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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. ____)
Hadson Corporation
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(Name of Issuer)
Common Stock 40501V101
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(Title of class of securities) (CUSIP number)
Thomas P. Donahue
4900 Renaissance Tower
1201 Elm Street
Dallas, TX 75270
(214) 745-4606 12/14/93
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(Name, address and telephone number (Date of event which requires
of person authorized to receive filing of this statement)
notices and communications)
If the filing person has previously filed a statement on Schedule 13G to
report the acquisition which is the subject of this Schedule 13D, and is
filing this schedule because of Rule 13d-1(b)(3) or (4), check the
following box [x].
Check the following box if a fee is being paid with the statement [_].
(A fee is not required only if the reporting person: (1) has a previous
statement on file reporting beneficial ownership of more than five percent
of the class of securities described in Item 1; and (2) has filed no
amendment subsequent thereto reporting beneficial ownership of five
percent or less of such class.) (See Rule 13d-7.)
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CUSIP No. 40501V101 13D - Page 2
1 NAME OF REPORTING PERSON: The Prudential Insurance
Company of America
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE
PERSON: 22-1211670
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP: (a) [_]
(b) [x]
3 SEC USE ONLY
4 SOURCE OF FUNDS:* 00
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED [_]
PURSUANT TO ITEM 2(d) OR 2(e):
6 CITIZENSHIP OR PLACE OF A mutual life insurance
ORGANIZATION: company organized under the
laws of New Jersey
NUMBER OF 7 SOLE VOTING POWER: 6,317,944
SHARES
BENEFICIALLY 8 SHARED VOTING POWER: --
OWNED BY
EACH 9 SOLE DISPOSITIVE POWER: 1,329,763
REPORTING
PERSON WITH 10 SHARED DISPOSITIVE POWER: --
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY REPORTING
PERSON: 6,317,944
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES [_]
CERTAIN SHARES:*
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11): 24.6%
14 TYPE OF REPORTING PERSON:* BD, IC, IA
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ITEM 1. SECURITY AND ISSUER.
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This Schedule 13D relates to the shares of common stock, par
value $.01 per share (the "Common Stock") of Hadson Corporation (the
"Issuer"), which has its principal executive office at 101 Park
Avenue, Suite 1400, Oklahoma City, Oklahoma 73102. The Prudential
Insurance Company of America, a New Jersey mutual insurance
corporation, for itself and its affiliates Pruco Life Insurance
Company and PruSupply, Inc. (collectively "Prudential"), previously
filed a statement on Schedule 13G dated February 9, 1990, as amended
on February 11, 1991, February 11, 1992, and February 5, 1993,
reflecting its beneficial ownership of securities of the Issuer.
ITEM 2. IDENTITY AND BACKGROUND.
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This statement is filed by Prudential which has its
principal business and principal office at 751 Broad Street, Newark,
New Jersey 07102. The following lists the current directors (the
"Directors") of The Prudential Insurance Company of America and their
principal occupations; unless otherwise noted, their business address
is 751 Broad Street, Newark, New Jersey 07102:
James G. Affleck has been retired since 1984.
Robert E. Beck has been retired since 1992.
William W. Boeschenstein is the Chairman of the Board and
Chief Executive Officer of Owens-Corning Fiberglass Corporation,
Fiberglass
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Tower, Toledo, Ohio 43659, which engages in the business of
manufacturing fiberglass products.
Robert J. Boutillier has been retired since 1982.
James E. Burke has been retired since 1990.
Brendan T. Byrne is a partner in the law firm of Carella,
Byrne, Bain, Gillfillan, Cecchi & Stewart, 6 Becker Farm Road,
Roseland, New Jersey 07066.
Lisle C. Carter, Jr. is a partner in the law firm of Verner
Liipfert, Bernhard, McPherson & Hand, Chartered, 1307 Fourth
Street, S.W., Washington, D.C. 20024.
Carolyne K. Davis is a Health Care Advisor at the accounting
firm of Ernst & Young, 1200 Nineteenth Street, N.W. Washington,
D.C. 20036.
William H. Gray, III is President and Chief Executive
Officer of the United Negro College Fund, Inc., 500 East 62nd
Street, New York, New York 10021.
Jon F. Hanson is Chairman of Hampshire Management Co., 235
Moore Street, Suite 200, Hackensack, New Jersey 07601.
Allen F. Jacobson has been retired since 1991.
Garnett L. Keith, Jr. is Vice Chairman of Prudential.
James C. Kellogg is a partner in the law firm of Townley &
Updike, 405 Lexington Avenue, New York, New York 10174.
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Burton G. Malkiel is a Professor of Economics at Princeton
University, 110 Fisher Hall, Prospect Avenue, Princeton
University, Princeton, New Jersey 08544.
John R. Opel has been retired since 1993.
Donald E. Procknow has been retired since 1986.
Robert H. Schaeberle is Chairman Emeritus of Nabisco Brands,
Inc., 200 DeForest Avenue, East Hanover, New Jersey 077936.
Richard M. Thomson is Chairman of the Board and Chief
Executive Officer of the Toronto-Dominion Bank, Toronto-Dominion
Centre, Toronto, Ontario M5K 1A2, Canada.
P. Roy Vagelos, M.D. is Chairman and Chief Executive Officer
of Merck & Co., Inc., a manufacturer of pharmaceuticals, 126 East
Lincoln Avenue, Rahway, New Jersey 07065.
Stanley C. Van Ness is an attorney at the law firm of Picco
Mack Herbert Kennedy Jaffe Perrella and Yoskin, One State Street
Square, Suite 1000, Trenton, New Jersey 08607.
Paul A. Volcker is Chairman of James D. Wolfenshohn, Inc.,
599 Lexington Avenue, New York, New York 10022.
Robert C. Winters is Chairman of the Board, President and
Chief Executive Officer of Prudential.
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The following persons are the current executive officers
(the "Officers") and controlling persons of Prudential, and each of
their business addresses is 751 Broad Street, Newark, New Jersey:
Robert C. Winters - Chairman of the Board, President and
Chief Executive Officer
Garnett L. Keith, Jr. - Vice Chairman
William P. Link - Executive Vice President ("EVP")
Edward D. Zinbarg - EVP
Robert P. Hill - EVP
Robert E. Riley - EVP, Prudential Reinsurance Company
James W. Stevens - Chairman and Chief Executive Officer,
Prudential Asset Management Group
William M. Bethke - President, Capital Markets Group
Stephen R. Braswell - Vice President, Investment Services
Group
John D. Brookmeyer - Senior Managing Director, Prudential
Global Asset Management
E. Michael Caulfield - President, Prudential Preferred
Financial Services
Robert M. Chmely - Chief Financial Officer, Prudential Asset
Management Group
Martha J. Clark - President, Prudential Asset Management
Company
James E. Dwane - President, Prudential Reinsurance
William S. Field - Chairman, Prudential Equity Investors,
Inc.
James R. Gillen - Senior Vice President and General Counsel
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Bruce J. Goodman - President, Prudential Business Systems
Nicholas M. Graves - President, Private Placement Group
Allen M. Haight - President, AARP Operations
Samuel H. Havens - President, Group Operations
Eugene B. Heimberg - President and Chief Investment Officer,
Prudential Investment Company
William G. Hunt, Jr. - Senior Vice President and Chief
Marketing Officer, Prudential Preferred
Financial Services
Milan E. Johnson - Chairman and Chief Executive Officer,
Prudential Residential Services Company
S. Ross Johnson - President, Canadian Operations
Ira J. Kleinman - President, Prudential Select Marketing
Company
Donald C. Mann - Senior Vice President
John P. Murray - EVP and Diector of Corporate Risk
Management
Eugene M. O'Hara - Senior Vice President, Comptroller and
Chief Financial Officer
I. Edward Price - President, International Insurance
Donald G. Southwell - President, Prudential Insurance and
Financial Services
Dorothy K. Light - Vice President and Secretary
Martin Pfinsgraff - Vice President and Treasurer
Prudential, the Directors and the Officers are collectively
referred to herein, as the "Enumerated Persons." Each of the
Directors and Officers is an American citizen, with the exception of
Messrs. S. Ross Johnson and Richard M.
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Thomson, who are Canadian citizens. Based upon the knowledge of
Prudential and without independent verification, none of the Enumerated
Persons has, during the last five years, been convicted in a criminal
proceeding (excluding traffic violations or similar misdemeanors), nor
have any of the Enumerated Persons, during the last five years, been a
party to a civil proceeding of a judicial or administrative body of
competent jurisdiction and as a result of such proceeding was or is
subject to a judgment, decree or final order enjoining future violations
of, or prohibiting or mandating activities subject to, federal or state
securities laws or finding any violation with respect to such laws.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
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Prudential acquired beneficial ownership of the shares of
Common Stock reported in Item 5 upon the conversion of certain
securities of the Issuer previously owned by Prudential, pursuant to
the merger consummated on December 14, 1993 (the "Merger") of Adobe
Pipeline Gas Company, an indirect wholly-owned subsidiary of Santa Fe
Energy Resources, Inc. ("SFER"), and a direct wholly-owned subsidiary
of SFER Pipeline, Inc. ("Pipeline", and collectively with SFER, "Santa
Fe") with and into the Issuer. The Merger was consummated pursuant to
the Agreement of Merger, dated as of July 28, 1993, as amended, by and
among the Issuer and Santa Fe.
Prior to the Merger and certain related transactions,
Prudential held the securities of the Issuer as set forth in the left-
hand column of the following table.
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The right-hand column reflects the securities of the Issuer that
Prudential received as a result of the Merger and the related
transactions.
Pre-Merger Securities Converted into or Exchanged For
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49,500 shares of 7% Senior (i) an aggregate of 553,658 shares
Cumulative Preferred Stock of Common Stock, (ii) a beneficial
interest in the H/P Trust (defined
in Item 5) and (iii) $33 million
aggregate principal amount of the
Senior Secured Notes (defined below)
300,000 shares of Common Stock (i) 20,001 shares of Common
Stock and (ii) 5,001 shares of
Junior Preferred Stock
(defined below), each share of
which is presently exercisable
for one share of Common Stock
72,704,000 shares of Class B A beneficial interest in the
Common H/P Trust
11,341,000 shares of Class C 756,104 shares of Common Stock
Common Stock
$23.4 million of 6.20% Senior $23.4 million of the Senior
Secured Notes due 2000 Secured Notes
In summary, upon the consummation of the Merger and the related
transactions, Prudential directly held an aggregate of 1,329,763
shares of Common Stock, a beneficial interest in the H/P Trust (which,
as described in Item 5 below, owns 4,983,180 shares of Common Stock),
5,001 shares of Junior Exchangeable Automatically Convertible
Preferred Stock, Series B, of the Issuer (the "Junior Preferred
Stock") presently exercisable for 5,001 shares of Common Stock, and
$56.4 million of the Issuer's 8% Senior Secured Notes due 2003 (the
"Senior Secured Notes").
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Each share of Junior Preferred Stock is exercisable for one
share of Common Stock upon the payment of the exercise price in effect
at the time of exercise and the delivery of certificate representing
the Junior Preferred Stock to the Company. The Junior Preferred Stock
automatically converts into .001 of a share of Common Stock, subject
to certain adjustments, on the earlier of (i) the thirty-first day
after the Common Stock has reached a certain reported sales price for
40 consecutive trading days or (ii) December 14, 1995.
ITEM 4. PURPOSE OF TRANSACTION.
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Prudential acquired the Common Stock reported in Item 5 in
the ordinary course of business, as a result of the Merger.
Prudential's investment in the Common Stock beneficially owned by it
is solely for investment purposes.
Other than as contemplated by the Trust Agreement (as
defined in Item 5), the Voting Agreement or the Registration Rights
Agreement (each as defined in Item 6), neither Prudential nor, to the
best of Prudential's knowledge without investigation, any other
Enumerated Person has any plans or proposals which relate to, or would
result in any actions listed in (a) through (j) inclusive, of Item 4
of Schedule 13D.
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ITEM 5. INTEREST IN SECURITIES OF THE ISSUER.
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DESCRIPTION OF THE H/P TRUST
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Pursuant to a Trust Agreement, dated as of December 14, 1993
(the "Trust Agreement") by and among the Issuer, Prudential and
Liberty Bank and Trust Company of Oklahoma City, N.A. (the "Trustee"),
a trust (the "H/P Trust") was formed and was funded by the Issuer with
4,983,180 shares of Common Stock (the "Trust Shares"). Initially, all
Trust Shares are designated as "Unclassified Shares" for purposes of
the Trust Agreement. Any Trust Shares that are from time to time
classified as described below will be designated as "Classified
Shares" for purposes of the Trust Agreement.
Pursuant to the Trust Agreement, the Company is obligated to
cause the transfer agent for the Junior Preferred Stock to deposit to
the H/P Trust all proceeds from the exercise of shares of Junior
Preferred Stock. At the end of each calendar quarter and upon
termination of the H/P Trust, the Trustee will compute the amount of
such exercise proceeds deposited to the H/P Trust since the last
classification of Trust Shares, if any, and the number of Exercise
Units (as defined below) represented thereby. "Exercise Units" means
the amount of exercise proceeds deposited to the H/P Trust at any
given time divided by the exercise price (the price per share of
Common Stock required to be paid upon exercise of shares of Junior
Preferred Stock) in effect on the date of the exercise giving rise to
such proceeds, after taking into account any adjustments to such
price. If, as of the last day of each calendar quarter or as of the
termination date of the trust (each such date, a "Reporting Date"),
the number of Exercise Units represented by exercise proceeds
deposited
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to the H/P Trust since the last classification of Trust Shares is
greater than the number (rounded to the next higher whole number, if
fractional) equal to the quotient of (A) 20% of the sum of (1) the
number of Unclassified Shares in the H/P Trust immediately prior to
the date of such calculation plus (2) the number of shares of Common
Stock directly held by Prudential immediately prior to the Reporting
Date divided by (B) the difference between (1) 100% minus (2) 80% of
the fraction (not greater than one) determined by dividing (x) the sum
of (I) the number of the Unclassified Shares in the H/P Trust
immediately prior to the date of such calculation plus (II) the number
of shares of Common Stock directly held by Prudential immediately
prior to the Reporting Date by (y) the number of all of the shares of
Common Stock issued and outstanding immediately before the date of
such calculation, treating any Classified Shares as not being issued
or outstanding and treating any Unclassified Shares that are
constructively owned by Prudential under Section 318 of the Internal
Revenue Code of 1986, as amended, as being issued and outstanding,
then the Trustee will (x) pay the principal amount of all exercise
proceeds deposited since the last classification of Trust Shares to
Prudential, (y) pay to the Issuer all other funds in the H/P Trust
(except such amount as the Trustee, in its sole discretion, shall
decide to retain for the payment of expenses), and (z) classify that
number of Unclassified Shares that is equal to the number of Exercise
Units corresponding to the amount of exercise proceeds deposited to
the H/P Trust since the last
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classification of Trust Shares, and distribute such Classified Shares
to the Issuer for cancellation.
The H/P Trust has a minimum term of seven months.
Thereafter, the H/P Trust will terminate on the day after all of the
outstanding shares of Junior Preferred Stock have been exercised for
or converted into Common Stock (as described in Item 3), but, in any
event, no later than December 15, 1995. Upon termination of the H/P
Trust (after first determining whether a Classification Event has
occurred and making the distributions according to (x), (y) and (z)
above), the Trustee will distribute the balance of Unclassified Shares
in the H/P Trust to Prudential and will distribute all other assets in
the H/P Trust, including any Classified Shares, to the Issuer.
Under the Trust Agreement neither the Trustee, Prudential
nor the Issuer has the power to sell, transfer, assign, pledge,
hypothecate, encumber or in any manner dispose of the Trust Shares
other than as described above. The Trustee also is obligated to vote
the Unclassified Shares in accordance with the instructions of
Prudential.
RESPONSE TO ITEMS 5(A)-(E)
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(a) Prudential directly owns 1,329,763 shares of Common
Stock and, pursuant to the Trust Agreement, has power to direct the
Trustee to vote the 4,983,180 shares of Common Stock held by the
Trust. Prudential has the right to acquire up to 5,001 shares of
Common Stock upon the exercise of the shares of the Junior Preferred
Stock it holds. Accordingly, Prudential may be deemed to
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beneficially own a total of 6,317,944 shares of Common Stock which
represents 24.6% of the outstanding Common Stock. As of the date
of this Schedule 13D and based upon the knowledge of Prudential without
independent verification, none of the other Enumerated Persons
beneficially owns any shares of the Common Stock.
Prudential expressly disclaims membership in a group with
SFER or Pipeline or both, for purposes of Rule 13d-5(b)(1) under the
Securities Exchange Act of 1934, as amended (the "Act"), and further
expressly disclaims that it beneficially owns any shares of Common
Stock beneficially owned by SFER or Pipeline.
(b) Prudential has the sole power to vote, or direct the
voting of, 6,317,944 shares of Common Stock, assuming Prudential's
exercise of the Junior Preferred owned by it.
Prudential has the sole power to dispose, or to direct the
disposition of, the 1,329,763 shares of Common Stock held directly by
it. Prudential does not, directly or indirectly, through any
contract, arrangement, understanding, relationship, or otherwise, have
or share investment power (as defined in Rule 13d-3(a)(2) under the
Act) or investment control (as used in Rule 16a-8(a)(3) under the Act)
with respect to the Trust Shares, including the power to dispose, or
to direct the disposition of, the Trust Shares.
As of the date of this Schedule 13D and based upon the
knowledge of Prudential without independent verification, none of the
other Enumerated Persons has the power to vote or dispose of any
shares of Common Stock.
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(c) Except in connection with the Merger as described in
Item 3, Prudential has not effected any transactions in the Common
Stock during the preceding 60 days. As of the date of this Schedule
13D and based upon the knowledge of Prudential without independent
verification, none of the other Enumerated Persons has effected any
transactions in the Common Stock during the preceding 60 days.
(d) No person other than Prudential is known to have the
right to receive or the power to direct the receipt of dividends from,
or the proceeds of the sale of, the shares of Common Stock
beneficially owned by it.
(e) Not applicable.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS
------ WITH RESPECT TO SECURITIES OF THE ISSUER
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Prudential is a party to three agreements with respect to
the shares of Common Stock beneficially owned by it: (i) the Trust
Agreement (as described in response to Item 5 which is incorporated
herein by reference), (ii) the Voting Agreement (defined below), and
(iii) the Registration Rights Agreement (defined below). In addition,
Prudential and the Issuer are parties to a Securities Purchase
Agreement (defined below) pursuant to which the Issuer's Senior
Secured Notes were issued.
VOTING AGREEMENT
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In connection with the Merger and the related transactions,
Prudential and Santa Fe entered into a Voting Agreement dated December
14, 1993 (the "Voting Agreement"),
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in which each party agreed to vote the shares of Common Stock
beneficially owned by it (which, in the case of Prudential, includes
the Trust Shares) in favor of persons designated by the parties from
time to time for election to the board of directors of the Issuer.
As a result of the Merger, the Issuer's entire board of directors
consists of eight directorships, divided into three classes, with
staggered terms. Each of Santa Fe and Prudential have agreed to vote
all of the shares of Common Stock beneficially owned by it so as to
cause: (i) 50% of the number of directorships constituting the entire
board of directors of the Issuer to be designated by Santa Fe, (ii)
one person designated by Prudential to be elected as a Class I director
of the Issuer and (iii) until the expiration of the initial term of a
Class III directors at the third annual meeting of stockholders following
the Merger, one person jointly designated by Santa Fe and Prudential to
be elected as a Class III director of the Issuer. Each of SFER and
Prudential has granted reciprocal irrevocable proxies with respect to
the shares of Common Stock beneficially owned by it, which proxies can
be exercised solely upon the failure of the grantor thereof to vote the
shares of Common Stock beneficially owned by it in accordance with the
Voting Agreement.
The Voting Agreement further provides that each of Santa Fe
and Prudential will vote all shares of Common Stock beneficially owned
by it against any proposed amendments to Section 3.03 of the Issuer's
By-laws, which governs the filling of vacancies on the Board, and
against any proposed amendment to Article 7 of the Issuer's
Certificate of Incorporation, which governs the amendment of such By-
laws provisions.
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The Voting Agreement terminates by its terms upon the
earlier to occur of (i) the tenth anniversary of the Merger and (ii)
such time as Prudential no longer beneficially owns at least 756,100
shares of Common Stock.
REGISTRATION RIGHTS AGREEMENT
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Pursuant to the Merger Agreement, the Issuer entered into
the Registration Rights Agreement, dated as of December 14, 1993 (the
"Registration Rights Agreement"), with Santa Fe and Prudential
pursuant to which each of Santa Fe and Prudential will be entitled to
certain demand and "piggyback" registration rights with respect to the
shares of capital stock of the Company issued to it in the Merger as
described below and, with respect to Prudential, any shares of Common
Stock that may be received by Prudential upon the termination of the
H/P Trust.
Pursuant to the Registration Rights Agreement, Prudential
will have the right, subject to certain limitations, exercisable one
time in any 12-month period, to require the Issuer to register,
pursuant to the Securities Act of 1933, as amended (the "Securities
Act"), the offer and sale of (i) the Common Stock received by
Prudential pursuant to the Merger, and (ii) any shares of Common Stock
that may be received by Prudential upon the termination of the H/P
Trust. All expenses in connection with the first two such demand
registrations will be borne by the Issuer; all expenses in connection
with subsequent demand registrations will be borne by Prudential and
any other selling stockholders. In addition, Prudential will have the
right to include shares of Common Stock held by it in any registration
statement filed by the Issuer pursuant to the Securities Act
(including any registration statement of the Issuer
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required by Santa Fe but excluding any registration statement filed
by the Issuer in connection with an employee stock plan). The Issuer
will pay all expenses incurred in connection with any such "piggyback"
registrations other than registration fees relating to the shares of
Common Stock to be sold for the account of Prudential in connection
with such registrations, fees and expenses of counsel for Prudential
and certain other expenses (which will be paid by Prudential).
SECURITIES PURCHASE AGREEMENT
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In connection with the Merger, Prudential and the Issuer
entered into a Securities Purchase Agreement dated as of December 14,
1994 (the "Securities Purchase Agreement") pursuant to which the
Issuer issued to Prudential (i) $23.4 million aggregate principal
amount of Senior Secured Notes in exchange for the $23.4 million
aggregate principal amount of the 6.20% Senior Secured Notes due 2000
then held by Prudential, and (ii) $33 million aggregate principal
amount of Senior Secured Notes in partial consideration for the
conversion of Prudential's shares of the Issuer's 7% Senior Cumulative
Preferred Stock pursuant to the Merger (see the table set out in Item
3). The Securities Purchase Agreement contains customary
representations, warranties, covenants and indemnification provisions.
The Senior Secured Notes are secured by a first priority lien granted
to a collateral agent for the benefit of Prudential and another senior
secured lender of the Issuer, primarily on the outstanding capital
stock of certain of the Issuer's subsidiaries and on the accounts
receivable and other personal property of the Issuer.
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Further, Prudential expressly disclaims membership in a
group with either Santa Fe or Pipeline or both, and expressly
disclaims that it beneficially owns any shares of Common Stock held by
either Santa Fe or Pipeline at any time.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
--------------------------------
1. Trust Agreement.
2. Voting Agreement.
3. Registration Rights Agreement.
4. Securities Purchase Agreement.
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SIGNATURE
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After due inquiry and to the best of my knowledge and
belief, I certify that the information set forth in this statement is
true, complete and correct.
Dated: January 17, 1994
THE PRUDENTIAL INSURANCE
COMPANY OF AMERICA
By: /s/ Jack L. Pfeilsticker
---------------------------
Name: Jack L. Pfeilsticker
Title: Assistant General
Counsel
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INDEX TO EXHIBITS
1. Trust Agreement dated as of December 14, 1993 by and among Hadson
Corporation, The Prudential Insurance Company of America, Pruco
Life Insurance Company, PruSupply, Inc., and Liberty Bank and
Trust Company of Oklahoma City, N.A., as Trustee.
2. Voting Agreement dated as of December 14, 1993 by and among The
Prudential Insurance Company of America, Pruco Life Insurance
Company, PruSupply, Inc., Santa Fe Energy Resources, Inc. and
SFER Pipeline, Inc.
3. Registration Rights Agreement dated as of December 14, 1993 by
and among Hadson Corporation, The Prudential Insurance Company of
America, Pruco Life Insurance Company, PruSupply, Inc., Santa Fe
Energy Resources, Inc. and SFER Pipeline, Inc.
4. Securities Purchase Agreement dated as of December 14, 1993 by
and among Hadson Corporation, The Prudential Insurance Company of
America, Pruco Life Insurance Company and PruSupply, Inc.
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TRUST AGREEMENT
AGREEMENT AND DECLARATION OF TRUST, dated as of December 14,
1993, by and among Hadson Corporation ("Hadson"), The Prudential
Insurance Company of America ("Prudential Insurance Company"), Pruco
Life Insurance Company ("Pruco") and PruSupply Inc. ("PruSupply"), and
Liberty Bank and Trust Company of Oklahoma City, N.A., a National
Banking Association with principal offices at Oklahoma City, Oklahoma
(the "Original Trustee").
W I T N E S S E T H:
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WHEREAS, the Board of Directors and stockholders of Hadson have
approved an Agreement of Merger dated as of July 28, 1993, as amended
(the "Merger Agreement"), relating to the proposed merger (the
"Merger") of Adobe Gas Pipeline Company, a wholly- owned subsidiary of
Santa Fe Energy Resources, Inc., with and into Hadson; and
WHEREAS, Prudential Insurance Company, Pruco and PruSupply
collectively own and hold (i) 300,000 shares of the Common Stock of
Hadson, par value $.01 per share, (ii) all of the outstanding shares
of the Class B Common Stock of Hadson, par value $.01 per share,
(iii) all of the outstanding shares of the Class C Common Stock of
Hadson, par value $.01 per share, and (iv) all of the outstanding
shares of the 7% Senior Cumulative Preferred Stock of Hadson, Series
A, par value $.01 per share; and
WHEREAS, the Merger Agreement contemplates that Prudential
Insurance Company, Pruco and PruSupply shall receive, in exchange for
their Class B Common shares and a portion of their 7% Senior
Cumulative Preferred shares, a beneficial interest in a trust to be
funded with 4,983,180 shares of the common stock of Hadson, par value
$.01 per share, as the surviving corporation in the Merger (the "New
Hadson Common Shares"), subject to certain rights retained by Hadson;
NOW, THEREFORE, in consideration of the premises and other
valuable consideration, and subject to the terms and provisions
contained in this Trust Agreement, it is hereby agreed as follows:
ARTICLE I.
THE TRUST FUND
1.01 Initial Funding. Immediately after the Merger becomes
effective, Hadson shall transfer, assign and deliver to the Trustee
FOUR MILLION NINE HUNDRED EIGHTY-THREE THOUSAND ONE HUNDRED EIGHTY
(4,983,180) New Hadson Common Shares (the "Initial Contribution").
1.02 Undertaking of the Trustee. Upon receipt of the Initial
Contribution, the Trustee shall hold such shares, and any
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additional property received by the Trustee pursuant to this Trust
Agreement, in a separate trust in accordance with the provisions of
this Trust Agreement.
1.03 Ownership and Control of Trust Fund. Except as expressly
provided hereunder, the beneficiaries under this Trust Agreement shall
have no title or right to, or possession, management or control of,
the Trust Fund. The whole title to all of the Trust Fund shall be
vested in the Trustee and the sole interest of the beneficiaries under
this Trust Agreement shall be the rights and benefits given to such
persons under this Trust Agreement.
ARTICLE II.
NAME AND DEFINITIONS
2.01 Name. This trust shall be known as the H/P Trust.
2.02 Terms Defined in the Recitals. Terms defined in the
recitals hereto have the meanings ascribed therein.
2.03 Additional Terms Defined. For purposes of this Trust
Agreement the following words and expressions shall have the following
meanings and usages:
"Automatic Conversion": The conversion of the New Hadson
--------------------
Junior Preferred Shares into New Hadson Common Shares on the earlier
of (i) the occurrence of the Early Automatic Conversion Date (as
defined in Article 4 Section 8.a. of the Charter) and (ii) the 2nd
anniversary of the Merger.
"Beneficiaries": Prudential and Hadson.
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"Charter": The Certificate of Incorporation of Hadson in
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effect on the Effective Date.
"Classification Date": any Reporting Date as of which the
-------------------
number of Exercise Units collected since the last Measurement Date is
greater than the number (rounded to the next higher whole number, if
fractional) equal to the quotient of (A) 20% of the sum of (1) the
number of Unclassified Shares held in the Trust Fund immediately prior
to such Reporting Date plus (2) the number of Prudential's New Hadson
Common Shares immediately prior to such Reporting Date, divided by (B)
the difference between (1) 100% minus (2) 80% of the fraction (not
greater than one) determined by dividing (x) the sum of (I) the number
of Unclassified Shares held in the Trust Fund immediately prior to
such Reporting Date plus (II) the number of Prudential's New Hadson
Common Shares immediately prior to such Reporting Date, by (y) the
number of all of the issued and outstanding New Hadson Common Shares
immediately before such Reporting Date, treating
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any Classified Shares held in the Trust Fund immediately prior to such
Reporting Date as not being issued or outstanding and treating any
Unclassified Shares that are constructively owned by Prudential under
Section 318 of the Code as being issued and outstanding.
"Classified Shares": all of the Trust's New Hadson Common
-----------------
Shares that have been designated as Classified Shares pursuant to
Section 4.06(c).
"Code": the Internal Revenue Code of 1986, as amended from
----
time to time. Any reference to a Section of the Code shall be deemed
to refer as well to any subsequent provision of law enacted in its
place, and shall be deemed to include all Treasury Regulations
promulgated under the Code interpreting or applying that Section.
"Conversion Notice": the notice required to be delivered by
-----------------
Hadson to the holders of the New Hadson Junior Preferred Shares
advising them of the automatic conversion of the New Hadson Junior
Preferred Shares into New Hadson Common Shares.
"Effective Date": the date on which the Merger becomes
--------------
effective.
"Exercise Price": the price per New Hadson Common Share
--------------
required to be paid at any given time pursuant to Article 4 Section
C.6. of the Charter in order to exercise a New Hadson Junior Preferred
Share to purchase New Hadson Common Shares, after taking into account
any adjustments required under the provisions of the Charter.
"Exercise Price Transfer Period": shall mean (i) for so
------------------------------
long as the Trustee and Transfer Agent are the same or are affiliated,
within one business day after any New Hadson Junior Preferred Shares
are exercised; (ii) in all other circumstances, on each Friday for all
exercises of New Hadson Junior Preferred Shares during the period
ending on the Wednesday of such week and starting on the Thursday of
the preceding week; provided, however, that if the aggregate amount
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received during such period (plus any amounts held over from prior
periods) is less than $50,000, all such amounts shall be held by the
Transfer Agent until the subsequent period and added to amounts
received in such subsequent period; and (iii) notwithstanding and in
addition to the foregoing, on the date of termination of the Trust in
accordance with the terms hereof.
"Exercise Proceeds": all amounts received by the Trustee
-----------------
from Hadson pursuant to Section 4.05.
"Exercise Units": the amount of Exercise Proceeds received
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by the Trustee at any given time divided by the Exercise
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Price in effect on the date of exercise giving rise to such Exercise
Proceeds.
"General Fund": the assets comprising the Trust Fund other
------------
than New Hadson Common Shares.
"Hadson's Transfer Agent": the institution retained by
-----------------------
Hadson from time to time as transfer agent with respect to New Hadson
Junior Preferred Shares.
"income": the income of the Trust as determined under the
------
terms of this Trust Agreement and applicable law, not including stock
dividends or other distributions in the form of New Hadson Common
Shares.
"Measurement Date": the Effective Date and each
----------------
Classification Date.
"New Hadson Junior Preferred Shares": shares of the Junior
----------------------------------
Exercisable Automatically Convertible Preferred Stock, Series B, par
value $.01 per share, of Hadson, as surviving corporation in the
Merger.
"Notice": the tangible expression of a communication sent,
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an instruction or direction given, or an action taken, pursuant to
this Trust Agreement. A Notice shall be effective only if it conforms
to the requirements of Section 13.05.
"Prudential": Prudential Insurance Company, as nominee and
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agent for itself, and its wholly-owned affiliates Pruco and PruSupply,
as provided in Section 9.02.
"Prudential's New Hadson Common Shares": 1,329,763 New
-------------------------------------
Hadson Common Shares.
"Reporting Date": (i) prior to the delivery of the
--------------
Conversion Notice, the last day of each calendar quarter and (ii)
after the delivery of the Conversion Notice, the Termination Date.
"Termination Date": the date upon which the Trust
----------------
terminates pursuant to Section 3.01.
"Trust": the separate trust held under this Trust
-----
Agreement.
"Trust Agreement": this Trust Agreement, as amended from
---------------
time to time.
"Trust Fund": all property (principal plus accrued,
----------
accumulated and undistributed income) that, at any particular time,
belongs to the Trust.
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"Trust Term": the period from the date of execution of this
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Trust Agreement though and including the Termination Date.
"Trustee": each Trustee and all Trustees (including the
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Original Trustee) serving under this Trust Agreement at any particular
time.
"Trust's New Hadson Common Shares": all of the New Hadson
--------------------------------
Common Shares held in the Trust Fund from time to time.
"Unclassified Shares": all of the Trust's New Hadson Common
-------------------
Shares that have not been reclassified pursuant to Section 4.06(c).
