forma presentation has not been
included.
12. FAIR VALUE OF FINANCIAL INSTRUMENTS
The estimated fair values of certain financial instruments have been
determined by the Company using available market information and appropriate
valuation methodologies. Management believes that the book values of the
Company's cash, net accounts receivable and accounts payable approximate fair
values, principally due to the short-term maturities of these instruments.
Management also believes that the book value of the Company's long-term debt
approximates fair value principally because the rates for the majority of these
instruments are determined based upon certain variable market interest rates
(see Note 5).
13. SUPPLEMENTAL CASH FLOW INFORMATION
On January 10, 1995, the Company purchased substantially all of the assets
and assumed certain liabilities of HIS. The liabilities assumed in connection
with the acquisition for the year ended December 31, 1995 were as follows:
<TABLE>
<S> <C>
Fair value of assets acquired (including goodwill) . . . . . . . . . . . . . . $28,621,000
Cash paid for assets, including direct acquisition costs. . . . . . . . . . . 27,028,000
----------
Liabilities assumed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,593,000
===========
</TABLE>
F-12
<PAGE> 91
14. SUMMARY FINANCIAL INFORMATION
Summary financial information for International as consolidated with
HydroChem is as follows (in thousands):
<TABLE>
<CAPTION>
As of December 31,
1995 1996
---- ----
<S> <C> <C>
Current assets . . . . . . . . . . . . . . . $1,879 $1,476
Noncurrent assets . . . . . . . . . . . . . . 212 155
Current liabilities . . . . . . . . . . . . . 646 85
Noncurrent liabilities . . . . . . . . . . . -- --
</TABLE>
<TABLE>
<CAPTION>
Year Ended December 31,
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
Revenue . . . . . . . . . . . . . . . $2,038 $4,850 $5,088
Gross profit . . . . . . . . . . . . 632 2,023 2,257
Net income (loss) . . . . . . . . . . (26) 366 100
</TABLE>
15. SUBSEQUENT EVENT (UNAUDITED)
On August 4, 1997, the Company issued $110,000,000 in principal amount
of HydroChem's 10 3/8% Senior Subordinated Notes due 2007 (the "Notes") in a
private offering pursuant to Rule 144A under the Securities Act of 1933. The
Company is currently in the process of registering an identical series of notes
with the Securities and Exchange Commission, which will be offered in exchange
for the Notes. International is a guarantor of the Notes.
F-13
<PAGE> 92
HYDROCHEM INDUSTRIAL SERVICES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1996 1997
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
Current assets:
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$ 671 $ 1,458
Receivables, net . . . . . . . . . . . . . . . . . . . . . . . . 24,357 27,220
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,569 3,621
Prepaid expenses and other current assets . . . . . . . . . . . . 1,140 1,938
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . 1,791 1,823
--------- ---------
Total current assets . . . . . . . . . . . . . . . . . . 31,528 36,060
Property and equipment, at cost . . . . . . . . . . . . . . . . . . 54,772 57,065
Accumulated depreciation . . . . . . . . . . . . . . . . . . . . . (17,360 (20,882)
--------- ---------
37,412 36,183
Intangible assets, net . . . . . . . . . . . . . . . . . . . . . . 46,582 45,516
--------- ---------
Total assets . . . . . . . . . . . . . . . . . . . . . .$ 115,522 $ 117,759
========= =========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . .$ 5,704 $ 6,296
Income taxes payable . . . . . . . . . . . . . . . . . . . . . . 12 795
Accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . 7,971 9,507
Current portion of long-term debt (Note 2) . . . . . . . . . . . 4,625 5,250
--------- ---------
Total current liabilities . . . . . . . . . . . . . . . . 18,312 21,848
Long-term debt (Note 2) . . . . . . . . . . . . . . . . . . . . . . 63,700 60,332
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . 7,740 8,062
Commitments and contingencies (Note 3)
Stockholder's equity:
Common Stock, $.01 par value:
1,000 shares authorized, 100 shares outstanding . . . . . . . 1 1
Additional paid-in-capital . . . . . . . . . . . . . . . . . . . 19,670 19,670
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . 6,099 7,846
--------- ---------
Total stockholder's equity . . . . . . . . . . . . . . . 25,770 27,517
--------- ---------
Total liabilities and stockholder's equity . . . . . . .$ 115,522 $ 117,759
========= =========
</TABLE>
See accompanying notes.
F-14
<PAGE> 93
HYDROCHEM INDUSTRIAL SERVICES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
JUNE 30,
-------------------
1996 1997
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . .$ 41,166 $ 42,326
Cost of revenue . . . . . . . . . . . . . . . . . . . . . . . 24,940 24,871
-------- --------
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . 16,226 17,455
Selling, general and administrative expense . . . . . . . . . 10,173 10,863
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . 1,900 1,978
-------- --------
Operating income . . . . . . . . . . . . . . . . . . . . . . 4,153 4,614
Other (income) expense:
Interest expense, net . . . . . . . . . . . . . . . . . . . 1,997 1,925
Other (income) expense, net . . . . . . . . . . . . . . . . (107) 19
Amortization of intangibles . . . . . . . . . . . . . . . . 381 391
-------- --------
Income before taxes . . . . . . . . . . . . . . . . . . . . . 1,882 2,279
Income tax provision . . . . . . . . . . . . . . . . . . . . 1,321 1,091
-------- --------
Net income . . . . . . . . . . . . . . . . . . . .$ 561 $ 1,188
======== ========
</TABLE>
See accompanying notes.
F-15
<PAGE> 94
HYDROCHEM INDUSTRIAL SERVICES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
---------------------
1996 1997
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Revenue ......................................................... $ 79,201 $ 80,714
Cost of revenue ................................................. 47,876 47,790
-------- --------
Gross profit .................................................... 31,325 32,924
Selling, general and administrative expense ..................... 20,184 21,161
Depreciation .................................................... 3,712 3,889
-------- --------
Operating income ................................................ 7,429 7,874
Other (income) expense:
Interest expense, net ......................................... 4,038 3,787
Other (income) expense, net ................................... (148 23
Amortization of intangibles ................................... 762 779
-------- --------
Income before taxes ............................................. 2,777 3,285
Income tax provision ............................................ 1,949 1,538
-------- --------
Net income ............................................ $ 828 $ 1,747
======== ========
</TABLE>
See accompanying notes.
F-16
<PAGE> 95
HYDROCHEM INDUSTRIAL SERVICES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF STOCKHOLDER'S EQUITY
(UNAUDITED)
<TABLE>
<CAPTION>
ADDITIONAL
COMMON PAID-IN RETAINED
STOCK CAPITAL EARNINGS TOTAL
------- ------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Balance at December 31, 1996 ............................ $ 1 $19,670 $ 6,099 $25,770
Net income ......................................... -- -- 1,747 1,747
------- ------- ------- -------
Balance at June 30, 1997 ................................ $ 1 $19,670 $ 7,846 $27,517
======= ======= ======= =======
</TABLE>
See accompanying notes.
F-17
<PAGE> 96
HYDROCHEM INDUSTRIAL SERVICES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
JUNE 30,
------------------
1996 1997
------- -------
(IN THOUSANDS)
<S> <C> <C>
Operating activities
Net income .......................................................... $ 561 $ 1,188
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation ..................................................... 1,900 1,978
Amortization ..................................................... 381 391
Amortization of deferred financing costs ......................... 149 142
Deferred income tax expense ...................................... 988 (202)
Loss (gain) on sale of property and equipment .................... (31) 14
Changes in operating assets and liabilities:
Receivables, net ................................................. 1,471 (1,354)
Inventories ...................................................... (306) 32
Prepaid expenses and other current assets ........................ 160 (317)
Accounts payable ................................................. (2,485) 156
Income taxes payable ............................................. (102) 744
Accrued liabilities .............................................. 525 2,477
Other assets ..................................................... (397) 47
------- -------
Net cash provided by operating activities ................... 2,814 5,296
Investing activities
Expenditures for property and equipment ............................. (2,113) (1,231)
Proceeds from sale of property and equipment ........................ 79 31
------- -------
Net cash used in investing activities ....................... (2,034) (1,200)
Financing activities
Repayments of long-term debt, net ................................... (924) (3,760)
------- -------
Net cash provided by (used in) financing
activities ................................................. (924) (3,760)
------- -------
Net increase (decrease) in cash ....................................... (144) 336
Cash at beginning of period ........................................... 1,570 1,122
------- -------
Cash at end of period ................................................. $ 1,426 $ 1,458
======= =======
</TABLE>
See accompanying notes.
F-18
<PAGE> 97
HYDROCHEM INDUSTRIAL SERVICES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
------------------
1996 1997
------- -------
(IN THOUSANDS)
<S> <C> <C>
Operating activities
Net income ...................................................................... $ 828 $ 1,747
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation ................................................................. 3,712 3,889
Amortization ................................................................. 762 779
Amortization of deferred financing costs ..................................... 294 288
Deferred income tax expense .................................................. 1,777 290
Loss (gain) on sale of property and equipment ................................ (45) 16
Changes in operating assets and liabilities:
Receivables, net ............................................................. 1,025 (2,863)
Inventories .................................................................. (165) (52)
Prepaid expenses and other current assets .................................... (628) (798)
Accounts payable ............................................................. (358) 592
Income taxes payable ......................................................... (334) 783
Accrued liabilities .......................................................... (1,095) 1,536
Other assets ................................................................. (397) --
------- -------
Net cash provided by operating activities ............................... 5,376 6,207
Investing activities
Expenditures for property and equipment ......................................... (3,245) (2,847)
Proceeds from sale of property and equipment .................................... 126 170
------- -------
Net cash used in investing activities ................................... (3,119) (2,677)
Financing activities
Repayments of long-term debt, net ............................................... (1,919) (2,743)
------- -------
Net cash provided by (used in) financing
activities ............................................................. (1,919) (2,743)
------- -------
Net increase in cash .............................................................. 338 787
Cash at beginning of period ....................................................... 1,088 671
------- -------
Cash at end of period ............................................................. $ 1,426 $ 1,458
======= =======
</TABLE>
See accompanying notes.
F-19
<PAGE> 98
HYDROCHEM INDUSTRIAL SERVICES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997
(UNAUDITED)
1. ORGANIZATION, FORMATION AND BASIS OF PRESENTATION
The consolidated financial statements include the accounts of HydroChem
Industrial Services, Inc. ("HydroChem") and its wholly owned subsidiary,
HydroChem International, Inc. ("International"), collectively referred to as
the "Company." HydroChem is a wholly owned subsidiary of HydroChem Holding,
Inc. ("Holding").
The accompanying unaudited consolidated financial statements presented
herein have been prepared by HydroChem in accordance with generally accepted
accounting principles for interim financial information and with the rules and
regulations of the Securities and Exchange Commission. Accordingly, they do not
include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements, although the Company
believes these disclosures are adequate to make the information presented not
misleading. In the opinion of management, the adjustments necessary for a fair
presentation of the periods presented have been reflected and are of a normal
recurring nature. Operating results for the interim periods are not necessarily
indicative of the results that may be expected for the remainder of the fiscal
year. These unaudited consolidated financial statements should be read in
conjunction with the Company's audited consolidated financial statements.
The Company is engaged in the business of providing industrial cleaning
services to a wide range of processing industries, including petrochemical
plants, oil refineries, electric utilities, pulp and paper mills, rubber plants
and aluminum plants. This type of work is typically recurring maintenance to
improve or sustain the operating efficiencies and extend the useful lives of
process equipment and facilities. Services provided include high-pressure water
cleaning, chemical cleaning, industrial vacuuming, waste minimization,
commissioning and other specialized services.
2. LONG-TERM DEBT
Long-term debt at December 31, 1996 and June 30, 1997 consisted of the
following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1996 1997
---- ----
<S> <C> <C>
Revolving loan . . . . . . . . . . . . . . . . . . $ 5,450 $ 4,832
Term loan A . . . . . . . . . . . . . . . . . . . . 19,875 17,750
Term loan B . . . . . . . . . . . . . . . . . . . . 25,000 25,000
------ ------
Total senior debt . . . . . . . . . . . . . . . . . 50,325 47,582
Less current portion of senior debt . . . . . . . . 4,625 5,250
----- -----
45,700 42,332
Subordinated debt . . . . . . . . . . . . . . . . . 18,000 18,000
------ ------
Total long-term debt . . . . . . . . . . . . . . . $63,700 $60,332
======= =======
</TABLE>
3. COMMITMENTS AND CONTINGENCIES
HydroChem is a defendant in various lawsuits arising in the normal course
of business. Substantially all of these suits are being defended vigorously by
HydroChem's insurance carriers. While the results of litigation cannot be
predicted with certainty, management believes the final outcome of such
litigation will not have a material adverse effect on the Company's
consolidated financial position.
F-20
<PAGE> 99
4. SUMMARY FINANCIAL INFORMATION
Summary financial information for International as consolidated with
HydroChem is as follows (in thousands):
<TABLE>
<CAPTION>
As of As of
DECEMBER 31, 1996 JUNE 30, 1997
----------------- -------------
<S> <C> <C>
Current assets . . . . . . . . . . . . . . . . $ 1,476 $ 1,566
Noncurrent assets . . . . . . . . . . . . . . . 155 127
Current liabilities . . . . . . . . . . . . . . 85 164
Noncurrent liabilities . . . . . . . . . . . . -- --
</TABLE>
<TABLE>
<CAPTION>
Three Months ended June 30, Six Months ended June 30,
--------------------------- -------------------------
1996 1997 1996 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenue . . . . . . . . . . . . . $ 736 $ 1,079 $ 1,695 $ 1,549
Gross profit . . . . . . . . . . 291 482 664 692
Net income (loss) . . . . . . . . (21) 23 23 (17)
</TABLE>
5. SUBSEQUENT EVENT
On August 4, 1997, the Company issued $110,000,000 in principal amount
of HydroChem's 10 3/8% Senior Subordinated Notes due 2007 (the "Notes") in a
private offering pursuant to Rule 144A under the Securities Act of 1933. The
Company is currently in the process of registering an identical series of notes
with the Securities and Exchange Commission, which will be offered in exchange
for the Notes. International is a guarantor of the Notes.
F-21
<PAGE> 100
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
As authorized by the Delaware General Corporation Law ("DGCL"), the
Company's Certificate of Incorporation (the "Certificate") provides that, to
the full extent permitted by the DGCL or any other applicable laws as presently
or hereafter in effect, no Director of the Company in his or her capacity shall
be personally liable to the Company in his or her capacity as director of the
Company. The DGCL does not permit limitation of liability of any director (i)
for breach of the director's duty of loyalty to the Company or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) in respect of
certain unlawful dividend payments or stock redemptions or repurchases, or (iv)
for any transaction from which the director derived an improper personal
benefit.
The Company's Bylaws provide that the Company will indemnify any
person who is or is threatened to be made a party to any action (other than an
action by or in the right of the Company) by reason of the fact that he is or
was a director or officer of the Company against amounts (including attorneys'
fees) incurred by him in connection with such action if he acted in good faith
and in a manner he reasonably believed to be in or not opposed to the best
interests of the Company. With respect to actions brought by or in the right
of the Company, an officer or director will be indemnified for expenses
(including attorneys' fees) incurred in connection with the defense or
settlement of the action if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Company, except that no such indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged liable
to the Company, except in certain limited circumstances. The Bylaws further
provide that the Company shall approve indemnification of any such person to
the fullest extent permitted under the DGCL, as to the same may be amended.
Delaware corporations are also authorized to obtain insurance to
protect officers and directors from certain liabilities, including liabilities
against which the Company cannot indemnify its directors and officers. The
Company has in place a directors' and officers' liability insurance policy.
The Company has entered into certain agreements ("Indemnification
Agreements") with each of its directors designed to give effect to the foregoing
provisions of the Certificate and Bylaws and to provide certain additional
assurances against the possibility of uninsured liability. The effect of these
provisions and the Indemnification Agreements will be to eliminate the rights of
the Company and its stockholders (through stockholders' derivative suits on
behalf of the Company) to recover monetary damages against a director for breach
of fiduciary duty as a director (including breaches resulting from negligence or
gross negligence) except in the situations described in clauses (i)-(iv) of the
second sentence of this paragraph. These provisions and the Indemnification
Agreements will not alter the liability of Directors of the Company under
federal securities laws.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
<TABLE>
(a)
Exhibit
Number Description
------ -----------
<S> <C>
3.1 Certificate of Incorporation of HydroChem Industrial Services, Inc., as amended through
December 15, 1993.
3.2 Certificate of Incorporation of HydroChem International, Inc., as amended through
October 4, 1994.
3.3 By-Laws of HydroChem Industrial Services, Inc.
3.4 By-Laws of HydroChem International, Inc.
4.1 Purchase Agreement, dated as of July 30, 1997, by and among HydroChem Industrial Services,
Inc., HydroChem International, Inc. and Donaldson, Lufkin & Jenrette Securities
Corporation, as Initial Purchaser, relating to the 10 3/8% Series A Senior Subordinated
Notes due 2007.
4.2 Indenture, dated as of August 1, 1997, among HydroChem Industrial Services, Inc., HydroChem
International, Inc., as Guarantor, and Norwest Bank, Minnesota, N.A., as Trustee.
4.3 Registration Rights Agreement dated August 4, 1997, by and among HydroChem Industrial
Services, Inc., HydroChem International, Inc. and Donaldson, Lufkin & Jenrette Securities
Corporation, as Initial Purchaser.
5.1 Opinion of Haynes and Boone, LLP.
10.1* HydroChem Holding, Inc. 1994 Stock Option Plan.
10.2* Employment Agreement dated November 1, 1992 between HydroChem Industrial Services, Inc. and
J. Pat DeBusk.
10.3* Employment Agreement dated November 1, 1992 between HydroChem Industrial Services, Inc. and
Gary Noto
10.4* Employment Agreement dated November 1, 1992 between HydroChem Industrial Services, Inc. and
Craig Kaple.
</TABLE>
II-1
<PAGE> 101
<TABLE>
<S> <C>
10.5* Employment Agreement dated December 15, 1993 between HydroChem Industrial Services, Inc.
and B. Tom Carter, Jr., as amended through December 9, 1996.
10.6* Employment Offer Letter dated June 3, 1996 from HydroChem Industrial Services, Inc. to
Selby F. Little, III.
10.7 Lease Agreement dated December 4, 1979 between HydroChem Industrial Services, Inc. and
Gracey Corporation, as amended through May 29, 1996.
12.1 Statement regarding computation of ratio of earnings to fixed charges.
21.1 List of subsidiaries of HydroChem Industrial Services, Inc.
23.1 Consent of Haynes and Boone, LLP (included in Exhibit 5.1).
23.2 Consent of Ernst & Young LLP.
25.1 Statement of Eligibility and Qualification on Form T-1 of Trustee.
27.1 Financial Data Schedule.
99.1 Form of Letter of Transmittal.
99.2 Form of Notice of Guaranteed Delivery.
</TABLE>
------------
* Management compensation or incentive plan.
ITEM 22. UNDERTAKINGS.
Each of the undersigned Registrants hereby undertakes:
(1) to file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(i) to include any prospectus required by section 10(a)(3)
of the Securities Act of 1933 (the "Securities Act");
(ii) to reflect in the prospectus any facts or events arising
after the effective date of this Registration Statement (or the most
recent post-effective amendment hereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in this Registration Statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Securities and Exchange Commission pursuant
to rule 424(b) if, in the aggregate, the changes in volume and price
represent no more than a 20% change in the maximum aggregate offering
price set forth in the "Calculation of Registration Fee" table in this
Registration Statement when it becomes effective;
(iii) to include any material information with respect to the
plan of distribution not previously disclosed in this Registration
Statement or any material change to such information in this
Registration Statement;
(2) that, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) to remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination
of the offering.
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against
II-2
<PAGE> 102
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed
by the final adjudication of such issue.
Each of the undersigned Registrants hereby undertakes to file an
application for the purpose of determining the eligibility of the trustee to
act under subsection (a) of Section 310 of the Trust Indenture Act in
accordance with the rules and regulations prescribed by the Commission under
Section 305(b)(2) of the Trust Indenture Act.
Each of the undersigned Registrants hereby undertakes to respond to
requests for information that is incorporated by reference into the prospectus
pursuant to Items 4, 10(b), 11 or 13 of this Form, within one business day of
receipt of such request, and to send the incorporated documents by first class
mail or other equally prompt means. This includes information contained in
documents filed subsequent to the effective date of this Registration Statement
through the date of responding to the request.
Each of the undersigned Registrants hereby undertakes to supply by
means of a post-effective amendment all information concerning a transaction,
and the company being acquired involved therein, that was not the subject of
and included in this Registration Statement when it became effective.
II-3
<PAGE> 103
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, the Company has duly caused this Registration Statement on Form S-4 to
be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Dallas, State of Texas, on the 22nd day of August, 1997.
HYDROCHEM INDUSTRIAL SERVICES, INC.
By: B. TOM CARTER, JR.
----------------------------------------
B. Tom Carter, Jr., Chairman of the
Board, President and Chief Executive
Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned officers
and directors of the Company hereby constitutes and appoints B. Tom Carter,
Jr., Selby F. Little, III and Pelham H. A. Smith, and each of them, as his true
and lawful attorney-in-fact and agent, with full power of substitution, for him
and on his behalf and in his name, place and stead, in any and all capacities,
to sign, execute, and file any and all documents relating to this Registration
Statement, including any and all amendments, exhibits and supplements thereto
and including any Registration Statement filed pursuant to Rule 462(b) of the
Securities Act of 1933, with any regulatory authority, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises in order to effectuate the same as fully to all intents
and purposes as he himself might or could do if personally present, hereby
ratifying and confirming all that said attorneys- in-fact and agents, or any of
them, or their or his substitute or substitutes, may lawfully do or cause to be
done.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on the 22nd day of August, 1997.
<TABLE>
<CAPTION>
NAME: CAPACITIES:
<S> <C>
B. TOM CARTER, JR. Chairman of the Board, President and
--------------------------------- Chief Executive Officer
B. Tom Carter, Jr.
SELBY F. LITTLE, III Executive Vice President and Chief
----------------------------------- Financial Officer
Selby F. Little, III
PATRICIA K. BURNS Corporate Controller
--------------------------------
Patricia K. Burns
ROBERT B. CRATES Director
--------------------------------
Robert B. Crates
THOMAS F. McWILLIAMS Director
------------------------------
Thomas F. McWilliams
</TABLE>
II-4
<PAGE> 104
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, the Company has duly caused this Registration Statement on Form S-4 to
be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Dallas, State of Texas, on the 22nd day of August, 1997.
HYDROCHEM INTERNATIONAL, INC.
By: B. TOM CARTER, JR.
----------------------------------------
B. Tom Carter, Jr., Chairman of the
Board, President and Chief Executive
Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned officers
and directors of the Company hereby constitutes and appoints B. Tom Carter,
Jr., Selby F. Little, III and Pelham H. A. Smith, and each of them, as his true
and lawful attorney-in-fact and agent, with full power of substitution, for him
and on his behalf and in his name, place and stead, in any and all capacities,
to sign, execute, and file any and all documents relating to this Registration
Statement, including any and all amendments, exhibits and supplements thereto
and including any Registration Statement filed pursuant to Rule 462(b) of the
Securities Act of 1933, with any regulatory authority, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises in order to effectuate the same as fully to all intents
and purposes as he himself might or could do if personally present, hereby
ratifying and confirming all that said attorneys- in-fact and agents, or any of
them, or their or his substitute or substitutes, may lawfully do or cause to be
done.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on the 22nd day of August, 1997.
<TABLE>
<CAPTION>
NAME: CAPACITIES:
<S> <C>
B. TOM CARTER, JR. Chairman of the Board, President and
--------------------------------- Chief Executive Officer
B. Tom Carter, Jr.
SELBY F. LITTLE, III Executive Vice President and Chief
----------------------------------- Financial Officer
Selby F. Little, III
PATRICIA K. BURNS Corporate Controller
--------------------------------
Patricia K. Burns
ROBERT B. CRATES Director
--------------------------------
Robert B. Crates
THOMAS F. McWILLIAMS Director
------------------------------
Thomas F. McWilliams
</TABLE>
II-5
<PAGE> 105
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description
------ -----------
<S> <C>
3.1 Certificate of Incorporation of HydroChem Industrial Services, Inc., as amended through
December 15, 1993.
3.2 Certificate of Incorporation of HydroChem International, Inc., as amended through
October 4, 1994.
3.3 By-Laws of HydroChem Industrial Services, Inc.
3.4 By-Laws of HydroChem International, Inc.
4.1 Purchase Agreement, dated as of July 30, 1997, by and among HydroChem Industrial Services,
Inc., HydroChem International, Inc. and Donaldson, Lufkin & Jenrette Securities
Corporation, as Initial Purchaser, relating to the 10 3/8% Series A Senior Subordinated
Notes due 2007.
4.2 Indenture, dated as of August 1, 1997, among HydroChem Industrial Services, Inc., HydroChem
International, Inc., as Guarantor, and Norwest Bank, Minnesota, N.A., as Trustee.
4.3 Registration Rights Agreement dated August 4, 1997, by and among HydroChem Industrial
Services, Inc., HydroChem International, Inc. and Donaldson, Lufkin & Jenrette Securities
Corporation, as Initial Purchaser.
5.1 Opinion of Haynes and Boone, LLP.
10.1* HydroChem Holding, Inc. 1994 Stock Option Plan.
10.2* Employment Agreement dated November 1, 1992 between HydroChem Industrial Services, Inc. and
J. Pat DeBusk.
10.3* Employment Agreement dated November 1, 1992 between HydroChem Industrial Services, Inc. and
Gary Noto
10.4* Employment Agreement dated November 1, 1992 between HydroChem Industrial Services, Inc. and
Craig Kaple.
10.5* Employment Agreement dated December 15, 1993 between HydroChem Industrial Services, Inc.
and B. Tom Carter, Jr., as amended through December 9, 1996.
10.6* Employment Offer Letter dated June 3, 1996 from HydroChem Industrial Services, Inc. to
Selby F. Little, III.
10.7 Lease Agreement dated December 4, 1979 between HydroChem Industrial Services, Inc. and
Gracey Corporation, as amended through May 29, 1996.
12.1 Statement regarding computation of ratio of earnings to fixed charges.
21.1 List of subsidiaries of HydroChem Industrial Services, Inc.
23.1 Consent of Haynes and Boone, LLP (included in Exhibit 5.1).
23.2 Consent of Ernst & Young LLP.
25.1 Statement of Eligibility and Qualification on Form T-1 of Trustee.
27.1 Financial Data Schedule.
99.1 Form of Letter of Transmittal.
99.2 Form of Notice of Guaranteed Delivery.
</TABLE>
------------
* Management compensation or incentive plan.
<PAGE> 1
EXHIBIT 3.1
CERTIFICATE OF INCORPORATION
OF
D-H ACQUISITION, INC.
ARTICLE ONE
The name of the corporation is D-H Acquisition, Inc. (hereinafter
referred to as the "Corporation").
ARTICLE TWO
The address of the registered office of the Corporation in the State
of Delaware is 1209 Orange Street, in the City of Wilmington, 19801, County of
New Castle. The name of its registered agent at such address is The Corporation
Trust Company.
ARTICLE THREE
The nature of the business to be conducted, and the purposes to be
promoted, by the Corporation is to engage in any lawful act or activity for
which corporations may be organized under the General Corporation Law of the
State of Delaware.
ARTICLE FOUR
The aggregate number of shares of stock which the Corporation shall
have the authority to issue is one thousand (1,000) shares of common stock, par
value $.01 per share.
ARTICLE FIVE
The name and mailing address of the incorporator is:
Name Mailing Address
Dennis R. Cassell Cassell & Stone
5956 Sherry Lane
Suite 1415
Dallas, TX 75225
<PAGE> 2
ARTICLE SIX
The powers of the incorporator shall terminate upon the filing of this
Certificate of Incorporation and the name and mailing address of the persons
who shall serve as directors until the first annual meeting of stockholders or
until their successors are elected and qualified are:
Name of Director Mailing Address
1. B. Tom Carter, Jr. 5956 Sherry Lane
Suite 930
Dallas, TX 75225
2. Thomas F. McWilliams 2001 Ross Avenue
Suite 3050
Dallas, TX 75201
ARTICLE SEVEN
The Board of Directors of the Corporation may exercise all such powers
and do all such lawful acts and things as are not by statute, the By-Laws, or
this Certificate of Incorporation directed or required to be exercised and done
by the stockholders.
ARTICLE EIGHT
The power to alter, amend or repeal the Corporation's By-Laws, and to
adopt new By-Laws, is hereby vested in the Board of Directors of the
Corporation, subject, however, to repeal or change by the affirmative vote of
the holders of a majority of the outstanding shares entitled to vote thereon.
ARTICLE NINE
A director of the Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for any breach of
fiduciary duty as a director, except for liability to the extent provided by
applicable law (i) for any breach of the director's duty of loyalty to the
Corporation or its stockholders, (ii) for acts or omissions not in good faith,
or which involve intentional misconduct or a knowing violation of law, (iii)
pursuant to Section 174 of the General Corporation Law of the State of
Delaware, or (iv) for any transaction from which such director derived an
improper personal benefit. If the General Corporation Law of the State of
Delaware is amended after the date of filing of this Certificate of
Incorporation to authorize corporate action to further eliminate or limit the
personal liability of directors,
-2-
<PAGE> 3
then the liability of a director of the Corporation, in addition to the
limitation on personal liability provided in this Article Nine, shall be
eliminated or limited to the fullest extent permitted by the General
Corporation Law of the State of Delaware, as so amended. Any repeal or
amendment of this Article Nine by the stockholders of the Corporation, or any
amendment, termination or repeal of relevant provisions of the General
Corporation Law of the State of Delaware or any other applicable law, shall not
adversely affect any elimination of or limitation on the personal liability of
a director of the Corporation for or with respect to any acts or omissions of
such director occurring prior to the effective date of such amendment,
termination or repeal.
ARTICLE TEN
Whenever a compromise or arrangement is proposed between the
Corporation and its creditors or any class of them and/or between the
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of the Corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for the Corporation under
the provisions of Section 291 of the General Corporation Law of the State of
Delaware or on the application of trustees in dissolution or of any receiver or
receivers appointed for the Corporation under the provisions of Section 279 of
the General Corporation Law of the State of Delaware, order a meeting of the
creditors or class of creditors, and/or of the stockholders or class of
stockholders of the Corporation, as the case may be, to be summoned in such
manner as the said court directs. If a majority in number representing three-
fourths in value of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of the Corporation, as the case may be,
agree to any compromise or arrangement and to any reorganization of the
Corporation as consequence of such compromise or arrangement, the said
compromise or arrangement and the said reorganization shall, if sanctioned by
the court to which the said application has been made, be binding on all of the
creditors or class of creditors, and/or on all of the stockholders or class of
stockholders, of the Corporation, as the case may be, and also on the
Corporation.
THE UNDERSIGNED, being the incorporator hereinbefore named, hereby
acknowledges, under penalties of perjury, that the foregoing Certificate of
Incorporation is my act and deed and that the facts therein stated are true.
/s/ DENNIS R. CASSELL
-------------------------------
Dennis R. Cassell, Incorporator
-3-
<PAGE> 4
State of Delaware
Office of the Secretary of State
I, WILLIAM T. QUILLEN, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO
HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF
AMENDMENT OF "D-H ACQUISITION, INC." FILED IN THIS OFFICE ON THE FIFTEENTH DAY
OF DECEMBER, A.D. 1993, AT 1:32 O'CLOCK P.M.
A CERTIFIED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO NEW CASTLE
COUNTY RECORDER OF DEEDS ON THE FIFTEENTH DAY OF DECEMBER, A.D. 1993 FOR
RECORDING.
[STATE SEAL] /s/ WILLIAM T. QUILLEN
--------------------------------------
William T. Quillen, Secretary of State
AUTHENTICATION: *4195057
DATE: 12/15/1993
<PAGE> 5
CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
OF
D-H ACQUISITION, INC.
(PURSUANT TO SECTION 242 OF THE GENERAL CORPORATION LAW
OF THE STATE OF DELAWARE)
Pelham H. A. Smith and Paul A. Helbling, being the Vice President and
Assistant Secretary, respectively, of D-H Acquisition, Inc. a corporation
organized and existing under and by Virtue of the laws of the State of Delaware
(the "Corporation") do each hereby certify as follows:
FIRST: That Article One of the Certificate of Incorporation of the
Corporation be, and hereby is, amended in its entirety to read as follows:
"Article One
The name of the corporation is HydroChem Industrial Services, Inc.
(hereinafter referred to as the "Corporation")."
THIRD: That the Board of Directors of the Corporation approved the
foregoing amendment by a unanimous written consent pursuant to the provisions
of Sections 141(f) and 242 of the General Corporation Law of the State of
Delaware and directed that such amendment be submitted to the stockholders of
the Corporation entitled to vote thereon for their consideration, approval and
adoption thereof.
FOURTH: That the stockholders of the Corporation entitled to vote
thereon approved the foregoing amendment by a unanimous written consent pursuant
to Sections 228 and 242 of the General Corporation Law of the State of Delaware.
* * * * *
<PAGE> 6
IN WITNESS WHEREOF, the undersigned, being the Vice President and the
Assistant Secretary of the Corporation, for the purpose of amending the
Certificate of Incorporation of the Corporation pursuant to the General
Corporation Law of the State of Delaware, under penalties of perjury, do each
hereby declare and certify that this the act and deed of the Corporation, and
the facts stated herein are true and accordingly have hereunto signed this
Certificate of Amendment of the Certificate of Incorporation as of this 15th
day of December, 1993.
D-H ACQUISITION, INC.
By: /s/ PELHAM H. A. SMITH
---------------------------
Name: Pelham H. A. Smith
Title: Vice President
Attest:
By: /s/ PAUL A. HELBLING
-------------------------
Name: Paul A. Helbling
Title: Assistant Secretary
<PAGE> 1
EXHIBIT 3.2
CERTIFICATE OF INCORPORATION
OF
HYDROCHEM INTERNATIONAL, INC.
ARTICLE ONE
The name of the corporation is HydroChem International, Inc.
(hereinafter referred to as the "Corporation").
ARTICLE TWO
The address of the registered office of the Corporation in the State
of Delaware is 1209 Orange Street, in the City of Wilmington, 19801, County of
New Castle. The name of its registered agent at such address is The Corporation
Trust Company.
ARTICLE THREE
The nature of the business to be conducted, and the purposes to be
promoted, by the Corporation is to engage in any lawful act or activity for
which corporations may be organized under the General Corporation Law of the
State of Delaware.
ARTICLE FOUR
The aggregate number of shares of stock which the corporation shall
have the authority to issue is one thousand (1,000) shares of common stock, par
value $.01 per share.
ARTICLE FIVE
The name and mailing address of the incorporator is:
Name Mailing Address
Dennis R. Cassell Cassell & Stone
5956 Sherry Lane
Suite 1415
Dallas, TX 75225
<PAGE> 2
ARTICLE SIX
The powers of the incorporator shall terminate upon the filing of this
Certificate of Incorporation and the name and mailing address of the persons
who shall serve as directors until the first annual meeting of stockholders or
until their successors are elected and qualified are:
Name of Director Mailing Address
1. B. Tom Carter, Jr. 5956 Sherry Lane
Suite 930
Dallas, TX 75225
2. Thomas F. McWilliams 2001 Ross Avenue
Suite 3050
Dallas, TX 75201
3. Robert B. Crates 301 Commerce Street
Suite 1600
Fort Worth, TX 76102
ARTICLE SEVEN
The Board of Directors of the Corporation may exercise all such powers
and do all such lawful acts and things as are not by statute, the By-Laws, or
this Certificate of Incorporation directed or required to be exercised and done
by the stockholders.
ARTICLE EIGHT
The power to alter, amend or repeal the Corporation's By-Laws, and to
adopt new By-Laws, is hereby vested in the Board of Directors of the
Corporation, subject, however, to repeal or change by the affirmative vote of
the holders of a majority of the outstanding shares entitled to vote thereon.
ARTICLE NINE
A director of the Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for any breach of
fiduciary duty as a director, except for liability to the extent provided by
applicable law (i) for any breach of the director's duty of loyalty to the
Corporation or its stockholders, (ii) for acts or omissions not in good faith
or which involve intentional misconduct or a knowing violation of law, (iii)
pursuant to Section 174 of the General Corporation Law of the State of
Delaware, or (iv) for any transaction from which such director
-2-
<PAGE> 3
derived an improper personal benefit. If the General corporation Law of the
State of Delaware is amended after the date of filing of this Certificate of
Incorporation to authorize corporate action to further eliminate or limit the
personal liability of directors, then the liability of a director of the
Corporation, in addition to the limitation on personal liability provided in
this Article Nine, shall be eliminated or limited to the fullest extent
permitted by the General Corporation Law of the State of Delaware, as so
amended. Any repeal or amendment of this Article Nine by the stockholders of
the Corporation, or any amendment, termination or repeal of relevant provisions
of the General Corporation Law of the State of Delaware or any other applicable
law, shall not adversely affect any elimination of or limitation on the
personal liability of a director of the Corporation for or with respect to any
acts or omissions of such director occurring prior to the effective date of
such amendment, termination or repeal.
ARTICLE TEN
Whenever a compromise or arrangement is proposed between the
Corporation and its creditors or any class of them and/or between the
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of the Corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for the Corporation under
the provisions of Section 291 of the General corporation Law of the State of
Delaware or on the application of trustees in dissolution or of any receiver or
receivers appointed for the Corporation under the provisions of Section 279 of
the General Corporation Law of the State of Delaware, order a meeting of the
creditors or class of creditors, and/or of the stockholders or class of
stockholders of the Corporation, as the case may be, to be summoned in such
manner as the said court directs. If a majority in number representing three-
fourths in value of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of the Corporation, as the case may be,
agree to any compromise or arrangement and to any reorganization of the
Corporation as consequence of such compromise or arrangement, the said
compromise or arrangement and the said reorganization shall, if sanctioned by
the court to which the said application has been made, be binding on all of the
creditors or class of creditors, and/or on all of the stockholders or class of
stockholders, of the Corporation, as the case may be, and also on the
Corporation.
-3-
<PAGE> 4
THE UNDERSIGNED, being the incorporator hereinbefore named, hereby
acknowledges, under penalties of perjury, that the foregoing Certificate of
Incorporation is my act and deed and that the facts therein stated are true.
/s/ DENNIS R. CASSELL
-------------------------------
Dennis R. Cassell, Incorporator
-4-
<PAGE> 5
CERTIFICATE OF AMENDMENT
TO THE
CERTIFICATE OF INCORPORATION
OF
HYDROCHEM INTERNATIONAL, INC.
(PURSUANT TO SECTION 242 OF THE GENERAL CORPORATION LAW OF THE STATE OF
DELAWARE)
Pelham H. A. Smith and Dennis R. Cassell, being the Vice President and
Secretary, respectively, of HydroChem International, Inc., a corporation
organized and existing under and by virtue of the laws of the State of Delaware
(the "Corporation") do each hereby certify as follows:
FIRST: Article Four of the Certificate of Incorporation of the
Corporation (the "Certificate") be, and hereby is, amended in its entirety to
read as follows:
"ARTICLE FOUR
The total number of shares of capital stock which the Corporation has
authority to issue is 200,000 shares of common stock, par value $1.00 per
share."
SECOND: The Board approved the foregoing amendments by written consent
pursuant to the provisions of Sections 141 and 242 of the General Corporation
Law of the State of Delaware and directed that such amendments be submitted to
the stockholders of the Corporation entitled to vote thereon for their
consideration, approval, and adoption thereof.
THIRD: The stockholders of the Corporation entitled to vote thereon
approved the foregoing amendments by written consent pursuant to the provisions
of Sections 228 and 242 of the General Corporation Law of the State of
Delaware.
-1-
<PAGE> 6
IN WITNESS WHEREOF, the undersigned, being vice President and the
Secretary of the Corporation, for the purpose of amending the Certificate of
Incorporation of the Corporation, pursuant to the General Corporation Law of
the State of Delaware, under penalties of perjury, do each hereby declare and
certify that this the act and deed of the Corporation, and the facts stated
herein are true and accordingly have hereunto signed this Certificate of
Amendment to the Certificate of Incorporation as of this 4th day of October,
1994.
HydroChem International, Inc.
By: /s/ PELHAM H.A. SMITH
---------------------------
Name: Pelham H. A. Smith
Title: Vice President
Attest:
By: /s/ DENNIS R. CASSELL
-------------------------
Name: Dennis R. Cassell
Title: Secretary
<PAGE> 1
EXHIBIT 3.3
BYLAWS
OF
D-H ACQUISITION, INC.
(hereinafter called the "Corporation")
ARTICLE I
OFFICES
Section 1. Registered Office. The registered office of the
Corporation shall be Corporation Trust Center, 1209 Orange Street, Wilmington,
Delaware 19801, County of New Castle.
Section 2. Other Offices. The Corporation may also have offices at
such other places both within and without the State of Delaware as the Board of
Directors may from time to time determine.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. Place of Meetings. Meetings of the stockholders for the
election of directors or for any other purpose shall be held at such time and
place, either within or without the State of Delaware, as shall be designated
from time to time by the Board of Directors and stated in the notice of the
meeting or in a duly executed waiver of notice thereof.
Section 2. Annual Meetings. The Annual Meeting of Stockholders shall
be held on the last Tuesday in September if not a legal holiday, otherwise on
the next regular business day following at 10:00 a.m., or at such other date
and time as shall be designated from time to time by the Board of Directors and
stated in the notice of the meeting, at which meetings the stockholders shall
elect by a plurality vote a Board of Directors, and transact such other
business as may properly be brought before the meeting. Written notice of the
Annual Meeting stating the place, date and hour of the meeting shall be given
to each stockholder entitled to vote at such meeting not less than ten nor more
than sixty days before the date of the meeting.
Section 3. Special Meetings. Unless otherwise prescribed by law or by
the Certificate of Incorporation, Special Meetings of Stockholders, for any
purpose or purposes, may be called by the President, a majority of the Board of
Directors, or the holders of a majority of all the shares of Capital Stock of
the Corporation issued and outstanding and entitled to vote. Such request shall
BYLAWS OF D-H ACQUISITION, INC. - PAGE 1 OF 15
<PAGE> 2
state the purpose or purposes of the proposed meeting. Written notice of the
Special Meeting stating the place, date and hour of the meeting and the purpose
or purposes for which the meeting is called shall be given not less than ten
nor more than sixty days before the date of the meeting to each stockholder
entitled to vote at such meeting.
Section 4. Quorum. Except as otherwise provided by law or by the
Certificate of Incorporation, the holders of a majority of the capital stock
issued and outstanding and entitled to vote thereat, present in person or
represented by proxy, shall constitute a quorum at all meetings of the
stockholders for the transaction of business. If, however, such quorum
shall not be present or represented at any meeting of the stockholders, the
stockholders entitled to vote thereat, present in person or represented by
proxy, shall have the power to adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum shall be present
or represented. At such adjourned meeting at which a quorum shall be present or
represented, any business may be transacted which might have been transacted at
the meeting as originally noticed. If the adjournment is for more than thirty
days, or if after the adjournment a new record date is fixed for the adjourned
meeting, a notice of the adjourned meeting shall be given to each stockholder
entitled to vote at the meeting.
Section 5. Voting. Unless otherwise required by law, the Certificate
of Incorporation or these Bylaws, any question brought before any meeting of
stockholders shall be decided by the vote of the holders of a majority of the
stock represented and entitled to vote thereat. Each stockholder represented
at a meeting of stockholders shall be entitled to cast one vote thereat held by
such stockholder. Such votes may be cast in person or by proxy, but no proxy
shall be voted on or after three years from its date, unless such proxy
provided for a longer period. The Board of Directors, in its discretion,
or the officer of the Corporation presiding at a meeting of stockholders, in
his discretion, may require that any votes cast at such meeting shall be cast
by written ballot.
Section 6. Consent of Stockholders in Lieu of Meeting. Unless
otherwise provided in the Certificate of Incorporation, any action required or
permitted to be taken at any Annual or Special Meeting of stockholders of the
Corporation may be taken without a meeting, without prior notice and without a
vote, if a consent in writing, setting forth the action so taken, shall be
signed by the holders of outstanding stock having not less than the minimum
number of votes that would be necessary to authorize such action at a meeting
at which all shares entitled to vote thereon were present and voted. Prompt
notice of the taking of the corporate action without a meeting by less than
unanimous written consent shall be given to those stockholders who have not
consented in writing.
BYLAWS OF D-H ACQUISITION, INC. - PAGE 2 OF 15
<PAGE> 3
Section 7. List of Stockholders Entitled to Vote. The officer of the
Corporation who has charge of the stock ledger of the Corporation shall prepare
and make, at least ten days before every meeting of stockholders, a complete
list of the stockholders entitled to vote at the meeting arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open
to the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten days prior to the
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder of the Corporation who is
present.
Section 8. Stock Ledger. The stock ledger of the Corporation shall be
the only evidence as to who are the stockholders entitled to examine the stock
ledger, the list required by Section 7 of this Article II or the books of the
Corporation, or to vote in person or by proxy at any meeting of stockholders.
ARTICLE III
DIRECTORS
Section 1. Number and Election of Directors. The affairs of the
Corporation shall be managed by a Board of Directors. The number of directors
may from time to time be fixed by resolution of such Board of Directors. Except
as provided in Section 2 of this Article, directors shall be elected by a
plurality of the votes cast at Annual Meetings of Stockholders, and each
director so elected shall hold office until the next Annual Meeting of
Stockholders and until his successor is duly elected and qualified, or until
his earlier resignation or removal. Any director may resign at any time upon
notice to the Corporation. Directors need not be stockholders.
Section 2. Vacancies. Vacancies and newly created directorships
resulting from any increase in the authorized number of directors may be filled
by a majority of the directors then in office, though less than a quorum, or by
a sole remaining director, and the directors so chosen shall hold office until
the next Annual Meeting of Stockholders and until their successors are duly
elected and qualified, or until their earlier resignation or removal.
Section 3. Duties and Powers. The business of the Corporation shall
be managed by or under the directorship of the Board of Directors, which may
exercise all such powers of the Corporation and do all such lawful acts and
things as are not by
BYLAWS OF D-H ACQUISITION, INC. - PAGE 3 OF 15
<PAGE> 4
statute or by the Certificate of Incorporation or by these Bylaws directed or
required to be exercised or done by the stockholders.
Section 4. Meetings. The Board of Directors of the Corporation may
hold meetings, both regular and special, either within or without the State of
Delaware. Regular meetings of the Board of Directors may be held without notice
at such time and at such place as may from time to time be determined by the
Board of Directors. Special meetings of the Board of Directors may be called
by the Chairman, if there be one, the President, the Secretary, or upon the
written request of one-third of the number of directors of the Corporation.
Notice thereof stating the place, date and hour of the meeting shall be given
to each director either by mail not less than forty-eight (48) hours before the
date of the meeting, by telephone or telegram on twenty-four (24) hours'
notice, or on such shorter notice as the person or persons calling such meeting
may deem necessary or appropriate in the circumstances.
Section 5. Quorum. Except as may be otherwise specifically provided
by law, the Certificate of Incorporation or these Bylaws, at all meetings of
the Board of Directors, a majority of the entire Board of Directors shall
constitute a quorum for the transaction of business and the act of a majority
of the directors present at any meeting at which there is a quorum shall be the
act of the Board of Directors. If a quorum shall not be present at any meeting
of the Board of Directors, the directors present thereat may adjourn the
meeting from time to time, without notice other than announcement at the
meeting, until a quorum shall be present.
Section 6. Actions of Board. Unless otherwise provided by the
Certificate of Incorporation or these Bylaws, any action required or permitted
to be taken at any meeting of the Board of Directors or of any committee
thereof may be taken without a meeting, if all of the members of the Board of
Directors or committee, as the case may be, consent thereto in writing, and the
writing or writings are filed with the minutes of proceedings of the Board of
Directors or Committee.
Section 7. Meetings by Means of Conference Telephone. Unless
otherwise provided by the Certificate of Incorporation or these Bylaws, members
of the Board of Directors of the Corporation, or any committee designated by
the Board of Directors, may participate in a meeting of the Board of Directors
or such committee by means of a conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other, and participation in a meeting pursuant to this Section 7 shall
constitute presence in person at such meeting.
Section 8. Committees. The Board of Directors may, by resolution
passed by a majority of the entire Board of Directors,
BYLAWS OF D-H ACQUISITION, INC. - PAGE 4 OF 15
<PAGE> 5
designate one or more committees, each committee to consist of one or more of
the directors of the Corporation. The Board of Directors may designate one or
more directors as alternate members of any committee, who may replace any
absent or disqualified member at any meeting of any such committee. In the
absence or disqualification of a member of a committee, and in the absence of a
designation by the Board of Directors of an alternate member to replace the
absent or disqualified member, the member or members thereof present at any
meeting and not disqualified from voting, whether or not he or they constitute
a quorum, may unanimously appoint another member or the Board of Directors to
act at the meeting in place of any absent or disqualified member. Any
committee, to the extent allowed by law and provided in the resolution
establishing such committee, shall have and may exercise all the powers and
authority of the Board of Directors in the management of the business and
affairs of the Corporation. Each committee shall keep regular minutes and
report to the Board of Directors when required.
Section 9. Compensation. By resolution of the Board of Directors, the
directors may be paid their expenses, if any, of attendance at each meeting of
the Board of Directors and may be paid a fixed sum for attendance at each
meeting of the Board of Directors or a stated salary as director. No such
payment shall preclude any director from serving the Corporation in any other
capacity and receiving compensation therefor. Members of special or standing
committees may, by resolution of the Board of Directors, be allowed like
compensation for attending committee meetings.
Section 10. Interested Directors. No contract or transaction between
the Corporation and one or more of its directors or officers, or between the
Corporation and any other corporation, partnership, association or other
organization in which one or more of its directors or officers are directors or
officers, or have a financial interest, shall be void or voidable solely for
this reason, or solely because the director or officer is present at or
participates in the meeting of the Board of Directors or committee thereof
which authorized the contract or transaction, or solely because his or their
votes are counted for such purpose if (i) the material facts as to his or their
relationship or interest and as to the contract or transactions are disclosed
or are known to the Board of Directors or the committee, and the Board of
Directors or committee in good faith authorized the contract or transaction by
the affirmative votes of a majority of the disinterested directors, even though
the disinterested directors be less than a quorum; or (ii) the material facts
as to his or their relationship or interest and as to the contract or
transaction are disclosed or are known to the stockholders entitled to vote
thereon, and the contract or transaction is specifically approved in good faith
by the vote of the stockholders; or (iii) the contract or transaction is fair
as to the Corporation as of the time it is authorized, approved or
BYLAWS OF D-H ACQUISITION, INC. - PAGE 5 OF 15
<PAGE> 6
ratified by the Board of Directors, a committee thereof or the stockholders.
Common or interested directors may be counted in determining the presence of a
quorum at a meeting of the Board of Directors or a committee which authorized
the contract or transaction.
ARTICLE IV
OFFICERS
Section 1. General. The officers of the Corporation shall be chosen
by the Board of Directors and shall be a Chairman of the Board, a President and
a Secretary. The Board of Directors, in its discretion, may also choose a
Treasurer, one or more Vice Presidents, Assistant Secretaries, Assistant
Treasurers and other officers. Any number of offices may be held by the same
person, unless otherwise prohibited by law, the Certificate of Incorporation or
these Bylaws. The officers of the Corporation need not be stockholders of the
Corporation nor, except in the case of the Chairman of the Board of Directors,
need such officers be directors of the Corporation.
Section 2. Election. The Board of Directors at its first meeting held
after each Annual Meeting of Stockholders shall elect the officers of the
Corporation who shall hold their offices for such terms and shall exercise such
powers and perform such duties as shall be determined from time to time by the
Board of Directors; and all officers of the Corporation shall hold office until
their successors are elected and qualified, or until their earlier resignation
or removal. Any officer elected by the Board of Directors may be removed at
any time by the affirmative vote of a majority of the Board of Directors. Any
vacancy occurring in any office of the Corporation shall be filled by the Board
of Directors. The officers shall not receive any stated salary for their
services; however, all officers shall be entitled to be paid or reimbursed for
all costs and expenditures incurred in the Corporation's business.
Section 3. Voting securities Owned by the Corporation. Powers of
attorney, proxies, waivers of notice of meeting, consents and other instruments
relating to securities owned by the Corporation may be executed in the name and
on behalf of the Corporation by the Chairman of the Board, the President or any
Vice President and any such officer may, in the name of and on behalf of the
Corporation, take all such action as any such officer may deem advisable to
vote in person or by proxy at any meeting of security holders of any
corporation in which the Corporation may own securities and at any such meeting
shall possess and may exercise any and all rights and powers incident to the
ownership of such securities and which, as the owner thereof, the Corporation
might have exercised and possessed if present. The Board of Directors
BYLAWS OF D-H ACQUISITION, INC. - PAGE 6 OF 15
<PAGE> 7
may, by resolution, from time to time confer like powers upon any other person
or persons.
Section 4. Chairman of the Board of Directors. The Chairman of the
Board of Directors shall preside at all meetings of the stockholders and of the
Board of Directors. The Chairman of the Board of Directors shall be the Chief
Executive Officer of the Corporation and shall have general supervision of its
business. He shall possess the same power as the President to sign all
contracts, certificates and other instruments of the Corporation which may be
authorized by the Board of Directors. The Chairman of the Board of Directors
shall also perform such other duties and may exercise such other powers as from
time to time may be assigned to him by these Bylaws or by the Board of
Directors.
Section 5. President. The President shall, subject to the control of
the Board of Directors and the Chairman of the Board of Directors, be the Chief
Operations Officer and shall have general supervision of the operations of the
Corporation. He shall execute all bonds, mortgages, contracts and other
instruments of the Corporation requiring a seal, under the seal of the
Corporation, except where required or permitted by law to be otherwise signed
and executed and except that the other officers of the Corporation may sign and
execute documents when so authorized by these Bylaws, the Board of Directors or
the Chairman of the Board. In the absence or disability of the Chairman of the
Board of Directors, or if there be none, the President shall preside at all
meetings of the stockholders and the Board of Directors. If there be no
Chairman of the Board of Directors, the President shall be the Chief Executive
Officer of the Corporation. The President shall also perform such other duties
and may exercise such other powers as from time to time may be assigned to him
by these Bylaws or by the Board of Directors.
Section 6. Vice President. At the request of the President or in his
absence or in the event of his inability or refusal to act (and if there be no
Chairman of the Board of Directors), the Vice President or the Vice Presidents
if there is more than one, if there be any, (in the order designated by the
Board of Directors) shall perform the duties of the President, and when so
acting, shall have all the powers of and be subject to all the restrictions
upon the President. Each Vice President shall perform such other duties and
have such other powers as the Board of Directors from time to time may
prescribe. If there be no Chairman of the Board of Directors and no Vice
President, the Board of Directors shall designate the officer of the
Corporation who in the absence of the President, or in the event of the
inability or refusal of the President to act, shall perform the duties of the
President, and when so acting, shall have all the powers of and be subject to
all the restrictions upon the President.
BYLAWS OF D-H ACQUISITION, INC. - PAGE 7 OF 15
<PAGE> 8
Section 7. Secretary. The Secretary shall attend all meetings of the
Board of Directors and all meetings of stockholders and record all the
proceedings thereat in a book or books to be kept for that purpose; the
Secretary shall also perform like duties of the standing committees when
required. The Secretary shall give, or cause to be given, notice of all
meetings of the stockholders and special meetings of the Board of Directors,
and shall perform such other duties as may be prescribed by the Board of
Directors, Chairman of the Board, or President, under whose supervision he
shall be. If the Secretary shall be unable or shall refuse to cause to give
notice of all meetings of the stockholders and special meetings of the Board of
Directors, and if there be no Assistant Secretary, then either the Board of
Directors or the President may choose another officer to cause such notice to
be given. The Secretary shall have custody of the seal of the Corporation, if
there be one, and the Secretary or any Assistant Secretary, if there be one,
shall have authority to affix the same to any instrument requiring it and when
so affixed, it may be attested by the signature of the Secretary or by the
signature of any such Assistant Secretary. The Board of Directors may give
general authority to any other officer to affix any seal of the Corporation and
to attest the affixing by his signature. The Secretary shall see that all
books, reports, statements, certificates and other documents and records
required by law to be kept or filed are properly kept or filed, as the case may
be.
Section 8. Treasurer. The Treasurer, if there be one, shall have the
custody of the corporate funds and securities and shall keep full and accurate
accounts of receipts and disbursements in books belonging to the Corporation
and shall deposit all moneys and other valuable effects in the name and to the
credit of the Corporation in such depositories as may be designated by the
Board of Directors. The Treasurer shall disburse the funds of the Corporation
as may be ordered by the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the President and the Board of Directors, at
its regular meeting, or when the Board of Directors so requires, an account of
all of his transactions as Treasurer and of the financial condition of the
Corporation. If required by the Board of Directors, the Treasurer shall give
the Corporation a bond in such sum and with such surety or sureties as shall be
satisfactory to the Board of Directors for the faithful performance of the
duties of his office and for the restoration to the Corporation, in case of his
death, resignation, retirement or removal from office, of all books, papers,
vouchers, money and other property of whatever kind in his possession or under
his control belonging to the Corporation.
Section 9. Assistant Secretaries. Except as may be otherwise provided
in these Bylaws, Assistant Secretaries, if there be any, shall perform such
duties and have such powers as from time to time may be assigned to them by the
Board of Directors, the President,
BYLAWS OF D-H ACQUISITION, INC. - PAGE 8 OF 15
<PAGE> 9
any Vice President, if there be one, or the Secretary, and, in the absence of
the Secretary or in the event of his disability or refusal to act, shall
perform duties of the Secretary, and when so acting, shall have all the powers
of and be subject to all the restrictions upon the Secretary.
Section 10. Assistant Treasurers. Assistant Treasurers, if there be
any, shall perform such duties and have such powers as from time to time may be
assigned to them by the Board of Directors, the President, any Vice President,
if there be one, or the Treasurer, and, in the absence of the Treasurer or in
the event of his disability or refusal to act, shall perform the duties of the
Treasurer, and when so acting, shall have all the powers of and be subject to
all the restrictions upon the Treasurer. If required by the Board of Directors,
an Assistant Treasurer shall give the Corporation a bond in such sum and with
such surety or sureties as shall be satisfactory to the Board of Directors for
the faithful performance of the duties of his office and for the restoration to
the Corporation, in case of his death, resignation, retirement or removal from
office, of all books, papers, vouchers, money and other property of whatever
kind in his possession or under his control belonging to the Corporation.
Section 11. Other officers. Such other officers as the Board of
Directors may choose shall perform such duties and have such powers as from
time to time may be assigned to them by the Board of Directors. The Board of
Directors may delegate to any other officer of the Corporation the power to
choose such other officers and to prescribe their respective duties and powers.
BYLAWS OF D-H ACQUISITION, INC. - PAGE 9 OF 15
<PAGE> 10
ARTICLE V
STOCK
Section 1. Form of Certificates. Every holder of stock in the
Corporation shall be entitled to have a certificate signed in the name of the
Corporation (i) by the Chairman of the Board of Directors, the President or a
Vice President and (ii) by the Secretary or an Assistant Secretary, or the
Treasurer or an Assistant Treasurer of the Corporation, certifying the number
of shares owned by him in the Corporation.
Section 2. Signatures. Where a certificate is countersigned by (i) a
transfer agent other than the Corporation or its employee or (ii) a registrar
other than the Corporation or its employee, any other signature on the
certificate may be a facsimile. In case any officer, transfer agent or
registrar who has signed or whose facsimile signature has been placed upon a
certificate shall have ceased to be such officer, transfer agent or registrar
before such certificate is issued, it may be issued by the Corporation with the
same effect as if he were such officer, transfer agent or registrar at the date
of issue.
Section 3. Lost Certificates. The Board of Directors may direct a new
certificate to be issued in place of any certificate theretofore issued by the
Corporation alleged to have been lost, stolen or destroyed, upon the mailing of
an affidavit of the fact by the person claiming the certificate of stock to be
lost, stolen or destroyed. When authorizing such issue of a new certificate,
the Board of Directors may, in its discretion and as a condition precedent to
the issuance thereof, require the owner of such lost, stolen or destroyed
certificate, or his legal representative, advertise the same in such manner as
the Board of Directors shall require and/or to give the Corporation a bond in
such sum as it may direct as indemnity against any claim that may be made
against the Corporation with respect to the certificate alleged to have been
lost, stolen or destroyed.
Section 4. Transfers. Stock of the Corporation shall be transferable
in the manner prescribed by law and in these Bylaws. Transfers of stock shall
be made on the books of the Corporation only by the person named in the
certificate or by his attorney lawfully constituted in writing and upon the
surrender of the certificate therefor, which shall be canceled before a new
certificate shall be issued.
Section 5. Record Date. In order that the Corporation may determine
the stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, or entitled to express consent to
corporate action in writing without a meeting, or entitled to receive payment
of any dividend or other
BYLAWS OF D-H ACQUISITION, INC. - PAGE 10 OF 15
<PAGE> 11
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock, or for the purpose of
any other lawful action, the Board of Directors may fix in advance a record
date, which shall not be more than sixty days nor less than ten days before the
date of such meeting, nor more than sixty days prior to any other action. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for
the adjourned meeting.
Section 6. Beneficial Owners. The Corporation shall be entitled to
recognize the exclusive right of a person registered on its books as the owner
of shares to receive dividends, and to vote as such owner, and to hold liable
for calls and assessments a person registered on its books as the owner of
shares, and shall not be bound to recognize any equitable or other claim to or
interest in such share or shares on the part of any other person, whether or
not it shall have express or other notice thereof, except as otherwise provided
by law.
ARTICLE VI
NOTICES
Section 1. Notices. Whenever written notice is required by law, the
Certificate of Incorporation or these Bylaws to be given to any director,
member of a committee or stockholder, such notice may be given by mail,
addressed to such director, member of a committee or stockholder, at his
address as it appears on the records of the Corporation, with postage thereon
prepaid, and such notice shall be deemed to be given at the time when the same
shall be deposited in the United States mail. Written notice may also be given
personally or by telegram, telex or cable.
Section 2. Waivers of Notice. Whenever any notice is required by law,
the Certificate of Incorporation or these Bylaws to be given to any director,
member of a committee or stockholder, a waiver thereof in writing, signed by
the person or persons entitled to said notice, whether before or after the time
stated therein, shall be deemed equivalent thereto.
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<PAGE> 12
ARTICLE VII
GENERAL PROVISIONS
Section 1. Dividends. Dividends upon the capital stock of the
Corporation, subject to the provisions of the Certificate of Incorporation, if
any, may be declared by the Board of Directors at any regular or special
meeting, and may be paid in cash, in property or in shares of capital stock of
the Corporation. Before payment of any dividend, thereby be set aside out of
any funds of the Corporation available for dividends such sum or sums as the
Board of Directors from time to time, in its absolute discretion, deems proper
as a reserve or reserves to meet contingencies, or for equalizing dividends, or
for repairing or maintaining any property of the Corporation, or for any proper
purpose, and the Board of Directors may modify or abolish any such reserve.
Section 2. Disbursements. All checks or demands for money and notes
of the Corporation shall be signed by such officer or officers or such other
person or persons as the Board of Directors may from time to time designate.
Section 3. Fiscal Year. The fiscal year of the Corporation shall be
fixed by resolution of the Board of Directors.
ARTICLE VIII
INDEMNIFICATION
Section 1. Right to Indemnification.
(a) The Corporation shall indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation) by
reason of the fact that he is or was a director or officer of the Corporation
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or upon
a plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding had
reasonable cause to believe that his conduct was unlawful.
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(b) The Corporation shall indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action or suit by or in the right of the corporation to procure a judgment in
its favor by reason of the fact that he is or was a director or officer of the
Corporation against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection with the defense or settlement of such
action or suit if he acted in good faith and in a manner he reasonably believed
to be in or not opposed to the best interests of the Corporation, except that
no such indemnification shall be made in respect of any claim, issue or matter
as to which such person shall have been adjudged to be liable to the
Corporation unless and only to the extent that the Court of Chancery of
Delaware or the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of such liability but in view
of all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the Court of Chancery of Delaware
or such other court shall deem proper.
(c) Notwithstanding the foregoing provisions of this Article VIII,
the Corporation shall approve indemnification of any Person to the fullest
extent authorized by the Delaware General Corporation Law, as the same exists
or may hereafter be amended (but, in the case of any such amendment, only to
the extent that such amendment permits the Corporation to provide broader
indemnification rights than said law permitted the Corporation to provide prior
to such amendment).
Section 2. Indemnification for Expenses. Notwithstanding any other
provision of this Article VIII, to the extent that a director or officer has
been successful on the merits or otherwise in defense of any action, suit or
proceeding referred to in Section 1 of this Article VIII, or in defense of any
claim, issue or matter therein, he shall be indemnified against all expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection therewith.
Section 3. Procedure to be Followed. Any indemnification under
Section 1 of this Article VIII (unless ordered by a court) shall be paid by the
Corporation if a determination is made (i) by the board of directors by a
majority vote of a quorum consisting of directors who were not parties to such
action, suit or proceeding, or (ii) if such a quorum is not attainable, or,
even if attainable and a quorum of disinterested directors so directs, by
independent legal counsel in a written opinion, or (iii) by the majority vote
of a quorum of the stockholders, that indemnification of the director, officer,
employee or agent is proper in the circumstances because he has met the
applicable standard of conduct set forth in Section 1 of this Article VIII.
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Section 4. Payment of Expenses in Advance. Expenses (including
attorneys' fees) incurred by a director or officer in defending a civil or
criminal action, suit or proceeding, shall be paid by the corporation in
advance of the final disposition of such action, suit or proceeding; provided,
however, that the payment of such expenses incurred by a director or officer in
advance of the final disposition of such action, suit or proceeding shall be
made only upon receipt of an undertaking by or on behalf of the director or
officer to repay all amounts so advanced in the event that it shall ultimately
be determined that such director or officer is not entitled to be indemnified
by the corporation as authorized in this Article VIII. Such expenses incurred
by other employees and agents may be so paid in such circumstances and upon such
terms and conditions, if any, as the board of directors deems appropriate.
Section 5. Other Rights. The indemnification and advancement of
expenses provided, or granted pursuant to, this Article VIII shall not be
deemed exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under bylaw, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in his
official capacity and as to action in any other capacity while holding office,
and shall continue as to a person who has ceased to be a director or officer,
and shall inure to the benefit of the estate, heirs, executors and
administrators of such person.
Section 6. Insurance. In addition to the indemnification by the
Corporation, the Corporation shall have the power to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee
or agent of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against any liability
asserted against him and incurred by him in any such capacity, or arising out
of his status as such, whether or not the corporation would have the power to
indemnify him against such liability under the provisions of this Article VIII.
Section 7. Severability. If this Article VIII or any portion hereof
shall be invalidated on any ground by any court of competent jurisdiction, such
invalidation shall in no way affect the remaining portions of this Article
VIII, and the Corporation shall nevertheless indemnify each person sought to be
indemnified under this Article VIII as to any expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement with respect to any
action, suit or proceeding, whether civil, criminal, administrative or
investigative, including an action by or in the right of the Corporation, to
the fullest extent permitted by an applicable portion of this Article VIII that
shall not have been invalidated and to the fullest extent permitted by
applicable law.
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Section 8. Indemnification of Others. Employees and agents who are
not officers of the Corporation and any Person who is or was serving at the
request of the Corporation as a director, officer, employee or agent of another
Corporation, partnership, joint venture, trust or other enterprise may be
indemnified to the same extent that indemnification is provided in this Article
VIII to directors and officers of the Corporation, in such circumstances and
subject to such limitations, terms and conditions as the board of directors
deems appropriate. Any indemnification provided pursuant to this Section 8 of
Article VIII shall not be deemed exclusive of any other rights to which such
persons seeking indemnification or advancement of expenses may be entitled
under any bylaw, agreement, or vote of stockholders or disinterested directors.
Section 9. Amendments. No amendment, termination or repeal of this
Article VIII or of relevant provisions of the Delaware General Corporation Law
or any other applicable law shall diminish in any way the rights of any person
to indemnification under the provisions hereof with respect to any action, suit
or proceeding arising out of, or relating to, any actions, transactions or
facts occurring prior to the final adoption of such amendment, termination or
repeal.
ARTICLE IX
AMENDMENTS
Section 1. Amendment of Bylaws. These Bylaws may be altered, amended
or repealed, in whole or in part, or new Bylaws may be adopted by the
stockholders or by the Board of Directors, provided, however, that notice of
such alternation, amendment, repeal or adoption of new Bylaws be contained in
the notice of such meeting of stockholders or Board of Directors, as the case
may be. All such amendments must be approved by either the holders of a
majority of the outstanding capital stock entitled to vote thereon or by a
majority of the entire Board of Directors then in office.
Section 2. Entire Board of Directors. As used in this Article IX and
in these Bylaws generally, the term "entire Board of Directors" means the total
number of directors which the Corporation would have if there were no
vacancies.
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<PAGE> 1
EXHIBIT 3.4
BYLAWS
OF
HYDROCHEM INTERNATIONAL, INC.
(hereinafter called the "Corporation")
ARTICLE I
OFFICES
Section 1. Registered Office. The registered office of the
Corporation shall be Corporation Trust Center, 1209 Orange Street, Wilmington,
Delaware 19801, County of New Castle.
Section 2. Other Offices. The Corporation may also have offices at
such other places both within and without the State of Delaware as the Board of
Directors may from time to time determine.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. Place of Meetings. Meetings of the stockholders for the
election of directors or for any other purpose shall be held at such time and
place, either within or without the State of Delaware, as shall be designated
from time to time by the Board of Directors and stated in the notice of the
meeting or in a duly executed waiver of notice thereof.
Section 2. Annual Meetings. The Annual Meeting of Stockholders shall
be held on the last Tuesday in November if not a legal holiday, otherwise on
the next regular business day following at 10:00 a.m., or at such other date
and time as shall be designated from time to time by the Board of Directors and
stated in the notice of the meeting, at which meetings the stockholders shall
elect by a plurality vote a Board of Directors, and transact such other
business as may properly be brought before the meeting. Written notice of the
Annual Meeting stating the place, date and hour of the meeting shall be given
to each stockholder entitled to vote at such meeting not less than ten nor more
than sixty days before the date of the meeting.
Section 3. Special Meetings. Unless otherwise prescribed by law or by
the Certificate of Incorporation, Special Meetings of Stockholders, for any
purpose or purposes, may be called by the President, a majority of the Board of
Directors, or the holders of a majority of all the shares of Capital Stock of
the Corporation issued and outstanding and entitled to vote. Such request shall
BYLAWS OF HYDROCHEM INTERNATIONAL, INC. - PAGE 1 OF 15
<PAGE> 2
state the purpose or purposes of the proposed meeting. Written notice of the
Special Meeting stating the place, date and hour of the meeting and the purpose
or purposes for which the meeting is called shall be given not less than ten
nor more than sixty days before the date of the meeting to each stockholder
entitled to vote at such meeting.
Section 4. Quorum. Except as otherwise provided by law or by the
Certificate of Incorporation, the holders of a majority of the capital stock
issued and outstanding and entitled to vote thereat, present in person or
represented by proxy, shall constitute a quorum at all meetings of the
stockholders for the transaction of business. If, however, such quorum
shall not be present or represented at any meeting of the stockholders, the
stockholders entitled to vote thereat, present in person or represented by
proxy, shall have the power to adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum shall be present
or represented. At such adjourned meeting at which a quorum shall be present or
represented, any business may be transacted which might have been transacted at
the meeting as originally noticed. If the adjournment is for more than thirty
days, or if after the adjournment a new record date is fixed for the adjourned
meeting, a notice of the adjourned meeting shall be given to each stockholder
entitled to vote at the meeting.
Section 5. Voting. Unless otherwise required by law, the Certificate
of Incorporation or these Bylaws, any question brought before any meeting of
stockholders shall be decided by the vote of the holders of a majority of the
stock represented and entitled to vote thereat. Each stockholder represented
at a meeting of stockholders shall be entitled to cast one vote thereat held by
such stockholder. Such votes may be cast in person or by proxy, but no proxy
shall be voted on or after three years from its date, unless such proxy
provided for a longer period. The Board of Directors, in its discretion, or the
officer of the Corporation presiding at a meeting of stockholders, in his
discretion, may require that any votes cast at such meeting shall be cast by
written ballot.
Section 6. Consent of Stockholders in Lieu of Meeting. Unless
otherwise provided in the Certificate of Incorporation, any action required or
permitted to be taken at any Annual or Special Meeting of stockholders of the
Corporation may be taken without a meeting, without prior notice and without a
vote, if a consent in writing, setting forth the action so taken, shall be
signed by the holders of outstanding stock having not less than the minimum
number of votes that would be necessary to authorize such action at a meeting
at which all shares entitled to vote thereon were present and voted. Prompt
notice of the taking of the corporate action without a meeting by less than
unanimous written consent shall be given to those stockholders who have not
consented in writing.
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<PAGE> 3
Section 7. List of stockholders Entitled to Vote. The officer of the
Corporation who has charge of the stock ledger of the Corporation shall prepare
and make, at least ten days before every meeting of stockholders, a complete
list of the stockholders entitled to vote at the meeting arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open
to the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten days prior to the
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder of the Corporation who is
present.
Section 8. Stock Ledger. The stock ledger of the Corporation shall be
the only evidence as to who are the stockholders entitled to examine the stock
ledger, the list required by Section 7 of this Article II or the books of the
Corporation, or to vote in person or by proxy at any meeting of stockholders.
ARTICLE III
DIRECTORS
Section 1. Number and Election of Directors. The affairs of the
Corporation shall be managed by a Board of Directors. The number of directors
may from time to time be fixed by resolution of such Board of Directors. Except
as provided in Section 2 of this Article, directors shall be elected by a
plurality of the votes cast at Annual Meetings of Stockholders, and each
director so elected shall hold office until the next Annual Meeting of
Stockholders and until his successor is duly elected and qualified, or until
his earlier resignation or removal. Any director may resign at any time upon
notice to the Corporation. Directors need not be stockholders.
Section 2. Vacancies. Vacancies and newly created directorships
resulting from any increase in the authorized number of directors may be filled
by a majority of the directors then in office, though less than a quorum, or by
a sole remaining director, and the directors so chosen shall hold office until
the next Annual Meeting of Stockholders and until their successors are duly
elected and qualified, or until their earlier resignation or removal.
Section 3. Duties and Powers. The business of the Corporation shall
be managed by or under the directorship of the Board of Directors, which may
exercise all such powers of the Corporation and do all such lawful acts and
things as are not by
BYLAWS OF HYDROCHEM INTERNATIONAL, INC. - PAGE 3 OF 15
<PAGE> 4
statute or by the Certificate of Incorporation or by these Bylaws directed or
required to be exercised or done by the stockholders.
Section 4. Meetings. The Board of Directors of the Corporation may
hold meetings, both regular and special, either within or without the State of
Delaware. Regular meetings of the Board of Directors may be held without notice
at such time and at such place as may from time to time be determined by the
Board of Directors. Special meetings of the Board of Directors may be called by
the Chairman, if there be one, the President, the Secretary, or upon the
written request of one-third of the number of directors of the Corporation.
Notice thereof stating the place, date and hour of the meeting shall be given
to each director either by mail not less than forty-eight (48) hours before the
date of the meeting, by telephone or telegram on twenty-four (24) hours'
notice, or on such shorter notice as the person or persons calling such meeting
may deem necessary or appropriate in the circumstances.
Section 5. Quorum. Except as may be otherwise specifically provided
by law, the Certificate of Incorporation or these Bylaws, at all meetings of
the Board of Directors, a majority of the entire Board of Directors shall
constitute a quorum for the transaction of business and the act of a majority
of the directors present at any meeting at which there is a quorum shall be the
act of the Board of Directors. If a quorum shall not be present at any meeting
of the Board of Directors, the directors present thereat may adjourn the
meeting from time to time, without notice other than announcement at the
meeting, until a quorum shall be present.
Section 6. Actions of Board. Unless otherwise provided by the
Certificate of Incorporation or these Bylaws, any action required or permitted
to be taken at any meeting of the Board of Directors or of any committee
thereof may be taken without a meeting, if all of the members of the Board of
Directors or committee, as the case may be, consent thereto in writing, and the
writing or writings are filed with the minutes of proceedings of the Board of
Directors or committee.
Section 7. Meetings by Means of Conference Telephone. Unless
otherwise provided by the Certificate of Incorporation or these Bylaws, members
of the Board of Directors of the Corporation, or any committee designated by
the Board of Directors, may participate in a meeting of the Board of Directors
or such committee by means of a conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other, and participation in a meeting pursuant to this Section 7 shall
constitute presence in person at such meeting.
Section 8. Committees. The Board of Directors may, by resolution
passed by a majority of the entire Board of Directors,
BYLAWS OF HYDROCHEM INTERNATIONAL, INC. - PAGE 4 OF 15
<PAGE> 5
designate one or more committees, each committee to consist of one or more of
the directors of the Corporation. The Board of Directors may designate one or
more directors as alternate members of any committee, who may replace any
absent or disqualified member at any meeting of any such committee. In the
absence or disqualification of a member of a committee, and in the absence of a
designation by the Board of Directors of an alternate member to replace the
absent or disqualified member, the member or members thereof present at any
meeting and not disqualified from voting, whether or not he or they constitute
a quorum, may unanimously appoint another member or the Board of Directors to
act at the meeting in place of any absent or disqualified member. Any
committee, to the extent allowed by law and provided in the resolution
establishing such committee, shall have and may exercise all the powers and
authority of the Board of Directors in the management of the business and
affairs of the Corporation. Each committee shall keep regular minutes and
report to the Board of Directors when required.
Section 9. Compensation. By resolution of the Board of Directors, the
directors may be paid their expenses, if any, of attendance at each meeting of
the Board of Directors and may be paid a fixed sum for attendance at each
meeting of the Board of Directors or a stated salary as director. No such
payment shall preclude any director from serving the Corporation in any other
capacity and receiving compensation therefor. Members of special or standing
committees may, by resolution of the Board of Directors, be allowed like
compensation for attending committee meetings.
Section 10. Interested Directors. No contract or transaction between
the Corporation and one or more of its directors or officers, or between the
Corporation and any other corporation, partnership, association or other
organization in which one or more of its directors or officers are directors or
officers, or have a financial interest, shall be void or voidable solely for
this reason, or solely because the director or officer is present at or
participates in the meeting of the Board of Directors or committee thereof
which authorized the contract or transaction, or solely because his or their
votes are counted for such purpose if (i) the material facts as to his or their
relationship or interest and as to the contract or transactions are disclosed
or are known to the Board of Directors or the committee, and the Board of
Directors or committee in good faith authorized the contract or transaction by
the affirmative votes of a majority of the disinterested directors, even though
the disinterested directors be less than a quorum; or (ii) the material facts
as to his or their relationship or interest and as to the contract or
transaction are disclosed or are known to the stockholders entitled to vote
thereon, and the contract or transaction is specifically approved in good faith
by the vote of the stockholders; or (iii) the contract or transaction is fair
as to the Corporation as of the time it is authorized, approved or
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<PAGE> 6
ratified by the Board of Directors, a committee thereof or the stockholders.
Common or interested directors may be counted in determining the presence of a
quorum at a meeting of the Board of Directors or a committee which authorized
the contract or transaction.
ARTICLE IV
OFFICERS
Section 1. General. The officers of the Corporation shall be chosen
by the Board of Directors and shall be a Chairman of the Board, a President and
a Secretary. The Board of Directors, in its discretion, may also choose a
Treasurer, one or more Vice Presidents, Assistant Secretaries, Assistant
Treasurers and other officers. Any number of offices may be held by the same
person, unless otherwise prohibited by law, the Certificate of Incorporation or
these Bylaws. The officers of the Corporation need not be stockholders of the
Corporation nor, except in the case of the Chairman of the Board of Directors,
need such officers be directors of the Corporation.
Section 2. Election. The Board of Directors at its first meeting held
after each Annual Meeting of Stockholders shall elect the officers of the
Corporation who shall hold their offices for such terms and shall exercise such
powers and perform such duties as shall be determined from time to time by the
Board of Directors; and all officers of the Corporation shall hold office until
their successors are elected and qualified, or until their earlier resignation
or removal. Any officer elected by the Board of Directors may be removed at
any time by the affirmative vote of a majority of the Board of Directors. Any
vacancy occurring in any office of the Corporation shall be filled by the Board
of Directors. The officers shall not receive any stated salary for their
services; however, all officers shall be entitled to be paid or reimbursed for
all costs and expenditures incurred in the Corporation's business.
Section 3. Voting Securities Owned by the Corporation. Powers of
attorney, proxies, waivers of notice of meeting, consents and other instruments
relating to securities owned by the Corporation may be executed in the name and
on behalf of the Corporation by the Chairman of the Board, the President or any
Vice President and any such officer may, in the name of and on behalf of the
Corporation, take all such action as any such officer may deem advisable to
vote in person or by proxy at any meeting of security holders of any
corporation in which the Corporation may own securities and at any such meeting
shall possess and may exercise any and all rights and powers incident to the
ownership of such securities and which, as the owner thereof, the Corporation
might have exercised and possessed if present. The Board of Directors
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<PAGE> 7
may, by resolution, from time to time confer like powers upon any other person
or persons.
Section 4. Chairman of the Board of Directors. The Chairman of the
Board of Directors shall preside at all meetings of the stockholders and of the
Board of Directors. The Chairman of the Board of Directors shall be the Chief
Executive Officer of the Corporation and shall have general supervision of its
business. He shall possess the same power as the President to sign all
contracts, certificates and other instruments of the Corporation which may be
authorized by the Board of Directors. The Chairman of the Board of Directors
shall also perform such other duties and may exercise such other powers as from
time to time may be assigned to him by these Bylaws or by the Board of
Directors.
Section 5. President. The President shall, subject to the control of
the Board of Directors and the Chairman of the Board of Directors, be the Chief
Operations Officer and shall have general supervision of the operations of the
Corporation. He shall execute all bonds, mortgages, contracts and other
instruments of the Corporation requiring a seal, under the seal of the
Corporation, except where required or permitted by law to be otherwise signed
and executed and except that the other officers of the Corporation may sign and
execute documents when so authorized by these Bylaws, the Board of Directors or
the Chairman of the Board. In the absence or disability of the Chairman of the
Board of Directors, or if there be none, the President shall preside at all
meetings of the stockholders and the Board of Directors. If there be no
Chairman of the Board of Directors, the President shall be the Chief Executive
Officer of the Corporation. The President shall also perform such other duties
and may exercise such other powers as from time to time may be assigned to him
by these Bylaws or by the Board of Directors.
Section 6. Vice President. At the request of the President or in his
absence or in the event of his inability or refusal to act (and if there be no
Chairman of the Board of Directors), the Vice President or the Vice Presidents
if there is more than one, if there be any, (in the order designated by the
Board of Directors) shall perform the duties of the President, and when so
acting, shall have all the powers of and be subject to all the restrictions
upon the President. Each Vice President shall perform such other duties and
have such other powers as the Board of Directors from time to time may
prescribe. If there be no Chairman of the Board of Directors and no Vice
President, the Board of Directors shall designate the officer of the
Corporation who in the absence of the President, or in the event of the
inability or refusal of the President to act, shall perform the duties of the
President, and when so acting, shall have all the powers of and be subject to
all the restrictions upon the President.
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Section 7. Secretary. The Secretary shall attend all meetings of the
Board of Directors and all meetings of stockholders and record all the
proceedings thereat in a book or books to be kept for that purpose; the
Secretary shall also perform like duties of the standing committees when
required. The Secretary shall give, or cause to be given, notice of all
meetings of the stockholders and special meetings of the Board of Directors,
and shall perform such other duties as may be prescribed by the Board of
Directors, Chairman of the Board, or President, under whose supervision he
shall be. If the Secretary shall be unable or shall refuse to cause to give
notice of all meetings of the stockholders and special meetings of the Board of
Directors, and if there be no Assistant Secretary, then either the Board of
Directors or the President may choose another officer to cause such notice to
be given. The Secretary shall have custody of the seal of the Corporation, if
there be one, and the Secretary or any Assistant Secretary, if there be one,
shall have authority to affix the same to any instrument requiring it and when
so affixed, it may be attested by the signature of the Secretary or by the
signature of any such Assistant Secretary. The Board of Directors may give
general authority to any other officer to affix any seal of the Corporation and
to attest the affixing by his signature. The Secretary shall see that all
books, reports, statements, certificates and other documents and records
required by law to be kept or filed are properly kept or filed, as the case may
be.
