<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
AMENDMENT NO. 1
Date of Report (Date of Earliest Event Reported): December 14, 1993
HADSON CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
Delaware 1-9891 31-0679954
(State or other jurisdiction of (Commission (I.R.S. Employer
incorporation) File Number) Identification No.)
</TABLE>
101 Park Ave. Suite 1400, Oklahoma City, Oklahoma 73102
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (405) 235-9531
Not Applicable
(Former name or former address, if changed since last report)
<PAGE> 2
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
THE MERGER
On December 14, 1993, Adobe Gas Pipeline Company ("AGPC") was merged
(the "Merger") with and into Hadson Corporation (the "Company") pursuant to an
Agreement of Merger dated as of July 28, 1993, as amended (the "Merger
Agreement"), among the Company, Santa Fe Energy Resources, Inc. ("Santa Fe")
and AGPC. Prior to the Merger, AGPC was an indirect-wholly owned subsidiary of
Santa Fe engaged, through its wholly-owned subsidiaries, in the gathering,
processing, transmission and marketing of natural gas, with interests in 10
natural gas pipeline systems located in Texas, New Mexico, Oklahoma and Montana
(of which six were operated by AGPC) and three natural gas processing plants
(collectively, and including the various contracts associated with such
facilities, the "AGPC Assets").
Prior to the Merger, AGPC entered into a gas contract with Santa Fe
and Santa Fe Energy Operating Partners, L.P. ("SFEOP") (the "Gas Contract").
As a result of the Merger, the Company succeeded to the rights and obligations
of AGPC under the Gas Contract. Following the Merger, with the consent of
Santa Fe and SFEOP, the Company assigned such contract to Hadson Gas Systems,
Inc., a wholly-owned subsidiary of the Company through which the majority of
the Company's natural gas marketing operations are conducted. The Gas Contract
has a term of approximately seven years and provides for the purchase by the
Company of essentially all of Santa Fe's and SFEOP's existing domestic natural
gas production as well as natural gas production that either Santa Fe or SFEOP
has the right to market. In addition, the Company has the right to purchase
new production from certain development properties of Santa Fe and SFEOP. The
price to be paid by the Company for purchases of natural gas under the Gas
Contract will fluctuate from month to month based on generally recognized
published price indices. Under other provisions of the Gas Contract, the
Company will be responsible for analyzing and recommending to Santa Fe and
SFEOP alternatives for the gathering, processing and marketing of natural gas
production from exploratory drilling activities of Santa Fe and SFEOP in the
United States. Accordingly, while production from such exploratory drilling
activities will not be dedicated to the Company under the Gas Contract, the
Company expects to have the opportunity to market significant amounts of any
such new production. In addition, the Company expects to have the opportunity
to acquire or construct and operate additional natural gas gathering and
processing facilities as a result of this relationship.
The term of the Gas Contract will run from the effective date of the
contract (i.e., no later than the effective time of the Merger (the "Effective
Time")) until March 31, 2001. However, either the Company or Santa Fe and
SFEOP will have the right to terminate the contract upon a material breach of
the contract or the occurrence of certain governmental actions. In addition,
Santa Fe and SFEOP will have the right to terminate the contract upon the
occurrence of certain other events, including (i) the failure of the Company to
purchase specified percentages of available production from Santa Fe and SFEOP
(other than as a result of force majeure), including the failure to purchase at
least 90% of available gas in any period of six consecutive months, and (ii)
the occurrence of an event of default under any debt or credit agreement of the
Company for borrowed money if such event results in the acceleration of any
obligation in excess of $10 million.
The Company will be required to release production dedicated under the
Gas Contract under certain circumstances, including (i) if Santa Fe or SFEOP
reasonably believe such production should be released to avoid any penalties
and costs that would otherwise be incurred by Santa Fe or SFEOP related to
production attributable to third parties, (ii) upon the sale or exchange of
wells by Santa Fe or SFEOP, as the case may be, if the average consideration to
be received by Santa Fe or SFEOP attributable to its interests in such wells is
less than $250,000 per well and (iii) if pipeline transportation imbalance
penalties incurred by Santa Fe or SFEOP as a result of sales under the Gas
Contract for gas produced from non-operated wells become excessive in the
reasonable opinion of Santa Fe and SFEOP. Santa Fe and SFEOP may also have gas
released from the Gas Contract if the Company's financial condition changes
materially and adversely and the Company
-1-
<PAGE> 3
does not provide financial assurances (such as letters of credit) acceptable to
Santa Fe and SFEOP for the value of such gas. In addition, Santa Fe and SFEOP
will retain the right to limit, curtail or shut-in dedicated production for any
reason (including inadequate price or unacceptable market conditions), subject
to certain notice requirements and certain other parameters.
In addition to effecting the acquisition by the Company of AGPC, the
Merger also effected a restructuring of the Company's current debt and equity
capitalization. Pursuant to the Merger Agreement:
<TABLE>
<CAPTION>
THE FOLLOWING SECURITIES: HAS/HAVE BEEN CONVERTED INTO:
------------------------ ----------------------------
<S> <C>
All of the outstanding common stock of AGPC (which 2,080,000 shares of the Company's new Senior
was held by Santa Fe) Cumulative Preferred Stock, Series A, par value
$.01 per share ("Senior Preferred Stock") having
an aggregate liquidation preference of $52
million; and
10,395,665 shares of common stock, par value $.01
per share ("Common Stock") (such number equaling
40% of the total number of shares of Common Stock
outstanding immediately after the Effective
Time, treating as outstanding (i) the 4,983,180
shares of Common Stock issued and deposited by the
Company to the "H/P Trust" described below and
(ii) a number of unissued shares of Common Stock
equal to the product of (A) 4,500,000 minus the
number of shares of the common stock, par value
$.01 per share, of the Company as constituted
prior to the Effective Time ("Old Common Stock")
that were issued prior to the Effective Time on
exercise of stock options granted under the
Company's 1992 Equity Incentive Plan (the "Equity
Incentive Plan"), multiplied by (B) .06667).