2.04 Gender and Number. Except where the context otherwise
requires, words importing the masculine gender include the feminine
and the neuter, if appropriate, words importing the singular number
shall include the plural number and vice versa and words importing
persons shall include firms, associations, corporations and other
entities.
2.05 Subdivision References. All references herein to Articles,
Sections and other subdivisions refer to the corresponding Articles,
Sections and other subdivisions of this Trust Agreement, and the word
"herein" and words of similar import refer to this Trust Agreement as
a whole and not to any particular Article, Section or subdivisions of
this Trust Agreement.
2.06 Titles. The Article titles and Section headings in this
Trust Agreement are included solely for purposes of identification,
and are not be used to construe any provision contained in this Trust
Agreement or for any other purpose.
ARTICLE III.
DURATION AND TERMINATION OF TRUST
3.01 Duration. The Trust shall terminate one (1) day after the
later to occur of the following events:
(i) the date occurring seven (7) months after
completion of the transfer and delivery of the Initial
Contribution to the Trustee pursuant to Section 1.01; or
(ii) the earliest date on which all New Hadson Junior
Preferred Shares have been converted, whether by the exercise by
the holder thereof or by Automatic Conversion, into New Hadson
Common Shares.
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3.02 Rule against Perpetuities. Notwithstanding any other
provision of this Trust Agreement, and particularly notwithstanding
the provisions of Section 3.01, the Trust shall terminate, if it shall
not have previously terminated, one (1) day before the twentieth
(20th) anniversary of the Effective Date.
3.03 Termination by Beneficiaries. The Trust may not be revoked
or terminated at any time prior to the Termination Date by the
Beneficiaries and/or the Trustee.
3.04 Continuance of Trust for Winding Up. After the Termination
Date, and solely for the purpose of liquidating and winding up the
affairs of the Trust, the Trustee shall continue to act as such until
its duties have been fully performed.
ARTICLE IV.
ADMINISTRATION OF THE TRUST FUND
4.01 No Disposition of the Trust's New Hadson Common Shares.
The Trustee shall not sell, transfer, assign, pledge, hypothecate,
encumber or in any other manner dispose of the Trust's New Hadson
Common Shares except as expressly provided in Sections 4.06(d) and
4.07.
4.02 Voting the Trust's New Hadson Common Shares. The Trustee
shall, at any meeting at which the Trust's New Hadson Common Shares
are eligible to vote (or in connection with any solicitation of
consents with respect to which the Trust's New Hadson Common Shares
are entitled to consent), vote (or consent with respect to) all of the
Trust's New Hadson Common Shares that are Unclassified Shares in
accordance with the instructions of Prudential.
4.03 Payment of Claims, Expenses and Liabilities. In accordance
with Article X, the Trustee shall pay from the General Fund all
claims, expenses, charges, liabilities and obligations of the Trust
Fund as contemplated by this Trust Agreement and as required by law.
Furthermore, no such charges may be charged against or paid from the
Trust's New Hadson Common Shares, from the principal amount of any
Exercise Proceeds held by the Trustee, or from any cash dividends paid
with respect to the Unclassified Shares.
4.04 Disposition of Net Income. The Trustee shall collect all
of the net income of the Trust Fund and shall hold or dispose of the
same as follows:
(a) The Trustee shall distribute all net income comprised of
dividends and other distributions paid with respect to Unclassified
Shares to Prudential immediately upon receipt.
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(b) Subject to the provisions of Section 10.02(b), the
Trustee shall distribute all net income comprised of dividends and
other distributions paid with respect to Classified Shares to Hadson
immediately upon receipt.
(c) The Trustee shall accumulate and add to the General Fund
all other net income earned on the Trust Fund (including net income
earned on investments made pursuant to Section 7.02).
4.05 Collection of Exercise Proceeds. (a) Hadson shall direct
Hadson's Transfer Agent to pay to the Trustee, and the Trustee shall
collect, within the Exercise Price Transfer Period, a sum (rounded up
to the next cent, if fractional) equal to the product of (i) the
Exercise Price in effect on the date on which such New Hadson Junior
Preferred Shares were exercised, multiplied by (ii) the number of New
Hadson Common Shares for which each New Hadson Junior Preferred Share
was exercised pursuant to Article 4 Section C.6. of the Charter on the
date on which such New Hadson Junior Preferred Shares were exercised,
multiplied by (iii) the number of New Hadson Junior Preferred Shares
that were exercised to purchase New Hadson Common Shares pursuant to
Article 4 Section C.6. of the Charter on the date on which such New
Hadson Junior Preferred Shares were exercised. Each such payment
shall be accompanied by a report by the Transfer Agent setting forth
(x) the date of exercise of each New Hadson Junior Preferred Share
with respect to which any payment is made, and (y) each of the items
referred to in parts (i), (ii) and (iii) of the foregoing sentence as
of the date of exercise.
(b) Upon receipt and collection of each payment of Exercise
Proceeds pursuant to subsection (a) above, the Trustee shall compute,
as of the date of exercise of each New Hadson Junior Preferred Share
with respect to which any payment is made (i) the aggregate amount of
Exercise Proceeds received by it during the period beginning on the
day after the last Measurement Date and ending on such date, and
(ii) the number of Exercise Units represented thereby. On each
Reporting Date, the Trustee shall determine the sum of all Exercise
Units received since the most recent Reporting Date (or the Effective
Date if there was no previous Reporting Date) in order to determine
whether such Reporting Date is a Classification Date.
4.06 Distributions and Classifications on Classification Dates.
Within five (5) business days after each Classification Date:
(a) The Trustee shall pay to Prudential the principal amount
of all Exercise Proceeds collected since the last Measurement Date.
(b) The Trustee shall pay to Hadson the balance of the
General Fund (except such amount as the Trustee, in its sole
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discretion, decides to retain for the payment of expenses, as provided
in Section 10.02(b)).
(c) The Trustee shall designate and characterize as
Classified Shares that number of Unclassified Shares that is equal to
the number of Exercise Units distributed to Prudential pursuant to
Section 4.06(a) since the last Measurement Date.
(d) The Trustee shall distribute the Classified Shares to
Hadson.
4.07 Final Distribution. Upon the Termination Date:
(a) The Trustee shall distribute to Prudential the balance
of Unclassified Shares remaining in the Trust Fund.
(b) The Trustee shall distribute to Hadson the balance of
the Trust Fund remaining after the distribution (if any) under
subsection (a) above (except such amount as the Trustee, in its sole
discretion, decides to retain for the payment of expenses, as provided
in Section 10.02(b)).
ARTICLE V.
REPORTS TO THE TRUSTEE AND VERIFICATION OF STOCKHOLDINGS
5.01 Reports by Hadson's Transfer Agent. Hadson shall provide,
or shall direct Hadson's Transfer Agent to provide, to the Trustee,
together with or prior to delivery of each payment made pursuant to
Section 4.05(a), a statement showing (i) the number of New Hadson
Junior Preferred Shares that had been exercised to purchase New Hadson
Common Shares pursuant to Article 4 Section C.6. of the Charter since
the most recent Measurement Date and since the latest Reporting Date,
and (ii) the number of New Hadson Junior Preferred Shares issued and
outstanding as of the date of such report, as shown on Hadson's
Transfer Agent's books and records.
5.02 Securities Law Reports. Hadson shall deliver to the
Trustee copies of all periodic reports, proxy statements and other
instruments or documents filed by Hadson with the United States
Securities and Exchange Commission promptly following such filing.
5.03 Reconciliation of Discrepancies. In the event of any
discrepancy between or among the reports obtained by the Trustee
pursuant to the preceding provisions of this Article concerning
(i) the number of New Hadson Junior Preferred Shares that had been
exercised to purchase New Hadson Common Shares pursuant to Article 4
Section C.6. of the Charter, (ii) the number of New Hadson Junior
Preferred Shares then remaining outstanding, (iii) the number of New
Hadson Common Shares issued upon exercise or
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conversion of New Hadson Junior Preferred Shares or (iv) such other
matters as the Trustee may reasonably request relating to the
transactions contemplated hereby, the Trustee shall reconcile such
discrepancy in such manner and on the basis of such evidence as the
Trustee, in its sole discretion, deems advisable, and shall determine
the number of shares so exercised, issued or outstanding, as the case
may be. The determination of the Trustee pursuant to the preceding
sentence shall be final and binding upon the Beneficiaries.
Alternatively, the Trustee may commence a legal action to reconcile
such discrepancy, if it deems it advisable to do so.
5.04 Reports by Prudential. (a) Within 10 business days after
the Effective Date, Prudential shall provide to the Trustee a
statement showing the number of Prudential's New Hadson Common Shares
owned as of the Effective Date, as shown on Prudential's books and
records.
(b) Notwithstanding the provisions of Section 5.03, in
making the computation of the quotient described in the definition of
"Classification Date" in Section 2.03, the Trustee may rely,
absolutely and without further investigation, upon the report provided
by Prudential pursuant to this Section, and the Trustee shall not be
obligated to inquire into the accuracy of any such Notice or to verify
the number of Prudential's New Hadson Common Shares.
ARTICLE VI.
TAX MATTERS
6.01 Income Tax Status. (a) The Trust is intended to be
treated as a grantor trust subject to the provisions of Subchapter J,
Subpart E of the Code that is owned by the Beneficiaries, as grantors,
as follows:
(i) for all federal, state and local income tax
purposes, Prudential shall be deemed to be the owner of each
Unclassified Share held in the Trust Fund during all or any
portion of a taxable year of Prudential, but only for such
portion of the taxable year as such Unclassified Share is so
characterized under this Trust Agreement; and
(ii) for all federal, state and local income tax
purposes, Hadson shall be deemed to be the owner of the
General Fund and each Classified Share held in the Trust
Fund during all or any portion of a taxable year of Hadson,
but only, in the case of a Classified Share, for such
portion of the taxable year as such Classified Share is so
characterized under this Trust Agreement.
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(b) Any and all items of income, gain, loss, amount realized,
deduction or credit attributable to Unclassified Shares during the
period they are deemed to be owned by Prudential for tax purposes
shall be allocated to Prudential, and all remaining items of income,
gain, loss, amount realized, deduction or credit attributable to the
Trust Fund shall be allocated to Hadson, provided, however, that the
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Trustee shall not determine the amount of any income, gain or loss
recognized by Prudential in connection with a distribution of Exercise
Proceeds to Prudential in exchange for the reclassification of
Unclassified Shares pursuant to Section 4.06, it being understood and
agreed that Prudential shall be solely responsible for such
determination.
(c) The Trustee is authorized to take any action consistent
with the provisions of this Trust Agreement that may be necessary or
appropriate to minimize any potential tax liability of the
Beneficiaries arising out of the operations of the Trust.
6.02 Tax Returns and Reports. In accordance with Section
1.671-4(a) of the Treasury Regulations, the Trustee will file with the
United States Internal Revenue Service annual information tax returns
showing the items of income, loss, amount realized, deduction and
credit attributable to the Trust and detailing the allocation of such
items to the Beneficiaries, as provided in Section 6.01. The Trustee
will send to each Beneficiary a copy of the separate statement
containing such information and will instruct each Beneficiary to
report such items on its federal income tax return.
6.03 Tax Reporting by Beneficiaries. Each Beneficiary hereby
covenants and agrees that it shall file all applicable federal, state
and local income tax returns and reports on a basis and in a manner
consistent in all material respects with the provisions of Section
6.01, and that each such return or report shall include the items of
income, loss, amount realized, deduction and credit set forth in the
copy of the income tax reporting statement delivered to such
Beneficiary by the Trustee pursuant to Section 6.02.
ARTICLE VII.
POWERS OF AND LIMITATIONS ON THE TRUSTEE
7.01 Limitations on Trustee. The Trustee shall not at any time,
on behalf of the Trust or the Beneficiaries, enter into or engage in
any trade or business, and no part of the Trust Fund shall be used or
disposed of by the Trustee in furtherance of any trade or business.
The Trustee shall be restricted to receiving the Trust's New Hadson
Common Shares, voting (or executing consents with respect to) the
Trust's New Hadson Common Shares in the manner provided herein,
performing any other obligations
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imposed under or pursuant to any agreements to which the Trustee is
subject by virtue of ownership of the Trust's New Hadson Common Shares
(including exercising the powers set forth in Section 7.03), receiving
the Exercise Proceeds from Hadson or Hadson's Transfer Agent,
determining and collecting income from the Trust Fund, collecting,
receiving, compromising and settling receivables, discharging,
compromising and settling any unascertained, unliquidated or
contingent debts, liabilities or obligations for the payment of which
any reserve may have been established by the Trustee, disposing of the
Trust Fund as provided in Article IV of this Trust Agreement, and
bringing suit or defending any suit against the Trust or the Trustee
on behalf of the Trust, and exercising such other powers and duties as
specified elsewhere in this Trust Agreement, including, without
limitation the duties specified in Section 7.03, for the purposes of
carrying out the terms of this Trust Agreement.
7.02 Limitations on Investments. The Trustee shall invest the
Exercise Proceeds and other funds received by it as Trustee or
otherwise held in the Trust Fund only in (a) short-term marketable
direct obligations of, or guaranteed as to principal and interest by,
the United States government or any agency thereof; or (b) insured
demand deposit accounts or interest-bearing certificates of deposit or
other similar obligations of domestic banks or other financial
institutions having a shareholders' equity or equivalent capital of
not less than Fifty Million Dollars ($50,000,000), at the then best
generally available rates of interest for like amounts and like
periods, provided, however, that the maturities of any of the
foregoing shall not exceed one (1) year.
7.03 Specific Powers of Trustee. Subject to the limitations
contained in this Trust Agreement, the Trustee shall have, in addition
to any powers conferred by any other provision of this Trust
Agreement, the power to take any and all actions as, in the sole
discretion for the Trustee, are necessary or advisable to effectuate
the purpose of the Trust, including the following specific powers:
(a) To retain all or any assets constituting part of the
Trust Fund, to hold legal title to property of the Trust in the
name of the Trust, to invest or reinvest funds of the Trust only
as provided in Section 7.02 and to cause such investments of any
part to be registered and held in its name, as Trustee, or in the
names of nominees.
(b) To maintain appropriate books and records relating to
the Trust and the Trust Fund detailing the acts and transactions
of the Trustee.
(c) To initiate, prosecute, defend, supervise, direct,
compromise or settle any claim, demand, action or proceeding
relating to the Trust or this Trust Agreement, and in
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connection therewith, at the Trustee's discretion, to retain and
employ such agents and professionals (including professionals
affiliated with the Trustee or any retained by Hadson or
Prudential) and to confer upon them such authority as the Trustee
may deem expedient to carry out its duties hereunder, and to pay
reasonable compensation therefor from the Trust Fund; provided
that the Trustee shall not be required to enter into or maintain
any claim, demand, action or proceeding relating to the Trust
unless it shall have sufficient funds on hand for that purpose or
unless it shall have been indemnified to its satisfaction against
all expenses and liabilities to which it may, in its judgment, be
subjected by any such action on its part.
(d) To perform any and all acts, exercise any and all
rights, enter into any and all proceedings, contracts and
other instruments (including, but not limited to the
preparation and filing of any and all statements and papers,
documents and instruments of any kind and nature with the
United States Securities and Exchange Commission or any
other governmental body having jurisdiction over the Trust
or the Merger Agreement with respect to the Trust's New
Hadson Common Shares) that are not inconsistent with the
provisions of this Trust Agreement and that the Trustee
deems necessary and advisable in its opinion for the
exercise by the Trustee of all the rights and privileges
accorded to it hereunder, for the protection and safekeeping
of the Trust's New Hadson Common Shares, and for the
administration of the Trust in accordance with the terms of
this Trust Agreement and applicable law.
ARTICLE VIII.
ACCOUNTS OF THE TRUSTEE
8.01 Accounts and Inspection. The Trustee shall keep accurate
and detailed accounts of all investments, receipts and disbursements
and other transactions hereunder and all accounts, books and records
relating thereto shall be open at all reasonable times to inspection
and audit by any person designated by Hadson or by Prudential. The
Trustee shall promptly deliver to such designee any reports on the
Trust Fund that are reasonably requested.
8.02 Accounting Reports. Within a reasonable time period
following the Termination Date, and within one hundred twenty (120)
days, or such other agreed-upon period, after removal or resignation
of the Trustee, the Trustee shall deliver to the Beneficiaries a
certified written report, in a format acceptable to the Beneficiaries,
setting forth (i) all investments, receipts and disbursements, and
other transactions effected during the
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period from the date of this Trust Agreement, or from the close of any
preceding period covered by such a report, to the date of such
removal, resignation or termination, (ii) all cash, securities and
other property held at the close of such period and the current value
thereof, and (iii) such other information as may be required of the
Trustee under any applicable law.
8.03 Right to Judicial Accounting. Nothing contained in this
Article shall be construed as a limitation upon or prohibition against
the Trustee's right to have its accounting judicially settled.
8.04 Preservation of Books and Records. All records and
accounts maintained by the Trustee with respect to the Trust shall be
preserved for such period as may be required under any applicable law.
Upon the expiration of any such required retention period, the Trustee
shall have the right to destroy such records and accounts after first
notifying the Beneficiaries of its intention and transferring to the
Beneficiaries all records and accounts requested. The Trustee shall
have the right to preserve all records and accounts in original form,
or on microfilm, magnetic tape, or any other similar process.
ARTICLE IX.
LIABILITIES AND INDEMNIFICATION OF THE TRUSTEE
9.01 Generally. The Trustee accepts and undertakes to discharge
the trust created by this Trust Agreement upon the terms and
conditions hereof. The Trustee shall exercise such of the rights and
powers vested in it by this Trust Agreement, and use the same degree
of care and skill in its exercise of such rights and powers, as a
prudent man would exercise or use under the circumstances in the
conduct of its own affairs. No provision of this Trust Agreement
shall be construed to relieve the Trustee from liability for its own
recklessness or its own intentional or willful and wanton misconduct
resulting in private gain, except that:
(a) The Trustee shall not be liable for any action taken in
good faith in reliance upon the advice of professionals.
(b) The Trustee shall not be liable except for the
performance of such duties and obligations as are specifically set
forth in this Trust Agreement, and no implied covenants or obligations
shall be read into this Trust Agreement against the Trustee.
(c) The Trustee shall not be liable for any error of
judgment made in good faith.
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9.02 Interaction with Prudential Insurance Company on Behalf of
its Affiliates. Prudential Insurance Company shall act as sole agent
and nominee for itself, Pruco and PruSupply under this Trust
Agreement, shall receive all distributions made pursuant to Article IV
and shall deliver and receive all Notices required to be delivered
hereunder, on behalf of itself, Pruco and PruSupply. The Trustee
shall not be required to see to the proper allocation or application
of any distribution hereunder among those entities, which shall be the
sole responsibility of Prudential Insurance Company. All actions of
and Notices furnished by Prudential Insurance Company shall be deemed
to have been made by or furnished on behalf of Prudential Insurance
Company, Pruco and PruSupply, and the Trustee shall not be required to
inquire into the actual authority of Prudential to take such action or
furnish such Notice, as the case may be. Notwithstanding the
foregoing, Prudential Insurance Company, Pruco and PruSupply shall be
jointly and severally liable for all of the responsibilities of
Prudential under this Trust Agreement.
9.03 Reliance by Trustee. Except as otherwise provided in
Section 7.01:
(a) The Trustee may rely and shall be protected in acting
upon any resolution, certificate, statement, instrument, opinion,
report, notice, request, consent, order or other paper or document
reasonably believed by the Trustee to be genuine and to have been
signed or presented by the proper party or parties.
(b) The Trustee may consult with legal counsel to be
selected by it, and pay the cost of such consultation from the General
Fund, and the advice or opinion of such counsel shall be full and
complete personal protection to the Trustee and agents of the Trust in
respect of any action taken or suffered by it in good faith and in
reliance on, or in accordance with, such advice or opinion.
9.04 Indemnification of Trustee. In addition to, and not in
limitation of, the provisions of Section 10.02, the Trustee shall be
indemnified by and receive reimbursement from Hadson against and from
any and all loss, liability, damage or expense that the Trustee may
incur or sustain, in good faith and without recklessness or its own
intentional or willful and wanton misconduct resulting in personal
gain, in the exercise and performance of any of the powers and duties
of the Trustee under this Trust Agreement. The Trustee may receive
advance payments in connection with indemnification under this
Section, provided that prior to receiving any such advance, the
Trustee shall first have given a written undertaking to repay any
amount advanced to it and to reimburse the Trust or Hadson, as
applicable, in the event it is subsequently determined that it is not
entitled to such indemnification. The rights accruing to the Trustee
by reason of the foregoing shall not be deemed to exclude any other
right to which it may legally be entitled, nor shall anything
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else contained herein restrict the right of the Trustee to
contribution under applicable law.
9.05 Advances by Prudential. In the event that Hadson fails to
pay to the Trustee any amount requested pursuant to Section 9.04 or
Section 10.02, the Trustee shall notify Prudential of such failure and
of the amount requested and unpaid, and Prudential may (but need not)
advance such amount to the Trustee as a loan to the Trust at such rate
of interest and upon such other terms and conditions as the Trustee
and Prudential shall agree. All such interest shall be charged as a
general administration expense of the Trust.
9.06 Bond of Trustee. Neither the Original Trustee nor any
successor Trustee shall be obliged to file or furnish any bond or
surety for the performance of its duties, unless otherwise ordered by
a Court, and if so ordered, all costs and expenses of providing such
bond or surety shall be paid or reimbursed from the General Fund.
9.07 Liability to Third Persons. No Beneficiary shall be
subject to any personal liability whatsoever, in tort, contract or
otherwise, to any person in connection with the Trust Fund or the
affairs of the Trust, and no Trustee or agent of the Trust shall be
subject to any personal liability whatsoever, in tort, contract or
otherwise, to any person in connection with the Trust Fund or the
affairs of the Trust, except for its own recklessness or its own
intentional or willful and wanton misconduct resulting in personal
gain; and all such persons shall look solely to the Trust Fund for
satisfaction of claims of any nature arising in connection with
affairs of the Trust.
9.08 Nonliability of Trustee for Acts of Predecessors. Any
successor Trustee may accept and rely upon any accounting made by or
on behalf of any predecessor Trustee hereunder, and any statement or
representation made as to the assets comprising the Trust Fund or as
to any other fact bearing upon the prior administration of the Trust.
A Trustee shall not be liable for having accepted and relied upon such
accounting, statement or representation if it is later proved to be
incomplete, inaccurate or untrue. A Trustee or successor Trustee
shall not be liable for any act or omission of any predecessor
Trustee, nor have a duty to enforce any claims against any predecessor
Trustee on account of any such act or omission.
9.09 Nonliability of Trustee for Acts of Others. Nothing
contained in this Trust Agreement shall be deemed to be an assumption
by the Trustee of any of the liabilities, obligations or duties of any
of the other parties hereto, and shall not be deemed to be or contain
a covenant or agreement by the Trustee to assume or accept any such
liability, obligation or duty.
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ARTICLE X.
COMPENSATION OF TRUSTEE
10.01 Trustee Compensation. Each Trustee shall be entitled to
such compensation for services rendered as shall be mutually agreed
upon by the Trustee and Hadson prior to such Trustee's accession to
office, to be paid in such installments and at such intervals as shall
have been specified in such agreement.
10.02 Advances for Expenses. (a) Hadson shall pay to the
Trustee such amounts as the Trustee shall request from time to time to
enable the Trustee to satisfy all reasonable expenses (except those
resulting from its own recklessness or its own intentional or willful
and wanton misconduct resulting in private gain) incurred by the
Trustee as a result of the execution of its duties hereunder,
including, but not limited to, legal and accounting expenses, expenses
incurred or anticipated as a result of disbursements and payments made
or to be made by the Trustee, and reasonable compensation for agents,
counsel or other services rendered to the Trustee by third parties,
and expenses incident thereto, including taxes of any kind whatsoever,
and related interest and penalties, that may be levied or assessed
under existing or future laws of any jurisdiction upon or in respect
of the Trust or the Trust's New Hadson Common Shares. All amounts
received by the Trustee pursuant to this Section shall be added to the
General Fund.
(b) In lieu of requesting funds for the payment of
anticipated expenses, as provided in subsection (a) above, the Trustee
may retain as much or all of the General Fund that would otherwise be
payable to Hadson pursuant to Section 4.04(b) as the Trustee, in its
sole and absolute discretion shall deem advisable as a reserve for the
payment of such expenses.
10.03 Prior Lien of Trustee. The Trustee shall have a prior
lien upon the Trust Fund to secure payment of any amounts payable to
the Trustee or to employees or agents of the Trust as compensation for
services to the Trust or for indemnification pursuant to Section 9.04
above.
ARTICLE XI.
TRUSTEE AND SUCCESSOR TRUSTEES
11.01 Generally. The Trustee shall be a bank or trust company
authorized to act as a corporate fiduciary under the laws of the State
of New York or a national banking association chartered under the laws
of the United States. A Trustee that changes its name or reorganizes,
reincorporates or merges with or into or consolidates with any other
entity shall be deemed to be
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a continuing entity and shall continue to act as a Trustee hereunder.
11.02 Initial Appointment of Trustee. The Trustee shall be
initially appointed by Hadson.
11.03 Resignation. The Trustee may resign as Trustee by
delivering a Notice of resignation to Hadson. Such resignation shall
become effective on the day specified in such Notice (which shall not
be less than thirty (30) days after delivery of such Notice) or upon
the appointment of such Trustee's successor and such successor's
acceptance of such appointment, whichever is later.
11.04 Appointment of Successor. In the event of the removal,
resignation, bankruptcy or insolvency of the Trustee, a vacancy shall
be deemed to exist and a successor shall be appointed by Hadson.
11.05 Acceptance of Appointment by Successor Trustee. The
removal, resignation, bankruptcy or insolvency of the Trustee shall
not operate to terminate the Trust created by this Trust Agreement or
to revoke any existing agency created pursuant to the terms of this
Trust Agreement or invalidate any action theretofore taken by the
Trustee. Any successor Trustee appointed hereunder shall execute an
instrument accepting its appointment and shall deliver one counterpart
thereof to each of the Beneficiaries, and, in case of the Trustee's
resignation, to the retiring Trustee. Thereupon such successor shall,
without any further act, become vested with all the liabilities,
duties, powers, rights, title, discretion and privileges of its
predecessor in the Trust with like effect as if originally named
Trustee. The retiring Trustee shall duly assign, transfer and deliver
to such successor all property and money held by such retiring Trustee
hereunder and shall, as reasonably requested by such successor,
execute and deliver an instrument or instruments conveying and
transferring to such successor upon the trust herein expressed, all
the liabilities, duties, powers, rights, title, discretion and
privileges of such retiring Trustee.
ARTICLE XII.
AMENDMENTS
12.01 Amendment Authority. Whenever necessary to carry out the
purpose of the Trust, this Trust Agreement may be amended by the
Trustee with the unanimous consent and approval of the Beneficiaries;
provided, however, that no such amendment may be made that would have
the effect of (i) extending the Termination Date beyond the date
specified in Section 3.02, (ii) authorizing the Trustee to engage in a
trade or business, or (iii) expanding the amendment powers of the
Trustee under this Article.
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ARTICLE XIII.
MISCELLANEOUS PROVISIONS
13.01 Intention of Parties to Establish Trust. This Trust
Agreement is intended to create a trust without transferable
beneficial interests (except as permitted by operation of law) and the
Trust created hereunder shall be governed and construed in all
respects as a trust.
13.02 Instruments of Further Assurance. Hadson and Prudential
shall, upon the reasonable request of the Trustee, execute,
acknowledge and deliver such further instruments and do such further
acts as may be necessary or proper to carry out effectively the
purpose of this Trust Agreement.
13.03 Governing Law. This Trust Agreement shall be construed
and enforced according to the internal laws of the State of Oklahoma
and all provisions hereof shall be administered according to the laws
of the State of Oklahoma.
13.04 Severability. In the event any provision of this Trust
Agreement or the application thereof to any person or circumstances
shall be finally determined by a court of proper jurisdiction to be
invalid or unenforceable to any extent, the remainder of this Trust
Agreement, or the application of such provision to persons or
circumstances or in jurisdictions other than those as to or in which
it is held invalid or unenforceable, shall not be affected thereby,
and each provision of this Trust Agreement shall be valid and enforced
to the fullest extent permitted by law.
13.05 Notices. (a) Any Notice or other communication required
or permitted to be made in accordance with this Trust Agreement shall
be in writing and shall be deemed to have been sufficiently given, for
all purposes, if delivered personally, or if delivered during regular
business hours by facsimile transmission, telex or other electronic or
telegraphic means, or if delivered by a recognized overnight or two-
day delivery service or if mailed by first class mail:
(i) if to the Trustee at Liberty Bank and Trust Company of
Oklahoma City, N.A., 100 North Broadway, Liberty Tower, Seventh
Floor, Oklahoma City, Oklahoma 73102, Attention: John Brown,
Trust Department. Facsimile number: (405) 231-6293.
(ii) if to any Beneficiary, to the last known business
address of such Beneficiary reflected in the Trustee's records.
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(b) Any entity may change the address at which it is to receive
Notices under this Trust Agreement by furnishing written Notice
thereof to the Trustee as provided above.
13.06 Counterparts. This Trust Agreement may be executed in any
number of counterparts, each of which shall be an original, but such
counterparts shall together constitute but one and the same
instrument.
13.07 Effective Date. This Trust Agreement shall become
effective immediately after the filing of the Certificate of Merger
with respect to the Merger with the Secretary of State of the State of
Delaware.
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IN WITNESS WHEREOF, the parties hereto have executed this Trust
Agreement or caused this Trust Agreement to be duly executed by their
respective officers and the Trustee herein has executed this Trust
Agreement, as Trustee, effective as of the day and year first above
written.
ATTEST: HADSON CORPORATION
By:________________ By:____________________________________
ATTEST: THE PRUDENTIAL INSURANCE COMPANY
OF AMERICA
By:_________________ By:____________________________________
ATTEST: PRUCO LIFE INSURANCE COMPANY
By:_________________ By:____________________________________
ATTEST: PRUSUPPLY INC.
By:_________________ By:____________________________________
ATTEST: LIBERTY BANK AND TRUST COMPANY
OF OKLAHOMA CITY, N.A.
By:_________________ By:____________________________________
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STATE OF OKLAHOMA )
) ss:
COUNTY OF )
-------
Before me, the undersigned, a Notary Public in and for said
County and State on this day of , 19 , personally
---- ------------- --
appeared to me known to be the identical
---------------------------
person who subscribed the name of the maker thereof to the foregoing
instrument as its President and acknowledged to me that
executed the same as his free and voluntary act and
--------------
deed and as the free and voluntary act and deed of such corporation,
for the uses and purposes therein set forth.
Given under my hand and seal of office the day and year last
above written.
My commission expires
------------- --------------------------
Notary Public
STATE OF NEW JERSEY )
) ss:
COUNTY OF )
-------
Before me, the undersigned, a Notary Public in and for said
County and State on this day of , 19 , personally
---- ------------ --
appeared to me known to be the identical person who
---------------
subscribed the name of the maker thereof to the foregoing instrument
as its President and acknowledged to me that
------ -------------
executed the same as his free and voluntary act and deed and as the
free and voluntary act and deed of THE PRUDENTIAL INSURANCE COMPANY OF
AMERICA, for the uses and purposes therein set forth.
Given under my hand and seal of office the day and year last
above written.
My commission expires
------------- --------------------------
Notary Public
21
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<PAGE>
STATE OF NEW JERSEY )
) ss:
COUNTY OF )
-------
Before me, the undersigned, a Notary Public in and for said
County and State on this day of , 19 , personally
---- ------------ --
appeared to me known to be the identical person who
-----------------
subscribed the name of the maker thereof to the foregoing instrument
as its President and acknowledged to me that
------- ----------------
executed the same as his free and voluntary act and deed and as the
free and voluntary act and deed of PRUCO LIFE INSURANCE COMPANY for
the uses and purposes therein set forth.
Given under my hand and seal of office the day and year last
above written.
My commission expires
------------- --------------------------
Notary Public
STATE OF NEW JERSEY )
) ss:
COUNTY OF )
-------
Before me, the undersigned, a Notary Public in and for said
County and State on this day of , 19 , personally
---- ------------ --
appeared to me known to be the identical person who
-----------------
subscribed the name of the maker thereof to the foregoing instrument
as its President and acknowledged to me that
------- ----------------
executed the same as his free and voluntary act and deed and as the
free and voluntary act and deed of PRUSUPPLY, INC., for the uses and
purposes therein set forth.
Given under my hand and seal of office the day and year last
above written.
My commission expires
------------- --------------------------
Notary Public
22
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VOTING AGREEMENT
This Agreement, dated the 14th day of December, 1993, is by
and among SANTA FE ENERGY RESOURCES, INC., a Delaware corporation with
its executive offices located at 1616 South Voss Road, Suite No. 1000,
Houston, Texas 77057 ("SFER"), SFER PIPELINE, INC., a Delaware
corporation and a wholly-owned subsidiary of SFER ("Pipeline"), and
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA, a New Jersey mutual
insurance company with its executive offices located at 100 Mulberry
Street, Newark, New Jersey 07102 ("Prudential Insurance"), PRUCO LIFE
INSURANCE COMPANY, an Arizona corporation ("Pruco"), and PRUSUPPLY,
INC., a Delaware corporation ("PruSupply" and, together with
Prudential Insurance and Pruco, being collectively referred to herein
as "Prudential").
