POST-QUALIFICATION AMENDMENT NO. 1 TO
FORM T-3
APPLICATION FOR QUALIFICATION OF
INDENTURE UNDER THE
TRUST INDENTURE ACT OF 1939
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
THE HALLWOOD GROUP INCORPORATED
3710 Rawlins, Suite 1500
Dallas, Texas
(214) 528-5588
SECURITIES TO BE ISSUED UNDER THE INDENTURE TO BE QUALIFIED
TITLE OF CLASS AMOUNT
10% Collateralized Subordinated Debentures due $20,555,443
July 31, 2005
Approximate date of proposed public offering:
As promptly as possible after the effective date of this
Application for Qualification
Name and address of agent for service:
Melvin J. Melle
The Hallwood Group Incorporated
3710 Rawlins, Suite 1500
Dallas, Texas
(214) 528-5588
Copies to:
W. Alan Kailer
Jenkens & Gilchrist,
a Professional Corporation
1445 Ross Avenue, Suite 3200
Dallas, Texas 75202
THE APPLICANT HEREBY AMENDS THIS APPLICATION ON SUCH DATE OR DATES AS
MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE APPLICANT SHALL FILE A
FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS APPLICATION SHALL
THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH THE TRUST INDENTURE ACT OF 1939,
AS AMENDED, OR UNTIL THIS APPLICATION SHALL BECOME EFFECTIVE ON SUCH DATE AS THE
COMMISSION, ACTING PURSUANT TO SECTION 8(a) OF THE SECURITIES ACT OF 1933, AS
AMENDED.
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<PAGE>
GENERAL
1. General Information.
-------------------
(a) Form of organization. A corporation.
(b) State or other sovereign power under the laws of which organized. Delaware.
2. Securities Act Exemption Applicable.
-----------------------------------
The Hallwood Group Incorporated, a Delaware corporation (the "Applicant"),
is relying upon the exemption provided by Section 3(a)(9) of the Securities Act
of 1933, as amended (the "Securities Act"), in claiming that registration of the
10% Debentures (as hereinafter defined) to be issued by the Applicant in
connection with the offer to exchange (the "Exchange Offer") hereinafter
described is not required under the Securities Act.
The Exchange Offer will be made pursuant to the terms and provisions of a
certain Exchange Offer Circular dated June __, 1998 (the "Exchange Offering
Circular") and the related Letter of Transmittal (the "Letter of Transmittal").
Pursuant to the Exchange Offering Circular and the Letter of Transmittal, the
Applicant is offering to exchange (the "Exchange") its 7% Collateralized Senior
Subordinated Debentures due July 31, 2000 (the "7% Debentures"), for its 10%
Collateralized Subordinated Debentures due July 31, 2005 (the "10% Debentures")
in the ratio of $100 principal amount of 7% Debentures for each $100 principal
amount of 10% Debentures. Consummation of the Exchange Offer is conditioned upon
the qualification of the Indenture (the "Indenture") for the 10% Debentures, a
copy of which is filed as an exhibit to this Form T-3, under the Trust Indenture
Act of 1939, as amended (the "Trust Indenture Act").
The Applicant has not sold, and will not sell any securities of the same
class as the 10% Debentures, and has not sold, by or through an underwriter, any
securities of the same class as the 10% Debentures at or about the same time as
the Exchange Offer.
The Applicant has appointed State Street Bank and Trust Company as the
exchange agent (the "Exchange Agent") in connection with the Exchange Offer. In
such capacity, the Exchange Agent will perform services for the Applicant in
connection with the exchange of 7% Debentures pursuant to the Exchange Offer.
The Applicant has agreed to pay the Exchange Agent reasonable and customary fees
for its services, and reimburse the Exchange Agent for its reasonable
out-of-pocket expenses in connection therewith.
As of March 31, 1998, $20,555,443 aggregate principal amount of the 7%
Debentures were outstanding. If 100% of the outstanding 7% Debentures are
accepted for exchange pursuant to the Exchange Offer, the Applicant will be
required to issue a total of $20,555,443 aggregate principal amount of 10%
Debentures.