Each share of the Company's 8% Junior Cumulative (i) 1.50733 shares of Common Stock and (ii)
Convertible Preferred Stock, Series B, par value 1.09667 shares of Junior Exercisable
$.01 per share ("Old Junior Preferred Stock"), Automatically Convertible Preferred Stock, Series
outstanding immediately prior to the Effective B, par value $.01 per share, of the Company
Time ("Junior Preferred Stock").
Each share of Old Common Stock outstanding (i) .06667 (approximately 1/15th) of a share of
immediately prior to the Effective Time Common Stock and approximately .01667 of a share
of Junior Preferred Stock.
All of the outstanding shares of the Company's The right to receive 97.27% of the "P Interest" in
Class B Common Stock, par value $.01 per share the H/P Trust, which interest (in its entirety)
("Class B Common Stock"), outstanding immediately initially represents a beneficial trust interest
prior to the Effective Time, all of which were in the Trust Shares and could ultimately result in
held by The Prudential Insurance Company of the payment to Prudential of an amount equal to
America and certain of its affiliates the amount of all proceeds payable upon the
(collectively, "Prudential") exercise of the shares of Junior Preferred Stock
to be issued
</TABLE>
-2-
<PAGE> 4
<TABLE>
<CAPTION>
THE FOLLOWING SECURITIES: HAS/HAVE BEEN CONVERTED INTO:
------------------------ ----------------------------
<S> <C>
in the Merger (which could total as much as
approximately $16.1 million), as described below.
Each share of the Company's Class C Common Stock, .06667 (approximately 1/15th) of a share of Common
par value $.01 per share ("Class C Common Stock"), Stock (756,104 shares in the aggregate).
outstanding immediately prior to the Effective
time, all of which were held by Prudential
All of the shares of the Company's 7% Senior (i) an aggregate of 553,658 shares of Common
Cumulative Preferred Stock, Series A, par value Stock, (ii) the right to receive the remaining
$.01 per share ("Old Senior Preferred Stock"), 2.73% of the P Interest in the H/P Trust and (iii)
outstanding immediately prior to the Effective the right to receive $33 million aggregate
Time, which have an aggregate liquidation principal amount of 8% Senior Secured Notes Due
preference of $49.5 million and were held by 2003 of the Company ("Senior Secured Notes").
Prudential
</TABLE>
The reverse split of the Old Common Stock that was effected pursuant to the
Merger upon the conversion of each share of the Old Common Stock into
approximately 1/15th of a share of Common Stock is referred to herein as the
"Reverse Split Stock."
THE PRUDENTIAL DEBT RESTRUCTURING
The Senior Secured Notes that Prudential received upon conversion of
the Old Senior Preferred Stock in the Merger were issued pursuant to a
securities purchase agreement entered into by the Company and Prudential
governing the Senior Secured Notes (the "Securities Purchase Agreement").
Pursuant to the Securities Purchase Agreement, and concurrently with the
consummation of the Merger, the Company also issued an additional $23.4 million
($2.5 million of which was prepaid on the same date) of Senior Secured Notes in
exchange for the $23.4 million of 6.20% Senior Secured Notes Due 2000 of the
Company (the "Old Senior Secured Notes") currently held by Prudential (the "
Prudential Debt Restructuring"). The Merger, the issuance of the Trust Shares
to the H/P Trust and the Prudential Debt Restructuring are collectively
referred to herein as the " Transactions" and the date of consummation of the
Transactions, December 14, 1993, referred to herein as the "Closing Date."
EFFECT OF THE MERGER ON OWNERSHIP OF THE COMPANY
The following table sets forth information regarding beneficial
ownership of the Common Stock immediately prior to the Transactions and as
adjusted to give effect to the Transactions. This table has been prepared for
illustrative purposes only, based on the assumptions described below.
-3-
<PAGE> 5
<TABLE>
<CAPTION>
PRE-MERGER POST-MERGER(1)
------------------------------------ ----------------------------------
FULL
NO DILUTION FULL DILUTION(2) NO DILUTION(3) DILUTION(4)
--------------- ------------------ --------------- -----------
<S> <C> <C> <C> <C>
Holders of Common Stock (other
than Prudential)(5) 36.7% 22.2% 12.6% 15.5%
Prudential:
Old Common Stock .2 .1 24.6(6) 5.1
Class B Common Stock 54.6 33.0 0.0 0.0
Class C Common Stock 8.5 5.2 0.0 0.0
------ ------ ------ ------
63 .3 38.3 24.6 5.1
Stock option holders 0.0 2.0 0.0 2.4
Holders of Old Junior Preferred
Stock (5) 0.0 37.5 22.3 37.5
Santa Fe 0.0 0.0 40.5 39.5
------ ------ ------ -----
100.0% 100.0% 100.0% 100.0%
====== ====== ====== ======
</TABLE>
(1) Reflects the conversion, pursuant to the Merger, of each outstanding share
of Old Common Stock into .06667 (approximately 1/15th) of a share of Common
Stock; the conversion, pursuant to the Merger, of each outstanding share of
Old Junior Preferred Stock into 1.50733 shares of Common Stock; the
issuance, pursuant to the Merger, of 10,395,665 shares of Common Stock to
Santa Fe (which number is equal to 40% of the sum of (i) the number of
shares of Common Stock outstanding immediately following the Merger
(treating as outstanding for such purpose (i) the Trust Shares to be issued
by the Company to the H/P Trust immediately after the Effective Time and
(ii) a number of unissued shares of Common Stock equal to the product of
(A) 4,500,000 minus the number of shares of Old Common Stock that have been
issued prior to the Effective Time on exercise of stock options granted
under the Equity Incentive Plan multiplied by (B) .06667) based on the
number of shares of Common Stock and Old Junior Preferred Stock outstanding
immediately prior to the Effective Time; the issuance immediately after the
Merger to the H/P Trust of the 4,983,180 Trust Shares; the conversion,
pursuant to the Merger, of each outstanding share of Class C Common Stock
into .06667 (approximately 1/15th) of a share of Common Stock; and the
conversion, pursuant to the Merger, of all outstanding shares of Old Senior
Preferred Stock into an aggregate 553,658 shares of Common Stock.