R E C I T A L S:
---------------
WHEREAS, pursuant to that certain Agreement of Merger (the
"Merger Agreement"), dated as of July 28, 1993, as amended, among
Hadson Corporation ("Hadson"), SFER and Adobe Gas Pipeline Company, a
wholly-owned subsidiary of Pipeline ("AGPC"), AGPC will be merged (the
"Merger") with and into Hadson, and, pursuant to the Merger Agreement,
Hadson will issue to Pipeline and Prudential (in addition to the other
stockholders of Hadson) the number of shares of common stock, par
value $0.01 per share, of Hadson (the "New Hadson Common Stock")
specified in Section 2.7 of the Merger Agreement; and
WHEREAS, as result of the Merger, Prudential will, among
other things, receive the right to receive 97.27% of a beneficial
interest in a trust (the "HP Trust") which will contain 4,983,180
shares of New Hadson Common Stock (the "Trust Shares") in exchange for
its existing Class B Common Stock, approximately 756,104 shares of New
Hadson Common Stock in exchange for its existing Class C Common Stock;
20,001 shares of New Hadson Common Stock in exchange for 300,000
shares of existing Hadson Common Stock; approximately 553,686
additional shares of New Hadson Common Stock, and the right to receive
the remaining 2.73% of a beneficial interest in the HP Trust; and
certain other consideration in exchange for its 7% Senior Cumulative
Preferred Stock of Hadson; and
WHEREAS, immediately upon the consummation of the Merger,
Hadson will deposit the Trust Shares into the H/P Trust, a trust of
which Prudential will be a beneficiary and Prudential
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will be entitled to direct the voting of certain of the Trust Shares;
and
WHEREAS, immediately upon the consummation of the Merger,
the total number of members of the whole Board of Directors of Hadson
(the "Board of Directors") will consist of eight persons divided into
three classes, seven of such positions to be filled immediately after
the Merger and the remaining position to be vacant pending selection
by the Board of Directors of a Chief Executive Officer of Hadson, who
is expected to fill such vacancy; and
WHEREAS, in connection with the Merger each of SFER,
Pipeline and Prudential have agreed, on the terms and subject to the
conditions set forth herein, to vote for and to grant to the other
party a proxy to vote the shares of New Hadson Common Stock held by
them for certain nominees to the Board of Directors, all as more fully
set forth in this Agreement;
NOW, THEREFORE, in consideration of the foregoing, and for
other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree as follows:
1. ELECTION OF DIRECTORS
(a) During the term of this Agreement (as set forth in
Section 5 hereof), at any time when one or more directors of Hadson
are to be elected by stockholders, SFER will be entitled to designate,
by written notice to Prudential, for election to Hadson's Board of
Directors at such special or annual meeting of stockholders at which
such directors are to be elected by the holders of shares of New
Hadson Common Stock, or for election by written consent of such
holders, to Hadson's Board of Directors, such number of persons as is
necessary so that, after giving effect to the election of such
person(s), all persons designated by SFER for election to Hadson's
Board of Directors will represent fifty percent (50%) of the total
number of persons constituting the whole Board of Directors
immediately after such election, such designation to be effected in
such a manner as to provide, subject to the terms of Hadson's
certificate of incorporation and bylaws, as then amended and in
effect, that at least one person designated by SFER pursuant to this
Section 1(a) will be designated to serve as a member of each class of
directors of the Board of Directors.
(b) During the term of this Agreement, at any time when one
or more directors of Hadson are to be elected by
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stockholders, Prudential will be entitled to designate by written
notice to SFER, for election to Hadson's Board of Directors at such
special or annual meeting of stockholders at which such directors are
to be elected by the holders of shares of New Hadson Common Stock, or
for election by written consent of such holders, to Hadson's Board of
Directors, one person to serve as a member of Hadson's Board of
Directors, such designation to be effected in such a manner as to
provide that after giving effect to the election of such person, one
person (and only one person) designated by Prudential for election to
Hadson's Board of Directors will, subject to the terms of Hadson's
certificate of incorporation and by-laws, as then amended and in
effect, be a member of Hadson's Board of Directors serving in Class I
of such Board.
(c) Until the first to occur of (i) the date of the Annual
Meeting of Stockholders of Hadson to be held in 1996 (the "1996 Annual
Meeting"), (ii) the inability of Prudential and SFER, despite their
respective reasonable best efforts in good faith, to agree upon a
designee to fill a vacancy in the Hadson Board of Directors caused by
the death, disability, retirement, resignation or removal of J.
Michael Adcock (or a person theretofore designated pursuant to this
Section 1(c) as a successor to Mr. Adcock (a "Successor")) prior to
the 1996 Annual Meeting, and (iii) the termination of this Agreement,
if at any time prior to the 1996 Annual Meeting a vacancy shall exist
in Hadson's Board of Directors, which vacancy is caused by the death,
disability, retirement, resignation or removal of Mr. Adcock or any
Successor, Prudential and SFER will be entitled to jointly designate,
by written notice acknowledged by both Prudential and SFER, for
election to Hadson's Board of Directors at any special or annual
meeting of stockholders at which directors are to be elected by the
holders of New Hadson Common Stock, or for election by written consent
in lieu of a meeting, which special or annual meeting or written
consent is effective prior to the 1996 Annual Meeting, one person to
serve as a member of Hadson's Board of Directors to fill such vacancy
as a member of Class III of Hadson's Board of Directors until the 1996
Annual Meeting. The designation by Prudential and SFER in accordance
with the preceding sentence shall be effected in such a manner as to
provide, subject to Hadson's restated certificate of incorporation and
bylaws, as then amended and in effect, that after giving effect to the
election of such person, one person designated jointly by Prudential
and SFER for election to Hadson's Board of Directors will be
designated as a Class III member of Hadson's Board of Directors until
the 1996 Annual Meeting (Prudential and SFER acknowledge that, upon
consummation of the Merger, Mr. Adcock will constitute such a joint
designee
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for purposes of this Section 1(c)). Notwithstanding the foregoing,
Prudential and SFER acknowledge and agree that if a vacancy in
Hadson's Board of Directors occurs prior to the 1996 Annual Meeting by
reason of the death, disability, retirement, resignation or removal of
Mr. Adcock (or a Successor) and if, despite the reasonable best
efforts in good faith of Prudential and SFER, Prudential and SFER are
unable within 45 days after such vacancy first occurs to jointly agree
upon a Successor designee, each of Prudential and SFER shall be free
to vote their respective shares of New Hadson Common Stock in favor of
the person of their choice to fill such vacancy.
(d) Each of SFER, Pipeline and Prudential agrees to vote
the shares of New Hadson Common Stock held by it or by any of its
Affiliates to call and attend any and all annual and special meetings
of the Hadson stockholders at which directors are to be elected and to
vote their respective shares of New Hadson Common Stock at such
meeting or to execute and deliver written consents in connection with
the election of directors by written consent of stockholders in lieu
of a meeting in such a manner as to (i) elect its own designee(s) to
the Board of Directors of Hadson as are designated in accordance with
this Agreement, (ii) elect the designee(s) to the Board of Directors
of Hadson of the other party hereto as are designated in accordance
with this Agreement, and (iii) to elect any joint designee to the
Board of Directors of Hadson as may be mutually agreed upon by SFER
and Prudential pursuant to Section 1(c) hereof. SFER and Prudential
will each cause the persons designated by it for election for the
Board of Directors to timely provide to Hadson such information as is
required in order to enable Hadson to fulfill its obligations pursuant
to applicable requirements of the U.S. Federal securities laws.
(e) Notwithstanding anything in this Agreement to the
contrary, SFER, Pipeline and Prudential each expressly acknowledge
that it is the intention of the parties hereto that this Agreement
will become effective, and the parties will each take any and all
necessary actions, so that the composition of the Board of Directors
will be as contemplated by this Section 1 immediately following the
consummation of the Merger.
2. VACANCIES
If, as a result of death, disability, retirement,
resignation, removal or otherwise there shall exist or occur any
vacancy in any directorship on the Board of Directors which SFER or
Prudential is individually, or which SFER and Prudential acting
jointly, are entitled to designate under Section 1 above
4
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<PAGE>
each party hereto agrees to use its reasonable best efforts to cause
the remaining members of the Board of Directors to fill such vacancy
with a candidate designated by SFER or Prudential by written notice to
the other party or, in the case of a joint director designated in
accordance with Section 1(c), by written notice acknowledged by both
Prudential and SFER, as the case may be, so as to restore the
composition of the Board of Directors to that contemplated by Section
1 above as promptly as practicable (provided, however, that any former
director who was removed from office shall not thereafter be
designated a director by either SFER or Prudential). Notwithstanding
the foregoing, if the Board of Directors fails to fill such vacancy
within five business days after being advised by SFER or Prudential or
both such parties, as the case may be, of the designee for such
vacancy, then each of SFER, Pipeline and Prudential agrees to take
such action, including, without limitation, executing written consents
or calling and voting at a special meeting of stockholders, as may
reasonably be necessary to restore the composition of the Board of
Directors to that contemplated by Section 1 above as promptly as
practicable, but in no event later than 60 days (subject to applicable
U.S. federal securities laws).
3. ADDITIONAL OBLIGATIONS OF SFER AND PRUDENTIAL
During the term of this Agreement, Prudential and SFER shall
use their respective reasonable best efforts to assure that the total
number of directors constituting Hadson's whole Board of Directors
remains an even number and is never less than six.
4. LIMITED IRREVOCABLE PROXIES
(a) SFER and Pipeline, jointly and severally, hereby
irrevocably designate and appoint Prudential, for and on behalf of
SFER and Pipeline and in each of their names, places and stead, as
each of their true and lawful proxy and attorney-in-fact to call any
special meetings of Hadson's stockholders and to attend any and all
annual and special meetings of the Hadson stockholders at which
directors are to be elected and to vote, or to act by written consent
in lieu of a vote or meeting, any and all shares of New Hadson Common
Stock that SFER or Pipeline may own during the term of this Agreement
(i) in such a manner as to cause the person designated by Prudential
in accordance with Section 1(b) hereof and any person jointly
designated by Prudential and SFER in accordance with Section 1(c)
hereof, to be elected as members of Hadson's Board of Directors, (ii)
against any amendment to Section 3.03 of the bylaws of Hadson in
accordance with Article 7 of Hadson's restated certificate of
incorporation as in effect immediately following the Merger and
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against any proposed amendment to Article 7 of Hadson's restated
certificate of incorporation, and (iii) to call a special meeting of
stockholders if reasonably necessary under Section 2 hereof; provided,
however, that the foregoing designation by SFER and Pipeline of
Prudential as their attorney-in-fact and proxy is solely for the
limited purposes of permitting Prudential to vote, or to act by
written consent in lieu of a vote or meeting, such shares of New
Hadson Common Stock in favor of the election of Prudential's designee
to Hadson's Board of Directors as contemplated in Section 1(b) hereof
and the person jointly designated by Prudential and SFER in accordance
with Section 1(c) hereof, to vote, or to act by written consent in
lieu of a vote or meeting, such shares against any amendment to
Section 3.03 of the bylaws and any proposed amendment to Article 7 of
the restated certificate of incorporation and to call a special
meeting of the stockholders if reasonably necessary under Section 2
hereof, and may be exercised or otherwise utilized by Prudential at
any meeting of Hadson's stockholders (or by written consent in lieu of
a meeting) only if SFER or Pipeline fails or refuses to vote its
shares of New Hadson Common Stock at such meeting, or to act by
written consent in lieu of a vote or meeting, with respect to the
matters for which proxies are granted hereunder.
(b) Prudential hereby irrevocably designates and appoints
SFER, for and on behalf of Prudential and in its name, place and
stead, as Prudential's true and lawful proxy and attorney-in-fact to
call any special meetings of Hadson's stockholders and to attend any
and all annual and special meetings of the Hadson stockholders at
which directors are to be elected and to vote (or in the case of any
Trust Shares in which Prudential has a beneficial interest, to direct
the trustee to vote such shares), or to act by written consent in lieu
of a vote or meeting, any and all shares of New Hadson Common Stock
that Prudential may own during the term of this Agreement, (i) in such
a manner as to cause the persons designated by SFER in accordance with
Section 1(a) hereof and the person jointly designated by Prudential
and SFER in accordance with Section 1(c) hereof, to be elected as
members of Hadson's Board of Directors, (ii) against any amendment to
Section 3.03 of the bylaws of Hadson in accordance with Article 7 of
Hadson's restated certificate of incorporation as in effect
immediately following the Merger and against any proposed amendment to
Article 7 of Hadson's restated certificate of incorporation, and (iii)
to call a special meeting of stockholders, if reasonably necessary,
under Section 2 hereof; provided, however, that the foregoing
designation by Prudential of SFER as Prudential's attorney-in-fact and
proxy is solely for the limited purposes of permitting SFER to vote,
or to act by
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written consent in lieu of a vote or meeting, such shares of New
Hadson Common Stock in favor of the election of its designees to
Hadson's Board of Directors as contemplated in Section 1(a) hereof and
the person jointly designated by Prudential and SFER in accordance
with Section 1(c) hereof, to vote, or to act by written consent in
lieu of a vote or meeting, such shares against any amendment to
Section 3.03 of the bylaws and any proposed amendment to Article 7 of
the restated certificate of incorporation and to call a special
meeting of the stockholders if reasonably necessary under Section 2
hereof, and may be exercised or otherwise utilized by SFER at any
meeting of Hadson's stockholders (or by written consent in lieu of a
meeting), only if Prudential fails or refuses to vote (or to direct
the trustee under the Trust Agreement to vote) its shares of New
Hadson Common Stock at such meeting, or to act by written consent in
lieu of a vote or meeting, with respect to the matters for which
proxies are granted hereunder.
(c) Notwithstanding the terms of Sections 4(a) and (b)
hereof, SFER, Pipeline and Prudential shall each be free at any time
and from time to time to sell, transfer or otherwise dispose of any
and all shares of New Hadson Common Stock that such person may own,
and agree that the trustee may classify Trust Shares and may transfer
and deliver Trust Shares to Prudential upon termination of the Trust,
and to Hadson for cancellation, each in accordance with the Trust
Agreement, and, upon any and each such sale, transfer or disposition
(other than any sale, transfer or disposition to an Affiliate (as
defined below) of SFER, Pipeline or Prudential, as the case may be),
the proxy granted pursuant to Section 4(a) or (b) hereof in respect of
the shares of New Hadson Common Stock so sold, transferred or
otherwise disposed of shall terminate. For purposes hereof, Affiliate
shall mean, with respect to a specified person, any person that
directly or indirectly through one or more intermediaries, controls or
is controlled by or under common control with the person specified.
In furtherance of the foregoing, each of Pipeline, SFER and Prudential
agrees not to transfer any shares of New Hadson Common Stock to an
Affiliate unless the Affiliate becomes a party to this Agreement.
(d) The proxies granted pursuant to Sections 4(a) and (b)
hereof are personal and may not be transferred or assigned, in whole
or in part (by operation of law or otherwise) to any other person or
persons without the prior written consent of the party granting such
proxy, except to an Affiliate of the party receiving such proxy.
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(e) Each of SFER and Pipeline represents and warrants to
Prudential that (i) each of SFER and Pipeline has duly authorized,
executed and delivered this Agreement and this Agreement constitutes a
valid and binding agreement, enforceable against it in accordance with
its terms, and neither the execution and delivery of this Agreement
nor the performance by SFER or Pipeline of the transactions
contemplated hereby will constitute a violation of, a default under,
or conflict with any contract, commitment, agreement, understanding,
arrangement or restriction of any kind to which SFER or Pipeline is a
party or by which SFER or Pipeline is bound; (ii) consummation by each
of SFER and Pipeline of the transactions contemplated hereby will not
violate, or require any consent, approval, or notice under any
provision of law other than a filing on Form 13D or Form 13G or any
other form that may be required under the Securities Exchange Act of
1934, as amended (the "Exchange Act"); and (iii) upon consummation of
the Merger, each of SFER and Pipeline will have the power and right to
vote all of the shares of New Hadson Common Stock that it will receive
upon consummation of the Merger as contemplated herein.
(f) Prudential represents and warrants to SFER and Pipeline
that (i) Prudential has duly authorized, executed and delivered this
Agreement and this Agreement constitutes a valid and binding
agreement, enforceable against it in accordance with its terms, and
neither the execution and delivery of this Agreement nor the
performance by Prudential of the transactions contemplated hereby will
constitute a violation of, a default under, or conflict with any
contract, commitment, agreement, understanding, arrangement or
restriction of any kind to which Prudential is a party or by which
Prudential is bound; (ii) consummation by Prudential of the
transactions contemplated hereby will not violate, or require any
consent, approval, or notice under any provision of law other than a
filing on Form 13D or Form 13G or any other form that may be required
under the Exchange Act; and (iii) upon consummation of the Merger,
Prudential will have the power and right to vote all of the shares of
New Hadson Common Stock that it will receive upon consummation of the
Merger, and will have the power and right to direct the Trustee to
vote the Trust Shares with respect to which Prudential is the
beneficial owner.
(g) SFER, PIPELINE AND PRUDENTIAL EACH AGREES THAT THE
PROXIES AND ALL OTHER POWER AND AUTHORITY INTENDED TO BE CONFERRED
PURSUANT TO SECTIONS 4(a) AND (b) HEREOF HEREBY ARE IN EACH CASE
COUPLED WITH AN INTEREST SUFFICIENT IN LAW TO SUPPORT AN IRREVOCABLE
GRANT AND POWER, AND THEREFORE ARE IRREVOCABLE.
8
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<PAGE>
5. TERM
This Agreement shall be effective immediately upon
consummation of the Merger (the date thereof, the "Effective Date"),
and continue for a term of 10 years, provided that this Agreement
shall earlier terminate at such time as Prudential no longer
beneficially owns (as defined in Rule 13d-3 under the Exchange Act) at
least 756,100 shares of the New Hadson Common Stock.
6. SPECIFIC PERFORMANCE
Each of SFER, Pipeline and Prudential acknowledges that:
(a) the actions to be taken by it under the provisions of
this Agreement are of a special character;
(b) such actions are impossible or impracticable to
replace;
(c) the other parties to this Agreement may be damaged if
the provisions hereof are not specifically enforced; and
(d) the award of monetary damages may not adequately
protect any party in the event of a breach hereof by any other party
or parties.
By virtue thereof, each of SFER, Pipeline and Prudential agrees and
consents that if it breaches any of the provisions of this Agreement,
the injured party or parties, in addition to any other rights and
remedies available under this Agreement or otherwise, shall (without
any bond or other security being required and without the necessity of
proving monetary damages) be entitled to a temporary and/or permanent
injunction to be issued by a court of competent jurisdiction
restraining the breaching party from committing or continuing any
violation of this Agreement, or any other appropriate decree of
specific performance. Such remedies shall not be exclusive and shall
be in addition to any other remedy which any of them may have.
7. MISCELLANEOUS
(a) Governing Law. Except to the extent that the matters
-------------
set forth herein are governed by the Delaware General Corporation Law
(the "Delaware Act"), in which case such matters shall be governed by
and construed in accordance with the
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Delaware Act, this Agreement shall be governed by and construed in
accordance with the laws of the State of New York, without regard to
principles governing conflicts of law.
(b) Amendment; Termination. This Agreement cannot be
----------------------
amended or terminated orally, but only by an agreement in writing
signed by the party or parties against whom enforcement of any waiver,
amendment, modification or discharge is sought.
(c) Execution in Counterparts. This Agreement may be
-------------------------
signed in one or more counterparts, each of which shall be an
original, but all of which together shall constitute one instrument.
(d) Severability. If any term, provision, covenant or
------------
restriction of this Agreement, or the application thereof to any
circumstance shall, to any extent, be held by a court of competent
jurisdiction to be invalid, void or unenforceable, the remainder of
the terms, provisions, covenants and restrictions of this Agreement or
the application thereof to any other circumstance, shall remain in
full force and effect, shall not in any way be affected, impaired or
invalidated, and shall be enforced to the fullest extent permitted by
law.
(e) Notices. All communications provided for herein shall
-------
be in writing, and shall be addressed to the relevant party at the
following addresses:
(i) if to SFER or Pipeline, at:
Santa Fe Energy Resources, Inc.
1616 South Voss Road
Suite No. 1000
Houston, Texas 77057
Attn: Senior Vice President/General
Counsel
Fax No.: (713) 268-5341
(ii) if to Prudential, at:
Prudential Capital Group
100 Mulberry Street
Gateway Center 4, 10th Floor
Newark, New Jersey 07102
Attn: Joseph Y. Alouf
Vice President
Fax No.: (201) 802-2333
cc: Jack L. Pfeilsticker
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<PAGE>
(f) Entire Agreement; Headings. This Agreement embodies
--------------------------
the entire agreement and understanding among the parties relating to
the subject matter hereof and supersedes all prior agreements and
understanding relating to the subject matter hereof. The headings in
this Agreement are for purposes of reference only and shall not limit
or otherwise affect the meaning hereof.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first above written.
SANTA FE ENERGY RESOURCES,
INC.
By: /s/ J.L. Payne
--------------------------
Name: J.L. Payne
Title: President
SFER PIPELINE, INC.
By: /s/ J.L. Payne
--------------------------
Name: J.L. Payne
Title: President
THE PRUDENTIAL INSURANCE
COMPANY OF AMERICA
By: /s/ David Descalzi
--------------------------
Name: David Descalzi
Title: Vice President
PRUCO LIFE INSURANCE
COMPANY
By: /s/ David Descalzi
--------------------------
Name: David Descalzi
Title: Vice President
11
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<PAGE>
PRUSUPPLY, INC.
By: /s/ Judith Somerstein
--------------------------
Name: Judith Somerstein
Title: Vice President
12
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REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT, dated as of December 14, 1993,
among The Prudential Insurance Company of America, PruSupply, Inc. and
Pruco Life Insurance Company (collectively, "Prudential", and each
individually, a "Prudential Entity"), Santa Fe Energy Resources, Inc.,
a Delaware corporation ("Santa Fe"), Hadson Corporation, a Delaware
corporation (the "Company"), and SFER Pipe-Line, Inc., a Delaware
corporation ("Pipeline," and collectively with Santa Fe, "SFER").
1. Background. This Agreement is made pursuant to (i) the
----------
Agreement of Merger dated as of July 28, 1993 among SFER, Adobe Gas
Pipeline Company, a Delaware corporation and a wholly owned subsidiary
of SFER, and the Company (as amended, the "Merger Agreement") and (ii)
the Securities Purchase Agreement of even date herewith by and among
the Company and each Prudential Entity (the "Purchase Agreement").
Pursuant to the Merger Agreement, upon consummation of the Merger (as
defined therein), the Company shall issue to SFER 2,080,000 shares of
Senior Cumulative Preferred Stock, Series A, par value $0.01 per share
(the "Senior Preferred Stock") and a number of shares of new Common
Stock, par value $0.01 per share, of the Company (the "New Common
Stock"), as is equal to approximately 40% of the total number of
shares of New Common Stock outstanding after giving effect to the
Merger.
Prudential holds all of the existing shares of the Company's
Class B Common Stock, par value $.01 per share, the Company's Class C
Common Stock, par value $.01 per share and the Company's 7% Senior
Cumulative Preferred Stock (respectively, the "Existing Class B Common
Stock", the "Existing Class C Common Stock" and the "Existing Senior
Preferred Stock"). Prudential also holds 300,000 shares of the
Company's existing Common Stock, par value $.01 per share (the "Old
Common Stock").
As a result of the Merger, Prudential will receive the right
to receive 97.27% of a beneficial interest in a trust (the "H/P
Trust") containing 4,983,180 shares of New Common Stock (such shares,
the "Trust Shares") in exchange for its Existing Class B Common Stock;
approximately 756,104 shares of New Common Stock in exchange for its
Existing Class C Common Stock; and approximately 553,658 shares of New
Common Stock, the right to receive the remaining 2.73% of a beneficial
interest in the H/P Trust, and $33 million aggregate principal amount
of new 8% Senior Secured Notes of the Company in exchange for its
Existing Senior Preferred Stock; and will receive 20,001 shares of New
Common Stock and certain shares of Junior Exercisable Automatically
Convertible Preferred Stock, Series B, par value
<PAGE>
<PAGE>
$.01 per share (the "Junior Preferred Stock"), in exchange for its
300,000 shares of Old Common Stock.
As a material part of the inducement to SFER to enter into
the Merger Agreement, and to each Prudential Entity to enter into the
Purchase Agreement, the Company has agreed to provide the registration
rights set forth in this Agreement. This Agreement shall become
effective upon the occurrence of both (a) the issuance of the shares
of Senior Preferred Stock and New Common Stock to SFER pursuant to the
Merger Agreement and (b) the issuance of the New Common Stock and
other Merger consideration to each Prudential Entity pursuant to the
Merger.
2. Registration under Securities Act, etc.
--------------------------------------
2.1. Registration on Request. (a) Upon the written request
-----------------------
of SFER or any one or more of the Prudential Entities (this and other
defined terms have the meanings specified in Section 3 hereof),
requesting that the Company effect the registration under the
Securities Act of all or part of Registrable Securities held by them
and specifying the intended method of disposition thereof and whether
or not such requested registration is to be an underwritten offering,
the Company will promptly give written notice of such requested
registration to all other holders of Registrable Securities and
thereupon the Company will use its best efforts to effect the
registration under the Securities Act of:
(i) the Registrable Securities which the Company has
been so requested to register by such holders, and
(ii) all additional Registrable Securities which the
Company has been requested to register by the holders thereof by
written request given to the Company within 30 days after the
giving of such written notice by the Company (which request shall
specify the intended method of disposition of such Registrable
Securities),
all to the extent required to permit the disposition (in accordance
with the intended methods thereof) of the Registrable Securities so to
be registered; provided, however, that: (A) Prudential (including for
-------- -------
this purpose, any assignee of all Registrable Securities owned by any
Prudential Entity) shall be entitled to request such registration of
its New Common Stock only once in any twelve month period, SFER (or
any assignee of all Registrable Securities of any class or series
owned by SFER) shall be entitled to request such registration of its
New Common Stock only once in any twelve month period, and SFER (or
any assignee of all Registrable Securities of any class or series
owned by SFER) shall be entitled to request such registration of its
Senior Preferred Stock only once in any twelve month period and (B)
with respect to any registration statement filed, or to
2
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<PAGE>
be filed, pursuant to this Section 2.1, if the Board of Directors of
the Company determines, in its good faith judgment, that the
registration of such Registrable Securities would materially and
adversely impact any material financing activity (the "Disadvantageous
Condition"), notwithstanding any other provision of this Section 2.1,
upon the giving of a written notice to such effect to holders of
Registrable Securities, the Company (1) in the event that the
registration statement has been filed, shall be entitled to cause such
registration statement to be withdrawn and shall be entitled to not
file a substitute registration statement and (2) in the event no
registration statement has yet been filed, shall be entitled to not
file any such registration statement, in either case until the earlier
of (the "Resumption Date") (i) the expiration of a reasonable period
not to exceed 120 days or (ii) the date on which the Board of
Directors of the Company determines the Disadvantageous Condition no
longer exists. The Company shall promptly deliver written notice of
the Resumption Date to each holder of the Registrable Securities. If,
as a result of a Disadvantageous Condition, a registration statement
was withdrawn or was not filed, the Company shall use its best efforts
to effect the registration under the Securities Act, as promptly as
reasonably practicable after the Resumption Date, of the Registrable
Securities included or to be included in such registration statement,
unless the holder requesting such registration by written notice (a
"Withdrawal Notice") to the Company requests that the Company not
effect such registration. If a holder delivers a Withdrawal Notice to
the Company, the holder's original request for registration of its
Registrable Securities (which was delayed as a result of the existence
of a Disadvantageous Condition) shall not be included in determining
---
whether a request for registration has been given in any twelve month
period.
(b) Registration of Other Securities. Whenever the Company
--------------------------------
shall effect a registration pursuant to this Section 2.1 in connection
with an underwritten offering by one or more holders of Registrable
Securities, no securities other than Registrable Securities shall be
included among the securities covered by such registration unless (a)
the managing underwriter of such offering shall have advised each
holder of Registrable Securities to be covered by such registration in
writing that the inclusion of such other securities would not
adversely affect such offering and (b) the holders of all Registrable
Securities to be covered by such registration shall have consented in
writing to the inclusion of such other securities.
(c) Registration Statement Form. Registrations under this
---------------------------
Section 2.1 shall be on such appropriate registration form of the
Commission (i) as shall be selected by the Company and as shall be
reasonably acceptable to each holder of the Registrable Securities
requested to be included in such registration and (ii) as shall permit
the disposition of such Registrable Securities in
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<PAGE>
accordance with the intended method or methods of disposition
specified in their request for such registration. The Company agrees
to include in any such registration statement all information which
holders of Registrable Securities being registered shall reasonably
request.
(d) Expenses. The Company will pay all Registration
--------
Expenses in connection with (i) the first two registrations of Senior
Preferred Stock by SFER, (ii) the first two registrations of New
Common Stock requested by SFER, and (iii) the first two registrations
of New Common Stock requested by Prudential, pursuant to Section
2.1(a). The Registration Expenses (and underwriting discounts and
commissions and transfer taxes, if any) in connection with each other
registration requested under this Section 2.1 shall be allocated among
all Persons on whose behalf securities of the Company are included in
such registration, on the basis of the respective amounts of the
securities then being registered on their behalf.
(e) Effective Registration Statement. A registration
--------------------------------
requested pursuant to this Section 2.1 shall not be deemed to have
been effected (i) unless a registration statement with respect thereto
has become effective, (ii) if, after it has become effective, such
registration is interfered with by any stop order, injunction or other
order or requirement of the Commission or other governmental agency or
court for any reason, (iii) if, after it has become effective, such
registration does not remain effective for 120 days or such lesser
time period sufficient to permit the sale of the Registrable
Securities registered thereby in accordance with the intended method
of distribution, or (iv) if the conditions to closing specified in the
purchase agreement or underwriting agreement entered into in con-
nection with such registration are not satisfied or waived.
(f) Selection of Underwriters. If a requested registration
-------------------------
pursuant to this Section 2.1 involves an underwritten offering, the
underwriter or underwriters thereof shall be selected by the Company
and shall be reasonably acceptable to each holder of Registrable
Securities to be so registered.
(g) Priority in Requested Registrations. If (i) a
-----------------------------------
requested registration pursuant to this Section 2.1 involves an
underwritten offering of the securities so being registered (on a firm
commitment basis) by or through one or more underwriters of recognized
standing under underwriting terms appropriate for such a transaction
and (ii) the managing underwriter shall advise the Company in writing
(with a copy to each holder of Registrable Securities requesting
registration) that, in its opinion, the number of securities requested
to be included in such registration exceeds the number which can be
sold in (or during the time of) such offering without having a
material adverse effect thereon (including on the price at which such
Registrable
4
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<PAGE>
Securities are expected to be sold), then the Company will include in
such registration, to the extent of the number of shares which the
Company is so advised can be sold in (or during the time of) such
offering, first, all securities requested by Prudential and SFER
pursuant to Section 2.1(a) to be sold for its own account and second,
all other Registrable Securities requested to be included in such
registration on the basis of the percentage of the Registrable
Securities of the Company held by the holders of Registrable
Securities which have requested that such Securities be included. In
connection with any registration as to which the provisions of this
clause (g) apply, no securities other than Registrable Securities
shall be covered by such registrations.
2.2. Incidental Registration. (a) Right to Include
----------------
Registrable Securities. If the Company at any time proposes to
----------------------
register any of its securities under the Securities Act (other than by
a registration on Form S-8 or any successor or similar forms and other
than pursuant to Section 2.1), whether or not for sale for its own
account, it will each such time give prompt written notice to all
holders of Registrable Securities of its intention to do so describing
such securities and specifying the form and manner and the other
relevant facts involved in such proposed registration (including,
without limitation, in the case of an underwriting, the identity of
the managing underwriter and whether such offering will be pursuant to
a "best efforts" or "firm commitment" underwriting) and of such
holders' rights under this Section 2.2. Upon the written request of
any holder made within 30 days after the receipt of any such notice
(which request shall specify the intended method of disposition of
such holder's Registrable Securities), the Company will use its best
efforts to effect the registration under the Securities Act of the
Registrable Securities of such holder requested to be included in such
registration, to the extent requisite to permit the disposition (in
accordance with the intended methods thereof as aforesaid) of such
Registrable Securities, provided that if, at any time after giving
--------
written notice of its intention to register any securities and prior
to the effective date of the registration statement filed in
connection with such registration, the Company shall determine for any
reason not to register or to delay registration of such securities
initially intended to be registered, the Company may, at its election,
give written notice of such determination to each holder of
Registrable Securities and, thereupon, (i) in the case of a
determination not to register, shall be relieved of its obligation to
register Registrable Securities in connection with such registration
(but not from its obligation to pay the Registration Expenses in
connection therewith), without prejudice, however, to the rights of
any holder or holders of Registrable Securities entitled to do so to
request that such registration be effected as a registration under
Section 2.1, and (ii) in the case of a determination to delay
registering, shall
5
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<PAGE>
be permitted to delay registering any Registrable Securities for the
same period as the delay in registering such other securities. No
registration effected under this Section 2.2 shall be deemed to have
been effected pursuant to Section 2.1 or shall relieve the Company of
its obligation to effect any registration upon request under Section
2.1. The Company will pay all Registration Expenses, other than
registration fees relating to Registrable Securities to be sold for
the account of the holder thereof and the fees and expenses of counsel
for such holder, all of which will be at such holder's expense, in
connection with each registration of Registrable Securities requested
pursuant to this Section 2.2.