AFFILIATION
3. Affiliates.
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<TABLE>
<CAPTION>
<S> <C>
- ---------------------------------------------------------------------------------------------------------
Affiliate Basis for Control
- ---------------------------------------------------------------------------------------------------------
Brock Suite Hotels, Inc. 100% ownership of voting securities
- ---------------------------------------------------------------------------------------------------------
Brock Suite Greenville, Inc. 100% ownership of voting securities
- ---------------------------------------------------------------------------------------------------------
Brock Suite Huntsville, Inc. 100% ownership of voting securities
- ---------------------------------------------------------------------------------------------------------
Brock Suite Tulsa, Inc. 100% ownership of voting securities
- ---------------------------------------------------------------------------------------------------------
Brookwood Companies Incorporated 100% ownership of voting securities
- ---------------------------------------------------------------------------------------------------------
Brookwood Laminating, Inc. 100% ownership of voting securities
- ---------------------------------------------------------------------------------------------------------
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- ----------------------------------------------------------------------------------------------------------
Affiliate Basis for Control
- ----------------------------------------------------------------------------------------------------------
Hallwood Commercial Real Estate, Inc. 100% ownership of voting securities
- ----------------------------------------------------------------------------------------------------------
Hallwood G.P., Inc. 100% ownership of voting securities
- ----------------------------------------------------------------------------------------------------------
Hallwood Hotels, Inc. 100% ownership of voting securities
- ----------------------------------------------------------------------------------------------------------
Hallwood-Integra Holding Company Incorporated 100% ownership of voting securities
- ----------------------------------------------------------------------------------------------------------
Hallwood Investment Company 100% ownership of voting securities
- ----------------------------------------------------------------------------------------------------------
Hallwood Kenyon Holding Company 100% ownership of voting securities
- ----------------------------------------------------------------------------------------------------------
Hallwood Realty Corporation 100% ownership of voting securities
- ----------------------------------------------------------------------------------------------------------
HEPGP Ltd. 100% ownership of voting securities
- ----------------------------------------------------------------------------------------------------------
HWG 95 Advisors, Inc. 100% ownership of voting securities
- ----------------------------------------------------------------------------------------------------------
HWG 98 Advisors, Inc. 100% ownership of voting securities
- ----------------------------------------------------------------------------------------------------------
Kenyon Industries, Inc. 100% ownership of voting securities
- ----------------------------------------------------------------------------------------------------------
Condo Hotel and Resort Management, Inc. 100% ownership of voting securities
- ----------------------------------------------------------------------------------------------------------
HWG Realty Investors, Inc. 100% ownership of voting securities
- ----------------------------------------------------------------------------------------------------------
HSC Securities Corporation 100% ownership of voting securities
- ----------------------------------------------------------------------------------------------------------
Integra Hotels, Inc. 100% ownership of voting securities
- ----------------------------------------------------------------------------------------------------------
Integra Resort Management, Inc. 100% ownership of voting securities
- ----------------------------------------------------------------------------------------------------------
</TABLE>
MANAGEMENT AND CONTROL
4. Directors and Executive Officers.
--------------------------------
<TABLE>
<CAPTION>
<S> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------
Name Address Office(s)
- ---------------------------------------------------------------------------------------------------------------------
Anthony J. Gumbiner 3710 Rawlins, Suite 1500 Chairman of the Board and
Dallas, Texas 75219 Chief Executive Officer
- ---------------------------------------------------------------------------------------------------------------------
Brian M. Troup 3710 Rawlins, Suite 1500 President, Chief Operating Officer
Dallas, Texas 75219 and Director
- ---------------------------------------------------------------------------------------------------------------------
William L. Guzzetti 3710 Rawlins, Suite 1500 Executive Vice President
Dallas, Texas 75219
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Melvin J. Melle 3710 Rawlins, Suite 1500 Vice President, Chief Financial
Dallas, Texas 75219 Officer and Secretary
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Charles A. Crocco, Jr. 3710 Rawlins, Suite 1500 Director
Dallas, Texas 75219
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J. Thomas Talbot 3710 Rawlins, Suite 1500 Director
Dallas, Texas 75219
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
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5. Principal Owners of Voting Securities.