Section 8. Treasurer. The Treasurer, if there be one, shall have the
custody of the corporate funds and securities and shall keep full and accurate
accounts of receipts and disbursements in books belonging to the Corporation
and shall deposit all moneys and other valuable effects in the name and to the
credit of the Corporation in such depositories as may be designated by the
Board of Directors. The Treasurer shall disburse the funds of the Corporation
as may be ordered by the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the President and the Board of Directors, at
its regular meeting, or when the Board of Directors so requires, an account of
all of his transactions as Treasurer and of the financial condition of the
Corporation. If required by the Board of Directors, the Treasurer shall give
the Corporation a bond in such sum and with such surety or sureties as shall be
satisfactory to the Board of Directors for the faithful performance of the
duties of his office and for the restoration to the Corporation, in case of his
death, resignation, retirement or removal from office, of all books, papers,
vouchers, money and other property of whatever kind in his possession or under
his control belonging to the Corporation.
Section 9. Assistant Secretaries. Except as may be otherwise provided
in these Bylaws, Assistant Secretaries, if there be any, shall perform such
duties and have such powers as from time to time may be assigned to them by the
Board of Directors, the President,
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<PAGE> 9
any Vice President, if there be one, or the Secretary, and, in the absence of
the Secretary or in the event of his disability or refusal to act, shall
perform duties of the Secretary, and when so acting, shall have all the powers
of and be subject to all the restrictions upon the Secretary.
Section 10. Assistant Treasurers. Assistant Treasurers, if there be
any, shall perform such duties and have such powers as from time to time may be
assigned to them by the Board of Directors, the President, any Vice President,
if there be one, or the Treasurer, and, in the absence of the Treasurer or in
the event of his disability or refusal to act, shall perform the duties of the
Treasurer, and when so acting, shall have all the powers of and be subject to
all the restrictions upon the Treasurer. If required by the Board of Directors,
an Assistant Treasurer shall give the Corporation a bond in such sum and with
such surety or sureties as shall be satisfactory to the Board of Directors for
the faithful performance of the duties of his office and for the restoration to
the Corporation, in case of his death, resignation, retirement or removal from
office, of all books, papers, vouchers, money and other property of whatever
kind in his possession or under his control belonging to the Corporation.
Section 11. Other Officers. Such other officers as the Board of
Directors may choose shall perform such duties and have such powers as from
time to time may be assigned to them by the Board of Directors. The Board of
Directors may delegate to any other officer of the Corporation the power to
choose such other officers and to prescribe their respective duties and powers.
ARTICLE V
STOCK
Section 1. Form of Certificates. Every holder of stock in the
Corporation shall be entitled to have a certificate signed in the name of the
Corporation (i) by the Chairman of the Board of Directors, the President or a
Vice President and (ii) by the Secretary or an Assistant Secretary, or the
Treasurer or an Assistant Treasurer of the Corporation, certifying the number
of shares owned by him in the Corporation.
Section 2. Signatures. Where a certificate is countersigned by (i) a
transfer agent other than the Corporation or its employee or (ii) a registrar
other than the Corporation or its employee, any other signature on the
certificate may be a facsimile. In case any officer, transfer agent or
registrar who has signed or whose facsimile signature has been placed upon a
certificate shall have ceased to be such officer, transfer agent or registrar
before such certificate is issued, it may be issued by the Corporation with the
BYLAWS OF HYDROCHEM INTERNATIONAL, INC. - PAGE 9 OF 15
<PAGE> 10
same effect as if he were such officer, transfer agent or registrar at the date
of issue.
Section 3. Lost Certificates. The Board of Directors may direct a new
certificate to be issued in place of any certificate theretofore issued by the
Corporation alleged to have been lost, stolen or destroyed, upon the mailing of
an affidavit of the fact by the person claiming the certificate of stock to be
lost, stolen or destroyed. When authorizing such issue of a new certificate,
the Board of Directors may, in its discretion and as a condition precedent to
the issuance thereof, require the owner of such lost, stolen or destroyed
certificate, or his legal representative, advertise the same in such manner as
the Board of Directors shall require and/or to give the Corporation a bond in
such sum as it may direct as indemnity against any claim that may be made
against the Corporation with respect to the certificate alleged to have been
lost, stolen or destroyed.
Section 4. Transfers. Stock of the Corporation shall be transferable
in the manner prescribed by law and in these Bylaws. Transfers of stock shall
be made on the books of the Corporation only by the person named in the
certificate or by his attorney lawfully constituted in writing and upon the
surrender of the certificate therefor, which shall be canceled before a new
certificate shall be issued.
Section 5. Record Date. In order that the Corporation may determine
the stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, or entitled to express consent to
corporate action in writing without a meeting, or entitled to receive payment
of any dividend or other distribution or allotment of any rights, or entitled
to exercise any rights in respect of any change, conversion or exchange of
stock, or for the purpose of any other lawful action, the Board of Directors
may fix in advance a record date, which shall not be more than sixty days nor
less than ten days before the date of such meeting, nor more than sixty days
prior to any other action. A determination of stockholders of record entitled
to notice of or to vote at a meeting of stockholders shall apply to any
adjournment of the meeting; provided, however, that the Board of Directors may
fix a new record date for the adjourned meeting.
Section 6. Beneficial Owners. The Corporation shall be entitled to
recognize the exclusive right of a person registered on its books as the owner
of shares to receive dividends, and to vote as such owner, and to hold liable
for calls and assessments a person registered on its books as the owner of
shares, and shall not be bound to recognize any equitable or other claim to or
interest in such share or shares on the part of any other person, whether or
not it shall have express or other notice thereof, except as otherwise provided
by law.
BYLAWS OF HYDROCHEM INTERNATIONAL, INC. - PAGE 10 OF 15
<PAGE> 11
ARTICLE VI
NOTICES
Section 1. Notices. Whenever written notice is required by law, the
Certificate of Incorporation or these Bylaws to be given to any director,
member of a committee or stockholder, such notice may be given by mail,
addressed to such director, member of a committee or stockholder, at his
address as it appears on the records of the Corporation, with postage thereon
prepaid, and such notice shall be deemed to be given at the time when the same
shall be deposited in the United States mail. Written notice may also be given
personally or by telegram, telex or cable.
Section 2. Waivers of Notice. Whenever any notice is required by law,
the Certificate of Incorporation or these Bylaws to be given to any director,
member of a committee or stockholder, a waiver thereof in writing, signed by
the person or persons entitled to said notice, whether before or after the time
stated therein, shall be deemed equivalent thereto.
ARTICLE VII
GENERAL PROVISIONS
Section 1. Dividends. Dividends upon the capital stock of the
Corporation, subject to the provisions of the Certificate of Incorporation, if
any, may be declared by the Board of Directors at any regular or special
meeting, and may be paid in cash, in property or in shares of capital stock of
the Corporation. Before payment of any dividend, there by be set aside out of
any funds of the Corporation available for dividends such sum or sums as the
Board of Directors from time to time, in its absolute discretion, deems proper
as a reserve or reserves to meet contingencies, or for equalizing dividends, or
for repairing or maintaining any property of the Corporation, or for any proper
purpose, and the Board of Directors may modify or abolish any such reserve.
Section 2. Disbursements. All checks or demands for money and notes
of the Corporation shall be signed by such officer or officers or such other
person or persons as the Board of Directors may from time to time designate.
Section 3. Fiscal Year. The fiscal year of the Corporation shall be
fixed by resolution of the Board of Directors.
BYLAWS OF HYDROCHEM INTERNATIONAL, INC. - PAGE 11 OF 15
<PAGE> 12
ARTICLE VIII
INDEMNIFICATION
Section 1. Right to Indemnification.
(a) The Corporation shall indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation) by
reason of the fact that he is or was a director or officer of the Corporation
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or upon
a plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding had
reasonable cause to believe that his conduct was unlawful.
(b) The Corporation shall indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action or suit by or in the right of the corporation to procure a judgment in
its favor by reason of the fact that he is or was a director or officer of the
Corporation against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection with the defense or settlement of such
action or suit if he acted in good faith and in a manner he reasonably believed
to be in or not opposed to the best interests of the Corporation, except that
no such indemnification shall be made in respect of any claim, issue or matter
as to which such person shall have been adjudged to be liable to the
Corporation unless and only to the extent that the Court of Chancery of
Delaware or the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of such liability but in view
of all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the Court of Chancery of Delaware
or such other court shall deem proper.
(c) Notwithstanding the foregoing provisions of this Article VIII,
the Corporation shall approve indemnification of any Person to the fullest
extent authorized by the Delaware General Corporation Law, as the same exists
or may hereafter be amended
BYLAWS OF HYDROCHEM INTERNATIONAL, INC. - PAGE 12 OF 15
<PAGE> 13
(but, in the case of any such amendment, only to the extent that such amendment
permits the Corporation to provide broader indemnification rights than said law
permitted the Corporation to provide prior to such amendment).
Section 2. Indemnification for Expenses. Notwithstanding any other
provision of this Article VIII, to the extent that a director or officer has
been successful on the merits or otherwise in defense of any action, suit or
proceeding referred to in Section 1 of this Article VIII, or in defense of any
claim, issue or matter therein, he shall be indemnified against all expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection therewith.
Section 3. Procedure to be Followed. Any indemnification under
Section 1 of this Article VIII (unless ordered by a court) shall be paid by the
Corporation if a determination is made (i) by the board of directors by a
majority vote of a quorum consisting of directors who were not parties to such
action, suit or proceeding, or (ii) if such a quorum is not attainable, or,
even if attainable and a quorum of disinterested directors so directs, by
independent legal counsel in a written opinion, or (iii) by the majority vote
of a quorum of the stockholders, that indemnification of the director, officer,
employee or agent is proper in the circumstances because he has met the
applicable standard of conduct set forth in Section 1 of this Article VIII.
Section 4. Payment of Expenses in Advance. Expenses (including
attorneys' fees) incurred by a director or officer in defending a civil or
criminal action, suit or proceeding, shall be paid by the corporation in
advance of the final disposition of such action, suit or proceeding; provided,
however, that the payment of such expenses incurred by a director or officer in
advance of the final disposition of such action, suit or proceeding shall be
made only upon receipt of an undertaking by or on behalf of the director or
officer to repay all amounts so advanced in the event that it shall ultimately
be determined that such director or officer is not entitled to be indemnified
by the corporation as authorized in this Article VIII. Such expenses incurred
by other employees and agents may be so paid in such circumstances and upon
such terms and conditions, if any, as the board of directors deems appropriate.
Section 5. Other Rights. The indemnification and advancement of expenses
provided, or granted pursuant to, this Article VIII shall not be deemed
exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under may bylaw, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in his
official capacity and as to action in any other capacity while holding office,
and shall continue as to a person who has ceased to be a director or
BYLAWS OF HYDROCHEM INTERNATIONAL, INC. - PAGE 13 OF 15
<PAGE> 14
officer, and shall inure to the benefit of the estate, heirs, executors and
administrators of such person.
Section 6. Insurance. In addition to the indemnification by the
Corporation, the Corporation shall have the power to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee
or agent of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against any liability
asserted against him and incurred by him in any such capacity, or arising out
of his status as such, whether or not the corporation would have the power to
indemnify him against such liability under the provisions of this Article VIII.
Section 7. Severability. If this Article VIII or any portion hereof
shall be invalidated on any ground by any court of competent jurisdiction, such
invalidation shall in no way affect the remaining portions of this Article
VIII, and the Corporation shall nevertheless indemnify each person sought to be
indemnified under this Article VIII as to any expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement with respect to any
action, suit or proceeding, whether civil, criminal, administrative or
investigative, including an action by or in the right of the Corporation, to
the fullest extent permitted by an applicable portion of this Article VIII that
shall not have been invalidated and to the fullest extent permitted by
applicable law.
Section 8. Indemnification of Others. Employees and agents who are
not officers of the Corporation and any person who is or was serving at the
request of the Corporation as a director, officer, employee or agent of another
Corporation, partnership, joint venture, trust or other enterprise may be
indemnified to the same extent that indemnification is provided in this Article
VIII to directors and officers of the Corporation, in such circumstances and
subject to such limitations, terms and conditions as the board of directors
deems appropriate. Any indemnification provided pursuant to this Section 8 of
Article VIII shall not be deemed exclusive of any other rights to which such
persons seeking indemnification or advancement of expenses may be entitled
under any bylaw, agreement, or vote of stockholders or disinterested directors.
Section 9. Amendments. No amendment, termination or repeal of this
Article VIII or of relevant provisions of the Delaware General Corporation Law
or any other applicable law shall diminish in any way the rights of any person
to indemnification under the provisions hereof with respect to any action, suit
or proceeding arising out of, or relating to, any actions, transactions or
facts occurring prior to the final adoption of such amendment, termination or
repeal.
BYLAWS OF HYDROCHEM INTERNATIONAL, INC. - PAGE 14 OF 15
<PAGE> 15
ARTICLE IX
AMENDMENTS
Section 1. Amendment of Bylaws. These Bylaws may be altered, amended
or repealed, and new Bylaws may be adopted, by a majority of a quorum of the
entire Board of Directors of the Corporation then in office, subject, however,
to repeal or change by the affirmative vote of the holders of a majority of the
outstanding shares entitled to vote thereon.
Section 2. Entire Board of Directors. As used in this Article IX and
in these Bylaws generally, the term "entire Board of Directors" means the total
number of directors which the Corporation would have if there were no
vacancies.
BYLAWS OF HYDROCHEM INTERNATIONAL, INC. - PAGE 15 OF 15
<PAGE> 1
Exhibit 4.1
HYDROCHEM INDUSTRIAL SERVICES, INC.
HYDROCHEM INTERNATIONAL, INC.
$110,000,000
10 3/8% Series A Senior Subordinated Notes due 2007
Purchase Agreement
July 30, 1997
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
<PAGE> 2
$110,000,000
10 3/8% Series A Senior Subordinated Notes due 2007
of HydroChem Industrial Services, Inc.
PURCHASE AGREEMENT
July 30, 1997
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
277 Park Avenue
New York, New York 10005
Dear Sirs:
HydroChem Industrial Services, Inc., a Delaware corporation
(the "Company"), proposes to issue and sell to Donaldson, Lufkin & Jenrette
Securities Corporation (the "Initial Purchaser") an aggregate of $110,000,000
in principal amount of its 10 3/8% Series A Senior Subordinated Notes dues 2007
(the "Series A Notes"), subject to the terms and conditions set forth herein.
The Series A Notes are to be issued pursuant to the provisions of an indenture
(the "Indenture"), to be dated as of the Closing Date (as defined below), among
the Company, the Guarantor (as defined below) and Norwest Bank, Minnesota,
N.A., as trustee (the "Trustee"). The Series A Notes and the Series B Notes
(as defined below) issuable in exchange therefor are collectively referred to
herein as the "Notes." The Notes will be guaranteed (the "Subsidiary
Guarantee") by HydroChem International, Inc., a Delaware corporation (the
"Guarantor"). Capitalized terms used but not defined herein shall have the
meanings given to such terms in the Indenture.
1. OFFERING MEMORANDUM. The Series A Notes will be offered and sold to
the Initial Purchaser pursuant to one or more exemptions from the registration
requirements under the Securities Act of 1933, as amended (the "Act"). The
Company and the Guarantor have prepared a preliminary offering memorandum,
dated July 14, 1997 (the "Preliminary Offering Memorandum") and a final
offering memorandum, dated July 30, 1997 (the "Offering Memorandum"), relating
to the Series A Notes and the Subsidiary Guarantee.
1
<PAGE> 3
Upon original issuance thereof, and until such time as the
same is no longer required pursuant to the Indenture, the Series A Notes (and
all securities issued in exchange therefor, in substitution thereof or upon
conversion thereof) shall bear the following legend:
"THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS
ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER
SECTION 5 OF THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND, THE SECURITY EVIDENCED HEREBY MAY NOT BE
OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR ANY APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF
THE SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE SELLER MAY
BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE
SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF THE
SECURITY EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE COMPANY THAT
(A) SUCH SECURITY MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED,
ONLY (1)(a) TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A
QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE
144A, OR (b) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN
OPINION OF COUNSEL IF THE COMPANY SO REQUESTS), (2) TO THE COMPANY OR
(3) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE,
IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE
UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND (B) THE HOLDER
WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER
FROM IT OF THE SECURITY EVIDENCED HEREBY OF THE RESALE RESTRICTIONS
SET FORTH IN (A) ABOVE."
2. AGREEMENTS TO SELL AND PURCHASE. On the basis of the
representations, warranties and covenants contained in this Agreement, and
subject to the terms and conditions contained herein, the Company agrees to
issue and sell to the Initial Purchaser, and the Initial Purchaser agrees to
purchase from the Company, an aggregate principal amount of $110,000,000 of
Series A Notes at a purchase price equal to 97.5% of the principal amount
thereof (the "Purchase Price").
3. TERMS OF OFFERING. The Initial Purchaser has advised
the Company that the Initial Purchaser will make offers (the "Exempt Resales")
of the Series A Notes purchased hereunder on the terms set forth in the
Offering Memorandum, as amended or supplemented, solely to persons whom the
Initial Purchaser reasonably believes to be "qualified institutional buyers" as
defined in Rule 144A under the Act (the "Eligible Purchasers"). The Initial
Purchaser will offer the Series A
2
<PAGE> 4
Holders (including subsequent transferees) of the Series A
Notes will have the registration rights set forth in the registration rights
agreement (the "Registration Rights Agreement"), to be dated the Closing Date,
in substantially the form of Exhibit A hereto, for so long as such Series A
Notes constitute "Transfer Restricted Securities" (as defined in the
Registration Rights Agreement). Pursuant to the Registration Rights Agreement,
the Company and the Guarantor will agree to file with the Securities and
Exchange Commission (the "Commission") under the circumstances set forth
therein, (i) a registration statement under the Act (the "Exchange Offer
Registration Statement") relating to the Company's 10 3/8% Series B Senior
Subordinated Notes due 2007 (the "Series B Notes"), to be offered in exchange
for the Series A Notes (such offer to exchange being referred to as the
"Exchange Offer") and the Subsidiary Guarantee thereof and (ii) a shelf
registration statement pursuant to Rule 415 under the Act (the "Shelf
Registration Statement" and, together with the Exchange Offer Registration
Statement, the "Registration Statements") relating to the resale by certain
holders of the Series A Notes and to use its reasonable best efforts to cause
such Registration Statements to be declared and remain effective and usable for
the periods specified in the Registration Rights Agreement and to consummate
the Exchange Offer. This Agreement, the Indenture, the Notes, the Subsidiary
Guarantee and the Registration Rights Agreement are hereinafter sometimes
referred to collectively as the "Operative Documents."
4. DELIVERY AND PAYMENT.
(a) Delivery of, and payment of the Purchase Price
for, the Series A Notes shall be made at the offices of Vinson & Elkins L.L.P.
at 2001 Ross Avenue, Suite 3800, Dallas, Texas 75201, or such other location as
may be mutually acceptable. Such delivery and payment shall be made at 9:00
a.m. Dallas, Texas time, on August 4, 1997, or at such other time as shall be
agreed upon by the Initial Purchaser and the Company. The time and date of
such delivery and the payment are herein called the "Closing Date."
(b) One or more of the Series A Notes in definitive
global form, registered in the name of Cede & Co., as nominee of The Depository
Trust Company ("DTC"), having an aggregate principal amount corresponding to
the aggregate principal amount of the Series A Notes (collectively, the "Global
Note"), shall be delivered by the Company to the Initial Purchaser (or as the
Initial Purchaser directs) in each case with any transfer taxes thereon duly
paid by the Company against payment by the Initial Purchaser of the Purchase
Price thereof by wire transfer in same day funds to the order of the Company
(or as the Company may direct). The Global Note shall be made available to the
Initial Purchaser for inspection not later than 9:30 a.m., New York City time,
on the business day immediately preceding the Closing Date.
5. AGREEMENTS OF THE COMPANY AND THE GUARANTOR. Each of
the Company and the Guarantor hereby agrees with the Initial Purchaser as
follows:
3
<PAGE> 5
(a) To advise the Initial Purchaser promptly and,
if requested by the Initial Purchaser, confirm such advice in writing, (i) of
the issuance by any state securities commission of any stop order suspending
the qualification or exemption from qualification of any Series A Notes for
offering or sale in any jurisdiction designated by the Initial Purchaser
pursuant to Section 5(e) hereof, or the initiation of any proceeding by any
state securities commission or any other federal or state regulatory authority
for such purpose and (ii) of the happening of any event during the period
referred to in Section 5(c) below that makes any statement of a material fact
made in the Preliminary Offering Memorandum or the Offering Memorandum untrue
or that requires any additions to or changes in the Preliminary Offering
Memorandum or the Offering Memorandum in order to make the statements therein
not misleading. The Company shall use its reasonable best efforts to prevent
the issuance of any stop order or order suspending the qualification or
exemption of any Series A Notes under any state securities or Blue Sky laws
and, if at any time any state securities commission or other federal or state
regulatory authority shall issue an order suspending the qualification or
exemption of any Series A Notes under any state securities or Blue Sky laws,
the Company shall use its reasonable best efforts to obtain the withdrawal or
lifting of such order at the earliest possible time.
(b) To furnish the Initial Purchaser and those
persons identified by the Initial Purchaser to the Company as many copies of
the Preliminary Offering Memorandum and the Offering Memorandum, and any
amendments or supplements thereto, as the Initial Purchaser may reasonably
request. Subject to the Initial Purchaser's compliance with its
representations and warranties and agreements set forth in Section 7 hereof,
the Company consents to the use of the Preliminary Offering Memorandum and the
Offering Memorandum, and any amendments and supplements thereto required
pursuant hereto, by the Initial Purchaser in connection with Exempt Resales.
(c) During such period as in the opinion of
counsel for the Initial Purchaser an Offering Memorandum is required by law to
be delivered in connection with Exempt Resales by the Initial Purchaser and in
connection with market-making activities of the Initial Purchaser for so long
as any Series A Notes are outstanding, (i) not to make any amendment or
supplement to the Offering Memorandum of which the Initial Purchaser shall not
previously have been advised or to which the Initial Purchaser shall reasonably
object after being so advised and (ii) to prepare promptly upon the Initial
Purchaser's reasonable request, any amendment or supplement to the Offering
Memorandum which may be necessary or advisable in connection with such Exempt
Resales or such market-making activities.
(d) If, after the date hereof during the period
referred to in Section 5(c) above, any event shall occur or condition shall
exist as a result of which, in the opinion of the Company or counsel to the
Initial Purchaser, it becomes necessary to amend or supplement the Offering
Memorandum in order to make the statements therein, in the light of the
circumstances when such Offering Memorandum is delivered to an Eligible
Purchaser, not misleading, or if, in the opinion of the Company or counsel to
the Initial Purchaser, it is necessary to amend or supplement the Offering
Memorandum to comply with any applicable law, forthwith to prepare an
appropriate amendment or supplement to such Offering Memorandum so that the
statements therein, as so amended or supplemented, will not, in the light of
the circumstances when it is so delivered, be
4
<PAGE> 6
misleading, or so that such Offering Memorandum will comply with applicable
law, and to furnish to the Initial Purchaser and such other persons as the
Initial Purchaser may designate such number of copies thereof as the Initial
Purchaser may reasonably request.
(e) Prior to the sale of all Series A Notes
pursuant to Exempt Resales as contemplated hereby, to cooperate with the
Initial Purchaser and counsel to the Initial Purchaser in connection with the
registration or qualification of the Series A Notes for offer and sale to the
Initial Purchaser and pursuant to Exempt Resales under the securities or Blue
Sky laws of such jurisdictions as the Initial Purchaser may request and to
continue such qualification in effect so long as required for Exempt Resales
and to file such consents to service of process or other documents as may be
necessary in order to effect such registration or qualification; provided,
however, that neither the Company nor the Guarantor shall be required in
connection therewith to register or qualify as a foreign corporation in any
jurisdiction in which it is not now so qualified or to take any action that
would subject it to general consent to service of process or taxation other
than as to matters and transactions relating to the use of the Preliminary
Offering Memorandum or the Offering Memorandum or Exempt Resales, in any
jurisdiction in which it is not now so subject.
(f) So long as the Notes are outstanding, (i) to
mail and make generally available within 90 days after the end of each fiscal
year to the record holders of the Notes a financial report of the Company and
its subsidiaries on a consolidated basis (and a similar financial report of all
unconsolidated subsidiaries, if any), all such financial reports to include a
consolidated balance sheet, a consolidated statement of operations, a
consolidated statement of cash flows and a consolidated statement of
shareholders' equity as of the end of and for such fiscal year, together with
comparable information as of the end of and for the preceding year, certified
by the Company's independent public accountants and (ii) to mail and make
generally available as soon within 45 days after the end of each quarterly
period (except for the last quarterly period of each fiscal year) to such
holders, a consolidated balance sheet, a consolidated statement of operations
and a consolidated statement of cash flows (and similar financial reports of
all unconsolidated subsidiaries, if any) as of the end of and for such period,
and for the period from the beginning of such year to the close of such
quarterly period, together with comparable information for the corresponding
periods of the preceding year; provided, however, that the time periods
specified above may be extended by the Company to the extent the Company has
extended the filing dates for its public reports, which would include such
information by a valid filing with the Commission meeting the requirements of
the Commission for any such extension.
(g) So long as the Notes are outstanding, to
furnish to the Initial Purchaser as soon as available copies of all reports or
other communications filed by the Company or the Guarantor with the Commission
or any national securities exchange on which any class of securities of the
Company or the Guarantor is listed and such other publicly available
information concerning the Company and/or its subsidiaries as the Initial
Purchaser may reasonably request.
(h) So long as any of the Series A Notes remain
outstanding and during any period in which the Company and the Guarantor are
not subject to Section 13 or 15(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), to make available to any holder
5
<PAGE> 7
of Series A Notes and any prospective purchaser of such Series A Notes upon
request by a holder, the information ("Rule 144A Information") required by Rule
144A(d)(4) under the Act.
(i) Whether or not the transactions contemplated
in this Agreement are consummated or this Agreement is terminated, to pay or
cause to be paid all expenses incident to the performance of the obligations of
the Company and the Guarantor under this Agreement, including: (i) the fees,
disbursements and expenses of counsel to the Company and the Guarantor and
accountants of the Company and the Guarantor in connection with the sale and
delivery of the Series A Notes to the Initial Purchaser and pursuant to Exempt
Resales, and all other fees or expenses in connection with the preparation,
printing, filing and distribution of the Preliminary Offering Memorandum, the
Offering Memorandum and all amendments and supplements to any of the foregoing
(including financial statements) prior to or during the period specified in
Section 5(c), including the mailing and delivering of copies thereof to the
Initial Purchaser and persons designated by it in the quantities specified
herein, (ii) all costs and expenses related to the transfer and delivery of the
Series A Notes to the Initial Purchaser and pursuant to Exempt Resales,
including any transfer or similar taxes payable thereon, (iii) all costs of
printing or producing this Agreement, the other Operative Documents and any
other agreements or documents in connection with the offering, purchase, sale
or delivery of the Series A Notes, (iv) all expenses in connection with the
registration or qualification of the Series A Notes and the Subsidiary
Guarantee for offer and sale under the securities or Blue Sky laws of the
several states and all costs of printing or producing any preliminary and
supplemental Blue Sky memoranda in connection therewith (including the filing
fees and fees and disbursements of counsel for the Initial Purchaser in
connection with such registration or qualification and memoranda relating
thereto), not to exceed $20,000 in the aggregate, (v) the cost of printing
certificates representing the Series A Notes and the Subsidiary Guarantee, (vi)
all expenses and listing fees in connection with the application for quotation
of the Series A Notes in the National Association of Securities Dealers, Inc.
("NASD") Automated Quotation System - PORTAL ("PORTAL"), (vii) the fees and
expenses of the Trustee and the Trustee's counsel in connection with the
Indenture, the Notes and the Subsidiary Guarantee, (viii) the costs and charges
of any transfer agent, registrar and/or depositary (including DTC), (ix) any
fees charged by rating agencies for the rating of the Notes, (x) all costs and
expenses of the Exchange Offer and any Registration Statement, as set forth in
the Registration Rights Agreement, and (xi) all other costs and expenses
incident to the performance of the obligations of the Company and the Guarantor
hereunder for which provision is not otherwise made in this Section.
(j) To use its reasonable best efforts to effect
the inclusion of the Series A Notes in PORTAL and to maintain the listing of
the Series A Notes on PORTAL for so long as the Series A Notes are outstanding.
(k) To use its reasonable best efforts to obtain
the approval of DTC for "book-entry" transfer of the Notes, and to comply with
all of its agreements set forth in the representation letters of the Company
and the Guarantor to DTC relating to the approval of the Notes by DTC for
"book-entry" transfer.
(l) During the period beginning on the date
hereof and continuing to and including the Closing Date, not to offer, sell,
contract to sell or otherwise transfer or dispose of any
6
<PAGE> 8
debt securities of the Company or the Guarantor or any warrants, rights or
options to purchase or otherwise acquire debt securities of the Company or the
Guarantor substantially similar to the Notes and the Subsidiary Guarantee
(other than (i) the Notes and the Subsidiary Guarantee and (ii) borrowings in
the ordinary course of business under the Senior Credit Facility (as defined in
the Offering Memorandum)), without the prior written consent of the Initial
Purchaser.
(m) Not to sell, offer for sale or solicit offers
to buy or otherwise negotiate in respect of any security (as defined in the
Act) that would be integrated with the sale of the Series A Notes to the
Initial Purchaser or pursuant to Exempt Resales in a manner that would require
the registration of any such sale of the Series A Notes under the Act.
(n) Not to voluntarily claim, and to actively
resist any attempts to claim, the benefit of any usury laws against the holders
of any Notes.
(o) To cause the Exchange Offer to be made in the
appropriate form to permit Series B Notes and guarantees thereof by the
Guarantor registered pursuant to the Act to be offered in exchange for the
Series A Notes and the Subsidiary Guarantee and to comply with all applicable
federal and state securities laws in connection with the Exchange Offer.
(p) To comply with all of its agreements set
forth in the Registration Rights Agreement.
(q) To use its reasonable best efforts to do and
perform all things required or necessary to be done and performed under this
Agreement by it prior to the Closing Date and to satisfy all conditions
precedent to the delivery of the Series A Notes and the Subsidiary Guarantee.
6. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE COMPANY
AND THE GUARANTOR. As of the date hereof, each of the Company and the
Guarantor represents and warrants to, and agrees with, the Initial Purchaser
that:
(a) The Preliminary Offering Memorandum and the
Offering Memorandum, as of their respective dates, did not, and the Offering
Memorandum, as of the Closing Date, will not, and any supplement or amendment
to them will not, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, except that the representations and warranties contained
in this paragraph (a) shall not apply to statements in or omissions from the
Preliminary Offering Memorandum or the Offering Memorandum (or any supplement
or amendment thereto) based upon information relating to the Initial Purchaser
furnished to the Company in writing by the Initial Purchaser expressly for use
therein. The Company has no knowledge of and has received no notice of any
stop order preventing the use of the Preliminary Offering Memorandum or the
Offering Memorandum, or any amendment or supplement thereto, or the issuance of
any order asserting that any of the transactions contemplated by this Agreement
are subject to the registration requirements of the Act.
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<PAGE> 9
(b) Each of the Company and the Guarantor has
been duly incorporated, is validly existing as a corporation in good standing
under the laws of its jurisdiction of incorporation and has the corporate power
and authority to carry on its business as described in the Preliminary Offering
Memorandum and the Offering Memorandum and to own, lease and operate its
properties, and each is duly qualified and is in good standing as a foreign
corporation authorized to do business in each jurisdiction in which the nature
of its business or its ownership or leasing of property requires such
qualification, except where the failure to be so qualified would not have a
material adverse effect on the business, prospects, financial condition or
results of operations of the Company and the Guarantor, taken as a whole (a
"Material Adverse Effect").
(c) All outstanding shares of capital stock of
the Company have been duly authorized and validly issued and are fully paid,
non-assessable and not subject to any preemptive or similar rights.
(d) The Guarantor is the only subsidiary, direct
or indirect, of the Company. All of the outstanding shares of capital stock of
the Guarantor have been duly authorized and validly issued and are fully paid
and non-assessable, and are owned directly by the Company, free and clear of
any security interest, claim, lien, encumbrance or adverse interest of any
nature (each, a "Lien"), except for the Lien under the Senior Credit Facility
as described in the Offering Memorandum.
(e) This Agreement has been duly authorized,
executed and delivered by the Company and the Guarantor.
(f) The Indenture has been duly authorized by the
Company and the Guarantor and, on the Closing Date, will have been validly
executed and delivered by the Company and the Guarantor. When the Indenture
has been duly executed and delivered by the Company and the Guarantor (assuming
due execution by the Trustee), the Indenture will be a valid and binding
agreement of the Company and the Guarantor, enforceable against the Company and
the Guarantor in accordance with its terms except as such enforcement may be
limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance or other laws affecting creditors' rights and remedies generally and
except as such enforcement is subject to general principles of equity,
regardless of whether enforcement is considered in a proceeding in equity or at
law. On the Closing Date, the Indenture will conform in all material respects
to the requirements of the Trust Indenture Act of 1939, as amended (the "TIA"
or "Trust Indenture Act"), and the rules and regulations of the Commission
applicable to an indenture which is qualified thereunder.
(g) The Series A Notes have been duly authorized
and, on the Closing Date, will have been validly executed and delivered by the
Company. When the Series A Notes have been issued, executed and authenticated
in accordance with the provisions of the Indenture and delivered to and paid
for by the Initial Purchaser in accordance with the terms of this Agreement,
the Series A Notes will be entitled to the benefits of the Indenture and will
be valid and binding obligations of the Company, enforceable in accordance with
their terms except as such enforcement may be limited by bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance or other laws
affecting creditors' rights and remedies generally and except as such
enforcement is
8
<PAGE> 10
subject to general principles of equity, regardless of whether enforcement is
considered in a proceeding in equity or at law. On the Closing Date, the
Series A Notes will conform in all material respects to the description thereof
contained in the Offering Memorandum.
(h) On the Closing Date, the Series B Notes will
have been duly authorized for issuance by the Company in accordance with the
terms of the Indenture. When the Series B Notes are issued, executed and
authenticated in accordance with the terms of the Exchange Offer and the
Indenture, the Series B Notes will be entitled to the benefits of the Indenture
and will be the valid and binding obligations of the Company, enforceable
against the Company in accordance with their terms, except as such enforcement
may be limited by bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance or other laws affecting creditors' rights and remedies
generally and except as such enforcement is subject to general principles of
equity, regardless of whether enforcement is considered in a proceeding in
equity or at law.
(i) The Subsidiary Guarantee to be endorsed on
the Series A Notes by the Guarantor has been duly authorized by the Guarantor
and, on the Closing Date, will have been duly executed and delivered by the
Guarantor. When the Series A Notes have been issued, executed and
authenticated in accordance with the Indenture and delivered to and paid for by
the Initial Purchaser in accordance with the terms of this Agreement, the
Subsidiary Guarantee of the Guarantor endorsed thereon will be entitled to the
benefits of the Indenture and will be the valid and binding obligation of the
Guarantor, enforceable against the Guarantor in accordance with its terms,
except as such enforcement may be limited by bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance or other laws affecting
creditors' rights and remedies generally and except as such enforcement is
subject to general principles of equity, regardless of whether enforcement is
considered in a proceeding in equity or at law. On the Closing Date, the
Subsidiary Guarantee to be endorsed on the Series A Notes will conform in all
material respects as to legal matters to the description thereof contained in
the Offering Memorandum.
(j) The Subsidiary Guarantee to be endorsed on
the Series B Notes by the Guarantor has been duly authorized by the Guarantor
in accordance with the terms of the Indenture and, when issued, will have been
duly executed and delivered by the Guarantor. When the Series B Notes have
been issued, executed and authenticated in accordance with the terms of the
Exchange Offer and the Indenture, the Subsidiary Guarantee of the Guarantor
endorsed thereon will be entitled to the benefits of the Indenture and will be
the valid and binding obligation of the Guarantor, enforceable against the
Guarantor in accordance with its terms, except as such enforcement may be
limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance or other laws affecting creditors' rights and remedies generally and
except as such enforcement is subject to general principles of equity,
regardless of whether enforcement is considered in a proceeding in equity or at
law. When the Series B Notes are issued, authenticated and delivered, the
Subsidiary Guarantee to be endorsed on the Series B Notes will conform as to
legal matters to the description thereof in the Offering Memorandum.
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<PAGE> 11
(k) The Registration Rights Agreement has been
duly authorized by the Company and the Guarantor and, on the Closing Date, will
have been duly executed and delivered by the Company and the Guarantor. When
the Registration Rights Agreement has been duly executed and delivered by all
parties thereto, the Registration Rights Agreement will be a valid and binding
agreement of the Company and the Guarantor, enforceable against the Company and
the Guarantor in accordance with its terms except as such enforcement may be
limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance or other laws affecting creditors' rights and remedies generally and
except as such enforcement is subject to general principles of equity,
regardless of whether enforcement is considered in a proceeding in equity or at
law, and except as any rights to indemnity and contribution under such
agreement for liabilities arising under federal and state securities laws may
be limited by judicial decision or public policy. On the Closing Date, the
Registration Rights Agreement will conform in all material respects as to legal
matters to the description thereof in the Offering Memorandum.
(l) Neither the Company nor the Guarantor is in
violation of its respective charter or by- laws or in default in the
performance of any obligation, agreement, covenant or condition contained in
any indenture, loan agreement, mortgage, lease or other agreement or instrument
that is material to the Company and the Guarantor, taken as a whole, to which
the Company or the Guarantor is a party or by which the Company or the
Guarantor or their respective property is bound, except for any such violations
which, in the aggregate, would not have a Material Adverse Effect.
(m) Subject to the assumptions set forth in
Section 6(cc), the execution, delivery and performance of this Agreement, the
Indenture, the Series A Notes, the Series B Notes, the Subsidiary Guarantee and
the Registration Rights Agreement by the Company and the Guarantor and
compliance by the Company and the Guarantor with all provisions hereof and
thereof and the consummation of the transactions contemplated hereby and
thereby (i) will not require any consent, approval, authorization or other
order of, or qualification with, any court or governmental body or agency
(except such as may be required under the securities or Blue Sky laws of the
various states and, in the case of the Series B Notes, the Indenture and the
Registration Rights Agreement, such as may be required under the Act or the
TIA), (ii) will not conflict with or constitute a breach of any of the terms or
provisions of, or a default under, (A) the charter or by-laws of the Company or
the Guarantor or (B) any indenture, loan agreement, mortgage, lease or other
agreement or instrument to which the Company or the Guarantor is a party or by
which the Company or the Guarantor or their respective property is bound, and
(iii) will not (A) violate or conflict with any applicable law or any rule,
regulation, judgment, order or decree of any court or any governmental body or
agency having jurisdiction over the Company or the Guarantor or their
respective property, (B) result in the imposition or creation of (or the
obligation to create or impose) a Lien under, any agreement or instrument to
which the Company or the Guarantor is a party or by which it or either of them
is bound, or to which any properties of the Company or the Guarantor is or may
be subject, (C) result in the termination or revocation of any Authorization
(as defined below) of the Company or the Guarantor or (D) result in any other
impairment of the rights of the Company or the Guarantor as holder under any
such Authorization, except, in the case of clauses (ii)(B) and (iii), for such
breach, default, violation, Lien or termination as would not, singly or in the
aggregate, have a Material Adverse Effect.
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<PAGE> 12
(n) There are no legal or governmental
proceedings pending or, to the Company's best knowledge, threatened to which
the Company or the Guarantor is or could be a party or to which any of their
respective property is or could be subject, which might result, singly or in
the aggregate, in a Material Adverse Effect.
(o) Neither the Company nor the Guarantor has
violated any foreign, federal, state or local law or regulation relating to the
protection of human health and safety, the environment or hazardous or toxic
substances or wastes, pollutants or contaminants ("Environmental and Safety
Laws") or any provisions of the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), or the rules and regulations promulgated
thereunder, except for such violations which, singly or in the aggregate, would
not have a Material Adverse Effect.
(p) There is no alleged liability on the part of
the Company or the Guarantor or to the best knowledge of the Company, any
potential liability or costs associated with Environmental and Safety Laws
(including, without limitation, any capital or operating expenditures required
for clean-up, closure of properties or compliance with Environmental and Safety
Laws or any permit, license or approval, any related constraints on operating
activities and any potential liabilities to third parties) which would, singly
or in the aggregate, have a Material Adverse Effect.
(q) Each of the Company and the Guarantor has
such permits, licenses, consents, exemptions, franchises, authorizations and
other approvals (each, an "Authorization") of, and has made all filings with
and notices to, all governmental or regulatory authorities and self-regulatory
organizations and all courts and other tribunals, including without limitation,
under any applicable Environmental and Safety Laws, as are necessary to own,
lease, license and operate its respective properties and to conduct its
business, except where the failure to have any such Authorization or to make
any such filing or notice would not, singly or in the aggregate, have a
Material Adverse Effect. Each such Authorization is valid and in full force
and effect and each of the Company and its subsidiaries is in compliance with
all the terms and conditions thereof and with the rules and regulations of the
authorities and governing bodies having jurisdiction with respect thereto; and
no event has occurred (including, without limitation, the receipt of any notice
from any authority or governing body) which allows or, after notice or lapse of
time or both, would allow, revocation, suspension or termination of any such
Authorization or result or, after notice or lapse of time or both, would result
in any other impairment of the rights of the holder of any such Authorization;
and such Authorizations contain no restrictions that are burdensome to the
Company or any of its subsidiaries; except where such failure to be valid and
in full force and effect or to be in compliance, the occurrence of any such
event or the presence of any such restriction which would not, singly or in the
aggregate, have a Material Adverse Effect.
(r) The accountants, Ernst & Young LLP, that have
certified the financial statements included in the Preliminary Offering
Memorandum and the Offering Memorandum are independent public accountants with
respect to the Company and the Guarantor, as required by the Act and the
Exchange Act. The historical financial statements and notes thereto, set forth
in the Preliminary Offering Memorandum and the Offering Memorandum comply as to
form in all material respects with the requirements applicable to registration
statements on Form S-1 under the Act.
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<PAGE> 13
(s) The historical financial statements and notes
thereto forming part of the Offering Memorandum (and any amendment or
supplement thereto), present fairly the consolidated financial position,
results of operations and changes in cash flows of the Company and the
Guarantor on the basis stated in the Offering Memorandum at the respective
dates or for the respective periods to which they apply; such statements and
notes have been prepared in accordance with generally accepted accounting
principles consistently applied throughout the periods involved, except as
disclosed therein; and the other financial and statistical information and data
set forth in the Offering Memorandum (and any amendment or supplement thereto)
is, in all material respects, accurately presented and prepared on a basis
consistent with such financial statements and the books and records of the
Company.
(t) The pro forma financial statements included
in the Preliminary Offering Memorandum and the Offering Memorandum have been
prepared on a basis consistent with the historical financial statements of the
Company and the Guarantor and give effect to assumptions made on a reasonable
basis and in good faith and present fairly the historical and proposed
transactions contemplated by the Preliminary Offering Memorandum and the
Offering Memorandum; and such pro forma financial statements comply as to form
in all material respects with the requirements applicable to pro forma
financial statements included in registration statements on Form S-1 under the
Act. The other pro forma financial and statistical information and data
included in the Offering Memorandum are prepared on a basis consistent with the
pro forma financial statements.
(u) The Company is not and, after giving effect
to the offering and sale of the Series A Notes and the application of the net
proceeds thereof as described in the Offering Memorandum, will not be, an
"investment company," as such term is defined in the Investment Company Act of
1940, as amended.
(v) There are no contracts, agreements or
understandings between the Company or the Guarantor and any person granting
such person the right to require the Company or the Guarantor to include
securities held by such person in any Registration Statement.
(w) Neither the Company nor the Guarantor nor any
agent thereof acting on the behalf of any of them has taken, and none of them
will take, any action that might cause this Agreement or the issuance or sale
of the Series A Notes to violate Regulation G (12 C.F.R. Part 207), Regulation
T (12 C.F.R. Part 220), Regulation U (12 C.F.R. Part 221) or Regulation X (12
C.F.R. Part 224) of the Board of Governors of the Federal Reserve System.
(x) Since the respective dates as of which
information is given in the Offering Memorandum other than as set forth in the
Offering Memorandum (exclusive of any amendments or supplements thereto
subsequent to the date of this Agreement), (i) there has not occurred any
material adverse change or any development involving a prospective material
adverse change in the condition, financial or otherwise, or the earnings,
business, management or operations of the Company and the Guarantor, taken as a
whole, (ii) there has not been any material adverse change or any development
involving a prospective material adverse change in the capital stock or
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<PAGE> 14
in the long-term debt of the Company or the Guarantor and (iii) neither the
Company nor the Guarantor has incurred any material liability or obligation,
direct or contingent.
(y) Each of the Preliminary Offering Memorandum
and the Offering Memorandum, as of its date, contains all the information
specified in, and meeting the requirements of, Rule 144A(d)(4) under the Act.
(z) When the Series A Notes and the Subsidiary
Guarantee are issued and delivered pursuant to this Agreement, neither the
Series A Notes nor the Subsidiary Guarantee will be of the same class (within
the meaning of Rule 144A under the Act) as any security of the Company or the
Guarantor that is listed on a national securities exchange registered under
Section 6 of the Exchange Act or that is quoted in a United States automated
inter-dealer quotation system.
(aa) No form of general solicitation or general
advertising (as defined in Regulation D under the Act) was used by the Company,
the Guarantor or any of their respective representatives (other than the
Initial Purchaser, as to whom the Company and the Guarantor make no
representation) in connection with the offer and sale of the Series A Notes
contemplated hereby, including, but not limited to, articles, notices or other
communications published in any newspaper, magazine or similar medium or
broadcast over television or radio, or any seminar or meeting whose attendees
have been invited by any general solicitation or general advertising. No
securities of the same class as the Series A Notes have been issued and sold by
the Company within the six-month period immediately prior to the date hereof.
(bb) Prior to the effectiveness of any
Registration Statement, the Indenture is not required to be qualified under the
TIA.
(cc) No registration under the Act of the Series A
Notes or the Subsidiary Guarantee is required for the sale of the Series A
Notes and the Subsidiary Guarantee to the Initial Purchaser as contemplated
hereby or for the Exempt Resales assuming the accuracy of the Initial
Purchaser's representations and warranties and compliance by the Initial
Purchaser with its agreements set forth in Section 7 hereof.
(dd) The Company has complied with all provisions
of Section 517.075, Florida Statutes (Chapter 92-198, Laws of Florida).
(ee) Each certificate signed by any officer of the
Company or the Guarantor and delivered to the Initial Purchaser or counsel for
the Initial Purchaser shall be deemed to be a representation and warranty by
the Company or the Guarantor to the Initial Purchaser as to the matters covered
thereby.
The Company acknowledges that the Initial Purchaser and, for
purposes of the opinions to be delivered to the Initial Purchaser pursuant to
Section 9 hereof, counsel to the Company and the Guarantor and counsel to the
Initial Purchaser will rely upon the accuracy and truth of the foregoing
representations and hereby consents to such reliance.
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<PAGE> 15
7. INITIAL PURCHASER'S REPRESENTATIONS AND WARRANTIES.
The Initial Purchaser represents and warrants to, and agrees with, the Company
and the Guarantor:
(a) Such Initial Purchaser is a QIB, with such
knowledge and experience in financial and business matters as is necessary in
order to evaluate the merits and risks of an investment in the Series A Notes.
(b) Such Initial Purchaser (A) is not acquiring
the Series A Notes with a view to any distribution thereof or with any present
intention of offering or selling any of the Series A Notes in a transaction
that would violate the Act or the securities laws of any state of the United
States or any other applicable jurisdiction and (B) will be reoffering and
reselling the Series A Notes only to QIBs in reliance on the exemption from the
registration requirements of the Act provided by Rule 144A.
(c) Such Initial Purchaser agrees that, in
connection with Exempt Resales, such Initial Purchaser will solicit offers to
buy the Series A Notes only from, and will offer to sell the Series A Notes
only to, Eligible Purchasers. Each Initial Purchaser further agrees that it
will offer to sell the Series A Notes only to, and will solicit offers to buy
the Series A Notes only from Eligible Purchasers that the Initial Purchaser
reasonably believes are QIBs, that agree that (x) the Series A Notes purchased
by them may be resold, pledged or otherwise transferred within the time period
referred to under Rule 144(k) (taking into account the provisions of Rule
144(d) under the Act, if applicable) under the Act, as in effect on the date of
the transfer of such Series A Notes, only (I) to the Company or any of its
subsidiaries, (II) to a person whom the seller reasonably believes is a QIB
purchasing for its own account or for the account of a QIB in a transaction
meeting the requirements of Rule 144A under the Act, (III) in accordance with
another exemption from the registration requirements of the Act (and based upon
an opinion of counsel acceptable to the Company) or (IV) pursuant to an
effective registration statement and, in each case, in accordance with the
applicable securities laws of any state of the United States or any other
applicable jurisdiction and (y) they will deliver to each person to whom such
Series A Notes or an interest therein is transferred a notice substantially to
the effect of the foregoing.
(d) Such Initial Purchaser agrees that it will
not offer, sell or deliver any of the Series A Notes in any jurisdiction
outside the United States except under circumstances that will result in
compliance with the applicable laws thereof, and that it will take at its own
expense whatever action is required to permit its purchase and resale of the
Series A Notes in such jurisdictions. Such Initial Purchaser understands that
no action has been taken to permit a public offering in any jurisdiction
outside the United States where action would be required for such purpose.
The Initial Purchaser acknowledges that the Company
and the Guarantor and, for purposes of the opinions to be delivered to each
Initial Purchaser pursuant to Section 9 hereof, counsel to the Company and the
Guarantor and counsel to the Initial Purchaser will rely upon the accuracy and
truth of the foregoing representations and the Initial Purchaser hereby
consents to such reliance.
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<PAGE> 16
8. Indemnification.
(a) The Company and the Guarantor agree, jointly
and severally, to indemnify and hold harmless the Initial Purchaser, its
directors, its officers and each person, if any, who controls such Initial
Purchaser within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act, from and against any and all losses, claims, damages, liabilities
and judgments (including, without limitation, any legal or other expenses
incurred in connection with investigating or defending any matter, including
any action that could give rise to any such losses, claims, damages,
liabilities or judgments) caused by any untrue statement or alleged untrue
statement of a material fact contained in the Offering Memorandum (or any
amendment or supplement thereto), the Preliminary Offering Memorandum or any
Rule 144A Information provided by the Company or the Guarantor to any holder or
prospective purchaser of Series A Notes pursuant to Section 5(h) hereof or
caused by any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, except insofar as such losses, claims, damages, liabilities or
judgments are caused by any such untrue statement or omission or alleged untrue
statement or omission based upon information relating to the Initial Purchaser
furnished in writing to the Company by such Initial Purchaser; provided,
however, that the indemnification contained in this paragraph with respect to
the Preliminary Offering Memorandum shall not inure to the benefit of the
Initial Purchaser (or to the benefit of any director or officer of the Initial
Purchaser or any person controlling the Initial Purchaser) on account of any
such loss, claim, damage, liability or judgment arising from the sale of the
Series A Notes by the Initial Purchaser to any person if a copy of the Offering
Memorandum, as it may be amended or supplemented, shall not have been delivered
or sent to such person, at or prior to the written confirmation of such sale,
and the untrue statement or alleged untrue statement or omission or alleged
omission of a material fact contained in the Preliminary Offering Memorandum
was corrected in the Offering Memorandum, as it may have been amended or
supplemented; provided that the Company has delivered the Offering Memorandum,
as it may have been amended or supplemented, to the Initial Purchaser in
requisite quantity on a timely basis to permit such delivery or sending.
(b) The Initial Purchaser agrees to indemnify and
hold harmless the Company and the Guarantor, and their respective directors and
officers and each person who controls (within the meaning of Section 15 of the
Act or Section 20 of the Exchange Act) the Company or the Guarantor, to the
same extent as the foregoing indemnity from the Company and the Guarantor to
the Initial Purchaser but only with respect to claims and actions based upon
information relating to the Initial Purchaser furnished in writing to the
Company by the Initial Purchaser expressly for use in the Preliminary Offering
Memorandum or the Offering Memorandum.
(c) In case any action shall be commenced
involving any person in respect of which indemnity may be sought pursuant to
Section 8(a) or 8(b) (the "indemnified party"), the indemnified party shall
promptly notify the person against whom such indemnity may be sought (the
"indemnifying party") in writing and the indemnifying party shall assume the
defense of such action, including the employment of counsel reasonably
satisfactory to the indemnified party and the payment of all fees and expenses
of such counsel, as incurred (except that in the case of any action in respect
of which indemnity may be sought pursuant to both Sections 8(a) and 8(b), the
Initial Purchaser shall not be required to assume the defense of such action
pursuant to this Section 8(c),
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<PAGE> 17
but may employ separate counsel and participate in the defense thereof, but the
fees and expenses of such counsel, except as provided below, shall be at the
expense of the Initial Purchaser). Any indemnified party shall have the right
to employ separate counsel in any such action and participate in the defense
thereof, but the fees and expenses of such counsel shall be at the expense of
the indemnified party unless (i) the employment of such counsel shall have been
specifically authorized in writing by the indemnifying party, (ii) the
indemnifying party shall have failed to assume the defense of such action or
employ counsel reasonably satisfactory to the indemnified party or (iii) the
named parties to any such action (including any impleaded parties) include both
the indemnified party and the indemnifying party, and the indemnified party
shall have been advised by its counsel that there may be one or more legal
defenses available to it which are different from or additional to those
available to the indemnifying party (in which case the indemnifying party shall
not have the right to assume the defense of such action on behalf of the
indemnified party). In any such case, the indemnifying party shall not, in
connection with any one action or separate but substantially similar or related
actions in the same jurisdiction arising out of the same general allegations or
circumstances, be liable for the fees and expenses of more than one separate
firm of attorneys (in addition to any local counsel) for all indemnified
parties and all such fees and expenses shall be reimbursed as they are
incurred. Such firm shall be designated in writing by Donaldson, Lufkin &
Jenrette Securities Corporation, in the case of the parties indemnified
pursuant to Section 8(a), and by the Company, in the case of parties
indemnified pursuant to Section 8(b). The indemnifying party shall indemnify
and hold harmless the indemnified party from and against any and all losses,
claims, damages, liabilities and judgments by reason of any settlement of any
action (i) effected with its written consent or (ii) effected without its
written consent if the settlement is entered into more than twenty business
days after the indemnifying party shall have received a request from the
indemnified party for reimbursement for the fees and expenses of counsel as
contemplated above and, prior to the date of such settlement, the indemnifying
party shall have failed to comply with such reimbursement request. No
indemnifying party shall, without the prior written consent of the indemnified
party, effect any settlement or compromise of, or consent to the entry of
judgment with respect to, any pending or threatened action in respect of which
the indemnified party is or could have been a party and indemnity or
contribution may be or could have been sought hereunder by the indemnified
party, unless such settlement, compromise or judgment (i) includes an
unconditional release of the indemnified party from all liability on claims
that are or could have been the subject matter of such action and (ii) does not
include a statement as to or an admission of fault, culpability or a failure to
act, by or on behalf of the indemnified party.
(d) To the extent the indemnification provided
for in this Section 8 is unavailable to an indemnified party or insufficient in
respect of any losses, claims, damages, liabilities or judgments referred to
therein, then each indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such indemnified party
as a result of such losses, claims, damages, liabilities and judgments (i) in
such proportion as is appropriate to reflect the relative benefits received by
the Company and the Guarantor, on the one hand, and the Initial Purchaser on
the other hand from the offering of the Series A Notes or (ii) if the
allocation provided by clause 8(d)(i) above is not permitted by applicable law,
in such proportion as is appropriate to reflect not only the relative benefits
referred to in clause 8(d)(i) above but also the relative fault of the Company
and the Guarantor, on the one hand, and the Initial Purchaser, on the other
hand, in connection with the statements or omissions which resulted in such
losses, claims,
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<PAGE> 18
damages, liabilities or judgments, as well as any other relevant equitable
considerations. The relative benefits received by the Company and the
Guarantor, on the one hand and the Initial Purchaser, on the other hand, shall
be deemed to be in the same proportion as the total net proceeds from the
offering of the Series A Notes (before deducting expenses) received by the
Company, and the total discounts and commissions received by the Initial
Purchaser bear to the total price to investors of the Series A Notes, in each
case as set forth in the table on the cover page of the Offering Memorandum.
The relative fault of the Company and the Guarantor, on the one hand, and the
Initial Purchaser, on the other hand, shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company and the Guarantor, or the
Initial Purchaser and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Company and the Guarantor, and the Initial
Purchaser agree that it would not be just and equitable if contribution
pursuant to this Section 8(d) were determined by pro rata allocation or by any
other method of allocation which does not take account of the equitable
considerations referred to in the immediately preceding paragraph. The amount
paid or payable by an indemnified party as a result of the losses, claims,
damages, liabilities or judgments referred to in the immediately preceding
paragraph shall be deemed to include, subject to the limitations set forth
above, any legal or other expenses incurred by such indemnified party in
connection with investigating or defending any matter, including any action,
that could have given rise to such losses, claims, damages, liabilities or
judgments. Notwithstanding the provisions of this Section 8, the Initial
Purchaser shall not be required to contribute any amount in excess of the
amount by which the total price of the Series A Notes purchased by it were sold
to investors in Exempt Resales exceeds the amount of any damages which the
Initial Purchaser has otherwise been required to pay by reason of such untrue
or alleged untrue statement or omission or alleged omission. No person guilty
of fraudulent misrepresentation (within the meaning of Section 11(f) of the
Act) shall be entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation.
(e) The remedies provided for in this Section 8
are not exclusive and shall not limit any rights or remedies which may
otherwise be available to any indemnified party at law or in equity.
9. CONDITIONS OF INITIAL PURCHASER'S OBLIGATIONS. The
obligations of the Initial Purchaser to purchase the Series A Notes under this
Agreement are subject to the satisfaction of each of the following conditions:
(a) All the representations and warranties of the
Company and the Guarantor contained in this Agreement shall be true and correct
on the Closing Date with the same force and effect as if made on and as of the
Closing Date.
(b) On or after the date hereof there shall not
have occurred any downgrading, nor shall any notice have been given of any
intended or potential downgrading or of any review for a possible change that
does not indicate the direction of the possible change, in the rating of the
Company or the Guarantor, or any securities of the Company or the Guarantor or
in the
17
<PAGE> 19
rating outlook for the Company or the Guarantor (including, without limitation,
the placing of any of the foregoing ratings on creditwatch with negative or
developing implications or under review with an uncertain direction) by any
"nationally recognized statistical rating organization" as such term is defined
for purposes of Rule 436(g)(2) under the Act.
(c) The Initial Purchaser shall have received on
the Closing Date a certificate dated the Closing Date, signed by the President
and the Chief Financial Officer of the Company, confirming the matters set
forth in Sections 9(a), 9(b) and 9(d).
(d) Since the respective dates as of which
information is given in the Offering Memorandum other than as set forth in the
Offering Memorandum (exclusive of any amendments or supplements thereto
subsequent to the date of this Agreement), (i) there shall not have occurred
any change or any development involving a prospective change in the condition,
financial or otherwise, or the earnings, business, management or operations of
the Company and the Guarantor, taken as a whole, (ii) there shall not have been
any change or any development involving a prospective change in the capital
stock or in the long-term debt of the Company or any of its subsidiaries and
(iii) neither the Company nor any of its subsidiaries shall have incurred any
liability or obligation, direct or contingent, which, in any such case
described in clause 9(d)(i), 9(d)(ii) or 9(d)(iii), in your judgment, has
resulted in or is expected to result in a Material Adverse Effect and, in your
judgment, makes it impracticable to market the Series A Notes on the terms and
in the manner contemplated in the Offering Memorandum.
(e) You shall have received on the Closing Date
an opinion (satisfactory to you and counsel for the Initial Purchaser), dated
the Closing Date, of Cassell & Stone, L.L.P., counsel for the Company and the
Guarantor, to the effect that:
(i) each of the Company and its
subsidiaries has been duly incorporated, is validly
existing as a corporation in good standing under the
laws of its jurisdiction of incorporation and has the
corporate power and authority to carry on its
business as described in the Offering Memorandum and
to own, lease and operate its properties;
(ii) each of the Company and its
subsidiaries is duly qualified and is in good
standing as a foreign corporation authorized to do
business in each jurisdiction in which the nature of
its business or its ownership or leasing of property
requires such qualification, except where the failure
to be so qualified would not have a Material Adverse
Effect;
(iii) all the outstanding shares of
capital stock of the Company have been duly
authorized and validly issued and are fully paid,
non-assessable and not subject to any preemptive or
similar rights;
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<PAGE> 20
(iv) all of the outstanding shares
of capital stock of the Guarantor have been
duly authorized and validly issued and are
fully paid and non-assessable, and are owned
by the Company, free and clear of any Lien,
except for the Lien under the Senior Credit
Facility;
(v) neither the Company nor the
Guarantor is in violation of its respective charter
or by-laws and, to the best of such counsel's
knowledge after due inquiry, neither the Company nor
the Guarantor is in default in the performance of any
obligation, agreement, covenant or condition
contained in any indenture, loan agreement, mortgage,
lease or other agreement or instrument that is
material to the Company and the Guarantor, taken as a
whole, to which the Company or the Guarantor is a
party or by which the Company or the Guarantor or
their respective property is bound, except for any
such violations which, in the aggregate, would not
have a Material Adverse Effect;
(vi) the execution, delivery and
performance of this Agreement and the other Operative
Documents and compliance by the Company and the
Guarantor with all the provisions hereof and thereof
and the consummation of the transactions contemplated
hereby and thereby will not require any consent,
approval, authorization or other order of, or
qualification with, any court or governmental body or
agency (except such as may be required under the
securities or Blue Sky laws of the various states)
and will not conflict with or constitute a breach of
any of the terms or provisions of, or a default
under, the charter or by-laws of the Company or the
Guarantor or, to the best of such counsel's
knowledge, any indenture, loan agreement, mortgage,
lease or other agreement or instrument that is
material to the Company and the Guarantor, taken as a
whole, to which the Company or the Guarantor is a
party or by which the Company or the Guarantor or
their respective property is bound, or violate or
conflict with any applicable law, rule or regulation
(other than applicable Blue Sky laws, as to which no
opinion need be expressed), or, to the best of such
counsel's knowledge, any judgment, order or decree of
any court or any governmental body or agency having
jurisdiction over the Company or the Guarantor or
their respective property, or result in the
imposition or creation of (or the obligation to
create or impose) a Lien under, any agreement or
instrument known to such counsel to which the Company
or the Guarantor is a party or by which it or any of
them is bound, or to which any properties of the
Company or any of its subsidiaries is or may be
subject, or, to the best of such counsel's knowledge
result in the termination or revocation of any
Authorization of the Company or the Guarantor or
result in any other impairment of the rights of the
holder of any such Authorization.
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<PAGE> 21
(vii) after due inquiry, such counsel
does not know of any legal or governmental
proceedings pending or threatened to which
the Company or the Guarantor is or could be a
party or to which any of their respective
property is or could be subject, which would
reasonably be expected to result, singly or
in the aggregate, in a Material Adverse
Effect;
(viii) to the best of such counsel's
knowledge, neither the Company nor the Guarantor has
violated any Environmental and Safety Law or any
provisions of the Employment Retirement Income
Security Act of 1974, as amended ("ERISA"), or the
rules and regulations promulgated thereunder, except
for such violations which, singly or in the
aggregate, would not have a Material Adverse Effect;
and
(ix) to the best of such counsel's
knowledge after due inquiry, there are no contracts,
agreements or understandings between the Company or
the Guarantor and any person granting such person the
right to require the Company to include securities
held by such person in any Registration Statement to
be filed by the Company under the Act.
In addition, such counsel shall state that it
has participated in conferences with officers and
other representatives of the Company, representatives
of the independent public accounts for the Company,
your representatives and your counsel in connection
with the preparation of the Preliminary Offering
Memorandum and the Offering Memorandum and has
considered the matters required to be stated therein
and the statements contained therein and, although
such counsel has not independently verified the
accuracy, completeness or fairness of such statements
(except as indicated above), such counsel advises you
that, on the basis of the foregoing, no facts came to
its attention that caused it to believe that the
Preliminary Offering Memorandum or the Offering
Memorandum (as amended or supplemented, if
applicable), at the time such Preliminary Offering
Memorandum or Offering Memorandum was circulated or
that the Offering Memorandum, at the Closing Date,
contained or contains an untrue statement of a
material fact or omitted or omits to state a material
fact required to be stated therein or necessary to
make the statements therein, in the light of the
circumstances under which they were made, not
misleading. Without limiting the foregoing, such
counsel may further state that they assume no
responsibility for, and have not independently
verified, the accuracy, completeness or fairness of
the financial statements, notes and other financial
data included in the Preliminary Offering Memorandum
or the Offering Memorandum.
(f) You shall have received on the Closing Date
an opinion (satisfactory to you and counsel for the Initial Purchaser), dated
the Closing Date of Haynes and Boone, LLP, special counsel for the Company and
the Guarantor, to the effect that:
20
<PAGE> 22
(i) the Series A Notes have been duly
authorized and, when executed and authenticated in
accordance with the provisions of the Indenture and
delivered to and paid for by the Initial Purchaser in
accordance with the terms of this Agreement, will be
entitled to the benefits of the Indenture and will be
valid and binding obligations of the Company,
enforceable in accordance with their terms except as
such enforcement may be limited by bankruptcy,
insolvency, reorganization, moratorium, fraudulent
conveyance or other laws affecting creditors' rights
and remedies generally and except as such enforcement
is subject to general principles of equity,
regardless of whether enforcement is considered in a
proceeding in equity or at law;
(ii) the Subsidiary Guarantee has been
duly authorized and, when the Series A Notes are
executed and authenticated in accordance with the
provisions of the Indenture and delivered to and paid
for by the Initial Purchaser in accordance with the
terms of this Agreement, the Subsidiary Guarantee
endorsed thereon will be entitled to the benefits of
the Indenture and will be valid and binding
obligations of the Guarantor, enforceable in
accordance with its terms except as such enforcement
may be limited by bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance or
other laws affecting creditors' rights and remedies
generally and except as such enforcement is subject
to general principles of equity, regardless of
whether enforcement is considered in a proceeding in
equity or at law;
(iii) the Indenture has been duly
authorized, executed and delivered by the Company and
the Guarantor and is a valid and binding agreement of
the Company and the Guarantor, enforceable against
the Company and the Guarantor in accordance with its
terms except as such enforcement may be limited by
bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance or other laws affecting
creditors' rights and remedies generally and except
as such enforcement is subject to general principles
of equity, regardless of whether enforcement is
considered in a proceeding in equity or at law;
(iv) this Agreement has been duly
authorized, executed and delivered by the Company and
the Guarantor;
(v) The Registration Rights Agreement
has been duly authorized, executed and delivered by
the Company and the Guarantor and is a valid and
binding agreement of the Company and the Guarantor,
enforceable against the Company and the Guarantor in
accordance with its terms, except as such enforcement
may be limited by bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance or
other laws affecting creditors' rights and remedies
generally and except as such enforcement is subject
to general principles of equity, regardless of
whether enforcement is considered in a proceeding in
equity or at law;
21
<PAGE> 23
(vi) the Series B Notes have been duly
authorized for issuance in accordance with the terms
of the Indenture;
(vii) the statements under the captions
"Description of Notes," "Certain U.S. Federal Income
Tax Considerations," "Notice to Investors" and "Plan
of Distribution" in the Offering Memorandum, insofar
as such statements constitute a summary of the legal
matters, documents or proceedings referred to
therein, fairly present in all material respects such
legal matters, documents and proceedings;
(viii) the Company is not and, after giving
effect to the offering and sale of the Series A Notes
and the application of the net proceeds therefrom as
described in the Offering Memorandum, will not be, an
"investment company" as such term is defined in the
Investment Company Act of 1940, as amended;
(ix) the Indenture complies as to form in
all material respects with the requirements of the
TIA, and the rules and regulations of the Commission
applicable to an indenture which is qualified
thereunder. It is not necessary in connection with
the offer, sale and delivery of the Series A Notes to
the Initial Purchaser in the manner contemplated by
this Agreement or in connection with the Exempt
Resales to qualify the Indenture under the TIA.
(x) no registration under the Act of the
Series A Notes is required for the sale of the Series
A Notes to the Initial Purchaser as contemplated by
this Agreement or for the Exempt Resales assuming (i)
each Initial Purchaser is a QIB, (ii) the accuracy
of, and compliance with, the Initial Purchaser's
representations and agreements contained in Section 7
of this Agreement and (iii) compliance by the Company
and the Guarantor set forth in Section 5(h) of this
Agreement.
In addition, such counsel shall state that it
has participated in conferences with officers and
other representatives of the Company, representatives
of the independent public accounts for the Company,
your representatives and your counsel in connection
with the preparation of the Preliminary Offering
Memorandum and the Offering Memorandum and has
considered the matters required to be stated therein
and the statements contained therein and, although
such counsel has not independently verified the
accuracy, completeness or fairness of such statements
(except as indicated above), such counsel advises you
that, on the basis of the foregoing, no facts came to
its attention that caused it to believe that the
Preliminary Offering Memorandum or the Offering
Memorandum (as amended or supplemented, if
applicable), at the time such Preliminary Offering
Memorandum or Offering Memorandum was circulated or
that the Offering Memorandum, at the Closing Date,
contained or contains an untrue statement of a
material fact
22
<PAGE> 24
or omitted or omits to state a material fact required
to be stated therein or necessary to make the
statements therein, in the light of the circumstances
under which they were made, not misleading. Without
limiting the foregoing, such counsel may further
state that they assume no responsibility for, and
have not independently verified, the accuracy,
completeness or fairness of the financial statements,
notes and other financial data included in the
Preliminary Offering Memorandum or the Offering
Memorandum.
The opinions described in Sections 9(e) and 9(f) above shall
be rendered to you at the request of the Company and the Guarantor and shall so
state therein. Whenever any such opinion is qualified to counsel's
"knowledge," such counsel may identify the relevant items of information known
to them on one or more exhibits to such opinion.
(g) The Initial Purchaser shall have received on the
Closing Date an opinion, dated the Closing Date, of Vinson & Elkins L.L.P.,
counsel for the Initial Purchaser, in form and substance reasonably
satisfactory to the Initial Purchaser.
(h) The Initial Purchaser shall have received, at the
time this Agreement is executed and at the Closing Date, letters dated the date
hereof or the Closing Date, as the case may be, in form and substance
satisfactory to the Initial Purchaser from Ernst & Young LLP, independent
public accountants, containing the information and statements of the type
ordinarily included in accountants' "comfort letters" to the Initial Purchaser
with respect to the financial statements and certain financial information
contained in the Offering Memorandum.
(i) The Series A Notes shall have been approved by the
NASD for trading and duly listed in PORTAL.
(j) The Initial Purchaser shall have received a
counterpart, conformed as executed, of the Indenture which shall have been
entered into by the Company, the Guarantor and the Trustee.
(k) The Company and the Guarantor shall have executed the
Registration Rights Agreement and the Initial Purchaser shall have received an
original copy thereof, duly executed by the Company and the Guarantor.
(l) The Company shall not have failed at or prior to the
Closing Date to perform or comply with any of the agreements herein contained
and required to be performed or complied with by the Company at or prior to the
Closing Date.
10. EFFECTIVENESS OF AGREEMENT AND TERMINATION. This
Agreement shall become effective upon the execution and delivery of this
Agreement by the parties hereto.
23
<PAGE> 25
This Agreement may be terminated at any time prior to the
Closing Date by the Initial Purchaser by written notice to the Company if,
after the date hereof, any of the following has occurred: (i) any outbreak or
escalation of hostilities or other national or international calamity or crisis
or change in economic conditions or in the financial markets of the United
States or elsewhere that, in the Initial Purchaser's judgment, is material and
adverse and, in the Initial Purchaser's judgment, makes it impracticable to
market the Series A Notes on the terms and in the manner contemplated in the
Offering Memorandum, (ii) the suspension or material limitation of trading in
securities generally on the New York Stock Exchange, the American Stock
Exchange or the Nasdaq National Market or minimum prices for securities shall
have been established on any such exchange or the Nasdaq National Market, (iii)
the suspension of trading of any securities of the Company or the Guarantor on
any exchange or in the over-the-counter market, (iv) the enactment,
publication, decree or other promulgation of any federal or state statute,
regulation, rule or order of any court or other governmental authority which in
your opinion materially and adversely affects, or will materially and adversely
affect, the business, prospects, financial condition or results of operations
of the Company and the Guarantor, taken as a whole, (v) the declaration of a
banking moratorium by either federal or New York State authorities or (vi) the
taking of any action by any federal, state or local government or agency in
respect of its monetary or fiscal affairs which in the Initial Purchaser's
opinion has a material adverse effect on the financial markets in the United
States and would, in the Initial Purchaser's judgment, make it impracticable to
market the Series A Notes.
11. MISCELLANEOUS. Notices given pursuant to any
provision of this Agreement shall be addressed as follows: (i) if to the
Company or the Guarantor, to 6210 Rothway, Suite 150, Houston, Texas 77040,
(713) 462-2130 and (ii) if to the Initial Purchaser, Donaldson, Lufkin &
Jenrette Securities Corporation, 277 Park Avenue, New York, New York 10172,
Attention: Syndicate Department, or in any case to such other address as the
person to be notified may have requested in writing.
The respective indemnities, contribution agreements,
representations, warranties and other statements of the Company, the Guarantor
and the Initial Purchaser set forth in or made pursuant to this Agreement shall
remain operative and in full force and effect, and will survive delivery of and
payment for the Series A Notes, regardless of (i) any investigation, or
statement as to the results thereof, made by or on behalf of the Initial
Purchaser, the officers or directors of the Initial Purchaser, any person
controlling the Initial Purchaser, the Company, the Guarantor, the officers or
directors of the Company or the Guarantor, or any person controlling the
Company or the Guarantor, (ii) acceptance of the Series A Notes and payment for
them hereunder and (iii) termination of this Agreement.
If for any reason the Series A Notes are not delivered by or
on behalf of the Company as provided herein (other than as a result of any
termination of this Agreement pursuant to Section 10 or a breach by the Initial
Purchaser of this Agreement), the Company and the Guarantor, jointly and
severally, agree to reimburse the Initial Purchaser for all out-of-pocket
expenses (including the fees and disbursements of counsel) incurred by them.
Notwithstanding any termination of this Agreement, the Company shall be liable
for all expenses which it has agreed to pay pursuant to Section 5(i) hereof.
The Company and the Guarantor also agree, jointly and severally, to reimburse
the Initial Purchaser and its officers, directors and each person, if any, who
controls such Initial
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<PAGE> 26
Purchaser within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act for any and all fees and expenses (including without limitation
the fees and expenses of counsel) incurred by them in connection with enforcing
their rights under this Agreement (including without limitation its rights
under this Section 11).
Except as otherwise provided, this Agreement has been and is
made solely for the benefit of and shall be binding upon the Company, the
Guarantor, the Initial Purchaser, the Initial Purchaser's directors and
officers, any controlling persons referred to herein, the directors, officers
and controlling persons of the Company and the Guarantor and their respective
successors and assigns, all as and to the extent provided in this Agreement,
and no other person shall acquire or have any right under or by virtue of this
Agreement. The term "successors and assigns" shall not include a purchaser of
any of the Series A Notes from the Initial Purchaser merely because of such
purchase.
This Agreement shall be governed and construed in accordance
with the laws of the State of New York.
This Agreement may be signed in various counterparts which
together shall constitute one and the same instrument.
25
<PAGE> 27
Please confirm that the foregoing correctly sets forth the
agreement among the Company, the Guarantor and the Initial Purchaser.
Very truly yours,
HYDROCHEM INDUSTRIAL SERVICES, INC.
By: /s/ B. TOM CARTER, JR.
-------------------------------
Name: B. Tom Carter, Jr.
Title: President and Chief
Executive Officer
HYDROCHEM INTERNATIONAL, INC.
By: /s/ B. TOM CARTER, JR.
-------------------------------
Name: B. Tom Carter, Jr.
Title: President and Chief
Executive Officer
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By: /s/ RICHARD DEITCH II
--------------------------
Richard Deitch II
Vice President
26
<PAGE> 28
EXHIBIT A
================================================================================
REGISTRATION RIGHTS AGREEMENT
Dated as of August ___, 1997
by and among
HydroChem Industrial Services, Inc.
HydroChem International, Inc.
and
Donaldson, Lufkin & Jenrette
Securities Corporation
================================================================================
<PAGE> 29
This Registration Rights Agreement (this "Agreement") is made and
entered into as of August 4, 1997, by and among HydroChem Industrial Services,
Inc., a Delaware corporation (the "Company"), HydroChem International, Inc., a
Delaware corporation (the "Guarantor"), and Donaldson, Lufkin & Jenrette
Securities Corporation (the "Initial Purchaser"), who has agreed to purchase
the Company's 10 3/8% Series A Senior Subordinated Notes due 2007 (the "Series
A Notes") pursuant to the Purchase Agreement (as defined below).
This Agreement is made pursuant to the Purchase Agreement, dated July
30, 1997 (the "Purchase Agreement"), by and among the Company, the Guarantor
and the Initial Purchaser. In order to induce the Initial Purchaser to
purchase the Series A Notes, the Company has agreed to provide the registration
rights set forth in this Agreement. The execution and delivery of this
Agreement is a condition to the obligations of the Initial Purchaser set forth
in Section 3 of the Purchase Agreement.
The parties hereby agree as follows:
SECTION 12. DEFINITIONS
As used in this Agreement, the following capitalized terms shall have
the following meanings:
Act: The Securities Act of 1933, as amended.
Business Day: Any day except a Saturday, Sunday or other day in
the City of New York, or in the city of the corporate trust office of the
Trustee, on which banks are authorized to close.
Broker-Dealer: Any broker or dealer registered under the Exchange
Act.
Broker-Dealer Transfer Restricted Securities: Series B Notes that
are acquired by a Broker-Dealer in the Exchange Offer in exchange for Series A
Notes that such Broker-Dealer acquired for its own account as a result of
market making activities or other trading activities (other than Series A Notes
acquired directly from the Company or any of its affiliates).
Certificated Securities: As defined in the Indenture.
Closing Date: The date hereof.
Commission: The Securities and Exchange Commission.
Consummate: An Exchange Offer shall be deemed "Consummated" for
purposes of this Agreement upon the occurrence of (a) the filing and
effectiveness under the Act of the Exchange Offer Registration Statement
relating to the Series B Notes to be issued in the Exchange Offer, (b) the
maintenance of such Registration Statement continuously effective and the
keeping of the Exchange Offer open for a period not less than the minimum
period required pursuant to Section 3(b) hereof and (c) the delivery by the
Company to the Registrar under the Indenture of Series B
A-1
<PAGE> 30
Notes in the same aggregate principal amount as the aggregate principal amount
of Series A Notes tendered by Holders thereof pursuant to the Exchange Offer.
Damages Payment Date: With respect to the Series A Notes, each
Interest Payment Date.
Exchange Act: The Securities Exchange Act of 1934, as amended.
Exchange Offer: The registration by the Company under the Act of the
Series B Notes pursuant to the Exchange Offer Registration Statement pursuant
to which the Company shall offer the Holders of all outstanding Transfer
Restricted Securities the opportunity to exchange all such outstanding Transfer
Restricted Securities for Series B Notes in an aggregate principal amount equal
to the aggregate principal amount of the Transfer Restricted Securities
tendered in such exchange offer by such Holders.
Exchange Offer Registration Statement: The Registration Statement
relating to the Exchange Offer, including the related Prospectus.
Exempt Resales: The transactions in which the Initial Purchaser
proposes to sell the Series A Notes to certain "qualified institutional
buyers," as such term is defined in Rule 144A.
Holders: As defined in Section 2 hereof.
Indemnified Holder: As defined in Section 8(a) hereof.
Indenture: The Indenture, dated the Closing Date, among the Company,
the Guarantor and Norwest Bank, Minnesota, N.A., as trustee (the "Trustee"),
pursuant to which the Notes are to be issued, as such Indenture is amended or
supplemented from time to time in accordance with the terms thereof.
Interest Payment Date: As defined in the Indenture and the Notes.
NASD: National Association of Securities Dealers, Inc.
Notes: The Series A Notes and the Series B Notes.
Person: An individual, partnership, corporation, trust, joint
venture, limited liability company, unincorporated organization, or a
government or agency or political subdivision thereof.
Prospectus: The prospectus included in a Registration Statement at
the time such Registration Statement is declared effective, as amended or
supplemented by any prospectus supplement and by all other amendments thereto,
including post-effective amendments, and all material incorporated by reference
into such Prospectus.
Record Holder: With respect to any Damages Payment Date, each Person
who is a Holder of Notes on the record date with respect to the Interest
Payment Date on which such Damages Payment Date shall occur.
A-2
<PAGE> 31
Registration Default: As defined in Section 5 hereof.
Registration Statement: Any registration statement of the Company
and the Guarantor relating to (a) an offering of Series B Notes pursuant to the
Exchange Offer or (b) the registration for resale of Transfer Restricted
Securities pursuant to the Shelf Registration Statement, in each case, (i)
which is filed pursuant to the provisions of this Agreement and (ii) including
the Prospectus included therein, all amendments and supplements thereto
(including post-effective amendments) and all exhibits and material
incorporated by reference therein.
Restricted Broker-Dealer: Any Broker-Dealer which holds
Broker-Dealer Transfer Restricted Securities.
Series B Notes: The Company's 10 3/8% Series B Senior Subordinated
Notes due 2007 to be issued pursuant to the Indenture (i) in the Exchange Offer
or (ii) upon the request of any Holder of Series A Notes covered by a Shelf
Registration Statement, in exchange for such Series A Notes.
Shelf Registration Statement: As defined in Section 4 hereof.
TIA: The Trust Indenture Act of 1939 (15 U.S.C. Section 77aaa-77bbbb)
as in effect on the date of the Indenture.
Transfer Restricted Securities: Each Note, until the earliest to
occur of (a) the date on which such Note is exchanged by a person other than a
Restricted Broker-Dealer in the Exchange Offer, (b) the date on which such Note
has been disposed of in accordance with a Shelf Registration Statement, (c) the
date on which such Note is disposed of by a Broker-Dealer pursuant to the "Plan
of Distribution" contemplated by the Exchange Offer Registration Statement
(including delivery of the Prospectus contained therein) or (d) the date on
which such Note is distributed to the public pursuant to Rule 144 (or any
successor provision then in force) under the Act or is saleable under Rule
144(k) (or any successor provision then in force).
Underwritten Registration or Underwritten Offering: A registration
in which securities of the Company are sold to an underwriter for reoffering to
the public.
SECTION 13. HOLDERS
A Person is deemed to be a holder of Transfer Restricted Securities
(each, a "Holder") whenever such Person owns Transfer Restricted Securities.
