Prepared by R.R. Donnelley Financial -- Form 10-Q

-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Uj4HLpBjF6bXxxMKqlWaDyMYtKJX8z0LTskn4gTLDuqfsdhGn/BnuTYoDg11MK/F tmpmPmr4xC+AnL/a9xottg== 0001021408-02-010993.txt : 20020814 0001021408-02-010993.hdr.sgml : 20020814 20020814175449 ACCESSION NUMBER: 0001021408-02-010993 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20020630 FILED AS OF DATE: 20020814 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CHART INDUSTRIES INC CENTRAL INDEX KEY: 0000892553 STANDARD INDUSTRIAL CLASSIFICATION: FABRICATED PLATE WORK (BOILER SHOPS) [3443] IRS NUMBER: 341712937 STATE OF INCORPORATION: DE FISCAL YEAR END: 2002 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-11442 FILM NUMBER: 02737533 BUSINESS ADDRESS: STREET 1: 5885 LANDERBROOK DRIVE STREET 2: SUITE 150 CITY: MAYFIELD HEIGHTS STATE: OH ZIP: 44124 BUSINESS PHONE: 4407531490 10-Q 1 d10q.htm FORM 10-Q Prepared by R.R. Donnelley Financial -- Form 10-Q

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2002

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 1-11442

CHART INDUSTRIES, INC.

(Exact Name of Registrant as Specified in its Charter)

Delaware
(State or Other Jurisdiction
of Incorporation or Organization)

34-1712937
(I.R.S. Employer Identification No.)

5885 Landerbrook Dr., Suite 150, Cleveland, Ohio 44124
(Address of Principal Executive Offices) (ZIP Code)

Registrant’s Telephone Number, Including Area Code: (440) 753-1490

Not Applicable
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes x No o

At June 30, 2002, there were 25,025,239 outstanding shares of the Company’s Common Stock, par value $.01 per share.

Page 1 of 22 sequentially numbered pages.


PART I.	FINANCIAL INFORMATION

Item 1.		Financial Statements.

		The information required by Rule 10-01 of Regulation S-X is set forth on pages 3 through 12 of this Report on Form 10-Q.

CHART INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share amounts)

	June 30, 2002			December 31, 2001

	(Unaudited)
ASSETS
Current Assets
Cash and cash equivalents	$	6,656		$	11,801
Accounts receivable, net		48,184			45,427
Inventories, net		52,780			56,490
Other current assets		31,244			26,062

Total Current Assets		138,864			139,780
Property, plant and equipment, net		60,972			62,070
Goodwill, net		168,939			168,282
Other assets, net		39,340			38,848

TOTAL ASSETS	$	408,115		$	408,980

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities
Accounts payable	$	27,985		$	25,634
Customer advances and billings in excess of contract revenue		12,535			9,290
Accrued expenses and other liabilities		27,837			35,617
Current portion of long-term debt		34,747			12,963

Total Current Liabilities		103,104			83,504
Long-term debt		236,445			259,120
Other long-term liabilities		16,647			17,016
Shareholders’ Equity
Preferred stock, 1,000,000 shares authorized, none issued or outstanding Common stock, par value $.01 per share – 60,000,000 shares authorized, 25,188,619 and 24,917,187 shares issued at June 30, 2002 and December 31, 2001, respectively		252			249
Additional paid-in capital		43,453			42,832
Retained earnings		11,605			14,699
Accumulated other comprehensive loss		(2,504	)		(7,670	)
Treasury stock, at cost, 163,380 and 109,437 shares at June 30, 2002 and December 31, 2001, respectively		(887)			(770)

		51,919			49,340

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	408,115		$	408,980

The balance sheet at December 31, 2001 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements.

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

CHART INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(Dollars and shares in thousands, except per share amounts)

	Three Months Ended June 30,						Six Months Ended June 30,

	2002			2001			2002			2001

Sales	$	79,180		$	84,797		$	146,888		$	173,829
Cost of sales		58,589			63,266			109,538			125,229

Gross profit		20,591			21,531			37,350			48,600
Selling, general and administrative expense		15,049			14,118			31,555			32,412
Employee separation and plant closure costs		165			1,539			1,308			1,539
Equity income in joint venture		(170	)		(64	)		(279	)		(283	)

		15,044			15,593			32,584			33,668

Operating income		5,547			5,938			4,766			14,932
Other income (expense):
Gain on sale of assets		1,420						1,420
Interest expense, net		(4,666	)		(5,893	)		(8,755	)		(12,196	)
Financing costs amortization		(421	)		(375	)		(1,745	)		(743	)
Derivative contracts valuation expense		(480	)		(240	)		(412	)		(1,062	)
Foreign currency (loss) gain		(851	)		431			(662	)		18

		(4,998	)		(6,077	)		(10,154	)		(13,983	)

Income (loss) before income taxes, minority interest and cumulative effect of change in accounting principle		549			(139	)		(5,388	)		949
Income tax expense (benefit)		234			260			(2,295	)		834

Income (loss) before minority interest and cumulative effect of change in accounting principle		315			(399	)		(3,093	)		115
Minority interest, net of taxes		(44	)		25			1			46
Income (loss) before cumulative effect of change in accounting principle		359			(424	)		(3,094	)		69
Cumulative effect of change in accounting principle, net of taxes											88

Net income (loss)	$	359		$	(424	)	$	(3,094	)	$	(19	)

Net income (loss) per common share:
Income (loss) before cumulative effect of change in accounting principle	$	0.01		$	(0.02	)	$	(0.12	)	$	0.00
Cumulative effect of change in accounting principle											0.00

Net income (loss) per common share	$	0.01		$	(0.02	)	$	(0.12	)	$	0.00

Net income (loss) per common share — assuming dilution:
Income (loss) before cumulative effect of change in accounting principle	$	0.01		$	(0.02	)	$	(0.12	)	$	0.00
Cumulative effect of change in accounting principle											0.00

Net income (loss) per common share — assuming dilution	$	0.01		$	(0.02	)	$	(0.12	)	$	0.00

Shares used in per share calculations		24,951			24,534			24,900			24,458

Shares used in per share calculations – assuming dilution		25,041			24,534			24,900			24,633

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

CHART INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(Dollars in thousands)

	Six Months Ended June 30,

	2002			2001

OPERATING ACTIVITIES
Net loss	$	(3,094	)	$	(19	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Cumulative effect of change in accounting principle					88
Gain on sale of assets		(1,420	)
Depreciation and amortization		5,630			8,350
Financing costs amortization		1,745			743
Amendment-related professional fees expensed		3,538
Employee separation and plant closure costs		232			1,180
Other non-cash operating activities		(1,033	)		569
Increase (decrease) in cash resulting from changes in operating assets and liabilities:
Accounts receivable		(2,304	)		(578	)
Inventory and other current assets		(2	)		1,708
Accounts payable and other current liabilities		(7,560	)		(17,053	)
Customer advances and billings in excess of contract revenue		2,587			(1,414	)

Net Cash Provided By (Used In) Operating Activities		385			(6,426	)
INVESTING ACTIVITIES
Capital expenditures		(1,855	)		(4,030	)
Proceeds from sale of assets		2,300
Other investing activities		489			(426	)

Net Cash Provided By (Used In) Investing Activities		934			(4,456	)
FINANCING ACTIVITIES
Borrowings on revolving credit facilities		21,786			64,857
Repayments on revolving credit facilities		(21,591	)		(46,078	)
Principal payments on long-term debt		(1,586	)		(9,438	)
Amendment-related fees paid		(5,380	)
Other financing activities		(141	)		(43	)

Net Cash (Used In) Provided By Financing Activities		(6,912	)		9,298

Net decrease in cash and cash equivalents		(5,592	)		(1,584	)
Effect of exchange rate changes on cash		448			(547	)
Cash and cash equivalents at beginning of period		11,801			4,921

CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	6,656		$	2,790

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

CHART INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements — June 30, 2002
(Dollars and shares in thousands, except per share amounts)

NOTE A — Basis of Preparation

The accompanying unaudited condensed consolidated financial statements of Chart Industries, Inc. and subsidiaries (the “Company”) have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Certain prior year amounts have been reclassified to conform to the current year presentation. Operating results for the three-month and six-month periods ended June 30, 2002 are not necessarily indicative of the results that may be expected for the year ending December 31, 2002. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2001.

Nature of Operations: The Company manufactures standard and custom-built industrial process equipment primarily used for low-temperature and cryogenic applications. The Company has developed an expertise in cryogenic systems and equipment, which operate at low temperatures sometimes approaching absolute zero. The majority of the Company’s products, including vacuum-insulated containment vessels, heat exchangers, cold boxes and other cryogenic components, are used throughout the liquid-gas supply chain for the purification, liquefaction, distribution, storage and use of industrial gases and hydrocarbons. Headquartered in Cleveland, Ohio, the Company has domestic operations located in 12 states and international operations located in Australia, China, the Czech Republic, Germany and the United Kingdom.

Use of Estimates: The preparation of financial statements in conformity with accounting principles generally accepted in the United States 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.

Revenue Recognition: For the majority of the Company’s products, revenue is recognized when products are shipped, title has transferred and collection is reasonably assured. For these products, there is also persuasive evidence of an arrangement, and the selling price to the buyer is fixed or determinable. For product lines in the Process Systems and Equipment segment, engineered tanks and liquefied natural gas fueling stations, the Company uses the percentage of completion method of accounting. Earned revenue is based on the percentage that incurred costs to date bear to total estimated costs at completion after giving effect to the most current estimates. The cumulative impact of revisions in total cost estimates during the progress of work is reflected in the period in which these changes become known. Earned revenue reflects the original contract price adjusted for agreed upon claims and change orders, if any. Losses expected to be incurred on contracts in process, after consideration of estimated minimum recoveries from claims and change orders, are charged to operations as soon as such losses are known.

NOTE B — Accounting Changes

Effective January 1, 2002, the Company adopted Financial Accounting Standards Board (“FASB”) Statement of Financial Accounting Standards (“SFAS”) No. 141, “Business Combinations,” and SFAS No. 142, “Goodwill and Other Intangible Assets,” which establish financial accounting and reporting for acquired goodwill and other intangible assets and supersede Accounting Principles Board (“APB”) Opinion No. 16, “Business Combinations,” and APB Opinion No. 17, “Intangible Assets.” Under SFAS No. 142, goodwill and indefinite lived intangible assets are no longer amortized but are reviewed at least annually for impairment. Intangible assets that have finite useful lives will continue to be amortized over their useful lives.

SFAS No. 142 requires that indefinite lived intangible assets be tested for impairment and that goodwill be tested for impairment at the reporting unit level at the date of adoption and at least annually thereafter. The company determines the fair value of any indefinite lived intangible assets, compares the fair value to its carrying value and records an impairment loss if the carrying value exceeds its fair value. Goodwill is tested utilizing a two-step approach. After recording any impairment losses for indefinite lived intangible assets, the company is required to determine the fair value of each reporting unit and compare the fair value to its carrying value, including goodwill, of such reporting unit (step one). If the fair value exceeds the carrying value, no impairment loss would be recognized. If the carrying value of the reporting unit exceeds its fair value, the goodwill of this unit may be impaired. The amount of the impairment, if any, would then be measured in step two, which compares the implied fair value of reporting unit goodwill with the carrying amount of that goodwill.

CHART INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements — June 30, 2002
(Dollars and shares in thousands, except per share amounts)

NOTE B — Accounting Changes - Continued

As part of adopting this standard as of January 1, 2002, the Company determined that it has one indefinite lived intangible asset in addition to goodwill. The Company evaluated the impairment of its one indefinite lived intangible asset during the first quarter of 2002 and determined that it was not impaired. The Company completed step one of the transitional impairment test for goodwill during the second quarter of 2002 and determined there were no indicators of impairment as of January 1, 2002. As such, the Company will not record a cumulative effect charge as of January 1, 2002 for the adoption of SFAS No. 142.

Prior to the adoption of SFAS No. 142, amortization expense was recorded for goodwill and other intangible assets. The following table sets forth a reconciliation of net income (loss) and earnings per share information adjusted in 2001 for the non-amortization provisions of SFAS No. 142:

	Three Months Ended June 30,					Six Months Ended June 30,

	2002		2001			2002			2001

Reported income (loss) before cumulative effective of change in accounting principle	$	359	$	(424	)	$	(3,094	)	$	69
Add back goodwill and indefinite lived intangible asset amortization, net of tax				1,368						2,663

Adjusted income (loss) before cumulative effect of change in accounting principle		359		944			(3,094	)		2,732
Cumulative effect of change in accounting principle										88

Adjusted net income (loss)	$	359	$	944		$	(3,094	)	$	2,644

Basic and diluted earnings per share:
Reported income (loss) before cumulative effect of change in accounting principle	$	0.01	$	(0.02	)	$	(0.12	)	$	0.00
Add back goodwill and indefinite lived intangible asset amortization, net of tax				0.06						0.11

Adjusted income (loss) before cumulative effect of change in accounting principle		0.01		0.04			(0.12	)		0.11
Cumulative effect of change in accounting principle										0.00

Adjusted net income (loss)	$	0.01	$	0.04		$	(0.12	)	$	0.11

Weighted average shares – basic		24,951		24,534			24,900			24,458
Weighted average shares – assuming dilution		25,041		24,534			24,900			24,633

The following table displays the intangible assets that continue to be subject to amortization and accumulated amortization as well as intangible assets not subject to amortization.

	June 30, 2002					December 31, 2001

	Gross Carrying Amount		Accumulated Amortization			Gross Carrying Amount		Accumulated Amortization

Amortized intangible assets
Existing technology	$	7,690	$	(4,322	)	$	7,690	$	(3,649	)
Patents		2,053		(805	)		1,977		(676	)

	$	9,743	$	(5,127	)	$	9,667	$	(4,325	)

Unamortized intangible assets
Know-how and intellectual property	$	6,128	$	(1,532	)	$	5,824	$	(1,456	)
Goodwill		183,590		(14,651	)		182,865		(14,583	)

	$	189,718	$	(16,183	)	$	188,689	$	(16,039	)

Differences in gross carrying amounts between June 30, 2002 and December 31, 2001 are attributable to exchange rate changes on Pound Sterling intangible assets.

CHART INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements — June 30, 2002
(Dollars and shares in thousands, except per share amounts)

NOTE B — Accounting Changes - Continued

Amortization expense for intangible assets subject to amortization was $387 and $772 for the three and six months ended June 30, 2002, respectively, and is estimated to be approximately $1,500 annually for fiscal years 2002 through 2004, and approximately $200 annually for fiscal years 2005 and 2006.

Effective January 1, 2002, the Company adopted SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” which addresses financial accounting and reporting for the impairment or disposal of long-lived assets. Effective May 15, 2002, the Company adopted SFAS No. 145, “Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections,” which rescinds, amends and clarifies certain previously issued FASB statements. Initial adoption of SFAS No. 144 and No. 145 had no effect on the Company’s financial statements.

NOTE C — Recently Issued Accounting Standards

In August 2001, the FASB issued SFAS No. 143, “Accounting for Asset Retirement Obligations,” which amends SFAS No. 19, “Financial Accounting and Reporting by Oil and Gas Producing Companies,” and is effective for all companies. This statement addresses the financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. SFAS No. 143 is effective for fiscal years beginning after June 15, 2002. The Company does not expect this statement to have a material impact on the Company’s financial position, liquidity, cash flows or results of operations.

In July 2002, the FASB issued SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities,” which nullifies Emerging Issues Task Force Issue No. 94-3, “Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring).” SFAS No. 146 is effective for exit or disposal activities that are initiated after December 31, 2002. The Company does not expect this statement to have a material impact on the Company’s financial position, liquidity, cash flows or results of operations.

NOTE D — Inventories

The components of inventory consist of the following:

	June 30, 2002			December 31, 2001

Raw materials and supplies	$	28,720		$	31,004
Work in process		16,055			14,639
Finished goods		8,155			10,997
LIFO reserve		(150	)		(150	)

	$	52,780		$	56,490

NOTE E — Debt and Credit Arrangements

In March 1999 the Company negotiated a consolidated credit and revolving loan facility (the “Credit Facility”), which originally provided for term loans of up to $250,000 and a revolving credit line of $50,000, which may also be used for the issuance of letters of credit. The Company entered into the Series 1 Incremental Revolving Credit Facility in November 2000 and the Series 2 Incremental Revolving Credit Facility in April 2001 (collectively, the “Incremental Credit Facility”), providing a revolving credit line of $10,000 in addition to the credit line available under the Credit Facility. At June 30, 2002, the Company had borrowings of $217,760 and $35,730 on the term loan and revolving credit portions of its Credit Facility, and borrowings of $9,980 on its Incremental Credit Facility. The Credit Facility and Incremental Credit Facility were amended in March 2002 (the “March 2002 Amendments”) to modify certain covenants until March 31, 2003, to defer $25,747 of term loan amortization payments from scheduled payment dates in 2002 to primarily 2005 and to extend the Incremental Credit Facility to March 31, 2003. The March 2002 Amendments resulted in an increase in interest rates of 0.25 percent, the addition of one financial covenant and scheduled reductions in the commitment amounts of the revolving credit lines of the Credit Facility and the Incremental Credit Facility.

CHART INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements — June 30, 2002
(Dollars and shares in thousands, except per share amounts)

NOTE E — Debt and Credit Arrangements – Continued

The March 2002 Amendments call for the Company to prepay borrowings under the Credit Facility and Incremental Credit Facility in an aggregate amount of at least $75,000 (“Minimum Prepayment Amount”) from the net proceeds of an equity investment, sale of assets and other sources of new capital. If the Minimum Prepayment Amount is not made by September 30, 2002, the Company’s interest rates will increase by another 0.25 percent, and will increase again by 0.25 percent each quarter thereafter. If the Minimum Prepayment Amount is achieved, these additional interest rate increases will be eliminated. The March 2002 Amendments also provided for the issuance of market-priced warrants to the lenders for the purchase of two percent of the Company’s Common Stock at June 28, 2002. Accordingly, the Company was obligated to issue to its lenders at June 28, 2002 warrants to purchase, in the aggregate, 513,559 shares of Chart Common Stock at an exercise price of $2.425 per share. These warrants have been valued at $729 and will be amortized to financing costs amortization expense over the remaining term of the Company’s Credit Facility, which expires in March 2006. If the Minimum Prepayment Amount is not made by September 30 or December 31, 2002, the lenders will be issued market-priced warrants (which may be priced above or below $2.425 per share, depending on the market prices of the Company’s Common Stock preceding the respective dates of issuance) for the purchase of an additional five percent and three percent, respectively, of the Company’s Common Stock. If at least $50,000 of the Minimum Prepayment Amount is made from the net proceeds of an equity investment by September 30 or December 31, 2002, no warrants will be required to be issued to the lenders on those dates.

Under the terms of the Credit Facility, as modified by the March 2002 Amendments, term loans and revolving credit bear interest, at the Company’s option, at rates equal to the prime rate plus incremental margins or LIBOR plus incremental margins. The incremental margins vary based on the Company’s financial position and currently range from 2.0 percent to 4.75 percent. At June 30, 2002, the Company’s average interest rate for borrowings on the Credit Facility was 6.39 percent. The Company entered into two interest rate derivative contracts to manage interest rate risk exposure relative to the term loan portions of the Credit Facility. One of these contracts expired and was settled on June 28, 2002. The other collar covering $31,781 of the debt outstanding at June 30, 2002 expires in March 2006. The Company is also required to pay a commitment fee of 0.5 percent per annum on the unused amount of the revolving credit portion of the Credit Facility. At June 30, 2002, the Company had letters of credit outstanding and bank guarantees totaling $14,099 supported by the Credit Facility.

The Credit Facility, as modified by the March 2002 Amendments, contains certain covenants and conditions which impose limitations on the Company and its operating units, including meeting certain financial tests and the quarterly maintenance of certain financial ratios on a consolidated basis such as: minimum net worth, maximum leverage, minimum pre-tax interest coverage ratio, minimum fixed charge coverage ratio and minimum earnings before interest, taxes, depreciation, amortization and restructuring charges. The Company is permitted to pay cash dividends not exceeding $7,200 in any fiscal year after January 1, 2001, but only if at both the time of payment of the dividend and immediately thereafter there is no event of default under the Credit Facility. The Company, however, has not paid dividends since the second quarter of 1999. As of June 30, 2002, the Company was in compliance with the covenants and conditions of the Credit Facility.

NOTE F — Net Income (Loss) per Share

The calculations of basic and diluted net income or loss per share for the three-month and six-month periods ended June 30, 2002 and 2001 are set forth below. The assumed conversion of the Company’s potentially dilutive securities (employee stock options and warrants) was not dilutive for the three-month period ended June 30, 2001 and the six-month period ended June 30, 2002. As a result, the calculation of diluted net loss per share for the three-month period ended June 30, 2001 and the six-month period ended June 30, 2002 set forth below do not reflect any assumed conversion. The amount of potentially dilutive securities is presented in the table for both periods, however, to give an indication of the potential dilution that may occur in future periods.

CHART INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements — June 30, 2002
(Dollars and shares in thousands, except per share amounts)

NOTE F — Net Income (Loss) per Share – Continued

	Three Months Ended June 30,					Six Months Ended June 30,

	2002		2001			2002			2001

Income (loss) before cumulative effect of change in accounting principle	$	359	$	(424	)	$	(3,094	)	$	69
Cumulative effect of change in accounting principle										88

Net income (loss)	$	359	$	(424	)	$	(3,094	)	$	(19	)

Weighted-average common shares		24,951		24,534			24,900			24,458
Effect of dilutive securities: Employee stock options and warrants		90		151			81			175

Dilutive potential common shares		25,041		24,685			24,981			24,633

Net income (loss) per common share:
Income (loss) before cumulative effect of change in accounting principle	$	0.01	$	(0.02	)	$	(0.12	)	$	0.00
Cumulative effect of change in accounting principle										0.00

Net income (loss) per common share	$	0.01	$	(0.02	)	$	(0.12	)	$	0.00

Net income (loss) per common share – assuming dilution:
Income (loss) before cumulative effect of change in accounting principle	$	0.01	$	(0.02	)	$	(0.12	)	$	0.00
Cumulative effect of change in accounting principle										0.00

Net income (loss) per common share – assuming dilution	$	0.01	$	(0.02	)	$	(0.12	)	$	0.00

NOTE G — Comprehensive Income (Loss)

The Company reports comprehensive loss in its consolidated statement of shareholders’ equity. The components of accumulated other comprehensive loss are as follows:

	June 30, 2002		December 31, 2001

Foreign currency translation adjustments	$	1,326	$	6,492
Minimum pension liability adjustments, net of taxes of $737		1,178		1,178

	$	2,504	$	7,670

Total comprehensive income (loss) for the three months ended June 30, 2002 and 2001 was $6,290 and $(698), respectively. Total comprehensive income (loss) for the six months ended June 30, 2002 and 2001 was $2,072 and $(3,268), respectively.