(b) Priority in Incidental Registrations. If (i) a
------------------------------------
registration pursuant to this Section 2.2 involves an underwritten
offering of the securities so being registered, whether or not for
sale for the account of the Company, to be distributed (on a firm
commitment basis) by or through one or more underwriters of recognized
standing under underwriting terms appropriate for such a transaction,
(ii) the Company is requested to include any Registrable Securities
under 2.2(a), and (iii) the managing underwriter of such underwritten
offering shall inform the Company and the holders of the Registrable
Securities requesting such registration by letter of its belief that
the number of securities requested to be included in such registration
exceeds the number which can be sold in (or during the time of) such
offering, then the Company will include in such registration, to the
extent of the number which the Company is so advised can be sold in
(or during the time of) such offering, first, all securities proposed
by the Company to be sold for its own account, second, such
Registrable Securities requested to be included in such registration
pro rata on the basis of the number of shares of such securities so
proposed to be sold and so requested to be included, and third, all
other securities of the Company requested to be included in such
registration pro rata on the basis of the number of shares of such
securities so proposed to be sold and so requested to be included.
2.3. Registration Procedures. If and whenever the Company
-----------------------
is required to use its best efforts to effect the registration of any
Registrable Securities under the Securities Act as provided in
Sections 2.1 and 2.2, the Company will as expeditiously as possible:
(i) prepare and (as soon thereafter as possible or in any
event no later than 60 days after the end of the period within
which requests for registration may be given to the Company) file
with the Commission the requisite registration statement to
effect such registration and thereafter use its best efforts to
cause such registration statement to become effective, provided
--------
that the Company may discontinue any registration of its securities
which are not Registrable
6
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<PAGE>
Securities (and, under the circumstances specified in Section
2.2(a), its securities which are Registrable Securities) at any
time prior to the effective date of the registration statement
relating thereto;
(ii) prepare and file with the Commission such amendments
(including post-effective 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 disposition of all securities covered by such
registration statement until such time as all of such securities
have been disposed of in accordance with the intended methods of
disposition by the seller or sellers thereof set forth in such
registration statement (which period shall in no event exceed 120
days from effectiveness of such registration statement);
(iii) furnish to each seller of Registrable Securities
covered by such registration statement such number of conformed
copies of such registration statement and of each such amendment
and supplement thereto (in each case including all exhibits),
such number of copies of the prospectus contained in such
registration statement (including each preliminary prospectus and
any summary prospectus) and any other prospectus filed under Rule
424 under the Securities Act, in conformity with the requirements
of the Securities Act, and such other documents, as such seller
may reasonably request;
(iv) use its best efforts to register or qualify all
Registrable Securities and other securities covered by such
registration statement under such other securities or blue sky
laws of such jurisdictions as each seller thereof shall
reasonably request, to keep such registration or qualification in
effect for so long as such registration statement remains in
effect, and take any other action which may be reasonably
necessary or advisable to enable such seller to consummate the
disposition in such jurisdictions of the securities owned by such
seller, except that the Company shall not for any such purpose be
required to qualify generally to do business as a foreign
corporation in any jurisdiction wherein it would not, but for the
requirements of this subdivision (iv), be obligated to be so
qualified, or to consent to general service of process in any
such jurisdiction;
(v) use its best efforts to cause all Registrable
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
7
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<PAGE>
seller or sellers thereof to consummate the disposition of such
Registrable Securities;
(vi) furnish to each seller of Registrable Securities and
each Requesting Holder (as defined in Section 2.6), a signed
counterpart, addressed to such seller and such Requesting Holder
(and underwriters, if any) of
(x) an opinion of counsel for the Company, dated the
effective date of such registration statement (and, if such
registration includes an underwritten public offering, dated
the date of the closing under the underwriting agreement),
reasonably satisfactory in form and substance to such
seller, and
(y) a "comfort" letter, dated the effective date of
such registration statement (and, if such registration
includes an underwritten public offering, dated the date of
the closing under the underwriting agreement), signed by the
independent public accountants who have certified the
Company's financial statements included in such registration
statement,
covering substantially the same matters with respect to such
registration statement (and the prospectus included therein) and,
in the case of the accountants' letter, with respect to events
subsequent to the date of such financial statements, as are
customarily covered in opinions of issuer's counsel and in
accountants' letters delivered to the underwriters in
underwritten public offerings of securities and, in the case of
the accountants' letter, such other financial matters, and, in
the case of the legal opinion, such other legal matters, as such
seller or such Requesting Holder, if any, may reasonably request;
(vii) immediately notify each seller of Registrable
Securities covered by such registration statement, each
Requesting Holder, and their respective counsel (and the managing
underwriter, if any) at any time when a prospectus relating
thereto is required to be delivered under the Securities Act,
upon discovery that, or upon the happening of any event as a
result of which, the prospectus included in such registration
statement (or deemed to be included in such registration
statement if the registration statement, at the time it is
declared effective, omits certain information pursuant to Rule
430A of the Securities Act), 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, and at the request of
any such seller or Requesting Holder promptly prepare and furnish
to such
8
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seller or Requesting Holder a reasonable number of copies of a
supplement to or an amendment of such prospectus as may be
necessary 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;
(viii) otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission, and 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 the first full calendar month after the effective date of
such registration statement, which earnings statement shall
satisfy the provisions of Section 11(a) of the Securities Act,
and will furnish to each such seller and Requesting Holder at
least five business days prior to the filing thereof a copy of
any amendment or supplement to such registration statement or
prospectus and shall not file any amendment or supplement thereof
to which any such seller or Requesting Holder shall have
reasonably objected on the grounds that such amendment or
supplement does not comply in all material respects with the
requirements of the Securities Act or of the rules or regulations
thereunder;
(ix) provide and cause to be maintained a transfer agent
and registrar for all Registrable Securities covered by such
registration statement from and after a date not later than the
effective date of such registration statement;
(x) use its best efforts to list all Registrable Securities
covered by such registration statement on any securities exchange
on which any of the Company's capital stock is then listed; and
(xi) enter into such agreements and take such other actions
as the Requisite Holders shall reasonably request in order to
expedite or facilitate the disposition of such Registrable
Securities.
The Company may require each seller of Registrable Securities as to
which any registration is being effected to furnish the Company such
information regarding such seller and the distribution of such
securities as the Company may from time to time reasonably request in
writing.
Each holder of Registrable Securities agrees by acquisition of
such Registrable Securities that upon receipt of any notice
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from the Company of the happening of any event of the kind described
in subdivision (vii) of this Section 2.3, such holder will forthwith
discontinue such holder's disposition of Registrable Securities
pursuant to the registration statement relating to such Registrable
Securities until such holder's receipt of the copies of the
supplemented or amended prospectus contemplated by subdivision (vii)
of this Section 2.3 and, if so directed by the Company, will deliver
to the Company (at the Company's expense) all copies, other than
permanent file copies, then in such holder's possession of the
prospectus relating to such Registrable Securities current at the time
of receipt of such notice.
2.4 Underwritten Offerings. (a) Requested Underwritten
----------------------
Offerings. If requested by the underwriters for any underwritten
---------
offering or by holders of Registrable Securities pursuant to a
registration requested under Section 2.1, the Company will enter into
an underwriting agreement with such underwriters for such offering,
such agreement to be satisfactory in substance and form to each such
holder and the underwriters and to contain such representations and
warranties by the Company and such other terms as are generally
prevailing in agreements of this type, including, without limitation,
indemnities to the effect and to the extent provided in Section 2.7.
The holders of Registrable Securities to be distributed by such
underwriters shall be parties to such underwriting agreement and may,
at their option, require that (i) any or all of the representations
and warranties by, and the other agreements on the part of, the
Company to and for the benefit of such underwriters shall also be made
to and for the benefit of such holders of Registrable Securities and
(ii) any or all of the conditions precedent to the obligations of such
underwriters under such underwriting agreement be conditions precedent
to the obligations of such holders of Registrable Securities. Any
such holder of Registrable Securities shall not be required to make
any representations or warranties to or agreements with the Company or
the underwriters other than representations, warranties or agreements
regarding such holder, such holder's Registrable Securities, such
holder's intended method of distribution and any other representation
required by law.
(b) Incidental Underwritten Offerings. If the Company at
---------------------------------
any time proposes to register any of its securities under the
Securities Act as contemplated by Section 2.2 and such securities are
to be distributed by or through one or more underwriters, the Company
will, if requested by any holder of Registrable Securities as provided
in Section 2.2 and subject to the provisions of Section 2.2(b),
arrange for such underwriters to include all the Registrable
Securities to be offered and sold by such holder among the securities
to be distributed by such underwriters. The holders of Registrable
Securities to be distributed by such underwriters shall be parties to
the underwriting agree-
10
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<PAGE>
ment between the Company and such underwriters and may, at their
option, require that any or all of the representations and warranties
by, and the other agreements on the part of, the Company to and for
the benefit of such underwriters shall also be made to and for the
benefit of such holders of Registrable Securities and that any or all
of the conditions precedent to the obligations of such underwriters
under such underwriting agreement be conditions precedent to the
obligations of such holders of Registrable Securities. Any such
holder of Registrable Securities shall not be required to make any
representations or warranties to or agreements with the Company or the
underwriters other than representations, warranties or agreements
regarding such holder, such holder's Registrable Securities and such
holder's intended method of distribution and any other representation
required by law.
(c) In the event of any underwritten offering under a
registration pursuant to Section 2.1 or 2.2 (other than in the case of
a registration under Section 2.2, if the majority of the securities
covered thereby are to be sold for the account of holders other than
the Company), Prudential, SFER and each assignee of all Registrable
Securities of any class or series owned by SFER or any Prudential
Entity agree, if so required by the managing underwriters and to the
extent timely notified in writing by the Company or by the managing
underwriter or underwriters, not to effect any public sale or
distribution (including any sale pursuant to Rule 144) of Registrable
Securities (other than as part of such offering) within the period
commencing seven days prior to the effective date of the registration
statement with respect to such offering and ending 90 days after the
effective date, or such lesser period agreed to by any other
shareholders of the Company in connection with such registration,
after the effective date of such registration statement.
2.5. Preparation; Reasonable Investigation. In connection
-------------------------------------
with the preparation and filing of each registration statement under
the Securities Act pursuant to this Agreement, the Company will give
the holders of Registrable Securities registered under such
registration statement, their underwriters, if any, and their
respective counsel and accountants, the opportunity to participate in
the preparation of such registration statement, each prospectus
included therein or filed with the Commission, and each amendment
thereof or supplement thereto, and will give each of them such access
to its books and records and such opportunities to discuss the
business of the Company with its officers and the independent public
accountants who have certified its financial statements as shall be
necessary, in the opinion of such holders' and such underwriters'
respective counsel, to conduct a reasonable investigation within the
meaning of the Securities Act.
11
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<PAGE>
2.6. Rights of Requesting Holders. The Company will not
----------------------------
file any registration statement under the Securities Act unless it
shall first have given to SFER and each Prudential Entity that then
owns shares of Registrable Securities at least 30 days prior written
notice thereof and, if so requested by any Prudential Entity or SFER,
shall have consulted with each Prudential Entity and SFER concerning
the selection of underwriters, counsel and independent accountants for
the Company for such offering and registration. If any Prudential
Entity or SFER shall so request within 30 days after such notice, it
shall be a "Requesting Holder" hereunder and shall have the rights of
a Requesting Holder provided in this section 2.6 and in sections 2.3
and 2.7. The Company further covenants that a Requesting Holder shall
have the right to participate in the preparation of any such
registration or comparable statement and to require the insertion
therein of material furnished to the Company in writing, which in such
Requesting Holder's judgment should be included and, at the Company's
expense, to retain counsel and/or independent public accountants (but
limited to only one firm of independent public accountants for all
Requesting Holders which will be determined by the affirmative vote of
the holders of a majority of the number of Registrable Securities
being registered) to assist such Requesting Holder in such
participation. In addition, if any such registration statement refers
to any Requesting Holder by name or otherwise as the holder of any
securities of the Company, then such Requesting Holder shall have the
right to require (x) the insertion therein of language, in form and
substance satisfactory to such Requesting Holder, to the effect that
the holding by such Requesting Holder of such securities does not
necessarily make such Requesting Holder a "controlling person" of the
Company within the meaning of the Securities Act and is not to be
construed as a recommendation by such Requesting Holder of the
investment quality of the Company's debt or equity securities covered
thereby and that such holding does not imply that such Requesting
Holder will assist in meeting any future financial requirements of the
Company, or (y) in the event that such reference to such Requesting
Holder by name or otherwise is not required by the Securities Act or
any rules and regulations promulgated thereunder, the deletion of the
reference to such Requesting Holder.
2.7. Indemnification. (a) Indemnification by the Company.
--------------- ------------------------------
In the event of any registration of any securities of the Company
under the Securities Act, the Company will, and hereby does, (i) in
the case of any registration statement filed pursuant to Section 2.1
or 2.2, indemnify and hold harmless the seller of any Registrable
Securities covered by such registration statement, its directors,
officers, employees and agents and each other Person who participates
as an underwriter in the offering or sale of such securities and each
other Person, if any, who controls such seller or any such underwriter
within the meaning
12
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<PAGE>
of the Securities Act, and (ii) in the case of any registration
statement of the Company, indemnify and hold harmless any Requesting
Holder, its directors, officers, employees and agents and each other
Person, if any, who controls such Requesting Holder within the meaning
of the Securities Act, in each case against any losses, claims,
damages or liabilities, joint or several, to which such seller or
Requesting Holder or any such directors, officers, employees, agents,
underwriters or controlling persons may become subject under the
Securities Act or otherwise, insofar as such losses, claims, damages
or liabilities (or actions or proceedings, whether commenced or
threatened, 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 not misleading, and the
Company will reimburse such seller, such Requesting Holder and all
such directors, officers, employees, agents, underwriters and
controlling persons for any legal or any other expenses reasonably
incurred by them in connection with investigating or defending any
such loss, claim, liability, action or proceeding; provided that the
--------
Company shall not be liable in any such case to the extent that any
such loss, claim, damage, liability (or action or proceeding in
respect thereof) or expense arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission
made in such registration statement, any such preliminary prospectus,
final prospectus, summary prospectus, amendment or supplement in
reliance upon and in conformity with written information furnished to
the Company through an instrument duly executed by such seller or
Requesting Holder, as the case may be, specifically stating that it is
for use in the preparation thereof and, provided further that the
--------
Company shall not be liable to any Person who participates as an
underwriter, in the offering or sale of Registrable Securities or any
other Person, if any, who controls such underwriter within the meaning
of the Securities Act, in any such case to the extent that any such
loss, claim, damage, liability (or action or proceeding in respect
thereof) or expense arises out of such Person's failure to send or
give a copy of the final prospectus, as the same may be then supple-
mented or amended, to the Person asserting an untrue statement or
alleged untrue statement or omission or alleged omission at or prior
to the written confirmation of the sale of Registrable Securities to
such Person if such statement or omission was corrected in such final
prospectus. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of such seller,
such Requesting Holder or any such director, officer, employee, agent,
13
<PAGE>
<PAGE>
underwriter or controlling person and shall survive the transfer of
such securities by such seller.
(b) Indemnification by the Sellers. The Company may
------------------------------
require, as a condition to including any Registrable Securities in any
registration statement filed pursuant to Section 2.3, that the Company
shall have received an undertaking satisfactory to it from the
prospective seller of such securities, to indemnify and hold harmless
(in the same manner and to the same extent as set forth in subdivision
(a) of this Section 2.7) the Company, each director of the Company,
each officer of the Company and each other Person, if any, who
controls the Company within the meaning of the Securities Act, with
respect to any statement or alleged statement in or omission or
alleged omission from such registration statement, any preliminary
prospectus, final prospectus or summary prospectus contained therein,
or any amendment or supplement thereto, if such statement or alleged
statement or omission or alleged omission was made in reliance upon
and in conformity with written information furnished to the Company
through an instrument duly executed by such seller specifically
stating that it is for use in the preparation of such registration
statement, preliminary prospectus, final prospectus, summary
prospectus, amendment or supplement. Such indemnity shall remain in
full force and effect, regardless of any investigation made by or on
behalf of the Company or any such director, officer or controlling
Person and shall survive the transfer of such securities by such
seller. In no event shall the liability of any seller of Registrable
Securities hereunder be greater in amount than the dollar amount of
the proceeds received by such seller upon the sale of the Registrable
Securities giving rise to such indemnification obligation.
(c) Notices of Claims, etc. Promptly after receipt by an
----------------------
indemnified party of notice of the commencement of any action or
proceeding involving a claim referred to in the preceding subdivisions
of this Section 2.7, such indemnified party will, if a claim in
respect thereof is to be made against an indemnifying party, give
written notice to the latter of the commencement of such action,
provided that the failure of any indemnified party to give notice as
--------
provided herein shall not relieve the indemnifying party of its
obligations under the preceding subdivisions of this Section 2.7,
except to the extent that the indemnifying party is actually
prejudiced by such failure to give notice. In case any such action is
brought against an indemnified party, unless in such indemnified
party's reasonable judgment a conflict of interest between such
indemnified and indemnifying parties may exist in respect of such
claim, the indemnifying party shall be entitled to participate in and
to assume the defense thereof, jointly with any other indemnifying
party similarly notified to the extent that it may wish, with counsel
reasonably satisfactory to such indemnified party, and after notice
from the indemnifying party to such indemnified party of its election
so to assume the
14
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<PAGE>
defense thereof, the indemnifying party shall not be liable to such
indemnified party for any legal or other expenses subsequently
incurred by the latter in connection with the defense thereof other
than reasonable costs of investigation. No indemnifying party shall,
without the consent of the indemnified party, consent to entry of any
judgment or enter into any settlement 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) Other Indemnification. Indemnification similar to that
---------------------
specified in the preceding subdivisions of this Section 2.7 (with
appropriate modifications) shall be given by the Company and each
seller of Registrable Securities with respect to any required
registration or other qualification of securities under any Federal or
state law or regulation of any governmental authority other than the
Securities Act.
(e) Indemnification Payments. The indemnification required
------------------------
by this Section 2.7 shall be made by periodic payments of the amount
thereof during the course of the investigation or defense, as and when
bills are received or expense, loss, damage or liability is incurred.
(f) Contribution. If for any reason the indemnification
------------
provided for in this Section 2.7 is unavailable to an indemnified
party, then the indemnifying party shall contribute to the amount paid
or payable by the indemnified party as a result of such loss, claim,
damage or liability in such proportion as is appropriate to reflect
not only the relative benefits received by the indemnified party and
the indemnifying party, but also the relative fault of the indemnified
party and the indemnifying party, as well as any other relevant
equitable considerations; provided, however, that no holder shall be
-------- -------
required to contribute in an amount greater than the dollar amount of
the proceeds received by such holder with respect to the sale of any
securities. The amount paid or payable by a party as a result of the
losses, expenses, liabilities and claims referred to above shall be
deemed to include any legal or other fees or expenses reasonably
incurred by such party in connection with investigating or defending
any claim or action. 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.
2.8. Adjustments Affecting Registrable Securities. The
--------------------------------------------
Company will not effect or permit to occur any combination or
subdivision of shares which would adversely affect the ability of the
holders of Registrable Securities to include such Registrable
Securities in any registration of its securities contemplated by
15
<PAGE>
<PAGE>
this Section 2 or the marketability of such Registrable Securities
under any such registration.
3. Definitions. As used herein, unless the context
-----------
otherwise requires, the following terms have the following respective
meanings:
Commission: The Securities and Exchange Commission or any
----------
other Federal agency at the time administering the
Securities Act.
Company: As defined in the introductory paragraph of this
-------
Agreement.
Disadvantageous Condition: As defined in Section
-------------------------
2.1(a)(ii).
Exchange Act: The Securities Exchange Act of 1934, 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. Reference to a particular section of
the Securities Exchange Act of 1934 shall include a
reference to the comparable section, if any, of any such
similar Federal statute.
Existing Junior Preferred Stock: The Company's Junior
-------------------------------
Cumulative Convertible Preferred Stock, Series B, par value
$.01 per share.
Junior Preferred Stock: As defined in Section 1.
----------------------
Merger Agreement: As defined in Section 1.
----------------
New Common Stock: As defined in Section 1.
----------------
Person: A corporation, an association, a partnership, a
------
business, an individual, a governmental or political
subdivision thereof or a governmental agency.
Prudential: As defined in the introductory paragraph of
----------
this Agreement.
Prudential Entity: As defined in the introductory paragraph
-----------------
of this Agreement.
Purchase Agreement: As defined in Section 1.
------------------
Registrable Securities: (a) Any shares of Senior Preferred
----------------------
Stock issued to SFER pursuant to the Merger Agreement or the
Company's Restated Certificate of Incorporation, as amended,
(b) any shares of New Common Stock issued to SFER pursuant
to the Merger Agreement,
16
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<PAGE>
(c) any shares of New Common Stock issued to any Prudential
Entity as a result of the Merger, (d) any shares of Junior
Preferred Stock issued to any Prudential Entity pursuant to
the Merger Agreement and any shares of New Common Stock
issued to any Prudential Entity upon conversion or exercise
of such shares of Junior Preferred Stock, (e) any Trust
Shares distributed to any Prudential Entity pursuant to the
termination of the H/P Trust, and (f) any other securities
received by any Prudential entity or SFER as or in
connection with any dividend, distribution, split or
recapitalization of any of the foregoing.
Registration Expenses: All expenses incident to the
---------------------
Company's performance of or compliance with Section 2,
including, without limitation, all registration, filing and
National Association of Securities Dealers fees, all fees
and expenses of complying with securities or blue sky laws,
all word processing, duplicating and printing expenses,
messenger and delivery expenses, the fees and disbursements
of counsel for the Company and of its independent public
accountants, including the expenses of any special audits or
"cold comfort" letters required by or incident to such
performance and compliance, but excluding the cost of any
special audit not required to be included in such
registration statement by applicable law, rule or
regulation, the fees and disbursements incurred by the
holders of Registrable Securities to be registered or by any
Requesting Holder (in each case, including the fees and
disbursements of any counsel and accountants retained by the
holders of Registrable Securities to be registered or by any
Requesting Holder), premiums and other costs of policies of
insurance against liabilities arising out of the public
offering of the Registrable Securities being registered and
any fees and disbursements of underwriters customarily paid
by issuers or sellers of securities, but excluding
underwriting discounts and commissions and transfer taxes,
if any. In any case where, pursuant to Section 2.1(d), not
all Registration Expenses are to be borne by the Company,
the term "Registration Expenses" (as used to define the
expenses to be allocated among all Persons requesting such
registration) shall not include salaries of Company
personnel or general overhead expenses of the Company,
auditing fees, premiums or other expenses relating to
liability insurance required by underwriters of the Company
or other expenses for the preparation of financial state-
ments or other data normally prepared by the Company in the
ordinary course of its business or which the Company would
have
17
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<PAGE>
incurred in any event all of which expenses shall be borne
by the Company.
Requesting Holder: As defined in Section 2.6.
-----------------
Resumption Date: As defined in Section 2.1(a)(ii).
---------------
Securities Act: The Securities Act of 1933, 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. References to a particular section of the
Securities Act of 1933 shall include a reference to the
comparable section, if any, of any such similar Federal
Statute.
Senior Preferred Stock: As defined in Section 1.
----------------------
Trust Shares: As defined in Section 1.
------------
Withdrawal Notice: As defined in Section 2.1(a)(ii).
-----------------
4. Rule 144; Rule 144A.
-------------------
4.1 Rule 144. The Company 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
the Company is not required to file such reports, will, upon the
request of any holder of Registrable Securities, make publicly
available other information) and will take such further action as any
holder of Registrable Securities may reasonably request, all to the
extent required from time to time to enable such holder to sell
Registrable Securities 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 of Registrable Securities,
the Company will deliver to such holder a written statement as to
whether it has complied with such requirements.
4.2 Rule 144A. The Company covenants that, if it is not
---------
subject to the reporting requirements of Section 13 or Section 15(d)
of the Exchange Act, it will, upon the request of any holder of
Registrable Securities, make available such information as may be
required by Rule 144A(d)(4) in order to permit sales pursuant to Rule
144A under the Securities Act. In addition, the Company will take
such further action as any holder of Registrable Securities may
reasonably request, to the extent required to enable such holder to
sell Registrable Securities without registration under the Securities
Act within the limitation of the exemptions provided by (a) Rule 144A
under the
18
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<PAGE>
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 of Registrable Securities,
the Company will deliver to such holder a written statement as to
whether it has complied with such requirements.
5. Amendments and Waivers. This Agreement may be amended
----------------------
and the Company may take any action herein prohibited or omit to
perform any act herein required to be performed by it, only if the
Company shall have obtained the written consent to such amendment,
action or omission to act, of the holder or holders of 50% or more of
the shares of each class of Registrable Securities affected thereby;
provided that so long any Prudential Entity or SFER holds Registrable
Securities affected thereby, its written consent shall be required for
any amendment, action or omission to act. Each holder of any
Registrable Securities at the time or thereafter outstanding shall be
bound by any consent authorized by this Section 5, whether or not such
Registrable Securities shall have been marked to indicate such
consent.
6. Nominees for Beneficial Owners. In the event that any
------------------------------
Registrable Securities are held by a nominee for the beneficial owner
thereof, the beneficial owner thereof may, at its election, be treated
as the holder of such Registrable Securities for purposes of any
request or other action by any holder or holders of Registrable
Securities pursuant to this Agreement or any determination of any
number or percentage of shares of Registrable Securities held by any
holder or holders of Registrable Securities contemplated by this
Agreement. If the beneficial owner of any Registrable Securities so
elects to be so treated, the Company may require assurances reasonably
satisfactory to it of such owner's beneficial ownership of such
Registrable Securities.
7. Notices. All communications provided for hereunder
-------
shall be sent by first-class mail and (a) if addressed to a party or
holder of Registrable Securities other than the Company, addressed to
such entity in the manner set forth in the Purchase Agreement (with
respect to Prudential) or the Merger Agreement (with respect to SFER),
or at such other address as such party shall have furnished to the
Company and the other holders of Registrable Securities in writing, or
(b) if addressed to the Company, at 101 Park Avenue, Suite 1400, P.O.
Box 26770, Oklahoma City, Oklahoma 73126-6770, Attention: Chief
Financial Officer, or at such other address, or to the attention of
such other officer, as the Company shall have furnished to each holder
of Registrable Securities at the time outstanding; provided, however,
-------- -------
that any such communication to the Company may also, at the option of
any of the parties hereunder, be either delivered to the Company at
its address set forth above or to any officer of the Company.
19
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<PAGE>
8. Assignment. This Agreement shall be binding upon and
----------
inure to the benefit of and be enforceable by the parties hereto and
their respective successors and assigns. Any transferee of any
Registrable Securities hereunder that is not, under applicable law,
permitted to publicly resell such Registrable Securities without
restriction may become a holder of Registrable Securities hereunder
upon such person's acquisition of such Registrable Securities by
executing a counterpart hereof; provided, however, that no transferee
-------- -------
of any Prudential Entity or SFER, other than an affiliate of such
transferor, shall be entitled to exercise any right hereunder which is
designated as being a right of any Prudential Entity or SFER,
respectively (other than generally as a holder of Registrable
Securities), unless such transferee has acquired all Registrable
Securities owned by such Prudential Entity or SFER, respectively.
9. Descriptive Headings. The descriptive headings of the
--------------------
several sections and paragraphs of this Agreement are inserted for
reference only and shall not limit or otherwise affect the meaning
hereof.
10. Specific Performance. The parties hereto recognize and
--------------------
agree that money damages may be insufficient to compensate the holders
of any Registrable Securities for breaches by the Company of the terms
hereof and, consequently, that the equitable remedy of specific
performance of the terms hereof will be available in the event of any
such breach.
11. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED AND
-------------
ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE
GOVERNED BY, THE INTERNAL LAWS OF THE STATE OF NEW YORK WITHOUT REGARD
TO THE PRINCIPLES THEREOF REGARDING CONFLICT OF LAWS.
12. Counterparts. This Agreement may be executed
------------
simultaneously in any number of counterparts, each of which shall be
deemed an original, but all such counterparts shall together
constitute one and the same instrument.
20
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<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement
to be executed and delivered by their respective officers thereunto
duly authorized as of the date first above written.
HADSON CORPORATION
By:___________________________
Title:
THE PRUDENTIAL INSURANCE
COMPANY OF AMERICA
By:___________________________
Title:
PRUCO LIFE INSURANCE COMPANY
By:____________________________
Title:
PRUSUPPLY, INC.
By:____________________________
Title:
SANTA FE ENERGY RESOURCES, INC.
By:____________________________
Title:
SFER PIPELINE INC.