-------------------------------------
As of March 31, 1998: Based on 1,254,827 shares outstanding
<TABLE>
<CAPTION>
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------
Column D
Column B Column C Percentage
Column A Title of Class Amount of Voting
Name And Complete Mailing Address Owned Owned (1) Securities
- ----------------------------------------------------------------------------------------------------------------
Alpha Trust Common 457,791(2) 36.5%
c/o Radcliffes Trustee Company SA Stock
9 Rue, Charles Humbert
1205 Geneva, Switzerland
- ----------------------------------------------------------------------------------------------------------------
Epsilon Trust Common 305,196(3) 24.3%
c/o Radcliffes Trustee Company SA Stock
9 Rue, Charles Humbert
1205 Geneva, Switzerland
- ----------------------------------------------------------------------------------------------------------------
Heartland Advisors, Inc. Common 87,500(4) 7.0%
790 North Milwaukee Street Stock
Milwaukee, WI 53202
- ----------------------------------------------------------------------------------------------------------------
Charles A. Crocco, Jr. Common 10,550(5) .8%
3710 Rawlins, Suite 1500 Stock
Dallas, Texas 75219
- ----------------------------------------------------------------------------------------------------------------
Anthony J. Gumbiner Common 55,800(6) 4.3%
3710 Rawlins, Suite 1500 Stock
Dallas, Texas 75219
- ----------------------------------------------------------------------------------------------------------------
William L. Guzzetti Common (7) -
3710 Rawlins, Suite 1500 Stock
Dallas, Texas 75219
- ----------------------------------------------------------------------------------------------------------------
Melvin J. Melle Common 6,000(8) .5%
3710 Rawlins, Suite 1500 Stock
Dallas, Texas 75219
- ----------------------------------------------------------------------------------------------------------------
J. Thomas Talbot Common 10,000(9) .8%
3710 Rawlins, Suite 1500 Stock
Dallas, Texas 75219
- ----------------------------------------------------------------------------------------------------------------
Brian M. Troup Common 37,200(10) 2.9%
3710 Rawlins, Suite 1500 Stock
Dallas, Texas 75219
- ----------------------------------------------------------------------------------------------------------------
<FN>
- --------------------------
(1) Assumes, for each person or group listed, the exercise of all stock
options held by such person or group that are exercisable within 60
days, in accordance with Rule 13d-3(d)(1)(i) of the Exchange Act, but
the exercise of none of the convertible securities owned by any other
holder of options.
(2) Mr. Gumbiner has the power to designate and replace the trustees of the
Alpha Trust. Mr. Gumbiner and his family are among the discretionary
beneficiaries of this Trust.
(3) Mr. Gumbiner has the power to designate and replace the trustees of the
Epsilon Trust. Mr. Troup and his family are among the discretionary
beneficiaries of this Trust.
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(4) Based on the Schedule 13G filed by Heartland Advisors, Inc.
("Heartland") on January 27, 1998, as amended by subsequent
correspondence with the Company. All of the shares are held in
investment advisory accounts of Heartland. As a result, various persons
have the right to receive or the power to direct the receipt of
dividends from, or the proceeds from the sale of, the shares. No
individual investment advisory account holds in excess of 4.75% of the
Company's common stock.
(5) Includes currently exercisable options to purchase 10,000 shares of
common stock, par value $.10 per share (the "Common Stock").
(6) Includes currently exercisable options to purchase 55,800 shares of
Common Stock. Excludes 457,791 shares of Common Stock held by Alpha
Trust. In addition, Mr. Gumbiner holds currently exercisable options to
purchase 127,500 units of Hallwood Energy Partners, L.P. ("HEP"),
currently exercisable options to purchase 59,600 shares of Hallwood
Consolidated Resources Corporation (" HCRC"), and currently exercisable
options to purchase 25,800 units of HRP.
(7) In addition, Mr. Guzzetti owns 100 units of HEP and 400 units of HRP,
currently exercisable options to purchase 63,750 units of HEP,
currently exercisable options to purchase 31,800 shares of HCRC, and
currently exercisable options to purchase 15,000 units of HRP.
(8) Includes currently exercisable options to purchase 6,000 shares of
Common Stock.
(9) Includes currently exercisable options to purchase 10,000 shares of
Common Stock.
(10) Includes currently exercisable options to purchase 37,200 shares of
Common Stock. Excludes 305,196 shares of Common Stock held by Epsilon
Trust. In addition, Mr. Troup holds currently exercisable options to
purchase 85,000 units of HEP, currently exercisable options to purchase
42,400 shares of HCRC, and currently exercisable options to purchase
17,200 units of HRP.