NOTE H — Employee Separation and Plant Closure Costs

During the second quarter of 2002, the Company recorded employee separation and plant closure costs of $165 related to the closure of its Denver, Colorado manufacturing facility of the Distribution and Storage segment. These charges were in addition to $1,143 of employee separation and plant closure costs recorded in the first quarter of 2002. The total charges included $996 for lease termination and facility-related closure costs and $312 for severance and other benefits related to terminating 23 employees. In the first half of 2002, the Company also recorded non-cash inventory valuation charges included in cost of sales of $255 for the write-off of inventory at this site. At June 30, 2002, the Company had an accrual of $923 remaining for the closure of the Denver facility, primarily for lease termination costs.

At December 31, 2001, the Company had an employee separation and plant closure costs accrual of $486 remaining related to several actions taken in 2001, principally the closure of certain sites within the cryogenic services business of the Distribution and Storage segment. Due to payments made in the first half of 2002, at June 30, 2002, the Company had an accrual of $265 remaining related to these actions, primarily for lease termination costs.

CHART INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Unauditied Condensed Consolidated Financial Statements — June 30, 2002
(Dollars and shares in thousands, except per share amounts)

NOTE I — Operating Segments

The Company has the following three reportable segments: applied technologies (“Applied Technologies”), distribution and storage equipment (“Distribution and Storage”) and process systems and equipment (“Process Systems”). The reportable segments are each managed separately because they manufacture and distribute distinct products with different production processes and sales and marketing approaches. The Applied Technologies segment sells products including liquefied natural gas (“LNG”) alternative fuel systems, telemetry products, magnetic resonance imaging (“MRI”) cryostat components, bulk liquid CO2 systems, medical products, biological storage systems, cryogenic systems and components and stainless steel tubing. The Distribution and Storage segment sells cryogenic bulk storage systems, cryogenic packaged gas systems and cryogenic services to various companies for the storage and transportation of both industrial and natural gases. The Process Systems segment sells heat exchangers and coldboxes to natural gas, petrochemical processing and industrial gas companies who use them for the liquefaction and separation of natural and industrial gases. Due to the nature of the products that each segment sells, there are no intersegment sales.

The Company evaluates performance and allocates resources based on operating income (loss), which is defined as profit or loss from operations before gain (loss) on sale of assets, net interest expense, deferred financing costs amortization expense, derivative contracts valuation income (expense), income taxes, minority interest and cumulative effect of change in accounting principle.

	Three Months Ended June 30, 2002

	Applied Technologies		Distribution & Storage		Process Systems		Corporate			Total

Sales	$	35,187	$	25,906	$	18,087				$	79,180
Operating income (loss) (A) (B)		5,746		1,049		2,113	$	(3,361	)		5,547

	Three Months Ended June 30, 2001

	Applied Technologies		Distribution & Storage		Process Systems			Corporate			Total

Sales	$	38,240	$	34,128	$	12,429					$	84,797
Operating income (loss)		5,325		1,838		(909	)	$	(316	)		5,938

	Six Months Ended June 30, 2002

	Applied Technologies		Distribution & Storage		Process Systems		Corporate			Total

Sales	$	65,694	$	50,702	$	30,492				$	146,888
Operating income (loss) (A) (B)		9,642		478		2,639	$	(7,993	)		4,766

	Six Months Ended June 30, 2001

	Applied Technologies		Distribution & Storage		Process Systems		Corporate			Total

Sales	$	72,364	$	67,707	$	33,758				$	173,829
Operating income (loss)		10,946		3,335		2,339	$	(1,688	)		14,932

______________

(A)

Distribution and Storage operating loss for the three and six months ended June 30, 2002 includes $165 and $1,308, respectively, of employee separation and plant closure costs and $234 and $255, respectively, in inventory valuation charges related to the closure of the Company’s Denver, Colorado mobile equipment manufacturing facility.


	(B)		Corporate operating loss for the three and six months ended June 30, 2002 includes $1,023 and $3,538, respectively, of professional fees incurred in obtaining the latest amendments to the Company’s credit facilities.

CHART INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Unauditied Condensed Consolidated Financial Statements — June 30, 2002
(Dollars and shares in thousands, except per share amounts)

NOTE J — Contingencies

The Company’s operating units are parties, in the ordinary course of their businesses, to various legal actions related to performance under contracts, product liability and other matters, several of which actions claim substantial damages. The Company believes these legal actions will not have a material adverse effect on the Company’s financial position or liquidity. The Company is subject to federal, state and local environmental laws and regulations concerning, among other matters, waste water effluents, air emissions and handling and disposal of hazardous materials such as cleaning fluids.

The Company has been named as a defendant in several similar civil cases pending related to an accident occurring on December 7, 2000 at a nursing home outside Dayton, Ohio. A nitrogen tank was connected to the nursing home’s oxygen system resulting in the death of five elderly patients and injuries to five additional patients from inhaling the nitrogen. The claims against the Company in these cases include negligence, strict product liability, failure to warn, negligence per se, breach of warranty, punitive damages, wrongful death, loss of consortium and negligent infliction of emotional distress. The allegations underlying the claims include defective or deficient manufacture, construction, design, labeling, formulation and warnings with regard to a cylinder. The plaintiffs in these cases are seeking, in total, $28,500 in compensatory damages, $30,000 in punitive damages, $2,000 for loss of consortium damages, prejudgment and post-judgment interest and costs and fees from the Company and other defendants named in the claims. The Company is vigorously defending all of these cases and has filed its answer, denied all liability and cross-claimed for contribution from certain co-defendants. Certain co-defendants have filed cross-claims against the Company claiming contribution. All of these cases have been settled with the other defendants. The Company was not involved in any of the mediation or settlement negotiations, in part because the Company has not received any settlement demands. Additionally, the Company believes that the claims made against it are the most tenuous of any defendant and that the plaintiffs will be unable to articulate a plausible negligence claim based on product liability. Of further significance is the fact that some of the co-defendants have been criminally indicted in this matter. The Company, however, has not been so indicted. The trial in the matter of the State of Ohio vs . BOC Gases, et al. , the first of the criminal actions, was heard in May 2002. The trial lasted three days and resulted in a directed verdict in favor of the defendants. A second criminal trial, State of Ohio vs. I.H.S. Carriage-by-the-Lake has been scheduled for October 2002. At this time, the civil cases continue to be stayed pending the outcome of the criminal matters. The Company has been dismissed from one of the civil cases. After testimony provided during the first of the criminal proceedings, counsel for the Plaintiff in the matter of Kenneth D. Reynolds, Administrator of the Estate of Darla Jean Reynolds vs. Integrated Health Services, et al. felt that Ohio law would no longer support a claim against the Company. Defense counsel forwarded this Reynolds entry to all remaining plaintiffs requesting dismissal. The remaining plaintiffs, however, have advised that they intend to pursue discovery before considering dismissal of claims against the Company. Accordingly, defense counsel will prepare the appropriate motions to request a summary judgment.

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Market Overview

The Company’s operating performance for the second quarter of 2002 was significantly stronger than the first quarter of 2002. Sales increased 17 percent and gross profit increased 23 percent from the 2002 first-quarter results. Performance by business segment was mixed but generally in line with the Company’s earlier forecasts. The strong order intake for the Process Systems and Equipment (“PS&E”) segment in the previous two quarters provided the basis for increased sales and gross margin contribution in the second quarter of 2002. While 2002 second-quarter orders for this segment were below the previous two quarters, the orders were above expected levels. The PS&E businesses continue to actively bid natural gas, ethylene and other large hydrocarbon projects around the world. The Company anticipates increasing demand for these PS&E products in the second half of 2002. Although up slightly from the first quarter of 2002, the Distribution and Storage (“D&S”) segment was below plan in orders, sales and gross margin for the second quarter of 2002. Capital spending reductions by industrial gas customers and the general economic conditions in North America and Europe caused sales and order softness for bulk tanks, engineered tanks and tank rehabilitation services. Low factory workload created under-absorption of fixed overhead and reduced gross margin in the D&S segment.

Based upon the Company’s understanding of current economic conditions, management is optimistic that the Company’s markets will support increased demand for its products in the second half of 2002. If so, management expects the second half of 2002 to show a slight improvement in sales and gross margin contribution compared to the second quarter of 2002 and anticipates improved operating earnings each quarter as the year progresses.

Three and Six Months Ended June 30, 2002 and 2001

Sales for the second quarter of 2002 were $79.2 million versus $84.8 million for the second quarter of 2001, a decrease of $5.6 million, or 6.6 percent. Primarily driven by a decrease in oil field equipment sales, which were strong in the second quarter of 2001, D&S segment sales in the second quarter of 2002 were down $8.2 million, or 24.1 percent, to $25.9 million. In addition, sales of standard cryogenic tanks were down because of the continued industry-wide capital spending reduction by the large industrial gas companies. The Applied Technologies (“AT”) segment was also impacted by the slowdown in industrial gas company spending as it experienced reductions in vacuum-insulated pipe sales and in the sales of cryogenic systems which incorporate tanks, piping and other components. Partially offsetting this decline was the relative strength of the hydrocarbon-processing markets of the PS&E segment. The PS&E segment had sales of $18.1 million in the second quarter of 2002, an increase of $5.7 million, or 45.5 percent, over the second quarter of 2001.

Sales for the first six months of 2002 were $146.9 million versus $173.8 million for the first six months of 2001, a decrease of $26.9 million, or 15.5 percent. Sales decreased in all three of the Company’s operating segments. In the D&S segment sales decreased $17.0 million from $67.7 million in the first half of 2001 to $50.7 million in the first half of 2002. This decrease was evidenced in overall lower sales of standard cryogenic tanks and packaged gases, due to the continued softness in the U.S. and Europe metal fabrication industries and related businesses, and a decrease in oil field equipment sales, which were particularly strong in the first half of 2001. PS&E sales decreased $3.3 million to $30.5 million in the first half of 2002, as sales to the relatively strong hydrocarbon-processing markets in 2002 replaced the stronger sales of heat exchangers and cold boxes for the Trinidad project which occurred in the first half of 2001. AT sales declined $6.7 million compared to the first half of 2001 primarily due to weak cryogenic systems sales.

Gross profit for the second quarter of 2002 was $20.6 million versus $21.5 million for the second quarter of 2001, a decrease of $0.9 million, or 4.4 percent. Gross profit margin for the second quarter of 2002 was 26.0 percent versus 25.4 percent for the second quarter of 2001. The increase in gross profit margin was largely driven by a better sales mix in the PS&E and AT segments, offset by low plant utilization in the D&S segment. Gross profit for the first six months of 2002 was $37.4 million versus $48.6 million in the first six months of 2001, a decrease of $11.2 million, or 23.1 percent. Gross profit margin for the first six months of 2002 was 25.4 percent versus 28.0 percent for the first six months of 2001. The lower gross profit and gross profit margin were primarily caused by generally lower factory throughput, particularly for bulk tank and packaged gas products, resulting in under-absorption of overhead expenses, and certain non-recurring PS&E equipment sales in 2001.

In March 2002, the United States Government instituted various levels of tariffs on certain imported steel products. These tariffs would have had the impact of increasing the manufactured cost of certain of the Company’s D&S segment bulk storage tanks by between 8 and 18 percent. In June 2002, the United States Government excluded certain steel products, including 9 percent nickel steel used in the Company’s bulk storage tanks, from these tariffs. At this time, the Company does not expect increases in its manufactured cost of bulk tanks due to the tariff exclusion for 9 percent nickel steel.

SG&A expense for the second quarter of 2002 was $15.0 million versus $14.1 million for the second quarter of 2001. SG&A expense as a percentage of sales was 19.0 percent for the second quarter of 2002 versus 16.6 percent for the second

quarter of 2001. Second-quarter 2001 SG&A expense reflected several positive items, including a favorable financial settlement with a tenant in Europe and positive experience on medical and workers’ compensation claims. SG&A expense in the second quarter of 2002 included $1.0 million of expenses related to the Company’s pursuit of investor capital and the completion of plant consolidation studies and unfavorable medical claims experience of $0.5 million.

SG&A expense for the first half of 2002 was $31.6 million versus $32.4 million for the first half of 2001, a decrease of $0.9 million, or 2.6 percent. SG&A expense as a percentage of sales was 21.5 percent for the first half of 2002 versus 18.6 percent for the first half of 2001. Included in SG&A expense in the first half of 2002 is $3.5 million of expenses related to the Company’s pursuit of investor capital and the completion of plant consolidation studies, which increased SG&A expense as a percentage of sales by 2.4 points.

The Company has embarked on an aggressive manufacturing facility reduction plan designed to consolidate excess capacity and reduce overall operating costs. The first step of this plan was the closure of the Company’s Denver-East facility, which was completed in the second quarter of 2002. The second step in this plan, announced in July 2002, includes the closure of the Company’s Costa Mesa, California and Columbus, Ohio manufacturing facilities. The expenses of closing these two facilities of approximately $2.6 million will be incurred primarily in the third and fourth quarters of 2002. Management anticipates annual savings of over $3 million and a recovery of one-time costs for the closure of these two facilities in less than one year. Due to debt covenant considerations, the Company will soon request bank approval to proceed with the closures of additional facilities that will involve the sale of significant assets. If approved, the implementation of this step of the plan in the second half of 2002 will result in further restructuring expenses and will put some negative short-term pressure on sales. The recoupment of restructuring expenses from operating improvements related to this step is expected to be about one year.

The Company recorded $0.2 million and $1.3 million of employee separation and plant closure costs related to its consolidation of the Denver-East facility during the three-month and six-month periods ended June 30, 2002, respectively. The total charges included $1.0 million for lease termination and facility-related closure costs and $0.3 million for severance and other benefits related to terminating 23 employees. In the first half of 2002, the Company also recorded non-cash inventory valuation charges included in cost of sales of $0.3 million for the write-off of inventory at this site. At June 30, 2002, the Company had a reserve of $1.0 million remaining for the closure of the Denver facility, primarily for lease termination costs.

The Company incurred $1.5 million of employee separation and plant closure costs in the second quarter and first half of 2001 related primarily to the Cryogenic Services Division as the Ottawa Lake, Michigan, facility and two smaller sites were closed. The 2001 closure costs primarily included the write-off of leasehold improvements, equipment, and severance costs. The Company also incurred $0.8 million of inventory charges in the second quarter and first half of 2001 related to these sites, which were included in cost of sales for the 2001 period.

The Company recorded $1.3 million and $2.5 million of goodwill amortization in the second quarter and first six months of 2001, respectively. Due to the Company’s adoption of SFAS No. 142 in the first quarter of 2002, the Company is no longer recording goodwill amortization. During the second quarter of 2002, the Company completed the transitional impairment tests of SFAS No. 142 and determined there were no indicators of impairment for its reporting units with goodwill. As such, the Company will not be required to record a cumulative effect charge as of January 1, 2002 for the adoption of SFAS No. 142.

The Company recorded $0.2 million and $0.3 million of equity income in its Coastal Fabrication joint venture in the second quarter and first half of 2002, respectively, compared with equity income of $0.1 million and $0.3 million in the second quarter and first half of 2001, respectively.

The Company sold its cryogenic pump product line during the second quarter of 2002 for proceeds of $2.3 million and recorded a gain of $1.4 million in other income.

Net interest expense was $4.7 million and $5.9 million for the second quarters of 2002 and 2001, respectively, and $8.8 million and $12.2 million for the six months ended June 30, 2002 and 2001, respectively, reflecting lower overall interest rates. The Company manages its interest rate exposure through the use of interest rate collars on a portion of the term debt and to a lesser extent by varying LIBOR maturities in the entire Credit Facility. An interest rate collar covering $76.0 million of the Company’s term debt expired and was settled on June 28, 2002. The Company’s remaining interest rate collar covering $31.8 million of term debt expires on March 31, 2006. The Company’s interest rate collars do not qualify as hedges under the provisions of SFAS No. 133 “Accounting for Derivative Instruments and Hedging Activities,” which the Company adopted effective January 1, 2001. This statement requires such collars to be recorded in the consolidated balance sheet at fair value. Changes in their fair value must be recorded in the consolidated statement of operations. Accordingly, the Company recorded a charge to operations as of January 1, 2001 as a cumulative effect of a change in accounting principle, net of income taxes. The interest rate collars are valued using the market standard methodology of discounting the expected future cash payments based on an expectation of future interest rates derived from observed market forward interest rate yield curves. These valuations resulted in derivative contracts valuation

expense of $0.5 million and $0.2 million in the second quarters of 2002 and 2001 respectively, and $0.4 million and $1.1 million for the six months ended June 30, 2002 and 2001, respectively. The liability relating to the collar outstanding of $1.2 million is recorded by the Company in accrued interest in the consolidated balance sheet at June 30, 2002, and represents the estimated payments to be made over the life of the collars.

The Company recorded $0.4 million of financing costs amortization expense in the second quarters of 2002 and 2001 respectively, and $1.7 million and $0.7 million of financing costs amortization expense in the six months ended June 30, 2002 and 2001, respectively. The first-half 2002 financing costs amortization expense includes $1.0 million related to the Company obtaining waivers of certain financial covenants to March 15, 2002. Under its current capital structure, the Company expects financing costs amortization expense to be approximately $0.4 million per quarter for the rest of 2002.

The Company recorded $0.9 million and $0.7 million of foreign currency remeasurement losses in the second quarter and first half of 2002, respectively, versus $0.4 million and $0.02 million of foreign currency remeasurement gains in the second quarter and first half of 2001, respectively. These foreign currency remeasurement gains and losses result from certain of the Company’s subsidiaries entering into transactions in currencies other than their functional currency.

Income tax expense of $0.2 million for the second quarter of 2002 and income tax benefit of $2.3 million for the first half of 2002 were recorded based on the Company’s estimated 2002 annual effective tax rate of 42.6 percent. Income tax expense of $0.3 million for the second quarter of 2001 included the cumulative effect of adjusting the Company’s estimated 2001 annual effective tax rate from 52.8 percent for the three months ended March 31, 2001 to 87.9 percent for the six months ended June 30, 2001.

As a result of the foregoing, the Company reported net income of $0.4 million, or $0.01 per diluted share, for the second quarter of 2002 compared with a net loss of $0.4 million, or $0.02 per diluted share, for the second quarter of 2001. The Company reported a net loss of $3.1 million, or $0.12 per diluted share, for the six months ended June 30, 2002, versus a net loss of $0.02 million, or $0.00 per diluted share, for the six months ended June 30, 2001. If the non-amortization provisions of SFAS No. 142 were in effect for 2001, the Company’s second-quarter 2001 net income would have been $0.9 million, or $0.04 per diluted share, and the Company’s first-half 2001 net income would have been $2.6 million, or $0.11 per diluted share.

Liquidity and Capital Resources

Cash provided by operations in the first half of 2002 was $0.4 million compared with $6.5 million used in operations in the first half of 2001. Operating cash flow improved in the first half of 2002 versus the first half of 2001 due to favorable progress billing terms on long-term project contracts and a tightening over expenditures for capital projects and other goods and services.

Capital expenditures for the first half of 2002 were $1.9 million compared with $4.0 million in the first half of 2001. The Company presently does not have any large capital projects in process and anticipates approximately the same level of capital expenditures experienced in the second quarter of 2002 for the remaining quarters of this year.

At June 30, 2002, the Company had borrowings of $217.8 million and $35.7 million on the term loan and revolving credit portions of its Credit Facility, respectively, and borrowings of $10.0 million on its Incremental Credit Facility. The Credit Facility and Incremental Credit Facility were amended in March 2002 (the “March 2002 Amendments”) to modify certain covenants until March 31, 2003, to defer $25.7 million of term loan amortization payments from scheduled payment dates in 2002 to primarily 2005 and to extend the Incremental Credit Facility to March 31, 2003. The March 2002 Amendments resulted in an increase in interest rates of 0.25 percent, the addition of one financial covenant and scheduled reductions in the commitment amounts of the revolving credit lines of the Credit Facility and the Incremental Credit Facility.

The March 2002 Amendments call for the Company to prepay borrowings under the Credit Facility and Incremental Credit Facility in an aggregate amount of at least $75.0 million (“Minimum Prepayment Amount”) from the net proceeds of an equity investment, sale of assets and other sources of new capital. If the Minimum Prepayment Amount is not made by September 30, 2002, the Company’s interest rates will increase by another 0.25 percent, and will increase again by 0.25 percent each quarter thereafter. If the Minimum Prepayment Amount is achieved, these additional interest rate increases will be eliminated. The March 2002 Amendments also provide for the issuance of market-priced warrants to the lenders for the purchase of two percent of the Company’s Common Stock at June 28, 2002. Accordingly, the Company was obligated to issue to its lenders at June 28, 2002 warrants to purchase, in the aggregate, 513,559 shares of Chart Common Stock at an exercise price of $2.425 per share. These warrants have been valued at $0.7 million and will be amortized to financing costs amortization expense over the remaining term of the Company’s Credit Facility, which expires in March 2006. If the Minimum Prepayment Amount is not made by September 30 or December 31, 2002, the lenders will be issued market-priced warrants (which may be priced above or below $2.425 per share, depending on the market prices of the Company’s Common Stock preceding the respective dates of issuance) for the purchase of an additional five percent and three percent, respectively, of the Company’s Common Stock. If at least $50.0 million of the Minimum Prepayment

Amount is made from the net proceeds of an equity investment by September 30 or December 31, 2002, no warrants will be required to be issued to the lenders on those dates.

The Credit Facility, as modified by the March 2002 Amendments, contains certain covenants and conditions which impose limitations on the Company and its operating units, including meeting certain financial tests and the quarterly maintenance of certain financial ratios on a consolidated basis such as: minimum net worth, maximum leverage, minimum pretax interest coverage ratio, minimum fixed charge coverage ratio and minimum earnings before interest, taxes, depreciation, amortization and restructuring charges. The Company is permitted to pay cash dividends not exceeding $7.2 million in any fiscal year after January 1, 2001, but only if at both the time of payment of the dividend and immediately thereafter there is no event of default under the Credit Facility. The Company, however, has not paid dividends since the second quarter of 1999. As of June 30, 2002, the Company was in compliance with the covenants and conditions of the Credit Facility.

The Company had total debt of $271.2 million and $272.1 million at June 30, 2002 and December 31, 2001, respectively. The increase in the current portion of long-term debt, from $13.0 million at December 31, 2001 to $34.7 million at June 30, 2002, is due to increasing quarterly amortization on the term loan portions of the Credit Facility and the expiration of the Incremental Credit Facility at March 31, 2003.

The Company is continuing to pursue potential sources of equity capital and is currently in discussions with several investor groups, including one group that is at an advanced stage of due diligence, regarding a potential investment in the Company. The Company is also pursuing the sale of certain assets that are non-core. Proceeds from any of these transactions would be used by the Company to pay down debt obligations on its Credit Facility and Incremental Credit Facility, although the Company can provide no assurance that it will be able to complete any such transaction.