(2) Reflects the conversion of all then outstanding shares of Old Junior
Preferred Stock into Old Common Stock at the conversion rate of 21.74
shares of Old Common Stock for each share of Old Junior Preferred Stock.
Also reflects the issuance of 4,500,000 shares of Old Common Stock upon
exercise of stock options that might have been granted under the Equity
Incentive Plan, which is the maximum number of shares that might have been
issued pursuant to such plan.
(3) Assumes (i) no exercise of stock options and (ii) no exercise of shares of
Junior Preferred Stock.
(4) Reflects (i) the exercise by the holders of all shares of Junior Preferred
Stock issued pursuant to the Merger of the right to purchase, upon
surrender of such share and payment of the exercise price, one share of
Common Stock for each share of Junior Preferred Stock (an aggregate of
4,983,180 shares of Common Stock) and (ii) the deposit by the Company to
the H/P Trust of all proceeds of such exercises and the consequent ultimate
distribution to the Company of all of the Trust Shares in accordance with
the terms of the H/P Trust. Also assumes the issuance of 633,365 shares of
Common Stock upon exercise
-4-
<PAGE> 6
of stock options that may be granted under the Equity Incentive Plan, which
is the maximum number of shares that may be issued pursuant to such plan as
amended, giving effect to the Reverse Stock Split.
(5) Based on the shares of Old Common Stock and Old Junior Preferred Stock
outstanding at June 30, 1993; does not reflect conversion of shares of Old
Junior Preferred Stock into Old Common Stock subsequent to that date.
(6) Reflects the issuance of (i) 553,658 shares of Common Stock upon the
conversion, pursuant to the Merger, of the Old Senior Preferred Stock and
(ii) 756,104 shares of Common Stock upon the conversion, pursuant to the
Merger, of the Class C Common Stock. Also includes the 4,983,180 trust
shares (the "Trust Shares") (Prudential will initially be the beneficial
owner of all of the Trust Shares and, as such, will have the right to
direct the voting of all of such shares until such time as Trust Shares are
"classified," such classification to occur when the transfer agent for
the Junior Preferred Stock deposits to the H/P Trust all proceeds of
exercise of shares of Junior Preferred Stock), 20,001 shares of Common
Stock that Prudential is assumed to have received upon conversion of the
300,000 shares of Old Common Stock that Prudential held prior to the Merger
and 5,001 shares issuable upon the exercise of shares of Junior Preferred
Stock assumed to have been received by Prudential as a result of the
Merger. (As a result of the conversion of the Old Senior Preferred Stock
pursuant to the Merger, Prudential also received $33 million principal
amount of Senior Secured Notes).
BUSINESS PROPERTIES OF AGPC
General. As a result of the Merger, the Company has succeeded to the
business and properties of AGPC. AGPC was involved in the gathering,
transmission, processing and marketing of natural gas, primarily in the Permian
Basin of West Texas and Southeast New Mexico. These operations are conducted
through three subsidiaries of AGPC (now subsidiaries of the Company): Adobe
Gas Gathering and Processing Co., Adobe Gas Marketing Co. and Adobe Gas Co.
(the "AGPC Subsidiaries"). The AGPC Subsidiaries own undivided interests in
the AGPC Assets or equity interests in joint ventures or partnerships which in
turn own undivided interests in the AGPC Assets (see "-- Properties" below).
In addition, prior to the Merger, Santa Fe transferred to AGPC or one of the
AGPC Subsidiaries an undivided interest in two gathering systems, West Caddo
and Britt Ranch (see "-- Properties" below) which, as a result of the Merger,
were acquired by the Company.
Gas Gathering and Transportation. The AGPC Subsidiaries have
interests in 10 gas pipeline systems, of which six are operated by the AGPC
Subsidiaries. Natural gas is acquired at the well-head for resale, generally
under short-term contracts at the point the gathering system connects with a
major interstate pipeline. In certain circumstances, natural gas is
transported for others in return for a transportation fee. In some cases,
natural gas is sold directly to end-users who are physically connected to the
pipeline systems under long-term contracts. During 1992, an average of 87 MMCF
per day of natural gas (net to AGPC's interest) was purchased or transported
through these pipeline systems.
Gas Processing. The AGPC Subsidiaries have interests in three gas
processing plants. During 1992, such plants produced an average of 47,000
gallons per day (net to AGPC's interest) of natural gas liquids ("NGLs").
These facilities are capable of processing approximately 74 MMCF per day of
natural gas. One of these facilities has been essentially out of operation for
the past several years. This facility is currently being refurbished and
connected to the Company's Llano pipeline system and is expected to be in
operation by the fourth quarter of 1993. NGLs produced by these facilities are
generally transported via pipeline to common fractionation points where such
liquids are sold into wholesale markets.