SECTION 14. REGISTERED EXCHANGE OFFER
(a) Unless the Exchange Offer shall not be permitted by applicable
federal law (after the procedures set forth in Section 6(a)(i) below have been
complied with), the Company and the Guarantor shall (i) cause to be filed with
the Commission as soon as practicable after the Closing Date, but in no event
later than 60 days after the Closing Date, the Exchange Offer Registration
Statement, (ii) use their reasonable best efforts to cause such Exchange Offer
Registration Statement to become effective at the earliest possible time, but
in no event later than 120 days after the Closing
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Date, (iii) in connection with the foregoing, (A) file all pre-effective
amendments to such Exchange Offer Registration Statement as may be necessary in
order to cause such Exchange Offer Registration Statement to become effective,
(B) file, if applicable, a post-effective amendment to such Exchange Offer
Registration Statement pursuant to Rule 430A under the Act and (C) cause all
necessary filings, if any, in connection with the registration and
qualification of the Series B Notes to be made under the Blue Sky laws of such
jurisdictions as are necessary to permit Consummation of the Exchange Offer,
and (iv) upon the effectiveness of such Exchange Offer Registration Statement,
commence and Consummate the Exchange Offer. The Exchange Offer Registration
Statement shall be on the appropriate form permitting registration of the
Series B Notes to be offered in exchange for the Series A Notes that are
Transfer Restricted Securities and to permit sales of Broker-Dealer Transfer
Restricted Securities by Restricted Broker-Dealers as contemplated by Section
3(c) below.
(b) The Company and the Guarantor shall use their reasonable best efforts
to cause the Exchange Offer Registration Statement to be effective
continuously, and shall keep the Exchange Offer open, for a period of not less
than the minimum period required under applicable federal and state securities
laws to Consummate the Exchange Offer; provided, however, that in no event
shall such period be less than 20 Business Days. The Company and the Guarantor
shall cause the Exchange Offer to comply with all applicable federal and state
securities laws. No securities other than the Notes shall be included in the
Exchange Offer Registration Statement. The Company and the Guarantor shall use
their respective best efforts to cause the Exchange Offer to be Consummated
within 30 Business Days after the Exchange Offer Registration Statement has
become effective.
(c) The Company shall include a "Plan of Distribution" section in the
Prospectus contained in the Exchange Offer Registration Statement and indicate
therein that any Restricted Broker-Dealer who holds Series A Notes that are
Transfer Restricted Securities and that were acquired for the account of such
Broker-Dealer as a result of market-making activities or other trading
activities, may exchange such Series A Notes (other than Transfer Restricted
Securities acquired directly from the Company or any affiliate of the Company)
pursuant to the Exchange Offer; provided, however, such Broker-Dealer may be
deemed to be an "underwriter" within the meaning of the Act and must,
therefore, deliver a prospectus meeting the requirements of the Act in
connection with its initial sale of each Series B Note received by such
Broker-Dealer in the Exchange Offer, which prospectus delivery requirement may
be satisfied by the delivery by such Broker-Dealer of the Prospectus contained
in the Exchange Offer Registration Statement. Such "Plan of Distribution"
section shall also contain all other information with respect to such sales of
Broker-Dealer Transfer Restricted Securities by Restricted Broker-Dealers that
the Commission may require in order to permit such sales pursuant thereto, but
such "Plan of Distribution" shall not name any such Broker-Dealer or disclose
the amount of Notes held by any such Broker-Dealer, except to the extent
required by the Commission as a result of a change in policy after the date of
this Agreement.
The Company and the Guarantor shall use their reasonable best efforts
to keep the Exchange Offer Registration Statement continuously effective,
supplemented and amended as required by the provisions of Section 6(c) below to
the extent necessary to ensure that it is available for sales of Broker-Dealer
Transfer Restricted Securities by Restricted Broker-Dealers, and to ensure that
such Registration Statement conforms with the requirements of this Agreement,
the Act and the policies, rules and regulations of the Commission as announced
from time to time, for a period of
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one year from the date on which the Exchange Offer is Consummated or such
shorter period ending when all Broker-Dealer Transfer Restricted Securities
have been sold by Restricted Broker-Dealers.
The Company and the Guarantor shall promptly provide sufficient
copies of the latest version of such Prospectus to such Restricted
Broker-Dealers promptly upon request, and in no event later than two business
days after such request, at any time during the above period of continuous
effectiveness in order to facilitate such sales.
SECTION 15. SHELF REGISTRATION
(a) Shelf Registration. If (i) the Company is not required to file an
Exchange Offer Registration Statement with respect to the Series B Notes
because the Exchange Offer is not permitted by applicable law (after the
procedures set forth in Section 6(a)(i) below have been complied with) or (ii)
if any Holder of Transfer Restricted Securities shall notify the Company within
20 Business Days following the Consummation of the Exchange Offer that (A) such
Holder was prohibited by law or Commission policy from participating in the
Exchange Offer or (B) such Holder may not resell the Series B Notes acquired by
it in the Exchange Offer to the public without delivering a prospectus and the
Prospectus contained in the Exchange Offer Registration Statement is not
appropriate or available for such resales by such Holder or (C) such Holder is
a Broker-Dealer and holds Series A Notes acquired directly from the Company or
one of its affiliates, then the Company and the Guarantor shall use its best
efforts to (x) cause to be filed on or prior to 60 days after the date on which
the Company determines that it is not required to file the Exchange Offer
Registration Statement pursuant to clause (i) above or 60 days after the date
on which the Company receives the notice specified in clause (ii) above, a
shelf registration statement pursuant to Rule 415 under the Act (which may be
an amendment to the Exchange Offer Registration Statement (in either event, the
"Shelf Registration Statement")), relating to all Transfer Restricted
Securities the Holders of which shall have provided the information required
pursuant to Section 4(b) hereof, and shall (y) use their respective best
efforts to cause such Shelf Registration Statement to become effective on or
prior to 120 days after the date on which the Company becomes obligated to file
such Shelf Registration Statement. If, after the Company has filed an Exchange
Offer Registration Statement which satisfies the requirements of Section 3(a)
above, the Company is required to file and make effective a Shelf Registration
Statement solely because the Exchange Offer shall not be permitted under
applicable federal law, then the filing of the Exchange Offer Registration
Statement shall be deemed to satisfy the requirements of clause (x) above.
Such an event shall have no effect on the requirements of clause (y) above.
The Company and the Guarantor shall use their reasonable best efforts to keep
the Shelf Registration Statement discussed in this Section 4(a) continuously
effective, supplemented and amended as required by and subject to the
provisions of Sections 6(b) and (c) hereof to the extent necessary to ensure
that it is available for sales of Transfer Restricted Securities by the Holders
thereof entitled to the benefit of this Section 4(a), and to ensure that it
conforms with the requirements of this Agreement, the Act and the policies,
rules and regulations of the Commission as announced from time to time, for a
period of at least two years (as extended pursuant to Section 6(c)(i))
following the date on which such Shelf Registration Statement first becomes
effective under the Act or such shorter period ending when all of the Transfer
Restricted Securities available for sale thereunder have been sold pursuant
thereto.
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(b) Provision by Holders of Certain Information in Connection with the
Shelf Registration Statement. No Holder of Transfer Restricted Securities may
include any of its Transfer Restricted Securities in any Shelf Registration
Statement pursuant to this Agreement unless and until such Holder furnishes to
the Company in writing, within 20 days after receipt of a request therefor,
such information specified in item 507 of Regulation S-K under the Act and such
other information as the Company may reasonably request for use in connection
with any Shelf Registration Statement or Prospectus or preliminary Prospectus
included therein. No Holder of Transfer Restricted Securities shall be
entitled to Liquidated Damages pursuant to Section 5 hereof unless and until
such Holder shall have used its best efforts to provide all such information.
Each Holder as to which any Shelf Registration Statement is being effected
agrees to furnish promptly to the Company all information required to be
disclosed in order to make the information previously furnished to the Company
by such Holder not materially misleading.
SECTION 16. LIQUIDATED DAMAGES
If (i) any Registration Statement required by this Agreement is not
filed with the Commission on or prior to the date specified for such filing in
this Agreement, (ii) any such Registration Statement has not been declared
effective by the Commission on or prior to the date specified for such
effectiveness in this Agreement, (iii) the Exchange Offer has not been
Consummated within 30 Business Days after the Exchange Offer Registration
Statement is first declared effective by the Commission or (iv) any
Registration Statement required by this Agreement is filed and declared
effective but shall thereafter cease to be effective or fail to be usable for
its intended purpose without being succeeded by a post-effective amendment to
such Registration Statement that cures such failure and that is itself declared
effective within three business days following such cessation of effectiveness
(each such event referred to in clauses (i) through (iv), a "Registration
Default"), then the Company and the Guarantor hereby jointly and severally
agree to pay liquidated damages to each Holder of Transfer Restricted
Securities with respect to the first 90-day period immediately following the
occurrence of such Registration Default, in an amount equal to $.0481 per week
per $1,000 principal amount of Transfer Restricted Securities held by such
Holder for each week or portion thereof that the Registration Default
continues. The amount of the liquidated damages shall increase by an
additional $.0481 per week per $1,000 in principal amount of Transfer
Restricted Securities with respect to each subsequent 90-day period until all
Registration Defaults have been cured, up to a maximum amount of liquidated
damages of $.1924 per week per $1,000 principal amount of Transfer Restricted
Securities. Notwithstanding anything to the contrary set forth herein, (1)
upon filing of the Exchange Offer Registration Statement (and/or, if
applicable, the Shelf Registration Statement), in the case of (i) above, (2)
upon the effectiveness of the Exchange Offer Registration Statement (and/or, if
applicable, the Shelf Registration Statement), in the case of (ii) above, (3)
upon Consummation of the Exchange Offer, in the case of (iii) above, or (4)
upon the filing of a post-effective amendment to the Registration Statement or
an additional Registration Statement that causes the Exchange Offer
Registration Statement (and/or, if applicable, the Shelf Registration
Statement) to again be declared effective or made usable in the case of (iv)
above, the liquidated damages payable with respect to the Transfer Restricted
Securities as a result of such clause (i), (ii), (iii) or (iv), as applicable,
shall cease.
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All accrued liquidated damages shall be paid to the Global Note
Holder by wire transfer of immediately available funds or by federal funds
check and to Holders of Certificated Securities by mailing checks to their
registered addresses on each Damages Payment Date. All obligations of the
Company and the Guarantor set forth in the preceding paragraph that are
outstanding with respect to any Transfer Restricted Security at the time such
security ceases to be a Transfer Restricted Security shall survive until such
time as all such obligations with respect to such security shall have been
satisfied in full.
SECTION 17. REGISTRATION PROCEDURES
(a) Exchange Offer Registration Statement. In connection with the
Exchange Offer, the Company and the Guarantor shall comply with all applicable
provisions of Section 6(c) below, shall use their reasonable best efforts to
effect such exchange and to permit the sale of Broker-Dealer Transfer
Restricted Securities being sold in accordance with the intended method or
methods of distribution thereof, and shall comply with all of the following
provisions:
(i) If, following the date hereof and prior to the consummation of
the Exchange Offer, there has been published a change in Commission policy
with respect to exchange offers such as the Exchange Offer, such that in
the reasonable opinion of counsel to the Company there is a substantial
question as to whether the Exchange Offer is permitted by applicable
federal law, the Company and the Guarantor hereby agree to seek a
no-action letter or other favorable decision from the Commission allowing
the Company and the Guarantor to Consummate an Exchange Offer for such
Series A Notes. The Company and the Guarantor hereby agree to pursue the
issuance of such a decision to the Commission staff level, but shall not
be required to take commercially unreasonable action to effect a change in
Commission policy. In connection with the foregoing, the Company and the
Guarantor hereby agree to take all such other actions as are reasonably
requested by the Commission or otherwise required in connection with the
issuance of such decision, including without limitation (A) participating
in telephonic conferences with the Commission, (B) delivering to the
Commission staff an analysis prepared by counsel to the Company setting
forth the legal bases, if any, upon which such counsel has concluded that
such an Exchange Offer should be permitted and (C) diligently pursuing a
resolution (which need not be favorable) by the Commission staff of such
submission.
(ii) As a condition to its participation in the Exchange Offer
pursuant to the terms of this Agreement, each Holder of Transfer
Restricted Securities shall furnish, upon the request of the Company,
prior to the Consummation of the Exchange Offer, a written representation
to the Company and the Guarantor (which may be contained in the letter of
transmittal contemplated by the Exchange Offer Registration Statement) to
the effect that (A) it is not an affiliate of the Company, (B) it is not
engaged in, and does not intend to engage in, and has no arrangement or
understanding with any person to participate in, a distribution of the
Series B Notes to be issued in the Exchange Offer and (C) it is acquiring
the Series B Notes in its ordinary course of business. Each Holder hereby
acknowledges and agrees that any Broker-Dealer and any Holder using the
Exchange Offer to participate in a distribution of the securities to be
acquired in the Exchange Offer (1) could not under Commission policy as in
effect on the date of this Agreement rely on the position of the
Commission enunciated in
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Morgan Stanley and Co., Inc. (available June 5, 1991) and Exxon Capital
Holdings Corporation (available May 13, 1988), as interpreted in the
Commission's letter to Shearman & Sterling dated July 2, 1993, and similar
no-action letters (including, if applicable, any no-action letter obtained
pursuant to clause (i) above), and (2) must comply with the registration
and prospectus delivery requirements of the Act in connection with a
secondary resale transaction and that such a secondary resale transaction
must be covered by an effective registration statement containing the
selling security holder information required by Item 507 or 508, as
applicable, of Regulation S-K if the resales are of Series B Notes
obtained by such Holder in exchange for Series A Notes acquired by such
Holder directly from the Company or an affiliate thereof.
(iii) To the extent required by the Commission, prior to
effectiveness of the Exchange Offer Registration Statement, the Company
and the Guarantor shall provide a supplemental letter to the Commission
(A) stating that the Company and the Guarantor are registering the
Exchange Offer in reliance on the position of the Commission enunciated in
Exxon Capital Holdings Corporation (available May 13, 1988), Morgan
Stanley and Co., Inc. (available June 5, 1991) and, if applicable, any
no-action letter obtained pursuant to clause (i) above, (B) including a
representation that neither the Company nor the Guarantor has entered into
any arrangement or understanding with any Person to distribute the Series
B Notes to be received in the Exchange Offer and that, to the best of the
Company's and the Guarantor's information and belief, each Holder
participating in the Exchange Offer is acquiring the Series B Notes in its
ordinary course of business and has no arrangement or understanding with
any Person to participate in the distribution of the Series B Notes
received in the Exchange Offer and (C) any other undertaking or
representation required by the Commission as set forth in any no-action
letter obtained pursuant to clause (i) above.
(b) Shelf Registration Statement. In connection with the Shelf
Registration Statement, the Company and the Guarantor shall comply with all the
provisions of Section 6(c) below and shall use their reasonable best efforts to
effect such registration to permit the sale of the Transfer Restricted
Securities being sold in accordance with the intended method or methods of
distribution thereof (as indicated in the information furnished to the Company
pursuant to Section 4(b) hereof), and pursuant thereto the Company and the
Guarantor will prepare and file with the Commission the Shelf Registration
Statement relating to the registration on any appropriate form under the Act,
which form shall be available for the sale of the Transfer Restricted
Securities in accordance with the intended method or methods of distribution
thereof within the time periods and otherwise in accordance with the provisions
hereof.
(c) General Provisions. In connection with any Registration Statement
and any related Prospectus required by this Agreement to permit the sale or
resale of Transfer Restricted Securities (including, without limitation, any
Exchange Offer Registration Statement and the related Prospectus, to the extent
that the same are required to be available to permit sales of Broker-Dealer
Transfer Restricted Securities by Restricted Broker-Dealers), the Company and
the Guarantor shall:
(i) use their reasonable best efforts to keep such Registration
Statement continuously effective and file by post-effective amendment
thereto all requisite financial statements for the period specified in
Section 3 or 4 of this Agreement, as applicable. Upon the occurrence of
any (A) matter described in Section 6(c)(iii) hereof or (B) any event that
would cause any such
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Registration Statement or the Prospectus contained therein not to be
effective and usable for resale of Transfer Restricted Securities during
the period required by this Agreement, the Company and the Guarantor shall
file promptly an appropriate amendment to such Registration Statement, (1)
in the case of clause (A), correcting any such misstatement or omission,
and (2) in the case of clauses (A) and (B), use their reasonable best
efforts to cause such amendment to be declared effective and such
Registration Statement and the related Prospectus to become usable for
their intended purpose(s) as soon as practicable thereafter.
(ii) prepare and file with the Commission such amendments and
post-effective amendments to the Registration Statement as may be
necessary to keep the Registration Statement effective for the applicable
period set forth in Section 3 or 4 hereof, or such shorter period as will
terminate when all Transfer Restricted Securities covered by such
Registration Statement have been sold; cause the Prospectus to be
supplemented by any required Prospectus supplement, and as so supplemented
to be filed pursuant to Rule 424 under the Act, and to comply fully with
Rules 424, 430A and 462, as applicable, under the Act in a timely manner;
and comply with the provisions of the Act with respect to the disposition
of all securities covered by such Registration Statement during the
applicable period in accordance with the intended method or methods of
distribution by the sellers thereof set forth in such Registration
Statement or supplement to the Prospectus;
(iii) advise the underwriter(s), if any, and selling Holders
promptly and, if requested by such Persons, confirm such advice in
writing, (A) when the Prospectus or any Prospectus supplement or
post-effective amendment has been filed, and, with respect to any
Registration Statement or any post-effective amendment thereto, when the
same has become effective, (B) of any request by the Commission for
amendments to the Registration Statement or amendments or supplements to
the Prospectus or for additional information relating thereto, (C) of
receipt by the Company of notification with respect to the issuance by the
Commission of any stop order suspending the effectiveness of the
Registration Statement under the Act or of the suspension by any state
securities commission of the qualification of the Transfer Restricted
Securities for offering or sale in any jurisdiction, or receipt by the
Company of notification with respect to the initiation of any proceeding
for any of the preceding purposes, or (D) of the existence of any fact or
the happening of any event that makes any statement of a material fact
made (or incorporated by reference) in the Registration Statement, untrue,
or that results in the Registration Statement omitting to state a material
fact required to be stated therein or necessary to make the statements
therein not misleading, or of the existence of any fact or the happening
of any event that makes any statement of a material fact made (or
incorporated by reference) in the Prospectus untrue, or that results in
the Prospectus omitting to state a material fact required to be stated
therein or necessary in order to make the statements therein, in the light
of the circumstances under which they were made, not misleading. If at
any time the Commission shall issue any stop order suspending the
effectiveness of the Registration Statement, or any state securities
commission or other regulatory authority shall issue an order suspending
the qualification or exemption from qualification of the Transfer
Restricted Securities under state securities or Blue Sky laws, the Company
and the Guarantor shall use their reasonable best efforts to obtain the
withdrawal or lifting of such order at the earliest possible time;
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(iv) furnish to the Initial Purchaser, each selling Holder named in
any Shelf Registration Statement or Prospectus and each of the
underwriters in connection with such sale, if any, before filing with the
Commission, copies of any Registration Statement or any Prospectus
included therein or any amendments or supplements to any such Registration
Statement or Prospectus (including all documents incorporated by reference
after the initial filing of such Registration Statement), which documents
will be subject to the review and comment of such Holders and underwriters
in connection with such sale, if any, for a period of at least five
Business Days, and the Company will not file any such Registration
Statement or Prospectus or any amendment or supplement to any such
Registration Statement or Prospectus (including all such documents
incorporated by reference) to which the selling Holders of the Transfer
Restricted Securities covered by such Registration Statement or the
underwriters in connection with such sale, if any, shall reasonably object
within five Business Days after the receipt thereof, except for such
prospectus, amendment or supplement (or document incorporated by
reference) which counsel to the Company has advised the Company in writing
is required to be filed in order to comply with applicable law. A selling
Holder or underwriter, if any, shall be deemed to have reasonably objected
to such filing if such Registration Statement, amendment, Prospectus or
supplement, as applicable, as proposed to be filed, contains a material
misstatement or omission or fails to comply with the applicable
requirements of the Act;
(v) promptly prior to the filing of any document that is to be
incorporated by reference into a Registration Statement or Prospectus,
provide copies of such document to the selling Holders and to the
underwriters in connection with such sale, if any, make the Company's and
the Guarantor's representatives available for discussion of such document
and other customary due diligence matters, and include such information in
such document prior to the filing thereof as such selling Holders or
underwriters, if any, reasonably may request;
(vi) make available at reasonable times for inspection by the
selling Holders, any managing underwriter participating in any disposition
pursuant to such Registration Statement and any attorney or accountant
retained by such selling Holders or any of such underwriters, all
financial and other records, pertinent corporate documents and properties
of the Company and the Guarantor customarily inspected by underwriters in
Underwritten Registrations and cause the Company's and the Guarantor's
officers, directors and employees to supply all information reasonably
requested by, and customarily supplied in connection with Underwritten
Registrations to, any such Holder, underwriter, attorney or accountant in
connection with such Registration Statement or any post-effective
amendment thereto subsequent to the filing thereof and prior to its
effectiveness;
(vii) if requested by any selling Holders or the underwriters in
connection with such sale, if any, promptly include in any Registration
Statement or Prospectus, pursuant to a supplement or post-effective
amendment if necessary, such information as such selling Holders and
underwriters, if any, may reasonably request to have included therein,
including, without limitation, information relating to the "Plan of
Distribution" of the Transfer Restricted Securities, information with
respect to the principal amount of Transfer Restricted Securities being
sold to such underwriters, the purchase price being paid therefor and any
other terms of the offering of the Transfer Restricted Securities to be
sold in such offering; and make all
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required filings of such Prospectus supplement or post-effective amendment
as soon as practicable after the Company is notified of the matters to be
included in such Prospectus supplement or post-effective amendment;
(viii) furnish to each selling Holder and each of the underwriters
in connection with such sale, if any, without charge, at least one copy of
the Registration Statement, as first filed with the Commission, and of
each amendment thereto, including all documents incorporated by reference
therein and all exhibits (including exhibits incorporated therein by
reference);
(ix) deliver to each selling Holder and each of the underwriters, if
any, without charge, as many copies of the Prospectus (including each
preliminary prospectus) and any amendment or supplement thereto as such
Persons reasonably may request; the Company and the Guarantor hereby
consent to the use (in accordance with law) of the Prospectus and any
amendment or supplement thereto by each of the selling Holders and each of
the underwriters, if any, in connection with the offering and the sale of
the Transfer Restricted Securities covered by the Prospectus or any
amendment or supplement thereto;
(x) enter into such agreements (including an underwriting agreement)
and make such representations and warranties and take all such other
actions in connection therewith in order to expedite or facilitate the
disposition of the Transfer Restricted Securities pursuant to any
Registration Statement contemplated by this Agreement as may be reasonably
requested by any Holder of Transfer Restricted Securities or underwriter
in connection with any sale or resale pursuant to any Registration
Statement contemplated by this Agreement, and in such connection, whether
or not an underwriting agreement is entered into and whether or not the
registration is an Underwritten Registration, the Company and the
Guarantor shall:
(A) furnish (or in the case of paragraphs (2) and (3), use its
reasonable best efforts to furnish) to each selling Holder and each
underwriter, if any, upon the effectiveness of the Shelf Registration
Statement and to each Restricted Broker-Dealer upon Consummation of
the Exchange Offer:
(1) a certificate, dated the date of Consummation of the
Exchange Offer or the date of effectiveness of the Shelf
Registration Statement, as the case may be, signed on behalf of
the Company and the Guarantor by (x) the President or any Vice
President and (y) a principal financial or accounting officer of
the Company and the Guarantor, confirming, as of the date
thereof, the matters set forth in paragraphs (a) through (d) of
Section 9 of the Purchase Agreement and such other similar
matters as the Holders, underwriters and/or Restricted Broker
Dealers may reasonably request;
(2) an opinion, dated the date of Consummation of the
Exchange Offer or the date of effectiveness of the Shelf
Registration Statement, as the case may be, of counsel for the
Company and the Guarantor covering matters similar to those set
forth in paragraphs (e) and (f) of Section 9 of the Purchase
Agreement, and in any event including a statement to the effect
that such counsel has participated in conferences with officers
and other representatives of the Company and the Guarantor,
representatives of the independent public accountants for the
Company and the
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Guarantor and have considered the matters required to be stated
therein and the statements contained therein, although such
counsel has not independently verified the accuracy,
completeness or fairness of such statements; and that such
counsel advises that, on the basis of the foregoing (relying as
to materiality to a large extent upon facts provided to such
counsel by officers and other representatives of the Company and
the Guarantor and without independent check or verification), no
facts came to such counsel's attention that caused such counsel
to believe that the applicable Registration Statement, at the
time such Registration Statement or any post-effective amendment
thereto became effective and, in the case of the Exchange Offer
Registration Statement, as of the date of Consummation of the
Exchange Offer, contained an untrue statement of a material fact
or omitted to state a material fact required to be stated
therein or necessary to make the statements therein not
misleading, or that the Prospectus contained in such
Registration Statement as of its date and, in the case of the
opinion dated the date of Consummation of the Exchange Offer, as
of the date of Consummation, contained an untrue statement of a
material fact or omitted to state a material fact necessary in
order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
Without limiting the foregoing, such counsel may state further
that such counsel assumes no responsibility for, and has not
independently verified, the accuracy, completeness or fairness
of the financial statements, notes and schedules and other
financial data included in any Registration Statement
contemplated by this Agreement or the related Prospectus; and
(3) a customary comfort letter, dated as of the date of
effectiveness of the Shelf Registration Statement or the date of
Consummation of the Exchange Offer, as the case may be, from the
Company's independent accountants, in the customary form and
covering matters of the type customarily covered in comfort
letters to underwriters in connection with primary underwritten
registered offerings, and affirming the matters set forth in the
comfort letters delivered pursuant to Section 9 of the Purchase
Agreement, without exception;
(B) set forth in full or incorporate by reference in the
underwriting agreement, if any, in connection with any sale or resale
pursuant to any Shelf Registration Statement the indemnification
provisions and procedures of Section 8 hereof with respect to all
parties to be indemnified pursuant to said Section; and
(C) deliver such other documents and certificates as may be
reasonably requested by the selling Holders, the underwriters, if
any, and Restricted Broker Dealers, if any, to evidence compliance
with clause (A) above and with any customary conditions contained in
the underwriting agreement or other agreement entered into by the
Company and the Guarantor pursuant to this clause (x).
The above shall be done at each closing under such underwriting or
similar agreement, as and to the extent required thereunder, and if at any
time the representations and warranties of the Company and the Guarantor
contemplated in (A)(1) above cease to be true and correct, the Company and
the Guarantor shall so advise the underwriters, if any, the selling
Holders and
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<PAGE> 41
each Restricted Broker-Dealer promptly and if requested by such Persons,
shall confirm such advice in writing;
(xi) prior to any public offering of Transfer Restricted Securities,
cooperate with the selling Holders, the underwriters, if any, and their
respective counsel in connection with the registration and qualification
of the Transfer Restricted Securities under the securities or Blue Sky
laws of such United States jurisdictions as the selling Holders or
underwriters, if any, may request and do any and all other acts or things
necessary or advisable to enable the disposition in such jurisdictions of
the Transfer Restricted Securities covered by the applicable Registration
Statement; provided, however, that neither the Company nor the Guarantor
shall be required to register or qualify as a foreign corporation where it
is not now so qualified or to take any action that would subject it to the
service of process in suits or to taxation, other than as to matters and
transactions relating to the Registration Statement, in any jurisdiction
where it is not now so subject;
(xii) issue, upon the request of any Holder of Series A Notes
covered by any Shelf Registration Statement contemplated by this
Agreement, Series B Notes having an aggregate principal amount equal to
the aggregate principal amount of Series A Notes surrendered to the
Company by such Holder in exchange therefor or being sold by such Holder;
such Series B Notes to be registered in the name of such Holder or in the
name of the purchasers of such Notes, as the case may be; in return, the
Series A Notes held by such Holder shall be surrendered to the Company for
cancellation;
(xiii) in connection with any sale of Transfer Restricted Securities
that will result in such securities no longer being Transfer Restricted
Securities, cooperate with the selling Holders and the underwriters, if
any, to facilitate the timely preparation and delivery of certificates
representing Transfer Restricted Securities to be sold and not bearing any
restrictive legends; and to register such Transfer Restricted Securities
in such denominations and such names as the Holders or the underwriters,
if any, may request at least two Business Days prior to such sale of
Transfer Restricted Securities;
(xiv) provide a CUSIP number for all Transfer Restricted Securities
not later than the effective date of a Registration Statement covering
such Transfer Restricted Securities and provide the Trustee under the
Indenture with printed certificates for the Transfer Restricted Securities
which are in a form eligible for deposit with the Depository Trust
Company;
(xv) cooperate and assist in any filings required to be made with
the NASD and in the performance of any due diligence investigation by any
underwriter (including any "qualified independent underwriter") that is
required to be retained in accordance with the rules and regulations of
the NASD, and use their reasonable best efforts to cause such Registration
Statement to become effective and approved by such governmental agencies
or authorities as may be necessary to enable the Holders selling Transfer
Restricted Securities to consummate the disposition of such Transfer
Restricted Securities;
(xvi) otherwise use their reasonable best efforts to comply with all
applicable rules and regulations of the Commission, and make generally
available to its security holders with regard
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<PAGE> 42
to any applicable Registration Statement a consolidated earnings statement
meeting the requirements of Rule 158 (which need not be audited) covering
a twelve-month period beginning with the first month after the effective
date of the Registration Statement (as such term is defined in paragraph
(c) of Rule 158 under the Act) no later than 45 days after the end of such
twelve-month period (or 90 days if such period is a fiscal year);
(xvii) cause the Indenture to be qualified under the TIA not later
than the effective date of the first Registration Statement required by
this Agreement and, in connection therewith, cooperate with the Trustee
and the Holders of Notes to effect such changes to the Indenture as may be
required for such Indenture to be so qualified in accordance with the
terms of the TIA; and execute and use its best efforts to cause the
Trustee to execute, all documents that may be required to effect such
changes and all other forms and documents required to be filed with the
Commission to enable such Indenture to be so qualified in a timely manner;
and
(xviii) provide promptly to each Holder upon request each document
filed with the Commission pursuant to the requirements of Section 13 or
Section 15(d) of the Exchange Act.
(d) Restrictions on Holders. Each Holder agrees by acquisition of a
Transfer Restricted Security that, upon receipt of any notice from the Company
of the existence of any fact of the kind described in Section 6(c)(iii)(D)
hereof, such Holder will forthwith discontinue disposition of Transfer
Restricted Securities pursuant to the applicable Registration Statement until
such Holder's receipt of the copies of the supplemented or amended Prospectus
contemplated by Section 6(c)(xv) hereof, or until it is advised in writing by
the Company that the use of the Prospectus may be resumed, and has received
copies of any additional or supplemental filings that are incorporated by
reference in the Prospectus (the "Advice"). If so directed by the Company,
each Holder will deliver to the Company (at the Company's expense) all copies,
other than permanent file copies then in such Holder's possession, of the
Prospectus covering such Transfer Restricted Securities that was current at the
time of receipt of such notice. In the event the Company shall give any such
notice, the time period regarding the effectiveness of such Registration
Statement set forth in Section 3 or 4 hereof, as applicable, shall be extended
by the number of days during the period from and including the date of the
giving of such notice pursuant to Section 6(c)(iii)(D) hereof to and including
the date when each selling Holder covered by such Registration Statement shall
have received the copies of the supplemented or amended Prospectus contemplated
by Section 6(c)(xv) hereof or shall have received the Advice.
SECTION 18. REGISTRATION EXPENSES
(a) All expenses incident to the Company's and the Guarantor's
performance of or compliance with this Agreement will be borne by the Company,
regardless of whether a Registration Statement becomes effective, including
without limitation: (i) all registration and filing fees and expenses
(including filings made by any Purchaser or Holder with the NASD (and, if
applicable, the fees and expenses of any "qualified independent underwriter")
and its counsel that may be required by the rules and regulations of the NASD);
(ii) all fees and expenses of compliance with federal securities and state Blue
Sky or securities laws; (iii) all expenses of printing (including printing
certificates for the Series B Notes to be issued in the Exchange Offer and
printing of Prospectuses), messenger and delivery services and telephone; (iv)
all fees and disbursements of counsel for the
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<PAGE> 43
Company, the Guarantor and the Holders of Transfer Restricted Securities
(subject to the limitations set forth in (b), below); (v) all rating agency
fees and application and filing fees, if any, in connection with listing the
Notes on a national securities exchange or automated quotation system; and (vi)
all fees and disbursements of independent certified public accountants of the
Company and the Guarantor (including the expenses of any special audit and
comfort letters required by or incident to such performance).
The Company will, in any event, bear its and the Guarantor's internal
expenses (including, without limitation, all salaries and expenses of its
officers and employees performing legal or accounting duties), the expenses of
any annual audit and the fees and expenses of any Person, including special
experts, retained by the Company or the Guarantor.
(b) In connection with any Registration Statement required by this
Agreement (including, without limitation, the Exchange Offer Registration
Statement and the Shelf Registration Statement), the Company and the Guarantor
will reimburse the Holders of Transfer Restricted Securities being tendered in
the Exchange Offer and/or resold pursuant to the "Plan of Distribution"
contained in the Exchange Offer Registration Statement or registered pursuant
to the Shelf Registration Statement, as applicable, for the reasonable fees and
disbursements of not more than one counsel, who shall be chosen by the Holders
of a majority in principal amount of the Transfer Restricted Securities for
whose benefit such Registration Statement is being prepared; provided, however,
that such fees and disbursements shall not exceed $10,000.
SECTION 19. INDEMNIFICATION
(a) The Company and the Guarantor, jointly and severally, agree to
indemnify and hold harmless (i) each Holder and (ii) each person, if any, who
controls (within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act) any Holder (any of the persons referred to in this clause (ii)
being hereinafter referred to as a "controlling person") and (iii) the
respective officers, directors, partners, employees, representatives and agents
of any Holder or any controlling person (any person referred to in clause (i),
(ii) or (iii) may hereinafter be referred to as an "Indemnified Holder"), to
the fullest extent lawful, from and against any and all losses, claims,
damages, liabilities, judgments, actions and expenses (including without
limitation and as incurred, reimbursement of all reasonable costs of
investigating, preparing, pursuing or defending any claim or action, or any
investigation or proceeding by any governmental agency or body, commenced or
threatened, including the reasonable fees and expenses of counsel to any
Indemnified Holder) directly or indirectly caused by, based upon or arising out
of any untrue statement or alleged untrue statement of a material fact
contained in any Registration Statement, preliminary prospectus or Prospectus
(or any amendment or supplement thereto), or any omission or alleged omission
to state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, except insofar as such losses,
claims, damages, liabilities or expenses are caused by, based upon or arise out
of an untrue statement or omission or alleged untrue statement or omission that
is made in reliance upon and in conformity with information relating to the
Initial Purchaser or any of the Holders furnished in writing to the Company by
any of the Holders expressly for use therein.
A-15
<PAGE> 44
In case any action or proceeding (including any governmental or
regulatory investigation or proceeding) shall be brought or asserted against
any of the Indemnified Holders with respect to which indemnity may be sought
against the Company or the Guarantor, such Indemnified Holder (or the
Indemnified Holder controlled by such controlling person) shall promptly notify
the Company and the Guarantor in writing (provided, that the failure to give
such notice shall not relieve the Company or the Guarantor of their obligations
pursuant to this Agreement unless such failure to notify results in the
forfeiture by the Company or the Guarantor of substantive rights or defenses).
The Company shall assume the defense thereof, including the employment of
counsel reasonably satisfactory to the Indemnified Holder. Such Indemnified
Holder shall have the right to employ separate counsel in any such action but
the fees and expenses of such counsel shall be paid at the expense of such
Indemnified Holder unless (i) the employment of such counsel has been
specifically authorized in writing by the Company, (ii) the Company has failed
to assume the defense and employ counsel or (iii) the named parties to any such
action include both such Indemnified Holder and the Company or the Guarantor,
and such Indemnified Holder has been advised by such counsel that there may be
one or more legal defenses available to it which are different from or
additional to those available to the Company or the Guarantor, it being
understood, however, that the Company and the Guarantor shall not, in
connection with any one such action or proceeding or separate but substantially
similar or related actions or proceedings in the same jurisdiction arising out
of the same general allegations or circumstances, be liable for the reasonable
fees and expenses of more than one separate firm of attorneys (in addition to
any local counsel) at any time for such Indemnified Holders, which firm shall
be designated by the Holders of a majority of the principal amount of the Notes
covered by such Registration Statement. Neither the Company nor the Guarantor
shall be liable for any settlement of any such action or proceeding effected
without the Company's prior written consent, which consent shall not be
withheld unreasonably, and the Company and the Guarantor agree to indemnify and
hold harmless each Indemnified Holder from and against any loss, claim, damage,
liability or expense by reason of any settlement of any action effected with
the written consent of the Company. Neither the Company nor the Guarantor
shall, without the prior written consent of each Indemnified Holder, settle or
compromise or consent to the entry of judgment in or otherwise seek to
terminate any pending or threatened action, claim, litigation or proceeding in
respect of which indemnification or contribution may be sought hereunder
(whether or not any Indemnified Holder is a party thereto), unless such
settlement, compromise, consent or termination includes an unconditional
release of each Indemnified Holder from all liability arising out of claims
that are the subject matter of such action, claim, litigation or proceeding.
(b) Each Holder of Transfer Restricted Securities agrees, severally
and not jointly, to indemnify and hold harmless the Company and the Guarantor,
and their respective directors, officers, and any person controlling (within
the meaning of Section 15 of the Act or Section 20 of the Exchange Act) the
Company, and the respective officers, directors, partners, employees,
representatives and agents of each such person (or controlling person), to the
same extent as the foregoing indemnity from the Company and the Guarantor to
each of the Indemnified Holders, but only with respect to claims and actions
caused by or arising out of information relating to such Holder furnished in
writing by such Holder expressly for use in any Registration Statement,
preliminary prospectus or Prospectus (or any amendment or supplement thereto).
In case any action or proceeding shall be brought against the Company, the
Guarantor or its directors, officers or any such controlling person in respect
of which indemnity may be sought against a Holder of Transfer Restricted
Securities, such Holder shall have the rights and duties given the Company and
the
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<PAGE> 45
Guarantor, and the Company, the Guarantor, such directors, officers, employees,
representatives or agents, or such controlling person shall have the rights and
duties given to each Holder by the preceding paragraph. In no event shall any
Holder be liable or responsible for any amount in excess of the amount by which
the total received by such Holder with respect to its sale of Transfer
Restricted Securities pursuant to a Registration Statement exceeds (i) the
amount paid by such Holder for such Transfer Restricted Securities and (ii) the
amount of any damages which such Holder has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or alleged
omission.
(c) If the indemnification provided for in this Section 8 is
unavailable to an indemnified party under Section 8(a) or Section 8(b) hereof
(other than by reason of exceptions provided in those Sections) in respect of
any losses, claims, damages, liabilities or expenses referred to therein, then
each applicable indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such indemnified party
as a result of such losses, claims, damages, liabilities or expenses in such
proportion as is appropriate to reflect the relative benefits received by the
Company and the Guarantor, on the one hand, and the Holders, on the other hand,
from their sale of Transfer Restricted Securities or if such allocation is not
permitted by applicable law, the relative fault of the Company and the
Guarantor, on the one hand, and of the Indemnified Holders, on the other hand,
in connection with the statements or omissions which resulted in such losses,
claims, damages, liabilities or expenses, as well as any other relevant
equitable considerations. The relative fault of the Company and the Guarantor,
on the one hand, and of the Indemnified Holders, on the other hand, shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to
state a material fact relates to information supplied by the Company or the
Guarantor or by the Indemnified Holders and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The amount paid or payable by a party as a result of
the losses, claims, damages, liabilities and expenses referred to above shall
be deemed to include, subject to the limitations set forth in the second
paragraph of Section 8(a), any legal or other fees or expenses reasonably
incurred by such party in connection with investigating or defending any action
or claim.
The Company, the Guarantor and each Holder of Transfer Restricted
Securities agree that it would not be just and equitable if contribution
pursuant to this Section 8(c) were determined by pro rata allocation (even if
the Holders were treated as one entity for such purpose) or by any other method
of allocation which does not take account of the equitable considerations
referred to in the immediately preceding paragraph. Notwithstanding the
provisions of this Section 8, no Holder or its related Indemnified Holders
shall be required to contribute, in the aggregate, any amount in excess of the
amount by which the total received by such Holder with respect to the sale of
its Transfer Restricted Securities pursuant to a Registration Statement exceeds
the sum of (A) the amount paid by such Holder for such Transfer Restricted
Securities plus (B) the amount of any damages which such Holder has otherwise
been required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The Holders' obligations to contribute pursuant to this
Section 8(c) are several in proportion to the respective principal amount of
Series A Notes held by each of the Holders hereunder and not joint.
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SECTION 20. RULE 144A
The Company and the Guarantor hereby agree with each Holder, for so
long as any Transfer Restricted Securities remain outstanding and during any
period in which the Company or the Guarantor is not subject to Section 13 or
15(d) of the Securities Exchange Act, to make available, upon request of any
Holder of Transfer Restricted Securities, to any Holder or beneficial owner of
Transfer Restricted Securities in connection with any sale thereof and any
prospective purchaser of such Transfer Restricted Securities designated by such
Holder or beneficial owner, the information required by Rule 144A(d)(4) under
the Act in order to permit resales of such Transfer Restricted Securities
pursuant to Rule 144A.
SECTION 21. UNDERWRITTEN REGISTRATIONS
No Holder may participate in any Underwritten Registration hereunder
unless such Holder (a) agrees to sell such Holder's Transfer Restricted
Securities on the basis provided in customary underwriting arrangements entered
into in connection therewith and (b) completes and executes all reasonable
questionnaires, powers of attorney, and other documents required under the
terms of such underwriting arrangements.
SECTION 22. SELECTION OF UNDERWRITERS
For any Underwritten Offering, the investment banker or investment
bankers and manager or managers for any Underwritten Offering that will
administer such offering will be selected by the Holders of a majority in
aggregate principal amount of the Transfer Restricted Securities included in
such offering. Such investment bankers and managers are referred to herein as
the "underwriters."
SECTION 23. MISCELLANEOUS
(a) Remedies. Each Holder, in addition to being entitled to exercise all
rights provided herein, in the Indenture, the Purchase Agreement (in the case
of the Initial Purchaser) or granted by law, including recovery of liquidated
or other damages, will be entitled to specific performance of its rights under
this Agreement. The Company and the Guarantor agree that monetary damages
would not be adequate compensation for any loss incurred by reason of a breach
by them of the provisions of this Agreement and hereby agree to waive the
defense in any action for specific performance that a remedy at law would be
adequate.
(b) No Inconsistent Agreements. Neither the Company nor the Guarantor
will, on or after the date of this Agreement, enter into any agreement with
respect to its securities that is inconsistent with the rights granted to the
Holders in this Agreement or otherwise conflicts with the provisions hereof.
Neither the Company nor the Guarantor has previously entered into any agreement
granting any registration rights with respect to its securities to any Person.
The rights granted to the Holders hereunder do not in any way conflict with and
are not inconsistent with the rights granted to the holders of the Company's
and the Guarantor's securities under any agreement in effect on the date
hereof.
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<PAGE> 47
(c) Adjustments Affecting the Notes. Neither the Company nor the
Guarantor will take any action, or voluntarily permit any change to occur, with
respect to the Notes that would materially and adversely affect the ability to
Consummate the Exchange Offer.
(d) Amendments and Waivers. The provisions of this Agreement may not be
amended, modified or supplemented, and waivers or consents to or departures
from the provisions hereof may not be given unless (i) in the case of Section 5
hereof and this Section 12(d)(i), the Company has obtained the written consent
of Holders of all outstanding Transfer Restricted Securities and (ii) in the
case of all other provisions hereof, the Company has obtained the written
consent of Holders of a majority of the outstanding principal amount of
Transfer Restricted Securities. Notwithstanding the foregoing, a waiver or
consent to departure from the provisions hereof that relates exclusively to the
rights of Holders whose securities are being tendered pursuant to the Exchange
Offer and that does not affect directly or indirectly the rights of other
Holders whose securities are not being tendered pursuant to such Exchange Offer
may be given by the Holders of a majority of the outstanding principal amount
of Transfer Restricted Securities subject to such Exchange Offer.
(e) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, first-class mail
(registered or certified, return receipt requested), telex, telecopier or air
courier guaranteeing overnight delivery:
(i) if to a Holder, at the address set forth on the records of
the Registrar under the Indenture, with a copy to the Registrar under the
Indenture; and
(ii) if to the Company or the Guarantor:
HydroChem Industrial Services, Inc.
6210 Rothway, Suite 150
Houston, Texas 77040
Telecopier No.: (713) 329-2440
Attention: Mr. Michael Steindler
With a copy to:
Cassell & Stone, L.L.P.
5956 Sherry Lane, Suite 1400
Dallas, Texas 75225
Telecopier No.: (214) 696-0377
Attention: Mr. Dennis R. Cassell
Haynes and Boone, LLP
901 Main Street, Suite 3100
Dallas, Texas 75202
Telecopier No.: (214) 651-5940
Attention: Ms. Janice Sharry
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<PAGE> 48
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five Business
Days after being deposited in the mail, postage prepaid, if mailed; when
receipt acknowledged, if telecopied; and on the next business day, if timely
delivered to an air courier guaranteeing overnight delivery.
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Trustee at the
address specified in the Indenture.
(f) Successors and Assigns. This Agreement shall inure to the benefit of
and be binding upon the successors and assigns of each of the parties,
including without limitation and without the need for an express assignment,
subsequent Holders of Transfer Restricted Securities; provided, however, that
this Agreement shall not inure to the benefit of or be binding upon a successor
or assign of a Holder unless and to the extent such successor or assign
acquired Transfer Restricted Securities directly from such Holder at a time
when such Holder could not transfer such Transfer Restricted Securities
pursuant to a Shelf Registration Statement. Each Holder of Transfer Restricted
Securities agrees to be bound by and comply with the terms and provisions of
this Agreement.
(g) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(h) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(i) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE
CONFLICT OF LAW RULES THEREOF.
(j) Severability. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable, the validity, legality and enforceability of
any such provision in every other respect and of the remaining provisions
contained herein shall not be affected or impaired thereby.
(k) Entire Agreement. This Agreement is intended by the parties as a
final expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect
of the subject matter contained herein. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein
with respect to the registration rights granted with respect to the Transfer
Restricted Securities. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject matter.
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<PAGE> 49
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first written above.
HYDROCHEM INDUSTRIAL SERVICES, INC.
By:
-------------------------------------
Name:
Title:
HYDROCHEM INTERNATIONAL, INC.
By:
-------------------------------------
Name:
Title:
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By:
-------------------------------------
Name:
Title:
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<PAGE> 1
EXHIBIT 4.2
HYDROCHEM INDUSTRIAL SERVICES, INC.
AND
HYDROCHEM INTERNATIONAL, INC.
AS GUARANTOR
$110,000,000
10 3/8% SENIOR SUBORDINATED NOTES DUE AUGUST 1, 2007
_____________
INDENTURE
DATED AS OF AUGUST 1, 1997
_____________
NORWEST BANK, MINNESOTA, N.A.
AS TRUSTEE
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TABLE OF CONTENTS
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ARTICLE 1
DEFINITIONS AND INCORPORATION BY REFERENCE
Section 1.01 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.02 Other Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 1.03 Incorporation by Reference of Trust Indenture Act . . . . . . . . . . . . . . . . . . . . . . . 15
Section 1.04 Rules of Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
ARTICLE 2
THE NOTES
Section 2.01 Form and Dating . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 2.02 Execution and Authentication . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 2.03 Registrar and Paying Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 2.04 Paying Agent to Hold Money in Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 2.05 Holder Lists . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 2.06 Transfer and Exchange . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 2.07 Replacement Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 2.08 Outstanding Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 2.09 Treasury Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 2.10 Temporary Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 2.11 Cancellation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 2.12 Defaulted Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 2.13 Record Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 2.14 Computation of Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 2.15 CUSIP Number . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
ARTICLE 3
REDEMPTION
Section 3.01 Notices to Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 3.02 Selection of Notes to Be Redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 3.03 Notice of Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 3.04 Effect of Notice of Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 3.05 Deposit of Redemption Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 3.06 Notes Redeemed in Part . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 3.07 Optional Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 3.08 Mandatory Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 3.09 Repurchase Offer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
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ARTICLE 4
COVENANTS
Section 4.01 Payment of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 4.02 Maintenance of Office or Agency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 4.03 Compliance Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 4.04 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 4.05 Stay, Extension and Usury Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 4.06 Change of Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 4.07 Asset Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 4.08 Restricted Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 4.09 Incurrence of Indebtedness and Issuance of Preferred Stock . . . . . . . . . . . . . . . . . . . 40
Section 4.10 Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 4.11 Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries . . . . . . . . . . . . 42
Section 4.12 Limitation on Layering Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 4.13 Additional Subsidiary Guarantees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 4.14 Unrestricted Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 4.15 Transactions with Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 4.16 Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
ARTICLE 5
SUCCESSORS
Section 5.01 Limitations on Merger, Consolidation or Sale of Substantially All Assets . . . . . . . . . . . . 45
Section 5.02 Successor Corporation Substituted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
ARTICLE 6
DEFAULTS AND REMEDIES
Section 6.01 Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 6.02 Acceleration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 6.03 Other Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Section 6.04 Waiver of Past Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Section 6.05 Control by Majority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Section 6.06 Limitation on Suits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Section 6.07 Rights of Holders to Receive Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Section 6.08 Collection Suit by Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Section 6.09 Trustee May File Proofs of Claim . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Section 6.10 Priorities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 6.11 Undertaking for Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
</TABLE>
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ARTICLE 7
TRUSTEE
Section 7.01 Duties of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Section 7.02 Rights of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Section 7.03 Individual Rights of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Section 7.04 Trustee's Disclaimer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Section 7.05 Notice of Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Section 7.06 Reports by Trustee to Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Section 7.07 Compensation and Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Section 7.08 Replacement of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Section 7.09 Successor Trustee by Merger, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Section 7.10 Eligibility; Disqualification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Section 7.11 Preferential Collection of Claims Against the Company . . . . . . . . . . . . . . . . . . . . . 57
ARTICLE 8
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
Section 8.01 Option to Effect Legal Defeasance or Covenant Defeasance . . . . . . . . . . . . . . . . . . . . 57
Section 8.02 Legal Defeasance and Discharge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Section 8.03 Covenant Defeasance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
Section 8.04 Conditions to Legal or Covenant Defeasance . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
Section 8.05 Deposited Money and Government Securities to be Held in Trust; Other Miscellaneous Provisions . . 60
Section 8.06 Repayment to the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Section 8.07 Reinstatement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
ARTICLE 9
AMENDMENT, SUPPLEMENT AND WAIVER
Section 9.01 Without Consent of Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Section 9.02 With Consent of Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Section 9.03 Compliance with Trust Indenture Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
Section 9.04 Revocation and Effect of Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
Section 9.05 Notation on or Exchange of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
Section 9.06 Trustee to Sign Amendments, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
</TABLE>
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ARTICLE 10
SUBSIDIARY GUARANTEES
Section 10.01 Subsidiary Guarantees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
Section 10.02 Execution and Delivery of Subsidiary Guarantees . . . . . . . . . . . . . . . . . . . . . . . . 66
Section 10.03 Subsidiary Guarantors May Consolidate, etc., on Certain Terms . . . . . . . . . . . . . . . . . 67
Section 10.04 Releases Following Sale of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
Section 10.05 Limitation of Subsidiary Guarantor's Liability . . . . . . . . . . . . . . . . . . . . . . . . . 68
Section 10.06 Application of Certain Terms and Provisions to the Subsidiary Guarantors. . . . . . . . . . . . . 69
Section 10.07 Release of Subsidiary Guarantees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
Section 10.08 Subordination of Subsidiary Guarantees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
ARTICLE 11
SUBORDINATION
Section 11.01 Agreement to Subordinate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
Section 11.02 Liquidation; Dissolution; Bankruptcy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
Section 11.03 Default on Designated Senior Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
Section 11.04 Acceleration of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
Section 11.05 When Distribution Must Be Paid Over . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
Section 11.06 Notice by Company. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
Section 11.07 Subrogation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
Section 11.08 Relative Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
Section 11.09 Subordination May Not Be Impaired by Company . . . . . . . . . . . . . . . . . . . . . . . . . . 73
Section 11.10 Distribution or Notice to Representative . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
Section 11.11 Rights of Trustee and Paying Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
Section 11.12 Authorization to Effect Subordination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
Section 11.13 Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
</TABLE>
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ARTICLE 12
MISCELLANEOUS
Section 12.01 Trust Indenture Act Controls . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
Section 12.02 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
Section 12.03 Communication by Holders with Other Holders . . . . . . . . . . . . . . . . . . . . . . . . . . 76
Section 12.04 Certificate and Opinion as to Conditions Precedent . . . . . . . . . . . . . . . . . . . . . . . 76
Section 12.05 Statements Required in Certificate or Opinion . . . . . . . . . . . . . . . . . . . . . . . . . 76
Section 12.06 Rules by Trustee and Agents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
Section 12.07 Legal Holidays . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
Section 12.08 No Recourse Against Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
Section 12.09 Duplicate Originals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
Section 12.10 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
Section 12.11 No Adverse Interpretation of Other Agreements . . . . . . . . . . . . . . . . . . . . . . . . . 78
Section 12.12 Successors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
Section 12.13 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
Section 12.14 Counterpart Originals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
Section 12.15 Table of Contents, Headings, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
</TABLE>
EXHIBITS
Exhibit A Form of Note
Exhibit B-1 Form of Certificate for Exchange or Registration of
Transfer of Certificated Notes
Exhibit B-2 Form of Certificate for Exchange or Registration of
Transfer From Rule 144A Global Note to Certificated
Note
Exhibit B-3 Form of Certificate for Exchange or Registration of
Transfer From Certificated Note to Rule 144A Global
Note
Exhibit C Form of Supplemental Indenture
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<PAGE> 7
INDENTURE dated as of August 1, 1997, among HydroChem Industrial
Services, Inc., a Delaware corporation (the "Company"), HydroChem
International, Inc., a Delaware corporation, as guarantor, and Norwest Bank,
Minnesota, N.A., a national banking association, as trustee ("Trustee").
Each party agrees as follows for the benefit of each other and for the
equal and ratable benefit of the Holders of the 10 3/8% Series A Senior
Subordinated Notes due 2007 (the "Series A Notes") and the 10 3/8% Series B
Senior Subordinated Notes due 2007 (the "Series B Notes" and, together with the
Series A Notes, the "Notes") of the Company:
ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE
SECTION 1.01 DEFINITIONS
"Acquired Debt" means (i) Indebtedness of any Person existing
at the time such Person became a Restricted Subsidiary or is merged with or
into the Company or a Restricted Subsidiary, including, without limitation,
Indebtedness incurred in connection with, or in contemplation of, such other
Person becoming a Restricted Subsidiary or merging with or into the Company or
a Restricted Subsidiary, and (ii) Indebtedness secured by a Lien encumbering
any asset acquired by the Company or any Restricted Subsidiary.
"Affiliate" of any specified Person means any other Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified Person. For purposes of this definition,
"control" (including, with correlative meanings, the terms "controlling,"
"controlled by" and "under common control with"), as used with respect to any
Person, shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of such Person,
whether through the ownership of voting securities, by agreement or otherwise;
provided that, with respect to Parent and the Company only, beneficial
ownership of 10% or more of the voting securities of Parent or the Company
shall be deemed to be control.
"Agent" means any Registrar, Paying Agent or co-registrar.
"Agent Members" means any member of, or participant in, the
Depositary.
"Applicable Procedures" means, with respect to any transfer or
exchange of beneficial interests in a Global Note, the rules and procedures of
the Depositary that are applicable to such transfer or exchange.
"Asset Sale" means (i) the sale, lease, conveyance or other
disposition of any assets (including, without limitation, by way of a sale and
leaseback) other than sales or dispositions of Cash Equivalents and inventory
in the ordinary course of business (provided that the sale, lease, conveyance
or other disposition of all or substantially all of the assets of the Company
and its Restricted Subsidiaries taken as a whole will be governed by the
provisions of Section 4.06 hereof and/or the provisions of Section 5.01 hereof
and not by the provisions of Section 4.07) hereof, and
<PAGE> 8
(ii) the issue or sale by the Company or any of its Restricted Subsidiaries of
Equity Interests of any of the Company's Restricted Subsidiaries, in the case
of either clause (i) or (ii), whether in a single transaction or a series of
related transactions (a) that have a fair market value in excess of $2,000,000
or (b) for net proceeds in excess of $2,000,000. Notwithstanding the
foregoing: (i) a transfer of assets by the Company to a Wholly-Owned
Restricted Subsidiary or by a Wholly-Owned Restricted Subsidiary to the Company
or to another Wholly-Owned Restricted Subsidiary, (ii) an issuance of Equity
Interests by a Wholly-Owned Restricted Subsidiary to the Company or to another
Wholly-Owned Restricted Subsidiary, and (iii) a Restricted Payment that is
permitted by Section 4.08 hereof will not be deemed to be Asset Sales.
Notwithstanding the foregoing, the term "Asset Sale" shall not include any
sale, lease, conveyance, transfer or disposition of all or any part of the
assets of its HII's Singapore branch, having a cumulative value not to exceed
$2,500,000, in exchange for any combination of cash, Cash Equivalents, assets
or Equity Interests in a Person having operations in Southeast Asia; provided
that if assets or Equity Interests are received in connection with such
disposition, such assets must be useful in, or the Person whose Equity
Interests are received must be in, the Company's or HII's business or any
business similar or reasonably related thereto.
"Authentication Order" means an Officer's Certificate ordering
the Trustee to authenticate Notes.
"Bankruptcy Law" means Title II, U.S. Code or any similar
federal or state law for the relief of debtors.
"Board of Directors" means the Board of Directors of the
Company or any authorized committee of the Board of Directors.
"Board Resolution" means a resolution duly adopted by the
Board of Directors of the Company.
"Business Day" means any day other than a Legal Holiday.
"Capital Lease Obligation" means, at the time any
determination thereof is to be made, the discounted present value of the
liability in respect of a capital lease that would at such time be required to
be capitalized on a balance sheet of such Person in accordance with GAAP.
"Capital Stock" means (i) in the case of a corporation,
corporate stock, (ii) in the case of an association or business entity, any and
all shares, interests, participations, rights or other equivalents (however
designated) of corporate stock, (iii) in the case of a partnership or limited
liability company, partnership or membership interests (whether general or
limited), and (iv) any other interest or participation that confers on a Person
the right to receive a share of the profits and losses of, or distributions of
assets of, the issuing Person.
2
<PAGE> 9
"Cash Equivalents" means (i) United States dollars or foreign
currency that is readily exchangeable into United States dollars, (ii)
securities issued or directly and fully guaranteed or insured by the United
States government or any agency or instrumentality thereof having maturities of
not more than 12 months from the date of acquisition, (iii) certificates of
deposit and Eurodollar time deposits with maturities of 12 months or less from
the date of acquisition, bankers' acceptances with maturities not exceeding 12
months and overnight bank deposits, in each case with any domestic commercial
bank having capital and surplus in excess of $500,000,000 and a Keefe Bank
Watch Rating of "B" or better, (iv) repurchase obligations with a term of not
more than seven days for underlying securities of the types described in
clauses (ii) and (iii) above entered into with any financial institution
meeting the qualifications specified in clause (iii) above, and (v) commercial
paper having the highest rating obtainable from Moody's Investors Service, Inc.
or Standard & Poor's Corporation and in each case maturing within 12 months
after the date of acquisition.
"Certificated Notes" means Notes that are in the form of the
Notes attached hereto as Exhibit A-1, that do not include the information
called for by footnotes 1 and 2 thereof.
"Change of Control" means the occurrence of any of the
following events: (i) the sale, lease, transfer, conveyance, barter or other
disposition (other than by way of merger or consolidation), in one or a series
of related transactions, of all or substantially all of the assets of Parent or
the Company and its Restricted Subsidiaries taken as a whole to any "person"
(as such term is used in Section 13(d)(3) of the Exchange Act) other than the
Principals or their Related Parties, (ii) the consummation of any transaction
(including, without limitation, any merger or consolidation) the result of
which is that any "person", other than the Principals and their Related
Parties, becomes the "beneficial owner" (as such term is defined in Rule 13d-3
and Rule 13d-5 under the Exchange Act, except that a person shall be deemed to
have "beneficial ownership" of all securities that such person has the right to
acquire, whether such right is currently exercisable or is exercisable only
upon the occurrence of a subsequent condition), directly or indirectly, of more
than 50% of the Voting Stock of Parent or the Company (measured by voting power
rather than number of shares), (iii) the first day on which a majority of the
members of the Board of Directors of Parent or the Company are not Continuing
Directors, or (iv) Parent or the Company consolidates with, or merges with or
into, any Person (other than a consolidation or merger of Parent and the
Company), or any Person consolidates with, or merges with or into, Parent or
the Company, pursuant to a transaction in which any of the outstanding Voting
Stock of Parent or the Company is converted into or exchanged for cash,
securities or other property, other than any such transaction where the
majority of the members of the Board of Directors of such Person are Continuing
Directors.
"Commission" or "SEC" means the Securities and Exchange
Commission.
"Company" means HydroChem Industrial Services, Inc., a
Delaware corporation.
"Consolidated Cash Flow" means, with respect to the Company
for any period, the Consolidated Net Income of the Company and its Restricted
Subsidiaries for such period plus (i) an amount equal to any extraordinary
loss, extraordinary provision or provision for restructuring operations plus
any net loss realized in connection with an Asset Sale (to the extent such
losses were deducted in computing such Consolidated Net Income), plus (ii)
provision for taxes based on income
3
<PAGE> 10
or profits of the Company and its Restricted Subsidiaries for such period, to
the extent that such provision for taxes was included in computing such
Consolidated Net Income, plus (iii) consolidated interest expense of the
Company and its Restricted Subsidiaries for such period, whether paid or
accrued and whether or not capitalized (including, without limitation,
amortization of debt issuance costs and original issue discount, non-cash
interest payments, the interest component of any deferred payment obligations,
the interest component of all payments associated with Capital Lease
Obligations, commissions, discounts and other fees and charges incurred in
respect of letter of credit or bankers' acceptance financings, and net payments
(if any) pursuant to Hedging Obligations), to the extent that any such expense
was deducted in computing such Consolidated Net Income, plus (iv) depreciation,
amortization (including amortization of goodwill and other intangibles but
excluding amortization of prepaid cash expenses that were paid in a prior
period) and other non-cash expenses (excluding any such non-cash expense to the
extent that it represents an accrual of or reserve for cash expenses in any
future period or amortization of a prepaid cash expense that was paid in a
prior period) of the Company and its Restricted Subsidiaries for such period to
the extent that such depreciation, amortization and other non-cash expenses
were deducted in computing such Consolidated Net Income minus (v) non-cash
write-ups increasing such Consolidated Net Income for such period, in each
case, on a consolidated basis and determined in accordance with GAAP; provided
that Consolidated Net Income shall exclude the impact of foreign currency
translations. Notwithstanding the foregoing, the provision for taxes on the
income or profits of, and the depreciation and amortization and other non-cash
charges of, a Restricted Subsidiary of the referenced Person shall be added to
Consolidated Net Income to compute Consolidated Cash Flow only to the extent
that a corresponding amount would be permitted at the date of determination to
be distributed to the Company by such Restricted Subsidiary either (i) without
prior governmental approval or (ii) with governmental approval that has been
obtained or that could readily and reasonably be obtained, and without direct
or indirect restriction pursuant to the terms of its charter and all
agreements, instruments, judgments, decrees, orders, statutes, rules and
governmental regulations applicable to that Restricted Subsidiary or its
stockholders.
"Consolidated Net Income" means, with respect to the Company
for any period, the aggregate of the Net Income of the Company and its
Restricted Subsidiaries for such period, on a consolidated basis, determined in
accordance with GAAP and excluding any extraordinary loss that will be incurred
as a result of the application of the net proceeds from the issuance of the
Notes; provided that (i) the Net Income (but excluding, in all events, any
loss) of any Person that is not a Restricted Subsidiary or that is accounted
for by the equity method of accounting shall be included only to the extent of
the amount of dividends or distributions paid in cash to the referenced Person
or a Wholly-Owned Restricted Subsidiary thereof, (ii) the Net Income of any
Restricted Subsidiary shall be excluded to the extent that the declaration or
payment of dividends or similar distributions by that Restricted Subsidiary of
that Net Income is not at the date of determination permitted without any prior
governmental approval (unless such governmental approval could be readily and
reasonably obtained) or, directly or indirectly, by operation of the terms of
its charter or any agreement, instrument, judgment, decree, order, statute,
rule or governmental regulation applicable to that Subsidiary or its
stockholders, (iii) the Net Income of any Person acquired in a pooling of
interests transaction for any period prior to the date of such acquisition
shall be excluded, and (iv) the cumulative effect of a change in accounting
principles shall be excluded.
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<PAGE> 11
"Consolidated Net Worth" means, with respect to any Person as
of any date, the sum of (i) the consolidated equity of the common stockholders
of such Person and its consolidated Subsidiaries as of such date plus (ii) the
respective amounts reported on such Person's balance sheet as of such date with
respect to any series of preferred stock (other than Disqualified Stock) that
by its terms is not entitled to the payment of dividends unless such dividends
may be declared and paid only out of net earnings in respect of the year of
such declaration and payment, but only to the extent of any cash received by
such Person upon issuance of such preferred stock, less (x) all write-ups
(other than write-ups resulting from foreign currency translations and
write-ups of tangible assets of a going concern business made within 12 months
after the acquisition of such business) subsequent to the Issue Date in the
book value of any asset owned by such Person or a consolidated Subsidiary of
such Person, (y) all investments as of such date in unconsolidated Subsidiaries
and in Persons that are not Subsidiaries (except, in each case, Permitted
Investments), and (z) all unamortized debt discount and expense and unamortized
deferred charges, excluding goodwill and other purchased intangibles, as of
such date, all of the foregoing determined in accordance with GAAP.
"Continuing Directors" means, as of any date of determination,
any member of the Board of Directors of the Company or the Parent who (i) was a
member of such Board of Directors on the Issue Date, (ii) was nominated for
election or elected to such Board of Directors pursuant to the Stockholders
Agreement at any time or from time to time, or (iii) was nominated or elected
by a majority of the Continuing Directors who were members of such Board at the
time of such nomination or election.
"Corporate Trust Office of the Trustee" shall be at the
address of the Trustee specified in Section 12.02 or such other address as the
Trustee may give notice to the Company.
"Default" means any event that is or with the passage of time
or the giving of notice or both would be an Event of Default.
"Depositary" means, with respect to the Notes issuable or
issued in whole or in part in global form, the Person specified in Section 2.03
hereof as the Depositary with respect to the Notes, until a successor shall
have been appointed and become such Depositary pursuant to the applicable
provision of this Indenture, and, thereafter, "Depositary" shall mean or
include such successor.
"Designated Senior Debt" means (i) any Indebtedness
outstanding under the New Credit Facility, and (ii) any other Senior Debt
permitted under this Indenture the principal amount of which is $25,000,000 or
more and that has been designated by the Company as "Designated Senior Debt" by
the filing with the Trustee of a Board Resolution giving effect to such
designation.
"Disqualified Stock" means any Capital Stock that, by its
terms (or by the terms of any security into which it is convertible or for
which it is exchangeable), or upon the happening of any event, matures or is
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or
redeemable at the option of the Holder thereof, in whole or in part, on or
prior to the date that is 91 days after the date on which the Notes mature;
provided that Capital Stock issued to employees
5
<PAGE> 12
pursuant to agreements providing that the employee may require the Company to
repurchase such Capital Stock in certain circumstances shall not be deemed to
be Disqualified Stock if such agreements provide that the repurchase rights are
subject to the limitations on such repurchases set forth in Section 4.08.
"Dollars" and "$" means lawful money or currency of the United
States of America.
"Equity Interests" means Capital Stock and all warrants,
options or other rights to acquire Capital Stock (but excluding any debt
security that is convertible into, or exchangeable for, Capital Stock).
"Equity Offering" means a public or private offering of the
Capital Stock of the Company, Parent or any Subsidiary of the Company or
Parent.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time.
"Exchange Offer" means the offer that may be made by the
Company pursuant to the Registration Rights Agreement to exchange Series B
Notes for Series A Notes.
"Existing Indebtedness" means up to $3,000,000 in aggregate
principal amount of Indebtedness (including outstanding undrawn letters of
credit) of the Company and its Restricted Subsidiaries in existence on the
Issue Date after application of the net proceeds from the Company's sale of the
Notes, until such amounts are repaid.
"Excluded Restricted Subsidiary" means any Wholly-Owned
Restricted Subsidiary principally engaged in a business similar to that of the
Company or any of its Restricted Subsidiaries or any business reasonably
related thereto and domiciled outside the United States of America so long as
the issuance of a Subsidiary Guarantee by such Subsidiary would, as determined
in a resolution of the Board of Directors (based on written advice from an
independent accounting firm of national standing) set forth in an Officer's
Certificate delivered to the Trustee, create a material tax disadvantage.
"Fixed Charges" means, with respect to the Company for any
period, the sum, without duplication, of (i) the consolidated interest expense
of the Company and its Restricted Subsidiaries for such period, whether paid or
accrued (including, without limitation, amortization of debt issuance costs and
original issue discount, non-cash interest payments, the interest component of
any deferred payment obligations, the interest component of all payments
associated with Capital Lease Obligations, commissions, discounts and other
fees and charges incurred in respect of letter of credit or bankers' acceptance
financings, and net payments (if any) pursuant to Hedging Obligations), and
(ii) the consolidated interest expense of the Company and its Restricted
Subsidiaries that was capitalized during such period, and (iii) any interest
expense on Indebtedness of another Person that is Guaranteed by the Company or
one of its Restricted Subsidiaries or secured by a Lien on assets of the
Company or one of its Restricted Subsidiaries (whether or not such Guarantee or
Lien is called upon), and (iv) the product of (a) all dividend payments,
whether or not
6
<PAGE> 13
in cash, on any series of preferred stock of the Company or any of its
Restricted Subsidiaries, other than dividend payments on Equity Interests
payable solely in Equity Interests of the Company and dividend payments from
Restricted Subsidiaries to the Company, times (b) a fraction, the numerator of
which is one and the denominator of which is one minus the then current
combined federal, state and local statutory tax rate of the Company, expressed
as a decimal, in each case, on a consolidated basis and in accordance with
GAAP.
"Fixed Charge Coverage Ratio" means with respect to the
Company for any period, the ratio of the Consolidated Cash Flow of the Company
for such period to the Fixed Charges of the Company for such period. In the
event that the Company or any of its Restricted Subsidiaries incurs, assumes,
Guarantees or redeems any Indebtedness (other than revolving credit borrowings)
or issues preferred stock subsequent to the commencement of the period for
which the Fixed Charge Coverage Ratio is being calculated but prior to the date
on which the event for which the calculation of the Fixed Charge Coverage Ratio
is made (the "Calculation Date"), then the Fixed Charge Coverage Ratio shall be
calculated giving pro forma effect to such incurrence, assumption, Guarantee or
redemption of Indebtedness, or such issuance or redemption of preferred stock,
as if the same had occurred at the beginning of the applicable four-quarter
reference period. In addition, for purposes of making the computation referred
to above, (i) acquisitions that have been made by the Company or any of its
Restricted Subsidiaries, including through mergers or consolidations and
including any related financing transactions, during the four-quarter reference
period or subsequent to such reference period and on or prior to the
Calculation Date shall be deemed to have occurred on the first day of the
four-quarter reference period and Consolidated Cash Flow for such reference
period shall be calculated without giving effect to clause (iii) of the proviso
set forth in the definition of Consolidated Net Income, and (ii) the
Consolidated Cash Flow attributable to discontinued operations, as determined
in accordance with GAAP, and operations or businesses disposed of prior to the
Calculation Date, shall be excluded, and (iii) the Fixed Charges attributable
to discontinued operations, as determined in accordance with GAAP, and
operations or businesses disposed of prior to the Calculation Date, shall be
excluded, but only to the extent that the obligations giving rise to such Fixed
Charges will not be obligations of the Company or any of its Restricted
Subsidiaries following the Calculation Date.
"GAAP" means generally accepted accounting principles set
forth in the opinions and pronouncements of the Accounting Principles Board of
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as have been approved by a significant segment
of the accounting profession, which are in effect on the Issue Date; provided
that all reports and other financial information provided by the Company to the
Holders, the Trustee and/or the Commission shall be prepared in accordance with
GAAP, as in effect on the date of such report or other financial information.
"Global Note" means the Rule 144A Global Note.
"Government Securities" means direct obligations of, or
obligations guaranteed by, the United States of America, or any agency or
instrumentality thereof for the payment of which obligations or guarantee the
full faith and credit of the United States of America is pledged.
7
<PAGE> 14
"Guarantee" means a guarantee (other than by endorsement of
negotiable instruments for collection in the ordinary course of business),
direct or indirect, in any manner (including, without limitation, letters of
credit and reimbursement agreements in respect thereof), of all or any part of
any Indebtedness.
"Hedging Obligations" means, with respect to any Person, the
obligations of such Person under (i) interest rate swap agreements, interest
rate cap agreements and interest rate collar agreements, (ii) other agreements
or arrangements designed to protect such Person against fluctuations in
interest rates, or (iii) agreements or arrangements designed to protect such
Person against fluctuations in foreign currency exchange rates.
"HII" means HydroChem International, Inc., a Delaware
corporation.
"Holder" means a Person in whose name a Note is registered.
"Indebtedness" means, with respect to any Person, any
indebtedness of such Person, whether or not contingent, in respect of borrowed
money or evidenced by bonds, notes, debentures or similar instruments or
letters of credit (or, without double counting, reimbursement agreements in
respect thereof) or bankers' acceptances or representing Capital Lease
Obligations or the balance deferred and unpaid of the purchase price of any
property or representing any Hedging Obligations, except any such balance that
constitutes an accrued expense or trade payable, if and to the extent any of
the foregoing indebtedness (other than letters of credit and Hedging
Obligations) would appear as a liability upon a balance sheet of such Person
prepared in accordance with GAAP, as well as all indebtedness of others secured
by a Lien on any asset of such Person (whether or not such indebtedness is
assumed by such Person) and, to the extent not otherwise included, the
Guarantee by such Person of any indebtedness of any other Person.
"Indenture" means this Indenture, as amended or supplemented
from time to time.
"Initial Purchaser" means Donaldson, Lufkin & Jenrette
Securities Corporation.
"Investments" means, with respect to any Person, all
investments by such Person in other Persons (including Affiliates) in the forms
of direct or indirect loans (including guarantees of Indebtedness or other
obligations), advances or capital contributions (excluding any advances to
customers and any commission, travel, moving, relocation or similar advances to
officers and employees made in the ordinary course of business), purchases or
other acquisitions for consideration of Indebtedness, Equity Interests or other
securities, together with all items that are or would be classified as
investments on a balance sheet prepared in accordance with GAAP. If the
Company or any Restricted Subsidiary of the Company sells or otherwise disposes
of any Equity Interests of any direct or indirect Restricted Subsidiary of the
Company such that, after giving effect to any such sale or disposition, such
Person is no longer a Restricted Subsidiary of the Company, the Company shall
be deemed to have made an Investment on the date of any such sale or
disposition equal to the fair market value of the Equity Interests of such
Restricted Subsidiary not sold or disposed of in an amount determined as
provided in the final paragraph of Section 4.08.
8
<PAGE> 15
"Issue Date" means August 4, 1997, the date on which the
Series A Notes are originally issued.
"Legal Holiday" means a Saturday, a Sunday or a day on which
banking institutions in The City of New York or at a place of payment or
authorized or obligated by law, regulation or executive order to remain.
"Lien" means, with respect to any asset, any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind in respect of such
asset, whether or not filed, recorded or otherwise perfected under applicable
law (including any conditional sale or other title retention agreement, any
lease in the nature thereof, any option or other agreement to sell or give a
security interest in and any filing of or agreement to give any financing
statement under the Uniform Commercial Code (or equivalent statutes) of any
jurisdiction) (other than with respect to an operating lease).
"Liquidated Damages" means all liquidated damages owing
pursuant to Section 5 of the Registration Rights Agreement.
"Net Income" means, with respect to the Company, the net
income or loss of the Company and its Restricted Subsidiaries, determined in
accordance with GAAP and before any reduction in respect of preferred stock
dividends, excluding, however, (i) any gain (but not loss), together with any
related provision for taxes on such gain (but not loss), realized in connection
with (a) any Asset Sale (including, without limitation, dispositions pursuant
to sale and leaseback transactions), or (b) the disposition of any securities
by the Company or any of its Restricted Subsidiaries or the extinguishment of
any Indebtedness of the Company or any of its Restricted Subsidiaries, and (ii)
any extraordinary or nonrecurring gain (but not loss), together with any
related provision for taxes on such extraordinary or nonrecurring gain (but not
loss).
"Net Proceeds" means the aggregate cash proceeds received by
the Company or any of its Restricted Subsidiaries in respect of any Asset Sale
(including, without limitation, any cash received upon the sale or other
disposition of any non-cash consideration received in any Asset Sale), net of
the direct costs relating to such Asset Sale (including, without limitation,
legal, accounting and investment banking fees, and sales commissions) and any
travel or relocation expenses incurred as a result thereof, taxes (including
income taxes) paid or payable as a result thereof, or as a result of required
prepayments or repayments of Indebtedness resulting in the permanent reduction
thereof (after taking into account any available tax credits or deductions and
any tax sharing arrangements), amounts required to be applied to repay
Indebtedness secured by a Lien on such asset or assets (other than pursuant to
the New Credit Facility) and any reserve for adjustment in respect of the sale
price of such asset or assets established in accordance with GAAP.
"New Credit Facility" means that certain Credit Facility
pursuant to which, following the Company's sale of the Notes, the Company
anticipates that it will obtain a revolving or term loan in an aggregate amount
not to exceed $25,000,000.
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<PAGE> 16
"Note Custodian" means the Trustee, as custodian with respect
to the Global Note, or any successor entity thereto.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, costs, expenses, damages and other
liabilities payable under the documentation governing any Indebtedness.
"Officer" means, with respect to any Person, the Chief
Executive Officer, the President, the Chief Financial Officer, the Treasurer,
any Assistant Treasurer, the Controller, the Secretary or any Vice President
thereof.
"Officer's Certificate" means a certificate signed on behalf
of the Company by an Officer, who must be the principal executive officer,
principal financial officer or principal accounting officer of the Company.
"Opinion of Counsel" means an opinion from legal counsel who
is reasonably acceptable to the Trustee. Except with respect to any opinion
delivered pursuant to Article 8, the counsel may be an employee of or counsel
to the Company.
"Parent" means HydroChem Holding, Inc., a Delaware
corporation.
"Permitted Investments" means: (a) any Investments in the
Company or in a Restricted Subsidiary (other than an Excluded Restricted
Subsidiary) of the Company; (b) any Investments in Cash Equivalents, to the
extent that any such Investment is not made for speculative investment
purposes; (c) any Investments by the Company or any Restricted Subsidiary of
the Company in a Person, if as a result of any such Investment (i) such Person
becomes a Restricted Subsidiary (other than an Excluded Restricted Subsidiary)
of the Company, or (ii) such Person is merged, consolidated or amalgamated with
or into, or transfers or conveys substantially all of its assets to, or is
liquidated into, the Company or a Restricted Subsidiary (other than an Excluded
Restricted Subsidiary) of the Company; (d) any Restricted Investment made as a
result of the receipt of non-cash consideration from an Asset Sale that was
made pursuant to and in compliance with Section 4.07; (e) any acquisition of
assets in exchange for the issuance of Equity Interests (other than
Disqualified Stock) of the Company; (f) loans and advances to officers,
directors and employees for business-related travel expenses, moving or
relocation expenses and other similar expenses, in each case incurred in the
ordinary course of business; (g) Hedging Obligations included in the definition
of Permitted Debt; (h) advances to employees not exceeding $500,000 outstanding
at any one time, in the aggregate; (i) Investments, including the acquisition
of assets, Equity Interests or other securities, the payment for which consists
of Equity Interests of the Company (exclusive of Disqualified Stock); and (j)
Investments by the Company or its Restricted Subsidiaries in its Excluded
Restricted Subsidiaries, the aggregate outstanding amount of which does not
exceed 7.5% of the first $500,000,000 of consolidated total assets of the
Company and its Restricted Subsidiaries, plus 5% of such total assets in excess
of $500,000,000.
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<PAGE> 17
"Permitted Junior Securities" means Equity Interests in the
Company or unsecured debt securities that (i) are subordinated to all Senior
Debt (and any debt securities issued in exchange for Senior Debt) on terms at
least as favorable to the Senior Debt as those contained in Article 11 hereof,
(ii) may be guaranteed by the Subsidiary Guarantors on terms at least as
favorable to the Senior Debt as those contained in the Subsidiary Guarantees,
and (iii) have a final maturity and weighted average life to maturity which is
the same as or greater than, the Notes.
"Permitted Liens" means: (i) Liens securing Senior Debt or
Senior Debt of any Restricted Subsidiary that were permitted by the terms
hereof to be incurred, (ii) Liens in favor of the Company or any Restricted
Subsidiary, (iii) Liens on property of a Person existing at the time such
Person is merged into or consolidated with the Company or any Restricted
Subsidiary of the Company; provided that such Liens were in existence prior to
the contemplation of such merger or consolidation and do not extend to any
assets other than those of the Person merged into or consolidated with the
Company or any Restricted Subsidiary, (iv) Liens on property existing at the
time of acquisition thereof by the Company or any Restricted Subsidiary of the
Company; provided that such Liens were in existence prior to the contemplation
of such acquisition, (v) Liens to secure the performance of statutory
obligations, surety or appeal bonds, performance bonds or other obligations of
a like nature incurred in the ordinary course of business, (vi) Liens existing
on the Issue Date, (vii) Liens to secure Indebtedness (including Capital Lease
Obligations) permitted by clause (viii) of the second paragraph of Section 4.09
covering only the assets acquired with such Indebtedness and accessions,
modifications, products and proceeds thereof, (viii) Liens for taxes,
assessments or governmental charges or claims that are not yet delinquent or
that are being contested in good faith by appropriate proceedings promptly
instituted and diligently concluded; provided that any reserve or other
appropriate provision as shall be required in conformity with GAAP shall have
been made therefor, (ix) encumbrances and restrictions consisting of zoning
restrictions, easements or other restrictions on the use of real property,
which do not materially impair the use thereof for the purpose intended, and
none of which is violated by existing or proposed structures or land use, and
(x) Liens incurred in the ordinary course of business of the Company or any
Restricted Subsidiary with respect to obligations that do not exceed $5,000,000
at any one time outstanding and that (a) are not incurred in connection with
the borrowing of money or the obtaining of advances or credit (other than trade
credit in the ordinary course of business), and (b) do not in the aggregate
materially detract from the value of the property or materially impair the use
thereof in the operation of business by the Company or such Restricted
Subsidiary.
"Permitted Refinancing Indebtedness" means any Indebtedness of
the Company or any Restricted Subsidiary issued in exchange for, or the net
proceeds of which are used to extend, refinance, renew, replace, defease or
refund other Indebtedness of the Company or any Restricted Subsidiary; provided
that: (i) the principal amount (or accreted value, if applicable) of such
Permitted Refinancing Indebtedness does not exceed the principal amount of (or
accreted value, if applicable), plus accrued interest on, the Indebtedness so
extended, refinanced, renewed, replaced, defeased or refunded (plus the amount
of premiums, prepayments, penalties, and reasonable expenses incurred in
connection therewith), (ii) such Permitted Refinancing Indebtedness has a final
maturity date equal to or later than the final maturity date of, and has a
Weighted Average Life to Maturity equal to or greater than the Weighted Average
Life to Maturity of, the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded, (iii) if the Indebtedness being
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<PAGE> 18
extended, refinanced, renewed, replaced, defeased or refunded is subordinated
in right of payment to the Notes, such Permitted Refinancing Indebtedness has a
final maturity date later than the final maturity date of, and is subordinated
in right of payment to, the Notes on terms at least as favorable to the Holders
of Notes as those contained in the documentation governing the Indebtedness
being extended, refinanced, renewed, replaced, defeased or refunded, and (iv)
such Indebtedness is incurred either by the Company or by the Restricted
Subsidiary who is the obligor on the Indebtedness being extended, refinanced,
renewed, replaced, defeased or refunded.