By:____________________________
Title:
21
<PAGE>
SECURITIES PURCHASE AGREEMENT
_________________________________________________________________
_________________________________________________________________
HADSON CORPORATION
$56,400,000
SENIOR SECURED NOTES
Dated as of December 14, 1993
_________________________________________________________________
_________________________________________________________________
NYFS05...:\33\68533\0020\1870\AGR92393.U2G
<PAGE>
<PAGE>
TABLE OF CONTENTS
Page
----
1. ISSUANCE AND EXCHANGE OF SECURITIES . . . . . . . . . . . . . 3
2. CLOSING OF THE ISSUANCE AND EXCHANGE OF SECURITIES . . . . . 4
2A. CLOSING . . . . . . . . . . . . . . . . . . . . . . . . 4
3. CONDITIONS . . . . . . . . . . . . . . . . . . . . . . . . . 6
3A. CONDITIONS OF CLOSING . . . . . . . . . . . . . . . . . 6
3A(1). CERTAIN DOCUMENTS . . . . . . . . . . . . . . . . . 6
3A(2). OPINION OF PURCHASERS' SPECIAL COUNSEL . . . . . . . 10
3A(3). REPRESENTATIONS AND WARRANTIES; NO DEFAULT . . . . . 10
3A(4). RECEIPT PERMITTED BY APPLICABLE LAWS . . . . . . . . 10
3A(5). PROCEEDINGS . . . . . . . . . . . . . . . . . . . . 11
3A(6). MATERIAL ADVERSE EFFECT . . . . . . . . . . . . . . 11
3A(7). FEES AND EXPENSES PAID . . . . . . . . . . . . . . . 11
4. PREPAYMENTS . . . . . . . . . . . . . . . . . . . . . . . . . 11
4A. REQUIRED PREPAYMENTS . . . . . . . . . . . . . . . . . 11
4B. OPTIONAL PREPAYMENT . . . . . . . . . . . . . . . . . . 12
4C. NOTICE OF PREPAYMENT . . . . . . . . . . . . . . . . . 13
4D. PARTIAL PREPAYMENTS PRO RATA . . . . . . . . . . . . . 13
4E. RETIREMENT OF NOTES . . . . . . . . . . . . . . . . . . 13
5. AFFIRMATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . 14
5A. FINANCIAL STATEMENTS; REPORTS . . . . . . . . . . . . . 14
5B. INFORMATION REQUIRED BY RULE 144A . . . . . . . . . . . 17
5C. INSPECTION OF PROPERTY . . . . . . . . . . . . . . . . 18
5D. COVENANT TO SECURE NOTES EQUALLY . . . . . . . . . . . 18
5E. MAINTENANCE OF PROPERTIES; INSURANCE . . . . . . . . . 18
5F. CORPORATE EXISTENCE, ETC. . . . . . . . . . . . . . . . 19
5G. PAYMENT OF TAXES AND CLAIMS . . . . . . . . . . . . . . 19
5H. COMPLIANCE WITH LAWS, ETC. . . . . . . . . . . . . . . 20
5I. TRUST. . . . . . . . . . . . . . . . . . . . . . . . 20
6. NEGATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . 20
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6A. INTENTIONALLY OMITTED . . . . . . . . . . . . . . . . . 20
6B. DIVIDEND LIMITATION . . . . . . . . . . . . . . . . . . 20
6C. LIEN, DEBT, AND OTHER RESTRICTIONS . . . . . . . . . . 21
6C(1). LIENS . . . . . . . . . . . . . . . . . . . . . . . 22
6C(2). DEBT . . . . . . . . . . . . . . . . . . . . . . . . 24
6C(3). LOANS, ADVANCES, INVESTMENTS AND CONTINGENT
LIABILITIES . . . . . . . . . . . . . . . . . . . . 26
6C(4). INTENTIONALLY OMITTED . . . . . . . . . . . . . . . 28
6C(5). MERGER AND SALE OF ASSETS . . . . . . . . . . . . . 28
6C(6). LEASE RENTALS . . . . . . . . . . . . . . . . . . . 30
6C(7). SALE AND LEASE-BACK . . . . . . . . . . . . . . . . 31
6C(8). SALE OR DISCOUNT OF RECEIVABLES . . . . . . . . . . 31
6C(9). CERTAIN CONTRACTS . . . . . . . . . . . . . . . . . 31
6C(10). PRIORITY DEBT . . . . . . . . . . . . . . . . . . . 33
6C(11). TRANSACTIONS WITH AFFILIATES . . . . . . . . . . . 33
6C(12). TRANSFER OF ASSETS TO SUBSIDIARIES . . . . . . . . 34
6C(13). SUBSIDIARY DIVIDEND RESTRICTIONS . . . . . . . . . 34
6D. ISSUANCE OF STOCK BY SUBSIDIARIES; CERTAIN CHANGES . . 34
6E. COMPLIANCE WITH ERISA . . . . . . . . . . . . . . . . . 35
6F. MAINTENANCE OF BUSINESS . . . . . . . . . . . . . . . . 37
6G. MODIFICATION OF MATERIAL AGREEMENTS . . . . . . . . . . 37
7. EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . . . . . 38
7A. ACCELERATION . . . . . . . . . . . . . . . . . . . . . 38
7B. RESCISSION OF ACCELERATION . . . . . . . . . . . . . . 42
7C. NOTICE OF ACCELERATION OR RESCISSION . . . . . . . . . 43
7D. OTHER REMEDIES . . . . . . . . . . . . . . . . . . . . 43
8. REPRESENTATIONS, COVENANTS AND WARRANTIES . . . . . . . . . . 43
8A. ORGANIZATION; AUTHORITY; ENFORCEABILITY . . . . . . . . 43
8B. FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . 44
8C. ACTIONS PENDING . . . . . . . . . . . . . . . . . . . . 45
8D. OUTSTANDING DEBT . . . . . . . . . . . . . . . . . . . 45
8E. TITLE TO PROPERTIES . . . . . . . . . . . . . . . . . . 45
8F. TAXES . . . . . . . . . . . . . . . . . . . . . . . . . 46
8G. CONFLICTING AGREEMENTS AND OTHER MATTERS . . . . . . . 46
8H. OFFERING OF SECURITIES . . . . . . . . . . . . . . . . 47
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8I. USE OF PROCEEDS . . . . . . . . . . . . . . . . . . . . 47
8J. ERISA . . . . . . . . . . . . . . . . . . . . . . . . . 48
8K. GOVERNMENTAL CONSENT . . . . . . . . . . . . . . . . . 49
8L. ENVIRONMENTAL COMPLIANCE . . . . . . . . . . . . . . . 49
8M. DISCLOSURE . . . . . . . . . . . . . . . . . . . . . . 50
8N. CAPITAL STOCK AND RELATED MATTERS . . . . . . . . . . . 51
8O. PATENTS, LICENSES, ETC. . . . . . . . . . . . . . . . . 51
8P. INVESTMENT COMPANY ACT . . . . . . . . . . . . . . . . 52
8Q. PUBLIC UTILITY HOLDING COMPANY ACT . . . . . . . . . . 52
8R. SECURITY INTERESTS . . . . . . . . . . . . . . . . . . 52
8S. DELIVERY OF BMO CREDIT AGREEMENT . . . . . . . . . . . 52
9. REPRESENTATIONS OF EACH PURCHASER . . . . . . . . . . . . . . 52
9A. NATURE OF PURCHASE . . . . . . . . . . . . . . . . . . 52
9B. SOURCE OF FUNDS . . . . . . . . . . . . . . . . . . . . 53
10. DEFINITIONS AND ACCOUNTING TERMS . . . . . . . . . . . . . . 53
10A. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . 53
10B. ACCOUNTING PRINCIPLES, TERMS AND DETERMINATIONS . . . 65
10C. COMPUTATION OF TIME PERIODS . . . . . . . . . . . . . 66
11. JUDICIAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . 66
11A. CONSENT TO JURISDICTION . . . . . . . . . . . . . . . 66
11B. ENFORCEMENT OF JUDGMENTS . . . . . . . . . . . . . . . 66
11C. SERVICE OF PROCESS . . . . . . . . . . . . . . . . . . 67
11D. NO LIMITATION ON SERVICE OR SUIT . . . . . . . . . . . 67
12. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . 67
12A. NOTE PAYMENTS . . . . . . . . . . . . . . . . . . . . 67
12B. EXPENSES; INDEMNITY . . . . . . . . . . . . . . . . . 68
12C. CONSENT TO AMENDMENTS . . . . . . . . . . . . . . . . 70
12D. FORM, REGISTRATION, TRANSFER AND EXCHANGE OF NOTES;
LOST NOTES . . . . . . . . . . . . . . . . . . . . . . 71
12E. PERSONS DEEMED OWNERS; PARTICIPATIONS . . . . . . . . 72
12F. SURVIVAL OF REPRESENTATIONS AND WARRANTIES AND
COVENANTS; ENTIRE AGREEMENT . . . . . . . . . . . . . . 72
12G. SUCCESSORS AND ASSIGNS . . . . . . . . . . . . . . . . 73
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12H. DISCLOSURE TO OTHER PERSONS . . . . . . . . . . . . . 73
12I. NOTICES . . . . . . . . . . . . . . . . . . . . . . . 74
12J. PAYMENTS DUE ON NON-BUSINESS DAYS . . . . . . . . . . 74
12K. SATISFACTION REQUIREMENT . . . . . . . . . . . . . . . 74
12L. GOVERNING LAW . . . . . . . . . . . . . . . . . . . . 75
12M. SEVERABILITY . . . . . . . . . . . . . . . . . . . . . 75
12N. DESCRIPTIVE HEADINGS . . . . . . . . . . . . . . . . . 75
12O. COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . 75
12P. SEVERALTY OF OBLIGATIONS . . . . . . . . . . . . . . . 75
PURCHASER SCHEDULE
SCHEDULE 3A(6) -- CERTAIN EVENTS
SCHEDULE 6C(1) -- CERTAIN LIENS
SCHEDULE 6C(3) -- PERMITTED INVESTMENTS
SCHEDULE 6C(9) -- CERTAIN CONTRACTS
SCHEDULE 8C -- CERTAIN PENDING OR THREATENED LITIGATION
SCHEDULE 8D -- OUTSTANDING DEBT
SCHEDULE 8E -- PROPERTY DISPOSED OF SINCE DECEMBER 31, 1992
SCHEDULE 8G -- CONFLICTING AGREEMENTS
SCHEDULE 8J -- CERTAIN ERISA PLANS
SCHEDULE 8T -- CERTAIN SUBSIDIARIES
EXHIBIT A -- FORM OF SENIOR SECURED NOTE
EXHIBIT B -- FORM OF CERTIFICATE OF MERGER
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EXHIBIT C -- FORM OF COLLATERAL AGENCY AGREEMENT
EXHIBIT D -- FORM OF INTERCREDITOR AGREEMENT
EXHIBIT E -- FORM OF OPINION OF COMPANY'S SPECIAL COUNSEL
EXHIBIT E-1 -- FORM OF OPINION OF COMPANY'S DELAWARE COUNSEL
EXHIBIT F -- FORM OF OPINION OF COMPANY'S COUNSEL
EXHIBIT F-1 -- FORM OF OPINION OF COMPANY'S COUNSEL
EXHIBIT G -- FORM OF REGISTRATION RIGHTS AGREEMENT
EXHIBIT H -- FORM OF CASH COLLATERAL AGREEMENT
EXHIBIT I -- FORM OF VOTING AGREEMENT
EXHIBIT K -- FORM OF BY-LAW AMENDMENTS
EXHIBIT S -- FORM OF OPINION OF SFER'S COUNSEL
EXHIBIT T -- FORM OF TRUST AGREEMENT
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<PAGE>
HADSON CORPORATION
101 Park Avenue, Suite 1400
Oklahoma City, OK 73102
As of December 14, 1993
To Each of the Purchasers Named in the
Purchaser Schedule Attached Hereto
Ladies and Gentlemen:
The undersigned, Hadson Corporation, a Delaware corporation
(the "COMPANY"), and each of the institutions listed on the Purchaser
Schedule (collectively, the "PURCHASERS"), hereby agree as follows:
PRELIMINARY STATEMENT. The Company and the Purchasers
entered into a Restated Securities Purchase Agreement, dated as of
December 16, 1992 (the "EXISTING PURCHASE AGREEMENT"), pursuant to
which, among other things, the Company issued to the Purchasers
secured promissory notes in the aggregate principal amount of
$56,400,000.00 (the "EXISTING NOTES"), 49,500 shares of the Company's
7% Senior Cumulative Preferred Stock, Series A, par value $.01 per
share (the "EXISTING SENIOR PREFERRED"), 300,000 shares of the
Company's Common Stock, par value $.01 per share (the "EXISTING
COMMON"), 72,704,000 shares of the Company's Class B Common Stock, par
value $.01 per share (the "EXISTING CLASS B COMMON"), and 11,341,000
shares of the Company's Class C Common Stock, par value $.01 per share
(the "EXISTING CLASS C COMMON"). CAPITALIZED TERMS USED HEREIN AND
NOT OTHERWISE DEFINED HEREIN SHALL HAVE THE MEANINGS SPECIFIED IN
PARAGRAPH 10.
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The Company has entered into an Agreement of Merger, dated
as of July 28, 1993, and amended as of November 9, 1993 (as so
amended, the "MERGER AGREEMENT"), with Santa Fe Energy Resources,
Inc., a Delaware corporation ("SFER"), and Adobe Gas Pipeline Company,
a Delaware corporation ("AGPC") and a wholly owned subsidiary of SFER
Pipeline, Inc., a Delaware corporation and a wholly-owned subsidiary
of SFER ("Pipeline"), pursuant to which AGPC will be merged with and
into the Company, with the subsidiaries of AGPC thereby becoming
Subsidiaries of the Company (the "MERGER"). Pursuant to the Merger
Agreement, as of the Effective Time (as defined in the Merger
Agreement), (i) all of the shares of common stock of AGPC will be
converted into 2,080,000 shares of Senior Preferred Stock and such
number of shares of New Common as is set forth in Section 2.7 of the
Merger Agreement, (ii) each share of the Company's 8% Junior
Cumulative Convertible Preferred Stock, Series B, par value $.01 per
share (the "OLD JUNIOR PREFERRED"), outstanding immediately prior to
the Merger will be converted into 1.50733 shares of New Common and
1.09667 shares of New Junior Preferred Stock, (iii) each share of
Existing Common outstanding immediately prior to the Merger will be
converted into (A) .06667 (approximately 1/15th) of a share of New
Common and (B) a number of shares of New Junior Preferred Stock equal
to the quotient of (1) the amount, if positive, by which (a) 4,983,180
exceeds (b) the product of 1.09667 times the number of shares of Old
Junior Preferred outstanding immediately prior to the Merger divided
by (2) the number of shares of Existing Common outstanding immediately
prior to the Merger, (iv) the shares of the Existing Class B Common
outstanding immediately prior to the Merger will be converted into the
right to receive a beneficial interest in the Trust,
(v) each share of Existing Class C Common outstanding immediately
prior to the Merger will be converted into .06667 (approximately
1/15th) of a share of New Common and (vi) the shares of the Existing
Senior Preferred outstanding immediately prior to the Merger will be
converted into an aggregate of 553,658 shares of New Common, the right
to receive a beneficial interest in the Trust and the right to receive
$33,000,000 aggregate principal amount of the Company's senior secured
promissory notes (the
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<PAGE>
"MERGER NOTES") (such conversions described in clauses (i) through
(vi) being referred to, collectively, as the "CONVERSIONS"). On the
Effective Date, the Company will settle a trust with 4,983,180 shares
of New Common naming the Purchasers as the beneficiaries thereof in
accordance with the terms of the Trust Agreement.
Immediately following the Merger, HEPSI will be merged with
and into the Company, with the Subsidiaries directly owned by HEPSI,
thereby becoming direct Subsidiaries of the Company.
On the date hereof, the Purchasers are entering into this
Securities Purchase Agreement (this "AGREEMENT") with the Company,
pursuant to which, among other things, (i) the indebtedness and
obligations of the Company under the Existing Purchase Agreement will
be, on and as of the Effective Date, exchanged for $23,400,000
aggregate principal amount of the Company's senior secured promissory
notes (the "EXCHANGE NOTES" and, together with the Merger Notes, the
"SENIOR SECURED NOTES"), (ii) the Company will issue the Merger Notes
and (iii) certain rights and obligations of the parties with respect
to the Senior Secured Notes and the securities issued to the
Purchasers pursuant to the Merger Agreement are set forth. The
Company has requested that the Purchasers enter into this Agreement
for such purposes. The Purchasers are, on the terms and subject to
the satisfaction of the conditions stated below, agreeable to granting
the request of the Company and the Company and the Purchasers have
agreed, subject to the satisfaction of such conditions, to terminate
the Existing Purchase Agreement in its entirety, except to the extent
specifically set forth herein.
1. ISSUANCE AND EXCHANGE OF SECURITIES. On the Effective Date,
the Company shall have authorized the issuance and payment of and
shall issue and pay or deliver to each Purchaser, and each Purchaser
shall receive, in the amounts set forth opposite such Purchaser's name
in the Purchaser Schedule attached hereto:
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(i) (A) subject to the terms and conditions hereinafter set
forth, the Exchange Notes in the aggregate original principal amount
of $23,400,000 in exchange for the Existing Notes and (B) the Merger
Notes, all such Notes to be dated the Effective Date, to mature on
December 31, 2003, to bear interest on the unpaid balance thereof from
the date thereof until the principal thereof shall become due and
payable at the rate equal to 8.0% per annum, and to be substantially
in the form of Exhibit A attached hereto; and
(ii) certificates evidencing the aggregate of 1,309,762
full shares of New Common issuable upon the Conversion of the Existing
Class C Common and the Existing Senior Preferred pursuant to the
Merger Agreement, which New Common shall have the rights to be set
forth in the Restated Certificate of Incorporation of the Company as
proposed to be amended pursuant to the Certificate of Merger with
respect to the Merger (the "CERTIFICATE OF MERGER"), which shall be
substantially in the form of Exhibit B attached hereto (as so amended,
the "NEW RESTATED CERTIFICATE OF INCORPORATION"); and
(iii) subject to the terms and conditions hereinafter set
forth, cash payments in an aggregate amount equal to accrued and
unpaid interest on the Existing Notes as of the Effective Date at the
rate set forth in the Existing Notes (the "CASH PAYMENTS").
The term "NOTES" as used herein shall include each Senior
Secured Note and each Note delivered in substitution or exchange for
any such Note pursuant to this Agreement. The term "EQUITY
SECURITIES" shall mean the shares of New Common described in clause
(ii) above. The term "SECURITIES" shall mean the Notes and the Equity
Securities.
2. CLOSING OF THE ISSUANCE AND EXCHANGE OF SECURITIES.
2A. CLOSING. On the Effective Date, which shall occur as
promptly as practicable following the Effective Time (the
4
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<PAGE>
"CLOSING" or the "DATE OF CLOSING"), the Company will deliver to each
Purchaser, at the offices of Weil, Gotshal & Manges at 767 Fifth
Avenue, New York, New York, against surrender by such Purchaser of its
Existing Notes and the stock certificates evidencing its Existing
Class B Common, Existing Class C Common and Existing Senior Preferred,
as applicable, (i) the Senior Secured Notes evidencing the aggregate
principal amount of the Senior Secured Notes to be received by such
Purchaser, in the denomination or denominations specified with respect
to such Purchaser in the Purchaser Schedule, (ii) stock certificates,
registered in such Purchaser's name, evidencing the aggregate number
of shares of New Common to be received by such Purchaser in the
numbers specified with respect to such Purchaser in the Purchaser
Schedule, and (iii) by wire transfer of immediately available funds to
the account indicated with respect to such Purchaser on the Purchaser
Schedule, the aggregate amount of Cash Payments to be received by such
Purchaser. Immediately upon surrender, the Existing Notes will be
cancelled and the Existing Purchase Agreement will be automatically
terminated, except to the extent expressly set forth herein. Upon
receipt by the Purchasers of the Senior Secured Notes, the Equity
Securities, and the Cash Payments as set forth above, The Prudential
Insurance Company of America shall deliver, free and clear of any and
all liens created by or consented to by any of the Purchasers or by
The Prudential Insurance Company of America, in its capacity as agent
for the Purchasers, (a) to the Company (x) all funds being held by it
as collateral for the obligations under the Existing Notes pursuant to
that certain Cash Collateral Agreement, dated as of July 15, 1993, as
amended, between the Company and The Prudential Insurance Company of
America, as agent for the benefit of the purchasers under the Existing
Purchase Agreement, by wire transfer of such funds to the Company's
Account No. 2-927-929, ABA No. 031000037, at Mellon Bank, N.A.,
Philadelphia, Pennsylvania and (y) all certificates and instruments
being held by it as collateral for the Existing Notes which are not
being delivered to the Collateral Agent as set forth in clause (b)
below and (b) to the Collateral Agent all certificates and instruments
being held by it as collateral for
5
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<PAGE>
the Existing Notes which will be held by the Collateral Agent as
Collateral. As promptly as practicable after the Closing, the Company
shall pay to each Purchaser, by business check, any cash payable to
such Purchaser in lieu of any fractional shares of New Common pursuant
to Section 2.9(a) of the Merger Agreement.
3. CONDITIONS.
3A. CONDITIONS OF CLOSING. The effectiveness of this Agreement
and the obligation of each Purchaser to exchange its Existing Notes as
set forth herein is subject to the satisfaction, on or before the Date
of Closing, of each of the following conditions:
3A(1). CERTAIN DOCUMENTS. Each Purchaser shall have received
the following, each dated the Date of Closing:
(i) The Senior Secured Notes, certificates evidencing the
Equity Securities and the Cash Payments.
(ii) Certified copies of the resolutions of the Board of
Directors of the Company and each of its Subsidiaries, as the
case may be, authorizing and approving (a) this Agreement, the
Registration Rights Agreement, the Trust Agreement, the Present
Collateral Documents, and the issuance of the Securities and (b)
the Merger Agreement, the HEPSI Merger and each of the other
Related Transactions, and of all documents evidencing other
necessary corporate action and governmental approvals, if any,
with respect to this Agreement, the Registration Rights
Agreement, the Trust Agreement, the Present Collateral Documents,
the Securities, the Merger, the HEPSI Merger and each other
Related Transaction and the transactions contemplated hereby and
thereby, as the Purchasers may reasonably request.
(iii) Certified copies of the resolutions of the Board of
Directors of each of SFER and Pipeline authorizing and approving
the Registration Rights Agreement, the Voting
6
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<PAGE>
Agreement, and in the case of SFER, the Merger Agreement, and the
transactions contemplated thereby, accompanied by a certificate
of the Secretary or an Assistant Secretary of each of SFER and
Pipeline certifying the names and the true signatures of the
officers of such company authorized to execute each such
agreement.
(iv) A certificate of the Secretary or an Assistant
Secretary of the Company and each of its Subsidiaries, as the
case may be, certifying the names and true signatures of the
officers of the Company and each of its Subsidiaries, as the case
may be, authorized to execute this Agreement, the Registration
Rights Agreement, the Trust Agreement, the Present Collateral
Documents, the Notes and the other documents to be delivered
hereunder.
(v) Certified copies of the by-laws of the Company, as
proposed to be amended by the by-law amendments in the form of
Exhibit K attached hereto (as amended, the "BY-LAWS"), which
shall be in full force and effect.
(vi) A favorable opinion of (A) Kelley Drye & Warren,
special New York counsel to the Company, (B) Potter Anderson &
Corron, special Delaware counsel to the Company, (C) Vinson &
Elkins L.L.P., special counsel to the Company, and (D) Diamond,
Stuart & Timmons, counsel to the Company, satisfactory to the
Purchasers and substantially in the form of Exhibits E, E-1, F
and F-1, respectively, attached hereto, and as to such other
matters as the Purchasers may reasonably request.
(vii) A favorable opinion of Andrews & Kurth, L.L.P.,
counsel to SFER and Pipeline, satisfactory to the Purchasers and
substantially in the form of Exhibit S attached hereto, and as to
such other matters as the Purchasers may reasonably request.
7
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<PAGE>
(viii) Copies of the Present Collateral Documents, duly
executed and delivered by the Company, and each Subsidiary a
party thereto, each in form and substance satisfactory to the
Purchasers, with copies of each of the following:
(A) executed copies of financing statements (Form UCC-
1) to be filed under the Uniform Commercial Code of each
jurisdiction as may be necessary or, in the opinion of the
Purchasers, desirable to perfect the security interests
created by such Present Collateral Documents;
(B) certificates representing the shares of stock
pledged under such Present Collateral Documents and undated
stock powers for such certificates executed in blank;
(C) promissory notes representing the notes pledged
under such Present Collateral Documents and undated bond
powers for such notes executed in blank; and
(D) such evidence that all other actions necessary or,
in the opinion of the Purchasers, desirable to perfect and
effect the security interests created by such Present
Collateral Documents have been taken (other than (i) filing
of financing statements, which shall be filed as promptly as
practicable after the Closing and (ii) perfection of the
Collateral Agent's interest in bank accounts and disbursing
accounts of the Company).
(ix) Copies of certified copies of Requests for Information
or Copies (Form UCC-11), or equivalent reports, listing all
effective financing statements which name the Company or any Sub-
sidiary (under its present name and any previous name) a party to
the Present Collateral Documents,
8
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<PAGE>
as debtor and which are filed in all jurisdictions in which the
Company or such Subsidiary owns property or conducts business
together with copies of such financing statements.
(x) The Registration Rights Agreement, duly executed and
delivered by the Company, SFER and Pipeline in the form of
Exhibit G attached hereto (the "REGISTRATION RIGHTS AGREEMENT").
(xi) A copy of the BMO Credit Agreement together with all
related documents thereto (other than the Present Collateral
Documents), certified by an officer of the Company as being a
true and correct copy of each such document, in form and
substance satisfactory to the Purchasers.
(xii) The Intercreditor Agreement, duly executed by BMO, as
Agent under the BMO Credit Agreement.
(xiii) [Intentionally Omitted].
(xiv) Evidence that the Certificate of Merger has been duly
executed by the Company and has been duly filed with the
Secretary of State of the State of Delaware.
(xv) Evidence that a certificate of merger with respect to
the HEPSI Merger, in form and substance satisfactory to the
Purchasers, has been duly executed by the Company and has been
duly filed with the Secretary of State of the State of Delaware.
(xvi) The Voting Agreement, duly executed by SFER and
Pipeline.
(xvii) The Collateral Agency Agreement duly executed by the
Collateral Agent and BMO, as Agent under the BMO Credit
Agreement, in substantially the form of Exhibit C hereto (the
"COLLATERAL AGENCY AGREEMENT").
9
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<PAGE>
(xviii) The Trust Agreement, duly executed by the Company
and the Trustee, in substantially the form of Exhibit T hereto.
(xix) Such additional documents, information and materials
as the Purchasers may reasonably request, including, without
limitation, copies of any debt agreements, security agreements
and other material contracts to which the Company or any
Subsidiary is a party.
3A(2). OPINION OF PURCHASERS' SPECIAL COUNSEL. Such Purchaser
shall have received from Weil, Gotshal & Manges, who are acting as
special counsel for the Purchasers in connection with this transac-
tion, a favorable opinion satisfactory to such Purchaser as to such
matters incident to the matters herein contemplated as it may
reasonably request.
3A(3). REPRESENTATIONS AND WARRANTIES; NO DEFAULT. The
representations and warranties of the Company and each Subsidiary
contained in paragraph 8 of this Agreement and in each of the Present
Collateral Documents shall be true on and as of the Date of Closing;
there shall exist on the Date of Closing no Event of Default or
Default; and the Company shall have delivered to such Purchaser an
Officer's Certificate satisfactory to such Purchaser, dated the Date
of Closing, attesting to both such effects.
3A(4). RECEIPT PERMITTED BY APPLICABLE LAWS. (i) The purchase
of and payment for (by exchange of the Existing Notes) the Exchange
Notes to be acquired by such Purchaser on the Date of Closing on the
terms and conditions herein provided, (ii) the receipt by the
Purchaser of the Merger Notes, the Equity Securities and the other
interests to which it is entitled under the Merger Agreement and (iii)
the establishment of the Trust on the Date of Closing on the terms and
conditions provided in the Trust Agreement shall not violate any
applicable law or governmental regulation (including, without
limitation, section 5 of the Securities Act or Regulation G, T or X of
the Board of
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<PAGE>
Governors of the Federal Reserve System) and shall not subject such
Purchaser to any tax, penalty, liability or other onerous condition
under or pursuant to any applicable law or governmental regulation,
and such Purchaser shall have received such certificates or other
evidence as it may request to establish compliance with this
condition.
3A(5). PROCEEDINGS. All corporate and other proceedings taken
or to be taken in connection with the transactions contemplated hereby
and the Related Transactions and all documents incident thereto shall
be satisfactory in substance and form to such Purchaser, and such
Purchaser shall have received all such counterpart originals or
certified or other copies of such documents as it may reasonably
request.
3A(6). MATERIAL ADVERSE EFFECT. No event shall have occurred
since December 31, 1992 and be continuing which in the judgment of any
Purchaser has had or could reasonably be expected to have a Material
Adverse Effect other than as set forth on Schedule 3A(6).
3A(7). FEES AND EXPENSES PAID. The Purchasers shall have
received evidence satisfactory to them that the fees and expenses to
be paid by the Company on the date hereof pursuant to paragraph 12B
shall have been paid in full.
4. PREPAYMENTS. The Notes shall be subject to prepayment with
respect to the required prepayments specified in paragraph 4A and the
optional prepayments permitted by paragraph 4B.
4A. REQUIRED PREPAYMENTS. (i) Until the Notes shall be paid in
full, the Company shall apply to the prepayment of the Notes, without
premium, (A) $2,500,000 on the Closing Date, (B) $1,000,000, on or
prior to August 1, 1994 and (C) such sums as shall reduce the
outstanding principal amount of the Notes, as of December 31 in the
year set forth below, to the amount set forth opposite such year:
11
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Year Outstanding Principal Amount
---- ----------------------------
<S> <C>
1994 $52,900,000.00
1995 52,900,000.00
1996 50,400,000.00
1997 44,500,000.00
1998 36,500,000.00
1999 28,500,000.00
2000 20,500,000.00
2001 12,500,000.00
2002 4,500,000.00
2003 0.00
</TABLE>
Each such prepayment shall be in integral multiples of $500,000 and be
accompanied by interest on the amount prepaid at the rate specified in
the Notes to such prepayment date. Each such payment described in the
immediately preceding clause (C), if not earlier made, shall become
due on December 31 in the relevant year.
(ii) Upon receipt by the Company of the proceeds of Asset Sales
in excess of the amounts set forth in paragraph 6C(5)(iv) which the
Company either (x) does not intend to use for the acquisition of other
assets within 90 days as set forth in such paragraph or (y) does not
so use within the 90 days set forth in such paragraph, the Company
shall apply such excess to the prepayment of the principal of the
Notes, and to the payment of interest to such prepayment date on the
amount prepaid at the rate specified in the Notes, without premium.
4B. OPTIONAL PREPAYMENT. The Notes shall be subject to
prepayment, in whole at any time or from time to time in part (but any
such partial payment shall be in integral multiples of $500,000),
without premium, at the option of the Company, at 100% of the
principal amount so prepaid plus interest accrued thereon to the
prepayment date.
12
<PAGE>
<PAGE>
4C. NOTICE OF PREPAYMENT. The Company shall give the holder of
each Note irrevocable written notice of any prepayment pursuant to
paragraph 4A or 4B not less than 10 Business Days prior to the
prepayment date, specifying such prepayment date and the principal
amount of the Notes, and of the Notes held by such holder, to be
prepaid on such date and stating that such prepayment is to be made
pursuant to paragraph 4A or 4B. Notice of prepayment having been
given as aforesaid, the principal amount of the Notes specified in
such notice, together with interest thereon to the prepayment date,
shall become due and payable on such prepayment date. The Company
shall, on or before the day on which it gives written notice of any
prepayment, give telephonic notice of the principal amount of the
Notes to be prepaid and the prepayment date to each Significant Holder
which shall have designated a recipient of such notices in the
Purchaser Schedule attached hereto or by notice in writing to the
Company.
4D. PARTIAL PREPAYMENTS PRO RATA. Upon any partial prepayment
of the Notes pursuant to paragraph 4A or 4B, the principal amount so
prepaid shall be allocated to all Notes at the time outstanding
(including, for the purpose of this paragraph 4D only, all outstanding
Notes purchased or otherwise acquired by the Company or any of its
Subsidiaries or Affiliates other than by prepayment pursuant to
paragraph 4A or 4B) in proportion to the respective outstanding
principal amounts thereof.
4E. RETIREMENT OF NOTES. The Company shall not, and shall not
permit any of its Subsidiaries or Affiliates to, prepay or otherwise
retire in whole or in part prior to their stated final maturity (other
than by prepayment pursuant to paragraph 4A or 4B or upon acceleration
of such final maturity pursuant to paragraph 7A), or purchase or
otherwise acquire, directly or indirectly, Notes held by any holder
unless the Company or such Subsidiary or Affiliate shall have offered
to prepay or otherwise retire or purchase or otherwise acquire, as the
case may be, the same proportion of the aggregate principal amount of
Notes held by
13
<PAGE>
<PAGE>
each other holder of Notes at the time outstanding upon the same terms
and conditions. Any Notes so prepaid or otherwise retired or
purchased or otherwise acquired by the Company or any of its
Subsidiaries or Affiliates shall not be deemed to be outstanding for
any purpose under this Agreement, except as provided in paragraph 4D.
5. AFFIRMATIVE COVENANTS. From and after the Effective Date,
(i) so long as any Note shall remain unpaid and (ii) following the
payment of the Notes in full, with respect to paragraphs 5A, 5B and
5C, if and so long as the Company is not subject to the reporting
requirements of section 13 or 15(d) of the Exchange Act and any
Purchaser holds Equity Securities, the Company covenants that:
5A. FINANCIAL STATEMENTS; REPORTS. The Company will deliver to
each Significant Holder in quadruplicate (delivery in quadruplicate to
The Prudential Insurance Company of America will satisfy the Company's
obligation to deliver such reports to Prudential hereunder):
(i) as soon as available and in any event within 30 days
after the end of each fiscal year of the Company, consolidating
and consolidated statements of projected income from operations
and of projected cash flows and a consolidating and consolidated
projected balance sheet of the Company and its Subsidiaries, in
each case for the following fiscal year, such projected
statements to be prepared on a quarterly basis and to be based,
and reported by the chief executive officer, chief financial
officer or treasurer of the Company as being based, on the
Company's best estimates, information and assumptions at the
time, and all such statements to be in reasonable detail and
supported by a schedule enumerating the principal assumptions
incorporated therein;
(ii) as soon as practicable and in any event within 45 days
after the end of each month in each fiscal year of the
14
<PAGE>
<PAGE>
Company (other than the last month in each fiscal year),
consolidating and consolidated statements of income,
stockholders' equity and cash flows of the Company and its
Subsidiaries for such month and, in the case of the last month of
a quarterly period, for such quarterly period and for the period
from the beginning of the current fiscal year to the end of such
quarterly period, and consolidating and consolidated balance
sheets of the Company and its Subsidiaries as at the end of such
month, setting forth in the case of the consolidated statements
in comparative form corresponding consolidated figures for the
corresponding month, and in the case of the last month of a
quarterly period, for the corresponding period in the preceding
fiscal year, all in reasonable detail and satisfactory in form to
the Required Holder(s) and certified by an authorized financial
officer of the Company, subject to changes resulting from year-
end adjustments; provided, however, that delivery pursuant to
------------------
clause (iv) below of copies of the Quarterly Report on Form 10-Q
of the Company for any such quarterly period filed with the
Securities and Exchange Commission shall be deemed to satisfy the
requirements of this clause (ii) with respect to consolidated
financial statements for such quarterly period;
(iii) as soon as practicable and in any event within 120
days after the end of each fiscal year, consolidating and
consolidated statements of income and cash flows and a
consolidated statement of stockholders' equity of the Company and
its Subsidiaries for such year, and a consolidating and
consolidated balance sheet of the Company and its Subsidiaries as
at the end of such year, setting forth in the case of such
consolidated statements in comparative form corresponding
consolidated figures from the preceding annual audit, all in
reasonable detail and satisfactory in form to the Required
Holder(s) and, as to the consolidated statements, reported on by
independent public accountants of recognized national standing
selected by the Company whose report shall be without limitation
as
15
<PAGE>
<PAGE>
to the scope of the audit and satisfactory in substance to the
Required Holder(s) and, as to the consolidating statements,
certified by an authorized financial officer of the Company;
provided, however, that delivery pursuant to clause (iv) below of
-------- -------
copies of the Annual Report on Form 10-K of the Company for such
fiscal year filed with the Securities and Exchange Commission
shall be deemed to satisfy the requirements of this clause (iii)
with respect to consolidated financial statements;
(iv) promptly upon transmission thereof, copies of all such
financial statements, proxy statements, notices and reports as it
shall send to the holders of its outstanding securities (or
trustees or agents therefor) and copies of all registration
statements (without exhibits) and all reports which it files with
the Securities and Exchange Commission (or any governmental body
or agency succeeding to the functions of the Securities and
Exchange Commission);
(v) promptly upon receipt thereof, a copy of each other
report submitted to the Company or any Subsidiary by independent
accountants in connection with any annual, interim or special
audit made by them of the books of the Company or any Subsidiary;
(vi) promptly after the filing or receiving thereof, copies
of all reports and notices which the Company or any ERISA
Affiliate files under ERISA with the Internal Revenue Service,
the PBGC or the U.S. Department of Labor or which the Company or
any ERISA Affiliate receives from the PBGC, in each case which
relate to any Lien or liability not permitted by this Agreement;
(vii) upon delivery thereof to BMO, a copy of all financial
statements and reports delivered to BMO by the Company pursuant
to the BMO Credit Agreement, unless the same has been delivered
under this Agreement; and
16
<PAGE>
<PAGE>
(viii) with reasonable promptness, such other information
respecting the condition or operations, financial or otherwise,
of the Company or any of its Subsidiaries as such Significant
Holder may reasonably request.