Gas Marketing. The AGPC Subsidiaries have also been involved in the
marketing of natural gas which is not transported through their pipeline
systems, although such activities have not been significant in comparison to
their gathering, transmission and processing operations. These activities have
been conducted via a limited number of long-term contracts and a variety of
short- term "spot" contracts. During 1992, an average of 66 MMCF per day was
marketed under such arrangements.
-5-
<PAGE> 7
Competition. The AGPC Subsidiaries compete with a number of gas
pipelines and processors that are active in the area of its facilities. Such
competition is on the basis of service, reliability and market responsive
pricing for gathering, transmission and processing services.
Environmental Matters and Governmental Regulation. The AGPC
Subsidiaries are generally subject to the same environmental and regulatory
factors as is the Company. Under the Natural Gas Act, natural gas gathering
facilities are exempt from jurisdiction of the Federal Energy Regulatory
Commission (the "FERC"), while interstate transmission facilities are subject
to FERC jurisdiction. The FERC has historically distinguished between these
types of activities on a very fact-specific basis which makes it difficult to
predict with certainty the status of the AGPC gathering facilities. While the
FERC has not issued any order or opinion declaring AGPC's facilities as
gathering rather than transmission facilities, Santa Fe has represented to the
Company that it believes that these systems meet the traditional tests that the
FERC has used to establish a pipeline status as a gatherer. Members of the
FERC have recently expressed the intention to reassess the FERC's traditional
gathering criteria in light of the implementation of Order No. 636. The
Company cannot predict what, if any, changes such reassessment might cause in
the traditional gathering test applied by the FERC. Further, while some states
provide for the rate regulation of pipelines engaged in the intrastate
transportation of natural gas, such regulation has not generally been applied
against gatherers of natural gas. However, Oklahoma has recently enacted
legislation that prohibits the imposition of unjustly or unlawfully
discriminatory gathering rates, and permits the Oklahoma Corporation Commission
to adopt corrective action to remedy complaints regarding such rates. The
gathering systems included in the AGPC Assets could be adversely affected
should they be subjected in the future to the application of such state or
federal regulation. See "-- Properties" below.
Certain activities involving the AGPC Subsidiaries are subject to the
jurisdiction of the Railroad Commission of Texas (the "RRC"). The RRC has the
authority, under the Texas Gas Utility Regulatory Act and other statutes, to
regulate the rates, services and operations of gas utilities in Texas. Santa
Fe has represented to the Company that it believes that the activities of the
AGPC Subsidiaries subject to such regulation comply with all applicable laws
and regulations of the RRC and that such laws and regulations do not affect
materially the financial condition or results of operations of the AGPC
Subsidiaries.
Number of Persons Employed. AGPC had no employees. As of September
30, 1993, approximately 41 employees of Santa Fe were involved in conducting
AGPC's operations. In connection with the Merger, 24 of such Santa Fe
employees accepted offers of employment with the Company.
Properties. The following table sets forth the percentage ownership
interest of the AGPC Subsidiaries in the listed natural gas gathering,
transmission and processing facilities. Santa Fe has represented to the
Company that it is aware of certain defects in AGPC's title to certain of the
AGPC Assets, but based on the information currently available to it, the
Company does not believe that those defects would have a material adverse
effect on the AGPC Assets taken as a whole.
-6-
<PAGE> 8
<TABLE>
<CAPTION>
PERCENTAGE
OWNERSHIP
DESCRIPTION LOCATION INTEREST
- ----------- -------- ----------
<S> <C> <C>
PowerTex Pipeline System (approximately 74 miles Lubbock and Hockley Counties, Texas 65.36%
of 10", 8" and 6" transmission pipelines)
Sale Ranch Gathering System and Processing Martin, Dawson and Midland Counties, 87.25%
Plant(1) (approximately 286 miles of 2" through Texas
10" gathering pipelines; lean oil absorption gas
processing plant)
Apple Creek Processing Plant (cryogenic gas Glasscock County, Texas 90%
processing plant)
Antelope Ridge Gas Plant (cryogenic gas Lea County, New Mexico 76.85%
processing plant)
East Caddo Gathering System (approximately 60 Caddo and Grady Counties, Oklahoma 24.42%
miles of 8", 6" and 4" gathering pipelines)
Hillsboro Gathering System (approximately 4 miles Grady County, Oklahoma 11.54%
of 3" and 4" gathering pipelines)
Yucca Butte Gas System (approximately 18 miles of Pecos County, Texas 14.24%
6" and 4" gathering pipelines)
West Caddo Gathering System (approximately 105 Caddo, Custer and Washita Counties, 15%
miles of 10" through 4" gathering pipelines) Oklahoma
Owens Corning Pipeline (approximately 2 miles of Randall County, Texas 50%
4" transmission pipeline)
Britt Ranch System (approximately 23 miles of 8" Wheeler County, Texas 50%
through 3" gathering pipelines)
North Dunkirk Gathering System (approximately Tolle County, Montana 100%
30 miles of 6" and 4" gathering pipelines)
Burleson County Pipeline System (approximately Burleson County, Texas 100%
10 miles of 10", 6" and 4" gathering pipelines)
Pecos County Pipeline System (approximately Pecos County, Texas 100%
15 miles of 6" and 4" gathering pipelines)
</TABLE>
- ---------------
(1) Adobe Gas Gathering and Processing Co. ("Adobe Gas") has negotiated an
agreement in principle with Parker & Parsley Petroleum Company
("Parker & Parsley") whereby Adobe Gas will assign to Parker & Parsley
a 30% interest in the Sale Ranch Gathering System and the Sale Ranch
Processing
-7-
<PAGE> 9
Plant. In return, Parker & Parsley has agreed to (i) dedicate certain
natural gas production to Adobe Gas (including certain production
currently being gathered and processed through the Sale Ranch
facilities and certain other production which is currently being
processed elsewhere), (ii) assign to Adobe Gas a gathering system in
Eddy County, New Mexico (the "Loving System"), (iii) dedicate to Adobe
Gas for processing all natural gas currently connected to the Loving
System and (iv) make a cash payment to Adobe Gas of $2.5 million.