</FN>
</TABLE>
UNDERWRITERS
6. Underwriters. Not applicable
------------
The 10% Debentures will be issued for no additional consideration upon
exchange of the 7% Debentures. The Company has not retained any dealer-manager
or similar agent in connection with the Exchange Offer and will not make any
payments to any broker-dealer or other person soliciting the exchange of 7%
Debentures for 10% Debentures.
CAPITAL SECURITIES
7. (a) Capitalization. As of March 31, 1998:
--------------
<TABLE>
<CAPTION>
<S> <C> <C>
- ---------------------------------------------------------------------------------------------------------------
Column A Column B Column C
Title of Class Amount Authorized Amount Outstanding
- ---------------------------------------------------------------------------------------------------------------
Common Stock, $.10 par value 10,000,000 shares 1,254,827 shares
- ---------------------------------------------------------------------------------------------------------------
Series B Preferred Stock, $.10 par value 500,000 shares 250,000 shares
- ---------------------------------------------------------------------------------------------------------------
7% Collateralized Senior Subordinated $45,647,600 principal amount $20,555,443 principal amount
Debentures
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
(b) Voting Rights. Each share of Common Stock is entitled to one vote for
the election of directors and upon all other matters and participates ratably
with all other shares of Common Stock in all dividends and distributions. The
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holders of shares of Series B Preferred Stock are not entitled to vote on
matters brought before the Company's Stockholders, except as otherwise provided
by law.
INDENTURE SECURITIES
8. ANALYSIS OF INDENTURE PROVISIONS.
--------------------------------
General
-------
The 10% Debentures will be issued by the Company under the Indenture,
between the Company and Bank One, N.A. as trustee (the "Indenture Trustee"). The
10% Debentures will be issued in fully registered form in the original aggregate
principal amount of up to $20,555,443 in denominations of $100 or integral
multiples thereof. The 10% Debentures mature on July 31, 2005. Interest on the
10% Debentures will accrue from the date of issuance at the rate of 10% per
annum, payable quarterly on January 1, April 30, July 31 and October 31 of each
year, commencing on July 31, 1998.
The 10% Debentures may be redeemed at the election of the Company, at any
time and from time to time, as a whole or in part, at a redemption price equal
to 100% of the principal amount of 10% Debentures to be redeemed, together with
accrued interest to the redemption date.
The 10% Debentures constitute senior subordinated Indebtedness (as defined
in the Indenture), subordinated to Senior Indebtedness, which is defined in the
Indenture as all Indebtedness of the Company, which, by its terms, is expressly
senior in right of payment to the 10% Debentures.
The 10% Debentures will be secured by a first and senior lien on all of the
issued and outstanding capital stock of Brock Suite Hotels, Inc., ("Brock
Suites") an indirect wholly-owned subsidiary of the Company (the "Collateral")
that will be pledged to the Indenture Trustee. Brock Suites owns fee interests
in Residence Inn by Marriott hotels located in Tulsa, Oklahoma and Greenville,
South Carolina, and a leasehold interest in a Residence Inn by Marriott hotel in
Huntsville, Alabama. The Residence Inn in Tulsa was constructed in two phases,
in 1981 and 1983, as an upper tier, extended stay hotel. The property is
arranged in an apartment-like setting offering a residential environment for
extended stay guests. The hotel is comprised of 135 suites in seventeen,
two-story residential buildings. Each of the two buildings contains eight suites
each. The two-story Gatehouse serves as a registration and lobby area along with
a breakfast bar, central gathering area and an executive board room. The
Greenville, South Carolina hotel was constructed in 1984 as an extended stay
Residence Inn hotel. Similar to the Tulsa hotel, the Greenville hotel offers 96
suites in twelve, two-story residential buildings of eight suites each, along
with a central Gatehouse. The Huntsville, Alabama hotel was also constructed in
1984 as an extended stay Residence Inn hotel. As with the other Residence Inn
hotels, the property is arranged in an apartment-like setting offering a
residential environment for extended stay guests. The hotel provides 112 suites
in fourteen, two-story residential buildings of eight suites each, along with a
central Gatehouse.
The 10% Debentures will also be secured by a subordinate and junior lien on
a pool of assets (the "Security Pool") owned by the Company that is pledged to
the trustee (the "Old Indenture Trustee") under an existing indenture (the "Old
Indenture") for the benefit of the holders of the Company's 7% Debentures.