Together with each delivery of financial statements required by
clauses (ii) and (iii) above, the Company will deliver to each
Significant Holder an Officer's Certificate demonstrating (with
computations in reasonable detail) compliance by the Company and its
Subsidiaries with the provisions of paragraphs 6B and 6C(1) through
6C(13) inclusive and stating that there exists no Event of Default or
Default, or, if any Event of Default or Default exists, specifying the
nature and period of existence thereof and what action the Company
proposes to take with respect thereto. Together with each delivery of
financial statements required by clause (iii) above, the Company will
deliver to each Significant Holder a certificate of such accountants
stating that, in making the audit necessary for their report on such
financial statements, they have obtained no knowledge of any Event of
Default or Default, or, if they have obtained knowledge of any Event
of Default or Default, specifying the nature and period of existence
thereof. Such accountants, however, shall not be liable to anyone by
reason of their failure to obtain knowledge of any Event of Default or
Default which would not be disclosed in the course of an audit
conducted in accordance with generally accepted auditing standards.
The Company also covenants that immediately after any
Responsible Officer obtains knowledge of an Event of Default or
Default, it will deliver to each Significant Holder an Officer's
Certificate specifying the nature and period of existence thereof and
what action the Company proposes to take with respect thereto.
5B. INFORMATION REQUIRED BY RULE 144A. The Company will, upon
the request of the holder of any Securities that is a qualified
institutional buyer, provide such holder, and any
17
<PAGE>
<PAGE>
qualified institutional buyer designated by such holder, such
financial and other information as such holder may reasonably
determine to be necessary in order to permit compliance with the
information requirements of Rule 144A under the Securities Act in
connection with the resale of Securities, except at such times as the
Company is subject to the reporting requirements of section 13 or
15(d) of the Exchange Act. For the purpose of this paragraph 5B, the
term "qualified institutional buyer" shall have the meaning specified
in Rule 144A under the Securities Act.
5C. INSPECTION OF PROPERTY. The Company will permit any Person
designated by any Significant Holder in writing, at such Significant
Holder's expense, to visit and inspect any of the properties of the
Company and its Subsidiaries, to examine the corporate books and
financial records of the Company and its Subsidiaries and make copies
thereof or extracts therefrom and to discuss the affairs, finances and
accounts of any of such corporations with the principal officers of
the Company and its independent public accountants, all at such
reasonable times and as often as such Significant Holder may
reasonably request.
5D. COVENANT TO SECURE NOTES EQUALLY. The Company will, if it
or any Subsidiary shall create or assume any Lien upon any of its
property or assets, whether now owned or hereafter acquired, other
than Liens permitted by the provisions of paragraph 6C(1) (unless
prior written consent to the creation or assumption thereof shall have
been obtained pursuant to paragraph 12(C)), make or cause to be made
effective provision whereby the Notes will be secured by such Lien
equally and ratably with any and all other Debt thereby secured so
long as any such other Debt shall be so secured.
5E. MAINTENANCE OF PROPERTIES; INSURANCE. The Company will
maintain or cause to be maintained in good repair, working order and
condition all properties used or useful in the business of the Company
and its Subsidiaries and from time to time will make or cause to be
made all appropriate repairs, renewals and replacements thereof, all
to the extent material to the Company
18
<PAGE>
<PAGE>
and its Subsidiaries taken as a whole. The Company will maintain or
cause to be maintained, with financially sound and reputable insurers,
insurance (including self-insurance, co-insurance, retainage and other
similar arrangements) with respect to its properties and business and
the properties and businesses of its Subsidiaries against loss or
damage of the kinds customarily insured against by corporations of
established reputation engaged in the same or similar businesses and
similarly situated, of such type and in such amounts as are
customarily carried under similar circumstances by such other
corporations.
5F. CORPORATE EXISTENCE, ETC. Subject to the provisions of
paragraph 6C(5), the Company will at all times preserve and keep in
full force and effect its corporate existence, and rights and
franchises material to its business, and those of each of its
Subsidiaries and will qualify, and cause each of its Subsidiaries to
qualify, to do business in any jurisdiction where the failure to do so
would have a material adverse effect on the financial condition or
operations of the Company and its Subsidiaries taken as a whole,
provided that the corporate existence of any such Subsidiary,
--------
including, without limitation, any Subsidiary which was a subsidiary
of AGPC prior to the Merger, may be terminated if, in the good faith
judgment of the Board of Directors of the Company, such termination is
in the best interests of the Company and could not reasonably be
expected to have a Material Adverse Effect on the holders of the Notes
or the Equity Securities.
5G. PAYMENT OF TAXES AND CLAIMS. The Company will, and will
cause each of its Subsidiaries to, all to the extent material to the
Company and its Subsidiaries taken as a whole, pay all taxes,
assessments and other governmental charges imposed upon it or any of
its properties or assets or in respect of any of its franchises,
business, income or property before any penalty or significant
interest accrues thereon, and all claims (including, without
limitation, claims for labor, services, materials and supplies) for
sums which have become due and payable and which by law have or may
become a Lien upon any of its properties or assets, provided that no
--------
such charge or claim
19
<PAGE>
<PAGE>
need be paid if being contested in good faith by appropriate
proceedings and if such accrual or other appropriate provision, if
any, as shall be required by generally accepted accounting principles
shall have been made therefor.
5H. COMPLIANCE WITH LAWS, ETC. The Company will comply and
cause its Subsidiaries to comply with the requirements of all
applicable laws, rules, regulations and orders of any governmental
authority, the noncompliance with which would materially and adversely
affect the financial condition or operations of the Company and its
Subsidiaries taken as a whole.
5I. TRUST. The Company will comply with the terms of the Trust
Agreement.
6. NEGATIVE COVENANTS. From and after the Effective Date, so
long as any Note shall remain unpaid, the Company covenants that:
6A. INTENTIONALLY OMITTED.
6B. DIVIDEND LIMITATION. The Company will not pay or declare
any dividend on any class of its stock or make any other distribution
on account of any class of its stock, or redeem, purchase or otherwise
acquire, directly or indirectly, any shares of its stock (other than
pursuant to the Merger Agreement, the Equity Incentive Plan or the
Special Options) or make any payments of principal of, or retire,
redeem, purchase or otherwise acquire, any Subordinated Debt (all of
the foregoing being herein called "RESTRICTED PAYMENTS"), other than
(i) dividends on Senior Preferred Stock payable in shares of such
stock, (ii) payments of Intercompany Notes, (iii) issuances of shares
of New Common issuable upon the exercise or conversion of shares of
New Junior Preferred Stock in accordance with the New Restated Cer-
tificate of Incorporation, (iv) pursuant to the Trust Agreement, (v)
the surrender to and receipt by the Company of shares of New Junior
Preferred Stock upon the exercise or conversion thereof pursuant to
the New Restated Certificate of
20
<PAGE>
<PAGE>
Incorporation, (vi) payments of cash in lieu of issuing (A) fractional
shares of New Common in connection with the exercise or conversion of
shares of New Junior Preferred Stock or (B) fractional shares of
Senior Preferred Stock in connection with the payment of dividends on
such stock payable in shares of such stock, provided, that the cash
--------
payments described in clauses (A) and (B) above (other than those made
from the proceeds of any aggregation and sale of fractional shares)
shall not aggregate more than $100,000 during any fiscal year of the
Company and (vii) other Restricted Payments (other than in respect of
New Common) during the calendar years set forth below, but only if, on
the date such other Restricted Payments are declared (in the case of a
dividend) or paid (in the case of other Restricted Payments), (x) no
Default or Event of Default shall exist or shall result from such
Restricted Payment and (y) the outstanding principal balance of the
Notes has been reduced to the amount set forth opposite the calendar
year described below in which such date occurs:
<TABLE>
<CAPTION>
Outstanding Principal
Calendar Year Balance of Notes
------------- ---------------------
<S> <C>
1996 $30,300,000.00
1997 24,800,000.00
1998 19,300,000.00
1999 13,800,000.00
2000 8,300,000.00
2001 2,800,000.00
2002-2003 0.00
</TABLE>
The term "STOCK" as used in this paragraph 6B shall include warrants
and options to purchase stock.
6C. LIEN, DEBT, AND OTHER RESTRICTIONS. The Company will not
and will not permit any Subsidiary to:
21
<PAGE>
<PAGE>
6C(1). LIENS. Create, assume or suffer to exist any Lien upon
any of its properties or assets, whether now owned or hereafter
acquired, except
------
(i) Liens for taxes, assessments, governmental levies or
charges not yet due or which are being contested in good faith by
appropriate proceedings and for which adequate reserves with
respect thereto are maintained on the books of the Company or
such Subsidiary in accordance with generally accepted accounting
principles,
(ii) other statutory Liens (including landlord liens)
incidental to the conduct of its business or the ownership of its
property and assets which were not or are not incurred in
connection with the borrowing of money or the obtaining of
advances or credit or guaranteeing the obligations of a Person,
and which do not in the aggregate materially detract from the
value of its property or assets or materially impair the use
thereof in the operation of its business,
(iii) Liens on property or assets of a Subsidiary to secure
Debt permitted under paragraph 6C(2)(iii),
(iv) Liens on assets purchased from a seller other than the
Company or a Subsidiary, which Liens are created at the time of
acquisition of such property by the Company or any Subsidiary or
within 10 days thereafter, to secure not more than 90% (or to
secure Debt incurred by the Company or any Subsidiary to pay not
more than 90%) of the purchase price thereof, but only to the
extent the incurrence of such Debt is permitted by paragraph
6C(2)(vi),
(v) any Lien renewing, extending or refunding any Lien
permitted by clause (iv) above, provided that the principal
--------
amount secured is not increased, and the Lien is not extended to
other property of the Company or any Subsidiary,
22
<PAGE>
<PAGE>
(vi) Liens presently existing or hereinafter created in
favor of the Purchasers or their Transferees or in favor of the
Collateral Agent for the benefit of the banks now or hereafter
parties to the BMO Credit Agreement and the Purchasers or their
Transferees, including, without limitation, any Lien created by
any of the Collateral Documents,
(vii) Liens on real or personal property, arising out of
Liens or claims of owners of oil and gas interests created by
statute securing the purchase price payable for oil and gas
purchased by the Company or any Subsidiary in the ordinary course
of business; provided that all such Liens shall be discharged in
--------
a timely fashion or contested in good faith by appropriate
proceedings; provided, further, that any order or notice entered
-------- -------
or given in said proceedings for execution of the enforcement of
said Lien shall be stayed within 30 days from the date of entry
of such order or the giving of such notice,
(viii) other Liens incidental to the conduct of its
business or the ownership of its property and assets which were
not or are not incurred in connection with the borrowing of money
or the obtaining of advances or credit (including those arising
under contracts with the government of the United States or any
State thereof or any local subdivision or contracting agency of
any thereof, or pledges or deposits securing performance
obligations under the natural gas sales contracts, which together
do not exceed $2,000,000 in the aggregate, and pledges or
deposits for the purpose of securing a stay or discharge of legal
proceedings not exceeding $25,000), and which do not in the
aggregate materially detract from the value of its property or
assets, or materially impair the use thereof in the operation of
its business,
(ix) Liens granted by the Subsidiary Borrowers on all
inventory, accounts receivables, cash, deposits,
23
<PAGE>
<PAGE>
instruments, investment securities and other personal property of
the Subsidiary Borrowers, in each instance whether now owned or
existing or hereafter issued, acquired or arising and all
proceeds thereof (collectively, the "BMO COLLATERAL") to secure
the obligations of the Company and the Subsidiary Borrowers
pursuant to the BMO Credit Agreement; provided that the
--------
outstanding amount of letters of credit secured by the BMO
Collateral shall not at any time exceed $60,000,000 and the
amount of advances secured by the BMO Collateral shall not at any
time exceed $10,000,000,
(x) Liens on property acquired by the Company or any
Subsidiary which Liens were in place at the time such property
was acquired, provided that such Liens were not granted in
--------
contemplation of the property being so acquired,
(xi) Liens created by the Indemnity and Holdback Agreement,
dated December 15, 1991, by and among the Company, HD Energy
Corporation ("HD Energy"), LG&E Energy Corp. and LG&E Energy
Systems Inc., as modified by the Settlement Agreement made the
23rd day of September 1992, and
(xii) Liens existing on the date hereof set forth on
Schedule 6C(1).
6C(2). DEBT. Create, incur, assume or suffer to exist any Debt,
except
------
(i) Debt of the Company represented by the Senior Secured
Notes,
(ii) Debt of the Company and the Subsidiary Borrowers under
the BMO Credit Agreement, guarantees of the obligations of the
Subsidiary Borrowers under the BMO Credit Agreement, and any
amendments, modifications, renewals and extensions thereof
permitted pursuant to paragraph 6G,
24
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<PAGE>
(iii) Debt of the Company to a Wholly Owned Subsidiary, of
a Wholly Owned Subsidiary to the Company, of a Subsidiary
Borrower to another Subsidiary Borrower, of a Pledged Subsidiary
to another Pledged Subsidiary and of an Other Subsidiary to an
Other Subsidiary,
(iv) Debt of the Company and the Subsidiaries pursuant to
the Collateral Documents,
(v) Guaranties permitted by paragraph 6C(3)(vi) and
guaranties and other arrangements permitted by paragraph
6C(9)(v)(y) and (z),
(vi) Debt incurred to pay the purchase price of property
acquired by the Company or any Subsidiary in an aggregate amount
outstanding not at any time in excess of the sum of (x) 20% of
the Total Capital of the Company on the Effective Date, after
giving effect to the transactions contemplated hereby and to the
Related Transactions, as such Total Capital is determined
pursuant to a balance sheet of the Company as of the Effective
Date delivered to the Purchasers not later than 60 days following
the Effective Date and (y) 50% of the amount of all prepayments
of the principal balance of the Notes made on or after the
Effective Date other than such prepayments made with the proceeds
of Asset Sales pursuant to paragraph 4A(ii), and any refundings
or refinancings of any such Debt, provided, however, that (A) all
-------- -------
such Debt shall be without recourse to the Company or any
Subsidiary or any of their respective assets (other than the
property being acquired), (B) the amount of any such Debt shall
not exceed the lesser of 90% of (i) the cost of the property so
acquired and (ii) the fair value of such property and (C) the
amount of such Debt that may be outstanding pursuant to clause
(y) above shall be reduced by the amount of Debt outstanding
pursuant to subparagraph (vii) below,
25
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<PAGE>
(vii) Debt incurred by the Company in an aggregate amount
outstanding not at any time in excess of 50% of the aggregate
amount of principal prepayments of the Notes pursuant to
paragraph 4B, provided, that (A) all such Debt shall be borrowed
--------
from BMO and shall be either nonsecured or secured only by Liens
permitted under paragraph 6C(1)(vi), and (B) the amount of Debt
that may be outstanding pursuant to this subparagraph (vii) shall
be reduced to the extent Debt is outstanding pursuant to clause
(y) of subparagraph (vi) above as a result of principal payments
pursuant to paragraph 4B, and
(viii) Debt incurred by the Company in an aggregate amount
outstanding not at any time in excess of the amount by which the
principal balance of the Notes is prepaid with the proceeds of
Asset Sales.
6C(3). LOANS, ADVANCES, INVESTMENTS AND CONTINGENT LIABILITIES.
Make or permit to remain outstanding any loan or advance to, or extend
credit (other than credit extended in the normal course of business to
any Person who is not an Affiliate of the Company) to, or guarantee,
endorse or otherwise be or become contingently liable, directly or
indirectly, in connection with the obligations, stock or dividends of,
or own, purchase or acquire (other than pursuant to the Merger
Agreement) any stock, obligations or securities of, or any other
interest in, or make any capital contribution to, any Person, except
------
that the Company or any Subsidiary may
(i) own the stock of Subsidiaries (including, without
limitation, Subsidiaries which were subsidiaries of AGPC
immediately prior to the Merger, Beck & Root Fuel Company and
Midwest Energy Companies, Inc., in each case in the amounts set
forth on Schedule 6C(3),
(ii) acquire and own stock, obligations or securities
received in settlement of debts (created in the ordinary course
of business) owing to the Company or any Subsidiary,
26
<PAGE>
<PAGE>
(iii) own, purchase or acquire (a) certificates of deposit
of commercial banks organized under the laws of the United States
(having capital resources in excess of $250,000,000) and
commercial paper rated A-1 by Standard and Poor's Corporation or
P-1 by Moody's Investors Services, Inc., and (b) obligations of
the United States Government or any agency thereof, and
obligations guaranteed by the United States Government, in each
case due within one year from the date of purchase and payable in
the United States in United States dollars,
(iv) endorse negotiable instruments for collection or
deposit in the ordinary course of business,
(v) make or permit to remain outstanding travel and other
like advances to officers and employees in the ordinary course of
business, in an aggregate amount not to exceed $50,000 at any
time outstanding,
(vi) make and maintain the Guarantees described in
paragraph 6C(2)(ii) and the Guarantees described in Schedule
6C(3),
(vii) hedge its risk positions relating to the operations of
its natural gas marketing business,
(viii) make or suffer to exist loans to, or investments in,
Beck & Root Fuel Company in an aggregate amount outstanding not
to exceed at any time $2,000,000,
(ix) make or permit ordinary course of business investments
by the Company or any Subsidiary in partnerships or joint
ventures holding title to pipe lines and gathering systems or gas
processing plants and loans and advances by the Company or any
Subsidiary to such partnerships or joint ventures provided that
such partnerships or joint ventures shall at no time incur Debt
for borrowed money or for the deferred purchase price of property
for which the Company or
27
<PAGE>
<PAGE>
any Subsidiary could under any circumstances be liable except for
Debt held by the partners or joint ventures in proportion to
their equity interests in the partnership or joint venture in
question,
(x) permit to make and remain outstanding the Debt
permitted by paragraph 6C(2)(iii),
(xi) make or permit the arrangements permitted by paragraph
6C(9)(v)(y) and (z), and
(xii) in addition to advances relating to Debt permitted by
paragraph 6C(2)(iii), make or permit advances by the Company to
Wholly-Owned Subsidiaries arising from the Company providing
administrative services to such Wholly-Owned Subsidiaries or
temporarily paying expenses arising in the ordinary course of
business of any Wholly-Owned Subsidiary which are not made to
maintain the net worth of such Wholly-Owned Subsidiary so long as
each such Wholly-Owned Subsidiary is invoiced monthly by the
Company and makes payments in full of the invoiced amount within
30 days after the date of such invoice.
6C(4). INTENTIONALLY OMITTED.
6C(5). MERGER AND SALE OF ASSETS. Other than the Merger, the
HEPSI Merger, the contract described in clause (x)(A) of the proviso
to paragraph 6C(11) and transfers permitted under paragraphs 6C(2),
6C(3) and 6C(7), merge or consolidate with or into any other Person or
convey, lease, transfer or otherwise dispose of any of its assets to
any Person, except that
------
(i) any Wholly-Owned Subsidiary may merge with the Company
(provided that the Company shall be the continuing or surviving
corporation), any Subsidiary Borrower may merge with any other
Subsidiary Borrower, any Pledged Subsidiary may merge with any
other Pledged Subsidiary and any Other Subsidiary may merge with
any Other Subsidiary,
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(ii) any Wholly-Owned Subsidiary may sell, lease, transfer
or otherwise dispose of any of its assets to the Company, any
Subsidiary Borrower may sell, lease, transfer or otherwise
dispose of any of its assets to another Subsidiary Borrower, any
Pledged Subsidiary may sell, lease, transfer or otherwise dispose
of any or all of its assets to another Pledged Subsidiary and any
Other Subsidiary may sell, lease, transfer or otherwise dispose
of any or all of its assets to any Other Subsidiary,
(iii) the Company or any Subsidiary may sell inventory in
the ordinary course of business consistent with past practices,
(iv) the Company or any Subsidiary may engage in Asset
Sales in which it receives cash consideration in an amount equal
to the fair value (as determined in good faith by the Board of
Directors of the Company) at the time of such Asset Sale of the
assets sold to the extent the cash consideration net of taxes and
other reasonable expenses incurred in connection therewith does
not exceed (x) $5,000,000 in the aggregate during the first 12
full calendar months following the Effective Date or (y)
$10,000,000 in the aggregate from and after the Effective Date;
provided, however, that the Company or any Subsidiary may engage
-------- -------
in Asset Sales for cash consideration in excess of the amounts
set forth in clauses (x) and (y) above if the amount of such
excess is, upon receipt thereof, deposited with a designee of the
Purchasers pursuant to a cash collateral agreement in the form of
Exhibit H, and subsequently used by the Company or such
Subsidiary within 90 days following receipt thereof (x) to prepay
the Notes as set forth in paragraph 4A(ii) or (y) to acquire
assets useful to the Company or such Subsidiary consistently with
paragraph 6F; provided, further, that, unless the Company shall
-------- -------
forward to the Purchasers a certified resolution of its Board of
Directors that the Company intends to reinvest such proceeds as
set forth in clause (y) above, the Company shall apply such
proceeds to
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prepayment of the Notes immediately upon receipt thereof;
provided, further that the Company or any Subsidiary acquiring
-------- -------
assets with the proceeds of any Asset Sales permitted under the
first proviso to this paragraph 6C(5)(iv) shall pledge to the
-------
Purchasers the stock of any Subsidiary formed to hold such
assets, and
(v) the Company may merge or consolidate or sell, lease or
otherwise transfer substantially all of its assets if (a) the
Liens under the Collateral Documents are unaffected thereby or
are replaced to the satisfaction of the Purchasers with
essentially equivalent Liens; (b) either the Company is the
surviving or resulting Person of such merger or consolidation or
the surviving or resulting Person or the transferee (if other
than the Company) is a corporation having substantially all of
its assets in the United States or Canada and conducting
substantially all of its business in the United States or Canada;
(c) the surviving or resulting Person or the transferee (if not
the Company) assumes by supplemental agreement delivered to the
Purchasers, in form and substance satisfactory to the Purchasers,
all of the obligations of the Company under this Agreement, the
Trust Agreement, the Registration Rights Agreement and each
Collateral Document; (d) the Purchasers receive opinions of
counsel to the Company (or such other Person) satisfactory in
form and substance to the Purchasers; (e) after giving effect to
such merger, consolidation or transfer, the surviving or
resulting Person or the transferee is able to incur at least $1
of additional Debt without giving rise to an Event of Default or
Default; and (f) immediately after giving effect to such merger,
consolidation or transfer, no Event of Default or Default would
be continuing.
6C(6). LEASE RENTALS. Enter into or permit to remain in effect,
any agreement to rent or lease (as lessee) any real or personal
property; provided, however, that the Company or any Subsidiary may
-------- -------
enter into or permit to remain in effect any such
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lease (other than a lease that would be required to be capitalized on
the books of the Company or such Subsidiary) if the aggregate minimum
annual payments under all such leases for any fiscal year do not
exceed 10% of the Net Worth of the Company as of the last day of the
previous fiscal year.
6C(7). SALE AND LEASE-BACK. Enter into any arrangement with any
lender or investor or to which such lender or investor is a party
providing for the leasing by the Company or any Subsidiary of real or
personal property which has been or is to be sold or transferred by
the Company or any Subsidiary to such lender or investor or to any
Person to whom funds have been or are to be advanced by such lender or
investor on the security of such property or rental obligations of the
Company or any Subsidiary; provided, however, that the Company or any
-------- -------
Subsidiary may enter into any such arrangement if the aggregate annual
rental obligations under all such arrangements entered into after the
Effective Date for any fiscal year do not exceed 10% of the Net Worth
of the Company as of the last day of the previous fiscal year.
6C(8). SALE OR DISCOUNT OF RECEIVABLES. Sell with recourse, or
discount (other than to the extent of finance and interest charges
included therein) or otherwise sell for less than face value thereof,
any of its notes or accounts receivable except notes or accounts
receivable the collection of which is doubtful in accordance with
generally accepted accounting principles.
6C(9). CERTAIN CONTRACTS. Except as set forth on Schedule
6C(9), enter into or be party to:
(i) any contract providing for the making of loans,
advances or capital contributions to any Person or for the
purchase of any property from any Person, in each case in order
to enable such Person to maintain working capital, net worth or
any other balance sheet condition or to pay debts,
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dividends or expenses, except as permitted by the provisions of
paragraph 6C(3), or
(ii) any contract for the purchase of materials, supplies
or other property or services if such contract (or any related
document) requires that payment by the Company or any Subsidiary
for such materials, supplies or other property or services shall
be made regardless of whether or not delivery of such materials,
supplies or other property or services is ever made or tendered
(other than contracts for firm transportation of natural gas
entered into in the ordinary course of business pursuant to which
aggregate annual charges payable by the Company and its
Subsidiaries do not exceed $4,000,000), or
(iii) any contract to rent or lease (as lessee) any real or
personal property if such contract (or any related document)
provides that the obligation to make payments thereunder is
absolute and unconditional under conditions not customarily found
in commercial leases then in general use or requires that the
lessee purchase or otherwise acquire securities or obligations of
the lessor, or
(iv) any contract for the sale or use of materials,
supplies or other property, or the rendering of services, if such
contract (or any related document) requires that payment to the
Company or any Subsidiary for such materials supplies or other
property, or the use thereof, or payment for such services, shall
be subordinated to any indebtedness (of the purchaser or user of
such materials, supplies or other property or the Person entitled
to the benefit of such services) owed or to be owed to any
Person, or
(v) any other contract which, in economic effect, is
substantially equivalent to a guarantee, except as permitted
pursuant to the provisions of paragraphs 6C(1), 6C(2) or 6C(3)
and except in any such case (x) by the endorsement of negotiable
instruments for deposit or collection or similar
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transactions in the ordinary course of business, (y) guarantees
by the Company or any Subsidiary of the contractual obligations
of any Subsidiary (not involving borrowings), and letters of
credit issued pursuant to the BMO Credit Agreement and (z) surety
bonds, performance bonds, other letters of credit or guarantees
posted as security for performance of commercial arrangements
(not involving any borrowings) or similar contracts entered into
in the ordinary course of business, not to exceed $4,000,000 in
the aggregate at any time.
6C(10). PRIORITY DEBT. Create, assume or incur, or in any
manner become or be liable in respect of, indebtedness for money
borrowed, advances made or goods purchased (other than Liens permitted
under paragraph 6C(1)(vii) and Debt permitted under paragraph
6C(2)(ii)), if the lender of such money or the Person making such
advances or the vendor of such goods (or any Person who guarantees or
otherwise becomes surety for the whole or any part of such
indebtedness or acquires any right or incurs any obligation to become,
either immediately or upon the occurrence of some future contingency,
the owner of the whole or any part thereof) shall have any right, by
reason of statute (including, without limitation, 31 U.S.C.A. section
3713), or otherwise, to have any claim in respect of such
indebtedness first satisfied out of the general assets of the Company
or such Subsidiary in priority to the claims of its general creditors.
6C(11). TRANSACTIONS WITH AFFILIATES. Directly or indirectly,
purchase, acquire or lease any property from, or sell, transfer or
lease any property to, or otherwise deal with, in the ordinary course
of business or otherwise (i) except as contemplated by the Merger
Agreement, the New Restated Certificate of Incorporation and the
Registration Rights Agreement, any Affiliate (except as specifically
permitted hereunder), (ii) any Person owning, beneficially or of
record, directly or indirectly, either individually or together with
all other Persons to whom such Person is related by blood, adoption or
marriage, stock of the Company aggregating 3% or more of any
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<PAGE>
class of equity securities issued by the Company or any Subsidiary,
other than a Purchaser, except as contemplated by the Merger
Agreement, the New Restated Certificate of Incorporation and the
Registration Rights Agreement, or (iii) any Person related by blood,
adoption or marriage to any Person described or coming within the
provisions of clause (i) or (ii) of this paragraph 6C(11) other than,
in the case of clauses (i), (ii) and (iii) above, on terms that are no
less favorable to the Company or such Subsidiary than would be
obtained in a transaction negotiated at arm's length from a Person not
an Affiliate; provided, however, that the Company may (x) enter into,
-------- -------
at arm's length, (A) gas marketing and other arrangements related to
natural gas and natural gas liquids, including, without limitation, a
gas marketing agreement with SFER and Santa Fe Energy Operating
Partners, L.P., in substantially the form annexed to the Merger
Agreement, and (B) other arrangements not to exceed at any time
outstanding $2,000,000 in the aggregate, with Beck & Root Fuel Company
or as otherwise permitted under paragraph 6C(3), upon terms no less
favorable to the Company than could be obtained if no relationship
existed, (y) pay compensation and other employee related benefits to
each of T. K. Hendrick and J. Michael Adcock in connection with his
former employment with the Company and (z) pay fees and expenses to
Bank of Oklahoma, N.A. in payment of Bank of Oklahoma's services as
recordkeeper of the Company's employee stock ownership/401K plan.
6C(12). TRANSFER OF ASSETS TO SUBSIDIARIES. Transfer any assets
to any Subsidiary other than as permitted pursuant to paragraphs
6C(2), 6C(3) and 6C(5).
6C(13). SUBSIDIARY DIVIDEND RESTRICTIONS. Enter into, or be
otherwise subject to, any contract or agreement (including its
certificates or articles of incorporation) which limits the amount of,
or otherwise imposes restrictions on the payment of, dividends by any
Subsidiary, other than the BMO Credit Agreement.
6D. ISSUANCE OF STOCK BY SUBSIDIARIES; CERTAIN CHANGES. (a)
The Company will not permit any Subsidiary (either directly,
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or indirectly by the issuance of rights or options for, or securities
convertible into or exercisable for, such shares) to issue, sell or
otherwise dispose of any shares of any class of the stock of such
Subsidiary (other than directors' qualifying shares).
(b) Except in connection with any exercises, exchanges,
redemptions or conversions otherwise permitted hereby or as otherwise
contemplated hereby, the Company (i) will not, and will not permit any
Subsidiary to, make any changes in its capital structure, its
certificate of incorporation or by-laws (except in connection with the
issuance of additional shares of any class or series of capital stock,
whether such class or series is now existing or hereafter created, and
exercises, exchanges, redemptions or conversions of any such shares
permitted under paragraph 6B) or (ii) will not, and will not permit
any Subsidiary to, make any changes in any business objective,
purpose, or operations which might reasonably be expected to adversely
affect the repayment of the obligations hereunder or have a Material
Adverse Effect.
6E. COMPLIANCE WITH ERISA. The Company will not, and will not
permit any ERISA Affiliate to:
(i) engage in any transaction in connection with which the
Company or any of its Subsidiaries would be subject to either a
material civil penalty assessed pursuant to section 502(i) of
ERISA or a material tax imposed by section 4975 of the Code;
(ii) terminate or partially terminate any Plan if such
termination would result in liability of the Company or an ERISA
Affiliate to the PBGC in an amount exceeding $50,000;
(iii) fail to make full payment when due of all amounts
which the Company, any of its Subsidiaries or an ERISA Affiliate
is required to contribute to any Plan or Multiemployer Plan under
section 302 of ERISA and section
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<PAGE>
412 of the Code, or permit to exist any accumulated funding
deficiency, whether or not waived, with respect to any such Plan;
(iv) fail to make any payments when due to any
Multiemployer Plan which the Company or any ERISA Affiliate is
required to make under any agreement relating to such
Multiemployer Plan or any law pertaining thereto;
(v) adopt or become obligated to contribute to any new
Multiemployer Plan or other Plan subject to Section 412 of the
Code;
(vi) adopt or become obligated to contribute to any
"employee welfare benefit plan" as defined under Section 3(l) of
ERISA that provides health or life insurance to participants
after their termination of employment (except those benefits
required to be provided under Section 4980B of the Code or where
the obligation to contribute is not material); or
(vii) amend or permit an ERISA Affiliate to amend a Plan
resulting in an increase in current liability for the plan year
such that either the Company or the ERISA Affiliate is required
to provide security in a material amount to such plan under
Section 401(a)(29) of the Code.
The Company agrees (x) upon request by the Significant
Holders, to request a current statement of withdrawal liability from
each Multiemployer Plan to which the Company or an ERISA Affiliate
contributes or to which the Company or an ERISA Affiliate has an
obligation to contribute and (y) to transmit a copy of such statement
to each Significant Holder, so long as such Significant Holder or its
nominee shall be the holder of any Notes, and to each other
Significant Holder of any Note, within 15 days after the Company
receives the same.
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6F. MAINTENANCE OF BUSINESS. The Company will not and will not
permit any Subsidiary to engage in any business other than the
business currently engaged in by the Company and its Subsidiaries and
business ancillary thereto, including, without limitation, the
gathering, marketing, sales, purchasing, storing, transportation and
processing of natural gas, natural gas liquids and petroleum products
and the hedging of risk positions related to the operation of a
natural gas marketing business.