"Person" means any individual, corporation, limited liability
company, partnership, association, joint stock company, trust or trustee
thereof, estate or executor thereof, unincorporated organization or joint
venture.
"Principals" means Citicorp Venture Capital, Ltd., BT Capital
Partners, Inc., LKCM Venture Partners I Ltd., World Equity Partners, L.P., CCT
Partners II, L.P., HES Management, Inc., Heller Financial, Inc. and B. Tom
Carter, Jr.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of the Issue Date, by and among the Company and the other
parties named on the signature pages thereof, as such agreement may be amended,
modified or supplemented from time to time.
"Related Party" with respect to any Principal means (i) any
controlling stockholder, 80% (or more) owned Subsidiary, or any spouse or
immediate family member (in the case of an individual) of such Principal, or
(ii) any trust, corporation, partnership or other entity, the beneficiaries,
stockholders, partners, owners or Persons beneficially holding an 80% or more
controlling interest of which consist of such Principal and/or such other
Persons referred to in the immediately preceding clause (i).
"Representative" means (i) the administrative agent under the
New Credit Facility, or (ii) the indenture trustee or other trustee, agent or
representative for any other Senior Debt.
"Responsible Officer" when used with respect to the Trustee,
means any officer within the Corporate Trust Office (or any successor group of
the Trustee) assigned by the Trustee to administer the Indenture in its
corporate trust department.
"Restricted Investment" means an Investment other than a
Permitted Investment.
"Restricted Subsidiary" means (i) each direct or indirect
Subsidiary of the Company existing on the date of the Indenture, and (ii) any
other direct or indirect Subsidiary of the Company formed, acquired or existing
after the date of the Indenture, in each case which is not designated by the
Board of Directors as an "Unrestricted Subsidiary."
"Rule 144A" means Rule 144A promulgated under the Securities
Act.
12
<PAGE> 19
"Rule 144A Global Note" means a permanent global note that
contains the paragraph referred to in footnote 1 and the additional schedule
referred to in footnote 2 to the form of the Note attached hereto as Exhibit
A-1, and that is deposited with and registered in the name of the Depositary,
representing Notes sold in reliance on Rule 144A.
"Securities Act" means the Securities Act of 1933, as amended
from time to time.
"Senior Debt" means (i) all Obligations (including without
limitation interest accruing after a filing of a petition in bankruptcy whether
or not such interest is an allowable claim in such proceeding) of the Company
under the New Credit Facility, and (ii) any other Indebtedness permitted to be
incurred by the Company under the terms hereof, unless the instrument under
which such Indebtedness is incurred expressly provides that it is on a parity
with or subordinated in right of payment to the Notes. Notwithstanding
anything to the contrary in the foregoing, Senior Debt will not include, (w)
any liability for federal, state, local or other taxes owed or owing by the
Company, (x) any Indebtedness of the Company to any of its Subsidiaries or
other Affiliates, (y) any trade payables or instruments evidencing such
liability, or (z) any Indebtedness that is incurred in violation of this
Indenture.
"Senior Debt of the Subsidiary Guarantor" means (i) all
Guarantees by the Subsidiary Guarantor of Obligations (including without
limitation interest accruing after a filing of a petition in bankruptcy whether
or not such interest is an allowable claim in such proceeding) of the Company
under the New Credit Facility and (ii) any Indebtedness permitted to be
incurred by the Subsidiary Guarantor under the terms hereof, unless the
instrument under which such Indebtedness is incurred expressly provides that
such Guarantee is on a parity with or subordinated in right of payment to the
Subsidiary Guarantees. Notwithstanding anything to the contrary in the
foregoing, Senior Debt of the Subsidiary Guarantor will not include (x) any
liability for federal, state, local or other taxes owed by the Company, any of
its Subsidiaries or other Affiliates thereof, (y) any trade payables or
instruments evidencing such liability, or (z) any Indebtedness that is incurred
in violation of this Indenture.
"Significant Subsidiary" means any Restricted Subsidiary that
would be a "significant subsidiary" as defined in Article 1, Rule 1-02 of
Regulation S-X, promulgated pursuant to the Securities Act, as such Regulation
is in effect on the date hereof.
"Stated Maturity" means, with respect to any installment of
interest or principal on any series of Indebtedness, the date on which such
payment of interest or principal was scheduled to be paid in the original
documentation governing such Indebtedness or as amended on or prior to the date
hereof, and shall not include any contingent obligations to repay, redeem or
repurchase any such interest or principal prior to the date originally
scheduled for the payment thereof.
"Stockholders Agreement" means the Stockholders Agreement
dated as of December 15, 1993, and as amended on January 10, 1995, by and among
Parent and all of its stockholders.
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<PAGE> 20
"Subsidiary" means, with respect to any Person, (i) any
corporation, association or other business entity of which more than 50% of the
total voting power of shares of Capital Stock entitled (without regard to the
occurrence of any contingency) to vote in the election of directors, managers
or trustees thereof is at the time owned or controlled, directly or indirectly,
by such Person or one or more of the other Subsidiaries of that Person (or a
combination thereof), and (ii) any partnership (a) the sole general partner or
the managing general partner of which is such Person or a Subsidiary of such
Person or (b) the only general partners of which are such Person or of one or
more Subsidiaries of such Person (or any combination thereof).
"Subsidiary Guarantees" means the guarantees executed by the
Subsidiary Guarantors, substantially in the form of the guarantee attached to
Exhibit A hereto.
"Subsidiary Guarantors" means HII and all future direct or
indirect subsidiaries of the Company or any Subsidiary Guarantor that execute a
Subsidiary Guarantee in accordance with the provisions hereof, and their
respective successors and assigns.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C.
Sections 77aaa-77bbbb) as in effect on the date on which this Indenture is
qualified under the TIA.
"Transfer Restricted Securities" means securities that bear or
are required to bear the legend set forth in Section 2.06 hereof.
"Trustee" means the party named as such above until a
successor replaces it in accordance with the applicable provisions of this
Indenture and thereafter means the successor serving hereunder.
"Unrestricted Subsidiary" means (i) any Subsidiary that is
designated by the Board of Directors as an Unrestricted Subsidiary in
accordance with Section 4.14 hereof, and (ii) any Subsidiary of an Unrestricted
Subsidiary.
"Voting Stock" of any Person as of any date means the Capital
Stock of such Person that is at the time entitled to vote in the election of
the Board of Directors of such Person.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (i) the sum
of the products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse
between such date and the making of such payment, by (ii) the then outstanding
principal amount of such Indebtedness.
"Wholly-Owned Restricted Subsidiary" of any Person means any
Restricted Subsidiary of such Person all of the outstanding Capital Stock or
other ownership interests of which (other than directors' qualifying shares or
any similar de minimis requirements of applicable law) shall at the time be
owned by such Person or by one or more Wholly-Owned Restricted Subsidiaries of
such Person.
14
<PAGE> 21
SECTION 1.02 OTHER DEFINITIONS
<TABLE>
<CAPTION>
Defined in
Term Section
---- -------------
<S> <C>
"Affiliate Transaction" . . . . . . . . . . . . . . . . . . . . . 4.12
"Asset Sale Offer" . . . . . . . . . . . . . . . . . . . . . . . 4.07
"Asset Sale Offer Period" . . . . . . . . . . . . . . . . . . . . 4.07
"Asset Sale Offer Purchase Date" . . . . . . . . . . . . . . . . 4.07
"Benefitted Party" . . . . . . . . . . . . . . . . . . . . . . . 10.01
"Change of Control Offer" . . . . . . . . . . . . . . . . . . . . 4.06
"Change Of Control Offer Period" . . . . . . . . . . . . . . . . 4.06
"Change of Control Payment" . . . . . . . . . . . . . . . . . . . 4.06
"Change of Control Purchase Date" . . . . . . . . . . . . . . . . 4.06
"Covenant Defeasance" . . . . . . . . . . . . . . . . . . . . . . 8.03
"Custodian" . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.01
"DTC" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.03
"Event of Default" . . . . . . . . . . . . . . . . . . . . . . . 6.01
"Excess Proceeds" . . . . . . . . . . . . . . . . . . . . . . . . 4.07
"Legal Defeasance" . . . . . . . . . . . . . . . . . . . . . . . 8.02
"Legal Holiday" . . . . . . . . . . . . . . . . . . . . . . . . . 12.07
"Net Proceeds" . . . . . . . . . . . . . . . . . . . . . . . . . 4.07
"Paying Agent" . . . . . . . . . . . . . . . . . . . . . . . . . 2.03
"Payment Blockage Notice" . . . . . . . . . . . . . . . . . . . . 11.03
"Permitted Debt" . . . . . . . . . . . . . . . . . . . . . . . . 4.09
"QIB" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.01
"Registrar" . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.03
"Restricted Payments" . . . . . . . . . . . . . . . . . . . . . . 4.08
"Transfer Restricted Security" . . . . . . . . . . . . . . . . . 2.06
</TABLE>
SECTION 1.03 INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT
Whenever this Indenture refers to a provision of the TIA, the
provision is incorporated by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the following
meanings:
"indenture securities" means the Notes;
"indenture security holder" means a Holder;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the
Trustee;
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<PAGE> 22
"obligor" on the Notes means the Company, each Subsidiary
Guarantor and any successor obligor upon the Notes.
All other terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by SEC rule under the
TIA have the meanings so assigned to them.
SECTION 1.04 RULES OF CONSTRUCTION
Unless the context otherwise requires:
(1) a term has the meaning assigned to it herein;
(2) an accounting term not otherwise defined has the
meaning assigned to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and in the
plural include the singular; and
(5) provisions apply to successive events and
transactions.
(6) references to sections or rules under the Securities
Act shall be deemed to include substitute, replacement or successor
sections or rules adopted by the SEC from time to time.
ARTICLE 2
THE NOTES
SECTION 2.01 FORM AND DATING
The Notes, the Subsidiary Guarantees and the Trustee's certificate of
authentication shall be substantially in the form of Exhibit A-1, which is part
of this Indenture. The Notes may have notations, legends or endorsements
required by law, stock exchange rule or usage. Each Note shall be dated the
date of its authentication. The Notes shall be issued initially in
denominations of $1,000 and integral multiples thereof.
The terms and provisions contained in the Notes shall constitute, and
are hereby expressly made, a part of this Indenture, and the Company, the
Subsidiary Guarantors and the Trustee, by their execution and delivery of this
Indenture, expressly agree to such terms and provisions and to be bound
thereby.
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(a) Rule 144A Global Notes. Notes offered and sold within the
United States to qualified institutional buyers as defined in Rule 144A
("QIBs") in reliance on Rule 144A shall be issued initially in the form of Rule
144A Global Notes, which shall be deposited on behalf of the purchasers of the
Notes represented thereby with the Depositary or a custodian of the Depositary
at its New York office, and registered in the name of the Depositary or a
nominee of the Depositary, duly executed by the Company and authenticated by
the Trustee as hereinafter provided. The aggregate principal amount of the
Rule 144A Global Notes may from time to time be increased or decreased by
adjustments made on the records of the Trustee and the Depositary or its
nominee as hereinafter provided.
(b) Global Notes in General. The Global Note shall represent the
outstanding Notes and shall provide that it shall represent the aggregate
amount of outstanding Notes from time to time endorsed thereon and that the
aggregate amount of outstanding Notes represented thereby may from time to time
be reduced or increased, as appropriate, to reflect exchanges and redemptions.
Any endorsement of the Global Note to reflect the amount of any increase or
decrease in the amount of outstanding Notes represented thereby shall be made
by the Trustee or the Note Custodian, at the direction of the Trustee, in
accordance with instructions given by the Holder thereof as required by Section
2.06 hereof.
Except as set forth in Section 2.06 hereof, the Global Note may be
transferred, in whole and not in part, only to another nominee of the
Depositary or to a successor of the Depositary or its nominee.
(c) Book-Entry Provisions. The Company shall execute and the
Trustee shall, in accordance with this Section 2.01(d) and Section 2.02,
authenticate and deliver the Global Note that (i) shall be registered in the
name of the Depositary or the nominee of the Depositary and (ii) shall be
delivered by the Trustee to the Depositary or pursuant to the Depositary's
instructions or held by the Trustee as custodian for the Depositary.
Agent Members shall have no rights either under this Indenture with
respect to the Global Note held on their behalf by the Depositary or by the
Trustee as custodian for the Depositary or under the Global Note, and the
Depositary may be treated by the Company, the Subsidiary Guarantors, the
Trustee and any agent of the Company or the Trustee as the absolute owner of
the Global Note for all purposes whatsoever. Notwithstanding the foregoing,
nothing herein shall prevent the Company, the Subsidiary Guarantors, the
Trustee or any agent of the Company or the Trustee from giving effect to any
written certification, proxy or other authorization furnished by the Depositary
or impair, as between the Depositary and its Agent Members, the operation of
customary practices of such Depositary governing the exercise of the rights of
an owner of a beneficial interest in the Global Note.
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<PAGE> 24
SECTION 2.02 EXECUTION AND AUTHENTICATION
Two Officers shall sign the Notes for the Company by manual or
facsimile signature.
If an Officer whose signature is on a Note no longer holds that office
at the time a Note is authenticated, the Note shall nevertheless be valid.
A Note shall not be valid until authenticated by the manual signature
of the Trustee. The signature shall be conclusive evidence that the Note has
been authenticated under this Indenture.
The Trustee shall, upon delivery of an Authentication Order,
authenticate Notes for original issue up to the aggregate principal amount
stated in paragraph 4 of the Notes. The aggregate principal amount of Notes
outstanding at any time may not exceed such amount, except as provided in
Section 2.07 hereof.
The Trustee may appoint an authenticating agent acceptable to the
Company to authenticate Notes. An authenticating agent may authenticate Notes
whenever the Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authentication by such agent. An
authenticating agent has the same rights as an Agent to deal with the Company
or an Affiliate of the Company.
Neither the Company nor the Trustee shall have any responsibility for
any defect in the CUSIP number that appears on any Note, check, advice of
payment or redemption notice, and any such document may contain a statement to
the effect that CUSIP numbers have been assigned by an independent service for
convenience of reference and that neither the Company nor the Trustee shall be
liable for any inaccuracy in such numbers.
SECTION 2.03 REGISTRAR AND PAYING AGENT
The Company shall maintain in the Borough of Manhattan, the City of
New York, State of New York, and in such other locations as it shall determine,
(i) an office or agency where Notes may be presented for registration of
transfer or for exchange ("Registrar") and (ii) an office or agency where Notes
may be presented for payment ("Paying Agent"). The Registrar shall keep a
register of the Notes and of their transfer and exchange. The Company may
appoint one or more co-registrars and one or more additional paying agents.
The term "Registrar" includes any co-registrar and the term "Paying Agent"
includes any additional paying agent. The Company may change any Paying Agent
or Registrar without notice to any Holder. The Company shall notify the
Trustee in writing of the name and address of any Agent not a party to this
Indenture. If the Company fails to appoint or maintain another entity as
Registrar or Paying Agent, the Trustee shall act as such. The Company or any
of its Subsidiaries may act as Paying Agent or Registrar.
The Company initially appoints The Depository Trust Company ("DTC") to
act as Depositary with respect to the Global Note.
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<PAGE> 25
The Company initially appoints the Trustee to act as the Registrar and
Paying Agent and to act as Note Custodian with respect to the Global Note. The
Company initially appoints the Trustee to act as the Registrar and Paying Agent
with respect to the Certificated Notes.
SECTION 2.04 PAYING AGENT TO HOLD MONEY IN TRUST
The Company shall require each Paying Agent, other than the Trustee,
to agree in writing that the Paying Agent will hold in trust for the benefit of
Holders or the Trustee all money held by the Paying Agent for the payment of
principal, premium, if any, interest and Liquidated Damages, if any, on the
Notes, and shall notify the Trustee of any default by the Company in making any
such payment. While any such default continues, the Trustee may require a
Paying Agent to pay all money held by it to the Trustee. The Company at any
time may require a Paying Agent to pay all money held by it to the Trustee.
Upon payment over to the Trustee, the Paying Agent (if other than the Company
or a Subsidiary) shall have no further liability for the money. If the Company
or a Subsidiary acts as Paying Agent, it shall segregate and hold in a separate
trust fund for the benefit of the Holders all money held by it as Paying Agent.
Upon the occurrence of events specified in Section 6.01(ix) or (x) hereof, the
Trustee shall serve as Paying Agent for the Notes.
SECTION 2.05 HOLDER LISTS
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
all Holders and shall otherwise comply with TIA Section 312(a). If the
Trustee is not the Registrar, the Company shall furnish to the Trustee at least
seven Business Days before each interest payment date and at such other times
as the Trustee may request in writing, a list in such form and as of such date
as the Trustee may reasonably require of the names and addresses of the Holders
of Notes, and the Company shall otherwise comply with TIA Section 312(a).
SECTION 2.06 TRANSFER AND EXCHANGE
(a) Transfer and Exchange of Global Note. The transfer and
exchange of the Global Note or beneficial interests therein shall be effected
through the Depositary, in accordance with this Indenture and the procedures of
the Depositary therefor, which shall include restrictions on transfer
comparable to those set forth herein to the extent required by the Securities
Act. Beneficial interests in the Global Note may be transferred to Persons who
take delivery thereof in the form of a beneficial interest in the Global Note
in accordance with the transfer restrictions set forth in the legend in
subsection (g) of this Section 2.06.
(b) Transfer and Exchange of Certificated Notes. When
Certificated Notes are presented by a Holder to the Registrar with a request:
(x) to register the transfer of the Certificated Notes; or
(y) to exchange such Certificated Notes for an equal
principal amount of Certificated Notes of other authorized
denominations,
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<PAGE> 26
the Registrar shall register the transfer or make the exchange as requested;
provided that the Certificated Notes presented or surrendered for register of
transfer or exchange:
(i) shall be duly endorsed or accompanied by a written
instruction of transfer in form satisfactory to the Registrar duly
executed by such Holder or by his attorney, duly authorized in writing
with the signature guaranteed; and
(ii) in the case of a Certificated Note that is a Transfer
Restricted Security, such request shall be accompanied by the
following additional information and documents, as applicable:
(A) if such Transfer Restricted Security is being
delivered to the Registrar by a Holder for registration in the
name of such Holder, without transfer, or such Transfer
Restricted Security is being transferred to the Company or any
of its Subsidiaries, a certification to that effect from such
Holder (in substantially the form of Exhibit B-1 hereto);
(B) if such Transfer Restricted Security is being
transferred to a QIB in accordance with Rule 144A under the
Securities Act or pursuant to an exemption from registration
in accordance with Rule 144 under the Securities Act or
pursuant to an effective registration statement under the
Securities Act, a certification to that effect from such
Holder (in substantially the form of Exhibit B-1 hereto); or
(C) if such Transfer Restricted Security is being
transferred in reliance on any other exemption from the
registration requirements of the Securities Act a
certification to that effect from such Holder (in
substantially the form of Exhibit B-1 hereto) and an Opinion
of Counsel from such Holder or the transferee reasonably
acceptable to the Company and to the Registrar to the effect
that such transfer is in compliance with the Securities Act.
(c) Transfer of a Beneficial Interest in the Global Note for a
Certificated Note
(i) Any Person having a beneficial interest in the Global
Note may upon request, subject to the Applicable Procedures, exchange
such beneficial interest for a Certificated Note. Upon receipt by the
Trustee of written instructions or such other form of instructions as
is customary for the Depositary, from the Depositary or its nominee on
behalf of any Person having a beneficial interest in the Global Note,
and, in the case of a Transfer Restricted Security, the following
additional information and documents (all of which may be submitted by
facsimile):
(A) if such beneficial interest is being
transferred to the Person designated by the Depositary as
being the beneficial owner, a certification to that effect
from such Person (in substantially the form of Exhibit B-2
hereto);
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<PAGE> 27
(B) if such beneficial interest is being
transferred to a QIB in accordance with Rule 144A under the
Securities Act or pursuant to an exemption from registration
in accordance with Rule 144 under the Securities Act or
pursuant to an effective registration statement under the
Securities Act, a certification to that effect from the
transferor (in substantially the form of Exhibit B-2 hereto);
or
(C) if such beneficial interest is being
transferred in reliance on any other exemption from the
registration requirements of the Securities Act, a
certification to that effect from the transferor (in
substantially the form of Exhibit B-2 hereto) and an Opinion
of Counsel from the transferee or the transferor reasonably
acceptable to the Company and to the Registrar to the effect
that such transfer is in compliance with the Securities Act;
in which case the Trustee or the Note Custodian, at the direction of
the Trustee, shall, in accordance with the standing instructions and
procedures existing between the Depositary and the Note Custodian,
cause the aggregate principal amount of the Global Note to be reduced
accordingly and, following such reduction, the Company shall execute
and the Trustee shall authenticate and deliver to the transferee a
Certificated Note in the appropriate principal amount.
(ii) Certificated Notes issued in exchange for a
beneficial interest in the Global Note pursuant to this Section
2.06(c) shall be registered in such names and in such authorized
denominations as the Depositary, pursuant to instructions from its
direct or indirect participants or otherwise, shall instruct the
Trustee. The Trustee shall deliver such Certificated Notes to the
Persons in whose names such Notes are so registered. Following any
such issuance of Certificated Notes, the Trustee, as Registrar, shall
instruct the Depositary to reduce or cause to be reduced the aggregate
principal amount at maturity of the Global Note to reflect the
transfer.
(d) Restrictions on Transfer and Exchange of Global Note.
Notwithstanding any other provision of this Indenture (other than the
provisions set forth in subsection (f) of this Section 2.06), the Global Note
may not be transferred as a whole except by the Depositary to a nominee of the
Depositary, or by a nominee of the Depositary to the Depositary or another
nominee of the Depositary, or by the Depositary or any such nominee to a
successor Depositary or a nominee of such successor Depositary.
(e) Transfer and Exchange of a Certificated Note for a Beneficial
Interest in the Global Note. Holders of Certificated Notes may offer, resell,
pledge or otherwise transfer such Notes only pursuant to an effective
registration statement under the Securities Act, inside the United States to a
QIB in a transaction meeting the requirements of Rule 144A, in a transaction
meeting the requirements of Rule 144 under the Securities Act, or to the
Company or any of its Subsidiaries, in each case in compliance with any
applicable securities laws of any State of the United States or any other
applicable jurisdiction.
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When Certificated Notes are presented by a Holder to the Registrar
with a request (x) to cancel any Certificated Notes in exchange for a
beneficial interest in the Global Note, the Registrar shall register the
transfer or make the exchange as requested if its requirements for such
transactions are met; provided that the Certificated Notes presented or
surrendered for register of transfer or exchange:
(i) shall be duly endorsed or accompanied by a written instruction
of transfer in form satisfactory to the Registrar duly executed by
such Holder or by his attorney, duly authorized in writing, which
instructions, if applicable, shall direct the Trustee (A) to cancel
any Certificated Note being exchanged for a beneficial interest in the
Global Note in accordance with Section 2.11 hereof, and (B) to make,
or to direct the Registrar to make, an endorsement on the Global Note
to reflect an increase in the aggregate principal amount of the Notes
represented by the Global Note; and
(ii) in the case of a Certificated Note that is a Transfer
Restricted Security, such request shall be accompanied by the
following additional information and documents, as applicable:
(A) if such Certificated Note is being delivered to the
Registrar by a Holder for registration in the name of such
Holder, without transfer, a certification to that effect from
such Holder (in substantially the form of Exhibit B-3 hereto);
(B) if such Certificated Note is being transferred to a
QIB in accordance with Rule 144A, pursuant to Rule 144 under
the Securities Act or pursuant to an effective registration
statement under the Securities Act, a certification to that
effect from such Holder (in substantially the form of Exhibit
B-3 hereto); or
(C) if such Transfer Restricted Security is being
transferred in reliance on any other exemption from the
registration requirements of the Securities Act, a
certification to that effect from such Holder (in
substantially the form of Exhibit B-3 hereto) and an Opinion
of Counsel from such Holder or the transferee reasonably
acceptable to the Company and to the Registrar to the effect
that such transfer is in compliance with the Securities Act.
(f) Authentication of Certificated Notes in Absence of Depositary.
If at any time:
(i) the Depositary for the Notes notifies the Company
that the Depositary is unwilling or unable to continue as Depositary
for the Global Note and a successor Depositary for the Global Note is
not appointed by the Company within 90 days after delivery of such
notice; or
(ii) the Company delivers to the Trustee an Officer's
Certificate notifying the Trustee that it elects to cause the issuance
of Certificated Notes under this Indenture,
22
<PAGE> 29
then the Company shall execute, and the Trustee shall, upon receipt of an
Authentication Order in accordance with Section 2.02 hereof, authenticate and
deliver, Certificated Notes in an aggregate principal amount equal to the
principal amount of the Global Note in exchange for the Global Note.
(g) Legends
(i) Except as permitted by the following paragraphs (ii),
(iii) and (iv), each Note certificate evidencing the Global Note and
Certificated Notes (and all Notes issued in exchange therefor or
substitution thereof) shall bear a legend in substantially the
following form (each a "Transfer Restricted Security"):
"THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY
ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF
THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND THE SECURITY EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN
APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THE SECURITY
EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON
THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT
PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF THE SECURITY
EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE COMPANY THAT (A) SUCH
SECURITY MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (1)(a)
TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A QUALIFIED
INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT)
IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, OR (b) IN
ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS
OF THE SECURITIES ACT (AND, IN THE CASE OF CLAUSE (b), BASED UPON AN
OPINION OF COUNSEL IF THE COMPANY SO REQUESTS), (2) TO THE COMPANY OR
(3) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT, AND, IN EACH CASE, IN ACCORDANCE WITH ANY APPLICABLE
SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER
APPLICABLE JURISDICTION AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT
HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER FROM IT OF THE SECURITY
EVIDENCED HEREBY OF THE RESALE RESTRICTIONS SET FORTH IN (A) ABOVE."
(ii) Upon any sale or transfer of a Transfer Restricted
Security (including any Transfer Restricted Security represented by
the Global Note) pursuant to Rule 144 under the Securities Act or
pursuant to an effective registration statement under the Securities
Act:
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<PAGE> 30
(A) in the case of any Transfer Restricted
Security that is a Certificated Note, the Registrar shall
permit the Holder thereof to exchange such Transfer Restricted
Security for a Certificated Note that does not bear the legend
set forth in (i) above and rescind any restriction on the
transfer of such Transfer Restricted Security upon receipt of
a certification from the transferring Holder substantially in
the form of Exhibit B-1 hereto; and
(B) in the case of any Transfer Restricted
Security represented by the Global Note, such Transfer
Restricted Security shall not be required to bear the legend
set forth in (i) above, but shall continue to be subject to
the provisions of Section 2.06(a) hereof; provided that with
respect to any request for an exchange of a Transfer
Restricted Security that is represented by the Global Note for
a Certificated Note that does not bear the legend set forth in
(i) above, which request is made in reliance upon Rule 144,
the Holder thereof shall certify in writing to the Registrar
that such request is being made pursuant to Rule 144 (such
certification to be substantially in the form of Exhibit B-2
hereto).
(iii) Upon any sale or transfer of a Transfer Restricted
Security (including any Transfer Restricted Security represented by
the Global Note) in reliance on any exemption from the registration
requirements of the Securities Act (other than exemptions pursuant to
Rule 144A or Rule 144 under the Securities Act) in which the Holder or
the transferee provides an Opinion of Counsel to the Company and the
Registrar in form and substance reasonably acceptable to the Company
and the Registrar (which Opinion of Counsel shall also state that the
transfer restrictions contained in the legend are no longer
applicable):
(A) in the case of any Transfer Restricted
Security that is a Certificated Note, the Registrar shall
permit the Holder thereof to exchange such Transfer Restricted
Security for a Certificated Note that does not bear the legend
set forth in (i) above and rescind any restriction on the
transfer of such Transfer Restricted Security; and
(B) in the case of any Transfer Restricted
Security represented by the Global Note, such Transfer
Restricted Security shall not be required to bear the legend
set forth in (i) above, but shall continue to be subject to
the provisions of Section 2.06(a) and (c) hereof.
(iv) Notwithstanding the foregoing, upon consummation of
the Exchange Offer in accordance with the Registration Rights
Agreement, the Company shall issue and, upon receipt of an
Authentication Order in accordance with Section 2.02 hereof, the
Trustee shall authenticate Series B Notes in exchange for Series A
Notes accepted for exchange in the Exchange Offer, which Series B
Notes shall not bear the legend set forth in (i) above, and the
Registrar shall rescind any restriction on the transfer of such Series
B Notes, in each case unless the Holder of such Series A Notes is
either (A) a broker-dealer, (B) a Person participating in the
distribution of the Series A Notes or (C) a Person who is an affiliate
(as defined in Rule 144) of the Company.
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<PAGE> 31
(h) Cancellation and/or Adjustment of Global Note. At such time
as all beneficial interests in the Global Note have been exchanged for
Certificated Notes, redeemed, repurchased or cancelled, the Global Note shall
be returned to or retained and cancelled by the Trustee in accordance with
Section 2.11 hereof. At any time prior to such cancellation, if any beneficial
interest in the Global Note is exchanged for an interest in Certificated Notes,
redeemed, repurchased or cancelled, the principal amount of Notes represented
by the Global Note shall be reduced accordingly and an endorsement shall be
made on the Global Note, by the Trustee or the Note Custodian, at the direction
of the Trustee, to reflect such reduction.
(i) General Provisions Relating to Transfers and Exchanges
(i) To permit registrations of transfers and exchanges,
the Company shall execute and the Trustee shall authenticate
Certificated Notes and the Global Note at the Registrar's request.
(ii) No service charge shall be made to a Holder for any
registration of transfer or exchange, but the Company may require
payment of a sum sufficient to cover any transfer tax or similar
governmental charge payable in connection therewith (other than any
such transfer taxes or similar governmental charge payable upon
exchange or transfer pursuant to Sections 2.10, 3.07, 4.06, 4.07 and
9.05 hereof).
(iii) The Certificated Notes and the Global Note issued
upon any registration of transfer or exchange of Certificated Notes or
the Global Note shall be the valid obligations of the Company,
evidencing the same debt, and entitled to the same benefits under this
Indenture, as the Certificated Notes or the Global Note surrendered
upon such registration of transfer or exchange.
(iv) Neither the Company nor the Registrar shall be
required:
(A) to issue, to register the transfer of or to
exchange Notes during a period beginning at the opening of
business on a Business Day fifteen (15) days before the day of
any selection of Notes for redemption under Section 3.02
hereof and ending at the close of business on the day of
selection; or
(B) to register the transfer of or to exchange
any Note so selected for redemption in whole or in part,
except the unredeemed portion of any Note being redeemed in
part; or
(C) to register the transfer of or to exchange a
Note between a record date and the next succeeding interest
payment date.
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<PAGE> 32
(vi) Prior to due presentment for the registration of a
transfer of any Note, the Trustee, any Agent and the Company may deem
and treat the Person in whose name any Note is registered as the
absolute owner of such Note for the purpose of receiving payment of
principal of and interest and Liquidated Damages, if any, on such
Notes, and neither the Trustee, any Agent nor the Company shall be
affected by notice to the contrary.
(vii) The Trustee shall authenticate Certificated Notes and
the Global Note in accordance with the provisions of Section 2.02
hereof.
The Registrar may conclusively rely on information set forth in a
certificate substantially in the form of Exhibit B-1, B-2 or B-3 hereto, and
other certificates and opinions received pursuant to this Section 2.06 and, in
the absence of receipt of such a certificate or opinion, shall not be deemed to
have knowledge of a transfer of an interest in the Global Note absent actual
knowledge of such transfer.
SECTION 2.07 REPLACEMENT NOTES
If any mutilated Note is surrendered to the Trustee or the Company and
the Trustee receives evidence to its satisfaction of the destruction, loss or
theft of any Note, the Company shall issue and the Trustee, upon the written
order of the Company signed by two Officers of the Company, shall authenticate
a replacement Note if the Trustee's requirements are met. If required by the
Trustee or the Company, an indemnity bond must be supplied by the Holder that
is sufficient in the judgment of the Trustee and the Company to protect the
Company, the Trustee, any Agent and any authenticating agent from any loss that
any of them may suffer if a Note is replaced. The Company may charge the
Holder for its expenses in replacing a Note.
Every replacement Note is an additional obligation of the Company and
shall be entitled to all of the benefits of this Indenture equally and
proportionately with all other Notes duly issued hereunder.
SECTION 2.08 OUTSTANDING NOTES
The Notes outstanding at any time are all the Notes authenticated by
the Trustee except for those cancelled by it, those delivered to it for
cancellation, those reductions in the interest in the Global Note effected by
the Trustee in accordance with the provisions hereof, and those described in
this Section as not outstanding. Except as set forth in Section 2.09 hereof, a
Note does not cease to be outstanding because the Company or an Affiliate of
the Company holds the Note.
If a Note is replaced pursuant to Section 2.07 hereof, it ceases to be
outstanding unless the Trustee receives proof satisfactory to it that the
replaced Note is held by a bona fide purchaser.
If the principal amount of any Note is considered paid under Section
4.01 hereof, it ceases to be outstanding and interest on it ceases to accrue.
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If the Paying Agent (other than the Company, a Subsidiary or an
Affiliate of any thereof) holds, on a redemption date or maturity date, money
sufficient to pay the principal amount of any Notes due and payable on that
date, then on and after that date such Notes shall be deemed to be no longer
outstanding and shall cease to accrue interest.
SECTION 2.09 TREASURY NOTES
In determining whether the Holders of the required principal amount of
Notes have concurred in any direction, waiver or consent, Notes owned by the
Company, any Subsidiary Guarantor or any Affiliate of the Company or any
Subsidiary Guarantor, shall be considered as though not outstanding, except
that for the purposes of determining whether the Trustee shall be protected in
relying on any such direction, waiver or consent, only Notes that the Trustee
knows are so owned shall be so disregarded.
SECTION 2.10 TEMPORARY NOTES
Until Certificated Notes are ready for delivery, the Company may
prepare and the Trustee shall authenticate temporary Notes upon a written order
of the Company signed by two Officers of the Company. Temporary Notes shall be
substantially in the form of Certificated Notes but may have variations that
the Company considers appropriate for temporary Notes and as shall be
reasonably acceptable to the Trustee. Without unreasonable delay, the Company
shall prepare and the Trustee shall authenticate Certificated Notes in exchange
for temporary Notes.
Holders of temporary Notes shall be entitled to all of the benefits of
this Indenture.
SECTION 2.11 CANCELLATION
The Company at any time may deliver Notes to the Trustee for
cancellation, which the Company may have acquired in any manner whatsoever, and
all Notes so delivered shall be promptly cancelled by the Trustee. The
Registrar and Paying Agent shall forward to the Trustee any Notes surrendered
to them for registration of transfer, exchange or payment. The Trustee and no
one else shall cancel all Notes surrendered for registration of transfer,
exchange, payment, replacement or cancellation and shall return cancelled
Certificated Notes or the cancelled Global Note to the Company (subject to the
record retention requirement of the Exchange Act). Certification of the
destruction of all cancelled Notes shall be delivered to the Company. The
Company may not issue new Notes to replace Notes that it has redeemed or paid
or that have been delivered to the Trustee for cancellation.
SECTION 2.12 DEFAULTED INTEREST
If the Company or any Subsidiary Guarantor defaults in a payment of
interest on the Notes, it shall pay the defaulted interest in any lawful manner
plus, to the extent lawful, interest payable on the defaulted interest, to the
Persons who are Holders on a subsequent special record date, in each case at
the rate provided in the Notes and in Section 4.01 hereof. The Company shall
notify the Trustee in writing of the amount of defaulted interest proposed to
be paid on each Note and the date
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of the proposed payment. The Company shall fix or cause to be fixed each such
special record date and payment date; provided that no such special record date
shall be less than ten (10) days prior to the related payment date for such
defaulted interest. At least fifteen (15) days before the special record date,
the Company (or, upon the written request of the Company, the Trustee in the
name and at the expense of the Company) shall mail or cause to be mailed to
Holders a notice that states the special record date, the related payment date
and the amount of such interest to be paid.
SECTION 2.13 RECORD DATE
The record date for purposes of determining the identity of Holders of
the Notes or consent to any action by vote or consent authorized or permitted
under this Indenture shall be determined as provided for in TIA Section 316(c).
SECTION 2.14 COMPUTATION OF INTEREST
Interest on the Notes shall be computed on the basis of a 360-day year
comprised of twelve 30-day months.
SECTION 2.15 CUSIP NUMBER
The Company in issuing the Notes may use a "CUSIP" number, and if it
does so, the Trustee shall use the CUSIP number in notices of redemption or
exchanges convenient to Holder; provided that any such notice may state that no
representation is made as the correctness or accuracy of the CUSIP number
printed in the notice or on the Notes and that reliance may be placed only on
the other identification numbers printed on the Notes. The Company shall
promptly notify the Trustee of any change in the CUSIP number.
ARTICLE 3
REDEMPTION
SECTION 3.01 NOTICES TO TRUSTEE
If the Company elects to redeem Notes pursuant to the optional
redemption provisions of Section 3.07 hereof, it shall furnish to the Trustee,
at least 45 days but not more than 90 days before a redemption date (unless a
shorter notice shall be satisfactory to the Trustee), an Officer's Certificate
setting forth the Section of this Indenture pursuant to which the redemption
shall occur, the redemption date, the principal amount of Notes to be redeemed
and the redemption price.
If the Company is required to make an offer to purchase Notes pursuant
to Section 4.06 or 4.07 hereof, it shall furnish to the Trustee, at least 45
days before the scheduled purchase date, an Officer's Certificate setting forth
the section of the Indenture pursuant to which the offer to purchase shall
occur, the terms of the offer, the principal amount of Notes to be purchased,
the purchase price, the purchase date and a statement to the effect that the
Company or one of its Restricted Subsidiaries has affected an Asset Sale and
there are Excess Proceeds aggregating more than $5,000,000 or a Change of
Control has occurred, as applicable.
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SECTION 3.02 SELECTION OF NOTES TO BE REDEEMED
If less than all of the Notes are to be redeemed, the Trustee shall
select the Notes to be redeemed among the Holders of the Notes in compliance
with the requirements of the principal national securities exchange, if any, on
which the Notes are listed or, if the Notes are not so listed, on a pro rata
basis, by lot or by such other method as the Trustee shall deem fair and
appropriate. In the event of partial redemption by lot, the Trustee shall make
the selection not less than 30 nor more than 60 days prior to the redemption
date from the outstanding Notes not previously called for redemption. Notices
of redemption may not be conditional.
The Trustee shall promptly notify the Company in writing of the Notes
selected for redemption and, in the case of any Note selected for partial
redemption, the portion of the principal amount thereof to be redeemed. Notes
and portions of them selected to be redeemed shall be in principal amounts of
$1,000 or whole multiples of $1,000; except that if all of the Notes of a
Holder are to be redeemed, the entire outstanding amount of Notes held by such
Holder, even if not a multiple of $1,000, shall be redeemed. Except as
provided in the preceding sentence, provisions of this Indenture that apply to
Notes called for redemption also apply to portions of Notes called for
redemption.
SECTION 3.03 NOTICE OF REDEMPTION
At least 30 days but not more than 90 days before a redemption date,
the Company shall mail, by first class mail, a notice of redemption to each
Holder whose Notes are to be redeemed at its registered address.
The notice shall identify the Notes to be redeemed and shall state:
(1) the redemption date;
(2) the redemption price and the accrued and unpaid
interest and Liquidated Damages, if any, per $1,000 of principal;
(3) if any Note is being redeemed in part, the portion of
the principal amount of such Note to be redeemed and that, after the
redemption date, upon surrender of such Note, a new Note or Notes in
principal amount equal to the unredeemed portion will be issued;
(4) the name and address of the Paying Agent;
(5) that Notes called for redemption must be surrendered
to the Paying Agent to collect the redemption price;
(6) that, unless the Company defaults in making such
redemption payment, interest on Notes called for redemption ceases to
accrue on and after the redemption date;
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(7) the paragraph of the Notes pursuant to which the
Notes called for redemption are being redeemed; and
(8) that no representation is made as to the correctness
or accuracy of the CUSIP number, if any, listed in such notice or
printed on the Notes.
At the Company's request, the Trustee shall give the notice of
redemption in the Company's name and at its expense.
SECTION 3.04 EFFECT OF NOTICE OF REDEMPTION
Once notice of redemption is mailed, Notes called for redemption
become irrevocably due and payable on the redemption date at the price set
forth in the Note.
SECTION 3.05 DEPOSIT OF REDEMPTION PRICE
On or before the redemption date, the Company shall deposit with the
Trustee or with the Paying Agent money sufficient to pay the redemption price
of and accrued interest and Liquidated Damages, if any, on all Notes to be
redeemed on that date. The Trustee or the Paying Agent shall return to the
Company any money deposited with the Trustee or the Paying Agent by the Company
in excess of the amounts necessary to pay the redemption price of, and accrued
interest and Liquidated Damages, if any, on all Notes to be redeemed.
Interest on the Notes to be redeemed will cease to accrue on the
applicable redemption date, whether or not such Notes are presented for
payment, if the Company makes the redemption payment. If any Note called for
redemption shall not be so paid upon surrender for redemption because of the
failure of the Company to comply with the preceding paragraph, interest will be
paid on the unpaid principal, from the redemption or purchase date until such
principal is paid, and to the extent lawful on any interest not paid on such
unpaid principal, in each case at the rate provided in the Notes and in Section
4.01 hereof. Section 8.06 shall apply to any Notes not redeemed within two
years from the redemption date. If a Note is redeemed or purchased on or after
an interest record date but on or prior to the related interest payment date,
then any accrued and unpaid interest and Liquidated Damages, if any, shall be
paid to the Person in whose name such Note was registered at the close of
business on such record date.
SECTION 3.06 NOTES REDEEMED IN PART
Upon surrender of a Note that is redeemed in part, the Company shall
issue and the Trustee shall authenticate for the Holder at the expense of the
Company a new Note equal in principal amount to the unredeemed portion of the
Note surrendered.
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SECTION 3.07 OPTIONAL REDEMPTION
Except as set forth below, the Notes shall not be redeemable at the
Company's option prior to August 1, 2002. Thereafter, the Notes shall be
subject to redemption at any time at the option of the Company, in whole or in
part, upon not less than 30 nor more than 90 days' notice, at the redemption
prices (expressed as percentages of principal amount) set forth below, plus
accrued and unpaid interest and Liquidated Damages, if any, to the applicable
redemption date, if redeemed during the twelve-month period beginning on August
1 of the years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
<S> <C>
2002 . . . . . . . . . . . . . . . . . . . . . . . . 105.188%
2003 . . . . . . . . . . . . . . . . . . . . . . . . 103.458%
2004 . . . . . . . . . . . . . . . . . . . . . . . . 101.729%
2005 and thereafter . . . . . . . . . . . . . . . . . . 100.000%
</TABLE>
Notwithstanding the foregoing, at any time prior to August 4, 2000,
the Company may on any one or more occasions redeem up to an aggregate of 35%
of the original aggregate principal amount of Notes at a redemption price of
109.375% of the principal amount thereof, plus accrued and unpaid interest and
Liquidated Damages, if any, to the redemption date, with the net proceeds of
one or more Equity Offerings; provided that at least 65% of the original
aggregate principal amount of Notes remains outstanding immediately after such
redemption; and provided that such redemption shall occur within 90 days of the
date of the closing of any such Equity Offering.
Any redemption pursuant to this Section 3.07 shall be made pursuant to
the provisions of Sections 3.01 through 3.06 hereof.
SECTION 3.08 MANDATORY REDEMPTION
The Company shall have no mandatory redemption or sinking fund
obligations with respect to the Notes, except as may be set forth in Sections
4.06 and 4.07 hereof.
SECTION 3.09 REPURCHASE OFFER
In the event that the Company shall be required to commence an offer
to all Holders to repurchase Notes (a "Repurchase Offer") pursuant to Section
4.07 hereof, an "Excess Proceeds Offer," or pursuant to Section 4.06 hereof, a
"Change of Control Offer," the Company shall follow the procedures specified
below.
A Repurchase Offer shall commence no later than ten Business Days
after a Change of Control (unless the Company is not required to make such
offer pursuant to Section 4.06(d) hereof) or an Excess Proceeds Offer
Triggering Event (as defined below), as the case may be, and remain open for a
period of twenty Business Days following its commencement and no longer, except
to the extent that a longer period is required by applicable law (the "Offering
Period"). No later than five Business Days after the termination of the Offer
Period (the "Purchase Date"), the Company
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shall purchase the principal amount of Notes required to be purchased pursuant
to Section 4.07 hereof, in the case of an Excess Proceeds Offer, or Section
4.06 hereof, in the case of a change of Control Offer (the "Offer Amount") or,
if less than the Offer Amount has been tendered, all Notes tendered in response
to the Repurchase Offer. Payment for any Notes so purchased shall be made in
the same manner as interest payments are made.
If the Purchase Date is on or after an interest record date and on or
before the related interest payment date, any accrued and unpaid interest and
Liquidated Damages, if any, shall be paid to the Person in whose name a Note is
registered at the close of business on such record date, and no additional
interest or Liquidated Damages, if any, shall be payable to Holders who tender
Notes pursuant to the Repurchase Offer.
Upon the commencement of a Repurchase Offer, the Company shall send,
by first class mail, a notice to the Trustee and each of the Holders, with a
copy to the Trustee. The notice shall contain all instructions and materials
necessary to enable such Holders to tender Notes pursuant to such Repurchase
Offer. The Repurchase Offer shall be made to all Holders. The notice, which
shall govern the terms of the Repurchase Offer, shall describe the transaction
or transactions that constitute the Change of Control or Excess Proceeds Offer
Triggering Event, as the case may be and shall state:
(a) that the Repurchase Offer is being made pursuant to
this Section 3.09 and Section 4.07 or 4.06 hereof, as the case may be,
and the length of time the Repurchase Offer shall remain open;
(b) the Offer Amount, the purchase price and the Purchase
Date;
(c) that any Note not tendered or accepted for payment
shall continue to accrue interest;
(d) that, unless the Company defaults in making such
payment any Note accepted for payment pursuant to the Repurchase Offer
shall cease to accrue interest and Liquidated Damages, if any, after
the Purchase Date;
(e) that Holders electing to have a Note purchased
pursuant to a Repurchase Offer, shall be required to surrender the
Note, with the form entitled "Option of Holder to Elect Purchase" on
the reverse of the Note, duly completed, or transfer by book-entry
transfer, to the Company, the Depositary, or the Paying Agent at the
address specified in the notice not later than the close of business
on the last day of the Offering Period;
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(f) that Holders shall be entitled to withdraw their
election if the Company, the Depositary or the Paying Agent, as the
case may be, receives, not later than the expiration of the Offer
Period, a telegram, telex, facsimile transmission or letter setting
forth the name of the Holder, the principal amount of the Note the
Holder delivered for purchase and a statement that such Holder is
withdrawing his election to have such Note purchased;
(g) that, if the aggregate principal amount of Notes
surrendered by Holders exceeds the Offer Amount, the Company shall
select the Notes to be purchased on a pro rata basis (with such
adjustments as may be deemed appropriate by the Company so that only
Notes in denominations of $1,000, or integral multiples thereof, shall
be purchased; and
(h) that Holders whose Notes were purchased only in part
shall be issued new Notes equal in principal amount to the unpurchased
portion of the Notes surrendered (or transferred by book-entry
transfer).
On or before 10:00 a.m. (New York City time) on each Purchase Date,
the Company shall irrevocably deposit with the Trustee or Paying Agent in
immediately available funds the aggregate purchase price with respect to a
principal amount of Notes equal to the Offer Amount, together with accrued and
unpaid interest and Liquidated Damages, if any, thereon, to be held for payment
in accordance with the terms of this Section 3.09. On the Purchase Date, the
Company shall, to the extent lawful, (i) accept for payment, on a pro rata
basis to the extent necessary, the Offer Amount of Notes or portions thereof
tendered pursuant to the Repurchase Offer, or if less than the Offer Amount has
been tendered, all Notes tendered, (ii) deliver or cause the Paying Agent or
Depositary, as the case may be, to deliver to the Trustee Notes so accepted and
(iii) deliver to the Trustee an Officer's Certificate stating that such Notes
or portions thereof were accepted for payment by the Company in accordance with
the terms of this Section 3.09. The Company, the Depositary or the Paying
Agent, as the case may be, shall mail or deliver to each tendering Holder on
the Purchase Date an amount equal to the purchase price of the Notes tendered
by such Holder and accepted by the Company for purchase, plus any accrued and
unpaid interest and Liquidated Damages, if any, thereon, and the Company shall
promptly issue a new Note, and the Trustee, shall authenticate and mail or
deliver such new Note, to such Holder equal to the principal amount to any
unpurchased portion of such Holder's Notes surrendered. Any Note not so
accepted shall be promptly mailed or delivered by the Company to the Holder
thereof. The Company shall publicly announce in a newspaper of general
circulation or in a press release provided to a nationally recognized financial
wire service the results of the Repurchase Offer on the Purchase Date.
Other than as specifically provided in this Section 3.09, any purchase
pursuant to this Section 3.09 shall be made pursuant to the provisions of
Sections 3.01, 3.02, 3.05 and 3.06 hereof.
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ARTICLE 4
COVENANTS
SECTION 4.01 PAYMENT OF NOTES
The Company shall pay or cause to be paid the principal of, premium,
if any, and interest and Liquidated Damages, if any, on the Notes on the dates
and in the manner provided in the Notes. Principal, premium, if any, and
interest and Liquidated Damages, if any, shall be considered paid on the date
due if the Paying Agent (other than the Company or a Subsidiary), holds as of
10:00 a.m. (New York City time) money deposited by the Company in immediately
available funds and designated for and sufficient to pay all principal,
premium, if any, and interest and Liquidated Damages, if any, then due. Such
Paying Agent shall return to the Company, no later than five Business Days
following the due date for payment, any money (including accrued interest, if
any) that exceeds such amount of principal, premium, if any, and interest and
Liquidated Damages, if any, required for payment on the Notes.
The Company shall pay interest (including post-petition interest in
any proceeding under any Bankruptcy Law) on overdue principal at the applicable
interest rate on the Notes to the extent lawful; it shall pay interest
(including post-petition interest in any proceeding under any Bankruptcy Law)
on overdue installments of interest (without regard to any applicable grace
period) at the same rate to the extent lawful.
SECTION 4.02 MAINTENANCE OF OFFICE OR AGENCY
The Company shall maintain in the Borough of Manhattan, The City of
New York, an office or agency (which may be an office of the Trustee or
Registrar) where Notes may be surrendered for registration of transfer or
exchange and where notices and demands to or upon the Company in respect of the
Notes and this Indenture may be served. The Company shall give prompt written
notice to the Trustee of the location, and any change in the location, of such
office or agency. If at any time the Company shall fail to maintain any such
required office or agency or shall fail to furnish the Trustee with the address
thereof, such presentations, surrenders, notices and demands may be made or
served at the Corporate Trust Office of the Trustee.
The Company may also from time to time designate one or more other
offices or agencies where the Notes may be presented or surrendered for any or
all such purposes and may from time to time rescind such designations; provided
that no such designation or rescission shall in any manner relieve the Company
of its obligation to maintain an office or agency in the Borough of Manhattan,
The City of New York for such purposes. The Company shall give prompt written
notice to the Trustee of any such designation or rescission and of any change
in the location of any such other office or agency.
The Company hereby designates the Corporate Trust Office of the
Trustee as one such office or agency of the Company in accordance with Section
2.03.
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SECTION 4.03 COMPLIANCE CERTIFICATE
(a) The Company shall deliver to the Trustee, within 120 days after
the end of each fiscal year, an Officer's Certificate stating that a review of
the activities of the Company and its Subsidiaries during the preceding fiscal
year has been made under the supervision of the signing Officer with a view to
determining whether he or she has kept, observed, performed and fulfilled in
all respects its obligations under this Indenture and further stating, as to
such Officer signing such certificate, that, to the best of his or her
knowledge, each entity has kept, observed, performed and fulfilled each and
every covenant contained in this Indenture and is not in default in the
performance or observance of any of the terms, provisions and conditions hereof
or thereof (or, if such Default or Event of Default shall have occurred,
describing all such Defaults or Events of Default of which he may have
knowledge and what action each is taking or proposes to take with respect
thereto).
(b) The Company shall, so long as any of the Notes are outstanding,
deliver to the Trustee, forthwith upon becoming aware of any Default or Event
of Default or an Officer's Certificate specifying such Default, Event of
Default or event of default and what action the Company is taking or proposes
to take with respect thereto.
SECTION 4.04 TAXES
The Company shall, and shall cause each of its Restricted Subsidiaries
to, pay prior to delinquency all material taxes, assessments, and governmental
levies except as contested in good faith and by appropriate proceedings.
SECTION 4.05 STAY, EXTENSION AND USURY LAWS
The Company and each Subsidiary Guarantor covenants (to the extent
that it may lawfully do so) that it shall not at any time insist upon, plead,
or in any manner whatsoever claim or take the benefit or advantage of, any
stay, extension or usury law wherever enacted, now or at any time hereafter in
force, which may affect the covenants or the performance of this Indenture; and
the Company and each Subsidiary Guarantor (to the extent it may lawfully do so)
hereby expressly waives all benefit or advantage of any such law, and covenants
that it shall not, by resort to any such law, hinder, delay or impede the
execution of any power herein granted to the Trustee, but shall suffer and
permit the execution of every such power as though no such law has been
enacted.
SECTION 4.06 CHANGE OF CONTROL
(a) Upon the occurrence of a Change of Control, each Holder of
Notes shall have the right to require the Company to repurchase all or any part
(equal to $1,000 or an integral multiple thereof) of such Holder's Notes
pursuant to the offer described below (the "Change of Control Offer") at an
offer price in cash equal to 101% of the aggregate principal amount thereof
plus accrued and unpaid interest and Liquidated Damages, if any, to the date of
purchase (the "Change of Control Payment"). Within 30 days following any
Change of Control, the Company shall mail a notice to each Holder describing
the transaction or transactions that constitute the Change of Control and
offering to repurchase Notes on the date specified in such notice, which date
shall be
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no earlier than 30 days and no later than 60 days from the date such notice is
mailed (the "Change of Control Payment Date"), pursuant to the procedures
required by this Indenture and described in such notice. The Company shall
comply with the requirements of Rule 14e-1 under the Exchange Act and any other
securities laws and regulations thereunder to the extent such laws and
regulations are applicable in connection with the repurchase of the Notes as a
result of a Change of Control. The Change of Control Offer shall remain open
from the time of mailing until the Business Day preceding the Change of Control
Payment Date.
(b) On the Change of Control Payment Date, the Company shall, to
the extent lawful, (1) accept for payment all Notes or portions thereof
properly tendered pursuant to the Change of Control Offer, (2) deposit with the
Paying Agent an amount equal to the Change of Control Payment in respect of all
Notes or portions thereof so tendered and (3) deliver or cause to be delivered
to the Trustee for cancellation the Notes so accepted together with an
Officer's Certificate stating the aggregate principal amount of Notes or
portions thereof being purchased by the Company. The Paying Agent shall
promptly mail to each Holder of Notes so tendered the Change of Control Payment
for such Notes, and the Trustee shall promptly authenticate and mail (or cause
to be transferred by book entry) to each Holder a new Note equal in principal
amount to any unpurchased portion of the Notes surrendered, if any; provided
that each such new Note will be in a principal amount of $1,000 or an integral
multiple thereof. The Company shall publicly announce the results of the
Change of Control Offer on or as soon as practicable after the Change of
Control Payment Date.
(c) In the event a Change of Control occurs at a time when the
Company is prohibited from purchasing Notes under the terms of any Senior Debt,
then prior to the mailing of the notice to Holders pursuant to Section 4.06(a),
but in any event within 30 days following any Change of Control, the Company
shall obtain the requisite consents, if any, under all agreements governing
such Senior Debt to the purchase of Notes pursuant to a Change of Control Offer
or repay any Senior Debt prohibiting such purchase of Notes.
(d) The Company shall not be required to make a Change of Control
Offer upon a Change of Control if a third party makes the Change of Control
Offer in the manner, at the times and otherwise in compliance with the
requirements set forth in this Indenture applicable to a Change of Control
Offer made by the Company, including any requirement to repay in full any
Senior Debt or obtain the consents of any of the Company's lenders to such
Change of Control Offer, and purchases all Notes validly tendered and not
withdrawn under such Change of Control Offer.
(e) The Change of Control provisions described above will be
applicable whether or not any other provisions of this Indenture are
applicable.
SECTION 4.07 ASSET SALES
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, consummate an Asset Sale unless (i) the Company (or the
Restricted Subsidiary, as the case may be) receives consideration at the time
of such Asset Sale at least equal to the fair market value, as determined in
good faith by the Company (evidenced by a resolution of the Board of Directors
set
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forth in an Officer's Certificate delivered to the Trustee), of the assets or
Equity Interests issued or sold or otherwise disposed of, and (ii) at least 75%
of the consideration received therefor by the Company or such Restricted
Subsidiary is in the form of (a) cash or Cash Equivalents, or (b) property or
assets useful in the Company's or such Restricted Subsidiary's business or any
business similar or reasonably related thereto, or (c) stock if the acquired
entity becomes a Restricted Subsidiary and is engaged in a business similar or
reasonably related to that of the Company or any Restricted Subsidiary;
provided that the amount of (x) any liabilities (as shown on the Company's or
such Restricted Subsidiary's most recent balance sheet) of the Company or any
Restricted Subsidiary (other than contingent liabilities and liabilities that
are by their terms subordinated to the Notes or any guarantee thereof) that are
assumed by the transferee of any such assets pursuant to a customary novation
agreement that releases the Company or such Restricted Subsidiary from further
liability, and (y) any securities, notes or other obligations received by the
Company or any such Restricted Subsidiary from such transferee that are
converted by the Company or such Restricted Subsidiary into cash or Cash
Equivalents (to the extent of the cash received) within 180 days following the
closing of the Asset Sale, shall be deemed to be cash for purposes of this
provision.
Within 365 days after the receipt of any Net Proceeds from an Asset
Sale, the Company may apply such Net Proceeds, at its option, (a) to repay
permanently Senior Debt or Senior Debt of the Restricted Subsidiaries, or (b)
to the acquisition of an interest in another business, the making of a capital
expenditure or the acquisition of other long-term assets, in each case, in the
same business as the Company or any Restricted Subsidiary or any business
similar or reasonably related thereto. Pending the final application of any
such Net Proceeds, the Company or the Restricted Subsidiaries, as the case may
be, may temporarily reduce outstanding indebtedness under the New Credit
Facility or otherwise invest such Net Proceeds in any manner that is not
prohibited by this Indenture. Any Net Proceeds from Asset Sales that are not
applied or invested as provided in the first sentence of this paragraph will be
deemed to constitute "Excess Proceeds." When the aggregate amount of Excess
Proceeds exceeds $5,000,000, the Company shall make an offer to all Holders of
Notes (an "Asset Sale Offer") to purchase the maximum principal amount of Notes
that may be purchased out of the Excess Proceeds, at an offer price in cash in
an amount equal to 100% of the principal amount thereof plus accrued and unpaid
interest and Liquidated Damages, if any, to the date of purchase, in accordance
with the procedures set forth in Section 3.09 hereof. If the aggregate
principal amount of Notes tendered by Holders thereof exceeds the amount of
Excess Proceeds, the Trustee shall select the Notes to be purchased on a pro
rata basis. If the aggregate principal amount of Notes tendered pursuant to an
Asset Sale Offer is less than the Excess Proceeds, the Company may use any
remaining Excess Proceeds for general corporate purposes. Upon completion of
such offer to purchase, the amount of Excess Proceeds shall be reset at zero.
SECTION 4.08 RESTRICTED PAYMENTS
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly: (i) declare or pay any dividend or
make any other payment or distribution on account of the Company's or any of
its Restricted Subsidiaries' Equity Interests (including, without limitation,
any payment in connection with any merger or consolidation involving the
Company) or to the direct or indirect holders of the Company's or any of its
Restricted Subsidiaries' Equity Interests in their capacity as such (other than
dividends or distributions payable in Equity Interests
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(other than Disqualified Stock) of the Company), (ii) purchase, redeem or
otherwise acquire or retire for value (including without limitation, in
connection with any merger or consolidation involving the Company) any Equity
Interests of the Company or any direct or indirect parent of the Company (other
than any such Equity Interests owned by the Company or any Wholly-Owned
Restricted Subsidiary of the Company), (iii) make any payment on or with
respect to, or purchase, redeem, defease or otherwise acquire or retire for
value any Indebtedness that is subordinated to the Notes, except a payment of
interest or principal at Stated Maturity, or (iv) make any Restricted
Investment (all such payments and other actions set forth in clauses (i)
through (iv) above being collectively referred to as "Restricted Payments"),
unless, at the time of and after giving effect to such Restricted Payment:
(a) no Default or Event of Default shall have occurred
and be continuing or would occur as a consequence thereof; and
(b) the Company would, at the time of such Restricted
Payment and after giving pro forma effect thereto as if such
Restricted Payment had been made at the beginning of the applicable
four-quarter period, have been permitted to incur at least $1.00 of
additional Indebtedness pursuant to the Fixed Charge Coverage Ratio
test set forth in the first paragraph of Section 4.09; and
(c) such Restricted Payment, together with the aggregate
amount of all other Restricted Payments made by the Company and its
Restricted Subsidiaries after the Issue Date (excluding Restricted
Payments permitted by clauses (ii), (iii) and (iv) of the next
succeeding paragraph), is less than the sum of (i) 50% of the
Consolidated Net Income of the Company for the period (taken as one
accounting period) from the beginning of the first fiscal quarter
commencing after the Issue Date to the end of the Company's most
recently ended fiscal quarter for which internal financial statements
are available at the time of such Restricted Payment (or, if such
Consolidated Net Income for such period is a deficit, less 100% of
such deficit), plus (ii) 100% of the aggregate net cash proceeds
received by the Company since the Issue Date from (A) contributions to
the Company's capital, and (B) the issue or sale of Equity Interests
of the Company (other than Disqualified Stock) or of Disqualified
Stock or debt securities of the Company that have been converted into
such Equity Interests (other than Equity Interests (or Disqualified
Stock or convertible debt securities) sold to a Restricted Subsidiary
of the Company and other than Disqualified Stock or convertible debt
securities that have been converted into Disqualified Stock), plus
(iii) to the extent that any Restricted Investment that was made after
the Issue Date is sold for cash or otherwise liquidated or repaid for
cash, the lesser of (A) the cash return of capital with respect to
such Restricted Investment (less the cost of disposition, if any) and
(B) the initial amount of such Restricted Investment, plus (iv) the
aggregate amount of $5,000,000.
The foregoing provisions shall not prohibit (i) the payment of the
dividend of approximately $8,500,000 to Parent with a portion of the net
proceeds from the Company's sale of the Notes, (ii) the payment of any dividend
within 60 days after the date of declaration thereof, if at said date of
declaration such payment would have complied with the provisions of this
Indenture, (iii) the redemption, repurchase, retirement, defeasance or other
acquisition of any subordinated Indebtedness
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or Equity Interests of the Company in exchange for, or out of the net cash
proceeds of the substantially concurrent sale (other than to a Restricted
Subsidiary of the Company) of, other Equity Interests of the Company (other
than any Disqualified Stock); provided that the amount of any such net cash
proceeds that are utilized for any such redemption, repurchase, retirement,
defeasance or other acquisition shall be excluded from clause (c) (ii) of the
preceding paragraph, (iv) the defeasance, redemption, repurchase or other
acquisition of subordinated Indebtedness with the net cash proceeds from an
incurrence of Permitted Refinancing Indebtedness, (v) the payment of any
dividend by a Restricted Subsidiary of the Company to the holders of its common
Equity Interests on a pro rata basis, (vi) the repurchase of any Indebtedness
subordinated or pari passu in right of payment to the Notes at a purchase price
not greater than 101% of the principal amount of such Indebtedness in the event
of a Change of Control in accordance with provisions of the "Change of Control"
covenant; provided that prior to or contemporaneously with such repurchase the
Company has made the Change of Control Offer as provided in such covenant with
respect to the Notes and has repurchased all Notes validly tendered for payment
and not withdrawn in connection with such Change of Control Offer, (vii) the
repurchase, redemption or other acquisition or retirement for value of any
Equity Interests of the Company or any Restricted Subsidiary of the Company
held by any current or former employee or director of the Company (or any of
its Restricted Subsidiaries) pursuant to any management equity subscription
agreement or stock option agreement; provided that the aggregate price paid for
all such repurchased, redeemed, acquired or retired Equity Interests shall not
exceed $1,000,000 in any twelve- month period or $5,000,000 in total and no
Default or Event of Default shall have occurred and be continuing immediately
after such transaction, (viii) any loans, advances, distributions from the
Company to Parent or any Restricted Subsidiary, or any loans, advances,
distributions or payments by a Restricted Subsidiary to Parent, the Company or
to another Restricted Subsidiary, in each case pursuant to intercompany
Indebtedness, intercompany management agreements and other intercompany
agreements and obligations entered into in the ordinary course of business,
including reasonable advisory and service fees and any indemnity obligations,
(ix) if Parent files tax returns which include the Company, payments to Parent
under any customary and reasonable tax sharing arrangement, and (x) payments to
Parent in respect of customary and reasonable accounting, legal or other
professional or administrative expenses or reimbursements for franchise or
similar taxes and governmental charges incurred which relate to the business,
operations or finances of the Company or Restricted Subsidiary and in respect
of fees, offering costs and related expenses associated with any future
registration statements filed with the Commission and subsequent ongoing public
reporting requirements.
The amount of all Restricted Payments (other than cash) shall be the
fair market value on the date of the Restricted Payment of the asset(s) or
securities proposed to be transferred or issued by the Company or such
Restricted Subsidiary, as the case may be, pursuant to the Restricted Payment.
The fair market value of any non-cash Restricted Payment shall be determined by
the Board of Directors whose resolution with respect thereto shall be delivered
to the Trustee. Not later than the date of making any Restricted Payment, the
Company shall deliver to the Trustee an Officer's Certificate stating that such
Restricted Payment is permitted and setting forth the basis upon which the
calculations required by this Section 4.08 were computed.
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SECTION 4.09 INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, issue, assume,
guarantee or otherwise become directly or indirectly liable, contingently or
otherwise, with respect to (collectively, "incur") any Indebtedness (including
Acquired Debt) and that the Company shall not issue any Disqualified Stock and
shall not permit any of its Restricted Subsidiaries to issue any shares of
Disqualified Stock; provided that the Company may incur Indebtedness (including
Acquired Debt) or issue shares of Disqualified Stock and may permit any
Restricted Subsidiary to incur any Indebtedness (including Acquired Debt) or
issue shares of Disqualified Stock if the Fixed Charge Coverage Ratio for the
Company's most recently ended four full fiscal quarters for which internal
financial statements are available immediately preceding the date on which such
additional Indebtedness is incurred or such Disqualified Stock is issued would
have been at least 2.0 to 1, determined on a pro forma basis (including a pro
forma application of the net proceeds therefrom), as if the additional
Indebtedness had been incurred, or the Disqualified Stock had been issued, as
the case may be, at the beginning of such four-quarter period.
The provisions of the first paragraph of this Section 4.09 shall not
apply to the incurrence of any of the following items of Indebtedness
(collectively, "Permitted Debt"):
(i) the incurrence by the Company of Indebtedness and letters of
credit (with letters of credit being deemed to have a principal amount
equal to the maximum potential liability of the Company and its
Subsidiaries thereunder) under the New Credit Facility (or pursuant to
any successor facility, which successor facility need not constitute
Permitted Refinancing Indebtedness), along with any Guarantee thereof
by any of the Restricted Subsidiaries, up to an amount at any time
incurred equal to the greater of (a) $25,000,000, less the aggregate
amount of all Net Proceeds of Asset Sales applied to permanently repay
any such Indebtedness or, in the case of any such revolving
Indebtedness, permanently reduce commitments therefor pursuant to
Section 4.07 above or (b) the sum of 85% of the Company's consolidated
accounts receivable and 60% of its consolidated inventory, in each
case, from time to time, as determined in accordance with GAAP;
(ii) the incurrence by the Company or any of its Restricted
Subsidiaries of Hedging Obligations that are incurred for the purpose
of fixing or hedging interest rate risk with respect to any floating
rate Indebtedness that is permitted by the terms of this Indenture to
be outstanding or that are incurred by the Company or any of its
Restricted Subsidiaries to protect against currency exchange rate risk
in the conduct of its operations;
(iii) the incurrence by the Company and its Restricted
Subsidiaries of the Existing Indebtedness;
(iv) the incurrence by the Company of Indebtedness
represented by the Notes and the incurrence by the Subsidiary
Guarantors of Indebtedness represented by the Subsidiary Guarantees;
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(v) the incurrence by the Company or any of its Restricted
Subsidiaries of Permitted Refinancing Indebtedness in exchange for, or
the net proceeds of which are used to refund, refinance or replace
Indebtedness that was permitted by this Indenture to be incurred;
(vi) the incurrence of Indebtedness in respect of
performance bonds or surety or appeal bonds in the ordinary course of
business;
(vii) the incurrence by the Company or any of its Restricted
Subsidiaries of intercompany Indebtedness between or among the Company
and any of its Wholly-Owned Restricted Subsidiaries; provided that (a)
if the Company is the obligor on such Indebtedness, such Indebtedness
is expressly subordinated to the prior payment in full in cash of all
Obligations with respect to the Notes and if a Subsidiary Guarantor is
the obligor on such Indebtedness, such Indebtedness is expressly
subordinated to the prior payment in full in cash of all Obligations
with respect to the Subsidiary Guarantees, and (b)(1) any subsequent
issuance or transfer of Equity Interests that results in any such
Indebtedness being held by a Person other than the Company or a
Wholly-Owned Restricted Subsidiary and (B) any sale or other transfer
of any such Indebtedness to a Person that is not either the Company or
a Wholly-Owned Restricted Subsidiary shall be deemed, in each case, to
constitute an incurrence of such Indebtedness by the Company or such
Restricted Subsidiary, as the case may be;
(viii) the incurrence by the Company or any of its
Restricted Subsidiaries of Indebtedness represented by Capital Lease
Obligations, mortgage financings or purchase money obligations, in
each case incurred for the purpose of financing all or any part of the
purchase price or cost of construction or improvements of property
used in the business of the Company or such Restricted Subsidiaries,
in an aggregate principal amount not to exceed $7,500,000 at any time
outstanding;
(ix) the incurrence by the Company or any of its Restricted
Subsidiaries of additional Indebtedness in an aggregate principal
amount (or accreted value, as applicable) at any time outstanding,
including all Permitted Refinancing Indebtedness incurred to refund,
refinance or replace any other additional Indebtedness incurred
pursuant to this clause (ix), not to exceed $10,000,000; and
(x) the incurrence of Indebtedness by any Restricted
Subsidiary pursuant to a Guarantee of Indebtedness permitted to be
incurred.
For purposes of determining compliance with this covenant, in the
event that an item of Indebtedness meets the criteria of more than one of the
categories of Permitted Debt described in clauses (i) through (x) above or is
entitled to be incurred pursuant to the first paragraph of this Section 4.09,
the Company shall, in its sole discretion, classify such item of Indebtedness
in any manner that complies with this Section 4.09 and such item of
Indebtedness shall be treated as having been incurred pursuant to only one of
such clauses or pursuant to the first paragraph hereof. Any Indebtedness that
may be incurred pursuant to this covenant may be incurred under the New Credit
Facility. Accrual of interest, the accretion of accreted value and the payment
of interest in the form
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of additional Indebtedness will not be deemed to be an incurrence of
Indebtedness for purposes of this Section 4.09.
SECTION 4.10 LIENS
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, assume or suffer to
exist any Lien (except Permitted Liens) on any asset now owned or hereafter
acquired, or any income or profits therefrom or assign or convey any right to
receive income therefrom, unless the Notes are equally and ratably secured with
the obligation or liability secured by such Lien until such time as such
obligations are no longer secured by a Lien.
SECTION 4.11 DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING RESTRICTED
SUBSIDIARIES
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective any encumbrance or restriction on the ability of any
Restricted Subsidiary to (i)(a) pay dividends or make any other distributions
to the Company or any of its Restricted Subsidiaries (1) on its Capital Stock,
or (2) with respect to any other interest or participation in, or measured by,
its profits, or (b) pay any indebtedness owed to the Company or any of its
Restricted Subsidiaries, (ii) make loans or advances to the Company or any of
its Restricted Subsidiaries, or (iii) transfer any of its properties or assets
to the Company or any of its Restricted Subsidiaries, except for such
encumbrances or restrictions existing under or by reason of (a) Existing
Indebtedness as in effect on the Issue Date, (b) the New Credit Facility, and
any amendments, modifications, restatements, renewals, increases, supplements,
refundings, replacements or refinancings thereof; provided that such
amendments, modifications, restatements, renewals, increases, supplements,
refundings, replacement, or refinancings are no more restrictive in the
aggregate with respect to such dividend and other payment restrictions than
those contained in the New Credit Facility (or any successor facility thereof),
(c) this Indenture, the Notes and the Subsidiary Guarantees, (d) applicable
law, (e) any instrument regarding the sale, lease or purchase of any asset or
governing Indebtedness or Capital Stock of a Person acquired by the Company or
any of its Restricted Subsidiaries as in effect at the time of such acquisition
(except to the extent such Indebtedness was incurred in connection with or in
contemplation of such acquisition), which encumbrance or restriction is not
applicable to any Person, or the properties or assets of any Person, other than
the Person, or the property or assets of the Person, so acquired; provided
that, in the case of Indebtedness, such Indebtedness was permitted by the terms
of this Indenture to be incurred, (f) by reason of customary non-assignment
provisions in licenses or leases entered into in the ordinary course of
business and consistent with past practices, (g) mortgages or other purchase
money obligations or Capital Lease Obligations for property acquired in the
ordinary course of business that impose restrictions of the nature described in
clause (iii) above on the property so acquired, (h) contracts for the sale of
assets, including restrictions with respect to a Restricted Subsidiary under an
agreement for the sale or disposition of all the stock or assets of such
Restricted Subsidiary, or (i) Permitted Refinancing Indebtedness; provided that
the restrictions contained in the agreements governing such Permitted
Refinancing Indebtedness are no more restrictive in the aggregate than those
contained in the agreements governing the Indebtedness being refinanced.
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SECTION 4.12 LIMITATION ON LAYERING DEBT
Notwithstanding the provisions of Section 4.09 hereof, the Company
shall not incur, create, issue, assume, guarantee or otherwise become liable
for any Indebtedness that is subordinate or junior in right of payment to any
Senior Debt and senior in any respect in right of payment to the Notes. In
addition, the Subsidiary Guarantors shall not incur, create, issue, assume,
guarantee or otherwise become liable for any Indebtedness that is subordinate
or junior in right of payment to any Senior Debt of the Subsidiary Guarantor
and senior in any respect in right of payment to its Subsidiary Guarantee.
SECTION 4.13 ADDITIONAL SUBSIDIARY GUARANTEES
If any entity (other than an Excluded Restricted Subsidiary) shall
become a Restricted Subsidiary after the Issue Date, then such Restricted
Subsidiary shall execute and deliver to the Trustee a supplemental indenture in
form and substance substantially similar to Exhibit C hereto pursuant to which
such Restricted Subsidiary shall unconditionally Guarantee all of the Company's
obligations under the Notes and deliver an Opinion of Counsel reasonably
satisfactory to the Trustee that such supplemental indenture has been duly
executed and delivered by such Restricted Subsidiary.
SECTION 4.14 UNRESTRICTED SUBSIDIARIES
The Board of Directors may designate any Subsidiary (including any
Restricted Subsidiary or any newly acquired or newly formed Subsidiary) to be
an Unrestricted Subsidiary so long as: (i) neither the Company nor any
Restricted Subsidiary is directly or indirectly liable for any Indebtedness of
such Subsidiary, (ii) no default with respect to any Indebtedness of such
Subsidiary would permit (upon notice, lapse of time or otherwise) any holder of
any other Indebtedness of the Company or any Restricted Subsidiary to declare a
default on such other Indebtedness or cause the payment thereof to be
accelerated or payable prior to its stated maturity, (iii) any Investment in
such Subsidiary deemed to be made as a result of designating such Subsidiary an
Unrestricted Subsidiary will not violate the provisions of Section 4.08, (iv)
neither the Company nor any Restricted Subsidiary has a contract, agreement,
arrangement, understanding or obligation of any kind, whether written or oral,
with such Subsidiary other than (A) those that might be obtained at the time
from Persons who are not Affiliates of the Company or (B) administrative, tax
sharing and other ordinary course contracts, agreements, arrangements and
understandings or obligations entered into in the ordinary course of business,
and (v) neither the Company nor any Restricted Subsidiary has any obligation to
subscribe for additional shares of Capital Stock or other Equity Interests in
such Subsidiary, or to maintain or preserve such Subsidiary's financial
condition or to cause such Subsidiary to achieve certain levels of operating
results other than as permitted by Section 4.08. Notwithstanding the
foregoing, the Company may not designate as an Unrestricted Subsidiary any
Subsidiary which, on the Issue Date, is a Significant Subsidiary, and may not
sell, transfer or otherwise dispose of any properties or assets of any such
Significant Subsidiary to an Unrestricted Subsidiary, other than in the
ordinary course of business. Any Investment made by the Company or any
Restricted Subsidiary which is designated from a Restricted Subsidiary to an
Unrestricted Subsidiary shall thereafter be considered as having been a
Restricted Payment (to the extent not
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previously included as a Restricted Payment) made on the day such Subsidiary is
designated an Unrestricted Subsidiary in the amount of the greater of (i) the
fair market value (as determined by the Board of Directors of the Company in
good faith) of the Equity Interests of such Subsidiary held by the Company and
its Restricted Subsidiaries on such date, and (ii) the amount of the
Investments determined in accordance with GAAP made by the Company and any of
its Restricted Subsidiaries in such Subsidiary.
The Board of Directors may designate any Unrestricted Subsidiary as a
Restricted Subsidiary; provided that such designation will be deemed to be an
incurrence of Indebtedness by a Restricted Subsidiary of any outstanding
Indebtedness of such Unrestricted Subsidiary and such designation will only be
permitted if (i) such Indebtedness is permitted by Section 4.09, and (ii) no
Default or Event of Default would occur as a result of such designation.
Any such designation by the Board of Directors pursuant to this
Section 4.14 shall be evidenced to the Trustee by the filing of a Board
Resolution with the Trustee giving effect to such designation.
SECTION 4.15 TRANSACTIONS WITH AFFILIATES
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, make any payment to, or sell, lease, transfer or otherwise
dispose of any of its properties or assets to, or purchase any property or
assets from, or enter into or make or amend any transaction, contract,
agreement, understanding, loan, advance or guarantee with, or for the benefit
of, any Affiliate (each of the foregoing, an "Affiliate Transaction"), unless
(i) such Affiliate Transaction is on terms that are at least as favorable as
those that could reasonably be expected to be obtained by the Company or the
relevant Restricted Subsidiary in a comparable transaction by the Company or
such Restricted Subsidiary with an unrelated Person, and (ii) the Company
delivers to the Trustee (a) with respect to any Affiliate Transaction or series
of related Affiliate Transactions involving aggregate consideration in excess
of $1,000,000, a resolution of the Board of Directors set forth in an Officer's
Certificate certifying that such Affiliate Transaction complies with clause (i)
above and that such Affiliate Transaction has been approved by a majority of
the disinterested members of the Board of Directors, and (b) with respect to
any Affiliate Transaction or series of related Affiliate Transactions involving
aggregate consideration in excess of $5,000,000, an opinion as to the fairness
to the Company of such Affiliate Transaction from a financial point of view
issued by an accounting, appraisal or investment banking firm of national
standing; provided that the following shall not be deemed to be Affiliate
Transactions: (u) any employment agreement entered into by the Company or any
of its Restricted Subsidiaries in the ordinary course of business and
consistent with the past practice of the Company or such Restricted Subsidiary,
(v) transactions between or among the Company and/or its Restricted
Subsidiaries, (w) Restricted Payments that are permitted by the provisions of
Section 4.08 hereof, (x) reasonable and customary fees paid by the Company or
such Restricted Subsidiary to members of their respective Boards of Directors,
(y) transactions or agreements existing as of the Issue Date, and (z)
reasonable and customary grants of stock, stock options or other Equity
Interests to employees and directors of the Company in accordance with duly
adopted stock grant, stock option and similar plans.
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SECTION 4.16 REPORTS
Whether or not required by the rules and regulations of the
Commission, so long as any Notes are outstanding, the Company shall furnish to
the Holders of Notes (i) all quarterly and annual financial information that
would be required to be contained in a filing with the Commission on Forms 10-Q
and 10-K if the Company were required to file such Forms, including a
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and, with respect to the annual information only, a report thereon
by the Company's certified independent auditors and (ii) all current reports
that would be required to be filed with the Commission on Form 8-K if the
Company were required to file such reports. In addition, whether or not
required by the rules and regulations of the Commission, the Company shall file
a copy of all such information and reports with the Commission for public
availability (unless the Commission will not accept such a filing) and make
such information available to securities analysts and prospective investors
upon request. In addition, the Company has agreed that, for so long as any
Notes remain outstanding, it shall furnish to the Holders and to prospective
purchasers designated by such Holders, upon their request, the information
required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act.
The financial information to be distributed to Holders of Notes shall
be filed with the Trustee and mailed promptly following filing with the
Commission or such date as such information should have been required to have
been filed with the Commission to the Holders at their addresses appearing in
the register of the Notes maintained by the Registrar.
The Company shall provide the Trustee with a sufficient number of
copies of all reports and other documents and information and, if required by
the Company, the Trustee will deliver such reports to the Holders under this
Section 4.03.
ARTICLE 5
SUCCESSORS
SECTION 5.01 LIMITATIONS ON MERGER, CONSOLIDATION OR SALE OF SUBSTANTIALLY
ALL ASSETS
The Company shall not consolidate or merge with or into (whether or
not the Company is the surviving corporation), or sell, assign, transfer,
lease, convey or otherwise dispose of all or substantially all of its
properties or assets in one or more related transactions, to another
corporation, Person or entity unless (i) the Company is the surviving
corporation or the entity or the Person formed by or surviving any such
consolidation or merger (if other than the Company) or to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made is a corporation organized or existing under the laws of the United
States, any state thereof or the District of Columbia; (ii) the entity or
Person formed by or surviving any such consolidation or merger (if other than
the Company) or the entity or Person to which such sale, assignment, transfer,
lease, conveyance or other disposition shall have been made assumes all the
obligations of the Company under the Notes and this Indenture pursuant to a
supplemental indenture in a form reasonably satisfactory to the Trustee; (iii)
immediately after such transaction no Default or Event of Default exists; and
(iv) except in the case of a merger of the Company with or into a Wholly-Owned
Restricted Subsidiary of the Company, the Company or the entity or Person
formed by or surviving
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any such consolidation or merger (if other than the Company), or to which such
sale, assignment, transfer, lease, conveyance or other disposition shall have
been made (A) will have Consolidated Net Worth immediately after the
transaction equal to or greater than the Consolidated Net Worth of the Company
immediately preceding the transaction and (B) will, after giving pro forma
effect thereto as if such transaction had occurred at the beginning of the
applicable four-quarter period, be permitted to incur at least $1.00 of
additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set
forth in the first paragraph of Section 4.09 above.
The Company shall deliver to the Trustee prior to the consummation of
the proposed transaction an Officer's Certificate to the foregoing effect and
an Opinion of Counsel stating that the proposed transaction and such
supplemental indenture if applicable comply with this Indenture. The Trustee
shall be entitled to conclusively rely upon such Officer's Certificate and
Opinion of Counsel.