The Security Pool consists of all of the issued and outstanding capital
stock of the Brookwood Companies Incorporated ("BCI") and Hallwood Hotels, Inc.
("HHI"), each a direct or indirect wholly-owned subsidiary of the Company (the
stock of BCI referred to as the "Brookwood Collateral"). BCI is a complete
textile service firm that develops and produces innovative fabrics and related
products through specialized finishing, treating and coating processes. HHI owns
leasehold interests in the Longboat Key Holiday Inn hotel in Sarasota, Florida
and the Airport Embassy Suites hotel in Oklahoma City, Oklahoma. The Longboat
Key Holiday Inn, originally constructed in 1973, is situated on 750 feet of
private beach on the Gulf of Mexico. The hotel has 121 rooms and 25 suites and,
as part of the conversion to a Holiday Inn & Suites hotel, was recently
renovated at a cost of $3.5 million. The renovation was substantially completed
in March 1998. The Airport Embassy Suites hotel is the only full-service,
all-suite hotel in Oklahoma City and is located two miles from the Will Rogers
International Airport. The six-story, 236-room suite hotel was originally
constructed in 1981 and has been maintained through capital investment in recent
years.
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<PAGE>
The security interests in the Collateral and the Security Pool will be
granted to the Indenture Trustee pursuant to a Pledge and Security Agreement
(the "Pledge Agreement") to be dated as of the date of the consummation of the
Exchange Offer.
The Brookwood Collateral is also pledged to The Bank of New York pursuant
to a first lien to secure the indebtedness of BCI (the "BCI Senior
Indebtedness"), which constitutes Senior Indebtedness under both the Old
Indenture and the New Indenture. The outstanding principal amount of the BCI
Senior Indebtedness was $13,600,000 as of March 31, 1998. The lien in favor of
the outstanding 7% Debentures that is secured by a lien on the Security Pool is
senior to the lien of the 10 % Debentures.
(A) EVENTS OF DEFAULT
"Event of Default" under the Indenture, means any one of the following
events (whatever the reason for such Event of Default and whether it is
voluntary or involuntary or be effected by operation of law or pursuant to
any judgment, decree or order of any court or any order, rule or regulation
of any administrative or governmental body): (a) the Company defaults in
(i) the payment of the principal of (or premium, if any, on) the 10%
Debentures at maturity (including upon optional or mandatory redemption or
otherwise); or (ii) the payment of any interest on the 10% Debentures when
such interest becomes due and payable and such default continues for a
period of 30 days; or (b) if, upon release by the Indenture Trustee of an
asset in the Security Pool the Company fails to (A) redeem an aggregate
principal amount of the 10% Debentures equal to the lesser of the Net Value
(as defined in the Indenture) of such asset on the date of issuance of the
10% Debentures or the Net Proceeds (as defined in the Indenture) of the
sale of such asset, (B) repurchase 10% Debentures in the open market or
private transactions in an amount equal to the value of the released assets
or (C) deposit in a special account maintained by the Indenture Trustee,
the consideration received in exchange for any asset released from the Lien
of the Pledge Agreement (as defined in the Indenture) in order to effect
its sale; (ii) the Company grants or creates any security interest on any
of the assets in the Security Pool with respect to other Indebtedness of
the Company (but excluding Indebtedness incurred in connection with the
refinancing of any such Indebtedness existing on the date of the Indenture
to the extent that the holders of such Indebtedness are entitled to the
benefit of an existing Lien on any assets in the Security Pool) unless (i)
such security interest is permitted by the Indenture covering the 7%
Debentures (for so long as it remains in effect), (ii) the aggregate Net
Value of the assets in the Security Pool immediately following the granting
or creating of such security interest is at least equal to the then
aggregate outstanding principal amount of the 7% Debentures that are then
outstanding, if any, and the 10% Debentures, and (iii) such additional
Indebtedness does not exceed $25 million in the aggregate at any time; or
(c) (i) the Company fails to maintain in the City of New York, New York, an
office or agency where 10% Debentures may be presented for exchange and
where notices and demands to or upon the Company in respect of the 10%
Debentures may be served, (ii) (A) if the Company at any time acts as its
own paying agent and fails, on or before each due date (including upon
acceleration, optional or mandatory redemption or otherwise) of the
