March 27, 2002

Mr. Pelham Smith
4213 Southwestern Blvd.
Dallas, Texas 75225

Dear Pelham:

This letter shall confirm the following  agreement  regarding  your  departure
from HydroChem Industrial Services, Inc. ("HydroChem"):

      1. Your  resignation  as Chief  Financial  Officer  was  accepted  as of
February 11, 2002,  and your  resignation  as Executive  Vice President and an
employee will be accepted effective June 30, 2002.

      2. Your  current  base  compensation  shall  continue  in effect for the
remainder of your employment.

      3.  After  the   termination  of  your  employment  on  June  30,  2002,
HydroChem will pay you severance  compensation  in an amount equal to one year
of base  compensation at your current rate.  HydroChem will pay this amount in
installments as if your employment had continued through June 30, 2003.

      4. Between now and June 30, 2002,  you will remain  responsible  for our
international   business  and  will  also  assist  me  on  various   corporate
development  and similar  projects.  You will also continue to be available as
needed to  provide  transition  assistance.  It is  contemplated  that most of
your time will be spent in the Dallas  office,  but you will be required to be
in Houston and /or to travel elsewhere on company  business as needed.  During
the period  between  now and June 30,  2002,  you will  continue  to adhere to
HydroChem's policies and procedures as you have done in the past.

      5. You will not exercise  your  Extended  Deferral  Elections  under the
Deferred  Bonus Plan of HydroChem  Industrial  Services  (the  "Plan").  Also,
notwithstanding  anything contained herein or elsewhere to the contrary,  your
resignation  as Executive  Vice President and an employee as of June 30, 2002,
as contemplated by this letter agreement,  shall be deemed to be a termination
without Cause for the purpose of section 1.1 (a) of the Plan.

      6. This letter  agreement  constitutes the entire  agreement  between us
on this subject  matter,  and it supersedes and replaces any prior  agreements
on this  subject.  This letter  agreement may be amended in the future only by
a written instrument signed by both HydroChem and you.

If the foregoing is satisfactory,  please sign this letter below and return to
me.  A duplicate original is enclosed for your records.


                                          Sincerely,

                                          /s/ B. Tom Carter, Jr.
                                          ----------------------
                                          B. Tom Carter, Jr.
                                          Chairman of the Board and
                                          Chief Executive Officer


AGREED AND ACCEPTED

/s/ Pelham Smith
----------------
Pelham Smith
March 27, 2002