The Company currently believes that cash forecasted to be generated by operations will be sufficient to satisfy its working capital, capital expenditure and debt repayment requirements for 2002.

Orders and Backlog

Chart’s consolidated orders for the second quarter of 2002 totaled $77.2 million, compared with orders of $75.5 million for the first quarter of 2002. Chart’s consolidated firm order backlog at June 30, 2002 was $68.8 million, a decrease of $5.0 million from $73.8 million at March 31, 2002.

AT orders for the second quarter of 2002 totaled $37.5 million, compared with $33.3 million for the first quarter of 2002. Second-quarter orders were strong in biomedical products. The backlog in this segment has been adjusted by $3.2 million to reflect the cancellation of an LNG fuel station for the city of Santa Monica, California due to stringent bonding requirements the Company was not willing to undertake.

In the D&S segment, orders for the second quarter of 2002 totaled $25.3 million, compared with $22.5 million for the first quarter of 2002. These amounts included the recently announced orders for LNG tanks for several Norwegian LNG terminals.

PS&E orders for the second quarter of 2002 totaled $14.5 million, compared with $19.7 million in the first quarter of 2002. PS&E backlog at June 30, 2002 was $28.1 million, down from $31.7 million at March 31, 2002. The decrease in backlog is not necessarily indicative of future quarters, as backlog levels in this segment can fluctuate significantly due to the large size of the projects awarded and the variability in timing of order placement.

Critical Accounting Policies

The Company’s condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States. As such, some accounting policies have a significant impact on amounts reported in these financial statements. A summary of those significant accounting policies can be found in the Company’s 2001 Annual Report on Form 10-K, filed on April 1, 2002, in the Notes to the Consolidated Financial Statements, Note A, and under the caption “Critical Accounting Policies” within Management’s Discussion and Analysis of Financial Condition and Results of Operations. In particular, judgment is used in areas such as revenue recognition for long-term contracts, determining the allowance for doubtful accounts and inventory valuation reserves, derivatives, debt covenants, pensions and deferred tax assets.

Accounting Changes and Recently Issued Accounting Standards

Effective January 1, 2002, the Company adopted Financial Accounting Standards Board (“FASB”) SFAS No. 141, “Business Combinations,” and SFAS No. 142, “Goodwill and Other Intangible Assets,” which establish financial accounting and reporting for acquired goodwill and other intangible assets and supersede Accounting Principles Board (“APB”) Opinion No. 16, “Business Combinations,” and APB Opinion No. 17, “Intangible Assets.” Under SFAS No. 142, goodwill and indefinite lived intangible assets are no longer amortized but are reviewed at least annually for impairment. Intangible assets that have finite useful lives will continue to be amortized over their useful lives. As part of adopting this standard as of January 1, 2002, the Company determined that it has one indefinite lived intangible asset in addition to goodwill. The Company evaluated the impairment of its one indefinite lived intangible asset during the first quarter of 2002 and determined that it was not impaired. The Company completed step one of the transitional impairment tests for goodwill during the second quarter of 2002 and determined there were no indicators of impairment as of January 1, 2002. As such, the Company will not record a cumulative effect charge as of January 1, 2002 for the adoption of SFAS No. 142.

In August 2001, the FASB issued SFAS No. 143, “Accounting for Asset Retirement Obligations” which amends SFAS No. 19, “Financial Accounting and Reporting by Oil and Gas Producing Companies,” and is effective for all companies. SFAS No. 143 addresses the financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs and is effective for fiscal years beginning after June 15, 2002. The Company does not expect SFAS No. 143 to have a material impact on the Company’s financial position, liquidity, cash flows or results of operations.

Forward-Looking Statements

The Company is making this statement in order to satisfy the “safe harbor” provisions contained in the Private Securities Litigation Reform Act of 1995. This Quarterly Report on Form 10-Q includes forward-looking statements relating to the business of the Company. In some cases, forward-looking statements may be identified by terminology such as “may,” “will,” “should,” “expects,” “anticipates,” “believes,” “projects,” “forecasts,” “continue” or the negative of such terms or comparable terminology. Forward-looking statements contained herein or in other statements made by the Company are made based on management’s expectations and beliefs concerning future events impacting the Company and are subject to uncertainties and factors relating to the Company’s operations and business environment, all of which are difficult to predict and many of which are beyond the control of the Company, that could cause actual results of the Company to differ materially from those matters expressed or implied by forward-looking statements. The Company believes that the following factors, among others, could affect its future performance and cause actual results of the Company to differ materially from those expressed or implied by forward-looking statements made by or on behalf of the Company: (a) general economic, political, business and market conditions and foreign currency fluctuations; (b) competition; (c) decreases in spending by its industrial customers; (d) the loss of a major customer or customers; (e) the effectiveness of operational changes and restructuring initiatives expected to increase efficiency and productivity; (f) the ability of the Company to manage its fixed-price contract exposure; (g) the ability of the Company to pass on increases in raw material prices; (h) the Company’s relations with its employees; (i) the extent of product liability claims asserted against the Company; (j) variability in the Company’s operating results; (k) the ability of the Company to attract and retain key personnel; (l) the costs of compliance with environmental matters; (m) the ability of the Company to protect its proprietary information; (n) the ability of the Company to access additional sources of capital and sell certain assets on acceptable terms; (o) the ability of the Company to satisfy debt covenants, pay down its debt and restructure its debt arrangements; and (p) the threat of terrorism and the impact of responses to that threat.

Item 3.

Quantitative and Qualitative Disclosures About Market Risk.

In the normal course of business, operations of the Company are exposed to continuing fluctuations in foreign currency values and interest rates that can affect the cost of operating and financing. Accordingly, the Company addresses a portion of these risks through a program of risk management.

The Company’s primary interest rate risk exposure results from the Credit Facility’s various floating rate pricing mechanisms. This interest rate exposure is managed by the use of interest rate collars on a portion of the term debt and to a lesser extent by varying LIBOR maturities in the entire Credit Facility. An interest rate collar covering $76.0 million of the Company’s debt expired and was settled on June 28, 2002. The Company’s remaining interest rate collar covering $31.8 million of debt expires on March 31, 2006. The fair value of the contract related to the collar outstanding at June 30, 2002 is a liability of $1.2 million. If interest rates were to increase 200 basis points (2 percent) from June 30, 2002 rates, and assuming no changes in debt from the June 30, 2002 levels, the additional annual expense would be approximately $5.1 million on a pretax basis.

The Company has assets, liabilities and cash flows in foreign currencies creating foreign exchange risk, the primary foreign currencies being the British Pound, the Czech Koruna and the Euro. Monthly measurement, evaluation and foreign currency forward exchange contracts are employed as methods to reduce this risk. The Company enters into foreign currency forward exchange contracts to hedge anticipated and firmly committed foreign currency transactions. The Company does not hedge foreign currency translation or foreign currency net assets or liabilities. The terms of the derivatives are one year or less. If the value of the U.S. dollar were to strengthen 10 percent relative to the currencies in which the Company has foreign currency forward exchange contracts at June 30, 2002, the result would be a loss in fair value of approximately $0.3 million.

PART II. OTHER INFORMATION

Item 1.

Legal Proceedings

certain co-defendants. Certain co-defendants have filed cross-claims against the Company claiming contribution. All of these cases have been settled with the other defendants. The Company was not involved in any of the mediation or settlement negotiations, in part because the Company has not received any settlement demands. Additionally, the Company believes that the claims made against it are the most tenuous of any defendant and that the plaintiffs will be unable to articulate a plausible negligence claim based on product liability. Of further significance is the fact that some of the co-defendants have been criminally indicted in this matter. The Company, however, has not been so indicted. The trial in the matter of the State of Ohio vs. BOC Gases, et al. , the first of the criminal actions, was heard in May 2002. The trial lasted three days and resulted in a directed verdict in favor of the defendants. A second criminal trial, State of Ohio vs. I.H.S. C arriage-by-the-Lake has been scheduled for October 2002. At this time, the civil cases continue to be stayed pending the outcome of the criminal matters. The Company has been dismissed from one of the civil cases. After testimony provided during the first of the criminal proceedings, counsel for the Plaintiff in the matter of Kenneth D. Reynolds, Administrator of the Estate of Darla Jean Reynolds vs. Integrated Health Services, et al. felt that Ohio law would no longer support a claim against the Company. Defense counsel forwarded this Reynolds entry to all remaining plaintiffs requesting dismissal. The remaining plaintiffs, however, have advised that they intend to pursue discovery before considering dismissal of claims against the Company. Accordingly, defense counsel will prepare the appropriate motions to request a summary judgment.

Item 2.

Changes in Securities and Use of Proceeds.

As of June 28, 2002, the Company was obligated to issue to its lenders warrants to purchase an aggregate of 513,559 shares of common stock under the March 2002 Amendments to the Company’s Credit Facility. No additional consideration was received by the Company for the issuance of the warrants. The warrants are exercisable upon issuance at an exercise price of $2.425 per share, expire on the third anniversary after issuance, and include customary anti-dilution provisions, registration rights and tag-along rights. The issuance of warrants was made in reliance on the exemption from the registration requirements of the Securities Act of 1933 provided by Section 4(2) thereunder, on the basis that the transaction did not involve a public offering. A copy of the warrant agreement pursuant to which the warrants were issued is attached as an exhibit to this Form 10-Q.

Item 4.

Submission of Matters to a Vote of Security Holders.

The Annual Meeting of Stockholders of the Company was held on June 6, 2002. The following matters were voted on at the meeting:

1. Election of Arthur S. Holmes as a Director for a term of three years. The nominee was elected as Director with the following votes:

For			22,699,224
Withheld			489,801

2. Proposal to amend and restate the Company’s 1997 Stock Bonus Plan to increase the aggregate number of shares available for issuance by 500,000 and to make other changes to the plan. The proposal was approved with the following votes:

For			20,742,630
Against			1,303,747
Abstain			1,142,645

For a description of the bases used in tabulating the above-referenced votes, see the Company’s definitive Proxy Statement used in connection with the solicitation of proxies for the Annual Meeting of Stockholders held on June 6, 2002.

Item 6.

Exhibits and Reports on Form 8-K

(a)

Exhibits.

See the Exhibit Index on page 22 of this Form 10-Q.

(b)

Reports on Form 8-K.

On April 8, 2002, the Company filed an amendment to its Current Report on Form 8-K dated January 28, 2002 and originally furnished to the Securities and Exchange Commission on January 29, 2002 solely to correct an error in the EDGAR submission of the original document

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


			Chart Industries, Inc.

			(Registrant)


Date: August 14, 2002			/s/ Michael F. Biehl

			Michael F. Biehl Chief Financial Officer and Treasurer (Duly Authorized and Principal Financial Officer)

EXHIBIT INDEX

	Exhibit Number		Description of Document

	10.1		Warrant Agreement, dated as of June 28, 2002, by and between the Company and the Holders signatories thereto (filed herewith)

	10.2		Amended and Restated 1997 Stock Bonus Plan of the Company (filed herewith)

22 EX-10.1 3 dex101.txt WARRANT AGREEMENT Exhibit 10.1 EXECUTION COPY ================================================================ WARRANT AGREEMENT Between CHART INDUSTRIES, INC. and THE HOLDERS PARTY HERETO Dated as of June 28, 2002 ================================================================ TABLE OF CONTENTS

(i) SECTION 5.06. Merger, Consolidation or Disposition of Assets............... 21 SECTION 5.07. Other Action Affecting Common Stock.......................... 21 SECTION 5.08. Exclusions from Adjustment................................... 21 SECTION 5.09. Notice of Adjustments........................................ 22 SECTION 5.10. Notice of Certain Corporate Action........................... 22 ARTICLE VI REGISTRATION RIGHTS.................................................. 23 SECTION 6.01. Demand and Piggyback Registrations........................... 23 SECTION 6.02. Hold-Back Agreements; Cutbacks............................... 25 SECTION 6.03. Registration Procedures...................................... 26 SECTION 6.04. Registration Expenses ....................................... 30 SECTION 6.05. Indemnification.............................................. 31 SECTION 6.06. No Other Registration Rights................................. 33 ARTICLE VII TAG-ALONG SALE...................................................... 33 SECTION 7.01. Tag-Along Rights............................................. 33 SECTION 7.02. Procedures................................................... 35 SECTION 7.03. Amendment of Article VII..................................... 35 ARTICLE VIII HOLDERS' RIGHTS.................................................... 35 SECTION 8.01. Delivery Expenses............................................ 35 SECTION 8.02. Taxes........................................................ 36 SECTION 8.03. Replacement of Instruments................................... 36 SECTION 8.04. Indemnification.............................................. 36 SECTION 8.05. Inspection Rights............................................ 37 ARTICLE IX OTHER COVENANTS OF THE ISSUER........................................ 37 SECTION 9.01. Financial Statements, Etc.................................... 37 SECTION 9.02. Related Party Transactions................................... 38 SECTION 9.03. Restrictions on Performance.................................. 38 SECTION 9.04. Modification of Other Equity Documents....................... 38 SECTION 9.05. Reservation and Authorization of Common Stock................ 38 SECTION 9.06. Notice of Expiration Date.................................... 39 SECTION 9.07. Documentation of Subsequent Warrants......................... 39 ARTICLE X MISCELLANEOUS......................................................... 39 SECTION 10.01. Waiver...................................................... 40 SECTION 10.02. Notices..................................................... 40 SECTION 10.03. Expenses, Etc............................................... 40 SECTION 10.04. Amendments, Etc............................................. 40 SECTION 10.05. Successors and Assigns...................................... 41 SECTION 10.06. Survival.................................................... 41 SECTION 10.07. Specific Performance........................................ 41 SECTION 10.08. Captions.................................................... 41 SECTION 10.09. Counterparts................................................ 41

(ii) SECTION 10.10. Governing Law.......................................... 41 SECTION 10.11. Severability .......................................... 41 SECTION 10.12. Entire Agreement....................................... 42 SECTION 10.13. Rights of Holders of Warrants.......................... 42 SCHEDULES Schedule 2.02 - Allocation of Warrants Schedule 3.07(a) - Existing Convertible Securities and Options Schedule 3.07(b) - Existing Registration Rights ANNEXES Annex 1 - Form of Warrant Annex 2 - Form of Assignment Annex 3 - Form of Joinder Agreement