SECTION 5.02 SUCCESSOR CORPORATION SUBSTITUTED
Upon any consolidation or merger, or any sale, lease, conveyance or
other disposition of all or substantially all of the assets of the Company in
accordance with Section 5.01, the successor corporation formed by such
consolidation or into or with which the Company is merged or to which such
sale, lease, conveyance or other disposition is made shall succeed to, and be
substituted for (so that from and after the date of such consolidation, merger,
sale, lease, conveyance or other disposition, the provisions of this Indenture
referring to the "Company" shall refer instead to the successor corporation and
not to the Company), and may exercise every right and power of the Company
under this Indenture with the same effect as if such successor Person had been
named as the Company herein; provided, that the Company shall not be released
or discharged from the obligation to pay the principal of or interest on the
Notes.
ARTICLE 6
DEFAULTS AND REMEDIES
SECTION 6.01 EVENTS OF DEFAULT
Each of the following constitutes an "Event of Default":
(i) default for 30 days in the payment when due of
interest on, or Liquidated Damages with respect to, the Notes (whether
or not prohibited by Article 11 hereof);
(ii) default in payment when due of the principal of or
premium, if any, on the Notes (whether or not prohibited by Article 11
hereof);
(iii) failure by the Company to comply with the provisions
of Section 4.06, 4.07 or 5.01;
(iv) failure by the Company for 30 days after written
notice from the Trustee or the Holders of at least 30% in principal
amount of the then outstanding Notes to comply with Sections 4.08 and
4.09 hereof;
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(v) failure by the Company for 60 days after written
notice from the Trustee or Holders of 30% in principal amount of the
then outstanding Notes to comply with any of its other agreements in
this Indenture or the Notes;
(vi) except as permitted by this Indenture, any Subsidiary
Guarantee shall be held in any judicial proceeding to be unenforceable
or invalid or shall cease for any reason to be in full force and
effect or any Subsidiary Guarantor, or any Person acing on behalf of
any Subsidiary Guarantor, shall deny or disaffirm its obligations
under its Subsidiary Guarantee;
(vii) default under any mortgage, indenture or instrument
under which there may be issued or by which there may be secured or
evidenced any Indebtedness for money borrowed by the Company or any of
its Restricted Subsidiaries (or the payment of which is guaranteed by
the Company or any of its Restricted Subsidiaries) whether such
Indebtedness or guarantee now exists, or is created after the Issue
Date, which default (a) is caused by a failure to pay principal when
due at final stated maturity (a "Payment Default") or (b) results in
the acceleration of such Indebtedness prior to its express maturity
and, in each case, the principal amount of any such Indebtedness,
together with the principal amount of any other such Indebtedness
under which there has been a Payment Default or the maturity of which
has been so accelerated, aggregates $7,500,000 or more;
(viii) failure by the Company or any of its Restricted
Subsidiaries to pay final judgments aggregating in excess of
$7,500,000, which judgments are not paid, discharged or stayed for a
period of 60 days;
(ix) the Company or any of its Significant Subsidiaries
pursuant to or within the meaning of any Bankruptcy Law (a) commences
a voluntary case, (b) consents to the entry of an order for relief
against it in an involuntary case, (c) consents to the appointment of
a Custodian of it or for all or substantially all of its property, (d)
makes a general assignment for the benefit of its creditors, or (e)
generally is unable to pay its debts as the same become due; or
(x) a court of competent jurisdiction enters an order or
decree under any Bankruptcy Law that (a) is for relief against the
Company or any of its Significant Subsidiaries in an involuntary case,
(b) appoints a Custodian of the Company or any of its Significant
Subsidiaries or for all or substantially all of their property, or (c)
orders the liquidation of the Company or any of its Significant
Subsidiaries, and the order or decree remains unstayed and in effect
for 60 days.
To the extent that the last day of the period referred to in clause
(i), (iii), (iv) or (v) of the immediately preceding paragraph is not a
Business Day, then the first Business Day following such day shall be deemed to
be the last day of the period referred to in such clauses. Any "day" will be
deemed to end as of 11:59 p.m., New York City time.
The term "Custodian" means any receiver, trustee, assignee, liquidator
or similar official under any Bankruptcy Law.
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SECTION 6.02 ACCELERATION
If any Event of Default (other than an Event of Default with respect
to the Company or a Significant Subsidiary specified in clauses (ix) or (x) of
Section 6.01 hereof) occurs and is continuing, the Trustee or the Holders of at
least 30% in principal amount of the then outstanding Notes may declare all the
Notes to be due and payable by notice in writing to the Company and the Trustee
specifying the respective Event of Default and that it is a notice of
acceleration (the "Acceleration Notice"), and the same (i) shall become
immediately due and payable or (ii) if there are any amounts outstanding under
the New Credit Facility, shall become immediately due and payable upon the
first to occur of an acceleration under the New Credit Facility or five
Business Days after receipt by the Company and the Representative under the New
Credit Facility of such Acceleration Notice but only if such Event of Default
is then continuing. Notwithstanding the foregoing, in the case of an Event of
Default arising from certain events of bankruptcy or insolvency, with respect
to the Company, any Significant Subsidiary or any group of Restricted
Subsidiaries that, taken together, would constitute a Significant Subsidiary,
all outstanding Notes will become due and payable without declaration or other
action or notice. Holders of the Notes may not enforce this Indenture or the
Notes except as provided herein. Subject to certain limitations, Holders of a
majority in principal amount of the then outstanding Notes may direct the
Trustee in its exercise of any trust or power. In the event of a declaration
of acceleration of the Notes because an Event of Default has occurred and is
continuing as a result of the acceleration of any Indebtedness described in
Section 6.01(vii), the declaration of acceleration of the Notes shall be
automatically annulled if the holders of any Indebtedness described in Section
6.01(vii) have rescinded the declaration of acceleration in respect of such
Indebtedness within thirty (30) days of the date of such declaration and if (i)
the annulment of the acceleration of the Notes would not conflict with any
judgment or decree of a court of competent jurisdiction, and (ii) all existing
Events of Default, except nonpayment of principal or interest or Liquidated
Damages on the Notes that became due solely because of the acceleration of the
Notes, have been cured or waived. The Trustee may withhold from Holders of the
Notes notice of any continuing Default or Event of Default (except a Default or
Event of Default relating to the payment of principal or interest) if it
determines that withholding notice is in their interest.
In the case of any Event of Default occurring by reason of any willful
action (or inaction) taken (or not taken) by or on behalf of the Company with
the intention of avoiding payment of the premium that the Company would have
had to pay if the Company then had elected to redeem the Notes pursuant to
Section 3.07 hereof, an equivalent premium shall also become and be immediately
due and payable to the extent permitted by law upon the acceleration of the
Notes. If an Event of Default occurs prior to August 1, 2002, by reason of any
willful action (or inaction) taken (or not taken) by or on behalf of the
Company with the intention of avoiding the prohibition on redemption of the
Notes prior to August 1, 2002, then the premium specified Section 3.07 hereof
shall also become immediately due and payable to the extent permitted by law
upon the acceleration of the Notes.
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SECTION 6.03 OTHER REMEDIES
If an Event of Default occurs and is continuing, the Trustee may
pursue any available remedy to collect the payment of principal or interest on
the Notes or to enforce the performance of any provision of the Notes or this
Indenture.
The Trustee may maintain a proceeding even if it does not possess any
of the Notes or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Holder in exercising any right or remedy
accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. All remedies
are cumulative to the extent permitted by law.
SECTION 6.04 WAIVER OF PAST DEFAULTS
(1) Holders of at least a majority in aggregate principal amount
of the Notes then outstanding (including consents obtained with a purchase or
tender or exchange offer for Notes) by notice to the Trustee may on behalf of
the Holders of all of the Notes waive any existing Default or Event of Default
and its consequences under this Indenture, except a continuing Default or Event
of Default in the payment of interest or Liquidated Damages, if any, on, or the
principal of, the Notes. Upon any such waiver, such Default shall cease to
exist, and any Event of Default arising therefrom shall be deemed to have been
cured for every purpose of this Indenture; but no such waiver shall extend to
any subsequent or other Default or impair any right consequent thereon.
(2) The Trustee may, without the consent of any Holders of the
Notes, waive any Event of Default that relates to untimely or incomplete
reports or information if the legal rights of the Holders would not be
materially adversely affected thereby and may waive any other defaults the
effect of which would not materially adversely affect the rights of the Holders
under this Indenture.
SECTION 6.05 CONTROL BY MAJORITY
Holders of at least a majority in principal amount of the then
outstanding Notes may direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or exercising any trust or
power conferred on it. However, the Trustee may refuse to follow any direction
that conflicts with law or this Indenture, that the Trustee determines may be
unduly prejudicial to the rights of other Holders, or that may involve the
Trustee in personal liability. The Trustee may take any other action which is
proper which is not inconsistent with any such direction.
SECTION 6.06 LIMITATION ON SUITS
A Holder may pursue a remedy with respect to this Indenture, the
Subsidiary Guarantee or the Notes only if:
(1) the Holder gives to the Trustee written notice of a
continuing Event of Default;
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(2) the Holders of at least 30% in principal amount of
the then outstanding Notes make a written request to the Trustee to
pursue the remedy;
(3) such Holder or Holders offer and, if requested,
provide to the Trustee indemnity satisfactory to the Trustee against
any loss, liability or expense;
(4) the Trustee does not comply with the request within
60 days after receipt of the request and the offer and, if requested,
the provision of indemnity; and
(5) during such 60-day period the Holders of a majority
in aggregate principal amount of the then outstanding Notes do not
give the Trustee a direction inconsistent with the request.
A Holder may not use this Indenture to prejudice the rights of another
Holder or to obtain a preference or priority over another Holder.
SECTION 6.07 RIGHTS OF HOLDERS TO RECEIVE PAYMENT
Notwithstanding any other provision of this Indenture, the right of
any Holder of a Note to receive payment of principal, premium, if any, and
interest on the Note, on or after the respective due dates expressed in the
Note, or to bring suit for the enforcement of any such payment on or after such
respective dates, shall not be impaired or adversely affected without the
consent of the Holder.
SECTION 6.08 COLLECTION SUIT BY TRUSTEE
If an Event of Default specified in Section 6.01(i) or (ii) occurs and
is continuing, the Trustee is authorized to recover judgment in its own name
and as trustee of an express trust against the Company for the whole amount of
principal and interest remaining unpaid on the Notes and interest on overdue
principal and, to the extent lawful, interest and such further amount as shall
be sufficient to cover the costs and expenses of collection, including the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel.
SECTION 6.09 TRUSTEE MAY FILE PROOFS OF CLAIM
The Trustee is authorized to file such proofs of claim and other
papers or documents as may be necessary or advisable in order to have the
claims of the Trustee (including any claim for the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel)
and the Holders allowed in any judicial proceedings relative to the Company (or
any other obligor upon the Notes), its creditors or its property and shall be
entitled and empowered to collect, receive and distribute any money or other
property payable or deliverable on any such claims and any custodian in any
such judicial proceeding is hereby authorized by each Holder to make such
payments to the Trustee, and in the event that the Trustee shall consent to the
making of such payments directly to the Holders, to pay to the Trustee any
amount due to it for the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel, and any other amounts due the
Trustee under Section 7.07 hereof. To the extent that the payment of any such
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compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel, and any other amounts due the Trustee under Section 7.07 hereof
out of the estate in any such proceeding, shall be denied for any reason,
payment of the same shall be secured by a Lien on, and shall be paid out of,
any and all distributions, dividends, money, securities and other properties
which the Holders of the Notes may be entitled to receive in such proceeding
whether in liquidation or under any plan of reorganization or arrangement or
otherwise. Nothing herein contained shall be deemed to authorize the Trustee
to authorize or consent to or accept or adopt on behalf of any Holder any plan
of reorganization, arrangement, adjustment or composition affecting the Notes
or the rights of any Holder thereof, or to authorize the Trustee to vote in
respect of the claim of any Holder in any such proceeding.
SECTION 6.10 PRIORITIES
If the Trustee collects any money pursuant to this Article 6, it shall
pay out the money in the following order:
First: to the Trustee, its agents and attorneys for amounts due under
Section 7.07, including payment of all compensation, expense and liabilities
incurred, and all advances made, by the Trustee and the costs and expenses of
collection;
Second: to Holders for amounts due and unpaid on the Notes for
principal, premium, if any, interest and Liquidated Damages, if any, ratably,
without preference or priority of any kind, according to the amounts due and
payable on the Notes for principal, premium, if any, interest, and Liquidated
Damages, if any, respectively;
Third: without duplication, to Holders of Notes for any other
Obligations owing to the Holders of Notes under the Notes or this Indenture;
and
Fourth: to the Company or to such party as a court of competent
jurisdiction shall direct.
The Trustee may fix a record date and payment date for any payment to
Holders pursuant to this Section 6.10.
SECTION 6.11 UNDERTAKING FOR COSTS
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted by
it as a Trustee, a court in its discretion may require the filing by any party
litigant in the suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in the suit, having due regard to
the merits and good faith of the claims or defenses made by the party litigant.
This Section does not apply to a suit by the Trustee, a suit by a Holder
pursuant to Section 6.07, or a suit by Holders of more than 10% in principal
amount of the then outstanding Notes.
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ARTICLE 7
TRUSTEE
SECTION 7.01 DUTIES OF TRUSTEE
(1) If an Event of Default has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested in it by this
Indenture, and use the same degree of care and skill in their exercise, as a
prudent person would exercise or use under the circumstances in the conduct of
their own affairs.
(2) Except during the continuance of an Event of Default:
(a) The duties of the Trustee shall be determined solely
by the express provisions of this Indenture and the Trustee need
perform only those duties that are specifically set forth in this
Indenture and no others, and no implied covenants or obligations shall
be read into this Indenture against the Trustee.
(b) In the absence of bad faith on its part, the Trustee
may conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Trustee and conforming to the requirements
of this Indenture. In the case of any such certificates or opinions
which by any provision hereof are specifically required to be
furnished to the Trustee, the Trustee shall be under a duty to examine
the same to determine whether or not they conform to the requirements
of this Indenture (but need not confirm or investigate the accuracy of
mathematic calculations or other facts stated therein).
(3) The Trustee may not be relieved from liabilities for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(a) This paragraph does not limit the effect of paragraph
(2) of this Section.
(b) The Trustee shall not be liable for any error of
judgment made in good faith by a Responsible Officer, unless it is
proved that the Trustee was negligent in ascertaining the pertinent
facts.
(c) The Trustee shall not be liable with respect to any
action it takes or omits to take in good faith in accordance with a
direction received by it pursuant to Section 6.05.
(4) Whether or not therein expressly so provided, every provision
of this Indenture that in any way relates to the Trustee is subject to
paragraphs (1), (2) and (3) of this Section.
(5) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or incur any liability. The Trustee may refuse to
perform any duty or exercise any right or power unless it receives indemnity
satisfactory to it against any loss, liability or expense.
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(6) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree in writing with the Company.
Money held in trust by the Trustee need not be segregated from other funds
except to the extent required by law.
(7) All indemnifications and releases from liability granted
herein to the Trustee shall extend to the directors, officers, employees and
agents of the Trustee and to the Paying Agent and Registrar.
SECTION 7.02 RIGHTS OF TRUSTEE
(1) The Trustee may conclusively rely upon any document believed
by it to be genuine and to have been signed or presented by the proper Person.
The Trustee need not investigate any fact or matter stated in the document, but
the Trustee may, in its discretion, make such further inquiry or investigation
into such facts or matters as it may see fit, and, if the Trustee shall
determine to make such further inquiry or investigation, it shall be entitled
to examine the books, records and premises of the Company, personally or by
agent or attorney.
(2) Before the Trustee acts or refrains from acting, it may
require an Officer's Certificate or an Opinion of Counsel or both. The Trustee
shall not be liable for any action it takes or omits to take in good faith in
reliance on such Officer's Certificate or Opinion of Counsel. The Trustee may
consult with counsel of its selection and the advice of such counsel or any
Opinion of Counsel shall be full and complete authorization and protection from
liability in respect of any action taken, suffered or omitted by it hereunder
in good faith and in reliance thereon.
(3) The Trustee may act through agents and shall not be
responsible for the misconduct or negligence of any agent appointed with due
care.
(4) The Trustee shall not be liable for any action it takes or
omits to take in good faith which it believes to be authorized or within its
rights or powers conferred upon it by this Indenture.
(5) Unless otherwise specifically provided in this Indenture, any
demand, request, direction or notice from the Company shall be sufficient if
signed by an Officer of the Company.
(6) The permissive rights of the Trustee to do things enumerated
in this Indenture shall not be construed as a duty unless so specified herein.
(7) The Trustee shall not be deemed to have notice of any Default
or Event of Default unless a Responsible Officer of the Trustee has actual
knowledge thereof unless written notice of any event which is in fact such a
Default is received by the Trustee at the Corporate Trust Office of the
Trustee, and such notice references the Notes and this Indenture.
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SECTION 7.03 INDIVIDUAL RIGHTS OF TRUSTEE
The Trustee in its individual or any other capacity may become the
owner or pledgee of Notes and may otherwise deal with the Company or an
Affiliate with the same rights it would have if it were not Trustee. Any Agent
may do the same with like rights. However, the Trustee is subject to Sections
7.10 and 7.11. Subject to the provisions of Section 310(b) of the TIA, the
Trustee shall be permitted to engage in transactions with the Company and its
Subsidiaries other than those contemplated by this Indenture.
SECTION 7.04 TRUSTEE'S DISCLAIMER
The Trustee shall not be responsible for and makes no representation
as to the validity or adequacy of this Indenture or the Notes, it shall not be
accountable for the Company's use of the proceeds from the Notes or any money
paid to the Company or upon the Company's written direction under any provision
hereof. The Trustee shall not be responsible for the use or application of any
money received by any Paying Agent other than the Trustee and it shall not be
responsible for any statement or recital herein or any statement in the Notes
or any other document in connection with the sale of the Notes or pursuant to
this Indenture other than its certificate of authentication.
SECTION 7.05 NOTICE OF DEFAULTS
The Trustee shall not be deemed to have notice of a Default or an
Event of Default unless (i) the Trustee has received written notice thereof
from the Company or any Holder or (ii) a Responsible Officer of the Trustee
shall have actual knowledge thereof. Except as otherwise expressly provided
herein, the Trustee shall not be bound to ascertain or inquire as to the
performance or observance of any of the terms, conditions, covenants or
agreements herein, or of any of the documents executed in connection with the
Notes, or as to the existence of a Default or Event of Default hereunder.
Subject to Section 6.04(2), if a Default or Event of Default occurs
and is continuing and if it is known to a Responsible Officer of the Trustee,
the Trustee shall mail to Holders a notice of the Default or Event of Default
within 90 days after it obtains knowledge of the existence of such Event of
Default. Except in the case of a Default or Event of Default in payment of
principal, premium or interest on any Note, the Trustee may withhold the notice
if and so long as a committee of its Responsible Officers in good faith
determines that withholding the notice is in the interests of Holders.
SECTION 7.06 REPORTS BY TRUSTEE TO HOLDERS
Within 60 days after each December 31 beginning with the December 31
following the date of this Indenture, the Trustee shall mail to Holders a brief
report dated as of such reporting date that complies with TIA Section 313(a)
(but if no event described in TIA Section 313(a) has occurred within the
twelve months preceding the reporting date, no report need be transmitted).
The Trustee also shall comply with TIA Section 313(b). The Trustee shall also
transmit by mail all reports as required by TIA Section 313(c).
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Commencing at the time this Indenture is qualified under the TIA, a
copy of each report at the time of its mailing to Holders shall be filed with
the SEC and each stock exchange, if any, on which the Company has informed the
Trustee that Notes are listed. The Company shall promptly notify the Trustee
when the Notes are listed on any stock exchange.
SECTION 7.07 COMPENSATION AND INDEMNITY
The Company shall pay to the Trustee from time to time reasonable
compensation, as the Company and the Trustee shall from time to time agree, for
its acceptance of this Indenture and services hereunder. The Trustee's
compensation shall not be limited by any law on compensation of a trustee of an
express trust. The Company shall reimburse the Trustee promptly upon request
for all reasonable disbursements, advances and expenses incurred or made by it
in addition to the compensation for its services. Such expenses shall include
the reasonable compensation, disbursements and expenses of the Trustee's agents
and counsel.
The Company shall indemnify the Trustee or any predecessor Trustee and
their agents, employees, officers and directors against any and all losses,
liabilities, expenses or taxes (other than taxes based upon, measured by or
determined by the income of the Trustee) incurred by it arising out of or in
connection with the acceptance or administration of its duties under this
Indenture, including the costs and expenses of defending itself against any
claim or liability in connection with the exercise or performance of any of its
powers or duties hereunder, except to the extent that such loss, damage, claim,
liability or expense is due to its own negligence or bad faith. The Trustee
shall notify the Company promptly of any claim for which it may seek indemnity.
Failure by the Trustee to so notify the Company shall not relieve the Company
of its obligations hereunder. The Company shall defend the claim and the
Trustee shall cooperate in the defense. The Trustee may have separate counsel
and the Company shall pay the reasonable fees and expenses of such counsel.
The Company need not pay for any settlement made without its consent, which
consent shall not be unreasonably withheld.
The Company need not reimburse any expense or indemnify against any
loss or liability incurred by the Trustee through its own negligence or bad
faith.
The obligations of the Company under this Section 7.07 shall survive
the satisfaction and discharge of this Indenture.
To secure the Company's payment obligations in this Section, the
Trustee shall have a Lien prior to the Notes on all money or property held or
collected by the Trustee, except that held in trust to pay principal and
interest on particular Notes. Such Lien shall survive the satisfaction and
discharge of this Indenture.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 6.01(ix) or (x) occurs, the expenses and the
compensation for the services are intended to constitute expenses of
administration under any Bankruptcy Law.
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SECTION 7.08 REPLACEMENT OF TRUSTEE
A resignation or removal of the Trustee and appointment of a successor
Trustee shall become effective only upon the successor Trustee's acceptance of
appointment as provided in this Section 7.08.
The Trustee may resign at any time and be discharged from the trust
hereby created by so notifying the Company. The Holders of a majority in
principal amount of the then outstanding Notes may remove the Trustee by so
notifying the Trustee and the Company. The Company may remove the Trustee if:
(1) the Trustee fails to comply with Section 7.10;
(2) the Trustee is adjudged a bankrupt or an insolvent or
an order for relief is entered with respect to the Trustee under any
Bankruptcy Law;
(3) a Custodian or public officer takes charge of the
Trustee or its property; or
(4) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Company shall promptly appoint a
successor Trustee.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company or
the Holders of at least 10% in principal amount of the then outstanding Notes
may petition any court of competent jurisdiction for the appointment of a
successor Trustee.
If the Trustee after written request by any Holder who has been a
Holder for at least six months fails to comply with Section 7.10, such Holder
may petition any court of competent jurisdiction for the removal of the Trustee
and the appointment of a successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Thereupon the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. The successor Trustee shall mail a notice of its
succession to Holders. The retiring Trustee shall promptly transfer all
property held by it as Trustee to the successor Trustee, provided all sums
owing to the Trustee hereunder have been paid and subject to the Lien provided
for in Section 7.07. Notwithstanding replacement of the Trustee pursuant to
this Section 7.08, the Company's obligations under Section 7.07 hereof shall
continue for the benefit of the retiring Trustee.
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SECTION 7.09 SUCCESSOR TRUSTEE BY MERGER, ETC.
If the Trustee consolidates, merges or converts into, or transfers all
or substantially all of its corporate trust business to, another corporation,
the successor corporation without any further act shall be the successor
Trustee.
SECTION 7.10 ELIGIBILITY; DISQUALIFICATION
There shall at all times be a Trustee hereunder which shall be a
corporation organized and doing business under the laws of the United States of
America or of any state thereof authorized under such laws to exercise
corporate trustee power, shall be subject to supervision or examination by
Federal or state authority and shall have (or in the case of a corporation
included in a bank holding company system, the related bank holding company
shall have) a combined capital and surplus of at least $50,000,000 as set forth
in its most recent published annual report of condition.
This Indenture shall always have a Trustee who satisfies the
requirements of TIA Section 310(a)(1) and 310(a)(5). The Trustee is subject
to TIA Section 310(b).
SECTION 7.11 PREFERENTIAL COLLECTION OF CLAIMS AGAINST THE COMPANY
The Trustee is subject to TIA Section 311(a), excluding any creditor
relationship listed in TIA Section 311(b). A Trustee who has resigned or been
removed shall be subject to TIA Section 311(a) to the extent indicated
therein.
ARTICLE 8
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
SECTION 8.01 OPTION TO EFFECT LEGAL DEFEASANCE OR COVENANT DEFEASANCE
The Company and the Subsidiary Guarantors may, at the option of their
respective Board of Directors evidenced by a resolution set forth in an
Officer's Certificate, at any time, with respect to the Notes and the
Subsidiary Guarantees, elect to have either Section 8.02 or 8.03 be applied to
all outstanding Notes upon compliance with the conditions set forth below in
this Article Eight.
SECTION 8.02. LEGAL DEFEASANCE AND DISCHARGE
Upon the Company's exercise under Section 8.01 of the option
applicable to this Section 8.02 and subject to the satisfaction of the
conditions contained in Section 8.04 hereof, the Company and all Subsidiary
Guarantors shall be deemed to have been discharged from their respective
obligations with respect to all outstanding Notes and the Subsidiary Guarantee
on the date the conditions set forth below are satisfied (hereinafter, "Legal
Defeasance"). For this purpose, such Legal Defeasance means that (i) the
Company and each Subsidiary Guarantor shall be deemed to have paid and
discharged the entire Indebtedness represented by the outstanding Notes and
Subsidiary Guarantee, , which shall thereafter be deemed to be "outstanding"
only for the purposes of Section 8.05 and the other Sections of this Indenture
referred to in (a) and (b) below, and to have satisfied all their
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respective other obligations under such Notes, the Subsidiary Guarantees, and
this Indenture (and the Trustee, on demand of and at the expense of the
Company, shall execute proper instruments acknowledging the same), and (ii) the
Subsidiary Guarantors shall each be released from its Subsidiary Guarantee,
except for the following which shall survive until otherwise terminated or
discharged hereunder: (a) the rights of Holders of outstanding Notes to
receive solely from the trust fund described in Section 8.04, and as more fully
set forth in such Section, payments in respect of the principal of, premium, if
any, and interest and Liquidated Damages, if any, on such Notes when such
payments are due, (b) the Company's obligations with respect to such Notes
under Sections 2.03, 2.05, 2.06, 2.07, 2.10 and 4.02, (c) the rights, powers,
trusts, duties and immunities of the Trustee hereunder and the Company's
obligations in connection therewith, and (d) this Article Eight. Subject to
compliance with this Article Eight, the Company may exercise its option under
this Section 8.02 notwithstanding the prior exercise of its option under
Section 8.03 with respect to the Notes.
SECTION 8.03 COVENANT DEFEASANCE
Upon the Company's exercise under Section 8.01 of the option
applicable to this Section 8.03 and subject to satisfaction of the conditions
contained in Section 8.04 hereof, the Company and each Subsidiary Guarantor
shall be released from its obligations under the covenants contained in
Sections 4.03, 4.04, 4.06, 4.07, 4.08, 4.09, 4.10, 4.11, 4.12, 4.13, 4.14, 4.15
and 4.16 and Article 5 with respect to the outstanding Notes and Subsidiary
Guarantees on and after the date the conditions set forth below are satisfied
(hereinafter, "Covenant Defeasance"), and the Notes shall thereafter be deemed
not "outstanding" for the purposes of any direction, waiver, consent or
declaration or act of Holders (and the consequences of any thereof) in
connection with such covenants, but shall continue to be deemed "outstanding"
for all other purposes hereunder (it being understood that such Notes and
Subsidiary Guarantees shall not be deemed outstanding for accounting purposes).
For this purpose, such Covenant Defeasance means that, with respect to the
outstanding Notes and Subsidiary Guarantees, the Company may omit to comply
with and shall have no liability in respect of any term, condition or
limitation set forth in any such covenant, whether directly or indirectly, by
reason of any reference elsewhere herein to any such covenant or by reason of
any reference in any such covenant to any other provision herein or in any
other document and such omission to comply shall not constitute a Default or an
Event of Default under Section 6.01(iii), (iv) or (v), but, except as specified
above, the remainder of this Indenture and such Notes and Subsidiary Guarantees
shall be unaffected thereby. In addition, upon the Company's exercise under
Section 8.01 of the option applicable to this Section 8.03, Sections 6.01(iii)
through 6.01(viii) shall not constitute Events of Default.
SECTION 8.04 CONDITIONS TO LEGAL OR COVENANT DEFEASANCE
The following shall be the conditions to the application of either
Section 8.02 or Section 8.03 to the outstanding Notes and Subsidiary
Guarantees:
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(1) the Company shall irrevocably have deposited or
caused to be deposited with the Trustee (or another trustee satisfying
the requirements of Section 7.10 who shall agree to comply with the
provisions of this Article Eight applicable to it) as trust funds in
trust for the purpose of making the following payments, specifically
pledged as security for, and dedicated solely to, the benefit of the
Holders of such Notes, (a) cash in U.S. Dollars in an amount, or (b)
non-callable Government Securities which through the scheduled payment
of principal and interest and Liquidated Damages, if any, in respect
thereof in accordance with their terms will provide, not later than
one day before the due date of any payment, cash in U.S. Dollars in an
amount, or (c) a combination thereof, in such amounts, as will be
sufficient, in the opinion of a nationally recognized firm of
independent public accountants expressed in a written certification
thereof delivered to the Trustee, to pay and discharge and which shall
be applied by the Trustee (or other qualifying trustee) to pay and
discharge the principal of, premium, if any, and interest and
Liquidated Damages, if any, on the outstanding Notes on the stated
maturity or on the applicable redemption date, as the case may be, and
the Company must specify whether the Notes are being defeased to
maturity or to a particular redemption date of such principal or
installment of principal, premium, if any, or interest; provided that
the Trustee shall have been irrevocably instructed to apply such money
or the proceeds of such non-callable Government Securities to said
payments with respect to the Notes;
(2) In the case of an election under Section 8.02, either
(i) (A) the Notes will become due and payable at their stated maturity
within one year after the date of such election pursuant to Section
8.02 or, within one year after the date of such election, the Notes
will be redeemable at the option of the Company and will be redeemed
by the Company pursuant to irrevocable instructions issued to the
Trustee at the time of such election for the giving of a notice of
redemption by the Trustee for such redemption, and (B) the Company
shall have delivered to the Trustee an Opinion of Counsel in the
United States reasonably satisfactory to the Trustee to the effect
that the Holders of the outstanding Notes will not recognize income,
gain or loss for federal income tax purposes as a result of such Legal
Defeasance and will be subject to Federal income tax in the same
amount, in the same manner and at the same times as would have been
the case if such Legal Defeasance had not occurred or (ii) the Company
shall have delivered to the Trustee an Opinion of Counsel in the
United States reasonably satisfactory to the Trustee confirming that
(A) the Company has received from, or there has been published by, the
Internal Revenue Service a ruling or (B) since the date hereof, there
has been a change in the applicable federal income tax law, in either
case to the effect that, and based thereon such opinion shall confirm
that, the Holders of the outstanding Notes will not recognize income,
gain or loss for federal income tax purposes as a result of such Legal
Defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been
the case if such Legal Defeasance has not occurred;
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(3) In the case of an election under Section 8.03, the
Company shall have delivered to the Trustee an Opinion of Counsel in
the United States reasonably acceptable to the Trustee confirming that
the Holders of the outstanding Notes will not recognize income, gain
or loss for federal income tax purposes as a result of such Covenant
Defeasance and will be subject to Federal income tax in the same
amounts, in the same manner and at the same times as would have been
the case if such Covenant Defeasance had not occurred;
(4) No Default or Event of Default with respect to the
Notes shall have occurred and be continuing on the date of such
deposit (other than a Default or Event of Default resulting from the
borrowing of funds to be applied to such deposit) or, in so far as
Section 6.01(ix) or (x) is concerned, at any time in the period ending
on the 91st day after the date of such deposit (it being understood
that this condition shall not be deemed satisfied until the expiration
of such period);
(5) Such Legal Defeasance or Covenant Defeasance shall
not result in a breach or violation of, or constitute a default under,
the New Credit Facility or any other material agreement or instrument
(other than this Indenture) to which the Company or any of its
Restricted Subsidiaries is a party or by which the Company or any of
its Restricted Subsidiaries is bound;
(6) The Company shall have delivered to the Trustee an
Officer's Certificate stating that the deposit made by the Company
pursuant to its election under Section 8.02 or 8.03 was not made by
the Company with the intent of preferring the Holders over other
creditors of the Company or with the intent of defeating, hindering,
delaying or defrauding creditors of the Company or others; and
(7) The Company shall have delivered to the Trustee an
Officer's Certificate and an Opinion of Counsel in the United States,
each stating that all conditions precedent provided for relating to
either the Legal Defeasance under Section 8.02 or the Covenant
Defeasance under Section 8.03 (as the case may be) have been complied
with as contemplated by this Section 8.04.
SECTION 8.05 DEPOSITED MONEY AND GOVERNMENT SECURITIES TO BE HELD IN TRUST;
OTHER MISCELLANEOUS PROVISIONS
Subject to Section 8.06, all money and non-callable Government
Securities (including the proceeds thereof) deposited with the Trustee (or
other qualifying trustee, collectively for purposes of this Section 8.05, the
"Trustee") pursuant to Section 8.04 in respect of the outstanding Notes shall
be held in trust and applied by the Trustee, in accordance with the provisions
of such Notes and this Indenture, to the payment, either directly or through
any Paying Agent (including the Company or any Subsidiary acting as Paying
Agent) as the Trustee may determine, to the Holders of such Notes of all sums
due and to become due thereon in respect of principal, premium, if any, and
interest, but such money need not be segregated from other funds except to the
extent required by law.
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The Company shall pay and indemnify the Trustee against any tax, fee
or other charge imposed on or assessed against the cash or non-callable
Government Securities deposited pursuant to Section 8.04 or the principal and
interest received in respect thereof other than any such tax, fee or other
charge which by law is for the account of the Holders of the outstanding Notes.
Anything in this Article 8 to the contrary notwithstanding, the
Trustee shall deliver or pay to the Company from time to time upon the request
of the Company any money or non-callable Government Securities held by it as
provided in Section 8.04 which, in the opinion of a nationally recognized firm
of independent public accountants expressed in a written certification thereof
delivered to the Trustee (which may be the opinion delivered under Section
8.04(1)), are in excess of the amount thereof which would then be required to
be deposited to effect an equivalent Legal Defeasance or Covenant Defeasance.
SECTION 8.06 REPAYMENT TO THE COMPANY
Any money deposited with the Trustee or any Paying Agent, or then held
by the Company, in trust for the payment of the principal of, premium, if any,
or interest on any Note and remaining unclaimed for two years after such
principal, and premium, if any, or interest has become due and payable shall be
paid to the Company on its request or (if then held by the Company) shall be
discharged from such trust; and the Holder of such Note shall thereafter, as a
creditor, look only to the Company for payment thereof, and all liability of
the Trustee or such Paying Agent with respect to such trust money, and all
liability of the Company as trustee thereof, shall thereupon cease; provided,
that the Trustee or such Paying Agent, before being required to make any such
repayment, may at the expense of the Company cause to be published once, in The
Wall Street Journal (national edition), notice that such money remains
unclaimed and that, after a date specified therein, which shall not be less
than 30 days from the date of such notification or publication, any unclaimed
balance of such money then remaining will be repaid to the Company.
SECTION 8.07 REINSTATEMENT
If the Trustee or Paying Agent is unable to apply any United States
Dollars or non-callable Government Securities in accordance with Section 8.02
or 8.03, as the case may be, by reason of any order or judgment of any court or
governmental authority enjoining, restraining or otherwise prohibiting such
application, then the Company's obligations under this Indenture and the Notes
shall be revived and reinstated as though no deposit had occurred pursuant to
Section 8.02 or 8.03 until such time as the Trustee or Paying Agent is
permitted to apply all such money in accordance with Section 8.02 or 8.03, as
the case may be; provided that, if the Company makes any payment of principal
of, premium, if any, or interest or Liquidated Damages, if any, on any Note
following the reinstatement of its obligations, the Company shall be subrogated
to the rights of the Holders of such Notes to receive such payment from the
money held by the Trustee or Paying Agent and provided, further, that if such
order or judgment is issued in connection with the insolvency, receivership or
other similar occurrence with respect to the Trustee, upon the reinstatement of
such obligations the Company shall be released from its obligations under
Sections 4.03, 4.04, 4.06, 4.07, 4.08, 4.09, 4.10, 4.11, 4.12, 4.13, 4.14, 4.15
and 4.16 and Article 5.
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ARTICLE 9
AMENDMENT, SUPPLEMENT AND WAIVER
SECTION 9.01 WITHOUT CONSENT OF HOLDERS
Notwithstanding Section 9.02 of this Indenture, the Company and the
Trustee may amend or supplement this Indenture or the Notes without the consent
of any Holder of a Note:
(a) to cure any ambiguity, defect or inconsistency;
(b) to provide for uncertificated Notes in addition to or
in place of Certificated Notes;
(c) to provide for the assumption of the Company's or a
Subsidiary Guarantor's obligations to the Holders of the Notes in the
case of a merger or consolidation pursuant to Article 5 hereof or
Section 10.03 hereof, as applicable;
(d) to provide for additional Subsidiary Guarantors as
set forth in Section 4.16;
(e) to make any change that would provide any additional
rights or benefits to the Holders of the Notes or that does not
adversely affect the legal rights hereunder of any Holder of the Note;
or
(f) to comply with requirements of the SEC in order to
effect or maintain the qualification of this Indenture under the TIA.
Upon the request of the Company, accompanied by a Board Resolution
authorizing the execution of any such supplemental indenture, and upon receipt
by the Trustee of the documents described in Section 9.06 hereof, the Trustee
shall join with the Company in the execution of any supplemental indenture
authorized or permitted by the terms of this Indenture and to make any further
appropriate agreements and stipulations which may be therein contained, but the
Trustee shall not be obligated to enter into such supplemental indenture which
affects its own rights, duties or immunities under this Indenture or otherwise.
SECTION 9.02 WITH CONSENT OF HOLDERS
The Company, the Subsidiary Guarantors and the Trustee may amend or
supplement this Indenture or the Notes with the written consent of the Holders
of at least a majority in principal amount of the then outstanding Notes
(including consents obtained in connection with a purchase of, tender offer for
or exchange offer for the Notes) and any existing Default (including, without
limitation, an acceleration of the Notes) or compliance with any provision of
this Indenture or the Notes or Subsidiary Guarantees may be waived with the
written consent of the Holders of at least a majority in principal amount of
the then outstanding Notes (including consents obtained in connection with a
purchase of, tender offer for or exchange offer for the Notes).
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Upon the request of the Company, accompanied by a Board Resolution
authorizing the execution of any such supplemental indenture, and upon the
filing with the Trustee of evidence satisfactory to the Trustee of the consent
of the Holders as aforesaid, and upon receipt by the Trustee of the documents
described in Section 9.06 hereof, the Trustee shall join with the Company and
the Subsidiary Guarantors in the execution of such supplemental indenture
unless such supplemental indenture affects the Trustee's own rights, duties or
immunities under this Indenture or otherwise, in which case the Trustee may in
its discretion, but shall not be obligated to, enter into such supplemental
indenture.
It shall not be necessary for the consent of the Holders under this
Section to approve the particular form of any proposed amendment or waiver, but
it shall be sufficient if such consent approves the substance thereof.
After a supplement, amendment or waiver under this Section becomes
effective, the Company shall mail to the Holders of each Note affected thereby
a notice briefly describing the supplement, amendment or waiver. Any failure
of the Company to mail such notice, or any defect therein, shall not, however,
in any way impair or affect the validity of any such supplemental indenture,
amendment or waiver. Subject to Sections 6.03, 6.04(a) and 6.07 hereof, the
Holders of a majority in principal amount of the Notes then outstanding may
waive compliance in a particular instance by the Company with any provision of
this Indenture or the Notes. However, without the consent of each Holder
affected, a supplement, amendment or waiver under this Section may not (with
respect to any Notes held by a non-consenting Holder):
(1) reduce the principal amount of Notes whose Holders must
consent to an amendment, supplement or waiver;
(2) reduce the principal of or change the fixed maturity of
any Note or alter the provisions with respect to redemption of the
Notes other than provisions relating to Sections 3.09, 4.06 and 4.07
hereof;
(3) reduce the rate of or change the time for payment of
interest, including default interest, or Liquidated Damages on any
Note;
(4) waive a Default or Event of Default in the payment of
principal of or premium, if any, or interest or Liquidated Damages on
any Note (except a recision of acceleration of the Notes by the
Holders of at least a majority in aggregate principal amount of the
Notes and a waiver of the payment default that resulted from such
acceleration);
(5) make any Note payable in money other than that stated in
the Note;
(6) make any change in Section 6.04(a) or 6.07 hereof or in
this sentence of this Section 9.02 or the rights of Holders of Notes
to receive payments of principal of or premium, if any, or interest or
Liquidated Damages on the Notes;
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(7) waive a redemption payment with respect to any Note
(other than a payment required by the provisions of Sections 4.06 or
4.07 hereof); or
(8) make any change in the foregoing amendment and waiver
provisions.
SECTION 9.03 COMPLIANCE WITH TRUST INDENTURE ACT
Every amendment to this Indenture, the Subsidiary Guarantees or the
Notes shall be set forth in a supplemental indenture that complies with the TIA
as then in effect.
SECTION 9.04 REVOCATION AND EFFECT OF CONSENTS
Until a supplement, amendment or waiver becomes effective, a consent
to it by a Holder is a continuing consent by the Holder and every subsequent
Holder or portion of a Note that evidences the same debt as the consenting
Holder's Note, even if notation of the consent is not made on any Note.
However, any such Holder or subsequent Holder may revoke the consent as to its
Note if the Trustee receives written notice of revocation before the date the
waiver or amendment becomes effective. An amendment or waiver becomes
effective in accordance with its terms and thereafter binds every Holder.
The Company may, but shall not be obligated to, fix a record date for
determining which Holders must consent to such supplement, amendment or waiver.
If the Company fixes a record date, the record date shall be fixed at (i) the
later of 30 days prior to the first solicitation of such consent or the date of
the most recent list of Holders furnished to the Trustee prior to such
solicitation pursuant to Section 2.05, or (ii) such other date as the Company
shall designate.
SECTION 9.05 NOTATION ON OR EXCHANGE OF NOTES
The Trustee may place an appropriate notation about a supplement,
amendment or waiver on any Note thereafter authenticated. The Company in
exchange for all Notes may issue and the Trustee shall authenticate new Notes
that reflect the supplement, amendment or waiver.
Failure to make the appropriate notation or issue a new Note shall not
affect the validity and effect of such supplement, amendment or waiver.
SECTION 9.06 TRUSTEE TO SIGN AMENDMENTS, ETC.
The Trustee shall sign any amendment or supplemental indenture
authorized pursuant to this Article 9 if the amendment does not adversely
affect the rights, duties, liabilities or immunities of the Trustee. If it
does, the Trustee may, but need not, sign it. In signing or refusing to sign
such amendment or supplemental indenture, the Trustee shall be entitled to
receive, if requested, an indemnity reasonably satisfactory to it and to
receive and, subject to Section 7.01, shall be fully protected in relying upon,
an Officer's Certificate and an Opinion of Counsel as conclusive evidence that
such amendment or supplemental indenture is authorized or permitted by this
Indenture, that it is not inconsistent herewith, and that it will be valid and
binding upon the Company in accordance
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with its terms. The Company may not sign an amendment or supplemental
indenture until the Board of Directors approves it.
ARTICLE 10
SUBSIDIARY GUARANTEES
SECTION 10.01 SUBSIDIARY GUARANTEES
Subject to the provisions of this Article 10, each Subsidiary
Guarantor, jointly and severally, hereby unconditionally guarantees to each
Holder of a Note authenticated and delivered by the Trustee and to the Trustee
and its successors and assigns, that: (i) the principal of, premium, if any,
interest and Liquidated Damages, if any, on the Notes shall be duly and
punctually paid in full when due, whether at maturity, by acceleration or
otherwise, and interest on overdue principal, premium, if any, (to the extent
permitted by law) interest on any interest, if any, and Liquidated Damages, if
any, on the Notes and all other obligations of the Company to the Holders or
the Trustee hereunder or under the Notes (including fees, expenses or other)
shall be promptly paid in full or performed, all in accordance with the terms
hereof, and (ii) in case of any extension of time of payment or renewal of any
Notes or any of such other obligations, the same shall be promptly paid in full
when due or performed in accordance with the terms of the extension or renewal,
whether at stated maturity, by acceleration or otherwise. Failing payment when
due of any amount so guaranteed or failing performance of any other obligation
of the Company to the Holders, for whatever reason, each Subsidiary Guarantor
shall be jointly and severally obligated to pay, or to perform or to cause the
performance of, the same immediately. An Event of Default under this Indenture
or the Notes shall constitute an event of default under the Subsidiary
Guarantees, and shall entitle the Trustee or the Holders of Notes to accelerate
the obligations of each Subsidiary Guarantor hereunder in the same manner and
to the same extent as the obligations of the Company. Each Subsidiary
Guarantor hereby agrees that its obligations hereunder shall be unconditional,
irrespective of the validity, regularity or enforceability of the Notes or this
Indenture, the absence of any action to enforce the same, any waiver or consent
by any Holder of the Notes with respect to any thereof, the entry of any
judgment against the Company, any action to enforce the same or any other
circumstance which might otherwise constitute a legal or equitable discharge or
defense of a Subsidiary Guarantor. Each Subsidiary Guarantor hereby waives and
relinquishes: (a) any right to require the Trustee, the Holders or the Company
(each, a "Benefitted Party") to proceed against the Company, the Subsidiaries
or any other Person or to proceed against or exhaust any security held by a
Benefitted Party at any time or to pursue any other remedy in any secured
party's power before proceeding against the Subsidiary Guarantors; (b) any
defense that may arise by reason of the incapacity, lack of authority, death or
disability of any other Person or Persons or the failure of a Benefitted Party
to file or enforce a claim against the estate (in administration, bankruptcy or
any other proceeding) of any other Person or Persons; (c) demand, protest and
notice of any kind (except as expressly required by this Indenture), including
but not limited to notice of the existence, creation or incurring of any new or
additional Indebtedness or obligation or of any action or non-action on the
part of the Subsidiary Guarantors, the Company, the Subsidiaries, any
Benefitted Party, any creditor of the Subsidiary Guarantors, the Company or the
Subsidiaries or on the part of any other Person whomsoever in connection with
any obligations the performance of which are hereby guaranteed; (d) any defense
based upon an election of remedies by a Benefitted Party, including but not
limited
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to an election to proceed against the Subsidiary Guarantors for reimbursement;
(e) any defense based upon any statute or rule of law which provides that the
obligation of a surety must be neither larger in amount nor in other respects
more burdensome than that of the principal; (f) any defense arising because of
a Benefitted Party's election, in any proceeding instituted under the
Bankruptcy Law, of the application of Section 1111(b)(2) of the Bankruptcy
Code; and (g) any defense based on any borrowing or grant of a security
interest under Section 364 of the Bankruptcy Code. The Subsidiary Guarantors
hereby covenant that the Subsidiary Guarantees shall not be discharged except
by payment in full of all principal, premium, if any, and interest on the Notes
and all other costs provided for under this Indenture, or as provided in
Section 8.02.
If any Holder or the Trustee is required by any court or otherwise to
return to either the Company or the Subsidiary Guarantors, or any trustee or
similar official acting in relation to either the Company or the Subsidiary
Guarantors, any amount paid by the Company or the Subsidiary Guarantors to the
Trustee or such Holder, the Subsidiary Guarantees, to the extent theretofore
discharged, shall be reinstated in full force and effect. Each of the
Subsidiary Guarantors agrees that it shall not be entitled to any right of
subrogation in relation to the Holders in respect of any obligations guaranteed
hereby until payment in full of all obligations guaranteed hereby. Each
Subsidiary Guarantor agrees that, as between it, on the one hand, and the
Holders of Notes and the Trustee, on the other hand, (x) the maturity of the
obligations guaranteed hereby may be accelerated as provided in Article 6
hereof for the purposes hereof, notwithstanding any stay, injunction or other
prohibition preventing such acceleration in respect of the obligations
guaranteed hereby, and (y) in the event of any acceleration of such obligations
as provided in Article 6 hereof, such obligations (whether or not due and
payable) shall forthwith become due and payable by such Subsidiary Guarantor
for the purpose of the Subsidiary Guarantee.
SECTION 10.02 EXECUTION AND DELIVERY OF SUBSIDIARY GUARANTEES
To evidence its Subsidiary Guarantee set forth in Section 10.01
hereof, each of the Subsidiary Guarantors agrees that a notation of the
Subsidiary Guarantees substantially in the form included in Exhibit A-1 hereto
shall be endorsed on each Note authenticated and delivered by the Trustee and
that this Indenture shall be executed on behalf of the Subsidiary Guarantors by
an Officer of the Subsidiary Guarantors and attested to by an Officer other
than the Officer executing this Indenture.
Each of the Subsidiary Guarantors agrees that the Subsidiary
Guarantees set forth in this Article 10 will remain in full force and effect
and apply to all the Notes, notwithstanding any failure to endorse on each Note
a notation of the Subsidiary Guarantees.
If an Officer whose facsimile signature is on a Note no longer holds
that office at the time the Trustee authenticates the Note on which the
Subsidiary Guarantees are endorsed, the Subsidiary Guarantees shall be valid
nevertheless.
The delivery of any Note by the Trustee, after the authentication
thereof hereunder, shall constitute due delivery of the Subsidiary Guarantees
set forth in this Indenture on behalf of the Subsidiary Guarantors.
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SECTION 10.03 SUBSIDIARY GUARANTORS MAY CONSOLIDATE, ETC., ON CERTAIN TERMS
(a) Nothing contained in this Indenture or in the Notes shall
prevent any consolidation or merger of a Subsidiary Guarantor with or into the
Company or another Subsidiary Guarantor, or shall prevent the transfer of all
or substantially all of the assets of a Subsidiary Guarantor to the Company or
another Subsidiary Guarantor. Upon any such consolidation, merger, transfer or
sale, the Subsidiary Guarantee of such Subsidiary Guarantor shall no longer
have any force or effect.
(b) Except as provided in Section 10.03(a), or a transaction
referred to in Section 10.04, no Subsidiary Guarantor shall, in a single
transaction or series of related transactions, consolidate or merge with or
into (whether or not such Subsidiary Guarantor is the surviving corporation)
another corporation, Person or entity other than the Company or another
Subsidiary Guarantor unless (i) subject to the provisions of Section 10.04
hereof, the entity or Person formed by or surviving any such consolidation or
merger (if other than such Subsidiary Guarantor) assumes all the obligations of
such Subsidiary Guarantor under its Subsidiary Guarantee and this Indenture
pursuant to a supplemental indenture substantially in the form of Exhibit C
hereto, (ii) immediately after such transaction no Default or Event of Default
exists, (iii) the Company shall, after giving pro forma effect thereto as if
such transaction had occurred at the beginning of the applicable four-quarter
period, be permitted to incur at least $1.00 of additional Indebtedness
pursuant to the Fixed Charge Coverage Ratio test set forth in the first
paragraph of Section 4.09, and (iv) such Subsidiary Guarantor shall have
delivered to the Trustee an Officer's Certificate and an Opinion of Counsel
addressed to the Trustee, each stating that such consolidation or merger and
such supplemental indenture, if any, comply with this Indenture and that such
supplemental indenture is enforceable. In case of any such consolidation or
merger and upon the assumption by the successor corporation, by supplemental
indenture, executed and delivered to the Trustee substantially in the form of
Exhibit C hereto, of the Subsidiary Guarantees endorsed upon the Notes and the
due and punctual performance of all of the covenants and conditions of this
Indenture to be performed by such Subsidiary Guarantor, such successor
corporation shall succeed to and be substituted for such Subsidiary Guarantor
with the same effect as if it had been named herein as a Subsidiary Guarantor.
Such successor corporation thereupon may cause to be signed any or all of the
Subsidiary Guarantees to be endorsed upon all of the Notes issuable hereunder
which theretofore shall not have been signed by the Company and delivered to
the Trustee. All the Subsidiary Guarantees so issued shall in all respects
have the same legal rank and benefit under this Indenture as the Subsidiary
Guarantees theretofore and thereafter issued in accordance with the terms of
this Indenture as though all of such Subsidiary Guarantees had been issued at
the date of the execution hereof. The requirements of clause (iii) of this
Section 10.03(b) shall not apply in the case of a consolidation or merger with
or into the Company or any other Subsidiary Guarantor. All the Subsidiary
Guarantees so issued shall in all respects have the same legal rank and benefit
under the Indenture as the Subsidiary Guarantees theretofore and thereafter
issued in accordance with the terms of this Indenture as though all of such
Subsidiary Guarantees had been issued at the date of execution hereof.
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(c) The Trustee, subject to the provisions of Section 10.04
hereof, shall be entitled to receive an Officer's Certificate and an Opinion of
Counsel as conclusive evidence that any such consolidation, merger, sale or
conveyance, and any such assumption of Obligations, comply with the provisions
of this Section 10.03. Such Officer's Certificate and Opinion of Counsel shall
comply with the provisions of Section 12.05.
SECTION 10.04 RELEASES FOLLOWING SALE OF ASSETS
In the event of a sale or other disposition of all or substantially
all of the assets of any Subsidiary Guarantor, by way of merger, consolidation
or otherwise, or a sale or other disposition of all of the Capital Stock of any
Subsidiary Guarantor, which sale or other disposition otherwise complies with
the terms of this Indenture, then such Subsidiary Guarantor (in the event of a
sale or other disposition, by way of such a merger, consolidation or otherwise,
of all of the Capital Stock of such Subsidiary Guarantor) or the corporation
acquiring the property (in the event of a sale or other disposition of all of
the assets of such Subsidiary Guarantor) shall be released from and relieved of
any obligations under its Subsidiary Guarantee; provided that in the event of
an Asset Sale, the Net Proceeds from such sale or other disposition are treated
in accordance with the provisions of Section 4.07 hereof. Upon delivery by the
Company to the Trustee of an Officer's Certificate and Opinion of Counsel, to
the effect that such sale or other disposition was made by the Company in
accordance with the provisions of this Indenture, including, without
limitation, Section 4.07 hereof, the Trustee shall execute any documents
reasonably required in order to evidence the release of any such Subsidiary
Guarantor from its obligations under its Subsidiary Guarantee. Any Subsidiary
Guarantor not released from its obligations under its Subsidiary Guarantee
shall remain liable for the full amount of principal of and interest on the
Notes and for the other obligations of any Subsidiary Guarantor under this
Indenture as provided in this Article 10.
SECTION 10.05 LIMITATION OF SUBSIDIARY GUARANTOR'S LIABILITY
Each Subsidiary Guarantor, and by its acceptance hereof each Holder,
hereby confirms that it is the intention of all such parties that the guarantee
by such Subsidiary Guarantor pursuant to its Subsidiary Guarantee not
constitute a fraudulent transfer or conveyance for purposes of the Bankruptcy
Law, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act
or any similar federal or state law. To effectuate the foregoing intention,
the Holders and such Subsidiary Guarantor hereby irrevocably agree that the
obligations of such Subsidiary Guarantor under this Article 10 shall be limited
to the maximum amount as will, after giving effect to all other contingent and
fixed liabilities of such Subsidiary Guarantor and after giving effect to any
collections from or payments made by or on behalf of any other Subsidiary
Guarantor in respect of the obligations of such other Subsidiary Guarantor
under this Article 10, result in the obligations of such Subsidiary Guarantor
under the Subsidiary Guarantee of such Subsidiary Guarantor not constituting a
fraudulent transfer or conveyance.
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SECTION 10.06 APPLICATION OF CERTAIN TERMS AND PROVISIONS TO THE SUBSIDIARY
GUARANTORS
(a) For purposes of any provision of this Indenture which provides
for the delivery by any Subsidiary Guarantor of an Officer's Certificate and/or
an Opinion of Counsel, the definitions of such terms in Section 1.01 shall
apply to such Subsidiary Guarantor as if references therein to the Company were
references to such Subsidiary Guarantor.
(b) Any request, direction, order or demand which by any provision
of this Indenture is to be made by any Guarantor, shall be sufficient if
evidenced as described in Section 12.02 as if references therein to the Company
were references to such Subsidiary Guarantor.
(c) Any notice or demand which by any provision of this Indenture
is required or permitted to be given or served by the Trustee or by the holders
of Notes to or on any Subsidiary Guarantor may be given or served as described
in Section 12.02 as if references therein to the Company were references to
such Subsidiary Guarantor.
(d) Upon any demand, request or application by any Subsidiary
Guarantor to the Trustee to take any action under this Indenture, such
Subsidiary Guarantor shall furnish to the Trustee such certificates and
opinions as are required in Section 12.04 hereof as if all references therein
to the Company were references to such Subsidiary Guarantor.
(e) In the case at any time any Paying Agent other than the
Trustee shall have been appointed by the Company and be then acting hereunder,
the term "Trustee" as used in this Article 10 shall in each case (unless the
context shall otherwise require) be construed as extending to and including
such Paying Agent.
SECTION 10.07 RELEASE OF SUBSIDIARY GUARANTEES
Concurrently with the defeasance of the Notes under Section 8.02
hereof, the Subsidiary Guarantors shall be released from all of their
obligations under the Subsidiary Guarantees and this Article 10.
SECTION 10.08 SUBORDINATION OF SUBSIDIARY GUARANTEES
The obligations of each Subsidiary Guarantor under its Subsidiary
Guarantee pursuant to this Article 10 is subordinated in right of payment to
the prior payment in full in cash of all Senior Debt of the Subsidiary
Guarantor on the same basis as the Notes are subordinated to Senior Debt of the
Company. For the purposes of the foregoing sentence, the Trustee and the
Holders shall have the right to receive and/or retain payments by any of the
Subsidiary Guarantors only at such times as they may receive and/or retain
payments in respect of Notes pursuant to this Indenture, including Article 11
hereof. In the event that the Trustee receives any Subsidiary Guarantor
payment at a time when the Trustee has actual knowledge that such payment is
prohibited by the foregoing sentence, such Subsidiary Guarantor payment shall
be paid over and delivered to the holders of the Senior Debt of the Subsidiary
Guarantor remaining unpaid, to the extent necessary to pay in full all such
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Senior Debt. In the event that a Holder receives any Subsidiary Guarantor
payment at a time when such payment is prohibited by the foregoing sentence,
the Subsidiary Guarantor payment shall be paid over and delivered to the
holders of the Senior Debt of such Subsidiary Guarantor remaining unpaid, to
the extent necessary to pay in full all such Senior Debt.
Each Holder of a Note by its acceptance thereof (a) agrees to and
shall be bound by the provisions of this Section 10.08, (b) authorizes and
directs the Trustee on the Holder's behalf to take such action as may be
necessary and appropriate to effectuate the subordination so provided, and (c)
appoints the Trustee as the Holder's attorney-in-fact for any and all such
purposes.
ARTICLE 11
SUBORDINATION
SECTION 11.01 AGREEMENT TO SUBORDINATE
The Company agrees, and each Holder by accepting a Note agrees, that
the Indebtedness evidenced by the Note (including but not limited to Liquidated
Damages) is subordinated in right of payment, to the extent and in the manner
provided in this Article, to the prior payment in full in cash of all Senior
Debt (whether outstanding on the date hereof or hereafter created, incurred,
assumed or guaranteed), and that the subordination is for the benefit of the
holders of Senior Debt.
SECTION 11.02 LIQUIDATION; DISSOLUTION; BANKRUPTCY
Upon any payment or distribution to creditors of the Company in a
liquidation or dissolution of the Company or in a bankruptcy, reorganization,
insolvency, receivership or similar proceeding relating to the Company or its
property, in an assignment for the benefit of creditors or any marshaling of
the Company's assets and liabilities:
(1) holders of Senior Debt shall be entitled to receive
payment in full in cash of all Obligations due in respect of such
Senior Debt (including interest after the commencement of any such
proceeding at the rate specified in the applicable Senior Debt whether
or not allowable as a claim in any such proceeding) before Holders
shall be entitled to receive any payment with respect to the Notes
(except that Holders may receive (i) Permitted Junior Securities, and
(ii) payments and other distributions made from any defeasance trust
created pursuant to Section 8.01 hereof); and
(2) until all Obligations with respect to Senior Debt (as
provided in subsection (1) above) are paid in full in cash, any
distribution to which Holders would be entitled but for this Article
shall be made to holders of Senior Debt (except that Holders may
receive (i) Permitted Junior Securities, and (ii) payments and other
distributions made from any defeasance trust created pursuant to
Section 8.01 hereof), as their interests may appear.
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SECTION 11.03 DEFAULT ON DESIGNATED SENIOR DEBT
The Company may not make any payment or distribution to the Trustee or
any Holder in respect of Obligations with respect to the Notes (other than (i)
Permitted Junior Securities, and (ii) payments and other distributions made
from any defeasance trust created pursuant to Section 8.01 hereof) until all
principal and other Obligations with respect to the Senior Debt have been paid
in full if:
(i) a default in the payment of any principal or other
Obligations with respect to Senior Debt occurs and is continuing; or
(ii) a default, other than a payment default, on Senior
Debt occurs and is continuing that then permits holders of the Senior
Debt to accelerate its maturity and the Trustee receives a notice of
the default (a "Payment Blockage Notice") from a Person who may give
it pursuant to Section 11.11 hereof. If the Trustee receives any such
Payment Blockage Notice, no subsequent Payment Blockage Notice shall
be effective for purposes of this Section unless and until (a) at
least 365 days shall have elapsed since the delivery of the
immediately prior Payment Blockage Notice, and (b) all scheduled
payments of principal, premium, if any, and interest on the Notes that
have come due have been paid in full in cash. No nonpayment default
that existed or was continuing on the date of delivery of any Payment
Blockage Notice to the Trustee shall be, or be made, the basis for a
subsequent Payment Blockage Notice.
The Company may and shall resume payments on and distributions in
respect of the Notes upon the earlier of:
(1) in the case of a Default referred to in Section
11.03(i) hereof, upon the date which the default is cured or waived,
or
(2) in the case of a default referred to in Section
11.03(ii) hereof, on the earlier of the date on which such default is
cured or waived or 179 days after the date on which the Payment
Blockage Notice is received, unless a Payment Default on any Senior
Debt then exists and such Senior Debt has not been accelerated.
SECTION 11.04. ACCELERATION OF NOTES
If payment of the Notes is accelerated because of an Event of Default,
the Company shall promptly notify Representatives of the holders of Senior Debt
of the acceleration.
SECTION 11.05. WHEN DISTRIBUTION MUST BE PAID OVER
In the event that the Trustee receives any payment or distribution of
any Obligations with respect to the Notes at a time when the Trustee has actual
knowledge that such payment is prohibited by Section 11.02 or 11.03 hereof,
such payment or distribution shall be held by the Trustee in trust for the
benefit of, and shall be paid forthwith over and delivered, upon written
request, to, the holders
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of Senior Debt as their interests may appear or their Representative under the
indenture or other agreement (if any) pursuant to which Senior Debt may have
been issued, as their respective interests may appear, for application to the
payment of all Obligations with respect to Senior Debt remaining unpaid to the
extent necessary to pay such Obligations in full in accordance with their
terms, after giving effect to any concurrent payment or distribution to or for
the holders of Senior Debt.
In the event that a Holder receives any payment or distribution of any
Obligations with respect to the Notes at a time when such payment is prohibited
by Section 11.03 hereof, such payment or distribution shall be paid forthwith
over and delivered, upon written request, to, the holders of Senior Debt as
their interests may appear or their Representative under the indenture or other
agreement (if any) pursuant to which Senior Debt may have been issued, as their
respective interests may appear, for application to the payment of all
Obligations with respect to Senior Debt remaining unpaid to the extent
necessary to pay such Obligations in full in accordance with their terms, after
giving effect to any concurrent payment or distribution to or for the holders
of Senior Debt.
With respect to the holders of Senior Debt, the Trustee undertakes to
perform only such obligations on the part of the Trustee as are specifically
set forth in this Article 11, and no implied covenants or obligations with
respect to the holders of Senior Debt shall be read into this Indenture against
the Trustee. The Trustee shall not be deemed to owe any fiduciary duty to the
holders of Senior Debt, and shall not be liable to any such holders if the
Trustee shall pay over or distribute to or on behalf of Holders or the Company
or any other Person money or assets to which any holders of Senior Debt shall
be entitled by virtue of this Article 11, except if such payment is made as a
result of the willful misconduct or gross negligence of the Trustee.
SECTION 11.06. NOTICE BY COMPANY.
The Company shall promptly notify the Trustee and the Paying Agent of
any facts known to the Company that would cause a payment of any Obligations
with respect to the Notes to violate this Article, but failure to give such
notice shall not affect the subordination of the Notes to the Senior Debt as
provided in this Article.
SECTION 11.07. SUBROGATION
After all Obligations with respect to the Senior Debt are paid in full
in cash and until the Notes are paid in full, Holders shall be subrogated
(equally and ratably with all other Indebtedness pari passu with the Notes) to
the rights of holders of Senior Debt to receive distributions applicable to
Senior Debt to the extent that distributions otherwise payable to the Holders
have been applied to the payment of Senior Debt. A distribution made under
this Article 11 to holders of Senior Debt that otherwise would have been made
to Holders is not, as between the Company and Holders, a payment by the Company
on the Notes.
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SECTION 11.08. RELATIVE RIGHTS
This Article defines the relative rights of Holders and holders of
Senior Debt. Nothing in this Indenture shall:
(1) impair, as between the Company and Holders, the
obligation of the Company, which is absolute and unconditional, to pay
principal of and interest on the Notes in accordance with their terms;
(2) affect the relative rights of Holders and creditors
of the Company other than their rights in relation to holders of
Senior Debt; or
(3) prevent the Trustee or any Holder from exercising its
available remedies upon a Default or Event of Default, subject to the
rights of holders and owners of Senior Debt to receive distributions
and payments otherwise payable to Holders.
If the Company fails because of this Article to pay principal of,
interest or Liquidated Damages, if any, on a Note on the due date, the failure
is still a Default or Event of Default.
SECTION 11.09. SUBORDINATION MAY NOT BE IMPAIRED BY COMPANY
No right of any holder of Senior Debt to enforce the subordination of
the Indebtedness evidenced by the Notes shall be impaired by any act or failure
to act by the Company or any Holder or by the failure of the Company or any
Holder to comply with this Indenture.
Without in any way limiting the generality of the foregoing paragraph,
the holders of the Senior Debt may, at any time and from time to time, without
the consent of or notice to the Trustee or Holders, without incurring
responsibility to the Holders and without impairing or releasing the
subordination provided in this Article 11 or the obligations hereunder of the
Holders to the holders of Senior Debt, do any one or more of the following:
(i) change the manner, place or terms of payment or extend the time or payment
of, or renew or alter, Senior Debt or any instrument evidencing the same or any
agreement under which Senior Debt is outstanding; provided that any such
alteration shall not (a) increase the amount of Senior Debt outstanding in a
manner prohibited by this Indenture, or (b) otherwise violate Section 4.09
hereof, (ii) sell, exchange, release or otherwise deal with any property
pledged, mortgaged or otherwise securing Senior Debt, (iii) release any Person
in any manner for the collection of Senior Debt; provided that any such sale,
exchange, release or other transaction shall not violate Section 4.13 hereof,
and (iv) exercise or refrain from exercising any rights against the Company or
any other Person; provided that in no event shall any such actions limit the
right of the Holder to take any action to accelerate the maturity of the Notes
in accordance with the provisions set forth in Article 6 or to pursue any
rights or remedies against the parties to this Indenture under this Indenture
or under applicable laws if the taking of such action does not otherwise
violate the terms of this Article 11.
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SECTION 11.10. DISTRIBUTION OR NOTICE TO REPRESENTATIVE
Whenever a distribution is to be made or a notice given to holders of
Senior Debt, the distribution may be made and the notice given to their
Representative.
Upon any payment or distribution of assets of the Company referred to
in this Article 11, the Trustee and the Holders shall be entitled to
conclusively rely upon any order or decree made by any court of competent
jurisdiction or upon any certificate of such Representative or of the
liquidating trustee or agent or other Person making any distribution to the
Trustee or to the Holders for the purpose of ascertaining the Persons entitled
to participate in such distribution, the holders of the Senior Debt and other
Indebtedness of the Company, the amount thereof or payable thereon, the amount
or amounts paid or distributed thereon and all other facts pertinent thereto or
to this Article 11. Notwithstanding the foregoing, with respect only to
Obligations under the New Credit Facility, the Trustee and the Holders shall be
entitled to rely only upon the order or decree made by any court of competent
jurisdiction or upon a certificate of a Representative of the New Credit
Facility for the purpose of ascertaining the matters described in the preceding
sentence.
SECTION 11.11. RIGHTS OF TRUSTEE AND PAYING AGENT
Notwithstanding the provisions of this Article 11 or any other
provision of this Indenture, the Trustee shall not be charged with knowledge of
the existence of any facts that would prohibit the making of any payment or
distribution by the Trustee, and the Trustee and the Paying Agent may continue
to make payments on the Notes, unless the Trustee shall have received at its
Corporate Trust Office at least five Business Days prior to the date of such
payment written notice of facts that would cause the payment of any Obligations
with respect to the Notes to violate this Article. Only the Company or a
Representative of holders of Designated Senior Debt may give the notice.
Nothing in this Article 11 shall impair the claims of, or payments to, the
Trustee under or pursuant to Section 7.07 hereof.
The Trustee in its individual or any other capacity may hold Senior
Debt with the same rights it would have if it were not Trustee. Any Agent may
do the same with like rights.
SECTION 11.12. AUTHORIZATION TO EFFECT SUBORDINATION
Each Holder of a Note by the Holder's acceptance thereof authorizes
and directs the Trustee on the Holder's behalf to take such action as may be
necessary or appropriate to effectuate the subordination as provided in this
Article 11, and appoints the Trustee to act as the Holder's attorney-in-fact
for any and all such purposes. If the Trustee does not file a proper proof of
claim or proof of debt in the form required in any proceeding referred to in
Section 6.09 hereof at least 30 days before the expiration of the time to file
such claim, a Representatives of Senior Debt is hereby authorized to file an
appropriate claim for and on behalf of the Holders of the Notes.
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SECTION 11.13. AMENDMENTS
The provisions of this Article 11 or any related definitions shall not
be amended or modified in a manner adverse to the holders of Senior Debt
without the written consent of the holders of all Senior Debt.
ARTICLE 12
MISCELLANEOUS
SECTION 12.01 TRUST INDENTURE ACT CONTROLS
If any provision of this Indenture limits, qualifies or conflicts with
the duties imposed by TIA Section 318(c), the duties imposed by TIA Section
318(c) shall control.
SECTION 12.02 NOTICES
Any notice or communication by the Company, any Subsidiary Guarantor
or the Trustee to the other is duly given if in writing and delivered in Person
or mailed by first-class mail, telecopier or overnight air courier guaranteeing
next day delivery, to the other's address:
If to the Company or a Subsidiary Guarantor:
HydroChem Industrial Services, Inc
6210 Rothway
Houston, Texas 77040
Attention: Chief Financial Officer
Telecopier: (713) 324-2440
If to the Trustee:
Norwest Bank, Minnesota, N.A.
Corporate Trust
Norwest Center
Sixth and Marquette
Minneapolis, Minnesota 55479-9969
Attention: Corporate Trust Department
Telecopier No.: (612) 667-9825
The Company or the Trustee by notice to the other may designate
additional or different addresses for subsequent notices or communications.
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All notices and communications (other than those sent to Holders)
shall be deemed to have been duly given: at the time delivered by hand, if
personally delivered; five days after being deposited in the mail, postage
prepaid, if mailed; when receipt acknowledged, if telecopied; and the next
Business Day after timely delivery to the courier, if sent by overnight air
courier guaranteeing next day delivery.
Any notice or communication to a Holder shall be mailed by first-class
mail to its address shown on the register kept by the Registrar. Any notice or
communication shall also be so mailed to any Person described in TIA Section
313(c), to the extent required by the TIA. Failure to mail a notice or
communication to a Holder or any defect in it shall not affect its sufficiency
with respect to other Holders.
If a notice or communication is mailed in the manner provided above
within the time prescribed, it is duly given, whether or not the addressee
receives it.
If the Company mails a notice or communication to Holders, it shall
mail a copy to the Trustee and each Agent at the same time.
SECTION 12.03 COMMUNICATION BY HOLDERS WITH OTHER HOLDERS
Holders may communicate pursuant to TIA Section 312(b) with other
Holders with respect to their rights under this Indenture or the Notes. The
Company, the Trustee, the Registrar and anyone else shall have the protection
of TIA Section 312(c).
SECTION 12.04 CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT
Upon any request or application by the Company to the Trustee to take
any action under this Indenture, the Company shall furnish to the Trustee:
(1) an Officer's Certificate in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set
forth in Section 12.05 hereof) stating that, in the opinion of the
signers, all conditions precedent and covenants, if any, provided for
in this Indenture relating to the proposed action have been complied
with; and
(2) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set
forth in Section 12.05 hereof) stating that, in the opinion of such
counsel, all such conditions precedent and covenants have been
complied with.
SECTION 12.05 STATEMENTS REQUIRED IN CERTIFICATE OR OPINION
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture (other than a certificate
provided pursuant to TIA Section 314(a)(4)) shall include:
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(a) a statement that the Person making such certificate or
opinion has read such covenant or condition;
(b) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(c) a statement that, in the opinion of such Person, he has
made such examination or investigation as is necessary to enable him
to express an informed opinion as to whether or not such covenant or
condition has been complied with; and
(d) a statement as to whether or not, in the opinion of such
Person, such condition or covenant has been complied with.
SECTION 12.06 RULES BY TRUSTEE AND AGENTS
The Trustee may make reasonable rules for action by or at a meeting of
Holders. The Registrar or Paying Agent may make reasonable rules and set
reasonable requirements for its functions.
SECTION 12.07 LEGAL HOLIDAYS
If a payment date is a Legal Holiday at a place of payment, payment
may be made at that place on the next succeeding day that is not a Legal
Holiday, and no interest shall accrue for the intervening period.
SECTION 12.08 NO RECOURSE AGAINST OTHERS
No director, officer, employee, incorporator or stockholder of the
Company or any Subsidiary Guarantor, as such, shall have any liability for any
obligations of the Company or any Subsidiary Guarantor under the Notes, this
Indenture or any Subsidiary Guarantee or for any claim based on, in respect of,
or by reason of, such obligations or their creation. Each Holder of Notes by
accepting a Note waives and releases all such liability. The waiver and
release are part of the consideration for issuance of the Notes.
SECTION 12.09 DUPLICATE ORIGINALS
The parties may sign any number of copies of this Indenture. One
signed copy is enough to prove this Indenture.
SECTION 12.10 GOVERNING LAW
The internal law of the State of New York shall govern and be used to
construe this Indenture, the Notes and the Subsidiary Guarantees (without
regard to conflicts of law provisions). Each party hereto irrevocably submits
itself to the non-exclusive jurisdiction of the state and federal courts of New
York for purposes of this Indenture and agrees and consents that service of
process
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may be made upon it in any legal proceeding relating to this Indenture by any
means allowed under federal or New York law. The parties hereto hereby waive
and agree not to assert, by way of motion, as a defense or otherwise, that any
such proceeding is brought in an inconvenient forum or that the venue thereof
is improper.
SECTION 12.11 NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS
This Indenture may not be used to interpret another indenture, loan or
debt agreement of the Company or its Subsidiaries. Any such indenture, loan or
debt agreement may not be used to interpret this Indenture.
SECTION 12.12 SUCCESSORS
All agreements of the Company and the Subsidiary Guarantors in this
Indenture, the Notes and the Subsidiary Guarantees shall bind their respective
successors. All agreements of the Trustee in this Indenture shall bind its
successor.
SECTION 12.13 SEVERABILITY
In case any provision in this Indenture, the Notes or the Subsidiary
Guarantees shall be invalid, illegal or unenforceable, the validity, legality
and enforceability of the remaining provisions shall not in any way be affected
or impaired thereby.
SECTION 12.14 COUNTERPART ORIGINALS
The parties may sign any number of copies of this Indenture. Each
signed copy shall be an original, but all of them together represent the same
agreement.
SECTION 12.15 TABLE OF CONTENTS, HEADINGS, ETC.
The Table of Contents and Headings of the Articles and Sections of
this Indenture have been inserted for convenience of reference only, are not to
be considered a part hereof and shall in no way modify or restrict any of the
terms or provisions hereof.
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SIGNATURES
HYDROCHEM INDUSTRIAL SERVICES,
INC.
By: /s/ B. TOM CARTER, JR.
-------------------------------
B. Tom Carter, Jr.
President and Chief
Executive Officer
HYDROCHEM INTERNATIONAL, INC.
By: /s/ B. TOM CARTER, JR.
-------------------------------
B. Tom Carter, Jr.
President and Chief
Executive Officer
NORWEST BANK, MINNESOTA, N.A.,
as Trustee
By: /s/ CURTIS D. SCHWEGMAN
-------------------------------
Name: Curtis D. Schwegman
Title: Assistant Vice President
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EXHIBIT A
(Face of Security)
10 3/8% [Series A] [Series B] Senior Subordinated Notes due 2007
CUSIP No. _________
No. ___ $110,000,000
HYDROCHEM INDUSTRIAL SERVICES, INC., a Delaware corporation, promises
to pay to Cede & Co. or registered assigns, the principal sum of One Hundred
Ten Million Dollars ($110,000,000) on August 1, 2007.
Interest Payment Dates: February 1 and August 1, commencing February 1, 1998
Record Dates: January 15 and July 15 (whether or not a Business Day)
HYDROCHEM INDUSTRIAL SERVICES, INC.
By:
---------------------------------
Name:
Title:
By:
---------------------------------
Name:
Title:
TRUSTEE CERTIFICATE OF AUTHENTICATION
Dated:
This is one of the Notes referred to in the
within-mentioned Indenture
NORWEST BANK, MINNESOTA, N.A.
as Trustee
By:
--------------------------------
(Authorized Signature)
A-1
<PAGE> 87
(Back of Security)
10 3/8% [Series A] [Series B] Senior Subordinated Notes due 2007
[Unless and until it is exchanged in whole or in part for Notes in
definitive form, this Note may not be transferred except as a whole by the
Depositary to a nominee of the Depositary or by a nominee of the Depositary to
the Depositary or another nominee of the Depositary or by the Depositary or any
such nominee to a successor Depositary or a nominee of such successor
Depositary. Unless this certificate is presented by an authorized
representative of The Depository Trust Company (55 Water Street, New York, New
York) ("DTC") to the issuer or its agent for registration of transfer, exchange
or payment, and any certificate issued is registered in the name of Cede & Co.
or such other name as may be requested by an authorized representative of DTC
(and any payment is made to Cede & Co. or such other entity as may be requested
by an authorized representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the
registered owner hereof, Cede & Co., has an interest herein.]1/
[THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY
ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE UNITED
STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND THE
SECURITY EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN
THE ABSENCE OF SUCH REGISTRATION OR ANY APPLICABLE EXEMPTION THEREFROM. EACH
PURCHASER OF THE SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE SELLER
MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE
SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF THE SECURITY
EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE COMPANY THAT (A) SUCH SECURITY
MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (1)(a) TO A PERSON WHO
THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED
IN RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144A, OR (b) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN OPINION OF
COUNSEL IF THE COMPANY SO REQUESTS), (2) TO THE COMPANY OR (3) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH ANY
APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER
APPLICABLE JURISDICTION AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS
REQUIRED TO, NOTIFY ANY PURCHASER FROM IT OF THE SECURITY EVIDENCED HEREBY OF
THE RESALE RESTRICTIONS SET FORTH IN (A) ABOVE.]2/
_________________
1 This paragraph shall be included only if the Note is a Global Note.
2 This paragraph shall be removed upon the exchange of Series A
Notes for Series B Notes in the Exchange Offer or upon the sale of
the Series A Notes under a Shelf Registration Statement pursuant
to the Registration Rights Agreement.
A-2
<PAGE> 88
Capitalized terms used herein shall have the meanings assigned to them
in the Indenture referred to below unless otherwise indicated.
1. INTEREST. HydroChem Industrial Services, Inc., a Delaware
corporation (the "Company"), promises to pay interest on the principal amount
of this Note at the rate and in the manner specified below and shall pay the
Liquidated Damages, if any, payable pursuant to Section 5 of the Registration
Rights Agreement referred to below. Interest on the Notes will accrue at the
rate of 10 3/8% per annum and will be payable semi-annually in arrears on
February 1 and August 1, commencing on February 1, 1998, or if any such day is
not a Business Day, on the next succeeding Business Day (each an "Interest
Payment Date"), to Holders of record on the immediately preceding January 15
and July 15, respectively.
Interest will be computed on the basis of a 360-day year of twelve
30-day months. Interest on the Notes shall accrue from the most recent date to
which interest has been paid or duly provided for or, if no interest has been
paid or duly provided for, from the Issue Date of original issuance of the
Notes. To the extent lawful, the Company shall pay interest (including
post-petition interest in any proceeding under any Bankruptcy Law) on overdue
principal at the applicable interest rate on the Notes plus one percent; it
shall pay interest on overdue installments of interest (without regard to
applicable grace periods) at the same rate, to the extent lawful, (i) if
payment is made during the period of five Business Days following the date on
which such interest was due, to the Persons who were to receive payment on the
date such interest was due or (ii) if payment is made after such period, to the
Persons who are Holders on a subsequent special record date, which date shall
be at the earliest practicable date but in all events at least five Business
Days prior to the payment date.
2. METHOD OF PAYMENT. The Company shall pay interest on the
Notes (except defaulted interest) and Liquidated Damages, if any, to the
Persons who are registered Holders of Notes at the close of business on the
record date next preceding the Interest Payment Date, even if such Notes are
cancelled after such record date and on or before such Interest Payment Date.
Principal, premium, if any, interest and Liquidated Damages, if any, on the
Notes shall be payable at the office or agency of the Company maintained for
such purpose within the City and State of New York, or at the option of the
Company, payment of interest and Liquidated Damages, if any, may be made by
check mailed to the Holders of the Notes at their respective addresses set
forth in the register of Holders of Notes; provided that all payments with
respect to Notes the Holders of which have given wire transfer instructions to
the Company and the Trustee shall be required to be made by wire transfer of
immediately available funds to the accounts specified by the Holders thereof.
The Company shall pay principal, premium, if any, and interest in money of the
United States that at the time of payment is legal tender for payment of public
and private debts.
3. PAYING AGENT AND REGISTRAR. Initially, the Trustee under the
Indenture will act as Paying Agent and Registrar. The Company may change any
Paying Agent or Registrar without notice to any Holder. The Company or any of
its Subsidiaries may act as Paying Agent or Registrar.
A-3
<PAGE> 89
4. INDENTURE. The Company issued the Notes under an Indenture
dated as of August 1, 1997 ("Indenture") among the Company, the Subsidiary
Guarantor and the Trustee. The terms of the Notes include those stated in the
Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939 (15 U.S. Code Sections 77aaa-77bbbb) as in effect on the
date of the Indenture. The Notes are subject to all such terms, and Holders
are referred to the Indenture and such Act for a statement of such terms. The
terms of the Indenture shall govern any inconsistencies between the Indenture
and the Notes. Terms not otherwise defined herein shall have the meanings
assigned in the Indenture. The Notes are general unsecured obligations of the
Company limited to $110,000,000 in aggregate principal amount.
5. OPTIONAL REDEMPTION.
Except as set forth in the next paragraph, the Notes are not
redeemable at the Company's option prior to August 1, 2002. Thereafter, the
Notes will be subject to redemption at any time at the option of the Company,
in whole or in part, upon not less than 30 nor more than 90 days' notice, at
the redemption prices (expressed as percentages of principal amount) set forth
below, plus accrued and unpaid interest and Liquidated Damages, if any, to the
applicable redemption date, if redeemed during the twelve-month period
beginning on August 1 of the years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
<S> <C>
2002 . . . . . . . . . . . . . . . . . . . . . . . 105.188%
2003 . . . . . . . . . . . . . . . . . . . . . . . 103.458%
2004 . . . . . . . . . . . . . . . . . . . . . . . 101.729%
2005 and thereafter . . . . . . . . . . . . . . . . . 100.000%
</TABLE>
Notwithstanding the foregoing, at any time prior to August 4,
2000, the Company may on any one or more occasions redeem up to an aggregate
35% of the original aggregate principal amount of Notes at a redemption price
of 109.375% of the principal amount thereof, plus accrued and unpaid interest
and Liquidated Damages, if any, to the redemption date, with the net proceeds
of one or more Equity Offerings; provided that at least 65% of the original
aggregate principal amount of Notes originally issued remains outstanding
immediately after such redemption; and provided, further, that such redemption
shall occur within 90 days of the date of the closing of any such Equity
Offering.