6G. MODIFICATION OF MATERIAL AGREEMENTS. The Company will not,
and will not permit any of its Subsidiaries to, alter, amend, modify,
rescind, terminate or waive any of their respective rights under, or
take or omit to take any action, which act or omission would
constitute a material default or an event of default pursuant to, or
non-compliance with any contract, lease, mortgage, deed of trust or
instrument to which it is a party or by which it or any of its
property is bound, or any document creating a Lien; provided, however,
-------- -------
that (i) with respect to any contractual obligation other than this
Agreement, the Registration Rights Agreement, the Trust Agreement, the
Notes, the Collateral Documents and the BMO Credit Agreement, the
Company and its Subsidiaries may do so if the consequences thereof
would not have a Material Adverse Effect and (ii) with respect to the
BMO Credit Agreement, without the prior written consent of the
Required Holders, neither the Company nor any Subsidiary a party
thereto will amend or modify any provision which amendment or
modification would have a Material Adverse Effect (including, without
limitation, any such amendment or modification which would permit the
aggregate amount of revolving credit in the form of loans to the
Company that may be outstanding at any time thereunder to exceed
$10,000,000), provided, that the Company may enter into any
--------
modification or amendment of the BMO Credit Agreement which would (a)
increase the aggregate amount of revolving credit in the form of
letters of credit that may be issued thereunder by up to $10,000,000,
if such increase is for the reasonable working capital needs of the
Company and its Subsidiaries, or (b) without limiting increases
permitted by clause (a) above, would increase the amount of Debt
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(including letters of credit) that may be incurred thereunder by the
amount of Debt permitted to be incurred from time to time under
paragraph 6C(2)(vii); provided, further, that in the event of any
-------- -------
breach or event of default by a Person other than the Company or any
of its Subsidiaries under any such material contractual obligation,
the Company shall promptly notify the Purchasers of any such breach or
event of default.
7. EVENTS OF DEFAULT.
7A. ACCELERATION. If any of the following events shall occur
and be continuing for any reason whatsoever (and whether such
occurrence shall be voluntary or involuntary or come about or be
effected by operation of law or otherwise):
(i) the Company defaults in the payment of any principal of
or interest on any Note when the same shall become due, either by
the terms thereof or otherwise as herein provided and such
default continues for more than one (1) day after the date due;
or
(ii) the Company or any Subsidiary defaults (whether as
primary obligor or as guarantor or other surety) in any payment
of principal of or interest on any other obligation for money
borrowed (or any Capitalized Lease Obligation, any obligation
under a conditional sale or other title retention agreement, any
obligation issued or assumed as full or partial payment for
property whether or not secured by a purchase money mortgage or
any obligation under notes payable or drafts accepted represent-
ing extensions of credit) beyond any period of grace provided
with respect thereto, or the Company or any Subsidiary fails to
perform or observe any other agreement, term or condition
contained in any agreement under which any such obligation is
created (or if any other event thereunder or under any such
agreement shall occur and be continuing) and the effect of such
failure or other event is to cause, or to permit the holder or
holders of such obligation (or a trustee on behalf
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of such holder or holders) to cause, such obligation to become
due (or to be repurchased by the Company or any Subsidiary) prior
to any stated maturity, provided that the aggregate amount of all
--------
obligations as to which such a payment default shall occur and be
continuing or such a failure or other event causing or permitting
acceleration (or resale to the Company or any Subsidiary) shall
occur and be continuing exceeds $1,000,000; or
(iii) any representation or warranty made by the Company
herein, in any Collateral Document or by the Company or any of
its officers in any writing furnished to the Purchasers in
connection with or pursuant to this Agreement shall be false in
any material respect on the date as of which made and shall
continue to be false 30 days after the Company receives notice
thereof from the Purchasers; or
(iv) the Company fails to perform or observe (a) any term,
covenant or agreement contained in paragraph 5A and such failure
shall not be remedied with 15 days, or (b) any term, covenant or
agreement contained in paragraph 6B, 6C(1) through 6C(13) (other
than through the imposition of a non-consensual Lien by any
Person not a Subsidiary or Affiliate of the Company), 6D, or 6G
and such failure shall not be remedied within one Business Day or
(c) any other agreement, term, covenant or condition contained
herein or in any Collateral Document or the Registration Rights
Agreement and such failure shall not be remedied within 30 days
after notice from the Purchasers; or
(v) the Company or any Subsidiary makes an assignment for
the benefit of creditors or is generally not paying its debts as
such debts become due; or
(vi) any decree or order for relief in respect of the
Company or any Subsidiary is entered under any bankruptcy,
reorganization, compromise, arrangement, insolvency, readjustment
of debt, dissolution or liquidation or similar
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law, whether now or hereafter in effect (each, a "BANKRUPTCY
LAW"), of any jurisdiction; or
(vii) the Company or any Subsidiary petitions or applies to
any tribunal for, or consents to, the appointment of, or taking
possession by, a trustee, receiver, custodian, liquidator or
similar official of the Company or any Subsidiary, or of any
substantial part of the assets of the Company or any Subsidiary,
or commences a voluntary case under the Bankruptcy Law of the
United States or any proceedings relating to the Company or any
Subsidiary under the Bankruptcy Law of any other jurisdiction; or
(viii) any such petition or application is filed, or any
such proceedings are commenced, against the Company or any
Subsidiary and the Company or such Subsidiary by any act
indicates its approval thereof, consent thereto or acquiescence
therein, or an order, judgment or decree is entered appointing
any such trustee, receiver, custodian, liquidator or similar
official, or approving the petition in any such proceedings, and
such order, judgment or decree remains unstayed and in effect for
more than 60 days; or
(ix) any order, judgment or decree is entered in any pro-
ceedings against the Company decreeing the dissolution of the
Company and such order, judgment or decree remains unstayed and
in effect for more than 60 days; or
(x) any order, judgment or decree is entered in any pro-
ceedings against the Company or any Subsidiary decreeing a split-
up of the Company or such Subsidiary which requires the
divestiture of assets representing a substantial part, or the
divestiture of the stock of a Subsidiary whose assets represent a
substantial part, of the consolidated assets of the Company and
its Subsidiaries (determined in accordance with generally
accepted accounting principles) or which requires the divestiture
of assets, or stock of a Subsidiary, which shall have contributed
a substantial part of the
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consolidated net income of the Company and its Subsidiaries
(determined in accordance with generally accepted accounting
principles) for any of the three fiscal years then most recently
ended, and such order, judgment or decree remains unstayed and in
effect for more than 60 days; or
(xi) any judgment or order or judgments or orders for the
payment of money in an amount in excess of $1,000,000 in the
aggregate is rendered against the Company or any Subsidiary and
within ten (10) days (or, where such judgment or order is covered
by insurance and the insurer has admitted liability, 30 days)
after entry thereof, such judgment or order is not discharged or
execution thereof vacated, bonded or stayed pending appeal; or
(xii) the Company or any ERISA Affiliate becomes subject to
withdrawal liability or liability to the PBGC (other than for
unpaid annual premiums not yet due) in an amount exceeding
$500,000; or
(xiii) any Collateral Document shall cease to create a
valid and perfected security interest with such priority as is
contemplated by such document in any of the collateral purported
to be covered thereby or the Company or any Subsidiary shall so
state in writing except with respect to any bank account or
disbursing account of the Company;
(xiv) the Company defaults in the performance of any
provision of the Trust Agreement other than Sections 9.04 and
10.02(a) thereof or defaults in the performance of Section 9.04
or 10.02(a) of the Trust Agreement for a period of 30 days or
more;
then (a) if such event is an Event of Default specified in clause (i)
of this paragraph 7A, the holder of any Note (other than the Company
or any of its Subsidiaries or Affiliates) may at its option, by notice
in writing to the Company, declare such Note to be, and such Note
shall thereupon be and become, immediately due
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and payable at par together with interest accrued thereon, without
presentment, demand, protest or other notice of any kind, all of which
are hereby waived by the Company, (b) if such event is an Event of
Default specified in clause (vi), (vii) or (viii) of this paragraph 7A
with respect to the Company, all of the Notes at the time outstanding
shall automatically become immediately due and payable at par together
with interest accrued thereon, without presentment, demand, protest or
notice of any kind, all of which are hereby waived by the Company, and
(c) if such event is not an Event of Default specified in clause (i),
(vi), (vii) or (viii) of this paragraph 7A with respect to the
Company, the Required Holder(s) may at its or their option, by notice
in writing to the Company, declare all of the Notes to be, and all of
the Notes shall thereupon be and become, immediately due and payable
together with interest accrued thereon, without presentment, demand,
protest or other notice of any kind, all of which are hereby waived by
the Company.
7B. RESCISSION OF ACCELERATION. At any time after any or all of
the Notes shall have been declared immediately due and payable
pursuant to paragraph 7A, the Required Holder(s) may, by notice in
writing to the Company, rescind and annul such declaration and its
consequences if (i) the Company shall have paid all overdue interest
on the Notes and interest on such overdue interest at the rate
specified in the Notes which shall have become due other than by
reason of such declaration, (ii) the Company shall not have paid any
amounts which have become due solely by reason of such declaration,
(iii) all Events of Default and Defaults, other than non-payment of
amounts which have become due solely by reason of such declaration,
shall have been cured or waived pursuant to paragraph 12C, and (iv) no
judgment or decree shall have been entered for the payment of any
amounts due pursuant to the Notes or this Agreement. No such
rescission or annulment shall extend to or affect any subsequent Event
of Default or Default or impair any right arising therefrom.
7C. NOTICE OF ACCELERATION OR RESCISSION. Whenever any Note
shall be declared immediately due and payable pursuant to
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paragraph 7A or any such declaration shall be rescinded and annulled
pursuant to paragraph 7B, the Company shall forthwith give written
notice thereof to the holder of each Note at the time outstanding.
7D. OTHER REMEDIES. If any Event of Default or Default shall
occur and be continuing, the holder of any Note may proceed to protect
and enforce its rights under this Agreement and such Note by
exercising such remedies as are available to such holder in respect
thereof under applicable law, either by suit in equity or by action at
law, or both, whether for specific performance of any covenant or
other agreement contained in this Agreement or in aid of the exercise
of any power granted in this Agreement. No remedy conferred in this
Agreement upon the holder of any Note is intended to be exclusive of
any other remedy, and each and every such remedy shall be cumulative
and shall be in addition to every other remedy conferred herein or now
or hereafter existing at law or in equity or by statute or otherwise.
8. REPRESENTATIONS, COVENANTS AND WARRANTIES. The Company
represents, covenants and warrants as of the Effective Date, after
giving effect to the Merger, as follows:
8A. ORGANIZATION; AUTHORITY; ENFORCEABILITY. Each of the
Company and its Subsidiaries is a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation and has all requisite corporate power and authority to
own and operate its properties and to carry on its business as
presently conducted, and in the case of the Company and its
Subsidiaries (to the extent a party thereto), to enter into and
perform all of its obligations under this Agreement, the Registration
Rights Agreement, the Trust Agreement and the Collateral Documents, to
issue and deliver, and perform all of its obligations under, the
Securities and to consummate each of the Related Transactions. Each
of the Company and its Subsidiaries is duly licensed or qualified to
do business as a foreign corporation in each state where the failure
to be so licensed or qualified would have a material adverse effect on
the
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financial condition or operations of the Company and its Subsidiaries
taken as a whole and has all corporate power, material licenses,
franchises and other governmental authorizations and approvals
necessary to carry on its present business, with respect to which the
failure to possess would have a material adverse effect on the
financial condition or operations of the Company and its Subsidiaries
taken as a whole. Each of this Agreement is, the Registration Rights
Agreement and the Collateral Documents upon execution and delivery
will be, and the Notes when issued and delivered hereunder will be,
legal, valid, binding and enforceable obligations of the Company and
its Subsidiaries party thereto. Each Subsidiary of the Company (after
giving effect to the Merger and the HEPSI Merger) is listed on
Schedule 6C(3) under the heading "Subsidiaries of Hadson Corporation."
8B. FINANCIAL STATEMENTS. The Company has furnished each
Purchaser with the following financial statements, identified by a
principal financial officer of the Company: (i) a consolidated
balance sheet of the Company and its Subsidiaries as at December 31 in
each of the years 1990 to 1992, inclusive, and consolidated statements
of income, stockholders' equity and cash flows of the Company and its
Subsidiaries for each such year, all reported on by Price Waterhouse;
and (ii) a consolidating and consolidated balance sheet of the Company
and its Subsidiaries as at September 30 in each of the years 1992 and
1993 and consolidated statements of income and cash flows for the
nine-month period ended on each such date, prepared by the Company.
Such financial statements (including any related schedules and/or
notes) are true and correct in all material respects (subject, as to
interim statements, to changes resulting from audits and year-end
adjustments), have been prepared in accordance with generally accepted
accounting principles consistently followed throughout the periods
involved (except as otherwise stated therein or in the notes, if any,
thereto) and show all liabilities, direct and contingent, of the
Company and its Subsidiaries required to be shown in accordance with
such principles. The balance sheets fairly present the condition of
the Company and its Subsidiaries
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as at the dates thereof, and the statements of income and cash flows
fairly present the results of the operations of the Company and its
Subsidiaries and their cash flows for the periods indicated. No event
has occurred since December 31, 1992 which has had or could have a
Material Adverse Effect other than as set forth on Schedule 3A(6).
8C. ACTIONS PENDING. Except as otherwise set forth on Schedule
8C, there is no action, suit, investigation or proceeding pending or,
to the knowledge of the Company, threatened against the Company or any
of its Subsidiaries, or any properties or rights of the Company or any
of its Subsidiaries, by or before any court, arbitrator or
administrative or governmental body which might result in a Material
Adverse Effect.
8D. OUTSTANDING DEBT. Neither the Company nor any of its
Subsidiaries has outstanding any Debt except as permitted by paragraph
6C(2) or as set forth on Schedule 8D. Except as set forth on Schedule
8D, there exists no default under the provisions of any instrument
evidencing such Debt or of any agreement relating thereto.
8E. TITLE TO PROPERTIES. The Company and each of its Subsidiar-
ies has good and indefeasible title to its respective real properties
(other than properties which it leases) and good title to all of its
other respective properties and assets except where failure to have
such title to such real property, property or assets would not have a
Material Adverse Effect, including the properties and assets reflected
in the balance sheet as at December 31, 1992 referred to in paragraph
8B (other than properties and assets disposed of in the ordinary
course of business and any other assets and properties disposed of
since such date and described on Schedule 8E hereto), subject to no
Lien of any kind except Liens permitted by paragraph 6C(1). All
leases necessary in any material respect for the conduct of the
respective businesses of the Company and its Subsidiaries are valid
and subsisting and are in full force and effect.
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8F. TAXES. The Company and each of its Subsidiaries has each
filed all federal, state and other income tax returns which, to the
knowledge of the Responsible Officers of the Company, are required to
be filed by it and each has paid all taxes as shown on such returns
and on all assessments received by it to the extent that such taxes
have become due, except such taxes as are being contested in good
faith by appropriate proceedings for which adequate reserves have been
established in accordance with generally accepted accounting princi-
ples.
8G. CONFLICTING AGREEMENTS AND OTHER MATTERS. Neither the
Company nor any of its Subsidiaries is a party to any contract or
agreement or subject to any charter or other corporate restriction
which materially and adversely affects the business, property or
assets, or financial condition of the Company and its Subsidiaries
taken as a whole. Neither the execution nor delivery of this
Agreement, the Registration Rights Agreement, the Trust Agreement or
any Collateral Document nor the performance of any Related
Transaction, nor the issuance and delivery of the Securities, nor
fulfillment of nor compliance with the terms and provisions hereof and
thereof will conflict with, or result in a breach of the terms,
conditions or provisions of, or constitute a default under, or result
in any violation of, or result in the creation of any Lien upon (other
than Liens in favor of the Purchasers, Liens in favor of BMO and Liens
in favor of the Collateral Agent) any of the properties or assets of
the Company or any of its Subsidiaries pursuant to, the New Restated
Certificate of Incorporation or the By-laws or the charter or bylaws
of any of its Subsidiaries, any award of any arbitrator or any agree-
ment (including any agreement with stockholders), instrument, order,
judgment, decree, statute, law, rule or regulation to which the
Company or any of its Subsidiaries is subject except as set forth in
the agreements listed in Schedule 8G attached hereto. Neither the
Company nor any of its Subsidiaries is a party to, or otherwise
subject to any provision contained in, any instrument evidencing
Indebtedness of the Company or such Subsidiary, any agreement relating
thereto, or any other contract or agreement (including its charter) in
each
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case which limits the amount of, or otherwise imposes restrictions on
the incurring of, Debt of the Company of the type to be evidenced by
the Notes except as set forth in the agreements listed in Schedule 8G
attached hereto.
8H. OFFERING OF SECURITIES. A registration statement on Form S-
4 with respect to the Merger has been prepared by the Company in
conformity in all material respects with the requirements of the
Securities Act and the rules and regulations of the Securities and
Exchange Commission thereunder and filed with the Securities and
Exchange Commission and has become effective. Such registration
statement may have been amended prior to the Date of Closing, any such
amendment was so prepared and filed, and any such amendment filed
prior to the Date of Closing but after the effective date of such
registration statement has become effective. No stop order suspending
the effectiveness of such registration statement has been issued and
no proceeding for that purpose has been instituted or, to the
knowledge of the Company, threatened by the Securities and Exchange
Commission.
8I. USE OF PROCEEDS. Neither the Company nor any Subsidiary
owns or has any present intention of acquiring any "margin stock" as
defined in Regulation G (12 CFR Part 207) of the Board of Governors of
the Federal Reserve System ("MARGIN STOCK"). The Exchange Notes are
being issued in exchange for the Existing Notes and the Merger Notes
and the Equity Securities will be issued upon Conversion of the
Existing Class C Common and the Existing Senior Preferred. None of
the proceeds of the Notes will be used, directly or indirectly, for
the purpose, whether immediate, incidental or ultimate, of purchasing
or carrying any margin stock or for the purpose of maintaining,
reducing or retiring any Indebtedness which was originally incurred to
purchase or carry any stock that is currently a margin stock or for
any other purpose which might constitute this transaction a "purpose
credit" within the meaning of such Regulation G. Neither the Company
nor any agent acting on its behalf has taken or will take any action
which might cause this Agreement or the
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Notes to violate Regulation G, Regulation T or any other regulation of
the Board of Governors of the Federal Reserve System or to violate the
Exchange Act, in each case as in effect now or as the same may
hereafter be in effect.
8J. ERISA. No accumulated funding deficiency (as defined in
section 302 of ERISA and section 412 of the Code), whether or not
waived, exists with respect to any Plan (other than a Multiemployer
Plan). No liability to the PBGC (other than for unpaid annual
premiums not yet due) has been or is expected by the Company or any
ERISA Affiliate to be incurred with respect to any Plan (other than a
Multiemployer Plan) by the Company, any Subsidiary or any ERISA
Affiliate. Neither the Company, any Subsidiary nor any ERISA
Affiliate has incurred or presently expects to incur any withdrawal
liability under Title IV of ERISA with respect to any Multiemployer
Plan. Each of the execution and delivery of this Agreement, the
performance of the Related Transactions, the Trust Agreement, the
Registration Rights Agreement and the Collateral Documents, the
performance of the Related Transactions and the issuance and delivery
of the Securities will be exempt from, or will not involve any
transaction which is subject to, the prohibitions of section 406 of
ERISA and will not involve any transaction in connection with which a
penalty could be imposed under section 502(i) of ERISA or a tax could
be imposed pursuant to section 4975 of the Code. The representation
by the Company in the immediately preceding sentence is made in
reliance upon and subject to the accuracy of each Purchaser's
representation in paragraph 9B. Schedule 8J lists each Plan of the
Company and of each Subsidiary that is subject to ERISA except for
those Plans which are defined in Section 3(1) of ERISA and which do
not provide health or life insurance coverage after termination of
employment (except for benefits required to be provided under Section
4980B of the Code).
8K. GOVERNMENTAL CONSENT. Neither the nature of the Company or
of any Subsidiary, nor any of their respective businesses or
properties, nor any relationship between the
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Company or any Subsidiary and any other Person, nor any circumstance
in connection with the offering, issuance or delivery of the
Securities is such as to require any authorization, consent, approval,
exemption or other action by or notice to or filing with any court or
administrative or governmental or regulatory body (other than (i) the
filing of any required financing statements and required continuations
thereof, (ii) with respect to the registration statement prepared and
filed by the Company with respect to the Merger pursuant to the
Securities Act and the Proxy Statement - Prospectus and any amendments
or supplements thereto and related filings pursuant to applicable
state securities laws, and any amendments or supplements thereto,
(iii) routine filings after the Effective Date with the Securities and
Exchange Commission and/or state Blue Sky authorities and (iv) those
authorizations, consents, approvals, exemptions, notices or filings
which have been obtained or made and are in full force and effect,
copies of which have been provided to the Purchasers) in connection
with the execution and delivery of this Agreement, the Hadson Security
Agreement, the Pledge Agreement, the Trust Agreement or the
Registration Rights Agreement, the offering, issuance or delivery of
the Securities, the performance of the Related Transactions or (except
as specifically contemplated by the Registration Rights Agreement and
except for filings required under the HSR Act (as defined below) in
connection with the deliveries of shares of New Common to the
Purchasers pursuant to the Trust Agreement) fulfillment of or compli-
ance with the terms and provisions hereof or of the Securities. The
Company shall make any filing that may be required (or reasonably
requested by a Purchaser or a Transferee) pursuant to the Hart-Scott-
Rodino Antitrust Improvements Act of 1976, as amended, and the rules
and regulations thereunder (the "HSR ACT"), in connection with the
Related Transactions.
8L. ENVIRONMENTAL COMPLIANCE. The Company and its Subsidiaries
and all of their respective properties and facilities have complied at
all times and in all respects with all federal, state, local and
regional statutes, laws, ordinances and judicial or administrative
orders, judgments, rulings and
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regulations relating to protection of the environment except, in any
such case, where failure to comply would not result in a material
adverse effect on the business, condition, financial or otherwise, or
operations of the Company and its Subsidiaries taken as a whole.
8M. DISCLOSURE. Neither this Agreement nor any other document,
certificate or statement furnished to any Purchaser by or on behalf of
the Company in connection herewith contains any untrue statement of a
material fact or omits to state a material fact necessary in order to
make the statements contained herein and therein not misleading.
There is no fact peculiar to the Company or any of its Subsidiaries
which materially adversely affects or in the future may (so far as the
Company can now foresee) materially adversely affect the business,
property or assets, or financial condition of the Company and its
Subsidiaries, taken as a whole, and which has not been set forth in
this Agreement or in the other documents, certificates and statements
furnished to each Purchaser by or on behalf of the Company prior to
the date hereof in connection with the transactions contemplated
hereby. The Proxy Statement - Prospectus did not, as of the date
thereof or as of the date of any supplement thereto distributed by the
Company prior to the Date of Closing, contain any untrue statement of
a material fact or omit to state any material fact required to be
stated in order to make the statements therein, in the light of the
circumstances under which such statements were made, not misleading.
The projections of the Company and its Subsidiaries provided to the
Purchasers are reasonably based on the assumptions set forth therein
and the best information available to the officers of the Company at
the time of preparation thereof. To the best knowledge of the
Company, no facts exist which would result in any material adverse
change in any of such projections.
8N. CAPITAL STOCK AND RELATED MATTERS. On the Date of Closing
and after giving effect to the transactions contemplated hereby and to
the Related Transactions, (i) the authorized capital stock of the
Company will consist of 60,000,000 shares,
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of which 35,000,000 shares will represent New Common, 5,193,520 shares
will represent Senior Preferred Stock, and 4,983,180 shares will
represent New Junior Preferred Stock, (ii) no shares of capital stock
of the Company will be owned or held by or for the account of the
Company or any of its Subsidiaries, (iii) except for the New Junior
Preferred Stock, neither the Company nor any of its Subsidiaries has
or will have outstanding any stock or securities convertible into or
exchangeable for any shares of capital stock of the Company of any
Subsidiary, any rights to subscribe for or to purchase, or any options
for the purchase of, or any agreements providing for the issuance
(contingent or otherwise) of, or any calls, commitments or claims of
any other character relating to the issuance of, any capital stock of
the Company or any Subsidiary, or any stock or securities convertible
into or exchangeable for any such capital stock (other than as set
forth in the New Restated Certificate of Incorporation or the Merger
Agreement and other than awards granted under the Equity Incentive
Plan and the Special Options), and (iv) neither the Company nor any of
its Subsidiaries will be subject to any obligation (contingent or
otherwise) to repurchase, otherwise acquire or retire any shares of
stock (other than as set forth in the New Restated Certificate of
Incorporation, the Equity Incentive Plan, the Merger Agreement, the
Special Options or as specifically required or permitted hereby).
8O. PATENTS, LICENSES, ETC. The Company and its Subsidiaries
own or have the right to use patents, trademarks, service-marks, trade
names, copyrights, permits, licenses, franchises and other rights,
free from burdensome restrictions, which are reasonably necessary for
the operations presently conducted by the Company and its Subsidiaries
and as proposed to be conducted by the Company, the failure of which
to possess would have a Material Adverse Effect on the Company and its
Subsidiaries taken as a whole.
8P. INVESTMENT COMPANY ACT. Neither the Company nor any of its
Subsidiaries is an "investment company," or a company
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"controlled" by an "investment company," within the meaning of the
Investment Company Act of 1940, as amended.
8Q. PUBLIC UTILITY HOLDING COMPANY ACT. Neither the Company nor
any of its Subsidiaries is a "holding company," or a "subsidiary
company" of a "holding company," or an "affiliate" of a "holding
company" or of a "subsidiary company" of a "holding company," as such
terms are defined in the Public Utility Holding Company Act of 1935,
as amended.
8R. SECURITY INTERESTS. Except as provided herein and subject
to the Liens permitted under paragraph 6C(1), the Liens on and
security interests created in the Collateral under this Agreement and
the Collateral Documents will at all times have the priority
contemplated by the Collateral Documents and, upon the filing of the
appropriate financing statements and/or the taking of possession of
such Collateral, perfected security interests in the Collateral
(except for bank accounts and disbursement accounts of the Company) as
security for the obligations described therein and the Collateral will
not be subject to any liens or security interests of any other person
except as permitted hereunder.
8S. DELIVERY OF BMO CREDIT AGREEMENT. The Company has delivered
to each Purchaser on or prior to the date hereof a true, correct and
complete copy of the BMO Credit Agreement, including all amendments
and waivers of any provision thereof.
8T. VALUE OF CERTAIN SUBSIDIARIES. The aggregate value, as of
the Closing Date, of the assets of all of the Subsidiaries listed on
Schedule 8T, taken as a whole, does not exceed $100,000.
9. REPRESENTATIONS OF EACH PURCHASER. Each Purchaser represents
as follows:
9A. NATURE OF PURCHASE. Such Purchaser is not acquiring the
Securities to be received by it hereunder with a view to or
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for sale in connection with any distribution thereof within the
meaning of the Securities Act, provided that the disposition of such
Purchaser's property shall at all times be and remain within its
control.
9B. SOURCE OF FUNDS. No part of the funds being used by such
Purchaser to pay the purchase price of the Securities being purchased
by such Purchaser hereunder constitutes assets allocated to any
separate account maintained by such Purchaser. For the purpose of
this paragraph 9B, the term "separate account" shall have the meaning
specified in section 3(17) of ERISA.
10. DEFINITIONS AND ACCOUNTING TERMS.
10A. DEFINITIONS. For the purpose of this Agreement, the
following terms shall have the meanings specified with respect thereto
below (such meanings to be equally applicable to both the singular and
plural forms of the terms defined):
"AFFILIATE" shall mean any Person other than a Purchaser
directly or indirectly controlling, controlled by, or under direct or
indirect common control with, the Company, except a Subsidiary. A
Person shall be deemed to control a corporation if such Person
possesses, directly or indirectly, the power to direct or cause the
direction of the management and policies of such corporation, whether
through the ownership of voting securities, by contract or otherwise.
"AGPC" shall have the meaning specified in the Preliminary
Statement.
"AGREEMENT" shall have the meaning specified in the
Preliminary Statement.
"ASSET SALE" shall mean any sale or other disposition of
assets, including, without limitation, the stock or Debt of
Subsidiaries (including, without limitation, by merger or
consolidation, and whether by operation of law or otherwise),
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made on or after the Effective Date by the Company or any Subsidiary,
other than the sale or other disposition of assets by the Company or
any Subsidiary in the ordinary course of business.
"ASSIGNMENT AND SECURITY AGREEMENT" shall mean the
Assignment and Security Agreement, dated as of December 14, 1993, made
by HD Energy and the Company to the Collateral Agent.
"BANKRUPTCY LAW" shall have the meaning specified in clause
(vi) of paragraph 7A.
"BMO" shall mean Bank of Montreal.
"BMO COLLATERAL" shall have the meaning specified in clause
(ix) of paragraph 6C(1).
"BMO CREDIT AGREEMENT" shall mean the Credit Agreement dated
as of the date hereof, by and among the Company, the Subsidiary
Borrowers, and BMO, individually and as Agent for the banks listed on
the signature pages thereof, as amended, supplemented, extended,
renewed or otherwise modified from time to time in accordance with the
requirements of paragraph 6G.
"BUSINESS DAY" shall mean any day other than a Saturday, a
Sunday or a day on which commercial banks in New York City are
required or authorized to be closed.
"BY-LAWS" shall have the meaning specified in paragraph
3A(1)(v).
"CAPITALIZED LEASE OBLIGATION" shall mean any rental obliga-
tion which, under generally accepted accounting principles, would be
required to be capitalized on the books of the Company or any Subsid-
iary, taken at the amount thereof accounted for as indebtedness (net
of interest expense) in accordance with such principles.
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"CASH PAYMENTS" shall have the meaning specified in
paragraph 1.
"CERTIFICATE OF MERGER" shall have the meaning specified in
paragraph 1.
"CLOSING" shall have the meaning specified in paragraph 2.
"CODE" shall mean the Internal Revenue Code of 1986, as
amended.
"COLLATERAL" shall mean the property pledged under the
Collateral Documents, including the proceeds and products thereof.
"COLLATERAL AGENT" shall mean Harris Trust and Savings Bank,
in its capacity as Collateral Agent under the Collateral Documents.
"COLLATERAL AGENCY AGREEMENT" shall have the meaning
specified in paragraph 3.
"COLLATERAL DOCUMENTS" means the Hadson Security Agreement,
the Pledge Agreement, the NuHPI Pledge Agreement, the HD Energy Pledge
Agreement, the Hadson Defense Security Agreement and the Assignment
and Security Agreement, and all other security agreements, deeds of
trust, mortgages, chattel mortgages, pledges, guaranties, financing
statements, continuation statements, extension agreements and other
agreements or instruments now or hereafter delivered by the Company or
any Subsidiary to the Purchasers in connection with this Agreement or
to the Collateral Agent in connection with the Collateral Agency
Agreement or any transaction contemplated hereby to secure or guaranty
the payment of any part of the Notes or the obligations hereunder or
thereunder.
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"COMPANY" shall have the meaning specified in the
introductory sentence.
"CONVERSIONS" shall have the meaning specified in the
Preliminary Statement.
"CURRENT DEBT" shall mean, with respect to any Person, all
Indebtedness of such Person for borrowed money which by its terms or
by the terms of any instrument or agreement relating thereto matures
on demand or within one year from the date of the creation thereof and
is not directly or indirectly renewable or extendible at the option of
the debtor to a date more than one year from the date of the creation
thereof, provided that Indebtedness for borrowed money outstanding
--------
under a revolving credit or similar agreement which obligates the
lender or lenders to extend credit over a period of more than one year
shall constitute Funded Debt and not Current Debt, even though such
Indebtedness by its terms matures on demand or within one year from
the date of the creation thereof.
"DATE OF CLOSING" shall have the meaning specified in
paragraph 2.
"DEBT" shall mean Current Debt and Funded Debt.
"EFFECTIVE DATE" shall mean the date upon which each of the
Related Transactions and the transactions contemplated hereby is
consummated.
"EQUITY INCENTIVE PLAN" shall mean the Company's (1992)
Equity Incentive Plan, as amended and restated in the form included as
an annex to the Proxy Statement - Prospectus, with such changes to
such form of amendment as shall be reasonably acceptable to the
Purchasers.
"EQUITY SECURITIES" shall have the meaning specified in
paragraph 1.
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"ERISA" shall mean the Employee Retirement Income Security
Act of 1974, as amended.
"ERISA AFFILIATE" shall mean any corporation which is a
member of the same controlled group of corporations as the Company
within the meaning of section 414(b) of the Code, or any trade or
business which is under common control with the Company within the
meaning of section 414(c) of the Code.
"EVENT OF DEFAULT" shall mean any of the events specified in
paragraph 7A, provided that there has been satisfied any requirement
in connection with such event for the giving of notice, or the lapse
of time, or both, or the happening of any further condition, event or
act, and "DEFAULT" shall mean any of such events, whether or not any
such requirement has been satisfied.
"EXCHANGE ACT" shall mean the Securities Exchange Act of
1934, as amended.
"EXCHANGE NOTES" shall have the meaning specified in the
Preliminary Statement.
"EXISTING CLASS B COMMON" shall have the meaning specified
in the Preliminary Statement.
"EXISTING CLASS C COMMON" shall have the meaning specified
in the Preliminary Statement.
"EXISTING COMMON" shall have the meaning specified in the
Preliminary Statement.
"EXISTING NOTES" shall have the meaning specified in the
Preliminary Statement.
"EXISTING PURCHASE AGREEMENT" shall have the meaning
specified in the Preliminary Statement.
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"EXISTING SENIOR PREFERRED" shall have the meaning specified
in the Preliminary Statement.
"FUNDED DEBT" shall mean, with respect to any Person, all
Indebtedness of such Person which by its terms or by the terms of any
instrument or agreement relating thereto matures, or which is
otherwise payable or unpaid, more than one year from, or is directly
or indirectly renewable or extendible at the option of the debtor to a
date more than one year (including an option of the debtor under a
revolving credit or similar agreement obligating the lender or lenders
to extend credit over a period of more than one year) from, the date
of the creation thereof.