(iii) WARRANT AGREEMENT dated as of June 28, 2002 between CHART INDUSTRIES, INC., a company duly organized and validly existing under the laws of the State of Delaware (the "Issuer"), and each Person named under the caption "INITIAL HOLDERS" on the signature pages hereof (each an "Initial Holder" and, collectively, the "Initial Holders"). WHEREAS, the Issuer, certain of its subsidiaries and the Initial Holders (or their respective affiliates) are parties to a Credit Agreement dated as of April 12, 1999 (as amended and in effect, the "Credit Agreement"; references to the Credit Agreement herein shall apply whether or not the Credit Agreement is then in force and without regard to amendments thereto unless such amendments thereto have been consented to by the Required Holders, providing, subject to the terms and conditions thereof, for the extension of credit by the Initial Holders (or such affiliates) to the Issuer. WHEREAS, pursuant to the requirements of Section 6.12 of the Credit Agreement and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Issuer has agreed to issue one or more Warrants (as hereinafter defined) to each Initial Holder providing for the purchase of shares of Common Stock (as hereinafter defined), in the manner hereinafter provided. NOW, THEREFORE, the parties hereto agree as follows: ARTICLE I DEFINITIONS AND ACCOUNTING MATTERS SECTION 1.01. Definitions. As used in this Agreement, the following terms shall have the following meanings: "Affiliate" means, with respect to a specified Person, another Person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the Person specified. "Board" means the Board of Directors of the Issuer. "Business Day" means any day that is not a Saturday, Sunday or other day on which commercial banks in New York City are authorized or required by law to remain close. "Commission" means the Securities and Exchange Commission or any other similar or successor agency of the federal government administering the Securities Act and/or the Exchange Act. 2 "Common Stock" means the Issuer's Common Stock, par value $.01 per share, as constituted on the Issuance Date and any stock into which such Common Stock may thereafter be converted or changed, and also shall include any other stock of the Issuer of any other class, which is not preferred as to dividends or assets over any other class of any other stock of the Issuer. References herein and in the Warrants to the Common Stock outstanding "on a fully diluted basis" at any time means the number of shares of Common Stock then issued and outstanding, assuming full conversion, exercise and exchange of all Convertible Securities and "in the money" Options (as of the relevant date of determination) that are exchangeable for, or exercisable or convertible into, Common Stock, including the Warrants. All references to Common Stock herein shall be subject to appropriate adjustment by reason of any stock dividend, split, reverse split, combination, recapitalization or any similar corporate transaction. "Control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ability to exercise voting power, by contract or otherwise. "Controlling" and "Controlled" shall have meanings correlative thereto. "Convertible Securities" means evidences of indebtedness, interests or other securities or rights which are exchangeable for or exercisable or convertible into shares of Common Stock either immediately or upon the arrival of a specified date or the occurrence of a specified event, but shall not include Options. "Credit Agreement" has the meaning specified in the recital of this Agreement. "Current Market Value" means, on any date, (i) the average of the daily market prices for each day during the 10 consecutive trading days ending on the last trading day prior to such date or (ii) if the applicable securities are not publicly traded or are not registered under the Exchange Act, the fair value of such securities as reasonably determined in good faith by the Board. The market price for each such Business Day shall be the last sale price on such day as reported in the Consolidated Transaction Reporting System or as reported for such day by The Wall Street Journal, as applicable, or if such last sale price is not available, the average of the closing bid and asked prices as reported in either such system, or in any other case in which such price is not available, the average of the closing bid and asked prices quoted for such day as reported by The Wall Street Journal and the National Quotation Bureau pink sheets. "Current Warrant Price" means, as at any date, the amount per share of Common Stock equal to the quotient resulting from dividing the Exercise Price per Stock Unit in effect on such date by the number of shares (including any fractional share) of Common Stock comprising a Stock Unit on such date. "Demand Notice" has the meaning specified in Section 6.01(a). 3 "Demand Registration" has the meaning specified in Section 6.01(a). "Exchange Act" means the Securities Exchange Act of 1934, as amended, or any similar federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time. "Exercise Price" has the meaning specified in the form of the Warrant attached as Annex 1. "Expiration Date" has the meaning specified in the form of the Warrant attached as Annex 1. "Financial Statements" has the meaning specified in Section 3.11. "GAAP" means generally accepted accounting principles, consistently applied throughout the specified period. "Governmental Authority" means the government of the United States of America, any other nation or any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory, monetary or administrative powers or functions of or pertaining to government. "Holder" means any Person (including, without limitation, each Initial Holder) who acquires Warrants or Warrant Stock pursuant to the provisions of this Agreement, including any transferees of Warrants or Warrant Stock, and any successor thereto; provided that a holder of Warrants or Warrant Stock purchased pursuant to an effective registration statement, pursuant to Rule 144 or pursuant to any other sale of securities in a public trading market shall not be deemed a Holder. No Person shall be a Holder unless a Warrant has been effectively assigned to such Person. "Immediate Family" means, with respect to any Person who is a natural person, such Person's children, siblings and parents, but only if such child, sibling or parent lives in such Person's home. "Indemnified Party" has the meaning specified in Section 6.05(c). "Indemnifying Party" has the meaning specified in Section 6.05(c). "Initial Holder" has the meaning specified in the preamble of this Agreement. "Issuance Date" means June 28, 2002. 4 "Issuer" has the meaning specified in the preamble of this Agreement. "Joinder Agreement" has the meaning specified in Section 7.01(c). "Lien" means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset. For purposes of this Agreement, a Person shall be deemed to own subject to a Lien any asset which it has acquired or holds subject to the interest of a vendor or lessor under any conditional sale agreement, capital lease or other title retention agreement relating to such asset. "Loans" has the meaning assigned to such term in the Credit Agreement. "Losses" has the meaning specified in Section 6.05(a). "NASD" means the National Association of Securities Dealers. "Notes" means the promissory notes of the Issuer issued pursuant to the Credit Agreement. "NYSE" means the New York Stock Exchange. "Option" means any warrant, option or other right to subscribe for or purchase shares of Common Stock. "Option Plans" means any stock option plan, stock grant plan, restricted stock plan, stock bonus plan, stock purchase, stock option or employment arrangement or any other equity compensation arrangement approved from time to time by the Board. "Other Equity Documents" means the certificate of incorporation of the Issuer, the by-laws of the Issuer and any other instrument or document of organization or governance of the Issuer. "Other Holder" means any Person who acquires Other Warrants or Other Warrant Stock, including any transferees of Other Warrants or Other Warrant Stock; provided that a holder of Other Warrants or Other Warrant Stock purchased pursuant to an effective registration statement, pursuant to Rule 144 or pursuant to any other sale of securities in a public trading market shall not be deemed an Other Holder. "Other Warrant" and "Other Warrants" means the warrants to purchase Common Stock, if any, issued by the Issuer after the date hereof in accordance with Section 6.12 of the Credit Agreement and pursuant to the documentation contemplated by Section 9.07. 5 "Other Warrant Stock" means all shares of Common Stock issuable from time to time upon exercise of the Other Warrants. "Person" means any natural person, corporation, limited liability company, trust, joint venture, association, company, partnership, Governmental Authority or other entity. "Piggyback Notice" has the meaning specified in Section 6.01(a). "Piggyback Registration" has the meaning specified in Section 6.01(a). "Principal Shareholder" means, at any time, any Shareholder which either alone or together with its Related Parties owns 20% or more of the Common Stock on a fully diluted basis. "Registration Expenses" has the meaning specified in Section 6.04. "Related Parties" means (a) with respect to any Person who is a natural person, (i) such Person's spouse, any member of such Person's Immediate Family and any trust or similar arrangement for the benefit of such Person, such Person's spouse or any member of such Person's Immediate Family and (ii) any other Person (other than the Issuer or any of its Subsidiaries or any Person organized for charitable purposes) that is not a natural person and of which such Person owns or controls at least 20% of the voting equity interests, and (b) with respect to any Person who is not a natural person, any Subsidiary or Affiliate of such Person (other than the Issuer or any of its Subsidiaries or any Person organized for charitable purposes); provided that "Related Parties" shall not include any employee benefit plan. "Related Person" has the meaning specified in Section 4.07. "Required Holders" means the holders of a majority of the sum of (a) Warrant Stock issued or issuable upon exercise of the Warrants and held by the Holders and (b) Other Warrant Stock issued or issuable upon exercise of the Other Warrants and held by Other Holders. For purposes of giving notices, waivers and consents hereunder, holders of Warrants shall be deemed holders of the Warrant Stock issued on exercise thereof and holders of Other Warrants shall be deemed holders of the Other Warrant Stock issued on exercise thereof. "Restricted Certificate" means a certificate for Warrant Stock or Warrants bearing or required to bear the restrictive legend set forth in Section 4.03. "Restricted Securities" means Restricted Warrant Stock and Restricted Warrants. "Restricted Warrants" means Warrants evidenced by a Restricted Certificate. 6 "Restricted Warrant Stock" means Warrant Stock evidenced by a Restricted Certificate. "Revolving Credit Loan" has the meaning assigned to such term in the Credit Agreement. "Rights Agreement" means the Rights Agreement, dated as of May 1, 1998, as amended, between the Issuer and National City Bank, as rights agent. "Rule 144" means Rule 144 promulgated by the Commission under the Securities Act (or any successor or similar rule then in force). "Rule 144A" means Rule 144A promulgated by the Commission under the Securities Act (or any successor or similar rule then in force). "SEC Documents" has the meaning specified in Section 3.11. "Securities" means the Common Stock and any other equity securities of the Issuer of any kind or class. "Securities Act" means the Securities Act of 1933, as amended, or any similar federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time. "Seller" has the meaning specified in Section 6.01(a). "Seller Notice" has the meaning specified in Section 6.01(a). "Shareholder" means any Person who directly or indirectly owns any shares of Common Stock (including Warrant Stock issued upon exercise of a Warrant). "Stock Unit" means one share of Common Stock, as such Common Stock is constituted on the date hereof, and thereafter means such number of shares (including any fractional shares) of Common Stock and other securities, cash or other property as shall result from the adjustments specified in Article V. "Subsidiary" means, with respect to any Person (the "parent") at any date, any corporation, limited liability company, partnership, association or other entity the accounts of which would be consolidated with those of the parent in the parent's consolidated financial statements if such financial statements were prepared in accordance with GAAP as of such date, as well as any other corporation, limited liability company, partnership, association or other entity (a) of which securities or other ownership interests representing more than 50% of the equity or more than 50% of the ordinary voting power or, in the case of a partnership, more than 7 50% of the general partnership interests are, as of such date, owned, controlled or held, or (b) that is, as of such date, otherwise Controlled, by the parent or one or more subsidiaries of the parent or by the parent and one or more subsidiaries of the parent. "Tag-Along Participation Notice" has the meaning specified in Section 7.02. "Tag-Along Sale" has the meaning specified in Section 7.01(a). "Tag-Along Sale Notice" has the meaning specified in Section 7.02. "Tag-Along Seller" has the meaning specified in Section 7.01(a). "Term Loans" has the meaning assigned to such term in the Credit Agreement. "underwritten registration" or "underwritten offering" means a registration in which securities of the Issuer are sold to an underwriter for reoffering to the public. "Warrant" and "Warrants" means the Warrants issued by the Issuer pursuant to this Agreement as of June 28, 2002, evidencing rights to purchase up to an aggregate of 513,559 Stock Units (which Warrants represent, as of June 28, 2002, 2% of the outstanding shares of Common Stock on a fully diluted basis), and all Warrants issued upon transfer, division or combination of, or in substitution for, any thereof. "Warrant Stock" means all shares of Common Stock, as constituted on the Issuance Date, issuable from time to time upon exercise of the Warrants. SECTION 1.02. Terms Generally. The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words "include", "includes" and "including" shall be deemed to be followed by the phrase "without limitation". The word "will" shall be construed to have the same meaning and effect as the word "shall". Unless the context requires otherwise (a) any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein), (b) any reference herein to any Person (other than a Holder) shall be construed to include such Person's successors and assigns, (c) the words "herein", "hereof" and "hereunder", and words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particular provision hereof, (d) all references herein to Articles, Sections, Exhibits, Annexes and Schedules shall be construed to refer to Articles and Sections of, and Exhibits, Annexes and Schedules to, this Agreement or the Warrant, as the case may be, and (e) the words "asset" and "property" shall be construed to have the same meaning and effect and to 8 refer to any and all tangible and intangible assets and properties, including cash, securities, accounts and contract rights. SECTION 1.03. Accounting Terms and Determinations. Except as otherwise may be expressly provided herein, all accounting terms used herein shall be interpreted, and all financial statements and certificates and reports as to financial matters required to be delivered to the Holders hereunder shall be prepared, in accordance with GAAP. All calculations made for the purposes of determining compliance with the terms of this Agreement shall (except as otherwise may be expressly provided herein) be made by application of GAAP. ARTICLE II PURCHASE AND SALE OF WARRANTS SECTION 2.01. Authorization and Issuance of Warrant Stock and Warrants. The Issuer has authorized: (a) the issuance of Warrants evidenced by warrant certificates in the form of Annex 1; and (b) the issuance of such number of shares of Common Stock as shall be necessary to permit the Issuer to comply with its obligations to issue shares of Common Stock pursuant to the Warrants. SECTION 2.02. Issuance of Warrants. As of June 28, 2002, in satisfaction of the Issuer's obligations under Section 6.12(a)(i) of the Credit Agreement: (a) the Issuer shall issue to each Initial Holder, for no additional consideration, a Warrant evidencing the right to purchase such number of Stock Units as is set forth opposite the name of such Initial Holder on Schedule 2.02; (b) the Issuer shall deliver to each Initial Holder a single certificate for the Warrants issued pursuant to clause (a) above, registered in the name of such Initial Holder, except that, if any Initial Holder shall notify the Issuer in writing prior to such issuance that it desires certificates for such Warrants to be issued in other denominations or registered in the name or names of any Affiliate, nominee or nominees of such Initial Holder (other than a Related Person), then the certificates for such Warrants shall be issued to such Initial Holder in the denominations and registered in the name or names specified in such notice (and each such Affiliate or nominee shall be deemed a Holder); and (c) the Issuer shall deliver to the Initial Holders a legal opinion from counsel to the Issuer, addressed to the Initial Holders and in form and substance satisfactory to JPMorgan Chase Bank. 9 SECTION 2.03. Purchase for Initial Holders' Account. Each Initial Holder represents and warrants to the Issuer as follows: (a) Such Initial Holder is acquiring the Warrants and the Warrant Stock for investment for its own account, without a view to, or for resale in connection with, any distribution thereof in violation of the Securities Act or other applicable securities laws, all without prejudice, however, to the right of such Initial Holder at any time, in accordance with this Agreement, lawfully to sell or otherwise to dispose of all or any part of the Warrants or the Warrant Stock held by it. (b) Such Initial Holder (i) is an "accredited investor" within the meaning of Regulation D promulgated under the Securities Act and (ii) is in a financial position to hold the Warrant to be issued to it hereunder and the Warrant Stock relating thereto for an indefinite time and is able to bear the economic risk and withstand a complete loss of its investment in the Issuer. (c) All documents, records or books pertaining to this investment have been made available for inspection by such Initial Holder, its attorneys and/or its accountants. Such Initial Holder understands that such Initial Holder and/or its representatives have had the opportunity to ask questions of, and receive answers from, the Issuer or one or more persons acting on the Issuer's behalf concerning the offering of the Warrants and the Warrant Stock and the business of the Issuer and all such questions have been answered to such Initial Holder's full satisfaction. (d) Such Initial Holder is not the "beneficial owner", either alone or together with its "affiliates" or "associates" (as those terms are defined in the Exchange Act), of 5% or more of the outstanding shares of Common Stock as constituted on the Issuance Date. SECTION 2.04. Securities Act Compliance. Such Initial Holder understands that the Issuer has not registered the Warrants or the Warrant Stock under the Securities Act or applicable state securities laws, and such Initial Holder agrees that neither the Warrants nor the Warrant Stock shall be sold or transferred or offered for sale or transfer without registration or qualification under the Securities Act or applicable state securities laws or the availability of an exemption therefrom, all as more fully provided in Article IV, and such Initial Holder understands that the Warrants and the Warrant Stock will bear a legend to such effect and the Issuer will make a notation on its transfer books to such effect. SECTION 2.05. Listing. Prior to the issuance of Warrant Stock upon the exercise of a Warrant, the Issuer shall use best efforts to secure the listing of such shares of Warrant Stock upon each of the national securities exchange or automated quotation system, if any, upon which shares of Common Stock are then listed (subject to official notice of issuance upon the exercise of such Warrant) and shall maintain, so long as any other shares of Common 10 Stock shall be so listed, such listing of all shares of Warrant Stock from time to time issuable upon the exercise of a Warrant; and the Issuer shall use best efforts to so list on each national securities exchange or automated quotation system, and shall maintain such listing of, any other shares of capital stock of the Issuer issuable upon the exercise of a Warrant if and so long as shares of the same class shall be so listed on such national securities exchange or automated system. ARTICLE III REPRESENTATIONS AND WARRANTIES The Issuer represents and warrants as follows: SECTION 3.01. Existence; Qualification. The Issuer is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization. The Issuer is duly qualified, licensed or admitted to do business and is in good standing as a foreign corporation in every jurisdiction where the failure to be so qualified would have a material adverse effect on the business, financial condition, operations, assets, prospects, liabilities or capitalization of the Issuer and has all requisite corporate power and authority to transact its business as now conducted in all such jurisdictions. SECTION 3.02. No Breach. Assuming the truth and accuracy of the Initial Holders' representation contained in Section 2.03(d), the execution, delivery and performance of this Agreement and the Warrants by the Issuer and the consummation by it of the transactions contemplated hereby and thereby will not (a) violate the certificate of incorporation or by-laws or any other instrument or document of organization or governance of the Issuer, (b) violate, or result in a breach of or default under, any other material instrument or agreement to which the Issuer is a party or is bound, (c) violate any judgment, order, injunction, decree or award against or binding upon the Issuer, (d) result in the creation of any material Lien upon any of the properties or assets of the Issuer, or (e) (assuming the truth and accuracy of the Initial Holders' representations contained in Sections 2.03 and 2.04) violate any law, rule or regulation relating to the Issuer. SECTION 3.03. Corporate Action. Assuming the truth and accuracy of the Initial Holders' representation contained in Section 2.03(d), the Issuer has all necessary corporate power and authority to execute, deliver and perform its obligations under this Agreement and the Warrants; the execution, delivery and performance by the Issuer of this Agreement and the Warrants have been duly authorized by all necessary action (including all Shareholder action) on the part of the Issuer; this Agreement and the Warrants being issued on the date hereof have been duly executed and delivered by the Issuer and constitute the legal, valid and binding obligations of the Issuer, enforceable against the Issuer in accordance with their respective terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or other 11 similar laws affecting the enforcement of creditors rights generally and by general equitable principles (regardless of whether such enforceability is considered in a proceeding in equity or law); the Warrant Stock covered by the Warrants has been duly and validly authorized and reserved for issuance and shall, when paid for, issued and delivered in accordance with the Warrants, be duly and validly issued, fully paid and nonassessable and free and clear of any Liens (other than those imposed by applicable securities laws); and none of the Warrant Stock issued pursuant to the terms hereof will be in violation of any preemptive rights of any Shareholder. SECTION 3.04. Approvals. Assuming the truth and accuracy of the Initial Holders' representation contained in Section 2.03(d), except (a) in connection with the registration of the Warrant Stock pursuant to Article VI or (b) for any necessary stock exchange approvals, no authorizations, approvals or consents of, and no filings or registrations with, any Governmental Authority or any other Person (except for Persons who are Principal Shareholders or Related Parties thereof who shall be required to enter into a Joinder Agreement on or after the date of execution of this Agreement) are necessary for the execution, delivery or performance by the Issuer of this Agreement or the Warrants or for the validity or enforceability thereof. Any such action required to be taken as a condition to the execution and delivery of this Agreement, or the execution, issuance and delivery of the Warrants, has been duly taken by all such Governmental Authorities or other Persons, as the case may be. SECTION 3.05. Investment Company Act. The Issuer is not an "investment company", or a company "controlled by" an "investment company", within the meaning of the Investment Company Act of 1940, as amended. SECTION 3.06. Public Utility Holding Company Act. The Issuer is not a "holding company", or an "affiliate" of a "holding company" or a "subsidiary company" of a "holding company", within the meaning of the Public Utility Holding Company Act of 1935, as amended. SECTION 3.07. Capitalization. (a) As of the date hereof, the authorized capital stock of the Issuer consists of 60,000,000 shares of Common Stock, par value $.01 per share, and 1,000,000 shares of Preferred Stock, par value $.01 per share, of which 25,025,239 shares of Common Stock have been issued and are outstanding (and 163,380 shares of Common Stock are held in treasury). Except (i) for the Warrants issued hereunder, (ii) as set forth in Schedule 3.07(a) and (iii) Section 6.12 of the Credit Agreement, the Issuer does not have outstanding any Convertible Securities or Options exercisable or convertible into or exchangeable for any interests or other equity rights of the Issuer, nor does it have outstanding any agreements providing for the issuance of, or any commitments to issue, any Convertible Securities or Options. 12 (b) Other than this Agreement, Section 6.12 of the Credit Agreement or as set forth in Schedule 3.07(b), there is not in effect on the date hereof any agreement by the Issuer pursuant to which any holders of debt or equity securities of the Issuer have a right to cause the Issuer to register such securities under the Securities Act. None of the agreements listed on Schedule 3.07(b) contains any provision that conflict or are inconsistent with the rights granted under Article VI. (c) Except for this Agreement, there is not in effect on the date hereof any agreement by the Issuer or any of its Shareholders that (i) restricts the transferability of the Warrants and/or the Warrant Stock (whether or not in connection with a transfer of the Loans), (ii) restricts the transferability of the right of the Holder in this Agreement to any transferee of all or a portion of the Holder's Warrants and/or Warrant Stock, or (iii) requires any consent or other approval of any Person to the exercise of the Warrant by the Holder or the issuance of Warrant Stock upon such exercise. SECTION 3.08. Private Offering. Assuming the truth and accuracy of the Initial Holders' representations and warranties contained in Sections 2.03 and 2.04, the issuance and sale of the Warrants to the Holders hereunder are exempt from the registration and prospectus delivery requirements of the Securities Act. SECTION 3.09. Litigation. (a) There is no action, suit, proceeding or investigation pending or, to the knowledge of the Issuer, threatened against the Issuer or any of its Subsidiaries before any Governmental Authority seeking to enjoin the transactions contemplated by this Agreement or the Warrants or that involve this Agreement or the transactions contemplated herein. (b) Except for the matters disclosed in Schedule IV to the Credit Agreement or the SEC Documents, there are no actions, suits or proceedings by or before any arbitrator or Governmental Authority now pending against or, to the knowledge of the Issuer, threatened against or affecting the Issuer or any of its Subsidiaries as to which there is a reasonable possibility of an adverse determination and that, if adversely determined, could reasonably be expected, individually or in the aggregate, to result in a material adverse effect on the business, assets, liabilities, operations, material contracts, prospects or condition, financial or otherwise, of the Issuer and its Subsidiaries taken as a whole. SECTION 3.10. Brokers. All negotiations relative to this Agreement and the transactions contemplated hereby have been carried out by the Issuer directly with the Initial Holders without the intervention of any Person on behalf of the Issuer in such manner as to give rise to any valid claim by any Person against the Initial Holders or any other Holder for a finder's fee, brokerage commission or similar payment. 