Santa Fe and the Company have agreed in principle that if such
agreement is not consummated, Santa Fe will compensate the Company by
(i) entering into certain amendments to certain gas purchase contracts
between Santa Fe and Adobe Gas which will make such contracts more
advantageous to Adobe Gas and (ii) amend the Gas Contract to adjust
the pricing on certain amounts of production to specified amounts
which will be more advantageous to the Company.
MANAGEMENT CHANGES
The Merger also resulted in certain amendments to the Company's
Restated Certificate of Incorporation (the "Restated Certificate") and bylaws
that, among other things, increased the number of directors constituting the
entire Board of Directors of the Company to eight and divided the Company's
Board of Directors into three classes, Class I, Class II and Class III, which
classes shall be as nearly equal in number of directors as possible. The
directors first elected or appointed to Class I shall serve for an initial term
expiring at the annual meeting following the end of the Company's 1993 fiscal
year, the directors first elected or appointed to Class II shall serve for an
initial term expiring at the second annual meeting following the end of the
Company's 1993 fiscal year and the directors first elected or appointed to
Class III shall serve for an initial term expiring at the third annual meeting
following the end of the Company's 1993 fiscal year. All of the directors of
the Company immediately prior to the Merger other than Mr. J. Michael Adcock
resigned effective as of the Effective Time, and six new directors were
appointed to fill six of the seven vacancies created by such increase in the
number of the Company's directors and the resignations of such directors.
Information concerning Mr. Adcock and the new directors is set forth below.
J. MICHAEL ADCOCK, age 44, will serve as a Class III director. Mr.
Adcock was elected President and Chief Operating Officer of the Company on
March 9, 1990 and was elected Chief Executive Officer on September 8, 1992.
Mr. Adcock served as the Company's General Counsel from 1983 to 1990 and as its
Secretary from 1980 to 1990. He has been a director since 1981. For at least
three years prior to his election in March 1990 as President and Chief
Operating Officer, Mr. Adcock was a principal in the firm of Diamond, Adcock,
Stuart & Timmons (now Diamond, Stuart & Timmons), which firm renders legal
services to the Company. Mr. Adcock has resigned as an officer of the Company
effective as of December 15, 1993.
B.M. THOMPSON, age 61, was appointed as a Class II director on
December 14, 1993. Mr. Thompson was employed in various capacities by Phillips
Petroleum Company and its subsidiaries from 1954 to 1992. He served on the
board of that company for four years, and recently retired as Chairman and
Chief Executive Officer of GPM Gas Corporation, a subsidiary of Phillips that
processes natural gas.
JAMES L. PAYNE, age 56, was appointed as a Class II director on
December 14, 1993. Mr. Payne is the Chairman of the Board and Chief Executive
Officer of Santa Fe, positions he has held since June 1990, as well as
President of Santa Fe, a position he has held since January 1986. From 1982 to
January 1986, Mr. Payne was Senior Vice President - Exploration and Land of
Santa Fe. Mr. Payne also serves as a director of Santa Fe.
MICHAEL J. ROSINSKI, age 48, was appointed as a Class I director on
December 14, 1993. Mr. Rosinski serves as Vice President and Chief Financial
Officer of Santa Fe, positions he has held since September 1992. Prior to
joining Santa Fe in 1992, Mr. Rosinski was employed in various capacities by
Tenneco Inc. and its subsidiaries for 24 years. From 1988 until 1990, he
served with Tenneco as Deputy
-8-
<PAGE> 10
Project Executive for the Colombian Crude Oil Pipeline Project and from 1990
until August 1992 he was Executive Director of Investor Relations for Tenneco,
Inc.
J. FRANK HAASBEEK, age 58, was appointed as a Class I director on
December 14, 1993. Mr. Haasbeek serves as President and Chief Executive
Officer of International Transquip Industries, Inc. (a manufacturer of air
brake systems for heavy trucks, buses and trailers), positions he has held
since August 1991. From September 1990 to August 1991, Mr. Haasbeek was Senior
Vice President of GrandWest & Associates (a business consulting firm); from
March 1989 to October 1989 he served as President of L.J. Hooker Corporation (a
retailing and property management company); and from 1984 to March 1988 he
served as President and Chief Executive Officer of Hurricane Industries, Inc.
(a mini-steel mill). From April 1988 to February 1989 and from November 1989
to September 1990, Mr. Haasbeek was a private business consultant.
JAMES A. BITZER, age 30, was appointed as a Class I director on
December 14, 1993. Mr. Bitzer has served since 1991 as Second Vice President
of The Prudential Insurance Company of America and since January 1993 as Vice
President of the Prudential Capital Group of The Prudential Insurance Company
of America, which is involved in merchant banking activities on behalf of The
Prudential Insurance Company of America. From 1991 to 1992, Mr. Bitzer served
as Vice President of the Southwestern/Energy Group of Prudential Capital
Corporation, which was also involved in such merchant banking activities. From
1987 to 1991, Mr. Bitzer held various positions with Prudential in the
investment area.
GREG G. JENKINS, age 36, was appointed as a Class II director on
December 14, 1993. Mr. Jenkins became employed with the Company on October 1,
1993 and was elected as President and Chief Operating Officer of the Company on
December 17, 1993. Prior thereto, he served as Corporate Manager, Special
Projects for Santa Fe from March 1993 through September 1993. From July 1991
until March 1993, Mr. Jenkins was General Manager - Argentina of Santa Fe and
President of Petrolera Santa Fe S.A., a wholly-owned subsidiary of Santa Fe.