principal of, or interest on, any of the 10% Debentures, to segregate and
hold in trust for the benefit of the persons entitled to such principal,
premium or interest, and (unless such paying agent is the Indenture
Trustee) the Company fails promptly to notify the Indenture Trustee of such
action or any failure so to act; (B) the Company fails, on or before each
due date (including upon acceleration, optional as mandatory redemption or
otherwise) of the principal of (and premium, if any, on), or interest on,
any 10% Debentures, deposit with a paying agent a sum in same day funds
with respect to the payment of principal (and premium, if any, on) or
interest sufficient to pay the principal (and premium, if any, on) or
interest so becoming due, such sum to be held in trust for the benefit of
the persons entitled to such principal, premium or interest, and (unless
such paying agent is the Indenture Trustee) the Company fails promptly to
notify the Indenture Trustee of such action or any failure so to act; (C)
the Company fails to cause each paying agent other than the Indenture
Trustee to execute and deliver to the Indenture Trustee an instrument in
which such paying agent shall agree with the Indenture Trustee that such
paying agent will: (x) hold all sums held by it for the payment of the
principal of (and premium, if any, on) or interest on 10% Debentures in
trust for the benefit of the persons entitled thereto until such sums shall
be paid and delivered to such persons or otherwise disposed of as herein
provided; (y) the Company fails to give the Indenture Trustee notice of any
default by the Company (or any other obligor upon the 10% Debentures) in
the making of any payment of principal (and premium, if any, on) or
interest (including principal or interest due by reason of acceleration,
optional or mandatory redemption or otherwise); and (z) at any time during
the continuance of any such default, upon the written request of the
Indenture Trustee, the Company fails to pay to the Indenture Trustee all
sums so held in trust by such paying agent; (iii) the Company creates,
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<PAGE>
incurs, assumes or suffers to exist any indebtedness having a stated
maturity at the same time as or after the stated maturity of the 10%
Debentures which, by its terms or the terms of the instrument creating or
evidencing it, in any ways prohibits or restricts the payment at stated
maturity of the principal of the 10% Debentures in accordance with the
terms of the 10% Debentures and the Indenture; (iv) the Company fails to
cause its subsidiaries to preserve, renew and keep in full force and effect
its corporate existence, and take all reasonable action to maintain all
material rights (charter and statutory), privileges and franchises
necessary or desirable in the normal conduct of its business; (v) the
Company fails to deliver the compliance certificates required by the
Indenture; (vi) the Company fails to notify the Indenture Trustee in the
manner specified in the Indenture when an Event of Default occurs; (vii)
the Company at any time insists upon, or pleads, or in any manner
whatsoever claims or takes the benefit or advantage of, any stay or
extension law or any usury law or other law, which would prohibit or
forgive the Company from paying all or any portion of the principal of,
premium, if any, or interest on the 10% Debentures; (viii) (A) the Company
or any of its subsidiaries commences any case, proceeding or other action
(x) under any existing or future law of any jurisdiction, domestic or
foreign, relating to bankruptcy, insolvency, reorganization or relief of
debtors, seeking to have an order for relief entered with respect to it, or
seeking to adjudicate it a bankrupt or insolvent, or seeking
reorganization, arrangement, adjustment, winding-up, liquidation,
dissolution, composition or other relief with respect to it or its debts,
or (y) seeking appointment of a receiver, trustee, custodian or other
similar official for it or for all or any substantial part of its assets,
or the Company or any of its subsidiaries shall make a general assignment
for the benefit of its creditors; (B) there shall be commenced against the
Company or any of its subsidiaries any case, proceeding or other action of
a nature referred to in clause (A) above which (x) results in the entry of
an order for relief or any such adjudication or appointment or (y) remains
undismissed, undischarged or unbounded for a period of 60 days; or (C) the
Company or any of its subsidiaries shall generally not, or shall be unable
to, or shall admit in writing its inability to, pay its debts as they
become due. In addition, the New Indenture provides that the occurrence of
an Event of Default under the Old Indenture constitutes an Event of Default
under the Indenture.