13 SECTION 3.11. SEC Documents; Financial Statements. The Issuer has filed in a timely manner all documents that the Issuer was required to file since January 1, 2000 with the Commission under Sections 13, 14(a) and 15(d) of the Exchange Act. As of their respective filing dates, all documents filed by the Issuer since January 1, 2000 with the Commission (the "SEC Documents") complied in all material respects with the requirements of the Exchange Act or the Securities Act, as applicable. None of the SEC Documents as of their respective dates contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements made therein, in light of the circumstances under which they were made, not misleading. The financial statements of the Issuer included in the SEC Documents (the "Financial Statements") comply as to form in all material respects with applicable accounting requirements and with the published rules and regulations of the Commission with respect thereto. The Financial Statements have been prepared in accordance with GAAP and fairly present the consolidated financial position of the Issuer and its Subsidiaries at the dates thereof and the consolidated results of their operations and consolidated cash flows for the periods then ended (subject, in the case of unaudited statements, to the lack of full footnote disclosure and to normal, recurring adjustments). ARTICLE IV RESTRICTIONS ON TRANSFERABILITY SECTION 4.01. Transfers Generally. The Restricted Securities shall be transferable only upon the conditions specified in this Article IV and in Article VI, which conditions are intended to ensure compliance with the provisions of the Securities Act and applicable state securities laws in respect of the transfer of any Restricted Securities. SECTION 4.02. Transfers of Restricted Securities Pursuant to Registration Statement and Exemptions. The Restricted Securities may be offered or sold by the Holder thereof pursuant to an effective registration statement under the Securities Act and applicable state securities laws or a valid exemption therefrom (including, without limitation, to the extent applicable, Rule 144 or Rule 144A and applicable exemptions from state securities laws). SECTION 4.03. Restrictive Legends. Unless and until otherwise permitted by this Article IV, each certificate for the Warrants issued under this Agreement, each certificate for any Warrants issued to any subsequent transferees of any such certificate, each certificate for any Warrant Stock issued upon exercise of any Warrant and each certificate for any Warrant Stock issued to any subsequent transferee of any such certificate, shall be stamped or otherwise imprinted with a legend in substantially the following form: "THE TRANSFER OF THEn SECURITIES REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO THE RESTRICTIONS SPECIFIED IN THAT CERTAIN WARRANT AGREEMENT 14 DATED AS OF JUNE 28, 2002 (THE "WARRANT AGREEMENT") BETWEEN CHART INDUSTRIES, INC., A DELAWARE CORPORATION (THE "ISSUER"), AND THE HOLDERS PARTY THERETO FROM TIME TO TIME AS MODIFIED AND SUPPLEMENTED AND IN EFFECT FROM TIME TO TIME, AND NO TRANSFER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE SHALL BE VALID OR EFFECTIVE UNTIL SUCH RESTRICTIONS HAVE LAPSED OR BEEN FULFILLED, RELEASED OR WAIVED. A COPY OF THE FORM OF THE WARRANT AGREEMENT IS ON FILE AND MAY BE INSPECTED AT THE PRINCIPAL EXECUTIVE OFFICE OF THE ISSUER. THE HOLDER OF THIS CERTIFICATE, BY ACCEPTANCE OF THIS CERTIFICATE, AGREES TO BE BOUND BY THE PROVISIONS OF THE WARRANT AGREEMENT. THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS, AND ACCORDINGLY, SUCH SECURITIES MAY NOT BE TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF EXCEPT IN COMPLIANCE WITH THE REGISTRATION OR QUALIFICATION PROVISIONS OF APPLICABLE FEDERAL AND STATE SECURITIES LAWS OR APPLICABLE EXEMPTIONS THEREFROM." SECTION 4.04. Termination of Restrictions. All of the restrictions imposed by this Article IV upon the transferability of the Restricted Securities shall cease and terminate as to any particular Restricted Security when such Restricted Security shall have been effectively registered under the Securities Act and applicable state securities laws and sold by the Holder thereof in accordance with such registration or sold under and pursuant to Rule 144 or is eligible to be sold under and pursuant to paragraph (k) of Rule 144. Whenever the restrictions imposed by this Article IV shall terminate as to any Restricted Security as hereinabove provided, the Holder thereof shall, upon written request, be entitled to receive from the Issuer, without expense, a new certificate evidencing such Restricted Security not bearing the restrictive legend otherwise required to be borne by a certificate evidencing such Restricted Security, provided that the Holder thereof shall have furnished the Issuer with such certificates and opinions as the Issuer shall have reasonably requested. SECTION 4.05. Dispositions of Warrants and Warrant Stock. (a) Subject to compliance with the Securities Act, applicable state securities laws and the requirement as to 15 placement of a legend on certificates for Restricted Securities specified in Section 4.03, any Holder shall have the right to transfer any or all of its Restricted Securities to any Person. The Person to which Restricted Securities are transferred pursuant to the immediately preceding sentence shall be deemed to be a Holder of such Restricted Securities and bound by the provisions of this Agreement applicable to the Holders so long as such Person continues to own any of the Restricted Securities so transferred to it. (b) In connection with any transfer of any Warrant, the Holder shall surrender such Warrant to the Issuer, together with a written assignment of such Warrant duly executed by the Holder hereof or such Holder's agent or attorney-in-fact. Such written assignment shall be in the form of the Assignment attached as Annex 2. Upon such surrender and receipt by the Issuer of a written agreement, in form reasonably satisfactory to the Issuer, of the assignee agreeing to be bound by this Agreement to the same extent as such Holder was so bound), the Issuer shall execute and deliver a new Warrant or Warrants in the name of the assignee and in the denominations specified in such instrument of assignment, and the original Warrant shall promptly be canceled. (c) Any Warrant may be exchanged for other Warrants of the same series upon presentation to the Issuer, together with a written notice specifying the denominations in which new Warrants are to be issued, signed by the Holder thereof. The Issuer shall execute and deliver a new Warrant or Warrants to such Holder in exchange for the Warrant or Warrants to be divided or combined in accordance with such notice. The Issuer shall pay all expenses and other charges (including taxes, to the extent required by Section 8.02) payable in connection with the preparation, issuance, delivery, transfer or exchange of the Warrants. (d) The Issuer shall maintain books for the registration and transfer of the Warrants, and shall allow each Holder of Warrants to inspect such books at such reasonable times as such Holder shall request. SECTION 4.06. Provisions Applicable to Regulated Holders. (a) Notwithstanding anything in this Agreement or the Warrants to the contrary, no Holder that is subject to the provisions of 12 USC 24 (Seventh) or a similar provision of state law or any regulation that generally limits the ability of a bank to own equity interests of another Person, or that is subject to Regulation Y of the Board of Governors of the Federal Reserve System (or any successor regulation thereto) ("Regulation Y") or that is affiliated with any entity subject to the provisions of Regulation Y (if such Affiliate directly or indirectly holds securities of the Issuer) (any such Holder being referred to herein as a "Regulated Holder") and no transferee of such Regulated Holder may exercise the Warrants for a number of shares of Warrant Stock that would permit such Regulated Holder, together with its Affiliates and transferees, to own or control a number of shares of Warrant Stock greater than that permitted by applicable law including Regulation Y (and, for purposes of this restriction, a reasoned opinion of counsel to such Holder and reasonably acceptable to the Issuer based on facts and circumstances deemed appropriate by 16 such counsel to the effect that such Holder may lawfully own or control such number of shares shall be conclusive). (b) The Issuer shall not, without 15 days' prior written notice to each Holder, directly or indirectly, purchase, redeem, retire or otherwise acquire any shares of Common Stock if, as a result of such purchase, redemption, retirement or other acquisition and after giving effect to the exercise of all outstanding Warrants, a Holder, together with its Affiliates, shall own or control, or shall be deemed to own or control, in the aggregate a greater number of securities of any kind issued by the Issuer than are permitted under applicable law, including Regulation Y. (c) In the event of any underwritten public offering of Restricted Securities in which a Regulated Holder is participating, the Issuer shall provide reasonable assistance to the underwriter in ensuring that any Warrants or Warrant Stock sold by such Holder are widely disseminated. (d) In the event that a Regulated Holder determines that there is a Regulatory Problem (as defined below), the Issuer agrees to use commercially reasonable efforts to take all such actions as are within its control and reasonably required by such Regulated Holder in order (i) to effectuate and facilitate any transfer by any Regulated Holder (or any of its Affiliates) of any Warrant or Warrant Stock then held by such Regulated Holder to any Person designated by such Regulated Holder and (ii) to permit such Regulated Holder (or any of its Affiliates) to exchange all or a portion of any voting security then held by it on a share-for-share basis for shares of a non-voting security of the Issuer, which non-voting security shall convey equivalent economic benefits to those of such Warrants or Warrant Stock and include equivalent anti-dilution protection and otherwise shall be identical in all respects to the voting security exchanged for it, except that it shall be non-voting and shall be convertible into a voting security on such terms as are required by such Regulated Holder in light of regulatory considerations then prevailing. Such actions may include, but shall not necessarily be limited to, entering into such additional agreements, adopting such amendments to the certificate of incorporation and bylaws of the Issuer subject to required Shareholder approvals and taking such additional actions as are reasonably requested by any Regulated Holder in order to effectuate the intent of the foregoing. For purposes of this Agreement, a "Regulatory Problem" means any set of facts or circumstances wherein it has been asserted by any Governmental Authority (or any Regulated Holder believes that there is a substantial risk of such assertion) that any Regulated Holder is not entitled to hold, or exercise any significant right with respect to, any Warrant or Warrant Stock held by it. Any exchange referred to in clause (ii) above shall occur as soon as reasonably practicable but in any event within 60 days after written notice by the affected Regulated Holder to the Issuer (or such earlier date if required to comply with applicable law so long as such Regulated Holder has provided reasonable prior notice of such date to the Issuer). (e) At the request of the Issuer, at the time of the exercise of any Warrant by any Holder such Holder shall notify the Issuer in writing as to (i) whether such Holder is a Regulated 17 Holder and (ii) if such Holder is a Regulated Holder, the aggregate amount of Common Stock, Convertible Securities and Options then owned or controlled by such Holder and its Affiliates, provided that any failure or delay by any Holder in providing such notification shall not affect in any way the obligations of the Issuer hereunder or with respect to any Warrant or Warrant Stock. SECTION 4.07. Provisions Applicable to Related Persons. Notwithstanding any other provision of this Agreement or a Warrant, no Holder may exercise a Warrant (or any substitute security issued under Section 4.06(d)) if such Holder is then the "beneficial owner", either alone or together with its "affiliates" and "associates" (as those terms are defined in the Exchange Act), of 5% or more of the then outstanding shares of Common Stock as constituted on the Issuance Date (a "Related Person"), unless (a) such transaction is approved by the Shareholders in accordance with Article VI of the Issuer's certificate of incorporation or (b) the Issuer's certificate of incorporation previously has been amended to remove such Article and its requirements. If reasonably requested by such Related Person in writing, and subject to applicable fiduciary duties of the Board, the Issuer will use commercially reasonable efforts to secure the approval of the Shareholders to such exercise under such Article at the next regularly scheduled Shareholder meeting of the Issuer, provided that such Related Person provides all information to the Issuer about such Related Person and such transaction reasonably required under the Exchange Act to be included in the Issuer's proxy statement for such meeting and, if required, consents to the inclusion of such information in such proxy statement. ARTICLE V ADJUSTMENTS OF STOCK UNITS SECTION 5.01. Subdivisions and Combinations. If at any time the Issuer shall: (a) pay a dividend or other distribution of Common Stock; (b) subdivide or reclassify its outstanding shares of Common Stock into a larger number of shares of Common Stock; or (c) combine its outstanding shares of Common Stock into a smaller number of shares of Common Stock; then immediately after the occurrence of any such event the number of shares of Warrant Stock comprising a Stock Unit shall be adjusted so as to equal the number of shares of Warrant Stock which each Holder would have been entitled to receive with respect to such Stock Unit if such Holder had exercised the Warrant immediately prior to the occurrence of such event (or, in the case of any such dividend or distribution, immediately prior to the record date therefor). 18 SECTION 5.02. Issuance of Common Stock. In case at any time the Issuer (i) shall issue or sell shares of Common Stock and (ii) the consideration per share of Common Stock to be paid upon such issuance or sale is less than the Current Market Value per share of Common Stock in effect on the date of such issuance or sale, then the number of shares of Warrant Stock comprising a Stock Unit shall be adjusted to be that number determined by multiplying the number of shares of Warrant Stock comprising a Stock Unit immediately prior to the date of such issuance or sale by a fraction (not to be less than one) (A) the numerator of which shall be equal to the product of (x) the number of shares of Common Stock outstanding after giving effect to such issuance or sale and (y) the Current Market Value per share of Common Stock determined immediately prior to the date of such issuance or sale and (B) the denominator of which shall be equal to the sum of (x) the product of (1) the number of shares of Common Stock outstanding immediately prior to the date of such issuance or sale and (2) the Current Market Value per share of Common Stock determined immediately prior to the date of such issuance or sale and (y) the aggregate consideration to be received by the Issuer for the total number of shares of Common Stock to be issued or sold. Aggregate consideration for purposes of the preceding clause (B)(y) shall be determined as follows: in case any shares of Common Stock shall be issued or sold for cash, the consideration received therefor shall be deemed to be the amount payable to the Issuer therefor (without deduction therefrom of any expenses incurred or any underwriting commissions or concessions or discounts or, in the case of a private placement thereof, finders' fees or commissions paid or allowed by the Issuer in connection therewith). In case any shares of Common Stock shall be issued or sold for a consideration other than cash payable to the Issuer, the consideration received therefor shall be deemed to be the fair market value thereof as reasonably determined in good faith by the Board (without deduction therefrom of any expenses incurred or any underwriting commissions or concessions or discounts or, in the case of a private placement thereof, finders' fees or commissions paid or allowed by the Issuer in connection therewith). In case any shares of Common Stock shall be issued in connection with any merger of another corporation into the Issuer, the amount of consideration therefor shall be deemed to be the fair market value of such portion of the assets of such merged corporation as the Board shall reasonably determine to be attributable to such shares of Common Stock. SECTION 5.03. Issuance of Other Securities, Rights or Obligations. In case at any time the Issuer (i) shall issue or sell options to purchase or rights to subscribe for Common Stock or securities directly or indirectly convertible into or exchangeable for Common Stock (or options or rights with respect to such securities) and (ii) the consideration per share for which Common Stock is deliverable upon exercise of such options or rights or conversion or exchange of such securities (determined by dividing (x) the total amount received or receivable by the Issuer in consideration of such issuance or sale, plus the aggregate amount of consideration (if any) payable to the Issuer upon such exercise, conversion or exchange, by (y) the total number of shares of Common Stock necessary to effect the exercise, conversion or exchange of all such options, rights or securities) shall be less than the Current Market Value per share of Common Stock in effect on the date of such issuance or sale, then the number of shares of Warrant Stock 19 comprising a Stock Unit shall be adjusted on the date of such issuance or sale to be that number determined by multiplying the number of shares of Warrant Stock comprising a Stock Unit immediately prior to the date of such issuance or sale by a fraction (not to be less than one) (i) the numerator of which shall be equal to the product of (A) the total number of shares of Common Stock outstanding after giving effect to the exercise, conversion or exchange of all such options, rights or securities to be issued in such transaction and (B) the Current Market Value per share of Common Stock determined immediately before such date and (ii) the denominator of which shall be equal to the sum of (A) the product of (1) the total number of shares of Common Stock outstanding immediately prior to the date of such issuance or sale and (2) the Current Market Value per share of the Common Stock determined immediately prior to the date of such issuance or sale and (B) the aggregate consideration per share (determined as set forth in subsection (ii)(x) and (y) above) for which Common Stock is deliverable upon exercise, conversion or exchange of such options, rights or securities. Aggregate consideration for purposes of the preceding clause (B) shall be determined as follows: In case any options, rights or convertible or exchangeable securities (or options or rights with respect thereto) shall be issued or sold, or exercisable, convertible or exchangeable for cash, the consideration received therefor shall be deemed to be the amount payable to the Issuer (determined as set forth in subsection (ii)(x) and (y) above) therefor (without deduction therefrom of any expenses incurred or any underwriting commissions or concessions or discounts or, in the case of a private placement thereof, finders' fees or commissions paid or allowed by the Issuer in connection therewith). In case any such options, rights or securities shall be issued or sold, or exercisable, convertible or exchangeable for a consideration other than cash payable to the Issuer, the consideration received therefor (determined as set forth in subsection (ii)(x) and (y) above) shall be deemed to be the fair market value thereof as reasonably determined in good faith by the Board (without deduction therefrom of any expenses incurred or any underwriting commissions or concessions or discounts or, in the case of a private placement thereof, finders' fees or commissions paid or allowed by the Issuer in connection therewith). In case any such options, rights or securities shall be issued or sold, or exercisable, convertible or exchangeable in connection with any merger of another corporation into the Issuer, the amount of consideration therefor shall be deemed to be the fair market value of such portion of the assets of such merged corporation as the Board shall reasonably determine to be attributable to such options, rights or securities. SECTION 5.04. Superseding Adjustment. If at any time after any adjustment in the number of shares of Warrant Stock comprising a Stock Unit shall have been made on the basis of the issuance of any options or rights, or convertible or exchangeable securities (or options or rights with respect to such securities) pursuant to Section 5.03: (a) the options or rights shall expire prior to exercise or the right to convert or exchange any such securities shall terminate; or 20 (b) the consideration per share for which shares of Common Stock are issuable pursuant to the terms of such options or rights or convertible or exchangeable securities shall be increased or decreased, other than under or by reason of provisions designed to protect against dilution, such previous adjustment shall be rescinded and annulled, and thereupon a recomputation shall be made of the effect of such options or rights or convertible or exchangeable securities with respect to shares of Common Stock on the basis of: (A) treating the number of shares of Common Stock, if any, theretofore actually issued or issuable pursuant to the previous exercise, conversion or exchange of such options, rights or securities as having been issued on the date or dates of such exercise, conversion or exchange and for the aggregate consideration actually received and receivable therefor, and (B) treating any such options, rights or securities which then remain outstanding as having been granted or issued immediately after the time of such increase or decrease for the aggregate consideration per share for which shares of Common Stock are issuable upon exercise, conversion or exchange of such options, rights or securities. To the extent called for by the foregoing provisions of this Section 5.04 on the basis aforesaid, a new adjustment in the number of shares of Warrant Stock comprising a Stock Unit shall be made in accordance with Section 5.03, determined using the Current Market Value as determined at the time of the previous adjustment, which new adjustment shall supersede the previous adjustment so rescinded and annulled. If the exercise, conversion or exchange price provided for in any such option, right or security shall decrease at any time under or by reason of provisions designed to protect against dilution and there has been no anti-dilution adjustment under this Article V related to the same event, then in the case of the delivery of shares of Common Stock upon the exercise, conversion or exchange of any such option, right or security, the Stock Unit purchasable upon the exercise of a Warrant shall forthwith be adjusted (using a weighted average basis in accordance with the formula set forth in Section 5.03 and using the Current Market Value as determined at the time of initial issuance or sale thereof) in the manner which would have been obtained had the adjustment made upon issuance of such option, right or security been made upon the basis of the issuance of (and the aggregate consideration received for) the shares of Common Stock delivered as aforesaid. SECTION 5.05. Other Provisions Applicable to Adjustments. The following provisions shall be applicable to the making of adjustments of the number of shares of Warrant Stock comprising a Stock Unit: 21 (a) The sale or other disposition of any issued shares of Common Stock owned or held by or for the account of the Issuer (other than to the Holders hereunder) shall be deemed to be an issuance thereof for purposes of this Article V. (b) In computing adjustments under this Article V, fractional interests in Common Stock shall be taken into account to the nearest one-thousandth of a share. (c) If the Issuer shall take a record of the holders of its Common Stock for the purpose of entitling them to receive a dividend or distribution or subscription or purchase rights and shall, thereafter and before the distribution thereof, abandon its plan to pay or deliver such dividend, distribution, subscription or purchase rights, then no adjustment shall be required by reason of the taking of such record and any such adjustment previously made in respect thereof shall be rescinded and annulled. SECTION 5.06. Merger, Consolidation or Disposition of Assets. If the Issuer shall merge or consolidate with another Person, or shall sell, transfer or otherwise dispose of all or substantially all of its assets to another Person and pursuant to the terms of such merger, consolidation or disposition of assets, cash, shares of common stock or other securities of the successor or acquiring Person, or property of any nature is to be received by or distributed to the holders of Common Stock, then each outstanding Warrant shall automatically (effective as of the consummation of such merger, consolidation or sale, transfer or disposition), without any further action on the part of the Holder thereof, be converted into the right to receive (whether or not such Holder exercises such Warrant) the amount of cash or other consideration it would have been entitled to receive if such Holder had exercised such Warrant (to the extent not previously exercised) immediately prior to the occurrence of such merger, consolidation, sale, transfer or disposition, net of the aggregate exercise price of such Warrant, and such Warrant shall thereupon be deemed to have been exercised and be canceled. SECTION 5.07. Other Action Affecting Common Stock. If at any time or from time to time the Issuer shall take any action affecting its Common Stock, other than an action described in any of the foregoing subsections of this Article V or an action taken in the ordinary course of the Issuer's business and consistent with past practice, then, unless in the reasonable opinion of the Board such action will not have a material adverse effect upon the rights of the Holders of the Warrants, the number of shares of Warrant Stock comprising a Stock Unit shall be adjusted in such manner and at such time as the Board shall in good faith determine to be equitable in the circumstances. SECTION 5.08. Exclusions from Adjustment. Anything to the contrary herein notwithstanding, no adjustment to the number of shares of Warrant Stock comprising a Stock Unit shall be made as a result of, or in connection with, the issuance of (a) any Common Stock, Convertible Security or Option pursuant to an Option Plan or any Common Stock or Convertible Securities issuable or issued upon the conversion, exchange or exercise of any such Convertible 22 Security or Option (so long as the issuance, conversion, exchange or exercise price for such Common Stock, Convertible Security or Option is not less than the closing price for the Common Stock on the date of grant or the next preceding trading day on which a trade occurred), (b) any Common Stock issued pursuant to the Issuer's Amended and Restated 1997 Stock Bonus Plan as in effect on the date hereof, (c) any Common Stock or other securities pursuant to the exercise, conversion or exchange of Convertible Securities or Options outstanding on the Issuance Date and listed in Schedule 3.07(a), (d) any Common Stock, Convertible Securities or Options pursuant to any merger transaction involving the Issuer or any of its Subsidiaries or as consideration for the acquisition by the Issuer or any of its Subsidiaries of the capital stock or assets of any other Person (or any securities issued upon exercise or conversion thereof), (e) any rights to purchase securities issued with respect to each share of Common Stock pursuant to the Rights Agreement or (f) any Other Warrants or any Common Stock or other securities issued upon the exercise or conversion of the Warrants or the Other Warrants. SECTION 5.09. Notice of Adjustments. Whenever the number of shares of Warrant Stock comprising a Stock Unit shall be adjusted pursuant to this Agreement, the Issuer shall forthwith obtain a certificate signed by the Issuer's chief financial officer, setting forth, in reasonable detail, the event requiring the adjustment and the method by which such adjustment was calculated and specifying the number of shares of Warrant Stock comprising a Stock Unit, after giving effect to such adjustment. The Issuer shall promptly cause a signed copy of such certificate to be delivered to each Holder. The Issuer shall keep at its office copies of all such certificates and cause the same to be available for inspection at said office during normal business hours by any Holder or any prospective purchaser of Warrants designated by any Holder. SECTION 5.10. Notice of Certain Corporate Action. If the Issuer shall propose (i) to pay any dividend to the holders of its Common Stock or to make any other distribution to the holders of its Common Stock; (ii) to offer to all holders of its Common Stock rights to subscribe for or to purchase any additional shares of its Common Stock (or options or rights with respect thereto) (other than rights under the Rights Agreement); (iii) to effect any reclassification of its Common Stock; (iv) to effect any capital reorganization; (v) to effect any consolidation, merger or sale, transfer or other disposition of all or substantially all of its assets; (vi) to effect the liquidation, dissolution or winding up of the Issuer; or (vii) to take any other action which would require an adjustment to the number of shares of Warrant Stock comprising a Stock Unit to be made in accordance with this Article V, then, in each such case, the Issuer shall give to each Holder of Warrants a notice of such proposed action as soon as reasonably practicable prior to the date of the relevant transaction, which shall specify the date on which a record is to be taken for the purposes of such dividend, distribution or rights offer, or the date on which such reclassification, issuance, reorganization, consolidation, merger, sale, transfer, disposition, liquidation, dissolution or winding up is to take place and the date of participation therein by the holders of Common Stock, if any such date is to be fixed, and shall also set forth such facts with respect thereto as shall be reasonably necessary to indicate the effect of such action on the 23 Common Stock, and the number of shares of Warrant Stock which will comprise a Stock Unit after giving effect to any adjustment which will be required as a result of such action. The failure to give such notice, or any defect therein, shall not affect the legality or validity of any