Mr. Jenkins joined Santa Fe as a landman in December 1982 and became a
District Landman in December 1985 and Manager, Business Development in April
1989.
The Company has instigated a search for a new Chief Executive Officer
to replace Mr. Adcock in that post after the Merger. It is expected that the
person chosen to serve as Chief Executive Officer of the Company following the
Merger will be appointed to fill the sole remaining vacancy on the Company's
Board of Directors.
Except as noted above, all current executive officers of the Company
have retained their current positions with the Company following the Merger.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth information as of the dates indicated
with respect to any person (including any "group" as that term is used in
Section 13(d)(3) of the Exchange Act) who is known to management of the Company
to be the beneficial owner of more than 5% of the voting securities of the
Company.
<TABLE>
<CAPTION>
COMMON STOCK
-------------------------------------------------
NUMBER OF SHARES PERCENT OF CLASS
---------------- ----------------
<S> <C> <C>
The Prudential Insurance 6,317,944 (1) 24.6%
Company of America
Prudential Plaza
Newark, NJ 07102-3777
Elliott Associates, L.P. 3,385,305 (2) 13.2%
110 East 59th Street
New York, NY 10022
</TABLE>
-9-
<PAGE> 11
<TABLE>
<CAPTION>
COMMON STOCK
-------------------------------------------------
NUMBER OF SHARES PERCENT OF CLASS
---------------- ----------------
<S> <C> <C>
The H/P Trust 4,983,180 (3) 19.4%
c/o Liberty Bank and Trust Company
of Oklahoma City, N.A., as Trustee
P.O. Box 25848
Oklahoma City, OK 73125-9969
</TABLE>
(1) Based on Amendment No. 4 to Schedule 13G dated February 5, 1993 and filed
with the Commission, the number of shares of Common Stock outstanding
immediately before the Effective Time and Merger conversion ratios.
Includes (i) 776,105 shares directly owned by Prudential, (ii) 553,658
shares of Common Stock issued upon the conversion, pursuant to the Merger,
of the Old Senior Preferred Stock, (iii) 5,001 shares issuable upon the
exercise of shares of Junior Preferred Stock assumed to have been received
by Prudential as a result of the Merger and (iv) 4,983,180 shares in the
H/P Trust over which Prudential has voting control and therefore may be
deemed to have beneficial ownership but which number may decline from time
to time in accordance with a trust agreement entered into among the
Company, Prudential and Liberty Bank and Trust Company of Oklahoma City,
N.A., as Trustee, in connection with the Merger Agreement (the "Trust
Agreement") . See footnote (3).
(2) Based on Amendment No. 1 to Schedule 13D dated July 28, 1993 and filed with
the Commission, the number of shares of Common Stock outstanding
immediately before the Effective Time and Merger conversion ratios.
Includes 2,269,685 shares directly owned by Elliott Associates, L.P. and
1,115,619 shares issuable upon the exercise of shares of Junior Preferred
Stock assumed to have been received by Elliott Associates, L.P. as a result
of the Merger.
(3) Represents 4,983,180 shares in the H/P Trust over which the H/P Trust may
be deemed to have beneficial ownership, although, pursuant to the Trust
Agreement, Prudential will direct the voting of the shares. See footnote
(1).
SECURITY OWNERSHIP OF MANAGEMENT
The following table furnishes, as of December 14, 1993, except to the
extent otherwise indicated, information with respect to the beneficial
ownership of the Common Stock and Junior Preferred Stock (i) by each director
and each executive officer of the Company and (ii) by all directors and
executive officers of the Company as a group.
<TABLE>
<CAPTION>
NEW JUNIOR
COMMON STOCK PREFERRED STOCK
---------------------------------- -------------------------------
NUMBER NUMBER
OF PERCENT OF PERCENT
NAME AND ADDRESS OF BENEFICIAL OWNER SHARES OF CLASS SHARES OF CLASS
- ------------------------------------ ----------------- ---------------- --------------- --------------
<S> <C> <C> <C> <C>
J. Michael Adcock 31,523 (1)(5) * 2,078 *
Robert P. Capps 28,788 (2)(5) * 530 *
C. Jeff Goodell 29,009 (3)(5) * 586 *
Martha A. Burger 3,046 (4)(5) * 78 *
B.M. Thompson 6,667 (6) * -- --
James L. Payne 6,667 (6) * -- --
Michael J. Rosinski 6,667 (6) * -- --
J. Frank Haasbeek 6,667 (6) * -- --
</TABLE>
-10-
<PAGE> 12
<TABLE>
<CAPTION>
NEW JUNIOR
COMMON STOCK PREFERRED STOCK
---------------------------------- -------------------------------
NUMBER NUMBER
OF PERCENT OF PERCENT
NAME AND ADDRESS OF BENEFICIAL OWNER SHARES OF CLASS SHARES OF CLASS
- ------------------------------------ ----------------- ---------------- --------------- --------------
<S> <C> <C> <C> <C>
James A. Bitzer 0 -- -- --
Greg G. Jenkins 0 -- -- --
All directors and executive officers as a
group (10 persons) 119,034 * 3,272 *
</TABLE>
- ---------------
* Less than 1%.
(1) Includes 406 shares held directly; 2,308 shares held by the 401(k) Plan;
333 shares beneficially owned by Mr. Adcock but not registered in his name;
26,668 shares subject to stock options granted pursuant to the Equity
Incentive Plan; and 1,808 shares received upon conversion of 1,200 shares
of Old Junior Preferred Stock, pursuant to the Merger, held by Mr. Adcock's
wife.