(B) AUTHENTICATION AND DELIVERY
The 10% Debentures shall be executed on behalf of the Company by the
Chairman of its Board of Directors, its President or any of its Vice
Presidents. The signature of any of these officers on the 10% Debentures
may be manual or by facsimile. 10% Debentures bearing the manual or
facsimile signatures of individuals who were at any time the proper
officers of the Company shall bind the Company, notwithstanding that such
individuals or any of them have ceased to hold such offices prior to the
authentication and delivery of such 10% Debentures or did not hold such
offices at the date of such 10% Debentures. At any time and from time to
time after the execution and delivery of the Indenture, the Company may
deliver 10% Debentures executed by the Company to the Indenture Trustee for
authentication, together with a Company order for the authentication and
delivery of such 10% Debentures; and the Indenture Trustee in accordance
with such Company order shall authenticate and deliver such 10% Debentures
as provided in the Indenture and not otherwise. Each 10% Debenture shall be
dated the date of its authentication. No 10% Debenture shall be entitled to
any benefit under the Indenture or be valid or obligatory for any purpose
unless there appears on such 10% Debenture a certificate of authentication,
substantially in the form provided for in the Indenture, duly executed by
the Indenture Trustee or an authenticating agent by manual signature of an
authorized signatory, and such certificate upon any 10% Debenture shall be
conclusive evidence, and the only evidence, that such 10% Debenture has
been duly authenticated and delivered pursuant to the Indenture.
(C) SECURITY INTEREST
The Indenture Trustee may not release assets that comprise part of the
Collateral or those assets from the Security Pool which have been released
from all prior liens in favor of Senior Indebtedness and the 7% Debentures
(the "Free Security Pool Assets") unless immediately thereafter the Company
consummates a mandatory redemption or repurchase of 10% Debentures in the
amount of the "Release Amount" (as defined in both the Old and New
Indentures), or deposits with the Indenture Trustee the Release Amount. If
an asset that is part of the Collateral or the Free Security Pool Assets is
released from the lien granted to secure the 10% Debentures, in connection
with a sale of such asset, an amount at least equal to the lesser of (i)
the Net Value (as defined in the New Indenture) of such asset on the date
of the Exchange and (ii) the Net Proceeds (as defined in the New Indenture)
received by the Company from the sale or release of an asset that is part
of the Collateral or the Free Security Pool Assets must be used by the
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Company (A) simultaneously therewith, to redeem 10% Debentures at 100% of
the principal amount thereof, together with accrued interest to the
redemption date, or (B) substantially simultaneously therewith, to
repurchase 10% Debentures in the open market or privately for an aggregate
amount at least equal to the net proceeds from the sale of such asset, or
(C) simultaneously therewith, for deposit in a special account maintained
by the Indenture Trustee for the benefit of the holders of 10% Debentures.
10% Debentures will constitute secured indebtedness of the Company and will
rank on a parity with the 7% Debentures.
(D) SATISFACTION AND DISCHARGE
The Company may terminate its obligations under the 10% Debentures and
the Indenture if all 10% Debentures previously authenticated and delivered
(other than (i) 10% Debentures which have been destroyed, lost or stolen
and which have been replaced or paid, and (ii) 10% Debentures for whose
payment money has theretofore been deposited in trust or segregated and
held in trust by the Company and thereafter repaid to the Company, or
discharged from such trust) have been delivered to the Indenture Trustee
for cancellation and the Company has paid all sums payable by it hereunder.
The Company may also terminate its obligations under the 10% Debentures and
the Indenture if: (A) the Company has irrevocably deposited or caused to be
deposited with the Indenture Trustee or paying agent and conveyed all
right, title and interest for the benefit of the holders of 10% Debentures
("Holders"), under the terms of an irrevocable trust agreement in form and
substance reasonably satisfactory to the Indenture Trustee, as trust funds
in trust solely for the benefit of the Holders for that purpose, money or
direct non-callable obligations of the United States of America for the
payment of which obligations the full faith and credit of the United States
is pledged ("U.S. Government Obligations") maturing as to principal and
interest in such amounts and at such times as are sufficient (in the
opinion of a nationally recognized firm of independent public accountants
expressed in a written certification thereof delivered to the Indenture
Trustee), without consideration of any reinvestment of such interest, to
pay principal of, premium, if any, and interest on the outstanding 10%
Debentures, to redemption or maturity, provided that the Indenture Trustee
or paying agent shall have been irrevocably instructed to apply such money
or the proceeds of such U.S. Government Obligations to the payment of said
principal, premium, if any, and interest with respect to the 10%
Debentures, and provided, further, that from and after the time of deposit,
the money or U.S. Government Obligations deposited shall not be subject to
the rights of the holders of Senior Indebtedness; (B) no Event of Default
or Default with respect to the 10% Debentures shall have occurred and be
continuing on the date of such deposit; (C) the Company shall have
delivered to the Indenture Trustee an opinion of counsel to the effect that
the trust funds will not be subject to any rights of holders of Senior
Indebtedness; (D) the Company has paid or caused to be paid all sums then
payable by the Company under the 10% Debentures; and (E) the Company has
delivered to the Indenture Trustee an Officers' Certificate and an opinion
of counsel, each stating that all conditions precedent provided for in the
Indenture relating to the satisfaction and discharge of the Indenture have
been complied with. After any irrevocable deposit, the Indenture Trustee
upon request shall acknowledge in writing the discharge of the Company's
obligations under the 10% Debentures and the Indenture.