dividend, distribution, right, option, warrant, reclassification, reorganization, consolidation, merger, sale, transfer, disposition, liquidation, dissolution or winding up, or the vote upon any such action. ARTICLE VI REGISTRATION RIGHTS SECTION 6.01. Demand and Piggyback Registrations. (a) Either (i) upon receipt of notice (a "Demand Notice") from the Holders and/or Other Holders of at least 25% of the sum of (I) the Warrant Stock issued or issuable upon exercise of the Warrants (for which purpose, Holders of Warrants shall be deemed holders of the Warrant Stock issued on exercise thereof) and (II) the Other Warrant Stock issued or issuable upon exercise of the Other Warrants (for which purpose, Other Holders of Other Warrants shall be deemed holders of the Other Warrant Stock issued on exercise thereof) given at any time requesting that the Issuer effect the registration of such Warrant Stock and Other Warrant Stock held by such Holders and/or Other Holders, or (ii) whenever the Issuer gives notice (a "Piggyback Notice") that it proposes to effect the registration of all or any part of the Common Stock under the Securities Act (except pursuant to registrations on Form S-4 or Form S-8 promulgated by the Commission or any successor or similar forms thereto) (whether for its own account or for the benefit of Shareholders other than holders of the Warrants, the Warrant Stock, Other Warrants or Other Warrant Stock), the Issuer shall promptly, and in any event at least 20 days prior to the effective date of the proposed registration statement, give written notice of such proposed registration to all Holders and Other Holders. Each Holder or Other Holder that wishes to register its Warrant Stock or Other Warrant Stock, as the case may be, in such registration (each, a "Seller") shall, within 15 days after receipt of such notice from the Issuer, deliver to the Issuer a notice (a "Seller Notice") stating that such Seller wishes to participate therein and setting forth the number of shares of Warrant Stock or Other Warrant Stock that such Seller desires to include in such registration. The Issuer thereupon shall, subject to Section 6.01(b) as expeditiously as practicable, use its best efforts to effect the registration under the Securities Act of such Warrant Stock and Other Warrant Stock (any such registration effected or undertaken pursuant to a Demand Notice being herein referred to as a "Demand Registration" and any such registration of Warrant Stock or Other Warrant Stock effected in connection with a Piggyback Notice being herein referred to as a "Piggyback Registration"); provided that (w) the Issuer shall not be required to effect more than three Demand Registrations, (x) there shall be no limit on the number of Piggyback Registrations, (y) no Demand Registration or Piggyback Registration shall be available hereunder at any time after the fifth anniversary of the Issuance Date and (z) the Issuer shall not be required to honor a request for a Demand Registration pursuant to which a registration statement would be declared effective prior to the expiration of 120 days following the last effective date of any previous 24 registration statement pursuant to Section 6.01(a) . In the event that (i) the amount of securities proposed to be sold by Sellers pursuant to a Demand Notice shall be reduced pursuant to Section 6.02(a) to an amount which is less than 75% of the amount of securities originally proposed to be sold by Sellers, or (ii) any Demand Notice shall be withdrawn by the Holders and Other Holders originally giving such Demand Notice at any time prior to the filing by the Issuer of a preliminary registration statement in connection with such Demand Notice, then, in such event, no right to a Demand Registration shall be deemed to have been exercised or forfeited and such Demand Notice shall not operate to reduce the Issuer's obligation to effect Demand Registrations on the terms provided herein. (b) The Issuer may defer the filing (but not the preparation) of a registration statement required by Section 6.01(a)(i) until a date not later than 105 days after the date of the Demand Notice if at the time the Issuer receives the Demand Notice, (i) the Issuer is conducting or is actively pursuing a public offering of equity securities, (ii) the Issuer or any of its Subsidiaries is engaged in confidential negotiations or other confidential business activities, disclosure of which would be required in such registration statement, and the Board determines in good faith that such disclosure would be materially detrimental to the Issuer and its Shareholders or would have a material adverse effect on any such confidential negotiations or other confidential business activities or (iii) the Board determines in good faith that there is a valid business purpose or reason for delaying filing. A deferral of the filing of a registration statement pursuant to this Section 6.01(b) shall be lifted, and the requested registration statement shall be filed forthwith, if the event which resulted in such deferral is terminated (or, in the case of negotiations of the type referred to in clause (ii) above, such negotiations are disclosed). In order to defer the filing of a registration statement pursuant to this Section 6.01(b), the Issuer shall promptly (but in any event within 10 days), upon determining to seek such deferral, deliver to each Seller a certificate signed by an executive officer of the Issuer setting forth a statement of the reason for such deferral and an approximation of the anticipated delay, which information the Sellers shall treat as confidential. Within 20 days after receiving such certificate, Sellers holding a majority in interest of the Warrant Stock and Other Warrant Stock for which registration was previously requested may withdraw such request by giving notice of such withdrawal to the Issuer; if withdrawn, the Demand Notice shall be deemed not to have been made for all purposes of this Agreement. The Issuer may not invoke its right to defer the filing of a registration statement under this Section 6.01(b) more than once in any twelve-month period. (c) Neither the Issuer nor any of its security holders (other than holders of the Warrants, the Warrant Stock, the Other Warrants or the Other Warrant Stock) shall have the right to include any of the Issuer's securities in a registration statement to be filed as part of a Demand Registration unless (i) such securities are of the same class or series as the securities covered by such registration statement and (ii) if such Demand Registration is an underwritten offering, the Issuer or such security holders, as applicable, agree in writing to sell, subject to Section 6.02, their securities on the same terms and conditions as apply to the securities being sold. If any security holders of the Issuer (other than holders of the Warrants, the Warrant Stock, the Other 25 Warrants or the Other Warrant Stock) register securities in a Demand Registration in accordance with this Section 6.01(c), such holders shall pay the fees and expenses of their own counsel and their pro rata share, on the basis of the respective amounts of the securities included in such registration on behalf of each such security holder, of the expenses to be paid pursuant to Section 6.04 if such expenses are not paid by the Issuer for any reason. (d) If a Demand Registration involves an underwritten offering, the Issuer shall have the right to select the investment banker(s) and managing underwriter(s) to administer such offering, which investment banker(s) or managing underwriter(s), as the case may be, shall be reasonably acceptable to the holders of at least 50% of the Warrant Stock and Other Warrant Stock to be included in such Demand Registration. SECTION 6.02. Hold-Back Agreements; Cutbacks. (a) Each holder of Warrant Stock or Other Warrant Stock that is covered by a registration statement filed pursuant to Section 6.01 agrees, if requested by the managing underwriters in an underwritten offering, not to effect any public sale or distribution of securities of the Issuer of the same class as the securities included in such registration statement, including a sale pursuant to Rule 144 under the Securities Act (except as part of such underwritten registration), during the 15-day period prior to, and during the 90-day period beginning on, the closing date of each underwritten offering made pursuant to such registration statement, to the extent timely notified in writing by the Issuer or the managing underwriters; provided that such holders of Warrant Stock and Other Warrant Stock shall be subject to the hold-back restrictions of this Section 6.02(a) (i) only once during any twelve-month period and (ii) unless such underwriter(s) otherwise agree, only if each holder of equity securities of the Issuer which is a party to a registration rights agreement with the Issuer entered into on or after the date hereof, and each holder of equity securities purchased from the Issuer (which is party to a registration rights agreement with the Issuer entered into) at any time after the date of this Agreement (other than in a public offering), shall have agreed, to the extent permitted by law, not to effect any such public sale or distribution of such securities (including a sale under Rule 144), during such period, except as part of such underwritten registration. The foregoing provisions shall not apply to any Holder of Warrant Stock or Other Holder of Other Warrant Stock if such holder is prevented by applicable statute or regulation from entering into any such agreement; provided that such holder shall undertake, in its request to participate in any such underwritten offering, not to effect any public sale or distribution of any Warrant Stock or Other Warrant Stock held by such holder and covered by a registration statement commencing on the date of sale of the Warrant Stock or Other Warrant Stock, as the case may be, unless it has provided 45 days prior written notice of such sale or distribution to the underwriter or underwriters. (b) The Issuer agrees not to effect any public or private offer, sale or distribution of any of its equity securities or any class or series of its capital stock having a preference in 26 liquidation or with respect to dividends, including a sale pursuant to Regulation D under the Securities Act (other than any such sale or distribution of such securities in connection with any merger or consolidation by the Issuer or any subsidiary of the Issuer or the acquisition by the Issuer or a subsidiary of the Issuer of the capital stock or substantially all the assets of any other Person or in connection with any employee stock option or other benefit plan), during the 10-day period prior to, and during the 90-day period beginning with, the effectiveness of a registration statement filed under Section 6.01 to the extent timely notified in writing by any Holder of Warrant Stock, any Other Holder of Other Warrant Stock or the managing underwriters in an underwritten offering (except as part of such offering if permitted, or pursuant to registrations on Forms S-4 or S-8 or any successor form to such registration Forms). (c) In connection with any registration hereunder in which more than one security holder has a right to request registration of its Common Stock, in the event that such registration involves an underwritten offering and the managing underwriter or underwriters participating in such offering advise the security holders participating in such offering that the total number of shares of Common Stock to be included in such offering exceeds the amount that can be sold in (or during the time of) such offering without delaying or jeopardizing the success of such offering (including the price per share of Common Stock), then the total number of shares of Warrant Stock, Other Warrant Stock and all other shares of Common Stock which have registration rights with respect to such registration to be offered for the account of all security holders shall be reduced to a number deemed satisfactory by such managing underwriter or underwriters, provided that the shares of Common Stock to be excluded shall be determined in the following sequence: there shall be excluded (i) first, shares of Common Stock held by security holders of the Issuer requesting and legally entitled to include such shares of Common Stock in such registration pursuant to a "piggyback" registration (other than the holders of Warrant Stock and/or Other Warrant Stock), on a pro rata basis (based upon the number of shares of Common Stock requested (or proposed) to be registered by each such holder, (ii) second, to the extent requesting to be included pursuant to a Piggyback Registration, Warrant Stock and Other Warrant Stock, on a pro rata basis (based upon the number of shares of Warrant Stock and Other Warrant Stock requested to be included in such registration), (iii) third, shares of Common Stock held by security holders of the Issuer requesting and legally entitled to include such shares of Common Stock in such registration pursuant to a "demand" registration (other than the holders of Warrant Stock and/or Other Warrant Stock), on a pro rata basis (based upon the number of shares of Common Stock requested (or proposed) to be registered by each such holder and (iv) fourth, to the extent requesting to be included pursuant to a Demand Registration, Warrant Stock and Other Warrant Stock, on a pro rata basis (based upon the number of shares of Warrant Stock and Other Warrant Stock requested to be included in such registration). SECTION 6.03. Registration Procedures. If and whenever the Issuer is required by the provisions of Section 6.01(a)(i) or, with respect to subsections (d), (g), (h), (i), (j), (k) and (n) of this Section 6.03, by the provisions of Section 6.01(a)(i) or 6.01(a)(ii), to use its best 27 efforts to effect the registration of any of its securities under the Securities Act, the Issuer shall, as expeditiously as possible, (a) prepare and file with the Commission a registration statement with respect to such securities and use its best efforts to cause such registration statement to become and remain effective for a period of not less than 90 days to permit the sale of such securities in accordance with the plan of distribution chosen by the Seller or Sellers and the underwriter, if any; (b) prepare and file with the Commission such amendments and supplements to such registration statement and the prospectus used in connection therewith as may be necessary to keep such registration statement effective and to comply with the provisions of the Securities Act with respect to the sale or other disposition of all securities covered by such registration statement; (c) promptly notify each Seller and the underwriter or underwriters, if any: (i) when such registration statement or any prospectus used in connection therewith, or any amendment or supplement thereto, has been filed and, with respect to such registration statement or any post-effective amendment thereto, when the same has become effective; (ii) of any written comments from the Commission with respect to any filing referred to in clause (i) above and of any written request by the Commission for amendments or supplements to such registration statement or prospectus; (iii) of the notification to the Issuer by the Commission of its initiation of any proceeding with respect to the issuance by the Commission of, or of the issuance by the Commission of, any stop order suspending the effectiveness of such registration statement; and (iv) of the receipt by the Issuer of any notification with respect to the suspension of the qualification of any securities for sale under the applicable securities or blue sky laws of any jurisdiction; (d) furnish to each Seller such registration statement and of each amendment and supplement thereto (including all exhibits and documents incorporated by reference therein) and such numbers of copies of a prospectus, including a preliminary prospectus, in conformity with the requirements of the Securities Act, and such other documents, as such Seller may reasonably request in order to facilitate the public sale or other disposition of the securities owned by such Seller; 28 (e) use its best efforts to register or qualify the securities covered by such registration statement under such other securities or blue sky laws of such jurisdictions within the United States as each Seller shall reasonably request, and do such other reasonable acts and things as may be requested of it to enable such Seller to consummate the public sale or other disposition in such jurisdictions of the securities owned by such Seller, except that the Issuer shall not for any such purpose be required to qualify to do business as a foreign corporation in any jurisdiction wherein it is not otherwise required to be so qualified; (f) use its best efforts to cause the securities covered by such registration statement to be registered with or approved by such other governmental agencies or authorities as may be necessary to enable the Seller or Sellers thereof to consummate the disposition of such securities; (g) notify each Seller of any securities covered by such registration statement, at any time when a prospectus relating thereto is required to be delivered under the Securities Act, of the Issuer's becoming aware that the prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances under which they were made (upon receipt of which each Seller agrees to forthwith cease making offers and sales of such securities pursuant to such prospectus and to deliver to the Issuer any copies of such prospectus then in the possession of such Seller), and at the request of any such Seller promptly prepare and furnish to such Seller a reasonable number of copies of a prospectus supplemented or amended so that, as thereafter delivered to the purchasers of such securities, such prospectus shall not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances under which they were made; (h) make available to its security holders, as soon as reasonably practicable, an earnings statement covering the period of at least twelve months, but not more than eighteen months, beginning with one of the first three months after the effective date of the registration statement, which earnings statement shall satisfy the provisions of Section 11(a) of the Securities Act; (i) otherwise use its best efforts to comply with all applicable rules and regulations of the Commission; (j) use its best efforts to list such securities on any securities exchange on which the Common Stock is then listed, or, if not so listed, on a national securities exchange, if the listing of such securities is then permitted under the rules of such exchange; 29 (k) provide a transfer agent and registrar for all the securities covered by such registration statement not later than the effective date of such registration statement; (l) enter into such agreements and take such other actions as the Seller or Sellers shall reasonably request in order to expedite or facilitate the disposition of such securities; (m) obtain an opinion from the Issuer's counsel and a "cold comfort" letter from the Issuer's independent public accountants in customary form and covering such matters as the Seller or Sellers shall reasonably request; (n) make available for inspection by any Seller of securities covered by such registration statement, by any underwriter participating in any disposition to be effected pursuant to such registration statement and by any attorney, accountant or other agent retained by any such Seller or any such underwriter, all pertinent financial and other records, pertinent corporate documents and properties of the Issuer, and cause all of the Issuer's officers, directors and employees to supply all information reasonably requested by any such Seller, underwriter, attorney, accountant or agent in connection with such registration statement; and (o) permit any Seller of securities covered by such registration statement to require the insertion therein of material, furnished to the Issuer in writing, which in the reasonable judgment of such Seller should be included. If any such registration or comparable statement refers to any Seller by name or otherwise as the holder of any securities of the Issuer, then such Seller shall have the right to require (x) the insertion therein of language, in form and substance satisfactory to such Seller, to the effect that the holding by such Seller of such securities is not to be construed as a recommendation by such Seller of the investment quality of the Issuer's securities covered thereby and that such holding does not imply that such Seller will assist in meeting any future financial requirements of the Issuer, or (y) in the event that such reference to such Seller by name or otherwise is not required by the Securities Act or the Commission, the deletion of the reference to such Seller. The Issuer may require each Seller of securities to, and each such Seller, as a condition to including securities in such registration, shall, furnish the Issuer with such information and affidavits regarding such Seller and the distribution of such securities as the Issuer may from time to time reasonably request in writing in connection with such registration. No Seller may participate in any underwritten registration hereunder unless such Seller (x) agrees to sell such Seller's securities on the basis provided in any underwriting arrangements approved by the Persons entitled hereunder to approve such arrangements and (y) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other 30 documents reasonably required under the terms of such underwriting arrangements and these registration rights. Each Seller of securities agrees that upon receipt of any notice from the Issuer of the happening of any event of the kind described in Section 6.03(g), such Seller will forthwith discontinue such Seller's disposition of securities pursuant to the registration statement relating to such securities until such Seller's receipt of the copies of the supplemented or amended prospectus contemplated by Section 6.03(g) and, if so directed by the Issuer, will deliver to the Issuer (at the Issuer's expense) all copies, other than permanent file copies, then in such Seller's possession of any prospectus relating to such securities at the time of receipt of such notice. SECTION 6.04. Registration Expenses. All expenses incident to the Issuer's performance of or compliance with this Article VI, including without limitation all (i) registration and filing fees, fees and expenses associated with filings required to be made with the NYSE or NASD, (ii) fees and expenses of compliance with securities or blue sky laws (including reasonable fees and disbursements of counsel for the underwriters, if any, or selling holders in connection with blue sky qualifications of the Warrant Stock and Other Warrant Stock and determination of their eligibility for investment under the laws of such jurisdictions as the managing underwriters, if any, or holders of a majority of the Warrant Stock and the Other Warrant Stock being sold may reasonably designate, provided that the Holders and the Other Holders collectively shall be entitled to reimbursement for only one counsel in connection with each registration), (iii) printing expenses (including expenses of printing certificates for the Warrant Stock and the Other Warrant Stock in a form eligible for deposit with The Depository Trust Company and of printing prospectuses), (iv) fees and disbursements of counsel for the Issuer and customary out of pocket expenses and fees paid by issuers to the extent provided for in an underwriting agreement or otherwise (excluding discounts, commissions or fees of underwriters, selling brokers, dealer managers or similar securities industry professionals relating to the distribution of the Warrant Stock and Other Warrant Stock, transfer taxes or legal expenses of any Person other than the Issuer and the selling holders), (v) the cost of securities acts liability insurance if the Issuer so desires and (vi) fees and expenses of other Persons retained by the Issuer (all such expenses being herein called "Registration Expenses") will be borne by the Issuer regardless of whether the Registration Statement becomes effective. Each holder of Warrant Stock and Other Warrant Stock will pay any fees or disbursements of counsel to such holder and all underwriting discounts and commissions and transfer taxes, if any, and other fees, costs and expenses of such holder (other than Registration Expenses) relating to the sale or disposition of such holder's Warrant Stock or Other Warrant Stock, as the case may be. The Issuer, in any event, will pay the Issuer's own internal expenses (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties), the expense of any annual audit, the fees and expenses incurred in connection with the listing of the securities to be registered on each securities exchange on which similar securities issued by the Issuer are then listed, rating agency fees and the fees and expenses of any Person, including special experts, retained by the Issuer. 31 SECTION 6.05. Indemnification. (a) In the event of any registration of any of its securities under the Securities Act pursuant to this Article VI, the Issuer shall, to the full extent permitted by law, indemnify and hold harmless each Seller of such securities, its directors, officers and employees, and each other Person, if any, who controls such Seller within the meaning of Section 15 of the Securities Act, against any losses, claims, damages, liabilities or expenses ("Losses") to which such Seller or any such director, officer or controlling Person may become subject under the Securities Act or otherwise, insofar as such Losses (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in any registration statement under which such securities were registered under the Securities Act, any preliminary prospectus, final prospectus or summary prospectus contained therein, 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 (in the case of a prospectus, in light of the circumstances under which there were made) not misleading, and shall reimburse such Seller or such director, officer or controlling Person for any legal or any other expenses reasonably incurred by such Seller or such director, officer or controlling Person in connection with investigating or defending any such Loss; provided that the Issuer shall not be liable in any such case to the extent that any such Loss arises out of or is based upon any untrue statement or alleged untrue statement or omission or alleged omission made in such registration statement, preliminary prospectus, final prospectus, summary prospectus or amendment or supplement in reliance upon and in conformity with written information furnished by such Seller to the Issuer stating that it is for inclusion therein by such Seller; provided further that with respect to any untrue statement or omission or alleged untrue statement or omission made in any preliminary prospectus, the indemnity agreement contained in this paragraph shall not apply to the extent that any such Loss results from the fact that a current copy of the prospectus was not sent or given to the Person asserting any such Loss at or prior to the written confirmation of the sale of the securities concerned to such Person if the Issuer had prior thereto given such Seller the notice referred to in Section 6.03(g) and provided to such Seller a supplemented or amended prospectus as contemplated by Section 6.03(g), and such current copy of the prospectus would have cured the defect giving rise to such Loss. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of such Seller or such director, officer or controlling Person, and shall survive the transfer of such securities by such Seller. (b) Each Seller of securities which are included in a registration statement hereunder, as a condition to including securities in such registration statement, shall, to the full extent permitted by law, indemnify and hold harmless the Issuer, its directors and officers and each other Person, if any, who controls the Issuer within the meaning of Section 15 of the Securities Act, against any Losses to which the Issuer or any such director, officer or controlling Person may become subject under the Securities Act or otherwise, insofar as such Losses (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in such registration statement, any preliminary 32 prospectus, final prospectus or summary prospectus contained therein, 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 (in the case of a prospectus, in the light of the circumstances under which they were made) not misleading, if such untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with written information furnished by such Seller to the Issuer stating that it is specifically for use therein; provided, however, that the obligation to provide indemnification pursuant to this Section 6.05(b) shall be several, and not joint and several, among such Sellers on the basis of the number of securities included by each in such registration statement and the aggregate amount which may be recovered from any holder of securities pursuant to the indemnification provided for in this Section 6.05(b) in connection with any sale of securities shall be limited to the total proceeds received by such holder from the sale of such securities. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of the Issuer or any such other Person and shall survive the transfer of such securities by such Seller. (c) Promptly after receipt by any Person entitled to indemnification under this Section (an "Indemnified Party") of notice of the commencement of any action, such Person shall, if a claim in respect thereof is to be made against any other Person (an "Indemnifying Party") for indemnity under this Section 6.05, notify the Indemnifying Party in writing of the commencement thereof; but the omission so to notify the Indemnifying Party shall not relieve it from any liability which it may have to any Indemnified Party, except to the extent that the Indemnifying Party is prejudiced thereby. The Indemnifying Party may, upon being notified of such action, assume the defense thereof, with counsel satisfactory to such Indemnified Party, and, after such assumption, the Indemnifying Party shall not be liable to such Indemnified Party under this Section 6.05 for any legal expenses of other counsel or any other expenses, in each case subsequently incurred by such Indemnified Party, in connection with the defense thereof; provided, however, that the Indemnifying Party may not assume the defense of the action, and shall remain liable to the Indemnified Party for its legal expenses of counsel and other expenses, in the event that the Indemnified Party reasonably determines that a conflict of interest may exist between the Indemnified Party and the Indemnifying Party. No Indemnifying Party shall consent to entry of any judgment or enter into any settlement of the relevant claim or litigation without the consent of the Indemnified Party which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnified Party of a release from all liability in respect to such claim or litigation. (d) If the indemnification provided for in this Section 6.05 is unenforceable although available, or insufficient to hold harmless an Indemnified Party hereunder for any Losses (or actions in respect thereof) in respect of which the provisions of Section 6.05(a) or (b) would otherwise apply by their terms, then the Indemnifying Party shall contribute to the amount paid or payable by such Indemnified Party as a result of such Losses (or actions in respect thereof) in such proportion as is appropriate to reflect the relative fault of the Indemnifying Party 33 on the one hand and the Indemnified Party on the other hand in connection with the statements or omissions which resulted in such Losses (or actions in respect thereof), as well as any other relevant equitable considerations. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact relates to information supplied by the Indemnifying Party on the one hand or such Indemnified Party on the other hand and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The parties agree that it would not be just and equitable if contribution pursuant to this subsection 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 this subsection. The amount paid or payable as a result of the Losses (or actions in respect thereof) referred to above in this subsection shall be deemed to include any legal or other expenses reasonably incurred by such Indemnified Party in connection with investigating or defending any such action or claim. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation. SECTION 6.06. No Other Registration Rights. The Issuer shall not hereafter, without the consent of the Required Holders, grant any registration rights to any holder of Securities in respect of such Securities if such registration rights would rank senior to, or otherwise adversely affect, the registration rights granted in this Article VI. This Section 6.06 shall not prohibit the grant of registration rights to others on a "pari passu" basis with those granted in this Article VI. ARTICLE VII TAG-ALONG SALE SECTION 7.01. Tag-Along Rights. (a) If at any time prior to the third anniversary of the Issuance Date any Principal Shareholder or any Related Party thereof (each a "Tag-Along Seller") shall enter into an agreement to effect, or effect or propose to effect, any sale, transfer or other disposition of Common Stock owned by such Principal Shareholder or Related Party to any other Person (a "Tag-Along Sale"), each Holder of Warrants or Warrant Stock shall have the right, but not the obligation, to participate in such Tag-Along Sale by selling up to the number of shares (on an aggregate basis) of Warrant Stock issued upon exercise of Warrants equal to the product of (i) the total number of shares (on an aggregate basis) of Common Stock proposed to be sold in the proposed Tag-Along Sale multiplied by (ii) a fraction, the numerator of which is equal to the number of shares (on an aggregate basis) of Warrant Stock owned by such Holder immediately prior to such Tag-Along Sale, and the denominator of which is equal to (A) the number of shares (on an aggregate basis) of Common Stock (and Common Stock then issuable under Options and Convertible Securities) owned by the Tag-Along Seller immediately prior to such Tag-Along Sale plus (B) the number of shares (on an aggregate basis) of Warrant Stock owned by such Holder together with the number of shares (on an aggregate 34 basis) of Common Stock (and Common Stock then issuable under Options and Convertible Securities) owned by any holder thereof who has similar "tag-along" rights and elects to exercise such rights in connection with the Tag-Along Sale, in each case immediately prior to the Tag-Along Sale. Any such sales by such Holder shall be on the same terms and conditions as the proposed Tag-Along Sale by the Tag-Along Seller, except such Holder shall not be required to make any representations or warranties other than with respect to (x) its title to and ownership of the shares of Warrant Stock to be sold by it in such Tag-Along Sale, (y) such Holder's power and authority to effect such transfer and (z) such matters pertaining to compliance with securities law as the transferee of such Warrant Stock may reasonably require. As a condition to participating in such Tag-Along Sale, any such Holder proposing to sell Warrant Stock in such sale must exercise its Warrants to acquire Common Stock representing such Warrant Stock. No Person shall have the right to sell Warrants in any Tag-Along Sale. (b) Notwithstanding the foregoing, the provisions of Sections 7.01(a) and 7.02 shall not apply to the following: (I) any transfer, sale or disposition of any shares of Common Stock by any Principal Shareholder or any Related Party thereof: (i) to any Related Party of such Principal Shareholder (or, in the case of any such Related Party, to such Principal Shareholder), provided that prior to the consummation of such transfer, sale or disposition, the transferee (if not already party to a Joinder Agreement) shall have entered into a Joinder Agreement); (ii) in connection with any tender offer or other disposition of Common Stock in connection with any business combination involving the Issuer in which the Shareholders generally shall have the right to participate; (iii) by gift, to trusts and family partnerships for estate or charitable planning purposes, by will or as a result of inheritance laws; (iv) in a registered public offering; and (II) any other transfer, sale or disposition of any shares of Common Stock by any Principal Shareholder or any Related Party thereof (other than those permitted under clause (I) above); provided that the total aggregate number of shares transferred, sold or disposed of by such Principal Shareholder and its Related Parties under this clause (II) after the Issuance Date shall not be more than 10% of the then issued and outstanding Common Stock on a fully diluted basis. (c) On the date of execution of this Agreement the Issuer shall deliver to the Initial Holders a joinder agreement substantially in the form attached hereto as Annex 3 (a 35 "Joinder Agreement"), executed by each Principal Shareholder and each Related Party of such Principal Shareholder that owns Common Stock, pursuant to which such parties will agree to be bound by the provisions of this Article VII. As a condition to the validity of any sale, disposition or other transfer of any Common Stock by any Person which has executed and delivered a Joinder Agreement pursuant to this Section 7.01(c) to any other Person which, after giving effect thereto, together with its Related Parties would constitute a Principal Shareholder, such other Person (and each of its Related Parties that owns Common Stock) shall execute and deliver to the Issuer and each Holder a Joinder Agreement. SECTION 7.02. Procedures. If a Tag-Along Seller is participating in a Tag-Along Sale, at least 30 days before the proposed date thereof, the Issuer shall provide each Holder of Warrants or Warrant Stock with written notice of such Tag-Along Sale (a "Tag-Along Sale Notice") setting forth in reasonable detail the consideration per share to be paid by the transferee, the number of shares to be sold and the other terms and conditions of the Tag-Along Sale. Each Holder of Warrants or Warrant Stock wishing to participate in the Tag-Along Sale shall provide written notice (a "Tag-Along Participation Notice") to such Tag-Along Seller and to the Issuer within 15 days of the date the Tag-Along Sale Notice is deemed to have been received by such Holder. The Tag-Along Participation Notice shall set forth the number of shares (on an aggregate basis) of Warrant Stock, if any, such Holder elects to include in the Tag-Along Sale. If a Holder, or Holders, of Warrants or Warrant Stock has elected to participate in a Tag-Along Sale, the Tag-Along Seller shall reduce, to the extent necessary, the number of shares of Common Stock that it is entitled to sell in the Tag-Along Sale to permit the Holder, or Holders, of Warrants or Warrant Stock to participate in the Tag-Along Sale and the Holder, or Holders, of Warrant or Warrant Stock so electing shall sell in the Tag-Along Sale such number of shares identified in its Tag-Along Participation Notice. If the Tag-Along Participation Notice is not received from a Holder within the 15-day period specified above, the Tag-Along Seller shall have the right to sell or otherwise transfer the shares of Common Stock to the proposed transferee without any participation by such Holder, but only (i) on the terms and conditions stated in the Tag-Along Sale Notice, and (ii) if the sale or transfer of such shares of Common Stock is consummated not later than 60 days after the end of such 15-day period specified above. SECTION 7.03. Amendment of Article VII. No provision of this Article VII may be amended without the written consent of each of the Principal Shareholders and its Related Parties which is subject to the requirements of this Article VII. ARTICLE VIII HOLDERS' RIGHTS SECTION 8.01. Delivery Expenses. If any Holder surrenders any certificate for Warrants or Warrant Stock to the Issuer or a transfer agent of the Issuer for exchange for instruments of other denominations or registered in another name or names, the Issuer shall 36 cause such new instruments to be issued and shall pay the cost of delivering to or from the office of such Holder from or to the Issuer or its transfer agent, duly insured, the surrendered instrument and any new instruments issued in substitution or replacement for the surrendered instrument. SECTION 8.02. Taxes. The Issuer shall pay all taxes (other than federal, state, local or foreign income, gross receipts, excise, severance, capital stock, franchise, profits, withholding, personal property, sales, use, transfer, registration, value added and alternative or add-on minimum taxes) which may be payable in connection with the execution and delivery of this Agreement or the issuance of the Warrants and Warrant Stock hereunder or in connection with any modification of this Agreement or the Warrants and shall hold each Holder harmless without limitation as to time against any and all liabilities with respect to all such taxes. The obligations of the Issuer under this Section 8.02 shall survive any redemption, repurchase or acquisition of Warrants or Warrant Stock by the Issuer, any termination of this Agreement, and any cancellation or termination of the Warrants. SECTION 8.03. Replacement of Instruments. Upon receipt by the Issuer of evidence reasonably satisfactory to it of the ownership of and the loss, theft, destruction or mutilation of any certificate or instrument evidencing any Warrants or Warrant Stock, and (a) in the case of loss, theft or destruction, of indemnity reasonably satisfactory to it (provided that if the Common Stock is not at the time publicly traded and the owner of the same is any Holder or an institutional lender or investor, its own agreement of indemnity shall be deemed to be satisfactory), or (b) in the case of mutilation, upon surrender or cancellation thereof, the Issuer, at its expense, shall execute, register and deliver, in lieu thereof, a new certificate or instrument for (or covering the purchase of) an equal number of Warrants or Warrant Stock. SECTION 8.04. Indemnification. The Issuer shall indemnify and hold harmless each of the Holders and each of their respective directors, officers, employees, shareholders, Affiliates and agents (each, an "indemnified person") on demand from and against any and all losses, claims, damages, liabilities (or actions or other proceedings commenced or threatened in respect thereof) and expenses that arise out of, result from, or in any way relate to, any claim, proceeding or other action made, brought or threatened against an indemnified person relating to this Agreement or the Warrants, or in connection with the other transactions contemplated hereby, and to reimburse each indemnified person, upon its demand, for any reasonable legal or other expenses incurred in connection with investigating, defending or participating in the defense of any such loss, claim, damage, liability, action or other proceeding (whether or not such indemnified person is a party to any action or proceeding out of which any such expenses arise), other than any of the foregoing claimed by any indemnified person to the extent incurred 37 by reason of the gross negligence or willful misconduct of such indemnified person. No indemnified person shall be responsible or liable to either the Issuer or any other Person for any damages which may be alleged as a result of or relating to this Agreement or the Warrants (other than in connection with a breach of this Agreement), or in connection with the other transactions contemplated hereby and thereby. Any claim for indemnity in connection with or relating to a registration of securities pursuant to Article VI shall be governed by Section 6.05, without regard to the provisions of this Section 8.04. No indemnified person shall consent to entry of any judgment or enter into any settlement of the relevant claim or litigation without the consent of the Issuer (such consent not to be unreasonably withheld) that does not include as an unconditional term thereof the giving by the claimant or plaintiff to the Issuer of a release from all liability in respect to such claim or litigation. SECTION 8.05. Inspection Rights. At any time prior to the fifth anniversary of the Issuance Date, the Issuer shall afford, and shall cause its Subsidiaries to afford, any Holder or its authorized agents, access, at reasonable times, upon reasonable prior notice, (a) to inspect the books and records of the Issuer and its Subsidiaries, (b) to discuss with management of the Issuer and its Subsidiaries the business and affairs of the Issuer and its Subsidiaries and (c) to inspect the properties of the Issuer and its Subsidiaries, subject in each case to the provisions of Section 10.12(b) of the Credit Agreement. At the request of the Issuer, if a Holder is not bound by such Section 10.12(b), such Holder shall execute and deliver a confidentiality agreement with the Issuer on substantially the same terms as set forth in said Section 10.12(b). ARTICLE IX OTHER COVENANTS OF THE ISSUER The Issuer agrees with each Holder that, so long as any of the Warrants and/or Warrant Stock shall be outstanding and held by a Holder, provided that the covenants set forth below shall expire not later than the fifth anniversary of the Issuance Date: SECTION 9.01. Financial Statements, Etc. The Issuer covenants that it will file the reports required to be filed by it under the Securities Act and the Exchange Act and the rules and regulations adopted by the Commission thereunder (or, if it is not required to file such reports, it will, upon the request of the Required Holders, make publicly available other information so long as necessary to permit sales pursuant to Rule 144 under the Securities Act), and it will take such further action as any Holder may reasonably request, all to the extent required from time to time to enable such Holder to sell Warrants or Warrant Stock without registration under the Securities Act within the limitation of the exemptions provided by (a) Rule 144 under the Securities Act, as such Rule may be amended from time to time, or (b) any similar rule or regulation hereafter adopted by the Commission. Upon the request of any Holder, the 38 Issuer will deliver to such Holder a written statement as to whether it has complied with such information and filing requirements. SECTION 9.02. Related Party Transactions. The Issuer and its Subsidiaries shall not, directly or indirectly, enter into any agreement or transaction with any stockholder owning 10% or more of the Common Stock then outstanding, officer or director of the Issuer, or any "affiliate" or "associate" of such persons (as such terms are defined in rules and regulations promulgated under the Securities Act), including, without limitation, any agreement or transaction providing for the transfer of assets to, transfer of opportunities in the Issuer's business to, rental of property from, or otherwise requiring payments to, any such person or entity, without in each case the approval of at least a majority of the members of the Board or a committee thereof duly appointed to act with respect to such matter on behalf of the Board having no interest in such agreement or transaction. SECTION 9.03. Restrictions on Performance. The Issuer shall not at any time enter into an agreement or other instrument limiting in any manner its ability to perform its obligations under this Agreement or the Warrants, or making such performance or the issuance of Warrant Stock upon the exercise of any Warrant a default under any such agreement or instrument. SECTION 9.04. Modification of Other Equity Documents. The Issuer shall not amend or consent to any modification, supplement or waiver of any provision of any Other Equity Documents in any manner which would have a material adverse effect on the holders of Warrants or Warrant Stock, in each case without the prior written consent of the Required Holders. Without limiting the generality of the foregoing, the Issuer shall not amend, or consent to any modification, supplement or waiver of any provision of any Other Equity Documents in a way which would (i) restrict the transferability of the Warrants or the Warrant Stock, (ii) restrict the transferability of the rights of any Holder in this Agreement to any transferee of all or a portion of such Holder's Warrants and/or Warrant Stock or (iii) require any consent or other approval of any Person to the exercise of the Warrants by any Holder or the issuance of Warrant Stock upon such exercise. SECTION 9.05. Reservation and Authorization of Common Stock. The Issuer shall at all times reserve and keep available for issue upon the exercise or conversion of Warrants such number of its authorized but unissued shares of Common Stock as will be sufficient to permit the exercise in full of all outstanding Warrants. The Issuer shall not amend the provisions of its certificate of incorporation governing the Common Stock other than (i) to increase or decrease the number of shares of authorized capital stock (subject to the provisions of the preceding sentence) or (ii) to decrease the par value of any shares of Common Stock. All shares of Common Stock which shall be so issuable, when issued upon exercise of any Warrant and payment of the applicable Exercise Price therefor in accordance with the terms of this Warrant, 39 shall be duly and validly issued, fully paid and nonassessable and free and clear of any Liens (other than those arising under operation of applicable securities laws). Before taking any action which would result in an adjustment in the number of shares of Common Stock comprising a Stock Unit or which would cause an adjustment reducing the Current Warrant Price per share of Common Stock below the then par value, if any, of the shares of Common Stock issuable upon exercise of the Warrants, the Issuer shall take any corporate action which is necessary in order that the Issuer may validly and legally issue fully paid and nonassessable shares of Common Stock free and clear of any Liens (other than those arising under operation of applicable securities laws) upon the exercise of all the Warrants immediately after the taking of such action. Before taking any action which would result in an adjustment in the number of shares of Common Stock comprising a Stock Unit or in the Current Warrant Price per share of Common Stock, the Issuer shall obtain all such authorizations or exemptions thereof, or consents thereto, as may be necessary from any public regulatory body or bodies having jurisdiction thereof. Promptly following the execution of this Agreement, the Issuer will use best efforts to list on each national securities exchange on which any Common Stock may at any time be listed, subject to official notice of issuance upon exercise of the Warrants, and will maintain such listing of, all shares of Common Stock from time to time issuable upon the exercise of the Warrants, and as soon as reasonably practicable following completion of each such listing the Issuer will notify the Holders thereof. SECTION 9.06. Notice of Expiration Date. The Issuer shall give to each Holder notice of the Expiration Date. Such notice may be given by the Issuer not less than 30 days but not more than 60 days prior to the Expiration Date; provided that if the Issuer fails to give timely notice, the Expiration Date will be extended to the date which is 30 days after the day on which such notice is deemed received. SECTION 9.07. Documentation of Subsequent Warrants. The Issuer and the Initial Holders agree that the Issuer shall document any additional warrants to purchase shares of Common Stock granted hereafter pursuant to Section 6.12 of the Credit Agreement in substantially the same form as the Warrants issued hereunder and pursuant to a warrant agreement in substantially the same form as this Agreement. ARTICLE X MISCELLANEOUS 40 SECTION 10.01. Waiver. No failure on the part of any Holder to exercise and no delay in exercising, and no course of dealing with respect to, any right, power or privilege under this Agreement or the Warrants shall operate as a waiver thereof, nor shall any single or partial exercise of any right, power or privilege under this Agreement or the Warrant preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The remedies provided herein are cumulative and not exclusive of any remedies provided by law. SECTION 10.02. Notices. (a) All notices, requests and other communications provided for herein and in the Warrants (including any waivers or consents under this Agreement and the Warrants) shall be given or made in writing, (i) to any party hereto, delivered to the intended recipient at the "Address for Notices" specified below its name on the signature pages hereof; or, as to any party, at such other address as shall be designated by such party in a written notice to each other party, or (ii) to any other Person who is the registered Holder of any Warrants or Warrant Stock, to the address for such Holder as it appears in the stock or warrant ledger of the Issuer. (b) All such notices, requests and other communications shall be deemed received on the date on which they are personally delivered, sent by courier guaranteeing overnight delivery or sent by registered or certified mail, return receipt requested, postage prepaid, in each case given or addressed as aforesaid. SECTION 10.03. Expenses, Etc. The Issuer agrees to pay or reimburse the Holders for: (a) all reasonable out-of-pocket costs and expenses of the Holders (including the reasonable fees and expenses of Milbank, Tweed, Hadley & McCloy LLP, special New York counsel to JPMorgan Chase Bank and its Affiliates, but not the fees and expenses of counsel to any other Holder), in connection with (i) the negotiation, preparation, execution and delivery of this Agreement and the issuance of Warrants hereunder and (ii) any amendment, modification or waiver of (or consents in respect of) any of the terms of this Agreement and/or the Warrants; and (b) all costs and expenses of the Holders (including reasonable legal fees and expenses) in connection with (i) any default by the Issuer hereunder or under the Warrants or any enforcement proceedings resulting therefrom and (ii) the enforcement of this Section 10.03. SECTION 10.04. Amendments, Etc. Except as otherwise expressly provided in this Agreement, any provision of this Agreement and any Warrant or Warrant certificate issued hereunder may be amended or modified only by an instrument in writing signed by the Issuer and the Required Holders; provided that (a) the consent of the holders of any class of Warrant Stock or Warrants shall not be required with respect to any amendment or waiver which does not affect the rights or benefits of such class under this Agreement, and (b) no such amendment or waiver shall, without the written consent of all Holders of such Warrant Stock and Warrants at the time outstanding, amend this Section 10.04. 41 SECTION 10.05. Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns. SECTION 10.06. Survival. All representations and warranties made by the Issuer herein or in any certificate or other instrument delivered by it or on its behalf under this Agreement shall be considered to have been relied upon by the Holders and shall survive the issuance of the Warrants or the Warrant Stock regardless of any investigation made by or on behalf of the Holders. All statements in any such certificate or other instrument so delivered shall constitute representations and warranties by the Issuer hereunder. All representations and warranties made by the Holders herein shall be considered to have been relied upon by the Issuer and shall survive the issuance to the Holders of the Warrants or the Warrant Stock regardless of any investigation made by the Issuer or on its behalf. SECTION 10.07. Specific Performance. Damages in the event of breach of this Agreement by a Holder or the Issuer would be difficult, if not impossible, to ascertain, and it is therefore agreed that each Holder and the Issuer, in addition to and without limiting any other remedy or right it may have, will have the right to an injunction or other equitable relief in any court of competent jurisdiction, enjoining any such breach, and enforcing specifically the terms and provisions hereof, and each Holder and the Issuer hereby waives any and all defenses it may have on the ground of lack of jurisdiction or competence of the court to grant such an injunction or other equitable relief. The existence of this right will not preclude the Holders or the Issuer from pursuing any other rights and remedies at law or in equity which the Holders or the Issuer may have. SECTION 10.08. Captions. The captions and section headings appearing herein are included solely for convenience of reference and are not intended to affect the interpretation of any provision of this Agreement. SECTION 10.09. Counterparts. This Agreement may be executed in any number of counterparts, all of which when taken together shall constitute one and the same instrument and any of the parties hereto may execute this Agreement by signing any such counterpart signature page or counterpart. SECTION 10.10. Governing Law. This Agreement shall be governed by, and construed in accordance with, the law of the State of New York without giving effect to the conflicts of law principles thereof, except to the extent that New York conflicts of laws principles would apply the Delaware General Corporation Law to matters relating to corporations organized thereunder. SECTION 10.11. Severability. If any provision of this Agreement is held to be illegal, invalid or unenforceable under any present or future law, and if the rights or obligations 42 of any party hereto under this Agreement will not be materially and adversely affected thereby, (a) such provision will be fully severable, (b) this Agreement will be construed and enforced as if such illegal, invalid or unenforceable provision had never comprised a part hereof, (c) the remaining provisions of this Agreement will remain in full force and effect and will not be affected by the illegal, invalid or unenforceable provision or by its severance herefrom and (d) in lieu of such illegal, invalid or unenforceable provision, there will be added automatically as a part of this Agreement a legal, valid and enforceable provision as similar in terms to such illegal, invalid or unenforceable provision as may be possible. SECTION 10.12. Entire Agreement. This Agreement supersedes all prior discussions and agreements between the parties with respect to the subject matter hereof and, together with the Warrants, contains the sole and entire agreement between the parties hereto with respect to the subject matter hereof. SECTION 10.13. Rights of Holders of Warrants. Nothing herein or in any Warrant shall be construed as conferring upon any Holder of Warrants in its capacity as such (prior to the exercise of such Warrants) the right to vote or to consent or to receive notice as a Shareholder in respect of meetings of Shareholders or the election of directors of the Issuer or any other matter, or any rights whatsover as Shareholders. 