6. MANDATORY REDEMPTION.
The Company is not required to make mandatory redemption or sinking
fund payments with respect to the Notes, except as provided in paragraph 7
below.
7. REPURCHASE AT OPTION OF HOLDER.
(a) If there is a Change of Control, the Company shall be required
to offer to purchase all or any part (equal to $1,000 or an integral multiple
thereof) of each Holder's Notes at a purchase price in cash equal to 101% of
the aggregate principal amount thereof plus accrued and unpaid
A-4
<PAGE> 90
interest and Liquidated Damages, if any, to the date of purchase. Holders of
Notes that are subject to an offer to purchase will receive an offer to
purchase from the Company prior to any related purchase date, and may elect to
have such Notes purchased by completing the form entitled "Option of Holder to
Elect Purchase" appearing below.
(b) If the Company consummates any Asset Sale, the Company shall
be required, under certain circumstances, to apply the Excess Proceeds thereof
to an offer to all Holders of Notes to purchase the maximum principal amount of
Notes that may be purchased out of the Excess Proceeds at an offer price in
cash equal to 100% of the principal amount of the Notes, plus accrued and
unpaid interest and Liquidated Damages, if any, to the date of purchase, in
accordance with the procedures set forth in the Indenture. Holders of Notes
that are subject to an offer to purchase will receive an offer to purchase from
the Company prior to any related purchase date, and may elect to have such
Notes purchased by completing the form entitled "Option of Holder to Elect
Purchase" appearing below.
8. DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in face
denominations of $1,000 and integral multiples of $1,000. The Notes may be
transferred and exchanged as provided in the Indenture. The Registrar and the
Trustee may require a Holder, among other things, to furnish appropriate
endorsements and transfer documents and the Company may require a Holder to pay
any taxes and fees required by law or permitted by the Indenture. The Company
need not exchange or register the transfer of any Note or portion of a Note
selected for redemption except the unredeemed portion of any Note being
redeemed in part. Also, it need not (i) register the transfer of or exchange
any Notes during any period (a) beginning at the opening of business on a
Business Day fifteen (15) days before the day of any selection of Notes for
redemption and ending at the close of business on the day of selection or (b)
beginning at the opening of business on a Business Day fifteen (15) days before
an interest payment date and ending on the close of business on such interest
payment date.
9. SUBORDINATION. The Notes and the Subsidiary Guarantees are
subordinated in right of payment, to the extent and in the manner provided in
Article 11 of the Indenture, to the prior payment in full of all Senior Debt.
The Company agrees, and each Holder by accepting a Note consents and agrees, to
the subordination provided in the Indenture and authorizes the Trustee to give
it effect.
10. PERSONS DEEMED OWNERS. Prior to due presentment to the
Trustee for registration of the transfer of this Note, the Trustee, any Agent
and the Company may deem and treat the Person in whose name this Note is
registered as its absolute owner for the purpose of receiving payment of
principal of and interest on this Note and for all other purposes whatsoever,
whether or not this Note is overdue, and neither the Trustee, any Agent nor the
Company shall be affected by notice to the contrary. The registered holder of
a Note shall be treated as its owner for all purposes.
11. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain
exceptions, the Indenture, the Notes and the Subsidiary Guarantees may be
amended or supplemented with the written consent of the Holders of at least a
majority in principal amount of the then outstanding Notes, and any existing
Default or Event of Default (other than a Default or Event of Default relating
to the payment of principal, premium, interest or Liquidated Damages, if any,
except a payment default resulting
A-5
<PAGE> 91
from an acceleration that has been rescinded) or compliance with any provision
of the Indenture, the Notes or the Subsidiary Guarantees may be waived with the
written consent of the Holders of at least a majority in principal amount of
the then outstanding Notes. Without the consent of any Holder, the Indenture
or the Notes may be amended or supplemented to cure any ambiguity, defect or
inconsistency, to provide for uncertificated Notes in addition to or in place
of Certificated Notes, to provide for the assumption of the Company's or a
Subsidiary Guarantor's obligations to Holders of the Notes in case of a merger
or consolidation, to provide for additional Subsidiary Guarantors, to make any
change that would provide any additional rights or benefits to the Holders of
the Notes or that does not materially adversely affect the legal rights of any
such Holder under the Indenture, or to comply with the requirements of the
Commission in order to effect or maintain the qualification of the Indenture
under the Trust Indenture Act or to allow any Subsidiary Guarantor to guarantee
the Notes.
12. DEFAULTS AND REMEDIES. Events of Default include: (i) default
for 30 days in the payment when due of interest on, or Liquidated Damages with
respect to, the Notes (whether or not prohibited by the subordination
provisions of the Indenture); (ii) default in payment when due of the principal
of or premium, if any, on the Notes (whether or not prohibited by the
subordination provisions of the Indenture); (iii) failure by the Company to
comply with the provisions of Section 4.06, 4.07 or 5.01 of the Indenture; (iv)
failure by the Company for 30 days after written notice from the Trustee or the
Holders of at least 30% in principal amount of the then outstanding Notes to
comply with Sections 4.08 and 4.09 hereof; (v) failure by the Company for 60
days after written notice from the Trustee or Holders of 30% in principal
amount of the then outstanding Notes to comply with any of its other agreements
in this Indenture or the Notes; (vi) except as permitted by the Indenture, any
Subsidiary Guarantee shall be held in any judicial proceeding to be
unenforceable or invalid or shall cease for any reason to be in full force and
effect or any Subsidiary Guarantor, or any Person acing on behalf of any
Subsidiary Guarantor, shall deny or disaffirm its obligations under its
Subsidiary Guarantee; (vii) default under any mortgage, indenture or instrument
under which there may be issued or by which there may be secured or evidenced
any Indebtedness for money borrowed by the Company or any of its Restricted
Subsidiaries (or the payment of which is guaranteed by the Company or any of
its Restricted Subsidiaries) whether such Indebtedness or guarantee now exists,
or is created after the Issue Date, which default (a) is caused by a failure to
pay principal when due at final stated maturity (a "Payment Default") or (b)
results in the acceleration of such Indebtedness prior to its express maturity
and, in each case, the principal amount of any such Indebtedness, together with
the principal amount of any other such Indebtedness under which there has been
a Payment Default or the maturity of which has been so accelerated, aggregates
$7,500,000 or more; (viii) failure by the Company or any of its Restricted
Subsidiaries to pay final judgments aggregating in excess of $7,500,000, which
judgments are not paid, discharged or stayed for a period of 60 days; or (ix)
certain events of bankruptcy or insolvency with respect to the Company or any
Significant Subsidiary. If any Event of Default occurs and is continuing, the
Trustee or the Holders of at least 30% in principal amount of the then
outstanding Notes may declare all the Notes to be due and payable immediately.
Notwithstanding the foregoing, in the case of an Event of Default arising from
certain events of bankruptcy or insolvency, with respect to the Company, any
Significant Subsidiary or any group of Restricted Subsidiaries that, taken
together, would constitute a Significant Subsidiary, all outstanding Notes will
become due and payable without further action or notice. Holders may not
enforce the Indenture or the Notes except as provided in the Indenture.
A-6
<PAGE> 92
The Trustee may require indemnity satisfactory to it before it enforces the
Indenture or the Notes. Subject to certain limitations, Holders of a majority
in principal amount of the then outstanding Notes may direct the Trustee in its
exercise of any trust or power. The Trustee may withhold from Holders of the
Notes notice of any continuing Default or Event of Default (except a Default or
Event of Default relating to the payment of principal, premium or interest) if
it determines that withholding notice is in their interest. The Company is
required to deliver to the Trustee annually a statement regarding compliance
with the Indenture, and the Company is required upon becoming aware of any
Default or Event of Default, to deliver to the Trustee a statement specifying
such Default or Event of Default.
13. TRUSTEE DEALINGS WITH THE COMPANY. Subject to the provisions
of the Indenture, the Trustee in its individual or any other capacity may
become the owner or pledgee of Notes and may otherwise deal with the Company,
the Subsidiary Guarantors or any Affiliate of each with the same rights it
would have if it were not Trustee. Subject to the provisions of Section 310(b)
of the Trust Indenture Act, the Trustee shall be permitted to engage in
transactions with the Company and its Subsidiaries other than those
contemplated by the Indenture.
14. NO RECOURSE AGAINST OTHERS. No director, officer, employee,
incorporator, or stockholder of the Company or any Subsidiary Guarantor, as
such, shall have any liability for any obligations of the Company or any
Subsidiary Guarantor under the Notes, the Indenture or any Subsidiary Guarantee
or for any claim based on, in respect of, or by reason of, such obligations or
their creation. Each Holder of Notes, by accepting a Note waives and releases
all such liability. The waiver and release are part of the consideration for
the issuance of the Notes and any Subsidiary Guarantee.
15. AUTHENTICATION. This Note shall not be valid until
authenticated by the manual signature of the Trustee or an authenticating
agent.
16. ABBREVIATIONS. Customary abbreviations may be used in the
name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN
ENT (= tenants by the entireties), JT TEN (= joint tenants with right of
survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (=
Uniform Gifts to Minors Act).
17. ADDITIONAL RIGHTS OF HOLDERS OF TRANSFER RESTRICTED
SECURITIES. In addition to the rights provided to Holders of Notes under the
Indenture, Holders of Transferred Restricted Securities shall have all the
rights set forth in the Registration Rights Agreement dated as of the date of
the Indenture, between the Company and the parties named on the signature pages
thereof (the "Registration Rights Agreement").
18. CUSIP NUMBERS. Pursuant to a recommendation promulgated by
the Committee on Uniform Security Identification Procedures, the Company has
caused CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP
numbers in notices of redemption as a convenience to Holders. No
representation is made as to the accuracy of such numbers either as printed on
the Notes or as contained in any notice of redemption and reliance may be
placed only on the other identification numbers placed thereon.
A-7
<PAGE> 93
The Company shall furnish to any Holder upon written request and
without charge a copy of the Indenture. Requests may be made to:
HydroChem Industrial Services, Inc.
6210 Rothway
Houston, Texas 77040
Attention: Chief Financial Officer
Telecopier No.: (713) 329-2440
A-8
<PAGE> 94
SUBSIDIARY GUARANTEE
The Subsidiary Guarantor listed below (hereinafter referred to as the
"Subsidiary Guarantor," which term includes any successors or assigns under the
Indenture (the "Indenture") and any additional Subsidiary Guarantors), has
irrevocably and unconditionally guaranteed (i) the due and punctual payment of
the principal of, premium, if any, interest and Liquidated Damages, if any, on
the 10 3/8% Senior Subordinated Notes due August 1, 2007 (the "Notes") of
HydroChem Industrial Services, Inc., a Delaware corporation (the "Company"),
whether at stated maturity, by acceleration or otherwise, the due and punctual
payment of interest on the overdue principal, and premium if any, and (to the
extent permitted by law) interest on any interest, if any, and Liquidated
Damages, if any, on the Notes, and the due and punctual performance of all
other obligations of the Company, to the Holders or the Trustee all in
accordance with the terms set forth in Article 10 of the Indenture, (ii) in
case of any extension of time of payment or renewal of any Notes or any such
other obligations, that the same will be promptly paid in full when due or
performed in accordance with the terms of the extension or renewal, whether at
stated maturity, by acceleration or otherwise, and (iii) the payment of any and
all costs and expenses (including reasonable attorneys' fees) incurred by the
Trustee or any Holder in enforcing any rights under this Subsidiary Guarantee.
The obligations of the Subsidiary Guarantor to the Holder and to the
Trustee pursuant to this Subsidiary Guarantee and the Indenture are expressly
set forth in Article 10 of the Indenture and reference is hereby made to such
Indenture for the precise terms of this Guarantee.
No stockholder, officer, director, employee or incorporator, as such,
past, present or future of the Subsidiary Guarantor shall have any liability by
reason of his or its status as such stockholder, officer, director, employee or
incorporator for any obligations of the Subsidiary Guarantor under the Notes,
the Indenture or its Subsidiary Guarantee or for any claim based on, in respect
of, or by reason of, such obligations or their creation.
This is a continuing Guarantee and shall remain in full force and
effect and shall be binding upon the Subsidiary Guarantor and its successors
and assigns until full and final payment of all of the Company's obligations
under the Notes and Indenture and shall inure to the benefit of the successors
and assigns of the Trustee and the Holders, and, in the event of any transfer
or assignment of rights by any Holder or the Trustee, the rights and privileges
herein conferred upon that party shall automatically extend to and be vested in
such transferee or assignee, all subject to the terms and conditions hereof.
This is a Guarantee of payment and not of collectibility.
This Subsidiary Guarantee shall not be valid or obligatory for any
purpose until the certificate of authentication on the Note upon which this
Subsidiary Guarantee is noted shall have been executed by the Trustee under the
Indenture by the manual signature of one of its authorized officers.
The obligations of the Subsidiary Guarantor under its Subsidiary
Guarantee shall be limited to the extent necessary to insure that it does not
constitute a fraudulent conveyance under applicable law.
A-9
<PAGE> 95
THE TERMS OF ARTICLE 10 OF THE INDENTURE ARE INCORPORATED HEREIN BY
REFERENCE.
Capitalized terms used herein have the same meanings given in the
Indenture unless otherwise indicated.
HYDROCHEM INTERNATIONAL, INC.
By:
------------------------------------
Name:
Title:
ATTESTED TO:
By:
-------------------------
Name:
Title:
A-10
<PAGE> 96
ASSIGNMENT FORM
To assign this Note, fill in the form below: (I) or (we) assign and transfer
this Note to
- --------------------------------------------------------------------------------
(Insert assignee's soc. sec. or tax I.D. no.)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint _______________________________________________________
agent to transfer this Note on the books of the Company. The
agent may substitute another to act for him.
Date: Your Signature:
-------------------------- ------------------------
(Sign exactly as your name appears on
the face of this Note)
Signature Guarantee:
A-11
<PAGE> 97
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have all or any part of this Note
purchased by the Company pursuant to Section 4.06 or 4.07 of the Indenture,
check the box below:
[ ] Section 4.06 [ ] Section 4.07
If you want to elect to have only part of the Note purchased
by the Company pursuant to Section 4.06 or 4.07 of the Indenture, state the
amount you elect to have purchased (if all, write "ALL"): $___________
Date: Your Signature:
-------------------------- ------------------------
(Sign exactly as your name appears on
the face of this Note)
Tax Identification No.:
----------------
Signature Guarantee:
A-12
<PAGE> 98
SCHEDULE OF EXCHANGES FOR CERTIFICATED NOTES
The following exchanges of a part of this Global Note for
Certificated Notes have been made:
<TABLE>
<CAPTION>
Principal Amount of Signature of
Amount of decrease Amount of increase in this Global Note authorized officer
in Principal Amount Principal Amount of following such of Trustee or Note
Date of Exchange of this Global Note this Global Note decrease (or increase) Custodian
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
</TABLE>
A-13
<PAGE> 99
EXHIBIT B-1
FORM OF CERTIFICATE FOR EXCHANGE OR REGISTRATION OF TRANSFER
OF CERTIFICATED NOTES
(Pursuant to Section 2.06(b) of the Indenture)
Norwest Bank, Minnesota, N.A.
Norwest Center
Sixth and Marquette
Minneapolis, Minnesota 55479-0069
Attention: Corporate Trust Department
Re: 10 3/8% Senior Subordinated Notes due 2007 of HydroChem
Industrial Services, Inc.
Reference is hereby made to the Indenture, dated as of August 1, 1997
(the "Indenture"), among HydroChem Industrial Services, Inc., as issuer (the
"Company"), the Subsidiary Guarantor and Norwest Bank, Minnesota, N.A., as
trustee. Capitalized terms used but not defined herein shall have the meanings
given to them in the Indenture.
This letter relates to $_________ principal amount of Notes which are
evidenced by a Certificated Note (CUSIP No. ) and held with
the Depositary in the name of (the "Transferor").
The Transferor has requested a transfer of such Certificated Note to a Person
who will take delivery thereof in the form of an equal principal amount of Notes
evidenced by one or more Certificated Notes (CUSIP No. ) which Notes,
immediately after such transfer, are to be delivered to the transferor at the
address set forth below.
In connection with such request and in respect of the Notes
surrendered to the Trustee herewith for exchange (the "Surrendered Notes"), the
Holder of such Surrendered Notes hereby certifies that:
[CHECK ONE]
[ ] the Surrendered Notes are being acquired for the Transferor's own
account, without transfer;
or
[ ] the Surrendered Notes are being transferred to the Company or its
Subsidiaries;
or
[ ] the Surrendered Notes are being transferred pursuant to and in
accordance with Rule 144A under the Securities Act of 1933, as amended
(the "Securities Act"), and, accordingly, the Transferor hereby
further certifies that the Surrendered Notes are being transferred to
a Person that the Transferor reasonably believes is purchasing the
Surrendered Notes for its own account, or for one or more accounts
with respect to which such Person exercises sole
B1-1
<PAGE> 100
investment discretion, and such Person and each such account is a
"qualified institutional buyer" within the meaning of Rule 144A, in
each case in a transaction meeting the requirements of Rule 144A;
or
[ ] the Surrendered Notes are being transferred in a transaction permitted
by Rule 144 under the Securities Act;
or
[ ] the Surrendered Notes are being transferred pursuant to an effective
registration statement under the Securities Act;
or
[ ] such transfer is being effected pursuant to an exemption from the
registration requirements of the Securities Act other than Rule 144A
or Rule 144, and the Transferor hereby further certifies that the
Notes are being transferred in compliance with the transfer
restrictions applicable to the Global Note and in accordance with the
requirements of the exemption claimed, which certification is
supported by an Opinion of Counsel, provided by the transferor or the
transferee (a copy of which the Transferor has attached to this
certification) in form reasonably acceptable to the Company and to the
Registrar, to the effect that such transfer is in compliance with the
Securities Act;
and the Surrendered Notes are being transferred in compliance with any
applicable blue sky securities laws of any state of the United States.
This certificate and the statements contained herein are made for your
benefit and the benefit of the Company and Donaldson, Lufkin & Jenrette
Securities Corporation, the initial purchaser of such Notes being transferred.
Terms used in this certificate and not otherwise defined in the Indenture have
the meanings set forth in Rule 144A under the Securities Act.
-----------------------------------
[Insert Name of Transferor]
By:
--------------------------------
Name:
Title:
Dated: ,
-------------- -----
cc: HydroChem Industrial Services, Inc.
B1-2
<PAGE> 101
EXHIBIT B-2
FORM OF CERTIFICATE FOR EXCHANGE OR REGISTRATION OF TRANSFER
FROM RULE 144A GLOBAL NOTE TO CERTIFICATED NOTE
(Pursuant to Section 2.06(c) of the Indenture)
Norwest Bank, Minnesota, N.A.
Norwest Center
Sixth and Marquette
Minneapolis, Minnesota 55479-0069
Attention: Corporate Trust Department
Re: 10 3/8% Senior Subordinated Notes due 2007 of HydroChem
Industrial Services, Inc.
Reference is hereby made to the Indenture, dated as of August 1, 1997
(the "Indenture"), among HydroChem Industrial Services, Inc., as issuer (the
"Company"), the Subsidiary Guarantor and Norwest Bank, Minnesota, N.A., as
trustee. Capitalized terms used but not defined herein shall have the meanings
given to them in the Indenture.
This letter relates to $_______ principal amount of Notes which are
evidenced by a Rule 144A Global Note (CUSIP No. ) and held
with the Depositary in the name of ____________________________ (the
"Transferor"). The Transferor has requested a transfer of such beneficial
interest in the Notes to a Person who will take delivery thereof in the form of
an equal principal amount of Notes evidenced by one or more Certificated Notes
(CUSIP No. ) which Notes, immediately after such transfer, are to
be delivered to the transferor at the address set forth below.
In connection with such request and in respect of the Notes
surrendered to the Trustee herewith for exchange (the "Surrendered Notes"), the
Holder of such Surrendered Notes hereby certifies that:
[CHECK ONE]
[ ] the Surrendered Notes are being transferred to the beneficial owner of
such Notes;
or
[ ] the Surrendered Notes are being transferred pursuant to and in
accordance with Rule 144A under the Securities Act of 1933, as amended
(the "Securities Act"), and, accordingly, the Transferor hereby
further certifies that the Surrendered Notes are being transferred to
a Person that the Transferor reasonably believes is purchasing the
Surrendered Notes for its own account, or for one or more accounts
with respect to which such Person exercises sole investment
discretion, and such Person and each such account is a "qualified
institutional buyer" within the meaning of Rule 144A, in each case in
a transaction meeting the requirements of Rule 144A;
B2-1
<PAGE> 102
or
[ ] the Surrendered Notes are being transferred in a transaction permitted
by Rule 144 under the Securities Act;
or
[ ] the Surrendered Notes are being transferred pursuant to an effective
registration statement under the Securities Act;
or
[ ] such transfer is being effected pursuant to an exemption from the
registration requirements of the Securities Act other than Rule 144A
or Rule 144, and the Transferor hereby further certifies that the
Notes are being transferred in compliance with the transfer
restrictions applicable to the Global Note and in accordance with the
requirements of the exemption claimed, which certification is
supported by an Opinion of Counsel, provided by the transferor or the
transferee (a copy of which the Transferor has attached to this
certification) in form reasonably acceptable to the Company and to the
Registrar, to the effect that such transfer is in compliance with the
Securities Act;
and the Surrendered Notes are being transferred in compliance with any
applicable blue sky securities laws of any state of the United States.
This certificate and the statements contained herein are made for your
benefit and the benefit of the Company and Donaldson, Lufkin & Jenrette
Securities Corporation, the initial purchaser of such Notes being transferred.
Terms used in this certificate and not otherwise defined in the Indenture have
the meanings set forth in Rule 144A under the Securities Act.
-----------------------------------
[Insert Name of Transferor]
By:
--------------------------------
Name:
Title:
Dated: ,
-------------- -----
-----------------------------------
[Address of Transferor]
-----------------------------------
cc: HydroChem Industrial Services, Inc.
B2-2
<PAGE> 103
EXHIBIT B-3
FORM OF CERTIFICATE FOR EXCHANGE OR REGISTRATION OF TRANSFER
FROM CERTIFICATED NOTE TO RULE 144A GLOBAL NOTE
(Pursuant to Section 2.06(e) of the Indenture)
Norwest Bank, Minnesota, N.A.
Norwest Center
Sixth and Marquette
Minneapolis, Minnesota 55479-0069
Attention: Corporate Trust Department
Re: 10 3/8% Senior Subordinated Notes due 2007 of HydroChem
Industrial Services, Inc.
Reference is hereby made to the Indenture, dated as of August 1, 1997
(the "Indenture"), among HydroChem Industrial Services, Inc., as issuer (the
"Company"), the Subsidiary Guarantor and Norwest Bank, Minnesota, N.A., as
trustee. Capitalized terms used but not defined herein shall have the meanings
given to them in the Indenture.
This letter relates to $_________ principal amount of Notes which are
evidenced by a Certificated Note (CUSIP No. ) and held with
the Depositary in the name of (the "Transferor").
The Transferor has requested a transfer of such Certificated Note to a Person
who will take delivery thereof in the form of a beneficial interest in a Global
Note (CUSIP No. ).
In connection with such request and in respect of the Notes
surrendered to the Trustee herewith for exchange (the "Surrendered Notes"), the
Holder of such Surrendered Notes hereby certifies that:
[CHECK ONE]
[ ] the Surrendered Notes are being transferred to the beneficial owner of
such Notes;
or
[ ] the Surrendered Notes are being transferred pursuant to and in
accordance with Rule 144A under the Securities Act of 1933, as amended
(the "Securities Act"), and, accordingly, the Transferor hereby
further certifies that the Surrendered Notes are being transferred to
a Person that the Transferor reasonably believes is purchasing the
Surrendered Notes for its own account, or for one or more accounts
with respect to which such Person exercises sole investment
discretion, and such Person and each such account is a "qualified
institutional buyer" within the meaning of Rule 144A, in each case in
a transaction meeting the requirements of Rule 144A;
or
B3-1
<PAGE> 104
[ ] the Surrendered Notes are being transferred in a transaction permitted
by Rule 144 under the Securities Act;
or
[ ] the Surrendered Notes are being transferred pursuant to an effective
registration statement under the Securities Act;
or
[ ] such transfer is being effected pursuant to an exemption from the
registration requirements of the Securities Act other than Rule 144A
or Rule 144, and the Transferor hereby further certifies that the
Notes are being transferred in compliance with the transfer
restrictions applicable to the Global Notes and in accordance with the
requirements of the exemption claimed, which certification is
supported by an Opinion of Counsel, provided by the transferor or the
transferee (a copy of which the Transferor has attached to this
certification) in form reasonably acceptable to the Company and to the
Registrar, to the effect that such transfer is in compliance with the
Securities Act;
and the Surrendered Notes are being transferred in compliance with any
applicable blue sky securities laws of any state of the United States.
This certificate and the statements contained herein are made for your
benefit and the benefit of the Company and Donaldson, Lufkin & Jenrette
Securities Corporation, the initial purchaser of such Notes being transferred.
Terms used in this certificate and not otherwise defined in the Indenture have
the meanings set forth in Rule 144A under the Securities Act.
-----------------------------------
[Insert Name of Transferor]
By:
--------------------------------
Name:
Title:
Dated: ,
------------- -----
cc: HydroChem Industrial Services, Inc.
B3-2
<PAGE> 105
EXHIBIT C
FORM OF SUPPLEMENTAL INDENTURE
SUPPLEMENTAL INDENTURE (this "Supplemental Indenture"), dated as of
____________, 1997 between Subsidiary Guarantor (the "New Subsidiary
Guarantor"), a subsidiary of HydroChem Industrial Services, Inc., a Delaware
corporation (the "Company"), and Norwest Bank, Minnesota, National Association,
as trustee under the indenture referred to below (the "Trustee"). Capitalized
terms used herein and not defined herein shall have the meaning ascribed to
them in the Indenture (as defined below).
W I T N E S S E T H:
WHEREAS, the Company has heretofore executed and delivered to the
Trustee an Indenture (the "Indenture"), dated as of August 1, 1997, providing
for the issuance of an aggregate principal amount of $110,000,000 of 10 3/8%
Senior Subordinated Notes due 2007 (the "Notes");
WHEREAS, Section 4.13 of the Indenture provides that under certain
circumstances the Company may cause certain of its subsidiaries to execute and
deliver to the Trustee a supplemental indenture pursuant to which such
subsidiaries shall unconditionally guarantee all of the Company's obligations
under the Notes pursuant to a Subsidiary Guarantee on the terms and conditions
set forth herein; and
WHEREAS, pursuant to Section 9.01 of the Indenture, the Trustee is
authorized to execute and deliver this Supplemental Indenture.
NOW, THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the receipt of which is hereby acknowledged, the
New Subsidiary Guarantor and the Trustee mutually covenant and agree for the
equal and ratable benefit of the Holders of the Notes as follows:
1. CAPITALIZED TERMS. Capitalized terms used herein without
definition shall have the meanings ascribed to them in the Indenture.
2. AGREEMENT TO SUBSIDIARY GUARANTEE. The New Subsidiary
Guarantor hereby agrees, jointly and severally with all other Subsidiary
Guarantors, to guarantee the Company's Obligations under the Notes and the
Indenture on the terms and subject to the conditions set forth in Article 10 of
the Indenture and to be bound by all other applicable provisions of the
Indenture.
3. NO RECOURSE AGAINST OTHERS. No past, present or future
director, officer, employee, incorporator, shareholder or agent of any
Subsidiary Guarantor, as such, shall have any liability for any obligations of
the Company or any Subsidiary Guarantor under the Notes, any Subsidiary
Guarantees, the Indenture of this Supplemental Indenture or for any claim based
on, in respect of, or by reason of, such obligations or their creation. Each
Holder by accepting a Note waives and releases all such liability. The waiver
and release are part of the consideration for issuance of the Notes.
C-1
<PAGE> 106
4. NEW YORK LAW TO GOVERN. The internal law of the State of New
York shall govern and be used to construe this Supplemental Indenture.
5. COUNTERPARTS. The parties may sign any number of copies of
this Supplemental Indenture. Each signed copy shall be an original, but all of
them together represent the same agreement.
6. EFFECT OF HEADINGS. The Section headings herein are for
convenience only and shall not effect the construction hereof.
7. THE TRUSTEE. The Trustee shall not be responsible in any
manner whatsoever for or in respect of the validity or sufficiency of this
Supplemental Indenture or for or in respect of the correctness of the recitals
of fact contained herein, all of which recitals are made solely by the New
Subsidiary Guarantor.
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed and attested, all as of the date first above
written.
Dated: (NAME OF NEW SUBSIDIARY GUARANTOR)
------------------------
By:
------------------------------------
Name:
Title:
Dated: NORWEST BANK, MINNESOTA,
------------------------ NATIONAL ASSOCIATION
as Trustee
By:
------------------------------------
Name:
Title:
C-2
<PAGE> 1
EXHIBIT 4.3
================================================================================
REGISTRATION RIGHTS AGREEMENT
Dated as of August 4, 1997
by and among
HydroChem Industrial Services, Inc.
HydroChem International, Inc.
and
Donaldson, Lufkin & Jenrette
Securities Corporation
================================================================================
<PAGE> 2
This Registration Rights Agreement (this "Agreement") is made and
entered into as of August 4, 1997, by and among HydroChem Industrial Services,
Inc., a Delaware corporation (the "Company"), HydroChem International, Inc., a
Delaware corporation (the "Guarantor"), and Donaldson, Lufkin & Jenrette
Securities Corporation (the "Initial Purchaser"), who has agreed to purchase
the Company's 10 3/8% Series A Senior Subordinated Notes due 2007 (the "Series
A Notes") pursuant to the Purchase Agreement (as defined below).
This Agreement is made pursuant to the Purchase Agreement, dated July
30, 1997 (the "Purchase Agreement"), by and among the Company, the Guarantor
and the Initial Purchaser. In order to induce the Initial Purchaser to
purchase the Series A Notes, the Company has agreed to provide the registration
rights set forth in this Agreement. The execution and delivery of this
Agreement is a condition to the obligations of the Initial Purchaser set forth
in Section 3 of the Purchase Agreement.
The parties hereby agree as follows:
SECTION 1. DEFINITIONS
As used in this Agreement, the following capitalized terms shall have
the following meanings:
Act: The Securities Act of 1933, as amended.
Business Day: Any day except a Saturday, Sunday or other day in
the City of New York, or in the city of the corporate trust office of the
Trustee, on which banks are authorized to close.
Broker-Dealer: Any broker or dealer registered under the Exchange
Act.
Broker-Dealer Transfer Restricted Securities: Series B Notes that
are acquired by a Broker-Dealer in the Exchange Offer in exchange for Series A
Notes that such Broker-Dealer acquired for its own account as a result of
market making activities or other trading activities (other than Series A Notes
acquired directly from the Company or any of its affiliates).
Certificated Securities: As defined in the Indenture.
Closing Date: The date hereof.
Commission: The Securities and Exchange Commission.
Consummate: An Exchange Offer shall be deemed "Consummated" for
purposes of this Agreement upon the occurrence of (a) the filing and
effectiveness under the Act of the Exchange Offer Registration Statement
relating to the Series B Notes to be issued in the Exchange Offer, (b) the
maintenance of such Registration Statement continuously effective and the
keeping of the Exchange Offer open for a period not less than the minimum
period required pursuant to Section 3(b) hereof and (c) the delivery by the
Company to the Registrar under the Indenture of Series B Notes in the same
aggregate principal amount as the aggregate principal amount of Series A Notes
tendered by Holders thereof pursuant to the Exchange Offer.
<PAGE> 3
Damages Payment Date: With respect to the Series A Notes, each
Interest Payment Date.
Exchange Act: The Securities Exchange Act of 1934, as amended.
Exchange Offer: The registration by the Company under the Act of the
Series B Notes pursuant to the Exchange Offer Registration Statement pursuant
to which the Company shall offer the Holders of all outstanding Transfer
Restricted Securities the opportunity to exchange all such outstanding Transfer
Restricted Securities for Series B Notes in an aggregate principal amount equal
to the aggregate principal amount of the Transfer Restricted Securities
tendered in such exchange offer by such Holders.
Exchange Offer Registration Statement: The Registration Statement
relating to the Exchange Offer, including the related Prospectus.
Exempt Resales: The transactions in which the Initial Purchaser
proposes to sell the Series A Notes to certain "qualified institutional
buyers," as such term is defined in Rule 144A.
Holders: As defined in Section 2 hereof.
Indemnified Holder: As defined in Section 8(a) hereof.
Indenture: The Indenture, dated the Closing Date, among the Company,
the Guarantor and Norwest Bank, Minnesota, N.A., as trustee (the "Trustee"),
pursuant to which the Notes are to be issued, as such Indenture is amended or
supplemented from time to time in accordance with the terms thereof.
Interest Payment Date: As defined in the Indenture and the Notes.
NASD: National Association of Securities Dealers, Inc.
Notes: The Series A Notes and the Series B Notes.
Person: An individual, partnership, corporation, trust, joint
venture, limited liability company, unincorporated organization, or a
government or agency or political subdivision thereof.
Prospectus: The prospectus included in a Registration Statement at
the time such Registration Statement is declared effective, as amended or
supplemented by any prospectus supplement and by all other amendments thereto,
including post-effective amendments, and all material incorporated by reference
into such Prospectus.
Record Holder: With respect to any Damages Payment Date, each Person
who is a Holder of Notes on the record date with respect to the Interest
Payment Date on which such Damages Payment Date shall occur.
Registration Default: As defined in Section 5 hereof.
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<PAGE> 4
Registration Statement: Any registration statement of the Company
and the Guarantor relating to (a) an offering of Series B Notes pursuant to the
Exchange Offer or (b) the registration for resale of Transfer Restricted
Securities pursuant to the Shelf Registration Statement, in each case, (i)
which is filed pursuant to the provisions of this Agreement and (ii) including
the Prospectus included therein, all amendments and supplements thereto
(including post-effective amendments) and all exhibits and material
incorporated by reference therein.
Restricted Broker-Dealer: Any Broker-Dealer which holds
Broker-Dealer Transfer Restricted Securities.
Series B Notes: The Company's 10 3/8% Series B Senior Subordinated
Notes due 2007 to be issued pursuant to the Indenture (i) in the Exchange Offer
or (ii) upon the request of any Holder of Series A Notes covered by a Shelf
Registration Statement, in exchange for such Series A Notes.
Shelf Registration Statement: As defined in Section 4 hereof.
TIA: The Trust Indenture Act of 1939 (15 U.S.C. Section 77aaa-77bbbb)
as in effect on the date of the Indenture.
Transfer Restricted Securities: Each Note, until the earliest to
occur of (a) the date on which such Note is exchanged by a person other than a
Restricted Broker-Dealer in the Exchange Offer, (b) the date on which such Note
has been disposed of in accordance with a Shelf Registration Statement, (c) the
date on which such Note is disposed of by a Broker-Dealer pursuant to the "Plan
of Distribution" contemplated by the Exchange Offer Registration Statement
(including delivery of the Prospectus contained therein) or (d) the date on
which such Note is distributed to the public pursuant to Rule 144 (or any
successor provision then in force) under the Act or is saleable under Rule
144(k) (or any successor provision then in force).
Underwritten Registration or Underwritten Offering: A registration
in which securities of the Company are sold to an underwriter for reoffering to
the public.
SECTION 2. HOLDERS
A Person is deemed to be a holder of Transfer Restricted Securities
(each, a "Holder") whenever such Person owns Transfer Restricted Securities.
SECTION 3. REGISTERED EXCHANGE OFFER
(a) Unless the Exchange Offer shall not be permitted by applicable
federal law (after the procedures set forth in Section 6(a)(i) below have been
complied with), the Company and the Guarantor shall (i) cause to be filed with
the Commission as soon as practicable after the Closing Date, but in no event
later than 60 days after the Closing Date, the Exchange Offer Registration
Statement, (ii) use their reasonable best efforts to cause such Exchange Offer
Registration Statement to become effective at the earliest possible time, but
in no event later than 120 days after the Closing Date, (iii) in connection
with the foregoing, (A) file all pre-effective amendments to such Exchange
Offer Registration Statement as may be necessary in order to cause such
Exchange Offer Registration
-3-
<PAGE> 5
Statement to become effective, (B) file, if applicable, a post-effective
amendment to such Exchange Offer Registration Statement pursuant to Rule 430A
under the Act and (C) cause all necessary filings, if any, in connection with
the registration and qualification of the Series B Notes to be made under the
Blue Sky laws of such jurisdictions as are necessary to permit Consummation of
the Exchange Offer, and (iv) upon the effectiveness of such Exchange Offer
Registration Statement, commence and Consummate the Exchange Offer. The
Exchange Offer Registration Statement shall be on the appropriate form
permitting registration of the Series B Notes to be offered in exchange for the
Series A Notes that are Transfer Restricted Securities and to permit sales of
Broker-Dealer Transfer Restricted Securities by Restricted Broker-Dealers as
contemplated by Section 3(c) below.
(b) The Company and the Guarantor shall use their reasonable best efforts
to cause the Exchange Offer Registration Statement to be effective
continuously, and shall keep the Exchange Offer open, for a period of not less
than the minimum period required under applicable federal and state securities
laws to Consummate the Exchange Offer; provided, however, that in no event
shall such period be less than 20 Business Days. The Company and the Guarantor
shall cause the Exchange Offer to comply with all applicable federal and state
securities laws. No securities other than the Notes shall be included in the
Exchange Offer Registration Statement. The Company and the Guarantor shall use
their respective best efforts to cause the Exchange Offer to be Consummated
within 30 Business Days after the Exchange Offer Registration Statement has
become effective.
(c) The Company shall include a "Plan of Distribution" section in the
Prospectus contained in the Exchange Offer Registration Statement and indicate
therein that any Restricted Broker-Dealer who holds Series A Notes that are
Transfer Restricted Securities and that were acquired for the account of such
Broker-Dealer as a result of market-making activities or other trading
activities, may exchange such Series A Notes (other than Transfer Restricted
Securities acquired directly from the Company or any affiliate of the Company)
pursuant to the Exchange Offer; provided, however, such Broker-Dealer may be
deemed to be an "underwriter" within the meaning of the Act and must,
therefore, deliver a prospectus meeting the requirements of the Act in
connection with its initial sale of each Series B Note received by such
Broker-Dealer in the Exchange Offer, which prospectus delivery requirement may
be satisfied by the delivery by such Broker-Dealer of the Prospectus contained
in the Exchange Offer Registration Statement. Such "Plan of Distribution"
section shall also contain all other information with respect to such sales of
Broker-Dealer Transfer Restricted Securities by Restricted Broker-Dealers that
the Commission may require in order to permit such sales pursuant thereto, but
such "Plan of Distribution" shall not name any such Broker-Dealer or disclose
the amount of Notes held by any such Broker-Dealer, except to the extent
required by the Commission as a result of a change in policy after the date of
this Agreement.
The Company and the Guarantor shall use their reasonable best efforts
to keep the Exchange Offer Registration Statement continuously effective,
supplemented and amended as required by the provisions of Section 6(c) below to
the extent necessary to ensure that it is available for sales of Broker-Dealer
Transfer Restricted Securities by Restricted Broker-Dealers, and to ensure that
such Registration Statement conforms with the requirements of this Agreement,
the Act and the policies, rules and regulations of the Commission as announced
from time to time, for a period of one year from the date on which the Exchange
Offer is Consummated or such shorter period ending when all Broker-Dealer
Transfer Restricted Securities have been sold by Restricted Broker-Dealers.
-4-
<PAGE> 6
The Company and the Guarantor shall promptly provide sufficient
copies of the latest version of such Prospectus to such Restricted
Broker-Dealers promptly upon request, and in no event later than two business
days after such request, at any time during the above period of continuous
effectiveness in order to facilitate such sales.
SECTION 4. SHELF REGISTRATION
(a) Shelf Registration. If (i) the Company is not required to file an
Exchange Offer Registration Statement with respect to the Series B Notes
because the Exchange Offer is not permitted by applicable law (after the
procedures set forth in Section 6(a)(i) below have been complied with) or (ii)
if any Holder of Transfer Restricted Securities shall notify the Company within
20 Business Days following the Consummation of the Exchange Offer that (A) such
Holder was prohibited by law or Commission policy from participating in the
Exchange Offer or (B) such Holder may not resell the Series B Notes acquired by
it in the Exchange Offer to the public without delivering a prospectus and the
Prospectus contained in the Exchange Offer Registration Statement is not
appropriate or available for such resales by such Holder or (C) such Holder is
a Broker-Dealer and holds Series A Notes acquired directly from the Company or
one of its affiliates, then the Company and the Guarantor shall use its best
efforts to (x) cause to be filed on or prior to 60 days after the date on which
the Company determines that it is not required to file the Exchange Offer
Registration Statement pursuant to clause (i) above or 60 days after the date
on which the Company receives the notice specified in clause (ii) above, a
shelf registration statement pursuant to Rule 415 under the Act (which may be
an amendment to the Exchange Offer Registration Statement (in either event, the
"Shelf Registration Statement")), relating to all Transfer Restricted
Securities the Holders of which shall have provided the information required
pursuant to Section 4(b) hereof, and shall (y) use their respective best
efforts to cause such Shelf Registration Statement to become effective on or
prior to 120 days after the date on which the Company becomes obligated to file
such Shelf Registration Statement. If, after the Company has filed an Exchange
Offer Registration Statement which satisfies the requirements of Section 3(a)
above, the Company is required to file and make effective a Shelf Registration
Statement solely because the Exchange Offer shall not be permitted under
applicable federal law, then the filing of the Exchange Offer Registration
Statement shall be deemed to satisfy the requirements of clause (x) above.
Such an event shall have no effect on the requirements of clause (y) above.
The Company and the Guarantor shall use their reasonable best efforts to keep
the Shelf Registration Statement discussed in this Section 4(a) continuously
effective, supplemented and amended as required by and subject to the
provisions of Sections 6(b) and (c) hereof to the extent necessary to ensure
that it is available for sales of Transfer Restricted Securities by the Holders
thereof entitled to the benefit of this Section 4(a), and to ensure that it
conforms with the requirements of this Agreement, the Act and the policies,
rules and regulations of the Commission as announced from time to time, for a
period of at least two years (as extended pursuant to Section 6(c)(i))
following the date on which such Shelf Registration Statement first becomes
effective under the Act or such shorter period ending when all of the Transfer
Restricted Securities available for sale thereunder have been sold pursuant
thereto.
-5-
<PAGE> 7
(b) Provision by Holders of Certain Information in Connection with the
Shelf Registration Statement. No Holder of Transfer Restricted Securities may
include any of its Transfer Restricted Securities in any Shelf Registration
Statement pursuant to this Agreement unless and until such Holder furnishes to
the Company in writing, within 20 days after receipt of a request therefor,
such information specified in item 507 of Regulation S-K under the Act and such
other information as the Company may reasonably request for use in connection
with any Shelf Registration Statement or Prospectus or preliminary Prospectus
included therein. No Holder of Transfer Restricted Securities shall be
entitled to Liquidated Damages pursuant to Section 5 hereof unless and until
such Holder shall have used its best efforts to provide all such information.
Each Holder as to which any Shelf Registration Statement is being effected
agrees to furnish promptly to the Company all information required to be
disclosed in order to make the information previously furnished to the Company
by such Holder not materially misleading.
SECTION 5. LIQUIDATED DAMAGES
If (i) any Registration Statement required by this Agreement is not
filed with the Commission on or prior to the date specified for such filing in
this Agreement, (ii) any such Registration Statement has not been declared
effective by the Commission on or prior to the date specified for such
effectiveness in this Agreement, (iii) the Exchange Offer has not been
Consummated within 30 Business Days after the Exchange Offer Registration
Statement is first declared effective by the Commission or (iv) any
Registration Statement required by this Agreement is filed and declared
effective but shall thereafter cease to be effective or fail to be usable for
its intended purpose without being succeeded by a post-effective amendment to
such Registration Statement that cures such failure and that is itself declared
effective within three business days following such cessation of effectiveness
(each such event referred to in clauses (i) through (iv), a "Registration
Default"), then the Company and the Guarantor hereby jointly and severally
agree to pay liquidated damages to each Holder of Transfer Restricted
Securities with respect to the first 90-day period immediately following the
occurrence of such Registration Default, in an amount equal to $.0481 per week
per $1,000 principal amount of Transfer Restricted Securities held by such
Holder for each week or portion thereof that the Registration Default
continues. The amount of the liquidated damages shall increase by an
additional $.0481 per week per $1,000 in principal amount of Transfer
Restricted Securities with respect to each subsequent 90-day period until all
Registration Defaults have been cured, up to a maximum amount of liquidated
damages of $.1924 per week per $1,000 principal amount of Transfer Restricted
Securities. Notwithstanding anything to the contrary set forth herein, (1)
upon filing of the Exchange Offer Registration Statement (and/or, if
applicable, the Shelf Registration Statement), in the case of (i) above, (2)
upon the effectiveness of the Exchange Offer Registration Statement (and/or, if
applicable, the Shelf Registration Statement), in the case of (ii) above, (3)
upon Consummation of the Exchange Offer, in the case of (iii) above, or (4)
upon the filing of a post-effective amendment to the Registration Statement or
an additional Registration Statement that causes the Exchange Offer
Registration Statement (and/or, if applicable, the Shelf Registration
Statement) to again be declared effective or made usable in the case of (iv)
above, the liquidated damages payable with respect to the Transfer Restricted
Securities as a result of such clause (i), (ii), (iii) or (iv), as applicable,
shall cease.
-6-
<PAGE> 8
All accrued liquidated damages shall be paid to the Global Note
Holder by wire transfer of immediately available funds or by federal funds
check and to Holders of Certificated Securities by mailing checks to their
registered addresses on each Damages Payment Date. All obligations of the
Company and the Guarantor set forth in the preceding paragraph that are
outstanding with respect to any Transfer Restricted Security at the time such
security ceases to be a Transfer Restricted Security shall survive until such
time as all such obligations with respect to such security shall have been
satisfied in full.
SECTION 6. REGISTRATION PROCEDURES
(a) Exchange Offer Registration Statement. In connection with the
Exchange Offer, the Company and the Guarantor shall comply with all applicable
provisions of Section 6(c) below, shall use their reasonable best efforts to
effect such exchange and to permit the sale of Broker-Dealer Transfer
Restricted Securities being sold in accordance with the intended method or
methods of distribution thereof, and shall comply with all of the following
provisions:
(i) If, following the date hereof and prior to the consummation of
the Exchange Offer, there has been published a change in Commission policy
with respect to exchange offers such as the Exchange Offer, such that in
the reasonable opinion of counsel to the Company there is a substantial
question as to whether the Exchange Offer is permitted by applicable
federal law, the Company and the Guarantor hereby agree to seek a
no-action letter or other favorable decision from the Commission allowing
the Company and the Guarantor to Consummate an Exchange Offer for such
Series A Notes. The Company and the Guarantor hereby agree to pursue the
issuance of such a decision to the Commission staff level, but shall not
be required to take commercially unreasonable action to effect a change in
Commission policy. In connection with the foregoing, the Company and the
Guarantor hereby agree to take all such other actions as are reasonably
requested by the Commission or otherwise required in connection with the
issuance of such decision, including without limitation (A) participating
in telephonic conferences with the Commission, (B) delivering to the
Commission staff an analysis prepared by counsel to the Company setting
forth the legal bases, if any, upon which such counsel has concluded that
such an Exchange Offer should be permitted and (C) diligently pursuing a
resolution (which need not be favorable) by the Commission staff of such
submission.
(ii) As a condition to its participation in the Exchange Offer
pursuant to the terms of this Agreement, each Holder of Transfer
Restricted Securities shall furnish, upon the request of the Company,
prior to the Consummation of the Exchange Offer, a written representation
to the Company and the Guarantor (which may be contained in the letter of
transmittal contemplated by the Exchange Offer Registration Statement) to
the effect that (A) it is not an affiliate of the Company, (B) it is not
engaged in, and does not intend to engage in, and has no arrangement or
understanding with any person to participate in, a distribution of the
Series B Notes to be issued in the Exchange Offer and (C) it is acquiring
the Series B Notes in its ordinary course of business. Each Holder hereby
acknowledges and agrees that any Broker-Dealer and any Holder using the
Exchange Offer to participate in a distribution of the securities to be
acquired in the Exchange Offer (1) could not under Commission policy as in
effect on the date of this Agreement rely on the position of the
Commission enunciated in
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<PAGE> 9
Morgan Stanley and Co., Inc. (available June 5, 1991) and Exxon Capital
Holdings Corporation (available May 13, 1988), as interpreted in the
Commission's letter to Shearman & Sterling dated July 2, 1993, and similar
no-action letters (including, if applicable, any no-action letter obtained
pursuant to clause (i) above), and (2) must comply with the registration
and prospectus delivery requirements of the Act in connection with a
secondary resale transaction and that such a secondary resale transaction
must be covered by an effective registration statement containing the
selling security holder information required by Item 507 or 508, as
applicable, of Regulation S-K if the resales are of Series B Notes
obtained by such Holder in exchange for Series A Notes acquired by such
Holder directly from the Company or an affiliate thereof.
(iii) To the extent required by the Commission, prior to
effectiveness of the Exchange Offer Registration Statement, the Company
and the Guarantor shall provide a supplemental letter to the Commission
(A) stating that the Company and the Guarantor are registering the
Exchange Offer in reliance on the position of the Commission enunciated in
Exxon Capital Holdings Corporation (available May 13, 1988), Morgan
Stanley and Co., Inc. (available June 5, 1991) and, if applicable, any
no-action letter obtained pursuant to clause (i) above, (B) including a
representation that neither the Company nor the Guarantor has entered into
any arrangement or understanding with any Person to distribute the Series
B Notes to be received in the Exchange Offer and that, to the best of the
Company's and the Guarantor's information and belief, each Holder
participating in the Exchange Offer is acquiring the Series B Notes in its
ordinary course of business and has no arrangement or understanding with
any Person to participate in the distribution of the Series B Notes
received in the Exchange Offer and (C) any other undertaking or
representation required by the Commission as set forth in any no-action
letter obtained pursuant to clause (i) above.
(b) Shelf Registration Statement. In connection with the Shelf
Registration Statement, the Company and the Guarantor shall comply with all the
provisions of Section 6(c) below and shall use their reasonable best efforts to
effect such registration to permit the sale of the Transfer Restricted
Securities being sold in accordance with the intended method or methods of
distribution thereof (as indicated in the information furnished to the Company
pursuant to Section 4(b) hereof), and pursuant thereto the Company and the
Guarantor will prepare and file with the Commission the Shelf Registration
Statement relating to the registration on any appropriate form under the Act,
which form shall be available for the sale of the Transfer Restricted
Securities in accordance with the intended method or methods of distribution
thereof within the time periods and otherwise in accordance with the provisions
hereof.
(c) General Provisions. In connection with any Registration Statement
and any related Prospectus required by this Agreement to permit the sale or
resale of Transfer Restricted Securities (including, without limitation, any
Exchange Offer Registration Statement and the related Prospectus, to the extent
that the same are required to be available to permit sales of Broker-Dealer
Transfer Restricted Securities by Restricted Broker-Dealers), the Company and
the Guarantor shall:
(i) use their reasonable best efforts to keep such Registration
Statement continuously effective and file by post-effective amendment
thereto all requisite financial statements for the period specified in
Section 3 or 4 of this Agreement, as applicable. Upon the occurrence of
any (A) matter described in Section 6(c)(iii) hereof or (B) any event that
would cause any such
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<PAGE> 10
Registration Statement or the Prospectus contained therein not to be
effective and usable for resale of Transfer Restricted Securities during
the period required by this Agreement, the Company and the Guarantor shall
file promptly an appropriate amendment to such Registration Statement, (1)
in the case of clause (A), correcting any such misstatement or omission,
and (2) in the case of clauses (A) and (B), use their reasonable best
efforts to cause such amendment to be declared effective and such
Registration Statement and the related Prospectus to become usable for
their intended purpose(s) as soon as practicable thereafter.
(ii) prepare and file with the Commission such amendments and
post-effective amendments to the Registration Statement as may be
necessary to keep the Registration Statement effective for the applicable
period set forth in Section 3 or 4 hereof, or such shorter period as will
terminate when all Transfer Restricted Securities covered by such
Registration Statement have been sold; cause the Prospectus to be
supplemented by any required Prospectus supplement, and as so supplemented
to be filed pursuant to Rule 424 under the Act, and to comply fully with
Rules 424, 430A and 462, as applicable, under the Act in a timely manner;
and comply with the provisions of the Act with respect to the disposition
of all securities covered by such Registration Statement during the
applicable period in accordance with the intended method or methods of
distribution by the sellers thereof set forth in such Registration
Statement or supplement to the Prospectus;
(iii) advise the underwriter(s), if any, and selling Holders
promptly and, if requested by such Persons, confirm such advice in
writing, (A) when the Prospectus or any Prospectus supplement or
post-effective amendment has been filed, and, with respect to any
Registration Statement or any post-effective amendment thereto, when the
same has become effective, (B) of any request by the Commission for
amendments to the Registration Statement or amendments or supplements to
the Prospectus or for additional information relating thereto, (C) of
receipt by the Company of notification with respect to the issuance by the
Commission of any stop order suspending the effectiveness of the
Registration Statement under the Act or of the suspension by any state
securities commission of the qualification of the Transfer Restricted
Securities for offering or sale in any jurisdiction, or receipt by the
Company of notification with respect to the initiation of any proceeding
for any of the preceding purposes, or (D) of the existence of any fact or
the happening of any event that makes any statement of a material fact
made (or incorporated by reference) in the Registration Statement, untrue,
or that results in the Registration Statement omitting to state a material
fact required to be stated therein or necessary to make the statements
therein not misleading, or of the existence of any fact or the happening
of any event that makes any statement of a material fact made (or
incorporated by reference) in the Prospectus untrue, or that results in
the Prospectus omitting to state a material fact required to be stated
therein or necessary in order to make the statements therein, in the light
of the circumstances under which they were made, not misleading. If at
any time the Commission shall issue any stop order suspending the
effectiveness of the Registration Statement, or any state securities
commission or other regulatory authority shall issue an order suspending
the qualification or exemption from qualification of the Transfer
Restricted Securities under state securities or Blue Sky laws, the Company
and the Guarantor shall use their reasonable best efforts to obtain the
withdrawal or lifting of such order at the earliest possible time;
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<PAGE> 11
(iv) furnish to the Initial Purchaser, each selling Holder named in
any Shelf Registration Statement or Prospectus and each of the
underwriters in connection with such sale, if any, before filing with the
Commission, copies of any Registration Statement or any Prospectus
included therein or any amendments or supplements to any such Registration
Statement or Prospectus (including all documents incorporated by reference
after the initial filing of such Registration Statement), which documents
will be subject to the review and comment of such Holders and underwriters
in connection with such sale, if any, for a period of at least five
Business Days, and the Company will not file any such Registration
Statement or Prospectus or any amendment or supplement to any such
Registration Statement or Prospectus (including all such documents
incorporated by reference) to which the selling Holders of the Transfer
Restricted Securities covered by such Registration Statement or the
underwriters in connection with such sale, if any, shall reasonably object
within five Business Days after the receipt thereof, except for such
prospectus, amendment or supplement (or document incorporated by
reference) which counsel to the Company has advised the Company in writing
is required to be filed in order to comply with applicable law. A selling
Holder or underwriter, if any, shall be deemed to have reasonably objected
to such filing if such Registration Statement, amendment, Prospectus or
supplement, as applicable, as proposed to be filed, contains a material
misstatement or omission or fails to comply with the applicable
requirements of the Act;
(v) promptly prior to the filing of any document that is to be
incorporated by reference into a Registration Statement or Prospectus,
provide copies of such document to the selling Holders and to the
underwriters in connection with such sale, if any, make the Company's and
the Guarantor's representatives available for discussion of such document
and other customary due diligence matters, and include such information in
such document prior to the filing thereof as such selling Holders or
underwriters, if any, reasonably may request;
(vi) make available at reasonable times for inspection by the
selling Holders, any managing underwriter participating in any disposition
pursuant to such Registration Statement and any attorney or accountant
retained by such selling Holders or any of such underwriters, all
financial and other records, pertinent corporate documents and properties
of the Company and the Guarantor customarily inspected by underwriters in
Underwritten Registrations and cause the Company's and the Guarantor's
officers, directors and employees to supply all information reasonably
requested by, and customarily supplied in connection with Underwritten
Registrations to, any such Holder, underwriter, attorney or accountant in
connection with such Registration Statement or any post-effective
amendment thereto subsequent to the filing thereof and prior to its
effectiveness;
(vii) if requested by any selling Holders or the underwriters in
connection with such sale, if any, promptly include in any Registration
Statement or Prospectus, pursuant to a supplement or post-effective
amendment if necessary, such information as such selling Holders and
underwriters, if any, may reasonably request to have included therein,
including, without limitation, information relating to the "Plan of
Distribution" of the Transfer Restricted Securities, information with
respect to the principal amount of Transfer Restricted Securities being
sold to such underwriters, the purchase price being paid therefor and any
other terms of the offering of the Transfer Restricted Securities to be
sold in such offering; and make all
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<PAGE> 12
required filings of such Prospectus supplement or post-effective amendment
as soon as practicable after the Company is notified of the matters to be
included in such Prospectus supplement or post-effective amendment;
(viii) furnish to each selling Holder and each of the underwriters
in connection with such sale, if any, without charge, at least one copy of
the Registration Statement, as first filed with the Commission, and of
each amendment thereto, including all documents incorporated by reference
therein and all exhibits (including exhibits incorporated therein by
reference);
(ix) deliver to each selling Holder and each of the underwriters, if
any, without charge, as many copies of the Prospectus (including each
preliminary prospectus) and any amendment or supplement thereto as such
Persons reasonably may request; the Company and the Guarantor hereby
consent to the use (in accordance with law) of the Prospectus and any
amendment or supplement thereto by each of the selling Holders and each of
the underwriters, if any, in connection with the offering and the sale of
the Transfer Restricted Securities covered by the Prospectus or any
amendment or supplement thereto;
(x) enter into such agreements (including an underwriting agreement)
and make such representations and warranties and take all such other
actions in connection therewith in order to expedite or facilitate the
disposition of the Transfer Restricted Securities pursuant to any
Registration Statement contemplated by this Agreement as may be reasonably
requested by any Holder of Transfer Restricted Securities or underwriter
in connection with any sale or resale pursuant to any Registration
Statement contemplated by this Agreement, and in such connection, whether
or not an underwriting agreement is entered into and whether or not the
registration is an Underwritten Registration, the Company and the
Guarantor shall:
(A) furnish (or in the case of paragraphs (2) and (3), use its
reasonable best efforts to furnish) to each selling Holder and each
underwriter, if any, upon the effectiveness of the Shelf Registration
Statement and to each Restricted Broker-Dealer upon Consummation of
the Exchange Offer:
(1) a certificate, dated the date of Consummation of the
Exchange Offer or the date of effectiveness of the Shelf
Registration Statement, as the case may be, signed on behalf of
the Company and the Guarantor by (x) the President or any Vice
President and (y) a principal financial or accounting officer of
the Company and the Guarantor, confirming, as of the date
thereof, the matters set forth in paragraphs (a) through (d) of
Section 9 of the Purchase Agreement and such other similar
matters as the Holders, underwriters and/or Restricted Broker
Dealers may reasonably request;
(2) an opinion, dated the date of Consummation of the
Exchange Offer or the date of effectiveness of the Shelf
Registration Statement, as the case may be, of counsel for the
Company and the Guarantor covering matters similar to those set
forth in paragraphs (e) and (f) of Section 9 of the Purchase
Agreement, and in any event including a statement to the effect
that such counsel has participated in conferences with officers
and other representatives of the Company and the Guarantor,
representatives of the independent public accountants for the
Company and the
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<PAGE> 13
Guarantor and have considered the matters required to be stated
therein and the statements contained therein, although such
counsel has not independently verified the accuracy,
completeness or fairness of such statements; and that such
counsel advises that, on the basis of the foregoing (relying as
to materiality to a large extent upon facts provided to such
counsel by officers and other representatives of the Company and
the Guarantor and without independent check or verification), no
facts came to such counsel's attention that caused such counsel
to believe that the applicable Registration Statement, at the
time such Registration Statement or any post-effective amendment
thereto became effective and, in the case of the Exchange Offer
Registration Statement, as of the date of Consummation of the
Exchange Offer, contained an untrue statement of a material fact
or omitted to state a material fact required to be stated
therein or necessary to make the statements therein not
misleading, or that the Prospectus contained in such
Registration Statement as of its date and, in the case of the
opinion dated the date of Consummation of the Exchange Offer, as
of the date of Consummation, contained an untrue statement of a
material fact or omitted to state a material fact necessary in
order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
Without limiting the foregoing, such counsel may state further
that such counsel assumes no responsibility for, and has not
independently verified, the accuracy, completeness or fairness
of the financial statements, notes and schedules and other
financial data included in any Registration Statement
contemplated by this Agreement or the related Prospectus; and
(3) a customary comfort letter, dated as of the date of
effectiveness of the Shelf Registration Statement or the date of
Consummation of the Exchange Offer, as the case may be, from the
Company's independent accountants, in the customary form and
covering matters of the type customarily covered in comfort
letters to underwriters in connection with primary underwritten
registered offerings, and affirming the matters set forth in the
comfort letters delivered pursuant to Section 9 of the Purchase
Agreement, without exception;
(B) set forth in full or incorporate by reference in the
underwriting agreement, if any, in connection with any sale or resale
pursuant to any Shelf Registration Statement the indemnification
provisions and procedures of Section 8 hereof with respect to all
parties to be indemnified pursuant to said Section; and
(C) deliver such other documents and certificates as may be
reasonably requested by the selling Holders, the underwriters, if
any, and Restricted Broker Dealers, if any, to evidence compliance
with clause (A) above and with any customary conditions contained in
the underwriting agreement or other agreement entered into by the
Company and the Guarantor pursuant to this clause (x).
The above shall be done at each closing under such underwriting or
similar agreement, as and to the extent required thereunder, and if at any
time the representations and warranties of the Company and the Guarantor
contemplated in (A)(1) above cease to be true and correct, the Company and
the Guarantor shall so advise the underwriters, if any, the selling
Holders and
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<PAGE> 14
each Restricted Broker-Dealer promptly and if requested by such Persons,
shall confirm such advice in writing;
(xi) prior to any public offering of Transfer Restricted Securities,
cooperate with the selling Holders, the underwriters, if any, and their
respective counsel in connection with the registration and qualification
of the Transfer Restricted Securities under the securities or Blue Sky
laws of such United States jurisdictions as the selling Holders or
underwriters, if any, may request and do any and all other acts or things
necessary or advisable to enable the disposition in such jurisdictions of
the Transfer Restricted Securities covered by the applicable Registration
Statement; provided, however, that neither the Company nor the Guarantor
shall be required to register or qualify as a foreign corporation where it
is not now so qualified or to take any action that would subject it to the
service of process in suits or to taxation, other than as to matters and
transactions relating to the Registration Statement, in any jurisdiction
where it is not now so subject;
(xii) issue, upon the request of any Holder of Series A Notes
covered by any Shelf Registration Statement contemplated by this
Agreement, Series B Notes having an aggregate principal amount equal to
the aggregate principal amount of Series A Notes surrendered to the
Company by such Holder in exchange therefor or being sold by such Holder;
such Series B Notes to be registered in the name of such Holder or in the
name of the purchasers of such Notes, as the case may be; in return, the
Series A Notes held by such Holder shall be surrendered to the Company for
cancellation;
(xiii) in connection with any sale of Transfer Restricted Securities
that will result in such securities no longer being Transfer Restricted
Securities, cooperate with the selling Holders and the underwriters, if
any, to facilitate the timely preparation and delivery of certificates
representing Transfer Restricted Securities to be sold and not bearing any
restrictive legends; and to register such Transfer Restricted Securities
in such denominations and such names as the Holders or the underwriters,
if any, may request at least two Business Days prior to such sale of
Transfer Restricted Securities;
(xiv) provide a CUSIP number for all Transfer Restricted Securities
not later than the effective date of a Registration Statement covering
such Transfer Restricted Securities and provide the Trustee under the
Indenture with printed certificates for the Transfer Restricted Securities
which are in a form eligible for deposit with the Depository Trust
Company;
(xv) cooperate and assist in any filings required to be made with
the NASD and in the performance of any due diligence investigation by any
underwriter (including any "qualified independent underwriter") that is
required to be retained in accordance with the rules and regulations of
the NASD, and use their reasonable best efforts to cause such Registration
Statement to become effective and approved by such governmental agencies
or authorities as may be necessary to enable the Holders selling Transfer
Restricted Securities to consummate the disposition of such Transfer
Restricted Securities;
(xvi) otherwise use their reasonable best efforts to comply with all
applicable rules and regulations of the Commission, and make generally
available to its security holders with regard
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<PAGE> 15
to any applicable Registration Statement a consolidated earnings statement
meeting the requirements of Rule 158 (which need not be audited) covering
a twelve-month period beginning with the first month after the effective
date of the Registration Statement (as such term is defined in paragraph
(c) of Rule 158 under the Act) no later than 45 days after the end of such
twelve-month period (or 90 days if such period is a fiscal year);
(xvii) cause the Indenture to be qualified under the TIA not later
than the effective date of the first Registration Statement required by
this Agreement and, in connection therewith, cooperate with the Trustee
and the Holders of Notes to effect such changes to the Indenture as may be
required for such Indenture to be so qualified in accordance with the
terms of the TIA; and execute and use its best efforts to cause the
Trustee to execute, all documents that may be required to effect such
changes and all other forms and documents required to be filed with the
Commission to enable such Indenture to be so qualified in a timely manner;
and
(xviii) provide promptly to each Holder upon request each document
filed with the Commission pursuant to the requirements of Section 13 or
Section 15(d) of the Exchange Act.
(d) Restrictions on Holders. Each Holder agrees by acquisition of a
Transfer Restricted Security that, upon receipt of any notice from the Company
of the existence of any fact of the kind described in Section 6(c)(iii)(D)
hereof, such Holder will forthwith discontinue disposition of Transfer
Restricted Securities pursuant to the applicable Registration Statement until
such Holder's receipt of the copies of the supplemented or amended Prospectus
contemplated by Section 6(c)(xv) hereof, or until it is advised in writing by
the Company that the use of the Prospectus may be resumed, and has received
copies of any additional or supplemental filings that are incorporated by
reference in the Prospectus (the "Advice"). If so directed by the Company,
each Holder will deliver to the Company (at the Company's expense) all copies,
other than permanent file copies then in such Holder's possession, of the
Prospectus covering such Transfer Restricted Securities that was current at the
time of receipt of such notice. In the event the Company shall give any such
notice, the time period regarding the effectiveness of such Registration
Statement set forth in Section 3 or 4 hereof, as applicable, shall be extended
by the number of days during the period from and including the date of the
giving of such notice pursuant to Section 6(c)(iii)(D) hereof to and including
the date when each selling Holder covered by such Registration Statement shall
have received the copies of the supplemented or amended Prospectus contemplated
by Section 6(c)(xv) hereof or shall have received the Advice.
SECTION 7. REGISTRATION EXPENSES
(a) All expenses incident to the Company's and the Guarantor's
performance of or compliance with this Agreement will be borne by the Company,
regardless of whether a Registration Statement becomes effective, including
without limitation: (i) all registration and filing fees and expenses
(including filings made by any Purchaser or Holder with the NASD (and, if
applicable, the fees and expenses of any "qualified independent underwriter")
and its counsel that may be required by the rules and regulations of the NASD);
(ii) all fees and expenses of compliance with federal securities and state Blue
Sky or securities laws; (iii) all expenses of printing (including printing
certificates for the Series B Notes to be issued in the Exchange Offer and
printing of Prospectuses), messenger and delivery services and telephone; (iv)
all fees and disbursements of counsel for the
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<PAGE> 16
Company, the Guarantor and the Holders of Transfer Restricted Securities
(subject to the limitations set forth in (b), below); (v) all rating agency
fees and application and filing fees, if any, in connection with listing the
Notes on a national securities exchange or automated quotation system; and (vi)
all fees and disbursements of independent certified public accountants of the
Company and the Guarantor (including the expenses of any special audit and
comfort letters required by or incident to such performance).
The Company will, in any event, bear its and the Guarantor's internal
expenses (including, without limitation, all salaries and expenses of its
officers and employees performing legal or accounting duties), the expenses of
any annual audit and the fees and expenses of any Person, including special
experts, retained by the Company or the Guarantor.
(b) In connection with any Registration Statement required by this
Agreement (including, without limitation, the Exchange Offer Registration
Statement and the Shelf Registration Statement), the Company and the Guarantor
will reimburse the Holders of Transfer Restricted Securities being tendered in
the Exchange Offer and/or resold pursuant to the "Plan of Distribution"
contained in the Exchange Offer Registration Statement or registered pursuant
to the Shelf Registration Statement, as applicable, for the reasonable fees and
disbursements of not more than one counsel, who shall be chosen by the Holders
of a majority in principal amount of the Transfer Restricted Securities for
whose benefit such Registration Statement is being prepared; provided, however,
that such fees and disbursements shall not exceed $10,000.
SECTION 8. INDEMNIFICATION
(a) The Company and the Guarantor, jointly and severally, agree to
indemnify and hold harmless (i) each Holder and (ii) each person, if any, who
controls (within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act) any Holder (any of the persons referred to in this clause (ii)
being hereinafter referred to as a "controlling person") and (iii) the
respective officers, directors, partners, employees, representatives and agents
of any Holder or any controlling person (any person referred to in clause (i),
(ii) or (iii) may hereinafter be referred to as an "Indemnified Holder"), to
the fullest extent lawful, from and against any and all losses, claims,
damages, liabilities, judgments, actions and expenses (including without
limitation and as incurred, reimbursement of all reasonable costs of
investigating, preparing, pursuing or defending any claim or action, or any
investigation or proceeding by any governmental agency or body, commenced or
threatened, including the reasonable fees and expenses of counsel to any
Indemnified Holder) directly or indirectly caused by, based upon or arising out
of any untrue statement or alleged untrue statement of a material fact
contained in any Registration Statement, preliminary prospectus or Prospectus
(or any amendment or supplement thereto), or any omission or alleged omission
to state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, except insofar as such losses,
claims, damages, liabilities or expenses are caused by, based upon or arise out
of an untrue statement or omission or alleged untrue statement or omission that
is made in reliance upon and in conformity with information relating to the
Initial Purchaser or any of the Holders furnished in writing to the Company by
any of the Holders expressly for use therein.
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<PAGE> 17
In case any action or proceeding (including any governmental or
regulatory investigation or proceeding) shall be brought or asserted against
any of the Indemnified Holders with respect to which indemnity may be sought
against the Company or the Guarantor, such Indemnified Holder (or the
Indemnified Holder controlled by such controlling person) shall promptly notify
the Company and the Guarantor in writing (provided, that the failure to give
such notice shall not relieve the Company or the Guarantor of their obligations
pursuant to this Agreement unless such failure to notify results in the
forfeiture by the Company or the Guarantor of substantive rights or defenses).
The Company shall assume the defense thereof, including the employment of
counsel reasonably satisfactory to the Indemnified Holder. Such Indemnified
Holder shall have the right to employ separate counsel in any such action but
the fees and expenses of such counsel shall be paid at the expense of such
Indemnified Holder unless (i) the employment of such counsel has been
specifically authorized in writing by the Company, (ii) the Company has failed
to assume the defense and employ counsel or (iii) the named parties to any such
action include both such Indemnified Holder and the Company or the Guarantor,
and such Indemnified Holder has been advised by such counsel that there may be
one or more legal defenses available to it which are different from or
additional to those available to the Company or the Guarantor, it being
understood, however, that the Company and the Guarantor shall not, in
connection with any one such action or proceeding or separate but substantially
similar or related actions or proceedings in the same jurisdiction arising out
of the same general allegations or circumstances, be liable for the reasonable
fees and expenses of more than one separate firm of attorneys (in addition to
any local counsel) at any time for such Indemnified Holders, which firm shall
be designated by the Holders of a majority of the principal amount of the Notes
covered by such Registration Statement. Neither the Company nor the Guarantor
shall be liable for any settlement of any such action or proceeding effected
without the Company's prior written consent, which consent shall not be
withheld unreasonably, and the Company and the Guarantor agree to indemnify and
hold harmless each Indemnified Holder from and against any loss, claim, damage,
liability or expense by reason of any settlement of any action effected with
the written consent of the Company. Neither the Company nor the Guarantor
shall, without the prior written consent of each Indemnified Holder, settle or
compromise or consent to the entry of judgment in or otherwise seek to
terminate any pending or threatened action, claim, litigation or proceeding in
respect of which indemnification or contribution may be sought hereunder
(whether or not any Indemnified Holder is a party thereto), unless such
settlement, compromise, consent or termination includes an unconditional
release of each Indemnified Holder from all liability arising out of claims
that are the subject matter of such action, claim, litigation or proceeding.
(b) Each Holder of Transfer Restricted Securities agrees, severally
and not jointly, to indemnify and hold harmless the Company and the Guarantor,
and their respective directors, officers, and any person controlling (within
the meaning of Section 15 of the Act or Section 20 of the Exchange Act) the
Company, and the respective officers, directors, partners, employees,
representatives and agents of each such person (or controlling person), to the
same extent as the foregoing indemnity from the Company and the Guarantor to
each of the Indemnified Holders, but only with respect to claims and actions
caused by or arising out of information relating to such Holder furnished in
writing by such Holder expressly for use in any Registration Statement,
preliminary prospectus or Prospectus (or any amendment or supplement thereto).
In case any action or proceeding shall be brought against the Company, the
Guarantor or its directors, officers or any such controlling person in respect
of which indemnity may be sought against a Holder of Transfer Restricted
Securities, such Holder shall have the rights and duties given the Company and
the
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<PAGE> 18
Guarantor, and the Company, the Guarantor, such directors, officers, employees,
representatives or agents, or such controlling person shall have the rights and
duties given to each Holder by the preceding paragraph. In no event shall any
Holder be liable or responsible for any amount in excess of the amount by which
the total received by such Holder with respect to its sale of Transfer
Restricted Securities pursuant to a Registration Statement exceeds (i) the
amount paid by such Holder for such Transfer Restricted Securities and (ii) the
amount of any damages which such Holder has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or alleged
omission.
(c) If the indemnification provided for in this Section 8 is unavailable
to an indemnified party under Section 8(a) or Section 8(b) hereof (other than
by reason of exceptions provided in those Sections) in respect of any losses,
claims, damages, liabilities or expenses referred to therein, then each
applicable indemnifying party, in lieu of indemnifying such indemnified party,
shall contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages, liabilities or expenses in such
proportion as is appropriate to reflect the relative benefits received by the
Company and the Guarantor, on the one hand, and the Holders, on the other hand,
from their sale of Transfer Restricted Securities or if such allocation is not
permitted by applicable law, the relative fault of the Company and the
Guarantor, on the one hand, and of the Indemnified Holders, on the other hand,
in connection with the statements or omissions which resulted in such losses,
claims, damages, liabilities or expenses, as well as any other relevant
equitable considerations. The relative fault of the Company and the Guarantor,
on the one hand, and of the Indemnified Holders, on the other hand, shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to
state a material fact relates to information supplied by the Company or the
Guarantor or by the Indemnified Holders and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The amount paid or payable by a party as a result of
the losses, claims, damages, liabilities and expenses referred to above shall
be deemed to include, subject to the limitations set forth in the second
paragraph of Section 8(a), any legal or other fees or expenses reasonably
incurred by such party in connection with investigating or defending any action
or claim.
The Company, the Guarantor and each Holder of Transfer Restricted
Securities agree that it would not be just and equitable if contribution
pursuant to this Section 8(c) were determined by pro rata allocation (even if
the Holders were treated as one entity for such purpose) or by any other method
of allocation which does not take account of the equitable considerations
referred to in the immediately preceding paragraph. Notwithstanding the
provisions of this Section 8, no Holder or its related Indemnified Holders
shall be required to contribute, in the aggregate, any amount in excess of the
amount by which the total received by such Holder with respect to the sale of
its Transfer Restricted Securities pursuant to a Registration Statement exceeds
the sum of (A) the amount paid by such Holder for such Transfer Restricted
Securities plus (B) the amount of any damages which such Holder has otherwise
been required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The Holders' obligations to contribute pursuant to this
Section 8(c) are several in proportion to the respective principal amount of
Series A Notes held by each of the Holders hereunder and not joint.
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<PAGE> 19
SECTION 9. RULE 144A
The Company and the Guarantor hereby agree with each Holder, for so
long as any Transfer Restricted Securities remain outstanding and during any
period in which the Company or the Guarantor is not subject to Section 13 or
15(d) of the Securities Exchange Act, to make available, upon request of any
Holder of Transfer Restricted Securities, to any Holder or beneficial owner of
Transfer Restricted Securities in connection with any sale thereof and any
prospective purchaser of such Transfer Restricted Securities designated by such
Holder or beneficial owner, the information required by Rule 144A(d)(4) under
the Act in order to permit resales of such Transfer Restricted Securities
pursuant to Rule 144A.
SECTION 10. UNDERWRITTEN REGISTRATIONS
No Holder may participate in any Underwritten Registration hereunder
unless such Holder (a) agrees to sell such Holder's Transfer Restricted
Securities on the basis provided in customary underwriting arrangements entered
into in connection therewith and (b) completes and executes all reasonable
questionnaires, powers of attorney, and other documents required under the
terms of such underwriting arrangements.
SECTION 11. SELECTION OF UNDERWRITERS
For any Underwritten Offering, the investment banker or investment
bankers and manager or managers for any Underwritten Offering that will
administer such offering will be selected by the Holders of a majority in
aggregate principal amount of the Transfer Restricted Securities included in
such offering. Such investment bankers and managers are referred to herein as
the "underwriters."
SECTION 12. MISCELLANEOUS
(a) Remedies. Each Holder, in addition to being entitled to exercise all
rights provided herein, in the Indenture, the Purchase Agreement (in the case
of the Initial Purchaser) or granted by law, including recovery of liquidated
or other damages, will be entitled to specific performance of its rights under
this Agreement. The Company and the Guarantor agree that monetary damages
would not be adequate compensation for any loss incurred by reason of a breach
by them of the provisions of this Agreement and hereby agree to waive the
defense in any action for specific performance that a remedy at law would be
adequate.
(b) No Inconsistent Agreements. Neither the Company nor the Guarantor
will, on or after the date of this Agreement, enter into any agreement with
respect to its securities that is inconsistent with the rights granted to the
Holders in this Agreement or otherwise conflicts with the provisions hereof.
Neither the Company nor the Guarantor has previously entered into any agreement
granting any registration rights with respect to its securities to any Person.
The rights granted to the Holders hereunder do not in any way conflict with and
are not inconsistent with the rights granted to the holders of the Company's
and the Guarantor's securities under any agreement in effect on the date
hereof.
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<PAGE> 20
(c) Adjustments Affecting the Notes. Neither the Company nor the
Guarantor will take any action, or voluntarily permit any change to occur, with
respect to the Notes that would materially and adversely affect the ability to
Consummate the Exchange Offer.
(d) Amendments and Waivers. The provisions of this Agreement may not be
amended, modified or supplemented, and waivers or consents to or departures
from the provisions hereof may not be given unless (i) in the case of Section 5
hereof and this Section 12(d)(i), the Company has obtained the written consent
of Holders of all outstanding Transfer Restricted Securities and (ii) in the
case of all other provisions hereof, the Company has obtained the written
consent of Holders of a majority of the outstanding principal amount of
Transfer Restricted Securities. Notwithstanding the foregoing, a waiver or
consent to departure from the provisions hereof that relates exclusively to the
rights of Holders whose securities are being tendered pursuant to the Exchange
Offer and that does not affect directly or indirectly the rights of other
Holders whose securities are not being tendered pursuant to such Exchange Offer
may be given by the Holders of a majority of the outstanding principal amount
of Transfer Restricted Securities subject to such Exchange Offer.
(e) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, first-class mail
(registered or certified, return receipt requested), telex, telecopier or air
courier guaranteeing overnight delivery:
(i) if to a Holder, at the address set forth on the records of
the Registrar under the Indenture, with a copy to the Registrar under the
Indenture; and
(ii) if to the Company or the Guarantor:
HydroChem Industrial Services, Inc.
6210 Rothway, Suite 150
Houston, Texas 77040
Telecopier No.: (713) 329-2440
Attention: Mr. Michael Steindler
With a copy to:
Cassell & Stone, L.L.P.
5956 Sherry Lane, Suite 1400
Dallas, Texas 75225
Telecopier No.: (214) 696-0377
Attention: Mr. Dennis R. Cassell
Haynes and Boone, LLP
901 Main Street, Suite 3100
Dallas, Texas 75202
Telecopier No.: (214) 651-5940
Attention: Ms. Janice Sharry
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<PAGE> 21
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five Business
Days after being deposited in the mail, postage prepaid, if mailed; when
receipt acknowledged, if telecopied; and on the next business day, if timely
delivered to an air courier guaranteeing overnight delivery.
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Trustee at the
address specified in the Indenture.
(f) Successors and Assigns. This Agreement shall inure to the benefit of
and be binding upon the successors and assigns of each of the parties,
including without limitation and without the need for an express assignment,
subsequent Holders of Transfer Restricted Securities; provided, however, that
this Agreement shall not inure to the benefit of or be binding upon a successor
or assign of a Holder unless and to the extent such successor or assign
acquired Transfer Restricted Securities directly from such Holder at a time
when such Holder could not transfer such Transfer Restricted Securities
pursuant to a Shelf Registration Statement. Each Holder of Transfer Restricted
Securities agrees to be bound by and comply with the terms and provisions of
this Agreement.
(g) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(h) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(i) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE
CONFLICT OF LAW RULES THEREOF.
(j) Severability. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable, the validity, legality and enforceability of
any such provision in every other respect and of the remaining provisions
contained herein shall not be affected or impaired thereby.
(k) Entire Agreement. This Agreement is intended by the parties as a
final expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect
of the subject matter contained herein. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein
with respect to the registration rights granted with respect to the Transfer
Restricted Securities. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject matter.
-20-
<PAGE> 22
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first written above.
HYDROCHEM INDUSTRIAL SERVICES, INC.
By: /s/ B. TOM CARTER, JR.
---------------------------------------
Name: B. Tom Carter, Jr.
Title: Chairman, President and
Chief Executive Officer
HYDROCHEM INTERNATIONAL, INC.
By: /s/ B. TOM CARTER, JR.
---------------------------------------
Name: B. Tom Carter, Jr.
Title: Chairman, President and
Chief Executive Officer
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By: /s/ RICHARD DEITCH II
-------------------------------
Name: Richard Deitch II
Title: Vice President
-21-
<PAGE> 1
Exhibit 5.1
[Letterhead of Haynes and Boone, LLP]
August 25, 1997
HydroChem Industrial Services, Inc.
HydroChem International, Inc.