"GAS SYSTEMS" shall mean Hadson Gas Systems, Inc., an
Oklahoma corporation.
"GUARANTEE" shall mean, with respect to any Person, any
direct or indirect liability, contingent or otherwise, of such Person
with respect to any indebtedness, lease, dividend or other obligation
of another, including, without limitation, any such obligation
directly or indirectly guaranteed, endorsed (otherwise than for
collection or deposit in the ordinary course of business) or
discounted or sold with recourse by such Person, or in respect of
which such Person is otherwise directly or indirectly liable,
including, without limitation, any such obligation in effect
guaranteed by such Person through any agreement (contingent or
otherwise) to purchase, repurchase or otherwise acquire such
obligation or any security therefor, or to provide funds for the
payment or discharge of such obligation (whether in the form of loans,
advances, stock purchases, capital contributions or otherwise), or to
maintain the solvency or any balance sheet or other financial
condition of the obligor of such obligation, or to make payment for
any products, materials or supplies or for any transportation or
services regardless of the non-delivery or non-furnishing thereof, in
any such case if the purpose or intent of such agreement is to provide
assurance that such obligation will be paid or discharged, or that any
agreements relating thereto will be complied with, or that the
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holders of such obligation will be protected against loss in respect
thereof. The amount of any Guarantee shall be equal to the
outstanding principal amount of the obligation guaranteed or such
lesser amount to which the maximum exposure of the guarantor shall
have been specifically limited.
"HADSON DEFENSE SECURITY AGREEMENT" shall mean the Security
Agreement, dated as of December 14, 1993 by and between Hadson Defense
Systems, Inc., a Delaware corporation, and the Collateral Agent.
"HADSON SECURITY AGREEMENT" shall mean the Security
Agreement dated as of December 14, 1993, by and between the Company
and the Collateral Agent.
"HD ENERGY PLEDGE AGREEMENT" shall mean the Pledge
Agreement, dated as of December 14, 1993 by and between HD Energy and
the Collateral Agent.
"HEPSI" shall mean Hadson Energy Products and Services,
Inc., an Oklahoma corporation.
"HEPSI MERGER" shall mean the merger of HEPSI with and into
the Company on the Effective Date pursuant to Section 253 of the
Delaware General Corporation Law.
"INDEBTEDNESS" shall mean, with respect to any Person,
without duplication, (i) all items (excluding items of contingency
reserves or of reserves for deferred income taxes) which in accordance
with generally accepted accounting principles would be included in
determining total liabilities as shown on the liability side of a
balance sheet of such Person as of the date on which Indebtedness is
to be determined, excluding trade payables incurred in the ordinary
course of business on normal trade terms and which constitute current
liabilities, (ii) all indebtedness secured by any Lien on any property
or asset owned or held by such Person subject thereto, whether or not
the indebtedness secured thereby shall have been assumed, and (iii)
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all indebtedness of others with respect to which such Person has
become liable by way of a Guarantee.
"INDEMNIFIED PARTY" shall have the meaning specified in
paragraph 12B.
"INTERCOMPANY NOTES" shall mean and include any and all
debts, obligations and liabilities of the Company to any of its
Subsidiaries evidenced by a promissory note originally or currently
held or to be held by any Subsidiary.
"INTERCREDITOR AGREEMENT" shall mean the Intercreditor
Agreement, dated as of the Effective Date, among the Purchasers, BMO
and the Collateral Agent, in substantially the form of Exhibit D
hereto.
"LIEN" shall mean any mortgage, pledge, priority, security
interest, encumbrance, contractual deposit arrangement, lien
(statutory or otherwise) or charge of any kind (including any
agreement to give any of the foregoing, any conditional sale or other
title retention agreement, any lease in the nature thereof, and the
filing of or agreement to give any financing statement under the
Uniform Commercial Code of any jurisdiction) or any other type of
preferential arrangement for the purpose, or having the effect, of
protecting a creditor against loss or securing the payment or
performance of an obligation, it being understood that a covenant not
to create a Lien on any asset shall not be considered a "Lien" on such
asset.
"LLANO" shall mean Llano, Inc., a New Mexico corporation.
"MARGIN STOCK" shall have the meaning specified in paragraph
8I.
"MATERIAL ADVERSE EFFECT" shall mean a material adverse
effect on (i) the business, assets, operations, prospects or financial
or other condition of the Company and its Subsidiaries
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taken as a whole, (ii) the ability of the Company to pay the
obligations, or to perform its obligations under this Agreement, (iii)
the legality, validity or enforceability of this Agreement, the
Registration Rights Agreement, the Notes or any Collateral Document
or, (iv) the rights and remedies of the Purchasers under this
Agreement or any Collateral Document.
"MERGER" shall have the meaning specified in the Preliminary
Statement.
"MERGER AGREEMENT" shall have the meaning specified in the
Preliminary Statement.
"MERGER NOTES" shall have the meaning specified in the
Preliminary Statement.
"MULTIEMPLOYER PLAN" shall mean any Plan which is a
"multiemployer plan" (as such term is defined in section 4001(a)(3) of
ERISA).
"NET WORTH" shall mean, as of any date of determination
thereof, the common and preferred shareholders' equity of the Company
at such date as determined in accordance with generally accepted
accounting principles.
"NEW JUNIOR PREFERRED STOCK" shall mean the Company's Junior
Exercisable Automatically Convertible Preferred Stock, Series B, par
value $.01 per share, to have the rights set forth in the New Restated
Certificate of Incorporation.
"NEW RESTATED CERTIFICATE OF INCORPORATION" shall have the
meaning specified in paragraph 1.
"NEW COMMON" shall mean the Company's new common stock, par
value $.01 per share.
"NOTES" shall have the meaning specified in paragraph 1.
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"NUHPI PLEDGE AGREEMENT" shall mean the Pledge Agreement
dated as of December 14, 1993 by and between NuHPI, Inc., a Delaware
corporation, and the Collateral Agent.
"OFFICER'S CERTIFICATE" shall mean a certificate signed in
the name of the Company by its Chief Executive Officer, President and
Chief Operating Officer, Executive Vice President, Chief Financial
Officer or Treasurer.
"OLD JUNIOR PREFERRED" shall have the meaning specified in
the Preliminary Statement.
"OTHER SUBSIDIARY" shall mean a Wholly-Owned Subsidiary that
is not a Subsidiary Borrower or a Pledged Subsidiary.
"PBGC" shall mean the Pension Benefit Guaranty Corporation
or any successor entity.
"PERSON" shall mean and include an individual, a partner-
ship, a joint venture, a corporation, a trust, a limited liability
company, an unincorporated organization and a government or any
department or agency thereof.
"PIPELINE" shall have the meaning set forth in the
preliminary statement.
"PLAN" shall mean any "employee pension benefit plan" (as
such term is defined in section 3 of ERISA) which is or has been
established or maintained, or to which contributions are or have been
made, by the Company, any of its Subsidiaries or, with respect to a
Plan subject to Section 412 of the Code, any ERISA Affiliate.
"PLEDGE AGREEMENT" shall mean the Pledge Agreement dated as
of December 14, 1993 by and between the Company and the Collateral
Agent.
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"PLEDGED SUBSIDIARY" shall mean any Subsidiary the stock or
assets of which is subject to a Lien in favor of the Collateral Agent.
"PRESENT COLLATERAL DOCUMENTS" shall mean the Hadson
Security Agreement, the Pledge Agreement, the Assignment and Security
Agreement, the NuHPI Pledge Agreement, the HD Energy Pledge Agreement
and the Hadson Defense Security Agreement.
"PROXY STATEMENT - PROSPECTUS" shall mean the Company's
Proxy Statement - Prospectus, dated November 10, 1993, distributed by
the Company in connection with the Merger.
"PRUDENTIAL" shall mean The Prudential Insurance Company of
America and any of its affiliates.
"PURCHASER SCHEDULE" shall have the meaning specified in the
introductory sentence.
"PURCHASERS" shall have the meaning specified in the
introductory sentence.
"REGISTRATION RIGHTS AGREEMENT" shall have the meaning
specified in paragraph 3.
"RELATED TRANSACTIONS" shall mean, collectively, the Merger,
the HEPSI Merger and the Conversions.
"REQUIRED HOLDER(S)" shall mean the holder or holders of at
least 66 2/3% of the aggregate principal amount of the Notes from time
to time outstanding.
"RESPONSIBLE OFFICER" shall mean the chief executive
officer, chief operating officer, chief financial officer or chief
accounting officer of the Company or any other officer of the Company
involved principally in its financial administration or its
controllership function.
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"RESTRICTED PAYMENTS" shall have the meaning specified in
paragraph 6B.
"SECURITIES" shall have the meaning specified in
paragraph 1.
"SECURITIES ACT" shall mean the Securities Act of 1933, as
amended.
"SENIOR PREFERRED STOCK" shall mean the Company's Senior
Cumulative Preferred Stock, Series A, par value $.01 per share, to
have the rights set forth in the New Restated Certificate of
Incorporation.
"SENIOR SECURED NOTES" shall have the meaning specified in
paragraph 1.
"SFER" shall have the meaning specified in the Preliminary
Statement.
"SIGNIFICANT HOLDER" shall mean (i) each Purchaser, so long
as such Purchaser shall hold (or be committed under this Agreement to
purchase) any Note, or (ii) any other holder of at least 5% of the
aggregate principal amount of the Notes from time to time outstanding.
"SPECIAL OPTIONS" shall mean the options to purchase 100,000
shares of the Existing Common granted to each of Harry G. Hadler, S.D.
Wilks, C.B. and Walter C. Wilson in connection with the Merger.
"SUBORDINATED DEBT" shall mean Debt subordinated in right of
payment to any of the Notes.
"SUBSIDIARY" shall mean any corporation organized under the
laws of any state of the United States, Canada, or any province of
Canada, which conducts the major portion of its business in and makes
the major portion of its sales to Persons
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located in the United States or Canada, except directors' qualifying
shares, at least a majority of the total combined voting power of all
classes of Voting Stock of which shall, at the time as of which any
determination is being made, be owned by the Company either directly
or through Subsidiaries.
"SUBSIDIARY BORROWERS" shall mean Gas Systems, United LP and
Western Natural.
"TOTAL CAPITAL" shall mean, as of any date of determination
thereof, the sum of the following for the Company as determined in
accordance with generally accepted accounting principles: (i) common
and preferred shareholders' equity at such date; and (ii) the
outstanding principal amount of Funded Debt at such date (including
any portion thereof which may be Current Debt at such date).
"TRANSFEREE" shall mean any direct or indirect transferee of
all or any part of any Note.
"TRUST" shall mean the trust created pursuant to the Trust
Agreement.
"TRUST AGREEMENT" shall mean the Trust Agreement, dated as
of the Effective Date, by and between the Company, the Trustee and the
Purchasers, in substantially the form of Exhibit T.
"TRUSTEE" shall mean Liberty Bank and Trust Company of
Oklahoma City, N.A., in its capacity as trustee under the Trust
Agreement.
"UNITED LP" shall mean United LP Gas Corporation, an
Oklahoma corporation.
"VOTING AGREEMENT" shall mean a voting agreement, dated as
of the Effective Date, among SFER, Pipeline and the Purchasers, in
-----
substantially the form of Exhibit I.
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"VOTING STOCK" shall mean, with respect to any corporation,
any shares of stock of such corporation whose holders are entitled
under ordinary circumstances to vote for the election of directors of
such corporation (irrespective of whether at the time stock of any
other class or classes shall have or might have voting power by reason
of the happening of any contingency).
"WESTERN NATURAL" shall mean Western Natural Gas &
Transportation Corp., a Colorado corporation.
"WHOLLY-OWNED SUBSIDIARY" shall mean any corporation
organized under the laws of any state of the United States, Canada, or
any province of Canada, which conducts the major portion of its
business in and makes the major portion of its sales to Persons
located in the United States or Canada, and all of the stock of every
class of which, except directors qualifying shares, is, and 100% of
the total combined voting power of all classes of Voting Stock of
which shall, at the time as of which any determination is being made,
be owned by the Company either directly or through Wholly-Owned
Subsidiaries.
10B. ACCOUNTING PRINCIPLES, TERMS AND DETERMINATIONS. All
references in this Agreement to "generally accepted accounting
principles" shall be deemed to refer to generally accepted accounting
principles in effect in the United States at the time of application
thereof. Unless otherwise specified herein, all accounting terms used
herein shall be interpreted, all determinations with respect to
accounting matters hereunder shall be made, and all unaudited
financial statements and certificates and reports as to financial
matters required to be furnished hereunder shall be prepared, in
accordance with generally accepted accounting principles, applied on a
basis consistent with the most recent audited consolidated financial
statements of the Company and its Subsidiaries delivered pursuant to
clause (iii) of paragraph 5A or, if no such statements have been so
delivered, the most recent audited financial statements referred to in
clause (i) of paragraph 8B.
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10C. COMPUTATION OF TIME PERIODS. In this Agreement in the
computation of periods of time from a specified date to a later
specified date, the word "from" means "from and including" and the
words "to" and "until" each means "to but excluding."
11. JUDICIAL PROCEEDINGS.
11A. CONSENT TO JURISDICTION. The Company irrevocably submits
to the non-exclusive jurisdiction of any New York State or Federal
court sitting in the City of New York over any suit, action or
proceeding arising out of or relating to this Agreement or the Notes.
To the fullest extent it may effectively do so under applicable law,
the Company irrevocably waives and agrees not to assert, by way of
motion, as a defense or otherwise, any claim that it is not subject to
the jurisdiction of any such court, any objection that it may now or
hereafter have to the laying of the venue of any such suit, action or
proceeding brought in any such court and any claim that any such suit,
action or proceeding brought in any such court has been brought in an
inconvenient forum.
11B. ENFORCEMENT OF JUDGMENTS. The Company agrees, to the
fullest extent it may effectively do so under applicable law, that a
judgment in any suit, action or proceeding of the nature referred to
in paragraph 11A brought in any such court shall be conclusive and
binding upon the Company subject to rights of appeal, as the case may
be, and may be enforced in the courts of the United States of America
or the State of New York (or any other courts to the jurisdiction of
which the Company is or may be subject) by a suit upon such judgment.
11C. SERVICE OF PROCESS. The Company consents to process being
served in any suit, action or proceeding of the nature referred to in
paragraph 11A by mailing a copy thereof by registered or certified
mail, postage prepaid, return receipt requested, to the address of the
Company specified in or designated pursuant to paragraph 12I. The
Company agrees that such service (i) shall be deemed in every respect
effective
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service of process upon it in any such suit, action or proceeding and
(ii) shall, to the fullest extent permitted by law, be taken and held
to be valid personal service upon and personal delivery to the
Company. Notices hereunder shall be conclusively presumed received as
evidenced by a delivery receipt furnished by the United States Postal
Service or any commercial delivery service.
11D. NO LIMITATION ON SERVICE OR SUIT. Nothing in this
paragraph 11 shall affect the right of the Purchasers to service
process in any manner permitted by law, or limit any right that the
holders of any of the Notes may have to bring proceedings against the
Company in the courts of any jurisdiction or to enforce in any lawful
manner a judgment obtained in one jurisdiction in any other
jurisdiction.
12. MISCELLANEOUS.
12A. NOTE PAYMENTS. The Company agrees that, so long as any
Purchaser shall hold any Note, it will make payments of principal of,
and interest on, such Note, which comply with the terms of this Agree-
ment, by wire transfer of immediately available funds for credit (not
later than 12:00 noon, New York City time, on the date due) to such
Purchaser's account or accounts as specified in the Purchaser Schedule
attached hereto, or such other account or accounts in the United
States as such Purchaser may designate in writing, notwithstanding any
contrary provision herein or in any Note with respect to the place of
payment. The Company agrees that, so long as any Purchaser shall hold
any shares of Equity Securities, it will make dividend payments and
other distributions on the shares of Equity Securities to the holders
of record at the address appearing in the records of the Company in
accordance with the New Restated Certificate of Incorporation. Each
Purchaser agrees that, before disposing of any Note, such Purchaser
will make a notation thereon (or on a schedule attached thereto) of
all principal payments previously made thereon and of the date to
which interest thereon has been paid. The Company agrees to afford
the benefits of this paragraph 12A to any Transferee which shall have
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made the same agreement as each Purchaser has made in this paragraph
12A.
12B. EXPENSES; INDEMNITY. The Company agrees, whether or not
the transactions contemplated hereby shall be consummated, to pay, and
save each Purchaser and any Transferee harmless against liability for
the payment of, all out-of-pocket expenses arising in connection with
such transactions, including (i) all document production and duplica-
tion charges and the fees and expenses of any special counsel engaged
by such Purchaser or such Transferee in connection with this
Agreement, the Securities being purchased hereunder or received by the
Purchasers pursuant to the Merger Agreement, the Trust Agreement, the
Voting Agreement, the Registration Rights Agreement, the Collateral
Documents, the Related Transactions and the transactions contemplated
hereby and thereby, including, without limitation, all such charges,
fees and expenses for the period prior to the date hereof and any
subsequent proposed modification hereof or thereof, or proposed
consent hereunder or thereunder, whether or not such proposed
modification shall be effected or proposed consent granted and (ii)
the costs and expenses, including attorneys' fees, incurred by such
Purchaser or such Transferee in enforcing (or determining whether or
how to enforce) any rights hereunder or thereunder or in responding to
any subpoena or other legal process or informal investigative demand
issued in connection with this Agreement or the transactions contem-
plated hereby or by reason of such Purchaser's or such Transferee's
having acquired any Security including, without limitation, costs and
expenses incurred in any bankruptcy case of the Company or any
Subsidiary. To the fullest extent permitted under applicable law, the
Company agrees to indemnify and hold harmless each of the Purchasers
and each of their affiliates and their respective directors, officers,
employees, agents, advisors, attorneys and consultants (each an
"INDEMNIFIED PARTY"), on an after-tax basis, from and against any and
all losses, claims, actions, causes of action, suits, damages,
liabilities, costs and expenses, including, without limitation, taxes
(other than any income and franchise taxes except as set forth below),
environmental liabilities, costs and
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expenses and all fees and disbursements of counsel, which may be
incurred by or awarded against any such Indemnified Party in
connection with or arising out of, or by reason of the preparation of
the defense of, any investigation, litigation or proceeding, whether
or not any Indemnified Party is a party thereto, related to or in
connection with this Agreement or any of the transactions contemplated
hereby; provided, however, that the Company shall not be liable for
-------- -------
such indemnification to such Indemnified Party to the extent that any
indemnified liabilities arise on account of such Indemnified Party's
gross negligence or willful misconduct; provided, further, if and to
-------- -------
the extent such agreement to indemnify may be unenforceable for any
reason whatsoever, the Company shall make the maximum contribution to
the payment and satisfaction of each of the indemnified liabilities
which shall be permissible under the applicable law. In furtherance
(and not in limitation) of the foregoing, the Company agrees to
indemnify and hold harmless each of the Purchasers and each of their
affiliates on an after-tax basis against any federal, state or local
income tax liability incurred by any of them as a result of a
determination by any federal, state or local taxing authority that the
Notes issued by the Company to the Purchasers under this Agreement
have original issue discount, as defined in section 1273 of the Code,
or any provisions of state or local law having a similar purpose or
effect. For purposes of the two preceding sentences, an indemnity
payment is made on an after-tax basis if the amount is such that,
after the payment of any federal, state or local taxes payable on
account of the receipt of such indemnity payment, the remainder of the
indemnity payment is sufficient to pay all indemnified liabilities on
account of which the indemnity payment is made. If any federal, state
or local taxing authority shall assert a claim for income taxes
against any Purchaser or any of its affiliates that would be subject
to indemnification hereunder, such Purchaser or such affiliate shall
notify the Company in writing of such claim within 20 days after
receipt of such claim, and shall take such action to contest such
claim as the Company shall reasonably request from time to time,
including appeals. The failure of such Purchaser or such affiliate to
give
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timely notice of any such claim to the Company shall not pre-empt its
right to indemnification hereunder unless such failure results in the
Company's inability to contest any such claim. The Company agrees to
pay any Purchaser or any of its affiliates interest at the rate of
interest publicly announced by Morgan Guaranty Trust Company of New
York from time to time in New York as its Prime Rate commencing on the
date any such tax liability subject to indemnification hereunder is
paid by such Purchaser or such affiliate and ending on the date of the
related indemnity payment by the Company. The obligations of the
Company under this paragraph 12B shall survive the transfers,
redemption, exchange, purchase, conversion or other acquisition of any
shares of Equity Securities or the transfer of any Note or portion
thereof or interest therein by any Purchaser or any Transferee and the
payment of any Note.
12C. CONSENT TO AMENDMENTS. This Agreement may be amended, and
the Company may take any action herein prohibited, or omit to perform
any act herein required to be performed by it, if the Company shall
obtain the written consent to such amendment, action or omission to
act, of the Required Holder(s) except that, without the written
consent of the holder or holders of all Notes at the time outstanding,
no amendment to this Agreement shall change the maturity of any Note,
or change the principal of, or the rate or time of payment of interest
on, any Note, or affect the time, amount or allocation of any prepay-
ments, or change the proportion of the principal amount of the Notes
required with respect to any consent, amendment, waiver or
declaration. Each holder of any Note at the time or thereafter
outstanding shall be bound by any consent authorized by this paragraph
12C, whether or not such Note shall have been marked to indicate such
consent, but any Notes issued thereafter may bear a notation referring
to any such consent. No course of dealing between the Company and the
holder of any Note nor any delay in exercising any rights hereunder or
under any Note shall operate as a waiver of any rights of any holder
of such Note. As used herein and in the Notes the term "this
Agreement" and references thereto shall mean
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this Agreement as it may from time to time be amended, supplemented or
otherwise modified.
12D. FORM, REGISTRATION, TRANSFER AND EXCHANGE OF NOTES; LOST
NOTES. The Notes are issuable as registered notes without coupons in
denominations of at least $100,000, except as may be necessary to
reflect any principal amount not evenly divisible by $100,000. The
Company shall keep at its principal office a register in which the
Company shall provide for the registration of Notes and of transfers
of Notes. Each Purchaser may sell, transfer, negotiate or assign to
one or more Transferees all or a portion of the Notes held by it.
Upon surrender for registration of transfer of any Note at the
principal office of the Company, the Company shall, at its expense,
execute and deliver one or more new Notes of like tenor and of a like
aggregate principal amount, registered in the name of such Transferee
or Transferees. At the option of the holder of any Note, such Note
may be exchanged for other Notes of like tenor and of any authorized
denominations, of a like aggregate principal amount, upon surrender of
the Note to be exchanged at the principal office of the Company.
Whenever any Notes are so surrendered for exchange, the Company shall,
at its expense, execute and deliver the Notes which the holder making
the exchange is entitled to receive. Every Note surrendered for
registration of transfer or exchange shall be duly endorsed, or be
accompanied by a written instrument of transfer duly executed, by the
holder of such Note or such holder's attorney duly authorized in
writing. Any Note or Notes issued in exchange for any Note or upon
transfer thereof shall carry the rights to unpaid interest and
interest to accrue which were carried by the Note so exchanged or
transferred, so that neither gain nor loss of interest shall result
from any such transfer or exchange. Upon receipt of written notice
from the holder of any Note of the loss, theft, destruction or
mutilation of such Note and, in the case of any such loss, theft or
destruction, upon receipt of such holder's unsecured indemnity
agreement, or in the case of any such mutilation upon surrender and
cancellation of such Note, the Company will make and deliver
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to such holder a new Note, of like tenor, in lieu of the lost, stolen,
destroyed or mutilated Note.
12E. PERSONS DEEMED OWNERS; PARTICIPATIONS. Prior to due
presentment for registration of transfer, the Company may treat the
Person in whose name any Note is registered as the owner and holder of
such Note for the purpose of receiving payment of principal of and
interest on such Note and for all other purposes whatsoever, whether
or not such Note shall be overdue, and the Company shall not be
affected by notice to the contrary. Subject to the preceding
sentence, the holder of any Note may from time to time grant
participations in such Note to any Person on such terms and conditions
as may be determined by such holder in its sole and absolute
discretion, provided that any such participation shall be in a
--------
principal amount of at least $100,000.
12F. SURVIVAL OF REPRESENTATIONS AND WARRANTIES AND COVENANTS;
ENTIRE AGREEMENT. All representations and warranties contained herein
or made in writing by or on behalf of the Company in connection
herewith shall survive the execution and delivery of this Agreement
and the Securities, the transfer by any Purchaser of any Securities or
portion thereof or interest therein and the payment of any Note, and
may be relied upon by any Transferee, regardless of any investigation
made at any time by or on behalf of any Purchaser or any Transferee.
Subject to the preceding sentence, this Agreement, the Registration
Rights Agreement, the Trust Agreement, the Securities (including the
New Restated Certificate of Incorporation) and the Collateral
Documents embody the entire agreement and understanding between the
Purchasers and the Company and supersede all prior agreements and
understandings relating to the subject matter hereof, including,
without limitation, the Existing Purchase Agreement, which is hereby
terminated in its entirety; provided, however, that notwithstanding
-------- -------
the above or anything to the contrary set forth in this Agreement, the
Company's obligations under paragraph 12B of the Existing Purchase
Agreement shall survive the Closing hereunder and shall not be
terminated hereby.
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12G. SUCCESSORS AND ASSIGNS. All covenants and other agreements
in this Agreement contained by or on behalf of any of the parties
hereto shall bind and inure to the benefit of the respective
successors and assigns of the parties hereto (including, without
limitation, any Transferee) whether so expressed or not.
12H. DISCLOSURE TO OTHER PERSONS. The Company acknowledges that
the holder of any Note may deliver copies of any financial statements
and other documents delivered to such holder, and disclose any other
information disclosed to such holder, by or on behalf of the Company
or any Subsidiary in connection with or pursuant to this Agreement to
(i) such holder's directors, officers, employees, agents and
professional consultants, (ii) any other holder of any Note or Equity
Securities, (iii) any Person to which such holder offers to sell such
Note or Equity Securities or any part thereof, (iv) any Person to
which such holder sells or offers to sell a participation in all or
any part of such Note or Equity Securities, (v) any Person from which
such holder offers to purchase any security of the Company, (vi) any
federal or state regulatory authority having jurisdiction over such
holder, (vii) the National Association of Insurance Commissioners or
any similar organization or (viii) any other Person to which such
delivery or disclosure may be necessary or appropriate (a) in
compliance with any law, rule, regulation or order applicable to such
holder, (b) in response to any subpoena or other legal process or
informal investigative demand or (c) in connection with any litigation
to which such holder is a party.
12I. NOTICES. All notices or other communications provided for
hereunder (except for the telephonic notice required by paragraph 4C)
shall be in writing and sent by first class mail or nationwide
overnight delivery service (with charges prepaid) and (i) if to any
Purchaser, addressed to such Purchaser at the address specified for
such communications in the Purchaser Schedule attached hereto, or at
such other address as such Purchaser shall have specified to the
Company in writing, (ii) if to any other holder of any Note, addressed
to such other holder
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at such address as such other holder shall have specified to the
Company in writing or, if any such other holder shall not have so
specified an address to the Company, then addressed to such other
holder in care of the last holder of such Note which shall have so
specified an address to the Company, and (iii) if to the Company,
addressed to it at 101 Park Avenue, Suite 1400, Oklahoma City,
Oklahoma 73102, Attention: President, or at such other address as
the Company shall have specified to the holder of each Note in
writing; provided, however, that any such communication to the Company
-------- -------
may also, at the option of the holder of any Note, be delivered by any
other means either to the Company at its address specified above or to
any officer of the Company.
12J. PAYMENTS DUE ON NON-BUSINESS DAYS. Anything in this
Agreement or the Notes to the contrary notwithstanding, any payment of
principal of or interest on any Note that is due on a date other than
a Business Day shall be made on the next succeeding Business Day. If
the date for any payment is extended to the next succeeding Business
Day by reason of the preceding sentence, the period of such extension
shall be included in the computation of the interest payable on such
Business Day.
12K. SATISFACTION REQUIREMENT. If any agreement, certificate or
other writing, or any action taken or to be taken, is by the terms of
this Agreement required to be satisfactory to any Purchaser or to the
Required Holder(s), the determination of such satisfaction shall be
made by such Purchaser or the Required Holder(s), as the case may be,
in the sole and exclusive judgment (exercised in good faith) of the
Person or Persons making such determination.
12L. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE
GOVERNED BY, THE LAW OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE
PRINCIPLES THEREOF REGARDING CONFLICT OF LAWS.
12M. SEVERABILITY. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to
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such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof,
and any such prohibition or unenforceability in any jurisdiction shall
not invalidate or render unenforceable such provision in any other
jurisdiction.
12N. DESCRIPTIVE HEADINGS. The descriptive headings of the
several paragraphs of this Agreement are inserted for convenience only
and do not constitute a part of this Agreement.
12O. COUNTERPARTS. This Agreement may be executed in any number
of counterparts, each of which shall be an original but all of which
together shall constitute one instrument.
12P. SEVERALTY OF OBLIGATIONS. The exchanges of the Exchange
Notes hereunder are to be several transactions, and the obligations of
the Purchasers under this Agreement are several obligations. No
failure by any Purchaser to perform its obligations under this
Agreement shall relieve any other Purchaser or the Company of any of
its obligations hereunder, and no Purchaser shall be responsible for
the obligations of, or any action taken or omitted by, any other
Purchaser hereunder.
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If you are in agreement with the foregoing, please sign the form
of acceptance on the enclosed counterparts of this letter and return
the same to the Company, whereupon this letter shall become a binding
agreement among the Company and the Purchasers.
Very truly yours,
HADSON CORPORATION
By________________________
Title:
The foregoing Agreement is
hereby accepted as of the
date first above written.
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
By_________________________
Vice President
PRUCO LIFE INSURANCE COMPANY
By__________________________
Vice President
PRUSUPPLY, INC.
By_________________________
Vice President
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EXHIBIT A
---------
FORM OF SENIOR SECURED NOTE
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933 AND MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION EXCEPT PURSUANT TO AN EXEMPTION THEREFROM UNDER SUCH
ACT.
HADSON CORPORATION
8% SENIOR SECURED NOTE DUE 2003
No. __ New York, NY, December __, 1993
$___________
FOR VALUE RECEIVED, the undersigned, HADSON CORPORATION, a
corporation organized and existing under the laws of the State of
Delaware (herein called the "Company"), hereby promises to pay to
_________________________________, or its registered assigns, the
principal sum of _____________________________ DOLLARS
($_____________) on December 31, 2003, with interest (computed on the
basis of a 360-day year -- 30-day month) (a) on the unpaid balance
thereof at the rate of 8% per annum from the date hereof, payable
quarterly on the last day of March, June, September and December in
each year, commencing with the March 31, June 30, September 30 and
December 31 next succeeding the date hereof, until the principal
hereof shall have become due and payable and (b) on any overdue
payment (including any overdue prepayment) of principal, and any
overdue payment of interest, payable quarterly as aforesaid (or, at
the option of the registered holder hereof, on demand), at a rate per
annum from time to time equal to the greater of (i) 10% and (ii) 2%
over the rate of interest publicly announced by Morgan Guaranty Trust
Company of New York from time to time as its Prime Rate effective as
of the effective date of the change of each Prime Rate.
A-1
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<PAGE>
Payments of principal and interest on this Note are to be
made at the main office of Morgan Guaranty Trust Company of New York
in New York City or at such other place as the holder hereof shall
designate to the Company in writing, in lawful money of the United
States of America.
This Note is one of the Senior Secured Notes issued pursuant
to the Securities Purchase Agreement, dated as of December , 1993
--
(the "Agreement"), among the Company and the purchasers of the Senior
Secured Notes listed on the Purchaser Schedule attached thereto, and
is entitled to the benefits thereof. Capitalized terms used herein
not otherwise defined shall have the meanings ascribed to them in the
Agreement.
The Company agrees to make required prepayments of principal
on the dates and in the amounts specified in the Agreement. This Note
is also subject to optional prepayment, in whole or from time to time
in part, on the terms specified in the Agreement.
The repayment of the principal and interest on this Note is
secured as provided in the Collateral Documents. Reference is hereby
made to the Collateral Documents for a description of the property and
assets in which a security interest has been granted, the nature and
extent of the security, the terms and conditions upon which the
security interest was granted and the rights of the holder of this
Senior Secured Note in respect thereof.
This Senior Secured Note is a registered Note and, in
accordance with the terms of the Agreement, upon surrender of this
Senior Secured Note for registration of transfer, duly endorsed, or
accompanied by a written instrument of transfer duly executed, by the
registered holder hereof or such holder's attorney duly authorized in
writing, a new Senior Secured Note for a like principal amount will be
issued to, and registered in
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the name of, the Transferee. Prior to due presentment for
registration of transfer, the Company may treat the person in whose
name this Senior Secured Note is registered as the owner thereof for
the purpose of receiving payment and for all other purposes, and the
Company shall not be affected by any notice to the contrary.
If an Event of Default shall occur and be continuing, the
principal of this Senior Secured Note may be declared or otherwise
become due and payable in the manner and with the effect provided in
the Agreement.
THIS SENIOR SECURED NOTE IS INTENDED TO BE PERFORMED IN THE
STATE OF NEW YORK AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE
WITH THE LAWS OF NEW YORK, WITHOUT REGARD TO THE PRINCIPLES THEREOF
REGARDING CONFLICT OF LAWS.
HADSON CORPORATION
By:
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Title:
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