43 IN WITNESS WHEREOF, the parties hereto have duly executed this Warrant Agreement as of the date first above written. CHART INDUSTRIES, INC. By /s/ Michael F. Biehl ---------------------------------- Name: Michael F. Biehl Title:Chief Financial Officer and Treasurer 44 INITIAL HOLDERS JPMORGAN CHASE BANK By /s/ R. A. Odell --------------------------- Name: R. A. Odell Title: Managing Director Address for Notices: JP Morgan Chase Bank 270 Park Avenue, 20th Floor New York, New York 10017 45 NATIONAL CITY BANK By /s/ Michael J. Green ---------------------------------- Name: Michael J. Green Title: Corporate Banking Officer Address for Notices: National City Bank 1900 East Ninth Street-Loc. 2083 Cleveland, OH 44114-3484 46 BANK ONE NA, as successor to BANK ONE, MICHIGAN By /s/ Gaye C. Plunkett ---------------------------- Name: Gaye C. Plunkett Title: Vice President Address for Notices: ------------------- Bank One NA IL1-0631 1 Bank One Plaza Chicago, IL 60670 Attn: Gaye Plunkett 47 VAN KAMPEN PRIME RATE INCOME TRUST By: Van Kampen Advisory Investment Corp. By /s/ Christina Jamieson ------------------------------- Name: Christina Jamieson Title: Vice President Address for Notices: ------------------- Van Kampen One Parkview Plaza Oakbrook Terrace, Il 60181 Attn: Brian Buscher -and- State Street Bank & Trust Corporate Trust Department P.O. Box 778 Boston, MA 02102 Attn: Anne Chlebnik 48 SENIOR DEBT PORTFOLIO By: Boston Management and Research, as Investment Advisor By /s/ Payson F. Swaffield --------------------------------- Name:Payson F. Swaffield Title:Vice President Address for Notices: ------------------- Senior Debt Portfolio c/o Boston Management and Research 255 State Street, 6th Floor Boston, MA 02109 49 U.S. BANK NATIONAL ASSOCIATION By /s/ Greg Wilson -------------------------------- Name: Greg Wilson Title: VP Address for Notices: ------------------- Greg Wilson U.S. Bank U.S. Bancorp Center 800 Nicollet Mall Minneapolis, MN 55402 50 UNION BANK OF CALIFORNIA, N.A. By /s/ Hagop V. Jazmadarian -------------------------------- Name: Hagop V. Jazmadarian Title: Vice President Address for Notices: ------------------- Union Bancal Equities, Inc. Attn: Corrine Heyning, V.P. 445 South Figueroa Street, 21st Floor Los Angeles, CA 90071 (213) 236-6566 51 FLEET NATIONAL BANK By /s/ Peter M. Anzivino ---------------------------------------- Name: Peter M. Anzivino Title: Authorized Officer Address for Notices: John J. Quintal Fleet Boston Financial Corp. 175 Federal St., 10/th/ Floor Boston, MA 02110 52 GENERAL ELECTRIC CAPITAL CORPORATION By /s/ Janet K. Williams ------------------------------------- Name: Janet K. Williams Title: Duly Authorized Signatory Address for Notices: Amanda J. van Heyst General Electric Capital Corporation 6 High Ridge Park, Building 6C Stamford, CT 06927 -And- Jordan Dickstein UBS Paine Webber 1285 Avenue of the Americas 20th Floor New York, NY 10019-6028 53 HARRIS TRUST AND SAVINGS BANK By /s/ Sarah U. Johnston ------------------------------- Name: Sarah U. Johnston Title: Vice President Address for Notices: Lending Services 111 W. Monroe 17W Chicago, IL 60603 54 THE HUNTINGTON NATIONAL BANK By /s/ David F. Isler ------------------------------------ Name: David F. Isler Title: Senior Vice President Address for Notices: David F. Isler Senior Vice President Huntington National Bank 41 S. High Street HC 0733 Columbus, OH 43215 55 ENDEAVOUR, LLC by PPM America, Inc., its attorney-in-fact By /s/ David B. Nelson ---------------------------------- Name: David B. Nelson Title: Vice President Address for Notices: PPM America, Inc. 225 W. Wacker Drive, Suite 1500 Chicago, IL 60610 56 CITIZENS BANK OF MASSACHUSETTS By /s/ Christopher G. Daniel ------------------------------------ Name: Christopher G. Daniel Title: Vice President Address for Notices: Citizens Bank of Massachusetts 53 State Street / MBS 970 Boston, MA 02109 Telephone: 617-994-7135 Fax: 617-742-9471 57 BANK AUSTRIA CREDITANSTALT CORPORATE FINANCE, INC. By /s/ Dieter Boehme ----------------------------------- Name: Dieter Boehme Title: Executive Vice President Address for Notices: HVB Credit Advisors - Special Asset Advisory 150 East 42nd Street New York, NY 10017-6707 58 FIRST MERIT BANK N.A. By /s/ John F. Neumann ------------------------------- Name: John F. Neumann Title: Senior Vice President Address for Notices: FirstMerit Bank 101 W. Prospect Suite 350 Cleveland, Ohio 44115 Attn: J. Neumann 59 KEYBANK NATIONAL ASSOCIATION By /s/ Nadine M. Eames ----------------------------- Name: Nadine M. Eames Title: Vice President Address for Notices: Attn: Nadine Eames OH-01-27-0504 127 Public Square Cleveland, OH 44114-1306 60 KZH RIVERSIDE LLC By /s/ Susan Lee -------------------------------------- Name: Susan Lee Title: Authorized Agent Address for Notices: Virginia Conway KZH RIVERSIDE LLC c/o JPMorgan Chase Bank 140 East 45th Street 11th Floor New York, NY 10017 Tel: 212-622-9359 Fax: 212-622-0123 E-mail: virginia.r.conway@jpmorgan.com 61 KZH STERLING LLC By /s/ Susan Lee ------------------------------------- Name: Susan Lee Title: Authorized Agent Address for Notices: Virginia Conway KZH STERLING LLC c/o JPMorgan Chase Bank 140 East 45th Street 11th Floor New York, NY 10017 Tel: 212-622-9353 Fax: 212-622-0123 E-mail: virginia.r.conway@jpmorgan.com 62 KZH CYPRESSTREE - 1 LLC By /s/ Susan Lee ------------------------------------------- Name: Susan Lee Title: Authorized Agent Address for Notices: Virginia Conway KZH CypressTree - 1 LLC c/o JPMorgan Chase Bank 140 East 45th Street 11th Floor New York, NY 10017 Tel: 212-622-9353 Fax: 212-622-0123 E-mail: virginia.r.conway@jpmorgan.com Schedule 2.02 Allocation of Warrants Each Initial Holder shall receive Warrants to purchase that number of Stock Units set forth below opposite such Initial Holder's name:
- ------------------------------------------------------------------------------------------- INITIAL HOLDER NUMBER OF STOCK UNITS - -------------- --------------------- - ------------------------------------------------------------------------------------------- JPMORGAN CHASE BANK 43,094 - ------------------------------------------------------------------------------------------- NATIONAL CITY BANK 42,607 - ------------------------------------------------------------------------------------------- BANK ONE, NA 37,087 - ------------------------------------------------------------------------------------------- VAN KAMPEN PRIME RATE INCOME TRUST 52,343 - ------------------------------------------------------------------------------------------- SENIOR DEBT PORTFOLIO 34,895 - ------------------------------------------------------------------------------------------- U.S. BANK NATIONAL ASSOCIATION 32,464 - ------------------------------------------------------------------------------------------- UNION BANCAL EQUITIES, INC. 28,040 - ------------------------------------------------------------------------------------------- FSC CORP. 24,551 - ------------------------------------------------------------------------------------------- GE CAPITAL CFE, INC. 26,171 - ------------------------------------------------------------------------------------------- NORM & CO. 23,741 - ------------------------------------------------------------------------------------------- THE HUNTINGTON NATIONAL BANK 24,551 - ------------------------------------------------------------------------------------------- ENDEAVOUR, LLC 23,741 - ------------------------------------------------------------------------------------------- CITIZENS FINANCIAL GROUP, INC. 24,551 - ------------------------------------------------------------------------------------------- BANK AUSTRIA CREDITANSTALT CORPORATE FINANCE, INC. 15,827 - ------------------------------------------------------------------------------------------- FIRSTMERIT BANK, N.A. 20,449 - ------------------------------------------------------------------------------------------- KEYBANK NATIONAL ASSOCIATION 15,827 - ------------------------------------------------------------------------------------------- KZH RIVERSIDE LLC 17,448 - -------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------ KZH STERLING LLC 17,448 - ------------------------------------------------------------------------------------------ KZH CYPRESSTREE - 1 LLC 8,724 - ------------------------------------------------------------------------------------------ TOTAL: 513,559 - ------------------------------------------------------------------------------------------
Schedule 3.07(a) Existing Convertible Securities and Options 1. Convertible Securities: a. Warrants held by Chase Manhattan Bank to purchase an aggregate of 10,742 shares of Common Stock. b. Warrants held by CIT Group/Equity Investments, Inc. to purchase an aggregate of 12,434 shares of Common Stock. c. Rights under the Rights Agreement. 2. Options:
Shares Subject to ------------------ Plan Outstanding Options ---- ------------------- a. Key Employees Stock Option Plan and Second Amended and Restated 1997 Stock Option and Incentive Plan 1,605,770 b. 2000 Executive Incentive Stock Option Plan 436,666 c. 1994 Stock Option Plan for Outside Directors 4,500 d. 1995 Stock Option Plan for Outside Directors 7,500 e. 1996 Stock Option Plan for Outside Directors 236,250 f. Rights under the Rights Agreement.
3. Amended and Restated Voluntary Deferred Income Plan: 75,037 shares 4. Commitments to issue securities: a. Contingent commitment to issue warrants to purchase an aggregate of 1,000,000 shares of Common Stock pursuant to the Indemnification and Warrant Purchase Agreement, dated April 12, 1999, between the Issuer, MVE Holdings, Inc. and each of the former members of MVE Investors, LLC. b. Contingent commitment to issue warrants to purchase shares of Common Stock pursuant to Section 6.12 of the Credit Agreement. 2 c. Contingent and non-contingent commitments to issue securities pursuant to the Issuer's 401(k) Investment and Savings Plan, 1996 Stock Option Plan for Outside Directors and Amended and Restated 1997 Stock Bonus Plan. d. Customary offers before the date hereof to grant Options to employees in connection with an offer of employment. e. Obligations to issue securities under the Rights Agreement. Schedule 3.07(b) Existing Registration Rights 1. Registration rights granted to Chase Manhattan Bank and The CIT Group/Equity Investments, Inc. pursuant to the Registration Rights Agreement, dated August 30, 1991, among Cryenco Holdings, Inc, The CIT Group/Equity Investments, Inc. and Chemical Bank. 2. Registration rights granted to the former members of MVE Investors LLC pursuant to the Warrant Agreement, dated as of April 12, 1999, between the Issuer and the parties thereto. Annex 1 to Warrant Agreement [Form of Warrant] WARRANT THE TRANSFER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO THE RESTRICTIONS SPECIFIED IN THAT CERTAIN WARRANT AGREEMENT DATED AS OF JUNE 28, 2002 (THE "WARRANT AGREEMENT") BETWEEN CHART INDUSTRIES, INC., A DELAWARE CORPORATION (THE "ISSUER"), AND THE HOLDERS PARTY THERETO FROM TIME TO TIME AS MODIFIED AND SUPPLEMENTED AND IN EFFECT FROM TIME TO TIME, AND NO TRANSFER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE SHALL BE VALID OR EFFECTIVE UNTIL SUCH RESTRICTIONS HAVE LAPSED OR BEEN FULFILLED, RELEASED OR WAIVED. A COPY OF THE FORM OF THE WARRANT AGREEMENT IS ON FILE AND MAY BE INSPECTED AT THE PRINCIPAL EXECUTIVE OFFICE OF THE ISSUER. THE HOLDER OF THIS CERTIFICATE, BY ACCEPTANCE OF THIS CERTIFICATE, AGREES TO BE BOUND BY THE PROVISIONS OF THE WARRANT AGREEMENT. THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS, AND ACCORDINGLY, SUCH SECURITIES MAY NOT BE TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF EXCEPT IN COMPLIANCE WITH THE REGISTRATION OR QUALIFICATION PROVISIONS OF APPLICABLE FEDERAL AND STATE SECURITIES LAWS OR APPLICABLE EXEMPTIONS THEREFROM. No. of Stock Units Covered Hereby: [__] Warrant No. [_] WARRANT to Purchase Common Stock of CHART INDUSTRIES, INC. THIS IS TO CERTIFY THAT [___________], or its registered assigns (the "Holder"), is entitled to purchase in whole or in part from time to time from CHART INDUSTRIES, INC., a Delaware corporation (the "Issuer"), at any time prior to 5:00 p.m., New York time, on the third anniversary of the date hereof (as it may be extended pursuant to Section 9.06 of the Warrant Agreement, the "Expiration Date"),[____] Stock Units at a purchase price of -2- $2.425 per Stock Unit (the "Exercise Price"), subject to the terms and conditions hereinbelow provided. All capitalized terms unless otherwise defined herein shall have the meanings set forth in the Warrant Agreement. On and after the date hereof and until 5:00 p.m., New York time, on the Expiration Date, the Holder may exercise this Warrant, on one or more occasions, on any Business Day, in whole or in part, by delivering to the Issuer: (a) a written notice of the Holder's election to exercise this Warrant, which notice shall specify the number of Stock Units to be purchased (the "Exercise Notice"); (b) payment of the aggregate Exercise Price for the number of Stock Units as to which this Warrant is being exercised (payable as set forth below); and (c) this Warrant. The Exercise Price shall be payable (a) in cash or by certified or official bank check payable to the order of the Issuer or by wire transfer of immediately available funds to the account of the Issuer, (b) by delivery (or causing to be delivered) to the Issuer of Loans held by the Holder (or any of its Affiliates) and outstanding under, and the Note, if any, evidencing the same issued pursuant to, the Credit Agreement (provided that, if such Holder (or any such Affiliate or Affiliates) shall hold both Term Loans and Revolving Credit Loans, such Loans so delivered by such Holder shall consist of a ratable portion of the Term Loans and Revolving Credit Loans held by such Holder and/or its Affiliates; and any such Loans so delivered shall deemed to be paid for purposes of the Credit Agreement, with such payment in the case of such Term Loans being applied in inverse order of the maturity thereof), with such securities being credited against the Exercise Price in an amount equal to the aggregate principal amount of such Loans (plus unpaid and accrued interest) so delivered, or (c) by delivery of this Warrant Certificate to the Issuer for cancellation in accordance with the following formula: in exchange for the number of shares of Common Stock issuable on the exercise of the Warrants that are being exercised at such time, the Holder shall receive such number of shares of Common Stock as is equal to the product of (i) the number of shares of Common Stock issuable upon exercise of the Warrants being exercised at such time multiplied by (ii) a fraction, the numerator or which is the Current Market Value per share of Common Stock at such time minus the Exercise Price per share of Common Stock at such time, and the denominator of which is the Current Market Value per share of Common Stock at such time. Such Exercise Notice shall be substantially in the form of Exhibit A hereto. Upon receipt thereof, the Issuer shall, as promptly as practicable and in any event within 5 Business Days thereafter, execute or cause to be executed and deliver or cause to be delivered to the Holder a certificate or certificates representing the aggregate number of shares of Warrant Stock and other securities issuable upon such exercise and any other property to which the Holder is entitled. The certificate or certificates for Warrant Stock so delivered shall be in such denominations as may be specified in the Exercise Notice and shall be registered in the name of the Holder or such other name or names as shall be designated in such Exercise Notice. Such -3- certificate or certificates shall be deemed to have been issued and the Holder or any other Person so designated to be named therein shall be deemed to have become a holder of record of Warrant Stock, including, to the extent permitted by law, the right to vote Warrant Stock or to consent or to receive notice as a Shareholder, as of the date on which the last of the Exercise Notice, payment of the Exercise Price and this Warrant is received by the Issuer as aforesaid, and all taxes required to be paid by the Holder, if any, pursuant to the Warrant Agreement, prior to the issuance of Stock Units have been paid. If this Warrant shall have been exercised only in part, the Issuer shall, at the time of delivery of the certificate or certificates representing Warrant Stock and other securities, execute and deliver to the Holder a new Warrant evidencing the rights of the Holder to purchase the unpurchased Stock Units called for by this Warrant, which new Warrant shall in all other respects be identical with this Warrant, or, at the request of the Holder, appropriate notation may be made on this Warrant and the same returned to the Holder. The Issuer shall not be required to issue a fractional amount of Warrant Stock upon exercise of this Warrant. As to any fraction of a share of Warrant Stock which the Holder would otherwise be entitled to purchase upon such exercise, the Issuer shall pay a cash adjustment in respect of such final fraction in an amount equal to the same fraction of the Current Market Value per share of Warrant Stock on the date of exercise. If reasonably requested by the Issuer in connection with the exercise of this Warrant, the Holder shall deliver to the Issuer a certification of taxpayer identification number or similar form so requested by the Issuer. This Warrant shall be governed by, and construed in accordance with, the law of the State of New York without giving effect to the conflicts of law principles thereof, except to the extent that New York conflicts of laws principles would apply the Delaware General Corporation Law to matters relating to corporations organized thereunder. -4- IN WITNESS WHEREOF, the Issuer has duly executed this Warrant. Dated: June 28, 2002 CHART INDUSTRIES, INC. By ______________________________ Name: Title: Attest: ________________________________ Secretary Exhibit A to Warrant FORM OF EXERCISE (To be executed by the registered holder hereof) The undersigned registered owner of this Warrant irrevocably exercises this Warrant for the purchase of [___] Stock Units of CHART INDUSTRIES, INC., a Delaware corporation, and herewith makes payment therefor [in cash, as provided in clause (a) of the third paragraph of this Warrant] [by delivery of any Loans, as provided in clause (b) of the third paragraph of this Warrant] [by delivery of the Warrant Certificate(s) for cancellation in accordance with the formula provided in clause (c) of the third paragraph of this Warrant], all at the price and on the terms and conditions specified in this Warrant, and requests that certificates for the shares of Common Stock be issued in accordance with the instructions given below, and, if such Stock Units shall not include all of the Stock Units to which the Holder is entitled under this Warrant, that a new Warrant of like tenor and date for the unpurchased balance of the Stock Units issuable hereunder be delivered to the undersigned. Dated: _____________, 200_ __________________________________ (Signature of Registered Holder) Instructions for issuance and registration of Common Stock: __________________________________ Name of Registered Holder (please print) Social Security or Other Identifying Number: __________________________ Please deliver certificate to the following address: __________________________________ Street _____________________________________ City, State and Zip Code Annex 2 to Warrant Agreement FORM OF ASSIGNMENT (To be executed by the registered holder hereof) FOR VALUE RECEIVED, the undersigned registered owner of this Warrant hereby sells, assigns and transfers unto the assignee named below all the rights of the undersigned under this Warrant and the related Warrant Agreement with respect to the number of shares of Warrant Stock covered thereby set forth hereinbelow unto: Name of Assignee Address Number of Stock Units - -------------------------------------------------------------------------------- Dated: ____________, 200_ -------------------------------- Signature of Registered Holder ________________________________ Name of Registered Holder (Please Print) Witness: __________________________ Annex 3 to Warrant Agreement [Form of Joinder Agreement] JOINDER AGREEMENT, dated as of [_______], 200[_] between CHART INDUSTRIES, INC., a Delaware corporation (the "Issuer"), and the other parties signatories hereto (this "Joinder Agreement"). A. Reference is made to that certain Warrant Agreement dated as of June 28, 2002 (as modified and supplemented and in effect from time to time, the "Warrant Agreement"), between the Issuer and the Initial Holders. Each capitalized term used but not defined herein shall have the meaning assigned to such term in the Warrant Agreement; and B. Section 7.01(c) of the Warrant Agreement requires that the Issuer shall deliver to the Initial Holders this Joinder Agreement executed by the Issuer, each Principal Shareholder and each Related Party thereof that owns Common Stock. In consideration of the foregoing and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the undersigned hereby agrees that: 1. The undersigned: (a) is delivering this Joinder Agreement pursuant to Section 7.01(c) of the Warrant Agreement and (b) acknowledges receipt of a copy of the Warrant Agreement. 2. The undersigned hereby agrees to be bound by the provisions of Article VII of the Warrant Agreement (but no other provisions thereof). IN WITNESS WHEREOF, the undersigned has signed this Joinder Agreement as of the date first above written. [________________] By:_________________________________ Name: Title -2- Acknowledged and Agreed to as of the date first above written: CHART INDUSTRIES, INC. By:____________________________ Name: Title: EX-10.2 4 dex102.txt AMENDED AND RESTATED 1997 STOCK BONUS PLAN Exhibit 10.2 CHART INDUSTRIES, INC. AMENDED AND RESTATED 1997 STOCK BONUS PLAN 1. NAME AND PURPOSE. 1.1 The name of this plan is the Chart Industries, Inc. Amended and Restated 1997 Stock Bonus Plan ("Plan"). The Plan will be maintained by Chart Industries, Inc. (the "Company") to further the growth, success and interests of the Company and the stockholders of the Company by requiring certain management employees of the Company who receive a Qualifying Bonus (as defined in Section 3.3 below) to receive a portion of such Qualifying Bonus in Common Stock, par value $.01 per share, of the Company ("Shares") under the terms and conditions of and in accordance with this Plan, thereby increasing their direct involvement in the future success of the Company. 2. ADMINISTRATION OF THE PLAN. 2.1 This Plan shall be administered by the Compensation Committee (or any subcommittee thereof) (the "Committee") of the Board of Directors of the Company, which shall consist of at least two (2) directors, each of whom shall be a "non-employee director" within the meaning of Rule 16b-3 promulgated under the Securities Exchange Act of 1934 and any successor to such rule ("Rule 16b-3"). The Committee may, from time to time, designate one or more persons or agents to carry out any or all of its administrative duties hereunder; provided that none of the duties required to be performed by the Committee under Rule 16b-3 or Section 2.3 of the Plan may be delegated to any other person. 2.2 The Plan shall be administered and operated on the same annual accounting period as the Company (herein referred to as the "Plan Year"), which presently is the calendar year. The first Plan Year will be deemed to have commenced on January 1, 1997 and to have ended on December 31, 1997. In the event that the Company changes its annual accounting period, the Plan Year shall automatically change and the Committee may make such adjustments to the operation of the Plan as appropriate to reflect any short Plan Years, adjustments to the dates that Shares are awarded or any other adjustments that may be appropriate to reflect the change in the Plan Year. 2.3 The Committee shall interpret the Plan, and to the extent and in the manner contemplated herein, it shall exercise the discretion granted to it. The Committee shall issue from time to time such rules and interpretations as in its judgment are necessary in order to administer the Plan effectively. The Committee shall have the exclusive right in its sole discretion to determine the number of Shares awarded to each participant, to determine the price or prices at which Shares shall be awarded to each participant, to determine the time or times when Shares may be awarded and to prescribe the form, which shall be consistent with this Plan, of the instruments evidencing any award and issuance under this Plan and the legend, if any, to be affixed to the certificates representing Shares issued under this Plan. 3. ELIGIBLE EMPLOYEES AND PARTICIPATION. 3.1 Any employee of the Company or its subsidiaries shall be eligible to participate in the Plan if he has been awarded a Qualifying Bonus as defined in Section 3.3 below for the Plan Year or any portion of the Plan Year. 3.2 No member of the Board of Directors of the Company, unless he is also an employee of the Company or its subsidiaries, and no member of the Committee, shall be eligible to participate in the Plan. 3.3 The words "Qualifying Bonus" shall mean a bonus paid to an employee under one of the Company's Management Incentive Compensation Programs, as such programs may be amended from time to time. 3.4 Subject to approval by the Board of Directors of the Company, the Committee shall have the specific right to amend the Plan to exclude or include any employee under the Plan upon such terms and conditions as deemed appropriate by the Committee. 4. STOCK PORTION OF QUALIFYING BONUS. 4.1 The number of Shares that shall be awarded to a participant who is entitled to receive a Qualifying Bonus shall be determined by dividing the Stock Portion of a participant's Qualifying Bonus by the Adjusted Purchase Price of one Share. The Stock Portion of a participant's Qualifying Bonus shall be determined under a formula according to the participant's Qualifying Bonus amount. Such formula shall be the formula reflected in the chart set forth in Schedule A to the Plan, unless the Committee adopts a different formula or chart for any employee, class of employees or Plan Year. The Committee may adopt as many different formulas and charts as it deems necessary for each class of employees who receive a Qualifying Bonus in any Plan Year. 4.2 The Stock Portion of a participant's Qualifying Bonus shall be determined for each Qualifying Bonus paid with respect to a Plan Year by aggregating the amount of the current Qualifying Bonus together with all the Qualifying Bonuses previously paid with respect to such Plan Year to determine the Stock Portion for the current Qualifying Bonus. 4.3 The Adjusted Purchase Price for one Share shall be determined by calculating the average closing price of one Share for the five (5) trading day period ending on the last day of the month immediately preceding the month that includes the date in which payment of the Qualifying Bonus is actually made to the participant, and multiplying such average price by ninety-five percent (95%). 5. SHARES SUBJECT TO THE PLAN. 5.1 The Shares which may be awarded and issued to employees under this Plan shall be made available, at the discretion of the Board of Directors, either from authorized and unissued Shares of the Company or from Shares reacquired by the Company, including Shares purchased in the open market. 2 5.2 Shares issued to employees under this Plan shall be subject to such terms and conditions as the Committee in its discretion may provide. 5.3 Subject to the provisions of the succeeding paragraphs of this Section 5, the aggregate number of Shares which may be issued under this Plan shall not exceed seven hundred twenty-five thousand (725,000) Shares. In the event that this limitation applies in a Plan Year, the number of Shares that shall be awarded to an employee shall be that number of Shares equal to the aggregate number of Shares as limited by this Section 5.3 multiplied by a fraction where the numerator is equal to the number of Shares that would have been awarded to such employee without taking into account the limitations in this Section 5.3 and the denominator is equal to the total number of Shares that would have been awarded to all employees without taking into account the limitations in this Section 5.3. 5.4 In the event that the outstanding Shares shall be changed by reason of shares splits or combinations, recapitalization or reorganizations, or share dividends, the number of Shares and the class or classes of securities which may thereafter be issued under this Plan may be appropriately adjusted as determined by the Committee so as to reflect such change. 5.5 No fractional Shares shall be awarded under the Plan. In the event that the determination of the number of Shares that a participant is entitled to under the Plan results in a fractional Share, such participant shall be entitled to the number of whole Shares that results from rounding up such determination to the next larger whole Share. 6. AMENDMENTS. 6.1 This Plan may be amended at any time by the Board of Directors of the Company; provided, that if this Plan shall have been approved by the stockholders of the Company, no such amendment shall increase the maximum number of Shares that may be issued pursuant to this Plan, except pursuant to Section 5 hereof, without the further approval of such stockholders; and provided further, that no amendment to this Plan shall modify or impair the rights of participants who have been awarded Shares, or who have been granted the right to an award of Shares hereunder prior to any such amendment. 7. DURATION. 7.1 This Plan, as amended and restated, was approved by the Board of Directors of the Company on February 7, 2002 and becomes effective upon adoption by the affirmative vote of the holders of a majority of the voting power of the Company represented by the Shares present and eligible to vote, in person or by proxy, at any annual or special meeting of stockholders at which a quorum is present. This Plan shall terminate on December 31, 2006 or such earlier date as may be determined by the Board of Directors; provided, however, that such termination shall not impair the rights of participants to any award hereunder with respect to the Plan Year ending December 31, 2006 or any earlier Plan Year. 3 SCHEDULE A Effective for Bonuses Payable for any Fiscal Year
- -------------------------------------------------------------------------------------------- Qualifying Bonus Amount Stock Portion of Bonus - -------------------------------------------------------------------------------------------- Over But not Over - -------------------------------------------------------------------------------------------- $ 0 $ 25,000 $0 - -------------------------------------------------------------------------------------------- $25,000 $ 50,000 10% of total amount of bonus - -------------------------------------------------------------------------------------------- $50,000 $100,000 $5,000 plus 15% of amount over $50,000 - -------------------------------------------------------------------------------------------- $100,000 $12,500 plus 20% of amount over $100,000 - --------------------------------------------------------------------------------------------
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