6210 Rothway
Houston, Texas 77040
Re: Registration Statement on Form S-4; $110,000,000 Aggregate
Principal Amount of 10-3/8% Senior Subordinated Notes due
2007, Series B and the Guarantee thereof
Ladies and Gentlemen:
We have acted as special counsel for HydroChem Industrial Services, Inc., a
Delaware corporation (the "Company"), and HydroChem International, Inc., a
Delaware corporation (the "Guarantor"), in connection with the proposed
issuance by the Company of $110,000,000 aggregate principal amount of 10-3/8%
Senior Subordinated Notes due 2007, Series B (the "Notes") and the guarantee
thereof by the Guarantor (the "Guarantee") in exchange for an equivalent amount
of the Company's outstanding 10-3/8% Senior Subordinated Notes due 2007, Series
A (the "Old Notes"), which are also guaranteed by the Guarantor. The terms of
the offer to exchange are described in the Registration Statement on Form S-4
(the "Registration Statement") filed with the Securities and Exchange
Commission for the registration of the Notes and the Guarantee under the
Securities Act of 1933, as amended (the "Act"). The Old Notes have been, and
the Notes will be, issued pursuant to an indenture (the "Indenture") dated as
of August 1, 1997, among the Company, the Guarantor and Norwest Bank,
Minnesota, N.A., as Trustee (the "Trustee").
In connection with the foregoing, we have examined the Indenture, the
Registration Statement and such corporate records and instruments of the
Company and the Guarantor as we have deemed necessary or appropriate for
purposes of this opinion.
We are opining herein as to the effect on the proposed issuance of the Notes
and the Guarantee of the federal laws of the United States, the laws of the
State of Texas, the laws of the State of New York and the general corporate law
of the State of Delaware.
Specific Limitations and Qualifications on
Opinions Regarding Enforceability of the Notes and Guarantee
The enforceability of the Notes and the Guarantee is subject to (a) the effects
of (i) applicable bankruptcy, insolvency, reorganization, moratorium,
rearrangement, liquidation, conservatorship or similar laws of general
application now or hereafter in effect relating to or affecting the rights
<PAGE> 2
HydroChem Industrial Services, Inc.
HydroChem International, Inc.
August 25, 1997
Page 2
or remedies of creditors generally, (ii) general equity principles (regardless
of whether enforcement is sought in a proceeding in equity or law), and (iii)
statutory provisions of the federal Bankruptcy Code and the Uniform Fraudulent
Conveyance Act as adopted by the State of New York (and related court
decisions) pertaining to the voidability of preferential or fraudulent
transfers, conveyances and obligations, (b) the rights of the United States
under the Federal Tax Lien Act of 1966, as amended, (c) the application of a
standard of "good faith" such as that defined in Section 1.203 of the Uniform
Commercial Code as adopted in the State of New York (the "Code") and (d) any
limitations on rights to indemnity and contribution as may be imposed by
federal and state securities laws or the policies underlying them; provided,
however, that we note that any limitations referred to in clauses (a)(ii), and
(c) imposed by such laws on the enforceability of the Notes and the Guarantee
will not prevent the holders thereof from the ultimate realization of the
practical benefits of such instruments, except for the economic consequences of
any judicial, administrative or other procedural delay that may result from
such laws.
We express no opinion as to the enforceability of provisions of the Notes or
the Guarantee to the extent that such provisions: (i) state that any party's
failure or delay in exercising rights, powers, privileges or remedies under the
Note or the Guarantee, as the case may be, shall not operate as a waiver
thereof; (ii) purport to preclude the amendment, waiver, release or discharge
of obligations except by an instrument in writing; (iii) purport to indemnify
any person for (A) such person's violations of federal or state securities laws
or environmental laws, or (B) any obligation to the extent such obligation
arises from or is a result of such person's own negligence; (iv) purport to
establish or satisfy certain factual standards or conditions; (v) purport to
sever unenforceable provisions from the Note or the Guarantee, to the extent
that the enforcement of remaining provisions would frustrate the fundamental
intent of the parties to such instruments; (vi) restrict access to legal or
equitable remedies; or (vii) purport to waive any claim arising out of, or in
any way related to, the Notes or the Guarantee. We advise you that the
inclusion of such provisions in the Notes or the Guarantee does not render void
or invalidate the obligations and liabilities of the Company under other
provisions of such instruments.
We express no opinion as to: (i) whether a court would grant specific
performance or any other equitable remedy with respect to enforcement of any
provision contained in the Notes or the Guarantee; or (ii) the enforceability
of any provision contained in the Indenture relating to the appointment of a
receiver, to the extent that appointment of a receiver is governed by
applicable statutory requirements, and to the extent that such provision may
not be in compliance with such requirements.
We express no opinion as to the enforceability of those provisions of the
Guarantee that state or mean that the Guarantee shall not be impaired,
adversely affected or released by any of the following: (i) any action taken by
any holder of the Notes in bad faith, for the purpose of or with the effect of,
impairing any of the Guarantor's rights of subrogation, reimbursement,
contribution,
<PAGE> 3
HydroChem Industrial Services, Inc.
HydroChem International, Inc.
August 25, 1997
Page 3
indemnity or exoneration against the Company, any other guarantor or collateral
for the obligations guaranteed; or (ii) a legal determination that the
obligations guaranteed are void as a result of illegality.
Based upon the foregoing and subject to the qualifications stated herein, it is
our opinion that, when (i) the Registration Statement has been declared
effective under the Act, (ii) the Old Notes have been validly exchanged by the
Company, and (iii) the Notes and the Guarantee have been executed and delivered
by the Company and the Guarantor and authenticated by the Trustee, all in
accordance with the terms of the Indenture and the Registration Statement, the
Notes and the Guarantee will constitute valid and binding obligations of the
Company and the Guarantor, respectively, enforceable against the Company and the
Guarantor in accordance with their terms.
To the extent that the obligations of the Company or the Guarantors under the
Indenture may be dependent upon such matters, we assume for purposes of this
opinion that the Trustee is duly organized, validly existing and in good
standing under the laws of its jurisdiction of organization; that the Trustee
is duly qualified to engage in the activities contemplated by the Indenture;
that the Indenture has been duly authorized, executed and delivered by the
Trustee and constitutes the legally valid and binding obligation of the
Trustee, enforceable against the Trustee in accordance with its terms; that the
Trustee is in compliance, generally and with respect to acting as a trustee
under the Indenture, with all applicable laws and regulations; and that the
Trustee has the requisite organizational and legal power and authority to
perform its obligations under the Indenture.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to our firm contained therein under
the headings "Certain U.S. Federal Income Tax Considerations" and "Legal
Matters."
Very truly yours,
Haynes and Boone, LLP
<PAGE> 1
EXHIBIT 10.1
HYDROCHEM HOLDING, INC.
1994 STOCK OPTION PLAN
1. Purpose. The purpose of this 1994 Stock Option Plan (the
"Plan") is to advance the interests of HydroChem Holding, Inc. a
Delaware corporation, (the "Company") by encouraging certain
employees of the Company and its subsidiaries and non-employee
directors of the Company and its subsidiaries to acquire a
proprietary interest in the Company through ownership of the Class A
Common Stock, par value $.00005 per share, of the Company ("Class A
Common Stock"). Such ownership will encourage the optionees to
remain with the Company and will help attract other qualified persons
to become employees and directors thereof.
2. Administration. The Plan shall be administered by a
Committee (the "Committee") appointed by the Board of Directors of
the Company (the "Board") which shall be composed of not less than
two directors of the Company. Subject to the provisions of the Plan
and the approval of the Board, the Committee is authorized to grant
options under the Plan and to interpret the Plan and such options, to
prescribe, amend, and rescind rules and regulations relating to the
Plan and the options, and to make other determinations necessary or
advisable for the administration of the Plan, all of which
determinations shall be conclusive. In addition, in determining the
terms and conditions of the options granted hereunder, the Committee
shall be entitled in its discretion to permit the term of any option
granted hereunder to extend beyond the date of termination of an
optionee's employment, irrespective of the provisions of paragraph
8(e) hereof. The Committee shall act pursuant to a majority vote or
by unanimous written consent.
3. Types of Options. Options granted pursuant to the Plan
may be either incentive stock options ("Incentive Stock Options")
under Section 422 of the Internal Revenue Code of 1986, as amended
(the "Code"), or options not qualifying under that section of the
Code ("Non-qualified Stock Options"). It is the intent of the
Company that Non-qualified Stock Options granted under the Plan not
be classified as Incentive Stock Options, that Incentive Stock
Options granted under the Plan be consistent with and contain or be deemed to
contain all provisions required under Section 422 and the other appropriate
provisions of the Code and any implementing regulations (and any successor
provisions thereof), and that any ambiguities in construction be interpreted in
order to effectuate such intent.
4. Eligibility. Options shall be granted under the Plan to
such employees, officers, and directors of the Company or any of its
subsidiaries as the Committee shall determine from time to time.
5. Stock Subject to Options. The aggregate number of shares
that may be issued or sold under options granted pursuant to the Plan
(the "Shares") shall not exceed 100,000 shares of Class
-1-
<PAGE> 2
A Common Stock. The Shares shall be either authorized but unissued shares of
Class A Common Stock or issued shares of Class A Common Stock that shall have
been reacquired by the Company. The aggregate number of Shares may be adjusted
under paragraph 8(f) below. If any outstanding option under the Plan expires
or is terminated for any reason, the Shares allocated to the unexercised
portion of such option may again be subjected to an option or options under
the Plan.
6. Non-transferability of Options. No option shall be
transferable by the optionee otherwise than by will or the laws of descent and
distribution, and each option shall be exercisable, during the optionee's
lifetime, only by the optionee or by his guardian or legal representative.
7. Fair Market Value. For purposes of this Plan, "Fair Market
Value" shall be (i) the good faith determination by the Board of the fair
market value of the Class A Common Stock, on the applicable day and (ii) after
the effectiveness of a Registration Statement filed with the Securities and
Exchange Commission pursuant to the Securities Act of 1933, as amended,
relating to the Class A Common Stock, the applicable day's closing sales price
of the Class A Common Stock, as reported for consolidated transactions of the
principal exchange on which such stock is traded; or, if there are no sales on
that date, the price on the most recent trading day prior thereto; or, if the
Class A Common Stock is not traded on an exchange, the average of the bid and
ask prices reported in the over-the-counter market at the close of business on
the applicable day; or, if the Class A Common Stock is not publicly traded, the
good faith determination by the Board of the fair market value of the Class A
Common Stock on the applicable day.
8. Terms and Conditions of Options. The Committee shall have the
power, subject to the limitations contained in the Plan, to prescribe the terms
and conditions of any option granted hereunder. Each such option shall be
evidenced by an agreement in such form as the Committee shall from time to time
determine, which agreement shall prescribe the following terms and conditions
and such other terms and conditions as the Committee may deem necessary or
advisable:
(a) Allotment of Shares; Option Price. The Committee shall
determine the total number of Shares to be offered to each optionee
under the Plan. The Shares shall be offered from time to time under the
Plan at such price as shall be determined by the Committee, which price
shall not be less than the par value of the Class A Common Stock subject
to the option. The exercise price per share with respect to Incentive
Stock Options shall not be less than the Fair Market Value on the date
of grant of the Shares subject to the option, nor less than 110 percent
of such Fair Market Value in the case of any Incentive Stock Option
granted to an individual who, at the time the option is granted, owns
stock possessing more than 10 percent of the total combined voting power
of all classes of stock of the Company or its subsidiaries.
(b) Duration of Options. Except as otherwise set forth
herein, options granted under the Plan shall be exercisable for such
period of time as the Committee shall determine. No option shall be
exercisable after the expiration of ten years from the date of grant;
provided, however, that any Incentive Stock Option granted to an
individual who, at the time the option is granted, owns stock possessing
more than 10 percent of the total combined
-2-
<PAGE> 3
voting power of all classes of stock of the Company or its subsidiaries shall
by its terms not be exercisable after the expiration of five years from the
date of grant.
(c) Exercise of Options. Each option granted under the Plan
shall be exercisable from time to time over such period as the Committee
shall determine. In addition to any other limitations set forth herein,
the aggregate Fair Market Value of the Shares with respect to which
Incentive Stock Options are exercisable for the first time by an
optionee in any calendar year (under all plans of the Company and its
subsidiaries and its parent) shall not exceed $100,000. Notwithstanding
anything herein to the contrary, in the event of a "Change of Control,"
as hereinafter defined, all options granted hereunder shall become
immediately exercisable. A "Change of Control" for the purposes hereof
shall be deemed to have occurred if (i) at any time all of the voting
capital stock of the Company then issued and outstanding shall be sold;
(ii) in a merger or consolidation, the Company is not the surviving
Corporation and, with respect to an individual optionee, such optionee's
employment with the Company shall have been terminated within six months
thereafter; or (iii) the Company sells all or substantially all of its
assets to a person other than an affiliate or associate of the Company.
For purposes of this subsection, the term "persons" shall mean
individuals, groups, corporations, partnerships, or other entities. Any
person shall be deemed to be the beneficial owner of any shares of
voting capital stock of the Company:
(1) that such person owns directly, whether or not of record;
or
(2) that such person has the right to acquire pursuant to any
agreement or understanding or upon exercise of conversion
rights, warrants or options, or otherwise; or
(3) that are beneficially owned, directly or indirectly
(including shares deemed owned through application of
clause (2) above), by an "affiliate" or "associate" (as
defined in the rules of the Securities and Exchange
Commission under the Securities Act of 1933) of that
person; or
(4) that are beneficially owned, directly or indirectly
(including shares deemed owned through application of
clause (2) above), by any other person with which that
person or his affiliate or associate has any agreement,
arrangement, or understanding for the purpose of
acquiring, holding, voting, or disposing of the voting
capital stock of the Company.
(d) Payment for Shares. The purchase price of each Share
purchased upon the exercise of any option granted hereunder shall be
paid in full at the time of such purchase, and a stock certificate or
certificates representing Shares so purchased shall be delivered to the
person entitled thereto. Until the stock certificate or certificates
for such Shares are issued in his name, an optionee shall have none of
the rights of a stockholder. Payment may be made in whole or in part in
cash or, if the Committee so permits, in Common Stock of the Company
owned by the option holder, such stock to be valued at its Fair Market
Value on the date
-3-
<PAGE> 4
preceding the date the option is exercised. If certificates
representing shares of Common Stock are used to pay all or part of the
purchase price of an option, separate certificates shall be delivered
by the Company representing the same number of shares as each
certificate so used and an additional certificate shall be delivered
representing the additional shares to which the option holder is
entitled as a result of exercise of the option. It shall be a
condition to the performance of the Company's obligation to issue or
transfer Shares upon exercise of an option or options that the optionee
pay, or make provision satisfactory to the Company for the payment of,
any taxes (other than stock transfer taxes) which the Company is
obligated to collect with respect to the issue or transfer upon such
exercise. The Committee may provide the option holder with the right
to satisfy federal or state tax obligations by delivery of previously
owned shares of Common Stock or electing the withholding of Shares
otherwise issuable upon exercise of a Non-qualified Stock Option, the
Fair Market Value of which shares does not exceed the amount to cover
any federal or state tax obligations (including FICA) incurred in
connection with the exercise of such option.
(e) Termination of Options. Upon the termination of an
optionee's employment with the Company, a subsidiary, or parent, other
than as provided in paragraph 8(c)(ii) hereof or as a result of
retirement, disability, or death, any option held by the optionee, to
the extent not previously exercised, shall forthwith terminate. In the
event of termination of such employment as provided in paragraph
8(c)(ii) hereof, any option shall be exercisable within 30 days after
such termination. In the event of termination of such employment by
reason of retirement, disability, or death, any option shall be
exercisable at any time within three months after such retirement or
within one year after such disability (within the meaning of Section 422
of the Code) or death, but only to the extent of the number of Shares
for which such option was exercisable at the date of such termination of
employment. The transfer of an optionee between the Company, a
subsidiary, or its parent shall not be deemed a termination of
employment. Cessation of any corporation's relationship with the
Company as a subsidiary or parent shall constitute a "termination of an
optionee's employment" hereunder as to individuals employed by that
corporation, and options held by such individuals shall be terminated in
accordance with this subsection.
(f) Adjustment of Options. In the event of a stock dividend,
stock split or combination of shares, recapitalization,
reclassification, merger, or other similar capital or corporate
structure change, the number and kind of Shares at the time of such
change remaining subject to the Plan and to any option granted or to be
granted pursuant to the Plan, the option exercise price, and any other
relevant provisions shall be appropriately adjusted by the Committee,
whose determination shall be binding on all persons.
(g) Exchange of Options. Non-qualified Stock Options may be
granted in exchange for previously granted stock options having an
exercise price higher than the options received in such exchange.
9. Effective Date; Stockholder Approval; Term. The Plan shall
become effective on the date of the last to occur of the (i) adoption of the
Plan by the Board and (ii) approval of the Plan,
<PAGE> 5
within 12 months of such adoption, by holders of a majority of the Company's
capital stock outstanding and entitled to vote at a duly held stockholders'
meeting. No option hereunder shall be granted after the date that occurs 10
years after the Plan's effective date (or, if earlier, 10 years after the
adoption of the Plan in the case of an Incentive Stock Option) or the earlier
suspension or termination of the Plan in accordance with its terms. The Plan
shall terminate on the date that occurs 10 years after the Plan's effective
date or on such earlier date as it may be suspended or terminated under the
provisions of Section 10 below or as of which all Shares subject to options
authorized to be granted under the Plan shall have been acquired by exercise of
such options.
10. Amendment or Discontinuance of the Plan. The Board of Directors
of the Company may, insofar as permitted by law and subject to the limitations
contained in the Plan, at any time or from time to time, suspend or terminate
the Plan or revise or amend it in any respect whatsoever.
11. Applicable Laws or Regulations and Notifications of
Disposition. The Company's obligation to sell and deliver Shares under an
option is subject to such compliance as the Company deems necessary or
advisable with federal and state laws, rules, and regulations applying to the
authorization, issuance , listing, or sale of securities. The Company may also
require in connection with any exercise of an Incentive Stock Option that the
optionee agree to notify the Company when making any disposition of the Shares,
whether by sale, gift, or otherwise, within two years of the date of grant or
within one year of the date of exercise.
12. No Employment Right No Obligation to Exercise Option. Nothing
contained in the Plan, or in any option granted under it, shall confer upon any
optionee any right to continued employment by the Company, any of its
subsidiaries or its parent or to continued membership on the Board or limit in
any way the right of the Company, any of its Subsidiaries, or its parent, to
terminate the optionee's employment at any time. The granting of any option
hereunder shall impose no obligation upon the optionee to the exercise such
option.
-5-
<PAGE> 6
HYDROCHEM HOLDING, INC.
STOCK OPTION
NUMBER OF SHARES: EFFECTIVE DATE OF GRANT:
THIS CERTIFIES THAT
PRICE PER SHARE: EXPIRATION DATE:
-------------------------
("HOLDER")
has the right to purchase the Number of Shares of Class A Common Stock of
HydroChem Holding, Inc. ("Company") for the Price per Share on or before the
Expiration Date, all as set forth above; subject, however, to the terms and
conditions on the reverse side of this certificate.
This Option shall become exercisable in accordance with the vesting schedule
below.
WITNESS the signature of the Company's President and the Company's seal.
VESTING SCHEDULE
HOLDER'S ADDRESS:
HYDROCHEM HOLDING, INC.
HOLDER'S SOCIAL SECURITY NO.
BY -------------------------
<PAGE> 7
HYDROCHEM HOLDING, INC.
TERMS & CONDITIONS
I. Shares Optioned, Option Price and Time of Exercise. The Company hereby
grants to Holder, subject to the terms and conditions set forth hereinafter and
in the Company's 1994 Stock Option Plan (the "Plan"), the right and option to
purchase all or any part of the Number of Shares set forth on the reverse side
of this certificate of the presently authorized but unissued Class A Common
Stock; or issued shares of Class A Common Stock that have been reacquired by
the Company, par value $.00005 per share of the Company, at the Price per Share
set out on the reverse side of this certificate. No rights under this option
may be exercised after the Expiration Date set out on the reverse side of this
certificate, and before that time, this option may be terminated as hereinafter
provided. If Holder does not purchase the full number of shares to which he or
she is entitled in any one year, he or she may purchase such shares in the next
year specified in the Exercise Schedule, in addition to the shares which he or
she is otherwise entitled to purchase in the next year. No partial exercise of
such option may be for less than 25 full shares, unless the remaining shares so
purchasable are fewer than 25 shares. In no event shall the Company be required
to issue fractional shares. This option shall become immediately exercisable
upon a Change of Control as that term is defined in the Plan.
II. Payment For and Delivery of Stock. The purchase price of the shares as
to which an option is exercised shall be paid in full at the time of the
exercise. Such purchase price shall be payable in cash, or at the option of the
Holder of such option, in Class A Common Stock theretofore owned by such Holder
or, in a combination of cash and such Class A Common Stock theretofore owned by
such Holder or, in a combination of cash and such Class A Common Stock. For
purposes of determining the amount, if any, of the purchase price satisfied by
payment in Class A Common Stock, such Class A Common Stock shall be valued at
its fair market value on the date of exercise in accordance with Paragraph 7 of
the Plan. Any Class A Common Stock delivered in satisfaction of all or a portion
of the purchase price shall be appropriately endorsed for transfer and
assignment to the Company. The rights of the Holder to make payment of all or
any portion of the purchase price of the shares with other shares of Class A
Common Stock shall be of no force and effect, and shares of Class A Common Stock
may not be used for such purpose, if the payment of all or any portion of the
purchase price in such manner would result in any charge to the Company's
earnings in the opinion of the Company's independent accountants.
III. Termination of Option: Right to Repurchase. Upon termination of
Holder's employment with the Company or any of its subsidiaries, other than
as a result of retirement, disability or death, any option held by the Holder,
to the extent not previously exercised, shall forthwith terminate. In the event
of termination of such employment by reason of retirement, disability or death,
any option shall be exercisable at any time within three months after such
retirement or within one year after such disability (within the meaning of
Section 422 of the Code as defined in the Plan) or death, but only to the extent
of the number of shares for which such option was exercisable at the date of
such termination of employment. Cessation of any corporation's relationship with
the Company as a subsidiary shall constitute a "termination of a Holder's
employment" hereunder as to individuals employed by that corporation, and
options held by such individuals shall be terminated in accordance with this
section. In no event may the option granted herein be exercisable to any extent
by anyone after the Expiration Date specified on the reverse side of this
certificate. It is expressly agreed that, anything contained herein to the
contrary notwithstanding, this option shall not constitute or be evidence of any
agreement or understanding, expressed or implied, that the Company will employ
Holder for any period of time or in any position or at any particular rate of
compensation. So long as the Class A Common Stock is not registered under
Section 12 of the Securities Exchange Act of 1934, as amended, upon "termination
of Holder's employment: as defined in Section III, hereinabove, the Company, at
its option, shall have the right for a period of 90 days following the date of
termination of Holder's employment, to repurchase from the Holder at a price
equal to the then fair market value of the shares determined in accordance with
Paragraph 7 of the Plan, any or all shares theretofore purchased by the Holder
from the Company pursuant to the terms of this option agreement.
IV. Non-Assignability of Option: Right of First Refusal. Options may be
exercised solely by Holder or his or her guardian or legal representative
during his or her lifetime or after his or her death by the personal
representative of Holder's estate or the person or persons entitled thereto
under his or her will or under the laws of descent and distribution. The option
shall not be assignable or otherwise transferrable except by will or the laws
of descent and distribution. Upon any attempt to sell, assign or transfer, this
option or any right or privilege conferred hereby, this option shall
immediately terminate and thereupon become null and void. So long as the Class
A Common Stock is not registered under Section 12 of the Securities and Exchange
Act of 1934, as amended, and if Holder seeks to sell or dispose of all or any
part of his or her shares to a third party, he or she shall notify the Company
in writing of such proposed sale or disposition at least thirty days prior to
the date of the proposed sale or disposition. The notice shall contain the date
of the proposed sale or disposition, the identity of the proposed purchaser, and
the terms and price of the proposed sale or disposition. The Company shall have
the right to purchase such shares from Holder upon the same terms and at the
same price as such third party purchaser is prepared to pay. If the Company has
not exercised its right to so purchase such shares within 30 days after notice,
Holder may sell or dispose of such shares to the proposed purchaser upon the
same proposed terms and price.
V. Compliance With Governmental and Other Regulations. The Company shall
take such steps as may be required by law and applicable regulations, including
rules and regulations of the Secretary of State of the State of Delaware and
any applicable stock exchange or national market system, in connection with the
issuance and sale of any shares purchased upon the exercise of this option or
the listing of said shares on said exchange.
VI. Rights of Holder in Stock. Neither Holder nor his or her executor,
administrator, heirs or legatees shall have any rights or privileges of a
stockholder of the Company in respect to the shares issuable upon exercise of
this option, unless and until certificates representing such shares shall have
been issued by the Company and delivered to Holder.
VII. Investment Representation. The shares as to which this option is
exercised have not been registered under the Securities Act of 1933, as amended
(hereinafter the "Act"). Accordingly, upon exercise of this option, and if the
shares have not been registered under the Act, Holder shall represent and agree
in writing that he or she is acquiring the shares for the purpose of investment
and not with a view to distribution thereof, and that: (i) Holder knows any
shares to be sold to him or her hereunder have not been registered under the
Act or any state securities laws, (ii) Holder understands that he or she must
bear the economic risk of said prospective investment for an indefinite period
of time until the shares are registered under the Act or an exemption from
registration is available, and (iii) Holder will hold the shares for investment
for his or her own account and not with a view to the resale or distribution of
all or any portion of the shares and will not solicit any offer to buy,
purchase or otherwise acquire all or any portion of the shares otherwise than
(a) pursuant to an opinion of counsel reasonably satisfactory to the Company,
or pursuant to a no-action letter from the Securities and Exchange Commission,
that registration under the Act is not required, or (b) pursuant to an
effective registration statement under the Act.
VIII. Notices. Any notice to be given hereunder shall be addressed to the
Company, in care of its Chairman of the Board and Chief Executive Officer, 5956
Sherry Lane, Suite 930, Dallas, Texas, 75225, and any notice to be given to the
Holder shall be addressed to the address designated on the reverse side of this
certificate, or at such other address either party may hereafter designate in
writing to the other. Any such notice shall have been deemed duly given when
enclosed in a properly sealed envelope, addressed as aforesaid, registered or
certified, and deposited (postage and registry or certificate fee prepaid) in
the United States Mail.
IX. Successors or Assigns of the Company. This option shall be binding upon
and shall inure to the benefit of any successor or assign of the Company.
This Non-Qualified Stock Option is hereby accepted and agreed to
in all respects by Holder as of the Date of Grant, subject to the terms and
provisions of the 1994 Stock Option Plan of HydroChem Holding, Inc. under which
the option has been granted.
- --------------------------------- ---------------------------------
<PAGE> 1
EXHIBIT 10.2
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT, made as of the 1st day of November, 1992,
is by and between Hydro Environmental Services Limited Partnership, a Delaware
limited partnership ("Employer"), and J. Pat DeBusk ("Employee").
WHEREAS, Employer desires to continue to employ Employee in Employer's
business (the "Business"); and
WHEREAS, Employer desires to continue such employment with Employer;
NOW THEREFORE, in consideration of the premises, the full and faithful
performance of the respective agreements herein contained, and the discharge of
the respective obligations herein imposed, the parties mutually covenant and
agree that in lieu of all prior agreements between the parties relating
thereto, Employer will continue such employment and enter into certain
covenants for the protection of trade secrets and confidential information of
Employer, all upon the terms and conditions hereinafter set forth:
1. Term. Subject to the provisions for termination hereinafter
set forth, the term of this Agreement shall be for the period from November 1,
1992 through October 31, 1993 (the "Term"), unless earlier terminated by
Employee's death or disability. This Agreement shall be renewed automatically
on a year to year basis upon expiration of the Term or any renewal Term hereof,
on the conditions herein set forth, unless either party gives notice under
paragraph 10 to the other party, within thirty (30) days prior to expiration of
any term, of such party's election not to so renew this Agreement.
2. Duties. Employee shall have those duties and responsibilities
which are assigned to him during the Term. Employee agrees to perform
faithfully the duties assigned to him to the best of his ability.
The Employee agrees to provide his best advice, information, judgment
and knowledge with respect to the Business, and Employee warrants that he is
free to enter into the terms of this Agreement, that he has no obligations
inconsistent herewith, and that he will devote his full time and best efforts
to the Business.
Employee shall serve Employer loyally, diligently and effectively, and
shall at all times exert his best efforts to promote the success of the
Business' activities as hereinabove stated. Employee shall devote all his time,
energy and ability to the interests of Employer and to the discharge of his
duties and responsibilities in an efficient, trustworthy and businesslike
manner. He shall do nothing which will in any way impair or prejudice the name
or reputation of Employer.
<PAGE> 2
3. Compensation. Subject to the performance by Employee of the
foregoing duties, Employer agrees to compensate Employee during the Term at the
rate of $138,000 per annum, payable in accordance with the payroll policy of
Employer, but not less than once a month. Employer may from time to time change
the amount of such compensation; provided, however, that Employee's
compensation may not be reduced without his written consent. In addition,
Employee may be paid bonuses in such amounts, at such times and on such basis
as Employer may from time to time, in its absolute discretion, determine.
As authorized from time to time by either the Chief Executive Officer
or the President of Employer, Employee may incur reasonable expenses in
furtherance of the Business of Employer, including, without limitation,
expenses for entertainment, travel and similar items. Employer will reimburse
Employee for all such expenses upon presentation by Employee of an itemized
account together with supporting receipts for such expenditures in accordance
with the rules, practices, and policies established from time to time by
Employer.
4. Employee Covenants. At all times during the Term, and
thereafter, Employee agrees as provided below:
(a) Employee understands that Employer's business
interests require a confidential relationship between Employer and its
employees, the protection and confidential treatment of its employees,
of its inventions, trade secrets, know-how, programs and other
knowledge of its business, including the Business (hereinafter
collectively termed "Information") whether or not conceived or learned
by its employees in the course of their employment. Accordingly,
Employee shall keep confidential and treat confidentially all
Information, whether patentable, patented, or not, and shall not use
or aid others in using the Information in competition with Employer,
this obligation to exist both during and after termination of
Employee's employment by Employer pursuant to this Agreement and for
so long as any Information remains legally protectable as to persons
receiving it in a confidential relationship.
(b) Employee will disclose to Employer every significant
item of Information relating to Employer's interests and will disclose
in writing every invention while under the employ of Employer and
which reasonably relates to the Business.
(c) Upon Employer's request, either during or after
termination of his employment, but without expense to him, Employee
will execute any and all patent applications, assignments, and other
legal instruments that Employer shall deem necessary for the
protection of the Information; he will render aid and assistance in
all proceedings pertaining to
-2-
<PAGE> 3
such property, and will, in general, cooperate with all lawful efforts
by Employer to protect the Information.
(d) Upon termination of employment, or from time to time
during the Term as Employer may request, Employee will surrender to
Employer all papers, documents, writings, illustrations, models and
other property produced thereby or coming into his possession by or
through his employment with Employer and Employee agrees that all such
materials are at all times Employer's property.
(e) Employee acknowledges and affirms that Employer at
its expense has provided to the Employee unique and specialized
training. The Employee further acknowledges that such training was
provided to Employee at Employer's expense to enhance Employee's
knowledge of and contacts in the petrochemical and refining
industries.
(f) During the Term and for an additional period of one
year (two years if the Employee voluntarily terminates his Employment
with Employer) immediately following the term of Employment (the
"Restriction Period"), Employee shall not, directly or indirectly, (i)
induce any employee of Employer to terminate his employment with
Employer, (ii) hire any such employee, (iii) call upon or solicit,
with the intent to divert or take away, or divert or take away any
clients, customers, or accounts of Employer or otherwise interfere or
compete with Employer in connection with such clients, customers, and
accounts, or (iv) in his own behalf or as a partner, officer,
director, employee, agent, consultant or stockholder (other than as a
holder of less than 1% of the outstanding capital stock of any
corporation with a class of equity securities registered under Section
12(b) or 12(g)of the Securities Exchange Act of 1934, as amended)
engage in, invest in, or render services to any person or entity
engaged in the businesses in which Employer is then engaged, in any
county or parish of any state of the United States in which Employer
or any of its subsidiaries or affiliates conducts such business. The
parties intend that the covenants contained in this section 4(f) shall
be deemed to be a series of separate covenants, one for each county or
parish in each state of the United States and, except for geographic
coverage, each such separate covenant shall be identical in terms to
the covenant contained in this section 4(f). If, in any judicial
proceeding, the court shall refuse to enforce all of the separate
covenants contained in this section 4(f) because the time limit is too
long, it is expressly understood and agreed between the parties hereto
that for the purposes of such proceeding such time limitation shall be
deemed reduced to the extent necessary to permit enforcement of such
covenants. If, in any judicial proceeding, the court shall refuse to
enforce all of the separate covenants contained in
-3-
<PAGE> 4
this section 4(f) because they are more extensive (whether as to
geographic area, scope of business or otherwise) than necessary to
protect the business and goodwill of Employer or any of its
subsidiaries or affiliates, it is expressly understood and agreed
between the parties hereto that for purposes of such proceeding the
geographic area, scope of business or other aspect shall be deemed
reduced to the extent necessary to permit enforcement of such
covenants.
(g) Employee acknowledges that, in view of the nature of
the business in which the Employer is engaged, the restrictions
contained in this paragraph 4, (the "Restrictions") are reasonable and
necessary in order to protect the legitimate interests of the
Employer, and that any violation thereof would result in irreparable
injuries to the Employer, and Employee therefore further acknowledges
that, in the event Employee violates, or threatens to violate, any of
such Restrictions, the Employer shall be entitled to obtain from any
court of competent jurisdiction, without the posting of any bond or
other security, preliminary and permanent injunctive relief as well as
damages and an equitable accounting of all earnings, profits, and
other benefits arising from such violation, which rights shall be
cumulative and in addition to any other rights or remedies in law or
equity to which the Employer may be entitled. The legitimate interests
of the Employer include, but are not limited to, the identity of
customers, the special needs and requirements of customers, pricing
strategies, cost factors and bidding strategies.
(h) If any Restriction under this paragraph 4, or any
part thereof, shall be determined in any judicial or administrative
proceeding to be invalid or unenforceable, the remainder of the
Restrictions shall not thereby be affected and shall be given full
effect, without regard to the invalid provisions. If the period of
time or the area specified in the Restrictions shall be determined in
any judicial or administrative proceeding to be unreasonable, then the
court or administrative body shall have the power to reduce the period
of time or the area covered and, in its reduced form, such provisions
shall then be enforceable and shall be enforced.
(i) If Employee violates any of the Restrictions, the
applicable restrictive period shall be tolled from the time of the
commencement of any such violation until such time as such violation
shall be cured by Employee to the reasonable satisfaction of the
Employer.
-4-
<PAGE> 5
5. Termination.
(a) This Agreement may be terminated prior to the
expiration of its Term by (i) the Employer at any time or (ii) the
Employee at any time after expiration of the first six months of this
Agreement (the "Initial Term"), by written notice to the other. If
such termination is by the Employee for any reason or by the Employer
for Cause (as such term is hereinafter defined), all of the Employee's
rights to compensation under Section 3 above shall terminate upon such
termination, except amounts accrued in respect of periods prior to
such termination.
If such termination is by the Employer without Cause, the Employer
shall pay to the Employee, in addition to amounts accrued in respect
of periods prior to such termination:
(i) if such termination occurs during the Initial
Term, an amount equal to the amount that would otherwise be
payable to the Employee under this Agreement during (X) the
remainder of the Initial Term or (Y) the next six months
following the date of such termination, whichever is greater,
or
(ii) if such termination occurs following the
Initial term, an amount equal to the amount that would
otherwise be payable under this Agreement during the next six
months following the date of such termination.
In either case, such amount will be based on the Base Salary then in
effect and payable in installments as if the employment of Employee
had continued through the applicable number of months. "Cause" shall
mean (i) failure by the Employee to perform assigned duties in a
manner which is satisfactory to the Employer, (ii) a material breach
by Employee of any of his obligations hereunder, (iii) fraud or
willful misconduct on the part of the Employee, or (iv) conviction of
the Employee for fraud, misappropriation, embezzlement, or any felony.
(b) If the Employee shall die during the term of this
Agreement, this Agreement shall automatically terminate, and no
further compensation shall be payable to Employee hereunder.
(c) If the Employee is unable to discharge his duties
hereunder for a period of two consecutive months by reason of physical
or mental illness, injury or incapacity, the Employer may, by written
notice to the Employee, terminate this Agreement and no further
compensation shall be payable to Employee hereunder.
-5-
<PAGE> 6
6. Severability. In case any term, phrase, clause, paragraph,
restriction, covenant or agreement herein contained shall be held to be invalid
or unenforceable, the same shall be severed, and it is hereby agreed that the
same are meant to be severable, and shall not defeat or impair the remaining
provisions hereof.
7. Waiver. A waiver by any party hereto of a breach of any
provision of this Agreement, or of any duties imposed upon any party hereto by
law, or of any other clauses hereof, shall not operate or be construed as a
waiver of any subsequent or continuing breach of this Agreement by any party.
8. Assignment and Construction. This Agreement shall bind
and inure to the benefit of Employer, its successors and assigns, and Employee,
his heirs and personal representatives. Construction of the terms of this
Agreement shall be governed by the laws of the State of Texas.
9. Relationship Between the Parties. Employee shall be
considered and treated as having an employee status, and shall be entitled, to
the extent he is eligible, to participate in any plans, arrangements or
distribution of and by Employer pertaining to or in connection with any
pension, bonus, profit-sharing, or similar benefits and life, health, accident
and disability insurance or benefits, or similar employee fringe benefits for
employees of Employer. All fees, compensation and other things of value,
charged by Employer and received or realized as a result of the rendition of
services by Employee on behalf of Employer shall belong to and be paid and
delivered forthwith to Employer.
10. Notices. Any and all notices provided for herein shall
be in writing and shall be considered as properly given if delivered to the
party, or sent by certified mail, return receipt requested, at the addresses
set out below under their names.
[Remainder of page is intentionally left blank]
-6-
<PAGE> 7
EXECUTED in duplicate originals as of the date and year first above
written.
Employer:
HYDRO ENVIRONMENTAL SERVICES
LIMITED PARTNERSHIP
By: HES Management, Inc., a
Delaware corporation and sole
general partner of Hydro
Environmental Services Limited
Partnership
BY: /s/ B. TOM CARTER, JR.
----------------------------------
B. Tom Carter, Jr.
Chairman and Chief
Executive officer
Address:
c/o HES Management, Inc.
5956 Sherry Lane
Suite 930
Dallas, TX 75225-8025
Telecopy # 214-361-4715
Confirming # 214-691-0196
Employee:
/s/ J. PAT DEBUSK
-----------------------------------
J. Pat DeBusk
Address: 5203 Lymbar
Houston, Texas 77096
-7-
<PAGE> 1
EXHIBIT 10.3
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT, made as of the 1st day of November, 1992,
is by and between Hydro Environmental Services Limited Partnership, a Delaware
limited partnership ("Employer"), and Gary Noto ("Employee").
WHEREAS, Employer desires to continue to employ Employee in Employer's
business (the "Business"): and
WHEREAS, Employer desires to continue such employment with Employer;
NOW THEREFORE, in consideration of the premises, the full and faithful
performance of the respective agreements herein contained, and the discharge of
the respective obligations herein imposed, the parties mutually covenant and
agree that in lieu of all prior agreements between the parties relating
thereto, Employer will continue such employment and enter into certain
covenants for the protection of trade secrets and confidential information of
Employer, all upon the terms and conditions hereinafter set forth:
1. Term. Subject to the provisions for termination hereinafter
set forth, the term of this Agreement shall be for the period from November 1,
1992 through October 31, 1993 (the "Term"), unless earlier terminated by
Employee's death or disability. This Agreement shall be renewed automatically
on a year to year basis upon expiration of the Term or any renewal Term hereof,
on the conditions herein set forth, unless either party gives notice under
paragraph 10 to the other party, within thirty (30) days prior to expiration of
any term, of such party's election not to so renew this Agreement.
2. Duties. Employee shall have those duties and responsibilities
which are assigned to him during the Term. Employee agrees to perform
faithfully the duties assigned to him to the best of his ability.
The Employee agrees to provide his best advice, information, judgment
and knowledge with respect to the Business, and Employee warrants that he is
free to enter into the terms of this Agreement, that he has no obligations
inconsistent herewith, and that he will devote his full time and best efforts
to the Business.
Employee shall serve Employer loyally, diligently and effectively, and
shall at all times exert his best efforts to promote the success of the
Business' activities as hereinabove stated. Employee shall devote all his time,
energy and ability to the interests of Employer and to the discharge of his
duties and responsibilities in an efficient, trustworthy and businesslike
manner. He shall do nothing which will in any way impair or prejudice the name
or reputation of Employer.
<PAGE> 2
3. Compensation. Subject to the performance by Employee of the
foregoing duties, Employer agrees to compensate Employee during the Term at the
rate of $80,000 per annum, payable in accordance with the payroll policy of
Employer, but not less than once a month. Employer may from time to time change
the amount of such compensation; provided, however, that Employee's
compensation may not be reduced without his written consent. In addition,
Employee may be paid bonuses in such amounts, at such times and on such basis
as Employer may from time to time, in its absolute discretion, determine.
As authorized from time to time by either the Chief Executive Officer
or the President of Employer, Employee may incur reasonable expenses in
furtherance of the Business of Employer, including, without limitation,
expenses for entertainment, travel and similar items. Employer will reimburse
Employee for all such expenses upon presentation by Employee of an itemized
account together with supporting receipts for such expenditures in accordance
with the rules, practices, and policies established from time to time by
Employer.
4. Employee Covenants. At all times during the Term, and
thereafter, Employee agrees as provided below:
(a) Employee understands that Employer's business
interests require a confidential relationship between Employer and its
employees, the protection and confidential treatment of its employees,
of its inventions, trade secrets, know-how, programs and other
knowledge of its business, including the Business (hereinafter
collectively termed "Information") whether or not conceived or learned
by its employees in the course of their employment. Accordingly,
Employee shall keep confidential and treat confidentially all
Information, whether patentable, patented, or not, and shall not use
or aid others in using the Information in competition with Employer,
this obligation to exist both during and after termination of
Employee's employment by Employer pursuant to this Agreement and for
so long as any Information remains legally protectable as to persons
receiving it in a confidential relationship.
(b) Employee will disclose to Employer every significant
item of Information relating to Employer's interests and will disclose
in writing every invention while under the employ of Employer and
which reasonably relates to the Business.
(c) Upon Employer's request, either during or after
termination of his employment, but without expense to him, Employee
will execute any and all patent applications, assignments, and other
legal instruments that Employer shall deem necessary for the
protection of the Information; he will render aid and assistance in
all proceedings pertaining to
-2-
<PAGE> 3
such property, and will, in general, cooperate with all lawful efforts
by Employer to protect the Information.
(d) Upon termination of employment, or from time to time
during the Term as Employer may request, Employee will surrender to
Employer all papers, documents, writings, illustrations, models and
other property produced thereby or coming into his possession by or
through his employment with Employer and Employee agrees that all such
materials are at all times Employer's property.
(e) Employee acknowledges and affirms that Employer at
its expense has provided to the Employee unique and specialized
training. The Employee further acknowledges that such training was
provided to Employee at Employer's expense to enhance Employee's
knowledge of and contacts in the petrochemical and refining
industries.
(f) During the Term and for an additional period of one
year (two years if the Employee voluntarily terminates his Employment
with Employer) immediately following the term of Employment (the
"Restriction Period"), Employee shall not, directly or indirectly, (i)
induce any employee of Employer to terminate his employment with
Employer, (ii) hire any such employee, (iii) call upon or solicit,
with the intent to divert or take away, or divert or take away any
clients, customers, or accounts of Employer or otherwise interfere or
compete with Employer in connection with such clients, customers, and
accounts, or (iv) in his own behalf or as a partner, officer,
director, employee, agent, consultant or stockholder (other than as a
holder of less than 1% of the outstanding capital stock of any
corporation with a class of equity securities registered under Section
12(b) or 12(g) of the Securities Exchange Act of 1934, as amended)
engage in, invest in, or render services to any person or entity
engaged in the businesses in which Employer is then engaged, in any
county or parish of any state of the United States in which Employer
or any of its subsidiaries or affiliates conducts such business. The
parties intend that the covenants contained in this section 4(f) shall
be deemed to be a series of separate covenants, one for each county or
parish in each state of the United States and, except for geographic
coverage, each such separate covenant shall be identical in terms to
the covenant contained in this section 4(f). If, in any judicial
proceeding, the court shall refuse to enforce all of the separate
covenants contained in this section 4(f) because the time limit is too
long, it is expressly understood and agreed between the parties hereto
that for the purposes of such proceeding such time limitation shall be
deemed reduced to the extent necessary to permit enforcement of such
covenants. If, in any judicial proceeding, the court shall refuse to
enforce all of the separate covenants contained in
-3-
<PAGE> 4
this section 4(f) because they are more extensive (whether as to
geographic area, scope of business or otherwise) than necessary to
protect the business and goodwill of Employer or any of its
subsidiaries or affiliates, it is expressly understood and agreed
between the parties hereto that for purposes of such proceeding the
geographic area, scope of business or other aspect shall be deemed
reduced to the extent necessary to permit enforcement of such
covenants.
(g) Employee acknowledges that, in view of the nature of
the business in which the Employer is engaged, the restrictions
contained in this paragraph 4, (the "Restrictions") are reasonable and
necessary in order to protect the legitimate interests of the
Employer, and that any violation thereof would result in irreparable
injuries to the Employer, and Employee therefore further acknowledges
that, in the event Employee violates, or threatens to violate, any of
such Restrictions, the Employer shall be entitled to obtain from any
court of competent jurisdiction, without the posting of any bond or
other security, preliminary and permanent injunctive relief as well as
damages and an equitable accounting of all earnings, profits, and
other benefits arising from such violation, which rights shall be
cumulative and in addition to any other rights or remedies in law or
equity to which the Employer may be entitled. The legitimate interests
of the Employer include, but are not limited to, the identity of
customers, the special needs and requirements of customers, pricing
strategies, cost factors and bidding strategies.
(h) If any Restriction under this paragraph 4, or any
part thereof, shall be determined in any judicial or administrative
proceeding to be invalid or unenforceable, the remainder of the
Restrictions shall not thereby be affected and shall be given full
effect, without regard to the invalid provisions. If the period of
time or the area specified in the Restrictions shall be determined in
any judicial or administrative proceeding to be unreasonable, then the
court or administrative body shall have the power to reduce the period
of time or the area covered and, in its reduced form, such provisions
shall then be enforceable and shall be enforced.
(i) If Employee violates any of the Restrictions, the
applicable restrictive period shall be tolled from the time of the
commencement of any such violation until such time as such violation
shall be cured by Employee to the reasonable satisfaction of the
Employer.
-4-
<PAGE> 5
5. Termination.
(a) This Agreement may be terminated prior to the
expiration of its Term by (i) the Employer at any time or (ii) the
Employee at any time after expiration of the first six months of this
Agreement (the "Initial Term"), by written notice to the other. If
such termination is by the Employee for any reason or by the Employer
for Cause (as such term is hereinafter defined), all of the Employee's
rights to compensation under Section 3 above shall terminate upon such
termination, except amounts accrued in respect of periods prior to
such termination.
If such termination is by the Employer without Cause, the Employer
shall pay to the Employee, in addition to amounts accrued in respect
of periods prior to such termination:
(i) if such termination occurs during the Initial
Term, an amount equal to the amount that would otherwise be
payable to the Employee under this Agreement during (X) the
remainder of the Initial Term or (Y) the next six months
following the date of such termination, whichever is greater,
or
(ii) if such termination occurs following the
Initial term, an amount equal to the amount that would
otherwise be payable under this Agreement during the next six
months following the date of such termination.
In either case, such amount will be based on the Base Salary then in
effect and payable in installments as if the employment of Employee
had continued through the applicable number of months. "Cause" shall
mean (i) failure by the Employee to perform assigned duties in a
manner which is satisfactory to the Employer, (ii) a material breach
by Employee of any of his obligations hereunder, (iii) fraud or
willful misconduct on the part of the Employee, or (iv) conviction of
the Employee for fraud, misappropriation, embezzlement, or any felony.
(b) If the Employee shall die during the term of this
Agreement, this Agreement shall automatically terminate, and no
further compensation shall be payable to Employee hereunder.
(c) If the Employee is unable to discharge his duties
hereunder for a period of two consecutive months by reason of physical
or mental illness, injury or incapacity, the Employer may, by written
notice to the Employee, terminate this Agreement and no further
compensation shall be payable to Employee hereunder.
-5-
<PAGE> 6
6. Severability. In case any term, phrase, clause, paragraph,
restriction, covenant or agreement herein contained shall be held to be invalid
or unenforceable, the same shall be severed, and it is hereby agreed that the
same are meant to be severable, and shall not defeat or impair the remaining
provisions hereof.
7. Waiver. A waiver by any party hereto of a breach of any provision of
this Agreement, or of any duties imposed upon any party hereto by law, or of
any other clauses hereof, shall not operate or be construed as a waiver of any
subsequent or continuing breach of this Agreement by any party.
8. Assignment and Construction. This Agreement shall bind and inure
to the benefit of Employer, its successors and assigns, and Employee, his heirs
and personal representatives. Construction of the terms of this Agreement shall
be governed by the laws of the State of Texas.
9. Relationship Between the Parties. Employee shall be considered
and treated as having an employee status, and shall be entitled, to the extent
he is eligible, to participate in any plans, arrangements or distribution of
and by Employer pertaining to or in connection with any pension, bonus, profit-
sharing, or similar benefits and life, health, accident and disability
insurance or benefits, or similar employee fringe benefits for employees of
Employer. All fees, compensation and other things of value, charged by Employer
and received or realized as a result of the rendition of services by Employee
on behalf of Employer shall belong to and be paid and delivered forthwith to
Employer.
10. Notices. Any and all notices provided for herein shall be in
writing and shall be considered as properly given if delivered to the party, or
sent by certified mail, return receipt requested, at the addresses set out
below under their names.
[Remainder of page is intentionally left blank]
-6-
<PAGE> 7
EXECUTED in duplicate originals as of the date and year first above
written.
Employer:
HYDRO ENVIRONMENTAL SERVICES
LIMITED PARTNERSHIP
By: HES Management, Inc., a
Delaware corporation and sole
general partner of Hydro
Environmental Services Limited
Partnership
By: /s/ B. TOM CARTER, JR.
-----------------------------
B. Tom Carter, Jr.
Chairman and Chief
Executive Officer
Address:
c/o HES Management, Inc.
5956 Sherry Lane
Suite 930
Dallas, TX 75225-8025
Telecopy # 214-361-4715
Confirming # 214-691-0196
Employee:
/s/ GARY NOTO
--------------------------------
Gary Noto
Address: 2313 Prestwick Drive
League City, Texas 77573
-7-
<PAGE> 1
EXHIBIT 10.4
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT, made as of the 1st day of November, 1992,
is by and between Hydro Environmental Services Limited Partnership, a Delaware
limited partnership ("Employer"), and Craig Kaple ("Employee").
WHEREAS, Employer desires to continue to employ Employee in Employer's
business (the "Business"; and
WHEREAS, Employer desires to continue such employment with Employer;
NOW THEREFORE, in consideration of the premises, the full and faithful
performance of the respective agreements herein contained, and the discharge of
the respective obligations herein imposed, the parties mutually covenant and
agree that in lieu of all prior agreements between the parties relating
thereto, Employer will continue such employment and enter into certain
covenants for the protection of trade secrets and confidential information of
Employer, all upon the terms and conditions hereinafter set forth:
1. Term. Subject to the provisions for termination hereinafter
set forth, the term of this Agreement shall be for the period from November 1,
1992 through October 31, 1993 (the "Term"), unless earlier terminated by
Employee's death or disability. This Agreement shall be renewed automatically
on a year to year basis upon expiration of the Term or any renewal Term hereof,
on the conditions herein set forth, unless either party gives notice under
paragraph 10 to the other party, within thirty (30) days prior to expiration of
any term, of such party's election not to so renew this Agreement.
2. Duties. Employee shall have those duties and responsibilities
which are assigned to him during the Term. Employee agrees to perform
faithfully the duties assigned to him to the best of his ability.
The Employee agrees to provide his best advice, information, judgment
and knowledge with respect to the Business, and Employee warrants that he is
free to enter into the terms of this Agreement, that he has no obligations
inconsistent herewith, and that he will devote his full time and best efforts
to the Business.
Employee shall serve Employer loyally, diligently and effectively, and
shall at all times exert his best efforts to promote the success of the
Business' activities as hereinabove stated. Employee shall devote all his time,
energy and ability to the interests of Employer and to the discharge of his
duties and responsibilities in an efficient, trustworthy and businesslike
manner. He shall do nothing which will in any way impair or prejudice the name
or reputation of Employer.
<PAGE> 2
3. Compensation. Subject to the performance by Employee of the
foregoing duties, Employer agrees to compensate Employee during the Term at the
rate of $72,000 per annum, payable in accordance with the payroll policy of
Employer, but not less than once a month. Employer may from time to time change
the amount of such compensation; provided, however, that Employee's
compensation may not be reduced without his written consent. In addition,
Employee may be paid bonuses in such amounts, at such times and on such basis
as Employer may from time to time, in its absolute discretion, determine.
As authorized from time to time by either the Chief Executive Officer
or the President of Employer, Employee may incur reasonable expenses in
furtherance of the Business of Employer, including, without limitation,
expenses for entertainment, travel and similar items. Employer will reimburse
Employee for all such expenses upon presentation by Employee of an itemized
account together with supporting receipts for such expenditures in accordance
with the rules, practices, and policies established from time to time by
Employer.
4. Employee Covenants. At all times during the Term, and
thereafter, Employee agrees as provided below:
(a) Employee understands that Employer's business
interests require a confidential relationship between Employer and its
employees, the protection and confidential treatment of its employees,
of its inventions, trade secrets, know-how, programs and other
knowledge of its business, including the Business (hereinafter
collectively termed "Information") whether or not conceived or learned
by its employees in the course of their employment. Accordingly,
Employee shall keep confidential and treat confidentially all
Information, whether patentable, patented, or not, and shall not use
or aid others in using the Information in competition with Employer,
this obligation to exist both during and after termination of
Employee's employment by Employer pursuant to this Agreement and for
so long as any Information remains legally protectable as to persons
receiving it in a confidential relationship.
(b) Employee will disclose to Employer every significant
item of Information relating to Employer's interests and will disclose
in writing every invention while under the employ of Employer and
which reasonably relates to the Business.
(c) Upon Employer's request, either during or after
termination of his employment, but without expense to him, Employee
will execute any and all patent applications, assignments, and other
legal instruments that Employer shall deem necessary for the
protection of the Information; he will render aid and assistance in
all proceedings pertaining to
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<PAGE> 3
such property, and will, in general, cooperate with all lawful efforts
by Employer to protect the Information.
(d) Upon termination of employment, or from time to time
during the Term as Employer may request, Employee will surrender to
Employer all papers, documents, writings, illustrations, models and
other property produced thereby or coming into his possession by or
through his employment with Employer and Employee agrees that all such
materials are at all times Employer's property.
(e) Employee acknowledges and affirms that Employer at its
expense has provided to the Employee unique and specialized training.
The Employee further acknowledges that such training was provided to
Employee at Employer's expense to enhance Employee's knowledge of and
contacts in the petrochemical and refining industries.
(f) During the Term and for an additional period of one
year (two years if the Employee voluntarily terminates his Employment
with Employer) immediately following the term of Employment (the
"Restriction Period"), Employee shall not, directly or indirectly, (i)
induce any employee of Employer to terminate his employment with
Employer, (ii) hire any such employee, (iii) call upon or solicit,
with the intent to divert or take away, or divert or take away any
clients, customers, or accounts of Employer or otherwise interfere or
compete with Employer in connection with such clients, customers, and
accounts, or (iv) in his own behalf or as a partner, officer,
director, employee, agent, consultant or stockholder (other than as a
holder of less than 1% of the outstanding capital stock of any
corporation with a class of equity securities registered under Section
12(b) or 12(g) of the Securities Exchange Act of 1934, as amended)
engage in, invest in, or render services to any person or entity
engaged in the businesses in which Employer is then engaged, in any
county or parish of any state of the United States in which Employer
or any of its subsidiaries or affiliates conducts such business. The
parties intend that the covenants contained in this section 4(f) shall
be deemed to be a series of separate covenants, one for each county or
parish in each state of the United States and, except for geographic
coverage, each such separate covenant shall be identical in terms to
the covenant contained in this section 4(f). If, in any judicial
proceeding, the court shall refuse to enforce all of the separate
covenants contained in this section 4(f) because the time limit is too
long, it is expressly understood and agreed between the parties hereto
that for the purposes of such proceeding such time limitation shall be
deemed reduced to the extent necessary to permit enforcement of such
covenants. If, in any judicial proceeding, the court shall refuse to
enforce all of the separate covenants contained in
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<PAGE> 4
this section 4(f) because they are more extensive (whether as to
geographic area, scope of business or otherwise) than necessary to
protect the business and goodwill of Employer or any of its
subsidiaries or affiliates, it is expressly understood and agreed
between the parties hereto that for purposes of such proceeding the
geographic area, scope of business or other aspect shall be deemed
reduced to the extent necessary to permit enforcement of such
covenants.
(g) Employee acknowledges that, in view of the nature of
the business in which the Employer is engaged, the restrictions
contained in this paragraph 4, (the "Restrictions") are reasonable and
necessary in order to protect the legitimate interests of the
Employer, and that any violation thereof would result in irreparable
injuries to the Employer, and Employee therefore further acknowledges
that, in the event Employee violates, or threatens to violate, any of
such Restrictions, the Employer shall be entitled to obtain from any
court of competent jurisdiction, without the posting of any bond or
other security, preliminary and permanent injunctive relief as well as
damages and an equitable accounting of all earnings, profits, and
other benefits arising from such violation, which rights shall be
cumulative and in addition to any other rights or remedies in law or
equity to which the Employer may be entitled. The legitimate interests
of the Employer include, but are not limited to, the identity of
customers, the special needs and requirements of customers, pricing
strategies, cost factors and bidding strategies.
(h) If any Restriction under this paragraph 4, or any part
thereof, shall be determined in any judicial or administrative
proceeding to be invalid or unenforceable, the remainder of the
Restrictions shall not thereby be affected and shall be given full
effect, without regard to the invalid provisions. If the period of
time or the area specified in the Restrictions shall be determined in
any judicial or administrative proceeding to be unreasonable, then the
court or administrative body shall have the power to reduce the period
of time or the area covered and, in its reduced form, such provisions
shall then be enforceable and shall be enforced.
(i) If Employee violates any of the Restrictions, the
applicable restrictive period shall be tolled from the time of the
commencement of any such violation until such time as such violation
shall be cured by Employee to the reasonable satisfaction of the
Employer.
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<PAGE> 5
5. Termination.
(a) This Agreement may be terminated prior to the expiration of
its Term by (i) the Employer at any time or (ii) the Employee at any time after
expiration of the first six months of this Agreement (the "Initial Term"), by
written notice to the other. If such termination is by the Employee for any
reason or by the Employer for Cause (as such term is hereinafter defined), all
of the Employee's rights to compensation under Section 3 above shall terminate
upon such termination, except amounts accrued in respect of periods prior to
such termination.
If such termination is by the Employer without Cause, the Employer shall pay to
the Employee, in addition to amounts accrued in respect of periods prior to
such termination:
(i) if such termination occurs during the Initial Term,
an amount equal to the amount that would otherwise be payable to the
Employee under this Agreement during (X) the remainder of the Initial
Term or (Y) the next six months following the date of such
termination, whichever is greater, or
(ii) if such termination occurs following the Initial
term, an amount equal to the amount that would otherwise be payable
under this Agreement during the next six months following the date of
such termination.
In either case, such amount will be based on the Base Salary then in effect and
payable in installments as if the employment of Employee had continued through
the applicable number of months. "Cause" shall mean (i) failure by the Employee
to perform assigned duties in a manner which is satisfactory to the Employer,
(ii) a material breach by Employee of any of his obligations hereunder, (iii)
fraud or willful misconduct on the part of the Employee, or (iv) conviction of
the Employee for fraud, misappropriation, embezzlement, or any felony.
(b) If the Employee shall die during the term of this Agreement,
this Agreement shall automatically terminate, and no further compensation shall
be payable to Employee hereunder.
(c) If the Employee is unable to discharge his duties hereunder
for a period of two consecutive months by reason of physical or mental illness,
injury or incapacity, the Employer may, by written notice to the Employee,
terminate this Agreement and no further compensation shall be payable to
Employee hereunder.
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<PAGE> 6
6. Severability. In case any term, phrase, clause, paragraph,
restriction, covenant or agreement herein contained shall be held to be invalid
or unenforceable, the same shall be severed, and it is hereby agreed that the
same are meant to be severable, and shall not defeat or impair the remaining
provisions hereof.
7. Waiver. A waiver by any party hereto of a breach of any
provision of this Agreement, or of any duties imposed upon any party hereto by
law, or of any other clauses hereof, shall not operate or be construed as a
waiver of any subsequent or continuing breach of this Agreement by any party.
8. Assignment and Construction. This Agreement shall bind
and inure to the benefit of Employer, its successors and assigns, and Employee,
his heirs and personal representatives. Construction of the terms of this
Agreement shall be governed by the laws of the State of Texas.
9. Relationship Between the Parties. Employee shall be
considered and treated as having an employee status, and shall be entitled, to
the extent he is eligible, to participate in any plans, arrangements or
distribution of and by Employer pertaining to or in connection with any
pension, bonus, profit-sharing, or similar benefits and life, health, accident
and disability insurance or benefits, or similar employee fringe benefits for
employees of Employer. All fees, compensation and other things of value,
charged by Employer and received or realized as a result of the rendition of
services by Employee on behalf of Employer shall belong to and be paid and
delivered forthwith to Employer.
10. Notices. Any and all notices provided for herein shall
be in writing and shall be considered as properly given if delivered to the
party, or sent by certified mail, return receipt requested, at the addresses
set out below under their names.
[Remainder of page is intentionally left blank]
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<PAGE> 7
EXECUTED in duplicate originals as of the date and year first above
written.
Employer:
HYDRO ENVIRONMENTAL SERVICES
LIMITED PARTNERSHIP
By: HES Management, Inc., a
Delaware corporation and sole
general partner of Hydro
Environmental Services
Limited Partnership
By: /s/ B. TOM CARTER, JR.
-------------------------
B.Tom Carter, Jr.
Chairman and Chief
Executive Officer
Address:
c/o HES Management, Inc.
5956 Sherry Lane
Suite 930
Dallas, TX 75225-8025
Telecopy # 214-361-4715
Confirming #J14-691-0196
Employee:
/s/ CRAIG KAPLE
------------------------------------
Craig Kaple
Address: 14532 Cottage Oak Drive
Baton Rouge,
Louisiana 70810
<PAGE> 1
EXHIBIT 10.5
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (the "Agreement"), entered into as of the 15th day
of December, 1993, by and between HYDROCHEM HOLDING, INC., a Delaware
Corporation, (the "Employer") and B. TOM CARTER, JR., an individual (the
"Employee").
IN CONSIDERATION OF the mutual covenants herein contained and other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
1. EMPLOYMENT.
(a) Employer hereby agrees to employ Employee, and Employee agrees to
be employed as Chief Executive Officer of each of Employer, its wholly-owned
subsidiary, HydroChem Industrial Services, Inc. ("HydroChem") and HydroChem's
wholly-owned subsidiary, HydroChem International, Inc. ("HCI"), during the
Period of Employment as hereinafter defined. During the Period of Employment,
Employee also agrees to serve as a Director on the Board of Directors of each
of Employer, HydroChem, HCI and one or more of their respective subsidiaries,
as well as a member of any committee of such Boards of Directors to which
Employee may be duly elected or appointed. Employer has heretofore caused
Employee to be elected to the Boards of Directors and as Chairman of the Board
and Chief Executive Officer of each of Employer, HydroChem and HCI.
(b) Subject to Section 1(c) below and except upon termination for
Cause (as defined in Section 7(a) below) or while disabled (as described in
Section 7(d) below) or in the event of Employee's death, if at any time during
the Period of Employment, the Boards of Directors or stockholders fail, without
Employee's consent, to re-elect Employee as a Director or as Chairman of the
Board and Chief Executive Officer of Employer, HydroChem or HCI, or removes
Employee from such offices or directorship, or if at any time during the Period
of Employment, Employee shall fail to be vested by the Boards of Directors of
Employer, HydroChem or HCI with the power and authority of the Chairman of the
Board and Chief Executive Officer of Employer, HydroChem or HCI or Employee
shall lose any significant rights, duties or responsibilities attending such
offices, Employee shall have the right by written notice to Employer to
terminate his services hereunder, effective as of the last day of the month of
receipt of such notice, in which event the Period of Employment shall so
terminate on such last day of the month. Such termination under such
circumstances shall be deemed pursuant to Section 7(a) below as a termination
by Employer other
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<PAGE> 2
than for Cause, with all of the consequences which flow from such termination.
(c) Notwithstanding the provisions of Section 1(b) above, the Board
of Directors of Employer shall be entitled at anytime after expiration of the
first 24 months of the Period of Employment to elect another member of the
Board of Directors as Chairman of the Board of any or all of Employer,
HydroChem or HCI. In such event, Employer will continue to serve during the
remainder of the Period of Employment as the Chief Executive Officer of any
such entity without reduction of any of his duties and responsibilities and the
by-laws of the Employer, HydroChem or HCI, as the case may be, will be amended
to remove such duties and responsibilities from those assigned to the Chairman
of the Board.
2. PERIOD OF EMPLOYMENT.
The "Period of Employment" shall be for a period of five years from the
date hereof, except as otherwise provided herein.
3. DUTIES DURING THE PERIOD OF EMPLOYMENT.
Employee shall devote his full business time, attention and best efforts
to the affairs of Employer and HydroChem and their respective subsidiaries
during the Period of Employment, provided, however, that Employee may engage in
other activities, such as activities involving charitable, educational,
religious and similar types of organizations, speaking engagements, memberships
on the Board of Directors of other organizations, and similar type activities
to the extent that such other activities do not inhibit or prohibit the
performance of his duties under this Agreement and are consistent with the
provisions of Section 8 below.
4. CASH COMPENSATION.
(a) Base Salary.
Employer will pay to Employee during the Period of Employment a base
annual salary of $200,000; provided, however, it is agreed between the parties
that the Employer shall periodically review, and in light of such review may,
in the discretion of the Board of Directors of Employer, increase such base
annual salary.
(b) Bonus Payments.
(i) Upon execution of this Agreement, Employer will pay to Employee a
bonus in the amount of $150,000 in recognition of Employee's contribution to
the consummation of the acquisition by Employer of the DIS Division of Dowell
Schlumberger Incorporated.
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<PAGE> 3
(ii) For calendar year 1994 and all subsequent years during the Period
of Employment, Employee shall be entitled to such bonuses as the Compensation
Committee (which shall not include any director who is an employee of Employer
or any of its subsidiaries) of the Board of Directors of Employer shall
determine from time to time based upon the attainment by Employee of the
personal objectives established for Employee by such Compensation Committee.
5. Stock option.
(a) Stock Option Plan.
Employer agrees that at a Board meeting to be called for such purpose as
soon as practicable following the date hereof, Employer shall take all required
action to (i) adopt a Stock Option Plan (the "Stock Option Plan") whereby
employees of Employer shall be eligible to be granted options ("Options") to
buy shares of the authorized and unissued shares of the common stock, $.00005
par value, of the Employer (the "Common Stock") and (ii) grant to Employee an
Option to purchase up to an aggregate of 50,000 shares of Common Stock pursuant
to the terms of the Stock Option Plan.
(b) Vesting of Options.
The Options shall vest, and Employee shall have the right to exercise
the Options in installments over a five year period commencing on the first
anniversary of this Agreement as follows:
<TABLE>
<CAPTION>
Anniversary Percent Exercisable
----------- -------------------
<S> <C>
First 35%
Second 60%
Third 80%
Fourth 90%
Fifth 100%
</TABLE>
6. OTHER EMPLOYEE BENEFITS.
(a) Vacation and Sick Leave.
Employee shall be entitled to reasonable paid vacation periods and to
reasonable sick leave in accordance with Employer policy.
(b) Regular Reimbursed Business Expense.
Employer shall reimburse Employee for all expenses and disbursements
reasonably incurred by Employee in the performance of his duties during the
Period of Employment, and such other facilities or services as Employer and
Employee may, from time to time, agree are reimbursable.
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<PAGE> 4
(c) Employer's Benefit Plans or Arrangements.
In addition to the cash compensation provided for in Section 4 hereof,
Employee, subject to meeting eligibility provisions and to the provisions of
this Agreement, shall be entitled to participate in all employee benefit plans
of Employer, as presently in effect or as they may be modified or added to by
the Employer from time to time.
(d) Travel, Temporary Residence and Relocation.
Employer shall, upon receipt of appropriate documentation, pay or
reimburse Employee during the Period of Employment in amounts which, after
provision for the net amount of all income taxes payable by Employee with
respect to the receipt of such amounts, shall be equal to all out-of-pocket
expenses incurred in the reasonable discretion of Employee in traveling between
his present home in Dallas, Texas and Employer's offices in the Houston, Texas
area, and in temporarily residing in the Houston, Texas area; provided that the
aggregate of such amounts shall not exceed $125,000 in any fiscal year; and
provided further, that the character and sum of such amounts shall be subject
to annual review and approval by the Board. In addition, Employer shall
reimburse Employee in the same after tax manner for all of Employee's
reasonable out-of-pocket expenses of moving his family and their personal
effects from Dallas, Texas to the Houston, Texas area, including the closing
costs of acquiring a home; provided such move is made on or prior to the four-
year anniversary of this Agreement.
(e) Employee's Tenure.
Employee's employment with Employer shall be deemed to have commenced on
May 21, 1990 for purposes of calculating Employee's tenure in connection with
all employee benefit plans of Employer based on tenure and for all other
purposes relating to Employee's employment by Employer (it being understood
that this provision shall not apply to the Stock Option Plan described in
Section 5 above).
7. TERMINATION.
(a) Termination by Employer Other than for Cause; Voluntary
Termination; Change in Control.
If (i) Employer should terminate the Period of Employment for other than
Cause, or (ii) Employee should voluntarily terminate the Period of Employment
pursuant to Section 1(b) above, the Employer shall forthwith pay to Employee
in one lump sum an amount equal to Employee's then current base annual salary.
If (x) Employee's employment with Employer is terminated under any of the
circumstances described in the preceding Sentence or (y) a Change
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<PAGE> 5
of Control shall occur, then, in any such case, the provisions of Section 8(b)
below shall have no further force or effect.
"Cause" shall mean willful misconduct in following the legitimate
directions of the Board of Directors; conviction of a felony or a crime
involving theft; habitual drunkenness; excessive absenteeism not related to
illness, sick leave or vacations, but only after notice from the Board of
Directors followed by a repetition of such excessive absenteeism; dishonesty;
conflict of interest after written notice from the Board of Directors or; a
material breach of any of the provisions of this Agreement (it being understood
that this Agreement does not prescribe a required level of performance of
Employee). For purposes of this definition the term "legitimate directions of
the Board of Directors" shall mean those directions which would not cause
Employee to commit an illegal or unethical act or to violate Employee's
fiduciary duty as an officer or director of Employer.
A "Change in Control" shall have occurred if (i) the Employer sells
substantially all of its assets, (ii) Employer merges or combines with another
entity following which Employer is not the surviving entity, or (iii) any
"person" (as such term is used in Section 13(d) of the Securities Exchange Act
of 1934, as amended) or persons acting as a group, other than the stockholders
of Employer as of December 15, 1993, becomes the beneficial owner of securities
of Employer representing twenty percent or more of the combined voting power of
the Employer's then outstanding securities and there is a reduction in the
aggregate beneficial ownership of securities of the Employer held by
stockholders of Employer as of December 15, 1993 to less than twenty percent of
the combined voting power of the Company's then outstanding securities.
(b) Resignation by Employee: Termination for Cause.
If during the Period of Employment, Employee shall exercise his right of
termination under Section 1(b) above or shall otherwise elect to resign
voluntarily, Employee shall resign as a Director and officer and as an employee
of Employer and all applicable subsidiaries of Employer. If during the Period
of Employment, Employee shall be terminated for Cause or shall voluntarily
terminate his employment (other than pursuant to Section 1(b) above), Employee
shall not be entitled to any payments from Employer or any subsidiary of
Employer subsequent to such termination date other than payments of
compensation and reimbursement of expenses for periods prior thereto.
(c) Death.
The Period of Employment shall terminate automatically upon the death of
the Employee. The Employer shall pay to the Employee's beneficiaries or estate,
as appropriate, the compensation to which Employee is entitled pursuant to
Section 4(a)
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<PAGE> 6
hereof through the end of the month in which death occurs. Thereafter, the
Employer's obligations under Section 4 hereof shall terminate. Nothing in this
Section 7(c) shall affect any entitlement of the Employee's heirs to the
benefits of any life insurance plan.
(d) Disability.
If, in the reasonable judgment of the Board of Directors of Employer,
Employee shall be prevented from performing his duties hereunder in a manner
reasonably acceptable to the Board of Directors by reason of any physical or
mental incapacity (i) for a period of more than ninety (90) days in the
aggregate in any twelve-month period, (ii) forty-five (45) consecutive days in
any twelve-month period, or (iii) the Board of Directors of Employer reasonably
determines that Employee may not be expected to resume performing his duties in
a manner reasonably acceptable to the Board of Directors of Employer for a
period of forty-five (45) days, then, the Period of Employment shall terminate
on and the compensation to which Employee is entitled pursuant to Section 4(a)
hereof shall be paid up through (x) with respect to clause (i) above, the last
day of the month in which the ninetieth (90th) day of incapacity occurs, (y)
with respect to clause (ii) above, the last day of the month in which the
forty-fifth (45th) day of incapacity occurs, and (z) with respect to clause
(iii) above, the last day of the month in which the determination of incapacity
occurs and thereafter the Employer's obligations under Section 4 hereof shall
terminate. Notwithstanding the foregoing, in the event that (A) the Board of
Directors determines that, pursuant to clause (iii) of the preceding sentence,
Employee has become disabled and (B) on or prior to the forty-fifth (45th) day
following such determination Employee shall have become capable of performing
his duties pursuant to the standard contemplated in such clause (iii) above,
then Employee shall be entitled to invoke the provisions of Section 1 (b) above.
Nothing in this Section 7(d) shall affect Employee's rights under any
disability plan in which Employee is a participant.
8. Employment Provisions
(a) The Employee acknowledges that the information, observations and
data obtained by him while employed by the Employer concerning the Employer or
any of its subsidiaries ("Confidential Information") are the property of the
Employer or such subsidiary. Therefore, the Employer agrees that he shall not
disclose to any unauthorized person or use for his own account any Confidential
Information without the prior written consent of the Board, unless and to the
extent that the aforementioned matters become generally known to and available
for use by the public other than as a result of Employee's acts or omissions to
act. Employee shall deliver to the Employer at the expiration of the Period of
Employment, or at any other time the Employer may request, all
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<PAGE> 7
memoranda, notes, plans, records, reports, computer tapes and software and
other documents and data relating to the Confidential Information or the
business of the Employer or any subsidiary which he may then possess or have
under his control.
(b) The Employee acknowledges that in the course of his employment
with Employer, he will become familiar with the Employer's and any
subsidiaries' trade secrets and with other confidential information concerning
the Employer, its subsidiaries and their respective predecessors and that his
services have been and will be of special, unique and extraordinary value to
the Employer. Therefore, the Employee agrees that, during the Period of
Employment and for two years thereafter, he shall not directly or indirectly
own, manage, control, participate in, consult with, render services for, or in
any manner engage in any business competing with the businesses of the Employer
or its subsidiaries as such businesses exist or are in process during and upon
the expiration of the Period of Employment, within any geographical area in
which the Employer or its subsidiaries engage in such business. Nothing herein
shall prohibit the Employee from being a passive owner of not more than 2% of
the outstanding stock of any class of a corporation which is publicly traded,
so long as the Employee has no active participation in the business of such
corporation. If, at any time of enforcement of this provision, a court shall
hold that the duration, scope or area restrictions stated herein are
unreasonable under circumstances then existing, the parties agree that the
maximum duration, scope or area reasonable under such circumstances shall be
substituted for the stated duration, scope or area and that the court shall be
allowed to revise the restrictions contained herein to cover the maximum
period, scope and area permitted by law.
(c) For a period of two years following the expiration of the Period
of Employment, the Employee shall not directly or indirectly through another
entity (i) induce or attempt to induce any employee of the Employer or any of
its subsidiaries to leave the employ of the Employer or such subsidiary, or in
any way interfere with the relationship between the Employer or any of its
subsidiaries and any employee thereof, (ii) hire any person who was an employee
of the Employer or any of its subsidiaries at any time during the Period of
Employment except for such employees who have been terminated for at least six
months or (iii) induce or attempt to induce any customer, supplier, licensee,
franchisor or other business relation of the Employer or any of its
subsidiaries to cease doing business with the Employer or any of its
subsidiaries, or in any way interfere with the relationship between any such
customer, supplier, licensee, franchisor or business relation, on the one hand,
and the Employer or any of its subsidiaries, on the other hand.
(d) In the event of the breach or a threatened breach by the Employee
of any of the provisions of this Section 8, the
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<PAGE> 8
Employer, in addition and supplementary to other rights and remedies existing
in its favor, may apply to any court of law or equity of competent jurisdiction
for specific performance and injunctive or other relief in order to enforce or
prevent any violations of the provisions hereof (without posting a bond or
other security).
9. GOVERNING LAW.
This Employment Agreement is governed by and is to be construed and
enforced in accordance with the laws of the State of Texas, exclusive of the
conflict of laws provisions thereof. If under such law any portion of the
Employment Agreement is at any time deemed to be in conflict with any
applicable statute, rule, regulation or ordinance, such portion shall be deemed
to be modified or altered to conform thereto or, if that is not possible, to be
omitted from this Employment Agreement; and the invalidity of any such portion
shall not affect the force, effect and validity of the remaining portion
hereof.
10. NOTICES.
All notices under this Agreement shall be in writing and shall be deemed
effective when delivered in person, or forty-eight (48) hours after deposit
thereof in the U.S. mails, postage prepaid, for delivery as registered or
certified mail addressed in the case of
<TABLE>
<S> <C>
Employee, to: Mr. B. Tom Carter, Jr.
3705 Shenandoah
Dallas, Texas 75205
Employer, to: HydroChem Holding, Inc.
5956 Sherry Lane, Suite 930
Dallas, Texas 75225
With copies to: Citicorp Venture Capital, Ltd.
399 Park Avenue
New York, New York 10043
Attention: Thomas F. McWilliams
Kirkland & Ellis
Citicorp Center
153 East 53rd Street
New York, New York 10022
Attention: Stephen M. Zide, Esq.
</TABLE>
or such other address as may be stated in written notices furnished by either
of the foregoing persons to the other such person in the manner provided above.
8
<PAGE> 9
In lieu of personal notice or notice by deposit in the U.S. mail, a
party may give notice to the other by telegram or facsimile transmission.
11. REPRESENTATIONS AND WARRANTIES OF EMPLOYER.
Employer represents and warrants that the execution of this Agreement
has been duly authorized by resolution of its Board of Directors, and that this
Agreement constitutes a valid and binding obligation of the Employer in
accordance with its terms.
12. MISCELLANEOUS.
This Agreement and the agreements and documents contemplated hereby
constitute the entire understanding between Employer and Employee relating to
the employment of Employee by Employer and supersede and cancel all prior
written or oral agreements and understandings with respect to the subject
matter of this Agreement. This Agreement may be amended but only by a
subsequent written agreement of the parties. This Agreement shall be binding
upon and shall inure to the benefit of Employee, his heirs, executors,
administrators and beneficiaries and to the benefit of Employer and its
successors.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the year and day first above written.
HYDROCHEM HOLDING, INC.
/s/ B. TOM CARTER, JR. By /s/ PELHAM H. A. SMITH
- ------------------------- -------------------------
B. Tom Carter, Jr. Name Pelham H. A. Smith
-----------------------
Title Vice President
----------------------
In consideration of the premises and other good and valuable
consideration, the undersigned hereby unconditionally guarantees the punctual
performance by HydroChem Holding, Inc. of all of its duties and obligations
under the terms of this Employment Agreement.
HYDROCHEM INDUSTRIAL SERVICES, INC.
By /s/ PELHAM H. A. SMITH
-------------------------
Name Pelham H. A. Smith
-----------------------
Title Vice President
----------------------
9
<PAGE> 10
FIRST AMENDMENT TO EMPLOYMENT AGREEMENT
This First Amendment to Employment Agreement is entered into as of
January 10, 1995, by and between HydroChem Holding, Inc., a Delaware
corporation (the "Employer"), and B. Tom Carter, Jr., an individual (the
"Employee").
RECITALS
a. Employer and Employee entered into that certain Employment
Agreement as of December 15, 1993, which provides the terms of
the employment of Employee by Employer (the "Employment
Agreement").
b. Employer and Employee desire to amend the Employment Agreement as
hereinafter provided.
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt of which is hereby acknowledged, the
parties hereto agree as follows.
1. Section 5(a)(ii) of the Employment Agreement is hereby amended to
read in its entirety as follows:
"(ii) grant to Employee an Option to purchase up to an aggregate of
310,390 shares of Common Stock at an exercise price of $1.00 per share pursuant
to the terms of the Stock Option Plan."
IN WITNESS WHEREOF, the parties hereto have duly executed this First
Amendment as of the year and day first above written.
HYDROCHEM HOLDING, INC.
/s/ B. TOM CARTER By: /s/ PELHAM H. A. SMITH
- ------------------------- -------------------------
B. Tom Carter, Jr. - EMPLOYEE Name: Pelham H. A. Smith
-----------------------
Title: Vice President
----------------------
<PAGE> 11
In consideration of the premises and other good and valuable
consideration, the undersigned hereby unconditionally guarantees the punctual
performance by HydroChem Holding, Inc., of all its duties and obligations under
the terms of this First Amendment to Employment Agreement.
HYDROCHEM INDUSTRIAL SERVICES, INC.
By /s/ PELHAM H. A. SMITH
-------------------------
Name Pelham H. A. Smith
-----------------------
Title Vice President
----------------------
<PAGE> 12
SECOND AMENDMENT TO EMPLOYMENT AGREEMENT
THIS SECOND AMENDMENT TO EMPLOYMENT AGREEMENT is entered into as of the
20th day of March, 1995, by and between HydroChem Holding, Inc., a Delaware
corporation (the "Employer") and B. Tom Carter, Jr., an individual (the
"Employee").
RECITALS
A. Employer and Employee entered into a certain Employment Agreement as of
December 15, 1993, which as amended by a First Amendment to Employment
Agreement dated as of January 10, 1995, provides the terms of the
employment of Employee by Employer (the "Employment Agreement").
B. Employer and Employee desire to further amend the Employment Agreement
as hereinafter provided.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
1. SECTION 1(c) of the Employment Agreement is hereby amended by deleting
the number "24" from the third line thereof and substituting in lieu
thereof the number "36".
2. Section 6(d) of the Employment Agreement is hereby amended by deleting
the same in its entirety and substituting the following in lieu thereof:
(d) Travel, Temporary Residence and Relocation,
Employer shall, upon receipt of appropriate evidence of
payment thereof, pay or reimburse Employee during the Period of
Employment an amount or amounts which, after provision for the
net amount of all income taxes payable by Employee with respect
to the receipt of such amount or amounts, shall be equal to all
reasonable out-of-pocket expenses incurred in the reasonable
discretion of Employee in traveling between his present home in
Dallas, Texas and Employer's offices in the Houston, Texas area,
and in temporarily residing in the Houston, Texas area. In
addition, Employer shall reimburse Employee in the same after
tax manner for all of Employee's reasonable out-of-pocket
expenses of
-1-
<PAGE> 13
moving his family and their personal effects from Dallas, Texas
to the Houston, Texas area, including the closing costs of
acquiring a home; provided such move is made on or prior to the
four-year anniversary of this Agreement. The Employer, acting
through its Board of Directors, shall have the right from time
to time to review the expenses relating to the travel and
temporary living expenses of Employee and, to the extent the
Board of Directors concludes that such expenses can no longer be
justified, to negotiate an alternative arrangement with Employee
for the then remaining portion of the Period of Employment.