(E) EVIDENCE OF COMPLIANCE
Upon any application or request by the Company to the Indenture
Trustee to take any action under any provision of the Indenture, the
Company shall furnish to the Indenture Trustee an Officers' Certificate
stating that all conditions precedent, if any, provided for in the
Indenture (including any covenants compliance with which constitutes a
condition precedent) relating to the proposed action have been complied
with and an opinion of counsel stating that in the opinion of such counsel
all such conditions precedent, if any, have been complied with, except
that, in the case of any such application or request as to which the
furnishing of such documents is specifically required by any provision of
the Indenture relating to such particular application or request, no
additional certificate or opinion need be furnished. Every certificate or
opinion with respect to compliance with a condition or covenant provided
for in the Indenture shall include (a) a statement that each individual
signing such certificate or opinion has read such covenant or condition and
the definitions in the Indenture herein relating thereto; (b) a brief
statement as to the nature and scope of the examination or investigation,
if any, upon which the statements or opinions contained in such certificate
or opinion are based; (c) a statement that, in the opinion of each such
individual, 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, in the opinion of each such individual, such condition or covenant
has been complied with. The Company shall deliver to the Indenture Trustee,
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within 90 days after the end of each fiscal quarter, an Officers'
Certificate stating whether or not the signers know of any Event of Default
or Default that occurred during such fiscal quarter. If they do know of any
Event of Default or Default the certificate shall describe such Event of
Default or Default and its status. The first certificate to be delivered
pursuant to the Indenture shall be for the first fiscal quarter beginning
after the execution of the Indenture.
9. Other Obligors. None.
Contents of application for qualification. This application for
qualification comprises:
(a) Pages numbered 1 to 10 consecutively.
* (b) The statement of eligibility of each trustee under the Indenture to be
qualified.
* (c) The following exhibits in addition to those filed as a part of the
statement of eligibility of each trustee.
* T3A Second Restated Certificate of Incorporation of the Company filed as
Exhibit 4.2 to the Company's Form S-8 (File No. 33-63709), and
incorporated herein by reference.
* T3B Restated Bylaws of the Company filed as Exhibit 3.2 to the Company's
annual report on Form 10-K for the year ended December 31, 1997 (File
No. 1-8303) and incorporated herein by reference.
* T3C Form of Indenture and related Pledge and Security Agreement between
the Company and Bank One, N.A., Trustee.
* T3E.1 Exchange Offering Circular
* T3E.2 Letter of Transmittal
* T3E.3 Letter to Brokers
* T3E.4 Letter from Brokers to Clients
* T3E.5 Notice of Guaranteed Delivery
* T3E.6 Letter from The Hallwood Group Incorporated to Bondholders Exhibit
* T3E.7 Letter of Transmittal for Brokers, Banks and other Nominees
* T3F Cross Reference Sheet
* Previously filed.
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SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, the
Applicant, The Hallwood Group Incorporated, a corporation organized and existing
under the laws of Delaware, has duly caused this Amendment No. 1 to the
application to be signed on its behalf by the undersigned, thereunto duly
authorized, and its seal to be hereunto affixed and attested, all in the City of
Dallas, and State of Texas, on the 3rd day of August, 1998.
(SEAL) THE HALLWOOD GROUP INCORPORATED
By: /s/ Melvin J. Melle
---------------------------------------------
Name: Melvin J. Melle
Title: Vice President, Chief Financial Officer
and Secretary
Attest: /s/ Pat Thompson By: /s/ Joseph T. Koenig
----------------- ---------------------------------------------
Pat Thompson Name: Joseph T. Koenig
Title: Treasurer and Assistant Secretary
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