(2) Includes 2,120 shares held by the 401(k) Plan and 26,668 shares subject to
stock options granted pursuant to the Equity Incentive Plan.
(3) Includes 2,341 shares held by the 401(k) Plan and 26,668 shares subject to
stock options granted pursuant to the Equity Incentive Plan.
(4) Includes 313 shares held by the 401(k) Plan and 2,733 shares subject to
stock options granted pursuant to the Equity Incentive Plan.
(5) Information regarding the number of shares of Common Stock held for the
account of such person by the 401(k) Plan is based on the number of shares
held by such Plan as of June 30, 1993, which was the most current
information available to the Company as of the date of this Report.
(6) Shares subject to stock options granted pursuant to the Equity Incentive
Plan.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following summary of the material federal income tax consequences
to the Company resulting from the Transactions is based upon provisions of the
Internal Revenue Code of 1986, as amended (the "Code"), the Treasury
Regulations promulgated thereunder, and the judicial and administrative
interpretations thereof, all as in effect as of the date hereof, and all of
which are subject to change (possibly on a retroactive basis) or different
interpretation. There can be no assurance that the Internal Revenue Service
(the "Service") will not challenge one or more of the tax consequences
described herein, and the Company has not obtained, nor does it intend to
obtain, a ruling from the Service with respect to the federal income tax
consequences of the Transactions.
In General. The Merger should be treated as a tax-free reorganization
under section 368(a)(1)(A) of the Code, and the Company's basis in the assets
of AGPC acquired pursuant to the Merger should be equal to the basis of such
assets in the hands of AGPC prior to the Merger. The exchange of Old Senior
Secured Notes for Senior Secured Notes, the conversion of Old Senior Preferred
Stock into Common Stock and the right to receive a percentage of Prudential's
interest in the H/P Trust initially representing beneficial ownership of all of
the Trust shares (the "P Interest") and Senior Secured Notes, the conversion of
Class B Common Stock into the right to receive a percentage of the P Interest
in the H/P Trust, the conversion of Class C Common Stock into Common Stock and
the conversion of Old Junior Preferred Stock into Common Stock and Junior
Preferred Stock should all be treated as tax-free recapitalizations to the
Company and should not give rise to any taxable gain or loss to the Company.
Also, the exchange of Common Stock for Old
-11-
<PAGE> 13
Common Stock pursuant to the Reverse Stock Split and the issuance of shares of
Junior Preferred Stock to holders of Common Stock should not give rise to
taxable gain or loss to the Company.
Limitation on Use of NOLs. On its federal income tax return for its
taxable year ended December 31, 1991, the Company reported net operating losses
("NOLs") on a consolidated basis of approximately $96 million. Although the
Company has not filed its federal income tax return for the calendar year ended
December 31, 1992, the Company estimates that for such taxable year it incurred
an additional NOL of approximately $21 million. In addition, the Company
anticipates reporting adjustments which will decrease the amount of NOLs
reported in its 1991 federal income tax return by approximately $12 million.
These NOLs will expire between the years 1999 and 2008. If a corporation with
NOLs (a "loss corporation") undergoes an "ownership change" (as defined below),
the use of its NOLs is generally thereafter limited under section 382 of the
Code to an annual amount (the " Section 382 Limitation") equal to the product
of the long-term tax-exempt rate prescribed monthly by the Service (5.4% for
ownership changes occurring during August 1993) and the value of the loss
corporation's outstanding stock immediately before the ownership change (taking
into account redemptions occurring in connection with the ownership change, but
excluding certain capital contributions). Any portion of this Section 382
Limitation that is not used in a taxable year following the ownership change
can be carried forward to subsequent taxable years until the NOLs expire.
In general, an "ownership change" occurs if the percentage of the
value of the loss corporation's stock owned by one or more direct or indirect
"5-percent shareholders" has increased by more than 50 percentage points over
the lowest percentage of that value owned by those 5-percent shareholders at
any time during a "testing period," which is generally the shorter of the
three-year period preceding the ownership change or the period since the most
recent prior ownership change. Stock owned by less than 5- percent
shareholders is treated in the aggregate as owned by one or more groups, each
of which is treated as a 5-percent shareholder. In applying this test, certain
option, entity and family attribution rules are taken into account.
In connection with its 1992 pre-packaged bankruptcy (the "1992
Restructuring"), the Company experienced an ownership change under section 382.
Two alternative elective rules apply to an ownership change that occurs
pursuant to a Chapter 11 Case. Under section 382(l)(5) of the Code, the
Section 382 Limitation does not apply, provided stockholders and qualifying
creditors of the loss corporation receive at least 50% of the voting power and
value of the stock of the reorganized corporation in exchange for their debt or
equity interests. However, because one of the prices that must be paid for
this benefit is a zero Section 382 Limitation in the event of a subsequent
ownership change within two years, the Company will elect not to have the
special bankruptcy rule of section 382(1)(5) of the Code apply to the ownership
change that occurred in connection with the 1992 Restructuring.
By electing not to have section 382(1)(5) of the Code apply to the
Company, its Section 382 Limitation resulting from the 1992 Restructuring must
be determined under section 382(1)(6) of the Code by taking into account the
increase in the value of the Company's stock resulting from the cancellation of
debt obligations pursuant to the 1992 Restructuring. The Company has
determined that this Section 382 Limitation will allow it to offset taxable
income equal to approximately $4,500,000 each year.