IN WITNESS WHEREOF, the parties hereto have duly executed this Second
Amendment as of the year and day first above written.
HYDROCHEM HOLDING, INC.
By /s/ PELHAM H. A. SMITH
-------------------------
Name Pelham H. A. Smith
-----------------------
Title Vice President
----------------------
/s/ B. TOM CARTER
-------------------------
B. Tom Carter, Jr., an individual
In consideration of the premises and other good and valuable
consideration, the undersigned hereby unconditionally guarantees the punctual
performance by HydroChem Holding, Inc., of all its duties and obligations under
the terms of this Second Amendment to Employment Agreement.
HYDROCHEM INDUSTRIAL SERVICES, INC.
By /s/ PELHAM H. A. SMITH
-------------------------
Name Pelham H. A. Smith
-----------------------
Title Vice President
----------------------
-2-
<PAGE> 14
THIRD AMENDMENT TO EMPLOYMENT AGREEMENT
THIS THIRD AMENDMENT TO EMPLOYMENT AGREEMENT is entered into as of the
9th day of December, 1996, by and between HydroChem Holding, Inc., a Delaware
corporation (the "Employer") and B. Tom Carter, Jr., an individual (the
"Employee").
RECITALS
A. Employer and Employee entered into a certain Employment Agreement
as of December 15, 1995, which as amended by a First Amendment to
Employment Agreement dated as of January 10, 1995, and a Second
Amendment to Employment Agreement dated as of March 20, 1995,
provides the terms of the employment of Employee by Employer (the
"Employment Agreement").
B. Employer and Employee desire to further amend the Employment
Agreement as hereinafter provided.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
1. Section 1(b) of the Employment Agreement is hereby amended by deleting
the words "Subject to Section 1(c) below and" from the first line
thereof and replacing the word "except" which immediately follows such
deletion with the word "Except".
2. Section 1(c) of the Employment Agreement is hereby deleted in its
entirety.
IN WITNESS WHEREOF, the parties have duly executed this Third Amendment
as of the year and day first above written.
HYDROCHEM HOLDING, INC.
By /s/ PELHAM H. A. SMITH
-------------------------
Name Pelham H. A. Smith
-----------------------
Title Vice President
----------------------
/s/ B. TOM CARTER
-------------------------
B. Tom Carter, Jr., an individual
<PAGE> 15
In consideration of the premises and other good and valuable
consideration, the undersigned hereby unconditionally guarantees the punctual
performance by HydroChem Holding, Inc., of all its duties and obligations under
the terms of this Third Amendment to Employment Agreement.
HYDROCHEM INDUSTRIAL SERVICES, INC.
By /s/ PELHAM H. A. SMITH
-------------------------
Name Pelham H. A. Smith
-----------------------
Title Vice President
----------------------
<PAGE> 1
EXHIBIT 10.6
[HYDROCHEM LETTERHEAD]
June 3, 1996
Mr. Selby F. Little, III
P.O. Box 340565
Sacramento, CA 95834
Dear Bud:
HydroChem Industrial Services, Inc. (the "Company") is pleased to
offer you a position as Vice President and Chief Financial Officer. Additional
details of this offer are as follows:
1. Your employment will begin as of the date of this letter. As
Vice President and Chief Financial Officer, you will report to me.
2. Your base compensation will be $10, 417 per month payable in
accordance with the Company's normal payroll practices.
3. Upon satisfaction of the conditions set forth in paragraph 10
below, the Company will pay you a signing bonus of $25,000. Also, conditional
upon successful completion of the pending merger between the Company and Serv-
Tech, Inc., the Company will pay you an M&A bonus of $50,000. If that
transaction does not occur, the Company will pay you the same bonus for any
other major transaction which may close on or before May 31, 1997. Finally,
subject to your remaining employed through the date of payment, you will be
eligible for performance bonuses for 1996 and 1997 in amounts of up to 50% of
your actual base compensation for each respective year with a minimum guarantee
of $31,250 per year without proration for 1996. The amount of any performance
bonus over the minimum would be based upon Company financial performance and a
subjective evaluation of your performance. Performance bonuses will be paid
following completion of year end work and a performance evaluation.
4. You will be eligible for consideration under any new stock
option plan that may be adopted after the completion of the pending merger with
Serv-Tech, or after any amendment to the Company's existing plan which would
make additional shares available for options.
5. The Company will reimburse you for all reasonable out of
pocket moving and relocation expenses (including temporary living and commuting
expenses through August 31, 1996). These reimbursements will be "grossed up" to
the extent, if any, that they are taxable to you.
6. You will have the use of a Company car in accordance with the
Company's motor vehicle policy. If you at any time are not in compliance with
this policy due to your driving record or otherwise, then you could lose the
use of that vehicle. Due to the nature of your responsibilities, you will
maintain an adequate computer and facsimile machine at your home at your
expense.
7. You will be eligible to participate in all benefit programs
that are available to Company employees generally. A summary of the current
benefit program is attached.
8. Your employment by the Company is on an at will basis.
Accordingly, either the Company or you may terminate your employment at any
time whatsoever without cause. However, if the Company terminates your
employment without cause, then it will pay you severance compensation equal to
twelve months of your then current base compensation. Payment of any severance
compensation would be conditional upon your signing the Company's standard form
settlement agreement and general release. For the purposes of this paragraph 8,
"cause" shall mean (i) any act involving moral turpitude, (ii) any act of fraud
or willful miscon-
<PAGE> 2
Mr. Selby F. Little
June 3, 1996
Page Two
duct, (iii) a conviction for any felony, or (iv) any reoccurring and material
refusal to perform the duties of your employment which is not corrected within
fifteen (15) days after receipt of written notice thereof. Cause shall not mean
the failure to achieve any goal, objective or specific result.
9. As consideration for this offer of employment, the signing
bonus, the payment of your relocation expenses, and the fact that you will have
access to Company information that it is highly confidential and important to
the Company's future, you agree that you will not directly or indirectly enter
into or engage in any business in competition with the business of the Company
in any geographical area where the Company does business, either as an
individual on your own account or as a partner or as an employee or agent for
any person or business entity or as an officer, director or stockholder of a
corporation or otherwise. These restrictions shall apply for the duration of
your employment and for a period of one year thereafter.
10. This offer of employment is subject to your completion,
satisfactory to the Company, of its pre-employment procedures. These include
your completing an employment application and it not disclosing any matter
which would cause the Company to withdraw this offer of employment; your
completing a substance abuse test; your signing the Company's standard form
agreements regarding inventions, confidentiality, non solicitation of employees
and other similar matters; your motor vehicle report being obtained and it not
reporting any matter which would place you in conflict with the Company's
driving policy; and your providing certain information verifying your identity
and authorization to work in the United States.
Certain pre-employment forms will be given to you at the time your
substance abuse test is scheduled; these include the employment application and
Form I-9 Employment Eligibility Verification which you should complete and
return on or before the day you report to work.
If you desire to accept this offer, please sign this letter below and
return to me. A duplicate original is enclosed for your records. Signing this
letter shall also confirm that being employed by the Company would not conflict
with any covenant not to compete or other restrictions to which you may be
bound. It shall also mean that this letter constitutes the entire agreement
between us with respect to the subject matter hereof, and it shall supersede
and replace all prior or contemporaneous agreements, letters, representations,
negotiations and understandings with respect to said subject matter including,
but not limited to, the letter between us dated April 30, 1996.
I look forward to your joining HydroChem and making a valuable
contribution to our success.
Sincerely,
/s/ B. TOM CARTER, JR.
-------------------------
B. Tom Carter, Jr.
Chief Executive Officer
AGREED AND ACCEPTED
/s/ SELBY F. LITTLE, III
- --------------------------
Selby F. Little, III
<PAGE> 1
EXHIBIT 10.7
LEASE AGREEMENT
THE STATE OF TEXAS )
KNOW ALL MEN BY THESE PRESENTS:
COUNTY OF FORT BEND )
That GRACEY CORPORATION, hereinafter called "Lessor," for the
consideration hereinafter provided, does hereby LEASE AND LET unto
HYDRO-SERVICES, INC., a Texas corporation, hereinafter called "Lessee,"
(a) The following described property located in Missouri City, Fort
Bend County, Texas, to-wit:
Being 1.0214 acres of land in the B. B. B. and C. R. R. Co.
Survey No. 8, Abstract No. 116, in Fort Bend County, Texas; said
1.0214 acres being out of that certain 4.08 acres described in
Deed recorded in Volume 294, page 478 of the Fort Bend County
Deed Records, and being more fully described by metes and bounds
as follows:
BEGINNING at a 1/2 inch iron bar at the most Northerly corner of
said 4.08 acres, in the Southeasterly right-of-way line of U.S.
Highway 90-A;
THENCE South 68 deg. 08 min. West along the Southeasterly line of
Highway and Northerly line of said 4.08 acres, 125.0 feet to a
3/4 inch iron pipe;
THENCE South 22 deg. 00 min. East, parallel to and 125.0 feet
from the Easterly line of said 4.08 acres, 381.38 feet to a 3/4
inch iron pipe in the Southerly line of said 4.08 acres;
THENCE North 45 deg. 58 min. East along the Southerly line of
said 4.08 acres, 134.84 feet to a 3/4 inch iron pipe at the most
Easterly corner of said 4.08 acres;
THENCE North 22 deg. 00 min. West, along the Easterly line of
said 4.08 acres, 330.5 feet to the place of beginning and
containing 1.0214 acres of land, and being the same tract of land
described in Deed from W. A. Delmar et ux to Anna Dullnig, a feme
sole, dated March 4, 1959, recorded in Volume 389, page 652, Deed
Records of Fort Bend County, Texas.
Upon payment by the Lessee of the rents herein provided, and upon the
observance and performance of all the covenants, terms and conditions on
Lessee's part to be observed and performed, Lessee shall peaceably and quietly
hold and enjoy the leased premises for the term hereby demised without
hinderance or interruption by Lessor or any other person or persons lawfully or
equitably claiming by, through or under Lessor, and Lessor covenants and
warrants it has full right and lawful authority to enter into this lease for the
full term herein granted, and that it has good and marketable title to the
premises, subject, nevertheless, to the terms and conditions of this lease.
Page 1
<PAGE> 2
The land, premises and property above described is leased to Lessee
upon the following terms and conditions:
1. The initial term of this lease is for a period of
fifteen (15) years beginning October 1, 1979, and ending October 1, 1994.
Beginning October 1, 1994, this lease shall be on a month to month basis
commencing on the first day of each month and ending on the last day of each
month, and shall continue from month to month thereafter until terminated as set
forth herein.
2. The parties hereby agree that the time of delivery of
possession by Lessor to Lessee of the property covered by this lease and the
commencement date of this lease is October 1, 1979.
3. All notices sent to the Lessor shall be sent as follows:
Gracey Corporation
P.O. Box 308
Missouri City, Texas 77459
All notices sent to Lessee shall be sent as follows:
Hydro-Services, Inc.
P.O. Box 308
Missouri City, Texas 77459
All notices of elections set forth herein shall be given by either
mailing the same by registered or certified mail or by personal delivery
thereof to the respective addresses above mentioned.
4. At any time hereafter, either party hereto may cancel
this lease at the beginning of any month on one hundred eighty (180) days prior
written notice to the other party, such written notice to be given as specified
in Paragraph 3 hereinabove. If Lessee elects to cancel this lease, Lessee shall
remove all of its equipment from the property prior to the expiration of this
lease as provided in Paragraph 7 hereof. Any property of Lessee, real or
personal, not removed on the expiration of the lease will become the property of
Lessor and upon the termination date hereof, all rights of Lessee to utilize
the property leased hereunder shall cease.
5. The premises shall be used by Lessee for the purpose of
housing administrative offices for a contracting and manufacturing company and
as an assembly and fabricating shop for high pressure waterblasting equipment
and accessories.
Page 2
<PAGE> 3
6. For and in consideration of the use of the said premises, the
Lessee binds and obligates itself to pay Lessor in lawful money of the United
States of America at P.O. Box 308, Missouri City, Texas, or at such other
address as said Lessor may in writing notify Lessee in a manner and as provided
for hereunder in Paragraph 3 hereof a total rental of $3,400.00 per month, which
shall be paid for each month in advance on the first day of each such month.
Lessee shall be responsible for paying all ad valorem taxes and other
general and special assessments and charges (taxes and assessments) which, at
any time during the lease term, may be lawfully assessed, levied or imposed
against the leased premises by any taxing authority now existing or hereafter
created. Lessor hereby agrees to furnish written evidence of such increases in
taxes and assessments to Lessee.
Lessee shall be responsible for paying all insurance and utilities as
set forth in this lease agreement. In other words, this lease agreement shall
be construed as a "triple net lease" with the Lessor only being responsible for
paying principal and interest on any indebtedness against the subject property
and the Lessee responsible for paying all operating expenses.
7. Lessee contemplates that various improvements including
temporary fixtures and permanent fixtures, will be installed and placed in and
upon the land leased hereunder in connection with the conduct and operation of
its business. On the termination of this lease, however brought about, Lessee
may not remove any such improvements or any permanent fixtures so placed and
installed by it in and upon said premises. Furthermore, no changes,
alterations, or additions of improvements to the existing improvements upon
said premises may be made by Lessee without first obtaining the written consent
thereto from Lessor, and in the event of such consent, said improvements,
alterations, or additions cannot thereafter be removed by Lessee without first
obtaining the written consent of Lessor thereto.
In this connection, and in addition to the rental above provided,
Lessee binds and obligates itself to pay all taxes, charges and assessments,
levied and assessed against the fixtures, furniture, equipment and other
personal property it installs and places in and upon
Page 3
<PAGE> 4
the premises. Lessee further agrees to pay all license fees and franchise taxes
imposed on the operation of any business conducted by Lessee on the leased
premises.
8. Lessee shall not assign this lease or sublet the
premises or any part thereof or any of the property leased hereunder without
Lessor's written consent.
9. Lessor shall not be responsible for the repair,
maintenance or replacement of any of the premises, buildings, fixtures,
improvements or property, real or personal, leased hereunder or placed upon the
premises by Lessee, and in the event any of such property is stolen, destroyed,
becomes obsolete, beyond repair or unusable, Lessee will not be entitled to any
reduction in rent, and it is specifically understood and agreed as hereinbefore
provided that Lessee at its cost and expense is to make all repairs and keep all
of the premises and improvements in a good state of repair.
10. All gas and electric energy and other utilities,
including water, which may be used by Lessee upon the premises, shall be
contracted for by Lessee with the respective persons, firms or corporations
furnishing such utilities, and shall be paid for by the Lessee as often as
required by such persons, firms or corporations, and the Lessor shall in no
event be liable for such payment. If the rules of such persons, firms or
corporations require that the cost of such service, or the service of any of
them, be charge to the Lessor and the Lessor be required to pay the same, or be
by law or ordinance made a lien or charge against the premises, and the Lessor
discharges such lien or charge, then Lessee shall reimburse the Lessor upon
demand for any amount so advanced, and any amount so paid shall be secured in
the same manner as rents accruing hereunder.
11. Lessee agrees at all times to perform all lawful
requirements as to the use and occupancy of the premises and any improvements
which may be placed thereon, to keep the same clean and neat, and at Lessee's
expense to promptly execute and comply with all ordinances, federal, state and
municipal, now in force, or which may hereafter be enacted applicable to, or
which may affect such premises, including but
Page 4
<PAGE> 5
not limited to, all orders and requirements imposed by the board of health, the
building department, the fire department, and the police department and any and
all other municipal and county departments of the City of Missouri City and
Fort Bend County affecting and/or applicable to the premises.
12. The Lessor shall not be liable to the Lessee, its employees,
customers, invitees, guests, members, or the public for any defects which at
the time of Lessee's acceptance of said leased premises, exist, or which may
thereafter develop or exist in said leased premises or any of the property or
improvements leased hereunder, or for any injury or damage that may occur from
wind, water, rain, hail, snow, sleet, storm, leaks, breaks, fire, the elements,
negligence, or otherwise, and shall in no event be liable for any injury to
any person or property in or about the leased premises during the term of this
lease. While this lease is in effect, the Lessee shall indemnify and safe
harmless the Lessor against any liability or loss for injury or damage to
persons or property occurring on or off the leased premises and arising out of
or resulting from any cause whatsoever associated with the operations conducted
on the leased premises.
13. Lessee shall, during the term of this lease, carry for the
benefit and protection of itself and Lessor, public liability insurance with
minimum limits of Five Hundred Thousand Dollars ($500,000.00) in the event of
claim for injuries or death to any one person, and with a total minimum limit
of liability of the amount of One Million Dollars ($1,000,000.00) in any one
accident. All costs of such insurance shall be paid for by Lessee, and Lessee
shall promptly deliver and furnish to Lessor such insurance policies or true
and correct copies thereof and furnish satisfactory evidence of the payment of
the premiums therefor. The policy shall name Lessor and Lessee as insured, and
shall contain a clause that the insurer will not cancel or change the insurance
without first giving Lessor ten days prior written notice. The insurance shall
be in an insurance company approved by Lessor.
Page 5
<PAGE> 6
14. If the Lessee fails to pay any monthly installment of rent
promptly as it becomes due, or uses the premises for any unlawful purpose; or
fails to comply with any of the terms and provisions hereof, then in any of
such events, the Lessor shall have the option, notice of the exercise of such
option being hereby waived, to declare this lease forfeited and may then or
thereafter cancel and terminate this lease and re-enter upon and take
possession of the premises without notice and with or without legal process or
procedure, and may immediately or at any other time thereafter remove all
persons and property from the premises, and the Lessee expressly waives any and
all claims for damages by reason of such re-entry. Such action of the Lessor
in re-entering and resuming possession of said premises upon default by Lessee
shall not be in waiver of, nor shall it in anywise impair, Lessor's claim for
any rent or other sum or sums which may have become due prior to such re-entry
or which may become due thereafter. Lessor's option shall not be considered
waived by the failure of Lessor to exercise the same upon the occurrence of any
one or more of such defaults, but shall continue to exist and may be exercised
whenever default is made, and upon the exercise thereof, Lessor shall have the
right at its option, to thereupon lease said premises to any party or parties,
at such prices as it may be able to obtain, in its sole discretion, for the use
thereof during the unexpired period of this lease, and any loss in the value of
the lease suffered by Lessor on account of such default. Lessee agrees and
binds itself, its successors and assigns, to pay or cause to be paid unto the
Lessor at P.O. Box 308, Missouri City, Texas 77459, and the action of Lessor in
making such new lease or rental of the premises, and the price therefor, shall
be binding upon the Lessee, its successors and assigns.
15. It is agreed that no waiver of any breach of any covenant,
condition or provision of this lease shall be construed to be a waiver of any
other or subsequent breach of the same or any other covenant, condition or
provision; and further, that the acceptance of rent after default shall not be
a waiver of the right to demand payment of any subsequent installment of rent
on the day it becomes due.
16. In addition to the statutory landlord's lien, the Lessee
Page 6
<PAGE> 7
hereby gives to and creates in favor of the Lessor a first and preference lien
upon all furniture and fixtures, equipment, supplies, effects and personal
property of all kinds which the Lessee may place upon or have in and connected
with said premises to secure the payment of all rent that may become due, and
all other obligations assumed by Lessee under the terms of this lease, including
but not by way of limitation the agreement herein provided for the payment of
attorneys' fees.
17. Lessee binds and obligates itself to insure at its sole
cost and expense all of Lessor's buildings on the premises as well as all of
the personal property leased hereunder to Lessee, against fire and storm and
theft in their full insurable amounts, the loss payable in such policies of
insurance provided to be payable jointly to Lessor and Lessee. The proceeds of
any insurance payable under any of such policies shall be used to repair or
replace the damaged or stolen property and any excess proceeds thereof shall be
paid to Lessee. Such insurance policies or true and correct copies thereof shall
be delivered to Lessor and Lessee shall also furnish Lessor with satisfactory
evidence of the payment of the premium therefor.
18. In the event it becomes necessary for Lessor to employ
an attorney to enforce any of the covenants or agreements made by Lessee
hereunder, or to otherwise enforce same by legal proceedings or through the
probate, bankruptcy or other court, then Lessee agrees to and promises to pay
to Lessor any reasonable attorneys' fees and court costs or other expense
incurred by the Lessor in connection therewith.
19. Lessee agrees that prior to making any repairs or
improvements on the premises leased hereunder which shall cost a total of more
than One Thousand Dollars ($1,000.00); Lessee shall first furnish Lessor with
written notice and evidence satisfactory to Lessor as to the nature, extent
and cost of such improvements and repairs. No such improvements will be made
without the consent in writing of Lessor. Lessee shall, upon receipt, furnish
to Lessor copies of all invoices in connection with any repairs or improvements
made by Lessee on the leased premises, together with proof of payment thereof.
Nothing herein
Page 7
<PAGE> 8
contained shall be construed as giving Lessee the right, power or authority to
encumber any of the property or improvements covered by this lease with a lien
for any part of the cost of such repairs and improvements and such right, power
and authority is hereby specifically denied to Lessee.
20. At the expiration, termination, cancellation or forfeiture of
this lease, however caused or brought about, no notice or demand for possession
except as required herein shall be necessary, but the Lessee shall peaceably
surrender the premises to the Lessor, and Lessor may reenter upon and retake
possession thereof without any notice or demand. Any holding over by Lessee of
the premises leased hereby, after the termination or expiration of this lease,
irrespective of how same may be terminated, shall operate and be construed as a
tenancy from month to month at a monthly rental of (per clause 25 of this
lease). In the event of failure of Lessee to peaceably yield and surrender
possession of the premises to Lessor upon the expiration, termination,
cancellation or forfeiture of this lease, irrespective of why or how same is
caused or brought about, Lessor shall thereupon be entitled to institute
forcible detainer proceedings against Lessee to recover possession thereof.
21. Solvency and good business credit and reputation of the Lessee
are important considerations to the Lessor in the making of this lease
agreement, and the continuation of such solvency and good business credit and
reputation of the Lessee is likewise a material consideration to the Lessor.
Therefore, it is further stipulated and agreed that should the Lessee be
adjudged a bankrupt by a proper court, or make an assignment for the benefit of
creditors, or if the business of the Lessee on account of its insolvency be
placed by the decision of a proper court in the hands of a receiver, or if a
receiver for other grounds shall be appointed by a proper court, and the Lessee
during such receivership be adjudged insolvent by a court, either during the
time of such receivership or upon the termination thereof, then at the option
of the Lessor, after giving three (3) days' notice to Lessee, this lease shall
terminate and conclude and the Lessor shall be entitled in such
Page 8
<PAGE> 9
event to the immediate possession of said premises and no receiver, trustee in
bankruptcy or assignee for the benefit of creditors shall acquire in any such
case any of the rights of the Lessee.
22. If the leased premises or any portion thereof shall be acquired
or condemned by eminent domain for any public or quasi-public use or purpose,
Lessee shall not be entitled to any part of the award paid for such
condemnation and Lessor is to receive the full amount of such award, and Lessee
hereby expressly waives any right or claim to any part thereof.
23. No changes or modifications of this lease shall be binding on
either party hereto unless the same shall be in writing and shall be signed by
the parties hereto.
24. It is further specifically understood, agreed and stipulated by
and between the parties hereto, that no agreements of any kind or character
exist between the parties hereto regarding the premises covered by this lease
for the period of time covered hereby, other than those herein specifically
set forth and provided.
25. The rental herein agreed to be paid to Lessor shall be adjusted
each year during the term of this lease agreement on October 1, commencing
October 1, 1980, the latest index of the cost of living prepared by the
Department of Labor being consulted and the rental to be paid to Lessor shall
be adjusted upward only in the ratio that the latest cost of living index,
existing on October 1 of each succeeding year hereafter, commencing October 1,
1980, bears to such cost of living index on October 1, 1979, such upward
adjustment ratio to be applied to the annual base rate of rental set forth
herein. This adjustment of rental shall be made each year during the term of
this Lease Agreement in a like manner.
26. The effective date hereof shall be October 1, 1979.
Page 9
<PAGE> 10
EXECUTED in multiple counterparts this 4th day of December, 1979.
GRACEY CORPORATION
By: /s/ JACK F. HINRICHS
------------------------------------
Jack F. Hinrichs, President
ATTEST:
/s/ JOHN F. HINRICHS
- --------------------------------
John F. Hinrichs, Secretary LESSOR
HYDRO-SERVICES, INC.
By: /s/ JAMES C. TERRY, PRESIDENT
-----------------------------------
James C. Terry, President
ATTEST:
/s/ GERALD B. LANHAM
- --------------------------------
Gerald B. Lanham, Secretary LESSEE
Page 10
<PAGE> 11
FIRST AMENDMENT TO LEASE
AMENDMENT to Lease Agreement made as of the 1st day of July, 1994
between Gracey Corporation ("Lessor") and HydroChem Industrial Services, Inc.
("Lessee").
WHEREAS, Lessor and Lessee (as the ultimate assignee of HydroServices,
Inc.) are parties to a Lease Agreement (the "Lease") dated as of December 4,
1979 covering certain premises in Missouri City, Texas; and
WHEREAS, the term of the Lease expires on October 1, 1994; and
WHEREAS, the parties desire to amend the Lease for among other
reasons, to extend the term thereof to September 30, 1996 and to grant the
Lessee an option to renew the Lease for an additional term of one (1) year
thereafter;
NOW, THEREFORE, Lessor and Lessee hereby agree that the Lease shall be
amended as follows:
1. Section 1 of the Lease shall be deleted, and in lieu thereof
there shall be substituted a new Section 1 as follows:
"1. The initial term of this Lease shall be for a period
of seventeen (17) years beginning on October 1, 1979 and ending on
September 30, 1996."
2. Section 4 of the Lease shall be deleted, and in lieu thereof
there shall be substituted a new section 4 as follows:
"4. Lessee shall have an option to extend this Lease for
a renewal term of one (1) year. The renewal term shall be from October
1, 1996 to September 30, 1997. If Lessee desires to exercise this
option to renew, it shall give written notice thereof to Lessor by
June 30, 1996. All of the terms, covenants, and provisions of this
Lease shall apply to the renewal term."
3. The Lease shall remain in full force and effect except as
modified herein.
<PAGE> 12
IN WITNESS WHEREOF, Lessor and Lessee have executed this First
Amendment to Lease as of the date first hereinabove set forth.
Gracey Corporation HydroChem Industrial Services, Inc.
By: /s/ FANNIE J. HINRICHS By: /s/ B. TOM CARTER, JR.
------------------------ ---------------------------
Name: Fannie J. Hinrichs Name: B. Tom Carter, Jr.
---------------------- -------------------------
Title: Vice President Title: President & Chief
--------------------- ------------------------
Executive Officer
Page 2
<PAGE> 13
[HYDROCHEM LOGO]
May 29, 1996
Gracey Corporation
c/o Mr. John F. Hinrichs
12926 Dairy Ashford
Suite 100
Sugar Land, Texas 77478
Dear John:
This shall confirm your conversations with Mike Steindler regarding the Lease
dated as of December 4, 1979, as amended, between Gracey Corporation ("Lessor")
and HydroChem Industrial Services, Inc. ("Lessee") for the premises located at
1145 Highway 90A in Missouri City, Texas. Specifically, the Lease shall be
further amended as follows:
1. The current term of the Lease shall be extended to September
30, 1997 at the existing rental rate of $4,675 per month.
2. Lessee shall have additional options to extend the Lease for
two successive renewal terms of one year each from October 1, 1997 to September
30, 1998 and from October 1, 1998 to September 30, 1999. The rental for each
renewal term shall be subject to adjustment to reflect any increase in the
Consumer Price Index for the periods from October 1, 1996 to September 30, 1997
and from October 1, 1997 to September 30, 1998, respectively. If Lessee desires
to exercise these options, it shall give written notice to the Lessor by June
30, 1997 in the case of the first renewal term and by June 30, 1998 in the case
of the second renewal term.
If the foregoing is satisfactory, please have this letter signed by Gracey
Corporation and returned to Mike Steindler. A duplicate original is enclosed
for your records.
Sincerely,
HydroChem industrial Services, Inc.
By: /s/ PELHAM SMITH
----------------------------
Pelham Smith, Vice President
AGREED AND ACCEPTED
Gracey Corporation
By: /s/ JOHN F. HINRICHS
-----------------------
John F. Hinrichs, Vice President
6210 Rothway
Houston, Texas 77040
(713) 462-2130
Fax: (713) 939-7674
<PAGE> 1
EXHIBIT 12.1
HYDROCHEM INDUSTRIAL SERVICES, INC.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
Six months
Year ended December 31, ended June 30,
-----------------------------------------------------------------------------
1992 1993 1994 1995 1996 1996 1997
<S> <C> <C> <C> <C> <C> <C> <C>
FIXED CHARGES:
Interest expense $1,613 $1,922 $ 5,605 $ 8,693 $ 7,920 $4,038 $3,787
Implicit interest in leases 207 321 718 1,467 2,064 928 1,210
-----------------------------------------------------------------------------
Total fixed charges 1,820 2,243 6,323 10,160 9,984 4,966 4,997
Income before taxes 1,134 532 5,409 5,903 1,829 2,777 3,285
Fixed charges 1,820 2,243 6,323 10,160 9,984 4,966 4,997
-----------------------------------------------------------------------------
EARNINGS AS DEFINED $2,954 $2,775 $11,732 $16,063 $11,813 $7,743 $8,282
Ratio of earnings to fixed charges 1.6x 1.2x 1.9x 1.6x 1.2x 1.6x 1.7x
</TABLE>
<PAGE> 1
EXHIBIT 21.1
Subsidiary of HydroChem Industrial Services, Inc.
HydroChem International, Inc.
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to
the use of our report dated February 5, 1997, in the Registration Statement
(Form S-4) and related Prospectus of HydroChem Industrial Services, Inc. for
the registration of $110,000,000 of HydroChem Industrial Services, Inc.
10 3/8% Senior Subordinated Notes due 2007.
ERNST & YOUNG LLP
Houston, Texas
August 25, 1997
<PAGE> 1
EXHIBIT 25.1
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________________
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
_____________________________
_____ CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b) (2)
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
(Exact name of trustee as specified in its charter)
<TABLE>
<S> <C>
A U.S. NATIONAL BANKING ASSOCIATION 41-1592157
(Jurisdiction of incorporation or (I.R.S. Employer
organization if not a U.S. national Identification No.)
bank)
SIXTH STREET AND MARQUETTE AVENUE
Minneapolis, Minnesota 55479
(Address of principal executive offices) (Zip code)
</TABLE>
Stanley S. Stroup, General Counsel
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
Sixth Street and Marquette Avenue
Minneapolis, Minnesota 55479
(612) 667-1234
(Agent for Service)
_____________________________
HYDROCHEM INDUSTRIAL SERVICES, INC.
(Exact name of obligor as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 75-2503906
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
6210 ROTHWAY
Houston, Texas 77040
(Address of principal executive offices) (Zip code)
</TABLE>
_____________________________
10 3/8% SENIOR SUBORDINATED NOTES DUE 2007
(Title of the indenture securities)
================================================================================
<PAGE> 2
Item 1. General Information. Furnish the following information as to the
trustee:
(a) Name and address of each examining or supervising
authority to which it is subject.
Comptroller of the Currency
Treasury Department
Washington, D.C.
Federal Deposit Insurance Corporation
Washington, D.C.
The Board of Governors of the Federal Reserve System
Washington, D.C.
(b) Whether it is authorized to exercise corporate trust
powers.
The trustee is authorized to exercise corporate
trust powers.
Item 2. Affiliations with Obligor. If the obligor is an affiliate of the
trustee, describe each such affiliation.
None with respect to the trustee.
No responses are included for Items 3-14 of this Form T-1 because the obligor
is not in default as provided under Item 13.
Item 15. Foreign Trustee. Not applicable.
Item 16. List of Exhibits. List below all exhibits filed as a part of
this Statement of Eligibility. Norwest Bank
incorporates by reference into this Form T-1
the exhibits attached hereto.
Exhibit 1. a. A copy of the Articles of Association of the
trustee now in effect.*
Exhibit 2. a. A copy of the certificate of authority of the
trustee to commence business issued June 28,
1872, by the Comptroller of the Currency to
The Northwestern National Bank of
Minneapolis.*
b. A copy of the certificate of the Comptroller
of the Currency dated January 2, 1934,
approving the consolidation of The
Northwestern National Bank of Minneapolis and
The Minnesota Loan and Trust Company of
Minneapolis, with the surviving entity being
titled Northwestern National Bank and Trust
Company of Minneapolis.*
c. A copy of the certificate of the Acting
Comptroller of the Currency dated January 12,
1943, as to change of corporate title of
Northwestern National Bank and Trust Company
of Minneapolis to Northwestern National Bank
of Minneapolis.*
<PAGE> 3
d. A copy of the letter dated May 12, 1983 from
the Regional Counsel, Comptroller of the
Currency, acknowledging receipt of notice of
name change effective May 1, 1983 from
Northwestern National Bank of Minneapolis to
Norwest Bank Minneapolis, National
Association.*
e. A copy of the letter dated January 4, 1988
from the Administrator of National Banks for
the Comptroller of the Currency certifying
approval of consolidation and merger
effective January 1, 1988 of Norwest Bank
Minneapolis, National Association with
various other banks under the title of
"Norwest Bank Minnesota, National
Association."*
Exhibit 3. A copy of the authorization of the trustee to
exercise corporate trust powers issued January 2,
1934, by the Federal Reserve Board.*
Exhibit 4. Copy of By-laws of the trustee as now in effect.*
Exhibit 5. Not applicable.
Exhibit 6. The consent of the trustee required by Section 321(b)
of the Act.
Exhibit 7. A copy of the latest report of condition of the
trustee published pursuant to law or the requirements
of its supervising or examining authority.**
Exhibit 8. Not applicable.
Exhibit 9. Not applicable.
* Incorporated by reference to exhibit number 25 filed with
registration statement number 33- 66026.
** Incorporated by reference to exhibit number 7 to the Trustee's
Form T-1 filed as exhibit 25.2 to Current Report on Form 8-K
dated February 5, 1997 of Chase Manhattan Bank USA, N.A.
file number 333-07575.
<PAGE> 4
EXHIBIT 6
August 22, 1997
Securities and Exchange Commission
Washington, D.C. 20549
Gentlemen:
In accordance with Section 321(b) of the Trust Indenture Act of 1939, as
amended, the undersigned hereby consents that reports of examination of the
undersigned made by Federal, State, Territorial, or District authorities
authorized to make such examination may be furnished by such authorities to the
Securities and Exchange Commission upon its request therefor.
Very truly yours,
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION
/s/ CURTIS D. SCHWEGMAN
-----------------------------------
Curtis D. Schwegman
Assistant Vice President
<PAGE> 5
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as amended,
the trustee, Norwest Bank Minnesota, National Association, a national banking
association organized and existing under the laws of the United States of
America, has duly caused this statement of eligibility to be signed on its
behalf by the undersigned, thereunto duly authorized, all in the City of
Minneapolis and State of Minnesota on the 22nd day of August, 1997.
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION
/s/ CURTIS D. SCHWEGMAN
-----------------------------------
Curtis D. Schwegman
Assistant Vice President
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FOR THE
FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 1996 AND
ALSO FOR AS OF AND FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH STATEMENTS.
</LEGEND>
<CIK> 0001044607
<NAME> HYDROCHEM INDUSTRIAL SERVICES, INC.
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 6-MOS 12-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1996
<PERIOD-END> JUN-30-1997 DEC-31-1996
<CASH> 1,458 671
<SECURITIES> 0 0
<RECEIVABLES> 27,220 24,357
<ALLOWANCES> 0 0
<INVENTORY> 3,621 3,569
<CURRENT-ASSETS> 36,060 31,528
<PP&E> 57,065 54,772
<DEPRECIATION> 20,882 17,360
<TOTAL-ASSETS> 117,759 115,522
<CURRENT-LIABILITIES> 21,848 18,312
<BONDS> 0 0
0 0
0 0
<COMMON> 1 1
<OTHER-SE> 27,516 25,769
<TOTAL-LIABILITY-AND-EQUITY> 117,759 115,522
<SALES> 80,714 156,003
<TOTAL-REVENUES> 80,714 156,003
<CGS> 47,790 94,373
<TOTAL-COSTS> 47,790 94,373
<OTHER-EXPENSES> 25,852 51,881
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 3,787 7,920
<INCOME-PRETAX> 3,285 1,829
<INCOME-TAX> 1,538 1,284
<INCOME-CONTINUING> 1,747 545
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 1,747 545
<EPS-PRIMARY> .00 .00
<EPS-DILUTED> .00 .00
</TABLE>
<PAGE> 1
Exhibit 99.1
LETTER OF TRANSMITTAL
To Tender for Exchange
10 3/8% Senior Subordinated Notes due 2007, Series A
CUSIP NO. 448850AA5
of
HYDROCHEM INDUSTRIAL SERVICES, INC.
and the Guarantee thereof by
HYDROCHEM INTERNATIONAL, INC.
Pursuant to the Exchange Offer Prospectus dated _____________, 1997
================================================================================
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK
CITY TIME, ON _______________, 1997 (THE "EXPIRATION DATE") UNLESS THE EXCHANGE
OFFER IS EXTENDED, IN WHICH CASE THE TERM "EXPIRATION DATE" SHALL MEAN THE
LATEST DATE AND TIME TO WHICH THE EXCHANGE OFFER IS EXTENDED. TENDERS MAY BE
WITHDRAWN AT ANY TIME PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION
DATE.
================================================================================
The Exchange Agent is:
Norwest Bank, Minnesota, N.A.
<TABLE>
<S> <C>
By Overnight Courier: By Hand:
-------------------- -------
Norwest Bank Minnesota, National Association Norwest Bank Minnesota, National Association
Corporate Trust Operations Corporate Trust Operations
Norwest Center Northstar East, 12th Floor
Sixth and Marquette 608 2nd Avenue
Minneapolis, MN 55479-0069 Minneapolis, MN 55479-0113
By Facsimile: Confirm by Telephone:
------------ --------------------
Norwest Bank Minnesota, National Association (612) 667-9764
Corporate Trust Operations
(612) 667-4927
</TABLE>
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR
TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER THAN THE ONE LISTED
ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. THE INSTRUCTIONS SET FORTH IN THIS
LETTER OF TRANSMITTAL SHOULD BE READ CAREFULLY BEFORE THIS LETTER OF
TRANSMITTAL IS COMPLETED.
<PAGE> 2
The undersigned acknowledges receipt of the Prospectus dated
_____________, 1997 (the "Prospectus") of HydroChem Industrial Services, Inc.
(the "Company") and HydroChem International, Inc. ( the "Subsidiary Guarantor")
and this Letter of Transmittal (the "Letter of Transmittal"), which, together
with the Prospectus, constitutes the Company's and the Subsidiary Guarantor's
offer (the "Exchange Offer") to exchange $1,000 principal amount of its 10
3/8% Senior Subordinated Notes due 2007, Series B and the guarantee thereof
(the "New Notes") for each $1,000 principal amount of its outstanding 10 3/8%
Senior Subordinated Notes due 2007, Series A and the guarantee thereof (the
"Old Notes"). Recipients of the Prospectus should read the requirements
described in such Prospectus with respect to eligibility to participate in the
Exchange Offer. Capitalized terms used but not defined herein have the meaning
given to them in the Prospectus.
The undersigned hereby tenders the Old Notes described in the box
entitled "Description of Old Notes" below pursuant to the terms and conditions
described in the Prospectus and this Letter of Transmittal. The undersigned is
the registered owner of all the Old Notes and the undersigned represents that
it has received from each beneficial owner of Old Notes ("Beneficial Owners") a
duly completed and executed form of "Instruction to Registered Holder from
Beneficial Owner" accompanying this Letter of Transmittal, instructing the
undersigned to take the action described in this Letter of Transmittal.
This Letter of Transmittal is to be used only by a holder of Old Notes
(i) if certificates representing Old Notes are to be forwarded herewith or (ii)
if delivery of Old Notes is to be made by book-entry transfer to the Exchange
Agent's account at The Depository Trust Company (the "Depository"), pursuant to
the procedures set forth in the section of the Prospectus entitled "The
Exchange Offer -- Procedures for Tendering." If delivery of the Old Notes is to
be made by book-entry transfer to the account maintained by the Exchange Agent
at the Depository, this Letter of Transmittal need not be manually executed;
provided, however, that tenders of the Old Notes must be effected in accordance
with the procedures mandated by the Depository's Automated Tender Offer Program
and the procedures set forth in the Prospectus under the caption "The Exchange
Offer -- Book-Entry Transfer."
The undersigned hereby represents and warrants that the information
set forth in the box entitled "Beneficial Owner(s)" is true and correct.
Any Beneficial Owner whose Old Notes are registered in the name of a
broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender should contact such registered holder of Old Notes promptly and
instruct such registered holder of Old Notes to tender on behalf of the
Beneficial Owner. If such Beneficial Owner wishes to tender on its own behalf,
such Beneficial Owner must, prior to completing and executing this Letter of
Transmittal and delivering its Old Notes, either make appropriate arrangements
to register ownership of the Old Notes in such Beneficial Owner's name or
obtain a properly completed bond power from the registered holder of Old Notes.
The transfer of record ownership may take considerable time.
In order to properly complete this Letter of Transmittal, a holder of
Old Notes must (i) complete the box entitled "Description of Old Notes," (ii)
if appropriate, check and complete the boxes relating to book-entry transfer,
guaranteed delivery, Special Issuance Instructions and Special Delivery
Instructions, (iii) sign the Letter of Transmittal by completing the box
entitled "Sign Here" and (iv) complete the Substitute Form W-9. Each holder of
Old Notes should carefully read the detailed instructions below prior to
completing the Letter of Transmittal.
Holders of Old Notes who desire to tender their Old Notes for exchange
and (i) whose Old Notes are not immediately available, (ii) who cannot deliver
their Old Notes and all other documents required hereby to the Exchange Agent
on or prior to the Expiration Date or (iii) who are unable to complete the
procedure for book-entry transfer on a timely basis, must tender the Old Notes
pursuant to the guaranteed delivery procedures set forth in the section of the
Prospectus entitled "The Exchange Offer -- Guaranteed Delivery Procedures." See
Instruction 2 of the Instructions beginning on page 10 hereof.
Holders of Old Notes who wish to tender their Old Notes for exchange
must, at a minimum, complete columns (1), (2), if applicable (see footnote 1
below), and (3) in the box below entitled
2
<PAGE> 3
"Description of Old Notes" and sign the box on page 9 under the words "Sign
Here." If only those columns are completed, such holder of Old Notes will have
tendered for exchange all Old Notes listed in column (3) below. If the holder
of Old Notes wishes to tender for exchange less than all of such Old Notes,
column (4) must be completed in full. In such case, such holder of Old Notes
should refer to Instruction 5 on page 11.
<TABLE>
- ------------------------------------------------------------------------------------------------------------
DESCRIPTION OF OLD NOTES
- ------------------------------------------------------------------------------------------------------------
(1) (2) (3) (4)
Principal
Amount
Tendered
For
Exchange
(only if
different
amount
from
column
Old Note (3)) (must
Name(s) and Address(es) of Registered Number(s) be in
Holder(s) of Old Note(s), exactly as name(s) appear(s) on (Attach signed Aggregate integral
Old Note Certificate(s) List if Principal multiples
(Please fill in, if blank) necessary)(1) Amount of $1,000)(2)
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
---------------------------------------------
---------------------------------------------
---------------------------------------------
---------------------------------------------
- ------------------------------------------------------------------------------------------------------------
</TABLE>
- -----------------
(1) Column (2) need not be completed by holders of Old Notes tendering Old
Notes for exchange by book-entry transfer. Please check the
appropriate box on the next page and provide the requested
information.
(2) Column (4) need not be completed by holders of Old Notes who wish to
tender for exchange the principal amount of Old Notes listed in column
(3). Completion of column (4) will indicate that the holder of Old
Notes wishes to tender for exchange only the principal amount of Old
Notes indicated in column (4).
3
<PAGE> 4
[ ] CHECK HERE IF OLD NOTES ARE ENCLOSED HEREWITH.
[ ] CHECK HERE IF OLD NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE
DEPOSITORY AND COMPLETE THE FOLLOWING (FOR USE BY ELIGIBLE
INSTITUTIONS (AS HEREINAFTER DEFINED) ONLY):
Name of Tendering Institution:
---------------------------------------
Account Number:
---------------------------------------
Transaction Code Number:
---------------------------------------
[ ] CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO A
NOTICE OF GUARANTEED DELIVERY ENCLOSED HEREWITH AND COMPLETE THE
FOLLOWING (FOR USE BY ELIGIBLE INSTITUTIONS ONLY):
Name of Registered Holder of Old Note(s):
----------------
Date of Execution of Notice of Guaranteed Delivery:
----------------
Window Ticket Number (if available):
----------------
Name of Institution which Guaranteed Delivery:
----------------
Account Number (if delivered by book-entry transfer):
----------------
[ ] CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE ADDITIONAL
COPIES OF THE PROSPECTUS AND COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO:
Name:
------------------------------------------------------------
Address:
------------------------------------------------------------
------------------------------------------------------------
Number of Additional
Copies Desired:
--------------
4
<PAGE> 5
<TABLE>
<S> <C>
-------------------------------------------------- -------------------------------------------------
SPECIAL ISSUANCE INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(See Instructions 1, 6, 7 and 8) (See Instructions 1, 6, 7 and 8)
To be completed ONLY (i) if the New Notes To be completed ONLY if the New Notes issued
issued in exchange for Old Notes (or if in exchange for Old Notes (or if certificates for
certificates for Old Notes not tendered for Old Notes not tendered for exchange for New
exchange for New Notes) are to be issued in the Notes) are to be mailed or delivered (i) to
name of someone other than the undersigned or (ii) someone other than the undersigned, or (ii) to
if Old Notes tendered by book-entry transfer which the undersigned at an address other than the
are not exchanged are to be returned by credit to address shown below the undersigned's signature.
an account maintained at the Depository.
Issue to: Mail or deliver to:
Name
---------------------------------------------
(Please Print) Name
---------------------------------------------
(Please Print)
Address
------------------------------------------
Address
-------------------------------------------------- ------------------------------------------
-------------------------------------------------- --------------------------------------------------
(Include Zip Code)
--------------------------------------------------
(Include Zip Code)
--------------------------------------------------
(Tax Identification or Social Security No.)
--------------------------------------------------
(Tax Identification or Social Security No.)
Credit Old Notes not exchanged and delivered
by book-entry transfer to the Depository account
set forth below:
--------------------------------------------------
(Account Number)
-------------------------------------------------- -------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------
BENEFICIAL OWNER(S)
---------------------------------------------------------------------------------------------------------
State of Principal Residence of Each Beneficial Principal Amount of Old Notes Held for Account of
Owner of Old Notes Beneficial Owner(s)
---------------------------------------------------------------------------------------------------------
<S> <C>
---------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
</TABLE>
If delivery of Old Notes is to be made by book-entry transfer to the
account maintained by the Exchange Agent at the Depository, then tenders of Old
Notes must be effected in accordance with the procedures mandated by the
Depository's Automated Tender Offer Program and the procedures set forth in the
Prospectus under the caption "The Exchange Offer -- Book-Entry Transfer."
5
<PAGE> 6
SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
Pursuant to the offer by HydroChem Industrial Services, Inc. (the
"Company") and HydroChem International, Inc. (the "Subsidiary Guarantor"),
upon the terms and subject to the conditions set forth in the Prospectus dated
__________, 1997 (the "Prospectus") and this Letter of Transmittal (the "Letter
of Transmittal"), which, together with the Prospectus, constitutes the
Company's offer (the "Exchange Offer") to exchange $1,000 principal amount of
its 10 3/8% Subordinated Notes due 2007, Series B, and the guarantee thereof
(the "New Notes") for each $1,000 principal amount of its outstanding 10 3/8%
Senior Subordinated Notes due 2007, Series A, and the guarantee thereof (the
"Old Notes"), the undersigned hereby tenders to the Company and the Guarantor
for exchange the Old Notes indicated above.
By executing this Letter of Transmittal and subject to and effective
upon acceptance for exchange of the Old Notes tendered for exchange herewith,
the undersigned (A) acknowledges and agrees that the Company shall have fully
performed all of its obligations under that certain Registration Rights
Agreement dated as of August 4, 1997, among the Company, the Subsidiary
Guarantor and the Initial Purchaser (as defined in the Prospectus), except in
certain limited circumstances and (B) will have irrevocably sold, assigned and
transferred to the Company and the Subsidiary Guarantor, all right, title and
interest in, to and under all of the Old Notes tendered for exchange hereby,
and hereby appoints Norwest Bank, Minnesota, N.A. (the "Exchange Agent") as the
true and lawful agent and attorney-in-fact (with full knowledge that the
Exchange Agent also acts as agent of the Company and the Subsidiary Guarantor)
of such holder of Old Notes with respect to such Old Notes, with full power of
substitution, to (i) deliver certificates representing such Old Notes, or
transfer ownership of such Old Notes on the account books maintained by The
Depository Trust Company (the "Depository") (together, in any such case, with
all accompanying evidences of transfer and authenticity), to the Company, (ii)
present and deliver such Old Notes for transfer on the books of the Company,
and (iii) receive all benefits and otherwise exercise all rights and incidents
of ownership with respect to such Old Notes, all in accordance with the terms
of the Exchange Offer. The power of attorney granted in this paragraph shall be
deemed to be irrevocable and coupled with an interest.
The undersigned hereby represents and warrants that (i) the
undersigned has full power and authority to tender, exchange, assign and
transfer the Old Notes, and (ii) when such Old Notes are accepted for exchange
by the Company and the Guarantor, the Company and the Guarantor will acquire
good and marketable title thereto, free and clear of all liens, restrictions,
charges and encumbrances and not subject to any adverse claims. The undersigned
will, upon receipt, execute and deliver any additional documents deemed by the
Exchange Agent, the Company or the Guarantor to be necessary or desirable to
complete the exchange, assignment and transfer of the Old Notes tendered for
exchange hereby.
The undersigned hereby further represents to the Company and the
Guarantor that (i) the New Notes to be acquired by the undersigned in exchange
for the Old Notes tendered hereby and any beneficial owner(s) of such Old Notes
in connection with the Exchange Offer will be acquired by the undersigned and
such beneficial owner(s) in the ordinary course of business of the undersigned,
(ii) the undersigned (if not a broker-dealer referred to in the last sentence
of this paragraph) is not engaging and does not intend to engage in the
distribution of the New Notes and has no arrangement or understanding with any
person to participate in the distribution of the New Notes, (iii) the
undersigned and each beneficial owner acknowledge and agree that any person
participating in the Exchange Offer for the purpose of distributing the New
Notes must comply with the registration and prospectus delivery requirements of
the Securities Act of 1933, as amended (the "Securities Act"), in connection
with a secondary resale transaction of the New Notes acquired by such person
and cannot rely on the position of the staff of the Securities and Exchange
Commission (the "Commission") set forth in certain no-action letters, (iv) the
undersigned and each beneficial owner understand that a secondary resale
transaction described in clause (iii) above should be covered by an effective
registration statement containing the selling security holder information
required by Item 507 or Item 508, as applicable, of Regulation S-K of
6
<PAGE> 7
the Commission and (v) neither the undersigned nor any beneficial owner is an
"affiliate" of the Company or the Guarantor, as defined under Rule 405 under
the Securities Act. If the undersigned is a broker-dealer that will receive New
Notes for its own account in exchange for Old Notes that were acquired as a
result of market making or other trading activities, it acknowledges that it
will deliver a prospectus meeting the requirements of the Securities Act in
connection with any resale of such New Notes received in respect of such Old
Notes pursuant to the Exchange Offer; however, by so acknowledging and by
delivering a prospectus, the undersigned will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities Act.
The undersigned acknowledges that, (i) for purposes of the Exchange
Offer, the Company and the Guarantor will be deemed to have accepted for
exchange, and to have exchanged, validly tendered Old Notes, if, as and when
the Company gives oral or written notice thereof to the Exchange Agent. Tenders
of Old Notes for exchange may be withdrawn at any time prior to 5:00 p.m. New
York City time, on _______________, 1997 (the "Expiration Date"), and (ii) any
Old Notes tendered by the undersigned and not accepted for exchange will be
returned to the undersigned at the address set forth above unless otherwise
indicated in the box above entitled "Special Delivery Instructions."
The undersigned acknowledges that the Company's and the Guarantor's
acceptance of Old Notes validly tendered for exchange pursuant to any one of
the procedures described in the section of the Prospectus entitled "The
Exchange Offer" and in the instructions hereto will constitute a binding
agreement among the undersigned, the Company and the Guarantor upon the terms
and subject to the conditions of the Exchange Offer.
Unless otherwise indicated in the box entitled "Special Issuance
Instructions," please return any Old Notes not tendered for exchange in the
name(s) of the undersigned. Similarly, unless otherwise indicated in the box
entitled "Special Delivery Instructions," please mail any certificates for Old
Notes not tendered or exchanged (and accompanying documents, as appropriate) to
the undersigned at the address shown below the undersigned's signature(s). In
the event that either "Special Issuance Instructions" or "Special Delivery
Instructions" are completed, please issue the certificates representing the New
Notes issued in exchange for the Old Notes accepted for exchange in the name(s)
of, and return any Old Notes not tendered for exchange or not exchanged to, the
person(s) so indicated. The undersigned recognizes that the Company and the
Guarantor have no obligation pursuant to the "Special Issuance Instructions"
and "Special Delivery Instructions" to transfer any Old Notes from the name of
the holder of Old Note(s) thereof if the Company and the Guarantors do not
accept for exchange any of the Old Notes so tendered for exchange or if such
transfer would not be in compliance with any transfer restrictions applicable
to such Old Note(s).
In order to validly tender Old Notes for exchange, holders of Old
Notes must complete, execute and deliver this Letter of Transmittal.
Except as stated in the Prospectus, all authority herein conferred or
agreed to be conferred shall survive the death or incapacity of the
undersigned, and any obligation of the undersigned hereunder shall be binding
upon the heirs, personal representatives, successors and assigns of the
undersigned. Except as otherwise stated in the Prospectus, this tender for
exchange of Old Notes is irrevocable.
7
<PAGE> 8
- --------------------------------------------------------------------------------
SIGN HERE
-------------------------------------------------------------------------------
(Signature(s) of Owner(s))
Date: , 1997
-------------------
Must be signed by the registered holder(s) of Old Notes exactly as
name(s) appear(s) on certificate(s) representing the Old Notes or on a security
position listing or by person(s) authorized to become registered Old Note
holder(s) by certificates and documents transmitted herewith. If signature is
by trustees, executors, administrators, guardians, attorneys-in-fact, officers
of corporations or others acting in a fiduciary or representative capacity,
please provide the following information. (See Instruction 6).
Name(s):
---------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
(Please Print)
Capacity (full title):
-------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
Address:
---------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
(Include Zip Code)
Area Code and Telephone No: ( )
---- -------------------------------------------
Tax Identification or Social Security Nos:
-------------------------------------
Please complete Substitute Form W-9
GUARANTEE OF SIGNATURE(S)
(Signature(s) must be guaranteed if required by Instruction 1)
Authorized Signature:
--------------------------------------------------------
Dated:
-----------------------------------------------------------------------
Name and Title:
--------------------------------------------------------------
(Please Print)
Name of Firm:
----------------------------------------------------------------
- --------------------------------------------------------------------------------
8
<PAGE> 9
INSTRUCTIONS
Forming Part of the Terms and Conditions of the Exchange Offer
1. GUARANTEE OF SIGNATURES. Except as otherwise provided below,
all signatures on this Letter of Transmittal must be guaranteed by an
institution which is an "eligible guarantor institution" within the meaning of
Rule 17Ad-15 under the Securities Exchange Act of 1934, as amended, and is a
member of one of the following recognized Signature Guarantee Programs (an
"Eligible Institution"):
a. The Securities Transfer Agents Medallion Program (STAMP)
b. The New York Stock Exchange Medallion Signature Program
(MSP)
c. The Stock Exchange Medallion Program (SEMP)
Signatures on this Letter of Transmittal need not be guaranteed (i) if this
Letter of Transmittal is signed by the registered holder(s) of the Old Notes
tendered herewith and such registered holder(s) have not completed the box
entitled "Special Issuance Instructions" or the box entitled "Special Delivery
Instructions" on this Letter of Transmittal or (ii) if such Old Notes are
tendered for the account of an Eligible Institution. IN ALL OTHER CASES, ALL
SIGNATURES MUST BE GUARANTEED BY AN ELIGIBLE INSTITUTION.
2. DELIVERY OF THIS LETTER OF TRANSMITTAL AND OLD NOTES;
GUARANTEED DELIVERY PROCEDURES. This Letter of Transmittal is to be completed
by holders of Old Notes (i) if certificates are to be forwarded herewith or
(ii) if tenders are to be made pursuant to the procedures for tender by
book-entry transfer or guaranteed delivery set forth in the section of the
Prospectus entitled "The Exchange Offer." Certificates for all physically
tendered Old Notes or any confirmation of a book-entry transfer (a "Book-Entry
Confirmation"), as well as a properly completed and duly executed copy of this
Letter of Transmittal or facsimile hereof, and any other documents required by
this Letter of Transmittal, must be received by the Exchange Agent at its
address set forth on the cover of this Letter of Transmittal prior to 5:00
p.m., New York City time, on the Expiration Date. Holders of Old Notes who
elect to tender Old Notes and (i) whose Old Notes are not immediately
available, (ii) who cannot deliver the Letter of Transmittal, Old Notes or
other required documents to the Exchange Agent prior to 5:00 p.m., New York
City time, on the Expiration Date or (iii) who are unable to complete the
procedure for book-entry transfer on a timely basis, may have such tender
effected if: (a) such tender is made by or through an Eligible Institution, (b)
prior to 5:00 p.m., New York City time, on the Expiration Date, the Exchange
Agent has received from such Eligible Institution a properly completed and duly
executed Letter of Transmittal and Notice of Guaranteed Delivery (by facsimile
transmission, mail or hand delivery) setting forth the name and address of the
holder of such Old Notes, the certificate number(s) of such Old Notes and the
principal amount of Old Notes tendered for exchange, stating that tender is
being made thereby and guaranteeing that, within three New York Stock Exchange
trading days after the date of execution of the Notice of Guaranteed Delivery,
this Letter of Transmittal (or a manually executed facsimile thereof), properly
completed and duly executed, the certificates representing such Old Notes (or a
Book-Entry Confirmation), in proper form for transfer, and any other documents
required by this Letter of Transmittal, will be deposited by such Eligible
Institution with the Exchange Agent, and (c) a properly completed and duly
executed Letter of Transmittal (or a manually executed facsimile thereof) with
certificates for all tendered Old Notes, or a Book-Entry Confirmation, and any
other documents required by this Letter of Transmittal are received by the
Exchange Agent within three New York Stock Exchange trading days after the date
of execution of the Notice of Guaranteed Delivery.
THE METHOD OF DELIVERY OF OLD NOTES, THIS LETTER OF TRANSMITTAL AND
ALL OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE TENDERING
HOLDER OF OLD NOTES. EXCEPT AS OTHERWISE PROVIDED BELOW, THE DELIVERY WILL BE
DEEMED MADE ONLY WHEN ACTUALLY RECEIVED OR CONFIRMED BY THE EXCHANGE AGENT. IF
DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY
INSURED, IS RECOMMENDED. NEITHER THIS LETTER OF TRANSMITTAL NOR ANY OLD NOTES
SHOULD BE SENT TO THE COMPANY OR THE SUBSIDIARY GUARANTOR.
9
<PAGE> 10
No alternative, conditional or contingent tenders will be accepted.
All tendering holders of Old Notes, by execution of this Letter of Transmittal
(or facsimile hereof, if applicable), waive any right to receive notice of the
acceptance of their Old Notes for exchange.
3. INADEQUATE SPACE. If the space provided in the box entitled
"Description of Old Notes" above is inadequate, the certificate numbers and
principal amounts of the Old Notes being tendered should be listed on a
separate signed schedule affixed hereto.
4. WITHDRAWALS. A tender of Old Notes may be withdrawn at any
time prior to 5:00 p.m., New York City time, on the Expiration Date by delivery
of written notice of withdrawal to the Exchange Agent at the address set forth
on the cover of this Letter of Transmittal. To be effective, a notice of
withdrawal of Old Notes must (i) specify the name of the person who tendered
the Old Notes to be withdrawn (the "Depositor"), (ii) identify the Old Notes to
be withdrawn (including the certificate number or numbers and aggregate
principal amount of such Old Notes), (iii) be signed by the holder of Old Notes
in the same manner as the original signature on the Letter of Transmittal by
which such Old Notes were tendered (including any required signature
guarantees) or be accompanied by documents of transfer sufficient to have the
Trustee under the Indenture register the transfer of such Old Notes into the
name of the person withdrawing the tender, and (iv) be received by the Exchange
Agent prior to 5:00 p.m., New York City time, on the Expiration Date.
Withdrawals of tenders of Old Notes may not be rescinded, and any Old Notes
withdrawn will thereafter be deemed not validly tendered for purposes of the
Exchange Offer, and no New Notes will be issued with respect thereto unless the
Old Notes so withdrawn are validly retendered. Properly withdrawn Old Notes may
be retendered by following one of the procedures described in the section of
the Prospectus entitled "The Exchange Offer -- Procedures for Tendering" at any
time prior to 5:00 p.m., New York City time, on the Expiration Date.
5. PARTIAL TENDERS. (Not applicable to holders of Old Notes who
tender Old Notes by book-entry transfer). Tenders of Old Notes will be
accepted only in integral multiples of $1,000 principal amount. If a tender for
exchange is to be made with respect to less than the entire principal amount of
any Old Notes, fill in the principal amount of Old Notes which are tendered for
exchange in column (4) of the box entitled "Description of Old Notes" on page
3, as more fully described in the footnotes thereto. In case of a partial
tender for exchange, a new certificate, in fully registered form, for the
remainder of the principal amount of the Old Notes, will be sent to the holders
of Old Notes unless otherwise indicated in the appropriate box on this Letter
of Transmittal as promptly as practicable after the expiration or termination
of the Exchange Offer.
6. SIGNATURES ON THIS LETTER OF TRANSMITTAL, POWERS OF ATTORNEY
AND ENDORSEMENTS.
(a) The signature(s) of the holder of Old Notes on this Letter of
Transmittal must correspond with the name(s) as written on the face of the Old
Notes without alteration, enlargement or any change whatsoever.
(b) If tendered Old Notes are owned of record by two or more joint
owners, all such owners must sign this Letter of Transmittal.
(c) If any tendered Old Notes are registered in different names on
several certificates, it will be necessary to complete, sign and submit as many
separate copies of this Letter of Transmittal and any necessary or required
documents as there are different registrations.
(d) When this Letter of Transmittal is signed by the holder of the
Old Notes listed and transmitted hereby, no endorsements of Old Notes or
separate powers of attorney are required. If, however, Old Notes not tendered
or not accepted, are to be issued or returned in the name of a person other
than the holder of Old Notes, then the Old Notes transmitted hereby must be
endorsed or accompanied by appropriate powers of attorney in a form
satisfactory to the Company, in either case signed exactly as the name(s) of
the holder of Old Notes appear(s) on the Old Notes. Signatures on such Old
Notes or powers of attorney must be guaranteed by an Eligible Institution
(unless signed by an Eligible Institution).
10
<PAGE> 11
(e) If this Letter of Transmittal or Old Notes or powers of
attorney are signed by trustees, executors, administrators, guardians,
attorneys-in-fact, officers of corporations or others acting in a fiduciary or
representative capacity, such persons should so indicate when signing, and
proper evidence satisfactory to the Company of their authority so to act must
be submitted.
(f) If this Letter of Transmittal is signed by a person other than
the registered holder of Old Notes listed, the Old Notes must be endorsed or
accompanied by appropriate powers of attorney, in either case signed exactly as
the name(s) of the registered holder of Old Notes appear(s) on the
certificates. Signatures on such Old Notes or powers of attorney must be
guaranteed by an Eligible Institution (unless signed by an Eligible
Institution).
7. TRANSFER TAXES. Except as set forth in this Instruction 7,
the Company will pay all transfer taxes, if any, applicable to the transfer and
exchange of Old Notes pursuant to the Exchange Offer. If issuance of New Notes
is to be made to, or Old Notes not tendered for exchange are to be issued or
returned in the name of, any person other than the registered holder of the Old
Notes tendered, or if a transfer tax is imposed for any reason other than the
exchange of Old Notes pursuant to the Exchange Offer, and satisfactory evidence
of payment of such taxes or exemptions from taxes therefrom is not submitted
with this Letter of Transmittal, the amount of any transfer taxes payable on
account of any such transfer will be imposed on and payable by the tendering
holder of Old Notes prior to the issuance of the New Notes.
8. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS. If the New Notes,
or if any Old Notes not tendered for exchange, are to be issued or sent to
someone other than the holder of Old Notes or to an address other than that
shown above, the appropriate boxes on this Letter of Transmittal should be
completed. Holders of Old Notes tendering Old Notes by book-entry transfer may
request that Old Notes not accepted be credited to such account maintained at
the Depository as such holder of Old Notes may designate.
9. IRREGULARITIES. All questions as to the form of documents and
the validity, eligibility (including time of receipt), acceptance and
withdrawal of Old Notes will be determined by the Company, in its sole
discretion, whose determination shall be final and binding. The Company
reserves the absolute right to reject any or all tenders for exchange of any
particular Old Notes that are not in proper form, or the acceptance of which
would, in the opinion of the Company (or its counsel), be unlawful. The Company
reserves the absolute right to waive any defect, irregularity or condition of
tender for exchange with regard to any particular Old Notes. The Company's
interpretation of the terms of, and conditions to, the Exchange Offer
(including the instructions herein) will be final and binding. Unless waived,
any defects or irregularities in connection with the Exchange Offer must be
cured within such time as the Company shall determine. Neither the Company, the
Guarantor, the Exchange Agent nor any other person shall be under any duty to
give notice of any defects or irregularities in Old Notes tendered for
exchange, nor shall any of them incur any liability for failure to give such
notice. A tender of Old Notes will not be deemed to have been made until all
defects and irregularities with respect to such tender have been cured or
waived. Any Old Notes received by the Exchange Agent that are not properly
tendered and as to which the defects or irregularities have not been cured or
waived will be returned by the Exchange Agent to the tendering holders, unless
otherwise provided in this Letter of Transmittal, as soon as practicable
following the Expiration Date.
10. WAIVER OF CONDITION. The Company and the Guarantor reserve
the absolute right to waive, amend or modify any of the specified conditions
described under "The Exchange Offer -- Conditions" in the Prospectus in the
case of any Old Notes tendered (except as otherwise provided in the
Prospectus).
11. MUTILATED, LOST, STOLEN OR DESTROYED OLD NOTES. If a holder
of Old Notes desires to tender Old Notes pursuant to the Exchange Offer, but
any of such Old Notes has been mutilated, lost, stolen or destroyed, such
holder of Old Notes should contact the Trustee at the address set forth on the
cover of this Letter of Transmittal for further instructions:
11
<PAGE> 12
12. REQUESTS FOR INFORMATION OR ADDITIONAL COPIES. Requests for
information or for additional copies of the Prospectus and this Letter of
Transmittal may be directed to the Exchange Agent at the address or telephone
number set forth on the cover of this Letter of Transmittal.
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR A FACSIMILE THEREOF, IF
APPLICABLE) TOGETHER WITH CERTIFICATES, OR CONFIRMATION OF BOOK-ENTRY OR THE
NOTICE OF GUARANTEED DELIVERY, AND ALL OTHER REQUIRED DOCUMENTS MUST BE
RECEIVED BY THE EXCHANGE AGENT PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE
EXPIRATION DATE.
IMPORTANT TAX INFORMATION
Under current federal income tax law, a holder of Old Notes whose
tendered Old Notes are accepted for exchange may be subject to backup
withholding unless the holder provides the Company (as payor), through the
Exchange Agent, with either (i) such holder's correct taxpayer identification
number ("TIN") on Substitute Form W-9 attached hereto, certifying that the TIN
provided on Substitute Form W-9 is correct (or that such holder of Old Notes is
awaiting a TIN) and that (A) the holder of Old Notes has not been notified by
the Internal Revenue Service that he or she is subject to backup withholding as
a result of a failure to report all interest or dividends or (B) the Internal
Revenue Service has notified the holder of Old Notes that he or she is no
longer subject to backup withholding, or (ii) an adequate basis for exemption
from backup withholding. If such holder of Old Notes is an individual, the TIN
is such holder's social security number. If the Exchange Agent is not provided
with the correct taxpayer identification number, the holder of Old Notes may be
subject to certain penalties imposed by the Internal Revenue Service.
Certain holders of Old Notes (including, among others, all
corporations and certain foreign individuals) are not subject to these backup
withholding and reporting requirements. Exempt holders of Old Notes should
indicate their exempt status on Substitute Form W-9. A foreign individual may
qualify as an exempt recipient by submitting to the Exchange Agent a properly
completed Internal Revenue Service Form W-8 (the terms of which the Exchange
Agent will provide upon request) signed under penalty of perjury, attesting to
the holder's exempt status. See the enclosed Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9 (the "Guidelines") for
additional instructions.
If backup withholding applies, the Company is required to withhold 31%
of any payment made to the holder of Old Notes or other payee. Backup
withholding is not an additional federal income tax. Rather, the federal income
tax liability of persons subject to backup withholding will be reduced by the
amount of tax withheld. If withholding results in an overpayment of taxes, a
refund may be obtained from the Internal Revenue Service.
The holder of Old Notes is required to give the Exchange Agent the TIN
(e.g., social security number or employer identification number) of the record
owner of the Old Notes. If the Old Notes are held in more than one name or are
not held in the name of the actual owner, consult the enclosed Guidelines for
additional guidance regarding which number to report.
12
<PAGE> 13
<TABLE>
- ----------------------------------------------------------------------------------------------------------------------
PAYER'S NAME: Norwest Bank Minnesota, N.A.
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
SUBSTITUTE Part 1 - PLEASE PROVIDE YOUR TIN IN THE BOX AT RIGHT
AND CERTIFY BY SIGNING AND DATING BELOW ------------------------------
Social Security Number
OR
------------------------------
Employer Identification Number
-------------------------------------------------------------------------------------------
FORM W-9 Part 2 - Part 3 -
Certification Under Penalties of Perjury, I certify
that:
(1) The number shown on this form is my correct Awaiting TIN [ ]
taxpayer identification number (or I am waiting
for a number to be issued to me); and
(2) I am not subject to backup withholding either
because I have not been notified by the
Internal Revenue Service (the "IRS") that I am
subject to backup withholding as a result of a
failure to report all interest or dividends, or
the IRS has notified me that I am no longer
subject to backup withholding.
-------------------------------------------------------------------------------------------
Certificate instructions - You must cross out item (2) in Part 2 above if you have been
Department of the notified by the IRS that you are subject to backup withholding because of underreporting
Treasury interest or dividends on your tax return. However, if after being notified by the IRS that
Internal Revenue you are subject to backup withholding you received another notification from the IRS
Service stating that you are no longer subject to backup withholding, do not cross out item (2).
SIGNATURE DATE
------------------------------------ -------------------
Payer's Request for NAME
Taxpayer ------------------------------------------------------------------
Identification Number ADDRESS
(TIN) ---------------------------------------------------------------
CITY STATE ZIP CODE
-------------------- ------------------ -----------
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP
WITHHOLDING OF 31% OF ANY PAYMENT MADE TO YOU PURSUANT TO THE EXCHANGE
OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF
TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL
DETAILS.
13
<PAGE> 14
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE
IF YOU CHECK THE BOX IN PART 3 OF SUBSTITUTE
FORM W-9
- --------------------------------------------------------------------------------
PAYER'S NAME: NORWEST BANK, MINNESOTA, N.A.
- --------------------------------------------------------------------------------
CERTIFICATE OF AWAITING
TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number
has not been issued to me, and either (a) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office or
(b) I intend to mail or deliver such an application in the near future. I
understand that if I do not provide a taxpayer identification number with
sixty (60) days, 31% of all reportable payments made to me thereafter will be
withheld until I provide such a number.
---------------------------------- --------------------------------
Signature Date
- --------------------------------------------------------------------------------
14
<PAGE> 15
INSTRUCTION TO REGISTERED HOLDER
FROM BENEFICIAL OWNER
OF
10 3/8% SENIOR SUBORDINATED NOTES DUE 2007, SERIES A OF
HYDROCHEM INDUSTRIAL SERVICES, INC.
The undersigned hereby acknowledges receipt of the Prospectus dated
_____________________, 1997 (the "Prospectus") of HydroChem Industrial
Services, Inc., a Delaware corporation (the "Company"), and HydroChem
International, Inc., a Delaware corporation (the "Guarantor"), and the
accompanying Letter of Transmittal (the "Letter of Transmittal"), that together
constitute the Company's and the Guarantor's offer (the "Exchange Offer").
Capitalized terms used but not defined herein have the meanings ascribed to
them in the Prospectus.
This will instruct you, the registered holder, as to the action to be
taken by you relating to the Exchange Offer with respect to the 10 3/8% Senior
Subordinated Notes due 2007, Series A and the guarantee thereof (the "Old
Notes") held by you for the account of the undersigned.
The aggregate principal amount of the Old Notes held by you for the
account of the undersigned is (fill in amount):
$____________________________________ of the Old Notes.
With respect to the Exchange Offer, the undersigned hereby instructs
you (check appropriate box):
[ ] To TENDER the following principal amount of Old Notes held by
you for the account of the undersigned (insert principal amount of Old Notes to
be tendered, if any):
$___________________________ of the Old Notes.
[ ] NOT to TENDER any principal amount of Old Notes held by you
for the account of the undersigned.
If the undersigned instructs you to tender the Old Notes held by you
for the account of the undersigned, it is understood that you are authorized
(a) to make, on behalf of the undersigned (and the undersigned, by its
signature below, hereby makes to you), the representations and warranties
contained in the Letter of Transmittal that are to be made with respect to the
undersigned as a beneficial owner of the Old Notes, including but not limited
to the representations that (i) the undersigned's principal residence is in the
state of (fill in state) _______________________ _, (ii) the undersigned is
acquiring the New Notes in the ordinary course of business of the undersigned,
(iii) the undersigned either (A) is not participating, does not intend to
participate, and has no arrangement or understanding with any person to
participate, in the distribution of New Notes or (B) is a broker-dealer that
will receive New Notes for its own account in exchange for Old Notes that were
acquired as a result of market-making activities or other trading activities,
and acknowledges that it will deliver a prospectus meeting the requirements of
the Securities Act in connection with any resale of such New Notes received in
respect of such Old Notes pursuant to the Exchange Offer; however, by so
acknowledging and by delivering a prospectus, the undersigned will not be
deemed to admit that it is an "underwriter" within the meaning of the
Securities Act, (iv) the undersigned acknowledges that any person participating
in the Exchange Offer for the purpose of distributing the New Notes must comply
with the registration and prospectus delivery requirements of the Securities
Act of 1933, as amended, in connection with any resale transaction of the New
Notes acquired by such person and cannot rely on the position of the Staff of
the Securities and Exchange Commission set forth in certain no-action letters
(See the section of the Prospectus entitled "The Exchange Offer -- Purpose and
Effect"), (v) the undersigned understands that a secondary resale transaction
described in clause (iv) above should be covered by an effective registration
statement containing the selling securityholder information required by item
507 or Item 508, if applicable, of Regulation S-K of the Commission, and (vi)
the undersigned is not an "affiliate," as defined in Rule 405 under the
Securities Act, of the Company or the Guarantor; (b) to agree, on behalf of the
undersigned, as set forth in the Letter of Transmittal; and (c) to take such
other action as necessary under the Prospectus or the Letter of Transmittal to
effect the valid tender of Old Notes.
SIGN HERE
Name of Beneficial Owner(s) (please print):
-----------------------------------
Signature(s):
-----------------------------------------------------------------
Address:
----------------------------------------------------------------------
Telephone Number:
-------------------------------------------------------------
Taxpayer Identification or Social Security Number:
----------------------------
Date:
-------------------------------------------------------------------------
15
<PAGE> 1
EXHIBIT 99.2
NOTICE OF GUARANTEED DELIVERY
With Respect to
10 3/8% Senior Subordinated Notes due 2007, Series A
CUSIP NO. 448850AA5
of
HYDROCHEM INDUSTRIAL SERVICES, INC.
and the Guarantee thereof by
HYDROCHEM INTERNATIONAL, INC.
This form must be used by a holder of 10 3/8% Senior Subordinated
Notes due 2007, Series A and the guarantee thereof (the "Old Notes") of
HydroChem Industrial Services, Inc. (the "Company") and HydroChem
International, Inc. (the "Guarantor") who wishes to tender Old Notes to the
Exchange Agent in exchange for 10 3/8% Senior Subordinates Notes due 2007,
Series B and the guarantee thereof pursuant to the guaranteed delivery
procedures described in the "The Exchange Offer--Guaranteed Delivery
Procedures" of the Prospectus, dated _________, 1997 (the "Prospectus"), and in
Instruction 2 to the related Letter of Transmittal. Any holder who wishes to
tender Old Notes pursuant to such guaranteed delivery procedures must ensure
that the Exchange Agent receives this Notice of Guaranteed Delivery prior to
the Expiration Date of the Exchange Offer. Capitalized terms not defined herein
have the meanings ascribed to them in the Prospectus or the Letter of
Transmittal.
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON _____________, 1997, UNLESS EXTENDED (THE "EXPIRATION DATE").
To: Norwest Bank, Minnesota, N.A.
(the "Exchange Agent")
<TABLE>
<S> <C>
By Overnight Courier: By Hand:
-------------------- -------
Norwest Bank Minnesota, National Association Norwest Bank Minnesota, National Association
Corporate Trust Operations Corporate Trust Operations
Norwest Center Northstar East, 12th Floor
Sixth and Marquette 608 2nd Avenue
Minneapolis, MN 55479-0069 Minneapolis, MN 55479-0113
By Facsimile: Confirm by Telephone:
------------ --------------------
Norwest Bank Minnesota, National Association (612) 667-9764
Corporate Trust Operations
(612) 667-4927
</TABLE>
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE OR TRANSMISSION VIA A FACSIMILE NUMBER OTHER THAN THE ONE LISTED ABOVE
WILL NOT CONSTITUTE A VALID DELIVERY.
This form is not to be used to guarantee signatures. If a signature on
the Letter of Transmittal is required to be guaranteed by an "Eligible
Institution" under the instructions thereto, such signature guarantee must
appear in the applicable space provided in the signature box on the Letter of
Transmittal.
<PAGE> 2
LADIES AND GENTLEMEN:
The undersigned hereby tenders to the Company and the Guarantor, upon
the terms and subject to the conditions set forth in the Prospectus and the
related Letter of Transmittal, receipt of which is hereby acknowledged, the
principal amount of Old Notes set forth below pursuant to the guaranteed
delivery procedures set forth in the Prospectus and in Instruction 2 of the
Letter of Transmittal.
The undersigned hereby tenders the Old Notes listed below:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
Certificate Number(s) (if known) of Old Notes or Aggregate Principal Aggregate Principal
Account Number at the Book-Entry Facility Amount Represented Amount Tendered
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
</TABLE>
PLEASE SIGN AND COMPLETE
<TABLE>
<S> <C>
Signatures of Registered Holder(s) or Date: , 1997
----------------
Authorized Signatory: Address:
----------------------------- ---------------------------------------------------------
- -------------------------------------------------- -----------------------------------------------------------------
Area Code and Telephone No.:
- -------------------------------------------------- -------------------------------------
Name of Registered Holder(s):
---------------------
- --------------------------------------------------
- --------------------------------------------------
</TABLE>
This Notice of Guaranteed Delivery must be signed by the Holder(s)
exactly as their name(s) appear on certificates for Old Notes or on a security
position listing as the owner of Old Notes, or by person(s) authorized to
become Holder(s) by endorsements and documents transmitted with this Notice of
Guaranteed Delivery. If signature is by a trustee, executor, administrator,
guardian, attorney-in-fact, officer or other person acting in a fiduciary or
representative capacity, such person must provide the following information.
Please print name(s) and address(es)
Name(s):
----------------------------------------------------------------------
Capacity:
---------------------------------------------------------------------
Address(es):
------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- 2 -
<PAGE> 3
GUARANTEE
(Not to be used for signature guarantee)
The undersigned, a firm which is a member of a recognzied signature
guarantee medallion program and is an "eligible guarantor institution" within
the meaning of Rule 17Ad-15 under the Securities Exchange Act of 1934, as
amended, hereby guarantees deposit with the Exchange Agent of the Letter of
Transmittal (or facsimile thereof), together with the Old Notes tendered hereby
in proper form for transfer (or confirmation of the book-entry transfer of such
Old Notes into the Exchange Agent's account at the Book-Entry Transfer Facility
described in the Prospectus under the caption "The Exchange Offer -- Guaranteed
Delivery Procedures" and in the Letter of Transmittal) and any other required
documents, all by 5:00 p.m., New York City time, on the third New York Stock
Exchange trading day following the Date of execution of this Notice of
Guaranteed Delivery.
<TABLE>
<S> <C>
Name of Firm:
------------------------------------ --------------------------------------------------------------------
Address: Authorized Signature
-----------------------------------------
Name:
- ------------------------------------------------- ---------------------------------------------------------------
Area Code and Telephone No.: Title:
--------------------- --------------------------------------------------------------
Date: , 1997
---------------------------------------------------------
</TABLE>
DO NOT SEND OLD NOTES WITH THIS FORM. ACTUAL SURRENDER OF
OLD NOTES MUST BE MADE PURSUANT TO, AND BE ACCOMPANIED
BY, AN EXECUTED LETTER OF TRANSMITTAL.
- 3 -
<PAGE> 4
INSTRUCTIONS FOR NOTICE OF GUARANTEED DELIVERY
1. Delivery of this Notice of Guaranteed Delivery. A properly
completed and duly executed copy of this Notice of Guaranteed Delivery and any
other documents required by this Notice of Guaranteed Delivery must be received
by the Exchange Agent at its address set forth herein prior to 5:00 p.m., New
York City time, on the Expiration Date. The method of delivery of this Notice
of Guaranteed Delivery and any other required documents to the Exchange Agent
is at the election and sole risk of the holder, and the delivery will be deemed
made only when actually received by the Exchange Agent. If delivery is by mail,
registered mail with return receipt requested, properly insured, is
recommended. As an alternative to delivery by mail, the holders may wish to
consider using an overnight or hand delivery service. In all cases, sufficient
time should be allowed to assure timely delivery. For a description of the
guaranteed delivery procedures, see Instruction 2 of the Letter of Transmittal.
2. Signatures on this Notice of Guaranteed Delivery. If this Notice
of Guaranteed Delivery is signed by the registered holder(s) of the Old Notes
referred to herein, the signature must correspond with the name(s) written on
the face of the Old Notes without alteration, enlargement, or any change
whatsoever. If this Notice of Guaranteed Delivery is signed by a participant of
the Book-Entry Transfer Facility whose name appears on a security position
listing as the owner of Old Notes, the signature must correspond with the name
shown on the security position listing as the owner of the Old Notes.
If this Notice of Guaranteed Delivery is signed by a person other than
the registered holder(s) of any Old Notes listed or a participant of the
Book-Entry Transfer Facility, this Notice of Guaranteed Delivery must be
accompanied by appropriate bond powers, signed as the name of the registered
holder(s) appears on the Old Notes or signed as the name of the participant
shown on the Book-Entry Transfer Facility's security position listing.
If this Notice of Guaranteed Delivery is signed by a trustee, executor,
administrator, guardian, attorney-in-fact, officer of a corporation, or other
person acting in a fiduciary or representative capacity, such person should so
indicate when signing and submit with the Notice of Guaranteed Delivery
evidence satisfactory to the Company and the Guarantor of such person's
authority to so act.
3. Requests for Assistance or Additional Copies. Questions and
requests for assistance and requests for additional copies of the Prospectus
may be directed to the Exchange Agent at the address specified in the
Prospectus. Holders may also contact their broker, dealer, commercial bank,
trust company, or other nominee for assistance concerning the Exchange Offer.
- 4 -