The Company intends to take the position that the Transactions did not
cause an ownership change to occur on or before the closing of such
Transactions. However, due to uncertainties as to law and fact, there can be
no assurance that this will be the case. If the Transactions were deemed to
result in an ownership change, the Company's ability to utilize NOLs would be
subject to further restriction due to the imposition of a lower Section 382
Limitation than that resulting from the 1992 Restructuring. Furthermore, the
Company believes that, in connection with the Transactions, certain 5-percent
shareholders of the Company will increase their ownership of the Company's
"stock" (as defined for purposes of section 382(g) of the Code) by
approximately 40 percentage points, as such increases are measured for purposes
of section 382(g) of the Code. This 40 percentage-point increase in turn will
increase the risk that the Company will experience an
-12-
<PAGE> 14
ownership change in the future. A future ownership change could produce a
Section 382 Limitation lower than that resulting from the 1992 Restructuring.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of AGPC
Incorporated herein by reference from pages F-1 through F-4 of the
Company's Registration Statement on Form S-3, File No. 33-51373.
(b) Pro Forma Financial Information
Incorporated herein by reference from pages F-5 through F-11 of the
Company's Registration Statement on Form S-3, File No. 33-51373.
(c) Exhibits
<TABLE>
<S> <C>
*2.1 Agreement of Merger, dated as of July 28, 1993, by and among Santa Fe,
AGPC and the Company (filed as exhibit (c)(i) to the Company's Rule
13e-3 Transaction Statement, File No. 5-14102, as amended (the
"Schedule 13E-3"), and incorporated herein by reference)
*3.1 Restated Certificate of Incorporation of the Company (filed as exhibit
4.1 to the Company's Registration Statement on Form S-3, File No. 33-
51373, and incorporated herein by reference)
*3.2 Amended and Restated Bylaws of the Company, as amended as of December
14, 1993 (filed as exhibit 4.2 to the Company's Registration Statement
on Form S-3, File No. 33-51373, and incorporated herein by reference)
*4.1 Specimen certificate of the Common Stock of the Company (filed as
exhibit 4.3 to the Company's Registration Statement on Form S-3, File
No. 33-51373, and incorporated herein by reference)
*4.2 Restated Securities Purchase Agreement, dated as of December 14, 1993,
by and between the Company and Prudential
*4.3 Trust Agreement, dated as of December 14, 1993, by and between the
Company, Prudential and Liberty Bank and Trust Company of Oklahoma
City, N.A., as Trustee
*10.1 Credit Agreement, dated as of December 14, 1993, by and between the
Company, Hadson Gas Systems, Inc., United LP Gas Corporation, Western
Natural Gas & Transmission Corp. and Bank of Montreal, individually and
as Agent for the other Banks which may become a party thereto
*10.2 Registration Rights Agreement, dated as of December 14, 1993, by and
between the Company, Santa Fe and Prudential
</TABLE>
-13-
<PAGE> 15
<TABLE>
<S> <C>
*10.3 Amendment to Employment Agreement, dated as of December 14, 1993,
entered into between the Company and J. Michael Adcock
**23.1 Consent of independent accountants regarding report on financial
statements of AGPC Assets.
</TABLE>
- ---------------
* Previously filed.
** Filed with this Report.
-14-
<PAGE> 16
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has caused this Amendment to Report to be signed on its
behalf by the undersigned hereunto duly authorized.
HADSON CORPORATION (Registrant)
DATE: January 18, 1994 By: /s/ Robert P. Capps
-------------------------------------
Robert P. Capps
Executive Vice President, Chief
Financial Officer and
Treasurer
<PAGE> 17
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION OF EXHIBIT PAGE
------ ---------------------- ------------
<S> <C> <C>
*2.1 Agreement of Merger, dated as of July 28, 1993, by and among Santa Fe, AGPC and
the Company (filed as exhibit (c)(i) to the Company's Rule 13e-3 Transaction
Statement, File No. 5-14102, as amended (the "Schedule 13E-3"), and incorporated
herein by reference)
*3.1 Restated Certificate of Incorporation of the Company (filed as exhibit 4.1 to
the Company's Registration Statement on Form S-3, File No. 33-51373, and
incorporated herein by reference)
*3.2 Amended and Restated Bylaws of the Company, as amended as of December 14, 1993
(filed as exhibit 4.2 to the Company's Registration Statement on Form S-3, File
No. 33-51373, and incorporated herein by reference)
*4.1 Specimen certificate of the Common Stock of the Company (filed as exhibit 4.3 to
the Company's Registration Statement on Form S-3, File No. 33-51373, and
incorporated herein by reference)
*4.2 Restated Securities Purchase Agreement, dated as of December 14, 1993, by and
between the Company and Prudential
*4.3 Trust Agreement, dated as of December 14, 1993, by and between the Company,
Prudential and Liberty Bank and Trust Company of Oklahoma City, N.A., as Trustee
*10.1 Credit Agreement, dated as of December 14, 1993, by and between the Company,
Hadson Gas Systems, Inc., United LP Gas Corporation, Western Natural Gas &
Transmission Corp. and Bank of Montreal, individually and as Agent for the other
Banks which may become a party thereto
*10.2 Registration Rights Agreement, dated as of December 14, 1993, by and between the
Company, Santa Fe and Prudential
*10.3 Amendment to Employment Agreement, dated as of December 14, 1993, entered into
between the Company and J. Michael Adcock
**23.1 Consent of independent accountants regarding report on financial statements of
AGPC Assets.
</TABLE>
- ---------------
* Previously filed.
** Filed with this Report.
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 (No. 33-68820) of Hadson Corporation and this report on
Form 8K/A of Hadson Corporation of our report dated August 26, 1993 included in
its Registration Statement on Form S-3 (No. 33-51373) dated December 13, 1993
relating to the statement of revenues and direct operating expenses of the AGPC
Assets for the three years ended December 31, 1992.
/s/ PRICE WATERHOUSE
PRICE WATERHOUSE
Houston, Texas
January 17, 1994
